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REPERTORY OF APPELLATE BODY REPORTS

General Exceptions: Article XX of the GATT 1994


ON THIS PAGE:

Article XX — Two-tier analysis
Article XX(b) — Relationship with Article III
Article XX(b) — Evidence. See also General Exceptions: Article XX of the GATT 1994, Article XX(d) — Necessity test (G.3.6)
Article XX(a) and (b) — Necessity test
Article XX(b) — Objective pursued
Article XX(b) — Alternative measures
Article XX(d) — Level of enforcement — Alternative measure
Article XX(d) — “laws or regulations”
Article XX(d) — “to secure compliance”
Article XX(d) — Necessity test
Article XX(g) — “conservation of exhaustible natural resources”
Article XX(g) — “measures made effective in conjunction with”
Article XX(g) — “relating to”
Article XX(g) — Jurisdictional limitation. See also National Treatment, Relationship between Article III and Article XX (N.1.12)
Chapeau of Article XX — General
Chapeau of Article XX — “arbitrary or unjustifiable discrimination between countries where the same conditions prevail”
Chapeau of Article XX — “disguised restriction on international trade”


G.3.1 Article XX — Two-tier analysis     back to top

G.3.1.1 US — Gasoline, p. 22, DSR 1996:I, p. 3 at 20
(WT/DS2/AB/R)

 

… In order that the justifying protection of Article XX may be extended to it, the measure at issue must not only come under one or another of the particular exceptions — paragraphs (a) to (j) — listed under Article XX; it must also satisfy the requirements imposed by the opening clauses of Article XX. The analysis is, in other words, two-tiered: first, provisional justification by reason of characterization of the measure under XX(g); second, further appraisal of the same measure under the introductory clauses of Article XX.

 

G.3.1.2 US — Shrimp, paras. 119-120
(WT/DS58/AB/R)

 

The sequence of steps indicated above in the analysis of a claim of justification under Article XX reflects, not inadvertence or random choice, but rather the fundamental structure and logic of Article XX . …

 

The task of interpreting the chapeau so as to prevent the abuse or misuse of the specific exemptions provided for in Article XX is rendered very difficult, if indeed it remains possible at all, where the interpreter (like the Panel in this case) has not first identified and examined the specific exception threatened with abuse. …

 
G.3.2 Article XX(b) — Relationship with Article III     back to top

G.3.2.1 EC — Asbestos, para. 115
(WT/DS135/AB/R)

 

We do not agree with the Panel that considering evidence relating to the health risks associated with a product, under Article III:4, nullifies the effect of Article XX(b) of the GATT 1994. Article XX(b) allows a Member to “adopt and enforce” a measure, inter alia, necessary to protect human life or health, even though that measure is inconsistent with another provision of the GATT 1994. Article III:4 and Article XX(b) are distinct and independent provisions of the GATT 1994 each to be interpreted on its own. The scope and meaning of Article III:4 should not be broadened or restricted beyond what is required by the normal customary international law rules of treaty interpretation, simply because Article XX(b) exists and may be available to justify measures inconsistent with Article III:4. The fact that an interpretation of Article III:4, under those rules, implies a less frequent recourse to Article XX(b) does not deprive the exception in Article XX(b) of effet utile. Article XX(b) would only be deprived of effet utile if that provision could not serve to allow a Member to “adopt and enforce” measures “necessary to protect human … life or health”. Evaluating evidence relating to the health risks arising from the physical properties of a product does not prevent a measure which is inconsistent with Article III:4 from being justified under Article XX(b). We note, in this regard, that different inquiries occur under these two very different Articles. Under Article III:4, evidence relating to health risks may be relevant in assessing the competitive relationship in the marketplace between allegedly “like” products. The same, or similar, evidence serves a different purpose under Article XX(b), namely, that of assessing whether a Member has a sufficient basis for “adopting or enforcing” a WTO-inconsistent measure on the grounds of human health.

 
G.3.3 Article XX(b) — Evidence. See also General Exceptions: Article XX of the GATT 1994, Article XX(d) — Necessity test (G.3.6)     back to top

G.3.3.1 EC — Asbestos, para. 178
(WT/DS135/AB/R)

 

… In justifying a measure under Article XX(b) of the GATT 1994, a Member may also rely, in good faith, on scientific sources which, at that time, may represent a divergent, but qualified and respected, opinion. A Member is not obliged, in setting health policy, automatically to follow what, at a given time, may constitute a majority scientific opinion. Therefore, a panel need not, necessarily, reach a decision under Article XX(b) of the GATT 1994 on the basis of the “preponderant” weight of the evidence.


G.3.3A Article XX(a) and (b) — Necessity test     back to top

G.3.3A.1 Brazil — Retreaded Tyres, paras. 145-147
(WT/DS332/AB/R)

 

We turn to the methodology used by the Panel in analysing the contribution of the Import Ban to the achievement of its objective. Such a contribution exists when there is a genuine relationship of ends and means between the objective pursued and the measure at issue. The selection of a methodology to assess a measure’s contribution is a function of the nature of the risk, the objective pursued, and the level of protection sought. It ultimately also depends on the nature, quantity, and quality of evidence existing at the time the analysis is made. Because the Panel, as the trier of the facts, is in a position to evaluate these circumstances, it should enjoy a certain latitude in designing the appropriate methodology to use and deciding how to structure or organize the analysis of the contribution of the measure at issue to the realization of the ends pursued by it. This latitude is not, however, boundless. Indeed, a panel must analyse the contribution of the measure at issue to the realization of the ends pursued by it in accordance with the requirements of Article XX of the GATT 1994 and Article 11 of the DSU.

 

We note that the Panel chose to conduct a qualitative analysis of the contribution of the Import Ban to the achievement of its objective. In previous cases, the Appellate Body has not established a requirement that such a contribution be quantified. To the contrary, in EC — Asbestos, the Appellate Body emphasized that there is “no requirement under Article XX(b) of the GATT 1994 to quantify, as such, the risk to human life or health”. In other words, “[a] risk may be evaluated either in quantitative or qualitative terms.” Although the reference by the Appellate Body to the quantification of a risk is not the same as the quantification of the contribution of a measure to the realization of the objective pursued by it (which could be, as it is in this case, the reduction of a risk), it appears to us that the same line of reasoning applies to the analysis of the contribution, which can be done either in quantitative or in qualitative terms.

 

Accordingly, we do not accept the European Communities’ contention that the Panel was under an obligation to quantify the contribution of the Import Ban to the reduction in the number of waste tyres and to determine the number of waste tyres that would be reduced as a result of the Import Ban. In our view, the Panel’s choice of a qualitative analysis was within the bounds of the latitude it enjoys in choosing a methodology for the analysis of the contribution.

 

G.3.3A.2 Brazil — Retreaded Tyres, paras. 150-151 and footnotes 242-243
(WT/DS332/AB/R)

 

As the Panel recognized, an import ban is “by design as trade-restrictive as can be”. We agree with the Panel that there may be circumstances where such a measure can nevertheless be necessary, within the meaning of Article XX(b). We also recall that, in Korea — Various Measures on Beef, the Appellate Body indicated that “the word ‘necessary’ is not limited to that which is ‘indispensable’ ”. Having said that, when a measure produces restrictive effects on international trade as severe as those resulting from an import ban, it appears to us that it would be difficult for a panel to find that measure necessary unless it is satisfied that the measure is apt to make a material contribution to the achievement of its objective. Thus, we disagree with Brazil’s suggestion that, because it aims to reduce risk exposure to the maximum extent possible, an import ban that brings a marginal or insignificant contribution can nevertheless be considered necessary.242

 

This does not mean that an import ban, or another trade-restrictive measure, the contribution of which is not immediately observable, cannot be justified under Article XX(b). We recognize that certain complex public health or environmental problems may be tackled only with a comprehensive policy comprising a multiplicity of interacting measures. In the short-term, it may prove difficult to isolate the contribution to public health or environmental objectives of one specific measure from those attributable to the other measures that are part of the same comprehensive policy. Moreover, the results obtained from certain actions — for instance, measures adopted in order to attenuate global warming and climate change, or certain preventive actions to reduce the incidence of diseases that may manifest themselves only after a certain period of time — can only be evaluated with the benefit of time.243 In order to justify an import ban under Article XX(b), a panel must be satisfied that it brings about a material contribution to the achievement of its objective. Such a demonstration can of course be made by resorting to evidence or data, pertaining to the past or the present, that establish that the import ban at issue makes a material contribution to the protection of public health or environmental objectives pursued. This is not, however, the only type of demonstration that could establish such a contribution. Thus, a panel might conclude that an import ban is necessary on the basis of a demonstration that the import ban at issue is apt to produce a material contribution to the achievement of its objective. This demonstration could consist of quantitative projections in the future, or qualitative reasoning based on a set of hypotheses that are tested and supported by sufficient evidence.

 

G.3.3A.3 Brazil — Retreaded Tyres, para. 153
(WT/DS332/AB/R)

 

… As the Panel’s analysis was qualitative, the Panel did not seek to estimate, in quantitative terms, the reduction of waste tyres that would result from the Import Ban, or the time horizon of such a reduction. Such estimates would have been very useful and, undoubtedly, would have strengthened the foundation of the Panel’s findings. Having said that, it does not appear to us erroneous to conclude, on the basis of the hypotheses made, tested, and accepted by the Panel, that fewer waste tyres will be generated with the Import Ban than otherwise.

 

G.3.3A.4 Brazil — Retreaded Tyres, paras. 154-155
(WT/DS332/AB/R)

 

… [W]e wish to underscore that the Import Ban must be viewed in the broader context of the comprehensive strategy designed and implemented by Brazil to deal with waste tyres. This comprehensive strategy includes not only the Import Ban but also the import ban on used tyres, as well as the collection and disposal scheme adopted by CONAMA Resolution 258/1999, as amended in 2002, which makes it mandatory for domestic manufacturers and importers of new tyres to provide for the safe disposal of waste tyres in specified proportions. For its part, CONAMA Resolution 258/1999, as amended in 2002, aims to reduce the exposure to risks arising from the accumulation of waste tyres by forcing manufacturers and importers of new tyres to collect and dispose of waste tyres at a ratio of five waste tyres for every four new tyres. This measure also encourages Brazilian retreaders to retread more domestic used tyres by exempting domestic retreaders from disposal obligations as long as they process tyres consumed within Brazil. Thus, the CONAMA scheme provides additional support for and is consistent with the design of Brazil’s strategy for reducing the number of waste tyres. The two mutually enforcing pillars of Brazil’s overall strategy — the Import Ban and the import ban on used tyres — imply that the demand for retreaded tyres in Brazil must be met by the domestic retreaders, and that these retreaders, in principle, can use only domestic used tyres for raw material. Over time, this comprehensive regulatory scheme is apt to induce sustainable changes in the practices and behaviour of the domestic retreaders, as well as other actors, and result in an increase in the number of retreadable tyres in Brazil and a higher rate of retreading of domestic casings in Brazil. Thus, the Import Ban appears to us as one of the key elements of the comprehensive strategy designed by Brazil to deal with waste tyres, along with the import ban on used tyres and the collection and disposal scheme established by CONAMA Resolution 258/1999, as amended in 2002.

 

As we explained above, we agree with the Panel’s reasoning suggesting that fewer waste tyres will be generated with the Import Ban in place. In addition, Brazil has developed and implemented a comprehensive strategy to deal with waste tyres. As a key element of this strategy, the Import Ban is likely to bring a material contribution to the achievement of its objective of reducing the exposure to risks arising from the accumulation of waste tyres. On the basis of these considerations, we are of the view that the Panel did not err in finding that the Import Ban contributes to the achievement of its objective.

 

G.3.3A.5 Brazil — Retreaded Tyres, para. 156
(WT/DS332/AB/R)

 

In order to determine whether a measure is “necessary” within the meaning of Article XX(b) of the GATT 1994, a panel must assess all the relevant factors, particularly the extent of the contribution to the achievement of a measure’s objective and its trade restrictiveness, in the light of the importance of the interests or values at stake. If this analysis yields a preliminary conclusion that the measure is necessary, this result must be confirmed by comparing the measure with its possible alternatives, which may be less trade restrictive while providing an equivalent contribution to the achievement of the objective pursued. …

 

G.3.3A.6 Brazil — Retreaded Tyres, para. 182
(WT/DS332/AB/R)

 

In sum, the Panel’s conclusion that the Import Ban is necessary was the result of a process involving, first, the examination of the contribution of the Import Ban to the achievement of its objective against its trade restrictiveness in the light of the interests at stake, and, secondly, the comparison of the possible alternatives, including associated risks, with the Import Ban. The analytical process followed by the Panel is consistent with the approach previously defined by the Appellate Body. The weighing and balancing is a holistic operation that involves putting all the variables of the equation together and evaluating them in relation to each other after having examined them individually, in order to reach an overall judgement. We therefore do not share the European Communities’ view that the Panel did not “actually” weigh and balance the relevant factors, or that the Panel made a methodological error in comparing the alternative options proposed by the European Communities with the Import Ban.

 

G.3.3A.7 Brazil — Retreaded Tyres, paras. 210-211
(WT/DS332/AB/R)

 

… [T]he issue of whether the Import Ban is necessary within the meaning of Article XX(b) of the GATT 1994 … illustrates the tensions that may exist between, on the one hand, international trade and, on the other hand, public health and environmental concerns arising from the handling of waste generated by a product at the end of its useful life. In this respect, the fundamental principle is the right that WTO Members have to determine the level of protection that they consider appropriate in a given context. Another key element of the analysis of the necessity of a measure under Article XX(b) is the contribution it brings to the achievement of its objective. A contribution exists when there is a genuine relationship of ends and means between the objective pursued and the measure at issue. To be characterized as necessary, a measure does not have to be indispensable. However, its contribution to the achievement of the objective must be material, not merely marginal or insignificant, especially if the measure at issue is as trade restrictive as an import ban. Thus, the contribution of the measure has to be weighed against its trade restrictiveness, taking into account the importance of the interests or the values underlying the objective pursued by it. As a key component of a comprehensive policy aiming to reduce the risks arising from the accumulation of waste tyres, the Import Ban produces such a material contribution to the realization of its objective. Like the Panel, we consider that this contribution is sufficient to conclude that the Import Ban is necessary, in the absence of reasonably available alternatives.

 

The European Communities proposed a series of alternatives to the Import Ban. Whereas the Import Ban is a preventive non-generation measure, most of the proposed alternatives are waste management and disposal measures that are remedial in character. We consider that measures to encourage domestic retreading or to improve the retreadability of tyres, a better enforcement of the import ban on used tyres, and a better implementation of existing collection and disposal schemes, are complementary to the Import Ban; indeed, they constitute mutually supportive elements of a comprehensive policy to deal with waste tyres. Therefore, these measures cannot be considered real alternatives to the Import Ban. As regards landfilling, stockpiling, co-incineration of waste tyres, and material recycling, these remedial methods carry their own risks or, because of the costs involved, are capable of disposing of only a limited number of waste tyres. The Panel did not err in concluding that the proposed measures or practices are not reasonably available alternatives.

 

G.3.3A.8 China — Publications and Audiovisual Products, para. 242 and footnote 455
(WT/DS363/AB/R)

 

We do not see that the Appellate Body’s approach to the “necessity” analysis in Brazil — Retreaded Tyres differs from that in US — Gambling, which in turn referred to Korea — Various Measures on Beef.455 In each case, a sequential process of weighing and balancing a series of factors was involved. Although the language used is not identical, both reports articulate the same approach and, like the Appellate Body report in Korea — Various Measures on Beef, emphasize the need to identify relevant factors and undertake a weighing and balancing process including, where relevant, with respect to proposed alternative measures that may be less trade restrictive while making an equivalent contribution to the relevant objective. These three reports also all recognize that a comprehensive analysis of the “necessity” of a measure is a sequential process. As such, the process must logically begin with a first step, proceed through a number of additional steps, and yield a final conclusion.

 

G.3.3A.9 China — Publications and Audiovisual Products, paras. 247-249, 251-253
(WT/DS363/AB/R)

 

… [T]he Panel, confronted with the task of analysing the “necessity” of multiple provisions and requirements, undertook an analysis that was, in part, aggregated and relevant to all such provisions and requirements and, in part, disaggregated and specific to each provision or requirement. The Panel’s analysis also involved distinct steps contemplated under the “weighing and balancing” test. The Panel did not, however, complete all of the analytical steps relevant to each provision in consecutive paragraphs of its Report. …

 

In separating parts of its overall analysis of specific provisions in this way, the Panel may have created some confusion. In particular, the Panel’s use of the word “conclude” in setting out its intermediate findings risks misleading a reader, as does its characterization of certain requirements as “necessary” before it had considered the availability of a less restrictive alternative measure. Yet, a careful reading of the Panel’s analysis of the necessity of the State plan requirement, in its entirety, makes clear that the Panel included all relevant factors in its weighing and balancing exercise, including with respect to the alternative measures proposed by the United States. Read in this broader context, it is clear that the “conclusion” reached by the Panel after having completed one part of the overall weighing and balancing process did not constitute a “finding” that the State plan requirement is “necessary” in the sense of Article XX(a) of the GATT 1994. Rather, this conclusion was in the nature of a preliminary result, an indication that the Panel had completed certain steps of its analysis. Moreover, the Panel was careful to add the qualification that its “conclusion” was reached only “in the absence of reasonably available alternatives”. Had there not been a less restrictive alternative measure reasonably available to China, the Panel’s intermediate finding would have stood as part of an ultimate finding of necessity. Given the outcome of the Panel’s analysis of the alternative measure proposed by the United States, however, it did not.

 

… The Panel chose to group together all of the relevant provisions for purposes of certain steps of its analysis but to analyse these provisions individually for purposes of other steps in its analysis. While this was not necessarily the only way that the Panel could have approached its task, we do not see that, in the circumstances of this case, the Panel’s approach amounted to error or contradicted the approach set out in previous Appellate Body reports.

 

 

… [T]he term “necessary”, in the abstract, refers to a range of degrees of necessity. The Appellate Body explained that determining whether a measure is “necessary” involves a process of weighing and balancing a series of factors that prominently include the contribution made by the measure to secure compliance with the law or regulation at issue, the importance of the common interests or values protected by that law or regulation, and the accompanying impact of the law or regulation on imports or exports. The greater the contribution a measure makes to the objective pursued, the more likely it is to be characterized as “necessary”.

 

In Brazil — Retreaded Tyres, the Appellate Body clarified how the analysis of the contribution made by a challenged measure to the achievement of the objective pursued is to be undertaken. The Appellate Body noted that a party seeking to demonstrate that its measures are “necessary” should seek to establish such necessity through “evidence or data, pertaining to the past or the present”, establishing that the measures at issue contribute to the achievement of the objectives pursued. In examining the evidence put forward, a panel must always assess the actual contribution made by the measure to the objective pursued.

 

However, this is not the only type of demonstration that could establish such a contribution. The Appellate Body explained that a panel is not bound to find that a measure does not make a contribution to the objective pursued merely because such contribution is not “immediately observable” or because, “[i]n the short-term, it may prove difficult to isolate the contribution [made by] one specific measure from those attributable to the other measures that are part of the same comprehensive policy”. Accordingly … :

 

… a panel might conclude that [a measure] is necessary on the basis of a demonstration that [it] is apt to produce a material contribution to the achievement of its objective. This demonstration could consist of quantitative projections in the future, or qualitative reasoning based on a set of hypotheses that are tested and supported by sufficient evidence.

 

G.3.3A.10 China — Publications and Audiovisual Products, paras. 288, 292, 294
(WT/DS363/AB/R)

 

We recall that, in US — Gambling, the Appellate Body stated that a panel must independently and objectively assess the “necessity” of the measure before it, based on the evidence in the record. The Appellate Body also affirmed that it is for the responding party to make a prima facie case that its measure is “necessary” by putting forward evidence and arguments that enable the panel to assess the challenged measure in the light of the relevant factors to be “weighed and balanced”.

 

 

We note that the Panel did not cite any evidence in support of its assumption that the State plan requirement imposed a limitation on the number of import entities. We also note that the Panel did not explain why the contribution made by the presumed limitation in the State plan requirement would be a “material” one. …

 

 

In reaching its finding regarding the contribution made by the State plan requirement to the protection of public morals in China, the Panel simply stated that limiting the number of import entities “can make a material contribution” to the protection of public morals in China. Yet, the Panel neither addressed quantitative projections nor provided qualitative reasoning based on evidence before it to support that finding. The Panel Report contains no discussion of how or to what extent the State plan requirement can or does make a contribution. For these reasons, we disagree with the Panel’s finding that China had met its burden of proof regarding the contribution of the State plan requirement to the protection of public morals in China.

 

G.3.3A.11 China — Publications and Audiovisual Products, para. 303
(WT/DS363/AB/R)

 

At the outset of our analysis, we recall that the assessment of the restrictive effect of a measure on international trade is part of the “weighing and balancing” approach for assessing “necessity” — including within the meaning of Article XX(a) of the GATT 1994 — employed by WTO panels and the Appellate Body. The text of Article XX(a), however, refers only to measures “necessary to protect public morals”. It does not, therefore, provide explicit guidance on the question of whether, in assessing “necessity”, a panel may take into account only the restrictive effect the measures have on imports of relevant products, or whether a panel may also consider the restrictive effect of the measures on importers or potential importers. The text of Article XX(a) does not specifically refer to “imports” or “importers” or, in different terms, “products” or “traders”. However, the chapeau of Article XX of the GATT 1994 refers in a somewhat different context to “restrictions on international trade”.

 

G.3.3A.12 China — Publications and Audiovisual Products, paras. 306-307
(WT/DS363/AB/R)

 

… [W]hile in principle a panel must assess the restrictive effect of a measure on international commerce, this test must be applied in the light of the specific obligation of the covered agreements that the respective measure infringes. The assessment of the restrictive effect to be taken into account in a particular dispute may, in appropriate cases, extend beyond an assessment of the restrictive effect on imported products, as this assessment must be undertaken in the light of the measure at issue, the specific obligation of the covered agreements that the measure infringes, and the defence being invoked.

 

In the present case, the Panel found China’s measures to be inconsistent with, inter alia, China’s obligation in paragraph 5.1 of its Accession Protocol to grant the right to trade to all enterprises with respect to goods. This obligation is not only concerned with the question of what can be traded, but more directly with the question of who is entitled to engage in trading. In view of, on the one hand, China’s measures, which impose a restriction on who can engage in importing the relevant products, and, on the other hand, the nature of the specific obligation in paragraph 5.1, which stipulates who China must permit to engage in importing, we see no error in the Panel’s tailoring its assessment of the restrictive effect of the provisions of China’s measures to take into account the restrictive effect on beneficiaries of the right to trade. …

 

G.3.3A.13 China — Publications and Audiovisual Products, para. 308
(WT/DS363/AB/R)

 

We turn next to China’s allegation that the Panel committed a “logical error” in finding that the provisions of its measures are not “necessary” for essentially the same reasons as the ones for which the Panel found those provisions to be in violation of China’s trading rights commitments. China suggests that the restrictive effect of a measure could be relevant to a panel’s analysis of whether a measure is consistent with an obligation, or its analysis of whether that measure can be justified under an exception, but that it could not be relevant for both questions. We disagree. The fact that the restrictive effect of a measure is relevant in one context does not preclude that it may also be relevant in the other. In analyzing whether the provisions of China’s measures are inconsistent with Article 5.1 of China’s Accession Protocol, the Panel assessed whether the provisions restrict the enterprises that may engage in importing. Thereafter, in analysing whether the provisions could be justified as “necessary” under Article XX(a) of the GATT 1994, the Panel assessed to what extent the provisions restrict those wishing to engage in importing, as well as how the restrictive effect comports with the degree of contribution to the achievement of the objective, and the societal importance and value of the legitimate objective concerned. The restrictive effect of the provision was relevant to each of these distinct analytical inquiries. Therefore, we do not believe that the Panel’s approach constitutes circular reasoning. On the contrary, it is the result of a proper sequential analysis.

 

G.3.3A.14 China — Publications and Audiovisual Products, para. 310
(WT/DS363/AB/R)

 

… The less restrictive the effects of the measure, the more likely it is to be characterized as “necessary”. Consequently, if a Member chooses to adopt a very restrictive measure, it will have to ensure that the measure is carefully designed so that the other elements to be taken into account in weighing and balancing the factors relevant to an assessment of the “necessity” of the measure will “outweigh” such restrictive effect. …

 

G.3.3A.15 China — Publications and Audiovisual Products, paras. 318-319
(WT/DS363/AB/R)

 

… In Korea — Various Measures on Beef and EC — Asbestos, the Appellate Body clarified that, as part of an overall evaluation of “necessity” using the “weighing and balancing” process, a panel must examine whether the responding party could reasonably be expected to employ an alternative measure, consistent (or less inconsistent) with the covered agreements, that would achieve the objectives pursued by the measure at issue. An alternative measure may be found not to be “reasonably available” where it is merely theoretical in nature, for instance, where the responding party is not capable of taking it, or where the measure imposes an undue burden on that Member, such as “prohibitive costs or substantial technical difficulties”. Moreover, a “reasonably available” alternative measure must be a measure that would preserve the responding party’s right to achieve its desired level of protection with respect to the objective pursued under Article XX of the GATT 1994.

 

As regards the burden of proof with respect to “reasonably available alternatives”, the Appellate Body explained in US — Gambling that a responding party invoking Article XIV(a) of the GATS bears the burden of demonstrating that its GATS-inconsistent measure is “necessary” to achieve the objective of protecting public morals. This burden does not imply that the responding party must take the initiative to demonstrate that there are no reasonably available alternatives that would achieve its objectives. When, however, the complaining party identifies an alternative measure that, in its view, the responding party should have taken, the responding party will be required to demonstrate why its challenged measure nevertheless remains “necessary” in the light of that alternative or, in other words, why the proposed alternative is not a genuine alternative or is not “reasonably available”. If a responding party demonstrates that the alternative is not “reasonably available”, in the light of the interests or values being pursued and the party’s desired level of protection, it follows that the challenged measure must be “necessary”.

 

G.3.3A.16 China — Publications and Audiovisual Products, paras. 327-328
(WT/DS363/AB/R)

 

… As the Appellate Body report in US —Gambling makes clear, an alternative measure should not be found not to be reasonably available merely because it involves some change or administrative cost. Changing an existing measure may involve cost and a Member cannot demonstrate that no reasonably available alternative exists merely by showing that no cheaper alternative exists. Rather, in order to establish that an alternative measure is not “reasonably available”, the respondent must establish that the alternative measure would impose an undue burden on it, and it must support such an assertion with sufficient evidence.

 

In the present case, China did not provide evidence to the Panel substantiating the likely nature or magnitude of the costs that would be associated with the proposed alternative, as compared to the current system. Nor has China, in its appeal, pointed to specific evidence in the Panel record that would allow us to conclude that the Panel erred in failing to attribute sufficient significance to the evidence of financial and administrative burden that may attach to the proposed alternative measure. Instead, China simply argues that the proposal would involve “tremendous restructuring” and would “obviously put on China an excessively heavy financial and administrative burden”. However, as we see it, adopting any alternative measure will, by definition, involve some change, and this alone does not suffice to demonstrate that the alternative would impose an undue burden.

 

G.3.3A.17 China — Publications and Audiovisual Products, para. 335
(WT/DS363/AB/R)

 

Finally, it may be useful to indicate what we are not saying in reaching the above conclusion. we are agreeing with the Panel that the United States has demonstrated that the proposed alternative would be less restrictive and would make a contribution that is at least equivalent to the contribution made by the measures at issue to securing China’s desired level of protection of public morals. China, in turn, has not demonstrated that this alternative is not reasonably available. This does not mean that having the Chinese Government assume sole responsibility for conducting content review is the only alternative available to China, nor that China must adopt such a scheme. It does mean that China has not successfully justified under Article XX(a) of the GATT 1994 the provisions and requirements found to be inconsistent with China’s trading rights commitments under its Accession Protocol and Working Party Report. It follows, therefore, that China is under an obligation to bring those measures into conformity with its obligations under the covered agreements, including its trading rights commitments. Like all WTO Members, China retains the prerogative to select its preferred method of implementing the rulings and recommendations of the DSB for measures found to be inconsistent with its obligations under the covered agreements.

 
G.3.4 Article XX(b) — Objective pursued     back to top

G.3.4.1 EC — Asbestos, para. 172
(WT/DS135/AB/R)

 

… In this case, the objective pursued by the measure is the preservation of human life and health through the elimination, or reduction, of the well-known, and life-threatening, health risks posed by asbestos fibres. The value pursued is both vital and important in the highest degree. The remaining question, then, is whether there is an alternative measure that would achieve the same end and that is less restrictive of trade than a prohibition.

 

G.3.4.2 Brazil — Retreaded Tyres, para. 170
(WT/DS332/AB/R)

 

We note that the objective of the Import Ban is the reduction of the “exposure to the risks to human, animal or plant life or health arising from the accumulation of waste tyres” and that “Brazil’s chosen level of protection is the reduction of [these] risks … to the maximum extent possible”, and that a measure or practice will not be viewed as an alternative unless it “preserve[s] for the responding Member its right to achieve its desired level of protection with respect to the objective pursued”.


G.3.4A Article XX(b) — Alternative measures     back to top

G.3.4A.1 Brazil — Retreaded Tyres, para. 156
(WT/DS332/AB/R)

 

In order to determine whether a measure is “necessary” within the meaning of Article XX(b) of the GATT 1994, a panel must assess all the relevant factors, particularly the extent of the contribution to the achievement of a measure’s objective and its trade restrictiveness, in the light of the importance of the interests or values at stake. If this analysis yields a preliminary conclusion that the measure is necessary, this result must be confirmed by comparing the measure with its possible alternatives, which may be less trade restrictive while providing an equivalent contribution to the achievement of the objective pursued. It rests upon the complaining Member to identify possible alternatives to the measure at issue that the responding Member could have taken. As the Appellate Body indicated in US — Gambling, while the responding Member must show that a measure is necessary, it does not have to “show, in the first instance, that there are no reasonably available alternatives to achieve its objectives”. We recall that, in order to qualify as an alternative, a measure proposed by the complaining Member must be not only less trade restrictive than the measure at issue, but should also “preserve for the responding Member its right to achieve its desired level of protection with respect to the objective pursued”. If the complaining Member has put forward a possible alternative measure, the responding Member may seek to show that the proposed measure does not allow it to achieve the level of protection it has chosen and, therefore, is not a genuine alternative. The responding Member may also seek to demonstrate that the proposed alternative is not, in fact, “reasonably available”. As the Appellate Body indicated in US — Gambling, “[a]n alternative measure may be found not to be ‘reasonably available’ … where it is merely theoretical in nature, for instance, where the responding Member is not capable of taking it, or where the measure imposes an undue burden on that Member, such as prohibitive costs or substantial technical difficulties.” If the responding Member demonstrates that the measure proposed by the complaining Member is not a genuine alternative or is not “reasonably available”, taking into account the interests or values being pursued and the responding Member’s desired level of protection, it follows that the measure at issue is necessary.

 

G.3.4A.2 Brazil — Retreaded Tyres, paras. 171-172
(WT/DS332/AB/R)

 

We recall that tyres — new or retreaded — are essential for modern transportation. However, at the end of their useful life, they turn into waste that carries risks for public health and the environment. Governments, legitimately, take actions to minimize the adverse effects of waste tyres. They may adopt preventive measures aiming to reduce the accumulation of waste tyres, a category into which the Import Ban falls. Governments may also contemplate remedial measures for the management and disposal of waste tyres, such as landfilling, stockpiling, incineration of waste tyres, and material recycling. Many of these measures or practices carry, however, their own risks or require the commitment of substantial resources, or advanced technologies or know-how. Thus, the capacity of a country to implement remedial measures that would be particularly costly, or would require advanced technologies, may be relevant to the assessment of whether such measures or practices are reasonably available alternatives to a preventive measure, such as the Import Ban, which does not involve “prohibitive costs or substantial technical difficulties”.

 

Among the possible alternatives, the European Communities referred to measures to encourage domestic retreading or improve the retreadability of used tyres, as well as a better enforcement of the import ban on used tyres and of existing collection and disposal schemes. In fact, like the Import Ban, these measures already figure as elements of a comprehensive strategy designed by Brazil to deal with waste tyres. Substituting one element of this comprehensive policy for another would weaken the policy by reducing the synergies between its components, as well as its total effect. We are therefore of the view that the Panel did not err in rejecting as alternatives to the Import Ban components of Brazil’s policy regarding waste tyres that are complementary to the Import Ban.

 

G.3.4A.3 Brazil — Retreaded Tyres, paras. 174-175
(WT/DS332/AB/R)

 

In evaluating whether the measures or practices proposed by the European Communities were “alternatives”, the Panel sought to determine whether they would achieve Brazil’s policy objective and chosen level of protection, that is to say, reducing the “exposure to the risks to human, animal or plant life or health arising from the accumulation of waste tyres” to the maximum extent possible. In this respect, we believe, like the Panel, that non-generation measures are more apt to achieve this objective because they prevent the accumulation of waste tyres, while waste management measures dispose of waste tyres only once they have accumulated. Furthermore, we note that, in comparing a proposed alternative to the Import Ban, the Panel took into account specific risks attached to the proposed alternative, such as the risk of leaching of toxic substances that might be associated to landfilling, or the risk of toxic emissions that might arise from the incineration of waste tyres. In our view, the Panel did not err in so doing. Indeed, we do not see how a panel could undertake a meaningful comparison of the measure at issue with a possible alternative while disregarding the risks arising out of the implementation of the possible alternative. In this case, the Panel examined as proposed alternatives landfilling, stockpiling, and waste tyre incineration, and considered that, even if these disposal methods were performed under controlled conditions, they nevertheless pose risks to human health similar or additional to those Brazil seeks to reduce through the Import Ban. Because these practices carry their own risks, and these risks do not arise from non-generation measures such as the Import Ban, we believe, like the Panel, that these practices are not reasonably available alternatives.

 

With respect to material recycling, we share the Panel’s view that this practice is not as effective as the Import Ban in reducing the exposure to the risks arising from the accumulation of waste tyres. Material recycling applications are costly, and hence capable of disposing of only a limited number of waste tyres. We also note that some of them might require advanced technologies and know-how that are not readily available on a large scale. Accordingly, we are of the view that the Panel did not err in concluding that material recycling is not a reasonably available alternative to the Import Ban.

 

G.3.4A.4 Brazil — Retreaded Tyres, para. 182
(WT/DS332/AB/R)

 

In sum, the Panel’s conclusion that the Import Ban is necessary was the result of a process involving, first, the examination of the contribution of the Import Ban to the achievement of its objective against its trade restrictiveness in the light of the interests at stake, and, secondly, the comparison of the possible alternatives, including associated risks, with the Import Ban. The analytical process followed by the Panel is consistent with the approach previously defined by the Appellate Body. The weighing and balancing is a holistic operation that involves putting all the variables of the equation together and evaluating them in relation to each other after having examined them individually, in order to reach an overall judgement. We therefore do not share the European Communities’ view that the Panel did not “actually” weigh and balance the relevant factors, or that the Panel made a methodological error in comparing the alternative options proposed by the European Communities with the Import Ban.

 

G.3.4A.5 Brazil — Retreaded Tyres, para. 207
(WT/DS332/AB/R)

 

… The European Communities argues that the Panel erred in rejecting material recycling applications [as a reasonably available alternative measure] on the basis of their costs, suggesting that the Panel erroneously equated high costs with prohibitive costs, when only the latter would justify a finding that a given alternative is not “reasonably available”. This argument is based on an artificial distinction between high and prohibitive costs. Further, in our view, this is not an issue relating to the Panel’s appreciation of the evidence, but rather to its legal characterization of the facts. In any event, what disqualifies these alternatives, according to the Panel, is not their high costs as such, but the effect of these high costs in limiting the disposal capacity of these methods.

 
G.3.5 Article XX(d) — Level of enforcement — Alternative measure     back to top

G.3.5.1 Korea — Various Measures on Beef, para. 176
(WT/DS161/AB/R, WT/DS169/AB/R)

 

It is not open to doubt that Members of the WTO have the right to determine for themselves the level of enforcement of their WTO-consistent laws and regulations. We note that this has also been recognized by the panel in United States — Section 337, where it said: “The Panel wished to make it clear that this [the obligation to choose a reasonably available GATT-consistent or less inconsistent measure] does not mean that a contracting party could be asked to change its substantive patent law or its desired level of enforcement of that law. ” (emphasis added). …

G.3.5A Article XX(d) — “laws or regulations”     back to top

G.3.5A.1 Mexico — Taxes on Soft Drinks, para. 69
(WT/DS308/AB/R)

 

… Neither disputes that the expression “laws or regulations” encompasses the rules adopted by a WTO Member’s legislative or executive branches of government. We agree with the United States that one does not immediately think about international law when confronted with the term “laws” in the plural. Domestic legislative or regulatory acts sometimes may be intended to implement an international agreement. In such situations, the origin of the rule is international, but the implementing instrument is a domestic law or regulation. In our view, the terms “laws or regulations” refer to rules that form part of the domestic legal system of a WTO Member. Thus, the “laws or regulations” with which the Member invoking Article XX(d) may seek to secure compliance do not include obligations of another WTO Member under an international agreement.

 

G.3.5A.2 Mexico — Taxes on Soft Drinks, paras. 70-71
(WT/DS308/AB/R)

 

… the illustrative list [of “laws or regulations” provided in Article XX(d)] reinforces the notion that the terms “laws or regulations” refer to rules that form part of the domestic legal system of a WTO Member and do not extend to the international obligations of another WTO Member.

 

Our understanding of the terms “laws or regulations” is consistent with the context of Article XX(d). For example, paragraph (h) of Article XX refers to “obligations under any intergovernmental commodity agreement”. The express language of paragraph (h) would seem to contradict Mexico’s suggestion that international agreements are implicitly included in the terms “laws or regulations”. Article X:1 of the GATT 1994 … refers to “[l]aws, regulations, judicial decisions and administrative rulings” and to “[a]greements affecting international trade policy which are in force between a government … of any Member and the government … of any other Member”. Thus, a distinction is drawn in the same provision between “laws [and] regulations” and “international agreements”. Thus, Articles X:1 and XX(h) of the GATT 1994 do not lend support to interpreting the terms “laws or regulations” in Article XX(d) as including the international obligations of a Member other than that invoking the provision.

G.3.5B Article XX(d) — “to secure compliance”     back to top

G.3.5B.1 Mexico — Taxes on Soft Drinks, para. 72
(WT/DS308/AB/R)

 

… The terms “to secure compliance” speak to the types of measures that a WTO Member can seek to justify under Article XX(d). They relate to the design of the measures sought to be justified. There is no justification under Article XX(d) for a measure that is not designed “to secure compliance” with a Member’s laws or regulations. Thus, the terms “to secure compliance” do not expand the scope of the terms “laws or regulations” to encompass the international obligations of another WTO Member. Rather, the terms “to secure compliance” circumscribe the scope of Article XX(d).

 

G.3.5B.2 Mexico — Taxes on Soft Drinks, paras. 74-75
(WT/DS308/AB/R)

 

…We see no reason … to derive from the Appellate Body’s examination of “necessity”, in US — Gambling, a requirement of “certainty” applicable to the terms “to secure compliance”. In our view, a measure can be said to be designed “to secure compliance” even if the measure cannot be guaranteed to achieve its result with absolute certainty. Nor do we consider that the “use of coercion” is a necessary component of a measure designed “to secure compliance”. Rather, Article XX(d) requires that the design of the measure contribute “to secur[ing] compliance with laws or regulations which are not inconsistent with the provisions of” the GATT 1994.

 

… Even if “international countermeasures” could be described as intended “to secure compliance”, what they seek “to secure compliance with” — that is, the international obligations of another WTO Member — would be outside the scope of Article XX(d). This is because “laws or regulations” within the meaning of Article XX(d) refer to the rules that form part of the domestic legal order of the WTO Member invoking the provision and do not include the international obligations of another WTO Member.

 

G.3.5B.3 Mexico — Taxes on Soft Drinks, para. 77
(WT/DS308/AB/R)

 

We observe, furthermore, that Mexico’s interpretation of Article XX(d) disregards the fact that the GATT 1994 and the DSU specify the actions that a WTO Member may take if it considers that another WTO Member has acted inconsistently with its obligations under the GATT 1994 or any of the other covered agreements. By the same logic, such action under Article XX(d) would evade the specific and detailed rules that apply when a WTO Member seeks to take countermeasures in response to another Member’s failure to comply with rulings and recommendations of the DSB pursuant to Article XXIII:2 of the GATT 1994 and Articles 22 and 23 of the DSU. Mexico’s interpretation would allow WTO Members to adopt WTO-inconsistent measures based upon a unilateral determination that another Member has breached its WTO obligations, in contradiction with Articles 22 and 23 of the DSU and Article XXIII:2 of the GATT 1994.

 

G.3.5B.4 Mexico — Taxes on Soft Drinks, para. 79
(WT/DS308/AB/R)

 

For these reasons, we agree with the Panel that Article XX(d) is not available to justify WTO-inconsistent measures that seek “to secure compliance” by another WTO Member with that other Member’s international obligations. In sum, while we agree with the Panel’s conclusion, several aspects of our reasoning set out above differ from the Panel’s own reasoning. First, we conclude that the terms “laws or regulations” cover rules that form part of the domestic legal system of a WTO Member, including rules deriving from international agreements that have been incorporated into the domestic legal system of a WTO Member or have direct effect according to that WTO Member’s legal system. Second, we have found that Article XX(d) does not require the “use of coercion” nor that the measure sought to be justified results in securing compliance with absolute certainty. Rather, Article XX(d) requires that the measure be designed “to secure compliance with laws or regulations which are not inconsistent with the provisions of” the GATT 1994. Finally, we do not endorse the Panel’s reliance on the Appellate Body’s interpretation in US — Gambling of the term “necessary” to interpret the terms “to secure compliance” in Article XX(d).

 
G.3.6 Article XX(d) — Necessity test     back to top

G.3.6.1 Korea — Various Measures on Beef, para. 161
(WT/DS161/AB/R, WT/DS169/AB/R)

 

We believe that, as used in the context of Article XX(d), the reach of the word “necessary” is not limited to that which is “indispensable” or “of absolute necessity” or “inevitable”. Measures which are indispensable or of absolute necessity or inevitable to secure compliance certainly fulfil the requirements of Article XX(d). But other measures, too, may fall within the ambit of this exception. As used in Article XX(d), the term “necessary” refers, in our view, to a range of degrees of necessity. At one end of this continuum lies “necessary” understood as “indispensable”; at the other end, is “necessary” taken to mean as “making a contribution to”. We consider that a “necessary” measure is, in this continuum, located significantly closer to the pole of “indispensable” than to the opposite pole of simply “making a contribution to”.

 

G.3.6.2 Korea — Various Measures on Beef, para. 162
(WT/DS161/AB/R, WT/DS169/AB/R)

 

… It seems to us that a treaty interpreter assessing a measure claimed to be necessary to secure compliance of a WTO-consistent law or regulation may, in appropriate cases, take into account the relative importance of the common interests or values that the law or regulation to be enforced is intended to protect. The more vital or important those common interests or values are, the easier it would be to accept as “necessary” a measure designed as an enforcement instrument.

 

G.3.6.3 Korea — Various Measures on Beef, para. 163
(WT/DS161/AB/R, WT/DS169/AB/R)

 

There are other aspects of the enforcement measure to be considered in evaluating that measure as “necessary”. One is the extent to which the measure contributes to the realization of the end pursued, the securing of compliance with the law or regulation at issue. The greater the contribution, the more easily a measure might be considered to be “necessary”. Another aspect is the extent to which the compliance measure produces restrictive effects on international commerce, that is, in respect of a measure inconsistent with Article III:4, restrictive effects on imported goods. A measure with a relatively slight impact upon imported products might more easily be considered as “necessary” than a measure with intense or broader restrictive effects.

 

G.3.6.4 Korea — Various Measures on Beef, para. 164
(WT/DS161/AB/R, WT/DS169/AB/R)

 

In sum, determination of whether a measure, which is not “indispensable”, may nevertheless be “necessary” within the contemplation of Article XX(d), involves in every case a process of weighing and balancing a series of factors which prominently include the contribution made by the compliance measure to the enforcement of the law or regulation at issue, the importance of the common interests or values protected by that law or regulation, and the accompanying impact of the law or regulation on imports or exports.

 

G.3.6.5 Dominican Republic — Import and Sale of Cigarettes, para. 70
(WT/DS302/AB/R)

 

The Appellate Body Reports in Korea — Various Measures on Beef, EC — Asbestos and US—Gambling indicate that, in the assessment of whether a proposed alternative to the impugned measure is reasonably available, factors such as the trade impact of the measure, the importance of the interests protected by the measure, or the contribution of the measure to the realization of the end pursued, should be taken into account in the analysis. The weighing and balancing process of these three factors also informs the determination whether a WTO-consistent alternative measure which the Member concerned could reasonably be expected to employ is available, or whether a less WTO-inconsistent measure is reasonably available. …

 

G.3.6.6 Dominican Republic — Import and Sale of Cigarettes, para. 72
(WT/DS302/AB/R)

 

Having assessed the importance of the interests protected by the tax stamp requirement, its trade impact, and its contribution to the realization of the end pursued, the Panel also considered whether a WTO-consistent alternative measure is reasonably available to secure compliance with the Dominican Republic’s tax laws and regulations appropriate to the level of enforcement pursued by the Dominican Republic. In the light of its analysis of the relevant factors, especially the measure’s contribution to the realization of the end pursued, the Panel opined that the alternative of providing secure tax stamps to foreign exporters, so that those tax stamps could be affixed on cigarette packets in the course of their own production process, prior to importation, would be equivalent to the tax stamp requirement in terms of allowing the Dominican Republic to secure the high level of enforcement it pursues with regard to tax collection and the prevention of cigarette smuggling. The Panel gave substantial weight to its finding that the tax stamp requirement is of limited effectiveness in preventing tax evasion and cigarette smuggling; in particular, it found “no evidence to conclude that the tax stamp requirement secures a zero tolerance level of enforcement with regard to tax collection and the prevention of cigarette smuggling”. We consider that the Panel conducted an appropriate analysis, following the approach set out in Korea — Various Measures on Beef and in EC — Asbestos, and affirmed in US — Gambling. We see no reason to disturb the Panel’s conclusions in respect of the existence of a reasonably available alternative measure to the tax stamp requirement.

 

G.3.6.7 Mexico — Taxes on Soft Drinks, para. 74
(WT/DS308/AB/R)

 

… A measure that is not suitable or capable of securing compliance with the relevant laws or regulations will not meet the “necessity” requirement. …

 

G.3.6.8 Mexico — Taxes on Soft Drinks, para. 79
(WT/DS308/AB/R)

 

… we do not endorse the Panel’s reliance on the Appellate Body’s interpretation in US —Gambling of the term “necessary” to interpret the terms “to secure compliance” in Article XX(d).

 

G.3.6.9 US — Shrimp (Thailand) / US — Customs Bond Directive, paras. 307, 310, 316-317, 319
(WT/DS343/AB/R, WT/DS345/AB/R)

 

… the Panel addressed at the interim stage the issue of whether the United States should be permitted to “defend” the [enhanced continuous bond requirement] simultaneously under the Ad Note and under Article XX(d) of the GATT 1994. India had argued, first, that the Panel should have evaluated whether a Member must invoke footnote 24 of the Anti-Dumping Agreement in order to assert an affirmative defence under Article XX; and, secondly, given that the Panel had found that Article VI and the Ad Note and the Anti-Dumping Agreement constitute lex specialis, the Panel should have refused to evaluate the defence of the [enhanced continuous bond requirement] raised by the United States under Article XX(d) of the GATT 1994. The Panel rejected India’s arguments …

 

 

India’s appeal raises systemic issues about the availability of a defence under Article XX(d) to justify a measure found to constitute “specific action against dumping” under Article 18.1 of the Anti-Dumping Agreement, and not to be in accordance with the Ad Note to Article VI:2 and 3 of the GATT 1994, as well as Article 18.1 of the Anti-Dumping Agreement. Assuming, arguendo, that such a defence is available to the United States, we proceed to consider the United States’ appeal of the Panel’s finding that the [enhanced continuous bond requirement], as applied to subject shrimp, is “necessary” to secure compliance with certain United States laws and regulations within the meaning of Article XX(d). …

 

 

… we are of the view that the “necessity” test under Article XX(d) is different from the “reasonableness” test under the Ad Note. Relying on Appellate Body jurisprudence, the Panel considered that the following factors are relevant in determining whether a measure is “necessary” to secure compliance with laws and regulations: (i) the relative importance of the values or objectives the law or regulation is intended to protect; (ii) the extent to which the measure contributes to the realization of the end pursued — the securing of compliance with the law or regulation at issue; and (iii) the restrictive impact of the measure at issue on imports. We see no error in the Panel’s analysis of the meaning of the term “necessary” and the factors relied upon by it to evaluate the necessity of the [enhanced continuous bond requirement] to secure compliance with certain laws and regulations of the United States, as the Panel’s analysis is in consonance with the previous jurisprudence of the Appellate Body.

 

The [enhanced continuous bond requirement] is intended to secure potential additional liability that might arise from significant increases in the amount of dumping after the imposition of an anti-dumping duty order. The United States has not demonstrated that the margins of dumping for subject shrimp were likely to increase significantly so as to result in significant additional liability over and above the cash deposit rates. Like the Panel, we do not, therefore, see how taking security, such as the [enhanced continuous bond requirement], can be viewed as being “necessary” in the sense of it contributing to the realization of the objective of ensuring the final collection of anti-dumping or countervailing duties in the event of default by importers.

 

 

In view of this conclusion that the [enhanced continuous bond requirement], as applied to subject shrimp, is not “necessary” within the meaning of Article XX(d), we do not express a view on the question of whether a defence under Article XX(d) of the GATT 1994 was available to the United States.

 
G.3.7 Article XX(g) — “conservation of exhaustible natural resources”     back to top

G.3.7.1 US — Shrimp, para. 128
(WT/DS58/AB/R)

 

… Textually, Article XX(g) is not limited to the conservation of “mineral” or “non-living” natural resources. The complainants’ principal argument is rooted in the notion that “living” natural resources are “renewable” and therefore cannot be “exhaustible” natural resources. We do not believe that “exhaustible” natural resources and “renewable” natural resources are mutually exclusive. One lesson that modern biological sciences teach us is that living species, though in principle, capable of reproduction and, in that sense, “renewable”, are in certain circumstances indeed susceptible of depletion, exhaustion and extinction, frequently because of human activities. Living resources are just as “finite” as petroleum, iron ore and other non-living resources.

 

G.3.7.2 US — Shrimp, para. 130
(WT/DS58/AB/R)

 

From the perspective embodied in the preamble of the WTO Agreement, we note that the generic term “natural resources” in Article XX(g) is not “static” in its content or reference but is rather “by definition, evolutionary”. It is, therefore, pertinent to note that modern international conventions and declarations make frequent references to natural resources as embracing both living and non-living resources. …

 

G.3.7.3 US — Shrimp, para. 153
(WT/DS58/AB/R)

 

[The language of the Preamble of the WTO Agreement] demonstrates a recognition by WTO negotiators that optimal use of the world’s resources should be made in accordance with the objective of sustainable development. As this preambular language reflects the intentions of negotiators of the WTO Agreement, we believe it must add colour, texture and shading to our interpretation of the agreements annexed to the WTO Agreement, in this case, the GATT 1994. We have already observed that Article XX(g) of the GATT 1994 is appropriately read with the perspective embodied in the above preamble.

 
G.3.8 Article XX(g) — “measures made effective in conjunction with”     back to top

G.3.8.1 US — Gasoline, pp. 20-21, DSR 1996:I, p. 3 at 19-20
(WT/DS2/AB/R)

 

… the clause “if such measures are made effective in conjunction with restrictions on domestic product or consumption” is appropriately read as a requirement that the measures concerned impose restrictions, not just in respect of imported gasoline but also with respect to domestic gasoline. The clause is a requirement of even-handedness in the imposition of restrictions, in the name of conservation, upon the production or consumption of exhaustible natural resources.

 

… if no restrictions on domestically produced like products are imposed at all, and all limitations are placed upon imported products alone, the measure cannot be accepted as primarily or even substantially designed for implementing conservationist goals. The measure would simply be naked discrimination for protecting locally produced goods.

 

We do not believe … that the clause “if made effective in conjunction with restrictions on domestic production or consumption” was intended to establish an empirical “effects test” for the availability of the Article XX(g) exception. …

 

G.3.8.2 US — Shrimp, paras. 144-145
(WT/DS58/AB/R)

 

… We believe that, in principle, Section 609 is an even-handed measure.

 

Accordingly, we hold that Section 609 is a measure made effective in conjunction with the restrictions on domestic harvesting of shrimp, as required by Article XX(g).

 
G.3.9 Article XX(g) — “relating to”     back to top

G.3.9.1 US — Gasoline, pp. 17-18, DSR 1996:I, p. 3 at 16
(WT/DS2/AB/R)

 

… In enumerating the various categories of governmental acts, laws or regulations Which WTO Members may carry out or promulgate in pursuit of differing legitimate state policies or interests outside the realm of trade liberalization, Article XX uses different terms in respect of different categories:

 

“necessary” — in paragraphs (a), (b) and (d); “essential” — in paragraph (j); “relating to” — in paragraphs (c), (e) and (g); “for the protection of” — in paragraph (f); “in pursuance of” — in paragraph (h); and “involving” — in paragraph (i).

 

It does not seem reasonable to suppose that the WTO Members intended to require, in respect of each and every category, the same kind or degree of connection or relationship between the measure under appraisal and the state interest or policy sought to be promoted or realized.

 

G.3.9.2 US — Gasoline, p. 18, DSR 1996:I, p. 3 at 16-17
(WT/DS2/AB/R)

 

… Article XX(g) and its phrase, “relating to the conservation of exhaustible natural resources,” need to be read in context and in such a manner as to give effect to the purposes and objects of the General Agreement. The context of Article XX(g) includes the provisions of the rest of the General Agreement, including in particular Articles I, III and XI; conversely, the context of Articles I and III and XI includes Article XX. Accordingly, the phrase “relating to the conservation of exhaustible natural resources” may not be read so expansively as seriously to subvert the purpose and object of Article III:4. Nor may Article III:4 be given so broad a reach as effectively to emasculate Article XX(g) and the policies and interests it embodies. …

 

G.3.9.3 US — Gasoline, pp. 18-19, DSR 1996:I, p. 3 at 17
(WT/DS2/AB/R)

 

All the participants and the third participants in this appeal accept … that a measure must be “primarily aimed at” the conservation of exhaustible natural resources in order to fall within the scope of Article XX(g). Accordingly, we see no need to examine this point further, save, perhaps, to note that the phrase “primarily aimed at” is not itself treaty language and was not designed as a simple litmus test for inclusion or exclusion from Article XX(g).

 

G.3.9.4 US — Gasoline, p. 19, DSR 1996:I, p. 3 at 18
(WT/DS2/AB/R)

 

… We consider that, given that substantial relationship, the baseline establishment rules cannot be regarded as merely incidentally or inadvertently aimed at the conservation of clean air in the United States for the purposes of Article XX(g).

 

G.3.9.5 US — Shrimp, paras. 141-142
(WT/DS58/AB/R)

 

In its general design and structure, therefore, Section 609 is not a simple, blanket prohibition of the importation of shrimp imposed without regard to the consequences (or lack thereof) of the mode of harvesting employed upon the incidental capture and mortality of sea turtles. Focusing on the design of the measure here at stake, it appears to us that Section 609, cum implementing guidelines, is not disproportionately wide in its scope and reach in relation to the policy objective of protection and conservation of sea turtle species. The means are, in principle, reasonably related to the ends. The means and ends relationship between Section 609 and the legitimate policy of conserving an exhaustible, and, in fact, endangered species, is observably a close and real one. …

 

In our view, therefore, Section 609 is a measure “relating to” the conservation of an exhaustible natural resource within the meaning of Article XX(g) of the GATT 1994.

 
G.3.10 Article XX(g) — Jurisdictional limitation. See also National Treatment, Relationship between Article III and Article XX (N.1.12)     back to top

G.3.10.1 US — Shrimp, para. 121
(WT/DS58/AB/R)

 

… conditioning access to a Member’s domestic market on whether exporting Members comply with, or adopt, a policy or policies unilaterally prescribed by the importing Member may, to some degree, be a common aspect of measures falling within the scope of one or another of the exceptions (a) to (j) of Article XX. Paragraphs (a) to (j) comprise measures that are recognized as exceptions to substantive obligations established in the GATT 1994, because the domestic policies embodied in such measures have been recognized as important and legitimate in character. It is not necessary to assume that requiring from exporting countries compliance with, or adoption of, certain policies (although covered in principle by one or another of the exceptions) prescribed by the importing country, renders a measure a priori incapable of justification under Article XX. Such an interpretation renders most, if not all, of the specific exceptions of Article XX inutile, a result abhorrent to the principles of interpretation we are bound to apply.

 

G.3.10.2 US — Shrimp (Article 21.5 — Malaysia), para. 138
(WT/DS58/AB/RW)

 

In our view, Malaysia overlooks the significance of this statement [in paragraph 121 of US — Shrimp]. Contrary to what Malaysia suggests, this statement is not “dicta”. As we said before, it appears to us “that conditioning access to a Member’s domestic market on whether exporting Members comply with, or adopt, a policy or policies unilaterally prescribed by the importing Member may, to some degree, be a common aspect of measures falling within the scope of one or another of the exceptions (a) to (j) of Article XX”. This statement expresses a principle that was central to our ruling in United States — Shrimp.

 

G.3.10.3 US — Shrimp, para. 133
(WT/DS58/AB/R)

 

… We do not pass upon the question of whether there is an implied jurisdictional limitation in Article XX(g), and if so, the nature or extent of that limitation. We note only that in the specific circumstances of the case before us, there is a sufficient nexus between the migratory and endangered marine populations involved and the United States for purposes of Article XX(g).

 
G.3.11 Chapeau of Article XX — General     back to top

G.3.11.1 US — Gasoline, p. 22, DSR 1996:I, p. 3 at 20
(WT/DS2/AB/R)

 

The chapeau by its express terms addresses, not so much the questioned measure or its specific contents as such, but rather the manner in which that measure is applied. It is, accordingly, important to underscore that the purpose and object of the introductory clauses of Article XX is generally the prevention of “abuse of the exceptions … ”. …

 

G.3.11.2 US — Gasoline, p. 22, DSR 1996:I, p. 3 at 21
(WT/DS2/AB/R)

 

… If those exceptions are not to be abused or misused, in other words, the measures falling within the particular exceptions must be applied reasonably, with due regard both to the legal duties of the party claiming the exception and the legal rights of the other parties concerned.

 

G.3.11.3 US — Gasoline, p. 23, DSR 1996:I, p. 3 at 21
(WT/DS2/AB/R)

 

… The provisions of the chapeau cannot logically refer to the same standard(s) by which a violation of a substantive rule has been determined to have occurred. …

 

G.3.11.4 US — Gasoline, p. 25, DSR 1996:I, p. 3 at 23
(WT/DS2/AB/R)

 

“Arbitrary discrimination”, “unjustifiable discrimination” and “disguised restriction” on international trade may, accordingly, be read side-by-side; they impart meaning to one another. It is clear to us that “disguised restriction” includes disguised discrimination in international trade. It is equally clear that concealed or unannounced restriction or discrimination in international trade does not exhaust the meaning of “disguised restriction”. …

 

G.3.11.5 US — Shrimp, para. 159
(WT/DS58/AB/R)

 

The task of interpreting and applying the chapeau is, hence, essentially the delicate one of locating and marking out a line of equilibrium between the right of a Member to invoke an exception under Article XX and the rights of the other Members under varying substantive provisions (e.g., Article XI) of the GATT 1994, so that neither of the competing rights will cancel out the other and thereby distort and nullify or impair the balance of rights and obligations constructed by the Members themselves in that Agreement. The location of the line of equilibrium, as expressed in the chapeau, is not fixed and unchanging; the line moves as the kind and the shape of the measures at stake vary and as the facts making up specific cases differ.

 

G.3.11.6 US — Shrimp, paras. 156-157
(WT/DS58/AB/R)

 

… we consider that [the chapeau of Article XX] embodies the recognition on the part of WTO Members of the need to maintain a balance of rights and obligations between the right of a Member to invoke one or another of the exceptions of Article XX, specified in paragraphs (a) to (j), on the one hand, and the substantive rights of the other Members under the GATT 1994, on the other hand. Exercise by one Member of its right to invoke an exception, such as Article XX(g), if abused or misused, will, to that extent, erode or render naught the substantive treaty rights in, for example, Article XI:1, of other Members. Similarly, because the GATT 1994 itself makes available the exceptions of Article XX, in recognition of the legitimate nature of the policies and interests there embodied, the right to invoke one of those exceptions is not to be rendered illusory. The same concept may be expressed from a slightly different angle of vision, thus, a balance must be struck between the right of a Member to invoke an exception under Article XX and the duty of that same Member to respect the treaty rights of the other Members. …

 

In our view, the language of the chapeau makes clear that each of the exceptions in paragraphs (a) to (j) of Article XX is a limited and conditional exception from the substantive obligations contained in the other provisions of the GATT 1994, that is to say, the ultimate availability of the exception is subject to the compliance by the invoking Member with the requirements of the chapeau. …

 

G.3.11.7 US — Shrimp, para. 160
(WT/DS58/AB/R)

 

… We note, preliminarily, that the application of a measure may be characterized as amounting to an abuse or misuse of an exception of Article XX not only when the detailed operating provisions of the measure prescribe the arbitrary or unjustifiable activity, but also where a measure, otherwise fair and just on its face, is actually applied in an arbitrary or unjustifiable manner. The standards of the chapeau, in our view, project both substantive and procedural requirements.

 

G.3.11.8 US — Shrimp (Article 21.5 — Malaysia), para. 118
(WT/DS58/AB/RW)

 

The chapeau of Article XX establishes three standards regarding the application of measures for which justification under Article XX may be sought: first, there must be no “arbitrary” discrimination between countries where the same conditions prevail; second, there must be no “unjustifiable” discrimination between countries where the same conditions prevail; and, third, there must be no “disguised restriction on international trade”. The Panel’s findings appealed by Malaysia concern the first and second of these three standards.

 

G.3.11.9 Brazil — Retreaded Tyres, para. 215
(WT/DS332/AB/R)

 

The focus of the chapeau, by its express terms, is on the application of a measure already found to be inconsistent with an obligation of the GATT 1994 but falling within one of the paragraphs of Article XX. The chapeau’s requirements are twofold. First, a measure provisionally justified under one of the paragraphs of Article XX must not be applied in a manner that would constitute “arbitrary or unjustifiable discrimination” between countries where the same conditions prevail. Secondly, this measure must not be applied in a manner that would constitute “a disguised restriction on international trade”. Through these requirements, the chapeau serves to ensure that Members’ rights to avail themselves of exceptions are exercised in good faith to protect interests considered legitimate under Article XX, not as a means to circumvent one Member’s obligations towards other WTO Members.

 

G.3.11.10 Brazil — Retreaded Tyres, para. 224
(WT/DS332/AB/R)

 

We begin our analysis by recalling that the function of the chapeau is the prevention of abuse of the exceptions specified in the paragraphs of Article XX. In US — Shrimp, the Appellate Body stated that “[t]he chapeau of Article XX is, in fact, but one expression of the principle of good faith.” The Appellate Body added that “[o]ne application of this general principle, the application widely known as the doctrine of abus de droit, prohibits the abusive exercise of a state’s rights and enjoins that whenever the assertion of a right ‘impinges on the field covered by [a] treaty obligation, it must be exercised bona fide, that is to say, reasonably’.” Accordingly, the task of interpreting and applying the chapeau is “the delicate one of locating and marking out a line of equilibrium between the right of a Member to invoke an exception under Article XX and the rights of the other Members under varying substantive provisions (e.g., Article XI) of the GATT 1994, so that neither of the competing rights will cancel out the other and thereby distort and nullify or impair the balance of rights and obligations constructed by the Members themselves in that Agreement”. The location of this line of equilibrium may move “as the kind and the shape of the measures at stake vary and as the facts making up specific cases differ”.

 
G.3.12 Chapeau of Article XX — “arbitrary or unjustifiable discrimination between countries where the same conditions prevail”     back to top

G.3.12.1 US — Gasoline, pp. 23-24, DSR 1996:I, p. 3 at 22
(WT/DS2/AB/R)

 

… It was asked whether the words incorporated into the first two standards “between countries where the same conditions prevail” refer to conditions in importing and exporting countries, or only to conditions in exporting countries. The reply of the United States was to the effect that it interpreted that phrase as referring to both the exporting countries and importing countries and as between exporting countries. At no point in the appeal was that assumption challenged by Venezuela or Brazil. …

 

… we see no need to decide the matter of the field of application of the standards set forth in the chapeau nor to make a ruling at variance with the common understanding of the participants.

 

G.3.12.2 US — Shrimp, para. 150
(WT/DS58/AB/R)

 

… In order for a measure to be applied in a manner which would constitute “arbitrary or unjustifiable discrimination between countries where the same conditions prevail”, three elements must exist. First, the application of the measure must result in discrimination. As we stated in United States — Gasoline, the nature and quality of this discrimination is different from the discrimination in the treatment of products which was already found to be inconsistent with one of the substantive obligations of the GATT 1994, such as Articles I, III or XI. Second, the discrimination must be arbitrary or unjustifiable in character. We will examine this element of arbitrariness or unjustifiability in detail below. Third, this discrimination must occur between countries where the same conditions prevail. In United States — Gasoline, we accepted the assumption of the participants in that appeal that such discrimination could occur not only between different exporting Members, but also between exporting Members and the importing Member concerned. Thus, the standards embodied in the language of the chapeau are not only different from the requirements of Article XX(g); they are also different from the standard used in determining that Section 609 is violative of the substantive rules of Article XI:1 of the GATT 1994.

 

G.3.12.3 US — Shrimp, paras. 164-165
(WT/DS58/AB/R)

 

… It may be quite acceptable for a government, in adopting and implementing a domestic policy, to adopt a single standard applicable to all its citizens throughout that country. However, it is not acceptable, in international trade relations, for one WTO Member to use an economic embargo to require other Members to adopt essentially the same comprehensive regulatory programme, to achieve a certain policy goal, as that in force within that Member’s territory, without taking into consideration different conditions which may occur in the territories of those other Members.

 

… We believe that discrimination results not only when countries in which the same conditions prevail are differently treated, but also when the application of the measure at issue does not allow for any inquiry into the appropriateness of the regulatory programme for the conditions prevailing in those exporting countries.

 

G.3.12.4 US — Shrimp, para. 177
(WT/DS58/AB/R)

 

… Section 609, in its application, imposes a single, rigid and unbending requirement that countries applying for certification … adopt a comprehensive regulatory programme that is essentially the same as the United States’ programme, without inquiring into the appropriateness of that programme for the conditions prevailing in the exporting countries. Furthermore, there is little or no flexibility in how officials make the determination for certification pursuant to these provisions. In our view, this rigidity and inflexibility also constitute “arbitrary discrimination” within the meaning of the chapeau.

 

G.3.12.5 US — Shrimp (Article 21.5 — Malaysia), paras. 122-123
(WT/DS58/AB/RW)

 

We concluded in United States — Shrimp that, to avoid “arbitrary or unjustifiable discrimination”, the United States had to provide all exporting countries “similar opportunities to negotiate” an international agreement. Given the specific mandate contained in Section 609, and given the decided preference for multilateral approaches voiced by WTO Members and others in the international community in various international agreements for the protection and conservation of endangered sea turtles that were cited in our previous Report, the United States, in our view, would be expected to make good faith efforts to reach international agreements that are comparable from one forum of negotiation to the other. The negotiations need not be identical. Indeed, no two negotiations can ever be identical, or lead to identical results. Yet the negotiations must be comparable in the sense that comparable efforts are made, comparable resources are invested, and comparable energies are devoted to securing an international agreement. So long as such comparable efforts are made, it is more likely that “arbitrary or unjustifiable discrimination” will be avoided between countries where an importing Member concludes an agreement with one group of countries, but fails to do so with another group of countries.

 

Under the chapeau of Article XX, an importing Member may not treat its trading partners in a manner that would constitute “arbitrary or unjustifiable discrimination”. With respect to this measure, the United States could conceivably respect this obligation, and the conclusion of an international agreement might nevertheless not be possible despite the serious, good faith efforts of the United States. Requiring that a multilateral agreement be concluded by the United States in order to avoid “arbitrary or unjustifiable discrimination” in applying its measure would mean that any country party to the negotiations with the United States, whether a WTO Member or not, would have, in effect, a veto over whether the United States could fulfil its WTO obligations. Such a requirement would not be reasonable. For a variety of reasons, it may be possible to conclude an agreement with one group of countries but not another. The conclusion of a multilateral agreement requires the cooperation and commitment of many countries. In our view, the United States cannot be held to have engaged in “arbitrary or unjustifiable discrimination” under Article XX solely because one international negotiation resulted in an agreement while another did not.

 

G.3.12.6 US — Shrimp (Article 21.5 — Malaysia), para. 124
(WT/DS58/AB/RW)

 

As we stated in United States — Shrimp [Appellate Body Report, para. 168], “the protection and conservation of highly migratory species of sea turtles … demands concerted and cooperative efforts on the part of the many countries whose waters are traversed in the course of recurrent sea turtle migrations”. Further, the “need for, and the appropriateness of, such efforts have been recognized in the WTO itself as well as in a significant number of other international instruments and declarations”. For example, Principle 12 of the Rio Declaration on Environment and Development states, in part, that “[e]nvironmental measures addressing transboundary or global environmental problems should, as far as possible, be based on international consensus”. Clearly, and “as far as possible”, a multilateral approach is strongly preferred. Yet it is one thing to prefer a multilateral approach in the application of a measure that is provisionally justified under one of the subparagraphs of Article XX of the GATT 1994; it is another to require the conclusion of a multilateral agreement as a condition of avoiding “arbitrary or unjustifiable discrimination” under the chapeau of Article XX. We see, in this case, no such requirement.

 

G.3.12.7 US — Shrimp (Article 21.5 — Malaysia), para. 130
(WT/DS58/AB/RW)

 

… The Panel compared the efforts of the United States to negotiate the Inter-American Convention with one group of exporting WTO Members with the efforts made by the United States to negotiate a similar agreement with another group of exporting WTO Members. The Panel rightly used the Inter-American Convention as a factual reference in this exercise of comparison. It was all the more relevant to do so given that the Inter-American Convention was the only international agreement that the Panel could have used in such a comparison. As we read the Panel Report, it is clear to us that the Panel attached a relative value to the Inter-American Convention in making this comparison, but did not view the Inter-American Convention in any way as an absolute standard. Thus, we disagree with Malaysia’s submission that the Panel raised the Inter-American Convention to the rank of a “legal standard”. The mere use by the Panel of the Inter-American Convention as a basis for a comparison did not transform the Inter-American Convention into a “legal standard”. Furthermore, although the Panel could have chosen a more appropriate word than “benchmark” to express its views, Malaysia is mistaken in equating the mere use of the word “benchmark”, as it was used by the Panel, with the establishment of a legal standard.

 

G.3.12.8 US — Shrimp (Article 21.5 — Malaysia), para. 144
(WT/DS58/AB/RW)

 

In our view, there is an important difference between conditioning market access on the adoption of essentially the same programme, and conditioning market access on the adoption of a programme comparable in effectiveness. Authorizing an importing Member to condition market access on exporting Members putting in place regulatory programmes comparable in effectiveness to that of the importing Member gives sufficient latitude to the exporting Member with respect to the programme it may adopt to achieve the level of effectiveness required. It allows the exporting Member to adopt a regulatory programme that is suitable to the specific conditions prevailing in its territory. As we see it, the Panel correctly reasoned and concluded that conditioning market access on the adoption of a programme comparable in effectiveness, allows for sufficient flexibility in the application of the measure so as to avoid “arbitrary or unjustifiable discrimination”. We, therefore, agree with the conclusion of the Panel on “comparable effectiveness”.

 

G.3.12.9 US — Shrimp (Article 21.5 — Malaysia), paras. 149-150
(WT/DS58/AB/RW)

 

We need only say here that, in our view, a measure should be designed in such a manner that there is sufficient flexibility to take into account the specific conditions prevailing in any exporting Member, including, of course, Malaysia. Yet this is not the same as saying that there must be specific provisions in the measure aimed at addressing specifically the particular conditions prevailing in every individual exporting Member. Article XX of the GATT 1994 does not require a Member to anticipate and provide explicitly for the specific conditions prevailing and evolving in every individual Member.

 

We are, therefore, not persuaded by Malaysia’s argument that the measure at issue is not flexible enough because the Revised Guidelines do not explicitly address the specific conditions prevailing in Malaysia.

 

G.3.12.10 Brazil — Retreaded Tyres, para. 225
(WT/DS332/AB/R)

 

Analysing whether discrimination is arbitrary or unjustifiable usually involves an analysis that relates primarily to the cause or the rationale of the discrimination. Thus, we observe that, in US — Gasoline, the Appellate Body assessed the two explanations provided by the United States for the discrimination resulting from the application of the baseline establishment rules at issue. As it found them unsatisfactory, the Appellate Body concluded that the application of the baseline establishment rules resulted in arbitrary or unjustifiable discrimination. In US — Shrimp, the Appellate Body relied on a number of factors in finding that the measure at issue resulted in arbitrary or unjustifiable discrimination. The assessment of these factors by the Appellate Body was part of an analysis that was directed at the cause, or the rationale, of the discrimination. US — Shrimp (Article 21.5 — Malaysia) concerned measures taken by the United States to implement recommendations and rulings of the DSB in US — Shrimp. The Appellate Body’s analysis of these measures under the chapeau of Article XX focused on whether discrimination that might result from the application of those measures had a legitimate cause or rationale in the light of the objectives listed in the paragraphs of Article XX.

 

G.3.12.11 Brazil — Retreaded Tyres, paras. 226-228
(WT/DS332/AB/R)

 

… the analysis of whether the application of a measure results in arbitrary or unjustifiable discrimination should focus on the cause of the discrimination, or the rationale put forward to explain its existence. In this case, Brazil explained that it introduced the MERCOSUR exemption to comply with a ruling issued by a MERCOSUR arbitral tribunal. This ruling arose in the context of a challenge initiated by Uruguay against Brazil’s import ban on remoulded tyres, on the grounds that it constituted a new restriction on trade prohibited under MERCOSUR. The MERCOSUR arbitral tribunal found Brazil’s restrictions on the importation of remoulded tyres to be a violation of its obligations under MERCOSUR. These facts are undisputed.

 

We have to assess whether this explanation provided by Brazil is acceptable as a justification for discrimination between MERCOSUR countries and non-MERCOSUR countries in relation to retreaded tyres. In doing so, we are mindful of the function of the chapeau of Article XX, which is to prevent abuse of the exceptions specified in the paragraphs of that provision. In our view, there is such an abuse, and, therefore, there is arbitrary or unjustifiable discrimination when a measure provisionally justified under a paragraph of Article XX is applied in a discriminatory manner “between countries where the same conditions prevail”, and when the reasons given for this discrimination bear no rational connection to the objective falling within the purview of a paragraph of Article XX, or would go against that objective. The assessment of whether discrimination is arbitrary or unjustifiable should be made in the light of the objective of the measure. We note, for example, that one of the bases on which the Appellate Body relied in US — Shrimp for concluding that the operation of the measure at issue resulted in unjustifiable discrimination was that one particular aspect of the application of the measure (the measure implied that, in certain circumstances, shrimp caught abroad using methods identical to those employed in the United States would be excluded from the United States market ) was “difficult to reconcile with the declared objective of protecting and conserving sea turtles”. Accordingly, we have difficulty understanding how discrimination might be viewed as complying with the chapeau of Article XX when the alleged rationale for discriminating does not relate to the pursuit of or would go against the objective that was provisionally found to justify a measure under a paragraph of Article XX.

 

In this case, the discrimination between MERCOSUR countries and other WTO Members in the application of the Import Ban was introduced as a consequence of a ruling by a MERCOSUR tribunal. The tribunal found against Brazil because the restriction on imports of remoulded tyres was inconsistent with the prohibition of new trade restrictions under MERCOSUR law. In our view, the ruling issued by the MERCOSUR arbitral tribunal is not an acceptable rationale for the discrimination, because it bears no relationship to the legitimate objective pursued by the Import Ban that falls within the purview of Article XX(b), and even goes against this objective, to however small a degree. Accordingly, we are of the view that the MERCOSUR exemption has resulted in the Import Ban being applied in a manner that constitutes arbitrary or unjustifiable discrimination.

 

G.3.12.12 Brazil — Retreaded Tyres, paras. 229-230
(WT/DS332/AB/R)

 

The Panel considered that the MERCOSUR exemption resulted in discrimination between MERCOSUR countries and other WTO Members, but that this discrimination would be “unjustifiable” only if imports of retreaded tyres entering into Brazil “were to take place in such amounts that the achievement of the objective of the measure at issue would be significantly undermined”. The Panel’s interpretation implies that the determination of whether discrimination is unjustifiable depends on the quantitative impact of this discrimination on the achievement of the objective of the measure at issue. As we indicated above, analysing whether discrimination is “unjustifiable” will usually involve an analysis that relates primarily to the cause or the rationale of the discrimination. By contrast, the Panel’s interpretation of the term “unjustifiable” does not depend on the cause or rationale of the discrimination but, rather, is focused exclusively on the assessment of the effects of the discrimination. The Panel’s approach has no support in the text of Article XX and appears to us inconsistent with the manner the Appellate Body has interpreted and applied the concept of “arbitrary or unjustifiable discrimination” in previous cases.

 

Having said that, we recognize that in certain cases the effects of the discrimination may be a relevant factor, among others, for determining whether the cause or rationale of the discrimination is acceptable or defensible and, ultimately, whether the discrimination is justifiable. The effects of discrimination might be relevant, depending on the circumstances of the case, because, as we indicated above, the chapeau of Article XX deals with the manner of application of the measure at issue. Taking into account as a relevant factor, among others, the effects of the discrimination for determining whether the rationale of the discrimination is acceptable is, however, fundamentally different from the Panel’s approach, which focused exclusively on the relationship between the effects of the discrimination and its justifiable or unjustifiable character.

 

G.3.12.13 Brazil — Retreaded Tyres, paras. 232
(WT/DS332/AB/R)

 

… [W]e believe that Brazil’s decision to act in order to comply with the MERCOSUR ruling cannot be viewed as “capricious” or “random”. Acts implementing a decision of a judicial or quasi-judicial body — such as the MERCOSUR arbitral tribunal — can hardly be characterized as a decision that is “capricious” or “random”. However, discrimination can result from a rational decision or behaviour, and still be “arbitrary or unjustifiable”, because it is explained by a rationale that bears no relationship to the objective of a measure provisionally justified under one of the paragraphs of Article XX, or goes against that objective.

 
G.3.13 Chapeau of Article XX — “disguised restriction on international trade”     back to top

G.3.13.1 US — Gasoline, p. 25, DSR 1996:I, p. 3 at 23
(WT/DS2/AB/R)

 

… It is equally clear that concealed or unannounced restriction or discrimination in international trade does not exhaust the meaning of “disguised restriction”. We consider that “disguised restriction”, whatever else it covers, may properly be read as embracing restrictions amounting to arbitrary or unjustifiable discrimination in international trade taken under the guise of a measure formally within the terms of an exception listed in Article XX. Put in a somewhat different manner, the kinds of considerations pertinent in deciding whether the application of a particular measure amounts to “arbitrary or unjustifiable discrimination”, may also be taken into account in determining the presence of a “disguised restriction” on international trade. The fundamental theme is to be found in the purpose and object of avoiding abuse or illegitimate use of the exceptions to substantive rules available in Article XX.

 

242. Brazil’s appellee’s submission, paras. 80 and 83. According to Brazil, given its chosen level of protection to reduce the risk of waste tyre accumulation to the maximum extent possible, “[i]f the Panel finds that there are no reasonable alternatives to the measure, the measure is necessary — no matter how small its contribution — because the WTO does not second-guess the Member’s chosen level of protection” (Ibid., para. 80).     back to text

243. In this respect, we note that, in US — Gasoline, the Appellate Body stated, in the context of Article XX(g) of the GATT 1994, that, “in the field of conservation of exhaustible natural resources, a substantial period of time, perhaps years, may have to elapse before the effects attributable to implementation of a given measure may be observable” (Appellate Body Report, US — Gasoline, p. 21, DSR 1996:I, 3, at 20).     back to text

455. In articulating the proper approach in Brazil — Retreaded Tyres, the Appellate Body referred to its report in US — Gambling without distinguishing that case or suggesting any intention to depart from the approach articulated in US — Gambling (or, for that matter, Korea — Various Measures on Beef) (Appellate Body Report, Brazil — Retreaded Tyres, footnote 319 to para. 178 (referring to Appellate Body Report, US — Gambling, para. 307)).     back to text


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