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United
States — Standards for Reformulated and Conventional
Gasoline
WTO
case Nos 2 and 4. Ruling
adopted 20 May 1996
On
23 January 1995, only days after the WTO and its new
dispute settlement procedure came into being, Venezuela
complained to the Dispute Settlement Body that the United
States was applying rules that discriminated against
gasoline imports. Venezuela formally requested
consultations with the United States, as required under
WTO dispute settlement process.
The
case arose because the United States applied stricter
rules on the chemical characteristics of imported
gasoline than it did for domestically refined gasoline
(for details see
box).
Venezuela
said this was unfair because US gasoline did not have to
meet the same standards — it violated the “national
treatment”
principle and could not be justified under exceptions
to normal WTO rules for health and environmental
conservation measures.
(Legal
details below.)
Just
over a year later (on 29 January 1996) the dispute
panel completed its final report. (By then, Brazil had
joined the case, lodging its own complaint in April 1996.
The same panel considered both complaints.) The dispute
panel agreed with Venezuela and Brazil.
The
US was found to be violating WTO rules because it
discriminated against the gasoline imports.
The
United States appealed.
The
Appellate Body completed its report, and the Dispute
Settlement Body adopted the report on 20 May 1996,
one year and four months after the complaint was first
lodged. The appeal report upheld the panel’s
conclusions (although it made some changes to the
panel’s legal interpretation).
The
United States and Venezuela then took six and a half
months to agree on what the United States should do. The
agreed period for implementing the solution was 15 months
from the date the appeal was concluded (20 May 1996
to 20 August 1997). The Dispute Settlement Body
monitored progress — the United States submitted
“status reports” on 9 January and
13 February 1997, for example.
The
United States agreed with Venezuela that it would amend
its regulation within 15 months, and on
26 August 1997 it reported to the Dispute Settlement
Body that a new regulation had been signed on
19 August.
> See
also a
more detailed time-line showing various stages of the
case.
| Legally
speaking ... Venezuela
and Brazil claimed that the Gasoline Rule was
inconsistent, among other things, with GATT Article
III (“national treatment”),
i.e. treating domestic and imported products
equally), and was not covered by GATT
Article XX
(which deals with general exceptions to the
rules, including for certain environmental
reasons).
The
US argued that the Gasoline Rule was consistent
with Article III, and, in any event, was
justified under the exceptions contained in GATT
Article XX, paragraphs (b), (g) and (d).
The
Panel found
that the Gasoline Rule was inconsistent with
Article III, and could not be justified
under paragraphs (b), (d) or (g).
On
appeal of the Panel’s findings on Article
XX(g), the
Appellate Body found
that the baseline establishment rules contained
in the Gasoline Rule fell within the terms of
Article XX(g), but failed to meet the
requirements of the “chapeau”
(introductory paragraph) of Article XX.
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| The
US Clean Air Act and the Gasoline Rule: Following
a 1990 amendment to the Clean Air Act, the US
Environmental Protection Agency (EPA) promulgated
the Gasoline Rule on the composition and
emissions effects of gasoline, in order to reduce
air pollution in the US.
From
1 January 1995 (coincidentally the date when the
WTO came into being), the Gasoline Rule permitted
only gasoline of a specified cleanliness
(“reformulated gasoline”) to be sold to
consumers in the most polluted areas of the
country. In the rest of the country, only
gasoline no dirtier than that sold in the base
year of 1990 (“conventional gasoline”)
could be sold.
The
Gasoline Rule applied to all US refiners,
blenders and importers of gasoline.
It
required any domestic refiner which was in
operation for at least 6 months in 1990, to
establish an individual refinery baseline, which
represented the quality of gasoline produced by
that refiner in 1990.
The
Environmental Protection Agency also established
a statutory baseline, intended to reflect average
US 1990 gasoline quality.
The
statutory baseline was assigned to those refiners
who were not in operation for at least six months
in 1990, and to importers and blenders of
gasoline. Compliance with the baselines was
measured on an average annual basis.
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