Dispute body adopts rulings on Korean beef and US sanctions

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Cases DS161 and DS169: Appellate Body and Panel Reports on “Korea — Measures Affecting Imports of Fresh, Chilled and Frozen Beef”. Case brought by Australia and the US with Canada and New Zealand as third parties.

The Dispute Settlement Body adopted the Appellate Body report and the panel report as modified by the Appellate Body in this case. The Republic of Korea was found to have violated various WTO agreements. It was found to have discriminated against imported beef (violating “national treatment” in GATT) by requiring imported beef to be retailed separately from domestic beef i.e. through specialist stores, and it was found to have incorrectly calculated its domestic support incorrectly under the Agriculture Agreement.

Australia and the United States welcomed and supported the adoption of the reports. The United States noted that these were the first Reports to address the domestic support provisions of the Agriculture Agreement.

The EU disagreed with the treatment of Korea in this case as a developing country for the purposes of the Agriculture Agreement. It emphasized that Korea’s economic situation could not justify developing country status under any of the WTO Agreements.

Korea expressed some reservations about certain findings but, nevertheless, joined in the consensus to adopt the Reports. In accordance with Article 21.3 of the Dispute Settlement Understanding (DSU), Korea will have to indicate its intentions about implementing the findings within the next 30 days.

  
  
Case DS165 United States — Import Measures on Certain Products from the European Communities. Case brought by the EU Back to top

The Dispute Settlement Body (DSB) adopted the Appellate Body report and the panel report as amended by the Appellate Body.

This case arose as a consequence of the banana dispute (case DS27). It also reflects a problem that has become known as “sequencing”. The subject of the case was a US measure of 3 March 1999 that was the subject of this case.

In brief, in September 1997, the DSB decided that the EU’s regime for banana imports violated WTO rules. The EU had until 1 January 1999 to correct its banana regime.

On 2 February 1999, the US complained that the EU had not complied with the DSB’s rulings, and asked for authority to impose sanctions. However, a number of questions and concerns were raised about the lack of clarity in how Art.21.5 (examination of compliance) and Art.22 (authorization to retaliate by imposing sanctions) of the Dispute Settlement Understanding (DSU) should be interpreted, and the sequence in which they should be applied. The US and the EU could not agree on an interpretation on how to proceed.

On 29 January 1999, the US and the EU agreed on an ad hoc procedure (applying only to the banana case) which was also adopted by the whole DSB. They agreed that the US’s request for sanctions would be referred to arbitration (under DSU Art.22.6) to determine whether the level of the proposed sanctions was justified. They also agreed that this arbitration would be carried out by the same individuals who were already engaged in Art.21.5 proceedings (i.e. to examine whether the EU had complied).

On 2 March 1999, the arbitrators informed the DSB that they needed more information and more time to complete their work.

On 3 March 199, the US announced measures that would require importers to place bonds covering import duties of 100% on the European products the US was proposing for the sanctions. The US said it had to do this in order to ensure it was within the timetable set out in the rules. These bonds would be held, in the US’s words “to preserve [the US’s] right to impose 100% duties as of 3 March, pending the release of the arbitrators’ final decision.”

The following day, 4 March 1999, the EU launched a new case (DS165), arguing that the measure was illegal.

Meanwhile, on 9 April 1999 the arbitrators ruled that the proposed sanctions were too severe. On 19 April 1999 the DSB authorized the US to impose sanctions within the limit set by the arbitrators, and the US did so by imposing 100% duties on some but not all of the products for which the bonding requirements had been announced.

This case, then, is about whether the US’s 3 March 1999 bonding requirement was legal. Both the panel and Appellate Body said it is not about the actual sanctions imposed on 19 April 1999. The panel was established on 16 June 1999, and ruled on 19 April 2000. The bonding requirement was found to violate WTO agreements.

Both sides appealed some of the legal interpretation. The result, briefly, was that the US’s 3 March 1999 action was found to violate the Dispute Settlement Understanding because the action was taken before there had been a ruling on whether the EU was still failing to comply in the banana case.

The Appellate Body also said it was not its role to sort out the “sequencing problem” and that only WTO members could do this.

In the DSB meeting on 10 January 2001, All delegations who spoke (Argentina, Canada, Ecuador, the EC, Jamaica, Japan, also on behalf of Chile and Colombia, Korea, New Zealand, Norway, Saint Lucia, Switzerland, the US and Hong Kong, China) welcomed the Appellate Body’s confirmation that only members can amend or interpret the DSU rules and provisions.

Several countries stressed the need to re-start discussions on the issue of sequencing, based on a proposal submitted to the General Council by several of them on 10 October 2000.

The EU welcomed the rulings. The US States said it was satisfied that both the reports had correctly affirmed that the measure at issue was no longer in effect.

The chairperson said that further opportunities to exchange views on this matter would depend upon the General Council consideration of the 10 October 2000 proposal.