WTO ANALYTICAL INDEX: AGREEMENT ON IMPORT LICENSING PROCEDURES
Agreement on Import Licensing Procedures
The texts reproduced here do not have the legal standing of the original documents which are entrusted and kept at the WTO Secretariat in Geneva.
Having regard to the Multilateral Trade Negotiations;
Desiring to further the objectives of GATT 1994;
Taking into account the particular trade, development and financial needs of developing country Members;
Recognizing the usefulness of automatic import licensing for certain purposes and that such licensing should not be used to restrict trade;
Recognizing that import licensing may be employed to administer measures such as those adopted pursuant to the relevant provisions of GATT 1994;
Recognizing the provisions of GATT 1994 as they apply to import licensing procedures;
Desiring to ensure that import licensing procedures are not utilized in a manner contrary to the principles and obligations of GATT 1994;
Recognizing that the flow of international trade could be impeded by the inappropriate use of import licensing procedures;
Convinced that import licensing, particularly non-automatic import licensing, should be implemented in a transparent and predictable manner;
Recognizing that non-automatic licensing procedures should be no more administratively burdensome than absolutely necessary to administer the relevant measure;
Desiring to simplify, and bring transparency to, the administrative procedures and practices used in international trade, and to ensure the fair and equitable application and administration of such procedures and practices;
Desiring to provide for a consultative mechanism and the speedy, effective and equitable resolution of disputes arising under this Agreement;
Hereby agree as follows:
1. In EC — Poultry, Brazil argued before the Appellate Body that Articles 1.2 and 3.2 of the Licensing Agreement were not applicable to over-quota trade. In addressing these issues, the Appellate Body referred to the Preamble of the Licensing Agreement:
“The preamble to the Licensing Agreement stresses that the Agreement aims at ensuring that import licensing procedures ‘are not utilized in a manner contrary to the principles and obligations of GATT 1994’ and are ‘implemented in a transparent and predictable manner’.”(1)
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II. Article 1
Article 1: General Provisions
1. For the purpose of this Agreement, import licensing is defined as administrative procedures(1) used for the operation of import licensing regimes requiring the submission of an application or other documentation (other than that required for customs purposes) to the relevant administrative body as a prior condition for importation into the customs territory of the importing Member.
(footnote original) 1 Those procedures referred to as “licensing” as well as other similar administrative procedures.
2. Members shall ensure that the administrative procedures used to implement import licensing regimes are in conformity with the relevant provisions of GATT 1994 including its annexes and protocols, as interpreted by this Agreement, with a view to preventing trade distortions that may arise from an inappropriate operation of those procedures, taking into account the economic development purposes and financial and trade needs of developing country Members.(2)
(footnote original) 2 Nothing in this Agreement shall be taken as implying that the basis, scope or duration of a measure being implemented by a licensing procedure is subject to question under this Agreement.
4. (a) The rules and all information concerning procedures for the submission of applications, including the eligibility of persons, firms and institutions to make such applications, the administrative body(ies) to be approached, and the lists of products subject to the licensing requirement shall be published, in the sources notified to the Committee on Import Licensing provided for in Article 4 (referred to in this Agreement as “the Committee”), in such a manner as to enable governments(3) and traders to become acquainted with them. Such publication shall take place, whenever practicable, 21 days prior to the effective date of the requirement but in all events not later than such effective date. Any exception, derogations or changes in or from the rules concerning licensing procedures or the list of products subject to import licensing shall also be published in the same manner and within the same time periods as specified above. Copies of these publications shall also be made available to the Secretariat.
(footnote original) 3 For the purpose of this Agreement, the term “governments” is deemed to include the competent authorities of the European Communities.
(b) Members which wish to make comments in writing shall be provided the opportunity to discuss these comments upon request. The concerned Member shall give due consideration to these comments and results of discussion.
5. Application forms and, where applicable, renewal forms shall be as simple as possible. Such documents and information as are considered strictly necessary for the proper functioning of the licensing regime may be required on application.
6. Application procedures and, where applicable, renewal procedures shall be as simple as possible. Applicants shall be allowed a reasonable period for the submission of licence applications. Where there is a closing date, this period should be at least 21 days with provision for extension in circumstances where insufficient applications have been received within this period. Applicants shall have to approach only one administrative body in connection with an application. Where it is strictly indispensable to approach more than one administrative body, applicants shall not need to approach more than three administrative bodies.
7. No application shall be refused for minor documentation errors which do not alter basic data contained therein. No penalty greater than necessary to serve merely as a warning shall be imposed in respect of any omission or mistake in documentation or procedures which is obviously made without fraudulent intent or gross negligence.
8. Licensed imports shall not be refused for minor variations in value, quantity or weight from the amount designated on the licence due to differences occurring during shipment, differences incidental to bulk loading and other minor differences consistent with normal commercial practice.
9. The foreign exchange necessary to pay for licensed imports shall be made available to licence holders on the same basis as to importers of goods not requiring import licences.
10. With regard to security exceptions, the provisions of Article XXI of GATT 1994 apply.
11. The provisions of this Agreement shall not require any Member to disclose confidential information which would impede law enforcement or otherwise be contrary to the public interest or would prejudice the legitimate commercial interests of particular enterprises, public or private.
2. In EC — Bananas III, the Appellate Body interpreted the definition of “import licensing” set out in Article 1.1 and determined that procedures for tariff quotas that involve an application for a licence, such as the EC tariff quota procedures at issue, fell under the provisions of the Licensing Agreement:
“Although the precise terms of Article 1.1 do not say explicitly that licensing procedures for tariff quotas are within the scope of the Licensing Agreement, a careful reading of that provision leads inescapably to that conclusion. The EC import licensing procedures require ‘the submission of an application’ for import licences as ‘a prior condition for importation’ of a product at the lower, in-quota tariff rate. The fact that the importation of that product is possible at a high out-of-quota tariff rate without a licence does not alter the fact that a licence is required for importation at the lower in-quota tariff rate.
We note that Article 3.2 of the Licensing Agreement provides that:
‘Non-automatic licensing shall not have trade-restrictive or -distortive effects on imports additional to those caused by the imposition of the restriction.’ (emphasis added)
We note also that Article 3.3 of the Licensing Agreement reads:
‘In the case of licensing requirements for purposes other than the implementation of quantitative restrictions, Members shall publish sufficient information for other Members and traders to know the basis for granting and/or allocating licences.’ (emphasis added)
We see no reason to exclude import licensing procedures for the administration of tariff quotas from the scope of the Licensing Agreement on the basis of the use of the term ‘restriction’ in Article 3.2. We agree with the Panel that, in the light of the language of Article 3.3 of the Licensing Agreement and the introductory words of Article XI of the GATT 1994, the term ‘restriction’ as used in Article 3.2 should not be interpreted to encompass only quantitative restrictions, but should be read also to include tariff quotas.
For these reasons, we agree with the Panel that import licensing procedures for tariff quotas are within the scope of the Licensing Agreement.”(2)
3. The dispute in EC — Poultry concerned two EC regulations: one that opened a tariff quota for frozen poultry meat and a second (Regulation 1434/94) that provided rules governing administration of the tariff quota, and applied only to in-quota trade in frozen poultry meat. The Panel had found that “the Licensing Agreement, as applied to this particular case, only relates to in-quota trade.”(3) Brazil argued that nothing in the text or context of Articles 1.2 and 3.2 of the Licensing Agreement limits to in-quota trade the requirement in Article 1.2 that licensing systems be implemented “with a view to preventing trade distortions” or the prohibition in Article 3.2 of additional trade-restrictive or trade-distortive effects. The Appellate Body stated as follows:
“The preamble to the Licensing Agreement stresses that the Agreement aims at ensuring that import licensing procedures ‘are not utilized in a manner contrary to the principles and obligations of GATT 1994’ and are ‘implemented in a transparent and predictable manner’. Moreover, Articles 1.2 and 3.2 make it clear that the Licensing Agreement is also concerned, with, among other things, preventing trade distortions that may be caused by licensing procedures. It follows that wherever an import licensing regime is applied, these requirements must be observed. The requirement to prevent trade distortion found in Articles 1.2 and 3.2 of the Licensing Agreement refers to any trade distortion that may be caused by the introduction or operation of licensing procedures, and is not necessarily limited to that part of trade to which the licensing procedures themselves apply. There may be situations where the operation of licensing procedures, in fact, has restrictive or distortive effects on that part of trade that is not strictly subject to those procedures.
In the case before us, the licensing procedure established in Article 1 of Regulation 1431/94 applies, by its terms, only to in-quota trade in frozen poultry meat. No licensing is required by Regulation 1431/94 for out-of-quota trade in frozen poultry meat. To the extent that the Panel intended merely to reflect the fairly obvious fact that this licensing procedure applies only to in-quota trade, we uphold the finding of the Panel that ‘[t]he Licensing Agreement, as applied to this particular case, only relates to in-quota trade’.”(4)
4. In EC — Bananas III, the Appellate Body reversed the Panel’s finding that Article 1.3 of the Licensing Agreement “preclude[s] the imposition of one system of import licensing procedures in respect of a product originating in certain Members and a different system of import licensing procedures on the same product originating in other Members.”(5) In doing so, the Appellate Body drew a distinction between licensing rules per se, on the one hand, and their application and administration, on the other:
“By its very terms, Article 1.3 of the Licensing Agreement clearly applies to the application and administration of import licensing procedures, and requires that this application and administration be ‘neutral … fair and equitable’. Article 1.3 of the Licensing Agreement does not require the import licensing rules, as such, to be neutral, fair and equitable. Furthermore, the context of Article 1.3 — including the preamble, Article 1.1 and, in particular, Article 1.2 of the Licensing Agreement — supports the conclusion that Article 1.3 does not apply to import licensing rules. Article 1.2 provides, in relevant part, as follows:
‘Members shall ensure that the administrative procedures used to implement import licensing régimes are in conformity with the relevant provisions of GATT 1994 … as interpreted by this Agreement, …’
As a matter of fact, none of the provisions of the Licensing Agreement concerns import licensing rules, per se. As is made clear by the title of the Licensing Agreement, it concerns import licensing procedures. The preamble of the Licensing Agreement indicates clearly that this agreement relates to import licensing procedures and their administration, not to import licensing rules. Article 1.1 of the Licensing Agreement defines its scope as the administrative procedures used for the operation of import licensing regimes.
We conclude, therefore, that the Panel erred in finding that Article 1.3 of the Licensing Agreement precludes the imposition of different import licensing systems on like products when imported from different Members.”(6)
5. In Korea — Various Measures on Beef, the Panel followed the distinction between licensing rules per se and their administration, set out in the finding of the Appellate Body referenced in paragraph 4 above. The Panel examined the United States’ claim that Korea’s regulatory regime was inconsistent with Article 3.2 of the Licensing Agreement by granting exclusive authority to the LPMO and the SBS system to import beef, holding:
“[T]he Panel notes that many of the US claims regarding alleged violations of the Licensing Agreement are concerned with the substantive provisions of Korea’s import (and distribution) regime (by the LPMO or SBS super-groups). It has been said repeatedly that such substantive matters are of no relevance to the Licensing Agreement which is concerned with the administrative rules of import licensing systems.(7)
For these reasons, the Panel does not reach any general conclusion on the compatibility of Korea’s import licensing system with the WTO Agreement.”(8)
6. With respect to the distinction between licensing rules per se and their administration, see also paragraph 12 below.
7. The Panel in EC — Bananas III addressed the issue of whether Article 1.2 in itself creates obligations additional to those arising from the GATT 1994. The Panel considered the provisions of the Agreement, the 1979 Agreement and the GATT 1947, and concluded that “Article 1.2 of the WTO Licensing Agreement has become largely duplicative of the obligations already provided for in GATT, except for the reference to developing country Members. Given the context, Article 1.2 of the WTO Licensing Agreement has lost most of its legal significance.”(9) Relying on the principle of effective treaty interpretation,(10) the Panel found:
“[T]o the extent that we find that specific aspects of the EC licensing procedures are not in conformity with Articles I, III or X of GATT, we necessarily also find an inconsistency with the requirements of Article 1.2 of the WTO Licensing Agreement.”(11)
8. The Panel in EC — Bananas III also addressed the legal significance of the reference in Article 1.2 to developing country Members:
“With respect to Article 1.2’s requirement that account should be taken of ‘economic development purposes and financial and trade needs of developing country Members’, the Licensing Agreement does not give guidance as to how that obligation should be applied in specific cases. We believe that this provision could be interpreted as a recognition of the difficulties that might arise for developing country Members, in imposing licensing procedures, to comply fully with the provisions of GATT and the Licensing Agreement. In the alternative, Article 1.2 could also be read to authorize, but not to require, developed country Members to apply preferential licensing procedures to imports from developing country Members. In any event, even if we accept the latter interpretation, we have not been presented with evidence suggesting that, in its licensing procedures, there were factors that the EC should have but did not take into account under Article 1.2.
Therefore, we do not make a finding on whether the EC failed to take into account the needs of developing countries in a manner inconsistent with the requirements of Article 1.2 of the WTO Licensing Agreement.”(12)
9. In EC — Poultry, Brazil argued that the European Communities had violated the prohibition of trade distortion contained in Articles 1.2 and 3.2 of the Licensing Agreement. The Panel rejected Brazil’s claim. On appeal, Brazil argued that the Panel had failed to address or examine properly certain evidence, including evidence concerning Brazil’s falling share of the poultry market in the European Communities, and had not examined whether this falling market share was caused by the introduction of the European Communities licensing procedures for the tariff-rate quota for frozen poultry meat. The Appellate Body upheld the Panel. It noted that the EC Regulation at issue gave Brazil a 45 per cent share of the total tariff-rate quota (the same as Brazil’s share of exports of the product to the EC during the preceding three years); because the licences were fully utilized, Brazil’s share of the tariff-rate quota remained at 45 per cent and Brazil’s volume of exports of the product to the EC had risen since imposition of the tariff-rate quota.(13) The Appellate Body found that Brazil had failed to establish a causal link between the decline in market share and other indicators, on the one hand, and the licensing requirements at issue, on the other:
“Brazil has not, in our view, clearly explained, either before the Panel or before us, how the licensing procedure caused the decline in market share. Brazil has not offered any persuasive evidence that its falling market share could, in this particular case — with a constant percentage share of the tariff-rate quota, full utilization of the tariff-rate quota and a growing total volume of exports — be viewed as constituting trade distortion attributable to the licensing procedure. In other words, Brazil has not proven a violation of the prohibition of trade distortion in Articles 1.2 and 3.2 of the Licensing Agreement by the European Communities.
Brazil argues that the Panel did not consider a number of other arguments in its examination of the existence of trade distortion: that licences have been apportioned in non-economic quantities; that there have been frequent changes to the licensing rules; that licence entitlement has been based on export performance; and that there has been speculation in licences. These arguments, however, do not address the problem of establishing a causal relationship between imposition of the EC licensing procedure and the claimed trade distortion. Even if conceded arguendo, these arguments do not provide proof of the essential element of causation.
For these reasons, we uphold the finding of the Panel that Brazil has not established that the European Communities has acted inconsistently with either Article 1.2 or Article 3.2 of the Licensing Agreement.”(14)
12. In EC — Poultry, the Panel examined Brazil’s claim that the EC’s allocation of import licences on the basis of export performance was inconsistent with Articles 1.3 and 3.5(j) of the Licensing Agreement. The Panel noted:
“The requirement of export performance for the issuance of import licences on its face does seem unusual. However, Brazil has not elaborated on how the export performance requirement was administered and how it has affected the in-quota exports of poultry products from Brazil.”
13. Recalling the Appellate Body’s finding in Bananas III (referred to in paragraph 4 above), that Articles 1.3 applies to the administration of import licensing procedures, not to import licensing rules as such, the Panel further found: “In our view, the issue of licence entitlement based on export performance is clearly that of rules, not that of application or administration of import licensing procedures. Thus, Articles 1.3 is not applicable on this specific issue.”(15)
14. In EC — Poultry, the Panel examined a claim that the European Communities had failed to notify the Committee on Import Licensing of the sources where the information on its poultry tariff quota was published, as required by Article 1.4(a). The European Communities responded that it had not made such a notification because prior to the Appellate Body report in the EC — Bananas III case, it was not clear whether the Licensing Agreement applied to tariff-rate quotas (“TRQs”). The Panel rejected the EC’s defence:
“While we note the EC’s explanation for non-notification, we find this omission to be inconsistent with Article 1.4(a) of the Licensing Agreement. The fact that all the relevant information is published and that the administration of all agricultural TRQs in the EC has been notified to the WTO Committee on Agriculture does not in our view excuse the EC from notifying the sources of publication pursuant to this subparagraph.”(16)
15. The Panel in EC — Poultry also rejected Brazil’s claim that frequent changes to the licensing rules and procedures regarding the poultry TRQ had made it difficult for governments and traders to become familiar with the rules, contrary to the provisions of Articles 1.4, 3.3, 3.5(b), 3.5(c) and 3.5(d):
“We note that the transparency requirement under the cited provisions is limited to publication of rules and other relevant information. While we have sympathy for Brazil regarding the difficulties caused by frequent changes to the rules, we find that changes in rules per se do not constitute a violation of Article 1.4, 3.3, 3.5(b), 3.5(c) or 3.5(d).”(17)
16. At its meeting of 12 October 1995, the Committee on Import Licensing agreed on procedures for notification and review under the Licensing Agreement.(18)
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III. Article 2
Article 2: Automatic Import Licensing(4)
1. Automatic import licensing is defined as import licensing where approval of the application is granted in all cases, and which is in accordance with the requirements of paragraph 2(a).
(footnote original) 5 A developing country Member, other than a developing country Member which was a Party to the Agreement on Import Licensing Procedures done on 12 April 1979, which has specific difficulties with the requirements of subparagraphs (a)(ii) and (a)(iii) may, upon notification to the Committee, delay the application of these subparagraphs by not more than two years from the date of entry into force of the WTO Agreement for such Member.
(a) automatic licensing procedures shall not be administered in such a manner as to have restricting effects on imports subject to automatic licensing. Automatic licensing procedures shall be deemed to have trade-restricting effects unless, inter alia:
(i) any person, firm or institution which fulfils the legal requirements of the importing Member for engaging in import operations involving products subject to automatic licensing is equally eligible to apply for and to obtain import licences;
(b) Members recognize that automatic import licensing may be necessary whenever other appropriate procedures are not available. Automatic import licensing may be maintained as long as the circumstances which gave rise to its introduction prevail and as long as its underlying administrative purposes cannot be achieved in a more appropriate way.
17. The following developing country Members that were not parties to the 1979 Agreement invoked the provisions of footnote 5 regarding delayed application of Article 2.2(a)(ii) and/or Article 2.2(a)(iii): Bangladesh (1 January 1995), Bolivia (13 September 1995), Brazil (1 January 1995), Burkina Faso (3 June 1995), Cameroon (13 December 1995), Colombia (30 April 1995), Costa Rica (1 January 1995), Côte d’Ivoire (1 January 1995), Dominican Republic (9 March 1995), El Salvador (7 May 1995), Gabon (1 January 1995), Guatemala (21 June 1995), Honduras (1 January 1995), Indonesia (1 January 1995), Kenya (1 January 1995), Malaysia (1 January 1995), Myanmar (1 January 1995), Sri Lanka (1 January 1995), Thailand (1 January 1995), Tunisia (29 March 1995), Turkey (26 March 1995), United Arab Emirates (10 April 1996), Uruguay (1 January 1995) and Venezuela (1 January 1995).(19)
“It was noted that the two-year period of delay allowed under the Agreement had expired for all these Members, and accordingly the obligations of Article 2.2(a)(ii) and (a)(iii) apply to all current WTO Members. It was recalled that the invocation of the above provisions did not exempt the Members concerned from the obligation to notify under the Agreement. The mandatory notifications included publications and legislation relevant to import licensing, and replies to the Questionnaire on Import Licensing Procedures by 30 September each year. Those Members that had not yet made the necessary notifications under the Agreement were urged to do so at the earliest opportunity.”(20)
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IV. Article 3
Article 3: Non-Automatic Import Licensing
1. The following provisions, in addition to those in paragraphs 1 through 11 of Article 1, shall apply to non-automatic import licensing procedures. Non-automatic import licensing procedures are defined as import licensing not falling within the definition contained in paragraph 1 of Article 2.
2. Non-automatic licensing shall not have trade-restrictive or -distortive effects on imports additional to those caused by the imposition of the restriction. Non-automatic licensing procedures shall correspond in scope and duration to the measure they are used to implement, and shall be no more administratively burdensome than absolutely necessary to administer the measure.
3. In the case of licensing requirements for purposes other than the implementation of quantitative restrictions, Members shall publish sufficient information for other Members and traders to know the basis for granting and/ or allocating licences.
4. Where a Member provides the possibility for persons, firms or institutions to request exceptions or derogations from a licensing requirement, it shall include this fact in the information published under paragraph 4 of Article 1 as well as information on how to make such a request and, to the extent possible, an indication of the circumstances under which requests would be considered.
(i) the administration of the restrictions;
(ii) the import licences granted over a recent period;
(iv) where practicable, import statistics (i.e. value and/or volume) with respect to the products subject to import licensing. Developing country Members would not be expected to take additional administrative or financial burdens on this account;
(b) Members administering quotas by means of licensing shall publish the overall amount of quotas to be applied by quantity and/or value, the opening and closing dates of quotas, and any change thereof, within the time periods specified in paragraph 4 of Article 1 and in such a manner as to enable governments and traders to become acquainted with them;
(c) in the case of quotas allocated among supplying countries, the Member applying the restrictions shall promptly inform all other Members having an interest in supplying the product concerned of the shares in the quota currently allocated, by quantity or value, to the various supplying countries and shall publish this information within the time periods specified in paragraph 4 of Article 1 and in such a manner as to enable governments and traders to become acquainted with them;
(d) where situations arise which make it necessary to provide for an early opening date of quotas, the information referred to in paragraph 4 of Article 1 should be published within the time-periods specified in paragraph 4 of Article 1 and in such a manner as to enable governments and traders to become acquainted with them;
(e) any person, firm or institution which fulfils the legal and administrative requirements of the importing Member shall be equally eligible to apply and to be considered for a licence. If the licence application is not approved, the applicant shall, on request, be given the reason there for and shall have a right of appeal or review in accordance with the domestic legislation or procedures of the importing Member;
(f) the period for processing applications shall, except when not possible for reasons outside the control of the Member, not be longer than 30 days if applications are considered as and when received, i.e. on a first-come first-served basis, and no longer than 60 days if all applications are considered simultaneously. In the latter case, the period for processing applications shall be considered to begin on the day following the closing date of the announced application period;
(g) the period of licence validity shall be of reasonable duration and not be so short as to preclude imports. The period of licence validity shall not preclude imports from distant sources, except in special cases where imports are necessary to meet unforeseen short-term requirements;
(j) in allocating licences, the Member should consider the import performance of the applicant. In this regard, consideration should be given as to whether licences issued to applicants in the past have been fully utilized during a recent representative period. In cases where licences have not been fully utilized, the Member shall examine the reasons for this and take these reasons into consideration when allocating new licences. Consideration shall also be given to ensuring a reasonable distribution of licences to new importers, taking into account the desirability of issuing licences for products in economic quantities. In this regard, special consideration should be given to those importers importing products originating in developing country Members and, in particular, the least-developed country Members;
(k) in the case of quotas administered through licences which are not allocated among supplying countries, licence holders(6) shall be free to choose the sources of imports. In the case of quotas allocated among supplying countries, the licence shall clearly stipulate the country or countries;
(footnote original) 6 Sometimes referred to as “quota holders”.
(l) in applying paragraph 8 of Article 1, compensating adjustments may be made in future licence allocations where imports exceeded a previous licence level.
23. In EC — Poultry, Brazil asserted that traders could not determine which consignments were being imported within or outside the TRQ, and argued that this fact meant that the EC was not administering the licensing system in a transparent manner, thereby violating Article 3.5(a)(iii) and (iv). The EC responded that it had provided the relevant information when requested.(21) The Panel rejected Brazil’s claim because Brazil had not demonstrated that there had been any case where the EC had failed to provide the required information despite a request by Brazil, and found:
“Article 3.5(a) addresses specific situations in the operation of an import licensing scheme, subject to requests from Members. It is clear that Article 3.5(a) does not obligate Members to provide voluntarily complete and relevant information on the distribution of licences among supplying countries and statistics on volumes and values.”(22)
24. In EC — Poultry, Brazil argued on appeal that the Panel had erred in restricting Brazil’s “comprehensive claim in relation to a violation of the general principle of transparency underlying the Licensing Agreement” to an analysis of Article 3.5(a) of the Licensing Agreement. Brazil’s argument was that “the administration of import licences in such a way that the exporter does not know what trade rules apply is a breach of the fundamental objective of the Licensing Agreement.” The Appellate Body, however, upheld the Panel’s approach and the Panel’s finding that the European Communities measure was not inconsistent with Article 3.5(a) of the Licensing Agreement:
“Brazil’s notice of appeal contained no reference to a general issue of transparency in relation to the Licensing Agreement. However, Brazil argued in its appellant’s submission that the Panel erred in restricting Brazil’s ‘comprehensive claim in relation to a violation of the general principle of transparency underlying the Licensing Agreement’ to an analysis of Article 3.5(a) of the Licensing Agreement. The contention of Brazil is that ‘the administration of import licences in such a way that the exporter does not know what trade rules apply is a breach of the fundamental objective of the Licensing Agreement’.
Brazil argued before the Panel that ‘underlying the Licensing Agreement was the principle of transparency.’ Brazil submitted, in particular, that the European Communities was obliged under either Article 3.5(a)(iii) or (iv) of the Licensing Agreement to provide complete and relevant information on the distribution of licences among supplying countries and statistics on volumes and values. According to Brazil, the European Communities failed to fulfil this obligation. The Panel found that Brazil had not demonstrated that the European Communities had violated either Article 3.5(a)(iii) or (iv) of the Licensing Agreement. In the light of the existence of express provisions in Article 3.5(a) of the Licensing Agreement relating to transparency on which the Panel did in fact make findings, we do not believe that the Panel erred by refraining from examining Brazil’s ‘comprehensive’ claim relating to a general principle of transparency purportedly underlying the Licensing Agreement.”(23)
27. In EC — Poultry, Brazil claimed that speculation in licences discouraged full utilization of the poultry TRQ in violation of Articles 3.5(h) and 3.5(j). The European Communities responded that licences awarded under the regulation at issue were non-transferable, so as to avoid such speculation. The Panel rejected Brazil’s claim:
“While it may be true that Brazilian exporters have had additional difficulties in exporting to the EC market due to the speculation in licences, we note that the licences allocated to imports from Brazil have been fully utilized. In other words, the speculation in licences has not discouraged the full utilization of the TRQ. Thus, we do not find that the EC has acted inconsistently with Articles 3.5(h) and 3.5(j) of the Licensing Agreement in this regard.”(24)
28. In Turkey — Rice, the United States claimed that Turkey discouraged full utilization of the tariff rate quota on rice by requiring licence applicants to comply with a domestic purchase requirement. The Panel declined to rule on the US claim under Article 3.5(h) as it had ruled that the domestic purchase requirement violated Article III:4 of GATT 1994.(25)
29. In EC — Poultry, Brazil claimed that the allocation of licences where each applicant received a licence allowing imports of about 5 tonnes was inconsistent with Article 3.5(i) regarding issuance of licences in economic quantities. As a related matter, Brazil claimed that the absence of a newcomer provision in the regulation regarding the operation of the poultry TRQ was inconsistent with Article 3.5(j). The European Communities responded that licences for the quantity of about 5 tonnes were indeed being issued to newcomers and that the allocation of licences in small quantities was made in response to an ever increasing number of importers. The Panel rejected Brazil’s claims under Article 3.5(i) and (j) and found:
“We note Brazil’s argument that its exporters are facing difficulties in dealing with licences for small quantities, which is echoed in Thailand’s third-party submission also. While the decline in the average quantity per licence may cause problems for traders, we note at the same time that the total TRQ has been fully utilized. The very fact that the licences have been fully utilized suggests to us that the quantities involved are still ‘economic’, particularly in combination with the significant amount of the over-quota trade.”(26)
30. The Panel in EC — Poultry examined Brazil’s claim that the European Communities allocation of import licences on the basis of export performance was inconsistent with Articles 1.3 and 3.5(j) of the Licensing Agreement. While the Panel opined that “the requirement of export performance for the issuance of import licences on its face does seem unusual”, it nevertheless held that “the provision of Article 3.5(j) in this regard is hortatory and does not necessarily prohibit the consideration of other factors than import performance”.(27)
32. In Canada — Dairy, the Panel addressed the United States’ claim that Canada was in violation of Article II of the GATT 1994 and Article 3 of the Licensing Agreement because it restricted access to tariff quotas to certain cross-border imports by Canadians. Having found that the restriction was inconsistent with Article II:1(b) of the GATT 1994, the Panel did not find it necessary to examine whether in so doing, Canada also violated Article 3 of the Licensing Agreement.(28)
33. Similarly, the Panel in Turkey — Rice did not find it necessary to examine claims under Articles 3.5(a), 5.1, 5.2, 5.3 and 5.4 of the Agreement, as it had found that Turkey’s failure to grant Certificates of Control to import rice outside of the tariff-rate quota substantively violated Article 4.2 of the Agreement on Agriculture.(29) The Panel in Turkey — Rice also declined to rule on a US claim under Articles 3.5(h) as it had ruled that the measure at issue violated Article III:4 of GATT 1994.(30)
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V. Article 4
Article 4: Institutions
There is hereby established a Committee on Import Licensing composed of representatives from each of the Members. The Committee shall elect its own Chairman and Vice-Chairman and shall meet as necessary for the purpose of affording Members the opportunity of consulting on any matters relating to the operation of this Agreement or the furtherance of its objectives.
34. At its meeting of 1 December 1995, the Council for Trade in Goods approved the rules of procedure for meetings of the Committee on Import Licensing, where the Committee follows, mutatis mutandis, the rules of procedure for meetings of the General Council with certain exceptions.(31)
“On the basis of Article 4 of the Agreement, it was recognized that Members could express views on notifications of import licensing procedures as required under various Articles of the Agreement, and request clarifications, as may be necessary, from other Members on matters related to the Agreement on Import Licensing Procedures. It was, however, agreed that such views, and requests for clarification, should be communicated, in writing, to the delegations concerned with copies for information to the Secretariat preferably 21 days, but at least ten working days, in advance of the meeting at which they would be raised. Replies to the questions should also be forwarded to the delegations having raised the questions, in writing, with copies for information to the Secretariat. The questions and replies thus received would be circulated by the Secretariat.”(34)
37. On the question of possible duplication or overlapping of notifications, i.e. whether import licensing aspects associated with the administration of tariff quotas resulting from tariffication in agriculture should be notified to the Committee on Import Licensing or to the Committee on Agriculture, at its meeting of 12 October 1995 the Committee on Import Licensing agreed that “all import licensing procedures, including those dealing with the administration of tariff quotas in agriculture, should be notified to the Committee on Import Licensing. Any problem that might arise relating to duplication or overlapping of notifications, as well as related questions of simplification, could be taken up as necessary, at the appropriate body, i.e. the Working Group on Notification Obligations and Procedures.”(35) In its report to the Council for Trade in Goods, dated 21 August 1996, the Working Group on Notification Obligations and Procedures concluded that efforts to remove this possible duplication were not warranted.(36)
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VI. Article 5
Article 5: Notification
(a) list of products subject to licensing procedures;
(b) contact point for information on eligibility;
(c) administrative body(ies) for submission of applications;
(d) date and name of publication where licensing procedures are published;
(f) in the case of automatic import licensing procedures, their administrative purpose;
(g) in the case of non-automatic import licensing procedures, indication of the measure being implemented through the licensing procedure; and
(h) expected duration of the licensing procedure if this can be estimated with some probability, and if not, reason why this information cannot be provided.
4. Members shall notify the Committee of the publication(s) in which the information required in paragraph 4 of Article 1 will be published.
5. Any interested Member which considers that another Member has not notified the institution of a licensing procedure or changes therein in accordance with the provisions of paragraphs 1 through 3 may bring the matter to the attention of such other Member. If notification is not made promptly thereafter, such Member may itself notify the licensing procedure or changes therein, including all relevant and available information.
39. The 2010 Report of the Committee to the Council for Trade in Goods notes that as of December 2010, no reverse notification under Article 5.5 had been received since entry into force of the Agreement. Members have on occasion raised issues during meetings of the Committee.(38)
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VII. Article 6
Article 6: Consultation and Dispute Settlement
Consultations and the settlement of disputes with respect to any matter affecting the operation of this Agreement shall be subject to the provisions of Articles XXII and XXIII of GATT 1994, as elaborated and applied by the Dispute Settlement Understanding.
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VIII. Article 7
Article 7: Review
1. The Committee shall review as necessary, but at least once every two years, the implementation and operation of this Agreement, taking into account the objectives thereof, and the rights and obligations contained therein.
2. As a basis for the Committee review, the Secretariat shall prepare a factual report based on information provided under Article 5, responses to the annual questionnaire on import licensing procedures(7) and other relevant reliable information which is available to it. This report shall provide a synopsis of the aforementioned information, in particular indicating any changes or developments during the period under review, and including any other information as agreed by the Committee.
(footnote original) 7 Originally circulated as GATT 1947 document L/3515 of 23 March 1971.
4. The Committee shall inform the Council for Trade in Goods of developments during the period covered by such reviews.
41. At its meeting on 12 October 1995, the Committee on Import Licensing agreed on procedures for reviews under Article 7.1 of the Licensing Agreement.(39) The Committee has conducted eight biennial reviews under Article 7.1(40), based on factual reports prepared by the Secretariat under Article 7.2.
42. At its meeting on 12 October 1995, the Committee on Import Licensing agreed on procedures for notification under Article 7.3 of the Licensing Agreement, which require all Members to provide replies to the Questionnaire on Import Licensing Procedures attached to those procedures by 30 September each year.(41)
43. The annual questionnaire on import licensing provided for in Article 7.3 was first circulated in 1971 and later in document L/5670.(42) The annual notification obligation was first agreed in 1972, when the CONTRACTING PARTIES to the GATT 1947 adopted a report of the Committee on Trade in Industrial Products calling on all GATT contracting parties to notify changes in their import licensing systems on 30 September of each year.(43) The Understanding Regarding Notification, Consultation, Dispute Settlement and Surveillance, adopted on 28 November 1979 as part of the Tokyo Round results, reaffirmed the commitment of the GATT 1947 contracting parties to existing obligations under the GATT 1947 regarding publication and notification.(44) As all parties to the 1979 Agreement were contracting parties to the GATT 1947, the 1979 Agreement did not include any provisions in respect of the annual questionnaire.
44. The Report of the Working Group on Notification Obligations and Procedures of 10 July 1996 suggested that the notification obligations in the 1972 Decision were clearly superseded by the procedures adopted after entry into force of the WTO Agreement, and recommended that the Council for Trade in Goods propose their deletion.(45) Accordingly, on 19 February 1998, the General Council adopted the following decision:
“The notification obligations resulting from the Decision of the CONTRACTING PARTIES to the GATT 1947 taken at their twenty-eighth Session in November 1972 (SR.28/6, item 3) to adopt the report of the Committee on Trade in Industrial Products, including the Committee’s proposal regarding notification obligations on licensing systems (L/3756, paragraph 76), are hereby eliminated.”(46)
45. As of 29 October 2010, 98 Members had submitted notifications under Article 7.3 since 1 January 1995.(47) Eleven Members submitted replies to the Questionnaire in 1995, 22 Members in 1996, 25 Members in 1997, 26 Members in 1998, 20 Members in 1999, 32 Members in 2000, 23 Members in 2001, 41 Members in 2002, 25 Members in 2003, 16 Members in 2004, 19 Members in 2005, 36 Members in 2006, 46 Members in 2006, 37 Members in 2007, 31 Members in 2008, 42 Members in 2009 and 38 Members in 2010.(48)
46. Regarding review of notifications, see paragraph 36 above.
47. The Committee has submitted annual reports to the Council for Trade in Goods since 1995.(49) The Committee on Import Licensing for the Agreement (1979) on Import Licensing Procedures submitted annual reports to the GATT 1947 Council.(50)
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IX. Article 8
Article 8: Final Provisions
2. (a) Each Member shall ensure, not later than the date of entry into force of the WTO Agreement for it, the conformity of its laws, regulations and administrative procedures with the provisions of this Agreement.
48. On 2 May 1995, the Committee on Import Licensing for the 1979 Agreement adopted a Decision on Avoidance of Procedural and Institutional Duplication proposed by the Preparatory Committee for the WTO and adopted also by the General Council and the CONTRACTING PARTIES to the GATT 1947. The decision provided for notification and coordination procedures for the Tokyo Round and WTO Committees in order to avoid procedural and institutional duplication during the period of transition. These procedures covered notification of measures subject to notification obligations both under the WTO Agreement and under the GATT 1947 or a Tokyo Round Agreement; circulation of such notification; coordination of activities between the Tokyo Round Committees and WTO Committees; and joint and/or consecutive meetings, as appropriate, between such committees.(51)
49. On 12 October 1995, the parties to the 1979 Agreement on Import Licensing Procedures adopted a Decision to terminate the 1979 Agreement as of 1 January 1996, “on a date agreed in advance so as to provide predictability for policy makers and facilitate an orderly termination of the institutional framework of the  Agreement”.(52)
50. Article XVI:5 of the WTO Agreement provides in relevant part that “[r]eservations in respect of any of the provisions of the Multilateral Trade Agreements may only be made to the extent provided for in those Agreements.”
51. At the time of accepting the WTO Agreement or a protocol of accession to the WTO Agreement, a number of developing countries made notifications regarding delayed application of Article 2.2(a)(ii) and/or (iii): see paragraph 17 above.
52. At its meeting on 12 October 1995, the Committee on Import Licensing agreed on procedures for notification under Article 8.2(b) of the Licensing Agreement.(53) Regarding review of notifications, see paragraph 36 above.