This summary has been prepared by the Secretariat under its own responsibility. The summary is for general information only and is not intended to affect the rights and obligations of Members.
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Summary of the dispute to date
The summary below was up-to-date at
Complaint by Hong Kong, China
On 30 October 2020, Hong Kong, China requested consultations with the United States regarding certain measures concerning the origin marking requirement applicable to goods produced in Hong Kong, China.
Hong Kong, China claimed that measures appear to be inconsistent with:
- Articles I:1, IX:1 and X:3(a) of the GATT 1994;
- Articles 2(c), 2(d) and 2(e) of the Agreement on Rules of Origin; and
- Article 2.1 of the TBT Agreement.
On 9 November 2020, the United States requested the Chair of the DSB to circulate to Members a communication where it indicated that the United States accepted Hong Kong, China's request to enter into consultations, without prejudice to the US view that the measures imposed by the United States concern issues of national security not susceptible to review or capable of resolution by WTO dispute settlement.
On 13 November 2020, the Russian Federation requested to join the consultations. On 19 November 2020, the United States requested the Chair of the DSB to circulate to Members a communication where it rejected the Russian Federation's request to join the consultations.
Panel and Appellate Body proceedings
On 14 January 2021, Hong Kong, China requested the establishment of a panel. At its meeting on 25 January 2021, the DSB deferred the establishment of a panel.
At its meeting on 22 February 2021, the DSB established a panel. Brazil, Canada, China, the European Union, India, Japan, Korea, Norway, the Russian Federation, Singapore, Switzerland, Turkey and Ukraine reserved their third-party rights.
On 19 April 2021, Hong Kong, China requested the Director-General to compose the panel. On 29 April 2021, the Director-General composed the panel.
On 26 October 2021, the Chair of the panel informed the DSB that, in the light of the complexity of the issues presented in the dispute, the panel expected to issue its final report to the parties in the second quarter of 2022. In its communication, the Chair apprised the DSB that the report would be available to the public once it was circulated to the Members in all three official languages, and that the date of circulation depends on completion of translation. On 21 June 2022, the Chair of the panel informed the DSB that due to the complexity of the dispute, the panel now expected to issue its final report to the parties in the last quarter of 2022.
This dispute concerns a requirement in US law that imported goods produced in Hong Kong, China be marked to indicate that their origin is “China” (origin marking requirement).
Through the 1992 Hong Kong Policy Act, US Congress grants Hong Kong, China differential treatment from China in certain policy areas (including origin marking), on the condition that Hong Kong, China remains sufficiently autonomous from China. Following certain events in Hong Kong, China, including the adoption of the Hong Kong Security Law by China in 2020, the US President issued Executive Order 13936, determining that Hong Kong, China was no longer sufficiently autonomous and ordering suspension of the differential treatment in some areas (including origin marking). This led to the adoption of the origin marking requirement at issue.
Order of analysis
The Panel considered it appropriate to start its analysis with Hong Kong, China's claim under Article IX:1 of the GATT 1994. In light of the United States' invocation of Article XXI(b) of the GATT 1994, the Panel next decided that it was appropriate and also the most efficient way to proceed, to examine the question of whether this provision is self-judging such that it excludes any review of the challenged measure by a panel, as argued by the United States.
Whether Article XXI(b) is entirely self-judging
The Panel saw no disagreement between the parties on that Article XXI(b) contains language (“which it considers”) which refers to the invoking Member's own appreciation and judgement and is therefore “self-judging”. The Panel identified the disagreement to be about whether, as argued by the United States, the phrase “which it considers” extends to the entirety of Article XXI(b), or, whether, as submitted by Hong Kong, China and certain third parties, this phrase does not extend to the conditions and circumstances set out in the sub-paragraphs which would therefore be subject to review by the Panel.
The Panel carried out an interpretive analysis pursuant to Articles 31 and 33 of the Vienna Convention on the Law of Treaties. Based on this analysis the Panel concluded that the words “which it considers” in the chapeau of Article XXI(b) do not extend to the subparagraphs of that provision and that therefore the subparagraphs in Article XXI(b) are subject to review by a panel.
Article IX:1 of the GATT 1994
The Panel found that the measure constitutes an origin marking requirement that falls within the scope of Article IX:1, and that products produced in Hong Kong, China, which are subject to the measure, and products produced in any third country, which are not subject to the measure, could be presumed to be “like products” within the meaning of Article IX:1.
To assess whether the origin marking requirement accords to products of Hong Kong, China treatment that is different from the treatment accorded to products of other countries, the Panel first resolved a factual disagreement between the parties concerning the origin determination at issue. It found that the United States determines the origin of the products subject to the measure to be “Hong Kong, China” and not “China”.
The Panel found that a difference in treatment resulted from the United States requiring that products of Hong Kong, China be marked with a mark of origin indicating the name of another WTO Member (China), whereas goods of any third country must be marked with the name of that third country, and not with the name of another WTO Member. The Panel further found that this difference in treatment modified the conditions of competition to the detriment of products of Hong Kong, China, because, as a result, products of Hong Kong, China were required to compete in the US market with an indication that their origin is that of another WTO Member (China) and not with an indication of their origin as determined by the United States (i.e. Hong Kong, China). Those products were thus denied the possibility to compete in the US market under their own name, and thus to influence, develop, or benefit from, any value that may be attached, currently or in the future, to their origin
United States' invocation of Article XXI(b)(iii)
The Panel first addressed the interpretive and evidentiary aspects of subparagraph (iii) which the United States had indicated to be the relevant subparagraph in Article XXI(b).
The Panel concluded that the phrase "emergency in international relations" refers to a state of affairs of the utmost gravity, in effect a situation representing a breakdown or near-breakdown in the relations between states or other participants in international relations. The Panel found that the wording of the subparagraph enjoins a panel to examine the extent of the deterioration in relations between states or other participants in international relations, irrespective of what caused that deterioration. The Panel further noted that whether such situation exists must be assessed on a case-by-case basis in light of the specific facts involved. It considered that the state of relevant international relations may be understood in a spectrum between peaceful interaction on one end, and the breakdown in such relations on the other end (in situations such as war). In the Panel's view, an emergency in international relations was closer to this latter end, i.e. a breakdown in such relations.
Applying this interpretation to the facts at hand, the Panel concluded that although there was evidence of the United States and other Members being highly concerned about the human rights situation in Hong Kong, China, the situation had not escalated to a threshold of requisite gravity to constitute an emergency in international relations that would provide justification for taking actions that are inconsistent with obligations under the GATT 1994.
The Panel exercised judicial economy with respect to Hong Kong, China's claims under Article I:1 of the GATT 1994, Article 2.1 of the TBT Agreement, and Articles 2(c) and 2(d) of the ARO. With respect to Article I:1 of the GATT 1994 and Article 2.1 of the TBT Agreement, the Panel did not consider that additional findings on an MFN violation would be necessary to assist the DSB in making sufficiently precise recommendations and rulings. The Panel's conclusion on exercising judicial economy on the claims under the ARO was grounded on the factual finding that the United States determines the origin of the products to be “Hong Kong, China” and not “China”, which meant that the factual basis for contending that the dispute involved “rules of origin” within the meaning of the ARO was incorrect.
On 26 January 2023, the United States notified the DSB of its decision to appeal to the Appellate Body certain issues of law and legal interpretations in the panel report. On 1 February 2023, Hong Kong, China informed the DSB that it had taken note of the United States' notification of its appeal and that, given the current non-operational situation of the Appellate Body, it considered that all subsequent procedural deadlines set out in the Appellate Body's Working Procedures were suspended. Hong Kong, China also noted that the United States did not file an appellant submission in accordance with Rule 21(1) of the Appellate Body's Working Procedures. Hong Kong, China further indicated that it reserved its full right to file its own appeal on issues of law and legal interpretation in the panel report and to respond to the United States' appeal, and that it would await the instructions of the Appellate Body in this respect.
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