7.39 As examples of that practice, the Appellate Body referred to the Panel reports on Spain - Tariff treatment of Unroasted Coffee³⁵¹; EEC - Imports of Beef from Canada³⁵²; and Japan - Tariff on Imports of Spruce-Pine-Fir (SPF) Dimension Lumber.³⁵³

7.40 Presidential Decree 42/96 has been carefully drafted so as to avoid any appearance of discrimination among Members. On paper, Presidential Decree 42/96 allows Pioneer Companies to import duty free and tax free National Cars from any country in the world. De facto, however, all the cars which have so far benefited from Presidential Decree 42/96 were of Korean origin. This is not fortuitous. Presidential Decree 42/96 was conceived and applied from the outset by the Indonesian authorities with the deliberate and sole purpose of permitting the importation duty free and tax free by PT TPN of Kia cars made in Korea only, and no other cars.

7.41 The Indonesian authorities have acknowledged publicly that it is their policy to reserve the benefits of the National Car Programme exclusively for PT TPN. At a press conference held on 15 March 1996, Indonesia's Minister of Industry and Trade, Mr. Tunky Ariwibowo, announced the Indonesian Government's policy of reserving the benefits of the National Car Programme for PT TPN. Since then, this policy has been reiterated by Mr. Ariwibowo and other senior officials on many occasions. ³⁵⁴ That policy is confirmed by the fact that, as of date, PT TPN remains the only company which has been granted Pioneer status, even though other Indonesian car producers have also requested that status. Thus, in practice, Presidential Decree 42/96, even if drafted in generally applicable terms, had but a single addressee and beneficiary: PT TPN.

7.42 The decision of the Indonesian authorities to reserve the benefits of the National Car Programme for PT TPN entailed also a conscious, even if not explicit, decision by those authorities to grant the benefits provided by Presidential Decree 42/96 only with respect to imports of cars manufactured by Kia in Korea.

7.43 When adopting Presidential Decree 42/96, the Indonesian authorities could not have ignored that PT TPN would take advantage of that measure in order to import exclusively motor vehicles made by Kia in Korea. In particular, since they well were aware that:

7.44 Indeed, there is evidence in the record showing that Presidential Decree 42/96 was adopted in response to a precise request from PT TPN to be allowed to import specifically motor vehicles manufactured by Kia in Korea, and no other kind of motor vehicles. As discussed in the factual part, in a letter dated 12 December 1995, PT TPN asked the approval of the Indonesian authorities for inter alia:

7.45 The subsequent implementation of Presidential Decree 42/96 provides further confirmation that this measure was devised with the exclusive purpose of permitting the importation duty free and tax free by PT TPN of cars manufactured by Kia in Korea.

7.46 On 7 June 1996, PT TPN was authorised on the basis of Presidential Decree 42/96 to import 45,000 cars. This authorization remains to date the only one issued pursuant to Presidential Decree 42/96. The authorization specifies the "kind/type" of the cars to be imported in the following terms: "sedan S/515 - 1500 cc". The technical specifications of the S-515 are the same as those of Kia�s model "Sephia". Thus, even if the authorization did not direct expressly PT TPN to purchase the cars from any particular source, it was implicit in its terms that it covered only cars made by Kia in Korea.

7.47 In light of the above considerations, it comes as no surprise that each and every one of the 39,727 cars imported by PT TPN under Presidential Decree 42/96 as of 30 June 1997, the date on which the aforesaid authorization expired, were manufactured by Kia and imported from Korea.

7.59 Indonesia has gone on record as asserting that this tariff and tax exemption does not violate Article I:1 "because it does not direct recipients of the subsidy to import automobiles from any particular country. Private parties designated as national car companies are free to import qualifying automobiles from any country". ³⁵⁵

7.60 This attempted justification of such a blatantly WTO-inconsistent measure is disingenuous, at best. At the time Presidential Decree No. 42/1996 was issued, the Government of Indonesia already had approved the Kia Timor joint venture as the sole producer of a "national motor vehicle" and the sole beneficiary of benefits under the National Motor Vehicle programme. This project called for the production/assembly in Indonesia of Kia Sephia sedans, to be renamed the Timor S515 and S515i sedans. Indeed, Indonesia has claimed that it will not extend "national motor vehicle" benefits to any other vehicle to be produced by the Kia Timor joint venture. ³⁵⁶ Therefore, there was one car, and only one car, that could be imported as a "national motor vehicle", and that was a Korean car, the Kia Sephia sedan.

7.61 Moreover, the Government of Indonesia provided the one-year exemption from import duties and the luxury tax to facilitate the production/assembly in Indonesia of the Timor Kia Sephia sedan. As stated by the Minister of Industry and Trade: "This aims at accelerating the production process of Timor so that [the car] can quickly enter the market. The government gives PT Timor Putra Nasional a period of 12 months, from June 1996 through June 1997, to assemble the cars in Kia�s factory in Korea." ³⁵⁷

7.62 In light of this, it simply is incredible to claim, as does Indonesia, that private parties, either TPN or Kia Timor, were "free to import qualifying automobiles from any source". The objective of the one-year tariff and tax exemption on imported "national motor vehicles" was to facilitate the entry into the Indonesian market of the Timor Kia Sephia sedan - the only designated "national motor vehicle" at the time. This objective could not have been accomplished if Kia Timor or TPN were free to import any vehicle from any source they chose, such as an Opel Optima or a Ford Escort. Therefore, in reality, only Kia Sephia sedans from Korea were eligible for the preferential treatment accorded by Presidential Decree No. 42/1996.

7.63 Indeed, this case is analogous to the EEC Beef case, in which the panel found a violation of Article I in a situation where "exports of like products of other origin than that of the United States were in effect denied access to the European Communities market considering that the only certifying agency authorized to certify the meat ... was a United States agency mandated to certify only meat from the United States". ³⁵⁸ Just as only USDA-certified beef was eligible for access to the European Communities market in EEC Beef, in the instant case, the only motor vehicle "certified" for tariff- and tax-free treatment under Presidential Decree No. 42/1996 was the Kia Sephia sedan from Korea.

7.65 By its terms, the June 1996 programme was a one-time, one-year programme. Article 2 of Decree of the President No. 42/1996 (4 June 1996) ³⁵⁹, which provided the underlying authority for the programme, declared expressly:

The limitation to a one-time, one-year grant is reaffirmed in Decree of the Minister of Industry and Trade No. 142/MPP/Kep/6/1996 (5 June 1996), which implemented the Presidential Decree. ³⁶⁰ Article 1 thereof states:

7.66 These limitations are reflected in the authorization for TPN to import Timor S515 sedans under authority of the June 1996 programme. The "Recognition of Registered Importer/Sole Agent (IT/AT)," file number 1410/MPP/6/1996, signed by the Minister of Industry and Trade on 7 June 1996, notes in its title that it is valid through 30 June 1997. ³⁶¹ It includes the following limitation in paragraph 1 of its terms and conditions: "Only to import a total of 45,000 units of sedan with importation period limited to 30 June 1997" (emphasis added). ³⁶²

7.67 On 30 June 1997, the legal authority for the June 1996 programme expired as scheduled and the importation authority provided by "Recognition" number 1410/MPP/6/1997 ceased to be valid. ³⁶³ No comparable programme has been or will be authorized. Therefore, not only did the imports which Complainants claim violate Article I of the General Agreement cease over four-and-one-half months ago, there is no legal authority under which they could resume. The June 1996 programme has ended and, as demonstrated below, has no relevance to these proceedings.

7.72 The decision of the 1989 panel in Chile's complaint with respect to EEC - Restrictions on Imports of Dessert Apples (22 June 1987), BISD 36S/93, also is instructive. Chile urged the panel to rule that the European Communities should offer compensation to Chile because a ruling that the measures should be withdrawn would be meaningless because the measures had lapsed. The panel refused to make a finding of "retroactive prejudice" and to recommend compensation. (See id. para. 12.35 at p. 137.) ³⁶⁴

7.73 In sum, prior panel decisions also support the conclusion that where, as here, a programme and its underlying legal authority have expired, the panel should declare that no decision on the merits of the alleged inconsistency with Article I of the General Agreement is appropriate.

To continue with Indonesia has not violated Article I of GATT 1994

³⁵⁰ Appellate Body Report on EC - Regime for the Importation, Sale and Distribution of Bananas , adopted on 25 September, WT/DS 27/AB/R, para 232.

In the same report, the Appellate Body affirmed the Panel�s findings that the "operator category rules", the "activity function rules" and the "hurricane licence rules" applied by the Community in order to allocate licences for importing bananas under a tariff quota violated the Most-Favoured-Nation obligation contained in Article II of GATS because in respect of each of those measures a majority of the service suppliers of ACP origin fell within the "more favoured" category of suppliers and/or a majority of the "like" suppliers of the Complainants� origin were found in the "less favoured" category. In reaching this conclusion, the Appellate Body rejected an argument by the Community to the effect that the measures pursued a "legitimate policy" and were not "inherently discriminatory". According to the Appellate Body, the "aims" of a measure are not "relevant" in order to establish whether it affords de facto Most-Favoured-Nation treatment (at paras. 240-248).

³⁵¹ In Spain - Tariff Treatment of Unroasted Coffee (adopted on 11 June 1981, BISD 28S/102, 111-112). the Panel concluded that by applying different tariff rates to different varieties of coffee which had been previously found to be "like", Spain had infringed its obligations under Article I:1 The Panel noted that the complainant, Brazil, exported to Spain mainly those varieties that were subject to higher import duties. Thus, even if the application by Spain of different tariff rates to different coffee varieties was formally origin neutral, imports from Brazil were discriminated de facto vis-à-vis imports from other countries that exported mainly the varieties subject to the lower duty rates.

³⁵² In EEC - Imports of Beef from Canada (adopted on 10 March 1981, BISD 28S/92, 113) the Panel examined a tariff concession for high quality beef granted by the Community during the Tokyo Round. The Panel did not consider necessary to judge whether the terms of the concession were in themselves discriminatory. The Panel limited itself to note that a regulation implementing the concession required a certificate of authenticity issued and endorsed by one of the authorities included in an annex to that regulation. The annex in question listed only a US agency, it being specified that this agency was empowered to certify only meat of US origin. In light of this, the Panel concluded that the measures at issue

"...in their present form had the effect of preventing access of like products from other origin than the United States, thus being inconsistent with the most favoured nation principle in Article I of the General Agreement" [emphasis supplied] (at para 4.10).

³⁵³ Japan - Tariff on Imports of Spruce-Pine-Fir (SPF) Dimension Lumber, adopted on 19 July 1989 BISD 36S/167.

³⁵⁴ "Indonesia backs its Trade Policy for Auto Makers", Asian Wall Street Journal, Jakarta, 18 March 1996 (EC Exhibit C-1); "Jakarta�s tax breaks for car firm unfair: Japan", The Strait Times, Singapore, 24 March 1996 (EC Exhibit C-2); "The prospects for national cars", Business News, Jakarta, 18 April 1996 (EC Exhibit C-3). "Govt not to grant incentives for Bimantara cars", The Jakarta Post, Jakarta, 1 June 1996 (EC Exhibit C-4); "Another Suharto son launches Indonesia car", Reuters, Jakarta, 23 July 1996 (EC Exhibit C-7); "National car plan presses on in Indonesia", Financial Times, 9 July 1996 (EC Exhibit C-6); "Bimantara�s request for car policy review refused", The Jakarta Post, Jakarta, 6 June 1996 (EC Exhibit C-5); "Only one car firm to get protection", The Jakarta Post, Jakarta, 15 November 1996 (EC Exhibit C-8); "Only one car firm to get protection", The Jakarta Post, Jakarta 15 November 1996 (EC Exhibit C-8); "Indonesia backs its Trade Policy for auto makers" Asian Wall Street Journal, 18 March 1996 (EC Exhibit C-1); "Only one car firm to get protection", The Jakarta Post, Jakarta, 15 November 1996 (EC Exhibit C-8).

³⁵⁵ G/SCM/Q2/IDN/9 (23 May 1997), p. 3.

³⁵⁶ In responding to a question under the Annex V procedure, Indonesia stated, "[T]he Government does not intend to grant National Car benefits to PT. Timor Putra Nasional (�TPN�) for other models". (AV/14, p.4, Question #10(a)) and "In accordance with Manufacturing Licence for TPN, TPN also plans to produce or and assemble Timor commercial cars (Category I and IV). However, the Government of Indonesia maintains its position that the only national car produced in Indonesia is the S515i model sedan." (AV/16, p.3, Question #12/28(b)).

³⁵⁷ "Indonesia�s �National Car� to Be Built in S. Korea", The Reuter Asia-Pacific Business Report, 5 June 1996 (US Exhibit 14, pp. 62-63).

³⁵⁸ "EEC - Imports of Beef from Canada, L/5099, Report of the Panel adopted 10 March 1981, BISD 28S/92, para. 4.2(a).

³⁵⁹ Indonesia Exhibit 6.

³⁶⁰ Indonesia Exhibit 7.

³⁶¹ Indonesia Exhibit 13.

³⁶² Indonesia Exhibit 13.

³⁶³ Id.

³⁶⁴ The Government Procurement panel in Norway-Procurement of Toll Collection Equipment for the City of Trondheim (13 May 1992), GPR/DS2/R, reached the same conclusion. See id., paras. 4.17-4.26.