|
|
|
espa�ol - fran�ais - portugu�s |
Search
|
|
|
|
espa�ol - fran�ais - portugu�s |
|
Search
|
DOMINICAN REPUBLIC � MEASURES AFFECTING
4.351 In the opinion of the Dominican Republic, Honduras attempts to unduly expand the terms of reference of this Panel to include all products subject to the Selective Consumption Tax in its complaint against the transitional surcharge. In its first written submission, Honduras clearly states that it considers the transitional surcharge to be contrary to paragraph 1(b) of Article II of the GATT as the surcharge applies to cigarettes. It does not mention any other product. It was not until the first meeting of the Panel that Honduras suddenly included all of the products in the complaint, taking the idea from the written submission of certain third parties. By that time, the Dominican Republic had already used two of its opportunities to present its defence before the Panel. By including other products and thus expanding the coverage of its complaint, Honduras interfered with the Dominican Republic's right of defence and due process. 4.352 As regards substance, the Dominican Republic has already explained its position. By submitting an addition to its Schedule of Concessions on 14 September 1994, it bound other duties or charges at 30 per cent ad valorem in the case of cigarettes. This addition to its Schedule was submitted within the six months allowed under paragraph 7 of the Understanding on the Interpretation of Article II:1(b) of the GATT 1994. Neither Honduras nor any other WTO Member objected to this binding. Honduras is nevertheless now claiming that in April 1994, the Dominican Republic did not impose the transitional surcharge.255 However, as the Dominican Republic has explained, it was up to Honduras to submit that objection within three years following the day on which the Dominican Republic recorded that level of other duties and charges, pursuant to paragraph 4 of the Understanding. In other words, Honduras had until the end of 1997 to argue what it is belatedly claiming now. 4.353 The negotiating history of the Understanding leaves no room for doubt: it belies Honduras's argument. According to that history, set forth in paragraph 84 of the Dominican Republic's second written submission, the level, or indeed the existence, of another duty or charge is considered established as recorded by the Member, unless other Members challenge that binding within a given period of time. After that time, the binding is definitive and can no longer be challenged. According to the negotiating history, this was done in order to guarantee legal security. 4.354 Rather than acknowledging the meaning of the lapse of right under paragraph 4 of the Understanding, Honduras misrepresents the Dominican Republic's argument as suggesting that the lapse of the right to challenge the binding of other duties or charges derives from the approval of the schedules of concessions submitted by each Member to the Secretariat.256 This is not a faithful reflection of the Dominican Republic's argument. The lapse of the right to challenge the binding of other duties or charges derives from paragraph 4 of the Understanding, and not only from the failure to object to the lists annexed to the accession protocol within a period of 30 days following their submission. 4.355 Honduras also argues that the lapse within a period of three years does not apply because paragraph 4 of the Understanding only provides for situations in which a Member records a level of other duties or charges different from that which existed in April 1994.257 However, the second sentence of paragraph 4 establishes the lapse in cases in which the Member records a duty or charge that did not exist at the time of binding. That sentence reads as follows:
4.356 This is precisely the situation that Honduras claims exists in this case. Consequently, Honduras's claim that the lapse in a period of three years applies only to differences in the levels of other duties or charges and not to the actual existence of that other duty or charge is untrue. 4.357 Since Honduras provides the same arguments against the transitional surcharge and the foreign exchange fee, the Dominican Republic will not repeat the arguments by which it responded to and rejected Honduras's claims. It simply refers to what it had already said with respect to these measures. 4.358 Honduras has also failed to provide any new arguments or documentary evidence regarding the Dominican Republic's defence of the foreign exchange fee under Article XV:9 of the GATT. It merely cites the documentary evidence already presented and repeats its previous arguments. Consequently, the Dominican Republic reiterates its defence and arguments under Article XV in refutation of what Honduras has stated.
4.359 Honduras took this opportunity to focus on the following factors: its claims, its arguments and its evidence, in order to demonstrate that the Dominican Republic is breaching its WTO obligations. It also addressed the points that the Dominican Republic had made in its second submission. 4.360 First, Honduras claims that less favourable treatment for imported products is accorded as a result of the requirement that stamps be affixed in the territory of the Dominican Republic, in light of the privilege granted to domestic producers to affix the stamps in the course of their production process, a privilege that is not similarly accorded to foreign producers. It is important to emphasize that Honduras is not challenging the stamp requirement in and of itself as a fiscal measure. Honduras is challenging the unequal and discriminatory treatment that results from the requirement for importers and for domestic producers to affix the tax stamps at different points in the commercial process. In order to provide equal treatment to both importers and domestic producers, there are two options. The first is to allow the stamp to be affixed in the course of the production process for both. The second is to permit the affixation after the production process for both. It is, of course, up to an individual Member to determine which of these two alternatives would eliminate the discriminatory elements of the measure. Honduras has been consistently of the view that the first option would result in fewer costs than the second option and would also be less trade-restrictive. 4.361 The less favourable treatment accorded to imported cigarettes is inconsistent with the Dominican Republic's obligations under Article III:4 of the GATT. It is undisputed that imported and domestic cigarettes are like products. Therefore, the only issue is whether the Dominican Republic accords less favourable treatment to imported cigarettes. In its second submission, the Dominican Republic reiterates that "[l]ess favourable treatment, according to the Appellate Body, consists of the importing member modifying the conditions of competition in its market 'to the detriment of imported products' ".258 4.362 Using the Dominican Republic's own definition of "detriment", that is, "loss sustained by or damage done to a person or thing" or "a cause of loss or damage"259, Honduras has demonstrated that there is detriment to imported products. Honduras has sustained losses because of the additional costs and additional production steps associated with the affixation of stamps on imported cigarettes. These additional costs and additional production steps are not incurred and are not undertaken in respect of domestic cigarettes. To demonstrate these differences in costs and production steps, Honduras has submitted Exhibits HOND-14, 15, 16, 23, 24, 25, 26(a), 26(b) and 26(c). Until now, the Dominican Republic has not disputed these differences. Honduras also notes that damage in a different context is done to imported cigarettes. As a result of the stamp being fixed manually over the cellophane wrapping, the cigarette packets are less visually appealing to consumers than domestic cigarettes. To demonstrate such damage, Honduras has submitted to the Panel Exhibits 25(a) to (n) and 27(a) to (n). 4.363 The Dominican Republic has implicitly acknowledged that there are differences in the conditions of competition between imported and domestic products in respect of compliance with the tax stamp requirement.260 The point of contention between the Dominican Republic and Honduras is whether the modification of the conditions of competition is the result of the "inherent differences between imported and domestic products". The Dominican Republic does not explain clearly what it considers to be "inherent differences". As an example, the Dominican Republic refers to transportation costs and states: "There are additional costs that are inevitably linked to the condition of an imported product. The most obvious example of one such additional cost is the cost of transportation, which raises a product's delivered price and consequently, the final price of the imported product".261 Honduras wished to note that transportation costs are not "inherent" in the nature of imported products. It must be noted that transportation costs will also be incurred for the shipment within a country and sometimes the domestic transportation costs may be higher than the transportation costs for imported products. For example, an imported product shipped to Geneva from Ferney-Voltaire in neighbouring France would have lower transportation costs than a product shipped to Geneva from Zurich. Therefore, it is not correct to say that transportation costs are inherent costs in the nature of imported products. 4.364 In addition, the costs arising from compliance with the stamp requirement can hardly be considered as costs arising from the "inherent" differences between imported and domestic cigarettes. Instead, they are costs which arise from the different points in time at which the stamp must be affixed on imported cigarettes as compared to domestic cigarettes. They do not arise as a result of the "inherent differences" between imported and domestic goods. The costs are directly caused by a measure imposed by the Government of the Dominican Republic. 4.365 Moreover, under Article III:4, once a product has cleared customs, it should be subject to the same laws and requirements as a domestic product and should be treated no less favourably than the like domestic product. The issue of whether there are "inherent differences between imported and domestic products" is, therefore, irrelevant under Article III:4. 4.366 In its second submission, the Dominican Republic reiterates that Honduras has not established that the measure in question "has a protective application � i.e. that it affords protection to domestic producers".262 Honduras rebutted this argument in detail in its oral statement at the first hearing and in its second submission.263 Honduras emphasizes that the Appellate Body has sharply rejected the approach suggested by the Dominican Republic. It ruled that "Article III:4 does not specifically refer to Article III:1. Therefore, a determination of whether there has been a violation of Article III:4 does not require a separate consideration of whether a measure 'afford[s] protection to domestic production'".264 4.367 In its second submission, the Dominican Republic reiterates that because the volume of cigarette imports has increased, then "the stamp requirement has had no, or at most negligible, effect on imports and therefore has not been detrimental to the imported product".265 Again, Honduras has rebutted this argument in detail. The Appellate Body has also specifically addressed this issue. It stated: "�it is irrelevant that 'the trade effects' of the tax differential between imported and domestic products, as reflected in the volume of imports, are insignificant or even non-existent; Article III protects expectations not of any particular trade volume but rather of the equal competitive relationship between imported and domestic products".266 This reasoning applies in this case. 4.368 In any event, even though the actual trade volumes are not relevant for the Panel to make a finding of inconsistency, Honduras notes that the Dominican Republic has presented information in its Exhibits that is inconsistent or contradictory. Honduras has presented in its Answers to the Panel's Questions 1 and 2 evidence that total cigarette imports to the Dominican Republic represent less than 4 per cent of the total domestic cigarette market. Exhibit-DR-32 presents an even lower estimate of the market share of imported products: 0.4 per cent in 2002; 0.8 per cent in 2003 and 1.1 per cent in 2004. Yet, in Exhibit DR-31, the Dominican Republic presents information that the percentage of total imports is 1.5 per cent in 2001, 23.7 per cent in 2002 and 11.9 per cent in 2003. The information presented in these two exhibits of the Dominican Republic is inconsistent and contradictory. 4.369 The Dominican Republic has also contradicted itself on the issue of the effectiveness of the tax stamp requirement in the prevention of smuggling. In paragraph 60 of its second submission, the Dominican Republic states that this effectiveness is "evidenced by the lack of any known instances of cigarette smuggling in the Dominican Republic to date". However, in paragraph 105 of its first submission, the Dominican Republic stated, "[t]here are still documented cases of smuggling of cigarettes for retail in the Dominican Republic". It is not clear which statement of the Dominican Republic is correct. 4.370 Honduras notes that the Dominican Republic devoted a great deal of its first submission to the important role the stamp requirement plays in the prevention of smuggling in the context of the WHO Framework Convention. Honduras considers this Convention to be laudable and as a matter of fact, it has signed it on 18 June 2004. Honduras observes that despite the extensive references to the objectives of the Framework Convention in attempting to justify its discriminatory requirements, the Dominican Republic has not even signed the Convention as of 28 June 2004. The deadline for signature has now passed. In any event, Honduras notes that the entry into force of this Convention is not a relevant factor in the Panel's assessment of the WTO-consistency of the measures at issue. 4.371 Honduras recalls its detailed arguments rebutting this justification as set out in its second submission in paragraphs 35 to 72. Honduras has submitted evidence to the Panel which demonstrates that there are other less trade-restrictive measures available to the Dominican Republic which would achieve the same objective. (See Exhibit HOND-29.) 4.372 Contrary to the Dominican Republic's position, the requirement to affix the tax stamp at different points in time for domestic and imported cigarettes does not secure compliance with the Dominican Republic's tax code. The Dominican Republic, by defending a procedure designed to give less favourable treatment to imports, has forgotten the objective of the stamp requirement. It is Honduras's view that, by allowing the affixation of the stamp at the factory in Honduras below the cellophane and as part of the manufacturing process, having the Dominican Republic oversee the required administrative controls on the number of stamps given to the importer, and having the Dominican Republic tax inspectors inspect the shipment upon arrival at the Dominican Republic's Customs, the original objective of the stamp tax would be better achieved and with fewer costs to all parties concerned -including the government of the Dominican Republic- than it is now. 4.373 Turning to the bond requirement, Honduras disagrees with the Dominican Republic's recent assertion in its second submission that "[t]he bond requirement for domestic and imported cigarettes is neither a restriction or prohibition on the importation of cigarettes contrary to Article XI:1 of the GATT nor an internal measure that discriminates imported cigarettes contrary to Article III:4 of the GATT".267 Honduras noted that the Dominican Republic initially subscribed to the fact that the GATT disciplines would be applicable to the bond requirement. In this regard, Honduras recalled the statement in the Dominican Republic's first submission that:
4.374 Honduras's view is that a measure that affects imports of a particular product must be covered under either Article XI or Article III. The bond requirement affects the imports of alcohol and tobacco products. Therefore, it must be subject to the disciplines of either Article XI or Article III. Honduras therefore maintains the argument that it has presented throughout these proceedings on this issue. 4.375 Honduras's principal claim is that the bond requirement is inconsistent with Article XI:1. In support of this claim, Honduras indicated in its Reply to Question 35 from the Panel, that "the bond requirement applies prior to the entry of both domestic and imported cigarettes in the domestic market". Therefore, for imported products, it is a condition that must be met before importation can take place. Thus, Article XI:1 applies, and not Article III. The Dominican Republic has argued that:
4.376 Article 14 of Decree 79-03 did introduce a bond requirement for importers of cigarettes. It specifically states "[t]his bond shall be posted with the Directorate General of Internal Taxes by both importers and domestic producers". Even though Article 14 does not expressly state that the bond requirement is a condition for importation, it does not mean that the bond is not a condition for importation. Article 14 refers to Article 376 of the Dominican Republic's Tax Code which provides:
4.377 Article 376 makes clear that the posting of the bond is a pre-condition for domestic producers of alcohol and tobacco products. It must be recalled that, under the current regulations, the bond is required identically for domestic producers and importers. The Dominican Republic does not disagree with this. The fact remains that importers of cigarettes are obliged to post a bond and, therefore, by implication the bond must also be a pre-condition for importers. If the bond is not a pre-condition, then what would be the consequence of an importer not posting the bond? The only plausible answer is that if an importer is requested to post the bond for certain products, and does not so comply, those products would not be allowed to enter the territory of the Dominican Republic. The fact the Dominican Republic has failed to enforce the bond requirement until 13 May 2004 does not contradict the fact that it is a requirement under the law, and therefore does not undermine Honduras's claim that the measure as such is WTO-inconsistent. 4.378 In its second submission, the Dominican Republic asserts that "Honduras has not presented any evidence that the bond requirement has any restrictive effect on the importation of cigarettes"269 In response, Honduras refers to the consistent GATT and WTO jurisprudence on the irrelevance of trade effects in the determination that a measure violates Article XI:1. Thus, the GATT Panel in the case of EEC � Oilseeds I stated that:
4.379 In the context of its claim that the bond requirement falls under Article XI, Honduras stated in its reply to Question 35 addressed by the Panel that "� the requirement to post a bond does not affect 'the internal sale, offering for sale, purchase, transportation, distribution or use of products, an internal quantitative regulations requiring the mixture, processing or use of products in specified amount or proportions". Honduras noted that the Dominican Republic's argument that Article III:4 is not applicable to the bond requirement, attempts to make reference to this reply of Honduras as support. However, Honduras took the opportunity to note that this reply was provided to respond to the Panel's question on whether the measure fell under Article III or Article XI. It has been the consistent position of Honduras that the bond requirement falls under Article XI:1. Honduras has also made an "in the alternative" claim, that should the Panel find that the measure does not fall within Article XI:1, then it should assess the bond requirement under Article III:4. The Dominican Republic has therefore misunderstood the context in which Honduras's reply was given. 4.380 In conclusion, Honduras has established that the bond requirement is prima facie inconsistent with the Dominican Republic's obligations under Article XI:1, or, in the alternative, with Article III:4. The Dominican Republic has failed to rebut Honduras's claim. In addition, the Dominican Republic has attempted to justify its violation of its GATT obligations by seeking recourse to Article XX(d), but has failed to demonstrate that its measure is justified by that provision. 4.381 With respect to the Selective Consumption Tax, Honduras claims that the application of this tax as it applied on the date of request of the establishment of the Panel, and on the date of the establishment of this Panel, is inconsistent with Articles III:2, III:4, X:1, and X:3(a) of the GATT. The Dominican Republic has not rebutted the merits of these claims. Instead, the Dominican Republic contends that the Panel should dismiss Honduras's claims regarding the Selective Consumption Tax on procedural grounds. Honduras would address certain new arguments made by the Dominican Republic regarding this procedural argument and then briefly recall the arguments it made earlier on this point. 4.382 In its first submission, the Dominican Republic did not cite any legal authority supporting its contention that the claims should be dismissed.271 Indeed, at the First Meeting of the Panel, the Dominican Republic conceded that the Selective Consumption Tax as challenged by Honduras is within the terms of reference of the Panel. In their oral statement, the Dominican Republic also asserted that the new Article 367 of the Tax Code, as amended by Law 03-04, is not within the terms of reference of this Panel.272 Honduras agrees that Law 03-04 is not within the terms of reference of this Panel. Therefore, the measure at issue before the Panel is the Selective Consumption Tax as challenged by Honduras. The Panel is, therefore, obliged to make an objective assessment of the matter before it, including making findings and recommendations. 4.383 In its second submission, the Dominican Republic sought to base its contention on three broad grounds:
4.384 Honduras is of the view that these arguments are without merit and will respond to each of these grounds in turn. 4.385 First, the Dominican Republic contends that recommendations by the Panel regarding the Selective Consumption Tax (as it stood on the date of establishment of the Panel) would constitute "legal error" on the basis of certain observations of the Appellate Body in the US-Certain EC Products case. The Appellate Body report in US-Certain EC Products does not stand for the proposition that a Panel cannot make findings in respect of measures that are no longer in existence. The Appellate Body merely stated that "[t]he Panel erred in recommending that the DSB request the United States to bring into conformity with its WTO obligations a measure which the Panel has found no longer exists".278 In that case, there was a disagreement between the parties concerning the measures that were at issue in the terms of reference of the Panel. 4.386 In this case, there is agreement between the parties as to the measure at issue covered by the terms of reference. As noted above, the Dominican Republic conceded that the Selective Consumption Tax as challenged by Honduras is within the terms of reference of the Panel. Therefore, the Panel need not, and cannot, examine any replacement measure. 4.387 Indeed, Honduras submits that the Panel cannot examine the characteristics of any amendment that may have been implemented after the date of the establishment of the Panel as it would be outside of its terms of reference. The Panel cannot examine the provisions of Law 03-04 as it does not fall within the Panel's terms of reference. 4.388 Therefore, the Panel must restrict its examination to the Selective Consumption Tax as challenged by Honduras in the request for the establishment of the Panel and, as the Panel cannot take into account developments after its terms of reference were established, the Panel is duty-bound to make a recommendation on the Selective Consumption Tax as it existed at the time of the establishment of the Panel. As the Panel does not have the factual basis to find that the original Selective Consumption Tax is no longer in existence (because it cannot examine Law 03-04) it must make a finding on the measure before it. If it finds the measure to be WTO-inconsistent, it is obliged to make a recommendation to the Dominican Republic to bring its measures into conformity. 4.389 Second, the Dominican Republic contends that the Panel's findings on the Selective Consumption Tax claims would be contrary to the "principle of judicial economy". In US � Lead and Bismuth II, the Appellate Body categorically rejected an attempt by the United States to put forward a general principle that "�panels may not address any issues that need not be addressed in order to resolve the dispute between the parties".279 The principle of judicial economy involves discretion to decline to rule on particular issues, but only if the resolution of those issues is not necessary to resolve the dispute. In this case, the dispute concerns the Selective Consumption Tax as it stood as of the time of the request for the establishment of the Panel, or as of the time of the Panel's establishment, at the latest. The Panel has a duty to resolve this dispute. 4.390 The cases cited by the Dominican Republic do not support its position on this point. In Australia � Salmon, the Appellate Body did not invalidate the Panel's findings because they were contrary to the "principle of judicial economy". Indeed, it did precisely the opposite; it found fault with the Panel for not making findings on matters within the terms of reference.280 The Dominican Republic cites the Panel in Chile � Price Band System to the effect that "a panel is required to make the recommendation to bring a measure which it has found inconsistent into conformity if that measure is still in force. Conversely, when a Panel concludes that a measure was inconsistent with a covered agreement, the said recommendation cannot and should not be made".281 Honduras notes that this finding of the Panel was not reviewed by or endorsed by the Appellate Body on appeal. 4.391 Third, the Dominican Republic contends that an examination by the Panel of the Selective Consumption Tax is unwarranted because of factual circumstances. The presence of "lingering effects" or a "danger of reintroduction" is not a prerequisite for the examination of measures which are terminated after the date of establishment of the Panel. These tests were not even considered by the Panels in United States � Wool Shirts and Blouses282 and Indonesia � Autos283, where findings were made in respect of measures terminated or modified in the course of the proceedings. In any case the Dominican Republic cannot assert that Honduras has not provided evidence regarding the possibility of reintroduction of the Selective Consumption Tax system as it stood on the date of establishment of this Panel. Honduras has presented 10 exhibits demonstrating this possibility.284 The Dominican Republic has not responded to this evidence. 4.392 In a similar vein, the Dominican Republic relies on the fact that the Selective Consumption Tax claims involve measures that were revoked before the organizational meeting of the Panel. It fails to explain why the status of the measures at the time at which the Panel "started its adjudicative process"285 should be the relevant standard. This assertion is directly contrary to consistent GATT/WTO jurisprudence to the effect that the relevant time to assess whether a measure is within the terms of reference is the time at which the Panel is established.286 The Dominican Republic's assertion lacks any basis. 4.393 Moreover, the Dominican Republic elaborates on this flawed standard by stating"[t]here is no reason to believe that the precise moment when a Panel is established is the moment it begins its adjudication process".287 At least one Panel has taken a different view. In Argentina � Textiles and Apparel, the Panel observed: "the Argentine measure under consideration was revoked before the Panel was established and its terms of reference set, i.e. before the Panel started its adjudicative process".288 4.394 Honduras notes that in all the cases where a Panel chose not to examine a measure, the measure in question was terminated before the date of establishment of the Panel. That is not the situation in this case. In this case, the Selective Consumption Tax claims are within the terms of reference and this Panel is under a duty, deriving from Article 11 of the DSU, to assess those claims. In Japan � Alcoholic Beverages II, the Appellate Body held that a failure to address the full range of matters included in the terms of reference constituted an "error of law".289 It has reiterated this principle in Australia � Salmon290 and Japan � Agricultural Products II.291 4.395 Lastly, Honduras noted that the Dominican Republic requests an additional finding that the Selective Consumption Tax, as it stood at the date of the establishment of the Panel, does not result in any nullification and impairment of benefits to Honduras. Honduras noted that Article 3.8 of the DSU states the presumption of prima facie nullification or impairment of benefits in cases where there is an infringement of the obligations assumed under a covered agreement. 4.396 Turning to the Transitional Surcharge and the Foreign Exchange Fee, Honduras claims that the transitional surcharge and the foreign exchange fee constitute a charge imposed on or in connection with importation inconsistent with Article II:1(a) and (b) of the GATT. 4.397 Article II:1(b) must be construed in light of the Understanding on the Interpretation of Article II:1(b) of the GATT 1994. Paragraph 1 of the Understanding provides that "the nature and level of any 'other duties or charges' levied on bound tariff items, as referred to in that provision [Article II:1(b) of the GATT] shall be recorded in the Schedules of concessions annexed to GATT 1994 against the tariff item to which they apply�" Paragraph 2 of the Understanding clarifies that "the date as of which 'other duties or charges' are bound, for purposes of Article II of the GATT, shall be 15 April 1994". 4.398 Both parties agree that the transitional surcharge is an "other duty or charge" imposed on or in connection with importation within the meaning of the second sentence of Article II:1(b) of the GATT. 4.399 In addition, the Dominican Republic has acknowledged that "the transitional surcharge for economic stabilisation was introduced for the first time in June 2003" and that "it did not replace any previous similar or equivalent measure".292 Furthermore, the Dominican Republic has likewise clarified that "[t]he only 'other duty or charge' in force on 15 April 1994 was the exchange fee �"293, thus admitting that the transitional surcharge was not imposed on 15 April 1994. 4.400 With respect to the foreign exchange fee, it cannot be denied that it is a duty or charge. It is undisputed that the fee is imposed on imports, and therefore, it can properly be characterized as falling within "other duties or charges of any kind imposed on or in connection with � importation" (emphasis supplied) within the meaning of Article II:1(b), second sentence, of the GATT. Furthermore, both parties agree that it is currently imposed "� in excess of [the duties or charges] imposed on the date of [the GATT 1994]". 4.401 On the basis of the foregoing, the Panel should find that the transitional surcharge and the foreign exchange fee are inconsistent with Article II:1(b) of the GATT because they are "other duties or charges" within the meaning of Article II:1(b) of the GATT and are currently imposed "�in excess of [the duties or charges] imposed on the date of [the GATT 1994]". 4.402 In its defence, the Dominican Republic has stated the following:
4.403 Thus, the Dominican Republic argues that because it recorded (incorrectly in the view of Honduras) a certain specific level in its Schedule, it can levy any other duties or charges up to that level now. The Dominican Republic has agreed that the transitional surcharge did not even exist in 1994 and that the foreign exchange fee was only levied at a rate of 1.5 per cent in 1994. If this spurious line of argument is followed, there are several questions that would arise. The first question is: why would a Member record a duty or charge that did not even exist at the time or that existed at a significantly lower level than what it recorded? The second question is, as the Dominican Republic "uses up" 12 per cent (that is 10 per cent for the foreign exchange fee currently applied and 2 per cent for the transitional surcharge) � does that mean that in the future, the Dominican Republic can introduce new duties or charges up to the remainder of the present level? If the Panel were to accept such an approach, that would undermine the whole basis of commitments made in a Schedule of Concession and the requirement for transparency in recording. 4.404 The Dominican Republic has attempted to argue that it "did properly record the transitional surcharge and the foreign exchange fee as ODCs in its Schedule of Concessions on 14 September 1994, within the six-month period provided for by paragraph 7 of the Understanding�".295 Throughout these proceedings, Honduras has demonstrated that the measure that the Dominican Republic recorded was the Selective Consumption Tax, an internal measure. It did not record the transitional surcharge or the foreign exchange fee. As the Understanding only applies to the recording of "other duties or charges", the fact that the Dominican Republic recorded an internal tax within the six-month provided in paragraph 7 of the Understanding is completely irrelevant. The transitional surcharge and the foreign exchange fee cannot be brought under the cover of the recording of the Selective Consumption Tax. More specifically, the Dominican Republic has claimed that "the transitional surcharge and the foreign exchange fee are within the upper limit established by this recorded level of ODCs".296 However, as was clearly pointed out in the second submission of Honduras, the recording of the Selective Consumption Tax at a certain level does not give the Dominican Republic the authority to levy other types of duties or charges up to that level now. The Dominican Republic did not merely record a quantitative level for a general category of "ODCs". It specifically named the instrument "Impuesto Selectivo en Aduanas". The Dominican Republic has admitted that "[t]he heading 'Impuesto Selectivo en Aduanas' in the list attached to [its] 14 September 1994 notification� is a mistake", and that "there is a correspondence between the recorded level of other duties or charges� and the [Impuesto Selectivo en Aduanas] in force on September 1994�".297 Thus, the transitional surcharge and the foreign exchange fee were not "properly recorded" in the Dominican Republic's Schedule of Concessions. 4.405 Even assuming that the transitional surcharge and the foreign exchange fee were imposed on 15 April 1994, pursuant to paragraph 7 of the Understanding, the Dominican Republic had a period of six months from "the date of deposit of the instrument" referred to in that paragraph within which to inscribe the same in its Schedule of Concessions. That six-month period has long since expired, and, after the expiration of that period, the Dominican Republic was no longer authorized to add the transitional surcharge or the foreign exchange fee in its Schedule of concessions. This being the case, notwithstanding that the Dominican Republic had imposed the foreign exchange fee on 15 April 1994 at the rate of 1.5 per cent ad valorem, after the expiration of the six-month period, having failed to add the foreign exchange fee in its Schedule of Concessions, the continued imposition of the foreign exchange fee after that period at any level, including the present level of 10 per cent, is inconsistent with Article II:1(b) of the GATT. Article II:1(b) cannot be construed independently of the Understanding. 4.406 In its second submission, the Dominican Republic contends that "Honduras's challenge to the Dominican Republic's [other duties or charges] is barred by paragraph 4, second sentence, of the Understanding and therefore must not be allowed to proceed".298 In Honduras view, this argument is based on an incorrect interpretation of the scope and coverage of paragraph 4. 4.407 In Honduras's view, paragraph 4 does not apply because what the Dominican Republic recorded under "other duties or charges" was an internal tax, not "other duties or charges" within the meaning of Article II:1(b). Even if the transitional surcharge and the foreign exchange fee were somehow to be covered by the recording of the Selective Consumption Tax, the conditions set out in paragraph 4 to make this provision applicable would still not be met. 4.408 As indicated in its first sentence, paragraph 4 applies only to "other duties or charges" imposed on "a tariff item [that had] previously been the subject of a concession". (The Dominican Republic omitted the first sentence of paragraph 4 when it cited that paragraph in paragraph 84 of its Second written submission.) Therefore, this provision does not apply to any product that has not been the subject of a previous concession. Furthermore, the three-year deadline only applies to the right to challenge the recording of an other duty or charge which was not in existence at the time of the original binding or which was recorded at a higher level than that of the previously bound level. It is only in these situations that other Members had a three-year period to challenge the existence or consistency with the previous bindings. 4.409 The situation contemplated under the exception in paragraph 4 is not relevant to this dispute, as Honduras has not made a claim on any "tariff item [that had] previously been the subject of a concession", i.e. prior to 15 April 1994. Paragraph 4 does not apply to a challenge of a recording of an "alleged other duty or charge" which was not in fact imposed as of 15 April 1994. 4.410 This is the situation in this case. Therefore, paragraph 5 is applicable. Paragraph 5 states that Members retain the right to challenge the consistency of a recording of an "other duty or charge" with a Member's rights and obligations under GATT 1994 at any time. 4.411 In further support of its arguments relative to the three-year prescriptive period, in paragraph 84 of its second written submission, the Dominican Republic quoted selected portions of paragraphs 7 to 10 of the paper entitled "Article II:1(b): Legal Questions, Note by the Secretariat, MTN.GNG/NG7/W/61, 16 November 1989" and presented the paper as Exhibit DR-49. Reading only the selected portions quoted by the Dominican Republic, one might be misled into concluding that the three-year prescriptive period is applicable to this dispute. The Dominican Republic omitted the following wording in paragraph 7, which precedes the portion quoted by the Dominican Republic:
4.412 Indeed, a close scrutiny of Exhibit DR-49 indicates that it is a Note prepared by the Secretariat to provide advice on "two issues of a legal nature arising from the proposal that 'other duties or charges' (ODCs) should henceforth be recorded in tariff schedules".299 It is not part of the negotiating history of the Understanding nor does it constitute under Article XVI:1 of the Marrakesh Agreement a decision, procedure or customary practice followed by the CONTRACTING PARTIES to GATT 1947. Therefore, the probative value of this Exhibit must be questioned. 4.413 In any event, in the light of the clear language of paragraphs 4 and 5 of the Understanding which reflects the agreement of the Members, there is no need to examine secondary sources such as Exhibit DR-49. 4.414 In addition, the Dominican Republic contends that "any challenge to the recording or existence of [other duties or charges] must be brought under the Understanding, not under the GATT" as the right to challenge the recording or existence of [other duties or charges] is established by paragraph 4 of the Understanding"; and that "Honduras's challenges to the recording and existence of the transitional surcharge and foreign exchange fee as [other duties or charges] as of 15 April 1994 are therefore outside the terms of reference of the Panel and should be dismissed". 4.415 As earlier stated, paragraph 4 of the Understanding applies only to challenges to "other duties or charges" imposed on "a tariff item [that had] previously been the subject of a concession", and that paragraph 4 is not applicable to this dispute. 4.416 The Vienna Convention on the Law of Treaties provides that "[A] treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose"300 and that "[T]he context for the purpose of the interpretation of a treaty shall comprise � (a) any agreement relating to the treaty which was made between all the parties in connection with the conclusion of the treaty�"301 4.417 The Understanding is an agreement relating to the GATT 1994, specifically Article II:1(b) thereof, and was made in connection with the conclusion of the GATT 1994. It is therefore part of the context of GATT 1994, specifically Article II:1(b) thereof. Since a treaty interpreter has the obligation to interpret Article II:1(b) in accordance with the ordinary meaning given to its terms "in their context", among others, the references to Article II:1(b) in the terms of reference of the Panel necessarily include references to the Understanding. Thus, the Understanding is within the terms of reference of the Panel. In any event, the Dominican Republic has raised the recording of "other duties or charges" pursuant to the Understanding as its principal defence. 4.418 As Honduras has demonstrated that the measure is inconsistent with Article II:1(b), it has also demonstrated that the measure is inconsistent with Article II:1(a). 4.419 Turning to the Dominican Republic defence in respect of the foreign exchange fee, Honduras notes that by way of an alternative defence, the Dominican Republic argued that the foreign exchange fee is an exchange measure justified by Article XV:9 of the GATT. In its oral statement, replies to the questions of the panel, and second written submission, Honduras has demonstrated that the foreign exchange fee is not justified under Article XV:9 of the GATT because:
4.420 As the party invoking an exception, it is incumbent on the Dominican Republic to demonstrate that its measure is justified under Article XV:9(a). It has not done so. In its second submission, the Dominican Republic confines itself to a discussion of Article XV:4 of the GATT, stating that Honduras is "erroneously trying to resurrect its claim under Article XV:4 [of the GATT]".304 However, it is only in the event that the Dominican Republic were to successfully prove that its measure falls within Article XV:9(a) that Honduras would need to rebut by arguing that even if the measure is in accordance with Article XV:9(a), and consequently with the Articles of Agreement of the IMF, then Honduras would have to demonstrate that the measure nevertheless is inconsistent with Article XV:4. As Honduras considers that the Dominican Republic has not successfully established that its measure is justified by XV:9(a), there is no need for Honduras to raise Article XV:4 as a subsidiary claim. Furthermore, even though it does not bear the burden of proof on this issue, Honduras has demonstrated in Exhibit HOND-21(a), that there has been no notification from the IMF to the WTO to the effect that the Dominican Republic has been granted authorisation in order to levy the foreign exchange fee as an exchange action. 4.421 As Honduras had explained in the course of the First Substantive Meeting with the Panel, Honduras reserved its right to raise Article XV:4 not as a principal claim, but as a subsidiary claim, should the Dominican Republic be able to establish that the foreign exchange fee is justified under Article XV:9 of the GATT. 4.422 Finally, Honduras considers that the transitional surcharge and the foreign exchange fee as it applies to all products, including cigarettes, are within the mandate of the Panel. The reasons are the following: Article 6.2 of the DSU does not require a complainant to specify in its Panel request which are the products at issue; the request for consultations and the request for the establishment of the Panel make it clear that the challenge on the foreign exchange fee and the transitional surcharge referred to "imported goods" in general and therefore it is not necessary to specifically identify each and every product; unlike the other measures such as the bond requirement, the transitional surcharge and the foreign exchange fee are not product-specific. Based on the foregoing, Honduras requests the Panel to examine the WTO-consistency of the transitional surcharge as applied to all products including cigarettes. V. ARGUMENTS OF THE THIRD PARTIES
5.1 Chile declares that, as indicated in Annex DR-5, it is a major exporter of cigarettes to the Dominican Republic, so that the tax regime applicable to cigarettes affects it directly. Moreover, it has a special systemic interest in the proper application of the provisions of the WTO Agreement. 5.2 Chile asserts that the tax regime applied by the Dominican Republic is complex, and similar to those which have been applied in other destination markets for Chilean cigarettes. In general, these tax schemes provide for a variety of measures, all of which are characterized by their lack of transparency and give considerable discretion to the authorities. Consequently, rather than considering each measure individually, these regimes should be examined as a whole. The regime in force in the Dominican Republic and which is challenged by Honduras is no exception to this rule. It consists of measures, such as differential taxes, excessive administrative requirements, bonds, and so forth, which add up to protection of the local industry. 5.3 Chile contends that the tax base applied to cigarettes was not determined on the basis of the value thereof, or of some objective, transparent and non-discriminatory element, but rather, using prices fixed by the authorities on the basis of unpublished price surveys. Moreover, it appeared that while the law � Article 367(b) of the Tax Code � established how the tax base should be determined (according to the retail selling price), the regulation � Article 3 of Regulation 79-03 � made it less transparent and more arbitrary. Added to which, there was another rule � General Rule 02-96 � that established a different formula for making the calculation. Consequently, the determination was ultimately left up to the administrative authorities through mechanisms lacking in transparency. Chile has taken note of the fact that this formula has now been abolished in favour of a single selective tax. 5.4 Chile stresses that tax schemes such as the one applied by the Dominican Republic must be examined in the light of the reality of the markets. For example, in many cases not only is the tax base determined using criteria lacking in transparency, but the selling prices of the cigarettes are fixed by the authorities, which means that the effect (discriminatory) of the tax � which is calculated without taking account of the sales price of the product � can be much greater. 5.5 Chile highlights the amount of discretion that appears to be given to the authority in implementing the Dominican Republic's tax policy in the fact that although the law (Article 376 of the Tax Code) requires the posting of a bond only for alcohol and tobacco products produced in the Dominican Republic, a decision of the authorities (Article 14 of Regulation 79-03) has extended the bond requirement to imported cigarettes. 5.6 Chile notes that on the very day that the Panel was established, the Dominican Republic repealed two of the measures challenged by Honduras. That is, through the introduction of a single-rate tax determined on a single basis, the differential determination of the tax base for domestic and imported cigarettes was eliminated, as were the price surveys. 5.7 Chile suggests that, although it considers this legal reform to be a step forward towards the establishment of a transparent and non-discriminatory tax regime, there is nothing to prevent the Panel from ruling on the consistency of the measures in question with the WTO. As has been stated in the past:
5.8 Chile insists that the Panel must rule on the issues referred to it by the parties, in this case Honduras, in order to comply with one of the basic objectives of the WTO dispute settlement system, i.e. providing security and predictability to the multilateral trading system. 5.9 Chile argues that, although it seems the new methodology would guarantee equal treatment between domestically produced goods and imported goods, not only are there legal discriminations, but de facto discriminations as well, so that there could still be other instances of discriminatory treatment, for example in the way in which this new law is applied. Since it is still too early to make an assessment in this respect, given that the law was only recently adopted, Chile shall not engage in any analysis of the measures in this submission; indeed, their elimination clearly represents the best evidence of the view Chile shares with Honduras that they did in fact constitute unnecessary barriers to trade. 5.10 Chile highlights the fact that a significant portion of the arguments presented by the Dominican Republic in its written submission rest on the exception contained in Article XX(d) of the GATT 1994. In other words, that the requirement to affix stamps in the territory of the Dominican Republic and to post a bond are necessary to secure compliance with laws which are not inconsistent with the GATT. If these laws are inconsistent, the Article XX(d) exception cannot be invoked, as explained below. 5.11 The Dominican Republic argues that if the Panel were to determine that the requirement to affix tax stamps on imported cigarettes in the territory of the Dominican Republic and the requirement that importers post a bond are inconsistent with Article III of the GATT 1994, they would nevertheless be justified under Article XX(d) of the GATT 1994. 5.12 Chile will confine itself, on this point, to expressing its views on the subparagraph in question, and not on the introductory paragraph of Article XX. In any case, if the Panel applies the Article XX exception logically � based on the first Appellate Body Report306 � it must begin by examining the necessity stipulated in the subparagraph and conclude that the measures in question are not covered by that subparagraph, and that consequently there is no need for it to continue its analysis. 5.13 Article XX(d) states:
5.14 The Dominican Republic considers that the laws and regulations for which it is trying to secure compliance are the country's tax laws and regulations, particularly for the purpose of preventing tax evasion.307 Chile considers that the measures are not necessary for that purpose.
5.15 As Honduras stated in paragraph 2 of its written submission, the general practice among WTO Members is to permit such stamps to be affixed in the territory where the cigarettes are produced. In fact, this is what the Dominican Republic itself has established for other products. The requirement to affix the stamps in the territory of the Dominican Republic makes the procedure more cumbersome than necessary to comply with the legitimate objective, (e.g. practical problems associated with the unpacking and repacking of cigarettes); it increases costs; and it discourages imports. Chile insists that none of these can be considered to be normal costs associated with importation as the Dominican Republic claims. Nor can it be claimed that since this cost represents a very low percentage of the earnings of the importing company, there is no discrimination. 5.16 Chile further posits that it cannot be claimed that equal treatment does not involve discrimination. On the contrary, GATT/WTO jurisprudence recognizes that the prohibition of discrimination is an obligation not to treat similar situations differently or to treat different situations in the same way.308 5.17 The question Chile asks itself here is not whether or not the Dominican Republic is within its rights when it adopts measures necessary to secure compliance with its laws, regulations and other measures such as payment of taxes, but rather, whether or not the way in which this is being done discriminates between domestic and imported products. Given the difference in nature between them, the Dominican Republic's requirement that the stamps must in all cases be affixed in the territory of that Member (a) results in less favourable treatment for imported cigarettes as compared to domestic cigarettes; or (b) alters the conditions of competition in the market in question to the detriment of imported products. 5.18 Chile argues that the Bond required by the authorities of the Dominican Republic to guarantee the payment of the Selective Consumption Tax and other taxes is not an effective measure for that purpose. Given that the importer must pay the full amount of the Selective Consumption Tax when importing the product, the bond loses its purpose, since there is nothing to guarantee. If the importer does not pay the tax upon entry of the products, the products cannot be cleared. In its written submission, the Dominican Republic repeatedly points out that the tax authorities may reassess the liquidation and payment of the Selective Consumption Tax (within a period of three years). Given, however, that the new legislation establishes a single and fixed rate of RD$0.48 per cigarette, reassessment by the Directorate General of Internal Taxes (DGII) would no longer be necessary, and hence, neither would the bond. 5.19 For all of these reasons, Chile considers the stamp and bond requirements to be unjustified under Article XX(d) of the GATT 1994 in that: (a) they are not measures necessary to secure compliance with the tax laws of the Dominican Republic; (b) those laws are inconsistent with the WTO. 5.20 Chile considers that the laws and regulations of the Dominican Republic are inconsistent with the WTO in determining the tax base for cigarettes imported from Honduras � without transparent and generally applicable criteria � differently than for domestically produced cigarettes, and on the basis of unpublished sales surveys. This being the case, the measure that would be necessary to secure compliance with the said law is not covered by Article XX(d) of the GATT 1994. 5.21 Chile considers that Honduras made a prima facie case that the said measures were inconsistent with Articles III:2 and X of the GATT 1994. The Dominican Republic has not refuted that claim. Moreover, it errs in paragraphs 106 and 146 of its written submission when it states that Honduras did not challenge the WTO consistency of the tax legislation. Honduras did do so, and that is exactly what this dispute is about. 5.22 Chile insists that the fact the Dominican Republic revoked certain elements of its tax legislation applied to cigarettes that were challenged by Honduras does not relieve the Panel from ruling on their consistency with the WTO. 5.23 The Dominican Republic states that it bound, under the WTO, a list of "other duties or charges" applied to imports. That list, according to the Dominican Republic, can be said to include all of the duties and charges applied to imports to the extent that they do not exceed the 30 per cent binding in its Schedule XXIII. Consequently, the transitional surcharge on imports (2 per cent) and the foreign exchange fee are consistent with Article II:1(b) of the GATT 1994, second sentence, since together they do not exceed the 30 per cent bound rate. 5.24 Chile point outs that the Dominican Republic's Schedule XXIII contains a list of imported products subject to the Impuesto Selectivo en Aduanas (Selective Customs Tax). The Schedule makes no mention of the transitional surcharge on imports or the foreign exchange fee, or indeed any other tax. Consequently, the other "duty or charge imposed on or in connection with importation" bound by the Dominican Republic is the Selective Customs Tax. 5.25 Chile remarks that, although this Selective Customs Tax is not defined, it appears to be a certain tax which is (in the language of Article II:1(b), second sentence) "imposed on the date of this Agreement [the GATT] or... directly and mandatorily required to be imposed thereafter by the legislation in force in the importing territory [the Dominican Republic] on that date". Consequently, it is up to the Dominican Republic to show that the transitional surcharge on imports and the foreign exchange fee were applied at the date on which they were notified to the WTO or that they were directly and mandatorily required to be imposed thereafter by the legislation in force. 5.26 Chile considers that the Dominican Republic did not prove that the transitional surcharge on imports and the foreign exchange fee were equivalent to the Selective Customs Tax, and they were certainly not in force on the date of WTO notification, i.e. in 1994, since both of the measures were introduced last year. Nor did it identify the legislation in force on that date which directly or mandatorily required that the transitional surcharge on imports and the foreign exchange fee be imposed. 5.27 In Chile's view, the other duties and charges notified by WTO Members and included in their Schedules of Commitments are limited in two ways. Firstly, they are limited to the duty or charge specifically identified (in this case, a Selective Customs Tax), and secondly they are limited to the ceiling bound in each notification. Consequently, Members may not apply a charge or duty notified in excess of the maximum amount indicated nor, moreover, can they apply other duties or charges of another kind if they have not been notified and listed, even if their rates are lower than the bound level. 5.28 Finally, as pointed out by El Salvador and Nicaragua in their written submission, Chile is of the view that Honduras's challenge to the transitional surcharge on imports and the foreign exchange fee is not restricted to cigarettes alone. Both measures are in fact applicable to the whole tariff universe. Therefore, were the Panel to find that they are indeed "other duties or charges" properly recorded in the Schedule, they would only be so for the products specified in Schedule XXIII. For all other products, they would constitute duties or charges inconsistent with Article II.1(b) of the GATT 1994.
5.29 For the above reasons, Chile requests that the Panel, upon examining the consistency of the measures challenged by Honduras, take into account the context of the tax regime applied by the Dominican Republic to cigarettes.
5.30 In regard to consistency of the measures concerned with WTO obligations, China focuses its submission on the analytical approach established by WTO jurisprudence309 and provisions related to Article II:1, Article III, Article XV and Article XX(d). 5.31 Below China will proceed to address each of these issues involved in different measures separately.
5.32 According to the submission presented by the Dominican Republic, these two measures were replaced by new ones through Law 3-04 which amended Article 367 and 375 of the Tax Code310 on 9 January 2004, the same date on which the Panel for the present dispute was established and the terms of reference of the Panel were fixed.311 China would like to briefly comment on the factors which the Panel may take into account in considering whether it should make findings regarding these two alleged "dead measures". 5.33 China notes that Panels differentiated their positions in past GATT/WTO cases with regard to the issue of whether a Panel should make findings for revoked measures. Several factors, including the timing of the amendment, revocation or termination of the measures challenged, the extent to which the measure was amended, and the relevance of revocation of the measure to the implementation stage of the dispute settlement process, have been taken into account by previous Panels.
5.34 China point outs that for the measures that had been withdrawn prior to the issuance of the Panel report, the Panel in US � Wool Shirts and Blouses, similar to the GATT Panels in EEC � Dessert Apples and US � Canadian Tuna, nevertheless made findings on those measures challenged.312 5.35 China remarks that, in contrast, the Panel in Argentina � Textiles and Apparel declined to examine measures that had been revoked "prior to establishment of Panel", since the Panel refused to engage in speculating whether the defendant would re-introduce the measure, and operated on the assumption that the defendant would carry out its WTO obligations in good faith.313
5.36 China notes that the Appellate Body in Chile � Price Band System chose to deal with the changes, after the establishment of the Panel, which amended the measure challenged "without changing its essence".314 5.37 Similarly, in Brazil � Aircraft the Appellate Body ruled on changes and amendments to the measure challenged before the establishment of the Panel (and after consultation), which did not change the essence of the measure.315 5.38 In Indonesia � Autos, the complaint challenged the effectiveness of the revocation of one of the measures challenged. The Panel noted the practice of past GATT/WTO cases where Panels made findings in respect of a measure included in the terms of reference, which was otherwise terminated or amended after the commencement of the Panel proceedings.316 5.39 Bearing in mind the aforementioned factors considered by the Appellate Body and past Panels, China hopes the Panel could clarify the following preliminary questions before proceeding with any further examination of substantive issues with respect to these two measures which are included in the terms of reference of the Panel:
5.40 With regard to the foreign exchange fee, China would like to address the issue of whether the imposition of the foreign exchange fee complies with Article XV. 5.41 The core of Honduras's claim hinged upon the characterization of the foreign exchange fee as an "other duty or charge" within the meaning of Article II:1(b). In the footnote to paragraph 62 in its submission, Honduras considered it unnecessary for the Panel to decide "...whether the fee is an 'exchange action' or a 'trade action' within the meaning of Article XV:4 of the GATT". The Dominican Republic rebutted in its submission that "the transitional foreign exchange fee is an exchange restriction within the jurisdiction of the Fund, not a charge on imports within the jurisdiction of the GATT".317 5.42 China is of the view that, before proceeding with further examination on whether the imposition of the foreign exchange fee is inconsistent with the Dominican Republic's WTO obligations, it is necessary to consider whether the imposition of the foreign exchange fee obtains justification under Article XV:9(a) of the GATT 1994. 5.43 The negotiating history of the GATT provided that paragraphs 2, 4 and 9 of Article XV of the GATT 1994 served to avoid overlapping jurisdiction between IMF and GATT, although the WTO/GATT jurisprudence left the issue of whether Article XV:9(a) of the GATT serves as an exception to a Member's GATT obligations unanswered.318 China considers that interpretation of Article XV:9 cannot be isolated from other paragraphs of Article XV, particularly Article XV:2 and Article XV:4. As upheld by the Appellate Body in US � Gasoline, it is required by the general rule of interpretation in the Vienna Convention to give meaning and effect to all the terms of the treaty in order to avoid reducing whole clauses or paragraphs of a treaty to redundancy or inutility.319 5.44 GATT jurisprudence has established the jurisdiction of the WTO forum over monetary measures with an effect on trade. The 1977 GATT Report on the Monetary Measures Applied by Italy (Italian Measures) addressed a monetary measure (requirement of deposit for payment abroad) that contributed to the stabilization of Italian currency and served for the establishment of a longer term economic stabilization policy. The measure was non-discriminatory in its nature and would be gradually phased out at that time. Although some GATT Contracting Parties recognized that the measure had been approved by the International Monetary Fund and by the European Communities, a working party with a term of reference restricted to Article XV was established for the examination of the trade effects of the measures which was a matter of direct concern to the GATT. The working party invited Italy to consider an early removal of foreign exchange measure and to replace this temporary measure by "comprehensive alternative measures to help restore equilibrium as indicated in the finding of the International Monetary Fund".320 Despite this precedent, the extent to which Article XV:2 may require Panels to consider as "dispositive specific determinations of the IMF" has not yet been well clarified in GATT/WTO disputes.321 In Greece � Import Taxes, the Panel suggested the CONTRACTING PARTIES address an inquiry to the IMF with regard to the issues of whether the tax in question (a) was a multiple currency practice, and (b) whether or not it was in conformity with the Articles of Agreement of the International Monetary Fund. The staff of the IMF participated in the discussion.322 In contrast, the Appellate Body in Argentina � Textiles and Apparel, did not rule against the Panel's declination to consult with the IMF.323 Similarly, the Panel in India � Quantitative Restrictions ruled that under Article 13.2 of the DSU a Panel enjoys discretion and significant authority as to whether or not to seek information from experts and from any other external source. 5.45 In China's view, the plain text of Article XV:2 provides that the WTO "shall accept" the IMF's factual findings within its competence relating to foreign exchange, monetary reserves and balances of payments, as well as its legal determination on the consistency of "actions by a contracting party in exchange matters" with the IMF's Articles. 5.46 The title of Article XV indicates that it deals with "exchange arrangements". However, China notes that there exist differences in the use of terms with regard to exchange arrangements in Article XV:2, Article XV:4 and Article XV:9. Specifically, Article XV:2 refers to the mandatory consultation requirement with the IMF on "actions [by a contracting party] in exchange matters"; Article XV:9 refers to the justifications of "exchange controls or exchange restrictions" in accordance with IMF Articles, while Article XV:4 refers to "exchange actions" that may frustrate the intent of the GATT provisions. GATT/WTO jurisprudence is not clear on whether these differences connote a certain logic subordinate relationship of these terms, particularly between "exchange controls or exchange restrictions" under Article XV:9 in one category, and "actions in exchange matters" under Article XV:2 and "exchange actions" under Article XV:4 in the another category. In other words, it might be arguable whether the former category is a subset of the latter category. 5.47 By reviewing the provisions of Article XV, China further notes that Article XV:9 and Article XV:2, although by no means identical, are largely similar and, to some extent, in parallel: 5.48 Article XV:9 provides, in pertinent part, that:
5.49 Article XV: 2 provides, in relevant part, that:
5.50 In view of the parallel terms of the language in the two provisions, and in the absence of any contrary indication in the context, China believes fulfilment of the requirements under Article XV:9(a) should correspond to satisfaction of requirements under Article XV:2. Further, taking into account the institutional allocation of expertise resulting from multilateral negotiations regarding trade and exchanges between the WTO and IMF, assuming arguendo that measures constituting "exchange controls or exchange restrictions" within the meaning of Article XV:9, is subset to the category of "actions in exchange matters" under Article XV:2, the Panel is obliged to consult with IMF with regard to the measure of the foreign exchange fee in this dispute pursuant to Article XV:2. 5.51 China considers that two issues, specifically, should be resolved through consultation with IMF with respect to (a) whether the imposition of the foreign exchange fee falls within the scope of "exchange matters", and in particular, constitutes certain kinds of "exchange controls or exchange restrictions", and (b) whether the imposition of the foreign exchange fee is "in accordance with" the Articles of Agreement of the International Monetary Fund.
5.52 The Dominican Republic argued that the foreign exchange fee constitutes an "exchange control or restriction within the meaning of Article XV:9(a)".324 Having argued that the meaning of "exchange restriction" shall be interpreted in the light of the criterion established by the Executive Directors of the IMF on 1 June 1960325, the Dominican Republic seems to assert that the Panel may apply this criterion directly in the present dispute to determine the characterization of the foreign exchange fee. 5.53 The IMF criterion cited by the Dominican Republic states that "[t]he guiding principle in ascertaining whether a measure is a restriction on payments and transfers for current transactions under Article VIII, Section 2, is whether it involves a direct governmental limitation on the availability or use of exchange as such".326 5.54 China notes that the GATT/WTO regime, however, unlike that of the IMF, has never formally decided on how to distinguish between trade and exchange controls.327 5.55 China hopes that the Panel in the present case could clarify the issue of whether the aforesaid IMF-endorsed criterion, on the basis of which the IMF distinguishes trade and exchange matters, can be directly applied to the determination of whether the imposition of the foreign exchange fee falls within the scope of "exchange controls or exchange restrictions" under GATT Article XV:9(a). 5.56 Under Article XV:4, "[C]ontracting Parties shall not, by exchange action, frustrate the intent of the provisions of this Agreement". Assuming arguendo that the foreign exchange fee is an IMF-consistent foreign exchange action which falls within the scope of Article XV:4, it might be argued that such measure is still actionable under the provision of Article XV:4. 5.57 In accordance with the burden of proof principle established in US � Wool Shirts and Blouses328, it is for Honduras to establish a prima facie case of violation of Article XV:4 by the Dominican Republic. However, Honduras has chosen not to do so by stating it its first submission that it is unnecessary for the Panel to decide "whether the fee is an 'exchange action' or a 'trade action' within the meaning of Article XV:4 of the GATT".329 5.58 China hopes the Panel in the present dispute would clarify the relationship between Article XV:9 and Article XV:4 in examining of this dispute. 5.59 With regard to the stamp requirement, China would like to express its views regarding the requirements for the constitution of a violation under Article III:4, and discuss the possible justification for a breach of Article III:4 under Article XX(d) of GATT 1994 as follows:
5.60 The Appellate Body has held that, for a violation of Article III:4 to be established, three elements must be satisfied: (a) the imported and domestic products at issue are "like products"; (b) the measure at issue is a "law, regulation, or requirement affecting internal sale, offering for sale, purchase, transportation, distribution, or use" of the like products; and (c) the imported products are accorded "less favourable treatment" than that accorded to like domestic products.330 5.61 Among these three criteria, China would like to make further comments on certain parameters related to the examination of the third criterion, i.e. whether in the present dispute, the imported products concerned are accorded "less favourable treatment" than that accorded to like domestic products. As upheld by the Appellate Body in US � FSC (Article 21.5 -EC), an examination of an alleged Article III:4 violation must be grounded in close scrutiny of the "fundamental thrust and effect of the measure itself".331 The focus of the examination in this regard is the "modification of competition conditions".332 In other words, an examination of whether the Dominican Republic accords "less favourable" treatment to imported products should hinge on whether the actual effect of the measure in question, if it exists, adversely changes or affects the equality of competitive opportunities in the relevant market to the detriment of imported products. 5.62 China is of the view that, although this general principle, which seeks to avoid protection to domestic production in the application of internal tax and regulatory measures, is not explicitly invoked in Article III:4, nevertheless, it "informs" that provision.333 An examination of the "actual effect" of the measures in question on the competitive relationship is also guided by the "general principle" set out in Article III:1. In the present dispute, it becomes relevant to take into account the issues of whether or not the purpose of the stamp requirement is discriminatory or protective in favour of domestic products in the evaluation of its consistency with Article III:4.
5.63 China suggests that, should the Panel find the stamp requirement inconsistent with relevant GATT/WTO provisions, it might also need to examine whether the measure is provisionally justified under Article XX(d), and whether the measure meets the requirements as set forth in the chapeau of Article XX.334 The chapeau of Article XX makes it clear that it is the "measures", not the "legal finding of [violation], which are to be examined under Article XX (d)".335 5.64 In this submission, China would comment on the burden of proof and the analytical approach the Panel might consider in order to qualify a measure as "necessary" under Article XX (d).
5.65 China point outs that it has become a well-established rule that it is for the party invoking Article XX to demonstrate a prima facie case that the measure in question falls within one of the exceptions as specified in Article XX, and that it meets the requirements of the chapeau of Article XX. 5.66 For example, with regard to the burden of proof for individual paragraphs of Article XX, the Panel in Canada � FIRA held that "[s]ince Article XX(d) is an exception to the General Agreement it is up to Canada, as the party invoking the exception, to demonstrate that the purchase undertakings are necessary to secure compliance with the Foreign Investment Review Act".336 5.67 With regard to the burden of proof for the chapeau of Article XX, the defending party is required to establish to the Panel's satisfaction that the application of the measure does not constitute "a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail". In US � Gasoline, the Appellate Body noted the difference between the burden of proof under the individual paragraphs of Article XX on the one hand, and the burden of proof under the chapeau of Article XX on the other, and found that the burden of proof for the chapeau was a "heavier" one.337 5.68 In the light of the above principle, it is up to the Dominican Republic, who invokes Article XX(d) in the present dispute, to demonstrate that there is no other alternative WTO-consistent or less WTO-inconsistent measure it could reasonably employ in order to secure the compliance with its domestic policy goals.
5.69 The Appellate Body in Korea � Various Measures on Beef stressed that the reach of the word "necessary" is within a continuum of degrees of necessity, which is located "significantly closer" to the pole of "indispensable" than to the opposite pole of "simply making a contribution to".338 The more vital or important those common interests or values are, the easier it would be to accept as "necessary" a measure designed as an enforcement instrument.339 5.70 In China's view, along this continuum between "significantly closer to indispensable" and "simply making a contribution to", there may exist situations where a measure may be "necessary" to achieve the compliance pursuant to Article XX(d), and at the same time, achieve other objectives. By analogy, the necessity of the measure in question to secure compliance with the WTO-consistent laws and regulations need not amount to a "sole and exclusive" one. 5.71 Taking into consideration the relationship between the claimed policy objective of the measure and its "general design and structure"340 and in order to fully assess the "necessity" of a measure along the continuum, Panels in the past have undergone a process of "weighing and balancing a series of factors which prominently include the contribution made by the compliance measure" on the one hand, and "the importance of the common interests or values protected by that law or regulation, and the accompanying impact of the law or regulation on imports or exports" on the other hand.341 5.72 In addition, whether an alternative less trade-restrictive measure is reasonably available is relevant to the determination of the degree of necessity. So far, numerous Panel and Appellate Body reports, which have examined the test of "necessity" under Article XX (d) of GATT, have come to the conclusion that a restrictive measure taken by a Member is not necessary if an alternative measure, which that Member could reasonably be expected to employ and which is not inconsistent with other GATT provisions, is available to it.342 In order to decide whether a less trade-restrictive alternative measure is available, previous Panels took into account the specific facts of each individual case. 5.73 Finally, it could be argued, it is up to the Panel to decide, presuming that the stamp requirement were withdrawn, whether the Dominican Republic's regulatory goals to secure compliance with the Tax Code and prevent rampant cigarette smuggling would be satisfied.
5.74 As a third party to this dispute, China is not necessarily aware of the detailed contents and effects of several measures in question. In the light of the relevant WTO/GATT jurisprudence and the analytical approach with regard to the measures in question set forth above, China hopes the viewpoints and various issues it has raised may assist the Panel in its decision.
5.75 In the light of the strong historical, legal and economic ties between the two countries and in view of their common status as third parties to the dispute Dominican Republic � Measures Affecting the Importation and Sale of Cigarettes (WT/DS302), El Salvador and Nicaragua have decided to make a joint contribution to the proceedings. 5.76 The different matters at issue in this dispute are of considerable systemic interest, and in some cases, of substantial interest, as shall be shown further on. 5.77 In the paragraphs that follow, El Salvador and Nicaragua will present their views on the legal aspects of the measures in dispute.
5.78 In addressing this point, El Salvador and Nicaragua consider that it is important to refer to the fact raised by the Dominican Republic in its first written submission that Decree 646-03 of 30 June 2003 was revoked, and that a measure of equal effect was introduced by Law 2-04 of 4 January 2004. El Salvador and Nicaragua consider that the measure at issue, independently of the legal instrument containing it, continues to be the same, and its essential attributes have not been altered by the new law. 5.79 Consequently, to fully comply with its terms of reference, the Panel should analyse the measures at issue, i.e. Decree 646-03 and Law 2-04.343 5.80 At the same time, El Salvador and Nicaragua feel that it is also necessary to address the comments made by the Dominican Republic to the effect that the "transitional surcharge for economic stabilisation" of 2 per cent on the c.i.f. value of imports is duly covered by the reservation it made when it submitted an addition to its Schedule XXIII on 14 September 1994, under "other duties or charges". El Salvador and Nicaragua would like to examine the following points in this connection.
5.81 Article II:1(b) of the GATT 1994 stipulates:
5.82 At the same time, paragraph 1 of the Understanding on the Interpretation of Article II:1(b) of the GATT 1994 states:
5.83 Thus, both provisions establish the conditions or circumstances under which a duty or charge may be levied in addition to the ordinary customs duties in order to be valid. El Salvador and Nicaragua shall turn to these conditions or circumstances below in order to examine the validity of the Dominican Republic's assertion that the "transitional surcharge" applied to cigarettes is covered by the addition it made to its Schedule XXIII under "other duties and charges" on 14 September 1994.
5.84 A simple reading of Article II:1(b) of the GATT 1994, second sentence, reveals that for the levy of "other duties and charges" in addition to "ordinary customs duties" to be valid, one of the following circumstances must apply:
5.85 El Salvador and Nicaragua note that the "transitional surcharge" of 2 per cent on the c.i.f. value of imports does not comply with either of the circumstances set forth in Article II:1(b) of the GATT 1994, since neither of the measures by which the Dominican Republic imposed the said surcharge, in the past, or currently imposes it, was in force on 15 April 1994:
5.86 A reading of paragraph 1 of the Understanding on the Interpretation of Article II:1(b) of the General Agreement on Tariffs and Trade 1994 reveals that the nature and level of any "other duties or charges" levied on bound tariff items must be recorded in the Schedules of Concessions annexed to the GATT 1994. 5.87 Needless to say, then, that the addition made by the Dominican Republic on 14 September 1994 to its Schedule XXIII, under "other duties or charges", makes no reference whatsoever to a measure whose nature or level is equal or similar to the nature and level of the "transitional surcharge for economic stabilisation" of 2 per cent on the c.i.f. value of imports. 5.88 In this connection, it should be noted that the addition made to the Dominican Republic's Schedule XXIII under "other duties or charges" refers only to "lista de productos importados que pagan el Impuesto Selectivo en aduanas" (list of imported products which pay the Selective Tax at customs), in which it indicates as the level of the charge an ad valorem rate determined as a percentage for each tariff item. This charge is, apparently, a selective consumption tax. 5.89 The two above points lead to the firm conclusion that despite its contentions to the contrary, the Dominican Republic's "transitional surcharge for economic stabilisation" is at no time covered by its entries in its Schedule of Concessions XXIII.
5.90 In this second part of their analysis of the legal aspects of the "transitional surcharge", El Salvador and Nicaragua felt that it was extremely important to present their views on the coverage of goods falling within the scope of the measure at issue. 5.91 It was established above that the "transitional surcharge" is not covered by the Dominican Republic's entries in its Schedule of Concessions XXIII as it contends. Beyond that, however, the Dominican Republic has left a large void in its first written submission in its attempt to justify its transitional measure with respect to cigarettes only, and not with respect to the tariff universe to which the measure applies. 5.92 The Panel must examine the matter referred to it by Honduras which, with respect to the "transitional surcharge", can essentially be described as follows:
5.93 Thus, both Decree 646-2003 and Law 2-04 establish a transitional surcharge on the totality of goods in the tariff universe. Honduras has challenged the measure as such, without making any distinction in terms of a specific product. In this connection, the Appellate Body in the case European Communities � Customs Classification of Certain Computer Equipment notes that "Article 6.2 of the DSU does not explicitly require that the products to which the 'specific measures at issue' apply be identified." When Honduras submitted this measure for analysis by the Dispute Settlement Body, it never confined nor restricted its request for examination to the specific case of cigarettes, which means that the measure should be examined in respect of all products. At the same time, El Salvador and Nicaragua note that the Dominican Republic tried, and failed, to demonstrate the validity of its measure only in relation to cigarettes, which are included in the list that it annexed on 14 September 1994 to its Schedule of Concessions XXIII. 5.94 Furthermore, El Salvador and Nicaragua consider that the application of the measure to the tariff universe is inconsistent with the Dominican Republic's commitments under Article II:1(b) of the GATT. 5.95 Indeed, in the above paragraphs El Salvador and Nicaragua have shown that the "transitional surcharge" is a measure imposed by the Dominican Republic in violation of Article II:1(b) of the GATT in that it is applied to the products included in the Dominican Republic's Schedule XXIII, under "other duties and charges" added on 14 September 1994, as well as to the rest of the products of the tariff universe. Consequently, the measure is also in violation of the General Principle laid down in Article II:1(a).345 5.96 It is on the basis of these legal arguments that El Salvador and Nicaragua consider the "transitional surcharge" for economic stabilization of 2 per cent on the c.i.f. value of imports applied by the Dominican Republic to be totally inconsistent with the Dominican Republic's obligations under the GATT. 5.97 The Dominican Republic maintains in force a measure which establishes a levy in the form of a "foreign exchange fee" imposed on the value of imports. 5.98 El Salvador and Nicaragua have examined at length the arguments submitted by the Dominican Republic to the effect that this measure constitutes an "exchange measure" in accordance with the Articles of Agreement of the International Monetary Fund, and is therefore duly permitted under Article XV:9(a) of the GATT.346 5.99 It should be borne in mind, however, that the measure at issue retains the following characteristics:
5.100 These characteristics of the "foreign exchange fee" clearly point to a different conclusion: far from being an "exchange measure" associated with the inherent characteristics of exchange transactions, as the Dominican Republic contends, it is a duty or charge levied in addition to the ordinary customs duties. 5.101 Also, the Dominican Republic bears the burden of proof with respect to its claim that the "foreign exchange fee" is an exchange measure that is justified under Article XV:9(a). Indeed, El Salvador and Nicaragua note that the various elements of that claim remain to be proved. 5.102 This calls for a number of immediate comments on the statement made by the Dominican Republic in its first written submission that "... even if the Panel finds that the exchange fee is not an exchange measure justified by Article XV:9(a), the claim that it is inconsistent with Article II:1 would fail since the rate of the exchange fee is within the level of the ODCs recorded by the Dominican Republic in its Schedule".347 5.103 In this connection, El Salvador and Nicaragua revert to the remarks made with respect to the Dominican Republic's right to impose other duties or charges in the light of its entries in its Schedule of Concessions:
5.104 As already stated in this submission in the part concerning the "transitional surcharge", a simple reading of Article II:1(b) of the GATT, second sentence, reveals that for the levy of "other duties or charges" in addition to "ordinary customs duties" to be valid, one of the following circumstances must apply:
5.105 The "foreign exchange fee" is a measure applied by the Dominican Republic since 1991, and consequently, it was in force on 15 April 1994 at the time when the other duties and charges which could be applied in addition to the ordinary customs duties were bound. However it was never applied at its current rate of 10 per cent on the value of imports to the Dominican Republic. 5.106 Furthermore, the measure was never recorded in the list of "other duties or charges" that could be applied by the Dominican Republic in accordance with its Schedule of Concessions. In this connection, paragraph 1 of the Understanding on the Interpretation of Article II:1(b) of the GATT 1994 states that the nature and level of any "other duties or charges" levied on bound tariff items shall be recorded in the Schedule of Concessions annexed to the GATT 1994. The paragraph reads:
5.107 In the light of the above and of the Dominican Republic's Schedule of Concessions as supplemented by "other duties or charges" on 14 September 1994, it quickly becomes clear that neither the foreign exchange fee itself, nor its level of application, were recorded by the Dominican Republic. As was previously mentioned, the entries recorded by the Dominican Republic refer to a selective customs tax, which is apparently a selective consumption tax. 5.108 Thus, having established that the "foreign exchange fee" imposed by the Dominican Republic is applied at a level different from that applied on 15 April 1994, and having found that neither the measure itself nor its level were ever recorded in the Dominican Republic's Schedule of Concessions, it can clearly be concluded that the said measure is a duty or charge levied in addition to the ordinary customs duties and is therefore inconsistent with the Dominican Republic's obligations under the GATT 1994.
5.109 The Dominican Republic applies the "foreign exchange fee" to the totality of the tariff universe. El Salvador and Nicaragua note in this respect that the Dominican Republic has tried to justify its measure by stating that it was added to its Schedule of Concessions on 14 September 1994. 5.110 However, even if it turned out to be valid, this justification would cover the "foreign exchange fee" only for those tariff items included in the mentioned list that was added on 14 September 1994, and not for all of the products of the tariff universe. Here, as in the case of the transitional surcharge, the terms of reference given to the Panel by the DSB do not restrict examination of the measure to cigarettes and the Dominican Republic has therefore again left a large gap in its argument in attempting to justify the validity of the measure. 5.111 On the basis of the above considerations it can be said that the Dominican Republic has violated its obligations under Article II:1(b) of the GATT, and hence, it has also violated the general principle laid down in Article II:1(a) of the GATT.348 5.112 It is on the basis of these legal arguments that El Salvador and Nicaragua consider that the "foreign exchange fee" imposed by the Dominican Republic is a measure that is inconsistent with its obligations under the GATT. 5.113 The Dominican Republic requires that a stamp be affixed on cigarette packets in its territory pursuant to Article 37 of Decree 79-03, and Articles 1 and 2 of Decree 130-02.349 This stamp requirement is a measure that applies to both domestic and imported products.350 5.114 Consequently, it is important to analyse this measure in the light of Article III:4 of the GATT, which states:
5.115 Similarly, in connection with this provision, the Appellate Body in Korea � Various Measures on Beef, stated that:
5.116 El Salvador and Nicaragua agree with the position stated by Honduras and shared with the Dominican Republic that for the purposes of this case, imported cigarettes and domestic cigarettes are like products.352 5.117 The second of the mentioned elements establishes that the measure at issue must be a law, regulation, or requirement affecting the sale, offering for sale, purchase, transportation, distribution or use of the products on the domestic market. The measure at issue complies with this condition, since the requirement to affix a stamp on cigarettes in the Dominican Republic is imposed by the Dominican Republic in order to sell those products. Specifically, in the case of imported cigarettes, Decree 130-02 stipulates that these products shall be placed in a bonded warehouse or warehouse under the Directorate General of Internal Taxes where the control stamps provided for by Law 2461 of 1950 shall be applied. 5.118 The third and last of the elements which, according to the Appellate Body, must be satisfied for a violation of Article III:4 to be established is that the imported products must be accorded "less favourable" treatment than that accorded to like domestic products. In the case of the measure at issue, the producers of cigarettes in the Dominican Republic can affix the stamp on the cigarette packet as part of the production and labelling process, while in the case of imported cigarettes, the cigarettes have to be taken to bonded warehouses or warehouses under the control of the Directorate General for Internal Taxes, the packages unpacked, the cellophane wrapping removed, the stamp affixed and the packages wrapped and packed once again.353 For imported cigarettes, this process involves labour and capital costs in addition to those incurred in the case of domestic cigarettes, placing the former at a competitive disadvantage.354 5.119 Thus, though the measure may be applied according to the law both to domestic products and to imported products, in reality it results in less favourable treatment for imported products, and this constitutes a discrimination. 5.120 In the light of the above considerations, El Salvador and Nicaragua consider that the requirement to affix a stamp on cigarette packets exclusively in the territory of the Dominican Republic constitutes a violation of Article III:4 of the GATT. 5.121 El Salvador and Nicaragua also consider that this case has considerable systemic implications owing to the precedent that it could create with respect to measures that could be adopted for other products. If the Panel were to find that the requirement to affix stamps on cigarette packets exclusively in the territory of the Dominican Republic constitutes a GATT-consistent measure, it would be setting a precedent which would give rise to numerous abuses of the multilateral trading system that would be improperly justified by invoking a variety of problems parallel to the obligations of Members. 5.122 Having said this, El Salvador and Nicaragua do not deny the sovereign right of Member States to introduce, under the multilateral trading system, measures whose purpose is legitimate. However, the application of those measures must fully respect and comply with the obligations deriving from the commitments made by Members as part of that multilateral system.
5.123 El Salvador and Nicaragua consider that the current dispute is of considerable importance owing to its implications for trade relations with the Dominican Republic and for the proper functioning of the multilateral trading system in accordance with the commitments assumed by each WTO Member. 5.124 El Salvador and Nicaragua stated that in the foregoing submission they have established the factual and legal grounds for reaching the following conclusions:
5.125 In the light of the above, El Salvador and Nicaragua requested the Panel to recommend that the Dominican Republic bring its measures into conformity with the respective provisions of the GATT.
5.126 The European Communities stated that it intervenes in this case because of its systemic interest in the interpretation of fundamental provisions of the General Agreement on Tariffs and Trade 1994 (the "GATT"), in particular Article III. Therefore, the European Communities does not take a position on the specific facts of this case and the question of whether or not the challenged measures are WTO-consistent. 5.127 In its submission, Honduras argues that the transitional surcharge on imports is inconsistent with Article II:1(b) of the GATT. Moreover, in a footnote, Honduras maintains that, for this reason, the measure is also in breach of Article II:1(a) of the GATT.355 5.128 At the outset, the European Communities would note that it cannot agree with the statement made by Honduras that "Article II:1(a) of the GATT prohibits, in principle, duties and charges on bound items other than ordinary customs duties".356 Rather, that Article mandates treatment no less favourable than that provided for in the relevant schedule. The same applies to Article II:1(b) second sentence of the GATT as is further corroborated by the Understanding on the Interpretation of Article II:1(b).357 The text of the schedule will therefore govern the question of the WTO-compatibility of the particular "other duties or charges" a Member imposes. To the extent that the transitional surcharge on imports is inconsistent with the schedule, it would be in violation of Article II:1(b) of the GATT and consequently, to this extent, also in breach of Article II:1(a) of the GATT.358 5.129 The foreign exchange fee, as the European Communities understands it, is imposed on the exchange of local currency into foreign currency which is necessary to pay for imported goods.359 Honduras argues that this fee is contrary to Article II:1(b) of the GATT because it exceeds the levels of ''other duties and charges'' as inscribed by the Dominican Republic in its schedule.360 The Dominican Republic defends the foreign exchange fee in the first place by referring to Article XV:9(a) of the GATT.361 5.130 The European Communities does not take a position on Honduras's allegation that the foreign exchange fee would be contrary to Article II:1(b) of the GATT. However, the European Communities would like to make some systemic comments on the interpretation of Article XV:9(a) of the GATT: 5.131 First of all, the European Communities notes that this provision, and Article XV of the GATT as a whole, are closely related to the IMF field of activity. Under Article XV:9(a) of the GATT WTO Members may use ''exchange controls'' or ''exchange restrictions'' consistent with IMF rules. Therefore, the interpretation of this provision should not be conducted in isolation from the relevant IMF concepts and rules. The GATT cannot be assumed to have restricted the scope for Members to adopt these exchange measures consistent with IMF rules. 5.132 That said, the European Communities would note that it appears that a ''fee'' is not necessarily an ''exchange restriction'' within the terms of Article XV:9(a) of the GATT. The ordinary meaning of the term ''restriction'' is ''a limitation on action, a limiting condition''.362 Thus, while it is of course true that a fee would make foreign exchanges more expensive, this does not necessarily entail a limitation on the availability of foreign currencies. Thus, the exception under Article XV:9(a) of the GATT may not be pertinent in this case. 5.133 The European Communities would also note that Article XV:4 of the GATT provides that any ''exchange action'' shall not ''frustrate the intent of the provisions of this Agreement''. Clearly, not all ''exchange actions'' are exempted by virtue of Article XV:9(a) of the GATT. Care must be taken not to interpret this latter provision in a rather broad way to the detriment of the general principle under Article XV:4 of the GATT. To avoid such a conclusion, it appears, therefore, appropriate to give the notion of an ''exchange restriction'' under Article XV:9(a) of the GATT a meaning consistent with the actual terms used, with its immediate context and with the relevant IMF provisions. 5.134 In this context, the European Communities would also emphasise the objective and purpose of the WTO Agreements which aims at "expanding the trade in goods and services".363 It would be contrary to this objective if the trade impact of certain foreign exchange actions were to escape the GATT rules by virtue of a too broad interpretation of the term "exchange restriction" under Article XV:9(a) of the GATT.
5.135 The European Communities wishes to comment upon the legal test to be applied under Article III:4 of the GATT when assessing the question whether imported products are accorded "less favourable treatment" compared to the "like" domestic products. As is well established in the GATT/WTO jurisprudence, less favourable treatment can arise both from formally different and formally identical treatment of imports and like domestic products.364 The fact that the requirement to affix the stamp in the Dominican Republic's territory is identical for importers and domestic manufacturers, therefore, does not exclude the possibility of de facto less favourable treatment.365 5.136 According to the Appellate Body in Korea � Various Measures on Beef, the relevant standard for a determination of "less favourable treatment" is whether the measure at issue accords "conditions of competition" that are less favourable for imports than for the like domestic goods.366 5.137 The European Communities would object to the Dominican Republic's attempt to narrow the obligation of national treatment in Article III:4 of the GATT by importing "so as to afford protection" into the criterion of "less favourable treatment". On the basis of "so as to afford protection to the domestic industry" in Article III:1 of the GATT, the Dominican Republic appears to advocate an additional requirement under Article III:4, which is that the measure has "protective application".367 5.138 Firstly, this attempt goes in the direction of advocating the "aims-and-effects" approach which has been explicitly rejected in the WTO jurisprudence.368 A responding party can therefore not defend itself against the allegation of an Article III violation by insisting that its measure pursues entirely legitimate policies and is not inherently and intentionally discriminatory. 5.139 Secondly, while the Dominican Republic is right that the Appellate Body has acknowledged that Article III:1 of the GATT informs all of Article III, including its paragraph 4369, this does not result in the additional requirement(s) for a violation of Article III:4 of the GATT as argued by the Dominican Republic. The Appellate Body has made it clear that the principle of Article III:1 of the GATT is already expressed in the requirement of "no less favourable treatment" in Article III:4 of the GATT. Where there is less favourable treatment of the group of like imports, there is automatically protection of the group of like domestic products:
5.140 Thus, there is no need for an additional finding of the existence of what the Dominican Republic calls "protective application". 5.141 For this reason, the Dominican Republic also cannot defend itself with the argument that the costs imposed by its tax stamp measure are minimal and therefore result in no discriminatory or protective effect.371 Indeed, according to established jurisprudence even a minimal difference in taxes may contravene Article III:2, first sentence, of the GATT as this provision contains no de minimis exception.372 In addition, Article III of the GATT protects expectations of equal competitive opportunities, not of trade volumes.373 This simultaneously shows the irrelevance of the Dominican Republic's argument that the volume of imports has actually increased despite the allegedly discriminatory trade practice. 5.142 Finally, the Dominican Republic's arguments regarding the need for effective enforcement of tax laws, the danger of forgery and tax evasion and the lack of reasonably available regulatory alternatives do not belong in the analysis of competitive conditions and thus of national treatment. In the event of an inconsistency with Article III of the GATT, such considerations would be relevant in the examination of a justification under Article XX:(d) of the GATT. 5.143 Regarding the analysis of the "conditions of competition" one would need to assess whether the measure imposes additional costs on imported products compared to those imposed on like domestic products. In contrast, additional costs which are not truly the result of the governmental measure, but of a free choice by the importer, would be irrelevant. In the latter case, the additional costs borne by imports as compared with the like domestic products would not be entailed by the governmental measure and they should, therefore, be ignored in the "less favourable treatment" analysis. The same is valid for those competitive disadvantages which are not the result of the measure, but of economic, geographic or cultural circumstances inherently connected with the sale of products in export markets. 5.144 In sum, Article III:4 of the GATT requires that one considers only those costs that are imposed by the challenged measure itself and to assess whether the result is a disadvantage for imports in their competitive relationship with the like domestic products. 5.145 In the present case, the European Communities would not exclude that the Dominican Republic's requirement to affix the tax stamps in its territory creates a higher burden for imports and thus a competitive disadvantage vis-�-vis like domestic products. The Panel would need to assess the extent to which the alleged additional costs are truly imposed on importers compared to domestic producers and not only an exaggerated description of necessary additional steps or costs that are self-imposed by the importer, for instance by inefficient production processes.
5.146 Assuming that the ''tax stamp requirement'' were to be found in violation of Article III:4 of the GATT the Panel would then be called upon to adjudicate on the Dominican Republic' argument that the measure is justified under Article XX(d) of the GATT.374 5.147 The European Communities believes that a tax stamp requirement pursues a legitimate objective under the GATT, i.e. the levy of taxes on cigarettes, and that a tax stamp is an appropriate means to secure compliance with such an objective. However, the European Communities would invite the Panel to consider whether the concrete measure applied by the Dominican Republic is ''necessary'' in terms of Article XX(d) of the GATT. 5.148 The Appellate Body gave an exhaustive interpretation of the term "necessary" under Article XX(d) of the GATT in the case Korea � Various Measures on Beef. Thus, an examination of this term,
5.149 The Appellate Body has further added that, in its view,
5.150 In the case at hand, the European Communities would not contest that the tax stamp requirement is apt to achieve the compliance with the taxation of cigarettes in the Dominican Republic. However, Honduras contends that the tax stamp requirement has also a considerable adverse impact on the cost of importation due to the necessity to put the stamp on the cigarettes in the Dominican Republic. The European Community is not in a position to judge whether all the additional steps described by Honduras377 would necessarily occur, but it seems clear that the Dominican Republic' tax stamp requirement, at least, entails some more manufacturing steps for imports compared to the situation in which the stamps could be affixed in the ''home'' factory of the producer of imported cigarettes. According to the Appellate Body jurisprudence, such an aspect should be taken into account when assessing the ''necessity'' of the measure under Article XX(d) of the GATT. 5.151 In the EC's view, the requirement of a ''tax stamp'' could in principle also be achieved in a way that would be less burdensome for imports into the Dominican Republic. Such alternative methodology could consist, for instance, of selling tax stamps to authorized producers who would be entitled to fix the stamps on the cigarettes packets during the manufacturing process. If properly designed, such a procedure could sufficiently guarantee that only original tax stamps would be used, thus securing the objective of the tax stamp, while avoiding an unnecessary doubling in the manufacturing process for importers. 5.152 This being said, the European Communities does not contest the right of the Dominican Republic to choose its level of enforcement for its legitimate tax laws.378 However, as in the case Korea � Various Measures on Beef, this argument is not a "blank cheque" to the Member invoking Article XX(d) GATT. Instead, it is for the Panel to balance and weight all the arguments put forward by the party relying on this defence. 5.153 The Dominican Republic argues that the Panel should dismiss the claim because it is moot given the enactment of the Law 3-04 which was published on 14 January 2004379, that is after the establishment of the Panel, i.e. on 9 January 2004. Against this background, the European Communities considers that the Panel should conclude that the claim has become moot unless Honduras advances a special legal interest on why the Panel should still make a finding on this issue. 5.154 The European Communities is aware that the Panel's terms of reference form the jurisdictional basis for a case. For this reason, past Panels have been reluctant to dismiss a claim in case the underlying facts changed.380 That said, in the EC's view, it is important to take into account the rationale of the dispute settlement system. For instance, Article 3.2 of the DSU provides that this system "serves to preserve the rights and obligations of Members". Moreover, Article 3.3 of the DSU refers to "measures taken by another Member" and Article 3.7 of the DSU second sentence stipulates that "the aim of the dispute settlement mechanism is to secure a positive solution to a dispute". 5.155 The European Communities considers that, in case a measure is withdrawn, the basis for a ''dispute'' does not exist any more.381 In these circumstances, it would be for the complaining party to demonstrate why the dispute settlements proceedings should continue and to what extent its rights and obligations could still be affected. However, if the measure has simply become moot it is neither appropriate nor necessary any more for the Panel to make any findings on such a claim. Indeed, there would be no longer a ''measure'' which could ''affect the rights and obligations'' of another Member and, consequently, the case would be deprived of a "dispute". 5.156 The European Communities would insist that Article XI:1 of the GATT is not applicable to the bond requirement. This measure should be applied identically by both domestic manufacturers and importers ("tanto por importadores como por fabricantes locales").382 As the Interpretative Note Ad Article III makes clear, such a measure falls under Article III of the GATT and not within the scope of Article XI of the GATT. 5.157 In support of its subsidiary claim under Article III:4 of the GATT, Honduras asserts that the bond, which is a specific one-off guarantee (RD$ 5 million per importer or domestic producer), burdens an importer with small market share much more than a domestic producer with large market share. Honduras also claims that the bond serves to guarantee the payment of the Selective Consumption Tax, the actual burden of which depends on the quantities sold, such that the bond is not commensurate with the tax payable. 5.158 The European Communities would submit that the assessment whether the bond requirement de facto accords less advantageous competitive conditions to imported products than to the like domestic products should also take into account whether the bond requirement has a deterrent effect on potential domestic operators and importers. Domestic producers and also importers may be reluctant to set up business operations in the market of the Dominican Republic because of the bond requirement, with the result that that they do not actually exist on that market. When considering entry barriers resulting from the bond, it may be worth recalling that domestic producers must post the bond before starting production and importers (only) prior to importation. 5.159 The European Communities notes that while the parties have no disagreement about the "likeness" of the products in this case, i.e. cigarettes383, it is nevertheless important to note that for the purpose of the determination of a "less favourable treatment" "domestic" and "imported" should be compared as respective "groups". Thus, the Appellate Body in EC � Asbestos held
5.160 Therefore, in order to determine whether imported products are treated less favourably than domestic products one has to compare the "groups" of the respective like products.385 In the present case, it is not clear to the European Communities whether the bond requirement constitutes a "less favourable treatment" of the "group" of imported cigarettes compared to the "group" of cigarettes from the Dominican Republic. Indeed, in its claim Honduras only construes one example where an importer with a small market share is allegedly treated disadvantageously compared to a domestic producer with a big market share. Such an isolated example, however, is not sufficient to demonstrate that, under the terms of the decision EC � Asbestos, the "group" of imported products is treated less favourably than the "group" of domestic products. In other words, a single example, which might be purely anecdotal, tells nothing about the effects of the measure on the overall competitive relationship of imported and like domestic goods. 5.161 Furthermore, in order to make a prima facie case, it is not sufficient to rely for the determination of a "less favourable treatment" solely on the relative market share of importers as a group and domestic producers as a group. Honduras would also have to show that the imposition of a specific, fixed-amount bond results in a higher burden and a competitive disadvantage for the group of imported goods, as compared to the group of domestic like products. 5.162 As far as the Dominican Republic's defence on Article III:4 is concerned, in particular the relevance of "so as to afford protection" and "protective application" within "less favourable treatment", the European Communities would refer to its comments in connection to the tax stamp.
5.163 The European Communities considers that this case raises important
questions on the interpretation of Article III of the GATT. While not taking a
final position on the merits of the case, the Panel should carefully review the
scope of the claims in light of the observations made in this submission.
255 Second written submission of Honduras, 10 June 2004, para. 163. 256 Ibid., para. 174. 257 Ibid., para. 30. 258 Second written submission of the Dominican Republic, 10 June 2004, para. 46, citing the Appellate Body Report, Korea � Various Measures on Beef, para. 137. 259 Ibid., para. 47, quoting The New Shorter Oxford English Dictionary, supra note 52, Vol. I, p. 652. 260 First written submission of the Dominican Republic, 13 April 2004, para. 39. Second written submission of the Dominican Republic, 10 June 2004, para. 50. 261 First written submission of the Dominican Republic, 13 April 2004, para. 39. 262 Second written submission of the Dominican Republic, 10 June 2004, para. 45. 263 Oral statement of Honduras at the First Meeting of the Panel, para. 64-65. Second written submission of Honduras, 10 June 2004, paras. 30-34. 264 Appellate Body Report, EC � Bananas III, para. 216. 265 Second written submission of the Dominican Republic, 10 June 2004, para. 49. 266 Appellate Body Report, Japan � Alcoholic Beverages II, p. 16. 267 Second written submission of the Dominican Republic, 10 June 2004, para. 20. 268 First written submission of the Dominican Republic, 13 April 2004, para. 76. 269 Second written submission of the Dominican Republic, 10 June 2004, para. 30. 270 GATT Panel Report, EEC � Oilseeds I, para. 150, referring to the GATT Panel report on Japan � Leather II (US). 271 First written submission of the Dominican Republic, 13 April 2004, paras. 15-25. 272 Oral statement of the Dominican Republic at the First Meeting of the Panel, para. 6. 273 Second written submission of the Dominican Republic, 10 June 2004, section II.A.2. 274 Ibid., para. 7. 275 Ibid., section II.A.3. 276 Ibid., Section II.A.4. 277 Ibid., Section II.A.5. 278 Appellate Body Report, US � Certain EC Products, para. 81. 279 Appellate Body Report, US � Lead and Bismuth II, para.71. 280 Appellate Body Report, Australia � Salmon, paras. 225 -226. 281 Panel Report, Chile � Price Band System, para.7.112 (italics in original). 282 Panel Report, US � Wool Shirts and Blouses. 283 Panel Report, Indonesia � Autos. 284 Information provided by Honduras as Exhibits HOND-40 to HOND-49. 285 Second written submission of the Dominican Republic, 10 June 2004, para. 15. 286 See e.g. Panel Report, India � Autos, para. 7.22; Panel Report, Argentina � Textiles and Apparel, para. 6.11; Panel Report, US � Gasoline, para. 6.19; Panel Report, US �Wool Shirts and Blouses, para. 6.2; Panel Report, Canada � Wheat Exports and Grain Imports, paras. 6.255, 6.256 and 6.258. 287 Second written submission of the Dominican Republic, 10 June 2004, para. 15. 288 Panel Report, Argentina � Textiles and Apparel, para. 6.13. 289 Appellate Body Report, Japan � Alcoholic Beverages II, p. 26. 290 Appellate Body Report, Australia � Salmon. paras. 224-226. 291 Appellate Body Report, Japan � Agricultural Products II, paras. 111-112. 292 Replies of the Dominican Republic to the questions addressed by the Panel, 27 May 2004, reply to question No. 47, para. 44. 293 Ibid., reply to question No. 43, para. 40. 294 Second written submission of the Dominican Republic, 10 June 2004, para. 80. 295 Ibid., para. 80. 296 Ibid., para. 103. 297 Replies of the Dominican Republic to questions addressed by the Panel, 27 May 2004, reply to question No. 42, para. 38. 298 Second written submission of the Dominican Republic, 10 June 2004, para. 84. 299 See "Article II:1(b): Legal Questions, Note by the Secretariat", supra note 187, para. 1. 300 Vienna Convention on the Law on Treaties, Article 31.1. 301 Ibid., Article 31.2. 302 Oral statement of Honduras at the First Substantive Meeting with the Panel, paras. 22 to 35; Second written submission of Honduras, 10 June 2004, paras. 196 to 198. 303 Oral statement of Honduras at the First Substantive Meeting with the Panel, paras. 36-40; Second written submission of Honduras, 10 June 2004, paras. 199-203. 304 Second written submission of the Dominican Republic, 10 June 2004, paras. 75-76. 305 Panel Report, Chile � Price Band System, para. 7.6 (italics added and footnote omitted). 306 Appellate Body Report, US � Gasoline, p. 18. 307 First written submission of the Dominican Republic, 13 April 2004, paras. 102 and 143. 308 See Appellate Body Report, EC � Tariff Preferences, para. 153. 309 The Appellate Body stated that "[a]dopted panel reports are an important part of the GATT acquis... [and are] often considered by subsequent panels". See Appellate Body Report, Japan � Alcoholic Beverages II, p. 14. 310 See first written submission of the Dominican Republic, 13 April 2004, paras. 19-25. 311 Minutes of the WTO Dispute Settlement Body (DSB) Meeting on 9 January 2004, WT/DSB/M/162, circulated on 16 February 2004. 312 See Panel Report, US � Wool Shirts and Blouses, para. 6.2. 313 Panel Report, Argentina � Textiles and Apparel, paras. 6.10-14. 314 Appellate Body Report, Chile � Price Band System, paras. 136-139. 315 Appellate Body Report, Brazil � Aircraft, para. 132. 316 See e.g., Panel Report, Indonesia � Autos, para. 14.9. 317 First written submission of the Dominican Republic, 13 April 2004, para. 193. 318 Report of the GATT Special Sub-Group, "Working Party on Quantitative Restrictions - Relations between the GATT and the International Monetary Fund ", adopted on 2,4 and 5 March 1955, BISD 3S/170, L/332/rev.1 and Addenda, p. 195, para. 8. 319 Appellate Body Report, US � Gasoline, p. 23. 320 See Report of the GATT Working Party on Italian Measures, adopted on 2 March 1977, BISD 24S/129-134, L/4442), January 1978, para. 13. 321 See Panel Report, India � Quantitative Restrictions, para. 5.13. (The issue was not appealed). See Appellate Body Report, India � Quantitative Restrictions, para. 152. 322 GATT Panel Report, Greece � Import Taxes, para. 10. 323 Appellate Body Report, Argentina � Textiles and Apparel, paras. 84-85. 324 First written submission of the Dominican Republic, 13 April 2004, para. 198. 325 Ibid., para. 194. 326 Decision of the International Monetary Fund No. 1034-(60)27, para. 1 (1 June 1960), in Selected Decisions and Selected Documents of the International Monetary Fund (Twenty-fifth Issue, 2000) p. 428, reprinted at de Vries & Horsefield, The International Monetary Fund 1945-1965: Twenty Years of International Monetary Cooperation (IMGF, 1969), vol. III, pp. 260-261, cited from the First written submission of the Dominican Republic, 13 April 2004, footnote 163. 327 See 1981 Secretariat Background Paper on the consultation with Italy concerning the Italian deposit, BOP/W/51, p. 5, para. 14, cited in GATT, Analytical Index: Guide to GATT Law and Practice, updated Sixth Edtion, 1995, p. 435. 328 Appellate Body Report, US � Wool Shirts and Blouses, pp. 13-14. 329 First written submission of Honduras, 16 March 2004, footnote to para. 62. 330 Appellate Body Report, Korea � Various Measures on Beef, para. 133. 331 Appellate Body Report, US � FSC (Article 21.5 � EC), para. 215. Appellate Body Report, Korea � Various Measures on Beef, para.142. 332 Appellate Body Report, Korea � Various Measures on Beef, para. 137. 333 Appellate Body Report, EC � Asbestos, para. 98. 334 Appellate Body Report, Korea � Various Measures on Beef, para. 157. 335 Appellate Body Report, US � Gasoline, p. 16. While the original statement refers to Article XX (g), the Appellate Body's reasoning relies on the chapeau , which applies equally to Article XX (g) and Article XX (d). The Appellate Body's reasoning must therefore also extend to Article XX (d). See Panel Report, Argentina � Hides and Leather, footnote 560. 336 GATT Panel Report, Canada � FIRA, para. 5.20 (italics in original). 337 Appellate Body Report, US � Gasoline, pp. 22-23. 338 Appellate Body Report, Korea � Various Measures on Beef, para. 161. 339 Ibid., para. 162. 340 Panel Report, Argentina � Hides and Leather, para.11.303. 341 Appellate Body Report, Korea � Various Measures on Beef, para. 164. 342 See, e.g. GATT Panel Report, US � Section 337, para. 5.26; GATT Panel Report, Thailand � Cigarettes, para. 75; Panel Report, US � Gasoline, para. 6.22-6.28; and Panel Report, Argentina � Hides and Leather, paras. 11.324-11.331. 343 Panel Report, Argentina � Footwear (EC), paras. 8.24 and 8.45. 344 Request for the Establishment of a Panel by Honduras, supra note 2, para. 5. 345 First written submission of Honduras, 16 March 2004, footnote 34 to para. 58. 346 First written submission of the Dominican Republic, 13 April 2004, para. 201. 347 Ibid., para. 189. 348 First written submission of Honduras, 16 March 2004, footnote 34 to para. 58. 349 Ibid., paras. 20 to 23. 350 Ibid., paras. 75, and First written submission of the Dominican Republic, 13 April 2004, para. 37. 351 Appellate Body Report, Korea � Various Measures on Beef, para. 133. 352 First written submission of Honduras, 16 March 2004, paras. 72 to 74, and First written submission of the Dominican Republic, 13 April 2004, para. 32. 353 First written submission of Honduras, 16 March 2004, para. 78. 354 Ibid., para. 82. 355 First written submission of Honduras, 16 March 2004, paras. 47 et seq., footnote 34. 356 Ibid., para. 2. 357 Cf. Panel Report, Chile � Price Band System, para. 7.107. 358 Appellate Body Report, Argentina � Textiles and Apparel, para. 45. 359 First written submission of Honduras, 16 March 2004, paras. 15 et seq.; Dominican Republic first written submission, 13 April 2004, para. 193. 360 First written submission of Honduras, 16 March 2004, paras. 59 et seq. 361 First written submission of the Dominican Republic, 13 April 2004, paras. 190 et seq. 362 The New Shorter Oxford English Dictionary, supra note 52, Vol. II, p. 2,569. The European Communities would note that this definition appears to be similar to the term "exchange restriction" as interpreted by the IMF, cf. First written submission of the Dominican Republic, 13 April 2004, para. 194. 363 Agreement establishing the World Trade Organization, Preamble. 364 Appellate Body Report, Korea � Various Measures on Beef , paras. 136, 137; GATT Panel Report, US � Section 337, para. 5.11. 365 In this context, it should be pointed out that one should not misunderstand the GATT Panel's reference in US � Section 337, to "cases where the application of formally identical legal provisions would in practice accord less favourable treatment to imported products and a contracting party might thus have to apply different legal provisions to imported products to ensure that the treatment accorded them is in fact no less favourable" (emphasis added). The remedy to abolish the de facto discrimination which arises from identical treatment need not necessarily and always introduce different treatment of imports and domestic products. There may also exist forms of identical treatment other than the discriminatory one that would remove any less favourable treatment. 366 Appellate Body Report, Korea � Various Measures on Beef , para. 135. The Appellate Body's formulation, in para. 137 of that Report, "whether a measure modifies the conditions of competition in the relevant market to the detriment of imported products" (compared to domestic goods) expresses the same idea, even though strictly speaking "modifies to the detriment of imports" is a correct standard only where there previously was no (such) discriminatory measure imposing a competitive disadvantage on imports. Where, however, the previous regulatory situation was equally or even more discriminatory, there would be no "modification" to the detriment of imports, but nevertheless a national treatment violation because the measure in question still "accords" less advantageous conditions of competition to imports. See also Panel Report, Canada � Wheat Exports and Grain Imports, para. 6.184: "the relevant requirement� must adversely affect the competitive opportunities of imported grain vis-�-vis like domestic grain". 367 First written submission of the Dominican Republic, 13 April 2004, paras. 46, 51. 368 Appellate Body Report, EC � Bananas III, para. 241; Appellate Body Report, Japan � Alcoholic Beverages II, pp. 27-28. 369 Appellate Body Report, EC � Asbestos, para. 98; Appellate Body Report, Japan � Alcoholic Beverages II, p. 18. 370 Appellate Body Report, EC � Asbestos, para. 100. 371 First written submission of the Dominican Republic, 13 April 2004, paras. 45 and 53. 372 Appellate Body Report, Japan � Alcoholic Beverages II, p. 23; GATT Panel Report, Japan �Alcoholic Beverages I, paras. 5.8, 5.11; GATT Panel Report, US � Malt Beverages, para. 5.26. 373 Appellate Body Report, Japan � Alcoholic Beverages II, p. 16; GATT Panel Report, US � Superfund, para. 5.1.9. 374 See First written submission of the Dominican Republic, 13 April 2004, paras. 100 et seq. 375 Appellate Body Report, Korea � Various Measures on Beef, para. 164. 376 Ibid., para. 166. 377 First written submission of Honduras, 16 March 2004, para. 78. 378 First written submission of the Dominican Republic, 13 April 2004, para. 117. 379 See Corrigendum to the First written submission of the Dominican Republic, letter of 23 April 2004. 380 See GATT Panel Report, EEC � Animal Feed Proteins; Panel Report, US � Wool Shirts and Blouses, para. 6.2; Panel Report, Indonesia � Autos, para. 4.61. But see also, Panel Report, Argentina � Textiles and Apparel, para. 6.11 et seq. The European Communities however notes that each case presents its own particularities; thus, they may not necessarily constitute appropriate precedents. 381 See also Article 3.7, fourth sentence, Dispute Settlement Understanding: "the first objective of the dispute settlement mechanism is usually to secure the withdrawal of the measures concerned" (emphasis added). Obviously, if the measure does not exist any more the dispute settlement procedure has already achieved its primary purpose. 382 Decree 79-03, supra note 8, Article 14. 383 First written submission of Honduras, 16 March 2004, para. 73 et seq.; First written submission of the Dominican Republic, 13 April 2004, para. 32. 384 Appellate Body Report, EC � Asbestos, para. 100 (italics in original). 385 See also Appellate Body Report, Chile � Alcoholic Beverages, para. 52. |
|
