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Korea - Definitive Safeguard Measure on Imports of Certain Dairy Products
Report of the Panel
I. Claims under Article 12 of the Agreement on Safeguard
(a) Claim by the European Communities
4.684 The European Communities claim that Korea violated its obligations under Article 12 of the Agreement on Safeguards by failing to comply with the notification requirements and by failing to provide adequate opportunity for prior consultations.The following are the EC arguments in support of that claim:
(i) Violation of Article 4.1-2 of the Agreement on Safeguards- Failure to comply with notification requirements
4.685 Article 4.1 of the Agreement on Safeguards provides that:
"A Member shall immediately notify the Committee on Safeguards upon:
(a) initiating an investigatory process relating to serious injury or threat thereof and the reasons for it;
(b) making a finding of serious injury or threat thereof caused by increased imports; and
(c) taking a decision to apply or extend a safeguard measure." (emphasis added)
Article 12.2 further provides:
"In making the notifications referred to in paragraphs 1(b) and 1(c), the Member proposing to apply or extend a safeguard measure shall provide the Committee on Safeguards with all pertinent information, which shall include evidence of serious injury or threat thereof caused by the increased imports, precise description of the product involved and the proposed measure, proposed date of introduction, expected duration and timetable for progressive liberalization. In the case of an extension of a measure, evidence that the industry concerned is adjusting shall also be provided. The Council for Trade in Goods or the Committee on Safeguards may request such additional information as they may consider necessary from the Member proposing to apply ... the measure." (emphasis added)
4.686 The European Communities submit that, in failing to provide immediately the Safeguards Committee with the information required under Article 12.1-2 of the Agreement on Safeguards, Korea violated its obligations arising thereunder. It further submits that Korea failed to comply with its obligation laid down in Article 12.3 of the Agreement on Safeguards in respect of consultations. Furthermore, it considers that the insufficient amount of the information provided in the notifications was not justified on grounds of confidentiality pursuant to Article 12.11 of the Agreement on Safeguards.
4.687 In order to demonstrate this claim the European Communities first reviewed the general meaning and objective of procedural obligations in the Agreement on Safeguards, and then discussed the specific aspects relating to the violations of notification and consultation requirements.
(a) Objective and meaning of procedural obligations in respect of safeguard measures
4.688 In view of the limitative character of safeguard measures their inclusion in the WTO system is accompanied by limits to their use, so that the interests of all the parties are protected. This is particularly important as regards procedural requirements, like the notification obligations. As observed in the Panel report in Guatemala - Anti-Dumping Investigation Regarding Portland Cement from Mexico in respect of the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (AD Agreement) "[a] key function of the notification requirements in the AD Agreement is to ensure that interested parties, including Members, are able to take whatever steps they deem appropriate to defend their interests. Where a required notification is not made in a timely fashion, the ability of the interested party to take such steps is vitiated". 336 Thus, the Panel made clear that failure to comply with such requirements amounts, in itself, to a violation of a WTO Member's obligations under the AD Agreement. The Panel went on to add that "merely that the AD Agreement does not require some action following notification does not mean that nothing useful can take place following a timely notification, and that the exporting Member has therefore no interest in timely notification." 337 A fortiori this applies to a case like the one at stake, where, as will be shown below, consultations are mandated by the Agreement following notification and must take place on the basis of the information notified.
4.689 The European Communities also asserted that the notification requirements under Article 12.1-2 of the Agreement on Safeguards are clearly autonomous and additional to the transparency requirements imposed by Articles 3 and 4 of the agreement in respect of the domestic investigatory procedures. This is explained by a variety of considerations, including the possibility for the Members concerned to request consultations on the basis of that information and the general interest of all WTO Members, and not only those more directly concerned by the procedure, in monitoring compliance with the Agreement on Safeguards.Specifically as regards notifications under Article 12.1(b) and (c), as made clear from Article 12.3 one specific purpose is to offer the Members concerned an opportunity for adequate consultations. Effective exercise of these rights by WTO Members calls for a minimum guaranteed level of information officially transmitted in one of the working languages of the WTO. 338 Therefore, compliance with Article 12 requirements must be reviewed regardless of the conclusions which may be drawn in respect of the domestic procedure documents and measures.
(b) Notifications under Article 12.1(a) and Article 12.1.(b) of the Agreement on Safeguards
4.690 The European Communities consider that Korea failed to fulfil the obligations assumed under Article 12.1(a) and (b) of the Agreement on Safeguards, both in terms of timeliness and of sufficiency of its notifications.
4.691 Insofar as timeliness is concerned, the European Communities recall that the need for timely notifications is particularly stressed by the language of the opening clause of Article 12.1. In this respect, the European Communities note that a delay of 14 days (28 May 1996-11 June 1996) between the publication of the initiation decision and the date appearing on the relevant notification document cannot in principle be said to comply with the requirement of "immediate" notification "upon" initiation. 339 The same conclusion applies in respect of a delay of 40 days (23 October 1996-2 December 1996) between the publication of the injury finding and the date of the document which was notified to the Safeguards Committee. 340
4.692 The European Communities concede that the expression "immediately upon" may need to be interpreted also in the light of the type and amount of information to be provided and to the purposes for which the information may be used. Nevertheless, it submits that Korea's notifications fell short of the standard laid down in Article 12.1(a) and (b) even making allowance for those considerations.The amount of information required for those notifications, which relate to interim stages of the investigatory process, is limited and, in any event, Korea did not even provide that information in full. The European Communities therefore conclude that Korea failed to notify "immediately" information concerning the initiation of the safeguard procedure and the finding of serious injury.
4.693 As regards the content of Korea's notifications, the European Communities observe, in respect of the initiation notification 341, that no mention was made either of the conditions under which imports occurred, or of whether and on which basis serious injury or threat thereof was alleged by complainants in the domestic investigatory procedure, although, Article 12.1(a) includes an express reference to injury and the reasons therefor. The conditions under which the products investigated were imported should have likewise been mentioned, for their review equally constitutes a requirement for the adoption of a safeguard measure pursuant to Article 2 of the Agreement on Safeguards. Yet no mention in this respect is included in the initiation notification.
4.694 The inadequacy of the information provided by Korea is even more compelling relative to the injury notification. 342 The standard of notification in respect of injury findings is laid down in Article 12.2, which requires that "all pertinent information" must be supplied. Furthermore, in respect of the matters which are specifically mentioned as "pertinent information", Article 12.2 determines the particular type of information that is required. Thus, as regards "serious injury or threat thereof caused by increased imports", not any information, but evidence, must be provided in order to meet that standard. In the light of the context of Article 12.2, the "evidence" referred to cannot be but that mentioned in Article 4.2 of the Agreement on Safeguards, that is, in the first place, the "factors of an objective and quantifiable nature having a bearing on the situation of" the industry which are listed therein.
4.695 The European Communities note that no information of any kind, or evidence, was provided on the causal link between the increased imports and the serious injury. As to serious injury or threat thereof, the European Communities observe that most of the "factors" listed in Article 4.2 were neither mentioned, nor disregarded as not "pertinent". As to the import trends and conditions, no addition to the information already provided in the initiation notification was made. Thus, the issue of the "conditions" under which the foreign products were imported was still not addressed.
4.696 No justification for the incompleteness of the information submitted was provided in either notification. In particular even assuming, arguendo, that the confidential nature of the information received relative to serious injury or threat thereof and on the conditions under which the investigated products were imported could have justified a complete withholding of information, quod non, no such explanation was made in either notification.
4.697 In the light of the foregoing the European Communities consider that Korea violated its obligations under Article 12.1(a) and (b) of the Agreement on Safeguards.
(c) Notification under Article 12.1(c) of the Agreement on Safeguards
4.698 The European Communities consider that, as in the case of the notifications under Article 12.(a) and (b) of the Agreement on Safeguards, that made pursuant to Article 12.1(c) was neither timely nor complete. However, in order to discuss compliance with Article 12.1(c) the document constituting the notification must first be identified. There appear to be at least three acts self-qualifying as notification or that could in any event be relevant in order to assess whether Article 12.1(c) was complied with.
12.699 The European Communities note that, irrespective of the title given to the various documents mentioned above, the level of quantitative restrictions reported in the 24 March 1997 notification is different from the one reported in the documents previously notified, and is presumably based on different import statistics. 346 Furthermore, according to the 24 March document the measure described therein had already entered into force on 7 March 1997. Therefore, that document is likely to constitute an autonomous and final notification distinguished from the one reported in the previous documents and is based on partially different import statistics.
4.700 The European Communities consider that inasmuch as the information included in the document of 24 March 1997 regarding the date of entry into force of a safeguard measure in the form of a quantitative restriction is correct, Korea failed to notify it "immediately ... upon taking a decision to apply ... a safeguard measure" in accordance with Article 12.1(c) of the Agreement on Safeguards.
4.701 Besides the lapse of time (17 days) between the entry into force of the safeguard measure (7 March) and the date of the notification to the Safeguards Committee, the required content and the purpose of this notification warrant the same conclusion. In fact this constitutes the final document on the basis of which consultations can take place under Article 12.3 of the Agreement on Safeguards, and therefore offers the last opportunity for informed bilateral consultations before possibly starting dispute settlement consultations. Seen from this perspective, failure to meet the notification standards has the specific consequence of impairing a Member's provision of "adequate opportunity for prior consultations" within the meaning of Article 12.3 of the Agreement on Safeguards. As regards the required contents of the notification, the European Communities observe that in view of the length of the investigatory process and the previous notification requirements, much of the information should have been available even in English for long time, all the more so if already on 21 January Korea was able to announce "a decision to apply" a safeguard measure. This consideration further reinforces the conclusion that Korea failed to notify in time and thus violated Article 12.1(c) of the Agreement on Safeguards.
4.702 In the unlikely case that the 24 March document was considered to have been notified in time, the European Communities consider that the Panel should also find that it did not include "all pertinent information" and the notification was therefore not complete for purposes of Article 4.1(c). There is no explanation as to the basis for the calculation of the quota, and in particular, no reference to the last three representative years or to the necessity to depart from data relating to those years; that data on employment in a part of the domestic industry (raw milk production) is not provided; 347 that for profits and losses, information for the same part of the domestic industry is also not provided. 348 As with the notifications under Article 12.1(a) and (b), no justification was provided for withholding the missing information, either on grounds of confidentiality or on other grounds. In any event, confidentiality could obviously not have been invoked in respect of such information as the import data forming the basis for the calculation of the quantitative restrictions.
4.703 If the notification dated 24 March 1997 was not to be considered the relevant notification under Article 12.1(c), the European Communities submit, in the alternative, that neither the document dated 21 January 1997 nor that dated 31 January 1997 were complete. 349 Without the need to discuss them in any greater detail, this is made clear by the fact that Korea was indeed able to provide a significantly more detailed notification on 24 March 1997.
(ii) Violation of Article 12.3 of the Agreement on Safeguards- Failure to provide adequate opportunity for prior consultations
4.704 Article 4.3. of the Agreement on Safeguards provides that:
"A Member proposing to apply ... a safeguard measure shall provide adequate opportunity for prior consultations with those Members having a substantial interest as exporters of the product concerned, with a view to, inter alia, reviewing the information provided under paragraph 2, exchanging views on the measure and reaching an understanding on ways to achieve the objective set out in paragraph 1 of Article 8." (emphasis added)
Resulting from Korea's notification dated 24 March 1997, "in order to make its final decision on safeguard measures, Korea circulated a notification (G/SG/N/10/KOR/1 of 27 January 1997) to provide an opportunity for consultations with Member countries concerned in accordance with the Agreement on Safeguards. Korea then held bilateral consultations with the European Communities, Australia and New Zealand on 4 and 5 February 1997 in Geneva and also attended a special meeting of the Safeguards Committee on 21 February 1997". 350 The European Communities submit that consultations eventually afforded by Korea after their reiterated requests 351 failed to meet the standards laid down in Article 12.3 of the Agreement on Safeguards, and therefore Korea breached its obligations under that provision.
4.705 The European Communities first note that Article 4.3 expressly refers to a general standard of "adequacy" of the opportunity to consult, which is then clarified by reference to the subject matter of the consultations and their aim. The text of Article 12.3 makes clear that the purpose of the consultations is to foster an agreement between the WTO Members concerned or to ensure the maintenance of the balance of concessions pursuant to Article 8.1 of the Agreement on Safeguards.In particular Article 12.3, when specifying that it is for the Member "proposing to apply" to offer to consult, inter alia, on the "proposed measure", 352 implies that consultations must take place before the measure is taken (i.e., when it is still a "proposal"). This conclusion is reinforced if one has regard to the subject matter on which consultations must be afforded. In order for the opportunity to consult to be adequate pursuant to Article 12.3, consultations must take place on all the information provided under Article 12.2 of the Agreement on Safeguards. As already illustrated above, Article 12.2 in turn mentions "all pertinent information", including the evidence specified therein, as the one to be supplied in the notifications of injury findings and of the results of the procedure. Therefore, any consultations falling short of a review of all pertinent information would obviously not meet the Article 12.3 standard. The purpose of Article 12.3 logically requires that such consultations must be held on the basis of all the information required at a date prior to the application of the measure, so as to have a possibility to avoid it or ensure that the balance of concessions is preserved.
4.706 The European Communities believe they have already shown above that the documents notified by Korea, either before or after the date of the consultations, including the one dated 24 March 1997, were far from complete. Even assuming that the latter document were sufficiently detailed, the procedural history reported by Korea in its 24 March document omits to underline a crucial element, namely that consultations took place well before that document was supplied and when only the extremely limited information included in WTO Documents G/SG/N//6/KOR/2 (initiation notification), G/SG/N/8/KOR/1 (serious injury finding), G/SG/N/10/KOR/1 (Article 12.1(c) notification), and G/SG/N/11/KOR/1 (Article 9, footnote 2 notification) was available. It follows that by failing to provide all pertinent information in its notifications, and specifically in the ones made under Article 12.1(b) and (c) of the Agreement on Safeguards, in advance of consultations, Korea prevented WTO Members having a substantial interest as exporters from engaging in meaningful consultations, thus failing to provide them with an adequate opportunity in this respect. As a consequence, it also frustrated the further objective of those consultations, namely to reach an agreement or to ensure the maintenance of the balance of concessions as foreseen in Article 8.1 of the Agreement on Safeguards.
4.707 The European Communities further submit that if the document dated 21 January 1997 is found to be a notification of a "decision to apply a safeguard measure" within the meaning of Article 12.1(c) of the Agreement on Safeguards, by affording consultations on 4 February 1997 Korea frustrated the very purpose of the consultations under Article 12.3, which aim at finding a solution alternative to the imposition of a safeguard measure or at the least at enabling the Members concerned to influence the final decision. Thus, a fortiori in this case Korea should be found to have failed to comply with its obligation arising under Article 12.3 of the Agreement on Safeguards.
To continue with Response by Korea
336 See, Panel Report in Guatemala - Anti-Dumping Investigation Regarding Portland Cement from Mexico, 19 June 1998, WT/DS60/R, para. 7.42.
337 Id., at footnote 228.
338 It is clear in fact that the notifications serve, inter alia, the purpose of allowing review within the Safeguards Committee as expressly provided by Articles 13.1(f) and 13.2 of the Agreement on Safeguards. In this respect it should be recalled that Rule 35 of the Rules of Procedure for the Committee on Safeguards provides that "English, French and Spanish shall be the working languages" of that Committee.
339 See, WTO Doc. G/SG/N/6/KOR/2, 1 July 1996 (Exhibit EC-1).
340 See, WTO Doc. G/SG/N/8/KOR/1, 6 December 1996 (Exhibit EC-2).
341 See, WTO Doc. G/SG/N/6/KOR/2, 1 July 1996 (Exhibit EC-1).
342 See, WTO Doc. G/SG/N/8/KOR/1, 6 December 1996 (Exhibit EC-2).
343 See, WTO Doc. G/SG/N/10/KOR/1, 27 January 1997, p. 1 (Exhibit EC-5).
344 See, WTO Doc. G/SG/N/11/KOR/1, 21 February 1997, p.1 (Exhibit EC-6).
345 See, WTO Doc. G/SG/N/10/KOR/1/Suppl.1, 1 April 1997 (Exhibit EC-10).
346 Both the 21 January and 31 January documents refer to import statistics for 1993-1995 as the basis for calculating the quota level indicated therein. As the quota level included in the 24 March notification corresponds to that mentioned in the Notification of the Ministry of Trade, Industry and Energy of 7 March 1997 (Exhibit EC-9), the import data relied upon are presumably those mentioned in the 7 March Notification.
347 See, WTO Doc. G/SG/N/10/KOR/1/Suppl.1, 1 April 1997, p. 10, para. 3.6 (Exhibit EC-10).
348 Id., para. 3.10.a.
349 See, WTO Doc. G/SG/N/10/KOR/1, 27 January 1997 (Exhibit EC-5) and WTO Doc. G/SG/N/11/KOR/1, 21 February 1997 (Exhibit EC-6).
350 See, WTO Doc. G/SG/N/10/KOR/1/Suppl.1, p. 6, para. 7 (Exhibit EC-10). See, also WTO Doc. G/SG/11 of 18 March 1997, p. 1 (Communication from Korea on the results of consultations under Article 12.3 of the Agreement on Safeguards, Exhibit EC-7) and WTO Doc. G/SG/M/8, 10 June 1997, p. 2, para. 10 (Minutes of the special meeting of the Safeguards Committee held on 21 February 1997, Exhibit EC-8).
351 See, WTO Doc. G/SG/7, 12 December 1996 and WTO Doc. G/SG/8, 17 December 1996 (Exhibits EC-3 and EC-4).
352 It is only in the case of provisional safeguard measures that the Agreement on Safeguards (Article 12.4) makes an exception by allowing consultations to take pace after adoption of the measure.