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Korea - Definitive Safeguard Measure on Imports of Certain Dairy Products
Report of the Panel
(ii) The content of such notifications
7.122 Regarding the "content" of notifications under Article 12.1, we note that with regard to the notification of the initiation of an investigation, the terms of Article 12.1(a) only refer to the obligation to notify "initiating an investigatory process relating to serious injury or threat thereof and the reasons for it".
7.123 We also note that the notification under Article 12.1(a) does not have to take place before the investigation is initiated, but rather immediately upon its initiation. In this context, we recall that there is no individual country notification (as there exists for instance for antidumping actions) under the Agreement on Safeguards, presumably because in principle the safeguard measure is to be applied on an MFN basis. The purpose of the notification under paragraph 1(a) of Article 12 is to inform all WTO Members of the initiation of an investigation so that Members having a substantial interest may exercise their rights to participate in the investigation (provided for under Article 3.1) in the first instance and possibly to request consultations under Article 12.3.
(2) 12.1(b) and (c)
7.124 For the notifications envisaged under paragraphs 1(b) and (c) of Article 12, i.e. the finding of serious injury caused by imports, the proposed measure and the decision to apply a measure, we note that the terms of Article 12.2 provide for a standard expressed in terms of an overall and a specific requirement as to the content of these notifications. First, there is a reference to "all pertinent information" (the overall criterion) and then there is a list of factors (the specific criteria) presumed to be pertinent information for which information must be provided.
"12.2 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 increased imports, precise description of the product involved and the proposed measure, proposed date of introduction, expected duration and timetable for progressive liberalization." (emphasis added)
Article 12.2 refers thereby to six more specific items which must be covered by such notifications. Thus it is necessary to notify: (1) evidence of serious injury or threat thereof that was caused by increased imports, (2) the precise description of the product involved, (3) the proposed measure, (4) the proposed date of introduction, (5) the expected duration and (6) the timetable for progressive liberalization.
7.125 In our examination of the context of the expression "all pertinent information" in Article 12.2, we note that the same word "pertinent" is also used in Article 3, with reference to the domestic publication of the overall report. But Article 12 refers to "all pertinent information", while Article 3 refers to "all pertinent issues of fact and law". The term "information" differs from "issues of fact and law", the former being more general. Based on the ordinary meaning of the terms and their context, a distinction may be made between the less stringent requirement of "all pertinent information" for the purpose of the WTO notification (Article 12), and "all pertinent issues of fact and law" for the purpose of the final report (Article 3) which must be published domestically. "Information" (Article 12) on a matter is certainly less comprehensive than a "report setting forth ... reasoned conclusions" (Article 3) on the same matter.
7.126 The term "pertinent information" ought to be interpreted taking into account the context of Article 12 and the object and purpose of the Agreement on Safeguards and its notification requirements. We think that the notification serves essentially a transparency and information purpose. In ensuring transparency 475, Article 12 allows Members through the Committee on Safeguards to review the measures. Another purpose of the notification of the finding of serious injury and of the proposed measure is to inform Members of the circumstances of the case and the conclusions of the investigation together with the importing country's particular intentions. This allows any interested Member to decide whether to request consultations with the importing country which may lead to modification of the proposed measure(s) and/or compensation. 476
7.127 We understand the European Communities to argue that, although in a summary form, Members should notify to the WTO (pursuant to Article 12 of the Agreement on Safeguards) everything they are required to publish domestically pursuant to Articles 3 and 4 of the Agreement on Safeguards. We consider that the standards of what must be published domestically and what ought to be notified to the WTO are different. If Members, when they negotiated the Agreement on Safeguards, intended that what was to be published domestically also had to be notified to the WTO, they could have made such a requirement clear by simply referring in Article 12 to the publication requirements mentioned in Articles 3 and 4. However, the ordinary meaning of the word "information" implies that the other Members must gain knowledge of the actions undertaken by the notifying Member. In this sense, the amount of information notified must be sufficient to be useful to Members with a substantial interest in the proposed safeguard measure. We note that while not required by the Agreement on Safeguards, and not included as an element of information in the agreed notification formats adopted by the Committee, it may be desirable for the notification to include a reference to the published report on the case referred to in Articles 3.1 and 4.2. Such reference would, however, not replace the requirements of Article 12. We note finally that the Committee has the power to "request such additional information as they may consider necessary from the Member proposing to apply or extend the measure". 477
(iii) The timing of such notifications
7.128 Article 12.1 provides that "A Member shall immediately notify the Committee on Safeguard upon ..." (emphasis added). The ordinary meaning of the term "immediately" 478 introduces a certain notion of urgency. As discussed above, we believe that the text of Article 12.1, 12.2 and 12.3 makes clear that the notifications on the finding of serious injury and on the proposed measure shall in all cases precede the consultations referred to in Article 12.3. We note finally that no specific number of days is mentioned in Article 12. For us this implies that there is a need under the agreement to balance the requirement for some minimum level of information in a notification against the requirement for "immediate" notification. The more detail that is required, the less "instantly" Members will be able to notify. In this context we are also aware that Members whose official language is not a WTO working language, may encounter further delay in preparing their notifications.
7.129 We shall now proceed to examine the European Communities' claims with regard to the notifications made by Korea, and determine whether such notifications respect the requirements of Article 12 as to their content and timing.
(d) Examination of the specific notifications by Korea
(i) Notification pursuant to Article 12.1(a): The initiation of the investigation - 1 July 1996, G/SG/N/6/KOR/2
7.130 Korea's notification states the date of the initiation of the investigation, the products covered and then refers to two reasons for the initiation of the investigation: a petition was filed and the level of imports had increased. There is no explicit reference to any serious injury to the domestic industry, but Korea does refer to an initiation pursuant to Article 12.1(a) of the Agreement on Safeguards.
7.131 We disagree with the European Communities that such notification should necessarily include a discussion of all of the legal requirements for a safeguard action to be taken such as a discussion of the conditions of the markets, etc. We note that initiation is the beginning of the process, and the Agreement on Safeguards does not establish specific standards for the decision to initiate, as do Article 5 of the Agreement on the Implementation of Article VI of GATT 1994 and Article 11 of the Agreement on Subsidies and Countervailing Measures. Thus, to require a discussion in the notification of initiation of evidence regarding the elements that must be found to exist to impose a measure at the end of the investigation would impose a requirement at the initiation stage that is not required by the Agreement on Safeguards itself. We note in the first instance that whatever the relationship between the requirements of Article 12.2 regarding the contents of notifications and the contents of the investigation reports published pursuant to Articles 3.1 and 4.2, this question is not relevant to Article 12.1(a) notifications, as Article 12.2 specifically and exclusively addresses "notifications referred to in paragraphs [12.]1(b) and [12.]1(c)".
7.132 The format agreed by the Committee for notifications under Article 12.1(a) is not legally binding, although helpful. The guidance in the format is general as to the kind of information to be provided, referring simply to examples of information on the reasons for initiation, and saying nothing about the level of detail of that information.
7.133 Although Korea's notification could usefully have included a reference to allegations of serious injury and a cross-reference to any domestic publication(s) in Korea, we think that this notification was sufficient to inform WTO Members adequately of Korea's initiation of an investigation concerning a particular product, so that Members having an interest in the product could avail themselves of their right to participate in the domestic investigation process.
7.134 As to the timing of this notification, we note a delay of 14 days (28 May 1996 to 11 June 1996) between the publication of the initiation decision and its notification to the WTO. 479 We recall that Members are required to notify the initiation of any investigation "immediately", although no specific time-period is identified. We note, moreover, that the content of the Article 12.1(a) notification is minimal. Recalling again the reasons for the requirement of a notification without delay, we believe that any delay in Article 12.1(a) notifications can be problematic. We therefore disagree with Korea that it satisfied the requirement for an immediate notification because it did so "as soon as practically possible". There is no basis in the wording of Article 12.1 to interpret the term "immediately" to mean "as soon as practically possible". In light of all of the foregoing considerations, we find that the 14-day period between Korea's initiation of the investigation and its presentation of the notification related thereto, does not respect the requirements for "immediate" notification and is in violation of Article 12.1 of the Agreement on Safeguards.
(ii) Notification Pursuant to Article 12.1(b) and 12.2 : Determination of serious injury caused by increased imports - 2 December 1996, G/SG/N/8/KOR/1
7.135 Korea's notification of the finding of serious injury caused by increased imports stated that imports had grown, that the domestic industry's share of domestic consumption had decreased and domestic stocks had increased. There is no explicit reference to any analysis of the level of sales, production, productivity, and employment as such, nor is there any reference to any causation element. We note that there is no cross-reference to the domestic publication of this finding of serious injury where the reader would find further information.
7.136 We consider, however, that this notification contains sufficient information on what Korea considered to be evidence of injury caused by increased imports as well as on the other listed items in Article 12.2. We note that there is no explicit requirement to explain how such injury has been caused by increased imports. Rather the requirement is to notify "evidence of injury caused". We note that the last sentence of Article 12.2 allows for the possibility to request additional information. We find that Korea's notification would permit the effective exercise of the right of other Members to request consultations. Consequently, we consider that the content of that Korean notification made pursuant to Article 12.1(b) meets the requirements of Article 12.2 of the Agreement on Safeguards.
7.137 As to the timing of such notification, we note that, although it was made two months prior to the consultations, a delay of 40 days (23 October 1996 to 2 December 1996) between the domestic publication of the injury finding and the date of that notification to the Committee on Safeguards took place. We find that this delay does not satisfy the requirements for an immediate notification and therefore is in violation of Article 12.1 of the Agreement on Safeguards.
(iii) Notification Pursuant to Article 12.1(c) and 12.2 : Proposed measure - 21 January 1977, G/SG/N/10/KOR/1
7.138 As we mentioned before, we are of the view that Members are obliged under Article 12.1(c) to notify any decision with regard to the proposed imposition of a safeguard measure. Korea did so on 21 January 1997.
7.139 Considering that an important purpose of the notifications of the serious injury determination and the proposed measure is to provide other Members with an effective possibility to request consultations, we examine only the notifications of 2 December 1996 and 21 January 1997 which are the only notifications which were circulated before the consultations of 6 February 1997. The notification of 2 December 1996 is discussed above. We consider that this notification contains sufficient information on what Korea considered to be evidence of injury caused by increased imports as well as on the other listed items in Article 12.2. We note that there is no explicit requirement to explain how such injury had been caused. Rather one of the listed factors is "evidence of injury caused by increased imports". We note again that the last sentence of Article 12.2 allows for the possibility to request additional information. Consequently, we consider that the content of that Korean notification of its proposed measure, made pursuant to Article 12.1(c), meets the requirements of Article 12.2 of the Agreement on Safeguards as it contains sufficient information on the proposed measure, e.g. its nature, scope and duration, to provide Members with a substantial interests with adequate information to request consultations.
7.140 As to its timing, we note that this notification took place more than 6 weeks after the decision on the proposed measure was taken (6 December 1996 to 21 January 1997). For us, this is not an "immediate" notification. We consider that this delay does not meet the requirements for an "immediate" notification and therefore is in violation of Article 12.1 of the Agreement on Safeguards.
(iv) Notification Pursuant to Article 12.1(c) : The taking of the safeguard measure - 24 March 1997, G/SG/N/10/KOR/1. Suppl.
7.141 Following the consultations with interested Members and the special meeting of the Committee on Safeguards, Korea notified a revised description of its investigation process and the measure it had by then imposed. This notification is, in the present case, the more complete one.
7.142 We consider that provision of additional notifications following consultations may be helpful in furthering multilateral transparency, that it may be evidence of adequate consultations and may also constitute a rectification of prior, incomplete notifications. 480 In this context, we recall that one of the purposes of consultations is to review the Article 12.1(b) and (c) notifications, logically implying that such consultations may lead to revision and rectification of those notifications. The wording of Article 12.2 and 12.3 seems to confirm this possibility.
7.143 In our view notifications can always be revised. However, we cannot accept Korea's argument that the fact that the European Communities and Korea almost "settled" this case is evidence that the notification was sufficient. Parties may settle a case on the basis of additional information provided during the consultation and not contained in the prior notification.
7.144 As far as it covers Korea's final decision to take a safeguard measure 481, we find that the content of the Korean notification of 24 March 1997 meets the requirements of Article 12.1(c) and 12.2 of the Agreement on Safeguards.
7.145 As to the timing of this notification (as far as it covers Korea's final decision to take a safeguard measure), we note that Korea notified on 24 March 1997 that on 1 March 1997 a final decision had been taken to impose a quota as a safeguard measure. We fail to see how this can be viewed as an immediate notification. As far as it covers Korea's final decision to take a safeguard measure, we find that the timing of the Korean notification of 24 March 1997 does not meet the requirements of Article 12.1 of the Agreement on Safeguards.
2. Claim of inadequate consultations
7.146 The European Communities first claim that since Korea's notifications, which serve as the basis for the consultations, were incomplete and untimely, the consultations were therefore inadequate. For the European Communities, in order for the opportunity to consult to be adequate pursuant to Article 12.3, consultations must take place on all the pertinent information to be provided under Article 12.2 in advance of the consultations, including the evidence to be supplied in the notifications of injury findings and of the results of the investigation.
7.147 The European Communities further argue that Article 12.3, when specifying that it is for the Member "proposing to apply a safeguard measure " to offer to consult, inter alia, on the "proposed measure", implies that consultations must take place before the measure is applied (i.e. when it is still a "proposal"). We agree with the European Communities on this issue. Notification of the proposed measure must take place before the consultations.
7.148 In the present case, a special meeting of the Committee on Safeguards took place on 21 February 1997 and Korea held bilateral consultations with the European Communities, Australia and New Zealand on 4 and 5 February 1997 in Geneva. By failing to provide all pertinent information in its notifications in advance of consultations (and specifically those notifications made pursuant to Article 12.1(b) and (c)), the European Communities argues that 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.
7.149 Korea responds that after receiving two requests for consultations under Article 12.3 of the Agreement on Safeguards, it provided (although, according to Korea, this was not required) a preliminary notification of the proposed measure, under Article 12.1(c) on 21 January 1997. We have already mentioned that we consider that Members are under an obligation to notify any proposed measures and must also invite any interested party to consult on this issue. Korea adds that consultations were certainly fruitful as they almost resulted in a mutually agreed solution. The European Communities responds that the case was never settled but that in any case the information and responses submitted by Korea never provided it with all pertinent information.
7.150 We have found above that the content of Korea's notifications was in conformity with the provisions of Article 12. Moreover, we consider that consultations may be adequate even in circumstances where prior notifications of a finding of serious injury or of any proposed measure are incomplete. In fact one of the purposes of the consultations is to review the content of such notifications (and thereby augment it if necessary). During consultations parties usually exchange further information, exchange questions and answers and proceed to a thorough discussion of the national authority's determinations.
7.151 The parties have explicitly requested us to assess the compatibility of their consultations with the requirements of the Agreement on Safeguards, based on the chronology of events that they submitted to us. 482 We note that no formal mutually agreed solution was reached by the parties in this dispute, but we do not consider that the only criterion for assessing the adequacy of consultations is whether parties through such consultations settle their dispute. Many formal dispute settlement proceeding take place following consultations which are WTO compatible and which do not lead to a mutually agreed settlement of the dispute.
7.152 In the present case we note that parties exchanged questions and answers. The European Communities claims that it has always been unsatisfied with the Korean's answers and notifications (together with Korea's determination). This may be the case and would explain why it decided to pursue dispute settlement proceedings, but it does not prove that Korea did not consult in good faith for the purpose of informing interested Members of its investigation, its conclusion and its proposed actions. We note also that Korea did impose a measure at a level and for a duration different, and less restrictive, than initially proposed. Consultations were certainly fruitful in this respect, albeit not sufficient to satisfy the European Communities.
7.153 We reject therefore the EC claim that Korea failed to provide adequate opportunity to consult. Moreover, it seems to us that such consultations have led to an important revision of the initial notification and that parties, at some point, entered into very serious negotiations and considered serious elements of a mutually agreed solution. The fact that this proposed settlement was not formalized through the acceptance by the relevant internal authorities of the European Communities is immaterial. What is relevant for the purpose of this EC claim, is the fact that the parties to these consultations were able to negotiate quite effectively, which, in our view, demonstrates that the consultations were adequate. For us, this is the purpose of any consultation process and the scope of the obligation contained in Article 12.3 of the Agreement on Safeguards, i.e. to favour efforts by the parties to reach a mutually agreed solution of their disagreement. In our view Korea has very well respected its obligation during the consultation process in this case. We therefore reject this EC claim made pursuant to Article 12.3 of the Agreement on Safeguards.
VIII. Conclusions and Recommendations
8.1 In the light of the findings above, we conclude that the definitive safeguard measure was imposed inconsistently with the provisions of the Agreement on Safeguards in that
(a) Korea's serious injury determination is not consistent with the provisions of Articles 4.2(a) of the Agreement on Safeguards;
(b) Korea's determination of the appropriate safeguard measure is not consistent with the provisions of Article 5 of the Agreement on Safeguards;
(c) Korea's notifications to the Committee on Safeguards (G/SG/N/6/KOR/2, G/SG/N/8/KOR/1, G/SG/N/10/KOR/1, G/SG/N/10/KOR/1. Suppl) were not timely and therefore are not consistent with the provisions of Article 12.1 of the Agreement on Safeguards.
8.2 In the light of the findings above, we reject
(a) the European Communities' claim that Korea violated the provisions of Article XIX:1 of GATT by failing to examine the "unforeseen developments";
(b) the European Communities' claim that Korea violated the provisions of Article 2.1 of the Agreement on Safeguards by failing to examine, as a separate and additional requirement, the "conditions" under which increased imports caused serious injury to the relevant domestic industry.
(c) the European Communities' claims that the content of Korea's notifications to the Committee on Safeguards (G/SG/N/6/KOR/2, G/SG/N/8/KOR/1, G/SG/N/10/KOR/1, G/SG/N/10/KOR/1. Suppl) did not meet the requirements of Article 12.1, 12.2 and 12.3 of the Agreement on Safeguards.
(d) the European Communities' claim that Korea violated the provisions of Article 12.3 of the Agreement on Safeguards in refusing to offer appropriate consultations to the European Communities.
8.3 Under Article 3.8 of the DSU, in cases where there is infringement of the obligations assumed under a covered agreement, the action is considered prima facie to constitute a case of nullification or impairment of benefits under that agreement. Accordingly, we conclude that to the extent that Korea has acted inconsistently with the provisions of the Agreement on Safeguards, as described in paragraph 16.1 supra, it has nullified or impaired the benefits accruing to the European Communities under that agreement.
8.4 The Panel recommends that the Dispute Settlement Body request Korea to bring its measures into conformity with its obligations under the WTO Agreement.
475 We recall the need for transparency of Members' actions as emphasized in the Marrakesh Decision on Notification Procedures.
476 Article 12.3 explicitly provides that among the topics to be discussed are the objective of Article 8.1, i.e. endeavouring to maintain a substantially equivalent level of concession and other obligations to that existing under GATT.
477 Article 12.2 of the Agreement on Safeguards.
478 The New Webster Encyclopedic Dictionary defines immediately as "without delay, straightaway"; the New Shorter Oxford Dictionary defines it as "without delay, at once, instantly".
479 We note, however, a period of 34 days between the domestic publication of the initiation decision, 28 May 1996, and the date of the circulation of the said notification to all WTO Members, i.e. 1 July 1996.
480 In our view, in the event that a Member considers that it has to revise or to correct its notification, that Member may, but is not obligated to, offer further consultations on this revised notification before any definitive measure is imposed, in an attempt to prevent any eventual dispute settlement proceedings based on an alleged violation of Article 12.
481 This notification can only be viewed as a notification of the final decision taken since it was notified and circulated only after the final decision was put into force; this notification cannot be taken into account for the purpose of assessing whether Korea complied with its obligation to notify its proposed measure since this notification took place after the consultations, and therefore cannot remedy the flaws in the previous notification.
482 See paras.12.730 and 12.762 supra.