Report of the Panel

(e) Evidence of violation on an average basis

3.141 The United States emphasized that, in this dispute, the Panel needed not rely solely on possibilities of binding breaches. Argentina’s specific duties not only had the potential to exceed the bound rate, but in fact did. To demonstrate this, the United States had identified in a table gathering Argentina's textiles and apparel imports from the United States subject to ad valorem rates higher than 35 per cent 118 HS categories of textiles and apparel in which Argentina’s specific duties, on average, were greater than 35 per cent ad valorem.The data contained in that table represented (a) the value of Argentine imports from the United States for January-September 1996; (b) their volume, (c) the average price for the same period (a/b); (d) the Argentine DIEM in US$/kg; (e) the break-even price in US$/kg (see below) and; (f) the ad valorem equivalent duty for imports for the same period. The listed specific duties constituted more than 35 per cent of the average of transaction prices of merchandise imported in each category. This table made plain that, at the least, all merchandise having a lower actual value than the average were subject to duties above 35 per cent ad valorem. For example, with respect to HS category 6110.30, the average transaction price was US$11.39 per kilogram while the applicable specific duty was US$6.40 per kilogram. This resulted, on average, in duties equivalent to 56 per cent ad valorem. All goods with a value less than the average of US$11.39 per kilogram were subject to duties greater than 56 per cent. In addition, the calculations of "break-even price" signified that all goods in category 6110.30 worth less than US$18.29 per kilogram would be subject to duties in excess of 35 per cent ad valorem. This column was called the "break-even price" because only goods with a value greater than the amount listed entered Argentina subject to specific duties within the bound rate.

3.142 The United States also adjusted its calculations contained in these table and chart to take into account Resolution No. 597/97, which provided 5 stages of modifications of specific duties in certain categories. ⁹⁶ The adjusted figures were reflected in a table where the new specific duties were applied to imports for the period January-September 1996. Applying the Argentine data submitted by Argentina during the consultations ⁹⁷ to the new duties, the United States had found that Argentina still was in excess of 35 per cent, on average, with respect to 72 line-items. The United States had attempted to show how these figures broke-down in terms of product sectors. A chart covering specific sectors reflected how high Argentina’s specific duties were with respect to a variety of textile and apparel groupings, ranging on average from 40.9 per cent to 56.2 per cent.

3.143 The United States contended that the table described in para. 3.141 above not only showed that Argentina’s minimum specific import duties were excessive for products in the listed categories, but it also revealed how minimum specific import duties - no matter how low or seemingly modest  -would violate an ad valorem bound rate for at least some products in a category. For example, under HS 5514.22, the specific duty for this category was US$1.20 per kilogram. However, the average of actual transaction values for the category was only US$2.61 per kilogram, resulting in an average ad valorem equivalent of 46 percent. Thus, while a US$1.20 specific duty may seem reasonable on its face, in application it would exceed the bound rate for some products.

3.144 The United States specified that it had no data on import prices for 1995. The table it had presented in para. 3.141 above, which reflected 118 categories in which Argentina’s specific duties exceed 35 per cent ad valorem, was based on price data supplied by Argentina ⁹⁸ for the period January through September 1996. Information on 1995 figures was exclusive within the control of the Argentine authorities. The United States had however applied the 1996 price data previously supplied by Argentina to the specific duties that were in effect under Decree No. 2275/94 through September 1995. The results demonstrated that even the lower duties in place for much of 1995 still were excessive when compared against the Argentine price data for January through September 1996, the most reliable data available. Accordingly, Argentina’s specific duties, on average, would have exceeded 35 per cent ad valorem with respect to 76 tariff line-items. The averages frequently were quite high, even exceeding 100 per cent ad valorem. As excessive as were the duties as calculated above, the specific duties imposed by Resolutions No. 304/95 and No. 305/95 were even higher. Thus, the United States had identified far more categories (118) which on average exceeded 35 per cent ad valorem.

3.145 Referring to an evidence provided by the United States with respect to imports under tariff heading HS 6303.19, Argentina noted that the United States alleged that the ad valorem equivalent of the specific duty applicable was 480 per cent. If certain data were examined closely, however, it could be seen that this information was incorrect. The representative price data used to calculate the minimum specific import duties in 1994 corresponded to values for 1992-1993 and showed a price of US$48.60 per kg for tariff heading HS 6303.19. The corresponding representative price for the same tariff heading for 1996 amounted to US$16 per kg. Making a comparison, by way of example, it could be seen that the ad valorem equivalent of the minimum specific import duties applicable to this tariff heading (6303.19) remained below 35 per cent, despite the sharp fluctuation in prices. During 1996, imports into Argentina of goods under tariff heading 6303.19 had amounted to 256 kg. for a value of US$342. This corresponded to five samples and the average price of US$1.33 was solely due to the cost of freight and insurance. Samples with no commercial value were not subject to payment of import duties in Argentina. Moreover, it was well known that there was no textile product with a commercial value of US$1.33 per kg. This price did not even come close to the value of international prices for the raw materials.

3.146 Argentina contended that if, for the sole purpose of an academic mathematical exercise, one used another price basis for comparison with the minimum specific import duty rates that appeared in the methodology for the establishment of the DIEM criticized by the United States, the result could be totally different. For example, taking export prices for textiles and apparel from the United States to Argentina, many tariff headings whose ad valorem equivalent exceeded 35 per cent in the US examples would be now below this figure.

3.147 Argentina was of the view that it was impossible to ignore the differences between the theoretical prices of the goods on entering Argentina and the prices declared for the same headings by the exporters in the United States. For example, if one took the first four-digit heading (5208) in the United States table described in para. 3.141 above and compared it with the figures declared at exportation for that heading during the same period, according to the United States, the ad valorem equivalent of the specific duties for the first six lines of the table would range from 45 per cent to 97 per cent with an average price of US$7.67 c.i.f. - Port of Buenos Aires - and an average "break-even price" of US$/kg12.71. If one took the declarations made by the exporters in the United States for the same headings and the same period, one saw that the average export price for Argentina was US$12.97 f.a.s., i.e., approximately US$15 c.i.f. Buenos Aires. This was without taking into account the above-mentioned considerations concerning the effect of rounding off to the nearest thousand, together with the weight of the packaging, the non-payment of duty on samples, etc. The conclusions were obvious with respect to both the validity of the above mentioned evidence submitted by the United States and the reason why no importer had been prepared to challenge a transaction. Indeed, it had to be borne in mind that underinvoicing may constitute an offence.

3.148 Argentina argued that, as the other tables submitted by the United States showing infringements of the 35 per cent ceiling on a HS line basis had been produced in the same way, there was really no way of knowing the actual grounds on which the United States was claiming for a right which it did not know to have been infringed. In particular, the charts prepared by the United States on the basis of the table submitted by Argentina used data which presupposed or took it as an accepted fact that the prices and values corresponded to actual import transactions. These were suppositions, not fact, since the data derived from the two tables mentioned by Argentina in paras. 3.138-3.139 above and had all the shortcomings and defects previously noted.

3.149 The most important thing was that the price basis had to be derived from data other than those declared by the alleged importers of textiles and apparel in Argentina. Certainty could only be found in import transactions that actually took place. The only way of knowing whether these import transactions existed and were effectively subject to payment of minimum specific import duties exceeding 35 per cent was to use the full customs documentation corresponding to the transactions, including the receipt for payment of the import duties and taxes.

(f) The use of net v. gross weight

3.150 Argentina contended that the ad valorem equivalents of particular specific duties could be calculated theoretically by taking the average prices of imports. Nevertheless, it could not be claimed that these theoretical calculations constituted a demonstration or proved the real existence of import transactions actually corresponding to the theoretical analysis. One of the reasons for this was that the import figures in kilograms included samples with no commercial value (which did not pay import duties) and the weight of the outer packaging. This packaging was often heavy enough to affect the weight actually used for assessing minimum specific import duties.

3.151 Moreover, Argentina stressed that these specific import duties were calculated on the basis of the gross weight of the goods, i.e. without taking into account the packaging of each shipment or the wooden supports for the rolls of cloth, the crates, etc. Thus, the import statistics expressed the weight in kilograms corresponding to the transport documents which the importer presented when registering the importation and not the weight on which the calculation of the specific duty was based. In accordance with the above, the prices indicated in the US table identifying 118 cases of imposition of duties above the 35 per cent ad valorem bound rate should not be used even for making theoretical calculations of the ad valorem equivalents of the specific duties. Inasmuch as the United States had used data which were not compiled to form the basis for an analysis of the ad valorem equivalents of specific duties, the above-mentioned table represented a result which could not be considered useful for drawing conclusions of any kind.

3.152 The United States considered that, by arguing that its own data reflected "gross" weight instead of "net" weight, Argentina sought to reduce the kilograms reflected in the tables submitted by the United States. These kilograms were then divided into the value (which Argentina did not seek to change) to achieve a higher average price. The higher the average price, the more likely it would be that the equivalent ad valorem figures would be below 35 percent. For the United States, there were compelling reasons to believe that the Argentine data discussed in sub-section B.5.(d) above already reflected "net", not "gross" weight. The document said "importaciones de products de capitulos 51 a 64" and their "valor, cantidades and precios por kilogramo". Thus the title made it clear that these were the weights of products in these HS items. Further, a handwritten portion said "posiciones sujetas a derechos especificos 1996: enero - septiembre y valor anualizado". As Argentina asserted that its derechos specificos were calculated on the basis of net weight, why would Argentina make any reference to positions "sujetas a derechos especificos" if the data could not be used to calculate such specific duties? Argentina attempted to show the "difference of prices in Argentina and prices in export market". US export data was reported and collected on a net, not gross, weight basis. Indeed, the tables submitted by Argentina in relation to US and EC exports reflected US export data based on a net weight basis. If the purpose of Argentina when preparing this document were to compare average import prices, it should have compared its import prices to those of the United States, calculated using net weight basis.

3.153 For the United States, the data Argentina tried to impeach were the data it supplied when the United States had asked for information to perform its calculation of equivalents ad valorem. The data formed an important part of the consultations between the parties. Argentina never asserted in the consultations, in the first meeting with the parties, or in its answers to the Panel’s or the United States' questions that this data included "gross" weight. Such post hoc analysis, without any evidence other than Argentina’s bald assertion, could not be a valid basis for Argentina to reject its own statistics which demonstrated its repeated and clear violation of Article II.

3.154 The United States further stressed that, even assuming arguendo that Argentina was correct, and that the statistics referred to in sub-section B.5.(d) above did reflect the gross weight figures, the substitution of "net" figures did not change the results significantly. According to a leading US expert on the subject, use of gross weight would result in a distortion in the range of 2 to 5 per cent for textiles and 10-12 per cent for apparel items. In more extreme cases of high-priced apparel items, the packaging could add as much as 33 per cent to the weight. To show the negligible impact, the United States had adjusted the table it had presented in para. 3.141 above to reduce the weight of merchandise in the subject categories by 5 per cent for textiles and 12 per cent for apparel. This adjustment was illustrated in a revised table which reflected that there were still 99 line-items where the specific duties, on average, exceeded 35 per cent ad valorem.

3.155 Moreover, the United States recalled that it had submitted a table on imports from the European Communities for certain tariff headings on textiles which reflected calculations of the "equivalents ad valorem" and reflected the minimum specific import duty. Argentina had asserted that it calculated specific duties on the net weight of the goods, i.e., not counting the weight of the shipping packaging. Thus, it simply would make no sense for Argentina to calculate the ad valorem equivalent duty using the gross weight. Indeed, the purpose of this document appeared to be to show the EC that there were "only" four HS categories in which duties were applied on average in excess of 35 per cent ad valorem. Such a demonstration could be made only if the weight reflected on the document was that used to calculate the application of specific duties.

3.156 The United States further argued that Argentina had also stated regarding the use of "gross weight" that "we do not have net weight data", "Argentina cannot do it [collect the data] in any other way [than by gross weight]", and "we have always used gross weight in presenting our import and export data". The United States submitted the 1983 issue of the INDEC statistical yearbook, which described how Argentina presented and collected its export and import data in 1983. This document was the introduction to a much larger sets of Argentine import and export data for 1983. Near the bottom of the second page of the above mentioned document was a note which stated "comprende las cantidades netas declaradas para cada articulo por los exportadores e importadores, expresadas en la unidad de medida que corresponda". This document made it clear that at least in 1983, the Argentine authorities did collect only net data to report their imports and exports. Argentina had to come forward with documents to show that it did not collect data this way.

3.157 The United States recalled that Argentina also had stated that "Peso bruto could be found in all the individual customs forms [...] submitted by the United States". This was incorrect. In fact, the only peso (weight) which was found in all specific shipment documents was peso neto (net weight). Argentina gave some examples where it claimed that gross weight was reflected and where it showed that gross weight differed substantially from net weight. However, Argentina ignored the fact that it had only counted one page reflecting one portion of multi-HS shipments. For example, Argentina cited page 2 of the document. However, it ignored pages 3 and 4 where there was no gross weight reflected, but instead there was a reference at the top of the page to "item 1". This item 1 referred back to the first page of the group of documents where the total gross weight for the total shipment was reflected. The grouping of three documents was shown in the US document summarizing the main data mentioned in the customs documents at issue. The same situation existed for other examples mentioned by Argentina. These examples showed that gross weight was not computed or reflected in all Argentine customs documents. Only net weight was reflected in all documents.

3.158 The United States added that textile, apparel, and footwear products were shipped in large crates or containers. In most instances, products of different HS categories were shipped together. In order to determine the gross weight, the crate or container was weighed once only. It was the weight of the goods coming out of the crate that had to be weighed to determine the specific duties. This was net weight. The data Argentina had collected and tabulated in its HS annual statistics, was that which it collected, i.e., on a net basis. There was simply no evidence that gross data was collected on an 8 digit line basis, only net data was. Indeed, it would be impossible to collect gross weight on an 8 digit line basis using the import documents at issue.

3.159 In sum, for the United States, the Argentine data represented net weight, not gross weight. As such, this data was a reliable data source to create the documents demonstrating violations of the 35 per cent ad valorem rate referred to in paras. 83 et seq. above.

3.160 Regarding United States statements on the statistical data concerning imports of products of HS Chapters 51 to 64 in value, quantities and prices per kilograms and by country of origin, in particular on the volume/quantity of imports and their "net" or "gross" value, Argentina argued that the conclusions drawn by the United States regarding the alleged ad valorem equivalents did not correspond to the actual import transactions to which they supposedly relate. In order to ascertain the true situation, a distinction has to be drawn between gross and net weights and, if this was done, the result of calculating the ad valorem equivalent would most likely be different from that submitted by the United States. This statement was confirmed by the information given in the alleged customs documents submitted by the United States. Some of these documents showed the differences between gross and net weights. These differences could not be explained solely, as the United States had done, by stating that the imports in question formed part of shipments that contained other imports. The information supplied by Argentina and submitted by the United States regarding imports of products of HS Chapters 51 to 64 in value, quantities and prices per kilograms and by country of origin had been prepared on the basis of data directly compiled by the Department of Foreign Trade on the basis of tariff headings, and the values corresponding to quantities were gross kilograms. This information could not be compared with the foreign trade statistics published each year by INDEC in its statistical yearbooks. Moreover, it was particularly significant that criticism was directed at Argentina by submitting a copy of the 1983 Yearbook. Not only had 15 years gone by since then, but Argentina's tariff nomenclature had changed, the data collection system was not the same and, since 1991, Argentine Customs (52 offices throughout Argentina) had begun computerizing its operations, a process which affected and modified the collection of data.

  (g) Evidence based on imports from the EC and the rest of the world

3.161 The United States considered that, regardless of any problems Argentina may have with its own data, which formed an important part of the consultations preceding the formation of this Panel, Argentina had separately confirmed that its specific duties, on average, exceeded 35 per cent ad valorem in a number of categories. In a table on Argentina's textile and apparel imports from the EC and the rest of the world of selected categories of textiles and apparel subject to ad valorem rates higher than 35 per cent (January-July 1996), the United States had listed specific duties for selected categories of textile and apparel items from the European Communities that Argentina had acknowledged were greater than its bound rate. The document consisted of four pages and covered four different types of information: EC imports to Argentina in 1995; EC imports in the first seven months of 1996; all other imports during 1995; and all other imports during the first seven months of 1996. The document identified for each line-item the total kilograms of textiles imported, their total value, the average c.i.f. value, the specific duties charged, and the ad valorem equivalent. This table also showed categories that Argentina had determined to be in excess of 35 per cent ad valorem, on average, with respect to textiles and apparel from sources other than Europe. These numbers were not only based on data supplied by Argentina, but Argentina had actually performed the calculation of ad valorem equivalency.

3.162 Argentina contended that this table was based on statistical information whose origin remained obscure. ⁹⁹ Methodologically, the volume and value figures could not be used for calculating an average price for comparing with the Argentine minimum specific import duty and obtaining an ad valorem equivalent. The minimum specific import duty applicable to heading 57.04.90 was in fact US$1.70 during 1996. It was applied to the weight of the imported goods, excluding outer packaging and supports.

3.163 The United States replied that the information contained in its document was particularly reliable, since it had been created by Argentine officials who used Argentine customs data to calculate the ad valorem equivalency of 35 line-items of textiles. Argentina had given this document to the EC, and the EC had provided it to the United States. Argentina’s calculations showed that 4 of the 35 line-items of EC imports during 1995 and 1996 exceeded 35 per cent ad valorem. For the rest of the world, 22 of the 35 textile and clothing categories exceeded the bound rate on average in 1996 and 26 of 35 for 1995. Many of the average percentages for the rest of the world for 1995 and 1996 were well-over 50 per cent ad valorem. Since the prices of products within each of the 35 HS tariff headings varied, some imports were above and some were below the average prices. Given the large number of HS categories with an average greater than 50 per cent, there necessarily were many individual transactions well-above 35 per cent ad valorem.

3.164 In the opinion of the United States, Argentina had made no real attempt to attack the validity of the equivalent ad valorem calculations its officials had performed for the European Communities. At the consultation between the EC and Argentina, the EC presented and discussed this document extensively. The EC stated at the consultations that Argentine customs officials had presented the document to them in Buenos Aires in the late fall of 1996. Argentine officials at the 12 June 1997 consultation did not dispute this fact. The EC gave the United States a copy of the document at the consultation to which the United States was a joined party. The document was in Spanish, it referred to the DIEM, and it contained import data that only the Argentine Government could generate. Accordingly, there could be no doubt that this was a document produced by the Argentine Government. It was simply not sufficient for Argentina to claim that the origins of the document were obscure. Significantly, Argentina did not claim that the statistics and data of the same nature regarding imports of certain textile products from the European Communities, which the United States had submitted separately to the Panel, were inaccurate.

3.165 Argentina stated that with respect to the ad valorem equivalents mentioned in the above-mentioned table and, in particular, regarding the ad valorem equivalent of 49.2 (imports from the EC) or 45.7 per cent (imports from the rest of the world) mentioned for heading 5704.90 (carpets), it should be pointed out that, on the basis of the average prices of imports from the United States in 1996 for heading 5704.90, the minimum specific import duty collected ($1.66) represented an ad valorem equivalent of 35 per cent.

3.166 Argentina added that, generally, the documents submitted by the United States were the result of a compilation of statistical information supplied by Argentina, but for purposes other than those put forward at the time it was requested. The statistics supplied by Argentina in the course of its consultations with the United States had been supplied for other purposes, and their use in the calculations made by the United States had led to a number of problems and inaccuracies in the results obtained. In this respect, the table submitted by the United Sates regarding Argentina's textiles and apparel imports from the EC and the rest of the world of selected categories subject to ad valorem rates higher than 35 per cent for January-July 1996 had not been supplied by Argentina either to the United States or to the European Communities. The documentation in question was not provided by Argentina during formal consultations with the EC in the framework of the DSU. On the occasion on which the United States saw the mentioned document (that is, in association with the Article XXII consultations with the EC), Argentina made it clear that the paper did not come from Argentina and was not subject to discussion.

3.167 The minimum specific import duties on imports of textiles and apparel did not exceed 35 per cent ad valorem because the rates had been established on the basis of calculations made prior to application of those specific duties. The calculations made by the United States in order to show that the 35 per cent ad valorem equivalent had been exceeded were not correct because they were based on statistics that were inappropriate. A comparison of average prices based on statistics of import volume and value and the minimum specific import duties gave a theoretical ad valorem equivalent. This was not the import duty actually paid by importers in each case.

3.168 Noting Argentina's statement that the "best and closest statistics to reality available in this dispute came from the United States export data", the United States mentioned that it had refrained from using its export data because it wanted to focus on Argentina-produced data to avoid any assertions of inaccuracy of data. It had some doubts about the accuracy and completeness of its export data. Nevertheless, given the fact that Argentina had made the statements above, the United States felt compelled to provide the Panel with the US export data evidence available. The United States produced a document which listed 104 entire HS categories where the average ad valorem equivalent price exceeded 35 per cent. The prices and quantities therein reflected prices and quantities reported from US export data. This was another example that demonstrates that no matter how the Panel examined the data, no matter what the source of the data was, it showed that Argentina’s specific duties violated its 35 per cent ad valorem bindings.

(h) Examples of individual transactions

3.169 The United States stated that particular shipments also reflected payments in excess of 35 per cent ad valorem. It consequently submitted, during the first substantive meeting of the Panel, copies of two commercial invoices as well as part of the customs documentation pertaining to two import transactions, together with a summary table of the information contained in those documents. The documents referred to shipments of 9 May 1996 and 4 April 1996. The example of a shipment on 9 May 1996 of US carpets (style 1) in HS category 5703.20 included a c.i.f. value of US$56,271.90. Argentine customs documents indicated that specific duties of US$20,531, or a 36 per cent ad valorem equivalent, had been imposed and paid. The other documentation showed imports on 4 April 1996 of three types of US carpets (styles 2, 3 and 4) in HS category 5703.30. These invoices and Argentine customs documents reflected that the imposition of specific duties had resulted in the payment of duties of respectively 40; 60 and 67 per cent ad valorem.

3.170 Argentina had doubts concerning the validity and reliability of the invoices for the alleged import transactions regarding shipments dated 9 May 1996 (one category of product under HS 5703.20) and 4 April 1996 (three categories of products under HS 5703.30) submitted by the United States. It could be seen from these two commercial invoices, especially the second one, that not only was there no mention of the importer's name, tax identification number (CUIT), etc., but also that corrections and additions had been made by hand that were incomprehensible. The second of the alleged invoices submitted contained prices per unit of US$1.97, 2.61 and 3.77 per square metre for styles 2, 3 and 4 respectively. The information on United States textile exports in 1996 provided by Argentina indicated an average export price to Argentina of US$5.91 per square metre for the same tariff heading, a difference which highlighted the fact that if the invoiced price had been closer to the average levels, once adjusted to c.i.f. it would in none of the cases have exceeded 35 per cent. Thus, the next item of the invoice, which represented double the volume of the three previous items together, with a price per unit of US$6.92 was not claimed to exceed the 35 per cent limit. It was difficult to understand why the importers had not had recourse to the challenge procedure under those circumstances. Moreover, the invoices showed that samples valued at US$2,340 entered duty free when the maximum amount that may legally be imported into Argentine customs territory under this heading was US$100. This raised further doubts regarding the value of this document as evidence. In addition, if the value of the samples was added to the import total, the ad valorem equivalent did not exceed 35 per cent. Regarding the other transaction (styles 2, 3 and 4), taking the United States export prices, it could be seen that in no case did they exceed 35 per cent. Taking the prices allegedly declared by the importer on this invoice, however, the total was different. Consequently, it was not clear why the importer did not utilize the challenge procedure to contest the difference.

3.171 The United States also provided the Panel with copies of six Argentine customs documents relating to duties charged during 1996, identifying examples where specific duties in excess of 35 per cent ad valorem had been imposed and paid by importers. Examples 1-5 had been derived from 2 shipments of different types of footwear produced by a US manufacturer in Indonesia. Example 6 involves woven cotton fabric produced in the United States.

3.172 According to the United States, the calculation of these percentages was easily accomplished by examining the lower portion of each of the six Argentine customs forms presented, and dividing the specific duties (derecho especifico) by the total c.i.f. value (Valor en Aduana en Divisa).

3.173 With respect to the above-mentioned copies of invoices submitted by the United States involving footwear import transactions, Argentina considers them irrelevant since it was not appropriate for the Panel to rule on a measure which had been revoked prior to the adoption of its terms of reference. In any case, it could easily be determined that all these cases corresponded to import operations carried out by a large US manufacturer of athletic shoes. ¹⁰⁰ According to the information available, these operations presumably form part of the various actions which that company had brought against the Argentine State. Secondly, the specific operations submitted related to imports of footwear originating in Indonesia and not to textile imports from the United States.

3.174 Finally, Argentina could not give an opinion regarding the copy of invoice submitted by the United States (Example 6 above) which was said to correspond to the importation of a textile product (woven cotton fabric) produced in the United States and according to which the duties collected were 2 per cent in excess of the bound rate. Argentina did not have the name of the importer or the number of the operation, the tariff heading was illegible and, at the same time, there was no stamp or confirmation that this was a document that had been processed by the customs authorities.

3.175 In addition to the above-mentioned examples, the United States presented a specific example from October 1995 (a copy of a despacho de importación) regarding a shipment of US carpet on which specific duties of US$1,775.00 on a c.i.f. value of US$2,811.58 had been assessed. Application of specific duties in this instance resulted in a duty equivalent to 63 per cent ad valorem. If further particular examples of how Argentina’s specific duties exceeded 35 per cent ad valorem were needed, Argentina had provided them by submitting copies of the challenges by importers of Company X (involving footwear) and Company Y (involving textiles) against the imposition of minimum specific duties greater than 35 per cent ad valorem.

3.176 Argentina replied that the operation of October 1995 referred to by the United States involved only an amount of US$3,000 and the unit transaction value was US$1.90 although, in 1995, the year of the transaction, the average price for exports from the United States to Argentina in the same tariff heading gave a f.a.s. unit value of US$2.79. If this transaction had been carried out at the average value indicated, with the adjustment needed to be regarded as c.i.f.-Port of Buenos Aires, the minimum specific import duty applied (US$1.09) would have resulted in an ad valorem equivalent of less than 35 per cent (average c.i.f. value equalled US$3.18; ad valorem equivalent equalled 34 per cent). Argentina also noted that the duty had not been challenged, even though it was precisely for these specific cases, i.e. the operations with a transaction value much lower than the average for the tariff heading, that the challenge procedure was available. Similarly, as the documentation provided by the United States recorded, the operation was carried out under the "Green Channel" procedure, so that the goods were not examined by the Argentine customs administration.

3.177 For Argentina, it was highly significant that the United States could only submit a single transaction among the thousands corresponding to the approximately 580 tariff headings to which minimum specific import duties were applied. Moreover, the transaction value represented approximately 60 per cent of the average price of Argentine imports from the United States in this tariff heading and the importer chose not to make use of the procedure established by Argentine law for correcting possible excessive duty assessments.

3.178 The United States stressed that the best evidence of the excessive nature of Argentina’s specific duties were the Argentine customs forms identifying assessed duties. However, these were in the possession of the Argentine Government. For this reason, the United States had requested Argentina to produce all relevant customs forms involving imports in HS line-items 5407.81 (woven synthetic fibre fabric), 5703.20 (carpets), and 6110.30 (manmade fibre sweaters) for the period January-September 1996. The United States had chosen these three categories in part because Argentine customs data showed that the average duty paid for these three groups of imports from the United States was 99, 43 and 56 per cent, respectively, during the period January-July 1996. ¹⁰¹ Argentina had failed to produce these documents.

3.179 The United States also presented additional evidence before the second meeting of the Panel. This evidence consisted of a table and copies of import documents. The copies of import documents reflected the underlying Argentine customs documents that were summarized in the table. The page numbers on the copies of the import documents related to the first column in the table. Like other Argentine customs documents presented by the United States to the Panel, these documents showed examples in which Argentina had applied duties in excess of its 35 per cent ad valorem duties. The tables reflected a large number of specific examples where Argentina had applied and enforced specific duties that violated Argentina’s 35 per cent ad valorem bindings. One of the above-mentioned documents summarized them all: it referenced a total of 11 shipments of hosiery and socks during 1996 and 1997 within the apparel HS categories covered by the Argentine measures at issue in this dispute. Because many of these shipments included products in different HS categories, these 11 shipments involved a total of 20 instances of products in which Argentina had applied duties in excess of 35 per cent ad valorem. The same tables also summarized examples regarding footwear shipped during 1996. As with most of the apparel examples, there were more than one product category in each shipment. In 58 separate instances of products within these examples, the specific duties applied resulted in payment in excess of 35 per cent ad valorem duties. Thus, in total, the table reflected 78 different instances of shipments in which specific duties had been levied and paid in excess of 35 per cent equivalent ad valorem.

3.180 Among the data submitted by the United States, Argentina considered the example of the import document in which the export originated in United States customs territory. Apart from the general consideration that it concerned an import transaction for which customs clearance had been carried out manually, this particular case suffered from a number of formal defects which could ultimately invalidate the substantive arguments they were intended to support. Firstly, it represented only part of a larger shipment for which the customs documentation had not been supplied. What the total shipment consisted of was not said, nor was the full assessment of import duties and the amount to be paid by the importer on the basis of that full assessment mentioned. In addition, there was no receipt from the Banco de la Nación which represented the last step in the customs clearance procedure for imported goods. Secondly, the legal basis indicated for determining the ad valorem duty applied to the mentioned goods was erroneous, since Decree No. 2275/94 was not in force in March 1996, when the transaction took place, as it had been replaced by Decree No. 998/95 on 1 January 1996. Thirdly, the legal basis for determining the specific duty applicable to the tariff heading declared by the importer was apparently Resolution No. 1554/94, which in fact dated back to 1993 and in any event was not in force on the day in March on which the said import allegedly went through clearance procedures upon entry into Argentina. Fourthly, the legal basis on which the three per cent statistical tax was levied was definitely erroneous, since Resolution No. 1031/94 was not in force on the day in March on which the import allegedly went through Argentine customs clearance procedures. Indeed, at that time, the applicable statistical tax had been brought into force by Decree No. 389/95. Fifthly, the values declared by the alleged importer of the goods in question were US$6.19 per dozen pairs in two cases and US$8.05 per dozen pairs in the third case. These values were considerably lower than the average export prices of like goods (of the same tariff heading) originating in the United States in 1996. How was it possible for the alleged Argentine importer of the goods to accept to pay a specific duty of US$12,578 for this import transaction as against the applicable ad valorem tariff of US$3,999 without having recourse to the challenge procedure? Finally, Argentina found it impossible to delve further into all of these matters as the alleged importer's registration number and tax identification number (CUIT) as well as the import registration number, and the name and registration number of the customs agent, had been rubbed out. All of these considerations casted serious doubt on the credibility of this document.

3.181 Argentina believed that it was unacceptable, in the framework of the WTO, to continue addressing trade issues on the basis of anonymity of the actors involved and disputes settled between States on the basis of anonymous challenges. It would have been extremely useful for Argentina to have access to the elements which would have not only made it possible to verify, before the Panel, the credibility of the documentation submitted, but which would also been very useful to the Customs Authorities and the General-Directorate of Taxes in combatting fraud, evasion and smuggling which, to a certain extent, underlaid this discussion.

3.182 Argentina added that, of all of the evidence submitted by the United States there was not a single one that provided evidence of import duties actually paid to the Argentine Customs by importers. Only if such documentation had been included in the presentation would it have been possible to assert that tariffs in excess of 35 per cent ad valorem were collected for given textile or clothing imports. Argentina also provided the following documents:

3.183 Argentina argued that it could be seen from these documents that the evidence presented by the United States did not include all these different elements involved in the full processing of an import transaction by Argentine customs.

3.184 Argentina also raised the fact that the goods concerned in the evidence submitted by the United States were of Italian origin in all cases but one. Second, all of the transactions occurred in 1997 except one. Third, they involved different types and varieties of the same product, i.e. tights under tariff heading 6115. Fourth, all of the transactions were processed using the "manual system" while theoretically all transactions processed by the Buenos Aires Customs should use the MARIA computer system. The essential difference was that, with the manual system, the clearance form was filled in completely by the customs agent and then submitted to Customs, whereas with the computer system, the agent has direct access to the Customs computer, but may only feed in certain data, the rest of the information coming from the Customs data bank. The clearance forms provided did not signify that the duties were actually paid. The payment voucher, which represented the last step in the customs clearance process, had not been provided either. Finally, at least two of the shipments were partial shipments; in other words, only part of the customs documentation for a complete shipment was provided.

3.185 The United States argued that Argentina appeared to claim that the specific examples put forth by the United States that did not reflect imports from the United States were irrelevant. Thus, Argentina appeared to confuse two separate issues. The first issue was whether the United States had initiated a dispute settlement proceeding without any legitimate trade interest. Even assuming such a defense was valid, Argentina had not asserted it. In any event, there was no doubt that the United States had substantial exports of textiles, apparel and footwear to Argentina. The second issue was entirely separate, i.e., whether Argentina was applying specific duties to textile, apparel, and footwear imports in excess of 35 per cent equivalent ad valorem. This was an issue not dependent on the origin of the imported goods. Argentina had admitted that its customs officials had no discretion not to apply the minimum specific import duties, whatever the exporting country. Accordingly, evidence that imports from any WTO Member had been subject to duties in excess of a 35 per cent equivalent ad valorem rate in the relevant HS categories was very relevant to demonstrate Argentina’s violation of Article II GATT 1994.

3.186 For the United States, Argentina repeatedly claimed that the above-mentioned import documents were not reliable or authentic because they did not include any proof of payment. However, Argentina did not contest that for each of the 78 examples submitted by the United States (see para. 3.179) there was a reflection of the calculation of specific duties in excess of 35 per cent equivalent ad valorem.

3.187 With respect to Argentina's argument regarding one of the documents that it quoted the wrong legal texts, the United States submitted that the products in question were socks from the United States found under HS 6115.92.00. Argentina was correct that Resolution No. 2275/94 cited in the lower left hand corner of the document was no longer in effect in March 1996. However, the resolution in effect at the time the products in document 34 were imported - Resolution No. 304/95 -had exactly the same specific duty (US$7.6) as Resolution No. 2275/94 - and it was the correct US$7.6 specific duty which was reflected in the import document concerned. Argentina’s arguments did not show that the duty had not been paid or that the document was somehow not authentic. Rather, it showed that the importer could not keep track with the constant changes in the Argentine resolutions.

3.188 In response to the arguments of the United States that whether or not the legal measures referred to in this alleged customs document were correct was not important; that the minimum specific import duties rate applicable on the reported date of import (sometime in March 1996) was the same as that indicated; that Argentina did not contest the "assessments of specific duties" and thus acknowledged that they had been paid, Argentina reaffirmed the doubts that this alleged customs document raised as to whether it could be accepted as valid and recognized as part of an import transaction that actually took place.

3.189 Argentina also argued that the United States statements concerning the difficulty of obtaining this alleged documentation from Argentine importers, indicating that they did not provide it because they feared reprisals, were extremely surprising. One possible reason for the difficulty encountered by the United States in collecting evidence from Argentine companies could be inferred from the data on export prices from Italy to the United States for the same products that had allegedly been imported into Argentina according to the documentation submitted by the United States. Information on imports into the United States under heading HS 6115 showed that articles entering the United States at a price of US$51.52/kg were being imported into Argentina at a much lower price.

3.190 Argentina added that these alleged customs documents submitted by the United States related to an alleged import processing through the Buenos Aires Customs under the so-called "manual system". This made it virtually impossible to carry out any verification unless all the elements needed to identify the import and the importer were available. Without the possibility of checking, it was not possible to differentiate between real and fictitious imports.

3.191 The United States replied that, with respect to the authenticity of these customs documents and invoices, customs stamps and signatures could be found on many of the documents. Many of these stamps were from Argentine customs agents and were found at the bottom or the top of some forms under Oficializado - Firma y Sello Despachante de Aduana. Argentina had admitted in its replies to questions of the United States that "customs agents were considered to be auxiliary customs officials for import operations". Certainly, these official stamps of customs agents constituted a presumption that the documents were official unless Argentina could present evidence - not just oral assertions - that they were not authentic or constituted forgeries. No such evidence had been presented.

3.192 The United States added that Argentina admitted that its customs officials had no discretion not to apply the specific duties. "Applying" specific duties meant these customs officials had to charge and insist on payment of the duties before customs clearance. Given this lack of discretion, Argentina could not possibly claim that the specific duties reflected on the documents were not paid. There was no other way that the goods could have cleared customs, at least legally. Argentina had presented no evidence that there was no payment of these specific duties. It had presented no evidence that there were huge supplies of goods piling up in customs warehouses where no payment had been made.

3.193 Argentina replied that in the present case duties in excess of 35 per cent ad valorem had not been applied. Furthermore, there had been no cases of imports of textile products and clothing where the importers had challenged the application of specific duties on the grounds that they exceeded the 35 per cent ad valorem bound in the WTO. Under its legislation the commitment not to exceed the bound tariff level of 35 per cent ranked above the domestic laws and regulations. Moreover, the so-called challenge procedure provided for in Law No. 22.415 (Customs Code) fully guaranteed that the bound level could not be exceeded. The existence of this remedy neutralized the potential for exceeding the binding which, according to the United States, was inherent in the minimum specific import duty.

Continue on to Part 5 of Argentina - Measures Affecting Imports of Footwear, Textiles, Apparel and Other Items

Notes:

96. Boletín Oficial de la República Argentina, No. 28.650 of 20 May 1997.

97. The document submitted by Argentina was entitled Importaciones de Productos de los Capitulos 51 a 64 de la Nomenclatura Arancelaria Armonizada (1995 y 1996, en Valor, Cantidades y Precios por Kilogramo) and Importaciones de Productos de los Capitulos 51 a 64 de la Nomenclatura Arancelaria Armonizada (1995 y 9 Meses de 1996, en Valor y Cantidades, por Pais de Origen). See footnotes 94 and 95 above.

98. Ibid. The United States noted that volume data was not provided for 1995 which made the calculation of average duties paid for that period impossible.

99. See para. 3.166, below.

100. This company is hereafter referred to as "Company X".

101. The United States specified that these three categories, on average, would remain in excess of 35 per cent ad valorem even under Argentina's latest revision of its specific duties on textiles and apparel.