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UNITED STATES - DEFINITIVE SAFEGUARD MEASURES
B. CLAIMS RELATING TO THE LINE PIPE MEASURE
7.15 We will begin our review of the substantive issues in this case by
examining Korea's claims regarding the conformity of the line pipe measure with
GATT 1994 and the Safeguards Agreement. We will then address Korea's claims
regarding the ITC investigation leading to the imposition of that measure. We
shall begin our examination of the line pipe measure by addressing Korea's
claims under Article XIII. In order to determine the extent, if any, to which
the line pipe measure is subject to the disciplines of Article XIII, we must
first rule on the nature of the line pipe measure.
(a) Arguments of the parties
(i) Arguments by Korea
7.16 Korea asserts that the line pipe measure is a quantitative restriction in the form of a tariff quota. The measure is a tariff quota because it consists of two elements: a quota and a tariff. Normal duties are assessed on in-quota imports, and a higher tariff is imposed on over-quota imports. Korea argues that the measure is a tariff quota because one tariff rate is applied on in-quota imports of 9,000 short tons, while a higher tariff rate is imposed on out-quota imports (once the 9,000 short ton quota is exhausted). Korea notes that the measure is described as a tariff quota in the ITC recommendation, and in US Customs documentation.
(ii) Arguments by the United States
7.17 The United States argues that the measure is not a tariff quota, but rather a tariff surcharge with a 9,000 short ton exemption for each WTO Member. According to the United States, a tariff quota involves the "[a]pplication of a higher tariff rate to imported goods after a specified quantity of the item has entered the country at a lower prevailing rate".27 The United States also refers to a finding by the EC Bananas III - Article 21.5 panel that "a tariff quota is a quantitative limit on the availability of a specific tariff rate".28 On the basis of these definitions, the United States asserts that a measure is only a tariff quota if it provides for an overall limit on eligibility for the lower tariff rate. The United States asserts that the line pipe measure imposes no overall limit on the volume of imports that may be free of the supplemental duty. According to the United States, the only limit on the volume of imports free from the 19 per cent supplemental duty is the number of customs territories which choose to take advantage of the 9,000 short ton exemption. Since there is no overall limit on eligibility, the measure is not a tariff quota.
(b) Evaluation by the Panel
7.18 We see no reason to disagree with the United States that a tariff quota involves the "[a]pplication of a higher tariff rate to imported goods after a specified quantity of the item has entered the country at a lower prevailing rate".29 Nor do we disagree with the EC Bananas III - Article 21.5 panel that "a tariff quota is a quantitative limit on the availability of a specific tariff rate".30 However, we do disagree with the United States' argument that the existence of a tariff quota is dependent on the existence of an overall limit on eligibility for the lower tariff.
7.19 The two definitions advanced by the United States focus on the application, or availability, of a specified, and lower, tariff rate. In certain cases, the applicable tariff rate under a tariff quota will depend on whether or not the overall limit on the availability of the lower tariff rate has been met. This will be the case when an overall limit is fixed, without any additional allocation of that limit amongst exporting countries. In other cases, however, the application, or availability, of a lower tariff rate will in no way depend on whether or not any overall limit has been met. In cases in which the overall limit is allocated among exporting countries, the application, or availability, of a lower tariff rate will become dependent on whether or not a given exporting country has filled its allocation, irrespective of whether or not any overall limit has been filled. If a given country fills its allocation, imports from that country will become subject to a higher rate of duty, even if the overall limit remains unfilled. In our view, it makes little sense to establish definitions of tariff quotas that depend on the existence of an overall limit on the application, or availability, of a lower tariff rate, if in certain circumstances the existence of an overall limit will have no bearing on the applicability, or availability, of the lower tariff rate for imports from a specific country.
7.20 Our view that a measure may constitute a tariff quota even if it does not provide for an overall limit on the availability of the lower tariff rate is confirmed by Article XIII:2(a), read in conjunction with Article XIII:5. Article XIII:2(a) provides:
7.21 Article XIII:5 provides:
7.22 By virtue of Article XIII:5, Article XIII:2(a) applies to tariff quotas. Thus, in respect of tariff quotas, a quota representing the total amount of permitted imports shall be fixed, wherever practicable. These provisions at least acknowledge the possibility, therefore, that there may be situations in which it is not practicable to fix an overall limit, or quota, for a tariff quota. In other words, these provisions confirm that a tariff quota may exist, even though no overall limit is provided for.31
7.23 Without setting forth an exhaustive definition of tariff quotas, we consider that an accurate definition must include measures which place a quantitative limit on the application, or availability, of a lower tariff rate (and a higher tariff rate applicable once that quantitative limit has been exceeded), irrespective of whether that quantitative limit is (a) "overall", (b) "overall" and further allocated among exporting countries, or (c) country-specific, with no "overall" limit. Such an approach is entirely consistent with the two definitions relied on by the United States. In other words, the "specified quantity", or "quantitative limit", referred to in the definitions advanced by the United States, could be overall, overall and further allocated among exporting countries, or simply country-specific. On this basis, we conclude that the line pipe measure at issue is a tariff quota, since there are country-specific limits (9000 short tons) placed on the application, or availability, of the lower tariff rate, and it is these country-specific limits that determine whether or not line pipe from specific countries enters the United States at the lower or higher rate of duty.
7.24 We note that our conclusion as to the nature of the line pipe measure is consistent with the treatment of that measure by the United States' own Customs Service. In particular, the US Customs Service Quota Headquarters sent a memo to all Port Directors on 29 February 2000, referring to the implementation of "tariff quotas on certain circular welded carbon-quality line pipe."32
(a) The applicability of Article XIII
(i) Arguments of the parties
(1) Arguments by Korea
7.25 According to Korea, the provisions of Articles XIII and XIX, and Article 5 provide rules for the imposition of quantitative restrictions on imports and thus are directly applicable in this case. The requirements of Article XIII and Article XIX, and Article 5 must therefore be read together to determine the full set of obligations and responsibilities for imposing quantitative restraints including tariff quotas. Article XIII, entitled "Non-discriminatory Administration of Quantitative Restrictions," explicitly states at paragraph 5 that the provisions of Article XIII are applicable to tariff quotas.
7.26 Korea submits that the proper interpretation of the Agreement on Safeguards and Article XIII must proceed from the fact that the WTO is a single treaty. As such, all the provisions of the treaty must apply with full force and effect. Article II:2 of the WTO Agreement expressly manifests the intention of the Uruguay Round negotiators that the provisions of the WTO Agreements and the Multilateral Trade Agreements included in its Annexes 1, 2 and 3 must be read as a whole. The text of the SA also confirms that it must be read together with Article XIII as well as Article XIX. The Preamble of the SA states that the object and purpose of the SA was to "clarify and reinforce the disciplines of GATT 1994" (emphasis added). While Article XIX is specifically mentioned, it is not exclusively mentioned - all of the disciplines of GATT 1994 are incorporated. It is also logical given, as the United States concedes referring to the GATT Panel Report on Norway - Restrictions on Imports of Certain Textile Products,33 that Article XIII applied to the imposition of safeguard measures under Article XIX.34 Since they all relate to the same thing, they must "a fortiori be read as representing an 'inseparable package' of rights and disciplines which have to be considered in conjunction ... and read ... in a way that gives meaning to all of them harmoniously."35
7.27 Korea notes the US argument that Article 5 does not include each concept contained in Article XIII and that the United States essentially argues that the "intent" of the negotiators was to "exclude" certain obligations and rights contained in Article XIII.36 Korea submits that the determination of the "intent" of the negotiators is unknowable and equivocal except to the extent that the negotiators did know, based on Note to Annex 1A, that the WTO Agreements and GATT 1994 would be read together except in the case of a conflict. Such knowledge can safely be assumed from the text of the Agreement itself. Therefore, there was no need for the negotiators to spell out each and every general concept which has been established by GATT. To the contrary, it was only necessary to establish such additional requirements and departures to be specifically applied to WTO safeguard actions.37
(2) Arguments by the United States
7.28 The United States asserts that, despite the express language of Article XIII:5, the provisions of Article XIII do not apply to tariff quota safeguard measures. According to the US, safeguard measures are governed exclusively by Article XIX and the Safeguards Agreement. The United States notes that the GATT panel in Norway - Restrictions on Imports of Certain Textile Products38 found that GATT 1947 Article XIII applied to GATT 1947 Article XIX safeguard measures. However, the United States argues that "[t]he addition of the Safeguards Agreement to the GATT text under the WTO Agreement broke any link that may have existed between Articles XIII and XIX under GATT 1947."39
7.29 According to the United States, the Safeguards Agreement creates a "comprehensive agreement" regulating the application of safeguard measures. The explicit references to Article XIX make its provisions part of the Safeguards Agreement, forming an "inseparable package of rights and obligations." This is because, in the words of the Appellate Body in Argentina - Footwear Safeguard, they "relate to the same thing, namely the application by Members of safeguard measures". That "inseparable package of rights and obligations" contains procedural requirements, a non-discrimination obligation, and a variety of limitations on the application of safeguard restrictions, including provisions that duplicate some of the requirements of Article XIII. Therefore, as a legal matter, the WTO Agreement cannot be interpreted to apply the omitted provisions of Article XIII to measures authorized under the Safeguards Agreement.
(ii) Evaluation by the Panel
7.30 We are required to determine whether or not Article XIII applies to the line pipe safeguard measure. In addressing this issue, we note that the line pipe measure is a tariff quota, and that the provisions of Article XIII are expressly applied to tariff quotas by virtue of Article XIII:5.
7.31 The United States relies heavily on the findings of the Appellate Body in Argentina - Footwear Safeguard to argue that Article XIII should not apply in the context of safeguard measures. The Appellate Body's findings in Argentina - Footwear Safeguard concerned the application of Article XIX to safeguard measures. In considering this matter, the Appellate Body began its analysis by referring to Article II:2 of the WTO Agreement, which provides that:
7.32 The Appellate Body then stated that:
7.33 Concerning Article XIX in particular, the Appellate Body found that:
7.34 The Appellate Body added that:
7.35 The United States does not deny that Article XIII is generally binding on WTO Members. Rather, the United States asserts that Article XIII does not form part of the "inseparable package of rights and disciplines" governing the application of safeguard measures in particular. The United States argues that the Appellate Body's conclusion that Article XIX and the Safeguards Agreement form an 'inseparable package of rights and disciplines' was "based … on the fact that they 'relate to the same thing, namely the application by Members of safeguard measures'".44 According to the United States, the Appellate Body based this conclusion on the numerous references to Article XIX in the Safeguards Agreement. Moreover, the United States notes that the Safeguards Agreement adopts certain provisions of Article XIII, but not the others, and asserts therefore that the remaining provisions of Article XIII do not "relate to" the application of a safeguard measure.45
7.36 We note that the Appellate Body in Argentina - Footwear did indeed refer to certain provisions of the Safeguards Agreement that contain references to Article XIX. In particular, the Appellate Body referred to Articles 1 and 11.1(a):
This Agreement establishes rules for the application of safeguard measures which shall be understood to mean those measures provided for in Article XIX of GATT 1994.
Prohibition and Elimination of Certain Measures
7.37 The Appellate Body found that:
7.38 There is, however, nothing in Articles 1 and 11.1(a), nor in the Appellate Body's reasoning, to suggest that Article XIX applies in the context of safeguard measures to the exclusion of other GATT provisions.47 The mere fact that Article XIX applies does not prejudge the applicability of other GATT provisions. The starting-point for the Appellate Body's analysis regarding the application of Article XIX was the fact that "the provisions of Article XIX of the GATT 1994 and the provisions of the Agreement on Safeguards are all provisions of one treaty, the WTO Agreement".48 Only after this observation did the Appellate Body consider Articles 1 and 11 of the Safeguards Agreement. Furthermore, in United States - Lamb Meat the Appellate Body suggests that its analysis of Articles 1 and 11 merely lent support for its interpretation based on the fact that Article XIX and the provisions of the Safeguards Agreement are all provisions of the same WTO Agreement:
7.39 In our view, the Appellate Body's finding that Article XIX applies in the context of safeguard measures was based primarily on the fact that Article XIX and the provisions of the Safeguards Agreement are all provisions of the same treaty, namely the WTO Agreement. The Appellate Body merely derived support for this interpretation from Articles 1 and 11.1(a).
7.40 WTO Members have contracted a package of rights and obligations, including those set forth in the GATT 1994 and the Safeguards Agreement. A Member may only depart from the provisions of either the GATT 1994 or the Safeguards Agreement if such departure is expressly authorised. In this regard, we note the Appellate Body's finding in EC- Bananas III (AB) that "[i]f the negotiators had intended to permit Members to act inconsistently with Article XIII of the GATT 1994 [by virtue of the provisions of the Agreement on Agriculture], they would have said so explicitly."50 We see nothing in the Safeguards Agreement that expressly authorises a Member to act inconsistently with Article XIII. The fact that the Safeguards Agreement does not contain any express reference to Article XIII certainly does not amount to an express authorisation to depart from the provisions of that Article.
7.41 The United States further asserts that the drafters of the Safeguards Agreement incorporated into that Agreement those provisions of Article XIII that they wanted to, and that the remaining provisions of Article XIII should not apply because they were deliberately omitted. In particular, the United States argues that the Safeguards Agreement "incorporates principles - and even one entire block of text - from Article XIII. It omits the provisions of Article XIII that Korea now relies upon. To conclude now that Article XIII applies to safeguard measures would be to reverse the Members' decision to include only some of those provisions in the Safeguards Agreement."51
7.42 This argument is very similar to that advanced by the Argentina - Footwear Safeguard panel regarding the "unforeseen developments" criterion set forth in Article XIX:1. The panel found that WTO safeguard measures are governed by the Safeguards Agreement, to the exclusion of the unforeseen developments criterion contained in Article XIX. The Argentina - Footwear Safeguard panel found that:
7.43 The Appellate Body rejected the panel's reasoning in the following terms:
7.44 In light of these findings by the Appellate Body, we see no basis for drawing any conclusions from the supposed "express omission" of certain provisions of Article XIII from the Safeguards Agreement. Just because some provisions of Article XIII are replicated in the Safeguards Agreement, that alone does not mean that the remaining provisions cease to be binding on Members.54 We therefore decline to draw any conclusions from the fact that certain Article XIII provisions are not replicated in the Safeguards Agreement. Like the Appellate Body, we consider that if the Uruguay Round negotiators had intended to expressly omit Article XIII from the safeguards context, "they would and could have said so in the Agreement on Safeguards. They did not".55
7.45 The United States also argues that Article XIII:2(d) is "identical" to Article 5.2(a) of the Safeguards Agreement.56 According to the United States, "if Article XIII:2(d) applied independently to a safeguard measure, the inclusion of the same language in Article 5.2(a) becomes superfluous, which would violate the principle of effectiveness in interpretation of treaties".57 In our view, this argument misrepresents the principle of effectiveness in treaty interpretation. As noted by the panel in Turkey - Textiles, "the principle of effective interpretation or 'l'effet utile' or in Latin ut res magis valeat quam pereat reflects the general rule of interpretation which requires that a treaty be interpreted to give meaning and effect to all the terms of the treaty. For instance one provision should not be given an interpretation that will result in nullifying the effect of another provision of the same treaty."58 An interpretation of Article XIII that applies that provision in the context of safeguard measures does not, in our view, nullify any of the provisions of the Safeguards Agreement. All of the provisions of the Safeguards Agreement remain fully applicable. Although there may be some duplication between Article XIII:2(d) and Article 5.2 of the Safeguards Agreement, duplication is not the same as nullification. Furthermore, we note that the US approach to the principle of effective treaty interpretation would have precluded the Appellate Body from applying Article XIX, as a whole, in the context of safeguard measures, since certain provisions of Article XIX are duplicated by certain provisions of the Safeguards Agreement. The fact that the Appellate Body found that Article XIX, in its entirety, applies to safeguard measures, despite the resultant duplication, confirms our rejection of the United States' argument regarding the principle of effective treaty interpretation.
7.46 In any event, we note that Article XIII:2(d) is not "identical" to Article 5.2(a) of the Safeguards Agreement. In particular, Article 5.2(a) omits the last sentence of Article XIII:2(d), whereby:
In response to a question from the Panel at the second substantive meeting, the United States asserted:
7.47 We recall our earlier finding regarding the "express omission" of Article XIII provisions from the Safeguards Agreement. We see no reason to adopt a different approach with regard to the last sentence of Article XIII:2(d), especially not on the basis that a violation of the last sentence would also "likely" constitute a violation of Article 5.1, first sentence, or on the basis of speculation as to what "may" have caused negotiators not to expressly include this provision in the Safeguards Agreement. If the Uruguay Round negotiators had intended to expressly omit the last sentence of Article XIII:2(d) from the safeguards context, "they would and could have said so in the Agreement on Safeguards. They did not".60
7.48 The United States also argues that the public international law presumption against conflicts militates against an interpretation that applies Article XIII:2(d) to safeguard measures, since Article XIII:2(d) would not be subject to the exception created by Article 5.2(b). In our view, however, the issue of conflict between these provisions does not arise in this case, since the implication of our findings on Article 5.2(a) is that Article 5.2(b) quota modulation would not be available for tariff quotas (see below at para.7.75).
7.49 Furthermore, the United States argues that the non-application of Article XIII in the context of safeguard measures "also makes sense as a matter of policy". In particular, the United States asserts that "[t]o import additional restrictions into the Safeguards Agreement - such as the Article XIII restrictions on TRQs - is unnecessary and would limit Members' ability to achieve the objectives of the Agreement." However, we would suggest that it is the paucity of disciplines governing the application of tariff quota safeguard measures in Article 5 of the Safeguards Agreement61 that supports our interpretation of Article XIII. If Article XIII did not apply to tariff quota safeguard measures, such safeguard measures would escape the majority of the disciplines set forth in Article 5. This is an important consideration, given the quantitative aspect of a tariff quota. For example, if Article XIII did not apply, quantitative criteria regarding the availability of lower tariff rates could be introduced in a discriminatory manner, without any consideration to prior quantitative performance.62 In our view, the potential for such discrimination is contrary to the object and purpose of both the Safeguards Agreement, and the WTO Agreement. In this regard, the preamble of the Safeguards Agreement refers to the "need to clarify and reinforce the disciplines of GATT 1994" in the context of safeguards. We consider that the "disciplines of GATT 1994" surely include those providing for non-discrimination. In any event "the elimination of discriminatory treatment in international trade relations" is referred to explicitly in the preamble to the WTO Agreement. We further note that the preamble of the Safeguards Agreement also mentions that one of the objectives of the Safeguards Agreement is to "establish multilateral control over safeguards and eliminate measures that escape such control". We are of the view that non-application of Article XIII in the context of safeguards would result in tariff quota safeguard measures partially escaping the control of multilateral disciplines. This result would be contrary to the objectives set out in the preamble of the Safeguards Agreement.
7.50 For the above reasons, we find that the line pipe measure is subject to the provisions of Article XIII.
(b) The substance of Article XIII
7.51 Korea raises a number of claims under Article XIII. First, Korea claims that the United States violated the "general overarching requirement"63 of Article XIII:2 that a Member applying any import restriction "shall aim at a distribution of trade … approaching as closely as possible the shares which the various [exporting Members] might be expected to obtain in the absence of such restriction". Second, Korea claims that the United States violated the Article XIII:2(a) requirement to fix an overall quota wherever practicable, and the Article XIII:3(b) requirement to give public notice of the amount of that quota. Third, Korea claims that the United States failed to negotiate quotas with Members having a substantial interest in the product, contrary to Article XIII:2(d).
7.52 Article XIII:2 provides:
27 Dictionary of International Trade Terms, p. 157 (William S. Hein & Co., Inc.