|
|
espa�ol - fran�ais - portugu�s |
Search
|
CHILE - PRICE BAND SYSTEM AND SAFEGUARD MEASURES AB-2002-2 Report of the Appellate Body
WORLD TRADE ORGANIZATION
I. Introduction 1. Chile appeals certain issues of law and legal interpretations developed in the Panel Report, Chile -Price Band System and Safeguard Measures Relating to Certain Agricultural Products (the "Panel Report").1 2. The Panel was established on 12 March 2001 to consider a complaint by Argentina with respect to: (i) Chile's price band system for certain agricultural products; and (ii) Chile's provisional and definitive safeguard measures imposed on the same products.2 Before the Panel, Argentina claimed that Chile's price band system is inconsistent with Article II:1(b) of the General Agreement on Tariffs and Trade 1994 (the "GATT 1994") and Article 4.2 of the Agreement on Agriculture . Argentina also claimed that the safeguard measures imposed by Chile constitute a violation of Article XIX:1(a) of the GATT 1994 and certain provisions of the Agreement on Safeguards .
3. In the Panel Report, circulated to Members of the World Trade Organization (the "WTO") on 3 May 2002, the Panel found that Chile's price band system is inconsistent with Article 4.2 of the Agreement on Agriculture and Article II:1(b) of the GATT 1994.3 The Panel also found that Chile's safeguard measures on wheat, wheat flour and edible vegetable oils violated certain provisions of the Agreement on Safeguards and the GATT 1994.4 4. The Panel concluded that, to the extent Chile had acted inconsistently with the provisions of the GATT 1994, the Agreement on Agriculture and the Agreement on Safeguards, it had nullified or impaired the benefits accruing to Argentina under those Agreements.5 The Panel recommended that the Dispute Settlement Body (the "DSB") request Chile to bring its price band system into conformity with the Agreement on Agriculture and the GATT 1994. The Panel did not, however, make recommendations with respect to the safeguard measures challenged by Argentina.6 5. On 24 June 2002, Chile notified the DSB of its intention to appeal certain issues of law covered in the Panel Report and certain legal interpretations developed by the Panel, pursuant to paragraph 4 of Article 16 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (the "DSU"), and filed a Notice of Appeal pursuant to Rule 20 of the Working Procedures for Appellate Review (the "Working Procedures").7 On 4 July 2002, Chile filed its appellant's submission.8 On 19 July 2002, Argentina filed an appellee's submission.9 On the same day, Australia, Brazil, Colombia, Ecuador, the European Communities, Paraguay, the United States, and Venezuela each filed a third participant's submission.10
6. On 19 July 2002, the Appellate Body received communications from Japan and Nicaragua stating that they wished to attend the oral hearing in this appeal, although neither wished to file a written submission in accordance with Rule 24 of the Working Procedures.11 On 22 July 2002, the Appellate Body notified the participants and third participants that it was inclined to allow Japan and Nicaragua to attend the oral hearing as passive observers, if none of the participants or other third participants objected. No participant or third participant objected to Japan and Nicaragua attending the oral hearing. However, the European Communities considered that Japan and Nicaragua should be allowed to attend the oral hearing as third participants and not as passive observers. On 30 July 2002, the participants and third participants were informed that Japan and Nicaragua would be allowed to attend the oral hearing as passive observers. 7. The oral hearing was held on 6 and 7 August 2002.12 The participants and third participants presented oral arguments and responded to questions put to them by the Members of the Appellate Body Division hearing the appeal. 8. A description of Chile's price band system is contained in paragraphs 2.1 to 2.7 of the Panel Report. Nevertheless, we consider it useful, at this stage, to provide an overview of the operation of the price band system, in particular in the light of the amendment that Chile made to the price band system during the Panel proceedings.13
II. Background
9. The price band system was established under Chilean Law No. 18.525 on the Rules on Importation of Goods.14 The methodology for the calculation of the upper and lower thresholds of the price band system is set out in Article 12 of that law.15
10. At the second substantive meeting with the parties, Chile informed the Panel that Article 12 had been amended by Law 19.772, and submitted a copy of that law to the Panel.16 The amendment is dated 19 November 2001. It provides, in relevant part, that the combination of the price band duty and the ad valorem duty may not exceed the rate of 31.5 per cent ad valorem bound in Chile's WTO Schedule (referred to below as the "cap").17 Chile concedes that prior to the enactment of Law 19.772, the combination of the price band duty and the ad valorem duty did, at times, exceed Chile's bound rate.18 At the oral hearing before us, Chile explained that Law 19.772 was merely declaratory in nature because the total amount of duties that could be applied on products subject to the price band system had been subject to a tariff binding since the Tokyo Round. 11. The objective of Chile's price band system as stated in Article 12 of Law 18.525 is to " ensur[e] a reasonable margin of fluctuation of domestic wheat, oil-seed, edible vegetable oil and sugar prices in relation to the international prices for such products � .19 (footnotes omitted)
12. Price bands are calculated for each of the following product categories: (i) edible vegetable oils; (ii) wheat and wheat flour; and (iii) sugar.20
13. The total amount of duty that is applied to the products covered by the price band system consists of two components: (i) an ad valorem duty that reflects Chile's applied Most-Favoured Nation ("MFN") tariff rate; and (ii) a specific price band duty that is determined for each importation by comparing a reference price with the upper or lower threshold of a price band. 14. The ad valorem duty is the applied MFN rate which, under Chile's flat-tariff regime, is the same for all products. The MFN tariff rate bound by Chile in its WTO tariff schedule is 31.5 per cent. Chile has been reducing its applied MFN rates on an annual basis. The applied ad valorem rate in 2002 is 7 per cent.21 It is applied to the transaction value of the imported product to achieve the ad valorem duty for that product. 15. The specific duty (the price band duty) will be examined in the following subsections, where we discuss the determination of: (i) the upper and lower thresholds of the price bands; (ii) the weekly reference prices; and (iii) the calculation of specific price band duties for particular shipments.
16. The price bands provide upper and lower thresholds that are used to calculate the specific duty applicable to each importation of products subject to the price band system. 17. These price bands are determined on an annual basis through Decrees issued by the Executive.22 The bands that apply to wheat and wheat flour are determined for the period 16 December - 15 December23 and the band for edible vegetable oils corresponds to the period 1 November - 31 October.24 18. The upper and lower thresholds (that is, the ceiling and the floor prices) for each price band are determined in the following way:
19. The total amount of duty applicable is calculated by a customs agent who necessarily must be hired by the importer. The calculation is subject to revision by the customs authority.31 20. It should be noted that Chile's price bands are based on international market prices. Thus, over the long term, the upper and lower thresholds of the bands will fall when international prices fall and they will rise when those prices rise. The bands will be wider if prices fluctuate strongly.
21. The reference prices for each product category are determined on a weekly basis (every Friday for the following week) by the customs authorities, using the lowest relevant f.o.b. price observed, at the time of embarkation, in the foreign "markets of concern" to Chile.32 Thus, the weekly reference price will be the lowest f.o.b. price in any foreign "market of concern" during the previous week. The same weekly reference price applies to imports of all goods falling within the same product category, irrespective of the origin of the goods and regardless of the transaction value of the shipment.33 22. The determination of the reference price for a particular product category depends on the date of the bill of lading (more specifically, the week during which the goods are shipped). Thus, goods may arrive in Chile in different weeks, yet have the same import reference price applied to them if the dates of shipment from the exporting country fall within the same week. Similarly, goods may arrive in Chile in the same week and have different reference prices applied to them if the dates of shipment fall within different weeks. 23. There is no Chilean legislation or regulation, which specifies the international "markets of concern" to be used to calculate the applicable reference prices.34 It seems, however, that the markets and qualities chosen are intended to be representative of products actually "liable" to be imported to Chile.35 24. In the case of wheat, in calculating the reference price, Chile uses the lowest f.o.b. price for that product in "any market of concern". It is not clear whether Chile will use the lowest f.o.b. price for any quality of wheat as a reference price for all qualities of wheat.36 25. With respect to edible vegetable oils, Chile stated before the Panel that "the Reference Price has [generally] coincided with the price of crude soya bean oil, but in some cases it has corresponded to that of crude sunflower-seed oil."37 From the above, it is not clear whether the price for crude soya bean oil or crude sunflower-seed oil will be used as a reference price for all other edible vegetable oil products, including more expensive qualities of edible vegetable oils. 26. Contrary to the prices used for calculating the price bands, the lowest f.o.b. prices found in any market of concern and selected as reference prices are not adjusted for "usual import costs", and thus not converted to a c.i.f. basis.38 We also note that the reference price will be the lowest f.o.b. price in any market of concern, and thus will not be representative of an average of prices found in any given foreign market of concern.
27. The specific duty is levied on each shipment of a product subject to the price band system. The amount of the specific duty is determined once a week by comparing the weekly reference price with the upper and lower thresholds of the annually determined price band relating to the relevant product. 28. The specific duty, or rebate, is applied per tonne of the product as of the date of exportation (not importation) to Chile, regardless of the product's origin and of its transaction value. 29. The methodology used to calculate the applicable specific duty is the following:
30. In order not to impose duties in excess of the tariff rate bound in Chile's WTO schedule, the customs authorities would have to ensure that the combination of the applied ad valorem duty and the specific price band duty does not exceed 31.5 per cent of the transaction value of the shipment in question.
1 WT/DS207/R, 3 May 2002.
2 WT/DS207/3, 23 May 2001. We note that Chile's price band
system also applies to sugar. In its request for establishment of a Panel,
Argentina challenges Chile's price band system generally without referring to
any specific product categories. We note that the Panel's analysis of Chile's
price band system covers the wheat, wheat flour and edible vegetable oil bands,
but does not cover the sugar band.
3 Panel Report, para 8.1(a).
4
Ibid., para 8.1(b).
5
Ibid., para. 8.2.
6 Panel Report, para. 8.3. The Panel noted in paragraph 7.121
of its Report that "� the Panel received a communication from Chile stating that
the safeguard measures on wheat and wheat flour had been terminated as of 27
July 2001" and that it was later "informed by Chile that the safeguard measure
on vegetable oils would be terminated as of 26 November 2001." We note that
Chile did not appeal the Panel's findings that its safeguard measures were
inconsistent with certain provisions of the GATT 1994 and the Agreement on
Safeguards.
7 WT/DS207/5, 26 June 2002.
8 Pursuant to Rule 21(1) of the Working Procedures.
9 Pursuant to Rule 22 of the Working Procedures.
10 Pursuant to Rule 24 of the Working Procedures.
11 Japan and Nicaragua were third parties in the Panel
proceedings.
12 Pursuant to Rule 27 of the Working Procedures.
13 We are, of course, mindful of the scope of appellate review
pursuant to Article 17.6 of the DSU.
14 Consolidated version of Law 18.525, Official Journal of the
Republic of Chile, 30 June 1986 as amended by Law No. 18.591, Official Journal,
3 January 1987 and by Law No. 18.573, Official Journal, 2 December 1987. Panel
Report, footnote 5 to para. 2.2. See Annex CHL-2 to Chile's First Written
Submission to the Panel. Chile submits, and the Panel Report states, that a
price band system has been in effect since 1983. See Panel Report, paras. 7.97
and 7.139.
15 Article 12 of Law 18.525 states as follows:
For the sole purpose of ensuring a reasonable margin
of fluctuation of domestic wheat, oil-seeds, edible vegetable oils and
sugar prices in relation to the international prices for such products,
specific duties are hereby established in United States dollars per
tariff unit, or ad valorem duties, or both, and rebates on the
amounts payable as ad valorem duties established in the Customs
Tariff, which could affect the importation of such goods.
The amount of these duties and rebates, established
in accordance with the procedure laid down in this Article, shall be
determined annually by the President of the Republic, in terms which,
applied to the price levels attained by the products in question on the
international markets, make it possible to maintain a minimum cost and a
maximum import cost for the said products during the internal marketing
season for the domestic production.
For the determination of the costs mentioned in the
preceding paragraph, the monthly average international prices recorded
in the most relevant markets during an immediately preceding period of
five calendar years for wheat, oil-seed and edible vegetable oils and
ten calendar years for sugar shall be taken into consideration. These
averages shall be adjusted by the percentage variation of the relevant
average price index for Chile's foreign trade between the month to which
they correspond and the last month of the year prior to that of the
determination of the amount of duties or rebates, as certified by the
Central Bank of Chile. They shall then be arranged in descending order
and up to 25 per cent of the highest values and up to 25 per cent of the
lowest values for wheat, oil-seed and edible vegetable oils and up to 35
per cent of the highest values and up to 35 per cent of the lowest
values for sugar shall be removed. To the resulting extreme values there
shall be added the normal tariffs and costs arising from the process of
importation of the said products. The duties and rebates determined for
wheat shall also apply to meslin and wheat flour. In this last case,
duties and rebates established for wheat shall be multiplied by the
factor 1.56.
The prices to which these duties and rebates are
applied shall be those applicable to the goods in question on the day of
their shipment. The National Customs Administration shall notify these
prices on a weekly basis, and may obtain information from other public
bodies for that purpose.
16 See Panel Report, para. 2.3. The Panel was established 12
March 2001, more than six months before the amendment was enacted.
17 Article 2 of Law No. 19.772 added the following paragraph
to Article 12 of Law 18.525:
The specific duties resulting from the application of
this Article, added to the ad valorem duty, shall not exceed the
base tariff rate bound by Chile under the World Trade Organization for
the goods referred to in this Article, each import transaction being
considered individually and using the c.i.f. value of the goods
concerned in the transaction in question as a basis for calculation. To
that end, the National Customs Service shall adopt the necessary
measures to ensure that the said limit is maintained.
18 Chile's appellant's submission, para. 3 and footnote 2 in
which Chile notes "[r]ecognizing that Chile � ha[s] breached those WTO
commitments, Chile passed new legislation � to avoid the possibility of
recurrence of such a breach of the binding."
19 Article 12 of Law 18.525. Panel Report, para. 7.40, referring
to Chile's response to Question 9(f) of the Panel.
20 The following specific HTS subheadings are covered by the
price band system: In the wheat or meslin product category, HTS subheading
1001.9000. In the wheat or meslin flour product category, HTS subheading
1101.0000. In the sugar product category, HTS subheading 1701.1100 cane sugar,
1701.1200 beet sugar, 1701.9100 sugar containing added flavouring or colouring
matter, and 1701.9900 other. In the edible vegetable oils product category, HTS
subheading 1507.1000 crude soya-bean oil, 1507.9000 other crude soya-bean oil,
1508.1000 crude ground-nut oil, 1508.9000 other crude ground-nut oil, 1509.1000
virgin oil, 1509.9000 other, 1510.0000 other oils, 1511.1000 crude palm oil,
1511.9000 other crude palm oil, 1512.1110 crude sunflower-seed oil, 1512.1120
crude safflower oil, 1512.1910 other sunflower-seed oil, 1512.1920 other
safflower oil, 1512.2100 crude cotton-seed oil, 1512.2900 other crude
cotton-seed oil, 1513.1100 crude coconut (copra) oil, 1513.1900 other crude
coconut (copra) oil, 1513.2100 crude palm kernel or babassu oil, 1513.2900 other
crude palm kernel or babassu oil, 1514.1000 rapeseed, colza or mustard oil,
1514.9000 other, 1515.2100 maize (corn) oil, 1515.2900 other maize (corn) oil,
1515.5000 sesame oil, and 1515.9000 other sesame oil.
21 Chile intends to achieve an applied rate of zero in the year
2010.
22 Panel Report, para. 2.4. See first written submission by
Argentina to the Panel, footnotes 12 and 14 and Exhibits ARG-5 and ARG-7.
However, the most recent decrees contained in the Panel record date from the
year 1999.
23 The price band for wheat is used, however, to calculate the
specific duty or rebate, which is then multiplied by a factor of 1.56 to obtain
the specific duty or rebate for wheat flour. See Article 12 of Law 18.525,
Argentina's first written submission to the Panel, para. 6 and footnote 7
thereto, and Chile's first written submission to the Panel, para. 15 and
footnote 13.
24 This overview does not cover the price band for sugar.
25 "The calculations for each price made are made once a year,
once all of the necessary elements are available, in other words, usually
starting around February, as soon as the relevant inflation index calculated by
the Central Bank of Chile on the basis of national foreign trade data is
available." Chile's response to question 10(a) of the Panel.
26 We note, however, that edible vegetable oils cover 25 tariff
lines.
27 Panel Report, para. 2.6. Chile's response to Question 9(e) of
the Panel. However, the Secretariat Report in Chile's Trade Policy Review states
that the international prices used for edible oils is the f.o.b. price of raw
soya in New York. WT/TPR/S/28, Box III.1, p. 46. Argentina states in its first
written submission to the Panel that the price used is that of crude soya oil
f.o.b. New York.
28 Law No. 18.525 states that the average prices shall be
adjusted according to the percentage variation in the average price index
relevant for Chile's foreign trade between the corresponding month and the last
month in the year in which the specific duties are determined. At the oral
hearing, Chile further explained that this price index also reflects domestic
inflation and foreign exchange rate fluctuations.
29 Chile's first submission to the Panel, para. 15(4).
30 Panel Report, para. 7.44.
31 Panel Report, para. 6.15. Chile's response to questioning at
the oral hearing.
32 The reference price is thus unrelated to the transaction
price of the particular shipment.
33 Chile's response to question 9(a) of the Panel.
34 Panel Report, para. 7.44. Chile's response to questioning at
the oral hearing.
35 Chile's response to questioning at the oral hearing.
36 See Argentina's first written submission to the Panel, para.
16. See also Panel Report, para. 7.44. Chile's response to questioning at the
oral hearing.
37 These edible vegetable oils are identified by reference to 25
tariff lines. There does not seem to be any further adjustment of the prices for
crude soya bean oil or crude sunflower-seed oil to the products covered by the
other tariff lines relating to other edible vegetable oil products. Chile's
response to question 43(b) of the Panel. There is no "mark up" for edible
vegetable oil products of "outstanding quality". Chile's response to question 44
of the Panel.
38 Chile's response to question 9(d) of the Panel. Panel Report,
para. 7.39.
39 Chile's bound MFN tariff rate is at 31.5 per cent.
40 Panel Report, para. 4.20.
41 If the weekly reference price is within the price
band, only the ad valorem duty rate applies.
To continue with
III. Arguments of the Participants and Third
Participants |
|