WORLD TRADE WT/DS56/AB/R
27March 1998
ORGANIZATION(98-1190)
Appellate Body
ARGENTINA -MEASURES AFFECTING IMPORTS OFFOOTWEAR,
TEXTILES, APPAREL AND OTHER ITEMS
AB-1998-1
Report oftheAppellate BodyWT/DS56/AB/R
Page1
WORLD TRADE ORGANIZATION
APPELLATE BODY
Argentina -Measures Affecting Imports of
Footwear, Textiles, Apparel andOther
Items
Argentina, Appellant
United States, Appellee
European Communities, Third ParticipantAB-1998-1
Present:
El-Naggar, Presiding Member
Feliciano, Member
Matsushita, Member
I. Introduction: Statement oftheAppeal
1. Argentina appeals from certain issues oflawcovered andlegal interpretations developed in
thePanel Report, Argentina -Measures Affecting Imports ofFootwear, Textiles, Apparel andOther
Items1(the"Panel Report"). ThePanel wasestablished toconsider acomplaint bytheUnited States
against Argentina concerning certain measures maintained byArgentina affecting imports oftextiles,
apparel, footwear andother items, inparticular, measures imposing specific duties onvarious textile,
apparel orfootwear items allegedly inexcess ofthebound rateof35percentadvalorem provided
inArgentina 'sSchedule LXIV2andmeasures imposing astatistical taxof3percentadvalorem on
imports fromallsources otherthanMERCOSUR countries. Therelevant factual aspects ofArgentina 's
import regime fortextiles, apparel andfootwear aredescribed inthePanel Report, inparticular, at
paragraphs 2.1to2.21.
2. Argentina approved theresults oftheUruguay Round ofmultilateral tradenegotiations through
LawNo.24.425, promulgated on23December 1994, andthebound rateof35percentadvalorem
included initsSchedule LXIV became effective on1January 1995. Thisbinding wasgenerally
applicable toimports, withanumber ofexceptions thatarenotrelevant inthiscase. Inparallel,
1WT/DS56/R, 25November 1997.
2SeeArgentina'sSchedul eLXIV, FinalActEmbodyingtheResultsoftheUruguayRoundofMultilateralTradeNegotiations,
done atMarrakesh, 15April 1994.WT/DS56/AB/R
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Argentina maintained aregime ofMinimum Specific Import Duties ("DIEM")3asfrom1993inrespect
oftextiles,clothingandfootwearthroughaseriesofresolutionsanddecreescommencingwithResolution
No.811/93 of29July19934(concerning textiles andapparel) andResolution No.1696/93 of28
December 19935(concerning footwear), withsubsequent extensions andmodifications.6TheDIEM
were revoked inrespect offootwear on14February 1997 through Resolution No.225/97 ofthe
Argentine Ministry ofEconomy andPublic Works andServices, andthePanel decided nottoreview
theconsistency withtheWTOAgreement oftheDIEM withrespect tofootwear.7Inaddition, Argentina
imposed, from1989 to1994, a3percentadvalorem taxwhich related tothecollection ofstatistical
information bytheArgentine customs service regarding imports andexports.8Through Presidential
Decree No.2277/94 adopted on23December 19949,thetaxwasreduced tozeropercent, butwas
setagain at3percenton22March 1995 pursuant toPresidential Decree No.389/95 inrespect of
certain import transactions. ThetaxissetoutinArgentina 'sSchedule LXIV, under theheading "other
duties andcharges", at3percentadvalorem .
3. ThePanel Report wascirculated totheMembers oftheWorld Trade Organization (the"WTO")
on25November 1997. ThePanel reached thefollowing conclusions:
(a) theminimum specific duties imposed byArgentina ontextiles
andapparel areinconsistent withtherequirements ofArticle II
ofGATT;
(b) thestatistical taxofthree percentadvalorem imposed by
Argentina onimports isinconsistent withtherequirements of
Article VIIIofGATT.10
3InSpanish, Derechos deImportación Específicos Mínimos .
4Boletín Oficial delaRepública Argentina ,No.27.692 of2August 1993.
5Boletín Oficial delaRepública Argentina ,No.27.797 of30December 1993.
6Asfurther described inPanel Report, paras. 2.7-2.18, these extensions andmodifications arefound in:Presidential
Decree No.2275/94 of23December 1994, Boletín Oficial delaRepública Argentina ,No.28.050 of30December 1994;
ResolutionNo.304/95 (textilesandapparel)and305/95 (footwear)oftheMinistryofEconomy andPublicWorksandServices
of22September 1995; Presidential Decree No.998/95 of28December 1995, Boletín Oficial delaRepública Argentina ,
No.28.301 of29December 1995; Resolution Nos. 103/96 of6September 1996 and23/97 of7January 1997 oftheMinistry
ofEconomy andPublic Works andServices, Boletín Oficial delaRepública Argentina ,No.28.561 of10January 1997
(footwear); andResolution Nos. 299/96 of20February 1996, 22/97 of7January 1997, Boletín Oficial delaRepública
Argentina ,No.28.561 of10January 1997 and597/97 of14May1997 oftheMinistry ofEconomy andPublic Works and
Services, Boletín Oficial delaRepública Argentina ,No.28.650 of20May 1997 (textiles andapparel).
7Panel Report, para. 6.15.
8Boletín Oficial delaRepública Argentina ,No.26.652 of12June 1989.
9Boletín Oficial delaRepública Argentina ,No.28.050 of30December 1994.
10Panel Report, para. 7.1.WT/DS56/AB/R
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ThePanel made thefollowing recommendation:
ThePanel recommends thattheDispute Settlement Body request
Argentina tobring itsmeasures intoconformity withitsobligations
under theWTO Agreement.11
4. On21January1998,ArgentinanotifiedtheDisputeSettlementBody12(the"DSB")ofitsintention
toappeal certain issues oflawcovered inthePanel Report andlegalinterpretations developed bythe
Panel, pursuant toparagraph 4ofArticle 16oftheUnderstanding onRules andProcedures Governing
theSettlement ofDisputes (the"DSU"), andfiledaNotice ofAppeal withtheAppellate Body, pursuant
toRule20oftheWorking Procedures forAppellate Review .On2February 1998, Argentina filed
anappellant 'ssubmission.13On16February 1998, theUnited States filedanappellee 'ssubmission
pursuant toRule22oftheWorking Procedures forAppellate Review .Thatsame day,theEuropean
Communities filedathird participant 'ssubmission pursuant toRule24oftheWorking Procedures
forAppellate Review .Theoralhearing, provided forinRule27oftheWorking Procedures forAppellate
Review ,washeldon23February 1998. Attheoralhearing, theparticipants andthethirdparticipant
presented theirarguments andanswered questions from theDivision oftheAppellate Body hearing
theappeal.
II. Arguments oftheParticipants andtheThird Participant
A. Claims ofError byArgentina -Appellant
5. ArgentinaappealscertainaspectsofthelegalfindingsandconclusionsofthePanel.Withrespect
toArticleIIoftheGATT1994,ArgentinarequeststhatwereversethePanel'sfindingsinparagraph6.32
anddeclare thatthePanel erred inconcluding thatArgentina hadacted inconsistently withArticle II
"inallcases" inwhich Argentina applied theDIEM. With respect tothestatistical tax,Argentina
asksustoreverse thePanel'sfindings inparagraph 6.80ofthePanel Report. Finally, Argentina makes
certain procedural claims under Article 11oftheDSU.
11Panel Report, para. 7.2.
12WT/DS56/8, 21January 1998.
13Pursuant toRule 21(1) oftheWorking Procedures forAppellate Review.WT/DS56/AB/R
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6. Withrespect tothePanel'sfinding inparagraph 6.32ofthePanel Report concerning Article II
oftheGATT 1994, Argentina submits thatthePanel erred inlawininterpreting theobligation set
outinArticle II:1(a) andII:1(b) oftheGATT 1994 andtheUnderstanding ontheInterpretation of
Article II:1(b) oftheGATT 1994 asprohibiting aMember from applying atypeofdutyother than
thatwhich isbound, without taking intoaccount whether thelevel ofprotection ensuing from the
application ofthatdutyis,orisnot,higher thanthebound levelofprotection.
7. According toArgentina, aninternational legalobligation maybederived onlyfromaformal
source creating international law. Asregards theWTO, theonlyobligations bywhich Members are
bound arethosewhich flowfromtheMarrakesh Agreement Establishing theWorld Trade Organization14
(the"WTO Agreement ")andinstruments agreed uponunder itsprovisions, aswellasamendments under
Article Xandauthoritative interpretations under Article IX.There havebeennoamendments under
Article Xnoranyauthoritative interpretations under Article IX.Therelevant provision intheWTO
Agreement isArticle IIoftheGATT 1994andtheUnderstanding ontheInterpretation ofArticle II:1(b)
oftheGATT 1994.
8. Argentina asserts thatArticle IIoftheGATT 1994 must beinterpreted inconformity with
Articles 31and32oftheVienna Convention ontheLawofTreaties15(the"Vienna Convention ").The
correct interpretation ofArticle IIoftheGATT 1994should bebased ontheactual textofArticle II,
inparticular paragraphs 1(a)and1(b),andontheUnderstanding ontheInterpretation ofArticle II:1(b)
oftheGATT 1994,aswellasonGATT practice. ThetextsofArticle II:1(a) andII:1(b) should be
readinconjunction witheachother. Article II:1(a) laysdown ageneral obligation, andArticle II:1(b)
defines thescope ofthatobligation.
9. InArgentina 'sview, thePanel goes beyond theGATT 1994 ingiving an"extensive"
interpretation ofthescope oftheobligation, thereby adding requirements thatarenotprovided for
intheGATT 1994 itself. Thecommitment toaccord "treatment nolessfavourable" does not
automatically imply anobligation toapply a"specific typeofduty". Toassimilate theinterpretation
ofthe"duty setforthandprovided intheSchedule" withthenotion of"bound onlyadvalorem "and
toinferthatchanging thisresults in"lessfavourable" treatment notonlyfinds nosupport inthetext
oftheprovisions, butisalsonotsupported bytheUnderstanding ontheInterpretation ofArticle II:1(b)
oftheGATT 1994.Theobject andpurpose ofArticle II:1(a) and(b)canonlybetoaccord treatment
14Done atMarrakesh, Morocco, 15April 1994.
15Done atVienna, 23May 1969, 1155 U.N.T.S. 331; 8International Legal Materials 679.WT/DS56/AB/R
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nolessfavourable thanthatprovided forintheNational Schedule. Lessfavourable treatment isaccorded
when adutyexceeding thatsetforth intheNational Schedule isapplied.
10. Itisfurther argued byArgentina thatinArticle IIoftheGATT 1994, thebound dutyrepresents
aceiling onthelevelofprotection; thelegalobligation deriving from thisArticle isnottoexceed
thesaidceiling orbound maximum levelofprotection; andMembers arefreetochoose theformor
typeofdutyapplied provided themaximum levelofprotection ofthesaidbinding isnotexceeded.
Thus, adifference intheformofdutyapplied doesnotnecessarily constitute aviolation ofthebound
level.
11. Argentina submits thatthePanel hassourced thealleged obligation toapply atypeofduty
identical tothatrecorded intheNational Schedule in"pastGATT practice" andnotinaruleorprovision
contained inArticle IIoftheGATT 1994ortheUnderstanding ontheInterpretation ofArticle II:1(b)
oftheGATT 1994.ThePanel erred inlawininterpreting the"legal history andexperience" as
mandatory "practice", andthissubsequently ledtotheerrorofplacing itonthesamefooting as"other
decisions oftheCONTRACTING PARTIES oftheGATT 1947".16ThePanel canonlyhavearrived
atitsconclusion thatthere isanobligation beyond theliteral meaning ofthetextbymeans of
interpretation. Interms of"uniformity", "undisputed nature", "repetition" and"continuity", Argentina
stresses that"GATT practice" isdeficient. Certain GATT working party reports andpanel reports,
including those cited bythePanel, arecontradictory precedents which, incertain cases, leadtoan
interpretation different from thatadopted bythePanel itself.
12. Argentina submits thatthePanel concluded thatArgentina hadviolated Article IIbyapplying
theDIEM afterexamining only12417tariff linesoutof940tariff linesrelevant tothisdispute. The
Panel, therefore, erred inlawinconsidering thatArgentina infringed itsobligations under Article II
oftheGATT 1994 inallcases inwhich itapplied theDIEM.
13. Wearealsoasked toreverse thePanel'sfinding inparagraph 6.80ofthePanel Report that
thestatistical taxof3percentadvalorem isinviolation ofArticle VIII:1(a) oftheGATT 1994. The
Panel issaidtohaveerred infailing totakeintoaccount Argentina 'sobligations totheInternational
Monetary Fund (the"IMF") initsinterpretation ofArticle VIIIoftheGATT 1994. Argentina contends
16Paragraph 1(b)(iv) ofthelanguage ofAnnex 1Aincorporating theGATT 1994 intotheWTO Agreement .
17Thisincludes evidence withregard tosixtariff linesinthedocumentation submitted bytheUnited States prior tothe
second meeting withthePanel. WenotethatArgentina challenges thePanel'sacceptance ofthisevidence under Article 11
oftheDSU. SeePartVIofthisReport.WT/DS56/AB/R
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thatitsagreement withtheIMFincludes anundertaking toimpose ataxintheform ofastatistical
tax.Thisundertakingiscontainedinadocumententitled"MemorandumonEconomicPolicy"18,referred
tobyArgentina asa"Memorandum ofUnderstanding" between Argentina andtheIMF. Argentina
asserts that,byitsacquiescence, theUnited States helped tocreate Argentina 'sobligation withthe
IMF, andtheUnited States cannot nowdenythebinding nature, i.e.itslegaleffects withregard to
Article VIIIoftheGATT 1994, ofthatobligation.
14. Itisalsosubmitted byArgentina thatthePanel disregarded itsdutyunder Article 11ofthe
DSUbynotmaking anobjective assessment ofthematter before it.Paragraph 5.3ofthePanel Report
ignores anobvious factandappears tocontradict allthereasons given bythePanel regarding burden
ofproof when dealing withthematter oftheDIEM. ThePanel'sconclusion thatthestatistical tax
wasinconsistent withArticle VIIIoftheGATT 1994 doesnotmeet therequirement laiddown in
Article 12.7oftheDSUthatapanel report shallsetout"thefindings offact,theapplicability ofrelevant
provisions andthebasicrationale behind anyfindings andrecommendations thatitmakes." ThePanel's
failure toaccede totherequest bytheUnited States toconsult theIMFregarding theexistence ofthis
obligation ledtoanother error inlawbecause thePanel, ineffect, ignored relevant opinions thatcould
havehelped toform amore complete judgement.
15. InArgentina 'sview, thePanel alsoerred inlawbyexcluding fromitsconsideration subsequent
legislative developments --namely, theAgreement Between theInternational Monetary Fund andthe
World Trade Organization (the"Agreement Between theIMFandtheWTO")drawn uponthebasis
oftheDeclaration ontheContribution oftheWorld Trade Organization toAchieving Greater Coherence
inGlobal Economic Policymaking (the"Declaration onCoherence ")--andbyreaching itsconclusion
onthestatistical taxsolely onthebasis ofArticle VIIIoftheGATT 1994. Argentina argues thatthe
interpretation oftheAgreement Between theIMFandtheWTOiscovered bytheDSUasitisalegislative
development intheterms ofArticle V.1oftheWTO Agreement ,andtheWTO Agreement isincluded
inAppendix 1oftheDSU. Argentina asserts thatunder paragraph 5oftheDeclaration onCoherence ,
theWTO istocooperate withtheIMFandshould avoid "theimposition ongovernments ofcross-
conditionality oradditional conditions". IftheDeclaration onCoherence hadbeentaken intoaccount,
thePanel would have hadtoconsider theexistence ofacross-obligation within themeaning of
paragraph5ofthatDeclaration.AccordingtoArgentina,thisismadeevenmoreexplicitinparagraph10
oftheWTO-IMF Agreement .Thus, theissueatstakeisnotoneofmaking exceptions, butofinterpreting
theWTO Agreement inthelightofitscontent.
18Exhibit StotheUnited States 'firstwritten submission tothePanel.WT/DS56/AB/R
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16. Argentina states thatthePanel hasplaced Article VIIIoftheGATT 1994 ina"legal limbo",
isolated from related agreements andother relevant rules andprinciples ofpublic international law.
ThePanel undertook onlyapartial analysis ofthearguments putforward byArgentina, disregarded
subsequent legislative developments, anddidnottakeintoaccount previous practice. Referring to
theDirector-General 'sReport onimplementation oftheagreements between theWTO andtheIMF
andtheWorld Bank19andthediscussions onthisReport attheGeneral Council meeting of
10December 1997, Argentina argues thatthePanel should haveconsidered theneedtoensure that
thedecisions adopted bythesebodies aremutually supportive inthecontext oftheprovisions endorsed
intheDeclaration onCoherence .
17. Itisfurther claimed byArgentina thatthePanel didnotcomply withitsobligation under
Article 11oftheDSUontwocounts. First, thePanel accepted certain evidence submitted bytheUnited
States tothePanel on21July1997, twodaysbefore thesecond meeting oftheparties (tendaysafter
theexpiry ofthetime-limit forsubmitting therespective rebuttals). Argentina states thatitobjected
totheadmission ofsuchevidence intotherecord anddrewattention totheimpossibility ofresponding
totheevidence within thetwo-week period granted bythePanel. Thisevidence related totransactions
carried outusing themanual customs clearance system andnottheMARIA computerized system.
Thenames oftheimporters, customs identification numbers and,sometimes, thedescription ofthe
items imported weredeleted, thereby making itimpossible toverify anyoftheinformation submitted
within theperiod granted bythePanel. ForArgentina, thePanel'sposition isdifficult toreconcile
with"dueprocess", considering thatthesubmission ofevidence afterthetime-limit hasexpired alters
thebalance ofrights andobligations during examination ofthecaseand,combined withtheimpossibility
ofrebuttal within atighttime-limit, disadvantages oneparty, inthiscaseArgentina. Second, thePanel
failed tofulfilitsobligation torender anobjective assessment ofthematter bynotacceding totherequest
ofbothparties tothedispute toseekinformation andconsult withtheIMFsoastoobtain itsopinion
onspecific aspects ofthestatistical tax.TheDSU gives panels different toolstofulfil theobligation
under Article 11,andoneoftheseistherightto"seek information" provided inArticle 13oftheDSU.
ThePanel didnotmake useofthismeans, which would haveallowed ittoverify theinformation
provided bytheparties, which information could havealtered thePanel'sconclusion regarding the
statistical tax.Argentina further argues thatthePanel failed tofulfil ageneral obligation governing
procedure inanyinternational dispute, namely toelucidate afactorinvestigate anobjective claim that
bothparties tothedispute haveexpressed asaconcern, inorder toestablish thetruthregarding the
point raised.
19Agreements between theWTO andtheIMFandtheWorld Bank, Report bytheDirector-General onImplementation
oftheAgreements, WT/GC/W/68, 13November 1997. Annex ItoArgentina 'sappellant 'ssubmission.WT/DS56/AB/R
Page8
B. Arguments bytheUnited States -Appellee
18. TheUnited States endorses thefindings andconclusions ofthePanel inparagraph 6.32and
argues thatthePanel correctly concluded, onthebasis oftheevidence before it,thattheapplication
oftheDIEM violated Article IIoftheGATT 1994. TheUnited States alsoendorses paragraph 6.80
ofthePanel Report andargues thatthePanel acted consistently withArticle 11oftheDSU.
19. Withrespect toArticle IIoftheGATT 1994, theUnited States believes thatthePanel correctly
found thatArgentina ’sspecific duties areinconsistent withitsadvalorem binding, andthatthePanel's
interpretation ofArticle IIisconsistent withprinciples ofpublic international law,previous decisions
oftheAppellate Body andprior GATT practice, andgives fullmeaning tothetextofthisprovision.
20. TheUnited States contends thatoneofthefundamental objectives oftheGATT 1994, expressed
inthepreamble, istoachieve "thesubstantial reduction oftariffs". Toensure thattariff concessions,
oncemade, havethefullforce andeffect intended, Article IIprovides thatdutyratesidentified ina
WTO Member ’sSchedule aremaximum limits thatmaynotbeexceeded. Thisismade clear in
Article II:1(b) oftheGATT 1994. Article II:1(a) goesfurther; itobligates WTO Members toprovide
thequality of"treatment" provided forinitsSchedule. Paragraphs (a)and(b)ofArticle II:1together
guarantee WTO Members thattheirexports willnotbesubjected toduties greater thantheamount
establishedinrelevantSchedules.TheyalsoguaranteethatWTOMemberswillnotbeabletomanipulate
theadministration ofduties soastocollect excessive tariffs. Inthisway,Article IIensures thesecurity
andpredictability oftariff concessions.
21. Abasic submission oftheUnited States isthatArgentina ’sDIEM afford "treatment less
favourable" inviolation ofArticle IIbecause theyimpair thevalue oftheconcessions Argentina made
during theUruguay Round. TheDIEM necessarily havethepotential toexceed Argentina ’sbound
rateof35percent advalorem forsome covered items inthefuture, inviewofthefundamental difference
between advalorem andspecific duties, thedisparate ways eachaffects imported merchandise and
themanner inwhich Argentina fixestheratesofitsspecific duties.
22. According totheUnited States, Argentina incorrectly equates therestriction against imposing
duties inexcess ofabound rateunder Article II:1(b) withthebroader requirement ofArticle II:1(a)
toafford WTO Members "treatment nolessfavourable" inrespect ofgoods bound inaSchedule.
IfArgentina 'sviewweretobeaccepted, the"treatment nolessfavourable" requirement ofArticle II:1(a)
would mean nothing more thanacommitment torefrain from imposing duties inexcess ofaboundWT/DS56/AB/R
Page9
rate. Intheview oftheUnited States, suchareading would reduce Article II:1(a) to"redundancy
orinutility" contrary totheAppellate Body'sstatements inUnited States -Standards forReformulated
andConventional Gasoline .20Inadvancing itsinterpretation ofitsSchedule, Argentina essentially
seeks toachieve whatother WTO Members wererequired tonegotiate forduring theUruguay Round.
23. Incontrast, thePanel’sinterpretation gives effect toallrelevant parts oftheGATT 1994.
Itgives effect notonlytoArticle II:1(b) --i.e.,bydetermining thatArgentina ’sspecific duties, as
applied, exceed Argentina ’sbound rate--butalsotoArticle II:1(a), byacknowledging thattheinevitable
potential toexceed thebound rateinherent inArgentina ’stariffregime affords lessfavourable treatment
tolow-price future imports. Italsopreserves thevalue ofSchedules ofother WTO Members that
reserved theright toapply bothadvalorem andspecific duties. ThePanel’sdecision thusassures
the"security andpredictability" thatArticle 3.2oftheDSU demands. ThePanel gaveproper weight
toprior GATT practice. IntheviewoftheUnited States, theprinciples established inanumber of
GATT decisions clearly support thePanel’sdecision.
24. TheUnited States contends thatthePanel correctly concluded thatArgentina failed tomeet
itsburden ofrebutting thepresumption raised bytheUnited States thatallofArgentina 'sspecific duties
ontextiles andapparel violate Article IIoftheGATT 1994 andthatArgentina should conform the
measures imposing them totherequirements ofArticle II.
25. TheUnited States seesnomerit inArgentina 'sargument thatthePanel didnotadequately
consider itscontention thattheIMFrequires Argentina tolevythestatistical taxandthatthispurported
requirement establishes anexception totheprohibition contained inArticle VIIIoftheGATT 1994.
Argentina failed toestablish thattheIMFeverimposed orapproved sucharequirement, andthisfailure
topresent therequisite evidence cannot beremedied byArgentina onappeal. Moreover, there isno
provision intheWTO Agreement thatwould create theexception toArticle VIIIthatArgentina seeks.
Thefiscal character ofthestatistical taxrunscounter toArticle VIII, which prohibits the"taxation
ofimports ...forfiscal purposes." Thisprohibition isunqualified. Argentina ’sstatistical taxisnot
anexchange action andisthusoutside thescope ofArticle XVoftheGATT 1994. TheAgreement
between theIMFandtheWTO doesnotaddress, anddoesnotaffect, thesubstantive obligations of
Members under theWTOAgreement ,ortheextent towhich theIMFmayauthorize anexchange control
action thatisinconsistent withaprovision oftheGATT 1994. Furthermore, theDeclaration onthe
Relationship oftheWorld Trade Organization withtheInternational Monetary Fund (the"Declaration
20Adopted 20May 1996, WT/DS2/AB/R, p.23.WT/DS56/AB/R
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ontheRelationship oftheWTO withtheIMF")doesnotestablish anyexception toArticle VIIIofthe
GATT 1994. Thesame istruefortheDeclaration onCoherence .
26. Withrespect toArticle 11oftheDSU, theUnited States submits thattherealquestion Argentina
raises isnotwhether thePanel hasfailed todischarge itsdutyunder Article 11,butwhether thePanel
abused itsdiscretion inaccepting theadditional examples from theUnited States bycausing such
significant prejudice astodeny Argentina fundamental fairness ordueprocess. TheUnited States
believes thatthePanel didnotabuse itsdiscretion inadmitting suchadditional examples which were
submitted aspartofaclaim within thePanel’sterms ofreference andaspartofthenatural process
ofprogressively clarifying theparties ’positions. Furthermore, Argentina didnotdemonstrate that
ithassuffered prejudice fromthePanel’sacceptance oftheevidence inquestion. Atanyrate,exclusion
oftheevidence Argentina nowchallenges would notaltertheoutcome ofthedispute.
27. TheUnited States alsocontends thatthePanel didnotabuse itsdiscretion innotconsulting
withtheIMF. Given thatArgentina didnothaveplausible arguments onthelaworfacts, thePanel
wasunder noobligation toinquire withtheIMF. Furthermore, panels haveconsiderable discretion
indetermining howtheywould proceed, andtheWTO hasnotestablished guidelines regarding factual
discovery.
C. Arguments bytheEuropean Communities -Third Participant
28. With respect toArticle IIoftheGATT 1994, theEuropean Communities submits thatitwas
notnecessary, inorder toresolve thecasebefore it,forthePanel tohave made thefinding in
paragraph 6.32ofthePanel Report andthatviolation ofArticle IIoftheGATT 1994exists inrespect
ofallimport transactions where duties areimposed which exceed thebinding. Argentina ’sadmitted
methodology usedtoestablish theDIEM leadstoduties inexcess ofthebindings forallproducts priced
below the"representative price". Withrespect toArgentina 'sstatistical tax,theEuropean Communities
endorses thePanel’sfinding inparagraph 6.80ofthePanel Report. TheEuropean Communities also
makes certain comments withrespect toArgentina 'sclaims under Article 11oftheDSU.
29. Incoming totheconclusion thattheArgentine system ofDIEM mustviolate Article IIofthe
GATT 1994 inallcases, thePanel acknowledged thatthewording ofArticle IIdoesnotexplicitly
address thequestion ofwhether there isanobligation tousetheparticular typeofdutyreferred to
intheSchedule. ThePanel relied instead onpastGATT practice. Intheview oftheEuropean
Communities, GATT practice isonlyrelevant forthepurpose ofinterpreting WTO obligations andWT/DS56/AB/R
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cannot constitute asource ofobligations initself. ThePanel appears tohavetreated thepastGATT
practice towhich itrefers asasource oflaw. Thepastpractice referred tobythePanel, according
totheEuropean Communities, isfarfrom persuasive.
30. TheEuropean Communities believes thatthePanel should havetaken thewording andcontext
ofArticle IIoftheGATT 1994 asitsstarting point. Article II:1(a) mayfulfil arolesimilar tothat
ofArticle III:1. Article II:1(a) "articulates ageneral principle" which "informs" therestofArticle II.
Therelevant obligation inArticle II:1(a) andII:1(b) istogivetreatment "nolessfavourable" thanthat
provided forintheSchedule andtoexempt products ofother contracting parties fromduties "inexcess
ofthose" intheSchedule. TheSchedules setouttheratesofdutyandadutytype. Thereference to
atypeofdutycanbeexplained bythefactthatitisnecessary toestablish abasis forcalculation of
theamount ofdutywhich canbeimposed ineachcaseandnotasacommitment toimpose duties in
thatform only.
31. TheEuropean Communities contends thatnoprovision ofArticle IIcontains obligations relating
tothetypeasopposed totheamount oftheduty. Accordingly, theSchedules onlybindtheamount
ofthedutywhich maybeimposed inanycase,notthetypeofduty. TheEuropean Communities knows
ofnocasewhere aMember hasreserved, initsSchedule, therighttoimpose adifferent typeofduty
eventhough anoverall limitontheamount ofdutypayable under theother typeofdutywould not
beexceeded. Evenifitwereconsidered thatthetypeofdutywasalsobound independently ofthebinding
oftheamount, itwould stillbenecessary toshow thatthechange inthetypeofdutyledto"treatment
lessfavourable" thanthatresulting from thetypeofdutyreferred tointheSchedule.
32. Paragraph 6.31ofthePanel Report suggests thatachange inthetypeofduty"undermines
thestability andpredictability ofMembers ’Schedules." TheEuropean Communities doesnotconsider
thatthisisamatter covered byArticle IIoftheGATT 1994. Another possible basisforaconclusion
thatthechange inthetypeofthedutyleads to"treatment lessfavourable" thanthatresulting from
thetypeofdutyprovided forintheSchedule issuggested inparagraphs 6.46and6.47ofthePanel
Report. TheEuropean Communities doesnotbelieve thatchange incompetitive relationships isa
correct testtoapply inthiscase. Thewording ofArticle II:1(a) oftheGATT 1994 makes itclear
thattheobligation nottoexceed thetariff binding applies toeachindividual import transaction and
thatitisnotpossible foraMember tocompensate higher duties onsome transactions, oronsome
tariff lines, withlower duties elsewhere.WT/DS56/AB/R
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33. Inrespect ofthestatistical tax,theEuropean Communities agrees withArgentina thatitisnot
sufficient forthePanel tostate that"there isnoevidence thatArgentina wasrequested bythe
International Monetary Fund ("IMF") toimpose animport taxthatwould violate theprovisions of
theWTO Agreement" inorder toconclude thatthere canbenoquestion ofconflicting obligations.
Anobligation canalsoarise ifArgentina made thecommitment without ithaving beenrequested.
However, theonlydocument onwhich Argentina relies, inarguing thatitisunder anobligation to
theIMFtomaintain a3percentstatistical tax,istheMemorandum onEconomic Policy. Intheview
oftheEuropean Communities, thisisaunilateral communication totheIMF, notanagreement, which
mentions onlya3percenttemporary import surcharge oncertain imports. Thatthisdocument did
notcreate anobligation tomaintain the3percentstatistical taxisalsoindicated bythefactthatArgentina
reduced thetaxto0.5percentandreplaced itwithageneral increase intariffs of3percent.
34. TheEuropean Communities agrees withthePanel thatArgentina 'sargument thatitwasunder
aconflicting obligation totheIMFshould berejected. Anobligation ofArgentina totheIMFinrelation
toastatistical orimport tax,assuming ittoexist, will,inaccordance withtheprinciple ofpacta tertiis
necnocent necprosunt, notinitself beofanyconsequence totheWTO, theUnited States orthe
EuropeanCommunities.Theconditionsfortheoperationoftheprincipleofacquiescenceininternational
lawarenotmetinthepresent case. Alegalbasis within theWTO Agreement itself isnecessary for
thealleged obligation tohavetheeffect ofexcusing theviolation ofArticle VIIIoftheGATT 1994.
35. According totheEuropean Communities, theDeclaration onCoherence mayberelevant for
thepurpose ofinterpreting theprocedural provisions oftheWTO Agreement ,butcannot provide an
exception toanyofthesubstantive WTO obligations invoked inthiscase. TheDeclaration onthe
Relationship oftheWTO withtheIMFforms partofthecontext oftheWTO Agreement tobetaken
intoaccount initsinterpretation. TheAgreement Between theIMFandtheWTO isnotacovered
agreement forthepurpose oftheDSU. Inanyevent, itdoesnotcontain anyprovision relevant to
thisdispute. IntheviewoftheEuropean Communities, thearguments ofArgentina inrespect ofthis
Agreement amount toanallegation thatthePanel failed tofulfilaprocedural obligation toconsult the
IMF.
36. IfArgentina weretoseektojustify the3percentstatistical tax/import surcharge asabalance
ofpayments measure, itwould needtoinvoke Articles XIIandXVIII oftheGATT 1994 andnotify
theCommitteeonBalance-of-PaymentsRestrictionsunderArticlesXII:4orXVIII:12oftheGATT1994.
There isnoindication thatanyofthishasbeendone andthere is,therefore, nobasis toreview the
Panel’sfinding thatthemeasure isinconsistent withArticle VIIIoftheGATT 1994.WT/DS56/AB/R
Page13
37. With regard toArticle 11oftheDSU, theEuropean Communities contends thatitwasnot
necessary forthePanel tohaveevidence based oninvoices thatduties exceeding thebound levels were
imposed. TheEuropean Communities stresses theimportance ofrespecting theprinciples ofdueprocess
inpanel proceedings, butdoesnotconsider itnecessary orappropriate tocomment onthesubmission
anduseoftheevidence submitted bytheUnited States prior tothesecond meeting ofthePanel.
Article 13oftheDSU entitles apanel toseekinformation from anybody, including theIMF, ifit
considers thisnecessary. There wasnoneedforthePanel toseektheopinion oftheIMFonthe
existence ofanobligation toward itbyArgentina tomaintain the3percentstatistical dutysince that
would nothavebeenrelevant fordeciding whether ornotthere wasaviolation ofArticle VIIIofthe
GATT 1994.
III. Issues Raised inthisAppeal
38. Theappellant, Argentina, raises thefollowing issues inthisappeal:
(a) Whether theapplication byaMember ofatypeofdutyother thanthetypeprovided
forinthatMember 'sSchedule is,initself, inconsistent with Article IIofthe
GATT 1994;
(b) Whether thePanel erred inconcluding thatArgentina hadacted inconsistently with
itsobligations under Article IIoftheGATT 1994 "inallcases" inwhich Argentina
applied theDIEM;
(c) Whether thePanel erred initsapplication ofArticle VIIIoftheGATT 1994 tothe
3percentadvalorem statistical taxbynottaking intoaccount commitments that
Argentina states itmade totheIMF; and
(d) Whether thePanel acted inconsistently withArticle 11oftheDSU in:(i)admitting
certain evidence submitted bytheUnited States twodayspriortothesecond substantive
meetingofthePanelwiththeparties,andgrantingArgentinaonlytwoweekstorespond;
and(ii)notseeking information from, andconsulting with, theIMFsoastoobtain
itsopinion onspecific aspects ofthematter concerning thestatistical taximposed by
Argentina.WT/DS56/AB/R
Page14
IV. Interpretation ofArticle IIoftheGATT 1994
A. TheTypeofDuty
39. Article II:1oftheGATT 1994 states, inpertinent part:
(a) EachMembershallaccordtothecommerceoftheother
Members treatment nolessfavourable thanthatprovided forinthe
appropriatePartoftheappropriateScheduleannexedtothisAgreement.
(b) TheproductsdescribedinPartIoftheSchedulerelating
toanyMember,whicharetheproductsofterritoriesofotherMembers,
shall, ontheirimportation intotheterritory towhich theSchedule
relates, andsubject totheterms, conditions orqualifications setforth
inthatSchedule, beexempt from ordinary customs duties inexcess
ofthose setforth andprovided therein.
40. With respect toArticle II,thePanel found, interalia:
6.31 WenotethatthepastGATT practice isclear: asituation
whereby acontracting party applies onetypeofduties while its
Schedule refers tobindings ofanother typeofduties constitutes a
violation ofArticle IIofGATT, without anyobligation forthe
complaining party tosubmit further evidence thatsuchvariance leads
toaneffective breach ofbindings. ...Asaguarantee forpredictability
andtoensurethefullrespectofthenegotiationsunderArticleII,GATT
practice hasgenerally required thatonceaMember hasindicated the
type(s) ofduties inspecifying itsbound rate,itmustapply suchtype(s)
ofduties. Accordingly, faced withsuchavariance inthetype[of]
duties applied byArgentina from thatreflected initsSchedule, we
consider thatwedonothavetoexamine theeffects ofthatvariance
onpossible future imports. Indeed, suchavariance undermines the
stability andpredictability ofMembers 'Schedules.
6.32 We,therefore,findthatArgentina,inusingasystemofspecific
minimum tariffs although ithasbound itstariffs atadvalorem rates
only, isviolating theprovisions ofArticle IIofGATT andthatthe
United States does nothave toprovide further evidence thatthe
resultant duties exceed thebound tariffrate. Suchavariance between
Argentina ’sSchedule anditsapplied tariffs constitutes alessfavourable
treatment tothecommerce oftheother Members thanthatprovided
forinArgentina ’sSchedule, contrary totheprovisions ofArticle II
ofGATT.21
21Panel Report, paras. 6.31-6.32.WT/DS56/AB/R
Page15
41. Argentina appeals fromparagraphs 6.31and6.32ofthePanel Report, arguing thatthePanel
erred initsinterpretation thatArticle IIoftheGATT 1994doesnotpermit aMember toapply atypeof
dutyother thanthatprovided forinthatMember 'sSchedule. Argentina maintains thatthePanel should
havetaken intoaccount whether thelevelofprotection todomestic products ensuing fromtheapplication
oftheactual dutyimposed is,orisnot,higher thanthelevelofprotection resulting fromthedutybound
intheMember 'sSchedule. InArgentina 'sview, aMember isfreetochoose thetypeofdutyapplied,
provided thatthemaximum levelofprotection specified inthatMember 'sSchedule isnotexceeded.
42. Inparagraphs 6.31and6.32ofthePanel Report, thePanel holds thatanyvariance between the
typeofdutyprovided forinaMember 'sSchedule andthetypeofdutyactually applied bythatMember
"constitutes alessfavourable treatment tothecommerce oftheotherMembers"22thanthatprovided for
intheMember 'sSchedule, andtherefore isinconsistent withArticle IIoftheGATT 1994. Furthermore,
thePanel asserts thatthecomplaining party "does nothavetoprovide further evidence thattheresultant
duties exceed thebound tariffrate."23WenotethatthePanel didnotbaseitsfinding onatextual analysis
ofeither paragraph (a)or(b)ofArticle II:1oftheGATT 1994. Itobserves that"[t]he wording of
Article IIdoesnotseem toaddress explicitly whether WTO Members haveanobligation tousea
particular typeofduty"24,andthenasserts that"thewording ofArticle IImustbeinterpreted inthelight
ofpastGATT practice ...".25ThePanel relies heavily onwhatitcharacterizes as"pastGATT practice",
without undertaking anyanalysis oftheordinary meaning oftheterms ofArticle IIintheircontext and
inthelightoftheobject andpurpose oftheGATT 1994, inaccordance withthegeneral rulesoftreaty
interpretation setoutinArticle 31oftheVienna Convention .After citing threeworking partyreports26,
theadopted report ofthePanel onNewsprint27andtheunadopted panel report inEEC-Import Regime
forBananas28("Bananas II"),thePanel declared that"...thepastGATT practice isclear: asituation
whereby acontracting party applies onetypeofduties while itsSchedule refers tobindings ofanother
typeofduties constitutes aviolation ofArticle IIofGATT ...".29
22Panel Report, para. 6.32.
23Ibid.
24Panel Report, para. 6.24.
25Ibid.
26Working Party Report, Rectifications andModifications ofSchedules ,adopted 24October 1953, BISD 2S/63, para. 8;
Working Party Report, Transposition oftheSchedule XXXVII -Turkey ,adopted 20December 1954, BISD 3S/127; and
Working Party Report, Fourth Protocol onRectifications andModifications ,adopted 3March 1955, BISD 3S/130.
27Adopted 20November 1984, BISD 31S/114.
28DS38/R, 11February 1994, unadopted.
29Panel Report, para. 6.31.WT/DS56/AB/R
Page16
43. Wearenotpersuaded that"thepastGATT practice isclear". Thethreeworking party reports
cited bythePanel didnotarise inthecontext ofdispute settlement cases brought pursuant to
Article XXIII oftheGATT 1947, unlike some working party reports inGATT history thatresulted
fromcomplaints made under Article XXIII.30Wealsonotethatthese three working party reports did
notresult intheCONTRACTING PARTIES giving aruling ormaking recommendations, pursuant
toArticle XXIII:2 oftheGATT 1994, onwhether avariance inthetypeofdutyapplied byacontracting
party from thetypeofdutyprovided forinitsSchedule constituted aninfringement ofArticle II:1
oftheGATT 1947.31ThePanel alsoreferred tothereport ofthePanel onNewsprint thatdidnot,
onitsfacts, dealwiththeapplication byacontracting party ofaspecific dutyrather thananadvalorem
dutyprovided forinitsSchedule.32Finally, thePanel relied extensively ontheunadopted panel report
inBananas II.InourReport inJapan -Taxes onAlcoholic Beverages33,weagreed withthatpanel
that"unadopted panel reports ‘havenolegalstatus intheGATT orWTO system ...’",although we
believe that"‘apanel could nevertheless finduseful guidance inthereasoning ofanunadopted panel
report thatitconsidered toberelevant ’".Inthecasebefore us,thePanel'suseoftheBananas IIpanel
report appears tohavegonebeyond deriving "useful guidance" fromthereasoning employed inthat
unadopted panel report. ThePanel, infact,relies upon theBananas IIpanel report.
30See,forexample, Australian Subsidy onAmmonium Sulphate ,adopted 3April 1950, BISD II/188.
31AsthePanel observed inparagraph 6.26ofthePanel Report, wenotethattheworking party report inTransposition
ofSchedule XXXVII -Turkey ,adopted 20December 1954, BISD 3S/127, stated inparagraph 4:
Theobligations ofcontracting parties areestablished bytherates ofdutyappearing
intheschedules andanychange intheratesuchasachange from aspecific toan
advalorem duty could insome circumstances adversely affect thevalue ofthe
concessions toother contracting parties. Consequently, anyconversion ofspecific
intoadvalorem rates ofduty canbemade only under some procedure forthe
modification ofconcessions.
Thisworking party report, which examined aproposal byTurkey tochange intoadvalorem duties thespecific duties provided
forinitsSchedule, didnotaddress whether ornotsuchamodification would beinconsistent withArticle IIoftheGATT
1947.
32WenotethatthePanel onNewsprint ,adopted 20November 1984, BISD 31S/114, stated inparagraph 50:
...under long-standing GATT practice, even purely formal changes inthetariff
schedule ofacontracting party, which maynotaffect theGATT rights ofother
countries, such astheconversion ofaspecific toanadvalorem dutywithout an
increase intheprotective effect ofthetariff rateinquestion, have been considered
torequire renegotiations.
Itshould benoted thattheissue before thePanel onNewsprint wasnotwhether achange inthetypeofcustoms dutyapplied
byacontracting party fromaspecific dutytoanadvalorem dutywasconsistent withArticle IIoftheGATT 1947, butwhether
areduction inatariff-rate quota from1.5million tonnes to0.5million tonnes wasconsistent withArticle IIoftheGATT 1947.
Forthisreason, weconsider theabove statement tobeobiter .
33Adopted 1November 1996, WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/R, pp.14-15.WT/DS56/AB/R
Page17
44. Thelegalissuebefore ushereiswhether theapplication byaMember ofatypeofdutyother
thanthatprovided forinitsSchedule is,initself, inconsistent withArticle IIoftheGATT 1994. We
nowturntoanexamination ofthisquestion, first, inthelightoftheterms ofArticle II:1ofthe
GATT 1994 and,second, inthecontext ofArgentina 'sDIEM system atissue inthiscase.
45. Theterms ofArticle II:1(a) require thataMember "accord tothecommerce oftheother
Memberstreatmentnolessfavourablethanthatprovidedfor"inthatMember'sSchedule.ArticleII:1(b),
firstsentence, states, inpart: "The products described inPartIoftheSchedule ...shall, ontheir
importation intotheterritory towhich theSchedule relates, ...beexempt fromordinary customs duties
inexcess ofthose setforth andprovided therein." Paragraph (a)ofArticle II:1contains ageneral
prohibition against according treatment lessfavourable toimports thanthatprovided forinaMember 's
Schedule. Paragraph (b)prohibits aspecific kindofpractice thatwillalways beinconsistent with
paragraph (a):thatis,theapplication ofordinary customs duties inexcess ofthose provided forin
theSchedule. Because thelanguage ofArticle II:1(b), firstsentence, ismore specific andgermane
tothecaseathand, ourinterpretative analysis begins with, andfocuses on,thatprovision.
46. Atariff binding inaMember 'sSchedule provides anupper limitontheamount ofdutythat
maybeimposed, andaMember ispermitted toimpose adutythatislessthanthatprovided forin
itsSchedule. Theprincipal obligation inthefirstsentence ofArticle II:1(b), aswehavenoted above,
requires aMember torefrain fromimposing ordinary customs duties inexcess ofthose provided for
inthatMember 'sSchedule. However, thetextofArticle II:1(b), firstsentence, doesnotaddress whether
applying atypeofdutydifferent from thetypeprovided forinaMember 'sSchedule isinconsistent,
initself, withthatprovision.
47. Inaccordance withthegeneral rules oftreaty interpretation setoutinArticle 31ofthe
Vienna Convention ,Article II:1(b), firstsentence, mustbereadinitscontext andinlightoftheobject
andpurpose oftheGATT 1994. Article II:1(a) ispartofthecontext ofArticle II:1(b); itrequires
thataMember mustaccord tothecommerce oftheother Members "treatment nolessfavourable than
thatprovided for"initsSchedule. Itisevident tousthattheapplication ofcustoms duties inexcess
ofthose provided forinaMember 'sSchedule, inconsistent withthefirstsentence ofArticle II:1(b),
constitutes"lessfavourable"treatmentundertheprovisionsofArticleII:1(a).Abasicobjectandpurpose
oftheGATT 1994, asreflected inArticle II,istopreserve thevalue oftariff concessions negotiated
byaMember withitstrading partners, andbound inthatMember 'sSchedule. Once atariffconcessionWT/DS56/AB/R
Page18
isagreed andbound inaMember 'sSchedule, areduction initsvalue bytheimposition ofduties in
excess ofthebound tariff ratewould upset thebalance ofconcessions among Members.
48. Weturnnexttoexamine whether, byapplying theDIEM instead oftheadvalorem duties
provided forinitsSchedule, Argentina hasacted inconsistently withArticle II:1(b), firstsentence,
oftheGATT 1994.
49. Asweunderstand it,theArgentine methodology ofdetermining theDIEM is,first,toidentify
arepresentative international price foreachrelevant tariff category oftextile andapparel products.
Once thisrepresentative international price hasbeenestablished, Argentina thenmultiplies thatprice
bythebound rateof35percent, orbytheactually applied rateoflessthan35percent34,toarrive
attheDIEM fortheproducts inthatcategory. Customs officials aredirected, inaspecific transaction,
tocollect thehigher ofthetwovalues: theapplied advalorem rateortheDIEM.35
50. Tograsp themeaning andimplications oftheArgentine system, itisimportant tokeepinmind
thatforanyspecific duty, there isanadvalorem equivalent deduced from theratiooftheabsolute
amount collected totheprice oftheimported product. Thus, theadvalorem equivalent ofaspecific
dutyvaries withthevariation intheprice ofimports. Itishigher forlow-priced products thanfor
high-priced products. Toillustrate, aspecific dutyof$10collected onallimported products inacertain
tariff category, isequivalent to10percentadvalorem iftheprice oftheimported product is$100;
however, itisequivalent to20percentadvalorem iftheprice isonly$50.
51. Thus, under theArgentine system, whenever theamount ofthespecific dutyisdetermined
byapplying thebound rateof35percenttotherepresentative international price inacertain tariff
category, theadvalorem equivalent ofthespecific dutyisgreater than35percentforallimports at
prices below therepresentative international price; itislessthan35percentforallimports atprices
above therepresentative international price. Therefore, collecting thehigher ofthetwovalues means
applying thebound tariff rateof35percentadvalorem totherange ofprices above therepresentative
international price, andapplying theminimum specific import dutywithanadvalorem equivalent of
more than35percenttotherange ofprices below therepresentative international price.
34Argentina 'sresponse toquestioning attheoralhearing.
35AsthePanel observed, Resolution No.811/93 of29July1993, expressly stated inArticle 3that"thespecific import
duties established byArticle 1ofthisdecision shall operate asaminimum ofthecorresponding advalorem import duty".
SeePanel Report, para. 6.19 andfootnote 171.WT/DS56/AB/R
Page19
52. Incases where theamount oftheDIEM isdetermined byapplying arateoflessthan35per
cent--forexample, 20percent--totherepresentative international price inacertain tariff category,
theresult would beasfollows. Fortherange ofprices above therepresentative international price,
theadvalorem equivalent ofthespecific dutywould belessthan20percent. With respect tothe
range ofprices below therepresentative international price, adistinction should bemade between two
zones. Astoacertain zoneofprices immediately below therepresentative international price, the
advalorem equivalent ofthespecific dutywould begreater than20percentbutlessthan35percent.
However, forproducts atprices below thatzone, theadvalorem equivalent ofthespecific dutywould
begreater than35percent.36
53. Inthelightofthisanalysis, wemaygeneralize thatunder theArgentine system, whether the
amount oftheDIEM isdetermined byapplying 35percent, oraratelessthan35percent, tothe
representative international price, there willremain thepossibility ofaprice thatissufficiently low
toproduce anadvalorem equivalent oftheDIEM thatisgreater than35percent. Inother words,
thestructure anddesign oftheArgentine system issuchthatforanyDIEM, nomatter whatadvalorem
rateisusedasthemultiplier oftherepresentative international price, thepossibility remains thatthere
isa"break-even" pricebelow which theadvalorem equivalent ofthecustoms dutycollected isinexcess
ofthebound advalorem rateof35percent.
54. Wenotethatitispossible, under certain circumstances, foraMember todesign alegislative
"ceiling" or"cap" onthelevelofdutyapplied which would ensure that,evenifthetypeofdutyapplied
differs fromthetypeprovided forinthatMember 'sSchedule, theadvalorem equivalents oftheduties
actually applied would notexceed theadvalorem duties provided forintheMember 'sSchedule.
However, nosuch"ceiling" exists inthiscase. Themeasures atissuehere, aswehavealready noted,
specifically andexpressly require Argentine customs officials tocollect thegreater oftheadvalorem
orthespecific duties applicable, withnoupper limitontheleveloftheadvalorem equivalent ofthe
specific dutythatmaybeimposed. Before thePanel, Argentina argued thatitsdomestic challenge
procedure(recursodeimpugnación),incombinationwiththeprecedenceanddirecteffectofinternational
treaty obligations intheArgentine national legalsystem, operated asaneffective legislative "ceiling"
toensure thatadutyinexcess ofthebound rateof35percentadvalorem could never actually be
36SeePanel Report, para. 3.125.WT/DS56/AB/R
Page20
imposed. ThePanel didnotaccept thisargument37,andArgentina hasnotappealed fromthatfinding
ofthePanel. Inthiscase, therefore, there isnoeffective legislative "ceiling" intheArgentine system
which ensures thatduties inexcess ofthebound rateof35percentadvalorem willnotbeapplied.
55. Weconclude thattheapplication ofatypeofdutydifferent from thetypeprovided forina
Member 'sSchedule isinconsistent withArticle II:1(b), firstsentence, oftheGATT 1994totheextent
thatitresults inordinary customs duties being levied inexcess ofthose provided forinthatMember 's
Schedule. Inthiscase, wefindthatArgentina hasacted inconsistently withitsobligations under
Article II:1(b), firstsentence, oftheGATT 1994, because theDIEM regime, byitsstructure anddesign,
results, withrespect toacertain range ofimport prices inanyrelevant tariffcategory towhich itapplies,
inthelevying ofcustoms duties inexcess ofthebound rateof35percentadvalorem inArgentina 's
Schedule.
56. Wemodify thePanel'sfindings inparagraphs 6.31and6.32ofthePanel Report accordingly.
B. Violation ofArticle II"InAllCases"
57. Argentina claims thatthePanel erred infinding thatithadinfringed itsobligations under
Article IIoftheGATT 1994 "inallcases" inwhich itapplied theDIEM. Argentina argues thatthe
United States submitted evidence withrespect toonly118outoftheapproximately 940relevant tariff
categories intheNomenclatura Común MERCOSUR ("N.C.M.").38Argentina further asserts that,
hadevidence inrespect oftheremaining tariff categories beenexamined, itwould haveshown that
theapplication oftheDIEM, onaverage overalltariff categories, hadnotexceeded themaximum
level ofbinding inArgentina 'sSchedule.39Onanother ground, Argentina appeals thePanel’slate
admission intoevidence ofcertain invoices andcustoms documents submitted bytheUnited States
relating tospecific import transactions insixadditional tariff categories.40Weexamine thisseparate
ground ofappeal inPartVIofthisReport.
37Panel Report, para. 6.69.
38WenotethatthePanel appears tousetheterms "category", "HScategory", "line-item" and"tariff line"interchangeably.
(Seee.g.Panel Report, paras. 6.48, 6.52and6.54.) Wealsonotethattheparties, intheirsubmissions tothePanel, sometimes
usedthese terms interchangeably. (Seee.g.pp.8-10oftheUnited States 'second written submission tothePanel.) Inthis
Report, weusetheterm "tariff category" torefer totherelevant 6or8-digit subheading intheNomenclatura Común
MERCOSUR ("N.C.M.") applied byArgentina through Decree No.2275/94 of23December 1994, assubsequently modified.
39Argentina 'sappellant 'ssubmission, paras. 70-72.
40Argentina 'sappellant 'ssubmission, paras. 106-110.WT/DS56/AB/R
Page21
58. ThePanel concluded that:
Inthelightoftheforegoing, wefindthattheUnited States hasprovided
sufficient evidence thatArgentina haseffectively imposed duties on
imports oftextiles andapparel above 35percentadvalorem ,that
indeed thetotalamount ofduties collected annually ontheseitems leads
totheconclusion thatduties above 35percentadvalorem onthe
average transaction value havebeenimposed onthesame items, and
thatinanycase,aswefound inparagraph 6.47above, theverynature
oftheminimumspecificdutysystemimposedinArgentinaontheitems
atissue willinevitably lead,incertain instances, totheimposition of
duties above 35percentadvalorem .41
59. WenotethatthePanel didnotmake afinding thatArgentina hadinfringed itsobligations under
Article IIoftheGATT 1994"inallcases" inwhich itapplied theDIEM. Infact,thePanel stated that:
AsArgentina didnotprovide anyaffirmative evidence tothecontrary,
weconsider thatthisUSevidence provides reliable information that,
onatariff linebasis, duties above thebound rateof35percent
advalorem have been imposed. Weagree that, ifanaverage
calculation shows duties above 35percent, thisisevidence ofa
sufficient number oftransactions which weresubject toduties imposed
above the35percentadvalorem .TheUnited States wasableto
demonstrate thatArgentina hadimposed andcollected duties onthe
effective priceoftheimport transactions atlevels wellabove thebound
rateof35percentadvalorem .42
60. Itisourunderstanding thatArgentina isobjecting tothePanel'sconclusion thattheapplication
oftheDIEM isinconsistent withArgentina 'sobligations under Article IIoftheGATT 1994 tothe
extent thatthisconclusion wasbased onthePanel'sexamination ofevidence relating toonly118,or
atmost124,tariffcategories outofapproximately 940relevant tariffcategories fortextile andapparel
products.WenotethatArgentinadidnotchallengethemethodologyemployedbythePanelinexamining
theevidence submitted bytheUnited States identifying 118tariff categories which ledittoconclude,
onthebasisofstatistical datarelating totheaverage value oftransactions, thattheadvalorem equivalents
ofArgentina 'sspecific duties exceeded 35percentadvalorem ina"sufficient number oftransactions".43
41Panel Report, para. 6.65.
42Panel Report, para. 6.51.
43Ibid.WT/DS56/AB/R
Page22
61. Therealissue posed herebyArgentina iswhether theUnited States hadadduced sufficient
evidence toestablish aprima faciecaseofinconsistency withArticle II:1oftheGATT 1994 forall
tariff categories covered byChapters 51to63oftheN.C.M.. Aswehavenoted above, thePanel
stated thatthestatistical datasubmitted bytheUnited States ontheaverage import price ofcertain
products inrelation tothetotalamount ofduties collected, "...provides reliable information that,on
atarifflinebasis, duties above thebound rateof35percentadvalorem havebeenimposed."44(emphasis
added) Furthermore, thePanel agreed withtheUnited States that,"...ifanaverage calculation shows
duties above 35percent, thisisevidence ofasufficient number oftransactions which were subject
toduties imposed above the35percentadvalorem ."45(emphasis added) ThePanel alsonoted that
Argentina hadnotsubmitted "anyaffirmative evidence tothecontrary".46Argentina, inother words,
didnotsuccessfully overcome theprima faciecaseestablished bytheUnited States. Wecannot find
anyerror oflawinthefindings ofthePanel based ontheevidence submitted bytheUnited States on
average calculations relating to118tariffcategories outofapproximately 940tariffcategories fortextile
andapparel products.
62. Asnoted above, thePanel stated that"...theverynature oftheminimum specific dutysystem
imposed inArgentina ontheitems atissuewillinevitably lead,incertain instances ,totheimposition
ofduties above 35percentadvalorem ."47(emphasis added) Thisreference to"incertain instances"
indicates thatthePanel didnotconclude thatthere wasinfringement "inallcases". Werecall our
finding thattheDIEM regime, byitsstructure anddesign, results intheapplication ofspecific duties
withadvalorem equivalents exceeding 35percentforalltextile andapparel products imported atprices
below therelevant "break-even" prices intherelevant tariff categories.48Atthesame time, products
imported atprices above such"break-even" prices willbesubject toadutyequivalent to35percent
orlessadvalorem .Thisproposition holds forallrelevant tariffcategories relating totextile andapparel
products towhich theDIEM areapplied. Itistheresult ofArgentina requiring itscustoms officials
tocollect thehigher oftwovalues: theapplicable advalorem dutyortheDIEM. Itfollows that,under
suchasystem, therateofdutyapplicable toanyimport transaction depends ontheposition ofthe
imported product within theprevailing price range inanyrelevant tariff category. Thus, some
44Ibid.
45Ibid.
46Ibid.
47Panel Report, para. 6.65.
48Seeparas. 51-53 ofthisReport. Wenotethatthis"break-even" price willbetherepresentative international price
when theDIEM arecalculated onthebasis ofthe35percentbound advalorem rate. However, when theDIEM arecalculated
onthebasis ofalower, applied rate, the"break-even" price willbelower thantherepresentative international price.WT/DS56/AB/R
Page23
transactions willfallwithin aprice range where theapplication oftheDIEM results inadvalorem
equivalents exceeding 35percent. Other transactions, ontheother hand, willfallwithin apricerange
where theapplication oftheDIEM results inadvalorem equivalents lessthan,orequal to,35percent.
Weagree withArgentina, therefore, thattheapplication oftheDIEM doesnotresult inabreach of
Article IIforeachandevery import transaction inagiven tariffcategory. Atthesametime, however,
weagree withthePanel thatthere aresufficient reasons toconclude thatthestructure anddesign of
theDIEM willresult, withrespect toacertain range ofimport prices within arelevant tariffcategory,
inaninfringement ofArgentina 'sobligations under Article II:1foralltariffcategories inChapters 51
to63oftheN.C.M..
63. Forthese reasons, wefindnolegal basis onwhich toreverse thePanel'sfindings in
paragraph 6.65ofthePanel Report.
V. TheStatistical TaxandArgentina 'sStated Commitments totheIMF
64. AtthetimethePanel proceeding commenced, there wasineffect inArgentina anadvalorem
taxof3percentonimports, without aminimum oramaximum charge, which wascalled a"statistical
tax"andwasdescribed asdesigned tocover thecostofproviding astatistical service intended toprovide
areliable databaseforforeign trade operators.49Inrespect ofthisstatistical tax,thePanel found as
follows:
Consequently, following theGATT practice onthesubject matter, we
conclude thatArgentina ’sstatistical taxofthree percentadvalorem ,
initspresent form, isinviolation ofArticle VIII:1(a) ofGATT tothe
extent itresults incharges being levied inexcess oftheapproximate
costs oftheservices rendered aswellasbeing ameasure designated
forfiscal purposes.50
65. Argentina doesnotappeal thePanel’sfinding thatthestatistical taxisinconsistent withthe
substantive requirements ofArticle VIIIoftheGATT 1994. Rather, Argentina submits thatthePanel
erredinlawinfailing totakeintoaccount Argentina ’sobligations totheIMFinthePanel'sinterpretation
ofArticle VIII. Argentina refers totheMemorandum onEconomic Policy51,thatforms partofthe
49According toArgentina 'sstatement attheoralhearing on23February 1998, thisadvalorem statistical taxwasmodified
to0.5percentinDecember 1997.
50Panel Report, para. 6.80
51Exhibit StotheUnited States 'firstwritten submission tothePanel.WT/DS56/AB/R
Page24
panel record inthiscase, asa"Memorandum ofUnderstanding" between Argentina andtheIMF.
Argentina states thatthis"Memorandum ofUnderstanding" isa"simplified agreement" which includes
an"undertaking" oran"obligation" onitsparttocollect aspecified amount intheformofastatistical
tax.52Thisobligation issaidtobesetoutorreflected inthestatement onpage7oftheMemorandum
onEconomic Policy thatthefiscal measures tobeadopted byArgentina include "...increases inimport
duties, including atemporary 3percentsurcharge onimports".53
66. Argentina argues thatinfailing toconsider itsarguments about itsobligations totheIMFand
infailing toprovide anyreasons fornottaking these arguments intoaccount, thePanel disregarded
itsdutytomake "anobjective assessment ofthematter" under Article 11oftheDSU. Itisfurthermore
contended thatthePanel, inruling thatthestatistical taxisnotconsistent withArticle VIIIofthe
GATT 1994, failed tocomply withtherequirement inArticle 12.7oftheDSU that"apanel shallset
out...thebasicrationale behind anyfindings andrecommendations thatitmakes."54Argentina argues
stillfurther thatthePanel erred inlawinfailing toconsider certain "subsequent legislative
developments" --namely, theAgreement Between theIMFandtheWTO andtheDeclaration on
Coherence .55Paragraph 10oftheAgreement Between theIMFandtheWTO andparagraph 5ofthe
Declaration onCoherence require, intheviewofArgentina, that"theimposition ongovernments of
cross-conditionality oradditional conditions"56must beavoided.57
67. Inthe"Findings" section ofthePanel Report, thePanel said:
Wefindnoexception intheWTO Agreement thatwould excuse
Argentina'scompliancewiththerequirementsofArticleVIIIofGATT.
Moreover, weseenothing intheAgreement Between theIMFand
theWTO, theDeclaration ontheRelationship oftheWorld Trade
Organization withtheInternational Monetary FundandtheDeclaration
ontheContribution oftheWorld Trade Organization toAchieving
Greater Coherence inGlobal Economic Policymaking thatsuggests
thatweshould interpret Article VIIIasargued byArgentina.58
52Argentina 'sappellant 'ssubmission, para. 76.
53Argentina 'sappellant 'ssubmission, para. 82,andresponse ofArgentina toquestioning attheoralhearing.
54Argentina 'sappellant 'ssubmission, paras. 80-87.
55Argentina 'sappellant 'ssubmission, para. 91.
56Declaration onCoherence ,para. 5.
57Argentina 'sappellant 'ssubmission, paras. 95-96.
58Panel Report, para. 6.79.WT/DS56/AB/R
Page25
68. InPartVofitsReport, under theheading "Interim Review", although notinits"Findings"
section, thePanel offers someexplanation astowhyitdidnotaddress Argentina 'sarguments concerning
cross-conditionalities orconflicts between Argentina 'scommitments totheIMFanditsobligations
under theWTO Agreement .ThePanel stated:
Weseenoreason toaddress thiswider issue since, inthesituation
before thePanel, there isnoevidence thatArgentina wasrequested
bytheInternational Monetary Fund ("IMF") toimpose animport tax
thatwould violate theprovisions oftheWTO Agreement. Moreover,
weseenothing intheAgreement Between theIMFandtheWTO, the
Declaration ontheRelationship oftheWorld Trade Organization with
theInternational Monetary Fund andtheDeclaration onthe
Contribution oftheWorld Trade Organization toAchieving Greater
Coherence inGlobal Economic Policymaking thatsuggests thatwe
should change ourapproach.59(emphasis added)
69. Implicit intheabove statement isthePanel'sbelief thatArgentina hadnotsuccessfully shown
thatitwasrequired under anagreement withtheIMFtoimpose thestatistical tax.60Indeed, thePanel
doesnotappear tohavebeenconvinced thatArgentina hadalegally binding agreement withtheIMF
atall.From thepanel record inthiscase, itdoesnotappear possible todetermine theprecise legal
nature ofthisMemorandum onEconomic Policy, northeextent towhich commitments undertaken
byArgentina inthisMemorandum constitute legally binding obligations. Wenotethatpage7ofthe
Memorandum onEconomic Policy refers to"atemporary 3percent surcharge onimports", which
isnotnecessarily thesame thing asthe3percentstatistical taxlevied onimports. Argentina didnot
show anirreconcilable conflict between theprovisions ofits"Memorandum ofUnderstanding" with
theIMFandtheprovisions ofArticle VIIIoftheGATT 1994. Wethusagree withthePanel'simplicit
finding thatArgentina failed todemonstrate thatithadalegally binding commitment totheIMFthat
would somehow supersede Argentina 'sobligations under Article VIIIoftheGATT 1994.
70. Wealsoagree withthePanel thatthere isnothing intheAgreement Between theIMFandthe
WTO,theDeclaration ontheRelationship oftheWTO withtheIMFortheDeclaration onCoherence
which justifies aconclusion thataMember 'scommitments totheIMFshallprevail overitsobligations
under Article VIIIoftheGATT 1994. The1994 Declaration onCoherence isaMinisterial decision
thatarticulates theobjective ofpromoting increased cooperation between theWTO andtheIMFin
59Panel Report, para. 5.3.
60WenotethatthePanel’sstatement inparagraph 6.79ofthePanel Report thatArgentina "...does notargue thatit
isrequired toimpose thisspecific taxinorder tomeet itscommitments totheIMF" isnot,strictly speaking, accurate, as
itdoesnotreflect Argentina ’sarguments before thePanel orbefore theAppellate Body inthisappeal. SeePanel Report,
para. 3.276, andArgentina 'sappellant 'ssubmission, paras. 73-105.WT/DS56/AB/R
Page26
ordertoencouragegreatercoherenceinglobaleconomicpolicy-making.Thisobjectiveismoreexplicitly
recognized inthetreaty language oftheWTO Agreement inArticle III:5, which states:
Withaviewtoachieving greater coherence inglobal economic
policy-making, theWTO shall cooperate, asappropriate ,withthe
International Monetary Fund andwiththeInternational Bank for
Reconstruction andDevelopment anditsaffiliated agencies. (emphasis
added)
71. InfurtheranceoftheWTO'smandateto"cooperate,asappropriate"withtheIMF,theAgreement
Between theIMFandtheWTO wasconcluded in1996.61ThisAgreement provides forspecific means
ofadministrative cooperation between thetwoorganizations. Itprovides forconsultations andthe
exchange ofinformation between theWTO Secretariat andthestaffoftheIMFincertain specified
circumstances, andgrants toeachorganization observer status incertain oftheother'smeetings.62
72. TheAgreement Between theIMFandtheWTO,however, doesnotmodify, addtoordiminish
therights andobligations ofMembers under theWTO Agreement ,nordoesitmodify individual States '
commitments totheIMF. Itdoesnotprovide anysubstantive rulesconcerning theresolution ofpossible
conflicts between obligations ofaMember under theWTOAgreement andobligations under theArticles
ofAgreement oftheIMForanyagreement withtheIMF. However, paragraph 10oftheAgreement
Between theIMFandtheWTO contains adirection tothestaffoftheIMFandtheWTO Secretariat
toconsult on"issues ofpossible inconsistency between measures under discussion ".
73. Inthe1994 Declaration ontheRelationship oftheWTO withtheIMF,Ministers reaffirmed
that,unless otherwise provided forintheFinal ActEmbodying theResults oftheUruguay Round of
Multilateral Trade Negotiations ,"therelationship oftheWTO withtheInternational Monetary Fund,
withregard totheareas covered bytheMultilateral Trade Agreements inAnnex 1AoftheWTO
Agreement, willbebased ontheprovisions thathavegoverned therelationship oftheCONTRACTING
PARTIES totheGATT 1947withtheInternational Monetary Fund." Wenotethatcertain provisions
oftheGATT 1994, suchasArticles XII,XIV, XVandXVIII, permit aWTO Member, incertain
specified circumstances relating toexchange matters and/or balance ofpayments, tobeexcused from
61Done atSingapore, 9December 1996.
62Excluding theDSB anddispute settlement panels, except where "matters ofjurisdictional relevance totheFund are
tobeconsidered". TheWTO mayinvite amember ofthestaffoftheFund toattend ameeting ofDSB "when theWTO,
afterconsultation between theWTO Secretariat andthestaffoftheFund, finds thatsuchapresence would beofparticular
common interest tobothorganizations." Agreement Between theIMFandtheWTO,para. 6.WT/DS56/AB/R
Page27
certain ofitsobligations under theGATT 1994. However, Article VIIIcontains nosuchexception
orpermission.
74. Weagree, therefore, withthePanel thatthere is"nothing intheAgreement Between theIMF
andtheWTO,theDeclarationontheRelationshipoftheWorldTradeOrganizationwiththeInternational
Monetary Fund andtheDeclaration ontheContribution oftheWorld Trade Organization toAchieving
Greater Coherence inGlobal Economic Policymaking"63thatmodifies Argentina 'sobligations under
Article VIIIoftheGATT 1994. Wealsoagree withthePanel thatthere is"...noexception inthe
WTO Agreement thatwould excuse Argentina 'scompliance withtherequirements ofArticle VIIIof
GATT."64There doesnotappear tobeanything intheWTO Agreement orintheotherlegalinstruments
cited byArgentina thatwould relieve aMember from itsobligations under Article VIIIofthe
GATT 1994. Forthese reasons, weuphold thePanel'sfindings inparagraphs 6.79and6.80ofthe
Panel Report.
VI. Objective Assessment oftheMatter under Article 11oftheDSU
75. Argentina makes twoclaims under Article 11oftheDSU. Itsubmits thatthePanel acted
inconsistently withArticle 11in:(i)admitting certain evidence submitted bytheUnited States two
daysbefore thesecond substantive meeting ofthePanel withtheparties, andgranting Argentina only
twoweeks torespond; and(ii)notseeking information from, andconsulting with, theIMFtoobtain
itsopinion onspecific aspects ofthematter relating tothestatistical taximposed byArgentina.65We
examine eachofthese arguments inturn.
76. Article 11oftheDSU states inpart:
Thefunction ofpanels istoassist theDSBindischarging its
responsibilities under thisUnderstanding andthecovered agreements.
Accordingly,apanelshouldmakeanobjectiveassessmentofthematter
before it,including anobjective assessment ofthefactsofthecase
andtheapplicability ofandconformity withtherelevant covered
agreements, andmake suchother findings aswillassist theDSBin
making therecommendations oringiving therulings provided forin
thecovered agreements. ...
63Panel Report, para. 6.79.
64Ibid.
65Argentina 'sappellant 'ssubmission, paras. 106-114.WT/DS56/AB/R
Page28
A. Admission ofCertain Evidence
77. Argentina submits thatthePanel acted inconsistently withArticle 11oftheDSUbyadmitting
certain evidence offered bytheUnited States twodaysbefore thesecond substantive meeting ofthe
Panel withtheparties. Thisevidence consisted ofapproximately 90invoices andcustoms documents
purporting toshow specific cases inwhich Argentina hadapplied duties inexcess ofits35percent
advalorem tariffbinding.66Atthesecond substantive meeting ofthePanel withtheparties, Argentina
requested thePanel toreject thisevidence onthegrounds thatithadbeensubmitted toolateinthe
panel process andthat,because oftheblacking-out ofcertain information from these documents, it
would beimpossible forArgentina torespond tothisevidence. These documents related tocustoms
operations ortransactions carried outusing themanual customs clearance system rather thantheMARIA
computerized system which, Argentina states, made itimpossible toverify theinformation within the
timeperiod granted bythePanel.67ThePanel ruled thatitwould admit thisevidence, butallowed
Argentina twoweeks torespond toit.
78. Paragraph 6.55ofthePanel Report reads, inpart,asfollows:
Wenotethattherules ofprocedures ofpanels donotprohibit the
practice ofsubmitting additional evidence afterthefirsthearing ofthe
Panel. Until theWTO Members agree ondifferent andmore specific
rulesonthisregard, ourmainconcern istoensure that"dueprocess" is
respected andthatallparties toadispute aregiven alltheopportunities
todefend theirposition tothefullest extent possible. Inlightofthe
difficulties faced byArgentina inresponding tothisevidence onsuch
ashort notice, wedecided toaccept thisadditional evidence onthe
understanding thatArgentina would haveaperiod oftwoweeks to
provide further comments onthese additional invoices andcustoms
documents. Argentina informed thePanel thatitwould notbe
submitting anyfurther comment.
79. Article 11oftheDSUdoesnotestablish timelimits forthesubmission ofevidence toapanel.
Article 12.1oftheDSU directs apanel tofollow theWorking Procedures setoutinAppendix 3of
theDSU, butatthesame timeauthorizes apanel todootherwise afterconsulting theparties tothe
dispute. TheWorking Procedures inAppendix 3alsodonotestablish precise deadlines forthe
66SeePanel Report, paras. 3.179 and6.55.
67Argentina 'sappellant 'ssubmission, paras. 107-108.WT/DS56/AB/R
Page29
presentation ofevidence byaparty tothedispute.68ItistruethattheWorking Procedures "donot
prohibit" submission ofadditional evidence afterthefirstsubstantive meeting ofapanel withtheparties.
Itisalsotrue,however, thattheWorking Procedures inAppendix 3docontemplate twodistinguishable
stages inaproceeding before apanel. Paragraphs 4and5oftheWorking Procedures address the
firststage inthefollowing terms:
4. Before thefirstsubstantive meeting ofthepanel withthe
parties, theparties tothedispute shalltransmit tothepanel written
submissions inwhich theypresent thefacts ofthecaseandtheir
arguments.
5. Atitsfirstsubstantive meeting withtheparties, thepanel shall
asktheparty which hasbrought thecomplaint topresent itscase.
Subsequently, andstillatthesame meeting, theparty against which
thecomplaint hasbeenbrought shallbeasked topresent itspoint of
view.
Thesecond stage ofapanel proceeding isdealtwithinparagraph 7which states:
7. Formal rebuttals shallbemade atasecond substantive meeting
ofthepanel. Theparty complained against shallhavetherighttotake
thefloor firsttobefollowed bythecomplaining party. Theparties
shallsubmit, prior tothatmeeting, written rebuttals tothepanel.
Under theWorking Procedures inAppendix 3,thecomplaining party should setoutitscaseinchief,
including afullpresentation ofthefactsonthebasis ofsubmission ofsupporting evidence, during
thefirststage. Thesecond stage isgenerally designed topermit "rebuttals" byeachparty ofthe
arguments andevidence submitted bytheother parties.
80. Asnoted above, however, theWorking Procedures intheirpresent formdonotconstrain panels
withhardandfastrulesondeadlines forsubmitting evidence. ThePanel could haverefused toadmit
theadditional documentary evidence oftheUnited States asunseasonably submitted. ThePanel chose,
instead, toadmit thatevidence, atthesame timeallowing Argentina twoweeks torespond toit.
Argentina drewattention tothedifficulties itwould faceintracing andverifying themanually processed
customs documents andinresponding tothem, sinceidentifying names, customs identification numbers
68Aswehaveobserved intwoprevious Appellate Body Reports, webelieve thatdetailed, standard working procedures
forpanels would helptoensure dueprocess andfairness inpanel proceedings. SeeEuropean Communities -Regime for
theImportation, SaleandDistribution ofBananas ,adopted 25September 1997, WT/DS27/AB/R, para. 144; India -Patent
Protection forPharmaceutical andAgricultural Chemical Products ,adopted 16January 1998, WT/DS50/AB/R, para. 95.WT/DS56/AB/R
Page30
and,insome cases, descriptions oftheproducts hadbeenblacked out. ThePanel could wellhave
granted Argentina more thantwoweeks torespond totheadditional evidence. However, there isno
indication inthepanel record thatArgentina explicitly requested fromthePanel, atthattimeoratany
latertime, alonger period within which torespond totheadditional documentary evidence oftheUnited
States. Argentina alsodidnotsubmit anycountering documents orcomments inrespect ofanyof
theadditional documents oftheUnited States.
81. Accordingly, while another panel could wellhaveexercised itsdiscretion differently, wedo
notbelieve thatthePanel herecommitted anabuse ofdiscretion amounting toafailure torender an
objective assessment ofthematter asmandated byArticle 11oftheDSU.
B. Consultation withtheIMF
82. Argentina alsoargues thatthePanel failed tomake "anobjective assessment ofthematter",
asrequired byArticle 11oftheDSU, bynotacceding totherequest oftheparties toseekinformation
from, andconsult with, theIMFsoastoobtain itsopinion onspecific aspects ofthematter concerning
thestatistical tax.69TheDSUgivespanels different means orinstruments forcomplying withArticle 11;
among theseistherightto"seek information andtechnical advice" provided inArticle 13oftheDSU.
Argentina maintains thatthePanel didnotmake useofthisright, which would haveallowed ittoverify
theinformation provided bytheparties, andwhich might havealtered thePanel'sfindings regarding
thestatistical tax.70
83. During thepanel proceedings, theUnited States argued thatArgentina hadnotdemonstrated
thattheimposition ofa3percentstatistical taxwasrequired, orevenrequested, bytheIMF, and
invited thePanel toconsult withtheIMFtoascertain whether ithadasked Argentina toimpose the
tax.71Initsappellant 'ssubmission, Argentina states thatittoorequested "consultations" withtheIMF
bythePanel.72
84. Theonly provision oftheWTO Agreement thatrequires consultations withtheIMF is
Article XV:2 oftheGATT 1994. Thisprovision requires theWTO toconsult withtheIMFwhen
69Argentina 'sappellant 'ssubmission, para. 111.
70Argentina 'sappellant 'ssubmission, paras. 111-112.
71Opening statement oftheUnited States atthefirstmeeting ofthePanel withtheparties, p.8andsecond submission
oftheUnited States tothePanel, pp.25-26. Also seePanel Report, para. 3.281.
72Argentina 'sappellant 'ssubmission, para. 90,referring toPanel Report, para. 3.294.WT/DS56/AB/R
Page31
dealing with"problems concerning monetary reserves, balances ofpayments orforeign exchange
arrangements".73However, thiscasedoesnotrelate tothese matters. Article 13.1oftheDSU gives
apanel "...therighttoseekinformation andtechnical advice from anyindividual orbody which it
deems appropriate ."(emphasis added) Pursuant toArticle 13.2oftheDSU, apanel mayseek
information fromanyrelevant source andmayconsult experts toobtain theiropinions oncertain aspects
ofthematter atissue. Thisisagrant ofdiscretionary authority: apanel isnotduty-bound toseek
information ineachandevery caseortoconsult particular experts under thisprovision. Werecall
ourstatement inECMeasures Concerning Meat andMeat Products (Hormones) thatArticle 13of
theDSUenables apanel toseekinformation andtechnical advice asitdeems appropriate inaparticular
case, andthattheDSU leaves "tothesound discretion ofapanel thedetermination ofwhether the
establishment ofanexpert review group isnecessary orappropriate."74Justasapanel hasthediscretion
todetermine howtoseekexpert advice, soalsodoesapanel havethediscretion todetermine whether
toseekinformation orexpert advice atall.
85. AsintheWTO Agreement ,there arenoprovisions intheAgreement Between theIMFand
theWTO thatrequire apanel toconsult withtheIMFinacasesuchasthis. Under paragraph 8of
thislatter Agreement, inacaseinvolving "exchange measures within theFund'sjurisdiction", theIMF
"shall inform inwriting therelevant WTO body(including dispute settlement panels) ...whether such
measures areconsistent withtheArticles ofAgreement oftheFund." Thiscasedoesnot,however,
involve "exchange measures within theFund'sjurisdiction". Paragraph 8alsoprovides thattheIMF
"may communicate itsviews inwriting onmatters ofmutual interest tothe[WTO] oranyofitsorgans
orbodies (excluding theWTO'sdispute settlement panels )..."(emphasis added). Evidently, theIMF
hasnotbeenauthorized toprovide itsviews toaWTO dispute settlement panel onmatters notrelating
toexchange measures within itsjurisdiction, unless itisrequested todosobyapanel under Article 13
oftheDSU.
86. Inthiscase,wefindthatthePanel acted within thebounds ofitsdiscretionary authority under
Articles 11and13oftheDSUindeciding nottoseekinformation from, nortoconsult with, theIMF.
While itmight perhaps havebeenuseful forthePanel tohaveconsulted withtheIMFonthelegal
character oftherelationship orarrangement between Argentina andtheIMFinthiscase, webelieve
thatthePanel didnotabuse itsdiscretion bynotseeking information oranopinion from theIMF.
73Furthermore, Article XV:2 states that,insuchconsultations, theWTO "...shallaccept allfindings ofstatistical and
other factspresented bytheFund relating toforeign exchange, monetary reserves andbalances ofpayments, andshallaccept
thedetermination oftheFund astowhether action byaMember inexchange matters isinaccordance withtheArticles of
Agreement oftheInternational Monetary Fund ...".
74Adopted 13February 1998, WT/DS26/AB/R, WT/DS48/AB/R, para. 147.WT/DS56/AB/R
Page32
Forthesereasons, wefindthatthePanel didnotviolate Article 11oftheDSUbynotseeking information
from,andconsultingwith,theIMFsoastoobtainitsopiniononspecificaspectsofthematterconcerning
thestatistical taximposed byArgentina.
VII. Findings andConclusions
87. Forthereasons setoutinthisReport, theAppellate Body:
(a) modifies thePanel'sfindings inparagraphs 6.31and6.32ofthePanel Report by
concluding thattheapplication ofatypeofdutydifferent fromthetypeprovided for
inaMember 'sSchedule isinconsistent withArticle II:1(b), firstsentence, ofthe
GATT 1994totheextent thatitresults inordinary customs duties being levied inexcess
ofthose provided forinthatMember 'sSchedule. Inthiscase, Argentina hasacted
inconsistently with itsobligations under Article II:1(b), firstsentence, ofthe
GATT1994,becausetheDIEMregime,byitsstructureanddesign,results,withrespect
toacertain range ofimport prices inanyrelevant tariff category towhich itapplies,
inthelevying ofcustoms duties inexcess ofthebound rateof35percentadvalorem
inArgentina 'sSchedule;
(b) concludes thatthePanel didnoterrinfinding thatArgentina hadacted inconsistently
withitsobligations under Article IIoftheGATT 1994"inallcases" inwhich Argentina
applied theDIEM, and,therefore, upholds thefindings ofthePanel inparagraph 6.65
ofthePanel Report;
(c) upholds thefindings ofthePanel inparagraphs 6.79and6.80ofthePanel Report;
and
(d) concludes thatthePanel didnotviolate Article 11oftheDSUin:(i)admitting certain
evidencesubmittedbytheUnitedStatestwodayspriortothesecondsubstantivemeeting
ofthePanel withtheparties, andgranting Argentina twoweeks torespond; and(ii)
notseeking information from, andconsulting with, theIMFsoastoobtain itsopinion
onspecific aspects ofthematter concerning thestatistical taximposed byArgentina.WT/DS56/AB/R
Page33
Signed intheoriginal atGeneva this11thdayofMarch 1998 by:
_________________________
SaidEl-Naggar
Presiding Member
_________________________ _________________________
Florentino Feliciano Mitsuo Matsushita
Member Member