By admin
WORLD TRADE ORGANIZATION
U.S. claims victory in WTO dispute with EU over high technology products
On August 16, 2010, a Dispute Settlement Panel of the World Trade Organization (WTO) circulated its report in U.S.‑EU Dispute over tariffs on certain high‑tech products. The products at issue include flat panel computer monitors, multifunction printers, and certain cable and satellite set‑top boxes.
The dispute came before the WTO in May 2008 when the U.S., as well as various third parties such as Brazil and China (jointly U.S.), asked for consultations with the European Communities and its member States (jointly EU) about their tariff treatment of specified information technology products. The U.S. claimed that the EU has been collecting duties as high as 14% while there should be zero duties on such products.
The U.S. argued that EU tariffs for such technology products disregard the commitments to provide duty‑free treatment under the Information Technology Agreement (ITA). The EU allegedly imposes duties that are contrary to the scheduled duty‑free tariff concessions of the ITA.
In particular, several EU customs classifications, alone or in combination with Council Regulation (EEC) No. 2658/87 on the tariff and statistical nomenclature and on the Common Customs Tariff, are allegedly inconsistent with the EU obligations under Article II:1(a) and II:1(b) of the GATT 1994 and the applicable Schedules. As a result, these customs classifications nullify or impair benefits accruing to the U.S.
In September 2008, the WTO Dispute Settlement Body set up a Panel to resolve the dispute. The Panel’s report of August 2010 finds that:
[1] As for FPDs (Flat‑Panel Display Devices) within the scope of the CN code 8471 60 90: Because the concessions call for duty‑free treatment of products falling within their scope, this dutiable treatment is inconsistent with Article II:1(b) of the GATT 1994. The Panel notes, however, that the duties are currently suspended for some of these FPDs. For FPDs not subject to the duty suspension, the dutiable treatment is inconsistent with Article II:1(b) of the GATT 1994. The European Communities fails to accord treatment that is no less favorable.
[2] As for STBCs (set‑top boxes which have a communication function), the rules require duty‑free treatment of such products. This dutiable treatment is inconsistent with Article II:1(b) of the GATT 1994.
[3] The EU failed to publish CNEN 2008/C 112/03 promptly to enable governments and traders to become acquainted with them. Thus, the EU acted inconsistently with Article X:1 of the GATT 1994.
[4] The EU has also acted inconsistently with Article X:2 of the GATT 1994 with respect to the April 2007 CNEN amendment by enforcing it before its official publication as CNEN 2008/C 112/03 in the EU Official Journal on 7 May 2008.
[5] As for MFMs (Multifunctional Digital Machines), with respect to item 1 of the Annex to Commission Regulation No. 517/1999, the rules call for duty‑free treatment of products falling within its scope. This dutiable treatment is inconsistent with Article II:1(b) of the GATT 1994.
In October 2010, the EU informed the Dispute Settlement Body that it intended to implement the recommendations and rulings, and would need a reasonable period of time for that. The U.S. and the EU later agreed that a reasonable period would be until June 30, 2011.
Citation: World Trade Organization (WTO), European Communities and its Member States ‑ Tariff Treatment of Certain Information Technology Products ‑ Reports of the Panel (WT/DS375/R, WT/DS376/R, WT/DS377/R) (16 August 2010). The reports are available on the WTO website at www.wto.org; Office of the United States Trade Representative, August 2010, “United States Wins WTO Dispute with EU on High‑Tech Products.”
Filed in: 2010 International Law Update, Issue 8
By admin
WORLD TRADE ORGANIZATION
WTO Appellate Body rules favorably on most aspects of decision in favor of U.S. in U.S.‑China copyright dispute
On December 21, 2009, the Appellate Body of the World Trade Organization (WTO) issued its report (ABR) regarding the U.S.‑China dispute over “Measures Affecting Trading Rights and Distribution Services for Certain Publications and Audiovisual Entertainment Products” (DS363). The products at issue include movies for theater release, DVDs, music, books and journals. The ABR largely upholds the prior, very lengthy Dispute Settlement Report of August 2009, which sided with the U.S. on most issues. See 2009 International Law Update 95.
The dispute first came before the WTO in 2007. The U.S. asked for consultations with China about (1) certain Chinese measures that restrict trading rights as to imported movies for theater release, audio‑visual home entertainment products (videos/DVDs), sound recordings and publications (books, magazines, newspapers, electronic publications); and (2) certain Chinese measures that restrict market access for foreign suppliers. Because the consultations were unsuccessful, the DSB set up a Panel in November 2007. The DSB Report was almost 500 pages long.
The Appellate Body now:
(1) upholds the Panel’s conclusions, in [paragraph 8.1.2(c)(ii), (iii), (vi), and (vii) of] the Panel Report, that Article 30 of the Film Regulation and Article 16 of the Film Enterprise Rule are inconsistent with China’s trading rights commitments [in ¶¶ 1.2 and 5.1 of China’s Accession Protocol and paragraphs 83(d) and 84(a) and (b) of China’s Accession Working Party Report;]
(2) upholds the Panel’s conclusions, [in paragraph 8.1.2(d)(I) and (v) of the Panel Report727], that Article 5 of the 2001 Audiovisual Products Regulation and Article 7 of the Audiovisual Products Importation Rule are inconsistent with China’s obligation, in [paragraph 1.2 of ]China’s Accession Protocol [and paragraph 84(b) of China’s]
(3) finds that, by virtue of [the introductory clause of paragraph 5.1 of] China’s Accession Protocol, China may, in this dispute, invoke Article XX(a) of the GATT 1994 to justify provisions found to be inconsistent with China’s trading rights commitments under its Accession Protocol and Working Party Report;
(4) upholds the Panel’s conclusion, [in paragraph 8.2.(a)(I) of the Panel Report,] that China has not shown that the relevant provisions are “necessary” to protect public morals, within the meaning of Article XX(a) of the GATT 1994. As a result, China has not established that these provisions are justified under Article XX(a).
(5) upholds the Panel’s conclusion, [in paragraph 8.2.3(b)(I) of the Panel Report], that the provisions of China’s measures prohibiting foreign‑invested entities from engaging in the distribution of sound recordings in electronic form are inconsistent with Article XVII of the GATS.
The Appellate Body recommends that China bring the measures at issue into compliance with China’s Accession Protocol, China’s Accession Working Party Report, the GATS, and the GATT 1994.
Citation: China—Measures Affecting Trading Rights and Distribution Services for Certain Publications and Audiovisual Entertainment Products (DS363). The report is available at www.wto.org; U.S. Trade Representative press release of 21 December 2009, available at www.ustr.gov.
U.S. and EU resolve long‑standing banana dispute. On December 16, 2009, the U.S. Trade Representative announced that the U.S. and the European Union have resolved the longstanding banana dispute. The Agreement to settle the issues has been initialed. In the Agreement, the EU commits not to re‑introduce measures that discriminate among banana distributors, and to have a non‑discriminatory, tariff‑only system for the importation of bananas. Once fully ratified, the Agreement will resolve the parties’ WTO dispute, “EC ‑ Regime for the Importation, Sale and Distribution of Bananas” (WT/DS27). The Agreement complements the EU agreement with several banana‑supplying Latin American countries, the Geneva Agreement on Trade in Bananas, which was initialed the same day. The Agreements are still subject to the various parties’ domestic ratification procedures. Citation: U.S. Trade Representative press release of 16 December 2009, available at www.ustr.gov; the U.S.‑EU Agreement on bananas is available at www.ustr.gov/webfm_send/1566.
Egyptian Supreme Court supports appointment of women judges to administrative courts. Over conservative opposition, Egypt’s Constitutional Court recently gave substantial support to the right of women judges to sit on the bench in the state’s administrative courts. According to the Egyptian state media, the ruling at least partially settles a dispute within the State Council, the top administrative court, as to the extent to which the government should continue appointing female judges. When the Council voted overwhelmingly against female judges, this stirred the debate within the country over women holding senior government posts, especially in the judiciary. Women’s groups picketed the State Council following the decision. A political moderate on the issue, however, reportedly heads the court’s supervisory body. It overruled the Assembly, thus supporting the consideration of women candidates for the job. The Prime Minister then asked the Constitutional Court to resolve the standoff. The high court’s ruling said that all citizens are equal before the law, and upheld the power of the State Council’s supervisory body to resolve the issue. Nasser Amin, an Egyptian legal expert, suggests, however, that the ruling fell short of settling the issue once and for all. Thus debates within the administrative courts would probably continue between the conservatives and the liberals. “This is a good example of the liberal‑conservative split within all institutions of the Egyptian state,” Mr. Amin said. “The Constitutional Court could have put an end to it by ruling flat out that discriminating against women in public office is unconstitutional and has to stop.” The President had appointed the first female judge to the Constitutional Court in 2003 and by 2007 the government had seated 31 other female judges According to the AP, Egypt is not unaware of the women’s emancipation movement in the Middle East, being itself the spawning ground for several historic activists for women’s rights. Nevertheless, Egypt has allegedly fallen behind other Arab countries like Tunisia in appointing female judges. Citation: The Associated Press, Cairo, Egypt, filed on Monday, March 15, 2010 at 11:00:47 GMT.
U.S. and EU conclude short‑term agreement to transfer financial data to U.S. to assist it in tracking terrorist financial transactions. The Council of the European Union (EU) has authorized the signing of the “Agreement between the European Union and the United States of America on the processing and transfer of Financial Messaging Data from the European Union to the United States for purposes of the Terrorist Finance Tracking Program.” The purpose of the Agreement is for providers of international financial payment messaging services to make such data available to the U.S. Department of the Treasury. With this information, law enforcement will investigate and prosecute terrorist financing (Article 1). The U.S. may also make specific requests for information pursuant to Article 4 of the 20003 Agreement on Mutual Legal Assistance between the European Union and the United States of America. The Agreement will apply provisionally beginning on February 1, 2010, and expire on October 31, 2010. As soon as the Treaty of Lisbon enters into force, the parties intend to conclude a long‑term agreement on these matters. Citation: Decision 2010/16/CFSP/JHA, 2010 Official Journal of the European Union (L 
9, January 13, 2010. The text of the Agreement is attached to this Decision.
Filed in: 2009 International Law Update, Issue 12
By admin
WORLD TRADE ORGANIZATION
WTO Panel issues lengthy report in U.S.‑China Dispute over Chinese restrictions on imports of movies, books and other media finding many violations and inconsistencies between WTO rules and policies and actions by China
On August 12, 2009, the Dispute Settlement Body (DSB) of the World Trade Organization issued a Panel Report in the matter China ‑ Measures affecting trading rights and distribution services for certain publications and audiovisual entertainment (DS363).
In April 2007, the U.S. asked for consultations with China about (1) certain Chinese measures that restrict trading rights as to imported movies for theater release, audio‑visual home entertainment products (videos/DVDs), sound recordings and publications (books, magazines, newspapers, electronic publications); and (2) certain Chinese measures that restrict market access for foreign suppliers. Because the consultations were unsuccessful, the DSB established a Panel in November 2007. The Report is almost 500 pages long. Here is a summary of the Panel’s findings:
China’s commitments on trading rights in its Accession Protocol
(a) Measures relating to all the products:
(I) Article X.2 of the Catalogue of Prohibited Foreign Investment Industries, in conjunction with Articles 3 and 4 of the Foreign Investment Regulation, result in China acting inconsistently with paragraph 5.1 as well as paragraphs 83(d) and 84(a).
(ii) Article X.3 of the Catalogue of Prohibited Foreign Investment Industries, in conjunction with Articles 3 and 4 of the Foreign Investment Regulation, result in China acting inconsistently with paragraph 5.1 as well as paragraphs 83(d) and 84(a).
(v) Article 4 of the Several Opinions results in China acting inconsistently with paragraph 5.1 as well as paragraphs 83(d) and 84(a).
(b) Reading materials:
(ii) In respect of three requirements contained in Article 42 of the Publications Regulation, Article 42, in conjunction with Article 41, results in China acting inconsistently with paragraph 5.1 as well as paragraphs 83(d) and 84(a) and, hence, paragraph 1.2, except for audiovisual products.
(viii) Article 41 of the Publications Regulation results in China acting inconsistently with paragraph 84(b) (discretion).
(c) Films for theatrical release:
(ii) Article 30 of the Film Regulation results in China acting inconsistently with paragraph 84(b) (discretion).
(iii) Article 30 of the Film Regulation results in China acting inconsistently with paragraph 5.1 as well as paragraphs 83(d) and 84(a).
(vi) Article 16 of the Film Enterprise Rule results in China acting inconsistently with paragraph 84(b) (discretion).
(vii) Article 16 of the Film Enterprise Rule results in China acting inconsistently with paragraph 5.1 as well as paragraphs 83(d) and 84(a).
(d) Audiovisual products:
(I) Article 5 of the 2001 Audiovisual Products Regulation results in China acting inconsistently with paragraph 84(b) (discretion).
(ii) Article 27 of the 2001 Audiovisual Products Regulation results in China acting inconsistently with paragraph 84(b) (discretion).
(v) Article 7 of the Audiovisual Products Importation Rule results in China acting inconsistently with paragraph 84(b) (discretion).
(vi) Article 8 of the Audiovisual Products Importation Rule results in China acting inconsistently with paragraph 84(b) (discretion).
(x) Article 21 of the Audiovisual (Sub) Distribution Rule results in China acting inconsistently with paragraph 5.1 as well as paragraphs 83(d) and 84(a).
China’s defenses: (I) China has not demonstrated that any of the relevant measures are “necessary” to protect public morals, within the meaning of Article XX(a).
China’s national treatment and market access commitments under the GATS
(a) Distribution of reading materials:
(I) Article 4 of the Imported Publications Subscription Rule and Article 42 of the Publications Regulation are together inconsistent with China’s national treatment commitments under Article XVII of the GATS with respect to the wholesale of imported reading materials subject to subscription.
(ii) Article 2 of the Publications (Sub‑)Distribution Rule, in conjunction with Article 16 of the Publications Market Rule, is inconsistent with China’s national treatment commitments under Article XVII of the GATS with respect to the wholesale of imported reading materials subject to sales through the market.
(iii) Where master distribution involves wholesale or retail services, Article X:2 of the Catalogue of Prohibited Foreign Investment Industries of the Catalogue, in conjunction with Articles 3 and 4 of the Foreign Investment Regulation, is inconsistent with China’s national treatment commitments under Article XVII of the GATS. Article 4 of the Several Opinions is also inconsistent with Article XVII.
(iv) Article 62 of the 1997 Electronic Publications Regulation is inconsistent with China’s national treatment commitments under Article XVII of the GATS with respect to the master wholesale or wholesale of electronic publications.
(v) To the extent that it is applied to the wholesale of electronic publications, the Publications (Sub‑)Distribution Rule, together with the Publications Market Rule, is inconsistent with China’s national treatment commitments under Article XVII of the GATS.
(vii) The requirements concerning registered capital and operating term for foreign‑invested wholesalers, including service suppliers of other Members, respectively contained in paragraphs 4 and 5 of Article 7 of the Publications Sub‑Distribution Rule are inconsistent with China’s national treatment commitments under Article XVII of the GATS.
(b) Electronic Distribution of Sound Recordings:
(I) The Circular on Internet Culture (Article II), the Network Music Opinions (Article 8), and the Several Opinions (Article 4), each is inconsistent with China’s national treatment commitments under Article XVII of the GATS.
(c) Distribution of AVHE products:
(I) Article 8.4. of the Audiovisual (Sub‑)Distribution Rule is inconsistent with China’s market access commitments under Article XVI of the GATS as it contains a limitation on the participation of foreign capital in contractual joint ventures engaging in the distribution of AVHE products, which falls within the scope of Article XVI:2(f). For the same reasons, Article VI:3 of the Catalogue of Industries with Restricted Foreign Investment in the Catalogue, in conjunction with Article 8 of the Foreign Investment Regulation, is inconsistent with China’s market access commitments under Article XVI.
(ii) The Panel did not find that Article 1 of the Several Opinions is inconsistent with Article XVI of the GATS, as the United States has not established that this measure imposes a limitation that falls within the scope of Article XVI:2(f), as claimed by the United States.
(iii) Article 1 of the Several Opinions and the operating term requirement provided for by Article 8.5 of the Audiovisual (Sub‑)Distribution Rule each is inconsistent with China’s national treatment commitments under Article XVII of the GATS.
China’s national treatment obligations under Article III:4 of the GATT 1994
(a) Reading materials:
(i) Articles 3 and 4 of the Imported Publications Subscription Rule, as they are applied to newspapers and periodicals, are inconsistent with China’s obligations under Article III:4 of the GATT 1994.
(iii) Article 2 of the Publications (Sub‑)Distribution Rule, read in conjunction with Article 16 of the Publications Market Rule, is inconsistent with China’s obligations under Article III:4 of the GATT 1994.
Because China has acted inconsistently with the terms its Accession Protocol, the GATS, and GATT 1994, it has nullified and impaired benefits accruing to the U.S. The Panel recommends that China bring its measures into compliance with trading rules. – China is appealing the report.
Citation: China—Measures affecting trading rights and distribution services for certain publications and audiovisual entertainment (WT/DS363/R) (12 August 2009). The report is available on the website www.wto.org. U.S. Trade Representative press release of August 12, 2009, available at www.ustr.gov.
Russian Federation agrees to enlarge ISAF supply overflights to Afghanistan that include combat material. The United States welcomes the inaugural flight of lethal material transiting Russia en route to Afghanistan to support combat operations by the International Security Assistance Force (ISAF) there. This flight results from an agreement between the United States and the Russian Federation about transit of lethal material through Russian airspace. The two nations reached this accord last July during the Presidential summit in Moscow. It complements our agreement on shipment of non‑lethal supplies to ISAF across Russian territory which has been running smoothly for several months. Together, these provide valuable alternative supply routes to our troops in Afghanistan. Russia’s agreement to allow the United States to transit lethal equipment across its territory in support of ISAF operations is an important contribution to our efforts to improve security and stability in Afghanistan. The State Department looks forward to many more flights under this agreement. Citation: Statement 2009/1010, U.S. State Department, Ian Kelly, Spokesman; Washington, D.C., Thursday, October 8, 2009, 14:35:37 – 0500.
United Nations Security Council unanimously adopts declaration against wartime sexual assaults on women and girls. Members of the Council had before them Document S/2009/489, which contains the text of a draft resolution submitted by over 60 member nations. With Secretary of State Hillary Clinton presiding, it is noted that, under the U.N. Charter, the 15 members of the Council bear a primary duty to maintain international peace and security. Satisfying that responsibility entails protecting the lives and physical security of all people, including the women and girls who comprise half the planet’s population. Even though women and children are rarely responsible for initiating armed conflict, they are often war’s most vulnerable and violated victims. The present resolution represents a step forward in the UN’s global efforts to end violence perpetrated against women and children in conflict zones. It also builds on two prior Security Council resolutions: Resolutions 1325 and 1820, adopted last year and designed to respond to, and to prevent, sexual violence used as a tactic of war to target civilians. Yet despite these actions by the Security Council, violence against women and girls in conflict‑related situations has not diminished; in fact, in some cases, it has escalated. The dehumanizing nature of sexual violence doesn’t just harm a single individual or a single family or even a single village or a single group. It shreds the fabric that weaves us together as human beings, it endangers families and communities, erodes social and political stability, and undermines economic progress. We need to understand that it holds all of us back. Also, our prior failure as an international body to respond concretely to this global problem has eroded our collective effectiveness. So the Security Council must act now to uphold the legitimacy of this body. The Council adopted the draft resolution unanimously as Resolution 1888 of 2009. Citation: Summary of Remarks on Adoption of UNSCR Resolution to Combat Sexual Violence in Conflict; Hillary Rodham Clinton, U.S. Secretary of State presiding, U.N. Headquarters, New York City, Wednesday, September 30, 2009, 12:07:55 – 0500.
United Kingdom’s new Supreme Court opens its doors to replace House of Lords’ Judicial Committee. After six years of discussions and building, the United Kingdom’s new Supreme Court is finally ready for its judicial business. The twelve‑member Supreme Court will be the final United Kingdom court of appeal for all civil cases, and all criminal cases (excluding Scotland). It will also take over the jurisdiction of the Privy Council. The court will hear its first case on Monday, October 5. Until now, as readers of the Update know, the highest court in the land was a Judicial Committee of the House of Lords known as the Law Lords. They were hidden from public view and the general populace scarcely knew they existed. From now on, the public will know where its new highest court sits – in a refurbished Middlesex Guildhall on Parliament Square; they shall be better able to see the judges at work and, in a first for any court in England and Wales, watch cases broadcast on television. It is intended that the new tribunal possess transparency, visibility and constitutional clarity. Lord Phillips of Worth Matravers, its first President, expresses it: “Transferring the function of the [highest] court from technically being a function carried out by Parliament [the House of Lords] to a function carried out by a court of judges should advance this concept.” Lord Falconer of Thoroton agrees, contending that the reform was inevitable. “We could never go on having, in a liberal democracy, where our courts become ever more important, [the highest court] operating as a committee of the second chamber of the legislature whose acts of Parliament it was not only ruling on but, from time to time, voting on. It was an unsustainable position.” There will also be changes to the highest court’s internal judicial procedure: Lord Phillips, for example, favors more sittings by larger panels (e.g. seven or nine), and more single or majority judgments rather than the prior practice of each judge giving his own separate opinion. Its judges will be known as Justices and be addressed as My Lord or My Lady. Citation: The Times [United Kingdom], page unavailable online, Thursday, October 1, 2009, 2009 WLNR 19323668.
Demjanjuk appeal of order scheduling war crimes trial rejected by German high court. Germany’s highest court, the Bundesverfassungsgericht (BVerfG) [Federal Constitutional Court] has turned down two petitions that were filed to prevent the trial of John Demjanjuk on charges that, as a guard, he was an accessory to the mass murders at the death camp Sobibor in Nazi‑occupied Poland in 1943. The Federal Constitutional Court said that it rejected appeals from Demjanjuk’s attorney to overturn lower German court decisions to schedule his trial in Munich on next November 30 and to keep the 89‑year‑old in custody. Demjanjuk’s attorney had cited health concerns among other issues. The Court reasoned that such procedural rulings cannot be challenged through direct appeals to the Federal Constitutional Court. – The United States had the Ukrainian‑born Demjanjuk flown to Germany in May after he had lost a long battle in the U.S. federal courts to avoid deportation. Demjanjuk contends that he was merely a Red Army soldier whom the Nazis were holding as a prisoner of war and that he had never harmed anyone. Citation: Associated Press (online), Berlin, Wednesday, October 21, 2009 at 09:59:45 GMT; German Federal Constitutional Court [Bundesverfassungsgericht], Beschluesse vom 15.10.2009 und 16.10.2009, Az: 2 BvR 2331/09 und 2 BvR 2332/09.
EU Commission approves merger of Merck with Schering‑Plough Corporation. The Commission of the European Union has upheld the merger of Merck & Co. and the Schering‑Plough Corporation; the combined United States company would become the second‑largest producer of prescription medicines world‑wide. In its announcement, the EU’s antitrust authority said that the “transaction would not significantly impede effective competition” in the European pharmaceutical market. The acquisition of smaller Schering‑Plough will allow Merck to become the second‑ranking company globally in prescription medicine; this places it close behind Pfizer Inc. It is projected that the new company would have a total of about $42.4 billion in annual sales. Citation: Associated Press (online), Brussels, Belgium, Friday, October 23, 2009 at 08:52:43 GMT.
Filed in: 2009 International Law Update, Issue 7
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World Trade Organization tribunal adopts Panel report in United States‑China dispute over intellectual property rights, agreeing to some extent with United States complaints
The World Trade Organization (WTO) has adopted the Report of the Dispute Settlement Panel circulated on January 26, 2009, in the U.S.‑China dispute over intellectual property rights. The U.S. claimed that China (Plaintiffs) does not adequately protect and enforce U.S. copyrights and trademarks.
The U.S. had brought the complaint before the WTO in April 2007, requesting consultations. Specifically, the U.S. claims that (1) China lacked criminal procedures and penalties for commercial counterfeiting and piracy, which is inconsistent with Articles 41.1 and 61 of the WTO Agreement on Trade‑Related Aspects of Intellectual Property Rights (TRIPS).
The U.S. alleges that China punishes trademark counterfeiting and copyright infringement only when the violators have exceeded certain thresholds; the TRIPS, however, arguably requires the punishment of all such infringements. (2) China allows the release of certain infringing goods seized at the border into the channels of commerce once the importer has removed the infringing trademarks; this is inconsistent with Articles 46 and 59 of the TRIPS . (3) China fails to provide the protections of the Berne Convention for the Protection of Literary and Artistic Works of 1896, as revised and amended until 1971 [in force for U.S. March 1, 1989] to works of those authors whose publications or distribution the government has not authorized; this does not square with Article 9.1 of the TRIPS.
The Panel found, in particular:
(a) that the Chinese Copyright Law, specifically the first sentence of Article 4, does conflict with China’s obligations under: (I) Article 5(1) of the Berne Convention (1971), as incorporated by Articles 9.1 and 41.1 of TRIPS.
(b) with respect to the Customs measures the Panel concludes: (I) that Article 59 of TRIPS does not apply to the Customs measures insofar as they apply to goods destined for export; (ii) that the United States has not shown that the Customs measures are at war with Article 59 of TRIPS, since it incorporates the principles set out in the first sentence of Article 46 of the TRIPS ; and (iii) that the Customs measures are inconsistent with Article 59 of the TRIPS, as it incorporates the principle set out in the fourth sentence of Article 46 of TRIPS.
(c) The Panel concludes that the United States has not established that the criminal thresholds conflict with China’s obligations under the first sentence of Article 61 of the TRIPS.
To the extent that the Chinese Copyright Law and the Customs measures are inconsistent with the TRIPS , they nullify or impair benefits accruing to the United States under that Agreement. The Panel thus recommends that China bring its Copyright Law and the Customs measures into conformity with its obligations under the TRIPS Agreement.
Citation: China—Measures Affecting the Protection and Enforcement of Intellectual Property Rights, Report of the Panel (WT/DS362/R) (26 January 2009). [The Report is available on website: www.wto.org; U.S. Trade Representative press release of March 20, 2009, is available on website: www.ustr.gov.]
Filed in: 2009 International Law Update, Issue 3
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WTO Appellate Body issues Reports in Dispute over China’s discriminatory Taxation of imported Auto Parts, largely affirming Panel Report that such taxation infringes provisions of WTO regulations and policies
On December 15, 2008, the Appellate Body of the World Trade Organization (WTO) issued its reports in the dispute over China’s taxation of auto parts, and largely affirmed the prior Panel Report. The complaints allege that China’s taxes unfairly discriminate against the use of imported auto parts, and discourage auto manufacturers in China from using imported parts. They also put pressure on auto parts manufacturers to relocate manufacturing facilities to China.
The dispute began with complaints by the U.S., Canada and the European Communities. They requested WTO consultations in March and April of 2006, claiming that China’s tax measures affected their exports. The disputed tax measures included: (a) China’s Policy on Development of Automotive Industry (Order No. 8 of the National Development and Reform Commission, May 21, 2004); (b) Measures for the Administration of Importation of Automotive Parts and Components for Complete Vehicles (Decree No. 125), which entered into force on April 1, 2005); and [C]) Rules for Determining Whether Imported Automotive Parts and Components Constitute Complete Vehicles (General Administration of Customs Public Announcement No. 4, which entered into force on April 1, 2005, as well as their respective amendments and revisions.
The U.S. argued that the Chinese measures penalize manufacturers for using imported auto parts in the manufacture of vehicles for sale in China. Although China’s tariffs for auto parts are lower than those for complete vehicles, China assesses charges on imported auto parts that are effectively equal to the tariff on complete vehicles, if the imported parts exceed certain thresholds. These measures are inconsistent with the following WTO provisions: (1) Article 2 of the TRIMs Agreement; (2) Articles II (including ¶ 1) and III (including ¶¶ 2, 4 and 5) of the GATT 1994; and (3) Article 3 (including ¶¶ 1 and 2) of the SCM Agreement. Further, these tax measures nullify or impair the benefits accruing to the U.S.
Various other countries, including Japan and Mexico, joined the consultations. The consultations failed to produce a resolution, and in October 2006 the WTO Dispute Settlement Body established a single Panel to decide the matter. The Reports of the Panel were issued in July 2008.
As to the U.S. Complaint (WT/DS340), the Panel concluded that: (I) Policy Order 8, Decree 125 and Announcement 4 are inconsistent with Article III:2, first sentence of the GATT 1994 in that they subject imported auto parts to an internal charge in excess of that applied to like domestic auto parts; (ii) Policy Order 8, Decree 125 and Announcement 4 are inconsistent with Article III:4 of the GATT 1994 in that they accord imported auto parts less favorable treatment than like domestic auto parts; and (iii) Policy Order 8, Decree 125 and Announcement 4 are not justified under Article XX(d) of the GATT 1994 as measures that are necessary to secure compliance with laws or regulations which are not inconsistent with the GATT 1994.
In the alternative, assuming that the measures do fall within the scope of the first sentence of Article II:1(b) of the GATT 1994; Policy Order 8, Decree 125 and Announcement 4 are inconsistent with Article II:1(a) and Article II:1(b), first sentence of the GATT 1994 in that they accord imported auto parts treatment less favorable treatment than that provided for in the appropriate Part of China’s Schedule of Concessions; and (ii) Policy Order 8, Decree 125 and Announcement 4 are not justified under Article XX(d) of the GATT 1994 as measures that are necessary to secure compliance with laws or regulations which are not inconsistent with the GATT 1994.
With respect to CKD and SKD kits: Policy Order 8, Decree 125 and Announcement 4 are not inconsistent with Article II:1(b) of the GATT 1994; and (ii) Policy Order 8, Decree 125 and Announcement 4 are inconsistent with China’s commitment under ¶ 93 of China’s Working Party Report, which is an integral part of the WTO Agreement. The Panel recommended that China bring these inconsistent measures as listed above into conformity with its obligations under the GATT 1994 and the WTO Agreement.
In September 2008, China appealed to the Appellate Body, and the Appellate Body reports of December 15, 2008 largely affirm the Panel Reports.
As to the U.S. claims, the Appellate Body: (A) upheld the Panel’s finding that the charge imposed under the measures at issue is an internal charge within the meaning of Article III:2 of the GATT 1994, and not an ordinary customs duty within the meaning of Article II:1(b);
(B) upheld the Panel’s finding that with respect to imported auto parts in general, the measures at issue are inconsistent with Article III:2, first sentence, of the GATT 1994 in that they subject imported auto parts to an internal charge that is not applied to like domestic auto parts;
(C) upheld the Panel’s finding that with respect to imported auto parts in general, the measures at issue are inconsistent with Article III:4 of the GATT 1994 in that they accord imported auto parts less favourable treatment than like domestic auto parts;
(D) found that the Panel erred in construing the measures at issue as imposing a charge on completely knocked down (CKD) and semi‑knocked down (SKD) kits imported under Article 2(2) of Decree 125, and consequently reversed the Panel’s finding that, with respect to their treatment of imports of CKD and SKD kits, the measures at issue are inconsistent with the commitment in ¶ 93 of China’s Accession Working Party Report.
Citation: China—Measures Affecting Imports of Automobile Parts (AB‑2008‑10) (WT/DS339/AB/R, WT/DS340/AB/R, WT/DS342/AB/R), Reports of the Appellate Body ( December 15, 2008). The Reports are available at www.wto.org. The U.S. Trade Representative issued a press release dated December 15, 2008, which is available at www.ustr.gov.
United States ratifies Amendment and three Protocols to Conventional Weapons Convention. On January 21, the United States deposited with the United Nations its instruments of ratification for Protocols III, IV, and V to the Convention on Prohibitions or Restrictions on the Use of Certain Conventional Weapons which may be deemed Excessively Injurious or to have Indiscriminate Effects [in force for U.S. Sept. 24, 1995 with declarations, reservations, and understandings] (CCW) and for an amendment to that Convention. Protocol III covers incendiary weapons, Protocol IV deals with blinding laser weapons, and Protocol V has to do with explosive remnants of war. Significantly, the Amendment expands the scope of the Convention so as to apply to non‑international armed conflicts. The U.S. took a leading role in negotiating these Protocols and the Amendment. Moreover, it has long conformed with the norms contained in them, and is pleased to become a party to each of them. This action reaffirms the U.S. commitment to the development and implementation of international humanitarian law. The CCW and its Protocols are part of a legal regime that regulates the use of particular types of conventional weapons that may be deemed to pose special risks of having indiscriminate effects or causing unnecessary suffering, especially to noncombatants. The CCW is a “framework” convention. States Parties to the CCW negotiate protocols within this framework to regulate specific types of weapons. States ratify each protocol separately. Citation: U.S. State Department Media Note #2009/072, Office of Spokesman, Washington, D.C., Friday, January 23, 2009.
Canada and United States have signed updated agreement on emergency management. The Canadian Foreign Minister came to Washington on December 12 on his first official visit. In addition to discussing the many important issues on the bilateral agenda, the two Secretaries signed an updated U.S.‑Canada Memorandum of Agreement on Emergency Management Cooperation. The Agreement provides a framework for the two countries to cooperate in planning for, and responding to, natural and man‑made incidents, emergencies, and disasters. This new Agreement supersedes a 1986 agreement and reflects changes in agency responsibilities, stakeholders, and terminology, among many other features. In signing the new Agreement, the two Secretaries addressed a Security and Prosperity Partnership goal of coordinating appropriate responses to catastrophic incidents in North America, a goal reiterated at the 2007 and 2008 North American Leaders’ Summits. The U.S. had signed a similarly updated U.S.–Mexico Agreement on Emergency Management with Mexican Foreign Minister Espinosa during the U.S. Secretary’s visit to Mexico on October 23, 2008. Citation: Statement # 2008/1047 by (then) Secretary of State Condoleezza Rice, Washington, D.C., Friday, December 12, 2008.
Filed in: 2008 International Law Update, Issue 12
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Arbitrator issues award in U.S.–Antigua and Barbuda dispute over online gambling; permits Antigua and Barbuda to suspend obligations under the TRIPS Agreement even though U.S. had violated different sector obligations, namely GATS
On December 21, 2007, an arbitrator under the auspices of the Dispute Settlement Body (DSB) of the World Trade Organization (WTO) issued an award in the aftermath of the dispute between the U.S. and Antigua and Barbuda over on line gambling services. Interestingly, the arbitrator permitted Antigua and Barbuda to seek retaliation in a sector that is different (here: TRIPS Agreement, meaning intellectual property rights) from where the U.S. violations occurred (here: GATS, meaning services).
The dispute first came before the WTO in March 2003, when Antigua and Barbuda complained that the U.S. had implemented measures that impeded on line gambling providers from offering such services in the U.S., and requested consultations. In particular, Antigua and Barbuda argued that the U.S. measures were inconsistent with U.S. obligations under the General Agreement on Trade in Services (GATS), Articles II, VI, VIII, XI, XVI and XVII, as well as the U.S. Schedule of Specific Commitments annexed to the GATS.
The initial Panel Report in this dispute was issued on November 10, 2004, and found, inter alia, that the U.S. Wire Act, the Travel Act, and the Illegal Gambling Business Act, as well as several state laws, impede the cross border supply of recreational gambling services, contrary to the U.S. commitments. Thus, the U.S. failed to grant Antigua and Barbuda service providers a treatment that is “no less favorable” than provided for in the U.S. Schedule, and thus contrary to the market access provisions in Articles XVI:1 and XVI:2.
On April 7, 2005, the Appellate Body issued its report in this regard, affirming on different grounds the Panel’s finding that the U.S. Schedule includes a commitment to grant full U.S. market access for gambling and betting services. It confirmed that the U.S. had acted consistently with Articles XVI:1 and XVI:2 by limiting market access contrary to its commitments. Subsequently, an arbitrator ruled that the U.S. should comply with the recommendations and rulings of the DSB by April 3, 2006.
The WTO subsequently issued a Compliance Report, which found that the U.S. had failed to comply with the recommendations and rulings of the Dispute Settlement Body (DSB). In June 2007, Antigua and Barbuda requested DSB authorization to suspend $3.443 billion in concessions and related obligations that Antigua and Barbuda had towards the U.S. under the GATS and the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS). Even though the TRIPS Agreement is in a different sector, Antigua and Barbuda claimed that retaliation in the GATS sector was not practicable. The DSB referred the matter to an arbitrator according to Article 22.6 of the Dispute Settlement Understanding. Antigua and Barbuda later clarified that it was seeking retaliation only by suspending obligations under the TRIPS Agreement.
The arbitrator found that the annual level of nullification or impairment of benefits in this case is $21 million per year. Thus, Antigua and Barbuda may request permission from the DSB to suspend obligations to the U.S. under the TRIPS Agreement for up to $21 million per year.
Citation: World Trade Organization, United States—Measures Affecting the Cross Border Supply of Gambling and Betting Services (WT/DS285/ARB) (21 December 2007). The Report is available on the website www.wto.org. A press release of the U.S. Trade Representative of December 21, 2007 on this issue is available at www.ustr.gov.
Filed in: 2007 International Law Update, Issue11
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WTO Panel issues decision in U.S–Mexico dispute over anti dumping measures on Mexican steel; holds that model zeroing “as such” is inconsistent with the Anti Dumping Agreement
A Dispute Settlement Panel of the World Trade Organization (WTO) has issued its Report on the U.S.–Mexico dispute over anti dumping penalties on Mexican stainless steel in the form of steel sheet and strip in coils.
Mexico requested WTO consultations in May 2006, after the U.S. Department of Commerce (DOC) determined in 1999 that Mexico was dumping its stainless steel, and conducted five subsequent reviews. Mexico claims that several U.S. measures are inconsistent with trading obligations, including (1) the U.S. Tariff Act of 1930, (2) certain regulations of the U.S. DOC in Title 19 of the C.F.R., (3) the 1997 edition of the Import Administration Antidumping Manual, and (4) the DOC methodology to determine the overall margin of dumping for the products at issue, where the DOC disregarded (“zeroed”) negative dumping margins. According to Mexico, these U.S. measures violate Articles VI:1 and VI:2 of the GATT 1994; various articles of the Anti Dumping (AD) Agreement; and Article XVI:4 of the WTO Agreement.
Particularly, Mexico argues that with the DOC “zeroing procedures,” the margins of dumping calculated in investigations and periodic reviews do not fully reflect export prices that are above the normal value. It does not include the numerator of the weighted average dumping margin calculations of the results of comparisons where the export price exceeds the normal value. Mexico challenges the DOC “zeroing procedures” in connection with investigations where the weighted average normal value is compared with the weighted average export price (“model zeroing in investigations”), and the periodic reviews where the weighted average normal value is compared with individual export transactions (“simple zeroing in periodic reviews”).
Typically, the DOC calculates weighted average net prices for the product at issue. It then compares these U.S. prices to the product’s normal value, ideally in the form of a weighted average net price. After comparing U.S. price and normal value, the DOC applies “zeroing.” When the normal value is higher than the U.S. price, the resulting difference is the dumping amount. However, when the U.S. price is higher, the dumping amount is set to “zero” instead of applying the negative value. Consequently, “zeroing” eliminates negative dumping margins from the calculation and can easily create, at least in theory, dumping margins when there is no dumping.
After the consultations were unsuccessful, Mexico requested a dispute settlement panel in October 2006. The Panel finds, in particular, that:
(1) Model zeroing in investigations “as such” is inconsistent with Article 2.4.2. of the AD Agreement. However, simple zeroing in periodic reviews is “as such” not inconsistent with Articles VI:1 and VI:2 of the GATT 1994 and Articles 2.1, 2.4 and 9.3 of the AD Agreement.
(2) The DOC acted inconsistently with Article 2.4.2 of the AD Agreement in the investigation at issue by using model zeroing. However, the DOC did not act inconsistently by using simple zeroing in the periodic review on such Mexican steel products.
The Panel recommends that the U.S. bring its measure into conformity with its WTO obligations. It does not make a recommendation as to model zeroing in investigations “as such” because the DOC stopped using the methodology during these dispute settlement proceedings. The Panel does not make any specific recommendations as to how exactly the U.S. should implement the Panel findings.
Citation: World Trade Organization, United States—Final Anti dumping Measures on Stainless Steel from Mexico (WR/DS344/R) (20 December 2007). The text of the Panel Report is available at www.wto.org.
Filed in: 2007 International Law Update, Issue11
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WTO issues Compliance Report in U.S. Brazil Cotton Dispute
On December 18, 2007, a Panel of the World Trade Organization (WTO) issued its report on U.S. compliance with the original Panel and the Appellate Report in the U.S. Brazil Dispute over U.S. subsidies for Upland Cotton (DS267).
This dispute goes back to September 2002, when Brazil requested consultations with the U.S. regarding U.S. subsidies to producers of cotton. The WTO established a Panel to hear the dispute.
The Dispute Settlement Panel issued its report in May 2004, which was largely confirmed by the Appellate Body. In particular, the Appellate Body upheld, among other things:
(1) the Panel’s finding that the challenged U.S. price contingent subsidies (marketing loan program payments, user marketing payments, market loss assistance payments, counter cyclical payments) are a significant price suppression within the meaning of Article 6.3(c) of the SCM Agreement;
(2) the Panel’s finding that “user marketing payments” (payments to domestic users of such products) under Section 1207(a) of the Farm Security and Rural Investment Act of 2002 (FSRI) are subsidies contingent on the use of domestic over imported goods that are inconsistent with Articles 3.1(b) and 3.2 of the SCM Agreement; and
(3) the Panel’s finding that the U.S. credit guarantee programs (so called GSM 102, GSM 103 and SCGP, which support commercial financing of agricultural exports) are export subsidies within the meaning of the SCM Agreement.
Brazil requested an Article 21.5 panel in August 2006 to review U.S. compliance with the recommendations of the Dispute Settlement Panel. The Panel issued its compliance report, concluding that:
(1) The U.S. has acted inconsistently with its obligations under Articles 5(c) and 6.3(c) of the SCM Agreement in that the effect of marketing loan and counter cyclical payments to U.S. upland cotton producers under the FSRI Act of 2002 is a “significant price suppression” within the meaning of Article 6.3(c). Thus, the U.S. has failed to comply with the WTO recommendations.
(2) The U.S. has acted inconsistently with Article 10.1 of the Agreement on Agriculture through the GSM 102 export credit guarantees issued after 1 July 2005. The U.S. is applying export subsidies in a way to circumvent the U.S. export subsidy commitments. Thus, the U.S. has failed to bring its measures in conformity with the Agreement on Agriculture and failed to withdraw the subsidy without delay.
The U.S. must remove the adverse effects or withdraw the subsidy under Article 7.8 of the SCM Agreement.
Citation: United States—Subsidies on Upland Cotton, Recourse to Article 21.5 of the DSU by Brazil (WT/DS267/RW) (18 December 2007).
Filed in: 2007 International Law Update, Issue10
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WTO Panel issues mixed ruling in Japan Korea dispute over Japanese restrictions on imports of Dynamic Random Access Memories (DRAMS) from Korea
On July 13, 2007, the Dispute Settlement Body (DSB) of the World Trade Organization (WTO) issued its report in the matter of Korea’s complaint against Japan regarding the latter’s imposition of countervailing duties on certain Dynamic Random Access Memories (DRAMs) from Korea. The dispute arose out of Japan’s Investigating Authorities’ (the JIA) investigation of Korean DRAMs made by Hynix Semiconductor, Inc. (Hynix). JIA concluded that certain debt restructuring programs between Hynix and its creditors on October 2001 and December 2002 were improper subsidies. JIA calculated a countervailing duty rate of 27.2 % on imports of DRAMs from Hynix. The United States and EU asked to join the consultations in March 2006. Japan accepted both requests.
According to Korea, numerous errors in the Japanese response violated various articles of the Agreement on Subsidies and Countervailing Measures (the SMC Agreement) and the GATT 1994. For instance, the JIA allegedly failed to properly calculate the benefit and failed to base its final injury determinations on positive evidence.
The Panel found various violations of Japan’s obligations under the SCM Agreement. In particular, the Panel held (1) that Japan improperly found government “entrustment or direction” of the Four Creditors to take part in the December 2002 restructuring; (2) that Japan erred in finding that the December 2002 restructuring benefitted Hynix; (3) that Japan mistakenly calculated the amount of benefit conferred by the October 2001 and December 2002 restructurings; (4) that Japan improperly used methods to calculate the amount of benefit that were not provided for in its national legislation or implementing regulations; and (5) that Japan incorrectly levied countervailing duties in 2006, despite the JIA finding that some of the subsidies applied only from 2001 through 2005. (See section 8.2 of the Panel Report).
The Panel also rejected several of Korea’s claims. These included (1) that Japan improperly treated certain Hynix creditors as “interested parties”; (2) that Japan erred in finding government “entrustment or direction” of the creditors to take part in the October 2001 restructuring; and (3) that Japan mistakenly concluded that the October 2001 restructuring conferred a benefit on Hynix. (See section 8.1 of the Panel Report).
Citation: Japan – Countervailing Duties on Dynamic Random Access Memories (DRAMs) from Korea (DS 336) (July 13, 2007). Panel report is available on WTO website at “www.wto.org”; “WTO issues mixed ruling in Korea Japan chip dispute,” Siliconvally.com, July 13, 2007. See also 2005 International Law Update 29; 2005 International Law Update 111.
Filed in: 2007 International Law Update, Issue9
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WTO Appellate Body issues compliance report in U.S. Argentina dispute criticizing aspects of U.S. anti dumping measures on oil country tubular goods from Argentina
In the original WTO proceeding about anti dumping duties on oil country tubular goods (OCTGs) from Argentina, Argentina complained about several aspects of the “sunset” review conducted by the U.S. Department of Commerce (DOC) and the U.S. International Trade Commission (ITC) of the anti dumping duty order on OCTG products from Argentina. Under the sunset review, DOC and ITC conduct reviews no later than five years after it has issued an antidumping or countervailing duty order to determine whether revoking the order would be likely to lead (1) to the continuation or recurrence of dumping or subsidies of concern to DOC and (2) to the material injury which the ITC handles.
The disputed U.S. measures had to do with the waiver of an exporter’s right to take part in the review carried out by the DOC. At the time, there existed two types of waivers: (a) the so called “affirmative waiver” where the exporter explicitly waives its right to be a party to under Section 751(c)(4)(A) of the U.S. Tariff Act of 1930, [19 U.S.C. Section 1675]; and (b) the so called “deemed waiver”where the exporter, through silence or failure to submit a response, is deemed to have waived its right to be in on the proceeding under 19 C. F. R. Section 351.218(d)(2)(iii).
U.S. law requires federal agencies determine the likelihood of dumping for sunset review purposes on an “order wide” basis. An individual respondent may waive participation in the proceeding under Section 751(c)(4)(A). The result is that the agency will enter an affirmative finding of probable dumping for that company under Section 751(c)(4)(B).
In its original sunset review, DOC had based its affirmative likelihood of dumping determination on two bases: First, that dumping had continued over the life of the anti dumping order and, second, that import volumes had declined after the anti dumping order.
The WTO agreed with Argentina that certain provisions of U.S. law dealing with waivers in sunset reviews and certain provisions of the Sunset Policy Bulletin (SPB) on the DOC’s obligation to determine the likelihood of continuation or recurrence of dumping in sunset reviews, do not square with the Anti Dumping Act. On October 28, 2005, the DOC’s International Trade Administration issued a final rule amending 19 C.F.R. Part 351. See 70 Fed. Reg. 62061.
Dissatisfied with U.S. compliance, Argentina sought recourse under Article 21.5 of the Dispute Settlement Understanding as to whether government measures do comply with WTO trading rules. Argentina challenged the U.S. compliance under the WTO Anti Dumping Agreement and the Marrakesh Agreement Establishing the World Trade Organization (WTO Agreement).
A WTO Panel issued its report on November 30, 2006 (WT/DS268/RW). It found that certain waiver provisions under the Tariff Act remain inconsistent with the rules for sunset reviews laid down by Article 11.3 of the Anti Dumping Agreement. The DOC acted inconsistently with Article 11.3 of this Agreement in its determination of likelihood of continuation or recurrence of dumping for the purposes of its revised sunset determination in the Section 129 proceedings at issue.
In its report, the Appellate Body reverses the Panel’s finding that Section 751(c)(4)(B) of the Tariff Act, in conjunction with Section 751(c)(4)(A) and Section 351.218(d)(2) of the Regulations, is inconsistent with Article 11.3 of the Anti Dumping Agreement. Secondly, it approves the Panel’s finding that the DOC’s volume analysis was properly before the Panel. Finally, it agrees with the Panel’s finding that the DOC did not fail to carry out U.S. obligations under Articles 11.3 and 11.4 of the Anti Dumping Agreement by developing a new factual basis pertaining to the original review period for its Section 129 determination.
Citation: United States Sunset Reviews of Anti Dumping Measures on Oil Country Tubular Goods from Argentina (WT/DS268/AB/RW) (12 April 2007). The full report is available on the website www.wto.org.
Filed in: 2007 International Law Update, Issue4
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