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Release of WTO Appellate Body report on the Import Restrictions by Argentina

On January 15 (Geneva time), 2015, the WTO released an Appellate Body report on import restrictions imposed by the Argentine Republic (“Argentina”), an issue that has been examined by the WTO at the request of Japan, the U.S., and the EU. The report presents a ruling that fully supports Japan’s claim that the import restrictions by Argentina are inconsistent with Article XI:1 (General Elimination of Quantitative Restrictions) of the General Agreement on Tariffs and Trade 1994 (GATT).

1. Outline of the issue

Since November 2008, Argentina has imposed a series of import restrictions, including a trade balancing requirement, the Advanced Sworn Import Declaration procedure, and non-automatic import licenses, on the importation of a wide range of goods. These restrictions have had an impact on imports of a variety of goods, such as automobiles, home appliances, and electric products, from Japan to Argentina, and disrupted and delayed the flow of imports. To address this situation, Japan, jointly with the U.S., requested consultations with Argentina under the WTO Agreement in August 2012, and the consultations were held in September 2012. Based on the results of the consultations, Japan requested the WTO to establish a panel concerning the import restrictions by Argentina under the WTO Agreement in December 2012, jointly with the U.S. and the EU. Accordingly, the panel was established in January 2013.

*Note: The EU separately requested consultations with Argentina under the WTO Agreement in May 2012, and the consultations were held in July 2012.

References
METI News Release (August 21, 2012):
http://www.meti.go.jp/english/press/2012/0821_01.html
METI News Release (January 28, 2013):
http://www.meti.go.jp/english/press/2013/0128_01.html

Following its establishment, the panel held meetings (oral hearings) in September and December 2013, and the WTO finally released a panel report on August 22nd, 2014, which fully supports Japan’s claim that Argentina’s import restrictions are inconsistent with Article XI:1 (General Elimination of Quantitative Restrictions) of the GATT.

Reference
METI News Release (August 22, 2014):
http://www.meti.go.jp/english/press/2014/0822_01.html

Being dissatisfied with the panel report, Argentina appealed to the Appellate Body on September 26, 2014.

After holding an oral hearing at the Appellate Body meeting with both parties attending in November 2014, the Appellate Body has released its report on the import restrictions by Argentina.

2. Highlights of the report

The Appellate Body report fully approves the claims of Japan, the U.S., and the EU, supports the panel report, and recommends that Argentina rectify the restrictions in conformity with the WTO Agreement.

The Appellate Body report:

  1. supports the panel report that fully approves the claims of Japan, the U.S., and the EU;
  2. states that Argentina’s Advanced Sworn Import Declaration is a measure to restrict the importation of goods and thus inconsistent with Article XI:1 of the GATT;
  3. states that Argentina’s trade balancing requirement is recognized as a measure to restrict the importation of goods with systematic and continued application, and, accordingly, is inconsistent with Article XI:1 of the GATT; and
  4. recommends Argentina to rectify the WTO-inconsistent measures in conformity with the WTO Agreement.

References

1) Article XI (General Elimination of Quantitative Restrictions) of the GATT (excerpts)

  1. No prohibitions or restrictions other than duties, taxes or other charges, whether made effective through quotas, import or export licenses or other measures, shall be instituted or maintained by any contracting party on the importation of any product of the territory of any other contracting party or on the exportation or sale for export of any product destined for the territory of any other contracting party.

2) Major import restrictions imposed by Argentina

  1. Trade balancing requirement

    Under this measure, when importers intend to import a certain amount of goods to Argentina, the government of Argentina requires the importers to export the same amount of Argentine products in terms of value, in exchange for permitting the imports. The requirement is enforced through de facto guidance with no provisions. If such importers do not satisfy the requirement, the government may not approve such importers’ declaration under Advanced Sworn Import Declaration procedure in Item [ii] below, or may not issue a license under the non-automatic import licenses in Item [iii] below.

  2. Advanced Sworn Import Declaration procedure

    This system requires importers to declare an import list, amounts and values to the Argentine Federal Revenue Administration and obtain approval prior to importing goods. The details of the requirements are not publicized and the Administration operates them arbitrarily.

  3. Non-automatic import licenses

    The details of the requirements for issuing the licenses were undefined, and Argentina operated the requirements arbitrarily. However, Argentina abolished this system immediately before the panel was established.

3) Panel reports’ decisions

  1. Argentina’s Advanced Sworn Import Declaration procedure is a measure to limit imports and is inconsistent with Article XI:1 of the GATT.
  2. Argentina’s trade balancing requirement is recognized as a measure to limit imports with general and prospective application, and, accordingly, it is inconsistent with Article XI:1 of the GATT.

In response, METI Minister Miyazawa released a statement, shown in the Appendix.

3. Future schedule

The Appellate Body report is expected to be formally adopted at the WTO Dispute Settlement Body meeting on January 26, 2015.

Japan requests that Argentina implement the report’s recommendations as early as possible and immediately bring the WTO-inconsistent measures into conformity with related WTO Agreements.

4. Evaluation

These rulings are significant not only from the viewpoints of securing smooth exports to Argentine markets by Japanese companies but also for clarifying the fact that protective measures such as found in this case are not accepted under the WTO Agreements amid concerns that protective measures by emerging countries are tending to expand. In addition, these rulings are also significant because the rulings found the inconsistency with the WTO Agreement of measures that are based on de facto guidance with no written provisions as well, and thus did not allow Argentina to circumvent the rulings on inconsistency with the WTO Agreement by failing to establish any applicable laws and regulations and by not specifying the details of the import restrictions.

Release date

January 15, 2015

Divisions in charge

  • Information on WTO dispute settlements in general:
    Multilateral Trade System Department & WTO Compliance and Dispute Settlement, Trade Policy Bureau
  • Information on the Japan-Argentina economic relationship
    Latin America and Caribbean Office, Trade Policy Bureau
Ministry of Economy, Trade and Industry
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