||Import Restrictions on Yellowfin Tuna
To reduce the incidental intake of dolphins by Yellowfin tuna fisheries, the United States
enacted the Marine Mammal Protection Act in 1972, which bans imports of Yellowfin tuna and
their processed products from Mexico and other countries where fishing methods result in
the incidental intake of dolphins. To prevent circumvention, the United States also
demands that similar import restrictions be adopted by third countries importing Yellowfin
tuna or their processed products from countries subjected to the above import restrictions
and prohibits imports of Yellowfin tuna and their products from countries which do not
comply with this demand. Japan, the European Union, and others have been targeted by the
The United States contends that the above measures are designed to protect dolphins and
are measures "necessary to protect human, animal or plant life or health"
(Article XX (b)) and measures "relating to the conservation of exhaustible natural
resources" (Article XX (g)) and therefore, these measures are permissible under the
GATT as exceptions to the general prohibition of quantitative restrictions.
However, a panel established pursuant to the request of Mexico in February 1991 found in
September 1991 that the US measures violate the GATT. (However, because Mexico sought
resolution through bilateral negotiations with the United States, the report was not
adopted by the GATT Council.)
The panel report concluded that the US measures violate Article XI as quantitative
restrictions and that such restrictions are not justified by Article XX on the grounds
that (1) the measures may not be a necessary and appropriate means of protecting dolphins,
and (2) allowing countries to apply conservation measures which protect objects outside
territories and thus to unilaterally determine the necessity of the regulation and its
degree would jeopardize the rights of other countries.
In September 1992, a panel was established again at the behest of the European Communities
and the Netherlands (representing the Dutch Antilles). Its report, issued in May 1994,
found US measures to be in violation of the GATT.
The report noted that the United States' import prohibitions are designed to force policy
changes in other countries and indeed can only be effective if such changes are made.
Since these prohibitions are not measures necessary to protect the life and health of
animals exempted by nor primarily aimed at the conservation of exhaustible natural
resources, the report concluded that the US measures are contrary to GATT Article XI:1,
and are not covered by the exceptions in Articles XX:(b) or (g).
The report was submitted to the Council for adoption in July 1994, but the United States
blocked adoption. In reaction to this deadlock situation, the United States and the
governments of countries concerned, such as Latin American countries, have agreed to the
Panama Declaration which adopts restrictive measures under the IATTC pursuant to the
annual plan to regulate the incidental intake of dolphins, as prepared in 1992. In
response, the United States enacted the International Dolphin Conservation Programme Act
(Public Law No. 105-42) in August 1997, which would remove the embargo on Yellowfin tuna
with respect to imports from those IATTC members who participate in a dolphins
conservation programme formulated under the Law, if an enforceable international agreement
enters into force to implement the Panama Declaration. The international agreement which
has the legal binding force to carry this out, the international dolphin preservation
agreement was adopted in February 1998.
Aithough the United States is considering the lifting of the measures concerned, it
maintains them at present. We will continue to watch to ensure that the movement of the
United States closely as consistency with its obligations under the WTO Agreement.
||Import Restrictions on Shrimp and Shrimp Products
Under Section 609 of Public Law 101-162 of 1989, the United States began requiring on 1
May 1991 that shrimp fishers provide a certificate showing that their governments have a
regulatory programme comparable to the United States to protect sea turtles from
shrimpers' nets. Absent such a certificate, imports of shrimp from countries that allow
harvest methods of shrimp which may be harmful to sea turtles are banned.
The United States initially limited application of the law to fourteen countries in the
Caribbean and Gulf of Mexico region, requesting that these countries use the same kind of
turtle excluder devices as US shrimp trawlers. In accordance with the United States Court
of International Trade (USCIT) decision of December 1995 with regard to a lawsuit brought
by a US environmental NGO called "Earth Island Institute" in 1993, the United
States began applying the law to countries all over the world, including Japan, beginning
1 May 1996. A subsequent USCIT ruling allows shrimp to be imported without a certificate
if it is raised on fish farms (for more than 30 days), is harvested by methods that do not
involve the use of engines, or is cold-water shrimp (from regions where sea turtles do not
live). Otherwise, imports were banned without a certificate (regardless of whether
excluder devices are used or not).
India, Malaysia, Pakistan, and Thailand have requested consultations under GATT Article
XXII (the Philippines later joined as well) claiming the US measures violate GATT Article
XI and is not justified by any of the provisions of the GATT including Article XX. The
first round of consultations was held in November with Japan participating as a third
party. Further, at a DSB meeting held in January 1997, Thailand and Malaysia requested the
establishment of a panel, but the United States disagreed. Thailand, Malaysia and Pakistan
(India later joined as well) requested again, and the establishment of the panel was
decided at the DSB meeting held in February 1997. Japan reserved its rights as a third
The panel report issued in May 1998 found that US measures regarding shrimp imports
constituted "prohibitions or restrictions" under GATT Article XI:1 and were
therefore in violation of Article XI of the GATT 1994. It also found that measures that
attempted to influence the policies of other countries by threatening to undermine the
multilateral trading system were not justified even under GATT Article XX. The panel
recommended the DSB to request the United States to bring the measures in question into
conformity with its obligations under the WTO Agreement.
The United States appealed the decision in July. The Appellate Body did reverse some of
the panel's findings in October, but it also found that the US measures were not justified
under Article XX of the GATT 1994. In November 1998, the DSB adopted the report by the
Appellate Body which recommended the DSB to request the United States to bring its
measures into conformity with its obligations under the WTO Agreement. There were some
objections during the DSB meeting to the Appellate Body's interpretation of GATT Article
XX, because it left room for the extraterritorial application of domestic measures, but
the meeting adopted the report nonetheless. We expect that the United States will modify
its shrimp import regime so that the measures in question are consistent with its
obligations under the WTO Agreement, and we will continue to watch to ensure that this is
||Export Restrictions on Logs
To conserve spotted owls' habitat, the United States regulated the cutting of forests.
This in turn, reduced the supply on the domestic logs market and in response, the United
States in August 1990, imposed a permanent ban on exports of logs cut from federally-owned
forests and implemented export restrictions on logs cut from state-owned forests. From the
beginning, the Forest Resource Conservation and Shortage Relief Act of 1990, which took
effect in August 1990, regulated the export volume of state log sales as follows:
||States selling not more than 400 million board feet a year are permanently banned from
exporting logs cut from state-owned forests.
||States selling more than 400 million board feet a year are, without exception, banned
from exporting three-quarters of all logs cut from state-owned forests.
The sole state satisfying the requirements stated in B above is the State of
Washington, thus 25 percent of the logs cut from its state-owned forests were allowed for
export. Nevertheless, domestic lumber mills strongly requested to be allowed to maintain
or even increase the supply of logs cut from state-owned forests in order to achieve job
security and other objectives. In September 1992, the Secretary of Commerce published a
notice which totally banned the export of logs cut from state-owned forests from October
of that year until the end of 1993.
Further, in June 1993, the Forest Resource Conservation and Shortage Relief Act was
amended to totally ban exports from states satisfying the conditions of B above until the
end of 1995 and to ban exports from states selling more than the lesser of 400 million
board feet or the annual sales from January 1996.
Nevertheless, the Balanced Budget Downpayment Act enacted in January 1996 and the later
Omnibus Consolidated Rescissions and Appropriations Act of 1996 enacted in April extended
the total ban until October 1996. In October 1996, the Omnibus Consolidated Appropriations
Act of 1997 further extended the terms of the ban until October 1997 which was followed by
the public notice of the Department of Commerce in November 1996 which formally extended
it one year. Since the amendment of this act in November 1997, the export of logs from
forests west of 100 degrees west longitude, were permanently banned.
The United States contends that its measures are implemented to protect spotted owls and
related forest resources and to relieve the resultant shortage of lumber. It reasoned that
the restrictions are permissible "to protect human, animal, or plant life or
health" (Article XX (b) of the GATT) as well as to relieve a shortage of products
consumed domestically (Article XI:2(a) and Article XX (j) of the GATT), both of which
exempt certain quantitative restrictions from their ban.
It is unlikely that the above measures are necessary nor appropriate to protect the
spotted owls' habitat nor to relieve the shortage of products in the domestic market.
Conservation of spotted owls should be accomplished by restrictions on the cutting of
forest rather than export restrictions of logs. Although the Government imposes
restrictions on log exports, it allows domestic sales of logs without any restriction and
promotes exports of lumber. Thus, these restrictions should be characterized as
quantitative restrictions implemented to protect domestic lumber mills, and as a violation
of Article XI that cannot be justified by Article XX of the GATT. Japan will continue to
request that these measures should be brought into conformity with the WTO Agreement.
||Helms-Burton Law (the "Cuban Liberty and Democratic Solidarity Act")
The US Cuban Liberty and Democratic Solidarity Act bans import of Cuban products and
products with Cuban content from third countries. For further discussion, refer to the
relevant column in Chapter 14.
||Source Diversification System for Specific Imports
In an effort to reduce its trade deficit with Japan, Korea instituted in 1980 a source
diversification system for specific imports, as amended by Article 25 of the Executive
Order of Korea's Foreign Trade Law of 1987. Article 14(2) of this law authorizes the
Minister of Trade, Industry and Energy to approve exports and imports of certain products
designated in accordance with standards set forth in a presidential order for the purpose
of balancing trade with countries. Under this system, the approval of the Association of
Foreign Trading Agents of Korea is required for imports of products exported by the
country that had the largest trade surplus with Korea for the last five years (Notice of
Ministry of Trade, Industry and Energy Proclamation on Import Source Diversification
Article 2). This approval is not normally given, thereby functioning as a de facto import
ban. This measure is clearly in violation of Article XI of the GATT, which prohibits
At the outset of its administration, the system applied to Japan, the country having the
largest trade surplus with Korea during the previous year. However, when Saudi Arabia
became the country with the largest trade surplus in 1982, the system was amended in 1983
to apply to the country with the largest trade surplus "in the past five years."
As a result, Japanese products have been continuously subjected to the import
restrictions. As quantitative import restrictions are applied in a discriminatory fashion
against a specific country, the system is inconsistent with Articles I and XIII of the
GATT, which require the non-discriminatory administration of such restrictions. Practical
problems associated with its administration and sometimes arbitrary interpretation of
tariff classifications for the items covered by the system are also noted.
Japan has requested the immediate elimination of these measures, ever since their
introduction, taking every opportunity, at the ministerial level, and with the accession
of Korea to the OECD.
As a measure to improve Japan-Korea economic relations, Korea decided to reduce the 258
products subject to the restriction by half in the five-year period beginning in 1994, and
has been gradually removing items accordingly.
With membership in OECD, Korea is committed to the elimination of this programme by the
end of 1999. In addition, at the end of 1997, the government of Korea reached an agreement
with the IMF on measures to reinforce its economic reform programme. To support this
programme, Korea is receiving loans from the IMF, the G7 and other leading developed
countries. This resulted in a commitment from Korea to eliminate the import source
diversification programme by the end of June 1999. (Korea agreed to remove twenty-five
items from the list by the end of 1997, forty by the end of June 1998, thirty-two by the
end of 1998, and sixteen by the end of June 1999.) As a result, the number of designated
items in January 1998 was reduced to eighty-eight (HS 10-digit headings), primarily in the
industrial machinery, electrical and electronic equipment, and automotive sectors. (Note:
Restrictions had already been lifted on twenty-five items by the end of 1997 and forty
items by the end of June 1998.)
At the end of December 1998, restrictions were lifted on an additional thirty-two items,
including station wagons with engine displacement of 1500cc or less, photocopying
machines, ship engines, and wheat flour. At the end of June 1999, restrictions are
scheduled to be lifted on the remaining sixteen items, including sedan automobiles and
station wagons with engine displacement of 3000 cc or less. This will eliminate all
restrictions and bring an end to this system.
We believe that the abolition of this system will contribute toward the development of
free trade, since it will constitute the elimination of a measure that was inconsistent
with the WTO and was an impediment to trade between Japan and Korea.
||Quantitative Import Restrictions
Indonesia has maintained an import ban and quantitative restrictions on a variety of items
for the protection of domestic industries; for example, a template import ban on
automobiles and motorbikes, and import quotas on commercial vehicles. Recent deregulation
has caused a year by year decrease in the number of covered items. Under the terms of the
Minister of Commerce Ordinance No.133 (June 1996), however, Indonesia still places import
restrictions on 197 items (HS 9-digit basis, 203 items at the previous proclamation).
It is welcomed that restrictions for the protection of domestic industry have been eased
substantially since 1986 through the elimination or curtailment of central buying.
However, prohibitive high tariff barriers remain on automobile imports and further, bans
or restrictions on other residual items cannot be justified by the invocation of
exceptions, such as the balance of payment provisions, and are likely incompatible with
Article XI of the GATT 1994.
Exclusive import rights to these products are given to "sole agents" designated
by the Government of Indonesia and to a quasi-public corporation, "Persero." The
system is administered through central buying systems, and administrative guidance given
to the above organizations.
In January 1998, Indonesia announced that it has agreed with IMF to abolish, by 2003,
restrictions on imports of ships and the other restrictions except for those consistent
with GATT 1994 on health, safety, environment and national security grounds.
||Export Restrictions on Logs and Lumber Products
In January 1998, the Government of Indonesia, under an IMF agreement, announced that it
would be switching from a specific duty on the export of logs and lumber products
(calculated according to volume) to an ad valorem (calculated according to price) and
would reduce the duty to 10 percent in March. It was, however, late in implementing this
measure, and in April reached a second agreement with the IMF that contained a specific
schedule for reducing the export duty (to 30 percent by 22 April 1998, to 20 percent by
the end of December 1998, to 15 percent by the end of December 1999, and to 10 percent by
the end of December 2000) and also set export quotas for logs and lumber products, as well
as additional export regulations.
Under these regulations, the ad valorem values are calculated based on standard export
prices, which themselves are determined by the government according to methods that remain
opaque. The setting of export quotas for logs and lumber products is also likely to be in
violation of Article XI of the GATT, which prohibits restrictions on product exports.
Japan will request that these measures should be brought into conformity with the WTO
Import Restrictions under the Export and Import Act
Thailand imposes import restrictions under Article 5 and other provisions of the Export
and Import Act of 1979. Restrictions are provided not only to protect national security,
public order and morality, but also for the economic purpose of protecting domestic
industries. Specific items are prescribed by Royal Decrees or Notifications of the
Ministry of Commerce, with slight changes in the number of restricted items from year to
year. The 1995 list of items requiring import licenses, prepared by the Ministry of
Commerce, includes forty-three items (classification is not according to the HS system but
according to the Ministry classification). However, in line with the Uruguay Round
Agreement, the cabinet approved an import liberalization policy for agricultural products
on 20 December 1994 which has introduced a tariff quota system for twenty-three
agricultural, forestry, and fishing products before the end of 1995 and accordingly,
import restrictions have been lifted at this time. Even still, restrictions remain in
place for twenty items, including machinery, electrical equipment, and used automobiles,
about 30 percent of which are for the protection of domestic industries. These measures
taken for such purpose are likely to constitute violations of Article XI of the GATT since
they have not been justified under any exception clause such as the balance of payment
||Export Restrictions on Logs
Since 1906, the Province of British Columbia has limited exports of logs and chips, except
for surplus stockpiles, in order to protect domestic industries. In 1986, the Province
banned exports of high-quality Douglas fir, spruce and red cedar that do not have
permission by the Provincial Secretary of Forestry regardless of whether or not they were
in surplus. As quantitative restrictions designed to protect the domestic industry, it is
highly likely that they violate GATT Article XI. Although these measures are implemented
by a provincial government not directly committed to obligations under the WTO Agreements,
the Canadian Government must "take such reasonable measures as may be available to it
to ensure observance of the provisions of" the GATT, pursuant to Article XXIV:12.
Japan will continue to request the Government of Canada to take reasonable measures to
ensure the WTO consistency of these measures by the local government.
||US-Canada Soft Wood Lumber Pact
The United States argued before a GATT panel and the US-Canada Free Trade Agreement panel,
that cheap logging fees for forests owned by Canadian provincial governments constitute a
government subsidy which makes the price of coniferous products imported into the United
States unreasonably low and damages the US industry, but lost both cases because of
insufficient evidence. Unsatisfied with these results, the United States pursued the issue
through bilateral negotiations, reaching a formal agreement in May 1996.
Under the agreement, the Canadian federal government will levy an export tax on lumber
companies for any exports from British Columbia, Alberta, Ontario, or Quebec in excess of
a set volume (14.7 billion board feet, or about 35 million cubic meters). The term of the
agreement is for five years beginning 1 April 1996, during which US lumber producers agree
that the government of the United States will take no trade-restrictive measures against
Canada. The purpose of this measure, however, is clearly to protect the US lumber industry
and as such it probably constitutes an export restriction that is prohibited under Article
11.1(b) of the Agreement on Safeguards.
||Import Restrictions under the Customs Act
Under the terms of tariff orders and other provisions of Article 31 of the Customs Act of
1967, Malaysia restricts imports of four classes of products: 1) products subject to a
total import ban (fifteen items including multicolour copy machines and weapons); 2)
products which may be imported under certain conditions (thirty-eight items including
magnetic video cassette tapes and complete vehicles), supposedly for the protection of a
domestic industry; 3) products subject to temporary import restrictions in order to
protect a domestic industry (fifteen items including cement and plastics raw material);
and 4) products which are subject to conditions as to the manner of importation and
procedures requiring quality and safety certifications from competent authorities in
Malaysia or the exporting country (forty items including fertilizers and home electronic
appliances). The remaining import restrictions may be in violation of GATT Article XI
since they cannot be justified under the GATT as exceptional restrictions such as the
restriction necessary to safeguard the balance of payments.
||Export Restrictions on Logs
The Malaysian Government, with a view to increasing domestic timber processing in its
territory, initiated an export ban on logs of ten species from the Malay Peninsula in 1972
and, since then, has strengthened the ban from time to time, culminating in the
prohibition of exports of all logs except for small size wood in 1985. Since January 1993,
similar bans on exports had been imposed on a temporary basis in the State of Sabah, which
was permitted its own forest industry policy. Sabah's ban on exports changed to an annual
export quota of two million cubic meters in November 1996 because the state's finances had
deteriorated and it needed the tax revenues that log exports generate. The State of
Sarawak also has been implementing export quotas so as to set aside a certain share of
logs produced in its territory for domestic processing. These measures are highly likely
to violate GATT Article XI.
Japan will continue to request that these measures be brought into conformity with the WTO
<Column> Malaysian Export Promotion/ Import Reduction Programme
- Outline of Programme
The Government of Malaysia announced in its 1998 budget speech in October that it will
take various measures, such as the increase of tariffs, as a part of an "Export
Promotion/Import Reduction Programme" in response to the currency crisis in ASEAN
countries. Set forth below are relevant points of the programme.
||All imports of heavy machinery for the construction sector will be required to obtain
permission to import from the Ministry of International Trade and Industry and permission
will only be given if such machinery is not available domestically (as of 18 October
||Tariffs will be significantly increased on such products as automobiles and automobile
parts, construction material (paints, cement, steal materials, etc.), consumer durables
(pottery, refrigerators, cleaners, microwave ovens, etc.), and heavy machinery (cranes,
etc.) (as of 18 October 1997).
||170% -> 200%, 50% -> 150%, 35% -> 100%, etc.
||25% -> 30%
||25% -> 30%
||Tariffs will be increased in practice by changing the calculation method regarding
Licensed Manufacturing Warehouses and Free Industrial Zones (changing from either an
input/component basis or a finished goods basis to only a finished goods basis) (as of 18
October 1997). However, the amendments to this measure, as enacted at the end of January
1998, and retroactively made effective as of 18 October 1997, have lessened the impact on
||For the manufacturing sector, companies exporting goods with value-added of 30 percent
or 50 percent will be given, respectively, a 10 percent or 15 percent income tax
exemption. In the agricultural sector and the service sector, such as health, education,
and professional services, companies exporting will be given an income tax exemption of 10
percent of the increase in the export value (as of 1 January 1998).
||Expenditure incurred on advertising local brands will be given a preferential tax
deduction (as of 1 January 1998).
- Assessment of the Above Measures
||Regarding the import restrictions on heavy machinery for the construction sector,
prohibiting imports of products that are produced domestically is an import restriction,
and thus, may be in violation of Article XI of the GATT.
|(b) and (c)
||If the tariff increases are within the bound rate, these measures are WTO-consistent,
but there is concern regarding negative effects on trade (for details see Chapter 4 on
||These measures are considered to be prohibited subsidies in violation of the Agreement
on Subsidies and Countervailing Measures. They are further inconsistent with the
standstill provision under the Agreement (for details see Chapter 6 on Subsidies and
||These measures discriminate between foreign brands and local brands, and may well
violate Article 3 of the TRIPS Agreement. They may also violate Article III of the GATT
since they provide preferential treatment to some domestic products (for details see
Chapter 12 on Intellectual Property).
<Column>Import Restrictions by India for Balance of Payments (BOP) Reasons
- India has been invoking Article XVIII balance of payment provisions to restrict a broad
range of more than 3,300 items (mainly consumer goods) since 1960 (at present, about 2,700
items are restricted).
There are several problems with these restrictions:
||Although trade restrictions taken for balance of payment reasons are supposed to be
temporary measures, these restrictions have been in place since 1960.
||The restrictions cover an enormously broad range of items most of which are consumer
goods, which suggests that they are taken not for balance of payments reasons, but to
achieve industrial policy objectives (according to paragraph 4 of Understanding on the
Balance-of-Payments Provisions of the GATT, it is regulated that restrictive import
measures taken for balance of payments purposes may only be applied to control the general
level of imports).
||The administration of licenses for the importation of restricted goods lacks
transparency and the nature of the trade restrictions is unclear. In the complaint
requesting consultations under Article XXII of the GATT, Article I (the rules and import
licensing procedures shall be neutral in application and administered in a fair and
equitable manner; EU), and Article III (prohibition of non-automatic import licensing
procedures which shall have trade-restrictive and/or distortive effects on imports
additional to those caused by the imposition of the restriction; United States, Canada,
EU, Australia, New Zealand, Switzerland) of the Agreement on Import Licensing Procedures
have been cited.
||There are a plethora of special licensing systems that give exporting companies
priority access to import licenses. Not only are these systems used as if they were export
subsidies, but special import licenses are in fact hard to use because there is often no
one to resell them to.
- The Committee on Balance-of-Payments restrictions held a review of India's import
restrictions on 21 January 1997. At the review the IMF reported that India's foreign
currency reserves were not in a state that would justify quantitative restrictions nor was
there any threat of a serious decline. It therefore recommended that quantitative
restrictions be eliminated within a short period.
The BOP Committee subsequently invited the government of India to present a plan for
eliminating the measures taken for balance of payments reasons and decided to continue the
discussion of a phase-out plan. A discussion of the phase-out plan was scheduled for June
1997. In May 1997, India proposed a three-stage and nine-year phase-out schedule. That
plan was unsatisfactory to some developed countries. After that, these countries had
negotiations with India, but did not reach agreement. The United States, EU, Canada,
Switzerland, Australia and New Zealand requested consultations under Article XXII of the
GATT in July 1997. Japan joined these consultations as a third party and in parallel, held
bilateral negotiations with India. As a result, each country, except the United States,
reached agreement on the phase-out plan with India. The phase-out plan, with which Japan
agreed, is a three-stage six-year phase out schedule (the first stage-three years, the
second stage-two years, the third stage-one year). The phase-out period of Japan's
interested items were shortened in comparison with that proposed in May 1997 by India
(items which moved to the first stage: ITA products, electric products, watches,
cosmetics, and some textile and clothing; the items which moved to the second stage: some
cosmetic, and some automobiles, the remaining textile and clothing). On the other hand,
the negotiations between India and the United States did not reach agreement and a panel
was established at the DSB in July 1997 pursuant to the request of the United States.
According to this agreement, India's import restrictions under Article XVIII of the GATT
will be abolished (including the system of Special Import License under Article XVIII ),
but regarding the India's export and import policy, some problems on TRIMs remain (see
Chapter 8 on Trade-Related Investment Measures).
- In October 1998, the EU requested consultations with India under Article XXII of the
GATT regarding import restrictions that India had put in place under Articles XX and XXI
of the GATT. The purpose of these consultations was to clarify the consistency with
Articles XX and XXI of the GATT of import restrictions concerning the EU priorities items
on the import restrictions list submitted by India to the Committee on Balance-of-Payments
Restrictions in 1997. Japan participated as a third party in the India-EU consultations
held in December 1998.
<Column> Brazilian Measures Affecting Import Financing
|Under the past import financing scheme, it was possible for importers to borrow
foreign currency at the low international rate, and to invest funds obtained through the
resale of the imported products at the higher domestic interest rate, in the period before
the repayment date. In March 1997, claiming that this system grants export subsidies in
practice, the Government of Brazil imposed strict restrictions on import finances used for
imports of products with certain exceptions, in order to equalize the competitive
conditions for domestic and imported products.5
The measures have compelled importers to obtain financing before withdrawing the cost of
the import products, and consequently imports have been suppressed. However, the Brazilian
government regulates import finances and borrowing on a foreign currency by residents, but
the nature of the measures suggests that they go beyond the limits of valid exchange
control, and were introduced for the purpose of restricting imports.
On 1 January 1997, the European Union requested consultations under Article XXII of the
GATT claiming that the Brazilian measures violate Article II (ban on the any import charge
other than tariffs) and Article XI (general prohibition of quantitative restrictions) of
the GATT. Other interested Members including Japan, Australia, Switzerland and the United
States have joined this consultation as third parties.