Int’l Trade -- Erik Johnson

III.  Nullification or Impairment

  1. GATT Art XXIII
  2. Violation Nullification or Impairment
  3. “Any benefit . . . nullified or impaired . . . as the result of (a) the failure of another contracting party to carry out its obligations under this Agreement. . .” Art XXIII
  4. Uruguay case, p272, violation of GATT = a refutable presumption of nullification or impairment, but this is rebuttable if no damage / harm.
  5. Superfund case, p273, simply says US’s rebuttal (no harm no foul), is insufficient, b/c the goal of Art III is not to protect volume, but competitive conditions.
  6. Superfund’s suggestion that a violation of GATT is irrefutable is wrong / overruled.
  7. Nonviolation nullification or impairment
  8. An upset expectation of competitive conditions which does not otherwise violate the GATT
  9. Japan -- Photographic Film. P277.
  10. Purpose: quoting Oilseeds, “the idea underlying [nullification or impairment] is that the improved competitive opportunities that can legitimately be expected from a tariff concession can be frustrated not only by measures proscribed by the General Agreement, but also by measures consistent with the Agreement.”
  11. Members “have approached this remedy with caution. . .”
  12. Refutable presumption
  13. If something is new (post-concession) there is a refutable presumption of upset reasonable expectations
  14. If something is old (pre-concession) there is a refutable presumption of no upset expectations
  15. Harm
  16. Something > than “de minimus” req’d
  17. US lost Japan Film b/c it failed to show Japanese gov’t caused harm
  18. Intent?
  19. Intent is not req’d. p284
  20. Gov’t Action
  21. Some gov’t, instead of private action, req’d, but where the gov’t is involved in encouraging private action, that can be sufficient. P281.
  22. “Measure”
  23. Measure can be a law, regulation, or other governmental actions. P279
  24. Remedy?
  25. No obligation to discontinue (most violation nullification or impairments req discontinuation) but continuation can warrant reasonable retailiation.
  26. Later Note: Any change in domestic laws might be considered a non-violation nullification or impairment. Still, this argument is rarely advanced / successful.

IV.  Standard of Review / Remedies / Unilateralism

  1. Standard of Review
  2. “Evolving Issue” ® moving toward a standard between deference and de novo
  3. Hormones: p291 -- “Objective” review
  4. Remedies
  5. Remedies are prospective only, after a reasonable time has elapsed, and a party has refused to comply
  6. Trondheim: Remedy for historical violation = admonishment
  7. DSU Art XIX: Panels recommend compliance. If a reasonable compliance time has passed, retributive effects are possible.
  8. Effects of this leniency?
  9. Maybe increase cheating?
  10. Increased litigation b/c no incentive to settle
  11. If precedent is particularly valuable, this might be good!
  12. Unilateralism
  13. §301 case: p319. US statute giving apparently unilateral power to impose sanctions.
  14. H; okay, b/c US subsequently passed a congressional statement that it wouldn’t be used unless the WTO agreed.
  15. Other, rejected arguments?
  16. Mandatory v. Discretionary Unilateralism?
  17. Ct said we should gauge this “discretion” against DSU Art XXIII.
  18. Saw spirit of XXIII violated
  19. All systems has discretion to violate -- simply pass a new, violating law!
  20. H; “good faith” is a reqm’t -- sees statute as “bad faith.”
  21. Okay, we promise.
  22. Accepted.

V.  Tariffs & Quotas

  1. GATT Art II req’s nations to limit their tariffs to the bound rates, as determined by the country’s tariff schedule
  2. “GATT obligation refers to goods which are the products of territories of other contracting parties.” ß watch for origin status. . .
  3. Countries may charge any tariff for items not on the GATT schedule, and may charge below the GATT schedule if they choose
  4. Customs Law: p359
  5. Administration
  6. Varies from country to country
  7. When a good arrives in the US, it must either be formally entered, or held in a bonded facility pending later re-export
  8. Entry ® examination and “liquidation” (final assessment)
  9. “Imports for Consumption”?

ii. Classification

  1. GATT Law
  2. GATT Art II:5 provides for negotiations “w/ a view to a compensatory adjustment” when a classification prevents implementation of concessions.
  3. “goods not falling w.in any heading of the Nomenclature shall be classified under the heading appropriate to the goods to which they are most akin,” unless there is a “all other not specified” category. P352
  4. (1) new products must be deemed w/in bound Schedule items where the description clearly covers them, and (2) reference will be made to the nat’l law whose schedule is under dispute, but nat’l law is not dispositive. P352.
  5. US Law
  6. P. 361 -- General rules of classification
  7. (2)(a) = incomplete or unfinished. Equal the article if the incomplete has “the essential character” of the finished refered to. Also, disassembled = the referenced article.
  8. (2)(b) = mixtures. “materials or substances” which are mixed with other MorSs = the material or substance. If it could be under 2 classifications, see rules (3).
  9. (3) When, classifiable under 2 headings . . .
  10. (3)(a) More specific wins. But, if 2+ headings refer to only part of a mixed or composite good to be put up for retail sale, these headings are equally specific
  11. (3)(b): If not (3)(a), classified by the material which gives them their “essential character.”
  12. (3)(c): If not (a) or (b), then the last heading in numerical order among those meriting equal consideration
  13. (4): If not (2) or (3), look to “most akin”
  14. (6): Subheading Rules.
  15. Lynteq v. US: p363: Chemical derived from marigold meal imported. Finding that the chem “possesses qualities altogether difference from those present in the raw material from which it is derived,” and b/c “meal” = “coarse ground”, while chem was otherwise extracted, H; chem ≠ mm for classification.
  16. Lynteq: “Eo Nomine” (common meaning) of the heading text
  17. Eo Nomine, Chief Use, Actual Use
  18. EN = common meaning
  19. Chief Use = usual use of the good
  20. Actual Use = what will it actually be used for?
  21. Hypo: Screws to be imported for car manufacture. 3 options, (1) car parts, (2) screws, (3) little metal things.
  22. EN = (2) or (3), but (2) = more specific
  23. Chief = (2)
  24. Actual = (1), but importer would bear the burden of proving actual
  25. If EN and chief point one way, but actual another, importer must prove actual if he/she wants. Sykes: “Fuzzy memory” says actual = more specific, if proven.
  26. Principles
  27. Don’t dissesemble the whole, if one heading covers it
  28. Even if not assembled, but shipped together
  29. Use more specific, if possible
  30. Deference to Nat’l law regarding tariff classification

iii.  Valuation

  1. Most tariffs are ad valorem, meaning the value must be determined for t calc
  2. “Notional” v. “Positive” standards
  3. Notional = price the product would be sold in a perfectly competitive transaction
  4. Positive = price of the actual transaction, in most cases
  5. Tokyo Round produced an intern’l set of customs valuation rules
  6. Methods: (use in order) p370
  7. Transaction value -- actual price paid w/ adjustments for costs, charges, and expenses which are incurred but not reflected in the price
  8. Transaction value of identical goods -- sold to the same country around the same time
  9. Transaction value of similar goods
  10. Deductive or Computed Value
  11. Deductive = the price at which the goods are sold in the greatest aggregate quantity to unrelated persons in the import country w/ deductions for commission, profit, transport, and other costs associated w/ resale
  12. Computed = the value produced by summing the costs of production along w/ all other expenses and reasonable profit
  13. Note: Transaction value will not be used when the transaction is between related parties.
  14. These methods were incorporated into US law
  15. Generra Sportswear v. US: Quota payment properly included in the valuation, so long as it “was made to the seller in exchange for merchandise sold for export to the United States . . .”
  16. FOB v. CIF Valuation p375.
  17. FOB = price at point of shipment only
  18. CIF = price of the goods plus an amount covering transportation and insurance
  19. US uses FOB, most other countries use CIF

iv.  Origin

  1. A ® B ® X. How much work must be done in B to have the product count as originating in B?
  2. Substantial Transformation Test: WTO Agreement on Rules Origin Art III (p377)
  3. Superior Wire v. US: Spain wire rod ® Canada. Canada “drew” the wire rod into wire, and ® U.S. H; origin = spain.
  4. Ct considered:
  5. Value added: 15%, “does not pull in either direction”
  6. Change in tariff classification? Not dispositive, but may support a substantial transformation
  7. “Minor finishing step”?
  8. Change from a producers’ to a consumers’ good?
  9. Many uses to one “Unique destiny”? No, wire and wire rod can still be used for many purposes
  10. Quotas & Non-Tariff Barriers
  11. Art XI = GATT’s quota prohibition
  12. Prohibits all restrictions “other than duties, taxes or charges.”
  13. Canada - Administration of the FIRA (p393 fn1): GATT panel considered Canadian practices where foreign companies could invest in Canada only if they preferred Canadian imports to other inputs.
  14. Panel distinguished “importation” restrictions, goverened by XI, with “imported products” restrictions, handled by Art III. Therefore, these practices do not conflict with Art XI.
  15. Quantitative Restriction versus Basic Domestic Regulation
  16. If it applies to everyone equally, it is a domestic regulation, not violative of Art XI
  17. If it applies only to imports, it is an Art XI quantitative violation
  18. Watch for Absolute Bans, which Can = A Zero Quantity Quota Restriction!

VI.  THE MFN PRINCIPLE AND EXCEPTIONS (Customs Unions & Free Trade Areas)

  1. MFN = GATT Art. I
  2. Paragraph 1. Any advantage granted to a product from any country by a contracting party shall be accorded to the like product originating in or destined for all other contracting parties.
  3. Like product?
  4. If not “like,” no Art I violation. Japan Dimension Lumber
  5. Look to:
  6. tariff schedule classification. Japan Dimension Lumber
  7. the negotiation history of the tariff schedules binding goods to determine “like.” Germany -- Sardines.
  8. Other Countries classifications. Spain -- Coffee
  9. End product / Use > make-up or characteristics. Spain -- Coffee.
  10. “to any product” = services not included
  11. De Facto Discrimination
  12. Canada -- Auto Industry. P431. Canada offered import duty discounts for companies w/ an affiliate producing cars in Canada. I; has this exemption been accorded to like cars from all other member? H; no.
  13. Ct. notes that nominally this exemption is available to everyone
  14. But, de facto discimination (in addition to de jure “in law” discrimination) = a violation
  15. Here, only a small number of countries’ like products could get the exemption, therefore discimination de facto
  16. Free Trade Areas & Custom Unions
  17. Exception to the Art I MFN req’mts
  18. GATT Art. XXIV (ds p. 47), and GATT 1994 (ds. p. 90)
  19. Customs Area v. Free Trade Area. Art. XXIV(8)(a - b)
  20. FTA = group of territories in which the duties and restrictionsare eliminated on substantially all the trade b/w them
  21. CA = group of territories with elimiation of substantially all restrictions between them, and harmonization of external tariffs.
  22. Turkey -- Textile & Clothing: Turkey, entering the EC, introduced restrictions on imports from India, consistant with the EC’s custom area restrictions. I; can a country entering a customs area impose new restrictions on outside nations? H; not in this case, but sometimes
  23. (p.457) Art XXIV can justify the adoption of a measure which is inconsistent with certain other GATT provisions if:
  24. (1) it is introduced upon the formation of a customs union, and
  25. (2) only to the extent that the formation of the ca would be prevented if the measure were not allowed.
  26. Here, Turkey introduced no showing the EC - Turkey Customs Area would be prevented
  27. CITES:
  28. Substantially all the trade > some, but is < all
  29. “shall not on the whole be higher. . .” = applied, not bound, rates
  30. The country alleging this defense bears the burden of proof

VII.  NATIONAL TREATMENT OBLIGATION

  1. P479: While MFN prohibits discrimination as between the same goods from different countries, the national treatment clause prohibits discrimination between domestically produced goods and the same imported goods.
  2. GATT Art III (see also, for Art III:2,5,& 6, Ad Art III ds. p. 64
  3. Art III:1: No discrimination through internal procedures / taxes -- general statement of policy for remaining sections
  4. Art III:2: Discriminatory Taxation
  5. First sentence
  6. Japan -- Alcohol: p.494. Req’s (1) like products, and (2) imports taxed “in excess of” domestic products
  7. Likeness = a relative concept
  8. Considers: end-uses, consumers tastest, product’s properties
  9. Read “like product” narrowly
  10. H; shochu and vodka = like products
  11. “In excess of”
  12. “Even the smallest amount of excess is too much”
  13. Second Sentence
  14. Japan -- Alcohol: Req’s (1) directly competitive or substitutable products, (2) which are “not similarly taxed”, and (3) the taxation is “applied so as to afford protection”
  15. (1) Directly Competitive or Substitutable
  16. Broader than “like”! p499
  17. Physical Characteristics, end-uses, tariff classifications, elasticity of substitution, and the “market place”
  18. (2) Not similarly taxed
  19. More than a “de minimus” difference
  20. (3) So as to afford protection
  21. Not an issue of intent -- instead focuses on the application
  22. Art III:3 Unimportant
  23. Art III:4 Other, non-tax, discrimination (ie. Labeling discrimination, etc)
  24. Italian -- Agricultural Machinery: p482. Credit advantages given to buyers of domestic machinery. H; violation of Art III:4.
  25. Not a subsidy, says the ct, b/c given to the buyers, not the sellers
  26. Therefore, not exempt under III:8(b)
  27. Instead, a clear advantage given to domestic producers over foreign importers, in violation of Art III.
  28. Art III:4 req’s “laws regulations & Reqmt’s” about “like products” and “no less favorable” treatment
  29. Laws Regulations & Requirements
  30. US §337: p485. U.S. had different patent protection procedures for imported goods. H; violation of Art III:4
  31. “Laws, Regulations, & Requirements” = substantive and procedural
  32. No Less Favorable
  33. U.S. §337: “No less favorable than” = “unqualified” “effective equality of opportunities”
  34. “Underlying objective is to guarantee equality of treatment”
  35. Also, may not balance more favorable treatment of some imported products against less favorable treatment of other imported products -- instead look to each individual prods case
  36. CITE ALSO: Possibility of injury is all that is req’d to find a mandatory law in violation. Actual injury need not be alleged for the law to violate GATT. (Note. This extends beyond Art III) p.493.
  37. Korea -- Beef. P521. Do not look to actual differences, but instead to “whether a measure modifies the conditions of competition in the relevant market to the detriment of imported products.”
  38. Here, the “reduction of access to normal retail channels”
  39. Like products? EC -- Asbestos. P.507.
  40. Look first to the general principle of III:1 -- pg. 492
  41. Based on “consonance” with the III:1 principle, likeness = “fundamentally, a determination about the nature and extent of a competitive relationship between and among products.”
  42. “like” in III:4 is broader than “like” in III:2, first sentence, but not broader than the combination of the 1st and 2nd sentences of III:2!
  43. Uses evidence to consider “whether, and to what extent, the products are . . . in a competitive relationship in the marketplace.”
  44. Considers
  45. Properties, nature and quality
  46. end-uses
  47. consumers tastes + habits
  48. tariff classification
  49. substitutability

6.  HEALTH RISKS OF ONE PRODUCT