Adopted 31 July 2015
Complainant Guatemala
Respondent Peru
Third Parties Argentina; Brazil; China; Colombia; Ecuador; El Salvador; European Union; Honduras; India; Republic of Korea; United States
Measures at Issue
This dispute concerned the price range system (PRS) maintained by Peru that may result in the imposition of additional duties or rebates on certain types of imported rice, sugar, maize, and milk.
Main Adopted Findings of the Panel and Appellate Body
DSU Articles 3.7 and 3.10 (Good faith)
The Appellate Body did not consider that a clear stipulation of a relinquishment of Guatemala's right to have recourse to the WTO dispute settlement existed in this case in relation to the Dispute Settlement Understanding (DSU). The Appellate Body therefore upheld the Panel's finding that there was ‘no evidence that Guatemala brought these proceedings in a manner contrary to good faith’.Footnote 1
Agreement on Agriculture Article 4.2 (Variable import levies)
The Appellate Body held that ‘variable import levies’ are import levies characterized as ‘inherently variable’ because they contain a mechanism that causes the levies to change automatically and continuously,Footnote 2 and found that the Panel did not err in its assessment of the ‘variability’ of the measure at issue.Footnote 3 The Appellate Body further found that the Panel did not err in its assessment of additional features, such as the lack of transparency and a lack of predictability in the level of resulting duties, which serve to confirm a finding of ‘inherent variability’ but are not independent or absolute characteristics that a measure must display in order to be considered a ‘variable import levy’.Footnote 4 Thus, the Panel did not err in its conclusion that, by maintaining measures which constitute a variable import levy or, at the least, are border measures similar to a variable import levy, and are thus measures of the kind which have been required to be converted into ordinary customs duties, Peru is acted inconsistently with its obligations under Article 4.2 of the Agreement on Agriculture.Footnote 5
GATT Article II:1(b) (Ordinary customs duties)
The Appellate Body found that the Panel was correct in finding that additional duties resulting under the PRS are not ‘ordinary customs duties’ by taking into account its earlier finding under the Agreement on Agriculture regarding variable import levies.Footnote 6 Thus, the Panel did not err in its conclusion that, in applying measures which constitute ‘other duties or charges’ without having recorded them in its Schedule of Concessions, Peru's actions were inconsistent with its obligations under the second sentence of Article II:1(b) of the GATT 1994.Footnote 7
Agreement on Agriculture Article 4.2 and GATT Article II:1(b) (Relationship between WTO and Free Trade Agreement provisions)
The Appellate Body assessed Peru's argument that the Panel erred in its interpretation of Article 4.2 of the Agreement on Agriculture and Article II:1(b) of the GATT 1994 by failing to take into account under Article 31(3) of the Vienna Convention on the Law of Treaties (Vienna Convention) the following: the Free Trade Agreement (FTA) between Peru and Guatemala, and Articles 20 and 45 of Articles on Responsibility of States for Internationally Wrongful Acts adopted by the International Law Commission (ILC Articles). The Appellate Body found that Peru's arguments went beyond the interpretation of Article 4.2 and Article II:1(b) and amounted to arguing that, by means of the FTA, Peru and Guatemala actually modified these provisions between themselves.Footnote 8 The Appellate Body further found that the FTA between Peru and Guatemala and ILC Articles 20 and 45 are not ‘relevant’ to the interpretation of Article 4.2 and Article II:1(b) within the meaning of Article 31(3)(c) of the Vienna Convention, and that the FTA is not a subsequent agreement ‘regarding the interpretation’ of these provisions within the meaning of Article 31(3)(a) of the Vienna Convention.Footnote 9 The Appellate Body therefore found that the Panel did not err by failing to take into account the provisions of the FTA and ILC Articles 20 and 45 under Article 31(3) of the Vienna Convention.Footnote 10
Agreement on Agriculture Article 4.2 (Minimum import prices)
The Appellate Body rejected Guatemala's claims that the Panel interpreted ‘minimum import prices’ to require the imposition of duties based on the transaction value of imports, or the prevention of each and every import from entering below a specified threshold.Footnote 11 The Appellate Body further rejected Guatemala's claim that the Panel conflated the legal standard for ‘minimum import prices’ with the legal standard for border measures ‘similar’ to minimum import prices in footnote 1 of Article 4.2 of the Agreement on Agriculture.Footnote 12 However, the Appellate Body found that the Panel erred by not properly examining the design, structure, and operation of the measure to determine whether the measure establishes a ‘minimum import price’Footnote 13 and whether the measure is a border measure ‘similar’ to a ‘minimum import price’.Footnote 14 The Appellate Body was unable to complete the legal analysis as to whether the measure at issue is inconsistent with Article 4.2 of the Agreement on Agriculture because it is either a ‘minimum import price’ or a border measure ‘similar’ to a minimum import price within the meaning of footnote 1 of Article 4.2 of the Agreement on Agriculture.Footnote 15
