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Colombia – Measures Relating to the Importation of Textiles, Apparel and Footwear (Colombia–Textiles), DS461

Published online by Cambridge University Press:  19 December 2016

Rodd Izadnia
Rodd Izadnia*
Affiliation:
Works in the WTO Secretariat but writes in a wholly personal capacity
*
Email: rizadnia@gmail.com
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Extract

This dispute concerned the imposition by Colombia of a ‘compound tariff’ on the importation of certain textiles, apparel, and footwear classified under Chapters 61 through 64 of Colombia's Customs Tariff. The compound tariff was composed of an ad valorem levy, expressed as a percentage of the customs value of goods, and a specific levy, expressed in units of currency per unit of measurement. The ad valorem component of the compound tariff was 10% for all products regardless of their value; the specific component depended on price thresholds for certain textiles, apparel, and footwear, imposing a higher levy on products imported below the price threshold set out in the corresponding Chapter of Colombia's Customs Tariff.

Information

Type
Case Summaries
Information
World Trade Review , Volume 16 , Issue 1 , January 2017, pp. 141 - 143
Copyright
Copyright © Rodd Izadnia 2016 

  • Adopted   22 June 2016

  • Complainant   Panama

  • Respondent   Colombia

  • Third Parties   Ecuador, El Salvador, European Union, China, Guatemala, Honduras, Philippines, United States

Measures at Issue

This dispute concerned the imposition by Colombia of a ‘compound tariff’ on the importation of certain textiles, apparel, and footwear classified under Chapters 61 through 64 of Colombia's Customs Tariff. The compound tariff was composed of an ad valorem levy, expressed as a percentage of the customs value of goods, and a specific levy, expressed in units of currency per unit of measurement. The ad valorem component of the compound tariff was 10% for all products regardless of their value; the specific component depended on price thresholds for certain textiles, apparel, and footwear, imposing a higher levy on products imported below the price threshold set out in the corresponding Chapter of Colombia's Customs Tariff.Footnote 1

Main Adopted Findings of the Panel and Appellate Body

GATT Article II:1 (tariff bindings and schedules of concessions) and DSU Article 11 (‘objective assessment’)

With respect to Panama's claim that the compound tariff imposed by Colombia was inconsistent with Article II:1(a) and (b) of the GATT 1994 and Colombia's Schedule of Concessions, Colombia appealed the Panel's assessment under Article 11 of the DSU as the Panel had not considered it necessary to rule on Colombia's claim that the obligations contained in Article II:1(a) and (b) of the GATT 1994 are not applicable to illicit trade. The Appellate Body considered that the Panel was required to address the interpretive issue before it under Article II:1(a) and (b) of the GATT 1994 in light of the Panel's findings that implied that the measure did or could cover what Colombia considered to be illicit trade. The Appellate Body therefore reversed the Panel for having acted inconsistently with its duty under Article 11 of the DSU to make an objective assessment of the matter before it, including an objective assessment of the applicability of the relevant covered agreements.Footnote 2 In completing the legal analysis, the Appellate Body found that Article II:1(a) and (b) of the GATT 1994 does not exclude what Colombia classified as illicit trade. Noting that Colombia had only challenged the Panel's findings in respect of whether Article II:1 of the GATT 1994 applies to illicit trade, the Appellate Body upheld the Panel's findings that the compound tariff was inconsistent with Article II:1(a) and (b) of the GATT 1994 in the instances in which its application resulted in a duty exceeding the bound tariff rates in Colombia's Schedule of Concessions.Footnote 3

GATT Article XX(a) (measures ‘necessary to protect public morals’)

The Appellate Body reversed the Panel's conclusion that Colombia had failed to establish a relationship between the compound tariff and the objective of combating money laundering, and hence that Colombia had not shown that the compound tariff was a measure ‘designed’ to protect public morals. The Appellate Body considered that the Panel's analysis indicated that the compound tariff was not incapable of combating money laundering, and that it was therefore incumbent on the Panel to turn to the analysis of the ‘necessity’ of the measure.Footnote 4 In completing the legal analysis of ‘necessity’ on the basis of the Panel's findings, the Appellate Body considered that there was a lack of sufficient clarity regarding the degree of contribution of the compound tariff to the objective of combating money laundering and the degree of trade-restrictiveness of the measure. The Appellate Body accordingly found that Colombia had not demonstrated that the compound tariff is a measure ‘necessary to protect public morals’ within the meaning of Article XX(a) of the GATT 1994.Footnote 5

GATT Article XX(d) (measures ‘necessary to secure compliance with laws or regulations which are not inconsistent with the provisions of’ the GATT 1994)

The Appellate Body reversed the Panel's conclusion that Colombia had failed to demonstrate that the compound tariff was ‘designed’ to secure compliance with laws or regulations that are not GATT-inconsistent given the Panel's recognition that the compound tariff was not incapable of securing compliance with Article 323 of Colombia's Criminal Code.Footnote 6 In completing the legal analysis on the basis of the Panel's findings, the Appellate Body found that the compound tariff was ‘designed’ to secure compliance with laws or regulations which are not inconsistent with the GATT 1994, namely Article 323 of Colombia's Criminal Code. However, given the lack of sufficient clarity in respect of the measure's degree of contribution to securing compliance with Article 323 of Colombia's Criminal Code, as well as its degree of trade-restrictiveness, the Appellate Body found that Colombia had not demonstrated that the compound tariff was a measure ‘necessary to secure compliance with laws or regulations which are not inconsistent’ with the GATT 1994.Footnote 7

Footnotes

Case Summaries: WTO Disputes

The following summary provides a brief factual background and describes the key findings of recent WTO panel and Appellate Body reports.

1 See Panel Report, Colombia–Textiles, paras. 7.19–7.31; and Appellate Body Report, Colombia–Textiles, paras. 1.2–1.3.

2 Appellate Body Report, Colombia–Textiles, paras. 5.27–5.28.

3 Footnote Ibid., Colombia–Textiles, paras. 5.44–5.46; Panel Report, Colombia–Textiles, paras. 7.164, 7.180, and 7.193–194.

4 Appellate Body Report, Colombia–Textiles, paras. 5.89–5.93.

5 Footnote Ibid., paras. 5.116–5.117.

6 Footnote Ibid., paras. 5.135–5.136.

7 Footnote Ibid., paras. 5.149–5.150.

Ibid
Ibid
Ibid
Ibid

Case Summaries: WTO Disputes

The following summary provides a brief factual background and describes the key findings of recent WTO panel and Appellate Body reports.