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I. Preamble back to top
A. Text of the Preamble
Members,
Recalling that Ministers agreed at Punta del Este that “negotiations
in the area of textiles and clothing shall aim to formulate modalities
that would permit the eventual integration of this sector into GATT on
the basis of strengthened GATT rules and disciplines, thereby also
contributing to the objective of further liberalization of trade”;
Recalling also that in the April 1989 Decision of
the Trade
Negotiations Committee it was agreed that the process of integration
should commence following the conclusion of the Uruguay Round of
Multilateral Trade Negotiations and should be progressive in character;
Recalling further that it was agreed that special treatment should be
accorded to the least-developed country Members;
Hereby agree as follows:
B. Interpretation and Application of the
Preamble
No jurisprudence or decision of a competent WTO body.
II. Article 1
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A. Text of Article 1
Article 1
1. This Agreement sets out provisions to be applied by Members during
a transition period for the integration of the textiles and clothing
sector into GATT 1994.
2. Members agree to use the provisions of
paragraph 18 of Article 2
and paragraph 6(b) of Article 6 in such a way as to permit meaningful
increases in access possibilities for small suppliers and the
development of commercially significant trading opportunities for new
entrants in the field of textiles and clothing trade.(1)
(footnote original)
1 To the extent possible, exports from a
least-developed country Member may also benefit from this provision.
3. Members shall have due regard to the situation of those Members
which have not accepted the Protocols extending the Arrangement
Regarding International Trade in Textiles (referred to in this Agreement
as the “MFA”) since 1986 and, to the extent possible, shall afford
them special treatment in applying the provisions of this Agreement.
4. Members agree that the particular interests of the
cotton-producing exporting Members should, in consultation with them, be
reflected in the implementation of the provisions of this Agreement.
5. In order to facilitate the integration of the textiles and
clothing sector into GATT 1994, Members should allow for continuous
autonomous industrial adjustment and increased competition in their
markets.
6. Unless otherwise provided in this Agreement, its provisions shall
not affect the rights and obligations of Members under the provisions of
the WTO Agreement and the Multilateral Trade Agreements.
7. The textile and clothing products to which this Agreement applies
are set out in the Annex.(1)
B. Interpretation and Application of
Article 1
1. General
1. The Panel on US
— Underwear examined whether a certain
transitional safeguard measure imposed by the United States was
consistent with Article 6. In so doing, the Panel referred to
Article 1
in explaining the overall purpose of the Agreement on Textiles and
Clothing (ATC):
“[T]he overall purpose of the ATC is to integrate the textiles and
clothing sector into GATT 1994. Article 1 of the ATC makes this point
clear. To this effect, the ATC requires notification of all existing
quantitative restrictions (Article 2 of the ATC) and provides that they
will have to be terminated by the year 2004 (Article 9 of the ATC).”(2)
2. Article 1.2
(a) “meaningful increases in access possibilities for small
suppliers”
2. See the excerpt from the TMB’s comprehensive report to the
Council for Trade in Goods on the implementation of the ATC during the
first stage of the integration process (the “Implementation Report”),
referenced in paragraph 23 below.
(b) Footnote 1 to Article 1
3. In its Implementation Report, the TMB stated:
“[T]he TMB recalls the particular importance of a full and faithful
implementation of the provisions of the ATC in favour of least-developed
country Members, […] and invites Members to examine the possibilities
for providing, whenever possible, substantially increased market access
opportunities for the textile and clothing products of the
least-developed country Members. In such cases, the TMB expects that it
will be notified accordingly.”(3)
3. Article 1.4
4. In the Implementation Report, the TMB noted,
inter alia, that
Members have different perceptions on how the interests of
cotton-producing exporting Members should be reflected in the
implementation of the provisions of the ATC. The TMB thus encouraged
Members to have consultations in order to clarify implementation issues
related to Article 1.4:
“[I]t appears to the TMB that Members have different perceptions on
how the particular interests of the cotton-producing exporting Members
should be — and were — reflected in the implementation of the provisions
of the ATC. The TMB notes in this respect that the Members maintaining
restrictions under Article 2 had stated that they were prepared to have
consultations on this matter with the Members concerned. The TMB
encourages interested Members to enter into consultations with a view to
clarifying the issues related to the implementation of Article
1.4. The
TMB also recalls in this regard that, should the need arise, the
provisions of Article 8.4 are available for this purpose.”(4)
4. Article 1.5
5. The TMB’s Implementation Report contains,
inter alia, the
following statement on the implementation of the integration provisions
of the ATC with reference to Article 1.5:
“One preoccupation of the TMB is how the implementation of the
integration provisions of the ATC has ensured the full and faithful
implementation of the ATC within the time-frames established therein. In
the view of the TMB, one of the conditions of such an implementation is
a steady progress in terms of structural adjustment and, also, as a
result of this, an increased competition in the Members’ markets. This
interrelation is recognized by Article 1.5.
…
[T]he TMB does not have information or empirical evidence regarding
what has been the progress and accomplishment in terms of increasing the
competition and implementing autonomous industrial adjustment. The TMB
believes that it would be useful to have a better appreciation of the
progress and trends of autonomous industrial adjustment, as foreseen in Article
1.5.”(5)
III. Article 2
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A. Text of Article 2
Article 2
1. All quantitative restrictions within bilateral agreements
maintained under Article 4 or notified under Article 7 or 8 of the MFA
in force on the day before the entry into force of the WTO Agreement
shall, within 60 days following such entry into force, be notified in
detail, including the restraint levels, growth rates and flexibility
provisions, by the Members maintaining such restrictions to the Textiles
Monitoring Body provided for in Article 8 (referred to in this Agreement
as the “TMB”). Members agree that as of the date of entry into force
of the WTO Agreement, all such restrictions maintained between GATT 1947
contracting parties, and in place on the day before such entry into
force, shall be governed by the provisions of this Agreement.
2. The TMB shall circulate these notifications to all Members for
their information. It is open to any Member to bring to the attention of
the TMB, within 60 days of the circulation of the notifications, any
observations it deems appropriate with regard to such notifications.
Such observations shall be circulated to the other Members for their
information. The TMB may make recommendations, as appropriate, to the
Members concerned.
3. When the 12-month period of restrictions to be notified under
paragraph 1 does not coincide with the 12-month period immediately
preceding the date of entry into force of the WTO Agreement, the Members
concerned should mutually agree on arrangements to bring the period of
restrictions into line with the agreement year(2), and to establish
notional base levels of such restrictions in order to implement the
provisions of this Article. Concerned Members agree to enter into
consultations promptly upon request with a view to reaching such mutual
agreement. Any such arrangements shall take into account, inter alia,
seasonal patterns of shipments in recent years. The results of these
consultations shall be notified to the TMB, which shall make such
recommendations as it deems appropriate to the Members concerned.
(footnote original)
2 The “agreement year” is defined to mean a
12-month period beginning from the date of entry into force of the WTO
Agreement and at the subsequent 12-month intervals.
4. The restrictions notified under
paragraph 1 shall be deemed to
constitute the totality of such restrictions applied by the respective
Members on the day before the entry into force of the WTO Agreement. No
new restrictions in terms of products or Members shall be introduced
except under the provisions of this Agreement or relevant GATT 1994
provisions.(3) Restrictions not notified within 60 days of the date of
entry into force of the WTO Agreement shall be terminated forthwith.
(footnote original) 3 The relevant GATT 1994 provisions shall not
include Article XIX in respect of products not yet integrated into GATT
1994, except as specifically provided in paragraph 3 of the
Annex.
5. Any unilateral measure taken under Article 3 of the MFA prior to
the date of entry into force of the WTO Agreement may remain in effect
for the duration specified therein, but not exceeding 12 months, if it
has been reviewed by the Textiles Surveillance Body (referred to in this
Agreement as the “TSB”) established under the MFA. Should the TSB
not have had the opportunity to review any such unilateral measure, it
shall be reviewed by the TMB in accordance with the rules and procedures
governing Article 3 measures under the MFA. Any measure applied under an
MFA Article 4 agreement prior to the date of entry into force of the WTO
Agreement that is the subject of a dispute which the TSB has not had the
opportunity to review shall also be reviewed by the TMB in accordance
with the MFA rules and procedures applicable for such a review.
6. On the date of entry into force of the WTO Agreement, each Member
shall integrate into GATT 1994 products which accounted for not less
than 16 per cent of the total volume of the Member’s 1990 imports of
the products in the Annex, in terms of HS lines or categories. The
products to be integrated shall encompass products from each of the
following four groups: tops and yarns, fabrics, made-up textile
products, and clothing.(6)
7. Full details of the actions to be taken pursuant to
paragraph 6
shall be notified by the Members concerned according to the following:
(a) Members maintaining restrictions falling under
paragraph 1 undertake, notwithstanding the date of entry into force of the WTO
Agreement, to notify such details to the GATT Secretariat not later than
the date determined by the Ministerial Decision of 15 April 1994. The
GATT Secretariat shall promptly circulate these notifications to the
other participants for information. These notifications will be made
available to the TMB, when established, for the purposes of paragraph
21;
(b) Members which have, pursuant to
paragraph 1 of Article 6,
retained the right to use the provisions of Article
6, shall notify such
details to the TMB not later than 60 days following the date of entry
into force of the WTO Agreement, or, in the case of those Members
covered by paragraph 3 of Article 1, not later than at the end of the
12th month that the WTO Agreement is in effect. The TMB shall circulate
these notifications to the other Members for information and review them
as provided in paragraph 21.
8. The remaining products, i.e. the products not integrated into GATT
1994 under paragraph 6, shall be integrated, in terms of HS lines or
categories, in three stages, as follows:
(a) on the first day of the 37th month that the WTO Agreement is in
effect, products which accounted for not less than 17 per cent of the
total volume of the Member’s 1990 imports of the products in the
Annex. The products to be integrated by the Members shall encompass
products from each of the following four groups: tops and yarns,
fabrics, made-up textile products, and clothing;
(b) on the first day of the 85th month that the WTO Agreement is in
effect, products which accounted for not less than 18 per cent of the
total volume of the Member’s 1990 imports of the products in the
Annex. The products to be integrated by the Members shall encompass
products from each of the following four groups: tops and yarns,
fabrics, made-up textile products, and clothing;
(c) on the first day of the 121st month that the WTO Agreement is in
effect, the textiles and clothing sector shall stand integrated into
GATT 1994, all restrictions under this Agreement having been eliminated.
9. Members which have notified, pursuant to
paragraph 1 of Article 6,
their intention not to retain the right to use the provisions of Article
6 shall, for the purposes of this Agreement, be deemed to have
integrated their textiles and clothing products into GATT 1994. Such
Members shall, therefore, be exempted from complying with the provisions
of paragraphs 6 to 8 and
11.
10. Nothing in this Agreement shall prevent a Member which has
submitted an integration programme pursuant to paragraph 6 or
8 from
integrating products into GATT 1994 earlier than provided for in such a
programme. However, any such integration of products shall take effect
at the beginning of an agreement year, and details shall be notified to
the TMB at least three months prior thereto for circulation to all
Members.
11. The respective programmes of integration, in pursuance of
paragraph 8, shall be notified in detail to the TMB at least 12 months
before their coming into effect, and circulated by the TMB to all
Members.
12. The base levels of the restrictions on the remaining products,
mentioned in paragraph 8, shall be the restraint levels referred to in
paragraph 1.
13. During Stage 1 of this Agreement (from the date of entry into
force of the WTO Agreement to the 36th month that it is in effect,
inclusive) the level of each restriction under MFA bilateral agreements
in force for the 12-month period prior to the date of entry into force
of the WTO Agreement shall be increased annually by not less than the
growth rate established for the respective restrictions, increased by 16
per cent.
14. Except where the Council for Trade in Goods or the Dispute
Settlement Body decides otherwise under paragraph 12 of Article
8, the
level of each remaining restriction shall be increased annually during
subsequent stages of this Agreement by not less than the following:
(a) for Stage 2 (from the 37th to the 84th month that the WTO
Agreement is in effect, inclusive), the growth rate for the respective
restrictions during Stage 1, increased by 25 per cent;
(b) for Stage 3 (from the 85th to the 120th month that the WTO
Agreement is in effect, inclusive), the growth rate for the respective
restrictions during Stage 2, increased by 27 per cent.
15. Nothing in this Agreement shall prevent a Member from eliminating
any restriction maintained pursuant to this Article, effective at the
beginning of any agreement year during the transition period, provided
the exporting Member concerned and the TMB are notified at least three
months prior to the elimination coming into effect. The period for prior
notification may be shortened to 30 days with the agreement of the
restrained Member. The TMB shall circulate such notifications to all
Members. In considering the elimination of restrictions as envisaged in
this paragraph, the Members concerned shall take into account the
treatment of similar exports from other Members.
16. Flexibility provisions, i.e. swing, carryover and carry forward,
applicable to all restrictions maintained pursuant to this Article,
shall be the same as those provided for in MFA bilateral agreements for
the 12-month period prior to the entry into force of the WTO Agreement.
No quantitative limits shall be placed or maintained on the combined use
of swing, carryover and carry forward.
17. Administrative arrangements, as deemed necessary in relation to
the implementation of any provision of this Article, shall be a matter
for agreement between the Members concerned. Any such arrangements shall
be notified to the TMB.
18. As regards those Members whose exports are subject to
restrictions on the day before the entry into force of the WTO Agreement
and whose restrictions represent 1.2 per cent or less of the total
volume of the restrictions applied by an importing Member as of 31
December 1991 and notified under this Article, meaningful improvement in
access for their exports shall be provided, at the entry into force of
the WTO Agreement and for the duration of this Agreement, through
advancement by one stage of the growth rates set out in paragraphs 13
and 14, or through at least equivalent changes as may be mutually agreed
with respect to a different mix of base levels, growth and flexibility
provisions. Such improvements shall be notified to the TMB.
19. In any case, during the duration of this Agreement, in which a
safeguard measure is initiated by a Member under Article XIX of GATT
1994 in respect of a particular product during a period of one year
immediately following the integration of that product into GATT 1994 in
accordance with the provisions of this Article, the provisions of
Article XIX, as interpreted by the Agreement on Safeguards, will apply,
save as set out in paragraph 20.
20. Where such a measure is applied using non-tariff means, the
importing Member concerned shall apply the measure in a manner as set
forth in paragraph 2(d) of Article XIII of GATT 1994 at the request of
any exporting Member whose exports of such products were subject to
restrictions under this Agreement at any time in the one-year period
immediately prior to the initiation of the safeguard measure. The
exporting Member concerned shall administer such a measure. The
applicable level shall not reduce the relevant exports below the level
of a recent representative period, which shall normally be the average
of exports from the Member concerned in the last three representative
years for which statistics are available. Furthermore, when the
safeguard measure is applied for more than one year, the applicable
level shall be progressively liberalized at regular intervals during the
period of application. In such cases the exporting Member concerned
shall not exercise the right of suspending substantially equivalent
concessions or other obligations under paragraph 3(a) of Article XIX of
GATT 1994.
21. The TMB shall keep under review the implementation of this
Article. It shall, at the request of any Member, review any particular
matter with reference to the implementation of the provisions of this
Article. It shall make appropriate recommendations or findings within 30
days to the Member or Members concerned, after inviting the
participation of such Members.
B. Interpretation and Application of Article 2
1. General
6. At its meeting in December 1999, the TMB addressed the concern
expressed by a number of Members that the United States had introduced a
new restraint measure on exports of certain products from Turkey. The
measure was published under the United States domestic procedures, but
not notified to the TMB, since, according to the United States and
Turkey, it “was taken pursuant to a provision of the ATC which does
not require notification to the TMB”.(7) The TMB “examine[d] briefly
all the provisions of the ATC with a view to identifying under which
provision such a measure could have been agreed without requiring its
notification to the TMB”, stating as follows:
“Furthermore, restrictions maintained under Article 2 had to be
notified, in detail, within 60 days following the entry into force of
the WTO Agreement. A measure that had not been notified at all,
obviously could not fall under the provisions of
Article 2. Article 2.4
for its part states, inter alia, that ‘[n]o new restrictions in terms
of products or Members shall be introduced except under the provisions
of this Agreement or relevant GATT 1994 provisions’, but no provision
under Article 2 provides the possibility of introducing new
restrictions. The TMB noted, therefore, that the particular measure
subject to its examination could not have been taken pursuant to Article 2.”(8)
2. Article 2.1
7. In Turkey
— Textiles, the Panel established that the notification
requirement related to MFA restrictions set out in Article 2.1 which
required that such notification should be made within 60 days following
the entry into force of the WTO Agreement is mandatory. The Panel noted
that all Members that maintained MFA-derived restrictions upon the entry
into force of the WTO Agreement, and were accordingly vested the
maintenance of that right under the ATC, had notified the maintained
restrictions restrictions to the TMB:
“The lists of restrictions notified pursuant to Article 2.1
set the
starting point for the treatment of the restraints carried over from the
former MFA regime. Four WTO Members notified the TMB pursuant to Article
2.1 of the ATC: Canada, the European Communities, Norway and the United
States. We consider that the notification requirement of 60 days
referred to in Article
2.1 of the ATC is mandatory both for formal and
substantive reasons. The wording of Article 2.1 is unequivocal with the
use of the term ‘shall’. Moreover, since the purpose of the ATC is
to provide exceptions to the general application of Articles XI and
XIII
of GATT during an integration period to be completed by 1 January 2005,
these exceptions should be interpreted narrowly.(9) Stemming from this
provision, only the four Members above had the right to and did notify
measures which allowed them to maintain MFA-derived quantitative
restrictions for a maximum period of 10 years during which import quotas
must increase annually until the products they cover are integrated into
GATT. In the absence of an exception under the ATC or a justification
under GATT, no new quantitative restrictions introduced by a Member can
benefit from the exceptions provided for in Article
2.1 of the ATC after
this 60 day period.”(10)
3. Article 2.4
(a) Jurisprudence
8. In Turkey
— Textiles, the complainant, India, claimed that Turkey’s
increase in restrictions were “new” measures and therefore
inconsistent with Article 2.4 of the ATC. The Panel held that any
increase of an existing restriction was a “new measure” and hence a
violation of Article 2.4:
“The prohibition on ‘new restrictions’ must be interpreted
taking into account the preceding sentence: ‘The restrictions notified
under paragraph 1 shall be deemed to constitutes the totality of such
restrictions applied by the respective Members on the day before the
entry into force of the WTO Agreement’. The ordinary meaning of the
words indicates that WTO Members intended that as of 1 January 1995, the
incidence of restrictions under the ATC could only be reduced. We are of
the view that any legal fiction whereby an existing restriction could
simply be increased and not constitute a ‘new restriction’, would
defeat the clear purpose of the ATC which is to reduce the scope of such
restrictions, starting from 1 January 1995 (but for the exceptional
situations referred to in Article 2.4 of the ATC). Thus, we consider
that, setting aside the possibility of exceptions and justifications
mentioned in Article 2.4 of the ATC, any increase of an ATC compatible
quantitative restriction notified under Article 2.1 of the ATC,
constitutes a ‘new’ restriction.”(11)
(b) TMB statements
9. In its report of the meeting in December 1999, when examining a
new restriction introduced by the United States on Turkey’s exports of
certain textile products, as part of a broader understanding reached
between the two Members, the TMB recalled the content of Article 2.4 of the ATC
and concluded that the measure agreed upon by Turkey and the
United States had “not been demonstrated to be in conformity with the
provisions of the ATC”. (12)
“In concluding its examination of the measure mutually agreed
between Turkey and the United States, the TMB recalled that Article 2.4 of the ATC
states that ‘[n]o new restrictions in terms of products or
Members shall be introduced except under the provisions of this
Agreement or relevant GATT 1994 provisions’. After having considered
the new measure against the different provisions of the ATC on the basis
of the information available to it […], the TMB concluded that the
measure agreed upon by Turkey and the United States, affecting imports
by the United States of category 352/652 products, had not been
demonstrated to be in conformity with the provisions of the ATC.”(13)
4. Article 2.6
(a) The issue of “ex-positions”
10. At its meeting in May 1997, the TMB examined a notification by
Colombia, on behalf of itself and certain other WTO Members, regarding
certain aspects of the European Communities’ integration programme
notified under Article 2.6. With respect to the treatment of certain
products for which only a respective part (defined as “ex-position”
in the harmonized System) is included in “List of Products covered by
this Agreement”, the TMB stated as follows:
“The TMB agreed with Colombia that the integration programme of the
European Community for the first stage had also included certain imports
which did not qualify for integration as they did not fall under the
coverage of the ATC, as defined in its Annex. The TMB observed that with
respect to a number of HS ex-positions concerned this was not contested
by the European Community, which in particular referred to difficulties
or the impossibility of providing trade data for these products strictly
conforming to the description contained in the Annex to the ATC.
…
Also due to the lack of reliable statistical information, the TMB was
not in a position to pronounce itself on the magnitude of the
discrepancies which had occurred. It appeared however possible that
after necessary corrections, the EC’s integration programme could
account for less than 16 per cent of the EC’s total volume of 1990
imports. The TMB believed that the size of the shortfall, if any, could
best be assessed by the importing Member itself.
The TMB, therefore, recommended that the European Community
re-examine its first stage integration programme in light of the TMB’s
comments and findings, […]. The TMB expected the European Community to
report on the results of this examination as rapidly as possible. The
TMB agreed that it would keep this matter under review.”(14)
11. On the issue of “ex-positions”, at its meeting in May 1997,
the TMB further stated:
“During its review […] of the notification made by Colombia,
[…] alleging certain discrepancies in the programme of integration
notified by the European Community under paragraph 6 of Article 2 of the
ATC […], the TMB noted the statement of the EC’s representative that
several other WTO Members had included in the list of products to be
integrated in the first and/or second stages of implementation of the
ATC products of those HS lines in the Annex for which only part of the
line fell under the coverage of the ATC (indicated as ‘ex’ HS lines
in the Annex).
With regard to the programmes for the first stage of integration
which had already been reviewed by the TMB, the Body noted that it had
not ascertained whether the statistical information provided by Members
referred to the whole HS line or only to that portion of the HS line
covered by the ATC. The TMB, therefore, decided to verify with the
Members concerned whether the volume of imports they had notified for
the ‘ex HS lines’ related precisely to the products described in the
Annex.
With respect to the second stage of integration the review of which
had not yet been completed by the TMB, the Body decided to pay due
regard to these issues.”(15)
12. Again, on the issue of “ex-positions”, at its meeting in July
1997, the TMB concluded that, in principle, all Members that had
notified integration programmes could be affected by technical problems
due to the non-availability of statistical information in respect to the
precise product descriptions included in the Annex to the ATC:
“The TMB had a follow-up discussion on this matter which led to a
conclusion according to which, in principle, all the Members which had
notified integration programmes may be affected by technical problems
resulting essentially from the non-availability of statistical
information corresponding to the precise product descriptions contained
in the Annex to the ATC, independently of whether or not they had
included ‘ex HS items’ in their respective integration programmes
for Stage 1 and/or Stage 2. This resulted from the fact that in
quantifying and notifying the total volume of 1990 imports each Member
concerned had to include the relevant data related to the ‘ex HS lines’
defined in the Annex to the ATC. Therefore, the TMB decided to request
that all Members which had submitted integration programmes, including
those which had not as yet included in such programmes ‘ex HS items’,
ascertain whether the statistical data counted in calculating the total
volume of the Member’s 1990 imports of the products in the Annex
referred to the whole HS lines, or only to that portion of those HS
lines which was covered by the ATC. The TMB expected that Members would
report to it on the outcome of such verification.”(16)
13. In its Implementation Report in July 1997, the TMB observed that
several integration programmes did not fully meet the particular
technical criteria established under Article 2.6, but before examining
this data the TMB noted that it had not been possible to provide more
accurate data:
“[T]he TMB in some instances took note of integration programmes
which, in certain respects, did not fully meet the technical criteria
established under Article 2.6. This concerned cases where the data were
not available in volume, or for the year 1990, or where the share of
integration was calculated relative to data for the textiles and
clothing sector as a whole since data for the exact product coverage of
the ATC were not available. Prior to taking note of such notifications,
the TMB was assured that no better data could be obtained.”(17)
5. Article 2.7(b)
14. As regards late notifications, at its meeting in December 1996,
the TMB stated:
“With respect to notifications addressed to the TMB after the
respective deadlines foreseen in the ATC, the TMB reiterated that its
taking note of late notifications was without prejudice to the legal
status of such notifications.”(18)
6. Article 2.8
15. At its meeting in May 1997, in examining the notifications of a
number of Members pursuant to Articles 2.8(a) and
2.11, the TMB held:
“With regard to those notifications mentioned above for which the
calculation of the share of the products integrated had been made on the
basis of value, or of volume of imports of a different base year other
than 1990, the TMB ensured that no better data were available and that
the Members concerned had followed the same approach as for the
notification they had made pursuant to paragraphs 6 and
7(b) of Article 2.”(19)
7. Article 2.11
16. With respect to the treatment of late notifications, see
paragraph 14 above.
8. Articles 2.13 and 2.14
(a) Implementation of the growth-on-growth provisions
17. At its meeting in July 2002, the TMB considered it necessary, in
the context of the review of several notifications received pursuant to
Articles 2.1 and 2.2, to address the cross-cutting issue of the manner
in which the growth-on-growth provisions provided for in Articles 2.13
and 2.14 had to be implemented with respect to recently acceded Members,
such as China and Chinese Taipei.(20)
18. In relation to China, the TMB noted that the increase in the
growth rates should have been ideally implemented on the date of China’s
accession on 11 December 2001. The TMB observed that the four Members
maintaining restrictions on imports from China with reference to
Articles 2.1 had actually taken into account the growth rates only on 1 January
2002. This raised the issue whether the provisions of the accession
instrument allowed for the implementation of the growth-on-growth
provisions on 1 January 2002 only:
“In considering this aspect of the subject-matter, the TMB noted
that the increase in the respective growth rates, as far as, when
applicable, Stage 1 and in any event, Stage 2 were concerned, should
have been ideally implemented on 11 December 2001. At the same time, the
TMB recalled that it had already accepted that in any possible reading
of the third sentence of paragraph 241 of the Working Party report, the
term ‘as appropriate’ could (also) be related to the very last part
of the sentence which indicated that the respective commitments should
be applied ‘as from the date of China’s accession’. Based on this
flexibility inherent in the formulation, practical considerations could
also be raised in support of why an actual implementation starting on 1
January 2002 could be found to be appropriate. In terms of the
administration of restraints under the ATC, the beginning of a new
calendar year has always been a turning-point, since it represented the
start of a new ‘quota-year’, inter alia, by establishing the new
annual restraint levels, also as a result of the application of the
respective annual growth rates. Since the time difference between China’s
accession and the start of the implementation of the new annual
restraint levels for the year 2002 did not exceed three weeks, this
delayed actual implementation could be explained by practical
administrative considerations and the time-lag could not be considered
to be too excessive.
In light of the above considerations, the TMB concluded that though
some of the measures in question could have already been implemented as
from 11 December 2001, they had to be implemented at latest by 1 January
2002, and this had been done by Canada, the European Communities, Turkey
and the United States.”(21)
19. The TMB also discussed which increases in the growth rate should
apply, i.e. the growth rate increase of 16 per cent in paragraph 13 or
the rates in paragraph 14. In the absence of clarity with regard to this
issue, the TMB referred to the minimum requirements incumbent on
Members:
“[S]ince the relevant provisions of the legal instruments of China’s
accession did not provide an unambiguous guidance, it was not possible
to provide a clear answer to the question of whether the restraining
Members had also been required to apply the not less than 16 per cent
increase in the respective growth rates, as provided for in Article
2.13, for the Stage 1 integration process. The lack of a clear answer
regarding this aspect had led the TMB to consider those minimum
requirements which had to be implemented by the Members concerned. These
minimum requirements could be summarized in the following: as from 1
January 2002, the base levels in force on 10 December 2001 had to be
increased by the respective growth rates applied for the year 2001
(prior to China’s accession), increased by the full 25 per cent
applicable to Stage 2 and further increased by the 27 per cent
applicable to Stage 3.”(22) (emphasis original)
20. Concerning Chinese Taipei, the TMB reiterated its holding in its
examination of the rights of China with regard to this issue:
“[S]ince the relevant provisions of the legal instruments of
Chinese Taipei’s accession did not provide unambiguous guidance in
this regard, it was not possible to give a clear answer to the question
of whether restraining Members had also been required to apply the not
less than 16 per cent, followed by the not less than 25 per cent
increase in the respective growth rates, as provided for in Articles 2.13 and 2.14(a) for Stages 1 and 2, respectively. The lack of a clear
reply regarding this aspect led the TMB to consider those minimum
requirements which had to be implemented by the Members concerned. The
TMB concluded that these minimum requirements implied that on 1 January
2002, the base levels in force on 31 December 2001 had to be increased
by the respective growth rates applied in 2001, as further increased by
27 per cent which was applicable for Stage 3.”(23) (emphasis original)
9. Article 2.17
21. Concerning a mutually agreed solution notified by Pakistan under
Article 2.17 and by the United States under Article
5, which provided
for, inter alia, the introduction of a new restraint (on United States
imports from Pakistan on products falling under US categories 666-S and
666-P), the TMB indicated that:
“The TMB also recalled that according to Article
2.17, ‘[a]dministrative
arrangements, as deemed necessary in relation to the implementation of
any provision’ of Article 2 could be agreed between the Members
concerned. As the restrictions on category 666 — S and 666 — P products
had not been notified pursuant to Article 2.1 and, therefore, did not
fall under the scope of the provisions of Article 2, the TMB did not see
how the imposition of these new restrictions, even if mutually agreed
between the two Members, could be considered to be necessary in relation
to the implementation of the provisions of Article
2. The TMB also
observed that the administrative arrangements concluded between the
United States and Pakistan … did not provide for the introduction of
new quantitative restrictions …
The TMB, therefore, concluded that there appeared to be no
justification to apply new quantitative restrictions under
Article 2.17.”(24)
22. With respect to the same subject-matter examined under
Article 5,
see also the excerpts from the reports of the TMB referenced in
paragraphs 31-38 below.
10. Article 2.18
23. In examining the notifications provided by some Members on the
improvements in access provided to those Members whose exports had been
subject to restrictions on 31 December 1994 and whose restrictions
represented 1.2 per cent or less of the total volume of the importing
Members’ restrictions on 31 December 1991, the TMB stated as follows:
“The TMB observed that the implementation of this provision of the
ATC had been made by the Members concerned using different methodologies
and no Member used the option of equivalent changes with respect to a
different mix of base levels, growth and flexibility provisions. It was
observed that Article 2.18 does not provide precise guidance as to how
to implement the advancement by one stage of the growth rates set out in
Articles 2.13 and 2.14, or how to apply ‘at least equivalent changes
as may be mutually agreed with respect to a different mix of base
levels, growth and flexibility provisions’. However, it was noted that
the result in terms of market access in the first stage would have been
improved if the methodology chosen for the advancement by one stage of
the growth rates included the growth factor of the first stage, as done
by one Member.”(25)
11. Article 2.21
24. See the excerpts from the reports of the TMB referenced above.
IV. Article 3
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A. Text of Article 3
Article 3
1. Within 60 days following the date of entry into force of the WTO
Agreement, Members maintaining restrictions(4) on textile and clothing
products (other than restrictions maintained under the MFA and covered
by the provisions of Article 2), whether consistent with GATT 1994 or
not, shall (a) notify them in detail to the TMB, or (b) provide to the
TMB notifications with respect to them which have been submitted to any
other WTO body. The notifications should, wherever applicable, provide
information with respect to any GATT 1994 justification for the
restrictions, including GATT 1994 provisions on which they are based.
(footnote original)
4 Restrictions denote all unilateral
quantitative restrictions, bilateral arrangements and other measures
having a similar effect.
2. Members maintaining restrictions falling under
paragraph 1, except
those justified under a GATT 1994 provision, shall either:
(a) bring them into conformity with GATT 1994 within one year
following the entry into force of the WTO Agreement, and notify this
action to the TMB for its information; or
(b) phase them out progressively according to a programme to be
presented to the TMB by the Member maintaining the restrictions not
later than six months after the date of entry into force of the WTO
Agreement. This programme shall provide for all restrictions to be
phased out within a period not exceeding the duration of this Agreement.
The TMB may make recommendations to the Member concerned with respect to
such a programme.
3. During the duration of
this Agreement, Members shall provide to
the TMB, for its information, notifications submitted to any other WTO
bodies with respect to any new restrictions or changes in existing
restrictions on textile and clothing products, taken under any GATT 1994
provision, within 60 days of their coming into effect.
4. It shall be open to any Member to make reverse notifications to
the TMB, for its information, in regard to the GATT 1994 justification,
or in regard to any restrictions that may not have been notified under
the provisions of this Article. Actions with respect to such
notifications may be pursued by any Member under relevant GATT 1994
provisions or procedures in the appropriate WTO body.
5. The TMB shall circulate the notifications made pursuant to this
Article to all Members for their information.
B. Interpretation and Application of Article 3
1. General
25. With respect to the measure concerning the United States and
Turkey, referred to in paragraphs 6 and 8
above, the TMB confirmed that
all restrictive measures that touch upon the subject matter of the ATC,
even if they have been adopted on a basis other than ATC provisions,
have to be notified to the TMB:
“Since restrictions other than those covered by the provisions of
Article 2 also had to be notified within 60 days following the date of
entry into force of the WTO Agreement, the TMB observed that the
restraint could not have been agreed between Turkey and the United
States under the provisions of Article 3.1 either.
Article 3.3 does not
exclude the possibility, inter alia, of introducing new restrictions on
textile and clothing products. However, it contains not only the
requirement of ‘double’ notification (i.e. to the appropriate WTO
body and also to the TMB, for its information), but also limits the
possibility of applying, inter alia, new restrictions to those cases
where the measures were taken under any GATT 1994 provision. As to the
restraint agreed between Turkey and the United States, the TMB noted
that, according to the joint communication submitted by the two Members
concerned, this measure had not been introduced under a GATT 1994
provision, but that it had been taken pursuant to a provision of the ATC.
On this basis the TMB observed that the new restraint in question could
not have been introduced pursuant to the provisions of Article
3.”(26)
2. Article 3.1
(a) “restrictions”
26. At its meeting in November 2002, while reviewing an
Article 3.1
notification received from China, following its accession to the WTO,
the TMB considered, inter alia, the scope of the application of Article
3, i.e. whether it also applies to export restrictions. The TMB noted
that the term “restriction” in Article 3.1
is not subject to any
additional qualifications and that the language of the Article does not
support an interpretation whereby Article 3.1
only applies to imports:
“[A]rticle 3.1 uses the word ‘restrictions’ without any
additional qualifications and that the footnote to this provision
related to the same term states the following: ‘Restrictions denote
all unilateral quantitative restrictions, bilateral arrangements and
other measures having a similar effect.’(27) The language of
Article 3 does not limit the application of this provision to any specific type of
restriction. The export quotas maintained by China affecting silk yarn
and woven fabrics of silk are, undoubtedly, unilateral quantitative
restrictions, corresponding to the definition provided in the footnote
referred to above. Therefore, also in view of the lack of any further
precision in the respective provision of the ATC, export restrictions
are not a priori excluded from the scope of application of Article
3.
This conclusion is also in line with past practice in the TMB, whereby
the notification under Article 3 of certain measures affecting exports
of some textile products was not questioned.(28)
The TMB noted, furthermore, that the additional notification by China
referred to ‘restrictions on certain textile products which fall under
the coverage of ATC and are subject to Article 3
of [that] Agreement’.
This reference presumably indicated that, in the view of China, the
measures in question should be considered under the applicable
provisions of the ATC. It was observed that the notification of these
export restrictions under Article 3.1 and 3.2(b) did not appear to be
in contradiction with the relevant portion of the Report of the Working
Party on the Accession of China.(29)”(30)
3. Article 3.2(b)
27. At its meeting in February 1996, the TMB considered a
notification by hungary of the phase-out programme to be applied to the
restrictions maintained by that Member under Article 3.1. In taking note
of this programme, the TMB:
“[O]bserved that, in view of the general nature of this programme,
it expected that the details of its implementation in the respective
stages would be notified to the Body prior to their implementation, for
the Body’s consideration”.(31)
28. At its meeting in March 1996, “[t]he TMB reverted to its
consideration of a notification made by Japan, under Article 3.2(b), of
the phase out of the measures notified under Article 3.1. In taking note
of this phase-out programme the TMB expressed the expectation that its
implementation, in conformity with paragraph 2(b) of Article
3, would be
such as to provide appropriate progressive increases to the level of
restrictions on imports of silk yarn and silk fabric from Korea.”(32)
V. Article 4
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A. Text of Article 4
Article 4
1. Restrictions referred to in
Article 2, and those applied under
Article 6, shall be administered by the exporting Members. Importing
Members shall not be obliged to accept shipments in excess of the
restrictions notified under Article 2, or of restrictions applied
pursuant to
Article 6.
2. Members agree that the introduction of changes, such as changes in
practices, rules, procedures and categorization of textile and clothing
products, including those changes relating to the harmonized System, in
the implementation or administration of those restrictions notified or
applied under this Agreement should not: upset the balance of rights and
obligations between the Members concerned under this Agreement;
adversely affect the access available to a Member; impede the full
utilization of such access; or disrupt trade under this Agreement.
3. If a product which constitutes only part of a restriction is
notified for integration pursuant to the provisions of Article
2,
Members agree that any change in the level of that restriction shall not
upset the balance of rights and obligations between the Members
concerned under this Agreement.
4. When changes mentioned in
paragraphs 2 and 3 are necessary,
however, Members agree that the Member initiating such changes shall
inform and, wherever possible, initiate consultations with the affected
Member or Members prior to the implementation of such changes, with a
view to reaching a mutually acceptable solution regarding appropriate
and equitable adjustment. Members further agree that where consultation
prior to implementation is not feasible, the Member initiating such
changes will, at the request of the affected Member, consult, within 60
days if possible, with the Members concerned with a view to reaching a
mutually satisfactory solution regarding appropriate and equitable
adjustments. If a mutually satisfactory solution is not reached, any
Member involved may refer the matter to the TMB for recommendations as
provided in Article 8. Should the TSB not have had the opportunity to
review a dispute concerning such changes introduced prior to the entry
into force of the WTO Agreement, it shall be reviewed by the TMB in
accordance with the rules and procedures of the MFA applicable for such
a review.
B. Interpretation and Application of Article 4
1. General
29. In the context of examining the measure introduced by the United
States on exports of certain products from Turkey, referred to in
paragraphs 6 and 8 above, the TMB and held that the provisions of
Article 4 have to be read in conjunction with the other provisions of
the Agreement:
“[A]rticle 4.1 deals with the administration of ‘restrictions
referred to in Article 2, and those applied under
Article 6’. Article
4.2 states that ‘Members agree that the introduction of changes, such
as changes in practices, rules, procedures and categorization of textile
and clothing products including those changes relating to the harmonized
System, in the implementation or administration of those restrictions
notified or applied under this Agreement should not: upset the balance
of rights and obligations between Members concerned under this
Agreement; adversely affect the access available to a Member; impede the
full utilization of such access; or disrupt trade under this Agreement.’
Article 4.4 provides, inter alia, the possibility to reach a ‘mutually
acceptable solution regarding appropriate and equitable adjustment’
between Members when necessary changes, in the sense of Article
4.2, are
introduced in the implementation or administration of existing
restrictions. The TMB noted that, according to Article
4.4, such
mutually acceptable solutions did not have to be notified to the TMB.
The TMB recalled its findings that the new restriction could not have
been agreed pursuant to the provisions of Articles 2 and
6. It was also
observed that Article 4.4 does not provide explicit guidance regarding
the scope of the adjustment that can be agreed between the Members
concerned in the framework of the mutually acceptable solution. A
reading according to which the introduction of a new restriction, in the
sense of Article 2.4, can be agreed upon pursuant to
Article 4.4 as an
adjustment to balance possible improvements in the implementation or
administration of restrictions maintained pursuant to Article 2 was,
however, in the view of the TMB not consistent with the intention of the
drafters of the ATC, since Article 4 relates to the implementation or
administration of the restrictions referred to in Article 2, or applied
under Article 6. Also, the construction of
Article 4 and its language
seem to suggest that when changes, in the sense of Article 4.2 are
introduced, the appropriate and equitable adjustment referred to in
Article 4.4 can only involve and affect the restrictions that have
already been in place and notified pursuant to Article 2
or Article 6.”(33)
VI. Article 5
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A. Text of Article 5
Article 5
1. Members agree that circumvention by transshipment, re-routing,
false declaration concerning country or place of origin, and
falsification of official documents, frustrates the implementation of
this Agreement to integrate the textiles and clothing sector into GATT
1994. Accordingly, Members should establish the necessary legal
provisions and/or administrative procedures to address and take action
against such circumvention. Members further agree that, consistent with
their domestic laws and procedures, they will cooperate fully to address
problems arising from circumvention.
2. Should any Member believe that this Agreement is being
circumvented by transshipment, re-routing, false declaration concerning
country or place of origin, or falsification of official documents, and
that no, or inadequate, measures are being applied to address and/or to
take action against such circumvention, that Member should consult with
the Member or Members concerned with a view to seeking a mutually
satisfactory solution. Such consultations should be held promptly, and
within 30 days when possible. If a mutually satisfactory solution is not
reached, the matter may be referred by any Member involved to the TMB
for recommendations.
3. Members agree to take necessary action, consistent with their
domestic laws and procedures, to prevent, to investigate and, where
appropriate, to take legal and/or administrative action against
circumvention practices within their territory. Members agree to
cooperate fully, consistent with their domestic laws and procedures, in
instances of circumvention or alleged circumvention of this Agreement,
to establish the relevant facts in the places of import, export and,
where applicable, transshipment. It is agreed that such cooperation,
consistent with domestic laws and procedures, will include:
investigation of circumvention practices which increase restrained
exports to the Member maintaining such restraints; exchange of
documents, correspondence, reports and other relevant information to the
extent available; and facilitation of plant visits and contacts, upon
request and on a case-by-case basis. Members should endeavour to clarify
the circumstances of any such instances of circumvention or alleged
circumvention, including the respective roles of the exporters or
importers involved.
4. Where, as a result of investigation, there is sufficient evidence
that circumvention has occurred (e.g. where evidence is available
concerning the country or place of true origin, and the circumstances of
such circumvention), Members agree that appropriate action, to the
extent necessary to address the problem, should be taken. Such action
may include the denial of entry of goods or, where goods have entered,
having due regard to the actual circumstances and the involvement of the
country or place of true origin, the adjustment of charges to restraint
levels to reflect the true country or place of origin. Also, where there
is evidence of the involvement of the territories of the Members through
which the goods have been transshipped, such action may include the
introduction of restraints with respect to such Members. Any such
actions, together with their timing and scope, may be taken after
consultations held with a view to arriving at a mutually satisfactory
solution between the concerned Members and shall be notified to the TMB
with full justification. The Members concerned may agree on other
remedies in consultation. Any such agreement shall also be notified to
the TMB, and the TMB may make such recommendations to the Members
concerned as it deems appropriate. If a mutually satisfactory solution
is not reached, any Member concerned may refer the matter to the TMB for
prompt review and recommendations.
5. Members note that some cases of circumvention may involve
shipments transiting through countries or places with no changes or
alterations made to the goods contained in such shipments in the places
of transit. They note that it may not be generally practicable for such
places of transit to exercise control over such shipments.
6. Members agree that false declaration concerning fibre content,
quantities, description or classification of merchandise also frustrates
the objective of this Agreement. Where there is evidence that any such
false declaration has been made for purposes of circumvention, Members
agree that appropriate measures, consistent with domestic laws and
procedures, should be taken against the exporters or importers involved.
Should any Member believe that this Agreement is being circumvented by
such false declaration and that no, or inadequate, administrative
measures are being applied to address and/or to take action against such
circumvention, that Member should consult promptly with the Member
involved with a view to seeking a mutually satisfactory solution. If
such a solution is not reached, the matter may be referred by any Member
involved to the TMB for recommendations. This provision is not intended
to prevent Members from making technical adjustments when inadvertent
errors in declarations have been made.
B. Interpretation and Application of Article 5
1. General
30. In the context of examining the measure introduced by the United
States on exports of certain products from Turkey, referred to in
paragraphs 6 and 8 above, the TMB stated that all measures adopted on
the basis of Article 5 shall be notified to the TMB, unless the parties
reach a mutually agreed solution:
“[P]rovides, inter alia, the possibility of taking certain actions,
after consultations had been held between the Members concerned with a
view to arriving at a mutually satisfactory solution between them.
Article 5.4 stipulates, inter alia, that ‘… where there is evidence
of the involvement of territories of the Members through which the goods
have been transshipped, such action may include the introduction of
restraints with respect to such Members.’
Article 5.4 also states that
‘[t]he Members concerned may agree on other remedies in consultation’.
However, any action taken pursuant to
Article 5.4 has to be notified to
the TMB. In case of evidence that the ATC is being circumvented by false
declaration concerning fibre content, quantities, description or
classification of merchandise, Article 5.6 allows the Members concerned
to consult with a view to seeking a mutually satisfactory solution and
the same Article does not require the notification of such mutually
agreed solutions to the TMB. At the same time, the TMB observed that
Article 5 refers to situations of ‘circumvention by transshipment,
re-routing, false declaration concerning country or place of origin, and
falsification of official documents’, and that neither Turkey nor the
United States had invoked or reported such a situation. Without
prejudice as to whether in particular circumstances a new restriction
can be introduced, or not, pursuant to the provisions of
Article 5, the
TMB, on the basis of the information available to it, concluded that the
provision of the ATC referred to by both Turkey and the United States
could not be
Article 5.”(34)
2. Article 5.4
(a) “appropriate action, to the extent necessary to address the
problem”
31. In reviewing a number of administrative arrangements agreed
between the United States and several other Members under which triple
charges could be imposed on quotas to counter circumventions, the TMB
stated:
“[T]hat Article 5 of the ATC contained detailed descriptions of the
rules and procedures to be followed. It appeared to the TMB that some
aspects of the related provisions included in the administrative
arrangements could go beyond what was specified in Article
5. The TMB
noted, inter alia, that paragraph 4 of Article 5 of the ATC seemed to
provide some flexibility in terms of remedies or agreed actions that
could be foreseen in cases when circumvention has occurred. It observed,
however, that Article 5 contained no mention of the possibility for the
importing Member to impose triple charges on quotas, as a deterrent to
circumvention. The TMB noted in this regard that this provision had not
been utilized by the United States.
The TMB recalled that the United States had stated that when
provisions of the administrative arrangements were inconsistent with the
ATC, the provisions of the ATC would apply. The TMB understood that this
statement applied to each and every provision of the arrangements
notified. The TMB expected, therefore, that all the provisions of these
administrative arrangements would be implemented by the respective
Members in conformity with the relevant provisions of the ATC.”(35)
(b) “Members concerned may agree on other remedies in consultation”
32. Concerning a mutually agreed solution notified by Pakistan under
Article 2.17 and by the United States under Article
5, referenced in
paragraph 21 above, which provided, inter alia, for the introduction of
a new restraint (on United States imports from Pakistan on products
falling under United States categories 666-S and 666-P), the TMB
examined whether a new quantitative restriction, can be considered as an
“appropriate action” in the light of Article 5.4 of the ATC :
“The TMB observed that, apart from the third sentence of
Article 5.4, the introduction of a new restriction, even if mutually agreed
between the Members concerned, was not mentioned in Article
5.4 as an
‘appropriate action, to the extent necessary to address the problem’
when circumvention as defined in Article 5.1 had occurred. Furthermore,
the TMB understood that the introduction of restrictions, set out in the
third sentence of Article 5.4, related only to the true country or place
of origin in case there had been evidence of its involvement in the
transshipment. This provision, therefore, could not per se allow the
introduction of new restrictions on imports from Pakistan in the
particular case when circumvention had occurred.
The TMB also observed that while the second and third sentences of
Article 5.4 specified possible actions that could be taken when
circumvention had occurred, they did not provide an exhaustive list for
such actions. This was made clear by the language of the second sentence
as well as by the fifth sentence of Article 5.4, the latter providing
that ‘[t]he Members concerned may agree on other remedies in
consultation’.”(36)
33. While examining the measure referred to in
paragraph 32 above,
the TMB noted with respect to the fifth sentence of Article
5.4 that “the
Agreement did not specify what, in the context of this paragraph, could
or could not constitute the ‘other remedies’”. It also held that Article
5.4 was sufficiently clear that an objective interpretation of
“other remedies” could not be asserted as to grant Members the right
to adopt new quantitative restrictions:
“It could be argued that the ‘other remedies’ referred to in
Article 5.4 did not include the permission to introduce new quantitative
restrictions, since Article 5.4 in itself as well as the broader context
as determined by the ATC provided sufficient guidance to the Members
concerned to develop a correct understanding on what could or could not
constitute such ‘other remedies’ in the sense of Article
5.4. It
could be contended that Article 5.4 was sufficiently specific in
defining what type of actions can be taken in response to well defined
circumstances. The second sentence of this Article, in addressing the
issue of what kind of action could be taken in the relationship between
the importing Member (the United States) and the Member constituting the
true place of origin (Pakistan) of the goods allegedly circumvented
(cotton bedsheets), specified that ‘[s]uch action may include …,
where goods have entered, having due regard to the actual circumstances
and the involvement of the country or place of true origin, the
adjustment of charges to restraint levels to reflect the true country or
place of origin’. This formulation seemed to imply that the action
taken should affect the product that was subject to circumvention. Since
only the exports of products that had already been subject to
restrictions could be circumvented, the remedy for such circumvention
could not affect products other than those with respect to which
circumvention had been claimed. Reading the second sentence of Article
5.4 in conjunction with the fifth sentence, it appeared, therefore, that
the two Members could have agreed on adjustments of charges to the
restraint level established for the category 361 products or on ‘other
remedies’ affecting the same products, but not on ‘other remedies’
affecting other products, like category 666 — S and 666 — P products.
In addition, the third sentence of Article
5.4 explicitly allowed the
introduction of new restrictions, but did so only in cases where there
was evidence of the involvement of the territories of (third) Members
through which the goods had been transhipped […]. If this provision
were read together with the fifth sentence of Article
5.4, it appeared
that remedies other than the introduction of restrictions on imports of
category 361 products could also have been foreseen, but these actions
had to be limited to the products transshipped and to the Member through
which the transshipment was effected. The TMB understood that no
restrictions had been introduced by the United States against imports of
category 361 products from the Member through which the products of
Pakistani origin had allegedly been transhipped. Also, the TMB was not
aware of any other action taken by the United States vis-à-vis imports
of the transshipped products from the Member involved in this
transshipment. In any case, this sentence did not provide authorization
for the introduction of new restrictions on imports from Pakistan.”(37)
34. As further support for the proposition that the quantitative
restriction at issue was not permitted under Article
5.4, the TMB
referred to “the broader context” of the ATC. The TMB considered
that as the ATC expressly provides for an exception to the prohibition
on introducing new quantitative measures and that as it aims to achieve
a complete integration of this sector in the covered agreements of the
GATT 1994, these were conclusive in the determination that quantitative
restrictions cannot be introduced on the basis of Article
5.4:
“It could be contended that the broader context as defined by the
ATC also confirmed the statements included in [the] paragraphs [cited in
paragraph 32 above]. It could be argued that, since the Agreement sets
out provisions to be applied by Members during a transition period for
the integration of the textiles and clothing sector into GATT 1994 and
thus the ultimate objective of the Agreement was to ensure the full
integration of trade in the covered products into the GATT 1994 rules
and disciplines, the ATC carefully circumscribed the possibilities for
maintaining or introducing quantitative restrictions; (apart from the
third sentence of Article 5.4) the relevant provisions were contained in
Articles 2, 3 and 6. As indicated earlier, the provisions of
Articles 2 and 3 were not applicable to the particular case in question. While
Article 6 allowed for the introduction of new restrictions for a limited
duration, if the conditions specified in that Article were fully met, it
was observed, however, that neither of the two Members had invoked the
provisions of
Article 6 as a justification for the introduction of the
new restrictions. Keeping in mind also the provisions of Article
2.4, it
could be concluded on the basis of the arguments presented above that
the introduction of the new restrictions on imports of category 666
products from Pakistan, even if mutually agreed between the two Members,
could not be justified under the ATC.”(38)
35. With a view to giving due consideration to possible readings to
the fifth sentence of Article 5.4 other than its interpretation
referenced in paragraphs 32-34 above, the TMB also noted:
“It could also appear, however, that the language of the fifth
sentence of Article 5.4 was vague and permissive, not setting any
limitation on the kind of actions that would constitute possible ‘other
remedies’. It could, therefore, be argued that this formulation
provided broad discretion to the Members concerned in reaching an
agreement, in consultation, on what they consider in a particular case
to be appropriate remedies (other than those defined in the preceding
sentences of the same Article). On the basis of such a reasoning, one
could not exclude an argument that the introduction of restrictions on
products previously not subject to such restrictions could be considered
as a possibility for providing ‘other remedies’.”(39)
36. With respect to the treatment of the measure at issue under
Article 2.17, see the excerpts from the reports of the TMB referenced in
paragraph 21 above. Also, with respect to the same issue under Article
5.6, see the excerpt from the report of the TMB referenced in paragraph
37 below.
3. Article 5.6
37. Concerning a mutually agreed solution notified by Pakistan under
Article 2.17 and by the United States under Article
5, which provided,
inter alia, for the introduction of a new restraint (on United States
imports from Pakistan on products falling under United States categories
666-S and 666-P), the TMB examined, with respect to the measure
referenced in paragraphs 21 and 32
above, whether the introduction of
new quantitative import restrictions was permitted under Article
5.6,
and held that “it could be argued that the introduction of the new
restraints, even if mutually agreed between the two Members, could not
be justified in the context of Article 5.6”:
“It could be argued that Article
5.6 did not allow for taking such
measures as the introduction of new quantitative restrictions. The
second sentence of Article 5.6 envisaged that appropriate measures,
consistent with domestic laws and procedures, should be taken against
the exporters or importers involved. Therefore, it appeared that a
mutually satisfactory solution reached pursuant to this provision would
encompass appropriate measures against the firms involved (exporters
and/or importers), as opposed to those against governments. In addition,
while Article 5.6 was not precise in providing Members with modalities
for taking ‘appropriate measures’ in cases where false declarations
had been made for purposes of circumvention, it could be contended that
the loose disciplines attached to this provision (e.g. there was no
requirement to notify the appropriate measures agreed to the TMB),
compared to other provisions concerning the taking of measures having a
restrictive effect embodied in the ATC, raised doubts as to whether the
introduction of new restrictions could be contemplated under this
particular provision. Based on these considerations as well as on the
analysis regarding the broader context defined by the ATC, … it could
be argued that the introduction of the new restraints, even if mutually
agreed between the two Members, could not be justified in the context of
Article 5.6.
It could also be argued, that if one accepted that (i) incorrect
marking of cotton bedsheets had been, at least in part, the root of the
problem identified and that (ii) this practice amounted to a false
declaration as defined in Article 5.6, the language of this Article
authorized the Members concerned to agree, in case when no, or
inadequate, administrative measures were being applied to address and/or
to take action against such circumvention, on any kind of mutually
satisfactory solution, possibly including the introduction of new
restraints. Such a conclusion would rely, inter alia, on the lack in
this language of any explicit indication regarding the possible nature
of the measures that could be agreed between the Members as a mutually
satisfactory solution. The TMB declined to take a definitive position at
this stage regarding the applicability of this provision, as well as on
the conformity of the actions taken with Article
5.6.”(40)
38. With respect to the treatment of the measure at issue under
Article 2.17, see excerpts from the reports of the TMB referenced in the
section dealing with Article 2.17, paragraph 21 above.
Footnotes:
1. With respect to the Annex, see
Section XI.
(The list of textile and clothing products is omitted).
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2. Panel Report on
US — Underwear, para. 7.19.
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3. G/L/179, para. 308.
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4. G/L/179, para. 316.
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5. G/L/179, paras. 74 and 77.
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6. With respect to Article
2.6, in Marrakesh,
the Ministerial Conference took the following Decision on Notification
of First Integration under Article 2.6 of the ATC:
“Ministers agree that the participants
maintaining restrictions falling under paragraph 1 of Article 2 of the
Agreement on Textiles and Clothing shall notify full details of the
actions to be taken pursuant to paragraph 6 of Article 2 of that
Agreement to the GATT Secretariat not later than 1 October 1994. The
GATT Secretariat shall promptly circulate these notifications to the
other participants for information. These notifications will be made
available to the Textiles Monitoring Body, when established, for the
purposes of paragraph 21 of Article 2 of the Agreement on Textiles and
Clothing.”
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7. G/TMB/R/60, para. 29.
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8. G/TMB/R/60, para. 30.
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9. (footnote original) See for
instance in Panel Report on Indonesia
— Certain Measures Affecting the
Automobile Industry, adopted 23 July 1998, WT/DS54, 55, 59 and 64/R, (“Indonesia
— Autos”) (Not appealed), para. 14.92, where the period
allowed for notification to the TRIMS Committee under Article 5 of the
TRIMS Agreement, in order for a Member to benefit from the transition
provisions of the TRIMS Agreement, was considered mandatory.
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10. Panel Report on Turkey
— Textiles, para.
9.69.
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11. Panel Report on
Textiles — Turkey, para.
7.71.
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12. G/TMB/R/60, para. 33.
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13. G/TMB/R/60, para. 33.
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14. G/TMB/R/29, paras. 39, 41 and 42.
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15. G/TMB/R/29, paras. 43-45.
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16. G/TMB/R/34, para. 7.
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17. G/L/179, para. 29.
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18. G/TMB/R/22, para. 16. This statement was
subsequently repeated on a number of occasions.
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19. G/TMB/R/30, para. 8. At its forty-second
(March 1998) and fortyfourth meetings (May 1998), the TMB reiterated the
aforesaid position. G/TMB/R/41, para. 28; G/TMB/R/43, para. 5.
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20. In order to discharge its responsibilities,
the TMB was also required to examine and to reach an understanding on
the modalities agreed and guidance provided by Members in the respective
legal instruments of accession vis-à-vis the implementation of the
growth-on-growth provisions of the ATC. Only such a common understanding
could provide a basis and serve as a benchmark for the TMB, enabling it to verify if the
actual implementation had been effected in compliance with the
requirements established by the Members.
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21. G/TMB/R, paras. 30-31.
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22. (footnote original) G/TMB/R/90, para. 32.
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23. (footnote original) G/TMB/R/90, para. 43.
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24. G/TMB/R/45, paras. 27-28.
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25. G/L/179, para. 210.
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26. G/TMB/R/60, para. 30.
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27. (footnote original) See footnote 4 of the
ATC.
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28. (footnote original) Japan notified the
application of an export approval system affecting certain products with
certain specified destinations (United States, European Communities).
For details see G/TMB/N/82 and
G/TMB/N/175.
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29. (footnote original) See WT/ACC/CHN/49,
paragraph 165.
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30. G/TMB/R/93, paras. 19-20.
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31. G/TMB/R/9, para. 12.
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32. G/TMB/R/11, para. 8.
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33. G/TMB/R/60, para. 31.
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34. G/TMB/R/60,
para. 30.
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35. G/TMB/R/31, paras. 20-21.
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36. G/TMB/R/45, paras. 33-34.
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37. G/TMB/R/45, paras. 36-37.
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38. G/TMB/R/45, para. 38.
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39. G/TMB/R/45, para. 39.
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40. G/TMB/R/45, paras. 47-48.
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