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I. General back to top
1. The Agreement on Textiles and Clothing (ATC) was negotiated in the
Uruguay Round of Trade Negotiations. It replaced the Arrangement
Regarding International Trade in Textiles (MFA, or Multi-Fibre
Arrangement) of 20 December 1973. The ATC provided for all then-existing
textile and clothing trade restrictions to be notified and eliminated
over a period of 10 years from the date of entry into force of the WTO
Agreement. The ATC also provided that the ATC itself would be terminated
at the beginning of the 12th year of the WTO, together with all of
the remaining restrictions within its scope. As this termination duly
took place on 1 January 2005, the ATC is no longer in effect.
2. For additional information on practice under the ATC during the
1995–2005 period, see earlier editions of the WTO Analytical Index.
II. 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.
III. 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: Purpose and interpretation of the ATC
3. The Panel in US — Underwear examined whether a
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 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)
4. In Turkey — Textiles, the Panel noted (in relation to the
notification requirement of Article 2.1) that “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”.(3)
IV. 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.(4)
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
5. Article 2 provided for (1) notification of all restrictions
imposed under the MFA as of the day before the date of entry into force
of the WTO Agreement; (2) a ban on introduction or maintenance of
restrictions except as provided by Article 2(4);
(3) elimination of all
the notified restrictions, in four stages, supervised by the TMB; and
(4) provisions regarding application of Article XIX of the GATT 1994 to
products covered by the ATC, during the duration of the ATC.
6. ATC Articles 2 and 3 both required notifications thereunder to be
submitted within 60 days following the date of entry into force of the
WTO Agreement. Most such notifications were received in the 60 days
following 1 January 1995. However, where the terms of an accession
protocol provide that “those obligations in the Multilateral Trade
Agreements annexed to the WTO Agreement that are to be implemented over
a period of time starting with the entry into force of that Agreement
shall be implemented by [the acceding Member] as if it had accepted that
Agreement on the date of its entry into force”, the 60-day window
started on the date of accession. Accordingly, notifications under Article 2
and 3 were also received by and in respect of newly acceded
Members, until termination of the ATC on 1 January 2005.
7. 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 had been 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”.(5) 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:
“[R]estrictions 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. … 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.”(6)
2. Article 2.1
8. In Turkey — Textiles, the Panel found that
Article 2.1
established a mandatory requirement to notify all MFA restrictions
within a 60-day time window after entry into force of the WTO Agreement.
The Panel noted that all Members that could notify such MFA-derived
restrictions had done so, and no others could be notified later:
“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.(7) 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.”(8)
3. Article 2.4
(a) Jurisprudence
9. In Turkey — Textiles, 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 constitute 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.”(9)
(b) TMB statements
10. 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 stated:(10)
“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.”(11)
4. Article 2.17
11. 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 noted that the restrictions in question “had
not been notified pursuant to Article 2.1 and, therefore, did not fall
under the scope of the provisions of Article 2” and that “there
appeared to be no justification to apply new quantitative restrictions
under
Article 2.17.” (12)
V. 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
12. With respect to the measure concerning the United States and
Turkey, the TMB confirmed that all restrictive measures that touch upon
the subject matter of the ATC, even if adopted on a non-ATC basis, had
to be notified to the TMB:
“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.”(13)
2. Article 3.1
(a) “restrictions”
13. At its meeting in November 2002, while reviewing an
Article 3.1 notification by China following its accession to the WTO,(14) the
TMB considered, inter alia, whether Article 3 also applied to
export restrictions. The TMB noted:
“[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.’(15) 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.(16)
The TMB noted, furthermore, that the additional notification by China
referred to ‘restrictions on certain textile products which fall under
the coverage of the 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 Articles 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.(17)”(18)
VI. 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
14. In the context of examining the measure introduced by the United
States on exports of certain products from Turkey, the TMB 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.”(19)
VII. 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
15. In the context of examining a US restraint on exports of certain
products from Turkey, referred to in paragraphs 6 and 9 above, the TMB
stated that “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.”(20)
2. Article 5.4
(a) “appropriate action, to the extent necessary to address the
problem”
16. 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
“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.”(21)
(b) “Members concerned may agree on other remedies in consultation”
17. Concerning a mutually agreed solution notified by Pakistan under
Article 2.17 and by the United States under Article 5, referenced in paragraph 11 above, which provided, inter alia, for the
introduction of a new restraint, 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.”(22)
18. While examining the measure referred to in
paragraph 17 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 … The second
sentence … 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. … the two Members could have agreed on adjustments of
charges to the restraint level established for the [products already
subject to restriction] or on ‘other remedies’ affecting the same
products, but not on ‘other remedies’ affecting other products.”(23)
19. 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 11 above. Also, with respect to the same issue under
Article
5.6, see the excerpt from the report of the TMB referenced in paragraph
20 below.
3. Article 5.6
20. Concerning the same agreement, the TMB 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”.(24)
Footnotes:
1. With respect to the Annex,
see Section XII. (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. Panel Report, Turkey —
Textiles,
para. 9.69 (footnote in original omitted).
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4. 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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5. G/TMB/R/60, para. 29.
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6. G/TMB/R/60, para. 30.
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7. (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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8. Panel Report, Turkey —
Textiles,
para. 9.69.
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9. Panel Report, Turkey —
Textiles,
para. 9.71.
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10. G/TMB/R/60, para. 33.
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11. G/TMB/R/60, para. 33.
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12. G/TMB/R/45, paras. 27–28.
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13. G/TMB/R/60, para. 30.
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14. G/TMB/N/426 and
Add.1.
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15. (footnote original)
See footnote 4 of the ATC.
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16. (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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17. (footnote original)
See WT/ACC/CHN/49, paragraph 165.
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18. G/TMB/R/93, paras. 19–20.
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19. G/TMB/R/60, para. 31.
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20. G/TMB/R/60, para. 30.
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21. G/TMB/R/31, paras. 20–21.
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22. G/TMB/R/45, paras. 33–34.
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23. G/TMB/R/45, paras. 36–37.
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24. G/TMB/R/45, paras. 47–48.
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