WEEK 6 – TARRIFS

The first diagram divides trade barriers into two big categories:

A. Tariff Barriers
These are taxes on imports.
When a country imposes a tariff, the imported goods become more expensive.

👉 Tariffs are straightforward and visible.

B. Non-Tariff Barriers (NTBs)

These are rules, restrictions, or standards that make importing difficult without using taxes.

NTBs are divided into two groups:

1. Technical / Requirement Barriers

These are “rules about how a product must be”. Examples:

 Product standards: safety, quality, labeling rules

 Technical grading requirements: grading fruits, grains
 Phytosanitary rules: plant/animal health checks
 Building codes
 Quality certification

👉 These don’t officially ban a product but make it harder for foreign goods to meet the standards.

2. Impediments / Other Technical Barriers

These are direct restrictions on quantity or entry.

Examples include:

 Quantitative restrictions (only X amount can be imported)

 Bans
 Boycotts
  Licenses
 Quotas
 Tariff escalation (higher tariff as product becomes more processed)

Timber certification example:

 CITES, FLEGT, FSC — certifications that restrict illegal logging products

Other issues:

 Different standards across countries

 Environmental rules
 Homeland security measures

👉 These barriers can effectively stop imports completely.

📊 2nd Image: Comparison Table (Tariffs vs

Non-Tariff Barriers)
This table compares how tariffs and NTBs work.

TARIFF BARRIERS
Feature Meaning
Visibility High. Everyone can see the tax.
Ease of implementation Easy for governments to impose.
WTO rule Controlled under GATT Article II.
Impact on trade Makes imports costlier but still allows entry.
Common reasons given Revenue, protecting local industries.

👉 Tariffs raise price but don’t stop trade.

NON-TARIFF BARRIERS (NTBs)

Feature Meaning
Visibility Low. Often hidden in rules and standards.
Ease of Complex, often non-transparent.
 Feature Meaning
implementation
WTO rule Controlled under GATT Articles III, XI, XX, plus TBT & SPS Agreements.
Impact on trade Can completely block foreign products.
Consumer safety, environment, national security, but often used for
Common reasons
hidden protectionism.

👉 NTBs are more powerful and often more restrictive than tariffs.

⭐ In the simplest terms:

 Tariff = tax on imports. Visible, simple.
 Non-tariff barrier = rules, limits, certifications, bans. Often hidden, more powerful.

Tariffs make trade expensive.

NTBs can stop trade entirely.

1) What is a tariff (customs duty)?

A tariff is a tax that a government charges on goods when they cross a national border. Usually
the importing country charges it when goods enter. People sometimes say “tariff”, “duty”, or
“customs” interchangeably — they all mean a charge on imports (and sometimes on exports).
Tariffs are the common tools countries use to control trade, raise revenue, or protect local
industries.
Why governments use tariffs (three main reasons):
 Economic (protect domestic producers): Tariffs make imported goods more expensive
so locally made goods become relatively cheaper — this helps domestic firms compete.

 Financial (revenue): Tariffs bring money into the government budget.

 Political: Tariffs can be used as leverage in foreign policy — e.g., to punish or reward
trading partners.

2) Types of tariffs (how duty can be charged)

Tariffs vary by how the tax is calculated:
 Ad valorem duty — charged as a percentage of the goods’ value (e.g., 10% of the import
value). This is the most common.

 Specific duty — charged as a fixed amount per unit (e.g., $100 per ton, or $200 per car).

 Compound duty — both ad valorem and specific added (e.g., 10% + $30/ton).
  Mixed duty — the duty is whichever of two measures is higher/lower (e.g., 10% of value
or $3 per unit, whichever is greater).

 Other technical duties — based on content or strength (e.g., sugar content, alcohol
strength) for certain goods.

Below is a clear, exam-ready, simple explanation of Article II:1(b) and Goods Schedules
(Schedules of Concessions), connecting it to the text and image you provided.

⭐ What Are Goods Schedules (Schedules of

Concessions)?
In the WTO, every Member country files a Goods Schedule, which is basically the country’s
legal commitment on:

✔ The maximum tariff it will ever charge (called bound rate)

✔ Any other tariff or non-tariff concessions it agrees to give other WTO Members

Think of a Goods Schedule as a “tariff promise sheet” that a country signs when joining the
WTO.

⭐ Key Features of Goods Schedules

1. They contain ‘bound duties’

 Bound duty = maximum tariff limit a country can legally apply.

 Actual tariff applied by the country may be lower, but can never exceed the bound rate.

Example:
India’s bound rate on a product = 40%
Actual applied tariff = 10%
India can raise it to 40% but not above that.

→ The difference between bound and applied = policy space.

Countries fight to keep that policy space because it gives them room to increase tariffs during
crises.
2. They ensure transparency, certainty, and predictability

Other countries know the maximum tariff they will face → reduces trade uncertainty.

3. They are negotiated

 During WTO rounds (like the Uruguay Round)

 During accession of new members
 Bilaterally and multilaterally

4. They are part of the Marrakesh Protocol to GATT 1994

They are legally binding and can be interpreted by the Dispute Settlement Body just like the
GATT itself.

5. Products in Schedules follow HS Codes

HS = Harmonized System
This helps in:

 Tariff classification
 Determining “like products” in non-discrimination cases (MFN, National Treatment)

6. Schedules are identified by Roman numerals

Each Member gets a schedule in the order they joined.

Example:

 Schedule I – Australia
 Schedule 178 – Timor-Leste
⭐ Understanding Article II(1)(b) — in Simple
Words
Article II(1)(b) explains what a country must do with respect to these Schedules of Concessions.

📌 First Sentence – “Do Not Charge More Than the Bound

Rate”
WTO Members must:

 Exempt listed products from customs duties higher than the bound rates in their
Schedules.

📌 Meaning:
A member cannot impose customs duties beyond the bound tariff it promised in its
Schedule.

This is the heart of WTO tariff discipline.

📌 Second Sentence – “No Additional Import Charges”

Members must:

 Reduce the number of import duties or charges

 Prohibit any additional duties on bound items other than ordinary customs duties

✔ You can charge ordinary customs duties (within bound limits)

✘ You cannot add new random charges disguised as taxes on imports

⭐ What Article II Still Allows (Under Paragraph

2)
Countries can still impose:
✔ Internal taxes (Article III) e.g., GST/VAT

—but only if also applied to domestic products.

✔ Anti-dumping and countervailing duties

—if imposed consistently with Article VI

✔ Fees for services

—such as testing, inspection, port handling

—but they must reflect the cost of service, not be revenue-raising.

⭐ Article II(3) — Stability Clause

Countries cannot change valuation methods or exchange conversion in a way that reduces the
value of their tariff concessions.

Below is a clear, structured, exam-oriented explanation of the entire Article II jurisprudence

you posted — including EC – Chicken Cuts, India – Additional Import Duties, Argentina –
Textiles, and EC – Computer Equipment — in an easy but legally accurate manner.

Use this as your revision summary or 10–15 marker answer.

⭐ PART 1 — EC – CHICKEN CUTS

Issue

EC reclassified salted chicken cuts under a different HS code (0207) attracting higher duty
(30.9%) than the bound rate under HS 0210 (15.4%).

Why did this matter?

Reclassification doubled the tariff → made Brazil/Thailand exports less competitive.

Panel’s Three-Step Test

 1. What tariff treatment did the Schedule promise?
2. What tariff treatment did the measure apply?
3. Did the measure impose duties/conditions in excess of Schedule?

EC’s Argument

 Said “salted” must mean long-term preservation, so chicken wasn’t “salted”.

Panel & AB’s Finding

 “Salted” does NOT require long-term preservation.

 Chicken should fall under HS 0210, not 0207.
 EC imposed a higher tariff than the bound rate → violation of Article II:1(a) &
II:1(b).

Key Principle

✔ Misclassification that results in a higher tariff = breach of Schedule

✔ “Treatment less favourable” exists whenever duties exceed bound rates.

⭐ PART 2 — INDIA – ADDITIONAL IMPORT

DUTIES (AID & EAD)
India imposed:

1. Additional Duty (AID)

2. Extra-Additional Duty (EAD)

on imports like alcohol, industrial goods, etc.

India claimed:
“These are charges equivalent to internal taxes, so they are allowed under Article II:2(a).”

Panel’s Mistake (as corrected by AB)

The Panel said:

 If the border charge is “equivalent”, it’s enough.

 No need to check the internal tax consistency under Article III:2.
Appellate Body’s Key Clarification

Two requirements under Article II:2(a) are inseparable:

1. Equivalence
o Requires quantitative + qualitative comparison
o Must compare amount and effect
o You must check if border charge is in excess of internal tax
2. Consistency with Article III:2
o A border tax cannot be higher than domestic tax on like products
o Must be checked simultaneously

AB Holding

 Border charges are allowed only if they are truly equivalent to internal taxes and
comply with Article III:2.
 Tariffs are not inherently discriminatory — WTO allows tariffs up to bound levels.
 India’s duties were not justified under Article II:2(a).

ARGENTINA – TEXTILES & APPAREL

Below is a clear, detailed, exam-ready explanation of Argentina – Textiles and Apparel
(USA v. Argentina), with structure, reasoning, and why the Appellate Body ruled as it did.
I have rewritten it in a way that is easy to understand but legally precise.

ARGENTINA – Textiles and Apparel (USA v.

Argentina)
Full Detailed Explanation (Article II:1(b) – "In Excess Of")

1. Background of the Case

Argentina imposed customs duties on imported textiles and apparel using a dual system:

1. 35% ad valorem duty (percentage of value), OR

 2. A minimum specific duty called DIEM (Derechos de Importación Específicos
Mínimos).

The rule was:

For each product, apply whichever duty is higher — the % duty or the minimum specific
duty.

The bound rate for Argentina in its WTO Schedule was 35% ad valorem for these products.

2. The Problem: Why DIEM was Controversial

DIEM worked like a “floor price”.

For low-value imports:

 The 35% ad valorem duty might be very small.

 But the DIEM (specific duty) could be much higher.

For example:

 Import value = $10

 35% ad valorem = $3.5
 But DIEM (minimum duty) = $8

In such cases, the effective duty exceeds 35%, violating the tariff binding.

3. What the Panel Held

The Panel concluded:

 Argentina violated Article II:1(b) because:

1. It applied a different type of duty (specific DIEM) instead of the bound ad
valorem duty.
2. On low-value products, DIEM produced duties above 35%, violating the bound
rate.

So, the Panel said the measure was unlawful because the ‘type’ was different.
4. What the Appellate Body Said (IMPORTANT)

The Appellate Body agreed with the final conclusion (Argentina violated Article II:1(b)), but
DISAGREED with the Panel’s reasoning about the “type” of duty.

Key AB Clarification:

It is not a violation to use a different type of duty than the one listed in the Schedule.

This is crucial.

The reason:

A Schedule sets an upper limit on the amount of customs duty — not on its form.

Argentina could impose:

 ad valorem duties, or
 specific duties, or
 any combination,

as long as the actual duty collected is not “in excess of” the bound rate (35%).

5. The Core Legal Principle Established by the AB

Article II:1(b) first sentence prohibits:

Only duties that exceed the bound rate — not the use of different formats of duties.

Thus:

 If Argentina’s DIEM resulted in duties ≤ 35% → no violation.

 If DIEM resulted in duties > 35% (which it did on low-value imports) → violation.

Therefore:

What matters is the actual economic burden on imports, not the structure or label of the duty.

This is a very important doctrinal point.

6. How the AB Analyzed “In Excess Of”

The AB used a simple reasoning:

Step 1: Identify the bound rate

→ 35% ad valorem.

Step 2: Check actual duty charged

→ Because DIEM acted like a minimum duty, there were always import prices low enough that
the DIEM made the effective duty exceed 35%.

The AB said:

There will always be a “break-even” price below which DIEM produces a customs duty above
35%.

Thus, even if some products did not exceed 35%, the measure itself created the possibility of
exceeding the bound.

Because the design inherently allowed violations, the measure was WTO-inconsistent.

7. Final Holding of the AB

Argentina violated Article II:1(b) first sentence.

Not because:

 It imposed a different type of duty

But because:
 The DIEM system resulted in duties "in excess of" the bound 35% rate.

The AB quoted:

“The application of a type of duty different from the type in the Schedule is inconsistent only to
the extent that it results in excess duties.”

So the actual tax burden is what counts.

8. Why This Case Is Important (Exam Points)
(1) It clarifies that tariff bindings regulate the amount, not the form, of duties.

Members can use:

 specific duties
 compound duties
 variable duties
 mixed duties
as long as they respect bound levels.

(2) Introduces the “break-even price” test.

If the structure of a duty allows the possibility of exceeding the bound rate, it is WTO-
inconsistent even without evidence of actual over-collection.

⭐ PART 4 — EC – COMPUTER EQUIPMENT

Issue

US argued that EC's tariff concession on automatic data processing equipment should apply to
LAN equipment.

Panel relied on:

 Legitimate expectations of the US

 Said tariff concession should apply because US “expected it”.

Appellate Body Rejected the Panel’s Approach

Why?

Key Findings

1. Schedules are mutually negotiated — not based on unilateral expectations.

2. “Legitimate expectations” of one party cannot rewrite the schedule.
3. Interpretation must follow:
o Article 31 VCLT principles
 o HS Notes, context, past practice
o Not subjective expectations

EQUILVALENCE
Slide 23–24: “Equivalence” under Article II:2(a)
What the slide is saying

 Sometimes a country puts a border charge on imports that is supposed to be equal to a

domestic internal tax.
 Article II:2(a) allows such charges ONLY IF:
1. They are equivalent to the internal tax; AND
2. The internal tax is imposed consistently with Article III:2.

Meaning in simple terms

If India puts ₹100 GST on domestic liquor, then it can put a ₹100 border charge on imported
liquor (to equalize competition).

BUT:

 The charge must be quantitatively (numerically) equivalent.

 And the domestic tax itself must be lawful under national treatment rules (Article
III:2).

The Appellate Body emphasized that equivalence requires both qualitative + quantitative
comparison.

Slide 25–27: “Duties or charges” under Article II:1(b) –

India Additional Import Duties
Key points

 Article II:1(b) prohibits a Member from applying customs duties higher than its bound
rate.
 India imposed two charges:
o Additional Duty
o Extra-Additional Duty
 The debate was whether these charges were actually internal taxes in disguise.
What the AB said

 Tariffs are not inherently discriminatory.

 They are legitimate, as long as they don’t exceed bound rates.
 The Panel was wrong to say that only “inherently discriminatory” charges violate Article
II:1(b).
 A border charge is allowed under Article II:2(a) only when it matches the internal tax.

Simple takeaway

A WTO Member can add taxes at the border, but:

 They must be equivalent to domestic taxes.

 If the border charge is higher, it violates Article II.

To justify a border charge under II:2(a), you must show:

1. The border charge does not exceed the internal domestic tax.
2. The domestic tax itself is WTO-consistent.

The AB said:

 You cannot separate “equivalence” from Article III:2.

 A complaining country does NOT need to file a separate Article III claim.

COMMERCE

What it means According to Columbia Textiles.

 “Commerce” refers broadly to all trade in goods, including illicit trade (even smuggled
goods).
 Article II covers any trade crossing borders, regardless of the purpose or legality of the
transaction.

Why this matters

A Member cannot say:

“We don’t apply concessions to illegally traded goods.”

The term “commerce” is interpreted broadly.

Slide 31 – ‘Subject to terms and conditions’ & EC–
Bananas
Meaning

 A WTO Member can grant rights in its schedule (e.g., lower a tariff) but cannot reduce
its obligations.
 Schedule concessions are one-way obligations – they limit how much protection a state
can use.

Slide 32–33: The meaning of “in excess of” – Argentina

Textiles Case
Case facts

 Argentina had a system where:

o The duty was the higher of:
 35% ad valorem OR
 A minimum specific duty- also called (DIEM)
 The Panel found that Argentina violated Article II by applying a different type of import
duty than set out in its Schedule and because the minimum specific duty exceeded 35 per
cent when levied on low-value products

What AB said

 The violation is not because the type of duty changed.

 The violation occurs when actual duty collected exceeds the bound rate.
 . However, the text of Article II:1(b), first sentence, does not address whether applying
a type of duty different from the type provided for in a Member's Schedule is
inconsistent, in itself, with that provision.”

Slide 34 – Practical application: violations

What slide means

Argentina’s DIEM scheme could exceed the bound rate when applied to low-value imports.

Simple summary

WTO cares about actual burden, not format.

Slide 35–36: EC – Computer Equipment
Here is a clear, complete, exam-quality explanation of the EC – Computer Equipment case,
including the multimedia PC description (Heading 8471.49), the issue of LAN equipment, the
“legitimate expectations” controversy, and the Appellate Body’s reasoning in paragraph 84.

I’ll break it down in a structured, simple way while keeping all doctrinal depth.

EC – Computer Equipment Case (US v EC)

The EC had given a tariff concession for “automatic data processing equipment”
(ADP) under HS heading 84.71, usually attracting zero or very low tariffs.

The US argued that several products—including LAN (Local Area Network) equipment and
multimedia computer systems—should be classified as ADP equipment and therefore receive the
benefit of the low bound tariff.

Example description from Heading 8471.49:

A multimedia PC with:

 CPU
 RAM
 Hard disk
 CD-ROM
 Diskette drive
 TV monitor
 Keyboard
 Remote control
 Audio system
 Ability to play CDs, store digital files
 Multiple functions (PC, TV, sound system)

2. The Legal Issue

Whether the EC’s tariff concession on ADP equipment also applied to:

1. LAN equipment, and

 2. Certain multimedia personal computer systems
(like the one described above).

US argument:
These products should fall within the ADP category because the US expected that EC would
treat them as such, based on:

 EC’s past classification practices

 Statements made in negotiations
 Technical similarity to ADP equipment

So the US relied heavily on “legitimate expectations”.

3. What the Panel Held

The Panel accepted the US position:

Panel’s reasoning:

 The meaning of a tariff concession can be interpreted in light of the reasonable or

legitimate expectations of exporting Members.
 Since the US expected that LAN equipment would be treated as ADP equipment, the EC
must honor those expectations.

Outcome (Panel):

Violation by EC → because tariff treatment of LAN equipment did not match US expectations
of the concession.

4. What the Appellate Body Said: Completely Rejected the Panel's

Approach

The AB reversed the Panel.

(A) “Legitimate expectations” have NO role in interpreting

tariff schedules
AB said:
Article II:5 does not indicate that legitimate expectations are a vital element in interpreting a
tariff concession.

This means:

 You cannot interpret the legal meaning of a schedule entry only on the basis of what one
Member expected.
 Tariff schedules are mutually negotiated, not one-sided.

(B) Why legitimate expectations cannot be used

1. Schedules are part of the WTO treaty

Under GATT Article II:7, the schedules are integral to the GATT 1994.

So:

 They must be interpreted like any other treaty provision.

 The applicable method = Vienna Convention Article 31.

2. Treaty interpretation seeks “common intention”

Paragraph 84 (AB):

“The purpose of treaty interpretation is to ascertain the common intentions of the parties.”

Not:

 unilateral desires
 subjective expectations
 what one exporter hoped to gain

3. Security and predictability cannot be based on subjective expectations

The WTO’s purpose includes predictability, but:

This predictability cannot be maintained through unilateral expectations.

Predictability comes from:

 clear text
 HS codes
 mutual agreement
  consistent practice

(C) What the AB said the Panel should have examined

instead
The AB criticized the Panel for not using proper treaty interpretation tools.

These should have been examined:

1. The Harmonized System (HS) headings

→ Primary basis for classifying tariff lines.
2. HS Explanatory Notes
→ Key interpretative sources recognized internationally.
3. Subsequent practice
→ How both parties classified products during and after negotiations.
4. EC classification practice during the Tokyo Round
→ To see if LAN equipment was ever treated as ADP equipment.
5. US classification practice
→ To understand whether both sides had a common intention.
6. EC’s own classification legislation
→ To see how the EC legally defined and treated ADP equipment.

5. Final Holding of the AB

Key finding:

The tariff concession for ADP equipment did NOT extend to LAN equipment.

Because:

 Nothing showed a mutual intention to include LAN under heading 84.71.

 “Legitimate expectations” of the US were irrelevant.

Therefore:

EC’s higher tariff on LAN equipment was lawful.

7. Importance of the Case (Exam Gold Points)
(1) Rejects “legitimate expectations” as a source of legal entitlement

A Member’s expectation ≠ legal obligation.

(2) Reinforces the primacy of the Vienna Convention

Interpretation = text + context + object/purpose + subsequent practice.

(3) Tariff schedules are treaties

They require mutual intention for interpretation.

(4) Clarifies HS codes as essential context

Classification must follow:

 HS headings
 Explanatory Notes

What Counts as a QR (Quantitative

Restriction)?
A QR is a measure that limits the quantity of imports or exports—either directly or indirectly.

The WTO sees both:

 De jure QRs → written into the law (e.g., "imports limited to 10,000 tons")
 De facto QRs → effects restrict trade even if not explicitly written (e.g., restricting ports
of entry)

. TYPES OF QUANTITATIVE RESTRICTIONS

(Explaining each of the boxes in your image)

(A) PROHIBITION
1. Absolute ban

 Importation/exportation of a product is completely banned.

 Example: “No imports of used cars allowed.”

2. Conditional ban

 Import/export allowed only if certain conditions are met.

 Example: Import allowed only if the exporting country has a certain certificate.

👉 Both violate Article XI:1 unless they fall under exceptions.

Case example:
Canada – Periodicals → Complete ban = clear violation.

(B) QUOTA
Restriction on quantity of import/export

This includes:

 Global quotas
 Country-specific quotas
 Seasonal quotas

👉 Directly prohibited under Article XI because they limit volume.

Case example:
Colombia – Ports of Entry → Limiting entry to two ports was held to restrict quantity.

(C) Automatic vs Non-Automatic Licensing

Automatic Licensing

 License automatically issued → not normally a QR.

 Used for data collection.
Non-Automatic Licensing

 Licenses granted only after administrative approval.

4. Article XI:2 — Three Exceptions

These are narrow and strictly interpreted.

Exception 1: XI:2(a)
Export restrictions temporarily applied to prevent or relieve critical shortages

Key elements:

1. Must be an export restriction/prohibition

2. Must be temporary
3. To prevent/relieve critical shortage
4. Shortage must be of:
o Foodstuffs
o Other essential products

Case:
China – Raw Materials
China failed because:

 Restrictions were not temporary

 No real “critical shortage” existed

Exception 2: XI:2(b)
Import/export restrictions necessary for classification, grading, or marketing of
commodities

Example:

 Rules that classify meat into grades

 Cotton classification systems
These are quality-control measures, not protectionist.

Exception 3: XI:2(c)
Restrictions on agricultural/fisheries products needed to enforce domestic supply-
management measures

Example:

 Import restrictions to support:

o domestic price-support schemes
o marketing boards
o production quotas

These measures must be:

 part of a domestic regulation system

 not a protectionist disguise

TARIFF VERSUS QUOTAS

Although both forms of barriers may distort trade, economic theory portends to attach greater
degree of restriction on quotas because of the following reasons:

1. Quotas do not lead to any revenue gains for the importing countries
2. Quotas do not offer the predictability that tariffs offer due to lack of fixed rate of
protection. Unlike tariff, quotas make the consumption of a dutiable good impossible.
3. Quotas create problems of administration and transparency
4. The value of removing quotas is difficult to measure and obstructs trade negotiations
5. Quotas allow protected domestic producers to exercise greater monopoly powers

2. DE JURE QUANTITATIVE RESTRICTIONS

A measure that explicitly imposes a ban, quota, or port restriction.

Case: Canada – Periodicals

 Canada completely banned certain split-run magazines.

  The ban was written directly in the law → de jure QR.
 Held: Clear violation of Article XI:1.

Why?
A ban obviously limits quantity → no further evidence required.

3. DE FACTO QUANTITATIVE RESTRICTIONS

A measure that, although not formally limiting imports/exports, has the effect of restricting
quantitative access.

WTO panels accept de facto QRs, but evidence must show:

1. A limiting effect on trade; AND

2. A causal link between the measure and limitation.

Let’s go case by case.

(A) Argentina – Hides & Leather

Issue

 Local tanners’ representatives were present during customs inspections.

 EC argued this created pressure → slowed or discouraged exports.

Panel finding

 While de facto QRs are possible, here:

o No proof that presence of tanners restricted exports
o No explanation of how it caused decline in exports

Takeaway

De facto QRs require evidence of limiting effect.

Mere presence of domestic industry at inspections ≠ restriction.
(B) Colombia – Ports of Entry
Measure

 Colombia allowed imports from Panama/CFZ only through two ports.

Effect

 This:
o Increased cost of access
o Limited competitive opportunity
o Reduced volume of potential imports

Panel holding

 This was a de facto QR because:

Restricting entry to only two ports limits quantity and trade opportunities.

Important Principle

Limiting channels of entry is equal to limiting quantity.

(C) India – Autos

Measure

 India required certain commitments (e.g., foreign exchange balancing) to get import
licenses.

Finding

 Not every administrative condition = QR

 But where conditions restrict or cap imports, they become QRs.

Panel clarified

There must be a limiting effect on trade to amount to a QR.

(D) India – Quantitative Restrictions on Certain
Agricultural Products
This is the most important case on discretionary licensing.

Measure

 India used:
o Discretionary import licensing
o Restrictions justified as Balance of Payments (BoP) measures under Article
XVIII

Findings
(1) Under Article XI:1

 Discretionary licensing = QR
Why?
o Licensing delayed, restricted, or capped imports
o Created uncertainty → limited quantity

Even without proof of actual trade impact, the design, structure, and architecture showed
restriction.

(2) Under Article XVIII (BOP)

 India claimed BOP crisis.

 Panel found:
o India’s reserves were adequate
o Measures were not necessary to safeguard BOP
→ Violated Article XVIII:11 (second sentence)

Key legal principle

Article XI:1 is very broad—any import licensing with discretion = QR.

(E) Japan – Semi-Conductors

This case defines de facto QRs most clearly.

Measure

Japan:

 Pressured companies to limit exports of semiconductors below company-specific cost.

 Used administrative guidance—not legally binding.

Panel finding

These were de facto export restrictions, because:

Two essential criteria:

1. Sufficient incentives/disincentives
o Even non-mandatory guidance can be a QR if the government encourages
restriction strongly enough.
2. Government action essential to operation
o Government monitoring + threat of intervention meant companies complied.

Definition of ‘restriction’ (very important)

Panel held Article XI:1 covers measures that:

 “Create uncertainties”
 “Affect investment plans”
 “Restrict market access”
 “Make importation prohibitively costly”

Thus, even “soft law” or administrative guidance = QR if it discourages or limits quantity.

Here is a complete, accurate, exam-ready explanation of Slides 43–50 from your PPT, PLUS
a full explanation of Japan – Semi-Conductors and China – Raw Materials exactly in the
context and language of your PPT.
Everything below is tailored directly to the text contained in Slides 43–50 of Week [Link] ().

✅ SLIDE-WISE EXPLANATION (Slides 43–50)

🔹 Slide 43 – JAPAN – SEMI-CONDUCTORS (Part
1)
This slide introduces the meaning of “restriction” under Article XI:1.

What the Panel said “restriction” includes

Under Article XI:1, a restriction is not limited to quotas or bans.

It also includes any measure that:

 creates uncertainty,
 affects investment decisions,
 restricts market access, or
 makes imports/export prohibitively costly.

This is VERY broad.

Two-part test to determine a de facto QR

The Panel said non-binding measures (like “administrative guidance”) can still violate Article XI
if:

1. There are reasonable grounds showing that companies are motivated to comply
(through incentives, pressure, government monitoring, threat of intervention, etc.)
2. Government action is essential to implementation
(meaning exporters follow the measure because the government wants them to)

This case is critical because it establishes how non-mandatory or “soft law” measures can still
become de facto export restrictions.

🔹 Slide 44 – JAPAN – SEMI-CONDUCTORS (Part

2)
This slide explains the Arrangement Japan had with the US, involving three parts:

Part I – Market Access

Japan promised to:

  impress upon its producers the need to increase imports of foreign semiconductors,
 support foreign firms through promotional bodies,
 encourage long-term buyer–seller relationships.

This part is pro-trade, not restrictive.

Part II – Anti-Dumping Suspension + Price Monitoring

 Japan suspended anti-dumping cases on certain chips.

 But it also monitored cost and prices of certain semiconductors exported to the US.

The issue:
Japan’s monitoring and “guidance” created pressure not to export semiconductors below
company-specific cost, potentially restricting exports.

Part III – Consultations / Emergency provisions

 Regular consultations,
 Preservation of GATT rights.

Takeaway: Part II created the QR concerns, not Parts I or III.

🔹 Slide 45 – JAPAN – SEMI-CONDUCTORS

(Panel’s Findings)
Panel findings

 Japan claimed it applied all provisions on a MFN basis (not favouring US over others).
 US agreed that there was no secret preferential deal.

What the Panel examined

 Whether Japan gave preferential access to US firms.

→ Found NO evidence of discrimination.
 Whether the arrangement restricted exports to other countries.
→ The monitoring and guidance were the problem.
Key observation

Imports from other countries grew more than imports from the US → again proving no
discrimination.

BUT this does NOT eliminate Article XI concerns because Article XI prohibits quantitative
restrictions, not discrimination.

What the case was about

China imposed on several raw materials:

 export duties
 export quotas
 minimum export prices
 export licensing requirements

Complainants (US, EU, Mexico) argued:

China’s restrictions gave its domestic industry an unfair advantage by making global supply
scarce and expensive, while domestic industries enjoyed cheaper, abundant supply.

Slide 46 – CHINA – RAW MATERIALS (Part 1)

China argued that:

The chapeau of Article XI:2

(“shall not extend to…”)

means:

→ Before proving violation, complainants must show that the measures are NOT covered under
XI:2(a), (b) or (c).

China relied mainly on XI:2(a):

 export restrictions temporarily applied

 to prevent/relieve critical shortages
 of essential products
China analogised this to India – Additional Duties case to argue that interpretation should be
flexible.

🔹 Slide 48 – CHINA – RAW MATERIALS (Panel’s

Analytical Approach)
Panel’s key conclusion

 Many measures together created a restriction.

 Even if individually legal, collectively they amounted to WTO-inconsistent export
quotas.

Important point

Panels can examine measures acting in concert → to prevent governments from continuously
reissuing temporary measures to escape scrutiny.

Panel findings

 Export quotas on many products = violation of Article XI:1

 Export price coordination = de facto QR
(because exporters were pressured to meet minimum prices)

Licensing systems

 Automatic = OK
 Non-automatic and discretionary = QR

Minimum export price (MEP)

→ “clear violation” because they restrict export quantity by raising price artificially.

🔹 Slide 49 – CHINA – RAW MATERIALS (XI:2(a)

Exception)
China tried to justify quotas under Article XI:2(a).
Elements needed (Panel’s framework):

1. Must be an export prohibition/restriction (not a duty/charge)

2. Must be temporarily applied
3. Must prevent/relieve critical shortage
4. Products must be essential
5. Shortage must be extraordinary, reaching a “decisive stage”

Panel finding

China failed:

 Measures were in place for YEARS → not temporary

 No severe shortage proven
 Products not all “essential”

Therefore XI:2(a) did NOT apply.

🔹 Slide 50 – CHINA – RAW MATERIALS

(Appellate Body Conclusion)
What the AB upheld

 “Temporary” means applied only in interim, short duration, addressing “passing need”.
 China’s measures were long-standing, thus not temporary.
 “Critical shortages” =
→ shortages that are crucial, vital, decisive,
→ not routine supply fluctuations.

Final result

China could NOT justify its export quotas under XI:2(a).

Violation of Article XI:1 was upheld.