Brazil – Retreaded Tyres (AB 2007 ) PDF

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WORLD TRADE

WT/DS332/AB/R 3 December 2007

ORGANIZATION

(07-5290)

Original: English

BRAZIL – MEASURES AFFECTING IMPORTS OF RETREADED TYRES

AB-2007-4

Report of the Appellate Body

WT/DS332/AB/R Page i

I.

Introduction................................................................................................................................. 1

II.

Arguments of the Participants and the Third Participants .......................................................... 6 A.

Claims of Error by the European Communities – Appellant......................................... 6 1. 2. 3.

B.

Arguments of Brazil – Appellee ................................................................................... 21 1. 2. 3.

C.

The Necessity Analysis..................................................................................... 6 The Chapeau of Article XX of the GATT 1994 ............................................. 12 Conditional Appeal......................................................................................... 18 The Necessity Analysis................................................................................... 21 The Chapeau of Article XX of the GATT 1994 ............................................. 25 The European Communities' Conditional Appeal .......................................... 29

Arguments of the Third Participants............................................................................ 33 1. 2. 3. 4. 5. 6.

Argentina ........................................................................................................ 33 Australia.......................................................................................................... 34 Japan ............................................................................................................... 37 Korea............................................................................................................... 38 The Separate Customs Territory of Taiwan, Penghu, Kinmen, and Matsu .............................................................................................................. 40 United States................................................................................................... 43

III.

Issues Raised in This Appeal .................................................................................................... 45

IV.

Background and the Measure at Issue....................................................................................... 46

V.

A.

Factual Background .................................................................................................... 46

B.

The Measure at Issue ................................................................................................... 47

C.

Related Measures......................................................................................................... 50

The Panel's Analysis of the Necessity of the Import Ban ......................................................... 52 A.

The Panel's Necessity Analysis under Article XX(b) of the GATT 1994...................... 52 1. 2. 3.

B.

The Panel's Necessity Analysis and Article 11 of the DSU.......................................... 73 1. 2.

C.

The Panel's Analysis of the Contribution of the Import Ban to the Achievement of Its Objective ......................................................................... 52 The Panel's Analysis of Possible Alternatives to the Import Ban................... 63 The Weighing and Balancing of Relevant Factors by the Panel..................... 70 Article 11 of the DSU and the Panel's Analysis of the Contribution of the Import Ban to the Achievement of Its Objective ...................................... 74 Article 11 of the DSU and the Panel's Examination of Possible Alternatives to the Import Ban........................................................................ 78

General Conclusion on the Necessity Analysis under Article XX(b) of the GATT 1994 ............................................................................................................................. 82

WT/DS332/AB/R Page ii

VI.

The Panel's Interpretation and Application of the Chapeau of Article XX of the GATT 1994 .......................................................................................................................................... 83 A.

The MERCOSUR Exemption and the Chapeau of Article XX of the GATT 1994........ 83 1. 2.

B.

The MERCOSUR Exemption and Arbitrary or Unjustifiable Discrimination ................................................................................................ 85 The MERCOSUR Exemption and Disguised Restriction on International Trade.......................................................................................... 93

Imports of Used Tyres through Court Injunctions and the Chapeau of Article XX of the GATT 1994 ....................................................................................... 95 1. 2.

Imports of Used Tyres through Court Injunctions and Arbitrary or Unjustifiable Discrimination........................................................................... 95 Imports of Used Tyres and Disguised Restriction on International Trade ............................................................................................................... 98

VII.

The European Communities' Claims that the MERCOSUR Exemption Is Inconsistent with Article I:1 and Article XIII:1 of the GATT 1994 ............................................................. 99

VIII.

Findings and Conclusions....................................................................................................... 101

ANNEX I

Notification of an Appeal by the European Communities under Article 16.4 and Article 17 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU), and under Rule 20(1) of the Working Procedures for Appellate Review

WT/DS332/AB/R Page iii CASES CITED IN THIS REPORT Short Title

Full case title and citation

Australia – Salmon

Appellate Body Report, Australia – Measures Affecting Importation of Salmon, WT/DS18/AB/R, adopted 6 November 1998, DSR 1998:VIII, 3327

Brazil – Retreaded Tyres

Panel Report, Brazil – Measures Affecting Imports of Retreaded Tyres, WT/DS332/R, circulated to WTO Members 12 June 2007

Canada – Dairy

Appellate Body Report, Canada – Measures Affecting the Importation of Milk and the Exportation of Dairy Products, WT/DS103/AB/R, WT/DS113/AB/R and Corr.1, adopted 27 October 1999, DSR 1999:V, 2057

Canada – Wheat Exports and Grain Imports

Appellate Body Report, Canada – Measures Relating to Exports of Wheat and Treatment of Imported Grain, WT/DS276/AB/R, adopted 27 September 2004, DSR 2004:VI, 2739

Chile – Price Band System (Article 21.5 – Argentina)

Appellate Body Report, Chile – Price Band System and Safeguard Measures Relating to Certain Agricultural Products – Recourse to Article 21.5 of the DSU by Argentina, WT/DS207/AB/RW, adopted 22 May 2007

Dominican Republic – Import and Sale of Cigarettes

Appellate Body Report, Dominican Republic – Measures Affecting the Importation and Internal Sale of Cigarettes, WT/DS302/AB/R, adopted 19 May 2005, DSR 2005:XV, 7367

Dominican Republic – Import and Sale of Cigarettes

Panel Report, Dominican Republic – Measures Affecting the Importation and Internal Sale of Cigarettes, WT/DS302/R, adopted 19 May 2005, as modified by Appellate Body Report, WT/DS302/AB/R, DSR 2005:XV, 7425

EC – Asbestos

Appellate Body Report, European Communities – Measures Affecting Asbestos and Asbestos-Containing Products, WT/DS135/AB/R, adopted 5 April 2001, DSR 2001:VII, 3243

EC – Asbestos Panel Report, European Communities – Measures Affecting Asbestos and Asbestos-Containing Products, WT/DS135/R and Add.1, adopted 5 April 2001, as modified by Appellate Body Report, WT/DS135/AB/R, DSR 2001:VIII, 3305 EC – Bed Linen (Article 21.5 – India)

Appellate Body Report, European Communities – Anti-Dumping Duties on Imports of Cotton-Type Bed Linen from India – Recourse to Article 21.5 of the DSU by India, WT/DS141/AB/RW, adopted 24 April 2003, DSR 2003:III, 965

EC – Export Subsidies on Sugar

Appellate Body Report, European Communities – Export Subsidies on Sugar, WT/DS265/AB/R, WT/DS266/AB/R, WT/DS283/AB/R, adopted 19 May 2005, DSR 2005:XIII, 6365

EC – Hormones

Appellate Body Report, EC Measures Concerning Meat and Meat Products (Hormones), WT/DS26/AB/R, WT/DS48/AB/R, adopted 13 February 1998, DSR 1998:I, 135

EC – Sardines

Appellate Body Report, European Communities – Trade Description of Sardines, WT/DS231/AB/R, adopted 23 October 2002, DSR 2002:VIII, 3359

EC – Selected Customs Matters

Appellate Body Report, European Communities – Selected Customs Matters, WT/DS315/AB/R, adopted 11 December 2006

EC – Tube or Pipe Fittings

Appellate Body Report, European Communities – Anti-Dumping Duties on Malleable Cast Iron Tube or Pipe Fittings from Brazil, WT/DS219/AB/R, adopted 18 August 2003, DSR 2003:VI, 2613

Japan – Agricultural Products II

Appellate Body Report, Japan – Measures Affecting Agricultural Products, WT/DS76/AB/R, adopted 19 March 1999, DSR 1999:I, 277

Japan – Alcoholic Beverages II

Appellate Body Report, Japan – Taxes on Alcoholic Beverages, WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/R, adopted 1 November 1996, DSR 1996:I, 97

WT/DS332/AB/R Page iv

Short Title

Full case title and citation

Japan – Apples

Appellate Body Report, Japan - Measures Affecting the Importation of Apples, WT/DS245/AB/R, adopted 10 December 2003, DSR 2003:IX, 4391

Korea – Alcoholic Beverages

Appellate Body Report, Korea – Taxes on Alcoholic Beverages, WT/DS75/AB/R, WT/DS84/AB/R, adopted 17 February 1999, DSR 1999:I, 3

Korea – Dairy

Appellate Body Report, Korea – Definitive Safeguard Measure on Imports of Certain Dairy Products, WT/DS98/AB/R, adopted 12 January 2000, DSR 2000:I, 3

Korea – Various Measures on Beef

Appellate Body Report, Korea – Measures Affecting Imports of Fresh, Chilled and Frozen Beef, WT/DS161/AB/R, WT/DS169/AB/R, adopted 10 January 2001, DSR 2001:I, 5

Korea – Various Measures on Beef

Panel Report, Korea – Measures Affecting Imports of Fresh, Chilled and Frozen Beef, WT/DS161/R, WT/DS169/R, adopted 10 January 2001, as modified by Appellate Body Report, WT/DS161/AB/R, WT/DS169/AB/R, DSR 2001:I, 59

Mexico – Taxes on Soft Drinks

Appellate Body Report, Mexico – Tax Measures on Soft Drinks and Other Beverages, WT/DS308/AB/R, adopted 24 March 2006

Turkey – Textiles

Appellate Body Report, Turkey – Restrictions on Imports of Textile and Clothing Products, WT/DS34/AB/R, adopted 19 November 1999, DSR 1999:VI, 2345

US – Carbon Steel

Appellate Body Report, United States – Countervailing Duties on Certain Corrosion-Resistant Carbon Steel Flat Products from Germany, WT/DS213/AB/R and Corr.1, adopted 19 December 2002, DSR 2002:IX, 3779

US – Corrosion-Resistant Steel Sunset Review

Appellate Body Report, United States – Sunset Review of Anti-Dumping Duties on Corrosion-Resistant Carbon Steel Flat Products from Japan, WT/DS244/AB/R, adopted 9 January 2004, DSR 2004:I, 3

US – Gambling

Appellate Body Report, United States – Measures Affecting the Cross-Border Supply of Gambling and Betting Services, WT/DS285/AB/R and Corr.1, adopted 20 April 2005, DSR 2005:XII, 5663

US – Gambling

Panel Report, United States – Measures Affecting the Cross-Border Supply of Gambling and Betting Services, WT/DS285/R, adopted 20 April 2005, as modified by Appellate Body Report, WT/DS285/AB/R, DSR 2005:XII, 5797

US – Gasoline

Appellate Body Report, United States – Standards for Reformulated and Conventional Gasoline, WT/DS2/AB/R, adopted 20 May 1996, DSR 1996:I, 3

US – Line Pipe Panel Report, United States – Definitive Safeguard Measures on Imports of Circular Welded Carbon Quality Line Pipe from Korea, WT/DS202/R, adopted 8 March 2002, as modified by Appellate Body Report, WT/DS202/AB/, DSR 2002:IV, 1473 US – Oil Country Tubular Goods Sunset Reviews

Appellate Body Report, United States – Sunset Reviews of Anti-Dumping Measures on Oil Country Tubular Goods from Argentina, WT/DS268/AB/R, adopted 17 December 2004, DSR 2004:VII, 3257

US – Section 301 Trade Act

Panel Report, United States – Sections 301-310 of the Trade Act of 1974, WT/DS152/R, adopted 27 January 2000, DSR 2000:II, 815

US – Section 337 Tariff Act

GATT Panel Report, United States Section 337 of the Tariff Act of 1930, L/6439, adopted 7 November 1989, BISD 36S/345

WT/DS332/AB/R Page v

Short Title

Full case title and citation

US – Shrimp

Appellate Body Report, United States – Import Prohibition of Certain Shrimp and Shrimp Products, WT/DS58/AB/R, adopted 6 November 1998, DSR 1998:VII, 2755

US – Shrimp (Article 21.5 – Malaysia)

Appellate Body Report, United States – Import Prohibition of Certain Shrimp and Shrimp Products – Recourse to Article 21.5 of the DSU by Malaysia, WT/DS58/AB/RW, adopted 21 November 2001, DSR 2001:XIII, 6481

US – Shrimp (Article 21.5 – Malaysia)

Panel Report, United States – Import Prohibition of Certain Shrimp and Shrimp Products – Recourse to Article 21.5 of the DSU by Malaysia, WT/DS58/RW, adopted 21 November 2001, upheld by Appellate Body Report, WT/DS58/AB/RW, DSR 2001:XIII, 6529

US – Wheat Gluten

Appellate Body Report, United States – Definitive Safeguard Measures on Imports of Wheat Gluten from the European Communities, WT/DS166/AB/R, adopted 19 January 2001, DSR 2001:II, 717

US – Wool Shirts and Blouses

Appellate Body Report, United States – Measure Affecting Imports of Woven Wool Shirts and Blouses from India, WT/DS33/AB/R and Corr.1, adopted 23 May 1997, DSR 1997:I, 323

WT/DS332/AB/R Page vi ABBREVIATIONS USED IN THIS REPORT Abbreviation

Description

ABR

Associação Brasileira do Segmento de Reforma de Pneus (Brazilian Association of the Retreading Industry)

ABR Report

Report of the ABR on tyre retreading activities in Brazil, 26 May 2006 (Exhibit BRA-95)

CONAMA

Conselho Nacional do Meio Ambiente (National Council for the Environment of the Ministry of the Environment)

CONAMA Resolution 258/1999

CONAMA Resolution No. 258 of 26 August 1999 (Exhibits BRA-4 and EC-47)

CRTA

Committee on Regional Trade Agreements

DSB

Dispute Settlement Body

DSU

Understanding on Rules and Procedures Governing the Settlement of Disputes

Enabling Clause

GATT 1979 Decision on Differential and More Favourable Treatment, Reciprocity and Fuller Participation of Developing Countries, L/4903, 28 November 1979, BISD 26S/203

GATS

General Agreement on Trade in Services

GATT 1994

General Agreement on Tariffs and Trade 1994

Import Ban

Prohibition imposed by Brazil on imports of retreaded tyres

INMETRO

Instituto Nacional de Metrologia, Normalização e Qualidade Industrial (National Institute for Metrology, Standardization and Industrial Quality)

LAFIS

LAFIS Consultoria, Análises Sectoriais e de Empresas

MERCOSUR or Mercosur

Mercado Común del Sur (Southern Common Market) – a regional trade agreement between Brazil, Argentina, Uruguay, and Paraguay, founded in 1991 by the Treaty of Asunción, amended and updated by the 1994 Treaty of Ouro Preto

MERCOSUR exemption

Exemption from the Import Ban afforded by Brazil to imports of retreaded tyres originating in MERCOSUR countries

OECD

Organisation for Economic Co-operation and Development

Panel Report

Panel Report, Brazil – Measures Affecting Imports of Retreaded Tyres

Portaria SECEX 8/2000

Portaria SECEX No. 8 of 25 September 2000 (Exhibits BRA-71 and EC-26)

Portaria SECEX 14/2004

Portaria No. 14 of the SECEX, dated 17 November 2004 (Exhibits BRA-84 and EC-29)

SECEX

Secretaria de Comércio Exterior (Secretariat of Foreign Trade of the Brazilian Ministry of Development, Industry, and Foreign Trade)

WT/DS332/AB/R Page vii

Abbreviation

Description

Understanding on Article XXIV of the GATT 1994

Understanding on the Interpretation of Article XXIV of the General Agreement on Tariffs and Trade 1994

Working Procedures

Working Procedures for Appellate Review, WT/AB/WP/5, 4 January 2005

WTO

World Trade Organization

WT/DS332/AB/R Page 1 WORLD TRADE ORGANIZATION APPELLATE BODY

Brazil – Measures Affecting Imports of Retreaded Tyres

AB-2007-4 Present:

European Communities, Appellant Brazil, Appellee Argentina, Third Participant Australia, Third Participant China, Third Participant Cuba, Third Participant Guatemala, Third Participant Japan, Third Participant Korea, Third Participant Mexico, Third Participant Paraguay, Third Participant Separate Customs Territory of Taiwan, Penghu, Kinmen, and Matsu, Third Participant Thailand, Third Participant United States, Third Participant

Abi-Saab, Presiding Member Baptista, Member Taniguchi, Member

I.

Introduction

1.

The European Communities appeals certain issues of law and legal interpretations developed

in the Panel Report, Brazil – Measures Affecting Imports of Retreaded Tyres (the "Panel Report").1 The Panel was established to consider a complaint by the European Communities concerning the consistency of certain measures imposed by Brazil on the importation and marketing of retreaded tyres 2 with the General Agreement on Tariffs and Trade 1994 (the "GATT 1994").

1 2

WT/DS332/R, 12 June 2007.

Retreaded tyres are used tyres that are reconditioned for further use by stripping the worn tread from the skeleton (casing) and replacing it with new material in the form of a new tread, and sometimes with new material also covering parts or all of the sidewalls. (See Panel Report, para. 2.1) Retreaded tyres can be produced through different methods, all indistinctively referred to as "retreading". These methods are: (i) topcapping, which consists of replacing only the tread; (ii) re-capping, which entails replacing the tread and part of the sidewall; and (iii) remoulding, which consists of replacing the tread and the sidewall including all or part of the lower area of the tyre. (See ibid., para. 2.2) The retreaded tyres covered in this dispute are classified under subheadings 4012.11 (motor cars), 4012.12 (buses and lorri...