On August 22, 2014, a World Trade Organization (WTO) dispute settlement panel circulated its decision in Argentina – Measures Affecting the Importation of Goods (WT/DS438/R, WT/DS444/R, WT/DS445/R). The United States, the European Union and Japan (the complainants) challenged two separate, broadly defined measures, alleging that each restricted imports in a manner inconsistent with Argentina’s WTO obligations.

Trade-Related Requirements Measure

The panel first examined a set of five actions, referred to as the Trade-Related Requirements (TRRs). The complainants described the TRRs as a single measure that violated various provisions of the General Agreement on Tariffs and Trade (GATT) 1994, including Articles XI:1 and III:4. The panel found initially that, as part of a policy seeking to eliminate trade balance deficits and substitute imports for domestically-produced goods, Argentina required importers and other economic operators to undertake one or more of the following TRRs: (i) offset the value of their imports with, at least, an equivalent value of exports; (ii) limit their imports, either in volume or value; (iii) reach a certain level of local content in domestically produced goods; (iv) make or increase investments in Argentina; and (v) refrain from repatriating funds from Argentina. Notably, the TRRs were not contained in any law, regulation or other written measure. Thus, the panel focused first on the standard for identifying and challenging “unwritten” measures, followed by a detailed examination of the evidence in the record establishing the existence of each of the TRRs.

The panel next ruled that the TRRs constituted a single measure, which it examined first under Article XI:1 of the GATT 1994. Article XI:1 prohibits WTO Members from imposing “prohibitions or restrictions” on the importation of any product, including in the form of “other measures.” The panel found that the TRRs measure fell within the broad scope of the term “other measures.”

The panel then analyzed whether the TRRs measure constituted a prohibition or restriction, including in the form of a “limiting condition” that has restrictive effects on importation. Noting that companies were not allowed to import unless they achieved a trade balance or export surplus, the panel identified numerous restrictions imposed by the TRRs measure on the manner in which companies might fulfill these requirements. For instance, in order to continue importing, companies were required to increase their level of exports, making the right to import contingent upon export performance; therefore, this requirement constituted a “limiting condition” on imports and, hence, a restriction under Article XI:1. The import reduction requirement involved a per se limitation on imports. The required increase in local content, either by purchasing from domestic producers or by developing local manufacture, also had a direct limiting effect on imports, because the measure is designed to force the substitution of imports. The panel reached similar findings regarding each of the remaining TRRs and found that the TRRs measure was characterized by a lack of transparency and predictability, which further discouraged imports. As a result, Argentina’s TRRs measure was deemed to be a restriction on the importation of goods and thus inconsistent with Article XI:1.

The panel next examined the TRRs measure with respect to the local content requirement pursuant to Article III:4 of the GATT 1994. After finding that imported and domestic products were “like products,” the panel ruled that the local content requirement constituted a “requirement” within the meaning of Article III:4, because companies had to achieve a certain level of local content in order to import and to receive certain advantages. As a result, the level of imports that would otherwise have occurred decreased, meaning that the requirement affected the purchase and use of imports within the meaning of Article III:4. Finally, the panel found that the local content requirement modified the conditions of competition in Argentina to the detriment of imports, and thus granted imports less favorable treatment than like domestic goods. Accordingly, the panel ruled that the TRRs measure, with respect to the local content requirement, was inconsistent with Article III:4.

Advance Sworn Import Declaration Procedure

The complainants also asserted claims under various provisions of the GATT 1994 and the Agreement on Import Licensing Procedures concerning Argentina’s Advance Sworn Import Declaration (or “DJAI”) procedure. This measure required importers, prior to issuance of a purchase order or similar document, to submit a DJAI providing certain stipulated information. The filing of a DJAI by the importer initiated the DJAI procedure. To import goods an importer needed a DJAI in “exit” status. Goods covered by a DJAI in “observed” status could not be imported into Argentina.

Argentina argued that the DJAI procedure was a customs formality subject to Article VIII of the GATT 1994 and that Article XI:1 was not applicable. The panel disagreed, finding that the DJAI was a procedure by which Argentina determined the right to import. Moreover, even if the DJAI procedure was a customs or import formality subject to Article VIII, this did not per se exclude the applicability of Article XI:1. Finally, the panel found that it should presume the obligations contained within the two provisions apply harmoniously and cumulatively, rather than being mutually exclusive, as argued by Argentina. The panel also determined to analyze the claims raised by the complainants under Article XI:1 irrespective of whether the DJAI procedure constituted an import license. On this basis, the panel rejected Argentina’s argument that it should analyze the claims under the Import Licensing Agreement before the claims under Article XI:1.

Having examined these preliminary issues, the panel held that the DJAI procedure did violate Article XI:1, by having a limiting effect on imports which constituted an import restriction. Specifically, the DJAI procedure (i) restricted market access for imported products to Argentina, because obtaining a DJAI in exit status was not automatic; (ii) created uncertainty as to an applicant’s ability to import; (iii) did not allow companies to import as much as they desired or needed without regard to their export performance; and (iv) imposed a significant burden on importers unrelated to their normal importing activity. The panel also rejected Argentina’s argument that Article XI:1 requires a demonstration that a measure restricts the quantity of imports or exports, either by reference to the manner in which the measure is expressed (i.e., “in terms of quantity”) or in a way that is “quantifiable.” Moreover, the panel explained, previous panels had made clear that, rather than actual trade effects, Article XI:1 protects Members’ expectations as to the competitive relationship between their products and those of other Members in respect of importation itself.

In light of its findings of inconsistency under Article XI:1, the panel exercised judicial economy and declined to rule on the complainants’ other claims under Article X:1 and X:3(a) of the GATT 1994 and under Articles 1.3, 1.4(a), 3.2, 3.3, 3.5(f), 5.1, 5.2, 5.3 and 5.4 of the Import Licensing Agreement.