Legal Analysis · Western World

ASID attack, Part 2 of Argentina’s WTO woes: Interpretation of Article XI:1

In the last post, I had briefly talked about how Argentina’s debt crisis had forced the nation to impose certain restrictions on imports from nations like the United States, the European Union, Japan and Mexico. These measures, including measures like the the Advanced Sworn Import Declaration (ASID), which required foreign firms to secure approval by the Argentine authorities before importing their goods, were declared to offend certain provisions of the GATT, particularly Article X and XI. 

Last month, the United States[1], Japan[2], Mexico[3] and European Union[4] separately requested consultations with Argentina  concerning these measures where the US challenged inter alia the requirement to present for approval of a non-automatic import licenser, namely the Declaración Jurada Anticipada de Importación (DJAI), non-automatic licenses required in the form of Certificados de Importación (CIs) for the importation of certain goods, requirements imposed on importers to undertake certain trade-restrictive commitments and the systematic delay in granting import approval or refusal to grant such approval, or the grant of import approval subject to importers undertaking to comply with certain allegedly trade-restrictive commitments.[5]  The relevant aspect of the complaint is that the contracting parties claimed that the challenged measures appeared to be inconsistent with Articles III: 4, X: 1, X: 2, X: 3(a) and XI: 1 of the GATT.

The European Union opined that the DJAI procedure is a non-automatic import licensing system, inconsistent with Article XI: 1 of the GATT 1994. It further argued that even if the DJAI procedure was not considered to be an “import license”, it would still be inconsistent with a number of GATT provisions, including Article XI: 1. This seems to be based on the reasoning that the said procedure is a “quantitative restriction” since it has a “limiting effect on importation”, in the sense that Argentine authorities can block an importation through this system. This is supported by the fact that as long as the importation is blocked in that, the customs authorities do not allow the release of the imported goods into the Argentine market and the Argentine Central Bank refuses to authorize the opening of letters of credit, the issuance of bank guarantees, or the payment in foreign currency for the imported goods.

Thus the main contention of the complaining side was that all these characteristics and elements in the design and structure of the DJAI procedure limited the quantity of goods that could be imported into Argentina, creating uncertainty and affecting investment plans. In furtherance of the contention, the complainant referred to the manner in which the Secretariat of Domestic Trade (SCI) used the procedure as a tool to impose restrictions on prospective importers, including the requirement to export goods from Argentina.

The United States supported this stance by arguing that the DJAI requirement is a “restriction” within the meaning of the aforementioned Article, for three reasons. First, because DJAI applications were not granted in all cases and the requirement leaves the various participating agencies with wide discretion to grant or deny the approval for importation. Second, because the discretionary nature of the requirement allowed Argentine authorities to impose restrictions on importers as a condition to import, including a limitation on the value of imports based on an importer’s ability to export goods from Argentina. Thirdly, it was because the approval to import was only granted to importers after a considerable delay.

 This reasoning can find support in Japan’s contention that under the DJAI procedure:

  • At least six agencies have authority to suspend and prevent importation and the granting of an importation license by entering observations;
  • The criteria for suspension or approval of importation are not specified
  • No meaningful explanation must be provided to importers for either suspension or rejection of a DJAI application
  • The requirement covers all or virtually all categories of goods
  • The actual operation of the requirement results in substantial delays in or in the suspension of importation
  • In practice, Argentine agencies and officials often make the grant of importation rights contingent on compliance with certain restrictions
  • That there is no indication that Argentina imposes any of these requirements for any reason other than to prevent imports and to encourage local investment, trade balancing and import substitution.

Another significant argument put forward by Japan was that the DJAI requirement provided the relevant Argentine Government agencies with an open-ended discretion to restrict imports and, thus, leads to the type of uncertainty that the panel in China – Raw Materials found to be inconsistent with Article XI.

Argentina’s defense as a respondent begins from Para 6.8 of the Panel report wherein the nation argues that Article XI: 1 only applies to measures of a substantive nature.It further suggested that this does not apply to formalities or requirements that are connected with importation, which can only be examined under Article VIII of the GATT.

Alternatively, Argentina argued that, even if Article XI: 1 were to apply to customs or import formalities, Articles VIII and XI: 1 are mutually exclusive provisions and due to this conflict, the more specific provisions foreseen in Article VIII should prevail using the lex specialis doctrine.

In conclusion, Argentina submitted that, if the Panel determines that customs formalities are subject to Article XI: 1 and/or that the Import Licensing Agreement is not lex specialis in relation to the Article, then the Panel should in any case find that the complainants have failed to establish a prima facie case of inconsistency under Article XI: 1 of the GATT 1994 because any measure that is alleged to constitute a quantitative restriction under the Article must be “expressed in terms of quantity” or be “quantifiable”.

In its third-party submission, Australia asserted that, “even if the Panel accepts Argentina’s argument that the DJAI is a customs formality, the measure may still be evaluated under Article XI: 1 and it further disagreed with the way in which the purpose and focus of Article VIII of GATT has been characterized in the respondent’s submission. In Australia’s view, Article VIII does not primarily aim to permit and govern customs formalities, but specifically mentions import and export formalities only for the purposes of stating the need for Members to minimize their incidence and complexity”. This seems to stem from the understanding that if Argentina prevails in its argument that trade restrictive effects of customs formalities can only be evaluated under Article VIII while noting that it does not impose any specific disciplines in relation to these procedures, this “would result in a situation where the trade restrictive effects of customs formalities would effectively not be able to be evaluated at all“. Thus, Australia reported that the third-party view was that the trade-restrictive effects of the DJAI can be analyzed under both the relevant provisions of the Import Licensing Agreement and under Article XI: 1 of the GATT.

[1] Vide DS-444

[2] Vide DS-438

[3] Vide DS-446

[4] Vide DS-445

[5] Relevant information can be accessed at: http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds444_e.htm 

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