WT/DS162/R/Add.1 Page 76
J. VIOLATION OF ARTICLE III:4 OF THE GATT 1994
1. The relationship between Article III:4 and Article VI of the GATT 1994
In response to a question of the Panel to both parties regarding the relationship between Article III:4 and Article VI of the GATT 1994, Japan argues that Articles III:4 and VI are not related in the sense of necessarily being either dependent upon one another or mutually exclusive. Thus, as in the present case, a domestic measure can violate both Articles. More specifically, if a measure conforms with Article VI, it is a permitted border measure (a measure imposed on or in connection with importation) and so is not within the scope of Article III. In the instant case, however, the measure violates Article VI as an anti‑dumping law not in conformity therewith; it also violates Article III by regulating imported products under a separate, less favourable regime than is applicable to domestic products.
The United States, in reply to the Panel's question, considers that a specific law or measure falls under Article III:4 of GATT 1994 when it can be characterised as an "internal" law or measure. Basically, an "internal" law or measure is one, like the 1916 Act, that affects the internal sale, offering for sale, purchase, transportation, distribution or use of an imported product. Although it is possible for an internal charge or regulation to be collected or enforced in the case of an imported product at the time or point of importation and still be subject to Article III255, an "internal" law or measure nevertheless does not include a law or measure making a border adjustment, such as the imposition of duties on an imported product.
In the view of the United States, for a specific law or measure to fall under Article VI of the GATT 1994, two requirements must be satisfied. First, it must involve a particular type of border adjustment, not just any border adjustment; it must be one that imposes duties on an imported product. Second, it must also be an anti‑dumping law or measure, in the sense that it attempts to counteract injurious dumping based on findings of "dumping" and "injury."
The GATT 1947 panel report in United States ‑ Pork256 confirms that Article VI does not govern all laws and measures that impose border adjustments or even all laws and measures that impose border adjustments in the form of duties, but rather only laws and measures that attempt to counteract injurious dumping through the imposition of duties, based on findings of "dumping" and "injury." As the panel report explains, one of two basic GATT provisions that prohibits duties from being imposed is Article I:1 of the GATT 1994, which provides that duties and charges of any kind imposed in connection with importation must meet the most‑favoured‑nation standard. The other one, according to the panel report, is Article II:1, which provides that an importing Member shall not impose duties on another Member's products in excess of the rate set forth in the importing Member's Schedule of Concessions, i.e. the bound rate. Specifically, Article II:1(b) provides that a Member's products "shall […] be exempt from ordinary customs duties in excess of those set forth and provided [in the importing Member's Schedule of Concessions]. Such products shall also be exempt from all other duties or charges of any kind imposed on or in connection with the importation in excess of those imposed on the date of this Agreement or those directly and mandatorily required to be imposed thereafter by legislation in force in the importing territory on that date." Article II:2 does recognize certain situations where duties may be imposed in excess of the bound rate, such as "any anti‑dumping or countervailing duty applied consistently with the provisions of Article VI," but otherwise duties in excess of the bound rate (or duties provided on a non‑most‑favoured‑nation basis) are prohibited. When Article VI therefore is read in the context of Article I:1 and Article II:1, it can be seen how the coverage of Article VI is limited. Article VI itself applies only to laws or
255 The United States refers to the Interpretative Note ad Article III.
256 The United States refers to United States ‑ Pork, Op. Cit., para. 4.4.