Principer of handel system under wto

Världshandelsorganisationen förstår WTO: Grundläggande Principer för handelssystemet WTO-avtalen är långa och komplexa eftersom de är rättsliga texter som täcker ett brett spektrum av aktiviteter. De handlar om: jordbruk, textilier och kläder, bank, telekommunikation, statliga inköp, industristandarder och produktsäkerhet, hygienbestämmelser, immateriella rättigheter och mycket mer. Men ett antal enkla grundläggande principer löper genom alla dessa dokument. Dessa principer är grunden för det multilaterala handelssystemet. En närmare titt på dessa principer: Klicka på för att öppna ett objekt. Ett träd för sidnavigering öppnas här om du aktiverar JavaScript i din webbläsare. 1. Mestbegunstigade (MFN): behandla andra människor lika. Enligt WTO-avtalen kan länder normalt inte diskriminera mellan sina handelspartner. Ge någon någon speciell förmån (till exempel en lägre tullsats för en av sina produkter) och du måste göra samma för alla andra WTO-medlemmar. Denna princip kallas mestbegränsad nation (MFN) behandling (se rutan). Det är så viktigt att det är den första artikeln i Allmänna tull - och handelsavtalet (GATT). som reglerar varuhandeln. MFN är också en prioritet i Allmänna avtalet om handel med tjänster (GATS) (artikel 2) och avtalet om handelsrelaterade aspekter av immateriella rättigheter (TRIPS) (artikel 4), men i varje avtal behandlas principen något annorlunda . Tillsammans omfattar de tre avtalen alla tre huvudområdena för handel som hanteras av WTO. Vissa undantag är tillåtna. Till exempel kan länder inrätta ett frihandelsavtal som endast gäller varor som handlas inom gruppen som diskriminerar varor från utsidan. Eller de kan ge utvecklingsländerna särskild tillgång till sina marknader. Eller ett land kan höja hinder mot produkter som anses vara orättvist handlade från specifika länder. Och i tjänster får länder, i begränsade fall, diskriminera. Men avtalen tillåter endast dessa undantag under strikta förhållanden. I allmänhet betyder MFN att varje gång ett land sänker ett handelshinder eller öppnar en marknad måste den göra det för samma varor eller tjänster från alla sina handelspartner, oavsett om de är rika eller fattiga, svaga eller starka. 2. Nationell behandling: Behandling av utlänningar och lokalbefolkningen lika Importerade och lokalt producerade varor bör behandlas lika minst efter det att utländska varor har kommit in på marknaden. Detsamma bör gälla för utländska och inhemska tjänster samt för utländska och lokala varumärken, upphovsrätt och patent. Denna princip om nationell behandling (som ger andra samma behandling som egna medborgare) återfinns också i alla de tre huvudsakliga WTO-avtalen (artikel 3 i GATT. Artikel 17 i GATS och artikel 3 i TRIPS), även om principen återigen hanteras något annorlunda i var och en av dessa. Nationell behandling gäller endast när en produkt, tjänst eller objekt av immateriella rättigheter har kommit in på marknaden. Därför är tullar vid import inte ett brott mot nationell behandling, även om lokalt producerade produkter inte belastas med motsvarande skatt. Fria handel: gradvis genom förhandlingar tillbaka till toppen Att sänka handelshinder är ett av de mest uppenbara sätten att uppmuntra handel. De berörda hindren är tullar (eller tariffer) och åtgärder som importförbud eller kvoter som selektivt begränsar kvantiteterna. Från tid till annan har även andra problem som byråkrati och växelkurspolitik diskuterats. Sedan GATT-skapelsen 1947-48 har det skett åtta omgångar av handelsförhandlingar. En nionde runda, under Doha Development Agenda, är nu på gång. Först fokuserade de på att sänka tullar (tullar) på importerade varor. Till följd av förhandlingarna hade industriländerna i mitten av 1990-talet sjunkit till mindre än 4 procent av tullsatserna på industrivaror. Men efter 1980-talet hade förhandlingarna utvidgats till att täcka icke-tariffära hinder för varor och till de nya områdena såsom tjänster och immateriella rättigheter. Öppnande marknader kan vara fördelaktiga, men det kräver också justering. WTO-avtalen tillåter länder att gradvis införa förändringar genom progressiv liberalisering. Utvecklingsländerna ges vanligtvis längre tid för att uppfylla sina skyldigheter. Förutsägbarhet: genom bindning och öppenhet bakåt ibland Ibland är det lovande att inte höja ett handelshinder lika viktigt som att sänka en, eftersom löftet ger företagen en tydligare bild av sina framtida möjligheter. Med stabilitet och förutsägbarhet uppmuntras investeringar, jobb skapas och konsumenterna kan fullt ut njuta av fördelarna med konkurrensval och lägre priser. Det multilaterala handelssystemet är ett försök från regeringarna att göra affärsmiljön stabil och förutsägbar. Uruguayrundan ökade bindningar Procenttal av tullar bundna före och efter 1986-94 samtalen (Dessa är tulllinjer, så procentuella viktningar är inte viktiga i förhållande till handelsvolym eller värde) I WTO när länder är överens om att öppna sina marknader för varor eller tjänster , de binder sina åtaganden. För varor är dessa bindningar tak för tulltaxan. Ibland beskattar länder importen till priser som är lägre än de bundna priserna. Ofta är detta fallet i utvecklingsländerna. I industriländerna tenderar de faktiska priserna och de bundna räntorna att vara densamma. Ett land kan ändra sina bindningar, men först efter att ha förhandlat med sina handelspartner, vilket kan betyda att de kompenserar dem för förlust av handel. En av resultaten från Uruguayrundan av multilaterala handelsförhandlingar var att öka mängden handel under bindande åtaganden (se tabell). I jordbruket har 100 av produkterna nu bundna avgifter. Resultatet av allt detta: en väsentligt högre grad av marknadssäkerhet för handlare och investerare. Systemet försöker också förbättra förutsägbarheten och stabiliteten på andra sätt. Ett sätt är att avskräcka från användningen av kvoter och andra åtgärder som används för att fastställa gränser för importmängder som administrerar kvoter kan leda till mer rödband och anklagelser om orättvist spel. En annan är att göra ländernas handelsregler så tydliga och offentliga (transparenta) som möjligt. Många WTO-avtal kräver att regeringar offentliggör sina policies och metoder offentligt inom landet eller genom att anmäla WTO. Den regelbundna övervakningen av den nationella handelspolitiken genom översynsmekanismen för handelspolitiken utgör ett ytterligare medel för att uppmuntra insyn både nationellt och på multilateral nivå. WTO beskrivs ibland som en frihandelsinstitution, men det är inte helt korrekt. Systemet tillåter tariffer och, under begränsade omständigheter, andra former av skydd. Mer exakt är det ett system med regler som är avsedda för öppen, rättvis och oförvrängd konkurrens. Reglerna om icke-diskriminerings-MFN och nationell behandling är utformade för att säkerställa rättvisa handelsvillkor. Det är också de som är dumpade (exporterar till låg kostnad för att få marknadsandel) och subventioner. Problemen är komplexa och reglerna försöker fastställa vad som är rättvist eller orättvist, och hur regeringar kan reagera, i synnerhet genom att ta ut ytterligare importtullar beräknade för att kompensera för skador som orsakats av illojal handel. Många av de andra WTO-avtalen syftar till att stödja rättvis konkurrens: inom jordbruk, immateriella rättigheter, tjänster, till exempel. Avtalet om offentlig upphandling (ett plurilateralt avtal eftersom det är undertecknat av endast några WTO-medlemmar) utökar konkurrensreglerna för inköp av tusentals statliga enheter i många länder. Och så vidare. Uppmuntra utveckling och ekonomisk reform tillbaka till toppen WTO-systemet bidrar till utveckling. Å andra sidan behöver utvecklingsländerna flexibilitet i den tid de tar för att genomföra systemavtal. Och avtalen själva arv de tidigare bestämmelserna i GATT som möjliggör särskilt stöd och handelsmedgivanden för utvecklingsländer. Över tre fjärdedelar av WTO-medlemmar är utvecklingsländer och länder i övergång till marknadsekonomier. Under Uruguayrundans sju och en halv år genomförde över 60 av dessa länder autonoma handelsliberaliseringsprogram. Samtidigt var utvecklingsländer och övergångsekonomier mycket mer aktiva och inflytelserika i Uruguayrundans förhandlingar än i någon tidigare omgång, och de är ännu mer i den nuvarande utvecklingsagendan för Doha. I slutet av Uruguayrundan var utvecklingsländerna beredda att ta på sig de flesta av de skyldigheter som krävs av de utvecklade länderna. Men avtalen gav dem övergångsperioder för att anpassa sig till de mer obekanta och kanske svåra WTO-bestämmelserna, särskilt för de fattigaste, minst utvecklade länderna. Ett ministerbeslut som antogs i slutet av rundan säger att bättre länder bör påskynda genomförandet av åtaganden om marknadstillträde på varor som exporteras av de minst utvecklade länderna och det söker ökat tekniskt bistånd för dem. På senare tid har utvecklade länder började tillåta tullfri och kvotfri import för nästan alla produkter från minst utvecklade länder. I allt detta går WTO och dess medlemmar fortfarande igenom en inlärningsprocess. Den nuvarande utvecklingsagendan för Doha innehåller utvecklingsländer oro över de svårigheter de står inför för att genomföra Uruguayrundans avtal. Handelssystemet bör vara. utan diskriminering bör ett land inte diskriminera mellan sina handelspartner (vilket ger dem lika mest gynnad nation eller MFN-status) och det bör inte diskriminera mellan sina egna och utländska produkter, tjänster eller medborgare (som ger dem nationell behandling) friare hinder som kommer ner genom Förhandlings förutsägbara utländska företag, investerare och regeringar borde vara övertygade om att handelshinder (inklusive tullar och icke-tariffära hinder) inte bör höjas med godtyckliga tullsatser och marknadsåtagande åtaganden är bundna i WTO mer konkurrenskraftiga motverka otillbörliga metoder som exportbidrag och dumpningsprodukter till lägre kostnad för att få marknadsandelar mer fördelaktiga för mindre utvecklade länder, vilket ger dem mer tid att anpassa sig, större flexibilitet och speciella privilegier. Det låter som en motsägelse. Det föreslår särskild behandling, men i WTO betyder det faktiskt att icke-diskriminering behandlar nästan alla lika. Det här är vad som händer. Varje medlem behandlar alla övriga medlemmar lika som mest gynnade handelspartner. Om ett land förbättrar de fördelar som det ger till en handelspartner, måste det ge alla andra WTO-medlemmar samma behandling så att de alla är mest gynnade. MFN-status betyder inte alltid lika behandling. De första bilaterala MFN-fördragen inrättade exklusiva klubbar bland en av landets mest gynnade handelspartner. Enligt GATT och nu WTO är MFN-klubben inte längre exklusiv. MFN-principen säkerställer att varje land behandlar sina över140 medmänniskor lika. Men det finns några undantag. VERDENSHANDELSORGANISATION Medlemmarna är härmed överens om följande: Däck och Ansökan 1. Reglerna och förfarandena i denna överenskommelse ska tillämpas på tvister som väckts i enlighet med bestämmelserna om samråd och tvistlösning i de avtal som förtecknas i tillägg 1 till detta avtal (omnämns i detta avtal som de överenskomna avtalen). Reglerna och förfarandena i denna överenskommelse ska också gälla samråd och tvistlösning mellan ledamöter om deras rättigheter och skyldigheter enligt bestämmelserna i avtalet om upprättande av Världshandelsorganisationen (som avses i detta avtal som WTO-avtalet) och av detta fördrag tas isolerat eller i kombination med något annat överenskommet avtal. 2. Reglerna och förfarandena i detta överenskommelse ska tillämpas med förbehåll för sådana särskilda eller kompletterande regler och förfaranden för tvistlösning som ingår i de avtalade avtalen som anges i tillägg 2 till detta avtal. I den utsträckning det finns skillnad mellan reglerna och förfarandena i detta Förståelse samt de särskilda eller kompletterande regler och förfaranden som anges i Bilaga 2, gäller de särskilda eller kompletterande reglerna och förfarandena i tillägg 2. I tvister om regler och förfaranden som omfattas av mer än ett överenskommelse om det föreligger konflikt mellan särskilda eller kompletterande regler och förfaranden i sådana överenskomna avtal och där parterna i tvisten inte kan komma överens om regler och förfaranden inom 20 dagar efter etableringen av panelen ska ordföranden för tvistlösningsorganet enligt artikel 1 punkt 1 (som avses i detta avtal som DSB) i samråd med parterna i tvisten fastställa de regler och förfaranden som ska följas inom 10 dagar efter en begäran från någon av medlemmarna. Ordföranden ska styras av principen om att särskilda eller kompletterande regler och förfaranden ska användas om möjligt, och de regler och förfaranden som anges i detta överenskommelse bör användas i den utsträckning som är nödvändigt för att undvika konflikter. 1. Tvistlösningsorganet inrättas härmed för att förvalta dessa regler och förfaranden och, om inte annat föreskrivs i en överenskommen överenskommelse, bestämmelserna om samråd och tvistlösning i de överenskomna avtalen. Följaktligen ska DSB ha befogenhet att upprätta paneler, anta panel - och appellationsorganets rapporter, upprätthålla övervakning av genomförandet av domar och rekommendationer och tillåta upphävande av medgivanden och andra skyldigheter enligt de överenskomna avtalen. När det gäller tvister som uppstår i enlighet med ett avtal som omfattas av en pluralateral handelsavtal, skall termen "Medlem" som den används häri endast hänvisa till de medlemmar som är parter i den relevanta pluralila handelsavtalet. Om DSB hanterar tvistlösningsbestämmelserna i en pluralateral handelsavtal kan endast de medlemmar som är parter i det avtalet delta i beslut eller åtgärder som DSB vidtagit i förhållande till denna tvist. 2. DSB ska informera de relevanta WTO-råden och kommittéerna om eventuella utvecklingar i tvister relaterade till bestämmelserna i respektive avtalade avtal. 3. DSB ska sammanträda så ofta som nödvändigt för att utföra sina uppgifter inom de tidsramar som anges i detta Förståelse. 4. Om reglerna och förfarandena i detta överenskommelse föreskriver att DSB ska fatta ett beslut ska det göra det genom enighet (1). 1. Medlemmar bekräftar att de följer principerna för hantering av tvister hittills tillämpade enligt artiklarna XXII och XXIII i GATT 1947, samt de regler och förfaranden som vidareutvecklas och modifieras häri. 2. WTO: s system för tvistlösning är ett centralt element i att tillhandahålla säkerhet och förutsägbarhet för det multilaterala handelssystemet. Medlemmarna erkänner att det tjänar till att bevara medlemmarnas rättigheter och skyldigheter enligt de överenskomna avtalen och att klargöra de befintliga bestämmelserna i dessa avtal i enlighet med sedvanliga regler för tolkning av folkrätten. Rekommendationer och domar från DSB kan inte öka eller minska de rättigheter och skyldigheter som anges i de avtalade avtalen. 3. En snabb lösning av situationer där en medlem anser att några förmåner som direkt eller indirekt hänför sig till de avtalade avtalen försämras genom att åtgärder som vidtagits av en annan medlem är avgörande för WTO: s effektiva funktion och upprätthållandet av en lämplig balans mellan medlemmarnas rättigheter och skyldigheter. 4. Rekommendationer eller avgöranden från DSB ska syfta till att uppnå en tillfredsställande lösning av ärendet i enlighet med de rättigheter och skyldigheter enligt detta avtal och enligt de avtal som omfattas. 5. Alla lösningar på frågor som formellt höjts enligt bestämmelserna om konsultation och tvistlösning i de avtalade avtalen, inklusive skiljeförfaranden, ska överensstämma med dessa avtal och inte upphäva eller försämra förmåner som uppkommer till någon medlem enligt dessa avtal eller hindra uppnåendet av något syfte med dessa avtal. 6. Ömsesidigt överenskomna lösningar på frågor som formellt höjts enligt bestämmelserna om konsultation och tvistlösning i de avtalade avtalen ska meddelas DSB och de relevanta råd och kommittéer, där någon medlem kan höra några punkter som rör dem. 7. Innan ett ärende inleds ska en ledamot utöva sin bedömning om huruvida åtgärder enligt dessa förfaranden skulle vara fruktbara. Syftet med tvistlösningsmekanismen är att säkerställa en positiv lösning på en tvist. En lösning som är ömsesidigt acceptabel för parterna i en tvist och är förenlig med de överenskomna avtalen är tydligt att föredra. I avsaknad av en ömsesidigt överenskommen lösning är det främsta målet med tvistlösningsmekanismen att säkerställa att de berörda åtgärderna återkallas, om de visar sig vara oförenliga med bestämmelserna i något av de avtal som omfattas. Ersättningen bör endast tillgripas om en omedelbar återkallelse av åtgärden är omöjlig och som en tillfällig åtgärd i avvaktan på att åtgärden återkallas, vilket strider mot ett överenskommelse. Den sista utväg som denna överenskommelse ger medlemsstaterna möjlighet att inleda tvistlösningsförfaranden är möjligheten att tillfälligt upphäva tillämpningen av koncessioner eller andra skyldigheter enligt de avtalade avtalen på ett diskriminerande sätt gentemot den andra medlemmen, med förbehåll för att DSB godkänner sådana åtgärder. 8. Om det föreligger en överträdelse av de förpliktelser som antagits enligt ett överenskommet avtal anses handlingen vara prima facie för att utgöra ett fall av upphävande eller nedskrivning. Detta innebär att det normalt finns en presumtion att ett brott mot reglerna har en negativ inverkan på andra medlemmar i den avtalade överenskommelsen, och i sådana fall är det upp till den medlem mot vilken klagomålet har väckts för att väcka talan . 9. Bestämmelserna i detta avtal påverkar inte ledamöternas rätt att begära en auktoritativ tolkning av bestämmelser i ett avtal som omfattas av avtalet genom beslut enligt WTO-avtalet eller ett avtal om överenskommelse som är en pluralateral handelsavtal. 10. Det är underförstått att förfrågningar om förlikning och användningen av tvistlösningsförfarandena inte ska vara avsedda eller betraktas som omstridda handlingar och att om en tvist uppstår kommer alla ledamöter att i god tro engagera sig i ett försök att lösa de tvist. Det är också underförstått att klagomål och motklagomål avseende olika saker inte bör knyts samman. 11. Detta överenskommelse ska tillämpas endast i samband med nya ansökningar om samråd enligt samrådsbestämmelserna i de avtal som omfattas av avtal som gjordes den dag då WTO-avtalet trädde i kraft. När det gäller tvister för vilka begäran om samråd gjordes enligt GATT 1947 eller enligt något annat föregångareavtal med de överenskomna avtalen före WTO-avtalets ikraftträdande, gäller de relevanta tvistlösningsreglerna och förfarandena omedelbart före Datum för WTO-avtalets ikraftträdande ska fortsätta att gälla (2). 12. Trots vad som sägs i punkt 11 får klagande parten, som ett alternativ till bestämmelserna i artiklarna 4, om ett klagomål baserat på något av de överenskomna avtalen hämtas av en utvecklingsländermedlem gentemot en utvecklad landsmedlem. 5, 6 och 12 i detta överenskommelse, motsvarande bestämmelser i beslutet av den 5 april 1966 (BISD 14S18), med undantag för att, om panelen anser att tidsramen i punkt 7 i det beslutet inte är tillräcklig för att lämna sin rapport och med överenskommelse från den klagande parten kan tidsramen förlängas. I den utsträckning det skiljer sig från reglerna och förfarandena i artiklarna 4, 5, 6 och 12 och motsvarande regler och förfaranden i beslutet, skall det senare vara föremål för det. 1. Medlemmar bekräftar sitt beslut att stärka och förbättra effektiviteten i de samrådsförfaranden som medlemmarna anlitar. 2. Varje medlem åtar sig att med tillfredsställande hänsyn till och ha tillräckligt med möjligheter att samråda om eventuella yttranden från en annan ledamot om åtgärder som påverkar driften av något avtal som omfattas av det tidigare avtalet (3). 3. Om en begäran om samråd görs i enlighet med ett avtal som omfattas av avtalet, ska den medlem som ansökan lämnas in svara på begäran inom 10 dagar efter dagen för mottagandet och utan dröjsmål samråda i godo tro inom en period av högst 30 dagar efter mottagandet av begäran, i syfte att nå en ömsesidigt tillfredsställande lösning. Om medlemmen inte svarar inom 10 dagar efter mottagandet av begäran, eller inte samråder inom en period av högst 30 dagar, eller en period som annars inte är överens om varandra efter det att mottagandet mottagits, då kan den ledamot som begärde samråd gå vidare direkt för att begära inrättande av en panel. 4. Alla sådana begäran om samråd ska meddelas DSB och de berörda råd och kommittéer av den ledamot som begär samråd. Varje begäran om samråd ska lämnas in skriftligen och motivera begäran, inklusive identifiering av de aktuella åtgärderna och en uppgift om rättslig grund för klagomålet. 5. Vid samråd i enlighet med bestämmelserna i ett avtal om överenskommelse ska ledamöterna försöka uppnå en tillfredsställande anpassning av saken innan de vidtar ytterligare åtgärder enligt detta överenskommelse. 6. Samråd skall vara konfidentiellt och utan att det påverkar någon medlems rättigheter enligt något annat förfarande. 7. Om samrådet inte löser en tvist inom 60 dagar efter det att begäran om samråd har mottagits, kan den klagande parten begära att en panel upprättas. Den klagande parten kan begära en panel under 60-dagarsperioden om samrådsmedlemmarna gemensamt anser att samråd har misslyckats med att lösa tvisten. 8. I brådskande fall, inklusive de som berör lättfördärvliga varor, ska ledamöterna inleda samråd inom högst tio dagar efter mottagandet av begäran. Om samrådet inte har klarat tvisten inom 20 dagar efter det att mottagandet mottagits, kan den klagande parten begära att en panel upprättas. 9. I brådskande fall, inbegripet de som rör omhändertagliga varor, ska parterna i tvisten, paneler och överklagandeorgan göra allt för att påskynda förfarandet i största möjliga utsträckning. 10. Under samråd bör ledamöterna särskilt uppmärksamma de särskilda problemen och intressena hos utvecklingsländernas medlemmar. 11. När en annan än konsultmedlemmarna anser att den har ett väsentligt handelsintresse för konsultationer som hålls i enlighet med artikel XXII punkt 1 i GATT 1994, artikel XXII punkt 1 i GATS eller motsvarande bestämmelser i andra avtalade avtal ( 4). En sådan medlem får inom 10 dagar efter det att cirkulationen av begäran om samråd enligt nämnda artikel meddelats rådgivande ledamöter och DSB meddela sin önskan att bli med i samrådet. En sådan medlem ska anslutas i samrådet, förutsatt att den medlem till vilken begäran om samråd har behandlats instämmer i att påståendet om väsentligt intresse är välgrundat. I så fall ska de informera DSB. Om begäran om sammanslutning inte godkänns ska den sökande ledamoten vara beredd att begära samråd enligt artikel XXII punkt 1 eller artikel XXIII.1 i GATT 1994, artikel XXII 1 eller artikel XXIII, stycke 1 i GATS, eller motsvarande bestämmelser i andra överenskomna avtal. Goda kontor, förlikning och medling 1. Goda kontor, förlikning och medling är förfaranden som frivilligt genomförs om parterna i tvisten är överens. 2. Förhandlingar om goda kontor, förlikning och medling, och särskilt ställningstaganden som parterna i tvisten vidtagit under förfarandet, ska vara konfidentiella och utan att det påverkar någon parts rättigheter i några ytterligare förfaranden enligt dessa förfaranden. 3. Goda kontor, förlikning eller medling kan när som helst begäras av någon part i en tvist. De kan börja när som helst och avslutas när som helst. När förfaranden för goda kontor, förlikning eller medling avslutas kan en klagande part fortsätta med en begäran om inrättande av en panel. 4. När goda kontor, förlikning eller medling ingås inom 60 dagar efter det att en begäran om samråd har inkommit, måste den klagande parten tillåta en 60-dagarsperiod efter det att begäran om samråd mottagits innan den begärde upprättandet av en panel. Den klagande parten kan begära att en panel inrättas under 60-dagarsperioden om parterna i tvisten gemensamt anser att goda kontor, förlikning eller medling har misslyckats med att lösa tvisten. 5. Om parterna i en tvist överens kan förfaranden för goda kontor, förlikning eller medling fortsätta under paneldokumentets gång. 6. Generaldirektören får, i egenskap av befullmäktigad ledamot, erbjuda bra kontor, förlikning eller förmedling för att hjälpa medlemmarna att lösa en tvist. Upprättande av paneler 1. Om den klagande parten begär det, ska en panel inrättas senast vid DSB-mötet efter det att begäran först framstår som en sak på DSB: s dagordning, såvida inte DSB vid det sammanträdet beslutar med enighet om inte att skapa en panel (5). 2. Begäran om inrättande av en panel skall göras skriftligen. Den ska ange huruvida samråd hölls, identifiera de aktuella specifika åtgärderna och ge en kort sammanfattning av den rättsliga grunden för klagomålet som är tillräckligt för att framlägga problemet tydligt. Om sökanden begär att en panel ska inrättas med annan än standardutbudet ska den skriftliga förfrågan innehålla den föreslagna texten med särskilda villkor. Bestämmelser om paneler 1. Paneler ska ha följande mandat om inte parterna i tvisten är överens om varandra inom 20 dagar efter det att panelen inrättats: Att undersöka, mot bakgrund av relevanta bestämmelser i (namn på det avtal som omfattas (s) som parterna i tvisten hänvisade till), ärendet hänskjutit till DSB genom (namn på parti) i dokumentet. och att göra sådana resultat som hjälper DSB att göra rekommendationerna eller att ge de avgöranden som föreskrivs i detsamma avtalet / avtalen. 2. Paneler ska ta upp de relevanta bestämmelserna i något avtal eller avtal som parterna i tvisten har hänvisat till. 3. Vid upprättandet av en panel får DSB bemyndiga sin ordförande att utarbeta referenspanelens samråd i samråd med parterna i tvisten, med förbehåll för bestämmelserna i punkt 1. Den upprättade uppgiften skall sändas till alla medlemmar. Om annat än standardbestämmelserna överenskommits, kan en ledamot hämta någon punkt i samband med DSB. Panelsammansättning 1. Paneler ska bestå av välutbildade statliga och eller icke-statliga personer, inbegripet personer som har tjänstgjort eller lagt fram ett ärende vid en panel, företrädare för en medlem eller en avtalsslutande part i GATT 1947 eller som företrädare för rådet eller kommittén för något överenskommelse eller dess föregångare eller i sekretariatet, undervisas eller publiceras i internationell handelsrätt eller politik, eller tjänat som ledamot av en ledamot för ledande handelspolitik. 2. Panelmedlemmarna bör väljas i syfte att säkerställa medlemmarnas oberoende, en tillräckligt varierad bakgrund och ett brett spektrum av erfarenheter. 3. Medborgare av ledamöter vars regeringar (6) är parter i tvisten eller tredje part enligt definitionen i artikel 10 punkt 2, får inte tjänstgöra i en panel som berörs av tvisten, såvida inte parterna i tvisten är överens om något annat. 4. För att bistå vid val av paneldeltagare ska sekretariatet upprätthålla en vägledande förteckning över statliga och icke-statliga individer som har de kvalifikationer som anges i punkt 1, från vilka paneldeltagare kan dras efter behov. Denna förteckning skall innehålla en lista över icke-statliga paneldeltagare som inrättades den 30 november 1984 (BISD 31S9) och andra rutor och vägledande listor som upprättats enligt något av de överenskomna avtalen och skall behålla namnen på personer på dessa rutor och vägledande listor vid WTO-avtalets ikraftträdande. Medlemmar kan med jämna mellanrum föreslå namn på statliga och icke-statliga individer för införlivande i den vägledande förteckningen, tillhandahålla relevant information om deras kunskaper om internationell handel och av de sektorer eller föremål som omfattas av de överenskomna avtalen, och dessa namn ska läggas till i listan på godkännande av DSB. För var och en av de personer som är upptagna i listan ska listan innehålla specifika erfarenhetsområden eller sakkunskap hos individerna inom sektorerna eller föremålet för de avtalade avtalen. 5. Paneler ska bestå av tre paneldeltagare, såvida inte parterna i tvisten samtycker till, inom tio dagar efter det att panelen inrättats, till en panel bestående av fem paneler. Medlemmarna ska omedelbart informeras om panelens sammansättning. 6. Sekretariatet ska föreslå nomineringar till panelen till parterna i tvisten. Parterna i tvisten ska inte motsätta sig nomineringar utom av tvingande skäl. 7. Om det inte finns någon överenskommelse om paneldeltagarna inom 20 dagar efter det att en panel inrättats, på generalsekreterarens begäran, i samråd med DSB: s ordförande och ordföranden för det berörda rådet eller kommitté, bestämmer panelens sammansättning genom att utse de paneldeltagare som generaldirektören anser mest lämpliga i enlighet med relevanta särskilda eller kompletterande regler eller förfaranden i avtalet eller de överenskomna avtal som är aktuella i tvisten, efter samråd med parterna i tvisten. DSB: s ordförande ska informera ledamöterna av sammansättningen av den sålunda utformade panelen senast tio dagar efter det att ordföranden mottog en sådan begäran. 8. Ledamöterna ska i regel förbinda sina tjänstemän att fungera som paneldeltagare. 9. Panelists shall serve in their individual capacities and not as government representatives, nor as representatives of any organization. Members shall therefore not give them instructions nor seek to influence them as individuals with regard to matters before a panel. 10. When a dispute is between a developing country Member and a developed country Member the panel shall, if the developing country Member so requests, include at least one panelist from a developing country Member. 11. Panelists expenses, including travel and subsistence allowance, shall be met from the WTO budget in accordance with criteria to be adopted by the General Council, based on recommendations of the Committee on Budget, Finance and Administration. Procedures for Multiple Complainants 1. Where more than one Member requests the establishment of a panel related to the same matter, a single panel may be established to examine these complaints taking into account the rights of all Members concerned. A single panel should be established to examine such complaints whenever feasible. 2. The single panel shall organize its examination and present its findings to the DSB in such a manner that the rights which the parties to the dispute would have enjoyed had separate panels examined the complaints are in no way impaired. If one of the parties to the dispute so requests, the panel shall submit separate reports on the dispute concerned. The written submissions by each of the complainants shall be made available to the other complainants, and each complainant shall have the right to be present when any one of the other complainants presents its views to the panel. 3. If more than one panel is established to examine the complaints related to the same matter, to the greatest extent possible the same persons shall serve as panelists on each of the separate panels and the timetable for the panel process in such disputes shall be harmonized. 1. The interests of the parties to a dispute and those of other Members under a covered agreement at issue in the dispute shall be fully taken into account during the panel process. 2. Any Member having a substantial interest in a matter before a panel and having notified its interest to the DSB (referred to in this Understanding as a third party) shall have an opportunity to be heard by the panel and to make written submissions to the panel. These submissions shall also be given to the parties to the dispute and shall be reflected in the panel report. 3. Third parties shall receive the submissions of the parties to the dispute to the first meeting of the panel. 4. If a third party considers that a measure already the subject of a panel proceeding nullifies or impairs benefits accruing to it under any covered agreement, that Member may have recourse to normal dispute settlement procedures under this Understanding. Such a dispute shall be referred to the original panel wherever possible. Function of Panels The function of panels is to assist the DSB in discharging its responsibilities under this Understanding and the covered agreements. Accordingly, a panel should make an objective assessment of the matter before it, including an objective assessment of the facts of the case and the applicability of and conformity with the relevant covered agreements, and make such other findings as will assist the DSB in making the recommendations or in giving the rulings provided for in the covered agreements. Panels should consult regularly with the parties to the dispute and give them adequate opportunity to develop a mutually satisfactory solution. 1. Panels shall follow the Working Procedures in Appendix 3 unless the panel decides otherwise after consulting the parties to the dispute. 2. Panel procedures should provide sufficient flexibility so as to ensure high-quality panel reports, while not unduly delaying the panel process. 3. After consulting the parties to the dispute, the panelists shall, as soon as practicable and whenever possible within one week after the composition and terms of reference of the panel have been agreed upon, fix the timetable for the panel process, taking into account the provisions of paragraph 9 of Article 4, if relevant. 4. In determining the timetable for the panel process, the panel shall provide sufficient time for the parties to the dispute to prepare their submissions. 5. Panels should set precise deadlines for written submissions by the parties and the parties should respect those deadlines. 6. Each party to the dispute shall deposit its written submissions with the Secretariat for immediate transmission to the panel and to the other party or parties to the dispute. The complaining party shall submit its first submission in advance of the responding partys first submission unless the panel decides, in fixing the timetable referred to in paragraph 3 and after consultations with the parties to the dispute, that the parties should submit their first submissions simultaneously. When there are sequential arrangements for the deposit of first submissions, the panel shall establish a firm time-period for receipt of the responding partys submission. Any subsequent written submissions shall be submitted simultaneously. 7. Where the parties to the dispute have failed to develop a mutually satisfactory solution, the panel shall submit its findings in the form of a written report to the DSB. In such cases, the report of a panel shall set out the findings of fact, the applicability of relevant provisions and the basic rationale behind any findings and recommendations that it makes. Where a settlement of the matter among the parties to the dispute has been found, the report of the panel shall be confined to a brief description of the case and to reporting that a solution has been reached. 8. In order to make the procedures more efficient, the period in which the panel shall conduct its examination, from the date that the composition and terms of reference of the panel have been agreed upon until the date the final report is issued to the parties to the dispute, shall, as a general rule, not exceed six months. In cases of urgency, including those relating to perishable goods, the panel shall aim to issue its report to the parties to the dispute within three months. 9. When the panel considers that it cannot issue its report within six months, or within three months in cases of urgency, it shall inform the DSB in writing of the reasons for the delay together with an estimate of the period within which it will issue its report. In no case should the period from the establishment of the panel to the circulation of the report to the Members exceed nine months. 10. In the context of consultations involving a measure taken by a developing country Member, the parties may agree to extend the periods established in paragraphs 7 and 8 of Article 4. If, after the relevant period has elapsed, the consulting parties cannot agree that the consultations have concluded, the Chairman of the DSB shall decide, after consultation with the parties, whether to extend the relevant period and, if so, for how long. In addition, in examining a complaint against a developing country Member, the panel shall accord sufficient time for the developing country Member to prepare and present its argumentation. The provisions of paragraph 1 of Article 20 and paragraph 4 of Article 21 are not affected by any action pursuant to this paragraph. 11. Where one or more of the parties is a developing country Member, the panels report shall explicitly indicate the form in which account has been taken of relevant provisions on differential and more-favourable treatment for developing country Members that form part of the covered agreements which have been raised by the developing country Member in the course of the dispute settlement procedures. 12. The panel may suspend its work at any time at the request of the complaining party for a period not to exceed 12 months. In the event of such a suspension, the time-frames set out in paragraphs 8 and 9 of this Article, paragraph 1 of Article 20, and paragraph 4 of Article 21 shall be extended by the amount of time that the work was suspended. If the work of the panel has been suspended for more than 12 months, the authority for establishment of the panel shall lapse. Right to Seek Information 1. Each panel shall have the right to seek information and technical advice from any individual or body which it deems appropriate. However, before a panel seeks such information or advice from any individual or body within the jurisdiction of a Member it shall inform the authorities of that Member. A Member should respond promptly and fully to any request by a panel for such information as the panel considers necessary and appropriate. Confidential information which is provided shall not be revealed without formal authorization from the individual, body, or authorities of the Member providing the information. 2. Panels may seek information from any relevant source and may consult experts to obtain their opinion on certain aspects of the matter. With respect to a factual issue concerning a scientific or other technical matter raised by a party to a dispute, a panel may request an advisory report in writing from an expert review group. Rules for the establishment of such a group and its procedures are set forth in Appendix 4. 1. Panel deliberations shall be confidential. 2. The reports of panels shall be drafted without the presence of the parties to the dispute in the light of the information provided and the statements made. 3. Opinions expressed in the panel report by individual panelists shall be anonymous. Interim Review Stage 1. Following the consideration of rebuttal submissions and oral arguments, the panel shall issue the descriptive (factual and argument) sections of its draft report to the parties to the dispute. Within a period of time set by the panel, the parties shall submit their comments in writing. 2. Following the expiration of the set period of time for receipt of comments from the parties to the dispute, the panel shall issue an interim report to the parties, including both the descriptive sections and the panels findings and conclusions. Within a period of time set by the panel, a party may submit a written request for the panel to review precise aspects of the interim report prior to circulation of the final report to the Members. At the request of a party, the panel shall hold a further meeting with the parties on the issues identified in the written comments. If no comments are received from any party within the comment period, the interim report shall be considered the final panel report and circulated promptly to the Members. 3. The findings of the final panel report shall include a discussion of the arguments made at the interim review stage. The interim review stage shall be conducted within the time-period set out in paragraph 8 of Article 12. Adoption of Panel Reports 1. In order to provide sufficient time for the Members to consider panel reports, the reports shall not be considered for adoption by the DSB until 20 days after the date they have been circulated to the Members. 2. Members having objections to a panel report shall give written reasons to explain their objections for circulation at least 10 days prior to the DSB meeting at which the panel report will be considered. 3. The parties to a dispute shall have the right to participate fully in the consideration of the panel report by the DSB, and their views shall be fully recorded. 4. Within 60 days after the date of circulation of a panel report to the Members, the report shall be adopted at a DSB meeting ( 7 ) unless a party to the dispute formally notifies the DSB of its decision to appeal or the DSB decides by consensus not to adopt the report. If a party has notified its decision to appeal, the report by the panel shall not be considered for adoption by the DSB until after completion of the appeal. This adoption procedure is without prejudice to the right of Members to express their views on a panel report. Standing Appellate Body 1. A standing Appellate Body shall be established by the DSB. The Appellate Body shall hear appeals from panel cases. It shall be composed of seven persons, three of whom shall serve on any one case. Persons serving on the Appellate Body shall serve in rotation. Such rotation shall be determined in the working procedures of the Appellate Body. 2. The DSB shall appoint persons to serve on the Appellate Body for a four-year term, and each person may be reappointed once. However, the terms of three of the seven persons appointed immediately after the entry into force of the WTO Agreement shall expire at the end of two years, to be determined by lot. Vacancies shall be filled as they arise. A person appointed to replace a person whose term of office has not expired shall hold office for the remainder of the predecessors term. 3. The Appellate Body shall comprise persons of recognized authority, with demonstrated expertise in law, international trade and the subject matter of the covered agreements generally. They shall be unaffiliated with any government. The Appellate Body membership shall be broadly representative of membership in the WTO. All persons serving on the Appellate Body shall be available at all times and on short notice, and shall stay abreast of dispute settlement activities and other relevant activities of the WTO. They shall not participate in the consideration of any disputes that would create a direct or indirect conflict of interest. 4. Only parties to the dispute, not third parties, may appeal a panel report. Third parties which have notified the DSB of a substantial interest in the matter pursuant to paragraph 2 of Article 10 may make written submissions to, and be given an opportunity to be heard by, the Appellate Body. 5. As a general rule, the proceedings shall not exceed 60 days from the date a party to the dispute formally notifies its decision to appeal to the date the Appellate Body circulates its report. In fixing its timetable the Appellate Body shall take into account the provisions of paragraph 9 of Article 4, if relevant. When the Appellate Body considers that it cannot provide its report within 60 days, it shall inform the DSB in writing of the reasons for the delay together with an estimate of the period within which it will submit its report. In no case shall the proceedings exceed 90 days. 6. An appeal shall be limited to issues of law covered in the panel report and legal interpretations developed by the panel. 7. The Appellate Body shall be provided with appropriate administrative and legal support as it requires. 8. The expenses of persons serving on the Appellate Body, including travel and subsistence allowance, shall be met from the WTO budget in accordance with criteria to be adopted by the General Council, based on recommendations of the Committee on Budget, Finance and Administration. Procedures for Appellate Review 9. Working procedures shall be drawn up by the Appellate Body in consultation with the Chairman of the DSB and the Director-General, and communicated to the Members for their information. 10. The proceedings of the Appellate Body shall be confidential. The reports of the Appellate Body shall be drafted without the presence of the parties to the dispute and in the light of the information provided and the statements made. 11. Opinions expressed in the Appellate Body report by individuals serving on the Appellate Body shall be anonymous. 12. The Appellate Body shall address each of the issues raised in accordance with paragraph 6 during the appellate proceeding. 13. The Appellate Body may uphold, modify or reverse the legal findings and conclusions of the panel. Adoption of Appellate Body Reports 14. An Appellate Body report shall be adopted by the DSB and unconditionally accepted by the parties to the dispute unless the DSB decides by consensus not to adopt the Appellate Body report within 30 days following its circulation to the Members ( 8 ).This adoption procedure is without prejudice to the right of Members to express their views on an Appellate Body report. Communications with the Panel or Appellate Body 1. There shall be no ex parte communications with the panel or Appellate Body concerning matters under consideration by the panel or Appellate Body. 2. Written submissions to the panel or the Appellate Body shall be treated as confidential, but shall be made available to the parties to the dispute. Nothing in this Understanding shall preclude a party to a dispute from disclosing statements of its own positions to the public. Members shall treat as confidential information submitted by another Member to the panel or the Appellate Body which that Member has designated as confidential. A party to a dispute shall also, upon request of a Member, provide a non-confidential summary of the information contained in its written submissions that could be disclosed to the public. Panel and Appellate Body Recommendations 1. Where a panel or the Appellate Body concludes that a measure is inconsistent with a covered agreement, it shall recommend that the Member concerned ( 9 ) bring the measure into conformity with that agreement ( 10 ). In addition to its recommendations, the panel or Appellate Body may suggest ways in which the Member concerned could implement the recommendations. 2. In accordance with paragraph 2 of Article 3, in their findings and recommendations, the panel and Appellate Body cannot add to or diminish the rights and obligations provided in the covered agreements. Time-frame for DSB Decisions Unless otherwise agreed to by the parties to the dispute, the period from the date of establishment of the panel by the DSB until the date the DSB considers the panel or appellate report for adoption shall as a general rule not exceed nine months where the panel report is not appealed or 12 months where the report is appealed. Where either the panel or the Appellate Body has acted, pursuant to paragraph 9 of Article 12 or paragraph 5 of Article 17, to extend the time for providing its report, the additional time taken shall be added to the above periods. Surveillance of Implementation of Recommendations and Rulings 1. Prompt compliance with recommendations or rulings of the DSB is essential in order to ensure effective resolution of disputes to the benefit of all Members. 2. Particular attention should be paid to matters affecting the interests of developing country Members with respect to measures which have been subject to dispute settlement. 3. At a DSB meeting held within 30 days ( 11 ) after the date of adoption of the panel or Appellate Body report, the Member concerned shall inform the DSB of its intentions in respect of implementation of the recommendations and rulings of the DSB. If it is impracticable to comply immediately with the recommendations and rulings, the Member concerned shall have a reasonable period of time in which to do so. The reasonable period of time shall be: (a) the period of time proposed by the Member concerned, provided that such period is approved by the DSB or, in the absence of such approval, (b) a period of time mutually agreed by the parties to the dispute within 45 days after the date of adoption of the recommendations and rulings or, in the absence of such agreement, (c) a period of time determined through binding arbitration within 90 days after the date of adoption of the recommendations and rulings ( 12 ). In such arbitration, a guideline for the arbitrator ( 13 ) should be that the reasonable period of time to implement panel or Appellate Body recommendations should not exceed 15 months from the date of adoption of a panel or Appellate Body report. However, that time may be shorter or longer, depending upon the particular circumstances. 4. Except where the panel or the Appellate Body has extended, pursuant to paragraph 9 of Article 12 or paragraph 5 of Article 17, the time of providing its report, the period from the date of establishment of the panel by the DSB until the date of determination of the reasonable period of time shall not exceed 15 months unless the parties to the dispute agree otherwise. Where either the panel or the Appellate Body has acted to extend the time of providing its report, the additional time taken shall be added to the 15-month period provided that unless the parties to the dispute agree that there are exceptional circumstances, the total time shall not exceed 18 months. 5. Where there is disagreement as to the existence or consistency with a covered agreement of measures taken to comply with the recommendations and rulings such dispute shall be decided through recourse to these dispute settlement procedures, including wherever possible resort to the original panel. The panel shall circulate its report within 90 days after the date of referral of the matter to it. When the panel considers that it cannot provide its report within this time frame, it shall inform the DSB in writing of the reasons for the delay together with an estimate of the period within which it will submit its report. 6. The DSB shall keep under surveillance the implementation of adopted recommendations or rulings. The issue of implementation of the recommendations or rulings may be raised at the DSB by any Member at any time following their adoption. Unless the DSB decides otherwise, the issue of implementation of the recommendations or rulings shall be placed on the agenda of the DSB meeting after six months following the date of establishment of the reasonable period of time pursuant to paragraph 3 and shall remain on the DSBs agenda until the issue is resolved. At least 10 days prior to each such DSB meeting, the Member concerned shall provide the DSB with a status report in writing of its progress in the implementation of the recommendations or rulings. 7. If the matter is one which has been raised by a developing country Member, the DSB shall consider what further action it might take which would be appropriate to the circumstances. 8. If the case is one brought by a developing country Member, in considering what appropriate action might be taken, the DSB shall take into account not only the trade coverage of measures complained of, but also their impact on the economy of developing country Members concerned. Compensation and the Suspension of Concessions 1. Compensation and the suspension of concessions or other obligations are temporary measures available in the event that the recommendations and rulings are not implemented within a reasonable period of time. However, neither compensation nor the suspension of concessions or other obligations is preferred to full implementation of a recommendation to bring a measure into conformity with the covered agreements. Compensation is voluntary and, if granted, shall be consistent with the covered agreements. 2. If the Member concerned fails to bring the measure found to be inconsistent with a covered agreement into compliance therewith or otherwise comply with the recommendations and rulings within the reasonable period of time determined pursuant to paragraph 3 of Article 21, such Member shall, if so requested, and no later than the expiry of the reasonable period of time, enter into negotiations with any party having invoked the dispute settlement procedures, with a view to developing mutually acceptable compensation. If no satisfactory compensation has been agreed within 20 days after the date of expiry of the reasonable period of time, any party having invoked the dispute settlement procedures may request authorization from the DSB to suspend the application to the Member concerned of concessions or other obligations under the covered agreements. 3. In considering what concessions or other obligations to suspend, the complaining party shall apply the following principles and procedures: (a) the general principle is that the complaining party should first seek to suspend concessions or other obligations with respect to the same sector(s) as that in which the panel or Appellate Body has found a violation or other nullification or impairment (b) if that party considers that it is not practicable or effective to suspend concessions or other obligations with respect to the same sector(s), it may seek to suspend concessions or other obligations in other sectors under the same agreement (c) if that party considers that it is not practicable or effective to suspend concessions or other obligations with respect to other sectors under the same agreement, and that the circumstances are serious enough, it may seek to suspend concessions or other obligations under another covered agreement (d) in applying the above principles, that party sh all take into account: (i) the trade in the sector or under the agreement under which the panel or Appellate Body has found a violation or other nullification or impairment, and the importance of such trade to that party (ii) the broader economic elements related to the nullification or impairment and the broader economic consequences of the suspension of concessions or other obligations (e) if that party decides to request authorization to suspend concessions or other obligations pursuant to subparagraphs (b) or (c), it shall state the reasons therefor in its request. At the same time as the request is forwarded to the DSB, it also shall be forwarded to the relevant Councils and also, in the case of a request pursuant to subparagraph (b), the relevant sectoral bodies (f) for purposes of this paragraph, sector means: (i) with respect to goods, all goods (ii) with respect to services, a principal sector as identified in the current Services Sectoral Classification List which identifies such sectors ( 14 ) (iii) with respect to trade-related intellectual property rights, each of the categories of intellectual property rights covered in Section 1, or Section 2, or Section 3, or Section 4, or Section 5, or Section 6, or Section 7 of Part II, or the obligations under Part III, or Part IV of the Agreement on TRIPS (g) for purposes of this paragraph, agreement means: (i) with respect to goods, the agreements listed in Annex 1A of the WTO Agreement, taken as a whole as well as the Plurilateral Trade Agreements in so far as the relevant parties to the dispute are parties to these agreements (ii) with respect to services, the GATS (iii) with respect to intellectual property rights, the Agreement on TRIPS. 4. The level of the suspension of concessions or other obligations authorized by the DSB shall be equivalent to the level of the nullification or impairment. 5. The DSB shall not authorize suspension of concessions or other obligations if a covered agreement prohibits such suspension. 6. When the situation described in paragraph 2 occurs, the DSB, upon request, shall grant authorization to suspend concessions or other obligations within 30 days of the expiry of the reasonable period of time unless the DSB decides by consensus to reject the request. However, if the Member concerned objects to the level of suspension proposed, or claims that the principles and procedures set forth in paragraph 3 have not been followed where a complaining party has requested authorization to suspend concessions or other obligations pursuant to paragraph 3(b) or (c), the matter shall be referred to arbitration. Such arbitration shall be carried out by the original panel, if members are available, or by an arbitrator ( 15 ) appointed by the Director-General and shall be completed within 60 days after the date of expiry of the reasonable period of time. Concessions or other obligations shall not be suspended during the course of the arbitration. 7. The arbitrator ( 16 ) acting pursuant to paragraph 6 shall not examine the nature of the concessions or other obligations to be suspended but shall determine whether the level of such suspension is equivalent to the level of nullification or impairment. The arbitrator may also determine if the proposed suspension of concessions or other obligations is allowed under the covered agreement. However, if the matter referred to arbitration includes a claim that the principles and procedures set forth in paragraph 3 have not been followed, the arbitrator shall examine that claim. In the event the arbitrator determines that those principles and procedures have not been followed, the complaining party shall apply them consistent with paragraph 3. The parties shall accept the arbitrators decision as final and the parties concerned shall not seek a second arbitration. The DSB shall be informed promptly of the decision of the arbitrator and shall upon request, grant authorization to suspend concessions or other obligations where the request is consistent with the decision of the arbitrator, unless the DSB decides by consensus to reject the request. 8. The suspension of concessions or other obligations shall be temporary and shall only be applied until such time as the measure found to be inconsistent with a covered agreement has been removed, or the Member that must implement recommendations or rulings provides a solution to the nullification or impairment of benefits, or a mutually satisfactory solution is reached. In accordance with paragraph 6 of Article 21, the DSB shall continue to keep under surveillance the implementation of adopted recommendations or rulings, including those cases where compensation has been provided or concessions or other obligations have been suspended but the recommendations to bring a measure into conformity with the covered agreements have not been implemented. 9. The dispute settlement provisions of the covered agreements may be invoked in respect of measures affecting their observance taken by regional or local governments or authorities within the territory of a Member. When the DSB has ruled that a provision of a covered agreement has not been observed, the responsible Member shall take such reasonable measures as may be available to it to ensure its observance. The provisions of the covered agreements and this Understanding relating to compensation and suspension of concessions or other obligations apply in cases where it has not been possible to secure such observance ( 17 ). Strengthening of the Multilateral System 1. When Members seek the redress of a violation of obligations or other nullification or impairment of benefits under the covered agreements or an impediment to the attainment of any objective of the covered agreements, they shall have recourse to, and abide by, the rules and procedures of this Understanding. 2. In such cases, Members shall: (a) not make a determination to the effect that a violation has occurred, that benefits have been nullified or impaired or that the attainment of any objective of the covered agreements has been impeded, except through recourse to dispute settlement in accordance with the rules and procedures of this Understanding, and shall make any such determination consistent with the findings contained in the panel or Appellate Body report adopted by the DSB or an arbitration award rendered under this Understanding (b) follow the procedures set forth in Article 21 to determine the reasonable period of time for the Member concerned to implement the recommendations and rulings and (c) follow the procedures set forth in Article 22 to determine the level of suspension of concessions or other obligations and obtain DSB authorization in accordance with those procedures before suspending concessions or other obligations under the covered agreements in response to the fail ure of the Member concerned to implement the recommendations and rulings within that reasonable period of time. Special Procedures Involving Least-Developed Country Members 1. At all stages of the determination of the causes of a dispute and of dispute settlement procedures involving a least-developed country Member, particular consideration shall be given to the special situation of least-developed country Members. In this regard, Members shall exercise due restraint in raising matters under these procedures involving a least-developed country Member. If nullification or impairment is found to result from a measure taken by a least-developed country Member, complaining parties shall exercise due restraint in asking for compensation or seeking authorization to suspend the application of concessions or other obligations pursuant to these procedures. 2. In dispute settlement cases involving a least-developed country Member, where a satisfactory solution has not been found in the course of consultations the Director-General or the Chairman of the DSB shall, upon request by a least-developed country Member offer their good offices, conciliation and mediation with a view to assisting the parties to settle the dispute, before a request for a panel is made. The Director-General or the Chairman of the DSB, in providing the above assistance, may consult any source which either deems appropriate. 1. Expeditious arbitration within the WTO as an alternative means of dispute settlement can facilitate the solution of certain disputes that concern issues that are clearly defined by both parties. 2. Except as otherwise provided in this Understanding, resort to arbitration shall be subject to mutual agreement of the parties which shall agree on the procedures to be followed. Agreements to resort to arbitration shall be notified to all Members sufficiently in advance of the actual commencement of the arbitration process. 3. Other Members may become party to an arbitration proceeding only upon the agreement of the parties which have agreed to have recourse to arbitration. The parties to the proceeding shall agree to abide by the arbitration award. Arbitration awards shall be notified to the DSB and the Council or Committee of any relevant agreement where any Member may raise any point relating thereto. 4. Articles 21 and 22 of this Understanding shall apply mutatis mutandis to arbitration awards. 1. Non-Violation Complaints of the Type Described in Paragraph 1(b) of Article XXIII of GATT 1994 Where the provisions of paragraph 1(b) of Article XXIII of GATT 1994 are applicable to a covered agreement, a panel or the Appellate Body may only make rulings and recommendations where a party to the dispute considers that any benefit accruing to it directly or indirectly under the relevant covered agreement is being nullified or impaired or the attainment of any objective of that Agreement is being impeded as a result of the application by a Member of any measure, whether or not it conflicts with the provisions of that Agreement. Where and to the extent that such party considers and a panel or the Appellate Body determines that a case concerns a measure that does not conflict with the provisions of a covered agreement to which the provisions of paragraph 1(b) of Article XXIII of GATT 1994 are applicable, the procedures in this Understanding shall apply, subject to the following: (a) the complaining party shall present a detailed justification in support of any complaint relating to a measure which does not conflict with the relevant covered agreement (b) where a measure has been found to nullify or impair benefits under, or impede the attainment of objectives, of the relevant covered agreement without violation thereof, there is no obligation to withdraw the measure. However, in such cases, the panel or the Appellate Body shall recommend that the Member concerned make a mutually satisfactory adjustment (c) notwithstanding the provisions of Article 21, the arbitration provided for in paragraph 3 of Article 21, upon request of either party, may include a determination of the level of benefits which have been nullified or impaired, and may also suggest ways and means of reaching a mutually satisfactory adjustment such suggestions shall not be binding upon the parties to the dispute (d) notwithstanding the provisions of paragraph 1 of Article 22, compensation may be part of a mutually satisfactory adjustment as final settlement of the dispute. 2. Complaints of the Type Described in Paragraph 1(c) of Article XXIII of GATT 1994 Where the provisions of paragraph 1(c) of Article XXIII of GATT 1994 are applicable to a covered agreement, a panel may only make rulings and recommendations where a party considers that any benefit accruing to it directly or indirectly under the relevant covered agreement is being nullified or impaired or the attainment of any objective of that Agreement is being impeded as a result of the existence of any situation other than those to which the provisions of paragraphs 1(a) and 1(b) of Article XXIII of GATT 1994 are applicable. Where and to the extent that such party considers and a panel determines that the matter is covered by this paragraph, the procedures of this Understanding shall apply only up to and including the point in the proceedings where the panel report has been circulated to the Members. The dispute settlement rules and procedures contained in the Decision of 12 April 1989 (BISD 36S61-67) shall apply to consideration for adoption, and surveillance and implementation of recommendations and rulings. The following shall also apply: (a) the complaining party shall present a detailed justification in support of any argument made with respect to issues covered under this paragraph (b) in cases involving matters covered by this paragraph, if a panel finds that cases also involve dispute settlement matters other than those covered by this paragraph, the panel shall circulate a report to the DSB addressing any such matters and a separate report on matters falling under this paragraph. Responsibilities of the Secretariat 1. The Secretariat shall have the responsibility of assisting panels, especially on the legal, historical and procedural aspects of the matters dealt with, and of providing secretarial and technical support. 2. While the Secretariat assists Members in respect of dispute settlement at their request, there may also be a need to provide additional legal advice and assistance in respect of dispute settlement to developing country Members. To this end, the Secretariat shall make available a qualified legal expert from the WTO technical cooperation services to any developing country Member which so requests. This expert shall assist the developing country Member in a manner ensuring the continued impartiality of the Secretariat. 3. The Secretariat shall conduct special training courses for interested Members concerning these dispute settlement procedures and practices so as to enable Members experts to be better informed in this regard. AGREEMENTS COVERED BY THE UNDERSTANDING (A) Agreement Establishing the World Trade Organization (B) Multilateral Trade Agreements Annex 1A: Multilateral Agreements on Trade in Goods Annex 1B: General Agreement on Trade in Services Annex 1C: Agreement on Trade-Related Aspects of Intellectual Property Rights Annex 2: Understanding on Rules and Procedures Governing the Settlement of Disputes (C) Plurilateral Trade Agreements Annex 4: Agreement on Trade in Civil Aircraft Agreement on Government Procurement International Dairy Agreement International Bovine Meat Agreement The applicability of this Understanding to the Plurilateral Trade Agreements shall be subject to the adoption of a decision by the parties to each agreement setting out the terms for the application of the Understanding to the individual agreement, including any special or additional rules or procedures for inclusion in Appendix 2, as notified to the DSB. SPECIAL OR ADDITIONAL RULES AND PROCEDURES CONTAINED IN THE COVERED AGREEMENTS Agreement Rules and Procedures Agreement on the Application of Sanitary and Phytosanitary Measures 11.2 Agreement on Textiles and Clothing 2.14, 2.21, 4.4, 5.2, 5.4, 5.6, 6.9, 6.10, 6.11, 8.1 through 8.12 Agreement on Technical Barriers to Trade 14.2 through 14.4, Annex 2 Agreement on Implementation of Article VI of GATT 1994 17.4 through 17.7 Agreement on Implementation of Article VII of GATT 1994 19.3 through 19.5, Annex II.2(f), 3, 9, 21 Agreement on Subsidies and Countervailing Measures 4.2 through 4.12, 6.6, 7.2 through 7.10, 8.5, footnote 35, 24.4, 27.7, Annex V General Agreement on Trade in Services XXII:3, XXIII:3 Annex on Financial Services 4 Annex on Air Transport Services 4 Decision on Certain Dispute Settlement Procedures for the GATS 1 through 5 The list of rules and procedures in this Appendix includes provisions where only a part of the provision may be relevant in this context. Any special or additional rules or procedures in the Plurilateral Trade Agreements as determined by the competent bodies of each agreement and as notified to the DSB. l. In its proceedings the panel shall follow the relevant provisions of this Understanding. In addition, the following working procedures shall apply. 2. The panel shall meet in closed session. The parties to the dispute, and interested parties, shall be present at the meetings only when invited by the panel to appear before it. 3. The deliberations of the panel and the documents submitted to it shall be kept confidential. Nothing in this Understanding shall preclude a party to a dispute from disclosing statements of its own positions to the public. Members shall treat as confidential information submitted by another Member to the panel which that Member has designated as confidential. Where a party to a dispute submits a confidential version of its written submissions to the panel, it shall also, upon request of a Member, provide a non-confidential summary of the information contained in its submissions that could be disclosed to the public. 4. Before the first substantive meeting of the panel with the parties, the parties to the dispute shall transmit to the panel written submissions in which they present the facts of the case and their arguments. 5. At its first substantive meeting with the parties, the panel shall ask the party which has brought the complaint to present its case. Subsequently, and still at the same meeting, the party against which the complaint has been brought shall be asked to present its point of view. 6. All third parties which have notified their interest in the dispute to the DSB shall be invited in writing to present their views during a session of the first substantive meeting of the panel set aside for that purpose. All such third parties may be present during the entirety of this session. 7. Formal rebuttals shall be made at a second substantive meeting of the panel. The party complained against shall have the right to take the floor first to be followed by the complaining party. The parties shall submit, prior to that meeting, written rebuttals to the panel. 8. The panel may at any time put questions to the parties and ask them for explanations either in the course of a meeting with the parties or in writing. 9. The parties to the dispute and any third party invited to present its views in accordance with Article 10 shall make available to the panel a written version of their oral statements. 10. In the interest of full transparency, the presentations, rebuttals and statements referred to in paragraphs 5 to 9 shall be made in the presence of the parties. Moreover, each partys written submissions, including any comments on the descriptive part of the report and responses to questions put by the panel, shall be made available to the other party or parties. 11. Any additional procedures specific to the panel. 12. Proposed timetable for panel work: (a) Receipt of first written submissions of the parties: (1) complaining Party: (2) Party complained against: 3-6 weeks 2-3 weeks The above calendar may be changed in the light of unforeseen developments. Additional meetings with the parties shall be scheduled if required. EXPERT REVIEW GROUPS The following rules and procedures shall apply to expert review groups established in accordance with the provisions of paragraph 2 of Article 13. 1. Expert review groups are under the panels authority. Their terms of reference and detailed working procedures shall be decided by the panel, and they shall report to the panel. 2. Participation in expert review groups shall be restricted to persons of professional standing and experience in the field in question. 3. Citizens of parties to the dispute shall not serve on an expert review group without the joint agreement of the parties to the dispute, except in exceptional circumstances when the panel considers that the need for specialized scientific expertise cannot be fulfilled otherwise. Government officials of parties to the dispute shall not serve on an expert review group. Members of expert review groups shall serve in their individual capacities and not as government representatives, nor as representatives of any organization. Governments or organizations shall therefore not give them instructions with regard to matters before an expert review group. 4. Expert review groups may consult and seek information and technical advice from any source they deem appropriate. Before an expert review group seeks such information or advice from a source within the jurisdiction of a Member, it shall inform the government of that Member. Any Member shall respond promptly and fully to any request by an expert review group for such information as the expert review group considers necessary and appropriate. 5. The parties to a dispute shall have access to all relevant information provided to an expert review group, unless it is of a confidential nature. Confidential information provided to the expert review group shall not be released without formal authorization from the government, organization or person providing the information. Where such information is requested from the expert review group but release of such information by the expert review group is not authorized, a non-confidential summary of the information will be provided by the government, organization or person supplying the information. 6. The expert review group shall submit a draft report to the parties to the dispute with a view to obtaining their comments, and taking them into account, as appropriate, in the final report, which shall also be issued to the parties to the dispute when it is submitted to the panel. The final report of the expert review group shall be advisory only. 1. The DSB shall be deemed to have decided by consensus on a matter submitted for its consideration, if no Member, present at the meeting of the DSB when the decision is taken, formally objects to the proposed decision. back to text 2. This paragraph shall also be applied to disputes on which panel reports have not been adopted or fully implemented. back to text 3. Where the provisions of any other covered agreement concerning measures taken by regional or local governments or authorities within the territory of a Member contain provisions different from the provisions of this paragraph, the provisions of such other covered agreement shall prevail. back to text 4. The corresponding consultation provisions in the covered agreements are listed hereunder: Agreement on Agriculture, Article 19 Agreement on the Application of Sanitary and Phytosanitary Measures, paragraph 1 of Article 11 Agreement on Textiles and Clothing, paragraph 4 of Article 8 Agreement on Technical Barriers to Trade, paragraph 1 of Article 14 Agreement on Trade-Related Investment Measures, Article 8 Agreement on Implementation of Article VI of GATT 1994, paragraph 2 of Article 17 Agreement on Implementation of Article VII of GATT 1994, paragraph 2 of Article 19 Agreement on Preshipment Inspection, Article 7 Agreement on Rules of Origin, Article 7 Agreement on Import Licensing Procedures, Article 6 Agreement on Subsidies and Countervailing Measures, Article 30 Agreement on Safeguards, Article 14 Agreement on Trade-Related Aspects of Intellectual Property Rights, Article 64.1 and any corresponding consultation provisions in Plurilateral Trade Agreements as determine d by the competent bodies of each Agreement and as notified to the DSB. back to text 5. If the complaining party so requests, a meeting of the DSB shall be convened for this purpose within 15 days of the request, provided that at least 10 days advance notice of the meeting is given. back to text 6. In the case where customs unions or common markets are parties to a dispute, this provision applies to citizens of all member countries of the customs unions or common markets. back to text 7. If a meeting of the DSB is not scheduled within this period at a time that enables the requirements of paragraphs 1 and 4 of Article 16 to be met, a meeting of the DSB shall be held for this purpose. back to text 8. If a meeting of the DSB is not scheduled during this period, such a meeting of the DSB shall be held for this purpose. back to text 9. The Member concerned is the party to the dispute to which the panel or Appellate Body recommendations are directed. back to text 10. With respect to recommendations in cases not involving a violation of GATT 1994 or any other covered agreement, see Article 26. back to text 11. If a meeting of the DSB is not scheduled during this period, such a meeting of the DSB shall be held for this purpose. back to text 12. If the parties cannot agree on an arbitrator within ten days after referring the matter to arbitration, the arbitrator shall be appointed by the Director-General within ten days, after consulting the parties. back to text 13. The expression arbitrator shall be interpreted as referring either to an individual or a group. back to text 14. The list in document MTN. GNSW120 identifies eleven sectors. back to text 15. The expressionarbitrator shall be interpreted as referring either to an individual or a group. back to text 16. The expression arbitrator shall be interpreted as referring either to an individual or a group or to the members of the original panel when serving in the capacity of arbitrator. back to text 17. Where the provisions of any covered agreement concerning measures taken by regional or local governments or authorities within the territory of a Member contain provisions different from the provisions of this paragraph, the provisions of such covered agreement shall prevail. back to textBorder-Adjustable Taxes under the WTO Agreements This client alert summarizes the World Trade Organization (WTO) disciplines on border adjustable internal taxes and provides a general framework for assessing any future United States corporate tax plan that incorporates a border adjustment. In the coming weeks, Republican leadership in the US House of Representatives will introduce legislation to reform the corporate tax code, converting the current worldwide income tax into a destination-based tax on corporations US sales (including sales of imports), accompanied by a border adjustment that excludes export sales from the tax. The Republican proposal would be a radical departure from the current US corporate income tax system, essentially imposing an internal tax on imported goods for the first time in the United States, while permitting a rebate or exemption for US exports. Such a plan differs from President-elect Trumps apparent proposals to impose a steep border tax or tariff on imports into the United States from domestic companies that invest abroad, though many have speculated that the Republican tax proposal could serve as a final compromise between Congress and President-elect Trump on the issue of outsourcing and border taxes. The details of the proposed tax plan are not publicly available the current plan is only summarized in a House Republican blueprint 1 and legislative text reportedly has not been finalized but the border adjustment proposal has already become one of the most hotly-debated elements of the Republican tax reform proposal. A significant part of that debate has centered on whether the tax plan would be consistent with WTO rules on border adjustable taxes, with some commentators and business groups already expressing serious concerns that the Republican proposal would violate the United States international obligations and thus expose US exports to WTO-sanctioned retaliation. A border adjustable tax raises complex international trade law issues that may be summarized as follows, based on what we know of the Republican proposal: First, WTO rules in general permit border adjustments on indirect taxes, which the WTO Agreement on Subsidies and Countervailing Measures (SCM Agreement) defines as sales, excise, turnover, value added, franchise, stamp, transfer, inventory and equipment taxes, border taxes and all taxes other than direct taxes and import charges. Second, in order for a US tax measure to be generally permitted under WTO rules, it also (i) must be levied on imported products at a rate or amount no higher than the rateamount levied on domestically produced like products (to be consistent with GATT Articles II and III) and (ii) must provide a border adjustment on exports that is no greater than the amount of tax actually levied or owed on those goods (to be consistent with Article 3.1 of the SCM Agreement). Publicly available descriptions of the Republican proposal raise concerns that it would permit certain deductions (and thus establish lower tax rates) for domestically-produced goods, while denying the same deductions for the same imported products. Third, in order to avoid designation of a border adjustment as a prohibited export subsidy, based on item (e) of the SCM Agreements Illustrative List of export subsidies, the proposed tax must not be a direct tax, as defined in the Agreement. The Republican proposal might pass this test if it is deemed to be, for example, a subtraction method VAT, but at this stage there is insufficient information to answer this question. If the tax does not clearly fall within the SCM Agreements definition of direct tax, then it could be permitted where the tax is found (i) to be borne by or directly levied on a product and (ii) to ensure trade neutrality between imported and domestically-produced goods. Until the text of the tax legislation is published, it is not possible to make definitive conclusions with respect to these issues. Nevertheless, the following analysis should prove useful in assessing whether the final Republican proposal risks future WTO disputes and, in the case of US non-compliance with an adverse dispute settlement ruling, eventual retaliation by US trading partners. What is a Border Adjustable Tax A border adjustable tax as understood under WTO rules is a domestic (internal) tax on the sale of a product that may be adjusted at the border by levying the tax on imports and rebating or exempting it on exports. Border adjustable taxes are sometimes equated with indirect taxes, i. e., taxes borne directly by a product, although, as discussed below, the equation of border adjustable tax with indirect tax is imprecise. Indirect taxes are to be distinguished, and treated differently under WTO rules, from direct taxes like income or profit taxes. The economic theory underlying this distinction is that indirect taxes are passed through to the price of the product whereas direct taxes have a more complex relationship to price. The most common form of border adjustable tax is the VAT, which typically is levied on the customs value of a product plus duties and is collected on imports at the time of customs clearance. 2 Many WTO Members, including the EU (at standard rates varying among member states from 15 to 27), utilize a border adjustable VAT a fact that some Republicans have cited to justify the new US corporate tax proposal. What Do WTO Rules Say about Border Adjustable Taxes WTO rules allow for the adjustment of certain types of internal taxes at the border under certain conditions. The main conditions are summarized below. The tax must be applied equally to imports and like domestic products Any domestic tax levied on imported products must, regardless of whether it is border adjustable, be done so at a rate no higher than the rate levied on domestically produced like (similar) products. The general rule of GATT Article II:1(b) is that, other than customs duties, imports must be exempt from all other duties or charges of any kind. However, GATT Article II:2(a) allows a government to impose at the time a product crosses its border a charge equivalent to an internal tax imposed on a like domestic product, as long as the internal charge is imposed consistently with the national treatment principle of GATT Article III. 3 The imposition of an internal tax at the border will therefore be consistent with the GATT non-discrimination rules where it conforms to the provisions of GATT Article III:2, i. e., that the imported good is not subject, directly or indirectly to internal taxes or other internal charges of any kind in excess of those applied directly or indirectly to like domestic products (emphasis added). The WTO Panel in US FSC (Article 21.5 EC) clarified that the national treatment disciplines for internal taxes apply not only to indirect taxes like VATs but also to direct taxes like corporate income taxes: nothing in the plain language of Article III:4 specifically excludes requirements conditioning access to income tax measures from the scope of application of Article III, so that Article III:4 of the GATT 1994 applies to measures conditioning access to income tax advantages in respect of certain products. 4 The tax must be borne by a product and not be direct (as defined by WTO rules) WTO rules are based on the destination principle that taxes on products should be levied at their point of sale so as to align the tax treatment and conditions of competition of imported and domestic products in the marketplace. This principle has two general consequences for the permissibility of border tax adjustments under WTO rules: First, because traditional credit-invoice VATs, sales taxes and other consumption taxes are levied directly on products, they are undoubtedly eligible for border tax adjustment. Just as a country would not violate WTO non-discrimination principles by levying a domestic sales tax on imported products under GATT Article II (thereby establishing equal sales tax treatment between imported and domestic goods in the country), the country also may exempt exports from the sales tax, or rebate taxes paid, because the exported products will face equal treatment ( i. e., subject to the importing countrys local sales tax) once they reach their final destination. The permissibility of border tax adjustments was first addressed by the 1970 GATT Working Party on Border Tax Adjustments, which concluded that there was a convergence of views to the effect that taxes directly levied on products were eligible for tax adjustment and that certain taxes that were not directly levied on products were not eligible for tax adjustment, citing social security charges and payroll taxes as examples of the latter. 5 The Working Partys conclusion was applied in subsequent GATTWTO work, including dispute settlement. For example, the GATT panel in United States Taxes on Petroleum and Certain Imported Substances stated that the 1970 Working Party Report showed that the tax adjustment rules of the General Agreement distinguish between taxes on products and taxes not directly levied on products. 6 The un-adopted first GATT panel in the Tuna-Dolphin dispute concluded that under the national treatment principle of GATT Article III, contracting parties may apply border tax adjustments with regard to those taxes that are borne by products, but not for domestic taxes not directly levied on products. 7 The principle also applies to WTO subsidy rules. GATT Article VI:4 prohibits the application of countervailing (anti-subsidy) duties for rebates or exemptions upon exportation of taxes borne by the like product. Thus, the Note Ad Article to GATT Article XVI (on subsidies) states that the exemption of an exported product from duties or taxes borne by the like product when destined for domestic consumption, or the remission of such duties of taxes in amounts not in excess of those which have been accrued, shall not be deemed to be a subsidy. That language is repeated in footnote 1 of the SCM Agreement, and is implied in the Agreements Illustrative List of prohibited export subsidies (Item (g) and Footnote 60). Second, WTO export subsidy rules are distinct for (i) indirect taxes, which are levied directly on products (border tax adjustment allowed) and (ii) direct taxes which apply to income, profits and factors of production (border tax adjustment not allowed). The SCM Agreements Illustrative List of prohibited export subsidies expressly includes the full or partial exemption remission, or deferral specifically related to exports, of direct taxes or social welfare charges paid or payable by industrial or commercial enterprises. Footnote 58 of the SCM Agreement defines direct taxes as taxes on wages, profits, interests, rents, royalties, and all other forms of income, and taxes on the ownership of real property, and indirect taxes as sales, excise, turnover, value added, franchise, stamp, transfer, inventory and equipment taxes, border taxes and all taxes other than direct taxes and import charges. These two principles were addressed in a dispute settlement challenge by the EU to US tax legislation on the Domestic International Sales Corporation (DISC) and its successor the Foreign Sales CorporationExtraterritorial Income Acts (FSCETI). The law exempted DISC income ( i. e., export sales income) from corporate income tax and allowed partial deferment of tax on that income received by shareholders. The United States contended that the tax advantages granted to the export activities of US companies through the DISC and the FSCETI were analogous to tax advantages enjoyed by EU companies as a result of (i) the EUs use of the territorial system of direct taxation that exempted income from foreign economic processes ( e. g., overseas production for exports) 8 and (ii) the ability of EU companies to exempt VAT from exports and levy it on competing imports. The WTO Panel and the Appellate Body examining the FSCETI measures disagreed with the United States, concluding that FSCETI payments constituted a prohibited export subsidy under Article 3.1(a) of the SCM Agreement. The Panel in particular noted that the payments were specifically the type of prohibited border tax adjustment subsidy found in item (e) of the SCM Agreements the Illustrative List because they constituted full or partial exemption remission, or deferral. of direct taxes. paid or payable by industrial or commercial enterprises. 9 The Panel and Appellate Body rejected the US analogy between the FSC and EU territorial taxation because the WTO did not prescribe what kind of taxation system a Member should use but it did prohibit a Member, having chosen its taxation system (direct, world-wide taxation in the case of the United States), from exempting from that system foreign source income attributable to exports. That, the Panel said, constituted a prohibited export subsidy. A permitted border tax adjustment must not subsidize exports A border tax adjustment may not serve to subsidize exports in violation of Article 3 of the SCM Agreement. 10 As noted above, rebating or exempting indirect taxes such as VAT on exports is permitted under GATT Articles VI and XVI and the SCM Agreement and is therefore not treated as an export subsidy under WTO rules, as long as the rebateexemption rate is not greater than the rate at which the tax is levied domestically. On the other hand, such a rebateexemption will constitute a prohibited export subsidy under the SCM Agreement where it is in excess of the actual tax collected or due. 11 The SCM Agreements Illustrative List covers various forms of these prohibited export subsidies. Are Only Traditional Consumption Taxes Eligible for Border Adjustment It is often stated imprecisely that only traditional consumption taxes ( e. g., sales taxes or credit-invoice VATs paid by consumers and applied directly on products) are eligible for border adjustment under WTO rules. Although this may be a useful generalization, it should not be considered as definitive for several reasons. First, there has been no definitive Appellate Body ruling adopted by the Dispute Settlement Body on the general permissibility of border tax adjustments ( e. g., establishing an analytical framework for determining WTO-consistency). The US-FSC rulings, discussed above, assessed only one type of tax system (the US corporate income tax a clear direct tax) all other guidance was developed before the WTO came into existence. 12 Second, the 1970 Working Party Report and prior GATT Panel reports do not establish when a tax is borne by a product, nor do they provide a definitive list of the taxes that are expressly eligible or ineligible for border adjustment. The Working Party Report states only that certain taxes that were not directly levied on products were not eligible for tax adjustment, including social security charges whether on employers or employees and payroll taxes. 13 The Working Party also opted not to resolve a divergence of views with regard to the eligibility for adjustment of certain categories of tax, such as taxes occultes and property taxes. 14 Third, the Working Party Report establishes that the underlying philosophy behind the GATT rules governing border tax adjustments was the ensuring of a certain trade neutrality between imported and domestically-produced goods. 15 It is this neutrality, not the identity of the taxpayer (or type of tax), which WTO rules on border tax adjustments seek to protect. Finally, the definitions of direct tax and indirect tax under Footnote 58 of the SCM Agreement, as well as the US-FSC Panel ruling, leave grey areas for corporate taxes that share characteristics of both forms of taxation. Potentially falling into this grey area is business transfer tax or subtraction-method VAT, under which a uniform rate of tax is levied directly on corporate sellers (as opposed to productsconsumers) based on their sales revenue, less purchases. 16 Such a system is widely accepted as VAT (thus fitting the reference to value added in the definition of indirect tax in Footnote 58), but it is also a tax on some corporate income (thus meeting the footnotes direct tax definition). This ambiguity could protect a border adjustable, subtraction-method VAT from the relatively straightforward analysis of the US-FSC Panel under item (e) of the SCM Agreements Illustrative list of prohibited export subsidies. Furthermore, Japan has imposed a border adjustable, subtraction-method VAT since the early 1990s, without any serious interest or concern from other WTO Members 17 a strong indication that the system does not raise the same WTO problems as the United States FSCETI measures. How Should One Assess the WTO-consistency of a Proposed US Border Adjustable Tax The lack of actual legislation on the proposed US border adjustable corporate tax precludes definitive conclusions about the proposals consistency with the aforementioned WTO rules. However, it is possible that the proposal could pass muster at the WTO if it adheres to the following general rules. First, in order for the tax exemption or rebate on US exports to avoid being designated a prohibited export subsidy based on item (e) of the SCM Agreements Illustrative List, the proposed corporate tax must not be a direct tax, as defined in footnote 58 of the Agreement. 18 The Republican proposal might pass this test if it is, for example, a subtraction method VAT. If the tax at issue does not clearly fall within the definition of direct tax or indirect tax under footnote 58, then a WTO panel could apply the principles set out in the 1970 Working Party Report, examining whether the US tax (i) is borne by or directly levied on a product and (ii) ensures trade neutrality between imported and domestically-produced goods. Second, if the US tax measure were determined to be generally permitted under WTO rules, it must also (i) be levied on imported products at a rate or amount no higher than the rateamount levied on domestically produced like products (to be consistent with GATT Article III) and (ii) provide a border adjustment on export that is no greater than the amount of tax actually levied (to be consistent with Article 3.1 of the SCM Agreement). More information is needed to answer both of these questions, but various unofficial reports on the Republican tax plan raise some concerns under GATT Articles II and III because for domestically-produced goods, while denying the same deductions for the same imported products. 19 Once the legislative text is released, however, the two questions above may be answered through a simplified hypothetical assessment of the taxs effect on two identical US companies selling and exporting the same product, with one company selling only imports and the other selling only its own domestically-produced like products. If the total tax paid by the former company is more than that paid by the latter, then the tax system would likely discriminate against imported goods in violation of GATT Articles II and III. If the total border adjustment provided to one of the companies is more than the tax collected (or otherwise due), then the system would likely be a prohibited export subsidy under Article 3 of the SCM Agreement. At this stage, it is too early to conclude whether the Republican proposal for a border adjustable corporate tax raises significant concerns under WTO rules. However, our preliminary analysis above should assuage concerns that any such proposal would violate the United States international obligations. That conclusion will depend on the text of the final legislation and an assessment of whether (i) the tax itself is among those for which border adjustments are permitted (ii) the system imposes identical tax burdens on imported goods and domestically produced like products and (iii) the border adjustment on exports is no greater than the actual amount of tax collected or due. Finally, it is important to note that the appearance of WTO-inconsistency does not necessarily mean that the United States will abandon the border adjustment aspect of the Republican tax proposal, or that a WTO Member will challenge it. All policy measures of all Members, including the United States, are considered to be fully consistent with WTO rules until found otherwise in a WTO panel or Appellate Body ruling that is adopted by the WTO Dispute Settlement Body. Many WTO Members therefore adopt measures that they suspect or know to be problematic under WTO rules, but determine that such policies likely will not be challenged, including for diplomatic reasons, or that the legal risks are outweighed by political or economic considerations. More on this topic: Click here to visit our Trade and Transitions page. 1 A Better Way: Our Vision for a Confident America (Tax) . at 28 (Jun. 24, 2016) abetterway. speaker. govassetspdfABetterWay-Tax-PolicyPaper. pdf (The cash-flow based approach that will replace our current income-based approach for taxing both corporate and non-corporate businesses will be applied on a destination basis. This means that products, services and intangibles that are exported outside the United States will not be subject to US tax regardless of where they are produced. It also means that products, services and intangibles that are imported into the United States will be subject to US tax regardless of where they are produced.). 2 A tax need not be applied economy-wide or at a uniform rate in order to be eligible for adjustment under WTO rules. VAT is typically applied economy-wide, but sometimes is applied at different rates on different products. Excise taxes apply only to certain products (usually gasoline, alcohol and tobacco) but they too may be adjusted at the border under WTO rules. 3 This rule is confirmed by the Ad Note to GATT Article III, which states that any internal tax or other internal charge, which applies to an imported product and to the like domestic product and is collected in the case of the imported product at the time or point of importation, is nevertheless to be regarded as an internal tax or other internal charge and is accordingly subject to the provisions of Article III. 4 Panel Report, US FSC (Article 21.5 EC) . paras 8.142 and 8.144. 5 GATT (1970) Report of the Working Party on Border Tax Adjustments, adopted on 2 December . (L3464), paragraph 14, available at wto. orggattdocsEnglishSULPDF90840088.pdf (1970 WPR). 6 GATT Panel Report, United States Taxes on Petroleum and Certain Imported Substances, L6175, adopted 17 June 1987, BISD 34S136. para 5.2.4. 7 GATT Panel Report, United States Restrictions on Imports of Tuna, DS21R, DS21R, 3 September 1991, unadopted, BISD 39S155, para. 5.13 (emphasis added). 8 Some European countries tax only income earned domestically, whereas the United States and Japan tax worldwide income of their residents, including corporations. 9 Panel Report, US-FSC . para. 7.109. 10 The SCM Agreement includes tax incentives in its definition of a subsidy and prohibits them if they are contingent on export performance. The legal standard for a prohibited export subsidy is met when the subsidy is tied to actual or anticipated exportation. 11 See , e. g. , SCM Agreement, Annex I, Item (g) The exemption or remission, in respect of the production and distribution of exported products, of indirect taxes in excess of those levied in respect of the production and distribution of like products when sold for domestic consumption. See also Items (f), (h) and (i) and fn. 60. 12 The GATT Panel decisions discussed above are not binding on subsequent WTO dispute panels. However, the Appellate Body has found that adopted GATT panel reports, while not binding, do create legitimate expectations among WTO Members and, thus should be taken into account where they are relevant to any dispute. Unadopted panel reports have no legal status in the WTO system but may serve as useful guidance where relevant. Appellate Body Report, Japan Alcoholic Beverages II . p. 14, 15. 13 1970 WPR, para. 14 (emphasis added). 14 1970 WPR, para. 15. 15 1970 WPR, para. 9. See also id. at paras. 22 and 28. 16 See . t. ex. , OECD, Consumption Tax Trends 2016 . available at keepeekDigital-Asset-Managementoecdtaxationconsumption-tax-trends-2016ctt-2016-en. WFv0A9IrKUkpage1 17 See Reuters, Japans Consumption Tax Gets Taxing . (Nov. 12, 2015), available at tax. thomsonreutersblogonesourcevat-gst-managementjapans-consumption-tax-gets-taxing 18 The other two criteria would be met: (i) the tax would be paid or payable by industrial or commercial enterprises and (ii) the border adjustment would be a full or partial exemption remission, or deferral of the taxes at issue. 19 See . t. ex. . Ryan Ellis Tax Reform, Border Adjustability, and Territoriality . Forbes, Jan. 5, 2017 forbessitesryanellis20170105tax-reform-border-adjustability-and-territoriality7d5a015f73d1 (A VAT only allows deductions for business to business purchases. The House GOP tax reform plan, however, does allow for a business to deduct labor compensation paid (wages are then taxed on the individual level.). This publication is provided for your convenience and does not constitute legal advice. This publication is protected by copyright. 2017 White amp Case LLP Related Content