Home > Uncategorized > DISPUTE SETTLEMENT: Textiles/Apparel and Footwear DS461/Columbia vs Panama

DISPUTE SETTLEMENT: Textiles/Apparel and Footwear DS461/Columbia vs Panama

 

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This summary has been prepared by the Secretariat under its own responsibility. The summary is for general information only and is not intended to affect the rights and obligations of Members.

See also:
The basics: how disputes are settled in WTO
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Text of the Dispute Settlement Understanding

Other disputes involving:
Textiles
Footwear
Apparel
Panama
Colombia
General Agreement on Tariffs and Trade 1994

Current status  back to top

Panel report under appeal on 22 January 2016

Key facts  back to top

Short title: Colombia — Textiles
Complainant: Panama
Respondent: Colombia
Third Parties: Ecuador; El Salvador; European Union; China; Guatemala; Honduras; United States; Philippines
Agreements cited:
(as cited in request for consultations)
GATT 1994: Art. II:1, II:1(b), VIII:1, X:3(a)
Request for Consultationsreceived: 18 June 2013
Panel Reportcirculated: 27 November 2015

Summary of the dispute to date  back to top

The summary below was up-to-date at 27 November 2015

Consultations

Complaint by Panama.

On 18 June 2013, Panama requested consultations with Colombia with respect to the imposition by Colombia of a compound tariff affecting the importation of textiles, apparel and footwear from Panama. The measure at issue is a compound tariff that Colombia has allegedly imposed by Presidential Decree No. 074 of 23 January 2013 (Decree 074/2013). Panama claims that this measure at issue is contained in:

  1. Decree 074/2013;
  2. Decree 1497/2011 as regards the definition of the products covered by the nomenclature of Chapters 61, 62, 63 and 64 of the Tariff Schedule; and
  3. Memorandum No. 000165 of 30 April 2013 from the Customs Management Department of the Directorate of National Taxes and Customs on “measures to control compliance with Decree 074 of 2013”.

Panama claims that the measure at issue is inconsistent with:

  • Articles II:1(a), II:1(b), VIII:1(a), and X:3(a) of the GATT 1994.

On 28 June 2013, Guatemala requested to join the consultations. On 19 August 2013, Panama requested the establishment of a panel. At its meeting on 30 August 2013, the DSB deferred the establishment of a panel.

Panel and Appellate Body proceedings

At its meeting on 25 September 2013, the DSB established a panel. China, Ecuador, El Salvador, the European Union, Guatemala, Honduras and the United States reserved their third-party rights.  Subsequently, the Philippines reserved its third-party rights. On 20 December 2013, Panama requested the Director-General to compose the panel. On 15 January 2014, the Director-General composed the panel.

On 4 November 2014, the Chair of the panel informed the DSB that the start of the panel proceedings had been deferred owing to the unavailability of senior Secretariat lawyers and the panel therefore expected to issue its final report to the parties in August 2015 at the latest.

On 27 November 2015, the panel report was circulated to Members.

Summary of key findings

This dispute concerns a compound tariff imposed by Colombia to imports of textiles, apparel and footwear, consisting of: (i) a 10% ad valorem component and (ii) a specific component, which varies according to the import value and customs classification of the merchandise.

Panama challenged the compound tariff in certain situations where, in its view, the measure necessarily results in duties in excess of those set forth in Colombia’s Schedule of Concessions (35% or 40% ad valorem, depending on the product), in a manner inconsistent with Article II:1(a) and (b), first sentence, of the GATT 1994.

In response, Colombia argued that the imports affected by the compound tariff constitute “illicit trade” as they are imported at “artificially low prices” in order to launder money. In Colombia’s view, Article II of the GATT 1994 does not apply to illicit trade and, therefore, the Panel should reject Panama’s claims under this provision. In addition, Colombia argued that Panama failed to make a prima facie case that the compound tariff is inconsistent with Article II:1(a) and (b), first sentence, of the GATT 1994.

Colombia also argued that, if the compound tariff were found to be inconsistent with Article II of the GATT 1994, it is justified under Article XX(a), as a measure necessary to protect public morals, or under Article XX(d), as a measure necessary to secure compliance with Colombia’s laws against money laundering.

The Panel refrained from making a finding on whether Article II of the GATT 1994 applies to “illicit trade”. In the Panel’s view, such a finding would not be necessary or useful to secure a positive resolution of the dispute. The Panel noted that Colombia’s compound tariff applies to all imports of the products at issue, without distinguishing whether those imports constitute “licit” or “illicit” trade, or are being used for money laundering.

The Panel found that the compound tariff results in duties in excess of the bound rates set forth in Colombia’s Schedule of Concessions in certain circumstances, and is, therefore, inconsistent with Article II:1(b), first sentence, of the GATT 1994. The compound tariff was also found to be inconsistent with Article II:1(a) of the GATT 1994, as it accords less favourable treatment than that provided for in Colombia’s Schedule of Concessions.

With regard to Colombia’s defences, the Panel found that Colombia failed to demonstrate that the compound tariff is a measure necessary to protect public morals within the meaning of Article XX(a) of the GATT 1994. More precisely, the Panel found that Colombia failed to demonstrate that the compound tariff was either “designed” or “necessary” to fight money laundering.

The Panel also found that Colombia failed to demonstrate that the compound tariff is a measure necessary to secure compliance with Colombia’s laws against money laundering within the meaning of Article XX(d) of the GATT 1994. More precisely, the Panel found that Colombia failed to demonstrate that the compound tariff was “designed” or “necessary” to secure compliance with Colombia’s laws against money laundering.

Finally, the Panel found that, in light of the different exemptions to its application, the compound tariff is not applied in a manner consistent with the chapeau of Article XX of the GATT 1994.

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