Turkey – Measures Affecting the Importation of Rice

 

World Trade Organization – TRQ utilization – Agreement on Agriculture Article 4.2 – national treatment

The Turkey Measures Affecting the Importation of Rice case, brought by the United States, concerned various restrictions imposed by Turkey on the importation of rice. Turkey’s Schedule of Concessions on Goods provided for a 45 per cent import tariff on rice (the ‘out of quota tariff rate’) and also provided for separate bindings at lower rates for three categories of rice (the Tariff Rate Quotas). The United States complaint related to alleged restrictions on imports within the TRQs and also to alleged restrictions on imports of out of TRQ rice.

In its Request for Consultations dated 2 November 2005, the United States challenged various restrictions allegedly maintained by Turkey on the importation of rice, including the following measures: (i) Turkey’s alleged denial of, or failure to grant, licences (‘Certificates of Control’) to import rice outside of the TRQs; (ii) Turkey’s alleged requirement that importers were required to purchase specified quantities of domestic rice, in order to be allowed to import specific quantities of rice within the TRQs (‘the domestic purchase requirement’); (iii) Turkey’s administration of tariff-rate quotas for reduced tariff duty imports of rice; (iv) the combined effect of the measures identified under (i) and (ii); and (v) Turkey’s administration of its import regime for rice, more generally.17

Based on these allegations, the United States submitted that Turkey was in violation of the following provisions of WTO covered agreements:
• The alleged denial or failure to grant Certificates of Control to import rice outside the TRQs constituted a breach of Article XI(1) of the GATT 1994, as it was an unlawful prohibition or restriction on imports; a breach of Article 4(2) of the Agreement on Agriculture, because it was a measure that was required to have been converted into ordinary customs duties; a breach of Article 1(4) of the Import Licensing Agreement and Articles X(1) and X(2) of the GATT 1994, because Turkey had not published the measure; and a breach of Articles 3.5 of the Import Licensing Agreement, because Turkey had not specified a timeframe for handling import licence applications, and no reasons were provided for a rejection.

• The alleged requirement that importers were required to purchase specified quantities of domestic rice was a breach of Article III(4) of the GATT 1994, because Turkey was according imported rice less favourable treatment than that accorded to domestic rice; a breach of Article XI(1) of the GATT 1994, as it was an unlawful prohibition or restriction on imports; and a breach of Article 2(1) of the TRIMS Agreement and Article 4(2) of the Agreement on Agriculture, because it was a measure of the kind that was required to have been converted into ordinary customs duties.

• Turkey’s administration of tariff-rate quotas for reduced tariff duty imports of rice was inconsistent with Article 3.5 of the Import Licensing Agreement, because Turkey was administering the tariff-rate quotas in such a way that discouraged the full utilisation of quotas.

• Turkey’s domestic purchase requirement, in conjunction with its alleged failure to provide Certificates of Control for import of rice outside the TRQs, was a breach of Article XI(1) of the GATT 1994, because it was an unlawful restriction on imports; a breach of Article 4(2) of the Agreement on Agriculture, as it was is a measure of the kind that was required to have been converted into ordinary customs duties; and a breach of Article 1.6 of the Import Licensing Agreement, on the basis that applicants had to approach more than one administrative body in connection with their applications.

• Turkey’s administration of its import regime was inconsistent with Articles 3(5), 5(1), 5(2), 5(3) and 5(4) of the Import Licensing Agreement, because Turkey had failed to provide information on, and failed to notify, its import licensing regime.18

The United States requested consultations with Turkey on 2 November 2005, and on 16 November 2005, Australia and Thailand requested to join the consultations. Those consultations were not successful in resolving the dispute, and on 6 February 2006, the United States requested the establishment of a panel. The Dispute Settlement Body established a panel on 17 March 2006, and Australia (along with a number of other members of the WTO), reserved its third-party rights. On 31 July 2006, the Director-General of the WTO composed the panel. On 21 September 2007, the panel report was circulated to Members.

In its Report, the panel concluded that the Turkish government had made a decision to ‘deny, or fail to grant, Certificates of Control to import rice outside of the tariff rate quota’19 and that such decision constituted a ‘quantitative import restriction’, as well as a practice of ‘discretionary import licensing’, within the meaning of Article 4(2) of the Agreement on Agriculture.20 Even if the Turkish measures were not to be considered as a ‘quantitative import restriction’ or as a practice of ‘discretionary import licensing’, the panel considered that they at least qualified as ‘a measure that had sufficient likeness or resemblance, so as to be similar to quantitative import restrictions or to practices of discretionary import licensing.’21 Accordingly, the panel concluded that this conduct was ‘a measure of the kind which have been required to be converted into ordinary customs duties and [was] therefore inconsistent with Article 4(2) of the Agreement on Agriculture.’22

As for the other claims made in relation to Turkey’s alleged denial or failure to grant Certificates of Control to import rice at or below the bound MFN rate of duty, the panel considered that, for reasons of judicial economy, it was not necessary to

29 With regard to the United States’ claim regarding the combination of the domestic purchase requirement and the denial or failure to grant licences to import rice, the

address the claim relating to Article XI(1) of the GATT 1994;23 and also that it was not necessary to consider the manner in which the Turkish measures had been administered for the purposes of Articles X(1) and X(2) of the GATT 1994, and Article 1.4 of the Import Licensing Agreement.24

The panel’s finding that the decision to deny or fail to grant the certificates constituted a quantitative restriction and breached Article 4(2) is less remarkable than the fact that the panel was able to reach a finding of fact that the Turkish government had made a decision to deny, or fail to grant the certificates. The Turkish government denied that it had made any such decision and maintained that it was continuing to grant Certificates of Control needed for imports systematically and regularly. While there was evidence of one part of the Turkish government making a recommendation to the Minister to suspend the grant of Certificates of Control for the importation of rice, there was no conclusive evidence of the Turkish government making the decision that had been recommended to it. The panel relied on a range of evidence to establish a prima facie case and, in the absence of rebuttal from Turkey, accepted that the Turkish government had made a decision to suspend the grant of the Certificates.

With regard to Turkey’s domestic purchase requirement, the panel considered that this measure ‘modified the conditions of competition in the Turkish market to the detriment of imported rice.’25 It concluded that through this measure, Turkey ‘accorded less favourable treatment to imported rice than that according to like domestic rice’, in a manner inconsistent with Article III(4) of the GATT 1994.26 In accordance with the principle of judicial economy, the panel refrained from making any findings on the claims made under Article 4.2 of the Agreement on Agriculture, and Article XI(1) of the GATT 1994.27 Nor did the panel find it necessary to address the claim made under the TRIMS Agreement.28

As for the United States’ other claims, namely (i) that the combination of the domestic purchase requirement and the denial or failure to grant licences to import rice was a breach of Article XI(1) of the GATT 1994, Article 4(2) of the Agreement on Agriculture, and Article 1.6 of the Import Licensing Agreement; (ii) that Turkey was in violation of its obligations under Articles 3(5), 5(1), 5(2), 5(3) and 5(4) of the Import Licensing Agreement; and (iii) that Turkey was in violation of its obligations under Article 3(5) of the Import Licensing Agreement, for discouraging the full use of quotas, the panel refrained from making any findings on these measures, as it was not required to do so in order to dispose of the dispute.29 264 panel observed that it had ‘already found that the two measures challenged in conjunction by the United States … [were] each individually inconsistent with Turkey’s obligations under covered agreements’, and concluded that, in the light of those findings, ‘and under the guidance of the principle of judicial economy’, it did not need ‘to reach a separate conclusion on [those] measures considered jointly’: ibid [7.281]. As for the claim concerning Turkey’s failure to provide information on, and failure to notify, its import licensing regime, the panel exercised judicial economy in refraining from examining whether Turkey’s conduct also amounted to a violation of the relevant provisions: ibid [7.287]-[7.292]. And as for the United States’ claim that Turkey was administering the tariff-rate quotas in such a way that discouraged the full utilisation of quotas, the panel also exercised judicial economy in not addressing the issue whether Turkey was in breach of its obligations under Art 3.5 of the Import Licensing Agreement: ibid [7.299]-[7.301].

In light of its findings that Turkey was in breach of its obligations under Article 4(2) of the Agreement on Agriculture due to Turkey’s denial of or failure to grant Certificates of Control to import rice outside of the tariff rate quota, the panel recommended that the Dispute Settlement Body request Turkey to bring its measures into conformity with its obligations under the WTO agreements.30 As for its finding that the ‘domestic purchase requirement’ was a violation of Article III(4) of the GATT 1994, the panel observed that the measure in question was no longer in force, and it therefore refrained from making a recommendation in this regard.31

The Dispute Settlement Body adopted the panel’s report on 22 October 2007. On 10 October 2008, Turkey notified WTO member States that it had already complied with the recommendation of the Dispute Settlement Body.32

While the panel decided to assess the legality of the suspension of the Certificates of Control under Article 4.2 of the Agreement on Agriculture rather than GATT Article XI:1, it seems impossible that the panel could have found anything other than that the suspension of the Certificates also constituted a ‘restriction’ in violation of GATT Article XI:1. Article 4.2 of the Agreement on Agriculture came into existence at the end of the Uruguay Round as part of a move back to a stricter application of the prohibition of quantitative restrictions under GATT Article XI:1. The significance of that prohibition on quantitative restrictions was stressed in another case against Turkey when the panel said:

The prohibition on the use of quantitative restrictions forms one of the cornerstones of the GATT system. A basic principle of the GATT is that tariffs are the preferred and acceptable form of protection.33

A persistent practical problem with making the Article XI:1 prohibition work effectively has been the application of the prohibition to situations in which there is no law, regulation or express decision of a government to restrict imports. A similar situation was faced in the Korea Beef case in 2001 (in which Australia was complainant). In that case, the panel was prepared, in the absence of better evidence, to assess the market conditions in which a state trading entity with exclusive import rights was operating in order to find that the entity must have imposed a restriction on imports in violation of GATT Article XI:1.34 The evidence was considerably stronger in the present case. Despite the ruling having been made under Article 4.2 of the Agreement on Agriculture rather than GATT Article XI:1, the panel decision in Turkey Rice makes another step toward achieving an effective prohibition on quantitative restrictions, an important contribution to the integrity of the WTO system.

 

17 Turkey – Measures Affecting the Importation of Rice, WTO Doc WT/DS334/1, (2005) 1 (Request for Consultations by the United States); see also Turkey – Measures Affecting the Importation of Rice, WTO Doc WT/DS334/R (2007) [3.1] (Report of the Panel).

18 Turkey – Measures Affecting the Importation of Rice, WTO Doc WT/DS334/R (2007) [3.2] (Report of the Panel).

19 Ibid [7.89]-[7.101].

20 Ibid [7.87] (on the United States’ establishment of a presumption), [7.96-7.97] (on Turkey’s failure to provide relevant evidence), [7.103] (on Turkey’s failure to request any special procedures for the handling of confidential information), [7.107] (on Turkey’s failure to rebut the presumption), [7.121] (the Panel’s conclusion that Turkey had denied or failed to grant Certificates of Control to import rice outside of the tariff rate quota, and its characterisation of this as a ‘quantitative import restriction’, contrary to Art 4(2)), and [7.134] (the Panels’ conclusion that Turkey’s conduct could also be considered as a practice of ‘discretionary import licensing’, contrary to Art 4(2)).

21 Ibid [7.136].

22 Ibid [7.138].

23 Ibid [7.142].

24 Ibid [7.147]-[7.148].

25 Ibid [7.234].

26 Ibid [7.241].

27 Ibid [7.255].

28 Ibid [7.259].

30 Ibid [8.1]-[8.2].

31 Ibid [8.3]-[8.4].

32 Turkey – Measures Affecting the Importation of Rice, WTO Doc WT/DS334/14 (2008) (Status Report by Turkey).

33 Turkey Restrictions on Imports of Clothing and Textiles, WTO Doc WT/DS34/R [9.63] (Report of the Panel), adopted 19 November 1999.

34 Korea – Measures Affecting Imports of Fresh Chilled and Frozen Beef, WTO Doc WT/DS161, 169/R, adopted with the Report of the Appellate Body, WTO Doc WT/DS161, 169/AB/R, on 10 January 2001. See the panel’s conclusion at [845(g)] reflecting the reasoning at [721]-[767]. This finding was not appealed.

35 Brazil – Measures Affecting Imports of Retreaded Tyres, WTO Doc WT/DS332/R (Report of the Panel) (‘Brazil Tyres’) and Report of the Appellate Body, WTO Doc WT/DS332/AB/R, adopted 17 December 2007. See Panel Report [7.2] and Appellate Body Report [3].

36 Brazil Tyres, Appellate Body Report, [154].

Author: international