Guatemala Lodges Appeal in Peru Agricultural Duties Case

16 April 2015

Guatemala formally submitted a notice of appeal earlier this month in its WTO case against Peru’s additional duties on certain agricultural imports (DS457), raising questions over a series of legal findings in last December’s dispute panel ruling. The move came within days of Lima’s submission of its own appeal on the subject.

At issue in the dispute is Peru’s Price Range System, or PRS, which determines duties based on a series of factors. These include a reference price that reflects international market prices for a good, as well as a range involving a price ceiling and floor, which is established by international prices over the last 60 months. The duties primarily affect rice, sugar, maize, milk, and certain dairy products.

The panel had largely ruled in Guatemala’s favour late last year by finding that those duties constituted “variable import levies” in violation of global trade rules, particularly those outlined under Article 4.2 of the Agreement of Agriculture. (See Bridges Weekly, 4 December 2014

The panel had also ruled against Peru’s claims regarding Guatemala’s alleged violation of its “good faith” obligations by launching a WTO dispute. While the two trading partners had negotiated an FTA that permitted the system of duties used by Peru, that deal is not currently in force.

The case has thus drawn wide attention in the trade community, given the growing questions over how obligations taken by WTO members under free trade deals interact with their existing commitments at the global trade body. While these issues were raised in Peru’s appeal notice, the FTA dimension of the dispute is not discussed in Guatemala’s submission. (See Bridges Weekly, 2 April 2015)

Minimum import price

Despite disagreeing with Lima on the above-mentioned points, the panel had also denied Guatemala City’s claim that the additional duties under the PRS constituted a “minimum import price” or a border measure “similar to a minimum import price” within the meaning of the same legal provision – a finding which Guatemala is now challenging in its appeal.  

First, Guatemala has challenged the legal standard that the panel applied in defining measures that constitute a “minimum import price,” deeming this standard “excessively narrow” as it only includes measures applied with respect to the actual transaction value of each shipment of imports.

Furthermore, Guatemala says, the panel did not consider that the PRS’ design, structure, and operation entail an implicit minimum threshold that affords a specific type of protection, one that is not provided by ordinary specific duties.

Guatemala also argues that the panel erred in its analysis of whether the measure at issue was “similar to a “minimum import price,” given that the panel applied the same legal standard for both concepts.

Based on that interpretation, the panel had found that the measure at issue was not “similar” to a minimum import price, given that the duties system did not prevent imports from entering the Peruvian market at prices under a certain threshold.

However, Guatemala holds that the PRS’ setup and operation demonstrates the existence of an “explicit threshold,” namely the floor price itself, as well as an “implicit threshold,” which consists of the lowest transaction of the previous fortnight plus the additional duties generated by the PRS.

Under WTO rules, the Appellate Body now has 90 days from the date of appeal to issue its report. While it can review aspects of law – such as legal interpretation – it generally will not interfere with factual findings.

ICTSD reporting.

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