India - Additional And Extra-Additional Duties On Imports From The United States (AB-2008-7/WT/DS360)

Third Participant’s Submission of Australia

26 August 2008, Geneva

Short Title Full Case Title and Citation

Chile – Price Band System

Appellate Body Report, Chile – Price Band System and Safeguard Measures

Relating to Certain Agricultural Products, WT/DS207/AB/R, adopted 23 October 2002, DSR 2002:VIII, 3045.

Japan – Alcoholic Beverages

Appellate Body Report, Japan – Taxes on Alcoholic Beverages, WT/DS8/AB/R,WT/DS10/AB/R, WT/DS11/AB/R, adopted 1 November 1996, DSR 1996:I, 97.

Turkey – Textiles

Appellate Body Report, Turkey – Restrictions On Imports Of Textile And Clothing Products, WT/DS34/AB/R, adopted 19 November 1999, as modified by Appellate Body Report WT/DS34/AB/R, DSR 1999:VI, 2363.

US – Wool Shirts and Blouses

Appellate Body Report, United States – Measure Affecting Imports of Woven

Wool Shirts and Blouses from India, WT/DS33/AB/R and Corr.1, adopted

23 May 1997, DSR 1997:I, 323.

US – Customs User Fee

GATT Panel Report, United States – Customs User Fee. L/6264 - 35S/245, adopted 2 February 1988, BISD 35S/245.

US – Shrimp (Thailand)

Panel Report, United States – Measures Relating To Shrimp

From Thailand, WT/DS343/R, adopted 1 August 2008.


1. This appeal concerns the correct characterisation of charges imposed by India on imported products, specifically whether those charges are ‘ordinary customs duties’ or ‘other duties or charges’ under Article II:1(b) of GATT 1994; or whether they are charges justified under Article II:2(a). As such it raises a number of systemic issues relating to the interpretation and application of GATT 1994. Australia’s submission will address the following key issues:

a. the meaning of ‘ordinary customs duties’ and ‘other duties or charges’ in Article II:1(b)

b. Article II:2 as an affirmative defence

c. the meaning of ‘equivalent’ in Article II:2(a)

d. the relationship between Article II:2(a) and III:2.

2. At the outset, Australia believes the Panel should have used the following analytical framework for examining claims of inconsistency with Article II:

a. In the first instance the complaining party bears the burden of demonstrating that there is a prima facie case that the responding party is in breach of Article II:1(a) and / or Article II:1(b) [1]

b. Article II:2 is an affirmative defence, that is, it sets out exceptions or defences to the obligations raised in the rest of that Article, which must be raised by a responding party wishing to rely on it (provided the complaining party has established a prima facie case of inconsistency as referred to in paragraph 2a above). If a responding party seeks to rely on Article II:2, the burden of proof switches to that party to demonstrate that its measure falls within one of the three paragraphs set out in Article II:2

c. Where the responding party relies on Article II:2(a) it bears the burden of demonstrating that its charge(s), levied at the time of importation, meet the two separate requirements set out in that provision. The first requirement is that the charge levied at the time of importation must be ‘equivalent’ to an internal tax. The second is that the charge must be imposed consistently with the provisions of paragraph 2 of Article III.

‘Ordinary Customs Duties’ and ‘Other Duties and Charges’ in GATT Article II:1(b)

3. The Panel interpreted ‘ordinary customs duties’ (OCD) and ‘other duties and charges’ (ODC) set out in Article II:1(b) as referring only to those duties or charges which ‘inherently discriminate against imports’.[2] In arriving at this interpretation the Panel relied heavily on the following statement by the GATT Director General, adopted by GATT Council Decision of 26 March 1980:

‘I wish to point out in this connexion that such “other duties or charges” are in principle only those that discriminate against imports. As can be seen from Article II:2 of the General Agreement, such “other duties or charges” concern neither charges equivalent to internal taxes, nor anti-dumping or countervailing duties, nor fees or other charges commensurate with the cost of services rendered’.[3]

4. Australia submits that the above statement should not be read as establishing a strict test between OCDs and ODCs as being discriminatory and Article II:2 charges as being non-discriminatory as appears to have been done by the Panel.[4] Such a test is not required by the ordinary meaning of the text in context and adds an unnecessary layer of legal complexity to the analysis.[5]

5. The GATT Council Decision of 1980 is useful in that it explains the general policy justification for Article II:2, as was observed by the GATT Panel decision in US – Customs User Fee (1988):

‘In the words of an explanation of Article II:2 contained in a 1980 proposal by the Director-General (27S/24), the policy justification for the three types of border charges permitted by Article II:2 was that they did not "discriminate against imports"’.[6]

6. However, the Panel in US – Customs User Fee went on to observe that the above policy rationale does not apply to all aspects of Article II:2 since subparagraph (c) authorises charges which do ‘disadvantage imports vis-á-vis domestic products’.[7] Accordingly, the generally non-discriminatory nature of Article II:2 charges identified by the GATT Council Decision should not be extrapolated into an absolute rule.

7. Australia notes the Panel’s acknowledgement that those charges referred to in Article II:2 may not necessarily exhaustively account for the ‘universe of charges that do not inherently discriminate’ against imports.[8] It may therefore be impossible for a complaining party to establish comprehensively that a charge is inherently discriminatory. In such cases the complaining party alleging a breach of Article II:1 may therefore be unable to satisfy the burden of proof imposed on it by the Panel.

8. As noted in its submission to the Panel[9], Australia contends that a better way of examining whether a charge is an OCD or ODC for the purposes of GATT Article II:1(b) is to adopt a broader framework or system of examination such as that to which the Appellate Body alludes in Chile – Price Band System.[10]Australia maintains that an examination of the charge’s overall design, application and structure is necessary in deciding whether it falls within Article II:1(b). Such analysis should be applied on a case-by-case basis.

GATT Article II:2 – Right or Defence and Subsequent Burden of Proof

9. The general rule in relation to which party bears the burden of proof was described by the Appellate Body in US – Wool Shirts and Blouses as follows:

‘… it is a generally accepted canon of evidence in civil law, common law and, in fact, most jurisdictions, that the burden of proof rests upon the party, whether complaining or defending, who asserts the affirmative of a particular claim or defence.[11]

Australia agrees that the complaining party in all cases has the initial burden of making a prima facie case in support of the claims that it raises, before the burden shifts to the responding party to demonstrate consistency with an exception or affirmative defence.

10. Australia considers that the Panel erred in not characterising GATT Article II:2 as an exception or defence to the obligations set out in the rest of that Article.[12] Australia agrees that Article II:2 does allow situations in which other charges may be levied on imports that are not ‘ordinary customs duties’ or ‘other duties and charges’ within the meaning of GATT Article II:1(b). However, the characterisation of the provisions of Article II:2 as a separate category of charges[13] leads to the apportionment of a burden of proof which is inconsistent with the ordinary meaning of the text of this Article.

11. In support of its submission, Australia firstly notes that the language of Article II:2 (‘nothing in this Article shall prevent’) is similar to other Articles of GATT which have been interpreted as affirmative defences for which the burden of proof lies with the responding party:

a. The chapeau of GATT Article XX reads ‘…nothing in this Agreement shall be construed to prevent the adoption of or enforcement by any contracting party of measures…’. Thus, Article II:2 provides a set of exceptions or affirmative defences to the obligations set out in Article II, while ArticleXX provides certain exceptions or affirmative defences to the provisions of the GATT.[14] The Panel acknowledges that Article XX is a recognised exception but seeks to distinguish the text of similarly drafted Articles as not necessarily providing such defences.[15] Australia considers that this distinction is not justified.

b. Similarly, the chapeau to Article XXI also reads ‘[n]othing in this Agreement shall be construed (a) to require … (b) to prevent …(c) to prevent…’. Titled ‘security exceptions’, this Article has long been recognised as an exception to obligations set out in the other Articles of GATT 1994.[16]

c. Article XXIV:5 also provides the provisions of this Agreement shall not prevent, as between the territories of contracting parties, the formation of a customs union or of a free-trade area or the adoption of an interim agreement necessary for the formation of a customs union or of a free-trade area…’ [emphasis added]. This was interpreted by the Appellate Body in Turkey – Textiles to ‘justify the adoption of a measure which is inconsistent with certain other GATT provisions, and may be invoked as a possible “defence” to a finding of inconsistency’.[17]

12. There is further support for the interpretation of Article II:2 (and II:2(c) in particular) as an affirmative defence, and therefore the burden of proof being with the responding party, in the GATT Panel Report in US – Customs User Fee :

‘The Panel was of the view that the government imposing the fee should have the initial burden of justifying any government activity being charged for. Once a prima facie satisfactory explanation had been given, it would then be upon the complainant government to present further information calling into question the adequacy of that explanation.’[18]

13. Australia considers that the Panel in India – Additional Duties was incorrect in attempting to distinguish the Panel’s reasoning in US – Customs User Fee relating to Article II:2(c) as a defence.[19] In Australia’s view, the reasoning on which the Panel in US – Customs User Fee found Article II:2 (c) to require the burden of proof to fall on the party claiming consistency with that Article, applies equally to the other subparagraphs of Article II:2, which share the same chapeau.

14. In establishing a prima facie case of inconsistency with Article II:1, a complaining party should not also have to bear the burden of disproving consistency with Article II:2 (and therefore with Article III:2, as noted below). Australia would have concerns with imposing this additional burden on the complaining party because of its potential to lead to difficulties in the resolution of future disputes and to inequitable outcomes.

15. Australia notes the Appellate Body’s statement in EC – Hormones that:

‘[t]he general rule in a dispute settlement proceeding requiring a complaining party to establish a prima facie case of inconsistency with a provision of the SPS Agreement before the burden of showing consistency with that provision is taken on by the defending party, is not avoided by simply describing that same provision as an "exception".’[20]

However, in this instance the Panel has erred in not interpreting Article II:2 as a defence and thus recognising that the burden of proof rests on the Respondent claiming Article II:2 as a justification (or defence) for measures that are not consistent with Article II:1.

Meaning of ‘equivalent’ in GATT Article II:2(a)

16. Australia supports the Panel’s approach to ‘equivalent’ in GATT Article II:2(a), as requiring an examination of function, meaning underlying purpose or correlation to an existing internal tax.[21] The Panel rightly raises the Legal Drafting Committee comments in support of its definition of equivalent.[22]

17. Australia considers that the United States’ view that ‘equivalent’ must require a more in-depth examination of ‘structure, design and application of the two measures (with the relevant attributes for comparison in that examination being amount, effect and function)[23], is incorrect. In support of this assertion Australia notes:

a. First, the United States’ view is not supported by the ordinary meaning of the words in the first sentence of Article II:2(a) in their context. An overly-detailed interpretation of ‘equivalent’ detracts from the rationale for including the reference in Article II:2(a) to the obligations or standards set out in Article III:2. Such approach runs the risk of rendering inutile the second part of Article II:2(a), first sentence. It would also impose elements of an Article III:2 analysis on the first part of the sentence in II:2(a). Such requirement is not readily apparent from the ordinary meaning of that sentence.

b. Second, in a practical sense, an interpretation of equivalence which looks at structure and design could render charges levied at the border, which may genuinely adjust for internal taxes and comply with Article III:2, inconsistent with Article II:2(a). It is unlikely that all such ‘equivalent’ taxes charged at the border would be found to be ‘structured’, ‘applied’ or ‘designed’ in the same way as a more complex domestic tax.

18. This is not to say that no evidence needs to be adduced to demonstrate the existence of an equivalent domestic tax or internal charge. The sufficiency of evidence is a matter on which a Panel must satisfy itself in each case. As outlined above, the burden of proof should be placed on a party asserting the affirmative of a particular claim or defence.

Relationship between GATT Article II:2(a) and III:2

19. Australia agrees with the Panel’s findings on the relationship between GATT Articles II:2 and III:2[24], in that to comply with the requirements of Article II:2(a), a border tax has to be both ‘equivalent’ to an internal tax on like products, and ‘imposed consistently with the provisions of Article III:2’. The ordinary meaning of the language of Article II:2(a) sets up a two part test, with both parts being equally important in demonstrating the consistency of a charge with that provision.[25] Consistency with the obligations of Article III:2 is essential in passing the Article II:2(a) test.

20. In the situation where the burden of proof rests with a party claiming consistency with Article II:2(a), the relationship between Articles II:2(a) and III:2 makes it necessary to prove that the charges levied by the responding party are not in excess of those applied, directly or indirectly, to like domestic products. The jurisprudence on this point is well settled. As the Appellate Body stated in Japan – Alcoholic Beverages, ‘[e]ven the smallest amount of "excess" is too much. The prohibition of discriminatory taxes in Article III:2, first sentence, is not conditional on a ‘trade effects test’ nor is it qualified by a de minimis standard.’[26]

21. Australia does not agree with the characterisation by the United States of Article III:2[27] as confined only to internal taxes and charges. Such an approach would appear to read down the ordinary meaning of Ad Article III, which directs Members to regard internal taxes and charges, even if levied at the ‘time or point of importation’ on imported goods, as being subject to Article III disciplines. It would also appear to disregard the ordinary meaning and context of the language of Article II:2(a), which directly links charges ‘imposed at the time of importation’ to the provisions of Article III:2: ‘internal taxes or other internal charges of any kind’.

22. As raised in its Third Party Submission to the Panel[28], Australia considers that India’s charges in the present case may result in some imported products incurring charges ‘in excess of’ those imposed on some like domestic products (counter to the requirements of GATT Article III:2). This is because, as conceded by India, where internal charges are applied at different rates, the charge on imports is set at the highest internal rate.[29] This could presumably result in at least some imported products being subject to charges in excess of those applied to like domestic products. If this were indeed the result, Australia submits that those charges would be inconsistent with GATT Article III:2 and could not therefore satisfy the test set out in GATT Article II:2(a).

23. In Australia’s view, GATT Articles II and III, along with Ad Article III, describe a system of obligations and affirmative defences, and provide a framework for regulating the range of charges that may be imposed on imports as compensation for the treatment of like domestic products. These provisions cannot be read in isolation as the United States’ approach would appear to require.


24. Australia therefore concludes that:

a. a charge’s overall design, application and structure should be examined to determine whether it is an OCD or ODC for the purposes of GATT Article II:1.

b. GATT Article II:2 establishes a set of affirmative defences to the obligations set out in the rest of the Article. Accordingly, should a complaining party establish a prima facie case of inconsistency with Article II:1, a responding party wishing to rely on Article II:2 then bears the burden of proving the consistency of its charge(s) with that provision.

c. GATT Article II:2(a) sets out a two part test under which the charge at issue must be both ‘equivalent’ to an internal tax and be imposed consistently with Article III:2. ‘Equivalent’, as the Panel states[30], is an investigation of function or purpose, not a more in-depth examination of ‘structure, design and application’ as the United States asserts.[31]

[1] The Appellate Body in EC – Hormones said ‘[t]he initial burden lies on the complaining party, which must establish a prima facie case of inconsistency’, paragraph 48.

[2] Panel Report, paragraph 7.141.

[3] GATT document C/107/Rev.1 adopted on 26 March 1980, BISD 27S/22, 24, paragraph 9, referred to in the Panel Report, WT/DS360/ R, paragraph 7.144.

[4] Panel Report, paragraphs 7.129 – 7.134.

[5] Article 3.2 of the Dispute Settlement Understanding requires that the provisions of the Covered Agreements be read in accordance with the customary rules of interpretation of public international law. Article 31 of the Vienna Convention on the Law of Treaties requires that a treaty should be interpreted in good faith and in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in light of its object and purpose.

[6] US – Customs User Fee, paragraph 84.

[7] Ibid.

[8] Panel Report, paragraph 7.159.

[9] Third Party Submission of Australia, paragraph 9.

[10] Chile – Price Band System, paragraph 278.

[11] US – Wool Shirts and Blouses, page 14. (original footnote omitted)

[12] Panel Report, paragraph 7.148.

[13] Panel Report, paragraphs 7.132 and 7.133.

[14] US – Shrimp (Thailand), paragraph 6.44.

[15] Panel Report, paragraph 7.148.

[16] See for example the General Council Decision Concerning Article XXI of the General Agreement, Decision of 30 November 1982 (L/5426).

[17] Turkey – Textiles, paragraph 45.

[18] US – Customs User Fee, paragraph 98.

[19] Panel Report, paragraph 7.163.

[20] EC – Hormones,, paragraph 104.

[21] Panel Report, paragraphs 7.186 and 7.187.

[22] Panel Report, paragraph 7.187, citing Doc. EPCT/TAC/PV/26, page 21.

[23] Appellant Submission of the United States, paragraph 69.

[24] Panel Report, paragraphs 7.203 and 7.214.

[25] Australia is uncertain of the meaning or effect of the Panel’s reasoning in paragraph 7.215 of its report.

[26] Japan – Alcoholic Beverages, page 23.

[27] Appellant Submission of the United States, paragraph 48.

[28] Third Party Submission of Australia, paragraph 14.

[29] First Written Submission of India, 31 August 2007, at paragraph 14 and 15 regarding the AD and paragraphs 20 and 21 regarding the SUAD.

[30] Panel Report, paragraphs 7.186 and 7.187.

[31] Appellant Submission of the United States, paragraph 69.

Back to Disputes Main Page

Last Updated: 9 January 2013