Trade Law: An Introduction to Selected
International Agreements and U.S. Laws
Emily C. Barbour
Legislative Attorney
January 14, 2011
Congressional Research Service
7-5700
www.crs.gov
R41306
CRS Report for Congress
P
repared for Members and Committees of Congress

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Trade Law: An Introduction to Selected International Agreements and U.S. Laws

Summary
U.S. trade obligations derive from international trade agreements, including the General
Agreement on Tariffs and Trade (GATT), the other World Trade Organization (WTO) agreements,
and additional bilateral and regional trade agreements, as well as domestic laws intended to
implement those agreements or effectuate U.S. trade policy goals. This report provides an
overview of both sources of U.S. trade obligations, focusing on a select group of agreements,
provisions, and statutes that are most commonly implicated by U.S. trade interests and policy.
Historically, parties to international trade agreements were obligated to reduce two kinds of trade
barriers: tariffs and non-tariff trade barriers. Whereas the former may hinder an imported
product’s ability to compete in a foreign market by imposing an additional cost on the product’s
entry into the market, the latter has the potential to bar an import from entering that market
altogether by, for example, restricting the number of such imports that can enter the market or
imposing prohibitively strict packaging and labeling requirements. Consequently, at their most
basic, international trade agreements obligate their parties to convert at least some of their non-
tariff trade barriers into tariffs, set a ceiling on the tariff rates for particular products, and then
progressively reduce those rates over time. In addition, international trade agreements have
increasingly broadened their scope to target domestic policies that appear to operate as unfair
trade practices and to establish elaborate trade dispute settlement mechanisms. As illustrated in
this report, the typical international trade agreement today disciplines its parties’ use of tariffs and
trade barriers, authorizes its parties to use discriminatory trade measures to remedy certain unfair
trade practices, and establishes a dispute settlement body.
Domestic trade laws, meanwhile, can broadly be classified as laws (1) authorizing trade remedies,
including remedies for violations of trade agreements, countervailing duties for subsidized
imports, and antidumping duties for imports sold at less than their normal value, (2) setting
domestic tariff rates and providing special duty-free or preferential tariff treatment for certain
products, and (3) authorizing the imposition of trade sanctions to protect U.S. security or achieve
other policy goals. In addition to describing these domestic laws, this report summarizes the
constitutional authorities of Congress and the executive branch over international trade. Finally,
the report identifies many of the federal agencies and entities charged with overseeing the
development of new trade agreements and the administration and enforcement of federal trade
laws. Among the federal agencies and entities discussed are the United States Trade
Representative (USTR), the International Trade Administration (ITA), the International Trade
Commission (ITC), the United States Customs and Border Protection (CBP), and the United
States Court of International Trade (CIT).
This report is not intended as a comprehensive review of trade law. It is an introductory overview
of the legal framework governing trade-related measures. The agreements and laws selected for
discussion are those most commonly implicated by U.S. trade interests, but there are U.S. trade
obligations beyond those reviewed in this report.

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Trade Law: An Introduction to Selected International Agreements and U.S. Laws

Contents
Introduction ................................................................................................................................ 1
Part I: United States Trade Obligations Under International Law ................................................. 1
The Uruguay Round, Marrakesh Agreement, and World Trade Organization.......................... 2
The General Agreement on Tariffs and Trade (GATT) 1994............................................. 3
The Nondiscrimination Provisions of the GATT ........................................................ 3
Article II: Tariffs ....................................................................................................... 7
Article VIII: Fees and Formalities ............................................................................. 8
Article IX: Marks of Origin....................................................................................... 9
Article XI: General Elimination of Quantitative Restrictions ................................... 10
Article XX: General Exceptions to the GATT and “the Chapeau” ............................ 11
Article XXI: National Security Exceptions to the GATT.......................................... 13
Article XXIII: The Basis for WTO Dispute Settlement ............................................ 15
Article XXIV: Customs Unions and Free Trade Areas ............................................. 15
Other WTO Agreements Reached During the Uruguay Round....................................... 16
Antidumping Agreement ......................................................................................... 17
Agreement on Subsidies and Countervailing Measures............................................ 18
Agreement on Safeguards ....................................................................................... 21
Agreement on Rules of Origin................................................................................. 22
Agreement on Agriculture ....................................................................................... 23
Agreement on Technical Barriers to Trade............................................................... 27
Agreement on Sanitary and Phytosanitary Measures................................................ 28
General Agreement on Trade in Services ................................................................. 31
Agreement on Trade-Related Intellectual Property Rights........................................ 32
Dispute Settlement Understanding................................................................................. 34
The WTO Plurilateral Agreements................................................................................. 35
Agreement on Government Procurement ................................................................. 35
Agreement on Trade in Civil Aircraft ...................................................................... 37
The Doha Development Round ..................................................................................... 38
Free Trade Agreements in Effect and Pending Congressional Approval ............................... 39
North American Free Trade Agreement ......................................................................... 40
Dominican Republic-Central America-United States Free Trade Agreement .................. 42
Pending Free Trade Agreements with South Korea, Panama, and Colombia................... 44
Trade Negotiations for the Trans-Pacific Partnership Agreement.................................... 47
Part II: The U.S. Constitution and Separation of Powers ............................................................ 48
Article I of the Constitution and Legislative Branch Authority............................................. 48
Article II of the Constitution and Executive Branch Authority ............................................. 48
Separation of Powers in Practice: Fast Track and Trade Remedies ....................................... 49
Fast Track Authority: Trade Act of 1934, Trade Act of 1974, and Bipartisan Trade
Promotion Act of 2002 ............................................................................................... 49
Import Competition: Tariff Act of 1930 and Trade Act of 1974 ...................................... 50
Part III: Selected U.S. Agencies and Federal Entities with Responsibility for Aspects of
International Trade ................................................................................................................. 51
United States Trade Representative ..................................................................................... 51
United States International Trade Administration................................................................. 52
United States International Trade Commission .................................................................... 52
United States Customs and Border Protection...................................................................... 52
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Trade Law: An Introduction to Selected International Agreements and U.S. Laws

United States Court of International Trade........................................................................... 53
Part IV: Selected Federal Statutes Regulating International Trade .............................................. 54
Trade Remedy Laws ........................................................................................................... 54
Section 301 of the Trade Act of 1974: Remedies for Violations of Trade
Agreements and Other Inconsistent or Unjustifiable Foreign Trade Practices .............. 54
Countervailing Duties: Remedies for Imports of Subsidized Goods ............................... 55
Antidumping Duties and “Zeroing”: Remedies for Imports Sold at Less Than Fair
Value ......................................................................................................................... 57
Safeguards .................................................................................................................... 59
Domestic Tariff and Customs Law....................................................................................... 60
Harmonized Tariff Schedule.......................................................................................... 60
Generalized System of Preferences................................................................................ 61
Other Duty Free Entry Programs ................................................................................... 63
Statutory Authorities for the Imposition of Trade Sanctions ................................................. 63
Trading with the Enemy Act .......................................................................................... 64
International Emergency Economic Powers Act ............................................................ 65

Contacts
Author Contact Information ...................................................................................................... 67

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Trade Law: An Introduction to Selected International Agreements and U.S. Laws

Introduction
The post-World War II era has been characterized by a global movement toward liberalizing trade
and creating frameworks under which trade disputes can be avoided and resolved.1 In particular,
the trade agreements of the last half-century can be seen as adopting the view that government
bodies need a global legal framework to ensure that they effectively conform their countries’
policies and laws with their citizens’ interests.2 Legal theorists posit that trade policy failure, in
both the global and domestic arenas, as well as inequitable power dynamics among countries
engaged in trade negotiations, are the products of a legal architecture that does not sufficiently
discipline how governments represent their citizens’ interests.3 In this vein, the international trade
law regime has attempted to strengthen its enforcement mechanism over time to ensure that
national governments comply with trade law despite shifting domestic pressures.4
As international trade law has developed, there has been interplay between domestic and global
trade law. Initially, international trade agreements focused on tariffs, but, over time, they have
broadened to encompass aspects of domestic policymaking and establish fairly stringent dispute
settlement mechanisms. This interplay, however, has led to criticism that trade agreements
infringe national sovereignty and autonomy by (1) limiting the kinds of policy decisions a country
can make and (2) giving international trade dispute settlement bodies too much power to shape
and constrain domestic law.
This report provides an overview of the legal framework that governs trade-related measures.
This framework is composed of both international agreements and domestic laws. The particular
agreements and statutes selected for this report are those that are most commonly implicated by
U.S. trade interests and policy. This report is not intended to be a comprehensive review of trade
law.
Part I: United States Trade Obligations Under
International Law
Often, a single trade issue, such as dumping (the sale of goods in foreign markets at lower prices
than in the domestic market), is governed by both international agreements and federal laws.
Accordingly, this report first discusses international trade agreements and then turns to domestic
law.
The United States has international trade obligations under (1) the World Trade Organization
(WTO) agreements, which include the General Agreement on Trade and Tariffs (GATT) and other
“covered agreements;”5 (2) its own free trade agreements; and (3) other international agreements

1 See WORLD TRADE ORGANIZATION, WORLD TRADE REPORT 2007 iii, 247 (2007).
2 Id. at 80 (2007).
3 Id. at 79.
4 See id. at 118.
5 The term “covered agreements” refers to the Marrakesh Agreement, the Agreements in Annexes I and 2 of that
Agreement, and any Plurilateral Trade Agreement in Annex 4 of that Agreement. Appellate Body Report, Brazil—
Measures Affecting Desiccated Coconut, p.13 WT/DS22/AB/R (Feb. 21, 1997). The Marrakesh Agreement and the
(continued...)
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Trade Law: An Introduction to Selected International Agreements and U.S. Laws

with narrower policy goals, such as the conservation of natural resources. The scope of this
report, however, is limited to obligations incurred under agreements that seek to liberalize
international trade. In the WTO context, trade agreements are categorized as either multilateral
(accepted by all WTO Members as a condition of membership) or plurilateral (accepted by only
some WTO Members). Other free trade agreements may be classified as bilateral agreements
(which bind only two countries) and regional agreements (which bind countries within a discrete
region of the world). No matter their classification, most trade agreements have a corresponding
body of domestic law.
The Uruguay Round, Marrakesh Agreement, and World Trade
Organization
After World War II, developed nations sought to establish an open trade network to facilitate the
recovery of the global economy. These negotiations yielded a proposal for an International Trade
Organization (ITO), and, as a temporary fix until the ITO Charter could be negotiated, the
General Agreement on Trade and Tariffs 1947 (GATT 1947). The expectation was that the GATT
1947 would expire once a more comprehensive trade agreement, the ITO Charter, was developed
and ratified.6 Then the ITO would interpret and administer the ITO Charter.
However, the ITO never materialized, and, therefore, despite its provisional nature, the GATT
1947 became a permanent fixture in international trade.7 Nevertheless, to dispel any concern that
an international organization had been established, the GATT 1947 signatories continued to be
called “Contracting Parties” rather than “Members.” Moreover, the GATT 1947 was not
considered a comprehensive trade agreement because it consisted mainly of the commercial
policy provisions of the ITO charter.
Partly as a response to concerns about the GATT 1947’s strength and breadth, Contracting Parties
engaged in a series of “rounds” of multilateral trade negotiations over the ensuing decades: the
Dillon Round (1960-1962), the Kennedy Round (1964-1967), the Tokyo Round (1973-1979), the
Uruguay Round (1986-1994), and the ongoing Doha Development Round. Each round of talks
sought to liberalize new markets, lower tariffs, and identify solutions to different kinds of trade
barriers.8 It was not until the Uruguay Round that the Contracting Parties finally reached an
agreement on a charter for an international trade organization: the WTO.
The agreements completed in the Uruguay Round are detailed in the Marrakesh Agreement. Part
of this Agreement is the Agreement Establishing the World Trade Organization (the WTO
Agreement). The other texts negotiated during the Uruguay Round are annexed to the WTO
Agreement. Annex 1 contains 13 multilateral agreements on trade in goods as well as the General
Agreement on Trade in Services and the Agreement on Trade-Related Aspects of Intellectual

(...continued)
contents of its annexes will be discussed further in “The Uruguay Round, Marrakesh Agreement, and World Trade
Organization.”
6 WORLD TRADE REPORT, supra note 2, at 80.
7 See id.
8 The Kennedy Round was the first round to go beyond tariffs and deal with certain non-tariff measures. Id. at 184.
However, since then, non-tariff barriers have become a major part of multilateral trade negotiations.
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Property Rights.9 Annex 2 contains the Dispute Settlement Understanding, which sets out the
process by which WTO Members may resolve disputes over the meaning or application of a
WTO agreement. Annex 3 contains a Trade Policy Review mechanism, providing for periodic
review of a WTO Member’s trade laws and policies. Annexes 1 through 3, and the agreements
therein, must be accepted by a country as a condition of its membership in the WTO.
Accordingly, all of these agreements, along with the other provisions of the Marrakesh
Agreement, were approved and implemented in U.S. law through the Uruguay Round
Agreements Act (URAA, P.L. 103-465, 19 U.S.C. § 3501 et seq.), which then-President Bill
Clinton signed into law on December 8, 1994.
The General Agreement on Tariffs and Trade (GATT) 1994
The GATT 1994, which is found in Annex I of the WTO Agreement, consists of (a) the GATT
1947, (b) certain protocols, waivers, and tariff concessions made pursuant to the GATT 1947, and
(c) interpretations of particular language and provisions of the GATT 1947. At its most general,
the GATT sets the maximum tariffs for particular goods and countries, provides disciplines for the
regulation of imports and exports, and lists exceptions to these obligations. This report surveys
many of the articles of the GATT that are considered fundamental as well as those that are
frequently raised in WTO consultations or disputes over a WTO Member’s domestic trade
measures.
The Nondiscrimination Provisions of the GATT
The GATT seeks to prohibit WTO Members from discriminating between “like products” on the
basis of their origins. More specifically, the GATT bars WTO Members from discriminating
between like products because they originated in different WTO Members or because they
originated in a WTO Member’s territory rather than domestically. The GATT articles that lay out
this prohibition, Article I and Article III, are therefore known as the nondiscrimination provisions.
Although “like product” is used in both provisions, the GATT does not offer a single precise and
absolute definition of the term.10 Consequently, to determine whether two products are “like,”
WTO panels and the Appellate Body engage in a case-by-case analysis to discern whether the two
products are in a competitive relationship given the products’ properties and end uses, consumer
preferences, and tariff classification.11

9 The other agreements included in this annex are: the Agreement on Agriculture, the Agreement on Sanitary and
Phytosanitary Measures, the Agreement on Textiles and Clothing (which terminated in January 2005), the Agreement
on Technical Barriers to Trade, the Agreement on Trade-Related Investment Measures, the Agreement on Anti-
dumping, the Agreement on Customs Valuation, the Agreement on Preshipment Inspection, the Agreement on Rules of
Origin, the Agreement on Import Licensing, the Agreement on Subsidies and Countervailing Measures, and the
Agreement on Safeguards.
10 See Report of the Appellate Body, Japan—Taxes on Alcoholic Beverages, WT/DS8/AB/R, p. 21 (Oct. 4, 1996)
(writing that the concept of “like product” is “like an accordion”).
11 See Report of the Appellate Body, EC—Asbestos, WT/DS135/AB/R, ¶ 99 (Mar. 12, 2001); Working Party Report on
Border Tax Adjustments (Dec. 2, 1980), GATT B.I.S.D. (18th Supp.) at 97.
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Article I: Most Favored Nation Treatment
Article I of the GATT requires WTO Members to grant immediate and unconditional most-
favored-nation (MFN) treatment to the products of other Members.12 This means that any
privilege that a WTO Member grants in the context of customs duties or rules regarding
importation or exportation to any product imported from one country, whether a WTO Member or
not, must also be granted to any like product imported from all WTO Members.13
Notably, a measure that conditions the provision of an advantage on seemingly origin-neutral
criteria, such as characteristics of the producer, the import’s production process, or laws of the
exporting country that the importing country deems undesirable, may nevertheless be deemed to
violate Article I.14 For example, in Indonesia—Autos, a WTO panel assessed the Article I
consistency of Indonesian measures that, inter alia, accorded some automobiles a 0% sales tax
and others a 35% sales tax. The exemption from the sales tax and other duties was based on such
factors as the domestic car company’s relationship with the foreign importer, the use of local
content, and the use of the imported car parts in the assembly in Indonesia of a domestic car.15
The panel found that exemptions from the sales tax and other duties were advantages governed by
Article I:1. Moreover, it ruled that although the eligibility criteria for the exemptions appeared
origin-neutral, Indonesia violated Article I:1 by failing to accord these advantages unconditionally
to all WTO Members.16 In other words, because Indonesia’s conditions on an import’s receipt of
duty and sales tax exemptions had the effect of providing advantages to imports from one WTO
Member (Korea) but not to like products imported from other WTO Members, Indonesia
discriminated between like imports in violation of Article I.17
Article III: National Treatment
Article III articulates the basic principle of “national treatment”: Members must treat products
from other Members no less favorably than they treat their own domestic products.18 Accordingly,
Article III reflects concern that WTO Members could use internal taxation schemes, regulations,
and other domestic measures to protect their domestic industries. As written, Article III forbids
Members from using internal taxes, charges, and regulations that affect the “internal sale, offering

12 GATT, Art. I:1. Note that domestic U.S. law refers to MFN status as “normal trade relations.” Internal Revenue
Restructuring and Reform Act of 1998, P.L. 105-206 § 5003, 112 Stat. 685 (1998).
13 Note that free trade agreements are often facially inconsistent with this requirement but have generally been
permitted under Article XXIV. See infra “Article XXIV: Customs Unions and Free Trade Areas.”
14 Report of the Panel, Indonesia—Certain Measures Affecting the Automobile Industry, WT/DS54/R, ¶ 14.143 (July 2,
1998). See also Report of the Panel, Belgium—Family Allowances (Nov. 7, 1952), GATT B.I.S.D. (1st Supp.) 59, at ¶ 3
(1953) (holding that an exemption from a levy would violate Article I:1 if it was granted only if the recipients satisfied
certain conditions, thereby discriminating between contracting parties).
15 Indonesia—Autos, supra note 14, at paras. 14.145-14.146.
16 Chang Weng, Defenseless Policy: An Analysis of China’s Integrated Circuit Industry Tax Rebate Programs Under
WTO Laws, 30 N.C. J. INT’L L. & COM. REG. 625, 646 (2005) (“[N]ote that, although the Panel of Indonesia—Autos
stressed the relationship between the ‘criteria’ and the ‘product itself,’ what the Panel really relied on is the origin
specificity feature (the de facto discrimination effect of the autos from Korea and autos from other countries) of the
criteria and the effect thereof.”). See Indonesia—Autos, supra note 14, at ¶ 14.145.
17 Weng, supra note 16, at 646. See Indonesia—Autos, supra note 14, at paras. 14.145-14.147.
18 See GATT, Art. III:1.
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for sale, purchase, transportation, distribution or use of products,” as well as internal quantitative
regulations, so as to “afford protection to domestic production.”19
However, Article III prescribes different standards for national treatment depending on whether
the particular measure is a tax or regulation. When a measure is an internal tax or charge, Article
III:2 forbids its application if it either (1) is in excess of those taxes or charges applied to like
domestic products20 or (2) dissimilarly taxes imports and domestic products so as to afford
protection to a domestic product that is directly competitive with, or substitutable for, the
imported product.21 Alternately, when the practice in question is a regulation, such as a local
content requirement, advertising ban, or labeling requirement,22 Article III:4 proscribes its
application if it treats foreign products less favorably than like domestic products.23
As a result of Article III’s complexity, a variety of legal issues arise under it. There are frequent
disputes over the likeness or substitutability of the affected domestic and imported products.24
Members have also disputed whether a particular measure should be classified as a tax, subject to
the requirements of Article III:2, or a regulation, subject to the requirements of Article III:4.25
WTO and GATT panels have found that measures that tax particular products, such as sales taxes
or related tax credits, are governed by Article III:2, while measures that tax taxpayers for

19 GATT, Art. III:1.
20 Report of the Appellate Body, Canada—Certain Measures Concerning Periodicals, WT/DS31/AB/R, pp. 22-23
(June 30, 1997). Under this standard, “[e]ven the smallest amount of ‘excess’ is too much” under this standard. Report
of the Appellate Body, Japan—Taxes on Alcoholic Beverages, WT/DS8/AB/R, p. 23 (Oct. 4, 1996).
21 Japan—Alcoholic Beverages, supra note 20, at p. 24. The strict “in excess” standard applies only to the small group
of products that are considered “like”—that is, products that are perfect substitutes for each other. GATT, Interpretative
Note Ad Art. III:2; Canada—Periodicals, supra note 20, at p. 28. In contrast to “like products,” “directly competitive
and substitutable products” refers to both perfect and imperfect substitutes. Id. Therefore, when the complaining
Member’s products are directly competitive with, but not necessarily perfect substitutes for, the respondent’s domestic
products, the respondent’s tax is not subject to the “in excess” standard but rather to a two-prong test that asks whether
(1) the imported and domestic products are similarly taxed, and, if so, (2) whether the dissimilar taxation is applied so
as to protect domestic production. Japan—Alcoholic Beverages, supra note 20, at p. 24.
22 One example of an internal regulation deemed inconsistent with national treatment is the Korean dual retail scheme
that the United States and Australia challenged in 1999. In those two cases, Korean measures confined sales of
imported beef to stores bearing a “Specialized Imported Beef Store” sign. The panel held that both the requirement that
imported beef be sold only in certain stores and the requirement that those stores bear a specialized sign violated
Article III:4. Report of the Panel, Korea—Various Measures on Beef, WT/DS161/R, paras. 641-643 (July 31, 2000).
23 The Appellate Body has defined “like domestic product” more broadly for the purposes of the Article III:4 test than it
has for the purposes of the test for internal taxes and charges laid out in Article III:2. See Report of the Appellate Body,
EC—Measures Affecting Asbestos and Asbestos Containing Products, WT/DS135/AB/ R, ¶ 99 (Mar. 12, 2001). The
Appellate Body considers the term “like domestic product” in Article III:4 to include a small group of imperfectly
substitutable products in addition to perfectly substitutable products. See id.
24 E.g., Canada—Periodicals, supra note 20, at p. 3 (describing Canada’s argument that split-run and non-split-run
periodicals are like products); Japan—Alcoholic Beverages, supra note 20, at p.4 (describing Japan’s argument that
shochu and vodka are like products).
25 E.g., Report of the Panel, U.S.—Measures Affecting Tobacco (Oct. 4, 1994), GATT B.I.S.D. (41st Supp) 131, at
paras. 21, 75 (stating that the United States considered the provisions as enforcement measures for an underlying
regulation and not as a form of a tax or internal charge on a product within the meaning of Article III:2, which required
the Panel to determine whether the provisions were indeed “separate fiscal measures” within the realm of Article III:2);
Report of the Panel, U.S.—Taxes on Automobiles, DS31/R, ¶ 5.42 (Oct. 11, 1994) (unadopted) (summarizing the first
issue for the Panel’s consideration as whether the CAFE measure fell within the category of “internal taxes or other
internal charges” under Article III:2 or, rather, whether it fell within the category of “laws, regulations, and
requirements” under Article III:4 because it was actually a requirement enforced by penalty payments).
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engaging in particular behavior, such as tax credits for specified taxpayer purchases, are assessed
under Article III:4.26
In some disputes, Members have defended measures on the grounds that they are not “internal,”
and, therefore, not subject to the constraints of Article III.27 For example, in China—Auto Parts,
which arose partly under Article III:2, China argued that the charges in question were not internal
measures but rather valid methods of classifying imports for the purposes of assessing the correct
tariff on those imports at the border.28 In that case, the measures in question were Chinese policies
that permitted customs officials to classify imports of unassembled auto parts as motor vehicles,
and therefore subject to a higher tariff, provided that the unassembled parts had the “essential
character” of a motor vehicle and entered China in a single shipment.29 The Appellate Body found
that when a duty or charge is collected is not determinative of whether the duty or charge is
“internal.”30 Instead, the Appellate Body held that the test is not when a duty or charge is
collected but rather when the payer’s obligation to pay accrues.31 Where that obligation is
triggered by an event that occurs within the customs territory, such as the distribution or sale of
that product within the importing country, rather than at the moment of importation, the tax is
considered an internal measure for the purposes of Article III:2 even though it might be assessed
prior to that event occurring.32
A second issue under Article III is whether it permits WTO Members to distinguish between “like
products” solely on the basis of their process or production method (PPM). For example, can a
WTO Member discriminate against an imported product purely because it was produced in an
environmentally unsustainable way? To date, Article III case law does not permit a Member to
regulate two differently on the basis of such a distinction if it results in the imported good being
treated less favorably than the like domestic item.33 Nevertheless, there is language in WTO
decisions indicating that less favorable treatment of a like imported product may be permitted if it
can be explained by factors unrelated to foreign origin,34 and some scholars have suggested that

26 Compare U.S.—Measures Affecting Alcoholic and Malt Beverages (June 19, 1992), GATT B.I.S.D. (39th Supp.) 206,
at paras. 5.13-15 (ruling that U.S. excise tax credits for domestic wine and cider producers contravened Article III:2)
with Report of the Panel, U.S.—Tax Treatment for “Foreign Sales Corporations,” WT/DS108/RW, paras. 2.6, 8.144
(Aug. 20, 2001) (ruling that an income tax benefit provided for income earned predominantly as a result of goods
manufactured, grown, or extracted within the United States was governed by Article III:4).
27 See generally Report of the Appellate Body, China—Measures Affecting Imports of Automobile Parts,
WT/DS340/AB/R (Dec. 15, 2008).
28 See id. at paras. 14, 30, 47.
29 Id. at paras. 17, 111.
30 Id. at ¶ 158 (noting that “ordinary customs duties may be collected after the moment of importation and internal
charges may be collected at the moment of importation.”).
31 Id.
32 China—Auto Parts, supra note 27, at paras. 161-163.
33 Moreover, any prohibition on the import resulting from that product’s PPM (and not a product-related characteristic)
could constitute a quantitative restriction prohibited under Article XI, which is discussed later in this report. See Report
of the Panel, U.S.—Import Prohibition of Certain Shrimp and Shrimp Products, paras. 7.11-7.17, WT/DS58/R (May
15, 1998).
34 E.g., Report of the Appellate Body, Dominican Republic—Measures Affecting the Importation and Internal Sale of
Cigarettes, ¶ 96, WT/DS302/AB/R (April 25, 2005)) (“[T]he existence of a detrimental effect on a given imported
product resulting from a measure does not necessarily imply that this measure accords less favourable treatment to
imports if the detrimental effect is explained by factors or circumstances unrelated to the foreign origin of the product
...”).
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there is room for a WTO panel or Appellate Body to find a Member acted consistently with
Article III even when according less favorable treatment to an import because of its PPM.35
Article II: Tariffs
The original goal of the GATT was to move countries toward imposing tariffs, rather than non-
tariff trade barriers,36 that could then be reduced over time. Article II of the GATT embodies this
goal by requiring each WTO Member to abide by the tariff schedule that it has submitted to the
WTO. The goods that are subject to the negotiated tariff rates are called “bound” items.
Article II forbids Members from imposing tariffs on goods from other Members that are less
favorable than the tariff rates listed in the applicable schedule.37 Furthermore, Members may not
impose any other duty or charge on a product’s importation that exceeds the duties that existed at
the date the Members entered the WTO.38 There are, however, exceptions to Article II. Under
Article II:2, tariff concessions do not prevent Members from levying internal taxes consistent
with Article III:2 (these are often called “border tax adjustments”),39 antidumping or
countervailing duties consistent with the GATT and other relevant agreements, and fees or other
charges commensurate with the cost of services rendered.40

35 E.g., generally Robert Howse and Donald Regan, The Product/Process Distinction—An Illusory Basis for
Disciplining ‘Unilateralism’ in Trade Policy, 11 EUR. J. INT’L L. 249 (2000) (arguing that regulatory schemes that rely
on process or production based distinctions related to non-protectionist policies are consistent with Article III). But see
Steve Charnovitz, Law of Environmental PPMs in the WTO: Debunking the Myth of Illegality, 27 YALE J. INT’L L. 59,
91 (2002) (writing that the optimism similar to that expressed by Howse and Regan “that future WTO panels will
tolerate origin-neutral PPMs in the context of Article III would be unfounded.”).
36 An example of a non-tariff trade barrier is the Korean dual retail scheme that the WTO panel ruled against in 2000.
Korea—Beef, supra note 22, at paras. 641-643. As explained earlier, under that scheme, Korea confined sales of
imported beef to stores bearing a “Specialized Imported Beef Store” sign. Id. These kinds of trade barriers pose unique
obstacles to trade liberalization in part because, unlike tariffs, they can not be overcome simply by a willingness to pay
more money for the privilege of exporting products to a foreign country.
37 GATT, Art. II:1(a).
38 See id. at Art. II:1(b).
39 Border tax adjustments have particular significance in environmental policy. When a country wants its producers to
internalize a particular environmental cost, it usually wants to do so without depriving the domestic industry affected of
its global competitiveness. Consequently, it may impose a border tax adjustment (BTA) to “level the playing field,”
that is, prevent imports from countries whose producers do not internalize that cost from being cheaper than domestic
products whose producers do. However, not all taxes are eligible for treatment as a BTA. See, e.g., Report of the Panel,
United States—Taxes on Petroleum and Certain Imported Substances (June 17, 1987), GATT B.I.S.D. (34th Supp.)
136, at paras. 5.2.3 – 5.2.4 (hereinafter US—Superfund); Working Party Report on Border Tax Adjustments, GATT
B.I.S.D. (18th Supp.) 97, at ¶ 14 (1970). Taxes levied on producers, such as social security charges and payroll taxes,
are not eligible for treatment as a BTA, but taxes levied on products are. See, e.g., US—Superfund, supra, at ¶ 5.2.4;
Working Party Report on Border Tax Adjustments, supra, at ¶ 14. Accordingly, in US—Superfund, a GATT panel
upheld a BTA imposed by the United States on imported products derived from certain petro and inorganic chemicals.
US—Superfund, supra, at paras. 5.2.6-5.2.7. Having deemed the tax eligible for treatment as a BTA, the panel assessed
whether the tax in fact met the qualifications, listed in Article II:2(a), for exemption from Article II:1. Id. at paras.
5.2.7-5.2.10. See also Art. II:2(a) (exempting charges only if they are “equivalent to an internal tax imposed
consistently with the provisions of paragraph 2 of Article III in respect of the like domestic product or in respect of an
article from which the imported product has been manufactured or produced in whole or in part.”). The panel found
that the tax constituted a BTA that was, in principle, consistent with Article III:2 and, therefore, exempt from, rather
than an infringement of, Article II:1. US—Superfund, supra, at ¶ 5.2.10.
40 GATT, Art. II:2.
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Despite Article II’s importance to the GATT, its enforcement can be difficult because WTO
Members frequently disagree about which duty applies to a particular good. A country’s tariff
schedules address categories and sub-categories of products but do not expressly identify and
provide a tariff rate for every potential product variation and nuance.41 Despite these problems, a
country’s customs agency must rely on the tariff schedules as written to identify the kind of
product under consideration and apply a tariff rate. This leads to problems like the one
encountered in EC—Chicken Classification, in which Brazil complained that the European Union
incorrectly classified fresh chicken packed in salt as fresh chicken cuts rather than salted chicken
cuts.42 At issue was an EU regulation that provided the customs agency with guidance on the
distinction between salted and fresh chicken cuts, stating that chicken must be “deeply and
homogenously impregnated with salt in all parts” to be subject to the ad valorem duty that was
more favorable to foreign imports than the duty that was applied to fresh chicken.43
Article VIII: Fees and Formalities
Article VIII:1 of the GATT requires that all fees and charges imposed in connection with
importation or exportation be (1) limited in amount to the approximate cost of services rendered,
and (2) not represent an indirect protection to domestic products or a taxation of imports or
exports for fiscal purposes.44 The first prong (limiting the amount to the cost of services rendered)
is actually a dual requirement as it requires (a) that a service was rendered, and (b) that the level
of the charge does not exceed the approximate cost of that service.45 Moreover, the term “services
rendered” means services rendered to the individual importer in question.46
One of the early disputes involving Article VIII was US—Customs User Fee, which was heard by
a GATT panel in 1987. In that case, the European Union and Canada challenged the GATT-
consistency of an ad valorem processing fee charged by the U.S. Customs Service on all
commercial merchandise entering the United States.47 The amount of the fee charged varied
depended only on the appraised value of the merchandise, not on the costs incurred by the
Customs Service of processing the merchandise.48 The United States argued that the fee was
commensurate with the services rendered because it was commensurate with the sum costs of the
Customs Service’s commercial operations.49 The panel disagreed, finding that if the “cost of
services rendered” referred to the total cost of the relevant government activities, rather than to
the actual cost of the services rendered to the individual importers charged, Article VIII:1 would
not provide an objective standard by which the equitable apportionment of these fees could be

41 See, e.g., Report of the Panel, EC—Salted Chicken Cuts, WT/DS269/ R, p. 2 (May 30, 2005). In negotiating tariff
concessions, countries generally use a broad formula and do not look at every possible product individually. The result
is that the actual classification of many products is not discussed at all. Id.
42 Id. at 2, 10-12.
43 Id. at 7, 18.
44 Article VIII:4 provides a non-exhaustive list of the type of governmental activities connected to importation or
exportation to which Article VIII applies. These activities include licensing, statistical services, documentation,
inspection, and quarantine.
45 Report of the Panel, US—Customs User Fee (Feb. 2, 1988), GATT B.I.S.D. (35th Supp.) 245, at ¶ 69.
46 Id. at paras. 77, 80.
47 Id. at ¶ 7.
48 Id. at paras. 8, 10, 26.
49 US—Customs User Fee, supra note 45, at ¶ 28.
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ascertained.50 Accordingly, it ruled that it the U.S. processing fee was inconsistent with Article
VIII:1 to the extent that it caused fees to be levied in excess of the approximate cost of the
services provided to each individual importer.51
Similarly, in Argentina—Textiles, the panel found that Article VIII:1 forbade Argentina from
imposing an ad valorem duty with no fixed fee on textile and footwear imports. In that case,
Argentina was calculating an average import price for each tariff line of textiles, apparels, and
footwear to determine what the specific minimum duty was for products in that category.52 Upon
the importation of an article within that tariff line, Argentina then applied either the specific
minimum duty or an ad valorem duty with no fixed fee depending which duty was higher.53 While
Argentina claimed that it applied the higher ad valorem duty only to recoup the costs of the
“statistical services” involved in calculating the average import price for tariff line, the panel
ruled that because the ad valorem duty had no fixed maximum fee, it was inherently not limited
to the approximate cost of the services rendered and therefore inconsistent with Article VIII:1.54
In addition, in U.S.—Certain EC Products, a WTO panel ruled that Article VIII barred the United
States from increasing bonding requirements on imports from the European Communities in order
to secure the collection of future additional import duties that it was going to impose, once
authorized by the DSB, for the European Communities’ non-compliance with a WTO decision.55
The United States argued that the increased bonding requirements were a fee for the “early
release of merchandise,” but the panel found that the United States failed to provide any evidence
that the bonding requirements represented any approximate costs of such services.56
Article IX: Marks of Origin
Article IX of the GATT disciplines marks of origin laws, that is, laws setting requirements for the
labeling of certain products with their country or region of origin. Under Article IX:1, WTO
Members may not accord to the products of other Members “treatment with regard to marking
requirements” that is “less favorable than the treatment accorded to like products of any third
country.” Article IX thus requires most favored nation treatment in marks of origin laws just as
Article I requires most-favored nation treatment in the broader context of tariffs, other charges,
and all rules and formalities connected to importation and exportation. In addition, while Article
IX:2 recognizes that origin marking is important for protecting consumers against fraudulent or
misleading labels, it calls on WTO Members to reduce the trade barriers that may result from
domestic origin marking requirements.
Article IX is not so broad, however, as to govern measures requiring the labeling of process and
production methods, even when the measure requires this labeling based on the location where

50 Id. at ¶ 81.
51 Id. at ¶ 86.
52 Report of the Panel, Argentina—Measures Affecting Imports of Footwear, Textiles, Apparel, and Other Items,
WT/DS56/R, ¶ 2.6 (Nov. 25, 1997).
53 Id.
54 Id. at paras. 2.20, 6.75.
55 Report of the Panel, U.S.—Import Measures on Certain Products from the European Communities, WT/DS165/R,
pp. 3 – 5 (July 17, 2000).
56 Id. at ¶ 6.70.
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the good was produced or harvested.57 In US—Tuna/Dolphin I, an unadopted report, a GATT
panel rejected Mexico’s allegations that provisions of the U.S. Dolphin Protection Consumer
Information Act (DPCIA) were inconsistent with Article IX.58 The challenged provisions created
civil penalties for selling tuna products with labels or other indications that the tuna was
harvested in a manner not harmful to dolphins if the tuna was caught in particular locations by
certain methods.59 The GATT panel agreed with the United States that these labeling provisions
were subject to the nondiscrimination rules set by Article I and Article III:4, not the marks of
origin rules set by Article IX.60 The panel reasoned that because Article IX does not entail a
national treatment requirement, but only a most favored nation requirement, it was intended to
regulate the marking of origin of imported products, but not the marking of products or their
process and production methods generally.61
Article XI: General Elimination of Quantitative Restrictions
Quantitative prohibitions and restrictions on imports include non-tariff trade barriers such as
import and export licenses, quotas, bans, and embargoes. In essence, quantitative restrictions are
absolute restrictions on imports because they impose fixed rules that cannot be overcome by the
importer. Unlike internal regulations enforced at the border, quantitative restrictions hinder the
opportunity for a product to enter into, rather than simply compete in, the enforcing country’s
market.62
Article XI:1 bars WTO Members from placing quantitative prohibitions or restrictions on the
importation of any other Member’s products or the exportation of any domestic product to
another Member’s territory. In doing so, Article XI illustrates the strong preference of GATT and
Uruguay Round negotiators for tariffs as opposed to non-tariff border restrictions.63 These
negotiators intentionally made tariffs the border protection of choice because they are more
transparent and easily satisfied without bringing trade to a halt unlike quantitative restrictions,
and, perhaps most importantly, they are capable of definitive reduction over time.64
Although Article XI:1 is a cornerstone GATT obligation, import and export restrictions are the
frequent subject of WTO dispute settlement proceedings. In U.S.—Shrimp, for example, several
WTO Members requested that a panel examine a U.S. ban on shrimp imports from nations whose
trawling procedures the United States had not certified as sufficiently protecting sea turtles.65 The

57 See, e.g., Report of the Panel, U.S.—Restrictions on Imports of Tuna, (Sept. 3, 1991) GATT B.I.S.D. (39th Supp.) 155
(unadopted).
58 Id. at ¶ 2.12.
59 Id.
60 Id. at ¶ 5.41
61 US—Tuna/Dolphin I, supra note 57, at ¶ 5.41.
62 Report of the Panel, India—Measures Affecting the Automotive Sector, ¶ 7.224, WT/DS146/R, WT/DS175/R
(December 21, 2001).
63 GATT, Art. XI:1. See Report of the Panel, Turkey—Restrictions on Imports of Textile and Clothing Products,
WT/DS34/R ¶ 9.63 (May 31, 1999).
64 See Turkey—Textiles, supra note 63, at ¶ 9.63.
65 Report of the Panel, U.S.—Shrimp, supra note 33, at ¶ 7.11; Report of the Appellate Body, U.S.—Import Prohibition
of Certain Shrimp and Shrimp Products, WT/DS58/AB/R, paras. 2-6 (Oct. 12, 1998). Similarly, in U.S.—Tuna, a
GATT panel found that a U.S. embargo on tuna imports from countries that did not implement a regulatory regime that
prevented certain tuna harvesting practices was inconsistent with Article XI:1. Report of the Panel, U.S.—Tuna, supra
note 57, at ¶ 7.1.
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panel wrote that the express prohibition on imported shrimp from non-certified countries was
inconsistent with Article XI:1,66 raising doubts about the WTO consistency of similar measures
that ban imports or exports that do not meet certain criteria. More recently, the United States filed
a WTO case against China’s export restraints on certain raw materials.67
Despite the strong policy choice behind it, Article XI does provide exceptions to its rule,
including (1) export prohibitions or restrictions temporarily applied to prevent or relieve critical
shortages facing the exporting Party; (2) quantitative restrictions that are “necessary” for the
application of standards or regulations for the classification, grading, or marketing of
commodities in international trade; and (3) import restrictions designed to remove a temporary
surplus of the like domestic product.68
Other GATT articles may be implicated by the imposition of quantitative restrictions.69 Under
Article XIII, for example, quantitative restrictions must be applied in accordance with most
favored nation treatment.
Article XX: General Exceptions to the GATT and “the Chapeau”
Article XX identifies 10 policy-related exceptions to the provisions of the GATT that may justify
a GATT-inconsistent measure. To qualify for an exception, the violative measure must: (1) fall
within the scope of one of the 10 exceptions; and (2) be applied in a manner that does not
constitute arbitrary or unjustifiable discrimination between countries where the same conditions
prevail or a disguised restriction on international trade. This second condition is referred to as
“the chapeau” of Article XX because it is contained in the introductory clause, or the “hat,” of
Article XX.
The Article XX Exceptions
Among the 10 measures excepted from the GATT’s provisions are those measures (1) necessary
to protect public morals; (2) necessary to protect human, animal, or plant life and health; (3)
relating to products of prison labor; (4) imposed for the protection of national treasures of artistic,
historic, or archaeological value; or (5) relating to the conservation of exhaustible natural
resources which operate in conjunction with restrictions on domestic production or consumption.
Article XX operates as an affirmative defense in a WTO dispute settlement proceeding.
Consequently, Article XX is raised after a Member’s measures are deemed inconsistent with the

66 Report of the Panel, U.S.—Shrimp, supra note 33, at ¶ 7.16. As discussed below, the United States sought,
unsuccessfully, to justify the measure under Article XX(b). See infra notes 75-78 and accompanying text. Ultimately,
the Department of State revised its guidelines for the implementation of the country certification program. Notice of
Proposed Revisions to Guidelines for the Implementation of Section 609 of Public Law 101-162, 64 Fed. Reg. 14481
(Mar. 25, 1994); Revised Guidelines for the Implementation of Section 609 of Public Law 101-162, 64 Fed. Reg.
36946 (July 8, 1999).
67 Request for the Establishment of a Panel by the United States, China—Measures Related to the Exportation of
Various Raw Materials, WT/DS394/7 (Nov. 9, 2009).
68 GATT, Art. XI:2. See also Report of the Panel, Canada—Measures Affecting Exports of Unprocessed Herring and
Salmon (Mar. 22, 1988), GATT B.I.S.D. (35th Supp.) 98, at paras. 4.2-4.3 (assessing whether Canada’s export
restrictions on frozen fish that were not of “No. 1” quality were “necessary” for the purposes of Article XI:2(b)).
69 E.g., GATT, Art. XIII (requiring quantitative restrictions to be applied on an MFN basis); GATT, Art. XII
(permitting the imposition of quantitative restrictions to safeguard a Member’s balance of payments).
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GATT and is invoked by the defending Member who bears the burden of proving that Article XX
exempts the measures concerned from the provisions of the GATT. The defending Member must
first show that the measure fits within one of the exceptions covered by Article XX. For Article
XX exceptions that require the defending Member to prove that the measure is “necessary” to
achieve an identified goal (e.g., to protect human, animal, or plant health), this means that the
defending Member must make a prima facie case that (1) the common interests or values
protected by the measure are important, (2) the measure materially contributes to the realization
of the ends it pursues, and (3) the restrictive impact of the measure on international commerce is
outweighed by its contribution to the stated values or interests.70 The complaining Member may
then rebut the defending Member’s arguments by showing that there are less restrictive
alternatives available. Then the defending Member must show that these alternatives would not
be effective or feasible.71
The Article XX Chapeau
If the defending Member is successful in showing that the measure fits into one of the stated
Article XX exceptions, it must next show that the measure satisfies the “chapeau.” Specifically,
the defending Member must establish that, as applied, the measure neither (1) creates arbitrary or
unjustifiable discrimination between countries where the same conditions prevail nor (2)
constitutes a disguised restriction on international trade.72 The chapeau is intended to strictly
discipline the use of the Article XX exceptions so as to distinguish measures intended to protect
legitimate interests from measures intended to circumvent a Member’s WTO obligations.73
Accordingly, the chapeau imposes requirements that are more difficult to satisfy than the
requirements of any one of the 10 policy exceptions.74
The United States failed to satisfy these difficult requirements in U.S.—Shrimp. In that case, the
United States banned all shrimp harvested under the laws of nations that were not certified by the
United States as having sufficient laws to protect the sea turtles within their waters.75 In effect,
certification was granted only to those nations that, inter alia, required their shrimp trawlers to
use “Turtle Excluder Devices” that were comparable in effectiveness to those used in the United
States.76 The Appellate Body found that the U.S. measure was, essentially, the imposition of the
U.S. regulatory scheme on all other WTO Members, regardless of the different conditions
occurring within their countries.77 Accordingly, the Appellate Body wrote that discrimination
results “not only when countries in which the same conditions prevail are differently treated, but
also when the application of the measure at issue does not allow for any inquiry into the

70 Report of the Appellate Body, Korea—Various Measures on Beef, WT/DS161/AB/R ¶ 157 (July 31, 2000).
71 Report of the Appellate Body, Brazil—Measures Affecting Imports of Retreaded Tyres, WT/DS332/AB/R ¶ 156
(Dec. 3, 2007).
72 Id. at ¶ 215.
73 See id.
74 See Report of the Appellate Body, U.S.—Standards for Reformulated and Conventional Gasoline, WT/DS2/AB/R, p.
23 (Apr. 29, 1996) (describing the burden of demonstrating that a measure satisfies the Article XX chapeau as “of
necessity, a heavier task than that involved in showing that an exception, such as Article XX(g), encompasses the
measure at issue.”).
75 Report of the Appellate Body, U.S.—Shrimp, supra note 65, at paras. 3, 4.
76 Id. at ¶ 4.
77 Id. at paras. 164-65.
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appropriateness of the regulatory program for the conditions prevailing in those exporting
countries.”78
The Appellate Body clarified the Article XX chapeau analysis in Brazil—Tyres, which held that
an assessment of arbitrary or unjustifiable discrimination hinges on the relationship between the
discrimination and the legitimate objectives pursued by the measure.79 Brazil—Tyres addressed
the GATT consistency of a ban Brazil imposed on retreaded tire imports from countries that were
not part of the MERCOSUR80 customs union. Brazil sought to justify the ban as necessary to
protect public health and the environment within the meaning of Article XX(b).81 The Appellate
Body accepted Brazil’s Article XX(b) argument,82 but ruled that the import ban did not satisfy the
Article XX chapeau because, inter alia, the application of the measure discriminated against non-
MERCOUSR countries. Brazil defended the measure’s chapeau consistency on the grounds that
the MERCOSUR exemption was necessary to comply with a ruling by a MERCOSUR arbitral
tribunal.83 However, the Appellate Body stated that whether discrimination is arbitrary or
unjustifiable must be determined by comparing the rationale for—rather than the effects of—the
discrimination with the legitimate objective of the measure.84 The effect of the discrimination
may be relevant, the Appellate Body wrote, but it is not the controlling factor.85 Accordingly,
Brazil’s discrimination against non-MERCOSUR countries was deemed arbitrary or unjustifiable
because the reason for it—compliance with the arbitral tribunal’s ruling—was wholly unrelated to
Brazil’s goal of protecting public and environmental health.86
Article XXI: National Security Exceptions to the GATT
Article XXI lists three very specific occasions when international or domestic security interests
trump a Member’s obligations under the GATT. In any one of these three situations, a Member’s
noncompliance with the GATT will not be considered a violation of its provisions. These
occasions occur when:
(1) the Member’s noncompliance is the refusal to disclose information and the Member considers
the disclosure contrary to its essential security interests;

78 Id. at ¶ 165. As discussed in an earlier footnote, the Department of State ultimately changed its guidelines for
implementing the country certification program to bring the United States into compliance with the WTO decisions.
See supra note 66.
79 See Report of the Appellate Body, Brazil—Tyres, supra note 71, at ¶ 228.
80 MERCOSUR refers to a customs union between Argentina, Brazil, Paraguay, and Uruguay.
81 Report of the Panel, Brazil—Measures Affecting Imports of Retreaded Tyres, WT/DS332/R, ¶ 7.39 (June 12, 2007).
Brazil contended that because retreated tires have a shorter lifespan than new tires, they more quickly become—and
accumulate as—“waste tires,” which cause negative health and environmental consequences regardless of how they are
disposed. Id. at ¶ 7.175. Specifically, Brazil argued that the accumulation of waste tires increases the risk of toxic tire
fires and enlarges the breeding grounds for mosquito-borne diseases such as yellow fever and malaria. Id. at ¶ 7. 53. By
prohibiting retreated tire imports, Brazil sought to encourage the local producers to retread used tires that were already
in the country, and thereby avoid the unnecessary generation of additional waste. Id. at ¶ 7.123.
82 Report of the Appellate Body, Brazil—Tyres, supra note 71, at ¶ 212.
83 Report of the Panel, Brazil—Tyres, supra note 81, at ¶ 7.270.
84 Report of the Appellate Body, Brazil—Tyres, supra note 71, at paras. 228, 229.
85 Id. at ¶ 230.
86 Id. at paras. 228, 232-33.
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(2) the Member considers noncompliance necessary to protect its essential security interests
relating to fissionable materials, the traffic in arms or other materials for the purpose of supplying
a military establishment, or a time of a war or emergency in international relations, or
(3) the Member’s noncompliance occurs in its pursuit of its obligations under the UN Charter for
the maintenance of international peace and security.
In general, Article XXI is understood as intending to remove legitimate national security matters
from the scope of GATT obligations and to discourage use of the exception for measures with
commercially inspired goals.87 Moreover, some countries, including the United States, have taken
the position that the Article is “self-judging,” that is, that each WTO Member may determine
whether a particular matter is contrary to or necessary for the protection of its essential security
interests and that determination cannot be reviewed by WTO panels or the Appellate Body.88
While this position raises questions about the proper role of dispute settlement proceedings in this
area, to date there is no WTO case law on the application of Article XXI.
Despite the absence of case law, Article XXI has played a role in the diplomatic discourse that
precedes, and in some cases eliminates the need for, a request for consultations. For example,
when WTO Members have threatened to request consultations over the Cuban Liberty and
Democratic Solidarity (LIBERTAD) Act of 1996 (“Helms-Burton Act,” P.L. 104-114, 22 U.S.C.
6021 et seq.), the United States responded with claims that the measure was justified under
Article XXI. The goal behind the LIBERTAD Act was to dissuade other countries from investing
in Cuba and to generally undercut the Fidel Castro regime. To achieve this goal, the law codified
and strengthened the long-standing embargo against Cuba, making parties liable under U.S. law
for trafficking in property expropriated by Cuba from U.S. citizens without compensation and
requiring the U.S. State Department to deny visas to officials of companies that had trafficked in
such property.89 The European Union asked for WTO consultations, stating that the LIBERTAD
Act would violate both the GATT and the GATS by, inter alia, restraining E.U. companies who
export goods to Cuba or trade in goods from Cuba and excluding E.U. citizens from entering the
United States.90 During the ensuing meetings and negotiations between the United States and the
European Union, the United States contended that, if the LIBERTAD Act was indeed inconsistent
with the WTO agreements, it was justified under Article XXI. Moreover, because, in its view, it is
up to the country invoking Article XXI to determine when a particular trade measure is justified
by national security concerns, the United States argued that any WTO panel would lack
competence to assess the use of Article XXI and, consequently, there could be no WTO
proceedings on any dispute resulting out of the consultations on this issue.91 This dispute never
actually came before a panel because the two governments reached a diplomatic solution in the

87 Decision Concerning Article XXI of the General Agreement, Decision of November 30, 1982, GATT B.I.S.D. (29th
Supp.) 23 (1983).
88 Dapo Akande and Sope Williams, International Adjudication on National Security Issues: What Role for the WTO?,
43 VA. J. INT’L L. 365, 373-74 n.24 and accompanying text (2003).
89 P.L. 104-114, §§ 102, 401.
90 Request for Consultations by the European Communities, United States—The Cuban Liberty and Democratic
Solidarity Act, WT/DS38/1 (May 13, 1996).
91 C. O’Neal Taylor, Impossible Cases: Lessons from the First Decade of WTO Dispute Settlement, 28 U. PA. J. INT’L
ECON. L. 309, 378 (2007).
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form of a Memorandum of Understanding, and the European Union requested that the panel
suspend its work.92
Article XXIII: The Basis for WTO Dispute Settlement
Article XXIII provides the basis for dispute settlement under both the GATT and under the other
WTO agreements. Article XXIII entitles any WTO Member who considers that a benefit granted
by the GATT is being “nullified or impaired or that the attainment of any objective of the
Agreement is being impeded” to have recourse to WTO dispute settlement procedures.93 Most
often, the nullification or impairment of a benefit (or the impeding of the realization of an
objective) results from a violation of an obligation prescribed by a WTO agreement, but Article
XXIII states that it could also result from a Member’s application of a measure that does not
conflict with the provisions of a WTO agreement or from “any other situation.”94 However,
disputes alleging nullification and impairment of trade benefits from non-violative actions occur
much less frequently than disputes alleging violations of WTO agreements.
In general, proving nullification or impairment requires showing that the affected imports are
subject to and benefiting from a WTO agreement market access concession (e.g., a tariff) and
their competitive position is being upset by the challenged measure.95 However, when the
complaining Member demonstrates that the challenged measure violates an obligation prescribed
by a WTO agreement, the measure is considered prima facie to constitute a case of nullification
or impairment.96 In other words, there is a presumption that a breach of the rules adversely affects
other Members, and, consequently, it shifts the burden to the defending Member to disprove the
presumed nullification or impairment.97 To date, very few Members have tried to rebut this
presumption, and it appears that none have succeeded, which has led some to suggest that the
presumption may be rebuttable only in theory.98
Article XXIV: Customs Unions and Free Trade Areas
WTO Members’ participation in free trade agreements and customs unions99 is facially
inconsistent with the MFN obligation because parties to these arrangements may grant lower

92 European Union—United States: Memorandum of Understanding Concerning the U.S. Helms-Burton Act and the
U.S. Iran and Libya Sanctions Act, Apr. 11, 1977, 36 I.L.M 429 (1997).
93 GATT, Art. XXIII. See Report of the Appellate Body, India—Quantitative Restrictions on Imports of Agricultural,
Textile, and Industrial Products, ¶ 84 WT/DS90/AB/R (Aug. 23, 1999).
94 GATT, Art. XXIII:1.
95 Report of the Panel, Japan—Measures Affecting Consumer Photographic Film and Paper, ¶ 10.82, WT/DS44/AB/R
(Mar. 31, 1998).
96 Dispute Settlement Understanding, Art. 3.8.
97 Id.
98 E.g., PETER VAN DEN BOSSCHE, THE LAW AND POLICY OF THE WORLD TRADE ORGANIZATION: TEXTS, CASES AND
MATERIALS 185 (Cambridge University Press 2008) (2008).
99 The distinction, under Article XXIV:8, between customs unions and free trade area lies in the different GATT
requirements placed on how these two groups treat trade with third countries (i.e., non-members of the customs union
or free trade area). Compare GATT, Art. XXIV:8(a) (defining customs union) with id. at Art. XXIV:8(b) and Art.
XXIV:5(b) (defining free trade area). Broadly speaking, a member of a free trade area can restrain trade with a non-
member country more than it restrains trade with the other members of the free trade area so long as, in doing so, the
member country does not constrain trade with the non-member more than it had prior to the formation of the free trade
area. A member of a customs union, on the other hand, can never restrain trade with non-member countries even if, in
(continued...)
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tariff rates and more favorable treatment to each other’s goods without granting those benefits to
the goods of other WTO Members. However, these arrangements are permitted under Article
XXIV as vehicles of trade liberalization.100
Like Articles XX and XXI, Article XXIV operates as a defense to justify an otherwise GATT-
inconsistent measure, namely a measure related to the formation of customs unions or free trade
areas. Article XXIV justifies these measures only if the formation of the customs union or free
trade area in question would be made impossible if the measure concerned was not allowed.101 It
is unclear at this time, however, how a WTO panel or the Appellate Body would determine
whether a measure satisfies this standard.
Under Article XXIV:8(a), the members of both customs unions and free trade areas are required
to eliminate “duties and other restrictive regulations of commerce” with respect to “substantially
all” trade between them. The “substantially all” standard offers customs unions and free trade
areas some flexibility in the degree to which they liberalize the trade between them.102
Furthermore, in Argentina—Footwear, the Appellate Body found that Article XXIV:8(a)’s
requirement to eliminate all tariffs and commerce-restricting regulations on trade among customs
union members did not prohibit Argentina’s imposition of safeguard measures on countries who
were part of a customs union (MERCOSUR) with Argentina.103
Other WTO Agreements Reached During the Uruguay Round
All multilateral trade agreements negotiated during the Uruguay Round are binding on WTO
Members.104 These are agreements that a country must accept in order to become a WTO
Member. As mentioned, these agreements were implemented in U.S. law through the Uruguay
Round Agreements Act (“URAA,” P.L. 103-465, 19 U.S.C. § 3501), which then-President Bill
Clinton signed into law on December 8, 1994.
The WTO agreements selected for discussion below are those that are still in effect, impose
substantive, rather than purely procedural, requirements on WTO Members, and have been
commonly cited in WTO consultations and disputes. As with the overview of the selected
provisions of the GATT above, the following section is not a comprehensive list or discussion of
all of the agreements that are annexed to the Marrakesh Agreement. Instead, it is intended only as

(...continued)
doing so, it does not constrain trade with the non-member more than it had prior to the formation of the customs union.
100 GATT, XXIV:5(b)-(c), XXIV:8(b).
101 Report of the Appellate Body, Turkey—Restrictions on Imports of Textile and Clothing Products, ¶ 46,
WT/DS34/AB/R (Oct. 22, 1999). (“Article XXIV can justify the adoption of a measure which is inconsistent with
certain other GATT provisions only if the measure is introduced upon the formation of a customs union, and only to the
extent that the formation of the customs union would be prevented if the introduction of the measure were not
allowed.”)
102 Id. at ¶ 48. Other than noting this flexibility, the Appellate Body has offered little guidance on the meaning of
“substantially all.” Instead, in Turkey—Textiles, it simply noted that the term “substantially all the trade” is “not the
same as all the trade, and also that [it] is something considerably more than merely some of the trade.” Id. at ¶ 48.
103 Report of the Appellate Body, Argentina—Safeguard Measures on Imports of Footwear, WT/DS121/AB/R (Dec.
14, 1999).
104 However, under the Uruguay Round Agreements Act (URAA, P.L. 103-465, 19 U.S.C. § 3501 et seq.), U.S. law
prevails over conflicting provisions of WTO agreements until Congress or the executive branch acts to harmonize U.S.
law with WTO agreements and rulings. See 19 U.S.C. § 3512(a).
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an introduction to the WTO agreements that are frequently mentioned as governing common
types of trade measures.
Antidumping Agreement
Article VI of the GATT condemns dumping, the practice of exporting a product at a price lower
than the price charged for that product in the exporter’s home market, when it causes or threatens
material injury to an established industry in the territory of another Member or materially retards
the establishment of a domestic industry.105 The Agreement on Implementation of Article VI of
the GATT 1994 (the “Antidumping Agreement”) provides substantive and procedural
requirements for WTO Members to follow in conducting antidumping investigations and
imposing antidumping duties. All WTO Members must inform the Committee on Antidumping
Practices when they initiate anti-dumping actions and provide reports on all ongoing
investigations. If a Member fails to comply with either the substantive or procedural components
of the Antidumping Agreement, it can be taken to WTO dispute settlement. No action against the
dumping of exports from another Member can be taken except in accordance with the provisions
of the GATT, as interpreted by the Antidumping Agreement.106
Antidumping duties may only be imposed by a WTO Member if, following an investigation, that
Member determines that a product is being dumped and the dumped imports are causing injury to
a domestic industry. Consequently, many WTO disputes center around the validity of how a WTO
Member has reached its conclusion about the occurrence of dumping and the size of the duties
necessary to remedy it. In particular, the practice of using “zeroing”107 to assess a country’s
dumping margin has been a frequent subject of WTO dispute settlement proceedings108 and is
discussed later in this report.
Under the Antidumping Agreement, the first step in assessing a dumping margin is calculating the
normal value and the export price of the product. The normal value is ordinarily the market price
in the country of export.109 However, there may be circumstances when investigating authorities
have authority to use a different method of determining the normal value.110 The second step in
determining the dumping margin is comparing the export price and the normal value. Article 2.4
of the Antidumping Agreement requires this comparison be fair, made at the same level of trade

105 GATT, Art. VI:1.
106 AD Agreement, Art. 18.
107 Zeroing, which is discussed in greater detail later in this report, involves aggregating the dumping margins for all of
the different versions of a single product but assigning the value of zero to each sub-product’s dumping margin when
that sub-product’s export price exceeds its normal (home market) value. See infra “Antidumping Duties and “Zeroing”:
Remedies for Imports Sold at Less Than Fair Value.” In effect, zeroing means that the margins for sub-products sold at
less than their normal value are not offset in a dumping investigation by the margins for sub-products that are sold at
more than their normal value. Id. Consequently, a dumping margin determined under zeroing is likely to be higher than
a dumping margin determined without zeroing. See id.
108 E.g., Report of the Panel, U.S.—Antidumping Measures on Polyethylene Retail Carrier Bags from Thailand,
WT/DS383/R (Feb. 18, 2010); Report of the Panel, U.S.—Continued Existence and Application of Zeroing
Methodology, WT/DS350/R (Feb. 19, 2009). See also CRS Report RL32014, WTO Dispute Settlement: Status of U.S.
Compliance in Pending Cases, by Jeanne J. Grimmett (identifying, inter alia, cases that involve zeroing).
109 AD Agreement, Art. 2.1.
110 E.g., id. at Art. 2.2. (permitting a different method to be used when either there are no sales of like product in the
exporting country or the particular market situation does not permit a proper comparison).
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(i.e., ex-factory, wholesale, or retail), and made with sales that occurred, as nearly as possible, at
the same time.111
Once dumping is established, the Member must determine the presence, or absence, of injury. The
Antidumping Agreement only condemns dumping that causes or threatens injury to the domestic
industry. Consequently, diagnosing the presence of an injury to a domestic industry resulting from
the dumping is critical. This process entails identifying (1) the scope of the domestic industry, (2)
whether there is an injury, or threat of injury, to that domestic industry, and (3) whether there is a
causal link between the dumping and the industry. In turn, injury can take three forms: a material
injury, a threat of material injury, or the material retardation of that domestic industry’s
establishment.112
Under Article 4.1, the scope of the domestic industry flows from the definition of “like product,”
but does not necessarily include every producer of a like product.113 Instead, for purposes of
analyzing the effects of dumping, the domestic industry is simply a group of domestic producers
whose combined output is sufficient to constitute a major proportion of domestic production.114
Article 3 of the Antidumping Agreement provides a framework under which Members are
obligated to conduct their dumping investigations.115 These obligations are considered substantive
in WTO law, not merely procedural.116 Under Article 3.5, the injury suffered by the domestic
industry must be shown to be caused by the dumping. Article 3.5 contains a non-attribution
requirement: investigating authorities must examine any known factors other than the dumped
imports that are injuring the domestic industry at the same time and not attribute the injury caused
by these other factors to the dumped imports. This does not necessarily mean that the dumping
needs to be the principal cause of the domestic industry’s injury, but it does ensure that the injury
ascribed to the dumped imports is caused wholly by those dumped imports and not by other
factors.117
Agreement on Subsidies and Countervailing Measures
Like the Antidumping Agreement, the Agreement on Subsidies and Countervailing Measures
(SCM Agreement) is an agreement meant to expand, clarify, and implement some of the original

111 Allowances shall be made on a case-by-case basis for certain differences that affect price comparability and, in
some circumstances, for costs incurred between transportation and resale and/or profits accruing. AD Agreement, Art.
2.4,
112 AD Agreement, Art. 3 n. 9.
113 Id. at Art. 4.1 (“... the term ‘domestic industry’ shall be interpreted as referring to the domestic producers as a whole
of the like products or to those of them whose collective output of the products constitutes a major proportion of the
total domestic production of those products ...”).
114 Id.; Report of the Panel, Mexico—Antidumping Duties on Steel Pipes and Tubes from Guatemala, ¶ 7.322,
WT/DS331/R (June 8, 2007).
115 E.g., AD Agreement, Art. 3.1 (“A determination of injury ... shall be based on positive evidence and involve an
objective examination of both (a) the volume of the imported imports and the effect of the dumped imports ...”); Art.
3.2 (“[T]he investigating authorities shall consider whether there has been a significant increase in dumped imports
...”); Art. 3.4 (“The examination of the impact of the dumped imports on the domestic industry concerned shall include
an evaluation of all relevant economic factors and indices having a bearing ...”).
116 Report of the Appellate Body, Thailand—Anti-dumping Duties on Angles, Shapes, and Sections of Iron or Non-
Alloy Steel and H-Beams from Poland, ¶ 106, WT/DS122/AB/R (Mar. 12, 2001).
117 Van Den Bossche, supra note 98, at 536.
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provisions of the GATT. One of these provisions, Article VI addresses measures taken to offset
any subsidy granted to an imported product. The second, Article XVI, requires Members to notify
subsidies and be prepared to discuss limiting those subsidies if they cause serious damage to other
Members. However, neither Article VI nor Article XVI defines the term “subsidy” or provides
clear and comprehensive rules for governments who are either offering, or responding to,
subsidies. Consequently, these provisions were deemed vague and inconsistently applied, and
support developed for a new, clearer, and more comprehensive agreement on subsidies.
Accordingly, the SCM Agreement was developed to discipline Members’ use of subsidies and
their responses to countering the effects of certain subsidies.
Among the advantages that the SCM Agreement provides over the subsidy provisions of Articles
VI and XVI of the GATT is a more precise definition of subsidy. The SCM Agreement defines
“subsidy” as a financial contribution by a government or public body within a WTO Member’s
territory that confers a benefit.118 A financial contribution may take the form of (1) a direct
transfer of funds, such as a grant, loan, or loan guarantee; (2) government revenue (i.e., a tax)
“otherwise due” but foregone or not collected; (3) governmental provision of goods or services
other than general infrastructure; (4) governmental payments to a funding mechanism or the
government’s entrusting a private body to carry out at least one of the functions described
above.119 In addition, WTO panels and the Appellate Body have interpreted the word “benefit”
broadly to include receipt of a financial contribution on terms that are more favorable than those
available to the recipient in the marketplace.120
The SCM Agreement entitles a WTO Member to respond to subsidized imports in two ways. One
authorized response is to use the WTO dispute settlement process to seek withdrawal of the
subsidy or the removal of its adverse effects. The second authorized response is to launch a
domestic investigation and ultimately charge an extra duty, known as a countervailing duty, on
subsidized imports that are injuring domestic producers. For a subsidy to be remedied under
either procedure, it must be specific in law or fact to an enterprise, industry, or group thereof.121
Prohibited subsidies, as described below, are considered specific per se.
The SCM Agreement divides subsidies into two categories: prohibited and actionable. Prohibited
subsidies are contingent upon either export performance or the use of domestic over imported
products.122 If a subsidy is deemed prohibited, the WTO dispute settlement body will recommend

118 SCM Agreement, Art. 1.1.
119 Id.
120 Report of the Appellate Body, Canada—Measures Affecting the Export of Civilian Aircraft, WT/DS70/AB/R ¶ 149
(Aug. 2, 1999) (approving of the WTO panel’s finding that a financial contribution only confers a benefit if it is
provided on terms that are more advantageous than market terms).
121 SCM Agreement, Arts. 1.2, 2. In general, under Article 2, a subsidy is specific if it distorts the flow of resources.
See MARC BENITAH, THE LAW OF SUBSIDIES UNDER THE GATT/WTO SYSTEM, 259 (2001). For example, if the U.S.
gives a subsidy to all U.S. industries, that subsidy is not specific because it does not direct more resources to a
particular part of U.S. territory. However, that subsidy would be specific if the U.S. gave it to only those industries that
are in Alabama. See SCM Agreement, Art. 2.2. In that case, the flow of resources would be distorted within the United
States since more resources would be directed to one particular state, Alabama. In addition to geographic distortion, the
SCM Agreement is also concerned with distortion among industries, enterprises, and groups of industries or
enterprises. However, it can be difficult to define an “industry” or “group of industries.” Accordingly, a WTO Panel
has suggested that a subsidy to any industry or group of industries is specific unless it is “sufficiently broadly available
through an economy as not to benefit a particular limited group of producers of certain products.” Report of the Panel,
U.S.—Subsidies on Upland Cotton, WT/DS267/R, ¶ 7.1142 (Sept. 8, 2004).
122 SCM Agreement, Art. 3.1.
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that the subsidizing Member withdraw the subsidy without delay and specify a time-period in
which the measure should be withdrawn.123
All other subsidies are actionable, meaning they may be subject to dispute settlement or domestic
remedies if they are used in a way that causes adverse effects to the interests of the complaining
Member.124 There are three types of adverse effects: (1) material injury to the domestic industry
of the complaining member; (2) nullification or impairment of the Member’s WTO benefits (such
as tariff concessions on a particular product); and, (3) serious prejudice to the Member’s
interests.125
Regardless of whether the subsidies are prohibited or actionable, if the defending Member does
not remove a subsidy or its adverse effects within a set compliance period, the WTO dispute
settlement body may, upon request, authorize the complaining Member to impose new or
additional tariffs, known as countervailing duties, against the subsidizing Member’s exports.126
The goal of these countervailing duties is to effectively restore the benefits that are supposed to
accrue to the complaining Member under the WTO agreements. As discussed in the later section
on domestic investigations of foreign subsidies,127 Members may also impose countervailing
duties against subsidized imports without first requesting consultations and bringing the dispute
before a WTO panel. However, when a Member imposes countervailing duties without first
litigating the dispute, it may do so only if it initiates and conducts its investigation of the foreign
subsidies in accordance with the provisions of the SCM Agreement.128
The interpretation of the SCM Agreement is at issue in the “Boeing-Airbus cases”129 between the
United States and the European Union. The United States first requested dispute settlement
proceedings in 2004, alleging that the European Union provided a prohibited subsidy in the form
of “launch aid” from the governments of Germany, the United Kingdom, France, and Spain to aid
the development, production, and marketing of Airbus planes.130 Specifically, the United States
argued that these member states of the European Union provided launch aid loans at less than
commercial rates with repayment. Moreover, if Airbus fails to sell enough aircraft to repay the
loans, the member states indefinitely extended or forgave the outstanding balances on the
loans.131 The European Union counterclaimed, alleging that the U.S. also provided illegal
subsidies to its aerospace companies via sham contracts with the Department of Defense and
NASA, tax breaks from Illinois and Washington states, and bonds from Kansas.132 In the case
brought by the United States, the panel agreed with many of the claims made by the United

123 Id. at Art. 4.7.
124 Id. at Art. 5.
125 Id.
126 These countervailing measures can be imposed on any of the defending Member’s exports, but the amount of the
countervailing duty must not exceed the full amount of the subsidy. See SCM Agreement, Art. 19.2.
127 Infra notes 390-405.
128 SCM Agreement, Art. 10.
129 U.S.—Large Civil Aircraft, DS317; EC and Certain Member States—Large Civil Aircraft, DS316.
130 Request for Consultations by the United States, EC—Measures Affecting Trade in Large Civil Aircraft,
WT/DS316/1 (Oct. 12, 2004).
131 Id.
132 Request for Consultations by the European Communities, U.S.—Measures Affecting Trade in Large Civil Aircraft,
WT/DS317/1 (Oct. 12, 2004).
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States, and the European Union appealed the decision to the WTO Appellate Body.133 In the case
brought by the European Union, the panel’s confidential interim report reportedly suggests that
the panel agrees with many of the European Union’s arguments, including its claims that the
research and defense contracts that NASA and the Department of Defense awarded to Boeing
constitute actionable subsidies.134
Agreement on Safeguards
A safeguard measure is a temporary restriction imposed on imports to allow a domestic industry
time to adjust to import surges. These measures can be applied even in the absence of the unfair
trade actions required for antidumping or countervailing duties. Possible safeguards include
quotas, tariffs, and tariff rate quotas. Under Article 2.2 of the Agreement on Safeguards, however,
a safeguard measure must be product, not country, specific.135 Because safeguard measures
disturb the balance of rights and obligations, the Members affected by a safeguard are entitled to
appropriate trade compensation.136
The foundation for both domestic and international safeguard law is Article XIX of the GATT,
which permits Members to apply safeguards where two conditions are met: (1) imports are
increasing as a result of both unforeseen developments and the effect of obligations incurred by
Members under GATT, and (2) imports are increasing in such quantities as to cause or threaten
serious injury to domestic producers of like or directly competitive products.137 Both the U.S. law
on safeguard measures, discussed later in this report, and the WTO Agreement on Safeguards are
based on Article XIX.
The Agreement on Safeguards lays out (1) substantive requirements that must be met in order to
apply a safeguard,138 (2) procedural requirements for the application of a safeguard measure,139
and (3) characteristics of, and conditions relating to, a safeguard measure.140 Today, all safeguard
measures must comply with both Article XIX of the GATT and the Agreement on Safeguards.141

133 Report of the Panel, EC—Large Civil Aircraft, WT/DS316/R (June 30, 2010). See also Notification of an Appeal by
the European Union, EC—Large Civil Aircraft, WTDS316/12 (July 23, 2010).
134 Daniel Pruzin, EU Scores Major Win at WTO In Challenge to Boeing Subsidies, INT’L TRADE DAILY (Sept. 16,
2010).
135 In other words, safeguard measures must be applied without discrimination between the Members supplying the
product. For example, if the steel industry of Member A suffers serious injury as a result of a sudden surge of imports
of steel from Members B and C, Member A, if it chooses to impose a safeguard measure, must impose the measure
against imports from both Members B and C. Member A cannot choose to overlook the damage caused by Member B’s
steel industry and impose the safeguard measure only against Member C.
136 Agreement on Safeguards, Art. 8.1. The amount and character of this compensation is determined by consultation
between the two Members. Id. at Art. 12.3. If the Members fail to reach an agreement on compensation, the affected
exporting Member may suspend the application of substantially equivalent concessions or other obligations to the trade
of the Member applying the safeguard. Id. at Art. 8.2.
137 GATT, Art. XIX:1(a).
138 See, e.g., Agreement on Safeguards, Art. 2.1.
139 See, e.g., id. at Art. 3 (requiring Members to apply a safeguard measure only after undertaking and publishing an
investigation made pursuant to procedures that were previously established and publicly available); Art. 12.1 (requiring
Members to immediately notify the WTO when they initiate a safeguard investigation).
140 See, e.g., Agreements on Safeguards, Art. 7 (limiting the duration of safeguard measures to four years with the
possibility of one four-year extension).
141 Van Den Bossche, supra note 98, at 673.
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Under the Agreement on Safeguards, a Member may apply a safeguard measure only when it
determines that the product is being imported in such increased quantities as to cause or threaten
serious injury to the domestic industry that produces like or directly competitive products.142 The
Appellate Body has clarified the “increased imports” requirement to mean an increase that is
“recent, sudden, sharp, and significant.”143 This means that the legality of a safeguard hinges in
part on the rate and amount of the increase in the recent past. Import trends that precede the
recent past (e.g., import trends over the previous five years rather than the previous two) are not
grounds for imposing a safeguard measure, and, if older data and more recent data show
conflicting trends, the most recent data on imports takes precedence in a determination of a
safeguard measure’s legality.144 Moreover, WTO panels have narrowly interpreted the causation
element: the domestic industry’s injury must be caused solely by the import surge and not by any
other factor.145
Agreement on Rules of Origin
Rules of origin are used by WTO Members for a variety of commercial reasons. For example,
goods from developing-country Members generally benefit from lower import duties in
developed country Members under tariff preference programs. Accordingly, developing countries
want to ensure that the importing developed country imposes a tariff on those goods that
recognizes that they originated in the country that benefits from the tariff preference. Rules of
origin are also used to implement other commercial policy measures, such as origin marking
requirements and the application of most favored nation treatment to imported goods. However,
in a globalized economy it can be difficult to determine which country is the country of origin of
a particular product. While the general standard is where the last “substantial transformation”146
occurred, countries employ three different standards for determining where that was (1) where a
certain percentage of value was added to the good, (2) where the activity occurred that resulted in
the product being classified under a different tariff heading, and (3) where a specified production
process occurred.147 Because the rules to determine the origin of imported goods differ among
WTO Members with some Members deciding which rule to apply based on the purpose for which
the product’s origin is being determined, a Member’s application of its rules of origin is common
fodder for disputes.148

142 Agreement on Safeguards, Art. 2.1.
143 Report of the Panel, U.S.—Definitive Safeguard Measures on Imports of Wheat Gluten from the European
Communities, WT/DS166/R, ¶ 8.31 (Jul. 31, 2000). See also Report of the Appellate Body, Argentina-Footwear, supra
note 103, at p. 47 (“... the increase in imports must have been recent enough, sudden enough, sharp enough, and
significant enough, both quantitatively and qualitatively, to cause or threaten to cause ‘serious injury.’”).
144 Van Den Bossche, supra note 98, at 677.
145 Report of the Panel, Korea—Safeguard Measure on Imports of Certain Diary Products, WT/DS98/R, paras. 7.89-
7.90 (June 21, 1999) (“[I]f the national authority has identified factors other than increased imports which have caused
injury to the domestic industry, it shall ensure that any injury caused by such factors is not considered to have been
caused by the increased imports ... the [national] authority has the obligation not to attribute to the increased imports
any injury caused by other factors.”). This interpretation of the causation element is often referred to as non-attribution.
146 “Substantial transformation” occurs if an imported article is subjected to a manufacturing process that results in the
article having a name, character, or use different from the one it had when it was imported. See 19 C.F.R. §§
134.1(d)(1), 134.35.
147 Rod Falvey and Geoff Reed, Rules of Origin as Commercial Policy Instruments, 43 INT’L ECON. REV. 393, 394
(2002).
148 E.g., Request for Consultations, U.S.—Certain Country of Origin Labeling Requirements, WT/DS384/1 (Dec. 4,
2008); Request for Consultations, U.S.—Rules of Origin for Textiles and Apparel, WT/DS243/1 (Jan. 22, 2002);
(continued...)
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Aware of the problems arising from the lack of harmonization from countries’ use of different
rules of origin, WTO Members agreed during the Uruguay Round to the Agreement on Rules of
Origin. The Agreement provides a work program by which Members’ negotiate a uniform set of
“rules of origin used in non-preferential commercial policy instruments.”149 In other words, it
calls on Members to harmonize all rules of origin except for those related to the granting of tariff
preferences (i.e., more favorable tariff treatment to like products from certain countries).150 The
phrase “non-preferential commercial policy instruments” includes, inter alia, most favored nation
treatment, antidumping and countervailing duties, and safeguard measures.151
Once the Harmonization Work Program is completed, all WTO Members will apply only one set
of non-preferential rules of origin for all purposes. However, this work program is currently
running more than 10 years behind schedule.152 Until WTO Members reach an agreement that
harmonizes their nonpreferential rules of origin, Article 2 of the Agreement, which governs the
application of rules of origin during the “transition period,” is the major source of guidance on
these rules. Among Article 2’s lengthy list of directives is both a national treatment and an MFN
requirement,153 a prohibition on the use of rules of origin as a primary means of protecting
domestic industries or favoring a particular Member’s imports,154 and a requirement that rules of
origin not themselves create restrictive, distorting, or disruptive effects on trade.155 In the name of
transparency, Members are also required to notify the WTO Committee on Rules of Origin of
their respective rules of origin.156
Agreement on Agriculture
Liberalizing agricultural trade is an important and contentious subject in trade negotiations.157
Consequently, although the GATT 1947 never excluded agriculture, in practice, countries found it
mutually convenient to treat agriculture as though it was. The Uruguay Round negotiations
changed that by subjecting agriculture to the general provisions of the GATT and to a separate
sector-specific agreement (the Agreement on Agriculture). In addition to disciplining trade in
agricultural goods, the Agreement on Agriculture calls for continuing negotiations to take place to

(...continued)
Request for Consultations, U.S.—Tariff Rate Quota for Imports of Groundnuts, WT/DS111/1 (Jan. 8, 1998).
149 Agreement on Rules of Origin, Arts. 1.1, 1.2.
150 This kind of preferential treatment is discussed in greater length in the section on the Generalized System of
Preferences. See infra notes 440-448.
151 Agreement on Rules of Origin, Art.t 1.2.
152 See Unfinished Rules of Origin Business, WASH. TRADE DAILY (May 5, 2010); WORLD TRADE ORGANIZATION, WTO
ANNUAL REPORT 2009, 41 (2009); Van Den Bossche, supra note 98, at 435.
153 Agreement on Rules of Origin, Art. 2(d).
154 Id. at Art. 2(b); Report of the Panel, US—Rules of Origin for Textiles and Apparel Products, WT/DS243/R, ¶ 6.36
(June 20, 2003).
155 Agreement on Rules of Origin, Art. 2(c).
156 Id. at Art. 2(a).
157 The contentiousness of agricultural support arises because policies in favor of farmers and agricultural producers are
often perceived as unfair trade practices that undermine the objectives of the GATT.
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further liberalize agricultural trade.158 Those negotiations are under way as part of the Doha
Round,159 which has yet to be concluded.
The Agreement on Agriculture governs measures affecting the agricultural goods listed in Annex
I of the Agreement. With the exception of fish and fish products, Annex I lists all of the products
covered by first 24 chapters of the Harmonized Tariff System as well as a few products from 10
additional chapters. The Agreement focuses on measures in three areas: market access,160 export
competition,161 and domestic support programs for agriculture.162
Market Access
In terms of market access, the Agreement requires Members to negotiate tariff schedules for
agricultural products and binds them to the market access commitments contained therein.163 In
addition, the Agreement provides Members with the option of using a Special Agricultural
Safeguard if either (1) the volume of imports of a product that is the subject of a concession
exceeds a set trigger level, or (2) the price of imports of a product that is the subject of a
concession falls below a set price.164 If a Member chooses to impose this safeguard, the additional
customs duty can only be maintained until the end of the year in which it was imposed.165
Export Competition
In the context of export competition, the Agreement imposes schedules of commitments for
export subsidies.166 These schedules require Members to quantify their agricultural subsidies in
terms of the money spent and the agricultural products subsidized, cap their subsidies at those
amounts, and then lower those caps over a six-year period beginning in 1995. The Agreement
also requires Members to “work towards the development” of internationally agreed upon
standards to discipline the provision of export credits and export credit guarantees, which,
generally involve a Member’s private financial institutions extending financing to other countries
that want to purchase the lending country’s agricultural exports.167 Finally, with respect to food
aid, Members agreed, inter alia, to ensure that the provision of international food aid is not tied to
the commercial export of agricultural products to the countries receiving aid.168

158 Agreement on Agriculture, Art. 20.
159 The Doha Development Round is discussed at infra notes 272-275 and accompanying text.
160 See Agreement on Agriculture, Arts. 4.2, 5.
161 See id. at Arts. 3.3, 9 , 10.2, 10.4.
162 See id. at Arts. 3.1, 3.2, 6.1, 6.4, 6.5.
163 Id. at Art. 4.1.
164 Id. at Art. 5.1. Both Article 5.1 and Article 5.2 govern the “trigger level” and the “trigger price” at which a Member
may impose a safeguard.
165 Agreement on Agriculture, Art. 5.4.
166 Id. at Art. 3.3. The Agreement’s definition of “export subsidies” (subsidies that are contingent on export
performance) tracks that of the SCM Agreement, but its prohibitions on export subsidies apply in a more limited set of
circumstances.
167 Id. at Art. 10.2.
168 Id. at Art. 10.4.
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In U.S.—FSC, a WTO panel considered whether a tax benefit, namely an exclusion from gross
income, was consistent with the Agreement on Agriculture.169 The tax benefit at issue excluded
from a taxpayer’s gross income all income that was earned with respect to goods in transactions
involving property that (1) was manufactured, grown, or extracted within the United States; (2)
was held primarily for sale, lease, or rental outside the United States; and (3) had a fair market
value, no more than 50% of which was attributable to articles manufactured or extracted outside
of the United States or direct costs of labor performed outside of the United States. The Appellate
Body found that this tax measure was inconsistent with the Agriculture Agreement.170 More
specifically, after finding that the tax benefit was an export subsidy governed by the Agreement
on Agriculture, the Appellate Body wrote that the FSC measure allowed for the provision of an
unlimited subsidy to scheduled agricultural products that already received subsidies at the
reduction commitment levels specified in the U.S. Schedule.171 Accordingly, the FSC measure
enabled the United States to engage in the type of transfer of economic resources that violated the
spirit, if not the express terms, of Articles 3.3 and 9.1, and, as a result, the Appellate Body ruled
that the application of the FSC measure threatened to circumvent U.S. export subsidy
commitments in violation of Article 10.1.172
Domestic Support Programs
Articles 6 and 7 of the Agreement govern domestic support, specifically a Member’s measures
that favor its agricultural producers.173 These domestic support measures include price supports,
input subsidies, and payments based on planting. Article 6 refers to the domestic support
commitment schedules, in which Members specified their agricultural support reduction
commitments.174 However, not all domestic support programs need to be included in a Member’s
calculation of its agricultural support, which permits Members to avoid reducing all of their
agricultural support programs.175
Under the Agreement on Agriculture, domestic support measures are frequently classified as
“green box,”176 “blue box,”177 or “amber box”178 programs. Measures in either of the first two

169 Report of the Panel, U.S.—Tax Treatment for “Foreign Sales Corporations,” WT/DS108/RW, ¶ 8.144 (Aug. 20,
2001). The panel also considered whether the measures were consistent with the SCM Agreement and with Article III
of the GATT. Id. For a more thorough explanation of the FSC law, see Asif H. Qureshi and Roman Grynberg, United
States Tax Subsidies under Domestic International Sales corporation, Foreign Sales Corporation and Extraterritorial
Income Exclusion Act Legislation within the Framework of the World Trade Organization, 36 J. WORLD TRADE 979
(2002).
170 Id. at ¶ 153.
171 Id. at ¶ 152.
172 Id. at paras. 150, 152.
173 Agreement on Agriculture, Arts. 6.1, 7.
174 In these commitments, the “Total Aggregate Measurement of Support” (or “Total AMS”) refers to the sum of all
domestic support provided in favor of agricultural producers. Agreement on Agriculture, Art. 1(h).
175 See id. at Arts. 6.2, 6.4, Annex 2. Article 6.4 states that Members are not required to include in their calculation of
Total AMS: “(i) product-specific domestic support which would otherwise be required to be included in a Member’s
calculation of its Current AMS where such support does not exceed 5 per cent of that Member’s total value of
production of a basic agricultural product during the relevant year; and (ii) non-product-specific domestic support
which would otherwise be required to be included in a Member’s calculation of its Current AMS where such support
does not exceed 5 per cent of the value of that Member’s total agricultural production.” For developed countries, these
5% levels are the de minimis percentage that does not need to be included in their AMS. See id. at Art. 7.2(b).
176 “Green box” programs are programs that are presumed to have no—or only minimal—trade distorting effects and
abide by the terms of Annex 2. These measures include, inter alia: domestic food assistance programs (e.g., food
(continued...)
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“boxes” are exempt from inclusion in a Member’s calculation of its annual (or “Current Total”)
Aggregate Measurement of Support (AMS), while measures in the “amber box” are only exempt
from inclusion in a Member’s calculation of its Current Total AMS if they are de minimis. This
framework is derived from Article 7, which provides that measures exempted from a Member’s
calculation of its Current Total AMS will be deemed consistent with the AA if they are either:
• maintained in conformity with the terms of Annex 2; or
• provided at levels that do not exceed the relevant de minimis level.179
If, on the other hand, a measure is not exempted from the Member’s commitments, Article 7
requires the Member to include it in its calculation of annual AMS and ensure that the resulting
sum does not exceed the corresponding commitment level in the Member’s Schedule.180 In light
of these provisions, a WTO Member may initiate a WTO dispute on the grounds that another
WTO Member miscalculated its current total AMS with the effect of undercounting its support.181
The United States is committed to providing no more than $19.1 billion in AMS.182
For nearly a decade after the Marrakesh Agreement was signed, agricultural subsidies were
governed solely by the terms of the Agreement on Agriculture so that they could not be
challenged as prohibited or actionable subsidies under the Agreement on Subsidies and
Countervailing Measures (SCM Agreement) if they conformed with the Agreement on
Agriculture.183 However, this so-called “Peace Clause” expired at the end of 2003, and
agricultural subsidies are now subject to the requirements of the SCM Agreement.

(...continued)
stamps), agricultural research, infrastructure services, disaster assistance, and environmental programs.
177 “Blue box” programs essentially pay farmers for limiting their production of a particular product. More specifically,
“blue box” programs must both involve a direct payment under a production-limiting program and be either (1) based
on fixed areas and yields, or, if livestock payments, a fixed number of herd, or (2) made on 85% or less of the base
level of production. Because they limit—rather than encourage—production, they are considered less likely to
artificially suppress prices. The United States has not notified (reported to the WTO) any “blue box” payments since
the first year that “blue box” notifications were required.
178 Common examples of “amber box” programs are dairy and sugar price support programs, irrigation and grazing
programs, federal crop and revenue insurance, and counter-cyclical payments. An “amber box” program will be
excluded from the calculation of a Member’s total AMS, however, if it is considered de minimis, i.e., it will be
excluded if its total cost is small relative to the value of either a specific commodity or, if the program is commodity-
specific, the value of total production.
179 AA, Art. 7.1 (“Each Member shall ensure that any domestic support measure in favor of agricultural producers
which are not subject to reduction commitments because they qualify under the criteria set out in Annex 2 to this
Agreement are maintained in conformity therewith.”); 7.2(b) (“Where no Total AMS commitment exists in Part IV of a
Member’s Schedule, the Member shall not provide support to agricultural producers in excess of the relevant de
minimis level set out in” Article 6.4).
180 Id. at Art. 7.2(a).
181 In Korea—Beef, for example, the complaining parties (including the United States) alleged that Korea’s total
domestic support for its cattle industry exceeded Korea’s scheduled commitment level. Korea—Beef, supra note 22, at
¶ 823. The WTO panel agreed, finding that Korea had not followed the terms of Annex 3 in calculating the market
price support for beef and, in violation of Article 7.2, had erroneously omitted other non-exempt support measures from
its calculation of the current total AMS of support for beef producers. Korea—Beef, supra note 22, at ¶ 825.
182 Note by the Secretariat, Total Aggregate Measurement of Support, TN/AG/S/13, 3, 14 (Jan. 27, 2005).
183 Id. at Art. 13(a) (stating that “During the implementation period ... domestic support measures that conform fully to
the provisions of Annex 2 to this Agreement shall be: (i) non-actionable subsidies for purposes of countervailing duties;
[and] (ii) exempt from actions based on Article XVI of GATT and Part III of the Subsidies Agreement....”).
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Agreement on Technical Barriers to Trade
Technical barriers to trade (TBT) are generally certain kinds of measures intended to regulate a
product’s characteristics or their related production methods. The goal of the WTO Agreement on
Technical Barriers to Trade (“TBT Agreement”) is to strike a balance between permitting
countries to have regulatory autonomy to advance public policy and avoiding unnecessary
obstacles to international trade. To achieve that balance, the TBT Agreement disciplines the
imposition of technical regulations,184 standards,185 and conformity assessment procedures,186 all
of which are frequently adopted to protect the environment or human health, to ensure the quality
of products, to prevent deceptive practices, or to achieve some other legitimate objective. The key
difference between technical regulations and standards is that compliance with the former is
mandatory while compliance with the latter is voluntary.187 Conformity assessment procedures
(CAPS), on the other hand, are the procedures used to determine compliance with either a
technical regulation or a standard.188
The TBT Agreement covers measures affecting both agricultural and manufactured products, but
it does not cover sanitary and phytosanitary measures, which are discussed below. Typical TBT
measures covered by the Agreement are ingredient labeling requirements for food products or
pharmaceuticals, regulations of the volume and appearance of packaging, and labeling or
packaging requirements for dangerous chemicals or toxic substances. There is debate, however,
over whether the TBT Agreement also applies to process or production methods that do not affect
the characteristics of the final product that is put on the market.189 For example, it is unclear
whether the TBT Agreement covers technical regulations that distinguish between products solely
upon the environmental effects caused by their manufacturing processes.190
The TBT Agreement has different provisions for each of the three technical barriers to trade that it
regulates: standards, technical regulations, and conformity assessment procedures. To the extent
that the TBT Agreement has been the subject of WTO consultations and disputes, most of the
resulting case law interprets the provisions addressing technical regulations.
There are four basic substantive provisions relating to technical regulations: (1) in applying
technical regulations, Members must provide MFN status to other Members’ products;191 (2) in
applying technical regulations, Members must ensure that they do not violate the national

184 A “technical regulation” lays down product characteristics or their related processes and production methods with
which compliance is mandatory. For example, it could include or be limited to “terminology, symbols, packaging,
marking, or labeling requirements as they apply to a product, process, or production method.” TBT Agreement, Annex
1.1.
185 Compliance with standards is voluntary, unlike compliance with technical regulations. Compare TBT Agreement,
Annex 1.2 with TBT Agreement, Annex 1.1.
186 A “conformity assessment procedure” is a procedure used “to determine that relevant requirements in technical
regulations or standards are fulfilled.” TBT Agreement, Annex 1.3.
187 Compare TBT Agreement, Annex 1.1 with TBT Agreement, Annex 1.2.
188 TBT Agreement, Annex 1.3.
189 Van Den Bossche, supra note 98, at 808.
190 Andrew Mitchell and Christopher Tran, The Consistency of the EU Renewable Energy Directive with the WTO
Agreements 11 (Georgetown Law and Econ. Research Paper No. 1485549, 2009), available at
http://scholarship.law.georgetown.edu/fwps_papers. See HEINRICH WOHLMEYER, THE WTO, AGRICULTURE, AND
SUSTAINABLE DEVELOPMENT 128-29 (2002).
191 TBT Agreement, Art. 2.1.
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treatment principle (i.e., Members must not accord imported products less favorable treatment
than that accorded to like products of national origin);192 (3) Members must ensure that technical
regulations are not prepared, adopted, or applied with a view to, or effect of, either being more
trade restrictive than necessary to fulfill a legitimate objective or creating unnecessary obstacles
to international trade;193 and (4) Members should base their technical regulations on international
standards unless international standards would, because of unique country conditions, result in
ineffective or inappropriate regulations.194
The TBT Agreement encourages Members to participate in the work of international
standardizing bodies with the aim of achieving broader consensus on the creation and content of
international standards.195 The Agreement also strives to enhance the transparency of countries’
TBT measures and provide opportunities outside of dispute settlement proceedings for Members
to resolve concerns relating to TBT measures. For example, Article 2.9.1 requires Members to
publish notice of—and allow time for other Members to comment on—a proposed technical
regulation that was created in the absence of an international standard, deviates from the
applicable international standard, or may significantly affect trade. In addition, the Committee on
Technical Barriers to Trade (TBT Committee), which is composed of representatives from each
WTO Member, affords Members the opportunity to consult and resolve concerns relating to the
TBT Agreement or the accomplishment of its objectives.196
Agreement on Sanitary and Phytosanitary Measures
Sanitary and phytosanitary measures (“SPS measures”) are measures intended to protect human,
animal, or plant life or health from food-safety risks and other risks relating to pests or
diseases.197 They include, for example, bans on imported beef to prevent the spread of mad cow
disease or a food-safety regulation requiring all imported chicken meat to be heated to a certain
temperature for a specified length of time.198 While SPS measures can be thought of as a subset of
technical barriers to trade, as noted above, a measure can not be covered by both the SPS and the

192 Id.
193 Id. at Art. 2.2.
194 See id. at Art. 2.4. In EC-Sardines, the Appellate Body explained that an ineffective technical regulation is one that
lacks the capacity to accomplish all of the objectives pursued, and an inappropriate technical regulation is one that is
not suitable for the fulfillment of all of the objectives pursued. Appellate Body Report, EC-Sardines,
WT/DS231/AB/R, p.83 (Sept. 26, 2002).
195 E.g., id. at Art. 2.6 (“With a view to harmonizing technical regulations on as wide a basis as possible, Members shall
play a full part, within the limits of their resources, in the preparation by appropriate international standardizing bodies
of international standards for products for which they either have adopted, or expected to adopt, technical
regulations.”); id. at Art. 5.5 (“With a view to harmonizing conformity assessment procedures on as wide a basis as
possible, Members shall play a full part, within the limits of their resources, in the preparation by appropriate
international standardizing bodies of guides and recommendations for conformity assessment procedures.”).
196 TBT Agreement, Art. 13.1. The TBT Committee has, for example, been used as a forum to resolve WTO Members’
concerns about a technical regulation the country of Colombia implemented to promote the use of biofuels. See, e.g.,
Committee on Technical Barriers to Trade, Minutes of the Meeting of 5-6 November 2009, G/TBT/M/49 at paras. 193-
195 (Dec. 22, 2209). See also Committee on Technical Barriers to Trade, Specific Trade Concerns Raised in the TBT
Committee, G/TBT/GEN/74/Rev.6, pp. 27-28 (detailing the specific trade concerns involving TBT measures that were
raised between November 2009 and October 2010, including Mexico and the EU’s concerns about Colombia’s biofuels
regulation).
197 SPS Agreement, Annex A.
198 For more on SPS measures and concerns, read CRS Report RL33472, Sanitary and Phytosanitary (SPS) Concerns
in Agricultural Trade, by Geoffrey S. Becker.
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TBT Agreements.199 Therefore, SPS and TBT measures are mutually exclusive for the purposes
of applying WTO obligations.200
Article 2.2 of the SPS Agreement bars SPS measures that are (1) not based on scientific
principles, (2) maintained without sufficient scientific evidence, or (3) applied more broadly than
is necessary to protect human, animal, or plant life or health. Article 2.3 borrows language from
the chapeau of Article XX of the GATT by barring SPS measures that (1) “arbitrarily or
unjustifiably discriminate” between Members where identical or similar conditions prevail or (2)
are applied in a manner that constitutes a “disguised restriction” on international trade.
The SPS Agreement requires Members to base their SPS measures on international standards,
guidelines, or recommendations where they exist, as well as on a risk assessment that takes into
account the risk assessment techniques developed by the relevant international organizations.201
Three sources of international standards are: the Codex Alimentarius Commission (CODEX), the
World Organization for Animal Health (OIE), and the International Plant Protection Convention
(FAO). SPS measures that conform to these organizations’ international standards or guidelines
are deemed necessary and presumed consistent with both the SPS Agreement and the GATT.202 If
there is not a relevant international standard, Members may still apply SPS measures to imports
so long as the measures are based on “sufficient scientific evidence.”203 If the scientific evidence
is insufficient, Members may provisionally adopt SPS measures on the basis of the available
information but must seek additional information for a more objective assessment of the risk and
review the SPS measure within a reasonable period of time.204

199 Id. at Art. 1.5. See Report of the Panel, EC—Measures Concerning Meat and Meat Products, WT/DS26/R/USA,
¶8.29 (Aug. 18, 1997) (“Since the measures in dispute are sanitary measures, we find that the TBT Agreement is not
applicable to this dispute.”).
200 Consequently, dispute settlement proceedings involving the TBT and SPS Agreements may require resolution of
whether the measure in question is best characterized as a TBT or an SPS measure. Because it is more difficult to prove
that a measure is valid under the SPS Agreement, the defending Member will generally try to characterize it as a TBT
measure rather than an SPS measure. Scott Anderson, Partner, Sidley Austin LLP, Lecture at Georgetown University
Law School’s Academy of WTO Law and Policy (Nov. 19, 2009). See also Van Den Bossche, supra note 98, at 840
(“[I]t could be to the advantage of a complaining Member to challenge a measure under the SPS Agreement rather than
the TBT Agreement.”)
201 SPS Agreement, Art. 5.1. To satisfy Article 5.1’s risk assessment requirement, each measure must have undergone a
process through which the Member: (1) identified both the diseases or pests whose entry or spread the Member wants
to prevent as well as the potential biological and economic consequences associated with their entry or spread; (2)
evaluated the likelihood of both the entry or spread of those diseases or pests as well as the occurrence of the associated
biological and economic consequences; and (3) evaluated the likelihood that those diseases or pests would enter or
spread if the SPS measure is applied. Report of the Appellate Body, Australia—Measures Affecting Importation of
Salmon, WT/DS18/AB/R, paras. 123-24 (Oct. 20, 1998).
202 SPS Agreement, Art. 3.2.
203 See id. at Arts. 2.2, 5.1. The Appellate Body has ruled that the scientific evidence supporting a particular measure is
“sufficient” if there is a “rational or objective relationship between the SPS measure and the scientific evidence.”
Report of the Appellate Body, Japan—Measures Affecting Agricultural Products, WT/DS76/AB/R, ¶ 84 (Feb. 22,
1999). This is determined on a case-by-case basis in light of the particular circumstances of the case, including the
characteristics of the measure and the quality and quantity of the scientific evidence. Id. Moreover, a WTO panel has
interpreted the term “scientific evidence” broadly as information produced through a “scientific method.” Report of the
Panel, Japan—Measures Affecting the Importation of Apples, WT/DS245/R, at paras. 8.92, 8.93 (July 15, 2003).
204 Id. at Art. 5.7. Article 5.7 is understood as creating a “qualified exemption” from Article 2.2’s mandate not to
maintain SPS measures without sufficient evidence. Report of the Appellate Body, Japan—Agricultural Products II,
supra note 203, at ¶ 80.
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However, some measures may relate to the protection of human, animal, or plant life from pests,
diseases, and food-safety and yet be neither a TBT measure nor an SPS measure for the purpose
of the requirements described above. In EC—Biotech Products205 a WTO panel found that even
though the European Union designed its regulatory regime for the approval and marketing of
biotech products to protect the lives and health of humans and plants, not all aspects of that
regime were SPS measures subject to Article 5 of the SPS Agreement. In that case, the challenged
measure was the EU’s decision to temporarily place a moratorium on the approval of applications
to market new genetically modified organisms. The complaining countries alleged, inter alia, that
the temporary moratorium was an SPS measure imposed in violation of Article 5 of the SPS
Agreement, which requires Members to base their SPS measures on a risk assessment.206
Although Annex A(1) provides a general definition of the term “SPS measure,” the panel wrote
that not every measure that meets that definition is, ipso facto, subject to every provision in the
SPS Agreement.207 Instead, whether a measure is an SPS measure for the purposes of the core
requirements of the SPS Agreement is determined on the basis of the measure’s objective, its
form, and its nature.208 The panel stated that, unlike the EU’s temporary moratorium, SPS
measures have both the objective of protecting animal, plant, or human life or health and the
“nature” of “requirements and procedures.”209 Finding that the moratorium was a decision to
delay final substantive approval decisions, the panel held that it lacked the nature of either a
requirement or a procedure and therefore could be imposed in the absence of a risk assessment
without violating Article 5.210
In addition to disciplining Members’ use of SPS measures, the SPS Agreement seeks to increase
the transparency of each Member’s SPS regulatory regime and provide a forum for consultations
outside of WTO dispute settlement proceedings. Accordingly, the SPS Agreement requires each
Member to notify other Members of new or changed SPS regulations when the regulation will
significantly affect trade and either no relevant international standard exists or the new regulation
differs from the relevant international standard.211 It also establishes the Committee on Sanitary
and Phytosanitary Measures to, inter alia, facilitate ad hoc consultations and negotiations among
Members on specific sanitary and phytosanitary issues.212

205 Report of the Panel, EC—Measures Affecting the Approval and Marketing of Biotech Products, WT/DS291/R (Sept.
29, 2006). See also Simon Lester, European Communities—Measures Affecting the Approval and Marketing of Biotech
Products, 101 AM. J. INT’L L. 453 (2007) (describing the legal conclusions reached by the WTO panel in EC—Biotech
Products). For a more in-depth discussion of the case, see CRS Report RS21556, Agricultural Biotechnology: The
U.S.-EU Dispute, by Charles E. Hanrahan.
206 Report of the Panel, EC—Biotech Products, supra note 205, at paras. 4.132-4.133, 4.194, 4.253.
207 Id. at ¶ 7.1337.
208 Id. at ¶ 7.1334 (“[A]n SPS measure is to be determined, according to [Annex A(1)], by reference to such criteria as
the objective of the measure, its form and its nature.”).
209 Id. at ¶ 7.1380.
210 Id. at paras. 7.1379, 7.1381-84. Nevertheless, the panel did find a violation of Annex C(1)(a), which requires
Members to ensure that procedures to “check and ensure the fulfillment of sanitary or phytosanitary measures” are
“undertaken and completed without delay.” Report of the Panel, EC—Biotech Products, supra note 205, at paras.
7.1530, 7.1570. The European Union was unsuccessful in its attempt to justify the delay in undertaking and completing
approval procedures that was caused by the moratorium. Id. at paras. 7.1511-7.1529.
211 SPS Agreement, Annex B(3).
212 Id. at Art. 12.
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General Agreement on Trade in Services
The General Agreement on Trade in Services (GATS) is designed to liberalize trade in services.
Unlike international trade in goods, which is largely governed by measures imposed at countries’
borders, trade in services tends to be governed mostly by internal regulations. Internal regulations
might, for example, restrict the number of drugstores allowed within a geographical area, define
technical safety requirements for airline companies, or prohibit banks from selling certain
financial products.213 As this list suggests, the GATS disciplines a wide range of domestic
measures, but some of its provisions, including those on market access and national treatment, are
limited by the scope of each country’s commitments, which are defined in the national schedules
and subject to progressive reduction .214
If the specific service sector being regulated by a Member’s measure is not exempted or excluded
from the relevant provisions of the GATS, the GATS disciplines a broad swath of domestic
measures affecting trade in that service sector. The GATS does not define “service,” however,
and, instead, regulates the supply of a service in four “modes”: (1) from a service supplier in one
Member to a consumer in another Member without travel (e.g., an architecture firm mails
blueprints to a consumer overseas), (2) in the territory of one Member to a consumer of any other
Member (e.g., in the U.S. to a foreign tourist), (3) by a service supplier of one Member with a
commercial presence in the territory of any other member (e.g., by a commercial bank with
branches in a foreign country), and (4) by a service supplier of one Member travelling
temporarily to provide services in another Member (e.g., by a consultant on an overseas business
trip).215
Among the measures that affect trade in services and are subject to the GATS are laws,
regulations, procedures, and administration actions that concern the purchase, payment, or use of
a service and are issued by a central, regional, or local government.216 Only measures affecting
the supply of services in the exercise of governmental authority are excluded from GATS
obligations.217 By broadly defining “service” and “supply of service,” the GATS disciplines not
merely measures affecting the supply of the actual service (e.g., a measure regulating the supply
of accounting services to an overseas firm) but also measures affecting the production,
distribution, marketing, sale, and delivery of that service.218
Because the GATS permits Members to specify how they will reduce market access barriers to
trade in services, whether a particular measure is GATS-inconsistent generally hinges on the
scope of the national schedules of commitments of the Member imposing the measure. Unlike the
GATT, under which the nondiscrimination provisions apply to goods from all Members, the
GATS permits Members to schedule (1) exemptions from the Most Favored Nation (MFN)
treatment obligation,219 and (2) specific service sector commitments to the national treatment
obligation.220 As a result, each Member limits the scope of its obligations not to discriminate

213 Van Den Bossche, supra note 98, at 477.
214 See id.
215 GATS, Art. I:2.
216 Id. at Art. XXVIII.
217 Id. at Art. I:3(b).
218 Id. at Art. XXVIII(b).
219 Id. at Arts. II:1; V, V bis.
220 GATS, Arts. XVI, XVII, XXI.
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between services provided by firms from different Members and between services provided by
foreign, rather than domestic, firms.221 In addition to its basic obligations and Members’ national
schedules of commitments, the GATS also contains a number of annexes addressing the special
situations of individual services sectors.
The GATS does not compel a government to privatize services industries or outlaw government
or private monopolies. However, the GATS is concerned with increasing transparency.
Consequently, similar to the Agreements on Technical Barriers to Trade and Sanitary and
Phytosanitary Measures, Article III of the GATS requires governments to publish all relevant laws
and regulations and to set enquiry points that can provide foreign companies and governments
with information about entering and competing in a service sector. 222 This is particularly
important because the services sectors may be regulated by multiple government entities at both
the national and local levels. Consequently, service providers seeking to do business
internationally may be stymied by a lack of transparency in how a country licenses its service
providers or regulates service delivery. U.S. service providers continue to cite the lack of
transparency in the development and implementation of foreign countries’ regulations as a
primary obstacle to increasing foreign trade in services. If the policy goals behind the GATS are
achieved, Members’ will presumably have an improved understanding of all other Members’
services regulations.223
Agreement on Trade-Related Intellectual Property Rights
The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) sets minimum
standards for the intellectual property rights that WTO Members must offer their nationals and the
enforcement of those rights. Developing countries, however, have delayed compliance periods.
The basic tenet of TRIPS is the extension of most-favored-nation status and national treatment to
intellectual property rights (IPR). Consequently, any advantage in IPR protection granted to
nationals of one WTO Member must be granted to nationals of all other WTO Members, and
Members must treat nationals of other WTO Members no less favorably in terms of IPR
protection than they treat their own nationals.224 The term “nationals” in the TRIPS Agreement
refers to natural or legal persons that are either domiciled in a particular country or have a real
and effective industrial or commercial establishment there.
Prior to the TRIPS Agreement, intellectual property rights were primarily regulated at the
international level by treaties administered by the World Intellectual Property Organization
(WIPO). Most of the obligations of the WIPO treaties are now incorporated by reference into
Articles 2.1 and 9.1 of the TRIPS Agreement so that compliance with the WIPO treaties remains

221 Furthermore, Article XXI of the GATS allows a WTO Member to modify or withdraw any of its scheduled
commitments once three years have elapsed from the date the commitment entered into force, subject to certain
conditions, including possible compensation to Members affected by the change.
222 Id. at Art. III:1, 4. The WTO Council for Trade in Services releases an alphabetical list of each Member’s enquiry
points, which is available on the WTO Documents Online website. E.g., Council for Trade in Services, Contact and
Enquiry Points Notified to the Council for Trade in Services. Note by the Secretariat. S/ENQ/78 (Mar. 23, 2001)
available at http://docsonline.wto.org/gen_search.asp?searchmode=simple (enter document symbol S/ENQ/78). The
United States’ enquiry point is the Chair of the Trade Policy Sub-Committee on Services in the Office of the United
States Trade Representative. Id. at p. 20.
223 See GATS, pmbl.
224 TRIPS, Arts. 3, 4.
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the baseline for compliance with the TRIPS Agreement.225 However, the TRIPS Agreement also
builds on WIPO treaties by establishing additional minimum obligations, most notably in the
areas of copyright, trademarks, geographical indications,226 patents, and undisclosed information
(i.e., trade secrets).227 The TRIPS Agreement also has “exception clauses,” which permit WTO
Members to pass measures that authorize particular forms of IPR “infringement” without running
afoul of TRIPS Agreement obligations.228
In an early dispute over an exception clause, the European Communities alleged that Section
110(5) of the U.S. Copyright Act of 1976 (P.L. 94-443, 17 U.S.C.§101 et seq.) as amended by the
Fairness in Music Licensing Act of 1998 (P.L. 105-298) was inconsistent with the TRIPS
Agreement because it permitted the playing of radio and television music in certain retail,
drinking, and food service establishments without the payment of a royalty fee.229 The U.S.
argued that these exceptions were permissible under the TRIPS Agreement because they were
covered by Article 13, which permits WTO Members to create limited exceptions to the exclusive
rights of copyright holders.230 The panel found that Article 13 permits a WTO Member to provide
exceptions to the exclusive rights of copyright holders only if (1) those exceptions are clearly
defined,231 (2) when utilized, those exceptions do not create economic competition with the ways
that right holders normally extract economic value from copyrights and thereby deprive them of
significant or tangible commercial gains,232 and (3) when utilized, those exceptions do not cause
or have the potential to cause an unreasonable loss of income to the copyright owner.233
Applying this standard, the panel found that one, but not both, of the exceptions contained in
Section 110(5) were covered by Article 13. Specifically, the panel stated that the “homestyle”
exception, which allows small restaurants and retail outlets to amplify music broadcasts with

225 See id. at Arts. 2.1, 9.1.
226 “Geographical indications” are essentially the labels that identify a good as originating in a particular territory,
region, or locality to which a certain quality, reputation, or other characteristic of the good is generally attributed. For
example, a geographical indication is the label that identifies a bottle of sparkling wine as “Champagne” or a bottle of
whiskey as “Kentucky bourbon.”
227 In addition, the TRIPS Agreement is arguably a better tool for creating uniform international IPR protection
standards. There are 13 WIPO treaties covering intellectual property rights and member states can pick and choose
which of those treaties to join. As a result, the country of Guinea, for example, has chosen to sign only four of the 13
WIPO treaties dedicated to defining basic standards of intellectual property protection, whereas the United States has
chosen to sign nine. Consequently, under the WIPO treaty regime, not all countries incurred the same breadth of IPR
obligations. However, all WTO Members incurred the same breadth of IPR obligations because all WTO Members
must sign the TRIPS Agreement. Consequently, as a WTO Member, Guinea will be obligated to comply with all of the
standards defined in the TRIPS Agreement once its compliance period has passed, even though it declined to adopt
some of those standards in the context of WIPO treaties. For a list of WIPO treaties and member states, visit
http://www.wipo.int (last visited Jan. 28, 2010).
228 E.g., TRIPS, Arts. 13 (permits measures inconsistent with TRIPS Agreement copyright obligations), 17 (permits
measures inconsistent with TRIPS Agreement trademark obligations), 26.2 (permits measures inconsistent with TRIPS
Agreement industrial design obligations), 30 (permits measures inconsistent with TRIPS Agreement patent
obligations). For more on intellectual property rights and international trade, read CRS Report RL34292, Intellectual
Property Rights and International Trade, by Shayerah Ilias and Ian F. Fergusson.
229 Report of the Panel, U.S.—Section 110(5) of the U.S. Copyright Act, WT/DS160/R, paras. 2.1-2.10 (June 15, 2000).
230 Id. at paras. 3.3-3.4 (June 15, 2000). See TRIPS, Art. 13 (“Members shall confine limitations or exceptions to
exclusive rights to certain special cases which do not conflict with a normal exploitation of the work and do not
unreasonably prejudice the legitimate interests of the right holder.”).
231 Report of the Panel, U.S.—Copyright, supra note 229, at ¶ 6.113.
232 Id. at paras. 6.165, 6.183.
233 Id. at paras. 6.226-6.229.
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equipment commonly used in private homes without authorization or payment of a royalty to the
copyright holder, met the requirements of Article 13. In reaching this conclusion, it noted that
only a small percentage of all eating, drinking, and retail establishments in the U.S. was eligible
to use the exception and this small group was further narrowed by the additional requirement that
they use “homestyle” equipment (i.e., commonly available stereo systems).234 In contrast, the
“business” exception, which allowed food service, drinking, and small retail establishments to
amplify copyrighted music without authorization or payment of a fee, did not meet the
requirements of Article 13 because a substantial majority of U.S. eating and drinking
establishments and close to half of all U.S. retail establishments could make use of the
exception.235
Dispute Settlement Understanding
The WTO Understanding on Rules and Procedures Governing the Settlement of Disputes
(Dispute Settlement Understanding or DSU) significantly strengthened the earlier GATT dispute
settlement mechanism. The DSU creates a Dispute Settlement Body (DSB) with representatives
of all the WTO Members, which administers the WTO dispute settlement system.
If a Member wants to challenge another Member’s trade practices, it submits a written request for
consultation to the DSB identifying the measures at issue and the legal basis for the complaint.236
A consultation is an opportunity to settle the dispute without a panel being established. It is
confidential and will not work prejudice on either Member in any further proceedings.237
If consultations fail to resolve the dispute within 60 days, or one party refuses to enter them, the
complaining party may request a panel.238 If the DSB establishes a panel, that panel is authorized
to receive pleadings and rebuttals, hear oral arguments, and engage in other forms of fact
development.239 The panel then issues an interim report on which the two parties can comment.240
A final report addressing, if not adopting, the parties’ comments follows.241A party to the dispute
can appeal the legal interpretations or findings in a final report to the Appellate Body.242 Subject
to the “negative consensus rule,” the DSB will ultimately adopt the findings of the panel, or, if the
panel’s decision was appealed, those of the Appellate Body.243 The negative consensus rule states
that these findings should be adopted unless they are rejected by a consensus of Members on the
DSB.244

234 Id. at paras. 6.143, 6.145.
235 Id. at ¶6.133.
236 DSU, Art. 4.
237 Id. at Art. 4:6.
238 Id. at Art. 4:3, 7. But note that in cases of urgency, including those which concern perishable goods, the consultation
and panel proceedings are accelerated to the greatest extent possible. Id. at Arts. 4:8, 9.
239 See id. at Art. 13.
240 DSU, Art. 15.
241 Id. at Art. 16.
242 Id. at Art. 17.
243 Id. at Art. 17:14.
244 The negative consensus rule applies at other points in the dispute settlement process as well. For example, if a
consensus of Members on the DSB rejects the establishment of a panel, no panel will be established. Similarly, if a
consensus of Members on the DSB rejects the authorization of a requested countermeasure against a Member who has
(continued...)
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After adoption, the Member deemed in violation of a WTO obligation will generally be given a
reasonable period of time to bring its measures into compliance (usually between eight and 15
months).245 If the measures are not brought into compliance or the adequacy of compliance is
disputed, the parties may negotiate a settlement providing for compensation (i.e., additional trade
concessions) to the injured party.246 If these negotiations fail, the complaining Member may then
seek authority from the DSB to retaliate, namely to suspend some of its WTO obligations that
benefit the defending Member.247
The WTO Plurilateral Agreements
The preceding sections of this report discussed the multilateral agreements contained in the
Marrakesh Agreement. All countries must accept those agreements as a condition of WTO
membership. However, some WTO agreements are called “plurilateral agreements,” which
indicates that a country is not required to accept them as a condition of WTO membership.248
Consequently, only some Members, including the United States, have agreed to the two
plurilateral agreements discussed below. These agreements are contained in Annex 4 of the
Marrakesh Agreement. Initially there were four plurilateral agreements in Annex 4, but both the
International Dairy Agreement and the International Bovine Meat Agreement terminated in 1997.
Agreement on Government Procurement
To date, 40 countries have signed the Agreement on Government Procurement (AGP) and several
more (notably China, Jordan, and Moldova) are currently negotiating accession to it.249 The AGP
seeks to grant foreign suppliers of goods and services increased access to government
procurement opportunities. To achieve this goal, the AGP is designed to both reduce laws and
regulations that discriminate against foreign products or services and increase the transparency of
government procurement procedures.250
The general obligations of the AGP only apply to government contracts with a value exceeding
the monetary threshold for the procuring entity.251 These thresholds are identified in the five

(...continued)
not complied with a WTO decision, the complaining Member’s request for authorized retaliation will be denied.
245 Id. at Art. 21:3.
246 DSU, Art. 22:2.
247 Id. For more on dispute settlement in the WTO, read CRS Report RS20088, Dispute Settlement in the World Trade
Organization (WTO): An Overview, by Jeanne J. Grimmett.
248 In the WTO context, there are multilateral and plurilateral trade agreements, but outside of the WTO context, two
other kinds of trade agreements exist: bilateral agreements (which bind only two countries) and regional agreements
(which bind countries within a discrete region of the world).
249 Countries who are not parties to the AGP frequently have similar obligations under regional or free trade
agreements, which, in some cases may even be stricter than the obligations contained in the AGP.
250 For a thorough overview of U.S. procurement obligations under the AGP and regional free trade agreements, read
CRS Report RL32211, International Government-Procurement Obligations of the United States: An Overview, by
Todd B. Tatelman.
251 AGP, n. 2. Every two years the Office of the United States Trade Representative determines and publishes the
procurement thresholds for the implementation of various international procurement agreements, including the AGP.
E.g., Procurement Thresholds for Implementation of the Trade Agreements Act of 1979, 74 Fed. Reg. 68,907 (Dec. 29,
2009). Currently, the threshold for goods and services procured by the government of the United States in a process
governed by the AGP is $203,000. Id. This threshold applies until December 31, 2011.
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annexes contained in Appendix I so that Annex 1 contains the threshold for central government
entities, Annex 2 contains the threshold for sub-central government entities, etc.252 For
procurement contracts exceeding these thresholds, Article III of the AGP provides that each party
must provide to the products, services, and suppliers of other parties treatment no less favorable
than that which is accorded to (1) domestic products, services, and suppliers, and (2) products,
services, and suppliers of any other party.253 Each party must ensure that its entities do not treat
locally established suppliers less favorably on the basis of foreign affiliation or ownership.254
Moreover, parties may not discriminate against locally established suppliers on the basis of the
country of production of the good or service in question if that country is a party to the AGP.255
Similarly, Article IV mandates that the rules of origin applied for the purposes of government
procurement be the same as the rules of origin applied in the normal course of trade at the time of
the transaction in question.256
Article V provides limited exemptions from these AGP obligations to address the special financial
and trade needs of developing countries. For example, developing countries may negotiate with
other parties mutually acceptable exclusions from the rules on national treatment for certain
entities, products, or services.257 In addition, developed countries, including the United States,
have established their own limited exemptions from the AGP in the annexes to the AGP.258
Article VI requires that technical specifications prescribing the characteristics (such as quality,
performance, safety, dimensions, symbols, packaging, marking, or labeling) of either the products
or services to be procured must not be prepared, adopted, or applied with a view to or effect of
creating unnecessary obstacles to trade.259 Instead, they must be written in terms of performance
and based on international standards if possible, or, if no international standards are available, on
national technical regulations, or recognized national standards.260
As for transparency, Article IX requires the Parties’ entities to publish an invitation to participate
in all cases of intended procurement.261 Each notice of proposed procurement must state (1) the
contact point with the entity from which further information may be obtained; (2) the subject
matter of the contract; (3) the time-limits set for the submission of tenders or an application to be
invited to tender; and (4) the addresses from which documents relating to the contracts may be
requested.262 Additionally, when it is possible to provide other information (e.g., any economic or

252 AGP, n. 1. However, the breadth of states’ commitments in these annexes varies widely, and, to date, 12 U.S. states
have made no commitments to the AGP.
253 Id. at Art. 3:1.
254 Id. at Art. III:2(a).
255 Id. at Art. III:2(b).
256 Id.at Art. IV:1.
257 AGP, Art. V, V:4.
258 E.g., id. at United States Annex IV (excluding all transportation and dredging services, among others, from the
AGP). These exceptions are what prevent U.S. laws with narrow “buy American” provisions from running afoul of the
AGP. For more on the Buy American Act, 41 U.S.C. §§ 10a through 10d, read CRS Report 97-765, The Buy American
Act: Requiring Government Procurements to Come from Domestic Sources, by John R. Luckey.
259 See AGP, Art. VI:1. However, there are exceptions to this provided in the annexes.
260 Id. at Art. V:2.
261 Id. at Art. IX: 1. There are some exceptions to this rule in Article XV. Id.
262 Id. at Art. IX:7, 8.
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technical requirements or any options for further procurement), Article IX requires its inclusion in
the notice as well.263
Article XX and XXI govern the procedures for challenging a breach of the AGP. Article XX
requires Parties to provide timely, transparent, and effective procedures that enable suppliers to
challenge alleged breaches of the AGP in the context of procurements in which they have, or have
had, an interest.264 Parties must provide suppliers with the opportunity for their challenges to a
procurement process or decision to be heard by a court or impartial and independent review
body.265 If a Party, rather than a supplier, wishes to challenge the failure of another Party to carry
out its AGP obligations, it can rely on the Dispute Settlement Understanding to initiate
consultations.266
WTO panels have rendered very few decisions in the government procurement area.
Nevertheless, one of the most famous dispute settlement proceedings involving the AGP arose out
of a Massachusetts law (An Act Regulating State Contracts with Companies Doing Business with
or in Burma, 1996 Mass. Acts 239, ch. 130) that barred state entities from procuring goods or
services from any person or business organization doing business with Burma. The European
Union commenced dispute settlement proceedings against the U.S. on the grounds that the
Massachusetts law would prevent certain European companies from bidding on government
contracts in Massachusetts, in violation of the AGP.267 However, the European Union suspended
those proceedings when the U.S. Supreme Court held that the law was pre-empted by a federal
statute, the Foreign Operations, Export Financing, and Related Programs Appropriations Act of
1997,268 that imposed sanctions on Burma.269
Agreement on Trade in Civil Aircraft
The Agreement on Trade in Civil Aircraft (“Aircraft Agreement”), which entered into force on
January 1, 1980, predates the formation of the WTO. It remains, however, as one of the two WTO
plurilateral agreements that are in force for WTO Members who have accepted it. Thirty
countries, including all major aircraft manufacturing and exporting countries, are signatories to
this agreement,
The Aircraft Agreement seeks to establish an international framework to encourage continued
technological development of aeronautics, provide fair and equal competitive opportunities for
civil aircraft producers of the signatory nations, and eliminate some of the adverse trade effects
resulting from governmental support of civil aircraft development, production, and marketing.
Specifically, the Aircraft Agreement requires signatories to eliminate tariffs on civil aircraft,
engines, flight simulators, and related parts, and to provide these benefits on a nondiscriminatory
basis to other signatories.

263 Id. at Art. IX:6.
264 AGP, Art. XX:2.
265 Id. at Art. XX:2, 6.
266 Id. at Art. XXI.
267 M.J. TREBILCOCK AND ROBERT HOWSE, THE REGULATION OF INTERNATIONAL TRADE 584 (2005).
268 P.L. 104-208, 110 Stat. 3009.
269 Crosby v. Nat’l Foreign Trade Council, 530 U.S. 363, 372-74 (2000).
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Article 4 of the Aircraft Agreement forbids signatories from requiring or unduly pressuring
airlines and aircraft manufacturers to procure civil aircraft from a particular source that would
create discrimination against suppliers from any other signatory.270 Article 5 forbids quantitative
restrictions and other licensing requirements that would restrict imports and exports of civil
aircrafts in a manner that is inconsistent with the GATT. Article 6 requires signatories to apply the
provisions of the Agreement on Subsidies and Countervailing Measures (SCM Agreement) to
their civil aircraft industries, which explains why the Boeing-Airbus disputes271 deal largely with
the SCM Agreement rather than the Aircraft Agreement.
The Doha Development Round
While the Marrakesh Agreement marked the completion of the Uruguay Round, it also committed
Members to reopen negotiations on agriculture and services at the beginning of the 21st century.
Accordingly, new negotiations began in early 2000 and were expanded into a new WTO Round
the following year. November 2010 marked the ninth year of the Doha Development Round; it is
the longest-running negotiation in the postwar era.
The Doha Ministerial Declaration is effectively the charter for the Doha Round of talks.272 It
urges Members to focus on the unique concerns of developing and least-developed countries in
the negotiations. Hence, the Doha Round is formally known as the Doha Development Round.
The Declaration states that negotiations should be conducted transparently and open to all
Members as well as to states and customs territories that are currently in the process of
accession.273 In addition to the needs of developing and least-developed countries, top items on
the Doha Round’s agenda are trade in agriculture,274 non-agricultural market access (sometimes
called “NAMA”),275 and trade in services.
All of the agreements under negotiation must be adopted as one final agreement. Consequently,
until the Doha Round of negotiations is concluded, the few agreements that Members have
reached cannot be permanently implemented. Concluding negotiations in the Doha Round,
however, has proven difficult because of the number of countries involved and the differences
between them. Commentators have drawn different conclusions from the lack of finality: some
worry it portends the demise of the multilateral trading system, while others think it merely
reflects a shift in how multilateral negotiations are conducted.

270 Agreement on Trade in Civil Aircraft, Art. 4.2.
271 U.S.—Large Civil Aircraft, DS137; EC and Certain Member States—Large Civil Aircraft, DS136.
272 For more on the Doha Development Agenda, see CRS Report RL32060, World Trade Organization Negotiations:
The Doha Development Agenda, by Ian F. Fergusson.
273 Doha Ministerial Declaration, paras. 48, 49 (Nov. 14, 2001).
274 For more on the implications of the Doha Round on U.S. Agriculture, see CRS Report RS22927, WTO Doha
Round: Implications for U.S. Agriculture, by Randy Schnepf and Charles E. Hanrahan.
275 For more on the Doha Round’s non-agricultural market access negotiations, see CRS Report RL33634, The World
Trade Organization: The Non-Agricultural Market Access (NAMA) Negotiations, by Ian F. Fergusson.
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Free Trade Agreements in Effect and Pending Congressional
Approval
A free trade agreement is an agreement involving two or more trading partners under which trade
barriers are reduced or eliminated. The U.S. first entered free trade agreements with Israel and
Canada respectively. Today, the United States has free trade agreements with 17 countries,
including nations in Asia, the Middle East, South and Central America, and Africa.
Any free trade agreement is non-self-executing, meaning that these agreements have no legal
effect domestically until legislation implementing the agreement is enacted.276 Because
congressional action is necessary to approve a free trade agreement, these agreements and their
implementing legislation are called congressional-executive agreements.277
The following discusses the only two regional free trade agreements to which the United States is
a party: the North American Free Trade Agreement (NAFTA) and the Dominican-Republic
Central America-United States Free Trade Agreement (DR-CAFTA). It then addresses pending
free trade agreements and the negotiations for a third regional free trade agreement: the Trans-
Pacific Partnership Agreement. The United States is a party to 15 bilateral free trade agreements,
which are listed on the United States Trade Representative’s website.278
This report discusses only a few selected provisions of the following trade agreements. The
United States negotiates free trade agreements that, more or less, comport with the “model FTA”
developed by the Office of the U.S. Trade Representative (USTR). This model FTA evolved out
of the NAFTA framework and the trade agreement negotiating objectives mandated by
Congress.279 Under this model, the United States pursues trade liberalization in trade in goods
through provisions on nondiscrimination, tariff reduction, sanitary and phytosanitary measures,
technical barriers to trade, and other obligations that resemble those found in the GATT and WTO
agreements on trade in goods. In addition, the model FTA covers trade in services, with
specialized provisions on telecommunications and financial services, investment, government
procurement, competition policy, trade remedies, the scope and enforcement of intellectual
property rights, and dispute settlement.280 Finally, provisions on labor rights and environmental
cooperation have become increasingly standard, and there seems to be a movement toward
establishing anti-corruption and electronic commerce obligations as well.281 While the text of the
free trade agreements generally establishes each country’s obligations, the contracting countries
reserve exceptions to these obligations in the annexes. Consequently, a full understanding of each

276 19 U.S.C. § 2903.
277 For a more in-depth explanation of the difference between congressional-executive agreements and treaties, read
CRS Report 97-896, Why Certain Trade Agreements Are Approved as Congressional-Executive Agreements Rather
Than as Treaties, by Jeanne J. Grimmett.
278 Office of the United States Trade Representative, Free Trade Agreements, http://www.ustr.gov/trade-agreements/
free-trade-agreements (last visited May 6, 2010).
279 See C. O’Neal Taylor, Of Free Trade Agreements and Models, 19 IND. INT’L & COMP. L. REV. 569, 577, 581 (2009);
U.S. GEN. ACCOUNTING OFFICE, GAO-08-59, AN ANALYSIS OF FREE TRADE AGREEMENTS AND CONGRESSIONAL AND
PRIVATE SECTOR CONSULTATION UNDER TRADE PROMOTION AUTHORITY ACT 18-19 (2007), http://www.gao.gov/
new.items/d0859.pdf (last visited June 24, 2010).
280 Taylor, supra note 279, at 586.
281 Id. at 590-91 n. 127-28.
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country’s obligations under a free trade agreement comes from reading both the body and the
annexes to each agreement.
The free trade agreement chapters selected for discussion below, namely investment, intellectual
property, and labor, illustrate notable processes and trends in the evolution of the model FTA.
Investment has always been a crucial chapter for U.S. free trade agreements, but the language of
the model provisions has changed over time to reflect concern that initial NAFTA arbitral
tribunals’ interpretations of these provisions overly limited government regulatory power.282 The
core investment provisions of NAFTA have, in turn, been renegotiated and redrafted to
incorporate the NAFTA parties’ understanding of the concepts.283 In the case of intellectual
property rights, the model FTA has increasingly expanded the rights of intellectual property
holders beyond those required by the Trade-Related Intellectual Property Rights Agreement and
NAFTA.284 Finally, the model FTA’s approach to labor issues has evolved from addressing labor
issues outside of the agreement’s text to incorporating them into the final agreement and, more
recently, expanding upon the labor provisions so as to, perhaps, bolster their significance relative
to the other trade issues addressed.285
North American Free Trade Agreement
The North American Free Trade Agreement (NAFTA) entered into force on January 1, 1994. It
created the world’s largest free trade bloc by linking the United States, Canada, and Mexico. The
major goals of this agreement, as with any free trade agreement, are tarrification (the conversion
of non-tariff trade barriers into tariffs), tariff reduction, and, ultimately, tariff elimination.286
NAFTA also contains dispute settlement provisions that are separate from those used by the
WTO.287
Investment Provisions
In general, NAFTA requires Parties to provide the principles of most favored nation status and
national treatment to investors.288 Chapter Eleven of NAFTA lists certain protections for investors
of one Party who have investments in the territory of another. Some of these protections take the
form of substantive obligations to accord investors of another Party “fair and equitable treatment
and full protection and security” in accordance with international law289 and to prohibit specified
requirements on the investments of foreign investors.290 Furthermore, no Party may “directly or
indirectly nationalize or expropriate an investment of an investor of another Party in its territory

282 Id. at 591-92.
283 Id. at p. 592, n.134.
284 Id. at p. 593.
285 For more on how the U.S. approach to addressing labor in free trade agreements has evolved, read CRS Report
RS22823, Overview of Labor Enforcement Issues in Free Trade Agreements, by Mary Jane Bolle.
286 See NAFTA, Arts. 302-315.
287 Id. at Chapters 19 and 20.
288 Id. at Arts. 1102, 1104.
289 Id. at Art. 1005(1).
290 Id. at Art. 1106.
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or take a measure tantamount to nationalization or expropriation” except in certain
circumstances.291
These protections also include binding arbitration to resolve investor-state disputes. When an
investor from a NAFTA country believes that another Party has breached an obligation and the
investor has suffered a loss as a result, the investor has the right to file a claim for arbitration
against the allegedly offending nation.292 The investor does not need to obtain the permission or
participation of its own government before filing a claim.293
Intellectual Property Provisions
Chapter 17 of NAFTA obligates parties to accord national treatment to citizens of other NAFTA
parties in the protection and enforcement of their intellectual property rights.294 The scope of the
intellectual property rights to receive protection is delineated by both NAFTA and four separate
international agreements on intellectual property: the Geneva Convention for the Protection of
Producers of Phonograms Against Unauthorized Duplication of their Phonograms, the Berne
Convention for the Protection of Literary and Artistic Works, the Paris Convention for the
Protection of Industrial Property, and either the 1978 or the 1991 International Convention for the
Protection of New Varieties of Plants.295 If a party has not acceded to one of these agreements, it
must make every effort to do so.296 NAFTA further demarcates the scope of its intellectual
property protection in Article 1705 (on copyright), Article 1708 (on trademarks), Article 1709 (on
patents), Article 1711 (on trade secrets), Article 1712 (on geographical indications), and Article
1713 (on industrial designs).
In terms of enforcement, each party must ensure that enforcement procedures are available under
its domestic law so as to permit effective action to be taken against any act of infringement of
intellectual property rights covered by NAFTA.297 Moreover, each party must provide criminal
procedures and penalties in cases of willful trademark counterfeiting or copyright piracy on a
commercial scale.298 Article 1718 establishes additional enforcement mechanisms to prevent the
importation of counterfeit trademark goods or pirated copyright goods.
Labor
Unlike most other trade agreements to which the U.S. is a party, NAFTA does not contain labor
provisions but rather incorporates a side agreement on labor: the North American Agreement on
Labor Cooperation (“NAALC”).299

291 NAFTA, Art. 1110. A Party may nationalize or expropriate an investment “(a) for a public purpose; (b) on a non-
discriminatory basis, (c) in accordance with due process of law and Article 1105(1), and (d) on payment of
compensation....” Id.
292 Id. at Arts. 1116, 1117.
293 CRS Report RL31638, Foreign Investor Protection Under NAFTA Chapter 11, by Robert Meltz.
294 NAFTA,. Art. 1703.
295 Id. at Art. 1701(2).
296 Id. at Art. 1701(3).
297 Id. at Art. 1714.
298 NAFTA, Art. 1717(1).
299 Available at http://www/worldtradelaw.net/nafta/naalc.pdf.
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NAALC contains an “enforce your own laws” standard with respect to labor, requiring each party
to promote compliance with and effectively enforce its own labor law through appropriate
government action.300 It further requires that each Party ensure that persons with legally
recognized interests under its law have appropriate access to administrative, quasi-judicial,
judicial, or labor tribunals.301 Each Party’s law must ensure that these persons have recourse to
appropriate procedures to enforce rights arising under its labor law (including relevant laws on
occupational safety and health, employment standards, industrial relations, and migrant
workers).302 Each Party must ensure that these procedures result in a final decision on the merits
and are “fair, equitable, and transparent,” which means, in part, that they comply with due process
of law, are open to the public, afford the parties an opportunity to support their positions, and do
not entail unreasonable charges, time limits, or unwarranted delays.303 Finally, each Party must
promote public awareness of its labor law.304
NAALC also establishes the Commission for Labor Cooperation to oversee the implementation
of the Agreement, develop recommendations for its further elaboration, create technical
assistance programs, and facilitate Party-to-Party consultations.305
Dominican Republic-Central America-United States Free Trade Agreement
In August 2004, the United States signed the CAFTA-DR with Costa Rica, El Salvador,
Guatemala, Honduras, Nicaragua, and the Dominican Republic; a year later, the President signed
the requisite implementing legislation (P.L. 109-53, 119 Stat. 462, 19 U.S.C. § 4001 et seq.). It is
the first free trade agreement between the United States and a group of smaller developing
economies. As with other free trade agreements, CAFTA-DR requires each party to accord (1)
most favored nation status to the other parties and (2) national treatment to the other parties’
goods and investors.306 It also contains schedules of each Party’s tariff concessions307 and dispute
settlement provisions that, like NAFTA’s, are distinct from the WTO’s DSU.308
Investment
The agreement establishes a legal framework for investors. Like NAFTA, CAFTA-DR provides
certain protections to investors of one Party who have investments in the territory of another. All
forms of investment are protected, including real property, enterprises, debt, concessions, and
intellectual property. Some of these protections take the form of substantive obligations while
others permit investors to submit to binding international arbitration a claim for damages against
another Party.309

300 NAALC, Art. 3.1.
301 Id. at Arts. 4.1, 4.2.
302 Id. at Art. 4.
303 Id. at Art. 5.1.
304 Id. at Art. 7.
305 NAALC, Arts. 8, 10.
306 CAFTA-DR, Arts. 1.2, 3.2, 10.3.1, 10.4.
307 Id. at Annex III.
308 CAFTA-DR, Chapter 20.
309 E.g., id. at Arts. 10.5, 10.15.
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The key substantive protections (1) create a standard of minimum treatment,310 (2) require
compliance with the principle of national treatment,311 and (3) require all Parties to accord all
other Parties most favored nation status.312 In addition, Article 10.7 forbids any Party from
expropriating or nationalizing a covered investment either directly or indirectly unless it is done
for a public purpose and in a non-discriminatory manner, accompanied by payment of prompt and
adequate compensation, and performed in accordance with due process of law.313 Article 10.7 lays
out four requirements for fair and adequate compensation as well.314
In addition, as under NAFTA, when a disputing party considers that an investment dispute cannot
be settled by consultation and negotiation, the claimant may submit to arbitration under Article
10.16 that the respondent breached a substantive obligation, an investment agreement, or an
investment authorization, which resulted in loss or damage to the claimant.315 The first claim
brought under this provision was filed by a U.S. rail management company, Railroad
Development Corp., against the government of Guatemala in June 2009.316 Railroad
Development Corp. alleges breaches of both substantive obligations and of the investment
agreement between RDC and the Guatemalan government.317
Intellectual Property Provisions
Like chapter 17 of NAFTA, chapter 15 of CAFTA-DR obligates parties to accord national
treatment to citizens of other CAFTA parties in the protection and enforcement of their
intellectual property rights.318 However, it also illustrates how the intellectual property provisions
in the U.S. model FTA have evolved beyond those contained in chapter 17 of NAFTA. The model
FTA, over time, has enhanced the minimum scope of intellectual property protection by limiting
what is non-patentable, limiting government regulatory power, and expanding the forms protected
by patents and copyrights.319
For example, CAFTA-DR requires its parties to ratify or accede to a greater number of
international intellectual property agreements than NAFTA. These include but are not limited to:
the WIPO Copyright Treaty, the WIPO Performance and Phonograms Treaty, the Patent
Cooperation Treaty, the Budapest Treaty on the International Recognition of the Deposit of
Microorganisms for the Purposes of Patent Procedure, the Convention Relating to the
Distribution of Programme-Carrying Signals Transmitted by Satellite, the Trademark Law Treaty,

310 Under Art. 10.5 the Parties must accord investments of investors of another Party “fair and equitable treatment and
full protection and security” in accordance with international law.
311 CAFTA-DR, Art. 10.3.
312 Id. at Art. 10.4.
313 Id. at Art. 10.7.1. Additionally, it must comply with the minimum standard of treatment prescribed in Article 10.5.
Id.
314 Id. at Art. 10.7.2 (“Compensation shall: (a) be paid without delay; (b) be equivalent to the fair market value of the
expropriated investment immediately before the expropriation took place; (c) not reflect any change in value occurring
because the intended expropriation had become known earlier; and (d) be fully realizable and freely transferable.”)
315 CAFTA-DR, Art. 10.16.
316 RDC Seeks Compensation for Alleged CAFTA-DR Violations, INT’L TRADE DAILY (July 15, 2009).
317 Id.
318 CAFTA-DR, Art. 15.1(8).
319 Taylor, supra note 279, at 593.
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and the 1991 International Convention for the Protection of New Varieties of Plants.320 CAFTA-
DR further demarcates the scope of its intellectual property protection in Article 15.2 (on
trademarks), Article 15.3 (on geographical indications), Article 14.4 (on domain names on the
internet), Articles 15.5 and 15.6 (on copyright), and Article 15.9 (on patents).
CAFTA-DR has similar, if also more detailed and specific, enforcement provisions those in
NAFTA. In addition to mandating civil procedures, CAFTA-DR requires its parties to provide
criminal procedures and penalties in cases of willful trademark counterfeiting or copyright or
related rights piracy on a commercial scale.321 Unlike NAFTA, CAFTA-DR adds that the willful
importation or exportation of counterfeit or pirated goods is unlawful and criminally
punishable.322
Labor Provisions
Unlike NAFTA, labor provisions were written into CAFTA-DR, rather than incorporated through
a side agreement. However, the provisions in CAFTA-DR resemble those found in the North
American Agreement on Labor Cooperation (NAALC) that accompanied NAFTA. For example,
like NAALC, the CAFTA-DR contains an “enforce your own laws” standard with respect to
labor.323 A Party is in compliance with this standard if it is following a course of action or inaction
that “reflects a reasonable exercise of ... discretion or results from a bona fide decision regarding
the allocation of resources.”324
In addition, the CAFTA-DR also requires Parties to provide persons with legally recognized
interests under its law with access to tribunals for the enforcement of the Party’s labor laws and to
judicial proceedings that comply with due process of law, are open to the public (except where
justice requires otherwise), afford the parties an opportunity to support their positions, do not
entail unreasonable charges, time limits, or unwarranted delays, and are accompanied by a written
final decision on the merits of the case that is made publicly available without undue delay.325
Finally, to ensure compliance with these obligations, Article 16.6 provides that a Party may
request consultations with another Party regarding any labor-related matter by delivering a
written request. If the consulting Parties fail to resolve the matter and it concerns whether a Party
is conforming to its substantive obligations under Article 16.2, the complaining Party may resort
to one of the dispute settlement mechanisms described in Chapter 20.
Pending Free Trade Agreements with South Korea, Panama, and Colombia
The 112th Congress inherited free trade agreements with South Korea, Panama, and Colombia that
were signed in time to be considered under the fast track procedures described in the Bipartisan
Trade Promotion Authority Act of 2002 (P.L. 107-210, 116 Stat. 993, 19 U.S.C. § 3801 et seq.,),

320 CAFTA-DR, Art. 15.1.
321 Id. at Art. .51.11(26)(a).
322 Id.
323 Id. at Art. 16.2.1(a) (“A Party shall not fail to effectively enforce its labor laws, through a sustained or recurring
course of action or inaction, in a manner affecting trade between the Parties ...”).
324 Id. at Art. 16.2.1(b).
325 Id. at Arts. 16.2.2, 16.2.3.
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which expired at the end of June 2007.326 However, Congress has yet to approve implementing
legislation for any one of these three agreements.
The text of these agreements was informed by, and, in the case of the Colombia FTA, modified by
the 2007 “Bipartisan Trade Deal” between Congress and the George W. Bush Administration.327
This trade deal, which was reached on May 10, 2007, and, therefore, is sometimes called the
“May 10, 2007 understanding,” required the incorporation of certain provisions into the Peru,
South Korea, Panama, and Colombia trade agreements in the areas of labor, environment,
intellectual property, foreign investors’ rights, and port security.328 Essentially, the May 10, 2007,
understanding modified the model FTA, and, consequently, countries that had already passed
domestic legislation regarding pending free trade agreements with the United States incorporated
the changes.329 Among the most frequently discussed provisions of the Bipartisan Trade Deal are
those on labor and the environment. The labor provisions require U.S. free trade agreement
partners to adopt, maintain, and enforce five labor standards stated in the 1998 International
Labor Organization Declaration: freedom of association, the effective recognition of the right to
collective bargaining, the elimination of all forms of forced or compulsory labor, the effective
abolition of child labor, and the elimination of discrimination in respect of employment and
occupation.330 Moreover, both the labor and environment provisions subject allegations of the
labor and environmental chapters to the same general dispute settlement system used for trade
violations.331
U.S.-South Korean Free Trade Agreement
U.S.-South Korean Free Trade Agreement (KORUS FTA) was signed by President George W.
Bush shortly before the expiration of fast track authority in 2007.332 In June 2010, the Obama
Administration announced plans to seek Congress’s approval for the KORUS FTA after first
engaging in talks with South Korea over U.S. concerns with the agreement as signed, particularly
over its provisions involving market access for U.S. autos. These talks were concluded on
December 3, 2010, with a text that has been referred to as a “supplemental agreement” or
“supplementary deal” to the 2007 KORUS FTA.

326 Fast track procedures are discussed in greater detail later in this report. See infra “Article I of the Constitution and
Legislative Branch Authority.”
327 However, in 2010, officials negotiated changes to the text of the U.S.-South Korea Free Trade Agreement that was
entered into before the July 1, 2007 deadline for fast track consideration. The implications of these changes for fast
track consideration of implementing legislation for the U.S.-South Korea Free Trade Agreement are discussed in CRS
Report R41544, Trade Promotion Authority and the Korea Free Trade Agreement, by Emily C. Barbour.
328 Peru & Panama FTA Changes, http://waysandmeans.house.gov/Media/pdf/110/05%2014%2007/
05%2014%2007.pdf (last visited May 10, 2010).
329 See Lucien O. Chauvin, Peru’s Congress Approves Amendments to Free Trade Agreement with United States, Int’l
Trade Daily (June 29, 2007).
330 Peru & Panama FTA Changes, supra note 328, at I:A.
331 Id. at I:D, II:C.
332 For a discussion of the provisions and economic implications of the U.S.-Korea Free Trade, see CRS Report
RL34330, The Proposed U.S.-South Korea Free Trade Agreement (KORUS FTA): Provisions and Implications,
coordinated by William H. Cooper, CRS Report R41534, The EU-South Korea Free Trade Agreement and Its
Implications for the United States, by William H. Cooper et al., CRS Report R41389, Pending U.S. and EU Free Trade
Agreements with South Korea: Possible Implications for Automobile and Other Manufacturing Industries, by Michaela
D. Platzer, and CRS Report R40622, Agriculture in Pending U.S. Free Trade Agreements with Colombia, Panama, and
South Korea, by Remy Jurenas.
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The Administration has not submitted implementing legislation to Congress, but an implementing
bill is expected to be developed in consultation with Congress during the 112th Congress. It is
difficult to predict how the 2010 changes and the late date at which they were concluded might
affect Congress’s decision to consider the KORUS FTA implementing bill under the fast track
procedures.333 If the KORUS FTA implementing bill is deemed ineligible for—or otherwise
denied—fast track consideration, the bill, in its entirety, may be considered under the regular
procedures of each chamber. Under these procedures, the bill, like other pieces of legislation,
might not be brought up for a vote or might be passed with amendments.
Panama Free Trade Agreement
Like the KORUS FTA, the Panama Trade Promotion Agreement (Panama TPA) was signed by
President George W. Bush shortly before the expiration of fast-track authority. The
Administration has not submitted an implementing bill for the Panama TPA. Many believe that, if
implemented, the Panama TPA is unlikely to have a major effect on the U.S. economy because
Panama trades very little with the United States.334
Opponents of the Panama TPA frequently cite concerns with Panama’s reputation as a tax haven
and with its labor laws.335 Panama addressed the tax transparency issue on November 30, 2010,
when it signed a Tax Information and Exchange Agreement (TIEA) with the United States.
Colombia Free Trade Agreement
The Colombia Free Trade Agreement (CFTA) was signed in November 2006, several months
before the expiration of fast track authority.336 The George W. Bush Administration submitted an
implementing bill to Congress, which was introduced in the House on April 8, 2008.337 Two days
later, the House voted to make fast-track authority inapplicable to the implementing bill.338 New
implementing legislation has not been submitted, and Congress has not taken up the Colombia
FTA since.339
Although the CFTA mirrors many prior free trade agreements and permits government entities to
require a firm’s adherence to certain “acceptable” labor conditions in the government
procurement process,340 U.S. labor unions have objected to the CFTA on the grounds that

333 For a discussion of the issues that could be raised in connection with a decision to consider implementing legislation
for the KORUS FTA under the fast track procedures, see CRS Report R41544, Trade Promotion Authority and the
Korea Free Trade Agreement, by Emily C. Barbour.
334 For a discussion of the U.S.-Panama Free Trade Agreement, see CRS Report RL32540, The Proposed U.S.-Panama
Free Trade Agreement, by J. F. Hornbeck.
335 See United States Government Accountability Office (GAO), International Taxation: Large U.S. Corporations and
Federal Contractors with Subsidiaries in Jurisdictions Listed as Tax Havens or Financial Privacy Jurisdictions. GAO-
09-157. December 2008 (ranking Panama among the top 50 countries described as having “tax havens” or “financial
privacy jurisdictions”).
336 For a summary of CFTA, see CRS Report RL34470, The Proposed U.S.-Colombia Free Trade Agreement, by M.
Angeles Villarreal.
337 H.R. 5724/S. 2830, 110th Cong.
338 H.Res. 1092, 110th Cong.
339 In addition, the House Parliamentarian and Senate Parliamentarian have been reported to disagree about whether
implementing legislation introduced in their respective chambers would be entitled to fast track consideration.
Colombia, Panama, Korea FTAs Await Obama in 2009, 26 INT’L TRADE REP. 123 (2009).
340 CFTA, Art. 9.6.7.
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Colombian workers cannot fully exercise their labor rights.341 In particular, opponents of the
agreement contend that Colombia has a high rate of violence against trade unionists, inadequate
punishment for the perpetrators of that violence, and weak enforcement of the ILO’s core labor
standards and labor laws.
Trade Negotiations for the Trans-Pacific Partnership Agreement
In December 2009, the USTR notified Congress of the President’s intent to enter into negotiations
for a regional, Asia-Pacific trade agreement, known as the Trans Pacific Partnership (TPP)
Agreement. In that letter, the USTR identified its current TPP negotiating partners as Australia,
Brunei Darussalam, Chile, New Zealand, Peru, Singapore, and Vietnam. During the third round
of discussions in October 2010, Malaysia was formally included in negotiations,342 and, following
the fourth round in December 2010, Japan expressed interest in joining the talks as well.343
The USTR intends to proceed with the TPP negotiations as though they were covered by the
terms of the Bipartisan Trade Promotion Authority Act of 2002 (Trade Act of 2002). The act
entitled trade agreements that satisfied certain requirements, including being “entered into” by
July 1, 2007, to receive fast track consideration in Congress.344 Accordingly, although the TPP
cannot be entered into before the date required by the Trade Act of 2002, the Administration
provided written notice to Congress of its intent to enter the TPP negotiations 90 days before
doing so and has consulted with Congress about the negotiations.345
Negotiations over the structure of the TPP are ongoing. There appear to be three options: (1) a
single integrated agreement that would supersede existing bilateral free trade agreements, (2) a
grouping of existing and new free trade agreements with the United States,346 and (3) both a new
set of TPP rules and existing U.S. bilateral trade agreements so that parties could choose which of
the two sets of rules to apply in a particular circumstance.347 The informal target end-date for
negotiations is late November 2011.348

341 For more on the labor issues, see CRS Report RL34759, Proposed U.S.-Colombia Free Trade Agreement: Labor
Issues, by Mary Jane Bolle.
342 For more detail on the TPP, see CRS Report R40502, The Trans-Pacific Partnership Agreement, by Ian F.
Fergusson and Bruce Vaughn.
343 Japan and the TPP, WASH. TRADE DAILY (Jan. 10, 2011).
344 Request for Comments Concerning Proposed Trans-Pacific Partnership Trade Agreement, 74 Fed. Reg. 66,720
(Dec. 16, 2009); Administration to Send Formal TPP Notification to Congress Within Days, INSIDE U.S. TRADE (Dec.
11, 2009). See also P.L. 107-210, 116 Stat. 993, 19 U.S.C. § 3801 et seq.
345 Request for Comments, supra note 344. See 19 U.S.C. § 3804(a) (requiring the President to provide, at least 90
calendar days before initiating negotiations, written notice to the Congress of the President’s intention to enter into
negotiations and initiate consultations regarding the negotiations with, inter alia, the Committee on Finance of the
Senate and the Committee on Ways and Means of the House of Representatives).
346 Of the eight negotiating parties, the United States currently has free trade agreements with Singapore, Chile,
Australia, and Peru. The United States does not have a free trade agreement with Japan.
347 Decision on TPP Structure Among Key Challenges Facing Negotiators, INSIDE U.S. TRADE (Dec. 18, 2009). See
also Amy Tsui, TPP Talks Dealing with New Market Access, Address Existing FTAs Later, Negotiator Says, INT’L
TRADE REP. (Dec. 2, 2010) (“At issue is whether existing market access schedules negotiated under prior free trade
agreements... will stand as currently negotiated or whether TPP will subsume those agreements, with the possibility of
reopening those agreements for additional negotiations.”).
348 A Boost for TPP, WASH. TRADE DAILY 1 (Jan. 12, 2011).
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Part II: The U.S. Constitution and Separation of
Powers
The Constitution gives Congress and the Executive separate but complementary authority over
the regulation of international trade. Consequently, international trade law and its domestic
implementation is perhaps best understood as a joint effort between these two branches.
Consistent with its constitutional authority, the Congress enacts trade laws, which the Executive
implements and enforces. However, in the context of international trade agreements, the roles can
seem reversed, with the Executive negotiating the agreement and the Congress “implementing” it
with legislation.
Article I of the Constitution and Legislative Branch Authority
Article 1, section 8 of the United States Constitution gives Congress the authority to (1) “lay and
collect taxes, duties, imposts, and excises,” (2) “regulate commerce with foreign nations,” and (3)
“make all laws which shall be necessary and proper” to carry out these specific powers. Whereas
Congress was initially only concerned with the conditions under which an import could enter the
U.S.,349 it has, over time, used its authority over international trade to regulate virtually all areas
of trade policy, including how the Executive negotiates a trade agreement, how a negotiated trade
agreement can be implemented, how domestic industries can obtain “remedies” for injury
resulting from import competition, and how trade sanctions can be imposed.
Article II of the Constitution and Executive Branch Authority
Article II of the U.S. Constitution gives the President authority, subject to the advice and consent
of the Senate, to make treaties and appoint ambassadors.350 In addition, several clauses in Article
II (namely, the clauses relating to the grant of executive power, the appointment of ambassadors,
the submission of treaties, and the authority of the Commander in Chief) have been construed as
operating together to vest the President with the vast share of the responsibility for conducting
foreign relations.351 Consequently, the President is widely understood as having the authority to
both negotiate trade agreements and execute laws affecting foreign commerce (e.g., through
customs enforcement, collection of duties, implementation of trading remedy laws, and the
administration of export and import polices).

349 A comparison of the first U.S. “trade” law with more recent trade laws illustrates the increasing scope and
complexity of U.S. trade law. The first U.S. “trade” law took up only four pages in the Statutes at Large. See “An Act
for Laying a Duty on Goods, Wares, and Merchandises imported into the United States,” 1 Stat. 24 (1789). It dealt
solely with tariff rates on 75 categories of goods. Id. In contrast, the Omnibus Trade and Competitiveness Act of 1988
(P.L. 100-418, 102 Stat. 1107) covered 468 pages in the Statutes at Large and dealt with tariff schedules, antidumping,
countervailing duty, and other unfair trade practices procedures, intellectual property rights, trade negotiating authority,
and many other matters.
350 U.S. CONST. art. II, § 2.
351 U.S. CONST. art. II, § 1; American Ins. Assn v. Garamendi, 539 U.S. 396, 414 (2002); U.S. v. Curtiss-Wright Export
Corp., 299 U.S. 304 (1936); Saikrishna B. Prakash and Michael Ramsey, The Executive Power over Foreign Affairs,
111 YALE L. J. 231, 234 (2001).
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Separation of Powers in Practice: Fast Track and Trade Remedies
The following historical overview of two commonly discussed legal issues in international trade
(fast track authority and import competition) illustrates how Congress and the executive branch
have exercised their constitutional authorities over aspects of trade policy in response to changing
concerns.
Fast Track Authority: Trade Act of 1934, Trade Act of 1974, and Bipartisan
Trade Promotion Act of 2002
In the name of job creation, the Tariff Act of 1930 (“Smoot-Hawley Tariff Act,” 46 Stat. 590, 19
U.S.C. § 1202 et seq.) established the highest tariffs in U.S. history. However, other countries
quickly responded by closing off their markets, offsetting any new jobs resulting from the Tariff
Act. In part because of this international response to the Tariff Act, Congress was persuaded that
the U.S. needed international agreements that reduced tariffs. Accordingly, Congress passed the
Trade Agreements Act of 1934 (“1934 Trade Act,” Pub. L. 316, 48 Stat. 943, 19 U.S.C. § 1351 et
seq.) as an amendment to the Tariff Act, authorizing the President to adjust tariffs by negotiating
reciprocal agreements with foreign countries.352
Since Congress first granted the President negotiating authority in international trade with the
1934 Trade Act, Congress has periodically renewed, and occasionally expanded, that authority.
When Congress has expanded the President’s negotiating authority, it has often done so by
substantially reducing the possibility that Congress will delay a trade agreement’s implementation
or demand amendments. This kind of legislation is commonly known as trade promotion, or “fast
track,” authority (TPA). At its most basic, TPA resembles a guarantee that a trade agreement
negotiated by the President will receive expedited congressional consideration.353 Consequently,
the Executive generally favors TPA because it gives U.S. negotiators both flexibility and
credibility to negotiate a trade agreement with another country.
The modern form of TPA was first codified by the Trade Act of 1974,354 which developed out of a
proposal by President Nixon for authority to negotiate tariff concessions during the Tokyo Round
of the GATT. While the precise form of TPA can vary by the law establishing it, TPA statutes
typically: (1) authorize the President to enter certain reciprocal international agreements reducing
tariff and nontariff barriers; and (2) entitle those agreements to consideration under fast track
procedures in Congress if the President has satisfied additional substantive and procedural
conditions.355 In turn, the fast track procedures promote timely committee and floor action of the

352 19 U.S.C. § 1351.
353 However, unlike a guarantee, Congress can negate the application of TPA to particular agreements. For example, in
2008, the House of Representatives exercised its authority to set rules for its handling of proposed legislation, including
implementing legislation for trade agreements, reject the application of TPA to the implementing legislation for the
Colombia Free Trade Agreement. H.Res. 1092, 110th Cong.
354 P.L. 93-618, 88 Stat. 1978, 19 U.S.C. § 2101 et seq.
355 E.g., Bipartisan Trade Promotion Authority Act of 2002, P.L. 107-210, 116 Stat. 993; Omnibus Trade and
Competitiveness Act of 1988, P.L. 100-418, 102 Stat. 1107. For more on the history of Trade Promotion Authority, see
CRS Report RS21004, Trade Promotion Authority and Fast-Track Negotiating Authority for Trade Agreements: Major
Votes, by Carolyn C. Smith.
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legislation at issue by entitling the legislation to receive, for example, an up-or-down vote in
Congress without amendment and with limited debate.356
TPA was last granted by the Bipartisan Trade Promotion Act of 2002,357 which expired at the end
of June 2007.358 Congress has occasionally withheld TPA, and it has also approved and
implemented at least one trade agreement that was not considered pursuant to the fast track
procedures.359 Nevertheless, some worry that, in the absence of a statute authorizing TPA, foreign
governments will hesitate to engage in substantive trade negotiations with the United States
because Congress might demand amendments to a negotiated agreement or delay the agreement’s
implementation indefinitely.360
Import Competition: Tariff Act of 1930 and Trade Act of 1974
While the Tariff Act of 1930 is most often cited for raising tariffs, it, along with the Trade Act of
1974, is the primary source of modern U.S. trade remedy law. The objective of trade remedy laws
is to mitigate the adverse impact of import competition, particularly as a result of certain unfair
trade practices, on domestic industries and workers. The three most frequently applied U.S. trade
remedy laws are countervailing duty law, antidumping law, and safeguard law.361 The first two are
contained in the Tariff Act of 1930 while safeguard law is contained in the Trade Act of 1974.
The first U.S. trade remedy law was a countervailing duty law created largely in response to
Germany subsidizing its sugar exports.362 When Germany increased the subsidy to offset the new
U.S. duty, Congress made the countervailing duty more flexible by setting the amount of the duty
at the amount of the subsidy granted.363 Over time, this countervailing duty law was amended and
incorporated into Title VII of the Tariff Act of 1930.364
U.S. antidumping law followed a similar path of development. In the early 20th century, Congress
became concerned with foreign companies selling their products in the U.S. at a price less than

356 E.g., 19 U.S.C. §§ 3803-3808. For more discussion of Trade Promotion Authority, see CRS Report R41544, Trade
Promotion Authority and the Korea Free Trade Agreement, by Emily C. Barbour; CRS Report RL33743, Trade
Promotion Authority (TPA) and the Role of Congress in Trade Policy, by J. F. Hornbeck and William H. Cooper.
357 P.L. 107-210, 116 Stat. 993, 19 U.S.C. § 3801 et seq.
358 A grant of TPA is typically included in Title I of the Trade Act of 1974 (P.L. 93-618, 88 Stat. 1978, 19 U.S.C.
§ 2101 et seq.), which prescribes congressional power over presidential actions in international trade. 19 U.S.C.
§§ 2191-2194.
359 Congress considered, approved, and implemented the Jordan Free Trade Agreement under its regular procedures.
360 For example, the President lacked fast track authority between May 1994 and August 2002. David A. Gantz, The
“Bipartisan Trade Deal,” Trade Promotion Authority and the Future of U.S. Free Trade Agreements, 28 ST. LOUIS. U.
PUB. L. REV. 115, 131 (2008).
361 CRS Report RL32371, Trade Remedies: A Primer, by Vivian C. Jones.
362 Ronald A. Brand, GATT and the Evolution of the United States Trade Law, 18 BROOK. J. INT’L L. 101, 114 (1992).
By the end of the 19th century, the success of Germany’s sugar beet industry had guided Germany to the forefront of
the world’s sugar production. Steven B. Webb, Agricultural Production in Wilhelminian Germany: Forging an Empire
with Pork and Rye, 42 J. ECON. HIST. 309, 314-315 (1982).
363 Brand, supra note 362, at 114.
364 The Trade Act of 1974 expanded the scope and tightened the procedural requirements of U.S. countervailing duty
law, and the Trade Agreements Act of 1979 (P.L. 96-39, 93 Stat. 150) brought U.S. countervailing duty law into
compliance with the SCM Agreement.
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that which they charged in their home market.365 Consequently, Congress enacted the
Antidumping Act of 1916 (Pub. L. 64-271, 39 Stat. 798, repealed by Miscellaneous Trade and
Technical Corrections Act of 2004, P.L. 108-429, 118 Stat. 2434). Title II of the 1921 Emergency
Tariff Act (“Antidumping Act of 1921,” Pub. L. 67-10, 42 Stat. 9) transformed the original
antidumping system into the current model, which imposes an offsetting duty on articles exported
to the U.S. at a price less than that charged in the home market.366 This system was then
incorporated into Title VII of the Tariff Act of 1930.
The third kind of trade remedy law (safeguards) developed in the mid-20th century in response to
the tariff reductions achieved by international agreements.367 President Truman, as a concession to
Congress, agreed to set up a procedural mechanism to allow U.S. industries to apply for relief
from U.S. tariff cuts negotiated as part of the GATT.368 Congress codified this “escape clause” in
section seven of the Trade Agreements Extension Act of 1951. With the Trade Expansion Act of
1962 (Pub. L. 87-794, 76 Stat. 872), the Kennedy Administration succeeded in tightening the
“escape clause” standards because of foreign complaints that its use was undercutting U.S. tariff
concessions.369 However, these standards were loosened again with the Trade Act of 1974.370
Part III: Selected U.S. Agencies and Federal Entities
with Responsibility for Aspects of International
Trade
United States Trade Representative
The Office of the United States Trade Representative (USTR) is part of the Executive Office of
the President. The USTR is the principal vehicle through which the U.S. conducts trade
negotiations and implements U.S. trade policy. It is also responsible for keeping Congress
informed of any WTO dispute settlement proceeding involving the United States. Persons or
entities desiring an investigation of potential noncompliance with a trade agreement contact the
USTR, which handles Section 301 complaints against foreign unfair trade practices.371 The USTR
also oversees the administration of other aspects of U.S. trade law, including the Generalized
System of Tariff Preferences (commonly called the GSP), which permits duty-free entry for
imports from developing countries,372 and telecommunications reviews under Section 1377.373

365 Brand, supra note 362, at 114.
366 Antidumping Act of 1921, §§ 201-212, 42 Stat. at 9.
367 See Warren Maruyama, Evolution of the Escape Clause: Section 201 of the Trade Act of 1974 as Amended by the
Omnibus Trade and Competitiveness Act of 1988, 1989 BYU L. Rev. 393, 400 (1989).
368 See id. at 401.
369 See id. at 402-03.
370 See id. at 403.
371 For an explanation of Section 301 complaints, see the heading below entitled “Section 301 of the Trade Act of 1974:
Remedies for Violations of Trade Agreements and Other Inconsistent or Unjustifiable Foreign Trade Practices”.
372 For more on the GSP, see infra notes 442-448 and accompanying text.
373 Section 1377 of the Omnibus Trade and Competitiveness Act of 1988 (P.L. 100-418, 102 State. 1107) requires the
USTR to review, by March 31 of each year, the operation and effectiveness of U.S. telecommunications trade
agreements to determine whether any act, policy, or practice of any foreign country who is a party to one of these
(continued...)
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The USTR is also involved in reviewing recommendations from the International Trade
Commission under Sections 201374 on safeguards and 337 on intellectual property right
infringement.375
United States International Trade Administration
The International Trade Administration (ITA), which is located in the U.S. Department of
Commerce, is responsible for making determinations in both countervailing duty and anti-
dumping cases. Specifically, the ITA must determine whether there are subsidies in a
countervailing duty case and whether the sales are made at less than fair value in anti-dumping
cases.
United States International Trade Commission
The United States International Trade Commission (ITC) is an independent federal agency with
broad investigative responsibilities. One of the ITC’s primary duties is its investigative role in the
administration of U.S. trade remedy laws, which entails investigating the effects of dumped and
subsidized imports on domestic industries and conducting safeguard investigations including
investigations under the China-specific safeguard contained in section 3421 of the Trade Act of
1974. The ITC also adjudicates cases involving imports that allegedly infringe intellectual
property rights under Section 337 of the Tariff Act of 1930.376 In addition, the ITC maintains the
Harmonized Tariff Schedule, which Customs Services uses to assess the correct tariff on imported
goods.
United States Customs and Border Protection
U.S. Customs and Border Protection (CBP) is a part of the Department of Homeland Security. Its
primary trade functions include (1) enforcing intellectual property rights at the border, thereby
preventing the importation of counterfeit, pirated, or patent-infringing goods, (2) assuring that
appropriate duties and fees are paid, and (3) securing trade to and from the U.S. from acts of
terrorism. In addition, along with the Food and Drug Administration, CBP seeks to protect

(...continued)
agreements has not complied with its obligations. 19 U.S.C. § 3106. These reviews are not discussed in this report.
374 Codified at 19 U.S.C. §§ 2251-2254. For an example of USTR involvement in safeguard cases, see Rossella
Brevetti and Christopher S. Rugaber, ITC Advances Safeguard Case on Standard Pipe from China, INT’L TRADE DAILY
(Oct. 4, 2005) (stating that the USTR will consider a proposal of import made by the International Trade Commission
and then make a recommendation on it to President Bush).
375 Section 337 of the Tariff Act of 1930 (P.L. 71-361, 46 Stat. 590) is not discussed in this report. A Section 337 case
is one in which a domestic industry seeks to prove that imported articles have infringed on U.S. patents, federally
registered trademarks, copyrights, or mask works. 19 U.S.C. § 1337(a). These cases are ultimately adjudicated before
the International Trade Commission, an independent and quasi-judicial agency. For an example of USTR involvement
in a Section 337 case, see USTR Allows Limited Exclusion Order Against Qualcomm Phone to Become Final, INT’L
TRADE DAILY (Aug. 7, 2007) (stating that the USTR decided to allow the International Trade Commission’s limited
exclusion order issued in its investigation of Qualcomm mobile phones to become final).
376 See, e.g., Notice of Commission Decision Not To Review the ALJ’s Final Initial Determination,75 Fed. Reg. 82071
(Dec. 29, 2010) (describing the ITC’s involvement in the investigation and adjudication of allegations that, inter alia,
the importation of certain flash memory chips and products containing the same violated Section 337).
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American people, resources, and economic well-being from foods or plants that are contaminated,
diseased, infested, or adulterated.
United States Court of International Trade
The United States Court of International Trade (CIT) is part of the Judicial Branch. It was created
by the Customs Courts Act of 1980 (P.L. 96-417, 94 Stat. 1727),377 which transformed the United
States Customs Court into the Court of International Trade and expanded the CIT’s jurisdiction.
The President, with the advice and consent of the Senate, appoints the nine judges with lifetime
tenure to the CIT.
The CIT, which is located in New York City, has jurisdiction over cases arising anywhere in the
nation, but it may also hold hearings in foreign countries. The court may decide any civil action
against or by the United States, its officers, or its agencies arising out of any law pertaining to
international trade.378 All litigation involving the Generalized System of Preferences (GSP) is
commenced in the Court of International Trade. Appeals may be taken to the United States Court
of Appeals for the Federal Circuit, and, ultimately, to the Supreme Court of the United States.
When asked to review the decision of an administrative agency, federal courts apply the
“Chevron”379 standard of review, which is often associated with a high level of deference to the
agency’s decision. The Court of International Trade is no exception.380 Consequently, when it is
reviewing a decision by the U.S. Department of Commerce or ITC to impose antidumping duties
or use zeroing381 to determine a “dumping margin,” the CIT frequently respects the agency’s
decision.382

377 See generally 28 U.S.C §§ 251-258 (disciplining appointments to, and the operation of, the Court of International
Trade).
378 Court of International Trade, Jurisdiction of the Court, http://www.cit.uscourts.gov/informational/about.htm (last
visited Jan. 22, 2010). See 28 U.S.C. §§ 1581, 1582.
379 The Chevron standard of review was developed by the Supreme Court in its 1984 decision in Chevron U.S.A. v.
Natural Resources Defense Council. 467 U.S. 837 (1984). The Court established a two part test for reviewing an
agency’s statutory interpretation. See id. at 842-43. If Congress has spoken directly to the precise question at issue, then
the courts must give effect to that interpretation, but, if the statute is instead silent or ambiguous on the issue at hand,
then courts must defer to an agency’s “permissible construction of the statute.” Id. at 842-43.
380 E.g., Paul Muller Indus. GMBH & Co. v. United States, 435 F. Supp. 2d. 1241, 1243-44 (Ct. Int’l Trade 2006).
381 For a more in-depth discussion of zeroing, see infra notes 414-416 and accompanying text.
382 E.g., Paul Muller Indus., 435 F. Supp. 2d. at 1243-44; Timothy Brightbill, Jennifer Kwon, and Matthew W. Fogarty,
19 U.S.C. 1581(c)—Judicial Review of Antidumping & Countervailing Duty Determinations Issued by the Department
of Commerce, 39 GEO. J. INT’L L. 41, 54-55 (2007) (noting that the CIT’s use of a straightforward Chevron analysis to
ultimately determine that the Department of Commerce’s use of zeroing is in accordance with the law and suggests that
the court is deferring the responsibility for WTO compliance to the executive branch).
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Part IV: Selected Federal Statutes Regulating
International Trade
Trade Remedy Laws
Section 301 of the Trade Act of 1974: Remedies for Violations of Trade
Agreements and Other Inconsistent or Unjustifiable Foreign Trade Practices
Sections 301 through 310 of the Trade Act of 1974 (commonly referred to as “Section 301”)
require the USTR to impose trade sanctions on foreign countries that either (1) violate trade
agreements, (2) have acts, policies, or practices that are inconsistent with a trade agreement, or
(3) have acts, policies, or practices that are unjustifiable and burden U.S. commerce. 383 Section
301 also gives the USTR the option of imposing trade sanctions on foreign countries that
maintain acts, policies, or practices that are unreasonable or discriminatory and burden or restrict
U.S. commerce.384 The USTR is the only body authorized to challenge foreign trade practice on
behalf of the United States (or United States industries) under this law.
Before imposing mandatory sanctions under Section 301, the USTR engages in a two-step
process. First, the USTR must determine under Section 304(a)(1)385 whether a foreign country’s
acts or policies (1) violate U.S. rights under any trade agreement; (2) are inconsistent with a trade
agreement; or (3) are unjustifiable and burden or restrict U.S. commerce. If the USTR determines
that the country’s acts or policies fall into one of those categories, then the USTR may, subject to
any specific direction of the President, (1) suspend or withdraw benefits of U.S. concessions
under the trade agreement; (2) impose duties or other restrictions on the foreign country’s goods
or services; or (3) enter a binding agreement with the foreign country that commits it to
eliminating or phasing out the burden or practice in question or to provide the U.S. with
compensatory trade benefits.
The USTR is not required to act, however, if a WTO panel or dispute settlement ruling finds that
U.S. rights have not been violated. The USTR is also not required to act if it finds (1) that the
foreign country is taking satisfactory measures to grant U.S. trade agreement rights; (2) that the
foreign country is taking satisfactory measures to either eliminate the practice, provide an
imminent solution to it, or provide satisfactory compensatory benefits; or (3) that taking the
action would cause serious harm to the U.S. national security.386
Any interested person may file a petition with the USTR requesting that action be taken under
Section 301.387 The USTR must review the petitioner’s allegations and publish, in the Federal

383 19 U.S.C. § 2411(a).
384 Id. at § 2411(b).
385 Codified at 19 U.S.C. § 2414(a)(1).
386 19 U.S.C. § 2411(b).
387 Id. at § 2412(a).
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Register, notice of the determination and a summary of the reasons behind it.388 The USTR can
also initiate investigations to determine whether a matter is actionable.389
Countervailing Duties: Remedies for Imports of Subsidized Goods
Title VII of the Tariff Act of 1930390 governs the process by which the United States decides to
impose countervailing duties (CVDs) in response to subsidies by foreign countries. Title VII
creates two different sets of rules: one set governs the imposition of CVDs on goods from
countries that are part of the Agreement on Subsidies and Countervailing Duties (SCM
Agreement) and the other set governs the imposition of CVDs on countries that are not part of the
SCM Agreement.391
The U.S. International Trade Commission and the U.S. Department of Commerce (through the
International Trade Administration) jointly investigate allegations of countervailable subsidies.
Their investigations commence when an interested party392 files a countervailing duty petition
with both ITA and the ITC alleging that an industry in the United States is materially injured or
threatened by reason of the sale of subsidized imports in the United States at less than their fair
value.393 The petition must be filed “by or on behalf of the industry,” meaning that the domestic
producers or workers who support the petition must account for at least 25% of the total
production of the domestic like product and for more than 50% of the production of the domestic
like product produced by that portion of the industry expressing support for the petition.394
Interested parties may file both antidumping and countervailing duty petitions involving the same
imported merchandise. Both the ITA and the ITC are willing to review a petition before it is filed
to enable the petitioner to learn about any deficiencies in the petition that might delay or prevent
the initiation of an investigation.395

388 Id. For example, in the fall of 2010 the United Steelworkers filed a petition with the USTR alleging that China
employed a wide range of WTO-inconsistent policies that unfairly protected and supported their domestic producers in
the green energy sector. Initiation of Section 302 Investigation and Request for Public Comment: China—Acts,
Policies and Practices Affecting Trade and Investment in Green Technology, 75 Fed. Reg. 64776 (Oct. 20, 2010). On
October 15, 2010, the USTR responded by initiating an investigation. Id. The United States has since requested
consultations with China concerning China’s “Special Fund for Wind Power Manufacturing,” which the United States
alleged provides prohibited subsidies to wind power equipment manufacturers. Request for Consultations by the United
States, China—Measures Concerning Wind Power Equipment, WT/DS419/1 (Jan. 6, 2011).
389 19 U.S.C. § 2412(b).
390 Id. at § 1671 et seq.
391 Compare 19 U.S.C. § 1671(b) with 19 U.S.C. § 1671(c). In practice, the vast majority of subsidies investigations
have looked only at allegations of subsidies of other WTO Members.
392 An “interested party” is defined in 19 U.S.C. § 1677(9) to include, among others, (1) a manufacturer, producer or
wholesaler in the United States of a domestic like product, (2) a certified or recognized union or group or workers that
is representative of the industry, (3) a trade or business association of a majority of whose members manufacture,
produce, or wholesale a domestic like product, and (4) a coalition of firms, unions, or trade associations as already
described. 19 U.S.C. § 1677(9). Commerce may also initiate its own investigations, but it rarely does so. UNITED
STATES INTERNATIONAL TRADE COMMISSION, ANTIDUMPING AND COUNTERVAILING DUTY HANDBOOK 1-4 n.8 (2008).
393 19 U.S.C. § 1671(a).
394 Id. at § 1671a(c)(4).
395 United States International Trade Commission, supra note 392, at 1-4.
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Once a petition is received, the ITA and the ITC enter the first of two rounds of the investigation.
In this first round, the agencies must make preliminary determinations on the existence of both a
material injury to domestic industry and of a countervailable subsidy by the foreign country.
The ITC’s preliminary determination evaluates whether there is a “reasonable indication” of a
material injury, that is, whether the domestic industry is materially injured or threatened with
material injury or whether its establishment is materially retarded.396 However, the ITC will not
engage in this preliminary analysis if the allegedly subsidizing country is not a member of the
WTO and therefore entitled, under the SCM Agreement, to an injury determination.397 If, on the
other hand, the ITC finds that there is no reasonable indication of material injury, the
investigation is terminated and the ITA does not continue its own preliminary investigation.
The ITA’s preliminary determination evaluates whether there is a reasonable basis to believe or
suspect that a countervailable subsidy is being provided with respect to the subject
merchandise.398 If the ITA and the ITC reach affirmative determinations, namely that there is a
reasonable basis to believe the country being investigated is providing countervailable subsidy
that is causing a material injury to the domestic industry, the importers of the targeted
merchandise must post bond or provide some other security for the estimated subsidy for all
entries of the subject merchandise.399 In addition, at that point, the investigation enters the second
round in which both agencies must make final determinations.
The ITA makes its determination first. The ITA must determine whether or not a countervailable
subsidy is being provided with respect to the merchandise.400 Following the ITA’s final
determination, the ITC determines whether the domestic industry is materially injured or
threatened with material injury or whether its establishment in the United States is materially
retarded by reason of imports, sales, or likely sales of merchandise that the ITA has deemed
subsidized.401 However, as with the preliminary injury determination, the ITC will not engage in
this final analysis if the allegedly subsidizing country is not a member of the WTO.402
If the two agencies’ final determinations conclude that a countervailable subsidy was provided
with the effect of causing or threatening material injury to a domestic industry or its
establishment, then, upon publishing its finding, the Department of Commerce issues a
countervailing duty order equal to the net amount of the subsidy.403 This order instructs the U.S.
Customs and Border Protection to collect cash deposits of CVD duties on the merchandise in
question when it enters the U.S., but these cash deposits represent an estimate of the actual duties

396 19 U.S.C. § 1671b(a); ANTIDUMPING AND COUNTERVAILING DUTY HANDBOOK, supra note 395, AT II-5.
397 Id. at § 1671(c). Countries who are not members of the SCM Agreement are also not entitled to several other
procedural benefits in the CVD process, including a five-year review of countervailing duty orders, suspension of the
investigation under 19 U.S.C. § 1671c(c), or a determination of the presence of critical circumstances. Id.
398 Id. at § 1671b(b).
399 Id. at § 1671b(d).
400 Id. at § 1671d(a)(1). E.g., Final Affirmative Countervailing Countervailing Duty Determination, 75 Fed. Reg. 28557
(May 21, 2010).
401 19 U.S.C. § 1671d(b)(1).
402 Id. at § 1671(c). Countries who are not members of the SCM Agreement are also not entitled to several other
procedural benefits in the CVD process, including a five-year review of countervailing duty orders, suspension of the
investigation under 19 U.S.C. § 1671c(c), or a determination of the presence of critical circumstances. Id.
403 Id. at § 1671d(c). E.g., Notice of Antidumping Duty Order, 75 Fed. Reg. 37382 (June 29, 2010).
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owed.404 The final amount of the duties collected will be either the cash deposit, or, if an
administrative review is requested, the duty established by that review.405 Generally, the final duty
is determined by an administrative review.406
Antidumping Duties and “Zeroing”: Remedies for Imports Sold at Less Than
Fair Value
U.S. antidumping law strongly resembles the U.S. countervailing duty laws just discussed. As
under CVD law, the processes for the assessment and collection of AD duties are prescribed in
Title VII of the Tariff Act of 1930.407 And, as with CVD law, any interested party may petition the
Department of Commerce to investigate allegations of dumping, and these investigations may
also be self-initiated by Commerce. The petitions must be filed “by or on behalf of the
industry.”408 Like CVD investigations, AD investigations are jointly administered over the course
of two rounds by the Department of Commerce and the ITC.
Like countervailable subsidy investigations, the first round of an antidumping investigation
requires preliminary determinations by the ITA and the ITC. In this round, the ITC determines
whether there is a reasonable indication of material injury, and, if the ITC finds that there is, the
ITA assesses whether there is a reasonable basis to believe or suspect that the merchandise is
being sold, or is likely to be sold, at less than fair value.409 Predictably, the second round is the
round in which the ITA and ITC make their final determinations on these questions.410
As under CVD law, if both the ITA and ITC make affirmative determinations on these questions,
then the ITA issues an order instructing the U.S. Customs and Border Protection to collect cash
deposits of the AD duties on the merchandise in question when it enters the U.S., but these cash
deposits represent only an estimate of the actual duties owed.411 Typically, a final duty is not
established unless there is an administrative review of the AD order.412
Antidumping duties are based on the “weighted average dumping margin” as determined by the
ITA under 19 U.S.C. § 1677f-1.413 In determining the size of a dumping margin for a particular
product, the Department of Commerce has historically used a practice known as “zeroing” in its

404 DEPARTMENT OF COMMERCE, IMPORT ADMINISTRATION, 2009 ANTIDUMPING MANUAL 2 (2009).
405 Id. See 19 U.S.C. § 1675. For an explanation of administrative reviews, read the section titled “Use of ‘Zeroing’ in
Antidumping Proceedings: Background” in CRS Report RL32014, WTO Dispute Settlement: Status of U.S. Compliance
in Pending Cases, by Jeanne J. Grimmett, WTO Dispute Settlement: Status of U.S. Compliance in Pending Cases, by
Jeanne J. Grimmett. Although that section is looking only at antidumping duties, AD and CVD law mirror each other in
this area. See also CRS Report RL32371, Trade Remedies: A Primer, by Vivian C. Jones.
406 19 C.F.R. § 351.212(a). The United States is said to use a “retrospective” assessment system because, in the United
States, final liability for antidumping (and countervailing) duties is determined after the merchandise is imported. Id.
407 Codified by 19 U.S.C. § 1673 et seq. A second law involving AD duties, which is not discussed in this report, is
Section 1317 of the Omnibus Trade and Competitiveness Act of 1988. Section 1317 establishes procedures for the U.S.
to request a foreign government to act against third-country dumping that is injuring a U.S. industry.
408 19 U.S.C. § 1673a.
409 Id. at §§ 1673b(a)(1), 1673b(b)(1).
410 19 U.S.C. §§ 1673d(a)(1), 1673d(b)(1).
411 ANTIDUMPING MANUAL, supra note 404, at 2. See 19 U.S.C. § 1675.
412 Supra note 404 and accompanying text.
413 19 U.S.C. § 1673d(c)(B); 19 U.S.C. § 1677f-1.
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administrative reviews.414 Zeroing entails aggregating the dumping margins for all of the sub-
products but assigning the value of zero to a sub-product’s dumping margin when its export price
exceeds its normal (home market) value.415 Critics argue that this method inflates the dumping
margins and that the Department of Commerce should, instead, offset the margins for sub-
products sold at less their normal value with the margins for sub-products sold at more than their
normal value.
While the Court of International Trade has said Commerce’s decision to use “zeroing” to
calculate the dumping margin is a reasonable and permissible interpretation of the law, the WTO
has consistently ruled against the United States in cases brought by U.S. trading partners over the
Department of Commerce’s use of zeroing.416 The USTR has argued that zeroing is an acceptable
practice under the Agreement on Antidumping because, during the negotiations of the AD
Agreement, WTO Members had considered but purposefully declined to adopt a prohibition on
zeroing.417 However, the Dispute Settlement Body is highly unlikely to depart from the reasoning
of the adopted reports that ruled against zeroing.418 Meanwhile, the CIT and Court of Appeals for
the Federal Circuit are unlikely to depart from their practice of upholding the validity of zeroing
because they have left it to the executive branch to decide whether and how to comply with WTO
decisions.419
The Executive Branch is now considering taking action. On December 28, 2010, the Department
of Commerce published a notice of a proposed rule in the Federal Register, seeking comments on
the calculation of the dumping margin and antidumping duty orders.420 The Department is
proposing to abandon zeroing in administrative reviews of AD orders except, perhaps, where it
determines that zeroing would be appropriate.421 If adopted, Commerce would apply this new
methodology in all pending administrative reviews in which preliminary results are due more
than 60 days after publication of the final rule.422

414 However, the Department of Commerce abandoned its use of zeroing in original AD investigations in 2007.
415 See DEPARTMENT OF COMMERCE, IMPORT ADMINISTRATION, ANTIDUMPING MANUAL CHAPTER 6, 7 (1998).
416 Paul Muller Indus., 435 F. Supp. 2d. at 1244; Brightbill, Kwon, and Fogarty, supra note 382, at 54-55 (noting that
the CIT’s use of a straightforward Chevron analysis to ultimately determine that the Department of Commerce’s use of
zeroing is in accordance with the law, indicates that the CIT seems to want to defer responsibility for WTO compliance
to the executive branch).
417 WTO Appellate Body Issues Ruling Affirming Illegality of Zeroing in Mexican Steel Decision, 25 INT’L TRADE REP.
660 (May 1, 2008).
418 See Report of the Appellate Body, U.S.—Import Prohibition of Certain Shrimp and Shrimp Products, Recourse to
Article 21.5 of the DSU by Malaysia, WT/DS58/AB/RW, paras. 108-109 (Oct. 22, 2001) (stating that adopted panel
and Appellate Body reports “should be taken into account where they are relevant” because they create legitimate
expectations among WTO Members).
419 E.g., Koyo Seiko Co. v. United States, 551 F.3d 1286, 1291 (Fed. Cir. 2008) (“The determination whether, when,
and how to comply with the WTO’s decision on ‘zeroing,’ involves delicate and subtle political judgments that are
within the authority of the Executive and not the Judicial Branch”).
420 Antidumping Proceedings: Calculation of the Weighted Average Dumping Margin and Assessment Rate in Certain
Antidumping Duty Proceedings, 75 Fed. Reg. 81533 (Dec. 28, 2010).
421 Id. at 81534-35.
422 Id. at 81535.
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Safeguards
Section 201
Sections 201 through 204 of the Trade Act of 1974423 provide the authority and procedures for the
President to take action, including import relief, to facilitate a domestic industry’s adjustment to
import competition. Successful adjustment to import competition is defined as the domestic
industry’s ability to successfully compete or its orderly transfer of resources to other productive
pursuits.424
Under Section 201, if the International Trade Commission determines that an article is being
imported in such increased quantities as to be a substantial cause, or threat, of serious injury to
the domestic industry producing the like or directly competitive article, the President shall take all
appropriate action to facilitate the domestic industry’s adjustment.425 Any entity that is
representative of an industry may petition the ITC to make this determination.426 The law lists
several factors, including a relative increase in imports and decline in the proportion of the
domestic market supplied by domestic producers, that the ITC must consider in making its
determination.427 However, the statute does not cabin the ITC’s investigation to those factors.
If the ITC makes an affirmative determination, it must recommend the action that would address
the serious injury, or threat thereof, to the domestic industry.428 Specifically, it is authorized to
recommend, among other actions: an increase or imposition of a duty, a tariff-rate quota, and a
modification or imposition of a quantitative restriction.429 Upon receiving a report of the ITC’s
determination and recommendations, the President must determine and take “all appropriate and
feasible action” to make a positive adjustment to import competition.430 The President is required
to consider certain factors before determining what action to take.431 If the President concludes
that there is no appropriate and feasible action to take, the President must transmit to Congress a
document setting forth the reasons for the decision.432
China Safeguards
In addition to Section 201, Title IV of the Trade Act of 1974 also provides country-specific
safeguards under which the President can provide domestic industries with relief from domestic

423 Codified at 19 U.S.C. §§ 2251-2254.
424 19 U.S.C. § 2241(b). Additionally, dislocated workers in the industry must experience an orderly transition to
productive pursuits. Id.
425 19 U.S.C. § 2251(a).
426 Id. at § 2252(a)(1).
427 If the petition alleges serious injury, the ITC must consider (1) the significant idling of productive facilities in the
domestic industry; (2) the inability of a significant number of firms to carry out domestic production operations at a
reasonable level of profit, and (3) significant unemployment or underemployment within the domestic industry. 19
U.S.C.§ 22452(c)(1)(A). The statute provides a different set of factors for cases in which the petition alleges only a
threat of serious injury. 19 U.S.C. § 2252(c)(1)(B).
428 19 U.S.C. § 2252(e)(1).
429 Id. at § 2252(e)(2).
430 Id. at § 2253(a)(1).
431 Id. at § 2253(a)(2).
432 Id. at § 2253(b)(2).
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market disruption. In advance of China’s accession to the WTO, the United States and China
negotiated two temporary China-specific safeguards, which are scheduled to expire in 2013.433
The first provision is the so-called “China safeguard,” which is contained in Section 421 of the
Trade Act of 1974.434 Section 421 entitles the President to temporarily increase duties or other
import restrictions to remedy an import surge that threatens—or causes—market disruption of a
domestic producer of a similar product. For example, in September 2009, President Obama
determined that imports of new pneumatic car tires from China were being imported into the
United States in a fashion that caused or threatened to cause market disruption to domestic car tire
products.435 Accordingly, he exercised his authority under Section 421 to proclaim an additional
duty on certain Chinese tires.436
The second China-specific safeguard, Section 422 of the Trade Act of 1974,437 is an import
monitoring provision. It provides that if any WTO Member other than the United States requests
consultations with China under the product-specific safeguard provision, the United States
Customs Service must monitor imports of those same products into the United States. To date, the
President has not taken action pursuant to Section 422.
Domestic Tariff and Customs Law
Harmonized Tariff Schedule
The Harmonized Tariff Schedule (HTS) was enacted by the Omnibus Trade and Competitiveness
Act of 1988.438 It identifies the “rates of duty” for particular classes and articles of imported and
exported goods. The HTS is divided into three columns laying out (1) the rates of duty for
products receiving most favored nation treatment, (2) the rates of duty for products that do not
receive that treatment, and (3) the rates of duty for special duty-free and other preferential rates
that are accorded under free trade agreements and trade preference programs. In addition, there
are three different bases for assessing duties: (1) ad valorem rates, which assess duties by the

433 See Summary of the U.S.-China Bilateral WTO Agreement, Prepared by the White House National Economic
Council, November 15, 1999, 16 INT'L TRADE REP. 1888, 1890 (Nov. 15, 1999); 19 U.S.C. § 2451b(c) (requiring
termination of these provisions 12 years after the date of entry into force of the Protocol of Accession of the People’s
Republic of China to the WTO). See also World Trade Organization, Ministerial Decision of 10 November 2001,
Accession of the People’s Republic of China, WT/L/432, at ¶ 16 (2001).
434 U.S.-China Relations Act of 2000, P.L. 106-268, 114 Stat. 8880, § 103 (2000), codified at 19 U.S.C § 2451.
435 Proclamation No. 8414, 74 Fed. Reg. 47861 (September 17, 2009). President Obama’s determination was informed
by a recommendation from the International Trade Commission that imports of these tires were causing domestic
market disruption and should have an additional duty placed on them. Id.
436 Id. (“Pursuant to section 421(a) of the Trade Act (19 U.S.C. 2451(a)), I have determined to provide import relief
with respect to new pneumatic tires, of rubber, from China, of a kind used on motor cars... such import relief shall take
the form of an additional duty on imports of the products described ... ”). In response to the additional tariffs imposed
on Chinese tire imports, China filed a WTO complaint against the United States. Request for Consultations by China,
US—Measures Affecting Imports of Certain Passenger Vehicle and Light Truck Tyres from China, WT/DS399/1 (Sept.
16, 2009). The WTO panel ruled in favor of the United States in December 2010 and China appealed the decision. For
more information on the tires dispute, CRS Report R40844, Chinese Tire Imports: Section 421 Safeguards and the
World Trade Organization (WTO), by Jeanne J. Grimmett.
437 U.S.-China Relations Act of 2000, P.L. 106-268, 114 Stat. 8880, § 103 (2000), codified at 19 U.S.C § 2451a.
438 P.L. 100-418. It replaced the Tariff Schedules of the United States, enacted as Title I of the Tariff Act of 1930,
which had been in effect since 1963.
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value of the article; (2) specific rates, which assess duties by the weight or quantity of the article;
and (3) compound rates, which assess duties by a combination of ad valorem and specific rates.
However, Chapters 98 and 99 of the HTS also include special provisions and modifications that
permit, in certain circumstances, duty-free or partial duty-free entry of goods that would
otherwise be subject to duty. Among the exceptions to the HTS are suspensions or reductions of
duties resulting from free trade agreements and other international obligations, from a U.S.
tourist’s purchases while overseas, and from the application of the Generalized System of
Preferences, discussed below.
Generalized System of Preferences
Title V of the Trade Act of 1974, P.L. 93-618, as amended, governs the U.S. Generalized System
of Preferences (GSP).439 In the past few years, Congress has extended the GSP through a series of
short-term extensions. However, the 111th Congress did not extend the GSP in 2010; it lapsed
December 31, 2010.440
The GSP authorizes duty-free treatment for a variety of products from developing countries. It
originated in dialogues between the developed and the developing world in which the latter
successfully pushed for special access to industrial markets.441 Under the GSP, any United States
producer of an article that competes with GSP imports can petition to have a country or particular
group of products removed from the program. Similarly, any foreign exporter can petition for
product or beneficiary country status in the program. The President has broad authority to
withdraw, suspend, or limit the application of duty free entry under the GSP system.442
Two “competitive need” limitations restrict the availability of duty free GSP entry.443 The first
bars duty free entry for a product from a beneficiary country if, during the preceding year, that
country exported to the U.S. more than a designated dollar volume of that product. The second
bars duty free entry for a product if, during the preceding year, the beneficiary country exported
to the U.S. 50% or more of the total U.S. imports of that particular product. However, the
President has authority to waive these limitations in certain circumstances under 19 U.S.C. §
2463.444

439 19 U.S.C. §§ 2461-2467
440 P.L. 111-124; Obama Signs Omnibus Trade Act; Bill Extends ATPA, TAA for Six Weeks, INT’L TRADE REP. (Jan. 6,
2011). For additional information on the GSP, see CRS Report RL33663, Generalized System of Preferences:
Background and Renewal Debate, by Vivian C. Jones, CRS Report RS22541, Generalized System of Preferences:
Agricultural Imports, by Renée Johnson and CRS Report R41429, Trade Preferences: Economic Issues and Policy
Options, coordinated by Vivian C. Jones.
441 Although this system of tariff preferences contravenes the GATT’s most-favored nation principle, the so-called
“Enabling Clause” authorized WTO Members to establish these systems for developing nations beginning in 1971. See
World Trade Organization, Ministerial Decision of 28 November 1979, Different and More Favorable Treatment
Reciprocity and Fuller Participation of Developing Countries, L/4903 (1979). For more on trade preference systems,
see CRS Report RS22183, Trade Preferences for Developing Countries and the World Trade Organization (WTO), by
Jeanne J. Grimmett.
442 19 U.S.C. § 2464(a).
443 Id. at § 2464(c).
444 For example, the President can waive the percentage limitation if the President determines that that there is no like
or directly competitive article produced in the United States, the import comes from a least developed country and
Congress has received notice, the import comes from a country with which the U.S. has a longstanding preferential
trade relationship coupled with a trade agreement, or the import is not likely to have an adverse effect on the U.S.
(continued...)
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Eligible Countries
A list of GSP qualified nations and territories is contained in HTS General Note 3(c)(ii). 19
U.S.C. § 2462 also lists categories of countries that cannot benefit from the GSP program,
including other developed countries, communist states, and nations that collude with other
countries to withhold supplies or resources from international trade or otherwise raise the price of
goods in a way that could cause serious disruption to the world economy (such as an oil
restraining OPEC nation). Outside of these bars on eligibility, the Administration445 has
substantial discretion over which countries and products receive beneficiary status. In
determining whether a country is eligible, the Administration must evaluate, among other things,
if that country is upholding workers’ rights, protecting the property rights of U.S. citizens and
corporations, adversely affecting U.S. exports via its investment laws, protecting intellectual
property rights, extending equitable and reasonable access to its markets, refraining from
unreasonable export practices, reducing trade distorting investment practices (such as export
performance requirements), and reducing barriers to trade in services.446 The Administration must
also consider whether beneficiary countries are cooperative on drug enforcement and whether
they assist terrorists. Although the Administration must consider these and other factors in
assessing a country’s eligibility, the President may determine that a country qualifies for
beneficiary status despite having a less desirable record on any one or set of them if the
Administration finds GSP duty free entry would be in the national economic interest of the United
States.447
The Administration’s review of a country’s eligibility under the GSP program is ongoing, which
allows for disqualification, reinstatement, and graduation of GSP beneficiary nations. The
President may graduate a beneficiary country from the GSP program if the Administration
determines that the nation is sufficiently developed so as to no longer need the benefits of duty
free entry into the U.S. market. Specifically, the Administration must assess the economic
development level of the beneficiary country, the competitive position of the imports, and the
overall national economic interests of the U.S. Any country designated as a beneficiary nation
under the GSP program that is subsequently disqualified or graduated by the Administration must
receive notice and an explanation of the decision, permitting the country to respond and negotiate
its eligibility.
Eligible Products
In addition to country eligibility, the Administration also issues a list of products from each
country that qualify for duty free entry. The GSP program generally excludes leather products,
textiles and apparel, watches, certain electronics, and some categories of steel, footwear, and
glass from eligibility. A complex body of “rules of origin” determine where goods are from for

(...continued)
industry with which they compete and their duty free entry will serve the national economic interest. 19 U.S.C. §
2463(d).
445 The statute gives authority to the President to make this and other evaluations, however the President has delegated
the responsibility to the United States International Trade Commission (ITC).
446 19 U.S.C. § 2462(c).
447 Id.
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purposes of the GSP program.448 Generally, at least 35% of the appraised value of those goods
must have been added in the country seeking duty free entry.
In addition, the “rules of origin” in the GSP program favor certain regional economic groups.
Goods made in the ANDEAN pact, for example, may be designated as being made in one country
for purposes of determining their origin. However, not all third world regional economic groups
receive this treatment. The Central American Common Market and the Gulf Council of the
Middle East are among the regional economic groups who are excluded from this favorable
treatment.
Other Duty Free Entry Programs
In addition to the U.S. GSP program, the United States has similar non-reciprocal duty-free entry
programs for particular regions. One program is the Caribbean Basin Initiative of 1983
(CBERA),449 which offers substantial duty free entry to nearly all of the islands in, and many
countries bordering, the Caribbean Sea.450 A second is the Andean Trade Preference Act of
1991,451 under which the President is authorized to grant duty free treatment to imports of eligible
articles from Colombia, Peru, Bolivia, and Ecuador. ATPA was set to expire at the end of 2010,452
but Congress enacted a stopgap measure to extend ATPA until February 12, 2011.453 A third trade
preferences program is contained in the African Growth and Opportunity Act (AGOA),454 which
authorizes the President to designate Sub-Saharan African countries as beneficiary countries
eligible to receive duty-free treatment for certain articles.455
Statutory Authorities for the Imposition of Trade Sanctions
Although the United States has imposed trade embargoes since the earliest days of the republic,456
economic sanctions have become an increasingly prevalent feature of U.S. foreign policy in
recent decades.457 In general, the President imposes these sanctions by issuing an Executive Order
under existing statutory authorities. However, Congress also has a history of enacting legislation
that purports to impose sanctions directly or instructs the President as to what actions may or
must be taken with respect to imposing sanctions on a particular country or entity.458 Once

448 See 19 U.S.C. § 2463(b).
449 P.L. 98-67, 97 Stat. 369, codified at 19 U.S.C. § 2701 et seq.
450 Unlike some other regional trade preference programs, CBERA was made permanent in 1990. For more information
on CBERA and other trade preference programs aimed at countries in the Caribbean, see CRS Report RL33951, U.S.
Trade Policy and the Caribbean: From Trade Preferences to Free Trade Agreements, by J. F. Hornbeck.
451 P.L. 102-182, 105 Stat. 1236, codified at 19 U.S.C. § 3201 et seq.
452 For further information on ATPA, see CRS Report RS22548, ATPA Renewal: Background and Issues, by M.
Angeles Villarreal.
453 P.L. 111-344, § 201.
454 P.L. 106-200, 114 Stat. 251, codified at 19 U.S.C. §§ 2466a et seq.
455 19 U.S.C. § 2466a(a). The preferences established under AGOA will expire in 2015, but some textile-specific
preferences will expire earlier. For more information on AGOA, see CRS Report RL31772, U.S. Trade and Investment
Relationship with Sub-Saharan Africa: The African Growth and Opportunity Act, by Vivian C. Jones.
456 E.g., An Act to Prohibit the Importation of Certain Goods, Wares and Merchandise, 2 Stat. 379 (1806) (prohibiting
the importation of products made from leather, silk, hemp, flax, tin, or brass from Great Britain or Ireland).
457 See MICHAEL P. MALLOY, ECONOMIC SANCTIONS AND U.S. TRADE 4, 34 (1990).
458 E.g., Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010, P.L. 111-342, 124 Stat. 1312
(continued...)
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imposed, sanctions are implemented primarily by the U.S. Department of Treasury, Office of
Foreign Assets Control459 (OFAC) and the Commerce Department.
This section briefly discusses two of the most commonly cited sources of the President’s statutory
authority for country-specific economic sanctions: the Trading with the Enemy Act and the
International Emergency Economic Powers Act.460 However, sanctions, like other trade measures,
must be crafted to comply with not only domestic laws but also principles of customary
international law and WTO obligations.461 When the United States imposes unilateral sanctions, it
can provoke friction not only with the target country but also with countries that trade with the
target country. In turn, these countries may challenge the sanctions through WTO dispute
settlement proceedings or other avenues.462
Trading with the Enemy Act
The Trading with the Enemy Act463 (TWEA) was intended to authorize country-specific sanctions
during times of war. Congress briefly expanded TWEA to authorize sanctions during periods of
declared national emergency, but, in 1977, Congress relocated the statutory authority for issuing
sanctions in national emergencies from TWEA to the International Emergency Economic Powers
Act (IEEPA).
Despite these changes, the powers granted by Section 5 of TWEA464 have remained relatively
stable, and TWEA remains, at least in part, the statutory basis for some U.S. sanctions
programs.465 TWEA authorizes the President to take a wide variety of actions with respect to
virtually any transaction that is conducted by a person subject to U.S. jurisdiction or that involves

(...continued)
(2010); Sudan Peace Act of 2002, P.L. 107-245, 116 Stat. 1504 (2002); Iran Sanctions Act of 1996, P.L. 104-172, 110
Stat. 1541 (1996); Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010, P.L. 111-195.
459 The regulations implementing each sanction regime are issued by the Office of Foreign Asset Control and arranged,
country-by-country, in 31 C.F.R, Chapter V. OFAC posts information on each of the sanctions programs it oversees at
http://www.treasury.gov/resource-center/sanctions/Programs/Pages/Programs.aspx.
460 In addition to these two statutes, the Export Administration Act of 1979 (EAA), P.L. 96-72, 93 Stat. 503, is one of
the broadest sources of statutory authority under which the Executive may pursue sanctions. However, the EAA
expired in 2001 and is currently operating under an Executive Order invoking the International Emergency Economic
Powers Act. Exec. Order 13222, 66 Fed. Reg. 44025 (Aug. 22, 2001). For a description of the EAA, see CRS Report
RL31832, The Export Administration Act: Evolution, Provisions, and Debate, by Ian F. Fergusson.
461 See generally Michael P. Malloy, Ou est votre chapeau? Economic Sanctions and Trade Regulation, 4 CHI. J. INT’L
L. 374 (2003) (discussing commonly recurring issues with the consistency of U.S. sanctions with the customary
international law and the WTO Agreements, including issues associated with “secondary boycotts,” extraterritoriality,
and the national security exceptions of the GATT and GATS).
462 See, e.g., supra “Article XXI: National Security Exceptions to the GATT”(discussing the European Union’s
response to the LIBERTAD Act, which sought to dissuade other countries from investing in Cuba by strengthening the
U.S. embargo against it); Military and Paramilitary Activities in and Against Nicaragua (Nicar v. U.S.), 1986 I.C.J. 14,
181 (June 27) (analyzing the consistency of a broad range of U.S. measures against Nicaragua, including the imposition
of a trade embargo and the exclusion of all Nicaraguan vessels from U.S. ports, with principles of international law).
463 40 Stat. 411, 50 U.S.C. app. § 1 et seq.
464 50 U.S.C. app. § 5(b)(1)(B).
465 Malloy, supra note 457, at 35, 147. E.g., Presidential Determination No. 2010-13, 75 Fed. Reg. 54459 (Sept. 7,
2010) (continuing for one year the exercise of authorities under TWEA as implemented by the Cuban Assets Control
Regulations, 31 C.F.R. Part 515).
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property subject to U.S. jurisdiction and in which the foreign country—or a national thereof—has
an interest.466 Specifically, TWEA states that the President may:
[I]vestigate, regulate, direct and compel, nullify, void, prevent, or prohibit any acquisition,
holding, witholding, use, transfer, withdraw, transportation, importation or exportation of, or
dealing in, or exercising any right, power, or privilege with respect to, or transactions
involving, any property in which any foreign country or a national thereof has any interest by
any person, or with respect to any property, subject to the jurisdiction of the United States.467
TWEA’s prohibitory language is often tracked in the regulations implementing various economic
sanctions programs. However, the President has also exercised his affirmative authorities under
TWEA by, for example, directing and compelling certain foreign assets to be held in interest-
bearing accounts.468
International Emergency Economic Powers Act
IEEPA469 replaced TWEA in 1977 as the source of authority for the President to issue economic
sanctions during periods of declared national emergency—as opposed to wartime.470 Before the
President may exercise his IEEPA authorities, he must declare a national emergency with respect
to the threat involved.471 In addition, the President must consult with Congress, whenever
possible, before declaring a national emergency and regularly while the national emergency
remains in force.472 The question of whether a threat rises to the level of a national emergency
sufficient to trigger IEEPA-based sanctions appears to be nonjusticiable.473 However, Congress
may enact—and is required at a certain point to consider—a joint resolution terminating a
Declaration of National Emergency.474

466 See 50 U.S.C. app. § 5(b)(1)(B).
467 Id.
468 See, e.g., 31 C.F.R. § 500.205(b) (directing people holding certain property to place that property in an interest-
bearing account in a domestic bank). See also Malloy, supra note 457, at 145-46.
469 P.L. 95-223, as amended, 50 U.S.C. §§ 1701 et seq.
470 Malloy, supra note 457, at 35.
471 50 U.S.C. § 1701(a). See also National Emergencies Act, P.L. 94-412, 90 Stat. 1255.
472 50 U.S.C. § 1703(a). Some commentators have questioned the utility of these procedural requirements, citing
instances when no noticeable consultation between the President and Congress occurred and variations in the quality of
the President’s reports to Congress on IEEPA-based sanctions regimes. See, e.g., Malloy, supra note 457, at 171
(“[O]ne must question whether the IEEPA has in fact imposed any appreciable limitations upon the actual exercise of
presidential power under emergency conditions. The experience of the Iran crisis does not appear to suggest any
noticeable restriction of presidential power... nor do the reports of the President, periodically submitted to the Congress
under the IEEPA, appear to be particularly informative ... ”).
473 See Beacon Prods. v. Reagan, 633 F. Supp. 1191 (D. Mass. 1986) (holding that the issue of whether a foreign
country poses a sufficient threat to trigger the President’s power under IEEPA is a nonjusticiable political question),
aff’d in part and dismissed on the grounds of mootness by Beacon Prods. v. Reagan, 814 F.2d 1 (1st Cir. 1987). See also
Chang v. United States, 859 F.2d 893, 896 n. 3 (Fed. Cir. 1988) (stating that an inquiry into “the President’s motives
and justifications for declaring a national emergency... would likely present a nonjusticiable political question.”).
474 50 U.S.C. § 1622(a), (b). Congress must meet at least six months after a national emergency is declared to consider
enacting a joint resolution terminating the Declaration of National Emergency. Id. at § 1622(b). The President may also
issue a presidential proclamation terminating the Declaration of National Emergency. Id. at § 1622(a).
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Although the statutory trigger is different, the powers of IEEPA are very similar to those granted
by TWEA.475 Under IEEPA, the President may “investigate, regulate, prevent, or prohibit”
virtually any foreign economic transaction, from import or export of goods and currency to
transfer of exchange or credit.476 The USA Patriot Act477 further augmented the President’s IEEPA
authority by vesting him with the additional power to (1) block property during the pendency of
an investigation and (2) confiscate and vest property of any foreign country or foreign national
that has planned, authorized, aided, or engaged in armed hostilities with or attacks against the
United States.478 IEEPA exempts very few international transactions from the President’s
control,479 and it grants the President broad authority to prescribe definitions. For example, the
President may define who is a “U.S. person” subject to the prohibitions and restrictions of
sanctions issued under IEEPA.480
IEEPA has become the primary source of authority for country-specific sanctions regimes over
the past several decades. It was first used by President Jimmy Carter in response to the Iranian
hostage crisis.481 Similarly, after 9/11, President George W. Bush relied on IEEPA to block
property and property interests that come within the control of U.S. persons and belong to foreign
persons who committed acts of terrorism against U.S. nationals or the U.S. economy. 482 Among
the many sanctions programs that are currently based, at least in part, on the President’s IEEPA
authority are the U.S. sanctions against Myanmar (Burma),483 Cote d’Ivoire,484 Iran,485 North
Korea,486 Sudan,487 and Syria.488

475 Compare 50 U.S.C. app. § 5(b)(1)(B) with 50 U.S.C. § 1702(a)(1)(B).
476 50 U.S.C. § 1702(a); U.S. HOUSE OF REPRESENTATIVES SUBCOMMITTEE ON TRADE, OVERVIEW AND COMPILATION OF
U.S. TRADE STATUTES: PART I OF II 217 (2005 ed.). For example, the President may, under his IEEPA powers,
investigate, regulate, or prohibit (1) any transactions in foreign exchange, (2) any transfers of credit or payments
through or by a banking institution, to the extent that the transfers involve any interest of any foreign country or a
national thereof, (3) the importing or exporting of currency or securities, and (4) any acquisition, holding, withholding,
use, transfer, withdrawal, transportation, importation or exportation of, or dealing in, or exercising any right, power, or
privilege with respect to, or transactions involving foreign property. 50 U.S.C. §§ 1701(a), 1702(a)(1).
477 P.L. 107-56, 115 Stat. 272.
478 50 U.S.C. § 1701(a)(1)(B)-(C).
479 See 50 U.S.C. § 1702(b) (identifying personal communications not involving the transfer of anything of value,
charitable donations for necessities of life to relieve human suffering, the importation to or expatriation from any
country of information and informational materials not otherwise controlled by export control law or espionage, and
personal transactions ordinarily incident to travel as the four exempted transactions).
480 50 U.S.C. § 1704. For example, under Executive Order 13067, which issued IEEPA-based sanctions against Sudan,
a U.S. person subject to those sanctions is broadly defined to include any U.S. citizen, permanent resident alien, entity
(including a partnership, association, trust, joint venture, corporation, or other organization) organized under U.S. laws,
or any person in the United States.
481 Exec. Order 12170, 44 Fed. Reg. 65,729 (Nov. 14, 1979).
482 Exec. Order 13224, 66 Fed. Reg. 49,079 (Sept. 25, 2001). In addition to IEEPA, President Bush relied on his
authority under the United Nations Participation Act of 1945 (22 U.S.C. §287c).
483 31 C.F.R. Part 537. For information on U.S. sanctions against Myanmar, see CRS Report RS22737, Burma:
Economic Sanctions, by Larry A. Niksch and Martin A. Weiss.
484 31 C.F.R. Part 543.
485 31 C.F.R. Part 560. For information on U.S. sanctions against Iran, see CRS Report RS20871, Iran Sanctions, by
Kenneth Katzman.
486 31 C.F.R. Part 510. For information on U.S. sanctions against North Korea, see CRS Report R41438, North Korea:
Legislative Basis for U.S. Economic Sanctions, by Dianne E. Rennack and CRS Report RL31502, Nuclear, Biological,
Chemical, and Missile Proliferation Sanctions: Selected Current Law, by Dianne E. Rennack.
487 31 C.F.R. Part 538. For more information on U.S. sanctions against Sudan, see CRS Report RL32606, Sudan:
(continued...)
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Author Contact Information

Emily C. Barbour

Legislative Attorney
ebarbour@crs.loc.gov, 7-5842



(...continued)
Economic Sanctions, by Dianne E. Rennack.
488 31 C.F.R. Part 542. For more information on U.S. sanctions against Syria, see CRS Report RL33487, Syria: Issues
for the 112th Congress and Background on U.S. Sanctions, by Jeremy M. Sharp.
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