General Exceptions: GATT Article XX

Non-economic objectives may lead to the conclusion that there is no WTO violation. In EC –
Asbestos the health risks inherent in asbestos meant that products containing asbestos were
judged not to be “like” those products that did not contain asbestos.
Even where a violation of one of the basic GATT rules is established, the challenged measure
has a second chance of survival under the general exceptions of GATT Article XX.
Even a Violation of GATT article I (MFN), article III (NT), article XIII or is prohibited under
GATT Article II or XI, that measure can still be justified under one of the general exceptions
set out in GATT Article XX.

Subject to the requirement that such measures are not applied in a manner
which would constitute means of arbitrary or unjustifiable discrimination
between countries where the same conditions prevail, or a disguised
restriction on international trade, nothing in this Agreement shall be
construed to prevent the adoption or enforcement by any contracting party
of measures:
(a) Necessary to protect public morals
(b) Necessary to protect human, animal or plant life or health
(c) –
(d) necessary to secure compliance with laws or regulations which are not
inconsistent with the provisions of this Agreement
(e) –
(f) –
(g) relating to the conservation of exhaustible natural resources if such measures
are made effective in conjunction with restrictions on domestic production or
consumption.
(h) , (i), (j)

There is another GATT provision that offers an exception in pursuit of non-economic

objectives: GATT Article XXI on security exceptions which allows WTO Members to take
“any action which it considers necessary for the protection of its essential security interests…
taken in time of war or other emergency in international relations. No GATT/WTO case law
on Article XXI (US argue that the article is self-judging and, effectively outside of WTO
dispute settlement, a view contested by most commentators).

Requirements: a two step analysis

Article XX can be divided into two sections:

 the specific exceptions
 the introductory paragraph
To qualify for an exception, it is necessary to satisfy both the specific exceptions and the
chapeau (US – Gasoline panel report).

MEANING OF “NECESSARY” (exceptions a: public morals, b: human, animal or plant

life or health, d: secure compliance with domestic regulations)

Brazil – Tyres

Facts: Brazil adopted a ban on the importation of retreaded tires which are produced by
reconditioning used ones. The EC complained that this measure violated MFN (article I), NT
(article III) and quantitative restrictions (article XI). Brazil did not contest that the measures
were inconsistent with these provisions but argued that they were justified under article XX(b)
as measures to protect human and animal life or health.
The essence of Brazil’s argument was that the transportation, accumulation, and disposal of
tires create health risks by providing a breeding ground for mosquito-born diseases. Brazil
focused its measure on retreaded tires because these have a shorter lifespan than new tires so
their importation increases the number of waste tires in Brazil.

AB consideration whether the measures put in place by Brazil are “necessary”:

In Korea – Various measures of beef the AB underscored that “the word ‘necessary’ is not
limited to what which is ‘indispensable’”. Necessary refers to range of degrees of necessity.
At one end lies “necessary” understood as “indispensable”, at the other end is “necessary”
taken to mean as “making contribution to”. AB considered that a necessary measure is located
significantly closer to the pole of “indispensable”.
The meaning of “necessary” of Article XX(d) involves in every case a process of weighing
and balancing a series of factors which prominently include the contribution made by the
compliance measure to the enforcement od the law or regulation at issue, the importance of
the common interests or values protected by that law or regulation, and the accompanying
impact of the law or regulation on imports or exports.
The Import Ban can be said to contribute to the achievement of its objective when there is a
“genuine relationship of ends and means between the objective pursued and the measure at
issue.”
An import ban is “by design as trade-restrictive as it can be.” When a measure produces
restrictive effects on international trade as severe as those resulting from an import ban, it
appears to us that it would be difficult for a panel to find that measure necessary unless it is
satisfied that the measure is apt to make a material contribution to the achievement of its
objective.
AB agrees with the Panel that fewer waste tyres will be generated with the Import Ban in
place. In addition, Brazil has developed and implemented a comprehensive strategy to deal
with waste tyres. The Panel did not err in finding that the Import Ban contributes to the
achievement of its objective.

Possible alternatives:

If this analysis yields a preliminary conclusion that the measure is necessary, this result must
be confirmed by comparing the measure with its possible alternatives, which may be less
trade restrictive while providing an equivalent contribution to the achievement of the
objective pursued. It rests upon the complaining Member to identify possible alternatives.
While the Responding Member must show that the measure is “necessary”, it does not have to
“show, in the first instance, that there are no reasonably available alternatives to achieve its
objectives.” An alternative measure may be found not to be ‘reasonably available’ … where it
is merely theoretical in nature.
The objective of the Import Ban is the reduction of the “exposure to the risks to human,
animal or plant life or health arising from the accumulation of waste tyres” and that “Brazil’s
chosen level of protection is the reduction of these risks… to the maximum extent possible.”
Tyres are essential for modern transportation. However, at the end of their useful life, they
turn into waste that carries risks for public health and the environment. The EC referred to
measures to encourage domestic retreading or improve the retreadability of used tyres, as well
as a better enforcement of the import ban on used tyres and of existing collection and disposal
schemes. These measures already figure as elements of a comprehensive strategy designed by
Brazil to deal with waste tyres. The Panel did not err in rejecting as alternatives components
of Brazil’s policy regarding waste tyres that are complementary to the Import Ban.
EC contends that the Panel committed an error of law by applying a “narrow definition of
alternative” which differs from the “objective allegedly pursued by the challenged measure.”
In evaluating whether the measures or practices proposed by the EC were “alternatives”, the
Panel sought to determine whether they would achieve Brazil’s policy objective and chosen
level of protection. AB agrees with the Panel that non-generation measures are more apt to
achieve this objective because they prevent the accumulation of waste tyres while waste
management measures dispose of waste tyres only once they have accumulated. Because the
practices carry their own risks they are not reasonably available alternatives.

EC – Asbestos

A French regulation banning asbestos fibers in any form. The regulation prohibited the
manufacture, processing, sale import, possession for sale, and transfer of all varieties of
asbestos fibers. Canada complained that the regulation violated GATT Articles III:4 and XI.
As part of its defense, the EC that the regulation qualified under the Article XX(b) exception
for measures “necessary to protect human, animal or plant life or health.”

On the issue of whether the measure at issue is “necessary” the Panel stated that the EC has
made prima facie case for the non-existence of a reasonably available alternative to the
banning of chrysotile and chrysotile-cement products and recourse to substitute products.
Canada has not rebutted the presumption established by EC.
Canada’s argument relating to “quantification: of the risk, AB considered that there is no
requirement under Article XX(b) to quantify, as such, the risk to human life or health.
Canada’s argument relating to the level of protection, we note that it is undisputed that WTO
Members have the right to determine the level of protection of health that they consider
appropriate in a given situation. The scientific evidence before the Panel indicated that the
risk posed by PSG fibers is, in any case, less than the risk posed by chrysotile asbestos fiber,
although that evidence did not indicate that the risk posed by PSG fibers is non-existent.
Canada also asserts that the Panel erred in finding that “controlled use” is not a reasonably
available alternative to the Decree. This last argument is based on Canada’s assertion that, in
United States – Gasoline, both we and the panel held that an alternative measure “can only be
ruled out if it is shown to be impossible to implement.” Also an alternative measure not cease
to be “reasonably” available simply because the alternative measure involved administrative
difficulties for a Member.
United States – Section 337 of the Tariff Act of 1930: a contracting party cannot justify a
measure inconsistent with another GATT provision as “necessary” in terms of Article XX(d)
if an alternative measure which it could reasonably be expected to employ and which is not
inconsistent with other GATT provisions available to it.
Canada asserts that “controlled use” represents a “reasonably available” measure that would
serve the same end.
In AB view France could not reasonably be expected to employ any alternative measure if
that measure would involve a continuation of every risk that the Decree seeks to “halt.” Such
an alternative measure would, in effect, prevent France from achieving its chosen level of
health protection. “Controlled use” would, thus, not be an alternative measure that would
achieve the end sought by France.
We uphold the Panel’s finding that the EC has demonstrated prima facie case that there was
no “reasonably available alternative” to the prohibition inherent in the Decree. The Decree is
“necessary to protect human… life or health” within the meaning of Article XX(b) of the
GATT 1994.

Summary of the meaning of “Necessary” under Article XX

The word “necessary” is not limited to absolute necessity. Determination involves a weighing
and balancing of facts, including:
 contribution of the measure to the ends pursued
 importance of the common interests or values protected, and
 impact of the measure on imports or exports.
Though an import ban is as trade restrictive as possible, it can nevertheless be “necessary.”
Once a preliminary conclusion that a measure is necessary has been reached, it must be
confirmed by comparing the measure with its possible alternatives.
 An alternative must be less trade restrictive than the measure at issue
 An alternative must preserve the responding member’s right to achieve its desired
level of protection with respect to the right pursued
 An alternative must be reasonably available, meaning it must be something the
member is capable of undertaking.

POLICY CONCERNED BEHIND ARTICLE XX(a): PUBLIC MORALS

Prior to 2009, the only decision to address the language in XX(a) was a case under the GATS.
The Article XIV closely resembles Article XX of the GATT.

United States – Measures affecting the cross-border supply of gambling and betting
services

In this case, Antigua and Barbuda lodged a complaint under the GATS regarding a variety of
US state and federal laws and regulations. Antigua claimed the measures constituted a total
prohibition on the cross-border supply of gabling services. The measures at issue were
primarily focused on internet gambling. One of the arguments advanced by the United States
was that the laws and regulations in question were justified under the “public morals” and
“public order” clause of the GATS.
The United States argues that the challenged measures are necessary to protect public morals
and to maintain public order under Art XIV(a). According to the United States, remote supply
of gambling and betting services is particularly vulnerable to various forms on criminal
activity, especially organized crime. Also protecting children from uncontrolled gambling
settings is a matter of “public morals.”
The term “public morals” is used in article XX(a) of the GATT but not defined and it has no
been interpreted. The term “public order” is likewise not specifically defined in the GATS,
although a footnote to article XIV indicates that the “public order” exception may be invoked
only where a genuine and sufficiently serious threat is posed to one of the fundamental
interests of society.
The Panel considers that, despite the inherent difficulties and sensitivities associated with the
interpretation of the terms “public morals” and “public order” n the context of Article XIV(a),
we must nonetheless give meaning to these terms in order to apply them to the facts of the
case.
In determining ordinary meaning through the dictionary, a measure that is sought to be
justified under the Article XIV(a) must be aimed at protecting the interests of the people
within a community or nation as a whole. The term “public morals” denotes standards of right
and wrong conduct maintained by or on behalf of a community or nation. Both are two
different concepts.
For example, prevention under of underage gambling relates to public morals, while the fight
against organized crime is a matter of public order.
The Panel concludes that measures prohibiting gambling and betting services could fall within
the scope of Article XIV(a) if they are enforced in pursuance of policies, the object and
purpose of which is to “protect public morals” or “to maintain public order.”
The AB held that the US laws did no qualify for an exception due to the two step process, first
considering the specific exception and then the chapeau.

Summary of the Meaning “Public Morals”

 Members should be given some scope to define and apply for themselves the concept
of public morals
 A measure justified under the public morals exception must be aimed at protecting the
interests of the people within a community or a nation as a whole
 The term “public morals” denotes standards of right and wrong conduct maintained by
or on behalf of a community or nation

EC – Seals

EU banned seal products based on public concerns regarding animal welfare, but it then
provided for certain exceptions. The Panel found that the EU’s principal or main objective of
adopting a regulation on trade in seal products was to address public concerns on seal welfare.
Other objectives or interests reflected in the exceptions were only “accommodates so as to
mitigate the impact of the measure on those interests.”
The violation of GATT that needed justification under “public morals” was the exceptions to
the EU seal ban and their de facto discrimination of imports as opposed to domestic (Swedish)
seals and of Norwegian and Canadian imports as opposed to Greenlandic seal imports.
What must be justified is both the prohibitive and permissive (ban and exceptions) component
of the EU Seal Regime, taken together.
Canada made the interesting argument that the animal welfare risks associated with Canada’s
seal hunt are not any higher than the animal welfare risks associated with slaughterhouses and
other terrestrial wildlife hunts, such as deer hunts, which the EU tolerates. In absence of a
higher risk associated with seal hunts, Canada asserted that the EU cannot justify its measure
on public moral ground. The AB rejected the argument. When regulating public morals, a
WTO member must not “identify the existence of a risk” to public morals.

ARTICLE XX(b): “PROTECT HUMAN, ANIMAL OR PLANT LIFE OR HEALTH”

The requirement in Article XX(b) that a measure “protect human, animal or plant life or
health” in order to qualify for an exception to GATT rules has not provoked significant
controversy within the WTO dispute resolution system.
One important question was addressed in two unadopted GATT panel reports, is whether
GATT parties can protect or care about human, animal or plant health or life outside of their
own territory. In the Tuna – Dolphin disputes, where the United States banned tuna imports
on the ground that tuna fishing incidentally kills dolphins, the question arose of whether
GATT Article XX(b) permits the United States to enact measures so as to protect animals
outside the US territory. The panel answered this question in the negative. The Article doesn’t
expressly limit that protection to the jurisdiction of the contracting party concerned. But the
drafters focused on the use of sanitary measures to safeguard life or health of humans, animal
or plants within the jurisdiction of the importing country.
If the broad interpretation of Article XX(b) suggested by the United States were accepted,
each contracting party could unilaterally determine the life or health protection policies from
which other contracting parties could not deviate without jeopardizing their rights under the
General Agreement.
The second Tuna – Dolphin panel ultimately also found that the US tuna ban was not justified
under GATT Article XX, this second panel took a different view on the question of extra
jurisdictional protection of health or life under GATT Article XX(b). “States are not in
principle barred from regulating the conduct of their nationals with respect to persons,
animals, plants and natural resources outside their territory.” The AB, in its report on United
States – Shrimp, left the jurisdictional scope of GATT Article XX deliberately open.

ARTICLE XX(d): “SECURE COMPLIANCE WITH LAWS OR REGULATIONS…”

Article XX(d) provides an exception for trade measures that satisfy a two-part test:
 The measure must be designed to secure compliance with domestic laws or regulations
that are not themselves GATT-inconsistent
 The measure must be necessary to ensure compliance with those domestic laws and
regulations

Korea – Beef

The regulation referred to by Korea is the Korean Unfair Competition Act, which among other
things, aims at the prevention of deceptive practices. The alleged deceptive practices are the
misrepresentation od the origin of beef. The Panel recognizes that there can be good reasons
why a WTO Member might want information to be provided as to the origin of products and
particularly meat products.
Korea submits than in the case of foreign beef, it had to discard the normal application of the
Unfair Competition Act since this proved to be too difficult and too costly in late 1989 and
early 1990. Korea decided to segregate foreign beef at the retail level. The dual retail system
is presented by Korea as being an exceptional remedy and a substitute to the normal manner
of preventing practices forbidden by the Unfair Competition Act.
The Panel accepts that the dual retail system was put in place in order to secure compliance
with the Korean legislation against deceptive practices to the extent that it serves to prevent
acts inconsistent with the Unfair Competition Act.
First, the system was established at the time when, as stated by Korea and not refuted by the
Complaining parties, acts of misrepresentation were widespread in the beef sector.
Second, the dual retail system does appear to reduce the opportunities and thus the temptation
for butchers to misrepresent foreign beef for domestic beef.

Colombia – Indicative Prices and Restrictions on Ports of Entry

In 2005, Colombia adopted measures under which textiles and apparel could only be brought
into the country at 11 of Colombia’s 26 ports of entry. Furthermore, certain categories of
textiles, apparel, and footwear, originating in Panama and China were permitted to enter the
country only through the Bogota airport or the Barranquilla seaport.
Panama complained that these measures violated Article XI:1 of the GATT (prohibition on
non-tariff barriers) and Article I:1 (MFN).
Colombia argues that the laws and regulations for which the ports of entry measure seeks to
ensure compliance are not inconsistent with the GATT 1994. Colombia argues that Panama
has not challenged Colombia’s customs laws and regulations in a general manner, having only
made claims in respect of certain specific aspects.
Panel agrees with Panama that Colombia has the burden of prof to demonstrate that all
conditions of the defence are met, including the condition that the laws and regulations for
which the ports of entry measure is designed to secure compliance are not in themselves
GATT-inconsistent.
The next step in the analysis was consideration of whether the ports of entry measure was
“necessary” to secure compliance. It considered the importance of interests involved, the
extent to which the measure contributed to the realization of the ends pursued, and the
restrictive impact of the measure. The Panel concluded that Colombia has failed to establish
that the ports of entry measure is necessary.

Summary of the meaning of “secure compliance with laws or regulations which are not
inconsistent with” GATT obligations

 The measures must enforce WTO-compatible laws and regulations. The respondent
has the burden of proof but it is not necessary to show that every provision is WTO-
compatible. A respondent’s law will be treated as WTO-compatible unless proven
otherwise.
 It is not enough that the measure simply ensures the attainment of the objectives of the
laws and regulations
 The timing of violations and the measure’s implementation is a relevant factor.

ARTICLE XX(g): “RELATING TO THE CONSERVATION OF EXHAUSTIBLE

NATURAL RESOURCES”

This exception is highly controversial.

US – Shrimps concerns this provision. In this case, several WTO Members challenged a US
prohibition on the importation of shrimp products that were not caught in a manner consistent
with certain requirements. The challenged requirements were intended to ensure that the
harvesting of shrimp did not endanger sea turtles. The AB addresses two important issues:
 What constitutes an “exhaustible natural resource” and,
 What does it mean for a measure to be “relating to the conservation of exhaustible
natural resources.”

United States – Shrimp

The complainants’ principal argument is rooted in the notion that “living” natural resources
are “renewable”, and therefore cannot be “exhaustible” natural resources.
The words of the Article must be read by a treaty interpreter in the light of contemporary
concerns. The generic term is no static, but is rather by definition evolutionary. Modern
international conventions make frequent references to natural resources as embracing both
living and non-living resources. Moreover, two adopted GATT 1947 Panel reports previously
found fish to be an “exhaustible natural resource”. AB holds that measures to conserve
exhaustible natural resources, whether living or non-living, may fall within Article XX(g).
Whether the living natural resources sought to be conserved by the measure are “exhaustible”
under Article XX(g). That this element is present in respect of the five species of sea turtles
involved appears to be conceded by all. The exhaustibility of sea turtles would in fact have
been very difficult to controvert since all of the seven recognized species are today listed in
the Convention on International Trade in Endangered Species of Wild Fauna and Flora.
Article XX(g) requires that the measure sought to be justified be one which “relates to” the
conservation of exhaustible natural resources. The relationship between the measure at stake
and the conservation and the legitimate policy of conserving exhaustible natural resources.
In the present case, the relationship between the general structure and design of the measure
and the policy goal of conservation of sea turtles must be examined.
Section 609 imposes an import ban on shrimp that have been harvested with commercial
fishing technology which may adversely affect sea turtles. There are two basic exemptions to
this ban, both which relate clearly and directly to the policy goal:
1) Excludes from the import ban shrimps harvested “under conditions that do not
adversely affect sea turtles”
2) The measure exempts from the import ban a shrimp caught in waters subject to the
jurisdiction of certified countries.
Focusing on the design of the measure, it appears that Section 609 is not disproportionately
wide in its scope and reach in relation to the policy objective of protection and conservation
of sea turtle species. The means are reasonably related to the ends.
Section 609 is a measure “relating to” the conservation of an exhaustible natural resource
within the meaning of Article XX(g) of the GATT.

China – Raw Materials

The United States, the EU, and Mexico alleged that a set of Chinese measures were in
violation of provisions in both the GATT and China’s Accession Protocol. The complainant
identified certain export restraints on raw materials. China argued that some of these measures
qualified for an exception under GATT XX(g). The panel disagreed because the measures in
question were not “related to” conservation. China committed on its AP not to impose certain
export duties, and the AB found that this commitment was not subject to GATT Article XX
exceptions. China only had the option to justify some of its export quotas but its export duties
cannot be justified under Article XX(g) even if they would meet all the conditions thereunder.

To determine whether a challenged export restriction relates to conservation a panel should

examine the text of the measure itself. China in an official document commits to “formulate a
unified policy on the import and export of mineral products in accordance with the WTO rules
and commitments of accession to the WTO.” The Panel cannot find, nor has China pointed
out, measures relating to the conservation of refractory-grade bauxite and fluorspar in the
evidence China submitted relating to what it terms its “mineral policy”.
The Panel has not been able to see how this document confirms that China’s export quota on
refractory-grade bauxite and export duties on fluorspar were put in place as part of a
comprehensive conservation programme relevant specifically to refractory-grade bauxite and
fluorspar.
China also argues that export restrictions contribute to its stated objective on conservation of
the natural resources at issue because by reducing foreign demand for the resource, they will
reduce domestic production and, hence, the extraction of the resource
For the Panel, the measures that increase the costs of refractory-grade bauxite and fluorspar to
foreign consumers but decrease their costs to domestic users are difficult to reconcile with the
goal of conserving refractory-grade bauxite and fluorspar.
The Panel concludes that China has not met its burden of proving that its import quota on
refractory-grade bauxite and export duty on fluorspar “relate to conservation.” The Panel
nevertheless will continue to examine whether the measures “are made effective in
conjunction with restrictions on domestic production or consumption.” What the AB did
address was the condition that the measure is not only imposed on export but also “made
effective in conjunction with restrictions on domestic production or consumption.” For this
condition to be met:
 The measure is applied jointly with restrictions on domestic production or
consumption, and,
 The purpose of the challenged measure is to make effective restrictions on domestic
production or consumption.
The AB reversed the Panel, stating that this second element was not required. Article XX(g)
does not contain and additional requirement that the conservation measure be primarily aimed
at making effective the restrictions on domestic production or consumption.

Summary of the meaning of “relating to the conservation of natural resources”

The meaning of “exhaustible natural resource”:

 Are not limited to non-living resources. Measures to conserve exhaustible natural
resources, whether living or non-living fall within the scope.
 The term “natural resource” is evolutionary and must be interpreted in the light of
contemporary concerns.
 Recognition of a species as an endangered species appears to be sufficient for it to
exhaustible.
The meaning “relating to”:
 Is satisfied if the means (the measure at issue) are reasonably related to the ends (the
conservation objective).

General Exceptions: The Chapeau of GATT Article XX

To qualify as an exception under Article XX, a measure must do more than just satisfy one of the
specific provisions. It must also satisfy the Article XX “chapeau”, which provides as follows:

Subject to the requirement that such measures are not applied in a manner which would constitute a
means of arbitrary or unjustifiable discrimination between countries where the same conditions
prevail, or a disguised restriction on international trade, nothing in this Agreement shall be construed
to prevent the adoption or enforcement by any contracting party of measures: …

Introduction

Three requirements. Specially, the measure at issue must not:

1. Be applied in a manner which would constitute a means of arbitrary discrimination between
countries where the same conditions prevail.
2. Be applied in a manner which would constitute a means of unjustifiable discrimination
between countries where the same conditions prevail; or
3. Be a disguised restriction on international trade.

The chapeau to Article XX was discussed by the Appellate Body in its first ever decision: United
States – Gasoline.
In order that the justifying protection of Article XX may be extended to it, the measure at issue must
not only come under one or another of the particular exception but also satisfy the requirements
imposed by the opening clauses of Article XX.
The purpose and object of the introductory clauses is generally the prevention of abuse of the
exceptions. The chapeau is animated by the principle that while the exceptions of Article XX may be
invoked as a matter of legal right, they should not be so applied as to frustrate or defeat the legal
obligations of the holder of the right under the substantive rules of the General Agreement.

United States – Shrimp

One of the earliest and to this day most important case interpreting the chapeau. The background to
this dispute involves not only the WTO system, but also the administrative law of the United States.
In 1987, the US government issued regulations requiring US shrimp trawlers to use “turtle excluder
devices” (TEDs). A TED is a grate that is intended to allow shrimp to pass through the back of the net
while preventing turtles or other animals from doing so.
In 1989, an effort was made to create similar regulations that would apply to imports. Section 609
instructs the US Secretary of Commerce to initiate negotiation of international agreements for the
protection of sea turtles and prohibits the importation of shrimp harvested with technology that may
adversely affect sea turtles unless the nation is certified as having a regulatory program comparable to
the US.
The US issued Guidelines to evaluate the foreign regulatory programs limited to a set of countries in
the Caribbean and Western Atlantic. The in 1996, the Section 609 extended to all countries. All
shipments of shrimp must be accompanied by a declaration attesting that the product was harvested
“either under conditions that do not adversely affect sea turtles … or in waters subject to the
jurisdiction of a nation currently certified pursuant to Section 609. To be a certified, a nation’s
program must include a requirement that TEDs be used.
Later, the US ruled that shrimp harvested with commercial fishing technology that did not adversely
affect sea turtles could not be imported from non-certified countries.
India, Malaysia, Pakistan and Thailand argued that the import ban violated GATT Article I (MFN), XI
(Quantitative restrictions) and XIII (non-discrimination in administration of quantitative restrictions).
The US conceded that its shrimp measure was a quantitative restriction prohibited, but argued that it
qualified for an exception under Article XX(g) of the GATT.

AB Report
There are three standards contained in the chapeau:
1. Arbitrary discrimination between countries where same conditions prevail
2. Unjustifiable discrimination between countries where same conditions prevail
3. A disguised restriction on international trade.
In order for a measure to be applied in a manner which is discriminatory and contrary to the chapeau
three elements must exist:
1. The application of the measure must result in discrimination
2. The discrimination must be arbitrary or unjustifiable in character
3. This discrimination must occur between countries were same conditions prevail.
The task of interpreting and applying the chapeau is essentially a delicate one of locating and marking
out a line of equilibrium between the right of a Member to invoke an exception under Article XX and
the rights of the other Members under varying substantive provisions.

Unjustifiable discrimination

Section 609 is, in its application, an economic embargo which requires all other exporting Members, if
they wish to exercise their GATT right, to adopt essentially the same policy as applied to, and
enforced on, US domestic shrimp trawlers.
It is not acceptable, in international trade relations, for one WTO Member to use an economic
embargo to require other Members to adopt essentially the same regulatory program, not merely
comparable.
Furthermore, the US did not permit imports of shrimps harvested using TEDs comparable in
effectiveness to those require in the US if those shrimps originated in waters of countries not certified
under Section 609. In other words, shrimp caught using method identical to those employed in the US
have been excluded from the US market solely because they have been caught in waters of countries
that have not been certified by the US.
Second, the protection and conservation of sea turtles that is the objective of this measure, demands
concerted and cooperative efforts on the part of the many countries whose waters are traversed in the
course of recurrent sea turtle migrations. The Declaration on Environment and Development states that
unilateral actions to deal with environmental challenges outside the jurisdiction of the importing
country should be avoided. Environmental measures should be based on international consensus.
Third, the US negotiated and concluded one regional agreement for protection and conservation of sea
turtles: The Inter-American Convention. But it negotiated seriously with some, but not with other
Members (including the appellees) that export shrimp to the US. The effect is plainly discriminatory
and unjustifiable.

Arbitrary discrimination

Article X:3 of the GATT established certain minimum standards for transparency and procedural
fairness in the administration of trade regulations. The non-transparent and ex parte nature of the
internal governmental procedures applied by the competent officials and the US throughout the
certification processes under Section 609, as well as the fact that the countries whose applications are
denied do not receive formal notice of such denial, nor of the reasons for the denial, and the fact, too,
that there is no formal legal procedure for review of, or appeal from, a denial of an application, are all
contrary to the spirit of Article X:3.
AB finds that the measure is applied in a manner which amounts to a means not just of “unjustifiable
discrimination” but also of “arbitrary discrimination.”
For all this reasons, the measure does not qualify for the exemption under Article XX of the GATT
1994.
WTO Members are free to adopt their own policies aimed at protecting the environment as long as, in
so doing, they fulfill their obligations and respect the rights of other members under the WTO
Agreement.

The compliance decision

Following its loss, the US took a series of actions that it claimed brought it into compliance. Malaysia
disagreed and complained under Article 21.5 of the DSU (Dispute Settlement Understanding). Article
21.5 is the provision of the DSU intended to resolve disagreements about whether a losing defendant
has come into compliance with a panel or AB ruling. Malaysia argued that the US was not permitted
to unilaterally adopt an import ban outside the framework of an international agreement.

Malaysia states that despite the changes made by the United States to the original measure, elements
of “arbitrary or unjustifiable discrimination” still remain in the manner in which the new measure is
applied in the US.
According to Malaysia, demonstrating serious, good faith effort to negotiate an international
agreement for the protection and conservation of sea turtles is no sufficient to meet the requirements of
the chapeau of Article XX. Malaysia maintains the the chapeau requires instead the conclusion of such
an international agreement.
AB concluded that to avoid “arbitrary or unjustifiable discrimination”, the US had to provide all
exporting countries “similar opportunities to negotiate” an international agreement. The negotiations
must be comparable in the sense that comparable efforts are made, comparable resources are invested,
and comparable energies are devoted to securing an international agreement. So long as such
comparable efforts are made, it is more likely that “arbitrary or unjustifiable discrimination” will be
avoided between countries where an importing Member concludes an agreement with one group of
countries, but fails to do so with another group of countries.
Requiring that a multilateral agreement be concluded by US in order to avoid “arbitrary or
unjustifiable discrimination” in applying its measure would mean that any country party to the
negotiations with the US, whether a WTO Member or not, would have, in effect, a veto over whether
the US could fulfill its WTO obligations. Such a requirement would not be reasonable.

Flexibility of the revised Guidelines

According to Malaysia, even if the measure at issue allows certification of countries having regulatory
programs “comparable” to that of the US, it results in “arbitrary or unjustifiable discrimination”
because it conditions access to the United States market on compliance with policies and standards
“unilaterally” prescribed by the US.
In the light of the evidence brought by the US, the Panel is satisfied itself that this new measure, in
design and application, does not condition access to the US market on the adoption by an exporting
Member of a regulatory programme aimed at the protection and the conservation of sea turtles that is
essentially the same as that of the US.
There is an important difference between conditioning market access on the adoption of essentially the
same programme, and conditioning market access on the adoption of a programme comparable in
effectiveness, allows for sufficient flexibility in the application of the measure so as to avoid “arbitrary
or unjustifiable discrimination.”
US measure is now applied in a manner that meets the requirements of Article XX.

Summary of United States – Shrimp interpretation of the chapeau

The chapeau prohibition of (i) arbitrary or unjustifiable discrimination, (ii) between countries where
the same conditions prevail, and (iii) of disguised restrictions on trade represent three distinct
standards.
The chapeau seeks to balance the right of a member to invoke an exception under Article XX and the
rights of other members under the substantive provisions of the GATT.
The chapeau focuses on how the challenged measure is “applied” or implemented.
Unjustifiable discrimination:
 Not only must similar treatment be given to countries where similar conditions prevail, but a
measure must also allow for differential treatment when countries are in different situations.
 Access to the market of a country cannot be conditioned on adoption of a regulatory program
by the exporting country that is essentially the same as that of the importing country. It is
acceptable to condition the market access on adoption of a program that is comparable in
effectiveness.
 There is an obligation to undertake comparable negotiations with all relevant exporting
countries; but this is limited to an obligation to negotiate in good faith. It is not an obligation
to complete an agreement.
 Different countries must be given comparable phase-in periods (at least in this case).
 Comparable efforts must be made to transfer technology to different countries (at least in this
case).
Arbitrary discrimination:
 Rigidity an inflexibility may constitute arbitrary discrimination.
 A lack of adequate process can constitute arbitrary discrimination. In this case, there was
insufficient transparency, an unpredictable certification process, no opportunity for an
applicant to be heard, no reasons given for the denial of an application, and no review or
appeal of that decision.