University of Economics and Law

ASSIGNMENT 3

Class: K21408CA
Lecturer: Dr. Dao Gia Phuc
Name: Nguyễn Hữu Trung Kiên
ID: K214080598
Issues:
1. Does Averna's color labeling regulation based on carbon emission violate the
non-discrimination principle of Article 2.1 of the TBT Agreement?
2. Can Averna justify the implementation of color labeling laws by invoking the
general exceptions outlined in Article 2.2 of the TBT Agreement?
3. Whether Averna's failure to consider ISO standards, particularly ISO-14020,
when implementing the labeling regulation under the Promotion of Sustainability
Act, contradict Article 2.4 of the TBT Agreement?
4. Can it be argued that Averna's law, assigning red labels to cars from Qumar
while allowing green labels for cars from Letabia based on the manufacturer's
self-declaration, violates Article 2.1 of the TBT Agreement?
5. If this case fell to GATT 1994 under equivalent rules to TBT Agreement, a
would there be different outcome?
Rules:
TBT Agreement, Article 2.1.
TBT Agreement, Article 2.2.
TBT Agreement, Article 2.4.
GATT 1994, Article I:1.1
GATT 1994, Article III:4.2
GATT 1994, Article XX. 3

Applications:
To start with, we will determine whether the issue at hand is applicable to TBT
Agreement, specifically in the category of Technical regulation:
“Document which lays down product characteristics or their related processes and
production methods, including the applicable administrative provisions, with
which compliance is mandatory. It may also include or deal exclusively with

1
General Agreement on Tariffs and Trade (GATT) 1994, World Trade Organization, Article I.
2
General Agreement on Tariffs and Trade (GATT) 1994, World Trade Organization, Article III.
3
General Agreement on Tariffs and Trade (GATT) 1994, World Trade Organization, Article XX.
terminology, symbols, packaging, marking or labelling requirements as they
apply to a product, process or production method.”4
The 3 main factors specifying Technical regulation of TBT Agreement are:
“Apply to a product”, “Lays down product characteristics” and
“Mandatory”.
“Apply to a product”: The Averna’s labelling scheme is applied on Qumar’s car.
“Lays down product characteristics”: The labelling regulation is concerned about
carbon emission, a characteristic of vehicles.
“Mandatory”: The color labelling is a regulation enacted by Averna which is
applied on all new cars in Averna.
Therefore, The TBT Agreement is applicable to this case under the category of
Technical regulation.

1. Article 2.1 of TBT Agreement:

“Members shall ensure that in respect of technical regulations, products imported
from the territory of any Member shall be accorded treatment no less favourable
than that accorded to like products of national origin and to like products
originating in any other country”
To determine if Averna's labeling regulation violates Article 2.1 of TBT
Agreement, we must consider two elements: "like products" and "treatment no
less favorable." This raises the following questions:
-Are petrol, diesel car and hybrid, electric car “like products”?
“Like products” are decided on 4 factors5:
+ The products’ properties, nature and quality: Despite that the two types of
vehicles are operated on different energy. They are still, in general, of the same
physical nature in terms of appearance and components;
+ The products’ end-uses: They are both used as a means of transportation;
+ Consumers’ tastes and habits: These two types of cars can be used
interchangeably: low price (petrol/diesel) or eco-friendly (hybrid/electric);

4
Technical regulations (Annex 1.1).
5
AB report, US — Clove Cigarettes , World Trade Organization, DS406, para 119.
+ Tariff classification: They are both classified in the same HS code of 8703. 6
Therefore, petrol, diesel car and hybrid, electric car are “like products”.
-Did Qumar’s cars receive less favorable treatment under the labelling
regulation of Averna?
The "treatment no less favorable" requirement of TBT Agreement applies to
marketplace competition criteria in Article III:4 of GATT 1994, considering legal
and practical aspects.7
GATT 1994 lacks clear guidelines on what constitutes less/more favorable
treatment, so we consult the Korea - Various Measures on Beef (DS161) case, in
which "treatment no less favorable " means equal footing and competition
conditions for domestic and foreign products. 8 Here, Averna's color labeling
scheme, combined with consumers’ environmental concerns, leads to people
rejecting red-labeled cars from Qumar, potentially impacting sales, circulation,
and Qumar's competitiveness against domestic electric/hybrid vehicles.
Therefore, the labelling scheme has posed “less favorable treatment” for Qumar.
Based on the given analysis, Averna has violated the non-discrimination
treatment stated in Article 2.1 of TBT Agreement.

2. There are 3 tiers to decide the consistency under Article 2.2 of TBT
Agreement:9
- Whether the measure at issue trade restrictive:
The labeling regulations, combined with consumer environmental concerns (as
discussed in issue 1), can indirectly hinder the sales of Qumar's cars, thereby
creating trade restrictions.
-Whether the measure at issue fulfill a legitimate objective:

6
8703, Harmonized System Codes, Foreign Trade Online.
7
AB report, US — Clove Cigarettes, World Trade Organization, DS406.

8
AB report, Korea – Various Measures on Beef, World Trade Organization, DS161, para 136.
9
AB report, US — Tuna II (Mexico), World Trade Organization, DS381.
“…technical regulations shall not be more trade-restrictive than necessary to
fulfill a legitimate objective, taking account of the risks non-fulfillment would
create. Such legitimate objectives are, inter alia: national security requirements;
the prevention of deceptive practices; protection of human health or safety,
animal or plant life or health, or the environment. ...”. 10
The legitimate objectives listed above as:
+ National security requirements;
+ The prevention of deceptive practices;
+ Protection of human health or safety, animal or plant life or health, or the
environment.
The color labelling system is enacted by Averna in response to the growing
environmental concern in hopes to increase consumers’ awareness and
understanding of cars’ emission to protect the environment. Therefore, the
ultimate intention of the regulation falls into a legitimate objective specifically:
“Protection of human health or safety, animal or plant life or health, or the
environment.”

- Whether the measure at issue is not more trade restrictive than necessary
to fulfill a legitimate objective:
There are 3 factors to consider whether the regulation ‘not more trade-restrictive
than necessary’:11
+ The degree of contribution:
Averna's labeling regulation may have significant contribution that addresses
environmental concerns by introducing specific labels indicating cars’ carbon
emissions cars. It sets emission limits and requires cars labelled as “green” (Low
Carbon Emissions) or “red” (High Carbon Emissions) . This system is expected
to impact consumer decisions, promoting hybrid/electric cars while discouraging
petrol diesel options. Thus, the regulation shapes consumer behavior and
encourages environmentally friendly choices.
+ The trade restrictiveness:
Averna's labeling regulation creates a distinction of cars based on carbon
emissions, combined with consumers’ growing environmental concern. The shift
10
Technical barriers to trade Agreement, World Trade Organization, Article 2.2.
11
AB report, US — Tuna II (Mexico), World Trade Organization, DS381, para 322.
towards hybrid/electric car is expected which would restrict the circulation of
Qumar’s cars, eventually dropping their market share.
+ Nature of risks involved given the non-fulfillment of the objective through the
regulation:
Averna's labeling scheme is simple but lacks clarity and overlooks important
details. Relying solely on color may oversimplify and fail to accurately represent
each car's emission rate, potentially leading to misconceptions about Qumar's
cars. Consequently, non-compliance with the regulation may seem insignificant,
while compliance could pose greater risks.
Based on the analysis, the regulation, while addressing a legitimate objective
mentioned in Article 2.2 of TBT Agreement, may create unfavorable disparities
between achieving the objective and imposing trade restrictions.

3. To determine whether Averna acted inconsistently with Article 2.4 of TBT

Agreement, the 3 following factors shall be discussed:12
- Whether there exists a relevant International standard:
Fastcar highlighted the presence of ISO standard on general principles for
environmental labeling. Specifically, ISO 14020, adopted by the international
ISO standard, establishes a framework for creating and utilizing environmental
labels and declarations 13, This standard is endorsed by a two-thirds majority vote,
and its details can be accessed on the official ISO website.
- Whether the relevant international standard is used as a basis for the
technical regulation at issue:
We shall turn to the Terms and definitions of ISO 14020:14
“2.1
environmental label
environmental declaration
Claim which indicates the environmental aspects of a product or service

12
AB report, EC — Sardines, World Trade Organization, DS231.
13
Work Shop on ISO 14020 series (2007), ANEC, page 3-4.
14
Environmental labels and declarations — General principles, ISO 14020:2000(E), UBND tỉnh Vĩnh Long,
Terms and definition.
Note: An environmental label or declaration may take the form of a statement,
symbol or graphic on a product or package label, in product literature, in
technical bulletins, in advertising or in publicity, amongst other things.”
Averna's case involves an environmental label focusing on carbon emissions of
cars. The labeling system, which uses colors to distinguish between low and high
emissions, falls under the category of "graphic environmental label" as defined in
ISO 14020. Therefore, Averna's labeling regulation aligns with the core
principles of ISO 14020.

- Whether the relevant international standard is an effective and appropriate

means for the fulfillment of the legitimate objectives pursued:
For ISO 14020 to effectively satisfy the legitimate objective in this case:
“Protection of human health or safety, animal or plant life or health, or the
environment”, we shall consult some of its principles:15
“Principle 1
Environmental labels and declarations shall be accurate, verifiable, relevant and
not misleading.”
It is integral for labels applied on product to be precise on the environmental
aspects of, in this case, vehicles to satisfy consumers’ demand and concern on
emission.
“Principle 2
Procedures and requirements for environmental labels and declarations shall not
be prepared, adopted, or applied with a view to, or with the effect of, creating
unnecessary obstacles to international trade.”
This is especially vital, labels shall be enacted only to fulfill legitimate objectives
and not creating unnecessary restriction on international trade.
“Principle 5
The development of environmental labels and declarations shall take into
consideration all relevant aspects of the life cycle of the product.”
In contrast to Averna's labeling regulation, ISO 14020 considers the entire
lifecycle of a car, from raw materials to the finished product, to accurately
estimate emissions and provide comprehensive information to consumers.

15
Environmental labels and declarations — General principles, ISO 14020:2000(E), UBND tỉnh Vĩnh Long,
General Principles.
Therefore, it is reasonable to utilize ISO 14020 into the context of the case.
With all that said, Averna should have taken into account the ISO 14020
standard.

4. Article 2.1 of TBT Agreement also covers products that originate in any other
countries which in this case are cars from Letabia, thus we apply the same
elements used in issue 1: “like products” and “treatment no less favorable
than like domestic product.
Whether Qumar’s and Letabia’s cars are “like products”?
We once again follow the 4 factors:
+ The products’ properties, nature and quality: Despite being imported from
different countries and labelled differently, they are still of the same physical
components and structure;
+ The products’ end-uses: They are both used as a means of transportation;
+ Consumers’ tastes and habits: Consumers have the flexibility to
interchangeably use these cars in all aspects due to not having any notable
distinctions;
+ Tariff classification: Both of these products are identical automobiles and fall
under the same tariff classification category, specifically section 8703.
Therefore, Qumar’s and Letabia’s cars are like products.
Whether the measure granted Lebatia’s cars an advantage compared to
Qumar’s cars?
As discussed before, “treatment no less favorable” means equal footings and
conditions of competition for domestic as well as foreign products, additionally:
“products imported from the territory of any Member shall be accorded treatment
no less favourable than that accorded to like products of national origin and to
like products originating in any other country”16, Letabia’s cars in this case are
products “originating in any other country”, which shall also be accorded
“treatment no less favorable”. However, they are permitted to circulated under the
“green” label which grant them an advantage over the “red” label ones that
include Qumar’s.

16
Technical Barriers to trade Agreement, World Trade Organization, Article 2.1.
Based on the given analysis, Averna has once again violated the non-
discrimination treatment stated in Article 2.1 of TBT Agreement.

5. To see whether the application of GATT 1994 regulations instead could result
in an alternate result, we shall inspect the previous issues under GATT 1994:

In issue 1, we analyze National Treatment under Article III:4 of GATT,

considering "like products" and "treatment no less favorable." The difference lies
in identifying if the measure falls under technical regulation in TBT Agreement
and whether it is covered by Article III:4 in GATT 1994, which will not alter the
outcome

In issue 2, we examine General exceptions under Article XX of GATT 1994. The

outcome may differ due to specific factors analyzed for each article. Article XX
of GATT 1994 also applies to issue 3, considering the analysis regarding
necessity of the measure may lead to the acknowledgement of ISO 14020.

In issue 4, we utilize Article I:1 of GATT 1994 instead of reusing Article 2.1 that
TBT Agreement used in issue 1. Article I:1 also considers whether the same
"advantage" given to Letabia's cars has been "immediately and unconditionally"
given to Qumar's cars by Averna. However, the overall conclusion remains the
same based on the case facts and the given points.

Considering the slight differences in the application of certain issues, the overall
conclusion when applying GATT 1994 rules does not differ significantly from the
TBT Agreement.
Conclusion:
1. Averna’s labelling regulation has breached Article 2.1 of TBT Agreement.
2. Averna can’t justify its regulation under a legitimate objective in Article 2.2 of
TBT Agreement.
3. Averna has violated Article 2.4 of TBT Agreement by not acknowledging the
existence of the international standard of ISO 14020.
4. Averna’s given leverage to Lebatia is inconsistent with Article 2.1 of TBT
Agreement.
5. Under the application of GATT 1994 regulations, the overall outcome shall not
be alternate.

References
Appellate Body report, Korea – Various Measures on Beef, World Trade
Organization, DS161.
Appellate Body report, EC — Sardines, World Trade Organization, DS231.
Appellate Body report, US — Clove Cigarettes, World Trade Organization,
DS406.
Appellate Body report, US — Tuna II (Mexico), World Trade Organization,
DS381.
Environmental labels and declarations — General principles, ISO 14020:2000(E),
UBND tỉnh Vĩnh Long.
General Agreement on Tariffs and Trade (GATT) 1994, World Trade
Organization.
Technical Barriers to trade Agreement, World Trade Organization.
Work Shop on ISO 14020 series (2007), ANEC.
Harmonized System Codes, Foreign Trade Online.