ASPEN CASEBOOK SERIES

International Trade LawProblems, Cases, and Materials

Second Edition

Daniel C.K. ChowJoseph S. Platt-Porter Wright Morris & Arthur Professor of Law,The Ohio State University Michael E. Moritz College of Law

Thomas J. SchoenbaumResearch Professor of Law,George Washington University, Washington, DC

Law & Business

Contents

Preface xxviiAcknowledgments xxxi

1 The Law of International Trade andthe Multilateral Trading System

I. Some Background ConsiderationsA.B.

What Is the Law of International Trade?Distinguishing the Law of International BusinessTransactions and the Law of International Trade1. The Law of International Business Transactions2. The Law of International Trade3. Three Levels of Analysis

Notes and QuestionsProblem 1-1Problem 1-2

II. International Trade Flows

A.B.C.D.

III. ThtA.B.

Problem 1-3Trade in GoodsServices TradeForeign Direct InvestmentTechnology Trade

Problem 1-4Notes and QuestionsProblem 1-5Problem 1-6

; Principal Global Economic InstitutionsThe World BankThe International Monetary Fund

Notes and Questions

11

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xii Contents

Note on the Global Financial Crisis and the Role ofthe World Bank, IMF, and the WTO 23

Problem 1-7 25C. The World Trade Organization 25

1. GATT1947 262. The WTO 28

IV. The Case for and Against Free Trade: A Brief Look atInternational Economics 29A. Arguments in Favor of and Against Free Trade 30

Problem 1-8 • 30Douglas Irwin, Free Trade Under Fire (2004) 32Notes and Questions 42Problem 1-9 42Problem 1-10 43

B. United States-China Economic Relations 43Problem 1-11 " 43

1. The Growing U. S. Trade Deficit with China 432. Currency Valuation Issues and "Hoarding" by China 453. Risks Created by the Trade Deficit with China 47

Notes and Questions 49Problem 1-12 49

V. Negotiating Trade Concessions 49A. The Doha Development Agenda of 2001 50

Notes and Questions 51VI. Preferential Trade Agreements 51

A. Introduction 51Turkey — Restrictions on Imports of Textile and Clothing

Products 53Notes and Questions 55

B. Customs Unions and Free Trade Areas: Two Types ofPreferential Trade Areas 55

Problem 1-13 57Problem 1-14 57Problem 1-15 < 57Problem 1-16 58

C. The North American Free Trade Agreement: An Overview 58Problem 1-17 60Note on Labor and Environmental Standards in

Preferential Trade Agreements 60Note on Dispute Settlement and Preferential Trade

Agreements 61Notes and Questions 62

2 Dispute Settlement Within the WTO 63

I. General Considerations 63Notes and Questions 66

Contents xiii

Problem 2-1 66Notes on Implementation and Remedies 67Problem 2-2 70Problem 2-3 . 70Problem 2-4 70Note on Trade Remedies 71

II. Nullification or Impairment 71Problem 2-5 , 72Problem 2-6 72United States — Taxes on Petroleum and Certain

Imported Substances 72. Problem 2-7 " 74

EEC — Payments and Subsidies Paid to Processors andProducers of Oilseeds and Related Animal-Feed Proteins 74

Japan — Measures Affecting Consumer Photographic Filmand Paper " 76

Notes and Questions 80III. Burden of Proof 81

India — Additional and Extra-Additional Duties on Importsfrom the United States 81

Notes and Questions 84IV. Principles of Interpretation and Status of Adopted Reports \ 85

Problem 2-8 86Japan — Taxes on Alcoholic Beverages . 86Notes and Questions 89

V. Trade Retaliation Under National Laws 90Problem 2-9 91United States — Sections 301-310 of the Trade Act of 1974 91Notes and Questions 94Problem 2-10 94

The Implementation of International Trade Obligationsin the Domestic Legal Order ' 95

I. Introduction , 9 5II. Domestic Implementation of International Trade Obligations 96

A. The United States , 971. The Executive Branch 972. The Legislative Branch 993. The Judicial Branch 1014. State and Local Government 1015. Problems in the Allocation of Power over Trade 101

a. Negotiating a Trade Agreement 101b. Treaty versus Executive Agreement 102

United States Department of State, Foreign Affairs Manual 103Notes and Questions 103Problem 3-1 103

xiv Contents

c. Presidential Power over International Trade 103Problem 3-2 104United States v. Capps, Inc. 104Dames & Moore v. Regan 106Notes and Questions 111

d. The Clash Between State and Federal Power 111Problem 3-3 111Problem. 3-4 112Crosby v. National Foreign Trade Council 112

B. The European Union • . 114Notes and Questions ,._ 116

III. The Effect of International Trade Agreements on DomesticLaw and Resolving Conflicts Between International andDomestic Law 117A. The United States . 117

Problem 3-5 " 117Problem 3-6 118The Uruguay Round Agreements Act (1994) Title I — Approval

of, and General Provisions Relating to, the Uruguay RoundAgreements 118

Problem 3-7 121Problem 3-8 121Notes and Questions 121Problem 3-9 122

B. The European Union 122Problem 3-10 123Portuguese Republic v. Council 123Notes and Questions 125Note on the Relationship Between the International and

Domestic Legal Orders 127

4 The Core Principles of the WTO: Most FavoredNation and National Treatment 129

I. Introduction 129II. The Most Favored Nation Principle 129

Problem 4-1 131Problem 4-2 131Problem 4-3 131Problem 4-4 131

A. Scope of the MFN Obligations 131Problem 4-5 132Belgian Family Allowances (Allocations Familiales) 132Notes and Questions 133Problem 4-6 134

B. The "Like Product" Issue 134Treatment by Germany of Imports of Sardines 134

Contents xv

c.

D.

Notes and QuestionsProblem 4-7

De Facto DiscriminationCanada — Certain Measures Affecting the Automotive IndustryNotes and Questions

Exceptions to MFN ObligationsIII. National Treatment

A.

B.

C.

Problem 4-8Problem 4-9Notes and QuestionsProblem 4-10Problem 4-11

Internal Taxes and ChargesProblem 4-12fapan — Taxes on Alcoholic Beverages.Note on Philippines — Taxes on Distilled SpiritsCanada — Certain Measures Concerning PeriodicalsNotes and Questions

Government RegulationProblem 4-13Italian Discrimination Against Imported Agricultural MachineryProblem 4-14Korea — Measures Affecting Imports of Fresh, Chilled

and Frozen BeefNotes and QuestionsProblem 4-15

Government ProcurementProblem 4-16Norway — Procurement of Toll Collection Equipment

for the City of TrondheimNotes and Questions

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5 Trade in Goods: Customs and Tariff Law 179

II.

IntroductionA. Tariff Concessions

1. Types of Tariffs2. Calculation of Tariffs Under U.S. Law

Problem 5-1B. Economic and Social Policy Implications of TariffsGATT Rules on Tariffs and Customs

Problem 5-2Problem 5-3Argentina — Measures Affecting Imports of Footwear,

Textiles, Apparel and Other ItemsProblem 5-4Problem 5-5

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183184185

XVI

III.

IV.V.

VI.

VII.

The

Problem 5-6Notes and QuestionsNote on Freedom of Transit in International

TradeProblem 5-7

: Harmonized Tariff SystemProblem 5-8Problem 5-9Notes and Questions

Customs ProceduresProduct ClassificationA.

B.

C.

The WTO RulesProblem 5-10European Communities — Customs Classification of

Frozen Boneless Chicken CutsNotes and QuestionsProblem 5-11Canada/Japan — Tariff on Import of Spruce, Pine,

Fir (SPF) Dimension LumberSpain — Tariff Treatment of Unroasted CoffeeNotes and Questions

The United StatesProblem 5-12Problem 5-13Bausch & Lomb, Inc. v. United StatesMead Corporation v. United StatesProblem 5-14Problem 5-15

The European UnionCouncil Regulation 2658/87 of July 23, 1987E. I. DuPont deNemours, Inc. v. Commissioners of

Customs and ExciseNotes and Questions

ValuationA.

B.

C.

The WTO RulesProblem 5-16Problem 5-17

United States LawCentury Importers, Inc. v. United StatesLuigi Bormioli Corp., Inc. v. United StatesNotes and QuestionsProblem 5-18

European Union LawHans Sommer GmbH v. Hauptzollamt BremenNotes and Questions

Rules of OriginA.B.

WTO StandardsUnited States Law

Problem 5-19

Contents

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198200200201201202202205208

; 209209209

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Contents xvii

Koru North America v. United States 225SDI Technologies, Inc. v. United States • 228Notes and Questions 232

C. European Union Law 232Brother International GmbHv. Hauptzollamt Giessen 232

VIII. Customs and Free Trade Areas 235Cummins Inc. v. United States 236Problem 5-20 , 239Problem 5-21 239Problem 5-22 v _.. 239Note on Determining Origin under NAFTA 240NAFTA: A Guide to Customs Procedures 240Notes and Questions 244

6 Non-Tariff Trade Barriers 245

I. IntroductionII. Quotas

A. BackgroundProblem 6-1

B. GATT Rules on Quotas1. Overview2. Article XI: The "General Elimination" Rule

Problem 6-2Japan — Trade in Semi-ConductorsProblem 6-3Problem 6-4Problem 6-5Notes and QuestionsProblem 6-6Problem* 6-7Canada — Import Restrictions on Ice Cream and YoghurtNotes and Questions

3. The Administration of QuotasEuropean Communities — Regime for the Importation,

Sale and Distribution of BananasNotes and Questions

III. Agricultural TradeA. Overview of the AoA

1. Quotas and NTBs2. Domestic Support

a. Green Box Subsidiesb. Blue Box Subsidiesc. De Minimis Exceptionsd. Special and Differential Treatment Box Subsidiese. Amber Box Subsidies

245245

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XV111

IV.

V.

3. Export SubsidiesNotes and QuestionsProblem 6-8Problem 6-9Chile — Price Band System and Safeguard Measures

Relating to Certain Agricultural ProductsNotes and Questions

Technical Regulations and Product StandardsProblem 6-10Problem 6-11Problem 6-12Problem 6-13European Communities — Trade Description of SardinesProblem 6-14Problem 6-15Note on the TfiT Agreement and Food and Product

Labeling StandardsState Trading Enterprises

Problem 6-16Canada — Measures Relating to Exports of Wheat and

Treatment of Imported GrainNotes and Questions

Contents

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294297

7 General Exceptions: Trade and Civil Society 299

I. Introduction 299Notes and Questions 300Note on GATT Article XXI on Security Exceptions 300

II. Environmental Protection 301Problem 7-1 303

; Problem 7-2 303United States — Standards for Reformulated and

Conventional Gasoline 304Problem 7-3 308United States — Import Prohibition of Certain Shrimp and

Shrimp Products (Shrimp/Turtle Case) ' 308United States — Import Prohibition of Certain Shrimp and

Shrimp Products Recourse to Article 21.5 by Malaysia 314Notes and Questions 318

III. Product Safety 318European Communities — Measures Affecting Asbestos and

Asbestos-Containing Products 319Note on the "Necessary" Requirement in GATT Article XX 323Notes and Questions 325Note on Domestically Prohibited Goods and Dangerous

Products in International Trade 326IV. Food Safety: Sanitary and Phytosanitary Measures 326

Contents xix

V.

VI.

VII.

VIII.

A. IntroductionProblem 7-4Problem 7-5Problem 7-6Problem 7-7Problem 7-8'European Communities — Measures Concerning Meat and

Meat Products/Hormones Case)Notes and QuestionsProblem 7-9 INote on the EC Biotech Products Case

Waste Minimization and DisposalBrazil — Measures Affecting Imports ofRetreaded TyresNotes and Questions

Culture and TradeChina — Measures Affecting Trading Rights and

Distribution Services for Certain Publications andAudiovisual Entertainment Products

Notes and QuestionsClimate Change, Multilateral Environmental Agreementsand Trade

Specific Trade Obligations in Multilateral EnvironmentalAgreements and Their Relationship with the Rulesof the Multilateral Trading System

Notes and QuestionsNote on Climate Change and TradeProblem 7-10Problem 7-11Problem 7-12

Workers' RightsProblem 7-13Problem 7-14Problem 7-15Problem 7-16Note on Human Rights and International Trade

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328336338339340341346347

347356

357

. 359364365365366367369370371371371371

8 Safeguards 373

I. Introduction 373II. Safeguards Under the WTO 374

Problem 8-1 375Problem 8-2 376Problem 8-3 376

III. Safeguards Under U.S. Law 376Corus Group PLC v. International Trade Commission 377Problem 8-4 : , , . ' • 381Consumers Union of the United States, Inc. v. Kissinger 382

xx Contents

Problem 8-5 386Problem 8-6 386Report to the President on Certain Motor Vehicles and

Certain Chassis and Bodies Thereof 387The United States-Japan Voluntary Restraint Agreement of 1981 389Notes and Questions 389Problem 8-7 390Problem 8-8 391United States ^Definitive Safeguard Measures on Imports

of Certain Steel Products 391Notes and Questions ^ 397Note on Import Restrictions to Safeguard Balance

of Payments 398Note on the Relationship of GATT Article XV with

the Articles of Agreement of the InternationalMonetary Fund 400

Problem 8-9 401

9 Developing Countries 403

I. Introduction 403A. Overview of Developing Countries 403B. What Is a Developing Country? 405C. The History of Developing Countries within the GATT/WTO 406

Note on the Application of Safeguards and QuotasConcerning Textiles and Clothing < 410

II. The GATT and Developing Countries 410Problem 9-1 411Problem 9-2 411Notes and Questions 411

III. Developing Country Preference Systems Under the WTO 412A. The Generalized System of Preferences for the Trade in Goods 412

1. The United States 412Problem 9-3 412Problem 9-4 413Generalized System of Preferences 413Torrington Co. v. United States 415Notes and Questions 419

2. The European Union 420Problem 9-5 420Problem 9-6 420European Communities — Conditions for the Granting of Tariff

Preferences to Developing Countries 421Notes and Questions 426

B. Special and Differential Treatment Under OtherWTO Agreements 427

IV. Agricultural Trade Subsidies 428

Contents xxi

Problem 9-7 429Problem 9-8 430Problem 9-9 ' 430European Communities — Export Subsidies on Sugar 430Note on U.S. — Upland Cotton 436Postscript: The Growing Clout of Developing Countries —

Implications for the Future of the WTO 440

10 Unfair Trade Remedies: Anti-Dumping andCountervailing Duties ' 443

I. IntroductionProblem 10-1 ••**"

II. Dumping and Anti-Dumping DutiesA.

B.

C.

D.

E.

The Economic and Political DebateNotes and QuestionsProblem 10-2Problem 10-3

The Operation of the U.S. Anti-Dumping Laws:Procedural AspectsThe Calculation of Anti-Dumping Duties

Problem 10-4Problem 10-5Problem 10-6Problem 10-7

1. How Dumping Is DeterminedNotes and Questions

a. Dumping CalculationsNotes and QuestionsProblem 10-8

Injury Analysis'*Problem 10-9

1. Material InjurySandvik AB v. United States

2. CausationNucor Corporation v. United StatesNotes and Questions

International Law Discipline on Anti-Dumping Proceedings:The WTO Antidumping Agreement1. WTO Challenges to U.S. Anti-Dumping Law: Policy Issues

Problem 10-10United States — Anti-Dumping Act of 1916Notes and Questions

2. Procedural Aspects Under the WTO RulesUnited States — Anti-Dumping Measures on Certain

Hot-Rolled Steel Products from JapanNotes and Questions

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xxii Contents

3. Dumping Determinations 479United States — Measures Relating to Zeroing and

Sunset Reviews 479Notes and Questions 484

4. The Material Injury Analysis 485European Communities — Anti-Dumping Duties on

Malleable Cast Iron Tube or Pipe Fittings from Brazil 486Notes and Questions 492

HI. Subsidies and Countervailing Duties 493A. Introduction - _ 493B. The Economic and Political Rationales for Policies in

Favor of and Against Subsidies 4941. Types of Subsidies 4942. The Economic Debate over Subsidies 495

Problem 10-11_ . 495Notes and Questions 496

C. Challenging Subsidies at the WTO: The Subsidies andCountervailing Measures Agreement 4971. Defining Subsidies 4972. Specificity 4983. General Framework 4984. Agricultural Subsidies 4995. Prohibited Subsidies 500

Problem 10-12 500Problem 10-13 500United States — Tax Treatment for "Foreign Sales Corporations" 500Notes and Questions 504

6. Actionable Subsidies : 507Problem 10-14 507Indonesia — Certain Measures Affecting the Automobile

Industry 5077. WTO Remedies for Subsidization 514

United States — Tax Treatment for "Foreign Sales Corporations" 514Notes and Questions 517Note on the Aircraft Subsidy Trade War Between the

United States and the European Union 518D. Countervailing Duty Procedures Under U.S. Law 518

Problem 10-15 520Problem 10-16 521Problem 10-17 521Problem 10-18 521Problem 10-19 521

E. WTO Standards for Countervailing Duty Investigations 522United States — Countervailing Duty Investigation on

Dynamic Random Access Memory Semiconductors (DRAMS)from Korea 522

Problem 10-20 527Problem 10-21 527Notes and Questions 527Note on the Privatization of State-Owned Enterprises 528Note on the U.S.-Canada Softwood Lumber Case 529

Contents xxiii

11 Trade in Services and the GATS 531

I.II.

III.

IV.

V.

IntroductionThe Definitions of "Services" and "Modes of Supply"

Notes and QuestionsGATS ObligationsA. General Obligations ,

Problem 11-1 '- „ -Problem 11-2Problem 11-3

B. Obligations for Committed SectorsProblem 11-4Problem 11-5 _. _Problem 11-6Notes and QuestionsNote on the Lists of Article II (MFN) Exemptions

Market Access CommitmentsProblem 11-7Problem 11-8United States — Measures Affecting the Cross-Border

Supply of Gambling and Betting ServicesNotes and Questions

Sectoral Annexes to the GATSProblem 11-9Mexico — Measures Affecting Telecommunications

ServicesNotes and Questions

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12 Foreign Direct Investment and TRIMS 567

I. Introduction 567Problem 12-1 568

A. FDI and World Trade 568Notes and Questions 571

II. The Agreement on Trade-Related Investment Measures (TRIMS) 571Problem 12-2 572Canada — Administration of the Foreign Investment Review Act 572Problem 12-3 576Indonesia —'- Certain Measures Affecting the Automobile Industry 577Notes and Questions 585Problem 12-4 585Problem 12-5 586Note on the Role of the WTO in International

Investment Law 586

xxiv Contents

13 Intellectual Property and TRIPS 587

I. Introduction 587A. Intellectual Property and International Trade 587B. Intellectual Property and the WTO 589C. TRIPS: An Overview 590D. TRIPS, Civil Society, and Developing Countries 591

II. Copyright ' ' --~ 592Phil Collins v. Imtrat Handelsgesellschaft GmbH 593Notes and Questions 596

III. Patents 598A. Introduction 598

Problem 13-1 .-=- 599Notes and Questions 599Problem 13-2 600Problem 13-3 600

B. TRIPS, Pharmaceutical Patents, and Access to Medicines 600Problem 13-4 601Problem 13-5 . 602

1. The Doha Declaration 602DOHA WTO Ministerial Conference 2001: TRIPS and

Public Health 602Problem 13-6 603

2. The Implementation Decision 604Implementation of Paragraph 6 of the Doha Declaration

on the TRIPS Agreement and Public Health ,' 604Notes and Questions 605

IV. Trademarks and Geographical Indications 606A. Trademarks 606

: United States — Section 211 Omnibus Appropriations Acti of 1998 606

Notes and Questions 611B. Geographical Indications 611

Problem 13-7 • 611Problem 13-8 611Problem 13-9 612Consorzio del Prosciutto di Parma v. Asda Stores, Ltd. 612Notes and Questions 617Problem 13-10 617

V. Enforcement Under TRIPS 618A. Commercial Piracy 618

Statement of Professor Daniel Chow before the Senate GovernmentOversight and Management Subcommittee 619

Oral Testimony of Professor Daniel Chow before the UnitedStates-China Economic and Security Review Commission 621

Note on Trade Sanctions under U.S. Special 301 622Problem 13-11 622

Contents xxv

B. TRIPS Enforcement Obligations 6231. General Obligations 623

Problem 13-12' 6232. Criminal Enforcement 624

China — Measures Affecting the Protection and Enforcement ofIntellectual Property Rights 624

Notes and Questions 628Problem 13-13 r 628Notes and Questions 629

3. Civil and Administrative Enforcement 629Notes and Questions , 630

4. Border Controls ' 630a. Border Controls Under TRIPS 630

Problem 13-14 630China — Measures Affecting the Protection and Enforcement of

Intellectual Property Rights ' 630Notes and Questions 633

b. Border Controls under U.S. Law and EU Law 634Notes and Questions 634

c. Section 337 Exclusion Orders 635Fuji Photo Film Co., Ltd. v. International Trade

Commission • 636Notes and Questions 640

14 Export Controls 641

I. WTO Export Rules 642A. General Considerations 642

China — Measures Related to the Exportation of VariousRaw Materials 644

Notes and Questions 650B. Article XXI and National Security Exceptions 651

Note on Multilateral Export Controls 652II. U.S. Export Controls 653

A. Introduction 653B. Export Controls Under the EAA and the EAR 654

1. What Is Being Exported? 6552. Where Is the Destination of the Export? 6573. Who Will Receive the Item? 6574. What Use Will Be Made of the Item? 658

Notes and Questions 658Problem 14-1 659Problem 14-2 659Problem 14-3 659Problem 14-4 660Excerpts from U.S. Export Administration Regulations 660Export Control Classification Numbers (ECCN) 660

xxvi Contents

III. U.S.-Imposed Embargoes and Trade Restrictions onForeign Countries 663A. Introduction 663

Problem 14-5 664Problem 14-6 664Problem 14-7 665Problem 14-8 665

IV. Anti-Boycott Regulations 665Problem 14-9 666United States v. Meyer-- 666Notes and Questions^-- 670

Table of Cases 671Index _ . - 679