GD/199

Republic of Korea - Restrictions on Imports of Beef - Complaint by New Zealand

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Other titles

Korea Beef (NZ) (Source: GATT Analytical Index)

Parties

Complainant
New Zealand
Respondent
Korea
Third Parties
Australia
Canada
United States

Products at Issue

Products at issue
Beef
Type of product
Agricultural
Product sub-type
Meat products

Related disputes

GATT
Related GD
GD/190
GD/193
WTO

Key legal aspects

Legal basis
  • GATT Article XXIII:1
Claims raised
  • GATT Article VII
  • GATT Article X
  • GATT Article XI
  • GATT Article XIII
  • GATT Article XVIII
Defences raised
  • GATT Article XVIII section B (BoP)

Adjudicators

Type Panel
Chairperson Tai Soo Chew (Singapore)
Other members Yvonne Choi (Hong Kong), Piotr Freyberg (Poland)

Report

Type Panel
Legal basis at issue
  • GATT Article XXIII:1
Claims at issue
  • GATT Article II:1(b)
  • GATT Article VII
  • GATT Article X
  • GATT Article XI
  • GATT Article XIII
  • GATT Article XVIII
Defences at issue
  • GATT Article XVIII section B (BoP)
No of Pages (total / legal reasoning) 41 (and 5 annex)
  • -
  • Found not relevant
  • Not in report conclusions
  • Judicial economy exercised
  • Inconsistency found
  • Judicial economy exercised
  • Inconsistency found
  • Defence found to be inapplicable

Timeline

Request for consultations
Request for establishment
Establishment
Composition
Report
Adoption of report

Outcome

Outcome of the proceedings
Report adopted
Additional Info L/6505 (25/04/1989) Republic of Korea - Restrictions on Imports of Beef - Complaint by New Zealand - Report of the Panel: The were essentially two sets of restrictions on beef imports maintained by Korea: (a) measures amounting to a virtual suspension of imports introduced in November 1984 and May 1985 and subsequently amended in August 1988; and (b) restrictions on beef existing since Korea's accession to the General Agreement in 1967. The Panel noted that Korea's beef import measures introduced in 1984-1985 were taken for the purpose of protecting Korea's domestic cattle industry and not for balance-of-payments reasons and were therefore not notified to the Balance-of-Payments Committee. Korea also had not notified the amended restrictions maintained since August 1988 to the Balance-of-Payments Committee. Korea did not contest that these measures were contrary to the provisions of Article XI:1 and did not offer any justification for these measures under Article XI:2. The Panel concluded that the import measures and restrictions, introduced in 1984/85 and amended in 1988, were not consistent with the provisions of Article XI and were not taken for balance-of-payments reasons.

It was the view of the Panel that excluding the possibility of bringing a complaint under Article XXIII against measures for which there was claimed balance-of-payments cover would unnecessarily restrict the application of the General Agreement. This did not preclude, however, resort to special review procedures under Article XVIII: B. Indeed, either procedure, that of Article XVIII:12(d) or Article XXIII, could have been pursued by the parties in this dispute. However, the parties had chosen to proceed under Article XXIII.

The Panel concluded that in the light of the continued improvement of the Korean balance-of-payments situation and having regard to the provisions of Article XVIII:11, there was a need for the prompt establishment of a timetable for the phasing-out of Korea's balance-of-payments restrictions on beef, as called for by the CONTRACTING PARTIES in adopting the 1987 Balance-of-Payments Committee report.

The Panel noted that the Livestock Products Marketing Organization (LPMO) was a beef import monopoly established in July 1988, with exclusive privileges for the administration of both the beef import quota set by the Korean Government and the resale of the imported beef to wholesalers or in certain cases directly to end users such as hotels. Bearing in mind Article 31:5 of the Havana Charter (stating that import monopolies would "import and offer for sale such quantities of the product as will be sufficient to satisfy the full domestic demand for the imported product"), the Panel considered that, in view of the existence of quantitative restrictions, it would be inappropriate to apply Article II:4 of the General Agreement in the present case. The price premium obtained by the LPMO through the setting of a minimum bid price or derived sale price was directly afforded by the situation of market scarcity arising from the quantitative restrictions on beef. The Panel concluded that because of the presence of the quantitative restrictions, the level of the LPMO's mark-up of the price for imported beef to achieve the minimum bid price or other derived price was not relevant in the present case. The Panel stressed, however, that in the absence of quantitative restrictions, an import monopoly was not to afford protection, on the average, in excess of the amount of protection provided for in the relevant schedule, as set out in Article II:4 of the General Agreement. Furthermore, in the absence of quantitative restrictions, an import monopoly was not to charge on the average a profit margin which was higher than that "which would be obtained under normal conditions of competition (in the absence of the monopoly)". The Panel therefore expected that once Korea's quantitative restrictions on beef were removed, the operation of the LPMO would conform to these requirements.