Tutorial Activities

Luật thương mại quốc tế (Trường Đại học Kinh tế – Luật, Đại học Quốc gia Thành phố
Hồ Chí Minh)

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Case: Last year, Richland adopted a new legislation, commonly

referred to as the Tetra Pak Act, which requires that all non-alcoholic
beverages be sold in Tetra Pack containers. Until last year, non-
alcoholic beverages be sold in glass bottles and aluminum can.
According to Richland, the recycling of Tetra Pack containers is more
eco-friendly than the recycling of glass bottles (since no water and
no detergents are used). Moreover, the use of Tetra Pack containers,
rather than glass bottles, will reduce the use of silica, which is,
according to Richland, a mineral is ever-shorter supply. Richland also
argues that the mandatory use of Tetra Pack containers for non-
alcoholic beverages will help consumers to differentiate between
alcoholic beverages and non-alcoholic beverages and thus help to
avoid consumer fraud, as defined in Richland’s Consumer Protection
Act of 2019. Richland backs up these various justifications for its
Tetra Pack Act with scientific studies, but the conclusions of a few of
these studies reflect the majority view in the scientific community
(most of the evidences are given by RichContainer – a largest
producer of Tetra Pack in Richland).
Newland was the main exporter of fruit juice in glass bottles in
Richland. It was, therefore, most affected by Richland’s Tetra Pack
Act. Newland is of the opinion that Richland produced its legislation
primarily to support its emerging packaging industry. In Newland’s
view, there is no serious scientific basis for Richland’s requirements
to use Tetra Pack containers, and the level of environmental
protection set by Richland is exaggeratedly high. Newland also
points out that alcoholic beverages, and in particular wine, of which
Richland is an important producer and exporter, can be sold in glass
bottles as well as Tetra Pak containers. Moreover, for the next ten
years, soft-drinks produced in Friendland – a neighbour country of
Richland will not be subjected to the packaging requirements of the
Tetra Pack Act in order to give its producers sufficient time to adapt
the new requirements. Newland also notes that Richland rejected
Newland’s invitation to start multilateral negotiations on a gradual
reduction of the use of glass bottles for non-alcoholic beverages.
Newland has requested consultations with Richland on the WTO-
consistency of the Tetra Pack Act. You are part of a team of young
and talent trade lawyer instructed to prepare a legal brief in support
of the position of Newland. Your task is to write the part of this brief
dealing with Newland’s possible claims for Richland’s Tetra Pack Act
under Article XX of GATT 1994.

ANSWER
In this instance, analyzing the measure of Richland involves
two steps.
Firstly, we examine whether the measure is subject to any
GATT non-discrimination rules.

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1. National treatment
Problem: Does Richland's Tetra Pak Act violate GATT 1994 Article
III:4?
Rules: The Appellate Body in Korea - Various Measures on Beef
(2001) stated that there are three tiers of testing to see if internal
regulation is in compliance with Article III:4:
1. Whether the legislation in question is an article III:4-covered
statute, regulation, or mandate;
2. Whether native and imported goods are comparable
3. Whether imported goods receive less benevolent treatment
Appplication:
1. “All laws, rules, and specifications pertaining to the internal
sale, offering for sale, purchase, transit, distribution, or usage
of goods” are covered by Article III:4. It is customary to rely the
interpretation of the word "affecting" on the Italy - Agriculture
Machinery case, which said that two factors—"affecting"
internal sale, purchase, etc., and "controlling" the terms of sale
or chase—are necessary for a measure to fall under the
purview of Article III:4. The Appellate Body in the case US - MFC
upheld this claim. Tetra Pak Act was imposed by Richland in this
particular situation. At first view, this item appeared to meet
the criteria for the measures addressed in Article III:4 since it
was a regulation, a tool for regulating the flow of sales or
purchases in other areas rather than having an actual impact
on tax or fee. When it comes to "affecting," the Tetra Pak Act
has an impact on the importing and sale of fruit juice from
Newland. The Tetra Pak Act mandates that all non-alcoholic
beverages be packaged in accordance with its regulations,
rather than being packaged in glass bottles as is customary. In
the meantime, Richland's primary supplier of fruit juice in glass
bottles was Newland. Because Newland was compelled to use a
new technique as a result of this Act, the sale of its fruit juice
was impacted during the packaging process.
2. With regard to the component "like products," we would take
into account the similarity between two different types of
beverages: juice products imported from Newland to Richland
and alcoholic beverages made in Richland (domestic product).
As stated in the EC-Asbestos case, similar items must be
identified on a case-by-case basis based on four factors when
analyzing:
(i) Fruit juice and wine are clearly two different types of
beverages based on their characteristics, nature, and
quality. Wine is an alcoholic beverage, while fruit juice is a
non-alcoholic one that is made from pure and mature fruit.
Diluting and/or blending is a frequent process since many

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fruit juices are either too acidic or too highly flavorful to be

enjoyable to consume. As a result, fruit juice drinks typically
contain at least 20% juice along with any legal artificial
flavoring, coloring, and acidifying agents. Contrarily, wine is
typically manufactured from grapes or other fruits, but the
process involves fermenting these materials with water and
sugar in order to alter the fruit's properties in terms of both
physical and chemical aspects. As a result of the differing
recipes, the final flavors of these two types may be clearly
identified from one another and cannot be substituted.
(ii) These two drinks can both be used for regular drinking in the
end. In actuality, though, wine is typically only consumed by
adults, while fruit juice is typically consumed by a wide age
range. Therefore, the end-use of the two types differs
significantly.
(iii) Regarding the consumer's preferences and routines: There
are no new facts in the current case study to further analyze
in this component. However, in most cases, wine cannot be
used as a substitute when the supply of fruit juice is
reduced, stopped, or reversed. Regardless of tastes or
habits, these two goods meet a variety of needs.
(iv) The products are classified into two separate tariff
classifications. Fruit juice has the HS code 2009, whereas
wine has the code 2204 and is described in two different
ways.
Conclusion: Based on the four factors listed above, neither of the
two products could fall under the first sentence of Article III:2's
definition of a "like product" or the second sentence's definition of a
"competitive and alternative" product. However, in light of the
appellate body's ruling in the case of EC-Asbestos (2001), the
definition of a "like product" under Article III:4 is more expansive
than the first sentence of Article III:2 and most definitely not more
(also means the scope of second sentence of Art III:2). This leads to
the judgment that Article III:4 has not been violated because two of
the product types described in this case do not fall within its purview.
2. Most - favored - nation treatment
Problem: Does Richland's Tetra Pack Act breach the requirements for
MFN treatment under Article I:1 GATT 1994?
Rules: According to Article I:1 of the GATT 1994, there are 4
question set out to analyze each action of Richland to answer the
general issue above:
(i) Whether the measure of Richland that issue is a measure
covered by Article I:1 of the GATT 1994;
(ii) Whether the measure confers a trade "advantage";
(iii) Whether the products in question are "like products";

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(iv) Whether the advantage in question is given "immediately

and unconditionally" to all like products concerned,
regardless of their origin or destination.
Application:
Article I:1 reads "with respect to all aspects referred to in paragraphs
4 of Article III" in relation to the subject matter in question in (i). In
those regards, laws, rules, and specifications apply to any product's
internal sale, offering for sale, purchase, transit, distribution, or use.
In this instance, Richland mandates that Tetra Pack containers be
used for the sale of all non-alcoholic beverages. This move obviously
relates to enforcing legal restrictions and internal import
requirements. As a result, this issue is handled by GATT 1994 Article
I:1.
Regarding the second question in (ii), it is clearly recognized that
Richland gave Friendland, a neighboring nation, a greater
"advantage" than Richland. In fact, in order to allow Friendland's
manufacturers enough time to adjust to the new regulations, soft
drinks made there will not be subject to the Tetra Pack Act's
packaging restrictions for the next ten years. Following the Tetra
Pack Act's adoption, Newland is required to conform right away,
while Friendland gets 10 years to adjust to the new rules. As a result,
Friendland had the chance to execute the Tetra Pack Act's criteria
without seriously affecting the production of soft beverages. As a
result, items from Friendland have received a "advantage" over
those coming from Richland, which is against Article I:1 of the GATT
1994.
With regard to the third factor, "like product," we will assess each
relevant criterion on an individual basis to determine whether or not
there is "like product" in this situation. Based on the Japan - Alcoholic
Beverages case, the following four elements should be taken into
account:
(a) Properties, nature, and quality of the product (physical
characteristics): In this instance, the products are soft drinks
from Friendland and fruit juice from Newland. Juices made from
pure, fully-ripe fruit are unconcentrated liquids. Diluting and/or
blending is a frequent process since many fruit juices are
either too acidic or too highly flavorful to be enjoyable to
consume. The resulting fruit juice beverages typically have at
least 20% juice, whether it is single-strength or has been
reconstituted from frozen or canned concentrates. Pectins and
other additions, together with artificial flavoring, coloring, and
acidifying agents, may be allowed. While soft drinks are
alcoholic beverages made with drinkable water and proper
flavors and colors. Additionally, they might include fruit juices,
sweeteners, flavoring, coloring, acidification, foaming,
emulsifying, stabilizing, or viscosity-producing ingredients, as

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well as caffeine, quinine, and chemical preservatives. Fruit

juices and bottled waters are soft beverages. Fruit juice and
soft drinks have the same raw elements, hence their physical
properties are the same.
(b) End uses: Since fruit juice and soft drinks are both typically
consumed as beverages, customers' primary goals when
consuming them are drinks and refreshments.
(c) Fruit juice is classified as having HS Code 2009, while soft
drinks have HS Code 2202. It's clear that there is a distinction
since the two countries' commercial procedures are different.
However, these two goods are nearly identical.
(d) Consumer preferences and behaviors: It is unknown which
kinds of fruit juice and soft drinks Richland residents are
interested in. However, in general, customers' tastes do not
considerably change between various types of beverages. Due
to the identical physical characteristics, consumers can select
any beverage with no restrictions that is appropriate for
various consumer demographics.
The advantage that is given "immediately and unconditionally" is
the fourth factor to be taken into account under Article I(1) of the
GATT 1994. In this instance, Richland required imports from
Newland to comply with a requirement but did not "immediately"
force Friendland products to comply. Friendland specifically has
ten years to adjust to the new standards and is not subject to any
conditions.
Conclusion: The requirement that all non-alcoholic beverages be
supplied in Tetra Pack containers was a part of Richland's proposal
that broke Article I:1 of the GATT 1994.
Secondly, we then analyse whether the violated measure
falls within any exception under Article XX of GATT 1994 to
exempt the liability of Richland or not?
Article XX
Problem: Whether the Richland-Tetra pack violation of Article XX
GATT 1994 could be justified ?
Rule: According to AB report, US - Gasoline (1996) (para. 22), in
order for the measure in question to qualify for Article XX's
justification protection, it must not only fall under one or more of the
specific exceptions stated under Article XX's opening clauses
(paragraphs (a) to (j)). In other words, the analysis is two-tiered.
(1) whether Richland's measure satisfies the criteria for the
exceptions listed in Article XX's paragraphs (b) or (g);
(2) whether Richland's measure satisfies the criteria for Article XX's
Chapeau.
Application:
1. Sub - paragraphs

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1.1. Sub - paragraph (b)

Measures that are "essential to protect human, animal, or plant life
or health" are covered by Article XX(b). To evaluate whether a
measure is provisionally justified under this article, a two-tier system
is given out. Under Article XX(b), a GATT-inconsistent measure is
conditionally justified if: (i) The preservation of human life or health
is the policy goal pursued by the measure; (ii) The action is
necessary to achieve that policy goal.
Whether Richland’s measure is the policy objective protecting
the life or health of humans?
Richland claims that recycling Tetra Pack containers is more
environmentally friendly than recycling glass bottles (since no water
and no detergents are used). The mandated use of Tetra Pack
containers for non-alcoholic beverages, according to Richland, will
aid consumers in distinguishing between alcoholic and non-alcoholic
beverages and help consumers prevent fraud, as specified by
Richland's Consumer Protection Act of 2019.
Regarding its import ban on retreaded tires, Brazil argued in Brazil -
Retreaded Tyres (2007) that "the accumulation of waste tyres
creates a risk of mosquito-borne disease such as dengue and yellow
fever... because waste tyres create the ideal breeding grounds for
disease-carrying mosquitoes and that these diseases are also spread
through interstate transportation of waste tyres for disposal
operations. The buildup of scrap tires raises the possibility of tire
fires and harmful leaching... Animals are also at risk for illnesses
brought on by insects. Hazardous substances found in toxic plumes
generated from tyre fires injure not just humans but also animals.
Numerous poisonous chemicals and heavy metals present in
pyrolytic oil released by tyre fires harm animal and plant life and
health." We can observe that Brazil's policy is intended to address
the health risk that has an impact on people's wellbeing. As a result,
the panel agreed with Brazil's justification and determined that its
action is protected under Article XX (b).
The Chinese government, on the other hand, asserted in China -
Raw Materials (2012) that the export limitations on some of the raw
materials in question were: "part of comprehensive environmental
protection framework whose objectives are pollution reduction for
the protection of health of the Chinese population." China’s export
restrictions were not designed to address the health risks associated
with environmental pollution and the panel did not accept China's
argument because the panel found that China was unable to
substantiate that the export restrictions at issue “were part of a
comprehensive programme maintained in order to reduce pollution,
and thus cast serious doubts over whether the policy objective
pursued by the export restriction was the protection of life or health
of humans, animals or plants''.

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As a result, panels and the Appellate Body have looked at the

measure's design and structure to evaluate whether the policy
purpose it sought to achieve. In this situation, Richland shall
demonstrate a significant degree of deference in acknowledging that
the policy purpose of a measure is to safeguard life or health of
people, animals, or plants if Richland wants their measure is
temporarily justified under Article XX(b) of the GATT 1994. However,
The Tetra Pack recycling program is more environmentally friendly
than glass bottle recycling and "helps consumers to differentiate
between alcoholic beverages and non-alcoholic beverages and thus
help to avoid consumer fraud," according to Richland's policy
objective. However, this program is not intended to address the
health risk associated with environmental pollution. In China, the
similar problem with raw materials exists (2012). The citation of
environmental and health issues by China and Richland was
described as "merely a post hoc explanation established exclusively
for the purpose of this dispute." For this reason, Richland’s measure
doesn’t fall within the scope of application of Article XX (b) of the
GATT 1994.
To sum up, Richland's action is not provisorily justifiable in
accordance with GATT 1994 Article XX(b).
1.2. Sub paragraph (g)
Measures related to the discussion of exhaustible natural
resources are covered by Article XX(g). As a result, Article XX(g)
establishes a three-tier test that demands that a measure: (i) relate
to ‘the conversation of exhaustible natural resources’; (ii) ‘relate to’
the conversation of exhaustible natural resources; (iii) be made
effective in conjunction with restrictions on domestic production or
consumption.
(i) Whether Richland’s measure relates to the ‘conservation of
exhaustible natural resources’:
Richland asserted that the Tetra Pak Act will limit the usage of
silica, a material that is becoming more and more scarce. Natural
resources comprise both living and non-living resources, the
Appellate Body noted in US-Shrimp. Natural substances like silica
can be found all around us in the world. More than 25% of the
planet's crust is made up of silica, which is present in most rocks,
clays, and sands. Silica is therefore a "natural resource." Although
basalt and dolomite are among the most frequent volcanic rocks,
silica is just recycled, not renewable, even though it is one of the
most often encountered minerals in the Earth's crust. Therefore,
silica depletion will unavoidably occur in the future, especially if
human beings over-exploit the resource to produce the beverage
industry.
(ii) Whether Richland’s measure is a measure ‘relating to’ the
conversation of exhaustible natural resources:

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Article XX(g) demands a close and genuine relationship between

the measure and the policy purpose, according to the Appellate Body
in US - Shrimp. The means employed, i.e. the measure, must be
reasonably related to the end pursued, i.e. the conservation of an
exhaustible natural resource. A measure may not be excessively
broad in its scope or reach in comparison to the policy aim it seeks
to achieve. In this instance, Richland suggested that limiting the
usage of glass bottles will help reduce the use of silica, which is
thought to be a mineral that could be depleted. In actuality, silica
sand, soda ash, limestone, and frequently magnesium oxide and
aluminum oxide are the primary raw materials used to create
modern glass. People need non-alcoholic beverages in their daily
lives, and the non-alcoholic beverage industry is big and growing. As
a result, producers won't be able to utilize glass bottles anymore
thanks to the Tetra Pack Act, and the amount of silica used in
industry has drastically decreased. In other words, there is a
"substantial relationship"—one that can be seen to be near to reality
—between the Tetra Pak Act and the proper policy of silica
conservation.
(iii) Whether the measure at issue ‘made effective in
conjunction with restrictions on domestic production or
consumption’:
Actuality, the requirement of "even-handedness" in the
application of limits on both domestic and imported goods
constitutes the third component of the Article XX(g) test. Article
XX(g) only demands that products be treated "even-handedly," not
that imported and domestic goods must be treated exactly the
same. The Tetra Pak Act, a new piece of legislation that Richland
adopted, mandates that all non-alcoholic beverages be sold in Tetra
Pack containers. This indicates that the Richland legislation is
applicable to both domestic and imported alcoholic beverages,
regardless of whether the product is made inside or outside of
Richland's borders. Thus, in accordance with Article XX, Richland's
policy was "made effective in connection with limits on domestic
production or consumption" (g).
To sum up, Richland's action is provisorily justified by GATT Article
XX(g).
2. Chapeau

Considering the results of the analysis above, the next stage is

to decide whether this measure complies with the two requirements
made by Chapeau, which include: (i) whether this measure created
the arbitrary or unjustifiable discrimination; (ii) whether this measure
created the disguised restriction on international trade.

Firstly, whether this measure creates the arbitrary or

unjustifiable discrimination.

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(i) Whether the arbitrary discrimination is caused by this

measure. In accordance with US-Shrimp case law, arbitrary
discrimination manifests itself as strict and rigid, regardless
of the circumstances in the import country. Of this instance,
it is clear that Richland enforced the regulations without
taking into account the circumstances in Newland in order to
attain its objectives. Since Newland was Richland's primary
supplier of significant quantities of non-alcoholic beverages
(fruit juice), it was quite arbitrary to impose the Tetra Pak Act
without first notifying Newland and giving it time to adjust.
Tetra Pack containers must be switched from glass bottles,
which takes time and goes through several stages.
Friendland had ten years to change this rule, though.
Richland's measurement as a result led to arbitrary
discrimination.
(ii) if the discrimination caused by this measure is unjustified.
The Appellate Body made it plain in the US - Shrimp case
law that in order to comply with the clause of Article XX, a
Member must undertake genuine, good-faith efforts to
negotiate a multilateral solution before taking unilateral
action. Failure to make such attempts could result in
discrimination that isn't legal. It indicates that the Appellate
Body found that the action was unjustified because it was
adopted by the US without any attempt at negotiation with
the import country. In this instance, Richland declined to
engage Newland in multilateral negotiations. This
demonstrates that Richland did not try to negotiate with
Newland, which could have resulted in many benefits for the
two countries. Richland did not like the action that
Friendland received from Richland. As a result, Richland's
action led to an unjustified form of discrimination.
To sum up, Richland's Tetra Pack Act was responsible for the
arbitrary or unjustified discrimination described in Chapeau
of Article XX of the GATT 1994.
Secondly, whether this measure created the disguised restriction on
international trade. In this scenario, there is not enough evidence to
determine whether or not this measure imposed the disguised
restriction on foreign trade because this aspect is determined based
on de facto expressions.
In conclusion: Richland is unable to use the broad exceptions of GATT
1994 Article XX to support the passage of the Tetra Pack Act.

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