ASPEN PUBLISHERS

International Trade Law

Problems, Cases, and Materials

Daniel C.K. Chow

Joseph S. Platt-Porter Wright Morris & Arthur Professor of Law,The Ohio State University Michael E. MoritzCollege of Law

Thomas J. SchoenbaumProfessor of Graduate Studies,International Christian University, TokyoResearch Professor of Law,George Washington University, Washington, DC

.Wolters KluwerLaw & Business

AUSTIN BOSTON CHICAGO NEW YORK THE NETHERLANDS

Contents

Preface xxviiAcknowledgments xxix

1 The Law of International Trade andthe Multilateral Trading System

I.

II.

III.

Some Background ConsiderationsA.B.

What Is the Law of International Trade?Distinguishing the Law of International Business

Transactions and the Law of International Trade1. The Law of International Business Transactions2. The Law of International Trade3. Three Levels of Analysis

Notes and QuestionsProblem 1-1

International Trade Flows

A.B.C.D.

Problem 1-2Trade in GoodsServices TradeForeign Direct InvestmentTechnology Trade

Notes and QuestionsProblem 1-3

The Principal Global Economic InstitutionsA.

B.

The World BankNotes and Questions

The International Monetary FundNotes and QuestionsProblem 1-4

11

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X I

xii Contents

C. The World Trade Organization (WTO) 24Mitsuo Matsushita, Thomas J. Schoenbaum, and Petros

C. Mavroidis, The World Trade Organization: Law,Practice and Policy 25

Notes and Questions 27IV. The Case for Free Trade: A Brief Look at International

Economics 29A. Arguments in Favor of Free Trade 29

Problem 1-5 29Douglas Irwin, Free Trade Under Fire (2004) 30Notes and Questions 41

B. United States-China Economic Relations 44Problem 1-6 44

1. The Growing U.S. Trade Deficit with China 442. Currency Valuation Issues and "Hoarding" by China 453. Risks Created by the Trade Deficit with China 46

Notes and Questions 48V. Negotiating Trade Concessions 50

The Doha Development Agenda of 2001 51Notes and Questions 52

VI. Dispute Settlement 52A. General Considerations 52

Notes and Questions 54Notes on Implementation and Remedies 56United States — Standards for Reformulated

and Conventional Gasoline 58Problem 1-7 59Problem 1-8 60

B. Trade Remedies 60C. Nullification or Impairment 61

Problem 1-9 62United States — Taxes on Petroleum and Certain Imported

Substances 62Problem 1-10 64EEC—Payments and Subsidies Paid to Processors and

Producers of Oilseeds and Related Animal-Feed Proteins 64Japan—Measures Affecting Consumer Photographic Film

and Paper 66Notes and Questions ' 70

D. Burden of Proof 71Canada—Measures Affecting the Importation of Milk and

the Exportation of Dairy Products 72.Notes and Questions 77

E. Principles of Interpretation and Status of Adopted Reports 78Problem 1-11 78Japan—Taxes on Alcoholic Beverages 78Notes and Questions 81

F. Trade Retaliation Under National Laws 82Problem 1-12 82

Contents xiii

Mitsuo Matsushita, Thomas J. Schoenbaum, and PetrosC. Mavroidis, The World Trade Organization: Law,Practice and Policy 83

Notes and Questions 86United States — Sections 301-310 of the Trade Act of 1974 86Notes and Questions 90

VII. Preferential Trade Agreements 90A. Introduction 90

Problem 1-13 94Problem 1-14 94

B. The North American Free Trade Agreement: An Overview 95Problem 1-15 97Note on Labor and Environmental Standards in

Preferential Trade Agreements 97Note on Worker Productivity 98

The Implementation of International TradeObligations in the Domestic Legal Order 101

I. Introduction 101II. Domestic Implementation of International Trade Obligations 102

A. The United States 1031. The Executive Branch 1032. The Legislative Branch 1073. The Judicial Branch 1074. State and Local Government 1075. Problems in the Allocation of Power over Trade 107

a. Negotiating a Trade Agreement 107b. Treaty versus Executive Agreement 108

United States Department of State, Foreign Affairs ManualCircular No. 175 (2d ed. 1985) 109

Notes and Questions 109c. Presidential Power over International Trade 109

Problem 2-1 110United States v. Capps, Inc. 110Dames & Moore v. Regan 113Notes and Questions 118

d. The Clash Between State and Federal Power 118Problem 2-2 118Problem 2-3 119Crosby v. National Foreign Trade Council 119Notes and Questions 122Problem 2-4 123

B. The European Union 124Agreement Establishing the World Trade Organization 127Problem 2-5 133

xiv Contents

III. The Effect of International Trade Agreements on DomesticLaw and Resolving Conflicts Between International andDomestic Law 133

A. The United States 133Problem 2-6 134Problem 2-7 134The Uruguay Round Agreements Act (1994) 134Notes and Questions 137Problem 2-8 138

B. The European Union 138Portuguese Republic v. Council 139Notes and Questions 141

The Core Principles of the WTO: Most FavoredNation and National Treatment 143

I.II.

HI.

IntroductionThe Most Favored Nation Principle

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

A. Scope of the MFN ObligationsProblem 3-5Problem 3-6Belgian Family Allowances (Allocations Familiales)Notes and Questions

B. The "Like Product" IssueTreatment of Germany of Imports of SardinesNotes and QuestionsProblem 3-7

C. De Facto DiscriminationCanada—Certain Measures Affecting the Automotive

IndustryNotes and Questions

D. Exceptions to MFN ObligationsNational Treatment

Problem 3-8Notes and Questions

A. Internal Taxes and ChargesJapan — Taxes on Alcoholic BeveragesCanada — Certain Measures Concerning PeriodicalsNotes and Questions

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Contents xv

4

I.

II.

III.

B. Government RegulationProblem 3-9Italian Discrimination Against Imported Agricultural

MachineryProblem 3-10Korea — Measures Affecting Imports of Fresh, Chilled and

Frozen BeefNotes and QuestionsProblem 3-11

C. Government ProcurementNorway — Procurement of Toll Collection Equipment for the

City of TrondheimNotes and Questions

Intellectual Property and TRIPs

IntroductionA. Intellectual Property and International TradeB. Intellectual Property and the WTOC. TRIPs: An OverviewCopyright

Phil Collins v. Imtrat Handelsgesellschaft GmbHNotes and Questions

PatentsA. Introduction

Problem 4-1Notes and QuestionsProblem 4-2Problem 4-3

B. TRIPs and Pharmaceutical PatentsProblem 4-4Problem 4-5

1. The Doha DeclarationDOHA WTO Ministerial Conference 2001: TRIPs and

Public HealthProblem 4-6

2. The Implementation DecisionImplementation of Paragraph 6 of the Doha Declaration on

the TRIPs Agreement and Public HealthNotes and Questions

3. Exceptions and DiscriminationProblem 4-7Canada — Patent Protection of Pharmaceutical ProductsNotes and Questions

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IV. Trademarks and Geographical Indications 229A. Trademarks 229

Problem 4-8 232Problem 4-9 233McDonald's Corp. v. Joburgers Drive-Inn Restaurant (Pty)

Ltd. 234Notes and Questions 241Problem 4-10 241United States — Section 211 Omnibus Appropriations

Act of 1998 242Notes and Questions 249

B. Geographical Indications 250Problem 4-11 250Problem 4-12 250Problem 4-13 250Consorzio del Prosciutto di Parma v. Asda Stores, Ltd. 251Notes and Questions 256Problem 4-14 257

V. Enforcement Under TRIPs 257A. Commercial Piracy 257

Statement of Professor Daniel Chow before the SenateGovernment Oversight and Management Subcommittee,April 20, 1994 260

Oral Testimony of Professor Daniel Chow before the UnitedStates-China Economic and Security Review Commission,June 8, 2006 262

Note on Trade Sanctions Under U.S. Special 301 262Notes and Questions 263Problem 4-15 264

B. TRIPs Enforcement Obligations 2641. General Obligations 264

Problem 4-16 264Notes and Questions 265

2. Criminal Enforcement 265Problem 4-17 265Notes and Questions 265

3. Civil and Administrative Enforcement 266Notes and Questions 267

4. Border Controls 267a. Customs Seizure and Forfeiture 267

Notes and Questions 268b. Section 337 Exclusion Orders 269

Fuji Photo Film Co., Ltd. v. International Trade Commission 270Notes and Questions 276

Contents xvii

5

I.

II.

III.

IV.

V.

6

i.

II.

Trade in Services and the GATS

IntroductionA. GATS, TRIPs, and GATT ComparedThe Definitions of "Services" and "Modes of Supply"

Notes and QuestionsGATS ObligationsA. General Obligations

Problem 5-1Problem 5-2Problem 5-3

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

Market Access CommitmentsProblem 5-7Format for Country Schedules of Specific CommitmentsSample Schedule of Commitments: ArcadiaProblem 5-8United States—Measures Affecting the Cross-Border Supply

of Gambling and Betting ServicesNotes and QuestionsNote on Cross-Border Trucking Services Under

NAFTASectoral Annexes to the GATS

Problem 5-9Mexico—Measures Affecting Telecommunications ServicesNotes and Questions

Foreign Direct Investment and TRIMS

Introduction x

Problem 6-1A. FDI Within World Trade

Notes and QuestionsThe Agreement on Trade-Related Investment Measures (TRIMS)

Problem 6-2Canada—Administration of the Foreign Investment

Review ActProblem 6-3

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7

I.

II.

III.

IV.V.

Indonesia — Certain Measures Affecting the AutomotiveIndustry

Notes and QuestionsProblem 6-4Problem 6-5Note on the Outlook for a General Agreement on

Investment in the WTO

Trade in Goods: Customs and Tariff Law

IntroductionA. Tariff ConcessionsB. Economic and Social Policy Implications of Tariffs

Notes and QuestionsProblem 7-1

GATT Rules on Tariffs and CustomsProblem 7-2Problem 7-3Problem 7-4Problem 7-5Notes and Questions

The Harmonized Tariff SystemProblem 7-6Problem 7-7Notes and QuestionsHarmonized Tariff Schedule of the United States

Customs ProceduresProduct ClassificationA. The WTO Rules

European Communities — Customs Classification of CertainComputer Equipment

Problem 7-8European Communities — Customs Classification of Frozen

Boneless Chicken CutsNotes and QuestionsProblem 7-9Canada/Japan — Tariff on Import of Spruce, Pine, Fir

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

B. The United StatesProblem 7-10Problem 7-11Bausch & Lomb, Inc. v. United StatesLen-Ron Manufacturing Co., Inc. v. United StatesMead Corporation v. United StatesProblem 7-12

Contents

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Contents xix

VI.

VII.

VIII.

Problem 7-13Notes and Questions

C. The European UnionCouncil Regulation 2658/87E.I. DuPont deNemours, Inc. v. Commissioners of Customs

and ExcisePeacock AGv. Hauptzollamt PaderbornNotes and Questions

ValuationA. The WTO Rules

Problem 7-14Problem 7-15

B. United States LawCentury Importers, Inc. v. United StatesLuigi Bormioli Corp., Inc. v. United StatesNotes and QuestionsProblem 7-16

C. European Union LawHans Sommer GmbH v. Hauptzollamt BremenNotes and Questions

Rules of OriginA. WTO StandardsB. United States Law

Problem 7-17Koru North America v. United StatesSDI Technologies, Inc. v. United StatesNotes and Questions

C. European Union LawBrother International GmbH v. Hauptzollamt GiessenProblem 7-18

Customs and Free Trade AreasCummins Inc. v. United StatesProblem 7-19Problem 7-20Problem 7-21Note on Determining Origin Under NAFTAArticle 401NAFTA: A Guide to Customs Procedures U.S.

Department of Commerce GuidelinesNotes and Questions

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8 Non-Tariff Trade Barriers 433

I. Introduction 433II. Quotas 433

A. Background 433

XX

III.

rv.

V.

9

I.

II.

Problem 8-1B. GATT Rules on Quotas

1. Overview2. Article XI: The "General Elimination" Rule

Problem 8-2Problem 8-3Japan — Trade in Semi-ConductorsNotes and QuestionsProblem 8-4Canada — 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

Agricultural TradeProblem 8-5Problem 8-6Chile—Price Band System and Safeguard Measures

Relating to Certain Agricultural ProductsNotes and Questions

Technical Regulations and Product StandardsProblem 8-7Problem 8-8Problem 8-9Problem 8-10European Communities — Trade Description of SardinesProblem 8-11

State Trading EnterprisesProblem 8-12Canada—Measures Relating to Exports of Wheat

and Treatment of Imported GrainNotes and Questions

General Exceptions: Trade and Civil Society

IntroductionNotes and Questions

Environmental ProtectionProblem 9-1Problem 9-2Problem 9-3

Contents

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United States — Import Prohibition of Certain Shrimp andShrimp Products 493

Contents xxi

United States — Import Prohibition of Certain Shrimp andShrimp Products Recourse to Article 21.5 by Malaysia 502

Notes and Questions 506Note on Environment and Trade 507Problem 9-4 510

III. Protection of Human Health and Safety 510European Communities—Measures Affecting Asbestos and

Asbestos-Containing Products 510Note on the "Necessary" Requirement in GATT

Article XX 515Notes and Questions 517

IV. Food Safety: Sanitary and Phytosanitary Measures 519A. Introduction 519

Problem 9-5 520Problem 9-6 520European Communities—Measures Concerning Meat and

Meat Products (Hormones Case) 521Notes and Questions 533Note on the EC Biotech Products Case 534

V. Workers' Rights 535Problem 9-7 537Problem 9-9 537Problem 9-9 538Note on Human Rights and International Trade 538

10 Safeguards 539

I. Introduction 539II. Safeguards Under the WTO 540

Notes and Questions 541Problem 10-1 544Problem 10-2 545Problem 10-3 545

III. Safeguards Under U.S. Law 545Corus Group PLC v. International Trade Commission 547Problem 10-4 552Consumers Union of the United States, Inc. v. Kissinger 552Notes and Questions 557Case Study One: The U.S. Auto Safeguards of

1981 558Problem 10-5 558Problem 10-6 558Report to the President on Certain Motor Vehicles and

Certain Chassis and Bodies Thereof 559

xxii Contents

The U.S.-Japan Voluntary Restraint Agreement of1981 565

Notes and Questions 567Case Study Two: The U.S. Steel Safeguards Case of

2002 568Problem 10-7 568Report Submitted by President George W. Bush to the U.S.

Congress (2002) Pursuant to Section 203(B)(l) of theTrade Act of 1974, as Amended 568

Problem 10-8 571United States — Definitive Safeguard Measures on Imports

of Certain Steel Products 571Notes and Questions 581Note on import Restrictions to Safeguard Balance of

Payments 584

11

I.

II.

III.

Developing Countries

IntroductionA. Overview of Developing CountriesB. What Is a Developing Country?C. The History of Developing Countries Within the GATT/WTO

Notes and QuestionsNote on the Application of Safeguards and Quotas

Concerning Textiles and ClothingNote on Differing Views of DevelopmentProblem 11-1

The GATT and Developing CountriesProblem 11-2Problem 11-3Notes and Questions

Developing Country Preference Systems Under the WTOA. The Generalized System of Preferences for the

Trade in Goods1. The United States

Problem 11-4Problem 11-519 U.S.C. §246119 U.S.C. §246219 U.S.C. §2463Torrington Co. v. United StatesNotes and Questions

2. The European UnionProblem 11-6Problem 11-7

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Contents xxiii

European Communities — Conditions for the Granting ofTariff Preferences to Developing Countries 609

Notes and Questions 620B. Special and Differential Treatment Under Other

WTO Agreements 620Notes and Questions 621

IV. Agricultural Trade Subsidies 621Problem 11-8 623European Communities — Export Subsidies on Sugar 623Note on U.S. — Upland Cotton 632Postscript: The Growing Clout of Developing Countries:

Implications for the Future of the WTO 636

12 Unfair Trade Remedies: Anti-Dumping andCountervailing Duties 639

I.

II.

IntroductionExport AmericaNotes and QuestionsProblem 12-1

Dumping and Anti-Dumping DutiesA.

B.

C.

D.

The Economic and Political DebateMichael K. Young, United States Trade Law and PolicyThomas J. Schoenbaum, Market Contestability

and Reform of the Antidumping LawsBackgrounder, The Heritage Foundation, No. 261Notes and QuestionsProblem 12-2Problem 12-3

The Operation of the U.S. Anti-Dumping Laws:Procedural Aspects

Michael K. Young, United States Trade Law and PolicyNote on Appeals of Anti-Dumping Cases to Binational

Panels Under NAFTAThe Calculation of Anti-Dumping Duties

Problem 12-4Problem 12-5Problem 12-6Problem 12-7

1. How Dumping Is DeterminedNotes and Questions

a. Dumping CalculationsNotes and QuestionsProblem 12-8

Injury Analysis

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xxiv Contents

Problem 12-9 6711. Material Injury 671

Sandvik AB v. United States 6722. Causation 676

Nucor Corporation v. United States 676Notes and Questions 680

E. International Law Discipline on Anti-Dumping Proceedings:The WTO Antidumping Agreement 681

1. WTO Challenges to U.S. Anti-Dumping Law: PolicyIssues 682

Problem 12-10 682United States —Anti-Dumping Act of 1916 682Notes and Questions 684Problem 12-11 686

2. Procedural Aspects of U.S. Law Under the WTO 686United States—Anti-Dumping Measures on Certain Hot-

Rolled Steel Products from Japan 687Notes and Questions 692

3. Dumping Determinations 694United States—Measures Relating to Zeroing and Sunset

Reviews 694Notes and Questions 700

4. The Material Injury Analysis 700European Communities —Anti-Dumping Duties on

Malleable Cast Iron Tube or Pipe Fittingsfrom Brazil 701

Notes and Questions 709III. Subsidies and Countervailing Measures 710

A. Introduction 710B. The Economic and Political Rationales for Policies

Against Subsidies 712Types of Subsidies 712The Economic Debate over Subsidies 713Michael K. Young, United States Trade Law and Policy 714Problem 12-12 715Notes and Questions 716

C. Challenging Subsidies at the WTO: The Subsidies andCountervailing Measures Agreement 716

1. Defining Subsidies 7172. General Framework x 7173. Agricultural Subsidies 7184. Prohibited Subsidies 719

United States—Tax Treatment for "Foreign SalesCorporations" 719

Notes and Questions 7245. Actionable Subsidies 727

Problem 12-13 727Indonesia — Certain Measures Affecting the Automobile

Industry 7286. WTO Remedies for Subsidization 737

Contents xxv

United States — Tax Treatment for "Foreign SalesCorporations" 737

Notes and Questions 743D. Countervailing Duty Procedures Under U.S. Law 744

Michael K. Young, United States Trade Law and Policy 745Problem 12-14 748Problem 12-15 748Problem 12-16 748Notes and Questions 749

E. WTO Standards for Countervailing Duty Investigations 749United States — Countervailing Duty Investigation on

Dynamic Random Access Memory Semiconductors(DRAMS) from Korea 749

Problem 12-17 757Notes and Questions 757Note on the Privatization of State-Owned Enterprises 758Note on the U.S.-Canada Softwood Lumber Case 759

13 Export Controls 761

I. WTO Export Rules 761Note on Multilateral Export Controls 763

II. U.S. Export Controls 763A. Introduction 763B. Export Controls Under the EAA and the EAR 764

1. What Is Being Exported? 7662. Where Is the Destination of the Export? 7673. Who Will Receive the Item? 7684. What Use Will Be Made of the Item? 769

Notes and Questions 769Problem 13-1 770Problem 13-2 770Problem 13-3 770Problem 13-4 770Excerpts from U.S. Export Administration Regulations

Export Control Classification Numbers 771III. U.S.-Imposed Embargoes and Trade Restrictions on N

Foreign Countries 774A. Introduction 774

Problem 13-5 775B. The Cuban Embargo 775

Empresa Cubana Del Tabaco v. Culbro Corp. 776Notes and Questions 784

C. The Helms-Burton Act 784

xxvi Contents

Organization of American States: Inter-AmericanJuridical Committee Opinion Examining the U.S.Helms-Burton Act 786

Opinion of the Inter-American Juridical Committee inResponse to Resolution AC/Doc 3375/96 of the GeneralAssembly of the Organization Entitled "Freedom of Tradeand Investment in the Hemisphere" 786

Notes and Questions 790Problem 13-6 791Problem 13-7 791Problem 13-8 792

IV. Anti-Boycott Regulations 792Problem 13-9 793United States v. Meyer 793Notes and Questions 796

Bibliographical Note 799Table of Cases 809Index 815