Hong Kong China Goods may not be labelled “Made
in China” as Ordained by US, WTO Panel Rules against US
·
US view that the measures imposed by the
United States concern issues of national security not susceptible to review or capable
of resolution by WTO dispute settlement.
·
1992 Hong Kong Policy Act, US Congress grants
Hong Kong, China differential treatment from China in certain policy areas (including
origin marking).
·
The US President issued Executive Order 13936,
determining that Hong Kong, China was no longer sufficiently autonomous and ordering
suspension of the differential treatment in some areas (including origin marking).
·
United States determines the origin of the
products subject to the measure to be “Hong Kong, China” and not “China”.
·
The United States requiring that products
of Hong Kong, China be marked with a mark of origin indicating the name of another
WTO Member (China).
On 21 December the WTO
circulated the panel report in the case brought by Hong Kong, China in “United States
— Origin Marking Requirement” (DS597)
Summary of the dispute
to date
The summary below was
up-to-date at 21 December 2022
Consultations
Complaint by Hong Kong,
China
On 30 October 2020, Hong
Kong, China requested consultations with the United States regarding certain measures
concerning the origin marking requirement applicable to goods produced in Hong Kong,
China.
Hong Kong, China claimed
that measures appear to be inconsistent with:
·
Articles I:1, IX:1 and X:3(a) of the GATT 1994;
·
Articles 2(c), 2(d) and 2(e) of the Agreement
on Rules of Origin; and
·
Article 2.1 of the TBT Agreement.
On 9 November 2020, the
United States requested the Chair of the DSB to circulate to Members a communication
where it indicated that the United States was willing to enter into consultations
with Hong Kong, China, without prejudice to the US view that the measures imposed
by the United States concern issues of national security not susceptible to review
or capable of resolution by WTO dispute settlement.
On 13 November 2020, the
Russian Federation requested to join the consultations. On 19 November 2020, the
United States requested the Chair of the DSB to circulate to Members a communication
where it rejected the Russian Federation's request to join the consultations.
Panel and Appellate Body
proceedings
On 14 January 2021, Hong
Kong, China requested the establishment of a panel. At its meeting on 25 January
2021, the DSB deferred the establishment of a panel.
At its meeting on 22 February
2021, the DSB established a panel. Brazil, Canada, China, the European Union, India,
Japan, Korea, Norway, the Russian Federation, Singapore, Switzerland, Turkey and
Ukraine reserved their third-party rights.
On 19 April 2021, Hong
Kong, China requested the Director-General to compose the panel. On 29 April 2021,
the Director-General composed the panel.
On 26 October 2021, the
Chair of the panel informed the DSB that, in the light of the complexity of the
issues presented in the dispute, the panel expected to issue its final report to
the parties in the second quarter of 2022. In its communication, the Chair apprised
the DSB that the report would be available to the public once it was circulated
to the Members in all three official languages, and that the date of circulation
depends on completion of translation. On 21 June 2022, the Chair of the panel informed
the DSB that due to the complexity of the dispute, the panel now expected to issue
its final report to the parties in the last quarter of 2022.
On 21
December, the panel report was circulated to Members.
Summary of key findings
This dispute concerns
a requirement in US law that imported goods produced in Hong Kong, China be marked
to indicate that their origin is “China” (origin marking requirement).
Through the 1992 Hong
Kong Policy Act, US Congress grants Hong Kong, China differential treatment from
China in certain policy areas (including origin marking), on the condition that
Hong Kong, China remains sufficiently autonomous from China. Following certain events
in Hong Kong, China, including the adoption of the Hong Kong Security Law by China
in 2020, the US President issued Executive Order 13936, determining that Hong Kong,
China was no longer sufficiently autonomous and ordering suspension of the differential
treatment in some areas (including origin marking). This led to the adoption of
the origin marking requirement at issue.
Order of analysis
The Panel considered it
appropriate to start its analysis with Hong Kong, China's claim under Article IX:1
of the GATT 1994. In light of the United States' invocation of Article XXI(b) of
the GATT 1994, the Panel next decided that it was appropriate and also the most
efficient way to proceed, to examine the question of whether this provision is self-judging
such that it excludes any review of the challenged measure by a panel, as argued
by the United States.
Whether Article XXI(b)
is entirely self-judging
The Panel saw no disagreement
between the parties on that Article XXI(b) contains language (“which it considers”)
which refers to the invoking Member's own appreciation and judgement and is therefore
“self-judging”. The Panel identified the disagreement to be about whether, as argued
by the United States, the phrase “which it considers” extends to the entirety of
Article XXI(b), or, whether, as submitted by Hong Kong, China and certain third
parties, this phrase does not extend to the conditions and circumstances set out
in the sub-paragraphs which would therefore be subject to review by the Panel.
The Panel carried out
an interpretive analysis pursuant to Articles 31 and 33 of the Vienna Convention
on the Law of Treaties. Based on this analysis the Panel concluded that the words
“which it considers” in the chapeau of Article XXI(b) do not extend to the subparagraphs
of that provision and that therefore the subparagraphs in Article XXI(b) are subject
to review by a panel.
Article IX:1 of the GATT
1994
The Panel found that the
measure constitutes an origin marking requirement that falls within the scope of
Article IX:1, and that products produced in Hong Kong, China, which are subject
to the measure, and products produced in any third country, which are not subject
to the measure, could be presumed to be “like products” within the meaning of Article
IX:1.
To assess whether the
origin marking requirement accords to products of Hong Kong, China treatment that
is different from the treatment accorded to products of other countries, the Panel
first resolved a factual disagreement between the parties concerning the origin
determination at issue. It found that the United States determines the origin of
the products subject to the measure to be “Hong Kong, China” and not “China”.
The Panel found that a
difference in treatment resulted from the United States requiring that products
of Hong Kong, China be marked with a mark of origin indicating the name of another
WTO Member (China), whereas goods of any third country must be marked with the name
of that third country, and not with the name of another WTO Member. The Panel further
found that this difference in treatment modified the conditions of competition to
the detriment of products of Hong Kong, China, because, as a result, products of
Hong Kong, China were required to compete in the US market with an indication that
their origin is that of another WTO Member (China) and not with an indication of
their origin as determined by the United States (i.e. Hong Kong, China). Those products
were thus denied the possibility to compete in the US market under their own name,
and thus to influence, develop, or benefit from, any value that may be attached,
currently or in the future, to their origin
United States' invocation
of Article XXI(b)(iii)
The Panel first addressed
the interpretive and evidentiary aspects of subparagraph (iii) which the United
States had indicated to be the relevant subparagraph in Article XXI(b).
The Panel concluded that
the phrase "emergency in international relations" refers to a state of
affairs of the utmost gravity, in effect a situation representing a breakdown or
near-breakdown in the relations between states or other participants in international
relations. The Panel found that the wording of the subparagraph enjoins a panel
to examine the extent of the deterioration in relations between states or other
participants in international relations, irrespective of what caused that deterioration.
The Panel further noted that whether such situation exists must be assessed on a
case-by-case basis in light of the specific facts involved. It considered that the
state of relevant international relations may be understood in a spectrum between
peaceful interaction on one end, and the breakdown in such relations on the other
end (in situations such as war). In the Panel's view, an emergency in international
relations was closer to this latter end, i.e. a breakdown in such relations.
Applying this interpretation
to the facts at hand, the Panel concluded that although there was evidence of the
United States and other Members being highly concerned about the human rights situation
in Hong Kong, China, the situation had not escalated to a threshold of requisite
gravity to constitute an emergency in international relations that would provide
justification for taking actions that are inconsistent with obligations under the
GATT 1994.
Judicial economy
The Panel exercised judicial
economy with respect to Hong Kong, China's claims under Article I:1 of the GATT
1994, Article 2.1 of the TBT Agreement, and Articles 2(c) and 2(d) of the ARO. With
respect to Article I:1 of the GATT 1994 and Article 2.1 of the TBT Agreement, the
Panel did not consider that additional findings on an MFN violation would be necessary
to assist the DSB in making sufficiently precise recommendations and rulings. The
Panel's conclusion on exercising judicial economy on the claims under the ARO was
grounded on the factual finding that the United States determines the origin of
the products to be “Hong Kong, China” and not “China”, which meant that the factual
basis for contending that the dispute involved “rules of origin” within the meaning
of the ARO was incorrect.