India auto case

On 6 October 1998, the EC requested consultations with India concerning

certain measures affecting the automotive sector being applied by India.
The EC stated that the measures include the documents entitled Export
and Import Policy, 1997-2002, ITC (HS Classification) Export and Import
Policy 1997-2002 (Classification), and Public Notice No. 60 (PN/97-02)
of 12 December 1997, Export and Import Policy April 1997-March 2002,
and any other legislative or administrative provision implemented or
consolidated by these policies, as well as MoUs signed by the Indian
Government with certain manufacturers of automobiles. The EC
contended that:

under these measures, imports of complete automobiles and of

certain parts and components were subject to a system of nonautomatic import licenses.

in accordance with Public Notice No. 60, import licenses might be

granted only to local joint venture manufacturers that had signed an
MoU with the Indian Government, whereby they undertook, inter
alia, to comply with certain local content and export balancing
requirements.

The EC alleged violations of Articles III and XI of GATT 1994, and

Article 2 of the TRIMs Agreement.

On 1 May 1999, the United States requested consultations (WT/DS175)

with India in respect of certain Indian measures affecting trade and
investment in the motor vehicle sector. The United States contended that
the measures in question required manufacturing firms in the motor
vehicle sector to:
i.

achieve specified levels of local content;

ii.

achieve a neutralization of foreign exchange by balancing the value

of certain imports with the value of exports of cars and components
over a stated period; and

iii.

limit imports to a value based on the previous years exports.

According to the United States, these measures were enforceable under

Indian law and rulings, and manufacturing firms in the motor vehicle
sector must comply with these requirements in order to obtain Indian
import licenses for certain motor vehicle parts and components. The
United States considered that these measures violate the obligations of
India under Articles III and XI of GATT 1994, and Article 2 of the TRIMS
Agreement.
On 15 May 2000, the US requested the establishment of a panel. At its
meeting on 19 June 2000, the DSB deferred the establishment of a Panel.

Panel and Appellate Body proceedings

Further to a second request to establish a panel by the US, the DSB
established a panel at its meeting on 27 July 2000. The EC, Japan and
Korea reserved their third-party rights.
On 12 October 2000, the EC also requested the establishment of a panel.
At its meeting on 23 October 2000, the DSB deferred the establishment of
a Panel. Further to a second request by the EC, the DSB established a
panel at its meeting of 17 November 2000. Since a panel had already
been established with a similar mandate in the framework of the
case WT/DS175, the DSB decided to join the panel with the already
established panel in that case pursuant to Article 9.1 of the DSU. Japan
reserved its third-party rights. On 14 November 2000, the US requested
the Director-General to determine the composition of the Panel. On 24
November 2000, the Panel was composed.
On 21 December 2001, the Panel circulated its report to the Members. The
Panel concluded that:

India had acted inconsistently with its obligations under Article III:4
of the GATT 1994 by imposing on automotive manufacturers an
obligation to use a certain proportion of local parts and components
in the manufacture of cars and automotive vehicles
(indigenization condition);

India had acted inconsistently with its obligations under Article XI of

the GATT 1994 by imposing on automotive manufacturers an
obligation to balance any importation of certain kits and
components with exports of equivalent value (trade balancing

condition); and,

India had acted inconsistently with its obligations under Article III:4
of the GATT 1994 by imposing, in the context of the trade balancing
condition, an obligation to offset the amount of any purchases of
previously imported restricted kits and components on the Indian
market, by exports of equivalent value.

The Panel recommended that the DSB requests India to bring its measures
into conformity with its obligations under the WTO Agreements.
On 31 January 2002, India appealed the above Panel Report. In particular,
India sought review of the following Panels conclusion on the grounds that
they are in error and based upon erroneous findings on issues of law and
related legal instruments:

Articles 11 and 19.1 of the DSU required it to address the question

of whether the measures found to be inconsistent with Articles III:4
and XI:1 of the GATT had been brought into conformity with the
GATT as a result of measures taken by India during the course of the
proceedings, and

the enforcement of the export obligations that automobile

manufacturers incurred until 1 April 2001 under Indias former
import licensing scheme is inconsistent with Articles III:4 and XI:1 of
the GATT.

On 14 March 2002, India withdrew its appeal. Further to Indias withdrawal

of its appeal, the Appellate Body issued a short Report outlining the
procedural history of the case. At the DSB meeting on 5 April 2002, the US
commended Indias decision to withdraw its appeal and shared some of
Indias reservations with regard to Section VIII of the Panel Report. The EC
considered that the Panels findings were justified. Despite its decision to
withdraw its appeal as a result of the introduction of its new auto policy,
India indicated that the findings contained in Section VIII were outside of
the Panels terms of reference and were both factually and legally
incorrect. India requested that the DSB adopt only a part of the Panel
Report and consider the adoption of Section VIII only at its next meeting.
The EC responded that the Reports should be adopted unconditionally by
the parties, thus there was no justification for Indias request. The DSB

proceeded with the adoption in full of the Appellate Body and Panel
reports.

Implementation of adopted reports

On 2 May 2002, India informed the DSB that it would need a reasonable
period of time to implement the recommendations and rulings of the DSB
and that it was ready to enter into discussions with the EC and the US in
this regard.
On 18 July 2002, the parties informed the DSB that they had mutually
agreed that the reasonable period of time to implement the
recommendations and rulings of the DSB, shall be five months, that is
from 5 April 2002 to 5 September 2002.
On 6 November 2002, India informed the DSB that it had fully complied
with the recommendations of the DSB in this dispute by issuing Public
Notice No. 31 on 19 August 2002 terminating the trade balancing
requirement. India also informed that earlier it had removed the
indigenization requirement vide Public Notice No. 30 on 4 September 2001