I.

Fact:
Complainants: European Communities, Japan, United States
Respondent: Indonesia
Timeline:
Consultations requested: 3 October 1996
Panel requested: 12 May 1997
Panel established: 12 June 1997
Panel composed: 29 July 1997
Panel report circulated: 2 July 1998
adopted on 23 July 1998
Laws: Article I:1 GATT 1994
Related laws:
Art 21.3(c) DSU Arbitration award circulated

Issues:

hether the customs duty and sales tax benefits of the June 1996 car programme in favour of
imported National Cars and the customs duty benefits of the February 1996 car programme in
favour of imported parts and components to be used in National Cars assembled in Indonesia
violate Article I of GATT

Is the SCM Agreement the only agreement applicable to this dispute at the exclusion of
ArticleI of GATT?
Are the Claims Related to the June 1996 Car Programme Moot?

Are the tax and customs duty benefits of the February and June car programmes advantages of
the types covered by Article I?

Are these advantages offered “unconditionally” to all “like products”?

(a) Japan claims:
(i) the customs tariff exemption with regard to the import of automotive
parts and components and the sales tax exemption pertaining to the
February 1996 National Car Programme measures identified are
inconsistent with Article I:1 of GATT 1994, since the exemptions are
not accorded to the like products originating in all other members
including Japan;1
1
III. Findings and Recommendations Requested by the Parties20
 (ii) the exemption from customs tariff and sales tax granted under the
extended National Car Programme of June 1996 solely to the
completed automobiles originating in the Republic of Korea is
inconsistent with Article I:1 of GATT 1994, since the exemption is
not accorded to the like products originating in other Members
including Japan;
Japan request:
The Panel recommend that Indonesia bring its measures into conformity with its obligations
under GATT 1994
(b) EU claims:
(i) the following measures are inconsistent with Indonesia's obligations
under Article I:1 of GATT:

(ii) the exemption from customs duties on imports of National Cars;

(iii) the exemption from the sales tax on luxury goods for
imported National Cars;

(iv) the exemption from the sales tax on luxury goods for
National Cars assembled in Indonesia; and

(v) the exemption from customs duties on imports of parts and

components for the assembly of National Cars in Indonesia.

EU request:
(c) The US claims:
(i) Indonesia's exemption of CBU Kia Sephia sedans imported from
Korea from import duties and the luxury sales tax violates Article
I:1 of GATT 1994.2
The US request:
The United States requests that the Panel recommend that Indonesia bring its measures into
conformity with its obligations under GATT 1994, the TRIMs Agreement, the TRIPS
Agreement, and the SCM Agreement.

A. Indonesia's response to the claims raised under Article I:1 of GATT 1994

1. The June 1996 Programme expired 30 June 1997, so there

can be no present violation of Article I of GATT 1994

The legal authority for the June 1996

Programme expired on 30 June 1997

2
SICE - WTO - WT/DS54/R - WT/DS55/R - WT/DS59/R - WT/DS64/R /6 (oas.org)
 Because the programme and the authority under which it was granted
have terminated, there is no basis for an affirmative determination by
the Panel

Prior Panel decisions support the refusal to rule on an expired

measure

Indonesia has not violated Article I of GATT 1994 because it

did not grant an advantage to automobiles or parts originating in
one country that it did not accord to like products originating in
other countries

(a) Indonesia did not grant an advantage to automobiles or

parts originating in one country

That TPN made a commercial decision, without government

involvement, to enter into a commercial relationship with a
particular company does not constitute a de facto violation of
Article I

The Timor S515 and components and parts imported for it are
not "like" any passenger vehicles, components
or parts imported from the territories of complainants
The June 1996 Programme was a subsidy that expired and,
therefore, there is no violation of Article I of GATT 1994

The June 1996 Programme has expired and will not

be renewed

As to unsold Timors, the fact that the luxury tax is not forgone until sale is
a Subsidies Agreement issue, not an Article I issue

The fact that the authorization granted to PT TPN expired in June 1997 does
not prevent the Panel from ruling on the compatibility of that measure with
Article I:1
It is irrelevant that the Indonesian Government did not mandate expressly PT
TPN to import automobiles or parts originating in Korea
The automobiles and parts covered by the measures arelike any other
automobiles and parts
The panel analysis:
1. General defences of Indonesia
 (a) Is the SCM Agreement the only agreement applicable to this dispute at the exclusion
of Article I of GATT?
14.131 We have already discussed in Section C above why we consider that the SCM
Agreement is not generally the only relevant and applicable agreement to the measures
under examination. We found that the obligations contained in the WTO Agreement are
generally cumulative and can be complied with simultaneously. We shall, therefore,
now proceed to the examination of the claims of the complainants that aspects of the
Indonesian car programmes violate the MFN obligations of Article I of GATT.

14.132 Before we do this, we must address the argument put forward by Indonesia that
the Panel cannot or should not address the claims regarding the June 1996 car
programme because that programme has expired and because in any case PT TPN has
lost all its rights to any future benefits under that car programmeRebuttal arguments
made by the European Communities

1. General defences of Indonesia (a) Is the SCM Agreement the only agreement
applicable to this dispute at the exclusion of Article I of GATT? \

14.131 We have already discussed in Section C above why we consider that the SCM
Agreement is not generally the only relevant and applicable agreement to the measures
under examination. We found that the obligations contained in the WTO Agreement are
generally cumulative and can be complied with simultaneously. We shall, therefore,
now proceed to the examination of the claims of the complainants that aspects of the
Indonesian car programmes violate the MFN obligations of Article I of GATT.

14.132 Before we do this, we must address the argument put forward by Indonesia that
the Panel cannot or should not address the claims regarding the June 1996 car
programme because that programme has expired and because in any case PT TPN has
lost all its rights to any future benefits under that car programme

Are the tax and customs duty benefits of the February and June 1996 car programmes
advantages of the types covered by Article I? 14.139 The customs duty benefits of the
various Indonesian car programmes are explicitly covered by the wording of Article I.
As to the tax benefits of these programmes, we note that Article I:1 refers explicitly to
“all matters referred to in paragraphs 2 and 4 of Article III”. We have already decided
that the tax discrimination aspects of the National Car programme were matters covered
by Article III:2 of GATT. Therefore, the customs duty and tax advantages of the
February and June 1996 car programmes are of the type covered by Article I of GATT.
Are these advantages offered “unconditionally” to all “like products”?
Conclusion:
The panel conclude that the customs duty and sales tax benefits of the June 1996 car programme
in favour of imported National Cars and the customs duty benefits of the February 1996 car
programme in favour of imported parts and components to be used in National Cars assembled
in Indonesia violate Article I of GATT.