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WTO issues panel report on India’s domestic content requirements for solar products

WTO issues panel report on India’s domestic content requirements for solar products

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On 24 February 2016, the WTO issued the panel report in the case brought by the United States regarding “India – Certain Measures Relating to Solar Cells and Solar Modules” (WT/DS/456).

 Complaint by the United States.

On 6 February 2013, the United States requested consultations with India concerning certain measures of India relating to domestic content requirements under the Jawaharlal Nehru National Solar Mission (“NSM”) for solar cells and solar modules.

The United States claims that the measures appear to be inconsistent with:

  • Article III:4 of the GATT 1994;
  • Article 2.1 of the TRIMs Agreement; and
  • Articles 3.1(b), 3.2, 5(c), 6.3(a) and (c), and 25 of the SCM Agreement.

The United States also claims that the measures appear to nullify or impair the benefits accruing to the United States directly or indirectly under the cited agreements.

On 13 February 2013, Japan requested to join the consultations.  On 21 February 2013, Australia requested to join the consultations.

On 10 February 2014, the United States requested supplementary consultations concerning certain measures of India realting to domestic content requirements under “Phase II” of the Jawaharlal Nehru National Solar Mission (“NSM”) for solar cells and solar modules.

On 21 February 2014, Japan requested to join the consultations.

On 14 April 2014, the United States requested the establishment of a panel. At its meeting on 25 April 2014, the DSB deferred the establishment of a panel.

 Panel and Appellate Body proceedings

At its meeting on 23 May 2014, the DSB established a panel.  Brazil, Canada, China, the European Union, Japan, Korea, Malaysia, Norway, the Russian Federation and Turkey reserved their third party rights. Subsequently, Ecuador, Saudi Arabia and Chinese Taipei reserved their third party rights. Following the agreement of the parties, the panel was composed on 24 September 2014.

On 24 March 2015, the Chair of the panel informed the DSB that the panel expects to issue its final report to the parties by late August 2015, in accordance with the timetable adopted after consultation with the parties.

On 24 February 2016, the panel report was circulated to Members.

Summary of key findings

The claims brought by the United States concern domestic content requirements (DCR measures) imposed by India in the initial phases of India’s ongoing National Solar Mission. These requirements, which are imposed on solar power developers selling electricity to the government, concern solar cells and/or modules used to generate solar power.

The Panel found that the DCR measures are trade-related investment measures covered by paragraph 1(a) of the Illustrative List in the Annex to the TRIMs Agreement. The Panel found that this suffices to establish that they are inconsistent with both Article III:4 of the GATT 1994 and Article 2.1 of the TRIMs Agreement. The Panel decided nonetheless to assess the parties’ additional arguments under Article III:4 of the GATT 1994, and found that the DCR measures do accord “less favourable treatment” within the meaning of that provision.

Concerning the government procurement derogation in Article III:8(a) of the GATT 1994, the Panel found that the DCR measures are not distinguishable in any relevant respect from the domestic content requirements previously examined under this provision by the Appellate Body in Canada — Renewable Energy / Feed-In Tariff Program. Following the Appellate Body’s interpretation of Article III:8(a) of the GATT 1994 in that case, the Panel found that the discrimination relating to solar cells and modules under the DCR measures is not covered by the government procurement derogation in Article III:8(a) of the GATT 1994. In particular, the Panel found that the electricity purchased by the government is not in a “competitive relationship” with the solar cells and modules subject to discrimination under the DCR measures.

India argued that the DCR measures are justified under the general exception in Article XX(j) of the GATT 1994, on the grounds that its lack of domestic manufacturing capacity in solar cells and modules, and/or the risk of a disruption in imports, makes these “products in general or local short supply” within the meaning of that provision. The Panel found that the terms “products in general or local short supply” refer to a situation in which the quantity of available supply of a product, from all sources, does not meet demand in a relevant geographical area or market. The Panel also found that the terms “products in general or local short supply” do not cover products at risk of becoming in short supply, and found that in any event India had not demonstrated the existence of any imminent risk of a short supply. The Panel therefore found that India failed to demonstrate that the challenged measures are justified under Article XX(j).

India argued that the DCR measures are also justified under Article XX(d) of the GATT 1994, on the grounds that they secure India’s compliance with “laws or regulations” requiring it to take steps to promote sustainable development. The Panel considered that international agreements may constitute “laws or regulations”  within the meaning of Article XX(d) only insofar as they are rules that have direct effect” in, or otherwise form part of, the domestic legal system of the Member concerned. The Panel found that most of the instruments identified by India did not constitute “laws or regulations” within the meaning of Article XX(d), or were not laws or regulations in respect of which the DCR measures “secure compliance”. Therefore, the Panel found that India failed to demonstrate that the challenged measures are justified under Article XX(d).more informationJust the findings and conclusions in pdf format

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Anand Gupta Editor - EQ Int'l Media Network

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