India – Measures Affecting the Automotive Sector (WT/DS146, WT/DS175): Report of the Appellate Body

Summary

This appeal concerns the Panel Report, India – Measures Affecting the Automotive Sector (the “Panel Report”). The Panel was established to consider complaints by the United States and the European Communities relating to certain aspects of India's automotive components licensing policy as set forth in India's Public Notice No. 60 and the Memoranda of Understanding signed pursuant thereto. Public Notice No. 60 required each passenger car manufacturer in India to sign a Memorandum of Understanding (“MOU”) with the Director General of Foreign Trade, and specified a number of conditions to be included in such MOUs.

This dispute concerns two of the conditions stipulated by Public Notice No. 60 and included in each MOU, namely: (i) an “indigenization” requirement, whereby each car manufacturer was obliged to achieve indigenization, or local content, of a minimum level of 50 percent by the third year from the date of its first import of cars in the form of completely and semi-knocked down kits (“CKD/SKD kits”), or certain automobile components, and 70 percent by the fifth year from that date; and (ii) a “trade balancing requirement”, whereby each car manufacturer was obliged to balance, over the period of the MOU, the value of its imports of CKD/SKD kits and components with the value of its exports of cars and components. At the time Public Notice No. 60 was issued, India maintained import restrictions and a discretionary import licensing scheme for, inter alia, automobile CKD/SKD kits and components. A manufacturer that failed to comply with the conditions set forth in Public Notice No. 60 and the MOUs could be denied a licence to import CKD/SKD kits and components. India abolished its import restrictions and related discretionary import licensing scheme, including the restrictions and licensing requirements applicable to CKD/SKD kits and components, on 1 April 2001. This occurred during the course of the Panel proceedings. The relevant factual aspects of this dispute are set out in greater detail in paragraphs 2.1 through 2.5 of the Panel Report.

On 15 May 2000, the United States requested the establishment of a panel to examine the consistency of the measures at issue with Articles III:4 and XI:1 of the General Agreement on Tariffs and Trade 1994 (the “GATT 1994”), and Articles 2.1 and 2.2 of the Agreement on Trade-Related Investment Measures (the “TRIMS Agreement”).