RESTRICTED
WORLD TRADE WT/DS2/2/Add.1
31March 1995
ORGANIZATION(95-0767)
Original: Spanish
UNITED STATES -STANDARDS FOR REFORMULATED
AND CONVENTIONAL GASOLINE
Addendum
Thefollowing statement, made byVenezuela inWashington inthecontext ofArticle XXII:1
consultations withtheUnited States, iscirculated toMembers attherequest ofthedelegation of
Venezuela:
_______________
1. TheGovernment oftheRepublic ofVenezuela considers thatthefinaldecision adopted on
15December 1993 bytheUnited States Environmental Protection Agency, Regulation ofFuels and
FuelAdditives: Standards forReformulated andConventional Gasoline, codified at40,Code ofFederal
Regulations, Part80(hereinafter called "Gasoline Regulation") violates theobligations ofthe
United States under theAgreement Establishing theWorld Trade Organization (WTO Agreement),
including theGeneral Agreement onTariffs andTrade 1994("GATT") andtheAgreement onTechnical
Barriers toTrade. Similarly, theRegulation nullifies andimpairs Venezuela 'srights under theWTO
Agreement.
2. Venezuela objects totheGasoline Regulation because theRegulation contains provisions less
favourable toVenezuelan gasoline thantoUnited States-produced gasoline. Theapplication ofthese
lessfavourable provisions hasanadverse effect ontheconditions ofcompetition forVenezuelan gasoline
intheUnited States.
3. Forthepurposesoftheseconsultations,VenezuelawillbasethemontheviolationsofArticlesIII
andIoftheGATT andArticle 2oftheAgreement onTechnical Barriers toTrade andwillmake certain
observations regarding Article 12ofthatAgreement. Furthermore, Venezuela reserves therightto
invoke anyother provisions oftheWTO Agreement applicable inthiscase.
4. Venezuela istaking partinthese consultations inatruespirit ofcooperation forthepurpose
ofreaching amutually satisfactory solution tothismatter. Venezuela considers, however, thatin
addressing theproblem itisimportant torespect thefundamental principles thatgovern themultilateral
trading system. Infact,rulecompliance isacritical aspect oftheWTO Agreement. Accordingly,
ifnosatisfactory solution isreached within theprescribed consultation time-frame, Venezuela will
request theestablishment ofapanel toexamine thismatter.
5. InadditiontoconsideringthespecificissuesrelatedtotheGATTandtheAgreementonTechnical
Barriers toTrade, itwould bewiseinthese consultations toindicate theimplications oftheGasoline
Regulation fortheongoing debate overtrade andtheenvironment, particularly asitunfolds inthe
WTO Committee which considers thistopic, aswellasinother forums. Alarge number ofcountries
haveexpressed concern about theuseofenvironmental measures asdisguised barriers tointernationalWT/DS2/2/Add.1
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trade. Inthematter under discussion, suchimproper usemight wellbefound toexist. Venezuela
issimply seeking equal regulatory treatment foritsgasoline. Thisisnotacaseinwhich aWTO Member
seeks special treatment inorder toescape United States legislation.
6. Venezuela isnotseeking unnecessary confrontation onthismatter, butitcannot stand byidly
inthefaceofunfair treatment, associated withsuchfactors asmisinformation andmanipulation of
thefacts.
GATT, Article III
7. TheGasoline Regulation isinconsistent withtheprinciple ofnational treatment setforth in
Article III:1, anddiscriminates against imported gasoline inviolation ofArticle III:4. TheRegulation
accords lessfavourable treatment toimported gasoline thantoUnited States gasoline. Thisdifferential
treatment results inacompetitive disadvantage forimported gasoline.
8. Specifically, themethodology forestablishing the1990 baseline, against which compliance
withthepollution control requirements applicable tocurrent andfuture salesofgasoline ismeasured,
discriminates against imported gasoline. Thediscriminatory aspects oftheRegulation apply toboth
reformulated andconventional gasoline.
9. TheGasoline Regulation provides that,from1995through 1997gasoline produced byarefiner
intheUnited States canbecertified forsaleas"reformulated"1ifthegasoline 'slevels ofsulphur, olefins
andT-90 donotexceed thelevels ofthese parameters ingasoline produced bythatrefiner in1990
(therefiner 's"individual 1990baseline"). Accordingly, noUnited States refiner needmodify thelevels
ofsulphur, olefins andT-90initsgasoline during 1995-1997 period, compared toits1990production.
Incontrast, during thesameperiod, imported gasoline maynotbecertified asreformulated inaccordance
withtheforeign refiner 'slevels ofsulphur, olefins andT-90, since these parameters must conform
tothelevels stipulated bythestatutory baseline. Therefore, from1995to1997, reformulated gasoline
fromaforeign refinery, whose gasoline exported totheUnited States in1990 hadlevels ofsulphur,
T-90 andolefins above thestatutory baseline maynotbesoldintheUnited States market without
substantially increased costs. Suchcostsareassociated withchanges insuchforeign refinery 'smethods
ofproduction orwiththeuseofinputs fromothersources inorder tomeetthestatutory baseline criteria.
10. Thedifferential treatment between theuseofanindividual baseline andastatutory baseline
alsohasamajoreffectonconventional(non-reformulated)gasoline.From1995onwards,aUnitedStates
refiner 'sconventional gasoline must meetcertain performance parameters which arecalculated asa
percentage ofthevalues ofthatrefiner 'sindividual 1990baseline. These parameters cover, interalia,
theaverage annual levels ofsulphur, olefins andT-90. Forimported conventional gasoline, however,
thelevels oftheseparameters mustbecalculated asapercentage ofthevalues ofthestatutory baseline.
Therefore, inorder tobesoldintheUnited States, imported conventional gasoline mustbearthecosts
associated withchanges intherefinery 'smethods ofproduction orwiththeneedtouseother inputs,
soastomeetthestatutory baseline criteria.
11. Theinability touseanindividual baseline forthepurposes ofcertifying imported gasoline,
bothreformulated andconventional, adversely affects theconditions oftrade forimported gasoline
intheUnited States market. Thus, thecurrent Gasoline Regulation creates lessfavourable conditions
ofcompetitionforimportedgasoline(reformulatedgasolinefrom1995to1997andconventionalgasoline
from 1995 onwards) thanforgasoline produced andsoldintheUnited States.
1Thesaleofgasoline notcertified asreformulated isprohibited inany"covered area". "The covered areas"
comprise asignificant segment oftheUnited States gasoline market.WT/DS2/2/Add.1
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GATT, Article 1
12. TheGasoline Regulation isinconsistent withtheobligation oftheUnited States under Article I:1
oftheGATTtograntmost-favoured-nationtreatmenttoVenezuela.Specifically,theGasolineRegulation
grants lessfavourable treatment togasoline imported byanimporter which isinturnarefiner outside
theUnited States and,in1990, imported intotheUnited States notlessthan75percentofthegasoline
produced atitsrefinery, asopposed tothetreatment granted togasoline ofVenezuelan origin. The
latter, i.e.Venezuelan gasoline, ismeasured against thestatutory baseline, whereas other gasoline is
measured against theforeign refinery 'sindividual 1990baseline. Thisdifferential treatment effectively
affordsanadvantage,forexample,thecost-savingassociatedwiththeabilitytouseanindividualbaseline
forgasoline fromaparticular source, which isnotaccorded tolikeproduct originating inother WTO
Members. Indeed, because eligibility hinges onhistorical factstheuniverse ofeligible countries is
fixed. Infact,inpriorconsultations onthissubject, theUnited States identified onlyonesingle eligible
country.
Agreement onTechnical Barriers toTrade
Article 2
13. Under theAgreement onTechnical Barriers toTrade, theGasoline Regulation 's1990baseline
determinationmethodologyhastobeconsideredasa"technicalregulation",withsignificantimplications
forVenezuela 'strade. The1990 baseline determination methodology oftheGasoline Ruleviolates
Article 2.1oftheAgreement inquestion because itaccords lessfavourable treatment toVenezuelan
gasoline thantoUnited States-produced gasoline andtogasoline produced incertain thirdcountries
(those thatcanbenefit from the"75percent" provision).
14. Themethodology alsoviolates Article 2.2oftheAgreement because itcreates "unnecessary
obstacles tointernational trade" andbecause itis"more trade-restrictive thannecessary" tofulfil a
"legitimate objective" oftheRegulation, taking account oftherisksnon-fulfilment would create.
15. TheUnited States violates Article 2.3oftheAgreement onTechnical Barriers toTrade because
theobjective oftheGasoline Regulation "canbeaddressed inaless-trade restrictive manner" thanby
discriminatory application oftheRegulation 'sbaseline determination methodology. TheUnited States
could,withoutsacrificingtheexpectedenvironmentalbenefitsoftheRegulation,allowimportedgasoline,
likeUnited States-produced gasoline, tobemeasured against individual refinery 1990 baselines. In
fact,theUnited States Environmental Protection Agency hasrecognized thatVenezuelan refineries
havethedatanecessary toestablish theirbaselines. TheUnited States isaware, therefore, thatthere
arelesstrade-restrictive means ofimplementing theGasoline Regulation.
16. Venezuela requests that,inaccordance withArticle 2.5oftheAgreement, theUnited States
provide awritten explanation ofthejustification forthereasons forthediscriminatory treatment between
imported gasoline andUnited States gasoline, inthelightoftheprovisions ofparagraphs 2and3of
Article 2oftheAgreement onTechnical Barriers toTrade.
Agreement onTechnical Barriers toTrade
Article 12
17. TheUnitedStateshascertainobligationswithrespecttothedevelopingcountriesunderArticle12
oftheAgreement onTechnical Barriers toTrade. Itshould beclearthatVenezuela isinnowayseeking
specialtreatmentwithregardtotheGasolineRegulation.Onthecontrary,VenezuelaasksforitsgasolineWT/DS2/2/Add.1
Page4
toreceive thesametreatment asUnited States gasoline. However, theGasoline Regulation establishes
more stringent requirements forVenezuelan gasoline thanforUnited States gasoline.
18. TheGasoline Regulation nullifies andimpairs Venezuela 'srights under theWTO Agreement.
First, theviolations mentioned above constitute prima facie nullification andimpairment. Second,
thesubstantial economic injury thattheRegulation inflicts onVenezuela, ascompared withVenezuela 's
reasonable expectations fortrade ingasoline withtheUnited States, alsoconstitutes nullification and
impairment.
19. Asaresult ofthisRegulation, Venezuela anticipates thatthevalue ofitsgasoline exports to
theUnited States willbesignificantly reduced. Furthermore, itsshare ofthemarket willfall,causing
additional economic injury andthere willalsobeareduction intheeconomic benefits associated with
more thanUS$1 billion investment programme thatVenezuela hasundertaken inorder toproduce
reformulated andconventional gasoline fortheUnited States market.
20. Venezuela urges theUnited States tocomply withitsWTO Agreement obligations bygranting
equal treatment togasoline imports from Venezuela.
21. Venezuela trusts thatthepoints raised above willbeuseful inresolving thematter thatisthe
subject ofthese consultations.