## Facts

- Canada operated a domestic supply-management system for raw milk, including production/marketing quotas, which raised domestic raw-milk prices relative to world prices.
- In January 1988, Canada added various ice cream products and yogurt to its Import Control List.
- Canada required import permits for covered ice cream products and yogurt under a non-automatic licensing system tied to prior import history.
- For 1988, Canada did not publish a formal quota level, but permit issuance effectively limited imports (permits issued were substantially below quantities requested).
- In January 1989, Canada established explicit annual quotas for 1989 imports of the covered products.
- The United States challenged the measures through GATT consultations and then requested panel establishment; the panel report was adopted by the GATT Contracting Parties in December 1989.

## Issues

1. Whether Canada’s import permit requirements and quotas for ice cream products and yogurt were “prohibitions or restrictions other than duties, taxes or other charges” inconsistent with GATT Article XI:1.
2. Whether the measures were justified under the agricultural exception in GATT Article XI:2(c)(i) for imports of a product subject to domestic measures limiting quantities of the like domestic product marketed or produced.
3. Whether the measures’ administration raised concerns under GATT Articles X and XIII governing transparency and non-discriminatory administration of quantitative restrictions.
4. Whether the import permit system, independently of any stated quota level, constituted an import restriction contrary to Article XI:1.

## Decision

- The panel found Canada’s import quotas/restrictions on ice cream products and yogurt were quantitative restrictions inconsistent with GATT Article XI:1.
- The panel rejected Canada’s defense under Article XI:2(c)(i), holding Canada failed to demonstrate that the strict conditions of the exception were satisfied.
- The panel did not make full findings on all claims under Articles X and XIII after resolving the dispute under Article XI (judicial economy), while emphasizing that any permitted quantitative restriction would remain subject to Article XIII disciplines.
- The panel recommended that Canada bring its measures into conformity with its GATT obligations; the report was adopted.

## Legal Principles

- GATT Article XI:1 broadly prohibits quantitative restrictions on importation, including measures implemented through non-automatic permits and quota-like limitations.
- Article XI:2(c)(i) is a narrow exception, and the invoking party bears the burden to prove compliance with its conditions; interpretive relaxation is not permitted to cure practical difficulty.
- The Article XI:2(c)(i) exception is directed to the product directly subject to domestic quantity limitations and its competition with like imports; it does not extend to shielding downstream processors from higher input costs caused by domestic controls on a different (upstream) product.
- To invoke Article XI:2(c)(i), an importing restriction must be shown “necessary to the enforcement” of the domestic quantitative limitation; improving the position of domestic processors is insufficient.
- Even where a quantitative restriction could be justified by an exception, its allocation and administration must comply with the non-discrimination disciplines of Article XIII.

## Conclusion

The panel held that Canada’s import permit and quota regime restricting imports of ice cream products and yogurt violated GATT Article XI:1 and was not saved by the Article XI:2(c)(i) agricultural exception because Canada did not establish the required link between restrictions on processed products and enforcement of domestic quantity limits on raw milk.


Canada—Import Restrictions on Ice Cream & Yogurt, GATT B.I.S.D. (36th Supp.) 68 (Gatt Panel 1989)