## Facts

- Canada created the Canadian Wheat Board (CWB), a state trading enterprise with exclusive rights to purchase and sell Western Canadian wheat for export and for domestic human consumption.
- Under Canadian law, the CWB could set the initial price payable to producers and could guarantee payment to producers, supported by government-related financial arrangements.
- The United States challenged Canada’s measures in two main areas: (1) the legal regime governing CWB wheat export sales, and (2) domestic rules affecting the treatment of imported grain within Canada’s grain handling and transportation system.
- On wheat exports, the United States alleged that Canada failed to meet its GATT 1994 Article XVII:1 obligations because the CWB’s export sales were not made solely in accordance with commercial considerations and did not afford enterprises of other Members adequate opportunity to compete for participation in those sales.
- On imported grain, the United States challenged elements of Canada’s grain regulatory framework (including handling/segregation and transportation-related requirements) that, in the U.S. view, disadvantaged imported grain as compared to like Canadian grain.
- The United States claimed violations of GATT 1994 Article III:4 (national treatment on internal regulation), and also invoked Article 2 of the TRIMs Agreement to the extent the challenged requirements qualified as trade-related investment measures.
- Canada raised a threshold objection that parts of the U.S. request for establishment of a panel did not satisfy DSU Article 6.2 because the request allegedly failed to identify the specific measures at issue and/or provide an adequate summary of the legal basis.
- The Panel rejected the U.S. claim that the CWB export regime breached Article XVII:1, but found that certain measures affecting imported grain accorded less favourable treatment under Article III:4 (and that corresponding TRIMs Article 2 violations followed where applicable).
- Both Canada and the United States appealed issues of law and legal interpretation, including the meaning and structure of Article XVII:1 and the DSU Article 6.2 objection.

## Issues

1. What is the relationship between GATT 1994 Article XVII:1(a) and Article XVII:1(b): does subparagraph (b) impose an independent obligation, or does it inform the application of the non-discrimination rule in subparagraph (a) to STE purchases and sales?
2. What does Article XVII:1 require a Member to do with respect to an STE’s export sales—particularly regarding “commercial considerations” and “adequate opportunity” language in subparagraph (b)?
3. Did the United States establish, on the record, that Canada acted inconsistently with Article XVII:1 in relation to the CWB’s export sales of wheat?
4. Did Canada’s measures affecting grain handling and transportation accord less favourable treatment to imported grain than to like domestic grain, contrary to GATT 1994 Article III:4, and if so, did Article 2 of the TRIMs Agreement apply to any of those measures?
5. Did the U.S. panel request satisfy DSU Article 6.2’s requirements to identify the specific measures at issue and provide a brief summary of the legal basis sufficient to present the problem clearly?

## Decision

- The Appellate Body held that Article XVII:1 must be read as a whole: subparagraph (b) does not stand alone as a separate, “higher” obligation, but gives content to how the Article XVII:1(a) discipline applies to STE purchases or sales involving imports or exports.
- The Appellate Body rejected interpretations of Article XVII:1 that would treat an STE’s existence, exclusive privileges, or government support as enough, by themselves, to show a breach absent proof tied to the STE’s relevant market conduct in purchases or sales.
- Applying its interpretation, the Appellate Body did not sustain a finding that Canada violated Article XVII:1 with respect to the CWB wheat export regime, leaving Canada without a finding of breach on that part of the dispute.
- On the imported grain claims, the Appellate Body largely affirmed the Panel’s conclusions that certain aspects of Canada’s grain handling and transportation framework accorded less favourable treatment to imported grain, inconsistent with GATT 1994 Article III:4.
- The Appellate Body also agreed that, where the challenged requirements qualified as TRIMs and were inconsistent with Article III:4, they were inconsistent with TRIMs Agreement Article 2.
- On DSU Article 6.2, the Appellate Body confirmed that a panel request must identify the specific measures and give a brief summary of the legal basis, and it rejected Canada’s jurisdictional objection in substance, allowing the Panel to rule on the claims.

## Legal Principles

- GATT 1994 Article XVII:1(a) and (b) are interpreted together; subparagraph (b) informs the application of the Article XVII:1(a) discipline for an STE’s purchases or sales involving imports or exports.
- The “commercial considerations” and “adequate opportunity to compete” language in Article XVII:1(b) is not a free-standing benchmark detached from Article XVII:1(a); it functions in applying Article XVII’s discipline to specific purchasing or selling activity.
- A complainant alleging an Article XVII:1 breach must link its case to the STE’s conduct in relevant purchases or sales; exclusive privileges or state support, without more, do not establish inconsistency.
- Under GATT 1994 Article III:4, “less favourable treatment” can be shown by demonstrating that a measure changes competitive conditions to the detriment of imported like products; a complainant need not always prove quantified trade effects.
- TRIMs Agreement Article 2 operates through GATT national treatment obligations; when a measure is a TRIM and is inconsistent with GATT Article III:4, it is also inconsistent with TRIMs Article 2.
- DSU Article 6.2 requires that a panel request (i) identify the specific measures at issue and (ii) provide a brief summary of the legal basis sufficient to present the problem clearly; compliance is assessed in light of whether the respondent received fair notice of the case it had to answer.

## Conclusion

In Canada—Measures Relating to Exports of Wheat and Treatment of Imported Grain, the Appellate Body read GATT Article XVII:1(a) and (b) as a single discipline governing state trading enterprises’ import/export purchases and sales, rejected an approach that would treat CWB monopoly features as enough to prove a violation, and left Canada without a finding of breach on the CWB export regime, while largely affirming that parts of Canada’s grain handling and transportation rules accorded less favourable treatment to imported grain in violation of GATT Article III:4 (and TRIMs Article 2 where applicable), and confirming that the U.S. panel request satisfied DSU Article 6.2.


Canada—Measures Relating to Exports of Wheat and Treatment of Imported Grain, WT/DS276/AB/R (September 27, 2004)