## Facts

- The United States and Australia challenged multiple Korean measures regulating the importation and internal distribution of fresh, chilled, and frozen beef.
- Korea operated a “dual retail system” that separated retail channels for domestic and imported beef.
- Small retailers were required to sell either domestic beef or imported beef, but not both.
- Larger retailers permitted to sell both domestic and imported beef were required to maintain separate sales areas for each.
- The system reduced the number and type of outlets selling imported beef and limited consumer access to imported beef.
- Korea also applied additional import and distribution controls, including mark-ups on certain imported-beef sales and restrictions on which entities could import.
- The complainants further alleged Korea provided domestic support to the beef sector exceeding its Aggregate Measurement of Support (AMS) commitments under the Agreement on Agriculture for certain years.
- A single WTO panel heard both complaints and found multiple violations; Korea appealed aspects of the findings, including on national treatment, Article XX(d), and domestic support.

## Issues

1. Whether Korea’s dual retail system and related retail-sale requirements accorded imported beef “less favourable” treatment than like domestic beef, contrary to GATT 1994 Article III:4.
2. Whether the dual retail system was justified under GATT 1994 Article XX(d) as “necessary to secure compliance with laws or regulations.”
3. Whether Korea’s beef-sector domestic support exceeded its scheduled AMS commitment levels under the Agreement on Agriculture for the years at issue, and what methodology governs that comparison.
4. Whether the panel exceeded its terms of reference by addressing certain measures not adequately identified in the panel request under DSU requirements.

## Decision

- The Appellate Body upheld the finding that imported and domestic beef were like products and that the dual retail system was an internal regulation affecting sale and distribution within the meaning of GATT Article III:4.
- The Appellate Body upheld that the dual retail system accorded less favourable treatment to imported beef by modifying conditions of competition to the detriment of imports.
- The Appellate Body rejected Korea’s Article XX(d) defense, finding the dual retail system was not “necessary” to secure compliance with Korea’s competition-related laws because reasonably available, less trade-restrictive alternatives existed (e.g., improved inspections, monitoring, and sanctions against fraud).
- On domestic support, the Appellate Body clarified aspects of the legal approach to calculating Current Total AMS and comparing it to scheduled commitments, and it generally maintained the panel’s conclusion that Korea exceeded its AMS commitments in certain years.
- On terms of reference, the Appellate Body refined parts of the panel’s reasoning and reiterated notice requirements, but did not overturn the main substantive findings against Korea.
- The Appellate Body recommended Korea bring the inconsistent measures into conformity with WTO obligations.

## Legal Principles

- GATT 1994 Article III:4 analysis turns on whether a measure affects internal sale or distribution and modifies conditions of competition to the detriment of imported like products; facial discrimination is not required.
- A dual-channel retail requirement can violate Article III:4 where it limits commercial opportunities for imports and deprives them of an equal opportunity to compete.
- Under GATT 1994 Article XX(d), “necessary” requires a weighing of the measure’s contribution to securing compliance, the importance of the objective, and the measure’s trade-restrictiveness, including assessment of reasonably available, less GATT-inconsistent alternatives.
- A respondent invoking Article XX(d) must show that less trade-restrictive enforcement tools that could achieve compliance are not reasonably available.
- Agreement on Agriculture AMS compliance depends on applying the Agreement’s definitions and formulas to determine Current Total AMS and comparing it to scheduled commitment levels.
- Panels must remain within the “matter” identified in the panel request; claims must be identified with sufficient precision to provide notice and protect due process.

## Conclusion

The Appellate Body confirmed that Korea’s dual retail system for beef violated national treatment obligations by worsening competitive conditions for imported beef and failed Article XX(d) because less restrictive enforcement options were reasonably available, while also clarifying the framework for assessing AMS compliance and the limits imposed by panel terms of reference.


Korea—Measures Affecting Imports of Fresh, Chilled and Frozen Beef, WTO Doc. WT/DS161/AB/R, WT/DS169/AB/R (App. Body Dec. 11, 2000)