Copyright 1995 NLCIFT



Title:Understanding on the interpretation of article XXVIII



  UNDERSTANDING ON THE INTERPRETATION OF ARTICLE XXVIII OF THE
           GENERAL AGREEMENT ON TARIFFS AND TRADE 1994


1.   For the purposes of modification or withdrawal of a
concession, the Member which has the highest ratio of exports
affected by the concession (i.e., exports of the product to the
market of the Member modifying or withdrawing the concession) to
its total exports shall be deemed to have a principal supplying
interest if it does not already have an initial negotiating right
or a principal supplying interest as provided for in
Article XXVIII:1.  It is however agreed that this paragraph will
be reviewed by the Council for Trade in Goods five years from the
date of the entry into force of the Agreement Establishing the
MTO with a view to deciding whether this criterion has worked
satisfactorily in securing a redistribution of negotiating rights
in favour of small and medium-sized exporting Members.  If this
is not the case consideration will be given to possible
improvements, including, in the light of the availability of
adequate data, the adoption of a criterion based on the ratio of
exports affected by the concession to exports to all markets of
the product in question.

2.   Where a Member considers that it has a principal supplying
interest in terms of paragraph 1 above, it should communicate its
claim in writing, with supporting evidence, to the Member
proposing to modify or withdraw a concession, and at the same
time inform the MTO Secretariat.  Paragraph 4 of the "Procedures
for Negotiations under Article XXVIII" (BISD 27S/26) shall apply
in these cases.

3.   In the determination of Members with a principal supplying
interest (whether as provided for in paragraph 1 above or in
Article XXVIII:1) or substantial interest, it is agreed that only
trade in the affected product which has taken place on an m.f.n.
basis shall be taken into consideration.  However, trade in the
affected product which has taken place under non-contractual
preferences shall also be taken into account if the trade in
question has ceased to benefit from such preferential treatment,
thus becoming MFN trade, at the time of the renegotiation or will
do so by its conclusion.

4.   When a tariff concession is modified or withdrawn on a new
product (i.e., a product for which three years' trade statistics
are not available) the  Member possessing initial negotiating
rights on the tariff line where the product is or was formerly
classified shall be deemed to have an initial negotiating right
in the concession in question.  The determination of principal
supplying and substantial interests and the calculation of
compensation shall take into account inter alia production
capacity and investment in the affected product in the exporting
Member and estimates of export growth, as well as forecasts of
demand for the product in the importing Member.  For the purposes
of this paragraph "new product" is understood to include a tariff
item created by means of a breakout from an existing tariff line.

5.   Where a Member considers that it has a principal supplying
or a substantial interest in terms of paragraph 4 above, it
should communicate its claim in writing, with supporting
evidence, to the Member proposing to modify or withdraw a
concession, and at the same time inform the MTO Secretariat. 
Paragraph 4 of the "Procedures for Negotiations under Article
XXVIII" (BISD 27S/26) shall apply in these cases.

6.   When an unlimited tariff concession is replaced by a tariff
rate quota, the amount of compensation provided should exceed the
amount of the trade actually affected by the modification of the
concession.  The basis for the calculation of compensation should
be the amount by which future trade prospects exceed the level of
the quota.  It is understood that the calculation of future trade
prospects should be based on the greater of:

     (i)  the average annual trade in the most recent
          representative three year period, increased by the
          average annual growth rate of imports in that same
          period, or by ten per cent, whichever is the greater; 
          or

     (ii) trade in the most recent year increased by ten per
          cent.  

In no case shall the liability for compensation exceed that which
would be entailed by complete withdrawal of the concession.

7.   Any Member having a principal supplying interest, whether as
provided for in paragraph 1 above or in Article XXVIII:1, in a
concession which is modified or withdrawn shall be accorded an
initial negotiating right in the compensatory concessions, unless
another form of compensation is agreed by the Members concerned.