Mar 10, 1984


GENEVA, MARCH 9 (IFDA/CHAKRAVARTHI RAGHAVAN) -- The "manufacturing clause" in the U.S. copyright law, now extended till July 1, 1986, has been found to be violative of GATT, and prima facie "to nullify or impair" benefits to the EEC under GATT.-

In giving a ruling to this effect, a three-member GATT panel has recommended that the United States should bring its law into conformity with its GATT obligations.-

The panel ruled that when GATT was brought into force through the protocol of provisional application, it saved the mandatory legislation of states existing on October 30, l947, even if it were inconsistent with GATT obligations.-

Any subsequent changes in these laws, moving towards greater, though not full consistency, was also saved.-

But any changes in the reverse direction would be illegal and violative of GATT, the panel ruled.-

The manufacturing clause in the U.S. copyright law prohibits, with certain exceptions, the import into or public distribution in the United States of a copyrighted work preponderantly of non-dramatic literary material in the English language, if the author is a domicillary of the United States, unless it had been "manufactured" in the U.S.A. or Canada.-

"Manufacturing", under the law, includes typesetting, if the material is produced directly from type or plates made from type, making lithographic or photo-engraved plates, and printing and binding.-

The U.S. customs can seize materials imported in violation of this clause.-

Also, an infringer of a copyright has a complete defence in U.S. courts if the infringer produced the infringing materials in the U.S.A., and can show that the copyright owner imported the materials in violation of the manufacturing clause.-

It was first enacted in 1891, when foreign nationals were given copyright protection in the U.S.A. for the first time.-

The manufacturing clause was then introduced to protect the then infant U.S. printing and publishing industries from foreign competition, and specified that copyright protection in the U.S.A. would only be granted if the manufacture took place in the U.S.A.--

The law has since been amended several times, progressively reducing the coverage of the manufacturing clause.-

The 1976 amendment, for the first time, made manufacturing in Canada as meeting the requirements of the clause.-

It also provided for the first time an expiry date for the clause by specifying it was to be applied "prior to July 1, 1982".-

On June 30, the U.S. Congress enacted a further amendment extending the date to July 1, 1986.-

The bill was returned unsigned to Congress by the President, whereupon Congress overrode the veto, and enacted the law on July 13, 1982.-

The European Economic Community (EEC) raised a dispute before the GATT Council in July 1982, and following failure of bilateral consultations, a panel was set up in July 1983.-

The EEC contended that the re-enactment of the law in July 1982 was contrary to articles XI (general elimination of quantitative restrictions) and XIII (non-discriminatory administration of quantitative restrictions). It was not covered by the 1947 protocol of provisional application of GATT, relating to existing legislation.-

As a result, the EEC contended, the benefits that would otherwise have accrued to the EEC under GATT had been nullified and impaired, and the U.S. should be asked to terminate the prohibition of imports falling under the manufacturing clause.-

The U.S. contended that the 1982 law was fully covered by the protocol relating to "existing legislation", there was no prima facie impairment of any benefit accruing to the EEC under GATT, and even if there was, it was not serious enough to justify authorisation of suspension of concessions or other obligations since the EEC had suffered no economic harm.-

The panel ruled that the manufacturing clause, and the prohibition of imports covered by that clause, was inconsistent with U.S. obligations under article XI: l.-

Also, the 1982 enactment, extending the life of the clause, was not covered by the protocol of GATT on existing legislation.-

(The GATT was never formally ratified and brought into force by states as an international treaty, but functions as a provisional treaty under the protocol).-

(The protocol provided that part two of GATT (dealing with various trade policy measures) was to be applied "to the fullest extent not inconsistent with existing legislation" - that was mandatory and in force on October 30, 1947).-

The panel said that the crux of the issue involved whether any subsequent changes in the mandatory "existing legislation" of a country in force on October 30, 1947 would or would not be covered by the term "existing legislation".-

The panel noted a previous ruling in a Brazilian internal taxes case that a modification to an existing law would not lose protection, provided the "degree of inconsistency was not increased".-

A basic purpose of the provisional application of GATT, the panel said, had been to ensure that the value of tariff concessions was not impaired by new protective legislation.-

Permitting changes to "existing legislation" that did not increase the inconsistency with GATT was hence in accord with the purpose of the protocol of provisional application.-

Hence changes in the manufacturing clause that did not alter its degree of inconsistency with the general agreement, or a move towards a greater degree of consistency, would not result in changing its status under "existing legislation".-

All previous U.S. amendments had reduced the degree of inconsistency of the clause with GATT, and the 1976 enactment setting an expiry date had been "a policy change" and represented "a move towards greater GATT conformity".-

The postponing of the expiry date, in the 1982 legislation, was a reversal of this move, and "increased the degree of inconsistency" of the manufacturing clause with GATT.-

Once a Contracting Party had reduced the degree of inconsistency of "existing legislation" with GATT, there could be no justification for a subsequent move to increase the inconsistency of such law, even if the level did not exceed that which existed on October 30, 1947, the panel ruled.-

Since a basic aim of the general agreement was "security and predictability in trade relations among Contracting Parties", it would not be consistent with this aim if Contracting Parties were "free to reverse steps that had brought legislation, inconsistent with GATT and justified under the protocol of provisional application, into line with the provisions of the general agreement".-

The panel therefore found that the U.S. legislation of July 13, 1982 postponing the expiry date of the manufacturing clause could not be justified under the protocol of provisional application.-