[Ip-health] WTO TRIPS Council (June 2014): USTR submission on Non-Violation Complaints Under the TRIPS Agreement

Thiru Balasubramaniam thiru at keionline.org
Wed Jun 11 01:19:00 PDT 2014


WTO TRIPS Council (June 2014): USTR submission on Non-Violation Complaints
Under the TRIPS Agreement

http://keionline.org/node/2016

Submitted by thiru <http://keionline.org/user/6> on 11. June 2014 - 9:36

On 10 June 2014, the United States tabled a paper (IP/C/W/599) to the World
Trade Organization's (WTO) TRIPS Council on "Non-Violation Complaints Under
the TRIPS Agreement." This paper is expected to be discussed at the TRIPS
Council today (11 June 2014) under agenda item 7 on "Non-Violation and
Situation Complaints." <http://keionline.org/node/1963>

As previously mentioned in our February 2014 piece,

a 'non-violation complaint' at the WTO effectively amounts to a complaint
that a country has violated the spirit but not the letter of trade law.
While countries can launch such disputes at the WTO for trade in goods and
services, there is a moratorium on doing so over intellectual property
rights. For many WTO members, the application of non-violation and
situation complaints to the TRIPS Agreement, as advocated by Switzerland
and the United States of America, represent a stealth attack on WTO
members' sovereign right to use TRIPS flexibilities such as compulsory
licensing to safeguard health and promote access to medicines for all.

As many WTO members perceive non-violation complaints as Trojan Horse
threats to policy space enshrined under the TRIPS Agreement, this morning's
discussion of non-violation complaints will be closely watched.


--


NON-VIOLATION COMPLAINTS UNDER THE TRIPS AGREEMENT

COMMUNICATION FROM THE UNITED STATES

The following communication, dated 10 June 2014, is being circulated at the
request of the delegation of the United States.

_______________

INTRODUCTION

The applicability of non-violation complaints to the World Trade
Organization (WTO) Agreement on Trade-Related Aspects of Intellectual
Property Rights (TRIPS) is a matter of considerable importance to WTO
Members. Numerous WTO Members have intervened on this topic during meetings
of the TRIPS Council as well as in other bodies of the WTO and General
Agreement on Tariffs and Trade (GATT), 1 and have also submitted several
communications to the TRIPS Council on this issue. 2 While the views of
Members may vary, Members have consistently agreed on the importance of
continued examination of this issue. This agreement was reflected most
recently at the WTO Ministerial Conference in Bali, where Ministers decided
on 7 December 2013:

We take note of the work done by the Council for Trade-Related Aspects of
Intellectual Property Rights pursuant to our Decision of 17/12/2011 on
"TRIPS Non-Violation and Situation Complaints" ( WT/L/842 ), and direct it
to continue its examination of the scope and modalities for complaints of
the types provided for under subparagraphs 1(b) and 1(c) of Article XXIII
of GATT 1994 and make recommendations to our next Session, which we have
decided to hold in 2015. It is agreed that, in the meantime, Members will
not initiate such complaints under the TRIPS Agreement. 3

The decision of the United States to join consensus on that decision is
without prejudice to its continued position that non-violation and
situation complaints are fully appropriate in the context of the TRIPS
Agreement. In fact, the U.S. decision to join consensus was premised on the
interest expressed by Members to take up intensified work on this issue in
the TRIPS Council following the 2013 Bali Ministerial, which was reflected
in the statement of the Chair of the TRIPS Council at the 10-11 October
2013 meeting of the Council, where he explained:

At the same time, Members had indicated readiness to engage early next year
in intensified work on the examination of the scope and modalities for such
complaints with the intent of finding a way out of the current cycle of
extending the non-violation moratorium from one Ministerial Conference to
the next. 4

This paper is intended to advance the Council's intensified examination of
non-violation complaints under the TRIPS Agreement. The following
summarizes: the relevant provisions of the GATT 1994, the TRIPS Agreement,
and the Dispute Settlement Understanding (DSU); relevant GATT and WTO panel
and Appellate Body reports; and responses to issues raised by other WTO
Members regarding the applicability non-violation complaints under the
TRIPS Agreement.

PROVISIONS OF THE WTO AGREEMENT RELATING TO NON-VIOLATION COMPLAINTS

Provisions of the WTO Agreement relating to non-violation complaints
include Article XXIII of GATT 1994, Article 64 of the TRIPS Agreement, and
Articles 3.2 and 26 of the DSU. Article XXIII of GATT 1994 allows a WTO
Member to challenge another Member's measures which nullify or impair a
benefit under the Agreement. Article XXIII limits non-violation complaints
to those which may be brought by a member state if a "benefit accruing to
it directly or indirectly under this Agreement is being nullified or
impaired." A benefit is nullified or impaired for one of three reasons
under this article: 1(a) the failure of another WTO Member to carry out its
GATT obligations; 1(b) the application of another WTO Member's measure,
whether or not it is GATT-inconsistent (non-violation complaint); or 1(c)
the existence of any other situation (situation complaint) .

Article 64 of the TRIPS Agreement incorporates Articles XXII and XXIII of
the GATT 1994 into the TRIPS Agreement. The language of the TRIPS Agreement
is clear that the inclusion of non-violation complaints was contemplated by
WTO Members. Article 64.1 states:

The provisions of Articles XXII and XXIII of GATT 1994 as elaborated and
applied by the Dispute Settlement Understanding shall apply to
consultations and the settlement of disputes under this Agreement except as
otherwise specifically provided herein. 5

Article 64.2 then provides that the provisions of non-violation and
situation complaints in GATT Article XXIII will not apply for a period of
five years following the entry into force of the WTO Agreement. It is clear
that after five years, those provisions would apply to the TRIPS Agreement.
Finally, Article 64.3 is explicit and unambiguous that any extension of the
five-year period must be agreed by consensus. It is clear from the text of
Article 64 of the TRIPS Agreement that non-violation complaints were
envisioned by the Agreement's drafters as applying to the Agreement.

During 1999, the TRIPS Council did examine, during its meetings, the scope
and modalities of non-violation complaints. The Council, however, reached
no conclusions and made no recommendations. On 1 January 2000, the delay in
application provided by Article 64.2 ceased. It was only on 14 November
2001, that Ministers decided to continue to examine the scope and
modalities for such complaints and to make recommendations to the Fifth
Session of the Ministerial Conference, which include an agreement not to
initiate such complaints under the TRIPS Agreement until the 2003
Ministerial. However, no such recommendations were adopted at the 2003
Cancun Ministerial, meaning that the moratorium lapsed for a second time.
It was not until July 2004 that the General Council agreed by consensus to
a new moratorium on non-violation complaints. At the 14-15 March 2006,
TRIPS Council meeting, WTO Members agreed to keep non-violation and
situation complaints as a regular item on the agenda. 6

Article 3.2 of the DSU states, "Recommendations and rulings of the Dispute
Settlement Body cannot add or diminish the rights and obligations provided
in the covered agreements". WTO panels and the Appellate Body are bound by
Article 3.2. Because the Marrakesh Agreement and its subsidiary agreements
were the results of a single undertaking, it is highly unlikely, even if
Article 3.2 did not exist, that a panel would determine that something a
WTO Member agreed to accept under one part of that single undertaking could
nullify and impair benefits in another area. One of the conditions that
panels have held must exist for a non-violation complaint to succeed is
that the action complained of should not have been foreseeable at the time
of the negotiations. Obviously, if another WTO agreement expressly provides
for an action to be taken, that action was foreseen at the time of the
negotiations and the complaining party would not be able to demonstrate
that it is entitled to succeed in its non-violation claim under the TRIPS
Agreement.

Article 26 of the DSU also contemplates non-violation complaints by setting
out the manner in which they are to be applied in the WTO. That Article
limits the remedies available for non-violation complaints to a "mutually
satisfactory adjustment" with the implementing Member being under "no
obligation to withdraw the measure."

GATT AND WTO PANEL AND APPELLATE BODY REPORTS ADDRESSING NON-VIOLATION
COMPLAINTS

Under the GATT, complaining parties included non-violation complaints in
eight disputes. 7 In three GATT disputes, the panel upheld the
non-violation complaint and GATT Members adopted the panel report. In two
GATT disputes, the non-violation complaint was upheld, but GATT Members did
not adopt the panel report. Finally, in three GATT disputes, the
non-violation complaint was not upheld by the panel. The WTO dispute
settlement mechanism has also addressed eight non-violation complaints. 8
In addition, WTO dispute settlement mechanism has discussed non-violation
in the context of the TRIPS Agreement. 9 In those disputes, the panels
either did not uphold the non-violation complaints or exercised judicial
economy with respect to those complaints. Through these disputes, GATT and
WTO panels and the Appellate Body have provided extensive guidance
regarding non-violation complaints. These disputes have stressed the
importance of maintaining the availability of non-violation complaints.

An Exceptional and Important Remedy

The United States has previously recognized that "the number of instances
in which a non-violation complaint could succeed" by meeting these
requirements under the TRIPS Agreement "is very limited." 10 GATT and WTO
panels have acknowledged the need for caution with respect to such
complaints, noting that they "should remain an exceptional remedy." 11
Adjudicative bodies have also noted that "[t]he reason for this caution is
straightforward. Members negotiate the rules that they agree to follow and
only exceptionally would expect to be challenged for actions not in
contravention of those rules." 12

Nonetheless, even cases noting the limited circumstances for pursuing a
non-violation claim recognize that "the non-violation remedy is an
important and accepted tool of WTO/GATT dispute settlement." 13 Thus,
non-violation is not intended as a method of reducing the certainty of an
agreement, but rather in providing an "exceptional remedy" in certain
circumstances to ensure that benefits accruing under the relevant WTO
agreement are not nullified or impaired by a measure of another WTO Member.

Non-violation complaints "discourage actions that evade obligations without
directly violating them." 14 The purpose of including non-violation
complaints under Article XXIII:1(b) is "to protect the balance of
concessions under GATT by providing a means to redress government actions
not otherwise regulated by GATT rules that nonetheless nullify or impair a
Member's legitimate expectations of benefits from tariff negotiations." 15
The basic premise of non-violation remedies is that "Members should not
take actions, even those consistent with the letter of the treaty, which
might serve to undermine the reasonable expectations of negotiating
partners," not just in the context of tariff negotiations but in other
contexts as well. 16

Although this purpose is somewhat similar to the principle of international
law under pacta sunt servanda, described in Article 26 of the Vienna
Convention as meaning that "[e]very treaty in force is binding upon the
parties to it and must be performed by them in good faith," the
"non-violation doctrine goes further than just respect for the object and
purpose of the treaty" expressed under principles of international law. 17
Under the non-violation doctrine, there must be respect for "actual
provisions (i.e., concessions) as far as their material effect on
competitive opportunities." 18 This is an "extension of the good faith
requirement." 19 Therefore, even though non-violation remedies are rarely
applied, they nonetheless have "an important role – that of protecting the
reasonable expectations of competitive opportunities through negotiated
concessions." 20

Existing Template: Three Elements, Reasonably Anticipated, Case-by-Case
Analysis

In Japan – Measures Affecting Consumer Photographic Film and Paper (Japan –
Film), the panel identified three required elements of a non-violation
complaint:

(1) application of a measure by a WTO Member;

(2) a benefit accruing under the relevant agreement; and

(3) nullification or impairment of the benefit as the result of the
application of the measure. 21

The panel's analysis of these elements underscores the link between the
legitimacy of an expected benefit and whether the measure was reasonably
anticipated. According to the panel:

In order for expectations of a benefit to be legitimate, the challenged
measures must not have been reasonably anticipated at the time the tariff
concession was negotiated. If the measures were anticipated, a Member could
not have had a legitimate expectation of improved market access to the
extent of the impairment caused by these measures. 22

Relying on the EEC – Oilseeds report, the panel in Japan – Film further
clarified that "we do not believe that it would be appropriate to charge
the United States with having reasonably anticipated all GATT-consistent
measures." Rather, the panel reasoned that reasonable anticipation needs to
be addressed on a case-by-case basis. 23

Scope of Non-Violation Complaints Not Limited To Tariff Concessions

The availability of a non-violation complaint is not limited in terms of
the type of measure that may be challenged. In EC – Asbestos, for example,
the Appellate Body rejected the European Communities' argument that the
principle could only be applied to "commercial measures," noting that "the
text [of Article XXIII:1(b)] does not distinguish between, or exclude,
certain types of measures" from its application. 24 GATT Article XXIII:1(b)
is also not limited to tariff benefits. 25

In Korea – Procurement, the panel recognized the difference between
"traditional" non-violation complaints based upon concessions and
"non-traditional" non-violation complaints based upon negotiations under
the WTO Agreement on Government Procurement. In that dispute, the panel
provided for greater flexibility in the required elements outlined above
and adopted a slightly different test to apply non-violation complaints in
the context of government procurement negotiation rather than pursuant to a
concession. The panel assessed four elements of a non-violation dispute:

(1) there was an agreed concession on entities;

(2) resulting from that there was a reasonable expectation of enjoying
competitive bidding opportunities;

(3) an action which does not violate GPA rules is taken by the Member that
made the concession, including the concessions on entities; and

(4) resulting from that, the expected competitive bidding opportunities are
not available and the benefits of the concession have been nullified and
impaired. 26

Because the concern has been raised that "a non-violation remedy under the
TRIPS Agreement would be unpredictable without a common view on the
essential elements of the remedy in relation to intellectual property," the
adoption of these modified elements demonstrates the flexibility of such
elements to adapt to different contexts. 27

ISSUES OF CONCERN TO OTHER MEMBERS

Some WTO Members have raised questions regarding the application of
non-violation complaints to the TRIPS Agreement. These questions are
addressed below.

Non-Violation Complaints are Unnecessary Because the TRIPS Agreement is Not
Designed to Protect Market Access

Some Members have expressed their view that, unlike other WTO agreements,
the TRIPS Agreement is a sui-generis agreement which establishes minimum
standards of intellectual property protection rather than protecting market
access. 28 Some Members have also argued that even if the Agreement is a
market access agreement, it is of a "distinctive character and, therefore,
additional considerations are more or less needed to analyse the
application of non-violation under it." 29 Another view is that the TRIPS
Agreement is not designed to protect market access but "to establish
standards of IP protection, which, if abused, may even undermine market
access." 30

It is the view of the United States that the TRIPS Agreement is a market
access agreement. As stated in its preamble, the TRIPS Agreement is
intended "to reduce distortions and impediments to international trade …
and to ensure that measures and procedures to enforce intellectual property
rights do not themselves become barriers to legitimate trade." 31 The
Agreement also helps to reduce market distortions that existed prior to its
negotiation by establishing minimum standards on the scope of trade-related
intellectual property rights.

While it is true that the standards and procedures established in the
agreement are in part to protect the enjoyment of private rights, this type
of protection is not unique to the TRIPS Agreement – the Agreement on
Technical Barriers to Trade and the Agreement on Sanitary and Phytosanitary
Measures, for example, also establish minimum requirements that governments
must meet before imposing limitations on goods. Furthermore, it is
essential to note that intellectual property rights have the potential to
impact market access. For example, in the context of an anticipated
increase in market access resulting from a negotiated tariff reduction,
such reductions for a product may not be realized if others could market
identical products freely in spite of the existence of a patent claiming
that product or a trademark associated with these products.

The United States is also of the view that there is no substantial
difference between GATT, GATS and the TRIPS Agreement as they are all part
of the overall package of the WTO System. The perception of differences
between the agreements exists because the TRIPS Agreement's rights are
granted to persons rather than applied to goods. However, like any other
WTO Agreement, the rules set forth in the TRIPS Agreement determine the way
in which a WTO Member's goods and services should be treated in the
territories of other members, making the agreements more alike than
different in their application and purpose. 32

Notably, WTO adjudicative bodies have also found that non-violation
complaints are not limited to tariff concessions and commercial benefits.
For example, in EC – Asbestos, the Appellate Body rejected the argument of
the responding party in that dispute that it is possible to have
"legitimate expectations" only in connection with a purely "commercial
measure". The Appellate Body stated that "the text [of Article XXIII:1(b)]
does not distinguish between, or exclude, certain types of measures" and
that such distinctions would be "very difficult in practice". Likewise, as
explained above, the panel in Korea – Procurement, distinguished between
"traditional" non-violation complaints based upon concessions and
"non-traditional" non-violation complaints based upon negotiations under
the WTO Agreement on Government Procurement.

In addition, according to a note prepared by the GATT Secretariat,
non-violation and situation complaints originated out of an effort "to
protect agreed tariff reductions as well as the reciprocal 'balance of
concessions' from being undermined by non-tariff barriers or by other
government measures (e.g., outside of the trade sphere) ." 33

Non-violation Complaints are Unnecessary to Protect any Balance of Rights
and Obligations Inherent in the TRIPS Agreement

Some Members have expressed their concerns that non-violation and situation
complaints are unnecessary to protect any balance of rights because WTO
Members are not obliged to implement more extensive protections under the
TRIPS Agreement and because the Agreement already accurately reflects such
obligations. 34

The United States disagrees with the view that non-violation complaints
would be at odds with the balance of rights and obligations in the TRIPS
Agreement. The application of non-violation complaints was clearly
envisioned by the drafters of the TRIPS Agreement, as evidenced by the
language of Articles 64.1 and 64.2 which explicitly state that, after five
years, complaints under Article XXIII:1(b) and (c) of GATT would be
available under the Agreement. Therefore, the United States is of the view
that these drafters intended for non-violation complaints to constitute an
additional obligation to Members that is not expressed elsewhere in the
provisions of the Agreement.

Permitting Non-Violation Complaints will Introduce Incoherence Among WTO
Agreements and Upset the Balance by Elevating Private Rights over the
Interests of the Users of Intellectual Property

Some Members have raised concerns that allowing non-violation remedies
under the TRIPS Agreement would "unsettle [the] delicate balance of rights
and obligations" provided for under the agreement and elevate the interests
of private rights over the interests of public policy concerns. These
members are concerned that by allowing non-violation complaints, Members'
previously WTO consistent measures such as taxes and advertising
requirements will be subject to challenge. 35

The United States does not believe that the availability of non-violation
measures will raise these systemic concerns. As described in preceding
sections, WTO adjudicatory bodies will continue to be bound by Article 3.2
of the DSU, which clearly states that "[r]ecommendations and rulings of the
Dispute Settlement Body cannot add or diminish the rights and obligations
provided in the covered agreements." Additionally, Article 3.5 of the DSU
provides that all solutions to matters raised must also be consistent with
those agreements. Even absent these express provisions, however, it is
unlikely that a panel would ever determine that something a WTO Member had
agreed to under one part of the Marrakesh Agreement would nullify or impair
benefits agreed to under another part of the single undertaking.

Furthermore, past GATT and the WTO rulings provide sufficient guidance on
the scope of such complaints, which ensure that the scope of any
non-violation complaint would have to be precisely drawn and clearly
supported with detailed justification. Finally, as explained above,
non-violation complaints are an "exceptional" remedy. The United States
considers it unlikely that a limited remedy such as a non-violation
complaint would have the destabilizing impact that concerns some Members.

Application of Non-Violation Complaints will Undermine Regulatory Authority
and Infringe Sovereign Rights Inherent in the TRIPS Agreement

Some Members have suggested that the availability of non-violation
complaints will limit the ability and flexibility for states to secure
objectives relating to public health, nutrition, the transfer of technology
and other issues of public interest. They also suggest that their sovereign
rights will be limited by exposing to challenge any measure that affects
intellectual property that could not have been foreseen at the time of the
Uruguay Round. 36

The United States is of the view that the availability of non-violation
complaints will protect Members from intentional evasions of obligations
under the TRIPS Agreement while preserving the ability of any Member to
implement legitimate social, economic development, health, environmental
and cultural policies. Non-violation complaints will only be successful if
they could not have been foreseen when the Uruguay Round negotiations were
underway. Because there are a number of ways to implement social and
cultural policy goals, a Member may take this element of non-violation
complaints into consideration when crafting measures to protect these goals.

In this regard, the United States also notes the following considerations
conveyed by Switzerland at the February 2014, meeting of the TRIPS Council:

A number of delegations in their interventions today referred to their
concern as to the potential impact of the application of non-violation
complaints on their rights and obligations under TRIPS and more
particularly the flexibilities contained in the Agreement. Let me be clear
on this important point: It is our firm view that a non-violation complaint
cannot be brought against another Member for utilizing a flexibility
foreseen in the TRIPS Agreement. One of the necessary conditions that the
complaining party must demonstrate is that the offending measure could not
have been foreseen. That a Member may make use of a flexibility provided in
the TRIPS Agreement is, just as any other right under the TRIPS Agreement,
foreseeable by other Members. After all, they were written into the
Agreement, agreed by all Members and, as far as pertaining to public
health, also confirmed in the Doha Ministerial Declaration on the TRIPS
Agreement and Public Health of 14/11/2001. 37

Rights and Obligations in the TRIPS Agreement are Best Performed through
Good Faith Application of its Provisions

Some Members have argued that rights and obligations arising under the
TRIPS Agreement are better performed in accordance with established
principles of international law rather than under the non-violation
principle. These Members note their concern that the application of such
provisions would not be as "legally imprecise" as the notion of
non-violation complaints. 38

The United States disagrees that the good faith application of the
Agreement's provisions will in all circumstances fully protect Members in
the same way that the availability of non-violation complaints will. The
United States notes the discussion of the application of international law
as put forward in Korea – Procurement. In that dispute, the panel noted
that the "non-violation doctrine goes further than just respect for the
object and purpose of the treaty" as protected under the principle of pacta
sunt servanda principle under international law. 39 That dispute also noted
that the non-violation provision is needed because, while most of the time
actions taken by Members will be consistent with both the letter and the
spirit of the treaty, "upon occasion, it may be the case that some actions,
while permissible under one set of rules (e.g., the Agreement on Subsidies
and Countervailing Measures is a commonly referenced example of rules in
this regard), are not consistent with the spirit of other commitments." 40

There is Insufficient Guidance on Remedies and Dispute Settlement for
Non-Violation Complaints under the TRIPS Agreement

Some Members believe there is "insufficient guidance" in Article 26 of the
DSU and GATT dispute practice for panels and the Appellate Body to apply
non-violation and situation complaints in the context of the TRIPS
Agreement. 41 Others have found sufficient guidance and addressed
non-violation as part of a complaint. 42

The United States does not believe that questions regarding the
implementation of a provision of the TRIPS Agreement should serve as a
barrier to such implementation. Article 64 is no different than any TRIPS
Agreement provision on to the extent that no TRIPS Agreement provisions is
so detailed as to anticipate all possible variations of implementation
precisely. Such clairvoyance is not demanded of other TRIPS Agreement
provisions. In fact, any provision of any WTO agreement is similarly
situated – each agreement lays out a series of rights and obligations
agreed by WTO Members. Where WTO Members need clarification regarding such
rights and obligations, they have recourse to the WTO panel and Appellate
Body system.

It is the role of the dispute settlement body to preserve those rights and
obligations and to clarify the provisions of the covered agreements. As
affirmed in DSU Article 3.2, the WTO dispute settlement system "is a
central element in providing security and predictability to the
multilateral trading system." Critically, however, the dispute settlement
system cannot add to or diminish those rights and obligations.

It is within these well-established confines that GATT panels and the
Appellate Body have already conducted significant analysis of non-violation
provisions of the GATT 1994, which provides appropriate guidance on the
applicability and use of non-violation complaints. This guidance, combined
with the additional guidance provided by panels and the Appellate Body in
past GATT and WTO disputes, provides WTO Members with an appropriate scope
and set of modalities applicable to non-violation complaints also under the
TRIPS Agreement. As explained above, these include a set of three required
elements, which have been elaborated and refined through dispute settlement
and which include an assessment of reasonable anticipation and a
case-by-case determination.

Ultimately, the questions regarding the implementation of Article 64 have
to a great extent been answered, in part by the text of the relevant
covered agreements and in part by the GATT and WTO dispute settlement
system. Where additional questions remain, dispute settlement continues to
be the mechanism agreed by WTO Members to further clarify provisions of the
covered agreement, including Article 64. Members endeavoring to divine such
answers in the abstract divorced from a case-by-case analysis in the
dispute settlement system is at odds with the agreed rules of the road of
the WTO.

CONCLUSION

Non-violation complaints are fully appropriate in the context of the TRIPS
Agreement, and have have long been part of the WTO and the GATT.
Non-violation complaints serve an interest all WTO Members share, which is
to assist Members in protecting against measures that nullified or impaired
concessions. Non-violation complaints were part of the balance of rights
and obligations in the TRIPS Agreement. TRIPS Article 64 clearly provides
that the provisions of non-violation and situation complaints in GATT
Article XXIII would apply after a period of five years following the entry
into force of the WTO Agreement, but also unambiguously provides that any
extension of the five-year period must be agreed by consensus. The time has
come to allow the moratorium on non-violation complaints to expire.



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