|United States - Import Measures on Certain Products from the European Communities - Report of the Panel|
17 July 2000
UNITED STATES - IMPORT MEASURES ON
CERTAIN PRODUCTS FROM
THE EUROPEAN COMMUNITIES
Report of the Panel
The report of the Panel on United States - Import Measures on Certain Products from the European Communities is being circulated to all Members, pursuant to the DSU. The report is being circulated as an unrestricted document from 17 July 2000 pursuant to the Procedures for the Circulation and Derestriction of WTO Documents (WT/L/160/Rev.1). Members are reminded that in accordance with the DSU only parties to the dispute may appeal a panel report. An appeal shall be limited to issues of law covered in the Panel report and legal interpretations developed by the Panel. There shall be no ex parte communications with the Panel or Appellate Body concerning matters under consideration by the Panel or Appellate Body.
Note by the Secretariat: This Panel Report shall be adopted by the Dispute Settlement Body (DSB) within 60 days after the date of its circulation unless a party to the dispute decides to appeal or the DSB decides by consensus not to adopt the report. If the Panel Report is appealed to the Appellate Body, it shall not be considered for adoption by the DSB until after the completion of the appeal. Information on the current status of the Panel Report is available from the WTO Secretariat.
TABLE OF CONTENTS
I. PROCEDURAL BACKGROUND 1
II. FACTUAL ASPECTS 2
A. FACTUAL BACKGROUND TO THIS CASE 2
B. MEASURE AT ISSUE 7
C. US ORDINARY LIQUIDATION PROCEDURES, BONDING REQUIREMENTS AND RELEVANT TARIFF RATES 9
D. DEVELOPMENTS IN THE UNITED STATES AFTER 3 MARCH 1999 12
III. ARGUMENTS OF THE PARTIES 13
IV. ARGUMENTS OF THE THIRD PARTIES 14
V. INTERIM REVIEW 14
VI. FINDINGS 19
A. INTRODUCTION 19
B. EC CLAIMS AND US DEFENSES UNDER THE DSU AND GATT 1994 20
1. The EC claims 20
2. The US defenses 20
C. US REQUEST FOR A PRELIMINARY RULING 21
D. EC CLAIMS THAT THE 3 MARCH MEASURE VIOLATED ARTICLES 23 AND OTHERS OF THE DSU 21
1. Claims under Article 23 21
(a) Article 23 of the DSU as a whole 21
(b) The application of Article 23 to the present dispute 24
(i) Was the 3 March Measure a measure 'seeking the redress of' a WTO violation? 25
2. Article 23.1 together with Articles 23.2(c), 3.7 and 22.6 of the DSU 28
(a) Did the 3 March Measure constitute a suspension of GATT/WTO concessions or other obligations? (EC claims that the 3 March Measure violated Articles I, II, VIII and XI of GATT) 29
(i) The increased bonding requirement itself 30
(ii) Interest charges, costs and fees in connection with the lodging of the additional bonding requirement 34
(b) US Defences 36
(i) The US defence based on Article 13 of the CV Agreement 36
(ii) The US defence based on the increased "risk" that those EC listed imports represented 37
(c) Conclusion 38
3. Article 23.1 together with Articles 21.5 and 23.2(a) of the DSU 39
E. EC CLAIMS THAT THE 3 MARCH MEASURE VIOLATED ARTICLES I, II, VIII AND XI OF GATT 50
F. US DEFENSE BASED ON THE EUROPEAN COMMUNITIES' DELAYING TACTICS 50
VII. CONCLUSIONS AND RECOMMENDATIONS 51
1.1This proceeding was initiated by the European Communities, as complaining party against the United States.
1.2On 4 March 1999, the European Communities requested consultations with the United States under Article XXII:1 of the General Agreement on Tariffs and Trade 1994 ("GATT") and Article 4 of the Understanding on Rules and Procedures Governing the Settlement of Dispute ("DSU") with regard to the US decision, effective as of 3 March 1999, to withhold liquidation on imports from the European Communities of a series of products (listed in the Annex to the document WT/DS165/1), together valued at over $500 million on an annual basis, and to impose a contingent liability for 100 per cent duties on each individual importation of affected products as of this date. The European Communities claimed that according to information provided by the United States Trade Representative ("USTR"), this measure includes administrative provisions which foresee, among other things, the posting of a bond to cover the full potential liability.
1.3On 11 May 1999, the European Communities requested the establishment of a panel pursuant to Article 6 of the DSU (WT/DS165/8).
1.4In its panel request, the European Communities claims that:
"I have the honour to request, on behalf of the European Communities, the establishment of a panel pursuant to Article XXIII of the General Agreement on Tariffs and Trade 1994 (GATT 1994) and Articles 4 and 6 of the Dispute Settlement Understanding (DSU) with respect to the US decision, effective as of 3 March 1999, to withhold liquidation on imports from the EC of a list of products, together valued at $520 million on an annual basis, and to impose a contingent liability for 100 per cent duties on each individual importation of affected products as of this date (annex 1). This measure includes administrative provisions that foresee, among other things, the posting of a bond to cover the full potential liability.
& When the US received WTO authorization on 19 April 1999 to suspend concessions as of that date on EC imports of products with an annual value of only $191.4 million, a more limited list of products was selected from the previous list (annex 2). At the same time, the US confirmed, despite the prospective nature of the WTOs, the liability for 100 per cent duty on the products on the list in annex 2 that had entered the US for consumption with effect from 3 March 1999.
The European Communities considers that this US measure is in flagrant breach of the following WTO provisions:
- Articles 3, 21, 22 and 23 of the DSU;
- Articles I, II, VIII and XI of GATT 1994.
Through these violations of fundamental WTO rules, the US measure nullifies or impairs benefits accruing, directly or indirectly, to the European Communities under GATT 1994. This measure also impedes important objectives of GATT 1994 and of the WTO."
1.5On 16 June 1999, the Dispute Settlement Body ("DSB") established the Panel pursuant to Article 6 of the DSU. In accordance with Article 7.1 of the DSU, the terms of reference of the Panel are:
"To examine, in the light of the relevant provisions of the covered agreements cited by the European Communities in document WT/DS165/8, the matter referred to the DSB by the European Communities in that document and to make such findings as will assist the DSB in making the recommendations or in giving the rulings provided for in those agreements."
1.6Dominica, Ecuador, India, Jamaica, Japan, and St. Lucia, reserved their rights to participate in the Panel proceedings as third parties.
1.7On 29 September 1999, the European Communities requested the Director-General, pursuant to Article 8.7 of the DSU, to determine the composition of the Panel. On 8 October 1999, the Director-General announced the composition of the Panel as follows:
Chairman: Mr. Hugh McPhail
Members: Ms. Leora Blumberg
Mr. Peter Pale
1.8The Panel had substantive meetings with the parties on 16 and 17 December 1999, and 9 February 2000.
A.FACTUAL BACKGROUND TO THIS CASE
1.1At its meeting of 25 September 1997, the DSB adopted the Appellate Body report,1 and the panel reports,2 as modified by the Appellate Body report, on European Communities - Regime for the Importation, Sale and Distribution of Bananas.3 The Appellate Body report recommended that the [DSB] request the European Communities to bring the measures found in this Report and in the Panel Reports & to be inconsistent with the GATT 1994 and GATS into conformity with the obligations of the European Communities under those agreements."4 In this case, Ecuador, Guatemala, Honduras, Mexico and the United States (the "Complainants on EC - Bananas III") claimed that the EC regime for the importation, sale and distribution of bananas established by the Council Regulation (EEC) 404/93, and the subsequent EC legislation, regulations and administrative measures, was inconsistent with the WTO Agreement.5 At the DSB meeting of 16 October 1997, the European Communities confirmed that "the Communities would fully respect their international obligations with regard to this matter."6
2.2On 24 October 1997, the European Communities requested consultations with the Complainants on EC - Bananas III in order to reach agreement on a "reasonable period of time" for the implementation of the recommendations and rulings of the DSB adopted on 25 September 1997, but these consultations did not lead to an agreement.7 Pursuant to the request of the Complainants on EC - Bananas III, on 8 December 1997, the Director-General of the WTO appointed Mr. Said El-Naggar as the arbitrator.8 On 7 January 1998, the arbitrator decided that the "'reasonable period of time' & [was] the period from 25 September 1997 to 1 January 1999.9
2.3On 20 July 1998, the Council of the European Union adopted the Regulation (EC) No. 1637/98 amending the Council Regulation (EEC) No. 404/93 on the common organization of the market in bananas. This Regulation entered into force on 31 July 1998, and later became applicable as of 1 January 1999.10 Further, on 28 October 1998, the Commission of the European Communities adopted the Regulation (EC) No. 2362/98 laying down detailed rules for the implementation of the Council Regulation (EEC) No. 404/93 regarding imports of bananas into the European Communities. This Regulation entered into force on 1 November 1998, and later became applicable as of 1 January 1999 as well.11
2.4On 18 August 1998, the Complainants on EC - Bananas III jointly and severally requested consultations with the European Communities in relation to the proposed banana regime.12 Their request for consultations states as follows:
"At [a] meeting [of 6 August 1998], the EC clarified its view that Article 21.5 requires parties to consult as a prior condition to the resort to the original panel to resolve the disagreement over the WTO-consistency of the EC measures taken to implement the DSB rulings and recommendations. &
We do not agree that consultations are necessary before resorting to the original panel under Article 21.5. The EC's position taken for the purposes of this dispute appears calculated to produce maximum delay and is unsupportable for the effective functioning of the dispute settlement system. & "13
2.5On 8 September 1998, in their joint communication to the Chairman of the DSB, the Complainants on EC - Bananas III claimed that since the proposed banana scheme of the European Communities was inconsistent with the WTO Agreement, and thus, "in order to ensure compliance with the DSB recommendations and ruling by the end of the reasonable period of time on 1 January, 1999, & this matter should be referred to a panel pursuant to Article 21.5 [of the DSU]."14 At the DSB meeting of 22 September 1998, such panel was not established.15 At that meeting, however, the United States, on its own behalf and on behalf of the other Complainants on EC - Bananas III and Panama, stated as follows:
"& The EC's insistence on consultations only delayed the process. This delay would only prolong the dispute beyond the reasonable period of time established by the arbitrator. These delaying tactics, if tolerated, would have serious consequences for the DSU and the multilateral trading system. & "16
In response, the European Communities indicated as follows:
"The Community believed that the dispute which fell under Article 21.5 of the DSU should be resolved in accordance with the normal dispute settlement procedures except as otherwise provided in this Article. & The normal dispute settlement procedures implied the need to hold consultations and the Community had insisted on this point. & [T]hese were not delaying tactics but a simple application of the DSU procedures. & "17
2.6On 13 November 1998, Ecuador requested the reactivation of the 17 September 1998 consultations with the European Communities.18 As their consultations did not result in a mutually satisfactory solution, on 18 December 1998, Ecuador requested "the WTO Dispute Settlement Body, at today's meeting, to call for the re-establishment of the Panel that originally heard the case in order to resolve the conflict with the European Communities concerning the consistency of its measures to implement the recommendations and rulings of the Dispute Settlement Body of 25 September 1997."19 At its meeting of 12 January 1999, the DSB agreed "to refer to the original panel, pursuant to Article 21.5, the matter raised by Ecuador in document WT/DS27/41."20
2.7On 14 December 1998, the European Communities requested that the DSB establish "a panel under Article 21.5 of the DSU with the mandate to find that [its new bananas import regime] must be presumed to conform to WTO rules unless [its] conformity has been duly challenged under the appropriate DSU procedures."21 At its meeting of 12 January 1999, the DSB also agreed "to refer [the matter] to the original panel pursuant to Article 21.5 of the DSU."22
2.8On 14 January 1999, pursuant to Article 22.2 of the DSU, the United States "request[ed] authorization from the Dispute Settlement Body (DSB) to suspend the application to the European Communities (EC), and Member States thereof, of tariff concessions and related obligations under the General Agreement on Tariffs and Trade 1994 (GATT), covering trade in an amount of US$520 million,"23 claiming that the European Communities had "fail[ed] to bring its regime for the importation, sale and distribution of bananas (banana regime) into compliance, by 1 January 1999, with the GATT and the General Agreement on Trade in Services (GATS) or to otherwise comply with the recommendations and rulings of the DSB in EC - Regime for the Importation, Sale and Distribution of Bananas."24
2.9On 29 January 1999, the European Communities, "[p]ursuant to Article 22.6 of the DSU, & object[ed] to the level of suspension proposed by the United States in document WT/DS27/43," and further requested that "the matter & be submitted to arbitration", claiming "that the Community banana import measures found to be inconsistent with WTO obligations were withdrawn by 1 January 1999 and have therefore ceased to produce their effects since the expiry of the reasonable period of time determined in accordance with Article 21, paragraph 3 [of the DSU] & ".25
2.10At its meeting of 25, 28 and 29 January and 1 February 1999, the Chairman suggested, among others, as follows:
"[A]s to bananas the original panel is now engaged in two Article 21.5 proceedings. & [A]ssuming the EC make a request for arbitration under Article 22.6, the same individuals could be given the task of arbitrating the level of suspension. & There remains the problem of how the panel and the arbitrators would coordinate their work, but as they will be the same individuals, the reality is that they will find a logical way forward, in consultation with the parties. In this way, the dispute settlement mechanisms of the DSU can be employed to resolve all of the remaining issues in this dispute, while recognizing the right of both parties and respecting the integrity of the DSU."26
The DSB then agreed "that the matter be referred to arbitration by the original panel in accordance with Article 22.6 of the DSU."27
2.11On 18 February 1999, the United States,
"[p]ursuant to Article 22.7 of the [DSU], & request[ed] authorization from the [DSB] to suspend the application to the European Communities (EC), and member States thereof, of tariff concessions and related obligations under the General Agreement on Tariffs and Trade 1994 (GATT), in an amount consistent with DSU Article 22.4, as determined by the arbitrator pursuant to DSU Article 22.7 in 'EC - Regime for the Importation, Sale and Distribution of Bananas'."28
The United States further explained that "[a]ccording to Article 22.6 of the DSU and the timetable for the arbitrators' work, the arbitrators' decision is to be issued by 2 March 1999."29
2.12On 2 March 1999, the arbitrators, in their initial decision, requested the parties to supply them with certain additional information.30 They indicated that "[f]ollowing our receipt and analysis of that information, we expect to be in a position to issue a final decision in this matter soon thereafter."31
2.13On 3 March 1999, the United States took those actions described in Section B below. As described in Section I above, on 4 March 1999, the European Communities requested consultations with the United States on the matter under Article XXII:1 of the GATT and Article 4 of the DSU, and subsequently on 16 June 1999, pursuant to the EC request, the DSB established this Panel pursuant to Article 6 of the DSU.
2.14On 6 April 1999, the Article 22.6 arbitrators and the Article 21.5 panels issued simultaneously to the parties, both the decision of the arbitrators, and the panel reports on the recourse to Article 21.5 by Ecuador and the European Communities.32
2.15On 7 April 1999, pursuant to Article 22.7 of the DSU, the United States requested that "the DSB authorise it to suspend concessions in an amount up to US$191.4 million per year& ", referring to the arbitrators' decision issued to the parties on 6 April 1999.33
2.16On 9 April 1999, the following decision of the arbitrators was circulated to the Members:
"[T]he Arbitrators determine that the level of nullification or impairment suffered by the United States in the matter European Communities - Regime for the Importation, Sale and Distribution of Bananas is US$191.4 million per year. Accordingly, the Arbitrators decide that the suspension by the United States of the application to the European Communities and its member States of tariff concessions and related obligations under GATT 1994 covering trade in a maximum amount of US$191.4 million per year would be consistent with Article 22.4 of the DSU."34
2.17In reaching this conclusion, the arbitrators explained as follows:
"[W]e cannot fulfil our task to assess the equivalence between the two levels before we have reached a view on whether the revised EC regime is, in light of our and the Appellate Body's findings in the original dispute, fully WTO-consistent. It would be the WTO-inconsistency of the revised EC regime that would be the root cause of any nullification or impairment suffered by the United States. Since the level of the proposed suspension of concessions is to be equivalent to the level of nullification or impairment, logic dictates that our examination as Arbitrators focuses on that latter level before we will be in a position to ascertain its equivalence to the level of the suspension of concessions proposed by the United States."35
2.18On 12 April 1999, the panel which addressed the recourse to Article 21.5 of the DSU by the European Communities circulated a final report to the Members. In its report, the panel concluded that "we do not make findings as requested by the European Communities."36 In this proceeding, the European Communities claimed as follows:
"[S]ince Guatemala, Honduras, Mexico and the United States had failed to pursue any recourse to dispute settlement procedures under the rules and procedures of the DSU, the new EC regime for the importation, sale and distribution of bananas adopted in order to comply with the recommendations and rulings of the DSB in the three dispute settlement procedures ('EC - Regime for Importation, Sale and Distribution of Bananas') had to be deemed & in so far as [these parties to the original dispute] were concerned, to be in conformity with the WTO covered agreements so long as those original parties had not successfully challenged the new EC regime under the relevant dispute settlement procedures of the WTO."37
2.19On the same day, the panel which addressed the recourse to Article 21.5 of the DSU by Ecuador circulated a final report to the Members. In its report, the panel concluded that "aspects of the EC's import regime for bananas are inconsistent with the EC's obligations under & GATT 1994 and & GATS."38 This report was adopted by the DSB at its meeting of 6 May 1999.39
2.20At its meeting of 19 April 1999, the DSB, "pursuant to the US request under Article 22.7 of the DSU, agree[d] to grant authorization to suspend the application to the European Communities and its member States of tariff concessions and related obligations under GATT 1994, consistent with the decision of the Arbitrators contained in document WT/DS27/ARB."40
B.MEASURE AT ISSUE
2.21In this case, the European Communities requested that the DSB establish a panel,
"with respect to the US decision, effective as of 3 March 1999, to withhold liquidation on imports from the EC of a list of products, together valued at $520 million on an annual basis, and to impose a contingent liability for 100 per cent duties on each individual importation of affected products as of this date (annex 1 [to the request]). This measure includes administrative provisions that foresee, among other things, the posting of a bond to cover the full potential liability."41
2.22This request corresponds to the USTR press release of 3 March 1999, which states as follows:
"[E]ffective today, the U.S. Customs Service will begin 'withholding liquidation' on imports valued at over $500 million of selected products from the European Union (EU), consistent with U.S. rights under the WTO agreements. Withholding liquidation imposes contingent liability for 100 per cent duties on affected products as of March 3, 1999."42
2.23On 3 March 1999, Mr. Peter L. Scher, Special Trade Negotiator of the Trade Representative of the United States ("USTR"), wrote to Mr. Raymond W. Kelly, Commissioner of the US Customs Service, as follows:
"On January 14, 1999, the United States requested authorization from the World Trade Organization (WTO) to suspend the application to the European Communities (EC) of tariff concessions covering trade in an amount of US$520 million in response to the EC's failure to implement a WTO-consistent regime for the importation, sale, and distribution of bananas. The [USTR] intends to implement this suspension of tariff concessions by directing the Customs Service to impose 100 percent duties, ad valorem, on the products listed in the attachment to this letter. (See also 63 Fed. Reg. 63099 and 63 Fed. Reg. 71665 giving notice of the proposed increase in duties on selected products).
The EC requested that the U.S.-proposed level of suspension be reviewed by WTO arbitrators. The WTO dispute settlement rules require that the arbitration proceedings be completed on March 2. The arbitrators, however, failed to meet this deadline and are not expected to make their final decision until some later date. The USTR now seeks to preserve its right to impose 100 percent duties as of March 3, pending the release of the arbitrators' final decision.
Therefore, I am hereby requesting that until further notice the Customs Service withhold liquidation of entries of all articles identified in the attachment to this letter that are the products of Austria, Belgium, Finland, France, the Federal Republic of Germany, Greece, Ireland, Italy, Luxembourg, Portugal, Spain, Sweden or the United Kingdom and that are entered, or withdrawn from warehouse, for consumption, on or after March 3, 1999. I further request that the Customs Service today instruct port directors to review the sufficiency of bond posted with respect to entries described in the previous sentence, and to take steps to provide adequate or additional security in accordance with 19 C.F.R. ?13.13."43
2.24In response to the USTR's request, Mr. Philip Metzger, Director of the Trade Compliance Division of the US Customs Service, in a memorandum regarding "European Sanctions",44 gave the following instructions to the Customs Area and Port Directors:
"RE: European Sanctions
Effective for all merchandise classifiable under the Harmonized Tariff Schedule (HTS) subheadings listed below, entered, or withdrawn from warehouse, for consumption, on or after March 3, 1999, and produced in the listed countries, Area and Port Directors must require a Single Transaction Bond (STB) equal to the entered value of the merchandise. The only exception to this requirement is, at the discretion of the Port Director, the importer of record may use a continuous bond equal to 10 per cent of the total of the entered value of the covered merchandise imported by the importer for the preceding year. Ports should process increased continuous bonds immediately.
No entry shall be scheduled to liquidate earlier than the 314th day, thereby ensuring the withholding of liquidation as requested by USTR. &
Federal Republic of Germany
*Please note that the Netherlands and Denmark are not included on this list. &
Meat of swine, salted, in brine, dried or smoked, other than hams, shoulders, and cuts thereof, with bone in, or bellies (streaky) and cuts thereof
Pecorino cheese, made from sheep's milk, in original loaves, not suitable for grating
Sweet biscuits; waffles and wafers
Bath preparation, other than bath salts
Candles, tapers and the like
Other plates, sheets, film, foil and strip, noncellular and not reinforced, laminated, supported or similarly combined with other materials, of polymers of propylene
Handbags, whether or not with shoulder strap, including those without handle, with outer surface of sheeting of plastic
Articles of a kind normally carried in the pocket or in the handbag, with outer surface of sheeting of plastic, of reinforced or laminated plastic
Uncoated felt paper and paperboard in rolls or sheets
Folding cartons, boxes and cases, of noncorrugated paper or paperboard
Lithographs on paper or paperboard, not over 0.51 mm in thickness, printed not over 20 years at time of importation
Sweaters, pullovers, sweatshirts, waistcoats (vests) and similar articles, knitted or crocheted, wholly of cashmere
Bed linen, other than knit or crocheted, printed, of cotton, other than containing any embroidery, lace, braid, edging, trimming, piping or applique work, not napped
Lead-acid storage batteries, other than of a kind used for starting piston engines or as the primary source of electrical power for electrically powered vehicles of subheading 8703.90
Electrothermic coffee or tea makers, of a kind used for domestic purposes"45
2.25On the same day, the Customs Area and Port Directors accordingly started requiring that an importer of listed products imported from the listed EC countries lodge, in most cases, an increased continuous bond for the release of the products into the United States prior to the final liquidation in accordance with the instructions referred to in paragraph 2.24 above.
C.US ORDINARY LIQUIDATION PROCEDURES, BONDING REQUIREMENTS AND RELEVANT TARIFF RATES
2.26Under US law, when a shipment reaches the United States, the importer of record (i.e. the owner, purchaser, or licensed customs broker designated by the owner, purchaser, or consignee) will file entry documents for the goods with the port director at the port of entry. Imported goods are not legally entered until after the shipment has arrived within the port of entry, delivery of the merchandise has been authorised by the Customs, and estimated duties have been paid.46
2.27Liability for payment of duties is incurred at the time the goods arrive on a vessel within a Customs port when there is an intent to unload the goods at that port, or, if arrival is otherwise than by vessel, at the time of arrival within the Customs territory of the United States. The applicable rate of duty is the rate for the date the merchandise was entered for consumption or for immediate transportation of goods from one US port to another (so that Customs documentation can be submitted at the latter port).47
2.28At the time of entry, importers are required to pay only estimated duties. Any other duties and fees are to be collected at the time of liquidation, i.e. when the Customs has calculated the final amount of duties on imports based upon confirmation of the correct valuation, classification and origin of the goods. Section 1504, Paragraph (a) of the Tariff Act of 1930 sets forth a time-limit on liquidation, subject to certain exceptions, as follows: "& [A]n entry of merchandise not liquidated within one year from (1) the date of entry & (4) & shall be deemed liquidated at the rate of duty, value, quantity, and amount of duties asserted at the time of entry by the importer of record. & "48
2.29Before liquidation takes place, however, importers can obtain the release of their imports into the United States by submitting a bond and filing proper documentation. Section 142.4(a) of the Code of Federal Regulations ("CFR") Vol. 19, provides:
"& [M]erchandise shall not be released from Customs custody at the time Customs receives the entry documentation or the entry summary documentation which serves as both the entry and the entry summary, as required by ?42.3 unless a single entry or continuous bond on Customs Form 301 & has been filed. & "49
2.30The amount of a continuous bond on imports is determined in accordance with the "Guidelines for Determining Amounts of Bonds" attached to the Customs Directive, which the Assistant Commissioner of the Office of Commercial Operation issued to, among others, the District/Area Directors and Port Directors on 23 July 1991.50 The Guidelines set forth:
"The bond limit of liability amount shall be fixed in an amount the district director may deem necessary to accomplish the purpose for which the bond is given. The non-discretionary bond amount minimum is $50,000. & [T]he following formula shall be used.
None to $1,000,000 duties and taxes - the bond limit of liability amount shall be fixed in multiples of $10,000 nearest to 10 percent of duties, taxes and fees paid by the importer or broker acting as importer of record during the calendar year preceding the date of the application.
Over $1,000,000 duties and taxes - the bond limit of liability amount shall be fixed in multiples of $100,000 nearest to 10 percent of duties, taxes and fees paid by the importer or broker acting as importer of record during the calendar year preceding the date of the application."51
2.31The amount of a single transaction bond is determined in accordance with the same Guidelines, which set forth:
"Generally, a single transaction & bond & will be executed in an amount not less than the total entered value plus all duties, taxes, and fees which apply, unless the merchandise being imported falls into one of the following categories. In these cases, the bond will be executed in an amount which is not less than three times the total entered value of the merchandise.
1.Merchandise Subject to Other Agency Requirements Where Failure to Redeliver Could Pose a Threat to the Public Health and Safety
A)Food and Drug Administration (FDA) - All
G) Toxic Substances Control Act (TOSCA) - All"52
2.32However, Section 113.13(d) of the CFR, Vol. 19 sets forth the authority of the port director to impose additional security requirements as follows:
"(d) Additional security. Notwithstanding the provisions of this section or any other provision of this chapter, if a port director & believes that acceptance of a transaction secured by a continuous bond would place the revenue in jeopardy or otherwise hamper the enforcement of Customs law or regulations, he shall require additional security."53
2.33Accordingly, the Guidelines provide that the standard formulas mentioned in paragraphs 2.30 and 2.31 above shall not be applied if "any district director is aware that either extraordinary circumstances or a greater risk to the government involved."54 In such cases, the Guidelines require that:
"the district director with such knowledge shall contact the district where the bond is filed and convey the supporting facts so that appropriate action, if required, can be taken. For example, where the amount of a continuous bond does not cover the duty on a particular shipment and the district director suspects that a greater risk to the government is involved, the district director shall:
1. secure, at the time of release, deposit of the estimated duty due on the shipment, or,
2. request a single entry bond for that shipment, or
3. request that a new continuous bond in a higher amount be filed."55
2.34Based upon the US data for February 1999, continuous bonds were used for approximately 97 per cent of all entries made in that month, versus 3 per cent use of single transaction bonds. For entries from EC countries, approximately 94 per cent of entries in February 1999 were made using continuous bonds, versus 6 per cent use of single transaction bonds.56
2.35As of 3 March 1999, the binding tariff rates and applicable tariff rates of the United States with respect to the listed products were as follows:
Binding /Applied Rate
Pork, dried smoked
Plates, sheets, film
$0.121/kg + 4.6%
Felt paper and paperboard
Bed linen, cotton
Lead-acid storage batteries
Coffee or tea makers
*US Ex. 7.
D.DEVELOPMENTS IN THE UNITED STATES AFTER 3 MARCH 1999
2.36On 19 April 1999, the USTR determined that "effective April 19, 1999, a 100 per cent ad valorem rate of duty shall be applied to [certain] articles that are of the products of certain EC member States",57 following which the port directors were instructed to assess 100 per cent duties on those products, and accordingly 100 per cent duty deposits were required at the time of entry from 19 April 1999.58 The selected products were (i) bath preparations, other than bath salts; (ii) handbags, plastic; (iii) pocketbooks, plastic; (iv) felt paper and paperboard; (v) folding cartons; (vi) lithographs, (vii) bed linen, cotton; (viii) lead-acid storage batteries; and (ix) coffee or tea makers (except for those from Italy).59
2.37The following charts indicate the fluctuations (on a monthly basis and on the basis of the average of a preceding 12-month period) in the total value of imports from the European Communities during the period from January 1997 to September 1999, with respect to (i) those products contained in the 3 March list, and subject to the 19 April action (Chart A)60, and (ii) those products contained in the 3 March list but not subject to the 19 April action (Chart B)61:
III.ARGUMENTS OF THE PARTIES
3.1The arguments of the parties are set out in their submissions to the Panel (see Appendices 1.1 through 1.10 for the European Communities and Appendices 2.1 to 2.10 for the United States, to this Panel Report).
IV.ARGUMENTS OF THE THIRD PARTIES
4.1The arguments of the third parties are set out in their submissions to the Panel (see Appendix 3 for Dominica and St. Lucia, Appendix 4 for Ecuador (original Spanish), Appendix 5 for India, Appendix 6 for Jamaica, and Appendix 7 for Japan, to this Panel Report.
5.1On 27 March both the United States and the European Communities requested the Panel to review the interim report which had been issued to the parties on 13 March 2000. On 29 March, the European Communities reacted in writing to the US request. On 30 March the United States requested permission from the Panel to respond to the latest EC comments within 5 days. On 31 March the Panel granted this request and invited the United States to send its response to the EC comments by 4 April. On 4 April the United States sent us its last set of comments.
5.2In its request for review, the United States submitted four main comments and suggested other changes to our description of the facts of this case. The European Communities, in addition to commenting on the US request for review, also requested the Panel to review mainly two aspects of the Panel's findings.
5.3First, the United States argued that in the interim report the Panel reached conclusions on Articles 3.7 and 23.2(a) of the DSU for which the European Communities has not submitted any claim or any arguments.
5.4With reference to Article 23.2(a), the European Communities responded that the United States was attempting to redefine the scope of this dispute and re-argue Article 23.2(a). It insisted that in its written and oral submissions it referred to all the discussions and conclusions of the Panel Report on US - Section 301. In particular, the European Communities quoted paragraph 20 of its first written submission:
"& This course of events confirms that the USTR implemented the further action (unilaterally) decided upon only on the basis of its domestic legislation and thus irrespective of whether that action conformed to the requirements of Article 23; paragraphs 1 and 2, of the DSU."62 (underlined on the EC original, italics added)
The European Communities reiterated paragraph 14 of its oral presentation at the first substantive meeting to the effect that:
"The guiding principle of Article 23 is contained in paragraph 1 which also governs the more detailed provisions of paragraph 2 since this paragraph starts with the words "In such cases, Members shall" by which paragraph 1 is incorporated into paragraph 2. As the panel on Sections 301-310 has stated, Article 23.1 of the DSU prescribes that 'Members have to have recourse to the DSU dispute settlement system to the exclusion of any other system, in particular a system of unilateral enforcement of WTO rights and obligations'."63 (underlined on the EC original)
Finally, the European Communities referred to the various notices published in the Federal Register on this case (EC Annexes I, II and III), which deal expressly with both the unilateral determination of incompatibility and the unilateral implementation of trade sanctions.
5.5For the United States, the above references are not sufficient for the present Panel to reach the conclusion that the 3 March Measure was "contrary to Articles 23.2(a) and 21.5, first sentence, together with Ar
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