C. Administrative Aspects of the Banana Import Regime

(i) Eligible operators

8. The tariff quota of 2.553 million tonnes and traditional ACP quantities (857,700 tonnes) are made available to two categories of operators � traditional operators and newcomers. Under the EC's amended banana import regime, the operator categories (A, B and C) and the activity functions (primary importer, secondary importer/customs clearer and ripener) have been abolished.
9. Under the amended regime, operators have access to the above quantities in the following proportions: ⁷

traditional operators	92 per cent
newcomers	8 per cent.

This distribution between the two operator categories may be amended to "make better use of the tariff quotas and the traditional ACP quantities". ⁸ The quantities available in one operator category after requests have been fulfilled may be allocated to the other category.

10. To be eligible as a traditional operator, operators must be established in the European Communities during the period determining their reference quantity (explained below) and must have imported a minimum quantity of third-country and/or ACP-country bananas on their own account for subsequent marketing in the European Communities during the reference period. ⁹
11. To qualify as a newcomer, an operator must be established in the European Communities at the time of registration and must have been engaged "independently and on his own account in the commercial activity of importing fresh fruit and vegetables falling within Chapters 7 and 8 of the Tariff and Statistical Nomenclature and the Common Customs Tariff, or products under Chapter 9 [coffee, tea, maté and spices] thereof if he has also imported products falling within Chapters 7 and 8 in one of the three years immediately preceding the year in respect of which registration is sought �". The declared customs value of such imports during that three-year period must be at least Euro 400,000. ¹⁰
12. For the purposes of registration, newcomer operators are to provide, inter alia, to the competent authority in one of the EC member States certified evidence of having imported the products referred to above (import licences used or customs documents, as appropriate) and of having complied with the above minimum import value requirement. ¹¹ Applications for registration must be made by 1 July of each year in not more than one of the member States. Renewal of a newcomer's registration is subject to submission of proof that at least 50 per cent of the quantity allocated was imported on the newcomer's own account. ¹²

(ii) Determination of traditional operators' reference quantities and newcomer allocations

13. For each traditional operator, import entitlements are established (i.e. the annual "reference quantity") on the basis of quantities of bananas "actually imported" during the reference period. ¹³ The reference period for 1999 covers the years 1994-1996. ¹⁴ Written applications for reference quantities have to be submitted in one of the member States by 1 July of each year. ¹⁵ In their applications, operators have to provide data of the total volume of imports from origins covered by the tariff quota and of traditional ACP bananas during each year of the applicable reference period. Import volumes ("actual imports") are to be documented through both (i) copies of the import licences used either by the holder, or in the case of a transfer of the licence, by the transferee, and (ii) proof of payment of the customs duties. A traditional operator who furnishes proof of payment of customs duties, for the release into free circulation of a given quantity of bananas, without being the holder or the transferee holder of the relevant import licence, is considered to have actually imported the declared quantity provided that he has actually registered in a member State under Regulation (EEC) 1442/93 and/or fulfils the conditions of Regulation 2362 for registration as a traditional operator. ¹⁶
14. There are no reference quantities for newcomers. Applications for an annual quota must not exceed 10 per cent of the total annual quantity reserved for newcomers. ¹⁷ A new operator may become a traditional operator after three years of commercial activity. ¹⁸

(iii) Import licensing procedures

15. Imports of traditional ACP, non-traditional ACP and third-country bananas are subject to licensing procedures.
16. For the purpose of issuing import licences, the Commission of the European Communities may fix an "indicative quantity" of the annual tariff quota for the first three quarters of the year in accordance with the proportions set out in Table 1 above. It may be decided that during that period, applications for licences may not exceed a certain percentage of the reference quantity of each traditional operator or of the quantity allocated to each newcomer. ¹⁹
17. Applications for import licences have to be submitted in the European Communities member State where the operator is registered. Import licences are then issued, on a quarterly basis, following a two-round licensing procedure. In the first round, operators must specify, inter alia, the quantities requested from the origins specified in Table 1 above or from traditional ACP sources. ²⁰
18. A reduction coefficient is applied if licence requests, in any quarter and for any source, exceed significantly the indicative quantities or exceed the annual quantities available. ²¹ The reduction coefficients for each origin, if any, proportionally reduce the quantities indicated on the operators' licence requests. ²²
19. After the first round, the EC Commission publishes the origins and quantities for which new import licence applications can be made. For licence requests for origins that are subject to a reduction coefficient, operators may either renounce their licence requests or make new licence requests for the unfulfilled portion of their original licence request. ²³ Import licences cannot be used to import from origins other than the origin indicated on the licence. ²⁴
20. Unused import licences are, if requested, re-allocated to the same operator, whether a licence holder or transferee, for use in a subsequent quarter in the same year as the original licence. Such applications are not subject to the reduction coefficient that may apply in that quarter. ²⁵
21. Import licences are transferable once:

1. between traditional operators;
2. from traditional operators to eligible newcomers;
3. between eligible newcomers.

22. In the event of an import licence transfer among traditional operators, the reference quantity of the transferor and the transferee are, respectively, decreased and increased accordingly. In turn, traditional operators' reference quantities are reduced when transferred to a newcomer. Quantities transferred to a newcomer are credited when the new operator applies for traditional operator status. ²⁶ Newcomers are not permitted to transfer import licences to traditional operators. ²⁷

D. Lomé Waiver

23. The Fourth Lomé Convention, signed on 15 December 1989 between the European Communities and 68 African, Caribbean and Pacific (ACP) developing countries contains a protocol concerning bananas, along with provisions applying to products more generally. Like its predecessors, the Fourth Lomé Convention was notified to GATT and considered by a working party.
24. In December 1994, the European Communities was granted a waiver by the CONTRACTING PARTIES from the EC's obligations under Article I:1 of GATT 1947 as concerns the Lomé Convention. ²⁸ The waiver provides, in paragraph 1 of the decision, as follows:

"[T]he provisions of paragraph 1 of Article I of the General Agreement shall be waived, until 29 February 2000, to the extent necessary to permit the European Communities to provide preferential treatment for products originating in ACP States as required by the relevant provisions of the Fourth Lomé Convention, without being required to extend the same preferential treatment to like products of any other contracting party." ²⁹

25. In October 1996, the Lomé waiver was extended until 29 February 2000 (in accordance with the procedures mentioned in paragraph 1 of the Understanding in respect of Waivers and those of Article IX of the WTO Agreement). ³⁰

III. Procedural Issues

1. The European Communities contested the original complainants' position that consultations were not required under Article 21.5 of the DSU, since that provision referred explicitly to "these dispute settlement procedures", i.e. the entirety of the DSU. Consultations were in fact held on 17 September 1998 with all the original complainants on the amendments to Regulation 404 as set out in Regulation 1637. Also, in a communication of 13 November 1998, ³¹ Ecuador requested the "reactivation" of the consultations, which had started on 17 September 1998. In this communication, Ecuador explicitly referred to Regulation 2362. The consultations were held on 23 November 1998 in the presence of Ecuador and Mexico as original complainants.
2. The European Communities submitted that the alleged WTO-inconsistency of the revised EC import regime for bananas raised during consultations related exclusively to Articles I and XIII of GATT and Articles II and XVII of GATS. The European Communities was of the opinion that some claims raised by Ecuador in its first written submission went beyond the scope of this Panel procedure, which was limited to the settlement of a dispute "where there is disagreement as to the existence or consistency with a covered agreement of measures taken to comply with the [original] recommendations and rulings" (Article 21.5 of the DSU). The matter which was within the terms of reference of this Panel was therefore to be limited to the matters on which the DSB had adopted its recommendations and rulings based on the original panel and AB reports.
3. The European Communities was of the view that Ecuador's reference to Article 19 of the DSU, amounted to an attempt to transform this Panel procedure into a sort of arbitration "ex aequo et bono" which, in the opinion of the European Communities, had no legal basis under Article 21.5, and whose suggested recommendations would have the effect of imposing a modification of the existing bindings in the EC Schedules as they were negotiated in the Uruguay Round. However, a panel established in accordance with Article 21.5 had to apply "these dispute settlement procedures", i.e. the DSU.
4. According to the European Communities, this Panel could therefore only verify the consistency of measures taken to comply with the original recommendations and rulings of the DSB by "clarify[ing] the existing provisions" and "preserv[ing] the rights and obligations of members under the covered agreements". Panels should, in accordance with Article 19.1, "recommend that the Member concerned bring that measure into conformity with that agreement". However, they were not empowered to "recommend specific, immediate actions" as Ecuador had suggested. ³² Article 19.1, last part, allowed panels to "suggest ways" (i.e. technical means) in which a Member could implement the recommendation. This should be read in its context, i.e. paragraph 2 of the same Article, which explicitly forbade panels to "add to or diminish the rights and obligations provided in the covered agreements". The European Communities did not agree and will not allow that any of its negotiated rights and obligations bound in its Schedule be modified or affected outside a trade negotiation.
5. Ecuador submitted that the terms of Article 21.5 left no doubt that the issue in an Article 21.5 panel was not merely whether the new measures were consistent with specific rulings and recommendations of the DSB but also whether the measures that were taken allegedly for that purpose were consistent with the rules of the WTO Agreement. The plain language of Article 21.5 caused no injustice to the defending party, and EC claims to the contrary in this dispute would be frivolous. While the panel process was accelerated under Article 21.5, the defending party had the benefit of panel and perhaps AB rulings, as it designed remedial measures over a "normal" 15-month period with frequent DSB meetings. Further extraneous matters would be avoided, since only measures taken and not taken to comply with the rulings and recommendations would be at issue, even though the question was conformity with any WTO covered agreement. Finally, any rights of the defending party needed to be balanced against the rights and interests of the complainant party or parties. By the time of an Article 21.5 proceeding against a recalcitrant defendant, the complaining parties would have been suffering nullification or impairment for two and a half years or more with no compensation.
6. In this proceeding, Ecuador submitted, it was evident that every Ecuadorian complaint concerned an EC measure that had either been maintained contrary to panel rulings or that had been modified or extended without conforming to the WTO rules. If the European Communities was seeking to invoke a procedural defence under Article 21.5, Ecuador submitted that more than a footnote was required to meet the burden of such a defence. As concerns Ecuador's request for specific recommendations and suggestions under Article 19 of the DSU, Ecuador submitted that nothing in its request was inconsistent with the language of the DSU or with the WTO agreements. The suggestion of "ways" to comply was not limited on its face to "technical means", as claimed by the European Communities. Further, the past history of this dispute, was ample grounds for the Panel to use the authorities granted by the DSU. Ecuador further submitted that while repealing non-conforming measures was an important part of compliance, it was not a remedy insofar as some illegal measures were not fully remedied and other measures inconsistent with the WTO were substituted.

IV. Main Arguments³³

A. General

1. Ecuador challenged the conformity of the EC's revised system for the importation, sale and distribution of bananas with:

1. Articles I and XIII of the General Agreement on Tariffs and Trade 1994 (GATT 1994);
2. Articles II and XVII of the General Agreement on Trade in Services (GATS); and the rulings and recommendations of the original panel in its report on European Communities - Regime for the Importation, Sale and Distribution of Bananas ³⁴ (hereinafter "Panel report"), as modified by the AB in its report on European Communities - Regime for the Importation, Sale and Distribution of Bananas ³⁵ (hereinafter "AB report");
3. Ecuador requested the Panel not only to reaffirm its prior rulings and interpretations, as confirmed and modified by the AB, but also to provide the European Communities with a more explicit recommendation and guidance how to comply.
2. The European Communities requested that the Panel reject all the allegations made by Ecuador both under the GATT and the GATS and find that the European Communities had complied with the original recommendations and rulings of the DSB adopted on 25 September 1997.

B. Issues related to the GATT

3. Ecuador claimed that the revised EC system retained the same three categories of imports as the previous system and the same tariff treatment of those categories ³⁶ except as follows:

1. there were no individual country quotas in the ACP quantity for traditional ACP bananas; ³⁷
2. for non-traditional ACP bananas, ³⁸ there was no longer any 90,000 tonne limit on the amount that could enter the European Communities duty-free under the "other" category of the third-country quotas. For quantities above the third-country quotas, the tariff preference for non-traditional ACP bananas had been increased from 100 Euro per tonne to 200 Euro per tonne;
3. there were no country allocations to non-substantial suppliers.

To continue with Article I Issues

⁷ Article 2.1 of Regulation 2362.

⁸ Article 2.2 of Regulation 2362.

⁹ The minimum import quantity is 100 tonnes in any one year of the reference period, or 20 tonnes for bananas equal to or shorter than 10 cm. Article 3 of Regulation 2362.

¹⁰ Article 7 of Regulation 2362.

¹¹ Article 8 of Regulation 2362.

¹² Idem.

¹³ Article 4 of Regulation 2362.

¹⁴ For operators established in the new member States (Austria, Finland and Sweden) the corresponding reference period is 1994 and the first three quarters of 1995, see Article 5.4 of Regulation 2362.

¹⁵ Article 5 of Regulation 2362.

¹⁶ Article 5.3 of Regulation 2362.

¹⁷ Article 9 of Regulation 2362.

¹⁸ Article 10 of Regulation 2362.

¹⁹ Article 14 of Regulation 2362.

²⁰ Article 15 of Regulation 2362.

²¹ Article 17 of Regulation 2362.

²² For the applicable reduction coefficients in the first quarter of 1999, see Regulation (EC) No. 2806/98 and Regulation (EC) No.102/1999.

²³ Article 18 of Regulation 2362.

²⁴ Article 15.4 of Regulation 2362.

²⁵ Article 20 of Regulation 2362.

²⁶ Article 21.3 of Regulation 2362.

²⁷ Article 21 of Regulation 2362.

²⁸ GATT document L/7539 of 10 October 1994 and L/7539/Corr.1.

²⁹ Paragraph 1 of GATT document L/7604 of 19 December 1994.

³⁰ WT/L/186 of 18 October 1996.

³¹ WT/DS27/30 of 16 November 1998.

³² Ecuador's first submission, paragraph 27.

³³ Footnotes in this part of the report are those of the parties when not otherwise stated.

³⁴ 22 May 1997, WT/DS27/R/ECU.

³⁵ 9 September 1997, WT/DS27/AB/R.

³⁶ See Table 2 above under Factual Aspects, Secretariat remark.

³⁷ Traditional ACP bananas were defined as bananas originating in the following countries up to a limit of 857,700 tonnes: Belize, Cameroon, Cape Verde, Côte d�Ivoire, Dominica, Grenada, Jamaica, Madagascar, St. Lucia, Somalia, St. Vincent and the Grenadines and Suriname. Article 16.1 of Council Regulation (EEC) 404/93 as amended by Article 1 of Council Regulation (EC) 1637/98.

³⁸ Non-traditional ACP bananas were defined as quantities of bananas exported by the ACP countries which exceeded the quantity defined above. Article 15.1 of Council Regulation (EEC) 404/93 (as amended).