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World Trade

12 March 1998
Original: English

European Communities - Measures Affecting the Importation of Certain Poultry Products

Report of the Panel

The report of the Panel on European Communities - Measures Affecting the Importation of Certain Poultry Products is being circulated to all Members, pursuant to the DSU. The report is being circulated as an unrestricted document from 12 March 1998 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.



    Terms of reference
    Panel composition
    Current EC Schedule LXXX
    Licensing requirements for the poultry TRQ
    Special safeguards for out-of-quota volumes of frozen poultry meat
    Article XXVIII:4 of GATT
      (i) General
      (ii) Modifications of schedules
      (iii) The Vienna Convention on the Law of Treaties
        (a) Article 59(1) of the Vienna Convention
        (b) Article 30(3) of the Vienna Convention
        (c) Article 31 of the Vienna Convention
      (iv) Incorporation
      (v) MFN and Article XXVIII
      (vi) Principle of non-discrimination
      (vii) The EC's Uruguay Round Schedule - minimum access
      (viii) Protection of legitimate expectations
      (ix) The implementation of the frozen chicken TRQ
      (x) Compensation
      (xi) Interpretation of "global"
    Article XIII of GATT
      (i) by agreement
      (ii) by allocation on the basis of past performance
    The Agreement on Import Licensing Procedures
      (i) Notification
      (ii) Changes to the licensing rules
      (iii) Distortion of trade
      (iv) Licence entitlement based on export performance
      (v) Speculation in licences
      (vi) Economic quantities
      (vii) Newcomers
      (viii) Transparency
      (ix) Compensation
      (x) Burden of proof
    The Agreement on Agriculture
      (i) Article 4
      (ii) Article 5: safeguards
        (a) The price safeguard
        (b) C.i.f. prices
        (c) Injury requirement
        (d) The representative price
    Article X
    Article II of GATT
    Article III
    Terms of Reference
    Article XXVIII of GATT
    Article XIII of GATT
    The Licensing Agreement
    The Agreement on Agriculture
    Article II
    Nullification or Impairment


      (i) Relevance of the Oilseeds Agreement to this dispute
      (ii) Relationship between the Oilseeds Agreement and Schedule LXXX
      (iii) The Oilseeds Agreement as compensatory adjustment under Article XXVIII:2
        (a) Ordinary meaning of the terms
        (b) Object and purpose of the Oilseeds Agreement
        (c) Preparatory work of Article XXVIII
      (iv) Summary

      (i) Agreement on the allocation of the TRQ
      (ii) Participation of non-Members and East European countries in the TRQ
        (a) Non-Members
        (b) Members in East Europe
      (i) Notification
      (ii) Changes to the licensing rules
      (iii) Distortion of trade
      (iv) Licence entitlement based on export performance
      (v) Speculation in licences
      (vi) Issuance of licences in economic quantities and newcomers
      (vii) Transparency
      (viii) Summary
      (i) Article 5.1
        (a) Market entry price and the c.i.f. price
        (b) Injury requirement
        (c) Representative price
      (ii) Article 4.2
      (iii) Opinion by a member of the Panel




1. On 24 February 1997, Brazil requested consultations with the European Communities ("the Community" or the "EC") pursuant to Article 4 of the Understanding on Rules and Procedures governing the Settlement of Disputes ("DSU"), Article XXIII of the General Agreement on Tariffs and Trade 1994 ("GATT") and Article 6 of the Agreement on Import Licensing Procedures ("Licensing Agreement"), regarding the EC regime for the importation of certain poultry products (CN codes 0207 41 10, 0207 41 41 and 0207 41 71) and the implementation by the EC of the tariff rate quota in these products agreed in negotiations between Brazil and the EC under Article XXVIII of GATT (WT/DS69/1).

2. Consultations were held on 11 April and 21 May 1997. As they did not result in a mutually satisfactory solution of the matter, Brazil, in a communication dated 12 June 1997, requested the establishment of a panel to examine this matter in light of the GATT, the Licensing Agreement and the Agreement on Agriculture (WT/DS69/2).

3. The Dispute Settlement Body ("DSB"), at its meeting on 30 July 1997, established a panel with standard terms of reference in accordance with Article 6 of the DSU (WT/DS69/3). Thailand and the United States reserved their third party rights to make a submission and to be heard by the Panel in accordance with Article 10 of the DSU.

Terms of reference

4. The following standard terms of reference applied to the work of the Panel:

"To examine, in the light of the relevant provisions of the covered agreements cited by Brazil in document WT/DS69/2, the matter referred to the DSB by Brazil 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."

Panel composition

5. The parties to the dispute agreed on 11 August 1997 to the following composition of the Panel:

Chairman:Mr. Wilhelm Meier
Members:Mr. Peter May
Ms. Magda Shahin

6. The Panel met with the parties on 29-30 October and on 18 November 1997 and with third parties on 30 October 1997.

7. The Panel submitted its interim report to the parties of the dispute on 23 January 1998 and the final report on 12 February 1998.



8. Following the completion of the panel on the European Economic Community - Payments and Subsidies Paid to Processors and Producers of Oilseeds and Related Animal-feed Proteins ("Oilseeds panel")1 , the EC was authorized by the GATT CONTRACTING PARTIES on 19 June 1992 to enter into negotiations under Article XXVIII of GATT - Modification of Schedules - with interested contracting parties. Such negotiations were entered into with Brazil as well as with nine other contracting parties. 2 The negotiations with Brazil were terminated in July 1993 and the Agreed Minutes were signed by both parties on 31 January 1994.

9. The Agreement set out in the Agreed Minutes between Brazil and the EC resulting from negotiations pursuant to Article XXVIII, modified concessions in EC's Schedule LXXX concerning oilseeds, adding inter alia a new, duty-free, global tariff rate quota (TRQ) of 15,500 tonnes on frozen poultry meat under CN sub-headings 0207 41 10, 0207 41 41 and 0207 41 71. The poultry meat TRQ was also free from variable levies. Tariff quotas were also established for meat of turkey and beef. The tariff rate quotas were opened as from 1 January 1994 by Council Regulation (EC) No 774/94, dated 29 March 1994. Those concerning frozen poultry meat were contained in Article 3 which stated that "... an annual quota of 15,500 tonnes is hereby opened for poultry meat falling within CN codes 0207 41 10, 0207 41 41 and 0207 41 71." Rules for adjustment of the volumes and other conditions of the tariff quotas were also provided for (Article 8). Regulation 774/94 was amended in September 1995 by Regulation 2198/95 to take account of the Agreement on Agriculture resulting from the Uruguay Round negotiations.

Current EC Schedule LXXX

10. The current EC Schedule LXXX (Part I - Most Favoured Nation Tariff, Section I - Agricultural Products, Section I B - Tariff Quotas) provided for a duty-free tariff quota up to 15,500 tonnes of poultry meat 3 while the out-quota base duty rate was 1,600 ECU/tonne, 940 ECU/tonne and 1,575 ECU/tonne, respectively. The new decreasing bound out-of-quota rates replaced the variable levy that constituted the EC commitment under its previous Schedule as modified by the Article XXVIII Oilseeds negotiations. There were no licensing requirements for out-of-quota imports of frozen poultry meat.

Licensing requirements for the poultry TRQ

11. Council Regulation 774/94 opened, inter alia, a tariff quota for an annual volume of 15,500 tonnes for the relevant poultry meat products and provided that detailed rules for the application of the Regulation should be adopted in accordance with the procedures in Article 27 of Regulation 805/68 or in the corresponding Articles of other Regulations on the common organization of the markets concerned. Such detailed rules were subsequently set out in Commission Regulation 1431/94, dated 22 June 1994. Article 1 of Regulation 1431/94 provided that all imports under the tariff quotas for the relevant poultry meat products were subject "to the presentation of an import licence." 25 per cent of the quantity of the quota was allocated for each quarter of the year, save for 1994 when 50 per cent was allocated for each half of the year. Applicants for import licences had to be natural or legal persons who, at the time applications were submitted, had imported not less than 100 tonnes (product weight) of products falling within CN codes 0207 14 10, 0207 14 50 and 0207 14 70 in each of the two previous calendar years 4 whether in-quota or out-of-quota product. Licence applications and licences should show the country of origin. Applicants had to lodge a security. Licences were not transferable. 5 If applications exceeded the volume available for the quarter, the Commission fixed "a single percentage of acceptance for the quantities applied for". If this percentage was less than 5 per cent, the Commission was authorized not to award those quantities in which case the security was released (Article 4.4 of Regulation 1431/94).

Special safeguards for out-of-quota volumes of frozen poultry meat

12. The EC Schedule for out-of-quota frozen poultry meat reserved the right to introduce an additional duty (special safeguards) on imports of such meat if the conditions of Article 5 of the Agreement on Agriculture were fulfilled. The EC rules pertaining to special safeguards for out-of-quota poultry meat were contained in Regulation 1484/95, dated 28 June 1995, and provided that, unless the poultry imports were unlikely to disturb the EC internal market, an additional duty would be levied if the import price fell below a specific trigger price 6 set out in Annex II of Regulation 1484/95 for each product. The import price to be taken into account "should be checked against the representative prices on the world market or on the Community import market for the products in question;" (recital 7 of Regulation 1484/95). Such representative prices were to be determined taking into account in particular (i) the prices on third country markets; (ii) free-at-frontier offer prices; and (iii) prices at the various stages of marketing in the EC for imported products. 7 Recital 8 provided that the importer could choose a different basis from the representative price 8 for the calculation of the additional duty. Article 3 allowed for the possibility, at the request of the importer, to establish the additional duty on the basis of the c.i.f. price, if this price was higher than the applicable representative price. If the importer had chosen to use the c.i.f. price, he would have to provide to the competent authorities (i) the purchasing contract (or equivalent document); (ii) the insurance contract; (iii) the invoice; (iv) the certificate of origin; (v) the transport contract; and (vi) the bill of lading (where applicable). 9



13. The complaint examined by the Panel was related to the EC's measures governing the importation of poultry meat falling within CN codes 0207 14 10, 0207 14 50 and 0207 14 70 (formerly 0207 41 10, 0207 41 41 and 0207 41 71).

14. Brazil requested the Panel to find

(a) that the EC had failed to implement and administer the compensation TRQ in certain poultry meat products in line with the bilateral agreement reached with Brazil within the context of Article XXVIII:4 of GATT;

(b) that the provisions of Articles I and XIII of GATT did not necessarily apply to compensation TRQs;

(c) in the alternative, that the EC had failed to implement the TRQ in accordance with Article XIII, since the EC did not follow the allocation procedures contained in Article XIII;

(d) that the EC had failed to comply with the provisions of Articles 1 and 3 of the Agreement on Import Licensing in the administration of the import licences;

(e) that the licensing system did not comply with the transparency provisions of Article X and the specific provisions of Articles II and III of GATT;

(f) that the licensing system did not comply with the specific provisions of Articles II and III of GATT;

(g) that the EC had failed to comply with the provisions of Articles 4 and 5 of the Agreement on Agriculture in the implementation of the special safeguards that apply for trade in poultry meat outside the TRQ.

15. In the view of Brazil, such infringements of the covered Agreements implied the nullification or impairment of benefits accruing to Brazil. Accordingly, Brazil asked the Panel to recommend that the EC bring its measures into conformity with its obligations under the GATT, the Agreement on Import Licensing Procedures and the Agreement on Agriculture.

16. The EC requested the Panel to dismiss the claims advanced by Brazil either as inadmissible or unfounded. In particular, the Panel should find

(a) that there had been no breach by the EC of Articles XXVIII, XIII, X, II and III of GATT, Articles 4 and 5 of the Agreement on Agriculture and Articles 1 and 3 of the Agreement on Import Licensing Procedures; and

(b) that, consequently, there had been no nullification or impairment of Brazil's rights under the WTO.

*Note that footnotes in this and the following chapter are those of the parties.

Article XXVIII:4 of GATT

(i) General

17. Quoting paragraph 4(b) of Article XXVIII and its reference to paragraph 3(b), Brazil submitted that there was a balance in Article XXVIII between the recognition of the individual needs of Members and the global need to maintain an overall balance of concessions within a multilateral framework. In Brazil's opinion, there was nothing in the Article which prevented two Members from agreeing on a country-specific package of compensatory measures. Nor was there anything which mandated that compensation should be country-specific. Article XXVIII maintained a fine balance between these two possibilities. It allowed certain defined Members to negotiate and agree. Then it provided that other Members which might be dissatisfied with the agreement or which might wish to benefit from the agreement should have the right to ensure that the agreement did not prejudice their own rights and obligations. A time limit was placed on this right so as to promote legal certainty of the bilateral agreement within the multilateral framework. In this particular case, the EC created a series of distinct bilateral agreements, each with a distinct package of country-specific compensatory measures. These agreements were accepted by the other Members and had to stand within the multilateral system as country-specific agreements. No Member notified its intention to the CONTRACTING PARTIES to withdraw equivalent concessions.

18. The EC submitted that the purpose of the procedure under Article XXVIII was to ensure that the "security and predictability of GATT tariff bindings, a principle which constituted a central obligation in the system of the General Agreement", was preserved, in accordance with the provisions of Article II. In recognising that the procedure under Article XXVIII had been successfully completed, the CONTRACTING PARTIES accepted that the EC Schedules of concessions had been modified with their agreement and represented the new tariff commitments of the EC for the products concerned. The EC noted that no GATT contracting party objected to the revised Schedule within the three month period set out in the Decision of the CONTRACTING PARTIES of 26 March 1980. On the contrary, they had all agreed by 30 March 1994 to a new EC Schedule of commitments, as a result of the Uruguay Round, which included the outcome of Article XXVIII Oilseeds negotiations with respect to the frozen poultry meat.

19. Brazil submitted that the question of the compatibility with the General Agreement of bilateral agreements concluded outside, as opposed to within, the framework of the GATT was considered at the nineteenth Session of the CONTRACTING PARTIES in 1961. Referring to a note by the Executive Secretary10 , and while disagreeing that there were no provisions within the GATT itself for bilateral agreements, Brazil agreed with the view that there was no provision in the GATT for bilateral agreements between contracting parties and non-contracting parties. The Executive Secretary was concerned with the effect of bilateral agreements on other contracting parties. This concern was, in the view of Brazil, addressed in the multilateral aspects of Article XXVIII. However, in relation to the Executive Secretary's concerns, Brazil submitted that the opening of a country-specific frozen chicken TRQ by the Community did not give rise to a negative impact on the trade interests of other Members. There was considerable over-quota trade and this trade continued and would continue whether or not a TRQ had been opened. A country-specific TRQ merely increased a trade opportunity for one Member but did not preclude or diminish continued trading on an MFN basis for all Members.

To continue with European Communities - Measures Affecting the Importation of Certain Poultry Products, Article XXVIII:4 of GATT, Item #20.

1 Panel Report adopted on 25 January 1990, BISD 37S/86 and DS28/R, dated 31 March 1992.

2 Argentina, Canada, Hungary, India, Pakistan, Poland, Sweden, the United States and Uruguay.

3 HS 0207 14 10, 0207 14 50 and 0207 14 70.

4 Article 3 of Regulation 1431/94 as amended by Regulation 958/96.

5 Article 5 of Regulation 1431/94.

6 ECU 333.5, 235.7 and 316.6, respectively, for CN 0207 41 10, 0207 41 41, 0207 41 71, respectively.

7 Article 2 of 1484/95.

8 The representative prices were set out in Annex 1 to Regulation 1484/95. An example of a calculation of the additional duty was supplied to the Panel, by the EC, on a confidential basis. See paragraphs 191 and 192.

9 Article 3 of Regulation 1484/95.

10 "The General Agreement contains no provisions dealing specifically with the use of bilateral agreements. If a Contracting Party concludes a bilateral agreement with another contracting party or a government not party to the GATT, what is relevant for the General Agreement is the effect on the trade of other Contracting Parties of any measures affecting trade which that Government takes to make effective the provisions of the bilateral agreement ... it is therefore necessary to know the nature of the quota obligation provided for in the bilateral agreement and details of any measures affecting imports which are taken for the fulfilment of the bilateral obligation."