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7. Summary of the Panel's Analysis and Finding in respect of the EC claim under Section 304
7.131 The overall result of our analysis may be summarized as follows. We found that the statutory language of Section 304 constitutes a serious threat that determinations contrary to Article 23.2(a) may be taken and, in the circumstances of this case, is prima facie inconsistent with Article 23.2(a) read in the light of Article 23.1. We then found, however, that this threat had been removed by the aggregate effect of the SAA and the US statements before this Panel in a way that also removes the prima facie inconsistency and fulfils the guarantees incumbent on the US under Article 23. In the analogy described in paragraph7.65, the sign "No Trespassing. Trespassers may be shot on sight" was construed by us as going against the mutual promise made among the neighbours always and exclusively to have recourse to the police and the courts of law in any case of alleged trespassing. Continuing with that analogy, we would find in this case that the farmer has added to the original sign which was erected for all to read another line stating: "In case of trespass by neighbours, however, immediate recourse to the police and the courts of law will be made". We would hold as we did in this case that with this addition the agreement has been respected.
7.132 This conclusion is based on our reading of Section 304 as part of a multi-layered law containing statutory, institutional and administrative elements. We did, however, for prudential reasons, consider Section 304 on an alternative hypothesis which would regard our task as limited to an examination of statutory elements only. Even on this hypothesis, our overall conclusion of conformity would remain intact albeit by virtue of slightly different methodologies.
7.133First, the SAA could be considered not as an autonomous measure of the Administration determining its policy of implementing Section 304, but as an important interpretative element in the construction of the statutory language of Section 304 itself. Whereas the statutory language read on its own does not preclude a determination of inconsistency, as we found above in paragraph 7.31(d), following this alternative methodology, the statutory language read in the light of the SAA would have that effect.
7.134 Second, assuming that examination of the statutory language of Section 304 led us to conclude that, because of the broad discretion it gives to the USTR, the statute is in violation of Article 23, we would then need to consider an appropriate remedy, i.e. to consider how the US could restore to its WTO partners the guarantees embodied in Article 23. In our view, any lawful means by which the US Administration could curtail the discretionary element would be sufficient to achieve that goal. In the case at hand, we would then find that the SAA and statements of the kind made by the US to the DSB through this Panel effectively provide, for the reasons we explained above, such a remedy. Therefore, any violation we would thus have found on the basis of the statutory language of Section 304, under this second alternative, would have been remedied.
7.135 For the reasons outlined above we find that Section 304 is not inconsistent with US obligations under Article 23.2(a) of the DSU.
7.136 Should the undertakings articulated in the SAA and confirmed and amplified by the US to this Panel be repudiated or in any other way removed by the US Administration or another branch of the US Government,700 this finding of conformity would no longer be warranted.
D. The EC claim that section 306 is inconsistent with Article 23.2(a) of the DSU
1. Claims and Arguments of the Parties
7.137 Section 306 concerns the follow-up by the USTR to a determination under Section 304 that US rights under the WTO were being denied. When applied to WTO covered situations referred to in the EC claim it presupposes the completion of panel and, as the case may be, Appellate Body proceedings and a ruling by the DSB in favour of the US. Section 306 sets out the procedures under the Trade Act for obtaining DSB authorization for the suspension of concessions when, in the view of the US, another Member has failed adequately to implement the original ruling of the DSB.
7.138 The EC claims that Section 306 (b) requires the USTR to "consider" whether a WTO Member has implemented the recommendations of the DSB and, in the event of non-implementation, to determine what further action to take. The EC claims that this "consideration" constitutes a "determination" in the sense of Article 23 by the USTR on whether the Member concerned has violated US rights under the WTO Agreement. According to Article 23, determinations of inconsistency may not be made prior to exhaustion of DSB proceedings. However, the EC contends, according to Section 306 this specific determination has to be made no later than 30 days after the expiration of the reasonable period of time granted to the losing WTO Member to implement DSB recommendations. In the EC view, any dispute on the question of implementation has to be settled under Article 21.5 of the DSU which provides for referral of the matter to the original panel for a decision within 90 days. Since such referral can take place at the end or even after the lapse of the reasonable period of time, the EC contends, Section 306 (b) requires a unilateral determination on compliance without awaiting the results of a WTO proceeding under Article 21.5 in violation of Article 23.2(a).
7.139 The US responds that Section 306 does not require the USTR to make a "determination" in violation of Article 23.2(a) of the DSU. In the US view, for the USTR to assert US rights under Article 22 of the DSU, the USTR is not only permitted, but is affirmatively required to make a judgment on i.e. to "consider", the word used in Section 306 (b) itself whether implementation of DSB recommendations has taken place. According to the US, a Member wanting to suspend concessions under Article 22 has to request authorization from the DSB within 30 days after the lapse of the reasonable period of time. If not, it loses the right to obtain such authorization by negative consensus. Since, therefore, a winning Member has to formulate its request for authorization within 30 days even if, subsequently, the matter is referred to arbitration and authorization is only granted thereafter the US argues that Article 22 itself presupposes that the USTR indicate how it intends to suspend concessions within this 30 day deadline. This 30 day deadline has been transposed into Section 306 (b) and is, therefore, in the view of the US, consistent with Article 23.2(a).
7.140 In respect of the possible conflict between the 30 day period in Section 306 (b) and the 90 day time-limit for a ruling on implementation under Article 21.5, the US argues that recourse to and completion of Article 21.5 proceedings is not a prerequisite for a request for authorization to suspend concessions to be made whenever disagreement arises on implementation.
7.141 Article 21.5 of the DSU provides as follows:
Article 22.6 states:
2. Preliminary Panel Findings in respect of the Statutory Language of Section 306
7.142 We propose to adopt here a similar methodology as the one we employed in our examination of Section 304 and examine first the statutory language of Section 306 in the light of US obligations under Article 23.2(a) read in the light of Article 23.1.701
7.143 To facilitate the understanding of our subsequent findings, it may be useful to read Section 306 as consisting of two phases. A first phase deals with a "consideration" by the USTR that "a foreign country is not satisfactorily implementing a measure or agreement" (Section 306(b)(1)) or, as repeated in Section 306(b)(2), a "consideration" that "the foreign country has failed to implement". A second phase addresses the "determination" by the USTR on "what further action the Trade Representative shall take under section 301" (Section 306(b)(1)).
7.144 The second phase contains a mandatory element: the determination on the proposed action has to be made, according to Section 306, no later than 30 days after the expiration of the reasonable period of time given to the other WTO Member to implement DSB findings. This second phase can only be activated when the "consideration" in the first phase is made, i.e. when the USTR considers that implementation has failed.Ipso facto, the first phase as well has to take place within the 30 day time-frame prescribed for the second phase. We find, therefore, as a matter of fact, that Section 306 mandates the USTR to "consider" whether or not the WTO Member concerned has implemented DSB recommendations within 30 days after the lapse of the reasonable period of time.
7.145 We also find that the EC is correct in claiming that in certain circumstances this "consideration" by the USTR will necessarily take place before the completion of Article 21.5 procedures on implementation. The usual deadline for completion of procedures under Article 21.5 is 90 days after referral of the matter to the original panel. Article 21.5 does not further specify when and how such referral has to take place nor does it include a deadline for parties to invoke Article 21.5. On these grounds, it is reasonable to assume that situations can occur where Article 21.5 is invoked later than 60 days before the expiration of the reasonable period of time. As a result, the deadline for completion of the panel's work under Article 21.5 could fall later than the 30th day after the lapse of the reasonable period of time, the trigger referred to in Section 306 (b). In that event, the "consideration" required under Section 306 would thus need to be taken before the completion of Article 21.5 procedures.
7.146 We further find that USTR "considerations" under the first phase of Section 306 made subsequent to, and based on, internal monitoring by the USTR pursuant to Section 306 (a); and, in the case of a "consideration" that implementation failed, automatically and as a conditio sine qua non leading to a decision on action under Section 301 meet the threshold of firmness and immutability required for a "determination" under Article 23.2(a).702 Hereafter we thus refer to these "considerations" as "determinations".703 The US argument that the first phase of Section 306 is affirmatively required under Article 22 and represents no more than a belief necessary to the pursuit of dispute settlement procedures is, in our view, relevant not so much to the question of whether there is a "determination" but to the question of whether such "determination" is allowed under Article 23.2(a) since made "through recourse to dispute settlement in accordance with the rules and procedures" of the DSU, another element under Article 23.2(a) discussed below. We recall also that the USTR view under Section 306 that implementation failed is not a preliminary one that requires further confirmation by a panel but one referred to the DSB for immediate authorization to suspend concessions (unless an objection is raised against the level of suspension or the principles or procedures followed in considering what concessions to suspend).704
7.147 We further find, as a matter of fact, that although the USTR is obligated to make this determination within the 30 day time-frame, it has wide discretion as to the content of this determination. Specifically, we find that there do not exist any circumstances which would compel the USTR under the statutory language of Section 306 to determine that implementation has failed, i.e. to make a determination of inconsistency, whilst Article 21.5 procedures are still pending. In other words, it would always be open to the USTR under the Trade Act to determine that implementation has not failed so long as DSB procedures have not been exhausted. However, as in the case of Section 304, within the discretion created by the statutory language the USTR is not precluded by the statute from making such a determination.
7.148 It is important to note, however, that the determination at issue here, in WTO covered situations, is only a preliminary step under Section 306 to seek DSB authorization for the suspension of concessions or other obligations. The result of this determination is not the suspension of concessions without DSB authorization but a request albeit, according to the EC, a premature one for authorization from the DSB to impose such suspension.
3. US obligations under Article 23.2(a) of the DSU as applied to Section 306
7.149 We recall that our mandate is to examine the conformity of Section 306 as such with Article 23.2(a), rather than any specific application of Section 306 in a given dispute.
7.150 In relation to Section 304 it was clear that a determination of inconsistency made in a specific case prior to the completion of panel or Appellate Body proceedings and the adoption of a ruling by the DSB was a violation of Article 23.2(a).705 It was on this premise that we concluded that statutory language merely reserving the right to make such a determination was also a prima facie violation.
7.151 In the case of Section 306 we have already found that here, too, the statutory language reserves the right to the USTR to consider that implementation has failed, i.e. to make a determination of inconsistency prior to termination of Article 21.5 proceedings. However, before we conclude that statutory language which reserves this right amounts to a prima facie violation we need to decide whether such a determination in a specific case amounts to a violation. Unlike Section 304, in the case of Section 306 this issue is highly contentious and far from clear. Only if we find, as a matter of law, that Article 23.2(a) is violated when the USTR determines, in a specific case, that implementation has failed in the sense of Section 306 before the completion of Article 21.5 proceedings as a prelude to seeking DSB authorization for the suspension of concessions will we be able to find that statutory language in and of itself, which reserves the right to make such a determination, is WTO inconsistent.
7.152 Reading Section 306 in the light of US obligations under Article 23.2(a), the question arises, more particularly, whether determinations under Section 306 are made "through recourse to dispute settlement in accordance with the rules and procedures of [the DSU]" and made "consistent with the findings contained in the panel or Appellate Body report adopted by the DSB or an arbitration award rendered under [the DSU]".706 These two elements referred to in Article 23.2(a) are cumulative in nature. Determinations are only allowed when made through recourse to the DSU and consistent with findings adopted by the DSB or an arbitration award under the DSU.
7.153 In our view, this question goes to the core of the EC claim under Section 306. As noted earlier, the US maintains that determining that implementation has failed as a prelude to a request for authorization to suspend concessions even prior to the completion of Article 21.5 proceedings is mandated by Article 22. The EC contests this.
7.154 In accordance with our terms of reference, our mandate is to examine whether Section 306 conforms with Article 23.2(a). If we are able to discharge this mandate without seeking to resolve the altogether separate dispute on the correct interpretation of Articles 21.5 and 22 and the relationship between them, the subject of negotiations in the context of the DSU review, we should do so.707 Thus, this Panel should decide on the correct interpretation of Articles 21.5 and 22 and the relationship between them, only if it is legally indispensable.
7.155 We will, therefore, examine the conformity of Section 306 with Article 23.2(a) on the assumption, first, that the US view on Articles 21.5 and 22 is correct and, then, on the alternative assumption that the EC view in this respect is the correct one.
(a) Assuming the US view is correct
7.156 The US maintains that a proposal for suspension of concessions has to be submitted to the DSB within a 30 days time-frame and that, consequently, the US is obligated to determine that implementation has failed within that time-frame. The US view is based on the following reading of Article 22.
7.157 Article 22.6 states that the DSB " shall grant authorization to suspend concessions or other obligations within 30 days of the expiry of the reasonable period of time unless the DSB decides by consensus to reject the request" (emphasis added) or an objection to such request is raised and referred to arbitration. Article 22 thus provides an explicit time-limit for DSB authorization to be requested and granted, at least by virtue of negative consensus. Article 22 and Article 23 do not explicitly refer to Article 21.5.A fortiori nowhere is reference to Article 22 explicitly limited to cases where Article 21.5 has not been invoked.
7.158 Under this reading the US would effectively be obligated under Article 22 to make a determination on whether implementation took place within the time-frame prescribed in Section 306 if it is to benefit from the negative consensus rule. If not, the practice of positive consensus being reactivated, DSB authorization would only be obtained in case all Members, including the defending Member, agree.
7.159 Following the US approach, any determination made under Section 306 in the circumstances referred to in the EC claim would be consistent with Article 23.2(a) since it would be made "through recourse to dispute settlement in accordance with the rules and procedures of [the DSU]", in particular Article 22 thereof. The determination would then not be made as a unilateral act in pursuit of redress, but as an act required when seeking multilateral authorization for the suspension of concessions as provided for in the DSU itself.
7.160 On this reading, the question then arises whether the determination of non-implementation made through recourse to the DSU is also one "consistent with the findings contained in the panel or Appellate Body report adopted by the DSB or an arbitration award rendered under [the DSU]", in the sense of the second phrase of Article 23.2(a). If we consider this to be a reference to the findings of the panel or Appellate Body in the original dispute, then also this requirement would be met. The USTR determination of non-implementation would, indeed, follow and be based on the original findings of inconsistency with WTO rules as adopted by the DSB in respect of the original complaint.
7.161 Could the findings referred to in Article 23.2(a) be regarded, in the specific circumstances under the EC claim, as the findings of the panel examining implementation in the pending Article 21.5 procedures rather than the findings of the original panel? If this were so, one would have to conclude that since Article 21.5 procedures would still be pending no such findings would have been adopted. The determination would then be contrary to Article 23.2(a). In our view this does not constitute a plausible interpretation of Article 23.2(a) if we assume the US reading of Article 22 is correct.
7.162 As noted earlier, the determination would be one required under Article 22 in order to maintain the reversed consensus rule. Because of that, it would also be conduct required or at least authorized under Article 23.2(c), obliging Members to "follow the procedures set forth in Article 22 to determine the level of suspension of concessions or other obligations and obtain DSB authorization". There would then be a conflict between Article 23.2(a) and Article 23.2(c). Such conflict could be avoided by adopting the interpretation that the findings referred to in Article 23.2(a) are those of the original panel, not those of the Article 21.5 panel. For these reasons, and assuming the US approach is correct, we do not find that, in the circumstances at hand, the findings referred to in Article 23.2(a) are those of the panel under Article 21.5.
7.163 On these grounds, we find that if the US reading of Article 22 is correct, a determination, in a specific case, that implementation has failed pursuant to Section 306 as a prelude to a request for suspension of concessions in the circumstances referred to in the EC claim, could not be found to be inconsistent with Article 23.2(a) of the DSU. Consequently, the legislation authorizing such a determination would not be in violation either.708
(b) Assuming the EC view is correct
7.164 The EC view that Article 22 can only be activated once Article 21.5 procedures have been completed is based on the following reading of the relevant provisions. Article 21.5 states that "[w]here there is disagreement as to the existence or consistency with a covered agreement of measures taken to comply" and in the circumstances referred to under the EC claim there is such disagreement "such dispute shall be decided through recourse to these dispute settlement procedures". This arguably implies that in case of disagreement on implementation, Article 21.5 must be pursued, not Article 22. Moreover, Article 22.6 only applies "[w]hen the situation described in paragraph 2 occurs", i.e. in the event "the Member concerned fails to bring the measure found to be inconsistent with a covered agreement into compliance". Since, in the circumstances under examination, an Article 21.5 procedure is pending to make a decision on this very issue, it could be argued that as long as that procedure has not been completed, the conditions for a request for suspension of concessions under Article 22.6 are not fulfilled. Following this line of reasoning, pending Article 21.5, Article 22 cannot be invoked.709
7.165 Thus, following the EC approach, a Section 306 determination of non-implementation made, in a specific case, before the completion of Article 21.5 proceedings would be contrary to Article 23.2(a) because it would, in the EC view, not be made " through recourse to dispute settlement in accordance with the rules and procedures of [the DSU]", more particularly, made inconsistently with Articles 21.5 and 22. However, as we have already found, the statutory language of Section 306 mandates the USTR to make a determination within 30 days even if Article 21.5 procedures have not been completed and reserves for the USTR the discretion to make determinations of non-implementation that are on EC reading contrary to Article 23.2(a). As a result we consider that assuming the EC position is correct and for the reasons explained in our examination of the EC claim under Section 304710 the statutory language of Section 306, independently from its application in specific disputes, would prima facie violate US obligations under Article 23.2(a).
7.166 As explained earlier, this would be so because of the nature of the US obligations under Article 23. Under Article 23 the US promised not to resort to unilateral measures referred to in Article 23.2(a). However, in Section 306 assuming that the reading of the EC of Articles 21.5 and 22 is correct the US statutorily reserved the right to do exactly that.
7.167 However, even if we were to find such prima facie violation, it would be removed after consideration of the other elements under Section 306. For the reasons given above711, we would then find that the cumulative effect of the US undertakings in the SAA and the statements made by the US to the DSB through this Panel,712 is effectively and lawfully to curtail the discretion under Section 306 which would be at the source of the prima facie violation of Article 23.2(a).713 These undertakings would, indeed, fulfill the guarantees received by other WTO Members and, through them, economic operators in the market-place under Article 23.
7.168 Whatever the outcome of other pending panel proceedings, on which we have no view, the fact that the USTR did make a determination of non-implementation before the completion of Article 21.5 procedures in Bananas III, even if it turns out eventually that this was illegal, is not, in our view, an act of bad faith. It was based on the US interpretation given to Articles 21.5 and 22, an interpretation shared by other Members and now subject to negotiation. It seems to this Panel that the US attitude in this respect was due in large measure to the contradictory drafting of Articles 21.5 and 22 and may, as a result, be defensible as an act taken in order to safeguard its right to obtain DSB authorization to suspend concessions by negative consensus.714 This Panel has no basis on which it could doubt that if as a result of these negotiations or the Bananas III dispute resolution procedures, the EC view in relation to Articles 21.5 and 22 turns out to be correct, the US would honour its undertakings to respect DSU procedures also under Section 306. Indeed, once US obligations on this matter would thus be clear and the EC view in this respect be confirmed, the overriding commitment made by the US Administration to follow and await the completion of DSU procedures before making determinations under Section 306 would be activated.
4. The Panel's Finding in respect of the EC claim under Section 306
7.169 Based on the above, irrespective of whether we accept the US or the EC approach to Articles 21.5 and 22, our conclusion on the compatibility of Section 306 with Article 23.2(a) is the same. In these circumstances, since we are able to discharge our mandate without seeking to resolve the altogether separate dispute on the correct interpretation of Articles 21.5 and 22 and the relationship between them, we shall refrain from examining further the Article 21.5 versus Article 22 controversy. To do otherwise would fall outside our mandate as set out in Section VII.A of our Report.715
7.170 On these grounds, we find that Section 306, in the circumstances referred to in the EC claim, is not inconsistent with Article 23.2(a) of the DSU. The same caveats made in our findings as regards Section 304 also apply here.716
TO CONTINUE WITH UNITED STATES SECTIONS 301-310 OF THE TRADE ACT OF 1974
700 When we refer to the "US Government" in this Report we mean to include legislature, executive and judiciary.
701 See Section VII.B.6.
702 In this respect, see para. 7.20 and footnote 657 above.
703 Recalling the four elements required for there to be a breach of Article 23.2(a) in respect of specific acts taken in a given dispute, outlined above in footnote 657, we thus find that "considerations" under Section 306 are "determinations" in the sense of the second element under Article 23.2(a). We also find that determinations under Section 306 meet the first element under Article 23.2(a). The US is obviously seeking redress of WTO inconsistencies when it monitors the implementation of DSB findings under Section 306. The third element concerns the question as to whether the determination under Section 306 is one "to the effect that a violation has occurred ". Examining specifically the determination at issue here, the one statutorily reserved in Section 306, i.e. the determination that implementation did not take place, in other words, that implementing measures are not consistent with WTO rules even though Article 21.5 procedures have not yet been completed, we hold the view that such determination is one of inconsistency meeting the third element under Article 23.2(a).
704 See footnote 657 above.
705 See para. 7.50 and footnote 657.
706 As outlined in footnote 698, the determination statutorily reserved in Section 306 meets the first three elements for there to be a breach of Article 23.2(a) in a given dispute. The crucial question to be dealt with here remains, however, whether such determination also meets the fourth element under Article 23.2(a). In this respect see footnote 657.
707 As noted in the EC response to Panel question 23, "the EC has not requested this Panel to 'make a decision on the relationship between Article 21.5 and 22' of the DSU. Rather, the EC has requested the DSB and obtained the establishment of this Panel in order to make 'such findings as will assist the DSB in making the recommendations or giving the rulings provided for in' the provisions of the agreements cited in the WTO document WT/DS152/11 of 2 February 1999" (see para. 4.901 of this Report). We note that the EC added to its response that "the WTO consistency of Sections 301-310 must be assessed against all the provisions quoted in the Panels terms of reference, including Article 21.5 of the DSU on its own" and that "[t]he interpretation of Article 22 of the DSU is logically and legally a distinct issue to be addressed by the Panel separately, if necessary". However, nowhere did the EC substantiate any specific claim of violation of Article 21.5 or Article 22. These provisions are only relevant in this case as elements for an assessment of the EC claims under Article 23. If such assessment does not require a decision on the relationship between Articles 21.5 and 22, we do not consider it necessary the word referred to by the EC -- nor within our mandate as set out in Section VII.A of this Report, to solve this controversy.
708 See para. 7.151 of this Report.
709 In this respect, we note that in another dispute, Australia - Subsidies Provided to Producers and Exporters of Automotive Leather ("Australia Leather", WT/DS126/R, adopted 16 June 1999, not appealed), the US invoked Article 21.5 but agreed with the defending party, Australia, to await completion of Article 21.5 proceedings before requesting authorization to suspend concessions. With reference to footnote 6 to Article 4 of the SCM Agreement both parties agreed "that the deadline for DSB action under the first sentence of Article 22.6 of the DSU shall be 60 days after the circulation of the review panel report under Article 21.5 of the DSU, and that the deadline specified in the third sentence of Article 22.6 of the DSU for completion of arbitration shall be 45 days after the matter is referred to arbitration" (WT/DS126/8, p. 2).
710 See Section VII.C.3 and 4.
711 See Section VII.C.6.
712 See para. 7.112, second bullet point, paras. 7.114 ff. as well as footnotes 680 and 681.
713 In this respect, we recall that we found earlier that the statutory language of Section 306 allows the USTR to await the completion of DSU procedures, including Article 21.5 procedures, before making a determination of inconsistency under Section 306 (see para. 7.146 above). As to the lawfulness of taking account of result of Article 21.5 proceedings, Section 306 determinations have to be made "on the basis of the monitoring carried out" under Section 306 (a). Such monitoring may include reference to Article 21.5 proceedings.
714 We note that at least one other WTO Member recently acted in a similar way. In Australia Salmon, Canada as well requested DSB authorization to suspend concessions within the 30 days framework even though there was disagreement as to whether Australia had implemented DSB recommendations and a panel under Article 21.5 is now examining this disagreement. In Australia Salmon, Canada took an approach similar to that of the US in order to preserve its rights under Article 22. At the DSB meeting of 28 July 1999, Canada stated the following:
"in the context of the DSU review, both Australia and Canada had taken the same position on the interpretation of Articles 21.5 and 22: i.e. where there was a disagreement about implementation, a multilateral determination of inconsistency should precede the authorization to suspend concessions. Canada had tabled a detailed proposal to amend the DSU provisions with a view to ensuring such sequence. Since no agreement had yet been reached on this issue, Canada had to pursue its rights in accordance with the existing provisions of the DSU. At this stage, it was not possible for Canada to proceed with the Article 21.5 panel proceedings only, because such proceedings would be concluded after the expiry of the 30-day period provided for in Article 22, within which Canada had the right to request suspension of concessions by negative consensus" (WT/DSB/M/66, pp. 4-5).
On the other hand, see the sequence and procedures agreed upon in Australia Leather, set out in footnote 709.
715 We realize that as a result it is still unclear whether the USTR is now (1) as the US argues, required to make determinations of inconsistency under Section 306 even pending Article 21.5 procedures in order to preserve US rights under Article 22 or (2) as the EC argues, prohibited under Article 23.2(a) to make such determinations until the completion of Article 21.5 procedures. We stress, however, that our task was to examine the compatibility of US law as such and not its application in a specific dispute, i.e. not whether in a given dispute the USTR is allowed to make this or that determination. Under either hypothesis the US or the EC approach we found that Section 306 is not inconsistent with Article 23.2(a). This is now clearly established. Only the way Section 306 should be applied in a specific dispute an issue not falling within our mandate is left open.
See paras. 7.131-7.136 above.