4 October 1978

1.1. The Panel's terms of reference were established by the Council on 15 July 1976 (C/M/115, pages 4 and 5) as follows:

1.2. The Chairman of the Council informed the Council of the agreed composition of the Panel on 12 November 1976 (C/M/117, page 23):

1.3. Subsequently, at the Council meeting on 14 March 1978 (C/M/124, page 21) the Chairman informed the Council that Mr. Eggert and Mr Yoshikuni had been transferred from Geneva and were no longer available to serve as members of the Panel. He further informed the Council that the new agreed composition of the Panel was the following:

1.4. In the course of its work the Panel held consultations with the European Communities and the United States. Background arguments and relevant information submitted by both parties, their replies to questions put by the Panel, as well as relevant GATT documentation served as a basis for the examination of the matter. In addition, Australia, having requested Article XXIII:1 consultations with the Community concerning the same measures (L/4322), submitted a written presentation to the Panel outlining Australia's interest in the matter and supporting the United States allegation that these measures were not in accordance with the Community obligations under the GATT.

2.1. The following is a brief description of the factual aspects of the Community measures as the Panel understood them.

2.2. On 22 July 1975, the Council of the European Communities adopted Regulation (EEC) No. 1927/75 which stated in Article 2 that a minimum import price for tomato concentrates falling within sub-heading 20.02 C of the Common Customs Tariff would be fixed each year before 1 April for the subsequent marketing year. This Article further stated the factors that were to be taken into account when the minimum price was established.

2.3. This Article further stated that a special minimum price would be fixed for imports into the new Member States until 31 December 1977 and that this special minimum price would be aligned by stages with the minimum price established for the original Member States.

2.4. The foregoing provisions of Article 2 of Council Regulation (EEC) No. 1927/75 were replaced by identical provisions contained in Article 3 of Council Regulation (EEC) No. 516/77 which became effective on 1 April 1977.

2.5. Article 4 of Council Regulation (EEC) 1927/75 stated that any imports into the Community of the products listed in the Annex (recorded in paragraph 2.7) would be subject to the production of an import certificates which would be issued by Member States to any interested party who applied for such a certificate, irrespective of his place of establishment within the Community, and that the certificate would be valid for an import transaction carried out within the Community.

2.6. The second paragraph of this Article stated that the issue of an import certificate would be conditional upon the following:

2.7. The Annex referred to in paragraph 2.5 read as follows:

2.8. The foregoing provisions of Article 4 of Council Regulation (EEC) No. 1927/75 were replaced by identical provisions contained in Article 10 of Council Regulation (EEC) No. 516/77, which became effective on 1 April 1977. The foregoing Annex was replaced by an identical Annex IV to Council Regulation (EEC) No. 516/77.

2.9. Council Regulation (EEC) No. 1931/75 of 22 July 1975 fixed, for tomato concentrates with a dried extract content of 28 to 30 per cent, in immediate packaging of not less than 4 kgs., a minimum import price of 60 units of account per 100 kgs., and a special minimum price of 40 units of account per 100 kgs. These prices included customs duties and were applied from 1 September 1975 until 30 June 1976. Council Regulation (EEC) No. 1197/76 of 18 May 1976 raised the minimum price to 64 units of account and raised the special minimum price to 48 units of account for the period from 1 July 1976 until 30 June 1977. Council Regulation (EEC) No. 1361/77 of 20 June 1977 raised the minimum price to 66 units of account per 100 kgs., and raised the special minimum price to 57 units of account per 100 kgs. The minimum price was applicable for the marketing year from 1 July 1977 until 30 June 1978, while the special minimum price was applicable from 1 July 1977 until 31 December 1977.

2.10. Commission Regulation (EEC) No. 2104/75 of 31 July 1975 established special detailed rules for the application of the system of import licences for products processed from fruits and vegetables. Article 3 of this regulation stated that, without prejudice to the application of safeguard action, import licences, with or without advance fixing of the levy, would be issued on the fifth working day following that on which the application was lodged.

2.11. Article 4 of this Commission Regulation stated that import licences with or without advance fixing of the levy, would be valid for seventy-five days from their actual day of issue.

2.12. Article 5 of this Commission Regulation established the amount of the security for import licences, without advance fixing of the levy, for each product as follows:

2.13. Article 6 of this Commission Regulation established the amount of the security for import licences, with advance fixing of the levy, for each product as follows:

2.14. Article 7 of this Commission Regulation established the additional security to enforce the minimum import price for tomato concentrates at 10 units of account per 100 kgs., including immediate packings. This Article further stated that the additional security would be released:

Such proof would be furnished by production of:

2.15. This Article, as amended by Commission Regulation (EEC) No. 213/78 of 1 February 1978, further stated that this additional security would be forfeit if the applicant had not provided one of the proofs necessary for its release within six months from the last day of validity of the licence.

2.16. The Panel noted that all of the tariff headings and products listed in the Annex contained in paragraph 2.7 were bound in the Community's GATT Schedule, with the following exceptions:

3.1. The representative of the United States noted that Article XI:1 prohibited the institution of any restriction other than duties, taxes or other charges whether made effective through quotas, import or export licences or other measures.³ He argued that Article XI:1 was violated by the minimum import price for tomato concentrates which prohibited the importation of goods below a certain price and was, therefore, a restriction on the importation of those goods. In practical effect, he argued, the minimum import price served as a bar to lower quality products which, if their price was raised to the minimum price in order to gain access to the Community, would not be competitive in the Community market place. He further argued that the effect of the minimum import price was to artificially raise prices for the benefit of Community producers by limiting imports.

3.2. He charged that the import licensing system and the associated security deposit system were devices to facilitate the imposition of restrictions and themselves served as a bar and a restriction on importation in violation of Article XI:1. He argued that this licensing system did not work automatically and, in fact, served as an impediment to trade through burdensome administrative procedures and through the requirement of a security deposit which itself was an additional burden to trade which had no justification under the GATT. He further argued that this licensing system violated Article XI by encumbering trade and interfering with the normal contractual arrangements between buyers and sellers.

3.3. The representative of the European Communities stated the opinion that the minimum import price and associated additional security system for tomato concentrates was indeed a measure falling within the purview of Article XI:1. He stated that the mechanics and the objective of the system showed that the measures applied, i.e. the minimum import price and the security, could not be appreciated independently, but in their totality as a combination of measures put in place with the objective of evening out import prices, it being understood that each such measure could not be used separately in order to attain this objective. He argued that the main obligation of the importer was to respect the minimum import price so that, in principle, imports of tomato concentrates into the Community were allowed, but not below the minimum price level. He further argued that, in order to ensure compliance with this minimum import price regulation, the importer must lodge a security which was an administrative measure intended to ensure compliance with the minimum price requirement and was, therefore, an obligation derived from the obligation to observe the minimum import price requirement.

3.4. He argued that the restriction and the tax concept were mutually exclusive and that one could not, in good logic, argue that the system was at the same time inconsistent with Article XI because it restricted imports and with Article II because it provided for the collection of a charge. Consequently, he argued, the minimum import price and additional security system for tomato concentrates was, in the view of the Community, a measure which fell within the purview of Article XI and Article XI alone, so that it should be examined only in the light of the provisions of this Article.

3.5. With regard to the import certificate and associated security system applied for all of the specified products, he argued that this measure was an administrative formality in accordance with the provisions of Article VIII. He argued that, since these import certificates were issued automatically and unrestrictedly upon request, this system did not constitute a restriction of the type meant to be prohibited by Article XI:1.

3.6. The representative of the European Communities argued that the minimum import price and associated additional security system for tomato concentrates qualified for the exemptions offered by Article XI:2(c)(i) and (ii) from the provisions of Article XI:1.⁴ He argued that this system had been established to prevent supplies from coming from third countries at prices which could adversely affect the existence, in the fresh tomato market, of a system of intervention prices which resulted in the withdrawal of fresh tomatoes from the market and the limitation of marketing and production of tomato concentrates.

3.7. The representative of the United States presented the view that the minimum import price for tomato concentrates could not be justified as an exemption allowed under Article XI:2(c)(i) and (ii). He noted that Article XI:2(c) gave an exemption for import restrictions on any agricultural or fisheries product imported in any form, necessary to the enforcement of certain specified governmental measures. He argued that tomato concentrate was not an "agricultural ... product imported in any form" on which import restrictions could be allowable under some circumstances. He noted that Article XI:2(c) contained a definition of the term "in any form" based on language in the Havana Charter as follows:

3.8. Therefore, he argued, the three requirements in Article XI:2(c) were: first, that the product on which the restriction was placed be a perishable product; secondly, that it compete directly with the fresh product; and thirdly, that there be a restriction on the fresh product. He charged that none of these requirements were met in the case of the Community's system of minimum import prices for tomato concentrates.

3.9. He referred to the notes concerning the term "in any form"⁶ in the Analytical Index, and argued that tomato concentrate, either in tins or barrels, was not a perishable product. He quoted the opinion of food technologists in this field that tomato concentrate, whether packed in tins or barrels, did not have characteristics of perishability in the general meaning of the term as it applied to agricultural products. He stated that with proper and normal handling and storage, tomato concentrate retained its full value for several years.

3.10. He noted that Ad. Article XI stated that the product which was still perishable had to compete directly with the fresh product and argued that tomato concentrate did not compete with the fresh product except insofar as the fresh product was processed industrially into tomato concentrate and therefore lost its characteristics of freshness. Therefore, he argued, there was no direct competition between canned or barrelled tomato concentrate and its use, and the fresh tomato and its use.

3.11. With respect to the term "in any form" as used in Article XI:2(c), the representative of the European Communities argued that the concept of "perishable" goods was an extremely loose notion and it was difficult to determine at what stage a product could be regarded as perishable and at what stage as not perishable. Moreover, he argued that since the text of the General Agreement did not include this term there was in any case no interpretation that could be deemed authentic or even merely logical or economic. Furthermore, he stated that the United States references with regard to the Analytical Annex were incomplete and could easily be counter-balanced by other quotations supporting the Communities contentions. He argued that this was the case in particular for tomato concentrates which could be marketed in different packings. He stated that, for example, the Community imported considerable quantities of barrelled tomato concentrates (preserved in an entirely provisional manner) intended for direct utilization by the more advanced processing industry. Moreover, he argued that, in general, it would be easy to adduce evidence, from food technicians specialized in this field, that tomato concentrates declined considerably in value the longer they were stored, not only in the processing industry but also in private households. He stated that direct competition existed between fresh tomatoes and those concentrates. He argued that it was necessary to consider the consequences of the application of the concept that tomato concentrates were not perishable goods to determine if this concept would be reasonable. He argued that, in view of the proportion of the production of fresh tomatoes used for processing, i.e. 40 per cent of aggregate world production and 20 per cent of Community production for tomato concentrates alone, it was clear that any measure for the organization of the fresh market would become inoperative unless adequate protection was provided for the processed product which was a substantial outlet for the fresh product. As a result, he argued, such an interpretation would prevent any market organization measure in the tomato market, contrary to the intent of Article XI:2, which was designed precisely to promote such organization. He argued that one could not reasonably imagine that the intention of the GATT drafters had been to oppose the functioning of any mechanism, as provided for in paragraph 2(c) of Article XI, for this product in particular.

TO CONTINUE WITH PROGRAMME OF MINIMUM IMPORT PRICES

³ Article XI:1 reads: "No prohibitions or restrictions other than duties, taxes or other charges, whether made effective through quotas, import or export licences or other measures, shall be instituted or maintained by any contracting party on the importation of any product of the territory of any other contracting party or on the exportation or sale for export of any product destined for the territory of any other contracting party".

⁴ Article XI:2(c) reads:

"2. The provisions of paragraph 1 of this Article shall not extend to the following:

(a)...

(b)...

(c)Import restrictions on any agricultural or fisheries product, imported in any form,* necessary to the enforcement of governmental measures which operate:

or

⁵ Ad. Article XI, page 66, Basic Instruments and Selected Documents, Volume IV.

⁶ These notes on page 58, Analytical Index, Third revision, read: