ARBITRAL PANEL ESTABLISHED
PURSUANT TO
THE NORTH AMERICAN FREE TRADE AGREEMENT
Article 2008

Tariffs applied by Canada to certain U.S.-Origin Agricultural Products

Final Report of the Panel

December 2, 1996

Panel Members

Professor Elihu Lauterpacht, C.B.E., Q.C. (Chair)

Professor Ronald C.C. Cuming, Q.C.

Professor Donald M. McRae

Professor Sidney Picker, Jr.

Dean Stephen Zamora

TABLE OF CONTENTS

I. INTRODUCTION

II. SUBJECT-MATTER OF THE DISPUTE

III. TERMS OF REFERENCE

IV. CENTRAL CONTENTIONS OF THE DISPUTING PARTIES

A. The United States

B. Canada

A. The United States position and the Parties' characterization of the dispute

B. Canada's substantive defence

C. The obligation to tariffy

D. The application of the tariffs resulting from tariffication to over-quota imports of U.S.-origin agricultural goods under the NAFTA

(a) The Canadian case

(b) The United States reply

(c) The Canadian rejoinder

E. Observations of Mexico

A. Preliminary matters
(a) Identification of the issue

(b) Approach to interpretation

(c) Burden of proof

B. The central issues in dispute

(a) The temporal application of FTA Article 710
(i) The meaning of Article 710 in the FTA

(ii) The effect of the incorporation of FTA Article 710 into the NAFTA

(iii) The consequences of the respective interpretations of the FTA Article 710

(b) The substantive application of FTA Article 710

(i) The concept of "tariffication" under the WTO Agreement on Agriculture

(ii) The content of the "rights and obligations" incorporated by FTA Article 710

(c) The relationship between NAFTA Chapters Three and Seven

C. Conclusion

(2) Determination

I. INTRODUCTION

1. On February 2, 1995, the United States requested consultations with Canada pursuant to Article 2006(4) of the North American Free Trade Agreement ("NAFTA") "concerning the Government of Canada's application of customs duties higher than those specified in the NAFTA to certain agricultural goods that are originating goods within the meaning of the NAFTA". The consultations failed to resolve the matter. On June 1, 1995, the United States Trade Representative ("USTR") requested a meeting of the Free Trade Commission pursuant to NAFTA Article 2007. The Commission was unable to resolve the matter.

2. On July 14, 1995, the USTR requested the establishment of an arbitral panel pursuant to NAFTA Article 2008. By a letter of July 19, 1995, the Government of Mexico, acting under NAFTA Article 2013, expressed its intention to participate in the proceedings as a third party.

3. The Panel was constituted with the appointment, on January 19, 1996, of Professor Elihu Lauterpacht as Chair. The other members of the Panel were Professors Ronald C.C. Cuming, Donald M. McRae and Sidney Picker, Jr., and Dean Stephen Zamora.¹

4. In accordance with the Model Rules of Procedure for Chapter Twenty ("the Model Rules"), as ² supplemented by the instructions of the disputing Parties communicated by a letter of January 19, 1996, the following schedule applied:

January 22, 1996 - United States to file its initial written submission

February 19, 1996 - Canada to file its written counter-submission - Mexico to file its initial written submission

March 12, 1996 - hearing within 10 days of hearing - participating Parties to file supplementary written submissions

May 9, 1996 - initial report of the Panel to be presented to the disputing Parties

May 23, 1996 - disputing Parties entitled to submit comments on the initial report

June 10, 1996 - final report of the Panel to be presented to the disputing Parties

5. The First Submission of the United States was filed on January 22, 1996. The Counter-Submission of Canada and the First Submission of Mexico were filed on February 19, 1996.

6. The hearing was held in Ottawa on March 12-13, 1996. Subsequent to the hearing, the Panel submitted additional questions to the participating Parties. Following consultations between the Panel and the disputing Parties pursuant to Rule 20 of the Model Rules, the Panel modified the post-hearing schedule as follows:

March 22, 1996 - the participating Parties to exchange, and provide to the Panel, copies of documents referred to at the hearing

April 12, 1996 - supplementary written submissions to be filed

July 15, 1996 - initial report of the Panel to be presented to the disputing Parties

July 29, 1996 - disputing Parties entitled to submit comments on the initial report

August 15, 1996 - final report of the Panel to be presented to the disputing Parties

7. In accordance with the revised schedule, on March 22, 1996 the disputing Parties provided the Panel with the documents referred to at the hearing. The supplementary written submissions of the participating Parties were filed on April 12, 1996. The Initial Report of the Panel was submitted to the disputing Parties on July 15, 1996. The disputing Parties submitted comments on the Initial Report to the Panel on July 29, 1996.

8. In light of the comments submitted on the Initial Report, the Panel, in accordance with NAFTA Article 2016(5), requested the views of Canada on one matter. Following an application by the United States, permitted the United States an opportunity to comment in writing on the Canadian response to the Panel's enquiry and Canada an opportunity to reply to these further United States comments. The fact of these exchanges meant that the Panel was not in a position to present its Final Report to the disputing Parties on August 15, 1996 as previously determined. As a result, and in accordance with NAFTA Article 2017(1) and Rule 20 of the Model Rules, the Panel consulted the disputing Parties for the purpose of obtaining their agreement to an extension of the period within which the Final Report was to be presented to them. The disputing Parties agreed to the extension of time proposed by the Panel. The Final Report is presented to the disputing Parties in accordance with this revised schedule.

II. SUBJECT-MATTER OF THE DISPUTE

9. In its First Submission, the United States identifies the subject-matter of the dispute as the duties being applied by the Government of Canada ... to certain agricultural goods generally dairy, poultry, eggs, barley and margarine, including products thereof) that are originating goods as defined in the North American Free Trade Agreement ...

10. The goods in issue are specified in detail by reference to the relevant Harmonized Commodity Description and Coding System number in the enclosure to a letter of July 10, 1995 from the USTR to the ³ Canadian Minister of International Trade. The goods therein specified include poultry (chicken and turkey) and poultry products, dairy and dairy products (including milk, yogurt, buttermilk, whey, butter and other milk fats and oils, cheeses, curd, ice cream and other preparations containing milk and milk products), eggs and egg products, margarine, and barley and barley products.

11. The United States contends that Canada is applying, in respect of over-quota imports of these goods from the United States, tariffs which are in excess of those agreed to by Canada under the NAFTA. The United States ⁴ alleges that Canada increased its tariffs on some of the goods in question on January 1, 1995 and on the remainder of the goods on August 1, 1995 contrary to its NAFTA undertakings. The United States asserts that under the NAFTA

... Canada committed not to increase the rates of duties on the goods at issue above the rates in effect on December 31, 1993, and progressively to eliminate the duties on these goods ...⁵

12. Additionally, the United States contends that, under the NAFTA, the goods in issue "are to be assessed import duties at a special, concessionary rate".⁶

13. Canada does not dispute the fact of its imposition of tariffs in respect of over-quota imports of certain U.S.-origin goods in the period from January 1, 1995. However, whereas the United States characterizes the Canadian action as an increase in tariffs contrary to the NAFTA, Canada acknowledges only that it "has established TRQs [tariff-rate quotas] for the agricultural products in question". Canada maintains that it was ^{7 8} required to establish these tariffs in respect of the goods in issue by the Agreement on Agriculture concluded in the context of the Marrakesh Agreement Establishing the World Trade Organization ("WTO Agreement").

III. TERMS OF REFERENCE

14. By a letter jointly signed by their representatives on September 21, 1995, the disputing Parties agreed on the following terms of reference for the Panel in accordance with Rule 4 of the Model Rules and NAFTA Article 2012:

To examine, in the light of the relevant provisions of the North American Free Trade Agreement, the application of customs duties by the Government of Canada to the U.S.-origin products specified in the enclosure to the July 10, 1995, letter of the United States Trade Representative Michael Kantor to the Canadian Minister for International Trade Roy MacLaren, and to make findings and determinations as provided in Article 2016(2)(a) and (b).

15. The terms of reference do not request the Panel to make recommendations for the resolution of the dispute. Nor has the Panel been asked to determine whether the measures in contention have caused nullification or impairment of benefits accruing under any provision of the NAFTA.

IV. CENTRAL CONTENTIONS OF THE DISPUTING PARTIES

A. The United States

16. The central contention of the United States is that Canada is applying tariffs to over-quota imports of specified agricultural products of U.S.-origin contrary to its commitments under the NAFTA. In the submission of the United States, these over-quota tariff rates are "significantly in excess of the NAFTA bound rate of duty and significantly above the rate in existence on December 31, 1993".⁹

17. The United States invokes NAFTA Article 302(1) and (2) which provide:

1. Except as otherwise provided in this Agreement, no Party may increase any existing customs duty, or adopt any customs duty, on an originating good.

2. Except as otherwise provided in this Agreement, each Party shall progressively eliminate its customs duties on originating goods in accordance with its Schedule to Annex 302.2.

18. As existing customs duties were those which, pursuant to NAFTA Article 201(1), were "in effect on the date of entry into force of this Agreement", any increase in tariffs above the rate in effect on December 31, 1993 -the day preceding the entry into force of the NAFTA on January 1, 1994 - constitutes a breach of NAFTA Article 302(1).

B. Canada

19. Canada contends that, while it imposed tariffs on over-quota imports of specified U.S.-origin goods in the period in question, the tariffs were imposed in consequence of an obligation to tariffy existing non-tariff ¹⁰ barriers to trade in the goods in question pursuant to the WTO Agreement on Agriculture. This agreement entered into force as between Canada and the United States on January 1, 1995. The tariffs applied to over-quota imports of U.S.-origin goods are therefore measures equivalent in protective effect to the non-tariff barriers that had been applied to the U.S.-origin goods prior to the period in question rather than new restrictions on imports.

20. Canada further contends that, under the NAFTA, the disputing Parties agreed that while in-quota trade in agricultural goods between them would continue to be governed by the regime established by the Canada-United States Free Trade Agreement ("FTA"), over-quota trade would be governed by the arrangements that would emerge from the Uruguay Round of Multilateral Trade Negotiations ("Uruguay Round"). As the tariffs were imposed pursuant to the WTO Agreement on Agriculture obligation to convert existing non-tariff barriers into tariff equivalents, their application to the trade in agricultural goods between Canada and the United States is consistent with the Parties' commitments under the NAFTA.

21. Canada relies, inter alia, on FTA Article 710, incorporated into the NAFTA by NAFTA Annex 702.1, on NAFTA Article 309(1) and/or on NAFTA Note 5 as well as on the travaux préparatoires and other documents and on the subsequent practice of the disputing Parties.

V. FACTUAL AND LEGAL BACKGROUND

A. The Canada-United States Free Trade Agreement (FTA)

22. In May-June 1986, Canada and the United States began negotiations towards the conclusion of a free trade agreement. The FTA was signed on January 2, 1988 and entered into force on January 1, 1989.

23. In respect of trade in goods, the Parties set out a number of general obligations in FTA Chapter Four. By FTA Article 401(1), Canada and the United States agreed that neither Party would increase existing, or introduce new, customs duties on originating goods, save as provided in the Agreement. By FTA Article 401(2), the Parties established a three-stage regime for the progressive elimination of tariffs on originating goods.¹¹

24. In respect of trade in agricultural goods, the Parties set out particular arrangements in FTA Chapter Seven. Specific arrangements were adopted in respect of trade in fresh fruits and vegetables (FTA Article 702), market access for meat (FTA Article 704), market access for grain and grain products (FTA Article 705), market access for poultry and eggs (FTA Article 706) and market access for sugar-containing products (FTA Article 707).¹²

25. Although the Parties agreed to prohibit, subject to exceptions, the imposition of quantitative restrictions in respect of the import of some goods (notably meat), market access for grain, grain products, poultry and eggs was governed by specific arrangements which contemplated some restrictions on imports.

26. FTA Article 710 provided:

Unless otherwise specifically provided in this Chapter, the Parties retain their rights and obligations with respect to agricultural, food, beverage and certain related goods under the General Agreement on Tariffs and Trade (GATT) and agreements negotiated under the GATT, including their rights and obligations under GATT Article XI.

B. The GATT Uruguay Round and the conclusion of the North American Free Trade Agreement

28. Shortly after the commencement of the FTA negotiations, the Uruguay Round was launched with the Punta del Este Declaration of September 20, 1986. By that Declaration, the CONTRACTING PARTIES ¹⁶ decided "to enter into Multilateral Trade Negotiations on trade in goods within the framework and under the aegis of the General Agreement on Tariffs and Trade".

29. Various Contracting Parties, including Canada and the United States, submitted proposals suggesting approaches to the negotiations. On July 7, 1987 the United States presented its first proposal on agricultural reform calling for a complete phase-out over 10 years of all import barriers. This was followed by a further ¹⁷ proposal by the United States on November 9, 1988 in which it was suggested that all non-tariff barriers to imports be converted into tariff equivalents. The tariffication proposal was developed further in a series of ¹⁸ documents submitted by the United States - in particular, a Discussion Paper on Tariffication of July 10, 1989

("the July 1989 U.S. Tariffication Paper") and a Submission on Comprehensive Long-Term Agricultural Reform of October 25, 1989. ¹⁹

30. In contrast to the United States tariffication proposal, Canada submitted proposals aimed at "strengthening and clarifying" the application of GATT Article XI.²⁰

31. In the midst of these multilateral trade negotiations, in June 1991, Canada, Mexico and the United States began negotiations towards the conclusion of a North American free trade agreement. The NAFTA was signed on December 17, 1992 and entered into force on January 1, 1994.

32. Overlapping with the NAFTA negotiations, the Uruguay Round negotiations continued until December 15, 1993. The Agreement establishing the WTO, including the Uruguay Round package of agreements of which the WTO Agreement on Agriculture was a part, was signed on April 15, 1994 and entered into force on January 1, 1995.

33. The timeline of the various negotiations in which the disputing Parties were engaged was thus as follows:

May-June 1986 - FTA negotiations begin

September 1986 - Uruguay Round negotiations begin

January 2, 1988 - FTA signed

January 1, 1989 - FTA enters into force

June 1991 - NAFTA negotiations begin

December 17, 1992 - NAFTA signed

December 15, 1993 - Uruguay Round negotiations conclude

January 1, 1994 - NAFTA enters into force

April 15, 1994 - Agreement establishing the WTO signed

January 1, 1995 - WTO Agreement enters into force

34. As is thus evident, the disputing Parties were pursuing negotiations on trade in agricultural goods in two different contexts at the same time - multilaterally, within the Uruguay Round, and bilaterally or trilaterally within the framework of the NAFTA. Within the Uruguay Round, the Parties, together with other participating states,²¹ were addressing various proposals, including that of the United States, in favour of the comprehensive tariffication of all existing non-tariff barriers to agricultural trade, and that of Canada, in favour of strengthening and clarifying GATT Article XI.

35. From at latest December 1991 it appears that the momentum in favour of tariffication within the Uruguay Round was such that the proposal was likely to be adopted. This is evident from the Draft Final Act Embodying the Results of the Uruguay Round of Multilateral Trade Negotiations - Section L of which contained a "Text on Agriculture" - circulated on December 20, 1991 by the Chairman of the Trade Negotiations Committee, Arthur Dunkel ("the Dunkel Draft").²²

36. Part B of the Dunkel Draft "Text on Agriculture" was subsequently distributed in amended form as a separate document by the Chairman of the Market Access Group on December 20, 1993 under the title Modalities for the Establishment of Specific Binding Commitments under the Reform Programme ("the Modalities Document"). Paragraph 4 of the Modalities Document provided: ²³

4. For agricultural products currently subject to border measures other than ordinary customs duties, the reduction commitment specified in paragraph 5 below shall be implemented on customs duties resulting from the conversion of such measures ("tariffication"). The modalities of the conversion and other related provisions, including those relating to current access opportunities, and the establishment of minimum access opportunities are set out in Annex 3. The special safeguard provision may be invoked only in respect of these tariffied products.

37. Annex 3 of the Modalities Document went on to provide, in paragraph 3, that [t]ariff equivalents shall be established for all agricultural products subject to border measures other than ordinary customs duties ...

C. The WTO Agreement on Agriculture

38. The Uruguay Round came to an end with the adoption and signature of the Final Act Embodying the Results of the Uruguay Round of Multilateral Trade Negotiations ("the Final Act") in Marrakesh on April 15, 1994. The WTO Agreement, including the WTO Agreement on Agriculture, was an integral part of the Final Act. In accordance with the terms of paragraph 4 of the Final Act, the WTO Agreement entered into force on January 1, 1995.

39. Article 4 of the WTO Agreement on Agriculture, under the heading "Market Access", provides as follows:

1. Market access concessions contained in Schedules relate to bindings and reductions of tariffs, and to other market access commitments as specified therein.

2. Members shall not maintain, resort to, or revert to any measures of the kind which have been required to be converted into ordinary customs duties , except as otherwise provided for 1 in Article 5 and Annex 5.

These measures include quantitative import restrictions, variable import levies, minimum import prices, discretionary 1 import licensing, non-tariff measures maintained through state-trading enterprises, voluntary export restraints, and similar border measures other than ordinary customs duties, whether or not the measures are maintained under country-specific derogations from the provisions of GATT 1947, but not measures maintained under balance-of-payments provisions or under other general, non-agriculture-specific provisions of GATT 1994 or of other Multilateral Trade Agreements in Annex 1A to the WTO Agreement.²⁴

D. Relevant NAFTA provisions

40. The substantive provisions of the NAFTA relevant to the present dispute are found in Chapters Three and Seven, both of which are situated in Part Two of the NAFTA dealing with trade in goods. Chapter Three addresses the issue of "National Treatment and Market Access for Goods". Chapter Seven, in Section A, lays down measures relating to agricultural trade.

41. NAFTA Article 300, addressing the scope and coverage of Chapter Three, provides, inter alia, as follows:

This Chapter applies to trade in goods of a Party, including:

...(c) goods covered by another Chapter in this Part, except as provided in such ... Chapter.

42. NAFTA Article 302, in paragraphs (1) and (2), provides, inter alia, that, insofar as originating goods ²⁵ are concerned, and except as otherwise provided in the NAFTA, no Party may increase any existing customs duty, or adopt any customs duty and that each Party shall progressively eliminate its customs duties in accordance with its Schedule to NAFTA Annex 302.2.

43. Under the heading "Non-Tariff Measures", NAFTA Article 309(1) addresses the issue of import and export restrictions in the following terms:

1. Except as otherwise provided in this Agreement, no Party may adopt or maintain any prohibition or restriction on the importation of any good of another Party or on the exportation or sale for export of any good destined for the territory of another Party, except in accordance with Article XI of the GATT, including its interpretative notes, and to this end Article XI of the GATT and its interpretative notes, or any equivalent provision of a successor agreement to which all Parties are party, are incorporated and made a part of this Agreement.

Article 701: Scope and Coverage

1. This Section applies to measures adopted or maintained by a Party relating to agricultural trade.

2. In the event of any inconsistency between this Section and another provision of this Agreement, this Section shall prevail to the extent of the inconsistency.

45. In respect of agricultural trade, whereas Mexico and the United States, and Canada and Mexico, agreed bilaterally to the tariffication of non-tariff barriers to agricultural trade under the NAFTA, Canada and the United States were unable to reach such an agreement.

46. The failure of the three negotiating states to agree on a comprehensive trilateral regime for trade in agriculture under the NAFTA led ultimately to the conclusion of three separate bilateral arrangements on agriculture brought together under the framework of NAFTA Chapter Seven. As regards Mexico and the United States, trade in agriculture was addressed in NAFTA Article 703(2) and Annex 703.2, Section A. As regards Canada and Mexico, trade in agricultural goods was addressed in NAFTA Article 703(2) and Annex 703.2, Section B.

47. The regime applicable to agricultural trade between Canada and the United States was addressed in NAFTA Article 702(1) and Annex 702.1 in the following terms:

Article 702: International Obligations

1. Annex 702.1 applies to the Parties specified in that Annex with respect to agricultural trade under certain agreements between them.

Annex 702.1 Incorporation of Trade Provisions

1. Articles 701, 702, 704, 705, 706, 707, 710 and 711 of the Canada - United States Free Trade Agreement, which Articles are hereby incorporated into and made part of this Agreement, apply as between Canada and the United States.

2. The definitions of the terms specified in Article 711 of the Canada - United States Free Trade Agreement shall apply to the Articles incorporated by paragraph 1.

3. For purposes of this incorporation, any reference to Chapter Eighteen of the Canada -United States Free Trade Agreement shall be deemed to be a reference to Chapter Twenty (Institutional Arrangements and Dispute Settlement Procedures) of this Agreement.

4. The Parties understand that Article 710 of the Canada - United States Free Trade Agreement incorporates the GATT rights and obligations of Canada and the United States with respect to agricultural, food, beverage and certain related goods, including exemptions by virtue of paragraph 1(b) of the Protocol of Provisional Application of the GATT and waivers granted under Article XXV of the GATT.

48. There is no dispute between the Parties that the goods in issue in these proceedings come within the scope of both NAFTA Chapter Seven and the WTO Agreement on Agriculture.

Continue on to Section VI: Arguments of the Parties

² Model Rules of Procedure for Chapter Twenty of the North American Free Trade Agreement and Supplementary Procedures Pursuant to Rule 35 on the Availability of Information, July 13, 1995.

³ Commonly referred to simply as the Harmonized System or HS.

⁴ The word "tariff" is used in this Report by the Panel in preference to the word "duty" or "customs duty" for reasons of consistency only. In their submissions to the Panel, the participating Parties variously referred to the Canadian measures in issue in these proceedings as "tariffs", "tariff-rate quotas", "tariff equivalents", "duties" and "customs duties". For the purpose of this Report, the Panel understands the term "tariff" to mean simply a charge levied on the import of a product.

⁵ First Submission of the United States, at para.3.

⁶ First Submission of the United States, at para.1.

⁷ Canada describes a tariff-rate quota as consisting of "a low tariff rate for a negotiated quantity of imports for a product ("in-quota"), and a higher tariff rate on the quantities in excess ("over-quota")" (Counter-Submission of Canada, at p.i). A similar definition is given in the First Submission of the United States (at para.12, note 2).

⁸ Counter-Submission of Canada, at para.16.

⁹ First Submission of the United States, at para.12.

¹⁰ Tariffication refers to the process of converting non-tariff barriers into tariff equivalents, that is, a tariff rate which provides a level of protection which is equivalent to that provided by the non-tariff barrier. As pointed out later in this Report, the actual practice of tariffication was not always consistent with this definition.

¹¹ In accordance with FTA Article 201(1), originating goods meant goods qualifying under the rules of origin set out in FTA Chapter Three.

¹² Other substantive provisions addressed agricultural subsidies (FTA Article 701) and technical regulations and standards for agricultural, food, beverage and certain related goods (FTA Article 708).

¹³ GATT Article XI:2(c)(i) provides:

2. The provisions of paragraph 1 of this Article [requiring the general elimination of quantitative restrictions] shall not extend to the following:

...(c) Import restrictions on any agricultural or fisheries product, imported in any form, necessary to the enforcement of governmental measures which operate:
(i) to restrict the quantities of the like domestic product permitted to be marketed or produced, or, if there is no substantial domestic production of the like product, of a domestic product for which the imported product can be directly substituted; ...

¹⁴ Paragraph 1(b) of the PPA, the so-called "grandfather clause", provides that the Contracting Parties undertake to apply provisionally Part II of the GATT, including GATT Article XI requiring the general elimination of quantitative restrictions, "to the fullest extent not inconsistent with existing legislation". In its submissions to the Panel, Canada indicated that it had maintained a prohibition on the importation of margarine "since at least 1885" (Annex B to the Counter-Submission of Canada, at para.179).

¹⁵ The waiver in question is the Waiver Granted to the United States in Connection with Import Restrictions Imposed under Section 22 of the United States Agricultural Adjustment Act (of 1933), as Amended by decision of the CONTRACTING PARTIES of March 5, 1955; BISD 3S/32.

¹⁶ BISD 33S/19.

¹⁷ GATT Document MTN.GNG/NG5/W/14.

¹⁸ GATT Document MTN.GNG/NG5/W/83.

¹⁹ Respectively, GATT Document MTN.GNG/NG5/W/97, July 10, 1989 and GATT Document MTN.GNG/NG5/W/118, October 25, 1989.

²⁰ See, for example, the Canadian proposal of March 14, 1990; GATT Document MTN.GNG/NG5/W/159.

²¹ In this Report, the term "states" is used generically to describe GATT contracting parties, participants in the Uruguay Round negotiations and WTO Members.

²² GATT Document MTN.TNC/W/FA.

²³ GATT Document MTN.GNG/MA/W/24.

²⁴ Article 5 of the WTO Agreement on Agriculture addresses the application of "special safeguard provisions" "... in connection with the importation of an agricultural product, in respect of which measures referred to in paragraph 2 of Article 4 of this Agreement have been converted into an ordinary customs duty ..."

²⁵ See paragraph 17 supra.