UNITED STATES - IMPORT MEASURES ON CERTAIN PRODUCTS 
FROM THE EUROPEAN COMMUNITIES


AB-2000-9


Report of the Appellate Body

(Continuation)

2. Articles 23.2(a), 3.7 and 21.5 of the DSU

(a) Article 23.2(a) of the DSU

40. The European Communities submits that in its request for the establishment of a panel, it cited Articles 3, 21, 22 and 23 of the DSU as being those provisions in respect of which the European Communities claimed violations.

41. The European Communities submits that the United States does not contest, and could not contest, that the European Communities' claim of violation of Article 21.5 of the DSU was raised sufficiently clearly in the present case. According to the European Communities, there is a very close link that flows from Article 23.2(a) of the DSU between the obligation to resort to Article 21.5 procedures in the circumstances of the present case, and the prohibition on making unilateral determinations concerning the WTO-consistency of a trade measure taken in order to implement an earlier DSB recommendation.

42. The European Communities submits that the Panel did not err in finding that a determination could be "implied" from the actions taken by the United States. The European Communities submits that, as determined by the panel in United States - Sections 301-310 of the Trade Act of 1974, a "determination" only constitutes a violation under Article 23.2(a) of the DSU when it is made in the context of seeking redress of a perceived WTO-inconsistency committed by another WTO Member.¹⁷ An action seeking to impose trade retaliation must therefore be considered relevant when determining whether a breach of the obligations under Article 23.2(a) has been committed. The European Communities submits that, where a WTO Member concludes that another WTO Member has acted inconsistently with its WTO obligations, and this conclusion forms the basis of a measure seeking redress of the perceived WTO-inconsistency without following the dispute settlement procedures, such conclusion is a prohibited "determination", within the meaning of Article 23.2(a), in conjunction with Article 23.1 of the DSU.

(b) Article 3.7 of the DSU

43. The European Communities submits that Article 3.7, last sentence, of the DSU contains an obligation not to resort to the suspension of concessions or other obligations without authorization by the DSB. This provision is in line with Article 23.2(c) of the DSU, and the United States cannot argue that the European Communities did not make a claim of violation of the latter provision. A breach of the prohibition contained in Article 23.2(c) of the DSU entails by necessity a breach of the provision contained in Article 3.7, last sentence, of the DSU.

(c) Article 21.5 of the DSU

44. The European Communities submits that in its written submissions and oral statements before the Panel, the European Communities presented a claim and arguments according to which the United States violated Article 21.5 of the DSU when it applied the disputed measure, and requested the authorization of suspension of concessions in the absence of a finding that the European Communities' implementing measures were inconsistent with its WTO obligations.

III. Arguments of the Third Participants

A. Dominica and St. Lucia

1. The Measure at Issue

45. Dominica and St. Lucia submit that the European Communities' request for the establishment of a panel appears to cover sufficiently all the measures which gave effect to the United States' decision to impose 100 per cent retroactive duty liability, as of 3 March 1999, on selected products imported from the European Communities.

46. Dominica and St. Lucia argue that subsequent actions which modify the legal form, but confirm the substance of a previous measure identified in a panel request, may fall within a panel's terms of reference. According to Dominica and St. Lucia, the fundamental test is one of due process, that is, whether all parties received adequate notice of the claims raised. As such, subsequent actions merely modifying the legal form of an original measure that remains in force in substance, and that is the subject of a complaint, may fall within a panel's terms of reference.

2. The Mandate of Arbitrators Appointed Under Article 22.6 of the DSU

47. Dominica and St. Lucia submit that the Panel erred in its conclusion that the arbitration procedure under Article 22.6 of the DSU constitutes a proper WTO dispute settlement procedure to determine the WTO-consistency of implementing measures, as mandated by the first sentence of Article 21.5 of the DSU.

48. According to Dominica and St. Lucia, an Article 22.6 arbitrator has authority to determine the "level of suspension equivalent to the level of nullification", while an Article 21.5 panel has authority to determine the WTO-consistency of an implementing measure. Their mandates are distinct, irrespective of the possibility that the members of the original panel may serve both on the Article 21.5 panel and as Article 22.6 arbitrators. Dominica and St Lucia further submit that the conclusions of the Panel raise serious systemic concerns.

B. Ecuador

49. Ecuador fully shares the Panel's opinion that Members of the WTO should not take unilateral action in the resolution of WTO disputes. Should a situation arise in which Members of the WTO disagree as to whether a WTO violation has occurred, the only remedy available is to initiate dispute settlement procedures under the DSU.

50. In Ecuador's view, the possible conflict between the time frames of Article 21.5 and those of Article 22 cannot be used as an excuse to take unilateral action, just as this conflict cannot serve as a basis for any Member's "losing its fundamental rights", such as the right to suspend the application of concessions or other obligations.¹⁸ 

C. India

51. India strongly disagrees with the Panel's finding that the WTO-consistency of measures taken by the implementing Member can be determined through an Article 22.6 arbitration procedure. India submits that the panel procedures which were designed to address and rule on the merits of disputes, involving substantive obligations of Members of the WTO, are fundamentally different from the arbitration procedures provided under Articles 21.3 and 22.6 of the DSU. These arbitration procedures are given the limited task of determining, in the case of Article 21.3, the "reasonable period of time" for implementation and, in the case of Article 22.6, the level of suspension of concessions and whether the procedures and principles of Article 22.3 were followed.

52. India submits that, if an arbitration procedure under Article 22.6 could be used to determine the consistency of implementing measures, Article 21.5 of the DSU would lose its relevance and effect. India argues that, if the Panel's interpretation of Articles 21.5 and 22.6 of the DSU is allowed to stand, the use and relevance of Article 21.5 would be minimal, and Members of the WTO could conveniently bypass the procedures under Article 21.5, and proceed directly to Article 22.6.

D. Jamaica

53. Jamaica disagrees with the Panel's interpretation of the relationship between Articles 21.5 and 22 of the DSU, and supports the European Communities' grounds of appeal on this issue. Jamaica submits that the function of an Article 22.6 arbitrator is restricted to a specific role in a particular circumstance, namely to determine the appropriateness of the level of suspension of concessions or other obligations.

54. Jamaica submits that a new dispute over the WTO-consistency of implementing measures is to be resolved through "these dispute settlement procedures", as provided in Article 21.5 of the DSU. Jamaica submits that "these dispute settlement procedures" are the good offices, conciliation and mediation procedures in Article 5 of the DSU. Jamaica contends that "these dispute settlement procedures" are also the ordinary panel procedures, with the possibility of appeal to the Appellate Body. Jamaica requests that the Appellate Body find that arbitration under Article 22.6 of the DSU serves a specific and limited role which does not include any authority to determine the WTO-consistency of measures taken to comply with the recommendations and rulings of the DSB.

E. Japan

1. The Mandate of Arbitrators Appointed Under Article 22.6 of the DSU

55. Japan supports the European Communities' appeal of the Panel's finding that the WTO-consistency of implementing measures can be determined in the course of arbitration proceedings under Article 22.6 of the DSU. Japan submits that Article 21.5 and Article 22.6 proceedings serve entirely different functions and are governed by separate procedural requirements. In the view of Japan, the Panel did not take into account the distinction between proceedings under Article 21.5 and those under Article 22.6, and thus disregarded the intended structure of the dispute settlement process.

2. Articles II:1(a) and II:1(b), first sentence, of the GATT 1994

56. Japan does not support the United States' appeal of the Panel's finding that the bonding requirements imposed by the United States on 3 March 1999 violated Articles II:1(a) and II:1(b) of the GATT 1994. Japan considers that a bonding requirement is an integral part of the tariff collection process, and, therefore, should not be considered separate and apart from the imposition of the tariff itself. Japan, therefore, agrees with the Panel's finding that the imposition by the United States of the increased bonding requirements violated Articles II:1(a) and II:1(b), first sentence, of the GATT 1994.

3. Articles 23.2(a), 3.7 and 21.5 of the DSU

57. Japan does not support the United States' contention that the Panel erred in finding that the 3 March Measure was inconsistent with Article 3.7 of the DSU because that provision does not set forth an obligation which can be breached. Japan considers that like Article 23.2(c), Article 3.7 indicates that Members of the WTO only have the right to suspend concessions on a discriminatory basis subject to authorization by the DSB. Japan submits that, as the 3 March Measure constituted a suspension of concessions or other obligations without DSB authorization, the United States acted inconsistently with Article 3.7.

IV. Issues Raised in this Appeal

58. The Panel found that, by adopting the 3 March Measure, the United States acted inconsistently with its obligations under Articles I and II:1(a) and (b) of the GATT 1994 as well as Articles 3.7, 21.5, 22.6, 23.1, 23.2(a) and 23.2(c) of the DSU.¹⁹ The United States appeals the Panel's findings of inconsistency with Articles II:1(a) and II:1(b), first sentence, of the GATT 1994, and Articles 3.7, 21.5 and 23.2(a) of the DSU. The United States does not appeal the Panel's findings of inconsistency with Articles I and II:1(b), second sentence, of the GATT 1994, and Articles 22.6, 23.1 and 23.2(c) of the DSU. In our view, therefore, the United States has accepted the conclusions of the Panel that, by adopting the 3 March Measure, the United States acted inconsistently with its obligations under Articles I and II:1(b), second sentence, of the GATT 1994, and with the obligation in Article 23 of the DSU not to take unilateral action in redressing perceived breaches of WTO obligations by other WTO Members. To us, the most significant aspect of this case may well be the Panel's conclusions, which were not appealed, about the failure of the United States to comply with the legal imperative found in Article 23.1 of the DSU ,²⁰ which states:

When Members seek the redress of a violation of obligations or other nullification or impairment of benefits under the covered agreements or an impediment to the attainment of any objective of the covered agreements, they shall have recourse to, and abide by, the rules and procedures of this Understanding.

59. The following issues are raised in this appeal:

(a) Whether the Panel erred in finding that the measure at issue in this dispute is the 3 March Measure, which is the "increased bonding requirements as of 3 March on EC listed products", that this measure is no longer in existence, that the 19 April action is legally distinct from the 3 March Measure and that the 19 April action is not within the terms of reference of the Panel;

(b) Whether the Panel erred by stating that the WTO-consistency of a measure taken by a Member to comply with recommendations and rulings of the DSB can be determined by arbitrators appointed under Article 22.6 of the DSU;

(c) Whether the Panel erred by stating that "[o]nce a Member imposes DSB authorised suspensions of concessions or obligations, that Member's measure is WTO-consistent (it was explicitly authorised by the DSB)" ;²¹

(d) Whether the Panel erred in finding that the increased bonding requirements of the 3 March Measure are inconsistent with Articles II:1(a) and II:1(b), first sentence, of the GATT 1994; and

(e) Whether the Panel erred in finding that, by adopting the 3 March Measure, the United States acted inconsistently with its obligations under Articles 23.2(a), 3.7 and 21.5 of the DSU.

17. WT/DS152/R, adopted 27 January 2000

18. Ecuador's third participant's submission, para. 3.

19. Panel Report, para. 7.1.

20. Ibid., paras. 6.34, 6.87 and 7.1(a) and (d).

21. Panel Report, para. 6.112.

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