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WORLD TRADE
ORGANIZATION

WT/DS62/AB/R
WT/DS67/AB/R
WT/DS68/AB/R
5 June 1998
(98-2271)
  Original: English

EUROPEAN COMMUNITIES - CUSTOMS CLASSIFICATION
OF CERTAIN COMPUTER EQUIPMENT

AB-1998-2

Report of the Appellate Body


(continued)

B. Appellee - United States

27. The United States endorses the findings and conclusions of the Panel. The United States submits that the Panel was correct in determining that the request of the United States for the establishment of a panel sufficiently identified the measures and products at issue. The United States also asserts that regardless of whether the Appellate Body accepts the Panel's reasoning and interpretation of "legitimate expectations", the findings of the Panel Report support its ultimate conclusion that the impairment of treatment resulting from actions of customs authorities in the European Communities is inconsistent with Article II:1 of the GATT 1994. The United States also submits that the Panel correctly followed the standard laid down by the Appellate Body in United States - Shirts and Blouses and that, contrary to the arguments of the European Communities, the Panel did not establish a new burden of proof rule.

1. Request for the Establishment of a Panel

28. The United States asserts that the Panel correctly followed the guidance of the Appellate Body decision in European Communities - Bananas in determining that the United States sufficiently identified the measures and products at issue. According to the United States, the meaning of the term "specific measures", as used in Article 6.2 of the DSU, was addressed in European Communities - Bananas where the panel found that the panel request complied with the requirements of Article 6.2 of the DSU because the measures contested by the complainants were "adequately identified", even though they were not listed explicitly. In the view of the United States, the panel and Appellate Body decisions in European Communities - Bananas "teach that the specificity requirement of Article 6.2 will be met if the responding party is provided sufficient notice and identification of the measure(s) at issue, even if those measures are not specifically identified".27

29. It is further argued by the United States that its panel request identified both the timing and nature of the measures at issue which, in the application since June 1995 by the customs authorities in the European Communities, consist of tariffs to LAN equipment higher than those provided for in Schedule LXXX.28 The United States also submits that as of March 1997, both the European Communities and the United States agreed that Member State customs authorities were applying the higher tariff rates, under heading 85.17, to imports of LAN equipment. Accordingly, in the view of the United States, the European Communities has never had any basis to claim that it lacked sufficient information about the measures the United States sought to have modified at the time of the establishment of the panel. In applying the "adequate" or "sufficient" notice test of European Communities - Bananas, the United States submits that the European Communities had clear notice from the explicit terms used in the panel requests of the United States that the complaint concerned the application of higher tariffs for LAN equipment by customs authorities of Member States. Since the panel request identified the same measures which the European Communities acknowledged its customs officials were applying, the European Communities suffered, in the view of the United States, no prejudice, let alone prejudice sufficient to rise to the level of a violation of due process.

30. The United States submits that there is no basis for the assertion of the European Communities that the description of the United States of "all types of LAN equipment" and the allegedly inappropriate "curing" of the request for the establishment of a panel have led to a "serious violation of the European Communities' rights of defence". According to the United States, these arguments ignore the fact that the term, LAN equipment, is a recognized term of the trade and that, beginning as early as the pre-consultation stage of this dispute through the panel proceedings, the European Communities was made sufficiently aware of which products were the subject of the dispute. According to the United States, the argument of the European Communities also ignores the many contacts between officials of the European Communities and the United States prior to the submission of the panel request, in which the term, LAN equipment, was routinely used and understood. The United States disagrees with the European Communities regarding the need for parties to exhaustively detail every conceivable sub-grouping of more broader categories of products which are detailed in a request for the establishment of a panel. In the view of the United States, the appropriate standard to be applied to product coverage should be similar to that applied by the panel in European Communities - Bananas to the specificity of measures: whether the products are "sufficiently identified". According to the United States, applying the logic followed in European Communities - Bananas, such a test would be met if the complaining party identifies the general product grouping of the products concerned in terms of the ordinary meaning in a commercial context.

31. The United States submits that the Panel was correct when it stated that the more detailed definition of LAN equipment, provided by the United States to the Panel in response to a question, was an "elucidation" of the product coverage already specified in the requests of the United States for the establishment of a panel. According to the United States, the present case is quite different from the situation in European Communities - Bananas and India - Patents with respect to the addition of a new claim. In the request for the establishment of a panel against the European Communities,29 the United States first defined the parameters of the products at issue -- all LAN products -- and then provided examples of some types of LAN products. The United States submits that it need not have provided any such examples to have complied with Article 6.2 of the DSU because the term LAN products is a sufficiently precise term of the trade. Nor should the United States or any other WTO Member be required to exhaustively enumerate all product category sub-groups in its panel request. The United States also asserts that since its request for the establishment of a panel properly identified LAN equipment, the Panel was correct in distinguishing the present case from the panel decision in EEC - Quantitative Restrictions Against Hong Kong.

32. In the view of the United States, if the arguments of the European Communities on the specificity of product definition are accepted, there inevitably will be long, drawn-out procedural battles at the early stage of the panel process in every proceeding. The United States submits that according to the theory of the European Communities, a complaining party would be required to list each and every product in detail in its panel request.

2. "Legitimate Expectations" in the Interpretation of a Schedule

33. The United States submits that the attack of the European Communities on the Panel's reasoning places form over substance. In the view of the United States, the substance of the findings of the Panel is its fact-finding which supports the conclusion that the ordinary meaning of "automatic data-processing machines and units thereof" includes LAN equipment. The Panel found that the meaning of the text of the concession in heading 84.71 can include LAN equipment and that, as a matter of fact, Member State customs authorities treated LAN equipment as automatic data processing machines ("ADP machines") during the Uruguay Round and that the European Communities had given the United States and other trading partners reason to believe that this treatment would be continued. It is further argued by the United States that during the panel proceeding, the European Communities did not produce or prove facts demonstrating that LAN equipment was intended to be included in the binding in heading 85.17 of Schedule LXXX.30

34. Thus, in the view of the United States, regardless of whether the Appellate Body accepts the Panel's reasoning and interpretation of "legitimate expectations", the findings of the Panel Report support its ultimate conclusion that the European Communities, by failing to accord to imports of LAN equipment treatment no less favourable than that provided for in headings 84.71 or 84.73 of Schedule LXXX,31 has acted inconsistently with its obligations under Article II:1 of the GATT 1994. The United States argues that the Panel's reasoning was correct but that, even if the Appellate Body should reverse certain aspects of this reasoning, the Appellate Body should affirm the Panel's ultimate conclusion.

35. The United States submits that the Panel has properly interpreted the obligations of the European Communities under Schedule LXXX and Article II of the GATT 1994 in accordance with Articles 31 and 32 of the Vienna Convention. The text of the concession in heading 84.71 of Schedule LXXX provides that this concession applies to "automatic data processing machines and units thereof". According to the United States, the ordinary meaning of "automatic data processing machines and units thereof" includes computers and computer systems, as well as units of computers such as computer networking equipment, i.e., LAN equipment. The United States submits that the function of LAN equipment is not "line telephony or line telegraphy" but that of facilitation of shared processing and storage of data within a computer network or an extended computer system. The Panel found that the text of this concession can include LAN equipment and that to the extent the ordinary meaning of the concession is ambiguous, that ordinary meaning can be clarified by the practice of the importing Member. In the view of the United States, these findings are eminently reasonable and are consistent with prior GATT and WTO practice. They can and should be affirmed.

36. The United States asserts that an important factor in determining the "ordinary meaning" of a term used in a Schedule is how the negotiating Members treated the particular product at issue -- in this case, how the European Communities, the United States and interested third parties treated LAN equipment. According to the United States, while the Panel's analysis in paragraphs 8.23-8.28 labels such treatment as an element of "legitimate expectations", this label is not essential to the Panel's conclusion. The United States submits that regardless of the label, what is important is that the factual findings of the Panel, concerning the actual treatment of LAN equipment during the Uruguay Round, amount to a determination that the parties assumed and intended that the concession under heading 84.71 in Schedule LXXX would cover LAN equipment.

37. The United States argues that "factual indicia" of "legitimate expectations" which the Panel actually considered can also be regarded as the factual context of the concessions in Schedule LXXX as facts indicating the object and purpose of the concessions in Schedule LXXX, or as a "supplementary means of interpretation" admissible under Article 32 of the Vienna Convention. According to the United States, whether the Panel's analysis was phrased as an interpretation of "legitimate expectations", or whether it was an interpretation of the intentions and understandings of the negotiating parties, the conclusion is the same. The United States submits that the important point here is that the intentions of the United States, as well as the third parties in this dispute, were a relevant factor for the Panel to consider in interpreting the ordinary meaning of the terms used in Schedule LXXX.

38. Responding to a question asked by the Appellate Body during the oral hearing, the United States asserted that the Harmonized System and its Explanatory Notes could be deemed as part of the "circumstances of the conclusion" of the WTO Agreement within the meaning of Article 32 of the Vienna Convention and, therefore, could be used as a "supplementary means of interpretation" of Schedule LXXX. However, the United States also submitted that the Explanatory Notes are not generally treated as binding because they contain certain contradictions and are occasionally outdated. Thus, the United States considered that although the Explanatory Notes are relevant under Article 32 of the Vienna Convention, they should be treated with caution.

39. The United States submits that the European Communities argues that the text is the only permissible input for interpreting a Schedule. According to the United States, such a position leads to the conclusion that whenever a treaty interpreter cannot determine whether a given product falls within the exact product composition of a concession on the basis of the text of that concession, the importing Member can make this determination unilaterally. If this is the case, then the tariff obligations provided for under Articles II:1(a) and (b) of the GATT 1994, and the tariff concessions in the Schedules, would be reduced to inutility.

40. The United States further argues that the Panel properly considered the concept of "legitimate expectations" of WTO Members in analysing whether LAN equipment is included within the scope of the EC's concession in heading 84.71. The United States believes that the Panel properly relied on the concept of "legitimate expectations" and that the decision in India - Patents does not require the rejection of the Panel's use of "legitimate expectations" as a factor in its analysis of whether the European Communities is in violation of its obligations under Article II of the GATT 1994.

41. The issue, as the United States sees it, is really whether the "legitimate expectations" of an exporting Member are a relevant factor in determining the intentions of the negotiators and thus in determining the ordinary meaning of the terms used in the concession in heading 84.71 of Schedule LXXX. The United States submits that the Panel properly used the concept of "legitimate expectations" in determining and clarifying the intentions of the parties in this case. According to the United States, such an interpretation is supported by the text and context of Article II, as well as its object and purpose. In the view of the United States, the concept of "legitimate expectations" is entirely relevant in the context of any dispute concerning the application of actual tariff concessions. Contrary to the argument of the European Communities, the United States submits that the Panel's analysis has nothing to do with a "melding" of a basis for complaint under Articles III or XI of the GATT and a basis for a "non-violation nullification or impairment" complaint.

42. The United States argues that the argument of the European Communities confuses and distorts the Appellate Body's reasoning in India - Patents, and that it twists this reasoning into an instrument for undermining the enforcement of bargained-for tariff concessions. In the view of the United States, the conclusions argued by the European Communities are by no means ordained by the Appellate Body's findings and conclusions in India - Patents. The United States asserts that the European Communities has attempted to conflate the concept of "legitimate expectations", as used by the Panel, with the concept of "reasonable expectations" in the context of Article XXIII:1(b) of the GATT. The United States submits that these concepts are not the same thing. The phrases may exhibit accidental linguistic convergence, but are legally and historically distinct and deal with different situations. In the view of the United States, it is both possible and necessary to distinguish between the concepts employed in enforcing obligations under Articles III or XI of the GATT, the concepts involved in a "non-violation nullification or impairment complaint" and the concept of "legitimate expectations" employed by the Panel in the present dispute. According to the United States, all three concepts are intellectually and historically distinct and independent. They need not be distorted and conflated in the manner advocated by the European Communities.

43. The United States submits that as the Appellate Body pointed out in India - Patents, panels considering violation complaints concerning Articles III and XI of the GATT have developed the concept of protecting the expectations of contracting parties concerning the competitive relationship between their products and the products of other contracting parties. According to the United States, Article II of the GATT 1994 is different in nature from Article III. The obligations of Article II only apply to the extent that a Member has made tariff bindings in a Schedule. The United States asserts that Article II also has nothing to do with guaranteeing the equality of opportunity with regard to competitive conditions. The provisions of Article II permit and recognize the existence of tariffs and "other duties and charges" imposed at the border which imply an intentional competitive inequality between imports and like domestic products.

44. According to the United States, as the Appellate Body has noted in India - Patents, the non violation provision of Article XXIII:1(b) was aimed at preventing contracting parties from using non-tariff barriers, or other policy measures, to negate the benefits of negotiated tariff concessions. Like Article II of the GATT 1994, the non-violation remedy under Article XXIII:1(b) recognizes the existence of tariff barriers at the border, as well as the terms, conditions or qualifications of tariff concessions, which create intentional competitive inequality between imports and like domestic products. Thus, the United States submits that Article II and the non-violation remedy are broadly alike in that they both protect bargained-for market access and the integrity of Schedules. However, Article II protects and enforces the tariff concession itself. According to the United States, tariff concessions safeguard the right to a particular tariff rate, and a Member's responsibility to charge a duty no higher than the level bound in its Schedule, on products covered by the tariff binding in question.

45. The United States submits that the Panel, in the present dispute, used "legitimate expectations" as an interpretative aid to determine what the concession in heading 84.71 means, as well as whether LAN equipment was meant to be within the product composition of heading 84.71. If it is further argued by the United States that, on the other hand, the concept of "actions that could not reasonably have been anticipated" or "reasonable expectations" has been used in non-violation cases to answer the question that Article XXIII:1(b) raises, namely what GATT-legal impediments to market access an importing Member may impose without taking away the value of the concession (as opposed to violating the obligation to maintain the concession itself). Therefore, in the view of the United States, "legitimate expectations" are relevant in the interpretation of obligations under Article II of the GATT 1994, and actions which "could not reasonably have been anticipated" are relevant in the application of the non-violation remedy under Article XXIII:1(b). However, these two concepts apply under different conditions and for different purposes. The United States argues that the concept of "legitimate expectations" is entirely relevant in the context of any dispute concerning the violation of tariff concessions; the Panel's analysis has nothing to do with a "melding" of a basis for complaint under Articles III or XI of the GATT and a basis for a "non-violation nullification or impairment" complaint.

46. It is further argued by the United States that the context of the Uruguay Round Schedules, as defined by Article 31(2) of the Vienna Convention, clearly includes the GATT 1994 and, in particular, Article II thereof. The United States submits that the text of Article II:5 of the GATT 1994 is, therefore, a relevant part of this context and the Panel properly interpreted the meaning of tariff obligations in the light of Article II:5. According to the United States, in the text of Article II:5 the "treatment provided for" is to be understood as the "treatment contemplated by a concession". The United States asserts that the term used in Article II:5 is "contemplated" and that such a provision does not require that treatment has been "discussed" or "expressly agreed". In the view of the United States, the ordinary meaning of "contemplate" in this context is "to expect"; the "treatment" in question must be the treatment by the importing Member which was contemplated at the time. Thus, the United States concludes that the "treatment" provided by a concession is the treatment legitimately expected by the trading partners of the Member making the concession. According to the United States, in the present case, that treatment is the treatment these products were known to be receiving in the European Communities, openly and legally, at the time the binding was negotiated.

47. The United States asserts that it properly invoked Article II:5 of the GATT 1994 and complied with all its procedural requirements. However, discussions under Article II:5 stopped short when, as the European Communities itself recognizes, the European Communities refused to agree that the treatment contemplated was that claimed by the United States. According to the United States, it was this refusal that prevented any negotiations under Article II:5 with regard to a compensatory adjustment. Therefore, in the view of the United States, having frustrated the procedures of Article II:5, the European Communities may not claim them as a defence to its own violation of Article II:1.

48. The United States disagrees with the alternative argument of the European Communities that the Panel erred in relying on particular types of evidence, namely Binding Tariff Information ("BTIs") and actual trade data, as a factual basis for its findings of fact concerning actual tariff treatment during the Uruguay Round and the "legitimate expectations" based on that treatment. According to the United States, the European Communities distorts the Panel Report by arguing that the Panel found that the tariff treatment bound in Schedules must correspond to the actual tariff treatment, or else there is a breach of the "legitimate expectations" of the exporting Member and therefore a violation of Article II:1 of the GATT 1994. The United States submits that the substance of the Panel's findings amounted to an interpretation of the ordinary meaning of the concession in heading 84.71, on the basis of its text, context, object and purpose. Thus, in the view of the United States, the Panel has, in essence, interpreted the intentions of the parties and has determined what, in fact, the actual tariff treatment of LAN equipment was as a factor in evaluating those intentions.

49. The United States asserts that the European Communities is arguing that, when interpreting a Schedule, the only evidence that may be taken into account is the text of the Schedule itself. The United States submits that this "text only" approach not only contradicts the guidance of the Vienna Convention and the Appellate Body, with regard to the interpretation of treaties, but also leads to establishing the right of an importing Member to arbitrarily change the duty treatment of products whenever the text of the relevant concession is ambiguous.

50. According to the United States, the Panel did not use BTIs in order to determine how LAN equipment should be classified. Rather, it used BTIs as a form of factual evidence concerning the actual tariff treatment of certain products during a particular historical period. Therefore, the United States submits that the Panel properly relied on the evidence before it, including BTIs, affidavits by exporters and actual trade data, as a basis for its findings of fact concerning the actual tariff treatment of LAN equipment during the Uruguay Round and the legitimate expectations based on that treatment. In the view of the United States, the Panel's fact-finding was within the scope of its discretion under Article 11 of the DSU and, because these findings are factual, they do not fall within the permissible scope of an appeal under Article 17.6 of the DSU.

3. Clarification of the Scope of Tariff Concessions

51. According to the United States, when the Panel rejected the assertion of the European Communities that the exporting Member bears the burden of clarifying the product composition of concessions during tariff negotiations, the Panel did not, as the European Communities suggests, create a new rule on the burden of proof in dispute settlement proceedings. Rather, the Panel correctly followed the standard laid down by the Appellate Body in United States - Shirts and Blouses. The United States submits that the Panel examined first, whether the United States had presented factual information sufficient to raise the presumption that its claim concerning the actual treatment of LAN equipment during the Uruguay Round was true and, second, whether the European Communities had presented evidence sufficient to rebut that presumption once raised. In the view of the United States, the Panel correctly found that the United States had raised such a presumption as a matter of fact and that the European Communities had failed to rebut that presumption.

52. Regarding the argument of the European Communities that the Panel Report dedicates three pages to the totally irrelevant issue of the burden of clarification, the United States submits that it finds this claim curious because it is in this section of the Panel Report32 that the Panel addressed the purported defence of the European Communities that the United States should have clarified, during the negotiations, where LAN equipment would be classified. If the Panel had accepted this defence from the European Communities, the Panel would have imposed, according to the United States, a new rule limiting the scope of proof that could be brought forward by an exporting Member, in this situation, by restricting the exporting Member to textual arguments concerning the meaning of the terms in Schedule LXXX. Thus, the United States argues that if any change in the burden of proof is suggested, that suggestion comes from the European Communities and not the Panel or the United States.

53. The United States submits that the European Communities is wrong in asserting that the Panel's findings permitting exporting Members to present evidence of tariff treatment of individual shipments, practices of current classification and other such evidence, would permit the exporting Member to shift the burden of proof to the responding Member without any need to submit evidence related to the words of the agreement. The United States asserts that it submitted to the Panel evidence concerning the meaning of the term ADP machines in Schedule LXXX and the various products falling within that definition based on treatment by the WCO, the European Communities and industry. According to the United States, it never argued to the Panel -- and does not assert now - that it could sustain its burden of proof in this case without setting out the meaning of the terms of the agreement. The United States sustained its burden of demonstrating that the term ADP machines included all types of LAN equipment.

C. Third Participant - Japan

54. Japan submits that the Panel's legal reasoning regarding "legitimate expectations" and the requirement of clarification was correct and, therefore, requests that the European Communities respect the conclusion of the Panel and bring its tariff treatment of LAN equipment into conformity with its obligations under the GATT 1994.

55. Japan asserts that "[g]enerally, ... the importing Member is obliged to identify products and relevant duties in its tariff schedules ... if the importing Member requests to limit or determine a scope of the tariff concession and relevant duties for the products, which are not classified under the heading of the Harmonized System Committee (HSC) of the CCC and therefore classified differently in several countries".33 It is further argued by Japan that, "[i]n particular, the classification of the LAN equipment among the Members of the EC was not identical before the Uruguay Round. In other words, the common classification of the LAN equipment within the Members of the EC had not been established before the Uruguay Round, and the responsibility, the EC was required to discharge in this context, was inevitable".34

56. Japan submits that it agrees with the Panel that a tariff commitment is an instrument in the hands of an importing Member, in the light of its function to protect its own industry. Therefore, in the view of Japan, "[i]f the importing Member wishes to prove the expectations of the exporting Member, that a certain practice of its tariff classification will continue, are not legitimate, the importing Member as the effective bearer of its rights and responsibilities, will be in a position to correctly identify products and relevant duties in its tariff schedules, including such limitations or modifications as it intends to apply. Otherwise, no proof will be required to deny the legitimate expectations of the exporting Member that the tariff classification will continue and the predictability of protection through the imposition of tariffs would not be maintained".35

III. Issues Raised in this Appeal

57. The appellant, the European Communities, raises the following issues in this appeal:


(a) Whether the measures in dispute, and the products affected by such measures, were identified with sufficient specificity by the United States in its request for the establishment of a panel under Article 6.2 of the DSU;

(b) Whether the Panel erred in interpreting Schedule LXXX, in particular, by reading Schedule LXXX in the light of the "legitimate expectations" of an exporting Member, and by considering that Article II:5 of the GATT 1994 confirms the interpretative value of "legitimate expectations"; and

(c) Whether the Panel erred in putting the onus of clarifying the scope of a tariff concession during a multilateral tariff negotiation conducted under the auspices of the GATT/WTO, solely on the importing Member.

IV. Request for the Establishment of a Panel

58. The first issue that we have to address is whether the measures in dispute, and the products affected by such measures, were identified with sufficient specificity by the United States in its request for the establishment of a panel under Article 6.2 of the DSU.

59. Article 6.2 of the DSU provides, in part, that the request for the establishment of a panel shall:

... identify the specific measures at issue and provide a brief summary of the legal basis of the complaint sufficient to present the problem clearly. ...

60. The Panel considered that:

... the substance of the present case is the actual tariff treatment by customs authorities in the European Communities and the evaluation of that treatment in the light of the tariff commitments in Schedule LXXX.36

The Panel found that:

Viewed from this perspective, ... the United States has sufficiently identified the measures subject to the dispute, which concerns tariff treatment of LAN equipment and multimedia PCs by customs authorities in the European Communities.37

61. The Panel found that the definitions given by the United States of the terms, LAN equipment and PCs with multimedia capability, are "sufficiently specific for the purposes of our consideration of this dispute".38

62. The European Communities appeals these findings and submits that:

The Panel erred where it found that the measures under dispute and the products affected by such measures were identified sufficiently specifically by the United States to include measures other than Commission Regulation (EC) No. 1165/95 as far as it concerns Local Area Network (LAN) adapter cards.39

63. According to the European Communities, the request of the United States for the establishment of a panel:

... identifies one specific measure, namely Commission Regulation (EC) No. 1165/95 ... [relating to] LAN adapter cards. The other alleged measures are only vaguely described, without clearly identifying the type of measure, the responsible authority, the date of issue and the reference.40

64. We note that the request of the United States for the establishment of a panel reads in relevant part:

Since June 1995, customs authorities in the European Communities, including but not limited to those in the United Kingdom and Ireland, have been applying tariffs to imports of all types of LAN equipment including hubs, in-line repeaters, converters, concentrators, bridges and routers - in excess of those provided for in the EC Schedules. Those products were previously dutiable as automatic data processing equipment under category 8471, but, as a result of the customs authorities' action, are now subject to the higher tariff rates applicable to category 8517, "telecommunications apparatus". In addition, since 1995, customs authorities in the European Communities, particularly those in the United Kingdom, have increased tariffs on imports of certain personal computers ("PCs") from 3.5 per cent to 14 per cent, which is above the rate provided for in the EC Schedules. These increases have resulted from the reclassification of PCs with multimedia capability from category 8471 to other categories with higher duty rates.41

65. We consider that "measures" within the meaning of Article 6.2 of the DSU are not only measures of general application, i.e., normative rules, but also can be the application of tariffs by customs authorities.42 Since the request for the establishment of a panel explicitly refers to the application of tariffs on LAN equipment and PCs with multimedia capability by customs authorities in the European Communities, we agree with the Panel that the measures in dispute were properly identified in accordance with the requirements of Article 6.2 of the DSU.

66. With respect to the products affected by such measures, we note that the European Communities and the United States disagree on the scope of the terms, LAN equipment and PCs with multimedia capability. Regarding LAN equipment, the disagreement concerns, in particular, whether multiplexers and modems are covered by this term.

67. We note that Article 6.2 of the DSU does not explicitly require that the products to which the "specific measures at issue" apply be identified. However, with respect to certain WTO obligations, in order to identify "the specific measures at issue", it may also be necessary to identify the products subject to the measures in dispute.

68. LAN equipment and PCs with multimedia capacity are both generic terms. Whether these terms are sufficiently precise to "identify the specific measure at issue" under Article 6.2 of the DSU depends, in our view, upon whether they satisfy the purposes of the requirements of that provision.

69. In European Communities - Bananas, we stated that:

It is important that a panel request be sufficiently precise for two reasons: first, it often forms the basis for the terms of reference of the panel pursuant to Article 7 of the DSU; and, second, it informs the defending party and the third parties of the legal basis of the complaint.43

70. The European Communities argues that the lack of precision of the term, LAN equipment, resulted in a violation of its right to due process which is implicit in the DSU. We note, however, that the European Communities does not contest that the term, LAN equipment, is a commercial term which is readily understandable in the trade. The disagreement between the European Communities and the United States concerns its exact definition and its precise product coverage.44 We also note that the term, LAN equipment, was used in the consultations between the European Communities and the United States prior to the submission of the request for the establishment of a panel45 and, in particular, in an "Information Fiche" provided by the European Communities to the United States during informal consultations in Geneva in March 1997.46 We do not see how the alleged lack of precision of the terms, LAN equipment and PCs with multimedia capability, in the request for the establishment of a panel affected the rights of defence of the European Communities in the course of the panel proceedings. As the ability of the European Communities to defend itself was not prejudiced by a lack of knowing the measures at issue, we do not believe that the fundamental rule of due process was violated by the Panel.

71. The United States has stressed that "if the EC arguments on specificity of product definition are accepted, there will inevitably be long, drawn-out procedural battles at the early stage of the panel process in every proceeding. The parties will contest every product definition, and the defending party in each case will seek to exclude all products that the complaining parties may have identified by broader grouping, but not spelled out in 'sufficient' detail".47 We share this concern.

72. We agree with the Panel that the present case should be distinguished from EEC - Quantitative Restrictions Against Hong Kong. The request of the United States for the establishment of a panel refers to "all types of LAN equipment". Individual types of LAN equipment were only mentioned as examples. Therefore, unlike the panel in EEC - Quantitative Restrictions Against Hong Kong, we are not confronted with a situation in which an additional product item was added in the course of the panel proceedings.48 This is not a case in which an attempt was made to "cure" a faulty panel request by a complaining party.49

73. In conclusion, we agree with the Panel that the request of the United States for the establishment of a panel fulfilled the requirements of Article 6.2 of the DSU.


To continue with V. "Legitimate Expectations" in the Interpretation of a Schedule

Return to Table of Contents


27. Appellee's submission of the United States, para. 33.

28. We note that the United States also argued with regard to its two additional requests for the establishment of a panel (WT/DS67/3 and WT/DS68/2) that they also identified both the timing and nature of the measures at issue (appellee's submission of the United States, paras. 34 and 35).

29. See footnote 2 of this Report

30. Heading 85.17 relates to "electrical apparatus for line telephony or line telegraphy, including such apparatus for carrier?current line systems" (hereinafter referred to as "telecommunications equipment").

31. Heading 84.71 relates to "automatic data-processing machines and units thereof ..." and heading 84.73 relates to "parts and accessories (other than covers, carrying cases and the like) suitable for use solely or principally with machines of heading Nos. 84.69 to 84.72" (hereinafter referred to together as "ADP machines").

32. Panel Report, paras. 8.48-8.55.

33. Japan's third participant's submission, para. 8.

34. Ibid.

35. Japan's third participant's submission, para. 9

36. Panel Report, para. 8.12.

37. Ibid.

38. Panel Report, paras. 8.9-8.10.

39. Notice of Appeal of the European Communities, para. 1.

40. Appellant's submission of the European Communities, para. 19.

41. WT/DS62/4, 13 February 1997.

42. In an answer to a question at the oral hearing, the European Communities expressly accepted that "the application of a tariff in an individual case on a consignment is a measure" within the meaning of Article 6.2 of the DSU.

43. Appellate Body Report, adopted 25 September 1997, WT/DS27/AB/R, para. 142.

44. Answer of the European Communities to a question at the oral hearing.

45. See, for example, the letter from the Vice-President of the Commission of the European Communities, Sir Leon Brittan, to the United States Trade Representative, Ambassador Michael Kantor, dated 7 December 1995 (first submission of the United States to the Panel, Attachment 26); and the letter from the United States Trade Representative, Ambassador Michael Kantor, to the Vice-President of the Commission of the European Communities, Sir Leon Brittan, dated 8 March 1996 (first submission of the United States to the Panel, Attachment 28).

46. "Information Fiche" attached to letter from the Head of Permanent Delegation of the European Commission to the International Organizations in Geneva, Ambassador R.E. Abbott, to the Chargé d'Affaires of the United States to the WTO, Mr. A.L. Stoler, 13 March 1997 (first submission of United States to the Panel, Attachment 23).

47. Appellee's submission of the United States, para. 50.

48. In paragraph 30 of the panel report in EEC - Quantitative Restrictions against Hong Kong, the panel stated:

The Panel considered that just as the terms of reference must be agreed between the parties prior to the commencement of the Panel's examination, similarly the product coverage must be clearly understood and agreed between the parties to the dispute.

We have already noted that Article 6.2 of the DSU does not require that the products at issue be specified in a request for the establishment of a panel. Also, Article 7 of the DSU provides that panels shall have standard terms of reference, unless the parties to the dispute agree otherwise within 20 days from the establishment of the panel.

49. We recall that in our report in European Communities - Bananas, para. 143, we found that:

If a claim is not specified in the request for the establishment of a panel, then a faulty request cannot be subsequently 'cured' by a complaining party's argumentation in its first written submission to the panel or in any other submission or statement made later in the panel proceeding.