WORLD TRADE  
ORGANIZATION   
 WT/DS165/R  
17 July 2000  
 (00-2868)  
   Original:  English  
 
 
 
 
 
 
 
 
UNITED  STATES – IMPO RT MEASURES ON  
CERTAIN PRODUCTS FRO M  
THE EUROPEAN  COMMUNI TIES  
 
 
 
 
 
Report of the Panel  
 
 
 
 
 
 
The report of the Panel on United  States – Import Measures on Certain Products from the 
European  Communities is being circulated to all Members, pursuant to the  DSU.  The report is being 
circulated as an unrestricted document from 17 July 2000 pursuant to the Procedures for the 
Circulation and D erestriction of WTO Documents (WT/L/160/Rev.1).  Members are reminded that in 
accordance with the DSU only parties to the dispute may appeal a panel report.  An appeal shall be 
limited to issues of law covered in the Panel report and legal interpretations developed by the Panel.  
There shall be no  ex parte  communications with the Panel or Appellate Body concerning matters 
under consideration by the Panel or Appellate Body.  
 
 
 
 
 
 
 
 
 
 
 
Note by the Secretariat :  This Panel Report shall be adopted by the Dispu te Settlement Body (DSB) within 60 days after the date of its 
circulation unless a party to the dispute decides to appeal or the  DSB decides by consensus not to adopt the report.  If the  Panel Report is 
appealed to the Appellate Body, it shall not be cons idered for adoption by the  DSB until after the completion of the appeal.  Information on 
the current status of the Panel Report is available from the WTO Secretariat.  WT/DS165/R  
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TABLE OF CONTENTS  
Page  
 
I. PROCEDURAL BACKGR OUND  ................................ ................................ ..........................  1 
II. FACTUAL ASPECTS  ................................ ................................ ................................ ..............  2 
A. FACTUAL BACKGROUND TO  THIS CASE................................ ................................ .....................  2 
B. MEASURE AT ISSUE  ................................ ................................ ................................ .....................  7 
C. US ORDINARY LIQUIDATION PROCEDURES , BONDING REQUIREMENTS AND 
RELEVANT TARIFF RATES  ................................ ................................ ................................ ...........  9 
D. DEVELOPMENTS IN THE UNITED  STATES AFTER 3 MARCH  1999  ................................ .............  12 
III. ARGUMENTS OF TH E PARTIES  ................................ ................................ ......................  13 
IV. ARGUMENTS OF THE  THIRD PARTIES  ................................ ................................ ........  13 
V. INTERIM REVIEW  ................................ ................................ ................................ ...............  14 
VI. FINDINGS  ................................ ................................ ................................ ...............................  18 
A. INTRODUCTION  ................................ ................................ ................................ ..........................  18 
B. EC CLAIMS AND US DEFENSES UNDER THE DSU  AND GATT  1994  ................................ .........  20 
1. The EC cl aims  ................................ ................................ ................................ .........................  20 
2. The US defenses  ................................ ................................ ................................ ......................  20 
C. US REQUEST FOR A PRELIMI NARY RULING  ................................ ................................ ..............  20 
D. EC CLAIMS THAT THE 3 MARCH MEASURE VIOLATED ARTICLES 23 AND OTHERS OF 
THE DSU  ................................ ................................ ................................ ................................ ... 21 
1. Claims under Article  23................................ ................................ ................................ ..........  21 
(a) Article  23 of the DSU as a whole  ................................ ................................ .............................  21 
(b) The application of Article  23 to the present dispute  ................................ ................................ . 24 
(i) Was the 3 March Measure a measure 'seeking the redress of' a WTO violation?  ....................  24 
2. Article  23.1 together with Articles 23.2(c), 3.7 and 22.6 of the DSU  ................................ .. 28 
(a) Did the 3  March Measure constitute a suspension of  GATT/WTO concessions or 
other obligations? (EC claims that the 3  March Measure violated Articles I, II, VIII 
and XI of GATT)  ................................ ................................ ................................ ......................  29 
(i) The increased bonding requirement itself  ................................ ................................ .................  30 
(ii) Interest charg es, costs and fees in connection with the lodging of the additional 
bonding requirement  ................................ ................................ ................................ .................  34 
(b) US Defences  ................................ ................................ ................................ .............................  36 
(i) The US defence based on Article 13 of the CV Agreement  ................................ .......................  36 
(ii) The US defence based on the increased "risk" that those EC listed imports 
represented  ................................ ................................ ................................ ................................  37 
(c) Conclusion  ................................ ................................ ................................ ................................  38 
3. Article  23.1 together with Articles 21.5 and 23.2(a) of the DSU  ................................ .........  39 
E. EC CLAIMS THAT THE 3 MARCH MEASURE VIOLATED ARTICLES I, II, VIII  AND XI OF 
GATT  ................................ ................................ ................................ ................................ ........  50 WT/DS165/R  
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F. US DEFENSE BASED ON TH E EUROPEAN  COMMUNITIES ' DELAYING TACTICS  ..........................  50 
VII. CONCLUSIONS AN D RECOMMENDATIONS  ................................ ................................  51 WT/DS165/R  
Page 1 
 
 
I. PROCEDURAL BACKGROUN D 
1.1 This proceeding was initiated by the European  Communities, as complaining party against the 
United  States.  
1.2 On 4 March 1999, the European  Communities requested consultations with the  United  States 
under Article XXII:1 of the General Agreement on Tariffs and Trade 1994 ("GATT") and Article 4 of 
the Understanding on Rules and Procedures Governing the Settlement of Dispute ("DSU") with 
regard to the US decision, effective as of 3  March  1999, to withhold liquidation on imports from the 
European  Communities of a series of products (listed in the Annex to the document WT/DS165/1), 
together valued at over $500  million on an annual basis, and to impose a contingent liability for 
100 per cent duties on each individual importation of affected products as of this date.  The 
European  Communities claimed that according to information provided by the United  States Trade 
Representative ("USTR"), this measure includes administrative provisions which fo resee, among 
other things, the posting of a bond to cover the full potential liability.  
1.3 On 11 May 1999, the European  Communities requested the establishment of a panel pursuant 
to Article 6 of the DSU (WT/DS165/8).  
1.4 In its panel request, the European  Commun ities claims that:  
"I have the honour to request, on behalf of the European  Communities, the 
establishment of a panel pursuant to Article XXIII of the General Agreement on 
Tariffs and Trade 1994 (GATT 1994) and Articles 4 and 6 of the Dispute Settlement 
Understanding (DSU) with respect to the US decision, effective as of 3  March  1999, 
to withhold liquidation on imports from the EC of a list of products, together valued 
at $520 million on an annual basis, and to impose a contingent liability for 100 per 
cent duties on each individual importation of affected products as of this date 
(annex  1). This measure includes administrative provisions that foresee, among other 
things, the posting of a bond to cover the full potential liability.  
…  When the US received WT O authorization on 19 April 1999 to suspend 
concessions as of that date on EC imports of products with an annual value of only 
$191.4 million, a more limited list of products was selected from the previous list 
(annex 2).  At the same time, the US confirme d, despite the prospective nature of the 
WTOs, the liability for 100 per cent duty on the products on the list in annex 2 that 
had entered the US for consumption with effect from 3  March  1999.  
The European  Communities considers that this US measure is in f lagrant breach of 
the following WTO provisions:  
- Articles 3, 21, 22 and 23 of the DSU;  
- Articles I, II, VIII and XI of GATT 1994.  
Through these violations of fundamental WTO rules, the US measure nullifies or 
impairs benefits accruing, directly or indire ctly, to the European  Communities under 
GATT 1994. This measure also impedes important objectives of GATT 1994 and of 
the WTO."  
1.5 On 16 June 1999, the Dispute Settlement Body ("DSB") established the Panel pursuant to 
Article 6 of the DSU.  In accordance with  Article 7.1 of the DSU, the terms of reference of the Panel 
are: 
"To examine, in the light of the relevant provisions of the covered agreements cited 
by the European  Communities in document WT/DS165/8, the matter referred to the 
DSB by the European  Commun ities in that document and to make such findings as WT/DS165/R  
Page 2 
 
 
will assist the DSB in making the recommendations or in giving the rulings provided 
for in those agreements."  
1.6 Dominica, Ecuador, India, Jamaica, Japan, and St. Lucia, reserved their rights to participate in 
the Panel proceedings as third parties.  
1.7 On 29 September 1999, the European  Communities requested the Director -General, pursuant 
to Article 8.7 of the DSU, to determine the composition of the Panel.  On 8 October 1999, the 
Director -General announced the composition of the Panel as follows:  
 Chairman:   Mr. Hugh McPhail  
 
 Members:   Ms. Leora Blumberg  
   Mr. Peter Palečka  
 
1.8 The Panel had substantive meetings with the parties on 16 and 17 December 1999, and 
9 February 2000.  
II. FACTUAL ASPECTS  
A. FACTUAL BACKGROUND TO   THIS CASE 
2.1 At its meeting of 25 September 1997, the DSB adopted the Appellate Body report,1 and th e 
panel reports,2 as modified  by the Appellate Body report , on European  Communities  – Regime for the 
Importation, Sale and Distribution of Bananas .3  The Appellate Body report  recommended that the 
[DSB] request the European  Communities  to bring the measure s found in this Report and in the Panel 
Reports … to be inconsistent with the GATT 1994 and GATS into conformity with the obligations of 
the European  Communities under those agreements. "4  In this case,  Ecuador, Guatemala, Honduras, 
Mexico and the United  States (the "Complainants on  EC - Bananas III ") claimed that the EC regime 
for the importation, sale and distribution of bananas established by the Council Regulation (EEC) 
404/93, and the subsequent EC legislation, regulations and administrative measures, was inconsistent 
with the WTO Agreement.5  At the DSB meeting of 16 October 1997, the European  Communities 
confirmed that "the Communities would fully respect their international obligations with regard to this 
matter. "6 
2.2 On 24 October 1997, the European  Communities requested consultations with the  
Complainants on  EC - Bananas III  in order to reach agreement on a "reasonable period of time" for 
the implementation of the recommendations and rulings of the DSB adopted on 25 September 1997, 
but these consultati ons did not lead to an agreement.7  Pursuant to the request of the Complainants on  
EC - Bananas III , on 8 December 1997, the Director -General of the WTO appointed 
                                                      
1 Appellate Body Report on European  Communities  – Regime for the Importation, Sale and 
Distribution of Bananas  ("EC - Bananas III "), adopted on 25 September 1997, WT/DS27/AB/ R. 
2 Panel Reports on EC - Bananas III , modified by the Appellate Body, and adopted on 
25 September  1997, WT/DS27/R/ECU, WT/DS27/R/GTM, WT/DS27/R/HND, WT/DS27/R/MEX, and 
WT/DS27/R/USA.  
3 WT/DSB/M/37.  
4 Appellate Body Report on EC – Bananas III , op. cit., p ara. 257.  
5 Ibid., para. 1.  
6 WT/DSB/M/38.  
7 Awards of the Arbitrator under Article 21.3(c), EC - Bananas III , issued on 7 January 1998, 
WT/DS27/15, para. 2.  WT/DS165/R  
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Mr. Said El-Naggar as the arbitrator.8  On 7 January 1998, the arbitrator decided that the "' reasonable 
period of time' … [was] the period from 25 September 1997 to 1 January 1999.9 
2.3 On 20 July 1998, the Council of the European Union adopted the Regulation (EC) No. 
1637/98 amending the Council Regulation (EEC) No. 404/93 on the common organization of the 
market in bananas.  This Regulation entered into force on 31 July 1998, and later became applicable 
as of 1 January 1999.10  Further, on 28 October 1998, the Commission of the European  Communities 
adopted the Regulation (EC) No. 2362/98 laying down d etailed rules for the implementation of the 
Council Regulation (EEC) No. 404/93 regarding imports of bananas into the European  Communities.  
This Regulation entered into force on 1 November 1998, and later became applicable as of 
1 January  1999  as well .11 
2.4 On 18 August 1998, the Complainants on  EC - Bananas III  jointly and severally requested 
consultations with the European  Communities in relation to the proposed banana regime.12  Their 
request for consultations states as follows:  
"At [a] meeting [of 6 August 1998], the EC clarified its view that Article 21.5 
requires parties to consult as a prior condition to the resort to the original panel to 
resolve the disagreement over the WTO -consistency of the EC measures taken to 
implement the DSB rulings and recommend ations.  …  
… 
We do not agree that consultations are necessary before resorting to the original panel 
under Article 21.5.  The EC's position taken for the purposes of this dispute appears 
calculated to produce maximum delay and is unsupportable for the effe ctive 
functioning of the dispute settlement system.  …"13 
2.5 On 8 September 1998, in their joint communication to the Chairman of the DSB, the 
Complainants on  EC - Bananas III  claimed that since the proposed banana scheme of the 
European  Communities was incons istent with the WTO Agreement, and thus, " in order to ensure 
compliance with the DSB recommendations and ruling by the end of the reasonable period of time on 
1 January, 1999, … this matter should be referred to a panel pursuant to Article 21.5 [of the DSU ]."14  
At the DSB meeting of 22 September 1998, such panel was not established.15  At that meeting, 
however, the United  States, on its own behalf and on behalf of the other Complainants on EC – 
Bananas III  and Panama, stated as follows:  
"… The EC's insistenc e on consultations only delayed the process.   This delay would 
only prolong the dispute beyond the reasonable period of time established by the 
arbitrator.  These delaying tactics, if tolerated, would have serious consequences for 
the DSU and the multilat eral trading system. …"16 
In response, the European  Communities indicated as follows:  
                                                      
8 WT/DS27/14.  This appointment was made in accordance with footnote 12 to Article 21.3(c) of the 
DSU.  
9 Awards of the Arbitrator 21.3(c), EC – Bananas III , op. cit., para. 20.  
10 Communication, dated 15 December 1998, from the European  Communities to the Chairman of the 
DSB, WT/DS27/40.  
11 Ibid.   
12 Communication, dated 18 August 1998, from Ecuador, Guat emala, Honduras, Mexico, and the 
United  States to the Chairman of the DSB, WT/DS27/18.  
13 Ibid. 
14Communication , dated 8 September 1998,  from Ecuador, Guatemala, Honduras, Mexico, and the 
United  States, WT/DS27/21.  
15 WT/DSB/M/48.  
16 Ibid. WT/DS165/R  
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"The Community believed that the dispute which fell under Article 21.5 of the DSU 
should be resolved in accordance with the normal dispute settlement procedures 
except as otherwise provided in this Article.  … The normal dispute settlement 
procedures implied the need to hold consultations and the Community had insisted on 
this point. … [T]hese were not delaying tactics but a simple application of the DSU 
procedures. …"17 
2.6 On 13 November 1998, Ecuador requested the reactivation of the 17 September 1998 
consultations with the European  Communities.18  As their consultations did not result in a 
mutually satisfactory solution, on 18 December 1998, Ecuador requested " the WTO Dispute 
Settlement Body, at today's meeting, to call for the re -establishment of the Panel that 
originally heard the case in order to resolve the conflict with the European  Communities 
concerning the consistency of its measures to implement the recommendations and  rulings of 
the Dispute Settlement Body of 25  September  1997."19 At its meeting of 12 January 1999, the 
DSB agreed "to refer to the original panel, pursuant to Article 21.5, the matter raised by 
Ecuador in document WT/DS27/41."20  
2.7 On 14 December 1998, the Eu ropean  Communities requested that the DSB establish "a panel 
under Article 21.5 of the DSU with the mandate to find that [its new bananas import regime] must be 
presumed to conform to WTO rules unless [its] conformity has been duly challenged under the 
appropriate DSU procedures."21  At its meeting of 12 January 1999, the DSB also agreed "to refer [the 
matter] to the original panel pursuant to Article 21.5 of the DSU. "22 
2.8 On 14 January 1999, pursuant to Article 22.2 of the DSU, the United  States "request[ed] 
authorization from the Dispute Settlement Body (DSB) to suspend the application to the 
European  Communities (EC), and Member States thereof, of tariff concessions and related obligations 
under the General Agreement on Tariffs and Trade 1994 (GATT), covering  trade in an amount of 
US$520  million,"23 claiming that the European  Communities had "fail[ed] to bring its regime for the 
importation, sale and distribution of bananas (banana regime) into compliance, by 1 January 1999, 
with the GATT and the General Agreem ent on Trade in Services (GATS) or to otherwise comply with 
the recommendations and rulings of the DSB in EC - Regime for the Importation, Sale and 
Distribution of Bananas."24 
2.9 On 29 January 1999, the European  Communities, "[p]ursuant to Article 22.6 of the DSU, … 
object[ed] to the level of suspension proposed by the United  States in document WT/DS27/43," and 
further requested that "the matter … be submitted to arbitration", claiming "that the Community 
banana import measures found to be inconsistent with WTO  obligations were withdrawn by 
1 January  1999 and have therefore ceased to produce their effects since the expiry of the reasonable 
period of time determined in accordance with Article 21, paragraph 3 [of the DSU] …".25 
2.10 At its meeting of 25, 28 and 29 Janua ry and 1 February 1999, the Chairman suggested, among 
others, as follows:  
                                                      
17 Ibid. 
18 Communicat ion, dated 13 November 1998, from Ecuador to the Chairman of the DSB and the 
European  Communities, WT/DS27/30 and WT/DS27/30/Add.1.  
19Communication, dated 18 December 1998, from Ecuador to the Chairman of the DSB, WT/DS27/41.  
20 WT/DSB/M/53.  
21 Communication , dated 14 December 1998, from the European  Communities to the Chairman of the 
DSB, WT/DS27/40.  
22 WT/DSB/M/53.  
23 Communication, dated 14 January 1999, from the United  States  to the Chairman of the DSB , 
WT/DS27/43.  
24 Ibid. 
25 Communication, dated 29 January 1999, from the European  Communities  to the Chairman of the 
DSB , WT/DS27/46.  WT/DS165/R  
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"[A]s to bananas the original panel is now engaged in two Article 21.5 proceedings.  
…  [A]ssuming the EC make a request for arbitration under Article 22.6, the same 
individuals coul d be given the task of arbitrating the level of suspension. … There 
remains the problem of how the panel and the arbitrators would coordinate their 
work, but as they will be the same individuals, the reality is that they will find a 
logical way forward, in  consultation with the parties.  In this way, the dispute 
settlement mechanisms of the DSU can be employed to resolve all of the remaining 
issues in this dispute, while recognizing the right of both parties and respecting the 
integrity of the DSU."26 
The DS B then agreed "that the matter be referred to arbitration by the original panel 
in accordance with Article 22.6 of the DSU."27 
2.11 On 18 February 1999, the United  States,  
"[p]ursuant to Article 22.7 of the [DSU], … request[ed] authorization from the [DSB] 
to suspend the application to the European  Communities (EC), and member States 
thereof, of tariff concessions and related obligations under the General Agreement on 
Tariffs and Trade 1994 (GATT), in an amount consistent with DSU Article 22.4, as 
determined by t he arbitrator pursuant to DSU Article 22.7 in 'EC – Regime for the 
Importation, Sale and Distribution of Bananas'."28 
The United  States further explained that "[a]ccording to Article 22.6 of the DSU and 
the timetable for the arbitrators' work, the arbitrato rs' decision is to be issued by 
2 March 1999."29 
2.12 On 2 March 1999, the arbitrators, in their initial decision, requested the parties to supply them 
with certain additional information .30  They indicated that "[f]ollowing our receipt and analysis of that 
infor mation, we expect to be in a position to issue a final decision in this matter soon thereafter."31 
2.13 On 3  March  1999, the United  States took those actions described in Section B below.  As 
described in Section I above, on 4 March 1999, the European  Communities requested consultations 
with the United  States on the matter under Article XXII:1 of the GATT and Article 4 of the DSU, and 
subsequently on 16 June 1999, pursuant to the EC request, the DSB establ ished this Panel pursuant to 
Article 6 of the DSU.  
2.14 On 6 April 1999, the Article 22.6 arbitrators and the Article 21.5 panels issued simultaneously 
to the parties, both the decision of the arbitrators , and the panel reports on the recourse to Article 21.5 
by Ecuador and the European  Communities.32 
2.15 On 7 April 1999, pursuant to  Article 22.7 of the DSU, the United  States requested that "the 
DSB authorise it to suspend concessions in an amount up to US$191.4 million per year …", referring 
to the arbitrators ' decis ion issued to the parties on 6 April 1999.33  
                                                      
26 WT/DSB/M/54.  
27 Ibid. 
28 Communication, dated 18 February 1999, from the United  States  to the Chairman of the DSB , 
WT/DS27/47.  
29 Ibid. 
30 Decision by the Arbitrators on EC - Bananas  III, Recourse to Arbitration by the 
European  Communities under Article 22.6 of the DSU, issued on 9 April 1999, WT/DS27/ARB , ("EC - 
Bananas III  Arbitration (22.6 -7)"), para. 2.10.  
31 WT/DS27/48.  
32 See WT/DSB/M/59.  
33 Communication , dated 9 April 1999 , from the United  States to the Chairman of the DSB, 
WT/DS27/49.  WT/DS165/R  
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2.16 On 9 April 1999, the following decision of the arbitrators was circulated to the Members:  
"[T]he Arbitrators determine that the level of nullification or impairment suffered by 
the United  States in the matter Eu ropean  Communities  – Regime for the Importation, 
Sale and Distribution of Bananas  is US$191.4 million per year.  Accordingly, the 
Arbitrators decide that the suspension by the United  States of the application to the 
European  Communities and its member Stat es of tariff concessions and related 
obligations under GATT 1994 covering trade in a maximum amount of 
US$191.4  million  per year would be consistent with Article 22.4 of the DSU. "34 
2.17 In reaching this conclusion, the arbitrators explained as follows:  
"[W]e ca nnot fulfil our task to assess the equivalence  between the two levels before 
we have reached a view on whether the revised EC regime is, in light of our and the 
Appellate Body's findings in the original dispute, fully WTO -consistent.  It would be 
the WTO -inconsistency of the revised EC regime that would be the root cause of any 
nullification or impairment suffered by the United  States.  Since the level of the 
proposed suspension of concessions is to be equivalent to the level of nullification or 
impairment,  logic dictates that our examination as Arbitrators focuses on that latter 
level before we will be in a position to ascertain its equivalence to the level of the 
suspension of concessions proposed by the United  States."35 
2.18 On 12 April 1999, the panel which addressed the recourse to Article 21.5 of the DSU by the 
European  Communities circulated a final report to the Members.  In its report, the panel concluded 
that "we do not make findings as requested by the European  Communities. "36  In this proceeding, the 
European  Communities claimed as follows:  
"[S]ince Guatemala, Honduras, Mexico and the United  States had failed to pursue any 
recourse to dispute settlement procedures under the rules and procedures of the DSU, 
the new EC regime for the importation, sale and distribution of bananas adopted in 
order to comply with the recommendations and rulings of the DSB in the three 
dispute settlement procedures ( 'EC – Regime for Importation, Sale and Distribution 
of Bananas ') had to be deemed …in so far as [these parties to  the original dispute] 
were concerned, to be in conformity with the WTO covered agreements so long as 
those original parties had not successfully challenged the new EC regime under the 
relevant dispute settlement procedures of the WTO. "37 
2.19 On the same day, t he panel which addressed the recourse to Article 21.5 of the DSU by 
Ecuador circulated a final report to the Members.  In its report, the panel concluded that "aspects of 
the EC's import regime for bananas are inconsistent with the EC's obligations under …  GATT 1994 
and … GATS."38  This report was adopted by the DSB at its meeting of 6 May 1999.39 
2.20 At its meeting of 19 April 1999, the DSB, "pursuant to the US request under Article 22.7 of 
the DSU, agree[d] to grant authorization to suspend the application to t he European  Communities and 
its member States of tariff concessions and related obligations under GATT 1994, consistent with the 
decision of the Arbitrators contained in document WT/DS27/ARB."40 
                                                      
34 Arbitrat ion (22.6 -7) EC - Bananas III , para. 8.1. 
35 Ibid., para. 4.8 (emphasis original)  
36 Panel Report  on EC – Bananas III , Recourse to Article 21.5 by the European  Communities, 
circulated  on 12 April 1999, WT/DS27/RW/EEC, para. 5.1.  
37 Ibid., para. 2.22.  
38 Panel Report on EC – Bananas III , Recourse to Article 21.5 by Ecuador, adopted on 6 May 1999, 
WT/DS27/RW/ECU, para. 7.1.  
39 WT/DSB/M/61.  
40 WT/DSB/M/59.  WT/DS165/R  
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B. MEASURE AT ISSUE  
2.21 In this case, t he European  Communities reques ted that the DSB establish a panel,  
"with respect to the US decision, effective as of 3  March  1999, to withhold 
liquidation on imports from the EC of a list of products, together valued at 
$520  million on an annual basis, and to impose a contingent liabili ty for 100 per cent 
duties on each individual importation of affected products as of this date (annex 1 [to 
the request]).  This measure includes administrative provisions that foresee, among 
other things, the posting of a bond to cover the full potential liability."41  
2.22 This request corresponds to the USTR press release of 3  March  1999, which states as follows:  
"[E]ffective today, the U.S. Customs Service will begin 'withholding liquidation' on 
imports valued at over $500 million of selected products from th e European Union 
(EU), consistent with U.S. rights under the WTO agreements.  Withholding 
liquidation imposes contingent liability for 100 per cent duties on affected products as 
of March 3, 1999."42 
2.23 On 3  March  1999, Mr. Peter L. Scher, Special Trade Negoti ator of the Trade Representative 
of the United  States ("USTR"), wrote to Mr. Raymond W. Kelly, Commissioner of the US Customs 
Service, as follows:  
"On January 14, 1999, the United  States requested authorization from the World 
Trade Organization (WTO) to su spend the application to the European  Communities 
(EC) of tariff concessions covering trade in an amount of US$520 million in response 
to the EC's failure to implement a WTO -consistent regime for the importation, sale, 
and distribution of bananas.  The [US TR] intends to implement this suspension of 
tariff concessions by directing the Customs Service to impose 100 percent duties, ad 
valorem, on the products listed in the attachment to this letter.  (See also 63 Fed. Reg. 
63099 and 63 Fed. Reg. 71665 giving n otice of the proposed increase in duties on 
selected products).  
The EC requested that the U.S. -proposed level of suspension be reviewed by WTO 
arbitrators.  The WTO dispute settlement rules require that the arbitration proceedings 
be completed on March 2.  The arbitrators, however, failed to meet this deadline and 
are not expected to make their final decision until some later date.  The USTR now 
seeks to preserve its right to impose 100 percent duties as of March 3, pending the 
release of the arbitrators' f inal decision.  
Therefore, I am hereby requesting that until further notice the Customs Service 
withhold liquidation of entries of all articles identified in the attachment to this letter 
that are the products of Austria, Belgium, Finland, France, the Feder al Republic of 
Germany, Greece, Ireland, Italy, Luxembourg, Portugal, Spain, Sweden or the 
United  Kingdom and that are entered, or withdrawn from warehouse, for 
consumption, on or after March 3, 1999.  I further request that the Customs Service 
today instr uct port directors to review the sufficiency of bond posted with respect to 
entries described in the previous sentence, and to take steps to provide adequate or 
additional security in accordance with 19 C.F.R. §113.13."43 
                                                      
41 WT/DS165/8.  
42 USTR Press Release, dat ed 3  March  1999, "United  States takes customs action on European 
imports" (EC Annex VII).  
43 Letter dated 3  March  1999 from Mr. Peter L. Scher, Special Trade Negotiator to Commissioner 
Raymond W. Kelly, US Customs Service (US Ex. 12).  WT/DS165/R  
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2.24 In response to the USTR's request,  Mr. Philip Metzger, Director of the Trade Compliance 
Division of the US Customs Service, in a memorandum  regarding "European Sanctions" ,44 gave the 
following instructions to the Customs Area and Port Directors:  
"RE:  European Sanctions  
… 
Effective for all me rchandise classifiable under the Harmonized Tariff Schedule 
(HTS) subheadings listed below, entered, or withdrawn from warehouse, for 
consumption, on or after March 3, 1999, and produced in the listed countries, Area 
and Port Directors must require a Singl e Transaction Bond (STB) equal to the entered 
value of the merchandise.  The only exception to this requirement is, at the discretion 
of the Port Director, the importer of record may use a continuous bond equal to 10 per 
cent of the total of the entered va lue of the covered merchandise imported by the 
importer for the preceding year.  Ports should process increased continuous bonds 
immediately.  
No entry shall be scheduled to liquidate earlier than the 314th day, thereby ensuring 
the withholding of liquidati on as requested by USTR.  … 
Affected countries*:  
 Austria  
 Belgium  
 Finland  
 France  
 Federal Republic of Germany  
 Greece  
 Ireland  
 Italy 
 Luxembourg  
 Portugal  
 Spain  
 Sweden  
 United Kingdom  
 
*Please note that the Netherlands and Denmark are not included on  this list. … 
 
HTS Subheadings  
0210.19.00  
Meat of swine, salted, in brine, dried or smoked, other than hams, shoulders, and cuts 
thereof, with bone in, or bellies (streaky) and cuts thereof  
0406.90.57  
Pecorino cheese, made from sheep 's milk, in original lo aves, not suitable for grating  
1905.30.00  
Sweet biscuits; waffles and wafers  
3307.30.50  
Bath preparation, other than bath salts  
3406.00.00  
Candles, tapers and the like  
3920.20.00  
                                                      
44 Memorandum of 4 Marc h 19 99 to Customs Area and Port Directors, CMC Directors from  Trade 
Compliance Division, US Customs Service, Regarding European Sanctions (EC Annex VIII).  WT/DS165/R  
Page 9 
 
 
Other plates, sheets, film, foil and strip, noncellular and not reinforced, l aminated, 
supported or similarly combined with other materials, of polymers of propylene  
4202.22.15  
Handbags, whether or not with shoulder strap, including those without handle, with 
outer surface of sheeting of plastic  
4202.32.10  
Articles of a kind normal ly carried in the pocket or in the handbag, with outer surface 
of sheeting of plastic, of reinforced or laminated plastic  
4805.50.00  
Uncoated felt paper and paperboard in rolls or sheets  
4819.20.00  
Folding cartons, boxes and cases, of noncorrugated paper o r paperboard  
4911.91.20  
Lithographs on paper or paperboard, not over 0.51 mm in thickness, printed not over 
20 years at time of importation  
6110.10.10  
Sweaters, pullovers, sweatshirts, waistcoats (vests) and similar articles, knitted or 
crocheted, wholly o f cashmere  
6302.21.90  
Bed linen, other than knit or crocheted, printed, of cotton, other than containing any 
embroidery, lace, braid, edging, trimming, piping or applique work, not napped  
8507.20.80  
Lead -acid storage batteries, other than of a kind used fo r starting piston engines or as 
the primary source of electrical power for electrically powered vehicles of subheading 
8703.90  
8516.71.00  
Electrothermic coffee or tea makers, of a kind used for domestic purposes "45 
 
2.25 On the same day, the Customs Area and Por t Directors accordingly started requiring that an 
importer of listed products imported from the listed EC countries  lodge , in most cases,  an increased 
continuous  bond for the release of the products into the United  States  prior to the final liquidation in 
accordance with the instructions referred to in paragraph 2.24 above . 
C. US ORDINARY LIQUIDATION PROCEDURES , BONDING REQUIREMENTS  AND RELEVANT 
TARIFF RATES  
2.26 Under US law, when a shipment reaches the United  States, the importer of r ecord (i.e. the 
owner, purchaser, or licensed customs broker designated by the owner, purchaser, or consignee) will 
file entry documents for the goods with the port director at the port of entry.  Imported goods are not 
legally entered until after the ship ment has arrived within the port of entry, delivery of the 
merchandise has been authorised by the Customs, and estimated duties have been paid.46 
2.27 Liability for payment of duties is incurred at the time the goods arrive on a vessel within a 
Customs port when  there is an intent to unload the goods at that port, or, if arrival is otherwise than by 
vessel, at the time of arrival within the Customs territory of the United  States.  The applicable rate of 
duty is the rate for the date the merchandise was entered fo r consumption or for immediate 
transportation of goods from one US port to another (so that Customs documentation can be submitted 
at the latter port).47 
2.28 At the time of entry, importers are required to pay only estimated duties .  Any other duties 
and fees a re to be collected at the time of liquidation, i.e.  when the Customs has calculated the  final 
                                                      
45 Ibid. 
46 Excerpts from Customs Website on Entry Procedures ( US Ex. 8 ), §2. 
47 US Responses to Questio ns o f the Panel and the Parties, dated 13 January 1999, para. 6 
(Appendix  2.4 of this Panel Report).  WT/DS165/R  
Page 10 
 
 
amount of duties  on imports based upon confirmation of the correct valuation, classification and 
origin of the goods .  Section 1504, Paragraph (a) of the Tariff Act of 1930  sets forth a time -limit on 
liquidation, subject to certain exceptions, as follows: "… [A]n entry of merchandise not liquidated 
within one year from (1) the date of entry …(4) … shall be deemed liquidated at the rate of duty, 
value, quantity, and amount of duties asserted at the time of entry by the importer of record. …"48 
2.29 Before liquidation takes place, however, i mporters can obtain the release of their imports into 
the United  States  by submitting a bond and filing proper documentation.   Section 1 42.4(a) of the   
Code of Federal Regulations ( "CFR") Vol. 19,  provides:  
"…[M]erchandise shall not be released from Customs custody at the time Customs 
receives the entry documentation  or the entry summary documentation  which serves 
as both the entry and the  entry summary, as required by §142.3 unless a single entry 
or continuous bond on Customs Form 301 … has been filed. …"49 
2.30 The amount of a continuous bond on imports is determined in accordance with the 
"Guidelines for Determining Amounts of Bonds " attached to the Customs Directive , which the 
Assistant Commissioner of the Office of Commercial Operation issued to, among others, the 
District/Area Directors and Port Directors on 23 July 1991.50  The Guidelines  set forth:  
"The bond limit of liability amount shall be fixed in an amount the district director 
may deem necessary to accomplish the purpose for which the bond is given.  The 
non-discretionary bond amount minimum is $50,000.  …[T]he following formula 
shall be used.  
None to $1,000,000 duties and taxes – the bond limit of liability amount shall be 
fixed in multiples of $10,000 nearest to 10 percent of duties, taxes and fees paid by 
the importer or broker acting as importer of record during the calendar year preceding 
the date of the application.  
Over $1,000,00 0 duties and taxes – the bond limit of liability amount shall be fixed in 
multiples of $100,000 nearest to 10 percent of duties, taxes and fees paid by the 
importer or broker acting as importer of record during the calendar year preceding the 
date of the a pplication. "51 
2.31 The amount of a single transaction bond is determined in accordance with the same 
Guidelines, which set forth:  
"Generally, a single transaction … bond … will be executed in an amount not less 
than the total entered value plus all duties, taxe s, and fees which apply, unless the  
merchandise being imported falls into one of the  following categories.  In these cases, 
the bond will be executed in an amount which is not less than three times the total 
entered value of the merchandise.  
1. Merchandise Su bject to Other Agency Requirements Where Failure to Redeliver 
Could Pose a Threat to the Public Health and Safety  
 
A) Food and Drug Administration (FDA) – All 
… 
 
                                                      
48 19 U.S.C. §1504 (US Ex. 11).  
49 19 C .F.R. §142.4 (a) (1999 ) (US Ex. 11) . 
50 The Customs Directive No. 099 3510 -004, Monetary Guidelines for Setting Bond Amo unts, 
23 July 1991 (the "Customs Directive") (US Ex. 4).  
51 Ibid., pp. 3 -4. WT/DS165/R  
Page 11 
 
 
G) Toxic Substances Control Act (TOSCA) – All"52 
 
2.32 However,  Section 113.13 (d) of the CFR, Vol. 19 s ets forth the authority of the port director to 
impose additional security requirements as follows : 
"(d) Additional security.  Notwithstanding the provisions of this section or any 
other provision of this chapter, if a port director … believes that accepta nce of a 
transaction secured by a continuous bond would place the revenue in jeopardy or 
otherwise hamper the enforcement of Customs law or regulations, he shall require 
additional security. "53 
2.33 Accordingly, the Guidelines provide that the standard formulas mentioned in paragraphs 2.30 
and 2.31 above shall not be applied if "any district director is aware that either extraordinary 
circumstances or a greater risk to the government involved. "54  In such c ases, the Guidelines require 
that: 
"the district director with such knowledge shall contact the district where the bond is 
filed and convey the supporting facts so that appropriate action, if required, can be 
taken.  For example, where the amount of a cont inuous bond does not cover the duty 
on a particular shipment and the district director suspects that a greater risk to the 
government is involved, the district director shall:  
1. secure, at the time of release, deposit of the estimated duty due on the 
shipment, or,  
2. request a single entry bond for that shipment, or  
3. request that a new continuous bond in a higher amount be filed. "55 
2.34 Based upon the US data for February  1999 , continuous bonds were used for approximately 
97  per cent of all entries made in t hat month, versus 3 per cent use of single transaction bonds.  For 
entries from EC countries, approximately 94 per cent of entries in February 1999 were made using 
continuous bonds, versus 6 per cent use of single transaction bonds.56 
2.35 As of 3  March  1999, th e binding tariff rates and applicable tariff rates  of the United  States  
with respect to the listed products were as follows:  
Products  HTS Number  Binding /Applied Rate  
Pork, dried smoked  0210.19.00  $0.015/kg  
Pecorino cheese  0406.90.57  Free 
Sweet biscuit  1905.30.00  Free 
Bath preparations  3307.30.50  4.9%  
Candles, tapers  3406.00.00  Free 
                                                      
52 Ibid., pp. 4 -5. 
53 19 C .F.R. §113.13 (d) (1999) (US Ex. 6)  
54 Customs Directive, op.  cit., p. 3.  
55 Ibid. 
56 US Responses to Additional Questions  of the Panel , dated 10 February 2000  (Appe ndix 2.10 to this 
Panel Report) , para. 13. WT/DS165/R  
Page 12 
 
 
Plates, sheets, film  3920.20.00  4.2%  
Handbags, plastic  4202.22.15  18% 
Pocketbooks, plastic  4202.32.10  $0.121/kg + 4.6%  
Felt paper and paperboard  4805.50.00  Free 
Foldin g cartons  4819.20.00  1.4%  
Lithographs  4911.91.20  $0.066/kg  
Sweaters, cashmere  6110.10.10  5.8%  
Bed linen, cotton  6302.21.90  7.2%  
Lead -acid storage batteries  8507.20.80  3.5%  
Coffee or tea makers  8516.71.00  3.7%  
*US Ex. 7.  
D. DEVELOPMENTS IN THE UNITED  STATES AFTER 3 MARCH  1999  
2.36 On 19 April 1999, the USTR determined that "effective April 19, 1999, a 100  per cent  ad 
valorem  rate of duty shall be applied to [certain] articles that are of the products of certain EC 
member States",57 following which the port dire ctors were instructed to assess 100  per cent  duties on 
those products, and accordingly 100  per cent  duty deposits were required at the time of entry from 
19 April 1999.58  The selected products were (i) bath preparations, other than bath salts; (ii) handbag s, 
plastic; (iii)  pocketbooks, plastic; (iv) felt paper and paperboard; (v) folding cartons; (vi) lithographs, 
(vii) bed linen, cotton; (viii) lead -acid storage batteries; and (ix) coffee or tea makers (except for those 
from Italy).59 
2.37 The following charts i ndicate the fluctuations  (on a monthly basis and on the basis of the 
average of a preceding 12 -month period)  in the total value of imports from the 
European  Communities during the period from January 1997 to September 1999, with respect to  (i) 
those produc ts contained in the 3  March list, and subject to the 19 April action (Chart A)60, and (ii) 
those products contained in the 3  March list but not subject to the 19 April action (Chart B)61: 
                                                      
57 64 Fed. Reg. 19209 ( EC Annex  X). 
58 US Responses to Additional Questions of the Panel, dated 8 February 2000, para. 20 (Appendix 2.6 
to this Panel Report).  
59 US Ex. 7.  
60 Chart A is derived from the data conta ined in US Ex. 5.  
61 Chart B is derived from the data contained in US Ex. 10.  WT/DS165/R  
Page 13 
 
 
CHART A  
 
 
 
CHART B  
 
 
 
 
III. ARGUMENTS OF THE PAR TIES  
3.1 The arguments of th e parties are set out in their submissions to the Panel (see Appendices 1.1 
through 1.10 for the European  Communities and Appendices 2.1 to 2.10 for the United  States, to this 
Panel Report).  
IV. ARGUMENTS OF THE THI RD PARTIES  
4.1 The arguments of the third parties  are set out in their submissions to the Panel (see 
Appendix  3 for Dominica and St. Lucia, Appendix 4 for Ecuador (original Spanish), Appendix 5 for 
India, Appendix 6 for Jamaica, and Appendix 7 for Japan, to this Panel Report.  
Total Imports
Goods NOT Subject to Increased Duties
05000000100000001500000020000000250000003000000035000000400000004500000050000000
Jan-97Mar-97May-97Jul-97S ep-97Nov-97 Jan-98Mar-98May-98Jul-98S ep-98 Nov-98 Jan-99Mar-99May-99Jul-99S ep-99US$
050000000100000000150000000200000000250000000300000000350000000400000000
US$
Months 12 Months
Total Imports
Goods Subject to Increased Duties
050000001000000015000000200000002500000030000000
Jan-97Mar-97May-97Jul-97S ep-97Nov-97Jan-98Mar-98May-98Jul-98S ep-98Nov-98Jan-99Mar-99May-99Jul-99S ep-99US$
050000000100000000150000000200000000250000000
US$
Months 12 MonthsWT/DS165/R  
Page 14 
 
 
V. INTERIM REVIEW  
5.1 On 27 March b oth the United  States and the European  Communities requested the Panel to 
review the interim report which had been issued to the parties on 13  March 2000.  On 29 March, the 
European  Communities reacted in writing to the US request.  On 30 March the United  States 
requested permission from the Panel to respond to the latest EC comments within 5 days.  On 
31 March the Panel granted this request and invited the United  States to send its response to the EC 
comments by 4 April.  On 4 April the United  States sent us its last set of comments.   
5.2 In its request for review, the United  States submitted four main comments and suggested 
other changes to our description of the facts of this case.  The European  Communities, in addition to 
commenting on the US request for re view, also requested the Panel to review mainly two aspects of 
the Panel's findings.  
5.3 First, the United  States argued that in the interim report the Panel reached conclusions on 
Articles 3.7 and 23.2(a) of the DSU for which the European  Communities has not  submitted any 
claim or any arguments.   
5.4 With reference to Article  23.2(a), the European  Communities responded that the 
United  States was attempting to redefine the scope of this dispute and re -argue Article  23.2(a).  It 
insisted that in its written and or al submissions it referred to all the discussions and conclusions of the 
Panel Report on US - Section 301 .  In particular, the European  Communities quoted paragraph 20 of 
its first written submission:  
"… This course of events confirms that the USTR impleme nted the further action 
(unilaterally ) decided upon only on the basis of its domestic legislation  and thus 
irrespective  of whether that action conformed to the requirements of Article  23; 
paragraphs 1 and 2, of the DSU."62 (underlined on the EC original, it alics added)  
The European  Communities reiterated paragraph 14 of its oral presentation at the first substantive 
meeting to the effect that:  
"The guiding principle of Article  23 is contained in paragraph 1 which also governs 
the more detailed provisions of  paragraph 2 since this paragraph starts with the words 
"In such cases, Members shall" by which paragraph 1 is incorporated into paragraph 
2.  As the panel on Sections 301 -310 has stated, Article  23.1 of the DSU prescribes 
that 'Members have to have recour se to the DSU dispute settlement system to the 
exclusion of any other system, in particular a system of unilateral enforcement of 
WTO rights and obligations '."63 (underlined on the EC original)  
Finally, the European  Communities referred to the various notic es published in the Federal Register 
on this case (EC Annexes I, II and III), which deal expressly with both the unilateral determination of 
incompatibility and the unilateral implementation of trade sanctions.  
 
5.5 For the United  States, the above references are not sufficient for the present Panel to reach the 
conclusion that the 3  March Measure was "contrary to Articles 23.2(a) and 21.5, first sentence, 
together with Article  23.1 of the DSU".  Inasmuch as it had no notice that Article  23.2(a) would be the 
subject of Panel findings, the United  States claimed that it did not make any arguments on this 
subject.  
5.6 Second, on the substance of the Panel's discussion regarding the scope of Article  23.2(a) of 
the DSU, the United  States argued that statements made by US TR representatives had no legal 
significance and cannot themselves constitute "determinations".  For the United  States, the ability to 
                                                      
62 EC First Submission, para. 20 (Appendix 1.1 to this Panel Report).  
63 EC Oral Presentation at the First Substantive Meeting, para. 14 (Appendix 1.2 to this Panel Report).  WT/DS165/R  
Page 15 
 
 
take such a position for the purposes of asserting its rights under Article 22 of the DSU, is an inherent 
part of the exe rcise by a Member of its rights under the DSU.  The European  Communities responded 
that public statements constitute evidence of the nature of the 3  March Measure but are not measures 
themselves.  
5.7 Third, the United  States reiterated that the increased bondi ng requirements of the 3  March 
Measure did not create any liability additional to the US tariff bindings.  The European  Communities 
agreed with the conclusions reached by the Panel on this matter.    
5.8 The Panel notes that in its request for establishment of  a panel the European  Communities 
claimed violations of Articles 3, 21, 22 and 23 of the DSU.64  Section 3.3 of the EC first submission is 
entitled "The violation of Article  23 and Article 3 of the DSU".65  For us the ordinary meaning of the 
last sentence of  Article 3.7 of the DSU is clear when it provides that the suspension of concessions or 
other obligations is to be used as a last resort "subject to authorization by the DSB of such measures".  
In paragraph 5 of its first submission, the European  Communiti es refers to the three notices in the US 
Federal Register and states that "This proposed action was based on the unilateral determination by 
the United  States that "the measures the EC has undertaken to apply as of January 1, 1999 fail to 
implement the WTO  recommendations concerning the EC banana regime".66  In its first submission, 
the European  Communities refers to the US measures being in contravention of the requirements of 
Article  23, paragraphs 1 and 2.67  In paragraph 86 of its rebuttals, the European  Communities argues 
that "Article  23.1 and 23.2(a) of the DSU specify that such a finding (which in the terminology of 
Article  23 is called a 'determination') can only be made under the rules and procedures of the DSU".68  
The Panel also notes the arguments made by the European  Communities, as quoted above in 
paragraph 5.4. 
5.9 In paragraph 6.17 of our findings, we state that Article  23.1 contains a general obligation that 
any Member that "seeks the redres s" of a WTO violation shall do so within the institutional 
framework of the WTO.  We also reiterate the conclusions of the US - Section 301  Panel Report that 
paragraph 2 of Article  23 only provides "examples" of conduct that may contravene the rules of the  
DSU and which, if they take place when a Member is seeking to redress a WTO violation, constitute a 
violation of Article  23.1.69  In other words, as we discuss in our findings, when a measure is taken in 
the context described in the first paragraph of Arti cle 23 – i.e., when a Member is seeking the redress 
of a WTO violation – such measure, if taken outside the institutional framework of the WTO or in a 
manner inconsistent with the DSU, violates Article  23.1 of the DSU.   
5.10 In the Panel's view, the main claim  of the European  Communities is that on 3  March  1999 the 
United  States acted unilaterally, contrary to the fundamental obligation of Article  23 of the DSU.  We 
recall that Article  23.1 provides that when a Member seeks the redress of a WTO violation it sha ll 
have recourse to and abide by the DSU.  The more specific allegations of DSU inconsistencies only 
serve to provide examples of how the United  States did not "abide by" the rules of the DSU.  Since, in 
our view, the 3  March Measure is inconsistent with A rticles 3.7, last sentence, 22.6, 23.2(c), 21.5 and 
23.2(a), the United  States by introducing the 3  March Measure did not abide by the DSU.  Given that 
the 3  March Measure took place while the United  States was seeking to redress a WTO violation, the 
Unite d States violated Article  23.1 of the DSU.  
5.11 In addition, as we stated throughout our findings, we consider that the very wording of 
Article  23.1 covers situations where a Member seeks to redress any WTO violation, whether 
determined by a WTO adjudicating bo dy or unilaterally.  It would be ludicrous if the first paragraph 
                                                      
64 WT/D S165 /8. 
65 EC First Submission (Appendix 1.1 to this Panel Report).  
66 Ibid., para. 5.  
67 Ibid., para. 20.  
68 EC Rebuttal Submission, para. 86 (Appendix 1.5 to this Panel Report).  
69 Panel Report on United  States  – Sections 301 -310 of the Trade Act of 1974 ("US – Section 301 "), 
adopted on 27 January 2000, WT/DS152/R, para. 7.39.  WT/DS165/R  
Page 16 
 
 
of Article  23, which contains the general prohibition against unilateral actions, condemned only 
situations where a Member takes unilateral sanctions following a WTO - determined violation, 
without prohibiting situations where a Member determines unilaterally that a WTO violation has 
taken place before taking unilateral trade sanctions.  For us, therefore, the prohibition against 
unilateral determination is contained in the first paragraph of  Article  23 and the 
European  Communities has clearly made claims under Article  23 paragraphs 1 and 2.  
5.12 The United  States seems to be arguing that had it known that there was a claim challenging its 
3 March unilateral action, it would have been able to defe nd itself better.  We consider, on the 
contrary that the United  States was given ample opportunities to defend itself.  In its first submission, 
the European  Communities presented the dispute as one where USTR had "imposed trade sanction by 
effectively sto pping trade.  This course of events confirms that the USTR implemented the further 
action (unilaterally) decided upon only on the basis of its domestic legislation and thus irrespective of 
whether that action conformed to the requirements of Article  23, pa ragraphs 1 and 2".70  In its oral 
statements to the Panel at the first substantive meeting and in its rebuttals the European  Communities 
refers to various official statements from USTR all of which provide clear evidence of the nature of 
the EC claims.71 
5.13 Notwithstanding the serious allegations of violation of Article  23 of the DSU, throughout this 
panel process the United  States concentrates its arguments and discussions on the technicalities of its 
Customs Service's bonding requirements and the changes it pu t in place as of 3  March  1999 on listed 
imports from the European  Communities.  However, the issues before this Panel are not limited to 
bonding requirements.  The evidence before us demonstrates that the United  States was seeking to 
impose trade sanctions  against the European  Communities.  In this respect, we recall that the ordinary 
meaning of the terms " seek the redress" (the term used in Article  23.1) is "look for, try to obtain or 
bring about"72, implying a desire, an effort (successful or not) to "redr ess".  For us, it is clear from the 
evidence that the United  States was trying to impose trade sanctions - the ultimate remedy under 
WTO law - against listed imports from the European  Communities.  The various statements, 
declarations and other internal me mos of USTR and the US Customs Services confirm the context of 
the 3  March Measure, as a measure whereby the United  States was seeking the redress of what it had 
unilaterally determined to be a WTO violation.  
5.14 In addition, even if we were to accept the US a rgument that the ability to take such a public 
position (that the EC implementing measure violated the DSU) for the purposes of asserting its rights 
under Article 22 of the DSU, is an inherent part of the exercise by a Member of its rights under the 
DSU, w e are of the view that the unilateral determination made with the 3  March Measure was not of 
the nature of what was necessary for the United  States to assert and exercise its rights under 
Article  22.  Article  23.2(a) a contrario  authorises Members to make determinations through recourse 
to the DSU and consistent with findings of panels, the Appellate Body or arbitration.  When, in 
January 1999, the United  States required a DSB authorization pursuant to Article 22, it had to have 
reached an internal decision  that the EC implementing measure was WTO inconsistent.  (Since the 
United  States needed to come up with a proposal for sanctions, it means that the United  States needed 
to have decided previously that the implementing measure was, in its view, WTO inconsi stent.)  This 
US decision was a form of "determination", but one that is legal since made "through recourse to 
dispute settlement in accordance with" the DSU, namely, as required under Article 22.  However on 
3 March, when the United  States decided to act outside of the DSU process, it made a unilateral 
determination that the EC implementing measure was WTO inconsistent.  In doing so, the 
United  States was not (anymore) making a determination through the recourse of the DSU; in doing 
so the United  States di d not abide by the DSU.  The 3  March Measure in seeking the redress of a 
unilaterally determined WTO violation was inconsistent with Articles 23.2(a) and 21.5, and thus 
necessarily violated Article  23.1.   
                                                      
70 EC First submission, para. 20 (Appendix 1.1 to this Panel Report).  
71 E.g. EC Oral Presentation at the First Substantive Meeting, para. 10 (Appendix 1.2 to this Panel 
Report), and EC Re buttal Submission, para. 2 (Appendix 1.5 to this Panel Report).  
72 The New Little Oxford Dictionary.  WT/DS165/R  
Page 17 
 
 
5.15 We reiterate that on 3  March the United  States had  no right - no DSB authorization - to 
collect import duties above its bindings.  In putting in place increased bonding requirements to secure, 
as of 3  March, the payment of tariff duties up to 100 percent on listed imports from the 
European  Communities, th e United  States unilaterally began enforcing a right that it did not have, as 
bonding requirements are of the nature of a security and an enforcement mechanism.  
5.16  Fourth, the United  States also challenges our understanding of the US interpretation of the 
mandatory nature of the 60 day time -period within which an arbitration pursuant to Article 22.6 is to 
take place.  For us this US interpretation was clear from the public records of the minutes of the DSB 
and the Article 22.6 DSU Decision of the Arbitrators  of 9 April 199973 in EC – Bananas III .  The 
main point of our findings is that on 3  March, when it put in place the increased bonding 
requirements, the United  States had not requested the retroactive application of the suspension of 
concessions and should have known that.  On 3  March, therefore, it could not claim that it was 
entitled to secure an eventual retroactive right to collect 100 per cent  import tariffs on listed imports 
from the European  Communities.  
5.17 The United  States also argues that there is no  evidence that there were any interest charges, 
costs or fees.  We refer the United  States to paragraph 6.42 below where the Panel proceeds to an 
estimation of the costs of any such 3  March increased bonding requirements based on the evidence 
submitted by the United  States.  With regard to the United  States' discussion relating to the ordinary 
US Customs Service practices and what is allowed under Article 13 of the Agreement on Customs 
Valuation, we reiterate, again, that it is not our mandate to assess the bonding requirements practices 
of the US Customs Services in general.  
5.18 With a view to ensuring the clarity of this Panel Report, and taking into account our 
discussion on the nature of the first sentence of Article 21.5 prohibi ting unilateral determination of the 
WTO inconsistency of implementing measures, we have revised our findings in line with the above 
discussion.  We have also taken into account other comments made by the United  States, including 
calculation mistakes and i mproved our findings accordingly.  
5.19 The European  Communities is asking us to review our description of its claim with reference 
to the WTO inconsistency of some of the aspects of the Article 22.6 Arbitration Decision of 9 April 
(WT/DS27/ARB).  The European  Communities has also asked us to make others changes to our 
description of some of its arguments.  We have carefully reviewed the submissions and oral 
statements of the European  Communities and revised our draft accordingly.  We would like, however, 
to emp hasise some points.  
5.20 In its rebuttals, the European  Communities argues that the US action of 19 April was nothing 
but a confirmation of the 3  March measure74.  The European  Communities continues and argues that 
the "United  States in the Bananas  dispute [had]  recourse to a request for authorization of the 
suspension of concessions or other obligations based on a unilateral determination that the EC failed 
to honour its WTO obligations".75  For the European  Communities this was so because the 
United  States had n ot in hand an Article 21.5 panel report on the assessment of the WTO 
compatibility of the EC implementing measure when it requested the DSB authorization to retaliate.  
The European  Communities then argues that because on 3  March the United  States was in v iolation of 
Article 21.5, and because the 19 April action is only a confirmation of the 3  March Measure, on 
19 April the United  States was still in violation of Article 21.5.  In other words, the 3  March violation 
was of a continuing nature.  The European  Communities claims that a refusal from this Panel to 
                                                      
73 WT/DS27/ARB.  
74 This was a reiteration of the EC argument developed in its rebuttals.  See para. 20 of the EC Rebuttal 
Submission (Appendix 1.5  to this Panel R eport).  
75 EC Oral Presentation at the Second Substantive Meeting, §II (Appendix 1.8 to this Panel Report).  WT/DS165/R  
Page 18 
 
 
answer its request as to the nature of the 3  March Measure's violation would constitute a denial of 
justice.76 
5.21 We recall that the reason why the European  Communities considers that the 3  March Measure 
violates Article 21.5 of the DSU is because the European  Communities is of the view that a 
determination of the WTO compatibility of the EC implementing measure can only be done by an 
Article 21.5 panel and cannot be performed by the original panel through an  arbitration procedure 
pursuant to Article 22.6 of the DSU.  In this respect, the European  Communities considers that the 
determination of the WTO compatibility of the EC implementation measure performed by the 
Article  22.6 Arbitration Decision of 9 April 1999 is thus invalid.  This is why the 
European  Communities takes the position that this Panel did not even need to mention the Article 22.6 
Arbitration Decision given that for the European  Communities that 9 April Arbitration Decision was 
concerned exclus ively with the level of nullification and impairment of the revised EC Bananas 
regime.  
5.22 We disagree with the European  Communities.  We rather find that on 3  March there was a 
valid ongoing WTO adjudicating process on the determination of the WTO compatibili ty of the EC 
implementing measure.  But on 3  March, contrary to what was the case on 19 April, this adjudicating 
body (the Arbitration panel acting pursuant to Article 22.6) had not completed its work.  
5.23 We have therefore changed the wording of some paragrap hs of this panel report to ensure a 
better understanding of our discussion.  We have also taken into account other comments made by the 
European  Communities and revised our findings accordingly.      
VI. FINDINGS  
A. INTRODUCTION  
6.1 This dispute concerns an alleged u nilateral retaliation measure77 taken on 3  March  1999 by 
the United  States against listed imports from the European  Communities, contrary to the WTO 
Agreement.  
                                                      
76 The statement of the European  Communities to the Panel was: "This aspect of the present case has a 
bearing not only on the legal ba sis for the viol ations about which the EC complains, but also on the question 
whether the violation is of a continuing nature. As the Panel will easily understand, this aspect of the case is 
therefore of fundamental importance for the EC. If the Panel find s in favour of t he EC on this decisive point, the 
suspension of concessions is and remains inconsistent with the US obligations both for the initial list of 
3 March  1999, which constitutes Annex 1 to the EC’s request for the establishment of the Panel, and  for the 
reduced  list of 19 April 1999 which constitutes Annex 2 to the EC’s request for the establishment of the Panel. 
The EC believes that it is entitled to receive an answer from the Panel with regard to this important claim on 
which the parties clearl y have a disagre ement with very important legal and practical consequences in the 
present case. A denial of justice on this point would necessarily lead to continuing legal uncertainty and more 
litigation. The EC has already pointed out in its written subm issions that the re was no justification to resort to 
the suspension of concessions or other obligations in the present case, neither on 3  March  1999 nor on 
19 April  1999. The WTO -inconsistency of the 3  March measure could not "healed", by the authorization  of the 
DSB of 1 9 April 1999 simply because it was legally flawed from the outset. The EC repeats that in this context, 
the DSB authorization of 19 April 1999 was a necessary, but not a sufficient prerequisite for the suspension of 
concessions or other obl igations." EC Fi nal statement 2nd meeting.  This statement was a reiteration of the EC's 
arguments contained in its rebuttals.  See for instance paras. 78, 81 and 82 of the EC Rebuttal Submission 
(Appendix 1.5 to this Panel Report):  "However, in the case of the US, such a  decision by the DSB [speaking of 
Article 21.5 of the DSU] was missing on 3  March, was also missing on 19 April and is still missing today…  In 
conclusion, the EC reiterates that the contested US measure of 3  March  1999, confirmed  on 19 April 1999, is 
inconsistent with Article 21.5 of the DSU.  This inconsistency … was equally not healed by the authorization… 
granted by the DSB on 19 April 1999".  
77 In its First Submission, para.20 (Appendix 1.1 to this Panel Report), the European  Communities 
makes allegati on of "trade sanctions" imposed by the United  States.   We discuss briefly these various concepts 
hereinafter.  WT/DS165/R  
Page 19 
 
 
6.2 On 3  March the USTR press release provided as follows:  
"United  States Takes Customs Action on Eu ropean Imports  
[E]ffective today, the U.S. Customs Service will begin 'withholding liquidation' on 
imports valued at over $500 million of selected products from the European Union 
(EU), consistent with U.S. rights under the WTO agreements.  Withholding 
liquidation imposes contingent liability for 100 per cent duties on affected products as 
of March 3, 1999."78 
6.3  On 4 March 1999, the European  Communities requested consultations with the United  States 
with regard to a US decision effective as of 3  March  1999 re quiring additional bonding requirements 
in respect of listed imports from the European  Communities upon importation.79  
6.4 The European  Communities requested that the DSB establish a panel:  
"with respect to the US decision, effective as of 3  March  1999, to wit hhold 
liquidation on imports from the EC of a list of products, together valued at 
$520  million on an annual basis, and to impose a contingent liability for 100  per cent  
duties on each individual importation of affected products as of this date (annex 1 [t o 
the request]).  This measure includes administrative provisions that foresee, among 
other things, the posting of a bond to cover the full potential liability."80 
The measure at issue is hereinafter referred to as the "3  March Measure" and is described in 
paragraphs 1.4 and 1.5 of this Panel Report.  We note that the 3  March Measure was put in place as of 
3 March pending the release of the Arbitrators' final decision.81  We are also aware that on 19 A pril 
the United  States took a distinct legal action against a reduced list of imports from the 
European  Communities pursuant to the 19 April DSB authorization82. 
6.5 On 16 June 1999 the Dispute Settlement Body (DSB) established the present Panel with the 
mandat e to examine the request of the European  Communities.  The European  Communities claims 
that the 3  March Measure is inconsistent with Articles 23.1 and 23.2 (in particular 23.2(c)), 3.7, 21.5, 
and 22.6 of the DSU and with Articles I, II, VIII and XI of GATT .    
6.6 The 3  March Measure resulted83, in most cases, in increased levels of bonding requirements 
on listed imports (which the United  States calls the "retaliation list" 84) from the 
European  Communities (hereinafter referred to as "the EC listed imports").  T he bonding 
requirements generally applicable to the EC listed imports and the 3  March increased bonding 
requirements are described in paragraphs 2.24 to 2.34 of this Panel Report85. 
                                                      
78 USTR Press Release, dated 3  March  1999, "United  States Takes Customs Action on European 
Imports" (EC Annex VII).  
79 See WT/DS165/1 and para. 1.2 of this Panel Report.  
80 WT/DS165/8.  
81 See the USTR Press Release, dated 3  March  1999, "United  States Takes Customs Action on 
European Imports" (EC Annex VII).  
82 WT/DSB/M/59.  
83 US First Submission, par as. 33 -34 (Appendix 2.1 to this Panel Report ), and US Responses to 
Additional Questions of the Panel, dated 8 February 2000, paras. 3 to 5 (Appendix 2.6 to this Panel Report ). 
84 Expression used by Deputy USTR, EC Annex X.  See the list of such identified i mports from the 
European  Communities at para. 2.24 of this Panel Report.  
85 We further discuss our understanding of the 3  March increased bonding requirements in paras. 6.46 
to 6.51 of this Panel Report.  WT/DS165/R  
Page 20 
 
 
B. EC CLAIMS AND US DEFENSES UNDER THE DSU  AND GATT  1994  
1. The EC claims  
6.7 We understand the EC claims as being three -fold.  First, the European  Communities argues 
that on 3  March  1999 the United  States "imposed trade sanctions by effectively stopping trade"86.  In 
doing so, the U nited  States acted unilaterally, contrary to Articles 23.1 and 23.2, and 3.7 of the DSU 
and Articles I, II, VIII and XI of GATT 1994. Secondly, the 3  March Measure contravenes the 
provisions of Article 22.6 in that it constitutes a suspension of concession s or other obligations which 
was imposed by the United  States while the arbitration process pursuant to Article 22.6 -22.7 of the 
DSU was still ongoing.  Thirdly, the European  Communities submits that the United  States also 
violated Article 21.5 of the DSU because it had not exhausted this procedure when it requested DSB 
permission to suspend concessions or other obligations in respect of the EC listed imports.  For the 
European  Communities such a violation is of a continuing nature.  For the European  Commun ities, 
the 19 April action is only a confirmation of the US Measure of 3  March and it argues that a "[DSB 
decision adopting an Article 21.5 panel report] was missing on 3  March, was also missing on 19 April 
and is still missing today"87.  In the European  Communities' view, the WTO inconsistency of the 
3 March Measure could not have been healed by the DSB authorization of 19 April because it was 
flawed from the outset: the DSB authorization of 19 April 1999 was a necessary, but not a sufficient 
prerequisite f or the US suspension of concessions or other obligations.  
2. The US defenses  
6.8 The United  States' response is that the 3  March Measure did not constitute a suspension of 
concessions or other obligations: requiring bonds upon importation is a normal practice of  the US 
Customs Service (and of many other Members including the European  Communities), and is 
explicitly authorised by Article 13 of the Customs Valuation Agreement.  For the United  States, the 
3 March Measure did not violate Articles I, II and VIII or XI  of GATT.  The United  States argues that 
it did not violate Article  23 of the DSU:  it only took action in order "to preserve its rights" to collect 
duties as of 3  March and duties were neither assessed nor collected on 3  March.  The United  States 
adds tha t it did not violate Article 21.5 because there is a conflict between the time prescriptions of 
Article 21.5 and those of Article 22 which should be resolved in favour of the US interpretation, since 
it is clear that the DSB must be requested to authorise suspension within 30 days of the expiry of the 
reasonable period of time.  Otherwise, according to the United  States, the reverse consensus rule 
would no longer apply.  For the United  States, the US action of 19 April and the 19 April DSB 
authorization are  not matters before this Panel.  Finally, the United  States submits that the 
European  Communities unduly delayed both the US request for an Article 21.5 WTO compatibility 
assessment before the expiry of the reasonable period of time and the Article 22.6 ar bitration process.  
For the United  States, if the DSU procedural stages had been respected, the arbitration report 
authorising WTO compatible suspension of concessions or other obligations would have been issued 
to the parties before 3  March  1999.  
C. US REQUE ST FOR A PRELIMINARY  RULING  
6.9 On 21 January 2000, in the cover letter of its Rebuttal Submission, the United  States 
requested "the Panel to clarify, prior to the outset of the second substantive meeting, the measures that 
it considers to be within the Panel' s terms of reference…".  
6.10 The European  Communities responded, in its letter dated 24 January 2000, that the "Panel 
should not accede to this request at this late stage of the proceedings before it (…) unless the 
United  States was able to show 'good cause' fo r granting an exception".88 
                                                      
86 EC First submission, para. 20 (Appendix 1.1 to this Panel Report).  
87 EC Second submission, paras. 77 -78 (Appendix 1.5 to this Panel Report).  
88 EC Letter dated 24 January 2000 (Appendix 1.6 to this Panel Report).  WT/DS165/R  
Page 21 
 
 
6.11 On 9 February 2000 (at the beginning of the second substantive meeting of the Panel), the 
Panel heard the views of the parties on this matter.  On the same day, the Panel ruled that:  
"9. Implicit in the US request for this ruling  would appear to be a concern that 
this Panel may be going beyond its terms of reference, namely in examining measures 
other than that of 3  March  1999.  
10. The claims from the European  Communities as well as the defense submitted 
by the United  States obli ge us to understand what was effectively done on 3  March, if 
anything, in comparison with what is usually done on those listed imports or what 
was done on the same listed imports on 19 April 1999.   The EC claims also oblige us 
to be fully informed of the sequence of events that surrounded the 3  March decision, 
including that of 19 April.  
11. Some of the Panel's questions to the parties, and in particular to the United  
States, relate to the normal US bonding requirements, the bonding requirements 
imposed as  of 3 March on listed imports, and any subsequent US actions that may 
clarify the nature and effect of the 3  March Measure.  The Panel considers that the US 
replies to these questions are important to the Panel's understanding of the matter at 
issue.  
12. We note that in its report on Argentine – Measures Affecting Imports of 
Footwear, Textiles, Apparel and Other Items  (WT/DS56/R, para. 6.63) the panel did 
examine events that took place after the date of the measure at issue for the purpose 
of understanding  the way the Argentinian tariff system worked.  
13. Accordingly, we shall continue to limit ourselves to our terms of reference 
and to the measure therein identified, keeping in mind that events surrounding the 
3 March Measure may have to be addressed in or der for the Panel to provide an 
answer to the claims at issue.  
14. Finally, we are aware of our duties, pursuant to Article 11 of the DSU, to 
perform an objective assessment of the facts and the law applicable to the matter at 
issue."  
D. EC CLAIMS THAT THE 3 MARCH MEASURE VIOLATED ARTICLES 23 AND OTHERS OF THE DSU  
1. Claims under Article  23 
(a) Article  23 of the DSU as a whole  
6.12 We understand that the core of the EC claims is that the 3  March Measure is a 'trade sanction' 
that contravenes Article  23, first and second  paragraphs.  
6.13 The Panel believes that the adopted Panel Report on United  States  – Sections 301 -310 of the 
Trade Act of 1974  ("US – Section 301 ")89 has confirmed the crucial importance that WTO Members 
place on the dispute settlement system of the WTO, as th e exclusive means to redress any violations 
of any provisions of the WTO Agreement.90  This fundamental principle is embedded in Article  23 of 
the DSU:  
"Strengthening of the Multilateral System  
 
                                                      
89 Panel Report on US – Section 30 1. 
90 See the numerous statements of Members at the DSB meeting of 27 January 2000, WT/DSB/M/74 
approving the content of that Panel Report.  WT/DS165/R  
Page 22 
 
 
1. 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.  
2. In such cases, Members shall:  
(a)  not make a determination to the effect that a violation has occurred, that 
benefits have been nullified or impaired or that the attainment of any objective 
of the covered agreements has been impeded, except through recourse t o 
dispute settlement in accordance with the rules and procedures of this 
Understanding, and shall make any such determination consistent with the 
findings contained in the panel or Appellate Body report adopted by the DSB 
or an arbitration award rendered u nder this Understanding;  
(b)  follow the procedures set forth in Article 21 to determine the reasonable period 
of time for the Member concerned to implement the recommendations and 
rulings;  and  
(c) follow the procedures set forth in Article 22 to determin e the level of 
suspension of concessions or other obligations and obtain DSB authorization in 
accordance with those procedures before suspending concessions or other 
obligations under the covered agreements in response to the failure of the 
Member concerne d to implement the recommendations and rulings within that 
reasonable period of time."  
6.14 An important reason why Article  23 of the DSU must be interpreted with a view to 
prohibiting any form of unilateral action is because such unilateral actions threaten th e stability and 
predictability of the multilateral trade system, a necessary component for "market conditions 
conducive to individual economic activity in national and global markets"91 which, in themselves, 
constitute a fundamental goal of the WTO.  Unilat eral actions are, therefore, contrary to the essence of 
the multilateral trade system of the WTO.  As stated in the Panel Report on US – Section 301 : 
"7.75  Providing security and predictability to the multilateral trading system is 
another central object a nd purpose of the system which could be instrumental to 
achieving the broad objectives of the Preamble.  Of all WTO disciplines, the DSU is 
one of the most important instruments to protect the security and predictability of the 
multilateral trading system and through it that of the market -place and its different 
operators.  DSU provisions must, thus, be interpreted in the light of this object and 
purpose and in a manner which would most effectively enhance it."92 
6.15 In the US - Section 301  dispute, the Panel wa s convinced that the legislation at issue had to be  
examined both from the perspective of the damage it causes to Member governments and from the 
perspective of the damages caused to the market -place itself.  The following statement regarding the 
mere exi stence of a law that would allow for some unilateral actions to be taken, is even more relevant 
in specific instances of unilateral measures, such as those at issue in the present case:  
"…[unilateral actions] may prompt economic operators to change their c ommercial 
behaviour in a way that distorts trade.  Economic operators may be afraid, say, to 
continue ongoing trade with, or investment in, the industries or products threatened 
by unilateral measures.  Existing trade may also be distorted because economic  
                                                      
91 Panel Report on US – Section 301 , op. cit., para. 7.71.  "T he purpose of many of the  GATT/WTO 
disciplines, indeed o ne of the primary objects of the GATT/WTO as a whole, is to produce certain market 
conditions which would allow this … activity to flourish."  Ibid., para.7.73.  
92 Ibid., para. 7.75.  WT/DS165/R  
Page 23 
 
 
operators may feel a need to take out extra insurance to allow for the illegal 
possibility that the legislation contemplates, thus reducing the relative competitive 
opportunity of their products on the market.  Other operators may be deterred from 
trading  with such a Member altogether, distorting potential trade…."93  
6.16 The ordinary meaning of the terms used in Article  23.1 is plain and clear:  
23.1 When Members seek the redress of a violation  of obligations or other 
nullification or impairment of benefits un der 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. 
(emphasis added)  
6.17 The structure of Article  23 is that the fi rst paragraph states the general prohibition or general 
obligation, i.e. when Members seek the redress of a WTO violation94, they shall do so only through 
the DSU. This is a general obligation.  Any attempt to seek "redress" can take place only in the 
institutional framework of the WTO and pursuant to the rules and procedures of the DSU.  
6.18 The prohibition against unilateral redress in the WTO sectors is more directly provided for in 
the second paragraph of Article  23. From the ordinary meaning of the terms use d in the chapeau of 
Article  23.2 ("in such cases, Members shall"), it is also clear that t he second paragraph of Article  23 is 
"explicitly linked to, and has to be read together with and subject to, Article  23.1"95.  That is to say, 
the specific prohibition s of paragraph 2 of Article  23 have to be understood in the context of the first 
paragraph, i.e. when such action is performed by a WTO Member with a view to redressing a WTO 
violation.  
6.19 We also agree with the US – Section 301  Panel Report that Article  23.2 contains "egregious 
examples of conduct that contradict the rules of the DSU"96 and which constitute more specific forms 
of unilateral actions, otherwise generally prohibited by Article  23.1 of the DSU.  
"[t]hese rules and procedures [Article  23.1] clearl y cover much more than the ones 
specifically mentioned in Article  23.2.  There is a great deal more State conduct 
which can violate the general obligation in Article  23.1 to have recourse to, and abide 
by, the rules and procedures of the DSU than the insta nces especially singled out in 
Article  23.2. "(Footnotes omitted)97 
The same Panel identified a few examples of such instances where the DSU could be violated98 
contrary to the provisions of Article  23.   Each time a Member seeking the redress of a WTO viola tion 
is not abiding by a rule of the DSU, it thus violates Article  23.1 of the DSU.  
6.20 In order to verify whether individual provisions of Article  23.2 have been infringed (keeping 
in mind that the obligation to also observe other DSU provisions can be brough t under the umbrella of 
Article  23.1), we must first determine whether the measure at issue comes under the coverage of 
Article  23.1.  In other words, we need to determine whether Article  23 is applicable to the dispute 
before addressing the specific viola tions envisaged in the second paragraph of Article  23 of the DSU 
or elsewhere in the DSU.   
                                                      
93 Ibid., para. 7.90.  
94 Article  23.1 of the DSU refers more accurately to " 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", i.e. the three cause s of actions under WTO.  In thi s Panel Report, 
the expression "WTO violation(s)" refers to all three causes of actions mentioned in Article  23.1 of the DSU.  
95 Panel Report on US – Section 301 , op. cit., para 7.44 
96 Ibid., para. 7.45.  
97 Ibid. 
98 See ibid., f ootnotes 655 and 656 to para. 7 .45.  WT/DS165/R  
Page 24 
 
 
(b) The application of Article  23 to the present dispute  
6.21 Article  23.1 of the DSU provides that the criterion for determining whether Article  23 is 
applicable is whether  the Member that imposed the measure was "seeking the redress of" a WTO 
violation.  The measure in the present dispute is increased bonding requirements as of 3  March on EC 
listed imports.  
6.22 The term "seeking" or "to seek" is defined in the Webster New Encyc lopedic Dictionary  as: 
"to resort to, … to make an attempt, try".  This term would therefore cover situations where an effort 
is made to redress WTO violations (whether perceived or WTO determined violations).  The term "to 
redress" is defined in the New S horter Oxford English Dictionary  as "repair (an action); atone for (a 
misdeed); remedy or remove; to set right or rectify (injury, a wrong, a grievance etc.); obtaining 
reparation or compensation".  The term "redress" is defined in the New Shorter Oxford E nglish 
Dictionary  as: "reparation of or compensation for a wrong or consequent loss; remedy for or relief 
from some trouble; correction or reformation of something wrong". The term 'redress' implies, 
therefore, a reaction by a Member against another Member , because of a perceived (or WTO 
determined) WTO violation, with a view to remedying the situation.  
6.23 Article  23.1 of the DSU prescribes that when a WTO Member wants to take any remedial 
action in response to what it views as a WTO violation, it is obligated  to have recourse to and abide 
by the DSU rules and procedures.  In case of a grievance on a WTO matter, the WTO dispute 
settlement mechanism is the only means available to WTO Members to obtain relief, and only the 
remedial actions envisaged in the WTO sy stem can be used by WTO Members.99  The remedial 
actions relate to restoring the balance of rights and obligations which form the basis of the WTO 
Agreement, and include the removal of the inconsistent measure, the possibility of (temporary) 
compensation an d, in last resort, the (temporary) suspension of concessions or other obligations 
authorised by the DSB (Articles 3.7 and 22.1 of the DSU).  The latter remedy is essentially retaliatory 
in nature.100 
(i) Was the 3 March  Measure a measure 'seeking the redress of'  a WTO violation?  
6.24 We consider that there is ample evidence before us which demonstrates that when it took the 
3 March Measure, the United  States was seeking redress for a perceived WTO violation by the 
European  Communities, within the meaning of Article  23.1 of the DSU.  
6.25 The USTR Press Release announcing the 3  March Measure confirms its retaliatory nature, as 
a measure seeking to redress.  The official USTR Press Release of 3  March  1999 reads as follows:  
"United  States Takes Customs Action  on European Impor ts 
                                                      
99 This mechanism allows, of course, for consultations to be held outside the WTO.  
100 We note that the United  States often uses the term "to retaliate" or "retaliation".  The terms 
'retaliation' or 'to retaliate' is defin ed in the Webster New Encyclope dic Dictionary  as "to return like for like, to 
get even". In the Black Law Dictionary  (6th Ed.) retaliation refers to lex talionis  which it self is defined as: "The 
Law of retaliation; which requires the infliction upon a wro ngdoer of the same injury which  he has caused to 
another".  Under general international law, retaliation (also referred to as reprisals or counter -measures) has 
undergone major changes in the course of the XX century, specially, as a result of the prohibit ion of the use of 
force ( jus ad  bellum ).  Under international law, these types of countermeasures are now subject to requirements, 
such as those identified by the International Law Commission in its work on state responsibility (proportionality 
etc… see Ar ticle 43 of the Draft).  Howeve r, in WTO, countermeasures, retaliations and reprisals are strictly 
regulated and can take place only within the framework of the WTO/DSU. Elagab Omer Youssif, " The Legality 
of Non -Forcible Counter -Measures in International L aw (1988), Oxford University Pr ess; Boisson de 
Charzournes Laurence, Les contre -mesures dans les relations économiques internationales , (1992) A Pedone; 
Henkin L, Pugh R.C., Schacter O. and Smit H., International Law  (1993), West Publishing, p.570 -571 and 
Chapter 11.  WT/DS165/R  
Page 25 
 
 
[E]ffective today, the U.S. Customs Service will begin  'withholding liquidation' on imports valued at 
over $500 million of selected products from the European Union  (EU), consistent with U.S. rights  
under the WTO agreements.  Withholding liquidation imp oses contingent liability for 100 per cent 
duties  on affected products as of March 3, 1999…  
January 1, 1999, was the deadline for the EU to implement a WTO -consistent banana regime.  The 
EU failed to honor this deadline, thereby entitling the United  State s to suspend tariff concessions 
as early as February 1st on selected European products with the WTO's blessing ."101 (emphasis 
added)  
6.26 On its face, this description of the 3  March Measure shows that, because of the US perceived 
WTO inconsistency of the 1998 Ba nanas regime put in place by the European  Communities as a 
measure taken to implement the Panel and Appellate Body recommendations102 (the "EC 
implementing measure"), the United  States imposed an increased contingent liability on EC listed 
imports only.  Thi s 3 March Measure was, therefore, discriminatory and aimed at the 
European  Communities exclusively.  The unilateral imposition of a liability for 100  per cent  duty as 
of 3 March (well above the bound rates of tariffs) constitutes the imposition of a debt o n such imports, 
and adds further obligations on such imports, even if the full effect of such liability is suspended until 
a future liquidation date.  This debt, this liability, this additional obligation imposed on listed EC 
imports103, is evidence that the  United  States wanted to remedy, was 'seeking to redress', what it 
perceived to be a WTO violation.  
6.27 The request from USTR to the US Customs Service is also revealing.  On 3  March  1999, 
Mr. Peter L. Scher, Special Trade Negotiator of the USTR, wrote to Mr. Raymond W. Kelly, 
Commissioner of the US Customs Service, as follows:  
"….  The [USTR] intends to implement this suspension of tariff concessions by directing the Customs 
Service to impose 100 percent duties, ad valorem , on the products listed in the attach ment to this 
letter.  (See also 63 Fed. Reg. 63099 and 63  Fed. Reg. 71665 giving notice of the proposed increase in 
duties on selected products).  
….  The USTR now seeks to preserve its right  to impose 100 percent duties as of March 3, pending 
the release o f the arbitrators' final decision.  
Therefore, … I further request that the Customs Service today instruct port directors to review the 
sufficiency of bond posted with respect to entries described in the previous sentence, and to take steps 
to provide adequ ate or additional security in accordance with 19 C.F.R. §113.13." 104 (emphasis 
added)  
6.28 It becomes evident that the 3  March increased bonding requirements on EC listed imports was 
part of the retaliation scheme that the United  States had triggered with the S ection 301 -310 
notifications in the Federal Register.105  Although the United  States argues that the 3  March Measure 
was taken pursuant to Article 13(d) of the Code of Federal Regulation106, and not pursuant to the 
Sections 301 -310, it is now clear to us that the United  States took the 3  March Measure in the context 
                                                      
101 USTR Press Releas e, dated 3  March  1999, "United  States takes customs action on European 
imports" (EC Annex VII).  
102 Panel and Appellate Body Reports on EC – Bananas III , op. cit.; for a description of the 1998 EC 
Bananas Regime, see the EC Fir st submission, para. 3 and the US First submission, paras. 15 -17 
(Appendices  1.1. and 2.1 to this Panel Report).    
103 In paras. 6.46 to 6.51 of this Panel Report, we further discuss our understandin g of the actual 
increased of bo nding requirements resulting from the 3  March Measure.  
104 Letter dated 3  March  1999 from Mr. Peter L. Scher, Special Trade Negotiator to Commissioner 
Raymond W. Kelly, US Customs Service (US Ex. 12).  
105 Notification of the USTR , Doc. No. 301 -100a, 22 October  1998, 63 Fed. Reg. 56687; Notification 
of the USTR, Doc. No. 301 -100a, 10 November 1998, 63 Fed. Reg. 63099; and Notification of the USTR, Doc. 
No. 301 -100a, 29 December 1998, 63 Fed. Reg. 71665 (EC Annexes I, II and III).   We recall the definition of 
retaliation in paras. 6.22 and 6.23 of this Panel Report.  
106 US First Submission, para.33 (Appendix 2.1 of this Panel Report) and US Responses to Questions 
of the Panel an d the Parties, dated 13 January  2000, para. 53 (Appendix 2.4 of this Panel report).  WT/DS165/R  
Page 26 
 
 
of the US Section 301 process.107  This is also evidence that the United  States was seeking to "redress 
a WTO violation".  With its 3  March increased bonding requirements, the United  States put in pla ce 
an enforcement remedy, effective as of 3  March.  
6.29 In response to the USTR's request,  Mr. Philip Metzger, Director of the Trade Compliance 
Division of the US Customs Service, in a memorandum of 4 March 1999 ,108 gave the following 
instructions to the Customs  Area and Port Directors.  We note that t he subject of this memo is 
concerned exclusively with the 3  March Measure and is entitled "European Sanctions".109  This shows 
that the United  States was 'seeking' to redress a WTO violation : 
"RE:  European Sanctions…   
Effective for all merchandise classifiable under the Harmonized Tariff Schedule (HTS) subheadings 
listed below, entered, or withdrawn from warehouse, for consumption, on or after March 3, 1999, and 
produced in the listed countries, Area and Port Directors  must require a Single Transaction Bond 
(STB) equal to the entered value of the merchandise.  The only exception to this requirement is, at the 
discretion of the Port Director, the importer of record may use a continuous bond equal to 10 per cent 
of the tot al of the entered value of the covered merchandise imported by the importer for the 
preceding year.  Ports should process increased continuous bonds immediately.  
No entry shall be scheduled to liquidate earlier than the 314th day, thereby ensuring 
the with holding of liquidation as requested by USTR.  … "110 (emphasis added)  
 
6.30 On 16 March 1999, Mr. Philip Metzger, Director of the Trade Compliance Division issued a 
memorandum regarding "Clarification of Bond Requirements for European Sanctions " (emphasis 
added) to the port directors.111  This memorandum indicates that the US authorities considered that the 
increased bonding requirements had been imposed as a 'sanction' against the European  Communities.  
It reads as follows:  
"This memorandum is being issued as resul t of the large number of questions that we have received 
regarding bond sufficiency requirements for merchandise subject to European sanctions .  In an effort 
to establish uniformity for importers and ports, the following bond sufficiency requirements shoul d be 
adhered to by all ports:  
                                                      
107 We recall that the Notifications of the USTR in the Federal Register provided that on 3  March some 
action had to be taken.  For example, "The dates on which the USTR inte nds to implement action – Febru ary 1 
or not later than March 3 …"  Notification of the USTR, Doc. No. 300 -100a, 10 November 1998, 63 Fed. Reg. 
63099 (1998).  On its face  Section 306(b) of the Trade Act requires the USTR to determine what further action 
it shall take under Section 301(a)  if the USTR considers that a foreign country has failed to implement a 
recommendation made pursuant to dispute settlement proceedings under the WTO.  The USTR shall make this 
determination no later than thirty days after the  expiry of the reasonable perio d of time provided for such 
implementation under Article 21.3 of the DSU, which is January 31, 1999 in this case.  Section 305(a)(I) 
requires USTR normally to implement such action by no later than thirty days after the date on which that 
determination is made, or March 2 in this case.  See also Bill H.R. 4761, 9 October 1998, "To require the 
United  States Representative to take certain actions in response to the failure of the European Union to 
comply with the rulings of the World Trade Organization " where  Section 3 paragraph (F) where the Trade 
Representative is mandated to suspend liquidation on EC listed imports "in no event later than 2 March 1999.  
Although a Bill is not binding, it demonstrates that the United  States was  "seeking to redress a WTO viol ation". 
(EC Annex V)  
108 Memorandum  of 4 March 1999  to Customs Area and Port Directors, CMC Directors from  Trade 
Compliance Division, US Customs Service, Regarding European Sanctions (EC Annex  VIII).  
109 In the New Shorter Oxford  English Dictionary , the term " sanction" is defined as "a penalty enacted 
in order to enforce obedience of a law; later more widely, a punishment or reward for disobedience or obedience 
of a law."  In Webster's New Encyclopedic Dictionary , it is defined as  "an economic or military measu re 
adopted usually by several nations against another nation violating international law."  
110 Memorandum  of 4 March 1999  to Customs Area and Port Directors, CMC Directors from  Trade 
Compliance Division, US Customs Service, Re garding European Sanctions (EC Annex  VIII).  
111 Memorandum to Customs Area and Port Directors, CMC Directors from  Trade Compliance 
Division, US Customs Service, Regarding Clarification of Bond Requirements for European Sanctions, dated 
16 March 1999  (US Ex. 15). WT/DS165/R  
Page 27 
 
 
If the importer of record provides a statement at the time of entry 
(release) certifying that it has reviewed its continuous bond and has 
added to it an amount equal to 10 percent of the total of the entered 
value imported by the importer for the preceding year of the 
merchandise presently subject to the sanctions , the Port Director 
will accept the continuous bond."112 (emphasis added)  
6.31 The Press Conference given by Deputy USTR P. Scher on 3  March is another piece of 
evidence that  confirms that the 3  March Measure was seeking redress.  Below are some relevant 
excerpts:  
"Q. Does the withholding of liquidation fulfill the terms of the Bowles letter 
which says "If the EU seeks arbitration … the retaliatory action will go into effect o n 
the date that arbitration is concluded, but in no event later than March 3, 1999?  
A. … We retaliated by effectively stopping trade  as of 3  March in responding to  
the harm caused by the EC's WTO inconsistent  banana regime.  That purpose is 
achieved by wit hholding liquidation on the products on the retaliation list  … 
Q. What is the difference between imposing duties and withholding liquidation?  
A. There is little difference .  Withholding will, we expect, effectively stop 
imports just as immediately imposing  duties would .  Importers are going to be no 
more prepared to accept the contingent 100 per cent duty liability, as they would to 
pay 100 per cent duties.  They will wait for certainty.  
Q. Why aren't you keeping the White House commitments?  
A. … We are eff ectively stopping trade as of 3 March …. 
Q. How do you expect the EC to react?  
A. … But our action makes it crystal clear that there are consequences for 
failure to comply with WTO rulings . … 
                                                      
112 Ibid. WT/DS165/R  
Page 28 
 
 
Q. How is this consistent with the White House letter and the WT O? 
A. The White House letter commits the Administration to retaliate effective 
March 3; we have done that ."113 (emphasis added)  
6.32 The content of this Press Conference speaks for itself.  With the increased bonding 
requirements, the United  States was expecting to and wanted to stop trade .  The United  States wanted 
to effectively retaliate against the European  Communities for its alleged WTO incompatible 
implementing measure.  
6.33 It seems that the United  States specifically chose the increased bonding requirements as  a 
retaliation measure, because it considered that it would have an effect similar to that of increased 
import tariffs and would therefore stop trade.  The choice of that particular measure, i.e. the fact that 
an additional bonding requirements increase co sts to exporters/importers but do not bring any fiscal or 
other advantages to the United  States, is another element that confirms the retaliatory nature of the 
3 March Measure, i.e. redress, in that its only object is to impose administrative and financial  burdens 
on EC listed imports, so as to effectively stop trade.  
6.34 We conclude that with the 3  March Measure, the United  States was seeking to redress a 
perceived WTO violation by the European  Communities.  The additional burdens imposed by the 
additional bon ding requirements, and the declared purpose and intent of the United  States when it 
effectively began, through the additional bonding requirements, to enforce the imposition of 100 per 
cent duties on EC listed imports, demonstrate that the 3  March Measure was an action seeking to 
redress a perceived WTO violation, within the meaning of Article  23.1 of the DSU.  Having found 
that Article  23 applies to the 3  March Measure, we shall now proceed to examine the claims of the 
European  Communities.  
2. Article  23.1 to gether with Articles 23.2(c), 3.7 and 22.6 of the DSU  
6.35 Articles 23.2(c), 22.6 and 3.7 of the DSU prohibit any unilateral suspension of GATT/WTO 
concessions or obligations, without a DSB authorization. We recall that violations of Article  23.2 will 
take plac e when the measure at issue is taken in the context described in the first paragraph of 
Article  23114, i.e. as a measure seeking to redress a WTO violation.  We recall also that there are more 
violations of the DSU that can be captured by the general prohibi tion of Article  23.1 than those listed 
in paragraph 2 of Article  23. 
6.36 Since we have already concluded that the 3  March Measure constituted a measure taken to 
redress a WTO violation (covered by Article  23.1), we proceed to examine whether the same 3  March 
Measure violated the provisions of the sub -paragraph 2(c) of Article  23 of the DSU, as well as 
Articles 3.7 and 22.6 of the DSU.  
6.37 Article  23.2(c) prohibits any suspensions of concessions or other obligations (taken as 
measures seeking to redress a WTO violat ion), prior to a relevant DSB authorization. Article 3.7 
provides that suspension of concessions or other obligations should be used as a last resort, and 
subject to a DSB authorization.  In Article 22.6, the suspension of concessions or other obligations is 
prohibited during the arbitration process which can only take place before the DSB authorization.  
Articles 3.7, 23.2(c) and 22.6 read as follows:   
3.7 "…The last resort which this Understanding provides to the Member invoking the dispute 
settlement pr ocedures is the possibility of suspending the application of concessions or other 
obligations  under the covered agreements on a discriminatory basis vis -à-vis the other Member, 
subject to authorization by the DSB of such measures." (emphasis added)  
                                                      
113 See EC Annex X.  
114 See paras. 6.18 to 6.20 of this Panel Report.  WT/DS165/R  
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23.2(c)  "… Member shall: … follow the procedures set forth in Article 22 to determine the level of 
suspension of concessions or other obligations and obtain DSB authorization in accordance with 
those procedures before suspending concessions or other obligations  under the covered agreements 
in response to the failure of the Member concerned to implement the recommendations and rulings 
within that reasonable period of time." (emphasis added)  
22.6 " … Concessions or other obligations shall not be suspended during the  course of the 
arbitration."  
6.38 In the context of these provisions, any WTO suspension of concessions or other obligations 
without prior DSB authorization is explicitly prohibited.  On 3  March there was no relevant DSB 
authorization of any sort.  The remainin g issue is, therefore, whether the United  States, through its 
3 March Measure, suspended any concessions or other obligations vis-à-vis imports from the 
European  Communities.  If so, there would be a violation of the DSU provisions quoted above.  Did 
the 3  March increased bonding requirements on EC listed imports constitute a suspension of 
GATT/WTO concessions (a violation of Article II) or other obligations (violation of Articles I, VIII 
and XI)?  A response to this question will also provide the answer to  the European  Communities' 
claims that the 3  March Measure constituted a violation of Articles I, II, VIII and XI of GATT.  
(a) Did the 3  March Measure constitute a suspension of GATT/WTO concessions or other 
obligations? (EC claims that the 3  March Measure vio lated Articles I, II, VIII and XI of 
GATT)  
6.39 In this dispute the measure alleged to constitute a suspension of WTO concessions or other 
obligations is a decision to increase bonding requirements to secure the collection of up to 100 per 
cent duties on liste d imports from the European  Communities.   
6.40 In this context, we need to understand what the object of bonding requirements is and for 
what purpose they are used by importing authorities.  In addition, the United  States focuses its defense 
on the normal and specific bonding requirements of the US Customs Service in arguing that the 
3 March increase in bonding requirements on EC listed imports did not constitute a WTO suspension 
of concessions or other obligations under the WTO Agreement. We are well aware tha t it is not in our 
terms of reference to assess the bonding requirement practices of the US Customs Service in general.  
We have looked at the US bonding requirement mechanism and the trade effects of the action taken 
by the United  States on 3  March, only to understand the nature of the 3  March Measure.  Our 
assessment of the WTO compatibility of the 3  March increased bonding requirements is based 
exclusively on the evidence submitted by the United  States.  
6.41 Bonds are a means of securing and guaranteeing the  exercise of certain rights/obligations.  
Bonds are, therefore, required by the importing Member to guarantee the performance of that 
importing Member's specific rights (which constitute obligations for other Members).  For instance, 
many Members require b onds upon importation to guarantee the payment of the applicable duties or 
compliance with some internal regulation.  
6.42 Two different aspects of the additional bonding requirements of the 3  March Measure should 
be assessed. One aspect of the 3  March Measure t hat has to be examined is the increased bonding 
requirements as such, in relation to the tariffs they are supposed to guarantee. The other aspect of the 
3 March Measure which we will examine is whether it led to increased costs to obtain such additional 
bonds.  The United  States suggests that such costs typically would (1) for single bonds purchased for 
an entry of listed imports valued at $50,000, be approximately $175.00, assuming a rate of $3.50 per 
thousand dollars of bond value and (2) for continuous b onds calculated based on prior year listed 
imports of $50,000, $50 to $100 assuming a rate of $10 to $20 per thousand dollars of bond value.115  
                                                      
115 US Responses to Additional Questions of the Panel, dated 10 February 2000, para.5 (Appendix 2.10 
to this Panel Report ).  However, on the basis of th e example described in paras. 6.46 to 6.51 of this Panel 
Report, hereinafter, there would appear to be the potential for a more significant increase in costs, from at least 
$500 prior to 3  March to $10,000 after 3  March for continuous bonds.  WT/DS165/R  
Page 30 
 
 
These costs are not payable to the United  States, but to the institution that provides the bond.  We 
shall, there fore, examine both aspects of the 3  March Measure.  
(i) The increased bonding requirement itself  
6.43 A bonding requirement is essentially an enforcement mechanism accessory to the right that it 
aims at protecting. As discussed below, GATT jurisprudence also conclud es that bonding 
requirements are enforcement mechanisms and that their GATT compatibility should be assessed 
together with the principal rights/obligations they aim to guarantee.  In other words, a bonding 
requirement does not have any separate legal raiso n d'être  apart from the main right/obligation it 
guarantees; a bond is therefore part of and included in the right it aims to guarantee.  In the present 
dispute, the United  States alleges that the 3  March additional bonding requirements were put in place 
to secure the payment of 100  per cent duties and, as noted by Deputy USTR P. Scher on 3  March116, 
there is little difference between imposing 100  per cent duties and imposing a contingent liability of 
100 per cent of the value of the imports.  We should, ther efore, assess the WTO compatibility of the 
specific 3  March bonding requirements in light of the tariff rights (obligations) they seek to securing.  
6.44 The GATT jurisprudence confirms our understanding of the legal nature of bonding 
requirements.  In the adopt ed Panel Report on EEC – Measures on Animal Feed Proteins ,117 the Panel 
concluded that "the security deposit, including any associated cost, was only an enforcement 
mechanism for the purchase requirement and, as such, should be examined with the purchase 
obligation" (under Article III of GATT).118  The adopted Panel Report on EEC – Programme of 
Minimum Import Price, Licences and Surety Deposits for Certain Processed Fruits and Vegetables119 
also concluded that the security system was necessary for the enforcement  of the minimum import 
price and should be assessed together with it.  In that case, the Panel concluded that "the minimum 
import price and associated additional security system did not qualify for the exemptions provided by 
Article XI:2(c)(i) and (ii) fro m the provisions of Article XI:1… this system was inconsistent with 
…Article XI".120 
6.45 In the adopted Panel Report on United  States  - Section 337 of the Tariff Act of 1930121, the 
Panel examined the US Section 337, the purpose of which was to enforce the US pate nt law against 
imports.  The Panel stated that "enforcement procedures cannot be separated from the substantive 
provisions they serve to enforce", and examined whether such enforcement procedures benefitted 
from an Article XX(d) exception (as Section 337 t ogether with the patent law it enforced, violated 
Article III:4).  The Panel concluded in the negative.  The final conclusion of the Panel Report was that 
the US Section 337 as such (i.e. the enforcement mechanism), was inconsistent with Article III:4 of 
GATT.  
6.46 We note that on 3  March the bound tariff rates on EC listed imports were those listed in 
paragraph 2.35 of this Panel Report, all of which are well below 100  per cent ad valorem .  As of 
3 March  1999, the US increased bond ing requirements to guarantee payment of 100  per cent duties on 
$520 million of EC listed imports. It is helpful to examine, through an example, the actual effect of 
this 3  March Measure, taking annual imports of $10,000,000 (all being EC listed imports), subject to, 
say, 5 per cent bound duties ($500,000), for both continuous and single bonding requirements and for 
imports that are covered by the US Food and Drugs Act.  From the submissions of the United  States 
                                                      
116 See para. 6.31 of this Panel Report.  
117 Panel Report on EEC – Measures on Animal Feed Proteins ("Animal Feed Proteins "), adopted on 
14 March 1978, BISD 25S/49.  
118 Ibid., para. 4.4.  
119 Panel Report on EEC – Programme of Minimum Import Price, Licences and Surety Deposits for 
Certain Processed Fruits and Vegetables  ("Minimum Import Price "), adopted on 18 October 1978, BISD 
25S/68.  
120 Ibid., para. 4.14.  
121 Panel Report on United  States  - Secti on 337 of the Tariff Act of 1930, adopted on 7 November 1989, 
BISD 36S/345.  WT/DS165/R  
Page 31 
 
 
and its responses to our questions, our under standing of the 3  March increased bonding requirements 
is the following.  
6.47 The normal practice of the US Customs, with regard to the bonding requirements, is as 
follows:  
(i) For most products except those covered by a Food and Drug provision:  
-  A continuous  bond has to cover 10  per cent of the duties, taxes and fees for 
all the products during the preceding year and is to be no less than $50,000.  
- A single transaction bond has to cover the entered value plus any duties, 
taxes and fees for the entry of the m erchandise;  
(ii) For products covered by an additional Food and Drug requirement:  
-  A continuous bond has to cover 10  per cent of the duties, taxes and fees for 
all the products during the preceding year and is to be no less than $50,000.  
- A single trans action bond has to cover three times the amount of the entered 
value of the merchandise.  
It is our understanding that, as of 3  March  1999, the bonding requirements for the EC listed imports 
were:  
(iii)  For most products, except those covered by a Food an d Drug provision:  
-  A continuous bond has to cover 10  per cent of the entered value of covered 
goods in the preceeding year.  
- A single transaction bond has to cover the amount of the entered value of the 
merchandise.  
(iv) For products covered by an addit ional US Food and Drug Act requirement:  
- A continuous bond has then to cover 10  per cent of the entered value of 
covered goods in the preceeding year.  
- A single transaction bond has to cover three times the amount of the entered 
value of the merchandise.  
6.48 Taking imports not subject to the US Food and Drug requirements, before 3  March, for a 
continuous bond, our example of $10,000,000 value of imports would have been subject to 10 per 
cent of the duties of $500,000 (ignoring taxes and fees for the purposes of this example), so the 
amount of the bond would have been $50,000.  As of 3  March, the bonding requirement was 10 per 
cent of the entered value of covered goods in the previous year.  In our example the bonding 
requirement would, therefore, increase from  $50,000 to $1,000,000.  This would appear to be 
consistent with the Customs Services Memorandum referred to in paragraph 2.24 above.  
6.49 Before 3  March, for a single transaction bond, and assuming 50 individual shipments valued 
at $200,000 each, the bonding requirement was the entered value, $200,000 plus any duties (5 per 
cent - $10,000), so a total of $210,000.  As of 3  March, the bonding requirement was the amount of 
the entered value, so that the amount of the bond would have b een $200,000 for each shipment, i.e. a 
decrease.  In those cases where importers were permitted to take out a single transaction bond for a 
shipment rather than increase the continuous bond, there would be an increase, i.e. to the extent of the 
full amount  of the single transaction bond (in our example, $200,000), which is less of an increase 
than the alternative of a continuous bond of $1,000,000).  WT/DS165/R  
Page 32 
 
 
6.50 Bonding requirements on imports subject to the US Food and Drug requirements were 
unchanged for single transa ction bonds at three (3) times the entered value.  For continuous bonds, the 
situation would be as described in paragraph 6.48 above.  
6.51 We recall that approximately 93 per cent of the EC imports (and assuming therefore 
approxima tely 93  per cent of the EC listed imports) were subject to continuous entry bonds.122  From 
the evidence before us, we believe that in most cases of EC listed imports the 3  March Measure led to 
increased bonding requirements.  There may, however, be situatio ns where the 3  March additional 
bonding requirements were negligible or did not increase.  We consider, however, that the object of 
our examination is the mechanism put in place through the 3  March Measure as a whole.  
6.52 In this context, we recall the conclus ions of the Appellate Body in Argentina – Measures 
Affecting Imports of Footwear, Textiles, Apparel and other Items  ("Argentina – Textiles ")123 that if the 
possibility remains that Article II be violated, the tariff mechanism in place should be considered to  be 
in violation of Article II:  
"53. In the light of this analysis, we may generalize that under the Argentine system, 
whether the amount of the DIEM is determined by applying 35 per cent, or a rate less 
than 35 per cent, to the representative internationa l price, there will remain the 
possibility  of a price that is sufficiently low  to produce an ad valorem  equivalent of the 
DIEM that is greater than 35 per cent.  In other words, the structure and design of the 
Argentine system is such that for any DIEM, n o matter what ad valorem  rate is used as 
the multiplier of the representative international price, the possibility remains that there 
is a "break -even" price below which the ad valorem  equivalent of the customs duty 
collected is in excess of the bound ad valorem  rate of 35 per cent.  
… 
62. We recall our finding that the DIEM regime, by its structure and design, 
results in the application of specific duties with ad valorem equivalent exceeding 
35 per cent   … We agree with Argentina, therefore, that the applic ation of the DIEM 
does not result in a breach of Article II for each and every  import transaction in a 
given tariff category.  At the same time, however, we agree with the Panel that there 
are sufficient reasons to conclude that the structure and design  of the DIEM will 
result, with respect to a certain range of import price s within a relevant tariff 
category, in an infringement of Argentina's obligations under Article II:1 for all tariff 
categories in Chapters  51 to  63 of the N.C.M.."124 (emphasis added)  
6.53 The European  Communities claims that the 3  March Measure violated Article I of GATT, as 
it was applicable only to EC products and not to other like products from other WTO Members.   
6.54 We find that the 3  March additional bonding requirements violated the most -favoured -nation 
clause of Article I125 of GATT, as it was applicable only to imports from the European  Communities, 
although identical products from other WTO Members were not the subject of such an additional 
                                                      
122 US Responses to Additional Questions of the Panel, dated 8 February 2000, para. 13 (Appendix 2.6 
to this Panel Report) . 
123 Appellate Body Report on  Argentina – Measures Affecting  Imports of Footwear, Textiles, Apparel 
and other Items ("Argentina – Textiles "), adopted on 22 April 1998, WT/DS56/AB/R.  
124 Ibid., paras. 53 and 62.  
125 Article I:1 of GATT reads as follows:  "With respect to customs duties and charges of any kind 
imposed on or in connection with importation or exportation or imposed on the international transfer of payments 
for imports or exports, and with respect to the method of levying such duties and charges, and with respect to all 
rules an d formalities in connection wit h importation and exportation, and with respect to all matters referred to in 
paragraphs 2 and 4 of Article III, any advantage, favour, privilege or immunity granted by any contracting party to 
any product originating in or d estined for any other country s hall be accorded immediately and unconditionally to 
the like product originating in or destined for the territories of all other contracting parties."  WT/DS165/R  
Page 33 
 
 
bonding requirements.  The regulatory distinctio n (whether an additional bonding requirement is 
needed) was not based on any characteristic of the product but depended exclusively on the origin of 
the product and targeted exclusively some imports from the European  Communities.126 
6.55  The European  Communities  also claims that the 3  March Measure violated Article II of 
GATT which reads as follows:  
"1. (a) Each contracting party shall accord to the commerce of the other 
contracting parties treatment no less favourable than that provided for in the appropriate 
Part of the appropriate Schedule annexed to this Agreement.  
 (b) The products described in Part I of the Schedule relating to any 
contracting party, which are the products of territories of other contracting parties, shall, 
on their importation into the terr itory to which the Schedule relates, and subject to the 
terms, conditions or qualifications set forth in that Schedule, be exempt from ordinary 
customs duties in excess of those set forth and provided therein. Such products shall 
also be exempt from all ot her duties or charges of any kind imposed on or in connection 
with the importation in excess of those imposed on the date of this Agreement or those 
directly and mandatorily required to be imposed thereafter by legislation in force in the 
importing territo ry on that date."  
6.56 We have already discussed the nature of bonding requirements and concluded that their WTO 
compatibility should be assessed together with the rights or obligations they aim at securing.  In 
particular, when used to guarantee the payment of  customs duties, the bonding requirement becomes 
part of, and is included in, the right to collect customs duties (and the enforcement of this 
right/obligation).  Bonds are required to cover the payment of tariffs, and are nothing but the 
mechanisms relati ng to the collection of the customs duties, with no legally autonomous existence.  In 
the present dispute, the additional bonding requirements are said to have been put in place to secure 
the payment of increased tariffs; their WTO compatibility is, theref ore, to be determined with 
reference to the disciplines of Article II.   
6.57 We recall that the fundamental purpose of Article II is to preserve the value of tariff 
concessions negotiated by a Member with its trading partners, and bound in that Member's Schedu le.  
We agree with the Appellate Body statement in  Argentina – Textiles :   
"47. In accordance with the general rules of treaty interpretation set out in Article 31 
of the Vienna  Convention , Article II:1(b), first sentence, must be read in its context and 
in light of the object and purpose of the GATT 1994.  Article II:1(a) is part of the 
context of Article II:1(b);  it requires that a Member must accord to the commerce of 
the other Members "treatment no less favourable than that provided for" in its Schedu le. 
… A basic object and purpose of the GATT  1994, as reflected in Article  II, is to 
preserve the value of tariff concessions negotiated by a Member with its trading 
partners, and bound in that Member's Schedule ."127 (emphasis added)  
6.58 We consider, therefore, that the purpose of Article II is to prohibit any liability for customs 
duties above the maximum level recorded in a Member's Schedule. The 3  March additional bonding 
requirements were established at a level which would guarantee the collection of 100  per cent duties.  
                                                      
126 Panel Report on Indonesia – Certain Measures Affecting the Automobile In dustry  ("Indonesia – 
Automobile s"), adopted on 23 July 1998, WT/DS54,55,59, 64/R, para.14.147: "For the reasons discussed above, 
we consider that the June 1996 car programme which introduced discrimination between imports in the 
allocation of tax and custo ms duty benefits based on vario us conditions and other criteria not related to the 
imports themselves and the February 1996 car programme which also introduced discrimination between 
imports in the allocation of customs duty benefits based on various condi tions and other criteria not re lated to 
the imports themselves, are inconsistent with the provisions of Article  I of GATT."  
127 Appellate Body Report on  Argentina – Textiles , op. cit., para. 47.  WT/DS165/R  
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We have found that the bonding requirements should be assessed together with the rights/obligations 
they purport to protect, being in this case, the right to collect tariffs at bound levels.  The 3  March 
Measure imposed additional bonding req uirements to guarantee collection of 100  per cent tariff duty. 
The 3  March additional bonding requirements increased the contingent tariff liability for EC listed 
products above their bound levels, all of which are much lower than 100  per cent  ad valorem (the 
highest is 18  per cent).  In fact, on 3  March, with the additional bonding requirements on EC listed 
imports, the United  States began 'enforcing' the imposition of 100 per cent tariff duties on the EC 
listed imports, contrary to the levels bound in it s Schedule.   
6.59 We find that the increased bonding requirements of the 3  March Measure, as they provided a 
treatment less favourable than in the United  States' Schedules, violated Article II:1(a) of GATT.  The 
3 March Measure also violated Article II:1(b), f irst sentence, as it was guaranteeing and, therefore, 
enforcing tariffs above their bound levels.  
One Panelists' view  
6.60 One  Panelist is of the view that bonding requirements can legitimately be in place to enforce 
WTO compatible rights and obligations. Such  bonding requirements could benefit from the 
application of Article XX(d), as "measures necessary  to secure compliance with laws or regulations 
which are not inconsistent with the provisions of this Agreement", assuming they support WTO 
compatible rights/ obligations and they are not inconsistent with the provisions of the chapeau of 
Article XX). If bonding requirements are used to secure the respect of WTO compatible 
rights/obligations, they would not appear to be inconsistent with the WTO Agreement. Howev er, if 
not, they could be viewed as effectively imposing a form of 'restriction' contrary to Article XI of 
GATT.128 
6.61 In the present dispute, the increased bonding requirements did not enforce any legitimate 
WTO tariff rights and therefore could not be conside red as " necessary to secure compliance with laws 
or regulations which are not inconsistent" with GATT.   On 3  March, the tariffs were bound at levels 
below 100 per cent (the highest level is 18 per cent).   Any bonding requirements to cover the 
payment of tariffs above their bound levels cannot be viewed as a mechanism in place to secure 
compliance with WTO compatible tariffs and constituted, therefore, import restrictions for which 
there was no justification.  The actual trade effects of the 3  March Measur e, which are reflected on the 
charts contained in paragraph 2.37 of this Panel Report, confirm its restrictive nature and effect.  One 
Panelist found, therefore, that the 3  March Measure constituted a "restriction", contrary to  Article XI 
of GATT, rather than a duty or charge under Article II.  
 
(ii) Interest charges, costs and fees in connection with the lodging of the additional bonding 
requirement  
6.62 The other aspect of the 3  March Measure that we must examine is whether the increased  
interest charges, costs and fees constituted "other duties and charges" collected by the United  States 
on EC listed imports contrary to Article II:1(b) last sentence, as claimed by the 
European  Communities.129  The United  States submits that the costs of ob taining an additional 
bonding requirement are not charges, within the meaning of Article II:1(b) last sentence, because they 
are not paid to the United  States but to an independent entity.  
                                                      
128 Article XI:1 of GATT reads as follows: "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 Member  on the importation of any product of the territory of any other Member  
or on the exportation or sale  for export of any product destined for the territory of any other Member."  
129 For an evaluation of such costs we refer to our approximations in para. 6.42 above.  WT/DS165/R  
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6.63 Article II:1(b) of GATT prohibits the imposition of other duties a nd charges in excess of the 
customs duties.130  Article II:1(b), second sentence reads as follows:  
"Such products shall also be exempt from all other duties or charges of any kind 
imposed on or in connection with the importation in excess of those imposed on  the 
date of this Agreement or those directly and mandatorily required to be imposed 
thereafter by legislation in force in the importing territory on that date."  
6.64 We note that nothing in Article II:1(b), second sentence provides that only charges paid to th e 
importing country are to be covered by the terms "charges of any kind imposed on or in connection 
with the importation".  The GATT/WTO jurisprudence has consistently ruled that any governmental 
"measure" can be challenged before the GATT/WTO.   The 3  March Measure was a governmental 
measure.  It would be too easy for Members to avoid the disciplines of Article II:1(b) if any charges 
required to be paid upon importation were exempted from the application of Article II:1(b) when the 
payment is to be made to  another designated entity.  
6.65 We note that a similar issue was discussed in the adopted Panel Report on EEC – Programme 
of Minimum Import Price, Licences and Surety Deposits for Certain Processed Fruits and Vegetables : 
"4.15  The Panel next examined the statu s of the interest charges and costs in 
connection with the lodging of the additional security  associated with the minimum 
import price for tomato concentrates in relation to the obligations of the Community 
under Article  II:1(b).  The Panel noted the argum ent by the representative of the 
United  States that the interest charges and costs associated with the lodging of the 
additional security were charges on or in connection with importation in excess of 
those allowed by Article  II:1(b).  The Panel further no ted that the minimum import 
price and additional security system  for tomato concentrates had not been found to 
be consistent with Article  XI, nor had any justification been claimed by the 
Community under any other provision of the General Agreement.  The P anel 
considered that these interest charges and costs were "other duties or charges of any 
kind imposed on or in connection with importation" in excess of the bound rate 
within the meaning of Article  II:1(b).  Therefore, the Panel concluded that the intere st 
charges and costs in connection with the lodging of the additional security 
associated with the minimum import price for tomato concentrates were 
inconsistent with the obligations of the Community under Article  II:1(b) ."131 
(emphasis added)  
6.66 The United  States has confirmed that the additional bonding requirements did result in 
increased costs.132 
6.67 We find, therefore, that any additional interest, charges and costs incurred in connection with 
the lodging of the additional bonding requirements of the 3  March Mea sure violated Article II:1(b) of 
GATT.  
6.68 The European  Communities also claims that the 3  March Measure violated Article VIII of 
GATT.  We do not see how the costs relating to the bonding requirements upon importation could 
constitute the "approximate cost of  services rendered", in the sense of Article VIII.  
6.69 The meaning of Article VIII was examined in the adopted Panel Report on United  States  - 
Customs Users Fee133 and in the adopted Appellate Body and Panel Reports on  Argentina –  Textiles.  It 
                                                      
130 The GATT 1994 Un derstanding imposes the obligation to record su ch "other duties and charges" in 
a Member's Schedule.  Such additional charges resulting from the 3  March Measure could not have been 
recorded in the United  States Schedules of GATT 1994.  
131 Panel Report on Minimum Import Price , op. cit.,  para. 4.15.  
132 See para. 6.42 of this Panel Report.  WT/DS165/R  
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was found that A rticle VIII's requirement that the charge be "limited in amount to the approximate cost 
of services rendered" is "actually a dual requirement, because the charge in question must first involve a 
'service' rendered, and then the level of the charge must not  exceed the approximate cost of that 
'service'."134  The term "services rendered" means "services rendered to the individual importer in 
question."135   
6.70 Although very briefly in its rebuttals136, the United  States argued that bonding requirements 
could be viewed  as a form of fee for services rendered (the services being the "early release of 
merchandise") and therefore should benefit from the carve -out of Article II:2(c) of GATT, the 
United  States has not submitted any data on the second requirement.  There is no  evidence that what 
was required from importers represented any such approximate costs of any service.  It is also difficult 
to understand why the costs of such service would have suddenly increased on 3  March (did the 
United  States provide more services t o importers on 3  March?), and then only for listed imports from 
the European  Communities.  
6.71 We recall that the European  Communities had the burden to convince us that Article VIII was 
applicable to the present dispute, which we consider it has failed to do.  We consider that Article VIII 
is not relevant to the present dispute and, accordingly, we reject this EC claim.  
6.72 We thus find that prima facie  the increased bonding requirements of the 3  March Measure 
violated Article II:1(a) and II:1(b), first sentence of  GATT. One Panelist was of the view that the 
increased bonding requirements of the 3  March Measure rather violated Article XI of GATT, in 
imposing an unjustified restriction on imports.  We find that the additional interest charges, costs and 
fees incurred  in connection with the lodging of the additional bonding requirements violated 
Article  II:1(b), second sentence of GATT.  We also find that the 3  March Measure violated Article I 
of GATT.  
6.73 We conclude, therefore, that prima facie  the 3  March Measure const ituted a "suspension of 
concessions or other obligations" for the purpose of Articles 3.7, 22.6 and 23.2(c) of the DSU.  
(b) US Defences  
6.74  The United  States contests the EC claims and argues that the 3  March Measure did not 
constitute a suspension of GATT/WTO co ncessions or other obligations.  The US defense seems to be 
two-fold.  The United  States argues that the 3  March Measure, the (increased) bonding requirements, 
is explicitly authorised by Article 13 of the Agreement on Implementation of Article VII of GATT  
("Customs Valuation Agreement").  The United  States seems also to argue that it had the right to take 
the 3  March Measure because those imports represented an increased "risk", taking into account the 
(potential) eventual DSB authorization to suspend conc essions and other obligations on the EC listed 
imports.  First, we address the US defense based on Article 13 of the Customs Valuation Agreement.  
Secondly, we examine whether the rules of the DSU would provide the United  States with a right, on 
3 March  1999, to increase its tariffs on EC listed imports above its bindings, so that such right needed 
to be guaranteed.  
(i) The US defence based on Article 13 of the CV Agreement  
6.75 As further discussed below, the United  States argues that the non -compliance by the 
Euro pean  Communities created a risk, which allowed the United  States to have concerns over its 
ability to collect the full amount of duties which might be due.  In this respect, the United  States went 
                                                                                                                                                                     
133 Panel Report on United  States  - Customs Users Fee ("US – Customs Users Fee "), adopted on 
2 February 1988, 35S/245.  
134 Ibid., para. 69.  
135 Ibid., pa ra. 80.  
136 US Rebuttal Submission, paras. 29 and  30 (Appendix 2.5 to this Panel Report) . WT/DS165/R  
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to great lengths to explain to the Panel that its entry sys tem is consistent with Article 13 of the 
Customs Valuation Agreement.  It is sufficient to note that the Customs Valuation Agreement deals 
with issues relating to the customs value of imported products (i.e. whether, for example, the customs 
value of an im port is $150 or $175), not with how to determine the level of applicable tariffs (whether 
tariffs are 10 per cent or 25 per cent).  
6.76 Article 13 of the Customs Valuation Agreement reads as follows:  
"If, in the course of determining the customs value of import ed goods , it becomes 
necessary to delay the final determination of such customs value , the importer of the 
goods shall nevertheless be able to withdraw them from customs if, where so required, 
the importer provides sufficient guarantee in the form of a sur ety, a deposit or some 
other appropriate instrument, covering the ultimate payment of customs duties for 
which the goods may be liable.  The legislation of each Member shall make provisions 
for such circumstances." (emphasis added)   
6.77 In the present dispute  the United  States is not claiming that, as of 3  March, it required 
additional guarantees because the customs value of the EC listed imports had increased or changed on 
3 March  1999.  In the present dispute, there is no disagreement between the parties on the customs 
value of the EC listed imports.  Article 13 of the Customs Valuation Agreement allows for a 
guarantee system when there is uncertainty regarding the customs value of the imported products, but 
is not concerned with the level of tariff obligatio ns as such.  Article 13 of the Customs Valuation 
Agreement does not authorise changes in the applicable tariff levels between the moment imports 
arrive at a US port of entry and a later date once imports have entered the US market.  As we discuss 
further b elow, the applicable tariff (the applicable WTO obligation, the applicable law for that 
purpose137), must be the one in force on the day of importation, the day the tariff is applied.  In other 
words, Article 13 of the Customs Valuation Agreement is of no re levance to the present dispute. We 
reject, therefore, this US defense.  
(ii) The US defence based on the increased "risk" that those EC listed imports represented  
6.78 In its first set of answers, the United  States confirmed that the date of application of its tariff s 
is the date on which "goods arrive on a vessel within a Customs port" not a later date if a later event 
takes place.138   
6.79 According to the United  States, as of 3  March, the applicable tariff duty on EC listed imports 
could vary depending upon a future even t, i.e. a DSB authorization to suspend concessions or other 
obligations on the same EC listed imports.  This variation in the tariff level constituted a 'risk' which, 
we understand under US law, provided a justification for the Customs Service to change bo nding 
requirements on those EC listed imports.  
6.80  We understand that, generally, the customs clearance is based on two different types of 
factors: (1) factors relating to the assessment of the correct classification, customs valuation and 
origin of the goods :  this depends on the specificities of each individual import operation which must 
be declared by the importer; and (2) factors determined by the relevant customs legislation applicable 
on the date on which the customs liability is incurred, i.e. in the c ase of the United  States, the date of 
entry into the US customs territory. That legislation sets among other things the applicable duty rate.  
                                                      
137 Appellate Body Report on European  Communities  – Customs Classification of Certain Computer 
Equipment , adopted on 22 June 1998, WT/DS62, 67 and 68/AB/R, para. 84:  "[T ]he concessions provided in 
that Schedule are p art of the terms of the treaty .  As such, the only rules which may be applied in interpreting 
the meaning of a concession are the general rules of treaty interpretation set out in the Vienna Convention." 
(emph asis added)  
138 US Responses to Questions of the Panel and the Parties, dated 15 January 2000, paras. 6 and 7 
(Appendix 2.4 to this Panel Report).  We note that the Kyoto Convention obliges to "specify the point in time to 
be taken into consideration for the  purpose of determining the rates of import dut ies and taxes chargeable on 
goods declared for home use." (Standard 47 of Annex B.1)  WT/DS165/R  
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6.81 Bonding requirements often serve the purpose of guaranteeing the correctness of the 
operators' declarations concer ning the first set of factors (customs value, classification, origin of the 
imports). However, the 3  March Measure did not impose increased bonding requirements in order to 
guarantee payment of increased duties that would result from any uncertainty regard ing the customs 
value, classification or origin of the imports.  The change, the risk that is alleged to be the legal basis 
of the 3  March Measure, is a risk under US law, arising, according to the United  States, from a 
possible future change of the WTO le gal situation of the United  States and the 
European  Communities.  The national law of the United  States cannot justify any WTO 
inconsistency139.  No provisions of any WTO agreement refer to such risks or allow Members to 
create or maintain uncertainty with r egard to the upper limit of the applicable duty rate.  When a WTO 
agreement allows importers to apply measures to protect themselves against a situation 'threatening to 
occur' (a concept distinct from that of risk), it does provide so explicitly.140 
6.82 We note also that the principal object and purpose of DSB authorised suspension of 
concessions or other obligations is not to obtain monetary compensation for an amount equivalent to 
the lost trade (caused by the WTO incompatible measure), but rather to restrict t rade to an extent 
equivalent to the trade affected by the incompatible measure.  Even in situations of WTO authorised 
suspensions of concessions, those enterprises that suffer from the consequences of the incompatible 
measures do not get any form of compen sation out of the suspension of concessions.  The purpose of 
such DSB authorised retaliatory measure is not to collect duties to be redistributed to exporters who 
lost trade opportunities because of the WTO incompatible measure of another Member.  The majo r 
purpose of the WTO compatible suspension of concessions is to involve other interest groups from the 
Member at fault in order to induce compliance of that Member. The ultimate object of WTO 
authorised suspensions of concessions or other obligations is to  remove WTO benefits and, therefore, 
probably to stop some trade.  It is difficult to understand how a Member can obtain a retroactive 
permission to stop trade: either trade has been stopped or it has not.  It would be absurd to imagine a 
situation where a  Member would effectively stop trade while waiting for a DSB permission that may 
never come.  What would have initially been a measure to stop trade while waiting for a 'retroactive' 
DSB permission, would then become a unilateral action, contrary to Articl e 23.  Article  23 of the 
DSU is categorical: unilateral actions are prohibited at all times.  If trade has been stopped before a 
DSB authorization, there is a violation of Article  23; if trade has not been stopped, the DSB cannot 
stop trade retroactively, it is physically impossible.  
6.83 Finally, how can the United  States, on 3  March, claim that there was a risk that the EC listed 
imports become retroactively subjected to WTO compatible higher duties (100 per cent) as of 
3 March when its requests for the DSB a uthorization to suspend concessions or other obligations 
(14 January 1999 and 18 February 1999) did not even ask for the retroactive application of suspension 
of concessions or other obligations?  Even if it were possible to obtain such a retroactive 
autho rization, on 3  March the United  States had not requested it.141 
6.84 We thus reject the US defense to the effect that on 3  March it had a right to secure, through an 
additional bonding requirement, the payment of 100 per cent duties because there was a risk that 
pursuant to the DSU, the United  States would be retroactively authorised to suspend concessions or 
other obligations against EC listed imports.  
(c) Conclusion  
6.85 We find that the 3  March Measure violated Articles I, II:1(a) and II:1(b) of the GATT and, 
therefore,  constituted a suspension of concessions or other obligations within the meaning of 
Articles  23.2(c), 22.6 and 3.7 of the DSU.  
                                                      
139 Article 27 of the Vienna Convention on the Law of Treaties (the "Vienna Convention").  
140 See for instance Article 3.7 and f ootnote 9 of the Agreement on the Implementatio n of Article VI of 
GATT 1994, Article 15 and footnote 45 of the Agreement on Subsidies and Countervailing Duties and 
Article  4.1 of the Agreement on Safeguards.  
141 The Panel recalls the considerations set out i n para. 6.106  of this Panel Report and its footnotes.  WT/DS165/R  
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6.86 To the extent that the 3  March Measure constituted a GATT/WTO suspension of concessions 
or other obligations, it could take plac e only pursuant to a DSB authorization.  On 3  March  1999, the 
United  States did not have any DSB authorization to suspend any tariff concession or any other 
obligation in response to the alleged WTO violation by the European  Communities.  In fact, on 
3 March no WTO adjudicating body had yet determined (i) whether the EC implementing measure 
nullified any WTO benefits, (ii) the level of such nullification, if any, or (iii) the level of suspension 
that should be authorised, if any.  On 3  March, bonding requir ements on EC listed imports were 
increased but there were no related additional tariff rights to justify such an additional enforcement 
mechanism.  On 3  March, the United  States had no right to impose 100 per cent duties on the EC 
listed imports therefore no right to begin enforcing the imposition of 100 per cent duty on EC listed 
imports.  On 3  March, the United  States unilaterally suspended concessions or other obligations on 
EC listed imports, without DSB authorization.  
6.87 We find, therefore, that the 3  March Measure constituted a suspension of concessions or other 
obligations within the meaning of Articles 23.2(c), 3.7 last sentence and 22.6 last sentence, since 
(i) the increased bonding requirements of the 3  March Measure violated Articles II:1(a) and II:1 (b), 
first sentence (one Panelist is of the view that the 3  March Measure violated rather Article XI of 
GATT), (ii) the additional interest charges, costs and fees resulting from the 3  March Measure 
violated the second sentence of Article II:1(b) of GATT a nd (iii) the 3  March Measure violated 
Article I of GATT.  Having reached the prior conclusion that the 3  March Measure was a measure 
seeking to redress a WTO violation within the meaning of Article  23.1, we find that when it put in 
place the 3  March Measur e, prior to any DSB authorization and while the EC - Bananas III  (22.6 -7) 
Arbitration process was still ongoing, the United  States did not abide by the rules of the DSU - 
violating Articles 23.2(c), 3.7 and 22.6 of the DSU – and was therefore in violation of Article  23.1.  
3. Article  23.1 together with Articles 21.5 and 23.2(a) of the DSU  
6.88 The European  Communities claims that the 3  March Measure violated Article 21.5 of the 
DSU, because on 3  March the United  States had not exhausted the procedure of Article 21.5 , which, 
the European  Communities argues, should have been completed before the United  States requested 
the DSB permission to suspend concessions or other obligations.  For the European  Communities, 
such violation is of a continuing nature: the US suspensi on of concessions or other obligations of 
3 March is and remains inconsistent with the WTO Agreement.   In the European  Communities' view, 
the 19 April action is only a confirmation of the US 3  March action and it argues that a "[DSB 
decision adopting an A rticle 21.5 panel report] was missing on 3  March, was also missing on 19 April 
and is still missing today"142.  For the European  Communities, the WTO inconsistency of the 3  March 
Measure (and the 19 April US action) could not have been healed by the DSB auth orization of 
19 April because it was flawed from the outset: the DSB authorization of 19 April 1999 was a 
necessary, but not a sufficient prerequisite for the US suspension of concessions or other obligations.  
6.89 We recall that the US action of 19 April is n ot included in our terms of reference.  We 
consider that the 19 April action is a legally distinct measure and we disagree with the EC argument 
that the 19 April action is only a confirmation of the 3  March Measure.  We may examine the 19 April 
DSB authori zation to the United  States to suspend concessions and other obligations only to assess the 
US defence that the authorization may have cured any prior WTO inconsistency of the 3  March 
Measure.   
6.90 We recall that we have reached the prior conclusion that the 3 March Measure constituted a 
measure seeking to redress a WTO violation within the meaning of Article  23.1 of the DSU.  If we 
find that Article 21.5 of the DSU contains an obligation, its violation could be viewed as one of those 
DSU obligations which, al though not explicitly listed in Article  23.2, are covered by Article  23.1 
(which mandates the respect of rules and procedures of the DSU).  We examine therefore the meaning 
of Article 21.5 of the DSU.  
                                                      
142 US Second submission, paras. 77 -78 (Appendix 2.5 to this Panel Report).  WT/DS165/R  
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6.91 The first sentence of Article 21.5 reads as follows:  
"Where there is disagreement as to the existence or consistency with a covered 
agreement of measures taken to comply with the recommendations and rulings such 
dispute shall  be decided through recourse to these  dispute settlement procedures, 
including  wherev er possible resort to the original panel." (emphasis added)    
6.92 This sentence confirms that when an assessment of the WTO compatibility of a measure 
taken to comply with panel and Appellate Body recommendations (an "implementing measure") is 
necessary (beca use parties disagree), such determination can only be made through the WTO dispute 
settlement procedures.   Pursuant to Article  23.2(a), Members are obliged to have recourse exclusively 
to a WTO/DSU dispute settlement mechanism to obtain a 'determination' that a measure is WTO 
inconsistent.  We consider that the obligation to use the WTO multilateral dispute settlement 
mechanism (i.e. as opposed to unilateral or even regional mechanisms) to obtain any determination of 
WTO compatibility, is a fundamental obl igation that finds application throughout the DSU.  For us, 
the prohibition against unilateral determinations of WTO violation contained in the first sentence of 
Article 21.5 of the DSU is comparable to that of Article  23.2(a) of the DSU.143  We consider tha t the 
ordinary meaning of the terms of the first sentence of Article 21.5 is that in case of disagreement 
between the parties, the determination of the WTO compatibility of implementing measures shall be 
made through recourse to the WTO dispute settlement procedures. Therefore, we do not consider that 
the first sentence of Article 21.5 is only of a procedural nature but rather contains a substantive 
obligation similar to that of Article  23.2(a) of the DSU.  
6.93 Article 22.8 of the DSU, which forms part of the co ntext of Article 21.5, provides that "t he 
suspension of concessions or other obligations shall be temporary and shall only be applied until such 
time as the measure found to be inconsistent  … has been removed".  The term "measure found to be 
inconsistent" (which in the framework of Article 21.5 relates to the implementing measure) assumes an 
adjudicating process and must be read together with Article  23.2(a)144 that also mandates WTO 
adjudication to determine whether a WTO violation has occurred.  Article  23.2(a) also forms part of the 
context of Article 21.5.  For us, the first sentence of Article 21.5 is simply a more specific provision 
reiterating, in the specific context of implementing measures, the general prohibition against unilateral 
determination of WTO violations contained in Articles 23.1 and 23.2(a) of the DSU.   
6.94 In our view, this interpretation preserves the security and predictability of the WTO dispute 
settlement mechanism and the multilateral trade system it supports.  The determination of whet her an 
implementing measure is WTO inconsistent is a matter for the entire membership, and therefore 
should be assessed through the WTO institutional framework.  Many elements in Article 21 of the 
DSU, entitled "Surveillance of Implementation of Recommenda tions and Rulings", confirm that 
implementation of Panel and the Appellate Body recommendations is a systemic concern and that any 
WTO Member is directly concerned and interested in the implementation process of any other 
Member.  To ensure effective surve illance, implementation remains on the DSB Agenda as long as 
the matter is not resolved.  The implementing Member is also obliged to report periodically to the 
DSB and produce reports on the status of its implementation145. 
                                                      
143 Article 21.5, first sentence is one of those DSU provisions whose violations, although not listed  in 
Article  23.2 that contain egregious example s, may lead to a violation of Article  23.1.   
144 Article  23 is included in the context of Article 22.8 which must be taken into account when 
interpreting the ordinary meaning of the terms used in Article 22.8 o f the DSU, Article 31.1 and 31.2 of the 
Vienna Convention.  
145 See Article 21.6 of the DSU: "The DSB shall keep under surveillance the implementation  of 
adopted recommendations or rulings.  The issue of implementation of the recommendations or rulings may be  
raised at the DSB by any Member  at any time fo llowing their adoption.  Unless the DSB decides otherwise, the 
issue of implementation of the recommendations or rulings shall be placed on the agenda of the DSB meeting 
after six months following the date of establishment of the reasonable period of time pursuant to paragraph 3 
and shall remain on the DSB's agenda until the issue is resolved .  At least 10 days prior to each such DSB 
 WT/DS165/R  
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6.95 Based on the evidence below, we ar e of the view that on 3  March the United  States made a 
unilateral determination that the EC implementing measure violated the WTO; the United  States did 
not make this determination through the recourse to the rules of the DSU or following the conclusions 
of a Panel, the Appellate Body or Arbitration report (Article  23.2(a)), or through recourse to any of 
the dispute settlement procedures of the WTO.  
6.96 We recall that Article  23.2(a) reads as follows:  
"2. In such cases, Members shall:  
(a)  not make a determinat ion to the effect that a violation has occurred, that 
benefits have been nullified or impaired or that the attainment of any objective 
of the covered agreements has been impeded, except through recourse to 
dispute settlement in accordance with the rules an d procedures of this 
Understanding, and shall make any such determination consistent with the 
findings contained in the panel or Appellate Body report adopted by the DSB 
or an arbitration award rendered under this Understanding;"  
6.97 Article  23.2(a) of the DSU  confirms the general obligation of Article  23.1 and prohibits more 
explicitly any unilateral determination that a WTO violation has occurred in providing that all 
determinations of whether a WTO violation has occurred can only be made pursuant to the DSU 
process.146   
6.98 The term "determination" is defined in the New Shorter Oxford English Dictionary  as "The 
action of coming to a decision; the result of this; a fixed intention.  The action of definitely … 
establishing the nature of something [under 23.2(a) it w ould be the nature of a WTO violation]; exact 
ascertainment." In the context of the WTO, we consider that a 'determination' that a WTO violation 
has occurred is a decision that a WTO Member has violated the WTO Agreement and which bears 
consequences in WTO  trade relations.  
6.99 We note that Article  23.2(a) a contrario  means that determinations made by Members 
through recourse to the DSU and following findings by panels, the Appellate Body and arbitration are 
WTO compatible.  For instance, when, in January 1999, the United  States requested an Article 22 
procedure, it had made an internal 'determination' that the EC implementation measure was WTO 
incompatible and requested a WTO adjudication on this matter.  This US determination was made in 
the context of a DSU pr ocedure and was obviously not in violation of Article  23.  However, on 
3 March, as further discussed below, the United  States decided to act outside of the DSU process.  
6.100  For us there is ample evidence that the 3  March Measure constituted a unilateral 
deter mination by the United  States that a WTO violation had occurred for which the United  States 
determined that a remedial action was needed.  When on 3  March the United  States decided to take a 
                                                                                                                                                                     
meeting, the Member concerned shall provide the DSB with a status report  in wr iting of its progress in the 
implementation of the recommendations or rulings." (emphasis added)  
146 The Panel Report on US – Section 301  suggested that four elements must be satisfied for a specific 
act in a particular dispute to breach Article  23.2(a) of t he DSU: "(a) the act is taken 'in such cases' ( chapeau of 
Article  23.2), i.e. in a situation where a Member 'seek[s] 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', as referred to in Article  23.1; (b) the act constitutes a 'determination'; (c) the 
'determination' is one 'to the effect that a violation has occurred, that benefits have been nullified or impair ed or 
that the attainment of any objective of t he covered agreements has been impeded'; (d) the 'determination' is either 
not made 'through recourse to dispute settlement in accordance with the rules and procedures of [the DSU]' or not 
made 'consistent wit h the findings contained in the panel or Appell ate Body report adopted by the DSB or an 
arbitration award rendered under [the DSU]'."  The two elements of this requirement are cumulative in nature.  
Determinations are only allowed when made through recours e to the DSU and consistent with findings adopt ed by 
the DSB or an arbitration award under the DSU." Panel Report on US – Section 301 , op. cit., footnote 657.  WT/DS165/R  
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remedial action against EC listed imports, there was no WTO deter mination (no findings by a panel, 
Appellate Body or arbitration body) concluding that the EC implementing measure was incompatible 
with the WTO Agreement.  The unilateral action (as we concluded above in paragraph 6.86) taken b y 
the United  States implies necessarily a prior US unilateral determination that the EC implementing 
measure was inconsistent with the WTO.  When the United  States refers to its "rights" and the need to 
preserve its rights to collect higher duties, this US  determination of its rights was, therefore, unilateral.  
The USTR official announcement stated:  
"United  States Takes Customs Action  on European Imports  
[E]ffective today, the U.S. Customs Service will begin  'withholding liquidation' on imports valued at 
over $500 million of selected products from the European Union  (EU), consistent with U.S. rights  
under the WTO agreements.  Withholding liquidation imposes contingent liability for 100 per cent 
duties  on affected products as of March 3, 1999…  
January 1, 19 99, was the deadline for the EU to implement a WTO -consistent banana 
regime.  The EU failed to honor this deadline,  thereby entitling the United  States to 
suspend tariff concessions as early as February 1st on selected European products with 
the WTO's bles sing."147 (emphasis added)  
6.101  The United  States' unilateral determination that the EC implementing measure was WTO 
inconsistent (and therefore should be redressed) is also evident from the Press Conference given by 
Deputy USTR P. Scher on 3  March:  
"Q. Does the  withholding of liquidation fulfill the terms of the Bowles letter 
which says 'If the EU seeks arbitration … the retaliatory action will go into effect on 
the date that arbitration is concluded, but in no event later than March 3, 1999'?  
A. … We retaliated  by effectively stopping trade  as of 3  March in responding  to 
the harm caused by the EC's WTO inconsistent  banana regime.  That purpose is 
achieved by  withholding liquidation on the products on the retaliation list  … 
… 
Q. How do you expect the EC to react?  
A. … But our action makes it crystal clear that there are consequences for 
failure to comply with WTO rulings.  …"148 (emphasis added)  
6.102  The fact that on 3  March the United  States was saying that it was responding to a WTO 
violation when, on 3  March the WTO ha d not yet determined that there was a violation, confirms that 
the United  States made a unilateral determination that the European  Communities had committed a 
WTO violation.  
6.103  The request from USTR to the US Customs Service is also revealing:  
"….  The [USTR]  intends to implement this suspension of tariff concessions by directing the Customs 
Service to impose 100 percent duties, ad valorem , on the products listed in the attachment to this 
letter.  (See also 63 Fed. Reg. 63099 and 63  Fed. Reg. 71665 giving noti ce of the proposed increase in 
duties on selected products).  
….  The USTR now seeks to preserve its right  to impose 100 per cent  duties as of March 3, pending 
the release of the arbitrators' final decision." 149 (emphasis added)  
                                                      
147 USTR Press Release, dated 3  March  1999, "United  States Takes Customs Action on European 
Imports " (EC Annex VII).  
148 See EC Annex X.  
149 Letter da ted 3  March  1999 from Mr. Peter L. Scher, Special Trade Negotiator to Commissioner 
Raymond W. Kelly, US Customs Service (US Ex. 12).  WT/DS165/R  
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6.104  The United  States asserts th at it seeks to preserve its right to impose 100 per cent  duties (the 
same reference to the US right exists in the Official USTR Press release).  However, on 3  March  1999 
the United  States did not have any such right against any imports from the European  Communities, as 
the determination of whether the EC implementing measure was WTO compatible was still under 
consideration by the relevant WTO adjudicating body.  On 3  March the United  States may have had 
very strong expectations that its request for suspensi on of concessions or other obligations would be 
authorised, but to preserve a right, one must have this right first.  When the United  States declared that 
it needed to preserve its rights, such a right (to 100 per cent  duties) can only have been determined  
unilaterally by the United  States, contrary to Article  23.2(a) and 21.5 of the DSU. This is evidence 
that on 3  March the United  States took a unilateral action with a view to redressing the EC 
implementing measure which the United  States had unilaterally determined to be in violation of the 
WTO Agreement.  
6.105  In fact, it is only because the United  States had unilaterally determined that the 
European  Communities had violated the WTO Agreement that the United  States considered that it had 
the right to put in pla ce additional bonding requirements, the nature of which is to secure compliance 
with a WTO compatible rights/obligations.  The very choice of the measure, additional bonding 
requirements on EC listed imports, because its purposes are to secure rights, suff ices to demonstrate 
that on 3  March the United  States made a unilateral determination that the EC implementing measure 
violated the WTO Agreement and that it had a right to "take action".150 
6.106  There is also another very important element that demonstrates that  the United  States took the 
3 March Measure after having unilaterally  determined that it had the right to take remedial action as 
of 3 March.  The wording of the 3  March Measure leaves the impression that the United  States 
expected some form of retroactive  right to collect increased duties.  The remedy chosen on 3  March 
was part of the remedy that the United  States alleged would be authorised by the DSB later on.  There 
are, however, no explicit DSU provisions providing for retroactive application of retali atory 
measures; to the contrary, Article 22.6 explicitly prohibits such GATT/WTO sanctions during the 
arbitration process.  Nor are there any DSU provisions allowing for measures to be taken to 'preserve' 
a right to suspend concessions or other obligations .  The US requests for DSB authorization to 
suspend concessions or other obligations151 did not contain a claim for retroactive application of the 
authorization.  If, arguably, the United  States was entitled, when it made its requests (first, on 
14 January 1 999 for consideration by the DSB on 25 January 1999, and second, on 
18 February  2000), to expect that the arbitration panel would respect general time limits of 
Article  22.6, it could not assume, on 3  March, that it would benefit eventually from a DSB retr oactive 
                                                      
150 See the title of the 3  March USTR Press Release: "United  States Takes Cust oms Action on 
European Imports" (EC Annex VII).   We note in this context that the Notification in the Federal Register of 
10 November 1998 provided that "The dates on which the USTR intends to implement action – February 1 or 
not later than March 3 …" Noti fication of USTR, Doc. No. 301 -100a, 10 Novembe r 1998, 63 Fed. Reg. 63099 
(1998) (EC Annex II).  On its face, Section 306(b) of the Trade Act requires the USTR to determine what 
further action it shall take under Section 301(a) if the USTR considers that a  foreign country has failed to 
implement a reco mmendation made pursuant to dispute settlement proceedings under the WTO.  The USTR 
shall make this determination no later than thirty days after the expiry of the reasonable period of time provided 
for such i mplementation under Article 21.3 of the DSU, wh ich is January 31, 1999 in this case.  
Section  305(a)(I) requires USTR to implement such action by no later than thirty days after the date on which 
that determination is made, or March 2 in this case. We reca ll that the Panel on US – Section 301  had reach ed 
the conclusion that (irrespective of whether the US or EC approach to Article 21.5 and 22 is followed), 
Section  306 through which the USTR can make a determination that a Member's implementation has failed 
within 30  days after the expiry of the reasonab le period of time, is prima facie  inconsistent with Article  23.2(a) 
of the DSU.  We recall also that the Panel concluded that when USTR determines that an action is needed 
because there is "a 'consideration' t hat implementation failed, automatically and as  a conditio sine qua non  
leading to a decision on action under Section 301, that determination meet the threshold of firmness and 
immutability required for a 'determination' under Article  23.2(a)".  Panel Repo rt on US – Section 301 , op. cit., 
paras. 7.142 -147.  
151 WT/DS27/43 and WT/DS27/47.  WT/DS165/R  
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right.152  The United  States did not request retroactivity, and retroactive remedies are alien to the long 
established GATT/WTO practice where remedies have traditionally been prospective.   On 3  March 
the United  States had no WTO compatible 'right' (even potential) to any suspension of concessions or 
other obligations that could be retroactively confirmed. Therefore, the US assertion that it had such a 
right could only have been unilaterally determined.  
6.107  We conclude, therefore, that the 3  March measur e constituted a unilateral determination 
contrary to Article  23.2(a) and 21.5 of the DSU. As discussed above we consider that Articles 23.2(a) 
and 21.5 make it clear that the determination of the WTO compatibility of implementing measures 
can only be made through recourse to the DSU. On 3  March such WTO determination did not exist.  
The European  Communities claim that the United  States should be blamed.  But who should trigger 
this WTO determination of the WTO compatibility of an implementing measure?  
6.108  The European  Communities and the United  States disagree as to which party bears the burden 
of demonstrating compliance or non -compliance of such an implementing measure.  We consider that 
to the extent that there is a measure taken to comply with the Panel and  Appellate Body 
recommendations (an implementing measure), and that the content of such an implementing measure 
is distinct from the measure that was the object of the Panel and Appellate Body recommendations, 
Article 21.5 mandates the WTO determination of  whether such an implementing measure is WTO 
compatible.  We note that the existence of a measure, i.e. the issue whether a new measure has 
effectively been adopted to comply with Panel and the Appellate Body recommendations, is a matter 
that must also be determined by the DSB and not unilaterally.  
6.109  It would be, therefore, for the Member challenging the WTO consistency of the implementing 
measure (or challenging the very existence of an authentic implementing measure) to request that the 
matter be brought un der a WTO/DSU dispute settlement procedure (that Member is obligated to do so 
pursuant to Articles 21.5 and 23.2(a) of the DSU), in particular before the original panel if available.  
Traditionally in GATT/WTO, it is for the country that seeks the applicat ion of a specific provision or 
right, to ask for it.  We note, in this context, that it is relatively simple (and there is no need for any 
special legal interest and the 'standing' requirement is only one of 'potential' market interest.153) to 
initiate a dis pute settlement procedure pursuant to the DSU.  The Member intending to request DSB 
permission to suspend concessions or other obligations must, therefore, in the event of a disagreement 
between the parties, challenge the implementing measure and trigger t he WTO dispute settlement 
mechanism to obtain a WTO determination that the implementing measure is WTO inconsistent. As 
                                                      
152 On 3  March, the United  States had not requested any retroactive DSB permission and the arbitrator 
had not lost jurisdiction over the matter. We recall the conclusion of the  Arbitrators in the Article 22.6 Decision 
on EC – Bananas III : " On the face of it, the 60 -day period specified in Article 22.6 does not limit or define the 
jurisdiction of the Arbitrators ratione temporis .  It imposes a procedural  obligation on the Arbitr ators in respect 
of the conduct of their work, not a substantive obligation in respect of the validity thereof.  In our view, if the 
time-periods of Article 17.5 and Article 22.6 of the DSU were to cause the lapse of the authority of the 
Appellate Body or the Arbitrators, the DSU would have explicitly provided so.  Such lapse of jurisdiction is 
explicitly foreseen, e.g. in Article 12.12 of the DSU which  provides that "if the work of the panel has been 
suspended for more than 12 months, the authority for es tablishment of the panel shall lapse".  We reca ll a 
similar conclusion reached by the US – Section 301  Panel Report in para. 7.31.  The United  States must have 
known that such 3  March Measure was unilateral and not based on any reasonable expectation of re troactive 
application.  
153 See for instance the f ollowing clear statement of the Appellate Body in EC – Bananas III : "132. … 
We do not accept that the need for a 'legal interest' is implied in the DSU or in any other provision of the WTO 
Agreement… 135. Accor dingly, we believe that a Member has broad disc retion in deciding whether to bring a 
case against another Member under the DSU.  The language of Article XXIII:1 of the GATT 1994 and of 
Article 3.7 of the DSU suggests, furthermore, that a Member is expected  to be largely self -regulating in deciding 
whet her any such action would be 'fruitful'.  (…)  136. We are satisfied that the United  States was justified in 
bringing its claims under the GATT 1994 in this case.  The United  States is a producer of bananas, an d a 
potential export interest by the United  States cannot be excluded".  Appellate Body Report on EC – Bananas III , 
op. cit., paras. 132, 135 and 136.  WT/DS165/R  
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under general WTO rules154, that Member will bear the burden of proving that the new implementing 
measure violates provisions of the WTO A greement.  
6.110  Our position is confirmed by the following statement of the Appellate Body in Chile – Taxes 
on Alcoholic Beverages , 
"74. … Members of the WTO should not be assumed, in any way, to have 
continued  previous protection or discrimination through the adoption of a new 
measure. This would come close to a presumption of bad faith."155  (emphasis in 
original)  
and by the following conclusion of the Hormones Arbitration Report:  
"9. WTO Members, as sovereign entities, can be presumed  to act in conformity 
with their WTO obligations.  A party claiming that a Member has acted 
inconsistently  with WTO rules bears the burden of proving that inconsistency."156 
(emphasis in original)  
6.111  Our interpretation of the burden of proof will not favour the adoption of 'scam' implem enting 
measures.  To the contrary, we are well aware that immediate implementation of DSB 
recommendations is the relevant standard, explicitly repeated in Articles 3.7, 21.1 and 21.3 of the 
DSU.  In this context, we refer to the consistent jurisprudence of  arbitrators pursuant to Article 21.3(c) 
of the DSU that "… the first objective is usually the immediate removal  of the measure judged to be 
inconsistent …  Only if it is impracticable to do so, is the Member concerned entitled to a reasonable 
period of ti me"157.  It seems therefore clear that implementation shall proceed expeditiously.  
6.112  If the implementing Member abuses its right to implement the recommendations of Panels 
and Appellate Body within the reasonable period of time, such implementing Member will not benefit 
from the adoption of any scam measure, as it seems clear that it bears the burden of proving that the 
initial DSB authorised level of suspension of concessions and other obligations should be reduced 
(pursuant to the adoption of a new WTO compa tible measure).  This is consistent with the rule that 
the burden of proof always rests on the Member challenging the WTO compatibility of a measure.  
Once a Member imposes DSB authorised suspensions of concessions or obligations, that Member's 
measure is WTO compatible (it was explicitly authorised by the DSB).  If the Member affected by 
that other Member's measure (imposing suspension of concessions or obligations) wants to challenge 
                                                      
154 See the well -established principle to that effect in the Appellate Body Report on United  States  – 
Measu res Affecting Imports of Woven Wool Shirts and Blouses from India , adopted on 23 May 1997, 
WT/DS33/AB/R, p.14: "In addressing this issue, we find it difficult, indeed, to see how any system of judicial 
settlement could work if it incorporated the propositi on that the mere assertion of a claim might amo unt to 
proof.  It is, thus, hardly surprising that various international tribunals, including the International Court of 
Justice, have generally and consistently accepted and applied the rule that the party wh o asserts a fact, whether 
the claimant or the r espondent, is responsible for providing proof thereof.  Also, it is a generally -accepted canon 
of evidence in civil law, common law and, in fact, most jurisdictions, that the burden of proof rests upon the 
party, whether complaining or defending, who asser ts the affirmative of a particular claim or defence".  
155 Appellate Body Report on Chile – Taxes on Alcoholic Beverages , adopted on 12 January 2000, 
WT/DS87 and 110/AB/R, para. 74.  
156 Decision by the Arbitrators on European  Communities  – Measures concerning M eat and Meat 
Products (Hormones)  ("EC – Hormones "), Recourse to Arbitration by the European  Communities under 
Article  22.6 of the DSU, circulated on 12 July 1998,  WT/DS26/ARB, para. 9.  
157 Award of the Arbitrato r, Arbitration under Article 21.3(c) of the DSU  on Australia - Measure 
affecting Importation of Salmon  ("Australia – Salmon "), circulated on 23 February 1999, WT/DS18/9, paras. 
28-30.  See also Award of the Arbitrator, Arbitration under Article 21.3(c) of the DSU on EC - Hormones , 
circulated 29 May 199 8, WT/DS26/15, WT/DS48/13, para. 26 and Award of the Arbitrator, Arbitration under 
Article 21.3(c) of the DSU on Indonesia – Automobiles , circulated on 7 December 1998, WT/DS54/15, 
WT/DS55/14, WT/DS59/13, WT/D S64/12.  WT/DS165/R  
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the WTO compatibility of such measure (e.g. its level is no longer equiv alent to the level of 
nullification), it is for that affected Member to bear the related burden of proof.  
6.113  We consider that our interpretation is consistent with the terms of Article 22.8 of the DSU, 
which is very specific on this matter, and which provides : 
"22.8  The suspension of concessions or other obligations shall be temporary and shall 
only be applied until such time  as the measure found to be inconsistent with a covered 
agreement has been removed, or the Member that must implement recommendations or 
rulings provides a solution to the nullification or impairment of benefits, or a mutually 
satisfactory solution is reached." (emphasis added)  
6.114  It is only logical that the Member, author of the said measure found inconsistent, is in the best 
position to know  whether the situation has changed, i.e. whether the measure (or part of it) was 
removed and, consequently, whether the measure imposing the suspension should be challenged.  
That same Member should bear the burden of proving that the suspension measure is  not WTO 
compatible anymore because its level is not equivalent to the level of nullification of WTO benefits. 
Our interpretation is consistent with the fundamental WTO/DSU rule that Panel and Appellate Body 
recommendations must be implemented "immediately " (21.3(c) of the DSU) and that, at the latest at 
the expiry of the reasonable period, the WTO/DSU implementation mechanism can be triggered by an 
interested Member.   
6.115  Having found that the first sentence of Article 21.5 mandates the WTO compatibility 
assessment of an implementing measure through the exclusive recourse to the WTO dispute 
settlement mechanism, and that it is for the Member challenging the WTO compatibility of any 
measure to trigger such process, we must address the issue of which WTO dispute  settlement 
procedures can be used.   
6.116  The European  Communities claims that the United  States violated Article 21.5 because on 
3 March it did not have at hand an Article 21.5 panel report.  The European  Communities goes further 
and argues that the United  States should have had at hand an Article 21.5 panel report when it 
requested an Article 22 procedure to the DSB, (or at least when on 19 April the DSB authorised 
suspension of concessions and other obligations by the United  States).  In the European  Communi ties' 
view the 3  March violation is of a continuing nature and since the 19 April action is a confirmation of 
the 3  March measure which it self is inconsistent with the DSU, the 19 April action is a nullity under 
the DSU.  
6.117  First, we examine whether an Arti cle 21.5 determination can be made by an arbitration body 
through the Article 22.6 procedure.  In application of the principle clearly expressed in the first 
sentence of Article 21.5, the end of the first sentence (and the second sentence) of Article 21.5 refers 
to the specific 'possibility' of referring the matter to the original Panel, as one of the WTO dispute 
settlement procedures available to determine such WTO compatibility of implementing measures:  
"Where there is disagreement as to the existence or consistency with a covered 
agreement of measures taken to comply with the recommendations and ruling such 
dispute shall  be decided through recourse to these  dispute settlement procedures, 
including wherever possible resort to the original panel.  
The panel shall circulate its report within 90 days after the date of referral of the 
matter to it.  When the panel considers that it cannot provide its report within this 
time frame, it shall inform the DSB in writing of the reasons for the delay together 
with an e stimate of the period within which it will submit its report." (emphasis 
added)    
6.118  For us, this sentence confirms that if an assessment of the WTO compatibility of an 
implementing measure is necessary (because parties disagree) such a determination can onl y be 
obtained through the WTO dispute settlement procedures.  But what do "these dispute settlement WT/DS165/R  
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procedures" refer to?  There is no other indication on that matter in Article 21.5.  We must continue 
our examination of the ordinary meaning of the terms u sed in Article 21.5 of the DSU.  
6.119  If we examine the context of Article 21.5 (including the provisions of the DSU surrounding 
Article 21.5) and the object and purpose of the DSU, we note that there are several different types of 
WTO dispute settlement procedu res under the DSU that could be used to assess the WTO 
compatibility of the new implementing measure.  We recall that the first sentence of Article 21.5 
refers to " including  recourse to the original panel".  Although the panel (and Appellate Body) process 
is the most commonly used WTO dispute settlement procedure, Article 25 of the DSU, for example, 
explicitly provides for arbitration as a means of adjudicating WTO related disputes.  Article 25.4 
provides for the applicability of Articles 21 and 22 of the D SU to the results of such arbitration.  
There is no reason why the WTO assessment of the compatibility of an implementing measure could 
not be determined by an Article 25 arbitration, as one of the WTO dispute settlement procedures.    
6.120  We note that the dra fting history of Article 21.5 seems to confirm our interpretation based on 
the ordinary meaning of the terms used in their context.  In the Dunkel Draft, what was then 
Article  19.5 used the words " involving  resort to the original panel wherever possible"158.  Earlier, the 
Swiss delegate had put forward a proposal to introduce arbitration under the DSU159.  It seems that 
negotiators may have wanted to reflect this expansion of "WTO dispute settlement procedures" when 
they favoured the use of the term " including  recourse to the original panel" instead of " involving 
recourse to the original panel" for the first sentence of Article 21.5 of the DSU.   
6.121  We are aware that the arbitration process of Article 25 is distinct from that of Articles 21.3(c) 
or 22.6 of the DSU.   Our point is that 'panel' procedure is not the only dispute settlement procedure 
under the DSU.  We consider that the arbitration process pursuant to Article 22 may constitute a 
proper WTO dispute settlement procedure to perform the WTO assessment mandat ed by the first 
sentence of Article 21.5 of the DSU.  We think that the WTO compatibility determination of an 
implementing measure can be performed through an Article 22.6 -22.7 arbitration when assessing the 
"equivalent level of suspension of concessions"160.  We believe that the ordinary meaning of the terms 
"determine whether the level of such suspension is equivalent  to the level of nullification or 
impairment" confirms that the equivalence between the two levels cannot be fulfilled before the WTO 
compatib ility of the implementing measure has been assessed.161  In our view, this provision also 
confirms that the determination of whether the implementing measure nullifies any WTO benefit, 
must take place before the level of suspension of concessions or obligati ons can be assessed (and 
eventually authorised by the DSB).162 More importantly, however, this provision gives the arbitration 
panel the mandate and the authority to assess the WTO compatibility of the implementing measure. 
                                                      
158 MTN.TNC/W/FA.  Emphasis added by the Panel.  
159 See Arbitration within GATT, Communication from Switzerland , GATT Doc. No. 
MTN.GNG/NG13/W/33.  See also Terrence Stewart, The GATT Uruguay Round: A Negotiating History, Vol. 
II, (1993), Kluwer Law and  Taxation, p. 2772.  
160 Article 22.7 of the DSU r eads as follows: "The arbitrator acting pursuant to paragraph 6 shall not 
examine the nature of the concessions or other obligations to be suspended but shall determine whether the 
level of such suspension is equivalent to the level of nullification or imp airment .  The arbitrator may also 
determine if the proposed suspension of concessions or other obligations is allowed under the covered 
agreement.  However, if the matter referred to arbitration includes a cla im that the principles and procedures set 
forth  in paragraph 3 have not been followed, the arbitrator shall examine that claim.  In the event the arbitrator 
determines that those principles and procedures have not been followed, the complaining party shall  apply them 
consistent with paragraph 3.  The p arties shall accept the arbitrator's decision as final and the parties concerned 
shall not seek a second arbitration.  The DSB shall be informed promptly of the decision of the arbitrator and 
shall upon reques t, grant authorization to suspend concessions o r other obligations where the request is 
consistent with the decision of the arbitrator, unless the DSB decides by consensus to reject the request." 
(footnote omitted and emphasis added)  
161 In this context, we agree with the discussions and conclusions of t he Arbitrators in EC – 
Bananas  III, (22.6 -7) Arbitration, op. cit., paras 4.1 to 4.8.  
162 WT/DS27/ARB and WT/DS27/RW/EEC and WT/DS27/RW/ECU.  WT/DS165/R  
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Since the Article 22.6 arbitration  was given the authority to determine "a level of suspension 
equivalent to the level of nullification", it has the authority to assess both variables of the equation.  
6.122  We are well aware that it is not our mandate to assess the DSU compatibility of what was 
done in the EC - Bananas III  implementation panel and arbitration reports163.  We consider, 
nonetheless, that if, at the time when the Article 22.6 arbitration is requested, no WTO determination 
of the compatibility of the implementing measure has yet taken place, those acting in arbitration are 
obliged to assess first whether the implementing measure nullifies or impairs the WTO rights of the 
Member requesting DSB permission to retaliate.  This is a matter of simple legal logic: it is legally 
impossible to a ssess the level of suspension based on the level of nullification before assessing 
whether the implementing measure nullifies or impairs WTO rights.  Only after having assessed the 
WTO compatibility of the implementing measure can a WTO adjudicating body a ssess the impact of 
any such WTO incompatibility, which will indicate the "equivalent level of suspension of concessions 
and other obligations".  Since the Article 22.6 arbitration process was given the authority to determine 
"a level of suspension equival ent to the level of nullification", it has the authority to assess both 
variables of the equation, including whether the implementing measure nullifies any benefit and the 
level of such nullified benefits.  
6.123  We note also that both Article 22.6 and the first sentence of Article 21.5 refer to the 
possibility of recourse to the original panel; there is only one original panel for each dispute.  It is, 
therefore, not unreasonable to consider that the same original panel, through its arbitration procedure 
would, f irst, assess the WTO compatibility of the new measure, secondly, assess the impact, if any, of 
such WTO incompatible measure and thirdly determine the equivalent level of suspension of 
concessions or other obligations.  We understand that such is the prese nt practice of the DSB as it has 
developed under the DSU: the members of the original panel are mandated to act pursuant to 
Articles  21.5 and/or 22.6 -22.7 of the DSU.164  It is therefore reasonable to interpret the DSU so as to 
allow a single WTO adjudicatio n body to perform both the WTO compatibility determination of the 
implementing measure (Articles 21.5 and 23.2(a)) and the assessment of the appropriate level of 
suspension (pursuant to Article 22.6 -22.7).165 
                                                      
163 Ibid. 
164 In the following cases, the DSB decided that the matter wou ld be referred to the original panel under 
Article 21.5 of the DSU: (i) EC – Bananas III , Recourse to Article 21.5 by Ecuador (Communication dated 
18 December 1998, WT/DS27/41), WT/DSB/M/53; (ii) EC – Bananas III , Recourse to Article 21.5 by the 
European  Communities, WT/DSB/M/53; (iii)  Australia – Salm ons, Recourse to Article 21.5 by Canada 
(Communication dated 3 August 1999, WT/DS18/14), WT/DSB/M/66; (iv) Canada – Measures Affecting the 
Export of Civilian Aircraft , Recourse to Article 21.5 by Brazil (Commu nication dated 26 November 1999, 
WT/DS46/13), W T/DSB/M/72; (v) Brazil – Export Financing Programme for Aircraft, Recourse to Article 21.5 
by Canada (Communication dated 23 November 1999, WT/DS70/9), WT/DSB/M/72; and (vi) Australia – 
Subsidies Provided to P roducers and Exporters of Automotive Leather , Recourse to Article 21.5 by the 
United  States (Communication dated 4 October 1999, WT/DS126/8), WT/DSB/M/69.  In those cases except for 
(ii) above, the Member invoking the procedure requested specifically that the matter be referred to the original 
panel.  Also, in the following arbitration procedures under Article 22.6, the original panel members were 
appointed as arbitrators: (i) EC – Bananas III , Recourse to Arbitration by the European  Communities under 
Artic le 22.6 of the DSU, WT/DSB/M/54; (ii)  Australia  – Salmons , Recourse to Arbitration by Australia under 
Article 22.6 of the DSU, WT/DS18/16; and (iii) Decision by the Arbitrators on EC – Hormones , Recourse to 
Arbitration by the European  Communities under Art icle 22.6 of the DSU, op. cit., para. 2.  In th e case (i) above, 
the European  Communities specifically requested that the original panel carry out the arbitration.  
Communication, dated 3 February 1999, from the European  Communities to the Chairman of the DSB, 
WT/DS27/46.  
165 Adjudication of both whether  the implementing measure nullifies WTO rights and whether the level 
of suggested sanctions is equivalent to the level of nullification is very burdensome exercise and may sometimes 
lead to delay in the issuan ce of the arbitration report on this matter.   We note in this context, as did the Panel in 
US – Section 301 , para. 7.180 and footnote 720, as well as the arbitration panel in Bananas III , footnote 7 that 
on its face the 60 -day period specified in Article 22.6 does not limit or define the jurisdiction of arbitrators 
ratione temporis .  We discuss this point further when we address the US defense that if the 
 WT/DS165/R  
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6.124  We do not agree with the European  Communities' ar gument that because arbitration reports 
are not "adopted" by the DSB, arbitration is not covered by the terms "these dispute settlement 
procedures" in the first sentence of Article 21.5.  Adoption is not the only institutional means of 
action of the DSB.  It is the DSB that refers any matter to arbitration pursuant to Article 22.6.  It is the 
DSB that takes note of the arbitration report under Article 22.6, and the results of such arbitration 
decision will lead to a level of suspension that institutionally will be authorised by the WTO/DSB.  
We consider that the arbitration process under Article 22.6 is a form of WTO/DSU approved 
adjudication mechanism.  Nor do we agree with the European  Communities' argument that those 
acting through arbitration pursuant to  Article 22.6 do not have the mandate to examine the WTO 
compatibility of an implementing measure.  A determination of the "equivalent level of suspensions" 
necessitates a prior WTO determination of the level of nullification, if any, and those acting purs uant 
to Article 22.6 of the DSU have the authority to make such a determination.  With the DSU, as it 
stands now, we consider that a determination whether the implementing measure nullifies or impairs 
WTO benefits can only be performed by a WTO adjudicatin g body.166    
6.125  We are also well aware that WTO Members disagree on the relationship between one of the 
possible dispute settlement procedures that may be used, i.e. the recourse to the original panel which 
should issue its report within 90 days, and the timin g of the right to request DSB authorization to 
suspend obligations and concessions.  We note the efforts made by Members to solve this issue in the 
context of the DSU review167.  We consider that it may be possible to assess the WTO compatibility 
of an imple menting measure before the end of the reasonable period of time.  For the WTO 
compatibility of a measure to be assessed, such measure must have a certain degree of firmness.   We 
consider that as soon as a measure offers a sufficient level of certainty so that adjudication of that 
measure's feature is legally possible, its WTO compatibility can be assessed.168 
6.126  We reject, therefore, the EC claim that because the United  States had not exhausted the 
Article 21.5 procedure when it requested DSB permission to susp end concessions or other obligations 
in respect of EC listed imports, it violated Article 21.5 of the DSU.  On the contrary we consider that 
the WTO compatibility determination mandated by the first sentence of Article 21.5 can be performed 
by the original  panel or other individuals through the Article 22.6 -7 arbitration process.  We find that 
an Article 22.6 Arbitration panel is a valid WTO adjudicating body to perform the task mandated by 
Articles 23.2(a) and 21.5 of the DSU.  Consequently, we also reject  the European  Communities' claim 
that such a violation of Article 21.5 is of a continuing nature, as we believe that the then ongoing 
arbitration 'process' and the 9 April Decision was fully WTO/DSU compatible.  The reason why the 
United  States violated th e first sentence of Article 21.5 (and Article  23.2(a)) is because when it put in 
place the 3  March Measure there was no WTO adjudicating body that had determined that the EC 
implementing measure violated the WTO Agreement.  We recall again that the US acti on of 19 April 
is not part of our terms of reference.  
6.127  Notwithstanding the lacunae of the DSU drafting and the solutions suggested in the DSU 
Review process, we consider that there is no exception to the fundamental prohibition against 
unilateral determina tion of WTO inconsistency of any measure, including a measure adopted to 
                                                                                                                                                                     
European  Communities has not unduly delayed the procedures, the United Sates would have been entitled at the 
expiry of the 60 days (on 3  March) to ob tain a DSB authorization to retaliate.   
166 Of course Members may agree to limit or further regulate which procedure should be used to obtain 
such determination.  
167 US Ex. 3.  
168 As to the US argument that it had to file its Article 22.2 -22.6 request within 30  days following the 
expiry of the reasonable period so as not to lose the benefit of reversed consensus decision making, we note also 
that Article 2.4 of the DSU is categorical: DSB decision -making shall be do ne by consensus.  We note, 
however, that even i f the United  States were correct and that a request under Article 22.2 has to be filed within 
30 days, we do not understand how this would justify a unilateral suspension of concessions or other obligations 
without DSB authorization.  We agree with the Uni ted States that there is room for more coherence between the 
various procedural stages envisaged in the DSU.   In any case it is not our mandate to provide answers to all 
issues still open for negotiation in t he context of the DSU review exercise.  WT/DS165/R  
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comply with Panel and Appellate Body recommendations.  All such determinations must be made 
using the DSU as only WTO adjudicating bodies can determine that a measure (or an implement ing 
measure) violates the WTO Agreement, and in such cases, remedial actions taken by a Member in 
response to such violation can only take place within the institutional framework of the WTO and 
pursuant to the various requirements of the DSU.  
6.128  We consider that nothing in the DSB authorization of 19 April169 or in the 19 April US action 
against the EC listed imports has cured the WTO inconsistencies of the 3  March Measure.  We recall, 
however, that it is not in our mandate to assess the WTO compatibility of th e legally distinct US 
action of 19 April imposing DSB authorised suspension of concessions or other obligations against 
the EC listed imports.  Again, for us the 19 April action is not a confirmation of the 3  March action, 
but a distinct legal measure.  
6.129  We conclude, therefore, that Article 21.5, first sentence is another DSU obligation (similar  to 
Article  23.2(a)) which, although not explicitly listed in Article  23.2, is covered by Article  23.1, when 
the measure at issue was seeking to redress a WTO obligat ion.   
6.130  Having reached the prior conclusion that the 3  March Measure constituted a measure seeking 
to redress a WTO violation within the meaning of Article  23.1, we find that when the United  States 
put in place the 3  March Measure, no WTO adjudicating body had determined that the EC 
implementing measure was WTO incompatible.  The United  States, therefore, when it put in place the 
3 March Measure violated Article 21.5 of the DSU and in so doing, it refused to abide by the rules of 
the DSU, in violation of Art icle 23.1 of the DSU.   
E. EC CLAIMS THAT THE 3 MARCH MEASURE VIOLATED ARTICLES I, II, VIII  AND XI OF GATT  
6.131  We have already found above that the 3  March Measure constituted a suspension of 
concessions or other obligations in that (i) the increased bonding requ irements of the 3  March 
Measure violated Articles I, II:1(a) and II:1(b), first sentence of GATT  (One Panelist was of the view 
that such increased bonding requirements led, rather, to violations of Article XI of GATT) and (ii) the 
additional interest char ges, costs and fees resulting from the increased bonding requirements violated 
the second sentence of Article II:1(b) of GATT.  We also found that the 3  March Measure violated 
Article I of GATT.  Finally we rejected the EC claim that the 3  March Measure vi olated Article VIII 
of GATT.  
F. US DEFENSE BASED ON TH E EUROPEAN  COMMUNITIES ' DELAYING TACTICS  
6.132   The United  States argues that the European  Communities frustrated and delayed all the US 
efforts to comply with the DSU.  The United  States seems to be claiming th at the 
European  Communities violated rules of the DSU and of the DSB meetings, and this would, 
somehow, excuse the US (unilateral) action.   
6.133  Even if it were true that the European  Communities delayed DSB meetings and the arbitration 
process (and arguably v iolated the DSU and rules of the DSB meetings), it is clear that a Member 
cannot find in another Member's violation a justification to set aside the prescriptions of the DSU.  
The US argument (which implies that it considers itself justified to do what it did because what the 
European  Communities would have done was WTO illegal) is exactly what is prohibited by Article  23 
of the DSU: unilateral determination that a WTO violation has occurred and the unilateral imposition 
of suspensions of concessions or oth er obligations.  In short the regime of counter -measures, reprisals 
or retaliatory measures has been strictly regulated under the WTO Agreement.  It is now only in the 
institutional framework of the WTO/DSB that the United  States could obtain a WTO compati ble 
determination that the European  Communities violated the WTO Agreement, and it is only in the 
                                                      
169 WT/DSB /M/59.  WT/DS165/R  
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institutional framework of the WTO/DSB that the United  States could obtain the authorization to 
exercise remedial action.170 
6.134  The United  States also argues that the European  Communities unduly delayed the Article 22.6 
arbitration panel with the consequence that it was not able to issue its final decision on 3  March.  The 
United  States seems to be suggesting that the European  Communities should accept the consequen ce 
of this delay, and bear the consequences of the US unilateral actions which would not have taken 
place if the arbitration panel had proceeded expeditiously.  
6.135  We will offer only two brief comments on this defense.  First, no WTO violation can justify a 
unilateral retaliatory measure by another Member; this is the object of the prohibitions contained in 
Article  23.1 of the DSU.  If Members disagree as to whether a WTO violation has occurred, the only 
remedy available is to initiate a DSU/WTO dispute process  and obtain a WTO determination that such 
a WTO violation has occurred.  Secondly, as noted by the Panel in US – Section 301 , most of the 
time-limits in the DSU are either minimum time -limits without ceilings or maximum time -limits that 
are, nonetheless, i ndicative only.  In EC - Bananas III , the arbitration panel explicitly stated that the 
60-day period specified in Article 22.6 "does not limit or define the jurisdiction of the Arbitrators' 
ratione temporis .  It imposes a procedural obligation on the Arbit rators in respect of the conduct of 
their work, not a substantive obligation in respect of the validity thereof."171  Delays in dispute 
settlement procedures can always happen.  The fundamental obligation of Article  23 of the DSU 
would be a farce if every ti me there is a delay in a panel or arbitration process, the unsatisfied 
Member could simply unilaterally determine that a violation has occurred and unilaterally impose any 
remedy.  We reject, therefore, this US defense.  
VII. CONCLUSIONS AND RECO MMENDATIONS  
7.1 Although the 3  March Measure is no longer in existence, we conclude that:  
(a) The 3  March Measure was seeking to redress a WTO violation and was thus covered 
by Article  23.1 of the DSU; when it put in place the 3  March Measure the 
United  States did not abide by t he rules of the DSU, in violation of Article  23.1.  
(b) By putting into place the 3  March Measure, the United  States made a unilateral 
determination that the EC implementing measure violated the WTO, contrary to 
Articles 23.2(a) and 21.5, first sentence.  In do ing so the United  States did not abide 
by the DSU and thus violated Article  23.1 together with Article  23.2(a) and 21.5 of 
the DSU;  
(c) The increased bonding requirements of the 3  March Measure as such led to violations 
of Articles II:1(a) and II:1(b), first s entence; the increased interest charges, costs and 
fees resulting from the 3  March Measure violated Article II:1(b) last sentence.  The 
3 March Measure also violated Article I of GATT;   
(d) In view of our conclusions in paragraph (c) above, the 3  March Measur e constituted a 
suspension of concessions or other obligations within the meaning of Articles 3.7, 
22.6 and 23.2(c) imposed without any DSB authorization and during the ongoing 
Article 22.6 arbitration process.  In doing so the United  States did not abide by the 
DSU and thus violated Article  23.1 together with Articles 3.7, 22.6 and 23.2(c) of the 
DSU.  
                                                      
170 Therefore, in the WTO context, the provision of Article 60 of the Vienna Convention on the Laws 
of Treaties (1969) on this matter does not apply since the adoption of the more specific provisions of A rticle  23 
of the DSU.  
171 Arbitration (22.6 -7) EC – Bananas III , op. cit., footnote 7.  WT/DS165/R  
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With reference to paragraph (c) above, one Panelist is of the view that such increased bonding 
requirements of the 3  March Measure rather violated Article XI  of GATT.  
 
7.2 Under Article 3.8 of the DSU, in cases where there is infringement of the obligations assumed 
under a covered agreement, the action is considered prima facie  to constitute a case of nullification or 
impairment of benefits under that agreement.  Accordingly, we conclude that, to the extent that the 
United  States has acted inconsistently with the provisions of covered agreements, as described in the 
preceding paragraphs, it has nullified or impaired the benefits accruing to the complainant under th ose 
agreements.  
7.3 The Panel recommends that the Dispute Settlement Body request the United  States to bring its 
measure into conformity with its obligations under the WTO Agreement.  
 WT/DS165/R  
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Appendix 1.1  The First Submission of the European  Communities (10 November  1999 ) 
Appendix 1.2  The EC oral presentation at the First Substantive Meeting  (16 December 1999)  
Appendix 1.3  The EC final statement at the First Substantive Meeting (17 December 1999)  
Appendix 1.4  The EC Responses to Questions of Panel and Parties (13 Janu ary 2000 ) 
Appendix 1.5  Rebuttal Submission of the European  Communities  (21 January 2000)  
Appendix 1.6  The EC letter dated 25 January 2000 concerning the scope of the Panel's terms of  
  reference (25 January 2000)  
Appendix 1.7  The EC Responses to Additional  Questions of Panel (8 February 2000 ) 
Appendix 1.8  The EC oral presentation at the Second Substantive Meeting  (9 February 2000)  
Appendix 1.9  The EC final statement at the Second Substantive Meeting (9 February 2000)  
Appendix 1.10  The EC Responses to Additi onal Questions of Panel (10 February 2000 ) 
Appendix 2.1  The First Submission of the United  States (6 December 1999 ) 
Appendix 2.2  The US oral presentation at the First Substantive Meeting  (16 December 1999)  
Appendix 2.3  The US closing remarks at the First S ubstantive Meeting  (17 December 1999)  
Appendix 2.4  The US Responses to Questions of Panel and Parties (13 January 2000 ) 
Appendix 2.5  Rebuttal Submission of the United  States  (including its cover letter)  
  (21 January 2000)  
Appendix 2.6  The US Responses to Additional Questions of Panel (8 February 2000 ) 
Appendix 2.7  The US oral presentation on matters relating to the scope of this dispute at the  
  Second Substantive Meeting  (9 February 2000)  
Appendix 2.8  The US oral presentation at the Second Substantive Me eting  (9 February 2000)  
Appendix 2.9  The US closing statement at the Second Substantive Meeting  (9 February 2000)  
Appendix 2.10  The US Responses to Additional Questions of Panel (10 February 2000 ) 
Appendix 3  Oral presentation of Dominica and St. Lucia at T hird Party session  
  (17 December 1999)  
Appendix 4  Oral presentation of Ecuador at Third Party session (17 December 1999)  
Appendix 5  Third Party Submission of India (10 December 1999)  
Appendix 6  Third Party Submission of Jamaica (8 December 1999)  
Appendix 7 Oral presentation of Japan at Third Party session (17 December 1999)  
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