WORLD TRADE
ORGANIZATIONWT/DS72/R
24 November 1999
(99-5102)
Original:  English
EUROPEAN COMMUNITIES - MEASURES AFFECTING
BUTTER PRODUCTS
Report of the Panel
The report of the Panel on European Communities – Measures Affecting Butter Products is being
circulated to all Members, pursuant to the DSU.  The report is being circulated as an unrestricted
document from 24 November 1999 pursuant to the Procedures for  the Circulation and
Derestriction of WTO Docu ments (WT/L/160/Rev.1).WT/DS72/R
Page 1
1. On 24 March 1997, New Zealand requested consultations with the European Communities1
pursuant to Article 4 of the Understanding on Rules and Procedures Governing the Settlement of
Disputes (hereinafter referred to as the "DSU"), Article 14 of the Agreement on Technical Barriers to
Trade (hereinafter the "TBT Agreement"), Article 6 of the Agreement on Import Licensing
Procedures and Article XXII:1 of the General Agreement on Tariffs and Trade 1994 (GATT 1994)regarding some interpretations by the Commission of the European Communities (hereinafter the "EC
Commission") and by the United Kingdom's Cu stoms and Excise Department (hereinafter
"HMC&E") to the effect that New Zealand butter manufactured by the Ammix butter-making process
and the Spreadable butter-making process does not qualify for entry under the country-specific tariff
quota for butter established for New Zealand in the European Communities' WTO Schedule of
Concessions,
2 because butter manufactured by those processes is not "manufactured directly from
milk or cream"  as required by the terms of the tariff quota.
2. The EC Schedule of Concessions LXXX, which establishes a country-specific tariff quota for
butter of New Zealand origin, provides as follows3:
Description
of productTariff Item
number (s)Initial quota
quantity and
in-quota tarif f
rateFinal quota
quantity and
in-quota tarif f
rateImplementation
period from/to
1Initial
negotiating
right
2Other terms and
conditions
Butter ex 0405 00 76.667 t
86.88ECU/100 kg76.667 t
86.88ECU/100 kgButter of New Zealand
origin- at least 6 weeks old- with a fat content of notless than 80% but lessthan 82% by weight
- manufactured directly
from milk or cream     Qualification for thequota is subject toconditions laid down inthe relevant Community
provisions.
                                                     
1 Throughout this report, the European Communities as a party to this case will be referred to as the
"European Communities" (EC), as it appears in Article IX, paragraph 1 of the Marrakesh AgreementEstablishing the World Trade Organization.
2 The documents expressly referred to by New Zealand in its request consultations (WT/DS72/1) and in
its request for the establishment of a panel (WT/DS72/2) were the following:
(i) a letter (dated 25 July 1996) from HMC&E to KPMG which attached correspondence between
the Director of DG VI of the European Commission and a Director at the European Court ofAuditors;
(ii) a letter (dated 23 January 1997) from Dr. Franz Fischler, the European Commissioner for
Agriculture, to Dr. Lockwood Smith, the New Zealand Minister for International Trade;  and
(iii) a letter (dated 24 January 1997) from Sir Leon Brittan, Vice-President of the European
Commission, to Dr. Lockwood Smith, the New Zealand Minister for International Trade.
3 See WT/DS72/1.WT/DS72/R
Page 2
3. Consultations were held between New Zealand and the European Communities on
29 April 1997, but did not lead to a resolution of the dispute.
4. As a result, in a communication dated 6 November 1997 (see WT/DS72/2), New Zealand
requested the establishment of a panel.  New Zealand considered that the EC decisions that New
Zealand butter manufactured by the Ammix butter-making process and the Spreadable butter-makingprocess was not eligible for New Zealand's country-specific tariff quota for butter as contained in the
EC's WTO Schedule of Concessions annexed to the Marrakesh Protocol to GATT  1994 and the EC's
related actions nullified or impaired benefits accruing to New Zealand, within the meaning of Article
XXIII:1(a) of the GATT 1994, as a result of the EC failure to carry out its obligations under the
following provisions:
(a) Article II:1(b) of GATT 1994;
(b) Article X:1 of GATT 1994;(c) Article XI:1 of GATT 1994;
(d) Article 2, paragraphs 2, 9, 11 and 12 of the TBT Agreement; and
(e) Article 3, paragraph 3 of the Agreement on Import Licensing Procedures.
5. New Zealand also considered that these decisions and related actions had otherwise nullified
or impaired benefits accruing to New Zealand directly or indirectly under the Marrakesh AgreementEstablishing the World Trade Organization pursuant to Article XXIII:1(b) of GATT 1994.
6. The Dispute Settlement Body (DSB), at its meeting of 18 November 1997, established a panel
with the standard terms of reference as follows:
"To examine, in the light of the relevant provisions of the covered agreements cited
by New Zealand in document WT/DS72/2, the matter referred to the DSB byNew Zealand in that document and to make such findings as will assist the DSB in
making the recommendations or in giving the rulings provided for in those
agreements".
The United States reserved its right as a third party in the dispute, but did not participate in the Panel's
proceedings.
7. The parties to the dispute agreed on 13 January 1998 to the following composition of the
Panel
4:
Chairman: Mr. Attie Swart
Members: Mr. Robert Hudec
Ms. Claudia Orozco Jaramillo
8. On 18 February 1998, New Zealand requested a six-week suspension of the work of the Panel
pursuant to Article 12.12 of the DSU following the outcome of the proceedings initiated by the
New Zealand Dairy Board (NZDB)'s subsidiaries in the United Kingdom before the UK VAT &
Duties Tribunal, in order to explore whether it woul d be possible to reach a mutually agreed solution
                                                     
4 See WT/DS72/3.WT/DS72/R
Page 3
with the EC on the basis of the Tribunal's decision.  The Panel agreed to the suspension on 19
February 19985.  The Panel resumed its work on 30 March 1998.
9. The Panel met with the parties on 10 June 1998 and 15 July 1998.
10. On 2 September 1998, the Chairman of the Panel informed the DSB, under Article 12.9 of the
DSU, that the Panel would not be able to issue its report within six months of the agreement on thecomposition and terms of reference of the Panel (Article 12.8 of the DSU).  The reasons for the delay
are set out in WT/DS72/5.
11. The Panel submitted its interim report to the parties on 7 December 1998.  It submitted its
final report to the parties on 23 December 1998.
12. On 24 February 1999, New Zealand requested the Panel to suspend its work in accordance
with Article 12.12 of the DSU until 25 March 1999 (WT/DS72/6). On 24 March, New Zealand
requested an extension of the suspension until 1 April 1999 (WT/DS72/6/Add.1).  On 31 March, NewZealand requested an additional extension until 12 May 1999 (WT/DS72/6/Add.2).  On 12 May, New
Zealand requested an additional extension until 14 July 1999 (WT/DS72/6/Add.3). On 14 July, New
Zealand requested an additional extension until 7 October 1999 (WT/DS72/6/Add.4). On 5 October,
New Zealand requested an additional extension until 24 November (WT/DS72/6/Add.5).
13. On 11 November 1999, pursuant to Article 3.6 of the DSU, the parties notified the DSB and
the relevant councils and Committees that they had reached a mutually agreed solution, which was
circulated as document WT/DS72/7 on 18 November 1999.
14. The Panel takes note of the mutually agreed solution between the parties to the dispute and of
the provisions of Article 12.7 of the DSU which provides that "Where a settlement of the matter
among the parties to the dispute has been found, the report of the panel shall be confined to a briefdescription of the case and to reporting that a so lution has been reached."  Accordingly, the Panel
concludes its work by reporting that a mutually agreed solution to this dispute has been reached
between the parties.
__________
                                                     
5 See WT/DS72/4.