WORLD TRADE
ORGANIZATIONWT/DS69/AB/R
13 July 1998
(98-2688)
Original: English
EUROPEAN COMMUNITIES – MEASURES AFFECTING THE
IMPORTATION OF CERT AIN POULTRY PRODUCTS
AB-1998-3
Report of the Appellate BodyWT/DS69/AB/R
Page i
I. Introduc tion................................................................................................................. ...............1
II. Arguments of the Participan ts and Third Pa rticipan ts ...............................................................4
A. Brazil - Appellant ..........................................................................................................4
1. The Oilseeds Agreement..................................................................................4
2. Article XXVIII of  the GATT...........................................................................5
3. Article XIII of the GATT 1994........................................................................6
4. Article X of the GATT 1994............................................................................7
5. Agreement on Import Li censing Procedures ...................................................8
6. Article 11 of the DSU ......................................................................................9
B. European Communities - Appellee .............................................................................10
1. The Oilseeds Agreement................................................................................10
2. Article XXVIII of  the GATT.........................................................................11
3. Article XIII of the GATT 1994......................................................................11
4. Article X of the GATT 1994..........................................................................13
5. Agreement on Import Licensing Procedures .................................................13
6. Article 11 of the DSU ....................................................................................14
C. European Communities - Appellant ............................................................................15
1. Relationship between Schedule LXXX and the Oilseeds Agreement ...........15
2. Agreement on Agriculture .............................................................................16
D. Brazil - Appellee .........................................................................................................19
1. Relationship between Schedule LXXX and the Oilseeds Agreement ...........19
2. Agreement on Agriculture .............................................................................21
E. Arguments by the Third Participants ..........................................................................23
1. Thailand .........................................................................................................23
2. United States..................................................................................................24
III. Issues Raised in this Appeal ............................................................................................... .....27
IV. Relationship between Schedule LXXX and the Oilseeds Agreement .....................................28V. The Tariff-Rate Quota in Schedule LXXX..............................................................................31
A. The Exclusive or Non-exclusive Character of the Tariff-Rate Quota for
Frozen Poultry Meat in Schedule LXXX..................................................................... 31
B. Article XIII of the GATT 1994 .................................................................................... 34
C. Treatment of Non-Members under Article XIII of the GATT 1994............................. 36
VI. Article X of the GATT 1994.................................................................................................. ..38WT/DS69/AB/R
Page ii
VII. Agreement on Import Li censing Procedures ...........................................................................41
A. Scope of Application ...................................................................................................42
B. Trade Distortion .........................................................................................................43
C. Transparency ..............................................................................................................45
VIII. Article 11 of the DSU ..................................................................................................... .........46
IX. Agreement on Agriculture .................................................................................................... ...48
A. Article 5.1(b) ...............................................................................................................48
B. Article 5.5 ...................................................................................................................53
X. Findings and Conclusions..................................................................................................... ...59WT/DS69/AB/R
Page 1
WORLD TRADE ORGANIZATION
APPELLATE BODY
European Communities - Measures Affectingthe Importation of Certain Poultry Products
Brazil, Appellant/Appellee
European Communities, Appellant/Appellee
Thailand and the United States,
Third ParticipantsAB-1998-3
Present:
Bacchus, Presiding Member
El-Naggar, Member
Feliciano, Member
I. Introduction
1. Brazil and the European Communities appeal from certain issues of law and legal
interpretations in the Panel Report, European Communities - Measures Affecting the Importation of
Certain Poultry Products .1 The Panel was established to consider a complaint by Brazil regarding the
EC regime for the importation of certain frozen  poultry meat products falling within Common
Nomenclature ("CN") categories 0207 14 10, 0207 14 50 and 0207 14 70 (formerly CN categories0207 41 10, 0207 41 41 and 0207 41 71), and the implementation by the European Communities ofthe tariff-rate quota in these products agreed in negotiations between Brazil and theEuropean Communities.
2. The relevant factual aspects of this dispute are set out in the Panel Report, in particular, at
paragraphs 8-12. On 19 June 1992, the CONTRACTING PARTIES authorized theEuropean Communities to enter into negotiations with interested contracting parties under
Article XXVIII of the GATT 1947, following  adoption of the panel report on   European Economic
Community - Payments and Subsidies Paid to Processors and Producers of Oilseeds and Related
Animal-feed Proteins
2 ("EEC - Oilseeds ").  The European Communities entered into negotiations with
Brazil, as well as nine other contracting parties.  The negotiations with Braz il terminated in July 1993,
and the parties signed Agreed Minutes on 31 January 1994.  The bilateral agreement set out in theseAgreed Minutes (the "Oils eeds Agreement") provided, inter alia , for a duty-free global annual tariff-rate
quota of 15,500 tonnes for frozen poultry meat  under CN categories 0207 41 10, 0207 41 41 and
                                                     
1WT/DS69/R, 12 March 1998.
2Adopted 25 January 1990, BISD 37S/86;  and DS28/R, 31 March 1992.WT/DS69/AB/R
Page 2
0207 41 71.  The tariff-rate quota was opened as from 1 January 1994 by Council Regulation 774/943
("Regulation 774/94") of 29 Marc h 1994.  Commission Regulation 1431/944 ("Regulation 1431/94") of
22 June 1994 sets out detailed rules for the applicati on of Regulation 774/94, and stipulates, in Article 1,
that all imports under the tariff-rate quota for the relevant poultry meat products are subject to the
presentation of an import licence.  There are no licen sing requirements for out-of-quota imports of these
products.
3. Schedule LXXX of the European Communities5 ("Schedule LXXX") provides for a duty-free
tariff-rate quota for up to 15,500 tonnes of frozen poultry meat in Part I - Most Favoured Nation Tariff,
Section I - Agricultural Products, Section I - B - Ta riff Quotas, with out-of-quota base duty rates of
1,600 ECU/tonne, 940 ECU/tonne and 1,575 ECU/tonne, respectively.  The European Communities
reserved the right in Schedule LXXX to introduce an additional duty on out-of-quota imports of the
relevant poultry meat if the conditions for impositi on of the "Special Safeguard" in Article 5 of
the Agreement on Agriculture  were satisfied.  Council Regulation 2777/756  ("Regulation 2777/75")
of 29 October 1975, as amende d by Council Regulation 3290/947 ("Regulation 3290/94") of
22 December 1994, contains the general rule for the application of the additional safeguard duties inArticle 5 of the Agreement on Agriculture .  Article 5.3 of this regulation states:
The import prices to be taken into consideration for imposing an
additional import duty shall be determined on the basis of the cif
import prices of the consignment in question.
Commission Regulation 1484/95
8 ("Regulation 1484/95") of 28 June 1995 contains the detailed rules
pertaining to such special safeguard, and provides that, unless the imports of frozen poultry meat areunlikely to disturb the EC internal market, an additional duty will be levied if the import price falls
below a trigger price set out in Annex II of the Regulation.  The import price is either the
"representative price" or, upon the request of the importer, the c.i.f. price, if this price is higher thanthe applicable representative price.  The "representative price" is to be determined by taking intoaccount:  (i) "prices on third country markets";  (ii) "free-at-Community-frontier offer prices";  and(iii) "prices at the various stages of marketing in the Community for imported products".
9  If the c.i.f.
                                                     
3Official Journal No. L 91, 8 April 1994, p. 1.
4Official Journal No. L 156, 23 June 1994, p. 9.
5Schedule LXXX of the European Communities, Final Act Embodying the Uruguay Round of
Multilateral Trade Negotiations , done at Marrakesh, 15 April 1994.
6Official Journal No. L 282, 1 November 1975, p. 77.
7Official Journal No. L 349, 31 December 1994, p. 105.
8Official Journal No. L 145, 29 June 1995, p. 47.
9Regulation 1484/95, Article 2.WT/DS69/AB/R
Page 3
price of the shipment is used, the importer must provide to the competent authorities the documents
enumerated in Article 3 of Regulation 1484/95, that is:  the purchasing contract (or any otherequivalent document), the insurance contract, the invo ice, the certificate of origin (where applicable),
the transport contract, and, in the case of sea transport, the bill of lading.
4. The Panel Report was circulated to the Members of the World Trade Organization
(the "WTO") on 12 March 1998.  The Panel reached the following conclusions:
294. In light of our findings in S ection B and C above, we conclude
that Brazil has not demonstrated that the EC has failed to implement
and administer the poultry TRQ in line with its obligations under theWTO agreements.
295. In light of our findings in S ection D above, we conclude that
Brazil has not demonstrated that the EC has failed to implement the
TRQ in accordance with Article XIII of GATT.
296. In light of our findings in S ection E above, we conclude that
Brazil has not demonstrated that the EC has failed to implement the
TRQ in accordance with Articles 1 and 3 of the Licensing Agreement,
except on the point that the EC has failed to notify the necessary
information regarding the poultr y TRQ to the WTO Committee on
Import Licensing under Article 1.4(a)  of the Licensing Agreement.
297.  In light of our findings in  Section F, G and H above, we
conclude that Brazil has not demonstrated that the EC has failed to
comply with the provisions of Articles X, II and III of GATT in
respect of the implementation and administration of the poultry TRQ.
298. In light of our findings in S ection I above, we conclude that
the EC has failed to comp ly with the provisions of Article 5.1(b) of the
Agreement on Agriculture regarding the imports of the poultry
products outside the TRQ.
10
and made the following recommendation:
We recommend that the Dispute Settlement Body request the EC to
bring the measures found in this repo rt to be inconsistent with the
Licensing Agreement and the Agreement on Agriculture into
conformity with its obligations under those agreements.11
5. On 29 April 1998, Brazil notified the Dispute Settlement Body ("DSB") of its decision to
appeal certain issues of law covered in the Panel Report and certain legal interpretations developed by
                                                     
10Panel Report, paras. 294-298.
11Panel Report, para. 299.WT/DS69/AB/R
Page 4
the Panel, pursuant to paragraph 4 of Article 16 of the Understanding on Rules and Procedures
Governing the Settlement of Disputes  (the "DSU"), and filed a notice of appeal12 with the Appellate
Body pursuant to Rule 20 of the Working Procedures for Appellate Review  (the " Working
Procedures ").  On 11 May 1998, Brazil filed an appellant's submission.13 On 14 May 1998, the
European Communities filed its own appellant's submission.14  On 25 May 1998, both the European
Communities15 and Brazil filed appellee's submissions.16 On the same day, Thailand and the United
States filed separate third participants' submissions.17
6. The oral hearing in the appeal was held on 9 June 1998.  The participants and third
participants presented oral arguments and responded to questions put to them by the Members of theDivision hearing the appeal.  The participants and third participants also gave oral concludingstatements.  At the request of the Members of the Division, the participants and third participantssubmitted, on 12 June 1998, written post-hearing memoranda on particular issues relating to theappeal.  The participants submitted their respective written replies to these post-hearing memoranda
on 15 June 1998.
II. Arguments of the Participants and Third Participants
A. Brazil - Appellant
1. The Oilseeds Agreement
7. Brazil asserts that the Panel failed to apply the customary rules of interpretation of public
international law properly to the Oilseeds Agreemen t, as required by Article 3.2 of the DSU.  Brazil
maintains that in limiting its examination of the Oi lseeds Agreement to the "relevant parts" of the
Oilseeds Agreement, the Panel failed to examine all of the terms and provisions of the Oilseeds
                                                     
12WT/DS69/4, 29 April 1998.
13Pursuant to Rule 21(1) of the Working Procedures .
14Pursuant to Rule 23(1) of the Working Procedures .
15Pursuant to Rule 22 of the Working Procedures .
16Pursuant to Rule 23(3) of the Working Procedures .
17Pursuant to Rule 24 of the Working Procedures .WT/DS69/AB/R
Page 5
Agreement in accordance with Article 31 of the Vienna Convention on the Law of Treaties18 (the
"Vienna Convention "), including, in particular, how many parties there were to the agreement, the
structure of the agreement, the content of the different sections and the declared intention of theparties upon seeking authorization from the CONTRACTING PARTIES to negotiate.
8. With respect to the ordinary meaning to be gi ven to all the terms of the Oilseeds Agreement,
Brazil states that nothing in the text of the Oilseeds Agreement limits or diminishes the exclusivenature of that Agreement.  Brazil contends that th e Panel failed to interpret the Oilseeds Agreement in
good faith, and instead interpreted Article XXVIII of the GATT without taking the OilseedsAgreement appropriately into account.  Brazil argues that the Panel examined the object and purposeof Article XXVIII of the GATT but not the object and purpose of the Oilseeds Agreement itself.According to Brazil, the Panel should have examined  what was, in fact, agreed between the parties in
the Oilseeds Agreement and, in particular, the reasons the parties had entered into that Agreement andalso its compensatory nature.  Therefore, in the Brazilian view, the proper analysis of the Oilseeds
Agreement between Brazil and the European Commun ities required an examination of all the parts of
that Agreement as well as the different bilateral oilseeds agreements that the European Communities
had reached with different negotiating Members.
9. In the alternative, Brazil argues that the Pa nel erred in law in not examining the ordinary
meaning of the "relevant parts" of the Oilseeds Agr eement in the light of their context.  Brazil stresses
that the European Communities had specifically chos en to negotiate with Brazil separately from the
other parties to be compensated so that variable  solutions on compensation, rather than a common
most-favoured-nation ("MFN") solution, could be reached.
2. Article XXVIII of the GATT
10. Brazil asserts that the Panel failed to apply to Article XXVIII of the GATT properly the
customary rules of interpretation of public international law, as required by Article 3.2 of the DSU.
According to Brazil, under the terms of Article 31 of the Vienna Convention , the Panel should have
examined:  what was agreed between the parties;  whether what was agreed between the parties islegally possible within the terms of Article XXVIII of the GATT;  and finally, if it found that thespecific agreement was not compatible with other GATT provisions (Articles I and XIII), what theconsequences of such incompatibility would be.  Rather than adopting this step-by-step approach, thePanel only examined the question as to whether Articles I and XIII of the GATT 1994 apply to
                                                     
18Done at Vienna, 23 May 1969, 1155 U.N.T.S. 33;  8 International Legal Materials 679.WT/DS69/AB/R
Page 6
Article XXVIII tariff-rate quotas or whether Article XXVIII of the GATT can give rise to country-
specific provisions.
11. In the view of Brazil, Article XXVIII of the GATT is a lex specialis  providing for bilateral
solutions within a multilateral framework and maintaining a balance between bilateral and multilateral
rights and obligations.  There is nothing in Article  XXVIII of the GATT that prevents two contracting
parties from making an agreement on a country-specific package of compensatory measures,although, at the same time, nothing requires that compensation must be country-specific.  Brazilargues that Article XXVIII allows certain defined contracting parties to negotiate and agree.  And itprovides that other contracting parties have the right to ensure that such an agreement does not
prejudice their own rights.  In relation to the tariff-rate quota for frozen poultry meat, Brazil points outthat no Member objected to the specific agreement reached between the principal negotiating parties.Therefore, all Members must be deemed to have agreed to the solution reached between Brazil andthe European Communities.
12. In Brazil's view, Article XXVIII of the GATT can be an exception to the MFN rule contained
in Article I of the GATT 1994 if the parties negotiating the agreement so choose and if the othercontracting parties do not object.  The European Communities and Brazil had agreed on a country-specific tariff-rate quota and did not provide that the MFN principle should apply to that tariff-ratequota.  Brazil argues that the Panel erred in law in finding that an element in compensation for thewithdrawal of an MFN concession must be MFN.  According to Brazil, the opening of a country-
specific tariff-rate quota for frozen poultry meat by the European Communities does not impactnegatively on the trade interests of other Members.  That quota is not therefore something to which
the MFN principle necessarily applies.
3. Article XIII of the GATT 1994
13. Brazil claims that the Panel erred in finding that there was no evidence of an agreement
between the European Communities and Brazil on the allocation of the tariff-rate quota to Brazil.  ThePanel based its finding on supplementary evidence, that is, certain letters from Brazil to theEC Commission, and failed to analyze the main s upporting evidence of an agreement -- the Oilseeds
Agreement itself.  Brazil argues that, by not interpreting the Oilseeds Agreement at all, the Panelfailed to examine all of the evidence before it.
14. According to Brazil, the Panel also erred in la w in its analysis of the participation of non-
Members in tariff-rate quotas allocated within the terms of Article XIII of the GATT 1994.  Brazilstates that the relevant issue is whether or not a non-Member can be unilaterally allowed to participateWT/DS69/AB/R
Page 7
in a compensatory tariff-rate quota, especially in a situation where there is considerable over-quota
trade open to that non-Member.  It is clear from the text of Article XIII of the GATT 1994,particularly Article XIII:2 and Article XIII:2(d), that the allocation of quota shares is always intendedfor Members.  In footnote 140 of the Panel Report, the Panel reads paragraph 7.75 of the panel reports
in European Communities - Regime for the Importation, Sale and Distribution of Bananas
19 ("EC -
Bananas ") only partially.  According to Brazil, when the panel in  EC - Bananas  quoted the phrase
"all suppliers other than Members with a substantial interest in supplying the product", it referredexclusively to all suppliers that are Members with no substantial interest in supplying the product.The Panel appeared to be mandating the inclusion of non-Members, thereby expanding the wording ofArticle XIII of the GATT 1994, which merely limits the non-discrimination rule as betweenMembers.
15. Brazil submits that the Panel involved itself in a fundamental contradiction on Article XIII of
the GATT 1994.  On the one hand, the Panel pointed out that the exclusion of non-Members would
not be contrary to Article XIII:2 and that Members are free to choose;  but, on the other hand, the
Panel found that, if non-Members are excluded, the purposes of Article XIII are not achieved.  Brazil
notes that if the presence of non-Members is necessary for purposes of approximating the shares inthe absence of the restriction, then non-Members need to be included in the allocation of the tariff-ratequota.  They should be treated like Members.  This constitutes a violation of the WTO Agreement ,
which is an international treaty laying down contractual obligations and not  erga omnes  obligations.
According to Brazil, the only valid resolution of this contradiction is to interpret Article XIII of theGATT 1994 so as to prevent Members from allocating shares within the tariff-rate quota to non-
Members.  In Brazil's view, the origin and nature of the tariff-rate quota need to be considered, and
the Panel erred in concluding that the compensatory  nature of the tariff-rate quota opened under the
terms of Article XXVIII of the GATT was not to be considered and that Article XIII of the
GATT 1994 was simply a general provision.
4. Article X of the GATT 1994
16. Brazil alleges that the Panel erroneously assessed measures of general application under
Article X of the GATT 1994.  Brazil maintains that  any measure of general application will always
have to be applied to specific cases.  Therefore, a panel cannot dismiss a claim of inconsistency withArticle X of the GATT 1994 merely because the impact of the inconsistency is felt by individualtraders in individual situations.  The generally applicable regulations of the European Communities
                                                     
19Adopted 25 September 1997, WT/DS27/R/ECU, WT/DS27/R/GTM, WT/DS27/R/HND,
WT/DS27/R/MEX, and WT/DS27/R/USA.WT/DS69/AB/R
Page 8
under review do not allow Brazilian traders to know  whether the rules relating to in-quota or out-of-
quota trade will be applicable to a particular shipment of frozen poultry meat.  The object of Article Xof the GATT 1994 is to ensure that traders can become familiar with the applicable trade rules.According to Brazil, mere publication of the rule s is not sufficient to ensure familiarity and
predictability.  The rules must be drafted and administered in a reasonable way.  According to Brazil,
the Panel should have applied the principle of legal certainty to its examination of Article X of theGATT 1994 and its application to trade in frozen poultry meat.
17. Brazil submits that EC laws should allow traders to know which set of conditions is
applicable (the in-quota or the out-of-quota system) in a particular case.  There is a general need todraft clear general rules that will allow traders to distinguish between two systems that may beapplicable in a given case.  The Panel assumed that Brazil was arguing for transparency in eachspecific licence or shipment.  The lack of clarity and transparency in the general rules and in their
administration inevitably impact upon specific shipments and licences.
5. Agreement on Import Licensing Procedures
18. To Brazil, the Agreement on Import Licensing Procedures (the "Licensing Agreement ")
applies to both in-quota and out-of-quota trade in frozen poultry meat from Brazil to the European
Communities, and, in Brazil's view, the Panel erred in interpreting Article 3.2 of the Licensing
Agreement  as applicable only to in-quota trade.  Brazil argues that the Panel failed to give an
objective statement of reasons for this particular conclusion, and that there is nothing in the text of theLicensing Agreement  to justify the Panel's findings.  In the view of Brazil, nothing in the text or
context of Articles 1.2 and 3.2 of the Licensing Agreement limits exclusively to in-quota trade the
requirement that licensing systems for tariff-rate quotas be "implemented ... with a view to preventingtrade distortions".
19. The Panel, in examining whether there had been trade distortions in out-of-quota trade,
dismissed the evidence submitted by Brazil on its falling market share.  This evidence relates toBrazil's claim that the licensing system distorts tota l trade.  According to Brazil, in holding that an
increase in exports demonstrated that the decline in the percentage share in total trade was, first, not
relevant and, second, not due to a violation of the Licensing Agreement , the Panel failed to address the
real issue, which is, whether the fall in the market share was caused by the introduction of thelicensing system.  Brazil believes that it established a  prima facie  case of distortion of trade and that
the burden of proof had shifted to the European Communities to show why the licensing system wasnot distorting trade.  The Panel did not address this matter.WT/DS69/AB/R
Page 9
20. According to Brazil, the administration by the European Communities of the tariff-rate quota
for frozen poultry meat does not comply with the requirements of fairness, equity and proportionalityexpressed in Article 1.2, and in the preamble, to the Licensing Agreement .  Brazil argues that the
European Communities allows speculation in licenc es and the proliferation of traders.  Allowing
speculation is unfair and distorts trade.  It is al so "disproportionate".  The Panel failed to examine
whether speculation was affecting trade relations between Brazilian exporters and EC importers withthe subsequent reduction in Brazil's market share.  Brazil maintains that the Panel should also haveexamined the changes to the licensing rules, licence entitlement based on export performance, and theissuance of licences in non-economic quantities in the light of the requirement not to distort trade.Allowing the volume covered by individual licences to fall to below 5.5 tonnes is "disproportionate".
The Panel places an unusual emphasis on the fact that the tariff-rate quota licences were fully utilized.According to Brazil, there has been full utilization of the licences because an economic benefitaccrues to the holder of the licence when the privilege to import is exercised.  The licences can be
fully utilized even if the rules on administering the licences are "disproportionate" and unreasonable.
21. Brazil maintains that the Panel incorrectly restricted Brazil's claims concerning transparency
under the Licensing Agreement to an analysis of Article 3.5(a) of the Licensing Agreement .  The
administration of import licences in such a way that the exporter does not know what trade rules applyis, Brazil insists, a breach of the fundamental objective of the Licensing Agreement .  Brazil made a
comprehensive claim before the Panel relating to the violation of "the general principle oftransparency" in the administration of the licensing procedures "as laid down in the Preamble and
which underpin" the Licensing Agreement .  The Panel did not address this claim.
6. Article 11 of the DSU
22. Brazil asserts also that the Panel did not fulfil the duties incumbent upon it under Article 11 of
the DSU.  Although Brazil acknowledges that Article 11 of the DSU should not be interpreted so as to
limit the scope of any investigation a panel might wish to make or to limit what a panel considers willassist the DSB in making recommendations, Brazil maintains nonetheless that the wide discretion toexamine issues of concern should not disguise a failure of a panel to fulfil the requirement to make anobjective assessment of the matter before it.  Nor, when a panel chooses to examine issues ofprinciple, should it be allowed the discretion not to examine evidence of the practice of Members inrelation to those principles.
23. Brazil also contends that the Panel did not address a series of arguments put forward by Brazil
in relation to both GATT law and the practice of the Members:  first, the similarities between
Articles XXVIII and XXIV of the GATT that lead Brazil to question why the MFN principle inWT/DS69/AB/R
Page 10
Article I of the GATT 1994 must always apply in relation to Article XXVIII, but not necessarily so in
relation to Article XXIV;  second, the flexible nature of Article XXVIII of the GATT, which permitsbilateral agreements and the opening of bilateral concessions subject to the review of all Members;and, third, the text of Article XXVIII of the GATT, which allows the establishment of country-
specific tariff-rate quotas when other Members do not object.
24. The Panel failed in its obligation to the DSB to examine the practice of the Members.  The
Panel erred in law in considering that the practice of the Members does not show the possibility ofdeparting from the MFN principle in the case of tariff-rate quotas resulting from Article XXVIII ofthe GATT.  According to Brazil, Article XXVIII of the GATT, in and of itself, cannot be used by thePanel as an evidence to show that the Oilseeds Agreement signed between the European Communitiesand Brazil could not give rise to country-specific tariff-rate quotas.
25. Brazil submits that panels, and the Appellate Body, do not have the competence, within the
terms of the DSU, to limit or change the clear terms of agreements made between two Members to
which the other Members do not object.  The MFN principle is not absolute;  there are exceptions.  If
the Members have determined that the tariff-rate quota for frozen poultry meat is an exception, then apanel must respect that determination of the Members.  If, on the other hand, a panel does find that anagreement is void, it must examine the consequences of such a void agreement.  The Panel did notexamine this matter.
B. European Communities  - Appellee
1. The Oilseeds Agreement
26. In the view of the European Communities, the Panel reasonably and correctly performed its
task of interpreting the Oilseeds Agreement in the proper manner, by applying the principlesestablished in Article 31 of the Vienna Convention .  First, the Panel identified the relevant part of the
agreement in dispute.  Second, when addressing th e "ordinary meaning" of the relevant terms of the
Oilseeds Agreement, the Panel analyzed the arguments of both parties to conclude that "[various
arguments made by Brazil] … do not constitute conclusive evidence to the effect that the particular
terms used in the Oilseeds Agreement must be read in the way claimed by Brazil".  Third, the Panel
also concluded that the context of the terms "global annual tariff quota" does not give any additionalguidance for the purpose of determining a particular interpretation of the terms involved.  Fourth, the
Panel analyzed the object and purpose of the Oilseeds Agreement, which could not be assessed
without determining the object and purpose of the procedure set out in Article XXVIII of the GATT.WT/DS69/AB/R
Page 11
According to the European Communities, such an anal ysis is necessary in particular to consider the
inter-relationship between this provision and Article I of the GATT 1994.  The conclusion of thePanel that there is no provision in the WTO Agreements which allows departure from the MFNprinciple in the case of tariff-rate quotas resulting from Article XXVIII negotiations removed any
reasonable need to address the subordinate issue of the object and purpose of the specific procedure
under Article XXVIII that was concluded with the Oilseeds Agreement.
2. Article XXVIII of the GATT
27. The European Communities maintains that th e Panel findings on the interpretation of
Article XXVIII of the GATT are correct, and that the arguments put forward by the Panel todemonstrate that Article XXVIII of the GATT does not waive Members' obligations with respect tothe MFN clauses contained in Articles I and XIII of the GATT 1994 are extensively reasoned.
28. In the view of the European Communities, Article XXVIII is lex generalis  insofar as it
provides the normal procedural framework to be us ed by any Member in order legally to modify,
change or withdraw, totally or partially, one of its c oncessions.  Brazil is "wrong" to suggest that there
is nothing in Article XXVIII of the GATT that prevents two contracting parties from agreeing on a
country-specific package of compensatory measures.  The European Communities argues that the
terms of Article XXVIII:2, read in their context and in the light of its object and purpose, do notsupport Brazil's claims with respect to the Oilseed s Agreement.  The agreement resulting from the
Article XXVIII oilseeds negotiations and the poultry meat tariff concessions resulting from theMarrakesh Agreement Establishing the World Trade Organization
20 (the "WTO Agreement ") had the
same objective.  The fact that the oilseeds negotiations and the Uruguay Round negotiations wereinitiated for partially different reasons cannot affect these conclusions.  The negotiating history ofArticle XXVIII of the GATT confirms that Articles I and XIII of the GATT 1994 must be respected
when achieving an agreement in the framework of compensatory adjustment negotiations.  The fact
that the Article XXVIII negotiating process occurs on a bilateral basis cannot change this.
3. Article XIII of the GATT 1994
29. The European Communities argues that Brazil's claim concerning the existence of an
agreement between the European Communities and Brazil on the allocation of the tariff-rate quota forfrozen poultry meat should be rejected.  The Panel's conclusions, drawn from the examination of theletters sent by Brazil to the European Communities, are logical and fully reasoned and relate to                                                     
20Done at Marrakesh, 15 April 1994.WT/DS69/AB/R
Page 12
questions of fact.  Thus, Brazil's complaints in this respect appear totally unjustified and cannot
properly be the subject of this appeal.  According to the European Communities, the fact that theEuropean Communities did not answer these letters officially is further evidence of the lack of explicit(or even implicit) agreement with Brazil on this issue.
30. The European Communities states furthermor e that the Panel correctly interpreted
Article XIII:2(d) of the GATT 1994 and that Brazil's appeal of the Panel's finding that Article XIIIdoes not oblige Members to include or exclude non-Members therefore should be rejected.  The ECposition that Article XIII of the GATT 1994 operates only as a positive obligation to provide MFNtreatment to Members when allocating tariff-rate quota shares is based on both the terms ofArticle XIII:2 and on its objective.  An allocation of a share of a tariff-rate quota has been consideredto be an advantage by the Appellate Body in EC - Bananas
21 to such an extent that the basic principle
of non-discrimination applies strictly when allocating shares of a tariff-rate quota, including forMembers not having a substantial interest.  Thus, by assigning a share of the tariff-rate quota to all
substantially interested Members, including Braz il, the European Communities has provided Brazil
with the best possible (and legally sound) situation in the trade of frozen poultry meat within the
tariff-rate quota.
31. The European Communities insists that while ther e is a general obligation to treat on an MFN
basis any Member with respect to advantages granted even to a non-Member, there is no provision inthe WTO Agreement  forbidding Members from providing market access to non-Members on an MFN
basis.  Moreover, Brazil's claim that the European Communities should exclude any non-Membersupplying country from the allocation of the tariff-rate quota would inevitably entail an increase in its
share of the tariff-rate quota.  This is an "unjustified" request in the light of the chapeau of
Article XIII:2 of the GATT 1994.  Market access to the residual part of a tariff-rate quota is a matterthat cannot harm in any manner the trade interests of Members having a substantial interest if theirshares have been correctly allocated in accordan ce with the relevant prov isions of Article XIII.
According to the European Communities, this is th e case for Brazil with respect to the allocation of
the duty-free tariff-rate quota concerning frozen poultry meat, and therefore Brazil's position thatArticle XIII of the GATT 1994 is for the benefit of Members only is incorrect.
32. The European Communities maintains that the text of Article XIII:2(d) of the GATT 1994 is
clear:  a quota must be allocated among "supplying countries".  However, the rights and obligations
attached to  the allocation between supplying countries having a substantial interest apply only to
"contracting parties".  Thus, only substantial suppliers who are Members can claim participation in an                                                     
21Brazil refers to Appellate Body Report, EC - Bananas , adopted 25 September 1997, WT/DS27/AB/R,
paras. 161 and 162.WT/DS69/AB/R
Page 13
agreed distribution or can expect a share in case the importing Member proceeds to an allocation.
According to the terms of Article XIII, the shares  to be allocated to the substantial suppliers /Members
can be calculated as "proportions … of the total quantity or value of imports of the products".  The
European Communities insists that it applied the provis ions of Article XIII:2(d) to the tariff-rate quota
for frozen poultry meat:  "the allocation has been effected only with respect to Members having asubstantial interest on the basis of proportions of imports into the EC during a previous representative
period of three years".  Non-Member participation has been limited to the "others" category.
4. Article X of the GATT 1994
33. The European Communities submits that the Pa nel's approach in interpreting "measures of
general application" in Article X of the GATT 1994 wa s correct.  Article X requires that the general
terms and conditions of trade regulation be transparent so that operators are aware of the conditions
applying to commerce.  Application of Article X in the manner suggested by Brazil would be
impossible to implement in practice and would require that Members manage completely the termsand conditions of trade.  With respect to out-of-quota trade, the European Communities demonstrated,to the satisfaction of the Panel, as a matter of fact, that it has fully complied with the requirements ofArticle X.  By arguing that the Panel mischaracterized its claim under Article X, Brazil is seeking torefine and re-organise its arguments.  Brazil also raises an additional argument that the Panel erred inlaw by failing to apply the principle of legal cert ainty.  According to the European Communities, the
approach followed by Brazil is contrary to the provisions of Article 17.6 of the DSU, and thereforethose of Brazil's submissions that amount to either a re-characterization of its arguments or to new
arguments not submitted to the Panel should be dismissed as inadmissible.
5. Agreement on Import Licensing Procedures
34. The European Communities contends that the Pane l correctly restricted the application of the
Licensing Agreement  to in-quota trade.  This ruling is not only consistent with the text of the
Agreement, but also it is the logical consequence of the Panel's ruling on Article X of theGATT 1994.  Articles 1.2 and 3.2 of the  Licensing Agreement  make it clear that the trade restriction is
clearly linked to the effects flowing from the restriction imposed.
35. The European Communities submits that Brazil has been unable to demonstrate any trade
distorting effects of the administration of the tariff-rate quota for frozen poultry meat, on either in-quota or out-of-quota trade.  Brazil's submissions con cerning falling market share and burden of proof
amount to a request to the Appellate Body not to correct an error of law by the Panel but rather to re-WT/DS69/AB/R
Page 14
investigate and re-assess the factual questions before the Panel.  These submissions do not fall within
the proper scope of the appellate process.  Brazil seeks to advance before the Appellate Body "re-worked arguments" on transparency, equity and proportionality, thereby re-introducing its argumentson speculation and economic quantities that were considered and dismissed by the Panel.  This
constitutes an "abuse" by Brazil of the appellate process.
6. Article 11 of the DSU
36. The European Communities agrees with the Panel that Article XXV III of the GATT does not
waive Members' obligations with respect to the MFN clauses contained in Articles I and XIII of theGATT 1994.  In the context of the tariff-rate quota fo r frozen poultry meat, the issue of the relations
between Article XXIV and Article XXVIII was a "side-issue".  Although paragraphs 4 and 5 ofArticle XXIV provide a legal basis for an exception to Article I of the GATT 1994, these relate to theactual creation of a customs union.  The Oilseeds Agreement did not involve the creation of a customsunion or a free-trade area.  The Panel was therefore fully justified in not addressing that specificargument.  According to the European Communities, Brazil confuses the legal nature of a particular
tariff treatment granted through an Article XXVIII  procedure, that is based on the MFN, with the
economic effects of that particular tariff treatment.  Article XXVIII is a procedural, rather than a
substantive, provision and no Article XXVIII negotiation in which the European Commun ities was
involved was concluded with a non-MFN agreement.
37. With respect to the practice of Members in Article XXVIII negotiations, the European
Communities asserts that Brazil has not shown the existence of a "concordant, common andconsistent" practice of non-MFN Article XXVIII agreements.  Brazil's argument that Articles I andXIII do not necessarily apply to tariff-rate quotas opened as a result of compensation negotiationsunder Article XXVIII of the GATT, is not supported either by the text of the WTO Agreement or past
GATT practice.  The WTO Agreement  entered into force after the conclusion of the Oilseeds
Agreement.  At the time of the negotiation of the Oilseeds Agreement, the practice of the GATTcontracting parties, including panels, was squarely within the MFN interpretation of concessions.Moreover, as found by the Panel, the Oilseeds Agreement was incorporated into Schedule LXXX,whose poultry meat tariff concession is also un disputedly a MFN tariff commitment.  Finally, the
Oilseeds Agreement was "undoubtedly aimed at (partially) replacing MFN concessions in Oilseeds".WT/DS69/AB/R
Page 15
C. European Communities  - Appellant
1. Relationship between Schedule LXXX and the Oilseeds Agreement
38. The European Communities is satisfied with the conclusion reached in the Panel Report on
the relationship between the Oilseeds Agreement and Schedule LXXX, but submits that the Panelshould have followed a different line of legal reasoni ng to reach that conclusion.  According to the
European Communities, the relationship between the bilateral Oilseeds Agreement and the laterSchedule LXXX should be examined on the basis of Article 59.1, or, in the alternative, Article 30.3,of the Vienna Convention .  The Panel did not draw the logical conclusions from its finding in
paragraph 206 of the Panel Report that Articles 59.1 and 30.3 of the Vienna Convention  are customary
rules of interpretation of public international law.  Rather than applying Article 3.2 of the DSU and
the Vienna Convention , the Panel referred to the panel report in EEC - Oilseeds , which pre-dates the
entry into force of the DSU and which is therefore "irrelevant" in this case because it was decided inthe context of a non-violation case.
39. The undisputed evidence before the  Panel showed that the results of the bilateral Oilseeds
Agreement were incorporated into the final stages of the negotiations of Schedule LXXX andeventually agreed and ratified by all parties, including Brazil.  This was a "conscious act" of the twoparties in order to clarify their mutual obligatio ns.  In the meantime, the European Communities had
autonomously put into force the tariff-rate quota as an MFN market access opportunity.  The fact that
the EC Schedule applicable at the time did not provide for any tariff treatment for frozen poultry meat
other than variable levies should not be overlooked.
40. In the present case, the European Communities as serts that only one alternative is logically
possible:  either the Oilseeds Agreement and Schedule LXXX are identical in their content, or theyare not.  If they are identical, then the principle laid down in Article 59.1 of the  Vienna Convention
must be applicable because, in the specific context of the WTO, Brazil and theEuropean Communities intended that the matter sh ould be governed by the later treaty, which
introduced the tariff-rate quota as a new element of tariff binding within  the framework of the
EC Schedule.  If they are not identical, the earlier Oilseeds Agreement was changed by the later
Schedule LXXX with the assent and the active participation of all parties, including Brazil.  Thus, the
rule established  by Article 30.3 of the Vienna Convention  must be applicable, and the Oilseeds
Agreement can only be applied to the extent that it s provisions are compatible with those of the later
treaty, namely, Schedule LXXX.  And, in the view of the European Communities, there cannot be anydoubt that a new tariff-rate quota negotiated during the Uruguay Round was meant to be applied on an
MFN basis.WT/DS69/AB/R
Page 16
2. Agreement on Agriculture
41. The European Communities contends that contrary  to the legal interpretation applied by the
majority of the Panel, the phrase "on the basis of the c.i.f. import price" in Article 5.1(b) of the
Agreement on Agriculture  refers to the cost of the product plus insurance and freight charges and does
not include the duties payable.
42. Article 5.1(b) refers to the price at which imports "may enter" the customs territory.  This
wording confirms that the price in issue is that which is calculated at the moment a shipment arrivesand before its entry on to the EC market, at which point taxes and duties become payable.  The Panelincorrectly assumed that the words "the price at which imports of that product may enter the customsterritory" and the words "market entry price" are equivalent.  The phrase "on the basis of" inArticle 5.1(b) means "founded on".  The authors of the  Agreement on Agriculture  selected the c.i.f.
price as the principal parameter for the application of the special safeguard.  The Panel's statement in
paragraph 278 of the Panel Report that "the market entry price is something that has to be constructed
using the c.i.f. price as one of the parameters" incorrectly presupposes that the c.i.f. price is always thebasis for the calculation of the duties to be included in the notion of "market entry price".  Duties uponimportation of frozen poultry meat into the European Communities are not  ad valorem  but, rather,
fixed duties that are calculated on the basis of the quantities imported and not on the basis of the c.i.f.price.  The European Communities maintains that th e Panel's "restrictive" reading of Article 5.1(b)
does not take account of the proper context of that provision, in particular, footnote 2 to Article 5.1(b)and Article 5.5, and disregards the fact that the system applying the special safeguard clause is
separate and parallel to the tariffication scheme applied under Article 4.2 of the Agreement on
Agriculture .
43. Moreover, the European Communities states, the Panel disregarded the broader context of the
border protection measures in the agricultural sector that existed before the Uruguay Round and theirconversion into ordinary customs duties.  The special safeguard provision exists to ensure thatunknown or unpredictable factors that would cause c.i.f. prices of imports to drop below the leveltaken as a reference point during the Uruguay Round negotiations, could not fundamentally alter theinternal market prices and the domestic price support system.  This is in line with the results oftariffication as embodied in the schedules.  It is for this reason that Articles 5.1 and 5.5 of the
Agreement on Agriculture  provide for calculation of the additional duty "on the basis of the c.i.f.
price".  If this basis is altered, then the entire result of the Uruguay Round is modified.  The result ofthe majority of the Panel's interpretation is, as the dissenting member noted, that where a specific dutyis payable and this is higher than the trigger price, the trigger price can never be exceeded.  WithWT/DS69/AB/R
Page 17
respect to "subsequent practice" in Article 31.3(b) of the Vienna Convention , the European
Communities understands that the practice of other Members is not to include customs duties in thecalculation under Article 5.1(b).  A document used in the WTO technical assistance training coursesconfirms this approach.
44. Should the Appellate Body reverse the Panel's findings relating to Article 5.1(b) of the
Agreement on Agriculture , the European Communities submits that the Appellate Body should
dismiss Brazil's requests that issues relating to Articles 5.5 and 4.2 of that Agreement be taken up.These issues were not appealed in accordance with the rules on the scope of an appeal in Article 16.4of the DSU and in Rules 20.2(d) and 21.2(b)(i) of the  Working Procedures.  For reasons of due
process, consistency and fair treatment among all Members, the European Communities argues thatthe Appellate Body should not depart from the "strict" interpretation of these provisions adopted inEC - Bananas .  In respect of the reason given by the Division in the course of the oral hearing, "i.e.
that 'due process considerations' justified an ad ditional exchange of written memoranda" between the
participants, the European Communities wonders wh ether it would be compatible with the DSU to
incorporate other due process considerations that are not included in the DSU, any other coveredagreement, or the Working Procedures.  Any specific procedures adopted pursuant to Rule 16.1 of the
Working Procedures  must be consistent with the DSU, the other covered agreements and the Working
Procedures  themselves.
45. According to the European Communities, in practice, there is no need for the Appellate Body
to address in this case the theoretical issue raised by Brazil of whether the application by a panel ofthe principle of judicial economy would allow depart ure from the explicit provisions of Article 16.4
of the DSU and Rule 20 of the  Working Procedures.  The Panel made a finding in paragraph 286 with
respect to Article 5 of the Agreement on Agriculture  and Article X of the GATT 1994, that Brazil
"had not specified the manner in which the EC has vi olated these provisions".  Brazil did not appeal
from this finding, and the European Communities cannot be required to suffer the consequences of anappellant's failure to define properly the scope of its appeal.
46. According to the European Communities, Brazil's claim under Article 4.2 of the  Agreement
on Agriculture  was vague and was not supported by factual or legal arguments.  The purpose of the
appellate process is not to allow Members to correct or re-plead arguments that were barely sketchedout in the panel procedure and which, with hindsight , may be expanded, refined or improved.  Brazil
should not be allowed to abuse the appellate procedure by invoking non-existent reasons of "due
process" when Brazil did not properly make its case clear during the panel procedure.  In any event,the Panel's findings on Articles 5.5 and 4.2 are not logically or legally linked with the issuesWT/DS69/AB/R
Page 18
concerning the interpretation of Article 5.1(b) of the Agreement on Agriculture , and the Panel erred in
creating a link among these provisions that is non-existent in fact and law.
47. In the view of the European Communities, a de termination as to whether the representative
price violates Articles 5.5 and 4.2 of the Agreement on Agriculture requires a finding of fact centered
on the examination of EC legislation.  Examinati on of EC legislation is not an interpretation of
legislation as such:  it is a judgment as to whether or not the European Communities, in applying itslaw, is acting in conformity with its WTO obligations.  The Appellate Body cannot address issues offact and is bound by the determinations of fact made during the panel procedure.  Brazil itself admitsthat the Appellate Body would have to address issues of fact in order to decide these questions.  The
European Communities submits that certain assertions by Brazil relating to the document submittedby the European Communities to the Panel on 21 November 1997 misrepresent the reality of the panelprocedure.  The European Communities also states that Brazil breached the confidentialityrequirements of the panel procedure.
48. According to the European Communities, Brazil acknowledges that the EC rules on the
application of the special safeguard provision are in line with the provisions of Article 5 of theAgreement on Agriculture .  Thus, Brazil has formally accepted that its complaint concerning
Article 5.5 of the Agreement on Agriculture  is unfounded in law and should be dismissed.
49. The European Communities observes further that the Agreement on Agriculture  does not
impose a pre-determined system of calculating the "c.i.f. price of the shipment expressed in terms ofthe domestic currency."  Thus, the fact that a representative price system is not explicitly provided inthe Agreement on Agriculture  does not imply that the use of such a system automatically constitutes a
violation of Article 5.  The representative price is based on two main regulations.  First,
Regulation 3290/94, which implements the agreements concluded during the Uruguay Round in theagricultural sector, amends Regulation 2777/75.  The revised version of Article 5.3 ofRegulation 2777/75 lays down the general rule for the application of the special safeguard additionalduties as provided for in Article 5 of the Agreement on Agriculture .  Second, the detailed rules for the
application of this provision are found in Regulation 1484/95.  The European Communities states thatArticle 3 of that Regulation shows that "any importer is completely free to follow an approach basedon a shipment by shipment basis if he so wishes", as indicated by Article 5 of the Agreement on
Agriculture .  The apparent limitation of this entitlement to  situations in which the c.i.f. import price is
higher than the applicable representative price is not in violation of the Agreement on Agriculture .  It
represents, in fact, a substantial benefit for the im porter:  if the c.i.f. price is lower than the
representative price, then the additional duty to be paid is higher.WT/DS69/AB/R
Page 19
50. The European Communities states that the repres entative price, which is an average c.i.f.
price, is determined at regular intervals in order to keep the system up-to-date.  Availability ofrecourse to the different sources set out in Article 2.1 of Regulation 1484/95 is designed to ensure thatthe average c.i.f. price arrived at for a given country of origin "is truly representative".  For the poultry
products in question, the representative price is, in general, calculated on the basis of free-at-frontier
offer prices transmitted by the EC member states, either from usual monthly import statistics or fromad hoc  price recording of such date by importers.  Thus, the European Communities is, in fact, using
the free-at-frontier price.  The representative price is a means of boosting trade by reducingbureaucracy and paperwork.
51. According to the European Communities, the representative price does not impose penalties
on, or create deterrents for, the importer.  According to Article 3.2 of Regulation 1484/95, theimporter is given four months from the date of acceptance of the declaration of release for freecirculation to provide the necessary proof that the c.i.f. import price is higher than the representative
price.  If no such proof is provided, then the security is withheld.  This security amounts exactly to the
additional duty calculated on the basis of the representative price plus interest as from the date ofrelease of the goods into free circulation.  The evidence requested of the operators in order to establishthe c.i.f. price of a specific shipment consists of  normal and customary commercial documents for the
shipment of the products.  The representative price is "more transparent" than the determination of thec.i.f. price on a shipment-by-shipment basis.  It is a "more stable and less variable system" than theshipment-by-shipment approach explicitly mentioned in Article 5.5 of the  Agreement on Agriculture .
It provides operators with published c.i.f. prices that are regularly updated, but are applied only after
they have been published.  There is, according to the European Communities, no relation between the
representative price and a variable levy.
D. Brazil  - Appellee
1. Relationship between Schedule LXXX and the Oilseeds Agreement
52. Brazil argues that the Panel reached the correct conclusions on the applicability of
Articles 59.1 and 30.3 of the Vienna Convention .  Article 59 of the Vienna Convention  is not
applicable to the present situation because the Oilseeds Agreement was incorporated into the WTO
Agreement , and therefore the intention was that the matter be governed by the WTO Agreement , in the
light of the Oilseeds Agreement.  The intention of the parties was to incorporate the OilseedsAgreement into the WTO Agreement .  This confirms the relevance of the Oilseeds Agreement in
understanding Schedule LXXX.  According to Brazil, this is a question of the continuation of a validWT/DS69/AB/R
Page 20
agreement that was not terminated and was specifica lly incorporated into the later agreement intact
and without amendment.  For this reason, there was no provision in the Oilseeds Agreement relatingto its termination, or denunciation or withdrawal.  The Oilseeds Agreement remains a valid agreementbetween Brazil and the European Communities, is incorporated into the WTO Agreement  and,
therefore, remains the basis for the interpretation of the tariff-rate quota for frozen poultry meat.
53. Brazil states that the European Communities s howed its intention to continue to be bound by
the terms of the earlier Oilseeds Agreement by sp ecifically incorporating the earlier agreement into
the later WTO Agreement .  The matter is therefore governed by the WTO Agreement  as incorporating
the Oilseeds Agreement, which is compatible with the WTO Agreement .  Country-specific tariff-rate
quotas are compatible with the WTO Agreement  and with Members' Schedules, and Members provide
for country-specific tariff-rate quotas in their Schedules.
54. According to Brazil, the European Communities misreads Article 59 of the Vienna
Convention  by limiting its application to only one element of the subsequent treaty, its Schedule,
rather than referring to the WTO Agreement  as a whole.  Members intend that their relations should be
governed by the  WTO Agreement  read in the light of earlier agreements reached between Members.
The Oilseeds Agreement may be considered part of the GATT 1994, as a protocol or certificationrelating to tariff concessions within the meaning of paragraph 1(b)(i) of the language in Annex 1Aincorporating the GATT 1994 into the WTO Agreement .
55. Article 30.3 of the Vienna Convention  is not applicable in this case because the country-
specific aspects of the incorporated Oilseed s Agreement are fully compatible with the WTO
Agreement .  The incorporation of the Oilseeds Agreement into the WTO Agreement  did not change
the terms of the earlier agreement.
56. Brazil argues that if the tariff-rate quotas for frozen poultry meat in the Oilseeds Agreement
and the WTO Agreement  are identical, and if the Oilseeds Agreement was incorporated into
Schedule LXXX, then, on the basis of Article 30.2 of the Vienna Convention , the tariff-rate quota in
Schedule LXXX is the same as the tariff-rate quota in the Oilseeds Agreement and is therefore subjectto the conditions set out in the Oilseeds Agreem ent.  If the tariff-rate quotas in the Oilseeds
Agreement and the WTO Agreement  are not identical, and if the Schedule LXXX tariff-rate quota is a
new tariff-rate quota negotiated within the terms of the Uruguay Round, then the EuropeanCommunities would be in breach of its obligations under the Oilseeds Agreement, Article XXV III of
the GATT and Article 26 of the Vienna Convention .
57. According to Brazil, customary international law cautions against the application of one legal
maxim for the interpretation of treaties to the exclusion of others.  Acceptance of the EC argumentsWT/DS69/AB/R
Page 21
on Articles 59 and 30.3 of the Vienna Convention  would give undue weight to the legal maxim lex
posterior derogat prior  on the issue of the succession of treaties relating to the same subject-matter.
To ignore the relevance of the Oilseeds Agreement would undermine the security and predictability inthe multilateral trading system and the fundamental principle of legal certainty.  The European
Communities "did not perform its obligations to Brazil in good faith".
2. Agreement on Agriculture
58. In the view of Brazil, the Panel reached the correct conclusion on the interpretation of
Article 5.1(b) of the Agreement on Agriculture .  The special safeguard provision is an exception to the
requirement set out in Article 4.2 of that Agreement.  Contrary to the EC argument, the systemapplying the special safeguard clause is not separate and parallel to the tariffication process underArticle 4.2.  The provisions are linked.  Special safeguards are dependent on the implementation oftariffication.  The reduction in tariffs over time may, in certain circumstances, increase the need forthe introduction of special safeguards, but this does not necessarily make the two processes a differentset of rights and obligations.
59. According to Brazil, the "price at which a pr oduct may enter the customs territory" is the
duty-paid price and this market entry price, while "determined on the basis of" the c.i.f. price, is not
the c.i.f. price itself.  Payment of any applicable customs duty is a  sine qua non  of customs clearance.
Brazil agrees with the finding of the Panel that, for present purposes, the words "market entry price"and the "price at which a product may enter the customs territory" are equivalent.  Article 5.1(b)requires that the c.i.f. price is the price from which the calculation of the market entry price begins,but the market entry price is not the same as, but is "based on", the c.i.f. price.
60. Brazil stresses that Members were free to fix an appropriate "reference price" (or trigger
price) which was only, in general, to be based on the average c.i.f. unit value.  Members had a certain
discretion in fixing the reference price.  The fact that some Members may now be in a situation where
use of the special safeguard is unlikely in relation to a limited number of products because of the levelof the reference price which they have set and the level of tariff they have negotiated, is not materialto the proper interpretation of the text of Article 5.
61. Brazil asserts that if the Appellate Body reverses the findings of the Panel on Article 5.1(b) of
the Agreement on Agriculture , then the question will remain whether or not the European
Communities has complied with the other provisions of Article 5, in particular Article 5.5, or withArticle 4.2, and that the Appellate Body must cons ider the proper procedure to be followed with
regard to the finding of a panel on the basis of judicial economy.  Because the Panel did not examineWT/DS69/AB/R
Page 22
the substance of the claims under Articles 5.5 or 4.2 of the Agreement on Agriculture , there were no
issues of law to be appealed by Brazil.  According to Brazil, the very act of appeal of a panel's findingmust open the possibility for the appellee to address, not only the grounds of appeals raised by theappellant, but also those issues of law and of fact that become germane as a consequence of the
examination of those grounds.  This would be "in line with" the doctrine of due process, to consider
otherwise would be to defeat the doctrine of judi cial economy.  Should the Appellate Body reverse the
findings of the Panel on Article 5.1(b), Brazil cons iders that the Appellate Body should also address
the question of the substantive issues raised by Brazil so as not to diminish Brazil's rights in relationto dispute settlement.  Brazil considers that the best approach is the approach adopted in previousappeals, and that Rule 16 of the Working Procedures  allows such an approach.  The problem in this
case only arises if a finding is cross-appealed (without the benefit of a notice of appeal) and if thatfinding is reversed.
62. Brazil maintains that nothing in Article 5 of the  Agreement on Agriculture  permits a Member
to introduce a representative price system.  Accord ing to Brazil, the representative price mechanism
distorts the implementation by the European Commun ities of Article 5 and results in the application
of additional duties in a manner incompatible with that Article.  Even though Regulation 1484/95gives importers of out-of-quota frozen poultry meat two options for establishing the c.i.f. price of anyone shipment, the representative c.i.f. price nevertheless determines the conditions for the import offrozen poultry meat into the European Communities.  This is so because, upon importation, theEuropean Communities requires immediate payment of the additional duty calculated on the basis ofthe representative price.  If the importer elects to es tablish the actual c.i.f. price, payment of a security
of the same value as the additional duty is required.  This security must be pre-paid, and it is forfeited
unless the trader can comply with the proofs required under Article 3.1 of Regulation 1484/95.
63. According to Brazil, the information provided by the European Communities to the Panel on
the use by traders of all origins of the option to prove the actual c.i.f. price was inadequate and lackedtransparency.  Because of the complexities of the system, the use of the representative price is the ruleand not the exception.  The European Communities did not provide information to the Panel on howprecisely the representative price is calculated in practice.  Although the representative price issupposed to be representative of an average c.i.f. price of all shipments from any one origin, there isno element in its calculation that refers to the valu e of the product at the EC frontier or to the value of
the product on world markets.  To comply with Article 5 of the Agreement on Agriculture , the
European Communities is obliged to use the actual world price or free-at-frontier price.  Brazil arguesthat as an exception to Article 4.2 of the Agreement on Agriculture , Article 5 must be construed
narrowly.  The representative price is not the c.i.f. price, nor is it representative of the c.i.f. price ofany one shipment.  Therefore, the representative price mechanism is not provided for, nor inWT/DS69/AB/R
Page 23
compliance with, Article 5 of the  Agreement on Agriculture .  Brazil did not have an opportunity to
comment on the EC submission to the Panel of 21 November 1997 concerning the calculation by theEuropean Communities of the representative price, other than in a letter responding to the EC protestthat Brazil breached confidentiality with respect to these documents, and in the comments on the
interim report.
64. Brazil contends that, because the additional duty or bond that is payable on the basis of the
EC representative price varies regularly depending on the published representative price, it isequivalent to a variable levy.  This form of border protection measure is prohibited under Article 4.2of the Agreement on Agriculture .  Additional duties under Article 5.1(b) should be allowed to rise and
fall on the basis of the shipment-by-shipment c.i.f. price changes.
E. Arguments  by the Third Participants
1. Thailand
65. Thailand is of the view that a Member is free to conclude any bilateral agreement with any
country.  However, if the agreement has any effect on the rights and obligations of Members, all theprovisions of general application of the WTO Agreement , including Articles I, III and XIII of the
GATT 1994, must apply.  Thailand agrees with the Panel's findings in paragraphs 213, 216 and 218 ofthe Panel Report.  Allocation of any tariff-rate quota is governed by, and must be consistent with,
Article XIII:2(d) of the GATT 1994.  Insofar as the allocation of tariff-rate quotas to Members is
concerned, Thailand agrees with the Panel's finding in paragraph 232 of the Panel Report that"Article XIII is a general provision regarding the non-discriminatory administration of importrestrictions applicable to any TRQs regardless of their origin."
66. Thailand disagrees with the Panel's conclusion in paragraph 262 of the Panel Report that the
tariff-rate quota for frozen poultry meat is fully utilized.  Because the import licensing regime of theEuropean Communities is operating in such a way that exporters do not know whether thetransactions involved are within or outside the tari ff-rate quota, and thus cannot take that factor into
account when making the transactions, Thailand maintains it cannot be said that the tariff-rate quota is
fully utilized.  Once a tariff-rate quota is allocated, it must be administered in a manner that enables
Members to "utilize fully the share of any such to tal quantity or value which has been allotted" to
them in accordance with Article XIII:2(d) of the GATT 1994.  No conditions or formalities may beimposed that would prevent such full utilization.  This is a substantive provision that Thailandunderstands to be applicable not only with re spect to the total quantity or total value  per se , but alsoWT/DS69/AB/R
Page 24
in respect of the full benefits derived from the ta riff-rate quotas, including the full enjoyment of the
in-quota tariff rate.
67. Thailand agrees with the Panel's finding in paragraph 278 of the Panel Report that the
"ordinary meaning of the phrase 'the price at wh ich imports may enter the customs territory of the
member granting the concession' would include payment of applicable duties" and in paragraph 282
of the Panel Report that "the EC has not invoked the special safeguard provision with respect topoultry in accordance with Article 5.1(b)."  Thailand, however, disagrees with the Panel's exercise ofjudicial economy concerning Article 5.5 of the Agreement on Agriculture and argues that the Panel
should have examined the consistency of the representative price with Article 5.1(b).  In Thailand'sopinion, the representative price is not in conformity with Article 5.1(b), which requires that themarket entry price must be calculated on the basis of the c.i.f. import price of the shipment concernedalone.  To the extent that the representative price is used in place of the c.i.f. import price forcomparison with the trigger price for the purpose of setting additional duties to be paid as special
safeguard duties, it is also inconsistent with Article 5.5 of the  Agreement on Agriculture , which
requires that the comparison be made only between the c.i.f. import price and the trigger price.Because the representative price is calculated on the basis of an average of a variety of prices,including internal market prices that are not c.i.f.  prices within the meaning of Article 5.1(b), the
representative price is thus functioning in such a way as to stabilize the price of the product concerned
in the same fashion as the former EC regime of variable import levies.
2. United States
68. The United States supports the conclusion of the Panel that Brazil is not entitled to an
allocation of the entire in-quota quantity of the tariff-rate quota for frozen poultry meat.  The UnitedStates maintains that Brazil has failed to demonstrate that the EC allocation of this tariff-rate quota is
inconsistent with the obligations of the European Communities under Articles X III and XXVIII of the
GATT, or that Brazil is otherwise entitled to the entire in-quota quantity of this tariff-rate quota.
Brazil is incorrect to argue that as no Member objected, all Members must be deemed to have agreedto the solution agreed between Brazil and the European Communities.  According to the UnitedStates, Brazil misunderstands the purpose of a notice withdrawing concessions under Article XXVIIIof the GATT.  Failure to have recourse under Article XXVIII:3 of the GATT can hardly be perceivedas "agreement" of all Members, since not all Members have a right to such recourse.  Brazil also errsin claiming that the opening of a country-specific tariff-rate quota for frozen poultry meat by the
European Communities does not give rise to a negative impact on the trade interests of otherWT/DS69/AB/R
Page 25
Members.  A country-specific tariff-rate quota increases a trade opportunity for one Member, which
receives a benefit relative to other Members.
69. The United States believes that the Panel correctly found in paragraph 230 of the Panel
Report that there is "nothing in Article XIII that obligates Members to calculate tariff quota shares on
the basis of imports from Members only", and, consequently, that it was consistent with Article XIII
of the GATT 1994 for the European Communities to allow non-Members access to the tariff-ratequota.  The obligations in Article XIII with respect to the treatment of Members when allocating atariff-rate quota in no way imply that non-Members must be excluded from access to the in-quotaquantity of a tariff-rate quota.  The Panel correctly defined the issue before it as whether the EuropeanCommunities is required to exclude non-Members from the basis of the calculation of tariff quotashares.
70. The United States supports the Panel's conclusion in paragraph 269 of the Panel Report that
licences granted to a specific company or tariffs applied to a specific shipment would not be
considered measures of "general application" within the scope of Article X of the GATT 1994.
Moreover, the United States agrees with the EC view that Brazil's request to have each shipperinformed of whether a shipment would be in-quota or out-of-quota could be impossible to implementin practice and is not required by Article X of the GATT 1994.
71. To the extent that the Panel's statement in paragraph 249 of the Panel Report that "[t]he
Licensing Agreement, as applied to this particular case, only relates to in-quota trade" could be read torequire that the "effects" referred to in Article 3.2 of the  Licensing Agreement  are limited to effects
on in-quota imports, the United States supports the appeal of Brazil that the Panel's reasoning should
be modified.  The United States also supports Brazil's appeal with respect to the Panel's reliance on
"full utilization" of the in-quota quantity as being dispositive of whether or not there is a breach ofArticle 3.2 of the Licensing Agreement .  To the extent that the Panel's reasoning may be read to imply
that full utilization of a quota allocation would preclude a finding of trade distortion, the United Statessupports the appeal of Brazil that the Panel's reasoning should be modified.
72. According to the United States, the Appellate Body should reject the EC appeal concerning
the application of Articles 30.3 and 59.1 of the Vienna Convention .  The approach advocated by the
European Communities is based on the erroneous assumption that the agreement between theEuropean Communities and Brazil -- whether reflected in the bilateral Oilseeds Agreement or in
Schedule LXXX -- is dispositive in this case.  Ac cording to the United States, it is not the bilateral
agreement between the European Communities and Brazil which is at issue;  rather, the question iswhether the current allocation by the European Comm unities of its tariff-rate quota is in accordanceWT/DS69/AB/R
Page 26
with its obligations under Articles XIII and XXVIII of the GATT.  The Oilseeds Agreement is not a
"covered agreement" under the DSU.  The Panel correctly set forth the role of the Oilseeds Agreementin its analysis in paragraph 202 of the Panel Report.  The Panel's conclusion that the provisions of theOilseeds Agreement did not provide for Brazil to receive the entire amount of the tariff-rate quota for
frozen poultry meat renders moot much of the EC argument on this point.  Article XXVIII of the
GATT could not justify a quota allocation inconsistent with Article XIII, even had that allocationbeen implemented in accordance with the terms of the Oilseeds Agreement.
73. With respect to Article 5.1(b) of the Agreement on Agriculture , the United States supports the
position of the European Communities and believes that the Panel erred in interpreting the phrase "theprice at which imports of that product may enter the customs territory of the Member granting theconcession" to mean the price including the payment of applicable duties.
74. According to the United States, the Working Procedures  do not appear to address the situation
where a successful cross-appeal under Rule 23 woul d require that other issues raised in the panel
proceeding be addressed by the Appellate Body in order to resolve the dispute.  However, the United
States notes that where a procedural question arises that is not covered by the Working Procedures ,
Rule 16.1 of the Working Procedures  permits a Division to adopt an appropriate procedure for the
purposes of a particular appeal.  In this case, Brazil should not be denied relief to which it mightotherwise be entitled simply because it did not appeal issues that only became relevant in light of theEC cross-appeal.  However, the United States adds that for the purpose of making legal findings onBrazil's claims relating to additional duties, the Appellate Body should make legal findings based onlyon the Panel's factual findings or on facts submitted by the parties that were uncontested at the panel
stage, and not on facts presented by a party for the first time on appeal.
75. The United States maintains that the EC representative price is inconsistent with Article 5.5 of
the Agreement on Agriculture , as it appears to bear no relationship to the price of the individual
shipment it is intended to represent.  The United States agrees with Brazil that the burdens imposed bythe European Communities, and its use of a penalty provision, create an effective deterrent to tradersseeking to have additional duties calculated on a sh ipment-by-shipment basis.  In the view of the
United States, these facts undermine the EC claim that the use of a representative price is optional andhelp to explain the low rate at which traders are requesting shipment-by-shipment calculation ofadditional duties.  With respect to Brazil's claim under Article 4.2 of the Agreement on Agriculture ,
the United States wishes to express caution as to whether the changes in the special safeguard duty as
applied by the European Communities are such as to render it a "variable levy" within the meaning ofthat provision.  By its nature, the amount of additional duties calculated under Article 5.5 could varyfrom shipment to shipment, so some variation must be permitted under the  Agreement on Agriculture .WT/DS69/AB/R
Page 27
III. Issues Raised in this Appeal
76. The following legal issues were raised by the appellants in this appeal:
(a) Whether the Panel erred in its interpretation of the relationship between Schedule
LXXX and the Oilseeds Agreement;
(b) Whether the Panel erred in finding that the tariff-rate quota for frozen poultry meat in
Schedule LXXX was not exclusively for the benefit of Brazil and that no agreementexisted between Brazil and the European Communities on the allocation of the tariff-rate quota within the meaning of Article XIII:2(d) of the GATT 1994;
(c) Whether a tariff-rate quota resulting from negotiations under Article XXVIII of the
GATT 1947 must be administered in a non-discriminatory manner consistent withArticle XIII of the GATT 1994;
(d) Whether the Panel erred in its interpretation of Article XIII of the GATT 1994 with
respect to the rights and obligations of Members in relation to non-Members in the
administration of tariff-rate quotas;
(e) Whether the Panel erred in its application of Article X of the GATT 1994, and, in
particular, in its assessment of measures "of general application" in this case;
(f) Whether the Panel erred:  in finding that the Licensing Agreement  applies only to in-
quota trade in this case;  in finding that there was no trade distortion within themeaning of Articles 1.2 and 3.2 of the Licensing Agreement ;  and in not examining
Brazil's claim concerning a general principle of transparency underlying theLicensing Agreement ;
(g) Whether the Panel acted inconsistently with Article 11 of the DSU in not examining
certain arguments made by Brazil relating to GATT/WTO law and practice; and
(h) Whether the Panel erred in finding that the "price at which imports of [a] product may
enter the customs territory of the Member granting the concession, as determined on
the basis of the c.i.f. import price of the shipment concerned" in Article 5.1(b) of theAgreement on Agriculture  is the c.i.f. price plus ordinary customs duties.WT/DS69/AB/R
Page 28
IV. Relationship between Schedule LXXX and the Oilseeds Agreement
77. With respect to the relationship between the Oilseeds Agreement and Schedule LXXX in this
case, the Panel found, inter alia :
... in the present case, the Oilseeds Agreement was negotiated within
the framework of Article XXVIII of GATT.  Insofar as the content of
the Oilseeds Agreement is incorporated into Schedule LXXX - a point
not disputed by the parties - there is a close connection between the
two.22
The Panel also stated:
… the Oilseeds Agreement was concluded within the context of
Article XXVIII negotiations.  Under ordinary circumstances, the
resulting modification of the EC tariff schedule would have been
certified by the Director-General pursuant to the 1980 procedure for
modification and rectification of schedules.  However, as the
conclusion of the Oilseeds Agreement coincided with the substantiveconclusion of tariff negotiations in the Uruguay Round, this procedure
was not strictly followed.  The EC directly incorporated the substance
of the Oilseeds Agreement into its then-current tariff schedule,
effective 1 January 1994, and also into Schedule LXXX at the
conclusion of the Uruguay Round negotiations.  This proceduralanomaly, in our view, does not affect the legal characterization of the
Oilseeds Agreement as a bilateral agreement concluded within the
context of Article XXVIII negotiations, as is evidenced by the fact
that the negotiations leading to its conclusion were authorized by the
CONTRACTING PARTIES.
23
The Panel asserted that it would:
… proceed to the examination of the Oilseeds Agreement to the extent
relevant to the determination of the EC's obligations under the WTO
agreements vis-à-vis Brazil.24
78. Although the European Communities is satisfied with the practical result of the Panel Report
on this point, the European Communities argues that the Panel erred in its interpretation of the
                                                     
22Panel Report, para. 201.
23Panel Report, para. 204.
24Panel Report, para. 202.WT/DS69/AB/R
Page 29
relationship between Schedule LXXX and the Oilseeds Agreement.25   The Panel did not accept the
argument of the European Communities that Schedu le LXXX superseded and terminated the Oilseeds
Agreement because the WTO Agreement  was a later treaty relating to the same subject-matter in
accordance with Article 59.1 of the Vienna Convention , or that the Oilseeds Agreement only applies
to the extent compatible with Schedule LXXX in accordance with Article 30.3 of the Vienna
Convention .  The Panel stated:
... we cannot summarily dismiss the significance of the Oilseeds
Agreement in the interpretation of Schedule LXXX by recourse to the
public international law principles embodied in the ViennaConvention .
26
79. In our view, it is not necessary to have recourse to either Article 59.1 or Article 30.3 of the
Vienna Convention , because the text of the WTO Agreement  and the legal arrangements governing the
transition from the GATT 1947 to the WTO  resolve the issue of the relationship between
Schedule LXXX and the Oilseeds Agreement in this case.  Schedule LXXX is annexed to theMarrakesh Protocol to the General Agreement on Tariffs and Trade 1994 (the " Marrakesh
Protocol "), and is an integral part of the GATT 1994.
27   As such, it forms part of the multilateral
obligations under the WTO Agreement .  The Oilseeds Agreement, in contrast, is a bilateral agreement
negotiated by the European Communities and Brazil under Article XXV III of the GATT 1947, as part
of the resolution of the dispute in EEC - Oilseeds.28   As such, the Oilseeds Agreement is not a
"covered agreement" within the meaning of Articles 1 and 2 of the DSU. Nor is the OilseedsAgreement part of the multilateral obligations accepted by Brazil and the European Communitiespursuant to the WTO Agreement , which came into effect on 1 January 1995 .  The Oilseeds Agreement
is not cited in any Annex to the WTO Agreement .  Although the provisions of certain legal
instruments that entered into force under the GATT 1947 were made part of the GATT 1994 pursuantto the language in Annex 1A in corporating the GATT 1994 into the WTO Agreement
29, the Oilseeds
Agreement is not one of those legal instruments.
                                                     
25EC appellant's submission, para. 33.
26Panel Report, para. 207.
27Article II:7 of the GATT 1994.
28Adopted 25 January 1990, BISD 37S/86; and DS28/R, 31 March 1992.
29Those legal instruments are described in paragraph 1(b) of that incorporating language as including
certain protocols and certifications relating to tariff co ncessions, certain protocols of accession, certain decisions
on waivers granted under Article XXV of the GATT 1947, and "other decisions of the CONTRACTING
PARTIES to GATT 1947".WT/DS69/AB/R
Page 30
80. Furthermore, the Oilseeds Agreement does not c onstitute part of the "decisions, procedures
and customary practices followed by the C ONTRACTING PARTIES to GATT 1947" by which the
WTO "shall be guided" under Article XVI:1 of the WTO Agreement .  These "decisions, procedures
and customary practices" include only those take n or followed by the CONTRACTING PARTIES to
the GATT 1947 acting  jointly .
81. It is Schedule LXXX, rather than the Oilseeds Agreement, which contains the relevant
obligations of the European Communities under the WTO Agreement .  Therefore, it is
Schedule LXXX, rather than the Oilseeds Agreement,  which forms the legal basis for this dispute and
which must be interpreted in accordance with "customary rules of interpretation of publicinternational law" under Article 3.2 of the DSU.
82. In European Communities - Customs Classific ation of Certain Computer Equipment , we
made the following general statement on the interpretation of concessions in a Member's Schedule:
A Schedule is made an integral part of the GATT 1994 by Article II:7
of the GATT 1994.  Therefore, the concessions provided for in that
Schedule are part of the terms of the treaty.  As such, the only rules
which may be applied in interpreting the meaning of a concession arethe general rules of treaty interpretation set out in the Vienna
Convention.
30
83. We recognize that the Oilseeds Agreement was negotiated within the framework of
Article XXVIII of the GATT 1947 with the authorization of the CONTRACTING PARTIES and thatboth parties agree that the substance of the Oilseeds Agreement was the basis for the 15,500 tonnetariff-rate quota for frozen poultry meat that b ecame a concession of the European Communities in the
Uruguay Round set forth in Schedule LXXX.  Therefore, in our view, the Oilseeds Agreement may
serve as a supplementary means  of interpretation of Schedule LXXX pursuant to Article 32 of the
Vienna Convention , as it is part of the historical background of the concessions of the European
Communities for frozen poultry meat.
84. The Panel accepts that the Oilseeds Agreement can be useful in interpreting the EC
concession on frozen poultry meat in Schedule LXXX.
31   In paragraph 202, the Panel states "we
proceed to the examination of the Oilseeds Agreement to the extent relevant to  the determination of
the EC's obligations under the WTO agreements  vis-à-vis Brazil".  (emphasis added)  In
paragraph 207, the Panel states, "we cannot summarily dismiss the significance of the Oilseeds
                                                     
30Adopted 22 June 1998, WT/DS62/AB/R, WT/DS67/AB/R, WT/DS68/AB/R, para. 84.
31Panel Report, paras. 202 and 207.WT/DS69/AB/R
Page 31
Agreement in the interpretation of Schedule LXXX  by recourse to the public international law
principles embodied in the Vienna Convention".  (emphasis added)
85. We find no reversible error in the Panel's treatment of the relationship between Schedule
LXXX and the Oilseeds Agreement.
V. The Tariff-Rate Quota in Schedule LXXX
86. Three legal issues are raised with respect to the tariff-rate quota for frozen poultry meat in
Schedule LXXX:
(a) Whether the tariff-rate quota of 15,500 tonnes for frozen poultry meat specified in
Schedule LXXX is allocated exclusively for the benefit of Brazil, and whether anagreement existed between Brazil and the European Communities on the allocation ofthe tariff-rate quota within the meaning of Article XIII:2(d) of the GATT 1994;
(b) Whether a tariff-rate quota resulting from negotiations under Article XXVIII of the
GATT 1947 must be administered in a non-discriminatory manner consistent withArticle XIII of the GATT 1994; and
(c) Whether the trade of non-Members should be taken into account in calculating tariff-
rate quota shares under Article XIII of the GATT 1994.
A. The Exclusive or Non-exclusive Character of the Tariff-Rate Quota for Frozen
Poultry Meat in Schedule LXXX
87. With respect to the tariff-rate quota for frozen poultry meat of 15,500 tonnes specified in
Schedule LXXX, the Panel found, inter alia :
To sum up our findings in this section, we find no proof (either in the
text or in the object and purpose of the Oilseeds Agreement) in
support of the Brazilian claim that the poultry TRQ opened as the
result of the Oilseeds Agreement was intended to be a country-
specific tariff quota with Brazil being the sole beneficiary.  In other
words, we find that the European Communities is bound, on an MFNbasis, by its tariff commitments for frozen poultry meat.
32
                                                     
32Panel Report, para. 218.WT/DS69/AB/R
Page 32
88. Brazil argues that the Panel erred in finding that the tariff-rate quota for frozen poultry meat
was not allocated exclusively to Brazil, and in finding that there was no explicit agreement betweenBrazil and the European Communities to this effect within the meaning of Article XIII:2(d) of the
GATT 1994.
33   Brazil contends further that the Panel erred in limiting its examination of the Oilseeds
Agreement to the "relevant parts" of that  Agreement, and in failing to examine all the provisions of
the Oilseeds Agreement in accordance with Article 31 of the Vienna Convention.34
89. As we stated previously, it is Schedule LXXX, rather than the Oilseeds Agreement, that is the
relevant WTO obligation in this dispute and that must therefore be interpreted in accordance with"customary rules of interpretation of public international law" under Article 3.2 of the DSU.
90. Part I (Most-Favoured-Nation-Tariff), Section I (Agricultural Products), Section I-B (Tariff
Quotas) of Schedule LXXX provides a duty-free quota of 15,500 tonnes of frozen poultry meat fallingwithin CN subheadings 0207 41 10, 0207 41 41 and 0207 41 71.  There are no "other terms andconditions" specified relating to this tariff-rate quota in Schedule LXXX, and, in particular, there is no
reference to the Oilseeds Agreement and no mention that the tariff-rate quota is exclusively reserved
for exports from Brazil. The fact that the tariff-rate quota for frozen poultry meat appears in Part Iunder the heading "Most-Favoured-Nation Tariff" and that there are no other terms or conditionsspecified in Schedule LXXX concerning that concession would suggest, on the basis of the ordinarymeaning of the terms, that the tariff-rate quota for fr ozen poultry meat was intended to be allocated on
an MFN basis.
91. This view is confirmed by an examination of the relevant provisions of the Oilseeds
Agreement as a supplementary means of interpretation of the concessions made by the
European Communities in Schedule LXXX.  A footnote in the Oilseeds Agreement states:
Duty exemption shall be applicable for cuts falling within
subheadings 0207.41.10, 0207.41.41 and 0207.41.71 within the limitsof a global annual tariff quota  of 15.500 tonnes to be granted by the
competent Community authorities.  (emphasis added)
92. The Oilseeds Agreement uses the term "global annual tariff quota" in describing the 15,500
tonnes.  Although we agree with the Panel that this term is "non-legal", nevertheless, this is a term
well-understood in GATT/WTO practice to mean a tariff-rate quota that is to be administered on a
non-discriminatory basis pursuant to Article XIII of the GATT 1994.  As early as the Havana
                                                     
33Brazil's appellant's submission, paras. 80-84.
34Brazil's appellant's submission, paras. 17 and 21.WT/DS69/AB/R
Page 33
Conference in 1947, it was pointed out during discussions on the provision that later became
Article XIII of the GATT that " global quotas  not allocated among supplying countries might
sometimes operate in a manner unduly favourable to those countries best able for any reason to takeprompt advantage of the global quotas  at the opening of the quota period".
35  (emphasis added)  We
also refer to the statement in Panel on Newsprint :
In examining the EEC Regulation 3684/83, the Panel found that it did
not in fact constitute a change in the administration or management of
the tariff quota from a global quota  system to a system of country
shares, as had been asserted by the EC.36  (emphasis added)
In both cases, the term "global quota" was used in contrast with quotas allocated on a country-specific
basis.  In the light of this, and in the absence of any persuasive evidence to the contrary, we cannot
construe the term "global annual tariff quota" as used in the Oilseeds Agreement to mean a country-
specific quota allocated exclusively to Brazil.37
93. We proceed next to an examination of Brazil's claim that the Panel erred in finding that there
was no evidence of an agreement between Brazil and the European Communities on the allocation ofthe tariff-rate quota for frozen poultry meat within the meaning of Article XIII:2(d) of theGATT 1994.  To conform to Article XIII:2(d), all other Members having a "substantial interest" insupplying the product concerned would have to agree.  That is not the case here.  As the EuropeanCommunities did not seek an agreement with Thailand, the other contracting party having asubstantial interest in the supply of frozen poultry meat to the European Communities at that time, the
Oilseeds Agreement cannot be considered an agreemen t within the meaning of Article XIII:2(d) of the
GATT 1994.
94. We understand Brazil to argue that the bilateral character of the Oilseeds Agreement implies,
in itself, that the tariff-rate quota for frozen poultry meat is for Brazil's exclusive benefit and shouldnot be extended to others who are not parties to that Agreement.  The bilateral character of the
Oilseeds Agreement does not, by itself, constitute evidence of a common intent that the tariff-ratequota was for the exclusive benefit of Brazil.  We agree with the Panel that:
                                                     
35Reports of Committees and Principal Sub-Committees:  ICITO I/8, Geneva, September 1948, p. 91,
para. 28, cited in GATT, Analytical Index:  Guide to GATT Law and Practice  (1995), Vol. I, p. 400.
36Adopted 20 November 1984, BISD 31S/114, para. 51.
37See Jackson, J., World Trade and the Law of GATT  (Bobbs-Merrill, 1969), p. 232.  See also, for
example, the Dictionary of Trade Policy Terms (Centre for International Economic Studies, 1998), and the
Dictionary of International Trade (World Trade Press, 1998).WT/DS69/AB/R
Page 34
… most tariff concessions are negotiated bilaterally, but the results of
the negotiations are extended on a multilateral basis.  The fact that the
tariff-rate quota for frozen poultry meat was opened as a result of
bilateral negotiations between the EC and Brazil does not mean that
the EC was obligated to accord the benefit exclusively to Brazil.38
95. Therefore, we uphold the Panel's finding in paragraph 218 of the Panel Report that there is no
adequate proof to support Brazil's claim that the tariff-rate quota for frozen poultry meat set forth in
Schedule LXXX was intended to be a country-specific tariff-rate quota with Brazil as the sole
beneficiary.  We also agree with the Panel that there is no evidence that an agreement, explicit orotherwise, existed between Brazil and the European Communities concerning the allocation of the
tariff-rate quota for frozen poultry meat within the meaning of Article XIII:2(d) of the GATT 1994.
39
B. Article XIII of the GATT 1994
96. The Panel found that:
… there is no provision in the WTO agreements that allows departure
from the MFN principle in the case of TRQs resulting from
Article XXVIII negotiations.  Nor is there any decision of theCONTRACTING PARTIES or of the Ministerial Conference/General
Council, or any adopted panel or Appellate Body report that permits
such departure.
40
97. Brazil argues that the MFN principle in Articles I and XIII of the GATT 1994 does not
necessarily apply to tariff-rate quotas resulting from compensation negotiations under Article XXVIII
of the GATT.41   According to Brazil, because the purpose of the Oilseeds Agreement was to
compensate Brazil for the modification of EC concessions on oilseeds, Brazil is entitled to benefitexclusively from the modified concession.  In Brazil's view, the European Communities failed torespect the balance between the withdrawal of a concession and the offering of compensation inanother product
 . 42
                                                     
38Panel Report, para. 216.
39Panel Report, para. 227.
40Panel Report, para. 213.
41Brazil's appellant's submission, para. 46.
42Brazil's appellant's submission, paras. 47-55.WT/DS69/AB/R
Page 35
98. In United States - Restrictions on Imports of Sugar43,  the panel stated that Article II of the
GATT permits contracting parties to incorporate into their Schedules acts yielding rights under theGATT, but not acts diminishing  obligations under that Agreement.  In our view, this is particularly so
with respect to the principle of non-discrimination in Articles I and XIII of the GATT 1994.  In  EC -
Bananas , we confirmed the principle that a Member may yield rights but not diminish its obligations
and concluded that it is equally valid for the market access concessions and commitments foragricultural products contained in the Schedules annexed to the GATT 1994.
44   The ordinary meaning
of the term "concessions" suggests that a Member ma y yield or waive some of its own rights and grant
benefits to other Members, but that it cannot unilaterally diminish its own obligations.  Thisinterpretation is confirmed by paragraph 3 of the  Marrakesh Protocol , which provides:
The implementation of the concessions and commitments
contained in the schedules annexed to this Protocol shall, uponrequest, be subject to multilateral examination by the Members.  This
would be without prejudice to the rights and obligations of Members
under Agreements in Annex 1A of the WTO Agreement .  (emphasis
added)
99. Therefore, the concessions contained in Schedule LXXX pertaining to the tariff-rate quota for
frozen poultry meat must be consistent with Articles I and XIII of the GATT 1994.
100. Brazil argues that the Oilseeds Agreement was negotiated under Article XXVIII to
compensate Brazil for the impairment of benefits from the oilseeds concession.  According to Brazil,
there is an element of specificity about compensation, which explains and justifies possible departurefrom the principle of non-discrimination.
45  In support of this interpretation, Brazil refers to
compensation under Article XXIV:6 of the GATT.  In Brazil's view, no distinction should be made,
either in procedure or in intention, between compensation negotiated under Articles XXIV:6 and
XXVIII of the GATT.  In practice, Brazil maintains,  there are examples of both country-specific and
non-discriminatory tariff-rate quotas offered and implemented by the European Communities ascompensation under Article XXIV:6 of the GATT.  There is no reason, Brazil argues, why the sameprinciple should not apply to compensation under Article XXVIII of the GATT.
46   We do not accept
this argument.  We see nothing in Article XXVIII to suggest that compensation negotiated within itsframework may be exempt from compliance with the non-discrimination principle inscribed inArticles I and XIII of the GATT 1994.  As the Panel observed, this interpretation is, furthermore,
                                                     
43Adopted 22 June 1989, BISD 36S/331, para. 5.2.
44Adopted 25 September 1997, WT/DS27/AB/R, para. 154.
45Brazil's appellant's submission, paras. 46 and 51.
46Brazil's appellant's submission, para. 59.WT/DS69/AB/R
Page 36
supported by the negotiating history of Article XXVIII.  Regarding the provision which eventually
became Article XXVIII:3, the Chairman of the Tariff Agreements Committee at Geneva in 1947,concluded:
It was agreed that there was no intention to interfere in any way with
the operation of the most-favoured-nation clause.  This Article is
headed "Modification of Schedules".  It refers throughout to
concessions negotiated under paragraph 1 of Article II, the Schedules,and there is no reference to Article I, which is the Most-Favoured-
Nation Clause.  Therefore, I think the intent is clear:  that in no way
should this Article interfere with the operation of the Most-Favoured-
Nation Clause.
47
Although this statement refers specifically to the MFN clause in Article I of the GATT, logic requires
that it applies equally to the non-discriminatory administration of quotas and tariff-rate quotas underArticle XIII of the GATT 1994.
101. We agree with the Panel that:
If a preferential treatment of a particular trading partner not elsewhere
justified is permitted under the  pretext of "compensatory adjustment"
under Article XXVIII:2, it would create a serious loophole in the
multilateral trading system.  Such a result would fundamentally alter
the overall balance of concessions Article XXVIII is designed to
achieve.
48
102. For these reasons, we uphold the Panel's finding in paragraph 213 of the Panel Report that a
tariff-rate quota which resulted from negotiations under Article XXVIII of the GATT 1947, andwhich was incorporated into a Member's Urugua y Round Schedule, must be administered in a non-
discriminatory manner consistent with Article XIII of the GATT 1994.
C. Treatment of Non-Members under Article XIII of the GATT 1994
103. According to the Panel, there is nothing in Article XIII of the GATT 1994 that obligates
Members to calculate tariff-rate quota shares on the basis of imports from Members only.
49   In the
Panel's view, if the purpose of using past trade performance is to approximate the shares of Membersin the absence of the restrictions, as required under the chapeau of Article XIII:2, exclusion of a non-
                                                     
47EPCT/TAC/PV/18, p. 46;  see Panel Report, para. 217.
48Panel Report, para. 215.
49Panel Report, para. 230.WT/DS69/AB/R
Page 37
Member, particularly if it is an efficient supplier, would not serve that purpose.50   Accordingly, the
Panel found:
… the EC has not acted inconsistently with Article XIII of GATT by
calculating Brazil's tariff quota share based on the total quantity ofimports, including those from non-Members.
51
104. Brazil submits that under Article XIII:2(d) of the GATT 1994 non-Members have no right to
participate in a tariff-rate quota, and that a Member opening a tariff-rate quota has no right unilaterallyto allow such participation.
52  In Brazil's view, the Panel has expanded the wording of Article XIII of the
GATT 1994 by allowing the inclusion of  non-Members in a tariff-rate quota.53
105. We note that the finding of the Panel on this point is limited to one issue, namely, whether trade
of non-Members may be taken into account in the calculation of shares in a tariff-rate quota.  This
finding is narrower than the scope of Brazil's argument before the Panel, which was concerned withother issues related to the rights and obligations  of Members in relation to non-Members under Article
XIII, and particularly the particip ation of a non-Member in the "others" category of a tariff-rate quota.
The Panel's finding is also narrower than the scope of  Brazil's appeal, which is concerned with the rights
and obligations of Members in relation to non-Member s in the administration of tariff-rate quotas under
Article XIII.
106. We agree with the Panel that the calculation of shares must be based on the total imports of
the product in question -- whether those imports originate from Members or non-Members.
Otherwise, it would not be possible to comply with  the requirement in the chapeau of Article XIII:2
that:
In applying import restrictions to any product, Members shall
aim at a distribution of trade in such product approaching as closely as
possible the shares which the various Members might be expected toobtain in the absence of such restrictions … .
                                                     
50Panel Report, para. 230.
51Panel Report, para. 233.
52Brazil's appellant's submission, para. 89.
53Brazil's appellant's submission, para. 95.WT/DS69/AB/R
Page 38
107. This leaves unanswered two issues that were raised by Brazil before the Panel and also in both
Brazil's notice of appeal and Brazil' s appellant's submission, namely, the  allocation   of tariff-rate quota
shares to a non-Member, and the participation of non-Members in the "others " category  of a tariff-rate
quota.  With respect to these two issues, we are mindful of our mandate under Article 17.6 of the DSU
to limit appeals "to issues of law covered in the pane l report and legal interpretations developed by the
panel".  Also, we are mi ndful of Article 17.13 of the DSU, whic h states, "The Appellate Body may
uphold, modify or reverse the legal findings and conclu sions of the panel."  With these constraints in
mind, we note that there is no finding by the Panel or legal interpretation developed by the Panel oneither of these two issues.  It is true that in footnote 140 of the Panel Report, the Panel states that
paragraph 7.75 of the EC - Bananas  panel reports and "particularly the use of the phrase 'all suppliers
other than Members with a substantial interest in supplying the product' … indicates that the  Banana III
panel did not take the view that allocation of quot a shares to non-Members under Article XIII:2(d) was
not permitted".  We do not consider this comment made in a footnote by the Panel to be either a "legal
interpretation developed by the panel" within th e meaning of Article 17.6 of the DSU or a "legal
finding" or "conclusion" that the Appellate Body  may "uphold, modify or reverse" under Article 17.13
of the DSU.  It is undisputed in this case that there is no allocation  of a country-specific share in the
tariff-rate quota to a non-Member.  There is, ther efore, no finding nor any "legal interpretation
developed by the panel" that may be the subject of  an appeal of which the Appellate Body may take
cognizance.
108. Therefore, we uphold the finding of the Panel in paragraph 233 of the Panel Report that the
European Communities has not acted inconsistently with Article X III of the GATT 1994 by calculating
Brazil's tariff-rate quota share based on the tota l quantity of imports, including those from non-
Members.
VI. Article X of the GATT 1994
109. Article X of the GATT 1994 states, in relevant part:
1. Laws, regulations, judicial decisions and administrative rulings of
general application, made effective by any Member ... shall be
published promptly in such a manner as to enable governments and
traders to become acquainted with them ...
...
3. ( a) Each Member shall administer in a uniform, impartial and
reasonable manner all its laws, regulations, decisions and
rulings of the kind described in paragraph 1 of this Article.WT/DS69/AB/R
Page 39
110. With respect to Article X, the Panel found:
... that Article X is applicable only to laws, regulations, judicial
decisions and administrative rulings "of general application" ...
licences issued to a specific company or applied to a specific shipment
cannot be considered to be a measure "of general application".  In thepresent case, the information which Brazil claims the EC should have
made available concerns a specific shipment, which is outside the
scope of Article X of GATT.
In view of the fact that the EC has demonstrated that it has
complied with the obligation of publication of the regulations under
Article X regarding the licensing rules of general application, without
further evidence and argument in support of Brazil's positionregarding how Article X is violated, we dismiss Brazil's claim on this
point.
54
111. Article X:1 of the GATT 1994 makes it clear that Article X does not deal with specific
transactions, but rather with rules "of general application".55   It is clear to us that the EC rules
pertaining to import licensing set out in Regulation 1431/94 are rules "of general application".  ThePanel found that with respect to these rules of general application, the European Communities hadcomplied with its publication obligations under Article X.
56   Brazil does not appeal this finding.
112. Brazil, however, argues that the Panel erred in law in assessing measures of general
application in Article X of the GATT 1994 and that th e Panel also misinterpreted Brazil's submissions
relating to Article X.  According to Braz il, the generally applicable rules of the
European Communities relating to imports of frozen poultry meat do not allow Brazilian traders toknow whether a particular shipment will be subjec t to the rules governing in-quota trade or to rules
relating to out-of-quota trade, and Brazil maintains that this is a violation of Article X.
57
113. The approach to Article X of the GATT 1994 advocated by Brazil would require that a
Member specify in advance the precise treatment to be accorded to each individual shipment of frozen
poultry meat into the European Communities.  Although it is true, as Brazil contends, that anymeasure of general application will always have to be applied in specific cases, nevertheless, the
particular treatment accorded to each individual shipment cannot be considered a measure "of general
application" within the meaning of Article X.  The Panel cited the following passage from the panelreport in United States - Restrictions on Import s of Cotton and Man-made Fibre Underwear :
                                                     
54Panel Report, paras. 269-270.
55Panel Report, para. 269.
56Panel Report, para. 270.
57Brazil's appellant's submission, paras. 105 and 114.WT/DS69/AB/R
Page 40
The mere fact that the restraint at issue was an administrative order
does not prevent us from concluding that the restraint was a measure
of general application.  Nor does the fact that it was a country-specific
measure exclude the possibility of it being a measure of general
application.  If, for instance, the restraint was addressed to a specificcompany or applied to a specific shipment, it would not have qualified
as a measure of general application.  However, to the extent that the
restraint affects an unidentified number of economic operators,
including domestic and foreign producers, we find it to be a measure
of general application.
58
We agree with the Panel that "conversely, licences issued to a specific company or applied to a
specific shipment cannot be considered to be a measure 'of general application'"59 within the meaning
of Article X.
114. It is inherent in the nature of a tariff-rate quota that imports over the threshold quantity
specified in the rules of general application will not benefit from the terms of the tariff-rate quota.Within the framework of the rules of general application that establish the terms of the tariff-ratequota for frozen poultry meat, the detailed arrangements concerning the importation of a particularshipment of frozen poultry into the European  Communities are made primarily among private
operators.  These arrangements will determine whether a particular shipment falls within or outsidethe tariff-rate quota, and will consequently determine whether the rules relating to in-quota trade orthose relating to out-of-quota trade will apply to a given shipment.  These arrangements amongprivate operators have been generally left to them by the government of the Member concerned.
Article X of the GATT 1994 does not impose an obligation on Member governments to ensure that
exporters are continuously notified by importers as to the treatment particular impending shipmentswill receive in relation to a tariff-rate quota.
115. Article X relates to the publication  and administration  of "laws, regulations, judicial decisions
and administrative rulings of general application", rather than to the substantive content  of such
measures.  In EC - Bananas , we stated:
                                                     
58Adopted 25 February 1997, WT/DS24/R, para. 7.65.  In that case, we agreed with the panel's finding
that the safeguard measure restraint imposed by the United States was "a measure of general application" withinthe contemplation of Article X:2 of the GATT 1994.  See Appellate Body Report, United States - Restrictions
on Imports of Cotton and Man-made Fibre Underwear , adopted 25 February 1997, WT/DS24/AB/R, p. 21.
59Panel Report, para. 269.WT/DS69/AB/R
Page 41
The text of Article X:3(a) clearly indicates that the requirements of
"uniformity, impartiality and reasonableness" do not apply to the
laws, regulations, decisions and rulings themselves , but rather to the
administration  of those laws, regulations, decisions and rulings.  The
context of Article X:3(a) within Article X, which is entitled"Publication and Administration of Trade Regulations", and a reading
of the other paragraphs of Article X, make it clear that Article X
applies to the administration  of laws, regulations, decisions and
rulings.  To the extent that the laws, regulations, decisions and rulings
themselves are discriminatory, they can be examined for their
consistency with the relevant provisions of the GATT 1994.
60
Thus, to the extent that Brazil's appeal relates to the substantive content  of the EC rules themselves,
and not to their publication  or administration , that appeal falls outside the scope of Article X of the
GATT 1994.61   The WTO-consistency of such substantive content must be determined by reference
to provisions of the covered agreements other than Article X of the GATT 1994.
116. For these reasons, we uphold the Panel's finding in paragraph 269 of the Panel Report that
"the information which Brazil claims the EC should have made available concerns a specificshipment, which is outside the scope of Article X of GATT".
VII. Agreement on Import Licensing Procedures
117. Three issues are raised by Brazil with respect to the Licensing Agreement :
(a) Whether the Panel erred in interpreting Articles 1.2 and 3.2 of the Licensing
Agreement  so as to restrict the scope of application of that Agreement, in this case, to
in-quota trade;
(b) Whether the Panel erred in finding that there was no trade distortion in this case
within the meaning of Articles 1.2 and 3.2 of the Licensing Agreement ;  and
(c) Whether the Panel erred in failing to examine the general claim made by Brazil
concerning the violation of a principle of transparency set out in the preamble to, andunderlying, the Licensing Agreement .
                                                     
60Adopted 25 September 1997, WT/DS27/AB/R, para. 200.
61We note that the issue of the comprehensibility  of the EC measure does not arise in this case.WT/DS69/AB/R
Page 42
118. Article 1.2 of the  Licensing Agreement  states:
Members shall ensure that the administrative procedures used
to implement import licensing regimes are in conformity with therelevant provisions of GATT 1994 including its annexes and
protocols, as interpreted by this Agreement, with a view to preventing
trade distortions that may arise from an inappropriate operation of
those procedures , taking into account the economic development
purposes and financial and trade needs of developing countryMembers.  (emphasis added)
Article 3.2 of the Licensing Agreement  provides:
Non-automatic licensing shall not have trade-restrictive
or 
-distortive effects on imports additional to those caused by the
imposition of the restriction .  Non-automatic licensing procedures
shall correspond in scope and duration to the measure they are used to
implement, and shall be no more administratively burdensome thanabsolutely necessary to administer the measure.  (emphasis added)
119. With respect to the Licensing Agreement , the Panel found, in relevant part:
In examining these claims, we first note that Brazil's reference to the
percentage share relates to its total exports of poultry products to the
EC market, the majority of which consists of over-quota (duty paid)
trade.  The Licensing Agreement, as applied to this particular case,
only relates to in-quota trade .  Second, the licences issued to imports
from Brazil are fully utilized , which strongly suggests that any trade-
distortive effects of the operation of the licensing rules have been
overcome by exporters .  Third, the total volume of poultry exports
from Brazil has generally been increasing ... .  Therefore, we fail to
understand the relevance of the decline in the percentage share intotal trade to a violation of the Licensing Agreement .  Thus, based on
the evidence presented by Brazil regarding its percentage share of the
EC poultry market, we do not find that the EC has acted inconsistently
with Articles 1.2 and 3.2 of the Licensing Agreement.
62 (emphasis
added)
A. Scope of Application
120. Brazil maintains that there is nothing in the text or context of Articles 1.2 and 3.2 of the
Licensing Agreement that limits to in-quota trade the requirement in Article 1.2 that licensing systems
                                                     
62Panel Report, para. 249.WT/DS69/AB/R
Page 43
be implemented "with a view to preventing trade distortions" or the prohibition in Article 3.2 of
additional trade-restrictive or trade-distortive effects.63
121. The preamble to the Licensing Agreement   stresses   that the   Agreement aims at ensuring   that
import licensing procedures "are not utilized in a manner contrary to the principles and obligations of
GATT 1994" and are "implemented in a transparent and predictable manner".  Moreover, Articles 1.2
and 3.2 make it clear that the Licensing Agreement  is also concerned, with, among other things,
preventing trade distortions that may be caused by licensing procedures.  It follows that wherever animport licensing regime is applied, these requirements must be observed.  The requirement to preventtrade distortion found in Articles 1.2 and 3.2 of the Licensing Agreement  refers to any trade distortion
that may be caused by the introduction or operation of licensing procedures, and is not necessarilylimited to that part of trade to which the licensing procedures themselves apply.  There may besituations where the operation of licensing procedures, in fact, have restrictive or distortive effects onthat part of trade that is not strictly subject to those procedures.
122. In the case before us, the licensing procedure established in Article 1 of Regulation 1431/94
applies, by its terms, only to in-quota trade in frozen poultry meat.
64   No licensing is required by
Regulation 1431/94 for out-of-quota trade in frozen poultry meat.  To the extent that the Panelintended merely to reflect the fairly obvious fact that this licensing procedure applies only to in-quotatrade, we uphold the finding of the Panel that "[t]he Licensing Agreement, as applied to this particularcase, only relates to in-quota trade".
65
B. Trade Distortion
123. Brazil maintains that the Panel failed to address or examine properly certain evidence,
including evidence concerning Brazil's falling share of the EC poultry market, and did not examinewhether this falling market share was caused by the introduction of the EC licensing procedures for
the tariff-rate quota for frozen poultry meat.
66
                                                     
63Brazil's appellant's submission, para. 140.
64Article 1 of Regulation 1431/94 states:  "All imports into the Community under [the tariff-rate quota]
… shall be subject to the presentation of an import licence."
65Panel Report, para. 249.
66Brazil's appellant's submission, paras. 143-150.WT/DS69/AB/R
Page 44
124. The Panel stated that it "fail[ed] to understand the relevance of the decline in the percentage
share in total trade to a violation of the Licensing Agreement."67   The Panel then concluded that,
"based on the evidence presented by Brazil regarding its percentage share of the EC poultry market,we do not find that the EC has acted inconsistently with Articles 1.2 and 3.2 of the Licensing
Agreement."
68
125. Under Regulation 1431/94, Brazil's share in the EC tariff-rate quota for frozen poultry meat is
7,100 tonnes out of the total tariff-rate quota of 15,500 tonnes.69  This share is equal to approximately
45 per cent of the tariff-rate quota.  This is the same as Brazil's percentage share of the total exports offrozen poultry meat to the European Communities during the reference period of the preceding threeyears.  In addition, the Panel noted, licences issued by the European Communities for imports offrozen poultry meat from Brazil have been fully utilized.
70   This means that Brazil's percentage share
in the tariff-rate quota has remained at the same level as Brazil's share in the total trade over therelevant period.  Moreover, the absolute volume of exports of frozen poultry meat by Brazil in the
total exports of this product to the European Communities has been rising since the imposition of the
tariff-rate quota for frozen poultry meat.
71
126. Brazil has not, in our view, clearly explained, either before the Panel or before us, how the
licensing procedure caused  the decline in market share.  Brazil has not offered any persuasive
evidence that its falling market share could, in this particular case -- with a constant percentage shareof the tariff-rate quota, full utilization of the tariff-rate quota and a growing total volume of exports --be viewed as constituting trade distortion attributable to the licensing procedure.  In other words,Brazil has not proven a violation of the prohibition of trade distortion in Articles 1.2 and 3.2 of the
Licensing Agreement  by the European Communities.
                                                     
67Panel Report, para. 249.
68Ibid.
69Regulation 1431/94, Annex I.
70Panel Report, para. 249.
71Panel Report, para. 249 and Annex I.WT/DS69/AB/R
Page 45
127. Brazil argues that the Panel did not consider a number of other arguments in its examination
of the existence of trade distortion:  that licences have been apportioned in non-economic quantities;that there have been frequent changes to the licens ing rules;  that licence entitlement has been based
on export performance;  and that there has been speculation in licences.
72   These arguments, however,
do not address the problem of establishing a causal relationship between imposition of the EC
licensing procedure and the claimed trade distortion.  Even if conceded  arguendo , these arguments do
not provide proof of the essential element of causation.
128. For these reasons, we uphold the finding of the Panel that Brazil has not established that the
European Communities has acted inconsistently with either Article 1.2 or Article 3.2 of the  Licensing
Agreement .73
C. Transparency
129. Brazil's notice of appeal contained no reference to a general issue of transparency in relation
to the Licensing Agreement .  However, Brazil argued in its appellant's submission that the Panel erred
in restricting Brazil's "comprehensive claim in relation to a violation of the general principle of
transparency underlying the Licensing Agreement"74  to an analysis of Article 3.5(a) of the Licensing
Agreement .  The contention of Brazil is that "the administration of import licenses in such a way that
the exporter does not know what trade rules apply is a breach of the fundamental objective of theLicensing Agreement."
75
130. Brazil argued before the Panel that "underlying the Licensing Agreement was the principle of
transparency."76   Brazil submitted, in particular, that the European Communities was obliged under
either Article 3.5(a)(iii) or (iv) of the Licensing Agreement  to provide complete and relevant
information on the distribution of licences among supplying countries and statistics on volumes andvalues.  According to Brazil, the European Co mmunities failed to fulfil this obligation.
77  The Panel
found that Brazil had not demonstrated that the European Communities had violated either
                                                     
72Brazil's appellant's submission, paras. 151-160. We note that these facts were  considered by the Panel
in the context of other alleged violations of the Licensing Agreement , but not in the context of trade distortion
within the meaning of Articles 1.2 and 3.2 of the Licensing Agreement .
73Panel Report, para. 249.
74Brazil's appellant's submission, para. 161.
75Brazil's appellant's submission, para. 163.
76Panel Report, para. 105.
77Panel Report, para. 107.WT/DS69/AB/R
Page 46
Article 3.5(a)(iii) or (iv) of the Licensing Agreement.78  In the light of the existence of express
provisions in Article 3.5(a) of the Licensing Agreement  relating to transparency on which the Panel
did in fact make findings, we do not believe that the Panel erred by refraining from examining Brazil's"comprehensive" claim relating to a general principle of transparency purportedly underlying the
Licensing Agreement .
VIII.  Article 11 of the DSU
131. Article 11 of the DSU states in part:
The function of panels is to assist the DSB in discharging its
responsibilities under this Understanding and the covered agreements.Accordingly, a panel should make an objective assessment of the
matter before it, including an objective assessment of the facts of the
case and the applicability of and conformity with the relevant covered
agreements, and make such other findings as will assist the DSB in
making the recommendations or in giving the rulings provided for inthe covered agreements.
132. Brazil maintains that the Panel did not make "an objective assessment of the matter before it",
as required by Article 11 of the DSU, because the Panel allegedly failed to consider a series ofarguments put forward by Brazil relating to GA TT/WTO law and practice.  These arguments were:
"first, the similarities between Article XXIV and XXVIII: second, the flexible nature ofArticle XXVIII that permits bilateral agreements and the opening of bilateral concessions subject to
the review of all Members:  [and] third, the text of Article XXVIII, which allows the possibility of
country-specific solutions when other contracting parties do not object."
79
133. An allegation that a panel has failed to conduct the "objective assessment of the matter before
it" required by Article 11 of the DSU is a very serious allegation.  Such an allegation goes to the verycore of the integrity of the WTO dispute settlement process itself.  In  EC Measures Concerning Meat
and Meat Products (Hormones ), in relation to the requirement in Article 11 of the DSU that a panel
"make an objective assessment of the facts of the case", we stated:
                                                     
78Panel Report, para. 265.
79Brazil's appellant's submission, para. 58.WT/DS69/AB/R
Page 47
Clearly, not every error in the appreciation of the evidence (although
it may give rise to a question of law) may be characterized as a failure
to make an objective assessment of the facts. …  The duty to make an
objective assessment of the facts is, among other things, an obligation
to consider the evidence presented to a panel and to make factualfindings on the basis of that evidence.  The deliberate disregard of, or
refusal to consider, the evidence submitted to a panel is incompatible
with a panel's duty to make an objective assessment of the facts.  The
wilful distortion or misrepresentation of the evidence put before a
panel is similarly inconsistent with an objective assessment of the
facts.  "Disregard" and "distortion" and "misrepresentation" of the
evidence, in their ordinary signification in judicial and quasi-judicialprocesses, imply not simply an error of judgment in the appreciation
of evidence but rather an egregious error that calls into question the
good faith of a panel .  A claim that a panel disregarded or distorted
the evidence submitted to it is, in effect, a claim that the panel, to a
greater or lesser degree, denied the party submitting the evidencefundamental fairness, or what in many jurisdictions is known as due
process of law or natural justice.
80  (emphasis added)
Subsequently, in Argentina - Measures Affecting Imports of Footwear, Textiles, Apparel and Other
Items81, we found that the panel there had not committed an abuse of discretion amounting to a failure
to render "an objective assessment of the matter before it", as mandated by Article 11.
134. The same is true here.  The alleged failures imputed to the Panel by Brazil do not approach
the level of gravity required for a claim under Article 11 of the DSU to prevail.
135. We note, furthermore, that Brazil's appeal under Article 11 of the DSU relates, in effect, to
the judicial economy exercised by the Panel in its consideration of a number of arguments in support
of the various claims that Brazil submitted to the Panel.  Brazil argues that the Panel, in effect, abused
its discretion in not addressing in the Panel Report a series of arguments Brazil made in relation toGATT/WTO law and practice.  In United States - Measure Affecting Imports of Woven Wool Shirts
and Blouses from India , we stated that nothing in Article 11 "or in previous GATT practice  requires
a panel to examine all legal claims made by the complaining party", and that "[a] panel need only
address those claims which must be addressed in order to resolve the matter in issue in the dispute."
82
Just as a panel has the discretion to address only those claims  which must be addressed in order to
dispose of the matter at issue in a dispute, so too does a panel have the discretion to address only thosearguments  it deems necessary to resolve a particular claim.  So long as it is clear in a panel report that
a panel has reasonably considered a claim, the fact that a particular argument relating to that claim is
                                                     
80Adopted 13 February 1998, WT/DS26/AB/R, WT/DS48/AB/R, para. 133.
81Adopted 22 April 1998, WT/DS56/AB/R, paras. 81 and 86.
82Adopted 23 May 1997, WT/DS33/AB/R, pp. 18-19.WT/DS69/AB/R
Page 48
not specifically addressed in the "Findings" section of a panel report will not, in and of itself, lead to
the conclusion that that panel has failed to make the "objective assessment of the matter before it"
required by Article 11 of the DSU.
136. For these reasons, we conclude that the Panel did not fail to make the "objective assessment
of the matter before it" required by Article 11 of the DSU.
IX. Agreement on Agriculture
A. Article 5.1(b)
137. Article 5.1 of the Agreement on Agriculture  provides, in relevant part, as follows:
1. Notwithstanding the provisions of paragraph 1(b) of Article II of
GATT 1994, any Member may take recourse to the provisions of
paragraphs 4 and 5 below in connection with the importation of an
agricultural product, in respect of which measures referred to inparagraph 2 of Article 4 of this Agreement have been converted into
an ordinary customs duty and which is designated in its Schedule with
the symbol "SSG" as being the subject of a concession in respect of
which the provisions of this Article may be invoked, if:
…
(b) the price at which imports of that product
may enter the customs territory of the Member granting the
concession, as determined on the basis of the c.i.f. import
price of the shipment concerned expressed in terms of its
domestic currency, falls below a trigger price equal to theaverage 1986 to 1988  reference price
2 for the product
concerned.
______________________________________________________________
2The reference price used to invoke the provisions of this subparagraph
shall, in general, be the average c.i.f. unit value of the product concerned, orotherwise shall be an appropriate price in terms of the quality of the product and itsstage of processing.  It shall, following its initial use, be publicly specified andavailable to the extent necessary to allow other Members to assess the additionalduty that may be levied.
138. With respect to "the price at which imports of that product may enter the customs territory of
the Member granting the concession, as determined on the basis of the c.i.f. import price of theshipment concerned" in Article 5.1(b) of the Agreement on Agriculture , the Panel found that,WT/DS69/AB/R
Page 49
… the ordinary meaning of the terms used in Article 5.1(b) would
appear to support the interpretation advanced by Brazil, i.e. that the
market entry price must include duties paid.83
and that,
The object and purpose of Article 5.1(b) is to provide additional
protection against significant decline in import prices during the
implementation period of the Agreement on Agriculture after all
agricultural products have been "tariffied" under Article 4.2.  By its
nature, it has to address a situation that has occurred after the
tariffication process.  If the market entry price is equated with thec.i.f. import price, and then compared  with the trigger price
calculated using the c.i.f. price only, it would disregard the effect of
protection granted by high duties resulting from tariffication.  Thus,
although the drafting of Article 5.1(b) is not a model of clarity, in
light of the object and purpose of that subparagraph, it would beappropriate to interpret the market entry price under Article 5.1(b) to
include duties paid.
84
139. On this basis, the majority of the Panel concluded that "the EC has not invoked the special
safeguard provision with respect to the poultry products  in question in accordance with Article
5.1(b)."85
140. In contrast, one member of the Panel was "of the view that Article 5 of the Agreement on
Agriculture requires an importing Member to calculate the relevant import price within the meaningof Article 5.1(b) on the basis of the c.i.f. import price only." 
86
141. Brazil, as the exporting Member, endorses the Panel's finding that the relevant import price in
Article 5.1(b) of the Agreement on Agriculture  is the c.i.f. price plus ordinary customs duties.  This is
not surprising.  This would limit the instances in which the European Communities could imposeadditional safeguard duties.  In contrast, the European Communities, as the importing Member, is ofthe view that the relevant import price in Article 5.1(b) is the c.i.f. price  without  ordinary customs
duties.  This view increases the opportunities for an importing Member to impose additional safeguard
duties.
                                                     
83 Panel Report, para. 278.
84 Panel Report, para. 281.
85 Panel Report, para. 282.
86 Panel Report, para. 292.WT/DS69/AB/R
Page 50
142. The legal issue raised in this appeal concerns the proper interpretation of the phrase, "the
price at which imports of that product may enter the customs territory of the Member granting theconcession, as determined on the basis of the c.i.f. import price of the shipment concerned " (emphasis
added) in Article 5.1(b) of the Agreement on Agriculture .  Specifically, the issue is whether the
special safeguard mechanism in Article 5.1(b) is trigge red when the c.i.f. price, or when the c.i.f. price
plus ordinary customs duties, falls below the reference or trigger price.
143. The practical significance of this issue can be illustrated with the following hypothetical
example.  This dispute has no practical significance if  both the c.i.f. import price and the c.i.f. import
price plus customs duties fall above or below the trigger price.  If both prices are above the triggerprice, then additional duties cannot be imposed.  And, if both prices fall below the trigger price, then
additional duties may be imposed regardless of which definition of the relevant import price isadopted.  However, the practical significance of this dispute becomes apparent whenever the triggerprice falls between the other two prices, that is, when the trigger price is greater than the c.i.f. import
price but smaller than the c.i.f. import price plus customs duties.  To illustrate:
c.i.f. import price plus customs duties = 1,200
trigger price = 1,000
c.i.f. import price =    800
In this example, if the relevant price is defined as the c.i.f. import price plus customs duties, additional
duties may not be imposed since the relevant price is well above the trigger price.  If, on the other
hand, it is defined as the c.i.f. import price only (that is, without customs duties), additional duties
may be imposed because the relevant price is below the trigger price.  Thus, to adopt one definition,rather than another, will determine whether or not an importing Member may impose additionalsafeguard duties.
144. In examining this issue, we begin with the text of Article 5.1(b) which refers to:  "the price at
which imports of that product may enter the customs territory  of the Member granting the
concession …".  (emphasis added)  In interpreting this provision, the majority of the Panel uses theconcept of "market entry price".  However, this phrase is not found in the text of Article 5.1(b).  Yet,the Panel states as follows:
Thus, the ordinary meaning of the terms used in Article 5.1(b) would
appear to support the interpretation advanced by Brazil, i.e. that the
market entry price must include duties paid.
87  (emphasis added)
                                                     
87Panel Report, para. 278.WT/DS69/AB/R
Page 51
Again, in paragraph 281 of the Panel Report, the Panel states that "If the market entry price  is
equated with the c.i.f. import price … ."  (emphasis added)  In fact, this section of the Panel Report isentitled:  " Market entry price  and the c.i.f. price".  (emphasis added)
145. The relevant import price in Article 5.1(b) is described as "the price at which imports of that
product may enter the customs territory  of the Member granting the concession, as determined on the
basis of the c.i.f. import price of the shipment concerned".  It is noteworthy that the drafters of theAgreement on Agriculture  chose to use as the relevant import price the entry price into the  customs
territory , rather than the entry price into the domestic market .  This suggests that they had in mind the
point of time just before  the entry of the product concerned into the customs territory, and certainly
before entry into the domestic market, of the importing Member.  The ordinary meaning of these
terms in Article 5.1(b) supports the view that the "price at which that product may enter the customsterritory" of the importing Member should be construed to mean just that -- the price at which theproduct may enter the customs territory , not the price at which the product may enter the domestic
market  of the importing Member.  And that price is a price that does not include customs duties and
internal charges.  It is upon entry of a product into the customs territory, but before the product entersthe domestic market, that the obligation to pay customs duties and internal charges accrues.
146. Article 5.1(b) also states that the relevant import price is to be "as determined  on the basis of
the c.i.f. import price of the shipment concerned".  (emphasis added)  The Panel interprets this phrase
to mean "that the market entry price is something th at has to be constructed using the c.i.f. price as
one of the parameters."
88  We disagree.  In the light of our construction of the preceding phrase "the
price at which imports of the product may enter the customs territory of the Member granting theconcession", we conclude that the phrase "as determined on the basis of  the c.i.f. import price of the
shipment concerned" in Article 5.1(b) refers simp ly to the c.i.f. price without customs duties and
taxes.   There is no definition of the term "c.i.f. import price" in the  Agreement on Agriculture  or in
any of the other covered agreements
.  However, in customary usage in international trade, the c.i.f.
import price does not include any taxes, customs duties, or other charges that may be imposed on aproduct by a Member upon entry into its customs territory.
89  We think it significant also that ordinary
                                                     
88Panel Report, para. 278.
89We note that the Incoterms 1990  of the International Chamber of Commerce explains what the
acronym "c.i.f." means "cost, insurance and freight", but does not give a definition of "c.i.f. import price".However, according to customary usage in international trade, c.i.f. import price,  or simply c.i.f. price, is equal
to the price of the product in the exporting country plus additional costs, insurance and freight to the importing
country.  This definition may also be inferred from paragraph 2 of the Attachment to Annex 5 of the Agreement
on Agriculture .WT/DS69/AB/R
Page 52
customs duties are not mentioned as a component of the relevant import price in the text of Article
5.1(b).  Article 5.1(b) does not state that the relevant import price is "the c.i.f. price plus ordinarycustoms duties".  Accordingly, to read the inclusion of customs duties into the definition of the c.i.f.import price in Article 5.1(b) would require us to read words into the text of that provision that simply
are not there.
147. This reading of the text of Article 5.1(b) is supported by our reading of the context of that
provision in accordance with Article 31 of the Vienna Convention , which specifies that the ordinary
meaning of the terms of a treaty should be interpreted in their context.
148. We look first to the rest of Article 5.1.  In considering when additional special safeguard
duties under Article 5.1(b) may be imposed, the relevant import price must be compared with a triggerprice.  According to Article 5.1(b), this trigger price is "equal to the average 1986 to 1988 referenceprice for the product concerned".  Footnote 2 to Article 5.1(b) states:
The reference price used to invoke the provisions of this
subparagraph shall, in general, be the average c.i.f. unit value of the
product concerned, or otherwise shall be an appropriate price in terms
of the quality of the product and its stage of processing.  It shall,following its initial use, be publicly specified and available to the
extent necessary to allow other Members to assess the additional duty
that may be levied.
149. Thus, the reference price with which the relevant price is compared under Article 5.1 does
not include ordinary customs duties.  It is simply the average c.i.f. import price of the product
concerned during the reference period, 1986-1988.  Given this definition of the reference price, itcould not have been the intention of the drafters to compare a c.i.f. price exclusive of customs dutiesfor the reference period with a c.i.f. price inclusive of such duties today.
150. Paragraph 5 of Article 5 is also part of the co ntext of Article 5.1(b). This provision establishes
a link between the amount of the additional duty to  be imposed and the difference between the c.i.f.
import price of the shipment and the trigger price.  According to the schedule contained in
paragraph 5, when the difference between the c.i.f. import price of the shipment and the trigger price
is not greater than 10 per cent, no additional duty shall be imposed.  When the difference is greaterthan 10 per cent, additional duties may be imposed.  The amount of the additional safeguard dutiesincreases as the difference in the two prices increases.  We see no reference in paragraph 5 to "c.i.f.import price plus ordinary customs duties".  The price used to determine when the special safeguard
may be triggered and the price used to calculate the amount of the additional duties must be one andthe same.WT/DS69/AB/R
Page 53
151. Certain anomalies would arise from the interpretation adopted by the majority of the Panel.
One of these anomalies was cited in the opinion of the dissenting member of the Panel.90  I f
tariffication of non-tariff barriers on a certain product took the form of specific duties that weregreater than the trigger price, then an importing Member may never be able to invoke Article 5.1(b).
The truth of this observation is evident from the fact that the c.i.f. import price plus customs duties
may never fall below the trigger price. This consequence is not limited to the case of specific dutiesthat exceed the trigger price.  It could also occur in cases where tariffication takes the form of  ad
valorem  duties.  We know that tariffication has resulted in tariffs which are, in a large number of
cases, very high.  The probability is strong, therefore, that the ad valorem  duties could exceed the
percentage decrease in the c.i.f. import price by a substantial margin.  In such cases, the decrease inthe c.i.f. price would have to be very deep befo re the relevant import price would fall below the
trigger price.  Thus, the provisions of Article 5.1(b) would not be operational in many cases.  It isdoubtful that this was intended by the drafters of the "Special Safeguard Provisions".
152. Another anomaly that would arise from defining the relevant import price as the c.i.f. import
price plus ordinary customs duties would be that the right of Members to invoke the provisions of
Article 5.1(b) would depend on the level of tariffs resulting from tariffication.  Faced with a certaindecline in the c.i.f. price -- say, 20 per cent -- some Members would find themselves in a situation
where they could not invoke the price safeguard;  others would have the right to do so.  The firstcategory would comprise those Members with a relatively high level of tariffied duties;  the secondwould be those with a relatively moderate level.  Thus, the rights of Members would ultimatelydepend on the level of their tariffied duties.  It is doubtful, too, that this was intended by the drafters
of the "Special Safeguard Provisions".
153. For the foregoing reasons, we interpret the "price at which the product concerned may enter
the customs territory of the Member granting the concession, as determined on the basis of the c.i.f.import price" in Article 5.1(b) as the c.i.f. import price not including ordinary customs duties.
Accordingly, we reverse the finding of the Panel in paragraph 282 of the Panel Report.
B. Article 5.5
154. As noted above, the Panel found that the European Communities has acted inconsistently with
Article 5.1(b) of the Agreement on Agriculture .  In consequence, the Panel chose not to make a
finding under Article 5.5 of the Agreement on Agriculture .  The Panel stated:
                                                     
90Panel Report, para. 291.WT/DS69/AB/R
Page 54
We note that Brazil's argument on this point appears to address the
issue of whether the EC has follow ed its own regulations concerning
the operation of special safeguards.  To the extent that Brazil's claim
is directed to the appropriateness of the special safeguard mechanism
within the EC, we are unable to find any violation of the WTO rules.Although Brazil refers to Article 5 of the Agreement on Agriculture
and Article X:3 of GATT, it has not specified in what manner the EC
has violated these provisions.  In any event, since we have already
found a violation of Article 5.1(b) by the EC, for the sake of judicial
economy, we do not examine this claim any further.
91
This paragraph of the Panel Report can only be interpreted to mean that the Panel did not make a
finding on the consistency of the EC measure with Article 5.5.  The Panel acted within its discretionin choosing to exercise judicial economy in this manner.
92
155. Brazil did not include a claim relating to Article 5.5 of the Agreement on Agriculture  in its
notice of appeal.  Nor did Brazil claim in its appella nt's submission that the Panel erred in failing to
make a finding relating to Article 5.5.  The European Communities later filed an appellant's
submission of its own appealing the Panel's finding on Article 5.1(b) of the  Agreement on
Agriculture . Brazil then argued in reply in its appellee's submission that if we reversed the Panel's
finding on Article 5.1(b), it would then be necessary for us to address the issues arising under Articles5.5 and 4.2 of the Agreement on Agriculture .   Having decided to reverse the Panel's finding relating
to Article 5.1(b), we turn now to these additional issues.
156. We are aware of the provisions of Article 17 of the DSU that state our jurisdiction and our
mandate.  Article 17.6 of the DSU provides:  "An appeal shall be limited to issues of law covered in
the panel report and legal interpretations developed by the panel".  Article 17.13 of the DSU states:
"The Appellate Body may uphold, modify or reverse the legal findings and conclusions of the panel."In certain appeals, however, the reversal of a panel's finding on a legal issue may require us to make afinding on a legal issue which was not addressed by the panel.  This occurred, for example, in theappeals in United States - Standards for Reformulated and Conventional Gasoline
93  and in Canada -
Certain Measures Concerning Periodicals .94   And, in this appeal, as we have reversed the Panel's
finding on Article 5.1(b), we believe we should complete our analysis of the c.i.f. import price bymaking a finding with respect to the consistency of the EC regulation with Article 5.5, which was notaddressed by the Panel for reasons of judicial economy.
                                                     
91Panel Report, para. 286.
92We refer to our decision in United States - Measure Affecting Imports of Woven Wool Shirts and
Blouses from India , WT/DS33/AB/R, adopted 23 May 1997, p. 19.
93Adopted 20 May 1996, WT/DS2/AB/R, pp. 13-29.
94Adopted 30 July 1997, WT/DS31/AB/R, pp. 23-24.WT/DS69/AB/R
Page 55
157. Looking at Article 5 of the Agreement on Agriculture  as a whole, it is clear that the provisions
of Article 5.1(b) and Article 5.5 are closely linked.  Together,  these provisions establish the preciseconditions for imposing additional duties under the price-triggered special safeguards mechanism thatis established by Article 5.  Article 5.1(b) determines when the price-triggered special safeguard
mechanism may be activated so that additional duties may be imposed.  Article 5.5 determines the
method by which such additional duties will be calculated.
158. Article 5.5 of the Agreement on Agriculture  reads:
The additional duty imposed under subparagraph 1(b) shall  be set
according to the following schedule:
(a) if the difference between the c.i.f. import price of the
shipment expressed in terms of the domestic currency
(hereinafter referred to as the "import price") and the trigger
price as defined under that subparagraph is less than or equal
to 10 per cent of the trigger price, no additional duty shall beimposed;
(b) if the difference between the import price and the trigger price
(hereinafter referred to as the "difference") is greater than
10 per cent but less than or equal to 40 per cent of the trigger
price, the additional duty shall equal 30 per cent of the
amount by which the difference exceeds 10 per cent;
(c) if the difference is greater than 40 per cent but less than or
equal to 60 per cent of the trigger price, the additional duty
shall equal 50 per cent of the amount by which the difference
exceeds 40 per cent, plus the additional duty allowedunder (b);
(d) if the difference is greater than 60 per cent but less than or
equal to 75 per cent, the additional duty shall equal
70 per cent of the amount by which the difference exceeds60 per cent of the trigger price, plus the additional duties
allowed under (b) and (c);
(e) if the difference is greater than 75 per cent of the trigger price,
the additional duty shall equal 90 per cent of the amount bywhich the difference exceeds 75 per cent, plus the additional
duties allowed under (b), (c) and (d).  (emphasis added)
159. The legal issue raised with respect to Article 5.5 is whether it is permissible for the importing
Member to offer the importer a choice between the use of the c.i.f. price of the shipment as providedin Article 5.5, and another method of calculation which departs from this principle.  In this case, thealternative method consists of the "representative price" provided in Regulation 1484/95.WT/DS69/AB/R
Page 56
160. Regulation 2777/75, the Council regulation, contains the general rule for the application of
the additional "special safeguard" duties provided for in Article 5 of the Agreement on Agriculture .
Article 5.3 of Regulation 2777/75 states:
The import prices to be taken into consideration for imposing an
additional import duty shall be determined on the basis of the cif
import prices of the consignment in question.
161. However, what is really at issue here is Regulation 1484/95, the Commission regulation,
which sets forth in detail the EC system for calc ulating the additional duties on shipments of frozen
poultry meat to be imposed as a "special safegu ard" over and above the ordinary customs duties.
Regulation 1484/95 provides for two methods of calculating these additional duties.
162. The first method is explained in Article 3.1 of Regulation 1484/95, which provides:  "At the
request of the importer the additional duty may be established on the basis of the cif import price ofthe consignment in question, if this price is higher than the applicable representative price … ."According to Article 3.1, "the application of the cif price of the consignment in question for
establishing the additional duty is subject to the presentation by the interested party to the competentauthorities of the importing Member State of at least the following proofs:  the purchasing contract, orany other equivalent document, the insurance contra ct, the invoice, the certificate of origin (where
applicable), the transport contract, and, in the case of sea transport, the bill of lading".
95   An importer
requesting that this method be followed must lodge a security "equal to the amount of the additional
duty which he would have paid if the calculation of the additional duty had been made on the basis of
the representative price applicable to the product in question"96, for the goods to be released
immediately for free circulation within the European Communities.
163. The second method is explained in Article 3.3 of Regulation 1484/95, which provides that in
the absence of a request by the importer to calculate the additional duties on the basis of the c.i.f.import price of the consignment in question, "the import price of the consignment in question to betaken into consideration for imposing an additional du ty shall be the representative price referred to in
Article 2(1)" of the regulation.  According to Article 2.1 of Regulation 1484/95, the EC Commission
determines at regular intervals the "representative prices" of frozen poultry meat, "taking into account
in particular:  the prices on third country markets, free-at-Community frontier offer prices, and prices
at the various stages of marketing in the Community for imported products."
                                                     
95Regulation 1484/95, Article 3.1.
96Regulation 1484/95, Article 3.2.WT/DS69/AB/R
Page 57
164. To determine whether the two methods specified in the EC measure are consistent with the
obligations of the European Communities under Article 5.5 of the Agreement on Agriculture , we
must turn first to an examination of the text of Article 5.5.  The chapeau of Article 5.5 states: "Theadditional duty imposed under subparagraph 1(b) shall  be set according to the following
schedule … ".  (emphasis added)  According to the schedule in Article 5.5, the additional safeguard
duty is calculated as a certain percentage of the difference between the c.i.f. import price and thetrigger price.  This percentage increases with the increases in that difference.
165. In our view, the ordinary meaning of the text of Article 5.5 is clear.  The chapeau of
Article 5.5 clearly states that the schedule in the body of that provision is mandatory.  The word usedin the chapeau is "shall", not "may".  There is no qualifying language, and there is no language thatpermits any method other than that set out in the schedule in Article 5.5 as a basis for the calculationof additional duties.  Likewise, Article 5.5 clearly identifies the  c.i.f. import price of the shipment  as
the sole element to be compared with the trigger price in the calculation of the additional duties.
Article 5.5 stipulates that the amount of additional duties " shall  be set" on the basis of the comparison
of the c.i.f. import price of the shipment  concerned with the trigger price.  Thus, the ordinary meaning
of the c.i.f. import price of the shipment  is precisely that:  the c.i.f. import price of the shipment .
Unlike the trigger price with which it is compared, the c.i.f. import price is not described in the text ofArticle 5 of the Agreement on Agriculture  as an average price during a certain period of time.  It is
simply the c.i.f. import price of the shipment , that is, the actual price of an actual shipment.  There is
no authority in the text of Article 5.5 for a Member  to use any alternative to the c.i.f. import price,
shipment-by-shipment, in the calculation of the additional duties imposed under this special safeguard
mechanism.
166. The context of Article 5.5 supports this conclusion.  The context of Article 5.5 includes both
Article 5.1(b) and Article 4.2 of the Agreement on Agriculture .  As noted previously, Articles 5.1(b)
and 5.5 are inextricably linked.  We have already concluded that the relevant import price inArticle 5.1(b) is the c.i.f. import price of the shipment.  Under Article 5.1(b), this price must becompared to the trigger price to determine whet her the special safeguard mechanism is activated.
Both the import price and the trigger price mentioned in Article 5.1(b) are also the very same importprice and trigger price, respectively, that are mentioned in Article 5.5.  If the relevant import price thatis compared to the trigger price to determine wh ether the safeguard mechanism in Article 5.1(b) is
activated is  the c.i.f. import price of the shipment , then logic dictates that  the c.i.f. import price of the
shipment  that is used to set the amount of those additional duties under Article 5.5 cannot be anything
else.WT/DS69/AB/R
Page 58
167. We note that the safeguard mechanism in Article 5 of the Agreement on Agriculture  is
described as "special".  The reason for this description is that it is a unique mechanism compared withsafeguard provisions in Article XIX of the GATT 1994, the Agreement on Safeguards , and in
Article 6 of the Agreement on Textiles and Clothing .  It is not conditional upon a test of injury as it is
the case with other safeguard provisions;  it can be automatically activated when there is a certain
surge in the volume of imports (Article 5.1(a)) or a certain drop in the price of the product(Article 5.1(b)).  For this reason, it should not be invoked except in accordance with, and within theconfines of, the strict requirements of Article 5.  One of these requirements is that the relevant importprice to be compared with the trigger price for the purpose of establishing the amount of the additionalduties under Article 5.5 must be the  c.i.f. import price of the shipment .  To read the text of Article 5.5
as permitting the use of any price other than the c.i.f. import price, shipment-by-shipment, would notbe consistent with the special character of this provision.
168. Therefore, neither the text nor the context of Article 5.5 of the Agreement on Agriculture
permits us to conclude that the additional duties imposed under the special safeguard mechanism in
Article 5 of the Agreement on Agriculture  may be established by any method other than a comparison
of the  c.i.f. price of the shipment  with the trigger price.
169. With this conclusion in mind, we turn again to  the two methods employed in the EC measure.
With respect to the first method, it will be recalled that Article 3.1 of Regulation 1484/95 permits theadditional duties to be calculated, at the request of th e importer, on the basis of "the c.i.f. price of the
consignment" in question.  To the extent that this method uses the c.i.f. price of the shipment tocalculate the amount of the additional duties, it is consistent with Article 5.5 of the Agreement
on Agriculture .  We note, however, that this method is only available at the request of the importer
and also is only available if the price established by this method is higher than the applicablerepresentative price.  Otherwise, the alternative method, which does not use the c.i.f. price of theshipment, is used. This means that the actual c.i.f. price of the consignment is not used in all cases.To this extent, this method is not consistent with Article 5.5 of the Agreement on Agriculture .
170. With respect to the second method, it will be recalled that Article 3.3 of Regulation 1484/95
provides for the calculation of additional duties by re ference to the "representative price".  As pointed
out previously, the basic characteristic of the "representative price" is that it is an average of threeelements over a certain period of time.  The "representative price" may be more advantageous for
exporters of frozen poultry meat to the European Communities, "a useful and transparent tool for
importers to reduce bureaucracy",
97  conducive to the avoidance of fraud or other irregularities in the
                                                     
97EC post-hearing reply memorandum, para. 16.WT/DS69/AB/R
Page 59
pricing of imports of frozen poultry meat,98  "a means of boosting trade by dramatically reducing
bureaucracy and paperwork",99  and a method that the importer is "completely free" to choose.100   We
offer no views on any of these possible justifications for, or consequences of, the EC "representativeprice".  We need not do so.  For, whatever the "representative price" may or may not be, it is clear on
the face of the regulation that the "representative price" is not calculated on a shipment-by-shipment
basis and, therefore, it is not the c.i.f. price of the shipment  concerned.  Article 3.1 of Regulation
1484/95 states that: "At the request of the importer the additional duty may be established on the basisof the cif import price of the consignment in question, if this price is higher than the applicable
representative price … ." (emphasis added)  If the representative price can be lower or higher than the
c.i.f. price of the shipment concerned, then it obviously will not always be the same as the c.i.f. priceof the shipment .  For this reason, and because we hold that calculation of the additional "special
safeguard" duties on the basis of the c.i.f. price of the shipment  is mandatory, we conclude that the
use of the "representative price" is inconsistent with Article 5.5 of the Agreement on Agriculture.
171. To the extent that Regulation 1484/95 allows for the calculation of the additional duties under
Article 5 of the Agreement on Agriculture  on a basis other than the c.i.f. price of the shipment
concerned, it is inconsistent with the obligations of the European Communities under Article 5.5 ofthe Agreement on Agriculture .  Therefore, the "representative price" method in Regulation 1484/95 is
not consistent with Article 5.5 of the Agreement on Agriculture .  Having made this determination, it is
not necessary for us to proceed to examine whether the EC measure is consistent with Article 4.2 ofthe Agreement on Agriculture .
X. Findings and Conclusions
172. For the reasons set out in this Report,  the Appellate Body:
(a) finds no reversible error in the interpretation by the Panel of the relationship between
Schedule LXXX and the Oilseeds Agreement;
                                                     
98EC post-hearing reply memorandum, para. 15.
99EC post-hearing reply memorandum, para. 11.
100EC post-hearing reply memorandum, para. 11.WT/DS69/AB/R
Page 60
(b) upholds the Panel's findings that the European Communities is bound, on a non-
discriminatory basis, by its tariff commitments for frozen poultry meat, and that noagreement existed between Brazil and the European Communities on the allocation ofthe tariff-rate quota for frozen poultry meat within the meaning of Article XIII:2(d) of
the GATT 1994;
(c) upholds the Panel's finding that a tariff rate-quota resulting from negotiations under
Article XXVIII of the GATT 1947 must be administered in a non-discriminatorymanner consistent with Article XIII of the GATT 1994;
(d) upholds the Panel's finding that the European Communities has not acted
inconsistently with Article XIII of the GAT T 1994 in calculating Brazil's tariff-rate
quota share based on the total quantity of imports, including those from non-Members;
(e) upholds the Panel's finding relating to Article X of the GATT 1994;
(f) upholds the Panel's findings relating to Articles 1.2 and 3.2 of the
Licensing Agreement ;
(g) concludes that the Panel did not act inconsistently with Article 11 of the DSU in not
examining certain arguments made by Brazil relating to GATT/WTO law andpractice;
(h) reverses the finding of the Panel that the European Communities has acted
inconsistently with Article 5.1(b) of the Agreement on Agriculture  by invoking the
safeguard mechanism when the c.i.f. import price, not including ordinary customsduties, falls below the trigger price; and
(i) concludes that the representative price used in certain cases by the European
Communities in calculating the additional safeguard duties is inconsistent with
Article 5.5 of the Agreement on Agriculture .
173. The Appellate Body recommends  that the DSB request that the European Communities bring
its measures found in this Report, and in the Panel Report as modified by this Report, to beinconsistent with the Agreement on Agriculture  and the Licensing Agreement into conformity with its
obligations under those agreements.WT/DS69/AB/R
Page 61
Signed in the original at Geneva this 1st day of July 1998 by:
_________________________
James Bacchus
Presiding Member
_________________________ _________________________
Said El-Naggar Florentino Feliciano
   Member  Member