RESTRICTED  WORLD TRADE  
ORGANIZATION  WT/DSB/M/198 
26 October 2005 
 (05-4952) 
Dispute Settlement Body 
27 September 2005  
 
 
  
MINUTES OF MEETING 
 
Held in the Centre William Rappard
 
on 27 September 2005  
 
Chairman:  Mr  Eirik Glenne (Norway) 
 
 
 
Subjects discussed : 
 
1. Surveillance of implementation of recommendations adopted by the DSB.........................2  
(a) United States – Section 211 Omnibus Appropr iations Act of 1998:  Status report by 
the United States .............................................................................................................. ...........2  
(b) United States – Anti-dumping measures on certain hot-rolled steel products from 
Japan:  Status report by  the United States...................................................................................4  
(c) United States – Continued Dumping and Subsidy Offset Act of 2000:  Status report 
by the Unite d States ........................................................................................................... .........4  
(d) United States – Section 110(5) of the US Copyright Act:  Status report by the 
United States .................................................................................................................. .............6  
2. European Communities – Export subsidies on sugar:  Implementation of DSB 
recommendations and rulings..................................................................................................6  
(a) Communication from Australia, Brazil and Thailand.................................................................6  
3. United States – Countervailing measures concerning certain products from the  European Communities:  Recourse to Article 21.5 of the DSU by the  
European Communities..........................................................................................................1 1
 
(a) Report of the Panel............................................................................................................ ........11  
4. European Communities – Customs classifica tion of frozen boneless chicken cuts...........13  
(a) Report of the Appellate Body and Reports of the Panel ...........................................................13  
5. Appointment of Appella te Body members............................................................................20  
(a) Decision by the DSB on the reappointment of Appellate Body members................................20  
 WT/DSB/M/198 
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1. Surveillance of implementation of recommendations adopted by the DSB 
(a) United States – Section 211 Omnibus Appropr iations Act of 1998:  Status report by the 
United States (WT/DS176/11/Add.35) 
 (b) United States – Anti-dumping measures on certain hot-rolled steel products from Japan:  
Status report by the United States (WT/DS184/15/Add.35) 
 (c) United States – Continued Dumping and Subsid y Offset Act of 2000:  Status report by the 
United States (WT/DS217/16/Add.20 – WT/DS234/24/Add.20) 
 
(d) United States – Section 110(5) of the US Copyright Act:  Status report by the United States 
(WT/DS160/24/Add.10) 
 1. The Chairman
 recalled that Article 21.6 of the DSU required that "unless the DSB decides 
otherwise, the issue of implementation of the re commendations or rulings shall be placed on the 
agenda of the DSB meeting after six months follo wing the date of establishment of the reasonable 
period of time pursuant to paragraph 3 and shall remain on the DSB's agenda until the issue is 
resolved".  He proposed that the four sub-items to which he had just referred be considered separately. 
(a) United States – Section 211 Omnibus Appropria tions Act of 1998:  Status report by the 
United States (WT/DS176/11/Add.35) 
2. The Chairman  drew attention to document WT/DS176/ 11/Add.35, which contained the status 
report by the United States on progress in the impl ementation of the DSB's recommendations in the 
case concerning US Section 211 Omni bus Appropriations Act of 1998. 
3. The representative of the United States  said that his country had provided a status report in 
this dispute on 15 September 2005, in accordance w ith Article 21.6 of the DSU.  As noted in the 
report, several legislative proposals relating to  Section 211 that would implement the DSB's 
recommendations and rulings in this dispute had been  introduced in the current Congress, both in the 
US Senate and the US House of Representatives.  The US administration was working with the US 
Congress to implement the DSB's recommendations and ru lings.  In that connection, the United States 
had taken note of the statements made by the EC at the previous DSB meeting.  The United States 
failed to understand how its commitment to implemen t the DSB's recommendations and rulings in this 
dispute and its efforts to comply could undermine th e "authority" of the TRIPS Agreement.  To the 
contrary, these affirmed Members' commitments to the TRIPS Agreement. 
4. The representative of the European Communities  noted that on the agenda of the present 
meeting there were two disputes with regard to wh ich the United States had not only failed to respect 
its obligations under the TRIPS Agreement, but it had also failed to bring itself into compliance with 
the DSB's rulings and recommendations within the prescribed time-period for implementation.  The 
United States was one of the main sponsors of th e TRIPS Agreement.  Thus its unwillingness to abide 
by the TRIPS obligations undermined the authority of the Agreement.  There were four bills pending 
in the US Congress to repeal Section 211.  Adoption of such bills would remove a discriminatory legislation that had been driven by specific intere sts and would bring a satisfactory solution to this 
dispute.  This would conform to the US objective of ensuring effective and non-discriminatory protection of intellectual property rights worldwide. 
5. The representative of Cuba
 said that Section 211 of the US Omnibus Appropriations Act of 
1998 violated two main principles of the WTO;  i.e.  the principle of national treatment and that of 
most-favored-nation treatment.  Cuba had consistently asked the DSB to  request that the United States 
repeal Section 211 and that it fully meet its commitments as a WTO Member.  The so-called 
understanding between the United States and the EC, which had been presented to the DSB at its  WT/DSB/M/198 
 Page 3 
 
 
meeting on 20 July 2005, could only be considered as a "shameful surrender" on the part of the EC, 
which tacitly allowed the United States to continue  to apply Section 211.  There was a marked 
contrast between the EC's compliant and tolerant a ttitude towards the United States in this dispute and 
its firm and vocal position regarding the dispute ove r intellectual property, relating to Section 110(5) 
of the US Copyright Act.  One could ask whether Cu ba's legitimate rights would be used as a pawn by 
the powerful Members.  Failure to comply with the DSB's rulings and recommendations was 
becoming a weakness of the multilateral trading syst em.  How could anyone seriously argue that the 
dispute settlement mechanism provided security for all Members, when the failure of the most 
powerful Member to comply with its commitments a nd its flagrant violations were indulged.  All 
WTO Members had decided freely to be part of the multilateral trading system, which was based on 
principles and rules.  Multilateralism would thrive if there was trust and certainty that all Members 
would abide by such principles and rules, whereas systematic disregard for them would encourage  
arbitrariness and unilateralism. Cuba firmly reitera ted that the only way to comply with the DSB's 
rulings and recommendations would be to abolis h Section 211.  Cuba urged other Members to 
condemn such understandings as well as the US con tinued failure to comply with its commitments, 
not only in this dispute, but also in other di sputes, including those on the agenda of the present 
meeting. 
6. The representative of China  said that, due to systemic im plications, his delegation was 
concerned about the progress in this dispute.  At the 20 July DSB meeting, the parties to the dispute 
had notified the DSB that they had concluded an  understanding.  The EC had indicated in that 
understanding that it would not, at this stage, seek  authorization from the DSB to suspend concessions 
or other obligations and had retained its right to do  so in the future.  However, the understanding did 
not refer to any new deadline for implementation.  Although China recognized that the parties to the 
dispute had the right to settle procedural issues by mutual agreement, it was regrettable that the 
understanding contained no deadline.  That might r esult in a further delay of the implementation of 
the DSB's decision, which had been delivered three years ago.  China emphasized that the 
implementation in this dispute would not only be beneficial to the EC and Cuba, but also to the 
United States, who was an advocate of intellectual pr operty rights in all forums.  China applauded the 
US efforts to implement the DSB's decisions pertaining to the 1916 Anti-Dumping Act,  and wished 
that the United States continue the momentum in br inging its relevant measu res, which were found 
illegal by the DSB, into conformity with WTO rule s.  China joined the EC and Cuba in urging the 
United States to implement the DSB's deci sion in this dispute as soon as possible. 
7. The representative of Canada  recalled the provisions of Article 3.7 of the DSU, which 
provided that: "The aim of the dispute settlement mechanism is to secure a positive solution to a 
dispute.  A solution mutually acceptable to the part ies to a dispute and consistent with the covered 
agreements is clearly to be preferred." Against that background, he said that to characterize an 
agreement or an understanding betw een two disputing parties as "shameful" represented a departure 
from the DSB practice and the way Members viewed such  arrangements.  He also considered that, to 
the extent Cuba was concerned about protecting its  "legitimate economic interests", it had the right, 
under the WTO Agreement, to seek a settlement  of its dispute with the United States. 
8. The representative of Cuba  said that he had not intended to  intervene for the second time, but 
the statement made by Canada had prompted him to do so.  His delegation did not wish to challenge 
the right of the parties to the dispute to come to  an understanding, however "shameful" it might be, if 
such an understanding were to help to solve a dis pute. His delegation was concerned that the US/EC 
understanding had been reached behind closed doo rs, without consulting with other Members and 
without taking into account Cuba's legitimate rights.   Any WTO Member had the right to be informed 
of or to participate in discussions on such matters.  That was in fact what his delegation wished to 
convey and not what the representative of Canada had alluded to.  Cuba was aware of its WTO rights. 
It had not renounced its rights, and would neve r renounce them, in relation to the dispute under 
consideration. WT/DSB/M/198 
Page 4  
 
9. The DSB took note
 of the statements and agreed  to revert to this matter at its next regular 
meeting. 
(b) United States – Anti-dumping measures on certain hot-rolled steel products from Japan:  
Status report by the United States (WT/DS184/15/Add.35) 
10. The Chairman  drew attention to document WT/DS184/ 15/Add.35, which contained the status 
report by the United States on progress in the impl ementation of the DSB's recommendations in the 
case concerning US anti-dumping measures on certain hot-rolled steel products from Japan. 
11. The representative of the United States  said that his country had provided a status report in 
this dispute on 15 September 2005, in accordance with Article 21.6 of the DSU.  As of 23 November 2002, the US authorities had addresse d the DSB's recommendations and rulings with 
respect to the calculation of anti-dumping margins in the hot-rolled steel anti-dumping duty 
investigation at issue in this dispute.  Details  were provided in document WT/DS184/15/Add.3.  The 
US administration continued to support specific le gislative amendments that would implement the 
DSB's recommendations and rulings with respect to the US anti-dumping duty statute, and was 
working with the US Congress to  pass these amendments.  In that connection, on 19 May 2005, 
legislation had been introduced in the US H ouse of Representatives (H.R. 2473) that would 
implement the DSB's recommendations and rulings with respect to the US anti-dumping duty statute.  On 25 July 2005, the House Committee on Ways and Means had requested public comments by 2 September 2005, on whether to include H.R. 2473 in  broader trade legislation regarding technical 
corrections and miscellaneous duty suspension.  The Committee was now reviewing those comments. 
The US administration would continue to work with the US Congress to enact legislation to 
implement the DSB's recommendations and rulings. 
12. The representative of Japan
 said that the credibility of the dispute settlement system relied on 
each Member's sincere commitment to meet its obligations under the WTO Agreements, which 
notably included an obligation to secure prompt and effective implementation of the DSB's recommendations and rulings.  Japan had been waiti ng to see the passage of a bill introduced to the 
US Congress, which would amend the US anti-dumping st atute questioned in this dispute.  In that 
regard, Japan noted the status report by the United States, which touched upon the state of play of bill H.R. 2473 before the US Congress, and in particular  the part regarding public comments.  Although 
Japan had reached an understanding with the United States to reserve its right to resort to the 
measures set out under Article 22.2 of the DSU for a future date, it urged, once again, the 
United States to redouble its effort towards the full-fledged implementation of the DSB's 
recommendations and rulings in this dispute. 
13. The DSB took note
 of the statements and agreed  to revert to this matter at its next regular 
meeting. 
(c) United States – Continued Dumping and Subsidy Offset Act of 2000:  Status report by the 
United States (WT/DS217/16/Add.20 – WT/DS234/24/Add.20) 
14. The Chairman  drew attention to document WT/D S217/16/Add.20 – WT/DS234/24/Add.20, 
which contained the status report by the United St ates on progress in the implementation of the DSB's 
recommendations in the case concerning the US Conti nued Dumping and Subsidy Offset Act of 2000. 
15. The representative of the United States  said that his country had provided a status report on 
15 September 2005, in accordance with Article 21.6 of the DSU.  As noted in that report, the US 
administration had proposed repeal of the CDSOA in its budget proposal for fiscal year 2006.  In 
addition, legislation that would repeal the CD SOA had been introduced in the US House of 
Representatives.  The Committee on Ways and M eans was now reviewing public comments on 
whether to include that legislation in a broader b ill regarding technical corrections and miscellaneous  WT/DSB/M/198 
 Page 5 
 
 
duty suspension.  On 9 September 2005, an amendment to appropriations legislation had been filed in 
the US Senate.  The amendment would prohibit th e distribution of CDSOA funds unless distribution 
of such funds would not be inconsistent with US WTO obligations.  The US administration would 
continue to work with the US Congress to enact legisl ation, and to confer with the complaining parties 
in these disputes, in order to reach mutually  satisfactory resolutions of these matters. 
16. The representative of th e European Communities  said that, as had been mentioned at the 
previous DSB meeting, the Ways and Means Trade Sub-Committee of the House of Representatives 
had called on interested parties to comment on the in clusion of certain bills in a miscellaneous trade 
bill, including a bill introduced in  March 2005 to repeal the Byrd Amendment.  Since then, the Ways 
and Means Committee had posted on its website the subm issions made.  In that regard, he noted with 
interest that there were more submissions in favour of  repeal than against it.   In the previous week, 
there had also been some proposals in the US Senate to provide at least a temporary solution to this 
dispute.  After a long period of apparent total di sinterest in the US Congress, these were first positive 
signs.  The EC called on the US administration and the US Congress to build on this momentum and to repeal the Byrd Amendment without further delay. 
17. The representative of Canada
 said that his country noted the most recent status report of the 
United States on the Continued Dumping and Subsidy Offset Act of 2000.  As previously stated, 
Canada was disappointed that US inaction had re quired Canada and other WTO Members to impose 
trade restrictive measures in order to induce US  compliance with its WTO obligations.  Canada 
regretted that these measures were necessary so clo se to the Hong Kong Ministerial Conference, at a 
time when the world was preparing to engage more d eeply in negotiations to liberalize trade.  Canada 
again reminded the United States of their common interest in the  international trading system 
governed by the rule of law, which promoted trade ra ther than restricted it.   Canada welcomed the 
inclusion of the Ramstad Bill H.R. 1121 to repeal  the Byrd Amendment in the Miscellaneous Trade 
Legislation, currently being considered in the US Congress.  Canada urged the passage of that Bill in 
order to bring the United States into compliance with  its WTO obligations.  Canada also noted, in the 
US most recent status report on the Byrd Amendmen t, an amendment to Appropriations Legislation 
H.R. 2862.  Canada welcomed an explanation of this amendment. 
18. The representative of Japan  said that it was with a grave sense of regret that his country had to 
renew its call on the United States to secure the repeal of the CDSOA by passing the legislation 
without delay.  This was all the more relevant  as another round of illegal disbursement under the 
WTO-inconsistent CDSOA might soon be commenced.  In its most recent status report, the United 
States had referred to the proposed amendment to th e US appropriations legislation. The amendment, 
although incomplete, was a significant step in the right direction, provided that  it would effectively 
annul disbursements under the CDSOA for good, need less to say, should its passage be secured.  
However, it was Japan's understanding that although that amendment had been filed, it had not been 
introduced in the US Senate.  He recalled that Canada, the EC and Mexico  had put in place their 
countermeasures vis-à-vis the United States, pursuant to Article 22 of the DSU.  For its part, Japan 
had imposed 15 per cent additional duties on certain  US products as from 1 September.  It was 
regrettable that it had become necessary for four Me mbers to impose such trade-distorting "last resort" 
countermeasures.  Japan recalled that, as provided fo r in Article 22.8 of the DSU, the countermeasures 
shall be of a temporary nature until the implementa tion was secured.  Therefore, Japan once again, 
strongly called on the United States to intensify its efforts to secure a prompt repeal of the CDSOA. 
19. The representative of Brazil  said that his country had noted the US status report in relation to 
the Byrd Amendment dispute.   He recalle d that Article 21.6 of the DSU established, inter alia,  that 
"the Member concerned shall provide the DSB with a status report in writing of its progress in the 
implementation of the recommendations or ruli ngs."  The reasonable period of time for the 
United States to implement the DSB's rulings an d recommendations in the present dispute had ended 
on 27 December 2003, almost two years ago.  Howeve r, twenty status reports later, no real progress 
had been signalled by the US delegation.  Wh ile strongly urging the United States to repeal WT/DSB/M/198 
Page 6  
 
immediately the Byrd Amendment, Brazil would ap preciate elaboration by the United States on the 
next steps to be taken as regards the amendment of 9 September to Appropriations Legislation, 
referred to in document WT/DS217/Add.20 – WT/DS234/Add.20. 
20. The DSB took note
 of the statements and agreed  to revert to this matter at its next regular 
meeting. 
(d) United States – Section 110(5) of the US Copyright Act:  Status report by the United States 
(WT/DS160/24/Add.10) 
21. The Chairman  drew attention to document WT/DS160/ 24/Add.10, which contained the status 
report by the United States on progress in the impl ementation of the DSB's recommendations in the 
case concerning Section 110(5) of the US Copyright Act. 
22. The representative of the United States  said that his country had provided a status report in 
this dispute on 15 September 2005, in accordance w ith Article 21.6 of the DSU.  As noted in the 
report, the US administration continued to work with  the US Congress and to confer with the EC, in 
order to reach a mutually satisfactory resolution of  this matter.  The United States had taken note of 
the statement made by the EC at the 31 August DS B meeting.  There could be no question about the 
US willingness to provide protection to intellectual property rights.  The United States was second to 
none in providing strong protection for intellectual property rights.  And given other items on the 
agenda of the present meeting, the United States cons idered that the EC was hardly in a position to 
lecture other Members about agreements being one-way. 
23. The representative of the European Communities  said that more than five years after the 
adoption of the DSB's rulings in this dispute, th e dispute on the US Copyright Act was still on the 
DSB's agenda, to the dismay of European musician s and, he believed, of the WTO Membership as a 
whole.  And, if one were to judge from the latest status report that the DSB had received, the United States was doing little if anything to address the issue of substandard intellectual property 
protection in the copyright field.  The lack of inte rest of the United States to bring its legislation in 
line with the international standards on intellectua l property was a very disturbing signal, as it 
appeared that the self-proclaimed champion of inte llectual property rights seemed impotent to live up 
to its TRIPS obligations.  He thus wondered what  lesson should other WTO Members draw from that  
fact.   The TRIPS Agreement was not a one-way agreement which created rights for the United States and obligations for ot hers.  The EC urged the United States to accord the highest priority to the 
resolution of this issue.  Should that not be the cas e, the EC wished to recall that it had reserved its 
right to reactivate, at any point in  time, the arbitration on retaliation. 
24. The DSB took note
 of the statements and agreed  to revert to this matter at its next regular 
meeting. 
2. European Communities – Export subsidies on sugar:  Implementation of DSB 
recommendations and rulings 
(a) Communication from Australia, Brazil and Thailand (WT/DS265/32 – WT/DS266/32 – 
WT/DS283/13) 
25. The Chairman  drew attention to the communicati on from Australia, Brazil and Thailand 
contained in document WT/DS265/32 – WT /DS266/32 – WT/DS283/13 and invited the 
representatives of the respective countries to speak. 
26. The representative of Australia  said that he wished to commence his intervention with the 
observation that the DSB did not have injunctive po wers.  The functioning of the DSB was dependent 
on the good faith of WTO Members to observe and apply their WTO treaty commitments.  Australia  WT/DSB/M/198 
 Page 7 
 
 
had requested the inclusion of the present agenda item as a result of action by the EC,  during the 
WTO dispute implementation period in the Sugar dis pute, to increase exports of sugar by almost 
2 million tonnes, through a declassification mechanis m. That mechanism involved a declassification 
of quota sugar to C sugar.  C sugar could not be sold  on the internal EU market.  As a consequence of 
declassification, quota sugar which would otherwise be disposed on the internal market would be 
forced on to the external market.  Consistent w ith the recommendations and rulings of the DSB on 
19 May 2005 – which had found that all sugar exports  by the EC were subsidized and hence must be 
counted against its WTO export subsidy commitme nt limit of 1.273 million tonnes – the EC was 
required to take prompt steps to reduce its exports  from an average of 5 million tonnes a year to its 
WTO scheduled commitment limit of 1.273 million tonnes.  However, the declassification action 
meant that the EC would increase its  subsidized exports of sugar to a level of some 6 million tonnes in 
excess of the EC's WTO export subsidy commitments for sugar.  Clearly, action to increase exports 
would not be WTO compliant.  Nor could it be categorized as an act of WTO dispute implementation.  A WTO dispute implementation period did not ser ve to legitimize WTO-inconsistent actions. 
27. He said that Australia had requested the inclusion of this agenda item for three reasons, all of 
which were legitimate to the surveillance authority of the DSB.  First, because of an apparent 
interpretation by the EC that a WTO dispute implem entation period afforded a licence to unilaterally 
waive WTO obligations during that period.  In Austra lia's view, it was clear that there was nothing in 
the WTO to justify an interpretation that a WTO Memb er was entitled to suspend the application of its 
WTO obligations during a dispute implementation peri od.  Second, because the EC's interpretation, if 
accepted, would damage the functioning and credib ility of the WTO dispute settlement system.  
Suspension of obligations during a WTO dispute im plementation period would not be conducive to 
the security and predictability afforded by the WTO dispute settlement system to the multilateral 
trading system, in accordance with Article 3.2 of th e DSU.   In the circumstances of this dispute, 
action to increase exports – during a period in which steps were required to reduce exports – detracted 
from the predictability and security afforded by the multilateral trading system.  Such action would be 
no different from action to raise an applied tariff rate during a WTO dispute implementation period, 
following a WTO dispute ruling that the applied ra te was in excess of the WTO-bound rate.  Third, 
because action to increase subsidized exports in  excess of the limits imposed under the WTO 
Agreement on Agriculture – which were prohibited by  that Agreement – could serve to destabilize the 
world sugar market.  Reports indicated that decla ssification could serve to increase EC sugar exports 
from an average of 5 million tonnes to record levels of around 7 million tonnes.  Such action could 
serve to destabilize world sugar prices.  In cont rast, action to reduce EC sugar exports would be 
beneficial to world sugar price movements. 
28. He noted that the WTO disputes implementation period in this dispute had commenced on 
19 May 2005.  The WTO dispute implementation period was of an entirely different character from the transitional period for implementation of comm itments under Article 1(f) of the Agreement on 
Agriculture, which had expired in 2001.  A WTO implementation period was accorded to enable 
"prompt compliance" with the recommendations and ru lings of the DSB.  It did not constitute some 
sort of open season for non-application of WTO oblig ations.  Seemingly, the EC's justification for 
declassification was based on an interpretation that  it did not need to apply its WTO obligations 
pending the end of an implementation period.  If th e EC were to suggest that declassification was 
necessary and justifiable as an exceptional circumstan ce related to EC sugar reform – which, to the 
best of Australia's knowledge, it had not – then the proper course of action for the EC would be to 
seek a waiver under Article IX:3 of the WTO Agreement. 
29. In conclusion, he said that Australia wished to  place on the DSB record that, in Australia's 
view, declassification was neither necessary nor cond ucive to implementation.  To the contrary, it was 
clearly harmful to implementation.  Such action al so damaged the interests of many other WTO sugar 
producers, including many developing countries.  The im plementation period in r espect of this dispute 
had been in operation for over four months.  Th e EC's obligation to implement was extant from day 
one of that period.  The WTO arbitrator would de termine the date of expiry of the implementation WT/DSB/M/198 
Page 8  
 
period.  The DSU did not accord the EC any right to expect that an arbitrator appointed under 
Article 21.3 of the DSU could legitimize any WTO-inconsistent actions taken during the 
implementation period. 
30. The representative of Brazil
 recalled that on 19 May 2005, the DSB had adopted the Reports 
of the Panel and the Appellate Body in the Sugar dispute, which had been brought to the WTO by 
Brazil, Australia and Thailand.  In doing so, the DSB had recommended that the EC bring its measure 
found to be inconsistent with WTO rules into comp liance with its obligations under the Agreement on 
Agriculture.  He noted that it was worth stressing that , as a result of the adoption of the Reports by the 
DSB, the EC was under the obligation to reduce its subsidized exports of sugar from an average of 
approximately 5 million tonnes a year to its scheduled commitment level of a maximum of 
1.273 million tonnes.  The EC was equally requi red to reduce its budgeta ry outlays on export 
subsidies for sugar from an estimated €2 billion a year to its scheduled commitment level of a 
maximum of €499 million. 
31. He recalled that at the DSB meeting on 13 June  2005, the EC had formally communicated to 
all Members that it had the intention to comply w ith the DSB's rulings and recommendations, but that 
it would need a reasonable period of time in order to  do so.  From that date until 9 August 2005, the 
complainants and the EC had discussed possibl e time-frames for implementation. Negotiations, 
however, had not led to a mutually acceptable date.  The complainants, then, had requested that the 
reasonable period of time be established by an arbi trator, in accordance with Article 21.3(c) of the 
DSU.  The arbitration proceedings on a reasonable period of time were currently in place and the Arbitrator was expected to hand down his award by 28 October 2005.  The Arbitrator's award would 
determine the deadline by which the EC would have to conclude the implementation process in this  
dispute. 
32. He recalled that on 22 September 2005, the EC had taken a formal decision to declassify 
quota sugar to C sugar in an amount of approximately  2 million tonnes.  Given that C sugar could not 
be sold on the EC's market, that decision would resu lt in the increase of the EC's illegally subsidized 
exports of more than 7 million tonnes, or around 6 million tonnes in excess of its commitments under 
the Agreement on Agriculture.  In fact, the EC's in crease in subsidized exports alone was higher than 
the EC's scheduled commitments. 
33. In other words, instead of reducing its subsid ized exports of sugar, as recommended by the 
DSB more than four months ago, the EC was furt her increasing the quantity of  its illegal subsidized 
exports to the detriment of all ot her sugar producers and exporters in the world. The action by the EC 
had been taken in full knowledge of  the content and extent of its multilateral obligations in respect of 
its sugar exports. There was no way that the EC  could reconcile its deliberate decision on 
declassification with the fundamental principle of prompt compliance with the DSB's rulings and recommendations, enshrined in Articles 3.3 and 21.1 of the DSU.  Nor could the EC demonstrate how 
that decision would be compatible with the duty of each WTO Member to ensure the conformity of its 
laws, regulations and administrative procedures with its multilateral obligations, pursuant to 
Article XVI:4 of the Marrakesh Agreement.  The EC was in breach of the principle of good faith – a 
breach that the EC had attempted to impute to  the complainants throughout these proceedings. 
34. Brazil, together with Australia and Thailand, ha d brought this matter before the DSB in view 
of its authority to maintain surveillance of im plementation of rulings and recommendations, in 
accordance with Articles 2 and 21.6 of the DSU.   Neither of these two provisions imposed any 
threshold for a Member to take an implementati on-related matter to the DSB.  However, Brazil 
believed that the issue the co-complainants raised at the present meeting was of utmost relevance to 
the WTO Membership as a whole, and for the proper functioning of the WTO.  In order to justify the action taken, the EC might claim that a declassification decision was merely an ordinary action that the EC took every year;  that the action was only c oncerned with the balance of the EC's internal 
market; and  that a WTO Member was allowed to continue applying its pr esent WTO-inconsistent  WT/DSB/M/198 
 Page 9 
 
 
measure up to the very last day of the reasonable peri od of time.  In that respect, the EC might even 
ask the following question: "What is the raison d'êt re of a reasonable period of time, if a Member 
should adjust its illegal measure immediately upon adoption of a panel or Appellate Body report?" 
None of those excuses, by any minimally reasonabl e assessment, would be adequate to explain why 
the EC had decided to move away from – and not towards – compliance with the DSB's rulings and 
recommendations in the Sugar dispute.  A declassifi cation decision had not been an ordinary action to 
address supply and demand needs of EC's domestic ma rket.  Not after the adoption of the Panel and 
the Appellate Body Reports. Furthermore, the impa ct of such decision on international prices and, 
consequently, on the income of non-subsidized producers and exporters would be significant.  
Preliminary estimates indicated that the declassifi cation at issue would reduce the international price 
by more than 6 per cent. 
35. He then stressed the negative implications of a possible, but undesirable, reaction by the EC 
to what one could call the argument of  "a reasonable period of time as a carte blanche ". The 
implications of that argument certainly went we ll beyond the sugar-specific interests involved in the 
dispute in question. They should be a matter of gr eat interest and concern for all WTO Members, in 
particular those who believed that the WTO disput e settlement mechanism was a central element of 
the multilateral trading system and a tool for securing the positive and expedited resolution of 
disputes.  The assertion that, during a period intended to ensure compliance, a WTO Member would be entitled to exacerbate the pernicious effects of its  illegal measure, whatever the reasons it advanced 
to do so, was at odds with the most basic and centr al principles governing the settlement of disputes in 
the WTO. 
36. The EC's decision on declassification had altered – once again – the balance of rights and 
obligations to the detriment of Brazil and the co-c omplainants, as well as to other sugar producers and 
exporters outside the EC. The EC's action ran coun ter to the objective of positive solution of the 
disputes and had obvious consequences for the EC 's credibility. The EC knew as well as anyone else 
the stakes in the realm of complia nce with WTO rules. Better than anyone else, the EC knew its own 
stakes in the realm of compliance with WTO rul es.  The decision on declassification risked to 
seriously damage the credibility of the WTO dispute settlement as a central element in providing security and predictability to the multilateral trading system. 
37. There was no doubt that, legally speaking, the implementation of the DSB's recommendations 
in the present dispute referred only to the current ru les of the Agreement on Agriculture, a package of 
rights and obligations that had been in force for mo re than ten years.  Yet, it was unavoidable to note 
the negative signal that the EC had sent to WTO nego tiators less than three months before the Hong 
Kong Ministerial Conference by taking its decision on declassification. The elimination of all forms 
of export subsidies for agricultural goods by a credible  date was a political commitment.  At that point 
in time, Members should, at a minimum, apply a standstill as to the export subsidies commitments in 
place.  Instead, by taking its decision on declassification on 22 September 2005, the EC had detracted  
from its commitments in this area. Hardly anyone could find a more deleterious way to express the 
gap between the words and the deeds. 
38. Brazil urged the EC to reconsider its decision on declassification of quota sugar into C sugar 
and to adopt measures fully consiste nt with its obligations under the WTO Agreements, as clarified by 
the DSB's recommendations in the Sugar dispute. 
39. The representative of Thailand
 said that his country wished to join Australia and Brazil in 
expressing deep disappointment with the EC's d ecision of 22 September 2005 to declassify 
approximately 2 million tonnes of quota sugar to C sugar.  The reason for Thailand's disappointment 
was at least four-fold.  First, since May 2005 th e DSB had adopted the recommendations and rulings 
of the Panel and the Appellate Body in the Sugar di spute.  The EC had been under the obligation to 
comply with those rulings and to reduce its levels of subsidized sugar exports.  The EC had not done 
so.  On the contrary, the EC had decided to increas e its subsidized exports of sugar. Second, as the WT/DSB/M/198 
Page 10  
 
EC's subsidized sugar exports had already ex ceeded the levels permitted by the WTO, its 
declassification measures had further increased the excessive amount to approximately 6 million tonnes.  Third, such excessive sugar exports wo uld adversely affect world sugar prices.  The 
declassification measures in effect were harmful to the interests of developing-country Members, 
including Thailand.  They were in contravention of Article 21.2 of the DSU.  Finally, the EC's 
decision had been undertaken with the full knowledge  that such measures constituted an infringement 
of its commitments.  It ran counter to the EC's  obligation to commence its implementation of the 
DSB's recommendations and rulings on this matte r. Thailand had grave concerns about both the 
systemic and substantive implications of the EC's  declassification measures.  Thailand denounced the 
EC's decision to take such measures, which underm ined both the EC's obligations and the effective 
functioning of the DSB.  Therefore, Thailand strongl y urged the EC to reconsider its decision and to 
bring the measures at issue into conformity with its commitments. 
40. The representative of the European Communities
 said that the EC wished to assure other 
Members that it was conscious of its WTO obligat ions, including the obligation to implement the 
DSB's recommendations and rulings following the adoption of the Panel and the Appellate Body 
Reports in the Sugar dispute within a reasonabl e period of time still to be specified under the 
applicable WTO rules.  The Commission had al ready presented on 22 June 2005 an ambitious 
proposal entailing a comprehensive reform of the EC sugar regime that would result in significant cuts 
in prices, production and exports and would brin g about compliance with these rulings.  That  
proposal was being discussed in the Co uncil and the European Parliament. 
41. In the meantime, the EC was bound to apply its existing rules for the current management of 
the Sugar market.  These included the rule on decl assification of quota sugar, which were exportable 
with export refunds, to C sugar, which must be  exported without export refunds.  Although the 
decision on the amount had not yet been adopted, the EC expected that an amount of sugar higher than in recent years would have to be declassifi ed for 2005/2006 due to a number of incidental 
factors, including a fall in consumption and a rise  in stocks as a result of the EC enlargement. 
Nonetheless, he wished to point out that this was a technical calculation done in an objective and 
transparent manner under the existing rules, and that the objective of the rule was precisely to ensure 
that export refunds on sugar stayed within the limits set out in the EC's Schedule as it had understood 
them until the Appellate Body's ruling in the recent WTO dispute. 
42. In fact, while the EC had, at all times, scrupulously resp ected compliance with good faith 
interpretation of its obligations on export subsidies,  the rulings in the Sugar dispute were placing new 
constraints on exports of EC sugar, which were in turn taken into account in the sugar reform proposal 
presented by the Commission.  In order to ensure an  effective transition to these new rules, the EC 
had sought agreement with the other parties to  the dispute on a reasonable period of time for 
implementation, but had regrettably not been able to reach an agreement with the co-complainants on 
this. 
43. He expressed the EC's commitment to abide by its existing WTO obligations.  As it had 
already been declared in the DSB,  the EC intended to fully implemen t its obligations arising from the 
DSB's recommendations and rulings.  The EC had in f act already started to take the necessary steps to 
that end and would follow that path until implementa tion had been achieved.  Yet, the EC must insist 
that, like any other WTO Member in similar circ umstances, it was entitled to a reasonable period of 
time for its implementation because immediate complia nce was impossible.  The complainants – as 
much as they would wish the EC to comply with th e rulings immediately – were obliged to accept that 
the EC required a reasonable period of time for implementation. 
44. He noted that the complainants were right in stating that the EC was obliged to bring itself 
into compliance with the DSB's recommendations and rulings, and that the process of achieving that  
must start on day one of the reasonable period of ti me.  As stated, the EC was doing this and had 
wasted no time.  Where the complainants were wrong was their understanding of the process of  WT/DSB/M/198 
 Page 11 
 
 
bringing about WTO compliance:  it seemed that  they understood this as a gradual reduction of 
exports that had been found to be subsidized in consistently with WTO rules until those exports 
reached the amount of zero.  Hence there must be no increase of these exports during the implementation period.  This was not how the im plementation period was defined in the DSU.  
Implementation during the reasonabl e period of time was understood as a legislative process through 
which the measure found inconsistent had to be modifi ed so as to eliminate its legal flaws.  Until that 
had been achieved, it was impossible to have new ru les in place and consequently the old legal rules 
continued to apply.  For these reasons, the EC wa s puzzled about the complainants' request to place 
this issue on the agenda of the present meeting,  which seemed to be a novel way of applying the 
DSB's surveillance over implementation under Article 21.6 of the DSU. 
45. The DSB took note
 of the statements.  
3. United States – Countervailing measures co ncerning certain products from the 
 European Communities:  Recourse to  Article 21.5 of the DSU by the 
 European Communities 
(a) Report of the Panel (WT/DS212/RW) 
46. The Chairman  recalled that at its meeting on 27 September 2004, the DSB had decided, in 
accordance with Article 21.5 of the DSU, to refer to the original Panel the matter raised by the EC 
concerning the implementation by the United States of the DSB's recommendations in this dispute. 
The Report of the Panel contained in document WT/DS212/RW had been circulated on 17 August 2005 as an unrestricted document, in a ccordance with the Decision on Procedures for the 
Circulation and Derestriction of WTO Document s contained in WT/L/452.  The Report was now 
before the DSB for adoption of the request of th e European Communities.  The adoption procedure 
was without prejudice to the right of Members to express their views on the Panel Report. 
47. The representative of th e European Communities
 said that, first, the EC wished to thank the 
Panel and the WTO Secretariat for their speedy work on an admittedly highly technical and 
complicated subject. The EC was grateful in partic ular for the Panel's findings regarding the UK and 
Spanish cases in which the Unite d States, acting contrary to clear and unequivocal WTO 
jurisprudence, had been found in blatant violation of its obligations under the SCM Agreement.  The 
privatization dispute was already a long and protracted one, and it was time for the United States to correctly implement the jurisprudence as emphatically  repeated by the recent Panel under Article 21.5 
of the DSU.  At the present meeting, the EC did not wish to enter into details.  However, the EC felt 
the need to recall briefly the main obligations, as st ated in the Panel's findings and conclusions.  As 
reiterated in the original Panel and the Appellate Body in this case, in a sunset review process 
involving privatization information, the inv estigating authority was obliged under the SCM 
Agreement to examine whether the privatization was at  arm's length and fair market value in order to 
determine whether the benefit from the non-recu rring subsidies bestowed upon a pre-privatized 
company continued to exist for the privatized pr oducer.  This duty was clear and required an active 
and fully substantiated examination.  Mere assump tions did not suffice.  Second, the investigating 
authority was under the obligation in sunset reviews and revised sunset review proceedings to take 
into account all the evidence placed on its record  in making its determination of likelihood of 
continuation or recurrence of subsidization.  Refusal to consider new evidence was clearly 
inconsistent with Article 21.3 of the SCM Agreement.  The United States had done none  of the above.  
It was time to rectify its errors and finall y put an end to this protracted dispute. 
48. Having said that, the EC wished to briefly express its reservations over a number of points 
and findings made by the Panel.  First, the EC di d not agree with the finding of the Panel concerning 
the term "measures taken to comply" in this case.  Finding that the "measures taken to comply" in the 
proceedings under consideration had simply been th e affirmative likelihood-of-subsidization analysis, 
as set out in the Section 129 determinations, had not effectively promoted the positive resolution of WT/DSB/M/198 
Page 12  
 
the dispute and had not addressed the main problems, which were the maintenance of, or the failure to 
revoke, the countervailing duties in violation of the US commitments under the SCM Agreement.  
The Section 129 determinations were simply the st atement of reasons for the maintenance of the 
duties, not the measure that the United States ought to  have taken in order to comply with the DSB's 
rulings and recommendations.  The focal point was the maintenance of the countervailing duties in 
violation of the SCM Agreement and the Panel should have reasoned accordingly. 
49. Second, the EC wished to express again the view  that the spirit and also the sheer logic of 
recent WTO jurisprudence required analyzing privati zation issues based on the companies as a whole.  
Although the SCM Agreement did not prescribe a pa rticular methodology for analyzing whether a 
privatization was conducted at arm's length and at fa ir market value, both the spirit of past rulings as 
well as practical necessities, militated against "s egmentation" techniques that simply aimed at 
prolonging countervailing duties against clear economic  and market realities.  What should count was 
whether the company as a whole was privatized unde r conditions of arm's length and fair market 
value.  In this case and as a reminder, the privati zation of Usinor had occurred at arm's length and for 
fair market value because the aver age price paid for Usinor's shar es had exceeded the average price 
per share recognized by the Privatization Commi ssion, as necessary to recoup the value of the 
company, and fell within the market-clearing pri ce range that the USDOC had identified.  Following 
segmentation techniques, such as those employed by the United States risked opening Pandora's box 
and could perpetuate disputes and market distortions , which did not correspond to market realities.  
Despite the above reservations, the EC nevertheless did not wish to prolong this dispute and thus 
requested the adoption of the 21.5 Panel Report. 
50. The representative of the United States
 said that at the outset, he wanted to express his 
delegation's gratitude to the Panel and the Secretaria t for producing a report of very high calibre.  By 
way of background, it is worth recalling that the United States had implemented the original DSB 
recommendations and rulings by applying a ne w methodology for determining the continued 
countervailability of subsidies after full privatiza tion of the subsidy recipient.  In doing so, the 
United States had taken into account whether the priv atization was at arm's length and for fair market 
value.  Of the 12 administrative determinations  originally challenged by the EC, the EC had 
challenged implementation with respect to only thre e.  All involved sunset reviews concluding that 
subsidization was likely to continue or recur in  the event of revocation of the countervailing duty 
order.  The reviews involved French, UK and Span ish products.  It was very significant that the 
Article 21.5 Panel had found no breach with regard to the French case, in which the US Department 
of Commerce had found that certain shares in a Fren ch company had not been privatized at arm's 
length or for fair market value.  The Panel's fi nding recognized that the United States had applied a 
privatization methodology in response to the r ecommendations and rulings of the DSB that was 
consistent with the SCM Agreement.  Although the United States did not necessarily agree with all of 
the reasoning in paragraph 7.283 of  the Panel Report, it was obviously very pleased with this result. 
51. The United States was also very pleased with the Panel's finding that investigating authorities 
did not need to reconsider the likelihood of conti nuation or recurrence of injury merely because the 
recommendations and rulings of the DSB required rec onsideration of the likelihood of continuation or 
recurrence of subsidization. 
52. With regard to the UK and Spanis h reviews, the United States noted that it intended to modify 
its measures in response to the Article 21.5 Panel fi ndings that the United States should have applied 
its privatization analysis in these reviews.  At the same time, however, the United States was  
surprised at these findings, since the United States had implemented by assuming that the 
privatizations at issue were at arm's length and fo r fair market value, the most favourable outcome 
possible for respondents had the analysis actually been performed.  The United States had instead 
made its sunset determination of likely contin uation or recurrence of subsidization based on the 
existence of other subsidies which had not been ch allenged before the original Panel, and which, 
therefore, should not have been considered in the Article 21.5 proceeding.  WT/DSB/M/198 
 Page 13 
 
 
53. Similarly, concerning the UK case, the United States intended to modify its measure in 
response to the Panel's finding that the US author ities should have considered certain evidence that 
had been presented to them for the first time during implementation of the DSB's recommendations and rulings – even though that evidence could ha ve been presented during the underlying sunset 
review.  Here again, the United States considered  that the Panel should have found otherwise.  
Interested parties should not be able to use dom estic implementation proceedings to raise factual 
claims they chose not to raise in the original administrative proceedings and which were not the 
subject of the original WTO dispute.  In sum, while  the United States disagreed with certain aspects of 
the Article 21.5 Panel Report, the United States cons idered the Report overall to be very positive and 
well-reasoned. 
54. The DSB took note
 of the statements and adopted  the Panel Report contained in 
WT/DS212/RW. 
4. European Communities – Customs classifica tion of frozen boneless chicken cuts 
(a) Report of the Appellate Body (WT/DS269/AB/R  – WT/DS286/AB/R) and Reports of the 
Panel (WT/DS269/R and WT/DS286/R) 
55. The Chairman  drew attention to the communication from the Appellate Body contained in 
document WT/DS269/9 – WT/DS286/11 transmitting th e Appellate Body Report pertaining to the 
disputes:  "European Communities – Customs Classi fication of Frozen Boneless Chicken Cuts", 
which had been circulated on 12 September 2005 in document WT/DS269/AB/R – WT/DS286/AB/R, 
in accordance with Article 17.5 of the DSU.  He reminded delegations that, in accordance with the 
Decision on Procedures for the Circulation and De restriction of WTO Documents contained in 
document WT/L/452, the Appellate Body Report and the Panel Reports pertaining to these disputes 
had been circulated as unrestricted documents.  He not ed that Article 17.14 of the DSU required that:  
"An Appellate Body report shall be adopted by the DSB and uncond itionally accepted by the parties 
to the dispute unless the DSB decide s by consensus not to adopt the Appellate Body report within 
30 days following its circulation to Members.  Th is adoption procedure is without prejudice to the 
right of Members to express their views on an Appellate Body report". 
56. The representative of Brazil   recalled that on 12 September 2005, in its Report on: "European 
Communities – Customs Classification of Frozen B oneless Chicken Cuts", the Appellate Body had 
confirmed most parts of the findings and conclusion s of the Panel Report, which had been circulated 
on 30 May 2005.  Both the Panel and the Appellate  Body had concluded that the EC's current 
legislation on the classification of frozen boneless sa lted chicken was inconsistent with its multilateral 
obligations under the GATT 1994.  Brazil welcomed  the adoption of these Reports and thanked the 
Panel, the Appellate Body and the Secretariat for thei r hard work in this dispute.  The present outcome 
also reflected positively on Brazil's close co-operati on with Thailand, the other co-complainant with 
whom it had had the opportunity to work in the cont ext of the Sugar dispute. The Reports left no room 
for further interpretation:  the EC Regula tion 1223/2002 and the EC Decision 2003/97/EC had 
resulted in the imposition of customs duties in excess of the duties provid ed for in the EC's 
Schedule LXXX.  In reclassifying frozen boneless salte d chicken cuts, the EC had acted in breach of 
Article II:1(a) and Article II:1(b) of the GATT 1994.   Before going through the most relevant points 
raised by the Panel and the Appellate Body Re ports, he wished to reiterate the immediate 
consequences of the changes introduced by  the EC in its customs classification. 
57. First, with the enactment of Regulation No . 1223/2002 and Decision 2003/97/EC, exports of 
the product in question from Brazil to the EC market  had fallen by nearly 80 per cent.  During the 
three-year period in which that legislation had been in force, the EC's measures had caused an 
estimated loss of nearly US$2 billion for Brazilian e xporters. That loss was a direct consequence of  
the measures that had redefined the product exporte d by the co-complainants, which had been, until 
then, covered under heading 02.10 of the EC Comb ined Nomenclature as sa lted chicken (frozen or WT/DSB/M/198 
Page 14  
 
not) and subject then to an ad valorem  tariff of 15.4 per cent.  With the new measures, imports of 
frozen salted chicken cuts had been reclassified unde r heading 02.07 and subject to a specific tariff of 
€102.4/100 kg. amounting to an AVE four to five times higher than the tariff bound in Schedule LXXX. Under heading 02. 07, the product exported by the co-complainants, frozen salted 
chicken, had been reclassified as in natura  meat, fresh, chilled or frozen, without any kind of salting. 
The EC's objective was clear.  In changing the de finition and scope of heading 02.07, it was, in 
practice, prohibiting the imports of frozen salted chicken cuts under heading 02.10. 
58. When Brazil had brought this case to the WTO in  2003, it had not sought to obtain a lower 
tariff level for salted chicken cuts than that provide d for in the EC's Schedule nor had it tried to 
reinterpret the Harmonized System Convention.  The dispute under consideration was not about 
legitimate expectations of an exporting Member. It  was about the interpretation of the meaning and 
scope of a tariff concession in a Member's Schedule.  It was about the predictability and security of 
commitments undertaken by Members in their Schedul es, one of the foremost objectives and purposes 
of the WTO Agreement and the GATT 1994. 
59. With respect to the legal reasoning and conclu sions reached by the Panel and the Appellate 
Body, he wished to touch upon what Brazil considered to  be the most important issues in this dispute, 
namely, the terms of reference, the interpretation of  the term "salted" according to the rules of treaty 
interpretation codified in the Vienna Convention, an d the final findings of the Panel and the Appellate 
Body. With regard to the terms of reference, he  said that shortly after Brazil had requested the 
establishment of a panel in September 2003, the EC had enacted Regulations 1871/2003 and 2344/2003, in order to "clarify" the "cor rect interpretation of heading 02.10".
1 Although the Appellate 
Body had considered these pieces of legislation as outside the Panel's terms of reference, the 
Appellate Body had also clearly and unequivocal ly found that heading 02.10 of the Harmonized 
System was not exclusively characterized by the concept of long-term preservation.2  It followed that 
the concept found in Regulations No. 1871/2003 and No. 2344/2003 could not stand.  In the Appellate 
Body's own words:  "... meat to which salt has been added, so that its character has been altered, will 
be 'salted' within the meaning of heading 02.10, ev en if such salting does not place meat in a state of 
'preservation'."3  Moreover, as the Appellate Body stated:  "... the non-inclusion of the two subsequent 
measures in the Panel's terms of reference would not hinder a positive resolution of this dispute".4 
60. With regard to the interpretation of "salted" of heading 02.10, he said that the dispute in 
question would constitute an important reference for future analyses of the Vienna Convention.  The 
in-depth interpretation and application by the Pa nel and the Appellate Body of one of the major 
instruments for the interpretation of international tr eaties would certainly shed new light over future 
cases. In particular, Brazil welcomed the Appella te Body's finding that frozen salted chicken under 
heading 02.10 of the Harmonized System did not contain a requirement that salting must, by itself, ensure long-term preservation.
5  Although the Appellate Body had also recognized that the concept 
was not excluded from heading 02.10 of the Harmonized  System, it had explicitly set forth that if the 
criterion of long-term preservation were to form pa rt of the tariff commitment regarding frozen salted 
chicken in heading 02.10 of the EC Schedule, ther e must be clear evidence that such criterion had 
been agreed upon by all WTO Members for the EC Schedule.6  The Appellate Body had found no 
such evidence.7 
                                                      
1The EC's Responses to the Panel's Questions, para. 41. 
2 AB Report, para. 229. 
3 AB Report, para. 229. 
4 AB Report, para. 161. 
5 AB Report, para. 229. 
6 AB Report, para. 344. 
7 Idem.  WT/DSB/M/198 
 Page 15 
 
 
61. In fact, the Appellate Body had concluded that  the long term preservation criterion was not 
explicitly stated or clearly enshrined within the EC 's customs legislation or case law. Rather, the six-
year classification practice by European custom s authorities of the frozen salted chicken under 
heading 02.10 shown that the criterion was not as obvious and long-standing as purported by the EC. 
62. With regard to the final findings and conclusi ons, he said that three main conclusions had 
been drawn by the Panel and endorsed by the Appe llate Body:  (i) frozen boneless chicken cuts that 
had been impregnated with salt, w ith a salt content of 1.2 to 3 per cent, were covered by the tariff 
commitment under heading 02.10 of the EC Schedule;  (ii) EC Regulation 1 223/2002 and EC Decision 
2003/97/EC had resulted in the imposition of custom s duties on the products at issue that were in 
excess of the duties provided for in respect of the tariff commitment under heading 02.10 of the EC 
Schedule;  and (iii) the EC had acted inconsisten tly with the requirements of Articles II:1(a) and 
II:1(b) of the GATT 1994 and had, thus, nullified or impaired benefits accruing to Brazil and 
Thailand.  Considering that the above-mentione d measures were isolated European Commission 
regulations and decision, the removal of the incons istencies identified by the Panel and the Appellate 
Body should be a rather simple, straightforward a nd fast procedure.  The best way to bring these 
measures into conformity would be to withdraw th em immediately and to ensure that subsequent 
legislation did not impede the classification of the product under heading 02.10.  It was Brazil's 
expectation that the EC would fully and promptly comply with the DSB's recommendations on this matter.  Brazil would follow with interest all the implementation actions to be taken by the EC, and 
stood ready to consult with the EC, at the earliest opportunity, on a reasonable period of time for implementation. 
63. The representative of Thailand
 said that his country wished to thank the Panel, the Appellate 
Body and the Secretariat for the time and attention they had devoted to this factually and legally 
complex case.  The thoroughness and care with wh ich both the Panel and the Appellate Body had 
examined each of the parties' claims were exempl ary.  Thailand was pleased to note that the positions 
that it had taken since the outset of this dispute had prevailed before both the Panel and at the 
Appellate Body.  The Reports that would be adopted  at the present meeting were of great commercial 
importance to Thailand.  However, they also had syst emic implications that were of interest to all 
WTO Members.  Although time would not permit to re view the Appellate Body's  decision in detail, at 
the present meeting he wished to highlight certain as pects of the Appellate Body Report that were of 
particular consequence for all Members. 
64. First, he noted that the Appellate Body had affirmed the key principle that tariff bindings 
could not be circumvented through the reclassifica tion of products.  Prior to the conclusion of the 
Uruguay Round, the EC had established the scope and coverage of its tariff concession for "salted" 
meat.  Following the conclusion of the Round, Th ailand had exported large quantities of salted and 
frozen chicken cuts to the EC under this tariff conc ession.  However, when Thailand's exports to the 
EC had increased, the EC had changed the rules of th e game by declaring that Thailand's exports now 
had to be treated as frozen chicken.  As a result,  the product was subjected to a substantially higher 
tariff.  The reclassification was intended to, and it had, severely restricted Thai chicken exports to 
Europe.  From the time of the reclassification, Th ailand maintained that the actions taken by the EC 
violated its tariff concession on salted meat.  Th ailand was pleased that both the Panel and the 
Appellate Body had so agreed. 
65. In an organization that often considered a broa d range of issues related to goods, services, and 
intellectual property, the Appellate Body Repor t provided a salutary reminder of the central 
importance of tariff concessions in the multilate ral trading system.  When WTO Members – 
particularly developing-country Members – negotiate d tariff commitments, they expected them to be 
honoured faithfully by the Member granting them.  Indeed, the conditions of competition that tariff concessions guarantee were a crucial factor in the decision of each WTO Member whether or not to 
accept the results of a Round.  The Appellate Body's  decision thus provided strong reinforcement to 
the principles of security and predictability that underpinned the entire framework for negotiations in WT/DSB/M/198 
Page 16  
 
the current Round.  As a final observation on this firs t issue, he noted that one should be clear about 
what this decision did – and did not – say.  It did not say that Members could never reclassify products.  It did say that Members could not reclass ify products in such a way so as to breach their 
commitments under Article II of GATT 1994. 
66. A second matter that Thailand wished to draw to the attention of Members was the Appellate 
Body's analysis of treaty provisions at issue using the principles of treaty interpretation, as set out in 
the Vienna Convention on the Law of Treaties.  Th is was the first case in which the Appellate Body 
had provided such a through and detailed analysis  of each component of the principles of treaty 
interpretation such as "ordinary meaning", "contex t", "object and purpose", "subsequent practice" and 
"supplementary means of interpretation", as set out  in Article 31 and Article 32 of the Vienna 
Convention, incorporating many of the arguments made by Thailand.  It had clarified how the 
Harmonized System related to these principles.  Th e clarifications made by the Appellate Body on 
these key interpretative principles would, doubtless, be important in future disputes.  Thailand was 
pleased that the complaint it had brought and the ar guments it had presented had not only resolved the 
dispute at hand, but it had also led to the developm ent of jurisprudence that should help avoid similar 
disputes in the future. 
67. Thailand was, therefore, pleased to seek adopti on of the Appellate Body Report and the Panel 
Report, as modified by the Appellate Body Report.   These two Reports demonstrated that the rules-
based multilateral trading system worked – and work ed well – for developing countries.  Indeed, this 
year alone, Thailand had been a complainant in tw o cases before the Appellate Body, and had sought 
adoption of the reports in both cases.  This was a testimony to the fact that developing countries could 
negotiate commitments in the WTO with the confid ence that they could resort to the WTO dispute 
settlement mechanism should their trading partne rs not respect their part of the bargain. 
68. Finally, Thailand recalled that Article 21.1 of the DSU provided that prompt compliance with 
the DSB's recommendations or rulings was "essential  in order to ensure effective resolution of 
disputes to the benefit of all Me mbers."  Accordingly, the EC should implement the DSB's rulings as 
promptly and expeditiously as possible.  Thailand stood ready to discuss with the EC a "reasonable 
period of time" for implementation that reflected the shortest period possible within the legal system of the EC.  Thailand recognized that the EC had move d expeditiously in the past to adopt amendments 
to its Combined Nomenclature and hoped that the EC  could take prompt and effective action to adopt 
the required changes to implement the DSB's rulings  in this case.  Thailand looked forward to 
discussing with the EC the modalities for prompt implementation in these circumstances. 
69. The representative of the European Communities
 said that the EC had taken note of the 
Appellate Body Report.  It tha nked the Appellate Body members and the Secretariat for their work, 
but was unable to support the adoption of the Report.  The EC noted that the Appellate Body had accepted a number of the EC's criticisms of the Pane l's reasoning and had reversed the Panel's finding 
on a number of points concerning the interpretation of  the term 'salted' under tariff heading 0210, but 
had still come to the same ultimate conclusion as th e Panel.  However, in so doing, the Appellate 
Body had ignored a number of arguments made by th e EC which, in the EC's view, should have been 
considered as convincing.  It was regrettable that  these arguments had not been given a full airing, 
and had not been subject to detailed reasoning. There were a number of elements which the EC 
considered should have led the Appe llate Body to different conclusions . First, the Appellate Body had 
failed to provide a persuasive explanation of the structure of Chapter 2 of the Harmonized System,  
which according to the EC was based on two categor ies of state of meat, namely, fresh, chilled and 
frozen meat and meat preserved by one of the processes listed under heading 02.10, namely smoked, dried, in brine and salted.  Sheer logic and the hi storical evolution indicated that this was a valid 
categorization of Chapter 2 and past  practice seemed not to have cr eated any problems.  It was not 
after all a coincidence that the WCO had never f aced any problems with this categorization and had 
never witnessed any inter-State disputes regardi ng the classification of products preserved according 
to the processes of tariff heading 02.10.  WT/DSB/M/198 
 Page 17 
 
 
70. Second, the EC also failed to understand the Appellate Body's finding on the object and 
purpose under Article 31(1) of the Vienna Conven tion on the Law of the Treaties.  Although the 
Appellate Body had disagreed with the Panel a nd had recognized that the object and purpose of a 
particular treaty provision might allow better to ascer tain the common intentions of the parties, it had 
failed to correct the Panel's errone ous rejection of the EC's argument s.  It was well known to all trade 
negotiators that tariff commitments were struct ured and based on specific trade objectives of the 
parties concerned.  It was, thus, rather reasonabl e to ascertain the common intentions of the parties 
through a reasoned analysis of the particular objectives of the parties while negotiating tariff 
commitments, rather than having recourse to the very general and rather vague overall treaty purposes 
and objectives. 
71. Third, during the original Panel's proceedings , the EC had referred quite extensively to the 
classification practice of the complainants regarding th e products at issue.  The EC had repeated its 
reservations during the Appellate Body proceedings.  It was regrettable to see that the Appellate Body 
had preferred to rather ignore this issue and had, thus, failed to draw the a ppropriate conclusions.  On 
several occasions, the Appellate Body had ac knowledged that, in accordance with past WTO 
jurisprudence, the classification practice of several  Members was relevant including that of exporting 
Members.  Having said that and despite the fact that it had admitted that Members' Schedules and 
tariff commitments formed an integral part of the GATT 1994 and that the Members' Schedules were 
practically identical to the Harmonized System, it had nevertheless failed to draw the appropriate 
inferences.  In connection with the above, the Appellate Body seemed to agree with the Panel's 
statement that the latter examined the classificati on practice of exports from Brazil and Thailand and 
had found this evidence of limited probative value.  The EC failed to unde rstand how the Appellate 
Body had found the evidence submitted by the EC as being of limited probative value.  The EC still 
was not in a position to understand how a WTO Memb er could classify the same products under tariff 
heading 02.07 and demand importing countries to classify them under a different tariff heading, namely that of 02.10. 
72. At the same time, the EC wished to express its satisfaction over the interpretation given by the 
Appellate Body to the term "subsequent practice"  under Article 31(3)(b) of the Vienna Convention on 
the Law of Treaties and its finding that no internatio nal practice existed with respect to all products 
covered by the tariff heading at issue.  This was cl early a systemic issue and the Panel's interpretation 
was not only legally erroneous, but also dangerous  for the interpretation and application of a 
multilateral treaty such as the WTO.  Were the Panel's
  interpretation to be accepted, it would risk 
undermining the security and predictability of th e WTO Agreement and the GATT 1994 simply by 
reason of unilateral acts of Members. 
73. Unfortunately, the Appellate Body had imme diately undermined its own approach on 
subsequent practice through an application of supple mentary means of interpretation under Article 32 
of the Vienna Convention that made it impossible fo r negotiators to be sure of their scope of the 
commitments they were taking, and in this case certain ly to a nonsensical result:  a last minute Act of 
the European Commission published after the veri fication period in the Uruguay Round had been 
found to have influenced the minds of Uruguay Ro und negotiators, while long-standing practice and 
jurisprudence throughout the Uruguay Round, both in the EC and the United States, had not.  Moreover, the EC could not, but repeat again that  such finding bore little connection with reality.  
Had the negotiators indeed considered that salted meat covered any poultry with any amount of added 
salt, why had Brazil engaged in the EC – Poultry dispute and why had it only started exporting this 
product in 1998, two years after Thailand, and four  years after the conclusion of the Uruguay Round. 
The EC wished to voice its strong disagreement with the Appellate Body's finding on deemed 
knowledge as developed in the context of the anal ysis under Article 32 of the Vienna Convention on 
the Law of the Treaties.  For a demanding and de tailed multilateral Agreement, such as the WTO and 
the GATT 1994, it was at least risky to infer the co mmon intention of the parties simply based on the 
notion of "constructive knowledge".  That might le ad to the distortion or misrepresentation of the 
common intention of the parties through the arbitrary and possibly manipulated use of unilateral acts.  WT/DSB/M/198 
Page 18  
 
For treaties such as the WTO and the GATT 1994, the threshold must be set higher.  The 
"circumstance of conclusion" must be of an objective character clearly evident to all negotiators at the 
time of the conclusion of the treaty.  Deemed knowledge and especially asserted ex post was not 
sufficient and could not substitute the need to de monstrate a direct link between a circumstance and 
the common intentions of the parties. 
74. Finally, even setting aside all these objections , the EC did not unders tand how the Appellate 
Body had confirmed the Panel's ultimate conclusion.   It did not appear that the Appellate Body's 
ultimate conclusion of inconsistency followed from the reasoning. Even if it were correct that the term 
"salted" in heading 02.10 did not refer "exclusively  to products that have a level of salt content 
sufficient to ensure 'preservation' by salting", it did not necessarily fo llow that frozen boneless 
chicken cuts with a certain salt quantity was not also prima facie  classifiable under heading 02.07 – 
which covered frozen chicken.  The Harmonized Sy stem had certain rules for deciding under which 
heading a product, which was prima facie  classifiable under two headings, should be classified.  
While the EC considered that this rule was not a pplicable because the product was only classifiable 
under 02.07, the Appellate Body's finding that 02.10  could cover products which were prepared by 
salting necessarily raised the question whether th e particular products at issue also came under 
heading 02.07, and, if so, under which heading were they best classified.  Fo r all these reasons, the EC 
regretted that it could not support the adoption of that Report. 
75. The representative of Japan
 said that his country had not been a participant to these 
proceedings, but had examined the Appellate Body Repor t with great interest.  At the present meeting, 
his delegation wished to briefly comment on what w as stated by the Appellate Body in paragraph 199 
of its Report, because Japan considered that this ma tter was important from a systemic point of view. 
In paragraph 199, in its deliberation on whether the Harmonized Sy stem could be the "context" for the 
purpose of interpreting the EC's Schedule for tari ff concessions, the Appellate Body had engaged in 
the interpretation of Article 31(2)(a) of the Vienna  Convention.  However, it seemed to have been 
unnecessary for the Appellate Body to plunge into the interpretation of that Article of the Vienna 
Convention, regarding its statement that the Harmonized System was "relevant" in interpreting the EC  
Schedule. 
76. The representative of the United States  said that his country had participated in this 
proceeding because of the systemic importance of many of the issues relating to the proper interpretive approach to be applied in WTO disput e settlement.  While the United States did not take a 
position on the substantive outcome of the dispute, it considered several aspects of the Panel and the 
Appellate Body Reports to be we ll-reasoned.  For example, the United States considered that the 
Panel and the Appellate Body were  correct in concluding that two measures that post-dated the panel 
requests were not within the Panel's terms of re ference.  The Appellate Body had emphasized that 
previous disputes in which later amendments to a measure were included involved narrowly 
circumscribed "limited circumstances." 
77. To give other examples, the United States appreciated the thoughtful approach of the 
Appellate Body on the questions of whether the EC's  classification practice in this dispute could by 
itself constitute "subsequent practice" for the purpo ses of an analysis of context, as set forth in 
Article 31(3)(b) of the Vienna Convention, and whether classification practice and other acts of 
Members might be relevant for a panel's analys is in other ways, as supplementary means of 
interpretation under Article 32 of th e Vienna Convention.  Likewise, the United States appreciated the 
Appellate Body's thoughtful recognition, in the co ntext of discussing the relevance of domestic court 
judgments, of differences among Members' domestic  legal systems, and how these differences could 
affect conclusions drawn on the meaning and signifi cance of such judgments.  It was important that 
such Member-specific factors be taken into account in order to ensure accurate findings. 
78. While considering much of the analysis in this  Report helpful, the United States was troubled 
by some of the discussion concerning "object and purpose."  The Panel had considered it appropriate  WT/DSB/M/198 
 Page 19 
 
 
to examine the object and purpose of individual ag reement provisions, and had considered "security 
and predictability" as an object and purpose underlying  the GATT and the WTO.  On the first of those 
two points, although the Appellate Body had obser ved that the customary rules of interpretation 
reflected in Article 31 of the Vienna Convention contemplated an examination of the object and purpose of the agreement as a whole, and not that of individual provisions, the Appellate Body had 
gone on to suggest that a panel could examine the "object and purpose" of an individual provision if 
that inquiry were directed at assisting the panel "in determining the treaty's object and purpose on the 
whole."  The United States had serious misgivings a bout any attempt to identify, a priori, the "object 
and purpose" of an isolated provision.  The United States noted first that the task of ascertaining the 
"object and purpose" of a treaty as a whole was not always an easy one.  A treaty interpreter was not 
free to assign an "object and purpose" to a treaty unl ess there was some objective basis for it.  It was 
even more difficult to talk about the "object and purpose" of an individual provision. 
79. The "purpose" of any treaty provision could be determined only by ascertaining what the 
provision means.  In turn, ascertaining the meaning of a provision required interpreting that provision; 
and, under customary international law (and theref ore under Article 3.2 of the DSU), that process of 
interpretation proceeded in accordance  with the rules of interpretation reflected in Articles 31 and 32 
of the Vienna Convention.  However, it would a ppear to the United States that, under the approach 
suggested by the Appellate Body, a treaty interprete r could first identify some supposed "purpose" of 
a particular provision;  then use that "purpose" to  determine the object and purpose of the treaty as a 
whole;  and then, as a final step, interpret the provision on the basis of that "object and purpose."  It was not clear how this approach could avoid simply being circular. 
80. That approach would also seem to leave open the possibility of adding to or diminishing 
rights and obligations under the covered agreement at issue.  It should not be left to parties to a 
dispute (or to panels) to divine "purposes" of a provi sion, since a party was often simply using this as 
an invitation to re-write the provision.  It was pe rhaps for that reason that the Appellate Body had 
gone on to express a note of warning against using th at approach.  And so, while the United States 
questioned the approach for the reasons just expr essed, it could certainly agree with the Appellate 
Body when it "caution[s] against interpreting WTO law in the light of the purported 'object and purpose' of specific provisions, paragraphs or s ubparagraphs of the WTO agreements, or tariff 
headings in Schedules, in isolation from the object and purpose of the treaty on the whole."
8 
81. The United States was also troubled by the Pa nel and the Appellate Body conclusion that 
"security and predictability" was an object and purpose underlying the WTO and the GATT 1994 that 
should be considered in interpreting a Member's Sc hedule.  Neither the Panel nor the Appellate Body 
cited language in the text of the WTO or the GA TT 1994 referring to this as an object and purpose of 
those agreements.  Instead, the only authority cited in  the Reports were past Appellate Body reports.  
But the Appellate Body could not create or assign an object or purpose that was not there. 
82. The only place where these words appeared in  the WTO Agreement was Article 3.2 of the 
DSU.  There, it was explained that the dispute se ttlement system provided security and predictability 
to the multilateral trading system, not that "security  and predictability" was an object and purpose.  
Further, Article 3.2 explained that "security and predictability" were provided through a proper 
interpretation of the covered agre ements that did not add to or  diminish Members' rights and 
obligations.  In other words, security and predicta bility were the result of faithfully clarifying the 
covered agreements, they were not the object and purpose of the covered agreements.  Considering 
amorphous objects and purposes not found in the text of a covered agreement was a recipe for adding 
to or diminishing the rights and obligations actually found in that text;  in other words, this was an 
approach that undermined security and predictability. 
                                                      
8 AB Report, para. 239. WT/DSB/M/198 
Page 20  
 
83. Finally, he concluded by noting once again that  the US concerns with this aspect of the 
Reports did not mean that it considered either th e outcome incorrect, or that other aspects of the 
analysis were not proper and well-reasoned. 
84. The DSB took note
 of the statements, and adopted  the Appellate Body Report contained in 
WT/DS269/AB/R – WT/DS286/AB/R and the Panel Reports contained WT/DS269/R and 
WT/DS286/R, as modified by the Appellate Body Report. 
5. Appointment of Appellate Body members 
(a) Decision by the DSB on the reappointment of Appellate Body members 
85. The Chairman  recalled that Article 17.2 of the DSU provided that Appellate Body members 
shall each serve a four-year term and may be rea ppointed once.  He said that Messrs. Luiz Olavo 
Baptista, John Lockhart, and Giorgio Sacerdoti ha d been appointed to serve as Appellate Body 
Members in December 2001.  As a result, the term s of office for these three Appellate Body Members 
would expire in December 2005. Following th e process outlined at the DSB meeting held on 
20 June 2005, he said that he had consulted informa lly with delegations rega rding the positions held 
by those individuals.  He had reported on the results of those consultations to the DSB at its meeting 
on 20 July 2005 and had proposed that a decision on th e reappointment of Messrs. Baptista, Lockhart, 
and Sacerdoti be taken by the DSB at the present meeting.  No delegation had objected to his 
proposal.  Therefore, at the present meeting, he wi shed to propose that the DSB agree to appoint 
Messrs. Baptista, Lockhart, and Sacerdoti as Appella te Body Members for a second four-year term, to 
begin on 12 December 2005.  He then invited delega tions wishing to make statements to take the 
floor. 
86. The representative of Brazil  expressed his country's gratitude to the Chairman of the DSB for 
having conducted the process of reappointment of Appe llate Body members in an efficient, practical 
and consistent manner.  A decision by the DSB to be  taken on this matter, almost three months before 
the expiration of the terms of office of Messrs.  Baptista, Lockhart and Sacerdoti, constituted a 
valuable contribution to the proper functioning of  the WTO dispute settlement mechanism.  Brazil 
was also pleased to note the general support of WT O Members for the reappointment of those three 
Appellate Body members.  That demonstrated th at WTO Members continued to have confidence in 
their independence, impartiality and knowledge. 
87. The Chairman  proposed that the DSB take note of the statements and agree to appoint Messrs. 
Luiz Olavo Baptista, John Lockha rt, and Giorgio Sacerdoti as Appellate Body Members for a second 
four-year term, to begin on 12 December 2005. 
88. The DSB took note  of the statements and so agreed . 
 
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