EUROPEAN COMMUNITIES – SELECTED CUSTOMS MATTERS
Document: Notification of an Appeal by the United States under Article 16.4 and Article 17 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU), and under Rule 20(1) of the Working Procedures for Appellate Review
Date: 17 August 2006
Document codes: WT/DS315/11
Complainant: U.S.
Respondent: EU
Third parties: Argentina, Australia, Brazil, China, Taiwan, Hong Kong, India, Japan, South Korea
Dispute stage: Appellate Body
Agreements cited: Art. X:3, X:1  GATT 1994

EUROPEAN COMMUNITIES – SELECTED CUSTOMS MATTERS

Notification of an Appeal by the United States

under Article 16.4 and Article 17 of the Understanding on Rules
and Procedures Governing the Settlement of Disputes (DSU),
and under Rule 20(1) of the Working Procedures for Appellate Review

 The following notification, dated 14 August 2006, from the Delegation of the United States, is
being circulated to Members.

Pursuant to Article 16 of the Understanding on Rules and Procedures Governing the
Settlement of Disputes ("DSU") and Rule 20 of the Working Procedures for Appellate Review , the
United States hereby notifies its decision to app eal to the Appellate Body certain issues of law
covered in the Report of the Panel on
() and certain legal interpretations developed by the Panel.

The United States seeks review by the Appellate Body of the following aspects of the Report
of the Panel.

I. Terms of Reference

The United States seeks review of three sets of errors committed by the Panel with respect to
its analysis of its terms of reference.

(A) As the first step in its analysis the Pane l found, in paragraph 7.20 of the Report, that
"when a violation of Article X:3(a) of the [ General Agreement on Tariffs and Trade 1994 ] is being
claimed," the "measure at issue" that Article 6.2 requires to be identified in the request for
establishment of a panel is "the manner of administra tion that is allegedly non-uniform, partial and/or
unreasonable." This finding is in error and is based on erroneous findings on issues of law and related
legal interpretations contained in paragraphs 7.8 through 7.22 of th e Panel Report. In making this
finding, the Panel misinterpreted or misapplied Article 6.2 of the DSU.

While the Panel's finding that "manner of administ ration" is the measure at issue in a dispute
involving Article X:3(a) of the General Agreement on Tariffs and Trade 1994 ("GATT 1994") was in
error and should not be allowed to stand, the U.S. panel request did in fact identify the manner of
administration of European Communities ("EC") laws , regulations, decisions, and rulings of the kind
described in Article X:1 of the GATT 1994 at issu e (referred to hereafter collectively as "EC customs
law"), and the Panel did not find against the United States on this ground.

(B) Having incorrectly found "manner of administration" to be the measure at issue in a
dispute involving Article X:3(a) of the GATT 1994, the Panel also misconstrued the specific measures
at issue identified in the U.S. panel request as confined to the manner of administration of EC customs
law in certain specific areas, as opposed to the manner of administration of such measures irrespective

of area. Thus, the Panel found in paragraph 7.33 of the Report that the "specific measure at issue" in
this dispute, within the meaning of Article 6.2 of the DSU, was:

[T]he manner of administration by the national customs authorities of
the member States of the Community Customs Code, the
Implementing Regulation, the Common Customs Tariff, the TARIC
and related measures in the areas of customs administration
specifically identified in the Unite d States' request for establishment
of a panel – namely, the classification and valuation of goods,
procedures for the classification and valuation of goods, procedures
for the entry and release of goods , procedures for auditing entry
statements after goods are released into free circulation, penalties and
procedures regarding the imposition of penalties for violation of
customs rules and record-keeping requirements.
This finding is in error and is based on errone ous findings on issues of law and related legal
interpretations contained in paragraphs 7.23 through 7.32 and 8.1(a)(i) of the Panel Report. In making
this finding, the Panel misinterpreted or misapplied Articles 6.2 and 7.1 of the DSU.

(C) The Panel then made the erroneous legal conclusion that its terms of reference excluded
the U.S. claim that the design and structure of th e EC system of customs administration as a whole
results in the administration of EC customs law in a non-uniform manner, contrary to Article X:3(a)
of the GATT 1994. For example, paragraph 7.50 of its Report, the Panel made the erroneous finding
that "its terms of reference regarding the U.S. claim under Article X:3(a) of the GATT 1994 do not
include a challenge to the EC system of custom s administration overall or as a whole under Article
X:3(a) of the GATT 1994." The Panel made a simila rly erroneous finding in paragraph 7.63, stating
that "the United States is precluded from making an 'as such' challenge with respect to the design and
structure of the EC system of customs administra tion as a whole and also with respect to the design
and structure of the EC system in the areas of cu stoms administration that have been specifically
identified in the United States' request." This finding is repeated at paragraph 8.1(a)(iii) of the Panel's
Report.

These findings are in error and are based on e rroneous findings on issues of law and related
legal interpretations contained in paragraphs 7.11 through 7.20, 7.23 through 7.32, 7.40 through 7.50,
7.53 through 7.63, and 8.1(a)(iii) of the Pane l Report. In making these findings, the Panel
misinterpreted or misapplied Articles 6.2 and 7.1 of the DSU.

The Panel's error in excluding fro m its terms of reference the U.S. challenge with respect to
the EC system of customs administration as a whole di d not depend on its first two errors with respect
to its terms of reference. Even if the first two findi ngs in the Panel's analysis of its terms of reference
were correct (which we contend they were not), the Panel still should not have excluded the U.S.
challenge with respect to the EC's system of cust oms administration as a whole. The U.S. claim was
about features that are absent from the EC system of customs administration, which result in the EC
administering its customs laws in a non-uniform manner, contrary to Article X:3(a) of the GATT
1994. That central aspect of the U.S. complain t – which was evident from the panel request,
elaborated in U.S. submissions and statements, and well understood by the EC as evidenced by its
submissions and statements – was part of the U.S. panel request whether that request is understood as
encompassing the administration of EC customs law in all areas or only in certain areas (as the Panel
found).

Accordingly, the United States asks the Appellate Body to reverse the Panel's finding that this
claim was outside the Panel's terms of reference. Additionally, the United States asks the Appellate
Body to complete the Panel's analysis based on th e undisputed facts and the Panel's factual findings
regarding the EC system of customs administration. In light of the Panel's factual findings that the

various institutions and mechanisms that the EC he ld out as securing the uniform administration of its
customs laws – in an environment where admi nistration is the responsibility of 25 separate,
independent customs authorities – do not actually do so, the Appellate Body should find that the EC
system of customs administration as a whole results in the non-uniform administration of EC customs
law, in breach of Article X:3(a) of the GATT 1994.

II. Interpretation of the term "administer" in Article X:3(a) of the GATT 1994 as it relates to the
existence of divergent penalty laws and audit procedures

The United States seeks review of the Panel's legal conclusions that the existence of divergent
penalty laws and audit procedures are not inconsiste nt with Article X:3(a) of the GATT 1994, and the
related issues of law and legal interpretation. At paragraph 7.444, for example, the Panel found "no
violation of Article X:3(a) of the GATT 1994 with respect to the substantive differences in penalty
laws between member States." At paragraph 7.434 , for example, the Panel found "no violation of
Article X:3(a) of the GATT 1994 with respect to th e manner of administration of the audit procedure
requirements in the European Communities by the me mber States applicable to goods following their
release for free circulation."

In finding that the EC does not breach its Artic le X:3(a) obligation of uniform administration
to the extent that it puts EC customs law into practi cal effect through divergent penalty laws and audit
procedures, the Panel erred in its interpretation of the term "administer" as used in that provision. The
Panel's error regarding its approach to differences in customs penalty laws is based on erroneous
findings on issues of law and relate d legal interpretations containe d in paragraphs 7.113 through
7.119, 7.442 through 7.444, and 8.1(d)(ii) of the Panel Report. Its error regarding its approach to
differences in audit procedures is based on err oneous findings on issues of law and related legal
interpretations contained in paragraphs 7.113 through 7.119, 7.425 through 7.434, and 8.1(d)(i) of the
Panel Report.

The United States asks the Appellate Body to re verse the Panel's legal conclusions that the
existence of divergent penalty laws and audit proce dures are not inconsistent with Article X:3(a) of
the GATT 1994. The United States further asks the A ppellate Body to complete the Panel's analysis.
In light of the Panel's findings and undisputed facts regarding the existence of divergent penalty laws
and audit procedures, the Appellate Body should find that the EC fails to administer EC customs law
in a uniform manner, in breach of Article X:3(a) of the GATT 1994, to the extent it gives effect to EC
customs law through the maintenance of divergent penalty laws and audit procedures.

III. Interpretation of Article X:3(b) of the GATT 1994

The United States seeks review of the Panel's legal conclusion that "the European
Communities does not violate Article X:3(b) of the GATT 1994 merely because the decisions
regarding review of administration action relating to customs matters, which are taken by authorities
in the member States acting as organs of the Eu ropean Communities, do not apply and have effect
throughout the territory of the European Communities." Panel Report, para. 7.554; id., paras. 7.539,
7.556, and 8.1(e). That conclusion represents an erroneous interpretation of Article X:3(b) of the
GATT 1994, which was based on erroneous findings on i ssues of law and related legal interpretations
contained in paragraphs 7.526 through 7.538.

 The United States asks the Appellate Body to reverse the Panel's err oneous interpretation of
and conclusion under Article X:3(b). Further, the United States asks the Appellate Body to complete
the Panel's analysis. It is undisputed that each of the tribunals and procedures the EC provides is
limited to reviewing the administrative actions of the customs authority within a particular EC
member State. It also is undisputed that none of these tribunals or procedures issues decisions that
govern the practice of all of the agencies entruste d with administrative enforcement of the EC's
customs law (that is, the customs authorities of th e 25 EC member States). In light of these

undisputed facts, the Appellate Body should find that the EC is in breach of its obligation under
Article X:3(b) of the GATT 1994.