Document: report of the Appellate Body
Date: 29 June 2007
Document codes: WT/DS27/RW/USA
Complainant: Ecuador, Guatemala, Honduras, Mexico, U.S.
Respondent: EU
Third parties: Belize, Cameroon, Canada, Colombia, Costa Rica, Dominica, Dominican, Ghana, Grenada, India, Jamaica, Japan, Mauritius, Nicaragua, Panama, Philippines, Saint Lucia, Saint Vincent and the Grenadines, Senegal, Suriname, Venezuela, Côte d’Ivoire, Brazil, Madagascar
Dispute stage: Mutually Agreed Solution
Agreements cited: Art. I, II, III, X, XI, XIII  GATT 1994Art. 1, 3  Import LicensingArt. II, XVI, XVII  Services (GATS)Art. 2  Trade-Related Investment Measures (TRIMs)Art. 19  Agriculture

6.48 In the United States' view:

"As this is a compliance proceeding, there is no need for the Panel to recommend that
the DSB request the European Communities to bring its measures into conformity. It
suffices for the Panel to conclude that the European Communities has failed to
implement the recommendations and rulings of the DSB, as it does in
paragraph 8.4."
336
6.49 The European Communities argued instead that:

"Panels generally have the obligation to ta ke account of changes made to the measure
that is the subject of the dispute, where these changes have taken place during the
course of the proceedings ... [T]he measure that the Panel is in the process of
analysing in accordance with its terms of re ference has already b een repealed during
the course of these proceedings ... It is settled law that a Panel report may not contain
any recommendation to the DSB with regard to measures that are no longer in
existence (see, for example, the report of the Appellate Body in United States –
Import Measures on Certain Products from the European Communities ). Therefore,
the Panel may not include any recommendation in its report, because the measure that
is the subject of the current proceedings is no longer in existence."
337
6.50 As noted above 338, the Panel considers that the evidence submitted at this late stage by the
European Communities regarding the adoption of am endments to the EC bananas import regime is
inadmissible. Nevertheless, sin ce the original DSB recommendations and rulings in this dispute
remain operative through the results of the current compliance proceedings, the Panel has modified
the language in paragraph 8.13 of the interim report to reflect that it makes no new recommendation
to the DSB.

N. A
DDITIONAL REVISIONS AND CORRECTIONS
6.51 The Panel has also made some minor and ed itorial changes in paragraphs 2.5, 2.36, 2.58,
2.61, 2.72, 7.4, 7.9, 7.93, 7.100, 7.381, 7.478, 7.523, and 7.660 and in several footnotes of the report.

VII. FINDINGS
A. A
TTEMPTS AT HARMONIZING THE TIMETABLES
7.1 The present proceedings, as well as those of th e compliance panel requested by Ecuador in a
similar matter, have created an unprecedented situa tion. The matter before this compliance Panel,
requested by the United States on 29 June 2007, is clo sely related to the matter that was raised by
Ecuador in its own request for the establishment of a panel made on 23 February 2007. However,
despite its intention, the Panel was unable to harm onize the timetable of the current proceedings with
the timetable of the compliance panel requested by Ecuador.
7.2 Both disputes concern measures adopted by the European Communities with the alleged
purpose of complying with the rulings and recommendations of the DSB in the dispute European
Communities – Regime for the Importation, Sale and Distribution of Bananas (EC – Bananas III). In

336 United States' letter to the Panel dated 14 February 2008 (request for review of precise aspects of
the Interim Report), para. 17.
337 European Communities' letter to the Panel dated 14 February 2008 (request for review of precise
aspects of the Interim Report), para. 5.
338 See para. 6.18 above.

both disputes, the parties disagree whether these m easures are in conformity with the European
Communities' obligations under the WTO covered agreements.
7.3 In their respective complaints, Ecuador and the United States each challenge the
European Communities' current bananas import regime implemented through the
European Communities' Council Regulation (EC) No. 1964/2005, which establishes a zero-duty tariff
rate quota available only to bananas originating in ACP countries in an amount up to 775,000 mt.
Bananas of other origins have no access to this 775, 000 ton tariff rate quota and instead are subject to
a duty of €176/mt.339
7.4 The claims in both cases are very similar. Both Ecuador and the United States claim that the
challenged measures are inconsistent with Article I: 1 and Article XIII, paragraphs 1 and 2, of the
GATT 1994. In its own request, Ecuador advanced the additional claim that these measures are
inconsistent with Article II of the GATT 1994.
7.5 The Panel is aware that, according to Article 9.3 of the DSU:
"If more than one panel is established to ex amine the complaints related to the same
matter, to the greatest extent possible the same persons shall serve as panelists on
each of the separate panels and the timetab le for the panel process in such disputes
shall be harmonized."
7.6 During the course of the proceedings, the Pane l received a number of requests from the
European Communities to extend the deadlines and to harmonize the timetable for this case with that
of the panel requested by Ecuador. These requests were made through a written communication on 20
August 2007 with occasion of the organizational mee ting of the Panel with the parties, as well as
orally, during the substantive meeting of the Pane l with the parties and third parties, on 6 and 7
November 2007.
7.7 In all instances, the Panel considered, both th e European Communities' request and the views
expressed by the United States, the complaining party. In practice, however, since the proceedings of
the compliance panel requested by Ecuador began almost two months earlier than those of the
compliance Panel requested by the United States, any harmonization would not necessarily have
involved modifying the timetable of the proceedi ngs of the latter compliance Panel. Rather,
harmonization would have most likely involved a dela y in the proceedings requested by Ecuador in
order to harmonize the timetable of that case to that of the proceedings requested by the United States.
7.8 Harmonization of the timetable in both cases was made particularly difficult because of the
two-month period that elapsed between the dates on which the two panels began their respective
work. The Panel requested by Ecuador was compos ed by the WTO Director-General on 18 June. In
turn, the panel requested by the United States, whic h was established on 12 July 2007, was composed
on 13 August by the WTO Director-General. This two-month difference between the disputes was
particularly significant, since compliance proceedings, by their very nature, are intended to be brief.
7.9 In any event, the panel in the proceedings re quested by Ecuador decided not to modify the
timetable originally adopted in those proceedings. Among other considerations , that panel took into
account the fact that, when asked, Ecuador as the complaining party in those proceedings, strongly
objected to any changes in the timetable that would result in extending the proceedings further beyond
the 90-day period envisaged in Article 21.5 of the DSU. Ecuador's status as a developing country

339 EC – Bananas III (Article 21.5 – US) , Request for the Establishment of a Panel (WT/DS27/83)
2 July 2007, p. 2.

Member, and its interest in a prompt decision of th e matter, were additional factors taken into account
by that panel when preparing and revising the timetable for its proceedings.
340
7.10 In the light of these considerations, and no twithstanding the Panel's initial intention to
harmonize the timetable of both the proceedings re quested by Ecuador and those requested by the
United States, the Panel was unable to find a better a lternative for the timetable that was adopted in
these proceedings. This despite the fact that the Pa nel was aware that the approved timetable implied
a considerable burden of work, peaking at particular moments for the parties, as well as for the Panel
and the Secretariat.
7.11 However, in the Panel's view, the timetable in the current proceedings, adopted after having
consulted the parties, respects the requirement of due process and accords equal treatment to all
parties. In the circumstances of this case, the timetable adopted by the Panel prevented the arguments
of the parties being influenced by advance knowledge by one party of the findings of the panel in the
proceedings requested by Ecuador.
7.12 The Panel has also attempted to ensure to the greatest extent possible consistency between the
findings issued in this report and those issued by th e panel in the report requested by Ecuador. This is
notwithstanding the fact that these two proceedings were formally different, and that neither the
claims advanced by the complainants, nor the argum ents advanced by the respective parties, were
exactly the same in each of the cases.341
B. ORDER OF THE PANEL'S ANALYSIS
7.13 As noted in the descriptive section of th is report, the United States makes two main
substantive claims, namely that the European Co mmunities' bananas import regime is inconsistent
with Article I of the GATT 1994 and that it is also inconsistent with Article XIII of the GATT 1994,
including Article XIII:1 and XIII:2.
7.14 The European Communities in turn raises three preliminary issues. First, the European
Communities argues that the Panel must assess whether the United States has "standing" to
commence these proceedings. Second, the Europ ean Communities argues that the United States
should not be allowed to challenge the Eur opean Communities' measures because of the
Understanding on Bananas, signed by the United Stat es and the European Communities in April 2001
(Bananas Understanding).342 Third, the European Communitie s argues that the United States'
complaints fall outside of the scope of Article 21. 5 of the DSU, because th e European Communities'
current bananas import regime is not "a measure taken to comply" with the recommendations and
rulings of the DSB. As noted below 343, a fourth preliminary objection concerning the lack of formal
consultations was initially raised by the European Communities, and later withdrawn.
7.15 Finally, the European Communities argues that, if the Panel were to conclude that the United
States has standing and that the European Commun ities' bananas import regime does not comply with
the GATT, the Panel should nevertheless find that the existence of the European Communities'
bananas import regime has not caused the "nullificati on or impairment" of any benefit accruing to the
United States.

340 See Panel Report on EC – Bananas III (Article 21.5 – Ecuador II), paras. 7.9-7.10.
341 See United States' response to Panel question No. 97, paras. 101-102, and European Communities'
response to Panel question No. 97, paras. 175-177. See also European Communities' response to Panel question
No. 78, paras. 130-131.
342 See Understanding on Bananas between the European Communities and the United States of
11 April 2001, in EC – Bananas III, Notification of Mutually Agreed Solution (WT/DS27/58), 2 July 2001; and
EC – Bananas III, Communication from the United States (WT/DS27/59), 2 July 2001.
343 See paras. 7.533 to 7.542 below.

7.16 The Panel will begin by looking into the preliminary issues raised by the European
Communities. Indeed, if the Panel was to find th at any of these issues prevent the United States from
bringing this complaint, there would be no need for the Panel to examine the substantive claims raised
in these proceedings. If, on the contrary, after havi ng disposed of the preliminary issues raised by the
European Communities the Panel then finds that th e European Communities' bananas import regime
is inconsistent with Article I of the GATT 1994 or with Article XIII, or both, the Panel will finally
deal with the issue of whether such regime has nullified or impaired any benefit accruing to the
United States.
C. P
RELIMINARY OBJECTION OF THE EUROPEAN COMMUNITIES CONCERNING THE ALLEGED
LACK OF STANDING AND ARGUMENT REGARDING THE ALLEGED LACK OF NULLIFICATION OR
IMPAIRMENT OF BENEFITS TO THE UNITED STATES
1. The European Communities' arguments
7.17 The European Communities argues that:
"[E]ven assuming arguendo that the Cotonou Preference has not been in compliance
with the GATT since the end of 2005 … its existence between the end of 2005 and
the end of 2007 has not caused the United St ates a nullification or impairment of any
benefit accruing to it."344
7.18 In the European Communities' view, the Panel must first assess, "in order to determine
whether the United States has 'standing' to commence these proceedings"345:
"[W]hether the alleged violation of a WTO rule sufficiently 'touches' upon the
interests of the complaining party so as to justify the complaining party's [such]
'standing' to commence dispute settlement proceedings."346
7.19 The European Communities adds that the Panel' s determination of whether the United States
has standing in this dispute "is an issue of jurisd iction and the Panel has the obligation to examine it
on its own initiative".347
7.20 The European Communities further states that, should the Panel conclude "that the United
States has standing and that the Cotonou Preference does not comply with the GATT", the Panel
should then:
"[E]xamine what is the nullification or impairment suffered by the United States in
order to discharge its obligation to 'make such findings as will assist the DSB in
making the recommendations or in giving the rulings provided for in the covered
agreements'
348. The Panel also needs to determine whether there is 'nullification or
impairment' in order to offer the parties th e legal 'security and predictability' required
by Article 3.2 of the DSU and help them re ach a 'prompt settlement' of their dispute,
as required by Article 3.3 of the DSU."349
7.21 The European Communities considers that the term "nullification or impairment" "has the
same meaning both in the context of Article 3.8 of the DSU and of Article 22 of the DSU", since

344 European Communities' first written submission, para. 70.
345 Ibid., para 74.
346 Ibid., para 73.
347 European Communities' response to Panel question No. 82, para. 145.
348 (footnote original) See Article 11 of the DSU.
349 European Communities' first written submission, para. 74.

"there can be only one notion of 'nullification or impairment' for purposes of the DSU".
350 In this
respect, the European Communities argues that "Artic le 3.8 of the DSU allows the defending party to
rebut the presumption that the challenged measure causes a nullification or impairment of a benefit
accruing to the complaining party, even where it is established that the measure itself is not in
compliance with the WTO rules".351 In the European Communities' view:
"The United States and the Third Parties supporting them have asked the Panel to
simply assume automatically that there is always 'nullification or impairment' once a
GATT violation is established, without o ffering the defending party the opportunity
to rebut this presumption. However, elim inating the possibility of defending parties
to rebut the presumption of 'nullification or impairment' after a violation of the GATT
is established, requires the amendment or deletion of Article 3.8 of the DSU."352
7.22 The European Communities adds that since "t he Cotonou Preference has no 'impact on the
value of relevant EC imports from the United States'"353, it therefore "does not cause the United States
any nullification or impairment of a benefit for which the European Communities can face suspension
of concessions"354, under Article 22 of the DSU. Accordingly, the European Communities requests the
Panel to find that:
"[T]he existence of the Cotonou Preferen ce between the end of 2005 and the end of
2007 does not cause any 'nullification or impairment' of any benefit accruing to the
United States."
355
2. The United States' response
7.23 In response, the United States considers that "the Panel should dismiss the [European
Communities'] arguments". 356 In the United States' view, the arguments relating to both the United
States' alleged lack of standing and the alleged lack of nullification or impairment:
"[I]gnore the clear guidance of the Appellate Body in the underlying EC – Bananas
III proceedings, in which it addressed these very same issues and rejected very
similar reasoning by the [European Communities]."357

350 European Communities' first written submission, para. 71. European Communities' second written
submission, paras. 96 and 97. See also written version of European Communities' opening statement during
substantive meeting with the parties and third parties, paras. 28.
351 European Communities' first written submission, para. 70. See also written version of
European Communities' opening statement during substantive meeting with the parties and third parties,
paras. 27.
352 Written version of European Communities' closing statement during substantive meeting with the
353 European Communities' second written submission, para. 98. See also written version of
European Communities' opening statement during substantive meeting with the parties and third parties,
paras. 26, and joint third party written submission by Belize, Cameroon, Côte d'Ivoire, Dominica, the
Dominican Republic, Jamaica, St. Lucia, St. Vincent an d the Grenadines, and Suriname (ACP Countries' third
party written submission), paras. 1, 2 and 158.
354 European Communities' first written submission, para. 75.
355 European Communities' second written submission, para. 103. See also written version of
European Communities' opening statement during substantive meeting with the parties and third parties,
para. 30.
356 United States' second written submission, para. 64.
357 Ibid., para. 53.

7.24 The United States adds that, in the original EC – Bananas III proceedings, "the Appellate
Body upheld the panel's finding that the United States 'had standing' to bring claims under the
GATT 1994
358 against the EC's banana measures."359
7.25 Regarding the alleged lack of nullification or impairment, the United States considers that:
"[T]o prevail on its claims of an EC breach of GATT Articles I and XIII, the United
States is not required to demonstrate that the EC's banana measures nullify or impair
benefits accruing to it. In arguing to th e contrary, the EC confuses the function of
dispute settlement proceedings under DSU Articles 6 and 21.5 with arbitration
proceedings under DSU Article 22."360
7.26 In the United States' view:
"By focusing on nullification or impairment, the EC's argument seems to presume
that the ultimate outcome of dispute settlement is the suspension of concessions by
the complaining Member in order to achieve compliance by the responding Member.
There are, of course, two other preferred out comes set out in Article 3.7 of the DSU:
a mutually agreed solution consistent with the covered agreements and withdrawal of
WTO-inconsistent measures. In addition, th ere is resort to compensation. Indeed,
Article 3.7 of the DSU characterizes suspension of concessions as a 'last resort'."
361
7.27 The United States further adds that:
"[T]he EC made a similar argument to the original panel and Appellate Body, but its
argument was rejected. The reasoning of the Appellate Body remains applicable
here. In determining that the United St ates did in fact suffer nullification or
impairment of benefits at th e hands of the EC's banana measures, the Appellate Body
made clear that a showing of trade effects is unnecessary for purposes of
demonstrating that there has been a breach of a provision of the GATT."
362
7.28 The United States concludes that:
"[T]he clear EC breaches of GATT Articles I and XIII obviate the need for the United
States to affirmatively demonstrate the trade effects caused by the EC's banana
measures. As noted by the Appellate Body, 'the United States is a producer of
bananas and ... a potential export interest by the United States cannot be excluded.'
363
In addition, 'the internal market of the Un ited States for bananas could be affected by
the EC banana regime and by its eff ects on world supplies and world prices of
bananas.'364 Thus, the Panel should dismiss the EC's arguments."365

358 (footnote original) Appellate Body Report, European Communities - Regime for the Importation,
Sale and Distribution of Bananas , WT/DS27/AB/R, adopted 25 September 1997, ( "Bananas III (AB )"),
para. 138.
360 Ibid., para. 59.
361 Written version of United States' opening statemen t during substantive meeting with the parties and
third parties, para. 47. See also joint third party written submission by Nicaragua and Panama, para. 127.
362 United States' second written submission, para. 62. See also joint third party written submission by
Nicaragua and Panama, para. 118.
363 (footnote original) See Bananas III (AB), para. 251.
364 (footnote original) Id.

3. Panel's analysis
(a) Verification of the United States' standing to commence these proceedings
7.29 As noted above, the European Communities re quests the Panel to determine as an initial
matter whether the United States "has 'standing' to commence these proceedings".
366
7.30 Article 3.7 of the DSU reads in part:
"Before bringing a case, a Member shall exercise its judgement as to whether action
under these procedures would be fruitful. The aim of the dispute settlement
mechanism is to secure a positive solution to a dispute. A solution mutually
acceptable to the parties to a dispute and c onsistent with the covered agreements is
clearly to be preferred…"
7.31 The Appellate Body has indicated that the first sentence of this paragraph:
"[R]eflects a basic principle that Members should have recourse to WTO dispute
settlement in good faith, and not frivol ously set in motion the procedures
contemplated in the DSU …"
367
7.32 In the same report, the Appellate Body went on to point out the self-regulating nature of the
mechanism contained in that sentence:
"Given the 'largely self-regulating' nature of the requirement in the first sentence of
Article 3.7, panels and the Appellate Body must presume, whenever a Member
submits a request for establishment of a pa nel, that such Member does so in good
faith, having duly exercised its judgement as to whether recourse to that panel would
be 'fruitful'. Article 3.7 neither requires nor authorizes a panel to look behind that
Member's decision and to question its exercise of judgement ..."
368
7.33 The Panel starts by noting that the current pro ceedings involve what is termed a "compliance"
case, under Article 21.5 of the DSU, regarding whet her certain measures allegedly taken to comply
with the recommendations and rulings of the DSB in an original dispute conducted under the WTO's
dispute settlement procedures are consistent with the WTO covered agreements. By their nature,
compliance cases are linked with the original proceedi ngs in the dispute. As noted by the Appellate
Body:
"Article 21.5 proceedings do not occur in is olation from the original proceedings, but
… both proceedings form part of a continuum of events." 369
7.34 The Panel does not need to make a general de termination regarding wh ether panels may be
required to assess when a Member has "standing" to initiate dispute settlement proceedings under the
DSU. Rather, we note that the United States was a complaining party in the original proceedings of
the present case. In that case, the European Communities' bananas regime was found to be
inconsistent with the WTO covered agreements and to have resulted in the nullification or impairment
of trade benefits that should have accrued to the United States under such agreements. Accordingly,

365 United States' second written submission, para. 64. See also joint third party written submission by
Nicaragua and Panama, para. 132.
366 European Communities' first written submission, para. 73.
367 Appellate Body Report on Mexico – Corn Syrup (Article 21.5 – US), para. 73.
368 Ibid., para. 74.
369 Appellate Body Report on Chile – Price Band System (Article 21.5 – Argentina), para. 136.

in the circumstances of the presen t case, the United States, as an original complainant, holds a
particular interest in ensuring that the measure in question is brought into conformity with the WTO
agreements. The European Communities has failed to re but the existence of that particular interest.
Accordingly, the Panel does not need to conduc t, under the current compliance proceedings, a
separate analysis of whether, in the words of the European Communities, "the alleged violation of a
WTO rule sufficiently 'touches' upon the interests of th e [United States] so as to justify [that] party's
'standing' to commence dispute settlement proceedings".370
7.35 For the reasons indicated above, and especially in view of the particular interest of the United
States in the current compliance proceedings, the Panel finds that the United States had, under the
DSU, the right to request the initiation of such proceedings.
(b) Verification of the nullification or impairment of trade benefits accruing to the United States
7.36 As noted above, the European Communities has as ked the Panel that, should it conclude that
the United States has standing and that the prefer ence granted by the European Communities to an
annual duty-free tariff quota of imported banan as originating in ACP countries (the Cotonou
Preference) is inconsistent with the GATT, the Panel should then "examine what is the nullification or
impairment suffered by the United States."371
7.37 The European Communities' request regarding the alleged lack of nullification or impairment
of trade benefits accruing to the United States is contingent upon the Pane l having found that the
preference granted by the European Communities to an annual duty-free tariff quota of imported
bananas originating in ACP countries is inconsiste nt with the GATT. Accordingly, the Panel shall
turn to this issue after having considered the subs tantive claims made, under Articles I and XIII of the
GATT 1994, by the United States against the preferences granted by the European Communities.
4. Conclusion
7.38 For the reasons indicated in this section, the Pa nel preliminarily finds that the United States
had, under the DSU, the right to request the initiation of the current compliance proceedings.
D. PRELIMINARY OBJECTION OF THE EUROPEAN COMMUNITIES CONCERNING WHETHER THE
UNITED STATES IS BARRED FROM CHALLENGING THE EUROPEAN COMMUNITIES' BANANAS
IMPORT REGIME AS A RESULT OF THE BANANAS UNDERSTANDING SIGNED IN APRIL 2001
1. Arguments of the parties
(a) The European Communities' arguments
7.39 The European Communities argues that the complaint brought by the United States:
"[S]hould be dismissed in its entirety because ... the United States has already
accepted the continuation of the Doha waiver until the end of 2007 in the [Bananas]
Understanding [it signed with the European Communities in April 2001]."372

370 European Communities' first written submission, para. 73.
371 Ibid., para. 74.
372 European Communities' second written submission, para. 104. See Understanding on Bananas
between the European Communities and the United States. See EC – Bananas III , Notification of Mutually
Agreed Solution (WT/DS27/58), 2 July 2001, and EC – Bananas III , Communication from the United States
(WT/DS27/59), 2 July 2001. See also, European Communities' first written submission, para. 39.

7.40 The European Communities adds that:
"On May 29, 2001 and May 30, 2001, the United States and the European
Communities exchanged Letters confirming their 'common understanding' of their
'April 11 agreement'."
373
7.41 The European Communities argues that:
"In light of the content of the [Bananas] Understanding and the Letters and the rights
and obligations mutually accepted by both parties ... the Understanding is indeed a
'mutually agreed solution' to the banana dispute between the United States and the
European Communities".374
7.42 Regarding the content of the Bananas Understanding, the European Communities asserts that:
"[T]he Understanding (i) describes in great detail the characteristics of the two
banana import regimes that the European Communities should implement by July 1,
2001 and by January 1, 2002 respectively a nd (ii) expressly provides that the United
States' retaliation measures will be initia lly suspended and then terminated upon the
implementation by the European Communities of the second import regime on
January 1, 2002. Moreover, the Letters pr ovide even further detail on the allocation
of the licences to certain operators and the mutual rights and obligations of the United
States and the European Communities if various events occur ...
[T]he Understanding [also] provides that the United States should support the grant of
the 'waiver of Article I of the GATT that the EC has requested for preferential access
to the EC of goods originating in ACP states signatory to the Cotonou
Agreement'."375
7.43 According to the European Communities, the Ba nanas Understanding is "a mutually agreed
solution, as this term is defined in the DSU and, therefore, it is binding upon the United States". 376 In
the European Communities' view, pursuant to the Bananas Understanding:
"The United States has done more than simply voting in favour of the Cotonou
Preference waiver. The United States has entered into an international agreement
with the European Communities accepting th e existence of the Cotonou Preference
until the end of 2007 and, most importantly, it has received specific consideration for
doing so."377

373 European Communities' first written submission, para. 39. See also, European Communities' second
written submission, para. 8.
374 European Communities' first written submission, para. 42. See also, European Communities'
response to Panel question No. 80, para. 138, and Euro pean Communities' response to Panel question No. 106,
para. 181.
375 European Communities' first written submission, paras. 42-44.
376 European Communities' second written submission, para. 9.
377 Ibid., para. 16.

7.44 In particular, the European Communities argues that it:
"[H]as fully complied with its obligations under the [Bananas] Understanding in good
faith and relying on the expectation that th e United States would also comply with its
own obligations."378
7.45 According to the European Comm unities, the obligations of both parties, as provided in the
Bananas Understanding, were the following:
"[A]s of July 1, 2001, the European Co mmunities would implement an import regime
on the basis of historical licensing and with certain characteristics defined in Annex 1
of the Understanding. Upon the European Communities' implementation of this
regime, the United States would provisionally suspend its retaliation measures.
As soon as possible thereafter, the Eur opean Communities would implement another
import regime on the basis of historical licensing with certain other characteristics
defined in Annex 2 of th e Understanding. Upon the European Communities'
implementation of that regime, the United States' right to suspend its concessions
would be terminated. The deadline for the implementation of that regime was
January 1, 2002. If the European Commun ities failed to implement the new regime
by that date, the United States would have the right to re-impose their retaliation
measures."
379
7.46 The European Communities adds that it "imple mented the new import regime within the
agreed deadline and the United States' right to su spend concessions was terminated" and that "[t]his
was the end of the banana dispute between the United States and the European Communities".380
7.47 As regards the United States' complianc e with the Bananas Understanding, the
European Communities states that the United Stat es agreed "to have [its] retaliation rights
terminated"381 and voted in favour of approving the Doha waiver, exempting the Cotonou
Agreement's trade preferences from the application of Article I of the GATT until the end of 2007.382
7.48 The European Communities argues that:
"[T]he points raised by the United States ... do not suffice to rebut the European
Communities' argument that the Understanding is indeed a 'mutually agreed solution'
for purposes of the DSU, as evidenced by its content, the rights and obligations that
the parties undertook with it, the termination of the United States' retaliation measures
agreed therein and the side letters exch anged between the parties soon after the
signing of the Understanding."
383
7.49 Concerning the 26 June 2001 communication on the Bananas Understanding to the DSB in
which the United States stated that the "[Banana s] Understanding identifies the means by which the
long-standing dispute over the EC's banana import re gime can be resolved, but ... does not in itself

378 Ibid., para. 39.
379 European Communities' first written submission, paras. 22-23 (footnotes ommitted).
380 Ibid., para. 24.
381 Ibid., para. 24.
382 European Communities' second written submission, paras. 8-16. See also, European Communities'
first written submission, para. 44.
383 European Communities' second written submission, para. 26.

constitute a mutually agreed solution pursuant to Article 3.6 of the DSU"
384, the
European Communities claims that:
"The Panel should not take into considera tion the unilateral statement issued by the
United States after the signing of the Understanding and the Letters."385
7.50 According to the European Communities:
"[T]he analysis of the legal status and effect of the [Bananas] Understanding should
be based on its content and on the confirmations contained in the Letters exchanged
between the parties, where their true co mmon intentions and mutual understandings
and undertakings are expressed."
386
7.51 The European Communities points out that:
"[T]he [Bananas] Understanding (i) describes in great detail the characteristics of the
two banana import regimes that the Eu ropean Communities should implement by
July 1, 2001 and by January 1, 2002 respec tively and (ii) expressly provides that the
United States' retaliation measures will be initially suspended and then terminated
upon the implementation by the European Communities of the second import regime
on January 1, 2002. Moreover, the Lette rs provide even further detail on the
allocation of the licences to certain operators and the mutual rights and obligations of
the United States and the European Communities if various events occur."387
7.52 Furthermore, the European Communities argues that it:
"[C]annot see why a document that 'sets out a path' with the 'means to resolve a
dispute' should not qualify as a mutually agreed solution for purposes of the DSU.
Indeed, by definition, a 'mutually agreed solution' can be nothing else than a
document that sets the terms of the solution mutually agreed between the parties.
More often than not, a 'mutually agreed so lution' will describe the actions that the
parties have undertaken to perform (or refrain from) in the future".
388
7.53 The European Communities also supports the argument made by a number of ACP third
parties (namely Belize, Cameroon, Côte d'Ivoi re, Dominica, the Domini can Republic, Jamaica,
Madagascar, St. Lucia, St. Vincent and the Grenadines, and Suriname) that:
"The fact that the agreed solution between the EC and the US necessarily prevents the
US from referring the issue of the WTO c onsistency of the ne w EC banana import
regime under Article 21.5 proceedings is supported by the fact that [with the
agreement of all WTO Members, in Februa ry 2002,] pursuant to the Understandings
reached with Ecuador and the US, the banana dispute was taken off the agenda of the
Dispute Settlement Body in accordance with Article 21.6 of the DSU
389."390

384 EC – Bananas III , Communication from the United States (WT/DS27/59), 2 July 2001. See,
United States' second written submission, para. 34.
385 European Communities' first written submission, para. 41.
386 European Communities' first written submission, para. 41.
387 Ibid., para. 42.
388 European Communities' second written submission, para. 23.
389 ( footnote original) See Minutes of the DSB Meeting held on 1 February 2002, WT/DSB/M/119,
6 March 2002.
390 See ACP Countries' third party written submission, para. 60.

7.54 In this regard, the European Communities argues that, under the DSU:
"[R]ecourse to a compliance panel [is only allowed] when there is disagreement in the
sense of Article 21.5 of the DSU. On the contrary, a compliance panel is excluded
when a dispute has been settled. In fact, such a dispute is considered resolved once
and for all. This is evidenced by the wording of Article 21.6 of the DSU, which
specifies that the issue of implementation of the recommendations or rulings of the
DSB stays on its agenda 'until the issue is resolved'. This obviously means that a
dispute taken off the [DSB's] agenda is considered resolved.
This is precisely what happened in the present case. In fact, the Bananas III dispute
between the European Communities and th e Unites States has been settled through a
mutually agreed solution (namely, the [Ban anas] Understanding). This is evidenced
by the fact that – after the conclusion of the Understanding - the United States agreed,
first, to suspend its retaliatory measures a nd, ultimately, to terminate those measures.
Further, the issue of the implementation of the EC-Bananas III DSB
recommendations and rulings was withdrawn from the DSB's agenda with the consent
of all WTO members (including the United States), in accordance with Article 21.6 of
the DSU."
391
7.55 The European Communities also contends that:
"[E]ven if it is assumed arguendo that the [Bananas] Understanding is not a 'mutually
agreed solution' for purposes of Article 3.6 of the DSU, it cannot be denied that it is a
bilateral agreement between the United St ates and the European Communities with
which both parties undertook certain obligations and acquired certain rights. As such,
the Understanding forms part of the 'applicable rules of law' between the parties to the
dispute, as this term is defined in cust omary international law and codified in
Article 31, paragraph 3(c) of the Vienna Convention on the Law of the Treaties.
Therefore, its terms must be taken into consideration in order to determine the parties'
mutual rights and obligations under the GATT and the DSU."
392
7.56 In particular, the European Communities maintains that:
"[G]iven that the United States has accep ted in the [Bananas] Understanding the
principle that the Cotonou Preference would continue to exist until the end of 2007,
the United States is now barred from cha llenging the existence of the Cotonou
Preference in the period between the end of 2005 and the end of 2007, irrespective of
the reasons that the United States may claim in its complaint."393
7.57 In response to the United States' argument that "Article 31(3)(c) of the Vienna Convention
deals with interpretation of the covered agreements"394 and that, "[s]ince the EC-US Understanding is
a bilateral agreement between only the parties to this dispute, not all Members of the WTO, it cannot
be considered part of any 'applicable rules of law' that could inform the panel's interpretation of the
covered agreements"395, the European Communities responds that:

391 European Communities' response to Panel question No. 20, paras. 48-49. See also,
European Communities' response to Panel question No. 21, para. 51.
392 European Communities' first written submission, para. 43. See also, European Communities'
response to Panel question No. 80, paras. 139-142.
393 European Communities' first written submission, para. 45.
394 United States' second written submission, para. 38 (emphasis original).
395 Ibid., para. 39.

"There is a very large number of bilateral agreements between WTO Members which
are not listed in Appendix 1, but are given legal effect and are taken into account by
the WTO dispute settlement system."
396
7.58 The European Communities further asserts that:
"[T]he report of the panel in EC – Approval and Marketing of Biotech Products
[makes] clear that, in determining the rights and obligations of the parties to a dispute
under the GATT and the DSU, it is possible for a panel to take into consideration the
terms of any international agreement to which all parties to the dispute participate. In
the view of the European Communities, in interpreting the WTO obligations and
rights of two WTO Members in relation to each other, it is necessary to take into
consideration any relevant international agreement to which those two Members are a
party. This is precisely the case with th e [Bananas] Understanding, which has been
signed by both parties to the present disput e. Therefore, the European Communities
respectfully requests the Panel to reject the assertion that the United States attempts to
base on EC – Approval and Marketing of Biotech Products".397
7.59 In response to the United States' argument that "during the India – Autos proceeding (which,
like the negotiation of the EC-US Understanding, took place in the spring of 2001), the EC ... held the
view that a mutually agreed solution could not prevent recourse to the DSU" 398, the European
Communities responds that:
"In analysing the legal effects of mutually agreed solutions, the [ India – Autos] panel
stated in paragraph 7.113 of its report:
... such agreements are expressly referred to and supported by the
DSU. It is certainly reasonable to assume, particularly on the basis
of Article 3 of the DSU ... that these agreed solutions are intended to
reflect a settlement of the dispute in question, which both parties
expect will bring a final conclusion to the relevant proceedings.
399
The panel also found in paragraph 7.115 of its report that 'it may also be the case that
it cannot be lightly assumed that those drafters intended mutually agreed solutions,
expressly promoted by the DSU, to have no meaningful legal effect in subsequent
proceedings'. These statements confirm that the panel in India – Autos considered it
possible that a mutually agreed solution could bar a party from commencing dispute
settlement proceedings. Therefore, the Un ited States cannot rely on that panel's
report to support an assertion that a mutu ally agreed solution like the [Bananas]
Understanding cannot constitute a bar on the United States' right to challenge the
Cotonou Preference."
400
7.60 The European Communities finally adds that:
"[E]ven if it were to be assumed that the provisions of the Understanding itself cannot
be taken into consideration in determining the rights and obligations of the parties to

396 European Communities' second written submission, para. 29.
397 European Communities' second written submission, para. 34.
398 United States' second written submission, para. 41.
399 (footnote original) See the report of the panel in India – Measures affecting the automotive sector ,
400 United States' second written submission, paras. 36-37.

this dispute, the application of the principl e of good faith on the facts of this case
would bar the United States from challenging the Cotonou Preference."401
7.61 In the European Communities' opinion:
"[T]he principle of good faith, which runs through the entire DSU 402 and defines the
outer limits of the application of all ri ghts recognized by the DSU to WTO Members,
bars the United States from challenging the Cotonou Preference. As already
mentioned, the United States has already drawn the benefits from the Understanding
and was from the very beginning aware of the legal status of the Understanding and
of the obligations it undertook with it. Moreover, the European Communities has
fully complied with its obligations under th e Understanding in good faith and relying
on the expectation that the United States woul d also comply with its own obligations.
The application of the principle of good fa ith on these facts requires the United States
to perform now its part of the deal and refrain from challenging the existence of the
Cotonou Preference until the end of 2007."
403
7.62 Thus, the European Communities concludes that:
"Granting to WTO Members the right to re nege on the agreements with which they
reach mutually agreed solutions to thei r disputes would seriously compromise the
effectiveness of these mutually agreed so lutions and would foster the 'contentious'
character of the dispute resolution system. This would be inconsistent with the
purpose of the DSU as reflected in Article 3.10 and with the principles enshrined in
Article 3.7 (where it is stated that mutually agreed solutions are to be preferred)."
404
7.63 For the reasons explained above, the European Communities requests the Panel to dismiss
"the complaint of the United States ... in its entirety".405
(b) The United States' response
7.64 The United States confirms that in April 2001 it reached with the Eu ropean Communities "an
Understanding on Bananas".406 The United States also:
"[A]cknowledges that the [Bananas] Unders tanding is an important document in the
long history of this dispute. It sets out what the United States and the EC, back in
2001, considered to be means to resolve the bananas dispute."
407

401 Ibid., para. 9.
402 (footnote original) See, for example, the report of the Appellate Body in European Communities –
Export Subsidies on Sugar , dated April 28, 2005 (" EC – Export Subsidies on Sugar "), at para. 312, where it is
stated that "... WTO members ... must engage in dispute settlement proced ures in good faith, by virtue of
Article 3.10 of the DSU. This latter obligation covers , in our view, the entire spectrum of dispute settlement,
from the point of initiation of a case through implementation".
404 Ibid., para. 17.
405 Ibid., para. 104.
406 United States' first written submission, para. 7.
407 Written version of United States' opening statemen t during substantive meeting with the parties and
third parties, para. 36.

7.65 The United States, however, argues that:
"[T]he [European Communities'] asser tion that because the United States has
'accepted in the EC-US Understanding the principle that the Cotonou Preference
would continue to exist until the end of 2007, the United States is now barred from
challenging the existence of the Cotonou Pref erence in the period between the end of
2005 and the end of 2007' ... is incorrect".
408
7.66 The United States asserts that:
"[N]othing in the EC-US [Bananas] Understanding says that the United States was
agreeing to a reduction in its rights to ch allenge the WTO-consistency of any EC
measure. [The Bananas Understanding] c ontains no clause or provision in which the
United States 'accepted' that it would be 'barred' from recourse to the Dispute
Settlement Understanding."409
7.67 The United States adds that:
"[A]s contemplated by the EC-US [Banan as] Understanding, the United States did
support the adoption of a waiver of the EC's Article I obligations, and a waiver was
ultimately approved at Doha. Article 3 bis of the waiver states that '[w]ith respect to
bananas, the additional provisions in the Annex shall apply.' 410 These additional
provisions ... set out conditions which the ne w EC regime on bananas would have to
meet. The provisions also set out a special arbitration mechanism whereby if an
arbitrator found twice that the EC regime did not meet the conditions set out in the
Annex, the Article I waiver would cease to apply with respect to bananas before the
end of 2007 ... [T]he United States believes that the EC's Article I waiver ceased to
apply upon entry into force of the new EC regime for bananas on January 1, 2006."
411
7.68 The United States disagrees "with the EC's contention that the EC-US [Bananas]
Understanding represented a 'mutually agreed solu tion' as that term is used in the DSU." 412 I n t h e
United States' view:
"[I]t is clear from its text that the EC-US [Bananas] Understanding was a document
that identified the 'means' to resolve the dis pute, and set out a path forward, but that
no solution acceptable to both parties had yet b een put in place on the date of the EC-
US [Bananas] Understanding and that the U nderstanding was not itself the end of the
dispute."413
7.69 The United States further states that it:
"[D]id not and does not consider that the Understanding was a 'mutually agreed
solution' for purposes of Article 3.6. The United States made this clear immediately
after the EC unilaterally notified the Unde rstanding to the DSB as a 'mutually agreed
solution' in June of 2001 ... As the United States made clear to the EC and all

408 United States' second written submission, para. 23.
409 Ibid., para. 24. See also written version of United States' opening statement during substantive
meeting with the parties and third parties, para. 37.
410 (footnote original) See Exhibit US-3.
411 United States' second written subm ission, para. 27. See also wr itten version of United States'
opening statement during substantive meeting with the parties and third parties, para. 37.
412 United States' second written submission, para. 29.
413 Ibid., para. 32.

Members in 2001, the Understanding identified 'the means by which the long-
standing dispute ... can be resolved, but, as is obvious from its own text, it does not in
itself constitute a mutually agreed solution pursuant to Article 3.6 of the DSU'.
414"415
7.70 The United States adds that:
"Even if the Understanding were a 'mutually agreed solution', nothing in the DSU
permits the legal consequence that the EC proposes. The DSU provides three limited
consequences for 'mutually agreed solutions '. Article 3.6 requires that mutually
agreed solutions be notified to the DSB and the relevant Councils and Committees.
Article 12.7 provides that the existence of a mutually satisfactory solution reached
prior to the conclusion of a panel proceeding affects the form and content of the
panel's report. And Article 22.8 provides th at the suspension of concessions or other
obligations shall onl y be applied until, inter alia, a mutually satisfactory solution is
reached. The fact that the legal conseque nces of a 'mutually agreed solution' are
spelled out in these three provisions is significant because it stands in stark contrast to
the lack of any provision that assigns the legal consequences that the EC would now
attribute to such solutions.
In particular, there is no basis in Article 22.8 of the DSU, elsewhere in the DSU, or
elsewhere in the covered agreements for the EC argument that parties to a 'mutually
agreed solution' are precluded from having recourse to Article 21.5 proceedings."
416
7.71 The United States also disagrees:
"[W]ith the EC's assertion that, pursuant to Article 31(3)(c) of the Vienna Convention
on the Law of Treaties ('Vienna Convention'), the EC -US [Bananas] Understanding
must be taken into consideration to determine the parties' rights and obligations under
the GATT 1994 and the DSU."417
7.72 In the United States' opinion:
"Since the EC-US [Bananas] Understanding is a bilateral agreement between only the
parties to this dispute, not all Members of the WTO, it cannot be considered part of
any 'applicable rules of law' that could inform the panel's interpretation of the covered
agreements ...
[T]he DSU cannot be used to settle a dispute as to the meaning or effect of the EC-US
[Bananas] Understanding, and the DSU cannot enforce the Understanding by
blocking a party to the Understanding from recourse to the DSU."418

414 (footnote original) WT/DS27/59, G/C/W/270, 2 July 2001, second paragraph.
415 Written version of United States' opening statemen t during substantive meeting with the parties and
third parties, para. 38. See also, United States' response to Panel question No. 47, paras. 84-85, question No.
105, paras. 106-107, and question No. 106, paras. 108-109.
416 Written version of United States' opening statemen t during substantive meeting with the parties and
third parties, paras. 39-40. See al so, United States' response to Panel question No. 19, para. 32, and question
No. 20, paras. 33-34.
417 United States' second written subm ission, para. 36. See also wr itten version of United States'
opening statement during substantive meeting with the parties and third parties, para. 41.
418 United States' second written submission, paras. 39-40.

7.73 The United States further adds that:
"[I]t is telling that [in a previous case] th e EC, as a complaining party, has taken the
opposite view of the one it advanc es in this dispute ... [I]n India – Autos , 'the
European Communities argued that, not bei ng a "covered agreement" under the DSU,
the [mutually agreed solution] cannot be invoked by India "in order to justify the
violation of its obligations under the GATT and the TRIMs Agreement."'
419 For the
same reason, the EC-[Bananas] US Unders tanding – whether or not it is a 'mutually
agreed solution' – cannot 'be invoked by [the EC] 'in order to justify the violation of
its obligations under the GATT'."
420
7.74 The United States disagrees with the argument adva nced by some third parties that "the fact
that the agreed solution between the EC and the US necessarily prevents the US from referring the
issue of the WTO consistency of the new EC bana na import regime under Article 21.5 proceedings is
supported by the fact that pursuant to the Unde rstandings reached with Ecuador and the US, the
banana dispute was taken off the agenda of the Dispute Settlement Body in accordance with
Article 21.6 of the DSU"421.422 In the United States' view:
"It is incorrect to say that the issue was 'withdrawn' from the [DSB's] agenda.
Instead, as is apparent from the DSB minutes for the February 1, 2002 423 meeting all
that happened was that the EC declared its view that 'this matter should now be
withdrawn from the agenda' (presumably m eaning that despite Article 21.6, the EC
need no longer put a status report on the agenda of future DSB meetings). A review
of the minutes confirms that Ecuador agreed there was no need for the EC to put the
issue on the agenda of future DSB meetings in light of the fact that the EC had taken
the step set out in paragraph D of the Understanding and the next step that would
need to be taken by the EC was implementation of a tariff only regime by January 1,
2006. The DSB simply 'took note' of the statements and did not take a decision on
this issue. The fact that other Members did not request that this matter be on the
agenda of subsequent meetings presumably reflects that little would have been gained
by keeping this matter on the DSB agenda until the EC took the next step on
January 1, 2006.
It is also clear from the statements made at the meeting that the dispute was not
considered 'resolved'."
424
7.75 The United States concludes that "[t]he EC's ... preliminary objection - that the EC-US
[Bananas] Understanding bars this proceeding – is ... groundless".425
2. Panel's analysis
7.76 In order to decide this preliminary issue, the Panel will analyse first the nature and scope of
this preliminary objection of the European Communities, in particular in regard to Article 21.5 of the
DSU. The Panel will then assess the European Communities' preliminary objection.

419 (footnote original) India – Autos, para. 7.109 (footnote omitted).
420 United States' second written submission, para. 43.
421 ACP Countries' third party written submission, para. 24.
422 United States' response to Panel question No. 19, para. 32, and question No. 21, para. 38.
423 (footnote original) WT/DSB/M/119, 6 March 2002.
424 United States' response to Panel question No. 19, para. 32, and question No. 21, paras. 38-39.
425 United States' second written submission, para. 21 (footnotes omitted).

7.77 The Panel recalls that in US – Wool Shirts and Blouses the Appellate Body noted that:
"[I]t is a generally-accepted canon of evidence in civil law, common law and, in fact,
most jurisdictions, that the burden of proof rests upon the party, whether complaining
or defending, who asserts the affirmative of a particular claim or defence. If that
party adduces evidence sufficient to raise a presumption that what is claimed is true,
the burden then shifts to the other party, who will fail unless it adduces sufficient
evidence to rebut the presumption."
426 (footnote omitted)
7.78 The Appellate Body concluded in the same dis pute that, on the one hand, "a party claiming a
violation of a provision of the WTO Agreement by another Member must assert and prove its
claim"
427 and, on the other hand, "[i]t is only reasona ble that the burden of establishing ... a defence
should rest on the party asserting it. 428"429 This general approach to the burden of proof has been
confirmed in a number of reports since then, in cluding more recently in regard to compliance
proceedings pursuant to Article 21.5 of the DSU.430
7.79 Accordingly, the Panel needs to assess first wh ether the European Communities has made a
prima facie case supporting its preliminary objection. If such a prima facie case was found to exist,
the Panel would turn to assessing whether the Un ited States has succeeded in rebutting this
preliminary objection by the European Communities.
(a) The nature and scope of this preliminary issue under Article 21.5 of the DSU
7.80 In addition to other objections that are addr essed in specific sections of this report 431, the
European Communities questions the United States' right to contest the ACP preference because of
the Bananas Understanding signed with the European Communities in April 2001, both in general in
the context of WTO dispute settlement 432 and particularly in a compliance dispute. 433 T h e P a n e l
recalls that under its terms of reference its task is to examine the matter raised by the United States in
its request for the establishment of a panel made under Article 21.5 of the DSU and to make such
findings as will assist the DSB in making the recommendations or in giving the rulings provided for in
the WTO agreements. 434 Accordingly, the Panel will limit its consideration of the preliminary issue
raised by the European Communiti es to whether the United States is prevented, as a result of the
Bananas Understanding, from bringing a compliance dispute pursuant to Article 21.5 of the DSU.

426 Appellate Body Report on US – Wool Shirts and Blouses, p. 14.
427 Ibid., p. 16.
428 (footnote original) Furthermore, there are a few cases that are similar in that the defending party
invoked, as a defence, certain provisions and the panel explicitly required the defending party to demonstrate the
applicability of the provision it was asserting. See, for example, United States – Customs User Fee, adopted
2 February 1988, BISD 35S/245, para. 98, concerning Article II:2 of the GATT 1947; Canada – Import,
Distribution and Sale of Certain Alcoholic Drinks by Provincial Marketing Agencies , adopted 22 March 1988,
BISD 35S/37, para 4.34, concerning Article XXIV:12 of the GATT 1947; and United States – Measures Affecting
Alcoholic and Malt Beverages , adopted 19 June 1992, BISD 39S/206, para. 5.44, concerning the Protocol of
Provisional Application.
429 Appellate Body Report on US – Wool Shirts and Blouses, p. 16.
430 See Appellate Body Report on Brazil – Aircraft (Article 21.5 – Canada) , para. 66 and Appellate
Body Report on Chile – Price Band System (Article 21.5 – Argentina), para. 136.
431 See sections VII.C, VII.E and VII.F of this report.
432 See European Communities' first written submission, para. 45; and European Communities' second
written submission, paras. 9 and 14. See also written version of European Communities' opening statement
during substantive meeting with the parties and third parties, para. 2.
433 European Communities' response to Panel questio n No. 8, para. 15, question No. 20, para. 50, and
question No. 30, para. 58.
434 See EC – Bananas III (Article 21.5 – US) , Constitution of the Panel (WT/DS27/84/Rev.1),
5 September 2007, paras. 1-2.

7.81 In order to address the issue of whether th e Bananas Understanding can prevent the United
States from bringing a compliance dispute, the Panel will start by considering the scope of compliance
disputes. In relevant part, Article 21.5 of the DSU provides that:
"Where there is disagreement as to the existence or consistency with a covered
agreement of measures taken to comply with the recommendations and rulings such
dispute shall be decided through recourse to these dispute settlement procedures,
including wherever possible resort to the original panel."
7.82 The United States has brought this dispute under Article 21.5 of the DSU, by making the
following request:
"As there is 'disagreement as to the ex istence or consiste ncy with a covered
agreement of measures taken to comply w ith the recommendations and rulings' of the
DSB between the United States and the EC, the United States respectfully seeks
recourse to Article 21.5 of the DSU in this matter. The United States requests that the
DSB refer the matter to the original panel, if possible, pursuant to Article 21.5 of the
DSU."
435
7.83 As a different preliminary objection, the Eu ropean Communities has argued that the United
States' complaints should be rejected, as they fall out side of the scope of Article 21.5 of the DSU. In
the European Communities' view, its current bana nas import regime is not "a measure taken to
comply" with the recommendations and rulings of the DSB. 436 The Panel will deal with this different
preliminary issue separately. Instead, in this sec tion the Panel will focus on the more narrow issue of
whether the Bananas Understanding signed between the European Communities and the United States
in April 2001 bars the United States from bringing this compliance challenge.
(b) Is the United States barred by the Bananas U nderstanding from bringing this compliance
challenge?
(i) Panel's approach
7.84 The Panel notes that the European Communities makes the following suggestion to the Panel:
"[T]he Panel should take into consideration the terms of these agreements
[agreements to which all parties to a disput e participate and with which all parties to
the dispute undertake certain rights and obligations within the context of the DSU and
the GATT; i.e., ] in determining the rights and obligations of the parties towards each
other. It is not contested today that the Panel should enforce the agreement between
the parties to dispense with formal consu ltations prior to requesting the establishment
of the Panel. Equally, the Panel must also enforce the agreement between the parties
that allows the European Communities to follow a certain course of action in
exchange for the United States' receiving specific consideration.
This agreement is the [Bananas] Unders tanding, with which the United States
accepted that the European Communities w ould continue to offer the Cotonou
Preference to the ACP countries until the end of 2007. The United States cannot now
renege on its obligations and challenge the existence of the Cotonou Preference until
the end of 2007, because the United States has already received specific consideration

435 See EC – Bananas III (Article 21.5 – US) , Request for the Establishment of a Panel (WT/DS27/83)
2 July 2007, p. 3.
436 See para. 3.4 above.

for entering into the Understanding and was aware of the legal nature of the
Understanding from the very beginning."437
7.85 As indicated above, the European Communities appears to be making a sequential argument
under its first preliminary objection. 438 First, the European Communities argues that the
Bananas Understanding constitutes a mutually agreed solution providing for the ACP preference, and
therefore the United States is prevented from contesting the conformity of the European Communities'
current banana import regime in a compliance dis pute. Second, the European Communities makes a
similar, residual argument "even if it is assumed arguendo that the [Bananas] Understanding is not a
'mutually agreed solution' for purposes of Article 3.6 of the DSU." 439 If that were the case, the
European Communities argues that the Bananas Understanding is "a bilateral agreement between the
United States and the European Communities with which both parties undertook certain obligations
and acquired certain rights [and, as such,] its terms must be taken into consideration in order to
determine the parties' mutual rights and obligations under the GATT and the DSU." 440 Third, the
European Communities adds that, "even if it were to be assumed that the provisions of the
Understanding itself cannot be taken into consideration in determini ng the rights and obligations of
the parties to this dispute, the application of the principle of good faith on the facts of this case would
bar the United States from challenging the Cotonou Preference."441
7.86 In any event, the European Communities argues that:
"[G]iven that the United States has accep ted in the [Bananas] Understanding the
principle that the Cotonou Preference would continue to exist until the end of 2007,
the United States is now barred from cha llenging the existence of the Cotonou
Preference in the period between the end of 2005 and the end of 2007, irrespective of
the reasons that the United States may claim in its complaint."442
7.87 Accordingly, there are two common elements in the European Communities' arguments under
this preliminary issue:
(a) The alleged legally binding nature of the Bananas Understanding on the United
States, whether or not such Understanding qualifies as a mutually agreed solution;
and,
(b) That, as the European Communities puts it, "the United States has accepted in the
[Bananas] Understanding the principle that the Cotonou Preference would continue to
exist until the end of 2007."443
7.88 These two questions are potentially relevant fo r addressing this preliminary objection by the
European Communities. The Panel will first asse ss whether the Bananas Understanding bars the
United States from bringing this compliance challenge, by first looking at the language of the
Understanding. Only if the Panel was to find that the Bananas Understanding bars the United States
from bringing this dispute, would the Panel then turn to assessing, as suggested by the
European Communities, whether the Understanding i ndeed qualifies as a mutually agreed solution,

437 Final written version of the European Communities' opening statement at the substantive meeting of
the Panel with parties and third parties, paras. 1-2.
438 See summary of the European Communities' main arguments under this preliminary issue, in
paras. 7.39 to 7.62 above.
439 European Communities' first written submission, para. 43.
440 Ibid.
441 European Communities' second written submission, para. 9.
442 European Communities' first written submission, para. 45.
443 Ibid.

whether it qualifies as an agreement binding on the United States for the purposes of WTO dispute
settlement, or whether the application of the prin ciple of good faith on the facts of this case would
otherwise bar the United States from challenging the Cotonou Preference.
7.89 The Panel will follow the approach of the panel in India – Autos : it will conduct a case-
specific analysis of the preliminary issue raised by the European Communities. Indeed, in the India –
Autos dispute, in which the question of whether a mu tually agreed solution can prevent a party from
bringing a dispute was raised, the panel noted that:
"Without clear guidance in the DSU, this ques tion raises an important systemic issue.
... There may be significant differences between the provisions of mutually agreed
solutions from case to case, which may ... make it difficult to draw general
conclusions as to the relevance of [mut ually agreed] solutions to subsequent
proceedings other than on a case by case basis."
444
7.90 Further, the panel in India – Autos found that it "need[ed] to consider … the terms of the
MAS"445 because "[u]ltimately, it is the terms of the MAS that are the only possible source of any
restriction on our jurisdiction." 446 The Panel agrees with the Eu ropean Communities' argument in
these proceedings that "the analysis of the legal status and effect of the Understanding should be
based on its content and on the confirmations contai ned in the Letters exchanged between the parties,
where their true common intentions and mutual understandings and undertakings are expressed."447
7.91 The Panel intends to address this preliminary i ssue raised by the Eur opean Communities. At
the same time, however, the Panel does not consider it necessary for the resolution of this dispute to
address the more general issue of whether or not mutually agreed solutions or legally binding
agreements between parties to a dispute may pr event parties to such instruments from bringing
compliance disputes. The Panel agrees with the panel in India – Autos that this general issue "is not
expressly addressed in the DSU".
448 The Panel also recalls that, under Article 3.2 of the DSU,
the WTO dispute settlement system "serves to preser ve the rights and oblig ations of Members under
the covered agreements, and to clarify the existing provisions of those agreements in accordance with
customary rules of interpretation of public intern ational law." Further, under the same provision,
"[r]ecommendations and rulings of the DSB cannot add to or diminish the rights and obligations
provided in the covered agreements."
7.92 With regard to the method of assessment, the panel in India – Autos recognized that "[a]s [an]
MAS is not a covered agreement, it is not expr essly subject to the DSU requirement to utilise
customary rules of interpretation of international law." 449 Nevertheless, that panel also stated that:
"[S]ince [the MAS in question] is an agreement among States, the Panel finds it
appropriate to address the terms of this ag reement in accordance with the customary
rules of interpretation of international law. It will therefore consider the ordinary
meaning of the terms of the MAS in light of their context and taking into account
their object and purpose."
450
7.93 In the light of that statement by the panel in India – Autos and given the argument of the
European Communities that the Bananas Understandi ng would qualify as a mutually agreed solution,

444 Panel Report on India – Autos, para. 7.116 (footnote omitted).
445 Ibid., para. 7.117.
446 Ibid.
447 European Communities' first written submission, para. 41.
448 Panel Report on India – Autos, para. 7.114.
449 Ibid., para. 7.118.
450 Ibid.

this Panel will analyse the terms of the Banan as Understanding in accord ance with the customary
rules of interpretation of international law, as expressed in Articles 31 and 32 of the
Vienna Convention on the Law of Treaties to estab lish whether the Banan as Understanding prevents
the United States from bringing this compliance dispute. This is without prejudice to the actual legal
status of the Bananas Understanding, which the Panel will not address at this stage.
(ii) The terms and main elements of the Bananas Understanding
7.94 Turning to the analysis of the terms of the Bananas Understanding, the Panel notes that the
Understanding provides that "[t]he European Co mmission and the United States have identified the
means by which the long-standing dispute over the EC's banana import regime can be resolved."451
7.95 The Bananas Understanding sets out various future steps to be taken by its parties, who are
also the parties to the dispute before this Panel. The Understanding first addresses the three distinct
steps to be taken by the European Communities following the adoption of the Understanding.
First, the Understanding identifies the last, third step:
"In accordance with Article 16(1) of Re gulation No. (EC) 404/93 (as amended by
Regulation No. (EC) 216/2001), the European Communities (EC) will introduce a
Tariff Only regime for imports of bananas no later than 1 January 2006. "
452
(emphasis added).
7.96 Subsequently, the Bananas Understanding identif ies the two initial steps to be implemented
by the European Communities in the following terms:
"In the interim, the EC will implement an import regime on the basis of historical
licensing as follows:
1. Effective 1 July 2001, the EC will implement an import regime on the basis
of historical licensing as set out in Annex 1.
2. Effective as soon as possible thereafter, subject to Council and European
Parliament approval and to adoption of the Article XIII waiver referred to in
paragraph E, the EC will implemen t an import regime on the basis of
historical licensing as set out in Annex 2. The Commission will seek to
obtain the implementation of such an import regime as soon as possible."453
7.97 As for the United States, the Bananas Understanding prescribes two main steps. First:
"The United States will lift its reserve concerning the waiver of Article I of the GATT
1994 that the EC has requested for preferen tial access to the EC of goods originating
in ACP states signatory to the Cotonou Agreement; and will actively work towards
promoting the acceptance of an EC request for a waiver of Article XIII of the GATT
1994 needed for the management of quot a C under the import regime described in
paragraph C(2) until 31 December 2005."454

451 See Bananas Understanding, para. A, in EC – Bananas III , Notification of Mutually Agreed
Solution (WT/DS27/58), 2 July 2001, and EC – Bananas III , Communication from the United States
(WT/DS27/59), 2 July 2001.
452 Ibid., para. B.
453 Ibid., para. C.
454 Ibid., para. E.

7.98 Second:
"With respect to the United States' impos ition of increased duties applied to certain
EC products as of 19 April 1999 covering trade in an amount of US$191.4 million
per year (the "increased duties"):
1. Upon implementation of the import regi me described in paragraph C(1), the
United States will provisionally suspend its imposition of the increased
duties.
2. Upon implementation of the import regi me described in paragraph C(2), the
United States will terminate its imposition of the increased duties."
455
7.99 The Bananas Understanding adds that "[t]he United States may reimpose the increased duties
if the import regime described in paragraph C(2) does not enter into force by 1 January 2002."456
7.100 Without addressing the legal status of the Bana nas Understanding, the Panel agrees with the
European Communities that, as Article 3.7 of the DS U provides, mutually agreed solutions constitute
the "clearly preferred" solution to WTO disputes. Also, the Panel recognizes the systemic importance
of mutually agreed solutions for WTO dispute se ttlement, and the importance of parties complying
with the terms of such a mutually agreed solution.
7.101 Nevertheless, the Panel reaches a different c onclusion on Article 3.7 of the DSU than the
European Communities on whether the Bananas Understanding can bar the United States from
bringing this compliance challenge. Indeed, Article 3.7 of the DSU also provides that "[t]he aim of
the [WTO] dispute settlement mechanism is to secure a positive solution to a dispute" (emphasis
added).
7.102 Further, under Article 3.2 of the DSU, "the dispute settlement system of the WTO is a central
element in providing security and predictability to the multilateral trading system", and one of the
objectives of the WTO dispute settlement system is "to preserve the rights and obligations of
Members under the covered agreements".
7.103 Also, under Article 3.3 of the DSU:
"The prompt settlement of situations in which a Member considers that any benefits
accruing to it directly or indirectly under the covered agreements are being impaired
by measures taken by another Member is essential to the effective functioning of the
WTO and the maintenance of a proper balance between the rights and obligations of
Members" (emphasis added).
7.104 Finally, pursuant to Article 3.4 of the DSU, "[r]ecommendations or rulings made by the DSB
shall be aimed at achieving a satisfactory settlement of the matter in accordan ce with the rights and
obligations under [the DSU]" (emphasis added).
7.105 Accordingly, the Panel considers that any a lleged solution to WTO disputes, including a
mutually agreed solution, must "secure a positive solu tion" to the dispute in the sense of Article 3.7 of
the DSU. This requirement also applies to a solution that is alleged to be a "clearly preferred" or a

455 See Bananas Understanding, paras. D.1 and D.2, in EC – Bananas III , Notification of Mutually
Agreed Solution (WT/DS27/58), 2 July 2001, and EC – Bananas III , Communication from the United States
(WT/DS27/59), 2 July 2001.
456 Ibid., para. D.3.

legally binding one, as the European Communities argu es in regard to the Bananas Understanding.
The Panel has already noted the emphasis in the DS U on the prompt settlement of disputes and on the
"central" role of WTO dispute settlement in provi ding security and predictability to the multilateral
trading system. Given such emphasis, any solution to a WTO dispute can lead to a positive resolution
of a dispute only if the solution provides an overall satisfactory and effective settlement to the dispute
in question in the sense of Article 3.4 of the DSU.
7.106 The Panel notes that the parties do not contest the fact that both parties complied with
intermediate steps identified in the Bananas Unde rstanding. Indeed, the United States recognizes that
the European Communities complied with its obligations for the first two interim phases set out in the
Understanding (i.e., implementing an interim import regime for bana nas on the basis of historical
licensing as set out in the annexes of the Unde rstanding). In turn, the European Communities
recognizes that the United States has complied with its main obligations under the Understanding (i.e.,
provisionally suspending, and late r terminating, its imposition of increased duties to certain EC
products, as well as lifting its reserve concerning th e adoption of the waivers requested by the
European Communities).
7.107 Nevertheless, the Panel considers that u ltimately the Bananas Understanding did not
constitute a positive solution and an effectiv e settlement to the dispute in question. 457 The Panel
reaches this view for the following three reasons taken together:
(a) The Bananas Understanding provides only for a means, i.e. a series of future steps,
for resolving and settling the dispute;
(b) The adoption of the Bananas Understandi ng was subsequent to recommendations,
rulings and suggestions by the DSB; and,
(c) Parties have made conflicting communications to the WTO concerning the
Bananas Understanding.
7.108 Before turning to these three issues, the Panel r ecalls that one of the main arguments of the
European Communities under this preliminary issue is that the Bananas Understanding is a mutually
agreed solution or a legally binding agreemen t for the purposes of WTO dispute settlement.
The Panel does not address that argument at this point; however, the Panel does note that, assuming
that the Bananas Understanding qualifies as a mutually agreed solution or a legally binding agreement
for the purposes of WTO dispute settlement, there is a clear requirement for it to be consistent with
the covered agreements.
7.109 Article 3.7 of the DSU not only expresses a "clear preference" for mutually agreed solutions,
it also provides that "[a] solution mutua lly acceptable to the parties to a dispute and consistent with
the covered agreements is clearly to be preferred." (emphasis added) Article 3.5 of the DSU confirms
this requirement of conformity in regard to all solutions, not only mutually agreed solutions,
by stipulating that:
"All solutions to matters formally raised under the consultation and dispute settlement
provisions of the covered agreements, in cluding arbitration awards, shall be
consistent with those agreements and shall not nullify or impair benefits accruing to
any Member under those agreements, nor impe de the attainment of any objective of
those agreements."

457 Cfr. United States' response to Panel question No. 47, para. 84.

7.110 This obligation of conformity is closely relate d to the requirement that an alleged mutually
agreed solution or legally binding agreement can prevent the United States from bringing this
compliance challenge only if such alleged mutually agreed solution or legally binding agreement
provides a positive solution and effective settlement of the dispute. An alleged mutually agreed
solution or legally binding agreement could hardly provide a positive solution or effective settlement
for the purposes of WTO dispute settlement without being in conformity with the covered agreements.
(iii) The Bananas Understanding provides only for a means for resolving and settling the dispute
7.111 As the analysis of the terms and main elements of the Bananas Understanding shows,
the essence of the Understanding is a series of staged future steps that both sides agreed to take over a
period of several years following the adoption of the Understanding.
7.112 The Panel notes that, by its own terms, the Bananas Understanding "identified the means by
which the long-standing dispute over the [Europe an Communities'] bana na import regime can be
resolved"
458 (emphasis added). In the light of that lan guage and the various subsequent steps set out
in the Bananas Understanding, it is difficult to see how the Bananas Understanding, even if it were an
alleged mutually agreed solution or a binding agreement, could be an effective solution to a dispute in
the absence of parties' full compliance with all the steps set out therein.
7.113 Also, as indicated earlier, the Panel considers that one of the main functions of the
Bananas Understanding, if it were a mutually ag reed solution or a binding agreement, as the
European Communities argues, would be to provide an effective settlement to the dispute in question.
The Panel agrees with the panel in India – Autos, which was considering a mutually agreed solution
providing for future steps by its parties, that:
"It is certainly reasonable to assume, particularly on the basis of Article 3 of the DSU,
... that [mutually] agreed solutions are inte nded to reflect a settlement of the dispute
in question, which both parties expect will bring a final conclusion to the relevant
proceedings."
459
7.114 The Panel has not been called upon to assess, for the purposes of resolving the current
dispute, whether the steps set out in an alleged mutually agreed solution or other legally binding
agreement between the parties to a dispute may be enforced under the DSU.
7.115 In any event, one of the reasons for the "clear preference" for mutually agreed solutions under
Article 3.7 of the DSU, would seem to be that, by vi rtue of the mutual agreement of the parties that
they involve, such solutio ns are supposed to provide the most ef fective solution and settlement to the
dispute in question.
7.116 In this respect, an alleged mutually agreed solution or binding agreement that essentially
serves to provide for future steps by its parties, like the Bananas Understanding, can only "secure a
positive solution" in the sense of Article 3.7 of the DSU after implementation, because it
is inseparably linked to those futu re steps and to full compliance by the parties with each of those
steps. In other words, for the purposes of providi ng a positive solution and effective settlement to the
dispute in question, the full effect of the Banan as Understanding would be realized only after parties'
compliance with all the steps set out in the Understanding.

458 Bananas Understanding, para. A, in EC – Bananas III , Notification of Mutually Agreed Solution
(WT/DS27/58), 2 July 2001, and EC – Bananas III , Communication from the United States (WT/DS27/59), 2
July 2001.
459 Panel Report on India – Autos, para. 7.113.

7.117 The Panel recalls the importance of the requi rement of consistency with the covered
agreements of all solutions to WTO disputes. Without assessing the legal status of the
Bananas Understanding, the Panel considers that that requirement also applies to an alleged mutually
agreed solution or legally binding solution that, like the Bananas Understanding, provides for a series
of staged future steps by its parties.
7.118 Pursuant to Articles 3.7 and 3.5 of the DSU, an y mutually agreed solution shall be consistent
with the covered agreements. By virtue of Ar ticle 3.5 of the DSU, the same requirement of
consistency with the covered agre ements applies to an alleged le gally binding agreement that is
intended to provide an effective solution to a particular dispute.
7.119 This link between on the one ha nd, alleged mutually agreed solutions or legally binding
agreements and, on the other hand, the steps set out in such solutions or agreements, in the context of
compliance with the covered agreements, is perh aps more obvious for alleged mutually agreed
solutions or legally binding agreements recording the implementation of past steps agreed upon by the
parties. However, despite the different time persp ective, the same link is equally valid in the context
of alleged mutually agreed solutions or legally binding agreements setting out future steps.
7.120 In the light of that requirement of conformity with the covered agreements, the Panel remains
convinced that a complainant must have the righ t of having recourse to WTO dispute settlement,
under the DSU, in order to review the conformi ty with the covered agreements of a measure
purportedly taken to implement a step set out in an alleged mutually agreed solution or other legally
binding agreement.
(iv) The adoption of the Bananas Understanding subseq uent to recommendations and suggestions
by the DSB
7.121 The fact that the parties adopt ed the Bananas Understanding sub sequent to a series of reports
in this dispute by panels and the Appellate Body establishing inconsiste ncy with the covered
agreements constitutes relevant context for as sessing the European Communities' preliminary
objection.
460
7.122 The Dispute Settlement Body adopted the rele vant reports with recommendations that the
European Communities bring its measures into co mpliance, and suggestions how the European
Communities might do that made in the related first compliance proceeding brought by Ecuador. 461
Through these recommendations and suggestions, the DS B repeatedly tried to promote a resolution of
this dispute.
7.123 The European Communities argues that "[a]s c onsideration for entering into the [Bananas]
Understanding, the United States obtained a new EC banana import regime that would be in place
from July 1, 2001 and until January 1, 2006".462 The European Communities adds that:
"[T]he [Bananas] Understanding does not contain any express provision imposing on
the European Communities the obligation to implement a tariff only regime.
Paragraph B [of the Understanding] makes a simple reference to a provision of the
European Communities' secondary legislati on, which reflected the political decision

460 But see European Communities' response to Panel question No. 11, para. 20.
461 See Minutes of the Meeting of the Dispute Settlement Body Held in the Centre William Rappard on
25 September 1997, WT/DSB/M/37 of 4 November 1997, p. 27; Minutes of the Meeting of the Dispute
Settlement Body Held in the Centre William Rappard on 6 May 1999, WT/DSB/M/61 of 30 June 1999; and
Minutes of the Meeting of the Dispute Settlement Body Held in the Centre William Rappard on 19 April 1999,
WT/DSB/M/59 of 3 June 1999.
462 European Communities' second written submission, para. 8.

of the European Communities to change its banana import regime. This political
decision had already been taken before the signing of the Understanding between the
United States and the European Communities and their reaching an agreement on the
appropriate 'measures taken to comply'. This is confirmed by the fact that paragraph
B refers to an already existing piece of European Communities' legislation."
463
7.124 To this argument, the United States has responded that:
"Paragraph B [of the Bananas Understanding] states that the EC 'will introduce a
Tariff Only regime for imports of bananas no later than 1 January 2006.' [A]lthough
chronologically this would have been the last step to be taken, it is the first step
outlined in the Understanding. The EC's argument that this paragraph is just a 'simple
reference' to secondary legislation 'which reflected the political decision of the
European Communities to change its banana import regime'
464 before the signing of
the Understanding is an attempted post hoc rationale inconsistent with the plain text
of the Understanding. It ignores the fact th at this was a central element in the 'means
by which the long-standing dispute over th e EC's banana import regime can be
resolved,' and cannot change the fact that there would be a continuum of actions to be
taken, culminating with this step. This w ould have been the final action to be taken
in bringing the EC regime into compliance."465
7.125 The European Communities further adds that:
"[T]he [Bananas] Understanding does not in clude any language that might indicate
that the United States' acceptance of th e Cotonou Preference until the end of 2007
was subject to any conditions relating to the characteristics of the Cotonou
Preference. At the time the Understanding w as signed the only ch aracteristic of the
Cotonou Preference that was known to the parties and, therefore, was accepted by
both of them was that banana imports from ACP countries would be assured ' more
favourable treatment than that granted to third countries benefiting from the most
favoured nation clause for the same products ', as provided in Article 1 of Annex V to
the Cotonou Agreement. Therefore, as fa r as the United States is concerned, its
acceptance of the Cotonou Preference is not qualified in any way."
466
7.126 The European Communities notified the Bana nas Understanding with the following
communication:
"The European Communities (EC) wish to notify the Dispute Settlement Body (DSB)
that they have reached, with the United States of America and Ecuador, a mutually
satisfactory solution within the meaning of Article 3.6 of the DSU regarding the
implementation by the EC of the conc lusions and recommendations adopted by the
DSB in the dispute "Regime for the importation, sale and distribution of bananas"
(WT/DS27)"467 (emphasis added).
7.127 Notwithstanding the European Communities' argu ments, the Panel notes a close link between
each of the following: (i) the DSB recommendations a nd related suggestions made previously in this

463 European Communities' second written submission, para. 43. See also European Communities'
response to Panel question No. 14, paras. 30-33, and question No. 72, para. 121.
464 (footnote original) Second Written Submission by the European Communities, para. 43.
465 Written version of United States' opening statemen t during substantive meeting with the parties and
third parties, para. 9.
466 European Communities' second written submission, para. 12.
467 EC – Bananas III, Notification of Mutually Agreed Solution (WT/DS27/58), 2 July 2001, p. 1.

dispute; (ii) the third, final step foreseen by th e Bananas Understanding (i.e., the introduction by the
European Communities of "a Tariff Only regime fo r imports of bananas no later than 1 January
2006"); and, (iii) the measures contested by the United States before this Panel.
7.128 As mentioned earlier, the Panel has not b een called upon to assess whether, beyond the
possibility of having alleged implem entation steps reviewed under the DSU, the steps to be taken by
parties under an alleged mutually agreed solution or legally binding agreement may be enforced under
the DSU. In any event, the close link between the Bananas Understanding and the recommendations
and related suggestions of the DSB underscores th e relevance of the Bananas Understanding for the
resolution and settlement of this dispute. At the same time, the link between the DSB
recommendations and suggestions made previously in this dispute, the third, final step, foreseen by
the Bananas Understanding, and the measures cont ested by the United States before this Panel
confirms that the Bananas Understanding in itself cannot prevent the United States from bringing this
compliance dispute.
7.129 Given those links, parties' compliance with all future steps set out in the Bananas
Understanding is an even more important prec ondition of a positive solution and an effective
settlement of the dispute. However, while the United States recognizes the European Communities'
compliance with the first two steps under the Ba nanas Understanding, the United States contests
whether the European Communities has complied with the third step: "to introduce a Tariff Only
regime for imports of bananas no later than 1 January 2006"468:469
"[T]he [Bananas] Understanding sets out a series of steps. Two significant steps were
to be achieved by July 1, 2001, and January 1, 2002. As incentive to ensure that the
EC took those steps, the United States ag reed to first provisionally suspend its
imposition of increased duties and then terminate the imposition of increased duties
that the DSB had authorized the United Stat es to apply. This only proves that both
the United States and the EC complied with what is set out in paragraphs C and D of
the Understanding. Up to that point, there had yet to be full compliance by the EC.
Per the terms of the Understanding, there was an additional step to be taken."
470
7.130 Further, in its compliance challenge, the Un ited States challenges whether the current
European Communities' bananas import regime is in conformity with the covered agreements.
(v) Parties' conflicting communications to the WTO concerning the Bananas Understanding
7.131 Article 3.6 of the DSU provides that:
"Mutually agreed solutions to matters fo rmally raised under the consultation and
dispute settlement provisions of the covered agreements shall be notified to the DSB
and the relevant Councils and Committees, where any Member may raise any point
relating thereto."
7.132 In addition to conformity with the covered agreements, notification is the other main
requirement with regard to mutually agreed solutions under the DSU. The Panel notes that Article 3.6
of the DSU uses the passive voice, and it does not sp ecify whether the parties shall notify a mutually

468 Bananas Understanding, para. B, in EC – Bananas III , Notification of Mutually Agreed Solution
(WT/DS27/58), 2 July 2001, and EC – Bananas III , Communication from the United States (WT/DS27/59), 2
July 2001.
469 Written version of United States' opening statemen t during substantive meeting with the parties and
third parties, para. 14.
470 Ibid.

agreed solution separately or jointly, or whether notification by one of the parties to a mutually agreed
solution is sufficient, and if so, whether the complainant or the respondent shall make the notification.
7.133 Accordingly, the Panel does not address whet her the Bananas Understanding was notified
properly under Article 3.6 of the DSU or whether, as a result, this notification would affect whether it
could qualify as a mutually agreed solution. At the same time, the Panel considers that the explicit
notification requirement under Article 3.6 of the DSU is evidence of the importance that the DSU
attaches to the notification of mutu ally agreed solutions to the WT O. Thus, for the purposes of WTO
dispute settlement, the reaching of an alleged mutua lly agreed solution between parties to a dispute
needs to be complemented with notifying such agreement to all WTO Members. The indispensability
of this latter, multilateral element of mutually ag reed solutions is underscored by the requirement,
under Article 3.6 of the DSU, of notifying mutually agreed solutions not only to one WTO body or to
the WTO in general but to the "DSB and the re levant Councils and Committees", and also by the
explicit provision in Article 3.6 that in those bodies "any Member may raise any point relating
thereto."
7.134 Article 3.5 of the DSU, the provision immediately preceding Article 3.6, sets out two basic
requirements for "[a]ll solutions to matters form ally raised under the consultation and dispute
settlement provisions of the covered agreements": (i ) they "shall be consiste nt with [the covered]
agreements"; and, (ii) they "shall not nullify or impair benefits accruing to any Member under [the
covered] agreements, nor impede the attainment of any objective of those agreements."
7.135 The fulfilment of these two basic requirements of Article 3.5 of the DSU is an indispensable
multilateral element of "[a]ll solutions to matters formally raised under the consultation and dispute
settlement provisions of the covered agreements", including any alleged mutually agreed solution or
legally binding agreement that is intended to provi de a positive solution and effective settlement to a
dispute. Notification to the WTO membership is an additional multilateral element specific to
mutually agreed solutions because, unlike other solu tions to disputes, mutually agreed solutions are
usually not developed multilaterally.
7.136 It is a matter of fact that in this dis pute the European Commun ities sent to the DSB a
communication, dated 22 June 2001 entitled "Not ification of a Mutually Agreed Solution".
471
That communication stated that "[t]he European Communities (EC) wish to notify the Dispute
Settlement Body (DSB) that they have reached, with the United States of America and Ecuador, a
mutually satisfactory solution within the meaning of Article 3.6 of the DSU"
472, and it reproduced the
text of the Bananas Understanding. This communication by the respondent was closely followed by a
separate communication from the complainant, dated 26 June 2001, stating that the United States:
"[Had] received and reviewed the EC's separate notification of 22 June 2001, to the
Dispute Settlement Body (DSB) of our U nderstanding on banan as. As we have
explained to the EC during bilateral discussi ons last week and indicated at meetings
of the DSB, the Understanding identifies the means by which the long-standing
dispute over the EC's banana import regime can be resolved, but, as is obvious from
its own text, it does not in itself constitute a mutually agreed solution pursuant to
Article 3.6 of the DSU. In addition, in view of the steps yet to be taken by all parties,
it would also be premature to take this item off the DSB agenda"473 (emphasis added).
7.137 This latter communication by the United States also reproduced the text of the
Bananas Understanding, with the same language as the Bananas Understanding annexed to the

471 See EC – Bananas III, Notification of Mutually Agreed Solution (WT/DS27/58), 2 July 2001, p. 1.
472 See ibid.
473 EC – Bananas III, Communication from the United States (WT/DS27/59), 2 July 2001, p. 1.

European Communities' communication. Also, th e United States acknowledges that it signed the
Bananas Understanding. 474 Without assessing whether the Bananas Understanding is a mutually
agreed solution or legally binding agreement, th e Panel notes that these circumstances show that the
Bananas Understanding created an important bila teral link between the United States and the
European Communities. At the same time, these ci rcumstances also show that almost immediately
after the European Communities' attempt to accord a potential multilateral element to the
Bananas Understanding, the United States called in to question the multilateral status of that
Understanding and its role in definitively resolving the dispute.
7.138 As noted above, the Panel does not need to assess whether the Bananas Understanding was
notified properly under Article 3.6 of the DSU or whether, as a result, the Understanding could
qualify as a mutually agreed solution. However, the Panel notes that, under Article 3.6 of the DSU, so
far nearly all mutually agreed solutions have b een notified by the respondent and the complainant
(whether jointly or separately), with two exceptions where the mutually agr eed solution was notified
by the complainant only. 475 The Panel interprets this practice as illustrating the importance of the
complainant's involvement in, or at least its consen t to, not only the bilateral but also the multilateral
element, i.e. the notification to the DSB and relevant Councils and Committees, of any alleged
mutually agreed solution.
7.139 As mentioned earlier, under Article 3.5 of the DS U, "[a]ll solutions to matters formally raised
under the consultation and dispute settlement provisions of the covered agreements ... shall not nullify
or impair benefits accruing to any Member under [the covered] agreements". If a solution to a dispute
potentially affects the benefits accruing to WTO Me mbers, it is first and foremost the benefits
accruing to the complainant in the dispute that might be affected. This is particularly true for an
alleged mutually agreed solution or legally bind ing agreement that the respondent argues would bar
the complainant from bringing a challenge against a measure allegedly implementing a step set out in
such alleged mutually agreed solution or legally binding agreement.
7.140 The Panel notes that, immediately following the respondent's communication of the
Bananas Understanding to the WTO, the complainant in the dispute contested the multilateral status
of the Understanding and its role in definitively resolving the dispute. Accordingly, in the light of this
fact and of the requirement set out in Article 3.5 of the DSU for all solutions, it is difficult for the
Panel to see how the Bananas Understanding coul d provide a positive solution and an effective
settlement to the dispute.
7.141 It seems appropriate to assume that an allege d mutually agreed solution or legally binding
agreement that could bar the complainant from bringing a subsequent compliance dispute, would need
to provide a solution to the dispute for both parties, including in particular for the complainant, and
especially after the DSB established the inconsis tency with the covered agreement of measures
adopted by the respondent.
(vi) Remaining key arguments raised under this preliminary issue
7.142 The Panel will now turn to the remaining key ar guments raised under this preliminary issue,
namely: first, whether, through the Bananas Unde rstanding, the United States accepted the existence
of the ACP preference beyond 2005; and, second, the European Communities' arguments on good
faith.

474 See, for example, United States' first written submission, para. 7.
475 See Mexico – Certain Pricing Measures for Customs Valuation and Other Purposes ,
Communication from Guatemala (WT/DS298/2), 1 September 2005; and Colombia – Customs Measures on
Importation of Certain Goods from Panama , Notification of a Mutually Agreed Solution (WT/DS348/10),
7 December 2006.

Did the United States accept, through the Bana nas Understanding, the existence of the ACP
preference beyond 2005?
7.143 As noted earlier, one of the key argumen ts of the European Communities under this
preliminary issue is that, through the Bananas Understanding:
"The United States has entered into an in ternational agreement with the European
Communities accepting the existence of th e Cotonou Preference until the end of
2007."476
7.144 For the purposes of this compliance dispute, the relevant period is the one starting on
1 January 2006, when the European Communities introduced its current banana import regime,
contested by the United States. Accordingly, th e question is whether the European Communities
makes a prima facie case that, through the Bananas Understanding, the United States has accepted the
extension of the ACP preference beyond 2005.
7.145 The Bananas Understanding does not specify its period of applicability. While the
Understanding prescribes a step to be taken by the European Communities, the introduction of a tariff
only regime for imports of banan as, "no later than 1 January 2006" 477, it does not explicitly prescribe
any steps to be taken by the United States with effect beyond 2005.
7.146 In arguing that, through the Bananas Understandi ng, the United States has accepted the ACP
preference, the European Communities must be maki ng reference to the following step prescribed in
the Understanding for the United States:
"The United States will lift its reserve concerning the waiver of Article I of the
GATT 1994 that the EC has requested for preferential access to the EC of goods
originating in ACP States signatory to the Cotonou Agreement; and will actively
work towards promoting the acceptance of an EC request for a waiver of Article XIII
of the GATT 1994 needed for the management of quota C under the import regime
described in paragraph C(2) until 31 December 2005."
478
7.147 While this language in the Bananas Understanding might reflect an indirect acceptance of the
ACP preference until the end of 2005, it does not appear to mention any acceptance of the ACP
preference by the United States beyond 2005. Ind eed, the second element in the Understanding with
the United States referred to in the preceding paragr aph, relating to the waiver under Article XIII of
the GATT 1994 is explicitly limited to the end of 2005 . In other words, it cannot extend to the period
after 2005. Further, the first element of the step to be taken by the United States, relating to the
waiver under Article I of the GATT 1994, requires the United States to lift its reserve in the context of
a waiver requested by the European Communities.
7.148 The acceptance of that waiver request, like an y waiver request, does not depend only on one
Member, the United States, but on all WTO Members. The Bananas Understanding also comprises
the execution of phases and requires the implementation of several key features, which demand the
collective action of WTO Members.

476 European Communities' first written submission, para. 16.
477 Bananas Understanding, para. B, in EC – Bananas III , Notification of Mutually Agreed Solution
(WT/DS27/58), 2 July 2001, and EC – Bananas III , Communication from the United States (WT/DS27/59), 2
July 2001.
478 Ibid., para. E.

7.149 Since the United States could have accepted th e ACP preference only indirectly through
committing to lifting its reserve concerning a waiver request, the period for which the United States
might have indirectly accepted the ACP preference depends ultimately on the waiver being adopted
partly as a result of the United States' step under the Bananas Understanding.
7.150 The waivers ultimately adopted , namely the Doha waivers from Article I:1 and Articles
XIII:1 and XIII:2 of the GATT 1994 479, do not provide that it would unconditionally apply beyond
2005 in regard to bananas. Even the European Communities accepts that the Doha Waiver from
Article I:1 of the GATT 1994 sets out conditions for it s applicability to bananas in the period between
1 January 2006 and the overall expiration of the wa iver on 31 December 2007. In turn, the Doha
Waiver from Articles XIII:1 and XIII:2 of the GA TT 1994 expired by its own terms on 31 December
2005.
7.151 In the light of the above, the Panel finds th at the European Communities has not made a
prima facie case for one of its central arguments under this preliminary issue, namely that the United
States would have accepted, through the Bananas Understanding, the extension of the ACP preference
beyond 2005. As a consequence, the Panel fails to see how, as argued by the European Communities,
the United States would be prevented from bri nging this compliance dispute against the ACP
preference for the period starting on 1 January 2006.
7.152 This is underscored by the fact that one of th e main points of contention between the parties
to this compliance dispute concerns the conditions of the validity of the Doha Waiver from Article I:1
of the GATT 1994 to bananas in 2006-2007, a nd in particular the question whether the
European Communities effectively complied with the final step envisaged in the
Bananas Understanding and what implications that might have for the validity of the waiver for
bananas in 2006-2007.
Arguments by the European Communities concerning good faith
7.153 As mentioned earlier, the European Communiti es argues that "the principle of good faith ...
bars the United States from challenging the Cotonou Preference". 480 In the European Communities'
view:
"The deal between the parties would have been completely one-sided and unbalanced
if the United States were allowed first to reap all the benefits of the Understanding
(i.e., an EC import regime favourable to the US-based banana trading companies
between July 1, 2001 and December 31, 2005) and, after it had reaped all benefits, the
United States were allowed to avoid comp lying with its obligations towards the
European Communities (i.e., to allow the ex istence of the Cotonou Preference until
the end of 2007)."481
7.154 Further, the European Communities argues that:
"Granting to WTO Members the right to re nege on the agreements with which they
reach mutually agreed solutions to thei r disputes would seriously compromise the
effectiveness of these mutually agreed so lutions and would foster the 'contentious'

479 See Ministerial Conference, European Communities, The ACP – EC Partnership Agreement,
Decision of 14 November 2001 (WT/MIN(01)/15), 14 November 2001, and Ministerial Conference, European
Communities, Transitional Regime for the EC Autonomous Tariff Rate Quotas on Imports of Bananas, Decision
of 14 November 2001 (WT/MIN(01)/16), 14 November 2001.
480 European Communities' second written submission, para. 39.
481 Ibid., para. 13.

character of the dispute resolution system. This would be inconsistent with the
purpose of the DSU as reflected in Article 3.10 and with the principles enshrined in
Article 3.7 (where it is stated that mutually agreed solutions are to be preferred)."
482
7.155 The Panel starts by noting that the United St ates recognizes that the European Communities
has complied with its obligations for the first tw o interim phases set out in the Understanding (i.e.,
implementing an interim import regime for bananas on the basis of historical licensing as set out in
the annexes of the Understanding), and the Europ ean Communities recognizes that the United States
has complied with its main obligations under the Understanding (i.e., provisionally suspending its
imposition of increased duties to certain EC products and lifting its reserve concerning the adoption of
the waivers requested by the European Communities).
7.156 At the same time, both parties suggest that compliance with Bananas Understanding remained
partial. The United States contests whether the European Communities has complied with the third
phase set out in the Understanding (i.e., introducing a tariff only regime for imports of bananas). In
turn, the European Communities requests the Panel to enforce the Bananas Understanding, because in
its view the United States must now comply with "its obligations towards the European Communities
(i.e., to allow the existence of the Cotonou Preference until the end of 2007)".483
7.157 In view of the above, the European Communitie s' argument about an alleged parties' one-
sided compliance with the Bananas Understanding has limited relevance for assessing whether the
Bananas Understanding prevents the United States from bringing this compliance dispute.
7.158 Finally, as to the arguments of the European Communities on good faith, the Panel notes that
the United States is not challenging or questioning the Bananas Understanding itself, but rather is
challenging the conformity of the European Co mmunities' bananas import regime with the
European Communities' obligations under the WTO agreements.
7.159 As mentioned above, the Panel attaches great im portance to the conformity of an alleged
mutually agreed solution or legally binding agreement, including the future steps set out therein, with
the covered agreements, as well as to the possibili ty of the complainant to have recourse to WTO
dispute settlement to review the issue of conform ity. Nowhere in the Bananas Understanding has the
United States accepted that it would forego its right to challenge the conformity with the covered
agreements of any measure that the European Comm unities might take to implement a step set out in
the Bananas Understanding.
7.160 The Panel notes that in US – Offset Act (Byrd Amendment) the Appellate Body stated that
"there is a basis for a dispute settlement panel to determine, in an appropriate case, whether a Member
has not acted in good faith"484. However, the Appellate Body added that:
"Nothing ... in the covered agreements suppor ts the conclusion that simply because a
WTO Member is found to have violated a substantive treaty provision, it has
therefore not acted in good faith. In our view, it would be necessary to prove more
than mere violation to support such a conclusion."
485
7.161 Interpreting those considerations by the Appellate Body, the panel in Argentina –
Poultry Anti-Dumping Duties stated that:

482 European Communities' second written submission, para. 18.
483 Ibid., para. 13.
484 Appellate Body Report on US – Offset Act (Byrd Amendment), para. 297.
485 Ibid., para. 298.

"[T]wo conditions must be satisfied before a Member may be found to have failed to
act in good faith. First, the Member must have violated a substantive provision of the
WTO agreements. Second, there must be something 'more than mere violation'."
486
7.162 Article 3.10 of the DSU provides in relevant part that "if a dispute arises, all Members will
engage in these procedures in good faith in an effort to resolve the dispute." The
European Communities has not succeeded in making a prima facie case for the alleged violation of
that provision, let alone also for something "more than mere violation".
7.163 In the light of the above, the Panel rejects the European Communities' arguments concerning
good faith.
(vii) Conclusion
7.164 In the light of the foregoing analysis of the terms and context of the Bananas Understanding,
the Panel concludes that, even if the Bananas U nderstanding qualified as a mutually agreed solution
or a legally binding bilateral agreement at the ti me of its signature, it does not prevent the United
States from bringing this compliance dispute. The Panel therefore does not assess whether the
Bananas Understanding qualifies as a mutually ag reed solution or a legally binding bilateral
agreement, as argued by the European Communities. Nor does the Panel assess the arguments by the
European Communities that the Bananas Understandi ng would constitute applicable rules of law for
WTO dispute settlement.
7.165 In conclusion, the Panel considers that th e European Communities has not succeeded in
making a prima facie case in favour of its prelimin ary objection that the United States is barred from
challenging the ACP preference because of the Bananas Understanding signed between the United
States and the European Communities in April 2001. Accordingly, the Panel rejects this
European Communities' preliminary objection.
E. P
RELIMINARY OBJECTION OF THE EUROPEAN COMMUNITIES CONCERNING WHETHER THE
COMPLAINT BY THE UNITED STATES FALLS WITHIN THE SCOPE OF ARTICLE 21.5 OF THE DSU
1. Summary of Parties' arguments
(a) The European Communities' arguments
7.166 The European Communities "request s the Panel ... to reject the [United States'] complaint in
its entirety"487 because "the United States has erroneously brought this complaint under the procedures
of Article 21.5 of the DSU." 488 According to the European Comm unities, "[i]t is true that the
United States' challenge relates to a product (i.e., ba nanas) that was the subject of dispute resolution
between the United States and the European Commun ities in the past, culminating with the report of
the Appellate Body in 1997."489
7.167 However, the European Communities contends in its first written submission of
September 2007, "the import regime that [it] has in place today, and which the United States
challenges with the current proceedings, is not a 'm easure taken to comply' with the recommendations
and rulings of the DSB in 1997."
490 The European Communities argu es that, since its "current ...

486 Panel Report on Argentina – Poultry Anti-Dumping Duties, para. 7.36.
487 European Communities' first written submission, para. 52.
488 Ibid., para. 52.
489 Ibid., para. 47.
490 Ibid., para. 47.

banana import regime is not a 'measure taken to comply' with the 1997 rulings and
recommendations"
491, "[i]f the United States does indeed cons ider that the current banana import
regime violates the GATT, it should commence new proceedings on the basis of Article 6 of the
DSU."492 According to the European Communities:
"To hold otherwise would amount to allowing the use of Article 21.5 of the DSU in
order to challenge any measure relating to a product that has been the subject matter
of dispute resolution in the past. Such an abuse of Article 21.5 (and its expedited
procedures) would run against the nature and the object of Article 21.5 and the
findings of the Appellate Body in the Canada – Aircraft case."
493
7.168 According to the European Communities:
"It is settled law that the Article 21.5 pro ceedings can be used only to challenge the
legality of the ' measures taken to comply ' with the recommendations and rulings of
the DSB. They cannot be used to challenge the legality of ' any' measure taken by the
defending party, even if that measure relates to products that have been the subject of
dispute resolution procedures in the past.494"495
7.169 The European Communities concedes that "[f]o llowing a negative panel or Appellate Body
report, a defending party may take a number of initia tives that may affect the product market that was
the subject of the dispute." 496 However, "[t]he mere fact that these policy initiatives relate to a
product market that has been the subject of a disput e in the past does not suffi ce to characterize all of
these policy initiatives as 'measures taken to comply ' with the recommendations and rulings of the
DSB."497
7.170 Referring the report of the Appellate Body in US – Softwood Lumber IV
(Article 21.5 - Canada), the European Communities notes that:
"[T]he Appellate Body had f ound in its report ... that it is not 'up to the complaining
Member alone to determine what constitutes the measure taken to comply. It is rather
for the Panel itself to determine the ambit of its jurisdiction'. The Appellate Body
also found ... that 'to be sure, characterizing an act by a Member as a measure taken to
comply when the Member maintains otherwise is not something that should be done
lightly by a panel'."
498
7.171 According to the European Communities:
"[A] determination of whet her a particular measure constitutes a 'measure taken to
comply' should be based on (i) the agreement reached between the parties (in our case
the [Bananas] Understanding) and the rights and obligations undertaken in it (e.g., the
measures that bring the termination of the retaliation rights); (ii) the timing of the

491 European Communities' first written submission, para. 51.
492 Ibid.
493 Ibid.
494 (footnote original) See, for example, the Appellate Body report in Canada – Measures affecting the
export of civilian aircraft, Recourse by Brazil to Article 21.5 of the DSU , WT/DS70/AB/RW, dated
July 21, 2000 ("Canada – Aircraft"), at paragraph 36.
495 European Communities' first written submission, para. 46.
496 Final written version of the European Communities' opening oral statement at the substantive
meeting of the Panel with the parties and third parties, para. 5.
497 Ibid.
498 European Communities' response to Panel question No. 12.

various measures (e.g., was the decision to introduce the measure taken before the
negotiation of the [Bananas] Understanding or after); and (iii) on whether there is a
link between the DSB recommendations and rulings on the one hand and the
measures taken on the other."499
7.172 On the one hand, the European Communities id entifies specific measures it has taken since
1997 as measures taken to comply with the reco mmendations and rulings of the DSB in the
EC - Bananas III dispute in 1997. On the other hand, th e European Communities advances various
arguments contending that its cu rrent banana import regime, introdu ced on 1 January 2006, is not a
measure taken to comply.
(i) Alleged measures taken to comply identified by the European Communities
7.173 As to the measures allegedly taken to comp ly, the European Communities argues that it
"had already taken measures to comply with th e 1997 Appellate Body report in 1998, when it
introduced a different banana import regime than th e one found by the Appellate Body not to be in
compliance with the WTO rules." 500 The European Communities adds that "as far as the banana
dispute with the United States is concerned, the 'm easures taken to comply' with the findings and
recommendations of the Appellate Body in 1997 and the rulings and recommendations of the DSB in
1997 were taken by the European Communities in 2002."501 In particular:
"In compliance with the [Bananas Unde rstanding], the European Communities
introduced on January 1, 2002 the final 'measure taken to comply' with the 1997
Appellate Body report. This was the tariff-quota based import regime with the
characteristics agreed in Annex II of the [Bananas] Understanding. This was the
'measure taken to comply' that was agreed with the United States."
502
7.174 In response to the arguments of the United States about the relevance of paragraph B of the
Bananas Understanding503, the European Communities argues that:
"[T]he Understanding between the European Communities and the United States is
particularly relevant in determining whet her the current banana import regime is a
'measure taken to comply'. In particul ar, the rights and obligations undertaken by
both parties in the Understanding, the detaile d description of the import regime to be
implemented between 2002 and 2005 and the fact that the retaliation rights of the
United States would be terminated upon the European Communities' implementation
of the 2002-2005 import regime, taken toge ther, establish that the 2002-2005 import
regime was the 'measure taken to comply' that was agreed between the parties."504
7.175 Further, comparing its various bana nas import regimes addressed in the
Bananas Understanding, the European Communities points out that, in regard to the tariff-only regime
to be introduced on 1 January 2006, the Understanding:
"[M]akes simply a reference to that legislation and does not impose any relevant
obligation on either party (e.g., the Unders tanding does not provide for any particular
consequences for either party, if the tari ff only import regime is not introduced by

499 European Communities' response to Panel question No. 7.
500 European Communities' first written submission, para. 48.
501 Ibid., para. 50.
502 Ibid., para. 49.
503 See United States' response to Panel question No. 44.
504 European Communities' response to Panel question No. 4.

January 1, 2006). This is in stark cont rast with the 2002-2005 import regime, which
(i) is described in great detail in th e Understanding's two Annexes, (ii) its
implementation brings the termination of the United States' retaliatory measures, and
(iii) a potential non-implementation gave to the United States the right not to adhere
to the Understanding."
505
(ii) The current EC bananas import regime is not a measure taken to comply
7.176 The European Communities argues that its cu rrent bananas import regime, introduced on
1 January 2006, is not a measure taken to comply because the EC – Bananas III dispute ended before
2006 and its current bananas import regime do es not have the necessary linkage to the
1997 recommendations and rulings adopted by the DSB in the EC – Bananas III dispute.
The EC – Bananas III dispute ended before 2006
7.177 According to the European Communities, its dispute with the United States, "which had
culminated with the Appellate Body's report in 1997 and the United States' retaliation measures,
ended when the parties reached their 'mutually agreed solution' in 2001 and signed the
[Bananas] Understanding and exchanged the Le tters attached as an Exhibit to [the
European Communities' first written] submission." 506 Also, "the tariff-quota based import regime
with the characteristics agreed in Annex II of th e [Bananas] Understanding [and introduced by the
EC on 1 January 2002] ... was the 'measure taken to comply' that was agreed with the United States
and this was the end of the banana dispute between the parties."507
7.178 The European Communities notes that the preamble of:
"Council Regulation 2587/2001, adopted by the European Communities on
December 19, 2001, which introduced th e 2002-2005 banana import regime[,] ...
states that the Regulation introduces the measures resulting from:
'... numerous close contacts with supp lier countries and other interested
parties to settle the disputes ... and to take into account of the conclusions of
the panel set up under the dispute settlement system of the World Trade
Organisation (WTO).'
The European Communities notified this Regulation to the WTO on January 21, 2002
under the heading 'Status Report on the Implementation of the Recommendations and
Rulings in the Dispute regarding EC-Regime for the importation, sale and distribution
of bananas'. The notification states that 'by this Regulation the EC has implemented
Phase 2 of the Understandings with the United States and Ecuador'."
508
7.179 The European Communities adds that "the 'me asures taken to comply' with the findings and
recommendations of the Appellate Body in 1997 and the rulings and recommendations of the DSB in
1997 ... taken by the European Communities in 2002 ... were never challenged by the
United States."509 In particular, the European Communities argues that:

505 European Communities' response to Panel question No. 14.
506 European Communities' first written submission, para. 48.
507 Ibid., para. 49.
508 European Communities' response to Panel question No. 13.
509 European Communities' first written submission, para. 50.

"The United States and the European Comm unities agreed in the Understanding in
2001 that the 'measure taken to comply ' with the 1997 DSB recommendations and
rulings would be the 2002-2005 banana import regime. If the United States had
considered that the European Comm unities had failed to implement that
'measure taken to comply', the United St ates should have brought an Article 21.5
proceeding against that import regime at that time. However, the United States never
challenged the 2002-2005 banana import regime . This means that the dispute that
had led to the 1997 DSB recommendations and rulings was terminated upon the
European Communities' implementation of the measure agreed with the
United States."
510
7.180 Further, according to the Eur opean Communities, "the United States' retaliation rights
terminated upon the European Communities' implemen tation of this tariff-quota based regime and the
United States never requested from the DSB the right to reinstate those rights with relation to that
import regime."511 In particular, the European Communities points out that:
"The Understanding on Bananas provide d that, as of July 1, 2001, the
European Communities would implement an im port regime on the basis of historical
licensing and with certain characteristics de fined in Annex 1 of the Understanding. 512
Upon the European Communities' implementa tion of this regime, the United States
would provisionally suspend its retaliation measures."513
7.181 Furthermore:
"[According to the Bananas Understa nding, a]s soon as possible thereafter,
the European Communities would implement another import regime on the basis of
historical licensing with certain other characteristics defined in Annex 2 of the
Understanding.
514 Upon the European Communities' implementation of that regime,
the United States' right to suspend its concessions would be terminated. 515 The
deadline for the implementation of that regime was January 1, 2002. If the
European Communities failed to implement the new regime by that date, the
United States would have the right to re-impose their retaliation measures.516
The European Communities implemented the new import regime within the agreed
deadline and the United States ' right to suspend concessions was terminated. This
was the end of the banana dispute between the United States and the
European Communities.
517 The United States' agreemen t to have their retaliation
rights terminated confirms this point: the right to suspend concessions must be

510 European Communities' response to Panel question No. 16. See also European Communities' first
written submission, paras. 21 and 49.
511 European Communities' first written submission, para. 49.
512 (footnote original) See the Understanding, at paragraph C-1.
513 European Communities' first written submission, para. 22.
514 (footnote original) See the Understanding, at paragraph C-2.
515 (footnote original) See the Understanding, at paragraph D-2.
516 (footnote original) See the Understanding, at paragraph D-3.
517 (footnote original) See the Status Report on the Implementation of the Recommendations and
Rulings in the Dispute regarding European Communities – Regime for the Importation, Sale and Distribution of
Bananas, WT/DS27/51/Add.25, distributed to the WTO on January 21, 2002.

revoked once the defending WTO Member has fully complied with the DSB's
recommendations and rulings.
518"519
7.182 According to the European Communities, under the Bananas Understanding:
"The only case in which the United States would re-impose retaliatory measures was
if the Phase II regime [set out in paragra ph C-2 of the Bananas Understanding] '(did)
not enter into force by 1 January 2002'. [T]he fact that the United States accepted to
have their retaliation rights termin ated upon the implementation of the
tariff-quota-based import regime described in paragraph C-2 of the
[Bananas] Understanding confirms that the implementation of that import regime was
the agreed 'measure taken to comply'."
520
7.183 Further, "[t]he fact that the Understanding provided for the termination and not for the
continuation of the suspension of the retaliation rights of the United States after January 1, 2002
confirms that there was no dispute between the United States and the European Communities after
that date."521
7.184 The European Communities adds that:
"Article 22.8 of the DSU provides that retaliation measures must be terminated 'when
a mutually agreed solution is reached'. In the present case, the United States agreed
to terminate its retaliation measures upon implementation of phase 2 of the
[Bananas] Understanding, i.e., the introduction of the 2002-2005 import regime. This
is further evidence that the tariff only regi me to be introduced in 2006 was not 'a
measure taken to comply'."
522
7.185 The European Communities also argues that "the issue of the implementation of
the EC-Bananas III DSB recommendations and rulings was withdrawn from the DSB's agenda with
the consent of all WTO members (including the Un ited States), in accordance with Article 21.6 of
the DSU."
523 Accordingly, the European Communities contends:
"[A] compliance panel is excluded when a di spute has been settled. In fact, such a
dispute is considered resolved once and for a ll. This is evidenced by the wording of
Article 21.6 of the DSU, which specifies that the issue of implementation of the
recommendations or rulings of the DSB stays on its agenda 'until the issue is
resolved'. This obviously means that a di spute taken off the agenda is considered
resolved."
524
No linkage to the DSB recommendations and rulings of 1997
7.186 The European Communities points out that " it is generally accepted that Article 21.5
establishes a link between the 'measures taken to co mply' and the recommendations and rulings of the
DSB and that the determination of the scope of the 'measures taken to comply' should involve an

518 (footnote original) See the Handbook on the WTO Dispute Settlement System, A WTO Secretariat
Publication prepared for publication by the Legal Affairs Division and the Appellate Body, Cambridge
University Press, at page 81.
519 European Communities' first written submission, paras. 23-24.
520 European Communities' second written submission, para. 44.
521 European Communities' comments on United States' response to Panel question No. 22.
522 European Communities' response to Panel question No. 8.
523 European Communities' response to Panel question No. 20.
524 Ibid.

examination of the recommendations and rulings c ontained in the original report adopted by the
DSB.525"526 However, the European Communities contends, "there is no link between the
recommendations and rulings of the DSB [adopted in 1997] and the political decision of the
European Communities to introduce a tariff-only import regime by January 1, 2006."
527
7.187 Invoking the report of the Appellate Body in US – Softwood Lumber IV
(Article 21.5 - Canada), the European Communities argues that "in determining whether a challenged
measure is indeed a 'measure taken to comply', a pa nel must 'scrutinize the relationships' between the
challenged measure and the DSB recommendations and rulings." 528 Further, the
European Communities notes that "[t]he Appellate Body found ... that the determination 'may,
depending on the particular facts, call for an examination of the timing, nature and effects of the
various measures', as well as 'the factual and le gal background against which a declared "measure
taken to comply" is adopted'."529
7.188 According to the European Communities:
"In the 1990s, the European Communities had in place a completely different banana
import regime. That regime was based on the allocation of tariff quotas to various
groups of banana exporting countries, coupled with a licensing system for the banana
traders."530
7.189 Further, "the current banana import regime is radically different in design and effect from the
2002-2005 system, which ... was a 'measure taken to comply'."531
7.190 The European Communities also argues that:
"A careful analysis of the findings a nd recommendations of the Appellate Body
report in the EC–Bananas III case does not reveal any element that could support a
conclusion that the European Communities was obliged to move into a tariff only
regime in order to bring itself into complia nce with the covered agreements. Quite to
the contrary, the findings and recommendati ons of the Appellate Body allowed the
European Communities to bring itself in to compliance through the adoption of a
revised, tariff-quota-based import regime with a different allocation of quotas and
import licenses. There is no single finding or recommendation of the Appellate Body
that could be complied with only through the introduction of a tariff only import
regime."
532
7.191 Likewise, in response to the argument of th e United States that the Bananas Understanding
"contemplated a series of steps that would culminat e with the introduction of a 'tariff only' regime by
January 1, 2006"533, the European Communities argues that "the [Bananas] Understanding does not

525 (footnote original) See, for example, the report of the Appellate Body in United States – Sunset
reviews of anti-dumping measures on oil country tubular goods from Argentina, Recourse to Article 21.5 by
Argentina, dated April 12, 2007 ("US – OCTG (Article 21.5) AB"), at paragraph 142.
526 European Communities' second written submission, para. 45.
527 Ibid.
528 European Communities' response to Panel question No. 12.
529 Ibid.
530 European Communities' first written submission, para. 18.
531 Final written version of the European Communities' closing oral statement at the substantive
meeting of the Panel with the parties and third parties, para. 6.
532 European Communities' second written submission, para. 45.
533 United States' second written submission, para. 46.

contain any express provision imposing on the European Communities the obligation to implement a
tariff only regime."
534 The European Communities adds that:
"Paragraph B [of the Bananas Understandi ng], to which the United States refers,
makes a simple reference to a provision of the European Communities' secondary
legislation, which reflected the political decision of the European Communities to
change its banana import regime. This political decision had already been taken
before the signing of the Understanding between the United States and the
European Communities and their reaching an agreement on the appropriate 'measures
taken to comply'. This is confirmed by the fact that paragraph B refers to an already
existing piece of European Communities' legi slation. Therefore, the United States
wrongly asserts in ... its [second] written submi ssion that the parties agreed in the
[Bananas] Understanding that the tariff only regime would be a part of the 'measure
taken to comply'. In light of the difficul ties faced with the administration of the TRQ
regime, the European Communities had indeed taken the decision to move to a more
simplified tariff-only system over time."
535
7.192 According to the European Communities:
"The first piece of legislation providing for the introduction of a tariff-only banana
import regime was Council Regulation 216/2 001. However, the services of the
European Communities had started discussing the introduction of a tariff only banana
import regime even earlier. It is remi nded that the Council Regulation establishing
the common market in bananas required the European Commission to submit by 2001
proposals about the organisation of the common market after the end of 2002."536
7.193 Further:
"[T]he fact that the European Commun ities introduced a tariff-only regime on
January 1, 2006, in accordance with the provisions of Regulation 216/2001, does not
have any legal significance for the Eur opean Communities' relations with the
United States. The European Communities simply implemented its own legislation in
accordance with its provisions."537
7.194 According to the European Comm unities "if one looks at the general trend of modernisation
and liberalisation of the European Communities' co mmon agricultural policy, one may conclude that
the tariff-only banana import regime would have b een introduced even in the absence of any dispute
resolution proceedings in the banana sector, as it has been done in other product sectors."538
7.195 In response to a question by the Panel, th e European Communities states that it agrees 539 with
the argument raised by the ACP third parties that:
"Article 21.5 proceedings must necessarily be initiated within a reasonable period of
time from the date the recommendations and rulings to bring the matter into

534 European Communities' second written submission, para. 43.
535 Ibid. The European Communities also argues th at "[t]he introduction of the tariff-only import
regime was decided by the European Communities at least 2 years before the signing of the
[Bananas] Understanding." Final written version of the European Communities' closing oral statement at the
substantive meeting of the Panel with the parties and third parties, para. 6.
536 European Communities' response to Panel question No. 72.
537 European Communities' response to Panel question No. 14.
538 European Communities' second written submission, para. 45.
539 See European Communities' response to Panel question No. 10.

conformity with WTO obligations were adopted. In the present case,
the recommendations and rulings of the Panel and the Appellate Body in the original
dispute were adopted by the DSB in September 1997. Ten years can hardly be
regarded as a reasonable period of time."
540
7.196 Also, in response to the argument of the United States summarized by the
European Communities as "an assertion that the Pr eamble of Regulation 1964/2005 refers to the
arbitrations held in 2005 within the context of the Doha waiver and, hence, Regulation 1964/2005
must be considered as a measure taken to comply with the recommendations and rulings adopted by
the DSB in 1997" 541, the European Communities contends that "this point [does not] suffice ... to
establish a link between the tariff only regime and the recommendations and rulings of the DSB in
1997."542 First:
"[T]he arbitrations were part of the waiver granted by the WTO to the
Cotonou Agreement. The Cotonou Agreement was only signed in 2000, i.e.,
three years after the adoption of the DSB's recommendations and rulings. It is
difficult to see how a Regulation adopted to conform to the terms of a waiver relating
to an international agreement reached in 2000 can be said to be a 'measure taken to
comply' with a DSB ruling adopted in 1997."
543
7.197 Second, the European Communities maintains that "the subject matter of the 2005 arbitrations
has no relation to the 1997 DSB recommendations and rulings." 544 According to the
European Communities:
"[T]he Appellate Body had found in 1997 th at certain aspects of the then applicable
import regime of the European Commun ities violated certain WTO rules and,
therefore, nullified or impaired certain benefits accruing to the complaining WTO
Members. In contrast, the 2005 arbitrations sought to determine whether the new
import regime of the European Communities w ould at least maintain the total market
access that the MFN banana exporting countri es enjoyed under the old regime. In a
sense, the two subject matters can be said to be conflicting: the 1997 dispute aimed at
preserving the WTO rights of the complainants, while the 2005 arbitrations aimed at
simply preserving the conditions of access to the EC market which the complainants
and all other MFN suppliers were enjoying under the former TRQ regime. Therefore,
a Regulation adopted to conform to the ai ms of the 2005 arbitration cannot be a
'measure to comply' with the findings of the 1997 dispute."
545
7.198 Third, the European Communities argues that "the arbitration arrangement supports the
proposition that the tariff-quota-based import regime that was in place between January 1, 2002 and

540 ACP Countries' third party written submission, pa ra. 65. See also European Communities' second
written submission, para. 43.
541 European Communities' second written submission, para. 46. The United States originally
formulates that argument in the followi ng way: "The fifth clause in the preamble to EC Regulation 1964 itself
states that the measures are being ta ken in an effort to rectify the matter which the two Article I waiver Annex
arbitrations found inconsistent with that Annex. The Article I waiver and Annex are inextricably linked to the
Understandings, which are in turn inextricably linke d to the recommendations and rulings of the DSB in
Bananas III." United States' second written submission, para. 48.
542 European Communities' second written submission, para. 47.
543 Ibid.
544 Ibid., para. 48.
545 Ibid.

December 31, 2005 was the 'measure taken to comp ly' with the DSB recommendations and rulings of
1997."
546 According to the European Communities,
"The aim of the arbitrations was to 'm aintain the total market access of the MFN
suppliers' at its 2002 to 2005 level. This strongly suggests that the level of MFN
market access between 2002 and 2005 was satis factory for the MFN suppliers. This
also strongly suggests that whatever ma rket access problems the MFN suppliers had
at the time the DSB adopted its recommenda tions and rulings in 1997, had already
been corrected by 2002–2005. Indeed, if th e MFN suppliers were not satisfied with
their market access of 2002–2005 (as they were not satisfied with their market access
in 1997), why would they insist that the level of their 2002–2005 market access be
preserved? The fact that the import regime implemented by the
European Communities between 2002 and 2005 satisfied the MFN suppliers' market
access interests supports the conclusion that the import regime implemented by the
European Communities between 2002 and 200 5 was the 'measure taken to comply'
with the DSB recommendations and rulings of 1997."547
7.199 In response to the United States invoking various EC statements and press releases 548,
the European Communities points out that "none of these statements refer to the tariff-only system
introduced in 2006 as a 'measure taken to comply ' with the DSB's recommendations and rulings in
Bananas III."549 Rather, "[t]hose statements use terms such as 'to resolve this long-standing dispute',
'settling the longstanding WTO dispute', 'to put an end to the longstanding bananas dispute', and the
like."550 However, the European Co mmunities sees a "difference in meaning [between] 'settling a
dispute' and 'compliance' with DSB's recommendations and rulings" 551 because "[a] WTO Member
might well be ready to go 'beyond' what is necessary for compliance, in order to avoid future disputes
on a particular subject matter." 552 Referring to the Bananas Understanding, the
European Communities argues that:
"[I]t is undisputed that a mutually agreed solution may contain elements beyond those
necessary for compliance with the recommendati ons and rulings of the DSB. It is
also possible that a complaining party may demand less that full compliance or be
satisfied with some other measure than compliance. The European Communities
considers that once a complaining party has settled a dispute, through any measures it
has agreed to, such party may not bring Article 21.5 proceedings."553
7.200 Further:
"In any case, the European Communities does not consider that the Panel can take
into consideration excerpts of public rela tions statements, prepared by the press
service of the European Communities in different contexts and addressed to the
general public. The European Communities c onsiders that such press statements, by
their very nature, cannot contain authoritative interpretations of complex legal issues.
They are usually prepared by non-lawyers and aim to present to the general public a
short and simplified version of a situation that is difficult to grasp and analyse,

546 European Communities' second written submission, para. 49.
547 Ibid.
548 See United States' second written submission, para. 49; and Exhibit US-8.
549 European Communities' second written submission, para. 50.
550 Ibid.
551 Ibid.
552 Ibid.
553 European Communities' response to Panel question No. 8.

sometimes even by legal specialists of the field. Therefore, their content cannot be
used to replace proper legal analysis under the DSU."554
7.201 According to the European Communities, "[t]he credibility of the DSU can only be preserved
if panels and the Appellate Body base their findings on a solid analysis of the law and the facts and
not on an analysis of unrelated statements made by the parties in a completely different context."555
7.202 Accordingly, the European Communities "requ ests the Panel to disregard all press releases
and the invitations to public consultation submitted by the United States."556
7.203 In response to a question by the Panel, the European Communities states that it agrees with
the following argument by the ACP third par ties and "pleads them in the alternative" 557 to the
European Communities' other arguments:
"To the extent that the dispute relates to a measure which has been adopted pursuant
to the Doha waiver and other legal instru ments which came into existence only after
an earlier dispute, such measure cannot be regarded as being a measure taken to
comply with the recommendations and rulings of the DSB adopted in the pre-existing
earlier dispute."
558
7.204 The European Communities notes that "the Un ited States invites the Panel to determine
whether the current banana import regime of th e European Communities remains covered by the
Doha waiver."559 However, according to the European Communities,
"Such determination depends exclusively on the interpretation of the conditions set
by the Doha waiver and, therefore, it is unr elated to 'compliance with DSB rulings'.
The conditions imposed by the waiver in relation to the new tariff-only regime are the
result of negotiations that were not related to the DSB rulings and the
European Communities' compliance with th em. Therefore, a dispute over the
continued existence of the Doha waiver should have been brought under a new
dispute settlement case and not as a case under Article 21.5 of the DSU."560
7.205 In response to the argument by the United St ates that "the Panel should take the EC's
argument [in the parallel compliance proceeding brought by Ecuador in 2007] that its current bananas
regime implements a suggestion by the complianc e panel in Bananas III as a concession by the
EC that the measure taken by the EC on Janua ry 1, 2006 is directly linked to the DSB's
recommendations and rulings"561, the EC responds that:
"[I]n reaching any finding under the current proceedings, the Panel should not and
cannot take into consideration any proc eedings between the European Communities

554 European Communities' second written submission, para. 50.
555 Final written version of the European Communities' opening oral statement at the substantive
meeting of the Panel with the parties and third parties, para. 8.
556 European Communities' second written submission, para. 50.
557 European Communities' response to Panel question No. 11.
558 ACP Countries' third party written submission, para. 94.
559 European Communities' response to Panel question No. 11.
560 Ibid.
561 Final written version of the European Communities' opening oral statement at the substantive
meeting of the Panel with the parties and third parties, para. 16.

and parties other than the United States, such as the Article 21.5 proceedings
requested by Ecuador in 1999. To do otherwise, would lead to inequitable results."
562
7.206 In particular, the European Communities argues that:
"[T]he United States cannot rely on the findi ngs or suggestions of the first Ecuador
Article 21.5 Panel. The United States cannot be harmed by those findings and
suggestions. It is only fair that the Un ited States should not derive any benefit from
them either."563
7.207 Moreover, "the European Communities cons iders that the Panel cannot take into
consideration in the current proceedings the claims and defences advanced in the proceedings brought
by Ecuador."564
(b) The United States' response
7.208 The United States "requests that the Panel find th at ... the EC has failed to comply with the
recommendations and ruling of the DSB" 565, namely "the recommendations and rulings adopted by
the Dispute Settlement Body on September 25, 1997 566"567, "includ[ing] the findings of
inconsistencies of the EC's bananas regi me as well as the recommendation that the
European Communities 'bring the measures found in this Report and in the Panel Reports, as modified
by this Report, to be inconsistent with the GATT 1994 and the GATS into conformity with the
obligations of the European Communities under those agreements.'568"569
7.209 The United States contends that the "tariff and tariff rate quota measures [introduced by the
European Communities in 2006] fail to bring the EC into compliance with the Bananas III
recommendations and rulings and its WTO obligations."570 The United States argues that:
"After almost ten years from the adoption by the DSB of its recommendations and
rulings in European Communities - Regime for the Importation, Sale and Distribution
of Bananas ('Bananas III')571, and many opportunities for reform afforded to the
EC by the United States and other affected Members, the EC has yet to implement the
DSB's recommendations and rulings with a WTO compliant import regime for
bananas."
572
7.210 The United States notes that "[o]n January 1, 2006, the EC implemented a new regime for
importation of bananas through Council Regul ation (EC) No. 1964/2005 ('Regulation 1964') 573."574
However, according to the United States, "[t]his lat est regime continues to discriminate in favor of

562 European Communities' response to Panel question No. 78.
563 European Communities' comments on United States' response to Panel question No. 42.
564 European Communities' response to Panel question No. 78.
565 United States' first written submission, para. 49.
566 (footnote original) WT/DSB/M/37 (4 November 1997).
567 United States' response to Panel question No. 5.
568 (footnote original) Bananas III (AB), WT/DS27/R/USA, para. 257.
569 United States' response to Panel question No. 5.
570 United States' first written submission, para. 3.
571 (footnote original) Adopted 25 September 1997, WT/DSB/M/37 (4 November 1997).
572 United States' first written submission, para. 1.
573 (footnote original) Council Regulation (EC) No. 1964/2005, OJL 316/1, 2 December 2005,
amending Council Regulation (EEC) No. 404-93, OJL 47/1, 25 February 1993. Exhibit US–1.
574 United States' first written submission, para. 2.

imports of bananas originating in African, Cari bbean and Pacific ('ACP') countries and against
imports of bananas from other countries."575
7.211 Accordingly, the United States requests that the Panel reject the EC's preliminary objection
that "Regulation 1964 is not a 'measure taken to comply' with recommendations and rulings of the
DSB and therefore not within the scope of Understanding on Rules and Procedures Governing the
Settlement of Disputes ('DSU') Article 21.5.576"577 The United States adds that it:
"[W]as a party to the original Bananas III proceeding. It therefore has full rights to
ensure that the EC complies with the recommendations and rulings of the DSB."578
(i) The current EC bananas regime is a measure taken to comply
7.212 The United States asserts that:
"[T]he bananas import regime implemented by the European Communities on
January 1, 2006 is a 'measure taken to co mply with the recommendations and rulings'
of the Dispute Settlement Body ('DSB') and is therefore properly before this Panel
under Article 21.5 of the Understanding on Rules and Procedures Governing the
Settlement of Disputes ('DSU')."579
7.213 The United States describes that import regime in the following manner:
"On January 1, 2006, the European Comm unities implemented a revised regime for
the importation of bananas through Council Regulation (EC) No. 1964 of 2005.
Article 1 of Regulation 1964 contains two elements. Paragraph 1 establishes that
from January 1, 2006, the most-favored-nati on, or MFN, tariff rate for bananas will
be set at 176 euros per ton. Paragraph 2 creates an exception to this MFN rate by
establishing a duty-free tariff rate quota of up to 775,000 tons per year available
exclusively to bananas originating in the African, Caribbean and Pacific countries or
ACP countries. MFN-origin bananas have no right to enter under the zero-duty ACP
tariff rate quota."
580
7.214 The United States agrees with European Communities that:
"The text of Article 21.5 is clear that is applies where 'there is disagreement as to the
existence or consistency with a covered ag reement of measures taken to comply with
the recommendations and rulings' of the DSB. It is thus correct that Article 21.5
proceedings are limited to challenges rega rding the existence or consistency of
'measures taken to comply,' not 'any' measure."
581
7.215 However, "the United States recalls that, as th e Appellate Body has noted, '[p]anels and the
Appellate Body alike have found that what is a "measure taken to comply" in a given case is not

575 United States' first written submission, para. 2.
576 (footnote original) EC First Written Submission, paras. 46-52.
578 Final written version of the United States' closing oral statement at the substantive meeting of the
Panel with the parties and third parties, para. 3.
579 Final written version of the United States' opening oral statement at the substantive meeting of the
Panel with the parties and third parties, para. 2.
580 Ibid., para. 3.
581 United States' response to Panel question No. 39.

determined exclusively by the implementing Member.'
582"583 Also, "an implementing Member's
designation of a measure as one taken to comply, or not, is not determinative.584"585
7.216 The United States does not contest the EC argument that introducing a tariff-only bananas
import regime was not the only way for the Eu ropean Communities to comply with the DSB
recommendations and rulings of 1997 in the EC – Bananas III dispute. However, the United States
contends that:
"The EC argument turns the idea of 'mea sure taken to comply' on its head.
The EC argues that any time there is more than one way to come into compliance,
none of the options will ever be a 'measu re taken to comply' because the responding
Member could have made another choice in stead. That is fundamentally wrong.
A complaining Member must be able to have a panel look at the choice the
responding Member actually made."586
7.217 The United States notes that "[t]he recommendation of the Appellate Body was for the EC to
'bring the measures found in this Report and in the Pa nel Reports, as modified by this Report, to be
inconsistent with the GATT 1994 and the GATS in to conformity with the obligations of the
European Communities under those agreements.'" 587 Thus, the United States contends, "[c]ertainly a
WTO-consistent tariff only regime would be consistent with this recommendation."588
7.218 The United States also argues that "[t]he or iginal determination and original panel
proceedings, as well as the redetermination and the pane l proceedings under Article 21.5, form part of
a continuum of events.'589 According to the United States:
"Whether taken together or separately, th e EC's own declarations, the factual and
legal continuum of EC actions since Bananas III (including the various legal
instruments adopted by the EC), and the banana measures currently in force establish,
with unmistakable clarity, that the EC's 2006 banana regime, set out in
Regulation 1964, constitutes a 'measure taken to comply' with Bananas III
recommendations and rulings and is therefore within the scope of this Panel's purview
pursuant to DSU Article 21.5."590
7.219 According to the United States, there has been a continuum of events leading to the current
EC bananas import regime, such that it would th erefore qualify as a measure taken to comply:
"the circumstances leading up to Regulation 1964 establish a series of steps on the part of the

582 (footnote original) Appellate Body Report, United States – Final Countervailing Duty
Determination with Respect to Certain Softwood Lumber from Canada , WT/DS257/AB/RW, adopted
20 December 2005, para. 73.
583 United States' comment on the European Communities' response to Panel question No. 14.
584 (footnote original) United States – Final Countervailing Duty De termination with Respect to
Certain Softwood Lumber from Canada, WT/DS257/AB/RW, adopted 17 February 2004, para. 73.
585 Final written version of the United States' opening oral statement at the substantive meeting of the
Panel with the parties and third parties, para. 4.
586 United States' response to Panel question No. 42.
587 Ibid.
588 Ibid.
589 (footnote original) Mexico - Anti-Dumping Investigation of High Fructose Corn Syrup (HFCS) from
the United States (21.5) (WT/DS132/AB/RW), para. 121.
590 United States' second written submission, para. 52.

EC since 1999 leading towards compliance with the Bananas III recommendations and rulings by
means of a tariff-only regime to be installed no later than January 2006.591"592
7.220 In particular, the United States notes that:
"On September 25, 1997, the DSB adopted th e panel and Appellate Body reports in
Bananas III and recommended that the EC bring its measures into compliance. The
EC stated that it could not do so immediately, and an arbitrator acting under
Article 21.3 of the DSU determined that th e EC would have fifteen months and one
week to bring itself into compliance – that is until January 1, 1999. By that date, the
EC implemented two regulations, consisting of a discriminatory tariff rate quota and a
license-based system. These two regulations were then found in breach of the
GATT 1994 and the GATS by a compliance panel established at the request of
Ecuador and by an arbitrator reviewing a US request for authorization to suspend
concessions. The DSB adopted the report of the Article 21.5 panel on May 6, 1999,
again recommending that the EC bring itself into compliance. The DSB authorized
the United States to suspend concessions on April 19, 1999."
593
7.221 Subsequently:
"In November of 1999, in its status repor t regarding implementation of the DSB's
recommendations concerning its banana import regime, the EC representative
announced a new compliance proposal. This proposal would include a 'two-stage
process' involving a transitional period with a preferential tariff rate quota system for
ACP countries, followed by a flat tariff.
594 At the meeting, many concerns were
raised about the lack of details of the pr oposal and the perpetuation of discrimination
between Latin American and ACP suppliers."595
7.222 The United States lays great emphasis on that status report by the European Communities:
"As part of its status report on November 19, 1999, required under Article 21.6 of the
DSU, the EC announced to the entire WTO Membership a second attempt to reform
its banana regime. As reflected in th e DSB minutes, this 'proposal to modify
[the EC's] banana import regime' was to comprise a 'two-stage process, namely, after
a transitional period during which a tari ff quota system would be applied with
preferential access for ACP countries, a flat tariff would be introduced.'
596
This description shows that the measures comprising this 'two-stage process' – a
transitional period with quotas, with a flat-t ariff at the end – were intended to be
measures taken to comply."
597

591 (footnote original) See EC Statement to the Dispute Settlement Body on 19 November 1999,
WT/DSB/M/71, 11 January 2000; EC Press Release : "Commission gives new impetus to resolve banana
dispute," IP/00/707, 5 July 2000.
592 United States' second written submission, para. 50.
593 Final written version of the United States' opening oral statement at the substantive meeting of the
Panel with the parties and third parties, para. 5.
594 (footnote original) WT/DSB/M/71, 11 January 2000, page 2.
595 Final written version of the United States' opening oral statement at the substantive meeting of the
Panel with the parties and third parties, para. 6.
596 (footnote original) Minutes of Meeting of the Dispute Settlement Body held on 19 November 1999,
WT/DSB/M/71 (11 January 2000).
597 United States' response to Panel question No. 4.

7.223 The United States adds that:
"[T]he EC's statement to the DSB on that date concludes with the following
assessment by the EC of its two-stage proposal: 'The EC believed that its proposal
provided the best outcome to this dispute.'"
598
7.224 The United States notes that "[a]fter two years of continued non-compliance, in April 2001
the EC reached the Understanding on Bananas with the United States, and a very similar one with
Ecuador."599 The United States points out that:
"Consistent with the proposal that the EC had laid out in November 1999, the
[Bananas] Understanding set out a 'two-stage process', with a transitional period with
tariff rate quotas granting preferential treatment for the ACP countries and the
introduction of a 'Tariff Only regime for im ports of bananas no later than 1 January
2006.'"600
7.225 While the United States does not consider th e Bananas Understanding a mutually agreed
solution601, it "readily acknowledges the Understanding's direct relevance for purposes of establishing
that the EC's current bananas import regime is a me asure taken to comply with the DSB's rulings and
recommendations."602
7.226 The United States argues that "[t]he Understanding is an important fact in the procedural
history of this dispute, as it set out the roadmap through which the United States and Ecuador
expected that the bananas dispute would be finally resolved."
603
7.227 The United States adds that "[i]t is interesting that while the EC argues that the Understanding
precludes the United States from bringing this claim at all using arguments not based on the text of
the Understanding or any well-founded legal basis, it would ignore the plain meaning of the text."604
7.228 Turning to the text of the Bananas Understanding, the United States argues that:
"The Understanding laid out a series of step s, over multiple years, through which the
EC would bring itself into compliance. Paragraph A of the [Bananas] Understanding
serves as the introduction for the steps th at follow which 'identified the means by
which the long-standing dispute over the EC 's banana import regime [could] be
resolved.'
605"606

598 United States' comment on the European Communities' response to Panel question No. 4.
599 Final written version of the United States' opening oral statement at the substantive meeting of the
Panel with the parties and third parties, para. 7.
600 United States' response to Panel question No. 4.
601 The United States maintains that "[r]epeated efforts at negotiating a WTO-consistent and mutually
acceptable solution with the EC have been unsuccessful." United States' first written submission, para. 1.
602 United States' response to Panel question No. 44.
603 Final written version of the United States' opening oral statement at the substantive meeting of the
Panel with the parties and third parties, para. 7.
604 Ibid. See also United States' response to Panel question No. 46.
605 (footnote original) US – EC Understanding on Bananas, para. A. WT/DS27/59, G/C/W/270.
606 Final written version of the United States' opening oral statement at the substantive meeting of the
Panel with the parties and third parties, para. 8.

7.229 In turn:
"Paragraph B [of the Bananas Understanding] states that the EC 'will introduce a
Tariff Only regime for imports of bananas no later than 1 January 2006.' [A]lthough
chronologically this would have been the last step to be taken, it is the first step
outlined in the Understanding. ... [T]his was a central element in the 'means by which
the long-standing dispute over the EC's ba nana import regime can be resolved,'
[namely] ... that there would be a continuum of actions to be taken, culminating with
this step. This would have been the final action to be taken in bringing the EC regime
into compliance."
607
7.230 Furthermore:
"Paragraph C [of the Bananas Understanding] be gins with 'in the interim'. That is,
before taking the final step set out in para graph B, there were a series of other steps
that needed to be taken. Paragraph C, in conjunction with Annex I, goes on to detail
the interim licensing regime the EC would use between July 1, 2001, and December
31, 2005. These steps were 'interim' b ecause they still discriminated between WTO
Members, as evidenced inter alia by the fact that the EC recognized that it would
need waivers of Article I and XIII of the GATT 1994."608
7.231 The United States notes that:
"Paragraph D [of the Bananas Understanding] then deals with steps the United States
would take, in response to the successful completion of interim steps by the EC, with
respect to the US suspension of concessions against EC exports."
609
7.232 In turn:
"Paragraph E [of the Bananas Understanding] provides that the United States would
lift its reserve concerning the waiver of the EC's WTO obligations under GATT 1994
Article I for ACP-origin bananas. In add ition, the United States would work towards
promoting the acceptance by the WTO membership of the request for the Article XIII
waiver that would be needed fo r the management of quota C until
December 31, 2005."610
7.233 The United States emphasizes that:
"[P]er the terms of the Understanding, th e measures taken to comply with the DSB
recommendations included a series of interim steps and a final step on
January 1, 2006 – that is, the introduction of a tariff only regime. The interim regime
between July 1, 2001, and December 31, 2005, was a measure taken to comply, and
the regime that the EC introduced on January 1, 2006, which it claims to be a
tariff-only regime, is also a 'measure taken to comply.'"
611

607 Final written version of the United States' opening oral statement at the substantive meeting of the
Panel with the parties and third parties, para. 9.
608 Ibid., para. 10.
609 Ibid., para. 11.
610 Ibid., para. 12.
611 Ibid, para. 13.

7.234 Further, as regards the timing of the introducti on of the current EC bananas import regime,
the United States agrees
612 with the argument of Nicaragua and Panama that:
"The [Bananas] Understanding called for a Tariff-Only regime by 1 January 2006 in
order to come into compliance with Bana nas III. Regulation 1964 took effect
precisely on 1 January 2006 in order to put into force a 'tariff only' regime. 613
The timing of the current compliance meas ures, thus, fulfilled the Understanding's
compliance timeline."614
7.235 According to the United States, there is a cl ose link between the Bananas Understanding and
the various EC internal legal instruments:
"[T]he implementation of a tariff only regime by January 1, 2006 was part of the
steps agreed in the [Banan as] Understanding with the EC that would constitute the
'means by which the long-standing dispute ... can be resolved.' This is expressly set
out in paragraph B of the [Bananas] U nderstanding. Paragr aph B references
Regulation 404, as amended by Regulation 216. The first Whereas clause of
Regulation 1964, in turn also references Re gulation 404, as amended, with respect to
the move to a tariff only regime by January 1, 2006. Regulation 1964 is inextricably
linked to the Understanding and the steps that the EC had agreed to take for purposes
of compliance with the Bananas III recommendations and rulings. The fact that the
EC put this measure into place on the date contemplated by the Understanding
reinforces the point that the EC, itself, unders tood that its new regime was a step it
was taking to implement the rulings and recommendations of the DSB."
615
7.236 The United States adds that "the progression of legal instruments adopted by the EC since
Bananas III, further confirms the link between Regulation 1964 and the Bananas III rulings."616
7.237 According to the United States, those instruments start with Regulation 404, which was
amended in 2001 by Regulation 216 to require a ta riff only regime, and conc luded with Regulation
1964, which purportedly implemented the EC's 'tariff only' regime."617 In particular, the United States
agrees618 with the argument by Nicaragua and Panama that:
"– Regulation 404, the underlying EC re gulation examined in Bananas III, was
found in several of its trade provisions to be WTO-inconsistent.
– Regulation 216 amended Re gulation 404 to require a Tariff-Only regime by
no later than 1 January 2006 'to settle' Bananas III and 'compl[y] with the
rules on international trade.'
– Regulation 1964 implemented the current measures for the express purpose
of fulfilling the tariff-only requirement of Regulation 404, 619 as amended by
Regulation 216."620

612 United States' response to Panel question No. 14.
613 (footnote original) Id., Whereas Clause (1).
614 Third Party joint written submission of Nicaragua and Panama, para. 54.
615 United States' response to Pane l question No. 14. See also United States' second written
submission, para. 51.
616 United States' second written submission, para. 50.
617 Ibid.
618 See United States' response to Panel question No. 13.
619 (footnote original) Regulation 1964/2005.

7.238 According to the United States, these "three re gulations ... provide evidence of the connection
between the measure that was found to be in non-compliance in Bananas III, Regulation 404, and the
measure subject to this proceeding, Regulation 1964."621 The United States argues that:
"Regulation 216, amending Regulation 404, set out an interim tariff rate quota
regime, which would culminate with a tariff only regime by January 1, 2006.
Regulation 1964 establishes the purported ta riff only regime by January 1, 2006.
This regime can be no other than the regi me described by the EC since its proposal
was made at the November 19, [1999] DSB meeting and expressly included in
paragraph B of the [Bananas] Understanding entered into with the United States (and
Ecuador). Indeed, paragraph B [of th e Bananas Understanding] references
Regulation 404, as amended by Regulation 216."622
7.239 As regards EC Regulation 1964, the United States points out that "the intended effect of the
EC's current measures is closely linked to Regul ation 216, which in 20 01 sought to 'settle' the
long-standing Bananas dispute by calling for a 'tariff only' regime by January 1, 2006."623 Further:
"The fifth clause in the preamble to EC Regulation 1964 itself states that the
measures are being taken in an effort to rectify the matter which the two Article I
waiver Annex arbitrations found inconsistent with that Annex. The Article I waiver
and Annex are inextricably linked to the Understandings, which are in turn
inextricably linked to the recommendations and rulings of the DSB in
Bananas III."
624
7.240 The United States argues that:
"The status of the EC's measures is further confirmed by numerous EC statements
made between 1999 (when the EC first developed its 'two-stage' Bananas III
compliance solution) through 2006 (when, according to the EC, it implemented its
final stage). While these statements are too numerous to list here,
625
the EC statements made after 2002, when the EC argues, for purposes of this
proceeding, that it implemented its 'measu re taken to comply,' confirm that the
EC itself did not believe it had taken a 'measure taken to comply' at that time."626
7.241 Exhibit US-8, which lists excerpts from the EC statements invoked by the United States,
contains inter alia the following quotations from EC communications to WTO bodies:
(a) "The EC proposes to the DSB a 'two -stage' process for complying with Bananas III,
under which a revised 'transitional' tariff quot a system would first be implemented, to
be followed by a ' flat-tariff' regime no later than 1 January 2006. 627"628
("19 November 1999 EC Statement to the DSB"629);

620 Third Party joint written submission of Nicaragua and Panama, para. 53.
621 United States' response to Panel question No. 13.
622 United States' response to Panel question No. 13.
623 United States' second written submission, para. 51.
624 Ibid., para. 48.
625 (footnote original) See Exhibit US–8 for a full list of EC statements.
626 United States' second written submission, para. 49.
627 (footnote original) Dispute Settlement Body, Minutes of the Meeting Held in the Centre William
Rappard on 19 November 1999, WT/DSB/M/71, 11 January 2000, Item 1.
628 Exhibit US-8, p. 1.
629 Ibid.

(b) "The [EC] proposal envisages a two-stage process, comprising a tariff rate quota
(TRQ) system for several years; this system will be repla ced by a tariff only system
no later than 1 January 2006 .
630"631 ("11 February 2000 EC Status Report to the
DSB"632);
(c) "The EC and [US/Ecuador] have identified the means by which the long-standing
dispute over the EC's banana import regime can be resolved ... [T]he EC will
introduce a Tariff-Only regime for imports of bananas no later than
1 January 2006.
633"634 ("April 2001 EC–US and EC –Ecuador Understandings" 635);
and
(d) "The Understandings are 'a mutually satisfactory solution within the meaning of
Article 3.6 of the DSU regarding the implementation by the EC of the conclusions
and recommendations adopted by the DSB in the dispute "Regime for the
importation, sale and distribution of bananas " [Bananas III] '.636"637 ("22 June 2001
EC DSU Article 3.6 Notification"638).
7.242 Further, Exhibit US-8 contains the following excerpt from the European Communities' GATT
Article XIII Waiver639 of November 2001:
"The understandings reached by the EC, Ecuador and the United States ... identify the
means by which the longstanding dis pute over the EC's banana regime can be
resolved, in particular their provision for a temporary global quota allocation for ACP
banana supplying countries ... to enable them to prepa re for a tariff-only regime
...640"641
7.243 The United States argues that "[t]he various EC statements and communications provide
factual evidence that the regime implemented on January 1, 2006 is a 'measure taken to comply'".642
7.244 The United States also:
"note[s] that in the related [compliance] proceeding brought by Ecuador [in 2007], the
EC argues that the January 1, 2006 regime implements one of the suggestions made

630 (footnote original) Status Report by the European Communities, European Communities – Regime
for the Importation, Sale and Distribution of Bananas , WT/DS27/51/Add.1, 11 February 2000 (emphasis
added).
631 Exhibit US-8, p. 1.
632 Ibid.
633 (footnote original) EC–US Understanding, paras. A and B; EC–Ecuador Understanding, paras. A
and B.
634 Exhibit US-8, p. 2.
635 Ibid.
636 (footnote original) EC Notification, 1st paragraph of Communication, WT/DS27/58,
(emphasis added).
637 Exhibit US-8, p. 2.
638 Ibid.
639 Ibid.
640 (footnote original) GATT Article XIII Waiver, WT/MIN(01)/16, 14 November 2001
(emphasis added).
641 Exhibit US-8, p. 2.
642 United States' response to Panel question No. 41.

by the panel in the Ecuador 21.5 report. In that proceeding, the EC argues that
therefore the measure cannot be challenged."643
7.245 The United States "believes those arguments [b y the European Communities] are completely
unfounded."644 However:
"For purposes of this proceeding ... the Panel should take the EC's argument that its
current bananas regime implements a suggestion by the compliance panel in
Bananas III as a concession by the EC that the measure taken by the EC on January
1, 2006 is directly linked to the DSB's recommendations and rulings. ... [T]he Panel
should conclude that the EC's current bana nas import regime is a 'measure taken to
comply'."645
7.246 Further, while the United States "is not claiming th at th[e] last step [f oreseen for the EC by
the Bananas Understanding] is a measure taken to comply because of its relationship to the first
Ecuador [compliance] proceeding [of 1999],"
646 the United States notes that "the first suggestion by
the first Article 21.5 panel [requested by Ecuador in 1999] was indeed that the EC 'could choose to
implement a tariff-only system for bananas, without a tariff quota.' 647"648 According to the
United States, "[t]he fact that the panel in the fi rst Ecuador 21.5 proceeding conceived of a tariff only
regime as a potential means for compliance demonstr ates the error in the EC argument that its move
to what it describes as a tariff only regime in this proceeding is not a 'measure taken to comply.'"649
7.247 The United States argues that:
"To the extent that the EC may be arguing that the first Ecuador 21.5 panel's legal
reasoning cannot be considered by this Pa nel, the EC is wrong. Prior panel and
Appellate Body reports can be taken into account by subsequent panels."650
Also, "with respect to the EC's claim in para graph 9 that the United States cannot 'benefit'
from a proceeding to which we were not a party, the United States notes that findings in a
different proceeding may be considered by the Panel to the extent they are persuasive."
651
(ii) The response of the United States to the EC ar guments that the link with the original
recommendations and rulings was broken
7.248 The United States also advances various argumen ts to refute the EC assertion that the link
with the original recommendations and rulings of the DSB in 1997 in the EC – Bananas III dispute
has been broken.
7.249 As regards the nature of the measures in question, the United States "agrees that the
EC bananas regime in the 1990s contained additional tariff rate quotas allocated to different countries

643 Final written version of the United States' opening oral statement at the substantive meeting of the
Panel with the parties and third parties, para. 16.
644 Final written version of the United States' opening oral statement at the substantive meeting of the
Panel with the parties and third parties, para. 16.
645 Ibid. See also United States' response to Panel question No. 6.
646 United States' comment on the European Communities' response to Panel question No. 13.
647 (footnote original) Bananas III (21.5) (Ecuador), para. 6.156.
648 United States' response to Panel question No. 6.
649 Ibid.
650 United States' comment on the European Communities' response to Panel question No.6.
651 United States' comment on the European Communities' response to Panel question No. 4.

and a licensing system for traders."
652 Nevertheless, the United States "disagrees with the EC's
statement that its banana regime in 1990s was 'completely different'." 653 According to the
United States "there is a great deal of similarity in that the current regime suffers from the same WTO
non-compliant aspects as the regimes found to be in breach in the earlier Bananas III proceedings."
654
Further, the United States claims that "the essentia l nature of the EC's banana measures is closely
linked to the original EC banana quota and ta riff regime found to be WTO-inconsistent in
Bananas III."655
7.250 As regards the EC arguments concerning the lapse of time between the DSB
recommendations and rulings and the adoption of the current EC bananas import regime, the
United States argues that "[t]his ar gument must be soundly rejected." 656 According to the
United States:
"Article 21.5 of the DSU does not contain any such 'reasonable period of time'
limitation. Thus, there is no textual basis for the EC's proposed approach. ... [T]he
EC is attempting to impute into the text terms and conditions that are not there and
were not agreed by Members."657
7.251 Further, the United States argues that:
"[T]he timing in this case derives from th e timeline laid down in the Understanding
itself, which required as a final step the implementation of a tariff only regime by
January 1, 2006. The United States, Ecuador, and the other original complaining
parties recognized the importance that tr ade in bananas has for many of the
ACP countries and recognized that an abrupt fix to the bananas problem could have a
negative impact. That is why the United States, Ecuador and others were willing to
allow for a lengthy transitional period of adjustment leading to a new, tariff only
regime by January 1, 2006, as set out in the Understanding."
658
7.252 However, according to the United States, "[ t]his forbearance, by the United States and the
Latin American banana suppliers, has unfortunate ly been repaid by the EC with continued
discrimination and noncompliance."659 The United States adds that:
"It would have been much welcomed if the EC had brought itself into compliance
immediately upon adoption of the DSB's recomme ndations and rulings in 1997 or at
the end of the reasonable period of time - that is, January 1, 1999. Instead, the
EC chose to perpetuate a discriminatory system of tariff rate quotas."660
7.253 While noting that "[t]he final step provided fo r in the EC-US Understanding, the introduction
of a tariff only regime by January 1, 2006, was not scheduled to happen until four years [after 2002]",

652 United States' response to Panel question No. 37.
653 Ibid.
654 United States' response to Panel question No. 37.
655 United States' second written submission, para. 51.
656 Final written version of the United States' opening oral statement at the substantive meeting of the
Panel with the parties and third parties, para. 15.
657 United States' response to Panel question No. 10.
658 Ibid.
659 Final written version of the United States' opening oral statement at the substantive meeting of the
Panel with the parties and third parties, para. 15.
660 Ibid.

the United States contends that "[t]o argue that the EC did not need to take that final step with respect
to the EC-US Understanding would read paragraph B out of the Understanding."661
7.254 The United States also:
"[N]ote[s] that in other cases, a long peri od of time between the original rulings and
the 'measure taken to comply' has not preven ted Article 21.5 review. For example, in
the FSC662 case, the EC requested and obtained the establishment of a second
Article 21.5 panel almost 5 years after the or iginal ruling by the DSB. In that case,
the DSB adopted the recommendations a nd rulings in March 2000 and the second
Article 21.5 panel was established Fe bruary 2005. In addition, in EC – Hormones663
the EC claimed compliance over five years from the date of adoption of the
recommendations and rulings by the DSB. The EC claimed that if the United States
disagreed, it should seek recourse to an Article 21.5 panel. 664 Accordingly, the
EC itself has admitted what is already plain on the text of Article 21.5 - that the
length of time is not a bar to having recourse to Article 21.5."
665
7.255 Likewise, referring to the European Communitie s' Response to Questions from the Panel by
the European Communities (29 April 2005) in US - Softwood Lumber IV (Article 21.5 – Canada) , the
United States points out that:
"[T]he EC position with respect to Article 21.5 [in that dispute was] that: 'The nature
of the special procedures suggests that the purpose of the phrase "existence or
consistency with a covered agreement of a measure taken to comply ..." in
Article 21.5 is to cover any further dispute that relates to the original dispute'
666 and
that the time lapse before the new measure is taken is not a bar to Article 21.5
proceedings against that measure.667"668
7.256 As regards the European Communities' argument that the introduction of a tariff-only bananas
import regime was an autonomous and internal po licy decision of the European Communities, the
United States refers to the text of the Bananas Un derstanding, and argues that "the fact that a tariff
only regime could have been introduced by the EC independently of the bananas dispute does not
change the fact that the Understanding on Ba nanas specifically provides for this step." 669 According
to the United States, "[w]hat is relevant is that th e EC agreed to include it in the Understanding, as

661 United States' second written submission, para. 46.
662 (footnote original) United States – Tax Treatment for "Foreign Sales Corporations", Second
Recourse to Article 21.5 of the DSU by the European Communities , WT/DS108/AB/RW2, adopted
March 14, 2006.
663 (footnote original) EC – Measures Concerning Meat and Meat Products (Hormones) ,
WT/DS26/AB/R, WT/DS48/AB/R, adopted 13 February 1998.
664 (footnote original) See Minutes of Meeting held on 1 December 2003, WT/DSB/M/159
(15 January 2004), para. 23.
665 United States' response to Panel question No. 10.
666 (footnote original) Response to Questions from the Panel by the European Communities
(29 April 2005) in United States – Final Countervailing Duty Determination with Respect to certain Softwood
Lumber from Canada – Recourse to Article 21.5 of the DSU (DS257), para. 5.
667 (footnote original) Id., para. 14.
668 United States' comment on the European Communities' response to Panel question No. 7.
669 United States' response to Panel question No. 42.

paragraph B."
670 Conversely, the United States argues, "[a] 'political decision' could have been undone
at any point."671
7.257 The United States adds that:
"When the political decision to move to a tariff only system was taken is not relevant.
It makes sense that the EC would only have agreed to sign a bilateral agreement
committing itself to doing so only after the 'political decision' had been made.
Indeed, the fact that the EC may have decided to move to a tariff only regime by
January 1, 2006 before the Understanding an d then included it in the Understanding
seems to buttress our position."
672
7.258 Further, the United States maintains that: "The EC's argument that ... paragraph [B of the
Bananas Understanding] is just a 'simple referenc e' to secondary legislation 'which reflected the
political decision of the European Communiti es to change its banana import regime' 673 before the
signing of the Understa nding is an attempted post hoc rationale inconsistent with the plain text of the
Understanding."674
7.259 As regards the argument by the ACP third parties that the link with the original DSB
recommendations and rulings was broken by the Bananas Understanding and by the Doha Waiver 675,
the United States argues that "the ACP can point to nothing in the text of the DSU that speaks to
'breaking the connection'"676, thus "[t]he ACP proposed approach is without any legal basis."677
7.260 According to the United States, in regard to the Bananas Understanding:
"[A]s a matter of fact, the opposite is true . The [Bananas] Understanding affirms the
connection between the DSB recommendations and rulings and the EC new banana
regime. The [Bananas] Understanding is a bilateral understanding between the
United States and the EC. In that Unders tanding, the EC agreed to undertake certain
steps to bring itself into compliance. Those steps included, per the terms of
paragraph B of the Understanding, the adoptio n of a tariff only regime by January 1,
2006. The waiver was itself contemplated w ithin the terms of the Understanding. In
any case, ... the January 1, 2006 regime was a measure to be taken to comply,
expressly set out in the Understanding."678
7.261 Further, the United States disagrees with the argument of the ACP third parties that:
"Paragraph 6 of the Doha waiver and th[e ] Arbitrator's statement support the view
that disputes may arise specifically from the Doha waiver and its implementation and
justifies recourse to the dispute settlement system. To the extent that the dispute

670 United States' comment on the European Communities' response to Panel question No. 14.
671 United States' comment on the European Communities' response to Panel question No. 72.
672 United States' response to Panel question No. 47. See also United States' comment on the European
Communities' response to Panel question No. 14; United States' comment on the European Communities'
response to Panel question No. 72; and final written version of the United States' opening oral statement at the
substantive meeting of the Panel with the parties and third parties, para. 9.
673 (footnote original) Second Written Submission by the European Communities, para. 43.
674 Final written version of the United States' opening oral statement at the substantive meeting of the
Panel with the parties and third parties, para. 9.
675 See ACP Countries' third party written submission, para. 7.
676 United States' response to Panel question No. 9.
677 Ibid.
678 United States' response to Panel question No. 9.

relates to a measure which has been adopted pursuant to the Doha waiver and other
legal instruments which came into existe nce only after an earlier dispute, such
measure cannot be regarded as being a measure taken to comply with the
recommendations and rulings of the DS B adopted in the preexisting earlier
dispute."
679
7.262 In response, the United States again refers to the Bananas Understanding:
"The waiver was contemplated as part of the Understanding. See paragraph E of the
Understanding on Bananas. Therefore, it is hard to see how the existence of the
waiver means the EC regime is not a 'measure taken to comply.'"680
7.263 Further, according to the United States:
"The fact that the waiver expressly provided for recourse to dispute settlement simply
means that the waiver was drafted as contemplated by the Uruguay Round
Understanding on Waivers
681 and in a way in which most, if not all, waivers
are drafted. This cannot have the implications that the ACP Third Parties argue.
Finally, recourse to Article 21.5 is a recourse to dispute settlement
682 so there is in
any case no inconsistency between the Arbitr ator's statement and the US pursuit of
this Article 21.5 proceeding."683
7.264 As a further argument relating to the Doha Waiver, the United States points out that:
"[T]he Doha waiver, as well as the Ar ticle XIII waiver, were time bound.
Any 'compliance' that the EC achieved throug h them would expire with the waivers.
Consequently, in requesting the waiver, the EC must have known that additional steps
would be required after the expiration of the waiver in order to be in compliance with
the DSB's recommendations and rulings. Thus , the EC must always have known that
some 'measure taken to comply' would be necessary after the waiver expired. Indeed,
... the Article XIII waiver was set on December 31, 2005 precisely because per the
terms of the [Bananas] Understanding (paragra ph B), the EC was to move to a tariff
only regime by January 1, 2006. An Article XIII waiver would not have been needed
if and when the EC introduced a tariff only regime."
684
7.265 The United States "disagrees with the EC's assertion that the only dispute settlement avenue
open to the United States is 'new proceedings under GATT Article XXIII.' 685"686 In particular, the
United States disagrees "with the EC's argument that 'a dispute over the continued existence of the

679 ACP Countries' third party written submission, para. 94.
680 United States' response to Panel question No. 11.
681 (footnote original) Understanding in Respect of Waivers of Obligations under the General
Agreement on Tariffs and Trade 1994, para. 3, provides that Members may have recourse to dispute settlement.
682 (footnote original) DSU Article 21.5 provides, in relevant part, that "[w]here there is disagreement
as to the existence or consistency with a covered agreement of measures ta ken to comply with the
recommendations and rulings such dispute shall be decided through recourse to these dispute settlement
procedures ..." (emphasis added).
683 United States' response to Panel question No. 11.
684 Ibid.
685 (footnote original) Although the United States appreciates th e fact that in stating that: "If the
United States considers that this new banana import regime breaches the GATT, the United States can challenge
it," the EC is conceding that there is no "standing" requirement in the WTO Agreement.
686 United States' comment on the European Communities' response to Panel question No. 17.

Doha waiver should have been brought under a ne w dispute settlement case and not as a case under
Article 21.5 of the DSU.'
687"688 The United States argues that:
"In the current proceeding, [it] is cha llenging 'the consistency with a covered
agreement of measures taken to comply' (DSU Article 21.5): that is, the
United States is challenging the consis tency with Article I and XIII of the
GATT 1994 (a covered agreement) of the EC 's current bananas regime (a measure
taken to comply). The analysis of the c onsistency of that measure with Article I
requires an analysis of the Doha waiver because the EC – which does not deny that
the differential tariff treatment provided by the current regime for ACP and MFN
bananas is in breach of Article I:1 – argues that the Doha waiver covers the breach.
Therefore, the issue of the waiver's con tinued existence is properly before this
Article 21.5 Panel."
689
(iii) The response of the United States to the EC ar guments that the dispute was settled before
2006
7.266 The United States advances a number of arguments to refute the EC assertion that the
European Communities "took its ' final "measure taken to comply"' with the EC-US Understanding in
January 2002, 'when the EC introduced a new ta riff-based quota regime with the characteristics
agreed in Annex II of the Understanding' and the US 'right to suspend concessions terminated'.690"691
7.267 The United States argues that "[t]he EC's characterization of part-way measures taken not
even halfway through the period of implementati on envisioned in the EC-US Understanding finds no
basis in the text of the Understanding and ignores multiple EC statements regarding its measures."692
7.268 In response to the EC arguments concerning the termination of the United States' right to
retaliate in 2002, the United States contends that:
"[T]he Understanding sets out a series of steps. Two significant steps were to be
achieved by July 1, 2001, and January 1, 2002. As incentive to ensure that the
EC took those steps, the United States agreed to first provisionally suspend its
imposition of increased duties and then terminate the imposition of increased duties
that the DSB had authorized the United States to apply. This only proves that both
the United States and the EC complied with wh at is set out in paragraphs C and D of
the Understanding. Up to that point, there had yet to be full compliance by the EC.
Per the terms of the Understanding, there was an additional step to be taken."
693
7.269 Also, according to the United States:
"The terms of paragraph D [of the Banan as Understanding] did not 'terminate' the
'right of the United States to suspend con cessions.' To the contrary, the United States
agreed to terminate its 'imposition of increased duties' – i.e., its application at the time
of its rights under the DSB authorization of April 19, 1999 to suspend concessions or
other obligations – as consideration for the EC taking the step set out in

687 (footnote original) Replies to the Panel's Questions by the European Communities, para. 20.
688 United States' comment on the European Communities' response to Panel question No. 11.
689 United States' comment on the European Communities' response to Panel question No. 11.
690 (footnote original) EC First Written Submission, paras. 24, 49.
691 United States' second written submission, para. 45.
692 Ibid.
693 Final written version of the United States' opening oral statement at the substantive meeting of the
Panel with the parties and third parties, para. 14. See also United States' response to Panel question No. 22.

paragraph C(2). This is yet another instance of the EC turning logic on its head,
by arguing that the parties' forbearance in allowing the EC time to reform its bananas
import regime must necessarily imply that the parties agreed the dispute had been
resolved."694
7.270 The United States adds that:
"The DSB granted the United States authorization to suspend concessions or other
obligations on April 19, 1999, and that authorization remains in place. Thus, contrary
to the EC's suggestion, there was no need for the United States to request (to borrow
the EC's rather curious phrase) the 'right to reinstate those rights.' ...
The commitment of the United States to ta ke certain steps did not, however, mean
that the multilateral authorization and other WTO rights of the United States were
revoked. Had the parties to the Unders tanding intended for the DSB to revoke the
authorization, they could easily have included a clause providing for a joint request to
the DSB to that effect (much as they include d clauses with respect to the EC's waiver
requests); the [Bananas] Understanding, however, includes no such clause."
695
7.271 According to the United States, "there was no need for the parties to include a provision
revoking the US WTO-authorized right to suspen d concessions, because the [Bananas] Understanding
contemplated that the EC would introduce a WT O-consistent tariff-only regime immediately
following the conclusion of the interim TRQ."696
7.272 The United States also responds to the argument of the ACP third parties that:
"Article 22.8 of the DSU provides that 'the suspension of concessions or other
obligations shall be temporary and shall only be applied until such time as the
measure found to be inconsistent with a c overed agreement has been removed, or the
Member that must implement recommendations or rulings provides a solution to the
nullification or impairment of benefits, or a mutually satisfactory solution is reached.'
The fact that the US terminated its reta liation measures thus confirmed that the US
considered the dispute as having been resolv ed through the mutually agreed solution
in the form of the Understanding on Bananas reached with the EC."
697
7.273 The United States points out that it "did not consider the dispute 'resolved' [in 2002] as there
was still one more step the EC needed to ta ke according to the [Bananas] Understanding." 698
Also, the United States "did not, and does not, consider the [Bananas] Understanding to be a mutually
agreed solution."699 Thus:
"Article 22.8 of the DSU is not relevant in this situation, since there is no mutually
agreed solution. The fact that the United States agreed to terminate its imposition of
increased duties as an incentive for the EC to act, does not turn the Understanding
into a mutually agreed solution."700

694 United States' response to Panel question No. 22.
695 United States' response to Panel question No. 40.
696 Ibid.
697 ACP Countries' third party written submission, para. 61.
698 United States' response to Panel question No. 43.
699 Ibid.
700 United States' response to Panel question No. 45.

7.274 The United States adds that:
"[T]he ACP argument presumes that a comp laining Member is compelled to apply
suspension of concessions or other oblig ations unless one of the Article 22.8
conditions is met. That is not true – Members can choose not to apply their WTO
authorization (or not to apply it in full) for all sorts of reasons that have nothing to do
with whether the 22.8 conditions are met."
701
7.275 Referring to the European Communities' Res ponse to Questions from the Panel by the
European Communities (29 April 2005) in US – Softwood Lumber IV (Article 21.5 – Canada) , the
United States points out that:
"[T]he EC position [in that dispute was] tha t: 'The obligation to comply with that
recommendation is not extinguished throug h the adoption of a measure taken to
comply that is accepted by the complainant but continues to exist without limits in
time. The fact that the DSB has consider ed the issue as resolved for the purpose of
surveillance under Articles 21.6 and 22.8 of the DSU does not extinguish the
continuing obligation to withdraw the measure,' 702 and so Article 21.5 remains
available."703
7.276 As regards the arguments of the European Communities concerning the withdrawal of the
EC – Bananas III dispute from the agenda of the Dispute Se ttlement Body in 2002, the United States
argues that:
"It is incorrect to say that the issue was 'withdrawn' from the agenda. Instead, as is
apparent from the DSB minutes for the February 1, 2002704 meeting all that happened
was that the EC declared its view that 'this matter should now be withdrawn from the
agenda' (presumably meaning that despite Article 21.6, the EC need no longer put a
status report on the agenda of future DSB meetings)."
705
7.277 According to the United States:
"A review of the minutes confirms that Ecuador agreed there was no need for the
EC to put the issue on the agenda of future DSB meetings in light of the fact that the
EC had taken the step set out in paragra ph D of the Understanding and the next step
that would need to be taken by the EC was implementation of a tariff only regime by
January 1, 2006."706
7.278 Further, the United States notes that:
"The DSB simply 'took note' of the statem ents and did not take a decision on this
issue. The fact that other Members did not request that this matter be on the agenda
of subsequent meetings presumably reflects that little would have been gained by
keeping this matter on the DSB agenda until the EC took the next step on
January 1, 2006."
707

701 United States' response to Panel question No. 43.
702 (footnote original) Id., para. 12.
703 United States' comment on the European Communities' response to Panel question No. 7.
704 (footnote original) WT/DSB/M/119, 6 March 2002.
705 United States' response to Panel question No. 21.
706 Ibid.
707 Ibid.

7.279 The United States argues that:
"It is also clear from the statements made at the meeting that the dispute was not
considered 'resolved'. For example, the minutes reflect the following statements:
'Ecuador wished to reserve its rights under Article 21 of the DSU. Therefore
if there was any disagreement concer ning the measures applied by the EC,
the matter could be referred to the orig inal Panel pursuant to Article 21.5 of
the DSU.'708
'Honduras wished to reserve its rights, incl uding the right to request that this
matter be placed on the DSB agenda in the future.'709
'The United States would continue to work closely with the EC and other
Members to address any issues that might arise as the EC moved to a
tariff-based system for bananas and implemented the terms of the bilateral
Understanding on Bananas.'
710"711
7.280 The United States adds that:
"There have been other instances in which a status report has not been included on the
DSB agenda, but that hardly indicates the i ssue has been resolved . See for example
EC – Hormones, where although the item did not appear on the agenda, the EC itself
recognized that it still needed to come into compliance."712
7.281 Referring again to the European Communities' Response to Questions from the Panel by the
European Communities (29 April 2005) in US - Softwood Lumber IV (Article 21.5 – Canada) , the
United States points out that:
"[T]he EC position [in that dispute was] tha t: 'The obligation to comply with that
recommendation is not extinguished throug h the adoption of a measure taken to
comply that is accepted by the complainant but continues to exist without limits in
time. The fact that the DSB has consider ed the issue as resolved for the purpose of
surveillance under Articles 21.6 and 22.8 of the DSU does not extinguish the
continuing obligation to withdraw the measure,' 713 and so Article 21.5 remains
available."714
7.282 As to the EC argument that the United Stat es never challenged the measures taken by the
European Communities in 2002, the United States responds that:
"The United States saw no reason to ins titute Article 21.5 proceedings for the
2002-2005 interim regime. This does not mean that the United States was then
precluded from recourse to Article 21.5 proceedings once the EC took the next,
flawed step."715

708 (footnote original) WT/DSB/M/119, 6 March 2002, para. 5.
709 (footnote original) WT/DSB/M/119, 6 March 2002, para. 6.
710 (footnote original) WT/DSB/M/119, 6 March 2002, para. 8.
711 United States' response to Panel question No. 21.
712 Ibid.
713 (footnote original) Id., para. 12.
714 United States' comment on the European Communities' response to Panel question No. 7.
715 United States' comment on the European Communities' response to Panel question No. 10.

7.283 According to the United States:
"Even if [it] had had a reas on to challenge the interim steps taken by the EC but had
decided to wait until now, the United States would not have been precluded from
taking such action. It is established that the failure, as of a given point in time, to
challenge a measure as inconsistent with the WTO Agreement does not mean that
there is tacit acceptance of the measure. See Panel report on EEC - Quantitative
Restrictions Against Imports of Certain Products from Hong Kong , adopted July 12,
1983, BISD 30S/129, 138, paragraph 28."
716
7.284 The United States adds that:
"[I]t was not until the introduction of the new EC regime for bananas on
January 1, 2006 that the EC took the final, and unfortunately flawed, step required by
the Understanding. Ever since, the issue of non-compliance has been the subject of
discussions at the DSB, culminating with the Ecuador and US requests under
Article 21.5"
717 (footnote omitted).
(iv) A compliance proceeding can extend to measures closely related to measures taken to comply
7.285 In its third party submission, Japan argues that:
"[T]he Appellate Body in US – Softwood Lumber IV (21.5) addresses that, taking
account of the context of Article 21.5 and th e purpose of the DSU, 'a panel's mandate
under Article 21.5 of the DSU is not necessarily limited to an examination of an
implementing Member's measure declared to be "taken to comply",' and should also
include 'some measures with a particularly close relationship to the declared
"measure taken to comply", and to the recommendations and rulings of the DSB'.
718
The Appellate Body has further indicated in that case that, in order to find such a
'close relationship', an Article 21.5 panel may need to examine not only 'the timing,
nature, and effects of the various measures,' but also 'the factual and legal background
against which a declared "measure taken to comply" is adopted.' 719 The EC's 2006
regime was implemented s ubsequent to the adoption of the recommendations and
rulings of the DSB and, it is explicitly iden tified in the Understa nding, Paragraph B,
as a measure 'by which the long-standing dispute over the EC's banana import regime
can be resolved.'
720 Moreover, Japan understands th at the EC's 2006 regime is the
measure which grants a preferential treatment to the imports of bananas from the
ACP countries. In light of such timing, na ture and effect of the EC's regime, Japan
sees the argument that the EC's 2006 regime does not have a relationship with the
recommendations and rulings of the DSB in EC – Bananas III dispute to be hardly
convincing.
721"722

716 United States' second written submission, para. 47, footnote 35.
717 United States' second written submission, para. 47.
718 (footnote original) US – Softwood Lumber IV (21.5), para. 77 (Emphasis added.)
719 (footnote original) Ibid.
720 (footnote original) The Understanding, Paragraph A.
721 (footnote original) Japan notes that, in light of the WTO jurisprudence, the fact that the EC is not
obliged to implement its 2006 regime does not support the argument that the regime is excluded from a
"measure taken to comply" for the purpose of Article 21.5 of the DSU.
722 Japan's third party written submission, paras. 16-17.

7.286 The United States declares that it "completely ag rees with Japan that the EC's arguments that
the January 1, 2006 regime is not a measure taken to comply is 'hardly convincing.'" 723 T h e
United States argues that:
"[T]he DSB has already made clear in past Article 21.5 proceedings that 'a panel's
mandate under Article 21.5 of the DSU is not necessarily limited to an examination of
an implementing Member's measure declared to be 'taken to comply'". See for
example, Australia Leather and Australia Salmon.724"725
2. The Panel's analysis
(a) The Panel's approach
7.287 The Panel needs to assess whether the United Stat es has properly brought this dispute under
Article 21.5 of the DSU. The Panel will conduct th e analysis set out below, taking into account the
following considerations.
(i) Burden of proof
7.288 We have already noted the rules regarding the burden of proof that are applicable to the
preliminary issues raised by the European Communities.726 As in the case of the previous preliminary
objection raised by the European Communities, the Panel will assess first whether the European
Communities has made a prima facie case supporting its contention. If such a prima facie case was
found to exist, the Panel would turn to assessing whether the United States has succeeded in rebutting
this preliminary objection by the European Commun ities. Alternatively, if the Panel found that the
European Communities has not succeeded in making a prima facie case that the complaint of the
United States falls outside of the scope of Article 21.5 of the DSU, the Panel would reject this
preliminary objection by the European Communities without further analysis.
(ii) The specific issue before this Panel
7.289 Article 21.5 of the DSU provides that:
"Where there is disagreement as to the existence or consistency with a covered
agreement of measures taken to comply with the recommendations and rulings such
dispute shall be decided through recourse to these dispute settlement procedures,
including wherever possible resort to the orig inal panel. The panel shall circulate its
report within 90 days after the date of refe rral of the matter to it. When the panel
considers that it cannot provide its report within this time frame, it shall inform the
DSB in writing of the reasons for the delay together with an estimate of the period
within which it will submit its report."
7.290 The Panel notes that the preliminary objec tion of the European Communities focuses on one
specific element of the language of Article 21.5 of the DSU: that Article 21.5 of the DSU is not
applicable because the current EC bananas import regime, introduced on 1 January 2006, is not a

723 United States' response to Panel question No. 12, para. 26. See also, para. 6.30 above.
724 (footnote original) Panel Report, Australia – Automotive Leather II (Article 21.5 – US) , para. 6.4;
725 United States' response to Panel question No. 12.
726 See para. 7.76 to 7.79 above.

"measure taken to comply with the recommendations and rulings" adopted by the Dispute Settlement
Body in the EC – Bananas III dispute in 1997.
727
7.291 Accordingly, the Panel will address the Eur opean Communities' preliminary objection by
focusing on the specific issue whether the current EC bananas import regime is a measure taken to
comply for the purposes of Article 21.5 of the DSU.
(b) Whether the current EC bananas import regime is a measure taken to comply
(i) The limited scope of compliance proceedings pursuant to Article 21.5 of the DSU
7.292 At the outset of its analysis, the Panel notes that it agrees with the European Communities that
"Article 21.5 proceedings ... cannot be used to challenge the legality of ' any' measure taken by the
defending party, even if that measure relates to products that have been the subject of dispute
resolution procedures in the past. 728"729 The Panel also agrees with the argument of the
European Communities that, in general:
"Following a negative panel or Appellate Bo dy report, a defending party may take a
number of initiatives that may affect the product market that was the subject of the
dispute. The mere fact that these policy in itiatives relate to a product market that has
been the subject of a dispute in the past does not suffice to characterize all of these
policy initiatives as 'measures taken to comply' with the recommendations and rulings
of the DSB."
730
7.293 Both parties make reference to the Canada – Aircraft (Article 21.5 – Brazil) 731 dispute,
where the Appellate Body stated that:
"Proceedings under Article 21.5 do not concern just any measure of a Member of the
WTO; rather, Article 21.5 proceedings are limited to those 'measures taken to comply
with the recommendations and rulings' of the DSB. In our view, the phrase 'measures
taken to comply' refers to measures which have been, or which should be, adopted by a
Member to bring about compliance with the recommendations and rulings of the DSB.
In principle, a measure which has been 'taken to comply with the recommendations and
rulings' of the DSB will not be the same measure as the measure which was the subject
of the original dispute, so th at, in principle, there would be two separate and distinct
measures732: the original measure which gave rise to the recommendations and rulings
of the DSB, and the 'measures taken to comp ly' which are – or should be – adopted to
implement those recommendations and rulings."733

727 See European Communities' first written submission, paras. 47 and 51.
728 (footnote original) See, for example, the Appellate Body report in Canada – Measures affecting the
export of civilian aircraft, Recourse by Brazil to Article 21.5 of the DSU , WT/DS70/AB/RW, dated
July 21, 2000 ("Canada/Aircraft"), at paragraph 36.
729 European Communities' first written submission, para. 46.
730 Final written version of the European Communities' opening oral statement at the substantive
meeting of the Panel with the parties and third parties, para. 5.
731 See European Communities' first written submission, para. 46; and the United States' comments on
the European Communities' response to Panel question No. 7.
732 (footnote original) We recognize that, where it is alleged that there exist no "measures taken to
comply", a panel may find that there is no new measure.
733 Appellate Body Report on Canada – Aircraft (Article 21.5 – Brazil), para. 36. See also Appellate
Body Report on Mexico – Corn Syrup (Article 21.5 – US), paras. 78-79.

7.294 Likewise, in EC – Bed Linen (Article 21.5 – India) the Appellate Body held that "[i]f a claim
challenges a measure which is not a 'measure taken to comply', that claim cannot properly be raised in
Article 21.5 proceedings."734
7.295 Similarly, the Appellate Body in US – Softwood Lumber IV (Article 21.5 – Canada) held that
"there are some limits on the claims that can be raised in Article 21.5 proceedings 735"736, and observed
the following "balance that Article 21.5 strikes between competing considerations"737:
"On the one hand, [Article 21.5 of the DSU] seeks to promote the prompt resolution
of disputes, to avoid a complaining Memb er having to initiate dispute settlement
proceedings afresh when an original measu re found to be inconsistent has not been
brought into conformity with the recomme ndations and rulings of the DSB, and to
make efficient use of the original panel a nd its relevant experience. On the other
hand, the applicable time-limits are shorte r than those in original proceedings, and
there are limitations on the types of claims that may be raised in Article 21.5
proceedings. This confirms that the scope of Article 21.5 proceedings logically must
be narrower than the scope of original dis pute settlement proceedings. This balance
should be borne in mind in interpre ting Article 21.5 and, in particular,
in determining the measures that may be eva luated in proceedings pursuant to that
provision"
738 (emphasis added).
(ii) The Panel's role in assessi ng whether the current EC bananas import regime is a measure
taken to comply
7.296 The European Communities argu es that "the Appellate Body had found in its report ...
[in Softwood Lumber IV (Article 21.5 – Canada) ] that 'to be sure, characterizing an act by a Member
as a measure taken to comply when the Member main tains otherwise is not something that should be
done lightly by a panel'." 739 The Panel notes that the Appellate Body continued by stating that
"[y]et, a panel, in examining the factual and le gal circumstances within which the implementing
Member takes action, may properly reach just such a finding in some cases."740

734 Appellate Body Report on EC – Bed Linen (Article 21.5 – India), para. 78.
735 (footnote original) The Appellate Body has confirmed the existence of such limits in several cases.
For example, in US – Shrimp (Article 21.5 – Malaysia), the Appellate Body found that the panel had committed
no error in refusing to "re-examine, for WTO-consistency, even those aspects of a new measure that were part of
a previous measure that was the subject of a dispute, and were found by the Appellate Body to be
 WTO-consistent … and that remain unchanged as part of the new measure." (Appellate Body Report,
US - Shrimp (Article 21.5 – Malaysia), para. 89 (original emphasis)) The Appellate Body has also found that a
complaining party may not ask an Article 21.5 panel to re-examine certain matters ("the particular claim and
the specific component of a measure that is the subject of that claim") when the original panel made findings in
respect of these matters and those findings were not appealed. (Appellate Body Report, EC – Bed Linen
(Article 21.5 – India), para. 92-93) See also Appellate Body Report, Mexico – Corn Syrup (Article 21.5 – US) ,
paras. 121-122) However, when the measure taken to comply is a new measure, different from the measure at
issue in the original proceedings, "a panel is not confined to examining th e 'measures taken to comply' from the
perspective of the claims, arguments and factual circ umstances that related to the original measure".
(Appellate Body Report, Canada – Aircraft (Article 21.5 – Brazil) , para. 41) See also the discussion in
Appellate Body Report, EC – Bed Linen (Article 21.5 – India), paras. 88-89.
736 Appellate Body Report, US – Softwood Lumber IV (Article 21.5 – Canada), para. 71.
737 Ibid., para. 72.
738 Ibid.
739 European Communities' response to Panel question No. 12. See also Appellate Body Report,
US - Softwood Lumber IV (Article 21.5 – Canada), para. 74.
740 Appellate Body Report, US – Softwood Lumber IV (Article 21.5 – Canada), para. 74.

7.297 The Panel recalls that the panel on EC – Bed Linen (Article 21.5 – India) , in a finding upheld
by the Appellate Body
741, concluded that:
"[I]t is clear that it is the Panel, and not the [respondent], whic h decides whether the
measures cited by [the complainant] in the request for establishment are to be
considered 'measures taken to comply' and therefore fall within the purview of this
dispute. That said, however, it is also not [the complainant]'s right to determine
which measures taken by the EC are measures taken to comply. Rather, this is an
issue which must be considered and decided by an Article 21.5 panel."
742
7.298 Likewise, in Australia – Salmon (Article 21.5 – Canada) the panel held that:
"[A]n Article 21.5 panel cannot leave it to the full discretion of the implementing
Member to decide whether a measure is one 'taken to comply'. If one were to allow
that, an implementing Member could simply avoid any scrutiny of certain measures
by a compliance panel, even where such me asures would be so clearly connected to
the panel and Appellate Body reports concerned, both in time and in respect of the
subject-matter, that any impartial observer would consider them to be measures 'taken
to comply'."
743
7.299 Accordingly, the Panel considers that it is prope rly and ultimately its role, and not the role of
either the complainant or the respondent, to decide whether the current EC bananas import regime is a
measure taken to comply.
(iii) The current EC bananas import regime
7.300 The Panel will first assess what constitutes th e current EC bananas import regime.
The parties agree that the European Communities' current bananas import regime is the regime
introduced through EC Regulation 1964/2005 on 1 January 2006. 744 In addition, in its request for the
establishment of this compliance Panel the United St ates also refers to other EC Regulations, and
maintains that:
"[T]he measures through which the EC ma intains its current import regime for
bananas ... include:
– Regulation (EEC) 404/93 of 13 Fe bruary 1993, as amended by
Regulation (EC) 216/2001 of 29 January 2001;
– Regulation (EC) No. 1964/2005 of 29 November 2005; and
– for each of the regulations listed above, any amendments, implementing
measures, and other related measures."
745 (emphasis added).

741 "We agree with the Panel that it is, ultimately, for an Article 21.5 panel—and not for the
complainant or the respondent—to determine which of th e measures listed in the request for its establishment
are 'measures taken to comply'." Appellate Body Report on EC – Bed Linen (Article 21.5 – India), para. 78.
742 Panel Report on EC – Bed Linen (Article 21.5 – India), para. 6.15.
743 Panel Report on Australia – Salmon (Article 21.5 – Canada), para. 7.10, subparagraph 22. See also
Panel Report on Australia – Automotive Leather II (Article 21.5 – US), paras. 6.4-6.5.
744 See European Communities' first written submission, para. 4, footnote 2; and United States' first
written submission, para. 2.
745 EC – Bananas III (Article 21.5 – US) , Request for the Establishment of a Panel (WT/DS27/83)
2 July 2007, p. 2.

7.301 The European Communities does not contest this reference by the United States to
EC Regulations 404/1993 and 216/2001 and "any amendments, implementing measures and other
related measures" to those regulations, in the context of the current EC bananas import regime.
7.302 The parties describe the current EC bananas import regime in a similar manner. In its request
for the establishment of this compliance Panel the United States contends that:
"[O]n 29 November 2005, the EC adopte d Regulation (EC) No. 1964/2005, which
establishes a preferential (zero-duty) TRQ av ailable only to bananas originating in
African, Caribbean and Pacific ("ACP") countries. 746 Bananas of other origins have
no access to this 775,000 ton TRQ. Unde r Regulation (EC) No. 1964/2005 such
other bananas are subject instead to a duty of 176 euros/ton. 747 The regulation took
effect as of 1 January 2006."748
7.303 In turn, in its first written submission of September 2007 the European Communities
describes its "import regime for bananas"749:
"The European Communities subjects all bana na imports to a single tariff of € 176
per ton. There are no other tariffs and th ere are no quantitative restrictions imposed
on the importation of bananas. This import regime has been in force since
January 1, 2006.
The only exception to this rule is that the European Communities offers a trade
preference to those banana producing countries that have signed the
'Cotonou Agreement'. Pursuant to the Cotonou Agreement, the
European Communities has the obligation to accept the importation of products
originating from Cotonou beneficiary developing countries free of custom duties and
charges having equivalent effect or, at least, at preferential terms, until
December 31, 2007.
750 In the sector of bananas, the European Communities has
limited the quantity of bananas origin ating from Cotonou countries that can be
imported free of duty to 775,000 tons per year (the 'Cotonou Preference'). 751
All bananas imported from Cotonou countries beyond this 'cap' are subject to the
tariff of € 176 per ton.752"753

746 (footnote original) Regulation (EC) No. 1964/2005, para. 2, published in the Official Journal of the
European Communities (OJEC) L 316/1 of 12 December 2005 ("[e]ach year from 1 January, starting from
1 January 2006, an autonomous tariff quota of 775 000 tonnes net weight subject to a zero-duty rate shall be
opened for imports of bananas (CN code 0803 00 19) originating in ACP countries.").
747 (footnote original) Regulation (EC) No. 1964/2005, para. 1, published in the Official Journal of the
European Communities (OJEC) L 316/1 of 12 December 2005.
748 EC – Bananas III (Article 21.5 – US) , Request for the Establishment of a Panel (WT/DS27/83)
2 July 2007, p. 2.
749 European Communities' first written submission, title II.A.
750 (footnote original) See the Cotonou Agreement, Article 37, in combination with Annex V, Article 1.
751 (footnote original) Council Regulation (EC) 1964/2005, Article 1, paragraph 2.
752 (footnote original) For the sake of completeness, it is noted that the European Communities'
Generalised System of Preferences al so provides that banana imports from Least Developed Countries are
subject to a zero duty. This does not have any impact on the current proceedings: all Least Developed Countries
that are exporting bananas to the European Communities are also Cotonou beneficiary countries (Yemen and
Bangladesh are least developed countries but have no banana exports towards the European Communities).
753 European Communities' first written submission, paras. 3-4.

(iv) Criteria for assessing whether the current EC bananas import regime is a measure taken to
comply
7.304 As to whether the current EC bananas import re gime is a measure taken to comply, which is
the main issue to be assessed by th e Panel in the context of the third preliminary objection of the
European Communities, the Panel notes that in US – Softwood Lumber IV (Article 21.5 – Canada) the
Appellate Body examined the meaning of the phrase "measure taken to comply"
754, and held that
"[o]n its face ... the phrase 'measures taken to comply' seems to refer to measures taken in the
direction of, or for the purpose of achieving, compliance."755
7.305 Further, the Appellate Body held that:
"The word 'consistency' [in Article 21.5 of the DSU] implies that panels acting
pursuant to Article 21.5 must objectively assess whether new measures are, in fact,
consistent with relevant obligations under the covered agreements. As the
Appellate Body has already stated, such an evaluation involves consideration of 'that
new measure in its totality' and the 'fulfilment of this task requires that a panel
consider both the measure itself and the measure's application.'
756"757
7.306 Accordingly, the Appellate Body concluded that:
"The fact that Article 21.5 mandates a pane l to assess 'existence' and 'consistency'
tends to weigh against an interpretation of Article 21.5 that would confine the scope
of a panel's jurisdiction to measures that move in the direction of , or have the
objective of achieving , compliance. These words also suggest that an examination
of the effects of a measure may also be relevant to the determination of whether it
constitutes, or forms part of, a 'measure[] taken to comply' .758"759 (emphasis added;
original emphasis in bold)
7.307 The Panel also notes that Article 21.5 of the DSU refers to "measures taken to comply with
the recommendations and rulings ". (emphasis added) As regard s that language, the Appellate Body
in US – Softwood Lumber IV (Article 21.5 – Canada) held that:
"A ... feature of the first sentence of Article 21.5 is the express link between the
'measures taken to comply' and the reco mmendations and rulings of the DSB.
Accordingly, determining the scope of 'measures ta ken to comply' in any given case
must also involve examination of the recommendations and rulings contained in the
original report(s) adopted by the DSB."760 (emphasis added)
7.308 While noting that "the phrase 'measures taken to comply' does place some limits on the scope
of proceedings under [Article 21.5 of the DSU]" 761, the Appellate Body in US – Softwood Lumber IV
(Article 21.5 – Canada) also held that "in order to fulfil its mandate under Article 21.5, a panel must
be able to take full account of the factual and legal background against which relevant measures are

754 See Appellate Body Report on US – Softwood Lumber IV (Article 21.5 – Canada), para. 66.
755 Ibid.
756 (footnote original) Appellate Body Report, US – Shrimp, (Article 21.5 – Malaysia), para. 87.
757 Appellate Body Report on US – Softwood Lumber IV (Article 21.5 – Canada), para. 67.
758 (footnote original) Both participants agree that the effect s of measures taken by an implementing
Member can be relevant to determining whether or no t that measure may be exam ined in proceedings under
Article 21.5 of the DSU. (Participants' responses to questioning at the oral hearing).
759 Appellate Body Report on US – Softwood Lumber IV (Article 21.5 – Canada), para. 67.
760 Ibid., para. 68.
761 Ibid., para. 69.

taken, so as to determine the existence, or consiste ncy with the covered ag reements, of measures
taken to comply"762 (emphasis added). As mentioned above, in the same dispute the Appellate Body
similarly held that:
"To be sure, characterizing an act by a Member as a measure taken to comply when
that Member maintains otherwise is not something that should be done lightly by a
panel. Yet, a panel, in examining the factual and legal circumstances within which
the implementing Member takes action , may properly reach just such a finding in
some cases"763 (emphasis added).
7.309 Looking at previous disputes where comp liance panels reached such a finding,
the Appellate Body in US – Softwood Lumber IV (Article 21.5 – Canada) noted that one of the panels
in those previous compliance proceedings had "looked at the timing ... as well as the nature of the
[measure in question]". 764 Likewise, the Appellate Body noted that another previous compliance
panel had "found that [a measure] fell within th e scope of its terms of reference because, inter alia,
the [measure] at issue was 'inextricably linked' to th e measure that [the respondent in that dispute]
itself stated it had taken to comply, 'in view both of its timing and its nature'.765"766
7.310 In conclusion, in US – Softwood Lumber IV (Article 21.5 – Canada) the Appellate Body
summarized its approach in the following way:
"Taking account of all of the above, our in terpretation of Article 21.5 of the DSU
confirms that a panel's mandate under Article 21.5 of the DSU is not necessarily
limited to an examination of an implem enting Member's measure declared to be
'taken to comply'. Such a declaration will always be relevant, but there are additional
criteria, identified above, that should be a pplied by a panel to determine whether or
not it may also examine other measures. Some measures with a particularly close
relationship to the declared 'measure take n to comply', and to the recommendations
and rulings of the DSB, may also be suscep tible to review by a panel acting under
Article 21.5. Determining whether this is the case requires a panel to scrutinize these
relationships, which may, depending on the particular facts, call for an examination of
the timing, nature, and effects of the various measures. This also requires an
Article 21.5 panel to examine the factua l and legal background against which a
declared 'measure taken to comply' is adopt ed. Only then is a panel in a position to
take a view as to whether there are sufficie ntly close links for it to characterize such
an other measure as one 'taken to comply' and, consequently, to assess its consistency
with the covered agreements in an Article 21.5 proceeding."
767
7.311 The Panel recalls that, in addition to arguing th at its current bananas import regime is not a
measure taken to comply, the European Communities explicitly identifies the step it has taken in
accordance with paragraph C(2) of the Bananas Un derstanding as the final measure taken to comply
in the EC – Bananas III dispute:
"The dispute between the United States and the European Communities, which had
culminated with the Appellate Body's repor t in 1997 and the United States' retaliation
measures, ended when the parties reached their 'mutually agreed solution' in 2001 and

762 Ibid.
763 Ibid., para. 74.
764 Ibid.
765 (footnote original) Ibid., para. 6.5.
766 Appellate Body Report on US – Softwood Lumber IV (Article 21.5 – Canada), para. 75.
767 Ibid.

signed the [Bananas] Understanding and exchanged the Letters attached as an Exhibit
to th[e European Communities' first written] submission ...
In compliance with the mutually agr eed solution, the Eu ropean Communities
introduced on January 1, 2002 the final 'measure taken to comply' with the
1997 Appellate Body report. This was th e tariff-quota based import regime with the
characteristics agreed in Annex II of the Understanding. This was the 'measure taken
to comply' that was agreed with the United States and this was the end of the banana
dispute between the parties ...
 ... [A]s far as the banana dispute with th e United States is concerned, the 'measures
taken to comply' with the findings and r ecommendations of the Appellate Body in
1997 and the rulings and recommendations of the DSB in 1997 were taken by the
European Communities in 2002 ..."
768
7.312 The European Communities adds that this allege d final measure to comply was contained in
"Council Regulation 2587/2001, adopted by the European Communities on December 19, 2001,
which introduced the 2002-2005 banana import regime." 769 The United States disagrees with the
EC argument that the 2002-2005 EC bananas import regime was the final measure taken to comply;
however, the United States does not contest the reference by the European Communities to
EC Regulation 2587/2001 in the context of the 2002-2005 bananas import regime of the
European Communities.
7.313 The Panel also notes that, in addition to arguing that the current EC bananas import regime is
a measure taken to comply, the United States conte nds that "'a panel's mandate under Article 21.5 of
the DSU is not necessarily limited to an examinati on of an implementing Member's measure declared
to be "taken to comply"' ...770"771 Also, in its third party written submission, Japan argues that:
"[T]he Appellate Body in US – Softwood Lumber IV (21.5) addresses that, taking
account of the context of Article 21.5 and th e purpose of the DSU, 'a panel's mandate
under Article 21.5 of the DSU is not necessarily limited to an examination of an
implementing Member's measure declared to be "taken to comply",' and should also
include 'some measures with a particularly close relationship to the declared
"measure taken to comply", and to the recommendations and rulings of the
DSB'.
772"773
7.314 In the light of those arguments and of the af orementioned conclusions by the Appellate Body
in US – Softwood Lumber IV (Article 21.5 – Canada) , the Panel will assess whether, based on the
criteria identified by Appellate Body in US – Softwood Lumber IV (Article 21.5 – Canada) , the
current EC bananas import regime is a measure taken to comply in itself. Further, taking into account
the criteria identified by Appellate Body in US – Softwood Lumber IV (Article 21.5 – Canada) , the
Panel will assess whether the current EC bananas import regime is a measure taken to comply because
of "a particularly close relationship to the decl ared 'measure taken to comply' [i.e. the 2002-2005

768 European Communities' first written submission, paras. 48-50.
769 European Communities' response to Panel question No. 13.
770 (footnote original) Panel Report, Australia – Automotive Leather II (Article 21.5 – US) , para. 6.4;
771 United States' response to Panel question No. 12.
772 (footnote original) US – Softwood Lumber IV (21.5), para. 77 (Emphasis added.).
773 Japan's third Party written submission, paras. 16-17.

bananas import regime of the European Communiti es], and to the [original] recommendations and
rulings of the DSB."774
(v) Whether the current EC bananas import regime is closely related to the original
recommendations and rulings adopted by the DS B in 1997, including to the measure being
reviewed and found inconsistent in the original panel and appellate proceedings
7.315 As mentioned above, Article 21.5 of the DSU refe rs to "measures taken to comply with the
recommendations and rulings". In US – Softwood Lumber IV (Article 21.5) the Appellate Body held
in regard to this phrase that:
"A ... feature of the first sentence of Article 21.5 is the express link between the
'measures taken to comply' and the reco mmendations and rulings of the DSB.
Accordingly, determining the scope of 'mea sures taken to comply' in any given case
must also involve examination of the recommendations and rulings contained in the
original report(s) adopted by the DSB."
775
7.316 In the EC – Bananas III dispute, the Dispute Settlement body "adopted the Appellate Body
Report in WT/DS27/AB/R and the Pa nel Reports in WT/DS27/R/ECU,
WT/DS27/R/GTM-WT/DS27/R/HND, WT/DS27/R/MEX, WT/DS27/R/USA, as modified by the
Appellate Body Report"776 at its meeting of 25 September 1997.
7.317 In paragraph 9.1 of its report (WT/DS27/R/USA) adopted as a result of the original complaint
of the United States, the original panel the EC – Bananas III dispute concluded "that for the reasons
outlined in this Report aspects of the Europ ean Communities' import regime for bananas are
inconsistent with its obligations under Articles I:1, III:4, X:3 and XIII:1 of GATT, Article 1.3 of the
Licensing Agreement and Articles II and XVII of the GATS." Further, the original panel
"recommend[ed] that the Dispute Settlement Body request the European Communities to bring its
import regime for bananas into conformity with its obligations under GATT, the Licensing
Agreement and the GATS."777
7.318 Largely confirming the findings of the original panel under appellate review,
the Appellate Body "recommend[ed] that the Dispute Settlement Body request the
European Communities to bring the measures f ound in this Report and in the Panel Reports,
as modified by this Report, to be inconsistent with the GATT 1994 and the GATS into conformity
with the obligations of the European Communities under those agreements." 778 The detailed findings
of the original panel, as modified by the report of the Appellate Body, are summarised above.779
7.319 The Panel notes the close link that the Appellate Body in US – Softwood Lumber IV
(Article 21.5 – Canada) established between the analysis of th e original recommendations and rulings
and the measures at which those recommendations and rulings are directed:

774 Appellate Body Report, US – Softwood Lumber IV (Article 21.5 – Canada), para. 74.
775 Ibid, para. 68.
776 Dispute Settlement Body, Minutes of the Meeting Held in the Centre William Rappard on
25 September 1997, WT/DSB/M/37.
777 Panel Report on EC – Bananas III (US), para. 9.2.
778 Appellate Body Report on EC – Bananas III, para. 257.
779 See section II.E.2 above.

"Because such recommendations and rulings ar e directed at the measures found to be
inconsistent in the original proceedings
780, such an examination necessarily involves
consideration of those original measures."781
7.320 In the same dispute, the Appellate Body also held that:
"Article 21.5 of the DSU identifies the task of a panel operating pursuant to that
provision as resolving disagreements 'as to the existence or consistency with a
covered agreement of a measure taken to comply with the recommendations and
rulings' of the DSB. This task cannot be done in abstr action from the measure that
was subject of the original proceedings782"783 (emphasis added).
7.321 In line with the relevant request for the establishm ent of a panel in the original proceedings in
EC – Bananas III784, the above-mentioned findings in the original panel and Appellate Body
proceedings concerned "the EC regime for th e importation, sale and distribution of bananas
established by Council Regulation (EEC) 404/93 785, and the subsequent EC legislation, regulations
and administrative measures, including those reflecting the provisions of the Framework Agreement
on Bananas, which implemented, supplemented and amended that regime."
786
7.322 The original proceedings were dealing in particular with "the EC's common market
organization for bananas introduced on 1 July 1993" 787 through EC Regulation 404/1993. 788
The original panel summarized the main preferential tariff and quantitative elements of that regime:
"Title IV [of EC Regulation 404/1993], whic h regulates trade with third countries,
establishes three categories of imports: (i) traditional imports from twelve

780 (footnote original) Article 19.1 of the DSU mandates the recommendations that panels and the
Appellate Body are to make in the event of a finding that a measure is inconsistent with a covered agreement:
they "shall recommend that the Member concerned bring the measure into conformity with that agreement."
(footnotes omitted) Thus, the text of Article 19.1 confirms the link between the measure taken to comply and
the inconsistent measure that was the subject of the original proceedings.
781 Appellate Body Report on US – Softwood Lumber IV (Article 21.5 – Canada), para. 68.
782 (footnote original) Appellate Body Report, US – Softwood Lumber IV (Article 21.5 – Canada) ,
para. 68; Appellate Body Report, US – FSC (Article 21.5 – EC II), para. 61. The Appellate Body has already
recognized certain circumstances in which the scope of proceedings under Article 21.5 may be limited by the
scope of the original proceedings. For example, a part y cannot make the same clai m of inconsistency against
the same measure (or component of a measure) in an Article 21.5 proceeding if the original panel and Appellate
Body found the measure to be consistent with the obligation at issue (Appellate Body Report, US – Shrimp
(Article 21.5 – Malaysia), paras. 89-99), or if the original panel found that the complaining party had not made
out its claim with respect to the measure (or component of a measure). (Appellate Body Report, EC – Bed Linen
(Article 21.5 – India), paras. 92-93 and 99) Similarly, a party may not, in proceedings under Article 21.5 of the
DSU, seek to have the Appellate Body "revisit the original panel report" when that report was not appealed.
(Appellate Body Report, Mexico – Corn Syrup (Article 21.5 – US), para. 78).
783 Appellate Body Report on US – Softwood Lumber VI (Article 21.5 – Canada), para. 102.
784 See EC – Bananas III, Request for the Establishment of a Panel by Ecuador, Guatemala, Honduras,
Mexico and the United States (WT/DS27/6), p. 1.
785 (footnote original) Official Journal of the European Communities No. L 47 of 25 February 1993,
pp.1-11.
786 Panel Report on EC - Bananas III (US), para. 1.1; and Appellate Body Report on EC - Bananas III,
para. 1.
787 Panel Report on EC - Bananas III (US), para. 3.1. See also Appellate Body Report on
EC - Bananas III, para. 1.
788 See Article 33 of EC Regulation 404/1993; and Panel Report on EC - Bananas III (US), para. 3.4.

ACP countries789; (ii) non-traditional imports from ACP countries which are defined
as both any quantities in excess of traditional quantities supplied by traditional
ACP countries and any quantities supplied by ACP countries which are not traditional
suppliers of the EC; and (iii) imports from third (non-ACP) countries.

"Imports of bananas from the twelve traditional ACP countries enter duty-free up to
the maximum quantity fixed for each ACP country ... These allocations collectively
amount to 857,700 tonnes. These quantities are not bound in the EC Schedule.
There is no provision in the EC regulations fo r an increase in the level of traditional
ACP allocations.

Imports of non-traditional ACP bananas a nd bananas from third countries are subject
to a tariff quota (also referred to by the EC as the 'basic tariff quota') of, originally,
2 million tonnes (net weight). This tariff quota was increased to 2.1 million tonnes in
1994 and to 2.2 million tonnes as of 1 January 1995. These tariff quota quantities
were bound in the EC Uruguay Round Schedule.
790 The tariff quota can be adjusted
on the basis of a 'supply balance' to be derived from production and consumption
forecasts prepared in advance of each year. 791 In 1995 and 1996, a volume of
353,000 tonnes was added to the tariff quota as a result of 'consumption and supply
needs' resulting from the accession of three ne w EC member States, Austria, Finland
and Sweden. This additional volume is not bound in the EC Schedule. In practice,
however, the EC's tariff quota for non-tr aditional ACP and third-country banana
imports was increased to 2.553 million tonnes.
792
Of the tariff quota referred to above, 90,000 tonnes are reserved for duty-free entries
of non-traditional ACP bananas. This volume is bound in the EC Schedule as a result
of the BFA. By regulation, the EC allocated this import volume largely among
specific supplying countries ..."
793
7.323 Thus, a key element of the measure being revi ewed and found inconsistent in the original
proceedings was the preferential treatment by th e European Communities of banana imports from
ACP countries, as compared with the treatment accorded by the European Communities to other
WTO Members. That preferential treatment invol ved a zero-duty tariff rate quota of 857,700 tons
reserved for traditional ACP bananas imports and a ze ro-duty tariff rate quota of 90,000 tons reserved
for non-traditional ACP bananas imports.
7.324 In essence, the current EC bananas import re gime also maintains a preference for ACP
bananas imports. In its request for the establis hment of this compliance Panel the United States
argues that:

789 (footnote original) Belize, Cape Verde, Côte d'Ivoire, Ca meroon, Dominica, Grenada, Jamaica,
Madagascar, Suriname, Somalia, St. Lucia, and St. Vincent and the Grenadines (Article 15.1 of Council
Regulation (EEC) 404/93 (as amended) and the Annex thereto).
790 (footnote original) Schedule LXXX - European Communities.
791 (footnote original) Article 16 of Council Regulation (EEC) 404/93 (as amended).
792 (footnote original) In addition, the EC issued hurrican licences, see para. 3.15 below.
793 Panel Report on EC - Bananas III (US), paras. 3.7-3.10.

"Regulation (EC) No. 1964/2005, which establishes a preferential (zero-duty) TRQ
available only to bananas originating in African, Caribbean and Pacific ('ACP')
countries.
794 Bananas of other origins have no access to this 775,000 ton TRQ.
Under Regulation (EC) No. 1964/2005 such other bananas are subject instead to a
duty of 176 euros/ton.
795"796
7.325 Likewise, the European Communities concedes that its current bananas import regime
maintains a preference for ACP countries:
"[T]he European Communities offers a trade preference to those banana producing
countries that have signed the 'Cotonou Agreement' [i.e., to ACP countries]. ...
In the sector of bananas, the European Communities has limited the quantity of
bananas originating from Cotonou countries that can be imported free of duty to
775,000 tons per year (the 'Cotonou Preference'). 797 All bananas imported from
Cotonou countries beyond this 'cap' are subject to the tariff of € 176 per ton 798"799
(emphasis added).
7.326 Thus, both the original and the current EC ba nanas import regimes maintain, in the form of
one or more tariff rate quotas at a zero in-quota dut y, a preferential treatment for ACP countries in
comparison with the treatment accorded to other WTO Members. These are important similarities in
the nature and effects of the import regime reviewed in the original panel and appellate proceedings,
and the current EC bananas import regime, which is being contested by the United States before this
compliance Panel.
7.327 The Panel notes that EC Regulation 404/1993 on The Common Organization of the Market in
Bananas was the main measure reviewed in the orig inal panel and Appellate Body proceedings.
As mentioned above, the original proceedings concer ned "the EC regime for the importation, sale and
distribution of bananas established by Council Regulation (EEC) 404/93 800, and the subsequent
EC legislation, regulations and administrative measu res, including those reflecting the provisions of
the Framework Agreement on Bananas, which im plemented, supplemente d and amended that
regime."801

794 (footnote original) Regulation (EC) No. 1964/2005, para. 2, published in the Official Journal of the
European Communities (OJEC) L 316/ 1 of 12 December 2005 (" [e]ach year from 1 Ja nuary, starting from
1 January 2006, an autonomous tariff quota of 775 000 tonnes net weight subject to a zero-duty rate shall be
opened for imports of bananas (CN code 0803 00 19) originating in ACP countries.").
795 (footnote original) Regulation (EC) No. 1964/2005, para. 1, published in the Official Journal of the
European Communities (OJEC) L 316/1 of 12 December 2005.
796 EC – Bananas III (Article 21.5 – US) , Request for the Establishment of a Panel (WT/DS27/83)
2 July 2007, p. 2.
797 (footnote original) Council Regulation (EC) 1964/2005, Article 1, paragraph 2.
798 (footnote original) For the sake of completeness, it is noted that the European Communities'
Generalised System of Preferences al so provides that banana imports from Least Developed Countries are
subject to a zero duty. This does not have any impact on the current proceedings: all Least Developed Countries
that are exporting bananas to the European Communities are also Cotonou beneficiary countries (Yemen and
Bangladesh are least developed countries but have no banana exports towards the European Communities).
799 European Communities' first written submission, para. 4.
800 (footnote original) Official Journal of the European Communities No. L 47 of 25 February 1993,
pp.1-11.
801 Panel Report on EC - Bananas III (US), para. 1.1; and Appellate Body Report on EC - Bananas III,
para. 1.

7.328 In its request for the establishment of this compliance panel the United States describes
"the measures through which the EC maintain s its current import regime for bananas " 802, by making
explicit reference, in addition to EC Regula tion 1964/2005, to "Regulation (EEC) 404/93 of
13 February 1993, as amended by Regulati on (EC) 216/2001 of 29 January 2001" 803 and to
"any amendments, implementing measu res, and other related measures" 804 to those EC Regulations.
In the context of the current EC bananas import regime, the European Communities does not contest
the reference by the United States to EC Regulati on 404/93, as amended by EC Regulation 216/2001,
and to "any amendments, implementing measures, a nd other related measures" 805 to those
EC Regulations.
7.329 The Panel notes also that EC Regulation 1964/2005 has been adopted pursuant to
EC Regulation 404/1993, as amended by EC Re gulation 216/2001. This is argued by the
European Communities itself 806, and it is confirmed by the Bananas Understanding, which in
paragraph B makes explicit reference to both previous regulations:
"In accordance with Article 16(1) of Regulation No. (EC) 404/93 (as amended by
Regulation No. (EC) 216/2001) , the European Communities (EC) will introduce a
Tariff Only regime for imports of bananas no later than 1 January 2006." 807
(emphasis added)
7.330 Indeed, EC Regulation 216/2001 amended Article 16 of EC Regulation 404/1993 thus:
"1. This Article and Articles 17 to 20 sh all apply to imports of fresh products
falling within CN code ex 0803 00 19 up to the entry into force of the rate of the
common customs tariff for those produc ts, no later than 1 January 2006 ,
established under the procedure provided fo r in Article XXVIII of the General
Agreement on Tariffs and Trade.
2. Until the entry into force of the rate re ferred to in paragraph 1, imports of the
fresh products referred to in the said paragraph shall be under the tariff quotas opened
by Article 18"808 (emphasis added).
7.331 In turn, EC Regulation 1964/2005 makes explic it reference to EC Regulation 404/1993 in the
first recital of its preamble:
"Council Regulation (EEC) No 404/93 of 13 February 1993 on the common
organisation of the market in bananas provid es for the entry into force of a tariff only
regime for imports of bananas no later than 1 January 2006." (footnote omitted)
7.332 Further, Article 1.1 of EC Regulation 196 4/2005 fulfils the function determined by
Article 16.1 of EC Regulation 404/1993, as amended by EC Regulation 216/2001:

802 EC – Bananas III (Article 21.5 – US) , Request for the Establishment of a Panel (WT/DS27/83)
2 July 2007, p. 2.
803 Ibid., pp. 2-3. See also United States' response to Panel question No. 38.
804 EC – Bananas III (Article 21.5 – US) , Request for the Establishment of a Panel (WT/DS27/83)
2 July 2007, pp. 2-3. See also United States' response to Panel question No. 38.
805 EC – Bananas III (Article 21.5 – US) , Request for the Establishment of a Panel (WT/DS27/83)
2 July 2007, pp. 2-3. See also United States' response to Panel question No. 38.
806 See European Communities' response to Panel questions Nos. 14 and 72.
807 Documents WT/DS27/58 of 2 July 2001, p. 2, para. B, and WT/DS27/59 of 2 July 2001, para. B.
808 EC Regulation 216/2001, Article 1.1.

"As from 1 January 2006 the tariff rate fo r bananas (CN code 0803 00 19) shall be
EUR 176/tonne."
7.333 Article 3.1 of EC Regulation 1964/2005 makes fu rther reference to EC Regulation 404/1993
by providing that:
"The Commission shall be assisted by the Management Committee for Bananas
established by Article 26 of Regulation (EEC) No 404/93 ..."
7.334 The Panel notes that EC Regulation 404/93 on the Common Organization of the Market in
Bananas continued to apply even following the introduction, on 1 January 2006, of the current
EC bananas import regime through EC Regulation 1964/2005, and beyond the establishment of this
compliance Panel by the Dispute Settlement Body on 12 July 2007. As indicated above, EC
Regulation 1964/2005 makes severa l explicit references to EC Regulation 404/1993, without
repealing the latter. Further, in its request for th e establishment of the Panel dated 2 July 2007, the
United States explicitly identified EC Regulation 404/1993 as one of "the measures through which the
EC maintains its current import regime for bananas"
809 Neither party has argued that EC Regulation
404/1993 was not in force at the time of the establishment of this Panel.
7.335 The Panel also notes that the first compliance panel requested by Ecuador, in response to the
EC argument that a compliance Panel should no t look at the EC Regulations representing the
European Communities' attempt to comply with the original recommendations and rulings of the DSB
as of the expiry of the reasonable period of time on 1 January 1999, through amendments to
EC Regulation 404/1993, found that:
"[I]t is clear that the two measures spec ified by Ecuador (Regulations 1637/98 and
2362/98) were 'taken [by the European Co mmunities] to comply' with the DSB's
recommendations, as they modify aspects of the EC's banana import regime found by
the original panel and Appellate Body reports to be inconsistent with the EC's WTO
obligations. There is no suggestion in the text of Article 21.5 that only certain issues
of consistency of measures may be considered. Nor is there a suggestion that the
term 'measures' has a special meaning in Article 21.5 that would imply that only
certain aspects of a measure can be considered"810 (emphasis added).
7.336 Article 1.1 of EC Regulation 1637/1998 also amended inter alia Article 16 of EC Regulation
404/1993, and EC Regulation 2632/1998 "la[id] down detailed rules for applying the arrangements for
the importation of bananas under the tariff quotas provi ded for in Article 18(1) and (2) of Regulation
(EEC) No 404/93 and for the importation of quantities of trad itional ACP bananas as referred to in
Article 16 of that Regulation, and also the arrangements outside those quotas"811 (emphasis added).
7.337 Similarly, Article 1.1 of Regulation 1964/2005 fu lfils the function set out in Article 16.1 of
EC Regulation 404/1993, as amended by EC Regulation 216/2001; that amendment by
EC Regulation 216/2001 concerned an aspect of the EC's bananas import regime found by the original
panel and Appellate Body reports to be inconsistent with the European Communities' WTO
obligations.
7.338 In the light of the foregoing legal and factua l background of the current EC bananas import
regime, the Panel concludes that the current EC ba nanas import regime, in particular EC Regulation

809 EC – Bananas III (Article 21.5 – US) , Request for the Establishment of a Panel (WT/DS27/83)
2 July 2007, p. 2.
810 Panel Report on EC – Bananas III (Article 21.5 – Ecuador), para. 6.8.
811 EC Regulation 2632/1998, Article 1.

1964/2005 is closely related to the measure reviewed and found inconsistent in the original panel and
Appellate Body proceedings, and thus is closely re lated to the original recommendations and rulings
adopted by the DSB in 1997.
(vi) Whether the current EC bananas import regim e constitutes a measure taken by the
European Communities in the direction of, or for the purpose of achieving, compliance
7.339 The Panel notes that the Appellate Body in US – Softwood Lumber VI (Article 21.5 – Canada)
held that:
"Article 21.5 proceedings do not occur in is olation but are part of a 'continuum of
events'.812 This is a consequence of the mandate of an Article 21.5 panel, namely, to
examine whether recommendations and rulings from the original dispute have been
implemented consistently with the covered agreements."813
7.340 The Panel will therefore assess the relevant f actual and legal developments following the
adoption of recommendations and rulings by the DS B on 25 September 1997. The Panel recalls that
in the arbitration award of 7 January 1998 in EC – Bananas III pursuant to Article 21.3 of the DSU,
the arbitrator referred to "Article 21.1 of the DSU[, which] stipulates that 'prompt compliance with
recommendations or rulings of the DSB is essential in order to ensure effective resolution of disputes to
the benefit of all Members'."814 The same arbitrator concluded that:
"[P]ursuant to Article 21.3(c) [of the DSU], the 'reasonable period of time' for the
European Communities to implement the recommendations and rulings of the DSB
adopted on 25 September 1997 in European Communities – Regime for the
Importation, Sale and Distribution of Bananas , shall be the period from
25 September 1997 to 1 January 1999."
815
The European Communities' first attempt to comply with the original DSB recommendations
and rulings, and its review under dispute settlement proceedings
7.341 At the end of the above reasonabl e period of time, 1 January 1999 816,
the European Communities introduced the above -mentioned "Regulation (EC) No. 1637/98 ...
amending Regulation (EEC) No. 404/93 ... on the common organization of the market in bananas, and
(ii) Regulation (EC) No. 2362/98 ... laying do wn detailed rules for the implementation of
Regulation 404."817
7.342 Both EC Regulations were found to be measu res taken to comply with the original
recommendations and rulings of the DSB. 818 They were also found to be inconsistent with these
recommendations and rulings in two, practically simultaneous proceedings: (i) an arbitration pursuant
to Article 22.6 of the DSU between the European Communities and the United States 819; and
(ii) a compliance proceeding requested by Ecuador against the European Communities. 820 A third
compliance proceeding requested by the Europ ean Communities to establish that those

812 (footnote original) Appellate Body Report, Mexico – Corn Syrup (Article 21.5 – US), para. 121.
813 Appellate Body Report on US – Softwood Lumber VI (Article 21.5 – Canada), para. 103.
814 Award of the Arbitrator on EC – Bananas III (WT/DS27/15), para. 18.
815 Ibid., para. 20.
816 See Panel Report on EC – Bananas III (Article 21.5 – Ecuador), para. 2.1.
817 Ibid. See also Decision by the Arbitrators on EC – Bananas III (US) (Article 22.6 - EC), para. 5.3.
818 See Decision by the Arbitrators on EC – Bananas III (US) (Article 22.6 - EC), para. 4.3.
819 See Decision by the Arbitrators on EC – Bananas III (US) (Article 22.6 - EC).
820 See Panel Report on EC – Bananas III (Article 21.5 – Ecuador).

EC Regulations "must be presumed to conform to WTO rules"
821 referred to the negative findings of
the compliance panel requested by Ecuador.822
7.343 In the arbitration between the European Co mmunities and the United States pursuant to
Article 22.6 of the DSU, the arbitrators held that "any assessment of the level of nullification or
impairment presupposes an evaluation of consiste ncy or inconsistency with WTO rules of the
implementation measures taken by the European Co mmunities, i.e. the revised banana regime, in
relation to the panel and Appellate Body findings concerning the previous regime." 823 Accordingly,
the arbitrators concluded that "there is a continua tion of nullification or impairment of US benefits
under the revised EC regime" 824 inter alia because "the reservation of the quantity of 857,700 tonnes
for traditional ACP imports under the revised regime is inconsistent with paragraphs 1 and 2 of
Article XIII of GATT." 825 In conclusion, in their decision of 9 April 1999 the arbitrators
"determine[d] the level of nullification or impair ment suffered by the United States in the matter
European Communities – Regime for the Importation, Sale and Distribution of Bananas ..."826
7.344 On 19 April 1999, the DSB granted authori zation for the United States to suspend
concessions "consistent with the decision of the Arbitrators contained in document
WT/DS27/ARB."827
7.345 Similarly to the above arbitration pursuant Article 22.6 of the DSU, the first compliance panel
requested by Ecuador found in its report circulated on 6 May 1999 inter alia that "the reservation of
the quantity of 857,700 tonnes for traditional ACP imports under the revised regime is inconsistent
with paragraphs 1 and 2 of Artic le XIII of GATT [and] ... the country-specific allocations to Ecuador
as well as to the other substantial suppliers are not consistent with the requirements of
Article XIII:2."828 Further, in respect of Article I of the GATT 1994 the first compliance panel
requested by Ecuador found in relevant parts that:
"[T]he level of 857,700 tonnes for dut y-free traditional ACP imports can be
considered to be required by the Lomé C onvention because it appears to be based on
pre-1991 best-ever exports and not on allowances for investments. However, we also
find that it is not reasonable for the European Communities to conclude that
Protocol 5 of the Lomé Convention requir es a collective allocation for traditional
ACP suppliers. Therefore, duty-free treatment of imports in excess of an individual
ACP State's pre-1991 best-ever export volumes is not required by Protocol 5 of the
Lomé Convention. Accordingly, absent any other applicable requirement of the
Lomé Convention, those excess volumes are not covered by the Lomé waiver and the
preferential tariff thereon is therefore inconsistent with Article I:1.
Also in respect of Article I of GATT, we find that in respect of preferences for
non-traditional ACP imports, it is not unreasonable for the European Communities to
conclude that (i) non-traditional ACP imports at zero tariff within the 'other' category
of the tariff quota and (ii) the tariff preference of 200 Euro per tonne for out-of-quota
imports, are required by Article 168 of the Lomé Convention. Therefore, we find that

821 EC – Bananas III (Article 21.5 – EC), Request for the Establishment of a Panel (WT/DS27/40), p. 2.
822 See Panel Report on EC – Bananas III (Article 21.5 – EC), para. 4.15.
823 Decision by the Arbitrators on EC – Bananas III (US) (Article 22.6 - EC), para. 4.3.
824 Ibid., para. 5.98.
825 Ibid., para. 5.96.
826 Ibid., para. 8.1.
827 Dispute Settlement Body, Minutes of Meeting held in the Centre William Rappard on 19 April 1999
(WT/DSB/M/59), 3 June 1999, p. 11.
828 Panel Report on EC – Bananas III (Article 21.5 – Ecuador), para. 6.160.

the violations of Article I:1, as alleged by Ecuador in respect of preferences for
non-traditional ACP imports, are covered by the Lomé waiver."829
7.346 The first compliance panel requested by Ecuador:
"[C]onclude[d] that ... aspects of the EC's [revised] import regime for bananas are
inconsistent with the EC's obligations under Articles I:1 and XIII:1 and 2 of
GATT 1994 and Articles II and XVII of GATS. [T]herefore ... there is nullification
or impairment of the benefits accr uing to Ecuador under the GATT 1994 and the
GATS within the meaning of Article 3.8 of the DSU.
The Panel recommend[ed] that the Di spute Settlement Body request the
European Communities to brings its import re gime for bananas into conformity with
its obligations under the GATT 1994 and the GATS."830
7.347 EC Regulations 1637/1998 and 2362/1998 were also the subject of dispute settlement
proceedings brought at the end of 1998 by the Eu ropean Communities, which invoked Article 21.5 of
the DSU. In its request for the establishment of that compliance panel, the European Communities
noted that:
"In the DSB meeting of 22 September 1998, the original complainants expressed their
concern 'about the EC's failure to comply with the DSB's recommendations'.
They stated that 'consultations had confirmed that the Community and the
complaining parties could not agree on th e WTO-consistency of the measures taken
by the EC to comply with the DSB's recommendations by 1 January 1999'.
They emphasised that '[t]here was no doubt w ith regard to the existence of such a
disagreement between the Community and the co mplaining parties'. They also stated
that 'they had made it clear that there was no basis for any further consultations and
had no plans to hold further consultations'."
831
7.348 The European Communities also argued that:
"Article 23 of the DSU confirms that th ere is a general principle in the WTO
agreements that measures taken by WTO Memb ers are in conformity with their rules
unless they have been challenged under the appropriate dispute settlement procedures
and proven not to conform. Since none of th e original complainants has continued to
pursue the procedures under Article 21.5, they must presently be deemed to be
satisfied with the way in which the Eur opean Communities has brought its measures
into conformity with the recommendations and rulings of the DSB in this case."
832
7.349 Accordingly, "the European Communities re quest[ed] the establishment of a panel under
Article 21.5 of the DSU with the mandate to find that the above-mentioned implementing measures of
the European Communities must be presumed to co nform to WTO rules unless their conformity has
been duly challenged under the appropriate DSU procedures."833

829 Ibid., paras. 6.161-6.162.
830 Ibid., paras. 7.1-7.2.
831 EC – Bananas III (Article 21.5 – EC), Request for the Establishment of a Panel (WT/DS27/40), p. 2.
832 Ibid.
833 Ibid.

7.350 In its report, circulated on 12 April 1999, the compliance panel requ ested by the European
Communities decided "not [to] make findings as requested by the European Communities."
834
Nevertheless, the same compliance panel stated:
"We agree with the European Communities that there is normally no presumption of
inconsistency attached to a Member's measures in the WTO dispute settlement
system. At the same time, we also are of the view that the failure, as of a given point
in time, of one Member to challenge another Member's measures cannot be
interpreted to create a presumption that th e first Member accepts the measures of the
other Member as consistent with the WTO Ag reement. In this regard, we note the
statement by a GATT panel that 'it would be erroneous to interpret the fact that a
measure has not been subject to Article XXIII over a number of years, as tantamount
to its tacit acceptance by contracting parties'.
835"836
7.351 Also, the compliance panel requested by the European Communities made reference to the
findings of inconsistency by the first compliance panel requested by Ecuador:
"[W]e note that immediately prior (on the same date) to the establishment of this
Panel, a panel was established by the DSB at the request of Ecuador to consider
Ecuador's claim in an Article 21.5 proceed ing that the EC's implementing measures
are not consistent with its WTO obligations . The same three individuals are the
panelists in these two Article 21.5 proceed ings. Since we have found in the
proceeding initiated by Ecuador that the EC's implementing measures are not
consistent with its WTO obligations, it is clear that they cannot be presumed to be
consistent in this proceeding.837
7.352 The above three procedures established that the first attempt of the European Communities to
bring itself into compliance with the original reco mmendations and rulings adopted by the DSB in the
EC – Bananas III dispute in 1997, was inconsistent with the European Communities' WTO
obligations. The Panel reads that as a clear indi cation that the original attempt of the European
Communities to bring itself into compliance by 1 January 1999 was unsuccessful.
Subsequent developments
7.353 The United States points out that followi ng the European Communities' first,
unsuccessful attempt to bring itself into complia nce with the original DSB recommendations and
rulings:
"In November 1999, the EC announced a second attempt to reform its banana regime,
which was allegedly to comprise a 'two-stage process, namely, after a transitional
period during which a tariff quota system w ould be applied with preferential access
for ACP countries, a flat tariff would be introduced.'838"839

834 Panel Report on EC – Bananas III (Article 21.5 – EC), para. 5.1
835 (footnote original) Panel report on EEC – Quantitative Restrictions Against Imports of Certain
Products from Hong Kong, adopted on 12 July 1983, BISD 30S/129, 138, paragraph 28.
836 Panel Report on EC – Bananas III (Article 21.5 – EC), para. 4.13.
837 Panel Report on EC – Bananas III (Article 21.5 – EC), para. 4.15.
838 (footnote original) Minutes of Meeting of the Dispute Settlement Body held on 19 November 1999,
WT/DSB/M/71 (11 January 2000).
839 United States' first written submission, para. 5.

7.354 At the meeting of the DSB held on 19 November 1999:
"[T]he European Communities said that af ter extensive consultations with all the
interested parties, the EC had put forwar d a proposal to modify its banana import
regime. The EC considered that, under the present circumstances, the most
appropriate option would be to put in place a two-stage process, namely, after a
transitional period during which a tariff quota system would be applied with
preferential access for ACP countries, a flat tariff would be introduced . The level of
the flat tariff would be negotiated pursu ant to Article XXVIII of GATT 1994 and in
accordance with the negotiating directives contained in the proposal. During the
transitional period, the quota management system would be a key issue. Detailed
rules for administration of the tariff quota which would be adopted at a later stage
were of considerable importance for the acceptability of the new regime. For this
reason, the EC would seek agreement from interested countries on the management
system. The EC was ready to start this process immediately. He noted that finding
the means to respect its international obligations as well as other objectives
constituted a considerable challenge for the EC. The EC believed that its proposal
provided the best outcome to this dispute."
840
7.355 At the same DSB meeting:
"[T]he European Communities clarified th at during the transitional period, three
quotas would be available to all suppliers. The first would be the bound quota of 2.2
million tonnes at 75 Ecus/tonne, and the sec ond would be an autonomous quota of
353,000 tonnes at the same tariff level. A third tariff quota of 850,000 would also be
available. A preference of 275 Ecus/tonne would be granted to ACP countries.
That third quota would be characterized by a bidding procedure through which an
abatement with respect to the out-of-quota bound tariff rate would be determined.
This auctioning-striking price system would resolve both the level of the tariff and the
distribution of licences requested as well as the available quantities. A key practical
aspect of the transitional quota system was the management of the first two quotas.
The preferred option of interested parties for distribution of licences was a historical
system, but could only be implemented if there was agreement on a mechanism
compatible with both WTO and EC law. Un less such an agreement materialised, the
alternative would be an appropriate form of a 'first-come first-served system' for the
two quotas at 75 Ecus/tonne provided that the administrative problems could be
overcome in such a way that the scheme was non-discriminatory."
841
7.356 A few months later, in its status report to the DSB of 11 February 2000, also referred to by the
United States842, the European Communities stated that:
"As it has been explained before to the DSB, the EC has now developed a proposal
for the reform of the banana regime. The proposal envisages a two-stage process,
comprising a tariff rate quota (TRQ) system fo r several years; this system should be
replaced by a tariff only system no later than 1 January 2006. ...

840 Dispute Settlement Body, Minutes of Meeting held in the Centre William Rappard on
19 November 1999 (WT/DSB/M/71), 11 January 2000, para. 2.
841 Dispute Settlement Body, Minutes of Meeting held in the Centre William Rappard on
19 November 1999 (WT/DSB/M/71), 11 January 2000, para. 5.
842 See Exhibit US-8, p. 1.

As the proposal of November 1999 makes clear, if no feasible administrative system
which will resolve the dispute can be found regarding the distribution system for
licences in a TRQ system it will not be possible to maintain the proposal for a
transitional TRQ regime; in that case negotiations under GATT Article XXVIII to
replace the current system with a tariff only regime are envisaged."
843
7.357 Approximately one year later, in spring 2001 the European Communities reached two
separate but almost identical understandings on ba nanas with the United States and with Ecuador. 844
Although in the context of the second preliminary issue the parties contest the status and relevance of
their Bananas Understanding 845, as regards the third preliminary issue, they both attach great
relevance to that Understanding for the purposes of assessing whether the current EC bananas import
regime is a measure taken to comply.
7.358 According to the European Communities, "a de termination of whether a particular measure
constitutes a 'measure taken to comply' should be based [ inter alia ] on ... the agreement reached
between the parties (in our case the [Bananas] Understanding) and the rights and obligations
undertaken in it ..."
846 Likewise, the United States "readily acknowledges the Understanding's direct
relevance for purposes of establishing that the EC's current bananas import regime is a measure taken
to comply with the DSB's rulings and recommendations."847
7.359 As noted in its analysis of the European Communities' second preliminary objection, the
Panel does not intend to assess the status of the Bananas Understanding. 848 Nevertheless, in the light
of parties' agreement on the relevance of the Bana nas Understanding for the third preliminary issue,
the Panel will look at the language of that Understanding.
7.360 The Bananas Understanding provides in Paragr aph A that "[t]he European Commission and
[the United States/Ecuador] have identified the m eans by which the long-standing dispute over the
EC's banana import regime can be resolved." 849 Further, in its communication to the DSB concerning
the Understanding, the European Communities re ferred to the Understanding as "a mutually
satisfactory solution ... regarding the implem entation by the EC of the conclusions and
recommendations adopted by the DSB in the dispute 'Regime for the importation, sale and distribution
of bananas' (WT/DS27)."850
7.361 The Bananas Understanding sets out a series of bananas import regimes to be implemented by
the European Communities, which are in line with what was announced by the
European Communities at the DSB meeting of 19 No vember 1999 and in its above-mentioned status
report of 11 February 2000.
7.362 Paragraph B of the Understanding provides that "[i]n accordance with Article 16(1) of
Regulation No. (EC) 404/93 (as amended by Regulation No. (EC) 216/2001),

843 EC – Bananas III , Status Report by the European Communities (WT/DS27/51/Add.1),
8 September 1999.
844 See documents WT/DS27/58 of 2 July 2001; WT/DS27/59 of 2 July 2001; and WT/DS27/60 of
9 July 2001.
845 See paras.7.39 to 7.75 above.
846 European Communities' response to Panel question No. 7.
847 United States' response to Panel question No. 44.
848 See paras. 7.100 and 7.117 above.
849 Documents WT/DS27/58 of 2 July 2001, p. 2, para. A, and WT/DS27/59 of 2 July 2001, para. A.
850 Document WT/DS27/58 of 2 July 2001, p. 1.

the European Communities (EC) will introduce a Tari ff Only regime for impor ts of bananas no later
than 1 January 2006."851
7.363 In turn, paragraph C of the Bananas Understanding provides that:
"C. In the interim, the EC will implement an import regime on the basis of
historical licensing as follows:
1. Effective 1 July 2001, the EC will implement an import regime on the
basis of historical licensing as set out in Annex 1.
2. Effective as soon as possible thereafter, subject to Council and
European Parliament approval and to adoption of the Article XIII
waiver referred to in paragraph E, the EC will implement an import
regime on the basis of historical licensing as set out in Annex 2.
The Commission will seek to obtain the implementation of such an
import regime as soon as possible."
852
7.364 In exchange for the commitments by the Europ ean Communities set out in paragraphs B and
C of the Bananas Understanding, paragraph D of the Understanding provides with respect to the
United States that:
"D. With respect to the United States' imposition of increased duties applied to
certain EC products as of 19 April 1999 covering trade in an amount of US$191.4
million per year (the 'increased duties'):
1. Upon implementation of the import regime described in
paragraph C(1), the United States will provisionally suspend its
imposition of the increased duties.
2. Upon implementation of the import regime described in
paragraph C(2), the United States w ill terminate its imposition of the
increased duties.
3. The United States may reimpose the increased duties if the import
regime described in pa ragraph C(2) does not enter into force by 1
January 2002."
7.365 Further, paragraph E of the Bananas Understanding stipulates that:
"The United States will lift its reserve con cerning the waiver of Article I of the
GATT 1994 that the EC has requested for preferential access to the EC of goods
originating in ACP states signatory to the Cotonou Agreement; and will actively work
towards promoting the acceptance of an EC request for a waiver of Article XIII of the
GATT 1994 needed for the management of quota C under the import regime
described in paragraph C(2) until 31 December 2005."
7.366 The above-mentioned waivers were ultimately adopted by the Doha Ministerial Conference
on 14 November 2001. They waived obligations of the European Communities under provisions of
the GATT 1994 with which the original EC bananas im port regime had been found to be inconsistent

851 Ibid., p. 2, para. B, and Document WT/DS27/59 of 2 July 2001, para. B.
852 Documents WT/DS27/58 of 2 July 2001, p. 2, para. C, and WT/DS27/59 of 2 July 2001, para. C.

in the original proceedings and with which the revised EC bananas import regime of 1999 was found
to be inconsistent by the arbitrators pursuant to Article 22.6 of the DSU and by the first compliance
panel requested by Ecuador.
7.367 In the Doha Waiver from Article XIII:1 and 2 of the GATT 1994, the Ministerial Conference
"decide[d that]… [w]ith respect to the EC's impor ts of bananas, as of 1 January 2002, and until
31 December 2005, paragraphs 1 a nd 2 of Article XIII of the GATT 1994 are waived with respect to
the EC's separate tariff quota of 750,000 tonnes for bananas of ACP origin."
853 The Article XIII Doha
Waiver made specific reference to the Bananas Understandings, by " [t]aking note of the
understandings reached by the EC, Ecuador and the Un ited States that identify the means by which
the longstanding dispute over the EC's banana regime can be resolved, in particular their provision for
a temporary global quota allocation for ACP banana supplying countries under specified
conditions."854 As is clear from its text, the same recital of the Article XIII Doha Waiver noted that
the interim step foreseen by paragraph C of that Understanding was "temporary", which is also
confirmed by the fact that the Article XIII Doha Waiver applied only until the tariff-only regime
foreseen by paragraph B of the Bananas Understanding was supposed to enter into force. Further, the
Article XIII Doha Waiver referred to "the exceptional circumstances surrounding the resolution of the
bananas dispute and the interests of many WTO Members in the EC banana regime" 855, and
"[r]ecogniz[ed] the need to afford sufficient protection to the ACP banana supplying countries,
including the most vulnerable, during a limited tran sition period, to enable them to prepare for a
tariff-only regime."856
7.368 The Doha Waiver from Article I:1 of the GATT 1994 " [c]onsider[ed] that, in the field of
trade, the provisions of the ACP-EC Partnership Agreement requires preferential tariff treatment by
the EC of exports of products originating in the ACP States." 857 In the Article I Doha Waiver,
the WTO Ministerial Conference "decide[d that]… [s]ubject to the terms and conditions set out
hereunder, Article I, paragraph 1 of the General Agreement shall be waived, until 31 December 2007,
to the extent necessary to permit the Europ ean Communities to provide preferential tariff treatment
for products originating in ACP States as required by Article 36.3, Annex V and its Protocols of the
ACP-EC Partnership Agreement,858 without being required to exte nd the same preferential treatment
to like products of any other member." 859 Further, the Article I Doha Waiver provides that "[w]ith
respect to bananas, the additional provisions in the Annex shall apply."860 According to that Annex to
the Article I Doha Waiver, "[t]he waiver would apply for ACP products under the Cotonou
Agreement until 31 December 2007. In the case of bananas, the waiver will also apply until 31
December 2007, subject to the following, which is without prejudice to rights and obligations under
Article XXVIII."861

853 Transitional Regime for the EC Autonomous Tariff Rate Quotas on Imports of Bananas, Decision of
854 Ibid., third recital.
855 Ibid., fourth recital.
856 Transitional Regime for the EC Autonomous Tariff Rate Quotas on Imports of Bananas, Decision of
14 November 2001 (WT/MIN(01)/16), 16 November 2001, fourth recital.
857 European Communities – The ACP-EC Partnership Agreement (WT/MIN(01)/15),
14 November 2001, third recital.
858 (footnote original) Any reference to the Partnership Agreement in this Decision shall also include
the period during which the trade provisions of this Ag reement are applied on the ba sis of transitional measures
adopted by the ACP-EC joint institutions.
859 European Communities – The ACP-EC Partnership Agreement (WT/MIN(01)/15),
14 November 2001, para. 1.
860 Ibid., para. 3bis.
861 Ibid., Annex, chapeau.

7.369 As regards modifications to the EC bananas import regime in the period following the
adoption of the Bananas Understanding, the Panel notes that the European Communities argues that it
has not adopted its current bananas import regime specifically pursuant to paragraph B of the
Bananas Understanding.862 This argument seems to contradict the European Communities' argument
on good faith under the second preliminary issue that it "has fully complied with its obligations under
the [Bananas] Understanding in good faith and relying on the expectation that the United States would
also comply with its own obligations." 863 (emphasis added) That latter argument would suggest that
the European Communities argues that the banana s import regimes it introduced on 1 July 2001,
1 January 2002 and 1 January 2006 correspond to paragraphs C(1), C(2) and B of the
Bananas Understanding, respectively.
7.370 In the light of the similarities between paragraph C(1) and Annex 1 of the
Bananas Understanding, on the one hand, and EC Regulation 216/2001, on the other hand, the
European Communities EC Regulation 216/2001 Amending Regulation (EEC) No 404/93 on the
Common Organisation of the Market in Bananas clear ly corresponds to Phase I of the interim regime
set out by paragraph C of the Bananas Understanding.
7.371 Indeed, according to paragraph C(1) of the Ba nanas Understanding, the first phase of that
interim regime was supposed to become "[e]ffec tive on 1 July 2001". Similarly, the relevant
modifications in the management of tariff quotas set out in EC Regulation 404/1993, took effect on
1 July 2001. Under the second paragraph of Article 2 of EC Regulation 216/2001:
"[The Regulation] shall apply from 1 April 2001. However, the Commission may,
according to the procedure laid down in Artic le 27, delay the date until 1 July 2001 at
the latest, if this proves necessary for the implementation of the modifications in the
management of the tariff quotas."
7.372 In turn, Article 1 of EC Commission Regulati on 395/2001, notes that it "seeks ... to comply
with international commitments entered into by the Community within the World Trade Organisation
(WTO)"864, and provides that "Article 1 of Regula tion (EC) No 216/2001[, which introduces the
relevant modifications to EC Regulation 404/1993 shall apply from 1 July 2001."
7.373 Under Annex 1 of the Bananas Understanding, which describes Phase I of the EC interim
bananas import regime:
"1. A bound tariff-rate quota (TRQ) designa ted as quota 'A' will be set at
2,200,000 tonnes. An autonomous TRQ designated as quota 'B' will be set at
353,000 tonnes. These TRQs will be ma naged as one, with the total quota
being 2,553,000 tonnes. There is no expectation of allocation of shares of
either of these TRQs among country suppliers, and the Commission will not
seek to convene a meeting to that effe ct of the principal supplying countries
except upon the joint request of all such countries. The tariff applied to
bananas imported in the 'A' and 'B' quotas shall not exceed 75 euro/tonne.
2. A TRQ designated as quota 'C' will be set at 850,000 tonnes.

862 European Communities' second written submission, para. 43. The European Communities also
argues that "[t]he introduction of the tariff-only import regime was decided by the European Communities at
least 2 years before the signing of the [Bananas] Understanding." Final written version of the European
Communities' closing oral statement at the substantive meeting of the Panel with the parties and third parties,
para. 6.
863 European Communities' second written submission, para. 39.
864 EC Regulation 395/2001, recital 7.

3. Import licenses for 83% of the 'A' and 'B' TRQs will be distributed to
'traditional' operators based on each qualified 'traditional' operator's 1994-96
average annual final reference volume ('reference volume') for the 'A/B'
quotas. Qualified 'traditional' operators will be identified on the basis of the
distribution of licenses that occurred u nder Regulation 404, Article 19.1(a)
and Regulation 1442, Article 3.1(a) for 'Category A subfunction (a)'.
Importers will not need to produce new evidence.
4. Licenses for TRQ 'C' are intended to be distributed broadly in accordance
with the principles to be utilized in managing of licenses for TRQ's 'A' and 'B'
and on the basis of imports of ACP-origin bananas. The European
Commission and the United States will c onsult again within 4 weeks with a
view to finalizing the licensing principles for TRQ 'C'.
5. Within each TRQ, licenses may be used to import bananas from any source.
Licenses to import bananas into TRQ 'C' cannot be used to import bananas
into TRQs 'A' or 'B', and vice versa.
6. A 'non-traditional' operator category will be created with respect to 17% of
the quantity of the 'A and B' TRQs. Non-traditional operators cannot become
traditional operators in subsequent pe riods. Management of non-traditional
imports will be done by simultaneous examination."
7.374 In turn, the preamble of EC Regulati on 216/2001 makes reference to original
recommendations and rulings in the EC – Bananas III dispute:
"There have been numerous close cont acts with supplier countries and other
interested parties to settle the disputes arising from the import regime established by
Regulation (EEC) No 404/93 and to take account of the conclusions of the special
group set up under the dispute settlement system of the World Trade Organisation
(WTO)"
865 (footnote omitted, emphasis added).
7.375 Further, the preamble of EC Regulation 216/2001 describes the regime that this EC
Regulation intends to introduce, in a very similar way as Annex 1 to the Bananas Understanding:
"Analysis of all the options presented by the Commission suggests that establishment
in the medium term of an import system f ounded on the application of a customs duty
at an appropriate rate and application of a preferential tariff to imports from ACP
countries provides the best guarantees , firstly of achieving the objectives of the
common organisation of the market as regards Community production and consumer
demand, secondly of complying with the rules on international trade, and thirdly of
preventing further disputes.
However, such a system must be introduced upon completion of negotiations with the
Community's partners in accordance with WTO procedures, in particular
Article XXVIII of the General Agreement on Tariffs and Trade (GATT). The result
of these negotiations must be submitted for approval to the Council which must also,
in accordance with the provisions of the Treat y, establish the applicable level of the
Common Customs Tariffs.

865 EC Regulation 216/2001, recital 1.

Until the entry into force of that regime , the Community should be supplied under
several tariff quotas open to imports from a ll origins and managed in line with the
recommendations made by the dispute settlement body. The first tariff quota of
2200000 tonnes at a rate of EUR 75 s hould be bound in the WTO. A second,
additional tariff quota of 353000 tonnes should be opened to cater for the increase in
consumption resulting from enlargement of the Community in 1995, with the same
rate applying. To ensure satisfactory supply to the Community, a third, autonomous
tariff quota of 850000 tonnes should be opened, also for all origins. Under this latter
tariff quota, provision should be made for the possibility, in accordance with an
appropriate procedure, of a reduction in the applicable customs duty in order to allow
the effective importation of bananas orig inating in third countries which do not
benefit from the tariff preferences granted in respect of bananas originating in ACP
countries.
In view of the contractual obligations towards the ACP countries and the need to
guarantee them proper conditions of competiti on, application to imports of bananas
originating in those countries of a tariff preference of EUR 300 per tonne would
allow the trade flows in question to be main tained. This will entail in particular the
application to such imports of zero duty under the three tariff quotas.

Provision should be made for the additional tariff quota of 353000 tonnes to be
modified to take account of any increased Community demand found when a supply
balance is drawn up. Provision should also be made for suitable specific action to be
taken in response to exceptional circumstances liable to affect supply of the
Community market."
866 (emphasis added)
7.376 Article 1 of EC Regulation 216/2001 amended EC Regulation 404/1993 accordingly.
7.377 As regards Phase II of the European Commun ities' interim import regime foreseen under
paragraph C(2) of the Banan as Understanding, as mentioned above, the European Communities
argues that that phase was contained in "C ouncil Regulation 2587/2001, adopted by the
European Communities on December 19, 2001, which introduced the 2002-2005 banana import
regime."867 The United States does not contest the reference by the European Communities to
EC Regulation 2587/2001 in the context of the 2002-2005 bananas import regime of the
European Communities.
7.378 The European Communities notified that EC Regulation to the DSB with the following
introduction: "By ... Regulati on [2587/2001], the EC has implemented Phase 2 of the
[Bananas] Understandings with the United States and Ecuador (circulated as document WT/DS27/58
of 2 July 2001)."868
7.379 As the European Communities itself argues 869, similarly to EC Regulation 216/2001, the
preamble to EC Regulation 2587/2001 provides that "[ t]here have been numerous close contacts with
supplier countries and other interested parties to settle the disputes arising from the import regime

866 EC Regulation 216/2001, recitals 2-5 and 7.
867 European Communities' response to Panel question No. 13.
868 EC – Bananas III , Status Report by the European Communities (WT/DS27/51/Add.25),
21 January 2002, p. 1.
869 See European Communities' response to Panel question No. 13.

established by Regulation (EEC) No 404/93 and to take account of the conclusions of the panel set up
under the dispute settlement system of the World Trade Organisation (WTO)."
870
7.380 Further, Article 1.4 of EC Regulation 2587/ 2001 amends Article 18 of EC Regulation
404/1993 in line with Annex 2 to the Bananas U nderstanding, which describes Phase II of the interim
bananas import regime of the European Communities.
7.381 Finally, on 1 January 2006, EC Regulation 1 964/2005 entered into force. As mentioned
above, the European Communities identifies that Regulation as the measure introducing its current
bananas import regime. 871 Also, the European Communities does not contest that
EC Regulation 1964/2005 corresponds to paragraph B of the Banan as Understanding, which provides
that "In accordance with Article 16(1) of Regul ation No. (EC) 404/93 (as amended by Regulation
No. (EC) 216/2001), the European Communities (EC) will introduce a Tariff Only regime for imports
of bananas no later than 1 January 2006."
7.382 The preamble of EC Regulation 1964/2005 explicitly refers to "Council Regulation (EEC) No
404/93 of 13 February 1993 on the common organisati on of the market in bananas provides for the
entry into force of a tariff only regime for im ports of bananas no later than 1 January 2006." 872
Further, the preamble of EC Regulation 1964/2005 makes ample reference to the arbitrations pursuant
to the Annex to the Article I Doha Waiver 873, which addressed the two unsuccessful attempts of the
European Communities to rebind its bananas tariff in 2005.
Specific arguments by the European Communiti es to refute the proposition that its current
bananas import regime is a measure taken to comply
7.383 To assess whether the above events effec tively constitute a "continuum of events 874"875
between the original DSB recommendations and ruli ngs and the current EC bananas import regime,
the Panel will look at the main arguments raised by the European Communities to refute the
proposition that its current bananas import regime is a measure taken to comply. Most of these
arguments relate, at least in part, to the European Communities' argument that its final measure taken
to comply was its 2002-2005 bananas import regime , which corresponds to Phase II of the interim
regime set out in the Bananas Understanding.
Termination of the suspension of concessions by the United States
7.384 The European Communities argues that its 200 2-2005 bananas import regime was the final
measure taken to comply since "the United States' retaliation rights terminated upon the
European Communities' implementation of this tari ff-quota based regime and the United States never
requested from the DSB the right to reinstate those rights with relation to that import regime."876
7.385 Referencing Paragraph D of the Bananas Understanding877, the European Communities argues
that "the United States' retaliation rights termin ated upon the European Communities' implementation
of th[e 2002-2005] tariff-quota based regime." 878 According to the European Communities, "the fact
that the United States accepted to have their retalia tion rights terminated upon the implementation of

870 EC Regulation 2587/2001, recital 1.
871 See European Communities' first written submission, para. 4, footnote 2.
872 EC Regulation 1964/2005, recital 1.
873 See ibid., recitals 3-5.
874 (footnote original) Appellate Body Report, Mexico – Corn Syrup (Article 21.5 – US), para. 121.
875 Appellate Body Report on US – Softwood Lumber VI (Article 21.5 – Canada), para. 103.
876 European Communities' first written submission, para. 49.
877 See para. 7.184 above.
878 European Communities' first written submission, para. 49.

the tariff-quota-based import regime described in paragraph C-2 of the [Bananas] Understanding
confirms that the implementation of that import re gime was the agreed 'measure taken to comply'". 879
Further, the European Communities contends, "[t]he fact that the [Bananas] Understanding provided
for the termination and not for the continuation of the suspension of the retaliation rights of the
United States after January 1, 2002 confirms that there was no dispute between the United States and
the European Communities after that date."880
7.386 The European Communities additionally considers the dispute to have concluded since "the
United States never requested from the DSB the right to reinstate those rights with relation to that
import regime."881 Also, according to the European Communities, under the Bananas Understanding,
"[t]he only case in which the Unite d States would re-impose retaliatory measures was if the Phase II
regime [set out in paragraph C-2 of the Banan as Understanding] '(did) not enter into force by
1 January 2002'."882
7.387 According to the European Communities, "the right to suspend concessions must be revoked
once the defending WTO Member has fully co mplied with the DSB's recommendations and
rulings.883"884 The European Communities explains that:
"Article 22.8 of the DSU provides that retaliation measures must be terminated
'when a mutually agreed solution is reached '. In the present case, the United States
agreed to terminate its retaliation meas ures upon implementation of phase 2 of the
[Bananas] Understanding, i.e., the introduction of the 2002-2005 import regime.
This is further evidence that the tariff only regime to be introduced in 2006 was not
'a measure taken to comply'."
885
7.388 As noted above, in the arbitration concerning th e level of suspension or iginally proposed by
the United States886 (EC – Bananas III (US) (Article 22.6 – EC) , pursuant to Article 22.6 of the DSU
the arbitrator concluded that:
"In light of the foregoing considerations, th e Arbitrators determine that the level of
nullification or impairment suffered by the United States in the matter
European Communities – Regime for the Importation, Sale and Distribution of
Bananas is US$191.4 million per year. Accordingly, the Arbitrators decide that the
suspension by the United States of the app lication to the European Communities and
its member States of tariff concessions and related obliga tions under GATT 1994
covering trade in a maximum amount of US$191.4 million per year would be
consistent with Article 22.4 of the DSU."
887

879 European Communities' second written submission, para. 44.
880 European Communities' comments on United States' response to Panel question No. 22.
881 European Communities' first written submission, para. 49.
882 European Communities' second written submission, para. 44.
883 (footnote original) See the Handbook on the WTO Dispute Settlement System, A WTO Secretariat
Publication prepared for publication by the Legal Affairs Division and the Appellate Body, Cambridge
University Press, at page 81.
884 European Communities' first written submission, para. 24.
885 European Communities' response to Panel question No. 8.
886 See EC – Bananas III , Recourse by the United States to Ar ticle 22.2 of the DSU (WT/DS27/43),
14 January 1999.
887 Decision by the Arbitrators on EC – Bananas III (US) (Article 22.6 – EC), para. 8.1.

7.389 The United States modified its request for suspension of concessions accordingly
888, and on
19 April 1999, the DSB granted authorization for the United States to suspend concessions:
"[P]ursuant to the US request under Article 22.7 of the DSU, [the DSB] agree[s] to
grant authorization to suspend the appli cation to the European Communities and its
member States of tariff concessions a nd related obligatio ns under GATT 1994,
consistent with the decision of the Arbitrators contained in document
WT/DS27/ARB."889
7.390 The United States subsequently suspended concessions beginning in 1999.
7.391 At the DSB meeting of 1 February 2002, the United States made the following statement:
"[T]he United States ... was pleased to not e that the EC had increased the quota for
Latin American banana exporting countries by 100,000 tonnes effective from
1 January 2002. The United States had, therefore, terminated the suspension of
concessions in effect since 1999. The United States would continue to work closely
with the EC and other Members to address any issues that might arise as the
EC moved to a tariff-based system for ba nanas and implemented the terms of the
bilateral Understanding on Bananas."
890
7.392 The Panel notes that the United States does not contest that this was in response to the
introduction of Phase II of the European Communities ' interim bananas import regime set out in the
Bananas Understanding. However, the United States argues that:
"[T]he Understanding sets out a series of steps. Two significant steps were to be
achieved by July 1, 2001, and January 1, 2002. As incentive to ensure that the
EC took those steps, the United States agreed to first provisionally suspend its
imposition of increased duties and then terminate the imposition of increased duties
that the DSB had authorized the United States to apply. This only proves that both
the United States and the EC complied with wh at is set out in paragraphs C and D of
the Understanding. Up to that point, there had yet to be full compliance by the EC.
Per the terms of the Understanding, there was an additional step to be taken."
891
7.393 The Panel notes that Article 21.5 of the DSU do es not make any reference to retaliation, nor
to the suspension or termination of concessions. Nor does Article 22.8 of the DSU address what
measures can be considered as "measures taken to comp ly". This latter is a term used in Article 21.5
of the DSU.
7.394 The Panel recalls that the above arbitration procedure pursuant to Article 22.6 of the DSU
merely established the maximum annual amount of permissible suspension of concessions; neither
the arbitrator, nor the DSB indicated the period during which the United States would be entitled to
apply retaliatory measures.

888 See EC – Bananas III , Recourse by the United States to Ar ticle 22.7 of the DSU (WT/DS27/49),
9 April 1999.
889 Dispute Settlement Body, Minutes of Meeting held in the Centre William Rappard on 19 April 1999
(WT/DSB/M/59), 3 June 1999, p. 11.
890 Dispute Settlement Body, Minutes of Meeting held in the Centre William Rappard on
1 February 2002 (WT/DSB/M/119), 6 March 2002, para. 8.
891 Final written version of the United States' opening oral statement at the substantive meeting of the
Panel with the parties and third parties, para. 14. See also United States' response to Panel question No. 22.

7.395 Article 22.1 of the DSU provides that "[c]ompe nsation and the suspension of concessions or
other obligations are temporary measures available in the event that the recommendations and rulings
are not implemented within a reasonable period of time." Likewise, Article 22.8 of the DSU provides
that: "[t]he suspension of concessi ons or other obligati ons shall be temporary." This was also
confirmed by the arbitrator in EC – Bananas III (US) (Article 22.6 – EC) , who held that
"authorization to suspend concessions or other obligations is a temporary measure pending full
implementation by the Member concerned."892
7.396 The Panel agrees with the United States that "Members can choose not to apply their WTO
authorization (or not to apply it in full)." 893 This is illustrated by the history of the EC – Bananas III
dispute, where Ecuador chose not to retaliate despite the authorization to do so.894
7.397 The Panel considers that the suspension of concessions is a right, not an obligation.
Article 3.7 of the DSU provides that "[t]he last resort which this Understanding provides to the
Member invoking the dispute settlement procedures is the possibility of suspending the application of
concessions or other obligations under the covered ag reements on a discriminatory basis vis-à-vis the
other Member, subject to authorization by th e DSB of such measures" (emphasis added).
The European Communities also recognizes that retaliation involves a "right to suspend
concessions".895
7.398 Article 22.8 of the DSU provides that: "[t]he suspension of concessions or other obligations ...
shall only be applied until such time as the measure found to be inconsistent with a covered agreement
has been removed, or the Member that must implement recommendations or rulings provides a
solution to the nullification or impairment of benefits, or a mutually satisfactory solution is reached."
7.399 The Panel reads this part of Article 22.8 of the DSU as establishing a time-limit until which a
Member authorized to retaliate may exercise its right to retaliate. In other words, once authorized to
retaliate, a Member may choose whether or not to re taliate, but a Member choosing to retaliate shall
not apply such retaliation beyond the time-limit set out by Article 22.8 of the DSU. The Panel agrees
with the argument of the United States that "Members can choose not to apply their WTO
authorization (or not to apply it in full) for all so rts of reasons that have nothing to do with whether
the 22.8 conditions are met." 896 Indeed, the award of the arbitrator pursuant to Article 22.6 of the
DSU explicitly refers to "Members that for whatever reasons do not wish to suspend concessions."897
7.400 Since Members have the right but not the oblig ation to retaliate, the Panel does not believe
that the mere fact that a Member suspends and then terminates the suspension of concessions
necessarily means that "the measure found to be inconsistent with a covered agreement has been
removed, or the Member that must implement re commendations or rulings provides a solution to the
nullification or impairment of benefits, or a mutually satisfactory solution is reached."
7.401 Indeed, the arbitrator in EC – Bananas III (US) (Article 22.6 – EC) noted that the " temporary
nature [of retaliation] indicates that it is the purpose of countermeasures to induce compliance ."898

892 Decision by the Arbitrators on EC – Bananas III (US) (Article 22.6 – EC), para. 6.3.
893 United States' response to Panel question No. 43.
894 See EC – Bananas III , Recourse by Ecuador to Article 22.2 of the DSU (WT/DS27/52),
9 November 1999; Decision by the Arbitrators on EC – Bananas III (Ecuador) (Article 22.6 – EC) ;
EC - Bananas III, Recourse by Ecuador to Article 22.7 of the DSU (WT/DS27/54), 8 May 2000; and Dispute
Settlement Body, Minutes of Meeting held in the Centre William Rappard on 18 May 2000 (WT/DSB/M/80),
26 June 2000, para. 58.
895 European Communities' first written submission, para. 24.
896 United States' response to Panel question No. 43.
897 Decision by the Arbitrators on EC – Bananas III (US) (Article 22.6 – EC), para. 4.11.
898 Ibid., para. 6.3.

Likewise, the arbitrator in EC – Bananas III (Ecuador) (Article 22.6 – EC) stated that "the object and
purpose of Article 22 ... is to induce compliance."
899 Further, Article 22.1 of the DSU provides that
"neither compensation nor the suspension of concessi ons or other obligations is preferred to full
implementation of a recommendation to bring a measure into conformity with the covered
agreements."
7.402 The Panel agrees with the European Comm unities that paragraph D of the Bananas
Understanding linked the termination of the United States' suspension of concessions to the timely
introduction of Phase II of the interim regime set out in paragraph C(2) of the Understanding.
However, the Bananas Understanding referred to by the European Comm unities, also includes
paragraph B, which provides for a final step to fo llow immediately Phase II of the interim regime. In
its statement at the DSB meeting of 1 February 2002 on "terminat[ing] the suspension of concessions
in effect since 1999" 900 the United States made explicit refe rence to the Bananas Understanding and
the step set out in paragraph B thereof:
"The United States would continue to work closely with the EC and other Members
to address any issues that might arise as th e EC moved to a tariff-based system for
bananas and implemented the terms of the bilateral Understanding on Bananas."901
7.403 The Panel lastly recalls that in EC – Bananas III (US) (Article 22.6 – EC) the arbitrator noted
that "the European Communities argues that if we consider the WTO consistency of its banana regime
in an arbitration proceeding under Articl e 22, we will deprive Article 21.5 of its raison d'être ."902
The arbitrator "disagree[d]" 903, stating that "[f]or those Members that for whatever reasons do not
wish to suspend concessions, Article 21.5 will remain the prime vehicle for challenging
implementation measures."904
7.404 In the light of the above, the Panel considers th at the right to invoke Article 21.5 of the DSU
shall apply to the United States irrespective of whet her it terminated its suspension of concessions in
2002. Indeed, Article 21.5 of the DSU does not ma ke any reference to retaliation, nor to the
suspension or termination of concessions. Nor does Article 22.8 of the DSU talk about what
measures can be considered as measures taken to co mply, which is addressed in Article 21.5 of the
DSU. Thus, the termination of the United States' suspension of concessions cannot in itself be read as
a waiver of the US right to bring a compliance dispute or as an acceptance by the United States that
the 2002-2005 EC bananas import regime would be the final EC measure taken to comply.
Withdrawal from the DSB agenda
7.405 The European Communities also argues that "the issue of the implementation of the
EC-Bananas III DSB recommendations and rulings w as withdrawn from the DSB's agenda with the
consent of all WTO members (including the United States), in accordance with Article 21.6 of the
DSU."905 Accordingly, the European Communities contends:
"[A] compliance panel is excluded when a di spute has been settled. In fact, such a
dispute is considered resolved once and for a ll. This is evidenced by the wording of
Article 21.6 of the DSU, which specifies that the issue of implementation of the

899 Decision by the Arbitrators on EC – Bananas III (Ecuador) (Article 22.6 – EC), para. 76.
900 Dispute Settlement Body, Minutes of Meeting held in the Centre William Rappard on
1 February 2002 (WT/DSB/M/119), 6 March 2002, para. 8.
901 Ibid.
902 Decision by the Arbitrators on EC – Bananas III (US) (Article 22.6 – EC), para. 4.11.
903 Decision by the Arbitrators on EC – Bananas III (US) (Article 22.6 – EC), para. 4.11.
904 Ibid.
905 European Communities' response to Panel question No. 20.

recommendations or rulings of the DSB stays on its agenda 'until the issue is
resolved'. This obviously means that a di spute taken off the agenda is considered
resolved."906
7.406 At the DSB meeting held on 1 February 2002 907, under the agenda item "Surveillance of
implementation of recommendations adopted by the DSB", the Chairman of the DSB recalled that
"Article 21.6 of the DSU required that 'unless the DSB decides otherwise, the issue of implementation
of the recommendations or rulings shall be placed on the agenda of the DSB meeting after six months
following the date of establishment of the reasonable period of time pursuant to paragraph 3 and shall
remain on the DSB's agenda until the issue is resolved'."908
7.407 In the specific context of the EC – Bananas III dispute, the DSB Chairman "drew attention to
document WT/DS27/51/Add.25 which contained the status report by the EC on progress in the
implementation of the DSB's recommendations concerning its banana import regime."909
7.408 Subsequently, the European Communities stated that:
"[T]he EC had implemented on schedule the second phase of the Understandings on
Bananas concluded with the United Stat es and Ecuador in April 2001, and had
complied with its international obligations. [The EC] said that the regime set out in
[EC] Regulation [2587/2001] would be app licable until the time the EC's banana
import regime would become a tariff- only regime. This would take place by
1 January 2006 at the latest, following th e negotiations under Article XXVIII, which
in principle would begin in 2004. Under these circumstances, the EC considered that
this matter should now be withdrawn from the DSB agenda."910
7.409 In response, at the same meeting of the DS B, various Members, including Ecuador, Honduras
and the United States made statements. Subsequently, "[t]he DSB took note of [those] statements."911
7.410 The issue of the "Implementation by the Eur opean Communities of the recommendations and
rulings of the DSB in relation to 'European Co mmunities – Regime for the Importation, Sale and
Distribution of Bananas' 912 and related subsequent WTO proceed ings" appeared on the DSB agenda
four years later, at the first meeting of the DS B following the introduction of the current EC bananas
import regime. 913 It was discussed as an autonomous age nda item, separate from "Surveillance of
implementation of recommendations adopted by the DSB", and "the EC noted its disagreement with
the categorization of this matter as an 'implementation issue' relevant to Article 21 of the DSU." 914
The issue was further discussed at nume rous subsequent DSB meetings during 2006 915 and in early

906 Ibid.
907 See Dispute Settlement Body, Minutes of Meeting held in the Centre William Rappard on
1 February 2002 (WT/DSB/M/119), 6 March 2002, Item 1(a).
908 Ibid., para. 1.
909 Ibid., para. 2.
910 Dispute Settlement Body, Minutes of Meeting held in the Centre William Rappard on
1 February 2002 (WT/DSB/M/119), 6 March 2002, para. 3.
911 Ibid., 6 March 2002, para. 8.
912 (footnote original) WT/DS27.
913 See Dispute Settlement Body, Minutes of Meeting held in the Centre William Rappard on
20 January 2006 (WT/DSB/M/203), 24 February 2006.
914 Ibid., para. 55.
915 See Dispute Settlement Body, Minutes of Meeting held in the Centre William Rappard on
17 February 2006 (WT/DSB/M/205), 31 March 2006; Dispute Settlement Body, Minutes of Meeting held in the
Centre William Rappard on 17 March 2006 (WT/DSB/M/207), 26 April 2006; Dispute Settlement Body,
Minutes of Meeting held in the Centre William Rappard on 21 April 2006 (WT/DSB/M/210), 30 May 2006;

2007
916 until the DSB finally addressed the request fo r the establishment of compliance panels by
Ecuador917 and by the United States.918
7.411 The European Communities invokes the following part of the third sentence of Article 21.6 of
the DSU: "the issue of implementation of the recommendations or rulings shall ... remain on the
DSB's agenda until the issue is resolved", and argues that therefore "a dispute taken off the agenda is
considered resolved."919 The Panel considers that this can be ascertained only after analysing the text
of Article 21.6 in line with the customary rules of interpretation.
7.412 Article 21.6 of the DSU provides that:
"The DSB shall keep under surveilla nce the implementation of adopted
recommendations or rulings. The issue of implementation of the recommendations or
rulings may be raised at the DSB by an y Member at any time following their
adoption. Unless the DSB decides otherwi se, the issue of implementation of the
recommendations or rulings shall be placed on the agenda of the DSB meeting after
six months following the date of establis hment of the reasonable period of time
pursuant to paragraph 3 and shall remain on the DSB's agenda until the issue is
resolved. At least 10 days prior to each such DSB meeting, the Member concerned
shall provide the DSB with a status report in writing of its progress in the
implementation of the recommendations or rulings."
7.413 The excerpt invoked by the European Communities, namely that "the issue of implementation
of the recommendations or rulings shall ... remain on the DSB's agenda until the issue is resolved"
appears to be categorical. It uses the word "s hall", which implies an obligation, and the word
"remain", which implies continued action by the DSB.
7.414 However, this sentence begins with the qualif ier "[u]nless the DSB decides otherwise".
This qualification also applies to part of the sa me sentence invoked by th e European Communities.
Accordingly, per the terms of the sentence i nvoked by the European Communities, a plausible
interpretation of the third sentence of Article 21.6 of the DSU in the Panel's view is that the DSB may
decide that the "issue of implementation of the recommendations or rulings shall [ not] remain on the
DSB's agenda until the issue is resolved".

Dispute Settlement Body, Minutes of Meeting held in the Centre William Rappard on 17 May 2006
(WT/DSB/M/212), 20 June 2006; Dispute Settlement Body, Minutes of Meeting held in the Centre William
Rappard on 19 June 2006 (WT/DSB/M/215), 25 July 2006; Dispute Settlement Body, Minutes of Meeting held
in the Centre William Rappard on 19 July 2006 (WT/DSB/M/217), 12 September 2006; Dispute Settlement
Body, Minutes of Meeting held in the Centre W illiam Rappard on 1 September 2006 (WT/DSB/M/219),
6 October 2006; Dispute Settlement Body, Minutes of Meeting held in the Centre William Rappard on
28 September 2006 (WT/DSB/M/220), 2 November 2006; Dispute Settlement Body, Minutes of Meeting held
in the Centre William Rappard on 26 October 2006 (WT/DSB/M/221), 4 December 2006; Dispute Settlement
Body, Minutes of Meeting held in the Centre William Rappard on 21 November 2006 (WT/DSB/M/222),
12 January 2007; and Dispute Settlement Body, Minutes of Meeting held in the Centre William Rappard on
19 December 2006 (WT/DSB/M/224), 9 February 2007.
916 See Dispute Settlement Body, Minutes of Meeting held in the Centre William Rappard on
23 January 2007 (WT/DSB/M/225), 8 March 2007; and Dispute Settlement Body, Minutes of Meeting held in
the Centre William Rappard on 20 February 2007 (WT/DSB/M/226), 26 March 2007.
917 See Dispute Settlement Body, Minutes of Meeting held in the Centre William Rappard on
20 March 2007 (WT/DSB/M/228), 2 May 2007.
918 See Dispute Settlement Body, Minutes of Meeting held in the Centre William Rappard on
12 July 2007 (WT/DSB/M/235), 30 August 2007.
919 European Communities' response to Panel question No. 20.

7.415 The third sentence of Article 21.6 of the DS U provides that "[t]he DSB shall keep under
surveillance the implementation of adopted recommenda tions or rulings." Reading the first and third
sentences of Article 21.6 of the DSU together suggests that the DSB may fulfil its mandate of keeping
"under surveillance the implementation of adopted recommendations or rulings" otherwise than by
maintaining that issue on the agenda. The DSB coul d indeed do so for reasons of efficiency, for
instance in cases where no new elements warranting a debate occur between its meetings.
7.416 The first sentence of Article 21.6 of the DSU provi des that it is "[t]he DSB [that] shall keep
under surveillance the implementation of adopted r ecommendations or rulings" and the third sentence
of the same paragraph refers to the " DSB's agenda". (emphasis added) However, issues do not appear
automatically on the DSB agenda. It is the ri ght of WTO Members to raise the issue of the
implementation of adopted recommendations or ruli ngs. The second sentence of Article 21.6 of the
DSU provides that "any Member" "may" "raise[] " "[t]he issue of implementation of the
recommendations or rulings ... at the DSB", and establis hes that this right might be exercised "at any
time following the ... adoption [of recommendations and rulings]".
7.417 As regards the specific case before this Panel, the Panel considers that the statements by
Members at the DSB meeting of 1 February 2002 indicate that Members did not consider the "issue of
the implementation of the recommendations or rulings " resolved at the time of that DSB meeting.
On the contrary, most Members who spoke re ferred to the final step foreseen in the
Bananas Understanding and the need to comply w ith that step, which was subsequent to the
2002-2005 EC bananas import regime.
7.418 For instance, the United States noted that "[it ] would continue to work closely with the
EC and other Members to address any issues that might arise as the EC moved to a tariff-based
system for bananas and implemented the terms of the bilateral Understanding on Bananas."920
7.419 Likewise, although "Ecuador ... considered th at this item should no longer appear on the
agenda of future DSB meetings"921, it also stated that:
"[The Bananas] Understandi ng constituted a sound basis fo r the EC to implement a
transitional banana import regime so th at by 1 January 2006, at the latest, a
WTO-compatible tariff-only regime would be put into place. The transitional regime
contained various phases, stages and elements to be implemented. One element was
to obtain waivers from Articles I and XIII of the GATT 1994. However, the decision
to grant these waivers included new stages wh ich would have to be carried out in
order to ensure a proper transition to a tariff-only banana import regime, as from
1 January 2006."
922
7.420 Ecuador added that:
"Accordingly, insofar as the EC continued to impl ement the DSB's recommendations
by meeting its commitments , Ecuador wished to reserve its rights under Article 21 of
the DSU. Therefore if there was any di sagreement concerning the measures applied
by the EC, the matter could be referred to the original Panel pursuant to Article 21.5
of the DSU"923 (emphasis added).

920 Dispute Settlement Body, Minutes of Meeting held in the Centre William Rappard on
1 February 2002 (WT/DSB/M/119), 6 March 2002, para. 7.
921 Ibid., para. 5.
922 Ibid.
923 Ibid., para. 5.

7.421 Honduras also referred to the Bananas Understandings and:
"[E]xpressed [the] expectation that in order to implement the Understandings on
Bananas in accordance with the agreemen t reached at Doha, the EC would not
impose a prohibitive tariff that would make it impossible for Honduran bananas to
enter the EC market. Honduras hoped that this agreement would be honoured in good
faith. It should be kept in mind that Honduras had taken into account the interests of
all parties as well as the integrity of the world trading system."
924
7.422 The European Communities also referred to th e Bananas Understanding when requesting that
the issue be withdrawn from the DSB agenda:
"[T]he regime set out in [EC] Regul ation [2587/2001] would be applicable until the
time the EC's banana import regime would b ecome a tariff-only regime. This would
take place by 1 January 2006 at the latest , following the negotiations under
Article XXVIII, which in principle would begin in 2004."925 (emphasis added)
7.423 The Panel considers that the above statements by Members at the DSB meeting of 1 February
2002 do not reflect an agreement by Members that the issue of the implementation of the DSB
recommendations and rulings in the EC - Bananas III dispute could not be brought back to the DSB
agenda at a later point.
7.424 In fact, Honduras explicitly "reserve[d] its rights, including the right to request that this matter
be placed on the DSB agenda in the future." 926 Following the introduction of the current EC bananas
import regime, Honduras and other Members raised the issue of the "Implementation by the
European Communities of the recommendations and rulings of the DSB in relation to
'European Communities – Regime for the Impor tation, Sale and Distribution of Bananas' 927 and
related subsequent WTO proceedings" at DSB meeting held in 2006 and in early 2007, in line with
the right set out in the second sentence of Article 21.6.
7.425 As mentioned above, at its meeting of 1 February 2002 the DSB " took note of the
statements"928 made in the context of the "Surveill ance of implementation of recommendations
adopted by the DSB" in the EC – Bananas III dispute. In this regard the United States argues that:
"The DSB simply 'took note' of the statem ents and did not take a decision on this
issue. The fact that other Members did not request that this matter be on the agenda
of subsequent meetings presumably reflects that little would have been gained by
keeping this matter on the DSB agenda until the EC took the next step on
January 1, 2006."
929
7.426 The Panel notes that under the agenda ite m "Surveillance of implementation of
recommendations adopted by the DSB", the DSB would usually both "take note of the statements
made" and explicitly "agree to revert to the matter at its following regular meeting" in situations
where no Member contests that compliance has not yet been achieved by the complainant or the
dispute is not yet settled.

924 Ibid., para. 6.
925 Ibid., para. 3.
926 Dispute Settlement Body, Minutes of Meeting held in the Centre William Rappard on
1 February 2002 (WT/DSB/M/119), 6 March 2002, para. 6.
927 (footnote original) WT/DS27.
928 Dispute Settlement Body, Minutes of Meeting held in the Centre William Rappard on
1 February 2002 (WT/DSB/M/119), 6 March 2002, para. 9.
929 United States' response to Panel question No. 21.

7.427 Under the agenda item "Surveillance of implem entation of recommendations adopted by the
DSB", the DSB would merely "take note of the statem ents made" without explicitly agreeing to revert
to the matter in various types of situations. In some cases, it seems that the DSB would merely take
note of the statements made because no Member contests that compliance has been achieved. 930
However, there are also numerous instances where, under the agenda item "Surveillance of
implementation of recommendations adopted by th e DSB", the DSB would merely take note of
statements contesting whether compliance has been ac hieved, without explicitly agreeing to revert to
the matter.931
7.428 Therefore, the Panel cannot consider the mere fact that the DSB only took note of the
statements made at its meeting of 1 Februa ry 2002 as an indication that the original DSB
recommendations in the EC – Bananas III dispute were fully complied with, nor as an indication that
those recommendations were not fully complied with.
7.429 The Panel notes in this context that, on at least one occasion, the DSB discussed the
"Surveillance of implementation of recommendations adopted by the DSB" and merely took note of
statements contesting whether compliance had been achieved, and subsequently agreed to establishing
a compliance panel pursuant to Article 21.5 of the DSU. In EC – Bananas III, at the DSB meeting of
25 November 1998 the DSB Members expressed diverg ing opinions as to the first EC attempt to
comply referred to in a status report of the European Communities 932 achieves compliance. 933
The DSB merely took note of the statements made, w ithout explicitly agreeing to revert to the matter
at its next regular meeting. 934 This did not prevent the DSB from establishing, at a later meeting, the
first compliance panel requested by Ecuador in EC – Bananas III.935
7.430 In the light of the above, the Panel does not consid er that the mere fact that the issue of the
implementation of the recomme ndations or rulings in the EC – Bananas III dispute was withdrawn
from the DSB agenda necessarily means that that is sue was definitively resolved. Accordingly, the
Panel finds that it cannot draw the conclusion sugg ested by the European Communities from the text
of Article 21.6 of the DSU and the termination of the United States' suspension of concessions in
2002.
7.431 If the Panel were to reach the opposite conclusi on in this dispute, WTO Members might have
no other choice but to ensure that the issue of th e implementation of recommendations or rulings was
constantly maintained on the agenda of each DSB session merely for the sake of making sure that
that issue was not considered resolved by a panel. This would be the case even when no useful or
meaningful discussion of the implementation of r ecommendations or rulings can be expected at a
specific point in time prior to the issue of the implementation of recommenda tions or rulings being

930 See Dispute Settlement Body, Minutes of Meeting held in the Centre William Rappard on
26 September 2000 (WT/DSB/M/89), 23 October 2000, para. 46; and Dispute Settlement Body, Minutes of
Meeting held in the Centre William Rappard on 16 June 1999 (WT/DSB/M/64), 21 July 1999, p. 2.
931 See Dispute Settlement Body, Minutes of Meeting held in the Centre William Rappard on
21 October 1998 (WT/DSB/M/49), 19 November 1998, p. 4; Dispute Settlement Body, Minutes of Meeting
held in the Centre William Rappard on 27 January 2000 (WT/DSB/M/74), 22 February 2000, p. 8; and Dispute
Settlement Body, Minutes of Meeting held in the Centre William Rappard on 27 January 2000
(WT/DSB/M/74), 22 February 2000, p. 6.
932 See EC – Bananas III , Status Report by the European Communities (WT/DS27/17/Add.3),
13 November 1998.
933 See Dispute Settlement Body, Minutes of Meeting held in the Centre William Rappard on
25 November 1998 (WT/DSB/M/51), 22 January 1999, pp. 3-5.
934 See ibid., p. 5.
935 See Dispute Settlement Body, Minutes of Meeting held in the Centre William Rappard on
12 January 1999 (WT/DSB/M/53), 18 March 1999.

resolved. Such a practice would result in unn ecessarily lengthy agendas for DSB meetings being
adopted and would not contribute towards the smooth functioning of that body.
The relevance of the Doha Waivers
7.432 As noted above, in November 2001 the Doha Ministerial Conference adopted two waivers
from Articles I:1, and from XIII:1 and 2 of the GATT 1994, respectively, for a limited period of time.
Nevertheless, the Parties contest the relevance of the Doha Waivers for establishing whether or not
the current EC bananas import regime is a measure taken to comply.
7.433 The European Communities does not disagree that the preamble of EC Regulation 1964/2005
makes reference to the two arbitrations and to the European Communities' unsuccessful attempts to
rebind its bananas tariff pursuant to the Article I Doha Waiver. However, the European Communities
contests the US argument summarised by th e European Communities as "an assertion that the
Preamble of Regulation 1964/2005 refers to the arb itrations held in 2005 within the context of the
Doha waiver and, hence, Regulation 1964/2005 must be considered as a measure taken to comply
with the recommendations and rulings adopted by the DSB in 1997."
936 According to the
European Communities, "this point [does not] suffice ... to establish a link between the tariff only
regime and the recommendations and rulings of the DSB in 1997" 937 because "the subject matter of
the 2005 arbitrations has no relation to the 1997 DSB recommendations and rulings."938
7.434 The European Communities argues also that the Article I Doha Waiver proves that the current
EC bananas import regime is not a measure taken to comply:
"[T]he arbitrations were part of the waiver granted by the WTO to the
Cotonou Agreement. The Cotonou Agreement was only signed in 2000,
i.e., three years after the adoption of the DSB's recommendations and rulings. It is
difficult to see how a Regulation adopted to conform to the terms of a waiver relating
to an international agreement reached in 2000 can be said to be a 'measure taken to
comply' with a DSB ruling adopted in 1997."939
7.435 The parties do not contest that the two Doha Waivers are linked to paragraph E of the
Bananas Understanding, which provides that:
"The United States will lift its reserve con cerning the waiver of Article I of the
GATT 1994 that the EC has requested for preferential access to the EC of goods
originating in ACP states signatory to the Cotonou Agreement; and will actively work
towards promoting the acceptance of an EC request for a waiver of Article XIII of the
GATT 1994 needed for the management of quota C under the import regime
described in paragraph C(2) until 31 December 2005."
7.436 Both Doha Waivers were adopted for a limited pe riod of time. The Article XIII Doha Waiver
applied until the end of 2005, i.e. until the end of the application of the 2002-2005 EC bananas import
regime, which was the day preceding the entry into force of the tariff-only regime set out in

936 European Communities' second written submission, para. 46. The United States originally
formulated that argument in the following way: "The fi fth clause in the preamble to EC Regulation 1964 itself
states that the measures are being ta ken in an effort to rectify the matter which the two Article I waiver Annex
arbitrations found inconsistent with that Annex. The Article I waiver and Annex are inextricably linked to the
Understandings, which are in turn inextricably linke d to the recommendations and rulings of the DSB in
Bananas III." United States' second written submission, para. 48.
937 European Communities' second written submission, para. 47.
938 Ibid., para. 48.
939 Ibid., para. 47.

paragraph B of the Bananas Understanding. In turn , the Article I Doha Waiver applied to bananas in
general until 31 December 2007, but the Annex to the Article I Doha Waiver provided for the
possibility of the waiver expiring at the end of 2005:
"If the EC has failed to rectify the matter, this waiver shall cease to apply to bananas
upon entry into force of the new EC tariff regime ... on 1 January 2006."940
7.437 The European Communities argues, in the contex t of its rebuttal of the United States' claim
under Article I of the GATT 1994, that the Article I Doha Waiver applied to bananas until the end of
2007.941 The Panel will not address that issue at this point.
7.438 It suffices to note here that the argument of the European Communities implies that
the Article I Doha Waiver would have applied both during the validit y of the 2002-2005 EC bananas
import regime and the current EC bananas import regime, thus establishing a link between the two
regimes. This raises the question why the European Communities sees its 2002-2005 as its final
measure taken to comply.
7.439 If, on the contrary, the Article I Doha Waiver was to have expired in regard to bananas at the
end of 2005, it would have app lied, similar to the Article XIII Doha Waiver, exactly during Phase II
of the interim EC bananas import regime set out in paragraph C(2) of the Bananas Understanding.
Such possible coincidence between the period of vali dity of both Doha Waivers and Phase II of the
interim EC bananas import regime, as well as the wording of paragraph E of the
Bananas Understanding would establish a close link between the Doha Waivers and Phase II of the
interim EC bananas import regime.
7.440 Given such a close link between the Doha Wa ivers and Phase II of the interim EC bananas
import regime, the Panel agrees with the United States that the step set out in paragraph C(2) of the
Bananas Understanding "w[as] 'interim' because [ it] still discriminated between WTO Members, as
evidenced inter alia by the fact that the EC recognized that it would need waivers of Article I and XIII
of the GATT 1994."942
7.441 In any event, since the Doha Waivers applie d incontestably during the entire Phase II of the
interim EC bananas import regime and they were limited in time, they are relevant for confirming that
Phase II of the interim EC bananas import regime c ould not be the final measure taken to comply by
the European Communities. All parties concerned were of the opinion that only when a tariff-only
regime was introduced would the case be closed.
7.442 The Panel notes that the European Communities also argues that "the United States invites the
Panel to determine whether the current banana im port regime of the European Communities remains
covered by the Doha waiver."943 However, according to the European Communities:
"Such determination depends exclusively on the interpretation of the conditions set
by the Doha waiver and, therefore, it is unr elated to 'compliance with DSB rulings'.
The conditions imposed by the waiver in relation to the new tariff-only regime are the
result of negotiations that were not related to the DSB rulings and the
European Communities' compliance with th em. Therefore, a dispute over the

940 European Communities – The ACP-EC Partnership Agreement (WT/MIN(01)/15),
14 November 2001, Annex, fifth tiret.
941 See paras. 7.549 to 7.5517.552 below.
942 Final written version of the United States' opening oral statement at the substantive meeting of the
Panel with the parties and third parties, para. 10.
943 European Communities' response to Panel question No. 11.

continued existence of the Doha waiver should have been brought under a new
dispute settlement case and not as a case under Article 21.5 of the DSU."
944
7.443 The United States responds that:
"In the current proceeding, [it] is cha llenging 'the consistency with a covered
agreement of measures taken to comply' (DSU Article 21.5): that is, the
United States is challenging the consis tency with Article I and XIII of the
GATT 1994 (a covered agreement) of the EC 's current bananas regime (a measure
taken to comply)."945
7.444 The request of the United States for the establishment of this compliance Panel 946, and this
Panel's subsequent mandate upon establishment by the DSB, confirms that point by the United States.
7.445 Further, the United States argues that:
"The analysis of the consistency of that measure with Article I requires an analysis of
the Doha waiver because the EC argues th at the Doha waiver covers the breach.
Therefore, the issue of the waiver's con tinued existence is properly before this
Article 21.5 Panel."947
7.446 Indeed, it is the European Communities that i nvokes the Doha Waiver as a defence against
the US claim under Article I of the GATT 1994. Accordingly, the Panel rejects the EC argument that,
because of the Article I Doha Waiver and related arbitration proceedings, the Panel should not address
the US compliance complaint.
The relevance of the Bananas Understanding
7.447 As noted above948, both parties agree that the Bananas Understanding is relevant for assessing
whether the current EC bananas import regime is a measure taken to comply.
7.448 In the context of its arguments that its 2002-2005 bananas import regime was the final
measure taken to comply, the European Communities argues that:
"[T]he fact that the European Commun ities introduced a tariff-only regime on
January 1, 2006, in accordance with the provisions of Regulation 216/2001, does not
have any legal significance for the Eur opean Communities' relations with the
United States. The European Communities simply implemented its own legislation in
accordance with its provisions."949
7.449 Further, the European Communities contends, "there is no link between the recommendations
and rulings of the DSB [adopted in 1997] and the political decision of the European Communities to
introduce a tariff-only import regime by January 1, 2006." 950 According to the European
Communities, its "political decision [on introducing a tariff-only regime] had already been taken

944 Ibid.
945 United States' comment on the European Communities' response to Panel question No. 11.
946 See EC – Bananas III (Article 21.5 – US) , Request for the Establishment of a Panel (WT/DS27/83)
2 July 2007.
947 United States' comment on the European Communities' response to Panel question No. 11.
948 See paras. 7.357 to 7.359 above.
949 European Communities' response to Panel question No. 14.
950 European Communities' second written submission, para. 45.

before the signing of the Understanding between th e United States and the European Communities
and their reaching an agreement on the appropriate 'measures taken to comply'."951
7.450 The Panel disagrees with the European Comm unities that there is no link between the
political decision of the European Communities to introduce a tariff-only import regime by
1 January 2006 and the original DSB recommendations and rulings. EC Regulation 216/2001, which
the European Communities identif ies as the legislation embodying its political decision amends
Article 16(1) of EC Regulation 404/1993 to the following:
"This Article and Articles 17 to 20 shall a pply to imports of fresh products falling
within CN code ex 0803 00 19 up to the entry into force of the rate of the common
customs tariff for those products, no later than 1 January 2006 , established under the
procedure provided for in Article XXVIII of the General Agreement on Tariffs and
Trade" (emphasis added).
7.451 Article 1.1 of EC Regulation 1964/2005 w as adopted explicitly in accordance with
Article 16(1) of EC Regulation 404/1993, as amended by EC Regulation 216/2001.
7.452 Further, EC Regulation 216/2001 explicitly mentions that:
"There have been numerous close cont acts with supplier countries and other
interested parties to settle the disputes arising from the import regime established by
Regulation (EEC) No 404/93 and to take account of the conclusions of the special
group set up under the dispute settlement system of the World Trade Organisation
(WTO)" (footnote omitted).
7.453 Thus, the EC regulation identified by the Eu ropean Communities as embodying its political
decision to introduce a tariff-only regime explicitly li nks the current EC bananas import regime to the
original recommendations and rulings of the DSB.
7.454 The Panel also disagrees with the European Communities on the relevance of the political
decision adopted prior to, and referenced in, the Bananas Understanding. The European Communities
concedes that its political decision wa s incorporated into a binding legislation. As a matter of fact,
that binding legislation modified the prior binding legislation, which in turn served as a legal basis for
the necessary additional legislation to introduce the current EC bananas import regime.
7.455 The Panel considers it unrealistic that any Memb er would "identif[y] the means by which [a]
long-standing dispute over [its] import regime [concerning a key sector of agricultural trade] can be
resolved", without first conducting a reflection pr ocess and taking a political decision on the relevant
means to resolve that dispute. Th e same applies to the recording of that decision into an instrument
concluded with another Member and subsequently communicated to the DSB as a "mutually agreed
solution".
7.456 Also, if such a political decision has already b een incorporated into a Member's domestic
legislation, it would seem all the more reasonable that the instrument recording that decision and
concluded with another Member would refer to such legislation, as does paragraph B of the
Bananas Understanding.
7.457 In short, the alleged political nature of the Eu ropean Communities' prior decision to introduce
a tariff-only bananas import regime does not diminish the relevance of the Bananas Understanding for
establishing whether the current EC bananas import regi me is a measure taken to comply. In fact, the

951 Ibid., para. 43.

European Communities argues that its current EC ba nanas import regime corr esponds to the step set
out in paragraph B of the Bananas Understanding. In the context of its second preliminary objection,
the European Communities contends that it "has fully complied with its obligations under the
[Bananas] Understanding in good faith and relying on the expectation that the United States would
also comply with its own obligations."
952 As analysed above, this can only be interpreted to mean that
the European Communities is arguing that its import regimes introduced on 1 July 2001,
1 January 2002 and 1 January 2006 correspond to Phases I and II of its interim bananas import regime
and to the final step set out in the Bananas Understanding.
7.458 Further, even if it were true, as the Eu ropean Communities argues, that it "simply
implemented its own legislation in accordance with its provisions" 953, the Panel cannot fail to note the
following. The legislation invoked by the Eur opean Communities, namely EC Regulation 216/2001
explicitly refers to the original measure under re view in the original panel and Appellate Body
proceedings, i.e. EC Regulation 404/1993 954, and to the need "to take account of the conclusions of
the special group set up under the dispute settlement system of the World Trade Organisation".955
7.459 In the light of the above, without assessing the legal status of the Bananas Understanding,
the Panel confirms that that Understanding is rele vant for assessing whether the current EC bananas
import regime is a measure taken to comply.
7.460 As regards the text of the Bananas Understa nding analysed above, the Panel notes that both
paragraphs B and C of the Bananas Unders tanding describe steps to be taken by the
European Communities, and use th e word "will". Accordingly, the Panel considers that the
Bananas Understanding attaches at least equal impor tance to the two regimes set out in those two
paragraphs.
7.461 Further, on the basis of the relative position of paragraphs B and C, and the phrase "in the
interim" in the latter, the Panel considers that the Bananas Understanding accords key importance to
the tariff-only regime as a "means by which the lo ng-standing dispute over the EC's banana import
regime can be resolved. In fact, paragraph B of the Bananas Understanding, which provides for the
introduction of "a Tariff Only regime for impor ts of bananas no later than 1 January 2006" 956,
immediately follows paragraph A, which stipulat es that "[t]he European Commission and [the
United States/Ecuador] have identified the means by which the long-standing dispute over the EC's
banana import regime can be resolved." 957 In turn, paragraph C, which provides for "an import
regime on the basis of historical licensing" 958 only appears after paragraph B, and is introduced with
the phrase "in the interim".
The original DSB recommendations and rulings do not prescribe the introduction of a
tariff-only regime
7.462 The European Communities also argues that "[ t]here is no single finding or recommendation
of the Appellate Body that could be complied w ith only through the introduction of a tariff only
import regime"959:

952 European Communities' second written submission, para. 39.
953 European Communities' response to Panel question No. 14.
954 EC Regulation 216/2001, recital 1.
955 Ibid.
956 Documents WT/DS27/58 of 2 July 2001, p. 2, para. B, and WT/DS27/59 of 2 July 2001, para. B.
957 Documents WT/DS27/58 of 2 July 2001, p. 2, para. A, and WT/DS27/59 of 2 July 2001, para. A.
958 Documents WT/DS27/58 of 2 July 2001, p. 2, para. C, and WT/DS27/59 of 2 July 2001, para. C.
959 European Communities' second written submission, para. 45.

"A careful analysis of the findings a nd recommendations of the Appellate Body
report in the EC–Bananas III case does not reveal any element that could support a
conclusion that the European Communities was obliged to move into a tariff only
regime in order to bring itself into complia nce with the covered agreements. Quite to
the contrary, the findings and recommendati ons of the Appellate Body allowed the
European Communities to bring itself in to compliance through the adoption of a
revised, tariff-quota-based import regime with a different allocation of quotas and
import licenses."
960
7.463 In fact, to make such a positive suggestion, the original panel or the Appellate Body should
have issued suggestions pursuant to Article 19.1 of the DSU, which clearly distinguishes
recommendations from suggestions:
"Where a panel or the Appellate Body concl udes that a measure is inconsistent with a
covered agreement, it shall recommend that the Member concerned bring the measure
into conformity with that agreement. In addition to its recommendations, the panel or
Appellate Body may suggest ways in whic h the Member concerned could implement
the recommendations" (footnotes omitted; emphasis added).
7.464 The Panel recalls that no suggestions were is sued in the original panel and appellate
proceedings. Further, the Panel recalls that the fi rst compliance panel requested by Ecuador did issue
suggestions pursuant to Article 19.1. The first and second suggestions of that panel concerned a
"tariff-only system for bananas":
"First, the European Communities could choose to implement a tariff-only system for
bananas, without a tariff quota. This coul d include a tariff preference (at zero or
another preferential rate) for ACP bananas. If so, a waiver for the tariff preference
may be necessary unless the need for a waiv er is obviated, for example, by the
creation of a free-trade area consistent w ith Article XXIV of GATT. This option
would avoid the need to seek agreement on tariff quota shares.
Second, the European Communities could c hoose to implement a tariff-only system
for bananas, with a tariff quota for ACP bananas covered by a suitable waiver."
961
7.465 The Panel notes that parties disagree whether, in the light of the fact that those suggestions
were made in a proceeding not involving the United States, they are relevant before this compliance
Panel. The Panel does not need to address that question.
7.466 The Panel needs to address the specific argum ent by the European Communities that its
current bananas import regime is not a measure taken to comply since "[t]here is no single finding or
recommendation of the Appellate Body that could be complied with only through the introduction of a
tariff only import regime."962 In that context, the Panel notes that the first compliance panel requested
by Ecuador introduced its suggestions with the following introduction:
"While Members remain free to choose how th ey implement DSB recommendations
and rulings, it seems appropriate, after one impl ementation attempt has proven to be
at least partly unsuccessful, that an Article 21.5 panel make suggestions with a view
toward promptly bringing the dispute to an end.

960 Ibid.
961 Panel Report on EC – Bananas III (Article 21.5 – Ecuador), paras. 6.156-6.157.
962 European Communities' second written submission, para. 45.

In light of our findings and conclusions with respect to Articles I and XIII of GATT,
the requirements of the Lomé Convention and the coverage of the Lomé waiver,
above, in our view, the European Communities has at least the following options for
bringing its banana import regime in to conformity with WTO rules "
963 (emphasis
added).
7.467 The Panel considers that irrespective of the status of the above-mentioned suggestions for this
compliance dispute, it can properly take into consideration the above introduction to those
suggestions, including their highlighted portion, as it forms part of the jurisprudence of a previous
panel.
7.468 Indeed, in Japan – Alcoholic Beverages II, the Appellate Body held that:
"Adopted panel reports are an important part of the GATT acquis. They are often
considered by subsequent panels. They create legitimate expectations among WTO
Members, and, therefore, should be taken into account where they are relevant to any
dispute. However, they are not binding, except with respect to resolving the
particular dispute between the parties to that dispute. In short, their character and
their legal status have not been cha nged by the coming into force of the WTO
Agreement."
964
7.469 The Panel notes that the italicized parts in the introduction to the above-mentioned
suggestions by the first compliance panel requested by Ecuador confirm Members' freedom to choose
how they implement DSB recommendations and rulings, or suggestions issued pursuant to
Article 19.1 of the DSU. The Eu ropean Communities seems to refer to this freedom in its argument
that "[f]ollowing a negative panel or Appellate B ody report, a defending party may take a number of
initiatives that may affect the product market that was the subject of the dispute."965
7.470 Accordingly, the fact that the original DS B recommendations and rulings did not explicitly
require the European Communities to bring it self into compliance specifically through the
introduction of a tariff-only import regime is ir relevant for establishing whether the current
EC bananas import regime is a measure taken to comply.
The timing of the US compliance challenge
7.471 As regards the timing of the US compliance challenge, the European Communities makes two
main arguments.
7.472 First, the European Communities agrees966 with the argument made in the ACP third parties'
joint written submission that:
"Article 21.5 proceedings must necessarily be initiated within a reasonable period of
time from the date the recommendations and rulings to bring the matter into
conformity with WTO obligations were adopted. In the present case,
the recommendations and rulings of the Panel and the Appellate Body in the original

963 Panel Report on EC – Bananas III (Article 21.5 – Ecuador), paras. 6.154-6.155.
964 Appellate Body Report on Japan – Alcoholic Beverages II, p. 14.
965 Final written version of the European Communities' opening oral statement at the substantive
meeting of the Panel with the parties and third parties, para. 5.
966 See European Communities' response to Panel question No. 10.

dispute were adopted by the DSB in September 1997. Ten years can hardly be
regarded as a reasonable period of time."967
7.473 Second, in the context of its arguments that Phase II of its interim bananas import regime was
the final measure taken to comply, the European Communities contends that:
"If the United States had considered that the European Communities had failed to
implement that 'measure taken to comply', the United States should have brought an
Article 21.5 proceeding against that import regime at that time.
However, the United States never challenge d the 2002-2005 banana import regime.
This means that the dispute that had led to the 1997 DSB recommendations and
rulings was terminated upon the Europ ean Communities' implementation of the
measure agreed with the United States."
968
7.474 The Panel will first consider the timing of the US request for compliance proceedings in
relation to the adoption of the DSB recommendati ons and rulings and the introduction of the
2002-2005 EC bananas import regime.
7.475 The Panel agrees with the argument of the Unite d States that "Article 21.5 of the DSU does
not contain any 'reasonable period of time' limitation." 969 Indeed, Article 21.5 of the DSU is silent on
the timing of the start of a compliance dispute.
7.476 The Panel recalls that in US – Softwood Lumber IV (Article 21.5 – Canada) the
Appellate Body held that:
"Article 21.5 is one paragraph within an Article entitled 'Surveillance of
Implementation of Recommendations and Rulings'. As a whole, Article 21 deals with
events subsequent to the DSB's adoption of recommendations and rulings in a
particular dispute. The various paragraphs of Article 21 make clear that following
such recommendations and rulings, further relevant developments and disagreements
are to be dealt with through the reporting and surveillance modalities set out therein,
and in such a way as to achieve 'prompt resolution'. ... Article 21 sets out a number
of mechanisms to ensure collective oversi ght of that Member's implementation.
With respect to ... measures taken to comply, they are found in Article 21.5."970
7.477 The Panel does not consider that a Member is entitled to compliance pr oceedings pursuant to
Article 21.5 of the DSU merely because the same product, as in the original dispute, is being affected.
At the same time, the Panel does not consider it appr opriate to try to establish a specific threshold for
the admissibility of requests for compliance panel pr oceedings based on the time elapsed between the
adoption of the original DSB recommendations a nd rulings and the submission of a compliance
request. In the absence of specific criteria in th e DSU for such determination, each case must be
assessed on its own merits.
7.478 Given the considerable time that has pa ssed since the DSB adopted its original
recommendations and rulings in 1997, the resolution of the dispute through the more expeditious
compliance proceedings, rather than through standa rd dispute settlement procedures seems all the

967 ACP Countries' third party written submission, pa ra. 65. See also European Communities' second
written submission, para. 43.
968 European Communities' response to Panel question No. 16. See also European Communities' first
written submission, paras. 21 and 49.
969 United States' response to Panel question No. 10.
970 Appellate Body Report on US – Softwood Lumber IV (Article 21.5 – Canada), para. 70.

more warranted by Article 21.1 of the DSU, which provides that "prompt compliance with
recommendations or rulings of the DSB is essential in order to ensure effective resolution of disputes
to the benefit of all Members."
7.479 Article 3.3 of the DSU similarly provides that: "[t]he prompt settlement of situations in
which a Member considers that any benefits accrui ng to it directly or indirectly under the covered
agreements are being impaired by measures taken by another Member is essential to the effective
functioning of the WTO and the maintenance of a proper balance between the rights and obligations
of Members."
7.480 The Appellate Body and panels have also high lighted the importance of prompt compliance.
As the panel report on Australia – Salmon (Article 21.5 – Canada), referenced by the Appellate Body
in US – Softwood Lumber IV (Article 21.5 – Canada)
971, states:
"[A] complainant, after having prevailed in an original dispute, should not have to go
through the entire DSU process once again if an implementing Member in seeking to
comply with DSB recommendations under a c overed agreement is breaching,
inadvertently or not, its obligations unde r other provisions of covered agreements.
In such instances an expedited procedure s hould be available. This procedure is
provided for in Article 21.5. It is in line with the fundamental requirement of
'prompt compliance' with DSB recommendations and rulings expressed in both
Article 3.3 and Article 21.1 of the DSU."
972
7.481 Further, in the context of the above-referen ced "balance that Article 21.5 strikes between
competing considerations" 973, the Appellate Body in US – Softwood Lumber IV (Article 21.5 –
Canada) held that:
"[Article 21.5 of the DSU] seeks to promote the prompt resolution of disputes, to
avoid a complaining Member having to initia te dispute settlement proceedings afresh
when an original measure found to be inconsistent has not been brought into
conformity with the recommendations and rulin gs of the DSB, and to make efficient
use of the original panel and its releva nt experience. On the other hand, the
applicable time-limits are shorter than tho se in original proceedings ... This balance
should be borne in mind in interpreting Article 21.5 and, in particular, in determining
the measures that may be evaluated in proceedings pursuant to that provision."
974
7.482 The Panel next addresses the timing of the US co mpliance request relative to the introduction
of the 2002-2005 EC bananas import regime. Th e Panel's above summary of the developments
following the first attempt of the European Comm unities to comply with the DSB recommendations
and rulings identifies various indications in unilateral EC statements, the bilateral
Bananas Understanding, and in the multilateral Article XIII Doha Waiver, that Phase II of the interim
EC bananas import regime would be followed without interruption by a tariff-only regime, at the
latest by 1 January 2006. Therefore, the Panel considers it reasonable that the United States might not
have seen a "reason to institute Article 21.5 proceedings for the 2002-2005 interim regime" 975 prior to
the implementation of the alleged tariff-only regime, thus before 2006.

971 Ibid., paras. 78-79.
972 Panel Report on Australia – Salmon (Article 21.5 – Canada), para. 7.10, paragraph 9 of the Panel's
preliminary ruling.
973 Appellate Body Report on US – Softwood Lumber IV (Article 21.5 – Canada), para. 72.
974 Ibid.
975 United States' comment on the European Communities' response to Panel question No. 10.

7.483 The United States made its request for the establishment of a compliance Panel on
2 July 2007, during the period of validity of the current EC bananas import regime. Following the
introduction of the current EC bananas regime on 1 January 2006, throughout 2006 and into early
2007 the "Implementation by the European Commun ities of the recommendations and rulings of the
DSB in relation to 'European Communities – Regime for the Importation, Sale and Distribution of
Bananas'976 and related subsequent WTO proceedings" w as included in the agenda of the DSB.
On 23 February 2007, Ecuador requested the establishment of a compliance panel in the same dispute.
7.484 The Panel agrees with the United States that me rely because the United States did not invoke
Article 21.5 of the DSU against the 2002-2005 EC bananas import regime "does not mean that the
United States was then precluded from recourse to Article 21.5 proceedings once the EC took the next
... step"
977. Moreover, the Panel is of the view that "[ e]ven if the United States had had a reason to
challenge the interim steps taken by the EC but had decided to wait until now, the United States
would not have been precluded from taking such action."978
7.485 The compliance panel requested by the European Communities in EC – Bananas III stated
that:
"[T]he failure, as of a given point in ti me, of one Member to challenge another
Member's measures cannot be interpreted to create a presumption that the first
Member accepts the measures of the other Member as consistent with the WTO
Agreement. In this regard, we note the statement by a GATT panel that 'it would be
erroneous to interpret the fact that a measu re has not been subject to Article XXIII
over a number of years, as tantamount to its tacit acceptance by contracting
parties'.
979"980
7.486 The Panel recalls that the European Commun ities raises the above arguments concerning the
timing of the current EC bananas import regime in or der to refute the proposition that that regime is a
measure taken to comply. In particular, the European Communities argues that its final measure taken
to comply was its 2002-2005 bananas import regime.
7.487 As mentioned above, and referred to by the United States 981, in US – Softwood Lumber IV
(Article 21.5 – Canada) the Appellate Body held that:
"[A] panel's mandate under Article 21.5 of the DSU is not necessarily limited to an
examination of an implementing Member's meas ure declared to be 'taken to comply'.
Such a declaration will always be relevant, but there are additional criteria ... that
should be applied by a panel to determine whether or not it may also examine other
measures. Some measures with a particularly close relationship to the declared
'measure taken to comply', and to the re commendations and rulings of the DSB, may
also be susceptible to review by a pa nel acting under Article 21.5. Determining
whether this is the case requires a panel to scrutinize these relationships, which may,
depending on the particular facts, call for an examination of the timing ... of the
various measures."
982

976 (footnote original) WT/DS27.
977 United States' comment on the European Communities' response to Panel question No. 10.
978 United States' second written submission, para. 47, footnote 35.
979 (footnote original) Panel report on EEC – Quantitative Restrictions Against Imports of Certain
Products from Hong Kong, adopted on 12 July 1983, BISD 30S/129, 138, paragraph 28.
980 Panel Report on EC – Bananas III (Article 21.5 – EC), para. 4.13.
981 See United States' response to Panel question No. 12.
982 Appellate Body Report on US – Softwood Lumber IV (Article 21.5 – Canada), para. 75.

7.488 The Panel will therefore analyse the timing of the current EC bananas import regime in
relation to what the EC argues was its final measure to comply, i.e. the 2002-2005 EC bananas import
regime, as well as to the original DSB recommendations and rulings.
7.489 The Panel is aware that the introduction of th e current EC bananas import regime took place
more than nine years after the adoption of the or iginal recommendations and rulings, and four years
following the introduction of the 2002-2005 EC bananas import regime.
7.490 Nevertheless, in the context of establishing whet her a measure is a measure taken to comply
for the purposes of Article 21.5 of the DSU, the Pa nel does not consider that the issue of timing
should be confined to the length of time that elapses between the adoption of the original
recommendations and rulings, and the introduction of the measure alleged by the respondent to be a
measure taken to comply.
7.491 As regards in particular the timing of th e current and the 2002-2005 EC bananas import
regimes, the Panel recognizes that the two import regi mes did not overlap in time. However, there is
no disagreement between the parties that the current EC bananas import regime entered into force on
1 January 2006, and replaced "the import regime implemented by the European Communities between
2002 and 2005"
983, which applied until 31 December 2005. Also, as noted above, both regimes were
closely related to EC Regulation 404/1993, which w as reviewed in the original panel and appellate
proceedings, and which only expired at the end of 2007.
7.492 Further, as mentioned above, there were various indications in unila teral EC statements,
the bilateral Bananas Understanding, and in the multilateral Article XIII Doha Waiver, that the
European Communities intended to introduce a tari ff–only regime immediately following Phase II of
the interim EC bananas import regime, the latest by 1 January 2006.
7.493 Accordingly, the Panel considers that the ti ming of current and the 2002-2005 EC bananas
import regimes cannot prevent the current EC ba nanas import regime from being considered as a
measure taken to comply. Rather, there is an obvious and sufficiently close temporal link between the
European Communities' 2002-2005 bananas import regime and its current bananas import regime,
introduced on 1 January 2006.
7.494 Turning to the timing of the current EC ba nanas import regime and the adoption of the
original DSB recommendations and rulings, the Panel recalls the close link of the current EC bananas
import regime to the original recommendations an d rulings and to the measure reviewed in the
original panel and Appellate Body proceedings. EC Regulation 1964/2005 was adopted, at least in
part, pursuant to EC Regulation 404/1993, which was abolished only at the end of 2007. The Panel
also refers to Articles 21.1 and 3.3 of the DSU, a nd to the Panel's above conclusions on the basis of
"prompt compliance" and "prompt settlement" set out in those provisions of the DSU.
7.495 Accordingly, the Panel finds that the timing of the current EC bananas import regime relative
to the original recommendations and rulings does no t prevent this compliance Panel from considering
the current EC bananas import regime as a measure taken to comply.
Whether a particularly close link exists betw een the current and the 2002-2005 EC bananas
import regimes
7.496 As noted above, the European Communities argues that its current bananas import regime is
not a measure taken to comply since its final measure taken to comply was its 2002-2005 bananas
import regime.

983 European Communities' second written submission, para. 49.

7.497 As referred to by the United States, in US – Softwood Lumber IV (Article 21.5 – Canada) held
that:
"[A] panel's mandate under Article 21.5 of the DSU is not necessarily limited to an
examination of an implementing Member's meas ure declared to be 'taken to comply'.
Such a declaration will always be relevant, but there are additional criteria, identified
above, that should be applied by a panel to determine whether or not it may also
examine other measures. Some measures with a particularly close relationship to the
declared 'measure taken to comply', an d to the recommendations and rulings of the
DSB, may also be susceptible to review by a panel acting under Article 21.5. "984
(emphasis added)
7.498 As to the criteria to "[d]etermin[e] whether this is the case" 985 the Appellate Body found
that it:
"[R]equires a panel to scrutinize these rela tionships, which may, depending on the
particular facts, call for an examination of the timing, nature, and effects of the
various measures. This also requires an Ar ticle 21.5 panel to examine the factual and
legal background against which a declared 'm easure taken to comply' is adopted.
Only then is a panel in a position to take a view as to whether there are sufficiently
close links for it to characterize such an ot her measure as one 'taken to comply' and,
consequently, to assess its consistency with the covered agreements in an Article 21.5
proceeding."986
7.499 The Panel notes that it has already found that th ere is a sufficiently close relationship between
the current EC bananas import regime and the or iginal DSB recommendations and rulings in the EC –
 Bananas III dispute, in particular with the measures reviewed by the original panel and appellate
proceedings in that dispute. 987 Further, in the context of its an alysis of the European Communities'
arguments that its 2002-2005 bananas import regime was the final measure taken to comply, the Panel
has already found that there is a sufficiently clo se temporal relationship between the current and the
2002-2005 EC bananas import regimes.988
7.500 The Panel will now analyse the remaining criteria laid down by the Appellate Body in US –
 Softwood Lumber IV (Article 21.5 – Canada) , in particular whether there is a sufficiently close
relationship between the current and the 2002-2005 EC bananas import regimes as regards the nature
and effect of the two regimes and their factual and legal background.
The nature and effects of the current and the 2002-2005 EC bananas import regimes
7.501 As regards the nature and effects of the current and the 2002-2005 EC bananas import
regimes, the Panel notes that th e European Communities' 2002-2005 re gime is "an import regime on
the basis of historical licensing" 989 and involves a number of tariff rate quotas. Conversely, the
current EC bananas import regime does not involve a licensing system for MFN bananas.
7.502 Despite those differences, both the current and the 2002-2005 EC bananas import regimes
involve a preferential tariff rate quota for ACP c ountries. EC Regulation 2587/2001, which, the

984 Appellate Body Report on US – Softwood Lumber IV (Article 21.5 – Canada), para. 75.
985 Ibid.
986 Appellate Body Report on US – Softwood Lumber IV (Article 21.5 – Canada), para. 75.
987 See para. 7.494 above.
988 See para. 7.493 above.
989 Documents WT/DS27/58 of 2 July 2001, p. 2, para. C, and WT/DS27/59 of 2 July 2001, para. C.

European Communities contends, "introdu ced the 2002-2005 banana import regime"
990, amended
Article 18 of EC Regulation 404/1993 inter alia to provide for a zero-duty preferential tariff rate
quota (Quota C) of 750,000 tonnes for ACP bananas.991
7.503 Likewise, the Bananas Understanding provi des that, under the European Communities'
2002-2005 bananas import regime, "[ t]he TRQ 'C' will be 750,000 tonn es and will be reserved for
bananas of ACP origin."992
7.504 In turn, Article 1 of EC Regulation 1964/2005, which both parties identify as the EC measure
introducing the current EC bananas import regime993, provides:
"1. As from 1 January 2006 the tariff rate for bananas (CN code 0803 00 19)
shall be EUR 176/tonne.
2. Each year from 1 January, starting fro m 1 January 2006, an autonomous tariff
quota of 775 000 tonnes net weight subject to a zero-duty rate shall be opened for
imports of bananas (CN code 0803 00 19) originating in ACP countries."
7.505 In other words, the European Communities' current bananas import regime maintained the
preferential tariff rate quota of the previous regime for ACP countries. Indeed, the
European Communities describes its current bananas import regime:
"The European Communities subjects all bana na imports to a single tariff of € 176
per ton. ...
The only exception to this rule is that the European Communities offers a trade
preference to those banana producing countries that have signed the
'Cotonou Agreement'. ... [T]he quantity of bananas originating from
Cotonou countries that can be imported free of duty [is] 775,000 tons per year
(the 'Cotonou Preference').
994 All bananas imported from Cotonou countries beyond
this 'cap' are subject to the tariff of € 176 per ton.995"996
7.506 Importantly, the preferential in-quota duty w as zero under both EC import regimes, and
the beneficiaries of the TRQ, namely ACP countries, were the same under both regimes. The quantity
of the preferential tariff quota was only slightly di fferent; the current EC bananas import regime even
increased it by 25,000 tonnes per annum.
7.507 The Panel also notes that it is exactly the preference given to ACP countries in comparison to
the rest of the WTO Members that the United States is contesting in this compliance dispute. In its
request for the establishment of this compliance Panel, the United States argues that the current

990 European Communities' response to Panel question No. 13.
991 See EC Regulation 2587/2001, Article 1.4.
992 Documents WT/DS27/58 of 2 July 2001, and WT/DS27/59 of 2 July 2001, Annex 2, para. 3.
993 See United States' first written submission, para. 2; and European Communities' first written
submission, para. 4, footnote 2.
994 (footnote original) Council Regulation (EC) 1964/2005, Article 1, paragraph 2.
995 (footnote original) For the sake of completeness, it is noted that the European Communities'
Generalised System of Preferences al so provides that banana imports from Least Developed Countries are
subject to a zero duty. This does not have any impact on the current proceedings: all Least Developed Countries
that are exporting bananas to the European Communities are also Cotonou beneficiary countries (Yemen and
Bangladesh are least developed countries but have no banana exports towards the European Communities).
996 European Communities' first written submission, paras. 3-4.

EC bananas import regime is inconsistent with Articles I and XIII of the GATT 1994 997 because it
maintains:
"[A] preferential (zero-duty) TRQ availabl e only to bananas originating in African,
Caribbean and Pacific ('ACP') countries. 998 Bananas of other origins have no access
to this 775,000 ton TRQ. Under Regula tion (EC) No. 1964/2005 such other bananas
are subject instead to a duty of 176 euros/ton. 999 The regulation took effect as of
1 January 2006."1000
7.508 In the light of the above and despite the differe nces between the two regimes, the Panel finds
that the maintenance of a zero-duty preferential tari ff rate quota for ACP countries is a key similarity
in the nature and effects of the current and the 2002-2005 EC bananas import regimes. This similarity
is essential in the dispute before this complian ce Panel, including for assessing whether there is a
sufficiently close link between the two import regimes.
Legal and factual background of the two regimes
7.509 As regards the general lega l and factual background of the current and the 2002-2005
EC bananas import regimes, the Panel refers to its above analysis of the first attempt of the
European Communities to comply with the origin al DSB recommendations and rulings, and to its
summary of subsequent events.
7.510 As also noted above, the European Commun ities declares that its 2002-2005 bananas import
regime was introduced through EC Regulation 2587/2001 on 1 January 2002. 1001 F u r t h e r ,
the European Communities states that its current bananas import regime was introduced through
EC Regulation 1964/2005 on 1 January 2006.
7.511 Both regimes are closely connected to the or iginal DSB recommendations and rulings in the
EC – Bananas III dispute. As regards EC Regulation 2587/2001, the European Communities argues
that the preamble of that Regulation:
"[S]tates that the Regulation introduces the measures resulting from:
'... numerous close contacts with supplier c ountries and other interested parties to
settle the disputes ... and to take into acc ount of the conclusions of the panel set up
under the dispute settlement system of the World Trade Organisation (WTO).'"1002
7.512 Further, like the measures constituting the first attempt of the European Communities to bring
itself into compliance with the original DSB recommendations and rulings, EC Regulation 2587/2001

997 See EC – Bananas III (Article 21.5 – US) , Request for the Establishment of a Panel (WT/DS27/83)
2 July 2007.
998 (footnote original) Regulation (EC) No. 1964/2005, para. 2, published in the Official Journal of the
European Communities (OJEC) L 316/1 of 12 December 2005 ("[e]ach year from 1 January, starting from 1
January 2006, an autonomous tariff quota of 775 000 tonnes net weight subject to a zero-duty rate shall be
opened for imports of bananas (CN code 0803 00 19) originating in ACP countries.")
999 (footnote original) Regulation (EC) No. 1964/2005, para. 1, published in the Official Journal of the
European Communities (OJEC) L 316/1 of 12 December 2005.
1000 EC – Bananas III (Article 21.5 – US) , Request for the Establishment of a Panel (WT/DS27/83)
2 July 2007, p. 2.
1001 See European Communities' response to Panel question No. 13.
1002 Ibid.

"modif[ies] aspects of the EC's ba nana import regime found by the or iginal panel and Appellate Body
reports to be inconsistent with the EC's WTO obligations [i.e., Regulation 404/1993]."
1003
7.513 As for EC Regulation 1964/2005, the Panel has al ready found that that regulation is closely
related to the original DSB recommendations and ru lings, in particular to EC Regulation 404/1993,
which was the measure reviewed in the original panel and appellate proceedings.
7.514 Likewise, the Panel finds that both EC Re gulations 2587/2001 and 1964/2005 are closely
related to EC Regulation 216/2001.
7.515 Article 1.1 of EC Regulation 216/2001 amende d Article 16.1 of EC Regulation 404/1993 to
the following:
"This Article and Articles 17 to 20 shall a pply to imports of fresh products falling
within CN code ex 0803 00 19 up to the entry into force of the rate of the common
customs tariff for those products, no late r than 1 January 2006, established under the
procedure provided for in Article XXVIII of the General Agreement on Tariffs and
Trade."
7.516 Similarly to EC Regulation 216/2001, EC Re gulation 2587/2001 am ended EC Regulation
404/1993. In particular, Article 1.3 of EC Regulation 2587/2001 am ended Article 16.1 of
EC Regulation 404/1993, "last amended by Regulation (EC) No 216/2001"1004 to the following:
"This Article and Articles 17 to 20 shall a pply to imports of fresh products falling
within CN code 0803 00 19 until the entry into force, no later than 1 January 2006, of
the rate of the common customs tariff for those products established under the
procedure provided for in Article XXVIII of the General Agreement on Tariffs and
Trade (GATT)."
7.517 This amendment did not affect but rather confirmed the essence of Article 16.1 of
EC Regulation 404/1993, as previously amended by EC Regulation 216/2001, namely that the
European Communities would introduce a common cu stoms tariff for bananas by 1 January 2006,
following negotiations with relevant WTO Members pursuant to Article XXVIII of the GATT 1994.
7.518 As mentioned above, the preamble of EC Regula tion 1964/2005 refers to the need to adopt
such a common customs tariff pursuant to the amended EC Regulation 404/1993:
"Council Regulation (EEC) No 404/93 of 13 February 1993 on the common
organisation of the market in bananas provid es for the entry into force of a tariff only
regime for imports of bananas no later than 1 January 2006"
1005 (footnote omitted).
7.519 EC Regulation 1964/2005 then refers to the "negotiations under Article XXVIII of the
GATT 1994 with a view to modifying certain concessions for bananas" 1006 and to the unsuccessful
attempts of the European Communities to rebind its bananas tariff.1007
7.520 Finally, Article 1.1 of EC Regulation 1964/2005 fulfils the function set out in Article 16.1 of
EC Regulation 404/1993, as amended by EC Regulat ions 216/2001 and 2587/2001, and provides that
"[a]s from 1 January 2006 the tariff rate for bananas (CN code 0803 00 19) shall be EUR 176/tonne."

1003 Panel Report on EC – Bananas III (Article 21.5 – Ecuador), para. 6.8.
1004 EC Regulation 2587/2001, first recital of the preamble, footnote 4.
1005 EC Regulation 1964/2005, recital (1).
1006 Ibid., recital (2).
1007 Ibid., recitals (3)-(5).

7.521 The Panel concludes that the above legal a nd factual background of the current and the
2002-2005 EC bananas import regimes, in particular the above close link between EC Regulations
404/1993, 216/2001, 2587/2001 and 1964/2005, indicat e that the two regimes have a particularly
close relationship.
7.522 That close relationship is confirmed by th e role of the Bananas Understanding in the
developments following the first attempt of the Eu ropean Communities to bring itself into compliance
with the original recommendations and rulings of 1997. Indeed, the Bananas Understanding confirms
the European Communities' unilateral offers in 1999 and 2000 to bring itself into compliance with the
original DSB recommendations and rulings through a two-stage approach, the second stage of which
would involve a tariff-only EC bananas import regime to be introduced by 1 January 2006.
7.523 Subparagraphs C(1) and C(2) as well as Anne xes 1 and 2 of the Bananas Understanding set
out the "interim" steps to be taken by the Europ ean Communities prior to 1 January 2006. In turn,
paragraph B of the Bananas Understanding, which both parties consider relevant in the context of the
European Communities' third preliminary objection, explicitly refers to "Ar ticle 16(1) of Regulation
No. (EC) 404/93 (as amended by Regulation No. (E C) 216/2001)". The Panel cannot fail to note in
this context that Article 16.1 of EC Regulation 404/1993, and the various amendments and steps
pursuant to that Article, are key in establishing the close link between EC Regulations 404/1993,
216/1993, 2587/1993 and 1964/2005.
7.524 Further, the Bananas Understanding, which both parties consider relevant for assessing the
European Communities' third preliminary objec tion, provides in paragraph A that "[t]he
European Commission and the United States have identified the means by which the long-standing
dispute over the EC's banana im port regime can be resolved."
1008 The European Communities'
communication to the DSB concerning the Bananas Understanding states that "[t]he
European Communities (EC) wish to notify the Dispute Settlement Body (DSB) that they have reached,
with the United States of America and Ecuador, a mutually satisfactory solution within the meaning of
Article 3.6 of the DSU regarding the implementation by the EC of the conclusions and
recommendations adopted by the DSB in the dispute 'Regime for the importation, sale and distribution
of bananas' (WT/DS27)"
1009 (emphasis added). The Panel consider s that these phrases give rise to a
strong link between the Bananas Understanding and th e original panel and appellate proceedings in
EC – Bananas III.
(c) Conclusion
7.525 On the basis of the above reasons taken together , the Panel concludes that there is clearly a
"'continuum of events' 1010"1011 between the original DSB recommendations and rulings in the EC –
 Bananas III dispute and the current EC bananas import regime.
7.526 As mentioned earlier, the first attempt of th e European Communities to bring itself into
compliance as of the end of the "reasonable period of time" "to comply with the relevant DSB
recommendations and rulings", i.e. by 1 January 19 99, was found to be inconsistent with the WTO
rules in at least two dispute settlement procedures. This confirms that the European Communities'
first attempt to bring itself into compliance was unsuccessful.

1008 Documents WT/DS27/58 of 2 July 2001, and WT/DS27/59 of 2 July 2001, para. A.
1009 Document WT/DS27/58 of 2 July 2001, p. 1.
1010 (footnote original) Appellate Body Report, Mexico – Corn Syrup (Article 21.5 – US), para. 121.
1011 Appellate Body Report on US – Softwood Lumber VI (Article 21.5 – Canada), para. 103.

7.527 The Panel finds that the above-summarized deve lopments following the first attempt of the
European Communities to comply with the origin al DSB recommendations and rulings constitute a
second attempt by the European Communities to comply with those recommendations and rulings.
7.528 As expressed in unilateral EC statements to the DSB and in legislation adopted by the
European Communities, and also confirmed in th e bilateral Bananas Understandings and in the
multilateral Doha Waivers, a central element of that two-stage EC attempt to comply is the
introduction of a tariff-only bananas import regime by 1 January 2006.
7.529 The Panel notes that the European Communities' ar gument that the need to introduce the final
tariff-only regime is not part of the European Communities second attempt to comply would, as the
United States argues, "read paragraph B out of the [Bananas] Understanding."
1012 Further, as analysed
above1013, the same argument by the European Communiti es cannot be sustained even on the basis of
the EC domestic legislation invoked by the Europ ean Communities as the alleged real basis for
adopting EC Regulation 1964/2005. The Panel finds that the current EC bananas import regime,
introduced on 1 January 2006, constitutes an integr al part of that second EC attempt to comply,
although obviously this does not imply that th e current EC bananas import regime would be
necessarily consistent with the covered agreements, which is a matter that does not belong within the
assessment of this preliminary issue.
7.530 Indeed, in the light of its analysis of the rele vant criteria established by the Appellate Body in
US – Softwood Lumber IV (Article 21.5 – Canada) , there is a particularly close link between the
current bananas import regime and the 2002-2005 EC bananas import regime, which the EC argues
constitutes its final measure taken to comply. Th e three bananas import regimes introduced by the
European Communities on 1 July 2001, 1 January 2002 and 1 January 2006, were all part of the
European Communities' second attempt at bringing itself into compliance.
7.531 In the light of the above, the Panel concludes th at in itself the current bananas import regime
is a measure taken to comply with the original recommendations and rulings of the DSB in the EC –
 Bananas III dispute. Further, the current bananas impor t regime is a measure taken to comply with
the original recommendations and rulings of the DSB in the EC – Bananas III dispute also on the
basis of its particularly close relationship to th e alleged final measure taken to comply by the
European Communities, i.e. the 2002-2005 EC bananas import regime.
7.532 Accordingly, the Panel rejects the third pre liminary objection of the European Communities
and finds that the United States has properly brought this dispute under Article 21.5 of the DSU.
F. PRELIMINARY OBJECTION OF THE EUROPEAN COMMUNITIES CONCERNING THE LACK OF
FORMAL CONSULTATIONS
7.533 In addition to the above, in its first written s ubmission, the European Communities had raised
the additional preliminary objection claim that "[t]he United States … did not request
consultations."
1014
7.534 According to the European Communities:
"The United States requested the establishmen t of this Panel by invoking Article 21.5
of the DSU on July 2, 2007, without having requested consultations with the
European Communities. The European Co mmunities protested the lack of a prior

1012 United States' second written submission, para. 46.
1013 See para. 3.5 above.
1014 European Communities' first written submission, paras. 33-38.

request for consultations in the DSB meeting of July 12, 2007, where the
United States' request was discussed and th e decision for the establishment of the
Panel was taken."1015
7.535 The European Communities argued that the United St ates' complaint is vitiated by the lack of
prior consultations between the Parties1016 because:
"It is settled law that a complaining party is not entitled to request the establishment
of a panel unless it has first submitted a request for consultations.1017 If no request for
consultations has been made, the defendi ng party may raise a preliminary objection
before the panel (given that, pursuant to the DSU, a panel request is not subjected to
scrutiny by the DSB) and the panel is oblig ed to sustain the objection and dismiss the
case outright.
1018"1019
7.536 In response, the United States did not contest the absence, in these compliance proceedings,
of "formal consultations[pursuant to Article 4 of the DSU,] in addition to the discussions already
being held"1020 between the parties. However, the United States argued that:
"[It] was surprised that the EC raised this procedural objection given that the
United States and the EC had expressly agreed that the extensive discussions between
the United States and the EC concerning the EC's new regime prior to the request for
a panel would fulfill any consultation re quirement. The EC appears to have
recognized this when, as discussed below, it formally withdrew at the July 12, 2007,
DSB meeting any procedural objection to panel establishment stemming from the
lack of a formal request for consultations.
1021 This procedural arrangement is
reflected in an exchange of letters betw een the United States Trade Representative
('USTR') and the EC Commissioner for Trade. In that exchange, the USTR proposed
that 'our discussions to that point woul d fulfill any consultation requirement and the
EU would not object to a US request for the establishment of a Panel at the first DSB
meeting at which a US request is considered.'
1022 In his reply, the Commissioner
agreed that the 'EU would be ready not to object to a US request for the establishment
of a panel in July.'1023 Further communications between the United States and the EC
confirmed that the EC was making an uncond itional commitment not to raise the lack
of formal consultations as a procedural hurdle."1024
7.537 As regards the substance of the European Communities' preliminary objection, the United
States argued that:

1016 See ibid., paras. 33-38.
1017 (footnote original) See the Panel Report in Mexico – Definitive Anti-Dump ing Measures on Beef
and Rice, Complaint with Respect to Rice, WT/DS295/R ("Mexico – Rice"), at paragraphs 7.41 and 7.45.
1018 (footnote original) See the Panel Report in Brazil – Export Financing Programme for Aircraft ,
WT/DS46/R, dated April 14, 1999 ("Brazil/Aircraft"), at paragraph 7.10, upheld by the Appellate Body.
1019 European Communities' first written submission, para. 33.
1020 United States' second written submission, para. 17.
1021 (footnote original) Minutes of Meeting of the Dispute Settlement Body held on 12 July 2007,
1022 (footnote original) Letter from Amb. Schwab to Commissioner Mandelson, dated March 28, 2007,
fifth paragraph.
1023 (footnote original) Letter from Commissioner Mandelson to Amb. Schwab, dated 4 April 2007,
sixth paragraph.
1024 United States' second written submission, para. 4.

"Formal consultations are not a prerequis ite to the establishment of a panel under
Article 21.5. Contrary to the EC's asserti on, it is not 'settled law that a complaining
party is not entitled to request the establishment of a panel unless it has first
submitted a request for consultations.'
1025 The Appellate Body's analysis of this issue
in Mexico – HFCS (21.5) amply supports the US view on this point."1026
7.538 In particular, according to the United States:
"In Mexico – HFCS (21.5) , the Appellate Body observed that while, as a general
matter, 'consultations are a pre-requisite to panel proceedings,' the requirement that
parties engage in consultations 'is subject to certain limitations.' 1027 After reviewing
the requirements of DSU Articles 4.3, 4.7 a nd 6.2, the Appellate Body concluded that
'the lack of prior consultations is not a def ect that, by its very nature, deprives a panel
of its authority to deal with and dispose of a matter.' 1028 While the Appellate Body
did not decide whether this general rule was applicable to Article 21.5, it stated that
'even if the general obligations in the DSU regarding prior consultations were
applicable' to Article 21.5 proceedings, 'non- compliance would not have the effect of
depriving the panel of its authority to deal with and dispose of the matter.'1029"1030
7.539 The United States added that "the only prerequi site explicitly set forth in Article 21.5 for
proceedings under that provisions is that there be a 'disagreement' as to whether a Member has
implemented the recommendations and rulings of the DSB."
1031 The United States pointed out that
"[s]uch a disagreement clearly exists in this case" 1032, and it advances various textual, contextual,
factual and policy arguments 1033 to support the point that its compliance complaint is not vitiated by
the lack of formal consultations.
7.540 The Panel notes that the European Comm unities, in it second written submission,
reiterated that "[i]n the present case, the United St ates did not submit a request for consultations prior
to requesting the establishment of this Panel[, and that t]his would have sufficed for the Panel to
dismiss the United States' complaint outright."1034
7.541 The European Communities, however, also stated that:
"[A]s the United States points out in its second written submission, it appears that an
agreement had been reached between the United States Trade Representative and the
Commissioner for Trade of the European Communities expressly providing that the
United States and the European Communities agree to dispense with consultations in
the present case. This agreement was reached prior to the United States' request for
the establishment of this Panel.

1025 (footnote original) EC First Written Submission, para. 33 (internal footnote ommitted).
1026 United States' second written submission, para. 6.
1027 (footnote original) Appellate Body Report, Mexico – Anti-Dumping Investigation of High
Fructose Corn Syrup (HFCS) from the United States, Recourse to Article 21.5 of the DSU by the United States
("Mexico - HFCS (21.5)(AB)"),WT/DS132/AB/RW, adopted 21 November 2001, para. 58.
1028 (footnote original) Id., para. 64.
1029 (footnote original) Id., para. 65.
1030 United States' second written submission, para. 7.
1031 Ibid., para. 8.
1032 Ibid., para. 8.
1033 See ibid., paras. 9-19.
1034 European Communities' second written submission, para. 4.

In light of this agreement, the European Communities withdraws the objection raised
in paragraph 38 of its first written submission"1035 (emphasis added).
7.542 Given the explicit withdrawal by the Europ ean Communities of its preliminary objection
concerning the lack of formal consultations in th is dispute, the Panel refrains from assessing this
preliminary objection, and turns to the substantive claims of the United States in this dispute.
G. THE UNITED STATES' CLAIM UNDER ARTICLE I OF THE GATT 1994
1. The United States' claim
7.543 The United States argues that the European Co mmunities' import regime for bananas and,
more specifically, the tariff quota, which allows a specified yearly volume of 775,000 mt of bananas
of ACP origin to enter the European Communities' ma rket duty-free, is inconsistent with Article I of
the GATT 1994. The United States argues that th rough this regime the European Communities
"applies a zero tariff rate to imports of bananas originating in ACP countries in a quantity up to
775,000 tons but does not accord the same duty-free treat ment to imports of bananas originating in all
other WTO Members". 1036 The United States adds that the pr eference granted to bananas of ACP
origin is not covered by the waiver from Artic le I:1 of the GATT 1994, the ACP-EC Partnership
Agreement waiver (Doha Waiver), which was gr anted to the European Communities by the WTO
Ministerial Conference in Doha on 14 November 2001.1037
7.544 In the United States' view:
"[T]he EC is providing an 'advantage, favour, privilege or immunity' to ACP
Members by according ACP bananas duty -free access within the 775,000 ton tariff
rate quota, while subjecting all MFN banan as to a 176 euros per ton duty. The duty-
free treatment, amounting to a tariff savings of $4.33 per box, is only available to
bananas of ACP origin."1038
7.545 The United States adds that:
"[T]he measure by which the EC is granting the 'advantage, favour, privilege or
immunity' to ACP Members is in relation to a 'customs dut[y]' within the meaning of
Article I:1… [and] the EC is failing to accord the ACP tariff advantage 'immediately
and unconditionally' to the 'like product' of other WTO Members. Although MFN

1035 Ibid., paras. 5-6. But see ACP Countries' th ird party written submission, paras. 32-49, written
version of Cameroon's oral statement at the Panel's substantive meeting with the parties and third parties,
para. 17, written version of Jamaica's oral statement at th e Panel's substantive meeting with the parties and third
parties, para. 4, written version of Saint Lucia's oral statement at the Panel's substantive meeting with the parties
and third parties, para. 25, written version of Saint Vinc ent and the Grenadines' oral statement at the Panel's
substantive meeting with the parties and third parties, pa ra. 5, and written version of Suriname's oral statement
at the Panel's substantive meeting with the parties and third parties, paras. 2-6.
1036 United States' first written submission, para. 49. See also, United States' second written
submission, para. 96.
1037 Ministerial Conference, Europe an Communities, The ACP – EC Partnership Agreement, Decision
of 14 November 2001 (WT/MIN(01)/15), 14 November 2 001. See United States' second written submission,
paras. 67-80, and written version of United States' opening statement during substantive meeting with the parties
and third parties, paras. 27-34.
1038 United States' first written submission, para. 30.

bananas and ACP origin bananas are 'lik e product' imports, MFN bananas are being
denied the same duty-free tariff rate quota treatment as bananas of ACP origin"
1039
7.546 The United States further states that the Eur opean Communities' preference for bananas of
ACP origin is no longer covered by the Doha Waiver. In the United States' view:
"Under the express terms of the Annex [to the Doha Waiver, the Bananas Annex], the
EC had two opportunities to propose a regime that met the conditions set out in the
waiver. In 2005, pursuant to the Annex ar bitration mechanism, two WTO arbitrators
determined that the two proposals made by the EC did not 'result in at least
maintaining total market access for MFN supp liers'. Therefore, as required by the
fifth sentence in tiret 5 of the Annex to the Article I Waiver, the waiver 'cease[d] to
apply upon entry into force of the new EC tariff regime'. The 'new EC tariff regime'
is the measure that is the subject of these proceedings, Regulation 1964, which
entered into force on January 1, 2006."
1040
7.547 The United States concludes that:
"[T]he EC's Article I waiver expired on January 1, 2006, upon the implementation of
the new EC banana measures. In the absence of this waiver, the EC's banana
measures are maintained in violation of GATT Article I."1041
2. The European Communities' response
7.548 The European Communities has not invoked any arguments to contest the United States'
claim that the preference granted to bananas of ACP origin would be inconsistent with Article I of the
GATT 1994.1042
7.549 The European Communities considers, however, th at this preference is covered by a waiver
from Article I:1 of the GATT 1994, the Doha Waiv er, approved by the WTO Ministerial Conference
in November 2001. 1043 The European Communities states that the duration of this waiver was made
to correspond to the duration of th e trade preferences granted by the European Communities pursuant
to the Cotonou Agreement, i.e., until the end of 2007.1044 According to the European Communities,
"[T]he continued application of the D oha waiver until the end of 2007 depends on
whether the European Communities' import regime actually maintains total market
access for MFN suppliers and not on the number of arbitrations lost for the European
Communities before the new import regime was ever introduced."
1045
7.550 The European Communities also argues that, in accordance with the language contained in
the Doha Waiver, this waiver would only cease to a pply to bananas "upon entry into force of the new

1039 Ibid., paras. 31-32 (footnote omitted).
1040 Ibid., para. 35.
1041 United States' second written submission, para. 80.
1042 European Communities' response to panel question No. 89, para. 163. See also, United States'
second written submission, para. 66; and written version of United States' opening statement during substantive
meeting with the parties and third parties, para. 27.
1043 Ministerial Conference, Europe an Communities, The ACP – EC Partnership Agreement, Decision
of 14 November 2001 (WT/MIN(01)/15), 14 November 2001.
1044 European Communities' first written submission, para. 25. See also European Communities'
response to panel question No. 28, para. 55.
1045 European Communities' first written submission, para. 54. See also European Communities'
second written submission, para. 56, and European Communities' response to panel question No. 89, para. 163.

EC tariff regime", which the European Communities considers to mean "the tariff regime that was
presented to the Arbitrator and on which the Arbitrator made a pronouncement in its Award."1046
7.551 In the European Communities' view:
"The European Communities has fully sa tisfied the condition for the continued
application of the Doha waiver ... . The European Communities introduced on
January 1, 2006 a different import regime than the one analysed by the Arbitrator and
the evidence derived from the operation of th is import regime clearly establishes that
it more than maintains total market access for MFN suppliers."1047
7.552 In conclusion, the European Communities argue s that, since the preference granted to
imported bananas originating in ACP countries con tinues to be covered by the Doha Waiver, the
Panel should reject the United States' claim under Article I:1 of the GATT 1994.1048
3. Article I:1 of the GATT 1994
7.553 Under Article I:1 of the GATT 1994:
"With respect to customs duties and charges of any kind imposed on or in connection
with importation or exportation or imposed on the international transfer of payments
for imports or exports, and with respect to the method of levying such duties and
charges, and with respect to all rules a nd formalities in connection with importation
and exportation, and with respect to all matte rs referred to in pa ragraphs 2 and 4 of
Article III ... any advantage, favour, privilege or immunity granted by any contracting
party [Member] to any product originating in or destined for any other country shall
be accorded immediately and unconditionally to the like product originating in or
destined for the territories of all other contracting parties [Members]."
1049
7.554 In Canada – Autos, the Appellate Body explained the obj ect and purpose of Article I:1 of the
GATT 1994 as follows:
"Th[e] object and purpose [of Article I:1] is to prohibit discrimination among like
products originating in or destined for different countries. The prohibition of
discrimination in Article I:1 also serve s as an incentive for concessions, negotiated
reciprocally, to be extended to all other Members on an MFN basis."1050
7.555 In Indonesia – Autos, referring to the Appellate Body's ruling in EC – Bananas III , the panel
explained how to carry out the examination of a measure under Article I:1 of the GATT 1994:
"The Appellate Body, in Bananas III , confirmed that to establish a violation of
Article I, there must be an advantage, of the type covered by Article I and which is
not accorded unconditionally to all 'like products' of all WTO Members."1051

1046 European Communities' first written submission, para. 55.
1047 Ibid., para. 56. See also European Communities' second written submission, paras. 57-58.
1048 European Communities' first written submission, para. 62. See also European Communities'
second written submission, para. 65.
1049 Ad note omitted.
1050 Appellate Body Report on Canada – Autos, para. 84.
1051 Panel Report on Indonesia – Autos, para. 14.138.

4. Panel's analysis
7.556 The Panel starts by recalling that the Europ ean Communities has chosen not to contest the
United States' claim that the preference granted to bananas of ACP origin is inconsistent with Article I
of the GATT 1994.
7.557 Following the above-mentioned approach set out by the Appellate Body in EC – Bananas III,
as described by the panel in Indonesia – Autos, the Panel will nevertheless consider the arguments and
evidence presented by the United States, in order to determine whether they are sufficient to establish
a prima facie case of inconsistency with Article I of the GATT 1994. If this were determined to be
the case, the Panel would then turn to assessing whether the European Communities has made a prima
facie case that such inconsistency is covered by the Doha Waiver granted by the WTO Ministerial
Conference on 14 November 2001.
(a) Is the ACP preference inconsistent with Article I:1 of the GATT 1994?
7.558 As noted above, in order to analyse a clai m under Article I:1 of the GATT 1994, the Panel
needs to determine first whether the measure challenged constitutes an advantage (or favour, privilege
or immunity), of the type covered by Article I. If that were the case, the Panel would then turn to the
issues of the likeness of products and the immediate and unconditional extension of such advantage.
(i) Whether the preference granted by the Eu ropean Communities constitutes an advantage of
the type covered by Article I of the GATT 1994
7.559 The following facts are not in dispute:
(a) Under the terms of Council Regulation (E C) No. 1964/2005 of 24 November 2005,
and in accordance with the European Co mmunities' commitments under the ACP-EC
Partnership Agreement, also known as the Cotonou Agreement, the European
Communities allows a volume of 775,000 mt of bananas to enter the EC market free
of tariff duties;
(b) This duty-free treatment is only available to imports of bananas originating in ACP
countries, and not to like bananas originating in other Members; and,
(c) Imported bananas originating in other Members, as well as imports of bananas
originating in ACP countries beyond the annual volumes prescribed in the tariff
quota, are subject to a specific tariff of €176/mt.
1052
In other words, access eligibility to this preference depends on th e origin of the bananas, as only ACP
bananas qualify.

7.560 The Panel notes that the term "advantag e", under Article I:1 of the GATT 1994, has
traditionally been given a broad scope by GATT and WTO panels, as well as by the Appellate
Body.
1053 In this regard, the Panel concludes that the duty-free treatment available to imports of
bananas originating in ACP countries, solely because of their origin, constitutes an advantage, when
compared to the ordinary treatment accorded to bana nas of all other origins, which are subject to a

1052 See tariff regime for imports of bananas to the EC, in Council Regulation (EC) No. 1964/2005 of
24 November 2005, Exhibit US-1. See also, United States' first written submission, paras. 2 and 23, and
European Communities' first written submission, paras. 3 and 4.
1053 "[A] broad definition has been given to the term 'advantage' in Article I:1 of the GATT 1994 by the
panel in United States – Non-Rubber Footwear ." Appellate Body Report on EC – Bananas III , para. 206,
quoting GATT Panel Report on US – Non-Rubber Footwear, para. 6.9.

specific tariff of €176/mt. This advantage appli es regardless of the trade effects produced by the
actual level of the MFN tariff, since access to th e preference granted by the European Communities
affects the competitive opportunities for bananas from MFN suppliers vis-à-vis those accorded to
bananas originating in ACP countries.
(ii) Whether the relevant products in this dispute are like products
7.561 As to whether the relevant products in this dispute are "like products", the Panel notes that the
original panel in this dispute already "consider[ed] whether bananas from the EC, ACP countries,
BFA countries and other third countries are 'like' products for purposes of the claims made in respect
of Articles I, III, X and XIII of GATT"
1054, and found that:
"The factors commonly used in GATT prac tice to determine likeness, such as, for
example, customs classification, end-use, and the properties, nature and quality of the
product, all support a finding that bananas from these various sources should be
treated as like products.
1055 Moreover, all parties and third parties to the dispute have
proceeded in their legal reasoning on th e assumption that all bananas are 'like'
products in spite of any differences in quality, size or taste that may exist.
We find that bananas are 'like' products, for purposes of Article I, III, X, and XIII of
GATT, irrespective of whether they origin ate in the EC, in ACP countries, in BFA
countries or in other third countries."1056
7.562 Similarly, in the original proceedings the Appellate Body stated that:
"As no participant disputes that all bana nas are like products, the non-discrimination
provisions apply to all imports of bana nas, irrespective of whether and how a
Member categorizes or subdivides these imports for administrative or other
reasons."1057
The Appellate Body concluded that "[i]n the presen t case, the non-discrimination obligations of the
GATT 1994, specifically Articles I:1 and XIII 1058, apply fully to all imported bananas irrespective of
their origin ..."1059

7.563 The European Communities has not contested th e United States' assertion that "MFN bananas
and ACP origin bananas are 'like product' imports".1060
7.564 Accordingly, and in the light of the relevant fi ndings in earlier proceedings in this dispute, the
Panel confirms that the relevant products in this dispute, fresh bananas (corresponding to tariff item

1054 Panel Report on EC – Bananas III (Ecuador), para. 7.62.
1055 ( footnote original) For a general discussion of relevant factors for determining the likeness of
products, see Panel Report on "Japan – Taxes on Alcoholic Beverages", adopted on 1 November 1996,
WT/DS8/R, WT/DS10/R & WT/DS11/R, pp. 111-114, paras. 6.20-6.23, as modified by, Appellate Body Report
on "Japan – Taxes on Alcoholic Beverages", adopted on 1 November 1996, WT/DS8/AB/R, WT/DS10/AB/R &
WT/DS11/AB/R, pp. 19-21.
1056 Panel Report on EC – Bananas III (Ecuador), paras. 7.62-7.63.
1057 Appellate Body Report on EC – Bananas III, para. 190.
1058 (footnote original) We do not agree with the Panel's findings that Article X:3(a) of the GATT 1994
and Article 1.3 of the Licensing Agreement preclude the imposition of different import licensing systems on like
products when imported from different Members. See our Findings and Conclusions, paras. (l) and (m).
1059 Appellate Body Report on EC – Bananas III, para. 191.
1060 United States' first written submission, para. 32.

080300 12 or 080300 19) originating in ACP countries, are like products to fresh bananas originating
in other WTO Members, including MFN suppliers.
(iii) Whether the preference granted by th e European Communities is immediately and
unconditionally extended
7.565 Finally, it is not contested between the parties that the preference granted by the European
Communities to bananas of ACP origin is not extende d to like bananas originating in the territories of
any other WTO Members, including MFN suppliers.
7.566 As this advantage, in this case, is not extended to the like products of any other WTO
Members, it is necessarily not extended "imm ediately", nor "unconditionally". This is
notwithstanding the fact that the Panel notes that, in addition to the preferenc es granted to bananas of
ACP origin under the Cotonou Agreement, the Euro pean Communities also grants autonomous duty-
free access to its market to ba nanas originating in Least Developed Countries (LDCs) under the
Everything But Arms (EBA) arrangement.
1061
(iv) Preliminary conclusion regarding the United States' claim under Article I:1 of GATT 1994
7.567 For the reasons indicated above, the Panel finds that the United States has successfully made
a prima facie case that the preference granted by the European Communities to an annual duty-free
tariff quota of 775,000 mt of imported bananas orig inating in ACP countries constitutes an advantage
for this category of bananas, which is not accorded unconditionally to like bananas originating in non-
ACP WTO Members. The Panel therefore finds that this preference is inconsistent with Article I:1 of
GATT 1994.
(b) Is the preference covered by a waiver?
7.568 Having found that the preference granted by the European Communities to imported bananas
originating in ACP countries is in consistent with Article I:1 of the GATT 1994, the Panel will now
turn to the issue of whether this preference is covered by the Doha Waiver.
(i) Terms and conditions of the Doha Waiver and the Bananas Annex
7.569 In examining the terms of conditions containe d in the Doha Waiver, the Panel recalls the
words of the Appellate Body in its EC – Bananas III report:
"Although the WTO Agreement does not provide any specific rules on the
interpretation of waivers, Article IX of the WTO Agreement and the Understanding
in Respect of Waivers of Obligations u nder the General Agreement on Tariffs and
Trade 1994, which provide requirements fo r granting and renewing waivers, stress
the exceptional nature of waivers and subject waivers to strict disciplines. Thus,
waivers should be interpreted with great care."
1062
7.570 While the Doha Waiver was valid until 31 December 2007 1063, with regard to bananas this
was subject to the terms and conditions set out in the text of the Decision by which the WTO

1061 Council Regulation (EC) No. 980/2005 of 27 June 2005. European Communities' response to
Panel question No. 66, paras. 98-100. See para. 2.38 above.
1062 Appellate Body Report on EC – Bananas III , para. 185. See also GATT Panel Report on US –
Sugar Waiver, para. 5.9.
1063 Ministerial Conference, Europe an Communities, The ACP – EC Partnership Agreement, Decision
of 14 November 2001 (WT/MIN(01)/15), 14 November 2001, p. 2, para. 1.

Ministerial Conference adopted this waiver. T hose terms and conditions include the additional
provisions contained in the Annex to the Doha Waiver Decision (the Bananas Annex).1064
7.571 Under the terms and conditions set out in the Bananas Annex, the European Communities was
to announce a proposed rebinding of its tariff on bananas. 1065 Within a 60-day period following the
announcement by the European Communities of its in tentions concerning the rebinding of the tariff
on bananas, any WTO Member exporting bananas on an MFN basis could request that an arbitrator
determine "whether the envisaged rebinding of the EC tariff on bananas would result in at least
maintaining total market access for MFN banana suppliers". 1066 Should the arbitrator find that this
was not the case, according to the first sentence in th e fifth tiret of the Bananas Annex, the European
Communities was to "rectify the matter". In this case, the second sentence in the fifth tiret of the
Bananas Annex provides that the European Communiti es was to enter into consultations with those
interested parties that had requested the arbitration. According to the third sentence in the fifth tiret of
the Bananas Annex, if, notwithstanding these cons ultations, no mutually satisfactory solution was
agreed, the same arbitrator could be called upon ag ain, this time to determine "whether the EC had
rectified the matter". If the arbitrator found that the European Communities had failed to rectify the
matter, the fifth sentence in the fifth tiret of the Bananas Annex provides that the waiver would "cease
to apply to bananas upon entry into force of the new EC tariff regime". Pursuant to the sixth sentence
in the fifth tiret of the Bananas Annex, the entir ety of this process had to be conducted in such a
manner that the "negotiations and the arbitration procedures [should] be concluded before the entry
into force of the new EC tariff only regime on 1 January 2006".1067
7.572 Whether the Doha Waiver covers the European Communities' current banana import regime
may accordingly depend on whether or not, under the Bananas Annex, the Doha Waiver expired with
the introduction of the "new EC tariff regime" on 1 January 2006. Indeed, whether or not the Doha
Waiver expired on this date is the main issue of contention between the parties to this dispute.
(ii) Uncontested facts
7.573 The following facts are uncontested:
(a) On 31 January 2005, the European Comm unities notified the WTO Members that it
intended to replace its tariff concessions on tariff item 0803 00 19 (bananas) included
in the European Communities' Schedule CXL, with a bound duty of €230/mt. In its
notification, the European Communities indicated that its communication constituted
the announcement under the terms of the Bananas Annex to the Doha Waiver.
1068
(b) In March and April 2005, a number of WTO Members requested arbitration, pursuant
to the Bananas Annex.1069

1064 Ministerial Conference, Europe an Communities, The ACP – EC Partnership Agreement, Decision
of 14 November 2001 (WT/MIN(01)/15), 14 November 2001, p. 3, para. 3bis. The Bananas Annex is an
integral part of the Doha Waiver.
1065 Bananas Annex, tirets 1, 2 and 5.
1066 Ibid., tirets 2-4.
1067 Ibid., tiret 5.
1068 Article XXVIII:5 Negotiations, Schedule CXL – European Communities, Addendum
(G/SECRET/22/Add.1), 1 February 2005. See para. 2.18 above.
1069 European Communities, The ACP – EC Partnership Agreement, Recourse to Arbitration Pursuant
to the Annex to the Decision of 14 November 2001 (WT/L/607), 1 April 2005. See also, European
Communities, The ACP – EC Partnership Agreement, Reco urse to Arbitration Pursuant to the Annex to the
Decision of 14 November 2001, Communication from Colombia, Addendum (WT/L/607/Add.1), 1 April 2005;
Communication from Costa Rica, Addendum (WT/L/607/Add.2), 1 April 2005; Communication from Ecuador,

(c) In August 2005, the arbitrator delivered its first award pursuant to the Bananas
Annex, concluding that:
"[T]he European Communities' envisaged rebinding on bananas
would not result in at least maintaining total market access for MFN
banana suppliers, taking into acc ount all EC WTO market-access
commitments relating to bananas".
1070
(d) On 13 September 2005, the European Communities notified the interested parties its
revised proposal to provide from 1 January 2006 for an MFN tariff for bananas at
€187/mt and a tariff quota for ACP countries of 775,000 mt per year at zero duty.
1071
(e) On 26 September 2005, and in accordance with the terms of the Bananas Annex, the
European Communities requested arbitration on its revised proposal.1072
(f) In October 2005, the arbitrator delivered its second award pursuant to the Bananas
Annex, concluding that:
"[T]he European Communities' pr oposed rectification ... would not
result 'in at least maintaining total market access for MFN banana
suppliers', taking into account 'all EC WTO market-access
commitments relating to bananas' [and that] consequently ... the
European Communities has failed to rectify the matter, in accordance
with the fifth tiret of the Annex to the Doha Waiver [the Bananas
Annex]".
1073
(g) On 1 January 2006, the European Communiti es put into force a new regime for the
importation of bananas, through Counc il Regulation (EC) No. 1964/2005, which
includes a €176/mt MFN tariff, as well as a 775,000 mt duty-free tariff-rate quota for
ACP bananas.
1074

Addendum (WT/L/607/Add.3), 1 April 2005; Communication from Guatemala, Addendum (WT/L/607/Add.4),
1 April 2005; Communication from Honduras, Addendum (WT/L/607/Add.5), 1 April 2005; Communication
from Panama , Addendum (WT/L/607/Add.6), 1 April 2005; Communication from Nicaragua , Addendum
(WT/L/607/Add.7), 4 April 2005; Communication from Venezuela , Addendum (WT/L/607/Add.8), 4 April
2005; and, Communication from Brazil, Addendum (WT/L/607/Add.1), 4 April 2005. See para. 2.19 above.
1070 European Communities, The ACP – EC Partnership Agreement, Recourse to Arbitration Pursuant
to the Decision of 14 November 2001, Award of the Arbitrator (WT/L/616), 1 August 2005, para. 94. See also,
European Communities, The ACP – EC Partnership Agreemen t, Recourse to Arbitration Pursuant to the Annex
to the Decision of 14 November 2001, Communication from the Secretariat (WT/L/607/Add.13), 5 September
2005. See para. 2.19 above.
1071 European Communities, The ACP – EC Partnership Agreement, S econd Recourse to Arbitration
Pursuant to the Decision of 14 November 2001, Award of the Arbitrator (WT/L/625), 27 October 2005, para. 7.
See para. 2.20 above.
1072 European Communities, The ACP – EC Partnership Agreement, Recourse to Arbitration Pursuant
to the Annex to the Decision of 14 November 2001, Addendum, Communication from the European
Communities (WT/L/607/Add.14), 28 September 2005. See para. 2.21 above.
1073 European Communities, The ACP – EC Partnership Agreement, S econd Recourse to Arbitration
Pursuant to the Decision of 14 November 2001, Award of the Arbitrator (WT/L/625), 27 October 2005,
para. 127. See para. 2.21 above.
1074 Exhibit US-1, Council Regulation (EC) No. 1964/2005. See para. 2.36 above.

(iii) Main issue contested between the parties
7.574 As mentioned above, the main issue contested be tween the parties is whether, under the terms
of the Bananas Annex, the Doha Waiver expired wi th regard to bananas on 1 January 2006. Each
party suggests an alternative approach:
(a) The United States argues that, with regard to bananas, the Doha Waiver expired
automatically upon the entry into force of the new European Communities' tariff
regime, inasmuch as two successive arbitrations determined that the European
Communities' proposed rebinding of its tariff on bananas would not result in at least
maintaining total market access for MFN suppliers; and
(b) The European Communities argu es instead that, with regard to bananas, the Doha
Waiver would expire after all the procedur al steps envisaged in the Bananas Annex
had been completed, but only if the European Communities put into force an identical
regime to that analysed by the arbitrator or a new regime that would also fail to result
in at least maintaining total market access for MFN suppliers.
7.575 Specifically, the United States argues that:
"Under the express terms of the [Bananas] Annex, the EC had two opportunities to
propose a regime that met the conditions set out in the waiver. In 2005, pursuant to
the [Bananas] Annex arbitration mechanism, two WTO arbitrators determined that
the two proposals made by the EC did not 'r esult in at least maintaining total market
access for MFN suppliers'. Therefore, as re quired by the fifth sentence in tiret 5 of
the Annex to the Article I Waiver, the waiv er 'cease[d] to apply upon entry into force
of the new EC tariff regime'. The 'new EC tariff regime' is the measure that is the
subject of these proceedings, Regulation 1964, which entered into force on January 1,
2006".
1075
7.576 The European Communities responds that:
"[T]he correct interpretation of the Doha waiver is that it would expire, with regard to
bananas, only upon the entry into force of a European Communities' banana import
regime that would not satisfy the standard of 'maintaining total market access for
MFN countries'. Therefore, the continued application of the Doha waiver until the
end of 2007 depends on whether the Eu ropean Communities' import regime actually
maintains total market access for MFN suppliers and not on the number of
arbitrations lost for the European Comm unities before the new import regime was
ever introduced. …
Moreover, the Doha waiver provides that 'thi s waiver shall cease to apply to bananas
upon entry into force of the new EC tariff regime '. The European Communities
considers that the phrase ' the new EC tariff regime ' can only refer to the tariff regime
that was presented to the Arbitrator and on which the Arbitrator made a
pronouncement in its Award. In other word s, the Doha waiver would cease to apply
only if the European Communities implemented the import regime analysed by the
Arbitrator and found not to satisfy the standa rd of the Doha waiver. If the European
Communities introduced a different import regime than the one analysed by the
Arbitrator and that import regime did indeed main tain the total market access of the

1075 United States' first written submission, para. 35.

MFN suppliers, then the Doha waiver woul d continue to apply until the end of
2007."
1076
7.577 In other words, the United States asks the Panel to recognize the expiration of the Doha
Waiver for bananas by noting the European Communiti es' fulfilment of the conditions identified in
the Bananas Annex, namely, two negative arbitral awards and the introduction of a new EC tariff
regime for bananas. 1077 Conversely, the European Communiti es argues that the Doha Waiver would
have expired for bananas before the end of 2007 only if, in addition to those conditions, the European
Communities' had put in place a regime for the importation of bananas that did not satisfy the
standard of "maintaining total market access for MFN countries."
1078 The European Communities
argues further that the expiration of the Doha Waiv er would only occur if the bananas import regime
implemented by the European Communities was also the same regime found by the arbitrator not to
satisfy the standard of the Doha waiver, under the procedures in the Bananas Annex, rather than a
different one.1079
(iv) Conditions envisaged in the Bananas Annex
7.578 As noted above, the completion of the intermed iate procedural steps envisaged in the terms
and conditions set out in the Bananas Annex, i.e., the two negative arbitral awards, is an uncontested
matter of fact. Indeed, two successive arbitrations, as envisaged respectively in the fourth and fifth
tirets of the Bananas Annex, reached the conc lusion that the European Communities' proposed
rebinding of its tariff on bananas would not result in at least maintaining total market access for MFN
suppliers.
1080 Furthermore, on 1 January 2006, the European Communities put into force a new
regime for the importation of bananas, which was different from the one previously applied.1081
7.579 As also noted above, however, the European Communities argues that its current regime for
the importation of bananas is not to be consider ed as "the new EC tariff regime" in the terms
contained in the Bananas Annex. Additionally, the European Co mmunities argues that its current
regime for the importation of bananas results in at least maintaining total market access for MFN
banana suppliers, taking into account the European Communities' relevant commitments.
7.580 The European Communities' arguments in this regard raise two main questions:
(a) Whether the European Communities' current regime for the importation of bananas is
to be considered as "the new EC tariff regi me" in the sense of the terms contained in
the Bananas Annex; and
(b) Whether, the Bananas Annex links the expira tion of the Doha Waiver with regard to
bananas to the mere entry into force of such new regime or whether, under the
Bananas Annex, only a new tariff regime that does not at least maintain total market
access would result in such expiration of the waiver.

1076 European Communities' first written submission, paras. 54-55. See also European Communities'
second written submission, para. 56, and European Communities' response to panel question No. 29,
paras. 56-57.
1077 United States' second written submission, paras. 67-68.
1078 European Communities' first written submission, para. 54. See also European Communities'
second written submission, para. 57 and European Communities' response to panel question No. 29, para. 56.
1079 European Communities' first written submission, para. 55. See also European Communities'
second written submission, para. 58 and European Communities' response to panel question No. 29,
paras. 56-57.
1080 See above, paras. 2.19 and 2.21.
1081 See above, para. 2.36.

7.581 The Panel will accordingly consider the European Communities' arguments in this regard.
(v) Is the European Communities' current bananas regime "the new EC tariff regime"?
7.582 The first issue raised by the European Comm unities is whether the European Communities'
current regime for the importation of bananas is to be considered as "the new EC tariff regime" under
the terms contained in the fifth sentence of the fifth tiret of the Bananas Annex.
7.583 Under the fifth tiret of the Bananas Annex:
"The second arbitration award will be notifie d to the General Council. If the EC has
failed to rectify the matter, this waiver shall cease to apply to bananas upon entry into
force of the new EC tariff regime" (emphasis added).
7.584 As noted above, the European Communities argues that:
"[T]he phrase ' the new EC tariff regime ' can only refer to the tariff regime that was
presented to the Arbitrator and on which the Arbitrator made a pronouncement in its
Award. In other words, the Doha waiver would cease to apply only if the European
Communities implemented the import regime analysed by the Arbitrator and found
not to satisfy the standard of the D oha waiver. If the European Communities
introduced a different import regime than the one analysed by the Arbitrator and that
import regime did indeed maintain the tota l market access of the MFN suppliers, then
the Doha waiver would continue to apply until the end of 2007."
1082
7.585 The European Communities then concludes that it "has fully satisfied the condition for the
continued application of the Doha waiver". Fi rst, because it "introduced on January 1, 2006 a
different import regime than the one analysed by the Arbitrator". And secondly, because this new
regime "maintained total market access for MFN suppliers".1083
7.586 The Panel agrees with the European Communities that its current bananas import regime is
different from the ones analysed by the arbitrator s under the Bananas Annex. However, the Panel
fails to see how the terms of the Bananas Annex su pport the conclusion drawn from that fact by the
European Communities, namely that the European Communities has fully satisfied the condition for
the continued application of the Doha Waiver. More specifically, the Panel disagrees with the
European Communities that the phrase "the new EC ta riff regime" can only refer to the tariff regime
that was presented to the arbitrator and on which the arbitrator made a pronouncement in its award.
Indeed, the terms of the Doha Waiver do not suppor t the interpretation of the expression "the new EC
tariff regime" proposed by the European Communities.
7.587 The ordinary meaning of the word "new" suggest s something that is "[n]ot existing before;
now made or existing for the first time ... Different from a thing previously existing, known, etc." 1084
Taking into account this ordinary meaning of the word "new", the expression the "new EC tariff
regime" for bananas, in the context in which it is us ed in the fifth tiret of the Bananas Annex, should
be read as any regime adopted by the European Co mmunities that is different from the one previously
in existence. This regime would be "new", re gardless of whether it was the regime originally
proposed by the European Communities and analysed by the arbitrator or a different one.

1082 European Communities' first written submission, para. 55.
1084 The New Shorter Oxford English Dictionary, fifth edition (Clarendon Press, 2002), Vol. II, p. 1914.

7.588 As noted by the United States, in the Bana nas Annex, the measures examined by the
Arbitrator are not referred to by the terms "the new tariff regime". Rather, the matter examined by the
Arbitrator is described under the terms of the Bana nas Annex, as "the envisaged rebinding of the EC
tariff on bananas", "the rebinding", or to a dete rmination of "whether the EC has rectified the
matter".
1085
7.589 In any event, the European Communities' current tariff regime is clearly different from the
one previously in existence. Furthermore, the si xth sentence of the fifth tiret of the Bananas Annex
provides that "[t]he Article XXVIII negotiations an d the arbitration procedures shall be concluded
before the entry into force of the new EC tariff only regime on 1 January 2006 " (emphasis added).
The European Communities' current banana import regime entered into force exactly on that date.
7.590 Consequently, the Panel is not persuaded that the expression "the new EC tariff regime" used
in the fifth sentence of the fifth tiret of the Bananas Annex does not apply to the bananas import
regime instituted by the European Communities from 1 January 2006, through Council Regulation
(EC) No. 1964/2005.
(vi) Is the maintenance of total market access for MFN banana suppliers a relevant consideration
for extending the duration of the Doha Waiver with regard to bananas?
7.591 The Panel now turns to the second question rai sed by the European Communities, namely,
whether the European Communities' current regime fo r the importation of bananas results in at least
maintaining total market access for MFN banana suppliers, taking into account the relevant EC
commitments. In order to address this argument, ho wever, the Panel needs first to verify whether,
under the terms set out in the Bananas Annex, the Pa nel has the authority and is required to determine
if the European Communities' current regime for the importation of bananas results in at least
maintaining total market access for MFN banana suppliers.
7.592 If the Panel were to verify that, under the te rms set out in the Bananas Annex, it has the
authority to make such a finding and that it is re quired to do so and if the Panel further found that,
indeed, the European Communities' current regime for the importation of bananas results in at least
maintaining total market access for MFN banana suppliers, the question would then be whether such a
determination implies that the Doha Waiver, as it applies to bananas, has remained in force.
7.593 The Panel notes in this regard the European Communities' argument that:
"[T]he text of the Doha waiver shows that the 'test' for the termination of the waiver
was whether the European Communities w ould introduce an import regime that
maintains the total market access of MFN s uppliers and not whether the Arbitration
Awards would be negative for the European Communities."1086
7.594 However, this argument is not persuasive. The te xt of the fifth tiret of the Bananas Annex is
clear enough:
"If the arbitrator determines that the rebinding would not result in at least
maintaining total market access for MFN supp liers, the EC shall rectify the matter.
Within 10 days of the notification of the ar bitration award to the General Council, the
EC will enter into consultations with tho se interested parties that requested the
arbitration. In the absence of a mutually satisfactory solution, the same arbitrator

1085 See United States' response to panel question No. 29, para. 55.
1086 European Communities' second written submission, para. 57. See also ACP Countries' third party
written submission, paras. 97, 100 and 112.

will be asked to determine ... whether the EC has rectified the matter . The second
arbitration award will be notified to the General Council. If the EC has failed to
rectify the matter, this waiver shall cease to apply to bananas upon entry into force of
the new EC tariff regime" (emphasis added).
7.595 In our view, the expression " If the EC has failed to rectify the matter , this waiver shall cease
to apply" used in the last full sentence of the fift h tiret cannot be read in isolation from the expression
"In the absence of a mutually satisfactory solution, the same arbitrator will be asked to determine ...
whether the EC has rectified the matter ." The Panel agrees in this regard with the United States'
statement that:
"The phrase '[i]f the EC has failed to rectify the matter' [at the beginning of the fifth
sentence in tiret 5 of the Bananas Annex], can only refer back to the determination
required to be made by the [second] arbitr ator pursuant to the third sentence [of the
same tiret]."1087
7.596 Under the terms contained in the Bananas Anne x, the authority to determine whether the
European Communities' proposed regime for the im portation of bananas would result "in at least
maintaining total market access for MFN banana s uppliers" fell on the arbitrator and not on any other
WTO body.
7.597 The Bananas Annex contemplated two successive rounds of examination. Through the first
round, the arbitrator would examine the European Communities' original proposed rebinding of the
EC tariff on bananas to determine whether this proposed rebinding would maintain total market
access for MFN banana suppliers. Through the second ro und of examination, if such were the case,
the arbitrator would examine the revised proposal, to determine whether it had rectified the matter
(i.e., if it would result in maintaining total market access for MFN banana suppliers, to the extent that
the previous proposal had failed such test).
7.598 The terms contained in the Bananas Annex do not envisage any further examination after the
second arbitral award. In particular, no third ro und of examination is provided for in the Bananas
Annex. The terms of reference of this complia nce Panel are to examine the consistency of the
European Communities' bananas import regime with the WTO agreements and not to review the
findings made by the arbitrator.
7.599 The European Communities argues that the duration of the Doha Waiver was not linked to the
number of arbitrations lost by the European Communities before the new import regime was
introduced, but rather it depended on whether the new import regime actually maintains total market
access for MFN suppliers.
1088 In the European Communities' view:
"[T]he continued application of the D oha waiver until the end of 2007 depends on
whether the European Communities' import regime actually maintains total market
access for MFN suppliers and not on the number of arbitrations lost for the European
Communities before the new import regime was ever introduced."
1089
7.600 The Panel concurs with the statement by a number of the third parties that any determination
regarding the continued existence of the Doha waiver should not be based on purely "formalistic

1087 Written version of the United States' opening statement during substantive meeting with the parties
and third parties, para. 32. See also United States' response to panel question No. 56, para. 98.
1088 European Communities' first written submission, para. 54.
1089 Ibid.

arguments".
1090 However, under the terms of the Banan as Annex, it was the arbitrator, and not a
dispute settlement compliance panel, that had the aut hority to conduct a substantive analysis in order
to determine whether the European Communities' proposed regime for the importation of bananas
would result in maintaining total market access fo r MFN banana suppliers. Moreover, under the
terms of the Bananas Annex, it was the European Communities that had the burden to either propose a
rebinding of its tariff on bananas that would result in maintaining total market access for MFN banana
suppliers or, if it had failed to do so through its original proposal, to rectify the matter to the
satisfaction of the same arbitrator through a second examination.
7.601 The European Communities raises a hypotheti cal question concerning subsequent action
taken by the European Communities in the event that the arbitrator had issued a favourable ruling
with respect to the European Communities' proposed regime for the importa tion of bananas. The
European Communities asks the Panel to consider wh at would have happened then if (i) the European
Communities had then implemented a different system from that examined by the arbitrator or, (ii) the
operation of the system actually implemented by th e European Communities did not in fact maintain
market access for bananas.
1091 This argument does not change the terms actually contained in the
Bananas Annex. Even if the arbitrator had made such a finding and the European Communities later
implemented a different system from that examined by the arbitrator, there is nothing in the Bananas
Annex that would have prevented any WTO Memb er from having recourse to dispute settlement
proceedings. Through such proceedings, a panel could have been asked to determine whether in those
circumstances the system ultimately imposed by the European Communities was inconsistent with the
WTO agreements and whether the Doha Waiver was still in effect.
7.602 It is true that, since the arbitrator had to base its findings on a proposed regime, the actual
operation of such regime in the future could resu lt in effects on the bananas market different from
those estimated by the arbitrator. This may happen in any prospective determination, such as the one
that, under the terms of the Bananas Annex, the ar bitrator was to conduct regarding the European
Communities' proposed regime. The arbitrator based its determination on the terms of the European
Communities' proposal, including through the use of theoretical analyses and arithmetic calculations,
and availing itself of the best available information at the time. Even if this was to be regarded as a
shortcoming of the rules contained in the Bananas A nnex, it would not change the terms of that text,
nor would it mean the insertion of new additional steps that were not provided for or even intended by
the WTO membership.
7.603 The Panel also notes that, under the terms contai ned in the Bananas Annex, the authority to
determine whether the European Communities' proposed regime for the importation of bananas would
result "in at least maintaining total market access for MFN banana suppliers" for the purpose of the
waiver fell on the arbitrator. Such authority w as to be exercised, if needed, through two successive
rounds of arbitration envisaged in the Bananas Anne x. Accordingly, the issue could not be decided
by a WTO dispute settlement compliance panel, or by any other WTO body.
7.604 The Panel notes the European Communities' arguments that its current bananas import regime
would maintain total market access for MFN suppliers. 1092 However, in view of the preceding
analysis, after the completion of the two rounds of arbitration and the entry into force of a new

1090 See ACP Countries' third party written submission, paras. 4, 5, 99, 107, 110, 111, 156 and 158.
1091 European Communities' second written submission, para. 59. See also ACP Countries' third party
written submission, para. 111.
1092 See, inter alia, European Communities' first written submission, paras. 7-17 and 56-61, European
Communities' second written submission, para. 53, written version of the European Communities' oral statement
during substantive meeting with the parties and third parties, paras. 11 and 13, European Communities' response
No. 85, para. 152.

bananas import regime, the maintenance of total market access for MFN banana suppliers is not a
relevant consideration for maintaining the applica tion of the Doha Waiver with regard to bananas
beyond 1 January 2006. The opportunity for the Eu ropean Communities to demonstrate that its
proposed tariff only regime would maintain total market access for MFN banana suppliers, for the
purpose of maintaining the Doha waiver, was to be exercised through the arbitration proceedings
envisaged in the Bananas Annex.
7.605 In consequence, the Panel finds that it is not within its terms of reference to determine
whether the European Communities' current regime fo r the importation of bananas results in at least
maintaining total market access for MFN banana suppliers, for the purposes provided in the Bananas
Annex.
(vii) Conclusion regarding the Doha Waiver
7.606 For the reasons indicated above, with the comple tion of the different intermediate procedural
steps envisaged in the terms and conditions set out in the Bananas Annex, and upon the entry into
force of the bananas import regime institute d by the European Communities through Council
Regulation (EC) No. 1964/2005, the Doha Waiver ca nnot extend to the EC banana regime introduced
from 1 January 2006. The European Communities h as failed to make a prima facie case that, since
the entry into force of the new EC tariff regime, on 1 January 2006, a waiver from Article I:1 of
GATT 1994 has been in force to cover the prefer ence granted by the Eu ropean Communities to
imported bananas originating in ACP countries.
5. Conclusion
7.607 For the reasons indicated in this section, the Panel finds that the preference granted by the
European Communities to an annual duty-free tariff quota of 775,000 mt of imported bananas
originating in ACP countries constitutes an advantag e for this category of bananas, which is not
accorded to like bananas originating in non-ACP WTO Members. The Panel therefore finds that this
preference is inconsistent with Article I:1 of GA TT 1994. The Panel further finds that the European
Communities has failed to demonstrate the existenc e of a waiver from Article I:1 of GATT 1994 to
cover such preference.
H. T
HE UNITED STATES' CLAIM UNDER ARTICLE XIII OF THE GATT 1994
1. Summary of parties' arguments
(a) The United States' claim
7.608 The United States has requested the Panel to fi nd that the European Communities' current
bananas import regime is inconsistent with paragraphs 1 and 2 of Article XIII of the GATT 1994.1093
7.609 The United States argues that:
"There can be no doubt that Article XIII [of the GATT 1994] applies with respect to
the current [bananas] tariff rate quota regime , just as it did with respect to the EC's
prior banana import regimes."1094

1093 United States' first written submission, paras. 3, 27, 48 and 49. See also United States' second
written submission, para. 96.
1094 United States' first written submission, para. 38.

7.610 In the United States' view:
"The EC's 775,000 ton limit on duty-free access for ACP bananas is also a tariff quota
within the meaning of Article XIII. As su ch, the EC's tariff quota is subject to the
non-discrimination requirements of Article XIII."
1095
7.611 In that respect, the United States recalls the words of the compliance panel in EC – Bananas
III (Article 21.5 – Ecuador):
"Article XIII:5 provides that the provisions of Article XIII apply to 'tariff quotas'.
The European Communities es sentially argues that the amount of 857,700 tonnes for
traditional imports from ACP States constitutes an upper limit on a tariff preference
and is not a tariff quota subject to Article X III. However, by definition, a tariff quota
is a quantitative limit on the availability of a specific tariff rate. Thus, Article XIII
applies to the 857,700 tonne limit.
1096"1097
7.612 The United States adds that, although the Europ ean Communities was granted a waiver of its
obligations under Article XIII by the WT O Ministerial Conference in November 2001 1098, this waiver
expired in accordance with its terms on December 31, 2005. 1099 Accordingly, "[t]he EC has no
Article XIII waiver currently in force".1100
7.613 According to the United States:
"In disregard of GATT Article XIII:1 and the EC – Bananas III findings, the EC has
chosen to maintain a tariff rate quota u nder which MFN-origin bananas are neither
'treated equally' nor restricted 'similarly' to 'like' ACP-origin bananas. ACP bananas
receive preferential, protected access under the EC's banana regime, entering the EC
market duty-free up to a quantity of 775,000 tons. No MFN supplier receives any
such tariff rate quota treatment. By using a tariff rate quota on ACP imports, and an
entirely different means to restrict MFN im ports, the EC is preventing 'like' imports
from being 'treated equally, irrespectiv e of origin' in violation of GATT
Article XIII:1."
1101
7.614 The United States adds that:
"The EC's exclusive 775,000 ton ACP tariff rate quota fails to distribute any share
whatsoever to MFN suppliers, let alone a share they would have expected to obtain in
the absence of restrictions. This is so even though many of the excluded MFN
suppliers are principal or substantial supp liers of bananas to the EC, and leading
exporters of bananas to the world market . Therefore, the ACP tariff rate quota

1095 United States' second written submission, para. 85.
1096 (footnote original) EC – Bananas III (Article 21.5 – Ecuador), para. 6.20.
1097 United States' first written submission, para. 38.
1098 Ministerial Conference, European Communities, Transitional Regime for the EC Autonomous
Tariff Rate Quotas on Imports of Bananas, Decision of 14 November 2001 (WT/MIN(01)/16), 14 November
2001. See para. 2.12.
1099 United States' first written submission, paras. 18, 20 and 47. See also United States' second written
submission, para. 94.
1100 United States' first written submission, para. 47. See also United States' response to panel question
No. 33, paras. 61-62.
1101 United States' first written submission, para. 42. See also United States' second written submission,
para. 94, and written version of United States' opening statement during substantive meeting with the parties and
third parties, para. 21.

established through Regulation 1964, like prio r ACP tariff rate quotas, is inconsistent
with Article XIII:2."1102
(b) The European Communities' response
7.615 The European Communities has responded that the preference granted to ACP bananas does
not violate Article XIII of the GATT 1994.1103
7.616 In the European Communities' view:
"[B]anana imports from Latin American and other MFN suppliers are not subject to
any quantitative restriction: they are simply subject to a tariff. Therefore, the
conditions for the application of GATT Article XIII are not satisfied, i.e., there is no
quantitative restriction imposed on one WTO Member that it is not imposed on all
other countries."
1104
7.617 The European Communities also states that:
"GATT Article XIII cannot be used as a substitute for GATT Article I:1 wherever a
tariff quota exists. GATT Article XIII does not oblige the European Communities to
extend to Latin American countries the tariff preference it grants to the ACP countries
simply because this tariff preference is subject to a 'cap'. Article XIII does not cover
cases of tariff discrimination: this is the role of GATT Article I:1."
1105
7.618 In other words:
"[T]he anti-discrimination rules of Article XIII are aimed at quantitative
discrimination, while tariff discrimination is the exclusive preserve of Article I.
Offering a tariff preference to some count ries subject to a quantitative “cap” may be
an issue that needs to be analysed under Article I, but not under Article XIII."
1106
7.619 The European Communities adds that:
"There is extensive GATT and WTO practice to support the view that Members do
not regard exclusion from a tariff quota as a matter governed by Article XIII. This
practice is to be found in the waivers that have been granted for various preferential
schemes. With few exceptions (such as th e 2001 waiver respecting bananas) these
waivers are limited to Article I, and yet the preferences granted under these waivers
regularly include tariff quotas for the beneficiary countries only."
1107
7.620 According to the European Communities, "the facts in the current proceedings are not the
same as those that faced the [ EC – Bananas III ] Panel and Appellate Body in 1997". 1108 The

1102 United States' first written submission, para. 46. See also United States' second written submission,
para. 95.
1103 European Communities' first written submission, para. 63.
1104 Ibid., para. 64.
1105 Ibid., para. 65. See also European Communitie s' second written submission, paras. 71-72, and
European Communities' response to panel question No. 91, paras. 166-168.
1106 Written version of European Communities' opening statement during substantive meeting with the
parties and third parties, para. 14. See also European Communities' second written submission, para. 90.
1107 European Communities' second written submission, para. 75.

European Communities adds that its current bananas import regime is also "very different" to "the
2002-2005 banana import regime".
1109
"The main difference was that the 2002- 2005 import regime was an 'all-tariff-quota'
regime, where virtually all imports were ma de pursuant to tariff quotas with different
terms, awarded to different groups of countries and administered in different ways.
That import regime, which has been qualifie d as the equivalent of a 'quota system',
was not necessarily fully compatible with the provisions of Article XIII of the GATT.
For this reason, the United States and the European Communities agreed that a WTO
waiver from the application of Article XIII was necessary."1110
7.621 In view of the characteristics of its cu rrent bananas import regime, the European
Communities argues that an
"Article XIII waiver is not relevant for the current proceedings. The current
[bananas] import regime of the European Communities is not an 'all-tariff-quota'
system and cannot be qualified as the equivalent of a 'quota system'. There is a single
tariff imposed on all banana imports, with the exception of the preference granted to
the Cotonou beneficiary countries which is limited by a 'cap'."
1111
7.622 The European Communities requests the Panel to reject the United States' arguments
concerning Article XIII in their entirety.1112
2. Order of analysis
7.623 In order to consider the United States' cl aim under Articles XIII:1 and 2 of the GATT 1994,
the Panel will begin by addressing the European Communities' systemic arguments concerning the
interrelation of Articles I and XIII of the GA TT 1994 and the latter's applicability to the
European Communities' bananas import regime, as well as the United Stat es' response to those
arguments. If the European Communities' arguments in that context were rejected, the Panel would
then address the United States' substantive claim under both paragraphs 1 and 2 of Article XIII. In the
alternative, there would be no need to assess the Un ited States' substantive claim under Article XIII:1
and 2 of the GATT 1994.
3. The applicability of Article XIII of the GATT 1994 to the European Communities'
bananas import regime
(a) The European Communities' arguments
7.624 As noted above, the European Communities argu es that Article XIII of the GATT 1994 is not
applicable to the tariff preference granted by the European Communities to bananas from ACP
countries. In the European Communities' view , "Article XIII does not cover cases of tariff
discrimination: this is the role of GATT Article I:1." 1113 The European Communities considers that
Article XIII of the GATT 1994 does not cover the case when some WTO Members have been

1109 European Communities' response to panel question No. 33, para. 66. See also written version of
European Communities' opening statement during substa ntive meeting with the parties and third parties,
para. 25.
1110 European Communities' response to panel question No. 33, para. 66.
1111 Ibid., para. 67. See also European Communities' response to panel question No. 92,
paras. 169-170.
1112 European Communities' first written submission, para. 69. See also European Communities'
second written submission, para. 95.

included in a tariff quota and others have not, but "a pplies only to the kinds of treatment accorded to
the various Members who are included in the tariff quota".1114 The European Communities states that:
"The justification for this interpretation lies to some extent in the ordinary meaning of
the terms of Article XIII, but more partic ularly in their context (as well as the
'subsequent practice' of Members) and in the object and purposes of the GATT."1115
7.625 The European Communities argues that, by looking at their "ordinary meaning":
"[T]he terms of Article XIII [of the GATT 1994], taken in isolation, are open to either
of the interpretations proposed in this dis pute, but ... they fit more easily into the one
put forward by the European Communities".1116
7.626 With respect to such "ordinar y meaning", the European Communities argues first that "there
is something to be gained by looking closely" at the terms used in Article XIII:5 of the GATT 1994,
by which the provisions of Article XIII "shall appl y" to tariff quotas. The European Communities
considers in this respect that:
"The phrase 'shall apply to any tariff quota in stituted or maintained by an contracting
party', although by no means definitively excluding the interpretation proposed by the
United States, seems nevertheless to sit more easily with that which the European
Communities has maintained. Thus, if the dr afters had wished to give Article XIII
the broader meaning favoured by the United States they would have most likely used
a phrase such as Article XIII shall apply to the operation of tariff quotas etc . Instead
they chose to speak of the tariff quota it self, as though it was this arrangement alone
that was concerning them."
1117
7.627 Turning to the ordinary meaning of the terms used in Article XIII:2 of the GATT 1994, the
European Communities argues that:
"The language of this paragraph, while ag ain not being in itself decisive, gives a
further weight to the European Communiti es’ interpretation, because it commences
with the phrase 'In applying import restrictions to any product'. Applying this to tariff
quotas the phrase could be taken to read 'In applying tariff quotas to any product'.
Once again this directs attention at the ta riff quotas themselves rather than at their
relationship with another import regime (which is the issue in the current
dispute)."1118
7.628 The European Communities then argues that the pr incipal context of the terms in Article XIII
is provided by the GATT 1994, which in its view:
"[H]as obvious implications for the interp retation of Article XIII because of the way
in which [the GATT] maintains a fundam ental distinction between tariff and non-
tariff measures. Thus, tariffs are regulated by Article I and Article II, whereas non-
tariff measures are governed by Article XI and Article XIII. Discrimination in tariffs
is dealt with by Article I and in non-tariff measures by Article XIII. Article XI
forbids non-tariff measures whereas tariffs although not forbidden, are placed within

1115 Ibid., para. 90.
1116 Ibid., para. 70.
1117 European Communities' second written submission, para. 67.
1118 Ibid., para. 69.

the limits set in Members' schedules by Ar ticle II. The European Communities has
not found any instance where the same rule has been treated as both a tariff and a
non-tariff measure. Even where both elements are present they have been separated
for the purpose of applying GATT articles. Thus, in the first Article 21.5 case
brought by Ecuador in respect of the European Communities' 1998 banana regime the
panel distinguished between the quan titative elements, to which it applied
Article XIII, and the tariff discrimina tion elements, to which it applied
Article I
1119."1120
7.629 As an additional note related to the context in which the terms are used in Article XIII of the
GATT 1994, the European Communities argues that:
"All of the rules spelt out in the subpar agraphs of paragraph [XIII:2] concern the
distribution of tariff quotas. There is no reference whatsoever to the relationship
between tariff quotas and different import regimes applied to other products. Thus,
this context suggests that the rules in Article XIII concern only the internal
quantitative distribution of tariff quotas."
1121
7.630 The European Communities notes finally that:
"There is extensive GATT and WTO practice to support the view that Members do
not regard exclusion from a tariff quota as a matter governed by Article XIII. This
practice is to be found in the waivers that have been granted for various preferential
schemes. With few exceptions (such as th e 2001 waiver respecting bananas) these
waivers are limited to Article I, and yet the preferences granted under these waivers
regularly include tariff quotas for the beneficiary countries only."1122
7.631 In the European Communities' view:
"[T]here could hardly be clearer examples of such 'subsequent practice' [by the WTO
Members in interpreting Article XIII]. The practice existed at two levels, firstly in
the form of the waiver decisions taken by the CONTRACTING PARTIES, and
secondly in the form of the measures taken by GATT and WTO Members under the
authorization provided by those decisions. The first level of practice was necessarily
'concordant' since it took the form of mutu al action by all GATT members. For the
same reason it was also necessarily 'common'. Finally, the line of decisions was
consistent, and there has been no contrary GATT or WTO practice. Furthermore, the
practice has involved taking a particular st ance on the interpretation of the GATT.
All the decisions indicate that Members assumed that the grant of a tariff quota for
the benefit of certain countries to the exclusion of other Members would be an
infringement of Article I, but not of other GATT obligations, such as
Article XIII."
1123

1119 (footnote original) EC – Bananas III (Article 21.5 – Ecuador), paras. 6.160 and 6.161.
1120 European Communities' second written submission, para. 71.
1121 Ibid., para. 73.
1122 European Communities' second written submission, para. 75.
1123 Ibid., para. 84. See also written version of European Communities' opening statement during
substantive meeting with the parties and third parties, paras. 15-25.

7.632 Turning to the issue of the "object and purpo se of the agreement", the European Communities
adds that "there are a number of considerations that confirm the interpretation put forward by the
European Communities regarding the application of Article XIII to tariff quotas".1124 In its view:
"[T]he objective of Article XIII and in pa rticular of paragraph 2 is to achieve
particular quantitative distributions of trad e. In the case of quotas it is evident that
the appropriate distribution was to be achiev ed by direct quantitative measures, in the
last resort by allocating specific quantities to individual exporting countries. When,
as required by paragraph 5 [of Article XIII], these rules are applied to tariff quotas a
corresponding distribution can be achieved by allocating specific quantities of the
tariff quota. The notion that such a distri bution could be achieved by setting different
tariff levels for the various exporting count ries is economic nonsense. Consequently
it is not plausible that the drafters of Article XIII would have envisaged using
paragraph 2 to achieve such a goal."1125
7.633 The European Communities argues that "[c]onsideration of the objects and purposes of GATT
also leads to a rejection of the interpretation pr oposed by the United States for paragraph 1 of
Article XIII".1126 In the European Commun ities' view, the interpretation proposed by the United
States "would lead to non-Members of the WTO being accorded rights under the GATT".1127
"Such a situation would arise because the United States' interpretation would require
paragraph 1 to be read as though it said th at no tariff quota could be applied to ACP
Members unless a similar tariff quota were accorded to all other exporting (or
importing) countries. Unlike a 'prohibition or restriction', a tariff quota can be
beneficial rather than prejudicial to the country to which it is accorded., and since the
condition in paragraph 1 appli es to imports from (or exports to) all third countries,
and not merely those that are WTO Members, under the United States' interpretation
the benefit of a tariff quota could not be given to a Member unless it was also
accorded to all non-Members. Thus, adopti ng this interpretati on one could have a
situation where a Member which wished to let all other Members share in a tariff
quota could not do so unless it also allowe d non-Members a similar share. In the
European Communities' view such an outcom e is contrary to the object and purpose
of GATT."
1128
(b) The United States' arguments
7.634 The United States begins by noting the European Communities' argument that:
"[T]he measures contained in EC Regulati on 1964 are not subject to the requirements
of GATT Article XIII because the ACP tariff quota is not a 'quantitative restriction,'
but rather a 'cap' on a tariff preference.
1129 Indeed, the EC goes so far as to declare
that it 'subjects all banana imports to a single tariff of 176 euro per ton. There are no
other tariffs and there are no quantitative r estrictions imposed on the importation of
bananas.'
1130"1131

1124 European Communities' second written submission, para. 85.
1125 Ibid., para. 87.
1126 Ibid., para. 88.
1127 Ibid.
1128 European Communities' second written submission, para. 88.
1129 (footnote original) EC first written submission, paras. 64-65.
1130 (footnote original) EC first written submission, para. 3.
1131 United States' second written submission, para. 82.

7.635 In response, the United States contends that:
"The EC's description of its measure defies reality. EC Regulation 1964, the measure
subject to this proceeding, itself refers to a 'tariff rate quota for bananas originating in
ACP countries.' In the sixth whereas clause EC Regulation 1964 states that 'a tariff
rate quota for bananas originating in ACP countries should also be opened.'
1132 In
addition, Article 1.2 states that 'an autonomous tariff quota of 775,000 tonnes per net
weight subject to a zero-duty rate sha ll be opened for imports of bananas ...
originating in ACP countries.'1133"1134
7.636 The United States argues further that:
"The [European Communities] made the sa me argument in the first Article 21.5
proceeding brought by Ecuador and in the Article 22.6 proceeding with the United
States with respect to the then 857,700 ton tariff rate quota for ACP origin bananas.
The panel and arbitrator each rejected the EC's argument, explaining that 'a tariff
quota is a quantitative limit on the availability of a specific tariff rate' and therefore,
Article XIII applied to the 857,700 ton limit. 1135 The 775,000 ton limit on the duty-
free rate reserved for ACP countries is likewise a tariff rate quota subject to
Article XIII."1136
7.637 The United States adds that:
"As explained by the EC – Bananas III panel, Article XIII:1 establishes that no
import restrictions can be applied to one Member's products unless the importation of
like products from other Members is similarly restricted.1137 The panel also explained
that 'a Member may not restrict imports from some Members using one means and
restrict them from another using another means.' 1138 The Appellate Body confirmed
that the 'essence' of Article XIII 'is th at like products should be treated equally,
irrespective of origin.'1139"1140
7.638 The United States notes further that:
"Article XIII prohibits the EC from establis hing a duty-free tariff rate quota for some
Members, but not others, and from denying eq ual treatment to banana imports of all
origins. This interpretation of Article XIII prevents Members from circumventing
their basic GATT non-discrimination obligations, and is equally as applicable in this
instance as it was ten years ago."1141

1132 (footnote original) EC Regulation 1964 at 6th "Whereas" clause. Exhibit US-1.
1133 (footnote original) EC Regulation, Article 1.2. Exhibit US-1.
1134 United States' second written submission, para. 83.
1135 (footnote original) EC – Bananas III (Article 21.5 – Ecuador) , para. 6.20 and EC – Bananas III
(US) (Article 22.6 – EC), para.5.9
1136 Written version of United States' opening statement during substantive meeting with the parties and
third parties, para. 18. See also United States' second written submission, paras. 84-85.
1137 (footnote original) EC – Bananas III (Panel), para. 7.69.
1138 (footnote original) Id.
1139 (footnote original) EC – Bananas III, (AB), para. 190.
1140 Written version of United States' opening statement during substantive meeting with the parties and
third parties, para. 19.
1141 United States' second written submission, para. 91.

7.639 For these reasons, the United States concludes that:
"[I]t is clear that the EC's ACP-exclusive tariff quota is subject to the requirements of
GATT Article XIII. It is also undisputed th at the EC's waiver from its obligations
under Article XIII expired on December 31, 2 005. Thus, as demonstrated in the US
First Written Submission, because the EC uses a tariff rate quota on ACP imports and
an entirely different means to restrict MFN imports, the EC is preventing 'like'
imports from being 'treated equally, i rrespective of origin' in breach of GATT
Article XIII:1.
Moreover, because the EC fails to distribute any share whatsoever of its ACP tariff
quota to MFN suppliers, let alone a share they would have expected to obtain in the
absence of restrictions, it maintains its tariff quota in breach of GATT Article XIII:2
... [T]he EC chose to allot no share wh atsoever to non-ACP suppliers with a
substantial interest and no share to non-AC P suppliers with no substantial interest.
Thus, the EC breaches its obligations unde r GATT Article XIII:2 because it failed to
'similarly prohibit or restrict' those non-ACP bananas."1142
(c) Panel's analysis
(i) Relevance of Article XIII of the GATT 1994 to tariff quotas in agriculture
7.640 At the outset, the Panel notes that Article X III was originally drafted in the GATT 1947 to
address the administration of quantitative restrictio ns, in particular country quotas and any other
quotas. As a result of the Uruguay Round of Multila teral Trade Negotiations, quantitative restrictions
in agriculture were to be abolis hed and tariffied. As the panel on Turkey – Textiles stated in the
context of Articles XI and XIII of the GATT 1994:
"The prohibition on the use of quantitative restrictions forms one of the cornerstones
of the GATT system. A basic principle of the GATT system is that tariffs are the
preferred and acceptable form of protection. Tariffs, to be reduced through reciprocal
concessions, ought to be applied in a non-di scriminatory manner independent of the
origin of the goods (the 'most-favoured-na tion' (MFN) clause). ... The prohibition
against quantitative restrictions is a re flection that tariffs are GATT's border
protection 'of choice'. Quantitative restrictions impose absolute limits on imports,
while tariffs do not. In contrast to MF N tariffs which permit the most efficient
competitor to supply imports, quantitative rest rictions usually have a trade distorting
effect, their allocation can be problema tic and their administration may not be
transparent ...
Participants in the Uruguay Round recognized the overall detrimental effects of non-
tariff border restrictions (whether applied to imports or exports) and the need to
favour more transparent price-based, i.e. ta riff-based, measures; to this end they
devised mechanisms to phase-out quantitati ve restrictions in ... agriculture ... .
This recognition is reflected in ... th e Agreement on Agriculture where quantitative
restrictions were eliminated
1143 ..."1144 (emphasis added).

1142 Ibid., paras. 94-95.
1143 (footnote original) Under the Agreement on Agriculture, notw ithstanding the fact that contracting
parties, for over 48 years, had been relying a great deal on import restrictions and other non-tariff measures, the
use of quantitative restrictions and ot her non-tariff measures was prohibited and Members had to proceed to a
"tariffication" exercise to transform quantitative restrictions into tariff based measures.

7.641 Notwithstanding tariffication, the text of Article XIII of the GATT 1947, including its title,
"Non-discriminatory Administration of Quantitative R estrictions", has not been modified in the
Uruguay Round. The Panel reads that title as bei ng relevant to maintaining a close link with
Article XI of the GATT 1994, entitled "General E limination of Quantitative Restrictions". The
above-mentioned panel on Turkey – Textiles stated that:
"The wording of Articles XI and XIII is clear. Article XI provides that as a general
rule (we note the wording of the title of Article XI: " General Elimination of
Quantitative Restrictions"), WTO Members shall not use quantitative restrictions
against imports or exports.

Article XIII provides that if and when quantitative restrictions are allowed by the
GATT/WTO, they must, in addition, be imposed on a non-discriminatory basis."
1145
7.642 Following tariffication, Article XIII of the GA TT 1994 remains relevant for the agricultural
sector. As the Appellate Body stated earlier in this dispute, "[i]f the negotiators had intended to permit
Members to act inconsistently with Article XIII of the GATT 1994 [by virtue of the provisions of the
Agreement on Agriculture], they would have said so explicitly." 1146 In particular, Article XIII of the
GATT 1994 is relevant to one of the few remaining permissibl e practices with a quantitative
dimension in agriculture: tariff quotas. In this context, this Panel notes that the original panel
requested by Ecuador in this dispute found, similarly to the panel on Turkey – Textiles, that:
"The wording of Article XIII is clear. If quantitative restrictions are used (as an
exception to the general ban on their use in Article XI), they are to be used in the least
trade-distorting manner possible."1147
7.643 The original panel requested by Ecuador in this dispute added that:
"In this case, we are concerned with tariff quotas, which are permitted under GATT
rules, and not quantitative restrictions per se. However, Article XIII:5 makes it clear,
and the parties agree, that Article XIII app lies to the administration of tariff quotas.
... In interpreting the terms of Article XIII, it is important to keep their context in
mind. Article XIII is basically a provision relating to the administration of
restrictions authorized as exceptions to one of the most basic GATT provisions –
the general ban on quotas and other non-tariff restrictions contained in Article XI."
1148
(ii) Analysis of Article XIII:5 of the GATT 1994
7.644 The analysis of the Europ ean Communities' arguments concerning the interrelation of
Articles I and XIII of the GATT 1994, and the appli cability of the latter to the EC banana import
regime necessarily involves Article XIII:5 of th e GATT 1994, which provides that "[t]he provisions
of this Article shall apply to any tariff quota institu ted or maintained by any contracting party [WTO
Member], and, in so far as app licable, the principles of this Ar ticle shall also extend to export

1144 Panel Report on Turkey – Textiles, paras. 9.63-9.65.
1145 Ibid., paras. 9.61-9.62.
1146 Appellate Body Report on EC – Bananas III, para. 157. See also Panel Report on US – Line Pipe,
para. 7.40.
1147 Panel Report on EC – Bananas III (Ecuador), para. 7.68.
1148 Ibid.

restrictions." As mentioned earlier, the European Communities does not contest that, in principle, by
virtue of Article XIII:5, Article XIII is applicable to tariff quotas.1149
7.645 First, the Panel looks at the language of Artic le XIII:5 of the GATT 1994. The words "any"
(both before the terms "tariff quota" and "contracti ng party") and "shall" in Article XIII:5 underscore
the absolute and categorical nature of the application of "the provisions of ... Article [XIII]" to tariff
quotas. The Panel notes also that Article XIII:5 uses the term " any tariff quota instituted or
maintained by any [Member]" in the singular. The Pa nel reads this to mean that Article XIII of the
GATT 1994 is also applicable to one single tariff quota, and that this is so irrespective of whether that
single tariff quota is part of an import regime with mo re tariff quotas or is part of an import regime
that comprises only one tariff quota.
7.646 In an import regime containing a tariff quota w ith a preferential in-quota duty (whether or not
a zero duty) for some Members, and a higher out-of-quota MFN duty, the in- and out-of-quota duties
are two facets of the same preferential tariff quot a. As the first compliance panel requested by
Ecuador in this dispute stated, "a tariff quota is a quantitative limit on the availability of a specific
tariff rate".
1150 Citing that statement, the panel on US – Line Pipe established that "[it] see[s] no
reason to disagree with the United States that a tariff quota involves the '[a]pplication of a higher tariff
rate to imported goods after a specified quantity of the item has entered the country at a lower
prevailing rate'."1151 (footnote omitted)
7.647 Neither of the parties contest that the Eur opean Communities has, under its current banana
import regime introduced on 1 January 2006, a prefer ential zero-duty tariff quota of 775,000 mt per
annum reserved for ACP countries, combined with an MFN applied duty of 176 €/mt. The tariff
quota represents a quantitative limit on the pref erence to ACP countries because any ACP banana
imports to the European Communities exceeding that quantitative limit are subject to the out-of-quota
MFN duty.
7.648 Thus, the European Communities' current banana import regime is a tariff-quota-based import
regime, and the in- and out-of-quota duties are inherent parts of that regime. Accordingly, and in the
light of Article XIII:5 of the GATT 1994, in princi ple, Article XIII of the GATT 1994 applies to all
aspects of a preferential tariff quota, including the out-of-quota duty.
(iii) Interrelation of Articles I and XIII of the GATT 1994
7.649 The European Communities argues that the a pplicability of Article I of the GATT 1994 to
tariff discrimination prevents the applicabilit y of Article XIII of the GATT 1994 to the
European Communities' current bananas import regime.1152
7.650 Article I of the GATT 1994 is entitled "Gen eral Most-Favoured-Nation Treatment".
Paragraph 1 of Article I stipulates that:
"With respect to customs duties and charges of any kind imposed on or in connection
with importation or exportation or imposed on the international transfer of payments
for imports or exports, and with respect to the method of levying such duties and
charges, and with respect to all rules a nd formalities in connection with importation

1149 See European Communities' second written submission, para. 49.
1150 Panel Report on EC – Bananas III (Article 21.5 – Ecuador) , para. 6.20; and Decision by the
Arbitrators on EC - Bananas III (US) (Article 22.6 – EC), para. 5.9.
1151 Panel Report on US – Line Pipe, para. 7.18.
1152 See European Communities' first written submission, para. 65, European Communities' second
written submission, paras. 71-72, and European Communities' response to panel question No. 91,
paras. 166-168.

and exportation, and with respect to all matte rs referred to in pa ragraphs 2 and 4 of
Article III, any advantage, favour, privilege or immunity granted by any contracting
party [WTO Member] to any product origina ting in or destined for any other country
shall be accorded immediately and unconditi onally to the like product originating in
or destined for the territories of all other contracting parties [WTO Members]."
7.651 The Panel notes that Members' measures must comply with all relevant provisions of the
covered agreements. In regard to the applicabilit y of Article XIII of the GATT 1994 in the specific
context of agriculture, as mentioned above, the A ppellate Body found earlier in this dispute that
"[i]f the negotiators had intended to permit Member s to act inconsistently with Article XIII of the
GATT 1994 [by virtue of the provisions of the Agre ement on Agriculture], they would have said so
explicitly."
1153
7.652 As the European Communiti es argues, Article I of the GATT 1994 covers tariff
discrimination.1154 As a result, Article I does not address the quantitative element of the European
Communities' current bananas import regime, which is covered by Article XIII of the GATT 1994.
As elaborated further below 1155, the European Communities' current bananas import regime contains
an important quantitative element, and even if that element is applicable directly to the ACP countries,
it results in a restriction for MFN bananas within the meaning of Article XIII:1 of the GATT 1994.
7.653 As regards a partial overlap between tw o provisions in the covered agreements,
Article XIII:2(d) of the GATT 1994 and Article 5. 2 of the Safeguards Agreement, the panel on
US - Line Pipe stated that:
"As noted by the panel in Turkey – Textiles , 'the principle of effective interpretation
or 'l'effet utile' or in Latin ut res magis valeat quam pereat reflects the general rule of
interpretation which requires that a treaty be interpreted to give meaning and effect to
all the terms of the treaty. For instance one provision should not be given an
interpretation that will result in nullifying th e effect of another provision of the same
treaty.'
1156 An interpretation of Article XIII th at applies that provision in the context
of safeguard measures does not, in our vi ew, nullify any of the provisions of the
Safeguards Agreement. All of the provis ions of the Safeguards Agreement remain
fully applicable. Although there may be some duplication between Article XIII:2(d)
and Article 5.2 of the Safeguards Agreem ent, duplication is not the same as
nullification."1157
7.654 Applying the same approach to the interrela tion of Articles I and XIII of the GATT 1994,
this Panel notes that, even if there was some ove rlap between those two Articles, giving effect to
Article XIII would not nullify the effect of Article I.
7.655 The Panel also notes that in EC – Bananas III the European Communities argued, in regard
to the Lomé Waiver, that:

1153 Appellate Body Report on EC – Bananas III, para. 157. See also Panel Report on US – Line Pipe,
para. 7.40.
1154 See European Communities' first written submission, para. 65.
1155 See para. 7.660 below.
1156 (footnote original) Turkey – Textiles at footnote 327.
1157 Panel Report on US – Line Pipe, para. 7.45.

"[W]here aspects of a measure have been found to be covered by the waiver for
purposes of Article I, they should not be found to violate another GATT provision
imposing MFN-like obligations similar to those that have been waived ..."
1158
7.656 The original panel requested by Ecuador in EC – Bananas III found – a finding later reversed
by the Appellate Body 1159 – that the Lomé Waiver from Article I:1 of the GATT 1994 would extend
to Article XIII:1 of the GATT 1994. 1160 In this context, that panel had also looked into the "close
relationship between Articles I and XIII:1".1161
7.657 The Appellate Body rejected the original pa nel's conclusion that the Lomé Waiver from
Article I:1 would automatically extend to Article XIII:1 of the GATT 1994. 1162 The Appellate Body
noted that "[t]he Panel based its conclusion on the need to give 'real effect'1163 to the Lomé Waiver and
on the 'close relationship' 1164 between Articles I:1 and XIII:1". 1165 At the same time, however, the
Appellate Body stated that, "although Articles I and XIII of the GATT 1994 are both non-discrimination
provisions, their relationship is not such that a waiver from the obligations under Article I implies a
waiver from the obligations under Article XIII"1166 (emphasis added).
7.658 The Appellate Body did not elaborate further on the relationship between Articles I and XIII
of the GATT 1994. Nevertheless, the rejection by the Appellate Body of the panel's finding on the
scope of the Lomé Waiver indicates that Article s I and XIII of the GATT 1994 do not have the same
scope, and that an inconsistency with Article XIII is possible irrespective of whether or not there is an
inconsistency with Article I.
7.659 Finally, the Panel notes that on two earlier occasions in the EC – Bananas III dispute the
European Communities made an objection to the ap plicability of Article XIII of the GATT 1994 to
the then 857,700 mt duty-free tariff quota for ACP bananas 1167 similar to the objection the
European Communities has made in these proceedings regarding the 775,000 mt duty-free tariff quota
for ACP bananas. Both the first compliance panel requested by Ecuador and the arbitrator in the
proceedings requested by the European Communiti es pursuant to Article 22.6 of the DSU rejected
that objection:
"Article XIII:5 provides that the provisions of Article XIII apply to 'tariff quotas'.
The European Communities es sentially argues that the amount of 857,700 tonnes for
traditional imports from ACP States constitutes an upper limit on a tariff preference

1158 Panel Report on EC – Bananas III (Ecuador), para. 7.104.
1159 See Appellate Body Report on EC – Bananas III, para. 188.
1160 See Panel Report on EC – Bananas III (Ecuador), para. 7.110.
1161 The original panel on EC- Bananas III stated that "both [Articles I and XIII:1] prohibit
discriminatory treatment. Article I requires MFN treatme nt in respect of 'rules and formalities in connection
with importation', a phrase that has been interpreted broadly in past GATT practice, such that it can
appropriately be held to cover rules related to tariff qu ota allocations. Such rules are clearly rules applied in
connection with importation. Indeed, they are critical to the determination of the amount of duty to be imposed.
To describe the relationship somewhat differently, Article I establishes a general principle requiring non-
discriminatory treatment in respect of, inter alia, rules and formalities in connection with importation.
Article XIII:1 is an application of that principle in a specific situation, i.e., the administration of quantitative
restrictions and tariff quotas. In that sense, the scope of Article XIII:1 is identical with that of Article I."
(footnote omitted) Panel Report on EC – Bananas III (Ecuador), para. 7.107.
1162 See Appellate Body Report on EC – Bananas III, para. 188.
1164 (footnote original) Ibid., para. 7.107.
1165 Appellate Body Report on EC – Bananas III, para. 182.
1166 Appellate Body Report on EC – Bananas III, para. 183.
1167 Panel Report on EC – Bananas III (Article 21.5 – Ecuador) , paras. 4.26-4.27, 6.19-6.20; and
Decision by the Arbitrators on EC – Bananas III (US) (Article 22.6 – EC), paras. 5.8-5.9.

and is not a tariff quota subject to Article X III. However, by definition, a tariff quota
is a quantitative limit on the availability of a specific tariff rate. Thus, Article XIII
applies to the 857,700 tonne limit."
1168
7.660 In the context of the European Communities' obj ection to the applicability of Article XIII in
regard to the European Communities' preferentia l duty-free tariff quota for ACP countries, the main
difference between the European Communities' form er and current preferential tariff quota for ACP
countries is the level of the quantitative limit. Th e current preferential tariff quota for ACP countries
has been set at 775,000 mt instead of 857,000 mt . From the viewpoint of the applicability of
Article XIII, that quantitative difference is irrele vant as it does not eliminate the quantitative element
of the European Communities' measure. As stated by the first compliance panel requested by Ecuador
and the arbitrator in the proceedings requested by the European Communities pursuant to Article 22.6
of the DSU, it is the very quantitative limit that establishes the applicability of Article XIII of the
GATT 1994 to the European Communities' prefer ential tariff quota for ACP countries. Such
applicability does not depend on the specific level of the quantitative limit, nor on whether MFN
countries are also subject to a tariff quota or only an MFN tariff.1169
7.661 The Panel therefore rejects the argument made by the European Communities that:
"GATT Article XIII does not oblige the European Communities to extend to Latin
American countries the tariff preference it grants to the ACP countries simply
because this tariff preference is subject to a 'cap'. Article XIII does not cover cases of
tariff discrimination: this is the role of GATT Article I:1."
1170
7.662 In the light of the foregoing, the Panel is justified in addressing the consistency of the
European Communities' current ba nanas import regime with Artic le XIII of the GATT 1994.
Accordingly, the Panel will now turn to the substantive claims of the United States under
Articles XIII:1 and 2 of the GATT 1994.
4. The United States' claim under Article XIII:1 of the GATT 1994
(a) The United States' arguments
7.663 The United States argues that:
"By using a tariff rate quota on ACP imports , and an entirely different means to
restrict MFN imports, the EC is preventing 'like' imports from being 'treated equally,
irrespective of origin' in violation of GATT Article XIII:1."
1171
(b) The European Communities' response
7.664 In the view of the European Communities, there is no inconsistency with Article XIII:1 of the
GATT 1994 in its challenged measures. According to the European Communities:
"[T]he Cotonou Preference does not violate GATT Article XIII, as established by a
number of facts and considerations.

1168 Panel Report on EC – Bananas III (Article 21.5 – Ecuador) , para. 6.20; and Decision by the
Arbitrators on EC – Bananas III (US) (Article 22.6 – EC), para. 5.9.
1169 See Panel Report on EC – Bananas III (Article 21.5 – Ecuador), para. 6.20; and Decision by the
Arbitrators on EC – Bananas III (US) (Article 22.6 – EC), para. 5.9.
1170 European Communities' first written submission, para. 65.
1171 United States' first written submission, para. 42. See also United States' second written submission,
para. 94.

First, banana imports from Latin American a nd other MFN suppliers are not subject
to any quantitative restriction: they are simply subject to a tariff. Therefore, the
conditions for the application of GATT Article XIII are not satisfied, i.e., there is no
quantitative restriction imposed on one WTO Member that it is not imposed on all
other countries.
Second
, GATT Article XIII cannot be used as a substitute for GATT Article I:1
wherever a tariff quota exists. GATT Artic le XIII does not oblige the European
Communities to extend to Latin American c ountries the tariff preference it grants to
the ACP countries simply because this tariff preference is subject to a "cap".
Article XIII does not cover cases of tariff discrimination: this is the role of GATT
Article I:1 ...
Third, the facts in the current proceedings ar e not the same as those that faced the
Panel and Appellate Body in 1997. It is noteworthy that the United States does not
make any attempt to explain what are the restrictions on imports from MFN exporters
that are not similar to those it says are affecting imports from ACP countries."
1172
7.665 The European Communities adds that:
"[T]he interpretation proposed by the Unite d States for paragraph 1 of Article XIII…
would lead to non-Members of the WTO being accorded rights under the GATT.
Such a situation would arise because the Un ited States' interpretation would require
paragraph 1 to be read as though it said th at no tariff quota could be applied to ACP
Members unless a similar tariff quota were accorded to all other exporting (or
importing) countries. Unlike a 'prohibition or restriction', a tariff quota can be
beneficial rather than prejudicial to the c ountry to which it is accorded, and since the
condition in paragraph 1 appli es to imports from (or exports to) all third countries,
and not merely those that are WTO Members, under the United States' interpretation
the benefit of a tariff quota could not be given to a Member unless it was also
accorded to all non-Members. Thus, adopti ng this interpretati on one could have a
situation where a Member which wished to let all other Members share in a tariff
quota could not do so unless it also allowe d non-Members a similar share. In the
European Communities' view such an outcom e is contrary to the object and purpose
of GATT. As illustrated by national practice in matters such as anti-dumping and
countervailing duty law, Members do not in general regard WTO obligations as
extending to the treatment of imports from non-Members.
On the other hand, the European Communitie s' interpretation of Article XIII gives
rise to no such unacceptable consequences. By limiting the application of
Article XIII to the quantitative aspects of tariff quotas paragraph 1 can be taken to say
that no quantitative limitation may be placed on a Member's share of a tariff quota
unless all other countries' shares are similarly limited. This interpretation accords
rights to Members rather than non-Member s and so does not conflict with the objects
of the GATT."
1173
7.666 With respect to the reference made by the United States to the panel report in EC – Bananas
III, the European Communities argues that:

1172 European Communities' first written submission, paras. 63, 64, 65 and 67. See also European
Communities' second written submission, paras. 66-95.
1173 European Communities' second written submission, paras. 88-89.

"The United States quotes the EC – Bananas III panel to the effect that because of
Article XIII:1 'a Member may not limit th e quantity of imports from some Members
but not from others'
1174. The statement is uncontroversial. If discriminatory
quantitative restrictions were not prohib ited in this way then the basic GATT
objective of eliminating discrimination could be undermined whenever there was an
exception to the general ban on quantitative restrictions that is imposed by Article XI.
However, that panel's proposition does not im ply that paragraph 5 of Article XIII has
the effect of extending the obligations of that Article into situations of tariff
discrimination and thereby of overthrowing the basic distinction between tariffs and
quantitative measures that, as explained above , is fundamental to the GATT. Nor
was the panel in EC – Bananas III concerned with such a situation since the tariff
quotas that it was examining extended to all of the Members that were affected by the
dispute, albeit that those quotas were created by distinct legal instruments."1175
7.667 The European Communities also comments the reference made by the United States to the
Appellate Body report in EC – Bananas III:
"The United States also quotes the Appellate Body in EC – Bananas III where it
addresses the GATT non-discrimination provisions – Articles I and XIII. At the
outset it is worth stressing, as the United States quite properly acknowledges, that in
these passages the Appellate Body was concer ned with both of these provisions. In
the first quotation the Appellate Body mak es the non-controversial observation that
the essence of these GATT obligations is that products should be treated equally,
irrespective of their origin
1176. In the second quotation, taken from the same
paragraph, the Appellate Body says that the object and purpose of the non-
discrimination provisions would be defeated if 'by choosing a different legal basis for
imposing import restrictions, or by applyi ng different tariff rates' a Member could
avoid the application of these provisions.
Once again, no one could dissent from such propositions. The provisions of Articles
I and XIII provide a comprehensive system of barriers to discrimination, in which
there are no gaps or crevices through which national measures can penetrate, no
matter how cunningly they are drafted."
1177
7.668 In conclusion, according to the European Communities:
"[T]he scope of Article XIII, in particular of paragraphs 1 and 2, does not extend to
the relationship between the treatment of those Members that are covered by a tariff
quota and that of those which are not. The ju stification for this interpretation lies to
some extent in the ordinary meaning of the terms of Article XIII, but more
particularly in their context (as well as the 'subsequent practice' of Members) and in
the object and purposes of the GATT."
1178

1174 (footnote original) Panel report EC – Bananas III, para. 7.69.
1175 European Communities' second written submission, paras. 91-92.
1176 (footnote original) Appellate Body report EC – Bananas III, para. 190.
1177 European Communities' second written submission, paras. 93-94.
1178 Ibid., para. 90.

(c) Panel's analysis
(i) The relevant language of Article XIII:1 of the GATT 1994 for this dispute
7.669 According to Article XIII:1 of the GATT 1994:
"No prohibition or restriction shall be a pplied by any contracting party on the
importation of any product of the territory of any other contracting party or on the
exportation of any product destined for the territory of any other contracting party,
unless the importation of the like product of all third countries or the exportation of
the like product to all third countries is similarly prohibited or restricted."
7.670 Replacing the terms "any contracting party", "a ny other contracting party" and "all third
countries" with the relevant WTO Members involved in this dispute, the Panel understands that the
United States' claim under Article XIII:1 invokes that provision in the following way:
"No prohibition or restriction shall be app lied by [the European Communities] on the
importation of any product of the territory of [MFN banana suppliers] ... unless the
importation of the like product of [the bene ficiaries of the ACP tariff quota] ... is
similarly prohibited or restricted."
7.671 In the context of the United States' claim th at the European Communities does not treat MFN
bananas "equally" nor restricts them "similarly" to bananas from ACP countries, the only possible
reading of Article XIII:1 is the one provided by th e Panel in the preceding paragraph. The Panel does
not agree with the European Communities that this interpretation "would lead to non-Members of the
WTO being accorded rights under the GATT."
1179 In fact, the main purpose of Article XIII:1 of the
GATT 1994 is that products from WTO Members shoul d not have restrictions imposed upon them,
unless similar restrictions are placed on the like products of other countries.
7.672 In this dispute, the United States argues that bananas from MFN suppliers, including from the
United States, should be protected under Article XIII:1 of the GATT 1994. Accordingly, if the term
"any other contracting party" in Article XIII:1 is re placed with "MFN banana suppliers", and the term
"any contracting party" is replaced with "t he European Communities" (which the European
Communities does not seem to contest), the term "all third countries" may indeed refer to the ACP
countries. In that context, the term "all thir d countries" does not necessarily exclude WTO Members
other than the European Communities and MFN banana suppliers. Also, even if "all third countries"
should be interpreted as referring also to non-Memb ers of the WTO, an issue this Panel does not
address, the Panel's above interpretation of th e terms of Article XIII:1 does not imply that
Article XIII:1 would suddenly be turned into a provision protecting non-Members.
(ii) The applicability of Article XIII:1 of the GATT 1994
7.673 In the light of that interpretation of the releva nt terms of Article XIII:1, the Panel needs to
address three issues:
(a) Whether bananas are like products;
(b) Whether any prohibition or restriction is applied by the European Communities on
the importation of bananas from the territo ries of MFN banana suppliers, including
the United States; and

1179 Ibid., para. 88.

(c) Whether the importation of the like product fro m the beneficiaries of the ACP tariff
quota is similarly prohibited or restricted.
Whether all bananas are like products

7.674 The Panel has already concluded that the releva nt products in this dispute, fresh bananas
(corresponding to tariff item 0803 00 12 or 0803 00 19) originating in ACP countries, are like
products to those fresh bananas originating in other WTO Members, in terms of Article I of the GATT
1994.1180 Based on the same considerations, and for the purpose of the United States' claim under
Article XIII of the GATT 1994, the Panel may also consider them to be lik e products in terms of
Article XIII. This is irrespective of their origin, i.e., independently of whether they are produced in
ACP or MFN countries, or whether they are subjec t to the MFN out-of-quota tariff, the preferential
in-quota tariff under the ACP tariff quota or to any further preferential import regime of the
European Communities.
Whether any prohibition or restriction is applied by the European Communities on the
importation of bananas of the territory of MFN banana suppliers, including the United States
7.675 Article XIII:1 of the GATT 1994, entitled "Non-discriminatory Administration of
Quantitative Restrictions", can apply in this dispute only if there is a "prohibition or restriction"
within the meaning of Article XIII:1 on the im portation of bananas from MFN banana suppliers,
including the United States, to the European Comm unities. This is the second issue the Panel will
address under Article XIII:1, noting that, for the purpo ses of the analysis, finding either a restriction
or a prohibition would be sufficient for the Panel to move to the third element of its analysis under
Article XIII:1.
7.676 As regards the existence of any "restriction" , the Panel notes that, while panels and the
Appellate Body have not looked into the meani ng of the term "restriction" specifically under
Article XIII of the GATT 1994, traditionally, they have interpreted that term broadly in the context of
other provisions, such as Article XI of the GATT 1994.1181
7.677 Also, in the context of Article XI and othe r non-discrimination provisions of the GATT 1994,
it has been found that GATT disciplines on the use of restrictions are not meant to protect
"trade flows", but rather the "competitive opport unities of imported products". As the panel on
Argentina – Hides and Leather stated in the context of Article XI of the GATT 1994:
"[A]s to whether [the challenged measure ] makes effective a restriction, it should be
recalled that Article XI:1, like Articles I, II and III of the GATT 1994, protects
competitive opportunities of imported products, not trade flows.1182"1183
7.678 In the light of the above-mentioned close link between Articles XI and XIII of the
GATT 1994, the Panel considers that this broad in terpretation of the word "restriction" under
Article XI is relevant also for Article XIII.

1180 See para. 7.564 above.
1181 See Panel Report on India – Quantitative Restrictions , paras. 5.129-5.130. See also Panel Report
on Turkey – Textiles, para. 9.64; Panel Report on India – Autos , paras. 7.320 and 7.322; and Panel Report on
1182 ( footnote original ) See the Appellate Body Reports on Japan – Taxes on Alcoholic Beverages
(hereafter "Japan – Alcoholic Beverages II "), adopted on 1 November 1996, WT/DS8/AB/R, WT/DS10/AB/R,
WT/DS11/AB/R, at p.16; Korea – Taxes on Alcoholic Beverages , adopted on 17 February 1999,
WT/DS75/AB/R, WT/DS84/AB/R, at paras. 119-120 and 127.
1183 Panel Report on Argentina – Hides and Leather, para. 11.20.

7.679 Given that broad interpretation of the term "restriction", the Panel sees the European
Communities' preferential ACP tariff quota as a rest riction for bananas from MFN banana suppliers,
including the United States, within the meaning of Article XIII:1 of the GATT 1994. As the
European Communities acknowledges, its banana import regime confers a benefit, although a
quantitatively limited one, to bananas from ACP coun tries; bananas from the United States and other
MFN banana suppliers cannot have access to that quantitatively limited benefit.
1184 Any benefit
accorded to fresh bananas of only some Members pr esumably affects the competitive opportunities of
like bananas imported from other Members, including from the United States, to the
European Communities market. By its very nature, such a benefit reserved for some Members
generally represents a disadvantage for other Members.
7.680 The European Communities argues that Article X III only deals with quantitative restrictions
and quantitative discrimination, and not tariff restricti ons or discrimination. In this context, the Panel
notes that the word "quantitative" means "[p]ossessing quantity, magnitude, or spatial extent"; "[t]hat
is, or may be, considered with respect to the quan tity or quantities involved; estimated or estimable
by quantity."
1185
7.681 On its face, the quantity of bananas that MFN suppliers can export to the
European Communities is not restricted by th e European Communities' current bananas import
regime: MFN suppliers can export as many banan as to the European Communities as they wish.
However, such suppliers can export bananas to the European Communities only at the MFN €176/mt
out-of-quota tariff. Therefore, the quantities of bananas that MFN suppliers can export to the
European Communities are certainly affected by the fact that, up to the quantitative limit set by the
tariff quota, the ACP countries are entitled to expor t bananas to the Europ ean Communities at a zero
in-quota duty. As stated by the first compliance panel requested by Ecuador in this dispute, "[a]s to
the EC's suggestion that Ecuador has no interest in the collective allo cation to traditional ACP
suppliers, we note that the price and even the volume of Ecuador 's exports could be affected by the
price and volume of traditional ACP exports"
1186 (emphasis added).
7.682 Further, as mentioned earlier, under the tariff quot a, the benefit accorded to ACP countries is
determined in a quantitative manner. Up to the quantitative limit specified by the tariff quota, ACP
countries can export bananas to the European Co mmunities under the preferential in-quota duty.
Beyond the quantitative limit, ACP banana exports to the European Communiti es are also subject to
the out-of-quota duty.
7.683 As mentioned above, both the first compliance pa nel requested by Ecuador and the arbitrator
in the proceedings requested by the European Communities pursuant to Article 22.6 of the DSU
established that it is the very quantitative limit that establishes the applicability of Article XIII to the
European Communities' preferential tariff quota fo r ACP countries. Such applicability does not
depend on the specific level of the quantitative limit , nor on whether MFN countries are also subject
to a tariff quota or only to an MFN tariff.1187
7.684 Having established and identified a restriction w ithin the meaning of Article XIII:1 of the
GATT 1994 on banana imports from MFN suppliers to the European Communities, the Panel turns to
the third and last aspect of its analysis under Ar ticle XIII:1: whether banana imports from ACP
countries to the European Communities are similarly restricted.

1184 See European Communities' first written submission, para. 4.
1185 The New Shorter Oxford English Dictionary , L. Brown (ed.) (Clarendon Press, 1993), Vol. II,
p. 2439.
1186 Panel Report on EC – Bananas III (Article 21.5 – Ecuador), para. 6.22.
1187 See ibid., para. 6.20; and Decision by the Arbitrators on EC - Bananas III (US) (Article 22.6 – EC),
para. 5.9.

(iii) Whether the importation of bananas from ACP countries is similarly restricted
7.685 As mentioned earlier, similar to the MFN countries, the ACP countries may export bananas to
the European Communities at the MFN out-of-quota ta riff. However, as the European Communities
itself acknowledges
1188, ACP countries can also export bananas under the lower in-quota duty, which
is not available to MFN countries. The in-quota duty is zero, while the out-of-quota duty is 176 €/mt.
Since bananas from MFN countries do not have access to that preferential tariff quota reserved for
bananas from ACP countries, on its face, the importa tion into the European Communities of bananas
from ACP countries is not "similarly restricted" compared to that of bananas from MFN countries.
7.686 The Panel notes in this context that, accord ing to Exhibit EC-7 (Table 15), total
European Communities' banana imports from the ACP countries amounted to 891,218 mt in 2006,
and to a proportional 439,328 mt during the first half of 2007. In other words, since the introduction
of the European Communities' preferential ACP tariff quota, most European Communities banana
imports from the ACP countries have taken place unde r the beneficial zero in-quota duty of 775,000
mt per annum. Consequently, as indicated in Exhi bit EC-5 (Table 10), th e European Communities
has collected €20,454,544 of tariff revenues on the 891, 218 mt of total ACP banana imports in 2006,
while it collected €579,687,363 of tariff revenues on the 3,293,679 mt total MFN imports in the same
year. Thus, in the first year of the appli cation of its current banana import regime, the
European Communities has collected approximately 28 times more tariff revenues on its MFN banana
imports for almost four times the amount of impor ts than for its total banana imports from ACP
countries. In other words, in 2006, on averag e, the European Communities has subjected each
quantitative unit of MFN banana import to approx imately seven times more duty than each equal
quantitative unit of ACP banana import. These figures illustrate the way in which the
European Communities' current ba nana import regime restricts MF N banana imports, including any
imports from the United States, within the meaning of Article XIII:1 of the GATT 1994; at the same
time, it is quite clear that ACP bananas are not similarly restricted.
7.687 This Panel also notes that the original panel requested by Ecuador in this dispute stated that:
"Article XIII:1 establishes the basic principle that no import restriction shall be
applied to one Member's products unless th e importation of like products from other
Members is similarly restricted. Thus, a Member may not limit the quantity of
imports from some Members but not from others. But as indicated by the terms of
Article XIII (and even its title, 'Non-discr iminatory Administration of Quantitative
Restrictions'), the non-discrimination ob ligation extends further. The imported
products at issue must be 'similarly' restricted. A Member may not restrict imports
from some Members using one means and restrict them from another Member using
another means."
1189
7.688 In its ruling in EC – Bananas III , the Appellate Body upheld the relevant findings of that
original panel in the context of Article XIII:1, by stating that:
"When th[e] principle of non-discrimination is applied to the allocation of tariff quota
shares to Members not having a substantial interest, it is clear that a Member cannot,
whether by agreement or by assignment, allocate tariff quota shares to some Members
not having a substantial interest while not allocating shares to other Members who
likewise do not have a substantial interest. To do so is clearly inconsistent with the
requirement in Article XIII:1 that a Memb er cannot restrict the importation of any

1188 See, for example, European Communities' first written submission, para. 4.
1189 Panel Report on EC – Bananas III (Ecuador), para. 7.69.

product from another Member unless the importation of the like product from all third
countries is 'similarly' restricted.
Therefore, ... we conclude that the Panel f ound correctly that the allocation of tariff
quota shares, whether by agreement or by assignment, to some, but not to other,
Members not having a substantial interest in supplying bananas to the
European Communities is inconsistent with the requirements of Article XIII:1 of the
GATT 1994.
The [tariff quota] reallocation rules [of the BFA] allow the exclusion of
banana-supplying countries, other than BFA countries, from sharing in the unused
portions of a tariff quota share. Thus, imports from BFA countries and imports from
other Members are not 'similarly' restricted. We conclude, therefore, that the Panel
found correctly that the tariff quota realloca tion rules of the BFA are inconsistent
with the requirements of Article XIII:1 of the GATT 1994."
1190
7.689 Based on the reasoning of the original panel and the Appellate Body in this dispute, both the
first compliance panel requested by Ecuador and the arbitrator in the proceedings requested by the
European Communities pursuant to Article 22. 6 of the DSU established inconsistency with
Article XIII:1 of the GATT 1994, by stating that:
"[S]ome non-substantial supp liers, namely the ACP suppliers, could benefit from
access to the 'other' category of the MF N tariff quota once the 857,700 tonne tariff
quota was exhausted. On the other ha nd, non-substantial suppliers from third
countries have no access to the 857,700 tonne tariff quota once the 'other' category of
the MFN tariff quota is exhausted. Individual Members in these two groups –
traditional ACP suppliers and the other non- substantial suppliers – are accordingly
not similarly restricted. This disparate treatment is inconsistent with the provisions of
Article XIII:1, which require that '[n]o … r estriction shall be applied by any Member
on the importation of any product of the te rritory of any other Member … unless the
importation of the like product of all thir d countries … is similarly prohibited or
restricted'."1191
7.690 In the proceedings before this Panel, the European Communities argues that its current
banana import regime is different from the previ ous ones addressed by the Appellate Body and the
previous panels in this dispute.1192 In the European Communities' view, "the tariff quotas that [the EC
– Bananas III panel] was examining extended to all of the Members that were affected by the
dispute"1193, while under the current bananas import regime "MFN Members are not subject to any
quantitative restriction".1194
7.691 The European Communities argues that th e report of the Appellate Body in EC – Bananas III
confirms this interpretation of Article XIII:
"In that case the Appellate Body did not say that wherever like products were treated
unequally as regards origin there would be a breach of Article XIII. The Appellate
Body simply confirmed that a breach of GATT Article XIII may be found where

1190 Appellate Body Report on EC – Bananas III, paras. 161-163.
1191 Panel Report on EC – Bananas III (Article 21.5 – Ecuador) , para. 6.26; and Decision by the
Arbitrators on EC - Bananas III (US) (Article 22.6 – EC), para. 5.14.
1193 European Communities' second written submission, para. 92.
1194 European Communities' first written submission, para. 68.

different tariff quotas are imposed to different groups of countries and are
administered in a discriminatory manner."
1195
7.692 In the original dispute the Appellate B ody noted that, in regard to the earlier
European Communities' measures before the original panel and the Appellate Body:
"It ha[d] been argued by the European Co mmunities that there are two separate EC
import regimes for bananas, the preferentia l regime for traditional ACP bananas and
the erga omnes regime for all other imports of ba nanas. Submissions made by the
European Communities raise the question whet her this is of any relevance for the
application of the non-discrimination pr ovisions of the GATT 1994 and the other
Annex 1A agreements. The European Comm unities argues, in particular, that the
non-discrimination obligations of Articles I:1, X:3(a) and XIII of the GATT 1994 and
Article 1.3 of the Licensing Agreement , apply only within each of these separate
regimes. The Panel found that the European Communities has only one import
regime for purposes of applying the non-discrimination provisions of the GATT 1994
and Article 1.3 of the Licensing Agreement."
1196
7.693 In response to that argument by the Europ ean Communities, the Appellate Body established
that:
"The issue here is not whether the European Communities is correct in stating that two
separate import regimes exist for bananas, but whether the existence of two, or more,
separate EC import regimes is of any relevance for the application of the
non-discrimination provisions of the GATT 1994 and the other Annex 1A agreements.
The essence of the non-discrimination obliga tions is that like products should be
treated equally, irrespective of their origin. As no participant disputes that all
bananas are like products, the non-discrimina tion provisions apply to all imports of
bananas, irrespective of whether and how a Member categorizes or subdivides these
imports for administrative or other reasons. If, by choosing a different legal basis for
imposing import restrictions, or by applying different tariff rates, a Member could
avoid the application of the non-discrimination provisions to the imports of like
products from different Members, the object and purpose of the non-discrimination
provisions would be defeated. It would be very easy for a Member to circumvent the
non-discrimination provisions of th e GATT 1994 and the other Annex 1A
agreements, if these provisions apply only within regulatory regimes established by
that Member."
1197
7.694 Accordingly, the Appellate Body "uph[e]ld the findings of the [original] Panel 1198 that the
non-discrimination provisions of the GATT 1994, speci fically, Articles I:1 and XIII, apply to the
relevant EC regulations, irrespective if there is one or more 'separate regimes' for the importation of
bananas."1199
7.695 As the original panel requested by Ecuador also noted, "to accept that a Member could
establish quota regimes by different legal instrument s and argue that they are not as a consequence

1195 Ibid., para. 66.
1196 Appellate Body Report on EC – Bananas III, para. 189.
1197 Appellate Body Report on EC – Bananas III, para. 190.
1198 (footnote original) Panel Reports, paras. 7.82 and 7.167.
1199 Appellate Body Report on EC – Bananas III, para. 191.

subject to Article XIII would be, as argued by the Complainants, to eviscerate the non-discrimination
provisions of Article XIII."1200
7.696 Under the European Communities' current bana nas import regime, there might be no tariff
quota applicable to the MFN countries, and the ACP tariff quota might be the only preferential tariff
quota. However, that would not reduce the releva nce of the statement by the Appellate Body that
"[t]he issue here is not whether the European Communities is correct in stating that two separate import
regimes exist for bananas, but whether the existence of two, or more, separate EC import regimes is of
any relevance for the application of the non-discrimination provisions of the GATT 1994 and the other
Annex 1A agreements". As long as the European Communities has a preferential tariff quota reserved
for some Members and a higher MFN out-of-quota duty for all other Members, that statement remains
relevant. Further, the absence of more than one tariff quota reserved for some WTO Members under
the European Communities' current bananas impor t regime makes the following statement by the
Appellate Body even more relevant in these proceedings:
"If, by choosing a different legal basis for imposing import restrictions, or by
applying different tariff rates, a Member could avoid the application of the non-
discrimination provisions to the imports of like products from different Members, the
object and purpose of the non-discrimination provisions would be defeated. It would
be very easy for a Member to circumvent the non-discrimination provisions of the
GATT 1994 and the other Annex 1A agreem ents, if these provisions apply only
within regulatory regimes established by that Member."
1201
7.697 In the light of the foregoing, despite the Eur opean Communities' arguments on the specificity
of its current bananas import regime and the pr eferential ACP tariff quota under such regime, the
Panel reiterates that ACP banana imports to the Eu ropean Communities are not similarly restricted as
are like banana imports from MFN suppliers such as the United States.
7.698 Having found that the current EC bananas import regime shows all three elements set out in
Article XIII:1, the Panel concludes that the Euro pean Communities' current bananas import regime,
in particular its preferential tariff quota reserved for ACP countries, is inconsistent with Article XIII:1
of the GATT 1994.
5. The United States' claim under Article XIII:2 of the GATT 1994
(a) The United States' arguments
7.699 The United States maintains that the European Communities' current bananas import regime
is also inconsistent with Article XIII:2 of the GATT 1994. In the view of the United States:
"The EC's exclusive 775,000 ton ACP tariff rate quota fails to distribute any share
whatsoever to MFN suppliers, let alone a share they would have expected to obtain in
the absence of restrictions. This is so even though many of the excluded MFN
suppliers are principal or substantial supp liers of bananas to the EC, and leading
exporters of bananas to the world market . Therefore, the ACP tariff rate quota
established through Regulation 1964, like prio r ACP tariff rate quotas, is inconsistent
with Article XIII:2."
1202

1200 Panel Report on EC – Bananas III (Ecuador), para. 7.79.
1201 Appellate Body Report on EC – Bananas III, para. 190.
1202 United States' first written submission, para. 46.

7.700 The United States adds that:
"Article XIII:2(d) required the EC, once it opted to impose a tariff quota on banana
imports entering its market, to ensure, on failure to reach agreement on quota shares
among suppliers, that it 'allot[ed] to Memb ers having a substantial interest in
supplying the product shares based upon the proportions, supplied by such Members
during a previous representative period.' On ly having done so could the EC avoid
discriminating against the imports of non- ACP banana suppliers. [The European
Communities] failed to do so. Instead, the EC chose to allot no share whatsoever to
non-ACP suppliers with a substantial interest and no share to non-ACP suppliers with
no substantial interest.
1203 Thus, the EC breaches its obligations under GATT
Article XIII:2 because it failed to 'similarly prohibit or restrict' those non-ACP
bananas".1204
(b) The European Communities' arguments
7.701 As noted above, the European Communities responds that "the Cotonou Preference does not
violate GATT Article XIII." 1205 In the European Communities' view, "the scope of Article XIII, in
particular of paragraphs 1 and 2, does not extend to the relationship between the treatment of those
Members that are covered by a tariff quota and that of those which are not."1206
7.702 The European Communities argues that the United States' invocation of Article XIII:2:
"[F]ails to provide any explanation of how the extension of Article XIII to tariff
quotas is to apply in the case of paragraph 2. Moreover, the European Communities'
regime for bananas that is the subject of the present proceedings is significantly
different from that examined in the original dispute and which was the subject of the
remarks made by the panel that are quoted by the United States. In the previous
regime, exporting countries were granted various levels of access to the reduced tariff
level. In the present case the MFN Members are not subject to any quantitative
restriction. As there are no 'restrictions' applicable to their exports, there are no
restrictions on their exports that can be co mpared with those, if they can be called
such, that are applied to ACP exports".
1207
7.703 The European Communities adds that:
"[T]he objective of Article XIII and in pa rticular of paragraph 2 is to achieve
particular quantitative distributions of trad e. In the case of quotas it is evident that
the appropriate distribution was to be achiev ed by direct quantitative measures, in the
last resort by allocating specific quantities to individual exporting countries. When,
as required by paragraph 5, these rules ar e applied to tariff quotas a corresponding
distribution can be achieved by allocating specific quantities of the tariff quota. The
notion that such a distribution could be achi eved by setting different tariff levels for
the various exporting countries is economic nonsense. Consequently it is not

1203 (footnote original) See, e.g., Appellate Body Report, European Communities – Measures Affecting
the Importation of Certain Poultry Products , WT/DS69/AB/R, adopted 23 July 1998 (" EC – Poultry (AB) "),
para. 101.
1204 United States' second written submission, para. 95.
1205 European Communities' first written submission, para. 63.
1206 European Communities' second written submission, para. 90.
1207 European Communities' first written submission, para. 68.

plausible that the drafters of Article XIII would have envisaged using paragraph 2 to
achieve such a goal."1208
(c) Panel's analysis
7.704 The United States has invoked both the chapeau a nd subparagraph (d) of Article XIII:2 of the
GATT 1994.1209
(i) Chapeau of Article XIII:2 of the GATT 1994
7.705 Article XIII:2 of the GATT 1994 stipulates in its chapeau that:
"In applying import restrictions to any pr oduct, contracting parties [WTO Members]
shall aim at a distribution of trade in su ch product approaching as closely as possible
the shares which the various contracting parties [WTO Members] might be expected
to obtain in the absence of such restrictions and to this end shall observe the
following provisions ..."
7.706 The original panel requested by Ecuador in th is dispute confirmed that language by stating
that "the object and purpose of Article XIII:2 is to minimize the impact of a quota or tariff quota
regime on trade flows by attempting to approximate under such measures the trade shares that would
have occurred in the absence of the regime."
1210
7.707 The Panel notes that Cameroon, a beneficiary from the European Communities' preferences,
argues in its statement at the substantive meeting of the Panel with the parties and third parties that:
"[I] t is well known that the ACP banana producers are less competitive than the
MFN producers. In comparison with the latter, the ACP producers produce at higher
costs. For geographical and historical reasons, they do not have the same economies
of scale as the MFN producers. Further, the ACP producers can only compete with
them on markets on which they have preferential access. Proof of this fact is that
even the Caribbean ACP Countries, which are situated at the doorstep of the United
States, do not manage to compete with MFN producers on the North American
market. The absence of preferential acc ess and higher costs structures prevent ACP
producers from entering the United States market. Given that the European
Community constitutes the only major banana market to offer preferential access, the
ACP Countries are entirely dependent on this market."
1211
7.708 The Panel has already established that the Eu ropean Communities' current bananas import
regime subjects bananas from MFN suppliers, including from the United States, to a restriction within
the meaning of Article XIII:1 of the GATT 1994. The Panel also takes note of the statement by
Cameroon that ACP producers can only compete wi th MFN producers in markets where they enjoy
preferential access, which has not been contested by either other ACP third parties nor by the
European Communities. This statement constitut es a recognition that the preferential ACP tariff
quota regime under the European Communities' curren t bananas import regime is indispensable for
the very existence of ACP banana imports to th e European Communities. It is not necessary to

1208 European Communities' second written submission, para. 87.
1209 See EC – Bananas III (Article 21.5 – US), Request for the Establishment of a Panel (WT/DS27/83)
2 July 2007, p. 2; United States' first written subm ission, para. 45; and United States' second written
submission, para. 95.
1210 Panel Report on EC – Bananas III (Ecuador), para. 7.68.
1211 Written version of Cameroon's oral statement at the Panel's substantive meeting with the parties
and third parties, para. 5.

further assess this alleged lack of competitiv eness of ACP countries. The above uncontested
statement suffices to find that, given that MFN countries are excluded from the European
Communities' preferential ACP tariff quota, by definition, the ACP preference does not "aim at a
distribution of trade in [bananas] approaching as closely as possible the shares which the various
[Members, including both ACP and MFN countries] might be expected to obtain in the absence of
such restrictions." Thus, the Panel also finds that on its face the European Communities' current
bananas import regime, including its preferential ACP tariff quota, is inconsistent with the chapeau of
Article XIII:2 of the GATT 1994.
(ii) Subparagraph (d) of Article XIII:2 of the GATT 1994
7.709 The United States has also invoked subparagraph (d) of Article XIII:2 of the GATT 1994.
1212
That subparagraph provides that:
"(d) In cases in which a quota is allocated among supplying countries the
contracting party applying the restrictions may seek agreement with respect to the
allocation of shares in the quota with all ot her contracting parties having a substantial
interest in supplying the product concerne d. In cases in which this method is not
reasonably practicable, the contracting part y concerned shall allot to contracting
parties having a substantial interest in supplying the product shares based upon the
proportions, supplied by such contracting parties during a previous representative
period, of the total quantity or value of imports of the product, due account being
taken of any special factors which may have affected or may be affecting the trade in
the product. No conditions or formalities shall be imposed which would prevent any
contracting party from utilizing fully the sh are of any such total quantity or value
which has been allotted to it, subject to importation being made within any prescribed
period to which the quota may relate."
7.710 As stated by the original panel requested by Ecuador in this dispute:
"Article XIII's general requ irement of non-discrimination is modified in one respect
by Article XIII:2(d), which provides for th e possibility to allocate tariff quota shares
to supplying countries. Any such country specific allocation must, however, 'aim at a
distribution of trade ... approaching as cl osely as possible the shares which Members
might be expected to obtain in the absen ce of such restrictions' (chapeau of
Article XIII:2(d)).
Article XIII:2(d) further specifies the treatment that, in case of country-specific
allocation of tariff quota shares, must be give n to Members with 'a substantial interest
in supplying the product concerned'. For those Members, the Member proposing to
impose restrictions may seek agreement with them as provided in Article XIII:2(d),
first sentence. If that is not reasonably practicable, then it must allot shares in the
quota (or tariff quota) to them on the basis of the criteria specified in
Article XIII:2(d), second sentence."
1213
7.711 That same original panel addressed the question whether, under Article XIII:2(d),
"country-specific shares can also be allocated to Me mbers that do not have a substantial interest in

1212 See United States' first written submission, para. 45.
1213 Panel Report on EC – Bananas III (Ecuador), paras. 7.70-7.71.

supplying the product and, if so, what th e method of allocation would have to be." 1214 T h e p a n e l
noted that:
"As to the first point, we note that the first sentence of Article XIII:2(d) refers to
allocation of a quota 'among supplying countries'. This could be read to imply that an
allocation may also be made to Members th at do not have a substantial interest in
supplying the product. If this interpre tation is accepted, any such allocation must,
however, meet the requirements of Article X III:1 and the general rule in the chapeau
to Article XIII:2(d). Therefore, if a Member wishes to allocate shares of a tariff quota
to some suppliers without a substantial inter est, then such shares must be allocated to
all such suppliers. Otherwise, imports from Members would not be similarly
restricted as required by Article XIII:1.
1215 As to the second point, in such a case it
would be required to use the same method as was used to allocate the
country-specific shares to the Members havi ng a substantial interest in supplying the
product, because otherwise the requirements of Article XIII:1 would also not be
met."1216
7.712 On appeal, the Appellate Body stated that:
"Article XIII:2(d) provides specific rule s for the allocation of tariff quotas among
supplying countries, but these rules pertain only to the allocation of tariff quota shares
to Members 'having a substantial interest in supplying the product concerned'.
Article XIII:2(d) does not provide any specific rules for the allocation of tariff quota
shares to Members not having a substantial interest. Nevertheless, allocation to
Members not having a substantial interest must be subject to the basic principle of
non-discrimination. When this principle of non-discrimination is applied to the
allocation of tariff quota shares to Members not having a substantial interest, it is
clear that a Member cannot, whether by agreem ent or by assignment, allocate tariff
quota shares to some Members not having a substantial interest while not allocating
shares to other Members who likewise do not have a substantial interest. To do so is
clearly inconsistent with the requirement in Article XIII:1 that a Member cannot
restrict the importation of any product from another Member unless the importation
of the like product from all third countries is 'similarly' restricted"
1217
(emphasis added).
7.713 The Panel notes that all MFN countries are excluded from the European Communities'
preferential ACP tariff quota, and the group of MFN countries includes both substantial and non-
substantial suppliers of bananas to the European Communities. The United States has argued that:
"The EC's exclusive 775,000 ton ACP tariff rate quota fails to distribute any share
whatsoever to MFN suppliers, let alone a share they would have expected to obtain in
the absence of restrictions. This is so even though many of the excluded MFN
suppliers are principal or substantial supp liers of bananas to the EC, and leading
exporters of bananas to the world market".1218

1214 Ibid., para. 7.73.
1215 (footnote original) See Panel Report on "EEC Restrictions on Imports of Apples from Chile", adopted
on 10 November 1980, BISD 27S/98, 114, 116, paras. 4.11, 4.21.
1216 Panel Report on EC – Bananas III (Ecuador), para. 7.73.
1217 Appellate Body Report on EC – Bananas III, para. 161.
1218 United States' first written submission, para. 46.

7.714 Also, according to Exhibit EC-7, for each year since 1999, MFN suppliers have had high
shares of European Communities banana imports among all banana suppliers, in many cases higher
than those of ACP suppliers. Accordingly, sever al MFN suppliers may be considered to have a
substantial interest in supplying bananas to the European Communities under Article XIII:2(d) of the
GATT 1994.
7.715 In the light of the way in which Article XIII:2( d) has been interpreted by the original panel
and the Appellate Body in this dispute, a preferen tial tariff quota that is granted exclusively to some
Members and not to others, including substantial supp liers, cannot result in a distribution of trade in
bananas that would approach as closely as possibl e the shares which the various Members might be
expected to obtain in the absence of such restricti ons. Further, the same preferential tariff quota does
not comply with the second sentence of Article XIII:2(d) that:
"In cases in which [agreement with respect to the allocation of shares in the quota
with all other contracting parties having a substantial interest in supplying the product
concerned] is not reasonably practicable, the contracting party concerned shall allot to
contracting parties having a substantial inte rest in supplying the product shares based
upon the proportions, supplied by such c ontracting parties during a previous
representative period, of the total quantity or value of imports of the product, due
account being taken of any special factors which may have affected or may be
affecting the trade in the product."
7.716 Accordingly, the Panel finds that the Europ ean Communities' current bananas import regime,
including its preferential ACP tariff quota, is incons istent with subparagraph (d) of Article XIII:2 of
the GATT 1994, as well as with the chapeau of Article XIII:2.
6. The existence of an applicable waiver
7.717 As the Appellate Body stated in the context of Article XIII earlier in this dispute:
"Non-discrimination obligations apply to all imports of like pro ducts, except when
these obligations are specifically waived or are otherwise not applicable as a result of
the operation of specific provisions of the GATT 1994, such as Article XXIV.
1219 In
the present case, the non-discrimination ob ligations of the GATT 1994, specifically
Articles I:1 and XIII1220, apply fully to all imported bananas irrespective of their origin,
except to the extent that these obligations are waived ..."1221
7.718 As the United States argues in these proceedi ngs, the waiver from Articles XIII:1 and 2
adopted by the Ministerial Conference in Doha1222 expired by its own terms on 31 December 2005.1223
The Panel also notes that the European Communities does not argue that that waiver is still in force.
Indeed, the Panel finds that there is no waiver in force to cover the European Communities' current
bananas import regime and exonerate any inconsistencies of such regime with Articles XIII:1 and 2 of
the GATT 1994.

1219 (footnote original) Panel on Newsprint, adopted 20 November 1984, BISD 31S/114.
1220 (footnote original) We do not agree with the Panel's findings that Article X:3(a) of the GATT 1994
and Article 1.3 of the Licensing Agreement preclude the imposition of different import licensing systems on like
products when imported from different Members. See our Findings and Conclusions, paras. (l) and (m).
1221 Appellate Body Report on EC – Bananas III, para. 191.
1222 See Ministerial Conference, European Communitie s, Transitional Regime for the EC Autonomous
Tariff Rate Quotas on Imports of Bananas, Decision of 14 November 2001, (WT/MIN(01)/16),
14 November 2001.
1223 United States' first written submission, paras. 18, 20 and 47. See also United States' second written
submission, para. 94.

7.719 Also, for the reasons set out by the Appellate Body earlier in this dispute 1224, even if the Doha
Article I waiver applied to bananas beyond the e nd of 2005, which the Panel has already found not to
be the case1225, the coverage of that waiver from Article I of the GATT 1994 would not automatically
extend to Article XIII.
7. Conclusion
7.720 For the reasons explained above, the Panel conc ludes that the European Communities' current
bananas import regime, in particular its prefer ential tariff quota reserved for ACP countries, is
inconsistent with Articles XIII:1 and 2 of the GATT 1994. The Panel also concludes that there is no
waiver in force that exonerates the inconsistenc ies of the European Communities' current bananas
import regime with Articles XIII:1 and 2 of the GATT 1994.
I. FINAL REMARKS
7.721 In the factual section of this Report, the Pane l noted that a significant number of developing
and least developed country Members stated their re spective substantial intere st in the matter before
this Panel and reserved their third-party rights to participate in these proceedings.
7.722 The Panel is aware of the economic and social effects of the European Communities'
measures at issue in this case, particularly for ACP and Latin American ba nana exporting countries.
In recognizing this, as in previous panel proceed ings, the Panel decided to grant third parties
participatory rights which were subs tantially broader than those norma lly afforded to them under the
DSU.1226 This was done in the light of the particular circumstances of the present case, and without
the intention of setting any type of precedent.
7.723 In any event, the Panel wishes to recall the words of the original panel in the EC – Bananas
III dispute:
"The procedures under the DSU serve to ensure the settlement of disputes among
WTO Members in accordance with WTO obliga tions, not to add to or diminish these
obligations. Accordingly, our terms of re ference are to assist the DSB in reaching
conclusions with regard to the legal consistency with WTO rules of the EC's common
market organization for bananas. ...
From a substantive perspective, the fu ndamental principles of the WTO and WTO
rules are designed to foster the development of countries, not impede it. Having
heard the arguments of a large number of Members interested in this case and having
worked through a complex set of clai ms under several WTO agreements, we
conclude that the system is flexible en ough to allow, through WTO-consistent trade
and non-trade measures, appropriate po licy responses in the wide variety of
circumstances across countries, including countries that are currently heavily
dependent on the production and commercialization of bananas."
1227

1224 See Appellate Body Report on EC – Bananas III, para. 188.
1225 See para. 7.606 above.
1226 Panel Report on EC – Bananas III (Ecuador), para. 8.2.
1227 Panel Report on EC – Bananas III (Ecuador), paras. 8.1 and 8.3.

VIII. CONCLUSIONS
A. G
ENERAL CONCLUSIONS
8.1 In light of the findings above, and regarding the preliminary objections advanced by the
European Communities the Panel finds that:
(a) The United States had, under the DSU, the right to request the initiation of the current
compliance dispute settlement proceedings;
(b) The European Communities h as not succeeded in making a prima facie case that the
United States is prevented from challengi ng the European Communities' current
import regime for bananas, including the preference for ACP countries, because of
the Bananas Understanding, signed between the United States and the European
Communities in April 2001; and,
(c) The European Communities has failed in making a case that the United States'
complaint under Article 21.5 of the DSU should be rejected, because the
European Communities' current import regi me for bananas, including the preference
for ACP countries, is not a "measure taken to comply" with the recommendations and
rulings of the DSB in the original proceedings.
8.2 The Panel accordingly rejects the preliminary issues raised by the European Communities.
8.3 After having examined the substantive claims raised by the United States, as well as the
defences invoked by the European Communities, the Panel concludes that:
(a) The preference granted by the European Co mmunities to an annual duty-free tariff
quota of 775,000 mt of imported bananas orig inating in ACP countries constitutes an
advantage for this category of bananas, which is not accorded to like bananas
originating in non-ACP WTO Members, and is therefore inconsistent with Article I:1
of GATT 1994;
(b) With the expiration of the Doha Waiver from 1 January 2006 as it applied to bananas,
the European Communities has failed to dem onstrate the existence of a waiver from
Article I:1 of GATT 1994 to cover the preference granted by the European
Communities to the duty-free tariff quota of imported bananas originating in ACP
countries; and,
(c) The European Communities' current bana na import regime, in particular its
preferential tariff quota reserved for ACP countries, is also inconsistent with
Article XIII:1 and Article XIII:2 of the GATT 1994.
8.4 In consequence, the Panel concludes that, thr ough its current regime for the importation of
bananas, established in Council Regulation (EC) No. 1964/2005 of 29 November 2005, in particular
its duty-free tariff quota for bananas originating in ACP countries, the European Communities has
failed to implement the recommendations and rulings of the DSB.
B. N
ULLIFICATION OR IMPAIRMENT OF BENEFITS
8.5 The Panel has noted the European Communities' argument that the pref erential tariff quota
reserved for ACP countries has no impact on the value of relevant EC banana imports from the United

States.1228 The Panel likewise notes that the European Communities argues that such preferential
tariff quota therefore "does not cause the United States any nullification or impairment of a benefit for
which the European Communities can face suspen sion of concessions [under Article 22 of the
DSU]".1229
8.6 The Panel notes, however that, under Article 3.8 of the DSU, in cases where there is
infringement of obligations assumed under a covered agreement, the action is considered prima facie
to constitute a case of nullification or impairment of benefits under that agreement.
8.7 In this respect, the Panel finds relevant the statement made by the panel in the original
proceedings that:
"WTO rules are not concerned with actual trade, but rather with competitive
opportunities. Generally, it would be difficult to conclude that a Member had no
possibility of competing in respect of a product or service. The United States does
produce bananas in Puerto Rico and Hawaii. Moreover, even if the United States did
not have even a potential export interest, its internal market for bananas could be
affected by the EC regime and that regime's effect on world supplies and prices.
Indeed, with the increased in terdependence of the global economy, which means that
actions taken in one country are likely to ha ve significant effects on trade and foreign
direct investment flows in others, Members have a greater stake in enforcing WTO
rules than in the past since any deviati on from the negotiated balance of rights and
obligations is more likely than ever to affect them, directly or indirectly."
1230
8.8 In the same proceedings, the Appellate Body confirmed the panel's finding and stated that
"the United States is a producer of bananas, and a potential export interest by the United States cannot
be excluded" and that "[t]he internal market of th e United States for bananas could be affected by the
EC banana regime, in particular, by the effects of that regime on world supplies and world prices of
bananas".1231
8.9 The Panel has already noted that the current proceedings involve a "compliance" case, under
Article 21.5 of the DSU, regarding the matter of wh ether certain measures allegedly taken to comply
with the recommendations and rulings of the DSB in an original dispute conducted under the WTO's
dispute settlement procedures are consistent with the WTO covered agreements. By their nature,
compliance cases are linked with the original proceedi ngs in the dispute. The Panel finds guidance in
this respect in the Appellate Body's statement that "Article 21.5 proceedings do not occur in isolation
from the original proceedings, but… both proceed ings form part of a continuum of events."1232
8.10 Considering the link between the current compliance proceedings and the original
proceedings in the dispute, the Panel does not fi nd that the European Comm unities has successfully
rebutted the legal presumption established by Article 3.8 of the DSU that its inconsistent measures
nullify or impair benefits accruing to the United States under the WTO agreements. The arguments
advanced by the European Commun ities on the alleged lack of nullification or impairment have not
rendered irrelevant the considerati ons made by the panel and by the Appellate Body in the course of

1228 European Communities' second written submi ssion, para. 98. See also written version of
European Communities' opening statement during substantive meeting with the parties and third parties,
paras. 26.
1229 European Communities' first written submission, para. 75.
1230 Panel Report on EC – Bananas III, para. 7.50.
1231 Appellate Body Report on EC – Bananas III, para. 136.
1232 Appellate Body Report on Chile – Price Band System (Article 21.5 – Argentina), para. 136.

the original proceedings, regarding the actual and po tential trade interests of the United States in the
dispute.
8.11 In any event, the presumption, under Article 3.8 of the DSU, that a breach of an obligation
under a WTO covered agreement constitutes a case of nu llification or impairment of trade benefits, is
different from the determination of the precise level of such nullification or impairment, which is an
exercise conducted under Article 22 of the DSU, in cases when a complaining party has requested
authorization to suspend concessions or other obligati ons. It is not the task of a compliance panel to
determine the level of nullification or impairment of trade benefits accruing to the United States,
which would result from the measures maintained by the European Communities that are inconsistent
with the GATT 1994.
8.12 Accordingly, the Panel concludes that, to the extent that the current European Communities
bananas import regime contains measures inconsis tent with various provisions of the GATT 1994, it
has nullified or impaired benefits accruing to the United States under that Agreement.
C. R
ECOMMENDATION
8.13 Since the original DSB recommendations and rulin gs in this dispute remain operative through
the results of the current compliance proceedings, the Panel makes no new recommendation.