Document: WT/DS315/R Page A-1 ANNEX A RESPONSES TO QUESTIONS POSED BY THE PANEL AND OTHER PARTIES AFTER THE FIRST SUBSTANTIVE MEETING OF THE PANEL Contents Page Annex A-1 Responses of the United States to Questions posed by the Panel after
Document codes: WT/DS315/R
Complainant: U.S.
Respondent: EU
Third parties: Argentina, Australia, Brazil, China, Taiwan, Hong Kong, India, Japan, South Korea
Dispute stage: Appellate Body
Agreements cited: Art. X:3, X:1  GATT 1994

ANNEX A

RESPONSES TO QUESTIONS POSED BY THE PANEL AND OTHER PARTIES AFTER
THE FIRST SUBSTANTIVE MEETING OF THE PANEL

Contents Page
Annex A-1 Responses of the United States to Questions posed by the Panel after
the First Substantive Meeting
A-2
Annex A-2 Responses of the United States to Questions posed by the European
Communities after the First Substantive Meeting
A-44
Annex A-3 Responses of the European Co mmunities to Questions posed by the
Panel after the First Substantive Meeting
A-46
Annex A-4 Responses of the European Co mmunities to Questions posed by the
United States after the First Substantive Meeting
A-84
Annex A-5 Responses of Argentina to Questi ons posed by the Panel after the First
Substantive Meeting
A-87
Annex A-6 Responses of China to Questions posed by the Panel after the First
Substantive Meeting
A-92
Annex A-7 Responses of Japan to Questions posed by the Panel after the First
Substantive Meeting
A-94
Annex A-8 Responses of Korea to Questions posed by the Panel after the First
Substantive Meeting
A-102
Annex A-9 Responses of the Separate Customs Territory of Taiwan, Penghu,
Kinmen and Matsu after the First Substantive Meeting
A-107

ANNEX A-1

RESPONSES OF THE UNITED STATES TO QUESTIONS POSED BY THE PANEL AFTER
THE FIRST SUBSTANTIVE MEETING

(23 September 2005)

QUESTIONS FOR THE UNITED STATES:

1. Please respond to the assertion by the Eu ropean Communities in paragraph 14 of its
First Written Submission that the measure at issue in this dispute is "the manner in which the
EC administers" customs laws.

In this dispute, the United States is challe nging the manner in which EC customs law is
administered (as well as the absence of EC tribunals or procedures for the prompt review and
correction of customs administrative decisions, as required by Article X:3(b) of the GATT 1994). In
particular, we are challenging the absence of unifor mity in the administration of EC customs law.
The manner in which the EC administers its customs law – that is, the lack of uniformity in such
administration – may not itself be a "measure." The "specific measures at issue" for purposes of
Article 6.2 of the Understanding on Rules and Pr ocedures Governing the Settlement of Disputes
("DSU") are the laws, regulations, decisions and ru lings that make up EC customs law, though in
some cases these are being administered through laws and regulations which are themselves
measures. These measures are identified in the first paragraph of the US request for the establishment
of a panel (and are set out again in Question No. 3 of the Panel's consolidated questions). The United
States does not challenge the substance of these meas ures but, rather, the lack of uniformity in their
administration.

Lack of uniformity in administration of the measures at issue manifests itself in a number of
different ways. One way in which it manifests itsel f is through the existence of different instruments
in different member States to enforce EC customs law. For example, to the extent that different EC
member States have available and apply different penalties to enforce EC customs law, this is
evidence of a lack of uniformity in the administration of EC customs law. Similarly, to the extent that
different EC member States have available and ap ply different audit procedures to ensure compliance
with EC customs law, this too is evidence of lack of uniformity in the administration of EC customs
law.

Penalties and audit procedures – as well as ot her means of administration – may themselves
take the form of measures. The measures that are the means of administration cause and provide
evidence of the lack of uniformity of administration of the customs laws at issue. We will elaborate
on this point in our responses to Question Nos. 29, 32, and 90, infra.

2. In paragraph 20 of its First Written Submission, the United States submits that a
Member does not administer its law in a uniform manner within the meaning of Article X:3(a)
of the GATT 1994 if identical products or iden tical transactions receive different treatment in
different geographical regions and the Member provides no mechanism for the systematic
reconciliation of such differences. Similarly, in paragraph 119 of its First Written Submission,
the United States submits that, as concerns the administration of EC law with respect to
classification and valuation and to the applicat ion of certain customs procedures, there is an
absence of uniformity and an absence of legal mechanisms to achieve uniformity. Please clarify
whether the United States is arguing that: (a ) different treatment in different geographical
regions for identical products or identical transact ions would be in violation of Article X:3(a) of
the GATT 1994; or (b) different treatment in different geographical regions for identical
products or identical transactions would be in violation of Article X:3(a) of the GATT 1994 only

if there is no mechanism or no effective mech anism for the systematic reconciliation of such
differences.

The United States recognizes that in the course of administration of customs laws,
inconsistencies may occur from time to time betw een authorities in different regions within a WTO
Member's territory. The United States does not ar gue that the emergence of an inconsistency
automatically and necessarily evidences a breach of GATT Article X:3(a). The administration of
customs laws entails more than the first-instance decisions made at individual ports. Where an
inconsistency is systematically and promptly reconc iled, the fact that for a brief period there was an
inconsistency in administration does not mean that the Member has breached Article X:3(a). What is
critical is the existence of a mechanism – such as a central authority – to cure such inconsistencies.

The fact that there may be sporadic instances in which inconsistencies emerge and are cured
does not satisfy the Article X:3(a) obligation of "u niform" administration. This is evident, for
example, from the fact that the obligation of unifo rm administration applies to "all" of a Member's
laws, regulations, decisions and rulings of the kind described in paragraph 1 of Article X.

The argument of the United States is that th e EC does not have any mechanism to cure the
inconsistencies that exist in member State administration of customs law and render these non-
uniform results uniform. It is the absence of a central customs authority or any other mechanism to
achieve uniform administration that leads to the co nclusion that the EC fails to meet its obligation
under Article X:3(a).

3. Please identify what the United States is challenging under Article X:3(a) of the GATT
1994 regarding:

(a) Council Regulation (EEC) No. 2913/92 of 12 October 1992; Commission
Regulation (EEC) No. 2454/93 of 2 July 1993; and the Integrated Tariff of the
European Communities established by Council Regulation (EEC) No. 2658/87 of
23 July 1987;

(b) the "related measures" referred to in paragraph 3 of the United States' First
Written Submission; and

(c) EC rules on customs classification, customs valuation and customs procedures.

The United States is challenging the administration of the listed measures. By referring in its
request for establishment of a panel to each of th e measures referred to in the Panel's question, the
United States captured the universe of measures that constitute EC customs law. The principal such
measures are those referred to in subparagraph (a) of the Panel's question. However, those are not the
only such measures. As the EC itself has noted,
1 these measures are supplemented by miscellaneous
Commission regulations and other measures pertaini ng to customs classification and valuation and
customs procedures.

With regard to each of the listed measures, the measure is administered by 25 separate
member State customs authorities, and the instruments the EC holds out as reconciling the
divergences that occur among those separate authoriti es do not do so, so as to achieve the uniform
administration that GATT Article X:3(a) requires. While the substance of the various measures
differs – measures concerning classification are different from measures concerning valuation, for
example – the problem of non-uniform administration is the same. Accordingly, in our First Written
Submission, we described the problem of non-unifo rm administration in systemic terms and then

1See, e.g., EC First Written Submission, paras. 92-96.

described how that problem manifests itself in the three areas of classification, valuation, and customs
procedures.

4. If the United States is challenging the a lleged absence of uniformity overall with respect
to the administration of the EC customs system, please explain why and how the various specific
instances of alleged non-uniform administration po inted to by the United States to illustrate its
claim of non-uniform administration underline and fully support the essence of the United
States' claim.

The United States is, indeed, challenging the absence of uniformity overall with respect to the
administration of the EC customs system. In our First Written Submission and at the first Panel
meeting, we supported this cha llenge by providing evidence of how the system of customs law
administration operates. In particular, we demonstrated that EC customs law is administered by 25
separate member State customs authorities, and that the instruments the EC holds out as reconciling
the divergences that occur among those separate aut horities do not do so, so as to achieve the uniform
administration that GATT Article X:3(a) requires. In response, the EC described various principles of
EC law, as well as instruments and institutions th at, in its view, reconcile divergences and bring about
uniformity of administration. However, as the United States showed, none of these principles,
instruments, and institutions reconciles the divergences in member State administration. They amount
to a loose network of non-binding guidance to member State authorities, general duties of
cooperation, and discretion for Commission and memb er State officials to refer matters to the
Customs Code Committee. The only aspect of th is network that may be brought to bear
systematically is the opportunity for a trader to appeal action by a particular member State customs
authority through the courts of that member State. However, for reasons we discussed in our opening
statement at the first Panel meeting, the availabilit y of that opportunity does not discharge the EC's
obligation under Article X:3(a).

To illustrate the absence of uniformity overall w ith respect to the administration of the EC
customs system, we brought to the Panel's attenti on a number of illustrative cases. The main purpose
of these illustrations was to demonstrate that the EC's breach of Article X:3(a) is not simply an
abstract or technical problem. It is a problem with real-world implications for actual traders. What is
essential is not the number of illustrations or the par ticular details of each illustration. Rather, what
the illustrations show is that the systemic problem identified by the United States in demonstrating
how customs administration in the EC operates affects three key areas of customs administration –
classification, valuation, and customs procedures.

Blackout Drapery Lining
: The blackout drapery lining case is a glaring example of non-
uniform administration of the Common Customs Tariff in which no EC institution stepped in to cure
the non-uniformity. There, the customs authority in one member State – Germany – applied the
Common Customs Tariff in a manner that plainly diverged from its application by other member State
authorities. Its application of the Common Custom s Tariff caused it to classi fy the good at issue
under subheading 3921, whereas other member State authorities had consistently classified blackout
drapery lining under subheading 5907.

The German authority made no attempt to reconcile its classification decision with the
classification decisions reflected in binding tariff information ("BTI") issued by other member States'
customs authorities that were brought to its atten tion. Moreover, the German authority relied on a
rationale that plainly is not compelled by the Common Customs Tariff and that the Commission
nevertheless declined to identify as a non-uniformity. In particular, the German authority found that
the presence of plastic coating made the blackout drapery lining ineligible for classification under
Tariff subheading 5907 (contrary to the Harmoni zed System explanatory note on subheading 5907
2),
and the German authority relied on an interpretive aid specific to Germany – concerning the fineness

2Harmonized System Explanatory Note, Subheading 59.07 (Exhibit US-48).

of the lining's web – which the EC claims was developed by analogy to a Commission regulation
pertaining to the classification of ski trousers.3

In brief, the blackout drapery lining case is a case in which one member State's customs
authority declined to take account of other member States' BTI, ignored an applicable Harmonized
System explanatory note, and ultimately relied for its classification on a country-specific interpretive
aid based on an analogy to a good classifiable unde r a completely different chapter of the Common
Customs Tariff. This situation did not prompt any action by an EC institution to reconcile a non-
uniformity of administration, illustrating the US claim. Indeed, the very fact that when confronted
with this situation the EC denies that a non-uniformity even exists4 underscores the problem.

LCD Monitors: The LCD monitors case is another example of non-uniform administration of
the Common Customs Tariff by different member States, with the EC failing to step in to reconcile
the non-uniformity. Confronted with divergent class ifications for LCD monitors with digital video
interface, the Customs Code Committee was unable to reach a decision on how to reconcile the
divergences. Accordingly, the Council of the European Union adopted a stop-gap measure – a
regulation temporarily suspending duties on a subset of the product at issue based on size. Products
above the size threshold defined in the Council re gulation remain subject to duties depending on the
classification assigned in different member States.

The EC states that the adop tion of the Council regulation concerning a subset of LCD
monitors reflects a deliberate choice based on the "specific circumstances of the case."
5 It argues that
it took a qualified majority to adopt the Council duty suspension regulation, just as it would have
taken a qualified majority in the Customs Code Committee to actually approve a classification
regulation. The difference, however, is that a duty suspension regulation is far different from a
classification regulation. One is a temporary po licy solution, while the other is a definitive
determination of a technical issue. The ability of the Council to adopt a duty suspension regulation
does not demonstrate the system's ability to achieve uniformity when it comes to the administration of
classification rules. Indeed, the very fact that the question of classification remains unresolved shows
an inability of the system to achieve uniformity in this area.

That the LCD monitors case is an apt illustra tion of the problem identified by the United
States is further underscored by the EC's own e xplanation of the action that the Customs Code
Committee did take with respect to this good. At paragraph 353 of its Fi rst Written Submission, the
EC states that the Committee concluded that "unl ess an importer can demonstrate that a monitor is
only to be used with an ADP ma chine (heading 8471) or to be u sed as an indicator panel (heading
8531), it has to be classified under heading 8528." As we pointed out in our opening statement, the
requirement of a showing that a monitor is " only to be used with an ADP machine" is contrary to the
applicable Tariff Chapter note, which mak es reference to sole or principal use.
6 Thus, far from
illuminating the matter, the guidance given by the Comm ittee in this case appears to foster rather than
resolve inconsistent administration of classification rules.

Court of Auditors Valuation Report
: The Court of Auditors valuation report (Exhibit US-14)
discusses a number of divergences in member State administration of EC customs valuation rules.
The First Written Submission of the United States drew attention to highlights from this report. Like
the classification examples, the cases referred to he re all exhibit inconsistencies in member State
administration, coupled with failure by EC institutions to systematically cure the inconsistencies. The
one example of inconsistent administration of valuation rules where the EC states that it took action in

3EC First Written Submission, para. 343; Exhibit EC-78, p. 14.
4EC First Written Submission, para. 346.
5EC First Written Submission, para. 360.
6US Opening Statement, First Panel Meeting, para. 28.

response to the Court of Auditors report concerns vehicle repair costs covered by a seller under
warranty.
7 Yet, as the report explains at paragraph 73, the Commission was first made aware of
inconsistent member State practice in this area in a 1990 report. Th e fact that an instance of non-
uniform administration first called to the Commission's attention in 1990 was resolved by a regulation
adopted in 2002 hardly demonstrates that the system works in a manner consistent with the obligation
of uniform administration set forth in GATT Article X:3(a).

With respect to the other examples of non-uniform administration referred to in the Court of
Auditors report, the EC does not deny the divergences. Instead, it dismisses them as differences based
on factual issues 8, minor variations 9, or matters not part of customs procedures. 10 These simply
constitute the EC's characterizations. The fact re mains that the Court of Auditors report carefully
identifies particular inconsistencies in administratio n of customs valuation rules that the EC failed to
reconcile. In this respect, the illustrations in the re port further support the US challenge based on an
absence of overall uniformity in the EC customs administration system.

Reebok
: The Reebok case is a specific example of divergent administration of customs
valuation rules, with the EC faili ng to reconcile the divergence. As described in the First Written
Submission of the United States, the case entails one member State's authority treating an importer as
related to its non-EC sellers for valuation purposes. Other member State authorities did not find the
importer to be related to its non-EC sellers.

The Reebok case supports the US claim by showing a particular manifestation of non-uniform
administration in the valuation area. Tellingly, while the EC characterizes the case as "relatively
complex,"
11 it does not contradict the essential facts as described in the US First Written Submission.

Processing Under Customs Control : The United States referred to processing under customs
control as an illustration of member States diverging in the administration of EC law when it comes to
customs procedures. In particular, different memb er States apply different economic tests to decide
whether to permit processing under customs control. By way of example, we showed that the United
Kingdom customs authority requires an applicant to show both the creation of maintenance of
processing activities in the EC and an absence of ha rm to essential interests of Community producers
of similar goods. In contrast, we showed that th e French authority requires the former showing but
not the latter.

The EC responds that all member States apply both tests and refers to a mention of absence of
harm to competitors in the French customs bulletin in Exhibit US-35.
12 However, that mention (in
paragraph 78 of the bulletin) is simply an intr oductory paraphrase of certain provisions from the
Community Customs Code. After the introduction, the bulletin specifies that the economic conditions
test will be carried out according to the modalitie s set forth thereafter ("il s'effectue selon les
modalités définies ci-après"). As explained in the US First Written Submission, the relevant modality
(in paragraph 83) makes no reference to harm to Community producers.

Local clearance procedures
: The United States referred to local clearance procedures as a
second illustration of member States diverging in the administration of EC law with respect to
customs procedures. In particular, we showed that different member States impose different
requirements for carrying out local clearance proce dures. The EC counters that the US description

7EC First Written Submission, paras. 397-98.
8EC First Written Submission, para. 393.
9EC First Written Submission, para. 396.
10EC First Written Submission, para. 400.
11EC First Written Submission, para. 407.
12EC First Written Submission, para. 415.

blends certain discrete procedural steps and mistakes certain details with respect to particular member
States. However, the EC does not dispute the exis tence of divergences in the administration of local
clearance procedures.

Penalties
: Penalties represent a third aspect of customs procedures in which member States
diverge. The EC does not even contest the existence of divergences in this area. Rather, it contends
that penalties are not covered by Article X:3(a). It argues variously that the subject matter of
measures described in Article X:1 does not include penalties and that, in any event, differences in
penalties among member States are differences in s ubstantive law rather than differences in the
administration of EC customs law. As we explained in our opening statement 13 and additionally in
response to Question Nos. 29 and 32, infra, the EC misunderstands the US argument with respect to
penalties.

Measures setting forth penalties are tools for admini stering other laws – in this case, customs
laws. Thus, the availability of a penalty for vi olation of a customs law is intended to induce
compliance with that law. Article X:1 describes the laws that are to be administered uniformly under
Article X:3(a), as opposed to the tools for their unifo rm administration, such as penalties. Therefore,
even if the EC were correct that Article X:1 doe s not cover penalty laws, its argument would be
irrelevant.

Moreover, the EC's argument that differences in penalty laws are di fferences of substance
rather than differences of administration mistaken ly assumes that a law (or other measure) cannot be
administrative in nature. Plainly, penalty laws are administrative in nature, inasmuch as they presume
the existence of other laws and prescribe consequences for the violation of those laws.

In short, the penalties illustration underlines and fully supports the essence of the US claim by
pointing to yet another divergence in the administra tion of EC customs law. The EC does not dispute
that this divergence exists. Instead, it characterizes the divergence as outside the scope of Article X.
However, for the reasons just e xplained (and explained in greater detail in response to Question
Nos. 29 and 32), the EC's argument on this point is incorrect.

Audit Procedures
: The United States referred to diffe rences in audit procedures – i.e.
procedures for verifying importers' statements with r espect to classification, valuation, and origin of
goods – as a further example of non-uniformity in the area of customs procedures. Like penalties, the
EC concedes the existence of diffe rences among member States in this area. Its only argument as to
why such differences are not inconsistent with Article X:3(a) is that they are differences of substance
rather than differences of administration. But, as with penalties, this argument ignores that certain
measures are administrative in nature and, in e ffect, defines away an undeniable non-uniformity by
labeling it a non-uniformity pertaining to "substance".

Collectively, the various instances of non-uniform administration that we have summarized in
response to this question underline that the systemic problem at the heart of the present dispute
manifests itself in three principal areas of custom s administration. Precisely because the problem is
systemic, it is not confined to classification, valuation, or procedur es. Non-uniformity of
administration is an essential feature of all th ree areas. The chief evidence of non-uniform
administration is the demonstration that the instruments the EC holds out as reconciling the
divergences that occur among the 25 different member State customs authorities do not do so, so as to
achieve the uniform administration that GATT Article X:3(a) requires. The illustrations show how
the EC's administration of its customs laws allo ws non-uniform administration to persist in three
discrete areas.

13US Opening Statement, First Panel Meeting, paras. 46-52.

5. With respect to the United States' claims regarding the European Communities'
administration of rules on customs valuation , is the United States only challenging the
administration of EC rules regarding: (a) related parties; (b) royalty payments; (c) valuation on
a basis other than the transaction of last sale; and (d) vehicle repair costs covered under
warranty. If the United States is challenging ot her aspects of EC rules on customs valuation
under Article X:3(a) of the GATT 1994, please clearly and specifically identify those rules.

The United States claim concerns the system for customs law administration in the EC. That
system – in which EC customs law is administered by 25 separate member State authorities and the
EC fails to have in place a central agency or other mechanism to reconcile divergences among the
different authorities – fails to achieve the uniform administration required by GATT Article X:3(a).
The United States is challenging the EC's failure to have in place a system that achieves the uniform
administration required by that provision. This aspect of customs law administration in the EC affects
the administration of all of the rules that make up EC customs law. The EC's failure to achieve
uniform administration manifests itself in a variet y of areas, including those alluded to in this
question.

6. In paragraph 26 of the United States' First Written Submission, the United States notes
that it does "not purport to catalogue every aspect of customs procedures in which member
State practices diverge. Rather, we focus on a few key areas as a way to illustrate the more
general point." The United States specifically refers to EC customs rules regarding: (a) audit
following release for free circulation; (b) penalt ies for infringements of EC customs laws; (c)
processing under customs control; and (d) loca l clearance procedures. Please provide an
exhaustive list of all EC customs procedures challenged under Article X:3(a) of the GATT 1994.

The United States refers to its response to Ques tion No. 5. As indicated in the response to
that question, what the United States is challengi ng is the EC's failure to provide the uniform
administration required by GATT Article X:3(a). Th at failure is not confined to any particular
customs rule or group of rules. It is an overarching feature of customs law administration in the EC.
It is an essential aspect of the administration of all EC customs laws. The EC customs rules alluded to
in this question are illustrations of areas in which the lack of uniform administration manifests itself.

7. Please clarify what is meant by "treatm ent" in respect of each of the following
references:

(a) In paragraph 20 of its First Written Submission, the United States submits that
"a Member does not administer its la w in a uniform manner if identical
products or identical transactions receive different treatment in different
geographical regions and the Member provides no mechanism for the systematic
reconciliation of such differences."

(b) In paragraph 84 of its First Written Submission, the United States submits that
"as detailed as the Code and the Implem enting Regulation are, they do not
ensure uniform administration in the sense that similar transactions will be
treated similarly throughout the territory of the EC".

As used in the two quoted statements, the te rm "treatment" means the application to a
particular good or a particular transaction of laws , regulations, decisions and rulings of the kind
described in paragraph 1 of GATT Article X. Fo r example, when a customs authority applies a
measure of general application – e.g., a classificati on rule of interpretation – to a particular good and
thereby determines the good's classification and th e corresponding duty owed it accords treatment to
that good in the sense intended in paragraphs 20 a nd 84 of the First Written Submission of the United
States. Where customs authorities in different regions apply measures of general application
differently to materially identical goods or transac tions, this amounts to a failure to administer the

measures of general application in a uniform manner.

The blackout drapery lining case is a good case in point. There, the measure of general
application was the Common Customs Tariff. Th e question for customs authorities in different
member States was how to apply the Common Custom s Tariff to blackout drapery lining in order to
determine its classification. In its application of the Tariff, the German customs authority decided to
rely on an interpretive aid (derived from an EC re gulation pertaining to certa in apparel products) that
directed it to focus on the density of the product. That decision led it to classify the blackout drapery
lining under heading 3921. That was the treatment the German authority accorded the product. Other
member State authorities did not rely on the interp retive aid used by the German authority and,
consequently, classified the product differently, under h eading 5907. In short, different member State
authorities applied the Common Customs Tariff diffe rently, resulting in different classifications and
different duty liabilities.

8. Please comment on the European Comm unities' interpretation of the "minimum
standards" it alleges are demanded by the uniform ity obligation in Article X:3(a) of the GATT
1994.

The difficulty in responding to this question is that the EC has not actually identified what it
means by "minimum standards". It has characterized Article X:3(a) as "a minimum standards
provision", but has not elaborated on what that means.
14 It has offered no basis for identifying what
the minimum is. Nor has it explained how its characterization of Article X:3(a) flows from the
ordinary meaning of its terms, in their context, and in light of the object and purpose of the GATT
1994.

The EC's characterization of Article X:3(a) as a minimum standards provision is based
entirely on a passing reference in the Appellate Body report in US – Shrimp.
15 Article X:3(a) was not
directly at issue in that dispute. At issue wa s whether a measure that the United States claimed to
constitute a general exception subject to Article XX of the GATT 1994 was consistent with the
requirements set forth in the chapeau of that article – in particular, the requirement that a measure not
be applied in a manner which woul d constitute a means of arbitrary or unjustifiable discrimination
between countries where the same conditions prevail. In deciding that question, the Appellate Body
looked to Article X:3 as an analogous "due process" pr ovision. It stated that Article X:3 "establishes
certain minimum standards for transparency and pr ocedural fairness in the administration of trade
regulations. . . ." 16 However, the Appellate Body did not elaborate on what it meant by "minimum
standards." Indeed, it went on to find that whatever those standards are, the measure at issue in the
US – Shrimp dispute did not meet them. In short, th e passing use of the phrase "minimum standards"
in the Appellate Body report in US – Shrimp is of no help in illuminating the question of how the
obligation of uniform administration in Article X:3(a) should be interpreted.

9. In paragraph 19 of its Oral Statement at the first substantive meeting, the United States
submits that WTO jurisprudence suggesting that a pattern of non-uniformity is needed to prove
a violation under Article X:3(a) of the GATT 1994 is inapplicable to cases in which geographical
non-uniformity is being alleged. If that is the case, please clearly explain what would be needed
to prove a violation under Article X:3(a) in ca ses in which geographical non-uniformity is being
alleged.

The EC's assertion that a pattern of non-uni formity is needed to prove a violation under

14EC Oral Statement, First Panel Meeting, para. 24.
15See EC Oral Statement, First Panel Meeting, para. 24; EC First Written Submission, para. 231.
16Appellate Body Report, United States – Import Prohibition of Certain Shrimp and Shrimp Products ,
WT/DS58/AB/R, para. 183 (adopted 6 November 1998) ("US – Shrimp").

GATT Article X:3(a) comes from an isolated statement in the Panel report in US – Hot-Rolled Steel.
17
There, Japan alleged that the application of US an ti-dumping law in a particular investigation violated
the obligation of uniform, impartial and reasonable administration. The Panel found that Japan had
not even alleged (let alone established) "a pattern of decision-making" that would support its claim.18

In that context – where the claim was that the application of a particular law in a particular
case violated the obligations of Article X:3(a) – it made sense to insist on a pattern. It would be
difficult, if not impossible, to determine whether th e actions of the investigating authorities in that
case were uniform, impartial and reasonable without knowing what they had done in other, similar
cases. Assessing the presence or absence of uniformity, in particular, called for comparisons between
the case at hand and other similar cases.

Where, as in the present dispute, the issue is geographical non-uniformity, the context is much
different from the context in US – Hot-Rolled Steel . The question is not whether a particular
administrative authority is applying a particular law in a uniform manner – a determination that can be
made only by looking at multiple instances of that aut hority's application of the law. The question is
whether different authorities across the territory of a WTO Member (in this case, 25 different
authorities) are applying various laws uniformly.

How non-uniformity of administration can be shown where the nature of the non-uniformity
being alleged is geographical non-uni formity will depend on the circumstances of the allegation. In
the present dispute, the allegation is that the EC does not reconcile divergences among the member
State authorities when they occur and that the EC, th erefore, fails to uniformly administer its customs
law as Article X:3(a) requires. To prove this allega tion, what is needed is to provide evidence of the
mechanisms that the EC does have in place and to demonstrate how these fail to perform the role of
reconciling inconsistencies of administration among 25 different member State agencies. The United
States submits that this is what it has done in its First Written Submission and that, for the reasons
discussed in its opening statement and interventions at the first Panel meeting, the EC has failed to
rebut that evidence.

Moreover, requiring evidence of a pattern of non-uniformity in the present dispute would lead
to a perverse result. It would make it impossibl e to challenge an overall absence of uniformity and
instead force a complaining Member to focus one by one on individual instances of non-uniform
administration. Thus, even if the EC did not have in place the various mechanisms that it claims
(incorrectly) bring about uniformity of administration of customs law, another WTO Member still
would be precluded from making a systemic claim. Instead, it would have to resort to challenging
particular cases of non-uniform administration.

It is illogical for the EC to suggest that wh ere non-uniform administration evidences itself in
neat patterns – presumably, consistent differences between member States that go unreconciled – the
particular non-uniformities may be challenged under Article X:3(a), but where the system as a whole
fails to achieve uniform administration, there is no basis for challenge. To put it another way, by the
EC's reasoning, for non-uniform administration to be susceptible to challenge under Article X:3(a)
there must be a uniformity – i.e. a pattern – to th e non-uniform administration. But, by this same
reasoning, where non-uniform administration manifests itself in various and unpredictable ways in
diverse areas of customs law, due to the overall wa y in which the system operates, such non-uniform
administration is not susceptible to challenge. This result is inconsistent with Article X's focus on
fairness to traders
19 and should be rejected.

17EC First Written Submission, para. 240.
18Panel Report, United States – Anti-Dumping Measures on Certain Hot-Rolled Steel Products from
Japan, WT/DS/184/R, para. 7.268 (adopted 23 August 2001).
19See Panel Report, Argentina – Measures Affecting the Export of Bovine Hides and the Import of
Finished Leather, WT/DS155/R, paras. 11.76 to 11.77 (adopted 16 February 2001).

10. In paragraph 9 of its Oral Statement at th e first substantive meeting, the United States
submits that "our complaint is that beca use the retaining of competence over customs
administration in the hands of member State au thorities is not coupled with the systematic
reconciling of divergences among member State author ities, it is inconsistent with the obligation
of uniform administration under Article X:3(a)". Further, in paragraph 12 of its Oral
Statement at the first substantive meeting, the United States submits that the "system" for
administering customs law in the European Co mmunities does not ensure the uniformity that
Article X:3(a) requires. In light of the constitutional structure and institutional set-up in the
European Communities for the administration of customs matters, please specifically identify
aspects/elements/measures/mechanisms the United States would expect the European
Communities to take to achieve the "syste matic reconciliation of divergences among member
State authorities" to ensure uniform administrati on of its customs laws within the meaning of
Article X:3(a) of the GATT 1994.

Preliminarily, the United States notes that prescr ibing the method for the EC to come into
compliance with its obligation under GATT Article X:3( a) is not necessary to resolve this dispute.
What is at issue is whether the EC is in complian ce with its obligation, not what it must do to come
into compliance.

Having said that, in answering this question it is useful to consider different approaches to
customs administration along a spectrum. At one end of the spectrum is the status quo, which fails to
achieve the uniformity of administration required by GATT Article X:3(a). At the other end of the
spectrum is an approach to customs administra tion that relies on a single EC customs agency
authorized to ensure uniformity of administration acr oss the territory of the EC. Creation of such an
agency appears to the United States to be an obvious option for achieving the systematic
reconciliation of divergences among member State authorities to ensure uniform administration of the
EC's customs laws within the meaning of Article X:3(a). We understand this to be the principal
means of achieving uniform administration of customs law in the territory of virtually every other
WTO Member, and we are aware of no constitutiona l impediment to the EC's taking the same
approach. At the same time, we do not rule out the possibility that somewhere along the spectrum
between the status quo and the establishment of a sing le EC customs agency other options exist that
would enable the EC to satisfy its obligation of uniform administration under Article X:3(a).

11. Within the context of the present EC syst em of customs administration consisting of,
inter alia , the Customs Code Committee and the EBTI system, what value would be added
through the establishment of a single, centralized EC authority proposed by the United States in
the document entitled "Elements of Potential EC Customs Reform" dated 22 December 2004?

First, it should be noted that the centralized EC authority proposed in the 22 December 2004
document (included herewith as Exhibit US-49) w as one element of a multi-part package that the
United States proposed to the EC in the interest of reaching a mutually agreeable solution to the
present dispute. With that objective in view, the United States did not insist on the most obvious and
comprehensive approach to addressing lack of uni form administration of customs law in the EC
which, as discussed in response to Question No. 10, would have entailed the establishment of a
centralized authority for all aspects of the administration of customs law.

The United States focused on a centralized au thority for the issuance of binding advance
rulings (with respect to classification, valuation, and origin) because having in place an effective
system of binding advance rulings would represen t substantial progress toward achieving uniform
administration more generally. Having a single, centralized entity issue advance rulings would
eliminate the risk of divergent administration that exists when 25 different authorities perform that
function and no central authority routinely detects and steps in to cure inconsistencies.

With respect to valuation, the entity proposed would establish on an EC-wide basis a form of
binding guidance that does not exist today. As noted in our First Written Submission, only some
member States currently issue what amounts to binding valuation guidance (a divergence of
administration with respect to EC valuation rules).
20 Indeed, the concept of establishing EC-wide
binding valuation guidance was one of the improveme nts that the Court of Auditors recommended in
its report on the administration of valuation rules in the EC.21

With respect to classification, neither the Cu stoms Code Committee nor the EBTI database
brings uniformity of administration to the BTI system. As discussed in the First Written Submission
of the United States, institutional impediments, incl uding the fact that matters get referred to the
Committee only at the discretion of Commission or member State representatives, make the
Committee an ineffective arrangement for systemat ically achieving uniformity in the BTI system.
The EBTI database also is not an effective tool for achieving that objective. Unless a good is
described in exactly the same way to the authority consulting the da tabase as it had been described to
the authorities that previously issued BTI that ma y be relevant, a search of the database will be of
limited value. Even where descrip tions are the same or similar, the database does not reveal in any
detail the rationale applied by different authorities in classifying a particular good in a particular way.
It may indicate a citation to the general interpretive rule that the authorities relied on, but provides no
narrative explanation for the classification. Thus, an authority trying to decide how to classify a good
pursuant to an application for BTI would gain little insight into the rationale of other member State
authorities simply by consulting the EBTI database.
22

In sum, the value added by establishing a centralized authority as described in the
22 December 2004 document is to eliminate non-uniform administration to a large degree by
providing definitive, binding, EC-wide rulings on matters of valuation, classification, and origin.

12. The United States refers to divergent decisions taken by member State authorities
throughout its First Written Submission. For exampl e, the United States refers to divergence in
classification decisions: generally (paragraph 21); with respect to network cards for personal
computers (footnote 33); with respect to drip i rrigation products (footnote 33); and with respect
to unisex articles or shirts (paragraph 76). Fur ther, the United States refers to divergence in
customs valuation decisions (paragraphs 25 and 93). In light of these references, does the
United States consider that Article X:3(a) of the GATT 1994 requires substantive decisions to be
uniform? If so, does the United States consider that substantive decisions regarding customs
matters could amount to "administration" within the meaning of Article X:3(a)? If so, please
specify which type(s) of decisions.

Article X:3(a) requires administration of measures of the kind referred to in Article X:1 to be
uniform. The tools of administration can take a variety of forms. "Decisions" are tools of

20US First Written Submission, paras. 98-99.
21Court of Auditors, Special Report No 23/2000 concerning valuation of imported goods for customs
purposes (customs valuation), together with the Commission's replies, reprinted in Official Journal of the
European Communities C84, para. 52 (14 March 2001) ("Court of Auditors Valuation Report") (Exhibit US-14)
("The lack of Community-wide binding valuation decisi ons is one of the problems arising where a customs
union does not have a single customs administration."); id., para. 86 (recommending legislative action to allow
establishment of Community-wide valuation decisions).
22The EC suggests that the EBTI database is more acce ssible than the United Stat es claims, in light of
the number of consultations of the da tabase and the fact that the United St ates was able to find BTI concerning
blackout drapery lining. See EC First Written Submission, paras. 319 & 323. But, the number of consultations
of the database reveals very little. It may indicate anyt hing from academic curiosity to collection of statistical
information. The fact that the Unite d States was able to identify BTI concerning blackout drapery lining is due
to the fact that the exporter at issue had actual knowledge of the fact that particular member State authorities had
issued BTI for the product at issue at particular times. In other words, this BTI was not obtained by the sort of
random search that a trader or authority ordinarily would perform.

administration. Accordingly, when an EC member State customs authority decides to classify a good
in a particular way it is administering the Comm on Customs Tariff. When a member State customs
authority decides that the buyer and seller of goods are related parties it is administering the CCC
rules on valuation. Any decision by a member St ate customs authority that applies a measure of
general application to a particular good or transac tion may amount to "administration" within the
meaning of Article X:3(a). Where substantive decisions differ from one member State to another, this
is evidence of lack of uniform administration of the laws at issue in the decisions.

13. Please provide evidence of specific exampl es to prove the assertion made in paragraph
47 of the United States' First Written Submission th at, in reality, member States do not always
treat binding tariff information issued by other member States as binding.

We refer the Panel to Exhibit US-30, whic h is a March 2005 questionnaire on the topic of
"trade facilitation" prepared by a group based in the EC known as the Foreign Trade Association
("FTA"). As stated in the introduction, the questionnaire was sent to 70 of FTA's member companies,
and 20 responses were received, representing experience in five different member States. In response
to question 1.4, concerning classification, a comp any reported that "[b]inding tariff information from
Germany is still not accepted by other EU countries, especially Greece and Portugal."
23

We also refer the Panel to the report of the Panel in the dispute European Communities –
Customs Classification of Frozen Boneless Chic ken Cuts (Complaints by Brazil and Thailand) . At
issue there was whether a certain product should be classified under Tariff heading 0210 or 0207.
The complaining parties relied on issuance of BTI by several EC member States consistently
classifying the product under heading 0210. In respon se, the EC asserted that "this interpretation was
not followed in other EC customs offices."
24

Finally, we refer the Panel to Exhibit US-23, which is the decision of the Main Customs
Office in Bremen, Germany in the blackout drapery lining case. At page 4 of that decision, the
German customs authority acknowledges that "[n]umerous binding customs tariff decisions have been
handed down regarding comparable goods." Wit hout any explanation, however, the German
authority declined to follow those decisions and did not distinguish the product at hand from the
products at issue in those other decisions.

14. In paragraph 16 of its First Written Submission, the United States submits that "[t]here
is no customs authority to speak of. Nor is there an EC institution to systematically reconcile
divergences that may arise among member States in the administration of EC customs
legislation."
1 Is the United States suggesting that Article X:3(a) of the GATT 1994 requires
WTO Members to establish a central customs auth ority to reconcile divergences that may arise
among customs authorities throughout that Memb er? If so, please justify making reference to
the specific terms and meaning of the relevant terms in Article X:3(a).

The United States does not suggest that Article X:3(a) of the GATT 1994 requires WTO
Members to establish a central customs authority to reconcile divergences that may arise among

23Foreign Trade Association, Questionnaire on the to pic "Trade Facilitation": Facilitation of Trade in
WTO States, response to question 1.4 (March 2005) ("FTA Questionnaire") (Exhibit US-30).
24Panel Report, European Communities – Customs Classifi cation of Frozen Boneless Chicken Cuts
(Complaint by Brazil), WT/DS269/R, WT/DS286/R, para. 7.260 (circulated 30 May 2005) (" EC – Chicken
Cuts").

customs authorities throughout that Member. As discussed in response to Question No. 10, supra,
establishment of such an authority appears to be an obvious way for a WTO Member to comply with
its obligation of uniform administration under Article X:3(a). We are not aware of any WTO Member
other than the EC that does not have such an auth ority. At the same time, we do not rule out the
possibility that there may be other ways to achieve uniform administration.

15. In paragraph 76 of its First Written Submission, the United States submits that the
examples of blackout drapery lining and liquid cr ystal display flat monitors with digital video
interface are not isolated and that, rather, traders of other products have also encountered
practical difficulties resulting from the systemic problem of non-uniform administration of
customs classification law in the European Co mmunities. Please identify the other products
referred to in this statement and provide eviden ce of non-uniform administration for each of
them.

We refer the Panel to Exhibit US-30, the March 2005 Foreign Trade Association
questionnaire on trade facilitation. There, a res pondent company noted that "[u]nisex-articles or
shorts have different classifications in Italy and Spai n to those in Germany. These articles have to be
imported via Germany which causes additional costs."
25

We also refer to the Panel to Exhibit US-17, which is the opinion of the Advocate-General in
the ECJ case of Peacock AG v. Hauptzollamt Paderborn . In paragraphs 7-8 of that opinion, the
Advocate-General describes the facts of the case, wh ich included issuance of BTI for network cards
by customs authorities in Denmark, the Nether lands, and the United Kingdom, which were not
followed by customs authorities in Germany.

We also refer the Panel (as in our response to Question No. 13, supra), to the EC's admission
in the context of the EC – Chicken dispute. There, the EC asserted that customs authorities in certain
member States classified the produc t at issue differently from customs authorities in other member
States, despite BTI issued by the latter.

Finally, we refer the Panel to footnote 33 of the First Written Submission of the United States.
There, we refer to a case in which customs author ities in France and Spain differed over whether a
drip irrigation product should be classified as an ir rigation system or a pipe. In fact, France had
issued BTI for this product in 1999, classifying it as an irrigation system under Tariff heading 8424
(which carried an ad valorem duty rate of 1.7%). In December 2000, when an importer of this same
product attempted to enter the product through Spain, the Spanish customs authorities disregarded the
French BTI and classified the product as pipe, under Tariff heading 3717 (which carried an ad
valorem duty rate of 6.4%). The EC states that this matter ultimately was resolved through the
Commission's adoption of a classification regulation.
26 But, this does not change the fact that for a
year-and-a-half, when a trader should have been able to rely throughout the territory of the EC on BTI
issued by a given member State's customs authority, it was not able to do so.

16. With respect to tariff classification, the United States refers to non-uniform
administration with respect to blackout drapery lining, liquid crystal display flat monitors with
digital video interface, network cards for perso nal computers, drip irrigation products and
unisex articles or shorts, which examples it says are illustrative of non-uniform administration
of EC customs rules.

(a) Please provide all relevant statistical ev idence and/or other information to show
the incidence of non-uniform administ ration in the context of the overall
administration of the EC customs regime with respect to tariff classification.

25FTA Questionnaire, p. 4 (Exhibit US-30).

(b) To what degree are the tariff classifi cation cases involving blackout drapery
lining, liquid crystal display flat monitors with digital video interface, network
cards for personal computers, drip irri gation products and unisex articles or
shorts: (i) representative of; (ii) significant for; and (iii) have an impact on the
administration of the EC rules on tariff classification as a whole?

The US claim does not turn on the statistical frequency of non-uniform administration with
respect to tariff classification. We have referred to particular instances of non-uniform administration
with respect to tariff classification strictly by way of illustration, to demonstrate to the Panel the real-
world impact of what might otherwise seem to be an abstract and technical problem.

For purposes of the US claim, what is relevant is the fact that divergences occur and are not
reconciled, not the frequency of particular types of divergences. The EC itself acknowledges that
divergences occur
27 but argues that there are mechanisms in place to systematically reconcile such
divergences. The United States disagrees. The EC sy stem of customs law administration consists of
25 independent member State customs authorities w ith no central, EC authority or other, similar
mechanism overseeing their operation and reconciling di vergent administration. Instead, there is a
loose web of principles, instruments, and institu tions, including non-binding guidance, plus general
obligations of cooperation between member States, plus discreti onary referrals of matters to the
Customs Code Committee. That loose web of prin ciples, instruments, and institutions does not
provide the uniform administration of EC customs law required by Article X:3(a).

In any event, it is the EC, rather than the United States, that is likely to have the information
sought in this question. While the United States does not believe that the information at issue is
necessary for the Panel to find that the EC is not in compliance with its obligation of uniform
administration, the United States requests that the Pa nel exercise its authority under Article 13 of the
DSU to seek relevant information from the EC. For example, the Panel might seek from the EC a
statistically significant sample of BTI and other classification decisions from various member States
(including explanations of the bases for those d ecisions) in order to determine the frequency of
divergent administration. Additionally, the United St ates calls to the Panel's attention Exhibit US-33,
which is the EC's draft Modernized Customs Code. At page 4 of that document, the EC states, by
way of introduction, that "[a]n external study in 2003 has allowed the Commission to gain a clearer
understanding of the current situation in the member States and of the potential cost and benefits."
28
The United States requested a copy of this study dur ing consultations, but the EC declined to provide
it. The United States also suggests that the Panel request a copy of this study or draw an inference
from the EC's refusal to provide it.

The United States recalls that in evaluating th e incidence of non-uniform administration with
respect to valuation rules, the EC's Court of Auditors had access to "documents handled in the
Customs Valuation Committee, customs authority va luation audit files, written valuation rulings,
decisions of appeal tribunals and the actual custom s declarations" for more than 200 companies and
groups of companies.
29 The United States has not had the benefit of such access with respect to any
of the matters at issue in this dispute. Therefore, it is difficult to respond directly to the Panel's
question. If the Panel were to exercise its authority under Article 13 of the DSU, it might seek
information of the type that was made available to the Court of Auditors in preparing its report on
valuation. However, for the reasons discussed above, the Panel should not need the information
sought by this question in order to conclude that th e EC fails to comply with its obligation of uniform
administration of customs laws.

27See, e.g., EC First Written Submission, paras. 144, 238, 396, 401, 426.
28European Commission, Directorate-General for Taxation and Customs Union, TAXUD/458/2004 –
Rev 4, Draft Modernized Customs Code, p. 4 (11 November 2004) (Exhibit US-33).
29Court of Auditors Valuation Report, para. 10 (Exhibit US-14).

17. Please comment on the following argume nts made by the European Communities:

(a) In paragraph 331 et seq of its First Written Submission, the European
Communities argues that the case of blac kout drapery lining does not reveal any
lack of uniformity in the European Communities' classification practice.

(b) In paragraphs 347 et seq of its First Written Submission, the European
Communities argues that measures have been taken by the European
Communities to ensure uniform classification practice in respect of liquid crystal
display flat monitors with digital video interface.

The EC's assertion that the blackout drapery lining case does not reveal a lack of uniformity
in EC classification practice is incorrect for several reasons. First, the EC misstates the facts of the
case when it asserts that the product before the Germ an authorities was not flocked and, therefore,
was distinguishable from the product at issue in the various BTI contained in Exhibit US-22. In fact,
the determination of the Hamburg customs office on which the Bremen customs office relied found
the product to contain "flocking with individual fibers."
30 For classification purposes, the relative
density of the flocking was not a material di stinction between the product before the German
authorities and the product before other member State authorities. In fact, other member State
authorities have classified blackout drapery lining under heading 5907 where the flocking on the
products surface was found to be "sparsely applied."
31

Second, the EC simply ignores the statemen t by the German customs authority that
"[a]ssignment of the goods to class 5907 could only be considered if, in accordance with the label of
that class: ‘other webs,' the goods were not plastic-coated as per class 3921." 32 That statement was
plainly erroneous, as is evident from the Harmoni zed System explanatory note that accompanies
subheading 5907. According to that note, "The fa brics covered [under subheading 5907] include . . .
[f]abric, the surface of which is coated with glue (rubber glue or other), plastics, rubber or other
materials and sprinkled with a fine layer of other ma terial such as . . . textile flock or dust to produce
imitation suedes. . . ."33

Third, the EC asserts that the German customs authorities were justified in relying for their
classification decision on an interpretive aid that w as particular to Germany and not uniformly used
by member State customs authorities in applying the Common Customs Tariff to coated textile
fabrics, such as blackout drapery lining. That inte rpretive aid directed the customs authority to look
to the density of the product's fiber. 34 The EC states that "the text in question [i.e. referred to only by
the Hamburg Customs Office, not by the Main Cu stoms Office of Bremen which decided the
appeal."35 However, the Bremen Office plainly relied on the findings of the Hamburg Office and,
moreover, expressly referred to the fact that "[t]he web is not fine," an apparent allusion to the finding
of the Hamburg Office based on the interpretive aid.36

More fundamentally, the EC states that "the cr iterion that the web is not fine was developed
in analogy to another EC classification regulation a nd is a relevant factor to determine whether the

30Letter from Main Customs Office Hamburg-Waltershof to ORNATA GmbH, 29 July 1998 (original
and English translation), p. 1 (Exhibit US-50).
31BTI UK103424227 (Exhibit US-51).
32Hauptzollamt Bremen, Letter Decision to Bautex-Stoffe GmbH, 22 September 2004 (original and
English translation) ("Bautex-Stoffe Decision"), p. 4 (Exhibit US-23).
33Harmonized System Explanatory Note, Subheading 59.07 (Exhibit US-48).
34See generally US First Written Submission, para. 72.
35EC First Written Submission, para. 342.
36Bautex-Stoffe Decision, p. 4 (Exhibit US-23).

textile fabric is present merely for reinforcing purposes." 37 The classification regulation to which the
EC refers (Exhibit EC-78) is a regulation pertaining to the classification of ski trousers, which are
classifiable under Chapter 62 of the Tariff. The inte rpretive rules referred to in that regulation are
relevant to classification of an apparel item, but make no sense when applied for a product such as
blackout drapery lining. For example, the rules take account of whether the fabric forms the inside or
outside of the product, a criterion that is relevant to apparel but not to a product, such as lining, that
has no inside or outside.

The particular aspect of the ski trousers rule on which the German authority relied in this case
was the tightness of the weave of the fabric. Ho wever, Note 2(a) to Chapter 59 of the Common
Customs Tariff expressly makes that criterion irrelevant to the classification of coated fabrics. Thus,
it states that heading 5903 applies to "textile fabri cs, impregnated, coated, covered or laminated with
plastics, whatever the weight per square meter and whatever the nature of the plastic material. . . ."

In sum, contrary to the EC's assertion, the blackout drapery lining case illustrates a lack of
uniformity in classification practice within the EC inasmuch as (1) other member State authorities
have classified the product at issue under headin g 5907, even where flocking is sparse; (2) the
decision to exclude the product from heading 5907 due to the existence of a plastic coating was
directly contrary to the applicable Harmonized Sy stem explanatory note; and (3) the German customs
authority ultimately relied on an interpretive ai d that no other member State authority uses for
classifying the product at issue, and the EC conte nds that such reliance on a member State-specific
interpretive aid based on analogy to rules pertaining to a completely different product is justifiable
under EC law, even when the terms of the interpretiv e aid as applied are in direct contradiction to the
applicable Tariff chapter notes.

With respect to liquid crystal display ("LCD") monitors with digital video interface ("DVI"),
it is important to note that the EC does not claim that it ensures "uniform classification practice." It
states that it has taken measures to "ensure a uniform practice."
38 The difference is important and
highlights the fact that the EC has not reconciled non-uniformity in member State application of the
Common Customs Tariff to LCD monitors with DVI.

What the EC did was adopt a regulation that temporarily suspends duties on certain LCD
monitors with DVI regardless of their classification. The temporary duty suspension applies only to
monitors below a specified size threshold. Monitors above that threshold continue to be subject to
divergent classification from member State to member State, a fact that the EC does not contest.

The EC makes reference to a separate regula tion (set out in Exhibit EC-85) classifying
monitors of a particular type under heading 8528.
39 However, the monitors at issue there are below
the size threshold specified in the duty suspension regulation. In other words, the separate
classification regulation does nothing to reconcile n on-uniform classification of monitors above the
size threshold specified in the duty suspension regulation.

Curiously the regulation in Exhibit EC-85 stat es that "[c]lassification under subheading 8471
60 is excluded, as the monitor is not of a kind sole ly or principally used in an automated data
processing system. . . ." Thus, the Commission in this case applied the sole or principal use test, as
indicated in Note 5 to Chapter 84 of the Common Cu stoms Tariff. By contrast, the conclusion of the
Customs Code Committee to which the EC refers in paragraph 353 of its First Written Submission
requires that an importer demonstrate that "a monitor is only to be used with an ADP machine" in
order to have it classified under heading 8471.

37EC First Written Submission, para. 343.
38EC First Written Submission, para. 356.
39EC First Written Submission, para. 361.

As we discussed in our Oral Statement at the first Panel meeting, the conclusion of the
Customs Code Committee, which abandons the sole or principal use test set out in the Common
Customs Tariff in favor of a sole use test, actua lly detracts from rather than promotes uniformity.
40
member State authorities now are confronted with two conflicting tests for classifying LCD monitors
with DVI for ADP machines – the sole or principal u se test in the Tariff chapter notes or the sole use
test in the Customs Code Committee's conclusi on. Indeed, in stating that the Netherlands
classification of the goods at issue as video monitors is "in line with the CN, as confirmed by the
Customs Code Committee," the EC implies that more than one classification of the same goods may
be in line with the CN.

For the foregoing reasons, the measures the EC has taken do not provide uniform
classification practice, as non-uniform criteria are employed in respect of LCD monitors with DVI for
ADP machines.

18. Please respond to the submission made by the European Communities in paragraph 345
of its First Written Submission that "the United States has had its own difficulties in classifying
[blackout drapery lining]. In fact, the New York customs office first classified [blackout drapery
lining] products under HTSA heading 5903.90.25.00. This ruling was initially confirmed by the
Headquarters of US Customs. In 2004, these ru lings were revoked by Customs Headquarters,
which decided that the classification had been erroneous, and classified the merchandise under
heading HTSA 5907.00.6000".

The United States notes, first, that actions of US administrative agencies are not at issue in the
present dispute. Nevertheless, in the interest of illuminating the issues that are in dispute, the United
States answers as follows.

Pursuant to Customs Regulations (19 CFR 177.1), a ruling was requested regarding the
classification of blackout drapery lining (BDL). New York Ruling Letter (NY) H81427, dated
August 15, 2001, was issued in response to the re quest. In NY H81427, the BDL was classified in
heading 5903 of the Harmonized Tariff Schedul e (HTS). In NY H81427, the BDL was excluded
from classification in heading 5907, HTS, because the layer of flock was considered not visible to the
naked eye, following laboratory analysis. Chapter Note 5(a) to Chapter 59 excludes coated fabrics
from classification in heading 5907, HTS, if the coating cannot be seen with the naked eye.

A request for reconsideration of NY H81427 was made pursuant to Customs Regulations (19
CFR 177.12). In Headquarters Ruling Letter (HQ) 965343, dated July 30, 2002, the initial ruling was
affirmed. The ruling noted that according to the laboratory analysis the textile flocking was not
visible to the naked eye and determined that the BDL was classifiable in 5903, HTS.

A subsequent request was made to reconsid er HQ 965343. Thereafter, an additional
laboratory analysis was performed. This decision was based on a second lab report that identified the
presence of flock visible to the naked eye. It also demonstrated that the textile fabric had been coated
with a layer of plastics upon which a layer of textile flock had been applied.

In light of this new information, a notice pr oposing to revoke the previous ruling was issued
pursuant to US statute (19 USC 1625(c)) in the Customs Bulletin, Vol. 38, Number 6, on February 4,
2004. Interested parties were given 30 days to comment on the proposed revocation and/or identify
an affected ruling that was not identified in the notice. No comments were received in response to the
notice.

In HQ 966508, dated March 17, 2004, HQ 96534 3 and NY H81427 were revoked pursuant to

40US Oral Statement, First Panel Meeting, para. 28.

Customs Regulations (19 CFR 177.12). Sixty calenda r days after the final notice was issued, the
revocations became effective. The BDL was reclassified in heading 5907, HTS.

At no point during the foregoing process did the United States ever have in force conflicting
rulings on the BDL. US Customs pursued a tran sparent process, including a public notice, which
fully explained the proposed change and offered the public an opportunity to provide comments on its
proposal.

19. Please respond to the submission made by the European Communities in paragraph 362
of its First Written Submission that "the US customs authorities have also found it difficult to
properly classify LCD monitors. For instance, in a ruling of June 3, 2003, US Customs found
that it was not possible to determine the principal function of a particular type of LCD monitor,
and therefore decided to classify it under headin g 8528 in application of General Interpretative
note 3(c), which foresees classification under the heading which occurs last in numerical order".

The United States notes, first, that actions of US administrative agencies are not at issue in the
present dispute. Nevertheless, in the interest of illuminating the issues that are in dispute, the United
States answers as follows.

In examining the classification of LCD monitors, US Customs applies the requirements of
classification as an automatic data processing (ADP) un it within the meaning of Note 5(B) to Chapter
84 of the Harmonized System. Multimedia monitors meet the criteria of Note 5(B)(b) and 5(B)(c). In
reaching its classification decisions, US Customs has focused on whether the monitor meets the
criterion of Note 5(B)(a) as to whether or not it is of a kind solely or principally used with an ADP
system and whether the monitor is also prima facie classified under another heading (e.g., heading
8528, as a video monitor). In all of its administrativ e rulings dealing with this question, US Customs
applies judicial precedent in determining "principal use."

The ruling referred to in paragraph 362 of the EC's First Written Submission was submitted
for consideration in accordance with US Customs Regulations (see 19 CFR Part 177). Customs found
that the monitor in question was a composite mach ine as defined by Note 3 to Section XVI of the
Harmonized System, because it has the functions of both an ADP monitor and a video monitor. After
examining all of the evidence provided, Customs found that a principal function of the monitor in
question could not be established. Therefore, Customs followed the guidance of the General
Explanatory Notes to Section XVI which states in pertinent part: "Where it is not possible to
determine the principal function, and where, as provided in Note 3 to the Section, the context does not
otherwise require, it is necessary to apply General Interpretative Rule 3(c)."

Monitors have technical specifications that driv e their use. "Sole or principal use" is the
standard that the text of the Harmonized System spec ifies for classification of these machines. In this
instance, the trader was unable to demonstrate prin cipal use as an ADP monitor. Accordingly, based
on the HS, the proper result is to apply GRI 3(c).

20. With respect to the United States' reference in footnote 33 of its First Written
Submission to examples of allegedly divergen t classification decisions among member States
concerning network cards for personal computers and drip irrigation products, please respond
to comments made by the European Communities in footnote 177 of its First Written
Submission with respect to these two products.

With respect to both the network cards example and the drip irrigation products example, the
EC's comment is that the matter was resolved. In the first case, it was resolved through litigation that
ultimately led to an ECJ decision, and in the s econd case it was resolved through the adoption of a
Commission regulation. However, these observati ons obscure the fact that in both cases a key
element in the network of tools of uniform administration of classification rules as portrayed by the

EC – the requirement that member States honor BTI issued by other member States – did not operate
in the manner the EC claims it should. Although BTI issued by one member State is supposed to be
binding on all member States, both the network cards example and the drip irrigation products
example represent cases in which one or more member States did not treat as binding BTI issued by
other member States. This is so regardless of the fact that the matters may ultimately have been
resolved.

21. In paragraphs 51 and 52 of its First Writte n Submission, the United States submits that
the structure of the binding tariff information sy stem under EC law allows applicants to "pick
and choose" among member States, relying only on binding tariff information that is
favourable. Please provide evidence to prove th at this "picking" and "choosing" occurs in
practice.

The EC itself acknowledges that picking and choosing occurs in practice. For example, in the
Panel report in EC – Chicken Cuts , in summarizing the EC's argument, the Panel stated, "The
European Communities adds that it is possible under EC law to withdraw an application for a BTI
where the outcome is considered unfavourable by the importer."
41 Further, in its explanatory
memorandum accompanying the draft Modernized Custom s Code the EC states, "[I]t is proposed to
extend the binding effect of the decision [i.e. BTI] also to the holder(s) of the decision in order to
avoid the system only being used where the applicant is satisfied with the result."
42

A simple search of the EBTI database also strongly suggests the occurrence of picking and
choosing. It shows that the issuance of BTI is heav ily skewed in favor of certain member States. The
database allows a searcher to identify how many BTI each member State issued with a start date
during a specified period. Thus, if one queries how many BTI Germany issued with a start date
between January 1 and December 31, 2004, the search result indicates 12,731 BTI issued. The
numbers go down dramatically from there. Italy i ssued 232; Greece issued 1; Belgium issued 451.
43
This skewing suggests strategic selection of the member States in which importers apply for BTI.

Finally, that picking and choosing occurs in pr actice is confirmed by the fact that importers
regularly approach commercial officers at US emba ssies in EC member States to inquire as to the
optimal authorities from which to apply for BTI.

22. In paragraph 131 of its First Written Submission, the United States submits that the
problem of reaching a decision in the context of the Customs Code Committee is magnified by
the recent expansion of the European Communities to 25 member States. Does the United States
have any concrete evidence indicating that d ecision-making has become more difficult since
expansion? If so, please provide the Panel with all relevant evidence.

Given the decision-making process of the Committ ee as described in paragraphs 121 through
132 of the First Written Submission of the United States, it is evident on its face that decision-making
has become more difficult. In addition, we refe r the Panel to paragraph 131 of our First Written
Submission, in which we cite a senior EC official who stated that "organising a majority decision will
be more difficult, since one will have to negotiate with 25 – instead of 15 – member States." This
senior official is close to the decision-making pr ocess and certainly in a position to apprehend the
difficulties that would be encountered by enlargement.

41Panel Report, EC – Chicken Cuts, para. 7.261 (citing EC's Second Written Submission, para. 51; EC's
Reply to Panel Question No. 117).
42European Commission, Directorate-General for Taxation and Customs Union, TAXUD/447/2004
Rev 2, An Explanatory Introduction to the modernized Customs Code, p. 12 (Feb. 24, 2005) (Exhibit US-32).
43See http://europa.eu.int/comm/taxation_customs/dds/c gi-bin/ebtiquer?Lang=EN (last consulted on
23 September 2005).

23. Please clearly explain whether and, if so , how the following statements demonstrate a
violation of Article X:3(a) of the GATT 1994, making reference to the specific terms and
meaning of the relevant terms in Article X:3(a):

(a) In paragraph 86 of its First Written Submission, with respect to the treatment of
royalty payments, the United States s ubmits that the EC Court of Auditors
"found that in a number of cases, differen t member States apportioned royalties
differently to the customs value of identical goods imported by the same
company".

(b) In paragraph 87 of its First Written Submission, with respect to valuation on a
basis other than the transaction of the last sale, the United States submits that
the EC Court of Auditors "found that authorities in some member States
required importers to obtain prior approval for valuation on a basis other than
the transaction value of the last sale, whereas authorities in other States imposed
no such requirement".

(c) In paragraph 88 of its First Written Submission, with respect to vehicle repair
 costs covered under warranty, the United States notes that "[i]n at least one
 member State – Germany – the Court found that customs authorities reduced
 the customs value of imported vehicles by the value of repairs undertaken in the
 territory of the EC and reimbursed by the foreign seller. Other member States –
 in particular, Italy, the Netherlands, and the United Kingdom – declined
 requests for similar customs value reductions".

(d) In paragraphs 96 and 97 of its First Written Submission, the United States
 submits that the EC Court of Auditors "found that different member State
 authorities take different approaches to [valuation audits performed after goods
 have been released for free circulation] ... In the case of at least one member
 State, the Court found that the customs authorities lack the right to perform
 post-importation audits at all, except in cases of fraud. Even among the States in
 which authorities are permitted to perf orm post-importation audits, the Court
 found differences among working practices".

Each of these statements descr ibes an instance of inconsistent administration of EC customs
law concerning valuation. In each case, the incons istency was material, affecting importers' ultimate
liability for customs duties. These instances of incons istency, plus others to which the United States
has referred, illustrate the EC's failure to uniformly administer EC customs law.

The specific terms of Article X:3(a) at issue are "administer" and "uniform." We discuss the
meaning of these terms at paragraphs 32 to 38 of our First Written Submission. In particular, the
ordinary meaning of "administer" is "carry on or ex ecute (an office, affairs, etc.)," and the ordinary
meaning of the term "uniform" is "of one unchanging form, character, or kind; that stays the same in
different places or circumstances, or at different times." In each of the foregoing cases, EC law on
valuation was "executed" – in the sense that measures of general application were applied to particular
persons – in a manner that did not "stay[] the same in different places." Rather, it varied by member
State.

24. With respect to the four aspects of the EC customs regime on valuation that the United
States alleges are illustrative of the fact that EC customs rules are not administered uniformly
in the European Communities (namely, related parties; royalty payments; valuation on a basis
other than the transaction of last sale; and vehicle repair costs covered under warranty):

(a) Please provide all relevant statistical ev idence and/or other information to show
the incidence of non-uniform administ ration in the context of the overall
administration of the EC customs regime with respect to customs valuation.

(b) To what degree are the examples specific ally referred to by the United States in
its First Written Submission (concernin g related parties; royalty payments;
valuation on a basis other than the transaction of last sale; and vehicle repair
costs covered under warranty): (i) representative of; (ii) significant for; and (iii)
have an impact on the administration of the EC rules on customs valuation as a
whole?

The US claim does not turn on the statistical frequency of non-uniform administration with
respect to customs valuation. We have referred to particular instances of non-uniform administration
with respect to customs valuation strictly by way of illustration, to demonstrate to the Panel the real-
world impact of what might otherwise seem to be an abstract and technical problem.

For purposes of the US claim, what is relevant is the fact that divergences occur and are not
reconciled, not the frequency of particular types of divergences. The EC itself acknowledges that
divergences occur
44 but argues that there are mechanisms in place to systematically reconcile such
divergences. The United States disagrees. The EC sy stem of customs law administration consists of
25 independent member State customs authorities w ith no central, EC authority or other, similar
mechanism overseeing their operation and reconciling di vergent administration. Instead, there is a
loose web of principles, instruments, and institu tions, including non-binding guidance, plus general
obligations of cooperation between member States, plus discreti onary referrals of matters to the
Customs Code Committee. That loose web of prin ciples, instruments, and institutions does not
provide the uniform administration of EC customs law required by Article X:3(a).

In any event, it is the EC, rather than the United States, that is likely to have the information
sought in this question. While the United States does not believe that the information at issue is
necessary for the Panel to find that the EC is not in compliance with its obligation of uniform
administration, the United States requests that the Pa nel exercise its authority under Article 13 of the
DSU to seek relevant information from the EC. For example, the Panel might seek from the EC
information of the type that enabled the EC's Court of Auditors to make the findings contained in its
report on customs valuation (Exhibit US-14).

The United States recalls that in evaluating th e incidence of non-uniform administration with
respect to valuation rules, the Court of Auditors had access to "documents handled in the Customs
Valuation Committee, customs authority valuation a udit files, written valuation rulings, decisions of
appeal tribunals and the actual customs declarations" for more than 200 companies and groups of
companies.
45 The United States has not had the benefit of such access with respect to any of the
matters at issue in this dispute. Therefore, it is di fficult to respond directly to the Panel's question. If
the Panel were to exercise its authority under Article 13 of the DSU, it might seek information of the
type that was made available to the Court of Auditors in preparing its report on valuation.

Additionally, the United States calls to the Panel's attention Exhibit US-33, which is the EC's
draft Modernized Customs Code. At page 4 of that document, the EC states, by way of introduction,
that "[a]n external study in 2003 has allowed the Commission to gain a clearer understanding of the
current situation in the member States and of the potential cost and benefits."
46 The United States
requested a copy of this study during consultations , but the EC declined to provide it. The United
States also suggests that the Panel request a copy of this study or draw an inference from the EC's

44See, e.g., EC First Written Submission, paras. 144, 238, 396, 401, 426.
45Court of Auditors Valuation Report, para. 10 (Exhibit US-14).
46Draft Modernized Customs Code, p. 4 (Exhibit US-33).

refusal to provide it. However, for the reas ons discussed above, the Panel should not need the
information sought by this question in order to conclude that the EC fails to comply with its obligation
of uniform administration of customs laws.

25. Please respond to the submission made by the European Communities in paragraph 397
of its First Written Submission that differences that existed between member States in the
treatment of repair costs covered by a warranty have been resolved by Commission Regulation
(EC) No 444/2002 of 11 March 2002 (Exhibit EC-89).

While the regulation cited by the EC does appear to address the issue of treatment of repair
costs covered by warranty, what is remarkable is th at it took the EC 12 years to resolve this matter.
The Court of Auditors report notes that the in consistency at issue was first brought to the
Commission's attention in 1990. 47 A system that leads to resolution of non-uniformity of
administration 12 years after it is brought to the atte ntion of the relevant authority hardly satisfies the
requirement of Article X:3(a). We also note that th is is the only inconsistenc y identified in the Court
of Auditors report that the EC claims to have r esolved. The EC attempts, unsuccessfully, to explain
away four other material areas of non-uniformity of administration identified by the Court of Auditors
(treatment of royalty payments; conditions under whic h a sale other than the last sale which led to
introduction of goods into the EC may be used as ba sis for customs valuation; valuation audits; and
provision of binding valuation guidance), but does not deny the existence of non-uniformity of
administration in these areas.

26. Please provide concrete evidence to support the submission in paragraphs 25 and 90 –
92 of the United States' First Written Submission that different member States have taken
different positions on whether an importer is rel ated to non-EC companies that manufacture its
products for the purposes of customs valuation.

The description at paragraphs 25 and 90-92 of the First Written Submission of the United
States is based on a narrative account by the import er at issue. Due to concerns relating to the
pendency of litigation over the matter at issue and the commercial sensitivity of the information that
supporting documentation would contain, the importer declined to provide documentation at this time.

However, a Decision of the European Ombudsma n (Exhibit US-52) confirms the description
of the non-uniform administration of EC laws on valuation as set forth in the referenced paragraphs of
the First Written Submission of the United States. The importer at issue confirms that it is the
company described in that Decision. The impo rter's complaint concerning lack of uniform
administration of EC customs valuation rules by Spanish customs authorities and Netherlands
customs authorities is summarized, beginning at page 2.

What is especially revealing in this summary is the description of how the Commission dealt
with the company's complaint when it was brought to the Commission's attention in September 2000.
Rather than refer the matter to the Customs C ode Committee, the Commission replied three months
later "that the interpretation issues raised by the complainant were a matter for the national customs
authorities, and that [the Commission] has no r esponsibility to undertake a detailed examination of
very specific individual cases, this being the task of national administrations."
48 When the company
expressly requested referral to the Committee a y ear later, the Commission "rejected the idea." 49 The
company renewed its request in January 2002 and ov er two years later still had not received a reply
from the Commission. The Ombudsman's Decision indicates that following a meeting between agents

47Court of Auditors Valuation Report, paras. 73-74 (Exhibit US-14).
48Decision of the European Ombudsman on complaint 128/2004/OV against the European
Commission, p. 2 (2 June 2004) (Exhibit US-52).
49Decision of the European Ombudsman on complaint 128/2004/OV against the European
Commission, p. 2 (2 June 2004) (Exhibit US-52).

for the company and officials of the Commission's Directorate for Taxation and Customs Union in
May 2004, the complainant stated that "he no longer wished to pursue the complaint."
50 However, it
does not indicate that the underlying lack of uniformity actually was resolved. The fact that the
company is continuing to pursue its appeal through the Spanish courts indicates that, in fact, it has not
been resolved.

Finally, it is notable that while the EC char acterizes the matter as "relatively complex," 51 it
does not dispute the essential facts as described by the United States. That is, it does not disagree that
this case entails differential application of EC valu ation rules to a particular importer to determine
whether that importer's contracts with non-EC sellers gave rise to a control relationship.

27. In relation to processing under customs cont rol, is the United States concerned with
perceived discrepancies in the substantive test as between member States for determining
whether the economic conditions justify processing under customs control and/or is the United
States concerned with the application of the econo mic conditions test by member States? If the
latter, please provide concrete evidence to suppor t the allegation that such application is in
violation of Article X:3(a) of the GATT 1994.

This question highlights the fallacy in the EC's failure to recognize that measures may also
serve in the administration of other measures. Processing under customs control is a procedure
provided for in Article 130 of the Community Customs Code. Where an importer is permitted to use
this procedure, it may bring goods into the territory of the EC without duty being charged, perform
certain operations on those goods, and have the resu lting goods released for free circulation at the
duty rate applicable to the resulting goods. Thus, Ar ticle 130 plainly is a "regulation[] . . . pertaining
to . . . rates of duty . . . on imports. . ." within th e meaning of GATT Article X:1. As such, it must be
administered in a uniform manner, pursuant to GATT Article X:3(a).

Under the Community Customs Code and the Implementing Regulation, customs authorities
must make an "economic conditions" assessment to determine whether certain applications for
processing under customs control should be granted. The manner in which different member State
authorities administer that measure of general application is sometimes set forth in manuals or
bulletins or other member State-specific documents. These documents explain how member States
administer the EC regulations on processing under customs control.

The manuals or bulletins that explain how indi vidual member States apply the EC regulations
on processing under customs control serve an administrative function. That is, they prescribe how
other laws – certain articles of the Community Customs Code and the Implementing Regulation – will
be carried out. To the extent that different member State manuals or bulletins prescribe different
means of carrying out the EC rules they evidence non- uniformity in the administration of those rules.
To put this in the terms indicated by the Panel' s question, the United States is concerned with non-
uniformity in the application of the economic conditi ons test by different member State authorities,
which non-uniformity is evident in the substance of manuals and bulletins that prescribe how the test
is to be carried out in different member States.

To illustrate this non-uniformity, we contrast ed United Kingdom guidance on application of
the economic conditions test with French guidance.
52 We demonstrated that under the UK guidance,
an applicant must show evidence of both impact on its business and "impact upon any other
community producers of the imported goods."
53 By contrast, under the French guidance, an applicant

50Decision of the European Ombudsman on complaint 128/2004/OV against the European
Commission, p. 4 (2 June 2004) (Exhibit US-52).
51EC First Written Submission, para. 407.
52US First Written Submission, paras. 105-07.
53US First Written Submission, para. 105.

need only present evidence of the creation or maintenance of processing within the EC.54

The EC states that the French guidance "also refe rs to the test relating to the absence of harm
to competitors in the EC."55 The EC refers the Panel to paragr aph 78 of the French guidance (Exhibit
US-35). However, that reference is simply an in troductory paraphrase of certain provisions from the
Community Customs Code. After the introduction, the bulletin specifies that the economic conditions
test will be carried out according to the modalities set forth thereafter ("il seffectue selon les modalités
définies ci-après"). As explained in the US Fi rst Written Submission, the relevant modality (in
paragraph 83) makes no reference to harm to Community producers.

28. In paragraph 400 of its First Written Submission, the European Communities submits
that questions of auditing are not part of customs procedures. Please comment.

We note, first of all, that the EC assertion is entirely unexplained. The EC provides no basis
for the proposition that questions of auditing are not part of customs procedures.

Second, the EC appears to be relying on an exceedingly narrow definition of "customs
procedures." At the first Panel meeting, we understo od the EC to state that by "customs procedures"
it meant the term as defined in Article 4(16) of the Community Customs Code. That provision
defines "customs procedures" to mean the eight di fferent ways in which goods may be handled upon
importation into the territory of the EC (includi ng, for example, release for free circulation and
processing under customs control). The term has a pa rticular meaning specific to the context of the
Code. However, in other contexts, the EC uses th e term "customs procedures" in a broader, more
generic sense. For example, as we discussed in our opening statement at the first Panel meeting, the
EC's regional trade agreement with Chile requires that "customs provisions and procedures . . . be
based upon . . . the application of modern customs techniques, including . . . company audit methods...
".
56

Third, whether auditing is characterized as a customs procedure or not, audits plainly are tools
for administering EC customs laws. Where that u nderlying set of rules is EC customs law, audit
procedures are tools for administering that law. To the extent that different member States use
different audit procedures, they administer the underlying law differently. The EC dismisses any
differences as "minor in nature."
57 However, the Court of Auditors re port tells quite a different story.
Thus, it found that in one member State the au thorities lacked the authority to perform post-
importation audits at all, except in cases of fraud. And, it found that divergences in audit procedures
from member State to member State meant that "i ndividual customs authorities are reluctant to accept
each other's decisions."58 It is difficult to see how such differences can be characterized as "minor."

29. In paragraphs 429 – 431 of its First Wr itten Submission, the European Communities
submits that penalty provisions, which provide fo r a sanction in the case of a violation of a
provision of customs laws, are not themselves cu stoms laws and, therefore, are not covered by
Article X:3(a) of the GATT 1994. Please comment.

There are at least two fundamental flaws with the EC's assertion that Article X:3(a) does not
cover penalty provisions. First, it ignores the dis tinction between the laws that a member State
administers and the tools for administering those laws. It assumes, without any foundation, that
because penalty provisions take the form of laws they can only themselves be administered, and not
also serve as tools of administration of other laws. However, penalty provisions, like audit

54US First Written Submission, para. 107.
55EC First Written Submission, para. 415.
56US Opening Statement, First Panel Meeting, para. 53.
57EC First Written Submission, para. 400.
58US First Written Submission, para. 97 (quoting from Exhibit US-14).

procedures, presume the existence of other laws – in this case, other EC customs laws. Penalty
provisions do not exist in a vacuum. They are intrinsically linked to the underlying laws the
compliance with which they are meant to induce.
59 Indeed, the EC recognizes this basic proposition.
Thus, the Council Resolution on penalties set forth in Exhibit EC-41 states that "the absence of
effective, proportionate and dissuasive penalties for breaches of Community law could undermine the
very credibility of joint legislation. . . ."60

That penalties are tools for administering EC customs law is demonstrated by the de Andrade
case cited in the First Written Submission of the United States. 61 The EC measures being
administered in that case were Articles 49 and 53( 1) of the Community Customs Code. Article 49
prescribes specific time periods for carrying out the formalities necessary for goods covered by a
summary declaration to be assigned a customs-approve d treatment or use. Article 53(1), in turn,
states that "[t]he customs authorities shall without delay take all measures necessary, including the
sale of the goods, to regularize the situation of goods in respect of which th e formalities necessary for
them to be assigned a customs-approved treatment or use are not initiated within the periods
determined in accordance with Article 49."

In de Andrade , an importer failed to carry out the formalities necessary for goods to be
assigned a customs-approved treatment or use within the applicable time prescribed by Article 49 of
the Code. Accordingly, the Portugese customs author ity administered Article 53(1) – that is, it took
measures necessary to regularize the situation – by imposing a penalty provided for under Portugese
law. Through application of the penalty provision, the Portugese authority carried out Article 53(1) of
the Community Customs Code.

To the extent that different member States have different penalty provisions that apply to the
violation of EC customs law – a fact that the EC does not and cannot deny – they administer EC
customs law differently. Accordingly, the existe nce of diverse penalty provisions among the EC
member States – whereby the same offense may be tr eated as a serious criminal act in one state and a
minor infraction in another
62 – is evidence of non-uniform administration, in breach of GATT
Article X:3(a).

The second fundamental flaw in the EC's argume nt is its assumption that penalty provisions
pertain to "illegitimate actions" and theref ore cannot be covered by Article X:3(a).
63 As we discussed
in our opening statement, Article X:3(a) makes no distinction between legitimate and illegitimate
transactions. Moreover, the EC is simply wrong to assert that penalties apply only to illegitimate
transactions. Once again, the de Andrade case, where the only offense was to miss a deadline is a
case in point; here, a penalty was applied in the context of legitimate trade.

30. Please explain step-by-step the United States' understanding of procedures applicable in
the European Communities for:

(a) Clearance of goods for free circulatio n or otherwise using local clearance
procedures; and

(b) Clearance of goods for free circulatio n not using local clearance procedures.

59See The New Shorter Oxford English Dictionary , Vol. II, pp. 2144-45 (1993) (Exhibit US-53)
(defining "penalty," as relevant here, as "punishment imposed for breach of a law, rule, or contract").
60Council Resolution of 29 June 1995 on the effective and uniform application of Community law and
on the penalties applicable for breaches of Community law in the internal market, p. 1 (Exhibit EC-41).
61US First Written Submission, para. 100.
62See An Explanatory Introduction to the Modernized Customs Code, p. 13 (Exhibit US-32).
63EC First Written Submission, para. 432.

The United States' understanding of procedures a pplicable in the EC for clearance of goods
for free circulation is as follows (with references to the Community Customs Code ("CCC") and CCC
Implementing Regulation ("CCCIR") noted in parentheses):

Step 1: Goods are presented to customs. (CCC Art. 40) This usually is the responsibility of
the carrier and applies to all goods, irrespective of clearance method.
Step 2
: A summary declaration is presented to cust oms. (CCC Art. 43) This can be the
responsibility of the carrier, port or facility opera tor, or other person and takes the form of the
shipment-level detail manifest. Again, this applies to all goods, irrespective of clearance
method. Goods now have the status of being in temporary storage. (CCC Art. 50)
Step 3: Goods are assigned a customs approved treatme nt or use. (CCC Art. 48) This is
effected by making a declaration to place the goods under a customs procedure. The customs
procedure may be either a "normal procedure" (CCC Arts. 62-75) or a "simplified procedure"
(CCC Art. 76) Simplified procedures are furt her separated into three categories: local
clearance procedure (CCCIR Arts. 263-267), wa rehousing (CCCIR Art. 268), and simplified
declaration procedure. (CCCIR Arts. 269-271)

In sum, the procedures applicable for norma l clearance and clearance using local clearance
procedures are the same in the first two steps. At the third step, there is a separation. Where normal
procedures apply, the importer must make a full declaration, including supporting documents, and
afford the customs authorities the opportunity to ex amine the goods and take samples prior to release
for free circulation. (CCCIR, Arts. 239-252) Wher e local clearance procedures apply, the importer
notifies the customs authorities of arrival of the goo ds and enters the goods in its records, whereupon
they normally may be released for free circulation. (CCCIR, Art. 266). Under local clearance
procedures, a supplementary declaration is made afte r release. As described at paragraphs 109 to 116
of the First Written Submission of the United States, different member States administer the local
clearance procedures differently, including with respect to involvement of customs authorities prior to
release of goods, post-release requirements, and document retention requirements.

31. In paragraph 419 of its First Written Submission, the European Communities submits
that the United States' arguments with respect to local clearance procedures do not differentiate
between the summary declaration (dealt with in Article 43 of the Community Customs Code),
the local clearance notification (dealt with in Article 266 of the Implementing Regulation) and
the supplementary declaration (dealt with in Article 76(2) of the Community Customs Code)
and are, therefore, flawed. Please comment.

The lack of differentiation that the EC point s to does not affect the essential point of the
United States' discussion regarding local clearance pr ocedures. The lack of uniform administration
described in our First Written Submission exists whet her the particular stages in the clearance process
are separately articulated or not.

32. In paragraphs 220-221 of its First Wr itten Submission, the European Communities
submits that, where sub-federal laws exist in a particular WTO Member, it is the
administration of those laws to which Article X:3(a) of the GATT 1994 refers.

(a) Does Article X:3(a) apply to penal laws?

(b) If so, would the Panel be authorized to consider the administration of member
States' penal laws in respect of the United States' claim under Article X:3(a)?

We refer to our response to Question No. 29. As discussed there, penal laws for the violation
of customs laws are tools for the administration of those customs laws. They induce compliance with
the customs laws. To the extent different EC member States apply different pe nal laws to violations

of EC customs law, they administer EC customs law differently. Article X:3(a) requires WTO
Members to administer their customs laws uniformly. To the extent that penal laws are tools of
administration of customs laws and cause the administration of customs laws to be uniform or non-
uniform, Article X:3(a) applies to penal laws.

With respect to the second part of the Panel's qu estion, it is important to distinguish between
the administration of penal laws and the application of penal laws to administer customs laws of the
type described in Article X:1. For the reasons discussed in the preceding paragraph and in our
response to Question No. 29, the Panel is authori zed to consider penal laws as tools in the
administration of EC customs law in respect of the United States' claim under Article X:3(a). It is the
fact that different member States have different penal laws and therefore administer the underlying
EC customs law non-uniformly that is relevant to the United States' claim under Article X:3(a).
Whether each individual member State administer s its own penal law uniformly within its own
territory is not relevant to our claim.

The EC confuses this distinction by rejecti ng the proposition that laws may themselves be
administrative in nature. In its view, there is no su ch thing as a law that is administrative in nature.
Thus it states, "Where sub-federal laws exist in a particular WTO Member, it is therefore to the
administration of those laws that Article X:3(a) GATT refers."
64 It dismisses the possibility that laws
at the sub-federal level may be tools for administering laws at the federal level. Yet, that is precisely
what customs penalty provisions are. By suggesti ng that laws at the sub-federal level can never be
evaluated for Article X:3(a) purposes as tools for administering laws at the federal level, the EC reads
Article X:3(a) in a way that dramatically diminishes its effectiveness. By this logic, where federal
level customs laws are administered by sub-federa l authorities, almost any instance of non-uniform
administration at the federal level could be re-cast as a difference in substantive measures prescribed
at the sub-federal level, thereby enabling the federally organized WTO Member to avoid its obligation
of uniform administration. Such a reading of Article X:3(a), which deprives it of almost all utility
with respect to federal States, is contrary to customary rules of treaty interpretation of public
international law and must be rejected.

33. With respect to the four types of "customs procedures" that the United States alleges
are illustrative that EC customs rules are no t administered uniformly in the European
Communities (namely, audit following release for free circulation; penalties for infringements of
EC customs laws; processing under customs control; and local clearance procedures):

(a) Please provide all relevant statistical ev idence and/or other information to show
the incidence of non-uniform administ ration in the context of the overall
administration of the EC customs regime with respect to customs procedures.

(b) To what degree are the examples specific ally referred to by the United States in
its First Written Submission (concerning audit following release for free
circulation; penalties for infringements of EC customs laws; processing under
customs control; and local clearance pr ocedures): (i) representative of; (ii)
significant for; and (iii) have an impact on the administration of the EC rules on
customs procedures as a whole?

The US claim does not turn on the statistical frequency of non-uniform administration with
respect to customs procedures. We have re ferred to particular instances of non-uniform
administration with respect to customs procedures strictly by way of illustration, to demonstrate to the
Panel the real-world impact of what might otherwise seem to be an abstract and technical problem.

64EC First Written Submission, para. 221.

For purposes of the US claim, what is relevant is the fact that divergences occur and are not
reconciled, not the frequency of particular types of divergences. The EC itself acknowledges that
divergences occur 65 but argues that there are mechanisms in place to systematically reconcile such
divergences. The United States disagrees. The EC sy stem of customs law administration consists of
25 independent member State customs authorities w ith no central, EC authority or other, similar
mechanism overseeing their operation and reconciling di vergent administration. Instead, there is a
loose web of principles, instruments, and institu tions, including non-binding guidance, plus general
obligations of cooperation between member States, plus discreti onary referrals of matters to the
Customs Code Committee. That loose web of pr inciples, instruments, and institutions does not
provide the uniform administration of EC customs law required by Article X:3(a).

In any event, it is the EC, rather than the United States, that is likely to have the information
sought in this question. While the United States does not believe that the information at issue is
necessary for the Panel to find that the EC is not in compliance with its obligation of uniform
administration, the United States requests that the Pa nel exercise its authority under Article 13 of the
DSU to seek relevant information from the EC.

The United States recalls that in evaluating th e incidence of non-uniform administration with
respect to valuation rules, the EC's Court of Auditors had access to "documents handled in the
Customs Valuation Committee, customs authority va luation audit files, written valuation rulings,
decisions of appeal tribunals and the actual custom s declarations" for more than 200 companies and
groups of companies.
66 The United States has not had the benefit of such access with respect to any
of the matters at issue in this dispute. Therefore, it is difficult to respond directly to the Panel's
question. If the Panel were to exercise its authority under Article 13 of the DSU, it might seek
information of the type that was made available to the Court of Auditors in preparing its report on
valuation.

Additionally, the United States calls to the Panel's attention Exhibit US-33, which is the EC's
draft Modernized Customs Code. At page 4 of that document, the EC states, by way of introduction,
that "[a]n external study in 2003 has allowed the Commission to gain a clearer understanding of the
current situation in the member States and of the potential cost and benefits."
67 The United States
requested a copy of this study during consultations , but the EC declined to provide it. The United
States also suggests that the Panel request a copy of this study or draw an inference from the EC's
refusal to provide it. However, for the reasons discussed in above, the Panel should not need the
information sought by this question in order to conclude that the EC fails to comply with its obligation
of uniform administration of customs laws.

34. How does the United States ensure uniformity in administration of its customs laws at
different points of entry in the United States? In this regard, please provide details regarding
all relevant aspects of US customs administration, including in particular those aspects that are
not directly linked to the constitutional and institutional structure of US customs
administration.

The United States notes, first, that actions of US administrative agencies are not at issue in the
present dispute. Nevertheless, in the interest of illuminating the issues that are in dispute, the United
States answers as follows.

To achieve uniform customs administration, US Customs and Border Protection (CBP)
employs a variety of tools that apply to both first-instance decision making and correction of

65See, e.g., EC First Written Submission, paras. 144, 238, 396, 401, 426.
66Court of Auditors Valuation Report, para. 10 (Exhibit US-14).
67Draft Modernized Customs Code, p. 4 (Exhibit US-33).

inconsistent first-instance decisions.

With respect to first-instance decision making, CBP issues detailed regulations and further
elaborates on particular issues of interpretation or procedure through Directives, Handbooks and other
formal guidance to CBP officials. These are publishe d for wide circulation electronically and readily
available for consultation.

CBP also promotes first-instance uniform admi nistration through the direct intervention of
experts in the relevant subject areas. Thro ugh CBP's National Commodity Specialist Division
(NCSD), CBP supervises certain decisions on cust oms treatment by the Import Specialists who are
responsible for treatment decisions in the first instan ce in the ports of entry. Subject-matter experts at
CBP Headquarters also are in daily consultations with field officials as issues arise.

US customs administration also relies heavily on continuous dialogue with importers and
other interested persons under the principles of "informed compliance" and "reasonable care."

If definitive information is not available on a particular point, the importer may request a
binding ruling on any aspect of customs treatment. Rulings by the NCSD are issued within 30 days;
advance rulings issued by CBP Headquarters are issued, except in extraordinary circumstances, within
90 days. The Customs Rulings Online Search System (CROSS) is an essential tool of the binding
rulings program. Traders and customs officials cons tantly refer to the precedents published there for
guidance in deciding whether new rulings are needed and on the applicability of previous rulings to
rulings in preparation.

When CBP becomes aware of inconsistent decisi ons, it may correct any rulings less than 60
days old by simple notice to the recipient. More detailed procedures govern the modification or
revocation of decisions previously published more than 60 days earlier. Under section 625 of the
Tariff Act of 1930, as amended (19 USC 1625), an d CBP Regulations (19 CFR 177.12), CBP makes
appropriate corrections by giving public noti ce of the matter for consideration and CBP 's proposed
modification or revocation, inviting public commen t, and then publishing a revision that takes
account, as appropriate, of any public comment. Pu blication of a final section 625 modification or
revocation announces the customs treatment that will be given by CBP throughout the customs
territory of the United States with regard to the specific good or issue.

Another path for correction of non-uniform cu stoms treatment decisions is administrative
protest, pursuant to section 514 of the Tariff Act of 1930, as amended (19 USC 1514). Under this
procedure an importer can require CBP to examine and correct non-uniform decisions. Further, an
importer has the right to appeal final denial of a protest to the United States Court of International
Trade (CIT).

A trader has a right to quickly bring a protested customs decision before a review tribunal. A
trader exercises this right by requesting accelerated disposition by the port (19 CFR 174.22). Such a
protest not allowed within 30 days is deemed denied; the deemed denial is then ripe for appeal to the
CIT without further administrative action.

35. Please specifically identify what the United States is challenging/alleging under
Article X:3(b) of the GATT 1994 regarding:

(a) The level of bodies established to review customs decisions and the geographical
effect of their decisions (See paragraph 4 of the United States' First Written
Submission where it submits that appeals from customs decisions are a matter
for each member States and that, currently in the European Communities, there
are 25 different appellate regimes, none of which can yield a decision with EC-
wide effect);

(b) The procedures in member States regardi ng appeal mechanisms for review of
customs decisions (See paragraph 133 of the United States' First Written
Submission, where it notes that the "appellate mechanism in each member State
is different" and in paragraph 143 where it states that "appellate procedures
vary from member State to member State"); and

(c) Access on the part of traders to the European Court of Justice (See paragraph 5
of the United States' First Written Submission where it states that the European
Communities does not afford traders access to the European Court of Justice so
as to ensure, inter alia, prompt review and correction of customs decisions).

The United States is alleging that under Article X:3(b) of the GATT 1994, it is the WTO
Member (as opposed to regional subdivisions of the Member) that has an obligation to provide
tribunals or procedures for the prompt review a nd correction of administrative action relating to
customs matters; that the decisions of such tribuna ls or procedures must govern the practice of that
Member's agencies (here, the EC's agencies, as a whole, not just i ndividual member States' agencies);
and that Member's agencies must implement those decisions (again, EC agencies as a whole). The
United States also claims that the provision of tr ibunals or procedures by individual member States
within the EC does not satisfy the EC's obligati on under Article X:3(b), as the decisions of these
tribunals or procedures have effect only within their respective member States and not on EC agencies
generally.

The foregoing interpretation of Article X:3(b) is supported by the second sentence of that
provision, which states that the tribunals or pro cedures that a Member provides "shall be independent
of the agencies entrusted with administrative enfo rcement and their decisions shall be implemented
by, and shall govern the practice of, such agencies. . . ." (Emphasis added.) The phrase "shall govern
the practice of such agencies" re quires that enforcement agencies of a Member (here, the EC) follow
the reviewing tribunal's decisions. That is, that revi ewing tribunal's decisions must be effective with
respect to the Member's enforcement agencies, and not just some of them.

Where the German courts decide that a classification rule under the Common Customs Tariff
should be interpreted in a particular way, GATT Ar ticle X:3(b) requires that decision to govern the
practice of the EC's agencies entrusted with admini strative enforcement of the Tariff. But because
decisions of the German courts apply only to German agencies, they do not govern the practice of all
of the EC agencies entrusted with administrative enforcement of the Tariff.

With respect to procedures in member States regarding appeal mechanisms for review of
customs decisions, the only allegation the Unite d States is making is that, precisely because the
decisions by these appeal mechanisms do not have e ffect for some of the agencies of the EC, their
availability does not discharge the EC's obligation to provide tribunals or procedures for prompt
review and correction of customs decisions. The United States is not alleging, as the EC suggests,
68
that the procedures in member States would dischar ge the EC's obligation if they were sufficiently
prompt. The description of diverse member State appeal mechanisms set forth in our First Written
Submission was provided by way of background, to de monstrate that the non-uniformity that exists in
the administration of EC customs law carries through to the review of decisions by member State
customs authorities. In other words, the lack of uni formity of administration that exists in the first
instance is not cured by the EC by the provision of review tribunals or procedures that could render
decisions with effect throughout the territory of the EC and could, in theory, engender uniformity.

With respect to access on the part of traders to th e European Court of Justice, our allegation is

68EC Oral Statement, First Panel Meeting, paras. 72-77.

that the access the EC provides to this forum does not discharge the EC's obligation under
Article X:3(b). Even though decisions by the ECJ ma y have effect throughout the territory of the EC,
the time it takes for questions to get presented to and decided by the ECJ and the fact that, in general,
referral of questions to the ECJ is discretionary (except in the case of referrals by member State courts
from which there is no further appeal) means that the ECJ is not a tribunal or procedure for the prompt
review and correction of customs administrative decisions.

The EC evidently does not contest this allegation, as it argues that the tribunals or procedures
it provides for the prompt review and correction of customs administrative decisions are the member
State courts. In this view, the ECJ is not itself a forum for the prompt review and correction of
customs administrative decisions but, rather, an EC in stitution that assists the entities that are fora for
the prompt review and correction of customs administrative decisions. For the reasons discussed in
the first part of this response, the United States di sagrees with the EC's contention that member State
courts are fora that fulfill the EC's obligation of prompt review and correction.

36. What body(ies)/procedures are in place in the United States to discharge its obligations
under Article X:3(b) of the GATT 1994? Please explain how recourse to this(ese)
body(ies)/procedures works in practice.

The United States notes, first, that US institu tions and procedures are not at issue in the
present dispute. Nevertheless, in the interest of illuminating the issues that are in dispute, the United
States answers as follows.

The bodies in place in the United States to disch arge its obligations under Article X:3(b) are
the Office of Regulations and Rulings within US Cu stoms and Border Protection and the US Court of
International Trade (CIT). In general, a trader seeking review and correction of a customs decision
made at a port of entry may pursue one of two options. The first option is to seek review by the
Office of Regulations and Rulings, through a pro cess known as further review by Headquarters of
determinations on protests. Under this process, the Office of Regulations and Rulings provides
objective and impartial review of decisions made at the ports of entry. Its decisions are, in turn,
appealable to the CIT. The second option, as discuss ed in response to Question No. 34, is to request
accelerated administrative disposition of a protest by CBP, which permits the trader to begin a CIT
proceeding 30 days after making such a request if the protest is denied or merely not acted upon by
the port.

37. In paragraph 327 and footnote 162 of its First Written Submission, the European
Communities suggests that the United States' criti cism of the ECJ's decision to allow revocation
of binding tariff information in the Timmermans case is inconsistent with its criticism of a UK
court's decision to disallow revocation in the Bantex case. Please comment.

Precisely because the EC administers its cust oms laws through 25 different member State
authorities without any centralized customs administration or other mechanism for achieving
uniformity, both the situation described in Timmermans and the situation described in Bantex can
engender non-uniform administration. Under the Timmermans scenario, a customs authority can
revoke BTI on its own initiative notwithstanding the absence of any change in the underlying facts.
Where other authorities had relied upon and followed th e BTI issued by the first authority, there now
arises a non-uniformity. The other authorities are not required by EC law to revise their
classifications simply because the first authority decided on its own initiative to revoke BTI.

At the same time, the Bantex scenario may also give rise to a non-uniformity. This would
occur where a member State has i ssued BTI, then becomes aware of the existence of conflicting BTI
issued by other States, is persuaded that its initia l decision was in error and is unable to amend that
decision.

The seeming paradox that both of these scenarios may engender non-uniformity is resolved
when one recalls that there is no EC-level custom s authority or other mechanism to ensure uniform
administration. Conversely, if there were a centr al authority responsible for issuance of BTI, both
scenarios would be impossibilities. Any inconsistenc y that might emerge would be systematically
resolved at the EC level. That would be consistent with Article X:3(a). But, it is not what exists today
in the EC.

38. In paragraph 454 of the European Co mmunities' First Written Submission, the
European Communities submits that, since Article X:3(b) of the GATT 1994 refers to
"tribunals" and "procedures" in the plural, th is means that WTO Members may have several
tribunals, each of them covering a part of it s geography and being comp etent for the review of
the administrative decisions taken by their respective customs offices. Please comment.

The significance the EC attributes to use of the plural form in Article X:3(b) is not well
founded. Use of the plural form indicates a degree of flexibility. A WTO Member is not constrained
to have only a single tribunal or procedure, whether j udicial, arbitral or administrative, for the prompt
review and correction of administrative action re lating to customs matters. A Member might, for
example, provide a judicial tribunal but also give traders the option of seeking review and correction
by an arbitral tribunal (which might be quicker and less costly). Or, a Member might provide an
administrative tribunal for certain types of review (such as protests of classification or valuation
decisions) and a judicial tribunal for other types of review (such as the imposition of penalties).
Either of these scenarios would be consistent with use of the plural form in Article X:3(b). By
contrast, the EC's proposed interpretation would give a meaning to use of the plural form in
Article X:3(b) that is inconsistent with the require ment that the decisions of tribunals or procedures
for the review and correction of customs administ rative action govern the practice of "the agencies
entrusted with administrative enforcement."

It is not inconceivable that a WTO Member could provide several review tribunals or
procedures, each covering a different part of its geography, in a manner consistent with
Article X:3(b). What is important is that the d ecisions of these tribunals be given effect for the
Member's agencies as a whole, so as to govern the practice of the Member's agencies entrusted with
administrative enforcement of customs laws and not engender non-uniform enforcement. This might
be accomplished where a Member had a single, centra lized customs agency, required to give effect
throughout the Member's territory to the decisions of any tribunals reviewing its actions. In that case,
where the reviewing tribunal covering a given regi on issued a decision concerning interpretation of
classification rules, for example, th e customs agency could at once im plement the tribunal's decision
both in the particular region and throughout the cust oms territory. This woul d be consistent with
Article X:3(b). However, where – as in the EC – re view tribunals cover particular agencies and there
is no other mechanism to give eff ect to the decisions of individua l tribunals for the remaining EC
agencies (that is, the customs authorities of other member States), the geographical fragmentation of
review is inconsistent with Article X:3(b).

39. Please comment on paragraph 79 of the Eu ropean Communities' Oral Statement at the
first substantive meeting to the effect that, on average, review of the most recent 3 classification
cases by the USCIT took four years.

Preliminarily, the proposition for which the EC c ited the USCIT cases at issue is based on the
incorrect premise that the United States is challe nging the promptness (or lack of promptness) of
review and correction provided by EC member Stat e tribunals. As discussed in response to Question
No. 35, supra, the United States is not claiming that the EC would fulfill its obligation under GATT
Article X:3(b) but for the fact that the review pr ovided by member State tribunals is not prompt.
Accordingly, the point that the EC is trying to ma ke by referring to the time for disposition of cases
by the USCIT is entirely irrelevant.

Further, the actions of the USCIT are not at issu e in the present dispute. Nevertheless, in the
interest of illuminating the issues that are in dispute, the United States answers as follows.

First, the EC's discussion at paragraph 79 of its Oral Statement ignores the fact that in the US
courts the scheduling of proceedings is, to a signi ficant extent, conducted by mutual consent of the
parties, subject to the final control of the court. Th at was the approach taken in the three cases cited.
It is notable that the USCIT itself, once having heard the issues at trial or oral argument, rendered
decisions within, respectively, less than four months (Exhibit EC-99); less than four months
(Exhibit EC-100); and less than seven months (Exhibit EC-101).

Second, the EC exaggerates the time it took for the USCIT to decide the cited cases by
referring to the time from the filing of a formal summons to final disposition. While filing a summons
formally commences an action, the action does not really get underway until the plaintiff files a
complaint that sets forth his particular allegations. This may occur up to 18 months (or longer, by
request) after a summons is filed. Thus, in the case provided as Exhibit EC-101, for example, a
summons was filed in April 2001 but was not perf ected by submission of a complaint until April
2003.

40. How should "prompt" be defined under Article X:3(b) of the GATT 1994? Please
explain how this definition should be applied in practical terms.

The term "prompt" in GATT Article X:3(b) should be defined according to its ordinary
meaning, in context, and in light of the object and purpose of the GATT 1994. The ordinary meaning
of "prompt," as relevant here, is "without delay." What it means for action to be taken without delay
necessarily will depend on context. The word "prompt" does not, by itself, connote a particular
passage of time that will be relevant in all cont exts. In the context of review and correction of
administrative action, promptness may be a function, for example, of the complexity of the case.

From a practical point of view, it should not be necessary for this Panel to determine the
precise point at which review and correction ceases to be prompt. As discussed in response to
Question No. 35, it is not the claim of the United States that the EC would be in compliance with
Article X:3(b) but for the fact that the review and correction provided by member State tribunals is
not prompt. Rather, our claim is that given the fact that the decisions of member State tribunals do
not govern the practice of EC customs agencies in general, but only particular agencies in that
member State, the existence of these tribunals does not discharge the obligation of the EC under
Article X:3(b).

The only tribunal whose decisions can be given effect so as to govern the practice of EC
customs agencies in general is the ECJ. However, in light of the steps that must be taken in order to
get a question reviewed by the ECJ, the review provided by that forum cannot conceivably be
characterized as review "without delay." Accordi ngly, while another dispute may confront a panel
with the question of where to draw the line between prompt and not prompt, this Panel does not need
to answer that question.

QUESTIONS FOR BOTH PARTIES

89. Could a system in which it is primarily incumbent upon a trader to assert its rights to
achieve uniform administration on the part of the customs authorities in a particular WTO
Member (for example, by instituting appeals to complain about the decisions/treatment of those
customs authorities) comply with the obligations contained in Article X:3(a) of the GATT 1994?

It is difficult to answer this question without knowing about other features of the system
hypothesized. Depending on the mechanisms thr ough which traders asserted their rights, such a
system might comply with Article X:3(a). For example, a system in which a trader, upon

encountering a case of non-uniform administration, could appeal as a matter of right to a central
authority and obtain a resolution of the matter within a relatively brief, set period of time might
comply with that obligation. We would contrast this to a system in which the only way to reconcile a
non-uniformity as a matter of right is through protracted judicial review of each instance of non-
uniform administration separately. That system would not fulfil a Member's obligation under
Article X:3(a).

90. At paragraph 11.70 of its report, the Panel in Argentina – Hides and Leather stated that
"[t]he relevant question [in determining whether or not Article X:3(a) of the GATT 1994 is
applicable] is whether the substance of such a measure is administrative in nature or, instead,
involves substantive issues more properly deal t with under provisions of the GATT 1994".
Please provide your understanding of this statemen t, particularly the reference to "a measure
that is administrative in nature". In additi on, please explain in practical terms how the
distinction between measures that are administrative in nature and those that are not is relevant
for the application of Article X:3(a).

The United States understands the quoted statement from Argentina – Hides and Leather to
make clear that the fact that the tools for the administration of laws, regulations, decisions and rulings
of the kind described in paragraph 1 of Article X may take the form of measures does not put them
outside the scope of Article X:3(a). That article requires that certain specified measures of general
application be administered in a uniform manner. The obligation does not concern the substance of
the measures being administered but, rather, the ma nner in which they are administered. Thus, a
Member may (as is the case for a part of the US cl aims under Article X:3(a) in this dispute) challenge
the administration of a measure without challenging its substance (to use the terms in the Argentina –
Hides and Leather report).

However, the administration of measures may ta ke any number of forms, including ones that
are themselves measures. (For example, a penalt y provision is a measure that is a means of
administration of some other law or rule; it is a means of enforcing compliance with that underlying
law or rule.) The statement from Argentina – Hides and Leather emphasizes that measures may not
only be objects of administration, but also tools of administration of other measures. Furthermore,
measures that are tools of administration (rather than objects of administration) have administration as
their "substance" (again, using the terms employed by the Argentina – Hides and Leather Panel). So,
in the terminology of that report, measures that are administrative in nature are examined under
GATT Article X:3(a) for their "substance"; by contrast, measures that do not administer other
measures are examined under Article X:3(a) not for their "substance" but to see whether they are
being administered in a uniform manner.

The definition of "administrative" is "[p]erta ining to management of affairs; executive."
69
"Executive," in turn, means "[p]ertaining to executio n; having the function of putting something into
effect. . . ." 70 Thus, a measure is administrative in nature where it has the function of putting
something into effect. In other words, it presumes the existence of a distinct law, rule or other
measure and serves to execute or carry out that un derlying law, rule or other measure. Again, a
penalty measure is a good example. A penalty m easure necessarily presumes the existence of some
underlying measure. It makes no sense to speak of a penalty measure in the abstract, unconnected to a
particular measure that is sought to be enforced. A penalty measure has the function of putting into
effect underlying measures, such as customs laws.

Audit provisions are another good example. Aud it provisions do not exist independently of
the rules for which compliance is being audited. They have the function of putting rules into effect by

69The New Shorter Oxford English Dictionary, Vol. I, p. 28 (1993) (Exhibit US-54).
70The New Shorter Oxford English Dictionary, Vol. I, p. 877 (1993) (Exhibit US-55).

verifying compliance with those rules.

From a practical point of view, the nature of a measure as administrative is relevant to an
evaluation of compliance with Article X:3(a), b ecause such a measure provides evidence of how the
measures that it applies to are administered. If different regions within the territory of a WTO
Member use different administrative measures to put that Member's customs law into effect then, by
definition, the Member does not administer its customs law uniformly.

91. Please provide a copy of the list of proposals made by the United States contained in the
document entitled "Elements of Potential EC Customs Reform" dated 22 December 2004.

The list is included with this submission as Exhib it US-49. As the United States explained at
the first Panel meeting, we provided this list to the EC in December 2004 in an effort to reach a
mutually agreeable solution to the present disput e. The United States views pursuit of the proposals
on this list as a reasonable way for the EC to come into compliance with its obligations under
Article X:3 but does not view this as the only way for the EC to do so.

92. Please comment on paragraph 7 of its th ird party submission where the Separate
Customs Territory of Taiwan, Penghu, Kinmen and Matsu argues that the test of "minor
administrative variations" under Article X:3(a) of the GATT 1994 referred to by the GATT
Panel in EEC– Dessert Apples is not relevant for the present case. Does the applicability of this
test depend upon the existence of certain factua l/other circumstances? If so, please explain and
justify making reference to the specific terms of Article X:3(a).

We agree with the statement by the Separate Customs Territory of Taiwan, Penghu, Kinmen
and Matsu for the reasons set out in paragraph 7 of its third party submission. At issue in the EEC –
Dessert Apples dispute was the fact that different EC member States required applicants to complete
different forms for obtaining certain licenses. To the extent the GATT Panel found such
inconsistencies to be "minimal" it was because they did not have a material affect on traders. They
did not affect traders' liability for customs duties or other aspects of their ability to bring goods into
the territory of the EC and distribute and sell them in the EC. Conversely, in the present dispute, we
have provided evidence of a system that engend ers and fails to cure myriad divergences of
administration in matters that go to the core of cu stoms administration and affect traders' liability for
customs duty, as well as other aspects of their opera tions. Such divergences hardly can be described
as "minor administrative variations."

93. In paragraph 21 of its Oral Statement at th e first substantive meeting, the United States
submits that customs laws may be administe red through instruments which are themselves
laws, such as in the case of penalty laws.

(a) Please comment.

(b) Could this argument apply to all laws, regulations, judicial decisions and
 administrative rulings of general application referred to in Article X:1 of the
 GATT 1994?

(c) If so, please identify which types of laws, regulations, judicial decisions and
 administrative rulings of general application.

(d) What would be the impact and practical effect of such an interpretation on the
 administration of matters other than customs matters?

With respect to part (a) of this question, we refer the Panel to our responses to Question
Nos. 32 and 90.

With respect to parts (b) and (c), it is important to recall that the laws, regulations, judicial
decisions and administrative rulings of general a pplication referred to in Article X:1 of the GATT
1994 are the objects of administration under Article X:3(a). That is, they are the measures being
administered. In principle, any of these measures is capable of being administered through tools that
are themselves laws, regulations or other measure s. We see no basis for distinguishing between
measures of general application re ferred to in Article X:1 that are capable of being administered
through other measures that are administrative in na ture and measures of general application that are
not capable of being so administered.

With respect to part (d) of the question, we do not see the interpretation propounded as having
an impact or practical effect on administration per se. Under Article X:3(a), all of the measures of
general application referred to in Article X:1 mu st be administered in a uniform manner. That
obligation applies regardless of the form that the administration of a measure takes.

The argument at paragraph 21 of our Oral Stat ement was a rebuttal to the EC's argument that
differences in penalty provisions a nd audit procedures are outside the scope of Article X:3(a) because
they amount to differences of substance rather than differences of administration. The EC assumes,
incorrectly, that where provisions manifest themselves as laws, regulations, or other measures they
necessarily cannot serve the administration of othe r measures and provide evidence of non-uniformity
of administration of those other measures. Accordingl y, the EC contends that with respect to penalty
provisions and audit procedures, which in the EC ar e prescribed separately by each member State, the
only obligation under Article X:3(a) is that each me mber State administer its own penalty provisions
and audit procedures uniformly within its own territory.

We countered that the EC's argument glosses ove r the fact that measures may also serve an
administrative function. It ignores the character of penalty provisions and audit procedures as tools
for the administration of EC customs law. Viewed that way, differences in penalty provisions and
audit procedures from member St ate to member State are evid ence of non-uniformity in the
administration of EC customs law.

During discussion of this point at the first Panel meeting, the EC suggested that if the Panel
were to accept the US argument with respect to measures such as penalty provisions and audit
procedures, it would have widespread implications for matters covered by Article X:1 other than
customs matters. The EC noted that in addition to covering customs matters, Article X:1 covers
matters that commonly are regulated at regional levels of government, including the sale, distribution,
transportation, and insurance of imports. The EC suggested that the US argument concerning
penalties and audit procedures would require harmonization in these other areas as well.

The principal flaw in the EC argument remains its disregard of the distinction between
measures that are objects of administration and meas ures that serve in the administration of other
measures. The matters other than customs matter s described in Article X:1 – such as measures of
general application affecting the sale, distribution, transportation, and insurance of imports – are
distinguishable from penalty provisions and audit procedures inasmuch as they are objects of
administration rather than measures that serve an ad ministrative function. As explained in responses
to Question Nos. 29, 32, and 90, supra, penalty provisions and audit procedures necessarily presume
the existence of some underlying set of laws or rules a nd serve to carry out that set of laws or rules.
This is what makes them administrative in nature. On the other hand, Article X:3(a) requires that
measures affecting the sale, distribution, transpor tation, and insurance of imports themselves be
administered in a uniform manner over whatever re gion within the territory of a WTO Member they
apply. Therefore, accepting the US argument c oncerning penalty provisions and audit procedures
would not have the dramatic consequence that the EC suggests of compelling harmonization in a wide
array of non-customs areas.

94. With respect to the interpretation of the term "administration" in Article X:3(a) of the
GATT 1994, do the parties consider that a distinction should be drawn between, on the one
hand, administrative procedures applicable to and the treatment of traders and, on the other
hand, substantive decisions and the results of admi nistrative processes that affect traders? If so,
please explain the legal basis for the drawing of such a distinction.

The United States sees no basis in Article X:3(a) for the distinction in this question.
Article X:3(a) requires uniformity of administratio n and is indifferent to the different forms that
administration may take. This question identifies two alternative forms that administration may take –
i.e. administrative procedures applicable to and the treatment of traders, and substantive decisions and
the results of administrative processes that affect traders. By the former we understand the Panel to
mean, for example, penalty and audit procedures. By the latter we understand the Panel to mean, for
example, particular decisions with respect to classification and valuation. A WTO Member would not
comply with the obligation of uniform administration by having uniformity with respect to one of
these forms of administration but not the other.

QUESTIONS FOR THE PARTIES AND THIRD PARTIES

109. How should the term "administer" be int erpreted for the purposes of Article X:3(a) of
the GATT 1994?

Interpretation of the term "administer" is discussed at paragraphs 32 to 39 of the First Written
Submission of the United States. We also refer the Panel to our answers to Question Nos. 1, 12, and
23, supra. Finally, we refer the Panel to our answer to Question No. 90, in which we discuss the
meaning of the related term "administrative."

110. Does the uniformity obligation in Article X:3(a) of the GATT 1994 mean that there
should be no or only limited possibility for th e exercise of discretion in the administration of
customs laws?

It is not the case that the possibility of exercising discretion would always lead to
non-uniform administration of customs laws, in breach of GATT Article X:3(a). For example,
day-to-day operational exercises of discretion – for example, on whether to inspect a particular
shipment, whether to perform an audit of a particul ar importer, or whether to request supplemental
documentation in support of a requested classification – probably would not give rise to an absence of
uniformity of administration of customs laws.

111. Is the time taken to address a specific i ssue (including instances of divergences in
administration) a consideration to be taken in to account for the purposes of the uniformity
obligation in Article X:3(a) of the GATT 1994? If so, please explain why, making reference to
the specific terms of Article X:3(a).

The time taken to address a specific issue is a consideration to be taken into account for the
purposes of the uniformity obligation in Article X:3( a) of the GATT 1994. The time taken to address
an issue is relevant to the effectiveness of Artic le X:3(a). If a Member were permitted to allow non-
uniformity of administration to persist for indefi nite periods of time, as long as it cured the non-
uniformity eventually, the obligation of uniform ad ministration in Article X:3(a) would be rendered
meaningless. This would be contrary to the prin ciple of effectiveness in treaty interpretation, as
consistently recognized by the Appellate Body.
71

71See, e.g., Appellate Body Report, Argentina – Safeguard Measures on Imports of Footwear ,
WT/DS121/AB/R, para. 88 (adopted 12 January 2000); Appellate Body Report, Japan – Taxes on Alcoholic
Beverages, WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/R, p. 12 (adopted Nov. 1, 1996); Appellate Body

An illustration of the relevance of time to cons ideration of compliance with the obligation of
uniform administration is the case of differential a pproaches in the EC to the treatment for customs
valuation purposes of vehicle repair costs covered under warranty.72 In its report on administration of
valuation rules in the EC, the EC's Court of Aud itors stated that it brought this matter to the
Commission's attention in 1990. 73 In its First Written Submission, the EC states that it addressed the
non-uniformity at issue through the adoption of a regulation in 2002. 74 Thus, while the non-
uniformity of administration apparently was cured, it took 12 years to cure it. The United States
submits that an interpretation of Article X:3(a) unde r which a Member will be deemed to administer
its laws uniformly where it reconciles non-uniform administration 12 years after such administration
is brought to the attention of the relevant au thorities would render the obligation of uniform
administration a nullity, in contravention of the principle of effectiveness.

112. With respect to the WTO objective of securi ty and predictability in the international
trading environment (which was recently referred to by the Appellate Body in the context of
tariff commitments at paragraph 243 of its rep ort in EC – Chicken Cu ts WT/DS269/AB/R and
WT/DS286/R), please explain whether, why and how it is relevant for the interpretation of
Article X:3(a) of the GATT 1994.

As we discussed in our opening statement at the first Panel meeting, the EC suggests an
exceedingly narrow interpretation of Article X:3(a) of the GATT 1994.
75 It argues that the obligation
of uniform administration is subject to a variety of limitations, the net effect of which is to deprive the
obligation of uniform administration of any effectiv eness. Thus, the EC characterizes Article X:3(a)
as a "minimum standards" obligation, qualified by "p ractical realities," which is breached only when
non-uniform administration exhibits a particular pattern.76

The Panel should reject the EC's proposed interpretation of Article X:3(a) as lacking any basis
in the text and as inconsistent with the principl e of effectiveness. In this connection, it would
diminish an obligation in a covered agreement, contra ry to Article 3.2 of the DSU. As explained in
that article, the dispute settlement system provi des security and predictability through proper
interpretation of the covered agreements and by not adding to or diminishing the rights and
obligations of Members.77

113. Are the expectations of traders relevan t to an interpretation and application of
Articles X:3(a) and X:3(b) of the GATT 1994? If so, please explain why and how, making
reference to the specific language of those Articles.

The expectations of traders are relevant to an interpretation and application of Articles X:3(a)
and X:3(b). Under the customary rules of treaty in terpretation of public international law, a treaty
must be interpreted in accordance with the ordinary meaning to be given to its terms in their context
and in the light of the object and purpose of the treaty.
78 The text and context of Articles X:3(a) and

Report, United States – Standards for Reformulated and Conventional Gasoline, WT/DS2/AB/R, p. 23 (adopted
May 20, 1996).
72See US First Written Submission, paras. 88-89 (discussing Court of Auditors Valuation Report, paras.
73-74 (Exhibit US-14)).
73Court of Auditors Valuation Report, para. 73 (Exhibit US-14).
74EC First Written Submission, para. 397.
75US Oral Statement, First Panel Meeting, paras. 14-23.
76See EC Oral Statement, First Panel Meeting, para. 24; EC First Written Submission, paras. 235, 238,
241.
77The United States also notes that it questions the reference to "security and predictability in the
international trading environment" as an object and purpose of the WTO Agreement.
78Vienna Convention on the Law of Treaties, done at Vienna, 23 May 1969, 1155 U.N.T.S. 331, 8 ILM
679 (July 1969) ("VCLT"), Article 31(1).

X:3(b) indicates that the focus of Article X as a whol e is on fairness to traders. Thus, for example,
Article X:1 requires Members to publish certain meas ures of general application "promptly in such a
manner as to enable governments and traders to become acquainted with them." (Emphasis added.)
As the Panel in Argentina – Hides and Leather observed, "While it is normal that the GATT 1994
should require this sort of transparency between Members, it is significant that Article X:1 goes
further and specifically references the importance of tr ansparency to individual traders. . . . Thus, it
can be seen that Article X:3(a) requires an examination of the real effect that a measure might have on
traders operating in the commercial world."
79

Similarly, Article X:3(a) requires not only uni form administration, but also impartial and
reasonable administration of customs measures, and Article X:3(b) requires the provision of tribunals
or procedures for the prompt review and correction of customs administrative action. The Appellate
Body in US – Shrimp described these standards as pertaining to "transparency and procedural fairness
in the administration of trade regulations." 80 The obvious beneficiaries of the standards pertaining to
transparency and procedural fairness are traders.

Moreover, it is notable that the second sentence of Article X:3(b) requires that the practice of
agencies entrusted with the admi nistrative enforcement of custom s matters be governed by the
decisions of reviewing tribunals or procedures "unless an appeal is lodged with a court or tribunal of
superior jurisdiction within the time prescribed for appeals to be lodged by importers " (emphasis
added). In other words, a customs agency may app eal a tribunal's decision, and the tribunal's decision
need not govern the agency's practice during the pend ency of the appeal, but the agency may not be
allowed more time to lodge its appeal than importe rs would be allowed to lodge their appeals. The
reference to the time prescribed for appeals to be lodged by im porters as a benchmark is further
evidence that the text and context of Articles X:3(a) and X:3(b) supports a focus on traders.

114. Does the obligation contained in Arti cle X:3(a) of the GATT 1994 require overall
uniformity in administration or does it require un iformity in administration in each and every
case? Does the answer depend upon the nature of the challenge under Article X:3(a)? If so,
please explain. If overall uniformity is accepta ble under Article X:3(a), what would be the
practical/numerical threshold and/or benchmark for demonstrating that Article X:3(a) has been
violated?

Article X:3(a) does not specify whether it requires overall uniformity in administration or
uniformity in administration in each and every case. However, in the present dispute, the United
States is not challenging the EC for failing to achie ve uniformity in administration in each and every
case. It is challenging the EC for failing to achieve overall uniformity in administration of its customs
laws.

For the reasons set forth in our answers to Question Nos. 16, 24, and 33, supra, it is not
necessary to identify a practical/numerical thresh old and/or benchmark fo r demonstrating that
Article X:3(a) has been violated. What the Unite d States has demonstrated is that the system of
customs law administration in the EC – consisting of 25 independent authorities, with no central
agency or other mechanism to reconcile inconsiste ncies in administration among those authorities – is
such that it does not achieve the uniform administrati on that Article X:3(a) requires. As it is evidence
of how this system is designed and operates that show s the EC's failure to meet its obligation, what is
relevant is the fact that divergences occur and are not reconciled, not the frequency of particular types
of divergences.

115. Please comment on the submission made by Japan in paragraph 8 of its third party
submission to the effect that, in assessing the United States' claim under Article X:3(a) of the

79Panel Report, Argentina – Hides and Leather, paras. 11.76-11.77.

GATT 1994, it is necessary for the Panel to anal yze whether the alleged divergences exist, as
claimed by the United States, and if so, whether such divergences exist to a degree that would be
considered to be inconsistent with Article X:3(a) in light of the particular customs system as a
whole.

Please see the US answers to Qu estion Nos. 16, 24, 33, and 114, supra. Japan's suggestion
for assessing the United States' claim "in light of th e particular customs system as a whole" would
appear to carry a danger of creating a separate Article X:3(a) standard for every single WTO Member.
At issue is one of the most important aspects of the rules-based trading system, and assessment of
whether uniformity of administration is being achieved cannot vary in this fashion.

116. In paragraph 2 of Japan's Oral Statem ent at the third party session of the first
substantive meeting, Japan relies upon the "m inimum standards" of transparency and
procedural fairness referred to by the Appellate Body in US – Shrimp to argue that "[a]n
administration of regulations lacking 'uniform ity' [for the purposes of Article X:3(a) of the
GATT 1994] would in general terms be unjust, biased, inequitable, partial and opaque – in
other words, unfair and nontransparent". Fo llowing this line of reasoning, would the
requirements of transparency and procedural fairness apply to: (i) the processes or the
treatment of traders in the context of the applicat ion of customs laws; and/or (ii) the substantive
customs decisions to which traders are subject?

We refer the Panel to our response to Question No. 94, supra.

117. In paragraph 7.268 of its report, the Panel in US – Hot Rolled Steel (WT/DS184/R)
stated that "we note that Japan has not even alleged, much less established, a pattern of
decision-making with respect to the specific matters it is raising which would suggest a lack of
uniform, impartial and reasonable administration of the US anti-dumping law [under
Article X:3(a) of the GATT 1994]". Please comment on the Panel's finding that a pattern of
decision-making is needed in order to prove a violation of Article X:3(a).

We refer the Panel to our response to Question No. 9, supra.

118. What is meant by the words "pertaining to" in Article X:1 of the GATT 1994? Would
rules governing the operational procedures of bodies that oversee or are somehow involved in
the administration of customs laws – such as, for example, the EC Customs Code Committee –
qualify as laws, regulations, judicial decisions a nd administrative rulings of general application
"pertaining to" the classification or the valuation of products for customs purposes?

The words "pertaining to" in Article X:1 have thei r ordinary meaning, which, in this context,
is "[h]av[ing] reference or relation to."
81 These words stand in distinction to the word "affecting," the
other connector term in the first sentence of Artic le X:1. That is, the first sentence describes two
categories of laws, regulations, judicial decisions and administrative rulings of general application: (1)
those that pertain to certain subject matter, and (2) those that affect certain other subject matter. The
word "affecting," as used here, means "influenc[ing]."82

In the view of the United States, it is unlikel y that rules governing the operational procedures
of bodies that oversee or are somehow involved in the administration of customs laws – such as, for
example, the EC Customs Code Committee – would qualify as laws, regulations, judicial decisions
and administrative rulings of general application "per taining to" the classification or the valuation of
products for customs purposes. Such rules governing operational procedures may lack the relation to
the subject matter of classification and valuation necessary to qualify as "pertaining to" that subject

81The New Shorter Oxford English Dictionary, Vol. II, p. 2173 (1993) (Exhibit US-56).
82The New Shorter Oxford English Dictionary, Vol. I, p. 35 (1993) (Exhibit US-57).

matter.

119. Do penalty laws/provisions applicable to violations of customs laws fall within the scope
of the measures referred to in Article X:1 of the GATT 1994? If so, please explain making
reference to the relevant terms of Article X:1.

We refer the Panel to our responses to Question Nos. 29 and 32, supra.

120. What is the significance of Article XXIV:12 of the GATT 1994 for the interpretation of
Article X:3(a) of the GATT 1994?

In its First Submission, the EC suggests that its obligations under Article X:3(a) are somehow
qualified by Article XXIV:12.
83 This is not the case. Article XXIV:12 requires each WTO Member
to "take such reasonable measures as may be available to it to ensure observance of the provisions of
[the GATT] by the regional and local governments w ithin its territories." It is a recognition that for
certain WTO Members, particular regulatory matters implicated by GATT obligations may be
constitutionally outside the competence of the central government. In such cases, the central
government is required to take su ch reasonable measures as may be available to it to ensure that
regional and local governments comply with the releva nt obligations. As the EC itself has argued in
prior GATT disputes,
84 this is a narrow provision concer ning the implementation of certain
obligations. It is not a general excuse from or limitation on the applicability of Article X:3(a).
Indeed, the panels that have examined Article XXIV :12 have consistently recognized that it must be
construed narrowly, to avoid "imbalances in right s and obligations between unitary and federal
States."85

121. Making reference to the specific terms of Article X:3(b) of the GATT 1994, please
explain whether or not the obligation to ensure prompt review and correction of administrative
action is confined to first instance reviews by administering authorities.

Article X:3(b) refers to tribunals or proce dures for the "prompt review and correction of
administrative action relating to customs matters." It is "administrative" action that must be eligible
for prompt review and correction under this provisi on, as opposed to adjudicat ory action by inferior
tribunals or procedures. This reference suggests th at the obligation of prompt review and correction
applies to the first tribunal or procedure that a Member provides for the purpose of review and
correction that meets Article X:3(b)'s requirement of independence of the agencies entrusted with
administrative enforcement. This interpretati on is supported by the separate reference in
Article X:3(b) to appeals to a "court or tribunal of superior jurisdiction within the time prescribed for
appeals to be lodged by importers."

122. What does "correction" mean in Article X:3(b) of the GATT 1994?

We understand "correction" as used in Article X:3( b) to have its ordinary meaning, which in
this case is "[t]he action of pu tting right or indicating errors."
86 The tribunals or procedures that a
Member provides pursuant to Article X:3(b) must have the authority not only to review administrative

83EC First Written Submission, para. 220.
84See, e.g., GATT Panel Report, Import, Distribution and Sale of Alcoholic Drinks by Canadian
Provincial Marketing Agencies, L/6304, BISD 35S/37, para. 3.52 (adopted 22 March 1988).
85GATT Panel Report, Canada – Measures Affecting the Sale of Gold Coins , L/5863, paras. 63-64
(17 September 1985) (not adopted); see also GATT Panel Report, United States – Measures Affecting Alcoholic
and Malt Beverages , DS23/R, BISD 39S/206, para. 5.79 (adopted 19 June 1992) (supporting narrow
construction of Article XXIV:12).
86The New Shorter Oxford English Dictionary, Vol. I, p. 516 (1993) (Exhibit US-58).

action but also to put right errors made by th e administrative agencies whose actions they are
reviewing.

123. What is the legal relationship betw een Article X:3(a) of the GATT 1994 and
Article X:3(b) of the GATT 1994, if any?

Articles X:3(a) and X:3(b) each provide obliga tions concerning transparency and procedural
fairness to traders. As a legal matter, each subpa ragraph provides context for the interpretation of the
other in accordance with the customar y rules of treaty interpretation reflected in Article 31(1) of the
Vienna Convention.

ANNEX A-2

RESPONSES OF THE UNITED STATES TO QUESTIONS POSED BY
THE EUROPEAN COMMUNITIES AFTER THE FIRST SUBSTANTIVE MEETING

(23 September 2005)

1. In the United States, matters pertaining to taxes or other charges, or affecting the sale,
distribution, transportation, insurance, warehou sing inspection, exhibition, processing, mixing
or other use of products, are frequently governed by laws or regulations of the 50 states. The
content of such laws and regulations may var y considerably. Does the United States consider
that the administration of such state laws and regulations is uniform, as required by
Article X:3(a) GATT? Please explain.

The United States notes that the administration of measures of the United States is not at issue
in the present dispute. In addition, we note that the question by the European Communities (EC) does
not concern customs law, which is the type of me asure whose administration is in dispute in these
proceedings.
1 Finally, we do not understand the EC to be contending that its substantive customs law
varies from place to place within the territory of the European Communities.

2. Does the United States consider that the US Court of International Trade has provided
prompt review in the cases referred to as Exhibits EC-99 to EC-101? Please explain.

Please see the US answer to Panel Question No. 39.

3. According to US law (19 US 1515 [a], Exhibit EC-66), US Customs shall normally decide
on a protest within two years from the date the protest was filed. Does the United States
consider this provision to be in accordance with Article X:3(b) GATT? Please explain.

As was the case with Question No. 2, this qu estion appears to be based on the mistaken
premise that the United States is challenging the promptness (or lack of promptness) of review and
correction provided by EC member State tribunals. Further, the practices of US Customs are not at
issue in the present dispute. Nevertheless, in the in terest of illuminating the issues that are in dispute,
the United States answers as follows.

The United States considers that its system for the review and correction of customs
administrative decisions is entirely consistent w ith its obligations under GATT 1994 Article X:3(b).
Under the provision cited in this question, a protest filed by an importer serves to maintain the status
quo pending decision. If the importer prevails, he is entitled to accrued interest on any amounts to be
refunded. He is thus fully indemnified.

Moreover, an importer is not compelled to follow the protest procedure referred to in this

1Moreover, the premise to this question is incorrect, inasmuch as the scope of the laws and regulations
to which it refers does not reflect the text of Article X of the General Agreement on Tariffs and Trade 1994
("GATT 1994"). The obligation of uniform administration in Article X:3(a) concerns the administration of
laws, regulations, decisions and rulings of the kind described in Article X:1. The laws, regulations, decisions
and rulings of the kind described in Article X:1, in turn, are not laws, regulations, decisions and rulings
pertaining to any "taxes or other charges" – as this question suggests. Nor are they laws, regulations, decisions
and rulings affecting the sale, distribution, transporta tion, insurance, warehousing inspection, exhibition,
processing, mixing or other use "of products" generally – as the EC question also suggests. In both cases,
rather, Article X:1 establishes a link to "imports or exports," which this question ignores.

question. A trader is entitled to ask for accelerated disposition of a protest by the port. If the port
does not allow such a protest within 30 days it is d eemed denied; the deemed denial is then ripe for
appeal directly to the US Court of International Trade (USCIT) without further administrative action.

4. Under Article X:3(b) GATT, tribunals or pr ocedures for the review of customs decisions
shall be independent of the agencies entrusted with administrative enforcement. Does the United
States consider that the review provided by US Customs is in accordance with this
requirement? Please explain.

The United States notes that the review of cust oms administrative decisions in the United
States is not at issue in the present dispute. Nevertheless, in the interest of illuminating the issues that
are in dispute, the United States answers as follows.

The review provided by US Customs is in accordance with the requirement of Article X:3(b)
that a tribunal or procedure for review and correc tion be independent of the agencies entrusted with
administrative enforcement. The office in Cust oms that is responsible for reviewing customs
administrative actions is the Office of Regulations and Rulings, which is part of Customs and Border
Protection headquarters. That office is functiona lly independent of the ports whose decisions it
reviews. It comes under the jurisdiction of the A ssistant Commissioner of Cu stoms for the Office of
Regulations and Rulings whereas the ports come unde r the jurisdiction of the Assistant Commissioner
for Field Operations. And, as an office that is separate and independent from the ports, the Office of
Regulations and Rulings in fact provides for an objective and impartial review of administrative
action.

5. Does the United States consider that Article X:3(b) GATT requires WTO Members to
establish or maintain a tribunal for the review of customs decisions with competence for the
entire territory of the WTO Member in question? Does the United States consider that such a
tribunal must be a tribunal of first instance, or could it also be a tribunal of higher instance?
Please explain.

Please see the US answers to Panel Question Nos. 35 and 121.

ANNEX A-3

RESPONSES OF THE EUROPEAN COMMUNITIES TO QUESTIONS POSED BY THE
PANEL AFTER THE FIRST SUBSTANTIVE MEETING

(23 September 2005)

QUESTIONS FOR THE EUROPEAN COMMUNITIES:

41. As a matter of EC law, are the European Communities and/or the member States of the
European Communities responsible for discharging the obligations contained in Articles X:3(a)
and X:3(b) of the GATT 1994?
 As a matter of EC law, both the institutions of the European Communities (EC) and the
authorities of the member States, each of them acting within their sphere of competences, are
responsible for discharging the obligations contained in Articles X:3(a) and (b) GATT.
 As a matter of international law, the EC is so lely responsible for discharging the obligations
contained in Articles X:3(a) and (b) GATT.
42. As a matter of EC law, are the European Communities and/or the member States of the
European Communities responsible for the administration of: (a) Council Regulation (EEC) No.
2913/92 of 12 October 1992; (b) Commission Regulation (EEC) No. 2454/93 of 2 July 1993; (c)
the Integrated Tariff of the European Communi ties established by Council Regulation (EEC)
2658/87 of 23 July 1987?
 As a matter of EC law, both the institutions of the EC and the authorities of the member
States, each of them acting within their sphere of competences, are responsible for the administration
of the instruments referred to in the Panel's question.
43. The minutes of the DSB meeting held on 21 March 2005 (WT/DSB/M/186, para. 29)
record the European Communities as having st ated that the European Communities has in
place harmonized customs rules and institutio nal and administrative measures – enforced by
the Commission and the European Court of Justi ce – to prevent divergent practices. With
respect to those comments, please clarify which "divergent practices" the European
Communities was referring to?
 The EC was referring to any divergent practices which, in the absence of the EC instruments
currently in place to secure uniform administra tion, might arise in the area of EC customs
administration. The EC was not referring to any actual examples of divergent practices.
44. In paragraph 22 of its Oral Statement at the first substantive meeting, the European
Communities submits that, where laws and regulatio ns exist at a sub-federal level, all that
Article X:3(a) of the GATT 1994 requires is that such laws are administered in a uniform
manner in the area where they apply. How is th is argument relevant in the area of EC customs
law which is within the Community's exclusive competence?
 This argument is not relevant where the EC has exclusive competence, and where no laws of
the member States exist. However, the US claims also relate to areas where the EC does not have
exclusive competence, and where member States have legislated. One example is penalties for
violations of customs laws, which are set out in laws of the EC member States. Another example

might be the general administrative laws of the memb er States, where such laws are relevant to the
activities of the customs authorities in areas which are not harmonized by EC legislation.
45. In paragraph 16 of its Oral Statement at th e first substantive meeting, the United States
submits that "the EC suggests a limitation of 'p ractical realities' but identifies no standard by
which that limitation might be assessed. Similarly, while it asserts that 'a minimum degree of
non-uniformity is de facto unavoidable' it offers no standard for judging the degree of non-
uniformity that may exist without running afoul of Article X:3(a)". Please respond to the
United States' comments.

 The EC does not agree with the US comment. In paragraph 241 of its First Written
Submission, the EC has described the applicable standard as follows:
Accordingly, whether a particular member meets the requirement of
"uniformity" cannot be established merely by looking at an
individual example of practice. Rather, uniformity can be assessed
only on the basis of an overall pattern of customs administration.
Only if, on the basis of such general patterns, a WTO Member's
administration of its customs laws can be shown to be non-uniform,
is the standard of Article X:3(a) GATT violated.
This standard is fully based on the findings of the Panel in US – Hot Rolled Steel .
1 The same
approach was followed by the Panel in US – Corrosion-Resistant Steel Sunset Review.2
Several of the third parties have advocated a very similar test to be applied under
Article X:3(a) GATT. For instance, Australia has ar gued that "given the complex nature of customs
systems, some divergences may occur from time to time, but these should not be so widespread or
frequent as to render the customs administrati on inconsistent with Article X:3(a) GATT". 3 Similarly,
Japan has submitted the following:4
Therefore, if the Panel considers the cases referred to by the United
States as divergences, then furt her examination is necessary to
determine whether the EC's administration lacks uniformity to the
"degree" that would be inconsistent with Article X:3(a) of the GATT.
Such a determination should be based on whether the cases
mentioned by the United States are individual outcomes of the EC's
customs administration, or evidences of the non-uniformity of the
overall administration of the EC's customs regulation that may have a
significant impact on the competitive situation.
 It is noteworthy that in other cases, the United States has itself argued in favour a very similar
test. For instance, in US – Hot Rolled Steel, the US argued as follows:
5
The United States also warns that a distinction must be made
between the way one specific case was dealt with and the overall
administration of laws and regulations envisaged in Article X:3. The

 1 Panel Report, US – Hot Rolled Steel, para. 7.268.
 2 Panel Report, US – Corrosion Resistant Steel Sunset Review, para. 7.310.
 3 Australia, Oral Statement, para. 6.
 4 Japan, Oral Statement, para. 5.
 5 Panel Report, US – Hot Rolled Steel , para. 7.264. Similar arguments were also advanced by the
United States in Panel Report, US – Stainless Steel, para. 6.47.

United States stresses the fact that Japan is not arguing that the
overall AD practice of the United States is arbitrary or does not
ensure the necessary due process ri ghts, but only challenges the way
this case has been dealt with.
The US is therefore wrong to submit that the EC suggests no standard for the application of
Article X:3(a) GATT. The standard proposed is the one supported by the existing case law under
Article X:3(a) GATT, which has been endorsed by numerous members of the WTO, including the
United States itself.
At what point instances of non-uniformity would have to be regarded as so widespread and
frequent as to constitute an overall pa ttern of non-uniformity will have to be decided on the facts of
the particular case, taking into account the features of the system of customs administration in
question. However, that this standard is difficult to define in numerical term s in the abstract does not
mean it could not be applied by a Panel.
The United States has not provided a single example of lack of uniformity in the EC's system
of customs administration, let alone demonstrated the existence of an overall pattern of non-
uniformity. A small number of cases in a particular area clearly would not suffice for the purposes of
establishing an overall pattern of non-uniformity. Since the US has so far not come close to
discharging its burden of proof, the EC considers it di spensable for the Panel to define which specific
number of cases in a given area might constitute a pattern of non-uniformity.
46. In paragraph 25 of its Oral Statement at the first substantive meeting, the European
Communities submits that "there is a minimal threshold in Article X:3(a) of the GATT, which
implies that a variation in administrative pr actice must have a significant impact on the
administration of customs laws in order to consti tute a breach of Article X:3(a) GATT". Please
clarify in practical/quantitative terms what the European Communities means by a "minimal
threshold" in this respect.
In EEC – Dessert Apples, the Panel held that minor variations in the administrative practice of
EC member States could not be held to be contrary to Article X:3(a) GATT.
6
The EC believes that this minimum threshold reflects the fact that Article X:3(a) GATT does
not require uniformity for its own sake, but rather in tends to protect the interests of traders. This has
been recognized by the Panel in Argentina – Hides and Leather , which has stated that Article X:3(a)
GATT requires an examination of the real effect which a measure might have on traders:7
Thus, it can be seen that Article X:3(a) requires an examination of
the real effect that a measure might have on traders operating in the
commercial world. This, of course, does not require a showing of
trade damage, as that is generally not a requirement with respect to
violations of the GATT 1994. But it can involve an examination of
whether there is a possible impact on the competitive situation due to
alleged partiality, unreasonableness or lack of uniformity in the
application of customs rules, regulations, decisions, etc.
From the reports in EEC – Dessert Apples and Argentina – Hides and Leather , it can thus be
deduced that in order to constitute a violation of Article X:3(a) GATT, a pattern of non-uniformity in

 6 GATT Panel Report, EEC – Dessert Apples , para. 12.30 (for the full citation, cf. EC First Written
Submission, para. 233).
 7 Panel Report, Argentina – Hides and Leather, para. 11.77.

the administration of laws must have an impact on the competitive situation of traders, and that this
impact must be significant.
The EC does not contest that non-uniformity with respect to matters which have an impact on
customs duties owed by the trader could have a significant impact on the competitive situation, and
would thus be relevant under Article X:3(a) GATT. For this reason, differences in tariff classification
or customs valuation will, if they entail differen ces in duties payable, constitute more than a minor
variation from the point of view of Article X:3(a) GATT, provided they occur on a large scale.
However, the US has also rai sed claims regarding issues where there is no obvious impact on
the competitive situation of traders. One exampl e would be the alleged procedural differences
regarding the local clearance procedure, where it is not clear in which way such differences, even if
they existed, would have a significant impact on traders. 8 Another example would be the claims made
by the US regarding valuation audits.9
The EC would point out also that as the complaini ng party, it is for the US to show that there
is an impact on traders, and that such an impact is significant from the point of view of Article X:3(a)
GATT.
47. United States refers to divergent decisions taken by member State authorities
throughout its First Written Submission. For exampl e, the United States refers to divergence in
classification decisions: generally (paragraph 21); with respect to network cards for personal
computers (footnote 33); with respect to drip i rrigation product (footnote 33); and with respect
to unisex articles or shirts (paragraph 76). Fur ther, the United States refers to divergence in
customs valuation decisions (paragraphs 25 and 93). Can such divergence in decisions be
challenged under Article X:3(a) of the GATT 1994?
First, the EC would like to stress that it contest s that there is a divergence in decisions taken
by member States both generally and in respect of the specific issues referred to by the US.
10
Second, whereas individual decisions may constitute relevant evidence for establishing whether there
is a pattern of non-uniformity, individual decisions cannot be challenged under Article X:3(a) of the
GATT. In this respect, the EC can refer to its answer to the Panel's Question No. 45.
48. In paragraph 5 of its First Written Subm ission, the European Communities submits that
Article X:3(a) of the GATT 1994 is a provision laying down minimum standards for the
administration of customs law, not a legal basi s for harmonization of the systems of customs
administrations of WTO Members. In addition, in paragraphs 231 and 232 of its First Written
Submission, the European Communities submits th at, since Article X:3(a) only lays down
minimum standards, it does not oblige WTO Memb ers to meet the highest possible standards
achievable at a given point in time. Please explain what "minimum standards" are demanded
with respect to the uniformity obligation in Article X:3(a). Please explain in practical terms
how these "minimum standards" can and should be applied with respect to the specific areas of
customs administration referred to by the United States – namely, tariff classification, customs
valuation and customs procedures.
Article X:3(a) GATT merely requires that WTO Members administer the laws and
regulations covered in Article X:1 GATT in a unif orm manner. This means that on the basis of the

 10 Cf. EC First Written Submission, footnotes 158 and 177.

overall pattern of administration, the trader should have a reasonable assurance as to the way in which
the WTO Member in question will administer its laws and regulations.
In contrast, Article X:3(a) GATT does not specify in which way a WTO Member
should administer its laws and regulations, or wh ich tools it should employ in order to ensure
a uniform administration of such laws and regu lations. It is on this basis that the EC has
submitted that Article X:3(a) GATT is no basis for the harmonization of the customs laws of
WTO Members. That Article X:3(a) GATT is not a prescriptive provision has also been
stressed by a number of the third parties in the present case.11
49. Please comment on the substance of the follo wing statement by the Advocate General in
the Timmermans case (paragraph 41 of Exhibit US-21):
"... the tariff classification of equivalent goods cannot vary from
one member State to another according to the differing
assessments given by the various national customs authorities, as
this would fail to take into acco unt the objective of securing the
uniform application of the customs nomenclature within the
Community, which is intended, inter alia, to avoid the
development of discriminatory treatment as between the traders
concerned."
The EC agrees with this statement. Community law does not permit identical
12 goods to be
classified in different ways.
The EC would like to remark that in this respect, Community law is more demanding than
Article X:3(a) GATT, which is concerned only w ith the overall administration of a Member's laws
and regulations, and not with individual instances of tariff classification.
50. Please explain the purpose of binding tariff information, making reference to relevant
provisions of EC rules where possible. To the extent that there is any inconsistency, please
explain how such purpose can be reconciled with the following statement by the Advocate
General in the Timmermans case (Exhibit US-21, para. 60): "As regards the objective of the
uniform application of the customs nomenclature , I consider that, while a Commission decision
ordering the revocation of BTI is necessarily aimed at, and has the effect of, ensuring the
correct and uniform application of the customs nomenclature, the same cannot be said of the
practice whereby the customs authorities decide at their own discretion to revoke BTI which
they have issued following a change in their own interpretation of the relevant nomenclature,
even though, in so doing, the authorities in question may be motivated by the desire to align
their interpretation with that given by other customs authorities".
The purpose of binding tariff information is to provide holders with a measure of legal
certainty as regards the tariff classification of goods throughout the EC. To this extent, BTI also has
the objective of contributing to the uniform administration of tariff classification rules throughout the
EC.

 12 The EC understands as "identical" goods which correspond to one another in all respects which are
relevant for the tariff classification in question. It appears that the Advocate General used the term "equivalent"
in the same sense.

This objective can be deduced from numerous provisions of Community law concerning the
granting and effect of binding tariff information, in particular Article 12 of the CCC and Articles 5,
10, and 11 of the Implementing Regulation.
The EC disagrees with the statement of Advo cate General Léger referred to above. The
statement of the Advocate General assumes that a re vocation of BTI could be decided by the customs
authorities "at their own discretion". The correct clas sification in the combined nomenclature is not a
matter of discretion, and neither is the revocation of BTI which has been found to be incompatible
with the combined nomenclature. Similarly, the cu stoms authorities must not align themselves to just
any interpretation of the combined nomenclature, but to the correct interpretation.
Furthermore, it must be remembered that like the Commission, the customs authorities of the
member States are bound by the combined nomenclat ure, which they must interpret and apply
correctly. Therefore, the Advocate General is wrong to suggest that unlike a revocation by the
Commission, a revocation by the customs authoritie s of a member State cannot be assumed to serve
the purpose of a uniform interpretation of the Combined Nomenclature.
It is important to note that the Advocate General was not followed by the Court in
Timmermans. In its judgment, the Court did not refer to any discretion to be exercised by the customs
authorities. Rather, the Court made clear that the Cust oms authorities may revoke the BTI only if it is
wrong:
13
The issue of a BTI is made on the basis of an interpretation by the
customs authorities of the legal provisions applicable to the tariff
classification of the goods concerned and is subject to proper
justification for that interpretation.
Where, on more detailed examination, it appears to the customs
authorities that that interpretation is wrong
, following an error of
assessment or evolution in the thinking in relation to tariff
classification, they are entitled to co nsider that one of the conditions
laid down for the issue of a BTI is no longer fulfilled and to revoke
that BTI with a view to amending the tariff classification of the
goods concerned.
That the application of this case law helps, rath er than hinders, the uniform application of EC
customs law is convincingly illustrated by the Bantex case, in which the UK customs authorities
relied on the Timmermans judgment to revoke a BTI wh ich had erroneously been issued contrary to
an applicable classification regulation.
14
On a more general note, the EC would like to remark that opinions of Advocate Generals are
not legally binding in any sense, and are of limite d legal value. The opinion rendered by an Advocate
General is not in any way biding on the Court, and does not form part of its judgment. Rather, as the
Court of Justice has clarified, it constitutes an "individual reasoned opinion" of the Advocate General
as a Member of the Court of Justice.15
The opinion of the Advocate General may provide useful background for the interpretation of
a judgment of the Court of Justice where the Cour t has followed the Advocate General. In contrast,

 13 Exhibit US-2, paras. 24-25 (emphasis added).
 14 Cf. EC First Written Submission, fn. 162 and para. 469.
 15 Order of the Court of Justice, Case C-17/18, Emesa Sugar, [2000] ECR I-665, para. 14 (Exhibit EC-
102).

where, as in Timmermans, the Court has not follo wed the Advocate General, the Opinion of the
Advocate General is of very limited legal releva nce, and cannot be relied upon for ascertaining the
correct interpretation of EC law.
51. Article 11 of the Implementing Regulation provides that "[b]inding tariff information
supplied by the customs authorities of a member State since 1 January 1991 shall become
binding on the competent authorities of all the member States under the same conditions". In
light of this provision:

(a) Please identify the practical measur es in place to enforce Article 11 of the
Implementing Regulation and explain how those practical measures operate in
practice.
 Article 11 is contained in a regulation of the European Commissi on. In accordance with
Article 249 (2) EC Treaty, a regulation is binding in its entirety and directly applicable in all member
States. Accordingly, no further general measures ar e necessary to ensure th e applicability of this
provision.

 Should a member State fail to respect its obligation under Article 11 of the Implementing
Regulation, the normal mechanisms for securing the application of Community law would apply. Any
holder of BTI which is not recognized contrary to the provisions of Community law could obtain
judicial protection before the courts of the memb er State in question. In addition, the European
Commission could bring infringement proceedings against a member State which does not respect its
obligation to recognize BTI.

(b) Please explain whether and, if so, in what circumstances, binding tariff
information that is issued by one member State is binding on the competent
authorities of other member States, making reference to all relevant EC rules.
 Article 5 Nr. 1 of the Implementing Regul ation provides that BTI is binding on the
administrations of all member States when the cond itions laid down in Articles 6 and 7 are fulfilled.
Accordingly, all BTI issued in accordance with Comm unity law, and which continues to be valid, is
binding on the competent authorities of all member States.

(c) Are there any circumstances when binding tariff information that is issued by
one member State is not binding on the competent authorities of other member
States? If so, please explain in what ci rcumstances that will be the case, making
reference to all relevant EC rules.
 No. If BTI is binding on one member State, it is binding on all member States, and vice versa.
As regards the conditions under which BTI may cease to be valid, the EC can refer to paragraph 115
of its First Written Submission.
52. Article 8.1 of the Implementing Regulation provides that "[a] copy of the binding tariff
information notified ... and the facts ... shall be transmitted to the Commission without delay by
the customs authorities of the member State co ncerned". Does the transmission of binding
tariff information from customs authorities to th e Commission contemplated by Article 8.1 of
the Implementing Regulation occur in practice? What does the Commission do with the
binding tariff information once notified pursuant to Article 8.1 of the Implementing
Regulation?
 The transmission of binding tariff information from the customs authorities to the
Commission contemplated by Article 8.1 of the Implementing Regulation does occur in practice. The

data received by the Commission is introduced into th e EBTI data base in accordance with Article 8.3
of the Implementing Regulation.
53. Article 10(2)(a) of the Implementing Regulation provides that the customs authorities
may require the holder of binding tariff informat ion, when fulfilling customs formalities, to
inform the customs authorities that he is in po ssession of binding tariff information in respect of
goods being cleared through customs. Please provide evidence of how often and in what
circumstances customs authorities exercise thei r discretion in Article 10(2)(a) to require
disclosure of relevant binding tariff information.
Member States may invoke Article 10 (2) (a) of the Implementing Regulation wherever this is
warranted by the particular circumstances of the case, in particular if there is a doubt about the correct
classification of the good and if there is a suspicion that the trader may be in possession of BTI. The
member States and the European Commission do not keep statistics on the number of times this
provision is invoked.
54. Please comment on the EC Commission's statement at page 12 of An Explanatory
Introduction to the modernized Customs Code (E xhibit US-32) that "it is proposed to extend
the binding effect of [binding tariff information] al so to the holder(s) of the decision in order to
avoid the system only being used where the applican t is satisfied with the result" in light of
paragraph 308 of the European Communities' First Written Submission calling into question
the United States' submission that binding tariff information is not binding on holders thereof.
Currently, BTI is binding only on the customs authorities (cf. Article 5 of the Implementing
Regulation). In contrast, no provision currently pr ovides that BTI is binding on the holder, although
the customs authorities may, on the basis of Ar ticle 10 (2) (a) of the Implementing Regulation,
require the holder to inform them , when fulfilling customs formalities, that he is in the possession of
BTI.
The Commission services are currently consideri ng including a provision in the modernized
customs code which would render BTI binding al so on the holder. The provision as currently
envisaged would read as follows:16
Classification or origin decisions shall be binding only in respect of
the tariff classification or determination of the origin of goods and on
– the customs authorities, as against the holder, only in respect of
goods on which customs formalities ar e completed after the date of
the decision;
– on the holder, as against the customs authorities, from the date he
receives notification of the decision.
 The objective of such a provision would be to achieve a balance of obligations between the
customs authorities and the holder, and to further incr ease the transparency of the BTI system. In this
way, the provision in question reflects the EC's commitment to the continuous development and
modernization of EC customs legislation.
In contrast, the EC does not consider that the provision in question is in any way essential for
compliance with the EC's obligation under Article X:3(a) GATT. As the EC has already explained, 17

 16 Exhibit US-33, Article 14 (3). It should be stresse d that this provision, as all other provisions in
Exhibit US-33, is purely a working text, and does not constitute the official position of the European
Commission, or of any other EC institution.

BTI is granted primarily for the benefit of the hol der, who can therefore normally be expected to
invoke it. If the holder is dissatisfied with the BTI he has received, the normal course of action would
be for the holder to challenge the BTI in the cour ts. Moreover, there is no reason to assume that other
EC customs authorities would classify the good in question differently just because the BTI is not
invoked.
Finally, it should be noted that the version of the EBTI data base available to the customs
authorities allows the customs authorities to search for the name of the applicant or of the holder.
18
Accordingly, if there is a suspicion that a particular trader may be a holder of BTI for the goods in
question, this can easily be confirmed through consultation of the data base.
55. In light of the "Administrative Guidelin es on the European Binding Tariff Information
(EBTI) System and its Operation" (Exhibit EC-32), which expressly state that the Guidelines
are not legally binding, are customs authorities required to make referen ce to the EBTI system
before issuing binding tariff information? If so , please indicate the legal basis for such an
obligation and the circumstances in which reference to the EBTI system is required

The Administrative Guidelines as such are not legally binding. However, in the
administration of EC customs law, all member States are bound by the duty of cooperation (Article 10
EC).
This means that member States must take due account of the administrative guidelines.
Moreover, they must use all tools available to en sure the proper and uniform administration of EC
customs law. In this context, it is noted that th e establishment of the EBTI data base is explicitly
foreseen in Article 8 (3) of the Implementing Regulation.
On this basis, member States are required to duly consult the EBTI data base in all
appropriate cases. In which specific cases consultation of the EBTI data basis should occur, and how
extensive a particular search should be, has to be de termined on a case-by-case basis. In this context,
the EC member States are guided by the criteria set out in the Administrative Guidelines on the EBTI
system.19
56. The "Administrative Guidelines on the European Binding Tariff Information (EBTI)
System and its Operation" state at page 8 that, where two or more member States disagree on
the correct classification fo r a particular good, the Custom s Code Committee should be
informed. Please explain the practical mechanis ms in place to ensure that the Customs Code
Committee is duly informed in such circumstances.
 As a first step, the member States concer ned should consult with one another. Such
consultation can be done through any appropriate means. member States have a list of contact persons
in each customs authority which they can contact in such cases, which is made available to the
member States through the Circa Extranet.
 If the disagreement persists, the matter must be raised to the Customs Code Committee. In
legal terms, the basis for this is Article 249 CCC and Article 8 of Regulation 2658/87, according to
which the Customs Code Committee may examine any question concerning customs legislation or the
common customs tariff, either at the initiative of the chairman or at the request of a member State's
representative. In practice, the responsible offici al in the member State concerned will submit the

 17 Cf. EC First Written Submission, para. 309.
 19 Cf. Exhibit EC-32, p. 7.

issue to the Commission, which will then put it on the agenda of the Customs Code Committee in
accordance with Article 3 (2) (c) of the Committee's Rules of Procedure.20
57. In paragraph 320 of its First Written Submission, when discussing the utility of the
EBTI system for detecting divergences in binding tariff information issued by different customs
authorities, the European Communities concedes that product descriptions might vary but that
searches can be undertaken using a variety of ot her parameters. Please explain using concrete
examples which parameters could be used in or der to ensure that such divergences can be
detected.
 First of all, it appears necessary to recall that there are two versions of the EBTI data base,
one available to the public, the other, containing additional information, accessible to the Commission
and the customs authorities of the member States. 21 The EC understands the Panel's question to relate
to the public version of the data base.
The public version of the EBTI data base allo ws searches of valid BTI by issuing country,
start and end date of validity, BTI reference, CN code, keyword, or product description. As the EC
has explained, the keyword facility also includes a translation facility, which allows translation of
keywords into the official Community languages.
Typically, therefore, if a search using the product description does not yield results, a
promising search strategy will be to identify th e CN codes which might be considered for the
classification of the products, and to search them using appropriate keywords.
Furthermore, to help enquiries using keywor ds, the enquirer can make a "keyword search".
Such a search reveals all keywords available in alph abetical order. To use the keyword search, the
enquirer need only insert the first few letters of a word and all words in the browse that begin with
those letters will be shown.
Finally, it should be mentioned that BTI of ten also contain an image of the product
concerned, which will help with assessing whether a product classified in an existing BTI is
identical to the product being considered by the enquirer
58. With respect to the work undertaken by the Customs Code Committee:
(a) In respect of which specific customs matters does the Customs Code Committee
have the authority to reconcile differences among the member States?
 On the basis of Article 249 CCC, the Custom s Code Committee may deal with any issue
concerning the interpretation or application of custom s legislation. Similarly, on the basis of Article 8
of Regulation 2658/87, the Committee may deal with any matter concerning the Combined
Nomenclature or the Taric nomenclature.
With respect to the present and the following ques tions, the EC would like to clarify that it is
not entirely precise to refer to the Committee as "rec onciling differences". In particular, this is not
correct in all cases where the Committee is consulted on measures intended to ensure uniformity, such
as for instance classification regulations or explanator y notes. In these cases, it is the instrument itself
which will ensure a uniform application of Community law; it is not the Committee as such which is
"reconciling" a difference.
(b) As a practical matter, how does the Customs Code Committee prioritize matters
before it?

 20 Exhibit US-9.

First of all, the work of the Committee is carried out in the various sections of the Committee,
as listed in Article 1 (1) of the Committee's Rules of Procedure.
For each meeting of the Committee, the Chairm an will draw up the agenda in accordance
with Article 3 of the Committee's Rules of Procedur e. The agenda will include all matters put before
the Committee by the Commission, including drafts of all measures on which the Committee is to be
consulted under the comitology procedure, as we ll as all matters referred to the Committee by a
member State.
From a practical point of view, the Chairman may tend to address more urgent matters earlier
than less urgent matters. However, the Committee w ill address all issues that need attention at a given
point in time.
(c) How frequently do each of the various sections of the Customs Code Committee
meet?
 From 2002 to 2004, the number of meetings of the Customs Code Co mmittee has been as
follows:

2002 Total number of meetings of the Customs Code Com. 77

2002 Total number of days 113,5

2003 Total number of meetings of the Customs Code Com. 47

2003 Total number of days 77,5

2004 Total number of meetings of the Customs Code Com 85

2004 Total number of days 118,5

An overview of the number of meetings per section is provided as Exhibit EC-103.
(d) Can working groups of the Customs Code Committee make decisions and/or
take action that could be considered as decisions/action of the Customs Code
Committee? If so, please identify the types of decisions/action.
 No. Working groups merely prepare the work of the Committee.

(e) In paragraph 87 of its First Wri tten Submission, the European Communities
submits that, where justified by the complexity of a particular issue, the
Customs Code Committee may hear repre sentatives of the concerned industry
or traders and has done so in the past. Please identify the number of occasions
and circumstances in which industry rep resentatives and traders were consulted
by the Customs Code Committee.
 A list of organizations and traders invited to take part in meetings of the Customs Code
Committee with indication of the subject, number of the meeting and the day in which it took place is
attached as Exhibit EC-126. It covers the period from end-1999 to today.

(f) What criteria does the Customs Code Committee rely upon in determining
whether or not divergence in a particular area of customs administration should
be the subject of an EC Regulation?

A regulation will always be an act of the Comm ission, not of the Committee. Therefore, it is
in the first place the Commission, not the Committe e which must decide whether a regulation would
be the appropriate measure. Where required by Community law, the Committee will of course be
consulted on the proposed measure in accordance with the applicable comitology procedure.
The question whether a specific matter should be addressed through a regulation or through
other instruments cannot be answered in general, but would depend on the specific issue in question.
One relevant factor would certainly be whether th e issue must be addressed through an instrument
which is legally binding and directly applicable in all member States, in which case a regulation might
be the preferred instrument.
(g) In paragraph 277 of its First Writte n Submission, the European Communities
submits that "[d]ocuments relating to the Customs Code Committee, including
agendas and summary records of meetings, are available on the public register
of comitology of the European Commissi on, which is available to the public
through the internet". The excerpt of the webpage through which these
documents are available (contained in Exhibit EC-73) states that the "register
does not contain those documents that are not sent to the European Parliament".
Does this mean that agendas and summary records of meetings are sent to the
European Parliament? Which other documents "relating to the Customs Code
Committee" are available through the relevant website?
 Yes, agendas and summary records are sent to the European Parliament. Generally speaking,
no other documents are available through the relevant website.

(h) Could the exception contained in Article 4(3) of Regulation (EC) No. 1049/2001
of the European Parliament and of the Council of 30 May 2001 regarding public
access to European Parliament, Counc il and Commission documents (Exhibit
EC-74) ever be invoked with respect to any documents prepared by the Customs
Code Committee? If so, please expl ain in what circumstances, providing
relevant practical examples, if possible.
 The exception contained in Article 4(3) of Regulation (EC) No. 1049/2001 can in principle
also apply to documents relating to the Customs Code Committee. In accordance with Article 4 (3),
this would require that disclosure of the docum ent would seriously undermine the institution's
decision-making process.
This provision has been invoked in one cas e concerning access to working documents of a
working group of the Tariff and Statistical Nomenc lature Section of the Customs Code Committee.
An annulment action against the decision to re fuse access to the documents is currently pending
before the Court of First Instance.
(i) Regarding binding tariff information:
(i) For the purposes of Article 9 of the Implementing Regulation, how are
differences in binding tariff information identified?
 As the EC has already set out in its First Written Submission,
22 differences in tariff
classification may be identified in a number of ways. First, the difference may be noted by the
customs authorities in the course of their normal work when classifying products or deciding on
requests for BTI. One tool throu gh which the customs authorities may detect divergences is the EBTI
data basis. However, customs authorities may also learn about divergent practices in other ways, e.g.,

through discussions of classification issues with their contact points in other administrations or within
the Customs Code Committee, or through public sources.
Moreover, traders may also draw the attention of the member States' customs authorities or of
the Commission to the existence of practices in the field of tariff classification.
(ii) How are differences in binding tariff information brought to the
attention of the Committee?
 The EC can refer to its answer to the Panel's Question No. 56.

(iii) Please explain in practical terms how the Committee reconciles
differences in binding tariff informatio n that are brought to its attention
pursuant to Article 9 of the Implementing Regulation. Please make
reference to any relevant examples.
 The Committee
23 is frequently asked to give an opinion on measures proposed by the
Commission which will secure a uniform application of the CN, such as classification regulations and
EC explanatory notes. In addition, the Committee also may adopt opinions on specific issues of tariff
classification, which will be reflected in the records of its meetings.

(iv) How many cases of differences in binding tariff information have been
put forward to the Committee for re conciliation? How did those cases
come to be on the Committee's agenda? What was the outcome in each
of those cases, including the propos als made by the Committee and the
action taken by the EC Commission, if any? How long did it take to
resolve those cases?
 Given the short amount of time available, the EC is not yet able to provide an answer to this
part of the question. The EC will provide its answer to this part of the Panel's question as soon as
possible.
(Reply received on 3 October 2005):
From 1.1.2000 until today, 196 cases involving perceived divergences between BTIs have
come before the Customs Code Committee.
Out of these cases, 178 were referred by the customs authorities of one or more member
States, whereas 18 were brought before the Committee by the Commission.
3 of these cases were resolved following a judgmen t of the Court of Justice, 78 led to the
adoption of a classification regulation by the Commission, 9 to the adoption of a CN explanatory note,
3 to the adoption of a Commission decision on the inva lidation of BTI, 43 cases led to conclusions of
the Committee, and in 4 cases, the matter was submitted to the HS committee.
The average processing time until conclusion has been about 13 months. This average
includes periods necessary for translation of lega l measures and internal decision-making of the
European Commission.

(j) Regarding customs valuation:
(i) In paragraph 77 of its First Written Submission, the United States
submits that the Customs Code Committee does not have the authority

 23 On the term "reconciliation", cf. above the EC's answer to Question No. 58 (a).

to examine individual customs valuation cases with a view to reconciling
differences in administration from member State to member State.
Please comment.
 In accordance with Article 249 CCC, the Co mmittee may address any question concerning
customs legislation, including valuation issu es. The Committee may thus examine any question
regarding the interpretation and application of valuation rules, including the question whether
divergences have occurred in particular instances.
Another matter is that the function of the Committee is not to administer valuation rules in
individual instances. Accordingly, the Committee will not substitute itself for the individual customs
authorities or the competent courts of the member States in pending cases.
(ii) In what circumstances will/must the Customs Code Committee consider
divergences among member States in their application of EC rules on
customs valuation?
 The Committee will consider any divergence in th e application of EC valuation rules which is
brought before it by the Commission or a member State.

(iii) Please explain in practical terms how the Committee reconciles
differences in the application of EC rules on customs valuation. Please
make reference to any relevant examples.
 The Committee may issue opinions, which can ta ke the form of conclusions or commentaries
to the EC valuation rules. The conclusions of the Committee are contained in the EC Valuation
Compendium.
24 The Commission will also consult the Committee on any draft amendments to the
valuation rules contained in the Implementing Regulation.

(iv) How many cases of divergences in application of rules on customs
valuation have been put forward to the Committee for reconciliation?
How did those cases come to be on the Committee's agenda? What was
the outcome in each of those cases, including proposals made by the
Committee and the action taken by the EC Commission, if any? How
long did it take to resolve those cases?
 An overview of issues discussed in the valua tion section of the Customs Code Committee in
the 3-year period from mid 2002 to mid 2005 is attached as Exhibit EC-104.

(v) In paragraph 29 of the Commission's replies to the Court of Auditors
Special Report No 23/2000 concerning valuation of imported goods for
customs purposes (Exhibit US-14), the Commission states that "[u]nder
the rules of the Customs Code regarding the Valuation Committee the
Commission has no power to ask member States' administration to
render account of the treatment applie d to a given operator in each of
these states. The Code Committee tries to establish rules, guidelines or
other conclusions, usually without examining individual cases". Please
comment.

 24 Cf. EC First Written Submission, para. 130, and Exhibit EC-37.

It is correct that under the Rules of Procedur e of the Customs Code Committee, there is no
specific provision given the Commission a power to ask member States' to provide specific
information.
However, in the administration of customs laws , as in the administration of EC law generally,
member States are bound by the duty of cooperation (Article 10 EC). This duty of cooperation implies
a duty of facilitating the Commission's tasks as guardian of the Treaty, including a duty to provide all
information which is necessary for the Commission in order to ascertain whether member States have
applied Community law correctly. This has been explicitly confirmed by the European Court of
Justice in its case law:
25
The member States are under a duty, by virtue of Article 5 of the
Treaty, to facilitate the achievement of the Commission' s tasks,
which consist in particular, pur suant to Article 155 of the EEC
Treaty, in ensuring that the provisions of the Treaty and the measures
taken by the institutions pursuant thereto are applied. A member
State's refusal to cooperate with the Commission for the purpose of
the latter' s investigations to establish whether or not Community law
has been infringed by rules and practices applied in that State
therefore constitutes a failure by that State to fulfil its obligations.
 Moreover, there is no general pr oblem with transmission of information by the member States
to the Commission in the area of customs valua tion. Another matter is, as the EC has already
remarked, that it is not the function of the Committee to substitute itself for the individual customs
authorities or the competent courts of the member States in pending cases.

(k) With respect to paragraphs 103–104 of the European Communities' First
Written Submission:
(i) Please clarify with respect to which matters does the Customs Code
Committee adopt opinions through the comitology procedure.
 The Customs Code Committee adopts opinions under the comitology procedure in the
following matters:

• General legislation
• Counterfeit and pirated goods
• Customs procedures with economic impact
• Customs valuation
• Customs warehouses and free zones
• Duty-free arrangements
• Favourable tariff treatment (end-use of goods)
• Movements of air or sea passengers' baggage
• Origin
• Repayment
• Single Administrative document
• Tariff and statistical nomenclature – tariff classification//HS//TARIC/Textile/BTI
• Economic Tariff questions - Quotas
• Transit

 25 Case 272/86, Commission/Greece, [1988] ECR 4875 (Exhibit EC-105). Article 5 EC is now
Article 10 EC.

(ii) Please provide detail regarding th e subject-matter of opinions adopted
by the Customs Code Committee on qu estions relative to the application
and interpretation of the combined nomenclature. What procedures
apply with respect to such opinions?
 Opinions of the Customs Code Committee may relate to any matter of EC customs law.
From the legal point of view, where the Committee adopts opinions outside of the regulatory
or management procedure, the Committee may do so by simple majority. 26 Typically, however,
opinions of the Committee will be adopted in cases where the approach is the subject of broad
agreement in the Committee. Wh ere issues are controversial, a legally binding measure may be
preferred.
(iii) Can the Customs Code Committee ad opt opinions on matters other than
those adopted through the comitology procedure and those adopted on
questions relative to the application and interpretation of the combined
nomenclature? If so, please iden tify and explain the procedures for
their adoption.
 In accordance with Article 249 CCC, the Comm ittee can adopt opinions on all matters of
Community customs legislation. The procedures are those explained in the answer to the preceding
question.

(l) In paragraph 4 of Joined Cases 69 and 70/76, Dittmeyer, [1977] ECR 231
(Exhibit EC-31), the European Court of Justice notes that the opinions of the
Customs Code Committee are not lega lly binding and suggests that such
opinions may not be followed in certain circumstances. Please specifically
identify the circumstances in which an opinion of the Customs Code Committee
may not or will not be followed by the EC Commission, authorities of member
States and/or any other relevant body. Please provide statistics, if any, of
instances when the opinion of the Cu stoms Code Committee has not been
adopted/followed.
 Opinions of the Customs Code Committee are not legally binding. However, as the Court has
also stated in the judgment in question, they c onstitute an important means of ensuring the uniform
application of the common customs tariff and as su ch may be considered as a valid aid to the
interpretation of the tariff.
Member States' customs authorities are not legally bound by the opinions of the Customs
Code Committee. However, they are bound by th e duty of cooperation (Article 10 EC), which
includes an obligation to contribute to the uniform a pplication of Community law. For this reason, EC
member States are bound to give due weight to inte rpretations of EC customs law set out in opinions
of the Customs Code Committee.
From a practical point of view, it must be underlined that opinions of the Committee typically
reflect a common approach agreed by all member States. Accordingly, member States will normally
observe such agreed opinions as a matter of course.
59. In paragraph 316 of its First Written Submission, the European Communities submits
that individual traders "frequently approach the Commission or member States authorities
with particular problems of customs classificati on, who can then decide to take the necessary
action, including raising the issue before the Customs Code Committee". Are there any rules

26 Cf. Article 3 of the Comitology Decision (Exhibit US-10).

and/or guidelines in addition to the principles of good administrative behaviour applicable to
the EC Commission indicating what the Commis sion and member State authorities should do
and within what timeframes when approached by individual traders?
If a trader submits a complaint regarding an infringement of Community law by the
authorities of a member State, the principles set out in the Commission Communication on the
relations with the complainant (Exhibit EC-11) will apply.
Otherwise, the Commission's Code of Conduct contained in Annex to the Commission's
Rules of Procedure (Exhibit EC-12) will be applicab le. Point 4 of the Code of Conduct contains rules
for dealing with inquiries. According to these ru les, the Commission servi ces undertake to answer
enquiries in the most appropriate manner and as quickly as possible. Moreover, correspondence is
normally to be replied to within 15 days, unless the complexity of the matter does not allow a
response within such time-frame
60. According to the binding tariff informatio n issued by the customs authorities of the
United Kingdom, Ireland and the Netherlands (c ontained in Exhibit US-22), the blackout
drapery lining the subject of the binding tariff information were coated with textile flocking and
were classified under heading 5907 of the EC Combined Nomenclature. Please explain why
these products should be classified under he ading 5907 making reference to the specific terms
and meaning of heading 5907.
The products subject of these BTI are products wh ere textile fabric has been coated with
plastics which in turn has been co ated by textile flock. The classifi cation in these BTI has been made
in accordance with General Interpretative Rul es 1 and 2 of the Harmonized System and the
Harmonized System Explanatory Note (G) (1) to heading 59.07 (Exhibit EC-127).
61. Providing all relevant evidence, please expl ain whether and, if so, how the allegedly
conflicting binding tariff information for blackout drapery lining came to the attention of the
EC Commission.
On a preliminary point, the EC would like to r ecall that Germany has not issued any BTI, so
that there can be no conflicting BTI. Moreover, as the EC has already explained, there is no
contradiction between the BTI issued and the classification decision of the German customs
authorities.
27
The EC institutions first became aware of this case first through Inside US Trade of
November 12, 2004 (Exhibit EC-1), which reported on a submission made by Rockland Industries to
USTR following USTR's request for comments on the US consultation request in the present case.
The US raised the case directly with the EC fo r the first time in its First Written Submission
in the present case. Since then, the US has also raised the BDL case at a technical meeting between
US Customs and Border Protection and DG TAXUD in Washington on 14 July 2005. A copy of a
note handed over by US Customs to DG TAXUD is attached as Exhibit EC-106.
62. In paragraph 407 of its First Written Submission, the European Communities submits
that the Valuation Section of the Customs Code Committee examined the issue of the
application of Article 143(1)(e) of the Implementi ng Regulation by Spanish customs authorities
but did not establish any incompatibility with EC la w or lack of uniformity. If so, why was the
matter referred to a working group of the Committ ee? Currently, at what stage are discussions

 27 EC First Written Submission, para. 331 et seq.

of the working group with respect to this issue? When is a final decision due by the Committee
on this issue? How long will it take before the issue is finally resolved by the Commission?
In the case of Reebok, the firm concerned has not accepted the position of the Spanish
administration on the application of certain provisions of the EC Customs Code and Implementing
Provisions
28 to a particular commercial situation and fo llowing various interventions the Commission
presented the elements provided by Reebok to the Committee (for confidentiality reasons, Reebok
was not identified as such).
During the meetings of the Customs Code Committee on 1st October and 20th December 2004,
the views of delegates were that the facts tende d to show that the parties were related, as was
previously concluded by the Spanish authorities.
Since similar cases had been raised by two other member States in was considered that, in
2005, further work was desirable in this context. It was also recalled that since similar cases had come
in for attention, and these relate to manufact uring and processing operations which have become
significant in trade and economy terms, the Commission decided to carry further the work on the basis
of a working group of the Committee.
In August 2005 Reebok submitted, at the Commissi on's request, material indicating that there
could be a divergent approach in another member State. This material will now be looked at.
 The working group will begin to meet and work shortly. It is intended that the group will
produce concrete outputs which will both address th e general interpretati on and application of
Article 143(1)(e), and the specific elements which ha ve been the subject of disagreement between the
customs authorities in Spain and the firm in question.

63. In paragraph 44 of its Oral Statement at the first substantive meeting, the European
Communities submits that "EC valuation rules are quite detailed and guide the EC customs
authorities in all relevant circumstances". Please explain how this statement can be reconciled
with the EC Commission's replies to the Court of Auditors Special Report No 23/2000
concerning valuation of imported goods for customs purposes (Exhibit US-14) to the effect that
EC valuation rules are, to a large extent, based on simple but imprecise concepts which the
WTO legislator has tried to clarify in particular by establishing a range of sub-concepts without
however the margin of appreciation for the cust oms authorities being in reality significantly
reduced.
 The EC would like to remark that the statement referred to in the question refers in the first
place to the rules of the WTO Valuation Agreement.
As regards EC valuation rules, the EC mainta ins that these rules are detailed and cover all
relevant aspects of valuation practice, and thus provide comprehensive guidance for EC customs
authorities on all questions of customs valuation. Th at valuation rules acquire application to complex
factual situation, and that occasionally, difficulties of interpretation or application may occur, is not in
contradiction with this assessment.
64. With reference to paragraph 400 of the European Communities' First Written
Submission:
(a) What is the definition of a "customs procedure" under EC customs law?

 28 Article 29(2) of the Customs Code and Articles 143(1)(e) and 147 of the Customs Code
Implementing Provisions.

Article 3 (16) CCC defines a "customs procedure" as any of the following:
• release for free circulation;
• transit;
• customs warehousing;
• inward processing;
• processing under customs control;
• temporary admission;
• outward processing;
• exportation.

(b) What is the significance of categorising a matter as a "customs procedure" for
the purposes of EC customs law?
 Numerous provisions of the Customs Code re fer to the term "customs procedure". One
example would be Article 250 CCC, to which the Panel's Question No. 67 refers.

(c) Please explain why the definition of "customs procedures" under EC customs
laws should govern whether or not such procedures fall within the scope of
Article X:3(a) of the GATT 1994.
 These are independent questions. The term "custo ms procedure" is a term of EC law. The
scope of Article X:3(a) GATT depends on whether the law or regulation which is administered
pertains to one of the subject matters enumerated in Article X:1 GATT.

(d) Please identify the main pur pose of post-release audits.
 In accordance with Article 78 (2) CCC, the purpose of post-release audits is to assess whether
import declarations have been filed accurately.

(e) Why are post-release audits not considered as "customs procedures"?
 Because they are not one of the proce dures referred to in Article 3 (16) CCC.

65. The Council Resolution 95/C 188/01 of 29 June 1995 on the effective uniform application
of Community law and on the penalties applicable for breaches of Community law in the
internal market (Exhibit EC-41) provides that the Council agrees "that if there prove to be
serious difficulties for the smooth operation of the in ternal market due to disparities in national
penalty arrangements, solutions will have to be sought when necessary, so that penalties are
such as to ensure that legislation is applied e qually effectively throughout the Union, with due
regard for the respective jurisdictions of the Community and the member States and the
principles of the member States' national law, and in the light of the subsidiarity and
proportionality principles". Have any "sol utions" ever been taken by the Council in
accordance with this provision? If so, please expl ain the situations in which such solutions were
sought and why they were considered necessary.

 No.

66. Making reference to the relevant provisions of EC customs law, please explain the
circumstances in which an economic conditions a ssessment is needed at the member State level
and/or at the EC level in determining wheth er or not processing under customs control should
be authorized.

As the EC already explained in paragraphs 135 to 138 of its First Written Submission, for the
types of goods and operations mentioned in Anne x 76, Part A, of the Implementing Regulation
(Exhibit US-6), which represent the majority of the cases, the economic conditions shall be deemed to
be fulfilled in accordance with Article 552(1) fi rst subparagraph of the Implementing Regulation).
This means that, in these cases, customs authorities do not examine the economic conditions.
For the types of goods and operations mentioned in Annex 76, Part B, of the Implementing
Regulation and not covered by Part A of that Annex, the examination of the economic conditions shall
take place at Community level, through the relevant Committee procedure. This means that a uniform
application of the assessment of the economic co nditions is ensured for so-called sensitive goods
because the examination has to take place at Community level (see Article 552[2] of the
Implementing Regulation).
Third, for the types of goods and operations not mentioned in Annex 76 of the Implementing
Regulation, the examination of the economic conditions shall take place at national level
(Articles 502(1) and 552(1), second s ubparagraph, of the Implementing Regulation). An examination
at national level is required only in rare cases because, as mentioned before, either the economic
conditions are deemed to be fulfilled or the examination takes place at Community level.
Nevertheless, transparency and uniform applica tion of the assessment of the economic condition is
also ensured in these rare cases because member States have to communicate to the Commission
relevant information in accordance with Artic le 522 of the Implementing Regulation. The
Commission makes these particulars available to the customs administrations. Furthermore, if a
member State objects to an authorization issued or if the customs authorities concerned wish to
consult before or after issuing an authorization, an examination of the economic condition may take
place at Community level (see Articles 503 and 504 of the Implementing Regulation).
If there are still unclear elements in the above description, the EC would be happy to provide
further clarification upon request.
67. Please explain the scope and effect of Article 250 of the Community Customs Code.
This provision provides that where a customs pr ocedure is used in several member States,
decisions, identification measures, documents issued , and findings made, shall have the same legal
force in all of the member States involved. "Custo ms procedure" in this context means any of the
procedures referred to in Article 3 (16) CCC. Article 250 CCC applies in the context of a specific
customs procedure involving the same goods.
Article 250 CCC has the purpose of ensuring that customs procedures which take place on the
territory of several member States can be carried out efficiently and coherently.
68. With respect to paragraphs 220-221 of its First Written Submission, is the sole purpose
of the European Communities' reference to Ar ticle XXIV:12 of the GATT 1994 to support its
argument that Article X:3(a) does not require custom s laws to be regulated at the central level?
If so, please explain in practical terms what th is means for the administration of EC customs
laws. If not, please explain the other bases upo n which the European Communities seeks to rely
upon Article XXIV:12.
The EC has referred to Article XXIV: 12 GATT, and the GATT Panel Report in Canada –
Gold Coins , as support for its argument that Article X:3(a) GATT does not affect the federal
distribution of competences within a WTO Member , and therefore does not require the harmonization
of laws within a WTO Member. This means that where, within a WTO Member, certain matters are
regulated at the sub-federal level, Article X:3(a) GATT requires merely that these laws or regulations
be administered in a uniform manner. It does not re quire that such laws be replaced by a harmonized

law at the central level. An example for this is san ctions, which, within the EC, are regulated in laws
of the EC member States.
This interpretation is fully in line with th e object and purpose of Article X:3(a) GATT.
Article X:3(a) GATT wants to provide a minimum leve l of security and predictability for traders with
respect to the matters referred to in Article X:1 GATT. This objective is fully ensured if laws which
exist at the sub-federal level are administered in a uniform manner in the territory in which they
apply. It In order to achieve the purpose of Artic le X:3(a) GATT, it is not necessary to require WTO
Members to harmonize the laws applicable within a WTO Member at sub-federal level.
69. With respect to appeals to each of th e 25 member State courts responsible for review
and correction of customs matters:
The EC is willing to provide to the Panel information regarding the EC Court system,
including the member States' courts. However, it wo uld like to underline that this exercise forms part
of the burden of the proof, which is incumbent on the United States as complainant. The EC has
repeatedly insisted on this issue in its First Wr itten Submission (para. 474) and in its First Oral
Statement (paras. 63 to 66).
(a) What is the standard of review in the courts for each of the member States with
respect to administrative decisions of customs authorities?
 The Courts of all member States review and correct the legality of the administrative
decisions adopted in customs matters, including th e control of discretionary powers. The control of
legality also includes the compatibility with Comm unity law. Though some legal orders include a
classification of grounds for review comparable to that laid down by Article 230 of the EC Treaty (see
hereunder the answer to Question No. 71), this does not entail any significant differences in the type
of control ensured by national courts.

(b) In practical terms, what are the step s necessary to bring a case before each of
those courts (including details of cases when first instance reviews by the
relevant administering authorities are required)?
 Most of the EC member States require the trad er to lodge a request for an administrative
review before appealing to the relevant court. The exceptions are Belgium, Estonia, Greece, Cyprus,
France, Malta and Portugal, where administrative re views are voluntary, and Sweden, where there is
no administrative review and the administrative decision has to be appealed directly to the courts.
In the case of Spain, Italy, Ireland (second instance of the administrative review) and
Denmark, the administrative review is carried out by a body that is inde pendent of the agencies
entrusted with administrative enforcement.
(c) How long does the appellate process in respect of customs matters take in each
of those courts (including time taken for first instance reviews by the relevant
administering authorities, when they occur/are required)?
 Most of the EC member States normally ensure the completion of an administrative review in
less than 6 months. In several ca ses the average time limit is even more limited (around 1 month):
Czech Republic, Estonia, Greece, Spain, Ireland, C yprus, Latvia, Lithuania, Hungary and Slovakia.
Only in Denmark and Italy between 1 to 1,5 years are needed to take a decision in administrative
reviews.
In relation to judicial review, ten EC member States carry out a first instance review normally
in less than one year: Czech Republic, Spain, Cypr us, Hungary, Austria, Poland, Slovakia, Finland,

Sweden and United Kingdom. Between 1 to 2 years is the time spent in Germany, Estonia, Latvia and
the Netherlands. In the rest, an average of 2 to 3 years is required.
70. With respect to: (i) direct appeals to the Co urt of First Instance and the European Court
of Justice; and (ii) requests for preliminary ruling from the European Court of Justice:
(a) In practical terms, what are the st eps necessary to bring a case before the
Court?
 There is no administrative review to appeal befo re the Court of First Instance or the European
Court of Justice an administrative decision adopted by the EC institutions on customs matters. An
action for annulment must be brought directly to the relevant Court within two months from the
notification or the publication of the decision (Article 230 (5) of the EC Treaty). Under Articles 81 (2)
and 102 (2), respectively, of the Rules of Procedur e of the Court of Justice and the Court of First
Instance, this time limit is always expanded 10 furt her days to take into account of the distance
(Exhibits EC-107 and EC-108). According to the "Pra ctice Directions" adopted by each of the Courts,
a copy of the signed original of a procedural docum ent may be transmitted to the Registry either by
telefax or as an attachment to an electronic mail, provided that the signed original itself reaches the
Registry within ten days following such lodgement (Exhibits EC-109 and EC-110).
Decisions to refer for a preliminary ruling are ta ken by the member States courts, which will
normally hear both parties before making a refere nce, though they are not bound by the parties'
position in relation to the convenience or need to refe r. Furthermore, it is not necessary for the parties
in the case to raise the question, which can be deci ded by the national court of its own motion. The
national court is entitled to decide at what stage of the proceedings the reference is made, provided
that the case has not been decided yet. Further explanations on this procedure may be found in the
Information Note on references from national courts for a preliminary ruling adopted by the Court of
Justice (Exhibit EC-55).
(b) How long does the appellate/preliminar y ruling process in respect of customs
matters normally take?
 A case for annulment takes an average of 24 months: a representative example is the Sony
Playstation2 case (Exhibit US-12), where the application was lodged on 3 October 2001 and the
judgement was given on 30 September 2003.
Preliminary references need an average of 19 to 20 months to be completed, though, in some
cases, they can take up to 22 months. As an ex ample, the judgement in the case C-396/02, DFDS,
(Exhibit EC-25) was given in this latter time li mit (from 11 November 2002, date of reception, to
16 September 2004, date of the judgement).
71. Please identify how the following bodies "c orrect" administrative action (including
customs decisions) that is subject to challenge before those bodies (for example, annulment,
suspension, revocation etc.):
(a) the Court of First Instance;
(b) European Court of Justice;
 Under Articles 231 (1) and 224 (6) of the EC Treaty, in an action for annulment the European
Court of Justice and the Court of First Instance must either declare the contested act void or dismiss
the action. They have no jurisdiction to replace or amend the act in question, though they are allowed
to declare only part of a measure void. The grounds of illegality whic h parties may plead in an action
for annulment are lack of competence, infringe ment of an essential procedural requirement,

infringement of the Treaty or of any rule of la w relating to its application or misuse of powers
(Article 230, second paragraph, EC Treaty).
Both Courts may order that the application of an act challenged in proceedings before them be
suspended (Article 242 EC Treaty). They may also prescribe any other interim measures (Article 243
EC Treaty). Urgency, the establishment of a prima fa cie case and the balance of interests at stake are
necessary for granting interim relief.
(c) Courts of the member States; and
 Most of the member States Courts are only entitled to annul the administrative decision
should they consider it unlawful. However, in some cases, the courts may substitute its own decision
in cases involving payment of duties. A few national c ourts have the power to substitute or amend the
administrative decision challenged: Denmark, Latvia, the Netherlands, Sweden and Slovenia.

 (d) Bodies charged with undertaking first instance review of customs decisions in
the European Communities.
 Administrative authorities in the EC member States can repeal, revoke, alter or replace a
disputed administrative decision. During the proceedings, the implementation of the disputed decision
may be suspended on the basis of Article 244, second subparagraph, CCC.

72. What mechanisms exist, if any, to en sure that the outcome of review of a customs
decision in one member State court is notified to the courts of other member States?
As in most legal systems, such mechanisms do not exist in the EC. Due to the high number of
cases, the notification of the outcome of review of customs decisions in one member State court to the
courts of the other member States would be burdens ome and ineffective: a rough estimate of the cases
brought before the national member States courts of first instance gives a figure higher than 7,500.
73. Are national courts of the member States bound by preliminary rulings issued by the
European Court of Justice in all cases? If no t, please explain the circumstances in which the
preliminary rulings are not binding.
As the EC already explained in paragraph 188 of its First Written Submission, a preliminary
ruling is binding on the referring court, which must apply it to the case in which the reference is made.
In relation to references on validity, if the C ourt of Justice decides that a Community measure
is invalid, it has to be regarded as invalid for all purposes and in all courts: case 66/80, Spa
International Chemical Corporation, [1981] ECR 1191, paras 11-13 (Exhibit EC-111).
Rulings of the Court of Justice on interpretation have been considered binding on other courts
by virtue of the purpose of the preliminary rulin g procedure, which is to secure uniformity of
Community law (joined cases 28 to 30/62, Da Costa, [1963] ECR 31) (Exhibit EC-112). A member
State's court may nevertheless refer another question to the ECJ if the issue being considered seems
not to be materially identical with that which has already been the subject of a preliminary ruling in a
similar case or if the previous preliminary ruling has been given long time ago.
74. In paragraph 142 of its First Written Submissi on, the United States submits that, even if
the national courts of the member States could be regarded as meeting the requirements of
Article X:3(b) of the GATT 1994, there is nothing in the Community Customs Code that
requires review by those national courts to be "prompt". Please comment.

First of all, it should be noted that Article X: 3(b) GATT merely requires review to be prompt.
It does not require Members to take particularly measures for this purpose, such as setting time-limits.
So far, the US has not argued that review by the courts of the EC member States is not prompt, let
alone has provided any evidence in this respect.
Though the CCC does not contain any provision re quiring review by national courts to be
"prompt", this requirement is recognized in Commun ity law or in the legal systems of the member
States. Indeed, "promptness" forms part of the core of the right to an effective judicial protection.
According to settled case-law, fundamental right s form an integral part of the general
principles of law, the observance of which the Europ ean Court of Justice ensu res. For that purpose,
the Court draws inspiration from the constitutional traditions common to the member States and from
the guidelines supplied by international treaties for the protection of human rights on which the
member States have collaborated or to which they are signatories (see, i.a.: case C-71/02, Karner,
[2004] not yet reported, para. 48) (Exhibit EC-113).
The European Court of Justice has manifest ed that the European Convention on Human
Rights has special significance in that respect and the EC has already explained in paragraph 174 of
its First Written Submission that Article 6 (1) of the Convention lays down the right to a fair trial by
an independent and impartial tribunal established by law (Exhibit EC-49).
Furthermore, as it was already mentioned in paragraph 174 of the EC First Written
Submission, the right to an effective remedy befo re a tribunal is recognized in Article 47 of the
Charter of Fundamental Rights of the European Union (Exhibit EC-48).
Finally, the EC notes that there also seem to be no particular US measure which would ensure
that revision by USCIT be prompt.
75. In its First Written Submission, the European Communities refers to a number of
different institutions and mechanisms, which it submits help to ensure uniform administration
of EC customs laws (in particular, the Cust oms Code Committee, the European Court of
Justice, the supremacy and direct effect of EC law, the duty of cooperation, infringement
proceedings, the various instruments of EC customs cooperation, and budgetary control
measures). To the extent that the European Co mmunities has not already done so in its First
Written Submission, please specifically explain ho w each of these institutions and mechanisms
achieve uniformity with respect to the aspects of customs administration specifically identified
by the United States, namely: tariff classificati on; customs valuation; audit following release for
free circulation; penalties for infringements of customs laws; processing under customs control
and local clearance procedures.
The EC believes that it has given a comprehensiv e explanation of the EC's system of customs
law and administration. In principle, the general mechanisms and instrument s described in the EC's
First Written Submission are applicable in respect of all areas of customs law. However, to the extent
that the Panel has specific questions as to how specific instruments relate to a particular issue, the EC
is happy to provide further explanations upon request.
76. Please comment on the submission made by the United States in paragraph 44 of its
Oral Statement at the first substantive meeting that traders' right of appeal, which the
European Communities submits is part of the framework to ensure uniform administration of
EC customs laws, only relates to substantive viol ations rather than divergent administration of
substantive law. Further, please specifically id entify steps traders can take in the event that
they encounter such divergent administration, making reference to all relevant EC rules and
guidelines.

The right to obtain judicial review before the Courts of the member States applies to all
violations of Community law, regardless of what the issue in question might be.
The EC is not certain it understands the dis tinction between "substantive violations" and
"divergent administration of substantive law". A right of appeal if provided only if there is a violation
of Community law, regardless of whether it is "subs tantive" or not. By definition, in any case of a
non-uniform application of the law, an illegality will exist.
For this reason, the EC is not sure in which cases there could be said to be a "divergent
administration of the law" which does not involve an illegality. To the extent that the administration
of the law might involve discretion, and that such discretion is exercised in conformity with the
applicable law, there is obviously no right of appeal.
In any event, the EC would suggest that th e US might specify which specific cases it is
referring to. The EC would also ask whether in the United States, there is a right of appeal against
practices of administrative agencies which are in conformity with US law.
77. In Case 106/77, Simmenthal II, [1978] ECR 629 (Exhibit EC-5), the European Court of
Justice found that "the direct applicability of Community law means that its rules must be fully
and uniformly applied in all the member States from the date of their entry into force and for so
long as they continue in force". Please explain in practical terms what is meant by this finding
insofar as it suggests that the member States must "uniformly" apply EC customs law.
This finding means that all authorities of the member States, including the administrative
agencies and the Courts, must apply EC law unifo rmly. Concretely, this means that they should
interpret and apply Community law in accordance with all available guidance as to its proper
meaning, including the case law of the Court of Just ice. Where national law conflicts with provisions
of Community law, the courts must set aside such provisions. For the Courts of the member States,
one additional tool for ensuring that they apply Community law in a uniform manner is requests for
preliminary rulings in accordance with Article 234 EC. For a more detailed explanation, the EC refers
to its First Written Submission.
 29
78. In paragraph 35 of its First Written Submission, the European Communities notes that
Article 249(2) of the EC Treaty provides inter alia that: "A regulation shall have general
application. It shall be binding in its entirety a nd directly applicable in all member States". To
what extent does Article 249(2) allow member St ates to supplement provisions contained in EC
law in practice? What measures exist to prevent member State customs authorities from
relying upon policies/guidelines that are particular to that member State in the interpretation of
EC customs law?
A member State may act to supplement provisions contained in a Community regulation if it
is explicitly authorized to do so, or if a specific issue is not covered in the act of Community law.
However, any national legislation must strictly r espect the Community legislation, and may otherwise
be set aside by the courts.
30
The Court has also clarified that the direct ef fect of regulations cannot be hampered by any
domestic practices or provisions. 31 Moreover, the Court has stated that national authorities cannot
issue binding guidelines for the interpretation of Community law. 32 Accordingly, the interpretation of

 29 EC First Written Submission, para. 35 et seq.
 30 Case 230/78, Eridania-Zuccherifici, [1979] ECR 2749, para. 34 (Exhibit EC-114).
 31 Case 93/71, Leonesio, [1972] ECR 287, para. 22 (Exhibit EC-115).
 32 Case 94/77, Fratelli Zerbone, [1978] ECR 99, para. 27 (Exhibit EC-116).

Community law by national administrations and courts must be guided exclusively by the text of
Community law, and all contrary provisions or guidelines of national origin must be set aside.
79. Is there any obligation in EC law requiring member State customs authorities to consult
other member States before making customs decisions. If so, please identify and explain.
There is no general obligation in EC law requiring member States' customs authorities to
consult other member States before making cust oms decisions. Such an obligation would be
disproportionate, since millions of customs decisions are taken each year, and the great majority of
them pose no particular problem, and do not require any consultation between customs authorities.
This being said, obligations of mutual consu ltation may arise in application of the duty of
cooperation in specific situations, for instance in the context of the issuing of BTI (cf. EC answer to
the Panel's Question No. 56). Specific provisions of EC customs law may also impose an obligation of
mutual cooperation in certain circumstances. Examples would include the following provisions:
• Single authorization for end-use (Article 292 [2] CCIP)
• Customs procedures with economic impact (Article 500 CCIP)
• Regular shipping service (articles 313a-313b CCIP)
• Proof of Community status by authorized consignor (article 324e CCIP)
• Simplified transit procedure for air transport - level 2 (article 445 CCIP)
• Simplified transit procedure for sea transport - level 2 (article 448 CCIP)
Finally, a general framework for mutual c ooperation and assistance between member States'
customs authorities is provided by Regulation 515/97 (Exhibit EC-42).
80. The preamble to Council Regulation (EC) No. 515/97 of 13 March 1997 (Exhibit EC-42)
on mutual assistance between the administrati ve authorities of the member States and co-
operation between the latter and the Commission to ensure the correct application of the law on
customs and agricultural matters states that:
"Whereas the Commission must ensure that economic operators
are treated equally and that the application by the member
States of the mutual administrative assistance system does not
lead to discrimination between economic operators in different
member States; ..."
 Please explain what is meant by "treated equally" and "discrimination" .
 The two terms refer to the objective of ensuri ng that economic operators are treated alike in
all relevant aspects by member States' customs authorities, thus preventing a distortion of the
conditions of competition between economic operators.

81. Article 3(2) of Decision No. 253/2003/EC of the European Parliament and the Council of
11 February 2003 adopting an action programme for customs in the Community (Exhibit EC-
43) refers to the "Customs Policy Group". Please explain what the role(s)/function(s) of this
Group are.

 The Customs Policy Group is a high level working group, chaired by the Commission, and
comprised of heads of customs administrations or their deputies.

 The Customs Policy Group enables the Commissi on and the member States of the European
Union to work in partnership to ensure that th e common approach to customs policy is continuously

adapted to new developments. Its role is to deal with any customs issues of a political nature and in
particular to:

• review and, as necessary, adapt the common policy approach;
• analyse strategy (including training, computerization and external affairs);
• consider issues of principle referred to it by the Customs 2007 Committee;
• consider customs issues beyond the scope of the Customs 2007 programme;
• consider the implementation of the results obtained from Customs 2007 actions (e.g., use of
guidelines, development of risk management, measurement of results, etc.)

82. In paragraph 156 of the European Co mmunities' First Written Submission, the
European Communities refers to a number of "a ction programmes" aimed at strengthening the
effective implementation of the EC customs union, including training activities

(a) Does training of member State cust oms officials occur at the member State
and/or EC level?
 The training of customs officials takes place prim arily at national level. However, to reach a
harmonization in the training field, and in orde r to promote and common understanding the field of
customs administration, a "Common Customs Training Programme" was developed under a
predecessor programme of Customs 2007. The programme sets binding minimum standards for the
national basic training of Customs officials throughout the Community. The related "Common
Training modules" are currently being updated (finalized by end 2005).

 The programme supports national training ac tivities and supplements this training from a
central point of view with common training proj ects wherever needed. The development of such
common training projects (mainly for advanced vo cational training) are usually managed by the
Commission with support from member States subj ect experts and training specialists (e.g.,
development of common training material, other training support like training material catalogues,
good practice guides or e-learning modules with blended learning approach).

 A further mission of the Customs 2007 training programme is the development of an
organizational framework for customs training. For this purpose, the European Commission is
developing the Virtual Customs Academy. This is the defined as the provision of customs training and
best practice in various forms shared by member States with the support of the Commission in the
context of the Customs 2007 Programme.

 Customs 2007 seminars or conferences
 are organized and chaired by the Commission in
partnership with the host administration. Seminars or conferences organized within Customs 2007 are
often used as a tool to

• Update and enhance member States' knowledge on common legislation;
• Establish a forum for best common practice and develop practical guidance for
implementing common legislation;
• Provide a vehicle to exchange informa tion and share knowledge, specialization and
experience between member States;
• Launch new initiatives in the customs area.
Therefore, most of the seminars indeed cont ain an information/knowledge sharing part which
can be considered as a training method in the broad sense. For instance, the se minars dispose of such
an information sharing component during which the Commission presents new or modified common

legislation. Also the more practical oriented workshops organized by the Commission are in a way a
tool to disseminate information to member States' experts (e.g., NCTS workshop, RIF workshop, etc).
 (b) If so, please explain the nature and pur pose of such training. Is such training
aimed at assimilating the most recentl y acceded 10 EC member States and/or is
it part of longstanding and ongoing training for customs officials of all the EC
member States?
 Today, the 10 new member States are full partners in this process and they benefit
furthermore from all training material and modul es which were developed before their accession to
the EU.

 Moreover, already prior to accession, one of the priorities within the Customs 2007
Programme has been the pr eparation for enlargement
. According to Article 2 (2) of Decision
253/2003, the programme is open fo r participation by candidate countries for accession to the EC.
Several actions were set up specifically for candida te countries to enable them to comply with
Community customs legislation (tariff seminars, tr aining sessions for tariff applications, etc) and to
provide them with assistance as regards interconn ectivity (IT systems) and operational capacity.
Besides these special provisions, the candidate count ries have been invited to each single seminar and
to most of the other full-board activities organized for member States.

83. Please indicate whether and, if so, what ac tion has been taken pursuant to the following
paragraphs of Article 4 of Decision No. 253/2003/EC of the European Parliament and the
Council of 11 February 2003 adopting an action programme for customs in the Community:

(b) to identify, develop and apply best workin g practices, especially in the areas of post-
clearance audit control, risk analysis and simplified procedures;

(e) to improve the standardization and simp lification of customs procedures, systems
and controls;
(f) to improve the coordination of and co-o peration between laboratories carrying out
analysis for customs purposes in order to ensure, in particular, a uniform and
unambiguous tariff classification throughout the European Union;

(k) to develop common training measu res and the organizational framework for
customs training that would respond to the needs arising from programme actions.
 A list of programme actions which fall into the above mentioned objective categories is
attached as Exhibit EC-117.

 The European Community and its member Stat es have undertaken a series of actions to
improve working practices. These are carried out in a variety of ways, including benchmarking,
drafting of guidelines, creation of contact groups to share information and best practice, use of
targeted groups to follow up specific subjects et c. In the specific areas mentioned the European
Community has produced a guide to post clearance audit,
33 which sets out the recommended approach
to such controls.

 33 Exhibit EC-90.

The European Community has also worked on risk management for a number of years.
Following the introduction of the first Risk Analysis guide, actions have been focussed on promoting
a common approach to risk management. A Communi ty-wide seminar on risk analysis led to work
focussing upon establishing a Community framework fo r risk management. Since then, efforts have
turned towards creating a secure Community risk information exchange system based on the
principles set out in the framework. Such a system has been running on a pilo t basis for over a year.
The recent amendment to the Community customs code has introduced a legal obligation for a
Community Risk Management system. The Commission and its member States are now finalising
such a system which will operate on the secure IT base already piloted and en able the introduction of
Community risk profiles and effective exchange of risk information.
In addition to the work on risk management which sets out a common control approach, the
Community develops standardized approaches to sy stems and controls via a range of methods. These
include the exchange of officials, use of be nchmarking and project groups to examine specific
subjects (such as Single European Authorizations, production of guides, manuals etc.), training and
the development of IT systems. Targeted actions may also be developed for more specialized controls,
such as anti-counterfeiting.
84. Please explain what information/data is contained in the information system on the
integrated tariff of the Community (TARIC) refe rred to in Article 5(1)(d) of Decision No.
 253/2003/EC of the European Parliament and the Council of 11 February 2003 adopting an
action programme for customs in the Community.
The Taric includes all the information referred to in Article 2 (2) of Regulation 2658/87,
which is drafted as follows:
The tariff shall be based on the Combined Nomenclature and include:
(a) the measures contained in this Regulation;
(b) the additional Community subdivisions, referred to as ‘Taric
subheadings', which are needed for the implementation of specific
Community measures listed in Annex II;
(c) any other information necessary for the implementation or
management of the Taric codes a nd additional codes as defined in
Article 3(2) and (3);
(d) the rates of customs duty and other import and export charges,
including duty exemptions and pref erential tariff rates applicable to
specific goods on importation or exportation;
(e) measures shown in Annex II applicable on the importation and
exportation of specific goods.
 Annex II, which is referred to in Article 2 (2 ) (b) and (e) of Regulation 2658/87, is currently
contained in Annex II to Commission Regulation 1810/2004 (Exhibit EC-118).

85. In areas that are not specifically regulated by EC law so that, effectively, member State
authorities have discretion in the interpretation and application of law with respect to those
areas, what mechanisms, if any, are in place to ensure uniform interpretation and application of
the law throughout all the member States?

In areas which are not regulated by EC law, including primary EC law, member States are
free to legislate and to administer their own laws. There are no mechanisms in place at the level of the
EC to ensure a uniform interpretation and applicati on of the laws of member States in areas which are
not regulated by EC law.
It should be noted, however, that even wher e secondary Community law has not specifically
regulated an area, the member States may still be requi red to respect certain principles of EC law. An
example is the area of penalties for violations of Community law, where Article 10 EC requires that
member States provide penalties which are effective, proportionate and dissuasive.34
86. Please explain the current status of the Mo dernized Customs Code contained in Exhibit
US-33? Please clarify for how long the revision process has been ongoing. Please identify when
and how public/third party consultation took place with respect to this revision process.
The draft Modernized Customs Code Contained in Exhibit US-33 is a working document of
the services of the European Commission. It is no t the official position of the European Commission,
or of any other EC institution.
The Modernized Customs Code is a major project aiming at the recodification, modernization
and simplification of EC customs law, building on th e experience gained since the entry into force of
the Community Customs Code. The Commission first announced its intention to modernize and
simplify customs law in 2003. A first public consul tation on a draft modernized Customs Code was
held in July and August 2004. A second public consultation on a revised version of the code was held
in January 2005 (cf. Exhibit EC-47).
87. What is the legal relationship betw een Article X:3(a) of the GATT 1994 and
Article X:3(b) of the GATT 1994, if any? In th is regard, please specifically comment on the
following submissions made by the United States in its Oral Statement at the first substantive
meeting:
As the EC has already stated in its First Wr itten Submission (paras. 461 and 466) and in its
First Oral Statement (paragraph 60), Article X:3(a) and (b) GATT are separate obligations and it
cannot be considered that there is a legal relationship between both provisions.
 Article X:3(a) GATT provides for an obligati on to administer the laws and regulations
referred to in Article X:1 GATT in a uniform, impartial and reasonable manner. In contrast,
Article X:3(a) GATT requires each party to provide for prompt review of customs decisions.

 The fact that these provisions are contained in the same article does not mean that they should
be interpreted in such as way as to blur the dis tinction between the obligati ons which they contain.
Obviously, the two provisions must be interprete d in a harmonious way, taking into account their
respective object and purpose. However, this does not mean that obligations from one provision can
simply be imported into the other.

 In particular, the EC attaches great importance to the fact that Article X:3(a) GATT does not
concern the administration of laws concerning the ju dicial procedure and judicial organization, since
such laws are not among those referred to in Artic le X:1 GATT. Accordingly, Article X:3(a) GATT
can not be construed so as to require a harmonization of laws regarding judicial procedure and judicial
organization within a WTO Member.

 34 Cf. EC First Written Submission, para. 144 et seq.

(a) the EC argument that appeals to th e European Court of Justice form an
important instrument of uniform administration is inconsistent with its
contention in the context of Article X:3(b) of the GATT 1994 that the obligation
of uniform administration and the obligation to provide remedies from
administrative action are discrete obligations without any inherent link to one
another (paragraph 42);
 This argument presented by the US is based on an inaccurate interpretation, in that, according
to the US, preliminary references to the Court of Justice have the nature of an appeal. On the contrary,
that procedure is based on a cooperative relationship between the Court of Justice and national courts,
not a hierarchical one. The EC has already underlin ed this issue in paragraph 470 of its First Written
Submission.

 As the Court of Justice does not act as an appeal court when dealing with preliminary
references, its role has to be u nderstood in relation to the obligati on laid down by Article X:3(a)
GATT to ensure uniform administration of all laws , regulations, decisions and rulings described in
paragraph 1 of that Article. In fact, preliminary ru lings by the ECJ are one important instrument to
ensure uniform administration among all the other instruments described by the EC in its First Written
Submission. Prompt review and correction of ad ministrative action relating to customs matters
required by Article X:3(b) GATT is ensured by th e referring national court, not by the Court of
Justice.

(b) the link between Article X:3(a) and Article X:3(b) arises through the reference
in Article X:3(b) of the GATT 1994 to "administrative enforcement", which is
the subject of Article X:3(a) (paragraph 59).
 Similarly, the EC considers that the term "a dministrative enforcement" in Article X:3(b)
GATT does not establish a link between this provisi on and Article X:3(a) GATT. Article X:3(b)
GATT refers to "agencies entrusted with administ rative enforcement" to id entify the agencies which
are subject to prompt review, and from which the tr ibunals or procedures must be independent. This
does not mean that administration as such becomes the subject matter of Article X:3(b) GATT.

88. Does the obligation for prompt review and correction of administrative action in
Article X:3(b) of the GATT 1994 have direct effect in the member States? If so, what does this
mean in practical terms for the review of customs decisions by member State bodies?

 The European Court of Justice and the Court of First Instance have held that, having regard to
their nature and structure, the WTO agreements ar e not in principle among the rules in the light of
which the Court is to review the legality of me asures adopted by the Community institutions (Case C-
149/96, Portugal/Council, [1999] ECR I-8395, paras. 42-46 (Exhibit EC-119), case C-377/02, Van
Parys, [2005] not yet reported, para. 39 (Exhibit EC-120), and case T-19/01, Chiquita/Commission,
[2005] not yet reported, para. 114 (Exhibit EC-121 ). Consequently, Article X:3(b) GATT does not
create rights upon which individuals may rely directly before the courts by virtue of Community law.

 However, the EC would like to refer to its reply to Question No. 74, where it has explained
that the principle of "prompt review" is in any case inherent to the right to an effective judicial
protection, which is part of the general principles recognized in all member St ates as well as part of
the EC legal system, as recognized by the ECJ.

QUESTIONS FOR BOTH PARTIES

89. Could a system in which it is primarily incumbent upon a trader to assert its rights to
achieve uniform administration on the part of the customs authorities in a particular WTO

Member (for example, by instituting appeals to complain about the decisions/treatment of those
customs authorities) comply with the obligations contained in Article X:3(a) of the GATT 1994?
 Whether the practice of a WTO Member is in compliance with Article X:3(a) GATT must be
assessed on the basis of the overall pattern of administration of such member, taking into account all
elements of the system of that Member as a whole. For this reason, it is difficult to provide a general
answer to the Panel's question.

 This being said, the EC believes that wherea s procedural possibilities given to traders can
play an important role in securing uniformity of ad ministration, normally, the uniform administration
of the law should also be an objective of the public authorities. What specific tools should be at the
disposal of the authorities, and what tools should be available to private parties depends on the overall
design of the particular system, and cannot therefore be answered in the abstract.

90. At paragraph 11.70 of its report, the Panel in Argentina – Hides and Leather stated that
"[t]he relevant question [in determining whether or not Article X:3(a) of the GATT 1994 is
applicable] is whether the substance of such a measure is administrative in nature or, instead,
involves substantive issues more properly deal t with under provisions of the GATT 1994".
Please provide your understanding of this statemen t, particularly the reference to "a measure
that is administrative in nature". In addi tion, please explain in practical terms how the
distinction between measures that are administrative in nature and those that are not is relevant
for the application of Article X:3(a).

 The EC believes that this statement is not dir ectly relevant to the present case. The Panel in
Argentina – Hides and Leather had to decide on a challenge brought by the EC that a specific
Argentinian regulation which foresaw the presence of representatives of the Argentinian tanning
industry in the administrative procedure entaile d an unreasonable, partial and non-uniform
administration.
35 Argentina defended itself by arguing that th e EC was challenging the substance of a
rule, and not its administration.36

 In essence, what the Panel said in Argentina – Hides and Leather was thus that if a particular
law or regulation mandates administra tive behaviour that is unreasonabl e, non-uniform, or impartial,
then the law the law itself constitutes a violation of Article X:3(a) GATT. This is the sense in which
the Panel distinguished between administrative and substantive measures. Clearly, the Panel did not
intend to derogate in any way from the fact that Article X:3(a) GATT relates only to the
administration
 of laws and regulation.

 In the present case, no EC measure mandates in any way a non-uniform administration of EC
customs law. On the contrary, EC laws and regulations are designed to avoid any lack of uniformity.
Accordingly, the EC understands that the US case refers not to the EC customs laws as such, but
rather to the administration of these laws.

 Contrary to the submission of the United States,
37 the Panel in Argentina – Hides and Leather
does not support the measure that a WTO Member is not allowed to maintain laws at a sub-federal
level, as is the case in the EC for penalties. Firs t of all, it is uncl ear how the US defines
"administrative", and why it would consider penalty provisions as "administrative" rather than
"substantive".

 35 Panel Report, Argentina – Hides and Leather, para. 11.58.
 36 Panel Report, Argentina – Hides and Leather, para. 11.69.

 More importantly still, the fact that there exist, within a WTO Member, laws at the sub-
federal level which govern matte rs falling under Article X:1 GA TT has nothing to do with the
situation that the Panel dealt with in Argentina – Hides and Leather . For instance, penalty provisions
contained in the laws of the EC member States do not in any way entail a non-uniformity in the
administration of these laws. This is entirely different from the situation in Argentina – Hides and
Leather, where the Argentinian measure mandated the presence of partial and interested industry
representatives, which necessarily entailed a lack of reasonableness and impartiality in the
administration.

91. Please provide a copy of the list of proposals made by the United States contained in the
document entitled "Elements of Potential EC Customs Reform" dated 22 December 2004.

 A copy of the document is attached as Exhi bit EC-122. This document was transmitted by the
US to the EC on 22 December 2004 as a follow-up to the consultations held on 16 November 2004.

92. Please comment on paragraph 7 of its th ird party submission where the Separate
Customs Territory of Taiwan, Penghu, Kinmen and Matsu argues that the test of "minor
administrative variations" under Article X:3(a) of the GATT 1994 referred to by the GATT
Panel in EEC– Dessert Apples is not relevant for the present case. Does the applicability of this
test depend upon the existence of certain factua l/other circumstances? If so, please explain and
justify making reference to the specific terms of Article X:3(a).

 In this respect, the EC can refer to its answer to the Panel's Question No. 46.

93. In paragraph 21 of its Oral Statement at th e first substantive meeting, the United States
submits that customs laws may be administe red through instruments which are themselves
laws, such as in the case of penalty laws.

(a) Please comment.
 The EC disagrees with this submission. As th e EC has explained in response to the Panel's
Question No. 109, the term to "administer" in Artic le X:3(a) GATT means to "execute" or to "apply".
In the concrete context, this means that Article X: 3(a) GATT refers to the execution in concrete cases
of the laws, regulations, decisions and rulings of general application referred to in Article X:1 GATT.

 A law, such as the laws of the member Stat es containing provisions on penalties, is itself of
general application, and itself needs to be executed or applied. Accordingly, it cannot be said that such
a law "executes" or "applies" another. The US s ubmission is therefore not in accordance with the
ordinary meaning of the terms of Article X GATT.

 In addition, the US submission is incompatib le with the case law of the Appellate Body in EC
– Bananas III , according to which Article X:3(a) GATT does not apply to the laws and regulations
themselves, but rather to the administration thereof.
38 By arguing that a law can itself constitute
"administration" of a law, the US is undermining the clear distinction between the administration of
laws and the laws themselves. According to the Un ited States, any law-making activity could also be
argued to be administration. This is clearly not within the object and purpose of Article X:3(a) GATT.

(b) Could this argument apply to all laws, regulations, judicial decisions and
administrative rulings of general application referred to in Article X:1 of the
GATT 1994?

 38 Appellate Body Report, EC – Bananas III, para. 200.

This argument cannot apply to any of the instru ments referred to in Article X:1 GATT. The
laws, regulations, judicial decisions and administrativ e rulings referred to in this provision all have in
common that they must be "of general application". As such, they cannot be said to be executed or
applied by another law which is equally of general application.
(c) If so, please identify which types of laws, regulations, judicial decisions and
administrative rulings of general application.
 Cf. answer to the preceding question.

(d) What would be the impact and practical effect of such an interpretation on the
administration of matters other than customs matters?
 These consequences would be extremely serious for any WTO Member where laws,
regulations, or other measures of ge neral application exist at a sub -federal, regional or even local
level.

 If the United States were correct, any such sub -federal law, if it had any link with a law
existing at federal level, for instance because it is supplementing or complementing its provisions,
could be said to constitute "administration" of the la w. Accordingly, if several such laws exist within
different parts of the territory of a WTO Member, and if their content is not identical, the WTO
Member would be in violation of Article X:3(a) GATT.

 Such an interpretation would affect all WTO Members where legislation is not only present at
the central, but also at a lower level. It is a common phenomenon of federal-type systems that
legislation at the federal and sub-federal level is mutually complementary and interlocking.
Accordingly, the interpretation of Article X:3(a) GATT proposed by the US would seriously interfere
with the constitutional distribution of powers within most WTO Members with a federal structure, and
consequently should be rejected.

94. With respect to the interpretation of the term "administration" in Article X:3(a) of the
GATT 1994, do the parties consider that a distinction should be drawn between, on the one
hand, administrative procedures applicable to and the treatment of traders and, on the other
hand, substantive decisions and the results of admi nistrative processes that affect traders? If so,
please explain the legal basis for the drawing of such a distinction.

 The EC considers that such a distinction s hould be drawn. As the EC has stated earlier,
39
Article X:3(a) GATT does not exist for its own sa ke, but in order to provide certain minimum
standards of predictability for traders. Accordingly, Article X:3(a) is primarily concerned with the
administrative outcomes affecting traders, and not w ith laws and procedures as such. As the EC has
also said, 40 only to the extent that a particular pr ocedure results necessarily and inevitably in a
violation of Article X:3(a) GATT could such a pro cedure itself be said to be in violation of this
provision.

QUESTIONS FOR THE PARTIES AND THIRD PARTIES:

109. How should the term "administer" be int erpreted for the purposes of Article X:3(a) of
the GATT 1994?

 39 EC Response to the Panel's Question No. 46.
 40 EC Response to the Panel's Question No. 90.

The term "administer" is defined as "man age as a steward; carry on or execute".
41 In other
words, the term "administer" relates to the execu tion of something. In the case of Article X:3(a)
GATT, this administration relates to the laws, regula tions, decision and rulings of general application
referred to in Article X:1 GATT. In other words, in Article X:3(a) GATT, to "administer" means to
execute the general laws and regulations, i.e. to apply them in concrete cases.
This interpretation is also confirmed by the French and Spanish text, which use the terms
"appliquera" or "aplicará", respectively, which can be translated as "to apply". Therefore, the French
and Spanish also confirm that Article X:3(a) GATT is concerned with the application of the general
laws and regulations referred to in Article X:1 GATT.
110. Does the uniformity obligation in Article X:3(a) of the GATT 1994 mean that there
should be no or only limited possibility for th e exercise of discretion in the administration of
customs laws?
No. The exercise of discretion is a normal phenomenon in administrative law. The granting of
a discretion may be necessary where complex factual aspects of the particular case have to be taken
into account, or conflicting interests may need to be weighed and balanced, and where it is not
possible to determine the specific outcome for each case in a measure of general application.
Typically, the exercise of discretion granted by the authorities will be limited by law, and will be
governed by certain principles, su ch as the principle of non-discrimination. The proper exercise of
discretion granted by law can therefore not be regarded as a lack of uniformity contrary to
Article X:3(a) GATT.
111. Is the time taken to address a specific i ssue (including instances of divergences in
administration) a consideration to be taken in to account for the purposes of the uniformity
obligation in Article X:3(a) of the GATT 1994? If so, please explain why, making reference to
the specific terms of Article X:3(a).
In principle, Article X:3(a) GATT is concerne d with the outcome of the administration of
laws. For this reason, it is not incompatible with Article X:3(a) GATT if administrative instruments
which are intended to ensure uniformity may not ta ke effect immediately, as long as they ensure a
uniform application of the law within a reasonabl e time frame. In additio n, the time needed for
addressing a specific issue may also depend on the complexity and the circumstances of the case.
112. With respect to the WTO objective of securi ty and predictability in the international
trading environment (which was recently referred to by the Appellate Body in the context of
tariff commitments at paragraph 243 of its rep ort in EC – Chicken Cu ts WT/DS269/AB/R and
WT/DS286/R), please explain whether, why and how it is relevant for the interpretation of
Article X:3(a) of the GATT 1994.
The EC can refer to its response to the Panel's Question No. 46.
113. Are the expectations of traders relevan t to an interpretation and application of
Article X:3(a) and X:3(b) of the GATT 1994? If so, please explain why and how, making
reference to the specific language of those Articles.
The EC can refer to its Response to the Panel's Question No. 46.

 41 The New Shorter Oxford English Dictionary , Clarendon Press, Oxford, 1993, Volume 1, at 28
(Exhibit EC-123).

114. Does the obligation contained in Arti cle X:3(a) of the GATT 1994 require overall
uniformity in administration or does it require un iformity in administration in each and every
case? Does the answer depend upon the nature of the challenge under Article X:3(a)? If so,
please explain. If overall uniformity is acceptable under Article X:3(a), what would be the
practical/numerical threshold and/or benchmark for demonstrating that Article X:3(a) has been
violated?
The EC can refer to its response to the Panel's Question No. 45.
115. Please comment on the submission made by Japan in paragraph 8 of its third party
submission to the effect that, in assessing the United States' claim under Article X:3(a) of the
GATT 1994, it is necessary for the Panel to anal yze whether the alleged divergences exist, as
claimed by the United States, and if so, whether such divergences exist to a degree that would be
considered to be inconsistent with Article X:3(a) in light of the particular customs system as a
whole.
The EC agrees with Japan's Statement. As for the remaining aspects of the question, the EC
would refer to its response to the Panel's Question No. 45.
116. In paragraph 2 of Japan's Oral Statem ent at the third party session of the first
substantive meeting, Japan relies upon the "m inimum standards" of transparency and
procedural fairness referred to by the Appellate Body in US – Shrimp to argue that "[a]n
administration of regulations lacking 'uniform ity' [for the purposes of Article X:3(a) of the
GATT 1994] would in general terms be unjust, biased, inequitable, partial and opaque – in
other words, unfair and nontransparent". Fo llowing this line of reasoning, would the
requirements of transparency and procedural fairness apply to: (i) the processes or the
treatment of traders in the context of the applicat ion of customs laws; and/or (ii) the substantive
customs decisions to which traders are subject?
The EC agrees with Japan that the St atement of the Appellate Body in US – Shrimp is
relevant for the interpretation of the term "uniform ity" in Article X:3(a) GATT. As to the specific
questions put by the Panel, the EC can refer to its response to the Panel's Question No. 94.
117. In paragraph 7.268 of its report, the Panel in US – Hot Rolled Steel (WT/DS184/R)
stated that "we note that Japan has not even alleged, much less established, a pattern of
decision-making with respect to the specific matters it is raising which would suggest a lack of
uniform, impartial and reasonable administration of the US anti-dumping law [under
Article X:3(a) of the GATT 1994]". Please comment on the Panel's finding that a pattern of
decision-making is needed in order to prove a violation of Article X:3(a).
The EC can refer to its response to the Panel's Question No. 45.
118. What is meant by the words "pertaining to" in Article X:1 of the GATT 1994? Would
rules governing the operational procedures of bodies that oversee or are somehow involved in
the administration of customs laws – such as, for example, the EC Customs Code Committee –
qualify as laws, regulations, judicial decisions a nd administrative rulings of general application
"pertaining to" the classification or the valuation of products for customs purposes?
To "pertain to" is defined as "belong or be attached to, have reference or relation to".
42 In
other words, the subject matter of the laws, regula tions, decisions and rulings of general application

 42 The New Shorter Oxford English Dictionary , Clarendon Press, Oxford, 1993, Volume 2, at 2173
(Exhibit EC-123).

must belong to, have reference to, or be related to the subjects which are enumerated in Article X:1
GATT, i.e. the classification or the valuation of pr oducts for customs purposes, or to rates of duty,
taxes or other charges, or to requirements, restric tions or prohibitions on impor ts or exports or on the
transfer of payments therefore, or affecting th eir sale, distribution, transportation, insurance,
warehousing inspection, exhibition, processing, mixing or other use.
Rules governing the operational procedures of bodies that oversee or are somehow involved
in the administration of customs laws do not as su ch qualify as laws, regulations, judicial decisions
and administrative rulings of general application "per taining to" the classification or the valuation of
products for customs purposes. Such laws may ensu re that a Member fulfils its obligations under
Article X:3(a) GATT. However, this does not m ean that such laws governing operational bodies do
themselves become laws "pertaining to the classification or valuation of goods".
119. Do penalty laws/provisions applicable to violations of customs laws fall within the scope
of the measures referred to in Article X:1 of the GATT 1994? If so, please explain making
reference to the relevant terms of Article X:1.
As the EC has explained in response to the preceding question, Article X:1 GATT only
covers those laws which pertain to the subjects wh ich are enumerated in Article X:1 GATT, i.e. the
classification or the valuation of products for cust oms purposes, or to rates of duty, taxes or other
charges, or to requirements, restrictions or prohi bitions on imports or exports or on the transfer of
payments therefore, or affecting their sale, di stribution, transportation, insurance, warehousing
inspection, exhibition, processing, mixing or other use.
Penalties for violations of customs laws are not among the matters referred to in Article X:1
GATT. It can also not be considered that penalties fo r violations of customs laws necessarily "pertain
to" the classification or the valuation of products, or to rates of duties. For instance, the law of a
Member may set out a penalty for failure to declare a good upon importation. It does not appear that it
could be said that such a law would pertain to the classification or valuation of goods, or to rates of
duties.
It should be noted that by the very natu re of penalties, a requirement of uniform
administration does appear somewhat problematic. Pena lty provisions, and in particular provisions of
criminal law, typically give the authorities a marg in within which to assess th e penalty applicable in
the particular case. Such a margin is particularly necessary in order to take into account the individual
guilt of the defendant. By definition, in the applic ation of penalty provisions, a wider margin of
freedom is required than in the application of prov isions regarding classification, valuation, and rates
of duty.
This is implicitly also recognized by Article VIII:3 GATT, which only provides for certain
minimum standards of proportiona lity as regards the imposition of penalties for breaches of customs
regulations and procedural requirements. Moreove r, given the explicit reference to penalties as
contained in Article VIII:3 GATT, it appears that had the drafters of the GATT intended to include
penalties in Article X:1 GATT, they would have explicitly referred to them in this provision.
43
120. What is the significance of Article XXIV:12 of the GATT 1994 for the interpretation of
Article X:3(a) of the GATT 1994?

 43 In the context of the Doha Trade Facilitation Ne gotiations, Japan, Mongolia, Chinese Taipei and
Peru, have made the proposal to include a provision fo r "clearly stating and publicizing penalty provisions
against breaches of import and export formalities in relevant laws and regulations"; cf. the compilation prepared
by the Secretariat, TN/TF/W/43/Rev.1, p. 11 (Exhibit EC-70).

The EC can refer to its Response to the Panel's Question No. 68.
121. Making reference to the specific terms of Article X:3(b) of the GATT 1994, please
explain whether or not the obligation to ensure prompt review and correction of administrative
action is confined to first instance reviews by administering authorities.
Article X:3(b) GATT provides that tribunals or procedures ensuring the prompt review and
correction of administrative action on customs matters shall be independent of the agencies entrusted
with administrative enforcement. Only if the fi rst instance administrative review fulfils this
requirement of independence, this type of review may be considered a sufficient implementation of
the obligation to ensure prompt review and correction of administrative action.
122. What does "correction" mean in Article X:3(b) of the GATT 1994?
"Correction" has to be interpreted coupled with its accompanying term "review". Both should
cover the ordinary tasks of the courts and tribunals in controlling the Administration: to verify that
administrative decisions abide with the law and to provide the complainant with a remedy that
removes the illegality.
The EC considers that the term "review" refers to the first task, while "correction" describes
the second one.
This interpretation is comforted by the defi nition of both terms that may be found in the
dictionaries. Thus, while the term "review" refe rs in legal English to the "consideration of a
judgement, sentence, etc., by some higher court or au thority", "correction" is "an act or instance of
emendation" or "the neutralization of anything harmful".44 Similar definitions can be found in Spanish
and French. "Revisar" in Spanish is "examinar una cuenta, unas notas, un trabajo hecho, etc., para
asegurarse de que está bien o completo" and "rec tificar" means "corregir a alguien su conducta". 45 In
French, "réviser" means "examiner de nouveau pour ch anger, corriger », and « rectifier » is «faire
disparaître en corrigeant».46
123. What is the legal relationship betw een Article X:3(a) of the GATT 1994 and
Article X:3(b) of the GATT 1994, if any?
The EC can refer to its response to the Panel's Question No. 87.

 44 The New Shorter Oxford English Dictionary, Clarendon Press, Oxford, 1993, Volume 2, at 2582, and
Volume 1, at 516 (Exhibit EC-123).

45 María Moliner, Diccionario del uso del español , Editorial Gredos, Madrid, 1988, at 1003 and 960
(Exhibit EC-124).
 46 Le nouveau petit Robert, Dictionnaires Le Robert, Paris, 2003, at 2296 and 2201 (Exhibit EC-125).

ANNEX A-4

RESPONSES OF THE EUROPEAN COMMUNITIES TO QUESTIONS POSED BY
THE UNITED STATES AFTER THE FIRST SUBSTANTIVE MEETING

(23 September 2005)

1. At paragraphs 46 to 48 of its First Written Submission, the EC refers to the fact that the
Commission may bring infringement proceedings against member States and that individuals
play a vital role in bringing allegations of infringement to the Commission's attention.
(a) Since 1995, how many complaints by individuals regarding infringement have
been submitted to the Commission concerning member State administration of
customs law?
 The answer is 51.

(b) Since 1995, how many infringement proceedings has the Commission
commenced against member States concerning administration of customs law?
 The answer is 83.

2. At paragraph 38 of its Opening Statement, the EC states that "the EC is under no
obligation under Article X:3(a) GATT to establish a BTI system, let alone to design this system
in a particular way." Is it the EC's position that where a device – such as BTI – is not
specifically required by WTO obligations there is no obligation to administer that device in a
uniform manner?

 As the EC has stressed repeatedly, Articl e X:3(a) GATT concerns the administration
 of the
laws and regulations pertaining to the matters referred to in Article X:1 GATT.

 Since BTI pertains to the classification of goods, the EC does not contest that the EC's BTI
practice must be compatible with Article X:3(a) GATT.

 However, the US so far has not shown any actua l inconsistency in the EC's BTI practice, but
rather criticized specific aspects of the design of the EC's BTI system. This is not sufficient for
showing a violation of Article X:3(a) GATT.

 As concerns the US reference to other "devi ces", the EC would repeat that Article X:3(a)
GATT applies only to administration of the laws and regulations referred to in Article X:1 GATT. In
this respect, the EC can refer to its response to the Panel's Question No. 118.

3. When an importer seeks classification of a good imported into a given member State, is
the member State's customs authority required to search the EBTI database to determine
whether one of the other 24 member State authorities has issued BTI classifying that good?

 The EC understands the US question to refer to the classification of products in the course of
normal customs procedures, and not to the issuance of BTI.

 There is no general obligation to consult th e EBTI data base whenever customs authorities
classify a good. EC customs authorities have to deal with millions of customs declarations each year.
In the large majority of cases, the classification of the goods in question is unproblematic. It would

therefore be completely disproportionate, and r esult in a considerable slowing-down of customs
procedures, to require consultation of the EB TI data base in each a nd every case involving a
classification of goods.

 Of course, when classifying products, as in any other area of customs administration, the
customs authorities are under the general duty of coope ration (Article 10 EC). This means that they
must exercise due care, and use all necessary means, to decide on the concrete application of the
Combined Nomenclature. Wherever there is a doub t as to the correct classification of the good in
question, the available means which member States customs authorities have recourse to also include
consultation of the EBTI data base.

4. At paragraph 26 of its Opening Statement, the EC states that "where an individual
trader does not exhaust all the remedies and pro cedural possibilities afforded to him by the
system of a WTO Member, a resulting lack of un iformity cannot be attributed to a failure in
that Member's system." Is it the EC's position that the burden of ensuring uniform
administration lies with individual traders?

 No. The EC institutions and the member States customs authorities are also responsible for
ensuring a uniform interpretation and application of EC customs law.

 However, as the EC has explained, in any syst em of customs administrations, individuals also

have a role to play. If a trader decides not to a ppeal a decision in particular issue, even though a
possibility of appeal exists, this decision cannot be at tributed to the customs authorities. If, due to the
decision of an individual trader, a wrong decision is allowed to stand, this cannot be regarded as a
lack of uniformity attributable to that Member's system of customs administration.

5. In Question No. 27 of the Panel's provisional questions to the parties, the Panel asked
the EC to comment on the substance of the follo wing statement by the Advocate General in the
Timmermans case (para. 41 of Exhibit US-21):

"... the tariff classification of equivalent goods cannot vary from
one member State to another according to the differing
assessments given by the various national customs authorities, as
this would fail to take into acco unt the objective of securing the
uniform application of the customs nomenclature within the
Community, which is intended, inter alia, to avoid the
development of discriminatory treatment as between the traders
concerned."
We understood the EC, in its response at the 15 Se ptember 2005 Panel meeting, to state that the
term "equivalent goods" as used in the quoted statement should be understood to mean
"identical goods."
(a) Could the EC please confirm that this is its position?
(b) If so, what is the EC's basis for stat ing that the term "equivalent goods" as used
in the quoted statement should be understood to mean "identical goods"?
 The EC would refer the US to its r esponse to the Panel's Question No. 49.

6. Question No. 30 of the Panel's provisional questions to the parties asked the EC to
comment on the Commission 's statement at page 12 of An Explanatory Introduction to the
modernized Customs Code (Exhibit US-32) that "it is proposed to extend the binding effect of

[binding tariff information] also to the holder(s) of the decision in order to avoid the system only
being used where the applicant is satisfied with the result." We understood the EC to state that
the situation described in the quoted statement – i.e. "the system only being used where the
applicant is satisfied with the result" – is a rather rare circumstance.

 If it remains the EC's view that the si tuation described is a rather rare circumstance,
what is the basis for that view? Please supply any data on which the EC bases its view.
 The EC does not have any evidence that would indicate that such situations are frequent. The
EC cannot reasonably be expected to prove that something is "rare".

 Moreover, the EC would remark that the burden of proof in this case is on the US as the
complainant. Accordingly, it is for the US, not for the EC, to provide evidence that would show that
the situation referred to is a frequent circumstance.

7. Paragraph 407 of the EC's First Written Submission states, in the last sentence:
"However, it was decided that the case could be further examined through a working group of
the [Customs Code] Committee." In explaini ng this statement during the course of the
15 September 2005, Panel meeting, we understood th e EC to state that the reference to "the
case" in the quoted statement pertains not to th e case of RIL but to the general matter of what
constitutes a control relationship for customs val uation purposes. Could the EC please confirm
this understanding?

 The EC would refer the US to its r esponse to the Panel's Question No. 62.

ANNEX A-5

RESPONSES OF ARGENTINA TO QUESTIONS POSED BY THE PANEL
AFTER THE FIRST SUBSTANTIVE MEETING

(23 September 2005)

QUESTIONS FOR ALL THE THIRD PARTIES

103. What is meant by the term "uniform" in Article X:3(a) of the GATT 1994?

 Argentina reiterates 1 that the term "uniform" is defined as "of one unchanging form,
character, or kind; that is or stays the same in different places or circumstances, or at different times",
as indicated in WTO case law
2.

104. How do the third parties ensure uniformity in administration of their respective customs
laws at different points of entry? In this re gard, please provide details regarding all relevant
aspects of customs administration, including in particular those aspects that are not directly
linked to the constitutional and institutional structure of customs administration.
 No response provided.

105. What body(ies)/procedures are in place in th e third parties to discharge their obligations
under Article X:3(b) of the GATT 1994? Please explain how recourse to this(ese)
body(ies)/procedures works in practice, includi ng how long the review and correction process
takes.
 No response provided.

106. The United States refers to divergent decisions taken by member State authorities
throughout its First Written Submission. For exampl e, the United States refers to divergence in
classification decisions: generally (paragraph 21); with resp ect to network cards for personal
computers (footnote 33); with respect to drip i rrigation product (footnote 33); and with respect
to unisex articles or shirts (paragraph 76). Fur ther, the United States refers to divergence in
customs valuation decisions (paragraphs 25 and 93). Can such divergence in decisions be
challenged under Article X:3(a) of the GATT 1994?
 Argentina considers such divergence to be challengeable under Article X:3(a), as it may
imply non-uniform administration of regulations or administrative rulings of a general nature
pertaining to the classification or valuation of products for customs purposes.

"Divergence" in the administration of such re gulations or administrative rulings would make
it impossible for every exporter and importer to be able " to expect treatment of the same kind, in the

1 We refer to Argentina's Third Party Oral Statement of 15 September 2005, footnote 5, which in turn
refers to the Panel Report in Argentina – Measures Affecting the Export of Bovine Hides and the Import of
Finished Leather, WT/DS155/R, paragraph 11.83 (hereinafter Argentina – Hides and Leather).
2 Panel Report in Argentina – Hides and Leather , WT/DS155/R, paragraph 11.80 et seq. which in turn
refers to The New Shorter Oxford English Dictionary , volume II, Oxford (1993), page 3488. In our view, the
concept of uniformity should be separated from the concep t of non-discrimination, as indicated by the Panel in
Argentina – Hides and Leather, WT/DS155/R, paragraph 11.84.

same manner both over time and in differen t places and with respect to other persons "
3.
Consequently, administration would not be unifo rm and this would infringe the obligation under
Article X:3(a) of the GATT 1994.
 In other words, any divergence in these "d ecisions" would be inconsistent with the
requirement of "uniform administration of Customs laws and procedures between individual shippers
and even with respect to the same person at different times and different places"4.

107. In paragraphs 220-221 of its First Wr itten Submission, the European Communities
submits that, where sub-federal laws exist in a particular WTO Member, it is the
administration of those laws to which Article X:3(a) of the GATT 1994 refers.
(a) Does Article X:3(a) apply to penal laws?
 Argentina considers Article X:3(a) to be app licable to penal laws insofar as the latter cover
conduct pertaining to "the classification or the valuat ion of products for customs purposes, or to rates
of duty, taxes or other charges, or to requirements, restrictions or prohibitions on imports or exports or
on the transfer of payments therefore, or affecting their sale, distribution, transportation, insurance,
warehousing inspection, exhibition, processing, mixing or other use" (Article X:1).

(b) If so, would the Panel be authorized to consider the administration of member
States' penal laws in respect of the United States' claim under Article X:3(a)?
 In Argentina's opinion, yes, insofar as such laws refer to the administration of EC legislation.
We reiterate our view that, since its membership of the WTO is separate from that of its component
States, it is the EC that is bound to comply with the requirements of Article X:3(a) of the GATT
1994
5.

108. How should "prompt" be defined under Article X:3(b) of the GATT 1994?
 Argentina refers the Panel to its third party statement at the first Panel hearing6.

QUESTIONS FOR THE PARTIES AND THIRD PARTIES:
109. How should the term "administer" be int erpreted for the purposes of Article X:3(a) of
the GATT 1994?
 No response provided.

110. Does the uniformity obligation in Article X:3(a) of the GATT 1994 mean that there
should be no or only limited possibility for th e exercise of discretion in the administration of
customs laws?
 No response provided.

3 Panel Report in Argentina – Hides and Leather, WT/DS155/R, para. 11.83, referring to the concept of
uniformity.
4 Panel Report in Argentina – Hides and Leather , WT/DS155/R, para. 11.83, referring to the term
"uniform".
5 Argentina's First Third Party Oral Statement, 15 September 2005, para. 10.
6 Argentina's First Third Party Oral Stat ement, 15 September 2005, paras. 11 et seq. which refer to the
First Written Submission of the EC, para. 459.

111. Is the time taken to address a specific i ssue (including instances of divergences in
administration) a consideration to be taken in to account for the purposes of the uniformity
obligation in Article X:3(a) of the GATT 1994? If so, please explain why, making reference to
the specific terms of Article X:3(a).

 No response provided.

112. With respect to the WTO objective of securi ty and predictability in the international
trading environment (which was recently referred to by the Appellate Body in the context of
tariff commitments at paragraph 243 of its report in EC – Chicken Cuts WT/DS269/AB/R and
WT/DS286/R), please explain whether, why and how it is relevant for the interpretation of
Article X:3(a) of the GATT 1994.
 No response provided.

113. Are the expectations of traders relevan t to an interpretation and application of
Articles X:3(a) and X:3(b) of the GATT 1994? If so, please explain why and how, making
reference to the specific language of those Articles.
 Argentina reiterates its opinion that exporters and importers are the main beneficiaries of the
obligations established under Article X of the GATT 1994
7. This follows both from the provisions of
the GATT 1994 themselves – Article X:3(b) specifica lly refers to "importers", and Article X:1,
referred to under Article X:3(a), refers to "trade rs" and "enterprises, public or private"- and from
WTO case law8.

114. Does the obligation contained in Article X:3(a) of the GATT 1994 require overall
uniformity in administration or does it require uniformity in administration in each and every
case? Does the answer depend upon the nature of the challenge under Article X:3(a)? If so,
please explain. If overall uniformity is acceptable under Article X:3(a), what would be the
practical/numerical threshold and/or benchmark for demonstrating that Article X:3(a) has been
violated?
 No response provided.

115. Please comment on the submission made by Japan in paragraph 8 of its third party
submission to the effect that, in assessing the United States' claim under Article X:3(a) of the
GATT 1994, it is necessary for the Panel to anal yze whether the alleged divergences exist, as
claimed by the United States, and if so, whether such divergences exist to a degree that would be
considered to be inconsistent with Article X:3(a) in light of the particular customs system as a
whole.
 No response provided.

116. In paragraph 2 of Japan's Oral Statem ent at the third party session of the first
substantive meeting, Japan relies upon the "m inimum standards" of transparency and
procedural fairness referred to by the Appellate Body in US – Shrimp to argue that "[a]n

7 Argentina's First Third Party Oral Statement, 15 September 2005, para. 15.
8 Panel Report, Argentina – Measures Affecting the Export of Bovine Hides and the Import of Finished
Leather, WT/DS155/R, paras. 11.68, 11.76 and 11.77; Appellate Body Report, United States – Restrictions on
Imports of Cotton and Man-Made Fibre Underwear, WT/DS24/R, para. 21; Panel Report, United States – Anti-
Dumping Measures on Stainless Steel Plate in Coils and Stainless Steel Sheet and Strip from Korea ,
WT/DS179/R, paras. 6.50 and 6.51.

administration of regulations lacking 'uniform ity' [for the purposes of Article X:3(a) of the
GATT 1994] would in general terms be unjust, biased, inequitable, partial and opaque – in
other words, unfair and non-transparent". Following this line of reasoning, would the
requirements of transparency and procedural fairness apply to: (i) the processes or the
treatment of traders in the context of the applicat ion of customs laws; and/or (ii) the substantive
customs decisions to which traders are subject?
 No response provided.
117. In paragraph 7.268 of its report, the Panel in US – Hot Rolled Steel (WT/DS184/R)
stated that "we note that Japan has not even alleged, much less established, a pattern of
decision-making with respect to the specific matters it is raising which would suggest a lack of
uniform, impartial and reasonable administration of the US anti-dumping law [under
Article X:3(a) of the GATT 1994]". Please comment on the Panel's finding that a pattern of
decision-making is needed in order to prove a violation of Article X:3(a).
 No response provided.

118. What is meant by the words "pertaining to" in Article X:1 of the GATT 1994? Would
rules governing the operational procedures of bodies that oversee or are somehow involved in
the administration of customs laws – such as, for example, the EC Customs Code Committee –
qualify as laws, regulations, judicial decisions a nd administrative rulings of general application
"pertaining to" the classification or the valuation of products for customs purposes?
 No response provided.

119. Do penalty laws/provisions applicable to violations of customs laws fall within the scope
of the measures referred to in Article X:1 of the GATT 1994? If so, please explain making
reference to the relevant terms of Article X:1.
 No response provided.

120. What is the significance of Article XXIV:12 of the GATT 1994 for the interpretation of
Article X:3(a) of the GATT 1994?
 No response provided.

121. Making reference to the specific terms of Article X:3(b) of the GATT 1994, please
explain whether or not the obligation to ensure prompt review and correction of administrative
action is confined to first instance reviews by administering authorities.
 No response provided.

122. What does "correction" mean in Article X:3(b) of the GATT 1994?
 No response provided.

123. What is the legal relationship betw een Article X:3(a) of the GATT 1994 and
Article X:3(b) of the GATT 1994, if any?
 Argentina refers the Panel to what it said in its third party statement at the first Panel hearing9.

9 Argentina's First Third Party Oral Statement, 15 September 2005, paras. 5 – 10.

ANNEX A-6

RESPONSES OF CHINA TO QUESTIONS POSED BY THE PANEL
AFTER THE FIRST SUBSTANTIVE MEETING

(23 September 2005)

QUESTIONS FOR CHINA

95. In relation to paragraph 5 of its third party submission, please specify the starting point
and the ending point of the extra time China subm its is granted by virtue of the application of
Article XXIV:12 of the GATT 1994.
 Article XXIV:12 doesn't explicitly define the starting point and the ending point of the extra
time. However, the text a well as the purpose of Article XXIV:12 indicates that the starting point of
the extra time is no later than the date when th e measure taken by the local level authority of a
contracting party is found to be inconsistent with the provisions of GATT. And the ending point of the
extra time is the date when the measure inconsiste nt with the provisions of GATT by local authorities
is removed. Although it is desirable that the extr a time should be as short as possible, it is necessary
for the federal government of a contracting party to be allowed enough time to overcome the domestic
difficulties encountered.
96. With reference to paragraph 6 of China's third party submission, does China consider
that Article XXIV:12 of the GATT 1994 cannot apply to the substance and/or administration of
measures adopted at the federal/central level?
 No, Article XXIV:12 of the GATT 1994 cannot appl y to the substance and/or administration
of measures adopted at the federal/central level. China agrees with the GATT Panel in Canada – Gold
Coins that stated: "[t]his drafting history indicates, in the view of the Panel, that Article XXIV:12
applies only to those measures taken at the regional or local level which the federal government
cannot control because they fall outside its juri sdiction under the constitu tional distribution of
competence.
1 (Emphasis added by China)" Measures and/or administration of measures adopted at the
federal/central level is under the control of the fe deral/central government of a contracting party and
within the jurisdiction of the federal/central government.
97. In its third party submission, China appea rs to affirm the Panel's interpretation of the
term "uniform" in Argentina – Hides and Leather for the purposes of Article X:3(a) of the
GATT 1994. Does China understand that interpretation to mean that the administration of
customs rules must not vary over time?
China does not believe that the Panel's in terpretation of the term "uniform" in Argentina –
Hides and Leather to mean that the administration of customs rules must not vary over time. That is to
say, China does not believe that the Panel indicated in Argentina – Hides and Leather that the
administration of customs rules should be the same over time. What the Panel in Argentina – Hides
and Leather meant is that the administration of custom s rules cannot vary from time to time to the
extent that the predictability does not exist. The Panel in Argentina – Hides and Leather meant that
administration of customs rules should be stable over time or in the reasonable period of time.
Although the administration of customs rules may vary at the beginning phase, it shall have a
mechanism to correct the varied aspects so as to administer uniformly.

1 GATT Panel Report, Canada – Gold Coins, para. 65

QUESTIONS FOR ALL THE THIRD PARTIES (103 – 108)

 No responses provided.

QUESTIONS FOR THE PARTIES AND THIRD PARTIES (109 – 123)

 No responses provided.

ANNEX A-7

RESPONSES OF JAPAN TO QUESTIONS POSED BY THE PANEL
AFTER THE FIRST SUBSTANTIVE MEETING

(23 September 2005)

QUESTIONS FOR JAPAN

98. Please explain in practical terms what is meant by the reference to "results" in
paragraph 9 of Japan's Third Party Submission.
The term "results" in paragraph 9 of Japan 's third party submission means the actual
administrations of customs regulations, i.e. the "application of" trade regulations pertaining to
customs classification or valuation and other matters described in Article X:1 of the GATT.
For example, in a case where a Member has not introduced a sufficient system of the so called
"advance ruling system", but the particular Member's trade regulation is administered uniformly as a
result of implementation of other measures to ensure uniform administration, we are of the view that
the administration is consistent with Article X:3(a) of the GATT, and the "results" in this case, in light
of the usage we made in our submission, would be the actual application of the measures to ensure
uniformity by this Member.
99. With respect to paragraph 17 of its Third Party Submission, is Japan arguing that,
under Article X:3(a) of the GATT 1994, the outcome of review and correction procedures
provided for under Article X:3(b) of the GATT 1994 must be uniform? If so, please justify
making reference to the text of Articles X:3(a) and X:3(b)
 No. The point of paragraph 17 in Japan's thir d party submission is that Article X:3(b) of the
GATT obligates Members to maintain, or institute as soon as practicable, tribunals or procedures of
review for "prompt review and correction of admini strative action relating to customs matters" – the
matter of uniform implementation of such tribunals or procedures is a matter under Article X:3(a) of
the GATT, where applicable.
100. With respect to paragraph 2 of Japan's Oral Statement at the third party session of the
first substantive meeting, does Japan consider th at "transparency" and "procedural fairness"
are the only "minimum standards" that char acterize the requirements of Article X:3(a),
including, in particular, the uniformity requirement? If not, please identify any other relevant
"minimum standards"
The relevant part of paragraph 2 of Japan's Or al Statement indicates Japan's view on what the
Appellate Body in US – Shrimp had characterized as minimum standards of the requirements of
Article X:3(a). We stated in there that the requirements set out in Article X:3(a) are minimum
standards, as the definition of transparency and proc edural fairness overlap in part with uniformity –
we did not suggest whether these were the only char acteristics of the requirements thereof. As to
whether there are any other relevant "minimum sta ndards", Japan's point had been that uniformity, as
well as other requirements under Article X:3(a), i.e. impartiality and reasonability, are considered to
be "minimum standards" by the Appellate Body in US – Shrimp.
QUESTIONS FOR ALL THIRD PARTIES

103. What is meant by the term "uniform" in Article X:3(a) of the GATT 1994?

As we have submitted in our Third Party Su bmission and Oral Statement, we support the
following findings by panels, which define and give context to the meaning of the term "uniform" in
Article X:3(a) of the GATT 1994.
The Panel in Argentina – Hides and Leather determined that "uniform" in Article X:3(a) of
the GATT 1994 meant that uniformity meant Aunchanging form, character, or kind; that is or stays
the same in different places or circumstances, or at different times"1, and that:
Customs laws should not vary, th at every exporter and importer
should be able to expect treatment of the same kind, in the same
manner both over time and in different places and with respect to
other persons. Uniform administration requires that Members ensure
that their laws are applied consis tently and predictably and is not
limited, for instance, to ensuring equal treatment with respect to
WTO Members. That would be a substantive violation properly
addressed under Article I. This is a requirement of uniform
administration of Customs laws and procedures between individual
shippers and even with respect to the same person at different times
and different places.
2
We are of the view that this provi sion should not be read as a broad
anti-discrimination provision. We do not think this provision should
be interpreted to require all produc ts be treated identically. That
would be reading far too much into this paragraph which focuses on
the day to day application of Cust oms laws, rules a nd regulations.
There are many variations in products which might require
differential treatment and we do not thinks this provisions should be
read as a general invitation for a panel to make such distinctions.
3
Therefore, in addition to the meaning given to the term "uniform" that customs laws "should
not vary, that every exporter and importer should be ab le to expect treatment of the same kind, in the
same manner both over time and in different places and with respect to other persons…consistently
and predictably", Article X:3(a) sha ll be interpreted in the context of the "day to day application of
Customs laws, rule s and regulation". It is also necessary to take note that there is an extent to which
such uniformity required under Article X:3(a) of the GATT 1994. The Panel in US – Hot-Rolled Steel
clarified that a Member's measure to be in consistent with GATT X:3(a) of the GATT, it would have to
have a significant impact on the overall administrati on of that Member's law and not simply on an
impact on the outcome in the single case in question. 4 T h e GATT Panel in EEC – Dessert Apples
found that minimal differences such as the form in which licence applications could be made and the
requirement of pro-forma invoices did not in themselves establish a breach of Article X:3.5
104. How do the third parties ensure uniformity in administration of their respective customs
laws at different points of entry? In this re gard, please provide details regarding all relevant

 1 Panel Report, Argentina – Measures Affecting the Export of Bovine Hides and Import of Finished
Leather (Argentina – Bovine Hides), WT/DS155/R and Corr.1, adopted 16 February 2001, para. 11.80 (quoting
The New Shorter Oxford English Dictionary, Vol. II at 3488 (1993)).
 2 Ibid., para. 11.83.
 3Ibid., para. 11.84.
 4 See the Panel Report, United States – Anti-Dumping Measures on Certain Hot-Rolled Steel Products
from Japan (US – Hot-Rolled Steel), WT/DS184/R, adopted 23 August 2001, para. 7.268.
 5 See the GATT Panel Report, EEC – Restrictions on Imports of Dessert Apples (L/6491-36S/93)
(EEC – Dessert Apples), adopted on 22 June 1989, para.12.30.

aspects of customs administration, including in particular those aspects that are not directly
linked to the constitutional and institutional structure of customs administration.
Japan Customs administrates various measures to ensure the uniform customs administration,
varying from common methods such as consultations and meetings within and between (a) regional
customs to mechanisms at the national level, of which major measures are as follows:
With a view to ensure the uniform administ ration of customs regulations, Japan Customs
functions as the central authorities for tariff classifi cation and valuation, the function of which is to
carry the primary responsibility to interpret trade regulations relating to customs classification,
customs valuation as well as some relevant matters. When issuing decisions of advance rulings
(which are explained below) of difficult matters, regional customs are obliged to consult with the
central authorities. The central authorities main tain databases of the decisions made by regional
customs, and also provide various trainings for officials of regional customs in order to ensure
uniform administration of trade regulations throughout Japan.
Japan has implemented the advance ruling syst em for customs related matters regarding
imports since 1966. Under this system, the customs authorities informs, either orally (application and
ruling communicated through e-mail is treated as an "o ral" ruling) or in a written form (application
and ruling via CuPES (Customs Procedure Entry System ), a system that allows application through
the web-system, istreated as a "written" ruling), th e appropriate tariff classification, etc., to the
applicant (importers or other concerned parties of the goods to be imported) who has requested for an
advanced ruling. These rulings may be given concerni ng: tariff classification, tariff rates, origin of
goods and customs valuation. In addition, wh ere a written decision is made, such decisions are
publicized and provided to the public as a database on the internet at the official website of the Japan
Customs, in principle, except for commercially sensitive cases where publication is withheld.
Please also see our answer for Question No. 105 below, which explains the
tribunals/procedures which help implement a uniform administration of trade regulations in Japan.
105. What body(ies)/procedures are in place in th e third parties to discharge their obligations
under Article X:3(b) of the GATT 1994? Please explain how recourse to this(ese)
body(ies)/procedures works in practice, includi ng how long the review and correction process
takes.
Japan provides both administrative procedures and judicial procedures for the purpose of
prompt review and correction of administrative action relating to customs matters. The administrative
procedures cannot be abbreviated before filing a case to a judicial tribunal for some cases designated
by law, such as decisions to impose customs tariff. The details of each procedure are as follows:
First, any person who is not satisfied with an action taken by a regional customs may make an
objection to the Director-General (DG) of the particular regional customs, within two months after the
day following the date which the person became aware of the particular action. The DG is expected to
make a decision regarding whether the action had been appropriate within three months after
receiving such objection (if the decision is not ma de within that period, the person who made an
objection can move to the next procedure explained in the last paragraph of this reply).
Any person who is not satisfied with a decisi on made by the DG of the regional customs in
response to the objection made may file an appeal to the Minster of Finance within one month after
the day following the date the person receives the no tification of the DG's decision. The Minister of
Finance is expected to make a decision regarding whether the action had been appropriate within three
months after receiving the appeal (if the decision is not made within that period, the person who made

an objection can move to the next procedure expl ained in the first paragraph of the reply to
Question No. 106 below).
In addition, any person who is not satisfied with the decision made by the Minister of Finance
(or for some cases where the above procedures may be abbreviated, an action taken by a regional
customs) may file a case to a judicial tribunal with in six months after the date after becoming aware
of the decision (or action), or a year after the date of the decision (or action), in principle (this term
may be extended for certain cases).
106. The United States refers to divergent decisions taken by member State authorities
throughout its First Written Submission. For exampl e, the United States refers to divergence in
classification decisions: generally (paragraph 21); with resp ect to network cards for personal
computers (footnote 33); with respect to drip i rrigation product (footnote 33); and with respect
to unisex articles or shirts (paragraph 76). Fur ther, the United States refers to divergence in
customs valuation decisions (paragraphs 25 and 93). Can such divergence in decisions be
challenged under Article X:3(a) of the GATT 1994?
The nature of custom administration is that it often involves vast numbers of imports and
numerous different products which are complicated to classify, reflecting the realities such as the
speed of technological advances and the resulting pr oduction of new products. Therefore, the fact
divergences between individual decisions of variou s customs authorities may exist in itself is not
inconsistent with Article X:3(a) of the GATT.
Taking into account the above, if the cases mentioned by the United States substantiates the
non-uniformity of the overall administration of EC's customs regulation that may have a significant
impact on the competitive situation, then these decisions, which are implementations of "laws,
regulations, judicial decisions and administrative ru lings", would be divergences that reach the degree
which is inconsistent with Article X:3(a).
107. In paragraphs 220-221 of its First Wr itten Submission, the European Communities
submits that, where sub-federal laws exist in a particular WTO Member, it is the
administration of those laws to which Article X:3(a) of the GATT 1994 refers.
(a) Does Article X:3(a) apply to penal laws?
Yes, as long as such law is a penalty against violations of relevant trade regulations.
Article X:3(a) GATT applies to "laws, regulations , decisions and rulings of the kind described in
paragraph 1 of this Article". Article X:1 GATT thus specifies the scope of the "regulations, decisions
and rulings of the kind" in Article X:3(a) GATT, and stipulates as follows:
Laws, regulations, judicial decisi ons and administrative rulings of
general application, made effective by any contracting party,
pertaining to the classification or the valuation of products for
customs purposes, or to rates of duty, taxes or other charges, or to
requirements, restrictions or prohi bitions on imports or exports or on
the transfer of payments therefor, or affecting their sale, distribution,
transportation, insurance, warehousing inspection, exhibition,
processing, mixing or other use.
Penalties for violation of customs law are laws , regulation, decisions and rulings that are
imposed against violations of customs law, i.e. "p ertain to" "the classification or the valuation of
products for customs purposes, or to rates of duty, taxes or other charges…", and/or affects "their sale,
distribution …" and therefore fall within the scope of Article X:3(a) GATT.

Although Article VIII:3 GATT does prohibit from imposing substantial penalties for minor
breaches and sanctions, this is not the same as, and does not necessarily ensure a uniform
administration of sanctions, as the EC suggests.
6
However, as it is not specifically set out in Article X:1 that penalties are included, and it is
cumbersome to interpret whether penalties are included in the scope of regulations set out in
Article X:1. In connection with the efforts to clarify and improve Article VIII, as well as better
meeting the objective of Article X, Japan has prop osed that penalty provisions against breaches of
import and export formalities in rele vant laws and regulations be "cl early stated and publicized in the
negotiation of trade facilitation7.
(b) If so, would the Panel be authorized to consider the administration of member
States' penal laws in respect of the United States' claim under Article X:3(a)?
Yes, in our view, the Panel would be authorized to do so.
108. How should "prompt" be defined under Article X:3(b) of the GATT 1994?
In addition to what Japan has stated in paragr aph 18 of its third party submission, we view
that the appropriate definition of "prompt" in this sense means "being ready and quick to act as
occasion demands"8 as well as "without delay", while "delay" is "(a period of) time lost by inaction or
inability to proceed", as EC has stated in paragraph 459 of its First Written Submission. As to how to
determine whether a review had been conducted "ready and quick to act as occasion demands" or
"without delay", it would depend in accordance with the specific circumstances surrounding the
particular system, and should be decided in light of the totality of the relevant situation.
With the above in view, the administrative tr ibunal procedures of Japan may serve as a
reference. As stated in our answer for Questi on No. 11 above, in Japan's administrative tribunal
procedures for Customs procedures, the DG of a re gional customs makes a decision on a claim within
five months after the action at issue is administer ed by the particular regional customs (taking into
account the two month term for the applicant to make an objection and the three months for the DG to
make a decision in our answer for Q.11 above) in principle, and the Minister of Finance makes a
decision on an appeal against the decision of the DG within nine months after the action at issue is
administered in principle.
QUESTIONS FOR THE PARTIES AND THIRD PARTIES:

109. How should the term "administer" be int erpreted for the purposes of Article X:3(a) of
the GATT 1994?
No response provided.
110. Does the uniformity obligation in Article X:3(a) of the GATT 1994 mean that there
should be no or only limited possibility for th e exercise of discretion in the administration of
customs laws?
 No response provided.

 6 See the First Written Submission of the European Communities, para. 441.
 7 Section IV, TN/TF/W/17.
 8 Merriam-Webster Online Dictionary, http://www.m-w.com/cgi-bin/dictionary.

111. Is the time taken to address a specific i ssue (including instances of divergences in
administration) a consideration to be taken in to account for the purposes of the uniformity
obligation in Article X:3(a) of the GATT 1994? If so, please explain why, making reference to
the specific terms of Article X:3(a).
No response provided.
112. With respect to the WTO objective of securi ty and predictability in the international
trading environment (which was recently referred to by the Appellate Body in the context of
tariff commitments at paragraph 243 of its report in EC – Chicken Cuts WT/DS269/AB/R and
WT/DS286/R), please explain whether, why and how it is relevant for the interpretation of
Article X:3(a) of the GATT 1994.
As Article X:3(a) is a provision which contri butes to the security and predictability in
international trading environment by ensuring uni form, impartial and reas onable administration of
trade regulations, such WTO objective is relevant, and Article X:3(a) should be interpreted in light of
such objective.
113. Are the expectations of traders relevan t to an interpretation and application of
Articles X:3(a) and X:3(b) of the GATT 1994? If so, please explain why and how, making
reference to the specific language of those Articles.
 No response provided.
114. Does the obligation contained in Article X:3(a) of the GATT 1994 require overall
uniformity in administration or does it require uniformity in administration in each and every
case? Does the answer depend upon the nature of the challenge under Article X:3(a)? If so,
please explain. If overall uniformity is acceptable under Article X:3(a), what would be the
practical/numerical threshold and/or benchmark for demonstrating that Article X:3(a) has been
violated?
 No response provided.
115. Please comment on the submission made by Japan in paragraph 8 of its third party
submission to the effect that, in assessing the United States' claim under Article X:3(a) of the
GATT 1994, it is necessary for the Panel to anal yze whether the alleged divergences exist, as
claimed by the United States, and if so, whether such divergences exist to a degree that would be
considered to be inconsistent with Article X:3(a) in light of the particular customs system as a
whole.
 No response provided.
116. In paragraph 2 of Japan's Oral Statem ent at the third party session of the first
substantive meeting, Japan relies upon the "m inimum standards" of transparency and
procedural fairness referred to by the Appellate Body in US – Shrimp to argue that "[a]n
administration of regulations lacking 'uniform ity' [for the purposes of Article X:3(a) of the
GATT 1994] would in general terms be unjust, biased, inequitable, partial and opaque – in
other words, unfair and non-transparent". Following this line of reasoning, would the
requirements of transparency and procedural fairness apply to: (i) the processes or the
treatment of traders in the context of the applicat ion of customs laws; and/or (ii) the substantive
customs decisions to which traders are subject?
 No response provided.

117. In paragraph 7.268 of its report, the Panel in US – Hot Rolled Steel (WT/DS184/R)
stated that "we note that Japan has not even alleged, much less established, a pattern of
decision-making with respect to the specific matters it is raising which would suggest a lack of
uniform, impartial and reasonable administration of the US anti-dumping law [under
Article X:3(a) of the GATT 1994]". Please comment on the Panel's finding that a pattern of
decision-making is needed in order to prove a violation of Article X:3(a).
No response provided.
118. What is meant by the words "pertaining to" in Article X:1 of the GATT 1994? Would
rules governing the operational procedures of bodies that oversee or are somehow involved in
the administration of customs laws – such as, for example, the EC Customs Code Committee –
qualify as laws, regulations, judicial decisions a nd administrative rulings of general application
"pertaining to" the classification or the valuation of products for customs purposes?
"Pertain" in the context of Article X:1 means to "have reference or relation to; relate to"
9.
However, this should not mean that any matter, howe ver distantly related, falls within the scope of
Article X:1. The distinction should be made base d on whether the relevant laws, etc., are relevant
enough so that it can be seen to be directly relate to matters indicated in Article X:1. Therefore,
whether rules governing the operational procedures of bodies that oversee or are somehow involved in
the administration of customs laws pertaining to ma tters set out in Article X:1 should be determined
in light of the content of such rule. If it sets out the details of how to implement trade regulations,
then it may "pertain to" trade regulations set out in Article X:1. However, it is difficult to envision
that the rules governing operational procedures of bodi es is rules of "general application" as required
under Article X:1.
119. Do penalty laws/provisions applicable to violations of customs laws fall within the scope
of the measures referred to in Article X:1 of the GATT 1994? If so, please explain making
reference to the relevant terms of Article X:1.
Please see our answer for Question No. 107 (a) above.
120. What is the significance of Article XXIV:12 of the GATT 1994 for the interpretation of
Article X:3(a) of the GATT 1994?
 No response provided.
121. Making reference to the specific terms of Article X:3(b) of the GATT 1994, please
explain whether or not the obligation to ensure prompt review and correction of administrative
action is confined to first instance reviews by administering authorities.
 No response provided.
122. What does "correction" mean in Article X:3(b) of the GATT 1994?
 No response provided.

 9 The New Shorter Oxford English Dictionary, Vol. 2 at 2173 (1993).

123. What is the legal relationship betw een Article X:3(a) of the GATT 1994 and
Article X:3(b) of the GATT 1994, if any?

 No response provided.

ANNEX A-8

RESPONSES OF KOREA TO QUESTIONS POSED BY THE PANEL
AFTER THE FIRST SUBSTANTIVE MEETING

(23 September 2005)

QUESTIONS FOR KOREA

101. With respect to paragraph 7 of its third party submission, please explain in practical
terms how a distinction can be drawn between, on the one hand, a legitimate exercise of
discretion and, on the other hand, an instance of non-uniform administration in violation of
Article X:3(a) of the GATT 1994?
 Discretion a WTO member enjoys under the WT O regime does not mean that the member
can justify its deviation from otherwise applicab le obligation by referring to the discretion.
Discretion for a WTO member is only allowed only to the extent and only if the exercise of such
discretion is within the relevant obligations of the WTO regime.

 In more practical terms, Korea believes that the EC is free to adopt whatever customs
administration system as it pleases – whether it is a centrally-controlled single customs agency
system or 25 independent and separate customs agency system. However, as a WTO member, the
EC must make sure that administration of the customs laws and regulations is "reliable and
predictable" from the perspective of foreign e xporters, no matter which member country's customs
agency and procedures the exporters decide to utilize. So, Korea is of the opinion that the dividing
line between a legitimate exercise of discretion a nd violation of uniform administration obligation
should be whether there is "reliability and predictability" across the board of a WTO member. Korea
notes that the EC has not fulfilled this obligation.

102. In paragraph 3 of its third party submission, Korea refers inter alia to the
"frustrating", "burdensome", "unreasonable" and "unpredictable" administration of EC
customs laws from the perspective of forei gn exporters. Does Korea have any concrete
evidence to support these allegations?
 This observation is based upon the compilation of concerns and complaints of some Korean
exporters who have had to deal with the EC me mber country's varying administration of customs
laws and regulations. Due to the business confid ential nature of the underlying business transactions
(that is, as to some Korean exporters, explaining sel ection of a particular port of entry could reveal
their business strategy and plans) and sensitivity of the claims, Korea is not currently in the position
of providing concrete evidence in this respect. Ko rea, however, will make its best effort, if such
concrete evidence from the Korean side becomes crucial to the Panel's analysis. Korea notes that the
examples provided in the US First Written Submissi on seems to offer an accurate description of the
Korean exporters' problems as well.

QUESTIONS FOR ALL THIRD PARTIES

103. What is meant by the term "uniform" in Article X:3(a) of the GATT 1994?
 The "uniformity" standard as included in Article X:3(a) of the GATT 1994 does not mean
that a customs authority should render the same d ecision all the time. Korea does not believe it
logistically possible or practicable, given the ever-changing nature of existing products and the
advent of new products. In Korea's opinion, the uni formity means that a foreign exporter can expect

"reliable and predictable" administration of customs law and regulations. In other words, if a foreign
exporter has to "guess" at the border regarding cl assification or valuation, it shows the lack of
"reliability or predictability" in terms of custom s system, which would then lead to "non-uniform"
administration of customs laws and regulations.

104. How do the third parties ensure uniformity in administration of their respective
customs laws at different points of entry? In this regard, please provide details regarding all
relevant aspects of customs administration, includi ng in particular those aspects that are not
directly linked to the constitutional and institutional structure of customs administration.
 In Korea, the Korean Customs Se rvice is in charge of all cust oms issues. It applies customs
laws and regulations uniformly throughout the Kor ean territory. As all customs-related issues are
monitored and coordinated by a single government agency, a conflicting customs decision rarely
occurs, and any such conflict is promptly resolved.

105. What body(ies)/procedures are in place in the third parties to discharge their
obligations under Article X:3(b) of the GATT 1994? Please explain how recourse to this(ese)
body(ies)/procedures works in practice, includi ng how long the review and correction process
takes.
 An aggrieved importer can file a protest with the Korean Customs Service for correction or
clarification. When a protest is filed, the Korean Customs Service is required to issue a
determination within 30, 60 or 90 days depending upon the nature of the protest. If such request is
denied, the aggrieved importer can initiate a lega l action against Korean Cu stoms Service requesting
judicial review of the agency determination. This case can be then reviewed and determined by the
Administrative Court, which is a special court in the Korean judicial system to deal with this kind of
dispute. The time period for the judicial review is usually about one year, although a complex case
may take longer than that.

106. The United States refers to divergent decisions taken by member State authorities
throughout its First Written Submission. For ex ample, the United States refers to divergence
in classification decisions: generally (paragraph 21); with respect to network cards for personal
computers (footnote 33); with respect to drip irrigation product (footnote 33); and with respect
to unisex articles or shirts (paragraph 76). Fur ther, the United States refers to divergence in
customs valuation decisions (paragraphs 25 and 93). Can such divergence in decisions be
challenged under Article X:3(a) of the GATT 1994?
 To answer the question upfront, Korea belie ves that such "divergence" can also be
challenged under Article X:3(a) of the GATT 1994. Again, in Korea's opinion, the divergence
included in the US submission is simply a showcase of proving the lack of "reliability and
predictability" in terms of EC's administration of customs laws and regulations.

 If the divergence constitutes a simple aberrati on due to the inherent nature of customs
administration, as the EC attempts to portray, th en such divergence may not be challenged under the
provision. Korea, however, believes that the exampl es in the US submission are simply a tip of the
iceberg that indicates a chronic problem of di vergence, rather than infrequent, inadvertent
aberrations.

107. In paragraphs 220-221 of its First Wri tten Submission, the European Communities
submits that, where sub-federal laws exist in a particular WTO Member, it is the
administration of those laws to which Article X:3(a) of the GATT 1994 refers.
(a) Does Article X:3(a) apply to penal laws?

 Korea believes that the answer to the question is in the affirmative. As long as the relevant
provisions of the penal laws are directly related to administration of customs laws and regulations,
Korea does not see any particular reason to exclude penal laws.

(b) If so, would the Panel be authorized to consider the administration of member
 States' penal laws in respect of the United States' claim under Article X:3(a)?
 Korea notes that the standard should be whethe r the administration of penal laws by various
member states leads to "unreliable or unpredicta ble" penalization for customs related activities
committed by foreign exporters. If that is th e case, it may constitute possible violation of
Article X:3(a) of GATT 1994.

108. How should "prompt" be defined under Article X:3(b) of the GATT 1994?
 Korea believes that the term "prompt" shoul d be interpreted as "without delay" under given
circumstances. If a WT O member has a system under which a judicial review systematically takes
much longer time than that of other countries, the member fails to provide a "prompt" review. The
member should not be allowed to simply cher ry-pick an exceptionally time-consuming example
from the complaining country and then compare it with its own case in an attempt to justify its
alleged "promptness."

QUESTIONS FOR THE PARTIES AND THIRD PARTIES

109. How should the term "administer" be int erpreted for the purposes of Article X:3(a) of
the GATT 1994?
 Korea believes that the term "administer" covers all aspects relating to operation of customs
laws and regulations of a WTO member.

110. Does the uniformity obligation in Articl e X:3(a) of the GATT 1994 mean that there
should be no or only limited possibility for the exercise of discretion in the administration of
customs laws?
 To the extent that a WTO member should not exercise its discretion in a manner that violates
its uniformity obligation under Article X:3(a) of th e GATT 1994, one could say that there is "limited
possibility" for the exercise of discretion in the administration of customs laws and regulations.

111. Is the time taken to address a specific i ssue (including instances of divergences in
administration) a consideration to be taken in to account for the purposes of the uniformity
obligation in Article X:3(a) of the GATT 1994? If so, please explain why, making reference to
the specific terms of Article X:3(a).
 Korea believes that the time taken is also one of the elements to be considered in the
uniformity obligation under Article X:3(a) of the GATT 1994 because the time taken to address a
specific issue can alleviate or exacerbate the alleged divergence. In other words, the longer it takes,
the more expansive the divergence would be, and the more likely "non-uniformity" would exist.

112. With respect to the WTO objective of securi ty and predictability in the international
trading environment (which was recently referred to by the Appellate Body in the context of
tariff commitments at paragraph 243 of its report in EC – Chicken Cuts WT/DS269/AB/R and
WT/DS286/R), please explain whether, why and how it is relevant for the interpretation of
Article X:3(a) of the GATT 1994.

 No response provided.

113. Are the expectations of traders relevant to an interpretation and application of
Articles X:3(a) and X:3(b) of the GATT 1994? If so, please explain why and how, making
reference to the specific language of those Articles.
 As noted above, Korea believes that the underlyi ng theme of Article X:3(a) is to preserve a
"reliable and predictable" customs system for fo reign exporters. As such, in Korea's opinion the
provision is relevant to the expectations of traders.

114. Does the obligation contained in Article X:3(a) of the GATT 1994 require overall
uniformity in administration or does it require uniformity in administration in each and every
case? Does the answer depend upon the nature of the challenge under Article X:3(a)? If so,
please explain. If overall uniformity is accep table under Article X:3(a), what would be the
practical/numerical threshold and/or benchmark for demonstrating that Article X:3(a) has
been violated?

Korea believes that the uniformity as used in Article X:3(a) refers to an overall uniformity
rather than uniformity in each and every case. In other words, the Panel needs to evaluate all
relevant facts to determine whether the EC system can indeed guarantee a "reliable and predictable"
customs system for foreign exporters.
115. Please comment on the submission made by Japan in paragraph 8 of its third party
submission to the effect that, in assessing the United States' claim under Article X:3(a) of the
GATT 1994, it is necessary for the Panel to anal yze whether the alleged divergences exist, as
claimed by the United States, and if so, wheth er such divergences exist to a degree that would
be considered to be inconsistent with Article X:3( a) in light of the particular customs system as
a whole.
 No response provided.
116. In paragraph 2 of Japan's Oral Statem ent at the third party session of the first
substantive meeting, Japan relies upon the "m inimum standards" of transparency and
procedural fairness referred to by the Appellate Body in US – Shrimp to argue that "[a]n
administration of regulations lacking 'uniformit y' [for the purposes of Article X:3(a) of the
GATT 1994] would in general terms be unjust, biased, inequitable, partial and opaque – in
other words, unfair and non-transparent". Following this line of reasoning, would the
requirements of transparency and procedural fairness apply to: (i) the processes or the
treatment of traders in the context of the ap plication of customs laws; and/or (ii) the
substantive customs decisions to which traders are subject?
 No response provided.
117. In paragraph 7.268 of its report, the Panel in US – Hot Rolled Steel (WT/DS184/R)
stated that "we note that Japan has not even alleged, much less established, a pattern of
decision-making with respect to the specific matters it is raising which would suggest a lack of
uniform, impartial and reasonable administra tion of the US anti-dumping law [under

Article X:3(a) of the GATT 1994]". Please comment on the Panel's finding that a pattern of
decision-making is needed in order to prove a violation of Article X:3(a).
 As noted above, Korea believes that what matte rs in the examination of Article X:3(a) of
GATT 1994 is whether the overall administration of customs laws and regulations shows the across-
the-board uniformity rather than case-by-case approach . In that context, Korea believes that the
pattern of decision-making process would be more probative than an individual decision-making
process.

118. What is meant by the words "pertaining to" in Article X:1 of the GATT 1994? Would
rules governing the operational procedures of bodies that oversee or are somehow involved in
the administration of customs laws – such as, for example, the EC Customs Code Committee –
qualify as laws, regulations, judicial decisions and administrative rulings of general application
"pertaining to" the classification or the valuation of products for customs purposes?
 No response provided.
119. Do penalty laws/provisions applicable to vi olations of customs laws fall within the scope
of the measures referred to in Article X:1 of the GATT 1994? If so, please explain making
reference to the relevant terms of Article X:1.
No response provided.
120. What is the significance of Article XXIV:12 of the GATT 1994 for the interpretation of
Article X:3(a) of the GATT 1994?
 No response provided.
121. Making reference to the specific terms of Article X:3(b) of the GATT 1994, please
explain whether or not the obligation to ensure prompt review and correction of
administrative action is confined to first instance reviews by administering authorities.
 Korea believes that the promptness requi rement under Article X:3(b) of GATT 1994 is
applicable to all administrative and legal review procedures of a WTO Member until there is finality
to the dispute or challenge.
122. What does "correction" mean in Article X:3(b) of the GATT 1994?
 No response provided.
123. What is the legal relationship between Article X:3(a) of the GATT 1994 and
Article X:3(b) of the GATT 1994, if any?

 No response provided.

ANNEX A-9

RESPONSES OF THE SEPARATE CUSTOMS TERRITORY OF TAIWAN, PENGHU,
KINMEN AND MATSU TO QUESTIONS POSED BY THE PANEL
AFTER THE FIRST SUBSTANTIVE MEETING

(23 September 2005)

QUESTIONS FOR ALL THIRD PARTIES

103. What is meant by the term "uniform" in Article X:3(a) of the GATT 1994?

 We agree with the ordinary meaning of the term "uniform" as stated by the United States. 1 We
also agree wit the GATT Panel Report in EEC – Restrictions on Imports of Dessert Apples, Complaint
by Chile that uniformity is required "throughout the terr itories" of the relevant Member "over time".
The term "uniform" also refers to the uniform ity in administration as well as in the result of
administration.

104. How do the third parties ensure uniformity in administration of their respective
customs laws at different points of entry? In this regard, please provide details regarding all
relevant aspects of customs administration, includi ng in particular those aspects that are not
directly linked to the constitutional and institutional structure of customs administration.

 We believe that the most impor tant requirement to ensure uniformity is to have a uniform set
of laws and regulations for customs authorities to follow. The Separate Customs Territory of Taiwan,
Penghu, Kinmen and Matsu has such single and unified set of laws and rules in its territory as the
basis for customs officials to carry out their du ties. There is also a cen tral government agency
responsible for the oversight and monitor of cust oms administration. We believe the monitoring and
overseeing activities are of importance to ensure uniformity. Toward that end, we conduct on-the-job
training for our customs officials to ensure that all laws and regulations, whether new ones or ones
already in existence, are administered in accord ance with Article X:1(a). In addition, we hold
coordination meetings among officials from different points of entry, partly for the purpose of
eliminating differences.

105. What body(ies)/procedures are in place in the third parties to discharge their
obligations under Article X:3(b) of the GATT 1994? Please explain how recourse to this(ese)
body(ies)/procedures works in practice, includi ng how long the review and correction process
takes.
Under Article 45 of the Customs Law of the Customs Territory of Taiwan, Penghu, Kinmen
and Matsu, if a party is not satisfied with th e decision of the customs authority regarding the
classification of its products, the customs valuation decision, or the amount of duties or special
duties to be paid, it is entitled, within 30 days, to seek a review by the customs authority. The party
can also provide guarantees or bonds to receive its goods prior to the final decision on the review.
Also, under Article 46 of the Customs Law, the cust oms authority is required to make a decision on
the review within two months from the day after the receipt of the request for review. If the party is
still unsatisfied with the review decision, it can further make appeal to the Committee of
Administrative Appeals of the superior agency. The superior agency shall make its decision on such
administrative appeals within three months from th e appeal. Extension of the three-month period can

1 US First Submission, para. 35.

be made once. If the party is not satisfied with th e result of the administrative appeal, it can further
appeal to High Administrative Court and Supreme Administrative Court.
106. The United States refers to divergent decisions taken by member State authorities
throughout its First Written Submission. For ex ample, the United States refers to divergence
in classification decisions: generally (par agraph 21); with respect to network cards for
personal computers (footnote 33); with respect to drip irrigation product (footnote 33); and
with respect to unisex articles or shirts (paragraph 76). Further, the United States refers to
divergence in customs valuation decisions (paragraphs 25 and 93). Can such divergence in
decisions be challenged under Article X:3(a) of the GATT 1994?
Article X:3(a) of GATT 1994 requires uniform administration of all laws, regulations,
decisions and rulings of the kind described in paragr aph 1 of the same Article, which includes "laws,
regulations, judicial decisions and administrative rulings of general application, made effective by any
contracting party, pertaining to the classification or the valuation of products for customs purposes, or
to rates of duty, taxes or other charges, or to re quirements, restrictions or prohibitions on imports or
exports or on the transfer of payments therefor, or affecting their sale, dist ribution, transportation,
insurance, warehousing, inspecti on, exhibition, processing, mixing or other use." The divergent
decisions referred to by the United States can be challenged under Article X:3(a) because they are
administrative rulings affecting the classification of certain products. Such rulings have general
applicable effect on the subsequent importation of the same products.
107. In paragraphs 220-221 of its First Wri tten Submission, the European Communities
submits that, where sub-federal laws exist in a particular WTO Member, it is the
administration of those laws to which Article X:3(a) of the GATT 1994 refers.
(a) Does Article X:3(a) apply to penal laws?
(b) If so, would the Panel be authorized to consider the administration of member
States' penal laws in respect of the United States' claim under Article X:3(a)?
As a matter of fact, penal law that mandates punishments for infraction of regulations and
rulings pertaining to the administration of cust oms laws could also have great implication on
international trade. Penal law can form part of the overall structure of administration of customs laws.
We do not see why penal laws should be per se excluded from the scope of laws covered by
Article X:3(a).
 This Panel has the authority to consider the administration of Me mber's customs laws,
regulations, decisions and rulings, which includes penal laws that mandate penalties for the violation of
these laws, regulations, decisions and rulings.

108. How should "prompt" be defined under Article X:3(b) of the GATT 1994?

 The term "prompt" as defined under Article X:3(b) means no unnecessary or unjustifiable
delay or prolonging of the process or procedure to the extent that remedies pursuant to review and
correction of administrative action would no longer be enough to repa ir any injury arising from the
measure under review on the relevant party.

QUESTIONS FOR THE PARTIES AND THIRD PARTIES

109. How should the term "administer" be int erpreted for the purposes of Article X:3(a) of
the GATT 1994?

 Administering laws and regulations means a pplying, carrying out, or enforcing laws and
regulations, or making decisions on classification, valuation or other matters included in Article X:3(a)
based or not based on the applicable laws or regulations of the kind stated in Article X:3(a).

110. Does the uniformity obligation in Articl e X:3(a) of the GATT 1994 mean that there
should be no or only limited possibility for the exercise of discretion in the administration of
customs laws?

 In our view, it is possible for customs au thorities to have some discretion in the
administration of customs laws, within parameters set out by the customs laws that do not violate
Article X:3(a). The GATT Panel in EEC – Dessert Apples is consistent with our position in that it
recognizes that "minor administration variations", which may be the result of such discretion, can
exist without violating Article X:3(a).

111. Is the time taken to address a specific i ssue (including instances of divergences in
administration) a consideration to be taken in to account for the purposes of the uniformity
obligation in Article X:3(a) of the GATT 1994? If so, please explain why, making reference to
the specific terms of Article X:3(a).

 The requirements under Article X:3(a) include th e administration of laws and regulations in
a uniform, impartial and reasonable manner. Certai nly the time taken to address a specific issue
should be a consideration to be taken into account for the purpose of the "uniformity" obligation and
the obligation under "reasonableness". If a prolonge d time has been consumed to address a specific
issue, the relevant Member might not have observe d the requirement of administering the laws and
regulations in a reasonable manner. Also if different lengths of time have been in place in dealing
with similar kind of matters, it could be that the Member has not administered the laws and
regulations in a uniform manner.

112. With respect to the WTO objective of securi ty and predictability in the international
trading environment (which was recently referred to by the Appellate Body in the context of
tariff commitments at paragraph 243 of its report in EC – Chicken Cuts WT/DS269/AB/R and
WT/DS286/R), please explain whether, why and how it is relevant for the interpretation of
Article X:3(a) of the GATT 1994.

 We consider the WTO objective of security a nd predictability in the international trading
environment expressed by the Appellate Body to be very relevant to the interpretation of
Article X:3(a) of GATT 1994. Article X:3(a) requires Members to administer laws and regulations in
a uniform, impartial and reasonable manner. This requirement is the practical manifestation and
application of the fundamental principle of secur ity and predictability in the international trading
environment. Thus, when interpretation of this par ticular provision is made, the objective of security
and predictability should always be considered as important elements.

113. Are the expectations of traders relevant to an interpretation and application of
Articles X:3(a) and X:3(b) of the GATT 1994? If so, please explain why and how, making
reference to the specific language of those Articles.

 Specific expectations of traders are not di rectly relevant in the interpretation of
Article X:3(a) and (b) in general. However, in applying the standards of reasonableness and

impartiality in Articles X:3(a) and X:3(b), expectati ons of traders in that particular situation may
become an important consideration.

114. Does the obligation contained in Arti cle X:3(a) of the GATT 1994 require overall
uniformity in administration or does it require un iformity in administration in each and every
case? Does the answer depend upon the nature of the challenge under Article X:3(a)? If so,
please explain. If overall uniformity is accep table under Article X:3(a), what would be the
practical/numerical threshold and/or benchmark for demonstrating that Article X:3(a) has
been violated?

 We are of the view that the obligation c ontained in Article X:3(a) of GATT 1994 requires
uniformity in administration in each and every case over time and across the territory of the Member
in question where the same general conditions exist. This view is consistent with the ordinary
meaning of the term "uniform". In the real worl d, divergences do occur in the application. These
divergences should be treated as violations. If these violations are not properly addressed
domestically, they can be subject to challenge under the WTO.

115. Please comment on the submission made by Japan in paragraph 8 of its third party
submission to the effect that, in assessing the United States' claim under Article X:3(a) of the
GATT 1994, it is necessary for the Panel to anal yze whether the alleged divergences exist, as
claimed by the United States, and if so, wheth er such divergences exist to a degree that would
be considered to be inconsistent with Article X:3( a) in light of the particular customs system as
a whole.

 The United States have provided in this case evidence of the divergen ces that exist in the
administration of EC's customs laws, regulations, decisions and rulings, and our understanding is that
the EC disputes the existence of such divergences rather than the degree of divergences. We do not
see the textual basis upon which such a two-step analysis is required. The requirements under
Article X:3(a) are that the administration must be made uniformly, impartially and reasonably. Any
departure from such requirements is violation of this particular provision. It is our view that the
"minor administrative variations" indicated as acceptable in EEC – Dessert Apples refers to the type
of administration upon which variations occur rather than the degree of divergence.

116. In paragraph 2 of Japan's Oral Statem ent at the third party session of the first
substantive meeting, Japan relies upon the "m inimum standards" of transparency and
procedural fairness referred to by the Appellate Body in US – Shrimp to argue that "[a]n
administration of regulations lacking 'uniformit y' [for the purposes of Article X:3(a) of the
GATT 1994] would in general terms be unjust, biased, inequitable, partial and opaque – in
other words, unfair and non transparent". Following this line of reasoning, would the
requirements of transparency and procedural fairness apply to: (i) the processes or the
treatment of traders in the context of the ap plication of customs laws; and/or (ii) the
substantive customs decisions to which traders are subject?

 Our view is that the transparency and proce dural fairness requirements should apply to both
the treatment of traders in the context of the app lication of customs law and the substantive customs
decisions, because both of these are w ithin the concept of administration of laws and regulations and
because such administration must strictly follow Article X:3(a) of GATT 1994.

117. In paragraph 7.268 of its report, the Panel in US – Hot-Rolled Steel (WT/DS184/R)
stated that "we note that Japan has not even alleged, much less established, a pattern of
decision-making with respect to the specific matters it is raising which would suggest a lack of
uniform, impartial and reasonable administra tion of the US anti-dumping law [under

Article X:3(a) of the GATT 1994]". Please comment on the Panel's finding that a pattern of
decision-making is needed in order to prove a violation of Article X:3(a).

 We do not agree with the view expressed in the Panel report in US – Hot-Rolled Steel. There
is no requirement for the existence of a "pattern of decision-making with respect to the specific
matters it is raising" in order to find an Article X:3( a) violation. In addition, we are not certain what
the threshold is for establishing a "pattern of d ecision-making" Such a requirement would amount to
granting every Member the privilege to violate its obligations under Article X:3(a) until a "pattern of
decision-making" can be found.

118. What is meant by the words "pertaining to" in Article X:1 of the GATT 1994? Would
rules governing the operational procedures of bodies that oversee or are somehow involved in
the administration of customs laws – such as, for example, the EC Customs Code Committee –
qualify as laws, regulations, judicial decisions and administrative rulings of general application
"pertaining to" the classification or the valuation of products for customs purposes?

 According to Oxford English Dictionary, the words "pertaining to" mean to "be appropriate,
related, and applicable". This is quite broad. The rules governing the operational procedures of
bodies that oversee the administration of customs laws is undeniably related to the laws, regulations,
judicial decisions and administration of the customs matters listed in Article X:1. We therefore have
to consider that such rules to be within the scope of Article X:1. Unless we adopt such an
interpretation, a loophole could exist for Member s to deviate from the requirements imposed by
Article X:3(a).

119. Do penalty laws/provisions applicable to vi olations of customs laws fall within the scope
of the measures referred to in Article X:1 of the GATT 1994? If so, please explain making
reference to the relevant terms of Article X:1.

 Article X:1 includes laws and regulations "perta ining to the classification or the valuation of
products for customs purposes, or to rates of duty, taxes or other charges, or to requirements,
restrictions or prohibitions on imports or exports or on the transfer of payments therefor, or affecting
their sale, distribution, transpor tation, insurance, warehousing, in spection, exhibition, processing,
mixing or other use." Thus the issue, as correctly pointed out by the Panel in the previous question, is
whether a law or a regulation pertai ns to the matters listed in the provision. There is no distinction
between penal law and non-penal law for the purpose of the application of this provision. Thus penal
laws and provisions pertaining to customs matters as provided in Ar ticle X:1 should fall within the
scope of this provision.

120. What is the significance of Article XXIV:12 of the GATT 1994 for the interpretation of
Article X:3(a) of the GATT 1994?

 Article XXIV:12 requires every Member, regardl ess of its structure of government (not just
governments with a federal character), to take reas onable measures to ensure that all levels of its
government, including regional and local governments, observe the rules of GATT. This provision is
written in the form of an active obligation rather than an exception, and cannot be used, in any event,
as a justification for a central government to ex cuse itself from fulfilling its own WTO obligations,
regardless of the structure or organization of the Member's government. If that is the case, all
Members would be able to escape from its WTO ob ligations by delegating the administration of
customs matters to regional and local governments. We, therefore, do not believe that
Article XXIV:12 has any relevance in the interpretation of Article X:3(a) in this case.

121. Making reference to the specific terms of Article X:3(b) of the GATT 1994, please
explain whether or not the obligation to ensure prompt review and correction of
administrative action is confined to first instance reviews by administering authorities.

 Article X: 3(b) states that "Each contracti ng party shall maintain, or institute as soon as
practicable, judicial, arbitral or administrative tribunals or procedures for the purpose, inter alia, of
the prompt review and correction of administrativ e action relating to customs matters." We cannot
find any basis to support that the prompt review and correction of administrative action should be
confined to first instance only. In addition, the requirements are "prompt review" and "prompt
correction". It is possible that the result of the firs t instance is incorrect. The party might need to go
to second or even third instance for review. If there is no prompt second and third instance, it would
not be possible to have "prompt correction" as required by this provision.

122. What does "correction" mean in Article X:3(b) of the GATT 1994?

 "Correction" in Article X:3(b), in our view, means modification to remedy and to redress the
situation.

123. What is the legal relationship between Article X:3(a) of the GATT 1994 and
Article X:3(b) of the GATT 1994, if any?

 These two sub-paragraphs require distinctly independent obliga tions. Article X:3(a) is about
the administration of laws and regulations, while Arti cle X:3(b) is about the review and correction of
administrative actions. If the review and correctiv e mechanism is administ ered in a non-uniform,
partial and unreasonable way, Article X:3(a) can also apply, because the review and corrective
mechanism is also laws or regulations pertaining to customs matters. Additionally, if a customs law
is not administered uniformly and there is no judicial, arbitral or administrative tribunals or
procedures to review and correct the decisions, both Article X:3(a) and Article X:3(b) may be
violated.