EUROPEAN COMMUNITIES – SELECTED CUSTOMS MATTERS
Document: Report of the Panel
Date: 16 June 2006
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

EUROPEAN COMMUNITIES – SELECTED CUSTOMS
MATTERS

Report of the Panel

I. INTRODUCTION
1.1 On 21 September 2004, the United States requested consultations with the European
Communities (EC) pursuant to Articles 1 and 4 of the Understanding on the Rules and Procedures
Governing the Settlement of Disputes (DSU) and Ar ticle XXII:1 of the General Agreement on Tariffs
and Trade 1994 (GATT 1994) ().
1.2 The request referred to the alleged non-uniform manner in which the European Communities
administers its laws, regulations, decisions and rulin gs of the kind described in Article X:1 of GATT
1994 pertaining to the classification and valuati on of products for customs purposes and to
requirements, restrictions or prohibitions on imports.
1.3 The request identified the following measures: Council Regulation (EEC) No. 2913/92 of
12 October 1992 establishing the Community Customs Code, including all annexes thereto, as
amended (the "Code"); Commission Regulation (E EC) No. 2454/93 of 2 July 1993 laying down
provisions for the implementation of Council Re gulation (EEC) No. 2913/92 of 12 October 1992
establishing the Community Customs Code, including all annexes thereto, as amended (the
"Commission Regulation"); Council Regulation (E EC) No. 2658/87 of 23 July 1987 on the tariff and
statistical nomenclature and on the Common Custom s Tariff, including all annexes thereto, as
amended (the "Tariff Regulation"); the Integrated Tariff of the European Communities established by
virtue of Article 2 of Council Regulation (EEC) No. 2658/87 of 23 July 1987 on the tariff and
statistical nomenclature and on the Common Custom s Tariff, including all annexes thereto, as
amended (the "TARIC"); and for each of the above laws and regula tions, all amendments,
implementing measures and other related measures.
1.4 The request also referred to the alleged failu re of the European Co mmunities to institute
judicial, arbitral or administrative tribunals or procedures for the purpose, inter alia, of the prompt
review and correction of administrative action relating to customs matters.
1.5 The United States and the European Communiti es held consultations on 16 November 2004
but failed to reach a mutually satisfactory resolution of the matter. Consequently, in a communication
dated 13 January 2005
1, the United States requested the Dispute Settlement Body (DSB) to establish a
panel. Accordingly, at its m eeting of 21 March 2005, the DSB est ablished the Panel with standard
terms of reference. The terms of reference for the Panel are, therefore, the following:
"To examine, in the light of the relevant provisions of the covered agreements cited
by the United States in document WT/DS315/8, the matter referred to the DSB by the
United States in that document and to ma ke such findings as will assist the DSB in
making the recommendations or in giving the rulings provided for in those
agreements."
1.6 On 17 May 2005, the United States requested the Director-General to determine the
composition of the Panel, pursuant to paragraph 7 of Article 8 of the DSU. That paragraph provides:
If there is no agreement on the panelists within 20 days after the date of the
establishment of a panel, at the request of either party, the Director-General, in
consultation with the Chairman of the DSB and the Chairman of the relevant Council
or Committee, shall determine the com position of the panel by appointing the
panelists whom the Director-General consid ers most appropriate in accordance with
any relevant special or additional rules or procedures of the covered agreement or
covered agreements which are at issue in th e dispute, after consulting with the parties

1 WT/DS315/8 contained in Annex C.

to the dispute. The Chairman of th e DSB shall inform the Members of the
composition of the panel thus formed no later than 10 days after the date the
Chairman receives such a request.
1.7 On 27 May 2005, the Director-General accordingly composed the Panel as follows:
Chairman: Mr. Nacer Benjelloun-Touimi

 Members: Mr. Mateo Diego-Fernández
 Mr. Hanspeter Tschäni

1.8 Argentina; Australia; Brazil; China; Hong Kong, China; India; Japan; Korea; and
Chinese Taipei reserved their third party rights to participate in the Panel's proceedings.
1.9 The Panel held the first substantive meeting with the parties on 14-16 September 2005. The
session with the third parties took place on 15 Se ptember 2005. The Panel's second substantive
meeting with the parties was held on 22-23 November 2005.
1.10 On 10 January 2005, the Panel issued the Descri ptive Part of its Panel Report. The Interim
Report was issued to the parties on 10 February 2006 and the Final Report was issued to the parties on
31 March 2006.
II. FACTUAL ASPECTS
2.1 This dispute concerns, inter alia, the question of whether the manner in which the European
Communities administers its laws, regulations, d ecisions and rulings of the kind described in
Article X:1 of GATT 1994, pertaining to the classi fication and valuation of products for customs
purposes and to requirements, restrictions or prohibi tions on imports, complies with the obligation of
uniform administration contained in Article X:3(a) of the GATT 1994. In particular, the United States
argues that the following measures are not being ad ministered in a uniform way by the European
Communities in violation of Article X:3(a): (a) th e "Community Customs Code" contained in Council
Regulation (EEC) No. 2913/92 of 12 October 1992; (b) the "Implementing Regulation" implementing
the Community Customs Code contained in Commission Regulation (EEC) No. 2454/93 of 2 July
1993; (c) the "Common Customs Tariff", which wa s originally promulgated in Council Regulation
(EEC) No. 2658/87 but which is updated annually in the EC Official Journal; (d) the "Taric", which is
the Integrated Tariff of the European Communities established by virtue of Article 2 of the Council
Regulation (EEC) No. 2658/87 of 23 July 1987 and (d) "related measures". The United States also
challenges the alleged failure of the European Co mmunities to provide for the review and correction
of administrative action relating to customs matters in the manner prescribed by Article X:3(b) of the
GATT 1994.
A.
THE LEGISLATIVE FRAMEWORK FOR ADMINISTRATION OF EC CUSTOMS LAW
2.2 The EC Treaty establishes a common commercial po licy. According to Article 133(1) of the
EC Treaty, the common commercial policy is based on uni form principles, particularly with regard to
changes in tariff rates, the conclusion of tariff and trade agreements, the achievement of uniformity in
measures of liberalisation, export policy, and measures to protect trade such as those to be taken in the
event of dumping or subsidies. The ECJ has confirmed that the customs union and the common
commercial policy, which includes administration of customs matters, fall within the exclusive
competence of the European Communities.2

2 Opinion 1/75, Local Cost Standard, [1975] ECR 1355 (Exhibit EC-13).

2.3 The three main instruments comprising the legi slative framework for customs administration
in the European Communities are: the Community Customs Tariff; the Community Customs Code;
and the Implementing Regulation. Each of these instruments are EC regulations. Pursuant to
Article 249(2) of the EC Treaty, they are binding in their entirety and directly applicable in all
member States.
1. The Community Customs Tariff
2.4 The Community Customs Tariff was established by Council Regulation (EC) No. 2658/87 on
23 July 1987, which covers customs tariffs and the coll ection of international trade statistics. In turn,
the Community Customs Tariff establishes the Combin ed Nomenclature (CN). Being a signatory to
the HS Convention, the European Communities base d the CN on the Harmonized System (HS). In
particular, Article 1(2) of Regul ation No. 2658/87 states that the CN is comprised of: (a) the
harmonized system nomenclature; (b) EC subdivisi ons/headings to that nomenclature (where a
corresponding duty rate is specified); and (c) pre liminary provisions, additional sections or chapter
notes and footnotes relating to subheadings. The preliminary provisions contain, inter alia, general
rules for the interpretation of the CN.
2.5 The actual tariff nomenclature is contained in the Annex to Regulation No. 2658/87, which is
updated on a periodic basis pursuant to Article 12 of the Regulation. The current version of the
Annex was published on 7 September 2004 and cam e into force on 1 January 2005 as Commission
Regulation (EC) No. 1810/2004.
2.6 The CN has eight-digit codes, with the first si x digits representing the HS codes (as required
by the HS Convention) and the last two digits id entifying CN subheadings. Additionally, there may
be a 9th digit reserved for the use of national sta tistical subdivisions and a 10th and 11th digit for the
Integrated Tariff of the European Communities, known as the "Taric". 3 Similar to the HS, the CN
consists of 21 sections, covering 99 chapters. Some s ections and chapters of the CN are preceded by
notes.
2. The Community Customs Code
2.7 Council Regulation (EEC) No. 2913/92 establishes the Community Customs Code. 4 T h e
Community Customs Code comprises 253 articles and is divided into nine Titles, dealing with the
following topics – Title I: Scope and basic definitions; Title II: Factors on the basis of which import
duties or export duties and the other measures prescr ibed in respect of trade in goods are applied;
Title III: Provisions applicable to goods brought into the customs territory of the Community until
they are assigned a customs-approved treatment or us e; Title IV: Customs-approved treatment or use;
Title V: Goods leaving the customs territory of the Community; Title VI: Privileged operations;
Title VII: Customs debt; Title VIII: Appeals; Title IX: Final provisions.
3. The Implementing Regulation
2.8 According to Article 247 of the Community Customs Code, the measures necessary for the
implementation of the Community Customs Code are to be adopted by the Commission. On the basis
of Article 247, the Commission adopted Regula tion (EEC) No. 2454 of 2 July 1993 laying down
provisions for the Implementation of the Co mmunity Customs Code (the "Implementing

3 Article 2 of Regulation No. 2658/87 provides that the Taric shall be based on the CN. Section I of the
TARIC explicitly states that it incorporates, inter alia, (a) the provisions of the HS; and (b) the provisions of the
CN. The current version of the Taric is contained in Exhibit US-7.
4 The current version of the Community Customs Code is contained in Exhibit US-5.

Regulation").
5 The Implementing Regulation sets out in detail the provisions necessary for the
implementation of the Community Customs Code. Its structure broadly follows that of the
Community Customs Code.
B. INSTITUTIONS AND MECHANISMS INVOLVED IN THE ADMINISTRATION OF THE EC CUSTOMS
LAWS
1. The Commission
2.9 The Commission is not normally directly involved in the administration of EC customs law.
Rather, Article 211 of the EC Treaty provides that the Commission shall "ensure that the provisions of
this Treaty and the measures taken by the institutions pursuant thereto are applied". Generally, in the
area of customs administration, the function of the European Commission as the guardian of the
Treaty pursuant to Article 211 is to monitor the corr ect and uniform application of EC customs laws
by the member States. Where the Commission consid ers that a member State has failed to fulfil an
obligation under the Treaty, the Co mmission has the possibility, in accordance with the procedures of
Article 226 of the EC Treaty, to bring the matter be fore the ECJ. Such "infringement proceedings"
can be brought in response to any violation of Community law by a member State and can also
concern the incorrect application of Community law by the administrations of the member States. In
addition, there is a standardised procedure for co mplaints by individuals to be addressed to the
European Commission regarding alleged infringement s of Community law. Such complaints, which
may also concern the application of Community la w by national administrations, may lead to the
institution of infringement proceedings by the Comm ission. In accordance with Article 228(1) of the
EC Treaty, if the ECJ finds that a member State h as failed to fulfil an obligation under the EC Treaty,
the member State concerned is required to take the necessary measures to comply with the judgment
of the ECJ. Where the member State concerned fails to comply with the judgment, the ECJ may
impose a penalty payment on the member State pursuant to Article 228 (1) of the EC Treaty.
2.10 In the exercise of its duties under the EC Treaty, the public service of the European
Commission is guided by a Code of Conduct which is part of the Commission's rules of procedure,
and which sets out the principles of good administrative behaviour to be observed by all Commission
staff.6 In particular, Part 4 of the Code of Conduct provides that all enquiries must be dealt with as
quickly as possible, and sets out time limits within which corr espondence should be answered.
Complaints regarding non-compliance with the Code of Conduct may be addressed to the Secretariat-
General of the Commission. In addition, the Commi ssion is politically responsible to the European
Parliament. Moreover, in accordance with Article 194 of the EC Treaty, any citizen may direct a
petition to the European Parliame nt on any matter which comes within the Community's fields of
activity. Finally, in accordance with Article 195 of the EC Treaty, the European Parliament has
appointed an Ombudsman empowered to receive comp laints from individuals concerning instances of
maladministration in the activities of the Community institutions or bodies.
2. The member States
(a) Legal effect of EC customs law on member States
2.11 Jurisprudence of the ECJ has established that the law of the European Community, including
EC customs law, has primacy over the national law of the member States. 7 The principle of primacy
applies to all provisions contained in the EC Treaty (primary Community law) and in acts of the EC

5 The current version of the Implementing Regulation is contained in Exhibit US-6.
6 Exhibit EC-12.
7 Case 6/64, Costa/E.N.E.L., [1964] ECR 1251, 1270 (Exhibit EC-4); Case 106/77, Simmenthal II ,
[1978] ECR 629, para. 17-18 (Exhibit EC-5).

institutions (secondary Community law). It also app lies in respect of any provision of national law at
any level, including member States' constitutions. 8 In practical terms, the principle means that,
whenever a court of a member State encounters a conflict between a provision of Community law and
a provision of its national law, it must set aside the provision of national law and only apply
Community law.
2.12 Jurisprudence of the ECJ has also established th at Community law is directly effective in
member States. This means that Community la w may create rights for individuals, which can be
directly invoked by those indi viduals in proceedings before national courts and authorities. 9 T h e
principle of "direct effect" may apply both to primary Community law as well as to secondary
Community law.
(b) Administration of EC customs law
2.13 Community customs law is executed by the national authorities of the member States. This
arrangement is referred to as "executive federalism".
10 The principle of executive federalism within
the European Communities reflects the principle of subsidiarity, which is enshrined in Article 5(2) of
the EC Treaty, according to which the Community should take action only if and in so far as the
objectives of the proposed action cannot be sufficiently achieved by the member States.
2.14 Article 10 of the EC Treaty imposes the following obligation on the member States regarding
their administration, inter alia of EC customs law :
Member States shall take all appropriate me asures, whether general or particular, to
ensure fulfilment of the obligations arisi ng out of this Treaty or resulting from action
taken by the institutions of the Community. They shall facilitate the achievement of
the Community's tasks.
They shall abstain from any measure which could jeopardise the attainment of the
objectives of this Treaty.
3. The Customs Code Committee
2.15 The Customs Code Committee is establishe d by Articles 247a(1) and 248a(1) of the
Community Customs Code. The Customs Code Committee has adopted its own Rules of Procedure11,
which are based – with some minor modifications – on the standard rules of procedure for comitology
committees.12
2.16 In accordance with Article 1(1) of its Rul es of Procedure, the Customs Code Committee
comprises the following sections: Section for Genera l Customs Rules; Origin Section; Duty-Free
Arrangements Section; Customs Valuation Section; Section for Customs Warehouses and Free Zones;
Section for Customs Procedures with Economic Im pact; Transit Section; Single Administrative
Document Section; Repayment Section; Tariff and St atistical Nomenclature Section; Section on the
Movement of Air or Sea Passengers' Baggage; Economic Tariff Questions Section; Counterfeit Goods

8 Case 11/70, Internationale Handelsgesellschaft, [1970] ECR 1125, para. 3 (Exhibit EC-6).
9 Case 26/62, Van Gend en Loos, [1963] ECR 1, 25 (Exhibit EC-7).
10 Koen Lenaerts/Piet van Nuffel, Constitutional Law of the European Union , 2 nd ed, para. 14-047
(2005) (Exhibit EC-10).
11 Exhibit US-9. The Rules of Procedure of the Commi ttee are also available on the public website of
the European Commission:
http://europa.eu.int/comm/taxation_customs/customs/procedural_aspects/general/community_code/ind
ex_en.htm
12 These standard rules of procedure have been published in the Official Journal (Exhibit EC-2).

Section; Section for favourable treatment (end-u se of goods). The Customs Code Committee is
composed of representatives from each member State and chaired by a representative of the
Commission.
2.17 Article 249 of the Community Customs Code states that the Customs Code Committee has
the authority to examine any question concerning cust oms legislation which is raised by its chairman,
either on his own initiative or at the request of a me mber State's representative. A similar provision is
found in Article 8 of Regulation No. 2658/87 estab lishing the Common Customs Tariff, according to
which the Committee may examine any matter referre d to it by its chairman, either on his own
initiative or at the request of a representative of a member State, concerning the CN or the Taric.
2.18 In practice, the Customs Code Committee unde rtakes the following tasks: gives opinions on
amendments to the Community Customs Code or implementing measures proposed by the
Commission; examines questions concerning the interpretation of customs provisions or definitions of
terms used in customs legislation; exercises powers granted by virtue of specific customs legislation
e.g., Article 9(1) of Regulation No. 2658/87 rega rding: (a) amendment of the CN (including the
creation of statistical Taric sub-headings); (b ) consideration of classification regulations; (c)
determination of the position of the European Co mmunities in the Harmonized System Committee.
The opinions of the Customs Code Committee are not legally binding.
13
2.19 Articles 247a and 248a of the Community Customs Code provide that the Customs Code
Committee shall act as a regulatory or management committee. Article 247 of the Community
Customs Code foresees that the measures necessar y for the implementation of the Community
Customs Code are normally adopted according to the regulatory procedure. In certain cases,
including those mentioned in Article 248 of the Community Customs Code, the management
procedure applies instead.
2.20 According to Article 2 of the "Comitology Decision" contained in Decision 1999/468/EC,
14
the regulatory procedure should be applied for the ad option of "measures of general scope designed to
apply essential provisions of basic instruments". Ar ticle 5 of the Comitology Decision provides that
the Commission can adopt a proposed measure only if the Committee has agreed by qualified
majority.15 If no such majority has been reached or a qualified majority is against the proposal, the
draft is submitted to the European Council. The European Council must then decide by qualified
majority within 3 months, including to reject the m easure in question. If no decision is taken within
this time limit, the Commission adopts the proposed measure.
2.21 The "management procedure", which applies to "management measures", 16 is prescribed in
Article 4 of Decision 1999/468/EC. That Article pr ovides that, under this procedure, the Commission
can adopt a proposed measure even when the Committee does not agr ee. However, if a negative
opinion is rendered with a qualified majority by the Committee, the Commission must involve the
European Council who can take a different decision with qualified majority within 3 months. The
Commission can defer the application of the measure in such cases. In the ev ent that the European
Council takes no decision within three months, the suspended measure becomes applicable.

13 Joined Cases 69 and 70/76, Dittmeyer, [1977] ECR 231 (Exhibit EC-31).
14 Exhibit US-10.
15 A "qualified majority" decision involves a weighing of the votes of the member States pursuant to
Article 205(2) of the Treaty Establishing the European Community, as amended by Article 3 of the Protocol on
the Enlargement of the European Union.
16 Article 2 of the Comitology Decision explains that "management measur es" include measures
relating to the application of the common agricultural an d common fisheries policies, or to the implementation
of programmes with substantial budgetary implications.

2.22 Community legal acts other than the Community Customs Code may also include references
to the Customs Code Committee. In such cases, the applicable deci sion-making procedure is laid
down in the provision attributing decision-making power to the Commission. One example is
Article 10 of Regulation No. 2658/87 establishing the Common Customs Tariff, which provides that
the Commission will be assisted by the Custom s Code Committee in accordance with the
management procedure.
4. EC courts
(a) Role and function of the courts of member States
2.23 The courts of the member States perform a dua l role. When determining a dispute governed
by national law, they form part of the national le gal order. However, these national courts assume the
status of Community courts when determining a cas e governed by Community law. The courts of the
member States are competent to determine any di spute in cases where jurisdiction is not expressly
conferred on the ECJ nor on the EC Court of First Instance. Pursuant to Article 234 of the EC Treaty,
courts of member States may refer questions to the ECJ.
(b) Role and function of the ECJ
2.24 The ECJ and the Court of First Instance of the European Communities are constituted under
the EC Treaty and the Protocol on the Statute of the ECJ annexed to it.
17 Both Courts are composed
of one judge per member State and they normally decide in chambers of three or five judges. The
ECJ is assisted by eight Advocates General, who provide opinions on cases.
2.25 According to Article 220 of the EC Treaty, the central task of the ECJ and the Court of First
Instance is to ensure that, in th e interpretation and application of the Treaty, the law is observed.
Actions may be taken directly to the ECJ such as acti ons against member States for failure to fulfil an
obligation under Community law (Articles 226-228 of the EC Treaty), actions for the annulment of a
Community measure (Articles 230-231 of the EC Treaty), actions for failure by a Community
institution to act (Article 232 of the EC Treaty), and actions for damages relating to the Community's
non-contractual liability (Article 235 of the EC Treaty).
2.26 Proceedings before the ECJ may also originat e from a national court under Article 234 of the
EC Treaty. According to Article 234 EC, nati onal courts may refer any question regarding the
interpretation of Community law to the ECJ. With certain exceptions, member States' courts against
whose decision there is no judicial remedy under na tional law are obliged to refer such questions to
the ECJ.
2.27 Article 225(1) of the EC Treaty provides that the Court of First Instance shall have
jurisdiction at the first instance in respect of actions for annulment, actions for failure to act, actions
founded on non-contractual liability, staff cases and cases under arbitration clauses in Community
contracts, with the exception of those reserved to th e ECJ. According to Article 51 of the Statue of
the Court of Justice, the ECJ shall hear actions br ought by the Member States, the institutions of the
Communities and by the European Central Bank. The ECJ may hear appeals on points of law from
decisions of the Court of First Instance, where that Court has jurisdiction at first instance.

17 Exhibit US-42.

5. Cooperation between the member States and between the member States and the
Commission
(a) Council Regulation (EC) No. 515/97
2.28 Council Regulation (EC) No. 515/97 on mutual assistance between the administrative
authorities of the member States and cooperation between the latter and the Commission seeks to
ensure the correct application of, inter alia, the law on customs matters.
18
2.29 Title I of Regulation No. 515/97 deals with the provision of assistance on request between
member States customs authorities. Title II d eals with spontaneous assistance between customs
authorities. Title III deals with relations betw een member States' customs authorities and the
Commission. Title V establishes the Customs Information System, which is an automated
information system for the use of the administrative authorities of the member States and the
Commission to assist EC customs authorities in prev enting, investigating, and prosecuting operations
that are in breach of customs law.
(b) Action programmes
2.30 The Community has adopted and implemen ted successive action programmes aimed at
strengthening the effective implem entation of the EC customs union. The current action program,
"Customs 2007", applies for the period of 1 January 2003 to 31 December 2007. It is established by
Decision 253/2003/EC of the European Parliament and the Council. 19 The objectives of Customs
2007 are set out in Article 3 (1) of Decision 253/2003. According to this Article, the objectives of the
program are to ensure that the member States' customs administrations:
(a) carry out coordinated action to ensure that customs activity matches the needs
of the Community's internal market through implementing the strategy set out
in the aforementioned Commission communication and Council resolution on
a strategy for the customs union;
(b) interact and perform their duties as efficiently as though they were one
administration and achieve equivalent results at every point of the
Community customs territory;
(c) meet the demands placed on them by globalisation and increasing volumes of
trade and contribute towards strengthening the competitive environment of
the European Union;
(d) provide the necessary protection of the financial interests of the European
Union and provide a secure and safe environment for its citizens;
(e) take the necessary steps to prepar e for enlargement and to support the
integration of new member States.
2.31 Customs 2007 foresees a number of programme acti ons, which include actions in the field of
communication and information exchange systems, be nchmarking, exchanges of officials, seminars,
workshops and project groups, training activities, monitoring actions, and external actions in the form
of technical assistance and training.

18 Exhibit EC-42.
19 Exhibit EC-43.

6. Training
2.32 The training of customs officials of the member States takes place primarily at the national
level. In addition, a "Common Customs Traini ng Programme" was developed in the context of
Customs 2007.
7. Budgetary and financial control
2.33 According to Article 2(1)(b) of the Counc il Decision 2000/597/EC, Euratom on the system of
the European Communities' own resources 20, common customs tariff duties and other duties
established in respect of trade with non-member c ountries shall constitute an "own resource" entered
into the budget of the European Communities. Article 17(1) of Council Regulation (EC/Euratom)
No. 1150/200021 provides that member States must take all requisite measures to ensure that the
amounts corresponding to the Community's entitlement are made available to the Community as
specified in that Regulation. In accordance with Article 18(2)(a) of Regul ation No. 1150/2000, the
member States must, at the request of the EC Co mmission, carry out additional inspections, with
which the Commission shall be associated at its request. According to Article 18(3) of Regulation
No. 1150/2000, the Commission may also itself carry out inspection measures on the spot.
C.
SPECIFIC AREAS OF CUSTOMS ADMINISTRATION RE FERRED TO BY THE UNITED STATES IN ITS
SUBMISSIONS
1. Tariff Classification
2.34 The term "tariff classification" is defined in Article 20(6) of the Community Customs Code as
the relevant subheading of: (a) the CN or any othe r nomenclature based on it, with or without further
subdivisions, which is used for the application of Community tariff measures relating to trade in
goods (e.g., tariff suspensions, tariff preferences, anti-dumping duties); or (b) any other Community
nomenclature based on the CN, with or without furthe r subdivisions, which is used for the application
of non-tariff measures relating to trade in goods (e.g., import quotas for textile products, export
refunds for agricultural goods).
2.35 The obligation to classify products under the Community Customs Code is borne by "customs
authorities", which are defined in Article 4(3) of the Community Customs Code as the authorities
responsible inter alia for applying customs rules. In the context of the European Communities, which
is a customs union and which has a common customs tariff between EC member States and third
countries, the member State administrations are responsible for all opera tions relating to the
implementation on a day-to-day basis of the CN, including the making of classification decisions.
2.36 Jurisprudence of the ECJ establishes that tariff classification is carried out on the basis "of the
objective characteristics and properties of products which can be ascertained when customs clearance
is obtained".
22 Classification instruments that may be applicable throughout the European
Communities include classification regulations, HS explanatory notes and opinions, EC explanatory
notes, and opinions of the Customs Code Committee and binding tariff information.

20 Exhibit EC-44.
21 Exhibit EC-45.
22 Case 38/76, Luma, [1976] ECR 2027, para. 7 (Exhibit EC-18); Case C-233/88, van de Kolk, [1990]

(a) Classification Regulations
2.37 Pursuant to Article 9(1)(a) of Regulation No. 2658/87, the Commission may adopt regulations
on the classification of goods. Such classification regulations are adopted by the Commission in
accordance with the management procedure referred to in Article 10 of Regulation No. 2658/87.
Classification regulations determine the tariff subhead ing to be applied to the specific good described
in the Regulation but may also become relevant by analogy to products simila r to those described in
the regulation.
23 A classification regulation is binding th roughout the Community in accordance with
Article 249(2) of the EC Treaty but cannot amend the CN.24
(b) HS Explanatory Notes and WCO Opinions
2.38 According to Article 7(1)(b) of the HS Convention, the HS Committee can prepare
Explanatory Notes, classification opinions and othe r advice as guidance to the interpretation of the
HS. The ECJ has stated in its case law that, even though they are not normally binding in Community
law, HS Explanatory Notes and classification opi nions of the World Customs Organization (WCO)
are important aids in the interpretation of the Common Customs Tariff.
25 Nevertheless, the ECJ has
also judged that an interpretation of the HS approved by the WCO Council is binding on the
Community when it reflects general practice followed by the member States, unless it is incompatible
with the wording of the heading concerned or go es manifestly beyond the discretion conferred on the
WCO.26
(c) Explanatory Notes of the Combined Nomenclature
2.39 According to Article 9(1)(a) of Regulation No. 2658/87, the Commission may issue
explanatory notes to the CN. Such explanator y notes are adopted by the Commission in accordance
with the management procedure foreseen in Article 10 of that Regulation. Explanatory notes may
clarify particular issues of tariff classification arising under the CN but are distinct from the notes
which introduce the chapters of the CN. 27 Explanatory notes to the CN are not legally binding, and
cannot amend the CN. However, the ECJ has repeatedly acknowledged that explanatory notes are an
important aid in the interpretation of the CN.
28
(d) Opinions of the Customs Code Committee
2.40 On the basis of Article 8 of Regulation No. 2658/87, the Customs Code Committee may adopt
opinions on questions relating to the application a nd interpretation of the CN. Such opinions are
distinct from opinions which the Committee adopts in the context of a comitology procedure on
measures proposed by the Commission. Opinions adopted by the Committee are not legally binding.
However, the ECJ has held that that such opini ons constitute an important means of ensuring the

23 Case C-130/02, Krings, judgment of 4 March 2004 (not yet in the official reports), para. 35
(Exhibit EC-20).
24 Case C-401/93, GoldStar, [1994] ECR I-5587, para. 19 (Exhibit EC-21); Case C-265/89, Vismans,
25 Case C-396/02, DFDS, judgment of 16 September 2004 (not yet published), para. 28 (Exhibit EC-
25); Case 14/70, Deutsche Bakels, [1970] ECR 1001, paras 9-10 (Exhibit EC-26).
26 Cf. Case C-233/88, van de Kolk, [1990] ECR I-265, para. 9 (Exhibit EC-19).
27 Case 183/73, Osram, [1974] ECR 477 , para. 12 (Exhibit EC-27); Case 149/73, Witt, [1973] ECR
1587, para. 3 (Exhibit EC-28).
28 Case C-396/02, DFDS, judgment of 16 September 2004 (not yet published), para. 28 (Exhibit EC-
25); Case C-259/97, Clees, [1998] ECR I-8127, para. 12 (Exhibit EC-29).

uniform application of the common customs tariff by the authorities of the member States and, as
such, can be considered as a valid aid to the interpretation of the Common Customs Tariff.29
(e) Binding tariff information
2.41 The basic provisions on binding tariff information ("BTI") are set out in Article 12 of the
Community Customs Code. Further rules concerning binding information are contained in Title II of
Part I of the Implementing Regul ation (Articles 5-14). These additional provisions address, in
particular, the procedures for obtaining binding information, measures to be taken in the event of
binding information, the legal effect of binding information, and the expiry of binding information. In
addition, the Commission has issued administra tive guidelines on the European Binding Tariff
Information (EBTI) System and its operation.
30
2.42 The aim of binding information is to enable the trader to proceed with certainty where there
are doubts as to the classification or origin of goods, thereby protecting the trader against any
subsequent change in the position adopted by the customs authorities.
2.43 According to Article 6(1) of the Implemen ting Regulation, applications for binding
information are to be made in writing, either to the customs authorities in the member State or
member States in which the information is to be us ed, or to the competent customs authorities in the
member State in which the applicant is establishe d. In accordance with Article 6(5) of the
Implementing Regulation, a list of the member States ' authorities competent to issue BTI is regularly
published in the Official Journal.31
2.44 The application must be made on a standard application form conforming to the specimen
contained in Annex 1B to the Implementing Regulation. The details that an application for BTI must
contain are set out in Article 6(3)(A) of the Implementing Regulation. According to
Article 6(3)(A)(j), the application must contain the indication by the applicant whether, to his
knowledge, BTI for identical or similar goods has al ready been applied for, or issued in the
Community.
2.45 Article 8(1) of the Implementing Regulation provides that a copy of the application for BTI, a
copy of BTI notified to the applicant, and the info rmation contained in copy 4 of the BTI form shall
be transmitted to the Commission. This transmis sion is done by electronic means. In accordance
with Article 8(3) of the Implementing Regulation, th is data is stored in a database of the Commission,
called the EBTI data base. There are two versions of this database. One is available to the public for
consultation; the other is exclusively available to the Commission and issuing customs authorities of
the member States. The version available to th e public allows searches of valid BTI by issuing
country, start and end date of validity, BTI referen ce, CN code, keyword, or product description. The
public version of the EBTI database is accessible on the website of the European Commission.
32 The
version available to the Commission and customs authorities of the member States contains additional
information of a confidential nature, which is not made available to the public (i.e. the name and
address of the applicant, holder and agent, if one has been appointed, confidential commercial details
concerning the goods for which the BTI has been issued, including trade names). The version
available to the Commission and issuing customs authorities also contains all applications for BTI that
have been submitted to member State customs admi nistrations and BTI that has ceased to be valid.
33

29 Joined Cases 69 and 70/76, Dittmeyer, [1977] ECR 231, para. 4 (Exhibit EC-31).
30 Exhibit EC-32.
31 Exhibit EC-33.
32 http://europa.eu.int/comm/taxation_customs/dds/en/ebticau.htm.
33 A copy of the search interface of the database available to the Commission and issuing authorities of
the member States are contained in Exhibit EC-34.

According to the administrative guidelines issued by the Commission on the EBTI system, the EBTI
database should be consulted by customs authorities prior to the issuance of BTI in cases where there
is a doubt regarding the correct classification, or where different headings merit consideration.
34
2.46 As for who is responsible for issuing BTI, this is the task of member State customs
authorities. In particular, Article 12 of the Community Customs Code provides that member State
customs authorities must, upon written request, issu e BTI. When the customs authorities have
possession of all the elements nece ssary for them to determine the classification of the goods, BTI
shall be notified to the applicant as soon as po ssible in accordance with Article 7(1) of the
Implementing Regulation.
2.47 Article 10 of Implementing Regulation provides that BTI may only be invoked by the holder
of the information or the holder's representative. 35 Articles 5 and 11 of the Implementing Regulation
provide that BTI is binding on the administration of all member States. Further, according to
Article 12(2) of the Community Customs Code, BTI will be binding on the customs authorities as
against the holder of the BTI. Article 12(3) of th e Community Customs Code clarifies that BTI will
be binding only in respect of the tariff classification of goods that correspond in every respect to those
described in the information. Article 12(4) of the Community Customs Code indicates that BTI will
be valid for a period of six years but may be annulled where the customs authorities determine that the
information is based on inaccurate or incomplete info rmation from the applicant. Article 12(5) of the
Community Customs Code identifies the circum stances in which BTI shall cease to be valid,
including where BTI is revoked or amended in accordance with Article 9. Article 9 of the
Community Customs Code, in turn, provides for revocation or amendment of BTI where "one or more
of the conditions laid down for its issue were not or are no longer fulfilled." The ECJ has held that a
member State customs authority is entitled to cons ider that one of the provisions laid down for the
issuance of BTI is no longer fulfilled and to revoke that BTI where, on more detailed examination, it
appears to that authority that its initial interpreta tion of the legal provisions applicable to the tariff
classification of the goods concerned "is wrong, foll owing an error of assessment or evolution in the
thinking in relation to tariff classification"
36.
2.48 The procedure that will apply in the event of inconsistencies arising in BTI is set out in
Article 9 of the Implementing Regulation. In partic ular, such inconsistencies may be considered by
the Customs Code Committee if it has been placed on the agenda of the next meeting of the
Committee by the Commission or at the request of a representative of a member State. Article 9
further provides that, in light of such inconsistencies, the Commission must adopt a measure to ensure
the uniform application of the CN rules, as app licable, as soon as possible and within six months
following the meeting at which the inconsistency is placed on the agenda of the Customs Code
Committee. The measures foreseen in Article 9(1) of the Implementing Regulation may take the form
of a classification regulation adopted by the Commis sion on the basis of Article 9(1)(a) of Regulation
No. 2658/87. In accordance with Article 12(5)(a)(i ) of the Community Customs Code, where such a
regulation is adopted, BTI which is not in accordance w ith it will cease to be valid. Alternatively, the
Commission may also, on the basis of Article 12( 5)(a)(iii) of the Community Customs Code and
Article 9(1) of the Implementing Regulation, adopt a decision obliging the member State who issued
BTI to revoke it.

34 Exhibit EC-32, p. 7.
35 Article 5(3) of the Implementing Regulation defines the "holder" of BTI to mean "the person in
whose name the binding information is issued." The "holder" of BTI need not be the same as the "applicant" for
BTI.
36 Timmermans Transport & Logistics BV v. Inspecteur der Belastingdienst – Douanendistrict
Rososendaal and Hoogenboom Production Lts. v. Inspect eur der Belastingdienst – Douanendistrict Rotterdam ,
Joined Cases C-133/02 and C-134/02, 2004 ECR I-01125, 22 January 2004, para. 25 (Exhibit US-2).

2. Customs valuation
2.49 Where customs duties are calculated on an ad valorem basis – that is, they are expressed as a
percentage of the value of the good – the assessment of duties owed must include the valuation of the
good.
2.50 The basic provisions on customs valuation are contained in Chapter 3 of Title II of the
Community Customs Code (Articles 28-36). More de tailed provisions are contained in Title V of the
Implementing Regulation (Articles 141-181a). Title V is subdivided into seven chapters, concerning
general provisions; royalties and licensing fees; the place of introduction into the Community;
transport costs; rates of exchange; simplified pr ocedures for perishable goods ; and declarations of
particulars and documents to be furnished. In addition, Annex 23 of the Implementing Regulation
contains interpretative notes on customs valuation. Article 141(1) of the Implementing Regulation
requires that, when applying the provisions of th e Community Customs Code and the Implementing
Regulation, member States shall comply with the interpretative notes.
2.51 Pursuant to Article 29 of the Community Cust oms Code, the primary basis for determination
of customs value in the European Communities is th e "transaction value" – that is, the price actually
paid or payable for the imported goods. The tr ansaction value may be used for imported goods
provided that none of the restrictions or conditions leading to the rejection of the transaction value
applies.
2.52 According to Article 32 of the Community Customs Code, the transaction value must be
adjusted by additions to the price for: (a) commissions and br okerage; (b) the cost of containers and
packing; (c) goods and services supplied by the buyer; (d) any royalties or licence fees related to the
goods; (e) the proceeds to the seller of any subse quent resale, disposal or use of the imported
merchandise; and (f) the costs of transport, insura nce, loading and handling charges in the exporting
country. Articles 157 - 159 of the Implementing Re gulation provide further guidance concerning the
meaning of "royalties" and the circumstances when th ey should be included in the transaction value.
Article 33 of the Community Customs Code provides th at the transaction cost must also be adjusted
by deductions to the price for, for example: (a) cost s for transportation within the European
Communities; and (b) EC customs duties, antidum ping duties and other charges payable in the
European Communities by reason of the importation or sale of the goods.
2.53 The transaction value is the preferred and prim ary method of valuation and is used in most
instances. However, pursuant to Article 29(1)(b ) of the Community Customs Code, the transaction
value may be rejected if, inter alia , the buyer and seller are "related" parties. Article 143 of the
Implementing Regulation defines "related" parties to include cases such as: (a) where the parties are
legally recognized partners in business; and (b) one of them directly or indirectly controls the other.
Article 29(2) of the Community Customs Code makes it clear that the existence of a legal relationship
between the buyer and seller does not necessarily mean that the transaction value will be rejected.
This will only occur if the relationship influen ces the price. Annex 23 of the Implementing
Regulation, which contains interpretative notes on cu stom value, explains in more detail when the
transaction value should be disregarded in light of the relationship between buyer and seller.
2.54 Article 30 of the Community Customs Code provides that, if the transaction value cannot be
used, alternative bases for valua tion are to be used in the following sequential order: (a) the
transaction value of identical goods; (b) the transact ion value of similar goods; (c) the unit price at
which the imported or identical or similar goods are sold in the greatest aggregate quantity to persons
not related to the sellers; and (d) the computed va lue, which is the production cost including general
expenses and the usual amount of profit. Anne x 23 of the Implementing Regulations provides
additional guidance regarding when these alternative methods can be used.

2.55 Article 147(1) of the Implementing Regulation provides that, for the purposes of Article 29 of
the Community Customs Code, the fact that the goods which are the subject of a sale are declared for
free circulation shall be regarded as adequate indication that they we re sold for export to the customs
territory of the Community. Article 147(1) of the Implementing Regulation further provides that, in
the case of successive sales before valuation, only th e last sale, which led to the introduction of the
goods into the customs territory of the Community, or a sale taking place in the customs territory of
the Community before entry for free circulation of the goods, shall constitute such indication.
2.56 Where a need for further detailed rules on valuation occurs, the Commission may, in
accordance with the procedure referred to in Article 247 of the Community Customs Code, amend the
valuation rules contained in the Implementing Re gulation, which will be legally binding in all
member States. In addition, in accordance with Article 249 of the Community Customs Code, the
Customs Code Committee (through its Customs Valuation Section) may examine questions
concerning the application of EC customs legislation in the field of valuation. The Commission has
also issued a Compendium of Customs Valuation texts which contains commentaries prepared and
conclusions reached by the Customs Code Committ ee on specific issues of customs valuation on the
basis of Article 249 of the Community Customs Code. In addition, it contains excerpts from relevant
judgments of the ECJ on valuation issues, as well as indices of other relevant texts.
37
3. Audit following release for free circulation
2.57 Article 78 of the Community Customs Code au thorizes customs authorities to inspect the
commercial documents and data relating to any im ports or exports or to subsequent commercial
operations involving them. Such inspections help customs authorities to be in a position to satisfy
themselves as to the accuracy of the particulars cont ained in the relevant customs declaration. Such
inspections may be carried out at the premises of the declarant or of any person directly or indirectly
involved in these operations. Customs authorities may also examine goods where it is still possible
for them to be produced.
2.58 No provisions in the Community Customs Code nor in the Implementing Regulation oblige
customs authorities to conduct audits following the release of goods for free circulation or impose any
obligations on the manner in which such audits are to be conducted. However, the EC Commission in
conjunction with the member States has pr epared a Community Customs Audit Guide
38, which sets
out a framework for post-clearance and audit-based controls.
4. Penalties for infringements of EC customs law
2.59 There are no provisions in the Community Customs Code nor in the Implementing Regulation
that define the penalties applicable for violations of EC customs law. Therefore, as a general rule, the
nature and level of such penalties, whether administra tive or criminal in nature, are determined by the
national laws of the member States. Nevertheless , in furtherance of Article 10 of the EC Treaty,
member States must take all measures necessary fo r the proper implementation and application of EC
law, including the provision of penalties for violations of EC law. In particular, they must ensure that
particular infringements of Community law are penalized under conditions, both procedural and
substantive, which are analogous to those applicab le to infringements of national law of a similar
nature and importance and which, in any event, make the penalty eff ective, proportionate and
dissuasive.39 This has been confirmed by Council resolution of 29 June 1995 on the effective uniform

37 Exhibit EC-37.
38 Exhibit EC-90.
39 Case C-68/88, Commission/Greece, [1989] ECR 2965, para. 23-25 (Exhibit EC-38); similarly, Case
C-326/88, Hansen, [1990] ECR I-2911, para. 17 (Exhibit EC-39); Case C-36/94, Siesse, [1995] ECR I-3573,
para. 20 (Exhibit EC-40); Case C-213/99, Andrade, [2000] ECR I-11083, para. 19, 20 (Exhibit US-31).

application of Community law and on the penalties applicable for breaches of Community law in the
internal market, which recalls the relevant ca se law of the ECJ and calls upon member States to
ensure that "Community law is duly applied with the same effectiveness and thoroughness as national
law and that, in any event, the penalty provi sions adopted are effective, proportionate and
dissuasive".40 Where a member State fails to provide such effective, proportionate and dissuasive
penalities, it fails to fulfil its obligations under the EC Treaty.41
5. Processing under customs control
2.60 Article 130 of the Community Customs Code states that the procedure for processing under
customs control allows non-Community goods to be used in the customs territory of the Community
in operations which alter their nature or state, without being subject to import duties or commercial
policy measures, and thereafter allows the processed pr oducts to be released for free circulation at the
rate of import duty applicable to the processed products.
2.61 Article 85 of the Community Customs Code pr ovides that the use of the procedure for
processing under customs control (which is defined as a customs procedure with economic impact) is
conditional upon authorizati on being issued by the customs authorities at the request of the person
who carries out the processing or a rranges for it to be carried out. Authorization will only be granted
if certain conditions are fulfilled. One such condition is contained in Article 133(e) of the Community
Customs Code.
2.62 Article 133(e) of the Community Customs Code provides that, before granting authorization
under Article 85, the customs authorities must exam ine the economic consequences of the use of the
processing under customs control procedures to dete rmine whether or not the procedure helps to
create or maintain a processing activity in the Eu ropean Communities without adversely affecting the
essential interests of EC producers of similar goods. Article 502(3) of the Implementing Regulation
provides that, in respect of processing under custom s control arrangements, the examination shall
establish whether the use of non-Community sources enables processing activities to be created or
maintained in the Community.
2.63 Article 552 and Part A of Annex 76 of the Im plementing Regulation set out the cases in
which the economic conditions are deemed to be fulf illed so that, in those cases, an examination of
the economic conditions is not necessary. For the types of goods and operations mentioned in Part B
of Annex 76 of the Implementing Regulation and those not covered by Part A of that Annex, the
examination of the economic conditions must take place at Community level, through the relevant
Committee procedure. For the types of goods an d operations not mentioned in Annex 76 of the
Implementing Regulation, pursuant to Articles 502(1) and 552(1) of the Implementing Regulation, the
examination of the economic conditions shall take pl ace at national level. When examinations take
place at the national level, member States must communicate to the Commission relevant information
in accordance with Article 522 of the Implementing Regulation. Furthermore, pursuant to Articles
503 and 504 of the Implementing Regulation, if a memb er State objects to an authorization issued or
if the customs authorities concerned wish to consu lt before or after issuing an authorization, an
examination of the economic condition may take place at Community level.
6. Local clearance procedures
2.64 Pursuant to Article 263 of the Implementing Regulation, customs authorities of EC member
States may allow, upon request, the use of the "local clearance procedure" to any applicant wishing to

40 Exhibit EC-41.
41 Case C-68/88, Commission/Greece, [1989] ECR 2965, para. 23-25 (Exhibit EC-38), where Greece
was found to have violated its obligations under Article 10 of the EC Treaty.

have goods released for free circulation at the appl icant's premises or at other designated places. In
other words, an importer may have goods released fo r free circulation at its own premises or certain
other designated locations without having to present the goods to customs.
2.65 The basic provision for the local clearance pro cedure is Article 76(1)(c) of the Community
Customs Code. Additionally, where a data-pro cessing technique is used, Article 77 of the
Community Customs Code shall apply. More deta iled provisions are laid down in Articles 263 – 267
of the Implementing Regulation.
2.66 Under Article 263 of the Implem enting Regulation, authorisation to use the local clearance
procedure shall be granted to any person wishing to have goods released for free circulation at his
premises or at the other places designated or approved by the customs authorities in respect of goods
subject to certain procedures (transit or custom s procedures with economic impact) or which are
brought into the customs territory of the Commun ity with an exemption from the requirement that
they be presented to customs. Article 264(1) of the Implementing Regulation provides that
authorisation for local clearance will be granted provided that the applicant's records enable the
customs authorities to carry out effective checks.
7. Recovery of customs debt
2.67 Revenue from import and export duties based on the Common Customs Tariff constitutes
"own resources" pursuant to Article 2(1)(b) of th e Council Decision 2000/597/EC, Euratom. Articles
217 – 220 of the Community Customs Code govern th e entry into the accounts of the member States
and, therefore, constitute the link between, on the one hand, the obligations of the debtor to pay
import or export duty to the national customs administration and, on the other hand, the member
States' obligation to make the "own resources" ava ilable to the European Communities. Pursuant to
Article 221 of the Community Customs Code, as soon as the amount has been entered into the
accounts, it must be communicated to the debtor in accordance with the appropriate procedures.
Article 221(3) of the Community Customs Code stipulates the period of time within which the debt
must be communicated to the debtor.
D.
REVIEW OF CUSTOMS DECISIONS
1. Decisions the subject of judicial review
2.68 A "decision" is defined in Article 4(5) of the Community Customs Code as any "official act
by the customs authorities pertaining to customs ru les giving a ruling on a particular case, such act
having legal effects on one or more specific or identifiable persons ; this term covers, inter alia ,
binding information within the meaning of Artic le 12 [of the Community Customs Code]". In
addition, Article 6(3) of Community Customs Code provides that "[d]ecisions adopted by the customs
authorities in writing which either reject requests or are detrimental to the persons to whom they are
addressed shall set out the grounds on which they are based. They shall refer to the right of appeal
provided for in Article 243".
2.69 Article 243(1) of the Community Customs Code provides that any person directly and
individually concerned by a decision of the customs authorities regarding the application of customs
legislation has the right to lodge an appeal. An a ppeal is also possible where a requested decision has
not been taken within the time period stipulated in Article 6(2) of the Community Customs Code.
2. Review by member States' customs authorities and courts
2.70 Article 243(1) of the Community Customs Code st ates that an appeal must be lodged in the
member State where the relevant d ecision has been taken or applied for. In addition, Article 245 of

the Community Customs Code states that "provisions for the implementation of the appeals procedure
shall be determined by the member States", meani ng that appeals procedures are laid down in the
national laws of the member States.
2.71 Article 243(2) indicates that the right of appeal may be exercised: (a) initially before the
customs authorities designated for that purpose by the member States; and (b) subsequently, before an
independent body, which may be a judicial authority or an equivalent specialised body, according to
the provisions in force in the member States.
2.72 With respect to review by customs authorities d esignated in member States, this is required in
most member States. However, in Belgium, Est onia, Greece, Cyprus, France, Malta and Portugal,
administrative reviews are voluntary. Further, in Sweden, there is no administrative review and the
administrative decision has to be appealed directly to the courts. Administrative authorities in the
member States can repeal, revoke, alter or replace a disputed administrative decision.
2.73 Regarding appeals to member States' courts, mo st such courts are only entitled to annul the
administrative decision should they consider it unlaw ful. However, in some cases, the courts may
substitute their own decisions in cases involving the payment of duties. A few national courts have
the power to substitute or amend the administra tive decision challenged: Denmark, Latvia, the
Netherlands, Sweden and Slovenia.
3. Direct appeals to the ECJ
2.74 Article 230 of the EC Treaty vests individuals w ith the right to approach the Court of First
Instance directly in certain cases. Article 230, whic h concerns actions for annulment, deals with the
jurisdiction of the ECJ to review the legality of act s jointly adopted by the European Parliament and
the Council, the European Commission and the ECB, or by the Council itself or the Parliament where
the act is intended to produce legal effects vis-à- vis third parties. An action for annulment under
Article 230 does not cover acts adopted by a national authority. Nor does it extend to the EC Treaty
and its amendments.
III. PARTIES' REQUESTS FOR FINDINGS AND RECOMMENDATIONS
A. UNITED STATES42
3.1 The United States requests the Panel to:
(a) find that the European Communities is not in conformity with Article X:3(a)
and Article X:3(b) of the GATT 1994;
(b) recommend that the European Commun ities bring itself into compliance with
Article X:3(a) and Article X:3(b) of the GATT 1994 promptly.
B. EUROPEAN COMMUNITIES43
3.2 The European Communities requests the Panel to reject the claims raised by the United
States.

IV. ARGUMENTS OF THE PARTIES
4.1 The arguments of the parties' are set out in their written and oral submissions to the Panel, and
in their answers to questions. The parties' arguments as presented in their submissions are
summarized in this section. Th e summaries are based on the exec utive summaries submitted by the
parties. The parties' written answers to questions from the Panel and from each other are set out in the
Annexes to this Report (see list of Annexes at page xvi).
A.
FIRST WRITTEN SUBMISSION OF THE UNITED STATES
1. Introduction
4.2 This dispute raises two questions: First, do es the European Communities ("EC") administer
its customs laws, regulations, judicial decisions and administrative rulings of general application in a
uniform, impartial and reasonable manner, as required by Article X:3(a) of the General Agreement on
Tariffs and Trade 1994 ("GATT 1994")? Second, does the EC ha ve in place judicial, arbitral or
administrative tribunals or procedures for the purpose, inter alia, of the prompt review and correction
of administrative action relating to customs matters, as required by Article X:3(b) of the GATT 1994?
The answer to both questions is, no.
4.3 Instead of administering its basic customs law in a uniform way, the EC administers it in 25
different ways. As administration is the resp onsibility of each member State, questions of
classification and valuation may be subject to as many as 25 different interpretations, and traders are
subject to 25 different procedural regimes for bringi ng goods into free circulation in the EC. The net
result is an administration that distorts rather th an facilitates trade and that imposes transaction costs
that should not exist where administration is uniform.
4.4 This problem is magnified by the absence of EC tribunals or procedures for the prompt
review and correction of administrative action relating to customs matters. Like the administration of
EC customs measures, appeals from customs decisi ons are a matter for each member State. As a
result, there are 25 different appellate regimes in th e EC, none of which can yield a decision with
EC-wide effect, unless and until a question is referre d to the Court of Justice of the European
Communities ("the ECJ").
4.5 In the EC, the basic elements of the customs system are laid out in three pieces of legislation:
the Community Customs Code ("CCC"), the CCC Implementing Regulation ("Implementing
Regulation" or "CCCIR"), and the Common Customs Tariff ("the Tariff"). These measures (as well
as related measures) are administered separately by the customs authorities in each of the 25 member
States of the EC. There is a Customs Code Committee ("the Committee"), consisting of
representatives of each of the member States and ch aired by a representative of the Commission.
Ostensibly, one of its functions is to reconcile divergences that emerge in member State
administration of EC customs law. However, serious institutional constraints prevent it from fulfilling
that function on a systematic basis.
4.6 Where a trader disputes a decision by a member State's customs authorities, its only recourse
is to appeal that decision through the courts or othe r review tribunals of the member State. There is
no EC forum to which a trader can promptly a ppeal a decision by a member State's customs
authorities, including a decision that diverges from decisions of other member State authorities.
4.7 As a Member of the WTO in its own right, th at is, separately from its constituent member
States, the EC has an obligation to provide for administration of its customs laws and to provide for
the prompt review and correction of administrativ e action relating to customs matters in the manner
prescribed by GATT Articles X:3(a) and (b), respectively. The first question raised by this dispute is

whether the EC administers its customs law in a uniform manner, as required by Article X:3(a).
Considering the ordinary meaning to be given to th e terms of that article, the question is whether the
EC manages, carries on, or executes its customs law in a manner that is the same in different places or
circumstances, or at different times. Of particul ar relevance here is uniformity with respect to
different places.
4.8 One of the few panels to probe Article X:3(a) in any detail was the panel in Argentina –
Measures Affecting the Export of Bovine Hides and the Import of Finished Leather (" Argentina –
Hides and Leather"). The panel report in that dispute suppor ts the proposition that the requirement of
uniform administration in Article X:3(a) includes administration that is uniform across the territory of
a WTO Member. The EC does not administer its customs law in a manner that is uniform across
different places in the EC, as Article X:3(a) requires. It administers its customs law in a manner that
varies from member State to member State and fails to provide an EC mechanism for the systematic
reconciliation of such variations.
2. The EC fails to administer its customs law in a uniform manner
(a) Customs classification
4.9 One area in which divergent administration of EC customs law is especially troubling is
customs classification. Not surprisingly, when 25 different authorities are tasked with interpreting a
complex nomenclature system, the possibilities for dive rgent interpretations are substantial. Indeed,
the EC evidently was quite candid about this in its dispute with Thailand and Brazil over the
classification of frozen boneless chicken cuts ( European Communities – Customs Classification of
Frozen Boneless Chicken Cuts ). Neither the Code, nor any other provision of EC law of which the
United States is aware, requires one member State to follow another member State's interpretation of
the Tariff. If one member State classifies a product under a particular tariff subheading, there is no
requirement that other member States classify it under the same subheading. A fortiori, there is no
requirement that other member States follow the rationale of the first member State in classifying
similar goods.
4.10 It is instructive to consider administration of the EC's provision for advance classification
rulings, known as binding tariff information ("BTI"). Under the BTI system, an importer or other
interested party applies to a member State's cu stoms authorities for issuance of BTI confirming the
classification that will be assigned to particular goods on importation into the territory of that member
State. The application may be made by the "holder" of the BTI (i.e. the person in whose name it is
issued), or by another "applicant" (defined as any person who applies for BTI). The holder or other
applicant chooses the member State to which it will make the application.
4.11 Once issued, BTI is "binding on the custom s authorities as against the holder of the
information." Article 11 of the Implementing Regulation states that BTI issued by the authorities of
one member State is "binding on the competent au thorities of all the Member States under the same
conditions." However, in reality member States do not always treat BTI issued by other member
States as binding, and the BTI system does not ensure uniform administration of customs
classifications. Moreover, pre-existing BTI issued by one member State does not prevent an applicant
from trying to persuade a second member State that the classification in the original BTI was
mistaken. In issuing the new BTI, nothing in the Code or Implementing Regulation requires the
authorities to adhere to the findings contained in the previously issued BTI.
4.12 There are several ways in which the BTI system fails to achieve uniform administration with
respect to classification. The fi rst way is that it results in BTI shopping. In theory, the Commission
should be able to control BTI shopping by exercising its authority to reconcile inconsistent BTI.
However, there are several impediments to the Comm ission performing this function. First, it may be

difficult to detect whether, in fact, "different bindi ng information exists." BTI is particular to the
holder. Thus, it is possible for two different holders to possess conflicting BTI for identical
merchandise. That "different binding information ex ists" would not be readily apparent in that case.
Even where the same holder possesses conflicting BT I, the existence of the conflict may not be
readily apparent to the Commission or the represen tative of a member State. The holder of the BTI
may choose not to bring the conflict to the attenti on of the Committee. Other persons interested in
having the difference reconciled (e.g., competitors) w ould not necessarily be aware of the conflict.
Conversely, where a holder or other interested person is aware of conflicting BTI and wants to see the
conflict resolved, it has no right to have the matte r put before the Committee for resolution within a
prescribed period of time.
4.13 Moreover, differences in classification of identical goods from member State to member State
need not necessarily manifest themselves through conflic ting BTI. It is possible for an applicant to
receive unfavorable BTI from one member State and simply import the goods at issue through another
member State (possibly incurring additional shipping, distribution, or other costs) without necessarily
seeking BTI from that State. In that case, the existence of a difference would not necessarily be
apparent to the Commission.
4.14 The EC does have in place an electronic database available to the public for searching BTI.
In theory, one might be able to use the database to determine whether different member States had
issued conflicting BTI for identical products. Ho wever, as a practical matter, such a search is
extremely difficult, if not impossible.
4.15 Moreover, the inability to achieve uniform appli cation of the Tariff through the BTI system is
further demonstrated by the relative autonomy that each member State has with respect to revocation
or amendment of BTI. In a recent decision, in a case known as Timmermans, the ECJ held that a
member State customs authority can revoke BTI b ased on its own reconsideration of the Tariff (as
opposed to the revelation of facts not before it when the BTI was issued). The Court reached this
conclusion, even though the Advocate General had recommended the opposite conclusion, observing
that "the possibility of revoking BTI in this way is not readily compatible either with the objective of
the uniform application of the customs nomenclature or with the objective of legal certainty pursued
by the introduction of BTI." Indeed, this is precisely the problem from the point of view of GATT
Article X:3(a). Whatever limited potential the BTI system might have to provide for some degree of
uniformity across the EC with respect to the partic ular goods and holder that are the subject of the
BTI is further undermined by the fact that revisions to BTI are not even ostensibly "binding."
4.16 Finally, the problem of non-uniform administration of EC law on customs classification is
illustrated by two recent (but by no means isolated) cases. In one case, German customs authorities
have diverged from other member State authorities in the classification of a specialized textile product
(blackout drapery lining) for five years, and EC institutions have not reconciled the divergence. In the
second case, involving liquid crystal display flat monito rs with digital video interface, the question of
divergent classification (between the Netherlands, on the one hand, and other member States, on the
other) was brought before the Committee in 2004 and, with respect to a major subset of the product
concerned, remains unresolved today (and is subject to a temporary solution only with respect to the
rest).
(b) Customs valuation
4.17 In some respects, the problems of non-uniform administration of customs law are even more
pronounced in the area of valuation than they are in the area of classification. Unlike classification,
EC customs law on valuation does not even provid e a system comparable to BTI – that is, an
information system that is ostensibly binding (alb eit in a very limited way) and that (depending on
how designed and administered) could at least be a step towards achieving uniform administration. In

general, the ability of EC institutions to step into the breach to impose uniformity is limited. The
valuation section of the Committee does not have th e authority to examine individual cases with a
view to reconciling differences in administration from member State to member State.
4.18 The ways in which the valuation provisions of the Code and Implementing Regulation have
been applied differently in different member Stat es were catalogued in great detail in a December
2000 report by the EC Court of Auditors. One highli ght of the Court's report is differential treatment
of royalty payments. Under Article 32(1)(c) of the Code, royalties and license fees related to the
goods being valued are supposed to be added to the pr ice actually paid or payable, to the extent not
already included. The Court found that in a number of cases, different member States apportioned
royalties differently to the customs value of identical goods imported by the same company.
Significantly, it found that in the cases identified, the member States involved either did not bring the
disparate treatment to the attention of the Co mmittee, or the matter was not examined by the
Committee.
4.19 Another issue the Court examined was applicati on of the rule that allows imported goods, in
certain cases, to be valued on a basis other than the transaction of the last sale which led to the
introduction of the goods into the customs territory of the EC. The Court found that authorities in
some member States but not others required importers to obtain prior approval for valuation on a basis
other than the transaction value of the last sale.
4.20 A third issue identified by the Court was differen tial treatment of vehicle repair costs covered
under warranty. In at least one member State – Germany – the Court found that customs authorities
reduced the customs value of imported vehicles by th e 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 requ ests for similar customs value reductions. Of
particular note, the Court observed that the Comm ission had been aware of differential treatment
among member States for at least ten years and had not taken any steps to reconcile the difference. In
response, the Commission noted that since 1997 it ha d "attempted to align by means of implementing
legislation diverging practices in the Community" bu t was unable to attain the necessary majorities in
the Committee.
4.21 A recent case involving non-uniform administration of EC customs valuation law concerns
divergent approaches to the determination of whethe r an importer has a control relationship with its
off-shore suppliers. In that case, Spanish cust oms authorities found Reebok International Limited
(RIL) to have a control relationship with suppliers outside the EC based on its contracts with those
suppliers, while other member States (in particular, the Netherlands) found no such relationship. The
different interpretation has significant consequences. Member State authorities that agreed with RIL
that it did not have a control rela tionship with its suppliers allowed it to declare the customs value of
its goods on the basis of the "sale for export" transacti on value rule set out in Article 29 of the Code.
On the other hand, the Spanish authorities require d RIL to apply a different methodology. The net
impact on RIL was an additional customs liability of 350,000 Euros per year (390,000 Euros when
value-added tax and interest are included).
4.22 In sum, valuation, like classification, is an ar ea in which the EC does not provide for uniform
administration of its customs law. Each member State's authorities make their own interpretations of
the Code and Implementing Regulation, and even where differences between member States are
identified, the EC lacks the capacity systematically to reconcile them.
(c) Customs procedures
4.23 With respect to customs procedures, non-uniform administration is evident in various phases
of the customs process. It comes up, for example, in the audits that different member State authorities

perform after goods have been released for free circul ation. It is not uncommon for a member State's
authorities to perform an audit to verify the valu e that an importer declared for goods that were
released for free circulation. The December 2000 Court of Auditors Report found that different
member State authorities take different approach es to such valuation audits, with important
consequences for importers.
4.24 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, ex cept in cases of fraud. Even among States in which
authorities are permitted to perform post-importa tion audits, the Court found differences among
working practices, including the balance between reliance on examinations of goods at time of
importation and post-release audits. Significantly, the Court found that differences in working
procedures mean that "individual customs authorities are reluctant to accept each other's decisions."
One audit procedure that the Court highlighted was the issuance of written valuation decisions. While
some member States regularly issue written valuatio n decisions with binding effect going forward,
others rarely issue such decisions.
4.25 Another area in which administration varies from member State to member State concerns
penalties for violation of customs law. This area of divergence is one that h as been noted by the ECJ
on a number of occasions. The Commission itsel f has recognized (in its explanatory note
accompanying a recent proposed revision to the Code ) that "[e]conomic operators have complained
for a long time about the lack of harmonization wi th regard to penalties against infringements of the
customs rules. Specific offences may be considered in one Member State as a serious criminal act
possibly leading to imprisonment, whilst in anothe r Member State the same act may only lead to a
small – or even no – fine."
4.26 Yet another area in which the administration of EC customs law differs among member States
is the decision to permit what is known as "processing under customs control." Where this procedure
is permitted, goods may be brought into the EC w ithout being subject to duty and processed into
downstream products in the EC, with those products then being released for free circulation at the
applicable duty rate. Permission to engage in processing under customs control is subject to an
economic conditions assessment, which different memb er States administer differently. Guidance
issued by the United Kingdom customs author ities states that ther e are "two aspects
 to the economic
test" and requires an applicant to provide eviden ce of the impact on its business of processing under
customs control as well as evidence of "the impact upon any other community producers of the
imported goods." In contrast, French regulations, for example, do not impose the additional test of
demonstrating the absence of harm to competitors in the EC.
4.27 Another area in which non-uniform administrati on is evident is local clearance procedures
("LCP"). Under LCP, an importer may have goods re leased for free circulation at its own premises or
certain other designated locations (as opposed to customs premises). While the general concept of
how LCP is supposed to operate is set forth in the Implementing Regulation, the particular
requirements vary from member State to member Stat e. This is evident in the information that
member States require LCP importers to transmit to customs authorities before goods are released.
Some require only the electronic transmittal of manifest data. Others require that manifest data be
translated or supplemented. Variations also ar e evident in the involvement of customs authorities
prior to goods being released. Some member States rely on post-release audits, while others reserve
the right to inspect goods prior to release. Memb er States typically require that supplementary
information be transmitted to customs authorities following release under LCP, though here, too, the
requirements vary. For example, some member St ates require transmittal of the EC's DV1 valuation
form, whereas others do not. Some require the transmittal of invoices, certificates, and other
supporting documentation, whereas others do not. Finally, requirements for retaining documents
supporting LCP imports vary widely, ranging from f our years in the United Kingdom to ten years in
the Netherlands.

4.28 As the panel correctly observed in Argentina – Hides and Leather, "Article X:3(a) requires an
examination of the real effect that a measure might have on traders operating in the commercial
world" (para. 11.77). To that end, "[e]very expo rter and importer should be able to expect treatment
of the same kind, in the same manner both over time and in different places . . . " (para. 11.83;
emphasis added). Article X:3(a) thus acts as a chec k against certain distortions to trade that may
come about through administration that varies depe nding on factors such as point of entry within the
territory of a Member.
4.29 A system that subjects traders to different procedures and different interpretations of
classification and valuation law depending on the member State through which goods are imported
into the territory of the EC is contrary to this b asic principle. At a minimum, it makes it difficult for a
trader to have a reasonable expectation of the treatment goods will receive when they are imported
into the EC. It may also cause traders to make d ecisions about how to bring goods into the EC based
on known differences among member States.
(d) The Commission, acting through the Customs Code Committee, does not provide uniformity
to the administration of EC customs law
4.30 The mechanism provided in the Code for the Commission to address questions of
administration of EC customs law is the Custom s Code Committee. The Committee consists of
representatives of each of the member States and is chaired by a representative of the Commission.
Individual traders have no right to raise matters wi th the Committee. That right is reserved to the
chairman of the Committee and member State representatives. A trader may petition a member State
to bring a question before the Committee (though the C ode does not require member States to have a
petition process). However, the member State is under no obligation to respond favorably to such a
petition.
4.31 For the most part, the Committee operates under th e "regulatory procedure" laid down in the
EC's so-called "comitology" decision. In matters relating to binding advance rulings that member
States may issue on the classification or origin of goods, and in certain matters relating to preferential
tariff treatment, the Committee opera tes under the comitology decisi on's "management procedure."
Under both the regulatory procedure and the mana gement procedure, a decision by the Committee
requires the support of a majority of the member State representatives and at least 231 votes out of a
total of 321 (based on weighting by member State as set out in the EC Treaty), and failure to reach a
decision can lead to referral of the matter to th e Council of the European Union, with different
consequences depending on the applicable procedure. However, in practice, with respect to matters of
customs administration, the Commission turns to the Council only on extremely rare occasions.
Given institutional disincentives to refer matters to the Council, they may linger before the Committee
indefinitely, as the Commission atte mpts to achieve the necessary major ities. This may mean that in
controversial cases, no decision at all is taken.
4.32 The Code provides for adoption by the Committee of its own rules of procedure. Those rules
are notable for purposes of the present di spute primarily for what they do not say. First, the rules do
not contain any process for a trader affected by a member State's application of the Code to petition
the Committee. Second, the rules contain no require ment that the Committee publish its agenda in
advance of its meetings. Thus, a trader that may be affected by a question put before the Committee
has no assurance that it will be made aware of the pendency of the matter. Third, while the rules
contain an Article entitled "Admission of third pa rties," that Article does not establish a right for
potentially affected parties to submit evidence and arguments to the Committee or even to be present
at Committee meetings. It merely authorizes the Co mmittee Chairman to invite experts to address the
Committee and allows observers of certain third countries or organi zations as specified in other EC
instruments to be present at Committee meetings. Fi nally, there is no requirement that records of the
Committee's proceedings be made public. In fact , Article 15 of the rul es expressly provides that

decisions on public access to the Committee's docum ents are subject to the discretion of the
Commission and that, in any event, "[t]he Committee's discussions shall be kept confidential."
4.33 Traders as well as EC institutions have acknowledged the limits of the Committee procedure's
ability to reconcile differences in administration among member State customs authorities. For
example, in the Court of Auditors Valuation Re port, it was observed that in using the valuation
section of the Committee, the Commission "has to re ly on discussion, persuasion and encouragement
as the means of achieving common treatment of identi cal problems in Member States." In reply, the
Commission itself acknowledged that the Committee "can . . . only deal with a limited number of
important cases that are brought before it."
4.34 In sum, the Committee process through which the Commission operates in matters of customs
administration is not designed to systematically achieve uniform administration where divergences are
shown to exist. From the point of view of "trade rs operating in the commercial world" (the relevant
perspective for examining the Article X:3( a) obligation, as noted by the panel in Argentina – Hides
and Leather), a WTO Member does not provide for uniform administration where there is doubt as to
whether the mechanism ostensibly available for bringing about uniformity will or will not operate in
the case of any given divergence. The mechanism theo retically available for bringing uniformity to
the administration of customs law in the EC lacks a process for doing so on a systematic basis, and
this absence of a process leads back to the conclusion that the EC simply does not provide for the
uniform administration required by Article X:3(a).
3. The EC does not provide tribunals or pro cedures for the prompt review and correction
of administrative action relating to customs matters
4.35 The second aspect of the US claim concerns the EC's failure to provide for an EC court or
other forum to which a member State customs deci sion can be promptly appealed. Under the EC
system, review of a member State customs decision is available in the courts of that member State.
The only court with jurisdiction to issue decisions with EC-wide effect on matters of customs
administration is the ECJ. However, the referral of questions to that court is not automatic, and even
when a question does get referred to the ECJ, the time and steps necessary from the initial rendering
of a customs decision by a member State's author ities to issuance of a decision by the ECJ makes
review in that forum far from prompt.
4.36 The issue of reviewability of customs deci sions is linked to the issue of uniform
administration of customs law. To the extent that the administration of customs law is fragmented,
the provision for review in the courts of each of 25 member States does not alleviate the
fragmentation and may well compound it. In contrast, a single system of review could alleviate the
different initial results that may occur in different ports from time to time.
4.37 The GATT 1994 provision pertinent to appella te review of customs decisions is
Article X:3(b), which requires each WTO Member to "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 administrative action re lating to customs matters." The EC is a WTO
Member in its own right and is subject to Article X:3(b). Accordingly, the EC must have such
tribunals or procedures.
4.38 Relevant context for interpreting Article X:3(b) includes the immediately preceding
subparagraph in the paragraph in wh ich the obligation at issue appears. That subparagraph calls for
the "uniform, impartial, and reasonable" administra tion of customs laws. Thus, the decisions of the
tribunals or procedures must provide for the review and correction of customs matters for the EC as a
whole, not just within limited geographical regi ons within the EC. It is inconsistent with
Article X:3(b) to require a trader who had receiv ed adverse customs decisions in three different

member States, each at odds with the prevailing in terpretation of EC customs law in other member
States, to pursue separate appeals in each of those States.
4.39 The Community Customs Code says little on the question of appeals. It merely establishes
that there shall be a right to appeal from customs d ecisions; provides that, in the first instance, appeals
may be exercised before a member State's custom s authorities and subsequently before a court or
other independent body; and provides that, except in certain specified circumstances, "the lodging of
an appeal shall not cause implementation of the dis puted decision to be suspended." Beyond that, the
Code simply states that "[t]he provisions for the implementation of the appeals procedure shall be
determined by the Member States."
4.40 Thus, the Code leaves wide discretion to the individual member States in establishing
procedures for appeals from customs decisions, and th at discretion is evidenced in the diversity of
procedures in fact available in the different memb er States. Indeed, even if it could be argued
(contrary to what the United States argues here) that the EC might fulfill its obligation under
Article X:3(b) merely by requiring member States to have appellate procedures in place, it is notable
that nothing in the Code requires that review by member State tribunals be prompt. The Code is silent
on the question of timing.
4.41 In fact, appellate procedures vary from member State to member State with respect to factors
such as the availability of first-level review by the customs authorities themselves, time-periods for
first-level review by the customs authorities (where such review is mandatory before proceeding to
court), requirements to post security in order to avoid immediate enforcement of the decision on
appeal, and availability of review by courts of superior jurisdiction. For example, the time periods for
first instance reviews conducted by member State customs authorities can vary widely (from 30 days
in Ireland, to one year in the Netherlands). Mo reover, differences among procedures are even more
pronounced after the first stage of review.
4.42 At the top of the review structure is the ECJ. Unlike the decisions of the courts in individual
member States, the decisions of the ECJ do have effect throughout the territory of the EC. It is only at
this stage, after a trader has pursued its appeal th rough a member State's court system, that the trader
reaches a forum for review and correction provided by the EC itself. However, given the time it
necessarily takes to reach this foru m, it can hardly be considered to meet the EC's Article X:3(b)
obligation to provide "tribunals or procedures for the purpose . . . of the prompt review and correction
of administrative action relating to customs matters."
4.43 In commenting on the request for the establishment of a panel in this dispute, the EC referred
to the ECJ as the second institution (alongside the Commission) that enfor ces "harmonized customs
rules and institutional and administrative measures . . . to prevent divergent practices." That the EC
views the ECJ as serving this function is instructive and cause for examining the role actually filled by
the ECJ. What that examination reveals is significant institutional limitations on the ability of the ECJ
"to prevent divergent practices" and a failure of the ECJ to constitute a tribunal or procedure for
prompt review and correction of administrative act ion relating to customs matters, as required by
Article X:3(b). The principal manner in which a qu estion of a member State's administration of EC
customs law is likely to come before the ECJ is through a referral by the court of a member State,
pursuant to Article 234 of the EC Treaty. However, with the exception of courts of last resort, referral
of questions by member State courts is discre tionary. Moreover, even when a question does get
referred to the ECJ, the answer of the ECJ does not finally decide the matter. Rather the answer is
sent back to the requesting court, which then decides the case before it in light of the ECJ's guidance.
4.44 In his opinion in the 1997
Weiner case before the ECJ, the EC's Advocate General urged
member State courts to exercise self-restraint in referring questions of customs classification law to
the ECJ. The Advocate General found it "clear that the Court's contribution to uniform application of

the Common Customs Tariff by deciding on the classification of particular products will always be
minimal." The Advocate General's reasoning is easily transferrable to valuation and other areas in
which member States' administration of EC law may diverge. A key lesson to be drawn from Weiner
is that the ECJ is not suited to be the EC's tribuna l or procedure for prompt review and correction of
administrative action relating to customs matters requir ed by Article X:3(b). Its place within the EC
system – as the highest level adjudicator of questi ons of EC law – and the manner in which questions
are put to it – typically, through discretionary refe rral by member State courts – make it incapable of
serving that role.
4.45 As the ECJ is not set up to be an EC customs court – and, in any event, as the time it takes for
a question raised in a member State's customs decision ultimately to get to ECJ review hardly
qualifies such review as prompt – what is left is a patchwork of member State customs authorities
whose work is reviewed by member State courts, with no EC tribunal or procedure providing prompt
review and correction of customs decisions in a way that would bring about uniformity in the
administration of EC customs law. In sum, the EC provides no tribunal or procedure for the prompt
review and correction of administrative acti on relating to customs matters, as required by
Article X:3(b) of the GATT 1994.
4. Conclusion
4.46 For the reasons set forth in the First Written Submission of the United States, the EC fails to
comply with the obligations in Articles X:3(a) a nd X:3(b) of the GATT 1994. It does not administer
its customs laws, regulations, decisions and rulings in a uniform, impartial, and reasonable manner.
Nor does it maintain judicial, arbitral, or administra tive tribunals or procedures for the purpose of the
prompt review and correction of administrative action relating to customs matters. The United States
asks that the Panel find the EC is not in conform ity with Articles X:3(a) and X:3(b) of the GATT
1994 and recommend that it come into compliance promptly.
B.
FIRST WRITTEN SUBMISSION OF THE EUROPEAN COMMUNITIES
1. Introduction
4.47 The United States alleges that the EC does not fulfil its obligations under Article X:3(a) of the
GATT by failing to administer its customs laws in a uniform manner. Moreover, the United States
alleges that the EC does not comply with its ob ligations under Article X:3(b) GATT by not providing
judicial, arbitral or administrative tribunals or procedures for the prompt review and correction of
administrative action relating to customs matters.
4.48 These claims of the United States are unfounded. The United States does not provide
evidence that the EC fails to administer its cust oms laws in a manner contrary to Article X:3(a)
GATT. Apart from a small number of isolated a nd misleading examples, the United States provides
very little information about the actual administrati on of EC customs law. Since it does not provide
any evidence to the effect that the EC administers its customs laws in a non-uniform manner, the
United States fails to establish a prima facie case in support of its claims.
4.49 The focus of the United States case is not on the actual administration of EC customs laws,
but on the EC system of customs administration. Put simply, the United States objects to the fact that
the EC administers EC customs laws not through an EC customs agency, but through the national
administrations of its member States. Similarly, the United States objects to the fact that judicial
review of customs decisions in the EC is provi ded not through "EC-level tribunals", but through
tribunals of the EC member States. With these claims, the United States is putting into question
fundamental structural elements of the EC legal or der, without providing a shred of proof that these
structural elements are indeed incompatible with the requirements of Article X:3(a) and (b) GATT.

4.50 The US interpretation of Article X:3(a) and (b ) GATT is without basis in the text of these
provisions. According to the United States, Article X:3(a) and (b) GATT seems to prescribe in detail
the way in which a WTO Member must implement its customs laws. The EC does not believe that
this is the objective underlying Article X:3 GA TT. Article X:3 GATT is a provision laying down
minimum standards for the administration of custom s law, not a legal basis for the harmonization of
the systems of customs administration of WTO Members.
4.51 The weakness of the US case is also illustrated by the lukewarm reaction of traders to the US
case. In response to a request for input by th e United States Trade Representative following the
consultation request, USTR received a mere three submissions. Only one of these submissions is
referred to in the US First Written Submissi on. Of the other two submissions, one was
unsubstantiated, one unhelpful to the US case since it provided an example of the uniform application
of EC classification rules.
2. Factual background
(a) General principles of the EC legal system
4.52 The progress of European integration has largely been built on legislation. Over the decades,
the EC has built a large body of Community law covering an increasing range of policy areas on the
basis of the powers attributed to it in its founding treaties.
4.53 The success of European integration is base d on the direct and uniform application of
Community law in the legal order of the memb er States of the Comm unity. The European
Community is therefore very much a Community based on the rule of law. This fact is explicitly
recognized in Article 6(1) EU Treaty.
4.54 However, with the exception of some limited po licy fields, the EC does not itself administer
Community law through an EC-level administration. Rather, the execution of EC law takes place
through the national administrations of the member States, and similarly through the Courts of the
member States. This principle of administrati on through the member States can be described as
"executive federalism".
4.55 The US attack on the EC system of custom s administration directly puts into question
fundamental principles of EC law. In order to pl ace these issues in their pr oper context, a deeper
explanation of the basic principles of EC constitutional law is required.
(i) The EC institutions and the EC legislative process
4.56 According to Article 5 of the EC Treaty, the Community shall act within the limits of the
powers conferred upon it by the Treaty. Furthermore, Article 5 EC Treaty requires the EC to act in
accordance with the principles of subsidiarity and proportionality. The EC Treaty sets up a number of
institutions which shall carry out the tasks entr usted to the European Community. The main
institutions involved with the EC legislative proc ess are the European Pa rliament, the Council of
Ministers, and the European Commission.
4.57 The legislative procedure applicable to the adop tion of a particular legal act is laid down in
the specific legal basis conferring the powers on the Community to adopt such an act. In the large
majority of cases, the adoption of a legislative act of the Community will require a proposal from the
European Commission. In most cases, the EC Tr eaty foresees that legislative acts shall be adopted
jointly by the European Parliament and the Counc il in accordance with the co-decision procedure set
out in Article 251 EC Treaty. To this extent, the European Parliament and the Council can be

regarded as the primary legislative organs of the EC . In certain cases, the Treaty also provides that
the Council may adopt legislative acts alone, usually after consultation of the European Parliament.
(ii) The implementing powers of the European Commission
4.58 Article 202, third indent, of the EC Treaty provides that the Council may confer on the
Commission powers for the implementation of Commun ity law. Article 202, third indent, further
provides that the Council may impose certain requirement s in respect of the exercise of those powers.
Finally, the last sentence of Article 202, third indent, EC Treaty provides that these procedures must
be "consonant with principles and rules to be laid down in advance by the Council, acting
unanimously on a proposal from the Commission and after obtaining the opin ion of the European
Parliament".
4.59 On the basis of Article 202, third indent, of the EC Treaty, the Council has adopted Decision
1999/468. This decision, also known as the "Comitology Decision" , lays down, at a general level, the
procedures for the exercise of implementing po wers which the Council may delegate to the
Commission.
4.60 The Comitology Decision distinguishes three typ es of procedure: the advisory procedure, the
management procedure, and the re gulatory procedure. In accordance with Article 2 of the Decision,
the regulatory procedure should be applied for the ad option of "measures of general scope designed to
apply essential provisions of basic instruments". The management procedure is applicable to the
adoption of "management measures", such as thos e relating to the application of the common
agricultural and common fisheries policies, or to the implementation of programmes with substantial
budgetary implications. The advisory procedure is applicable in all other appropriate cases.
4.61 The specific procedures to be followed are resp ectively set out in Articles 3, 4 and 5 of the
Comitology decision. Under each of the pro cedures, the Commission is assisted by a committee
composed of representatives of the member States, and chaired by a representative of the
Commission. The Commission shall submit a draft of the measures to be adopted to the Committee.
4.62 Where the advisory procedure is applicable, the Committee shall deliver its opinion by simple
majority. In contrast, where the management and the regulatory proce dure are applicable, the
Committee shall deliver its opinion by qualified majo rity, which involves a weighing of the votes of
the member States as foreseen in Article 205(2) EC Treaty.
4.63 The main difference between the three proce dures lies in the consequences of a negative
opinion of the Committee. In the case of the advi sory procedure as described in Article 3 of the
Comitology Decision, the Commission shall take "u tmost account" of the opinion delivered by the
Committee. However, it may adopt the measure even if it is not in accordance with the opinion of the
Committee.
4.64 In the case of the management procedure described in Article 4 of the Comitology Decision,
the Commission adopts measures which shall apply i mmediately. However, if these measures are not
in accordance with the opinion of the committee, th ey shall be communicated by the Commission to
the Council. In that event, the Commission may defer application of the measures on which it has
decided for a period to be laid down in each basic instrument but which shall in no case exceed three
months from the date of such communication. Th e Council, acting by qualified majority, may take a
different decision within the period provided for by paragraph 3 of Article 4 of the Decision.
4.65 In the case of the regulatory procedure as describ ed in Article 5 of the Comitology Decision,
if the measure is not in accordance with the op inion of the Committee, the Commission shall submit

to the Council a proposal relating to the measures to be taken. In this case, the applicable procedure is
set out in Article 5(6) of the Decision.
4.66 Accordingly, the committees established pursu ant to the Comitology Decision fulfil an
important role in the Community's internal decision- making process. In particular, in the context of
the management and the regulatory procedure, the opinion of the Committee may determine whether a
measure can be adopted by the Commission, or must be referred to the Council.
4.67 In accordance with Article 7(1) of the Comito logy decision, each Committee shall establish
its own rules of procedure on the proposal of its chairman on the basis of standard rules of procedure.
(iii) The legal effect of Community law
4.68 On the basis of the powers attributed to th e European Community in the EC Treaty, the
institutions may adopt a number of legislative and other acts. Article 249(1) EC Treaty states that the
competent institutions may adopt regulations, dir ectives, decision, recommendations, and opinions.
The legal effect of these acts is described in Article 249(2) EC Treaty.
4.69 According to the constant case law of the C ourt of Justice, the law of the European
Community has primacy over the national law of the member States. This primacy of Community
law is a fundamental principle of the Community legal order. It applies to all provisions contained in
the EC Treaty and in acts of the EC institutions. It also applies against any provision of national law
at any level, including member States' constitutions. This means that whenever a Court of a Member
State encounters a conflict between a provision of Co mmunity law and a provision of its national law,
it must set aside the provision of national law, and apply Community law only.
4.70 A second fundamental principle of Community law is that of direct effect. As the Court has
held in its constant case law, Community law may cr eate rights for individuals which can be directly
invoked by those individuals in proceedings before nati onal courts and authorities. This direct effect
may apply both to provisions of the founding treaties and to acts of secondary Community law.
4.71 Taken together, the principles of supremacy and of direct effect are essential for the effective
and uniform application of Community law. Th ey enable individuals to invoke provisions of
Community law in proceedings before national cour ts. They thereby enable national judges – acting
in constant dialogue with the European Court of Justice through the preliminary reference procedure –
to safeguard the respect of Community law.
4.72 Moreover, the Court of Justice held that wh en the conditions under which individuals may
rely on the provisions of Community law before the national courts are met, all organs of the
administration, including decentralized authorities, are obliged to apply those provisions and if
necessary must directly set aside national provisions that are in contradiction with EC law.
(iv) The Commission, the member States, and the execution of Community law
4.73 Community law is typically implemented through the national administrations of the member
States. Only in a limited number of policy fields is the execution of Community law directly carried
out by European Commission.
4.74 The system of the execution of EC law has frequently been referred to as "executive
federalism". The principle of executive federalism within the EC also reflects the principle of
subsidiarity enshrined in Article 5(2) EC Treat y, according to which the Community should take
action only if and in so far as the objectives of the proposed action cannot be sufficiently achieved by
the member States.

4.75 The executive federalism of the EC is fully comp atible with the requirements of uniformity in
the interpretation and application of Community law. In this regard, the principles of primacy and
direct effect once again have an important role . Through those principles, Community law becomes
directly binding on national administrations, and ma y be invoked against them. This enables the
European Court of Justice to ensure, through th e preliminary reference procedure, the uniform
interpretation and application of Community law.
4.76 Moreover, Article 10 EC Treaty imposes on the member States a duty of cooperation, which
applies also to the execution of Community law by the member States.
4.77 In addition, Article 211, first indent, of th e EC Treaty provides that the Commission shall
"ensure that the provisions of this Treaty and the measures taken by the institutions pursuant thereto
are applied". In reflection of this role, the Comm ission is frequently referre d to as the "guardian of
the Treaty".
4.78 Where the Commission considers that a Member St ate has failed to fulfil an obligation under
the Treaty, the Commission has the possibility, in accordance with th e procedures of Article 226 EC
Treaty, to bring this matter before the Court of Justice. Such "infringement proceedings" can be
brought in response to any violation of Community law by a Member State, and can also concern the
incorrect application of Community law by the administrations of the member States.
4.79 In accordance with Article 228(1) EC Treaty, if the Court of Justice finds that a Member State
has failed to fulfil an obligation under the EC Treaty, the State concerned shall be required to take the
necessary measures to comply with the judgment of the Court of Justice. Where the Member State
concerned fails to comply with the judgment, th e possibility exists under Article 228(1) of the EC
Treaty for the Court of Justice to impose a penalty payment on the Member State.
4.80 Individuals have a vital role in detecting infringements of Community law. There is a
standardized procedure for complaints to be addressed to the European Commission regarding
infringements of Community law. Such complain ts, which may also concern the application of
Community law by national administrations, can lead to the institution of infringement proceedings
by the Commission.
4.81 The public service of the European Commission is guided by a code of conduct which is part
of the Commission's rules of procedure, and which sets out the principles of good administrative
behaviour to be observed by all Commission staff. The Code of Conduct provides in particular that
all enquiries must be dealt with as quickly as po ssible, and sets out time limits within which
correspondence should be answered. Complaints regarding non-compliance with the Code of Conduct
may be addressed to the Secretariat-General of the Commission.
4.82 The Commission in the exercise of its duties is also subject to certain other controls. In
particular, the Commission is politically responsib le to the European Parliament. Moreover, in
accordance with Article 194 EC Treaty, any citizen may direct a petition to the European Parliament
on any matter which comes within the Community's fi elds of activity. Finally, in accordance with
Article 195 EC Treaty, the European Parliament has appointed an Ombudsman empowered to receive
complaints from individuals concerning instances of maladministration in the activities of the
Community institutions or bodies.

(b) The administration of EC customs law
(i) The basic principles of the EC Customs Union
4.83 According to Article 23(1) EC Treaty, the Community shall be based upon a customs union
which shall cover all trade in goods and which shall involve the prohibition between member States of
customs duties on imports and exports and of all char ges having equivalent effect, and the adoption of
a common customs tariff in relation to third countries.
4.84 Accordingly, the EC customs union has an internal and an external dimension. As regards the
internal dimension, Article 25 EC Treaty provides for the prohibition of all customs duties and
charges having equivalent effect in trade between the member States. Articles 28 and 29 EC Treaty
contain a prohibition of quantitative restrictions and measures having equivalent effect on imports and
exports between the EC member States.
4.85 As for the external dimension, the EC Tr eaty establishes a common commercial policy.
According to Article 133(1) EC Treaty, the common commercial policy is based on uniform
principles, particularly in regard to changes in tariff rates, the conclusion of tariff and trade
agreements, the achievement of uniformity in measur es of liberalization, export policy, and measures
to protect trade such as those to be taken in the ev ent of dumping or subsidies. As the Court of Justice
has confirmed on numerous occasions, the custom s union and the common commercial policy fall
within the exclusive competence of the EC.
4.86 The internal dimension of the EC customs union also benefits products originating in third
countries. According to Article 23(2) EC Treaty, the prohibitions contained in Articles 25, 28 and 29
EC Treaty shall also apply to products from third countries which are in free circulation in member
States. Article 24 EC Treaty defines products from third countries as being in free circulation when
the import formalities have been complied with a nd any customs duties or charges having equivalent
effect which are payable have been levied in that Member State, and if they have not benefited from
total or partial drawback of such duties or char ges. In other words, once goods from a third country
are in free circulation in the EC, they are treated in every respect like Community goods, and benefit
from the free movement of goods in the internal ma rket in the same way as goods originating in the
Community.
(ii) The EC's international commitments in the field of customs administration and cooperation
4.87 The EC is a founding Member of the WTO. As such, the EC respects and implements its
commitments under the covered agreements. In pa rticular, EC customs law implements, and fully
respects, relevant WTO agreements such as the GATT, the Customs Valuation Agreement, or the
Agreement on Rules of Origin.
4.88 While the EC is not yet a Member of the Wo rld Customs Organization (WCO), the EC is a
party to numerous Conventions negotiated under the auspices of the WCO. Notably, the EC is a party
to the International Convention on the Harmonized Commodity and Coding System (HS Convention),
and the International Convention on the Simplifi cation and Harmonization of Customs Procedures
(Kyoto Convention).
4.89 The EC also has concluded a number of bilate ral agreements with third countries on customs
cooperation. In particular, the EC has concluded such an agreement with the United States.

(iii) The legislative framework of the EC Customs Union
4.90 On the basis of the powers attributed to them in the EC Treaty, the EC institutions have
adopted a number of legislative acts which establis h the legal framework of the EC customs union.
The three main instruments of EC customs legi slation are the Community Customs Tariff, the
Community Customs Code (CCC), and the Implementi ng Regulation. It is noteworthy that all these
instruments are regulations, which, according to Article 249(2) EC Treaty, are binding in their entirety
and directly applicable in all member States.
4.91 The Community Customs Tariff is established by Council Regulation (EEC) 2658/87. The
Community Customs Tariff establishes a combined nomenclature (CN) with a description of goods up
to an eight-digit code. The CN is based on the six-digit HS nomenclature, to which it adds
Community subdivisions, referred to as "CN subheadings".
4.92 In addition, the CN contains preliminary provi sions. These preliminary provisions notably
contain general rules for the interpretation of th e CN, other general provisions, as well as special
provisions for certain types of goods. In addition, the CN also contains section and chapter notes, as
well as footnotes relating to the application of duty rates.
4.93 The CN is contained in Annex I to Counc il Regulation 2658/87. In accordance with
Article 12 of this Regulation, the Commission adopts each year a regulation containing the complete
version of the CN. The CN contai ns the conventional rate of duties applicable on importation to the
Community and, where applicable, lower autonomous rates.
4.94 In accordance with Article 2 of Regulation 2658/ 87, an integrated tariff of the European
Communities (Taric) is established by the Commission. The Taric is based on the CN, and contains
all measures contained in the CN, additional Community subdivisions, referred to as Taric
subheadings, which are needed for the implementa tion of specific policies, any other information
necessary for the implementation or management of the Taric, as well as the rates of customs duty
applicable and other import and export charges, including duty suspensions and preferential tariff
rates. Taric codes include the 8-digit CN codes plus a 9
th and 10th digit. The Taric is established and
continuously updated by the Commission, and available online through the internet.
4.95 Article 9(1)(b), (d), (e) and (f) of Regul ation 2658/87 also give the Commission the
possibility to amend the combined nomenclature in certain respects. Such amendments must be
adopted in accordance with the management procedure referred to in Article 10 of the Regulation.
4.96 Council Regulation (EEC) 2913/92 establishes the Community Customs Code (CCC). The
CCC comprises 253 articles and is divided into nine Titles. The CCC together with its implementing
provisions constitutes a comprehensive codification of the rules for the administration of customs
throughout the Community.
4.97 According to Article 247 CCC, the measures ne cessary for the implementation of the CCC
are to be adopted by the Commission in accordan ce with the Regulatory Procedure referred to in
Article 247a CCC. Article 247a refers to Article 5 of the Comitology Decision.
4.98 On the basis of Article 247 CCC, the Commission has adopted Regulation (EEC) No. 2454 of
2 July 1993 laying down provisions for the Implementation of the CCC. The Implementing
Regulation is a voluminous text comprising ca. 800 arti cles and over 100 annexes. It sets out in detail
the provisions necessary for the implementation of the CCC. Its structure follows broadly that of the
CCC.

(iv) The Commission, the member States, and the Customs Code Committee
4.99 As is generally the case for Community law, Community customs law is executed by the
national authorities of the EU member States. Member States' customs authorities are bound by
Community customs law, which applies directly and uniformly through the Community legal order.
4.100 As in other fields of Community law, the Commission is not normally directly involved with
the administration of EC customs law. There are only a limited number of cases in which the
Commission may itself take decisions regarding the application of EC customs law. Generally, the
function of the European Commission as the guardian of the Treaties is to monitor the correct and
uniform application of EC customs laws by the member States.
4.101 A specific forum for cooperation between th e member States and the Commission is the
Customs Code Committee. This Committee is est ablished by Articles 247a(1) and 248a(1) of the
CCC. It is composed of representatives of all me mber States and chaired by a representative of the
Commission. It has adopted its own Rules of Proc edure, which are based on the standard rules of
procedure for comitology committees.
4.102 In accordance with Article 1(1) of its Rul es of Procedure, the Customs Code Committee
comprises a number of sections covering specific areas of customs law and administration. The
Customs Code Committee has a number of functi ons which are attributed to it in Community
legislation. Articles 247a and 248a CCC provide that the Customs Code Committee shall act as a
regulatory or management committee within the m eaning of the Comitology Decision. Article 247
CCC foresees that the measures necessary for th e implementation of the CCC are normally adopted
according to the regulatory procedure. In certa in cases, including those mentioned in Article 248
CCC, it is the management procedure which shall apply.
4.103 Legal acts other than the CCC may also include references to the Customs Code Committee.
In this case, the specific procedure applicable is laid down in the respective provision attributing the
decision-making power to the Commission. One example is Article 10 of Regulation 2658/87
establishing the Common Customs Tariff, which provid es that the Commission will be assisted by the
Customs Code Committee in accordance with the management procedure.
4.104 In addition, Article 249 CCC provides that the Committee may examine any question
concerning customs legislation which is raised by its chairman, either on his own initiative or at the
request of a Member State's representative. A similar provision is also found in Article 8 of
Regulation 2658/87 establishing the Common Customs Tariff, according to which the Committee may
examine any matter referred to it by its chairman, ei ther on his own initiative or at the request of a
representative of a Member State, concerning the combined nomenclature or the Taric nomenclature.
4.105 The Customs Code Committee is not a mechanism fo r the administrative or judicial review of
customs decisions. Rather, it is an integral part of the Community's regulatory process, through which
the member States' expertise is integrated into this process. The US complaints are accordingly based
on an erroneous understanding of the nature and functions of the Committee.
4.106 However, any individual with a concern regard ing the administration of customs matters can
bring this issue to the attention of the Commissi on, which will consider the matter and respond in
accordance with the Commission's Code of Conduct. If the Commission considers that the matter
requires consideration by the Committee, it will pu t this matter on the Committee's agenda. In a
similar fashion, a concerned individual may also address the administration of a Member State, which
may equally decide to raise the matter in the Committee.

4.107 Moreover, Article 9(1) of the Committee's Ru les of Procedure allows the Chairman, on his
initiative or at the request of a Member, to invite ex perts to talk on particular matters. Thus, where
this is justified by the complexity of a particular issue, the Committee may also hear representatives of
the concerned industry or traders, and has done so in the past.
(v) Tariff classification
4.108 According to Article 20(1) of the CCC, duties le gally owed where a customs debt is incurred
shall be based on the Common Customs Tariff. In acc ordance with the constant case law of the Court
of Justice, tariff classification is carried out on the basis "of the objective characteristics and
properties of products which can be ascertained when customs clearance is obtained".
4.109 In principle, the classification of goods is th e responsibility of the customs authorities of the
member States which carry out th e customs clearance of the goods c oncerned. In addition, there
exists a variety of tools which ensure a uniform classification practice throughout the Community.
These tools include classification regulations, HS explanatory notes and opi nions, EC explanatory
notes, and opinions of the Customs Code Comm ittee. Moreover, the CCC provides for binding
information on questions of tariff classification. In this way, Community law provides for a graduated
set of tools adaptable to the circumstances of the specific case in order to ensure a uniform
classification practice. Finally, judgments of the Court of Justice also are an important tool for
ensuring a uniform classification practice.
4.110 According to the first indent of Article 9( 1)(a) of Regulation 2658/87, the Commission may
adopt Regulations on the classification of goods. Su ch classification regulations are adopted by the
Commission in accordance with the management pro cedure referred to in Article 10 of Regulation
2658/87.
4.111 Classification regulations will determine the tari ff subheading to be applied to the specific
good described in the Regulation. The Court of Justice has confirmed that under certain
circumstances, classification regulations may also beco me relevant by analogy to products similar to
those described in the regulation. A classificati on regulation is binding throughout the Community in
accordance with Article 249(2) EC Treaty. However, classification regulations cannot amend the CN,
and must therefore respect the Common Customs Tariff.
4.112 Where a national Court has doubts about the validity of a classification regulation, it may
refer this question to the Court of Justice in acco rdance with Article 234(1)(b) of the EC Treaty. If
the question arises before a national court against the decision of which there is no further remedy, the
Court must refer this question to the Court of Jus tice. In determining whether or not the Commission
has exceeded its powers, the Court of Justice has sought to establish whether the Commission has
committed "a manifest error of assessment".
4.113 In contrast, since classification regulations ar e acts of general applicability, they would
normally not be of direct and individual concern to individuals as required by Article 230(4) EC
Treaty. Accordingly, classification regulations cannot normally be challenged through a direct
annulment action before the Tribunal of First Instan ce. Only under exceptiona l circumstances, where
a classification regulation is so specific that it affects only the applicant by virtue of certain attributes
which are peculiar to it, can a classification re gulation also be challenged directly through an
annulment action.
4.114 The Community is a party to the HS Convention, and the common customs tariff is based on
the HS nomenclature. According to Article 7(1 )(b) of the HS Convention, the HS Committee can
prepare Explanatory Notes, Classification Opinions and other advice as guidance to the interpretation
of the HS. The EC considers that WCO explanatory notes and classification opinions constitute an

important tool for uniform tariff classification not only within the Community, but also beyond. The
EC participates actively in the drafting of the e xplanatory notes and classification opinions, and has
up to now adopted all of the HS measures.
4.115 The Court of Justice has stated in its case la w that even though they are not normally binding
in Community law, HS Explanatory Notes and Clas sification Opinions of the WCO are an important
aid in the interpretation of the Community customs tari ff. In other cases, the Court of Justice has also
judged that an interpretation of the HS approve d by the WCO Council is binding on the Community
when it reflects the general practice followed by th e member States, unless it is incompatible with the
wording of the heading concerned or goes manif estly beyond the discretion conferred on the Customs
Cooperation Council.
4.116 According to Article 9(1)(a), second inde nt, of Regulation 2658/87, the Commission may
issue explanatory notes. Such explanatory not es are adopted by the Commission in accordance with
the management procedure foreseen in Article 10 of the Regulation.
4.117 Explanatory notes may equally clarify particular issues of tariff classification arising under
the CN. They must, of course, be distinguished from the notes which introduce the chapters of the
CN, and which are an integral part of the tariff a nd cannot be modified by explanatory notes. EC
explanatory notes are not legally binding, and cannot amend the CN. However, the Court of Justice
has repeatedly acknowledged that explanatory notes are an important aid in the interpretation of the
CN.
4.118 On the basis of Article 8 of Regulation 2658/87, the Customs Code Committee may adopt
opinions on questions relative to the application a nd interpretation of the combined nomenclature.
Such opinions must be distinguished from opini ons which the Committee adopts in the context of a
comitology procedure on measures proposed by the Commission.
4.119 Opinions adopted by Committee are not legally binding. However, the Court of Justice has
held that that such opinions constitute an important means of ensuring the uniform application of the
common customs tariff by the authorities of the memb er States and as such can be considered as a
valid aid to the interpretation of the tariff.
4.120 According to Article 12(1) of the CCC, the customs authorities shall, upon written request,
issue binding tariff information (BTI). The basic provisions on binding tariff information are set out
in Article 12 CCC. Further rules concerning binding in formation are contained in Title II of Part I of
the Implementing Regulation (Articles 5-14). These additional provisions address in particular the
procedures for obtaining binding information, m easures to be taken in the event of binding
information, the legal effect of binding informati on, and the expiry of binding information. In
addition, in order to ensure a harmonious and un iform application of the rules on binding tariff
information, the Commission has issued administrative guidelines on the European Binding Tariff
Information (EBTI) System and its operation.
4.121 According to Article 6(1) of the Implemen ting Regulation, applications for binding
information are to be made in writing, either to the customs authorities in the Member State or
member States in which the information is to be us ed, or to the competent customs authorities in the
Member State in which the applicant is established.
4.122 The application shall be made on a standard application form conforming to the specimen
contained in Annex 1 B to the Implementing Regula tion. The details which an application for BTI
must contain are set out in Article 6(3)(A) of the Implementing Regulation. According to
Article 6(3)(A)(j), the application must in particul ar contain the indication by the applicant whether,
to his knowledge, binding tariff information for id entical or similar goods has already been applied

for, or issued in the Community. When custom s have possession of all the elements necessary for
them to determine the classification of the goods, binding information shall be notified to the
applicant as soon as possible in accordance with Article 7(1) of the Implementing Regulation.
4.123 Article 8(1) of the Implementing Regulation provides that a copy of the application for BTI, a
copy of BTI notified to the applicant, and the info rmation contained in copy 4 of the BTI form shall
be transmitted to the Commission. This transmis sion is done by electronic means. In accordance
with Article 8(3) of the Implementing Regulation, th is data is stored in a database of the Commission,
which is called the EBTI data base.
4.124 There are two versions of this database. One is available to the public for consultation, the
other is exclusively available to the Commission a nd issuing authorities of the member States. The
version available to the public allows searches of va lid BTI by issuing country, start and end date of
validity, BTI reference, CN code, keyword, or pr oduct description. The public version of the EBTI
database is accessible on the website of the European Commission.
4.125 The version available to the Commission and na tional customs authorities contains additional
information of a confidential nature which is not made available to the public (i.e. the name and
address of the applicant, holder and agent, if one has been appointed, confidential commercial details
concerning the goods for which the BTI has been issued, including trade names). The version
available to the Commission and issuing customs au thorities also contains all applications for BTI
which have been submitted to customs administrations and BTI that has ceased to be valid.
4.126 The EBTI database is an important tool for securing a uniform BTI practice. In particular,
according to the administrative guidelines issued by the Commission on the EBTI system, the EBTI
data base must be consulted by customs authoriti es prior to the issuance of BTI in all cases where
there is a doubt regarding the correct classification, or where different headings merit consideration.
4.127 According to Article 12(2) CCC, BTI will be binding on the customs authorities as against the
holder of the BTI. It follows furthermore fro m Article 12(2) CCC and Article 5 No. 1 of the
Implementing Regulation that BTI is binding not only on the administration which has issued it, but
on the administrations of all member States.
4.128 According to Article 12(3) CCC, BTI will be binding only in respect of the tariff
classification of goods which correspond in every resp ect to those described in the information. In
accordance with Article 12(4) CCC, BTI will be valid for a period of six years. Further details
regarding the legal effect of binding information are set out in Articles 10 to 12 of the Implementing
Regulation.
4.129 Article 12(5) CCC sets out the cases in which BT I shall cease to be valid. According to
Article 12(6) of the CCC, the holder of binding information which ceases to be valid may still use that
information for a period of six months, provided that he concluded binding contracts for the purchase
or sale of the goods in question, on the basis of th e BTI, before the measure was adopted. Further
details are set out in Articles 13 and 14 of the Implementing Regulation.
4.130 In the event that despite the procedural saf eguards described above, different BTI exists,
Article 9(1) gives the Commission the power to a dopt the necessary measures to ensure the uniform
application of the CN. The measures foreseen in the second indent of Article 9(1) of the Implementing
Regulation may take the form of a classification regulation adopted by the Commission on the basis
of Article 9(1)(a) of Regulation 2658/87. In acco rdance with Article 12(5)(a)(i) of the CCC, where
such a regulation is adopted, BTI which is not in accordance with it will cease to be valid.
Alternatively, the Commission may also, on the basis of Article 12(5)(a)(iii) CCC and the second

indent of Article 9(1) of the Implementing Regul ation, adopt a decision obliging the Member State
who issued the BTI to revoke it.
4.131 A decision requiring the revocation of BTI is of direct and individual concern to the holder of
the BTI. Therefore, the holder may bring a direct action for the annulment of such a decision by the
Commission before the Court of First Instance in acco rdance with Article 230(4) EC. In contrast, a
direct action for annulment is normally not possible against a classification regulation. However, the
validity of such classification could be raised in th e context of proceedings be fore a national tribunal,
and could then be referred to the Court of Jus tice in accordance with the preliminary reference
procedure.
(vi) Customs valuation
4.132 Community customs law contains a complete set of rules for customs valuation in the EC.
The basic provisions are contained in Chapter 3 of Title II of the CCC (Articles 28 through 36). More
detailed provisions are contained in Title V of the Implementing Regulati on (Articles 141 to 181a).
Title V is subdivided into seven chapters, concer ning general provisions, royalties and licensing fees,
the place of introduction into th e Community, transport costs, rates of exchange, simplified
procedures for perishable goods, and declarations of particulars and documents to be furnished.
4.133 In addition, Annex 23 to the Implementing Re gulation contains interpretative notes on
customs value, which reflect the interpretative notes contained in Annex I to the WTO Valuation
Agreement. Article 141(1) of the Implementing Regulation requires that when applying the provisions
the provisions of the CCC and the Implementing Regulation, member States shall comply with the
interpretative notes. In addition, Article 141(2) of the Implementing Regulation refers to Annex 24 to
the Regulation, which sets out the generally accep ted accounting principles to be applied for the
determination of customs value. Finally, Annex 25 to the Implemen ting Regulation contains details
on the calculation of air transport costs to be included in the customs value.
4.134 In accordance with the WTO Valuation Agreem ent, Article 29(1) of the CCC provides that
the customs value of imported goods shall normally be the transaction value, i.e. the price actually
paid or payable for the goods when sold for export to the customs territory of the Community. The
details and exceptions to this rule are contained in the Community legislation referred to above, in
accordance with the WTO Valuation Agreement.
4.135 EC customs law also provides for a number of mechanisms to ensure the uniform application
of EC valuation rules. These tools are not as numerous as those available in the case of tariff
classification. However, this is due to the subs tantial differences between tariff classification and
valuation which must be kept in mind.
4.136 First, it should be noted that the EC valuation rules are extremely detailed. For this reason,
the room for specific additional interpretations is relatively small. Second, since the valuation of
goods is normally based on the transaction value, customs valuation very much depends on
evaluations to be carried out on a case-by-case basis. This means that valuation rules typically must
be of a general and abstract charac ter, rather than product specific. In other words, whereas it may be
possible to decide in the abstract on the classificatio n of a defined type of good, it is not possible to
lay down once and for all in the abstract the value of a particular good.
4.137 Where a need for further detailed rules on valuation occurs, the Commission may, in
accordance with the procedure of Article 247 CCC, amend the valuation rules contained in the
Implementing Regulation. Such ame ndments will be legally binding in all member States. From this
perspective, amendments to the Implementing Regula tion and its annexes may, in relation to specific
issues, be regarded as functionally similar to classification regulations.

4.138 Moreover, in accordance with Article 249 CCC, the Customs Code Committee (through its
Customs Valuation Section) may examine any ques tions concerning the application of EC customs
legislation in the field of valuation. On this basis, the CCC may issue opinions on specific issues of
application of EC valuation rules . Whereas such opinions are not le gally binding, they may constitute
useful guidance for the interpretation of the applicable EC law.
4.139 The Commission has also issued a Compendi um of Customs Valuation texts. This
Compendium contains commentaries prepared and conclusions reached by the Customs Code
Committee on specific issues of customs valuation on the basis of Article 249 CCC. In addition, it
contains excerpts from relevant judgments of the Court of Justice on valuation issues, as well as
indices of other relevant texts.
4.140 As in other areas of EC customs law, the ECJ pl ays an important role in ensuring the uniform
interpretation of EC valuation rules. Wherever a dispute occurs between an importer and EC customs
authorities on the interpretation and application of EC valuation rules, the national court may – and
sometimes must – refer the question to the Court of Justice in accordance with Article 234 EC Treaty.
(vii) Processing under customs control
4.141 The processing under customs control procedure (PCC) allows the nature or state of non-
Community goods to be altered without subjectin g them to import duties or commercial policy
measures. The resulting products are released for free circulation at the rate of import duty applicable
to the processed products in order to benefit fro m a lower import duty amount or to fulfil technical
requirements for placing the goods on the market.
4.142 The detailed provisions governing PCC are laid dow n in Articles 84 to 90 and 130 to 136 of
the CCC and Articles 496 to 523 and 551 to 552 of th e Implementing Regulation. The use of the
procedure requires an authorization, which is grante d only if certain conditions are fulfilled. The US
First Written Submission deals only with one type of condition, the so-ca lled "economic conditions"
which are described in Article 133(e) CCC. EC law ensures the uniform application of the assessment
of the economic conditions by several means.
4.143 For the types of goods and operations mentione d in Annex 76, Part A, of the Implementing
Regulation, which represent the majority of the cas es, the economic conditions shall be deemed to be
fulfilled in accordance with Article 552(1) first subp aragraph of the Implementing Regulation. This
means that, in these cases, customs authorities do not examine the economic conditions.
4.144 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
assessment of the economic conditions is ensu red for so-called sens itive goods because the
examination has to take place at Community level.
4.145 Third, for the types of goods and operations not mentioned in Annex 76 of the Implementing
Regulation, the examination of the economic cond itions shall take place at national level. 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.
(viii) Local clearance procedure
4.146 Community customs legislation contains simplified procedures in order to facilitate
completion of formalities for placing goods under a custom procedure as far as possible while
ensuring that operations are conducted in a proper manner. The local clearance procedure is one of
those simplified procedures, where an importer may have goods released for free circulation at its
own premises or certain other designated locations without having to present the goods to customs.
4.147 The basic provision for the local clearance pro cedure is Article 76(1)(c) CCC. Where a data-
processing technique is used, Article 77 CCC applies in addition. More detailed provisions are laid
down in Articles 263 to 267 of the Implementing Regulation.
4.148 According to Article 263 of the Implementing Regulation, authorization to use the local
clearance procedure shall be granted to any person wishing to have goods released for free circulation
at his premises or at the other places designated or approved by the customs authorities in respect of
goods subject to certain procedures (transit or cust oms procedures with economic impact) or which
are brought into the customs territory of the Commun ity with an exemption from the requirement that
they be presented to customs.
4.149 Under Article 267 of the Implementing Regula tion, the authorization shall lay down the
specific rules for the operation of the procedure. Article 266 of the Implementing Regulation imposes
some obligations on the holder of the authorization in order to enable the customs authorities to
satisfy themselves as to the proper conduct of the operations. Generally speaking, these obligations
consist in the notification to the customs authorities of some events (like the arrival of the goods to the
place designated for release or the holder's desire to have the goods released for free circulation) and
the obligation to enter the goods in the holder's records.
(ix) Penalties for violations of customs law
4.150 EC customs law does not explicitly set out the sanctions which apply in case of a violation by
individuals of provisions of EC customs law. Acco rdingly, the nature and level of such penalties,
whether administrative or criminal in nature, is determined by the national laws of the member States.
4.151 However, this does not mean that the member States have complete freedom in the
determination of the appropriate le vel of penalties. In its constant case law, the European Court of
Justice has repeatedly stated that Article 10 EC Treaty requires the member States to take all measures
necessary for the proper implementation and applica tion of Community law, including the provision
of penalties for violations of EC law.
4.152 According to the case law of the Court, member States are obliged to provide for effective,
proportionate and dissuasive penalities for any violati on of EC law. Where a member States fails to
provide such effective, proportionate and dissuasive penalities, it fails to fulfil its obligations under
the EC Treaty. This has been confirmed by the ECJ specifically also in respect of the application of
EC customs law.
4.153 The principles set out in the case law of the ECJ regarding the imposition of penalties for the
violation of EC law can be regarded as generally accepted principles of EC law. This is illustrated by
the Council resolution 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. This resolution recalls
the relevant case law of the Court of Justice, and calls upon member States to ensure that "Community

law is duly applied with the same effectiveness and thoroughness as national law and that, in any
event, the penalty provisions adopted are effective, proportionate and dissuasive".
(x) EC customs cooperation
4.154 An important instrument in the field of EC customs cooperation is Regulation (EC) 515/97 on
mutual assistance between the administrative authorities of the member States and cooperation
between the latter and the Commission to ensure th e correct application of the law on customs and
agricultural matters.
4.155 Title I of Regulation 515/97 deals with assistance on request between member States customs
authorities. According to Article 4(1) of the Regul ation, EC customs authorities must transmit to one
another, upon request, any information necessary to ensure compliance with the provisions of EC
customs legislation. The modalities of such assi stance are set out in the following articles of
Regulation 515/97. Article 7 provides that at th e request of a customs authority, the requested
authority shall keep a special watch for certain persons, places, movements of goods, or means of
transport. Article 9 provides that customs authorities shall, at the request of another customs authority,
carry out investigations concerning operations which appear to constitute a breach of customs
legislation.
4.156 Title II deals with spontaneous assistance between customs authorities. Article 15 provides in
particular that EC customs authorities must pr ovide each other spontaneously any information
concerning operations which appear to constitute violations of EC customs legislation.
4.157 Title III deals with relations between member States' customs authorities and the
Commission, and obliges member States in particular to provide information to the Commission on all
operations which appear to constitute breaches of EC customs law. According to Article 18(3) of the
Regulation, in response to a reasoned request fro m the Commission, the member States' authorities
shall take the actions foreseen in Articles 4 to 8 of the Regulation. According to Article 18(4) of the
Regulation, where the Commission considers that irregularities have taken place, it may prompt a
Member State to carry out an inquiry, at wh ich Commission officials may be present under the
conditions set out in Articles 9(2) and 11 of the Re gulation. The Member State authorities shall, as
soon as possible, communicate to the Commission the findings of the enquiry.
4.158 Title V establishes the Customs Information Sy stem (CIS). The CIS is an automated
information system for the use of the administrative authorities of the member States and the
Commission. In accordance with Article 23(2) of th e Regulation, its aim is to assist the EC customs
authorities in preventing, investigating, and pro secuting operations which are in breach of customs
law by allowing the rapid dissemination of relevant information among all EC customs authorities.
The conditions for the operation and use of the CIS are set out in detail in the following chapters of
Title V of the Regulation.
4.159 Finally, customs cooperation is obviously an ar ea which is subject to constant evolution,
reflecting changing circumstances and technological and practical needs. For this reason, the
Community has adopted and implemented successive action programmes aimed at strengthening the
effective implementation of the EC customs union. The current action program is Customs 2007,
which applies for the period of 1 January 2003 to 31 December 2007. It is established by Decision
No. 253/2003/EC of the European Parliament and the Council.
4.160 The objectives of Customs 2007 are set out in Article 3(1) of Decision 253/2003. For the
attainment of its objectives, Customs 2007 for esees a number of programme actions, which include
actions in the field of communication and informa tion exchange systems, benchmarking, exchanges
of officials, seminars, workshops and project gr oups, training activities, monitoring actions, and

external actions in the form of technical assist ance and training. According to Article 14 of the
Decision, the financial framework for the operations to be undertaken is set at €133 million.
(xi) Budgetary and financial aspects
4.161 The uniform implementation of the EC custom s union is also important for the EC for
budgetary and financial reasons. According to Article 2(1)(b) of the Council Decision 2000/597/EC,
Euratom on the system of the European Communitie s' own resources, common customs tariff duties
and other duties established in respect of trade with non-member countries shall constitute an own
resource entered into the budget of the European Co mmunities. According to Article 2(3) of the
Decision, of the amount collected, Members shall reta in an amount of 25% by way of collection cost.
Accordingly, the correct implementation of Commun ity customs law has direct implications for the
EC budget, and is also for this reason closely mon itored by the EC institutions, and in particular the
European Commission.
4.162 Council Regulation (EC/Euratom) No. 1150/200 0 sets out further procedures for the
implementation of the own resources decision. This Regulation provides further tools for the uniform
implementation of Community customs law, and therefore deserves to be considered here. According
to Article 17(1) of the Regulation, member States mu st take all requisite measures to ensure that the
amounts corresponding to the Community's entitlement are made available to the Community as
specified in the Regulation. In acco rdance with Article 18(2)(a) of the Regulation, the member States
must, at the request of the Commission, carry out additional inspections, with which the Commission
shall be associated at its request. According to Article 18(3) of the Regulation, the Commission may
also itself carry out inspection measures on the spot.
4.163 A failure to make available the Community's ow n resources is an infringement of the treaty,
which can give rise to infringement proceedings ag ainst the Member State concerned. Where such a
failure results from an incorrect application of EC customs law, the infringement procedures may at
the same time also result in a finding that the member States has incorrectly applied EC customs law.
(xii) The continuous evolution of EC customs law
4.164 The EC institutions keep EC customs law under co nstant review in order to ensure that EC
customs authorities can operate under the best possible conditions possible.
4.165 As the most recent example in this respect, the European Commission has launched a process
of public consultations with a view to the prepar ation of a modernized customs code. The draft
versions of the customs code have been submitted to several rounds of public consultations, in which
traders, national administrations and third countries were provided with an opportunity to comment on
the envisaged amendments. The United States did no t provide any comments in the context of these
consultations, even though it would have been perfectly possible for it to do so.
4.166 The Unites States has stated that "the most vo cal critics of the EC frequently have been the
EC's own officials". However, the statements to which the United States refers simply reflect the
ongoing process of reform and review of EC customs law. Indeed, the EC is not complacent about its
own system, and is committed to continue developing it in acco rdance with changing needs and
circumstances. However, this does not prove that the EC is in any way failing to comply with its
obligations under Article X:3(a) and (b) GATT.

(c) Judicial control in EC law
(i) The EC court system
4.167 In the EC, all disputes concerning matters govern ed by Community law which are not subject
to the jurisdiction of the Court of Justice of the EC (and the EC Court of First Instance) fall within the
competence of the national courts. The national courts thus assume the status of Community courts of
general competence, in the sense th at they are competent to determine any dispute that is not
expressly conferred on the EC Court of Justice and on the EC Court of First Instance. The situation of
the national courts is such that they perform a dual functional role. When determining a dispute
governed by national law, they continue to form part of the national legal order. When determining a
case governed by Community law, they belong from the functional point of view to the Community
legal order. Since the very foundation of the EC, the use of national courts to implement Community
law has been considered as the best way of ensuring justice in a swift manner close to the citizens.
4.168 The EC Treaty itself established the role of th e national courts in the application of the
Community legal order, as well as the scope and con sequences thereof, by virtue of its Article 234
concerning references to the Court of Justice by national Courts. Such ro le cannot be negated by
Community legislation. Therefore, any modification in the boundaries between the competences of
the Court of Justice and the national Courts would require the amendment of the EC Treaty.
4.169 The Court of Justice and the Court of Firs t Instance of the European Communities are
constituted under the EC Treaty and th e Protocol on the Statute of the Court of Justice annexed to it.
Both Courts are composed of one judge per Member State and they normally decide in chambers of
three or five judges. The Court of Justice is assisted by eight Advocates General, who act with
complete impartiality and independence in deliver ing an individual reasone d opinion on cases which
require his or her involvement.
4.170 According to Article 220 of the EC Treaty, the central task of the Court of Justice and the
Court of First Instance is to ensure that in the in terpretation and application of the Treaty, the law is
observed. This is done through different proce dures, which delimitate the jurisdiction of both
European Courts between themselves and with the national courts. The Court of Justice and the Court
of First Instance are to act within the limit s of the powers conferred upon them by the founding
treaties.
4.171 The main division between the different kinds of proceedings before the Court of Justice is
between those originating and terminating befo re the Court itself and those originating and
terminating before national courts. In addition, the Court of Justice is competent to hear appeals on
points of law from decisions of the Court of First In stance, where that Court has jurisdiction at first
instance.
4.172 The main kinds of proceedings originating and terminating before the Court of Justice are,
amongst others, actions against member States for failure to fulfil an obligation under Community
law, actions for the annulment of a Community measure, actions for failure by a Community
institution to act, and action for damages relating to the Community's non-contractual liability. The
second category of proceedings before the Court of Justice is actions which originate before a national
court but are referred to the Court of Justice for a ruling on the interpretation or validity of a point of
Community law.
4.173 Article 225(1) of the EC Treaty provides that the Court of First Instance shall have
jurisdiction at first instance in actions for annulme nt, actions for failure to act, actions founded on
non-contractual liability, staff cases and cases under ar bitration clauses in Community contracts, with
the exception of those reserved in th e Statute to the Court of Justice. As the Statute reserves to the

Court actions for annulment and actions for failure to act brought by institutions and member States in
some sectors, the jurisdiction conferred on the Cour t of First Instance covers virtually all direct
actions brought by natural or legal persons as well as direct actions by member States challenging
executive action by the Community inst itutions. In the fields thus defined, the Court of First Instance
has exclusive jurisdiction at first instance, its decisi ons being subject to a right of appeal on points of
law only to the Court of Justice.
(ii) Judicial protection in the EC legal system
4.174 As a Community based on the rule of law, the Community recognizes the right of individuals
to judicial protection. This right to an effective re medy before a tribunal is, first of all, recognized in
Article 47 of the Charter of Fundamental Rights of th e European Union, which reflects, in accordance
with Article 6(2) EU Treaty, the constitutional trad itions of the member States. It should be also
stressed that all EC members States are parties to the Council of Europe Convention for the Protection
of Human Rights and Fundamental Freedoms of 14 November 1950, where Article 6(1) lays down the
right to a fair trial by an independent and impartial tribunal established by law.
4.175 In the EC legal system, national courts guarant ee this right when a decision taken by national
authorities is challenged. This also applies to acts of the member States through which they
implement Community law. While the judicial or ganization and procedures in the member States
result from their various political, constitutional and le gal traditions, they all provide complete legal
protection in relation to administrative decisions.
4.176 As regards the decisions of the EC institutions, the main action to exercise this right is the
action for annulment. Under Article 230 of the EC Tr eaty, the Court is to review the legality of acts,
amongst others, adopted jointly by the European Parliament and the Council, of the acts of the
Council, and of the Commission, other than recomme ndations or opinions. Generally speaking, an
action for annulment is available in the case of all measures adopted by the institutions, whatever their
nature or form, which are intended to have legal effects. However, this jurisdiction does not cover
acts adopted by a national authority. Neither does it extend to the Treaty and its amendments.
4.177 Under Article 230(4) of the EC Treaty, natura l or legal persons may institute proceedings
against a decision addressed to that person or agai nst a decision which, although in the form of a
regulation or a decision addressed to another person, is of direct and individual concern to the former
person. The Court of Justice has interpreted "of direct concern" to mean that the effect of the measure
on the person's interests must not depend on the di scretion of another person, including the relevant
Member State. The requirement of "individual c oncern" is fulfilled where the measure in question
affects specific natural or legal persons by reason of certain attributes peculiar to them, or by reason
of a factual situation which differentiates them from all other persons and distinguishes them
individually in the same way as the addressee.
(iii) Preliminary rulings: the Court of Justice and the uniform interpretation and application of
Community law
4.178 The Court of Justice plays a central role in the uniform interpretation and application of
Community law throughout the Community by means of the preliminary reference procedure set out
in Article 234 EC Treaty.
4.179 Where a question as to any of these matters arises before any court or tribunal of a Member
State, that court or tribunal may, if it considers th at a decision on the question is necessary to enable it
to give Judgment, request the Court of Justice to give a ruling on it. Where any such question is
raised in a case pending before a court or tribunal of a Member State, against whose decisions there is

no judicial remedy under national law, that court or tribunal must bring the matter before the Court of
Justice.
4.180 However, where the validity of a Community act is challenged before a national court, the
Court of Justice has declared that the power to declare the act invalid must be reserved to the latter.
Therefore, if a national court considers that an act of an EC institution is invalid, it is obliged to make
a reference to the Court of Justice. The latter has justified this case law with the need to secure the
uniform application of all acts of the Community.
4.181 In a recent case, the Court of Justice confirmed that the principle of Member State liability for
breaches of Community law also applies when a breach is attributable to a Member State court,
because it fails to refer a case to the Court of Justice. In such cases, the affected claimant is entitled to
bring another suit, affording the national judge hear ing that case the opportunity to refer the issue to
the Court of Justice at the second attempt.
4.182 When entertaining a preliminary reference, the Court of Justice does not exercise an appellate
power to approve or overrule determinations of the referring courts. Rather, it assists the national
court in coming to a decision which has not been made at the time of the reference. The relationship
between national courts and the Court of Justice is co-operative and not hierarchical, based on the
recognition that each court has a different function, and on mutual goodwill and respect.
4.183 The main objective of this preliminary refe rence system is to guarantee the proper and
uniform interpretation and application of Community law throughout all the member States, avoiding
the establishment of a long and expensive appellate sy stem before the Court of Justice. This is
extremely important because the administration of the Community is, to a large extent, carried out by
the member States rather than by the Community institutions and because Community legislation may
require implementing measures to be adopted by nati onal legislatures or executives. It is through
preliminary references that divergences within and between the member States can be avoided and the
effective application of Community law be assured. At the same time, the reference procedure
constitutes the principal method by which the co mpatibility of national law and administrative
decisions with Community law is tested.
4.184 Apart from providing a means of ensuring unif ormity throughout the Community, individual
litigants find that their national cases are referred to the Court of Justice as to the validity or
interpretation of an act of a Community institution. All parties to the main action are entitled to
participate in the preliminary reference proceedings, as well as Members States and Community
institutions. It is the practice of the Commission to participate in every case before the Court of
Justice, as a consequence of its role as guardia n of the Community interest. A preliminary ruling
given by the Court of Justice is binding on the na tional court hearing the case in which the ruling is
given. Besides, national courts and tribunals implement faithfully the preliminary rulings of the Court
of Justice. If a referring court does not follow the ru ling of the Court of Justice, this would constitute
a breach of the obligations of the Member State under the Treaty, which could be brought before the
Court of Justice under Articles 226 to 228 of the EC Treaty.
4.185 A preliminary ruling has also an effect on persons who are not parties to the case referred. In
Simitzi v. Municipality of Kos , the Court held that Greece could no longer reasonably have believed
that a duty was compatible with Community law after the date of the Judgment in which a comparable
French charge was held not to be. In a recent cas e, the Court of Justice has expanded the effects of
preliminary rulings to certain res judicata situations. The Court declared that, in view of the
obligation on all the authorities of the member St ates to ensure observance of Community law and
because of the principle of cooperation arising fro m Article 10 EC, an administrative body may be
under an obligation to review a final administrati ve decision in order to take account of the
interpretation of the relevant provision given by the Court in a subsequent preliminary ruling.

(iv) Judicial review of customs decisions
4.186 Article 243(1) CCC provides that any person shall have the right to appeal against decisions
taken by the customs authorities which relate to the application of customs legislation and which
concern him or her directly and individually. Article 243(1) CCC also provides that any person who
has applied to the customs authorities for a decision relating to the application of customs legislation
and has not obtained a ruling on that request within the period referred to in Article 6(2) CCC shall
also be entitled to exercise the ri ght of appeal. Article 243(1) finally provides that the appeal must be
lodged in the member State where the decision has been taken or applied for.
4.187 Since Community customs law is implemented through the customs authorities of the
member States, the appeal is lodged before a tri bunal of the member State whose customs authorities
have issued the decision. In accordance with Ar ticle 245 CCC, the provisions governing the appeals
procedure are laid down in the national laws of the member States. The CCC abstains from
harmonising the national law on administrative and judicial appeals against customs decisions. This
reflects the fact that such procedural laws ofte n apply uniformly to the whole field of national
administration. Harmonization might therefore have led to the fragmentation of hitherto uniform
national appeals procedures.
4.188 As it has already been explained above, the role of the member States' courts in the judicial
review of customs decision is fully compatible wi th the uniform application of EC customs law.
member States' courts are obliged to apply EC law according to the interpretation given by the Court
of Justice and set aside any national provision or meas ure that is inconsistent with EC law. Wherever
a question of interpretation of Community law arises, such a question may be referred to the Court of
Justice in accordance with Article 234 EC. Where the national court is a court of last instance or any
national court considers that the Community measure is invalid, such court is obliged to refer the
question to the ECJ.
4.189 Finally, it should be noted that in exceptiona l cases, a right of appeal against customs
decisions may also be available directly to the EC Court of First Instance. This is the case when the
European Commission takes decisions applying EC customs law which are of direct and individual
concern to individuals within the meaning of Artic le 230(4) EC Treaty. Examples for such decisions
are Commission decisions revoking BTI. Another example would be Commission decisions on the
repayment or remission of import duties on equitabl e grounds on the basis of Article 907 of the
Implementing Regulation.
(d) The US system in comparison
(i) The administration of US customs law
4.190 In the United States, customs laws, which are federal laws, are essentially administered by US
Customs and Border Protection. US Customs and Bo rder Protection is an agency of the US Federal
Government part of the US Department of Homela nd Security. US Customs and Border Control has
20 Field Operations Offices which oversee 317 US ports of entry and 14 preclearance offices.
4.191 However, it is noteworthy that the fact that US customs law is implemented by a federal
agency is not specific to customs matters. On th e contrary, it reflects a fundamental interpretation of
US constitutional law according to which Congress ma y not require US states to implement federal
law. This has been confirmed by the US Supreme Court in the case Printz vs. United States.
4.192 The US dual federalism is diametrically opposed to the basic principles of the EC legal order.
The US system is characterized by a principle of "dual sovereignty", in which the individual States
may not be "conscripted" or "commandeered" to admini ster federal law. EC law is characterized by

the principle of executive federalism, where all EC law must be executed by the national authorities of
the member States, acting under the guidance and supervision of the EC institutions.
4.193 The EC does not intend to question the constitu tional choices which the United States has
made. However, in response to the US claims under Article X:3(a) GATT, it is important to stress
that the EC's executive federalism is just as fundame ntal and legitimate a constitutional choice as the
US system of dual sovereignty. The EC considers that its constitutional c hoices should be afforded
the same respect as those of the United States.
(ii) Review of customs decisions in US law
4.194 Judicial review in the US concerning customs and trade issues is in the first step attributed to
the United States Court of International Trade (the "USCIT"), which is a federal court established
under Article III of the US Constitution. The USCIT is equal in rank to a federal district court.
4.195 Appeals against the USCIT's decisions may in all cases be taken as of right to the US Court of
Appeals for the Federal Circuit (the "CAFC"). It is a specialized appellate court with the rank of a
federal circuit court, which has exclusive ju risdiction over appeals from the USCIT as well as a
disparate group on non-USCIT issues, patents appeals being the most common. Ultimately, an appeal
to the US Supreme Court, via petition for writ of certiorari, can be lodged.
4.196 It is worth noting that this centralized first instance judicial review at federal level through the
USCIT is a political choice that the United States has made. Under US law, State courts have also a
role in enforcing federal law, as was clearly explained by the US Supreme Court in the case Claflin v.
Houseman.
4.197 The EC does not intend to question the political choices which the United States has made to
organize its judiciary in relation to customs matter s. However, in response to the US claims under
Article X:3(b) GATT, it is important to stress that the EC's judiciary system is just as fundamental and
legitimate a constitutional choice as the US centr alized system. The EC considers that its
constitutional choices should be afforded the same respect as those of the United States.
3. The US claims under Article X:3(a) GATT
(a) The requirements of Article X:3(a) GATT
(i) Article X:3(a) GATT concerns the administrati on of customs laws, not the customs laws
themselves
4.198 The requirements of Article X:3(a) GATT do not concern the customs laws themselves, but
only their administration. This was clearly spelt out by the Appellate Body in EC – Bananas III.
4.199 This distinction is highly important for the pr esent case. It means that Article X:3(a) GATT
does not require a harmonization of laws within a Member where, for instance, different legal regimes
are applicable within different parts of the territory of a WTO Member.
4.200 This is particularly relevant for all WTO Me mbers which have a federal structure. In a
federal State or entity, different la ws may apply in the different parts of the territory of the Member
concerned, depending on whether it is the federal or the sub-federal level which has legislated on a
particular issue.
4.201
 Article X:3(a) GATT does not interfere with the question of whether a particular issue should
be dealt with at the federal or the sub-federal leve l. It guarantees merely that whatever laws exist

must be administered in uniform manner. However, where laws apply only in part of the territory of a
Member, this requirement is met provided that those laws are applied uniformly within the part of the
territory in which they are applicable.
4.202 Further confirmation for this interpretation is found in Article XXIV:12 GATT. The Panel in
Canada – Gold Coins found that this provision has the "func tion of allowing federal States to accede
to the General Agreement without having to cha nge the federal distribution of competence".
Accordingly, any interpretation of Article X:3(a) GATT which would affect the internal distribution
of competence is incompatible with Article XXIV:12 GATT.
4.203 In other words, Article X:3(a) GATT does not re quire that customs laws be regulated at the
central level of each WTO Member. The WTO Ag reements respect the internal structure and
divisions of competences in each WTO Member. 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.
(ii) Article X:3(a) GATT does not prescribe the ways in which WTO Members must administer
their customs laws
4.204 Article X:3(a) GATT does not prescribe the specific way in which WTO Members should
administer their customs laws. It merely sets ou t an obligation to administer customs laws in a
uniform manner.
4.205 Article X:3(a) GATT is not the only provision of the covered agreements dealing with the
administration of customs laws. Indeed, a number of Agreements contained in Annex 1A to the WTO
Agreement deal with specific matters of customs administration, notably the Valuation Agreement,
the Agreement on Rules of Origin, and the Agreement on Import Licensing Procedures.
4.206 Wherever it was felt necessary to lay down specific disciplines on how WTO Members
should administer their customs laws, appropria te provisions were included in the respective
agreements. For example, Articles 2(h) and 3(f) of the Agreement on Rules of Origin require WTO
Members to issue advance rulings on the origin of goods. If it had been felt necessary to include
similar obligations for the issuance of advance rulings on other issues, such as tariff classification or
customs valuation, such provisions could have been included in the covered agreements. If they were
not, it must be concluded that WTO Members did not consider such obligations appropriate.
4.207 Article X:3(a) GATT must therefore not be interpreted in such a way as to create WTO
obligations where WTO Members consciously abstai ned from laying them down. In other words,
Article X:3(a) GATT is not a legal basis for e ngaging in a harmonization of the customs law and
administrations of WTO Members through the DSU.
4.208 Respect of these principles is particularly necessary since the revision of Article X GATT is
currently the subject of the ongoing Doha negotiations on trade facilitation. In the context of these
negotiations, WTO Members have made a large number of proposals to supplement and improve
Article X GATT, including on issues which are the subject of the US claims. This also applies to the
United States itself, which has made a number of proposals in relation to Article X GATT, including a
proposal to create an obligation to "make available, upon request of a trader, binding rulings in certain
specific subject areas (e.g., tariff classification, cu stoms valuation, duty deferral)". Proposals on
advance rulings, the majority of which however is li mited to issues of tariff classification, have also
been made by a number of other countries.
4.209 These ongoing negotiations underline that on those matters in which it is currently silent,
Article X GATT in fact does not contain any obliga tions. It is unclear to the EC how the United
States can simultaneously make proposals for the cr eation of new obligations going beyond Article X

GATT, and then argue that very similar obliga tions are already owed under Article X GATT as it
currently stands.
4.210 The US case is motivated less by legal than by po litical considerations. In fact, this has been
explicitly admitted by the United States in a press re lease that was issued by USTR to announce the
US request, which indicated that "pressing a major player in world trade to administer its customs
laws and regulations in a uniform manner will he lp to advance" the Doha Round trade facilitation
negotiations. The EC is highly concerned by this at tempt by the United States to instrumentalize the
DSU for the purposes of influencing the ongoing Doha Round negotiations.
(iii) Article X:3(a) GATT lays down minimum standards
4.211 In line with the foregoing, it must be considered that Article X:3(a) GATT only lays down
minimum standards. It does not oblige WTO Me mbers to meet the highest possible standard
achievable at a given point in time. This character of Article X:3(a) as a minimum standard has been
emphasized by the Appellate Body in US – Shrimp. The Panel in Argentina – Hides and Leather has
also cautioned against reading too much into Article X:3(a) GATT.
4.212 Moreover, minor administrative differences in treatment cannot be regarded as implying a
violation of Article X:3(a) GATT. This was clearly stated by the GATT Panel in EC – Dessert
Apples, which confirmed that certain variations between EC member States in the administration of
import licensing, e.g., as regards the form in wh ich licence applications could be made and the
requirement of pro-forma invoices, did not constitute a breach of Article X:3(a) GATT.
4.213 Overall, Article X:3(a) GATT is therefore a minimum standards provision which guarantees
only a certain minimum level of uniformity in ad ministration. Moreover, Article X:3(a) GATT does
not prohibit administrative variations where such va riations are minor or do not significantly affect
the interests of traders.
(iv) The meaning of "uniform administration"
4.214 The meaning of the requirement of "uniform ad ministration" must be established in the light
of the foregoing observations. Moreover, account mu st be taken of the practical realities in which
customs administrations must work.
4.215 The administration of customs laws in the r eal world involves a number of difficulties and
challenges. First of all, the administration of cu stoms frequently involves complex questions of law
and fact. Second, the circumstances under which customs authorities operate are in continuous
evolution due to changes in goods traded or comme rcial behaviour. This requires customs authorities
to continuously adapt to new realities. Third, customs administration is a mass business.
4.216 Therefore, a measure of realism is required in the application of Article X:3(a) GATT. If
customs authorities struggle with a complex new question of law and fact, this does not already mean
that authorities in the member concerned administer customs law in a non-uniform manner. Similarly,
if it takes a certain amount of time to come to an established practice on a new and complex issue of
customs law, this does not yet mean that customs laws are being administered in a non-uniform way.
4.217 A complete uniformity in the application of customs laws could never be achieved by any
Member, even those with the most efficient system s of customs administration. In a large country
with a large bureaucracy, a minimum degree of non-uniformity is de facto unavoidable. This may
occur, for instance, because a trad er in a particular case does not challenge a particular decision even
though it was illegal. In such a case, non-uniformity ma y be the result, but this does not mean that the
Member in question fails to meet its obligations under Article X:3(a) GATT. The EC notes that the

United States appears to agree with this, since it st ates that "the fact that divergences occur is not
problematic in and of itself".
4.218 The proposition that individual instances of administration are not probative for a violation of
Article X:3(a) GATT also finds support in the case law under the DSU. In EC – Poultry , the
Appellate Body already confirmed that individual measures of application do not fall within the scope
of Article X GATT. In US – Hot Rolled Steel , the Panel stated that rather than relying on individual
instances of administration, it was necessary for th e complaining party to establish a pattern of
decision making contrary to Article X:3(a) GATT.
4.219 Accordingly, whether a particular member me ets the requirement of "uniformity" cannot be
established merely by looking at an individual ex ample of practice. Rather, uniformity can be
assessed only on the basis of an overall pattern of cu stoms administration. Only if, on the basis of
such general patterns, a WTO Member's administra tion of its customs laws can be shown to be non-
uniform, is the standard of Article X:3(a) GATT violated.
(b) The burden of proof
4.220 It is established case law under the DSU that th e party which asserts a particular claim bears
the burden of proof. In the present case, it is th e United States which claims that the EC does not
administer its customs laws in a uniform manner. It is accordingly the United States which must
adduce evidence to establish a prima facie case that its claim is true. Only if the United States
discharges this burden of proof will the burden shift to the EC to rebut the US case.
4.221 The United States does not even come close to di scharging this burden of proof. In fact, the
United States adduces only very sparse evidence rega rding the actual administration of EC customs
law. The examples given by the United States are pa rtially irrelevant, partially inconclusive, and in
any event do not show a general pattern of non-uniform administration of EC customs law.
4.222 Instead of adducing concrete evidence regardi ng the administration of EC customs law, the
United States tries to build its case on systemic criticisms of the EC system of customs administration,
arguing for instance that because EC law is admini stered by the authorities of the 25 EC member
States, "divergences will inevitably occur". Ho wever, the assertion that such "divergences are
inevitable", which the EC strongly contests, does not replace the proof that divergences actually
occur.
4.223 The entirely speculative nature of the US case is also illustrated by the US references to the
expected effects of the enlargement of the EU by 10 new member States on 1 May 2004. In the press
release of USTR announcing the US Panel Request, th e anticipated effects of EU enlargement were
cited as the primary reason for requesting a Panel.
4.224 At the time the United States made its request for a Panel, EU enlargement had been in effect
for less than eight months. The United States has not referred to any lack of uniformity in the
implementation of EC customs law by the administrations of the 10 new member States. Pure
speculation about possible future developments cannot replace facts and evidence as a basis for claims
made under the DSU.
4.225 In its efforts to avoid its own burden of proof, the United States prefers to refer to
pronouncements of EC officials or institutions, which it claims are the "most vocal critics" of the EC
system. However, these references are taken out of context, and do not su pport the conclusions the
Unites States would draw from them. In any event, the desire to make further progress is natural in
the context of a healthy system of customs administ ration. Such statements have nothing to do with

the question of whether the EC is in compliance wi th its obligations under Article X:3(a) GATT, and
do not exempt the United States from the necessity of discharging its burden of proof.
4.226 Finally, that the US case is not really based on any pattern of non-uniformity in the
administration of customs in the EC is strikingly conf irmed by the almost complete lack of reaction to
the call for input by the United States Trade Re presentative following the consultation request. If
really there was a pattern of non-uniformity, as the United States alleges, one could have expected
that the United States would receive more than three contributions, two of which were not even
pertinent to the US case.
(c) General issues underlying the US claims under Article X:3(a) GATT
(i) The fact that EC customs law is administered by the customs authorities of EC member States
is compatible with Article X:3(a) GATT
4.227 Article X:3(a) GATT does not prescribe the ways in which a WTO Member must implement
its customs laws. This also in cludes the question through what authorities or administration customs
laws are administered. Article X:3(a) GATT in no ways excludes that in a federal or quasi-federal
state or entity, customs laws could be administered by authorities at the sub-federal level. Contrary to
the United States, it does not prescribe the creation of a customs agency similar to US Customs and
Border Protection.
4.228 Moreover, when they administer EC customs law, the EC member States act as the organs of
the EC. This has been confirmed with by the recent Panel report in EC – Trademarks and
Geographical Indications (US) , where the Panel noted that when EC member States execute a
particular EC regulation, they do so as organs of the EC, for which the EC is responsible under public
international law.
4.229 For this reason, the United States is wrong to assert that there "is no EC customs authority to
speak of". The customs authorities of the EC member States, acting together with and under the
supervision of the competent institutions of the EC, are the EC customs authority. That this system of
customs administration is different from that of the United States is of no relevance under
Article X:3(a) GATT. It should also be recalled that the United States itself has accepted, in the EC-
US Agreement on customs cooperation, the fact th at the EC member States together with the
European Commission constitute the EC customs authority.
4.230 The United States is also wrong to assert that due to the involvement of EC member States in
the administration of EC customs law, "divergences inevitably occur". As the EC has already shown,
and will recall again in the following section, the EC has numerous mechanisms in place to ensure
that the administration of EC customs law takes pl ace in a uniform manner. In addition, the US
statement that in the EC system, a lack of uni formity would be "inevitable" is unsupported by
evidence.
(ii) The EC has measures in place to ensure the uniform administration of EC customs laws
throughout the EC
4.231 The US claim that the EC does not provide for the systematic reconciliation of divergences in
the application of EC customs law is false. It reflects a biased and incomplete presentation of the EC
system, in which the United States focuses on a sm all number of instruments while ignoring a wide
range of other instruments which equally contribute to the uniform interpretation and application of
EC customs law. Moreover, the United States fails to take into account the overall context of the EC
legal system and the ways in which uniformity is ensured within the EC system.

4.232 The EC finds it remarkable that the United St ates would make sweeping statements about the
uniformity of EC law without ever once mentioning such fundamental principles of EC law as the
supremacy and direct effect of EC law, the duty of cooperation, infringement proceedings, the various
instruments of EC customs cooperation, or the budgetary control aspects.
4.233 A particularly striking example of the highly sel ective US approach is customs classification,
where the United States concentrates mainly on the EC BTI system, without giving any consideration
to the other tools for ensuring a uniform classifica tion practice within the EC, such as classification
regulations, HS instruments, EC explanatory not es, or opinions of the Customs Code Committee.
Even where the US considers parts of the EC system, it presents these in a highly distorted way.
4.234 The question of whether the EC, at a systemat ic level, administers EC customs law in a
uniform manner cannot be evaluated by simply considering one single instrument in isolation.
Rather, the EC system has to be evaluated as a whole, taking into account all of the relevant
instruments in their proper context.
4.235 This evaluation should be made taking into account the structural elements of the EC legal
system and the overall record and experience of Eur opean integration. The structural elements which
the United States criticises are not specific to the administration of customs laws, but are general
structural elements of the EC cons titutional order. More than fifty years of successful integration in
Europe based on the EC's model of executive federalism should not lightly be dismissed.
(iii) Some necessary corrections re garding the role and functioning of the Customs Code
Committee
4.236 The United States argues that the Customs C ode Committee does not function efficiently
enough and that individual traders are not given enough rights in the context of the proceedings of the
Committee. These US criticisms are unfounded.
4.237 As regards the alleged inefficiency in the Committee's operation, the United States relies
essentially on general statements about "institu tional disincentives" which would keep the
Commission from putting matters to a vote. These a llegations regarding "institutional disincentives"
are unfounded and are not supported by any evidence. Moreover, the United States neglects that the
conditions under which the Chairman puts a matter to the vote or may postpone a vote are laid down
in Article 6 of the Rules of Procedure of the Committee.
4.238 The fact that in some cases, the Committee may have to be seized more than one time of the
same or of related matters has nothing to do with "institutional disincentives". Rather, this may reflect
the complexity of the issue in question and the need to gather a full understanding of the factual
situation before a decision can be taken.
4.239 The entirely speculative nature of the US claims is also illust rated by the references it makes
to the supposed negative effects of EU enlargemen t on the efficiency of the Committee. The United
Sates makes these statements without being able to support them with any concrete evidence.
4.240 As regards the rights of individual traders in re spect of the proceedings of the Committee, the
United States makes these arguments in the context of a discussion of whether the EC administers its
customs laws uniformly in acco rdance with Article X:3(a) GATT. The EC does not understand the
relevance of these arguments regarding the rights of private traders before the Committee for the
question of whether EC customs law is uniformly applied throughout the EC.
4.241 The US complaints seem to be based on a f undamental misunderstanding of the role of the
Customs Code Committee. The Committee is not a mechanism for the administrative or judicial

review of customs decisions. Rather, it is an integral part of the Community's regulatory process,
through which member States expertise is integrated into this process. There is accordingly no basis
for the extensive rights of private traders requested by the United States.
4.242 Any individual with a concern regarding the administration of customs matters can bring this
issue to the attention of the Commission, which will consider the matter and respond in accordance
with the Commission's Code of Conduct. If th e Commission considers that the matter requires
consideration by the Committee, it will put this matter on the Committee's agenda. In a similar
fashion, a concerned individual may also address the administration of a Member State, which may
equally decide to raise the matter in the Committee.
4.243 As regards the publication of agendas or reports of the Committee, there is no obligation of
publication in this respect. The United States also has not raised any claim under Article X:1 GATT.
In any event, the US claims are factually wrong. Documents relating to the Customs Code Committee,
including agendas and summary records of mee tings, are available on the public register of
comitology of the European Commission. More over, access to the agendas and records of the
Committee is governed by the EC rules on access to documents laid down in Regulation
EC/1049/2001.
(iv) The role of the Court of Justice in ensuring uniformity in the administration of EC customs
law
4.244 The United States contests that uniform admini stration can be guaranteed by the Court of
Justice through preliminary references made by nationa l courts. To sustain its arguments, the United
States relies on the opinion of AG Jacobs in Wiener. However, AG Jacobs´ position departs from the
case-law of the Court of Justice and, what is even more fundamental, his position as to the exercise of
a greater measure of self-restraint either on the part of the Court or by national courts was not
followed by the Court.
4.245 AG Jacobs proposed to the Court that the ques tion referred by the Bundesfinanzhof should be
answered by reminding the principles enshrined in th e case-law of the Court of Justice in relation to
customs classification. Contrary to the conclusions of the AG, the Court of Justice provided a specific
answer to the question of how the goods in question were to be classified.
4.246 As to AG Jacobs' advice for self-restraint addressed to national courts, the ruling of the Court
of Justice is completely silent on this issue. Therefore, AG Jacobs' non-binding opinion constitutes a
doctrinal position with no influence on the case law of the Court of Justice.
4.247 Concerning AG Jacob's statement about the supposed ly minimal contribution of the Court to
the uniform application of the Common Customs Tari ff, the United States has clearly taken it out of
context. What AG Jacobs underlined in its opinion is that, considering the detailed character of the
Common Customs Tariff, there were also other ways of ensuring uniformity in the field of customs
classification and gave the Commission's classification regulations as an example.
4.248 To confirm that AG Jacobs' advice for self-restra int is being followed by national courts, the
United States refers to two Judgments given by tw o different UK courts. Thus the support found by
the United States to its arguments is limited to tw o cases in one of the 25 EC member States. No
evidence is provided on the position taken by the ot her 24 national judiciary branches in relation to
the AG's advice (should such a position exist). Th e EC considers that these two UK cases are not
sufficient to support the US claim.
4.249 Moreover, in Anchor Foods Limited , the UK Queen's Bench Division did not rely on AG
Jacobs´ opinion to decide that there was no need to refer to Court of Justice. Indeed, the Queen´s

Bench Division decided not to refer because of the limited importance of the case. It should also be
pointed out that the Queen's Bench Division did not act in this case as a court of last instance and that,
therefore, it was not under an obligation to refer the case to the Court of Justice.
(d) The US claims under Article X:3(a) GATT
(i) Tariff classification
The ECJ and tariff classification
4.250 The United States argues that the ECJ as an ins titution is ill-equipped to bring uniformity to
the administration of the Tariff. This statement, which is solely based on the Opinion of AG Jacobs,
in Wiener, is wrong.
4.251 Concerning specifically the role of the ECJ in classification disputes, the EC disagrees with
the US opinion that because of this fact-intensive nature of classification questions, the ECJ cannot
play a useful role in securing a uniform admi nistration of EC classification rules. Even if
classification questions may typically be fact-int ensive, this does not make them fundamentally
different from other questions of law, which also in volve the application of abstract rules to factual
situations.
4.252 Moreover, it is in the nature of classification issues that they concern the classification of
specific goods. To which extent a classification of particular goods may be transposable by analogy
to different, but similar goods is a complex ques tion which can be evaluated only on a case-by-case
basis. Once again, however, this is a general issue of classification, and is not in any way specific to
the role of the Court.
4.253 Finally, the US attempts to belittle the role of the Court are strikingly at odds with its
allegations that the EC acts in a non-uniform manne r. The US comments would actually seem to cast
doubt on whether classification questions can be regula ted effectively at all. The concerns expressed
by the United States concerning the fact-intensive na ture of classification questions arise regardless of
whether the final decision-maker is a Court or an administrative agency.
4.254 Overall, the US line of argument leaves the EC perplexed. The United States seems to
practically claim that a uniform classification cannot be achieved, and then fault the EC for not doing
enough to achieve it.
Binding tariff information
4.255 Article X:3(a) GATT is a provision which sets out minimum standards, and does not
prescribe the specific means a Member must employ in order to ensure a uniform administration of
customs laws. For this reason, there is no obliga tion under WTO law for a Member to have a system
of binding tariff information in place. This is clearly illustrated also by the US proposals in the
context of the Doha Round trade facilitation negot iations, which aim at supplementing Article X
GATT by introducing an obligation to provide for advance rulings on classification matters.
4.256 The United States alleges that the EBTI system encourages "BTI shopping" and thus leads to
an increased risk of divergent BTIs. These US allegations are based on numerous misconceptions
about the EBTI system. The United States claims that the "holder or other applicant chooses the
member States to which it will make the application" . This is misleading. EC customs law does not
allow applicants to "pick and choose" the member State which will issue the BTI. According to
Article 6(1) of the Implementing Regulation, appl ications for BTI must be made either to the

competent authorities in the Member State or member States in which the information is to be used, or
to the competent authorities in the Member State were the applicant is established.
4.257 The United States also complains that a BTI "is not binding on the holder, in the sense that it
does not need to be invoked by the holder". Firs t, this is not entirely true. According to
Article 10(2)(a) of the Implementing Regulation, the customs authorities may require the holder,
when fulfilling customs formalities, to inform the cu stoms authorities that he is in possession of BTI
in respect of the goods being cleared through customs.
4.258 Second, the EC fails to see the practical relevan ce of this issue from the point of view of a
uniform BTI practice. The United States states that a person that has received unfavourable BTI in
one Member State "may ignore it, not apply for BTI in another State, and simply attempt to import
merchandise through another member State asserting the more favourable classification without
relying on BTI at all". This may be so, but the situation would be no different if no BTI had been
granted at all. BTI is granted for the benefit of th e holder. In the situati on described by the United
States, it would therefore be more natural for th e person which has received the unfavourable BTI to
challenge it, if it believes it to be wrong. Moreov er, there is no reason to assume that other EU
customs authorities will apply a different tariff classi fication than the one foreseen in the BTI, just
because the BTI is not invoked.
4.259 The US claim that an applicant may apply in one Member State and, if it is not favourable,
decline to invoke it and apply for BTI in another member State is wrong. According to
Article 6(3)(A)(j) of the Implementing Regulation, when applying for BTI, the applicant must indicate
whether, to his knowledge, binding tariff information for identical or similar goods has already been
applied for, or issued in the Community. Moreove r, Box 11 of the Standard BTI Application form
requires the applicant to declare whether he has a pplied or been issued wi th BTI for similar or
identical goods. The United States cannot here try to show deficiencies in the EC system by
constructing scenarios which are based on flagrant violations of EC rul es. In addition, Article 12(4)
CCC provides that BTI based on inaccurate or inco mplete information from the applicant shall be
annulled.
4.260 The United States argues that where divergent BTIs exist, the EC system does not provide for
sufficient mechanisms to correct these divergences. The scenario s and supposed difficulties which
the United States describes in detecting divergen t BTIs are largely theoretical. Classification
differences typically occur in cases where several h eadings potentially merit consideration, and the
choice between them is not entirely obvious. Such cases do not remain secret for long. It is the
customs authorities themselves which will first notice the difficulty, and if they do not, traders will
make them aware of it by challenging decisions wh ich they perceive as unfavourable to them. If a
challenge occurs, the question may be referred to the Court of Justice, which will ultimately lead to its
being clarified.
4.261 However, even before the Courts have been seized or have given judgment, frequently the
national customs authorities themselves will rais e the issue in the Customs Code Committee.
Alternatively, they may first seize the Commission of the matter, which may decide to bring it before
the Customs Code Committee.
4.262 Individual traders also frequently approach the Commission or member States authorities with
particular problems of customs classification, wh o can then decide to take the necessary action,
including raising the issue before the Customs Code Committee. In brief, difficulties in detecting
"hidden" divergent BTI are greatly exaggerated by the United States; experience in fact shows that
such divergences, if they have economic implications, do not remain hidden for long.

4.263 The EC also has the EBTI data base, which allows searches of all BTIs both by the public and
by the customs authorities. This data base is an important instrument of transparency in the EBTI
system. The EBTI database is very well received by traders and used frequently; in the first six
months of 2005, for instance, the average number of consultations per month was about 324.000.
4.264 The United States is wrong to argue that the search might be difficult because product
descriptions might vary. First, that product descriptions might vary is true, but this is hardly a barrier
to conducting a search. Searches of the public EBTI data base can be conducted using a variety of
parameters, and a careful targeting of criteria will yield results. Keywords are available in all official
languages of the EC. There is also a translation facility available to translate keywords into any of the
19 languages. Accordingly, language should not be a major difficulty in making searches.
4.265 Moreover, as the EC has also explained, there exists a version of the EBTI data base
accessible to the member States' customs authorities and the Commission. This data base allows
searches of BTI using additional parameters, incl uding notably the name and address of holder and
applicant. Moreover, this data base also allows searches of pending applications for BTI. Detailed
instructions for the EC customs authorities as to ho w to conduct searches have also been included in
the Administrative Guidelines on the EBTI system issued by the European Commission.
4.266 It is untrue that the EC has no means of detecting divergent BTIs. It is interesting to note that
the United States, in order to illustrate its clai m of a divergent classification practice regarding
blackout drapery lining has provided as an exhibit excerpts from the public EBTI data base. Thus, the
United States has itself disproved its claim that use of the EBTI data base is impossible.
4.267 The US criticisms of the judgment in decisi on of the Court of Justice in Case C-133/02,
Timmermans, are without merit. There is no reason to assume, as the United States does, that a
revocation of a BTI as allowed by the Court in Timmermans would lead to less uniformity. On the
contrary, a revocation may precisely be necessary in order to take into account that other customs
authorities have adopted a different classification prac tice, which is confirmed to be the correct one.
This in fact is precisely what happened in Timmermans, where the withdrawal of the BTI occurred
because "on a closer examination and in consulta tion with the customs authorities of a neighbouring
district concerning the interpretation of the app licable nomenclature, it had become apparent the
goods in question should be classified under" a different subheading. The same reasoning could also
have been applied if the divergence had arisen in relation to the practice of the authorities of another
Member State.
4.268 In any event, the Timmermans judgment does not primarily concern a question of uniform
application, but a question of legal security for th e trader. The Court of Justice held that the
legitimate interests of the trader were sufficiently protected by the provisions of Article 12(6) CCC,
which under certain conditions allow continued use of the BTI for a limited period of time. This is
not problematic under Article X:3(a) GATT.
Alleged divergences in EC classification practice

4.269 In order to support its claim, the United Stat es has referred to two cases in which the EC
allegedly has administered its laws in the field of tariff classification in a non-uniform manner.
However, both cases do not show any lack of uniformity in the EC's administration.
4.270 The first case of alleged divergences concerns the classification of Blackout Drapery Lining
(BDL). However, in this case, the goods examin ed by the German customs authorities were not
identical to those described in the BTI, since they were not flocked with a layer of textile flock.
Whether the product was flocked or not is an impor tant difference, which justifies the different
classification of the product. Accordingly, since th e United States has not shown that the products

were identical in the relevant r espect, the United States fails to s how that there is in fact any
inconsistency.
4.271 Moreover, the EC would like to recall that according to Article 12(3) CCC, the holder of BTI
must be able to prove that the good declared corre spond in every respect to those described in the
information. Goods as described in the decision of the German customs authorities would not appear
to fall under the description contained in the BTIs.
4.272 In addition, it should be noted that according to Article 6(3)(A)(d) of the Implementing
Regulation, it is the applicant which must provi de a detailed description of the goods permitting their
identification and the determination of their classifi cation in the customs nomenclature. In contrast,
the United States has not provided information as to whether samples were submitted to the
authorities issuing the BTI, and whether these samples were indeed identical with the ones that were
analysed by the German authorities.
4.273 Even if a mistake had occurred in the factual appraisal of the products, this does not mean that
there is a lack of uniformity in the application of EC customs law. In particular, if the importer in
question felt that the German authorities had erred in their appraisal of the good in question, he could
have appealed the decision of the Main Customs O ffice of Bremen before the Bremen Tax Court.
The United States has not provided information whethe r the importer in question has made an appeal.
If the importer has chosen not to appeal, then this ca nnot be used to claim a lack of uniformity in the
EC's system of customs classification. The EC would also note that neither the importer nor the
producer have ever brought the issue of classification of BDL to the attention of the European
Commission.
4.274 The administrative aids referred to by the lower German customs office contain nothing
contrary to Community law, and in any event is purely an interpretative aid prepared for
administrative purposes which does not in any way ha ve force of law, and does not derogate from
Community law. That handbooks, guidance or othe r compilations prepared by member States have
no legally binding character in Community law has been clarified by the European Court of Justice in
Binder.
4.275 Finally, it is not without interest to note that the United States has had its own difficulties in
classifying BDL, and has had to revoke previous classification rulings regarding BDL.
4.276 As regards the case of LCD monitors, the essen tial question is whether they are to be
classified as computer monitors or as video monitors . The correct classification of these monitors is a
relatively recent question which has arisen due to the increasing convergence of information
technology and consumer electronics. Many LCD mon itors, by virtue of their design and technical
characteristics, can serve both as a computer monitor and as a video monitor. It is therefore difficult
for customs authorities to establish on an objective basis the precise purpose for which a particular
monitor is intended.
4.277 In addition, there are a high number of different types of LCD monitors on the market. These
monitors differ in various aspects, including their size, the interfaces they possess and the signals they
can process, and their general design. To the exte nt that such features may have an impact on their
use, such differences between different types of monitors may also need to be taken into account.
4.278 The US claims that the EC does not ensure a uniform classification practice in respect of LCD
monitors must be regarded as unfounded. In fact , the EC institutions have kept this particular
classification issue under very close review from th e outset, and have taken the necessary measures to
ensure a correct and uniform classification practice in this respect.

4.279 The Customs Code Committee was seized of the issue for the first time in April 2004 and has
reviewed the situation at regular intervals since. Since the classification issue also requires technical
input from industry, the Committee also has, in accord ance with Article 9 of its Rules of Procedure,
heard representatives of the industry. At its meeting of 30 June to 2 July 2004, the Customs Code
Committee concluded that unless an importer can demons trate that a monitor is only to be used with
an ADP machine (heading 8471) or to be used as an indicator panel (heading 8531), it has to be
classified under heading 8528.
4.280 The allegation that the Netherlands wrongly classifies LCD Monitors as Video Monitors is
therefore misplaced. In principle, such a classifi cation is in line with the CN, as confirmed by the
Customs Code Committee. It must of course also be taken into account that the actual classification
of LCD monitors depends on the concrete monitor.
4.281 The EC institutions have taken further measures to ensure a uniform practice. The first such
measure is Council Regulation (EC) 493/2005 of 16 March 2005. The purpose of this measure is to
provide certainty about tariff treatment to the concerned importers through a suspension of duties for a
transitional period of time. From a practical purpose, the suspension of the duties fulfils exactly the
same purpose as that of a classification regulation, since it assures traders that, regardless of whether
the goods fall under heading 8471 or 8528, their goods will receive the same tariff treatment.
4.282 The US claim that the example of LCD Vide o Monitors shows that the Customs Code
Committee is inadequate to reconcile differences in member States interpretations is misplaced. The
Customs Code Committee has shown itself perfectly able to adopt the necessary conclusions, and it
continues to be involved in the continuous monitoring of the situation.
4.283 The EC has adopted another relevant measure , namely Regulation 634/2005, which classifies
LCD monitors of a particular type under headi ng 8528. Currently, the Commission keeps monitoring
the situation, and may adopt further classification regulations for LCD Monitors or other appropriate
measures as and when the need arises.
4.284 The US customs authorities have also found it difficult to properly classify LCD monitors.
For instance, in a ruling of June 3, 2003, US Cust oms 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
heading 8528 in application of General Interpre tative note 3(c), which foresees classification under
the heading which occurs last in numerical order.
4.285 Of the two cases which the United States has raised , neither shows any lack of uniformity in
the EC's administration of tariff classification. Both cases involve classification questions of a high
technical complexity, with which the United States has had its own difficulties. Accordingly, the
United States is far from having established any sign ificant pattern of non-uniformity in EC tariff
classification practice. On the contrary, the preceding discussion has shown that the EC customs
administration has the necessary mechanisms in place to ensure uniformity in tariff classification.
(ii) Customs valuation
The uniform administration of valuation rules in the EC

4.286 Valuation questions are regulated in Articles 28 through 36 of the CCC and in Articles 141 to
181 a of the Implementing Regulation, with further de tails being contained in Annexes 23 to 29 to the
Implementing Regulation. These provisions constitute an exhaustive regulation of customs valuation,
which overall does not leave room for discretion to member States' administration.

4.287 The EC rules are based on, and fully integrate, all the rules contained in the WTO Valuation
Agreement. According to the third preambular paragraph of the WTO Va luation Agreement, the
central objective of the WTO Valuation Agreement w as to "provide greater uniformity and certainty"
in the implementation of valuation rules. The EC wonders how the WTO Valuation Agreement can
achieve this objective if, as the US argues, it leav es "significant discretion" to WTO Members in the
valuation of goods for customs purposes.
4.288 There is no obligation under WTO law to ins titute a system of binding information for
valuation matters. Article X:3(a) GATT does not prescribe the specific ways in which WTO Member
must implement their customs laws. This is partic ularly obvious in the area of customs valuation,
which is governed by the WTO Valuation Agreement. If WTO Members had wished to provide for a
specific obligation to introduce or maintain system s of binding information on valuation matters, it
would have been natural to include such a an oblig ation in the Valuation Agreement. Further support
for this view comes from the fact that the US itsel f has, in the context of the Doha Negotiations on
trade facilitation, proposed to s upplement Article X GATT by creating an obligation to provide for
advance rulings on customs issues including customs valuation.
4.289 The case for binding valuation information as a to ol for ensuring uniformity is far less clear
than it is for binding tariff information. Speci fic goods do not change much over time, and are
certainly identical regardless of the place of import. On the other hand, customs valuation is based on
sets of data which can change from transaction to transaction, and from importer to importer. This
makes the matter of direct comparability between transactions, and importers, rather difficult.
Moreover, valuation data is of a relatively temporal nature, since sales contracts, prices and other
factors such as relationships between parties, and the details of royalty and licence fee agreements,
can change very frequently.
4.290 For these reasons, the content of binding va luation information would have to differ
considerably from the content of binding tariff in formation. In particular, unlike for tariff
information, where it is possible to provide in the abstract for the classification of a good
corresponding to a particular description, it is not po ssible to lay down in the abstract the value of a
good. Rather, binding information on valuation wo uld have to take on a much more nuanced and
specific character, focussing for instance on the char acterization of specific elements inherent in
certain recurrent transactions between the same parties.
4.291 Classification and valuation have inherent differences which mu st be taken into account.
Therefore, elements such as classification regula tions and binding tariff information are not easily
transposable to the area of valu ation. Instead, the Commission can carry out necessary clarifications
through amendments to the Implementing Regulati on. Such amendments can be seen as fulfilling a
function which is rather similar to that of cl assification regulations or EC explanatory notes.
Moreover, the Customs Code Committee, and in partic ular its valuation section, has a very important
role in the area of valuation, and has contributed to uniformity in particular by elaborating
commentaries and conclusions on numerous topical i ssues relating to the administration of valuation
rules.
4.292 The general mechanisms for providing for a unifo rm application of EC law also apply in the
area of customs valuation. First, if an individual trader feels incorrectly treated by a decision of a
member States' customs authority, he can bring an action against such decision before the member
States' court. If there is an issue of Community la w to be clarified, such question can, and in certain
circumstances must be, referred to the European Court of Justice. In this way, the Court of Justice has
clarified numerous issues of Community law in the area of customs valuation.
4.293
 Second, if the Commission finds that a member State applies Community provisions in the
field of customs valuation incorrectly, the Europ ean Commission can bring infringement proceedings

against such member State in accordance with Article 226 EC Treaty. There is no evidence
whatsoever that this system of administration do es not suffice to ensure a uniform administration of
EC valuation rules.
4.294 It is remarkable that the United States has never raised any problem regarding the
administration of EC valuation law in the WTO Committee on Customs Valuation, nor in the
Technical Committee. Moreover, not a single case h as ever been brought under the DSU against the
EC for a violation of the WTO Valuation Agreement.
Report 23/2000 of the EC Court of Auditors
4.295 The Court of Auditors is an institution which, through its examination and reporting activity,
equally contributes to the uniform application of Community customs law. Therefore,
Report 23/2000 is evidence for the ability of the EC system to detect difficulties wherever they occur.
4.296 Report 23/2000 is only th e expression of the views of one EC institution, which are not
necessarily shared by other institutions, or by the EC as a whole. Moreover, it is clear that the Report
of the Court of Auditors also contains certain political and technical judgments, which cannot
necessarily be assumed to be correct.
4.297 The objective of the Court of Auditors is to ensure the optimal collection and utilization of the
Community's own resources. This is entirely unrelated to the question of whether the EC is compliant
with Article X:3(a) of the GATT. Therefore, it ca nnot simply be assumed, as the United States seems
to do, that a criticism made by the Court of Aud itors in its Report translates into a violation of
Article X:3(a) GATT.
4.298 Report 23/2000 relates to a set of facts as examined by the Court in 1999-2000. It is striking
that the United States in its First Written Submissi on never asks the question as to what the EC might
have done in order to address the criticisms or suggestions raised by the Court of Auditors. As the EC
will show, the EC has in fact systematically wo rked through the issues raised by the Court of
Auditors, and wherever necessary ta ken the measures to ensure uniformity. A clear example for this
is the adoption of Commission Regulation 444/2002, which now clarifies the issue of warranties.
Even to the extent that any lack of uniformity actually existed, it cannot therefore be assumed that
such situation continues to exist today.
4.299 The Report of the Court of Auditors is a highl y synthetic document, which reflect the results
of a number of audits carried out by the Court at the time. Consequently, the conclusions in the
Court's report are of a certain leve l of generality. For this reason also, they are not adequate for
addressing the question of the EC's compliance with its obligations under Article X:3(a) GATT.
4.300 Accordingly, the United States should not be a llowed to rely on the Report of the Court of
Auditors, but rather be required to establish its prima facie case. In any event, Report 23/2000 of the
EC Court of Auditors does not show that the EC is in any way non-compliant with its obligations
under Article X:3(a) GATT.
The Reebok case
4.301 The only concrete example that the United Stat es provides in support of its allegation of non-
uniform administration of EC valuation rules is a case concerning Reebok International Limited
(RIL). However, this case does not support the US cl aim that the EC fails to administer its valuation
laws in a uniform manner.

4.302 The case, which is relatively complex, is curre ntly being examined by the Commission.
Moreover, the Commission submitted the issue to the Customs Code Committee (Valuation Section),
where it was discussed at two instances in Oct ober and December 2004. On the basis of the
information which had been submitted by RIL, the Committee did not establish any incompatibility
with EC law, or lack of uniformity between EC member States.
4.303 In any event, the EC notes that if the Span ish customs authorities had erred in assessing the
conditions of Article 143(1)(e) of the Implementing Regulation, RIL can appeal this decision before
the competent Spanish courts, and such an appeal is currently pending. If there are questions of
Community law arising, such questions can then be referred to the Court of Justice via a request for a
preliminary ruling.
4.304 Overall, the Reebok case provides any support fo r the US allegation that the EC fails to
administer is customs valuation rules in a uniform manner. The EC institutions have taken the
necessary action in response to the concerns of Ree bok. Moreover, and appeal is currently pending.
The Customs Code Committee is not a substitute for the normal appeals mechanisms before the
national courts.
(iii) Processing under customs control
4.305 The US claim that the UK authorities apply tests that go beyond the requirements of
Community law in respect of processing under customs control is wrong. The UK requirements are
exactly the same two laid down by Article 133(e) CCC.
4.306 Article 502(3) of the Implementing Regulation repe ats the first part of the sentence and this
has to be considered as an abbreviated reference to the requirements laid down in Article 133(e) CCC.
It cannot be otherwise considering that this Regul ation, which has been adopted by the Commission,
is implementing legislation and cannot modify the requirements laid down by the CCC.
4.307 Indeed, both documents, the CCC and the UK gui dance, require the same two conditions
(amongst others) for the granting of an authoriza tion for processing under customs control, which are
named as "economic conditions. Furthermore, it is wo rth noting that, contrary to what the US states,
the French "Bulletin officiel des douanes" also refers to the test relating to the absence of harm to
competitors in the EC. The US claim on Article X: 3(a) is not founded in relation to processing under
customs control.
(iv) Local clearance procedure
4.308 The US presentation is flawed in that it does not differentiate between the three steps of the
summary declaration, the local clearance notificatio n and the supplementary declaration. All goods
brought into the EC customs territory have to be presented to customs and the summary declaration is
the act by which this presentation is formalized. The lodging of the summary declaration is, therefore,
not a formality which is part of the local clearance procedure. Moreover, contrary to the US claims,
all these declarations may be lodged either under a paper-based or an electronic procedure.
4.309 Due to this confusion between the general obligations stemming from border crossing and
those attached to LCP, the description of the situation in the UK in the US First Written Submission is
inaccurate and does not correspond to the actual situation in this Member State.
4.310 In relation to the customs involvement prior to release, the fact that, at the frontier, anti-
smuggling and admissibility checks are made electronically does not mean that there is no
involvement of customs. Moreover, if the goods do not fulfil these checks, there will be a customs

action (physical check, seizure…). It is therefore wr ong to state that there is no customs involvement
prior to release in the UK.
4.311 Concerning the requirements after release, th e United States makes a misleading description
of the use of electronic clearance systems versus pa per-based systems. Both systems can be used in
all member States. As far as LCP is concerned, detailed Community rules for paper-based clearance
can be found in Articles 263 to 267 of the Implementing Regulation. Where the clearance system
used is electronic, additional rules are applicable and can be found in Articles 4(a) to (c) and
Articles 222-224 of the same Regulation.
4.312 As regards supporting document requirements, a ll EC member States apply identical rules.
The issue raised by the United States concerni ng the valuation form "DV1" again stems from a
confusion, since all member States allow operators having regular trade flows with the same suppliers
to submit only once the relevant DV1 together with the initial application to benefit from LCP.
4.313 In relation to the document retention require ments, the information on the Netherlands
provided by the United States is wrong. Moreover, Article 16(1) CCC provides that the requisite
documents shall be retained for a minimum period of three years, but leaves member States the
possibility to stipulate longer periods taking into account their general administrative and fiscal needs
and practices. The resulting time-frame differences between the EC member States for which the
United States submits evidence are not fundamental. Besides, the EC has already explained above
that Article X:3(a) GATT concerns the administration of customs laws, not the customs laws
themselves and this provision does not impose an ob ligation to harmonize legislation within a WTO
member.
4.314 In addition, in the light of the GATT Panel in EEC – Dessert Apples , the EC considers that
any such differences are not substantial in natu re and do not entail a lack of uniformity in the
application of customs laws contrary to Article X:3(a) GATT.
(v) Penalties for violations of customs law
4.315 The US claim that the EC violates is obligati ons under Article X:3(a) GATT by not providing
for a uniform administration of penalties for violati ons of customs laws must fail for three reasons.
First, penalty provisions are not covered by Article X:3(a) GATT. Second, Article X:3(a) does not
require the harmonization of member States' pena lty provisions. Third, EC law does ensure a
sufficient degree of uniformity of member States' penalty provisions.
4.316 The obligation of uniform administration in Article X:3(a) GATT applies only to the
administration of the laws referred to in Article X:1 GATT. In this respect, it is necessary to
distinguish between the customs laws themselves, and the provisions which set out the nature and
level of the penalty applicable for a violation of su ch laws. This is regardless of whether the penalty
is criminal or administrative in character, or whether it involves a fine, a prison term, or another
sanction. Therefore, penalty provisions, which pr ovide for a sanction in the case of a violation of a
provision of customs laws, are not themselves custom s laws. It must also be noted that the imposition
of sanctions concerns illegal behaviour, i.e. it concerns illegitimate actions rather than legitimate
trade, which is the focus of Article X:3(a) GATT.
4.317 Moreover, Article X:3(a) GATT concerns only the administration
 of customs laws, not the
substance of the customs laws themselves. This means in particular that Article X:3(a) GATT does
not create an obligation to harmonize laws which ma y exist within a WTO Member at the sub-federal
level. It merely requires that such laws be admini stered uniformly within the territory in which they
apply.

4.318 The penalties applicable for violations of custom s laws are set out in the national laws of the
member States, which of course must respect the pr inciples set out by Community law. Accordingly,
it is not the administration of penalty provisions wh ich varies within the EC; it is the laws themselves
which are different, albeit within the limits set by Community law.
4.319 The United States has not shown that the admini stration of those penalty provisions varies
within the member States which have adopted them. Rather, the United States is effectively requiring
a harmonization of penalty provisions within the EC. Article X:3(a) provides no legal basis for such a
claim.
4.320 The European Court of Justice has develope d clear guidelines for penalty provisions for
violations of EC customs law, which must be effective, proportionate, and dissuasive. These
principles have also been confirmed by the Council of the European Union.
4.321 Contrary to the US submission, in Andrade, the Court confirmed that member States cannot
act freely when laying down penalty provisions, but must ensure that the penalty is effective,
proportionate and dissuasive. In other words, memb er States are limited in two directions. They
cannot lay down penalties which are excessively sev ere and therefore violate the principle of
proportionality. On the other hand, they cannot lay down penalties which are so lenient that they have
no dissuasive effect and therefore do not ensure the effective application of Community law.
4.322 These fundamental principles are sufficient to ensu re uniformity in the application of customs
laws. This is also confirmed by Article V III:3 GATT, which specifically addresses the issue of
sanctions for violations of customs regulations , by merely laying down minimum standards of
proportionality.
4. The US claim under Article X:3(b) GATT
(a) The requirements of Article X:3(b) GATT
4.323 Article X:3(b) GATT requires the WTO member s to have tribunals or procedures of a
judicial, arbitral or administrative nature with th e main purpose of reviewing and correcting promptly
administrative decisions in customs matters. There ar e, therefore, four conditions laid down in the
provision: the material scope of the control (adminis trative decisions in customs matters), its nature
(tribunals or procedures of a judicial, arbitral or administrative nature), its purpose (review and
correction), and a time requirement principle (promptness).
4.324 In relation to the nature of the control, the pr ovision allows a certain margin of discretion to
the WTO members. The control may consist not onl y in tribunals but also in procedures, which
implies that there is no obligation to create a separa te body to ensure the control. Furthermore, the
nature of the control may be not judicial but also ar bitral or administrative. But what is particularly
important in our case is that Article X:3(b) refers to each of these controls in plural: WTO members
are obliged to have "tribunals or procedures" not "a tribunal" or "a procedure". The Spanish and
French versions of the provision also use the equivale nt terms in plural. This clearly allows the WTO
members to have several tribunals, each of them covering a part of its geography and being competent
for the review of the administrative decisions taken by their different customs offices.
4.325 Finally, the Appellate Body's interpretation of Article X GATT in EC – Poultry and EC –
Bananas III further supports that this provision does not impose any specific structure for the review
system (specific type of courts or procedures, number of instances, degree of centralization of the
review system…).

4.326 The EC may also comply with its obligation under X:3(b) through the courts of its member
States, as it has al ready been recognized by the Panel in EC – Trademarks and Geographical
Indications (US). The reasoning of this Panel does not only apply to the executive authorities, but
also to the judicial authorities of the member States when they apply and interpret Community law.
4.327 As to the time requirement, Article X:3(b) GATT requires a "prompt review and correction"
(emphasis added). Though the three linguistic versions of Article X:3(b) do not have exactly the same
meaning, all of them have a common denominator: the period of time to review a customs decision
has to be reasonably short. To be more precise on this question will certainly require making an
analysis on a case by case basis.
4.328 The EC does not agree with the US argument that the relevant context for the interpretation of
Article X:3(b) GATT includes the immediately preced ing subparagraph in the paragraph in which the
obligation at issue appears, and that therefore th e decisions of the tribunals or procedures must
provide for the review and correction of customs matters for the EC as a whole, not just within limited
geographical regions within the EC. Subparagraphs (a) and (b) lay down different obligations: one of
uniform administration, the other on remedies. From a legal point of view, Article X:3 GATT does
not make any link between both subparagraphs, whic h should, therefore be considered as separate
obligations.
(b) The EC provides for prompt review of customs decisions
(i) The claim regarding the absence of an EC customs court
4.329 The United States affirms that the EC fails "t o provide for an EC court […] to which a
member State customs decision can be promptly app ealed". This is clearly wrong. Article X:3(b)
GATT does not require a central court or procedure to appeal administrative decisions in customs
matters. There is no obligation under the GATT for the WTO members to establish a court similar to
the US Court of International Trade. Decisions of the member States' customs authorities, which are
based on EC law, are reviewed by the national cour ts and tribunals acting as the ordinary judges for
EC law. Customs decisions adopted by the EC ins titutions are reviewed by the Court of Justice (and,
in some cases, by the Court of First Instance) through direct actions or preliminary rulings on validity.
There is, therefore, a complete system of judicial protection in place.
4.330 Furthermore, the US analysis of the review system established by the EC and its member
States relies on an erroneous interpretation of Article X:3(b), which is based on the existence of a link
between this provision and Article X:3(a). However, there is no such link. Assuming, ad arguendo,
that there were a link between those two provisions , the US analysis would be partial and biased
because it does not take into account the EC mechan isms to ensure uniform administration in the
customs sector.
4.331 The Bantex decision mentioned by the United States shows the artificial analysis made by the
United States. In the absence of a real problem in the EC remedies system, the United States relies on
an individual case and tries to transform it into a systemic problem by relying on two hypotheses ("if
another member State's authorities had correctly classified Bantex's products" and "if a trader in
Bantex's position invokes the United Kingdom BTI in th e territory of another member State"). None
of these two situations have occurred in Bantex and, therefore, the US arguments have to be rejected
as not based on real facts.
4.332 On the contrary, the final outcome of the Bantex case shows that EC legal remedies ensure
uniform administration in customs matters. Following the UK High Court judgment, the HM
Customs and Excise decided on 23 March 2004 to revoke the BTIs on the basis of
Articles 12(5)(a)(iii) and 9 CCC and in the light of the Judgment of the Court of Justice in

Timmermans. This case proves that preliminary rulings gi ven by the Court of Justice are taken into
consideration by national authorities other than those directly involved in the specific case. It also
shows that the Timmermans Judgment in fact contributes to the uniform administration of EC law.
4.333 The United States misunderstands the EC system when it claims that "at the top of the
structure for reviewing customs authorities' administration of EC customs law is the ECJ". This is not
correct. The European Court of Justice does not re view national customs administrations decisions.
On the contrary, as we have already explained sever al times, it helps the national courts in such a
review through the preliminary ruling procedur e. This procedure is based on a cooperation
relationship between the Court of Justice and national courts, not on a hierarchical one.
(ii) Promptness in the review
4.334 The US First Written Submission provides no arguments for why customs decisions are
appealed before the national courts of the EC memb er States in a manner that cannot be qualified as
"prompt". The only argument of the United States is that "the time periods for first instance reviews
conducted by member State customs authorities can vary widely", for which purpose it compares the
time period for administrative reviews in three memb er States. Three other eventual divergences
between member States are mentioned in the US First Written Submission but the United States
neither develops these allegations in its argumenta tion nor provides representative specific examples
in the member States mentioned.
4.335 The EC recalls, first, that the burden is on the United States, as complainant, to make a prima
facie case in support of its position, and that, therefore, this burden cannot be shifted on the EC, as
respondent, by using the tactics of making general and unsubstantiated assertions.
4.336 In relation to the time periods for first instance administrative reviews conducted by member
State customs authorities, the only US claim is that they vary widely in the three member States
mentioned above. Again, the United States does not gi ve the reasons to conclu de that the three time
periods do not comply with the Article X:3(b) GATT requirement for a "prompt" review. Differences
as to time periods are not contrary to that pr ovision, which does not impose the obligation on the
WTO to harmonize time periods in administrative, judicial or arbitral reviews of customs
administrative decisions. A different interpretation would be contrary to the intrinsic nature of
Article X GATT, which is a provision, as it is spelled in its heading, on publication and administration
of trade rules, not on their contents.
C.
FIRST ORAL STATEMENT OF THE UNITED STATES
4.337 In its First Written Submission, the United States demonstrated that the European
Communities fails to administer its customs laws in the uniform manner required by Article X:3(a) of
the GATT. The United States also demonstrated th at the EC fails to provide the tribunals or
procedures for the prompt review and correction of administrative action relating to customs matters
that Article X:3(b) of the GATT requires.
4.338 The EC responded to the US claims in part by re-casting them, incorrectly, as either broad-
based attacks on European federalism or narrow comp laints about the particular outcomes of specific
cases. To the extent that the EC confronted the US arguments directly, its responses appeared to fall
into five categories: (1) that Article X:3(a) is a narrow provision setting out "minimum" obligations;
(2) that material divergences in member State administration of customs laws do not occur or are
systematically reconciled when they do occur; (3) that various principles, instruments, and institutions
in the EC ensure the uniform administration that Article X:3(a) requires; (4) that where certain
material differences admittedly exist among member State practices, these differences do not concern
administration of customs law at all but, rather, matters of general member State administrative law;

and (5) that, with respect to Article X:3(b), the EC fu lfills its obligation by virtue of the fact that each
member State provides a separate forum for review of customs administrative decisions.
4.339 The claims of the United States are straightforwar d. Both claims stem from the fact that the
EC, as a Member of the WTO in its own right – as distinct from its constituent member States – is
bound by the obligations set forth in Articles X:3(a) and X:3(b). With respect to Article X:3(a), the
EC provides for the administration of its customs la w by each of its 25 member States while failing to
ensure that the member States administer that law uniformly. That divergences among the member
States occur is undeniable. This fact is admitte d by the EC even in its own Written Submission.
Outside the context of this dispute, it has been ac knowledged by EC officials and has been a constant
complaint of traders. The claim of the United Stat es is that no EC institution systematically provides
for the reconciliation of such divergences, so as to achieve the uniformity of administration required
by Article X:3(a).
4.340 The US Article X:3(b) claim is that the EC fa ils to provide any forum for the prompt review
and correction of administrative action by member State customs authorities. While review is
provided for under the laws of individual member States, that review does not meet the EC's
obligation under Article X:3(b). Fragmentation of review, on a member State-by-member State basis,
is not consistent with Article X:3(b). That obligatio n must be interpreted in light of its context, which
includes Article X:3(a).
4.341 The issues raised by these claims are not new. C ontrary to the EC's suggestion, this dispute is
not the first time the United States has raised these issues with the EC. In fact, the United States has
raised these issues routin ely in the context of EC trade policy reviews since 1997. The United States
also has raised these issues in other WTO and b ilateral settings. The United States has decided to
pursue its claims through dispute settlement precise ly because the underlying problems persist despite
its efforts to address them in other fora.
4.342 It is important to make clear what this dispute is not about. The United States complaint is
not that the very decision to retain competence ove r customs administration in the hands of member
State authorities is per se inconsistent with the obligation of uniform administration under
Article X:3(a). The US complaint is that because the retaining of competence over customs
administration in the hands of member State author ities is not coupled with the systematic reconciling
of divergences among member State authorities, it is inconsistent with the obligation of uniform
administration under Article X:3(a). The EC is not subject to a lower requirement of uniform
administration than every other WTO Member simply by virtue of its "executive federalist" structure.
4.343 Just as this dispute is not about the EC's ri ght to adopt an executive federalist form of
government, it also is not about the particular decisions of individual member State authorities in
particular cases. In its First Submission, the United States set forth a number of illustrations to
demonstrate the lack of uniform administration of customs law in the EC. In its First Submission, the
EC treats these cases not as illustrations but as actual ma tters in dispute. The US argument is not that
any particular good should be classified or valued one way or another. Rather, the argument is that
the system for administering customs law in the EC does not ensure the uniformity that Article X:3(a)
requires.
4.344 In its First Submission, the United States iden tified the obligation of uniform administration
in Article X:3(a) and explained the scope of th at obligation applying customary rules of treaty
interpretation of public internati onal law. In particular, the Unit ed States considered the ordinary
meaning of the operative terms in Article X:3(a) in their context and in light of the object and purpose
of the GATT 1994. Applying this rule, the United St ates identified the relevant question as whether
the EC manages, carries on, or executes its customs law in a manner that is the same in different
places or circumstances, or at different times. The United States also discussed the report of the panel

in Argentina – Hides and Leather , which confirmed this understandi ng of the concept of uniform
administration.
4.345 In its First Submission, the EC entirely avoids the ordinary meaning of the operative terms of
Article X:3(a). Tellingly, its discussion under the he ading "The meaning of 'uniform administration'"
does not actually discuss the meaning of "uniform administration." Instead, it discusses supposed
limitations on the obligation of uniform administrati on. Thus, the EC asserts that the obligation of
uniform administration must be qualified by "practical realities," that "a minimum degree of non-
uniformity is de facto unavoidable," and that "uniformity can be assessed only on the basis of an
overall pattern of customs administration."
4.346 Not only does the EC's explanation of "uniform ad ministration" fail to come to grips with the
ordinary meaning of those words, but the limitati ons that it posits would effectively render the
obligation of uniform administration meaningless. For example, the EC suggests a limitation of
"practical realities," but identifies no standard by wh ich 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).
4.347 Moreover, the EC's contention that non-uniformity is impermissible only when it amounts to
a pattern
 of non-uniformity is entirely misplaced. The EC draws this proposition from two reports
that are not at all on point. First, it purports to rely on the Appellate Body's report in EC – Poultry .
However, the relevant issue there was not the meaning of "uniform administration," but rather, the
applicability of Article X at all to a particular im port license issued with respect to a particular
shipment.
4.348 Similarly, in the panel report in US - Hot-Rolled Steel on which the EC relies, the panel did
not reach the question of what "uniform administ ration" means. As is clear from the sentence
immediately preceding the extract on which the EC re lies, the relevant issue was "whether the final
anti-dumping measure before [the panel] in [that] dispute can be considered a measure of 'general
application.'"
4.349 More importantly, neither of the reports from which the EC seeks support concerned the issue
presented by this dispute, wh ich is lack of geographical
 uniformity in administration of a Member's
customs laws. Whatever the relevance of show ing a pattern of non-uniformity may be in other
contexts, the EC has failed to demonstrate its re levance to establishing a breach of Article X:3(a)
based on geographical non-uniformity.
4.350 The EC's other arguments attempting to narrow the obligation of uniform administration are
similarly flawed. For example, the EC charact erizes as "highly important for the present case" the
distinction between the substance of customs laws and their administration. The significance the EC
apparently attaches to this distinction is that differences among member States' laws – as, for example,
in the area of penalties – are beyond the purview of Article X:3(a), as they are differences of
substance rather than differences of administration.
4.351 The problem with this argument is that it ig nores the different forms that administration can
take. It assumes that laws cannot be instruments that administer other measures. That assumption,
however, is plainly incorrect. Customs laws may be administered through instruments which are
themselves laws. This is the case with respect to penalty laws, which are instruments for
administering customs laws by enforcing compliance with those laws. To the extent different EC
member States use different penalty measures to enforce compliance with EC customs laws, they
administer EC customs laws non-uniformly.

4.352 This latter observation is suppor ted by the panel report in Argentina – Hides and Leather . In
that dispute, the EC had challenge d as inconsistent with Article X:3( a) an Argentinian measure that
provided for private persons to be present during th e customs clearance for export of certain goods.
Argentina defended in part on the ground that the EC really was complaining about the substance of a
measure rather than its administration. In reje cting Argentina's argument, the panel stated: "Of
course, a WTO Member may challenge the substan ce of a measure under Article X. The relevant
question is whether the substance of such a measure is administrative in nature or, instead, involves
substantive issues more properly dealt with under other provisions of the GATT 1994. . . . If the
substance of a rule could not be challenged, even if the rule was administrative in nature, it is unclear
what could ever be challenged under Article X. . . ."
4.353 Likewise, in the present dispute, the line the EC draws between substance and administration
would render Article X:3(a) meaningless. By characterizing all laws, regulations, and rules pertaining
to customs matters as substantive measures, the EC would put all laws, regulations, and rules that are
instruments of customs administration beyond the reach of the disciplines Members have agreed to in
Article X:3. It defies logic to suggest that a GA TT obligation can be eliminated simply by virtue of
such characterization.
4.354 In its second line of argument, the EC challeng es the proposition that in the administration of
customs law, divergences among member State authorities occur and are not systematically reconciled
by the EC. In our First Submission, we demonstr ated this point through evidence of the EC's own
admissions, statements by traders, and illustrations of particular cases in which divergences have
occurred. The EC's response does not rebut this evidence.
4.355 When it comes to admissions by the EC or EC o fficials, the EC does not deny the truth of the
statements asserted. At most, it belittles them. For example, a statement by the EC's Commissioner
for Taxation and Customs Union recognizing that the Community Customs Code "may result in
divergent application of the common rules" is su mmarily dismissed by the EC as "reflect[ing] the
ongoing process of reform and review of EC customs la w." Statements by the EC's Court of Auditors
identifying systemic problems in reconciling diverg ent administration of customs valuation laws are
similarly tossed aside as "the expression of the views of one EC institution." Admissions by the EC in
the context of another recent dispute – European Communities – Customs Classification of Frozen
Boneless Chicken Cuts – regarding institutional difficulties in monitoring divergences in binding tariff
information issued by different member States are not acknowledged at all.
4.356 Unlike the EC, the United States finds statements by EC institutions and officials highly
relevant to the matter at hand. These statements are blunt acknowledgments of how the system of
customs law administration operates by persons who are in positions to have the information and
experience to know. The cumulative message that there is a problem of divergent administration and
no mechanism to systematically reconcile divergences is undeniable.
4.357 Nor is the EC's treatment of the illustrativ e cases cited by the United States any more
effective at rebutting this point. For example, in its First Submission the United States laid out an
illustrative case concerning divergent classification of LCD monitors. The United States noted that a
regulation by the Council of the European Union susp ended duties on a subset of such monitors, but
that member States continued to apply different clas sifications to other monitors. In particular, the
United States noted that the Netherlands continues to classify monitors with a diagonal measurement
of greater than 19 inches as video monitors, whereas other member State classify them as computer
monitors. The EC's terse response is that the classification by the Dutch authorities "is in line with the
CN, as confirmed by the Customs Code Committee."
4.358
That response is quite revealing for at least three reasons. First, it does not deny the
divergence among member State authorities on this matter. Second and relatedly, by characterizing

the Dutch classification as "in line" with the CN, the EC suggests that more than one classification
may be "in line" with the CN. But this is precisely the point of the illustration: Where more than one
classification is "in line" with the CN, the EC does not provide a mechanism for systematically
reconciling different classifications adopted by different member State authorities. Third, the
Customs Code Committee conclusion with which the Dutch classification supposedly is "in line" is
not itself in line with the relevant Chapter Note from the Common Customs Tariff. Specifically, the
Committee conclusion would prohibit a monitor from be ing classified as a computer monitor (under
Tariff heading 8471) unless an importer can demonstrate that it is "only
 to be used with an ADP
machine" – a computer machine. However, under th e relevant Tariff chapter notes, a monitor may be
classified as a computer monitor if "it is of a kind solely or principally used in an automatic data-
processing system." It hardly is conducive to uniform administration for member State authorities to
have to reconcile notes to the Common Customs Tariff that say one thing and a Customs Code
Committee conclusion that says something entirely different.
4.359 To take another example, in its First Subm ission the United States described the illustrative
case of differential administration of EC valuation rul es with respect to Reebok International Limited.
The United States described a situation in which different member State authorities have reached
different conclusions as to whether RIL's contr acts with non-EC suppliers establish a control
relationship for customs valuation purposes, and EC institutions have not rec onciled the divergence.
The EC dismisses this case as "relatively comple x" and states without explanation that, upon its
consideration of the matter, the Customs Code Co mmittee "did not establish any incompatibility with
EC law, or lack of uniformity between EC Member States." Then, the EC goes on to state that "the
Customs Code Committee is not a substitute for th e normal appeals mechanisms before the national
courts."
4.360 This response is notable for at least two reas ons. First, the EC does not deny the essential
facts as described in the US First Submission. It merely calls them "complex" and states that the
Customs Code Committee found no lack of uniformity. Second, in stressing that "the Customs Code
Committee is not a substitute for the normal appeals mechanisms before the national courts" the EC in
effect reinforces the crux of the US argument: There is no EC mechanism for ensuring uniform
administration. In any case, in numerous other parts of its First Submission, the EC readily
acknowledges that divergences among member States exist.
4.361 In its third line of argument, the EC challeng es the proposition that there is no EC mechanism
to ensure uniform administration of EC customs la w. In its First Submission, the United States
demonstrated that customs law in the EC is admini stered by 25 different member State authorities,
that this results in divergences of administration, and that no EC institution exists to systematically
reconcile those divergences. To demonstrate this last point, the United States focused on the role of
the Commission and the Court of Justice in matters of customs administration. The United States
focused on these two institutions, because the EC ha d asserted to the DSB that it was through the
operation of these two institutions that uniform admi nistration is enforced. The United States showed
that neither institution functions in a way that results in uniform administration. Its discussion of the
role of the Commission logically led the United States to focus on the Customs Code Committee
which, as the EC acknowledges, "is an integral part of the Community's regulatory process."
4.362 Because of the integral part played by the Committee, it is important to understand how the
Committee functions. The United States demonstr ated that various aspects of the Committee's
operation make it ineffective as a mechanism to syst ematically bring uniformity to the administration
of customs law. These include the absence of any right for a trader affected by a member State's
administration of the law to petition the Committee and the difficulty of obtaining answers to
technical questions of divergence in member St ate customs administration where those answers
require the support of qualified majorities of 25 member State representatives.

4.363 With respect to the ECJ, the United States dem onstrated that limitations on the ability to get
questions reviewed by the ECJ, procedural hurdles that must be passed before doing so, and the time
it takes to get questions answered by the ECJ make this institution, too, an ineffective mechanism to
systematically bring uniformity to the administration of customs law.
4.364 The EC challenges the US understanding of the operation of EC law and institutions,
contending that in seeking to id entify EC mechanisms that ensure uniformity of administration the
United States has focused inappropriately on th e Customs Code Committee and given inadequate
attention to principles of EC law as well as EC in stitutions and instruments of administration. The
main problem with this argument is that, on closer inspection, the individual elements that the EC
describes as contributing to uniform administration do not add up to a mechanism that systematically
leads to uniform administration where administration in the first instance is the responsibility of 25
different member State authorities.
4.365 For example, the EC refers to the existence of detailed substantive laws. But, detailed
substantive laws surely do not themselves ensure uniform administ ration. Indeed, the EC itself
stresses the distinction between substance and admi nistration. Moreover, the cataloging of divergent
administration in the EC Court of Auditors report on customs valuation (Exhibit US-14) demonstrates
that detailed laws are not themselves a substitute for uniform administration.
4.366 In other instances, the mech anisms the EC identifies represent an ideal of uniform
administration to which the EC aspires. For instance, the EC refers to the "duty of cooperation" in
Article 10 of the EC Treaty. It also attaches importance to the principles of supremacy and direct
effect as doctrines that are "essential for the effec tive and uniform application of Community law."
However, it cannot be assumed that by virtue of the duty of cooperation or the doctrines of supremacy
and direct effect uniformity of administration necessarily is achieved. Indeed, these principles do not
answer the question of what happens when EC law itself permits more than one manner of
administration.
4.367 Another instrument for achieving uniform admini stration that the EC describes is the ability
of traders to address matters of concern to the Co mmission or to member State representatives, which
may or may not, in turn, address them to the Customs Code Committee. As the EC itself
acknowledges, the Commission and member State representatives are under no obligation to bring
any given matter before the Committee.
4.368 The EC also emphasizes the role of appeals to national courts, with the possibility of
preliminary references to the ECJ, as a means of ensuring uniform administration. Where a trader
encounters a lack of uniform administration, its rec ourse is to appeal one or more of the divergent
actions to a national court which (unless it is a cour t from which there is no recourse) may or may not
make a preliminary reference to the ECJ. Even if the court does make a preliminary reference to the
ECJ, the matter still may take years to decide.
4.369 In short, where a trader detects a lack of unifo rm administration it has no right to appeal to an
EC institution to correct the lack of uniformity. In stead, it must proceed through "the normal appeals
mechanisms before the national courts" in the hope that this may lead eventually to an elimination of
the non-uniformity. The proposition that the norma l appeals mechanism is a key instrument of
uniform administration is notable for at least th ree reasons. First, litigation is a particularly
cumbersome tool to achieve the day-to-day operational uniformity of administration that
Article X:3(a) contemplates. Second, the EC's cont ention in this regard is at odds with its separate
contention – in discussing the US Article X:3(b) clai m – that the obligation of uniform administration
and the obligation to provide remedies from admini strative action are discrete obligations without any
inherent link to one another. Here, the EC suggests that they are inherently intertwined. Third, the
EC's emphasis on the normal appeals mechanisms leaves open the critical question of what happens if

a national court or, eventually, the ECJ finds that both the administrative action appealed and the
divergent administrative action to which it is compared are consistent with the applicable provision of
EC customs law. In other words, the EC does not, and cannot, contend that lack of uniformity itself is
grounds for appeal from and correction of administrative action. Thus, the emphasis the EC places on
a trader's right to pursue the "normal appeals mechanisms" does not really answer the question of how
non-uniformity is eliminated when EC law permits two or more non-uniform measures to co-exist.
4.370 In a similar vein, the EC's reference to the Commission's power to bring infringement
proceedings against member States that violate EC law is of little relevance. It may be that there are
instances in which a divergence in administration of EC law is so extreme as to give rise to an
infringement proceeding. But, this extraordinar y tool hardly serves to achieve uniformity of
administration where divergent practices do not give rise to breaches of EC law.
4.371 In short, a large part of the EC's argument is devoted to painting a picture of customs law
administration in the EC in which various instrume nts combine to ensure uniformity. But, when
looked at closely, the elements of that picture do not add up to a mechanism that provides for the
systematic reconciliation of divergences among member State customs authorities. What is glaringly
absent from this picture is any EC mechanism to systematically reconcile divergences in member
State administrative actions.
4.372 The EC's fourth line of argument is that certa in divergences in member State practice – in
particular, penalty provisions and audit procedures – are not really matters of administration of EC
customs law at all. It characterizes such matters as part of the general administrative law of individual
member States. It follows, according to the EC 's reasoning, that the EC has no Article X:3(a)
obligation with respect to these matters. The only Ar ticle X:3(a) obligation applies to the particular
member States in which the laws at issue apply, according to the EC.
4.373 By the EC's logic, one could define away almo st any obligation under Article X:3(a). Where
a divergence in administration takes the form of di fferent measures applicable in different regions
within a Member's territory, the Member could la bel the measures as substantive law rather than
instruments of administration of customs law and thus avoid the obligation of Article X:3(a) entirely.
The panel in Argentina – Hides and Leather saw through and rejected a similar argument.
4.374 The EC's argument in this dispute is even more troubling than the argument that the panel
rejected in Argentina – Hides and Leather , because the EC is suggesting that the obligation of
uniform administration does not necessarily extend to the limits of each WTO Member's territory.
The obligation is mutable, according to the EC. Fo r any given law being administered, it applies only
to the limits of the territory covered by that law. By this logic, there is no obligation of uniform
administration from region to region or even from locality to locality.
4.375 This argument has no basis in Article X:3(a). That Article applies to "each Member." Like
other GATT obligations, the obligation of uniform ad ministration is an obligation on the Member. It
is not a separate obligation on each individual region or locality within the Member's territory. Were
it otherwise, any instance of geographical non-unifo rm administration could be argued away simply
by sub-dividing the Member's territory and tr eating each sub-division separately for purposes of
Article X:3(a).
4.376 It is especially puzzling that the EC character izes penalty provisions and audit procedures as
outside the scope of Article X:3(a). Those instrume nts go to the heart of the way substantive customs
rules are administered. Indeed, that penalties are a critical tool for administering other laws is
expressly acknowledged in the Council Resolution on penalties set forth in Exhibit EC-41.

4.377 The EC also asserts that penalties fall outside th e scope of Article X:3(a) because they pertain
to "illegitimate actions rather than legitimate trad e." That argument mischaracterizes both Article X
and the concept of penalties. Article X does not make the distinction between legitimate and
illegitimate trade that the EC posits. Even if it did make such a distinction, it is not the case that
penalties apply only to illegitimate trade. The de Andrade case cited in the US First Submission is a
perfect example of the application of a penalty in th e context of legitimate trade. The only offense at
issue there was a failure to clear goods through custom s within the time period specified in the
Community Customs Code.
4.378 The EC argues in the alternative that even if Article X:3(a) does apply to penalties,
fundamental principles of EC law ensure that penalties meet the requirements of uniform
administration. The fundamental principles to whic h the EC refers are requirements that penalties be
"effective, proportionate, and dissuasive." But, th ese very general principles permit a wide range of
member State practices. As the EC itself acknowledg es, "Specific offences may be considered in one
Member State as a serious criminal act possibly leading to imprisonment, whilst in another Member
State the same act may only lead to a small – or even no – fine."
4.379 The same flaws attach to the EC's discussion of customs audits. The US First Submission
called attention to significant divergences in auditin g practices identified in the EC Court of Auditors
report. As with penalties, the EC summarily asserts that "questions of auditing are not part of customs
procedures, and therefore do not concern the admini stration of customs law as such." Nowhere does
the EC state the basis for its assertion, which is en tirely incorrect. Like penalties, audits are essential
tools in administering substantive customs laws.
4.380 The US First Submission explained that, in connection with audits, some member State
authorities provide traders with binding valuatio n guidance that may be relied upon in future
transactions, while others do not. Th e EC dismisses this observation by stating that "[w]hether such
advise might be legally binding is a question of general administrative law of the Member States." By
a simple act of characterization, the EC again purports to remove a matter from review under
Article X:3(a). The United States sees no basis for this assertion that different member State
approaches to valuation guidance are not "significant from the point of view of Article X:3(a)."
4.381 The United States turns, finally, to the EC's argu ment regarding Article X:3(b). In its First
Submission, the United States demonstrated that th e EC does not provide tribunals or procedures for
the prompt review and correction of administrative action relating to customs matters. The individual
member States provide fora for review of custom s decisions, but the existence of these fora does not
fulfill the obligation of the EC, as a WTO Member in its own right. The United States argued that the
Article X:3(b) obligation must be interpreted in light of its context, which includes Article X:3(a), and
that a fragmentation of review of customs decisions across the territory of a Member runs contrary to
that provision's obligation of uniform administration.
4.382 The EC's assertion that there is no link betwee n subparagraphs (a) and (b) of Article X:3 and
no obligation to interpret the latter in light of th e former is especially surprising, given the EC's
explanation of how uniformity of customs law ad ministration is achieved in the EC. A theme
repeated throughout the EC's First Submission is that appeals of customs decisions to national courts,
coupled with the possibility of national courts maki ng preliminary references to the ECJ, constitutes a
critical instrument of ensuring uniform administra tion of customs law. In other words, in its
Article X:3(a) argument, the EC effectively contends that reviews of customs decisions and
administration of customs laws are closely inte rtwined. That position supports interpreting the
obligation to provide reviews of customs decisions in light of the obligation to administer customs
laws uniformly.

4.383 Moreover, the EC simply is wrong to assert that Article X:3 "does not make any link"
between subparagraphs (a) and (b). The second sente nce of subparagraph (b) expressly states that the
decisions of the tribunals or procedures maintained or instituted in accordance with that subparagraph
"shall govern the practice of" "the agencies en trusted with administrative enforcement."
Administrative enforcement, in turn, is the subject of subparagraph (a).
4.384 The EC's contention that use of the plural fo rm in Article X:3(b) "clearly allows" the
provision of separate review tribunals covering diffe rent parts of a Member's territory is equally
flawed. Use of the plural form in Article X:3(b) might allow for the possibility that a Member may
provide different fora for different types of re view. For example, a Member might provide an
administrative tribunal for reviews of classification and valuation decisions and a separate judicial
tribunal for reviews of penalty decisions. This interp retation gives effect to use of the plural form in
Article X:3(b) without running afoul of the obligation to interpret that provision in light of the context
of Article X:3(a).
4.385 Finally, the EC asserts that it fulfills its Ar ticle X:3(b) obligation, because member State
courts are EC courts when it comes to the applicati on and interpretation of EC law. To support this
assertion, the EC refers to the panel report in EC – Trademarks and Geographical Indications (US) .
There, the panel found that in the exercise of certain executive functions, member State authorities
"'act de facto as organs of the Community.'" Without any explanation at all, the EC asserts that the
panel's reasoning in that dispute applies with e qual force to member State judicial authorities
exercising adjudicatory functions.
4.386 The EC's assertion does not, in fact, flow from the statement it quotes from that panel report.
First, the issue presented there was substantially different from the one presented here. The issue
there had absolutely nothing to do with obligations of the EC; it had to do with obligations of
particular member States. The question was whet her an individual member State executing an EC
regulation in a manner that discriminated between persons of other EC member States, on the one
hand, and persons of non-EC member States, on the other, violated a most-favored-nation obligation.
This very different context makes it impossible to ex trapolate from the finding in that dispute to the
issue presented in this dispute.
4.387 Second, the nature of the Article X:3(b) obliga tion is such that it cannot be carried out in a
geographically fragmented way in a single Member, such as the EC. It cannot be assumed that one
panel's recognition of member State executive authorities as de facto EC authorities for one particular
purpose in the context of one particular WTO oblig ation means that another panel must recognize
member State judicial authorities as de facto EC authorities for a different purpose in the context of an
entirely different WTO obligation.
4.388 In short, the fact that the EC may consider member State courts to be acting as de facto EC
courts when they interpret and apply EC law does not mean that the EC itself provides the tribunals or
procedures required by Article X:3(b). It remains th e fact that member State tribunals interpret and
apply the law within the territory of their respec tive member States. They can bind administrative
agencies only within their respec tive member States. This arrangement does not meet the EC's
obligation under Article X:3(b).

D. FIRST ORAL STATEMENT OF THE EUROPEAN COMMUNITIES
1. The significance of the case
(a) The constitutional significance of the case for the EC
4.389 The US case constitutes an unprecedented attack on fundamental principles of the EC legal
order. By challenging the involvement of the customs authorities of the EC member States in the
administration of EC customs law, the United Stat es is essentially requesting the EC to establish an
EC customs agency. This runs counter to the prin ciple of executive federalism in the EC legal order,
according to which EC law is generally implemented through the authorities of the member States.
4.390 Similarly, the US claim that the EC is obliged to provide judicial review through "EC-level
tribunals" is diametrically opposed to a fundamental structural principle of the EC judicial system, in
which judicial review of decisions of the member States authorities is provided by the tribunals of the
member States. Thus, on the sole basis of Artic le X:3(b) GATT, the United States is effectively
requiring the EC to engage in a complete overhaul of its judicial system, a task which could not be
carried out without a modification of the founding treaties of the EC.
4.391 The EC would like to emphasize that it rec ognizes and fully respects its obligations under
Article X GATT. The EC does not claim that it is in any way subject to different or lesser obligations
under Article X GATT than other WTO Members. However, the EC also believes that its
constitutional arrangements for the administration of customs laws, and review of customs decisions,
are fully compatible with the WTO Agreements. Indeed, the WTO Agreements respect and uphold
the constitutional autonomy of the WTO members. It is therefore a matter of great concern that, in
the present case, fundamental constitutional arrange ments are as such made the subject of WTO
dispute settlement.
4.392 In fact, with its present challenge, the United St ates seems to expect the EC to establish a
customs agency and a customs court similar to thos e existing in the United States. The EC believes
that Article X:3 GATT provides no legal basis for su ch a claim. Moreover, whereas the EC fully
respects the right of the United States to opt for a centralized system of customs administration and
judicial review, it believes its own constitutional choice of a system based on federal principles
deserves an equal measure of respect.
(b) The systemic importance of the case for the WTO
4.393 The present case is highly important for the WTO Membership at large. Indeed, in its
criticisms of specific instruments of EC customs administration, the United States adopts a maximalist
approach that should be of genuine concern to WTO members.
4.394 With this approach, the United States overstr etches the legal requirements of Article X:3
GATT beyond all recognition. Indeed, what is a st ake in the present dispute is essentially whether
Article X:3 GATT should become a legal basis for the harmonization of the systems of customs
administration of WTO Members through the DSU.
4.395 The EC emphatically believes that it should no t. The DSU is not a peer review process
through which the optimal design of customs admini strations can be sought. Rather, the purpose of
the DSU is, in accordance with Article 3.2 DSU, to preserve the rights and obligations of the
Members under the covered agreements, and thus prevent the nullificati on and impairment of benefits
accruing to Members under such agreements.

4.396 A rigorous focus on legal obligations is also made necessary by the overlap between the
present dispute and the ongoing negotiations on trad e facilitation of the Doha Round. According to a
public statement by the United States Trade Repr esentative, one of the essential objectives of the
United States in the present dispute is to enha nce the Doha Trade Facilitation Negotiations "by
pressing a major player in world trade". This political motivation behind the US case is also
illustrated by the overlap between some of the criticisms made by the United States in the present case
and its own proposals in the context of the Doha Round.
4.397 The EC is fully committed to the success of the Doha Round Negotiations, including the
negotiations on trade facilitation. However, as Japan has correctly pointed out in its Written
Submission, specific initiatives to ensure a unifo rm administration of customs laws should be
addressed through the Doha Negotiations, and not through the dispute settlement process.
2. The uniform administration of EC customs law
(a) The requirements of Article X:3(a) GATT
4.398 Article X:3(a) GATT requires WTO Members to administer the laws and regulations referred
to in Article X:1 GATT in a uniform manner. In its First Submission, the United States significantly
overstates the requirements imposed by Article X:3( a) GATT. Moreover, the United States ignores
almost completely the existing case law on this provision.
4.399 First, it is consistent case law since the Appellate Body Report in EC – Bananas that
Article X:3(a) GATT concerns only the administration of laws and regulations, and not those laws
and regulations themselves. This is a highly important point fo r Members which have a federal
structure, and where certain matters are regulated at a sub-federal level. Wh ere laws and regulations
exist at a sub-federal level, all that Article X:3(a) GATT requires is that such laws are administered in
a uniform manner in the area where they apply. Article X:3(a) GATT does not impose any
requirement to harmonize sub-federal laws within a WTO Member.
4.400 Second, Article X:3(a) GATT merely requires WTO Members to administer their laws and
regulations in a uniform manner, but is neutral as to the means which WTO Members employ for this
purpose. In other words, Article X:3(a) GA TT does not prescribe the specific instruments and
structures which WTO Members should use in the administration of their customs laws. Accordingly,
Article X:3(a) GATT does not have the purpose of harmonising the customs la ws and practices of
WTO Members, and is not a legal basis for achieving such a result through the DSU.
4.401 Third, as the Appellate Body has stressed in US – Shrimp , and as Japan has equally
confirmed, Article X:3(a) GATT is a minimum standa rds provision. It is a subsidiary provision
which provides WTO Members with certain minimum guarantees of uniformity in the administration
of customs laws and regulations. Wherever more precise and ambitious disciplines were necessary,
the corresponding obligations have been laid down in other provisions of the covered agreements.
4.402 Fourth, given the character of Article X:3(a) GATT as a minimum standards provision, not
every minor variation in administrative law and prac tice constitutes a lack of uniformity contrary to
Article X:3(a) GATT. This follows clearly from the GATT Panel Report in EEC – Dessert Apples ,
where the Panel held that certain variations be tween EC member States in the implementation of
import licensing arrangements were minor and th erefore did not amount to a violation of
Article X:3(a) GATT. In other words, there is a certain minimal threshold in Article X:3(a) GATT,
which implies that a variation in administrative practice must have a significant impact on the
administration of customs laws in order to constitute a breach of Article X:3(a) GATT.

4.403 Fifth, it is very important to recall the findings of the Panel in US – Hot Rolled Steel ,
according to which it is not possible to establish a lack of uniformity solely on the basis of an
individual instance of administration. Rather, as Japan has convincingly explained, it is necessary to
establish that there is a pattern of non-uniform administration with a significant impact on how
customs laws are administered. Such an interpretation of Article X:3(a) GATT is particularly
necessary given that customs authorities have to operate in comple x and rapidly changing
circumstances, to which they cons tantly need to adapt. Moreover, systems of customs administration
are complex, and their outcomes are determined by many factors, not all of which can be controlled
by the WTO Member in question. For instance, wh ere an individual trader does not exhaust all the
remedies and procedural possibilities afforded to him by the system of a WTO Member, a resulting
lack of uniformity cannot be attributed to a failure in that Member's system. Similarly, if a trader in an
individual case abuses procedural possibilities, or violates provisions of the law of the Member in
question, this cannot be regarded as proof of a lack of uniformity contrary to Article X:3(a) GATT.
(b) The burden of proof
4.404 The burden of proof for establishing that there is a pattern of non-uniformity in the
administration of the EC's customs laws is on the United States. The United States does not even
come close to discharging this burden of proof.
4.405 The United States has not primarily focussed on the actual administration of customs laws in
the EC, but rather on systemic aspects of the EC's system of customs administration. At the most
general level, the United States challenges the invol vement of the EC's member States authorities in
the administration of EC customs law. At a sec ond level, the United States criticizes the role or
capacity of various EC institutions and arrangements, such as the European Commission, the Court of
Justice, or the Customs Code Committee. Finally, at the management level, the United States also
criticizes various aspects of the EC's system of cust oms administration, such as the design of the EC's
EBTI system.
4.406 None of these arguments are relevant for the application of Article X:3(a) GATT, and none of
them amount to proof that there is a pattern of non-uniformity in the EC's customs administration. To
take the most fundamental point, the United States s ubmits to the Panel that the involvement of the
authorities of EC member States in the administra tion of EC customs law is incompatible with
Article X:3(a) GATT because "divergences inevita bly occur". The EC strongly contests this
statement. The EC would also express its amaze ment that the United States would assert that a
fundamental element of the EC legal order is inco mpatible with the GATT without offering any proof
for such a statement.
4.407 As regards the more specific instruments and institutions of the EC system, and as the EC has
already shown in its First Written Submission, th e US criticisms are based on misunderstandings or
misrepresentations of the EC system. In addition, Article X:3(a) GATT leaves WTO Members a large
measure of freedom as to how they administer thei r customs law, provided they do so in a uniform
manner. Therefore, the US criticisms are irreleva nt for the purposes of assessing the EC's compliance
with Article X:3(a) GATT.
4.408 Moreover, in its First Written Submission, the United States presents an incomplete and
distorted picture of the EC's system of customs ad ministration. On the basis of this inadequate
presentation of the facts, the United States chooses to address only those specific issues where it
perceives the EC system exhibits a weakness. However, in order to assess whether there is a
deficiency in the EC system, it is not sufficient to look at a particular issue or instrument in isolation.
Rather, as Japan has aptly explained, it is necessary to look at the EC's system as a whole.

4.409 As regards the actual administration of EC customs law, the US Submission remains almost
silent. In essence, the United States presents the Pa nel with two examples of alleged non-uniformity
in the area of tariff classification, and with one exam ple in the area of customs valuation. Even if
these cases actually demonstrated a lack of non-un iformity, one or two cases in a particular area
hardly amount to a statistically significant sample on which to assess whether there is a pattern of
non-uniformity. Moreover, as the EC has shown in its First Written Submission, none of the
examples adduced by the United States, all of whic h involve questions of customs administration of a
high technical complexity, in fact shows a lack of uniformity in the EC's administration.
4.410 No single fact could illustrate the weakness of the US case more clearly than the tepid
reaction which the USTR received when it launche d a call for comments following its consultation
request in the present dispute. In response to this call, USTR received a mere three submissions, two
of which the United States itself does not seem to have judged helpful for its case. The EC would
submit that if there indeed was a significant pattern of non-uniformity in the EC's practice, a stronger
reaction from interested industry and traders could have been expected.
4.411 Overall, the United States fails to establish that there is a pattern of non-uniformity in the EC's
system of customs administration.
(c) The claims raised by the United States
(i) Tariff classification
4.412 The first area in which the United States alleges that there exists a lack of uniformity is tariff
classification. The United States base s this claim essentially on a criticis m of the role of the Court of
Justice, and of the EC system of binding tariff inform ation. In addition, the US sets out two examples
of classification of specific products, which it alleges demonstrate a lack of uniformity in the EC's
practice.
4.413 As regards the two systemic issues, the US cr iticisms are unwarranted. The ECJ, acting in
particular through the preliminary reference procedur e, plays an important role in ensuring a uniform
interpretation and application of EC classification rules, and will continue to do so in the future.
4.414 Similarly, the EC's BTI system is an important tool for providing uniformity in tariff
classification throughout the EC, and security to tr aders. However, the EC is under no obligation
under Article X:3(a) GATT to establish a BTI system, le t alone to design this system in a particular
way.
4.415 Moreover, as Japan as pertinently remarked, both the ECJ and the EBTI system are only part
of the EC's classification system. As the EC has already noted, in order to assess whether the EC
administers classification rules in a uniform manner, it is not sufficient to only consider two elements
in isolation. Rather, the EC system should be cons idered as a whole, including also instruments such
as classification regulations, HS explanatory notes and opinions, and EC explanatory notes.
4.416 The two specific examples given by the United States concern the classification of blackout
drapery lining and of LCD monitors. However, neit her case demonstrates a lack of uniformity in the
EC's classification practice. In fact, both cases involve classification issues of a high complexity, with
which the United States itself has experienced cer tain difficulties. Accordingly, rather than
demonstrate a lack of uniformity in the EC's prac tice, these cases simply serve as an illustration of the
technical complexities of tariff classification in the rapidly evolving world of today.

(ii) Customs valuation
4.417 The second field where the United States alleges a lack of uniformity is customs valuation.
However, the US case here is as unsubstantiated as its claim in the field of tariff classification.
4.418 At a systemic level, the United States comp lains that the EC does not even provide for
binding valuation rulings. However, these complain ts are unjustified. The EC is not obliged under
Article X:3(a) GATT to provide for binding rulings on valuation questions or any other issues.
4.419 Moreover, there are considerable structural differences between tariff classification and
customs valuation which explain why the EC provid es for binding information in the area of tariff
classification, but not in the area of valuation. In particular, customs valuation is normally based on
the transaction value, and therefore involves data which can change from transaction to transaction,
and from importer to importer.
4.420 At the same time, EC valuation rules are quite detailed, and guide the EC customs authorities
in all relevant circumstances. Wherever clarific ation is necessary, this can be achieved through
amendments to the valuation rules contained in the Implementing Regulation or the Customs Code.
Moreover, the European Commission, the Custom s Code Committee, and the European Court of
Justice all play an important role in securing a uniform valuation practice.
4.421 In order to substantiate its allegations, the United States mainly relies on a report of 2000 by
the EC Court of Auditors. However, this report does not support the US case. In fact, as much as
anything else, it is evidence of the EC's ability to itself ensure uniformity in its customs
administration. Where necessary, the report has given rise to the appropriate action by the EC
institutions, and therefore does not constitute relevant evidence today. In addition, the EC would also
point out that the Court of Auditors did not in any way make judgments as to whether the EC was in
compliance with Article X:3(a) GATT, and it cannot be assumed that the issues raised in the report of
the Court of Auditors translate into a violation of the GATT.
4.422 At the level of actual practice, the United States presents only one example, concerning a
valuation dispute between Reebok International Lim ited (RIL) and the Spanish customs authorities.
However, this is a complex valuation dispute con cerning the assessment of whether RIL has a control
relationship with certain of its suppliers. The European Commission has kept this case, which is
currently pending before a Spanish court, under close review, and has also discussed it in the Customs
Code Committee. However, it must also be reca lled that neither the European Commission nor the
Customs Code Committee are a substitute for the normal appeals mechanisms before the national
courts.
(iii) Processing under customs control and local clearance procedure
4.423 The United States alleges that there is a lack of uniformity as regards two customs
procedures, namely processing under customs contro l and the local clearance procedure. These US
arguments are based on wrong interpretations and factual errors.
4.424 In relation to processing under customs control, the reality is that Community customs
legislation and the UK and French guidances requi re the same two "economic conditions" for the
granting of an authorization for processing under cust oms control. Therefore, there is no evidence
showing that the EC customs authorities administer this procedure in a non-uniform manner.
4.425 As to the local clearance procedure, the US First Written Submission is deficient in four
aspects. First, the United States does not provide a single exhibit to illustrate and support its claim.
Second, from the description provided in the US Fi rst Written Submission, it is clear that the United

States has misunderstood the different steps in th e process followed when goods are imported through
this procedure. Third, the US description of the procedure and of the documents retention
requirements contains fundamental errors. Finall y, any variations which might remain are not
substantial in nature and therefore do not exceed the minimal threshold of Article X:3(a) GATT.
(iv) Penalties for violations of customs law
4.426 Finally, the United States also claims that the EC fails to comply with its obligations by not
administering penalties for violations of customs laws in a uniform manner. This US claim must be
rejected for three reasons.
4.427 First, the EC submits that provisions which establish the penalty for a violation of customs
laws are not themselves related to the administration of customs laws and therefore do not fall within
the scope of Article X:3(a) GATT.
4.428 Second, it is important to note that the penalties applicable to violations of customs laws are
set out in laws and regulations of the EC member St ates. Accordingly, it is not the administration of
the laws which varies, but rather it is the laws th emselves which are different. However, as the EC
has already explained, there is no requirement in Article X:3(a) GATT to harmonize laws which apply
in a WTO Member at a sub-federal level.
4.429 Finally, EC law does provide for a sufficien t degree of harmonization of sanctions for
violations of customs law. As the European Court of Justice has clarified in its case law, member
States penalty provisions must be effective, propor tionate and dissuasive. Through these principles, a
uniform application of customs law throughout the EC is sufficiently safeguarded.
3. The prompt review of customs decisions in the EC
(a) The requirements of Article X:3(b) GATT
4.430 Article X:3(b) GATT merely requires WTO Member s to ensure that administrative decisions
in customs matters are reviewed promptly by an independent tribunal or through an independent
procedure. The United States misrepresents the requirements imposed by Article X:3(b) GATT.
4.431 The EC would like to recall once more that it is consistent case law since the Appellate Body
Reports in EC – Bananas and EC – Poultry that Article X GATT, and, therefore, its
subparagraph 3(b), does not impose any requireme nt of harmonization of laws within a WTO
Member. This means that where, within a WTO Memb er, separate systems of judicial review exist at
a sub-federal level, Article X:3(b) GATT does not re quire that such separate systems be harmonized.
It merely requires that in each of these separate systems of judicial review, a prompt review of
customs decisions is ensured.
4.432 In addition, it should also be recalled that Article X:3(a) and (b) GATT are separate
obligations. Accordingly, Article X:3(b) GATT, un like Article X:3(a) GATT, is not concerned with
questions of uniformity, but exclusively with the prompt review of customs decisions.
4.433 It should also be noted that in the EC, the review of customs decisions currently takes place as
part of the general systems for review of administra tive decisions in the field of administrative law or
tax law. Creating a separate jurisdiction for customs matters at EC level would, therefore, lead to
more, rather than less fragmentation of procedures fo r judicial review. This would not be in the
interest of traders, who in this case, rather than being able to have recourse to lawyers qualified in
general administrative or tax litigation in a particular Member State, would have to have recourse to
specialized lawyers experienced in specific EC-level procedures.

4.434 Moreover, Article X:3(b) GATT is neutral as to the means which WTO Members employ for
ensuring prompt review. In other words, this provision does not prescribe the specific bodies or
instruments, structures and time periods which WTO Members should use to ensure prompt review of
customs decisions. Accordingly, Article X:3(b) GATT does not have the purpose of harmonising the
laws of WTO Members, and is not a legal basis for achieving such a result through the DSU.
(b) The burden of proof
4.435 The burden of proof for establishing that the EC does not guarantee a prompt review of
customs decisions is on the United States. Again, as in the field of uniform administration, the United
States does not come close to discharging this burden of proof.
4.436 The United States has not primarily focussed on the actual review of customs decisions in the
EC, but rather on a systemic question of the EC's co urt system. At the most general level, the United
States considers insufficient the involvement of the EC's member States' courts and tribunals in the
review of customs decisions. The United States su bmits to the Panel that the involvement of the
courts and tribunals of EC member States in the application of EC customs law is incompatible with
Article X:3(b) GATT because "the burden to traders of non-uniform administration is not alleviated
through the appeals process". The EC strongly contests this statement.
4.437 As regards the actual functioning of EC court system, the US Submission remains almost
silent. In essence, the United States refers only to the maximum time-limits for the administrative
reviews in three EC member States and one of these references is not even accurate.
(c) The claims raised by the United States
(i) The absence of an EC customs court
4.438 The first US criticism is about the nature of the judicial review system established in the EC.
According to the United States, the absence of an EC-level review reinforces the divergences in
interpretation between the authorities in two different member States.
4.439 This interpretation is wrong in that it ma kes an unwarranted link between the two
subparagraphs in Article X:3 GATT and because Ar ticle X:3(b) GATT does not require a central
procedure or court, like the US Court of Intern ational Trade (USCIT), to appeal administrative
decisions in customs matters. In its Third Party Submission, Japan has supported the EC´s
interpretation.
4.440 Moreover, as the EC has explained in its Written Submission, where the tribunals of the
member States provide judicial review of decisions taken by the member States' customs authorities,
they act as organs of the EC, through which the EC discharges its obligations under Article X:3(b)
GATT. This view also finds support in the recent Panel Report in EC – Geographical Indications and
Trademarks (US).
(ii) The lack of promptness in the review
4.441 The second criticism made by the United States of the EC system is that it does not guarantee
a prompt review of customs decisions.
4.442 First of all, this US allegation is based on the divergence of the maximum time periods for
administrative reviews between three EC member St ates. However, the information given by the
United States in relation to the Netherlands is not fu lly correct. Point 6.2.7 of the Regulation to the
General Tax Act of the Netherlands provides that the tax authorities, which include the customs

authorities, will in principle decide on all objecti ons within six weeks. According to the same
provision, the legal time limit of one year, which is laid down in a separate act, is only to be applied in
exceptional cases, e.g., in the case of mass complaints , or where the complainant does not provide the
necessary cooperation.
4.443 Second, the US First Written Submission alleges that the time periods for administrative
reviews in the EC member States can vary widely. However, the United States provides no actual
evidence for this statement. In pa rticular, it should be kept in mind th at the periods referred to by the
United States are purely maximum time limits, a nd do therefore not necessarily provide information
on the actual length of administrative reviews.
4.444 The EC has already explained that Article X:3(b) GATT does not impose an obligation of
harmonization. Besides, the fact that an EC Member provides a one-year period instead of the three-
months period of another Member State does not mean that the former does not guarantee a prompt
review.
4.445 Even in the United States, the statutory maximum time-limit for deciding on protests is two
years. The United States does not explain why this maximum time limit would be compatible with
Article X:3(b) GATT, whereas the shorter periods provided for in certain EC member States would
not be. As a further illustration, it is also instru ctive to consider the practice of the US Court of
International Trade. In three recent classification ca ses, the USCIT invested nearly four years as an
average to take a decision.
4.446 These examples illustrate that establishing what is "prompt" and what is no longer "prompt"
may not be quite as straightforward as the United States would seem to suggest. Indeed, the actual
length for the administrative and judicial review of a customs decisions may depend on a number of
factors, not all of which are always fully under th e control of the WTO Member concerned. Such
factors may include the caseload, the factual and le gal complexity of the case, the behaviour of the
complainant, the involvement of other parties, as well as questions of administrative and judicial
procedure and organization. It is therefore highly difficult to provide abstract rules on the length of
administrative and, even more so, judicial proce dures, since there may always be exceptional cases
where a longer duration is justified by special circumstances of the case.
4.447 For this reason, the EC also submits that whether a WTO Member complies with its
obligation under Article X:3(b) GATT cannot be establis hed on the basis of isolated individual cases.
Rather, it would have to be established that there is a general pattern of a lack of prompt review in
order to consider that the obligation of Article X:3(b) GATT is violated.
E.
SECOND WRITTEN SUBMISSION OF THE UNITED STATES
1. Introduction
4.448 The 25 member States of the European Commun ities do not act as one when it comes to the
administration of EC customs law or the review and correction of customs administrative decisions.
Even though the EC in this proceeding disputes the US claims, the EC and EC officials have readily
acknowledged the underlying problem in statements outside the dispute settlement context.
4.449 Not surprisingly, uniformity is a goal to which the EC aspires. For example, in the Decision
adopting the EC's "Customs 2007" program (Exhib it EC-43), the European Parliament and the
Council of the European Union called for the continu ous adaptation of customs policy "to ensure that
national customs administrations operate as e fficiently and effectively as would one single
administration." However, the system of customs administration and review currently in place not

only falls far short of that goal, it also falls far short of the requirements of GATT 1994 Article X:3,
and therefore is in breach of that article.
4.450 Before countering the key themes that have emer ged in the EC's response to US claims, it is
necessary to discuss two general points that cut acro ss the EC's various arguments. First, the EC
repeatedly strikes an alarmist tone in responding to the US arguments. The Panel should regard the
EC's prediction of widespread upheaval with a h ealthy dose of skepticism. Nowhere does the United
States argue that Article X:3 compels WTO Members to have identical systems for customs
administration and review, nor is that the implication of US arguments.
4.451 Similarly flawed is the proposition that accepting the US arguments will lead to a requirement
of harmonization of non-customs-related provisions typically regulated at the regional or local level of
government. The EC draws that inference from the fact that the United States calls attention to
certain tools of administration of EC customs la w – in particular, penalty provisions and audit
procedures – which vary dramatically from member State to member State. However, the EC
disregards that the US argument is directed at la ws and regulations at the sub-federal (i.e. member
State) level that are used to verify and enforce compliance with laws and regulations prescribed at the
federal (i.e. EC) level. The US argument is not directed at the vast body of laws and regulations at the
sub-federal level that have nothing at all to do w ith verification and enforcement of compliance with
other laws and regulations or that concern only ve rification and enforcement of compliance with other
sub-federal laws and regulations.
4.452 Moreover, in suggesting that the logic of the US argument on Article X:3(b) would force
every WTO Member to have a single, centralized customs court, the EC again distorts the US
position. It is not the US view that Article X: 3(b) requires every WTO Member to have a single,
centralized customs court. It is the US view that Article X:3(b) requires every WTO Member to have
review tribunals or procedures whose "decisions . . . govern the practice of" "the agencies entrusted
with administrative enforcement" of its customs la ws. A Member may be able to accomplish that
where courts with regional jurisdiction review acti ons of a single customs authority. But, this does
not occur where, as in the EC, fragmentation of review is coupled with fragmentation of
administration.
4.453 Just as the Panel should not be swayed by the EC's prediction of a parade of horribles should
it accept the US arguments, it also should not be swayed by the EC's contention that coming into
compliance with its obligations would be difficult. Difficulty of coming into compliance has no
bearing on whether the EC is or is not currently in compliance with its obligations under GATT 1994
Article X:3. Relative difficulty of compliance shed s no light on the ordinary meaning of the treaty's
terms. Nor is it an element of context or the treaty's object and purpose.
2. GATT 1994 Article X:3 does not contain a relative, Member-specific standard
(a) The obligations in GATT 1994 Article X:3 do not va ry according to the particular features of
a Member's customs administration system
4.454 The EC incorrectly urges on the Panel a relative view of Article X:3(a). The EC suggests that
the obligation of uniform administration may mean different things for different WTO Members,
depending on the design of each Member's customs administration system. A relative standard is
suggested by, among other statements, the EC's allusion to GATT 1994 Article XXIV:12. That
Article simply provides that each WTO Member "shall take such reasonable measures as may be
available to it to ensure observance of the provisions of [the GATT 1994] by the regional and local
governments and authorities within its territories." It is not applicable here, because the present
dispute does not concern "observance of the provisi ons of [the GATT 1994] by the regional and local

governments and authorities" in the EC. Rather , it concerns observance of the provisions of
Article X:3 of the GATT 1994 by the EC itself.
4.455 Moreover, the EC does not formally invoke Article XXIV:12, but it does argue that "any
interpretation of Article X:3(a) which would aff ect the internal distribution of competence is
incompatible with Article XXIV:12 GATT." The EC appears to be trying to turn Article XXIV:12 on
its head. Paragraph 13 of the Understanding on the Interpretation of Article XXIV of the General
Agreement on Tariffs and Trade 1994 makes it clear that Article XXIV:12 does not excuse or alter a
Member's obligations. That paragraph explicitly states that "[e]ach Member is fully responsible under
GATT 1994 for the observance of all provisions of GATT 1994." The EC instead seems to be saying
that read in light of Article XXIV:12, Article X:3( a) will mean different things for different Members
depending on whether, as a matter of "the internal distribution of competence," a Member has decided
that certain tools for the administration of its cu stoms law (such as penalties and audits) are to be
prescribed and applied by regional governments.
4.456 This construction of Article X:3(a) as applying differently to different Members has no basis
in Article X:3(a) or in Article XXIV:12. Article XXIV:12 does not limit or otherwise qualify the
obligation of uniform administration. Indeed, Article XXIV:12 does not qualify the applicability of
GATT obligations at all. Rather, it is a narrow provision concerning the implementation of certain
obligations, which must be construed to avoid "i mbalances in rights and obligations between unitary
and federal States." (GATT Panel Report, Canada – Gold Coins, paras. 63-64)
4.457 That GATT 1994 Article XXIV:12 does not support a construction of Article X:3(a) that
varies from Member to Member is further demonstrated by contrasting that provision to a provision in
another WTO agreement – the General Agreement on Trade in Services ("GATS") – that does, in fact,
qualify Members' obligations. GATS Article VI :2(a), like GATT 1994 Article X:3(b), requires
Members to provide tribunals or procedures for the prompt review of certain administrative decisions.
However, that obligation is expressly qualified in the next subparagraph, which states that
"subparagraph (a) shall not be constr ued to require a Member to institu te such tribunals or procedures
where this would be inconsistent with its constitutional structure or the nature of its legal system." No
similar exception appears in GATT 1994 Article X:3.
4.458 Moreover, it should not pass without notice that despite its oblique assertion of "constitutional
implications" and its reference to "fundamental pr inciples of the EC legal order," the EC does not
formally invoke Article XXIV:12. Had it done so, it would have had the burden to demonstrate that
lapses in the uniform administration of EC cu stoms law concern matters "which the central
government cannot control under the constitutional distribution of powers." (GATT Panel Report, US
– Beverages, para. 5.79) Evidently this is a burden that the EC is not prepared to assume.
(b) The United States does not seek the harmonization of WTO Members' customs administration
systems
4.459 Finally, an essential aspect of the EC's urgi ng a relative standard for application of
Article X:3 is its mischaracterization of US claims as seeking "the harmonization of the systems of
customs administration of WTO Members through th e DSU." Contrary to the EC's assertion, the
United States does not argue that Article X:3 requir es each Member to have a single customs agency
and customs court. The United States recognizes the diversity of systems of customs administration
among WTO Members, which is evidenced in part by the responses to the Panel's Questions No. 10
and 11 to third parties. It is notable, however, that each of these third parties prominently identified
the existence of a single, centralized custom s agency in explaining how it ensures uniform
administration of customs laws across its territory. Just as it would be improper for the United States
to argue that Article X:3(a) requires harmonization of Members' systems of customs administrations,
it is improper for the EC to argue that its unique status within the WTO as perhaps the only Member

without a single, centralized customs agency makes it subject to a different standard with respect to
the obligation of uniform administration.
3. GATT 1994 Article X:3(a) is not a "subsidiary," "minimum standards provision" that is
breached only when the non-uniform admi nistration of a Member's customs laws
exhibits a discernible pattern
(a) There is no basis for the EC's characterization of GATT 1994 Article X:3(a) as a "subsidiary,"
"minimum standards provision"
4.460 The EC persists in characterizing Article X:3( a) as "a minimum standards provision" or "a
subsidiary provision." This characterization is b ased entirely on a passing reference by the Appellate
Body in its report in US – Shrimp . That statement, however, does not support the diminished
significance the EC attaches to Article X:3(a).
4.461 The EC misreads the phrase "minimum standards" as used in the US – Shrimp report to mean,
in effect, "low standards" or "minor standards." In context, however, it is clear that this was not the
sense in which the Appellate Body used the term. At issue was a law for which the United States had
invoked an exception under Article XX of the GATT. The Appellate Body looked to Article X:3 as a
provision establishing requirements analogous to "due process" that would be relevant to analyzing
whether the requirements in the chapeau of Article XX had been met. (para. 182) However, the
Appellate Body was not probing how strict or lenient the Article X:3 standard is. In fact, it found it to
be clear that various aspects of the measure at issue were "contrary to the spirit, if not the letter, of
Article X:3 of the GATT 1994." (para. 183)
4.462 Thus, in context, it is evident that in usi ng the phrase "minimum standards," the Appellate
Body in US – Shrimp was not making a judgment about how high or low the Article X:3 threshold is,
only that there is a threshold that must be met.
4.463 In any event, it is not clear how the EC's characterization of Article X:3(a) as a "minimum
standards provision" translates into a legal standard that may be applied by the Panel. The EC
suggests that in using "minimum standards" and similar phrases, what it really meant was that a
breach of the obligation of uniform administ ration can be established only if non-uniform
administration is shown on the basis of "an overa ll pattern" or "general patterns" of customs
administration.
(b) The United States is not required to demonstrate a "pattern" of non-uniform administration to
establish that the EC is in breach of its GATT 1994 Article X:3(a) obligation
(i) The "pattern" requirement asserted by the EC has no basis in GATT 1994 Article X:3(a)
4.464 The Appellate Body report in US – Shrimp on which the EC relies for its characterization of
Article X:3 as a "minimum standards provision" mak es no reference at all to a pattern requirement.
Indeed, the Appellate Body's finding that transpar ency and procedural fairness were lacking in
administration of the measure at issue there was based on a finding that certain formal safeguards
were absent from the system for administration of th at measure, rather than a finding of any "pattern"
of non-transparency or lack of procedural fairness as a matter of practice. (para. 181) Likewise, the
EC provides no mechanism to safeguard against th e non-uniform administration of EC customs laws
by 25 different member State authorities.
4.465 More fundamentally, there is no basis in the text of Article X:3(a) (or any other WTO
provision) for the proposition that a breach is established only when a pattern of non-uniform
administration is shown. The one panel to have examined in any depth the obligation of uniform

administration in Article X:3(a) – the Argentina – Hides and Leather panel – made no reference to a
"pattern" requirement for establishing a breach of that obligation. (paras. 11.80-11.83) That panel
found it "obvious . . . that it is meant that Custom s laws should not vary, that every exporter and
importer should be able to expect treatment of th e same kind, in the same manner both over time and
in different places and with respect to other persons ." (para. 11.83) As the obligation of uniform
administration was explained there, it plainly is capable of being breached even if various instances of
non-uniform administration do not exhibit a discernible pattern.
(ii) The EC fails to even explain what it believes th e United States must establish to meet the so-
called "pattern" requirement
4.466 The simple fact that "pattern" would be an el ement of a breach in addition to "non-uniform"
administration demonstrates the fatal flaw in the EC's proposed approach. The text of Article X:3(a)
does refer to administering in a "uniform manner." It does not refer to a "pattern of non-uniform"
administration.
4.467 Furthermore, the EC's proposed approach does not make sense even divorced from the agreed
text of the GATT 1994. The ordinary meaning of the word "pattern" as relevant here is "[a]n
arrangement or order discernible in objects, actions, id eas, situations, etc." Central to the concept of a
pattern is discernability of arrangement or order. Central to the concept of non-uniformity is the
absence of these very qualities. Thus, a pattern of non-uniform administration would appear to refer,
paradoxically, to a discernability of arrangement or or der in something that lacks a discernability of
arrangement or order (i.e. that is non-uniform). Despite this apparent anomaly, the EC does not
elaborate on the asserted "pattern" requirement.
4.468 The EC does make oblique references to a "statistically significant sample" of non-
uniformity, occurrences of non-uniformity that are "so widespread and frequent as to constitute an
overall pattern of non-uniformity," and occurrences of non-uniformity "on a large scale," as if to
imply that it equates the existence of a pattern of non-uniform administration with the frequency and
scope of non-uniform administration. However, these references shed little light on what the EC
believes must be shown in order to satisfy the so-called pattern requirement.
4.469 More importantly, the suggestion that there is some quantitative criterion for assessing
uniformity of administration is at odds with the EC's own acknowledgment that "Article X:3(a) GATT
does not require uniformity for its own sake, but rather intends to protect the interests of traders." The
interests of traders in uniform administration of the customs laws do not depend on the statistical
significance of occurrences of non-uniform administra tion, just as they do not depend on whether
instances of non-uniform administration manifest a pattern, in the ordinary sense of that term, or occur
in a haphazard way.
(iii) The reference to a "pattern" in the panel report in US – Hot-Rolled Steel is not relevant to the
present dispute
4.470 Moreover, the EC's assertion of a pattern requirement relies on a single sentence from the
panel report in US – Hot-Rolled Steel . The concept of a pattern was relevant to the question at issue
in that dispute in a way that it is not relevant in the present dispute.
4.471 In any dispute involving a claim of non-uniform administration, it must be asked what
uniform administration would look like. In the present dispute, which concerns a claim of overall
geographical non-uniformity of administration, the actual system in the EC is contrasted to a system
in which traders can reasonably expect treatment of the same kind, in the same manner when entering
their goods through different EC member States. To the extent that traders do not receive treatment of
the same kind, in the same manner when entering goods through different EC member States, that

state of affairs is recognizable as non-uniform administration, whether or not such non-uniform
administration constitutes a pattern.
4.472 Conversely, in US – Hot-Rolled Steel the relevant claim was that a particular application of
US antidumping law to particular producers in a particular investigation amounted to non-uniform
administration of US antidumping law. That proposition could be tested only if the panel had an
understanding of what uniform administration of US antidumping law looked like.
4.473 The claim at issue in the present dispute is far different. The United States is arguing that the
EC's system of customs law administration as a whole does not result in the uniform administration
that Article X:3(a) requires. Evidence of a pattern is not necessary to distinguish the EC system of
customs law administration as one that does not meet that obligation.
4.474 Curiously, in arguing for a generic "pattern" requirement, the EC cites the panel's summary of
the US argument in US – Hot-Rolled Steel. But, in that dispute, the United States was not arguing for
a generic "pattern" requirement. Quite to the contrary, the United States was arguing for a distinction
to be made between the way the panel analyzed Jap an's Article X:3 claims and the way panels had
analyzed Article X:3 claims in disputes challenging the overall administration of particular measures
of general application. The present dispute is one in which the United States challenges the overall
administration of EC customs law. In that sense, the US claim is more like the claim at issue in US –
Shrimp than the claim at issue in US – Hot-Rolled Steel.
(c) The EC acknowledges the existence of diverg ences among member State authorities in the
administration of EC customs law
4.475 Finally, it is important to recall that the EC itself acknowledges that divergences in
administration of its customs law among the 25 different member State authorities do in fact occur. It
submits that when they occur they either ar e reconciled through various EC instruments and
institutions, or they simply are immaterial or not relevant to the EC's Article X:3(a) obligation. But, it
acknowledges that divergences occur, and this point should not be lost.
4.476 In addition to general acknowledgments by the EC of divergences in the administration of EC
customs law, it has made particular acknowledgments of such divergences in the context of this
dispute. Specifically, it has acknowledged divergences in the areas of penalties and audit procedures,
approaches to permitting certain customs valuatio n methods, and administration of the economic
conditions test for use of the procedure known as processing under customs control.
4.477 In calling attention to the EC's various ac knowledgments of non-uniform administration of
EC customs law, the US purpose is to show that the EC's argument concerning the US burden of
proof is not written on a blank slate. While the EC charges that the United States has not met its
burden, its own statements preclude it from asserting that the 25 separate member State customs
authorities administer EC customs law as would a single EC-wide authority.
4. The instruments that the EC holds out as ensuring uniform administration do not do so
4.478 Central to the EC's argument that it complies with its obligation of uniform administration
under GATT 1994 Article X:3(a) is its assertion that certain EC instruments prevent divergences
among member States from occurring or correct them when they do occur.

(a) Most of the instruments that the EC holds out as securing uniform administration are non-
binding, discretionary, or extremely general in nature
4.479 First, the EC's replies to the Panel's questi ons underscore the non-binding, discretionary, or
extremely general nature of the instruments that supposedly secure uniform administration. For
example: (a) The EC acknowledges that the Ad ministrative Guidelines on the European Binding
Tariff Information (EBTI) System and its Operation "are not legally binding;" (b) When asked about
"practical mechanisms" to deal with the s ituation in which member States disagree on the
classification for a particular good, the EC replies that the member States " should consult with one
another," that if the disagreement persists the Customs Code Committee " may examine the question,"
and that "[i]n practice, the responsible official in the Member State concerned will submit the issue to
the Commission" (though the EC does not say what rule will compel this submission); (c) When
asked how, "in practical terms," the Customs C ode Committee reconciles differences in the
application of EC rules on customs valuation, the EC explains that "[t]he Committee may issue
opinions" which, it later explains, are not legally binding on member States' customs authorities; and
(d) When asked to explain "in practical terms" a finding by the ECJ that EC law must be applied
uniformly in all member States, the EC states that "this means that they [the authorities of the member
States] should interpret and apply Community law in accordance with all available guidance as to its
proper meaning."
4.480 Frequently, in referring to instruments that secu re uniform administration, the EC falls back
on member States' general duty of cooperation under Ar ticle 10 of the EC Treaty. That provision sets
forth a general obligation of member States under EC law. Tellingly, when the EC refers to it as an
instrument to secure uniform administration, it does not refer to any measu res making that general
obligation operational in the specific area of customs administration.
(b) Binding tariff information does not secure uniform administration
4.481 A more concrete instrument for securing uniform administration that the EC identifies is
binding tariff information. The EC's replies to questions confirm that BTI does not secure uniform
administration.
(i) The EC system permits "shopping" for favo rable BTI from among the 25 member State
customs authorities
4.482 One reason that BTI does not secure uniform administration is that traders may engage in BTI
shopping. That is, in a system where each of 25 different member State customs authorities is
separately responsible for issuing BTI, traders may manipulate the system to obtain the optimal
classification for their goods, regardless of whether such classification is uniformly agreed to among
all member States. The opportunity for manipulation is facilitated by the fact that under Article 12(2)
of the Community Customs Code (Exhibit US-5), BTI is "binding on the customs authorities as
against the holder of the information," but it is not binding on the holder.
4.483 In fact, in its explanatory introduction accompanying the draft Modernized Community
Customs Code (Exhibit US-32), the EC acknowledges the problem of BTI shopping as a factor
detracting from uniform administration. Thus it states that "it is proposed to extend the binding effect
of the decision [i.e. the BTI] also to the holder(s) of the decision in order to avoid the system only
being used where the applicant is sa tisfied with the result." (p. 12) Similarly, in its arguments in the
EC – Chicken Cuts dispute, the EC explained that "it is possible under EC law to withdraw an
application for a BTI where the outcome is consider ed unfavourable by the importer." (Panel Report,
para. 7.261)

4.484 At the first Panel meeting, the United States ha d understood the EC to assert that the situation
in which BTI is used only where the applicant is satisf ied with the result is a rather rare circumstance.
In a question following the first Panel meeting, the United States asked the EC to substantiate that
assertion. The EC's terse response was that it "do es not have any evidence that would indicate that
such situations are frequent," while also in effect conceding that it does not have evidence that such
situations are "rare." This response is not surprising. A problem of BTI shopping from the point of
view of uniform administration is precisely the fact that it is done in a way that does not generate
evidence and thus is difficult to identify. Traders hardly can be expected to come forward and openly
admit that they are taking advantage of the opportunity to seek optimal classification of their goods
from among 25 different customs authorities.
(ii) The power of a member State customs authority to revoke BTI based on nothing more than its
own reconsideration of the applicable classificati on rules, as affirmed in the Timmermans
decision, detracts from uniform administration
4.485 The EC's discussion of the Timmermans case and the possibility for member State authorities
to amend or revoke BTI on their own initiative also reinforces the point that BTI does not secure
uniform administration of EC customs law. Timmermans was the case in which the Court held that a
member State's customs authorities may amend or revoke BTI even where the only basis for
amendment or revocation is the authorities' own rec onsideration of the applicable classification rules.
The Court reached that conclusion despite the A dvocate General's observation (Exhibit US-21) that
"the possibility of revoking BTI in this way is not readily compatible either with the objective of the
uniform application of the customs nomenclature or with the objective of legal certainty pursued by
4.486 In explaining its disagreement with the Advocat e General's observation, the EC stated that
"[t]he correct classification in the combined nomencl ature is not a matter of di scretion, and neither is
the revocation of BTI which has been found to be incompatible with the combined nomenclature."
The EC went on to point out that "the Court made clear that the Customs authorities may revoke the
BTI only if it is wrong."
4.487 There is a serious flaw in the EC's logic. It assumes, without any b asis, that the correct
classification of any given good will always be objectively known to all member State authorities and,
therefore, "is not a matter of discretion." Under this assumption, the application of classification rules
is always a straightforward, mechanical exercise, and if a member State authority revokes BTI, it must
be due to an obvious error in the performance of that exercise, the correction of which necessarily will
advance uniformity.
4.488 The EC ignores the fact that applying classification rules to a particular good may require a
customs authority to make certain judgments and that, especially in complex cases, these judgments
may evolve upon further reflection. It is not the case that the correct classification is a matter of
discretion, but the findings leading to determination of the correct classification may entail exercises
of discretion, in the sense of judgment. It is inco rrect for the EC to assume that the classification of a
particular good will always be objectively known and obvious to all 25 customs authorities. In
relying on the Court's finding that "the Customs authorities may revoke the BTI only if it is wrong,"
and asserting that discretion has no part in such action, the EC misunderstands the sense in which
discretion is referred to and begs the question of who determines that BTI is wrong. Of course, absent
a Commission regulation, it is the member State authority itself that determines that the original BTI
is wrong. Accordingly, it cannot be assumed th at, where a customs authority revokes BTI based on
its revised assessment of the good's correct classi fication, such action will necessarily yield the
objectively correct classification and thereby align it with the other member State customs authorities,
resulting in uniform administration.

4.489 Where a member State authority initially issues BTI – presumably believing it has applied the
classification rules correctly – that BTI is supposed to be binding on other member State authorities
with respect to the particular holder of the BTI a nd the goods concerned. If that authority reconsiders
its application of the classification rules – again, presumably believing that its revised application of
the classification rules is correct – there is no mechanism to impose its reconsideration on a uniform
basis. It is in this sense that th e member State autonomy recognized in Timmermans detracts from
uniform administration.
4.490 A final point that bears recalling with respect to BTI is the very limited sense in which BTI is
ostensibly binding at all. As Korea underscores in its Third Party Submission, "The BTI from one
member state does not necessarily bind another memb er state to classify similar or identical goods
imported by a person other than the holder of the BTI in the same way, resulting in different
classifications and treatment for the same or simila r product." The EC itself called attention to this
limited applicability of BTI in the EC – Chicken dispute.
(c) The availability of review by member State courts as the "normal" means of reconciling
divergences in member State administration of EC customs laws does not fulfill the EC's
GATT 1994 Article X:3(a) obligation to administer its customs laws in a uniform manner
4.491 The one instrument the EC holds out as securing uniform administration that is binding in
character is review of customs administrative decisions by member State courts. The emphasis that
the EC puts on this instrument is problematic for at least three reasons. First, as the decision of a
member State court is binding only within that member State, an appeal to a member State court will
not necessarily engender uniform administration. It is notable that the EC confirms that it has in place
no mechanism to notify the courts of other member States of the outcome of review of a customs
decision in one member State court. Absent such a mechanism, it is difficult to see how one member
State court would be able to take account of relevant decisions of other member State courts, let alone
take the step of seeking to bring about uniform ad ministration by affirmatively aligning itself with
other member State courts.
4.492 Second, while the pursuit of an appeal before one member State court might or might not lead
to uniform administration in the case of a simple divergence between two member States, it does not
address the situation of a divergence involving several member States. In that case, the EC evidently
would require a trader to pursue an appeal through each of several member State courts in order to
achieve uniform administration. This is a particul arly onerous burden to impose on traders to achieve
a result – uniform administration – that they are entitled to as a matter of procedural fairness in the
first instance, pursuant to GATT 1994 Article X:3(a).
4.493 Third, the EC's emphasis on appeals to member State courts in effect stands GATT 1994
Article X:3(a) on its head. It takes a GATT obligation under which traders are entitled to certain
elements of procedural fairness in customs admi nistration and submits that it is fulfilled largely
though a system that imposes a requirement on trader s to overcome legal hurdles in order to attain
those elements of procedural fairness. This can be seen, for example, in the EC's assertion in its
statement at the first Panel meeting that "where an individual trader does not exhaust all the remedies
and procedural possibilities afforded to him by th e system of a WTO Member, a resulting lack of
uniformity cannot be attributed to a failure in that Member's system."
4.494 Article X:3 contains a pair of complementary ob ligations that afford procedural fairness to
traders. Pursuant to Article X:3(a), a trader may expect that, consistent with a Member's WTO
obligations, its customs laws will be administered in a uniform, impartial and reasonable manner
across the Member's territory. Pursuant to Article X:3(b), the trader may expect, consistent with the
Member's WTO obligations, access to an independent forum for the prompt review and correction of
particular instances of the uniform administration of the Member's customs laws. Pursuant to that

same provision, the trader may expect not only that the decisions of such independent fora will be
implemented by the authorities responsible for custom s administration, but also that they will govern
the practice of all such authorities, such that the customs laws will c ontinue to be administered in a
uniform manner in light of those decisions.
4.495 Yet the EC appears to say that compliance w ith Article X:3(b) would in and of itself
necessarily equate to compliance with Article X:3(a). In other words, the EC's approach would mean
that Article X:3(b) would render Article X:3(a) red undant. As the EC describes it, the trader is not
necessarily entitled to expect that th e EC's customs laws will be uniformly administered in the first
instance. Rather, it is through exercise of the right to review that the trader eventually may attain
uniform administration.
4.496 Moreover, according to the EC's explanation, a trader must be willing not only to pursue a
first level of review in order to attain uniform administration, but to "exhaust all the remedies and
procedural possibilities afforded to him by the system." Unless a trader is prepared to pursue multiple
layers of appeals, possibly in more than one member State, including opportunities for preliminary
reference of questions to the ECJ – a process which itself takes an average of 19 to 20 months to
complete – then any resulting lack of uniformity in the administration of EC customs law "cannot be
attributed to a failure in [the EC's] system."
4.497 The United States submits that in emphasizing appeals to member State courts as a key
instrument in securing uniform administration, the EC has taken an obligation of the EC to provide an
important element of procedural fairness to trader s and shifted the obligation to traders to seek out
that element of procedural fairness themselves. This is contrary to the text of GATT 1994 Article X:3
and the widely recognized focus of that Article on the interests of traders.
5. In arguing that matters such as penalties a nd audit procedures are outside the scope of
its obligation under GATT 1994 Article X:3(a), the EC relies on an erroneous
understanding of what it means to "administer" customs laws
4.498 There are no EC rules prescribing penalties for violations of EC customs laws. As the EC
Commission itself has acknowledged, "Specific offences may be considered in one Member State as a
serious criminal act possibly leading to imprisonme nt, whilst in another Member State the same act
may only lead to a small – or even no – fine." (Exhibit US-32, p. 13)
4.499 With respect to audit procedures, there ar e differences among working practices, including
the balance between reliance on examinations of goods at time of importation and post-release audits.
As the EC Court of Auditors observed, due to such differences, "'individual customs authorities are
reluctant to accept each other's decisions.'" (Exhibit US-14, para. 37) At the conclusion of audits,
some member State authorities provide traders what amounts to binding valuation information, which
they may invoke in future transactions, while others do not.
4.500 In dismissing the foregoing instances of non-uniform administration, the EC argued that they
are outside the scope of its obligation under GA TT 1994 Article X:3(a) because penalties and audit
procedures are not measures of the type described in Article X:1, and because penalties and audit
procedures do not constitute administration of me asures that are described in Article X:1.
Alternatively, the EC argued that certain EC gui delines cause penalties and audit procedures to be
uniform within the meaning of Article X:3(a). Of these arguments, the main emphasis to have
emerged is the proposition that differences among member States in penalties and audit procedures do
not constitute non-uniform administration of EC measures that indisputably are within the scope of
Article X:1.

(a) The EC relies on an erroneous understanding of what it means to "administer" customs laws
4.501 In its reply to the Panel's Question No. 93, the EC refers to the definition of the term
"administer" and states that, in light of that definition, "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." It then reasons that since a law of a member State, such as a penalty law, "itself
needs to be executed or applied," "it cannot be said th at such a law 'executes' or 'applies' another."
This reasoning is flawed for several reasons.
4.502 First and fundamentally, the EC relies on an ex ceedingly narrow, errone ous definition of the
term "administer." It begins correctly by referri ng to the dictionary definition of "administer" as
"execute." But, it then purports to paraphrase the definition and in so doing introduces a concept from
outside the dictionary definition and relies heavily on that concept in its argument. Specifically, it
asserts that "in Article X:3(a) GATT, to 'admin ister' means to execute the general laws and
regulations, i.e. to apply them in concrete cases." Thus the EC argues that only when a member State
authority applies EC customs laws "in concrete cases" is it administering those laws, and only
divergences in the application of EC customs laws "in concrete cases" ma y constitute non-uniform
administration. Conversely, according to the EC's reasoning, the mere employment of dramatically
different tools by different member State customs authorities for giving effect to EC customs laws
does not constitute non-uniform administration.
4.503 Of course, the concept of "concrete cases" app ears nowhere in the definition of "administer"
as quoted by the EC itself. The Un ited States does not dispute that the application of laws and
regulations in concrete cases is an action enco mpassed by the term "administer." However, the
United States disputes the EC's sugges tion that the term "administer" is limited to application in
concrete cases.
4.504 In fact, the absence of any such limiting concept is evident from a closer examination of the
term "administer." The EC correctly quotes the dic tionary definition of "admin ister" as "execute."
But, it does not probe further to define "execute." In fact, the ordinary meaning of "execute" as
relevant here is "[c]arry out, put into effect." The question, then, is whether audit procedures and
penalty provisions of different member States put EC customs laws into effect, or whether it is only
the application of those laws by customs authorities in concrete cases that puts them into effect. The
answer is that audit procedures and penalty provisi ons put EC customs laws into effect by verifying
and enforcing compliance with those laws.
(b) Penalties and audit procedures play a critical role in carrying out EC customs laws
4.505 The administration of EC customs laws depends in large part on th e actions of traders
themselves. It is traders who make who make declarations and provide the customs authorities
information concerning classification and valuatio n of goods. It would be impossible for the
authorities to thoroughly inspect every shipment or verify the contents of every declaration before
clearance. It is for this reason that tools for verifying and enforcing co mpliance with the customs
laws are critical to "carrying out" or "putting into effect" those laws.
4.506
Given the critical role that audits and penalties pl ay in giving effect to EC customs laws, it is
somewhat surprising that the EC asserts, for exampl e, that "provisions which establish the penalty for
a violation of customs laws are not themselves related to the administration of customs laws." Indeed,
in other contexts (e.g., Exhibit EC-41, p. 1) the EC has acknowledged the critical relationship between
penalties and the administration of customs laws.
4.507 The EC's position with respect to audits is equa lly puzzling. In its First Written Submission,
the EC asserted that audits, like penalties, "are not part of customs procedures, and therefore do not

concern the administration of customs laws as su ch." In its response to the Panel's Question
No. 64(e), the EC explained that it does not consider audits to be customs procedures "[b]ecause they
are not one of the procedures referred to in Article 3(16) CCC." However, the specific sense in which
the EC uses the term "customs procedure" for purposes of the CCC has absolutely no bearing on
whether audits are customs procedures for admini stering the CCC. Indeed, the EC so acknowledged
in response to the Panel's Question No. 64(c).
4.508 In other contexts, the EC has acknowledged th at audits are tools for administering EC
customs laws. For example, the Customs Audit Gu ide contained in Exhibit EC-90 refers to CCC
Articles 13 to 16 as "a legal basis for the undertaki ng of audits." (A framework for post clearance and
audit based controls, p. 4) CCC Article 13, in turn , states that member Stat e customs authorities may
"carry out all the controls they deem necessary to ensure that customs legislation is correctly applied."
(c) Member States' penalties and audit procedures are properly characterized as tools for the
administration of EC customs laws
4.509 The EC contends that, in describing member States' disparate penalty and audit provisions as
tools of the administration of EC customs law which constitute the non-uniform administration of
those laws, "the US is undermining the clear distin ction between the administration of laws and the
laws themselves." In the EC's view, penalty and audit provisions are themselves laws that are
administered and therefore cannot be described as tools for administering other laws (in this case, EC
customs laws).
(i) A law may be a tool for administering other laws
4.510 The flaw in the EC's reasoning is its assumption that a law can be viewed only one way, as
the thing that is administered and not also as a tool for administering something else. The United
States does not disagree with the proposition that a law providing for penaltie s or audit procedures
may be considered as something to be administer ed. But that does not exclude the possibility of
considering the same law as a tool for administering other laws, for example, by putting those laws
into effect through verification and enforcement. The EC itself recognized this precise point in
Argentina – Hides and Leather , where it challenged the same Argentinian measure from the
perspective of its substance and from the perspective of its character as a tool for administering other
laws. (Panel Report, para. 4.203)
(ii) Basing a claim of non-uniform administration on differences among member State laws that
are tools for administering the EC's customs la ws is not inconsistent with the Appellate
Body's finding that a GATT 199 4 Article X:3(a) claim must concern the administration of
customs laws rather than their substance
4.511 The distinction between administration and substa nce that the Appellate Body referred to in
EC – Bananas III is not to the contrary. The Appellate B ody there did not have occasion to consider
whether the different licensing procedures at issue represented a non-uniformity in the administration
of some other law. That question simply was not at issue there, as it is here.
4.512 By contrast, the panel in Argentina – Hides and Leather did have occasion to consider
whether a regulation could be cha llenged under Article X:3(a) as a tool for administering Argentina's
customs laws in a manner inconsistent with that provision. The EC in that dispute challenged a
measure of Argentina (Resolution 2235) as a tool fo r administering Argentina's customs laws (set
forth in other statutes and resolutions) in a manner inconsistent with Article X:3(a). Argentina
defended, just as the EC does here, by arguing th at the complaint was about the substance of a
measure rather than its administration, and therefore was outside the scope of Article X:3(a) under the
Appellate Body's reasoning in EC – Bananas III. The panel rejected that argument, noting that "[t]he

relevant question is whether the substance of such a measure is administrative in nature or, instead,
involves substantive issues more properly dealt with under other provisions of the GATT 1994."
(para. 11.70) In finding that the measure in questi on was administrative in nature the panel observed,
"Resolution 2235 does not create the classification requirements; it does not provide for export
refunds; it does not impose export duties. It merely provides for a certain manner of applying those
substantive rules." (para. 11.72)
4.513 Following the panel's reasoning in Argentina – Hides and Leather , the fact that tools for
administration of EC customs laws themselves take the form of laws does not mean that the United
States has ignored the difference between substance and administration highlighted in EC –
Bananas III. Like Resolution 2235 in Argentina – Hides and Leather , member States' penalty and
audit provisions do not prescribe rules on classificati on and valuation, but they do provide means of
"putting into effect" laws that do prescribe rules on classification and valuation.
(iii) The findings of the panel in Argentina – Hid es and Leather are directly relevant to the
present dispute
4.514 The EC disputes the relevance of the panel report in Argentina – Hides and Leather . First, it
asserts that a distinguishing feature of the measure challenged in Argentina – Hides and Leather was
that it mandated administration in a manner inconsiste nt with Article X:3(a). Second, it suggests that
unlike the measure challenged in Argentina – Hides and Leather , penalty provisions are not
recognizable as being administrative in nature. Neither of these arguments is well founded.
4.515 The question of whether the measure at issue in Argentina – Hides and Leather mandated
administrative behavior inconsistent with GATT 1994 Article X:3(a) or merely permitted it was
entirely irrelevant to the panel's findings in that di spute. The EC's suggestion that the panel report in
Argentina – Hides and Leather is irrelevant because unlike the measure at issue there penalty
provisions are not readily distinguishable as "administr ative" or "substantive" is addressed in the US
response to the Panel's Question No. 90.
4.516 Of course, the relevant question for Article X:3(a) purposes is not whether a measure is either
"administrative" or "substantive" in character. A measu re may have both qualities depending on the
perspective from which it is examined, as the EC argued in Argentina – Hides and Leather .
Distinguishing a measure as "administrative" in charact er, as the panel in that dispute explained, is a
matter of determining whether it prescribes the m eans for "executing" or "putting into effect"
substantive rules on classification and valuation, for example, which themselves are set forth in other
measures. Like the measure at issue in Argentina – Hides and Leather, EC member State penalty and
audit provisions do not prescribe substantive rules on classification and valuation, but they do put
such substantive rules as prescribed in EC regulations into effect.
4.517 Since, in the EC's view, a Member administer s its customs laws only when it applies those
laws "in concrete cases," the EC cannot conceive of the possibility that non-uniform administration of
customs laws may take the form of different a udit procedures and penalty provisions in different
regions of the Member's territory. The EC's understanding ignores the ordinary meaning of
"administer" as "execute," which in turn means "put into effect."
4.518 The EC recognizes that the focus of Article X:3 is on protecting the interests of traders. From
traders' point of view, however, the liability they may face for misclassification of goods or technical
errors in clearing goods through cu stoms, the likelihood of being audited, and the possibility that at
the conclusion of an audit the customs authoriti es may issue binding guidance that the traders may
rely upon in the future all are considerations that can be as important as the consideration of how the
customs authorities will classify and value their goods.

(d) Reference to "penalties" for "minor breaches" in GATT 1994 Article VIII:3 does not put
penalties outside the scope of Article X:3(a)
4.519 The EC makes the additional argument that the mention of "penalties for minor breaches of
customs regulations or procedural requirement s" in GATT 1994 Article VIII:3 is evidence that
penalties are not addressed by GATT 1994 Article X. But this argument is a non-sequitur. The fact
that Article VIII:3 sets substantive parameters fo r penalties for certain types of breaches of customs
regulations or procedural requirements – i.e. "minor breaches" – has nothing to do with whether
penalties may be considered to be tools for administering a Member's customs laws.
4.520 Carried to its logical extension, the EC's reas oning would lead to manifestly absurd results.
For example, it would mean that a Member could discriminate among other Members by applying
penalties to customs breaches involving products of some Members but not applying penalties to
customs breaches involving like products of other Members. This would not be a breach of GATT
1994 Article I, according to the EC's logic, because that article, like Article X:1, refers only to
"charges" and not expressly to "penalties."
(e) The US argument does not imply a requirement of harmonization of all sub-federal laws of
WTO Members that have any similarity in subject matter to federal laws
4.521 Equally unavailing is the EC's argument that a finding that differences in member States'
penalty and audit provisions cons titutes non-uniform administration of EC customs laws would have
dire implications for all WTO Members in a variet y of regulatory areas. This argument is based on
the erroneous premise that under the US argument a ny sub-federal law that had any similarity in
subject matter with a federal law (i.e. a "link") "could be said to constitute 'administration' of the law."
However, it is not the mere existence of a "link" between member States' penalty and audit provisions
and EC customs laws that makes the former administ rative in nature. Rather, it is the fact that the
very purpose of member States' penalty and audit pr ovisions is to "execute" or "put into effect" EC
customs laws that gives them that quality.
6. The decisions of review tribunals in the EC do not govern the practice of "the agencies"
entrusted with administrative enforcement of EC customs laws, contrary to GATT 1994
Article X:3(b)
4.522 The EC fails to comply with Article X:3(b) because the one review tribunal that it provides
whose decisions have EC-wide effect is the ECJ, and review by the ECJ does not meet the
requirement of promptness. Review by member State courts does not fulfill the EC's obligation, as
the decisions of each such court apply only within its respective member State. The decisions of any
given member State's courts do not "govern the practice of" "the agencies entrusted with
administrative enforcement" of customs laws in the EC as a whole. Further, Article X:3(b) must be
read in light of the obligation of uniform administ ration in Article X:3(a); accordingly, where review
leads to decisions whose effect is limited to particular regions within a Member's territory such review
is not consistent with Article X:3(b).
(a) The decisions of the tribunals or proce dures a WTO Member provides pursuant to GATT
1994 Article X:3(b) must govern the practice of "t he agencies" entrusted with administrative
enforcement of the Member's customs laws
4.523 The first sentence of Article X:3(b) requires Me mbers to provide tribunals or procedures for
the prompt review and correction of administrativ e action relating to customs matters. The second
sentence requires that such tribunals or procedur es "be independent of the agencies entrusted with
administrative enforcement" and that their decisions "be implemented by, and . . . govern the practice
of, such agencies." It is the requirement that th e decisions of review tribunals or procedures govern

the practice of the agencies entrusted with administ rative enforcement that ma kes clear that the EC
does not fulfill its obligation under Article X:3(b), since each of the multiple review tribunals it
provides renders decisions that govern the practi ce only of a subset of agencies entrusted with
administrative enforcement within a particular region in the EC.
4.524 The EC states that "Article X:3(b) GATT, unlik e Article X:3(a) GATT, is not concerned with
questions of uniformity, but exclusively with the prompt review of customs decisions." But if this
were so, there would be no need for Article X:3(b) to specify that the decisions of review tribunals
must "govern the practice of" the agencies entruste d with administrative enforcement. It would
suffice simply to require the provision of tribunal s or procedures whose decisions are "implemented
by" the agencies entrusted with administrative enforcement.
4.525 The ordinary meaning of the term "govern" as rele vant here is "[c]ontrol, influence, regulate,
or determine" or "[c]onstitute a law, rule, standa rd, or principle for." Accordingly, the distinct
"govern the practice" requirement in Article X:3( b) looks beyond the simple implementation of a
decision in the case at hand and requires that the de cision "control, influence, regulate or determine"
the practice of or "constitute a law, rule, standard , or principle for" "the agencies entrusted with
administrative enforcement" of the customs laws.
4.526 Moreover, it is " the agencies entrusted with administrativ e enforcement" whose practice is
required to be governed by the decisions of review tribunals or procedures. That requirement is not
fulfilled where the decisions of review tribuna ls or procedures govern the practice of only some of the
agencies entrusted with administrative enforcement.
4.527 This understanding is reinforced by the context provided by Article X:3(a). The EC concedes
that Articles X:3(a) and X:3(b) must be interpre ted "in a harmonious way." Where the decisions of
review tribunals govern the practice of the agencies entrusted with administrative enforcement, they
become part of the agencies' administration of the Member's customs laws in future cases. Since the
Member's customs laws must be ad ministered in a uniform manner, th e decisions of review tribunals
must govern the practice of "the agencies" throughout its territory.
4.528 Australia put the point succinctly in its statement at the first Panel meeting when it observed
that "the decisions and rulings of the review bodi es should be applied consis tently and be available
equally throughout the territory of the WTO member." That is not the case in the EC. Not only are
the decisions of individual member State courts applicable only within their respective member
States, and therefore not applied consistently through out the EC's territory, but such decisions are not
"available equally throughout the territory" of the EC. As the EC expl ained in response to the Panel's
Question No. 72, there is no mechanism to ensure that member State courts are kept apprised of the
customs review decisions of other member State courts.
4.529 The only review tribunal decisions that govern the practice of "the agencies" entrusted with
administrative enforcement of EC customs laws th roughout the EC's territory are decisions of the
ECJ. However, review by the ECJ can hardly be co nsidered to satisfy the Article X:3(b) requirement
of prompt review. The ordinary way for questions to be put before the ECJ is through the preliminary
reference procedure, in which it may take 19 to 20 months for the ECJ to render a decision (and that is
only an average).
(b) The US argument does not imply a requirement for every WTO Member to establish a single,
centralized customs court
4.530
 The EC has indicated that the EC is not th e only WTO Member to provide for review of
customs administrative actions on a regional basis and suggested that the US argument would imply
an obligation for each WTO Member to establish a si ngle review tribunal with jurisdiction throughout

its territory. However, whether or not there are other Members that provide for review of customs
administrative action on a regional basis, the EC is the only WTO Member of which the United States
is aware that has a combination of geographically fragmented customs administration and
geographically fragmented review.
4.531 The United States does not argue that Article X:3(b) requires every WTO Member to have a
single, centralized tribunal for the prompt review and correction of customs administrative actions.
What the United States does argue is that Article X:3(b) requires that the decisions of the tribunals
that a Member provides for the prompt review and correction of customs administrative actions
govern the practice of the agencies entrusted with administrative enforcement of the customs laws
throughout the Member's territory.
4.532 Where a Member has a single, centralized agen cy entrusted with the enforcement of its
customs laws, it is conceivable that it may fulfill its obligation under Article X:3(b) even where it
provides for review and correction through multiple tribunals each of whose jurisdiction is regionally
limited. In that case, where the court for a given re gion renders a decision, the agency should be able
both to implement that decision in the region and conf orm its practice throughout its territory. In this
way, the Member's administration of its customs laws would be governed by that decision, and its
customs law administration would be uniform. If the decision of a court in one region conflicts with a
decision of a court in another region, the agency sh ould be able to resolve the conflict by appealing
one or the other decision to a court or tribunal of superior jurisdiction, a possibility contemplated by
the second sentence of Article X:3(b).
4.533 Further evidence for the proposition that the re view and correction provided for pursuant to
Article X:3(b) must result in decisions that govern the administration of a Member's customs laws
throughout its territory is the proviso in the second sentence, which states that " the central
administration of such agency may take steps to obtain a review of the matter in another proceeding if
there is good cause to believe that the decision is inco nsistent with established principles of law or the
actual facts." (Emphasis added.) The proviso contemplates "the central administration" challenging a
tribunal's decision collaterally – i.e. "in another proceeding" – when the central administration
determines that "the decision is inconsistent with established principles of law or the actual facts."
But, that possibility makes sense only if the decision in the original proceeding would otherwise have
effect outside of that proceeding. If the decision's effects were confined to the proceeding in which it
was rendered, there would be no need or basis for a collateral challenge.
4.534 As the possibility of collateral challenge to tribuna ls' decisions implies that the effects of such
decisions are not confined to the particular proceed ings in which they are rendered, there is no basis
for suggesting that Article X:3(b) contemplates these effects having a scope that is narrower than the
Member's entire territory. Not only is there no basi s for such a suggestion, but the reference to "the
central administration" of the agency entrusted wi th administrative enforcement itself supports the
proposition that the effects of tribunals' decisions are contemplated as having a scope that covers the
Member's entire territory.
4.535 In sum, the combination of 25 separate EC member State customs authorities and review
tribunals that are distinct to each member State r esults in review tribunal decisions that do not govern
the practice of " the agencies entrusted with administrative en forcement" of the EC's customs laws.
For this reason, the provision of review and co rrection of member State customs administrative
decisions by member State tribunals fails to meet the EC's obligation under Article X:3(b).

F.
SECOND WRITTEN SUBMISSION OF THE EUROPEAN COMMUNITIES
1. The measures at issue in the present dispute
4.536 The US claim under Article X:3(a) GATT re lates to "the manner in which the EC
administers" its customs laws. As regards th e US claim under Article X:3(b) GATT, the EC
understands that the measure at issue is the allege d failure of the EC to provide for tribunals or
procedures for the prompt review and correction of customs decisions.
4.537 However, in relation to the claim under Artic le X:3(a) GATT, the United States goes on to
add that "the specific measure at issue" within the meaning of Article 6.2 DSU "are the laws
regulations, decisions and rulings that make up EC customs law", i.e. the measures listed in the first
paragraph of the US Panel request.
4.538 The EC does not agree that the measure listed in the first paragraph of the US panel request,
which include notably the Community Customs Code, the Implementing Regulation, and the
Community Customs Tariff, are the "measures at issu e" in the present dispute within the meaning of
Article 6.2 DSU. It follows clearly from the firs t sentence of the first paragraph of the US Panel
request that the US claim relates to the manner in which the EC administers the measures listed, not to
the measures themselves. The enumeration at the e nd of the first paragraph of the US request serves
merely the purpose of identifying the laws whic h the EC allegedly fails to administer in a non-
uniform manner. However, this does not mean that these laws themselves become measures at issue
in the present dispute.
4.539 The EC also does not share the view of the Unite d States that administration of laws "may not
itself be a measure". As the Appellate Body has confirmed in US – Corrosion-Resistant Steel Sunset
Review, any act or omission attributable to a WTO Me mber can be a measure of that Member for
purposes of WTO dispute settlement. This also appli es to the administration of laws as referred to in
Article X:3(a) GATT.
4.540 Close attention to what is the measure at issu e in the present dispute is particularly necessary
given the specific features of Article X:3(a) GAT T as the legal basis of the US claim. As the
Appellate Body has confirmed in EC – Bananas III , Article X:3(a) GATT relates only to the
administration of the laws and regulations referred to in Article X:1 GATT, not to those laws and
regulations themselves.
4.541 The US suggestion that administration may not be a measure would lead to the absurd result
that non-compliance with Article X:3(a) GATT could never be challenged under the DSU.
4.542 At the same time, the EC is concerned that th e United States is trying to blur the distinction
between the administration of measures, and th e measures themselves, and thereby effectively
attempts to enlarge the scope of the present dispute. For these reasons, the Panel should hold that the
acts of general application listed in the US pane l request are not measures at issue in the present
dispute.
4.543 On a further point, the United States has refu sed to identify the specific aspects of EC
customs administration that it was challenging. It has merely stated that it challenged the
administration of the listed measures, which it descr ibed as "capturing the un iverse of measures that
constitute EC customs law".
4.544 This does not constitute a sufficiently precise description of the measure at issue in the
present dispute. EC customs legislation is a large and complex body of law. It would therefore not
be sufficient to describe the measure at issue in the present as the "administration of EC customs law".

Rather, the measure at issue in the present dispute is the administration of EC customs law in those
respects referred to in the US Panel request, as fu rther refined in the US First Written Submission,
notably tariff classification, customs valuation, processing under customs control, local clearance
procedure, and penalties. This is also confirmed by the title of the present dispute, which is "Selected

Customs Matters", and thus cannot include simply all customs matters.
4.545 The United States attempts to keep the scope of the present panel proceedings vague are also
illustrated by the US's refusal to provide an exha ustive list of the customs procedures in respect of
which it alleges a lack of uniform administration, and in stead claims that this lack is "not confined to
any particular customs rule or group of rules". In this respect, the EC would remark that it cannot be
expected to defend itself against nebulous charges of non-uniform administration in areas that the
United States has not identified in its Panel request and its First Written Submission. Accordingly,
the US attempt to keep the scope of the present proceedings vague should be rejected.
2. The US claims under Article X:3(a) GATT
(a) The requirements of Article X:3(a) GATT
(i) Article X:3(a) GATT concerns the administrati on of customs laws, not the customs laws
themselves
4.546 The EC has explained, with reference to the relevant case law of the Appellate Body, that
Article X:3(a) GATT does not concern the laws and regulations themselves, but only their
administration. This means that Article X:3(a) GATT does not require a harmonization of laws
within a Member where, for instance, different lega l regimes are applicable within different parts of
the territory of a WTO Member. This is relevant in all areas where matters at issue in the present
dispute are governed by laws of the EC member Stat es, which is the case in particular with respect to
penalties for vi c olations of customs law.
4.547 The United States contests this interpretati on by arguing that "customs laws may be
administered through instruments which are themselves laws".
4.548 The EC considers this interpretation to be ma nifestly incompatible with the wording of
Article X:3(a) GATT, which refers only to the administration of the laws, regulations, decisions and
rulings of the kind referred to in Article X:1(a) GATT. Article X:1 GATT specifies that these
measures are all measures of general application. The administration of such measures is thus their
application in concrete cases. La ws, which are of general application, can therefore not at the same
time be regarded as measures of administration. The US argument would also be incompatible with
the clear distinction made by the Appellate Body in EC – Bananas III between the administration of
laws and the laws themselves.
4.549 The United States tries to escape from this conclusion by drawing a distinction between
"substantive" and "administrative" laws, for wh ich it claims as support the Panel Report in Argentina
– Hides and Leather. According to the United States, only laws which are of an administrative nature
must be administered in a uniform manner, wherea s no such obligation would exist with respect to
laws which are of a "substantive" character.
4.550 Apart from the fact that the United States furnis hes no explanation of what it understands by
"substantive" and what by "administrative" laws, the EC does not believe this interpretation to be
correct. The Panel Report in Argentina – Hides and Leather does not provide any support for the US
interpretation. The obligation of uniform applicati on applies to all the measures of the kind referred
to in Article X:1 GATT, regardless of whether they are "substantive" or "administrative" in nature.

The real distinction for Article X:3(a) GATT is thus not between substantive and administrative
measures, but between administration and the measures to be administered.
4.551 This matter is of great importance for all WTO Members where certain matters covered by
Article X:3(a) GATT may be regulated at the sub-fede ral level. This is even more important since
Article X:3(a) GATT does not only apply to the administration of customs laws, but also to laws
regarding the internal taxation and internal sale of products. In many WTO Members, including the
United States, such matters are frequently govern ed by sub-federal laws, which may result in the
existence of divergent rules across the territory of such WTO Members. If the US arguments were
accepted, differences in sub-federal legislation w ould have to be regarded as incompatible with
Article X:3(a) GATT. This would upset the fe deral balance in numerous WTO Members, and can
therefore not be a reasonable interpretation of Article X:3(a) GATT. This would be incompatible also
with the findings of the GATT Panel in Canada – Gold Coins, which held that the GATT respects the
internal distribution of competences within each WTO Member.
4.552 The United States has wrongly argued that the EC interpretation would put "all laws and
regulations that are instruments of customs admi nistration beyond the reach of the disciplines of
Articles X:3(a) GATT".
4.553 First of all, the EC argument applies only to those matters which are the subject matter of sub-
federal legislation, which is in the EC the case not ably for penalties. In the EC, as in other WTO
members, most areas of customs law are governed by laws at the federal level.
4.554 Moreover, even where a law exists at the sub-fe deral level, this does not mean it is "beyond
the reach" of Article X:3(a) GATT. On the contrary, Article X:3(a) GATT requires the uniform
administration of all laws, including those which might exist in a WTO Member at the sub-federal
level, within the area in which they apply.
4.555 Finally, the United States looses sight of th e actual object and purpose of Article X:3(a)
GATT. The purpose of this provision to ensure a cer tain minimum level of predictability and security
as regards the administration of the covered laws an d regulation to WTO Members and traders. This
objective is entirely respected if laws which apply at a sub-federal level within a WTO Member are
applied in a uniform manner within the territory in wh ich they apply. It is not compatible with this
objective and purpose to transform Article X:3(a) GATT into a provision which requires legislative
changes, and notably a harmonization of sub-federal within a WTO Member.
(ii) Article X:3(a) GATT does not prescribe the ways in which WTO Members must administer
their customs laws
4.556 Article X:3(a) GATT contains an obligation to administer customs laws in a uniform manner,
but does not prescribe the specific way in which WTO Members should administer their customs
laws.
4.557 At the level of principle, the United States does not appear to contest this point. In fact, it
states on a number of occasions that "prescribing the method for the EC to come into compliance with
Article X:3(a) GATT is not necessary to resolve this dispute".
4.558 However, the reality of the US claims is rather different. In particular, the United States is
effectively requiring the EC to establish a cust oms agency, which in addition should have
competences to issue advance rulings for a number of matters. A more prescriptive application of
Article X:3(a) GATT is hardly imaginable.

4.559 It is also interesting to note that the United States has so far not provided any explanation of
how its claims relate to its ow n proposal made in the context of the Doha Round Trade Facilitation
Negotiations, which in particular foresee the creati on of an obligation to provide for advance rulings
on tariff classification and valuation matters. The United States has also not contested that one of its
essential motives behind the present case is to influence the Doha Trade Facilitation Negotiations.
4.560 The EC therefore maintains its view that th e United States is seeking an application of
Article X:3(a) GATT which would be highly prescriptive in character, and effectively transform
Article X:3(a) GATT into a basis for the harmonizat ion of customs laws and practices along the US
model. The EC submits that such an interpretation should be rejected.
(iii) Article X:3(a) GATT lays down minimum standards
4.561 The United States has attempted to deny the im portance of the statement of the Appellate
Body in US – Shrimp, and criticized in particular that the Appellate Body "did not elaborate on what it
meant by minimum standards". However, this do es not change the fact that the Appellate Body
qualified Article X:3 GATT as a provision which lays down certain minimum standards of
transparency and procedural fairness. While this does not replace the need to interpret the actual
terms of Article X:3(a) GATT, it does shed some light on the limited objective underlying this
provision, which is directly opposed to the highl y ambitious interpretation advocated by the United
States.
4.562 In its First Written Submission, the EC has also explained, with reference to the GATT Panel
Report in EEC – Dessert Apples , that minor administrative differences in treatment cannot be
regarded as implying a violation of Article X:3(a) GA TT. This view has also been shared by Japan.
In its response to a question by the Panel, the EC has explained that this means that it is for the United
States, as the complaining party, to show that vari ations of administrative practice, even where they
existed, have a significant impact on traders.
4.563 The United States has tried to sweep this case law aside by claiming that it has "provided
evidence of a system that engenders and fails to cu re myriad divergences of administration in matters
that go to the core of customs administration and affect traders liability for customs duty, as well as
other aspects of their operations". The EC does not contest, for instance, that where the liability for
customs duty is affected, this is significant for th e competitive situation of a trader. However, as the
EC has already remarked, for some of the other a lleged differences, for instance as regards the local
clearance procedure or valuation audits, the Unite d States has so far provided no explanation as to
why such differences, even if they existed, would be significant for traders.
(iv) The meaning of "uniform administration"
4.564 As the Panel in US – Hot Rolled Steel has held, uniformity can be assessed only on the basis
of an overall pattern of customs administration. On ly 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.
 Very similar views have also been expressed by certain of the third
parties in the present case, namely Australia and Japan.
4.565 The United States has tried to distinguish the present case from US – Hot Rolled Steel and
EC – Poultry by arguing that these cases were not concerned with "geographical uniformity".
However, the US fails to explain why "geographi cal uniformity" should be treated any differently
from other kinds of uniformity, e.g., uniformity acro ss time. Nor is it clear why a different standard
would apply to the requirement of uniform admini stration on the one hand, and the requirement of
impartial and reasonable administration, on the other. The EC would also like to recall that it has

been the United States itsel f, which – in cases such as US – Hot Rolled Steel – has argued against
judging compliance with Article X:3(a) GATT only on the basis of individual cases.
4.566 In response to a question from the Panel, the United States has further elaborated that in the
present case, "the question is not whether a particular administrative authority is applying a particular
law in a uniform manner", but "whether different authorities across the territory of a WTO Member
[...] are applying various laws uniformly". Appare ntly, the United States is thus suggesting that a
stricter standard should apply to WTO Member s with a decentralized system of customs
administration compared to WTO Members with a centralized customs administration. The EC sees
no basis for such double standards, which should therefore be rejected.
4.567 Finally, contrary to what the US claims, the EC has never suggested that the pattern of non-
uniformity needed to be "neat". If instances of non- uniformity in the system of a WTO Member are
so widespread and frequent as to have a significant impact on the administration of that Member's
system, then this will amount to a pattern of non-uniform administration. There is no need for them to
be arranged in a particular pattern. Therefore, the US argument that the standard set out by the Panel
in US – Hot Rolled Steel would make it impossible to challenge an overall absence of uniformity is
simply incorrect.
(b) The burden of proof
4.568 The burden of proof rests on the United States as th e complainant in the present case. It is for
the United States to bring forward sufficient eviden ce to establish that there is a pattern of non-
uniform administration in respect of the aspects of EC customs law raised by the United States.
4.569 In its First Written Submission, the United States failed to bring forward any evidence to this
effect. It limited itself to raising a small number of cases on issues of tariff classification and customs
valuation. A limited number of cases in a particular area are insufficient for assessing the overall
administration of the EC's system. Moreover, the cases raised by the United States in fact do not
constitute examples of lack of uniformity in the EC's system.
4.570 The Panel asked the United States a number of questions aimed at obtaining from the United
States evidence concerning the actual incidence of non-uniform administration in the areas of EC
customs law raised by the United States.
4.571 In its responses, the United States does not furnish a single new piece of evidence of non-
uniformity in the EC's system. Instead, it responds that its claim "does not turn on the statistical
frequency of non-uniform administration". Moreover, it claims "that it is the EC, rather than the
United States, that is likely to have the informa tion sought in the question", and requests the Panel to
exercise its authority under Article 13 of the DSU to seek relevant information from the EC. For
instance, the United States suggests that the EC s hould be requested to provide "a statistically
significant sample of BTI and other classification decisions from various member States (including
explanations of the bases for those decisions) in order to determine the frequency of divergent
administration". As another example, the United States suggests that the "Panel might seek from the
EC information of the type that enabled the EC's C ourt of Auditors to make the findings contained in
its report on customs valuation".
4.572 These responses must be regarded as transparent a ttempts of the United States to rid itself of
the burden of proof, and should be rejected as such. It is not credible for th e United States to claim,
on the one hand, that there is a widespread pattern of non-uniform administration in the EC, and then
to claim that it does not have any evidence to support this claim.

4.573 Instead, the United States wishes to pass the burde n of proof to the EC by requesting that it
should be the EC which provides the information re quested. With this request, the United States is
essentially suggesting that the EC should proof its own innocence. This request is not only
completely without basis in WTO law, it also am ounts to a logical impossibility. Whereas it should
be possible for the United States to provide eviden ce of instances of non-uniform administration, if
such instances in fact existed, it is logically impo ssible for the EC to proof that such instances never
occur.
4.574 For this reason, it would be entirely impractical for the Panel to request the EC, as suggested
by the United States, to provide "a statistically significant sample of BTI and other classification
decisions from various member States (including e xplanations of the bases for those decisions) in
order to determine the frequency of divergent admini stration". Similarly, it is impractical for the
United States to suggest that 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". The
Report of the Court of Auditors was based on a udit visits that took place on the premises of the
Commission and the customs administrations of 12 EC member States in 1999-2000. The US
suggestion therefore amounts in essence to request ing the EC to conduct a new audit of customs
valuation. This is not a reasonable request to make of a defending party in the context of proceedings
under the DSU.
4.575 Moreover, the request made by the United Stat es goes considerably beyond the functions of a
Panel under Articles 13 of the DSU. Whereas the A ppellate Body has confirmed that Panel's have a
certain investigative authority, this authority also has its limits, which were clearly spelt out by the
Appellate Body in Japan – Agricultural Products II . In the present case, the United States is asking
the Panel to do precisely what the Appellate Body sa id it should not. Having failed to make its own
prima facie case, the United States is asking the Panel to seek the relevant information from the EC.
In this way, the Panel would relieve the United Stat es of its original burde n of proof, and make the
case for the complainant.
4.576 The United States seems to believe that it can establish a lack of uniformity by making broad
allegations of absence of uniformity in particular areas. However, the administration of customs law
in areas such as tariff classification or customs valuation depends on the particular circumstances of
each case. Accordingly, whether administration is uniform or not cannot be established without
knowledge of the "particular details of each case", and it is the responsibility of the United States as
the complainant to provide these details.
4.577 Finally, while the EC can certainly not be expected to prove that it administers its laws in a
uniform manner, it would like to point out that cer tain elements of the context of the present case
provide an indication that the factual allegations made by the United States are incorrect. The EC has
already, in its First Written Submission, pointed out the almost complete lack of reaction by US
industry and traders to the request by USTR for input to the present case.
4.578 A similarly interesting indication is provided by the reactions of other WTO Members, and
notably the third parties, to the present dispute. Of the nine WTO Members which have chosen to
become a party to the present dispute, not one has po inted to the existence of any examples of lack of
uniformity. The only third party which claimed that a lack of uniformity in the EC's practice existed
is Korea. However, Korea refused to do so, invoking "the business confidential nature of the
underlying business transactions". The EC consid ers that if Korea had indeed information which
might be helpful for the EC to ensure a uniform administration of its customs laws, Korea should have
shared this information in the first place with the EC. This would also be in accordance with the
customs cooperation agreement between the EC and Ko rea, which provides for obligations of mutual
information and assistance.

4.579 Finally, the United States keeps on referring to what it calls "blunt acknowledgements of how
the EC system operates" by certain EC officials of institutions, and claims that the "cumulative
message is that there is a problem of divergent administration". The United States is referring here to
a handful of dispersed statements by EC officials and institutions, which are taken out of context, and
are of no relevance for the present case. Most of these statements should be seen as a normal
reflection of the process of self-monitoring and improvement which is necessary for any system of
customs administration in the context of a rapidly evolving world. If every critical comment made in
the context of WTO Member's administrative and regulatory processes were immediately interpreted
as evidence of WTO-incompatibility, this would creat e a serious chilling effect on the internal policy
debates of WTO Members.
(c) General issues underlying the US claims under Article X:3(a) GATT
4.580 In its First Written Submission, the EC has already addressed a number of general issues
underlying the US claims under Article X:3(a) GATT, including the role of the member States, the
Commission, the Court of Justice, and the Customs Code Committee. The United States has so far
not responded in detail to these expl anations of the EC. Instead, its subsequent interventions have
highlighted two central tendencies underlying the US case: first, the US attempt to force the EC to
create an EC customs agency; and second, its tendency to belittle and ignore the functioning of the EC
institutions and procedures designed to ensure a uniform application of Community law throughout
the EC.
(i) The US case is aimed at compelling the EC to create an EC customs agency
4.581 The US submissions confirm that the US case is essentially aimed at compelling the EC to
establish an EC customs agency. While the United States has formally claimed that prescribing the
method for the EC to come into compliance with its obligations under Article X:3(a) GATT is "not
necessary to resolve this dispute", its claims a nd submissions in the present dispute tell a very
different story. Indeed, the alleged need for an EC customs agency is a recurrent theme in the
submissions of the United States. Consequently, the United States has referred to the creation of such
an agency as an "obvious option" for addressing its claims.
4.582 That the US case is exclusively aimed at the creation of an EC customs agency is also
illustrated by the US response to a Panel's questi on on the specific measures the United States would
expect the EC to adopt to address its claims. The United States referred only to creation of a customs
agency. While the United States indicated that it did not "rule out" that other options might exist for
addressing its claims, it failed to identify any other concrete measures which the EC could take.
4.583 The exclusive focus of the United States on the establishment of an EC customs agency is
also revealed by the US respon se to a Question by the Panel, wh ere it asked the United States to
comment on the EC's observation that the US criticisms of the ECJ judgment in Timmermans was
inconsistent with its criticism of the decision of the UK Court in Bantex. In response, the United
States explained that in the absence of a centralized customs authority, any scenario would lead to
non-uniform administration.
4.584 In the view of the United States, in the absence of such an agency, no modification to the EC's
rules and procedures in the areas of tariff classifi cation, customs valuation and customs procedures
would be sufficient to address the US claims.
4.585 Another confirmation of the nature of the US cl aims is the "wish list" which the United States
addressed to the EC following the co nsultations in the present dispute. This wish list included as its
first point the "establishment of a single, centraliz ed EC authority for issuing advance rulings, within

a brief, specified period following request, to traders regarding matters including classification,
valuation, and origin (both preferential and non-preferential)".
4.586 The United States has attempted to present this request as a sort of concession, since the
agency in question would be responsible only for i ssuing advance rulings. In response, the EC would
recall that there is – with the exception of origin matters – currently no obligation to provide for
advance rulings on customs matters. Accordingly, the suggestion that the EC should create an agency
with a competence to issue such rulings goes beyond current WTO commitments.
4.587 Overall, it becomes clear that the US case is not concerned with the actual administration of
EC customs law, but is an extremely ambitious case aimed at a complete overhaul of the EC's system
of customs administration. It would leave the EC with almost no other choice but to establish an
agency with operational tasks which are unprecedented in the history of the EC. Such an enterprise
would entail profound changes in the way EC law is administered, and have legal, financial and
personnel implications which are very difficult to project at the current stage. The EC also doubts that
this could be regarded as a "reasonable measure" within the meaning of Article XXIV:12 GATT.
4.588 More importantly still, executive federalism is a feature not just of EC customs law, but of EC
law in general. Since Article X:3(a) GATT applies not only to customs matters, but to all the matters
referred to in Article X:1 GATT, the issues raised in the present case do not seem necessarily limited
to the field of customs, but concern almost areas of EC law. Accordingly, it is a frontal attack on the
executive federalism of the EC legal order, with im plications that would go far beyond the area of
customs.
4.589 This claim cannot have a legal basis in Article X:3(a) GATT. This provision provides for
certain minimum standards of procedural fairness and transparency. Like the WTO Agreements
overall, it does not prejudge the internal autonom y of WTO Members on fundamental questions of
internal organization and administration.
(ii) The United States misrepresents the EC legal system
4.590 In its First Written Submission, the EC has set out in detail how the EC legal system ensures
the uniform interpretation and application of EC law through the EC. The EC has also set out how the
various institutions and actors involved contribute to the uniform application of EC customs law.
4.591 In its subsequent submissions, the United St ates has provided almost no reaction to these
explanations of the EC. Instead, the United States c hooses to persist in its highly selective reading of
the EC legal system, and ignores everything that do es not fit into the negative picture it wishes to
draw. The dismissive approach of the United States towards the EC legal system is reflected in a
repeated statement, where the US cl aims that the EC system consists in "a loose web of principles,
instruments, and institutions, including non-binding guidance, plus general obligations of cooperation
between member States, plus discretionary referrals of matters to the Customs Code Committee".
4.592 The EC considers such statements to be de rogatory towards the EC as a whole. The
mechanisms which the EC has describ ed are typical not only for the area of customs law, but for the
way in which the uniform interpretation and applica tion of EC law is ensured throughout the EC.
Accordingly, if the United States considers the EC customs union to constitute a "loose web", then
presumably this must apply to the EC as a whole.
4.593 Such statements betray a lack of understandi ng and appreciation of the history and success of
European integration over the last 50 years. It may also reflect the fact that there are considerable
difference between the constitutional structures a nd processes of the United States on the one hand,

and the EC on the other. However, such differen ces must be tolerated within the WTO, and cannot
simply be presumed to amount to violations of Article X:3(a) GATT.
4.594 As regards the role of the Commission, the Court of Justice, and the Customs Code
Committee, the United States has so far not furthe r substantiated its criticisms. As regards the
Customs Code Committee the United States, when asked whether it had any evidence to proof its
allegation that decision-making in the Committee h as become more difficult since the most recent
enlargement on 1 May 2005, the United States failed to produce the requested evidence, and instead
stated that this was "evident". In addition, it again referred to a statement from an EC official.
However, this statement was made in a personal capacity and right after the entry into force of
enlargement, and therefore can hardly be rega rded as "evidence" of what has happened since
enlargement.
(d) The US claims under Article X:3(a) GATT
(i) Tariff classification
Binding tariff information

The alleged risk of BTI shopping
4.595 The Panel asked the United States to provide evidence that "picking and choosing" actually
occurs in the EC's BTI system. In response, th e United States failed to provide such evidence.
Instead, it attempts to circumvent the question by referring to observations which are of no relevance
to the question.
4.596 First, the United States refers to a passage from Panel Report in EC – Chicken Cuts, in which
the EC is reported to have stated that it is possibl e under EC law to withdraw an application for a BTI
where the outcome is considered unfavourable by the importer. However, this statement does not
contain anything that would indicate that BTI shoppi ng occurs in the EC. Since BTI is granted upon
application, and in the interest of the applicant, it is normal that the application can be withdrawn until
the BTI has been issued. Before the issuance of BTI, the appli cant will in most cases not know the
tariff classification envisaged by the customs authori ties. In contrast, once the BTI has been issued,
the application can no longer be withdrawn. In a ddition, it should be noted that all applications,
including those which have been withdrawn, are en tered into the version of the EBTI data base to
which the customs authorities have access.
4.597 Second, the United States claims that the issuance of BTI is "heavily skewed in favor of
certain member States", and claims that this "skewing suggest strategic selection of the member States
in which importers apply for BTI". The EC consid ers that the fact that the authorities of certain
member States issue more BTIs than others simp ly reflects differences between member States in
terms of market size, geographical location, trading patterns, other practical considerations.
4.598 Finally, the US states that "importers regular ly approach the US embassies in EC Member
States to enquire as to the optimal authorities from which to apply for BTI". The EC would remark
that even if such questions were asked, this is no pr oof that divergent practices in fact occur. Indeed,
there is no "optimal authority", and the applica tion should be submitted to the competent Member
State authorities as determined by Article 6(1) of the Implementing Regulation.
The alleged difficulties of detecting and correcting divergent BTIs
4.599 The United States has also argued that the EC system does not provide for sufficient
mechanisms to detect and correct divergences between BTIs, should they occur.

4.600 In its responses to the Panel's question, the Un ited States has criticized that the EBTI data
base "does not reveal in any detail the rationale applied by different authorities in classifying a
particular good in a particular way". The EC is ast onished by this statement. For each BTI issued, the
EBTI data base (in both its versions) includes a detail ed description of the product sufficient to permit
their identification and classification, the CNN c ode under which the product was classified, and the
justification of this classification. The justifica tion will typically identify th e interpretative rules and
principles applied, and where appropriate other rele vant authority, such as case law of the Court of
Justice. The EC considers this information entirely sufficient to ensure full information about the BTI
practice of EC customs authorities.
4.601 The EC has also explained that the EBTI data ba se is very well received and intensively used
by traders and by customs authorities, as eviden ced by the fact that the average number of
consultations per month in the first half of 2005 was about 324.000. The United States has argued
that this number might "indicate anything from academic curiosity to collection of statistical
information". The EC finds the explanation th at 324.000 consultations per months would be
generated by "academic curiosity" or "collection of st atistical information" remarkably far-fetched. It
is clear that the EC EBTI data base is a useful tool for securing a uniform classification practice,
which is widely used by traders and customs authorities alike.
The US claim that member States do not treat BTI issued by other member States as
binding
4.602 In its First Written Submission, the United States has claimed that "Member States do not
always treat BTI issued by other Member States as bi nding". Once again, the United States has failed
to provide specific examples to prove its allegati on. Instead, it points to a survey of a trade
association to which it has already referred to in its First Written Submission. According to this
survey, one company reported that "binding tariff in formation from Germany is still not accepted by
other EU countries, especially Greece and Portugal".
4.603 The EC contests the existence of any probl em regarding the recognition of BTI from
Germany in other EC member States. The "survey" referred to by the United States is no "evidence"
to the contrary. It merely reflects a comment made by one unidentified company which is not
supported by any further explanation or evidence. Accordingly, it is impossible to verify the accuracy
of the statement. The EC would remark that even if an importer claims that BTI was not accepted,
this might in fact reflect a range of problems of an entirely different kind, for instance a lack of
identity of the products imported with those described in the BTI. Moreover, if indeed a customs
authority fails to recognize BTI issued by anothe r Member State, the importer can obtain judicial
review. The importer can also inform the European Commission, but the EC is not aware of this
having occurred.
4.604 Second, the United States refers to a statemen t by the EC in the context of the dispute EC –
Chicken Cuts, where the EC is quoted as asserting that a particular "interpretation" was not followed
in other EC customs offices. As the EC will ex plain further below, there was no difference of
interpretation or application of EC classification ru les in this case. However, for the purposes of the
present discussion, it suffices to point out that the EC's statement related only to "interpretation".
Nowhere in the Panel Report in EC – Chicken Cuts has the EC said that BTI was not recognized when
presented by the holder. Accordingly, the statem ent quoted by the United States is not a pertinent
answer to the Panel's question.
4.605 Finally, the United States refers the Panel to the decision of the Main Customs Office Bremen
in the Bantex case, in which the Customs Office noted that "numerous binding customs tariff
decisions have been handed down regarding compar able goods". This remark once again betrays a
misunderstanding of how the EC's BTI system works. BTI is binding on the customs authorities only

as against the holder of the BTI and it does not appear that Bantex GmbH was the holder of BTI for
the products at issue. Accordingly, once again, the United States responds to the Panel's question
with an example that is of no relevance to the question. In addition, it is noted that in the Bantex case,
the question was not whether there existed BTI fo r comparable goods, but whether the goods were
identical to those described in th e BTIs. As this was not the case, the example is even less apt to
support the US claim.
The legal effect of BTI
4.606 In its First Written Submission, the United Stat es has also made numerous criticisms of the
legal effects of BTI, which relate notably to the Timmermans case law of the European Court of
Justice. These criticisms are unfounded: the Timmermans case in fact can contribute to the uniform
application of EC customs law. The EC has also pointed out that the US' arguments were inconsistent
with its criticisms of the decision by the UK Court in the Bantex case.
4.607 When questioned by the Panel about this obvious inconsistency, the United States responded
that "in the absence of a centralized customs admini stration", both situations, i.e. either allowing the
revocation of BTI or not allowing it, could lead to a lack of uniformity. As the EC has already
explained above, this US response demonstrates irrefutably that the specific features of the EC's BTI
system are not in any way problematic from the poi nt of view of the uniform application of EC
classification rules. Rather, the US case is uniquely aimed at compelling the EC to create an EC
customs agency.
4.608 That there is nothing wrong with the EC's BTI system, and notably the effect of BTI in the EC
legal order, is also borne out by a comparison with the US rules on advance rulings. For instance, the
United States has criticized in its First Written Subm ission that BTI in the EC is "specific to the
holder". Interestingly, exactly the same appears to be true for advance rulings in the United States,
where US law explicitly cautions that "no other pe rson [than the one to whom the ruling is addressed]
should rely on the ruling letter or assume that th e principles of that ruling will be applied in
connection with any transaction other than the one described in the letter".
4.609 Similarly, US law also provides that a ruling letter may only be invoked "in the absence of a
change of practice or other modification or revoca tion which affects the principle of the ruling set
forth in the ruling letter". The EC fails to see how this is fundamentally different from the
Timmermans case law.
4.610 The rather limited effect of rulings issued by US Customs has also been confirmed by the US
Supreme Court in United States v. Mead Corp , in which the Court held that ruling letters of US
Customs have no legal force and that Customs ha s regarded a classification as conclusive only as
between itself and the importer to whom it was issued.
Alleged divergences in EC classification practice

Blackout Drapery Lining
4.611 In its First Written Submission, the EC has alre ady demonstrated that the products at issue
were not identical to the products described in th e BTI referred to by the United States, and that
accordingly, this case does not demonstrate a lack of uniformity in the EC's classification practice.
4.612 When required by the Panel to comment on the EC 's explanations, the United States starts its
observations by contesting the EC's statement that the product "before the German authorities was not
flocked". In support, the United States refers to a "decision" of the Main Customs Office Hamburg on
which the Main Customs Office Bremen is supposed to have relied. These statements are incorrect as

the letter of the Main Customs Office Hamburg rela ted to an administrative appeal introduced by a
company called Ornata GmbH. This appeal is in any way related to the administrative appeal
introduced by Bautex-Stoffe GmbH which was the subject of the decision of the Main Customs Office
Bremen, let alone that the Main Customs Office Bremen relied on the letter of the Main Customs
Office Hamburg.
4.613 It is also noted that contrary to the US cl aims, that letter does not contain a decision, but
rather requested the observations of the importer on the envisaged classification. In response to this
letter, the Ornata GmbH withdrew its protest by letter of 16.9.1998.
4.614 As regards the substance, the United States ac cuses the decision of the Main Customs Office
Bremen of being incompatible with an HS explanatory note to heading 59.07. This statement is
manifestly wrong. HS explanatory note (G)(1) to heading 59.07 provides that the fabrics covered
include "fabric, the surface of which is coated w ith glue (rubber glue or other), plastics, rubber or
other materials and sprinkled with a fine layer of other materials such as (1) textile flock or dust to
produce imitation suèdes". Therefore, the presence of textile flock or dust was a relevant criterion for
the classification under heading 59.07. The d ecision of the Main Customs Office Bremen took
account of this factor and, since the product was not flocked, it could accordingly not be classified
under heading 59.07.
4.615 The United States also unwarrantedly criticises the decision of the Main Customs Office
Bremen for having considered the density of the web of the product. According to Note (2)(a)(5) to
Chapter 59 of the CN, heading 5903 does not apply to plates, sheets, or strips of cellular plastics,
combined with textile fabric, where the textile fabr ic is present merely for reinforcing purposes. The
question whether the web was fine is a relevant criterion for establishing whether it is present for
reinforcement purposes or not.
4.616 The United States has also criticized the EC fo r having referred to a classification regulation
concerning a type of ski trousers. This criticis m is unwarranted. Commission Regulation 1458/97
concerned the classification of garments under he ading 6210, which covers "garments made up of
fabrics of heading 5602, 5603, 5903, 5906 or 5907". Accordingly, the classification regulation in
question concerned implicitly the classification of the fabric out of which the trouser was made. In
doing so, it had to apply Note 2(a)(5) to Chapter 59 of the combined nomenclature, i.e. determine
whether the fabric serves merely for reinforcing pu rposes, and in this context took into account a.o.
the "tight weave" of the fabric. Accordingly, Commission Regulation 1458/97 was certainly a
relevant precedent for the interpretation of note 2(a)(5) to Chapter 59.
4.617 For the same reason, the EC can also not find anything contrary to Community law in the
"interpretative aid" referred to by the lower German customs office: the criteria of the density of the
web mentioned in that text was fully compatible with Community law and the German text was
purely an interpretative aid without any legally binding character.
4.618 Finally, the United States also alleges that by relying on the tightness of the fabric, the Main
Customs Office Bremen violated the chapeau of Note 2(a) to Chapter 59, which states that
heading 5903 applies to "textile fabrics impregnate d, coated, covered or laminated with plastics,
whatever the weight per square meter". This criticism is equally unjustified because the weight
referred to is the weight of the entire product, i. e. the fabric as impregnated, coated, covered or
laminated. The Main Customs Office Bremen did not consider the weight of the product, but rather
the density of the web of the polyester fabric, which is only a part of the product. Accordingly, the
decision of the Office is entirely compatible with the Chapeau of Note 2(a) to Chapter 59.
4.619 Furthermore, the United States attempts to find fault with individual aspects of the reasoning
of the German customs authorities are also irrele vant for the present case, which does not concern the

question under which heading a particular produc t should properly have been classified, but the
question of uniformity of administration of EC classification rules. Moreover, to the extent that the
United States considers EC practice to be incompat ible with an HS explanatory note, it could raise
this matter in the context of the WCO in accordance with Article 10 of the HS Convention.
4.620 It is clear that the products as described in the decision of the Main Customs Office Bremen
were not identical to the products described in the BTIs referred to by the United States, since the
former were not flocked with textile flock, while the products in the BTIs are described as having
been flocked. On the basis of these product descripti ons, the products had to be classified differently.
Accordingly, this difference in tariff classification is not a lack of uniformity, but on the contrary the
result a correct application of the Combined Nomenclature.
4.621 Moreover, if an error had occurred in respect of the description of the goods by the German
customs authorities, the importers in question coul d have challenged the decision before the German
courts. However, no such action has been taken.
LCD Monitors
4.622 The EC has notably pointed to the fact that Council Regulation 493/2005, by suspending the
tariff duties under heading 8528 for monitors up to a certain size, ensures a uniform tariff treatment
for all the monitors covered by the Regulation. The United States continues to criticize this regulation
as being "provisional" and a "stop-gap measure" and it argues that a duty suspension is "far different
from a classification regulation".
4.623 The EC considers these objections to be unfounde d. That the regulation is valid only until
31 December 2006 reduces in nothing its value for ensuring a uniform tariff treatment throughout the
EC today. Moreover, before the expiration of the measure, the EC will examine the situation and will
adopt the measures which are necessary. The United States cannot build an allegation of non-uniform
administration on the mere speculation that the EC might fail to take certain measures in the future.
4.624 The United States is also wrong to claim that Regulation 493/2005 fails to ensure uniform
administration because the measure concerns the suspension of a duty rate, rather than the
classification of a product. The United States fails to appreciate that Article X:3(a) GATT does not
require uniform administration for its own sake, but rather in order to ensure uniform conditions of
treatment for traders. Accordingly, Article X:3( a) GATT can be held to be violated only where a
variation of practice in fact has a significant impact on traders. In the case of LCD monitors, due to
Regulation 493/2005, for the monitors covered by th e regulation, there is no difference in tariff duties
between monitors classified under heading 8471 an d those classified under heading 8528, since the
tariff rate for both will be 0%. Nor are there any other relevant differences in treatment. Accordingly,
even if there were differences in tariff classificati on for the monitors at issue, this would have
absolutely no impact on traders. This is why the trading community was in fact strongly supportive of
the measure.
4.625 In addition, the EC considers that even if the Panel were to hold that there was an
incompatibility with Article X:3(a) GATT, this incompatibility could not be held to constitute
nullification or impairment of any benefit accruing to the United States under Article X:3(a) GATT.
Since the United States has not contested that th e tariff treatment for the monitors covered by
Regulation 493/2005 is uniform, and the duty ra te is 0%, the presumption of nullification and
impairment established by Article 3.8 DSU would therefore have to be considered as rebutted in the
present case.
4.626 The United States also criticizes the conclusions reached by the Customs Code Committee at
its 346
th meeting of 30 June to 2 July 2004, according to which "unless an importer can demonstrate

that a monitor is only to be used with an ADP ma chine (heading 8471) or to be used as an indicator
panel (heading 8531), its has to be classified in head ing 8528". The US argues in particular that this
conclusion is incompatible with Note 5 to Chapte r 84 of the Common Customs Tariff, according to
which a unit is to be regarded as part of a complete system if "it is of a kind solely or principally used
in an automatic data-processing system".
4.627 The EC recalls that the present case does not concern the correctness of individual
classifications, but rather the question of uniform administration. The United States does not show
that there is any lack of uniformity; rather, it qu estions the substantive classification practice of the
EC. Such arguments are not admissible under Article X:3(a) GATT. This has also been confirmed by
US – Hot Rolled Steel , in which the Panel held that it was not "properly a Panel's task to consider
whether a Member has acted consistently with its own domestic legislation".
4.628 Moreover, the US allegations that the conc lusions of the Customs Code Committee are
incompatible with note 5(a) to Chapter 84 are fal se. On the basis of several presentations by the
industry concerned, the Committee concluded th at industry had not succeeded in presenting any
criteria on which principal use could be established.
4.629 The EC would add that it does not understand wh at purpose conclusions of the Customs Code
Committee could have if, as the United States seems to suggest, they should be limited to restating the
language of the Combined Nomenclature. In order to provide for a uniform application of the CN, it
must be possible for the Committee to reach, on th e basis of the facts available, and acting in
conformity with the Combined Nomenclature, sp ecific conclusions concerning the classification of
particular goods. It is in this way that th e Committee can and does contribute to the uniform
classification of goods throughout the EC. The US suggestion that the Committee's conclusions
"actually detracts rather than promotes uniformity" is thus manifestly unfounded.
4.630 The US' own practice does not seem to differ greatly from that of the EC on this point. In its
First Written Submission, the EC had already point ed to a ruling in which US Customs had found it
impossible to establish the "principal use" of a m onitor. In another recent ruling on LCD monitors,
US Customs found that "the dual purpose of the mon itors is indicative of a lack of principal use for
this good", and accordingly classified the good under heading 8528. Similarly, in a recent guidance to
traders on flat panel display modules, US Customs st ated the following: "The issue of principal/sole
use has been difficult to ascertain in the past. As a result of this review by US Customs, it has been
determined that only specific size flat panel display modules are principally used in ADP system [...]".
Further examples of alleged non-uniformity in classification practice
4.631 The Panel has asked the United States to prov ide evidence for its allegation that there are
other instances of non-uniform administration in the classification practice of the EC. In response, the
United States refers to a limited number of largel y unsubstantiated statements which it had already
made in its First Written Submission.
4.632 First, the United States refers to a questionna ire of a trade association of March 2005, in
which a respondent company is reported to have stated that "[u]nisex articles or shorts have different
classifications in Italy and Spain to those in Germ any". This "survey" is based on a comment from a
single unidentified company, and is not supported by fu rther evidence or explanations. On this basis,
it is impossible to ascertain the precise nature of the products concerned, or to identify the questions
of tariff classification which might be involved. A ccordingly, the EC considers that this statement
does not provide any evidence of a lack of uniformity in EC classification practice.
4.633 Second, the United States refers once again to Case C-339/98,
Peacock, in which Germany
had classified certain network cards differently fro m the classification envisaged in BTIs issued by

certain other member States. The EC fails to se e how this case illustrat es an absence of uniform
administration. First, the EC would recall that th is case relates to importations carried out before
1995. In 1995, however, the European Commission had, in order to ensure a uniform application of
Community law, adopted Regulation 1165/95 foreseei ng the classification of the adapter cards in
question under heading 8517 (electrical apparatus for line telegraphy).
4.634 The classification by the German customs aut horities was appealed in the competent courts,
which referred the question to the European Court of Justice. By judgment of 19 October 2000 in
case C-339/98, the Court of Justice decided that th e products in question had to be classified under
heading 8471 (automatic data-processing machines a nd parts thereof). In a further ruling, in case
C-463/95, Cabletron, the Court of Justice confirmed th is interpretation and decided that
Regulation 1165/95 was invalid.
4.635 Overall, the case of network cards is a ca se in which the Commission had already in 1995
taken the necessary measures to ensure a uniform cl assification practice. As the United States itself
has recognized, what is significant is not that a divergence may occur, but rather that it is addressed
and removed once it occurs. This is precisely what happened in Peacock.
4.636 In addition, the EC would remark that the correct classification of network equipment is a
complex technical question with which many custom s authorities have had to come to terms. The
United States itself experienced di fficulties in classifying networked equipment, and has revoked or
modified numerous rulings concerning the classification of such equipment. Finally, the classification
of network equipment has also led to a WTO dispute between the EC and the United States
concerning the correct classification of LAN equipm ent, in which the United States unsuccessfully
alleged that due to its classification practice, the EC was not respecting its tariff concessions in respect
of LAN equipment. The EC does not find it appr opriate that the United States raises what is
essentially a substantive classification question in the context of the present case, which is concerned
with uniformity of administration under Article X:3(a) GATT.
4.637 Third, the United States refers to the dispute EC – Chicken Cuts . However, it must be
recalled that EC – Chicken Cuts concerned the interpretation of the EC's tariff concessions, and
incidentally the question of the correct classificati on of the products in question. In contrast, in EC –
Chicken Cuts , the complainants did not make any clai ms under Article X:3(a) GATT, and it was
never alleged that the EC's classification practice ha d not been uniform. On the contrary, the facts of
the case show that for the entire period in questi on, the EC had measures in place which ensured the
uniform tariff classification of the products. On this basis, the Panel and the Appellate Body came to
the conclusion that the EC's classification practice had been entirely uniform.
4.638 Finally, the United States refers again to an alleged lack of uniformity regarding the
classification of drip irrigation products. This is a case of temporarily diverging BTI which was
promptly addressed through the adoption of a classification regulation, and which is today resolved.
4.639 Binding tariff information was issued by Fr ance on 6 July 1999 for a Roberts Irrigation
Product (Ro-Drip) under CN code 8424 81 10. On 9 February 2001, Spain issued BTI in which it
classified the product under CN code 3917 32 99. Th is issue of divergent BTI was discussed by the
Tariff and Statistical Nomenclature Section of the Customs Code Committee. During the process,
Roberts Irrigation Systems made a submission to th e Committee. Furthermore, the US government
also made several submissions to the Commission. The issue was resolv ed by the adoption of
Commission Regulation (EC) No. 763/2002 of 3 Ma y 2002, which classified the product under
heading 3917 32 99. C onsequently, France revoked and replaced the previously issued binding tariff
information.

4.640 The United States has alleged that this case suppor ts its claims because one or more member
States did not treat as binding BTI issued by other me mber States. This remark appears beside the
point, since the BTI were not issued for the same holders. In any ev ent, as the United States has itself
argued, what matters is not whether divergen ces occurred, but whether they are addressed and
removed when they occur. In the case of drip i rrigation products, this is precisely what happened.
Once the divergent BTIs had been detected, the case was promptly addressed and solved within
15 months, which is a period of time that is r easonable for for definitely resolving a complex
classification issue.
(ii) Customs valuation
Report 23/2000 of the EC Court of Auditors
4.641 The Panel asked the United States to provide evidence as regards the incidence of non-
uniform administration with respect to the issues of customs valuation discussed in Report 23/2000
and referred to by the United States. In response, the United States declined to provide such evidence,
arguing that its claim "does not turn on the statistical frequency of non-uniform administration".
4.642 The EC disagrees with this response. First of all, a violation of Article X:3(a) GATT requires
the existence of a pattern of non-uniform administra tion. Accordingly, the statistical incidence of
instances of non-uniform administration in the areas in question is a highly relevant question. Since
the United States has failed to provide su ch evidence, it has failed to establish a prima facie case of
violation of Article X:3(a) GATT.
4.643 More importantly still, with its references to Report 23/2000, the United States has not proved
the existence of a lack of uniformity in the EC's sy stem. The Report of the Court of Auditors did not
have the purpose of assessing compliance with Articl e X:3(a) GATT. Moreover, for all the issues
raised in the report, the report has been followed up by the EC institutions , and wherever necessary,
the appropriate measures have been taken.
4.644 The US response to these remarks is to ask the Panel "to exercise its authority under
Article of the 13 DSU [...] to seek information of th e type that was made available to the Court of
Auditors in preparing its report on valuation". As the EC has already remarked, this request amounts
to shifting the burden of proof to the EC, and should therefore be rejected.
4.645 Moreover, the US request is also impracticable . Report 23/2000 was based on audit visits that
took place on the premises of the Commission and the customs administrations of 12 EC member
States in 1999-2000. Whatever information the C ourt of Auditors, which is an independent EC
institution, may have collected at that time is in the possession of the Court of Auditors only. In
addition, such information would reflect the situ ation in 1999-2000, but not the situation today.
Accordingly, the US suggestion therefore amounts in essence to requesting the EC to conduct a new
audit of customs valuation. In this way, the United States seems to want to transform an EC
institution which is devoted to ensuring the prope r collection and administration of the EC's own
resources into a mechanism intended to provide it with the necessary evidence for conducting a WTO
challenge. The US request must be regarded inadmissible.
4.646 As regards the issue of repair costs covere d by a warranty, the United States now seems to
accept that this issue has been resolved by Commission Regulation 44/2002, of 11 March 2002.
However, the United States faults the EC for allegedly having taken mo re than 12 years to resolve the
matter. First of all, it is not accurate that the EC tolerated a lack of uniformity for 12 years. More
importantly still, what matters is that, on a complex issue of customs valuation, the EC itself detected
the problem and took the necessary measures to correct it. Accordingly, rather than showing any
failure in the EC's system, this case shows that the EC system functions properly.

4.647 The United States also refers agai n to the specific issue of valuation audits. In particular, the
United States refers to a statement in the report of the Court of Auditors according to which one
member States lacked the authority to perform post-importation audits.
4.648 In this respect, the EC would like to clar ify that under Article 76(2) CCC, every Member
State may proceed to all necessary verifications in or der to satisfy themselves of the accuracy of the
particulars contained in the declaration. This al so includes all questions regarding the value of the
goods. The Member State referred to by the Cour t of Auditors was Greece, which, in 2000, has
established a service with powers to conduct post-clear ance audits. In addition, the EC has also
referred to the EC Customs Audit Guide, which ensures a uniform audit practice across the EC.
The Reebok case

4.649 The Panel has requested the United States to provide concrete evidence to support its
submission that there is a lack of uniform applica tion as regards the treatmen t of related parties under
Article 143(e) of the Implementing Regulation. In its response, the United States informs that its
description of the case is based on a "narrative account by the importer at issue". Moreover, the US
states that "due to concerns relating to the pe ndency of litigation over the matter at issue and the
commercial sensitivity of the information that sup porting documentation would contain, the importer
declined to provide documentation at this time".
4.650 The United States does therefore not provide any ev idence for its claim that there is a lack of
uniformity in the application of Article 143(1)(e) of the Implementing Regulation. The United States
cannot justify this failure to discharge its burden of proof on the basis of the refusal of the importer in
question to provide the necessary evidence. It is fo r the United States itself, as the complaining party,
to provide the evidence for the claims it makes.
4.651 The United States has repeatedly stated that the "EC does not deny the essential facts". The
EC has certainly not contested that it has been contacted by Reebok with a problem regarding the
application of Article 143(1)(e) of the Implementin g Regulation by the Spanish customs authorities.
However, the EC contests that there is a problem of non-uniform application of this provision.
4.652 The United States also faults the EC for havi ng stated that the Commission and the Customs
Code Committee cannot serve as substitutes for the nor mal appeal procedures applicable in individual
cases, and has claimed that there is "no EC institu tion before which the trader has a right to obtain
uniform treatment". This is in stark contrast to th e fact that according to the US' own statements, the
case is currently pending before the Spanish cour ts, and the importer concerned refuses to share
information on account of this pendency. Moreover, as the EC has explained repeatedly, where a
court of a Member State applies Community law, it acts as an organ of the EC. Finally, if there is a
question of interpretation of Community law, th is question can – and in certain cases must – be
referred to the European Court of Justice by way of a request for a preliminary ruling, which ensures a
uniform interpretation of EC law throughout the Community.
4.653 In addition, the United States has referred to a decision by the European Ombudsman on a
complaint by an individual importer. The EC can confirm that the complaint was made on behalf of
Reebok, which claimed that the European Commission was not properly discharging its
responsibilities in respect of the administration of customs valuation law.
4.654 At the outset, the EC would like to point out that the Ombudsman did not take a decision on
the substance of the complaint. Rather, the complainant withdrew the complaint indicating that the he
"was satisfied with the position the Commission ha d adopted on the matter and with its proposal to
look into pending problematic issues".

4.655 Second, the EC would like to recall that th e European Ombudsman is another mechanism
which contributes to the proper administration of EC la w by the EC institutions. The fact that there is
a decision of the European Ombudsman is therefor e not as such problematic, but rather shows the
working of the various mechanisms of the EC's system.
4.656 Finally, the EC would remark that the facts as set out in the decision are not presented entirely
correctly. Notably, the United States quotes from a letter of the European Commission of
20 December 2000, in which the Commission is supposed to have stated "that the interpretation issues
raised by the complainant were a matter for the national customs authorities". This quotation is not
correct. In its letter of 20.12.2000, the Co mmission stated that "[t]he application of this criterion [of
Article 143(1)(e) Implementing Regul ation] in individual cases is of course a matter for national
administrations and the Commission Services could onl y express an opinion if a detailed file on all
aspects of the case was to be forwarded by the cust oms services in question. However, our services
do not, in general, have a respons ibility to undertake a detailed examination of very specific cases,
this being the task of the national administrations".
4.657 The EC considers that this statement reflects correctly the division of competences between
the European Commission and the customs authorities of the member States, which are competent for
the application of customs law in individual cases. It is neither possible nor appropriate for the
Commission to substitute itself for the competent au thority simply because in an individual case of
application a trader is not satisfied with an appro ach taken by the customs authority. On the contrary,
the European Commission is responsible for mon itoring and ensuring the correct and uniform
interpretation and application of EC customs law.
4.658 In the case in question, Reebok had simply not , at the time in question, submitted to the
European Commission any evidence that showed an in correct application of EC law, or a divergence
in the application of EC law. Accordingly, th e Commission did not see any ne ed to intervene in the
specific pending case.
4.659 Where the Commission is informed of a wrong in terpretation of Community law, including
Community customs law, the Commission will take the appropriate action. A pertinent example is
furnished by a complaint submitted by Reebok regard ing the imposition of compensatory interest by
the Spanish customs authorities. Since this comp laint showed an incompatibility with Community
law, this complaint led the Commission to initiate infringement proceedings against Spain. The EC
would underline that Reebok did not lodge a si milar complaint as regards the application of
Article 143(1)(e) CCC.
(iii) Processing under customs control
4.660 In relation to this customs procedure, the Unite d States has progressively limited its claims.
In its First Written Submission, the United States identified an eventual contradiction between
Article 133 CCC and Article 502(3) of the Implementi ng Regulation, in that the former requires an
applicant to provide information both on the creat ion or maintenance of processing activities in the
EC and an absence of harm to essential interests of Community producers of similar goods, while, in
contrast, the Implementing Regulation requires the former but not the latter.
 At the same time, the
United States highlighted that, according to its in terpretation, a guidance adopted by United Kingdom
required both types of information, while the French guidance simply sets out the first condition.
4.661 The EC explained in its First Written Submission that there is no contradiction between the
CCC and the Implementing Regulation, because the latte r is subsidiary legislation and cannot modify
the conditions laid down in the CCC. The EC al so explained that both the United Kingdom and the
French guidance required the importer to provide the two sets of information.

4.662 The United States insists that the French guidance makes no reference to information on harm
to Community producers, which is, on the contrary, required by the United Kingdom's guidance.
4.663 The EC considers that the US criticism is based on an isolated and incorrect interpretation of
the French guidance, which has to be interpreted in the context of the EC legislation. The guidance
refers to the economic conditions required to obtai n an authorization to process under customs control
in the same way as Article 502(3) of the Implementi ng Regulation: by using an abbreviation of the
requirements laid down in Article 133(e) CCC. Th e French authorities require the same kind of
information as the United Kingdom: the informa tion needed to assess whether "the necessary
conditions for the procedure to help create or maintain a processing activity in the Community
without adversely affecting the essential inter ests of Community producers of similar goods
(economic conditions) are fulfilled".
4.664 This interpretation is also supported by paragra ph 78 of the French guidance, which, within
Chapter III "Examination of economic conditions", play s the role of a chapeau to Section I, where
paragraph 83 is located. Contrary to what the United States affirms, this pa ragraph 78 is more than
simply an introductory paraphrase of certain provisions from the CCC.
 This paragraph reminds, for
Section I as a whole, that the absence of adver se effects on the essential interests of Community
producers is a general economic condition that is common to the three customs procedures therein
covered (inward processing, outward processing a nd processing under customs control), as it is
clearly laid down in Articles 117(c), 148(c) and 133(e) CCC, respectively.
4.665 In the present case, the United States has not s ubmitted any evidence on the application of the
guidance issued by the French authorities. The EC would like to recall that according to the case law
of the Appellate Body, it is the party which asserts th at a measure of another Member is inconsistent
with WTO obligations which has the burden of prov ing that the measure in question has the alleged
content or meaning. Relevant evidence for est ablishing the meaning may also include evidence
regarding the application of the measure. Th is was explained by the Appellate Body in US – Carbon
Steel and in US - Oil Country Tubular Goods Sunset Reviews.
(iv) Local clearance procedure
4.666 In response to two questions from the Panel, the United States has explained its understanding
of the procedures applicable in th e EC for clearance of goods for free circulation and it has claimed
that the lack of uniform administration described in its First Written Submission exists independently
of the particular stages in which the clearance process is articulated.
4.667 The description made by the United States is still not correct. The US states that simplified
procedures are separated into thr ee groups (local clearance, warehous ing and simplified declaration),
but the correct classification in relation to decl arations for release for free circulation should be
"incomplete declarations" (Articles 254-259 of the Implementing Regulation), "simplified declaration
procedure" (Articles 260-262) and "local clearance procedure" (Articles 263-267). The US
description mixes local clearance procedure for rel ease for free circulation and other simplifications
for customs procedures with economic impact, like warehousing. In any case, the EC considers the
United States has not explained the alleged di vergences between the practices of the customs
authorities and whether the differences occur between EC member States at equivalent steps in the
same procedure.
4.668 Besides, the EC would like to insist that paragraphs 110 to 115 and the table in paragraph 116
of the US First Written Submission describe inex istent divergences. Thus, taking the United
Kingdom and France as representative examples in re lation to inspection of goods by the customs
authorities prior to release, there is no contradic tion between the practices in these two EC member
States. In both cases, customs o fficials may (or may not) inspect goods prior to release. The EC

already explained this question in its First Written Submission, without receiving an answer from the
United States either in its First Oral Statement or in its response to the questions from the Panel. The
same problems occur with the other divergences alleged by the United States.
4.669 It is clear that, contrary to what the United States claims, the EC disputes the existence of
divergences in the administration of local clearan ce procedures and that the United States has not
provided a single exhibit to illustrate and support its claim.
(v) Penalties for violations of customs law
Penalty provisions are not covered by Article X:3(a) GATT
4.670 The United States argues that penalty provisions are "tools" for the administration of customs
laws. Interestingly, the United States itself appears to concede that penalty provisions are not as such
laws pertaining the matters referred to in Article X:1 GATT. Indeed, the United States itself explains
that "it is important to distinguish between the ad ministration of penal laws and the application of
penal laws to administer customs laws of the type described in Article X:1".
4.671 The EC does not contest that penalty provisions are relevant tools for ensuring a uniform
administration of customs law. This is precisely why EC law provides that penalty provisions must be
effective and dissuasive. However, the fact that penalty provisions are "tools" for the uniform
administration of customs laws does not mean that they are themselves laws or regulations pertaining
to the matters enumerated in Article X:1 GATT, in particular tariff classification, customs valuation,
or rates of duty. If, as the United States correctly argues, penalty provisions are merely "tools" to
ensure a uniform administration of those laws, then penalty provisions as such do not fall within the
scope of Article X:3(a) GATT.
4.672 The United States has tried to counter this argument by arguing that standards for penalty
provision also are addressed in the Kyoto Convention. However, the fact th at the Kyoto Convention,
which is a Convention negotiated in the context of the WCO, may contain certain provisions or
standards on penalty provisions has nothing to do w ith the scope of Article X:3(a) GATT. On the
contrary, the fact that the Kyoto Convention contai ns a harmonization of certain specific matters may
rather provide an indication that the WCO Member s considered that such matters were not yet
sufficiently addressed in the GATT.
4.673 The United States has also contested the EC's argument that penalties are concerned with
illegitimate actions rather than with legal trade. In support, it has referred to the example of the
judgment of the ECJ in de Andrade , where, according to the US, "t he only offense at issue was a
failure to clear goods through customs within the period specified in the Community Customs Code".
4.674 The EC fails to see the basis for the US objection. Penalties for violations of customs law by
definition are responses to contraventions of cu stoms law. Penalties are sanctions for acts or
omissions which are illegal. Penalty provisions th erefore have a fundamentally different character
from provisions which establish the conditions for legal trade, e.g., by setting tariff rates or
establishing rules for customs valuation.
4.675 The de Andrade case referred to by the United States confirms precisely this point. In de
Andrade, the importer had infringed Article 49 CCC, according to which, where goods are covered by
a summary declaration, the fo rmalities necessary for them to be assigned a customs-approved
treatment of use must be carried out within certain specified time-limits. The measures taken by the
customs authorities in de Andrade were a sanction for the failure of the importer to comply with these
time-limits. The de Andrade case demonstrates simply that sanctions are a tool for ensuring
compliance with EC law, and that EC member St ates apply the necessary sanctions. In contrast, de

Andrade does nothing to support the view that penalty provisions as such fall within the scope of
Article X:1 GATT.
Article X:3(a) GATT does not require the harmonization of member States' penalty
provisions
4.676 Article X:3(a) GATT concerns only the administ ration of customs laws, not the substance of
the laws themselves. This means in particular th at Article X:3(a) GATT does not create an obligation
to harmonize laws which may exist within a WTO Member at the sub-federal level. It merely
requires that such laws be administered uniformly within the territory in which they apply.
4.677 The United States continues to cl aim that because penalty provisions are contained in laws of
the EC member States, the EC administers its laws in a non-uniform manner. This is manifestly
wrong. As the EC has already stressed, it is not th e administration of penalty provisions which varies
within the EC; it is the laws themselves which are di fferent, albeit within the limits set by Community
law.
4.678 In its submissions, the United States has not claimed that EC member States fail to administer
their penalty provisions in a uniform manner. Ind eed the United States has stated that "whether each
individual member State administers its own penal law uniformly within its own territory is not
relevant to our claim". This is a striking admissi on, because it shows that the US claim in fact has
nothing to do with the administration of penalty provisions. Rather, the US claim is about the
harmonization of legislation within the EC, which is a claim which has no basis in Article X:3(a)
GATT.
4.679 The United States also reiterates its argument that the EC's reasoning would "dramatically
diminish the effectiveness of Article X:3(a) GATT. However, this statement is incorrect.
Article X:3(a) GATT applies to the administration of all of the laws referred to in Article X:1 GATT,
regardless of whether they apply in all or part of the territory of a WTO Member. If Article X:3(a)
GATT were held to apply penalty provisions, then it should apply to the administration of the penalty
provisions of each Member State. Accordingly, th e clear distinction drawn by the EC between the
administration of measures and their content does not in any way diminish the effectiveness of
Article X:3(a) GATT, but simply reflects the proper scope and content of this provision.
Community law ensures a sufficient degree of uniformity of penalty provisions

4.680 Finally, to the extent that penalty provisions can be regarded as relevant for ensuring a
uniform administration of the laws referred to in Article X:1 GATT, the EC considers that EC law
provides for a sufficient level of harmonization in this respect.
4.681 As the EC has already explained, the Eur opean Court of Justice has developed clear
guidelines for penalty provisions for violations of EC customs law, which must in particular be
effective, proportionate, and dissuasive. These princi ples have also been confirmed by the Council of
the European Union.
4.682 The United States has not shown that the fact that penalty provisions are contained in laws of
the member States leads in any way to a non-uniformity in the administration of the laws covered by
Article X:1 GATT, in particular laws regarding ta riff classification, customs valuation, and rates of
duty.
4.683 Instead, the United States has simply stated that "[t]o the extent that different member States
have different penalty provisions that apply to the violation of EC customs law [...] they administer

EC customs law differently." This argumentation is logically flawed, since the US fails to distinguish
between the application of the penalty provisions, and the application of the relevant substantive laws.
4.684 Indeed, it is not correct to assume that differences in penalties would necessarily lead to a lack
of uniformity in the application of the provisions the violation of which is sanctioned. Such a
consequence would result only if sanctions were not dissuasive or effective. If, on the contrary,
sanctions are dissuasive and effective, then it must be assumed that the related substantive provisions
will be respected, regardless of differences in the level of sanctions applicable.
4.685 Is is true that differences in the level of penalties may also be important from the point of
view of proportionality. However, proportionality has nothing to do with the question of uniform
administration under Article X:3(a) GATT. Rather , the proportionality of penalties is addressed in
Article VIII:3 GATT, and the United States has not ma de any claim that the EC does not comply with
this provision.
4.686 As the EC has explained, EC law requires th at sanctions be effective, proportionate, and
dissuasive. The United States has not shown that sanctions in the EC do not comply with these
principles. Moreover, the United States has not show n that divergences in penalty provisions of the
member States in any way lead to a non-uniformity in the application of the laws of the member
States. The US case remains therefore purely theoretical, and unsupported by any facts.
4.687 The United States has also again referred to th e EC's work on the modernized customs code,
which includes proposals for a harmonization of administrative penalties for violations of customs
law. In this respect, it must be stressed that th e purpose of these proposals is to further develop and
advance the EC the single market also in the field of penalties. This has nothing to do with the EC's
obligations under Article X:3(a) GATT.
3. The US claim under Article X:3(b) GATT
(a) Nature of the review: independent tribunals or procedures
4.688 The United States agrees with the EC that a WTO Member complies with this obligation
under Article X:3(b) GATT only when the review sy stem is independent of the agencies entrusted
with administrative enforcement in customs matters.
4.689 In this respect, the United States has raised no criticism about the independence of the
remedies instituted by the EC, either at Community level or at Member State level. It should,
however, be noticed that the United States applies a l ess strict standard of independence than the EC.
The latter has considered that a body ensuring admini strative review is independent of the agencies
entrusted with administrative enforcement only when it is not integrated into the organization of the
agencies. On the contrary, for the United States independence is already ensured when the office
responsible for administrative review is functiona lly independent of the ports whose decisions it
reviews, even if both offices form part of the same agency.
 The EC considers that the US
interpretation is not in conformity with Article X: 3(b), which requires that the reviewing tribunals or
procedures must be independent of the agencies entr usted with administrative enforcement. This
provision imposes an external separation between th e tribunals or procedures and the agencies and an
internal separation within an agen cy between the controller and the controlled is not sufficient to
comply with Article X:3(b).
4.690 The thrust of the US claim concentrates on the f act that the review decisions taken by the EC
member States "have effect only within their re spective member States and not on EC agencies
generally" and that "the provision of tribunals or procedures by individual member States within the
EC does not satisfy the EC's obligations under Article X:3(b)".

4.691 The United States relies on several arguments to support that assertion. First, the United
States has constantly argued that the Article X:3(b) GATT obligation must be interpreted in the light
of Article X:3(a) GATT, which the United States considers to be its context.
4.692 The EC has explained several times that each of those two subparagraphs in Article X:3
GATT lay down separate obligations and that it cannot be considered that there is a legal relationship
between these two provisions (i.e: the obligations from one provision cannot be imported into the
other).

4.693 The structure of Article X:3 GATT itself already justifies that interpretation. First,
subparagraph (b) does not make any reference to subparagraph (a), unlike subparagraph (c), which
contains an explicit link to subparagraph (b). Second, Article X:3 GATT is not introduced by a
chapeau allowing to affirm that the two separate subparagraphs are linked and that the obligations
therein instituted have to be interpreted in light of the each other.
4.694 Moreover, contrary to what the United States claims, review of customs decisions by the
courts of the EC member States does not run counte r to the obligation of uniform administration.
That type of review is perfectly compatible with the obligation of uniform administration, provided
that the latter is ensured by other means that are appropriate to this aim.
4.695 Finally, there is a substantial reason to reject th e US interpretation. If we consider that, as the
United States has accepted, the review established by Article X:3(b) is only a review of first instance,
to require uniformity at first instance would necessar ily imply the establishment of a central court of
first instance with jurisdiction over the whole terr itory of any WTO Member. This conclusion finds
no support in the wording of Article X:3(b) GATT, which makes no reference to the obligation to
establish such central court of first instance. Article X:3(b) GATT does not even require appeals to be
decided by a central court or tribunal of superior ju risdiction. The conclusion is that Article X:3(b)
does not deal with uniform administration/applicati on of customs law, which is covered exclusively
by subparagraph (a), but only with first instance remedies.
4.696 The United States is interpreting Article X:3(b) through the glass of its own legal system and
requiring all WTO Members to establish the equivalent to its Court of International Trade. Japan has
aligned with the EC in the rejection of this unilatera l interpretation. It is worth noting that Australia
has also argued that "Article X:3(b) is not a prescr iptive Article and includes no obligation to have a
central court".
4.697 Furthermore, the EC would like to recall that the establishment of a central customs court
within the EC institutional framework runs cont rary to one of its fundamental constitutional
principles: that the EC Court of Justice and the Cour t of First Instance are to act within the limits of
the powers conferred upon them by the founding treati es and that the courts of the EC member States
act as "ordinary" EC courts when applying Commun ity law. In the absence of a provision in the
Treaties attributing a competence to any or both of t hose Courts to review decisions taken by the EC
member States and in the presence of the preliminar y reference system laid down by Article 234 of
the EC Treaty, any modification in the boundaries betw een the competences of the Court of Justice or
the Court of First Instance and the nationals courts would require the amendment of the EC Treaty.
4.698 The EC believes that similar problems, at least at legislative level, may arise in those WTO
Members where a central tribunal or court of first instance in customs matters does not exist.
4.699 The United States claims to have found an argument to justify a relationship between
subparagraphs (a) and (b) of Article X:3 in the sec ond sentence of subparagraph (b), which states that
the decisions of the tribunals or procedures shall govern the practice of the agencies entrusted with
administrative enforcement.

4.700 The EC considers that sentence as a provision aimed at securing a fair implementation of
tribunal decisions in administrative law matters. To ensure respect by an administrative authority of
the decisions taken by a tribunal, most of the le gal systems have develope d different methods to
enforce the res iudicata principle. That is the sense that the EC gives to the "shall govern the
practice" sentence. It cannot mean, as it is sustaine d by the United States, that a first instance review
decision on a specific case constitutes the source of a general obligation upon the relevant agency.
Article X:3(b) only sets up an obligation to implement in fair terms the decision given by an
independent tribunal or through an independent procedure.
4.701 Second, the United States has contested the EC's argument that the use of the plural form in
Article X:3(b) GATT means that a WTO Member is allowed to have several different review
tribunals, each of them covering a part of its geography. According to the United States, "the use of
the plural form […] might allow for the possibility that a Member State may provide for different
types of review".
4.702 The EC contests this argument, because it does not take into account that the United States
and the EC interpretations are not mutually exclusive: the use of the plural form may indicate that a
WTO Member is entitled to maintain geographically limited tribunals and it may also indicate that a
WTO Member is allowed to maintain multiple fora for review of customs decisions.
4.703 Third, in its First Written Submission, the EC has explained that when the courts of the
member States apply Community law, they act as organs of the Community. This is one of the
cornerstone principles in the EC constitutional framework . In support, the EC has also referred to the
findings of the Panel in EC – Trademarks and Geographical Indications (US).
4.704 In its First Oral Statement, the United States has argued that the Panel Report in EC –
Trademarks and Geographical Indications (US) is not relevant, because "the issue presented there
was substantially different from the one presente d here". The EC disagrees. The issue in EC –
Trademarks and Geographical Indications was a US claim that, by applying an EC regulation, EC
member States were granting each other advantages not available to other third countries, and thus
violating most-favoured nation obligations. In respon se to this claim, the Pa nel held that member
States authorities, when implementing Community la w, were acting as organs of the EC; for this
reason, the Panel found that such application could not be regarded as the granting of advantages to
"other countries". The finding of the Panel in EC – Trademarks and Geographical Indications that
member States' authorities, when implementing EC law, act as organs of the EC , is highly relevant to
the present case. The fact that in the present case, the Unite d States has made a claim under
Article X:3(a) GATT, and not regarding most-fa voured national obligations , is no reason why the
Panel should ignore this case law.
4.705 In addition, the United States argues "that it cannot be assumed that one Panel's recognition of
member States executive authorities as de facto EC authorities [...] means that another panel must
recognize member States judicial
authorities as de facto EC authorities". The EC fails to see the basis
of this distinction. Both executive and judicial authorities are relevant public authorities in each WTO
Member. Both the actions of the executive and of the judicial branches may be relevant for
compliance with WTO obligations. Accordingl y, the EC sees no reason why only executive
authorities, but not judicial authorities of the me mber States, should be recognized as authorities of
the EC when implementing EC law.
4.706 The US arguments are also incompatible w ith principles of general international law
regarding responsibility for wrongful acts. In this re gard, the EC would refer to Article 4(1) of the
Articles on responsibility of States for internationall y wrongful acts elaborated by the International
Law Commission (ILC).

4.707 It follows clearly from this provision that , when it comes to the acts of a State under
international law, there is no distinction between acts of the legislative, executive and judicial organs.
For this very same reason, it would seem unjustifia ble to consider that only the executive authorities
of the member States, but not the judicial authorities of the member States, can act as EC organs.
4.708 Similarly, it follows from the ILC's articles on state responsibility that the responsibility for
internationally wrongful acts extends not only to orga ns of the central government, but also to organs
of territorial units. Accordingly, the EC has never contested that it is responsible in international law
for the compliance by EC member States with the obligations of the EC under the WTO Agreements.
4.709 With its argument that member States courts cannot be regarded as EC courts, the United
States seems to suggest that whereas the EC is re sponsible for the actions of EC member States, it
cannot have recourse to organs of the EC member States for discharging its obligations, such as the
one under Article X:3(b) GATT. Such a result w ould be highly contradictor y. Under the general
principles of state responsibility, attribution of cond uct relates to all acts and omission, regardless of
their legality. Accordingly, not only must conduct be attributed for the purposes of establishing a
violation of international obligations, but also in order to assess whether obligations have been
complied with. In other words, it is perfectly po ssible for the EC to have recourse to its member
States for the purposes of discharging international obligations, including the obligation to provide for
prompt review under Article X:3(b) GATT.
(b) Time requirement: promptness in the review
4.710 Along these proceedings, the claim has been pr ogressively reduced by the United States.
Indeed, the United States has lately explained that it is not arguing the lack of promptness of review
and correction provided by the EC member States tribunals.
4.711 As to the European Court of Justice and the Court of First Instance, the United States has
never claimed that the proceedings before these tw o Courts, when reviewing decisions taken by the
EC institutions, do not ensure prompt review. The only criticism sustained by the United States refers
to "preliminary rulings" (i.e.: references to the Co urt of Justice by national courts). The United States
argues that "the time it takes for questions to ge t presented to and decided by the ECJ and the fact
that, in general, referral of questions to the EC J is discretionary […] means that the ECJ is not a
tribunal or procedure for the prompt review and correction of customs administrative decisions".
4.712 The EC has already explained that this criticis m underlay the US misunderstanding of the EC
system: the ECJ does not review national customs administrations decisions, but it helps the national
courts in such a review through the preliminary ru ling procedure with the aim of ensuring the uniform
application of Community law throughout the Community. Therefore, preliminary rulings by the ECJ
are one of the EC mechanisms to ensure uniform administration of the EC trade laws, regulations,
judicial decisions and administrative rulings of ge neral application, as required by Article X:3(a)
GATT, and cannot be considered as such a mechanism of "review" of national customs decisions.
G.
SECOND ORAL STATEMENT OF THE EUROPEAN COMMUNITIES
1. The EC is not obliged to create an EC customs agency and a customs court
4.713 The EC has already explained the significant constitutional implications of the present case
for the EC as well as for the WTO Membership in gene ral. It has also explained that the US claims
under Article X:3 GATT are essentially directed at fo rcing the EC to create a centralized customs
agency and a customs court.

4.714 The subsequent submissions of the United Stat es have entirely confirmed this assessment.
The US has offered no evidence of non-uniform admini stration of EC customs law, or of judicial
review which would be less than prompt. Instead , it has focussed entirely on the involvement of the
customs authorities of the EC member States in the administration of EC customs law, which it claims
"as such" leads to a lack of uniformity contrary to Article X:3(a) GATT. Similarly, in its claims under
Article X:3(b) GATT, the US has focussed entirely on the absence of an EC customs court.
4.715 The US has protested this as a "caricature" of its claims. However, as so often, caricature
reveals the true nature of things. Immediately after assuring the Panel that it does not argue that
Article X:3(a) GATT requires WTO Members to have a single customs agency, the US retreats from
this assurance by stating that "establishing such an agency is the principal manner by which the
United States understands the vast majority of WTO Members (if not all WTO Members) to have
undertaken to discharge their obligation" under Ar ticle X:3(a) GATT. The US also claims that
because the EC does not have a single customs agency, it is obliged to have a single customs court.
4.716 The US fixation on the creation of a centralized customs agency and a customs court has been
a constant feature of the present proceedings. Th e creation of such an agency, which should be
equipped also with a competence to issue advance rulings on a number of issues, was the first demand
made by the United States of the EC during the c onsultation phase of the present dispute. The second
demand was the creation of an EC customs court. Moreover, when questioned by the Panel as to
which measures, short of establishing a customs agency and a customs court, the EC should take if the
US were to prevail with its claims, the US failed to identify a single concrete measure.
4.717 The US is therefore wrong to complain about the EC's misrepresenting its claims. The US
claim under Article X:3(a) GATT is clearly directed against the involvement of the customs
authorities of the EC member States in the administration of EC customs law. It is thus a direct
challenge to the EC's system of executive federalism, which is a general structural element of the EC
legal order, and not only in the field of customs ad ministration. The same is true for the US claim
under Article X:3(b) GATT, which is aimed at replacing the courts of the member States by an EC
customs court. The EC cannot be faulted for clearly spelling out the US claim.
4.718 The United States has accused the EC of advocatin g a relative view of Article X:3(a) GATT.
This argument is unfounded. The obligation of uniform, impartial and reas onable administration in
Article X:3(a) GATT is the same for all WTO Memb ers, including the EC. The EC has never argued
that it is subject to standards which are different from those applicable to other Members.
4.719 In support of its view, the US has referred to the fact that the EC, supported by Japan, has
argued that whether there exists a lack of unifo rmity must be established taking into account the
features of the system of customs administration in question. This is equally unfounded. It goes
without saying that whether a lack of uniformity exists in a particular system of customs
administration can only be determined on the basis of all relevant facts, which necessarily include the
features of the customs system in question. This has nothing to do with advocating a relative
standard, but is simply a requirement inherent in an objective assessment of the facts.
4.720 The US has claimed that "it is improper for the EC to argue that its unique status within the
WTO as perhaps the only Member without a single cen tralized customs agency makes it subject to a
different standard with respect to the obligation of uniform administration". The US has also stated
that "the EC is the only WTO Member [...] that has a combination of geographically fragmented
customs administration and geographically fragmented review". As the EC has already remarked, it is
not arguing that it is subject to a different standa rd than other WTO Members. However, even if it
were indeed the only WTO Member with a decentr alized system of customs administration and
judicial review, this does not mean that its system is in any way incompatible with Article X:3 GATT.

4.721 The EC is an original Member of the WTO. When the EC became a party to the WTO
Agreements, including the GATT 1994, its system of customs administration and judicial review was
perfectly well known to all Contracting Parties. With this knowledge, th e Contracting Parties,
including the United States, agreed that the EC shoul d become an original Member of the WTO. It
cannot seriously be argued that a fundamental characte ristic of the EC such as the involvement of the
EC member States in the administration of EC law, including customs law, and in the provision of
judicial review, is nonetheless to be regarded as incompatible with Article X:3(a) GATT.
4.722 This point deserves particular emphasis because it is not limited to the area of customs laws.
Article X:3(a) GATT applies to all the laws referr ed to in Article X:1 GATT. Accordingly, the
interpretations of the US would not just apply to the area of customs law. Rather, they would make
the involvement of sub-federal entities in the executi on of federal laws generally impossible in large
areas of economic regulation.
4.723 This is of considerable concern to the entire WTO Membership. While the US has a
constitutional system in which the spheres of co mpetence of the federal government and of the 50
states are clearly separated, other WTO Members ha ve systems which are marked by a system of
executive federalism, in which federal laws are im plemented through sub-federal units. As has been
recognized even by Judges of the US Supreme Cour t, executive federalism is a perfectly legitimate
constitutional choice, and there is no reason why it could not also apply in the area of customs.
Accordingly, the Panel should not accept an inte rpretation of Article X:3 GATT which would impose
a particular US view as to how federal laws should be implemented on other WTO Members.
4.724 The United States has also faulted the EC fo r having referred to Article XXIV:12 GATT.
These criticisms are unwarranted. The EC has invoke d this provision as support for its view that
GATT commitments, including Article X:3(a), were undertaken by the Contracting Parties in full
respect of their respective constitutional systems. As the Panel in Canada – Gold Coins has
explained, Article XXIV:12 GATT is a provision which has the "function of allowing federal states to
accede to the General Agreement without having to ch ange the federal distribution of competences".
As a counterpart, Article XXIV:12 GATT requires every WTO Member to take such reasonable
measures available to it to ensure observance of the provisions of the GATT at the sub-federal level.
4.725 The EC is fully committed to ensuring co mpliance by its member States with the
requirements of Article X GATT, in accordance with Article XXIV:12 GATT. However, this is not
what the US is asking of the EC. The US is ar guing that the EC should create a centralized customs
agency, a customs court, and should replace all rele vant legislation of the member States, notably on
the matter of penalties, by EC legislation. This w ould result in a radical shift in the federal balance
within the EC. Such an interpretation is therefore not compatible with the purpose of
Article XXIV:12 GATT.
4.726 As regards specifically the issue of a cust oms court, the US has also referred to
Article VI:2(b) GATS, and argued that the EC is tr ying to transpose this provision to Article X:3
GATT. This argument is manifestly unfounded. Article VI:2(b) GATS contains a general exception
which renders the obligation to institute the tribuna ls or procedures required by Article VI:2(a) GATS
essentially facultative for certain members. To this extent, the provision can be regarded as a more
far-reaching equivalent to Article X:3(c) GATT, which gives the possibility to provide review also
through procedures which are administered by bodies which are not independent. However, this has
nothing to do with the EC's arguments in the present case. The EC is not contesting that it is obliged
to institute tribunals or procedures for the provision of judicial review which are independent of the
agencies which they control. The EC merely poi nts out that the question how the EC organizes its
court system through which it provides judicial review is not prejudged by Article X:3 GATT.

4.727 The US has also argued that difficulties of coming into compliance should have no bearing on
assessing whether the EC is in compliance with Article X:3 GATT. At a general level, the EC agrees
that difficulties of compliance are not as such deci sive for the interpretation of an international
obligation. However, the US cannot expect that its claim should be accepted without any
consideration of its practical implications. Wh ereas the Panel is not required to decide on which
measures would be necessary for securing compliance, it should also not decide on this particular
dispute without giving due consideration to the real-world implications of the US claims.
2. The US claims under Article X:3(a) GATT
(a) The United States misrepresents the requirements of Article X:3(a) GATT
(i) Article X:3(a) GATT is a non-prescriptive, minimum standards provision
4.728 The US has disputed the EC's characterization of Article X:3(a) GATT as a minimum
standards provision. It also disputes the re levance of the Appellate Body Report in US – Shrimp ,
where the Appellate Body refers to the requi rements of Article X:3(a) GATT as "minimum
standards". In the view of the US, "minimum sta ndards" does not mean that these standards are "low
standards".
4.729 These US arguments amount to a mischaracterization of the EC's arguments. The EC has not
argued that Article X:3(a) GATT contains a "relativ e" standard, nor has it taken a position on whether
it is a "low" or a "high" standard. However, give n the highly ambitious application of Article X:3(a)
GATT sought by the US, it is necessary to reflect on the nature and purpose of the obligations
contained in this provision.
4.730 Article X:3(a) GATT is not a provision which prescribes in detail how WTO Members should
administer their customs laws. There are othe r provisions in the GATT, and in other covered
agreements, which contain the de tailed substantive disciplines with which Members must comply.
Article X:3(a) GATT complements these disciplines of the GATT and its annexes in order to ensure
that the enjoyment of the benefits of the GATT by other Members is not frustrated through measures
of administration which are unreasonable, partial, or non-uniform. It cannot be lightly assumed that
the administration of a WTO Member falls below these minimum standards.
4.731 This is confirmed by the Appellate Body in US – Oil Country Tubular Goods Sunset Reviews,
in which it held as follows: "A claim under Article X:3(a) of the GATT 1994 must be supported by
solid evidence; the nature and the scope of the clai m, and the evidence adduced by the complainant in
support of it, should reflect the gravity of the accu sations inherent in claims under Article X:3(a)
GATT". This clearly confirms that the Appellate Body considers that Article X:3(a) GATT sets out
basic minimum standards, a violation of which canno t be assumed lightly. Moreover, in a very recent
case, the United States itself argued that the ev idence offered to support an Article X:3(a) GATT
claim must reflect the gravity of such a claim.
(ii) Article X:3(a) GATT requires the United States to demonstrate the existence of a pattern of
non-uniform administration
4.732 In its Second Written Submission, the United States contests that it is required to demonstrate
the existence of a pattern of non-uniform admini stration in order to establish a violation of
Article X:3(a) GATT. The United States has also contested that the Panel Report in US – Hot-Rolled
Steel provides authority for such a requirement, and has claimed that the EC has based itself on "one
single sentence" of this report. This is mani festly untrue. The reference by the Panel in
US – Hot
Rolled Steel to the requirement of a pattern was not a mere dictum, but based on a considered
reflection of the requirements of Article X:3(a) GATT. It reflected the Panel's view that in order to

amount to a violation of Article X:3(a) GATT, the actions in question must "have a significant impact
on the overall administration of the law, and not simply on the outcome in the single case in
question". This, incidentally, was also the submission of the United States in US – Hot Rolled Steel.
4.733 The US tries to distinguish US – Hot Rolled Steel by submitting that in the present case, it is
not arguing that "a particular application" of EC customs law represents non-uniform administration,
but rather that the "EC's system of customs la w administration as a whole" does not comply with
Article X:3(a) GATT. The EC is baffled by this argument. The US seems to believe that because it
makes more sweeping claims, it needs to present l ess evidence. The EC submits that the opposite
should be true. It is not comprehensible to the EC how the US can challenge the "overall
administration" of the EC's system without actually showing how customs law is administered in that
system. It seems to the EC that in order to condemn the EC's system of customs administration as a
whole as incompatible with Article X:3(a) GATT, a very clear pattern of non-uniform administration
would have to be demonstrated.
4.734 The US has also referred to the Panel Report in Argentina – Hides and Leather, and has stated
that this Panel did not refer to the requi rement of a pattern. However, the Panel Argentina – Hides
and Leather provides no support for the US arguments. The measure challenged in Argentina – Hides
and Leather was a resolution which authorized representativ es of Argentinean industry to participate
in certain parts of the administrative procedure. It thereby made it impossible for Argentina to ensure
the protection of business confidential information, and administer its customs laws in an impartial
and reasonable manner. It was not contested that in the practical application of the resolution,
industry representatives did indeed participate in the process. Accordingly, since there was no doubt
that the administration by Argentina was uniformly unreasonable and partial, there was no reason for
the Panel to examine whether there was a pattern. This is entirely different from the present case,
where no EC measure mandates non-uniform administ ration; quite on the contrary, EC measures
ensure uniform administration, and the EC strongly contests that there is a lack of uniformity in the
EC's administration of its customs laws.
4.735 Finally, the US takes to misrepresenting the EC's argument by claiming that the EC had
requested it to show the existence of a "neat pattern" of non-uniform administration. The EC does not
understand the Panel in US – Hot Rolled Steel to have required the pattern of instances of
administration to be arranged in any particular order, or to be "neat". A pattern can also be constituted
by a repetition of similar acts or omissions. Where such instances of administration become
sufficiently widespread and frequent as to have an impact on the overall administration of the law, this
constitutes a lack of uniformity contrary to Article X:3(a) GATT. This is the standard which the US
must meet, no more, but also no less.
4.736 The US has also argued that a pattern cannot be required because "the interests of traders in
[....] uniform administration of the customs laws do not depend on the statistical significance of
occurrences of non-uniform administration". The EC disagrees. Article X:3(a) GATT protects
traders against an administration of customs la w in which they cannot reasonably predict the
treatment they will receive. It does not protect them against individual instances of administrative
error, which can and should be corrected through mech anisms of administrative and judicial review.
Accordingly, how widespread and frequent instances of non-uniform administration are is a relevant
consideration under Article X:3(a) GATT.
(b) The US has not provided any evidence of a lack of uniformity in the EC's administration of its
customs laws
4.737 As the EC has already mentioned, the Appellate Body in US – Oil Country Tubular Goods
Sunset Reviews has required that any claim under Article X: 3(a) GATT must be supported by "solid
evidence". The United States, which has the burden of proof as the complainant, has singularly failed

to discharge this burden. Far from producing soli d evidence, it has not produced any evidence to
support its claim of non-uniform administration in the EC's system of customs administration.
4.738 When required by the Panel to provide eviden ce to support its claim, the United States has
monotonously responded that such evidence was not releva nt to its claim, and th at if it were relevant,
it should be the EC which should provide it. As th e EC has already remarked, this is a transparent
attempt to shift the burden of proof to the EC, which should be rejected by the Panel.
4.739 The US claims that the EC has "acknowledged" instances of non-uniform administration in
the areas of penalties and audit procedures are unfounde d. As regards the issue of penalties, there is
no non-uniform administration, rather, as the EC will show further below, it is the laws of the member
States containing sanctions provisions which are differe nt. As regards the issue of audits, the EC has
already contested, and continues to contest, that ther e is a lack of non-uniform administration. As
explained, all member States have the necessary aud it capacity, and the audit practices of the member
States are sufficiently harmonized, with guidance provided by the EC Customs Audit Guide. This
Guide also addresses the selection of audit targets, and the question of risk assessment. It therefore
addresses the issue of the balance between inspecti ons at import and post-clearance audits which has
been raised by the US. The US therefore has not s ubstantiated its allegation that there is a lack of
uniformity in the EC's customs auditing practice.
4.740 The US also claims to have demonstrated that there is a lack of uniformity in the area of
processing under customs control. The EC does not see the basis for this statement. The US has
merely referred to guidance on this procedure, which it claims to contain certain divergences as
regards the application of the economic conditions. The EC has contested this interpretation made by
the US, which is not supported by the text of gui dance. In contrast, the US has not provided any
evidence of actual administration which would su pport its claim that there are differences in
administration.
4.741 The US alleges that the EC has recognized that such differences exist by explaining that in
certain cases, the examination of the economic conditi ons takes place at EC level. This statement is
unfounded. The EC has merely correctly expl ained the various ways in which the economic
conditions for processing under customs control are a pplied in the EC. That in certain cases, the
conditions are examined at EC level, whereas in other cases, they are examined at member States
level, does not mean that in the second case, there is a lack of uniform application. It is also noted
that in accordance with Article 522 of the Implemen ting Regulation, member States are obliged to
communicate to the Commission the info rmation about authorizations issued and applications refused
on the grounds that the economic conditions are not fu lfilled. This allows the Commission to verify
that the economic conditions are applied correctly.
4.742 Overall, the US has therefore not shown the existence of any lack of uniformity in the
administration of EC customs law, let alone the existence of a pattern of non-uniform administration.
(c) The US criticisms of the EC's system of cu stoms administration are unjustified, and do not
demonstrate any incompatibility with Article X:3(a) GATT
4.743 Since the United States has been unable to dem onstrate any actual lack of uniformity in the
EC's practice, it has instead tried to build its case on criticism of the various elements of the EC's
system of customs administration. Before a ddressing the specific arguments made by the United
States, the EC would like to make three general remarks.
4.744 First, systemic criticism cannot replace proof of actual lack of uniform administration. As the
EC has said time and time again, Article X:3(a) GATT does not prescribe how WTO Members should
administer their laws. The specific design of the EC's system could therefore become relevant under

Article X:3(a) GATT only if it necessarily led to a lack of uniformity. However, the US has provided
no evidence for such a proposition. In this regard, it is also necessary to recall the findings of the
Appellate Body in US – Carbon Steel , according to which it is the responsibility of the complainant
who alleges that the municipal law of another member has a particular meaning or effect to provide
evidence for such statement.
4.745 Second, in order to assess whether the EC's system ensures uniform administration of customs
laws, it is not sufficient to look at one particular instrument or feature in isolation. Rather, the
question is whether the EC's system as a whole, including all its relevant instruments, ensures uniform
administration. The approach followed by the Un ited States in its Second Written Submission is
precisely the opposite. The US selects a particul ar instrument, mischaracterises it, and then
triumphantly declares that such instrument is not su fficient to ensure uniform administration. It is
obvious that such a way of proceeding does not cons titute a fair and objective way of appraising the
EC's system.
4.746 Third, the US shows a marked tendency to ig nore all elements that do not suit it for the
purposes of its claims. For instance, in its discussions of EC classification practice, the US focuses
almost exclusively on the EBTI system, but does not acknowledge the existence of other binding
instruments of Community law, such as classification regulations or explanatory notes. Similarly, the
US has not acknowledged with one word the EC instruments existing in the field of customs
cooperation, or the budgetary and financial instruments. To put it differently, whereas the US is
happy to rely on a report of the Court of Auditors as alleged proof for a lack of uniformity in the EC's
system, the US does not wish to acknowledge that such EC institutions might also contribute to
uniformity, and therefore have to be taken into account in the evaluation of the overall system.
(i) Administrative guidance and the duty of cooperation
4.747 As the first of its systemic criticisms, the Unite d States claims that "most of the instruments
that the EC holds out as securing uniform administration are non-binding, discretionary, or extremely
general in nature".
4.748 This statement turns the EC's system ups ide down. The EC's system of customs
administration is based on a very comprehensive body of law, which is entirel y binding. In all areas
of customs law, the EC institutions dispose of th e necessary powers to adopt legally binding measures
as and wherever the need arises. This is compleme nted by a complete system of judicial protection
and review, which includes rights of appeal of trader s, but also the possibility to bring infringement
proceedings. To claim, therefore, that the EC's system is primarily based on non-binding means is
simply self-refuting.
4.749 The US also criticizes the reliance of the EC, in certain cases, on administrative guidance and
other instruments which are not legally binding, such as the EBTI guidelines, or the conclusions of the
Customs Code Committee. This criticism is unw arranted. The EC has recourse to non-binding
guidance as a complement to binding measures whenev er this is warranted by the specific issue at
hand, given for instance its technical character. To take but one example, the EC does not see what
would be gained by transforming the EBTI guidelines, which, for instance, contain instructions as to
how and when to consult the EBTI data base, into a legally binding instrument. Moreover, more
important is whether the guidelines are actually followed, and the US has produced no evidence to the
contrary.
4.750 As regards the duty of cooperation, the US has cr iticized that this obligation is too general in
nature. The EC does not agree. What matters is not that the duty of cooperation is a general
obligation, but that it exists. Moreover, it is lega lly binding, and can be sanctioned by the Court of
Justice. That cases before the Court may not be very frequent does not mean that the duty of

cooperation does not have practical effect. Quite on the contrary, it shows that it is generally
respected.
(ii) The EBTI system
4.751 The second systemic aspect criticized by the US is the EC's BTI system. The EC has already
intensively responded to the US arguments in this respect, and will therefore highlight only a number
of new aspects in the US arguments.
4.752 In its Second Written Submission, the US repeats its claim that the EC's system facilitates
BTI shopping. However, as the EC has already noted, the US does not provide any evidence for this
statement. In an apparent attempt to explain th is failure, the US now states that BTI shopping "is
done in such a way that it is does not generate evid ence and thus is difficult to identify". Moreover,
the US remarks that "traders can hardly be expect ed to come forward and openly admit that they are
taking advantage of the opportunity to seek optimal classification of their goods". The EC would
submit that alleged difficulties of providing eviden ce are not a reason for exempting the United States
from discharging its burden of proof. The United States cannot expect the Panel to accept its claim on
faith just because it states that providing evidence is too difficult.
4.753 Second, assuming for a moment that the United St ates presentation of the situation was right,
the EC also wonders wherein precisely would lie the nullification or impairment of benefits to the US.
It seems to the EC that if there is nullification a nd impairment, then the US should be able to support
this with some evidence. Inversely, if its trad ers have no interest in th e case, because they achieve
optimal classification of their goods, then the US has itself rebutted the presumption of nullification
and impairment in Article 3.8 DSU.
4.754 In its Second Written Submission, the US also continues its criticisms of the Timmermans
case law of the Court of Justice, which it claims is contrary to the uniform a pplication of EC customs
law. In this respect, the EC can largely refer to its earlier submissions. However, a new element in
the US arguments is that the US now appears to view classification a matter of discretion. In fact, the
US argues that tariff classification requires a customs authority to make certain judgments, which may
evolve over time. In this way, the US seems to take a highly dynamic approach to tariff classification,
which for the US seems to be at least partially a policy issue.
4.755 This approach may explain the frequent reconsiderations of classification issues in US
practice. It may also explain why the US seems to be much more concerned with geographical
uniformity than with uniformity over time. Howeve r, the EC does not agree with the US's point of
departure. Tariff classification, albeit complex, is a legal issue which is fully subject to judicial
review. At any given moment, there is only one correct classification for a particular product, and this
classification does not rapidly change on the basis of policy considerations.
4.756 Accordingly, the Timmermans case law does not in any way detract from the uniformity of
EC law. On the contrary, it allows member States to correct errors, where such errors have been
made. Contrary to the US view, this has nothing to do with applying the member States' "own
interpretation", but rather with applying the correct in terpretation. A perfect illustration for this is the
Bantex case, where the Timmermans case law allowed the UK authorities to bring their classification
practice into line with an EC cl assification regulation they had overlooked. Moreover, as the EC has
already shown, US rules for the revocation of adva nce rulings in the event of error or change of
practice do not seem to fundamentally differ from those in the EC.

(iii) Judicial review by member States' Courts
4.757 As the third and last issue, the US criticizes the EC for having referred to the judicial review
of customs decisions as another mechanism for securing the uniform application of EC customs law.
4.758 The US' first objection is that because decisions of member Stat es' courts are "binding only
within that Member State", a decision in a particul ar case might be inconsistent with the decisions of
the courts of other member States. This objection is spurious. Apart from the fact that there is no
requirement, as the EC will show la ter, for first instance judgment s to be "binding throughout the
Community", the US is forgetting that the EC memb er States courts are not operating in a vacuum.
Precisely in order to avoid the danger to which the United States refers, the EC Treaty has established
has the preliminary reference procedure. This pr ocedure allows the Court of Justice, acting in
constant dialogue with the member States' courts, to ensure a uniform interpretation and application of
Community law. It is important to note that in deciding whether a question of Community law should
be referred to the ECJ, or whether it can be rega rded as obvious, member States' courts must also
consider whether the matter will be equally obvi ous to the courts of other member States.
Accordingly, where courts of different member St ates have decided, or might decide, a question of
Community law differently, this is a reason for referring the question to the European Court of
Justice.
4.759 Furthermore, the US has criticized the fact th at the EC has no system of notification of
judgements between the courts of member States. In order to counter the EC's argument that such a
system would be burdensome and ineffective, the US has referred to the existence, in the United
States, of data bases such as Lexis and Westlaw. These remarks are beside the point. The EC
understands the Panel's Question No. 72 to have referred to mechanisms of formal "notification" of
judgments of one court to another. The EC does not understand the ques tion to have aimed at
privately-run data bases such as Lexis and Westlaw. As for such mechanism, similar data bases, as
well as legal and technical journals , obviously also exist in the EC. Moreover, typically traders and
brokers interested in the classification of a par ticular good are well aware of relevant judicial
decisions throughout the EC, and will bring them to th e attention of the courts, if these are not already
aware of them.
4.760 Second, the US argues that it is excessively burdensome for a trader which operates in several
member States to pursue his appeal in several courts. The EC does not agree. The situation described
by the US is due to the fact that the competence of EC tribunals is territorially limited, and, as the EC
will show, there is nothing wrong with that. More over, no trader is obliged to import the same good
through various different ports in different member States, but if he does so, the result may be that
different courts will be competent. Finally, this still does not mean that the trader would normally
have to conduct several appeals in parallel. If a question is referred to the Court of Justice, the normal
situation will be that other procedures in which th e same question is relevant can be suspended until
the Court has given judgment. Once the Court has given judgment, this interpretation will guide all
member States courts. Moreover, each referral to the European Court of Justice, as well as judgments
rendered, is published in the Official Journal of the European Union, which allows traders and judges
of other EC member States to be fully informed about cases which arose in another member State.
4.761 Finally, the US complains that the EC should not be allowed to refer to judicial review as an
instrument for securing uniform application si nce this is an "entitlement" of traders under
Article X:3(b) GATT. Moreover, the US claims that the EC is arguing that compliance with
Article X:3(b) would be sufficient for compliance with Article X:3(a) GATT.
4.762 These allegations are entirely unfounded. The EC has never claimed that the provision of
judicial review is sufficient for complying with Ar ticle X:3(a) GATT. On the contrary, the EC has
acknowledged that a system which purely relies on private rights of appeal would not normally appear

to be compliant with Article X:3(a) GATT. This is however not the case in the EC, where judicial
review is only one out of many mechanisms which c ontribute to the uniform application of EC law.
That judicial review is also at the same time an entitlement under Ar ticle X:3(b) GATT is irrelevant.
First of all, this provision concentrates solely on first-instance review. Secondly, there is nothing to
prevent that it may also at the same time be a tool for securing uniform administration.
4.763 Overall, the United States has failed to show that there are any features in the EC system
which necessarily would lead to a lack of uniformity in the EC's system of customs administration.
Quite on the contrary, the EC's system contains numerous, interlocking mechanisms which together
provide a high degree of assurance for a uniform in terpretation and applicati on of EC customs law.
The US claims should therefore be dismissed.
(d) Article X:3(a) GATT does not require the EC to harmonize member States' penalty provisions
4.764 A final claim under Article X:3(a) GATT concerns the issue of penalties for customs
violations. This US claim has nothing to do with the administration of laws, but rather is aimed at
forcing the EC to harmonize the member States laws which contain penalty provisions and replace
them with EC laws. This claim has no basis in Article X:3(a) GATT.
(i) Penalty provisions are not covered by Article X:3(a) GATT
4.765 First, the EC has explained that penalty provi sions are not among the laws which are referred
to in Article X:1 GATT, and therefore are not cove red by Article X:3(a) GATT. So far, the United
States has not provided any explanation as to why penalty provisions should be regarded as laws
within the meaning of Article X:1 GATT, i.e. laws "pertaining to the classification or valuation of
products for customs purposes, or to rates of duty, taxes, or other charges".
4.766 In fact, the United States does not even seem to argue that penalty provisions are laws within
the meaning of Article X:1 GATT. Instead, it merely states that penalty laws are "tools" for the
administration of the laws referred to in Article X:1 GATT. However, if penalty provisions are
merely tools for the administration of the laws in Article X:1 GATT, they are not themselves such
laws.
4.767 In its Second Written Submission, the US has al so made an oblique reference to the term
"charges" in Article X:1 GATT. However, the EC do es not believe that this term covers penalties.
"Charges" are contributions of a pecuniary nature , which are frequently "charged" in exchange for
services rendered or goods provided. Penalties respond to illegal behaviour by imposing a sanction.
Such sanctions may be financial in character, but can also take other forms. For instance, criminal
sanctions may include not just fines, but also impr isonment or social work. Administrative sanctions
may also include measures such as the destruction or forfeiture of the goods. It does not appear that
all these different types of sanctions can be included under the term "charges". This is also illustrated
by Article VIII GATT, which clearly distinguishes between fees and charges on the one hand, and
penalties, on the other.
(ii) Article X:3(a) GATT does not require the harm onization of laws which exist in a WTO
Member at sub-federal level
4.768 The second problem with the US claim is that member States' laws which contain penalty
provisions are themselves laws of general applicat ion. Accordingly, even if these laws fell under
Article X:1 GATT, it would be the administration of those laws to which Article X:3(a) GATT
applies. The alleged differences between member States' penalty provisions to which the US has
referred are not differences in administration, but differences between different legislative measures
applicable in different territories. That a particul ar topic may be regulated differently in different

parts of the territory of a WTO Member has nothing to do with non-uniform administration.
Accordingly, Article X:3(a) GATT cannot be used to create a duty to harmonize sub-federal laws
existing within a WTO Member.
4.769 The United States has tried to escape this conclusi on by repeating its mantra that "laws can
also be administered through laws", and that theref ore, member States' penalty provisions are to be
regarded as "administration" for the purpose of Article X:3(a) GATT. This interpretation is
fundamentally at odds with the ordinary meaning of the wording of Article X:3(a) GATT.
4.770 The United States has defined the term to "adm inister" as "to execute", which in term it
defines as "to carry out, put into effect". The EC can agree with these definitions. However, the EC
does not agree that a penalty provision "puts into effect" or "carries out" the substantive rule the
violation of which it is intended to sanction. For instance, a provision which provides for the
imposition of a sanction for the failure to declare a good does not "carry out" or "put into effect" the
provision which imposes the obligation to declare the good. The penalty provision itself needs to be
carried out through an administrative or judicial act imposing the sanction. It is this latter act which
can be regarded as executing the prohibition, and thus to constitute "administration". In contrast, the
penalty provision complements the substantive provision, but does not itself put it into effect.
4.771 Indeed, the United States itself has explicitly r ecognized that a penalty provision "may be
considered as something to be administered". This exposes the logical fallacy of the United States. A
law that itself needs to be "put into effect" cannot be said to "put into effect" another law. Rather,
penalty provisions and substan tive provisions are both measures of general application which
complement one another. That the former exists at the member States level and the latter at the EC
level does not mean that the former administers the latter.
4.772 The US has criticized the EC for having defined "administration" as the execution of laws "in
concrete cases". This criticism is unjustified. Th e administration of a law, which is defined as an act
of general application, by definition implies its a pplication in concrete cases. This follows clearly
from the structure of Article X GATT. Article X:1 GATT defines the laws of general application
which must be published by WTO Members. Article X:3(a) GATT then refers to these laws of
general application as the acts to be administered in a uniform, impartial and reasonable manner. It
defies the internal logic of Article X GATT to argue th at laws to be administered can at the same time
themselves constitute administration. This wo uld undermine the clear distinction between
"administration" and the laws to be admini stered recognized by the Appellate Body in EC –
Bananas III.
4.773 The US has sought support for its interpretation in the Panel Report in Argentina – Hides and
Leather, in which the Panel found that a particular Ar gentinean resolution constituted a violation of
the requirement of impartial and reasonable admi nistration. However, as the EC has already
explained, this was because the Argentinean measure made it impossi ble for Argentina to administer
its customs laws in a manner that was reasonable and impartial. Nowhere does the Panel Report in
Argentina – Hides and Leather indicate that the Argentinean measure administered some other
measure. Accordingly, Argentina – Hides and Leather provides not support to the US interpretation
in the present case.
4.774 Overall, the US interpretation that "laws may implement other laws" is highly contrived and
self-serving. It is designed to achieve a c ondemnation of the EC in the present case while
safeguarding those areas of economic activity which in the United States itself are regulated in state
law.
4.775 In the United States, a wine exporter may have to deal with 50 different sets of state
requirement for the sale of alcoholic beverages. Th is is probably far more burdensome than the fact

that an importer in the EC may have to reckon w ith the penalty provisions of one out of 25 member
States, depending on where the offence is committed. It is therefore not clear why the EC should be
obliged to harmonize its penalty provisions while the US is entitled to maintain sub-federal laws in
numerous areas covered by Article X:3(a) GATT.
4.776 Of course, the United States has a system of dual federalism where State law may never
implement federal law. However, this cannot m ean that all WTO Members in which the borderlines
between federal and state competence are less strict, and federal and state laws may therefore be
complementing one another, are somehow in violation of Article X:3(a) GATT.
(iii) Community law ensures a sufficient degree of uniformity of penalty provisions
4.777 Finally, the EC would clarify that whereas it does not accept that penalty laws can be
regarded as "administration", it does not contest that penalty laws may also be relevant for securing a
uniform application of the laws referred to in Ar ticle X:1 GATT. This is precisely why Community
law, as clarified by the Court of Justice, lays down certain basic rules for penalty provisions, which
must be effective, proportionate, and dissuasive.
4.778 These general requirements are sufficient for secu ring a uniform application of EC customs
laws, in accordance with Article X:3(a) GATT. The United States does not provide any evidence
which would show that the absence of a full harmon ization of penalty provisions in the EC leads to
any lack of uniformity in the application of EC laws in areas referred to by Article X:1 GATT.
4.779 The US has repeatedly referred to the fact that the EC, in the context of the discussions on the
modernized customs code, has considered includi ng a provision which would provide for a further
harmonization of administrative sanctions in the customs area. However, these discussions have
nothing to do with the question of whether the EC is in compliance with the requirements of
Article X:3(a) GATT. Where this is beneficial for the functioning of the internal market, the EC has
adopted harmonising measures in numerous areas, without this necessarily being a reaction to a WTO
obligation.
3. The US claim under Article X:3(b) GATT
(a) The ECJ and the requirement of prompt review
4.780 The US criticism on prompt review is limited to the role played by the ECJ through the
preliminary reference procedure. The US has not presented any allegation concerning the actions for
annulment of a Community measure, and, therefore, the US seems to admit that, in this type of
procedure, the ECJ and the Court of First Instance comply with the requirement of prompt review.
4.781 It should be pointed out that preliminary refe rences serve the purpose of ensuring the uniform
application and interpretation of Community law by th e tribunals of the member States. In this sense,
the Court of Justice, when acting through the pre liminary reference procedure, exercises a function,
which is not dissimilar to that of a supreme court. As the EC has repeatedly explained, preliminary
reference procedures at the same time also serve as one of the various instruments to ensure uniform
administration in accordance with Article X:3(a) GA TT. The EC has already affirmed that, in its
view, "administer" means to execute the general laws and regulations, to apply them in concrete cases.
Therefore, uniformity is ensured through a panoply of administrative and legal mechanisms, including
some judicial ones, like preliminary references or appeals to a second instance court. In no respect,
however, does the ECJ, through the preliminary refe rence procedure, provide "review" within the
meaning of Article X:3(b) GATT, nor is this in any way required for the EC's compliance with this
provision. In this context, it should be recalled that, as the US has already admitted, prompt review in
Article X:3(b) GATT refers only to first instance.

4.782 In any case, even if the requirement of promptness is applied to cases where preliminary
references are requested, the accumulated time span it takes for a case to go through the ECJ and the
relevant national court rarely arrives to the near ly four years average of the USCIT cases mentioned
by the EC in its First Oral Statement. In respon se to a question by the Panel, the US justifies these
delays on "the fact that in the US courts the sch eduling of proceedings is, to a significant extent,
conducted by mutual consent of the parties". The EC finds it difficult to justify an exception to the
"prompt review" obligation on the basis a procedural mechanism that relies on the discretionary will
of the defending agency.
4.783 Moreover, the EC would like to recall that the average periods for review by the USCIT to
which it has referred do not include the periods necessar y for appeals to the US Court of Appeals for
the Federal District or subsequently to the US Supreme Court. It would thus seem to the EC that if
the activity of the US Supreme Court were to be regarded as "review", it would certainly be no more
prompt than that provided by the ECJ.
(b) The requirement that the decisions of the tribunals must govern the practices of the agencies
4.784 The second US argument constitutes the core of its Second Written Submission in relation to
Article X:3(b) GATT. This argument refers to th e requirement that the decisions of the review
tribunals govern the practice of the agencies entr usted with administrative enforcement of the WTO
Member's customs law.
4.785 This argument has only appeared in these proceedings at a very last stage. The US used it for
the first time in some of its replies to the firs t Panel questions, notably Question No. 35, where the
Panel asked the US to identify what the US is challenging or alleging under Article X:3(b) GATT.
This appears to replace the more general argument in the US First Written Submission, according to
which "the opportunity for review and correction on a member-by-member State basis does not fulfil
the EC's obligation under Article X:3(b)". This chapter included some arguments, mainly on timing
and variations in review procedures, all of which seem to have been discarded in the course of the
proceedings. Therefore, the US argument built on the second sentence of Article X:3(b) seems to be a
last-minute fall-back position.
4.786 Although the late appearance of the argument ha s impeded a discussion between the parties,
the EC will duly explain why the US position on the "govern the practice" requirement is a
misrepresentation of Article X:3(b) GATT.
4.787 The US interpretation that any decision of a first instance tribunal binds the whole
organization of the customs agencies throughout a WT O Member's territory is based on four grounds:
three are related to the literal interpretation of th e provision, namely the reference to two different
obligations in the provision ("implement" and "gover n"), " the ordinary meaning of the term "govern"
and the use of the Article "the" before the term "a gencies", while the fourth ground is based on the
context provided by Article X:3(a) GATT.
4.788 The EC cannot agree with these arguments advanced by the US. In the first place, the EC has
already explained in its Second Written Submission the meaning of "govern" compared to the
expression "implement", and how the former refers first of all to an obligation of fairness when taking
a second administrative decision following the issuance of an independent review decision.
4.789 Second, to interpret the term "govern", the di fferent definitions of this term must be
differentiated. Should we admit that "govern" mean s "control, regulate, dete rmine, constitute a law,
rule, standard or principle for", the decisions of fi rst instance tribunals would be considered as having
binding effects, contrary to a common element that is shared by most of the "civil law" and "common

law" legal systems: that only high level or last inst ance tribunals take decisions that are considered as
binding and, therefore, a general source of law.
4.790 The EC can admit that a decision of a first instance regional tribunal plays the role of
guidance to other first instance regional tribunals. Thus, the ordinary meaning of "govern", among
those provided by the US, would be "influence". The decisions of a first instance tribunal are only
binding for the specific cases decide d by the same tribunal and, therefore, contrary to an argument
constantly repeated by the US, they are not an instrument ensuring uniform administration.
4.791 This interpretation reflects the situation in th ose third parties to the dispute having regional
courts of first instance in customs matters, like Br azil, China, Japan and, partially, India. On the
contrary, as their submissions have shown, those third parties having centralized courts for first
instance review of administrative decisions in cu stoms (Argentina, Australia and Korea) can easily
share the far-reaching interpretation of Article X:3(b) that the US follows in this case.
4.792 Third, the use of the term "the agencies" in Article X:3(b) do es not mean that those agencies
are all the agencies throughout the WTO Member's territory, in our case the EC. "The agencies" must
be read in context with the term to which it relates, "tribunals", which are tribunals of first instance.
Therefore, "the agencies" must be understood as "the agencies" whose deci sions are reviewed by
these tribunals of first instance. In the EC, "the agencies" are those established in each of its member
States, not the agencies established in the other member States.
4.793 Moreover, the US fails to give a proper meani ng to the term "decision" in Article X:3(b)
GATT. The "decision" of a tribunal in a particular case must be distinguished from the reasoning
which led it to this decision. For instance, if a tribunal decides on an action for the annulment of a
decision of the customs authorities, then the decision will be to annul the decision or not. If the
decision is to annul, then this decision will govern th e practice of the agency. In contrast, there is no
basis in Article X:3(a) GATT for assuming that all questions of interpretation which the tribunal may
have considered in the course of its reasoning e qually become binding on the agency. This would
give a role to judicial precedent which would go far beyond the practice of numerous WTO Members
which do not have a legal system based on case law.
4.794 This does not imply that the decisions of a tribunal of first instance, including the reasoning
contained in the judgement, do not produce any effects in the EC system. Such reasoning will
constitute relevant judicial practice which will be taken into account by the customs agencies.
Moreover, if a customs agency or a court in a EC member State does not share the interpretation of
the EC legislation given by a court of another member State, it will take the initiatives that are proper
to its respective position in the system: the customs agency shall consult and discuss the issue with the
Commission and the other member States, the court in another member State will or shall refer to the
EC Court of Justice.
4.795 Fourth, the US considers that its understanding of X:3(b) is reinforced by the context
provided by Article X:3(a). The EC has already challenged any linkage between these to set of
obligations in the course of these proceedings. Th e EC considers that the US interpretation finds no
support in the language, structure or objectives of Article X:3 GATT. The fact that, as the US
underlines, the EC has conceded that Articles X: 3(a) and X:3(b) must be interpreted "in an
harmonious way" does not mean that we agree to an interpretation that transforms Article X:3 GATT
in a "totum revolutum" provision, where the differe nt obligations are melted, with the unwarranted
consequence that the obligation to grant independent review and correction of customs administrative
decisions at first instance level is absorbed by th e obligation to ensure uniform administration of the
legislation.

4.796 Finally, it is not true, contrary to what the US declares, that "if they [i.e. the decisions of
review tribunals] govern the practice of only some of the agencies then, by definition, the
administration of the Member's laws will not be uni form". This categorical conclusion does not take
into account that, as the EC has explained, there ar e other means of ensuring uniform administration
and that the EC counts with a wide range of instruments which contribute to the uniform
interpretation and application of EC customs law.
(c) The US interpretation of Article X:3(b) GATT requires the establishment, in every WTO
Member, of a single and centralized customs court or a single and centralized customs
agency.
4.797 The US claims that it does not argue that Article X:3(b) requires every WTO Member to have
a single, centralized tribunal for the prompt review and correction of customs administrative actions.
The US accepts the existence of first instance regi onal courts provided that the WTO Member has a
single, centralized agency entruste d with the enforcement of customs law or that the various regional
customs authorities take other steps to ensure that the decisions of review tribunals govern the practice
of the agencies and that the Member continues to administer its customs laws in a uniform manner.
4.798 It is unclear to the EC why the existence of a centralized customs agency, which at best is a
question under Article X:3(a) GATT, should be li nked to the design of the court system under
Article X:3(b) GATT. The United States explains that "if the decision of a court in one region
conflicts with a decision of a court in another region, the agency should be able to resolve the conflict
by appealing one or the other decision to a court or a tribunal of superior jurisdiction". This
explanation is revealing, because it shows that ev en according to the United States, judgments of
courts of first instance are not binding on other c ourts, since otherwise, the conflict should not have
occurred at all. More importantly still, the US see ms to forget that it is the courts which should
control the agency, not the agency which controls th e courts. In the view of the US, it would be the
agency which would be charged with ensuring the uniformity of the practice of the first instance
tribunals, and which would select the judgment it wish es to appeal. This is an interpretation which
totally blurs the borderlines between the role of th e customs authorities and of the courts, and which
should not be accepted.
4.799 The only additional reason given by the US to su stain that a central agency would cure the
lack of a central court is a proviso that c onstitutes the fourth phrase in the second sentence of
Article X:3(b). This proviso provides the possib ility, for the central administration of a customs
agency, to request the review of a first instance court decision when there is good cause to believe that
the decision is inconsistent with established principl es of law or the actual facts. The US considers
that "that possibility makes sense only if the decisi on in the original proceeding would otherwise have
effect outside of that proceeding".
4.800 The US interpretation of this proviso is wrong in that it misunderstands the role played by the
review mechanism laid down in that proviso. That mechanism is not established to rectify the effects
of the original decision in the practice of the agencies but to provide a remedy, based on limited
grounds, against a decision that is no more challeng eable through ordinary means because it is time
barred.
4.801 That is clear, first, from the structure of paragraph (b). The exception provided by the proviso
refers to the time limits for appeals contained in the previous phrase in subparagraph (b) (the third
phrase in the second sentence of the subparagraph), not to the "govern the practice" requirement,
which is placed in the second phrase of the second sentence of Article X:3(b) GATT.
4.802 Second, that the proviso is not intended to rec tify the effects of the original decision in the
practice of the agencies also deriv es from the nature of this type of exceptional review. When the

review is based on the lack of c onsistency with established principles of law, its purpose is to protect
the cornerstones of a legal system, with the view to eliminate conflicts with the case-law of the
highest courts, which are responsible for refining tho se principles of law. When the review is based
on the lack of consistency with the actual facts, its purpose is to annul a judicial decision on discovery
of facts that were unknown to the court and to the party claiming the revision when the decision was
given. Neither of these two grounds of review is linked to the even tual effects of a first instance
judicial decision on the practice of the customs agencies. The review based on the respect of
principles has as its objective to en sure respect of the legal system and of the highest courts, the
review based on the discovery of new facts produces its effects only on the original decision.
4. Closing statement
4.803 The EC will begin its closing remarks by fi rst presenting a number of general comments on
the present case. It will then present its closing arguments on the US claims under Article X:3(a)
GATT. The EC will subsequently present its closing arguments on the US claims under
Article X:3(b) GATT.
4.804 A first general remark the EC would like to make is that the present case is not like any other
which has been litigated under the DSU. It c onstitutes a fundamental challenge against the entire
system of customs administration and judicial review of a WTO Member, namely the EC. Contrary
to what the US has alleged, this has nothing to do with "scare tactics", but simply describes the reality.
From the discussions it can be seen that the case is not limited to issues of customs law and
administration. Rather, it touches upon fundamental differences between legal traditions and cultures,
between Members which have a federal structure and those who do not, between Members who have
a system of executive federalism and others who do not, and between common law and continental
law systems on the value of judicial precedent. The EC believes that such issues are not properly
litigated under the DSU, but should be left to the constitutional autonomy of each WTO Member.
The EC is confident that the Panel will also be mi ndful of these considerations in its interpretation of
Article X GATT, which is not a provision which s hould be used to interfere with fundamental
questions regarding a Member's domestic legal system.
4.805 A second general remark the EC would like to make is that the Panel should not lose sight of
the real implications of the US claims. The US case is, as the EC has repeatedly emphasized, aimed
at the creation of an EC customs agency and an EC Court, plus the harmonization of member States'
laws in a number of areas. Despite all US professions to the contrary, this is the clear conclusion from
numerous US statements where the US declared that "in the absence" of an EC customs agency or a
customs court, such and such issue necessarily lead s to a lack of uniformity. This all-or-nothing
nature of the US arguments is troubling, since it represents a highly prescriptive application of
Article X:3(a) GATT on structural elements of the EC legal order which were well known at the time
the EC became a WTO Member.
4.806 As a third issue, the EC was planning to ra ise the issue of the US's late submission of
evidence. Given the Panel's decision to modify th e timetable, for which the EC would like to thank
the Panel, the EC will not further enter into this que stion at this stage. Nonetheless, the EC regrets
that the US has not presented its evidence earlier, and that the EC does not feel to be in the same
position as it would have been had the US presented its evidence as early as it should have. The EC
would also like to add that at the end of these pr oceedings, the feeling is still one of a lack of
conclusion. In fact, the EC feels as if it had been in a sort of trade policy review mechanism exercise,
and it seems discussions could still have continued on the EC's system of customs administration
forever. It does not seem that this is really how the WTO dispute settlement mechanism should be
used.
4.807 The following are the EC's closing remarks on Article X:3(a) GATT.

4.808 The present proceedings have shown that the pa rties have strongly different views of the
requirements of Article X:3(a) GATT. The US views this provision as a highly demanding legal
standard, which can be used to prescribe in detail how a WTO Member administers its customs law.
Moreover, the US also appears to believe, desp ite its professions that divergences as such are not
problematic, that a violation of Article X:3(a) can already be demonstrated through reference to
individual instances of administration.
4.809 The EC does not agree with these views of the US. In the view of the EC, Article X:3(a) is
purely a non-prescriptive, minimum standards provision which complements the substantive
disciplines of other provisions of the covered ag reements. Moreover, given the high number of
administrative instances in the day-to-day manage ment of customs, it cannot be assumed that a
violation can already be accepted because of individual instances of non-uniform administration.
Rather, as the Panel in US – Hot-Rolled Steel has stated, demonstration of a pattern of non-uniform
administration is required. Moreover, as the Appellate Body has clarified in US – Oil Country
Tubular Goods Sunset Reviews , "solid evidence" is needed corresponding to the gravity of the
allegation.
4.810 In the bulk of its submissions, the United States has tried to base its case not on evidence of
actual administration, but on systemic criticisms of EC's system of customs administration. In its
submissions, the EC has already responded in deta il to these allegations. It has also provided a
comprehensive description of the EC's system of customs administration, which it hopes will assist
the Panel in its task of proceeding to an objective assessment of the facts.
4.811 The EC would therefore limit itself to addressing some systemic claims raised in the US
Second Oral Statement. First, there is the continue d insistence of the US on its arguments that the EC
system encourages "BTI shopping". In support, it refers to what it calls "skewing" of the issuing of
BTI, and in particular the fact that some member States, notably Germany, issue a higher percentage
of BTIs than other member States. As the EC h as already remarked, this fact does not in any way
prove that BTI shopping occurs. Rather, it reflect s different commercial pa tterns and the general
importance of Germany as the largest economy in the EC internal market. It may also reflect different
habits of traders due to the fact that Germany w as the first member State to introduce BTI in the EC
before its Community-wide introduction through the EC Customs Code.
4.812 The US has also complained against a lack of obligations on the part of one member State
authority to take into account the BTI issued by other member States. This statement distorts the legal
situation in the EC. As the EC has explaine d, where a member Stat e, for instance through
consultation of the EBTI data base, learns of BTI divergent from the classification intended by it, the
Member State may not simply go ahead issuing conflicting BTI, but rather must refer this matter to
the Commission and/or the customs code committee.
4.813 Finally, the US also has continued its criticis m of the preliminary reference procedure as a
means for ensuring uniform administration. In suppor t, it has, in its Second Oral Statement, referred
to a recent judgment of the ECJ in Intermodal Transport, from which it has quoted very selectively.
The EC had planed to comment on this issue in its closing remarks, but given the additional time
granted by the Panel for comments on Part III of th e US Second Oral Statement, the EC will reserve
this for its written remarks.
4.814 Leaving the systemic issues, the EC turns now to what should be the focus of the US case:
namely the actual administration of EC customs law. In other words, when one takes stock of the US
submissions, has the US shown that there is a pa ttern of non-uniform administration of EC customs
law? The answer is a resounding "no".

4.815 As regards the area of tariff classification, th e US has essentially referred to only two single
cases of application, namely LCD monitors and blackout drapery lining (BDL).
4.816 As regards LCD monitors, the US position was first that the duty suspension regulation did
not ensure uniform application. More recently, and notably in its Second Oral Statement, the US has
shifted focus to the monitors not covered by this regul ation. In this context, it has referred to some
extremely recent developments which occurred durin g the Panel proceedings, for instance BTI issued
by the German authorities in July 2005, and i ndustry comments addressed to the European
Commission in September 2005. In the EC's view, these recent developments do not show that there
is a problem of non-uniform application contrary to Article X:3(a) GATT, but rather that there is an
issue in the process of resolution. In fact, the classification of the relevant monitors is an issue which
is currently under review, and relevant measures will be submitted to the Customs Code Committee in
the very near future.
4.817 As regards BDL, the US has not shown any lack of uniformity, either. As the EC has said
before, there is no evidence that the products befo re the German authorities were covered with textile
flock, and thus identical to those described in the BTI issued by the Dutch, Irish and UK authorities.
In a last-minute attempt to paper over this diffi culty, the US has submitted an affidavit by the
Chairman of Rockland, the producer of BDL. The EC has already explained that this statement by a
person with a clear interest in the classificati on of BDL has no probative value whatsoever.
Moreover, the affidavit does not concern the questio n whether the products before the EC authorities
were in fact identical. Rather, it contains mere ly an assurance that Rockland has never produced any
product that is not flocked. This, however, is not th e issue, since it is not clear that the products were
all produced by Rockland, nor that all of Rockla nd's products are indeed identical. Overall, the
question of whether the products were flocked is purely a question of the examination of the physical
goods by the competent customs authorities. Moreover, the EC notes that both importers concerned
by the German decisions, the Bautex GmbH and the Ornata GmbH, have not appealed the decisions.
For this reason, the United States cannot now claim ther e to be a lack of uniformity attributable to the
EC system.
4.818 In the area of customs valuation, the US has been even less forthcoming with evidence. It has
mainly referred to the report of the Court of Aud itors, which is however in itself a tool for ensuring
uniform administration, has been implemented, and no longer represents an accurate description of the
situation today. As regards actual cases, the US referred only to one single case, involving Reebok.
However, it has entirely failed to substantiate this case with evidence of non-uniform administration,
and has thus not fulfilled its burden of proof.
4.819 Finally, in the area of customs administrati on, the US seems to have entirely dropped its
arguments regarding the local clearance procedure. As regards processing under customs control, the
US simply repeats its erroneous interpretations of th e French guidance, which it misinterprets so as to
create the impression of a conflict with EC law. However, if fails to support its doubtful
interpretation with any evidence as regards the actual application of the guidance.
4.820 When one passes in review the factual basis of the US claims, one must conclude that it is
extremely thin. From the beginning, the United St ates has struggled to come forward with evidence
of non-uniform application. It has started by bri nging two examples in the area of classification and
one in the area of valuation. When it saw these examples evaporate, it tried to add, in a last-ditch
effort, two more cases, one of which even concerns a matter outside the Panel's terms of reference.
4.821 The EC submits that there is a stark mismatch between this lack of factual evidence, and the
extremely broad allegations of the US. Millions of customs issues are dealt with by the EC customs
authorities every year. If the EC's system of cu stoms administration were truly as deficient as the
United States alleges, then evidence of non-unif orm administration should be abundant, and the US

should have been able to provide numerous ex amples. But the opposite has been the case.
Significantly also, of the numerous third parties in the present proceedings, none, not even those
which in principle supported the US case, have point ed towards any examples of lack of uniformity in
the EC's system. This difficulty of the US to pr ovide evidence is essentially due to one fact: the EC's
system is not anywhere near as bad as the US woul d want to make it appear, but on the contrary as a
whole ensures a high degree of uniformity throughout the EC. For this reason, the US claims should
be rejected.
4.822 Before concluding on Article X:3(a) GATT, the EC would like to make some last remarks on
the issue of penalties. It has by now become clear th at this US claim is rather different from the other
claims in that it concerns not actual administration, but different legislation which exists at Member
States level. As the EC has explained, this claim must fail for several reasons.
4.823 First, penalty provisions are not among the laws referred to in Article X:1 GATT. The US
explanations in its Second Oral Statement that penalties somehow "pertain to classification", or would
be "charges" or "requirements on imports" simply have no basis in the text of Article X:1 GATT.
4.824 Second, provisions which set out penalties do not constitute "administra tion", but rather are
themselves laws of general application. That at th e same time, they may be related to the substantive
law which they sanction is neither here nor ther e. Laws may very well complement one another
without for that reason becoming "administration".
4.825 Finally, to the extent that penalty laws have an impact on the uniform application of customs
laws, the EC has taken the necessary measures to ensu re that member States' legislation on sanctions
does not undermine uniformity. In particular, the requirement that sanctions be dissuasive and
deterrent means that traders will normally respect th e substantive provisions of customs law; uniform
application of these laws is thus ensured.
4.826 The US has, in its Second Oral Statement, argued that the uniform application of US customs
laws "is not the point", because penalty laws still re main part of the "legal backdrop" against which
traders decide into which member State of the Community they import. This is wrong for two
reasons. First, because penalty provisions do not fall under Article X:1 GATT. And second, because
Article X:3(a) GATT only concerns the administration of laws, but does not give traders the right to
expect that in all parts of the territory of a WTO Member, the same laws will apply. In other words,
the "legal backdrop" in a WTO Member with a federal structure may perfectly well include sub-
federal laws, provided of course that these laws are administered in accordance with Article X:3(a)
GATT.
4.827 Accordingly, the Panel should reject the US cl aim that the EC is obliged to harmonize the
penalty laws of its member States.
4.828 Concerning Article X:3(b) GATT, the EC will mainly concentrate on some arguments put
forward by the US recently.
4.829 First, the EC would like to insist that the US arguments concerning Article X:3(b) have been
recently shifted to the requirement "govern the practice".
4.830 The EC will not repeat its arguments on this issu e, tough it is worth insisting on the fact that
the US carries out an interpretation that does not take into account that the obligations in
Article X:3(b) apply to first instance courts.
4.831 The US claims that the "govern the practice" requirement means "that the review court
decisions must control the way agencies administer the customs law". This interpretation imposes

very far-reaching obligations for all WTO Members, which do not correspond to the legal traditions
of most of the WTO Members of both "civil law or roman-germanic law" and the "common law"
families. In the US interpretati on, first instance courts will deliver judgments that will be binding
outside the relevant proceedings and will participate in the elaboration of a case-law or precedents that
will constitute a general source of law.
4.832 This surprising outcome is aggravated by th e fact, as the EC has heard from the present
discussions, that the US understands the term "deci sion" to cover not only the operative part of a
judgment but also its reasoning. The US interpretati on would imply a radical change in the nature of
those courts.
4.833 The EC would insist on the need to reject the far-reaching interpretation of Article X:3(b)
made by the US. The EC has provided the Panel with its own interpretation, which clearly confirms
that the EC court system complies with the requirements of Article X:3(b).
4.834 Second, the EC would like to note that, contrary to US claims, its position on the
interpretation of the "govern the practice" requireme nt is not in conflict with its interpretation of
Article X:3(b) GATT.
4.835 In paragraph 89 of its Second Oral Statement, the US distorts the EC's arguments in this
respect. The EC has never referred to the review of decisions of customs agencies by member States'
courts of first instance as a key means to achieve th e aim of uniform administration. What the EC has
sustained is something which has nothing to do with the misleading summary presented by the US.
The EC has explained that preliminary rulings by the European Court of Justice constitute an
important instrument of ensuring uniform administra tion of customs law. This role is played not
because preliminary references are made by courts of first instance, but because of the effects that the
resulting rulings by the ECJ have on all courts in the different member States.
4.836 Third, the EC would like to refer to the US rebu ttal of the EC's argument that the creation of
an EC Customs Court would breach fundamental EC constitutional principles. The US has alleged in
its Second Oral Statement that Article 225a of th e EC Treaty lays ground-work for the establishment
of new EC courts like the new Civil Service Tribunal.
4.837 This interpretation shows a total lack of understanding of the EC judicial system by the US.
4.838 Article 225a of the EC Treaty is just an or ganizational provision allowing the creation of
judicial organs to decide at first instance certain classes of action or proceedings in specific areas. In
other words, the creation of a new court would on ly imply the redistribution of the work of the
European Court of First Instance (CFI) and in no way entails the attribution of new competences to
EC Courts.
4.839 Therefore, no new court established according to Article 225a of the EC Treaty would be
entitled to examine actions other than the actions fo r annulment of some acts of EC institutions for
which the CFI has jurisdiction according to Articles 225 and 230 of the EC Treaty. No such court
would be entitled to review decisions taken by the member States' authorities. This remains the task
of the EC member States' courts under the system of attribution of competences laid down in the EC
Treaty, and will remain so unless an amendment to the EC Treaty is ratified by all member States.
4.840 The creation of a centralized customs court in the EC, therefore, would require a reform of the
EC Treaty.
4.841 The US kindly offers the EC another option to comply with its ambitious reading of the
obligation under Article X:3(b): instead of creati ng a central customs court, the EC can always

establish a centralized customs agency which, among ot her duties, will be in charge of ensuring that
review decisions of courts of first instance "control" how agencies administer EC customs laws.
4.842 The EC has been repeatedly accused by the US of calling fo r a special standard in the
application of Article X:3 GATT, accusation from wh ich we have duly defended ourselves. It seems
to the EC that it is rather the US who is tr ying to impose its own standard on the whole WTO
membership, since their interpretation of the oblig ations under Article X:3(b) leads always to the
imposition of one or the other body or institution fou nd in the US system (a central customs agency
and/or a central customs court). By contrast, the EC 's interpretation of Article X:3(b) allows the US
and other WTO Members to maintain their systems as long as they fulfill the important but distinct
obligations of uniform administration and prompt review of administrative decisions.
H.
SECOND ORAL STATEMENT OF THE UNITED STATES
1. Introduction
4.843 This dispute is about two things: first, the fact that the EC, through its 25 different customs
authorities, does not administer EC customs law in a uniform manner; and, second, the fact that the
EC fails to provide tribunals and procedures fo r the prompt review and correction of customs
administrative actions as required by Article X:3(b) of the GATT 1994.
4.844 With respect to Article X:3(a), the United States has shown that EC customs law is
administered by 25 separate, independent customs authorities. Absent some process or institution to
prevent divergences among these authorities or reconcile them when they occur, such a system plainly
would not satisfy the EC's obligation of uniform administration. And, indeed, such a process or
institution does not exist.
4.845 The EC asserts that such pr ocesses and institutions do exist. However, the processes and
institutions that the EC holds out as securing uniform administration do nothing of the sort. They are
either extremely general (e.g., the overarching duty of cooperation in EC Treaty Article 10), non-
binding (e.g., explanatory notes, guidance, and other "sof t law" instruments to which the EC has
referred), or discretionary in nature (e.g., the possi bility that a question may or may not be referred to
the Customs Code Committee). The one process of a binding nature that the EC holds out as securing
uniform administration – appeals to member State c ourts with the possibility of referral to the ECJ –
in effect puts a heavy burden on the trader to seek out uniform administration, rather than providing
for uniform administration in the first instance, as GATT Article X:3(a) requires. And, even this
process does not actually secure uniform administration.
4.846 The EC and individual EC officials acknowledge that the instruments purported to secure
uniform administration do not in fact do so. Trad ers share this view. In some areas (e.g., penalties
and audit procedures) the tools of administration differ from member State to member State such that
administration of EC customs law is undeniably non-uniform. The US has supported its arguments
with illustrations of particular instances in which member States have administered EC customs law
in a non-uniform way and the EC has failed to effectively and timely reconcile the divergences.
4.847 Moreover, the only tribunals or procedures availa ble for the prompt review and correction of
customs administrative action in the EC are member State courts. The decisions of these courts
govern only the actions of the customs authorities in the member States concer ned. As there is no
tribunal for the prompt review and correction of customs administrative actions whose decisions
govern the practice of customs authorities throughout the EC, the EC fails to meet its obligation under
Article X:3(b) of the GATT 1994.

4.848 It is important to keep in mind that this dis pute stems from the fact that the EC is a Member
of the WTO in its own right. This dispute coul d not have been brought under the GATT 1947, as the
EC itself (as distinct from individual member States) was not a Contracting Party to the GATT 1947.
EC arguments ranging from the timing of the US claim to the intentions of the drafters of Article X:3
need to be understood with this fact in mind.
2. The EC fails to rebut evidence supporting US Claims
4.849 The EC mistakenly asserts that th ere is a lack of evidence to support the US claims. In fact,
the US claims are amply supported by un-rebutted evidence of: the manner of operation of the very
"procedures and institutions of the EC legal system " that the EC claims "provide for a uniform
application and interpretation of EC law"; admission s by the EC and EC officials; statements of
traders; and illustrations of particular cases of non-uniform administration.
(a) EC admissions of non-uniform administration
4.850 Somewhat awkwardly, the EC attempts to distance itself from its own past admissions or
admissions by senior EC officials. In some cases, the EC dismisses such statements as irrelevant on
the theory that the speaker was not addressing th e consistency of EC ac tions with Article X:3 per se.
In the EC's view, it seems that an admission is relevant evidence only if the speaker actually draws the
legal conclusion that the action or inaction in question breaches Article X:3.
4.851 Thus, even though the EC Court of Auditors made a number of critical findings
demonstrating lack of uniform administration of EC customs valuation rules, the EC dismisses those
findings because "the Court of Auditors did not in any way make judgments as to whether the EC was
in compliance with Article X:3(a) GATT." Likewise, even though the explanatory note
accompanying the EC's draft Modernized Customs Code observed that "[s]pecific offences may be
considered in one member State as a serious criminal act possibly leading to imprisonment, whilst in
another member State the same act may only lead to a small – or even no – fine" (Exhibit US-32,
p. 13) the EC asserts that acknowledgment to be i rrelevant because it did not draw a legal conclusion
with respect to GATT Article X:3(a).
4.852 An admission by the EC or an EC official n eed not state a legal conclusion in order to
constitute relevant evidence. What matters is that the representations concerning factual matters tend
to support a legal conclusion relevant to the dispute.
4.853 Similarly, the Panel should decline the EC's suggestion that it pay no heed to the statements of
individual officials simply because they were not sp eaking officially on behalf of the EC. The point
that the EC consistently misses is that in each of these cases, a senior official with extensive
knowledge of the administration of EC customs la w – whether the Commission's Head of Customs
Legislation Unit or an Advocate General of the Court of Justice, for example – was speaking
authoritatively on that subject.
4.854 Yet another instance of the EC distancing itself from its own admissions is its discussion of
the EC – Chicken Cuts dispute. In that dispute, where it was convenient to its immediate interests, the
EC asserted an absence of uniform administration (i.e . lack of consistent classification of the product
at issue under one Tariff heading). And now, where a lack of uniform administration does not serve
the EC's immediate purpose, it latches onto the Pa nel's finding of consistent classification and
disavows its earlier statements.

(b) There is no requirement to show a "pattern" of non-uniform administration
4.855 In addition to distancing itself from its own ad missions, the EC responds to US evidence in
support of its Article X:3(a) claim by arguing th at the evidence does not exhibit a "pattern."
However, such a "pattern" requirement has no basis in Article X:3(a). Nor is it supported by the Panel
report in US – Hot-Rolled Steel, on which the EC heavily relies.
(c) Difficulty of certain customs administrati on questions does not counter evidence of non-
uniform administration and, in fact, highlights the problem
4.856 A further line of EC argument asserts that the cases identified by the United States as
illustrating non-uniform administration concerned "difficult" or "complex" matters of customs
administration and that US Customs, too, has enco untered problems in grappling with these matters.
But Article X:3(a) does not excuse non-uniform administration in difficult or complex cases. In fact,
it is precisely the difficult or complex cases that highlight most prominently the lack of uniform
administration in the EC.
4.857 In dealing with simple, commodity-type products, for example, the risk of non-uniform
administration of classification rules would seem to be less than for more sophisticated products. But,
when confronted with more sophisticated products or products embedding new technologies, the fact
that classification decisions are being made by 25 different authorities increases the likelihood of
divergent administration.
4.858 Moreover, far from supporting the EC's argu ment, its assertion that US Customs has
encountered difficulty in grappling with certain issues actually underscores the difference between
non-uniform administration of EC customs law and uniform administration of US customs law.
Whatever challenges US Customs may have enc ountered in dealing with difficult-to-classify
products, its decisions applied throughout the customs territory of the US
(d) Resolution of divergences among member States after months or years does not counter
evidence of non-uniform administration.
4.859 Another EC line of argument is that illustra tions of non-uniform administration identified by
the US are inapposite, because the non-uniformities at issue were resolved. This argument does not
rebut evidence of non-uniform administration, because in each instance non-uniform administration
existed and, moreover, was allowed to persist for months or years.
4.860 It cannot be the case that a Member fulfills its obligation of uniform administration under
Article X:3(a) as long as it reconciles instances of non-uniform administration eventually, even if it
takes many months or years to do so. Such a construction would deprive Article X:3(a) of any
meaning, as a Member could respond to any instance of non-uniform administration simply by
asserting that it was in the process of resolving it.
3. Recent cases confirm that processes EC hold s out as securing uniform administration
fail to do so
4.861 The EC accuses the United States of basing its claims on "theoretical" scenarios. A poignant
rebuttal of that critique is evident in the presentation made by a seasoned EC customs law practitioner,
Mr. Philippe De Baere, at a recent forum sponsor ed by the American Ba r Association (ABA).
(Exhibit US-59).
4.862 The EC has referred to explanatory notes and conclusions of the Customs Code Committee as
instruments to secure the uniform administration of EC customs law. In fact, what Mr. De Baere's

presentation shows (p. 14) is just the opposite. In some member States, an explanatory note may be
treated the same as a regulation and given prospective effect only. In others, an explanatory note may
be treated as a clarification and given retrospective effect.
4.863 In particular, Mr. De Baere describes a r ecent case involving the classification of video
camera recorders (i.e. camcorders) which demons trates not only differences among member States in
the treatment of EC explanatory notes, but also the problem of non-recognition of BTI from member
State to member State, the problem of non-uniform administration of the EC law (CCC
Article 221(3)) prescribing the period following importation during which a customs debt may be
collected, and the problem of recourse to member State courts as a supposed tool of securing uniform
administration. At issue in this case is the ques tion whether certain camcorders should be classified
under Tariff heading 8525.40.91 or 8525.40.99. A camcorder qualifies under the former heading if it
is "[o]nly able to record sound and images taken by the television camera." (Exhibit US-60). "Other"
camcorders qualify under heading 8525.40.99.
4.864 In July 2001, the Commission adopted an am endment to an explanatory note covering
heading 8525.40.99. The amendment provided that this heading includes "'ca mcorders' in which the
video input is obstructed by a plate, or in anot her way, or in which the video interface can be
subsequently activated as video input by means of software." (Exhibit US-61). The amended note led
to non-uniform administration of customs laws in at least three respects.
4.865 First, in view of the amended explanatory note, two member States (France and Spain)
reached back to collect additional duty on certain camcorders imported prior to the amendment and
classified under heading 8525.40.91. By contrast, other member States (in particular, the United
Kingdom and Germany) have expressly declined to gi ve retroactive effect to explanatory notes.
(Exhibits US-63 and US-64).
4.866 Second, subsequent to issuance of the amende d note, in June 2004, the Spanish customs
authority issued BTI classifying 19 camcorder m odels produced by a particular company under
heading 8525.40.91. (Exhibit US-65). In July 200 4, the French affiliate of the Spanish importer
informed the French customs author ity of the existence of these BTI during the course of an audit by
the French authority. Notwithstanding this info rmation, in November 2005, the French authority
informed the company that it intended to collect a dditional duty retroactively on certain camcorders,
including cameras, that is, models covered by the Spanish BTI.
4.867 Third, in deciding to give retroactive effect to the July 2001 explanatory note, the French
authority followed an interpretation of EC rules not followed by other member States on the period
after importation during which a customs debt may be collected. Article 221(3) of the CCC
(Exhibit US-5) sets that period as three years. The only exception to this rule is the lodging of an
appeal, which suspends the three-year period. However, beginning with a 1998 judgment of the
French Cour de Cassation (Exhibit US-66) concerning the predecessor to Article 221(3), the French
customs authority has taken the position that any administrative proceeding (procès-verbal)
investigating a possible customs infraction also has th e effect of suspending the three-year period. In
appeals from decisions following that position, litiga nts have consistently failed to persuade the
French court to refer to the ECJ the question of whether this position is consistent with CCC
Article 221(3) (Exhibits US-67 and US-68). And, indeed, as of December 2002, France's national
interpretation of Article 221(3) has become entren ched through an amendment to France's customs
law (Exhibit US-69). The refusal of even France's c ourt of last instance to refer this question to the
ECJ, even in the face of eviden ce that other member States interpret Article 221(3) differently, is
further demonstration that the availability of appeal s to member State courts is not the instrument of
securing uniform administration that the EC claims.

4.868 A second illustration in the De Baere presentation reinforces the point that, contrary to the
EC's argument, the opportunity to appeal customs administrative decisions to member State courts,
with the possibility of eventual referral to the EC J, does not secure uniform administration. The case
involves classification of the Sony PlayStation2 (PS2 ). The UK customs authority had issued BTI for
a good and then revoked it based on an EC Commissi on regulation adopting a different classification
for the good. When that regulation was annulled by the EC Court of First Instance, rather than restore
the BTI, the authority kept it revoked based on a re-evaluation of its original classification decision. It
confirmed the BTI's continued revocation on new, national grounds only weeks after the ECJ's
Timmermans decision. But for that action, the PS2 would have been subject to classification
instruments with (in theory) uniform EC-wide effect continuously, beginning with issuance of the UK
BTI, continuing with issuance of the Commission regulation, and continuing after the annulment of
that regulation with restoration of the BTI. The Timmermans judgment permitted the UK to disrupt
that presumably continuous uniformity by keeping the BTI revoked on grounds other than the
Commission regulation that had led to its revocation in the first place. Compounding this disruption
of uniform administration is the fact that the UK High Court of Justice declined to refer to the ECJ the
question of whether the customs authority could do this.
4.869 A third recent case that calls into question the e ffectiveness of appeals to member State courts
with the possibility of referral to the ECJ as a tool of uniform administration is the judgment of the
ECJ in Intermodal Transports (Exhibit US-71). That case concerned the classification of certain
tractors by the Dutch customs authority. Contra ry to the importer's request, the authority had
classified the tractors under heading 8701 rather than heading 8709. In its appeal, the importer called
to the Dutch court's attention the fact that the Finnish customs authority had classified similar goods
under heading 8709. Despite the apparent divergence, the court declined to refer the matter to the
ECJ. When the appeal reached the Supreme Court of the Netherlands, that court referred to the ECJ
the question of whether a member State court should make a preliminary reference to the ECJ when a
party brings to its attention conflicting BTI fo r similar goods issued by another member State
authority to a third party and the court believes that the BTI wrongly classified those goods.
4.870 The ECJ found that a national court is under no su ch obligation to refer. With respect to
courts other than courts of last instance, the ECJ sa id that evidence of divergent BTI "cannot limit the
freedom of assessment thus vested in [the nati onal] court under Article 234 EC." (Exhibit US-71,
paras. 32 and 45). Moreover, it said that even a court of last instance is under no obligation to refer if,
for example, it finds correct classification of the goods in question to be "so obvious as to leave no
scope for any reasonable doubt." (paras. 33 and 45). It went on to note that the national court has
"sole responsibility" for determining whether the corr ect classification of goods is "so obvious as to
leave no scope for any reasonable doubt." (para. 37).
4.871 Perhaps the EC's advisor, Mr. Vermulst, put it best in his article, "EC Customs Classification
Rules: Does Ice-Cream Melt?" (Exhibit US-72, p. 21) when he said:
The EC system with respect to judicial revi ew in classification matters and, more in
general, all customs issues is not only expensive and time-consuming for affected
parties, it also may lead to inconsistent j udgments by national courts, at least in first
instance. This problem is exacerbated by the fact that courts of certain member States
are much less likely to request preliminary rulings than those of other member States.
4. It is appropriate for the Panel to exercise its authority under DSU Article 13
4.872 With respect to the US suggestion that the Pa nel exercise its authority under Article 13.1 of
the DSU, the United States was not asking the Panel to make its
prima facie case. The United States
has already done that with the evidence and arguments it has put before the Panel. Rather, the United
States was suggesting that if an understanding of the statistical incidence of non-uniform

administration of EC customs law would help the Panel to evaluate the evidence, it should exercise its
authority under Article 13.1 to obtain certain informat ion, which is exclusively in the hands of the EC
or EC member States. As the panel in US – Upland Cotton recently explained, "Any suggestion that
a panel 'makes the complainant's case', wh en it merely exercises its powers under the DSU, is entirely
inaccurate." (para. 7.633).
5. The EC fails to rebut evidence that classification rules are administered in a non-
uniform manner
(a) BTI does not secure uniform administration
4.873 With respect to US arguments showing that BTI does not secure uniform administration, the
EC first denies that the ability of an importer to obtain BTI from any of 25 different member State
customs authorities, without any centralized contro l, encourages "BTI shopping." In particular, it
contends that its acknowledgment in the EC – Chicken Cuts dispute that "it is possible under EC law
to withdraw an application for BTI where the outco me is considered unfavourable by the importer"
(para. 7.261) does not indicate that BTI shopping occurs. But that contention is illogical. In a system
in which the administration of customs law was uni form, there would be little point in an importer's
withdrawing a request for a classification ruling upon learning the authority's proposed decision.
4.874 The EC also contends that the heavy skewing of BTI issuance in fa vour of certain member
States does not indicate BTI shopping, but merely differences in various commercial factors from
member State to member State. Such factors might be a logical explanation if the skewing were not
as dramatic as it actually is. However, it seems rema rkable that in a system which, according to the
EC, does not encourage BTI shopping, a single member State (Germany), representing just over 19%
of imports into the EC by value in 2004, issued a bout 37% of all BTI with a start date in 2004, while,
for example, another member State (Italy), representi ng about 11% of imports, issued less than 1% of
all BTI with a start date in 2004, and a member Stat e representing almost 2% of imports into the EC
(Greece), issued only a single BTI with a start date in 2004 (and only 10 with a start date in 2003 and
17 with a start date in 2002).
4.875 As the EC's advisor, Mr. Vermulst, has remarked (Exhibit US-74, pp. 1314-15):
Unfortunately, the same disparity with respect to the origin of preliminary rulings is
reflected in the requests for BTI, with sever al times more rulings issued by Germany
than by any other country. Such a disparity of numbers of proceedings has several
regrettable consequences. It implies th at Germany has proportionally too much
influence in this part of customs law. Moreover, the authority of a procedure is not
enhanced if most member States barely apply it.
4.876 Moreover, it is not just the opportunity to shop for a favourable classification that makes BTI
an inadequate instrument for securing uniform admi nistration of customs classification rules. The
lack of narrative explanation in BTI makes it di fficult to see how a given member State authority
came to its classification decision and thus for ot her authorities to determine whether they should
follow that decision in classifying similar goods.
4.877 Further limiting the utility of BTI as a means of securing uniform administration is the very
narrow sense in which BTI issued by one member State authority governs the actions of other
member State authorities. BTI issued by one memb er State authority is binding on other member
State authorities only to the extent that the person invoking the BTI is the person to whom it was
issued (the "holder") and the goods at issue are identi cal to those described in the BTI. But for such
cases, there is no obligation on the part of one memb er State authority to take account of BTI issued
by other member State authorities for similar goods wh en such BTI is brought to its attention. This

problem is evident in the EC's response to the US discussion of the EC – Chicken Cuts dispute.
Despite the EC's acknowledgment there that differe nt customs offices classified the identical goods
differently, the EC now states that "[n]owhere in the Panel Report in EC – Chicken Cuts has the EC
said that BTI was not recognized when presented by the holder."
4.878 The point is illustrated again by the EC's di scussion of the blackout drapery lining case. In
response to evidence that the EC customs office in Germany faile d to explain why it was not
following the classification decisions reflected in othe r offices' BTI, the EC simply states that "BTI is
binding on the customs authorities only as against the holder of the BTI."
4.879 The EC attempts to draw a comparison to the practice of US Customs. However, the very
regulation that the EC cites as evidence of US practice illustrates the difference between the US
advance ruling system, which promotes uniformity, and the EC BTI system, which does not. Thus,
section 177.9(a) of the regulation (Exhibit EC-129) states that where US Customs issues a ruling letter
with respect to a particular transaction or issue, "the principle of the ruling set forth in the ruling letter
... may be cited as authority in the disposition of transactions involving the same circumstances." The
EC BTI system contains no such provision.
(b) LCD monitors
4.880 With respect to evidence showing that the LCD monitors case is an important example of the
lack of uniform administration of EC rules on customs classification, the EC first asserts that the duty
suspension regulation concerning LCD monitors with DVI has resolved the lack of uniformity of
administration with respect to this particular cla ssification question and that the trading community is
satisfied with the outcome. In fact, this asserti on simply glosses over the fact that the suspension
regulation applies only to monitors below a certain size threshold, that it does not actually resolve the
underlying classification question, and that, for monitors above the size threshold, a state of non-
uniformity with serious financial consequences remain s. Moreover, the implication that the trading
community is satisfied is belied by recent statem ents from the very industry concerned with this
classification question (Exhibit US-75).
4.881 The EC next contests the US argument that an EC Customs Code Committee conclusion that
conflicts with an applicable chapter note in the Combined Nomenclature detracts from rather than
promotes uniform administration. The Committee's c onclusion stated that a monitor should not be
classified under Tariff heading 8471 unless an importer can show that it is " only to be used with an
ADP machine," whereas the applicable chapter note states that a mon itor is classifiable under heading
8471 if "it is of a kind solely or principally used in an automatic data-processing system." The
Committee's conclusion has put member State authorities in the quandary of having to decide what
weight to give the conclusion in view of an apparently conflicting chapter note.
4.882 For example, in a Tariff Notice issued in 2 004, the UK authority, evidently following the
Customs Code Committee's conclusion, stated th at "from October 2004, LCD/TFT Monitors that
incorporate a DVI connector are to be classified in Combined Nomenclature (CN) code 8528 21 90."
(Exhibit US-76). The Netherlands, by contrast, has taken a very different approach. In a decree of
July 2005, the Dutch customs authority explained that since April 2004 it had been classifying LCD
monitors with DVI under Tariff heading 8528, in view of a Commission regulation concerning plasma
monitors. It then went on to state (Exhibit US-77) that
[n]ot all member States are following this policy. The result is a diverted flow of
business, which is harmful to the competitiv eness of Dutch industry in the logistics
and services sector. For this reason, The Netherlands is making the policy as regards
classification of certain LCDs in the Combined Nomenclature more precise.

Accordingly, the decree set forth criteria that the Netherlands follows as of 22 November 2004.

4.883 Moreover, despite the Customs Code Committee' s conclusion, the German authority, too,
appears to have continued classifying LCD monitors with DVI under heading 8471, even where they
are principally though not solely for use with computers (Exhibit US-78).
4.884 Finally, the EC once again tries to divert the focus from its own practice to the practice of US
Customs. However, unlike the EC, where US Cu stoms found LCD monitors difficult to classify, its
rulings still applied throughout the territory of the United States.
(c) Blackout drapery lining
4.885 Similarly, the EC fails to rebut evidence demonstrating that the blackout drapery lining case is
yet another example of non-uniform administrati on of customs classification rules. The EC
erroneously calls into question whether the lining produced by Rockland Indu stries at issue in the
decision by the Main Customs Office in Bremen, which was classified under Tariff heading 3921, was
materially identical to lining that other member States had classified under heading 5907. In
particular, the EC asserts that the product before the Bremen Customs Office lacked a textile flocking,
while the product at issue in other classification d ecisions contained flocking. In fact, however, as
Rockland's President and Chief Executive Officer a ttests under oath (Exhibit US-79), "All coated
products produced by Rockland incorporate textile flocking as part of the coating process. Rockland
has never produced a coated product that does not inco rporate textile flocking. . . . Textile flocking is
required to prevent the fabric from sticking together."
4.886 Moreover, in context it appears that the Brem en Customs Office did not find an absence of
flocking per se but, rather, that flocking did not constitute a distinct layer in the Rockland product at
issue. What was relevant to the Bremen Customs Office was the existence of plastic in the coating,
regardless of whether textile flocking or other elem ents were mixed into that coating. That the
German customs authority takes this approach, contra ry to the approach taken by other member State
authorities, is confirmed by the letter from the Ha mburg customs office concerning Rockland's lining
product (Exhibit US-50).
4.887 Having ruled out classification of the lining unde r heading 5907, apparently based on its view
that the existence of plastic in the coating preclude d such classification, th e German authority then
looked to a German interpretive aid, which the EC states was derived by analogy to an EC regulation
classifying ski trousers. Though the EC states th at the interpretive aid was "without any legally
binding character," the German authority relied on it in a way that turned out to be determinative. In
any event, it is not consistent with uniform ad ministration for the German authority to classify a
textile product based on the selection of one prong from a three-prong test for the classification of an
apparel item, where no other member State authority has done this.
4.888 Finally, the EC asserts without any basis th at density of weave, the key criterion under
Germany's interpretive aid, is relevant to determ ining whether textile fabric is present merely for
reinforcing purposes. In fact, the notes pertaining to Chapter 39 of the Tariff make no reference to
density of weave as a relevant criterion, an d the notes to Chapter 59 expressly provide that
classification under that chapter is to be determined regardless of weight per square meter. The EC
asserts without basis that the reference to weight per square meter is different from density of weave.
In fact, however, weight per square meter necessarily is a function of density of weave.

6. The EC fails to rebut evidence that valuat ion rules are administered in a non-uniform
manner
4.889 Nor does the EC succeed in rebuttin g evidence that EC valuation rules are administered in a
non-uniform manner. In addition to the EC's failure to explain away the findings of non-uniformity in
the Court of Auditors report, two other points should be noted.
4.890 First, as previously noted, one of the ways in which member States administer the EC's
customs valuation rules non-uniformly is through di fferent auditing practices. In response, the EC
states that "under Article 76(2) CCC, every Member State may proceed to all necessary verifications
in order to satisfy themselves of the accuracy of the particulars contained in the declaration." But, the
fact that member States "may" do this proves nothing. It does not change the fact that member States'
audit practices in fact vary dramatically such that , as the EC Court of Auditors put it, "individual
customs authorities are reluctant to accept each other's decisions." (Exhibit US-14, para. 37).
4.891 The EC also claims that the EC Customs Aud it Guide "ensures a uniform practice across" the
EC. However, given that the Guide was only "recently finalized," and, in any event, given that it is
merely "intended as an aid to member States," ra ther than a binding obligation on them, there is no
basis for this assertion.
4.892 Second, with respect to the Reebok case, the EC fails to rebut that this is a stark illustration of
non-uniform administration of valuation rules. The EC states that RIL's appeals to Spanish courts
show that there is indeed a forum to which this tr ader can go to seek uniform administration. But, the
EC cannot seriously contend that, from the point of view of uniform administration, the right to
appeal a dispute to a member State court is comparable to a right to take a matter directly to an
institution with authority to give an answer that is definitive for the entire EC – a right which does not
now exist. GATT Article X:3(a) does not concer n a trader's right to appeal adverse customs
decisions; it concerns a Member's requirement to ad minister specified laws uniformly, whether or not
traders appeal administrative actions in particular cases.
4.893 Further, the EC mistakenly suggests that b ecause RIL withdrew its complaint to the EC
Ombudsman the problem with respect to non-uniform administration has been resolved. That simply
is not so. RIL's decision to withdraw its co mplaint does not change the Commission's evident
avoidance of the non-uniformity for over three years. Nor does it change the fact that there is a
divergence between the Spanish authority's administ ration of EC valuation rules and other member
States' administration of those rules.
7. The EC fails to rebut evidence that cust oms procedures are administered in a non-
uniform manner
(a) Processing under customs control
4.894 With respect to processing under customs contro l, the United States has shown that certain
member States approach the economic conditions assessment in very different ways. The United
Kingdom, for example, makes a two-prong assessment, looking first at whether processing under
customs control will enable processing activities to be created or maintained in the EC, and second at
whether it will harm essential interests of Community producers of similar goods. In contrast, France
applies only the first prong.
4.895 The EC's response to this evidence is that th e United States mis-reads the customs bulletin
explaining how France applies the economic conditions assessment. The EC a sserts that the bulletin
in fact makes reference to harm to Community pr oducers. However, that reference is merely an
introductory paraphrase of the CCC provision on processing under customs control. The operative

text of the French bulletin sets forth a one-prong t est, referring only to the creation or maintenance of
processing activity in the EC.
4.896 The EC replies with a circular argument. It says that "the French guidance . . . has to be
interpreted in the context of the EC legislation". In other words, even though the text of the French
guidance plainly says something different from the te xt of the UK guidance, the EC contends that in
fact it should not be read as diverging from the UK guidance because that would be inconsistent with
EC law. However, the EC fails to substantiate its assertion that inconsistency with the applicable EC
regulation automatically causes non-uniformity in memb er State administration of that regulation to
disappear.
4.897 The EC also faults the United States for not providing "evidence on the application of the
guidance issued by the French authorities". Howe ver, there was no need for the United States to do
so. This is not a case in which th e United States is alleging that e ither the French guidance or the UK
guidance is itself inconsistent with WTO obligatio ns and therefore, according to the EC, "has the
burden of proving that the measure in question has the alleged content or meaning". Rather, the
inconsistency with WTO obligations that the Un ited States is alleging is a lack of uniform
administration on the EC's part and, in the case of processing under customs control, the lack of
uniformity is evident on the face of divergent guidance from two different member States.
(b) Penalties
4.898 With respect to penalties, the EC first asserts that the GATT Article X:3(a) obligation of
uniform administration does not apply to penalties because penalties "are not among the matters
referred to in Article X:1 GATT". Contrary to the EC's claim, the United States does not concede this
point. On the contrary, the terms of Article X:1 pl ainly encompass penalty provisions. For example,
a law imposing a penalty for negligence in mis-decl aring a good's classification or valuation certainly
"pertain[s] to the classification or valuation of products for customs purposes". A penalty also may be
considered an "other charge[] . . . on imports". Or, considered as a consequence for failing to make a
truthful declaration, for example, a penalty pertains to "requirements . . . on imports".
4.899 A key flaw in the EC's argument is that it assumes that a law or regulation must either be the
thing being administered or a tool of administration. But, according to the EC, it cannot have one
aspect or the other, depending on one's perspective. That contention is groundless.
4.900 Further, although the EC appears to admit that penalties "ensur[e] compliance with EC law",
which is another way of saying that they administer EC law by giving effect to that law, the EC goes
on to avoid the US argument, which is that the diversity of member State penalty laws for giving
effect to EC customs law is an important instance of non-uniform administration of EC customs law.
Instead, the EC responds to an argument that the United States does not make. It contends that
"Article X:3(a) GATT does not create an obligatio n to harmonize laws which may exist within a
WTO Member at the sub-federal level". The US asserts no such generic requirement. It simply
argues that Article X:3(a) requires that the EC's customs law be administered uniformly. Since
different member States deploy different tools – that is, different penalty provisions – to give effect to
EC customs law, the EC does not administer its customs law uniformly.
4.901 Additionally, the EC errs in arguing that pena lties are outside the scope of Article X:3(a)
because they apply to actions that violate customs laws. Article X:3(a) does not make the distinction
between "illegitimate actions" and "legitimate trade" th at the EC posits. In any event, contrary to the
EC's assertion, penalty provisions do "establish the conditions for legal tr ade." In a system that relies
heavily on the actions of traders at every step of the way, penalty provisions administer the customs
laws – that is, they give effect to those laws – by setting consequences for the breach of those laws.

The problem is that in the EC those consequences vary dramatically from member State to member
State.
4.902 The EC argues in the alternative that while penalty provisions vary from member State to
member State, this does not mean that there is a l ack of uniform administration. Its basis for this
statement is the proposition that to the extent member State penalty laws must meet the test of being
"dissuasive and effective," pursuant to ECJ "guideli nes," they administer EC customs law uniformly,
regardless of differences among them. The EC's theo ry seems to be that as long as two different
penalty provisions both secure compliance with EC customs laws, any differences between them
simply are irrelevant.
4.903 But, the possibility that traders generally comp ly with the customs laws in two different
member States, despite differences in penalties, is be side the point. It does not change the fact that a
trader must take such difference into account, mu ch the same way that it takes into account the
likelihood that an authority will interpret classification or valuation rules in a favorable way.
8. Member State courts, whose decisions govern only the customs authorities in their
respective territories, do not fulfil the EC's obligation under Article X:3(b) of the GATT
1994
4.904 The EC fails to meet its Article X:3(b) oblig ation, because the decisions of member State
courts "govern the practice" of only a subset of the agencies entrusted with enforcement of EC
customs laws, and because the fragmentation of re view is inconsistent with the context of
Article X:3(b), which includes the requirement of uniform administration of EC customs law.
4.905 The EC argues that "govern the practice" means not hing more than "implement in fair terms".
However, Article X:3(b) already contains a separ ate requirement that agencies "implement[]" the
decisions of review tribunals or procedures. Th e EC's construction of "govern the practice" would
make it redundant with the separate "implement[]" requirement.
4.906 The decisions of an EC member State court gove rn the practice only of agencies within that
member State. Even where a court is presented w ith a clear divergence between practice within its
member State and practice in other member States – as was the case in Intermodal Transport and the
French cases on CCC Article 221(3) – there is no ob ligation to make a reference to the ECJ.
Moreover, as the EC has acknowledged, there is no mechanism in the EC for courts to be kept
apprised of customs review decisions of other member State courts, much less a mechanism for
customs authorities to be kept apprised of the decisi ons of courts other than those in their respective
member States.
4.907 The EC also argues incorrectly that Article X:3(b) should not be read in the light of
Article X:3(a) as context. In the EC's view, the absence of an "explicit link" or a "chapeau" means the
latter is not context for the former, even though th e two provisions are adjoining subparagraphs. This
position is in stark contrast to the EC's invocation of Article XXIV:12 as context for the interpretation
of Article X:3(a). And, while no rule of treaty interpretation requires an "explicit link" or a
"chapeau" for one provision to constitute context for th e interpretation of another, there is in fact an
explicit link between the provisions at issue here.
4.908 Article X:3(a) requires a Member to administer its customs laws in a uniform manner.
Article X:3(b) requires that the decisions of review tribunals or procedures "govern the practice" of
the agencies entrusted with administrative enforcement. The "govern the practice" requirement means
that review court decisions must control the way ag encies administer the customs laws. In this sense,
the two provisions are linked.

4.909 The EC rejects the proposition that review of customs decisions by member State courts
whose decisions govern only certain customs agencies is inconsistent with the obligation of uniform
administration. However, its argument in this respect is in conflict with its Article X:3(a) argument.
It states that review by member State courts "is perfectly compatible with the obligation of uniform
administration, provided that the latter is ensured by ot her means that are appropriate to this aim ."
Yet, in its Article X:3(a) argument the EC itself contends that review by member State courts is a key
means to achieving the aim of uniform administrati on. Now it is arguing that that aim must be
achieved by "other means" and that review by memb er State courts is merely "compatible" with that
aim.
4.910 Additionally, the EC wrongly purports to draw from the US argument an implicit requirement
for "the establishment of a central court of first in stance with jurisdiction over the whole territory of
any WTO Member". However, that is not the logical implication of the US argument. The logical
implication of the US argument is that under Ar ticle X:3(b), every WTO Member must give effect
throughout its territory to the decisions of its review tribunals. Where a Member has a single customs
administration it may well be able to do this ev en though it provides for multiple regional customs
courts. In the EC, perhaps uniquely, fragmented ad ministration is coupled with fragmented review,
and the result is inconsistent with Article X:3(b).
4.911 The EC also wrongly accuses the United States of "interpreting Article X:3(b) through the
glass of its own legal system". Ironically, in the very next breath the EC urges an interpretation of
Article X:3(b) through the glass of its own legal system. It asserts that establishing an EC customs
court – assuming that this would be the only way fo r the EC to comply with its Article X:3(b)
obligation – would "run[] contrary to one of [the EC's] fundamental constitutional principles" .
4.912 Finally, while the EC has cons istently professed that creating an EC customs court would
breach "fundamental constitutional principles", it shoul d be noted that the Treaty of Nice (inserting
Article 225a into the EC Treaty) in fact laid the groundwork for the establishment of new EC courts.
Also, its amendment of EC Treaty Article 220 contempl ates that "judicial panels may be attached to
the Court of First Instance under the conditions laid down in Article 225a". In light of the authority to
create special courts established by the Treaty of Nice, it seems that establishment of a court as one
option that would bring the EC into compliance with its GATT Article X:3(b) obligation would not
breach "fundamental constitutional principles".
9. Closing statement
4.913 The manner in which the EC has argued this di spute gives the impression that the issues are
far more complicated than they actually are. At ti mes, the EC has contended that the dispute is about
larger philosophical questions, such as differenc es in the doctrines undergirding federalism in the
United States and in the EC. At other times, th e EC has contended that the dispute is about the
minutiae of whether one or another EC customs authority decided a particular question correctly. It is
easy to get lost in the back-and-forth between politi cal theory and technical arcana. But when the
arguments on questions that have no bearing on this dispute are cleared away, the case is in fact very
simple.
4.914 With respect to Article X:3(a), the EC has an obligation to administer its customs laws in a
uniform manner. In practice, it administers its laws through 25 different authorities in different parts
of its territory. The decisions of any one authority do not bind any of the other authorities. If the EC
authority in Spain issues binding tariff information classifying a good in a particular way, the EC
authority in Germany is under no obligation to give any weight at all to that decision (other than in the
very limited case in which the BTI is invoked by its hol der). If a third party urges the EC authority in
Germany to follow the classification decision of the EC authority in Spain, even if that third party is
an affiliate of the holder, the EC authority in German y is under no obligation to do so. In short, one

part of the EC customs administration apparatus is under no obligation to act consistently with other
parts of the EC customs administration apparatus.
4.915 The EC states that this is not so. It states th at processes and institutions are in place to ensure
that different parts of the EC customs administra tion apparatus act uniformly. But this assertion does
not withstand scrutiny. With one exception (app eals to member State courts), the processes and
institutions are general obligations, non-binding guid ance, and discretionary mechanisms. This point
was well illustrated in the EC's preliminary respons e to the Panel's question 164(a). When asked to
comment on the observation that the EC refers to no measures making EC Treaty Article 10 – the
general duty of member State coope ration – operational in the context of customs administration, the
EC still referred to no specific measu res. It stated simply that the duty of cooperation in Article 10 is
a binding legal obligation, which can be enforced through infringement proceedings. Repeatedly, the
EC states that matters may
 get referred to the Customs Code Committee, that infringement actions
may be brought, that member States may give deference to the decisions of other member States. But,
the constant theme is that all of these so-called tools are discretionary.
4.916 In the absence of any processes or institutions that obligate different parts of the EC customs
administration apparatus to act uniformly, the desi gn and structure of the EC customs administration
system is such as to necessarily result in non-uniform administration. Even the one binding
instrument to which the EC has alluded does not cure this problem. Even when confronted with direct
evidence of a divergence in member State administ ration of customs law, a member State court is
under no obligation to refer a question to the ECJ.
4.917 In its opening statement at this Panel m eeting, in discussing a point pertaining to
classification, the EC stated that "[a]t any given moment, there is only one correct classification for a
particular product". The United States does not disagr ee. But, the question is: Who decides what that
correct classification is? In the EC, each of the 25 different customs authorities decides, each only
with respect to a particular territory, and none w ith the power to bind the others. The processes and
institutions to which the EC refers do not change th is. For this reason, the EC does not comply with
its obligation under GATT Article X:3(a).
4.918 With respect to Article X:3(b), the EC has an obligation to provide tribunals or procedures for
the prompt review and correction of administra tive action relating to customs matters, and the
decisions of such tribunals or procedures must be implemented by and govern the practice of the
agencies entrusted with administrativ e enforcement. The tribunals that the EC points to as providing
for the review and correction of administrative act ion relating to customs matters are the member
State courts. The decisions of each member State court apply only within the territory of that member
State. The EC customs authority in France is not required to follow the decisions of UK courts.
Indeed, there is not even a mechanism to make member State courts aware of customs review
decisions by other member State courts.
4.919 Under the foregoing structure, the decisions of the tribunals that the EC provides do not
govern the practice of the EC's agencies entrusted with administrative enforcement. Each court's
decisions govern the practice only of a discrete subset of such agencies. Not only is this inconsistent
with the text of Article X:3(b), but it also is incons istent with the context provided by Article X:3(a),
which indicates that the obligation to provide review tribunals should be read in a manner consistent
with the obligation to administer customs laws unifo rmly. The EC's only response is to argue that the
phrase "govern the practice" really means "implement in fair terms". (Second Submission, para. 230).
As this interpretation would render the separat e "implement" requirement in Article X:3(b)
superfluous, it should be rejected. Accordingly, the EC fails to meet its obligation to provide review
tribunals consistent with Article X:3(b).

4.920 The second point the United States makes in closing is that the Panel should not be distracted
by the EC's constant reference to dire conse quences that supposedly would flow from making the
findings the United States requests. Not only are th e EC's predictions not relevant, but they are not
accurate.
4.921 The first 19 paragraphs of the EC's Oral Statem ent at this meeting were devoted to recasting
the US claims incorrectly as claims that GATT Article X:3(a) requires the EC "to set up a centralized
customs agency and a customs court". (Second Oral Statement, para. 3). Having thus misstated the
U.S. claims, the EC went on to accuse the Unite d States of seeking to change "a fundamental
characteristic of the EC" and to bring about "a radical shift in the federal balance within the EC".
4.922 Moreover, the cataclysmic scenario the EC predicts is not confined to its own system. It
contends that the findings the United States se eks "would make the involvement of sub-federal
entities in the execution of federal laws generally impossible in large areas of economic regulation".
It claims that "[t]his is of considerable concern to the entire WTO membership".
4.923 These themes have been echoed throughout the EC 's submissions and interventions. The EC
is trying to dissuade the Panel from drawing the obvious conclusions that the facts and the law compel
by resorting to scare tactics. In effect, the EC is saying that its obligations under Article X:3 should
be interpreted in light of the consequences that any given interpretation would have. This was evident
when the EC said at one and the same time that GATT Article XXIV:12 is not relevant to
interpretation of GATT Article X:3(a), but that it woul d be relevant to interpre tation of Article X:3(a)
if it were found that Article X:3(a) requires the EC to create a centraliz ed customs agency and
customs court. (EC provisional response to Panel Provisional Question No. 155).
4.924 In the EC's view, an interpretation should be rejected if, for example, it would require a
radical shift in the federal balance within the EC. Bu t this is simply backwards. Relative difficulty of
compliance is not a basis for adopting or rejectin g a given interpretation of a treaty provision.
Moreover, under customary international law, as re flected in Article 27 of the Vienna Convention on
the Law of Treaties, "[a] party may not invoke the provi sions of its internal law as justification for its
failure to perform a treaty".
4.925 At paragraph 12 of the EC's Opening Statement at this Panel meeting, the EC reminded the
Panel that "the EC is an original Member of the WTO", and that when the Contracting Parties agreed
that the EC should become an original Member, th ey did so with knowledge of the EC's "system of
customs administration and judicial review". The EC reasons that in light of this knowledge, it cannot
be argued that the EC's system is inconsistent w ith GATT Article X:3. But, again, the EC has it
exactly backwards. It is not the case that the othe r original Members of the WTO must be considered
to have acquiesced in the EC's breach of a GATT obligation by having agreed that the EC should
become an original Member. Rather, the EC had to have considered and accepted the consequences
of Article X:3 when it decided to become a Member of the WTO in its own right. The EC is not now
free to argue that it does not like those consequences and so should be relieve d of the obligations it
freely accepted.
4.926 In short, the picture that the EC portrays of the institutional changes that would have to be
made in the EC if the Panel were to make the fi ndings the United States requests is pure hyperbole,
with no bearing at all on the issue at hand. The Pa nel should decline the EC's invitation to interpret
Article X:3 in light of the EC's prediction of what it would take for the EC to come into compliance
with its obligations. It also should give no credit to the proposition that the US claims will have dire
consequences for other WTO Members. The US claims are directed at a problem unique to the EC,
given its unique combination of geographically fragmented administration and geographically
fragmented review.