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

ANNEX B

RESPONSES TO QUESTIONS POSED BY THE PANEL AFTER THE
SECOND SUBSTANTIVE MEETING OF THE PANEL

Contents Page
Annex B-1 Responses of the United States to Questions posed by the Panel after
the Second Substantive Meeting
B-2
Annex B-2 Responses of the European Co mmunities to Questions posed by the
Panel after the Second Substantive Meeting
B-32
Annex B-3 Comments of the United States on the European Communities'
Responses to Questions posed by the Panel after the Second Substantive
Meeting
B-57
Annex B-4 Comments of the European Communities on the United States'
Responses to Questions posed by the Panel after the Second Substantive
Meeting
B-77

ANNEX B-1

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

(7 December 2005)

QUESTIONS FOR THE UNITED STATES:

124. In its replies to Panel Questions Nos. 1, 3, 5 and 114, the United States submits that it is
not challenging specific areas of customs admi nistration under Article X:3(a) of the GATT
1994. Rather, it is challenging the absence of uniformity in the administration of EC customs
laws as a whole/overall.

(a) Please make specific reference to the terms of the United States' request for
establishment of a panel to s upport the United States' submission
that such a challenge is within the Panel's terms of reference.

(b) Please confirm that the United States is only requesting the Panel to make
findings on the conformity or otherwise of the European Communities' system of
customs administration as a whole and not on the specific areas of customs
administration to which the United States has referred to in its submission to
substantiate its claim of violation of Article X:3(a) by the European
Communities.

The first sentence of the United States' request for establishment of a panel states that "the
manner in which the [EC] administers its laws, regulations, decisions and rulings of the kind
described in Article X:1 . . . is not uniform, impartial and reasonable and therefore is inconsistent with
Article X:3(a) of the GATT 1994."
1 The request then proceeds to identify the laws and regulations
that make up "EC customs laws as a whole." That is, first, it identifies the Community Customs Code
("CCC"), the CCC Implementing Regulation ("CCCIR"), and the Community Customs Tariff ("Tariff
Regulation"). These are the principal elements of EC customs law as a whole. 2 The request then
identifies several related instruments.

In the third paragraph, the request makes clear that the lack of uniform administration that
forms the basis for the US complain t is "manifest in differences among member States in a number of
areas, including but not limited to" th ose that are enumerated. This text, too, reflects the approach of
the panel request as a challenge to the absence of uniformity of administration of EC customs law
overall and demonstrates that a challenge based on administration of EC customs law as a whole is
within the Panel's terms of reference.

With respect to part (b) of the Panel's question, it is correct that the principal finding that the
United States is asking the Panel to make is that the EC's system of customs administration as a whole
is inconsistent with Article X:3(a) of the GATT 1994. At the same time, making such a finding does
not preclude findings on the specific areas of customs administration to which the United States has
referred in its submissions and interv entions to substantiate its claim of violation of Article X:3(a) by
the European Communities. While such findings on specific areas of EC customs administration are

1 Since first making its request for establishment of a panel, the United States has focused its complaint
on non-uniform administration (as opposed to partial or unreasonable administration). See US First Written
Submission, para. 33 n.15.
2 See EC First Written Submission, para. 63 (describing Community Customs Tariff, CCC, and CCCIR
as "[t]he three main instruments of EC customs legislation").

not strictly necessary to make the finding requested with respect to the EC's system of customs
administration as a whole, they would tend to suppor t the overall finding requested. Accordingly, the
United States would welcome findings on the specific areas, while recognizing that it may be
appropriate to exercise judicial economy for findings in these specific areas in light of a finding of a
breach concerning the EC's administration as a whole.

In particular, the evidence the United States h as presented supports subsidiary findings that
the EC fails to meet its GATT Article X:3(a) obliga tion of uniform administration with respect to the
administration of:
· the Tariff Regulation;
· CCC Article 32(1)(c) (regarding treatment of royalty payments for customs valuation
purposes);
· CCCIR Article 147 (regarding customs valuation on a basis other than the last sale
that led to introduction of a good into the customs territory of the EC);
· CCC Article 29 and CCCIR Article 143(1)(e ) (regarding circumstances under which
parties are to be treated as related for customs valuation purposes);
· all valuation provisions in the CCC and CCCIR (i.e. CCC, Articles 28 to 36, and
CCCIR, Articles 141 to 181a and Annexes 23 to 29), to the extent that different
member State authorities employ different audit procedures (with only some
providing binding valuation guidance, for example
3), making "individual customs
authorities . . . reluctant to accept each others decisions;"4
· all classification and valua tion provisions in the Tariff Regulation, CCC, and CCCIR,
to the extent that different member State authorities have at their disposal different
penalties to ensure compliance with those provisions; and
· CCC Article 133 and CCCIR Articles 502(3) and 552 (regarding assessment of the
economic conditions for allowing processing under customs control); and
· CCCIR Article 263-267 (regarding local clearance procedures).

To be clear, the Panel does not need to make the foregoing findings in order to make the
overall finding of non-conformity with Article X:3(a) requested by the United States. The systemic
breach that the United States has established – th e administration of the customs laws by 25
independent, territorially limited customs authorities, coupled with the lack of any effective, binding
EC procedures or institutions to ensure these aut horities administer EC customs laws uniformly –
applies to all aspects of customs administration w ithin the EC. The United States believes that non-
conformity with Article X:3(a) can be found on the basis of the design and structure of the EC's
system of customs administration.
5 Nevertheless, the divergences in specific areas of customs
administration that the United States has identif ied corroborate what necessarily results from the
design and structure of the system. Accordingly, the United States would welcome findings on these
specific areas of divergence.

125. With respect to its claim under Article X:3(a) of the GATT 1994, is the United States
only challenging non-uniformity of decisions/action taken by the member States or is the United
States also challenging non-uniformity of decision s/action taken at the EC-level (e.g., by EC
institutions)? If the latter, please elaborate.

3 See US First Written Submission, paras. 98-99.
4 Court of Auditors, Special Report No 23/2000 concerning valuation of imported goods for customs
purposes (customs valuation), together with the Commission’s replies, reprinted in the Official Journal of the
European Communities C84, para. 37 (14 March 2001) ("Court of Auditors Valuation Report") (Exhibit US-
14); see US First Written Submission, paras. 96-97.
5 Cf. Panel Report, Canada – Measures Relating to Exports of Wheat and Treatment of Imported
Grain, WT/DS276/R, para. 4.601 (adopted 27 September 2004 with Appellate Body report) (EC as third party
arguing that violation of GATT obligation may be found on the basis of "structural shortcomings") (" Canada –
Wheat Exports and Grain Imports").

The United States is challenging non-uniformity in the administration of EC customs law.
That law is administered principally by authoriti es located in each of the EC's 25 member States.
6 As
the EC states, "[T]he Commission is not normally di rectly involved with the administration of EC
customs law."7

Decisions and actions taken by the Commission a nd other EC institutions have a role in the
administration of EC customs law. But, it is the administration of EC law by the authorities located in
each of the EC's 25 member States that is the focus of the US claim.

EC institutions are relevant to the US claim, inasmuch as they do not step in to ensure
uniform administration among the separate authorities spread throughout the territory of the EC. In
other words, the absence of action by EC institutions is relevant. The absence of such action refutes
the argument that even though the administration of EC customs law is carried out by 25 independent,
regionally limited authorities, it nonetheless becomes uniform by virtue of the existence of various EC
procedures and institutions.

126. Is the United States' case essentially that the design and structure of the European
Communities' system of customs administration neces sarily results in violation of Article X:3(a)
of the GATT 1994? If so:

(a) Please specifically identify the aspect s of the European Communities' system
that necessarily result in a breach of Article X.3(a).

In answering this question, it is first importa nt to be clear about what the United States
understands "design and structure of the European Communities' system of customs administration"
to mean. The United States understands that term to refer to the following:

· Customs law in the EC is prescribed by EC institutions: the Council and the
Commission.
· EC customs law is administered by 25 different authorities, each responsible for a
different part of the territory of the EC.
· The EC has in place certain procedures a nd institutions which it contends secure
uniform administration among the 25 different authorities. These include a general
duty of cooperation among member States, guidelines on various matters (e.g., the
conduct of customs audits), discretionary m echanisms (e.g., referral of questions to
the Customs Code Committee), and the opportunity for traders to appeal customs
administrative action to member State cour ts, with the possibility of such courts
eventually referring questions of EC law to the ECJ.

If the design and structure of the EC system of customs administration consisted of nothing
more than customs laws prescribed by the Council and Commission and administered by 25
independent, regionally limited aut horities, without any mechanism or other means even ostensibly
present to ensure that the different authorities act ed uniformly, then the EC undeniably would not
fulfil its Article X:3(a) obligation. Indeed, the EC evidently does not dispute this point, as it contends
that it is "the procedures and institutions of th e EC legal system [that] provide for a uniform
application and interpretation of EC law, including EC customs law."
8 That is, the very fact of 25
separate, independent authorities having to exer cise judgment in interpreting and applying EC
customs law, without any procedures or institutions to ensure against divergences or to reconcile them
promptly and as a matter of right when they occur necessarily would constitute lack of uniform

6 See, e.g., EC First Written Submission, paras. 78-79.

administration, in breach of Article X:3(a).

Therefore, it is necessary to examine the "proce dures and institutions of the EC legal system"
that the EC identifies to determine whether they do, as the EC alleges, "provide for a uniform
application and interpretation of . . . EC customs la w." The United States submits that the procedures
and institutions identified by the EC do not do this. Those procedur es and institutions consist of very
general obligations (e.g., the oblig ation of cooperation under Article 10 of the EC Treaty) that are not
operationalized in the customs context, non-bindin g guidelines, and discretionary instruments (e.g.,
referrals to the Customs Code Committee). The onl y instrument of a binding character that the EC
has identified is the right to appeal to a member St ate court, with the possibility of a referral to the
ECJ. However, the possibility of eventually gaining redress before a review tribunal (which the EC is
required to provide pursuant to GATT Article X:3(b)) is not a substitute for administering laws in a
uniform manner in the first instance (as the EC is required to do pursuant to GATT Article X:3(a)). In
addition, an appeal to a member State court is hardly an effective pro cedure for ensuring uniform
administration, given the discretion a court has to not refer a question to the ECJ, even when
confronted with a direct conflict in different authorities' administration of EC law,
9 and given the
"expensive and time-consuming" nature of the procedure.10

In short, it is the absence of a critical feature from the design and structure of the EC's system
of customs law administration that necessarily results in non-uniform administration in breach of
GATT Article X:3(a). The missing critical feature is a procedure or institution that ensures that
divergences of administration among the 25 different customs authorities do not occur or that
promptly reconciles them as a matter of course when they do occur. The procedures and institutions
that the EC identifies (even under the EC's char acterization of those procedures and institutions)
cannot and do not result in uniform administration of EC customs law by 25 independent, regionally
limited customs authorities. Rather, the EC's ins titutions and procedures constitute a loose network
within which various responses to non-uniform administration may occur but need not necessarily
occur.11

This point is well illustrated in paragraph 99 of the EC's Opening Statement at the second
Panel meeting. There, the EC stated that

9 See US Second Oral Statement, paras. 31, 35-37.
10 US Second Oral Statement, para. 38 (quoting Edwin A. Vermulst, EC Customs Classification Rules:
Does Ice-Cream Melt? , p. 21, posted at http://www.vvg-law.com/publications.htm ("Vermulst, EC Customs
Classification Rules ") (Exhibit US-72)). In this regard, a remark by the EC in its Closing Statement at the
second Panel meeting is revealing. With respect to th e blackout drapery lining illustration, the EC noted "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 there to be a lack of uniformity attributable to
the EC system." EC Second Closing Statement, para. 16. This observa tion actually reinforces the US point
with respect to appeals as a tool of securing uniform administration. Given the time and expense required to
pursue an appeal – especial ly if one hopes eventually to reach the ECJ and obtain a judgment with EC-wide
effect – a small importer may well find that option not to be cost-effective. In the EC’s view, any non-
uniformity that persists as the result of such a decision to refrain from pursuing an appeal cannot be the basis for
a claim of "lack of uniformity attribut able to the EC system." Thus the EC turns GATT Article X:3(a) on its
head. It converts it from a provision focused on the obligations of a Member (in this case, the EC) to a
provision that imposes a burden on traders to pro-actively seek out uniform administration.
11 See US Closing Statement at Second Panel Meeti ng, paras. 5-6; US Second Written Submission,
paras. 48-52 (discussing various instances in which EC acknowledges general, non-binding, or discretionary
nature of procedures and institutions held out as securing uniform administration); see also EC Second Opening
Statement, paras. 51 ("What matters is not that the duty of cooperation is a general obligation, but that it exists.
Moreover, its is legally binding and can be sanctioned by the Court of Justice.") (emphasis added), 61 (" If a
question is referred to the Court of Justice, the normal s ituation will be that other procedures in which the same
question is relevant can be suspended until the Court has given judgment.") (emphasis added).

if a customs agency or a court in a[n] 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.
12
Nowhere does the EC state the ba sis for its predictions as to what "will" or "shall" happen
when a divergence in administrati on comes to light, and that is pr ecisely the point. The design and
structure of the EC system of customs administrati on lack procedures or institutions to ensure first,
that divergences do not occur or, second, that when divergences that necessarily result from the EC's
system come to light they "will" or "shall" be rec onciled promptly and as a matter of course. As the
system lacks any such procedures or institutions, it necessarily results in non-uniform administration
in breach of GATT Article X:3(a).

(b) Please explain why those aspects necessarily result in non-uniform
administration in violation of Article X:3( a) in respect of each and every area of
customs administrations in the European Communities.

With respect to part (b) of the Panel's question, the aspects of the design and structure of the
EC customs administration system to which the United States has referred – i.e. administration by 25
separate, independent authorities and lack of proc edures or institutions that can ensure against
divergences or promptly reconcile them as a matter of course when they occur – result in non-uniform
administration with respect to all areas of customs administration for the same reason. That is, the
administration of classification rules, valuation rul es, and customs procedures is subject to the same
flawed regime.

In each of these areas, the only procedures or institutions that allegedly secure uniform
administration are general, non-binding, discretiona ry procedures and institutions, with the exception
of court review. But, as has been mentione d above, court review does not secure uniform
administration, given the discretion that courts have in whether or not to refer matters to the ECJ, the
lack of an obligation on the part of the custom s authority in a given member State to follow the
decisions of courts in other member States, and indeed, the lack of any mechanism to inform the
customs authorities in the various member States of relevant customs decisions by courts in other
member States.
13

Finally, it is important to recognize that the US argument does not end with the US
demonstration that the design and structure of the EC system necessarily results in non-uniform
administration. In addition, the United States has shown throughout its submissions and interventions
that the EC and senior EC officials have recogni zed an absence of uniform administration; it has
shown examples of non-uniform administration; and it has shown that practitioners who actually must
work within the system understand administration to be non-uniform. In short, while demonstrating
that the design and structure of the EC system necessarily results in non-uniform administration is an
important part of the US argument, it is not the only part of the US argument.

127. With respect to paragraph 10 of the United States' Oral Statement at the second
substantive meeting, please specifically identify the "procedures" and "institutions" to which

12 EC Second Oral Statement, para. 99 (emphases added); see also EC Replies to First Panel Questions,
paras. 47-48, 58; EC First Written Submission, para. 86.
13 See Reply to Question No. 126, supra; see also US Second Opening Statement, paras. 31, 35-38; US
Second Written Submission, paras. 63-71.

the United States refers in support of its claim of violation of Article X:3(a) of the GATT 1994
on the part of the European Communities.

The reference to "procedures" and "institutions" in paragraph 10 of the US Oral Statement at
the second substantive meeting is a quotation from paragraph 76 of the EC's Second Written
Submission. As noted in the US response to the Panel's Question No. 126, the EC evidently
recognizes that, taken by itself, the administration of EC customs law by 25 separate, independent
customs authorities would not fulfil the EC's obligation of uniform administration under GATT
Article X:3(a). There would have to be procedur es or institutions to ensure that the 25 separate,
independent authorities administered the law in a uniform manner. Recognizing this point, the EC has
identified various procedures and institutions which it claims perform that function, and which the
United States has demonstrated do not perform that function, for reasons discussed in response to
Question No. 126 and in prior submissions and interventions.

Those procedures and institutions are:
· the general obligation of cooperation among me mber States set forth in Article 10 of
the EC Treaty;
· the possibility, under Article 226 of the EC Treaty, of the Commission bringing an
action against a member State for infringing an obligation under EC law;
· the possibility of a question being referred to the Customs Code Committee, at the
discretion of a Commission or member State representative;
· the issuance of regulations, non-binding explanatory notes, non-binding opinions by
the Customs Code Committee, non-binding guidance and information (as, for
example, the compendium on customs valua tion, the guidelines on audit procedures,
and the Administrative Guidelines on the European Binding Tariff Information
System);
· the issuance of BTI by customs authorities in individual member States, which need
not be followed in other member States except with respect to the individual holder of
the BTI;
· general provisions, including guidance by th e ECJ providing that penalty provisions
be "effective, proportionate and dissuasi ve"; provisions on information sharing
among member States set forth in Regulation (EC) 515/97; the Customs 2007 action
program, which aspires to attain a gr eater degree of cooperation among customs
authorities by the end of 2007; and Council Regulation (EC/Euratom) No 1150/2000
on collection of the EC's "own resources"; and
· the option for an affected party to app eal an adverse customs action to a member
State court, with the possibility of eventual referral of relevant questions of EC law to
the ECJ.

What is notable, from the perspective of the US GATT Article X:3(a) claim, is that not one of
the foregoing procedures or institutions ensures agai nst divergences that inevitably result when the 25
independent, regionally limited customs authorities ar e confronted with the myriad of day-to-day
choices in administering the EC's customs law, and not one of the foregoing procedures or institutions
provides for prompt reconciliation as a matter of ri ght of such divergences that do occur. As
explained in the US response to Question No. 126 and in prior US submissions,
14 these procedures
and institutions are distinguished by their very gene ral, non-binding, and discretionary qualities. Of
all of these procedures and institutions, the only one that a trader can access as a matter of right when
it encounters non-uniform administration is the option of appealing an adverse decision to a member
State court and urging that court or, eventually, a superior court to exercise its power to refer a
question to the ECJ. The existence of that single procedure of a binding nature does not fulfil the
EC's Article X:3(a) obligation, as previously discussed.

14 See, e.g., US Second Written Submission, paras. 48-52; US First Oral Statement, paras. 32-45.

128. In its reply to Panel Question No. 3, the United States explains that, while it is
principally challenging Council Regulation (EEC) No. 2913/92 of 12 October 1992; Commission
Regulation (EEC) No. 2454/93 of 2 July 1993; and the Integrated Tariff of the European
Communities established by Council Regulation (EEC) No. 2658/87 of 23 July 1987, these
measures are supplemented by miscellaneous Commission regulations and other measures
pertaining to customs classification and valuati on and customs procedures. Please specifically
identify these supplementary measure(s).

First, the United States wishes to make clear that it is not challenging the measures referred to
in this question per se but, rather, the administration of those measures.

The measures identified represent the principal substance of EC customs laws.
15 There are, as
the EC has indicated, related regulations and othe r measures pertaining to customs classification and
valuation and customs procedures. 16 As the same system of administration that applies to the three
identified measures also applies to the miscellaneous related meas ures, the problem of non-uniform
administration applies equally to those other measures.

The United States has referred to some supplem entary measures. Fo r example, the United
States has referred to the Council regulation susp ending duties on a subset of LCD monitors.
17 The
United States also has referred to the explanator y note on the classification of certain camcorders. 18
These are supplementary measures that the EC does not administer in a uniform manner. Like these
supplementary measures, other supplementary meas ures pertain to specific products or groups of
products in ways that elaborate on provisions set forth in the three core customs laws. Because of
their specificity and the diverse range of issues c overed, it would be impossible to identify all such
measures.

129. With respect to the United States' argument that certain laws can be considered as
administrative in nature" and/or as "tools of administration" for the purposes of Article X:3(a)
of the GATT 1994:

(a) Please list all laws/substantive provisions in the EC customs administration
regime enacted by the European Communities or by the member States other
than penalty laws that the United States classifies as "administrative" in nature
and/or that qualify as a "tool of administration".

(b) Referring to the terms of Article X:3(a), would such "tools of administration"
have to qualify as laws "of general application" within the meaning of
Article X:1 of the GATT 1994?

In addition to penalty laws, other provisions the United States has referred to that are
administrative in nature are binding tariff informa tion, member State audit provisions, member State
guidelines on applying the economic effects test for deciding whether to allow processing under
customs control, and guidelines issued by EC in stitutions (such as the Community Customs Audit
Guide (Exhibit EC-90)). The features common to these various provisions that make them

16 See, e.g., EC First Written Submission, paras. 92-96.
17 See US First Written Submission, para. 74 (referring to Council Regulation (EC) No 493/2005 of 16
March 2005, Official Journal of the European Union L82/1 (31 March, 2005) (Exhibit US-28)).
18 US Second Oral Statement, para. 28 (referri ng to Uniform Application of the Combined
Nomenclature (CN), Official Journal of the European Communities , 6 July 2001, p. C 190/10 (Exhibit US-61),
and Explanatory Notes to the Combined Nomenclature of the European Communities, Official Journal of the
European Communities, 13 July, 2000, p. 316 (Exhibit US-62)).

administrative in nature are the very features identified by the Panel in Argentina – Hides and Leather
at paragraph 11.72 of its report. In particular, none of these provisions establish substantive customs
rules. The substantive customs ru les are set forth in other provisions (notably, the Tariff Regulation,
the CCC, and the CCCIR). Furthermore, each of the foregoing provisions simply "provides for a
certain manner of applying those substantive rules."19

These tools of administration need not necessar ily qualify as laws of general application
within the meaning of Article X:1 of the GATT 1994. For purposes of Article X:3(a), it is the object
of administration – the thing being administered – as opposed to the provision doing the
administering, that must be a law of general appli cation within the meaning of Article X:1. This is
evident from the grammatical structure of Article X:3(a), in which the phrase "laws, regulations,
decisions and rulings of the kind described in paragr aph 1 of this Article" is the object of the phrase
"shall administer in a uniform, impartial and reasonable manner."
20

130. The Panel in its report in Argentina – Hides and Leather stated in paragraphs 11.71 and
11.75 that laws that are "administrative in nature" may be considered for their substance
under Article X:3(a) of the GATT 1994. Assuming a distinction between laws that are
"administrative in nature" and those that are not is justified under Article X:3(a), what criteria
should be applied in determining whether or not a measure is "administrative in nature"?

The Panel in Argentina – Hides referred to certain criteria for determining whether a measure
is administrative in nature. At paragraph 11.72 of its report, it found that the measure at issue there –
Argentina's Resolution 2235 – was administrative in na ture. In reaching that conclusion, it noted that
"Resolution 2235 does not establish substantive customs rules for enforcement of export laws." It
noted that the substantive rules were contained in other laws. It also noted that Resolution 2235
"provide[d] for a certain manner of applying those substantive rules."

These criteria take account of the ordinary meaning of "administrative." A measure is
administrative if it is executive in nature, that is, if it has "the function of putting something into
effect."
21 Thus, the ordinary meaning of "administrat ive" suggests a distinction between the thing
being put into effect and the thing that does the work of putting it into effect. The criteria identified
by the Panel in Argentina – Hides and Leather are premised on that distinction and enable an observer
to determine on which side of that distinction a given measure falls in view of the applicable
analytical framework.22 The United States submits that they are appropriate criteria for this Panel to
apply in determining whether penalty provisions and audit provisions, in particular, are administrative
in nature. For reasons the United States has discussed in previous submissions, the answer is that they
are administrative in nature.23

Penalty and audit provisions do not establish subs tantive customs rules. Rather, they provide
for a manner of applying substantive rules that are set forth in other measures (e.g., the Tariff

19 Panel Report, Argentina – Measures Affecting the Export of Bovine Hides and the Import of Finished
Leather, WT/DS155/R, para. 11.72 (adopted 16 February 2001) ("Argentina – Hides and Leather").
20 This does not mean that measures that are tools of administration do not qualify as laws of general
application within the meaning of Article X:1 of the GATT 1994. In other analytical contexts, such measures
may constitute the objects of administration, in which case it would be relevant to consider whether they are
laws of general application within the meaning of Article X:1. See US Second Oral Statement, paras. 76-77.
21 See US Replies to First Panel Questions, para. 158.
22 As the United States has discussed ( see US Second Oral Statement, pa ras. 76-77), the fact that a
given measure may qualify as administrative in one contex t does not mean that it ca nnot be characterized as
substantive in another context. One mistake the EC makes is to assume that a given measure must be either
substantive or administrative for all purposes. See EC Second Written Submission, para. 193; EC Second Oral
Statement, paras. 67, 72. But this simply is not so.
23 See, e.g. , US Replies to First Panel Questions, paras. 118-120, 156-160; US Second Written
Submission, paras. 72-98; US Second Oral Statement, paras. 78-81.

Regulation, CCC, and CCCIR). In a system that relies heavily on traders making truthful declarations
about their imports, penalty and audit provisions en sure compliance with the substantive rules.
Accordingly, they qualify as "administrative in nature" under the criteria in Argentina – Hides.

As penalty and audit provisions are administ rative in nature, differences in their terms
evidence differences in the way that the EC's 25 independent customs authorities administer
substantive EC customs rules in different parts of the EC's territory. As the EC itself has
acknowledged, the differences among penalty provisi ons are dramatic, such that for the same
infraction a customs authority may impose imprisonmen t in one part of the EC and a minor fine in
another.
24 Similarly, as the EC Court of Auditors observed, auditing practices are sufficiently
different as to cause some EC member States not to accept valuation determinations made by other
member States.25 The existence of these significant differenc es in the terms of the measures that are
the tools for administering substantive EC customs laws means that the substantive EC customs laws
are not administered in a uniform manner, and this is inconsistent with the EC's obligation under
GATT Article X:3(a).

131. In its reply to Panel Question No. 113, the United States notes that, in US– Shrimp, the
Appellate Body described the standards contained in Article X:3(a) of the GATT 1994 as
pertaining to "transparency and procedural fairness in the administration of trade
regulations." The United States submits that, accordingly, beneficiaries of the standards
pertaining to transparency and procedural fa irness are traders. Can this submission be
reconciled with the United States' reply to Pane l Question No. 8 and paragraph 23 of its Second
Written Submission, where the United States appears to question the meaning of and relevance
to Article X:3(a) of the "minimum standard s" referred to by the Appellate Body in US –
Shrimp? If so, please explain how.

The US response to Question No. 113 addresses a different point from the US response to
Question No. 8 and the statements at paragraph 23 of the US Second Written Submission. In its
response to Question No. 113, the United States wa s noting that the Appellate Body's statement in US
– Shrimp supports the proposition that Article X:3(a) should be understood as an obligation intended
to benefit traders. In its response to Questi on No. 8 and in paragraph 23 of its Second Written
Submission, the United States was noting that th e phrase "minimum standards" in the operative
passage in US – Shrimp was not elaborated on by the Appellate Body and did not need to be
elaborated on, as the Appellate Body found that the measure at issue clearly fell below the relevant
standards. The United States sees no inconsistenc y between these two observations. They are not
mutually exclusive.

With respect to "minimum standards" the point the United States has stressed is that the
passing use of this phrase by the Appellate Body is the only alleged support for the EC's view that
Article X:3(a) should be interpreted as a minimum standards provision. In fact, the reference does not
support the EC's view. Article X:3(a) must be inte rpreted in accordance with the ordinary meaning of
its terms, in light of their context and the object and purpose of the GATT 1994. Neither the terms,
nor the context, nor the object and purpose support the EC's characterization of Article X:3(a) as a
minimum standards provision. The Appellate Body's reference to "minimum standards" is not at odds
with this.

132. In its reply to Panel Question No. 2, the United States recognizes that, in the course of
administration of customs laws, inconsistenc ies may occur from time to time between
authorities in different regions within a WTO Member's territory. The United States further

24 European Commission, Directorate-General for Taxation and Customs Union, TAXUD/447/2004
Rev 2, An Explanatory Introduction to the modernized Customs Code , p. 13 (24 February 2005) (Exhibit US-
32).
25 Court of Auditors Valuation Report, para. 37 (Exhibit US-14).

notes that it does not argue that the emerg ence of an inconsistency automatically and
necessarily evidences a breach of Article X:3(a) provided that a mechanism – such as a central
authority – exists to cure such inconsistencies.

(a) Does the United States mean that a certain number and/or level of
inconsistencies should be tolerated under Article X:3(a) provided that a central
mechanism exists to cure such deficiencies?

(b) If so, please specifically explain how the number and/or level of inconsistencies
that should be tolerated can be identified.

(c) If not, please explain in further detail what the United States means by its
submission.

The US reply to Question No. 2 does not mean that a certain number and/or level of
inconsistencies should be tolerated provided that a cen tral mechanism exists to cure such deficiencies.
Under a system that provides for uniform admini stration, any differences that may emerge in
administration from one region to another should be resolved promptly and as a matter of right. If
that happens, then there will be no inconsistencies to be tolerated.

The point the United States was making in res ponse to Question No. 2 was that even where
customs laws are administered uniformly, as a practical matter, there may be momentary
inconsistencies between regions, wh ich are promptly resolved as a matter of right. This may be a
function, for example, of lapses in communication. Officials at a port in one part of the Member's
territory may not be immediately aware of a classifi cation ruling issued by the customs authority at
the request of an importer at a different port. To the extent that this may give rise to a momentary
inconsistency, uniform administration requires that the inconsistency be eliminated promptly and as a
matter of right. This is not the same as saying th at a threshold level of in consistencies is tolerable
under a system in which the customs laws are administered in a uniform manner.

In the EC, however, there is an absence of any procedures or institutions to resolve
differences among materially similar – or even iden tical – cases promptly and as a matter of right.
The ability to go to court to challenge a given admini strative action as inconsistent with EC law is not
such a procedure or institution. That is, review tribunals (as required by GATT Article X:3(b)) are
not a substitute for uniform administration in the fi rst instance (as required by GATT Article X:3(a)).
Moreover, as was discussed in the US opening statem ent at the second Panel meeting, courts in the
EC are not compelled to refer questions to the one forum capable of rendering judgments with EC-
wide effect, the ECJ, even when they are confront ed with direct divergences in the administration of
EC law.
26 Even if an appeal eventually brings about uniformity, non-uniformity may persist during
the pendency of what may be a long, drawn-out proceeding. 27 And, appellate review as a means of
obtaining uniform administration impermissibly puts th e onus on the trader to attain a state of affairs
that the Member itself is required to provide under GATT Article X:3(a).

The EC has referred, from time to time, to cases in which particular differences in
administration emerged and were eventually resolved. 28 However, the divergences at issue resulted
precisely from the structure and design of the EC's system of customs administration, and these
divergences are further evidence of the EC's failur e to administer its customs laws uniformly.
Moreover, what is remarkable about these cases is the haphazard way in which differences were
resolved and the time it took to resolve them. In each of the cases at issue there was a clearly

26 US Second Oral Statement, paras. 35-38.
27 See US Second Oral Statement, para. 38 (quoting Vermulst, EC Customs Classification Rules
(Exhibit US-72)).
28 See, e.g., EC Second Written Submission, paras. 136, 141, 156.

identified divergence in administration of EC law from region to region, but in none of them was
there a clearly identified path for resolving the divergences promptly and as a matter of right. Nor
does the fact that particular diverg ences may have been resolved in an ad hoc manner constitute
evidence that administration is uniform. Solvi ng one particular problem identified between two
authorities is not the same as saying that administ ration among 25 authorities is uniform, even with
respect to that particular issue.

133. In its reply to Panel Question No. 90, the United States submits that measures that are
"administrative in nature" are examined under Article X:3(a) of the GATT 1994 for their
"substance" whereas measures that do not admi nister other measures are examined under
Article X:3(a) not for their "substance" but to see whether they are being administered in a
uniform manner. Please explain in practical te rms the difference(s) in the tests applied under
Article X:3(a) to determine whether or not non-uniform administration exists with respect to
measures that are "administrative in nature" and those that are not administrative in nature.

The point the United States has made in response to Question No. 90 and elsewhere
29 is not
that different tests apply under Article X:3(a) to determine whether non-uniform administration exists
with respect to measures that are "administrative in nature" and those that are not administrative in
nature. If a measure is the object of administration – if it is the thing being administered – then
Article X:3(a) requires that it be administered in a uniform manner.

Some measures are administrative in nature in the sense that they give effect to other
measures. Penalty provisions are one example. A pe nalty provision exists as a tool for administering
some other measure by compelling compliance with that other measure. It would be difficult, if not
impossible, to analyze a penalty measure separ ate from the measure with which compliance is
sought.
30

Where a WTO Member employs very different administrative measures in different parts of
its territory to give effect to its customs laws – as is the case in the EC – that Member is administering
its customs laws differently in different regions. The different tools the EC uses to administer its
customs laws in different parts of its territory constitute non-uniform administration of its customs
laws.

This is not a question of different tests for di fferent types of laws. For purposes of this
dispute, the object of administration – the thing be ing administered – is the EC's customs laws. The
absence of uniform administration of the EC's customs laws is evidenced in part by the indisputable
fact that different customs authorities in the EC use different penalty tools to give effect to the EC's
customs laws.

In stating (in response to the Panel's Question No. 90) that "measures that are administrative
in nature are examined . . . for their substan ce," the point the United States was making was that
where the substance of measures that administer customs laws differs from region to region then,
logically, administration of the customs laws is non-uniform. The differences among the tools of
administration is evidence of the non-uniformity of administration of the underlying customs laws.

The US response to Question No. 90 referred to paragraph 11.70 of the Panel report in

29 See, e.g., US Second Written Submission, paras. 72-98.
30 See US Replies to First Panel Questions, para. 158. The EC mischaracterizes the US argument in
stating that "[l]aws may very well complement one another without for that reason becoming ‘administration.’"
EC Second Closing Statement, para. 23. The US argument is not that penalty provisions in the EC simply
"complement" substantive customs rules. Rather, penalty provisions are instruments for giving effect to those
substantive rules, much the same way that the measure at issue in Argentina – Hides and Leather was an
instrument for giving effect to Argentina’s substantive customs rules.

Argentina – Hides . The Panel in that dispute explaine d that where a measure is a tool of
administration of another measure, the substance of the first measure may result in administration of
the second in a manner inconsistent with GATT Article X:3(a).

In Argentina – Hides, the measure being administered was Argentina's rules on classification
and export duties. Resolution 2235 was a separate measure that was a tool for administering those
rules. As the Panel put it, Resolution 2235 provide d "a means to involve private persons in assisting
Customs officials in the application and enforcement of the substantive rules. . . ."
31 To the extent that
Resolution 2235 administered the substantive rules in a manner inconsistent with Article X:3(a),
Resolution 2235 was a legitimate target of a challenge under GATT Article X:3(a). Likewise, here, as
penalty provisions and audit procedures in the EC administer EC customs law in a non-uniform
manner, inconsistent with Article X:3(a), they are legitimate targets of the US claim under that article.

134. In its reply to Panel Question No. 118, the United States submits that it is unlikely that
rules governing the operational procedures of bodies that oversee or are somehow involved in
the administration of customs laws – such as, for example, the EC Customs Code Committee –
would qualify as laws, regulations, judicial d ecisions and administrative rulings of general
application "pertaining to" the classification or the valuation of products for customs purposes.
In light of this reply, please clarify whether or not the United States is challenging the manner
in which the Customs Code Committee operates.

The manner in which the Customs Code Committe e operates is not itself an instance of non-
uniform administration of EC customs law. Therefore, the United States is not challenging the
manner in which the Committee operates, per se. However, the way in which the Committee operates
is relevant to the US Article X:3(a) claim, because the Committee is one of the institutions that the EC
holds out as ensuring the uniform administration of EC customs law.

As discussed in the US response to Question No . 126, even the EC does not claim that it
would fulfil its obligation of uniform administrati on absent certain procedures and institutions alleged
to prevent divergences or reconcile them promptly. The ultimate question is whether the procedures
and institutions identified by the EC in fact do this. The answer is that they do not.

One of the key institutions identified by the EC is the Customs Code Committee.
Accordingly, it is important to understand how this co mmittee operates. In particular: Does it operate
such that when a trader encounters what it believ es to be a divergence in administration between two
different EC customs authorities, the trader can bring the allegation to the Committee as a matter of
right and have the Committee resolve the question with in a relatively brief time certain? That answer
is, No. Rather, questions get put before the Committee at the discretion of the Commission or
member State representatives. Where a trader asks to have a question put on the Committee's agenda,
the Commission or member State representative may or may not acquiesce. Even if the matter does
get put on the Committee's agenda, the trader has no right to plead its case before the Committee.
And, there is no limit on the time the Committee may take to consider the matter.
32 These
observations about how the Committee operates are relevant, because they contradict the EC's
assertion that the Committee is a key institution in ensuring uniform administration.

135. In its reply to Panel Question No. 7, in de fining the term "administer", the United States
emphasises the treatment of "products" and "tra nsactions" but makes no reference to the
treatment of "traders". Does this mean that th e United States considers that the Panel should

31 Panel Report, Argentina – Hides and Leather, para. 11.72.
32 See generally US First Written Submission, paras. 121-132; Exhibit EC-103 (indicating that section
of Customs Code Committee dealing w ith BTI has met only two to three time s in each of the past three years);
EC Reply to Panel Question No. 58(i) (iv) (indicating that average time to resolve cases involving alleged
divergences in BTI that get referred to Customs Code Committee has been about 13 months).

focus on the treatment of products and transa ction rather than on the treatment of traders
when determining whether or not there has been a violation of Article X:3(a)?

The US response to the Panel's Question No. 7 fo cused on use of the word "treatment" in the
two statements from the US first written submission re ferred to in that question. The two statements
addressed treatment accorded to products and transa ctions. Accordingly, the US response elaborated
on what the United States had meant by "treatment" in those two contexts. This does not mean that
the Panel should focus on the treatment of products and transactions rather than on the treatment of
traders when determining whether or not there has been a violation of Article X:3(a). The Panel
should focus on both treatment of products and transactions as well as treatment of traders,
recognizing that there is a high degree of overlap between the two types of focus.

From a customs point of view, how a trader's goods are classified and valued and,
consequently, what duty is assessed on them necessarily will be important to the trader. To the extent
that different customs authorities within the EC treat these matters differently they are, by extension,
according different treatment to the trader. Diffe rent treatment accorded to the classification and
valuation of goods will affect how the trader plan s its transactions. For example, anticipating a
certain classification of its goods in one region of the EC and a different classification in a different
region, the trader may be expected to plan its shipme nts accordingly. It is in this sense that a focus on
the treatment of goods and transactions overlaps with a focus on the treatment of traders.

However, according treatment to goods and transactions is not the only means by which a
customs authority may accord treatment to a trader. A customs authority also accords treatment to a
trader when, for example, it imposes a penalty, performs an audit, or permits a trader to clear its goods
through a simplified procedure, such as the local cl earance procedure. This point bears emphasis,
given the EC's suggestion that a Member administers its customs laws in a non-uniform manner only
when it imposes different duties on identical goods with identical value.
33

The EC's narrow understanding of what it means for a Member to administer its customs laws
in a non-uniform manner is at odds with the context of Article X:3(a) which, as the EC acknowledges,
indicates a focus on the treatment accorded to traders. 34 As the Panel in Argentina – Hides and
Leather explained, "Article X:3(a) requires an examination of the real effect that a measure might
have on traders operating in the commercial world."35 Moreover, "every exporter and importer should
be able to expect treatment of the same kind, in the same manner both over time and in different
places and with respect to other persons."36

The treatment that exporters a nd importers expect to be of the same kind in different places
within the territory of a Member is not limited to the duty assessed on particular goods. It includes,
for example, the penalties they may face in different places. The United States emphasizes this point
in particular, because the EC has suggested that di fferences in penalties from region to region do not
constitute non-uniform administration, as long as the diverse penalties all dissuade traders from
violating EC customs law.
37

33 See, e.g., EC Second Written Submission, para. 123 (arguing that LCD monitor case does not show
non-uniform administration in breach of GATT Article X:3(a), because regard less of classification, monitors
covered by temporary duty suspension regulation all are subject to 0% tariff rate); EC Replies to First Panel
Questions, para. 16; EC Second Closing Statement, para. 24 (arguing that despite significant differences in
penalties from member State to member State, unifor m administration is "ensured" because "traders will
normally respect the substantive provisions of customs law").
34 See, e.g., EC Replies to First Panel Questions, para. 14; EC Second Oral Statement, para. 18 (urging
that "due consideration" be given to "real-world implications of the US claims").
35 Panel Report, Argentina – Hides and Leather, para. 11.77.
36 Panel Report, Argentina – Hides and Leather, para. 11.83.
37 See, e.g., EC Second Oral Statement, paras. 78-79; EC Second Closing Statement, para. 24.

As the United States explained at the second Panel meeting, a trader may fully intend to
comply with the law and still be affected by diffe rences in penalties from region to region. Traders
tend to be risk averse and plan their transactions by taking into account a variety of factors, including
their potential liability for sanctions. It simply is in correct for the EC to assert that its customs laws
are administered uniformly even though different authorities have at their disposal dramatically
different tools for ensuring compliance with those laws . Contrary to this assertion, a general level of
compliance across regions does not equate to uniform administration. The EC ignores the fact that
differences in administration of the laws, including differences in the penalties that may be applied,
affect the way traders plan their shipments. In short, the EC ignores the trader-oriented focus of
Article X:3(a).

136. In paragraph 101 of its Second Writte n Submission, the European Communities
submits that, in the United States, binding tari ff information is specific to the holder of such
information, as is the case in the European Communities.

(a) Please comment.

(b) What measures does the United States have in place to prevent BTI-shopping?

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

In the United States, a person can seek what US Customs and Border Protection ("US
Customs") refers to as a ruling under part 177 of th e US Customs regulations. The regulations state
that the ruling is the "official position of the Customs Service with respect to the particular transaction
or issue described therein."
38 Accordingly, the ruling creates ri ghts and responsibilities on the part of
the holder of the ruling. However, other persons who are importing merchandise that is identical in
all material respects to the merchandise covered by the ruling also have the right to cite an existing
ruling as authority for the principle en unciated therein with respect to th eir merchandise. It is for this
reason that prior to modifying or revoking a ruling th at has been in effect for at least 60 days, US
Customs publishes notice of its intention to modify or revoke the ruling and considers comments from
the public on the merits of its proposed action. Thus, the modification and revocation procedure
demonstrates that persons whose merchandise is within the ambit of the principle that is enunciated in
the ruling can enjoy the benefits of the ruling.

By contrast, the operation of the BTI system in the EC is a dramatic illustration of how the
EC fails to administer its customs laws uniformly. Under the EC system, where the EC authority in
one region issues BTI to an importer, the EC auth ority in another region is under no obligation to
follow that BTI with respect to identical goods, un less the person invoking the BTI happens to be the
very same importer – i.e. the "holder" of the BTI. Even if the person invoking the BTI is an affiliate
of the holder of the BTI, the EC authority in the second region is under no obligation to follow the
BTI issued by the EC authority in the first region. Thus, the EC customs authority in one member
State is free to classify the identical product differe ntly than the EC customs authority in another
member State – or, indeed, than the EC customs authorities in any of the other 24 member States.

With respect to part (b) of the Panel's question, it should be noted that BTI shopping occurs
when there is non-uniform administration across regi ons within the territory of a Member. In the
United States, as a practical matter, BTI shopping cannot really occur, due to the fact that there is a
central office from which to obtain rulings, and, fo r any given commodity there is a single team of
experts – National Import Specialists within the National Commodity Specialist Division ("NCSD")
of US Customs and Border Protection – responsible for their issuance. For classification, initial

38 19 C.F.R. § 177.9(a) (Exhibit EC-129) (emphasis added).

rulings generally are issued by the NCSD special ist in New York. NCSD rulings are subject to
review and correction by US Customs headquarter s in Washington, DC. For matters other than
classification, rulings are issued centrally by US Customs in Washington, DC. Thus, "BTI shopping"
is precluded precisely due to the presence in the United States of what is absent in the EC, a central
authority.

137. Please comment on and respond to the following submissions by the European
Communities:

(a) With respect to the classification of blackout drapery lining by the Main
Customs Office of Bremen, in paragraphs 108 – 109 of its Second Written
Submission, the European Communities submits that the letter of the Main
Customs Office Hamburg relied upon by the United States contained in Exhibit
US-50 relates to an administrative appeal that is not related in any way to the
administrative appeal which was the subject of the decision by the Main
Customs Office Bremen.

The United States refers the Panel to paragra phs 60 to 64 of its opening statement at the
second Panel meeting, wherein this matter is discus sed, as well as to the affi davit of Mr. Mark R.
Berman (Exhibit US-79), which is discussed in that part of the US opening statement.
39 As explained
there, the letter from the Main Customs Office Brem en (Exhibit US-23) and the letter from the Main
Customs Office Hamburg (Exhibit US-50) both concern blackout drapery lining produced by
Rockland Industries. The Main Customs Office Br emen decided to exclude Rockland's product from
classification under Tariff heading 5907 on a grou nd evidently not applied by other EC customs
authorities – i.e. on the ground that the product had plas tic in its coating, regardless of whether textile
flocking or other elements were mixed into that coating. In its discussion of this case, the EC
purported to cast doubt on the proposition that this was the ground for the decision by the Main
Customs Office Bremen. 40 The letter from the Main Customs Office Hamburg confirms that this
indeed is the approach taken by the customs authority in Germany.

(b) In paragraph 123 of its Second Writte n Submission, the European Communities
argues that Article X:3(a) of the GATT 1994 can only be held to be violated
where a variation of practice has a significant impact on traders. The European
Communities submits that, in the case of liquid crystal display monitors with
digital video interface, even if there w ere differences in tariff classification for
the monitors at issue in this dispute, this would have no financial impact on
traders since, pursuant to EC Regulation No. 493/2005, the tariff rate for such
monitors would be 0% whether classified under tariff heading 8528 or under
8471.

The United States refers the Panel to paragra phs 52 to 59 of its opening statement at the
second Panel meeting, wherein this matter is discuss ed, as well as to Exhibits US-75 through US-78,
which are discussed in that part of the US openi ng statement. As explained there, four key
observations are relevant to this issue. Firs t, EC Regulation No. 493/2005 is a temporary duty
suspension regulation which does not actually resolve the underlying classification issue. The EC

39 In its Closing Statement at the second Panel meeting, the EC questioned the probative value of
Mr. Berman’s affidavit of Mr. Berman on the theory that Mr. Berman has "a clear interest in the classification of
BDL." EC Second Closing Statement, para. 16. However, the EC’s argument relies on the patently absurd
assumption that Mr. Berman somehow has an interest in the outcome of this WTO dispute. Of course, the
outcome of this dispute will have no effect whatsoever on classification of blackout drapery lining in Germany.
Neither Mr. Berman nor his company stands to gain anything by this dispute. Accordingly, the basis for the
EC’s questioning the credibility of Mr. Berman’s affidavit is entirely unfounded.
40 See EC First Written Submission, paras. 336-337.

states that "[b]efore its expiration, the EC institu tions will obviously review the situation and adopt
the measures which will be necessary then."41 While this may be obvious to the EC, the United States
is aware of no provision that compels this outcome. Moreover, as was discussed at the second Panel
meeting, the fact that the regulation temporarily suspends duties but does not resolve the underlying
classification issue is significant. Traders organize their business affairs with a long-term view, and in
making their shipping decisions they are likely to take account of which customs authorities will
accord the more favourable tariff treatment after the temporary regulation expires.

Second, the duty suspension regulation addresses the duty treatment of only monitors below a
specified size threshold. It has no relevance whatsoever to monitors above that size threshold.
42

Third, the EC's suggestion that the temporar y duty suspension regulation has garnered a
general degree of satisfaction within the affected industry is belied by recent communications to the
Commission from the major affected industry association in the EC. 43 That association ("EICTA")
describes "an unacceptable situation were [sic] various member States are applying classification rules
in an inconsistent manner, causing competitive disadvantage for some importers and making the
consequences of sourcing and routing decisions almost impossible to predict."44

In its Closing Statement at the second Panel meeting, the EC asserted that "the classification
of the relevant monitors is an issue which is cu rrently under review, and relevant measures will be
submitted to the Customs Code Committee in the very near future." 45 H o w e v e r , a s r e c e n t l y a s
6 December 2005, EICTA advised the Commission of its profound concerns regarding this matter.
EICTA noted not only its substantive disagreement with the Commission's proposed regulation, but
also its dismay at the Commission's lack of cons ultation with the trade associ ation, including its lack
of response to the association's 2 September, 2005 letter on this matter (Exhibit US-75).
46

Finally, as was summarized in the US opening st atement at the second Panel meeting, there is
a high degree of disarray among customs authorities in the EC over how to deal with the classification
of LCD monitors with DVI. The United States po inted to one customs authority (in the UK) that
appears to be following the opinion of the Customs Code Committee and classifying all such monitors
under heading 8528, regardless of sole or prin cipal use; another customs authority (in the
Netherlands) that has abandoned the guidance of th e Customs Code Committee for fear of adverse
commercial impact and is now applying its own set of criteria for deciding whether to classify
monitors under heading 8528 and 8471; and yet another customs authority (in Germany) that has just
recently issued BTI classifying an LCD monitor with DVI under heading 8471, based on a finding
that it is principally for use with computers (i.e. notwithstanding the conclusion of the Customs Code
Committee that classification under heading 8 471 is appropriate only when a monitor is solely for use
with computers).
47

(c) In paragraphs 392 – 393 of its first written submission, the European
Communities submits that it is not correct to state that different member States
apportion royalties differently to the customs value of identical goods imported
by the same company since the examples ref erred to by the Court of Auditors in

42 See US First Written Submission, para. 74.
43 See US Second Oral Statement, para. 52 (discussi ng Letter from Mark MacGan n, Director General,
EICTA, to Manuel Arnal Monreal, Director Internatio nal Affairs and Tariff Matters, European Commission,
p. 1 (Sep. 2, 2005) ("EICTA September 2005 Letter") (Exhibit US-75)).
44 EICTA September 2005 Letter, p. 1 (Exhibit US-75).
46 See Letter from Mark MacGann, Director General, EICTA, to Manuel Arnal Monreal, Director
International Affairs and Tariff Matters, European Commission (6 December 2005) (Exhibit US-81).
47 US Second Oral Statement, paras. 54-56.

its valuation report mostly involved different subsidiaries established in various
member States. The European Communiti es adds that, following the report of
the Court of Auditors, the Commissi on and the Customs Code Committee
worked through the cases examined by th e Court of Auditors in order to clarify
the issues and establish whether there had been a lack of uniformity. According
to the European Communities, in most ca ses, it was confirmed that the questions
involved were purely factual issues concerning the establishment of the
conditions of Article 32(2)(e) of the Co mmunity Customs Code. The European
Communities argues that, since no systematic lack of uniformity was found, it
was concluded that no amendment to the Customs Code Committee nor the
Implementing Regulation was required.

Even if the EC's assertions were correct, they still would not rebut the broader findings of the
Court of Auditors report. For example, the C ourt of Auditors found "weaknesses" in the EC's
administration of customs valuation rules to include, among others, "the absence of common control
standards and working practices"; "the absence of common treatment of traders with operations in
several member States"; and "the absence of Community law provisions allowing the establishment of
Community-wide valuation decisions."
48 The EC's assertions regarding the treatment of royalties do
not address any of these broader observations, a ll of which demonstrate a lack of uniform
administration as required by GATT Article X:3(a).

(d) In paragraphs 394 – 396 of its first written submission, the European
Communities submits that, with respect to the conditions under which a sale
other than the last sale may be used as the basis for establishing the transaction
value for customs valuation purposes, Article 147 (1) of the Implementing
Regulation provides that, where a price is declared which relates to a sale taking
place before the last sale on the basis of which the goods were introduced into the
customs territory of the Community, it must be demonstrated to the satisfaction
of the customs authorities that this sale of goods took place for export to the
customs territory in question. The European Communities submits that,
whereas the United States claims that the Court of Auditors "found that
authorities in some member States requi red importers to obtain prior approval
for valuation on a basis other than the tr ansaction value of the last sale", the
Court of Auditors merely stated that "in practice, some customs authorities do
impose a form of prior approval". The European Communities submits that,
contrary to the impression created by the Un ited States, there is no form of legal
requirement of prior approval in order to be able to rely on an earlier sale.
Moreover, according to the European Communities, given the potential
complexity of the issue involved, it is not unreasonable for a customs authority to
encourage traders who want to rely on the possibility of establishing the
transaction value on the basis of an earlier sale to have this issue settled in
advance. The European Communities submits that, in any event, such a practice
constitutes a minor variation in administ rative practice, which does not amount
to a lack of uniformity incompatible with Article X:3(a) of the GATT 1994.

In response to these EC statements, the United States makes three key observations. First, the
EC appears to see a distinction between "requir[in g] importers to obtain prior approval" and "in
practice . . . impos[ing] a form of prior approval ." The United States fails to see the relevant
distinction the EC would make between its charac terization of what certain (though not all) EC
customs authorities do and the US characterization of what those customs authorities do. The EC
evidently attaches significance to its assertion that "there is no form of legal requirement of prior
approval in order to be able to rely on an earlier sale ." It thus appears to distinguish between a "legal

48 Court of Auditors Valuation Report, para. 86 (Exhibit US-14).

requirement" and something that is "impose[d]" "in practice." 49 It is not clear to the United States
what the relevant distinction is nor, more importa ntly, how it could possibly matter to a trader who
must submit to the prior approval at issue, whether as a matter of "legal requirement" or as a matter of
"practice."

Significantly, the Court of Auditors found that "in practice, some customs authorities do
impose a form of prior approval."
50 The EC does not deny that such differences in administration of
CCCIR Article 147(1) exist. The EC states that "it is not unreasonable for a customs authority to
encourage traders who want to rely on the possib ility of establishing the transaction value on the basis
of an earlier sale to have this issue settled in a dvance." The United States does not disagree. The
existence of this practice per se is not problematic from the point of view of GATT Article X:3(a).
What is problematic is the fact that some custom s authorities within the territory of the EC impose a
form of prior approval while others do not. Theref ore, this is yet another example of non-uniform
administration by the EC in breach of Article X:3(a).

Second, it is significant not only that some EC customs authorities administer CCCIR
Article 147(1) by imposing a form of prior approval, while others do not, but also that the prior
approval obtained from an EC customs authority in one region has no binding force in other parts of
the territory of the EC. If an importer obtained prior approval from a customs authority in one EC
member State to establish transaction value on the b asis of a sale other than the last sale, it would
have no assurance that the prior approval would be honored by customs authorities in other EC
member States even with respect to identical transactions involving identical goods.

Finally, the EC asserts that the non-uniformity of administration of CCCIR Article 147(1)
represents a "minor variation." The United States fails to see the basis for this characterization. To the
contrary, from the trader's point of view, whether it must get prior approval in order to base customs
value on a sale other than the last sale would be qui te material to deciding where to enter its goods
into the EC. The EC's characterization of this divergence as a "minor variation" is another example of
the EC adopting an erroneous, exceedingly narrow vi ew of non-uniform administration, wherein the
only divergences that make a difference from the persp ective of Article X:3(a) are the ones that affect
the ultimate customs debt owed. In the EC's view , divergences in administration that merely affect
the burden on the trader or risk to the trader – whether divergences affecting how a trader gets the
right to base transaction value on a sale other than the last sale, the penalty-related risks a trader must
take into account, or the ability to obtain reliable, long-term assurance as to the classification of goods
even though the goods may be temporarily subject to an EC-wide duty suspension regulation (as in
the case of LCD monitors) – are not relevant.

The United States takes a very different view . The United States finds no basis for the
proposition that Article X:3(a) is breached only by non-uniform administration that affects the
ultimate customs debt owed by the trader but not by non-uniform administration that affects the
burden borne or risk faced by the trader. Indeed, it is notable that the Panel in Argentina – Hides and
Leather found that Argentina's Resolution 2235 breached Article X:3(a), even though that provision
did not affect the financial debt owed by traders. Rather, that provision subjected traders to a certain

49 Curiously, this position appears to be at odds with the EC’s position with respect to penalty
provisions, where the EC argues that precisely because differences in ad ministration from one authority to
another are a matter of different legal requirements in different member States, they are beyond the scope of an
examination into whether or not the EC is complying with its GATT Article X:3(a) obligation. Here, the EC
seems to concede that differences in legal requirements (as opposed to practices) regarding prior approval for
valuation on a basis other than last sale would constitute differences in administration cognizable under
Article X:3(a). By that logic, diff erences in legal requirements with re spect to penalties are evidence of non-
uniform administration of the customs laws whose compliance is ensured through those penalties, as the United
States has argued.
50 Court of Auditors Valuation Report, para. 64 (Exhibit US-14) (emphasis added).

risk, inasmuch as domestic competitors for the purchase of raw hides were entitled to be present at the
port along with customs officials inspecting hides prior to their exportation to foreign purchasers.
51

In sum, Article X:3(a) requires that a Member's customs laws be administered in a uniform
manner. That obligation is not lim ited by the conditions that the EC suggests, such that it is breached
only when administration in a non-uniform manner af fects the customs debt ultimately owed by the
trader.

(e) Regarding local clearance procedures, in paragraph 423 of its first written
submission, the European Communities submits that the fact that, at the
frontier, anti-smuggling and admissibilit y checks are made electronically does
not mean that there is no involvement of customs prior to release of goods for
free circulation. Moreover, if the goods do not fulfil these checks, there will be a
customs action (physical check, seizure …). The European Communities' argues
that, therefore, it is wrong to state that there is no customs involvement prior to
release in the United Kingdom. In paragraphs 422 – 426, concerning the
requirements prior to release in the framework of the local clearance
procedures, the European Communities subm its that shipping manifest data is
not required; rather a simplified declarat ion containing certain data must be
submitted. The European Communities a dds that the use of both electronic
clearance systems and paper- based systems is possible. As regards supporting
document requirements, the European Communities submits that all EC
member States apply identical rules. In particular, all member States allow
operators having regular trade flows with the same suppliers to submit only once
the relevant DV1 together with the initia l application to benefit from local
clearance procedures. Concerning do cument retention requirements, the
European Communities submits that the retention period in the Netherlands is 7
years. The European Communities submits that, besides, Article 16(1) of the
Community Customs Code 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 EC's statements regarding local clearance procedures identify the outer parameters in
which different customs authorities in the EC must operate. The United States does not dispute the
EC's characterization of what those outer parameters are. What the United States has argued is that
different EC customs authorities administer the lo cal clearance procedures differently within those
parameters. For a discussion of how they do so, the United States refers the Panel to paragraphs 109-
117 of its first written submission.

138. With respect to the comments made by the United States in paragraph 67 of its Oral
Statement at the second substantive meeting, do es the United States now accept the European
Communities' contention that audit procedures are part of valuation rules rather than
constituting customs procedures?

The United States does not accept the EC's characterization of audit procedures as part of
valuation rules rather than customs procedures. Audit procedures are more accurately described as
customs procedures that verify compliance with valuation rules.

The United States calls to the Panel's attention the discussion at paragraph 83 of the Second
Written Submission of the United States. As explaine d there, the EC's view that audit procedures do
not constitute customs procedures is based on its erroneous understanding of the term "customs

51 See, e.g., Panel Report, Argentina – Hides and Leather, paras. 11.91 to 11.93.

procedures" as encompassing only "the proce dures referred to in Article 3(16) CCC." 52 While
"customs procedures" is indeed a term of art under the CCC (referring to several defined categories of
treatment that a customs authority may assign to a pa rticular good), that specialized use of the term
has no relevance to the present dispute. In this di spute, the United States has used the term "customs
procedures" to refer to the diverse array of rules, other than classification an d valuation rules, that
govern how goods are treated for customs purposes on im portation into the EC. In fact, the EC itself
acknowledges that how the concept of "customs pro cedures" is defined for purposes of EC law, and
whether given procedures fall within the scope of Article X:3(a) of the GATT 1994 "are independent
questions."53 As audit procedures are tools for administer ing substantive rules that indisputably are
within the scope of Article X:3(a), differences am ong audit procedures from region to region within
the EC are evidence of non-uniformity in the ad ministration of EC customs laws, regardless of
whether they fall within the sp ecialized definition of "customs procedures" in the Community
Customs Code.

139. With respect to the United States' ar guments concerning processing under customs
control, is the United States arguing that the substance of French law implementing EC law that
applies in this area is different from the substa nce of law in other member States (such as the
United Kingdom)? Additionally or alternatively, is the United States arguing that the
application of French law in this area differs from the application by other member States? If
the latter, does the United States have any evidence to support its claim?

The US argument is that the substance of French law implementing EC law (CCC Article 133
and CCCIR Articles 502(3) and 552) identifies a one-prong economic effects test for deciding
whether to permit processing under customs control.
54 Other member States – for example, the
United Kingdom – identify a two-prong test. 55 A straightforward comparison between the French
guidance and the UK guidance demonstrates that Fr ance and the United Kingdom are administering
CCC Article 133 and CCCIR Articles 502(3) and 552 non-uniformly.

The United States has not made an argument with respect to the application of the French law.
There is no need to, as the French law and the UK law – both tools for the administration of the EC
law – are facially divergent. The application of each of those laws will thus necessarily diverge from
each other.

140. In paragraph 75 of the United States' Oral Statement at the second substantive meeting,
the United States submits that it is alleging a lack of uniformity on the European Communities'
part in the area of processing under custom s control. Please specifically identify the
acts/omissions on the part of European Communities that are alleged to result in a violation of
Article X:3(a) of the GATT 1994 in this area.

Article X:3(a) of the GATT 1994 requires the EC to administer certain laws in a uniform
manner. Among the laws that it must administ er in a uniform manner are CCC Article 133 and
CCCIR Articles 502(3) and 552, which pertain to processing under customs control. The EC law on
processing under customs control provides that with respect to certain goods, the customs authority
must undertake an economic assessment in order to decide whether to permit processing under
customs control.

There is some internal ambiguity within EC law on this issue. CCC Article 133 states that

52 EC Replies to First Panel Questions, para. 105.
53 EC Replies to First Panel Questions, para. 103.
54 Bulletin officiel des douanes no. 6527 at para. 83 (Aug. 31, 2001, as modified by BOD no. 6609,
Nov. 4, 2004) (Exhibit US-35).
55 HM Customs & Excise, Notice 237, "Processing Under Customs Control (PCC)," § 15 (June 2003)
(emphasis added) (Exhibit US-34).

authorization for processing under customs control shall be granted only where, inter alia , "the
necessary conditions for the procedure to help cr eate or maintain a processing activity in the
Community without adversely affecting the essentia l interests of Community producers of similar
goods (economic conditions) are fulfilled." Thus, this article sets out a two-part test: The proposed
processing activity (1) must "help create or maintain a processing activity in the Community," and (2)
must not "adversely affect[] the essential interests of Community producers of similar goods."

On the other hand, CCCIR Article 502(3) states, "For the processing under customs control
arrangements (Chapter 4), the examination shall establish whether the use of non-Community sources
enables processing activities to be created or maintained in the Co mmunity." CCCIR Article 502(3)
makes no reference to the second part of the economi c effects test described in CCC Article 133 – the
requirement that the proposed activity not "adversel y affect[] the essential interests of Community
producers of similar goods."

The EC asserts that CCCIR Article 502(3) "has to be considered as an abbreviated reference
to the requirements laid down in Article 133(e) CCC."
56 The EC gives no basis for this assertion,
which seems unusual given that, in general, the 680- page CCCIR gives a more detailed elaboration of
the provisions in the 77-page CCC and not a shorter paraphrase of the latter provisions. In any event,
the internal ambiguity within the substantive law it self evidently has given rise to non-uniformity of
administration. Thus, one EC customs author ity (in the United Kingdom) tells applicants for
authorization to engage in processing under customs control: "There are therefore two aspects to the
economic test and you must provide evidence to show both the impact upon your business and the
impact upon any other community producers of the imported goods." 57 This customs authority then
goes on to specify different types of evidence that applicants should provide to substantiate both
prongs of this economic test.

By contrast, another EC customs authority (in France) tells applicants for authorization to
engage in processing under customs control: "With re gard to processing under customs control, block
10 of the model request must be completed with info rmation showing that use of this customs regime
will create or maintain a processing activity in the Community. . . ."
58 It does not tell applicants that
the information they provide also must show th at the proposed processing activity will not adversely
affect the essential interests of Community producers of similar goods. Nor does it indicate types of
evidence that applicants should provide to satisfy such a second prong to the economic test.

The foregoing material difference between the evidence that one EC customs authority tells
applicants they must provide and the evidence that a different EC customs authority tells applicants
they must provide amounts to a non-uniformity in administration of the EC law providing for
processing under customs control. Not only has no EC institution (such as the Commission) stepped
in to reconcile this glaring divergence, but the EC de nies that there is a divergence at all, despite clear
documentary evidence to the contrary. The EC a sserts that even though the instructions one EC
customs authority gives to traders are materially different from the instructions that another EC
customs authority gives to traders, the differenc e should not be accorded any significance. The
United States fails to see how this difference can not be accorded significance. It is this divergence
that is inconsistent with the EC's obligation of uniform administration under GATT Article X:3(a),
with respect to processing under customs control.

57 HM Customs & Excise, Notice 237, "Processing Under Customs Control (PCC)," para. 15 (June
2003) (emphasis added) (Exhibit US-34).
58 Bulletin officiel des douanes no. 6527 at para. 83 (31 August 2001, as modified by BOD no. 6609,

141. In paragraph 215 of its Second Written Submission, the European Communities argues
that, with respect to its claim under Article X:3(b) of the GATT 1994, the United States does not
make any allegations regarding the scope of review demanded under Article X:3(b). Please
comment.

The EC's assertion that the United States does not make any allegations regarding the scope of
review demanded under Article X:3(b) is based on an analytical framework th at the EC has proposed
for examining that provision. Under that framewo rk, the EC suggests that Article X:3(b) can be
examined in terms of four issues: "the material scope of the control, its nature, its purpose and the
time requirement."
59 The United States has not used this same framework for examining the EC's
obligation under Article X:3(b). Therefore, th e comments the United States makes on the EC's
assertion with respect to scope of review are without prejudice to the US view of the appropriate
analytical framework under which to consider Article X:3(b).

Article X:3(b) requires the EC as a WTO Member to have in place certain "judicial, arbitral or
administrative tribunals or procedures." It then defines certain qualities that these tribunals or
procedures must have, as follows:

(1) They must provide for the "review and correction of administrative action relating to
customs matters";

(2) Such review and correction must be "prompt";

(3) The tribunals or procedures must be "i ndependent of the agencies entrusted with
administrative enforcement"; and

(4) The decisions of the tribunals or procedures must be

(a) "implemented by" and
(b) "govern the practice of"

the agencies entrusted with administrative enforcement "unless an appeal is lodged
with a court or tribunal of superior jurisd iction within the time prescribed for appeals
to be lodged by importers."

The US Article X:3(b) allegations in this disput e relate to the fourth of the above-enumerated
qualities that tribunals or procedures must have – in particular, the "govern the practice" requirement.
The tribunals or procedures for review and correct ion of administrative action relating to customs
matters that the EC provides – in particular, the c ourts in each of the EC's 25 member States – do not
have the fourth quality set out in Article X:3(b) because the decisions that they render do not govern
the practice of " the agencies entrusted with administrative en forcement." The decisions of any given
court govern the practice of only a subset of the ag encies entrusted with admi nistrative enforcement.
Therefore, the EC does not provide tribunals or pr ocedures that satisfy all of the requirements of
Article X:3(b). Not only is this inconsistent with the ordinary meaning of the text of Article X:3(b),
this conclusion is reinforced when that provision is read in its context as set forth in Article X:3(a).
To the extent that the decisions of review courts govern the practice of only certain agencies entrusted
with administrative enforcement, the EC's system of review undermines rather than complements the
uniform administration required by Article X:3(a). Since Article X:3(b) should be read in this
context, this is an additional reason to find that th e review courts provided by the EC fail to meet the
EC's obligation under Article X:3(b).
60

60 See generally US First Written Submission, paras. 134-139; US Second Written Submission,
paras. 102-109.

142. In light of the United States' argument in its reply to Panel Question No. 121 that the
obligation of prompt review and correction under Article X:3(b) of the GATT 1994 applies to
the first tribunal or procedure that a Me mber provides following the taking of an
administrative decision, if the Panel were to assu me for the sake of argument that the European
Communities is not obliged to establish a centr al review body(ies) with authority to make
decisions with EC-wide effect under Article X:3(b), please respond to the following:

(a) Does the United States consider that th e review by bodies in each of the EC
member States responsible for undertakin g first instance review of customs
decisions taken by member States authorities is in violation of Article X:3(b)?

(b) If so, please explain which aspect(s) of review by these bodies are in violation of
Article X:3(b), making reference to the relevant requirements of Article X:3(b)
and providing all relevant evidence in support.

(c) With regard to paragraph 86 of the Eu ropean Communities' Oral Statement at
the second substantive meeting, does the United States consider that review is
not "prompt" in violation of Article X:3(b) of the GATT 1994 with respect to the
following:

(i) first instance review by national courts of EC member States where
there has been no reference to the ECJ for a preliminary ruling; and/or

(ii) first instance review by national courts of EC member States where
there has been reference to the ECJ for a preliminary ruling.

The US complaint in this dispute is not about the review bodies provided by each of the EC's
member States. The United States has not argued, for example, that review at the member State level
breaches member States' obligations under GATT Article X:3(b). The thrust of the US claim is that
existing review at the member State level alone lacks features that would enable it to satisfy the EC's
Article X:3(b) obligation. In particular, a memb er State court issues decisions whose effects are
confined to the territory of that member State. No court within the territory of the EC that provides
prompt review and correction of customs administ rative actions issues decisions that govern the
practice of the agencies (as opposed to a subset of the agencies) entrusted with administrative
enforcement of EC customs law.

The EC asserts that the customs authorities lo cated in each of its 25 member States are EC
customs authorities. The EC concedes that the d ecisions of the courts in one member State do not
bind the authorities in other member States. Theref ore, the decisions of the courts in one member
State do not govern the practice of the EC agencies in the other 24 member St ates. This is a clear
breach of the plain language of Article X:3(b).

In discussing parts (a) and (b) of the Panel's question at the second substantive meeting with
the parties, the Panel explained that it was interested in knowing how the United States understands
the word "decisions" as used in Article X:3(b). In particular, the Panel asked whether the decisions
that must both be implemented by and govern the practice of the agencies entrusted with
administrative enforcement are simply the ultimate mandates or orders issued by the review courts, or
whether they encompass the courts' reasoning as we ll. Since, based on the discussion at the second
Panel meeting, the United States understands Question No. 142 to be addressed to this issue too, the
United States offers the following observations.

Article X:3(b) must be interpreted according to the ordinary meaning of its terms, in context,
and in light of the object and purpose of the GATT 1 994. The terms of Article X:3(b) plainly provide

that the decisions rendered by review tribuna ls or procedures must meet two independent
requirements: They must be implemented by the ag encies entrusted with administrative enforcement,
and they must govern the practice of those agen cies. These two independent requirements cannot
simply be merged into one, which is what the EC does in arguing that "govern the practice of" simply
means "implement in fair terms."61 For decisions to govern the practice of the agencies entrusted with
administrative enforcement, they must be given e ffect beyond simple implementation of the order in
the case at hand. 62 This is consistent with the context of Article X:3(b) – in particular, the uniform
administration requirement – as discussed above.

This then leads to the question of what "decisi ons" means. In other words: Which statements
by a review court must govern the practice of the agencies entrusted with ad ministrative enforcement
– simply the final mandate or order, or the mandate or order coupled with the court's reasons? At the
second Panel meeting, it was pointed out that in so me legal systems the term "decision" might be
understood as limited to the final mandate or order, while in others it might also encompass the court's
reasons. The United States submit s that whether "decisions" is understood to have a narrower or
broader meaning does not affect the "govern the practice" requirement. That is, even in a legal system
in which a decision is understood as pertaining only to the court's mandate or order and not to its
reasons, Article X:3(b) still requires that the decision both be implemented by and govern the practice
of the agencies entrusted with administrative enforcem ent. In fact, a Member need not have a legal
system that looks generally to judicial preceden t as a source of law in order to satisfy this
requirement.

A simple example will illustrate this point. Consider a case in which a review court has
overruled a Member's customs authority on a question of classification. The court finds that the
customs authority erred in classifying a good under h eading "X" and that it should have classified the
good under heading "Y." Implementation of the court's decision entails the customs authority revising
the classification of the particular merchandise in th e administrative action that gave rise to the court
review. It may be that in reaching its decision, th e court explained its reasons in a way that may have
broad applicability to other classification questions (o r even to other areas of law). In some legal
systems, the court's reasons might be accorded a cer tain weight, such that they should be deferred to
as precedent. However, the court's reasoning need not be treated as precedent in this sense in order
for its decision to govern the practice of the agencies entrusted with administrative enforcement. In
between the extremes of simple implementation in the case at hand and treatment as general precedent
is the possibility that the court's d ecision – its conclusion with respect to the correct classification of
the good at issue – will be applied to other cases involving identical goods. This is what the United
States understands by the concept of a decision govern ing the practice of the agencies entrusted with
administrative enforcement, as that concept is described in Article X:3(b).

Thus, in the foregoing illustration, if the court found that the customs authority had erred in
classifying the good at issue under heading "X" and that it should have classified it under heading
"Y," the "govern the practice" aspect of Article X:3( b) would require that in other cases the authority
follow the court's decision and classify identical goods under heading "Y," even if those goods are
imported by a party other than a party to the original court proceeding. It would not, however, require
that the court's decision be given a broader preceden tial effect, applicable not only to identical goods
but also to other goods and perhaps even to other areas of law. In the view of the United States, under
this understanding of the "govern the practice" aspect of Article X:3(b), it does not make a difference
whether a given Member's legal system treats a "d ecision" as consisting of only the court's order or
mandate, or including the court's reasons.

In sum, even if a Member's legal system treats a court's decision as consisting only of the
court's final mandate or order, GATT Article X:3(b) still requires that the decision govern the practice

62 See US Second Written Submission, paras. 104-106.

of the agencies entrusted with administrative enforcement and that this effect mean something distinct
from simple implementation of the decision. As discussed above, the decisions issued by review
courts in the EC fail to satisfy this requirement , as they govern the practice of only some of the
agencies entrusted with administrative enforcement in the EC.

With respect to part (c) of the Panel's questi on, the United States does not take a position in
this dispute as to whether review is "prompt" within the meaning of Article X:3(b) in the case of first
instance review by member State courts where th ere is no reference to the ECJ for a preliminary
ruling. This is not to say that the United States conc edes that such review is prompt. In this regard,
the United States recalls the observation of the EC's advisor, Mr. Vermulst, that "judicial review in
classification matters and, more in general, a ll customs issues is not only expensive and time-
consuming for affected parties, it also may lead to inconsistent judgments by national courts, at least
in first instance."
63

The United States has referred to the time it tak es for a question to be referred to and decided
by the ECJ in cases in which courts choose to exercise their discretion to refer to the ECJ.
64 T h e
United States has done so on the supposition that the EC J is the one tribunal that the EC provides that
appears to meet the other requirements of Article X: 3(b). In particular, unlike the courts of the EC
member States, the ECJ issues decisions that gov ern the practice of the agencies entrusted with
administrative enforcement of the EC's customs laws . Thus, if the ECJ were the tribunal maintained
by the EC to satisfy its Article X:3(b) obligation (a proposition that the EC rejects 65), then it would be
important to examine whether the review provided by that tribunal is prompt. In fact, it is not prompt.
Just to get a preliminary question put before the ECJ a trader may have to go through an
administrative appeals process (at which stage referral to the ECJ is not even possible),
66 followed by
multiple layers of court review, which itself may ta ke years. Even then, the trader has no assurance
that a question will get referred to the ECJ, even where it concerns a clear divergence among different
authorities' administration of the law. 67 If the question should happen to get referred to the ECJ, it
will take 19 to 20 months on average for the question to be decided. 68 The United States submits that
the time it takes for a question to get decided by th e ECJ following referral, c oupled with the time it
takes for a question to reach the ECJ in the firs t place, would fail to satisfy the requirement of
promptness if the EC were contending that revi ew by the ECJ satisfies its obligation under
Article X:3(b).69

143. In light of the United States' argument in its reply to Panel Question No. 121 that the
obligation of prompt review and correction under Article X:3(b) of the GATT 1994 applies to
the first tribunal or procedure that a Me mber provides following the taking of an

63 See US Second Oral Statement, para. 38 (quoting Vermulst, EC Customs Classification Rules, p. 21
(Exhibit US-72)).
64 See, e.g., US Second Written Submission, para. 109.
65 See, e.g., EC Second Oral Statement, para. 85.
66 See EC Replies to First Panel Questions, paras. 117 ("Most of the EC member States require the
trader to lodge a request for an administrative review before appealing to the relevant court."), 122 ("Decisions
to refer for a preliminary ruling are taken by the member States courts. . . . ) (emphasis added).
67 See US Second Oral Statement, paras. 35-38.
68 See EC Replies to First Panel Questions, para. 124.
69 See generally US Replies to First Panel Questions, paras. 152-154. As part (c) of the Panel’s
question refers to paragraph 86 of the EC’s Oral Statement at the second substantive meeting, the United States
makes an additional observation about that part of the EC’s statement. There, the EC compares the time it takes
for an appeal to make its way through member State cour t and ECJ review to the time it takes for an appeal in
the United States to be decided by the US Court of Inte rnational Trade ("CIT"). Th e EC provides an entirely
misleading description of the time it takes for a request for review to be decided in the United States. The
United States refers the Panel to paragraph 142 of the US Replies to the First Set of Panel Questions. Most
significantly, the EC simply ignores the extent to which the timing of review by the CIT is largely in the hands
of the party seeking review. See US Replies to First Panel Questions, paras. 150-151.

administrative decision and with respect to its claim under Article X:3(b) of the GATT 1994,
does the United States challenge review by the ECJ pursuant to Ar ticle 230 of the EC Treaty of
decisions taken by EC institutions? If so, please explain which aspect(s) of review by the ECJ
under Article 230 of the EC Treaty is in violatio n of Article X:3(b), making reference to the
relevant requirements of Article X:3(b) and providing all relevant evidence in support.

Article 230 of the EC Treaty pertains to review by the ECJ of the legality of acts adopted by
EC institutions, including the Commission and Counc il. In this dispute, the United States has not
raised any issue with respect to ECJ review pursuan t to Article 230. The US discussion of the role of
the ECJ has focused on the possibility of review pursuant to Article 234 of the EC Treaty – the
preliminary ruling mechanism. The EC asserts that through the preliminary ruling process, the ECJ
plays an important role in ensuring uniform administration of EC customs law.
70 The United States
has demonstrated that this is not the case. In pa rticular, in its Oral Statement at the second Panel
meeting, the United States showed that the cour ts in the various member States are under no
obligation to refer a question to the ECJ, even when they are confronted with evidence of an
undeniable divergence in the administration of EC customs laws.71

In its statement at the second Panel meeting, the EC stated that "if . . . a court in a[n] 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
court in another member State will or sh all refer to the EC Court of Justice."
72 These statements as to
what "will" or "shall" happen are without basis. And, as the illustrations the United States discussed
at the second Panel meeting make clear, the use of the preliminary ruling mechanism to which the EC
alludes does not happen, even in cases posing a stark divergence of administration among customs
authorities.

144. In its reply to Panel Question No. 74, th e European Communities submits that, although
the Community Customs Code does not contai n any provisions requiring that review by
national courts be prompt, there are a number of Community-wide measures (such as the
European Convention on Human Rights and the Charter of Fundamental Rights of the
European Union), which have the effect of requiring member States' tribunals to provide
prompt review. Please comment.

The United States notes that the EC's reply to Panel Question No. 74 is yet another example
of the EC making reference to a due-process type oblig ation of a very general nature, which it admits
is not operationalized in the customs context, as the source of fulfillment of its Article X:3 obligation.
The United States fails to see how such a general provision, not operationalized in the customs
context, can ensure that the tribunals the EC provi des for review of customs administrative actions in
fact provide prompt review. That said, in this dispute, the United States does not argue that the
review provided by particular member State tribuna ls is not prompt. Rather, these tribunals are not
tribunals that satisfy the requirements of Article X:3(b).

145. In its reply to Panel Question No. 36, the United States submits that first instance review
is undertaken by the Office of Regulations and Rulings, which is part of US Customs and
Border Protection. Please indicate whether or no t all review decisions issued by the Office of
Regulations and Rulings have effect throughout the United States.

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

70 See, e.g., EC First Written Submission, para. 185.
71 US Second Oral Statement, paras. 31, 35-38.

The first instance review by the Office of Regul ations and Rulings referred to in the US reply
to Panel Question No. 36 is known in the United St ates as "further review" of determinations on
protests. Decisions issued under the further re view procedure have the same force and effect as
advance ruling decisions. That is, they are binding as to the transactions described and cannot be
modified or revoked without going through the same modification process as is applicable to rulings.
The recipient of the further review decision would be able to employ it at any port throughout the
United States. Other persons whose goods are identi cal in all material respects would be able to
invoke the decision as authority for the disposition of their goods.

QUESTIONS FOR BOTH PARTIES

173. Making reference to the relevant terms of Article X:3(a) of the GATT 1994 and any
other supporting material, please explain whether or not the design and structure of a customs
administration system as a whole, or relevant co mponents thereof, can be considered as such in
determining whether or not Article X:3(a) has been violated for want of uniform
administration. Additionally or alternatively, is it necessary to have regard to specific instances
of non-uniform administration in order to demonstrate a violation of Article X:3(a)?

Article X:3(a) has some unusual aspects that n eed to be considered when looking at it under
the traditional "as such/as applied" framework. It is true that Article X:3(a) is concerned with
administration. However, one can conceive of a Member establishing a system of customs
administration that as such necessarily results in non-uniform administration in breach of
Article X:3(a) (as is the case in the EC). By way of analogy, in the Canada – Wheat Exports and
Grain Imports dispute, the Panel found the United States to have made "a per se challenge to the
[Canadian Wheat Board] Export Regime viewed in its entirety." 73 Canada did not object to the US
claim (concerning a breach of GATT Article XVII) on th is ground, and the Panel agreed to entertain
the US claim. 74 In fact, the EC as third party in that dispute argued that the GATT article at issue
could be breached by virtue of "structural shortcom ings" affecting the way the state trading enterprise
under consideration acts. 75 Analogously, in the present dispute the United States contends that
structural shortcomings in the EC's system of customs administration result in non-uniform
administration of EC customs law, in breach of Article X:3(a).

What is essential to an "as such" claim is th e obligation alleged to have been breached and
whether the object of the challenge necessarily results in a breach of that obligation. For the reasons
described in the US response to Question No. 126, the design and structure of the EC system of
customs administration necessarily result in non-uniform administration in breach of GATT
Article X:3(a).

Moreover, as also explained in response to Question No. 126, the US argument under
Article X:3(a) has not relied exclusively on dem onstrating that the design and structure of the EC
system of customs administration necessarily resu lts in non-uniform administration. The United
States also has supported its argument with evid ence that the EC and senior EC officials have
recognized an absence of uniform administration; examples of non-uniform administration; and
evidence practitioners who actually must work within the system understand administration to be non-
uniform.
76 The Panel asks whether it is necessary to ha ve regard to specific instances of non-uniform

73 Panel Report, Canada – Wheat Exports and Grain Imports, para. 6.28.
74 Panel Report, Canada – Wheat Exports and Grain Imports, para. 6.28.
75 Panel Report, Canada – Wheat Exports and Grain Imports , para. 4.601; see also id. , para. 4.603
("The European Communities also considers that Canada ’s explanation of the CWB’s institutional structure
does not provide for su fficient assurances that the CWB actually acts in accordance with the obligations under
Article XVII:1(a) and (b) GATT.").
76 See Reply to Question No. 126, supra.

administration in order to demonstrate a violation of Article X:3(a). While it is difficult to answer
that question in the abstract, it n eed not be answered in the cont ext of the present dispute, as the
support for the US claim under Article X:3(a) includes evidence of both the design and structure of
the EC system of customs administration and specific instances of non-uniform administration.

174. Please comment on the practical relevance, if any, of the following comment made by
the Panel in Argentina – Hides and Leather at paragraph 11.77 of its report: "Article X:3(a) [of
the GATT 1994] requires an examination of the real effect that a measure might have on
traders operating in the commercial world" (emphasis added).

In the context of Argentina – Hides and Leather , the reference to "the real effect on traders"
was in contradistinction to the suggestion that the obligation of uniform administration under
Article X:3(a) is breached only when a Member treats exports to one Member differently from exports
to another.
77 In determining whether Article X:3(a) has been breached, a panel should ask not
whether one WTO Member has been treated differe ntly from other WTO Members. It should ask
whether traders have been treated differently based, for example, on the part of the Member's territory
through which they import their goods. If the manner in which a Member administers its customs law
might encourage a trader to prefer importation through one region rather than another, this would be
probative of non-uniform administration, in breach of Article X:3(a).

Significantly, in the last sentence of paragraph 11.77 of its report, the Argentina – Hides and
Leather Panel noted that an examination of the real effect that a measure might have on traders "can
involve an examination of whether there is a possibl e impact on the competitive situation. . . ." In
other words, an examination of the real effect that a measure might have on traders is not confined to
an examination of whether traders in similar situa tions are required to pay different customs duties.
The concept of "a possible impact on the competitiv e situation" encompasses more than just liability
for customs duties. Notably, it includes the eff ect that non-uniform administration has of causing
traders to divert shipments from one region of a Member's territory to another region due, for
example, to relative certainty as to favourable classi fication or valuation, less risk of liability for
penalties, or likelihood of receiving authorization to engage in a specialized activity (e.g., processing
under customs control).
78

175. In paragraph 11.77 of the report in Argentina – Hides and Leather , the Panel stated that
"trade damage" need not be demonstrated in order to prove a violation of Article X:3(a). Please
comment.

To prove a violation of Article X:3(a), all the Un ited States is required to show is that the EC
administers its customs law in a non-uniform manner. The United States does not need to show harm
to the United States or to particular traders to s upport its Article X:3(a) claim. In particular, the
United States is under no obligatio n to show that particular instances of non-uniform administration
caused importers to pay higher tariffs than they would have paid under a system of uniform
administration. It may well be that non-uniform admi nistration causes traders to divert their trade in
ways that would make no sense where uniform administration prevailed, precisely to avoid having to
pay higher tariffs. As the United States discuss ed in its opening statement at the second Panel
meeting, this has been the case with respect to imports of LCD monitors into the EC. 79 Despite the
EC's protestations to the contrary, 80 whether such response to non-uniform administration yielded a

77 Panel Report, Argentina – Hides and Leather, para. 11.76.
78 See Replies to Questions 135, 137(b), and 137(d), supra.
79 See US Second Opening Statement, para. 52 (discussing EICTA September 2005 Letter, p. 1
(Exhibit US-75)).
80 See, e.g., EC Second Oral Statement, para. 54 ("the EC also wonders wherein precisely would lie the
nullification or impairment of benefits to the US"); EC Second Written Submission, para. 35 ("it is for the US,

particular measure of trade damage is not relevant to establishing an Article X:3(a) breach.

176. In paragraph 15 of its Oral Statement at the second substantive meeting, the European
Communities notes that it invokes Article XXIV: 12 of the GATT 1994 to support the view that
GATT commitments, including Article X:3(a) of the GATT, were undertaken by Contracting
Parties in full respect of their constitutional syst ems. What significance, if any, should be
attached to the fact that a customs union akin to the European Communities did not exist at the
time the text of the GATT was concluded in 1947?

The EC's statement at paragraph 15 of its S econd Oral Statement, and similar statements
elsewhere,
81 wrongly suggest that Article X:3(a) of the GATT 1994 ought to be interpreted in light of
the constitutional structures of individual Members, including the EC. By the EC's logic, the Panel
should start with the EC's constitutional structure as a fixed point and interpret Article X:3(a) around
that fixed point. Any interpretation that might result in the EC having to change its system of customs
administration and review, according to this argument, must be rejected.

As the United States explained in its Closing St atement at the second Panel meeting, the EC
has it exactly backwards. 82 It is not the EC's constitutional structure that should inform the meaning
of Article X:3(a); rather, it is the ordinary meaning of the terms of Article X:3(a) in context and in
light of the object and purpose of the GATT 1994 that should inform the EC's obligation under that
article.
83 Article XXIV:12 does not change this. 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. Thus, it provides that "[e]ach
Member is fully responsible under GATT 1994 for the observance of all provisions of GATT 1994."84

Whether or not a customs union "akin to" the EC existed when the GATT was concluded in
1947 is therefore not relevant to the analys is of the EC's obligations under Article X. 85 What is
important is that Article X:3(a) is drafted in a way that makes no special accommodation for a
Contracting Party with multiple, independent, regionally limited customs authorities and no
procedures or institutions to ensure that those va rious authorities administer the Contracting Party's
customs laws uniformly. Nor does Article XXIV: 12 make any such accommodation. As the United
States has explained, Article XXIV:12 is not a general excuse from or limitation on the applicability
of Article X:3(a).
86

When the EC joined the WTO in 1994 it accepted the text of, and the obligations under, the
GATT. There is nothing in the GATT 1994 or the WTO Agreement that suggests that the EC has
different rights or obligations from any other Me mber, nor is there anything in the WTO Agreement
that suggests that the fact of the EC's having beco me a Member affects the meaning of any provision
of the GATT 1994. Indeed, if the logic of the EC's argument were accepted here, there is a very
serious question as to where it would end. That is , what other GATT obligations would have to be
specially interpreted in light of the EC's (or any other Member's) constitutional structure?

as the complaining party, to show that variations of administrative practice, even where they existed, have a
significant impact on traders").
81 See, e.g. , EC Second Oral Statement, para. 12; EC Se cond Closing Statement, para. 3; EC First
82 See US Second Closing Statement, paras. 12-16.
83 Where the negotiators of the WTO agreements wa nted to take Members’ constitutional structures
into account, they knew how to do so. See, e.g. , General Agreement on Trade in Services , Art. VI:2(b);
Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 , Art. 4.2; see
also US Second Written Submission, para. 16 (discussing GATS, Art. VI:2(b)).
84 See US Second Written Submission, paras. 12-17.
85 The United States notes that it is not certain wh at precisely the Panel means by a customs union
"akin to" to the EC.
86 See US Replies to First Panel Questions, para. 188.

There is no basis for arguing that an interpretati on of Article X:3(a) that gives its terms their
ordinary meaning in context and in light of the GATT's object and purpose should be rejected because
that interpretation might require the EC to make ch anges to its system of customs administration and
review of customs decisions. The text of Article X did not change in 1994 when the EC became a
WTO Member. Rather than assume that the Contracting Parties' acceptance of the EC as a WTO
Member constituted acceptance that the EC's syst em of customs administration conformed with
Article X:3(a), the Panel should assume that the EC chose to become a Member of the WTO aware of
the obligations it would have under GATT Article X: 3(a) and committed to conform its system of
customs administration accordingly.

ANNEX B-2

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

(7 December 2005)

QUESTIONS FOR THE EUROPEAN COMMUNITIES

146. In its reply to Panel Question No. 42, the European Communities argues that, as a
matter of EC law, both the institutions of the European Communities and the authorities of
the member States, each of them acting within their respective spheres of competence, are
responsible for the administration of: (a) Co uncil Regulation (EEC ) No. 2913/92 of 12
October 1992; (b) Commission Regulation (EEC) No. 2454/93 of 2 July 1993; and (c) the
Integrated Tariff of the European Communiti es established by Council Regulation (EEC)
2658/87 of 23 July 1987. As a matter of EC law, please identify whether and the extent to
which the European Communities and/or the member States are responsible for the
enactment
1 and the administration of, inter alia, la ws and regulations in the following areas
of customs administration:

(a) Tariff classification;
(b) Customs valuation; and
(c) Customs procedures (particularly, audit following release for circulation
2;
penalties for infringements of EC customs legislation; processing under
customs control; and local clearance procedures).
If the European Communities shares competence with the member States in any one or more
of the above areas of customs administration, please clearly explain the delineation between
their respective competences in the relevant areas.
In the EC, customs law is to a very large ex tent regulated by EC law, and notably the
Common Customs Tariff, the Customs Code, and the Implementing Regulation. As the EC has
explained in response to the Panel's Question No . 78, member States may act to supplement EC
law only if the matter is not dealt with in the releva nt EC legislation, or if they are authorized by
EC legislation to do so.3
In the area of customs, there are therefor e only limited areas in which member States can
still legislate. member States legislation covers in particular organizational matters, such as the
establishment and designation of the member Stat es' authorities competent for the administration
of customs laws. Members States' law also determines the penalties applicable for violations of EC
customs law. Finally, member States' law may be relevant where EC law does not address a
specific question, e.g. the rules for the service of documents. Another example would be document
retention requirements, where Article 16 (1) CCC pr ovides that documents sh all be retained for a

1 By "enactment", we mean the en actment of laws and regulations in addition to and/or
supplementing the Community Customs Code, the Implementing Regulation and the Taric.
2 Assuming, for the sake of argument, that such a udits can be classified as a customs procedure for
the purposes of this dispute.
3 EC Reply to Panel Question No. 78, para. 145.

minimum period of three years, but leaves memb er States the possibility to stipulate longer
periods.
4
As the EC has already explained, as in most other areas of EC law, the administration of
EC customs law is primarily the r esponsibility of the EC member States. 5 The European
institutions, and notably the European Commission, administer EC customs law only in a limited
number of cases. However, the European Commission, as the guardian of the EC treaty, supervises
the correct implementation of EC customs law. 6 A specific forum to ensure coordination between
the member States and the Commission is provided by the Customs Code Committee.7
These general principles also apply with resp ect to the specific areas mentioned in the
Panel's question.8 The administration of tariff classification rules is in principle the responsibility
of the member States. However, the EC Commission disposes of a number of tools 9 to ensure a
uniform administration, including classification regulations, explanatory notes, but also decisions
requiring the revocation of BTI. The Commission is al so in charge of the running of the EBTI data
base. Moreover, the Customs Code Committee may examine any question of tariff classification,
and adopt conclusions on such issues.
As regards customs valuation, the administ ration of valuation rules is equally the
responsibility of the member States' authorities. However, the European Commission monitors the
correct application of customs valuation rul es, and the Customs Code Committee equally may
adopt guidelines and conclusions on questions of customs valuation wherever necessary.10
The conduct of customs audits and the administration of penalty provisions are equally the
responsibility of the member States authorities. As regards audits, the EC notes, however, that the
European Commission may also, on the basis of Regulation 1150/2000 (Exhibit EC-45) require
member States to carry out inspections, with which the Commission shall be associated upon
request, or itself carry out inspection measures.
Finally, as regards processing under customs control and the local clearance procedure, the
administration of these procedures is in principl e the responsibility of the member States. As
regards the application of the economic conditio ns for processing under customs control, the EC
has, however, already explained that in certain cases, the examination of these conditions takes
place at the Community level.11
147. Please explain in practical terms how Arti cle 10 of the EC Treaty is enforced and by
whom in the following areas of customs administration:
(a) Tariff classification;
(b) Customs valuation; and

6 EC First Written Submission, para. 79. For the tools available to the European Commission in this
regard, the EC refers to the description in EC First Written Submission, part. III A and B.
7 EC First Written Submission, para. 80 et seq.
8 Cf. EC First Written Submission, para. 88 et seq.
9 The EC notes that certain of these tools, notably classification regulations, are themselves
measures of general application, and do not therefore constitute "administration".
10 EC First Written Submission, para. 125 et seq.
11 Cf. EC First Written Submission, para. 137 – 138.

(c) Customs procedures (particularly, audit following release for circulation
12;
penalties for infringements of EC customs legislation; processing under
customs control; and local clearance procedures).
Please provide evidence of enforcement of Article 10 of the EC Treaty in the abovementioned
areas of customs administration, such as ECJ judgements in which Article 10 EC Treaty has
been invoked
As the EC has explained, the duty of coopera tion laid down in Article 10 EC is legally
binding and directly applicable in all member States. Accordingly, it must be respected by member
States' authorities in the administration of Community customs law.
The duty of cooperation inspires the interpreta tion of Community law by EC Courts, and
may be invoked in disputes before member St ates tribunals. If a question arises regarding the
application of Community law, including the duty of cooperation, this question can – or, in the
case of a tribunal of last instance, must – be referred to the Court of Justice. Finally, where a
member States infringes the duty of cooperation, this constitutes an infringement of the EC Treaty,
against which the European Commission can br ing infringement proceedings pursuant to
Article 226 EC.
In the area of classification, the ECJ relied on Article 10 in two recent cases following
references for a preliminary ruling. In Commissioners of Customs & Excise v. SmithKline
Beecham
13, Article 10 formed the central justification in the ECJ's decision that a domestic United
Kingdom court was obliged to undo the unlawful consequences of a breach of Community law. In
that case, the customs authority had classified ni cotine patches. On appeal, the High Court of
Justice of England and Wales, Chancery division, disagreed with the classification and referred the
question to the European Court of Justice. Examining principles of law and the factual
characteristics of the product, the ECJ agreed that the product was incorrectly classified. In light
of this incorrect classification, the Court found th at the national court was obliged to remedy the
non-compliance with Community law. In particular, it found: 14
Established case-law makes it clear that, in keeping with the
principle of the duty to cooperate in good faith laid down in
Article 10 EC, the member States are obliged to nullify the
unlawful consequences of a breach of Community law. The
obligation is incumbent on all the authorities of the member
States concerned within the sphere of their competence. It is thus
for the competent authorities and the courts of a member State to
take, within the sphere of their competence, all the measures,
general or particular, necessary to remedy the non-compliance of
incorrect binding tariff information. Such particular measures
include, more particularly, the annulment of the incorrect binding
tariff information and the adoption of new information in keeping
with Community law.
Kühne & Heitz v. Productschap voor Pluimvee en Eieren
15 involved a case where a trader
had been required to reimburse certain export re funds following a determination by the national
court that its product did not fall within the goods subject to the refunds. Later, the European

12 Assuming, for the sake of argument, that such audits can be classified as a customs procedure for
the purposes of this dispute.
13 Case C-206/03, SmithKline Beecham, Order of the Court of 19 January 2005 (not yet reported)
(Exhibit EC-142).
14 Id., para. 51 (citations omitted).
15 Case C-453/00, Kühne & Heitz, [2004] ECR I-837 (Exhibit EC-61).

Court of Justice made a contrary preliminary ru ling determination on the same issue. Following
this decision, the trader sought to obtain a sum e quivalent to the amount of refunds it would have
obtained if its product would have been classified in accordance with the ECJ judgment. The
Dutch court sought a preliminary ruling on the issue of whether, in light of the concept of legal
certainty, the court was indeed obliged to reopen the case. In answering the preliminary reference
question, the ECJ that in the light of the circum stances of the particular case, the principle of
cooperation arising from Article 10 EC obliged th e administrative body concerned "to review the
decision in order to take account of the interpre tation of the relevant provision of Community law
given in the meantime by the Court."
16
Article 10 EC has also been the basis of th e case law of the Court of Justice on penalties
for violations of Community law, including customs laws. 17 José Teodoro de Andrade v. Director
da Alfândega de Leixoes 18 addressed Portuguese penalties for failure to clear goods through
customs within the statutory time li mit. In that case, Mr. de Andrade brought an action before the
Tribunal Fiscal Aduaneiro do Porto claiming inter alia that Portuguese law, which provided for
either sale of the goods or subjecting them to an ad valorem surcharge for failure to comply was
customs clearance procedures within the statutory time limit, was contrary to the concept of
proportionality. In coming to its decision that the provisions for sale or ad valorem penalty did
not infringe the principle, the Court noted that Community legislation required the customs
authorities to take any measures necessary, includin g sale, in order to regularize the situation of
goods. With this in mind, the Court stated:
It is settled case-law, confirmed in paragraph 20 of Case C-36/94
Siesse v Director da Alfândega de Alcântara [1995] ECR I-3573,
that where Community legislation does not specifically provide
for any penalty for an infringement or refers for that purpose to
national legislation, Article 5 of the EC Treaty (now Article 10
EC) requires the member States to take all the measures necessary
to guarantee the application and effectiveness of Community law.
For that purpose, while the choice of penalty remains within their
discretion, they must ensure in particular that infringements of
Community law are penalized unde r conditions, both procedural
and substantive, which are analogous to those applicable to
infringements of national law of a similar nature and importance
and which, in any event, make the penalty effective, proportionate
and dissuasive. As regards customs offences, the Court has
pointed out that in the absence of harmonization of the
Community legislation in that field, the member States are
empowered to choose the penalties which seem appropriate to
them. They must, however, exercise that power in accordance
with Community law and its genera l principles, and consequently
with the principle of proportionality (see Siesse, paragraph 21).
19
Several other cases also address penalties in li ght of Article 10 similarly. These cases
include Hannle + Hofstetter Internationale Spedition v. Finanzlandesdirektion für Wien,
Niederosterreich und Burgenland20 and Siesse v. Director da Alfândega de Alcântara.21

16 Id., Para. 27.
17 Cf. already EC First Written Submission, para. 144 et seq. It is understood that this case law
concerns legislative measures of the member States.
18 Case C-213/99, de Andrade, [2000] ECR I-11083 (Exhibit US-31).
19 Id., paras. 19-20.
20 Case C-91/02, Hannl + Hofstetter, Judgment of 16 October 2003 (not yet reported) (Exhibit EC-
143).
21 Case C-36/94, Siesse, [1995] ECR I-3573, para. 20 (Exhibit EC-40).

In Commission v. Greece,
22 two consignments of maize exported from Greece to Belgium
in May 1986 in fact comprised maize imported from Yugoslavia, although they had been officially
declared by the Greek authorities as comprising Greek maize. For that reason the agricultural levy
payable to Community own resources had not been collected. According to the Commission that
fraud had been committed with the complicity of certain Greek civil servants. The Commission
brought infringement proceedings, arguing inter alia that Greece was, under Article 5 (now 10)
EC, obliged to bring proceedings against the perp etrators of the fraud and those who abetted it.
The Court upheld the Commission's submission:23
It should be observed that where Community legislation does not
specifically provide any penalty fo r an infringement or refers for
that purpose to national laws, regulations and administrative
provisions, Article 5 of the Treaty requires the member States to
take all measures necessary to guarantee the application and
effectiveness of Community law.
For that purpose, whilst the choi ce of penalties remains within
their discretion, they must ensure in particular that infringements
of Community law are penalized under conditions, both
procedural and substantive, which are analogous to those
applicable to infringements of national law of a similar nature and
importance and which, in any even t, make the penalty effective,
proportionate and dissuasive .
Moreover, the national authorities must proceed, with respect to
infringements of Community law, with the same diligence as that
which they bring to bear in implementing corresponding national
laws.
This overview of case law from the field of customs law
24 shows that Article 10 EC is
fully operational and can be applied by the ECJ and national tribunals. As the EC has already
explained, that there are not hundreds of court cases related to Article 10 EC in the area of customs
does not mean that the duty of cooperation is not enforced, but rather that it is generally
respected.25
148. In its reply to Panel Question No. 58 , the European Communities submits that, under
the Rules of Procedure of the Customs Code Committee, there is no specific provision
bestowing the Commission with the power to ask member States to provide specific
information. The European Communities argu es that, however, member States are bound
by the duty of cooperation under Article 10 of the EC Treaty, which implies a duty of
facilitating the Commission's tasks as guardian of the Treaty, including a duty to provide all
information which is necessary for the Commi ssion in order to ascertain whether member
States have applied Community law correctly. Please provide evidence of instances when
Article 10 of the EC Treaty has been in voked to require member States to provide
information in the area of customs administration.

22 Case 68/88, Commission v. Greece, 1989 [ECR] 2965 (Exhibit EC-38).
23 Id., para. 23 – 24.
24 In accordance with the Panel’s Question, the ex amples given in the present question are limited
to the field of customs law. Outsid e the area of customs law, there ar e numerous other cases in which the
ECJ has applied Article 10 EC.

As the EC has explained in its reply to Question No. No. 58, member States are under a
duty to facilitate the Commission's tasks as gua rdian of the treaty, which includes also the
provision of all information which might be requested by the Commission.
26
However, as the EC has explained,27 there is no problem of transmission of information by
the customs authorities of the member States to the Commission. Where a subject matter is dealt
with in the Customs Code Committee, it is freque ntly the member States of their own initiative
which have raised the matter and which will provi de information. Of course, the Commission also
frequently requests information from the member Stat es' customs authorities, either bilaterally or
through the Customs Code Committee. member Stat es' authorities provide this information as a
matter of course. Since there have been so far no failures to provide information when requested,
the European Commission has not had a reason to specifically invoke Article 10 of the EC Treaty
in this respect.
149. In its reply to Panel Question No. 79, the European Communities submits that
obligations of mutual consultation between customs authorities of member States may arise
in specific situations. Please provide details of all such obligations and the circumstances
when they apply in the following areas of customs administration:
(a) Tariff classification;
(b) Customs valuation; and
(c) Customs procedures (particularly, audit following release for circulation
28;
penalties for infringements of EC customs legislation; processing under
customs control; and local clearance procedures).
In replying to this question, the scope of the phrase "obligations of mutual consultation
between customs authorities of the member States" is taken to also cover practices such as the
provision or exchange of information, as well as consultation for the purposes of prior agreement
in relation to issuance of an authorization.
The EC would like to recall that, at the highest level of EC law, 29 there is a duty of
cooperation between EC member States. More c oncretely, mutual consultation between member
States may also follow from specific provisions of EC customs law. In the EC reply to the Panel's
Question No. 79, five such examples have already been provided in that response.
As regards tariff classification, the EC refers its replies to the Panel's Questions No. 55
and 56, in which it has explained the duty of coop eration of member States in the context of the
issuance of BTI.
In the area of valuation, in certain situati ons the valuation declared and accepted in one
member State has to be communicated to any and all other member States involved in the
transactions. This applies in certain cases of goods held under custom s warehousing, inward
processing, outward processing or goods imported for processing within the EC. Similarly, the
customs value of goods imported for temporary impor tation or end-use has to be notified to other
administrations.
30 There is also a best practice guide whic h deals with the exchange of information

26 EC Reply to Panel Question No. 58, para. 79.
27 EC Reply to Panel Question No. 58, para. 80.
28 Assuming, for the sake of argument, that such audits can be classified as a customs procedure for
the purposes of this dispute.
29 Member States are bound by the duty of cooperation (Article 10 EC), which includes an
obligation to further contribute to the uniform application of Community law.
30 Articles 296 and 523, respectively, of the Implementing Regulation.

(i.e. consultation) between member States in re lation to valuation advice, rulings and audit
(Exhibit EC-144).
As regards post-import audit, the obligation to consult other member States depends on the
specific issue involved, because post import audit can give rise to questions on any issue or aspect
of customs rules and customs controls.
With respect to the local clearance procedure and processing under customs control, where
such a procedure involves more than one member State, exchange of information is practiced.
Furthermore, Article 250 of the Customs Code prov ides that where a customs procedure is used in
several member States, the decisions, identifi cation measures and documents issued by one
member State shall have the same legal effects in other member States as such decisions, measures
taken and documents issued by each of those member States. Having provided for the legal effects
in other member States of measures taken, findings made, etc. by one member State, this provision
is therefore relevant to further illustrate that mutual consultation between member States can arise
in the context of many aspects of customs management.
Finally, a general framework for mutual cooperation and assistance between member
States' customs authorities is provided by Regulation 515/97 (Exhibit EC-42).
31 Under this
Regulation, member States have the general right to request relevant information from other
member States, on either persons or transac tions involving imports of goods, from other
administrations. member States also have the obligation to provide assistance (including
communication of all information in their possession ) where they consider it useful for ensuring
compliance with customs legislation, or where breaches (actual or potential) of customs legislation
arise. These general obligations, of course, can cover all areas of customs work.
150. Please explain what the Customs Informatio n System is and how it works in practice
(established pursuant to Council Regulation (EC) 515/97 of 13 March 1997 on mutual
assistance between the administrative authorities of the member States and cooperation
between the latter and the Commission to en sure the correct application of the law on
customs and agricultural matters (Exhibit EC-42)).
Customs authorities can face situations requiring immediate action in another EC member
State. For this reason, national authorities need to have a mechanism for communication and co-
operation already in place. The Customs Informati on System (CIS) has been put in place in order
to create such a fast communication interface.
The CIS consists of two databases: 1) " CIS 1
st pillar", which deals with infringements of
the Community law on customs and agricultural matters and 2 ) "CIS 3rd pillar", which deals with
serious contraventions related to customs matters (criminal law).
In each database, the main categories of information collected relate to:
- commodities
- means of transport
- businesses
- persons
- fraud trends
- availability expertise
- retained, seized, confiscated consignments.

Two search engines are available to search the database:

31 EC First Written Submission, para. 150 et seq.

- the standard search tool gives access to the whole data related to a case;
- a simplified search tool (Border Query Tool) provides, on the basis of
predetermined criteria, a quick access to useful elements on control purpose.

The CIS is managed by the European Anti-Fr aud Office (OLAF). In practice, the above
information is delivered through the AFIS (An ti-Fraud Information System) terminals in the
member States and direct access to data is r eserved exclusively for the national authorities
designated by each member State such as the cu stoms administrations. After having been checked
by the competent authority of each member State, the information uploaded in the database is sent
to the Commission for storage purposes.
151. What is the European Communities' definition of the term "uniform" in
Article X:3(a)?
The EC agrees with the definition referred to by the Panel in Argentina – Hides, according
to which "uniform" can be defined as "of one unchang ing form, character, or kind; that is or stays
the same in different places or circumstances, or at different times".
32
The EC would recall, however, that whether "a dministration" can be regarded as uniform
cannot be evaluated on the basis of individual instances of administration, but requires
demonstration of a pattern of non-uniform administration. 33 Moreover, identical standards must
apply to the requirement of uniformity over time, across territory, or as between individuals.34
152. In its reply to Panel Question No. 110, the European Communities submits that the
granting of discretion in a particular legisl ative provision may be necessary where complex
factual aspects have to be taken into account or where conflicting interests need to be
weighed and balanced. The European Communi ties further submits that, typically, the
exercise of such discretion will be limited by law and will be governed by certain principles,
such as the principle of non-discrimination.
 (a) Please explain the legal basis for the application of the principle of "non-
discrimination" in the context of the application of discretionary provisions
in the area of customs administration by member State customs authorities.
The main general reference in the EC Treaty to the principle of non-discrimination is
contained in Article 12 prohibiting discrimination on grounds of nationality. However, the Court
of Justice has declared it to be a fundamental pr inciple of law, whereby comparable situations
must not be treated differently and different situatio ns must not be treated in the same way, unless
such treatment is objectively justified.
35
(b) Which principles other than the principle of "non-discrimination" apply in
the context of the application of di scretionary provisions in the area of
customs administration by member State customs authorities?
Generally speaking, EC customs law is very detailed, and does not leave a large measure
of discretion to member States' customs authorities. To the extent that discretion exists, general

32 Panel Report, Argentina – Hides and Leather, para. 11.80.
33 EC First Written Submission, para. 63 et seq.
34 Cf. Panel Report, Argentina – Hides and Leather, para. 11.83.
35 See, inter alia , Case C-150/94, United Kingdom/Council , [1998] ECR I-7235, para. 97-101
(Exhibit EC-145), and case T-13/99, Pfizer Animal Health, [2002] ECR II-3305, para. 271-272 (Exhibit EC-
146).

principles of law most likely to be applied in customs administration by member State authorities
are proportionality, protection of legitimate expectations and effectiveness.
The principle of proportionality requires that measures adopted do not exceed the limits of
what is appropriate and necessary in order to attain the objective legitimately pursued by the
measure in question and that, when there is a choice between several appropriate measures,
recourse must be had to the least onerous.
36
The principle of protection of legitimate expect ations, which is linked to the principles of
good faith and legal security, extends to any individual who is in a situation in which it is apparent
that the administration has led him to entertain reasonable expectations by giving him precise
assurances.
37
The principle of effectiveness prohibits member States from taking measures which would
inhibit the implementation of EC law and requires them to give adequate effect to EC law in cases
arising before them (see, above, Commissioners of Customs & Excise v. SmithKline Beecham ,
para. 53).38
153. In its reply to Panel Question No. 94, the European Communities submits that
Article X:3(a) of the GATT 1994 is primarily concerned with the administrative outcomes
affecting traders. Can this statement be reconciled with the submission made by the
European Communities in its replies to Panel Question Nos. 47 and 49 that individual
decisions cannot be challenged as such under Article X:3(a)? If so, please explain how.
The two statements are fully compatible. In its response to the Panel's Question No. 9, the
EC intended to clarify that Article X:3 (a ) GATT does not concern laws, regulations, and
procedures as such, but only their administration. In response to the Panel's Question No. 47 and
49, the EC clarified that whether administration is in conformity with Article X:3 (a) GATT can be
evaluated only on the basis of a pattern of administration, not on the basis of individual instances
of administration.
154. In its reply to Panel Question No. 90, the European Communities argues that, in
essence, the Panel in Argentina – Hides and Leather said that, if a particular law or
regulation mandates administrative behaviour th at is, inter alia, non-uniform, the law itself
constitutes a violation of Article X:3(a) of the GATT 1994. Does this reasoning mean that, in
the context of this case, Article X:3(a) of the GATT 1994 will have been violated if EC law on
customs administration can be read, in essence, to mandate non-uniform administration? If
not, please explain the relevance, if any, of the abovementioned comments by the Panel in
Argentina – Hides and Leather to the present case.
Article X:3 (a) GATT is concerned with the administration of laws and regulations, not
with those laws and regulations themselves. However, the EC agrees that where a law or
regulation "mandates" a form of administration that is not uniform, reasonable, or partial, such law
or regulation could be regarded per se as a viola tion of Article X:3 (a) GATT. A law or regulation
will be mandatory in this sense if it does not leav e the authorities any possibility to administer the
laws or regulations in question in a uniform, impartial, or reasonable manner.
39

36 See, inter alia, Pfizer Animal Health , referred to in the previous footnote, paras. 411-412, and
Case C-192/01, Commission/Denmark, [2003] ECR I-9693, para. 45 (Exhibit EC-147).
37 See, inter alia, Case T-65/98, Van den Bergh Foods Ltd , [2003], not yet in the official reports,
para. 192, (Exhibit EC-148).
38 Para. 10 above.
39 This was the case in Argentina – Hides and Leather; cf. EC Second Oral Statement, para. 30.

In the EC, no law mandates a non-uniform administration of EC customs law. On the
contrary, EC laws ensure the uniform administra tion of EC customs law. The burden of proof for
establishing the contrary rests on the US. For th e question whether the EC system of customs
administration can be considered "as such" in determining whether Article X:3 (a) GATT has been
violated, the EC refers to its reply to the Panel's Question No. 173.
155. In paragraph 432 of its first written submission, the European Communities submits
that penalty laws are governed by fundamental rules of due process to which the disciplines
of Article X:3(a) of the GATT 1994 are ill-adapte d. Can this argument be reconciled with
the submission made by the European Commu nities in paragraph 231 of its first written
submission to the effect that Article X:3(a) only lays down minimum standards of
transparency and procedural fairness? If so, please explain how.
The EC believes that the two statements are fu lly compatible. The first statement concerns
the scope of Article X:1 GATT, whereas the second statement concerns the interpretation of the
substantive requirements of Article X:3 (a) GATT. The fact that Article X:3 (a) GATT contains
minimum standards of transparency and fairness do es not mean that this provision must apply to
penalties. Rather, this depends on whether penalty provisions are among the laws referred to in
Article X:1 GATT, which, as the EC has shown, is not the case.
40
Moreover, the EC maintains that the substantive standards of Article X:3 (a) GATT are ill
adapted to the application of penalties. This is particularly obvious with regard to the issue of
uniformity. Sanctions, and in particular criminal sanctions, involve an assessment of individual
guilt and conduct, including predictions regard ing rehabilitation and integration. A further
important consideration is proportionality. These c onsiderations are entirely different from those
regarding the uniform application of laws concerning classification or valuation of goods.
This finds further confirmation in the fact that sanctions are specifically addressed in
Article VIII:3 GATT, which imposes certain standa rds of proportionality with respects to the
imposition of penalties. If Article X:1 GATT was in tended to apply to penalties, then it would
have been natural to include a specific reference to them in this provision.
156. In its reply to Panel Question No. 48, the European Communities submits that the
obligation of uniform administration under Article X:3(a) of the GATT 1994 means that the
trader should have "reasonable assurance" as to the way in which the WTO Member in
question will administer its laws and regulations. Please elaborate in practical terms what is
meant by the reference to "reasonable assurance".
Reasonable assurance means that the treatment a trader can expect from the authorities of
such member should be reasonably predictable. This is in line with the requirements of the Panel
in Argentina – Hides , where the Panel held that uniform administration requires that Members
ensure that their laws are app lied consistently and predictably. 41 As the EC has also remarked,
whether the treatment to be expected from the cu stoms authorities is predictable in this sense must
be evaluated not on the basis of individual instances of administration, but taking into account the
overall pattern of administration.
157. In its reply to Panel Question No. 78 , the European Communities submits that a
member State may only act to supplement provi sions contained in a Community regulation
if it is explicitly authorized to do so or if a specific issue is not covered by Community
legislation. Does this mean that member States are prohibited from taking any action –

40 EC Second Written Submission, para. 190 et seq. ; Second Oral Statement, para. 66 et seq.
41 Panel Report, Argentina – Hides and Leather, para. 11.83.

whether binding or non-binding – in cases where a Community regulation does not explicitly
authorize the member State to do so or if a specific issue is covered by Community
legislation? If not, please explain what action member States are authorized to take.
As regards binding legislation, the EC can confirm that member States can only act to
supplement provisions contained in a Community regulation if they are authorized to do
42 so or if
a specific issue is not covered by Community legislation.
As regards non-binding measures, member States' authorities are not prevented from
issuing administrative guidelines or other non-binding documents for administrative purposes.
However, as the EC has already explained, and as the Court of Justice has confirmed on several
occasions, such measures cannot derogate in any way from the application of Community law by
the customs authorities and the courts.
43
158. In paragraph 68 of its Second Wri tten Submission, the European Communities
submits that it doubts that Article X:3(a) of the GATT 1994 requires the establishment of a
central customs agency because this could not be regarded as a "reasonable measure" within
the meaning of Article XXIV:12 of the GATT 1994 . Does this mean that the European
Communities considers that one of the effects of Article XXIV:12 when read with
Article X:3(a) is that Members are only requi red to take "reasonabl e measures" to fulfil
their obligations under the latter provision? If so, please provide support for such a view,
making reference to the terms of Articles X:3(a) and XXIV:12 respectively.
As the Panel in Canada – Gold Coins has explained, the purpose of Article XXIV:12
GATT is to "qualify the basic obligation to ensu re the observance of the General Agreement by
regional and local government authorities in the case of contracting parties with a federal
structure".
44 As the Panel further explained, Article XXIV:12 GATT does not limit the
applicability of the provisions of the General Ag reement, but "limits the obligations of federal
States to secure their implementation" within their domestic legal order.45
Accordingly, it is clear that a WTO Member w ith a federal structure, while fully bound by
the obligations under the covered agreement, is obliged to take "reasonable measures" to secure
their implementation by sub-federal entities. "Reasonable" measures cannot mean any and all
measures. Such a reading, as proposed by the US, 46 would fail to give any useful meaning to
Article XXIV:12 GATT.
In order to determine what is a "reasonable measure", the Panel in Canada – Gold Coins
has held that "the consequences of [...] non-observance [ of the provisions of the GATT ] by the
local government for trade relations with other c ontracting parties are to be weighed against the
domestic difficulties of securing observance". 47 This is also the standard which would have to be
applied in the present case.
As the EC has remarked, it is fully committed to ensuring uniform application of customs
law throughout the EC, and it has the necessary measures in place for this purpose. This is why the
EC has not invoked Article XXIV:12 GATT as a primary defence in the present case.

42 The EC would clarify that the authorization does not necessarily have to be "explicit"; it is
sufficient if it follows from the text of the Community legislation.
43 EC First Written Submission, para. 344; EC Reply to the Panel’s Question No. 78, para. 146.
44 GATT Panel Report, Canada – Gold Coins, para. 53.
45 GATT Panel Report, Canada – Gold Coins, para. 64.
47 GATT Panel Report, Canada – Gold Coins, para. 69.

However, the US claims go far beyond what is required for securing uniform application
of customs law by the authorities of the EC member States; rather, they are aimed at depriving the
EC member States of their competence for the administration of EC customs law by requiring the
creation of an EC customs agency, and EC customs court, and the harmonization of member States
law notably in the area of penalties. This would en tail a radical shift in the federal balance within
the EC. The EC does not believe that this can be described as a "reasonable measure" within the
meaning of Article XXIV:12 GATT.
This point is also illustrated by the conclusions of the Panel in Canada – Gold Coins ,
where the Panel did not take a position on whether the referral of the measure of the Province of
Ontario to the Canadian Supreme Court by the Government of Canada could be regarded as a
"reasonable measure" within the context of the Canadian legal order.
48 The EC submits therefore
that the creation of a customs agency, a customs court, or the harmonization of member States law,
could not be regarded as "reasonable measures" within the meaning of Article XXIV:12 GATT.
159. With respect to the Customs Code Committee:
(a) Are there any limits on the time for which a matter can remain unresolved on
the agenda of the Customs Code Commi ttee? If so, please specifically
identify the provisions that impose such time-limits.
There are no specific time limits for how long a matter can remain on the agenda of the
Customs Code Committee, nor of any other similar committee. The prescription of such time
limits would not be practical, since certain matter s may take more time to address than others.
Moreover, it is not entirely clear how "matter" s hould be defined. The matter may relate to the
adoption of a single measure, but may also be a series of related measures, or an ongoing policy
discussion. Similarly, the fact that the Committee re turns to a particular matter does not mean that
the issue has not been resolved, but may also be a reflection of ongoing monitoring and review.
Generally, all matters before the Customs Code Committee are dealt with as expeditiously as
possible, in accordance with requirements of good administrative practice.
(b) In its reply to Panel Question No . 58, the European Communities submits
that opinions of the Customs Code Committee typically reflect a common
approach agreed by all member States, which is normally observed by the
member States. Please provide proof to support this assertion.
Conclusions of the Customs Code Committee ty pically reflect a common approach of the
member States because they are adop ted by consensus. It is not fo r the EC, but for the US as the
complainant in the present case, to provide eviden ce to the contrary. One interesting example for
the observance of Customs Code Committee conclusions, however, is provided by the judgment of
the UK High Court concerning the classification of the Sony Playstation2 submitted by the US as
Exhibit US-70, in which the UK Court referred to the unanimous conclusions of the
Nomenclature Committee in support of its findings.
(c) How many cases of divergences of bindi ng tariff information have been put
forward to the Committee for reconciliation? How did those cases come to be
on the Committee's agenda? What was the outcome in each of those cases,
including the proposals made by the Committee and the action taken by the
EC Commission, if any? How long did it take to resolve those cases?
From 1.1.2000 until today, 196 cases involving perceived divergences between BTIs have
come before the Customs Code Committee.

48 GATT Panel Report, Canada – Gold Coins, para. 71.

Out of these cases, 178 were referred by the customs authorities of one or more member
States, whereas 18 were brought before the Committee by the Commission.
3 of these cases were resolved following a judgm ent of the Court of Justice, 78 led to the
adoption of a classification regulation by the Commission, 9 to the adoption of a CN explanatory
note, 3 to the adoption of a Commission deci sion on the invalidation of BTI, 43 cases led to
conclusions of the Committee, and in 4 cases, the matter was submitted to the HS committee.
The average processing time until conclusion h as been about 13 months. This average
includes periods necessary for translation of legal measures and internal decision-making of the
European Commission.
(d) In paragraph 266 of its first writte n submission, the European Communities
submits that it is incorrect to refer to the Customs Code Committee as an
institution of the European Communities. How does/should this
characterization of the Customs Code Committee affect the Panel's
consideration of the institutions, instru ments and mechanisms in place in the
European Communities to fulfil the re quirements of Article X:3(a) of the
GATT 1994?
The EC's comment was a correction of the incorrect characterization of the Customs Code
Committee in the US First Written Submission.
49
Under EC law, EC institutions are only those lis ted in Article 7 (1) EC Treaty, namely the
European Parliament, the Council, the Commissi on, the Court of Justice, and the Court of
Auditors.50 The Customs Code Committee is a committee established by the Customs Code in
order to assist the Commission in the exercise of certain powers delegated to it by the Council, in
accordance with Article 202 EC Treaty and the Comitology decision. 51 In addition, and
independently of the adoption of measures unde r the comitology procedure, under Article 249
CCC and Article 8 of Regulation 2658/87, the Customs Code Committee also has competence to
consider any question of Community custom law, and thus functions as a forum for coordination
and mutual information between the member States and the Commission.
The EC notes that in response to a question during the second substantive meeting with
the Panel (now Question No. 134), the US confir med that it was not challenging the manner in
which the Customs Code Committee operates. To this extent, the EC is not sure how the
characterization of the Customs Code Committee will affect the Panel's analysis. However, the
EC believes that a correct understanding of the role and functions of the Customs Code Committee
is important for the overall understanding of the EC's system of customs administration.
160. In cases where divergenc es are detected between the member States with respect to
the administration of EC customs laws (including but not limited to cases involving divergent
BTI), does the EC Commission have the authority to bypass the Customs Code Committee to
resolve such divergences? If so, please explai n the circumstances in which this is possible
and the frequency with which the Commission takes action independently of the Customs
Code Committee in cases of divergence.
A consultation of the Customs Code Committee is required wherever this consultation is
prescribed in the relevant Community legislati on, i.e. wherever the Commission acts in the
exercise of powers which have been delegated to it by the Council. Measures which require the
consultation of the Committee include, for instance, amendments to the implementing regulation,

50 Cf. EC First Written Submission, para. 19.
51 Cf. EC First Written Submission, para. 24 et seq. and Exhibit US-10.

the adoption of classification regulations or expl anatory notes, or of decisions requiring the
revocation of BTI.
52 In such cases, consultation is a necessary element of the procedure leading to
the adoption of the act.
Where the Commission does not act on the basis of powers delegated to it by the Council,
it is not required to have recourse to the Custom s Code Committee. As the guardian of the EC
Treaty, it may directly approach member States on any question relating to the administration of
customs law by the member States' authorities. Mo reover, where there exists an infringement of
Community law, the Commission may bring infr ingement proceedings in accordance with
Article 226 EC. The Commission may of course equall y chose to bring the matter before the
Customs Code Committee in acco rdance with Article 249 CCC and Article 8 of Regulation
2658/87; it is likely do so in particular where a matter does not relate only to one member State,
but is of interest to all member States.
161. Regarding the tariff classification of ne twork cards for personal computers and drip
irrigation products in the European Communi ties, does the European Communities accept
that, at one point in time, one or more EC member States did not treat as binding BTI issued
by the other EC member States?
The EC is not aware of any such instance regarding these two products. In this context, the
EC would like to recall that BTI is binding only against the holder of the BTI, which is a specific
natural or legal person.
53 BTI is not binding against other persons. This has also been confirmed by
the ECJ in the recent judgment in Intermodal Transports.54
162. With respect to the operation of the ECJ preliminary rulings system during the
period 1995 - 2005:
(a) What is the total number of preliminary rulings requested by member State
courts?
The total number of preliminary rulings re quested by member State courts during the
period 1995 – 2005 is 2,314.
(b) Of the total number of requests for preliminary rulings made during the
relevant period, how many concern the area of customs administration?
Please break down this figure for the following specific areas of customs
administration:
(i) Tariff classification;
(ii) Customs valuation; and
(iii) Customs procedures (particularly, audit following release for
circulation
55; penalties for infringements of EC customs legislation;
processing under customs control; and local clearance procedures).

52 Cf. EC First Written Submission, para. 75, 92, 99, 117.
54 Case C-495/03, Intermodal Transports, not yet reported, para. 27 (Exhibit US-71).
55 Assuming, for the sake of argument, that such audits can be classified as a customs procedure for
the purposes of this dispute.

Out of the total number of requests for preliminary rulings (2,314) during the period 1995
- 2005, 249 concern the area of customs administration. The breakdown is the following:
 Tariff classification 55
 Customs valuation 9
 Customs procedures 162
 O t h e r 2 3
(c) Of the total number of requests for preliminary rulings made in the customs
administration area, how many of th ose requests resulted in preliminary
rulings by the ECJ. Please break down this figure for the following specific
areas of customs administration:
(i) Tariff classification;
(ii) Customs valuation; and
(iii) Customs procedures (particularly, audit following release for
circulation
56; penalties for infringements of EC customs legislation;
processing under customs control; and local clearance procedures).
The outcome of the 249 requests for prelimin ary rulings concerning the area of customs
administration, broken down for the specific areas of customs administration, is the following:

 Judgements Orders Removed Pending Total
Classification 45 - 2 8 55
Valuation 7 - - 2 9
Procedures 114 9 22 17 162
Others 17 1 1 4 23
Total 183 10 31 25 249
163. In paragraph 61 of its Oral Statemen t at the second substantive meeting, the
European Communities submits that ECJ judgem ents following a request by the national
court of an EC member State "guide" all co urts of EC member States. Please clarify
whether or not the ECJ judgements in question are binding on courts of EC member States.
The EC confirms its reply to Question No. 73, 57 where it has explained that the ECJ
judgements given in preliminary references are binding on all courts of the EC member States.
However, in relation to interpretation of Community law, a member State's court may always refer

56 Assuming, for the sake of argument, that such audits can be classified as a customs procedure for
the purposes of this dispute.
57 EC Reply to Panel Question No. 73, paras. 131 and 132.

to the ECJ seeking confirmation, clarification or a ch ange in the ECJ case law. It is in this sense
that ECJ judgements guide the member State courts.
164. With respect to the 83 infringement proceedings commenced by the EC Commission
against member States concerning the administration of customs law during 1995 – 2005:
(a) Please break down this figure for the following particular areas of customs
administration:
(i) Tariff classification;
(ii) Customs valuation; and
(iii) Customs procedures (particularly, audit following release for
circulation
58; penalties for infringements of EC customs legislation;
processing under customs control; and local clearance procedures).
Out of the 83 cases, 2 cases relate to tariff classification, 1 case to customs valuation, 44
cases to customs procedures, and 36 cases to gene ral questions of EC customs law, notably
Articles 23 to 27 EC and 133 EC Treaty.
(b) What measures exist to ensure that the results of an infringement proceeding
by the EC Commission against a memb er State are binding on the other
member States?
No such measures exist, nor could they exist. An infringement procedure under
Article 226 always relates to a specific act or omission committed by a particular member State. In
accordance with Article 228 EC, it is that member St ate which, it if is found to have fulfilled its
obligations, is required to take the necessary measures to comply with the judgment.
It is noted that whereas a judgment under Article 228 EC is binding only on the Member
against which the proceedings were brought, the findi ngs of the court of Justice have the effect of
clarifying EC law, and to this extent will gui de other member States as regards their own
obligations under the Treaty. Moreover, in later infringement proceedings in which the same or
similar questions arise, the Commission can refer to the earlier case law of the Court as relevant
precedent.
165. In paragraph 167 of its Second Writte n Submission, the European Communities
submits that the European Ombudsman is a me chanism that contributes to the "proper"
administration of EC law. Please iden tify the number of instances the European
Ombudsman's advice has been sought in the area of customs administration and the action
taken by the Ombudsman in each of those instances.
In the period since 1999, the Ombudsman issued four decisions on matters of customs
administration. In one case, the Ombudsman ma de a critical remark. In two cases, the
Ombudsman found no maladministration. In a furthe r case, the complaint was withdrawn, so that
the Ombudsman did not take a decision on the substance of the complaint.
59

58 Assuming, for the sake of argument, that such audits can be classified as a customs procedure for
the purposes of this dispute.
59 The Reebok case (Exhibit US-52).

166. In paragraph 275 of its first written submission, the European Communities submits
that any individual with a concern regarding the administration of customs matters can
bring the issue to the attention of the EC Commission, which will consider the matter and
respond in accordance with the Commission's Code of Conduct. During the period 1995 –
2005:
(a) What is the total number of cases where individuals approached the EC
Commission with concerns regarding the administration of customs matters?
Please break down this figure for the fo llowing particular areas of customs
administration:
(i) Tariff classification;
(ii) Customs valuation; and
(iii) Customs procedures (particularly, audit following release for
circulation
60; penalties for infringements of EC customs legislation;
processing under customs control; and local clearance procedures).
(b) Providing all necessary evidence, pl ease explain the reaction and/or action
taken by the Commission in each of these cases and the time taken by the
Commission to respond.
On the basis of a search of the central archives of DG TAXUD, in the period 1996 61 to
2004, over 17000 letters were received from privat e bodies and operators on customs matters. Per
year, the total numbers are as follows:
Period Letters coming
from private
bodies and
operators in
customs matters
1996 2769
1997 3018
1998 2490
1999 3105
2000 1425
2001 1198
2002 1049
2003 918
2004 1334
It has not been possible for the archives to subdivide these numbers by sector concerned
for the entire period (classification, valuation, customs procedures). Moreover, the Panel will
appreciate that it is not feasible for the EC, within the time-frame imposed by the present
proceedings, to explain the reaction and/or acti on taken by the Commission in each of these cases
and the time taken by the Commission to respond.
However, in order to give the Panel an overv iew, the EC attaches representative tables for
the period 2002 to 2005 prepared by the most relevant units of the Commission's DG TAXUD
(Exhibit EC-149).

60 Assuming, for the sake of argument, that such audits can be classified as a customs procedure for
the purposes of this dispute.
61 Due to technical reasons, it has not been possible to provide data for the year 1995.

167. Please provide a list of any best working practice guidelines that have been issued in
the following areas of customs administration:
(a) Tariff classification;
(b) Customs valuation; and
(c) Customs procedures (particularly, audit following release for circulation
62;
penalties for infringements of EC customs legislation; processing under
customs control; and local clearance procedures).
For the area of tariff classification, the EC can refer to the EBTI guidelines (Exhibit EC-
32).
For the area of customs valuation, the EC re fers to the compendium of customs valuation
texts (Exhibit EC-37), which is regularly updated, and into which all relevant conclusion and
commentaries are integrated. Moreover, there is also a standard form for information exchange on
valuation matters which has been adopted in the form of conclusions of a project group under the
Customs 2002 programme (Exhibit EC-144).
As regards the issues referred to as "customs procedures" in the Panel's question, i.e. audit
following release for circulation; penalties for infri ngements of EC customs legislation; processing
under customs control; and local clearance pro cedures, the EC can refer to the following
guidelines:
• A Risk Analysis Guide issued to member States in 1998 (Exhibit EC-150).
• A Standard Risk Management Framework issued in 2002 (Exhibit EC-151).
• The Customs Audit Guide (Exhibit EC-90).
• Council Resolution of 29 June 1995 on the effective and uniform application of
Community law and on the penalties applicable for breaches of Community law in
the internal market (Exhibit EC-41).
168. Please comment on and respond to the following submissions by the United States:
(a) In paragraph 50 of its Second Written Submission, the United States argues
that the European Communities does not refer to any measures making
Article 10 of the EC Treaty operational in the area of customs administration
nor to any rules giving effect to this general obligation vis-à-vis member
States in particular situations.
The EC does not agree with the US statement. As the EC has already explained in its
Second Oral Statement,
63 the duty of cooperation is legally bi nding and directly applicable on all
member States. It can and has been enforced through recourse to the European Court of Justice; in
this respect, the EC can refer to its answer to the Panel's Question No. 147. That such cases are not
extremely numerous does not mean that the duty of cooperation does not have practical effect, but
rather that it is generally respected.
(b) In paragraph 86 of its Second Writte n Submission, referring to the Panel's
Report, Argentina – Hides and Leather , the United States submits that, while

62 Assuming, for the sake of argument, that such audits can be classified as a customs procedure for
the purposes of this dispute.

a law providing for penalties or audit procedures may be considered as
something to be administered, 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 thro ugh verification and enforcement. The
United States submits that the European Communities itself recognized this
point in Argentina – Hides and Leather , where it challenged the same
Argentinean measure from the perspective of its substance and from the
perspective of its character as a tool for administering other laws.
The EC disagrees with the US statement. As the EC has explained in its Second Oral
Statement,
64 Argentina – Hides concerned a particular Argentinean resolution which authorized the
participation of industry representatives in the administrative process. The Panel held that the
resolution constituted a violation of Article X:3 (a) GATT because it made it impossible for
Argentina to administer its customs laws in a manner that was reasonable and impartial. 65
Nowhere does the Panel Report in Argentina – Hides indicate that the Argentinean measure
administered some other measure. Accordingly, Argentina – Hides provides no support for the US
interpretation in the present case.
(c) In its reply to Panel Question No. 93 , the United States submits that matters
described in Article X:1 of the GATT 1994 other than customs matters – such
as measures of general applicatio n affecting the sale, distribution,
transportation, and insurance of import s – can be distinguished from penalty
provisions and audit procedures inasmuch as they are objects of
administration rather than measures that serve an administrative function.
The EC fails to see the basis for such a distin ction. The relevant distinction in Article X
GATT is the one between the measures of general a pplication referred to in Article X:1, and their
administration, which is referred to in Article X:3 (a) GATT. As the EC has already explained
previously,
66 Article X GATT does not distinguish betw een "laws" which are of "substantive"
character and others which are of "administr ative" character, or laws which "serve an
administrative function" and others which do not.
All of the laws referred to in Article X:1 GATT need to be administered. Accordingly,
they all serve an administrative function in th e sense that they guide the behaviour of the
authorities which are responsible for their administration. If the US interpretation was correct, all
laws within the scope of Article X:1 GATT would simultaneously also have to be regarded as
"administration" within the meaning of Article X:3 (a) GATT. Such an interpretation would wreak
havoc with the logic of Article X GATT, and simply has no basis in the wording of this provision.
It would also overturn the clear distinction be tween "administration" and the measures to be
administered upheld by the Appellate Body in EC – Bananas III.
67
As regards specifically penalty provisions, the EC has already ex plained that such
provisions are themselves laws to be administered, ra ther than administration. In this respect, the
EC can refer to its earlier submissions.68

64 EC Second Oral Statement, para. 74; cf. also EC Second Oral Statement, para. 30.
65 Cf. Panel Report, Argentina – Hides and Leather, para. 11.58, where the EC is quoted as arguing
that the resolution made the impartial application of the relevant customs rules impossible. This refutes at the
same time the US claim that the Panel report "made absolutely no reference" to the character of the measures
as mandatory or permissive (US Second Written Submission, para. 91).
66 Cf. EC First Written Submission, para. 216 et seq.; EC Second Writen Submission, para. 18 et
seq.
67 Appellate Body Report, EC – Bananas III, para. 200. Confirmed in Appellate Body Report, EC –
Poultry, para. 115 ; Panel Report, US – Corrosion Resistant Steel Sunset Reviews, para. 7.289.
68 EC Second Written Submission, para. 200 et seq. ; EC Second Oral Statement, para. 69 et seq.

As regards "audit procedures", the EC is not sure what "procedures" the US is referring to,
nor what is the parallel with the questi on of sanctions. As the EC has explained,
69 Article 78 (2)
CCC gives customs authorities the power to conduct post-clearance inspections and audits. As the
EC has also remarked all member States have the necessary audit capacities, and are guided by the
Community Customs Audit Guide (Exhibit EC-90). The EC does not believe that audit provisions
as such are among the laws which are enumerated in Article X:1 GATT. In any event, the basic
provisions exist at Community level, not at member States level, and a uniform audit practice is
ensured throughout the EC.
(d) In paragraph 25 of its Second Written Submission, the United States argues
that it is unclear how the European Communities' characterization of
Article X:3(a) of the GATT 1994 as a "minimum standards provision"
translates into a legal standard that may be applied by the Panel.
As the EC has explained in its Second Oral Statement,
70 the purpose of the qualification of
Article X:3 (a) GATT as a "minimum standard" is not to define the substantive standard of
Article X:3 (a) GATT, but to clarify the object and purpose of the provision. As the EC has also
explained, Article X:3 (a) GATT is not a provi sion which prescribes in detail how WTO Members
should administer their customs laws. There are other provisions in the GATT, and in other
covered agreements, which contain the detailed s ubstantive 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 benef its of the GATT by other Members is not frustrated
through measures of administration which are unreasonable, partial, or non-uniform. In accordance
with customary rules of treaty interpretation,
71 this limited object and purpose of Article X:3 (a)
GATT must guide the interpretation of the provision by the Panel.
(e) In paragraph 42 of its Oral Statement at the first substantive meeting, the
United States submits that the European Communities' contention that
appeals of customs decisions to national courts, coupled with the possibility of
national courts making preliminary references to the ECJ, constitutes a
critical instrument of ensuring uniform administration of customs law is at
odds with its contention that the obligation of uniform administration under
Article X:3(a) of the GATT 1994 and the obligation to provide remedies in
respect of administrative action under Article X:3(b) of the GATT 1994 are
discrete obligations without any inherent link
Should paragraph 42 of the US first Oral Stat ement be interpreted in this way, it would
constitute an incorrect understanding of the EC's position. The EC's submissions do not limit the
role played by preliminary references to the ECJ to those made by national courts of first instance,
which are the courts covered by Article X:3( b) GATT, as it has been acknowledged by the US.
72
References to the ECJ are also made by national courts of higher instances, which are tools for
securing uniform administration under Article X:3 (a) GATT. Furthermore, the EC considers that
the case-law constituted by ECJ preliminary ruling s is an important tool to ensure uniform
administration for the purposes of Article X:3(b) GA TT. Indeed, this role is not limited to the case
before the referring national court but it is also pl ayed in relation to future cases where a reference
to the ECJ will not take place and to the implementation of Community law by member States'
administrative authorities. The EC, therefore, insist s that preliminary references to the ECJ are to
be considered as one of the instruments aiming to ensure uniform administration as required by
Article X:3 (a) GATT.

69 EC Second Written Submission, para. 157-158. In the EC Second Written Submission, reference
was erroneously made to Article 76 (2) CCC; this should be corrected to read Article 78 (2) CCC.
70 EC Second Oral Statement, para. 23 et seq.
71 As evidenced by Article 31 (1) of the Vienna Convention on the Law of Treaties.
72 US Reply to Panel Question No. 121, para 189.

169. What is the specific legal basis under EC law according to which the following bodies
are considered as organs of the European Communities:
(a) the bodies established in the member States to review at the first instance
customs decisions taken by member State customs authorities; and
(b) national courts of the member States which are charged to review at the first
instance customs decisions taken by member State customs authorities?
In paragraph 70 of its First Oral Statement, th e EC referred to the tribunals of the member
States as organs of the EC in order to explain that , within the meaning of International law, the EC
is entitled to comply with its international obligations through those tribunals.
Under EC constitutional law, the role of the member States courts as bodies entrusted with
the ordinary application of Community law is b ased on the preliminary reference procedure to the
ECJ and on the basic principles of primacy of Community law and direct effect, which have
already been explained in our First Written Submission.
 73 The two principles also explain the
position of any administrative review body in relation to Community law.
Finally, a specific legal basis is found in the customs legislation, where Article 243 of the
CCC provides that the right of appeal may be ex ercised before the customs authorities designated
for that purpose by the member States and, subse quently, before an independent body, which may
be a judicial authority or an equivalent specialized body, according to the provisions in force in the
member States.
170. In its reply to Panel Question No. 74, the European Communities submits that,
although the Community Customs Code does not contain any provision requiring that
review by national courts be prompt, there ar e a number of measures that have effect
throughout the European Communities (such as the European Convention on Human Rights
and Fundamental Freedoms), which it argues have the effect of requiring member States'
tribunals to provide prompt review.
(a) Please explain in practical terms how the cited Community-wide measures
are enforced and by whom in the context of deadlines for review of
administrative decisions by member State tribunals.
Article 6 of the European Convention of Human Rights and Fundamental Freedoms
(Exhibit EC-49), on which Article 47 of the Char ter of Fundamental Rights is based (Exhibit EC-
48), is a provision applied in the EC member States, which are all parties to the Convention. This
provision can be invoked before any EC member St ate court. Courts and tribunals of second or
higher instance have a particular role in enforc ing the obligation to provide prompt review in
customs matters upon first instance tribunals. Once the domestic remedies ha ve been exhausted,
the case may be brought before the European Cour t of Human Rights (Article 35 of the European
Convention).
(b) Do these Community-wide measures a pply to the review by first instance
bodies in each of the EC member States?
Article 6 (1) of the European Convention on Human Rights and Article 47 of the Charter
of Fundamental Rights of the European Union only apply to judicial proceedings. However,
review of customs decisions by independent administrative bodies under Article X:3(b) GATT is
subject to principles related to good administrati on, like the observance of a reasonable time-limit

73 EC First Written Submission, paras 179-190 and 36- 40, respectively.

in administrative procedures.
74 The principle of good administration has been enshrined in
Article 41 (1) of the Charter of Fundamental Rights of the European Union as the right of every
person "to have his or her affairs handled impart ially, fairly and within a reasonable time". It
should be underlined that the Charter, as indicat ed in its Preamble, "reaffirms […] the rights as
they result, in particular, from the constitutional traditions and international obligations common to
the member States".
171. In what circumstances and pursuant to which provision(s) can/must the ECJ review
decisions issued by national courts of the member States?
Actions before the European Court of Justice and the Court of First Instance are limited to
those laid down by the EC Treaty, which have been listed in paragraph 171 and footnote 53 of the
EC First Written Submission. The EC Treaty does not establish an appeal to the Court of Justice or
to the Court of First Instance against decisions of the national courts of the member States.
Question No. 172 (reply due on 14 December 2005). Please comment on section III of the
United States' Oral Statement at the second su bstantive meeting, including any exhibits
referred to in that section

A reply to this question will be provided in a separate submission by 14 December 2005.

QUESTIONS FOR BOTH PARTIES:
173. Making reference to the relevant terms of Article X:3(a) of the GATT 1994 and any
other supporting material, please explain whet her or not the design and structure of a
customs administration system as a whole, or relevant components thereof, can be
considered as such in determining whether or not Article X:3(a) has been violated for want
of uniform administration. Additionally or alt ernatively, is it necessary to have regard to
specific instances of non-uniform administration in order to demonstrate a violation of
Article X:3(a)?
First of all, the EC would remark that the US panel request referred, as the measure at
issue, only to the administration of customs law, not to measures of general application which
constitute the EC's system of customs administration. As the EC has already explained, these
general measures are therefore not within the Panel's terms of reference.
75
As the EC has also already remarked, 76 Article X:3 (a) GATT is concerned with the
administration of laws and regulations, not with those laws and regulations themselves. The design
and structure of the EC's system of customs ad ministration, or individual components thereof,
could be regarded as constitutin g a violation of Article X:3 (a) GATT only if they necessarily and
inevitably lead to an administration that is contrary to the requirements of Article X:3 (a) GATT.
Whether the EC's system of customs admi nistration "as such" leads to non-uniform
administration is therefore a question of fact rega rding the interpretation and application of a large
body of the EC municipal law. The burden of proof to establish that the municipal law is in
violation of WTO obligations rest with the US as the complainant. The requirements for

74 Joint Cases T-44/01, T-119/01 and T-126/01, Vieira, [2003] ECR II-1209, para. 167 (Exhibit EC-
152).
75 CF EC Second Written Submission, para. 18 et seq.
76 Cf. above Reply to the Panel’s Question No. 154.

discharging this burden of proof have been described by the Appellate Body in US – Carbon Steel
as follows:
77
Thus, a responding Member's law will be treated as WTO-
consistent until proven otherwise. The party asserting that
another party's municipal law, as such, is inconsistent with
relevant treaty obligations b ears the burden of introducing
evidence as to the scope and meaning of such law to substantiate
that assertion. Such evidence will typically be produced in the
form of the text of the relevant legislation or legal instruments,
which may be supported, as appropriate, by evidence of the
consistent application of such laws, the pronouncements of
domestic courts on the meaning of such laws, the opinions of
legal experts and the writings of recognized scholars. The nature
and extent of the evidence require d to satisfy the burden of proof
will vary from case to case.
Accordingly, it cannot be assumed lightly that a measure of municipal law, let alone an
entire system of customs administration, as such leads to a violation of WTO obligations. Rather,
as the Appellate Body confirmed in US – Oil Country Tubular Goods Sunset Reviews with specific
reference to Article X:3 (a) GATT,
78 solid evidence is required to establish such a proposition.
Such evidence must include in par ticular evidence regarding the consistent application of the law,
in other words, in the current case, of a consistent lack of uniformity in the EC's system of customs
administration.
A recent illustration for the requirements for establishing an as such challenge is provided
by the Appellate Body report in US – Oil Country Tubular Goods from Mexico . In this case, the
Panel had come to the conclusion that a US admi nistrative guidance, the Sunset Policy Bulletin, as
such violated the Anti-Dumping Agreement after having considered a "sampling" out of more than
200 cases of application of the Bulletin. The Unite d States appealed this finding, referring
explicitly to "the serious nature of an 'as such ' challenge" and the "particular rigour required in
assessing such a challenge".79 The Appellate Body considered that the Panel's reliance on a limited
sample did not constitute an objective assessment of the facts as required by Article 11 DSU, and
therefore reversed the Panel's findings. 80
The contrast between US – Oil Country Tubular Goods from Mexico and the US
submissions in the present case could not be starker. In US – Oil Country Tubular Goods from
Mexico, a sample taken out of over 200 cases of application was held to be insufficient for
establishing that the Sunset Policy Bulletin as such violated WTO obligations. In the present case,
the US asks the Panel to come to the conclusion that the EC's system of customs administration
violates Article X:3 (a) GATT on the basis of less th an a handful of cases of application, some of
which it introduced at a very late stage in the pr oceedings, and non of whic h establish a lack of
uniformity.81 In addition, the US has consistently deni ed the relevance of factual information for
establishing the consistency of the EC's system of customs administration with Article X:3 (a)
GATT. It appears that whereas the US preaches rigou r in the establishment of the facts when it is
the defendant, it does not wish to see the same approach applied when it is the complainant.

77 Appellate Body Report, US – Carbon Steel, para. 157.
78 Appellate Body Report, US – Oil Country Tubular Goods Sunset Reviews, para. 217.
79 Appellate Body Report, US – Oil Country Tubular Goods from Mexico, para. 64.
80 Appellate Body Report, US – Oil Country Tubular Goods from Mexico, para. 210.
81 In this context, it is interesting to note that in US – Oil Country Tubu lar Goods from Mexico ,
para. 64, the US also complained about not having had a meaningful opportunity to rebut the evidence
created and presented by the Panel until the interim review stage.

Overall, the EC submits that the evidence presented by the US is insufficient for
establishing, in accordance with Article 11 DSU, that the EC's system of customs administration,
or particular components thereof, as such violates Article X:3 (a) GATT.
174. Please comment on the practical relevance, if any, of the following comment made by
the Panel in Argentina – Hides and Leather at paragraph 11.77 of its report: "Article X:3(a)
[of the GATT 1994] requires an examination of the real effect that a measure might have on
traders operating in the commercial world" (emphasis added).
The EC agrees that the effect of administration on traders is a relevant consideration in the
interpretation of Article X:3 (a) GATT. As the EC has said, this means that the treatment which a
trader can expect to receive from the customs authorities of a WTO Member should be reasonably
predictable.
82 As the EC has also explained, 83 this does not mean that individual instances of
administrative error, which can be corrected through administrative and judicial mechanisms
provided by a WTO Member's system, can be regarded as constituting a violation of Article X:3
(a) GATT.
The requirement to examine the effects of th e measure is also linked to the evidence
required for discharging the burden of proof. If the effects on traders are a relevant consideration
for Article X:3 (a) GATT, then the effect on tr aders should be demonstrable through adequate
evidence. The United States has submitted almost no evidence regarding the concrete application
of EC customs law to individual traders. Moreove r, when it requested input for its case from the
trading community, it received almost no contributions.
84 Since the effect on traders is a relevant
consideration for the interpretation and application of Article X:3 (a) GATT, the evidence adduced
by the US is insufficient for establishing a violation of Article X:3 (a) GATT.
Finally, since the effect on traders is a re levant consideration in the application of
Article X:3 (a) GATT, measures which entail no relevant difference in treatment between traders
whatsoever cannot be held to constitute a viola tion of Article X:3 (a) GATT. A case in point is
Regulation 493/2005, which the US has unjustifiably criticized even though this regulation ensures
entirely uniform tariff treatment by suspending the tariff duties on the covered products.
85
175. In paragraph 11.77 of the report in Argentina – Hides and Leather , the Panel stated
that "trade damage" need not be demonstrated in order to prove a violation of
Article X:3(a). Please comment.
The EC agrees that there is no requirement to show "trade damage" in order to prove a
violation of Article X:3 (a) GATT. Rather th an trade damage, the question is whether the
complainant has suffered nullification and impair ment within the meaning of Article XXIII
GATT. It follows from Article 3.8 DSU that where there is an infringement of the obligations
under the covered agreements, this is normally presumed to constitu te a case of nullification and
impairment. However, this presumption can be rebutted by the Member complained against.
As the EC has remarked, even if Regulation 49 3/2005 were held to constitute a violation
of Article X:3 (a) GATT, this clearly would be a case where there is no nullification and
impairment, since the duties applicable for all covered goods are zero. 86 More broadly speaking,
some of the explanations given by the US as to why it has not provided evidence of non-uniform

82 Cf. above, Reply to Panel Question No. 156.
84 EC First Written Submission, para. 10, and Exhibit EC-1.
85 EC First Written Submission, para. 356 et seq.

administration equally raise the question of what is the nullification and impairment from which
the US has suffered
.87
176. In paragraph 15 of its Oral Statemen t at the second substantive meeting, the
European Communities notes that it invokes Article XXIV:12 of the GATT 1994 to support
the view that GATT commitments, including Article X:3(a) of the GATT, were undertaken
by Contracting Parties in full respect of their cons titutional systems. What significance, if
any, should be attached to the fact that a customs union akin to the European Communities
did not exist at the time the text of the GATT was concluded in 1947?
The fact that the EC or any similar customs union did not exist at the time the GATT 1947
was concluded is of no significance.
Article XXIV:12 GATT is a general provision wh ich applies to all contracting parties in
which provisions of the GATT are implemented by regional or local governments. This is clearly
the case for the EC. In accordance with explanatory note 2 (a) to the GATT 1994, the references to
a "contracting party" in the GATT 1994 shall be deemed to read "Member". According to
Article XI:1 of the WTO Agreement, the EC is an original Member of the WTO. It is thus clear
that upon concluding the WTO agreements, all WT O Members agreed that the provisions of the
GATT, including Article XXIV:12 GATT, should apply to the EC.
Moreover, in accordance with Article II:1 of the WTO Agreements, the GATT 1994 is an
integral part of the WTO Agreement, which was accepted by the WTO Members as a "single
undertaking". It is true that the GATT 1994 incorporates, with modifications, the GATT 1947.
However, as the Appellate Body has clarified in Brazil – Desiccated Coconut, the GATT 1947 by
itself no longer constitutes the basis for the rights and obligations of WTO Members.
88
An interpretation of the GATT 1947 in isolati on would therefore not be an adequate way
of interpreting the GATT 1994 as an integral part of the WTO Agreements. For this reason, the
question whether the contracting parties to the GATT 1947 might have considered that
Article XXIV:12 GATT could or could not apply to a WTO Member such as the EC is of no
relevance for the interpretation of Article XXIV:12 of the GATT 1994.
This finds further confirmation in para. 13 of the Understanding on Article XXIV GATT,
which simply restates the obligations flowing from Article XXIV:12 GATT for WTO Members. If
WTO Members, at the time of conclusion of the Ma rrakech Agreement, had wished to subject the
EC to any special standards, it would have b een natural to include such provision in the
understanding on Article XXIV:12 GATT. Since this was not done, it must be assumed that
Article XXIV:12 GATT applies to the EC as it do es to any other WTO Member with regional or
local governments or authorities.
Finally, there is nothing in the text of Article XXIV:12 GATT which gives rise to the
assumption that this provision should not have applie d to a contracting party "akin to the EC". As
the EC has remarked, it does not claim to be subject to standards any different from those
applicable to other WTO Members. On the other hand, the EC also does not accept that the EC's
system of executive federalism and judicial review is fundamentally different from the systems of
other WTO Members which have a federal system. Accordingly, there is no reason for considering
that Article XXIV:12 GATT does not apply to the EC.

88 Appellate Body Report, Brazil – Desiccated Coconut, p. 14.

ANNEX B-3

COMMENTS OF THE UNITED STATES ON THE EUROPEAN COMMUNITIES'
RESPONSES TO QUESTIONS POSED BY THE PANEL AFTER THE SECOND
SUBSTANTIVE MEETING

(14 December 2005)

QUESTIONS POSED TO THE EUROPEAN COMMUNITIES

 The United States appreciates this opportuni ty to comment on the EC's replies to the
questions posed by the Panel following the second su bstantive meeting with the parties. Many of
the points the EC raises already have been addressed by the United States in prior written and oral
submissions or are not relevant to the resolution of this dispute. In the comments below, the
United States will focus primarily on new points th at the EC raises that are pertinent to the
resolution of this dispute and/or that have not been addressed in prior US submissions. The United
States does not comment on the reply to every quest ion that the Panel posed to the EC following
the second substantive meeting with the parties. The US decision not to comment on the EC's
reply to any particular question should not be understood as agreement with the EC's reply.
Question 146
 In its reply to Question No. 146, the EC delineated a number of areas in which the
administration of EC customs law is the responsibility of the independent authorities in each of the
25 EC member States. 1 An additional area that has been di scussed in this dispute and that should
be added to that delineation is the customs proce dure concerning the recovery of customs debts.
As discussed in the US oral statement at the second Panel meeting, 2 Article 221(3) of the
Community Customs Code (Exh. US-5) establish es a period of three years following importation
during which a customs debt may be collected. The EC's 25 independent, geographically limited
customs offices are each responsible for administering that rule and, as the United States showed,
different customs offices administer it differently. France, for example, has enacted a law whereby
the three-year period is suspended by any admi nistrative proceeding (procès-verbal) investigating
a possible customs infraction.3 Despite divergence with other customs authorities in other parts of
the EC, France's highest court (the Cour de Cassation) has declined to refer to the ECJ the question
of this rule's consistency with EC law.4
Question 147

 In its reply to Question No. 147, the EC stat es that "Article 10 EC is legally binding and
directly applicable in all member States." 5 It adds that Article 10 "inspires the interpretation of
Community law by EC courts." 6 It then gives an overview of cases in which Article 10 has been

1Replies of the European Communities to the Questions of the Panel After the Second Substantive
Meeting, paras. 3-7 (7 December 2005) ("EC Replies to 2nd Panel Questions").
2US Second Oral Statement, para. 31.
3Loi de finances rectificative p our 2002 (No. 2 002-1576 du 30 décembre 20 02), J.O. No. 304 du
31 décembre 2002, p. 22070 texte No. 2, Art. 44 (amendment to customs code, Art. 354) ("La prescription
4See Judgment of the Cour de Cassation, Case No. 143, 13 June 2001, pp. 439-40 (Exh. US-67);
Judgment of the Cour de Cassation, Case No. 144, 13 June 2001, p. 448 (Exh. US-68).

invoked and concludes that "Article 10 EC is fully operational and can be applied by the ECJ and
national tribunals."
7
 Whether Article 10 is "legally binding and dir ectly applicable" is beside the point. The
relevant question is whether th e very broad, overarching obligation set forth in Article 10
translates into specific rules in the customs area that would ensure uniform administration by the
EC's 25 independent, geographically limited customs offices. The answer is that it does not.
Article 10 simply states:
member States shall take all appropriate measures, whether
general or particular, to ensure fulfilment of the obligations
arising 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 jeopardize the
attainment of the objectives of this Treaty.

 Neither the EC Treaty nor other EC legislation states with particularity what "appropriate
measures" member States must take in the area of customs law to achieve uniform administration.
 From the point of view of GATT 1994 Article X:3(a) it matters little that EC Treaty
Article 10 is "legally binding" if (as is the case) it is not made operational in the customs area
through particular rules or regulations. The Unite d States has demonstrated this point in its prior
submissions. For example, where the customs authority in one part of the EC has classified a good
in a particular way, the "legally binding" natu re of EC Treaty Article 10 does not compel the
customs authority in another part of the EC to classify a materially identical good in the same
way.
8 A very concrete illustration of the inabilit y of EC Treaty Article 10 to secure uniform
administration of the customs laws is the case of LCD monitors. As the United States explained at
the second Panel meeting, 9 even though the Customs Code Committee issued a non-binding
conclusion regarding classification of these goods in July 2004, the administration of the
classification rules with respect to LCD monitors is in a state of disarray. Thus, the authority in
one member State (the United Kingdom) follows th at conclusion; another authority (in Germany)
evidently rejects it, having recently issued BTI classifying a monitor under heading 8471 based on
its principal use, even though the conclusion called for such classification based only on sole use;
and a third authority (in the Netherlands) has prom ulgated its own set of classification criteria out
of concern that the practices of other authorities were resulting in "a diverted flow of business,
which is harmful to the competitiveness of Dutch industry in the logistics and services sector."10
 Moreover, the cases cited by the EC in its re ply to Question No. 147 do nothing to affect
the conclusion that EC Treaty Article 10 does not secure the uniform administration of EC
customs law by the EC's 25 independent, geographi cally limited customs offices. For example,
the EC discusses the ECJ judgment in Commissioners of Customs & Excise v. SmithKline
Beecham (Exh. EC-142). The question in that case was what a member State court should do
upon finding that the classification of a good (nicotine patches) set forth in BTI, which had been
consistent with a World Customs Organization ("WCO") opinion, was not in fact the correct

8The one narrow exception is the case in which the classification by the first authority is set forth in
binding tariff information ("BTI") which is then invoked before the second authority by the very same
person to whom the BTI was issued, and only that person (i.e. "the holder").
9US Second Oral Statement, paras. 53-56.
10Douanerechten. Indeling van bepaalde LCD monitoren in de gecombineerde nomenclatuur, No.
CPP2005/1372M (8 July 2005) (original and unofficial English translation) (Exh. US-77).

classification under the EC Tariff. Not surprisingly, the ECJ found that the member State court
was "obliged to nullify the unlawful consequences" of the breach of EC law brought about by the
issuance of incorrect BTI.
11 However, the Court went on to say (in a portion of its decision not
cited by the EC in its reply to Question No. 147) that how an authority goes about remedying a
case of non-compliance with EC customs law is a matter "within the ambit of domestic law."
12
The only limitation is that member States follow th e very general "princip les of equivalence and
effectiveness."13 Thus, different authorities confronted with the same issue confronted by the UK
court are free to address the problem in different ways "within the ambit of domestic law."
 Another case that the EC discusses in its reply to Question No. 147 is the case of Kühne &
Heitz v. Productschap voor Pluimvee en Eieren (Exh. EC-61). This was a case in which an
administrative proceeding concerning an exporter's entitlement to certain refunds had closed. The
exporter had lost, due to a finding regarding classifi cation of the exported goods. Subsequently, in
an unrelated proceeding, the ECJ rendered a deci sion regarding the classification of materially
identical goods. Had that decision been availabl e sooner, the result of the Kühne & Heitz refund
request would have been different (i.e. favourable to the exporter). Following the ECJ decision,
the exporter started a new proceeding, which eventu ally led to referral to the ECJ of the question
whether the original Kühne & Heitz administrative proceeding should be reopened in light of the
ECJ classification decision. The ECJ found that in the circumstances of that case , the Dutch
customs authority was required "to review the decision in order to take account of the
interpretation of the relevant provision of Community law given in the meantime by the Court."14
 Notably, the circumstances of that case incl uded the fact that "under national law, [the
customs authority] ha[d] the power to reopen [its original] decision." 15 In fact, the ECJ recognized
that "Community law does not require that administrative bodies be placed under an obligation, in
principle, to reopen an administrative decision wh ich becomes final [due to expiry of reasonable
time-limits or exhaustion of remedies]." 16 Thus, while the Dutch administrative authority in the
Kühne & Heitz case itself was required to reopen an administrative decision in light of a
subsequent ECJ decision, Article 10 of the EC Treaty did not compel other EC administrative
authorities to do so if the laws in their respectiv e member States contained stricter rules on the
finality of administrative decisions. As a result, EC customs authorities in the 25 different parts of
the EC's customs territory may take different approaches to the effects of an ECJ customs
classification judgment on prior administrative proceedi ngs. This is yet another example of a lack
of uniform administration by the EC of its customs law.
 The EC also discusses the de Andrade case (which the United States has discussed in prior
submissions),17 as well as other cases involving EC Treaty Article 10 in the context of customs
penalties. As the United States has previously explained, these cases confirm that penalty
provisions may vary significantly from customs authority to customs authority in different parts of
the EC. As the ECJ explained in de Andrade , EC Treaty Article 10 simply requires customs
authorities to "take all the measures necessary to guarantee the application and effectiveness of
Community law."
18 It imposes no requirement that different customs authorities "guarantee the
application and effectiveness of Community law" in a uniform manner.

11Case C-206/03, SmithKline Beecham , Order of the Court of Jan. 19, 2005 (not yet reported),
para. 51 (Exhibit EC-142) ("SmithKline")
14Case C-453/00, Kühne & Heitz, [2004] ECR I-837, para. 27 (Exh. EC-61).
15Case C-453/00, Kühne & Heitz, para. 28 (Exh. EC-61).
16Case C-453/00, Kühne & Heitz, para. 24 (Exh. EC-61).
17See, e.g., US First Written Submission, para. 100; US First Oral Statement, para. 51; US Replies
to 1st Panel Questions, paras. 111-12.
18Case C-213/99, de Andrade, [2000] ECR I-11083, paras. 19-20 (Exh. US-31).

 Further, these decisions on customs penalties confirm that penalties are tools for
administering the rules of EC customs law with respect to classification, valuation, and customs
procedures, as the United States has argued. Thus, as just noted, the de Andrade decision refers to
penalties as measures "to guarantee the applicati on and effectiveness of Community law." That
characterization by the ECJ is consistent with the ordinary meaning of the term "administer"
19 and
contradicts the EC's argument that penalty provisi ons are not tools used to administer EC customs
laws.
 A similar characterization is articulated in the Hannle + Hofstetter case (Exh. EC-143).
That case concerned an Austrian law that imposed as a penalty an increase in duty to be paid in
certain situations involving delay in the payment of a customs debt. The ECJ found that "member
States are empowered to choose the penalties which seem appropriate to them" as long as they are
within the very general bounds of proportionality and effectiveness.
20 The Court went on to
observe that "[t]he objective of the measure is to prevent disadvantage to traders who respect
Community legislation and whose conduct ensures th at the customs debt can be entered into the
accounts and settled rapidly." 21 Again, the ECJ portrays a penalty measure as a tool for giving
effect to EC customs law (in this case, in the ar ea of customs procedures) by enforcing compliance
with that law. This confirms that penalty pr ovisions "administer" EC customs law within the
ordinary meaning of that term.22
 One final comment concerning the EC's repl y to Question No. 147 concerns its assertion
that a tribunal of last instance must refer to the ECJ a question regarding the application of
Community law that arises in a proceeding before it. 23 As has been shown, that obligation on the
part of tribunals of last instance is not absolute. Thus, the ECJ explained in Intermodal Transports
that a court of last instance is not required to refer a question to the ECJ if, for example, it finds the
correct classification of the goods in question to be "so obvious as to leave no scope for any
reasonable doubt."
24 Moreover, it is the court of last inst ance itself that has "sole responsibility"
for determining whether the correct classificati on of goods is "so obvious as to leave no scope for
any reasonable doubt."25 Indeed, as noted above, the question of whether the three-year period for
recovery of customs debts may be suspended by th e initiation of an administrative proceeding is a
question that a court of last instance (in France) has declined to refer to the ECJ, presumably
believing the answer to be obvious, even though initiation of an administrative proceeding does
not suspend the three-year period in other parts of the EC.26
Question 149

 The EC's reply to Question No. 149 is notable for at least two reasons. First, the EC
persists in referring to "oblig ations" of cooperation among customs authorities that are extremely
general and/or non-binding in nature. Second, the examples of specific obligations of mutual
consultation that the EC provides all pertain to s ituations in which some specific administrative
action must be taken by two or more customs au thorities, usually because a good or conveyance is
necessarily moving between two or more EC member States during a time when the authorities
continue to have a regulatory interest in th e good or conveyance. In effect, these are the
exceptions that prove the rule. That is, as the only examples of binding provisions on mutual

19See US First Written Submission, para. 34; see also US Replies to 1st Panel Questions, para. 158.
20Case C-91/02, Hannl + Hofstetter , Judgment of Oct. 16, 2003 (not yet reported), para. 18 (Exh.
EC-143).
21Case C-91/02, Hannl + Hofstetter, para. 21 (Exh. EC-143).
22See US Replies to 1 st Panel Questions, paras. 156-60; US Second Written Submission, paras. 85-
98.
24Intermodal Transports, paras. 33 & 45 (Exh. US-71).
25Intermodal Transports, para. 37 (Exh. US-71).

consultation the EC can provide are examples involving situations that necessarily involve
regulatory action by two or more customs authorities, the logical inference to be drawn is that in
other situations there are no specific, binding provi sions on mutual consultation. Surely the EC
would have cited such provisions if they existed for other situations. Thus, in the routine case of a
good being imported into the territory of the EC , clearing customs, and entering the stream of
commerce in the EC (i.e. attaining the status of a Community good), there are no specific, binding
provisions on mutual consultation.
 The EC begins its reply by alluding again to Article 10 of the EC Treaty.
27 On this point,
the United States refers to its comment on the EC's reply to Question No. 147. Later in its reply,
the EC refers to its replies to the Panel's Question No. 55 and 56. 28 Those replies discussed the
Administrative Guidelines on the European Bindi ng Tariff Information (EBTI) System and its
Operation. At the outset, the EC confirmed that those guidelines "are not legally binding." 29 The
EC then went on to state that, taken in conjunc tion with EC Treaty Article 10, customs authorities
must take "due account of the administrative gui delines" and must "use all tools available to
ensure the proper and uniform admi nistration of EC customs law." 30 However, what this entails
and who decides whether "due account" has been taken of the non-binding administrative
guidelines, the EC never explains.
 In its reply to the Panel's Question No. 56, th e EC stated that where two or more member
States disagree on the correct classification of a good they " should consult with one another."
31
Nowhere does the EC explain which customs authority should initiate such consultations or within
what time period. Nor does the EC explain wh at happens if a customs authority in a given
member State declines to consult. Nor does it e xplain what happens if a member State believes
that there is no actual disagreement on classificatio n because (despite an importer's assertions) it
believes that the goods that it is considering ar e materially different from the goods that other
member States are considering.
 The EC went on to state that "[i]f the disagre ement persists, the matter must be raised to
the Customs Code Committee." It asserted that "[ i]n practice, the responsible official in the
member State concerned will submit the issue to the Commission." 32 A g a i n , t h e E C g a v e n o
explanation as to the time period within which su ch submission "will" be made. Nor did it explain
which of the member States is "the member Stat e concerned" that "will submit the issue to the
Commission" when there is a disagreement among two or more member States.
Further in its reply to Question No. 149, the EC refers to "a best practice guide which
deals with the exchange of information (i.e. c onsultation) between member States in relation to
valuation advice, rulings and audit (Exhibit EC-144)." 33 However, the document to which the EC
refers appears to be simply a report on "possible working tools to assist information exchange in
customs valuation matters." It is not eviden t from the report that the ideas discussed therein
actually acquired the status of a "best practice guide," let alone that they became binding in any
sense.

 Additionally, the EC refers to a regulation that sets out "a general framework for mutual
cooperation and assistance" under which customs au thorities have "the general right to request
relevant information" from one another.
34 As the EC's own description of that regulation makes

34EC Replies to 2nd Panel Questions, para. 24 (referring to Regulation 515/97 (Exh. EC-42)).

clear, it is not a specific operationalization of a duty to administer EC customs law uniformly. It is
simply, in the EC's words, "a general framework."
 The EC's reply to Question No. 149 does refe r to some specific obligations of mutual
consultation among customs authorities. However, as noted above, these all involve situations in
which two or more customs authorities necessarily have a regulatory in terest in a good or
conveyance. For example, the EC refers to its reply to the Panel's Question No. 79.
35 There, the
EC cited six instances in which the CCCIR requires mutual consultation between customs
authorities.36 The first instance it cited was Article 292(2) of the CCCIR. That article concerns
the situation in which a good is accorded preferen tial tariff treatment on entering the EC "subject
to end-use customs supervisions." In other word s, the preferential tariff treatment is dependent on
the good's end use, which is subject to customs au thority verification. Because the end use may
occur in the territory of a member State other than the member State into which the good was
imported, according the treatment at issue may require coordination between customs authorities.
 Another instance cited by the EC in wh ich the CCCIR requires consultation between
customs authorities is Articles 313a-313b. Those provisions concern the status of a "regular
shipping service." A service may acquire that stat us if it "carries goods in vessels that ply only
between ports situated in the customs territory of the Community."
37 Verifying compliance with
that requirement necessarily requires coordination among customs authorities in different parts of
the territory of the EC. In this respect, the re quirement of mutual consultation associated with the
regular shipping service provision is like the requi rement of mutual consultation associated with
the provision on preferential treatment subject to end-use customs supervision. The other
provisions cited in the EC's reply to Question No. 79 are to similar effect.
 Likewise, the examples of specific mutual consultation requirements that the EC provides
in the areas of valuation and customs procedures all involve situations in which multiple customs
authorities are involved in a given transaction.38
 The EC's reply to Question No. 149 makes cl ear that customs authorities in the EC may
not even be aware of how other customs authorities in other parts of the EC are administering EC
customs laws. Traders are under no obligation to inform one authority of decisions made by
another authority, except in the narrowest of circum stances. In the absence of such information, it
is almost impossible to imagine how the 25 inde pendent, regionally limited customs authorities in
the EC could administer EC customs laws in a uniform manner.
 In sum, the EC's reply to Question No. 149 shows that, with certain very narrow
exceptions, there are no binding provisions speci fically requiring mutual consultation between
authorities in the customs context. There are very general requirements (such as that set forth in
EC Treaty Article 10) and non-binding guidelines (such as the administrative guidelines on the
EBTI system). But, these general requirements and non-binding guidelines are not given
operational effect through specific requirements appli cable in the customs cont ext. Therefore, as
has been seen, where a customs authority in one member State classifies a good in a particular
way, for example, and that classification is brou ght to the attention of another authority in a
different member State, there is no rule requiring the latter authority to take any particular action in
light of that information on what the former authority has previously done.

37CCCIR, Art. 313a(1) (Exh. US-6).
38See EC Replies to 2 nd Panel Questions, paras. 21, 23. With respect to local clearance procedures
and processing under customs control, the EC notably states that "where such a procedure involves more
than one member State, exchange of information is practiced." Id., para. 23 (emphasis added). The EC
identifies no specific requirement for such information exchange; it simply asserts that such exchange "is
practiced."

Question 151

 In its reply to Question No. 151, the EC refe rs once again to the supposed requirement that
to establish a breach of GATT 1994 Article X:3(a) a party must show not only that there is an
absence of uniform administration, but also that the non-uniform administration exhibits a
"pattern."
39 As the United States has shown in previ ous submissions, Article X:3(a) contains no
such "pattern" requirement.40
Question 152 (b)

 In responding to Question No. 152(b), the EC ass erts that EC customs law "does not leave
a large measure of discretion to member States' customs authorities." 41 The EC thus appears to be
using the term "discretion" in a very narrow sen se, which fails to appreciate that when a customs
authority decides how to classify a good or how to value a transaction it necessarily exercises
discretion in the sense that it must use judgment. 42 As detailed as the EC's customs rules may be,
they are not so detailed as to exclude the possibility of differences of view as to how they should
be applied in particular cases. While in theory there may well be a single "right answer" as to how
a given good should be classified or valued, it is not the case that every customs authority will
necessarily and automatically always reach that theoretically right answer. Administering the EC's
customs laws requires the EC customs authorities to exercise judgment. Within the EC's customs
territory, there are 25 independent, geographica lly limited authorities, with different legal
traditions, applying such judgment, and there is an absence of institutions or procedures that
ensure that these authorities exercise their judgment in the same way. The combination of these
features necessarily results in non-uniform administ ration by the EC of its customs laws, in breach
of GATT 1994 Article X:3(a).
Question 155

 In its reply to Question No. 155, the EC asserts that the applicability of GATT 1994
Article X:3(a) to penalty provisions "depends on whether penalty provisions are among the laws
referred to in Article X:1 GATT."
43 As the United States has explained in prior submissions, this
argument confuses the distinction between a measure that is being administered and a measure that
is doing the administering, in the sense that the la tter gives effect to the former. For a measure to
be within the scope of Article X:3(a), the measure being administered must be within the scope of
Article X:1, and it is not relevant whether the ad ministering measure is also within the scope of
Article X:1. What is relevant is whether such administering measures (i.e. the tools of
administration) differ from customs authority to cu stoms authority within the territory of a WTO
Member. To the extent that they do (as is the case in the EC), they demonstrate non-uniform
administration of the Member's customs laws.
 Moreover, the EC's contention that "the subs tantive standards of Article X:3(a) GATT are
ill adapted to the application of penalties" 44 misses the relevance of Article X:3(a) to the issue of
penalties. The EC explains that the application of penalties requires that the relevant authority
have flexibility to take account of degree of gu ilt and other factors. However, the question of
flexibility in the application of penalties is not at i ssue in this dispute. What is at issue is the

39EC Replies to 2nd Panel Questions, para. 31; see also id., para. 37 (reply to Question No. 153).
40See US First Oral Statement, paras. 17-19; US Replies to 1 st Panel Questions, paras. 36-41; US
Second Written Submission, paras. 26-38.
42See New Shorter Oxford English Dictionary , Vol. I, pp. 688-89 (1993) (defining "discretion," as
relevant here, to mean "[t]he action of discerni ng or judging; judgment; decision, discrimination"); see also
US Second Written Submission, paras. 59-61.

disparity in the tools available to different aut horities within the Member's territory to respond to
identical infractions. It is that disparity that demonstrates non-uniformity of administration of the
customs laws, regardless of how penalty provisions are applied in any particular case.
 Finally, the EC continues to seek support fro m the contrast between the explicit reference
to penalties in Article VIII:3 of the GATT 1994 and the absence of such a refe rence in Article X.
However, as the United States explained in its second written submission, the fact that
Article VIII:3 sets substantive parameters for pe nalties 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 admi nistering a Member's customs laws. There, the
United States explained that the EC's argument w ould lead to absurd results as, for example,
justifying discrimination among WTO Members in th e application of penalties in view of the
absence of any reference to penalties in GATT 1994 Article I.
45 Similarly, the logic of the EC's
argument would seem to preclude Article X claims regarding the imposition of antidumping duties
or of fees or other charges commensurate with th e cost of services rendered, since both of those
types of charges are explicitly addressed in other GATT Articles (Articles VI and II:2(c),
respectively) but not in Article X. As these out comes plainly would be absurd, the EC's argument
that penalties are not covered by Article X b ecause they are addressed in other GATT articles
should be rejected.
Question 156

 In its reply to Question No. 156, the EC states that "[r]easonable assurance means that the
treatment a trader can expect from the aut horities of such member should be reasonably
predictable."46 At the outset, the Panel should note that there is no "reasonable assurance" test in
GATT 1994 Article X:3(a). A Member could administer its customs laws in a non-uniform
manner in breach of Article X:3(a), regardless of whether it gives traders "reasonable assurances"
as to how it will administer its laws and regulations.
 Having asserted without support a "reasonable assurances" test that it equates to a test of
whether the treatment a trader can expect is "reas onably predictable," the EC then goes on to state
that predictability should be examined in terms of "the overall pattern of administration."
47
 The United States does not see how the existence of a "pattern" relates to the question of
reasonable predictability of treatment. The treatment that authorities will accord traders may lack
reasonable predictability whether or not the authorities' administration of the customs laws exhibits
a pattern.
 The United States agrees that, as a factual matter, where a Member administers its customs
laws in a uniform manner, the treatment the Member accords traders should be reasonably
predictable. It should be emphasized that the r easonable predictability that a trader should expect
under a system of uniform administration is reasonable predictability as to how the Member will
administer its laws. It is irrelevant that the customs authority in one region within a Member's
territory may administer the Member's laws in a reasonably predictable manner. There would be
little point in an obligation to administer customs la ws uniformly if it could be satisfied simply by
the customs authority in one region within a Memb er's territory according reasonably predictable
treatment, regardless of the actions of authorities outside that region. For example, if a customs
authority in one region predictably behaves in one way, and a customs authority in another region
predictably behaves in another way, that predic tability changes nothing about the fact that the
overall behaviour is not uniform. If a Member is satisfying its obligations under GATT 1994
Article X:3(a), a trader will have its reasonable expectations met that it will be accorded the same

45US Second Written Submission, paras. 96-97.

treatment for the same situation across the Member's te rritory, not just in one or another part of it.
The EC's system of customs administration does not satisfy that altogether reasonable expectation.
Question 157

 In its reply to Question No. 157, the EC notes that "member States' authorities are not
prevented from issuing administrative gui delines or other non-binding documents for
administrative purposes."
48 While the EC goes on to state that such guidelines and administrative
documents cannot derogate from the application of EC customs law, this does not change the fact
that the guidelines and administrative documents ar e particular to the member State issuing them,
as is the interpretation of EC customs law that the member State is applying.
 An illustration of this point is the guidance issued by the customs authority in the United
Kingdom and the customs authority in France, respectively, regarding administration of the EC
law on processing under customs control. As the United States has demonstrated, these two sets of
guidance, on their face, take different approaches to the administration of that law. 49 Whether or
not that guidance is characterized as binding or non-binding, and whether or not the guidance can
be said to derogate from EC customs law, an a pplicant for authorization to engage in processing
under customs control reasonably would understand that the customs authority in the United
Kingdom will follow the steps identified in the UK guidance and the customs authority in France
will follow the steps in the French guidance. It is for this reason that the United States maintains
that the differences in the guidance are evidence of non-uniform administration.
Question 158

 The EC's reply to Question No. 158 begins by recalling the statement by the Panel in
Canada – Gold Coins that "the purpose of Article XXIV:12 GATT is to 'qualify the basic
obligation to ensure the observance of the Gene ral Agreement by regional and local government
authorities in the case of contracting parties with a federal structure.'"
50 That statement is
important, because it highlights why Article XXIV:12 of the GATT 1994 is not relevant to the
present dispute. Article XXIV:12 is relevant to "the observance of the General Agreement by
regional and local government authorities." This dispute, by contrast, does not concern the
observance of an obligation under the GATT 1994 by regional and local government authorities
but, rather, by the EC itself. 51 It is the EC that has an affirmative obligation under GATT 1994
Article X:3(a) to administer EC customs law in a uniform manner. For that reason, this dispute is
distinguishable from Canada – Gold Coins , which involved a provincial government adopting a
measure for the raising of provincial revenue – a power that Canada's constitution vested
exclusively in the provincial legislature 52 – in a manner that put Canada in breach of its obligation
under GATT 1994 Article III. In that dispute, South Africa complained that Canada had breached
its GATT 1994 Article III obligation by virtue of th e provincial legislation. Here, by contrast, the
United States is not arguing that the action of an y single member State itself brings about a breach
by the EC of its obligation under GATT 1994 Article X:3(a). Rather, the United States is arguing
that the EC has breached its obligation under GATT 1994 Article X:3(a) by virtue of its failure to
administer its customs law – "federal" law, to use the EC's term – in a uniform manner.
 Second, even if Article XXIV: 12 were relevant to this dispute, it would not excuse the EC
from its obligation under Article X:3(a) or in any wa y affect its obligation under that Article. As

49See US Replies to 2nd Panel Questions, paras. 71-72, 73-78.
50EC Replies to 2nd Panel Questions, para. 46 (quoting GATT Panel Report, Canada – Gold Coins,
para. 53). The Panel should note that the GATT Panel report in Canada – Gold Coins was never adopted.
51See US Second Written Submission, paras. 13-17.
52See GATT Panel Report, Canada – Measures Affecting the Sale of Gold Coins , L/5863, para. 8
(17 September 1985, unadopted) ("Canada – Gold Coins").

paragraph 13 of the Understanding on the Interpretation of Article XXIV of the General Agreement
on Tariffs and Trade 1994 ("Understanding on Article XXIV") makes clear, "Each Member is
fully responsible under GATT 1994 for the observance of all provisions of GATT 1994. . . ." That
is, Article XXIV:12 imposes an obligation on Members with federal structures to take "reasonable
measures" to "ensure observance" by local or regional governments of a Member's obligations, but
Article XXIV:12 does not purport to alter the content of any GATT 1994 obligation for such
Members. Additionally, even where observan ce of WTO obligations by regional or local
governments is at issue, paragraph 14 of the U nderstanding on Article XXIV and Article 22.9 of
the Understanding on Rules and Procedures Governing the Settlement of Disputes ("DSU")
provide that "[t]he provisions of Articles XXII and XXIII of GATT 1994 as elaborated and applied
by the [DSU]" and "[t]he provisions of the cove red agreements and [the DSU]," respectively,
"relating to compensation and suspension of con cessions or other obligations apply in cases where
it has not been possible to secure such obser vance." Therefore, even if, pursuant to
Article XXIV:12, the EC's only obligation unde r Article X:3(a) were to take "reasonable
measures" to secure uniform administration of EC customs law, its failure to actually administer
its customs law in a uniform manner would not excuse it from relevant provisions on
compensation and suspension of concessions.
53
 Third, the United States notes that the EC states that it "has not invoked Article XXIV:12
GATT as a primary defence in the present case."54 That statement is important, because it implies
that the EC in fact has invoked Article XXIV:12 as a defense, just not a "primary" defense.
Previously, the EC had not actually "invoked Article XXIV:12 GATT as a . . . defence," but
merely referred to it as "support" for its pr oposed interpretation of GATT 1994 Article X:3(a). 55
This distinction is significant, because actua lly invoking Article XXIV:12 as a defense would
carry with it a burden to demonstrate that lapses in the uniform administration of EC customs law
concern matters "which the central government ca nnot control under the constitutional distribution
of powers."
56 If the EC is now arguing that it is not able to control the administration of customs
law by the customs authorities in the member States under its constitutional distribution of powers,
this only reinforces the point that the EC is not meeting its obligation to administer its customs law
uniformly under Article X:3(a).
 Finally, the EC's reply to Question No. 158 assumes that the US claims demand "creation
of an EC customs agency, and [sic] EC customs court, and the harmonization of member States
law notably in the area of penalties," and proceeds to argue that these are not reasonable
measures.
57 In fact, the EC mischaracterizes the US claims and thus responds to an argument the
United States does not make. The United States has ne ver insisted that the EC must create an EC
customs agency and an EC customs court and harm onize member States' laws. The United States
simply argues that the EC, like other WTO Members, must administer its customs laws in a
manner consistent with GATT 1994 Article X:3(a) and provide tr ibunals or procedures for the
prompt review and correction of administrative action relating to customs matters that comply
with Article X:3(b).
Question 159(b)

 In its reply to Question No. 159(b), the EC states that "[i]t is not for the EC, but for the US
as the complainant in the present cas e, to provide evidence" that c onclusions of the Customs Code

53See GATT Panel Report, Canada – Gold Coins , paras. 61-65 (discussing Canada’s obligation to
compensate South Africa until efforts pursuant to Ar ticle XXIV:12 bring Canada into compliance with
Canada’s obligation under Article III).
54EC Replies to 2nd Panel Questions, para. 49 (emphasis added).
56GATT Panel Report, United States – Measures Affec ting Alcoholic and Malt Beverages , BISD
39S/206, para. 5.79 (adopted 19 June 1992); see also US Second Written Submission, para. 17 & n.17.

Committee do not typically reflect a common approach of the member States or that they are not
adopted by consensus.
58 The EC's characterization of the burden of proof is wrong. It is "the party
who asserts a fact, whether the claimant or the res pondent, [that] is responsible for providing proof
thereof."59 In this case, it is the EC in rebuttal that has asserted that issuance of conclusions of the
Customs Code Committee is a procedure for ensuring uniform administration because the
conclusions are adopted by consensus. Therefore, it is the EC that has the burden to substantiate
that proposition. Indeed, the EC is uniquely positioned to demonstrate whether opinions of the
Customs Code Committee typically reflect a common approach agreed by all member States since
it alone has access to the full documentation evidencing the deliberations of the Committee.
 In any event, to the extent the evidence in this disput e has addressed the relationship
between opinions of the Customs Code Committ ee and the approach of member States, the
evidence has shown a prominent example of the two not being in accord. Specifically, in the LCD
monitors case, the customs authorities in at le ast two member States have taken approaches to
classification of the goods at issue that are at odds with the corresponding Customs Code
Committee conclusion.
60
Question 159(d)

 In its reply to Question No. 159(d), the EC states that it "is not sure how the
characterization of the Customs Code Committee will affect the Panel's analysis" since the United
States "[is] not challenging the manner in which the Customs Code Committee operates."61 As the
United States explained in its answer to Questi on No. 134, the way in which the Customs Code
Committee operates is relevant to the US Article X:3(a) claim because the Committee is one of the
institutions that the EC holds out as ensuring that the EC administers its customs laws uniformly.
The United States refers the Panel to its answer to that question for a fuller discussion of this
issue.62
Question 161

 In reply to Question No. 161, the EC states that it is not aware of customs authorities in
certain member States declining to treat as bi nding BTI issued by other customs authorities for
network cards and for drip irrigation products. The Panel should note, however, that the EC's
reply focuses narrowly on whether BTI issued to a particular "holder" for the products at issue
were ever not honored by customs authorities other than the issuing authority. More relevant is
the undeniable fact that these products were subject to divergent classification by different customs
offices within the EC, and these divergences were not resolved promptly and as a matter of right.
Thus, in the Peacock case, the Advocate General observed that "customs authorities of various
Community member States issued conflicting BTIs classifying items of LAN equipment variously
under headings 8471, 8473 and 8517."
63 Likewise, with respect to drip irrigation products, the EC
does not deny that there was a divergence of clas sification between different customs authorities.
Rather, it simply characterizes the divergence as "a case of temporarily diverging BTI." 64
"Temporarily diverging BTI" means that customs au thorities in different member States classified
materially identical products differently, such th at the EC was undeniably not administering EC
customs law uniformly.

59Appellate Body Report, United States – Measure Affecting Imports of Woven Wool Shirts and
Blouses from India, WT/DS33/AB/R and Corr.1, p. 14 (adopted 23 May 1997).
60See US Second Oral Statement, paras. 54-56.
62US Replies to 2nd Panel Questions, paras. 42-44.
63Peacock AG v. Hauptzollamt Paderborn, Case C-339/98, Opinion of the Advocate-General, 2000
ECR I-08947, para. 15 (28 October 1999) (Exh. US-17).
64EC Second Written Submission, para. 141.

Question 165

 The EC's reply to Question No. 165 concerning the role of the European Ombudsman in
the area of customs administration should be understood in the context of the Ombudsman's
mandate. In particular, as the guide entitled "T he European Ombudsman at a Glance" explains,
"The Ombudsman cannot investigate complaints agai nst national, regional or local authorities in
the member States, even when the compla ints are about European Union matters."
65 This point is
confirmed in a recent Ombudsman decision (presuma bly one of the four to which the EC referred
in its reply to Question No. 165). 66 The decision involved the purchase by a company in the
Netherlands of shoes from a seller in Finland which were accompanied by certificates of origin
issued by the Finnish authority that read "Hong Kong, China." The customs authority in the
Netherlands was unsure whether this meant that the shoes originated in Hong Kong or in China (a
significant difference, as shoes originating in Ch ina would be liable for antidumping duties). The
authority in the Netherlands began an investigati on into the origin of the goods. Subsequently, the
authority in Finland issued revised certificates of origin that read "Hong Kong." However, rather
than simply accept those certificates, the authority in the Netherlands contin ued its investigation,
ultimately concluding that the shoes were of Ch inese origin. This led to an assessment of
antidumping duties and then to a series of tran sactions between the Dutch company, the Dutch
customs authority and the EC Commission. The Commission's actions ultimately led the company
to file a complaint with the Ombudsman. In its decision, the Ombudsman made clear that the
company's inquiry "does not concern the decision taken by the Dutch customs authorities or the
allegedly erroneous certificates of origin deliv ered by the Finnish Chamber of Commerce.
Regarding these matters, the complainant has th e possibility to lodge complaints with the
respective national ombudsmen in the Netherlands and in Finland."
67
Question 168(a)

 In reply to Question No. 168(a), the EC stat es that "the duty of cooperation is legally
binding and directly applicable on all member States. It can and has been enforced." 68 A s t h e
United States explained in its comment on the EC's reply to Question No. 147, the relevant
question is not whether EC Treaty Article 10 is "l egally binding and directly applicable." The
relevant question is whether the very broad, overarching obligation set forth in Article 10 is made
operational in the customs area through specific rul es that would ensure uniform administration.
The answer is that it is not. For a full discussion of this issue, the United States refers the Panel to
its comment on the EC's reply to Question No. 147.
Question 168(b)
 In its reply to Question No. 168(b), the EC purports to describe what the Panel "held" in
Argentina – Hides. Specifically, it asserts that "[t]he Panel held that [Argentina's Resolution 2235]
constituted a violation of Article X:3(a) GATT because it made it impossible for Argentina to
administer its customs laws in a manner that was reasonable and impartial." 69 Notably, the portion
of the Argentina – Hides report that the EC cites in support of this proposition is not the Panel's
finding, but rather, the Panel's summary of the EC's argument. 70 It was the EC as complainant, not

65The European Ombudsman at a Glance, p. 2 (Exh. US-82).
66Decision of the European Ombudsman on complaint 1817/2004/OV against the European
Commission (7 November 2005) (Exh. US-83).
67Decision of the European Ombudsman on complaint 1817/2004/OV against the European
Commission, The Decision, para. 1.2 (7 November 2005) (Exh. US-83).
70Panel Report, Argentina – Measures Affecting the Export of Bovine Hides and
Import of Finished Leather, WT/DS155/R and Corr.1, para. 11.58 (adopted 16 February 2001) ("Argentina –
Hides").

the Panel, that contended that the Argentinian m easure at issue made the "impartial application of
the relevant customs rules impossible." Indeed, the very fact that the Panel did not adopt the EC's
characterization that the Argentinian measure ma de it "impossible" for Argentina to meet its
Article X:3(a) obligation suggests that the Panel did not rely on that characterization. This point is
supported by the fact that, although the Panel ultim ately concluded that Argentina's administration
of its customs law was not impartial, it did so for reasons other than that urged by the EC.
Significantly, it did not accept the EC's argument th at the mere presence of representatives of the
domestic tanning industry at the port upon the expo rtation of raw hides necessarily resulted in a
breach of the obligation of impartial administration.
71

 Second, the EC's reply to Question No. 168(b) indicates that the EC disagrees with the US
statement that in Argentina – Hides , the EC challenged the same Argentinean measure from the
perspective of its substance and from the perspec tive of its character as a tool for administering
other laws. On this point, the United States refers the Panel to paragraph 4.203 of the Panel report
in Argentina – Hides, which substantiates the US statement.
72
Finally, with respect to the EC's statement that "[n]owhere does the Panel Report in
Argentina – Hides indicate that the Argentinean measure administered some other measure," 73 the
United States refers the Panel to paragraph 11.72 of the Argentina – Hides report. There, the Panel
concludes that the measure at issue "merely pr ovides for a certain manner of applying those
substantive rules i.e. Argentina's customs laws]. This measure clearly is administrative in nature."

Question 168(c)

 In its reply to Question No. 168(c), the EC states that "Article X GATT does not
distinguish between 'laws' which are of 'subs tantive' character and others which are of
'administrative' character."
74 However, Article X:3(a) plainly does refer to certain "laws,
regulations, decisions and rulings" and to the ma nner in which a Member must administer such
"laws, regulations, decisions and rulings." A rele vant question, therefore, is how the manner of
administration of those laws, regulations, decisions and rulings is evidenced. As the Panel in
Argentina – Hides recognized, the manner of administrati on may be evidenced by other measures
that prescribe the way in which the laws, regulations , decisions and rulings are given effect. Such
other measures may appropriately be described as being administrative in character. From this
perspective, the laws, regulations, decisions a nd rulings that are being administered may be
described as being substantive in character. To the extent that a measure that is administrative in
character is evidence of the non-uniform administra tion of laws, regulations, decisions and rulings
that are substantive in character, the administ rative measure can be considered as part of a
challenge to a Member's failure to administer its laws uniformly under Article X:3(a).75
 The EC next proceeds to introduce a new argument in which it contends that all of the
laws in Article X:1 could be considered administra tive in character in the sense that they "need to
be administered." 76 T h e E C t h u s a t t e m p t s t o m a k e a reductio ad absurdum type argument.
However, its premise that what makes a law "admin istrative" is the "need to be administered" is
incorrect. In fact, what makes a law administra tive is that it provides for a certain manner of

71See Panel Report, Argentina – Hides , para. 11.99 ("Much as we are concerned in general about
the presence of private parties with conflicting commercial interests in the Customs process, in our view the
requirement of impartial administration in this dispute is not a matter of mere presence of ADICMA
representatives in such processes.").
72See also US Second Written Submission, para. 86.
75See US Second Written Submission, paras. 85-95; US Replies to 2d Panel Questions, paras. 25-
28, 35-41.

applying substantive rules. For further discussion on this point, the United States refers the Panel
to its answer to Question No. 130.
77
 The EC goes on to argue that penalty provisions cannot be administrative in nature
because they are "themselves laws to be administered." 78 In this regard, the EC makes the error of
assuming that a law that is administrative in character cannot itself be administered. That simply
is not true.
79
 Finally, the EC professes confusion with rega rd to the US discussion of audit procedures
as tools, like penalty provisions, that administer EC customs laws in a non-uniform manner. The
EC states that it fails to see "the parallel" between audit procedures and penalty provisions. 80 In
fact, the United States has been quite clear in artic ulating the parallel. Like penalty provisions,
audit procedures do not prescribe substantive customs rules, but rather, they are tools for verifying
and enforcing compliance with substantive rules, wh ich are set forth elsewhere. To the extent that
different customs authorities in the EC use very different audit procedures, they administer
substantive EC customs rules differently, just as is the case with different penalty provisions. 81
Indeed, the EC does not even assert that its 25 independent, geographically limited customs
authorities administer EC customs law uniformly th rough the use of audit procedures. It merely
states quite vaguely that they "have the necessary audit capacities, and are guided by the
Community Customs Audit Guide."82
Question 168(d)

 In its reply to Question No. 168(d), the EC states that it has referred to Article X:3(a) as a
"minimum standard" provision to clarify "the object and purpose of the provision."
83 The United
States disagrees with the EC's suggestion that an object and purpose can or need be attributed to an
individual treaty provision. Article 31(1) of the Vienna Convention on the Law of Treaties
("VCLT") provides that "[a] treaty shall be inte rpreted in good faith in accordance with the
ordinary meaning to be given to the terms of the tr eaty in their context and in the light of its object
and purpose." It is apparent that the "its" be fore "object and purpose" refers to the singular
"treaty," rather than to the plural "terms of the treaty." This view has been confirmed, for
example, by the Panel in US – Corrosion-Resistant Steel Sunset Review , which refers explicitly to
the "object and purpose of the treaty,"84 and the Appellate Body in EC – Hormones , which
discusses "the treaty's object and purpose."85
 Having purported to identify what it calls the "object and purpose" of Article X:3(a), the
EC goes on to state that "[i]n accordance with cu stomary rules of treaty interpretation, this limited
object and purpose of Article X:3(a) GATT must guide the interpretation of the provision by the
Panel."86 However, as already noted, the EC's approa ch is not in accordance with customary rules
of treaty interpretation, which provide for interpretation of a treaty in light of the treaty's object
and purpose. The EC's approach, in fact, turns customary rules of interpretation on their head.

77US Replies to 2nd Panel Questions, paras. 25-28.
79See US Second Oral Statement, paras. 76-77; US Replies to 2nd Panel Questions, para. 26 n.22.
81See US First Written Submission, paras. 97-99.
84Panel Report, United States – Sunset Review of Antidumping Duties on Corrosion-Resistant
Carbon Steel Flat Products from Japan , WT/DS244/R, para. 7.44 (adopted 9 Janaury 2004, as modified by
Appellate Body report) (emphasis added) ("US – Corrosion-Resistant Steel Sunset Review").
85Appellate Body Report, EC – Measures Concerning Meat and Meat Products , WT/DS26/AB/R,
WT/DS48/AB/R, para. 104 (adopted 13 February 1998) (emphasis added) ("EC – Hormones").
86EC Replies to 2nd Panel Questions, para. 84 (citing Article 31(1) of the Vienna Convention on the
Law of Treaties).

Rather than ascertaining the meaning or "purpose" of an individual treaty provision by examining
the ordinary meaning to be given to the terms of the treaty in their context and in the light of
treaty's object and purpose, the EC attempts first to identify a priori what it calls "the object and
purpose" of Article X:3(a) and then urges that this supposed "object and purpose" "guide the
interpretation of the provision."
 The EC's approach also is troubling in that it invites the possibility of adding to or
diminishing rights and obligations under the covered ag reement at issue. It should not be left to
parties to a dispute to divine "purposes," since a party may simply use this as an opportunity to re-
write the provision – which is precisely what the EC is doing in characterizing Article X:3(a) as a
"minimum standard" provision.
 Nowhere does Article X:3(a) or any ot her provision of the GATT 1994 articulate an
"object and purpose" that supports a characteriza tion of Article X:3(a) as a "minimum standard"
provision. In construing WTO agreements, the Appe llate Body has consistently looked to the text
of the relevant agreement to identify its object and purpose.
87 Here, however, the EC purports to
derive an "object and purpose" not from agreemen t text, but from a passing reference in an
Appellate Body report in a context unrelated to that of the present dispute, and in which the phrase
"minimum standard" was not in fact used to describe any supposed "object and purpose" of
Article X:3(a). This is a perfect example of the danger of pursuing treaty interpretation in the
manner the EC has proposed. The EC has selected an isolated statement about Article X:3(a) from
outside the text of the GATT 1994, labeled that statement as the "object and purpose" of
Article X:3(a), and then attempte d to leverage that statement to an entirely self-serving end.
Because it is contrary to customary rules of treaty interpretation, the EC's characterization of this
"object and purpose" should be rejected.
Question 168(e)

 The EC's reply to Question No. 168(e) repeats the EC's position that preliminary
references to the ECJ are an instrument of ensu ring uniform administration, but it does not show
how that position can be reconciled with the EC's view that Articles X:3(a) and X:3(b) set forth
discrete obligations without any inherent link. In fact, in prior submissions, the EC has portrayed
the ECJ as an entity that has a "cooperative relationshi p" with and "helps" the review courts in the
member States, working with them to ensure th at they interpret and apply EC law correctly. 88 The
ECJ thus would appear to play an integral role in the review process. At the same time, the EC
describes the decisions of the ECJ as important in struments for ensuring uniform administration.
In this sense, the EC appears to acknowledge a clear link between the function of uniform
administration and the function of review of administrative action. As the EC's own
characterizations support the existence of a link between uniform administration and the review

87See, e.g., Appellate Body Report, European Communities – Conditions for the Granting of Tariff
Preferences to Developing Countries , WT/DS246/AB/R, para. 92 (adopted 20 April 2004) (object and
purpose identified through examination of preamble of WTO Agreement and text of Enabling Clause);
Appellate Body Report, United States – Continued Dumping and Subsidy Offset Act of 2000 ,
WT/DS217/AB/R, WT/DS234/AB/R, para. 311 (adopted 27 January 2003) (overall object and purpose of
DSU expressed in Article 3.3 of that agreement); Appellate Body Report, Chile – Price Band System and
Safeguard Measures Relating to Certain Agricultural Products , WT/DS207/AB/R, paras. 140-42 (adopted
23 October 2002) (referring to Articles 3.4 and 3.7 of DSU to describe its object and purpose); Appellate
Body Report, Argentina – Safeguard Measures on Imports of Footwear , WT/DS121/AB/R, para. 95
(adopted 12 January, 2000) (referring to preamble of Safeguards Agreement to identify its object and
purpose).
88EC Replies to 1 st Panel Questions, para. 174 ("[preliminar y reference] procedure is based on a
cooperative relationship between the Court of Justice and national courts"); EC Second Written Submission,
para. 244 ("ECJ does not review national customs administration decisions, but it helps the national courts in
such a review."); EC First Written Submission, para. 470 (same).

and correction of administrative action, its conten tion that Article X:3(a) does not provide context
for Article X:3(b) should be rejected.
Question 169

 In its reply to Question No. 169, the EC expl ains that tribunals in the EC member States
are "organs of the EC" by virtue of "the prelimin ary reference procedure to the ECJ and . . . the
basic principles of primacy of Community law and direct effect."
89 It follows, according to the
EC's argument, that these features qualify member State tribunals as the tribunals for prompt
review and correction that the EC provides to fulfil its obligation under GATT 1994
Article X:3(b).
 What is notable about this line of reasoning is that it implies that the actions that the EC
takes to fulfil its Article X:3(b) obligation are indistinguishable from the actions that the EC's
member States take to fulfill their Article X:3(b) obligations. The very same tribunals that the EC
member States maintain for the prompt review a nd correction of administrative action relating to
customs matters are the tribunals that the EC maintains for that same purpose, according to the EC.
Thus, the EC appears to reason that if the indi vidual member States are complying with their
obligations under Article X:3(b) then the EC ne cessarily is complying with its obligation under
Article X:3(b).
 However, the fact that the same tribunal ma y be considered, as a matter of internal EC
law, as both a member State tribunal and an EC tribunal does not mean that it meets the
requirements of GATT 1994 Article X:3(b) with respect to both the EC and the member State's
obligations. As the United States has discussed in prior submissions, one of characteristics that a
tribunal must have to satisfy a WTO Member's oblig ation under Article X:3(b) is that its decisions
must "govern the practice of" "the agencies entrusted with administrative enforcement."
90 Plainly,
"the agencies entrusted with administrative en forcement" means something different from the
point of view of an EC member State than it does from the point of view of the EC.
 With respect to France, for example, "t he agencies entrusted with administrative
enforcement" are the French customs authorities. With respect to the EC, "the agencies entrusted
with administrative enforcement" are the 25 inde pendent, geographically limited customs offices
of the EC. It may well be that the decisions of a French review tribunal govern the practice of the
agencies entrusted with administrative enforcement in France. However, they indisputably do not
govern the practice of the agencies entrusted with administrative enforcement of EC customs law
throughout the EC. In this sense, the fact that the French tribunal may satisfy France's obligation
under Article X:3(b) does not mean that it also sa tisfies the EC's obligation. In sum, although as a
matter of EC law a tribunal may serve a dual func tion as both a member State tribunal and an EC
tribunal, this does not mean that it also satisfies both the member State's obligation under
Article X:3(b) and the EC's obligation under Article X:3(b).
Question 173

 In its reply to Question No. 173, the EC st arts by drawing a distinction between "the
administration of customs law" and "measures of general application wh ich constitute the EC's
system of customs administration," as if these two things were entirely unrelated.
91 In fact, they
are not unrelated at all. To the extent that me asures of general appli cation which constitute the
EC's system of customs administration (or the absence of certain measures) result in non-uniform
administration, they establish that the EC admini sters its customs laws in a manner inconsistent

90See US Replies to 2 nd Panel Questions, para. 81; US Second Oral Statement, paras. 83-85; US
Second Written Submission, paras. 102-09; US Replies to 1st Panel Questions, paras. 135-40.

with GATT 1994 Article X:3(a). As discussed in the US response to Question No. 126, the design
and structure of the EC's system of customs administration establish that very conclusion.
92
 The EC proceeds to assert that to establish that the EC's system of customs administration
"as such" leads to non-uniform administration, the United States must provide "evidence regarding
the consistent application of the law,"
93 citing the Appellate Body reports in US – Carbon Steel ,
US – Oil Country Tubular Goods Sunset Reviews , and US – Oil Country Tubular Goods from
Mexico.94 However, that is not what the reasoning in these reports demonstrates. Even in the
quotation from US – Carbon Steel which the EC cites, it is clear that, in looking at the meaning of
a municipal law, it is not required to produce evidence of the la w's application; rather, evidence
from the text of the law itself "may be supported, as appropriate, by evidence of the consistent
application of such law[]." 95 The fact that in the disputes cited by the EC the complaining parties
introduced such evidence (because other, more direct, evidence did not support their position), and
that the quality of that evidence therefore had to be examined, does not mean that such evidence is
required (given, in particular, the Appellate Body statement in US – Carbon Steel).
 In contrast to disputes in which other typ es of evidence may have been "appropriate," in
the present dispute, the United States has demonstrat ed that the design and structure of the EC's
system of customs administration necessarily resu lts in the non-uniform administration of EC
customs law, in breach of Article X:3(a). In particular, the fact that the EC administers its customs
laws through 25 independen t, regionally limited offices, without any institution or procedure that
ensures that divergences of administration do not occur or that promptly reconciles them as a
matter of course when they do occur, necessarily results in non-uniform administration in breach
of GATT 1994 Article X:3(a).
Further, the United States notes that the EC's discussion of US – Oil Country Tubular
Goods from Mexico relates not to Article X:3(a) of the GATT 1994, but rather, to Mexico's claim
under Article 11.3 of the Antidumping Agreement . In fact, Mexico had asserted a GATT 1994
Article X:3(a) claim in addition to its Antidumping Agreement claim. In addressing that claim, the
Appellate Body stated,

In our view, an assessment of the USDOC's determinations for
the purpose of determining whether the USDOC administers
United States laws and regulations on sunset reviews in a
uniform, impartial, and reasonable manner in accordance with
Article X:3(a) of the GATT 1994 entails an inquiry much
different from that involved in determining whether the SPB
instructs the USDOC to treat certain scenarios as conclusive or
determinative contrary to Article 11.3 of the Anti-Dumping
Agreement. Therefore, in the absence of any consideration by the
Panel of this claim, we are not in a position to rule on it.
96
 For this reason as well, the report in US – Oil Country Tubular Goods from Mexico fails to
support the EC's characterization of what is required to support a claim under GATT 1994
Article X:3(a).

92US Replies to 2nd Panel Questions, paras. 9-16.
94EC Replies to 2nd Panel Questions, paras. 95-98.
95Appellate Body Report, United States – Countervailing Duties on Certain Corrosion-Resistant
Carbon Steel Flat Products from Germany , WT/DS213/AB/R and Corr.1, para. 157 (adopted
19 December 2002) (emphasis added) ("US – Carbon Steel").
96Appellate Body Report, United States – Anti-Dumping Measures on Oil Country Tubular Goods
(OCTG) from Mexico , WT/DS282/AB/R, para. 218 (adopted 28 November 2005) (" US – Oil Country
Tubular Goods from Mexico").

Question 174

 In its reply to Question No. 174, the EC acknowledges that "the effect of administration on
traders is a relevant consideration in the interp retation of Article X:3(a) GATT," but then states
that "this does not mean that individual instances of administrative error, which can be corrected
through administrative and judicial mechanisms provided by a WTO Member's system, can be
regarded as constituting a violation of Article X:3(a) GATT."
97 However, a central issue in this
dispute is not whether "individual instances of administ rative error . . . can be regarded as
constituting a violation of Article X:3(a) GATT. " The United States has not made any such
allegation. Rather, with respect to errors, the issue is who decides what is error.98 In the EC, each
of 25 independent, geographically limited customs authorities, with different legal traditions,
decides for itself what is the correct interpretation of EC customs law and what is error. That is,
there is no EC institution or procedure that ma kes the EC's customs o ffices take these decisions
uniformly across all of its 25 member States. If, in a given case, an affected person believes that
one of these 25 authorities has erred, he may appeal to a tribunal which, again, is geographically
limited. Only if a Commission or member State representative exercises his discretion to refer a
matter to the Customs Code Committee, or if a memb er State court exercises its discretion to refer
a question to the ECJ, might an entity with EC-wid e authority say definitively what is correct and
what is error. This aspect of the EC syst em of customs administration – the EC does not
administer its customs law uniformly across its customs territory in the first instance – is
inconsistent with GATT 1994 Article X:3(a).
 Additionally, the EC asserts that effects on trad ers are relevant to burden of proof and then
states that the United States has failed to show effects on traders and therefore failed to discharge
its burden of proof.
99 This charge is wrong for at least two reasons. First and foremost, as the EC
acknowledges in its reply to Question No. 175, the United States has no obligation to prove
damages in order to prevail on its Article X:3(a) claim. 100 Second, the EC's discussion of trade
effects mis-reads the Panel report in Argentina – Hides . As relevant here, that report noted that
consideration of an Article X:3(a) claim requires "a n examination of the real effect that a measure
might have on traders operating in the commercial world." 101 The Panel was referring not
necessarily to measurable effects, such as increa sed customs duties, but to a qualitative impact on
the competitive environment. This is evident from the next two sentences in the Panel report. The
Panel acknowledged that there is no requirement to show trade damage. But, it said, determining
whether there has been of breach of Article X:3(a) "can involve an examination of whether there is
a possible impact on the competitive situation due to alleged partiality, unreasonableness or lack of
uniformity in the application of customs rules, regulations, decisions, etc."102
 In Argentina – Hides itself, it was not evident from the Panel report that the right of
domestic industry representatives to be present durin g the completion of customs formalities prior
to the export of raw hides increased costs to exporters or to foreign purchasers of those hides.
Nevertheless, this right did alter the competitiv e environment, inasmuch as domestic industry
representatives were able to see exporters' confidential business information. Similarly, the non-
uniformity of administration of EC customs la ws alters the competitive environment without
necessarily affecting traders' liability for customs duties in a given case. For example, a trader
may effectively be compelled to modify its shipping patterns to account for the non-uniform

98See generally US Second Written Submission, para. 60.
101Panel Report, Argentina – Hides, para. 11.77 (emphasis added).
102Panel Report, Argentina – Hides, para. 11.77 (emphasis added).

administration. This has been the case, notably , with respect to imports into the EC of LCD
monitors.
103
 In fact, the EC's reply to Question No. 174 refers to the case of LCD monitors, offering
this as an example of the absence of any effect on traders, in view of the temporary duty
suspension regulation. However, as the United States pointed out in its answer to Question
No. 137(b), to view the LCD monitors case as a case involving no effects on traders requires an
observer to take an exceedingly narrow view of what constitutes effects on traders.
104
Question 175

 The EC's reply to Question No. 175 begins with the observation that "there is no
requirement to show 'trade damage' in order to prove a violation of Article X:3(a) GATT,"
105 a
point with which the United States agrees. 106 The EC then turns to the question of "whether the
complainant has suffered nullification and impair ment within the meaning of Article XXIII
GATT."107 The EC then wrongly describes nullification and impairment as being limited to effects
on traders' duty liability. 108 In fact, there are other ways in which benefits accruing to the United
States under the GATT 1994 may be nullified or impa ired as a result of the EC's non-uniform
administration of its customs laws. For example, benefits accruing to the United States are
nullified or impaired if traders effectively are compelled to alter shipping patterns or incur
additional costs as a result of the EC's non-uniform administration.
 Further, the EC's reply makes reference to paragraph 54 from the EC's oral statement at
the second Panel meeting. 109 There, the EC asserted that if tr aders "achieve optimal classification
of their goods" under the EC's system of non-uniform administration, then there is no nullification
or impairment to speak of. However, the EC has provided no reason to believe that traders do, in
fact, "achieve optimal classification of their goods" under the EC's system of non-uniform
administration. Therefore, the EC has failed to rebut the presumption that its infringement of its
obligations under GATT 1994 Article X:3(a) constitute a case of nullification or impairment.
110
 Moreover, the EC's line of reasoning concer ning traders achieving "optimal classification
of their goods" leads to absurd results. Under a system of non-uniform administration of customs
laws, as in the EC, there may be a theoretically opt imal way to take advantage of the system. For
a trader with time and resources, it may be possi ble to identify the region that offers the ideal
approach to classification and valuation, with th e lowest risk of imposition of penalties or other
costs. Of course, for small exporters or exporters that ship on an infrequent basis, the costs of
identifying how best to take advantage of the non-un iform system may be excessive. In short, just

103See US First Written Submission, para. 74 n.70; US Second Oral Statement, para. 52; see also
id., para. 21 (divergence in classification of drip irrigation products effectively compelled exporter to modify
shipping practices).
104US Replies to 2 nd Panel Questions, paras. 56-60; see also US Second Oral Statement, paras. 52-
59. In its reply to Question No. 174 (para. 101) the EC suggests (as it has in prior submissions) that the
number of responses that the United States received to its invitation for public comment on the issues in this
dispute is a relevant consideration for the Panel. In fact, it is entirely irreleva nt, which is why the United
States has refrained from answering such statements. The United States simply would remark that there are
multiple ways in which traders communicate with US government agencies. Written submissions in
response to formal calls for comment are only one such way. Not surprisingly, given the public nature of
such comments and the fact that stakeholders must deal with EC customs authorities on a day-to-day basis,
some stakeholders prefer to convey their views through other channels.
106See US Replies to 2nd Panel Questions, para. 102.
109EC Replies to 2nd Panel Questions, para. 104 n.87.
110See DSU, Art. 3.8.

because it may be theoretically possible to identify optimal treatment under a system of non-
uniform administration does not mean that there is a lack of nullification or impairment. Nor, of
course, does it mean that there is no breach of the GATT 1994 Article X:3(a) obligation of
uniform administration.
Question 176

 The EC's reply to Question No. 176 focuses on the relevance of GATT 1994
Article XXIV:12 to the EC's ob ligation under GATT 1994 Article X:3(a). The same issue is
addressed in the EC's reply to Question No. 158. Accordingly, the United States refers the Panel
to its comments on the EC's reply to that ques tion, above. The only further comment that the
United States adds is to note that in its reply to Question No. 176, the EC frames the relevant issue
as whether "WTO Members, at the time of conclusion of the Marrakech Agreement, had wished to
subject the EC to any special standards."
111 The United States agrees that in concluding the
Marrakesh Agreement the WTO Members did not s ubject the EC to "special standards." The
implications of that fact are not only that th e EC is subject to the same rights as other WTO
Members but also that it is subject to the same obligations as other WTO Members. That is
precisely why it would be inappropriate to constr ue GATT 1994 Article X:3(a) through the lens of
the EC's unique constitutional structure.

ANNEX B-4

COMMENTS OF THE EUROPEAN COMMUNITIES ON THE UNITED STATES'
RESPONSES TO QUESTIONS POSED BY THE PANEL AFTER THE SECOND
SUBSTANTIVE MEETING

(14 December 2005)

QUESTIONS POSED TO THE UNITED STATES

 In its present submission, the EC provides its comments on the replies of the US to the
Questions of the Panel after the second substantiv e meeting. Given the advanced stage of the
proceedings, the EC will, in the present submissi on, focus on arguments which are made for the
first time in the US replies. The fact that the EC does not comment on a particular reply or
argument does not imply that the EC agrees with the reply or argument. To the extent that the US
reiterates arguments to which the EC has alread y responded in earlier submissions, the EC refers
to its earlier submissions.
Question 124
 In its response to the Panel's question, the US repeats its statement, which it already made
in earlier submissions, that it is challenging the administration of EC customs law "as a whole". 1
In addition, the US now adds that it would also "welcome" findings on the specific areas of EC
customs administration identified in its Panel reque st, even though it also states that it considers
such findings as "not strictly necessary".2 It then provides a list of provisions in respect of which it
claims to have established an absence of uniform administration.3
 The EC is perplexed by these responses of the United States, which seem designed to
maintain, even in this late stat e of the proceedings, a maximum of ambiguity as to what precisely
the United States is challenging.
 As regards the US claim that it is challengi ng the "administration of EC customs law as a
whole", the EC has already commented that such a wide interpretation of th e US Panel request is
not in accordance with the requirements of Ar ticle 6.2 DSU, which requires a sufficient
identification of the sp ecific measure at issue. 4 It has further elaborated on this point in its
additional submission on Part III of the US Second Oral Statement, to which it hereby refers.5
As regards the individual areas of customs administration identified in the US Panel
request, and notably the third paragraph thereof, th e EC remarks that it is not clear what the US
means when it states that it would "welcome" such findings. It should be recalled that a Panel's
function is not to make findings of violations of its own initiative, but rather to resolve a dispute
between the parties. The US should therefore have clearly stated whether it requests such findings
or not.
Furthermore, the EC would recall the terms of reference of the Panel include the question
of non-uniform administration of EC customs law only in the areas enumerated in paragraph 3 of
the US panel request. As the EC has set out in its additional submission regarding Part III of the

1 US Reply to Panel Question No. 124, para. 2 – 3.
2 US Reply to Panel Question No. 124, para. 3, 5.
3 US Reply to Panel Question No. 124, para. 4.
5 EC Additional Submission, Section II.B.

US Second Oral Statement,
6 this means notably that the clai m regarding an alleged absence of
uniformity in the administration of Article 221 CCC is not within the Panel's terms of reference.
The EC notes that the US reply does not indeed mention Article 221 CCC as one of the provisions
with respect to which the US claims to have presented evidence supporting subsidiary findings of
violation.7
Finally, it is appropriate to recall that the Pa nel's terms of reference include, in accordance
with Article 7 DSU, only measures which were in ex istence at the time the matter was referred to
it by the DSB. This means that the Panel can not make findings on measures which no longer
existed at the time it was established.
8 Similarly, the Panel can also not address measures which
were not yet in existence at that time it was established.9
This reminder is necessar y since the United States has, throughout its submissions,
repeatedly referred to alleged examples of non-uniform administration which it itself
acknowledges no longer exist. Examples for this ar e the US references to the classification of
network cards or drip irrigation products. 10 Another example are the persistent references by the
US to the issues raised in the report of the Court of Auditors on customs valuation. 11 On the other
hand, the US has also referred to certain even ts, notably regarding the classification of LCD
monitors, which are subsequent to the establishmen t of the Panel, and for that reason also are
outside the Panel's terms of reference.12
In conclusion, with respect to the US claim under Article X:3 (a) GATT, the EC
understands the Panel's terms of reference to include the admi nistration of EC customs law, at the
time of the establishment of the Panel, in the specific areas of EC customs law enumerated in
paragraph 3 of the US Panel request.
Question 126
The EC contests the US' statement, made in re ply to this question, that the EC does not
have "a procedure or institution that ensures that divergences of administration among the 25
different customs authorities do not occur or that promptly reconciles them as a matter of course
when they occur".
13 The EC has already explained the numerous mechanisms of EC law which
ensure a uniform administration of EC customs la w. For the sake of avoiding repetition, the EC
will refer to its earlier submissions.14
What is noteworthy about the US reply is, ho wever, the US statement that this alleged
absence of procedures or instituti ons applies "with respect to all areas of customs administration
for the same reason", including to the administration classification rules, valuation rules, and
customs procedures.
15 In other words, the United States criticisms of particular aspects of the EC's

6 EC Additional Submission, Section II.B.
7 US Reply to Panel Question No. 124, para. 4.
8 Cf. Panel Report, Japan – Film, para. 10.58; Panel Report, US – Gasoline, para. 6.19.
9 Panel Report, US – Upland Cotton, para. 7.158 – 7.160.
10 Cf. US Second Oral Statement, para. 21.
11 US Second Oral Statement, para. 21, where the US refers to the issue of warranties. This is also
reflected in the references to various valuation provisions in paragraph 4 to the US Reply, all of which seem
to relate to issues which were raised in the report of the Court of Auditors, but which have subsequently
been followed up and, to the extent necessary, resolv ed (cf. already EC Seco nd Written Submission, para.
384 et seq.).
12 US Second Oral Statement, para. 55 – 57 and Exhibits US-76 to US-78.
13 US Reply to Panel Question No. 126, para. 12.
14 Cf. in particular EC First Written Submission, para. III.
15 US Reply to Panel Question No. 126, para. 14 (emphasis in the original). It is noted that in its
judgment in Intermodal Transports , to which the US has referred in its Second Oral Statement, the ECJ

system in specific areas, such as for instance th e EBTI system, do not seem to be essential to the
US claims. Accordingly, despite the US protestati ons to the contrary, what the US appears to be
seeking is nothing less than a fundamental overhaul of the EC's system of customs administration,
and the only feasible tool for this purpose the US h as suggested so far appears to be the creation of
an EC customs agency.
Question 127
In its Reply to the Panel's Question, the US first gives a list of the EC procedures and
institutions which, in the EC's submission, ensure uniform administration of EC customs law, but
then proceeds to complain that " not one of the foregoing procedures or institutions provides for
prompt reconciliation of divergences as a matter of right".
16
In response, the EC would first recall that whether the EC system ensures uniform
administration must be evaluated on the basis of the EC's system as a whole, and not by looking at
individual measures in isolation. 17 The question is therefore not whether one or the other
instrument by itself ensures uniform administration, but whether the available instruments together
ensure uniform administration.
Second, the US seems to complain that, possi bly with the exception of judicial review
before member States courts, none of the instrume nts provide for a reconciliation "as of right". In
this respect, the EC would like to remark th at Article X:3 (a) GATT merely requires WTO
Members to ensure uniform administration, but does not prescribe as to how they must achieve
this goal. Accordingly, no WTO Member is obliged to grant traders any particular "rights" with
respect to the provision of uniform administration. Therefore, the question to which extent a WTO
Member ensures uniform administration through measures which can be activated by traders "as of
right" or through measures which are at the discreti on of the authorities is a question regarding the
design of each Member's system which is not prejudged by Article X:3 (a) GATT.
Question 128
The EC finds it noteworthy that in response to the Panel's question, the US states that
"because of their specificity and the diverse range of issues covered, it would be impossible to
identify all measures" which supplement the measures referred to in the Panel's question.
18 This is
in stark contrast to the US statement that it is challenging the "administration of EC customs law
as a whole", which is an even wider body of la w. The US response therefore supports the EC's
view that the reference to the "administration of EC customs law as a whole" is not a sufficient
description of the specific measure at issue.19
Question 129
According to the United States' reply, besides penalty provisions, "binding tariff
administration, member States audit provisions, member State guidelines on applying the
economic test for deciding whether to allow processing under customs control, and guidelines
issued by the EC institutions" are "administrative provisions". In contrast, the rules of the Tariff
regulation, the CCC, and the Implementing Regulat ion are supposed not to be "administrative",
because they contain "substantive customs rules".
20

equally noted that various mechanisms exist to ensure a uniform classification practice in the EC (Exhibit
US-71, para. 41-44.)
16 US Reply to Panel Question No. 127, para. 19 (emphasis original).
18 US Reply to Panel Question No. 128, para. 22.
19 Supra, Comments on US Reply to the Panel’s Question No. 124.
20 US Reply to Panel Question No. 129, para. 23.

The EC fails to see what is the basis for these distinctions, which are entirely artificial.
The relevant distinction is not between "adminis trative provisions" and "substantive provisions",
but between the laws, regulations, judicial deci sions and administrative rulings referred to in
Article X:1 GATT, and their administrati on referred to in Article X:3 (a) GATT.
21 Despite the
contortions to which the US has gone to show the opposite, 22 a law is not "administration" of
another law.
It is noted that the classification into "admin istrative" and "substantive" matters proposed
by the US is entirely haphazard. On the one ha nd, it is not clear what BTI, which clearly is
administration since it relates only to one specifi c holder, has to do with the guidelines to which
the US refers subsequently. 23 On the other hand, it is not true that the Tariff regulation, the CCC
and the Implementing Regulation contain only rules which are "substantive in nature". Rather,
many of the provisions contained in these acts are of procedural character, and thus, according to
the United States, would have to be regarded as "administration" rather than as measures to be
administered. The US interpretation thus leads to manifestly absurd results.
Question 130
As the EC has already explained, the term "a dministrative" was used by the Panel in
Argentina – Hides in a different context, and is of no di rect relevance to the interpretation of
Article X:3 (a) GATT in the present case.24
In its reply, the US has commented on the ordi nary meaning of the term "administrative",
which it defines as "executive", i.e. as something th at has "the function of putting something into
effect".25 However, as the EC has already said, a law of general application cannot be said to be
"putting into effect" another law of general application. Moreover, all provisions of
"administrative law", which in many WTO member States is the term used for characterising the
laws governing the conduct of p ublic authorities, would otherwise have to be regarded as
"administration". Accordingly, quite apart from the fact that the distinction between
"administrative" and "substantive" measures has no basis in Article X GATT, the US interpretation
does not respect the ordinary meaning of the term "administrative", and would lead to patently
absurd results.
Question 132
In its reply to the Panel's question, the US states the following: "Under a system that
provides for uniform administration, any differences that may emerge in administration from one
region to another should be resolved promptly and as a matter of right. If that happens, there will
be no inconsistencies to be tolerated".
26
The EC is not sure it understands the re lationship between the first and the second
sentence of the US response. On the one hand, the US seems to acknowledge that "differences"
may emerge. On the other hand, the US states that "there will be no inconsistencies to be
tolerated". It is not clear to the EC whether there is, for the US, a difference between "differences"
and "inconsistencies". If there is, the EC wonde rs what it is. If there is not, then the second
sentence would appear to contradict the first.

21 EC Second Written Submission, para 18 et seq.
22 Cf. for instance the highly artificial reference to a "provision doing the administering" in the US
Reply to the Panel’s Question No. 129, para. 24.
23 As for "member States’ audit provisions", the US has not specified what provisions it is referring
to. To the extent, however, that such provisions exist at member States level, they clearly would have to be
regarded as laws and not as administration.
24EC Second Oral Statement, para. 30, 74.
 25 US Reply to Panel Question No. 130, para. 26.
26 US Reply to Panel Question No. 132, para. 31.

The only way to reconcile the two sentences would then be to adopt a meaning of
"prompt" which is equivalent to "instantaneous". However, the EC considers that such a definition
would not be reasonable even in the most centralized of systems of customs administration.
Indeed, in any administration, administrative action is rarely ever "instantaneous". Accordingly, it
must be sufficient for Article X:3 (a) GATT if differences are reconciled within a reasonable time-
frame, given also the circumstances of the specifi c case in issue. The EC notes that this is in
accordance with the US' own submissions on Article X:3 (b) GATT, where the US has argued that
what is "prompt" is a "function, for example, of the complexity of the case".
27
The United States itself illustrates this point by conceding that even in a centralized
system, there may be "momentary inconsistencies between regions", for instance due to lapses of
communication. As one example, the US mentions that officials in one port of the Member's
territory may not be immediately aware of a classification ruling issued by the customs authority at
a different port. 28 However, the US does not explain why it can be assumed that in a centralized
system of customs administration, such incons istencies would necessarily remain "momentary",
and in particular how and why they would be instantaneously detected when they occur.
The US also once again requires that the re conciliation of differences should take place as
"a matter of right". 29 In this regard, the EC would repeat that Article X:3 (a) GATT requires only
that administration be uniform, but not that the reconciliation of divergences necessarily take place
as "a matter of right".30
Finally, the US also criticizes that the reconciliation in the EC takes place in what it calls a
"haphazard" manner and that there is no "clearly identified path" for resolving the differences. 31
The US is of course right that in the EC, there are various tools available all of which contribute to
uniform administration, and therefore there may be various paths through which a particular case
can be resolved. This is arguably a difference fro m the US system, where, due to the existence of
US customs as a centralized agency, there may be a smaller number of tools and procedural
avenues. However, this structural difference be tween the EC and the US system has nothing to do
with the EC's compliance with Article X:3 (a) GATT, nor does it make the EC's system
"haphazard". Article X:3 (a) GATT does not requ ire that all differences always be resolved
through "one single path". Rather, it leaves th e WTO Members the choice as to what tools they
may wish to employ in order to ensure uniform administration, and these tools may differ
depending on the circumstances of the particular case.
Question 133
The EC can refer to its comments on the US replies to the Panel's Question Nos. 129 and
130.
Question 134
The EC takes note that the United States is not challenging the way in which the customs
code committee operates as such.
32 Nonetheless, the US repeats its criticism that traders cannot
bring their cases before the Customs Code Committee "as a matter of right" and have them
resolved there.33 In this respect, the EC can only repeat that first of all, Article X:3 (a) GATT does
not require that traders are given any specific ri ghts, whether before the Customs Code Committee

27 US Reply to Panel Question No. 40, para. 152.
28 US Reply to Panel Question No. 132, para. 32.
29 US Reply to Panel Question No. 132, para. 31.
30 Above, third paragraph of the Comments on US Reply to Panel Question No. 127.
31 US Reply to Panel Question No. 132, para. 34.
32 US Reply to Panel Question No. 134, para. 42.
33 US Reply to Panel Question No. 134, para. 44.

nor elsewhere.
 34 Accordingly, whether EC legislation grants traders or industry a right to be heard
prior to the adoption of a measure such as a clas sification regulation or not is a question of the
internal design of the EC's system of no relevance for Article X:3 (a) GATT.35
The EC also notes that the US claims, with re ference to Exhibit EC-103, that the "section
of the Customs Code Committee dealing with BTI" meets only two to three times a year. 36 This
statement is based on a misunderstanding. The US is referring to the meetings of the "BTI"
subsection of the Tariff and Statistical Nomencla ture section of the Customs Code Committee.
However, this section deals only with the technical and general aspects regarding the operation of
the BTI system. Cases of divergent BTI are dea lt with in the three sectoral subsections of the
Tariff and Statistical Nomenclature section (Agric ulture and chemicals, mechanical appliances,
textiles). As can be seen from Exhibit EC-103, in 2002 – 2004, these three subsections have held
a total of 13-14 meetings per year.
Question 135
In its reply to the Panel's question, the US states that the "treatment" that exporters and
importers expect to be of the same kind does not only relate to the duty assessed on a particular
goods, but includes also penalties they may face in different places. 37 On the basis of this reply, it
appears that the US is understanding Article X:3 (a) GATT to be a general provision guaranteeing
equal treatment to traders in all aspects relating to their operations.
The EC would recall that that Article X:3 (a ) GATT is not a general rule stipulating the
equal treatment of traders, but a more limited provision requiring the uniform administration of a
specified set of laws. The US interpretation overlooks that Article X:3 (a) GATT is therefore
limited in two ways: first, because it applies onl y the laws which are enumerated in Article X:1
GATT, and which, for instance, do not in clude penalty provisions; and second, because
Article X:3 (a) GATT concerns only the administra tion of law, but not substantive differences
which may exist between laws applicable in different parts of the territory of a WTO Member.
Question 136
In its response to the Panel's Question, the United States responds that other persons than
those to whom the ruling letter is addressed "have the right to cite an existing ruling as authority
for the principle enunciated therein", and theref ore "can enjoy the benefits of the ruling". 38 I t
appears that this response does not correctly describ e the legal effect of advance rulings in the US
legal order.
First of all, it is important to note that advance rulings of US customs are not legally
binding. As the US Supreme Court has held in US vs. Mead Corporation, advance rulings are not
entitled to Chevron deference, i.e. are not legally binding on co urts in proceedings before them. 39
Rather, the Supreme Court held that advance rulings are merely entitled to " Skidmore deference",
i.e. are entitled to deference "proportion al to their 'power to persuade'". 40 In other words, the US
Supreme Court accords only a very limited degree of deference to advance rulings of US Customs.

34 Cf. above, third paragraph of the comment on US Reply to Panel Question No. 127.
35 Cf. EC First Written Submission, para. 272. In addition, as the EC has already noted, the
Customs Code Committee does occasiona lly hear traders and industry re presentatives in accordance with
Article 9 of its Rules of Procedure (EC First Written Submission, para. 87).
36 US Reply to Panel Question No. 134, footnote 32.
37 US Reply to Panel Question No. 135, para. 49.
38 US Reply to Panel Question No. 136, para. 52.
39 EC Second Written Submission, para. 103, and Exhibit EC-130.
40 Exhibit EC-130.

Moreover, it must be noted that in accord ance with 19 CFR 177 (9) (c), no other person
than the one to whom the ruling letter is addressed should rely on a ruling letter or assume that the
principles of that ruling will be applied in co nnection with any transaction other than the one
described in the letters. This provision has b een relied on repeatedly by US courts and US
authorities in order to prevent traders from rely ing on ruling letters that were not addressed to
them.
For example, Fujitsu Compound Semiconductor, Inc. v. United States
41 concerned the
import of laser diode modules. In that case, Fujitsu imported the laser diode modules that were
classified under tariff subheading 8541.40.95 dutiable at 4.2 per cent ad valorem. The laser diodes
were liquidated and Fujitsu did not protest th e rulings. Following the liquidations, Toshiba
imported the same product. Later, two Headqua rter customs rulings determined the correct
classification for the laser diode modules to be under tariff 8541.40.20 at a dutiable rate of 2 per
cent ad valorem . As a result of the contrary rulings, Fujitsu sought to inter alia reverse the final
liquidation decision. In coming to its conclusion that the Headquarter classification rulings could
not be applied to the uncontested liquidation, the Court noted:
 42
[T]he mere existence of a HQ letter does not mean it is
automatically applicable to entries other than those covered by the
letter. The letter ruling in this case was issued to Toshiba on a
like-product, not to Fujitsu. Customs regulations provide that
other than the party to whom the ruling is addressed, "no other
person should rely on the ruling letter or assume that the
principles of that ruling will be applied in connection with any
transaction other than the one described in the letter".
The same point is also illustrated by US Customs Ruling HQ 954622.
43 There, a trader
sought to retroactively apply a Headquarters Ruli ng Letter to goods it imported based on the fact
that a customs ruling it previously obtained classified like goods differently. Although the ruling
expressly noted that 19 CFR § 177 (9) (c) generally does not apply to any transaction other than
the one described in the letter, in that case the Headquarters ruling could be retroactively applied to
a third party transaction based on the specific wordi ng of the ruling relied up on. In particular, it
stated that "any previously issued rulings which clearly conflict with the analysis and result herein
set forth are likewise revoked." Therefore, while a ruling can be written to have broader effect, 19
CFR § 177 (9) (c) normally precludes binding application of the ruling to third parties and
transactions not addressed therein.
Accordingly, the United States overstates grea tly the difference between advance rulings
and BTI in the EC. Moreover, the US ignores that unlike advance rulings in the US system, BTI is
not the only tool available for ensuring a uniform administration of classification rules. For
instance, as the EC has already explained, the EC can adopt classification regulations or EC
explanatory notes.
44 Classification regulations are legally binding throughout the Community in
accordance with Article 249 EC. 45 Moreover, while they must respect the CN, any question
regarding their validity would have to be refe rred to the European Court of Justice for a
preliminary ruling, which will examine whether the Commission has committed a "manifest error
of assessment".46 As long as the Court of Justice has not declared a classification regulation to be
invalid, it must be applied by all customs aut horities, and can be invoked by individuals.

41 Slip Op. 2003-6 (Ct. Int’l Trade 2003) (Exhibit EC-161).
42 Exhibit EC-161, at 7-8. Although the language quoted refers to "like-product", an earlier part of
the opinion states that the products were actually identical (p. 2)
43 Exhibit EC-162.
44 EC First Written Submission, para. 92 et seq.

Accordingly, it seems fair to say that the lega l authority of EC classification regulations is
considerably stronger than that of rulings of US customs.
Overall, however, the question of the legal effe ct of BTI or advance rulings is irrelevant
under Article X:3 (a) GATT. It must be recalled that Article X:3 (a) GATT does not contain any
obligation whatsoever to have a system of adva nce rulings. Even less does Article X:3 (a) GATT
prescribe precisely how such a system of advan ce rulings should be designed in terms of the
effects that such advance rulings will have. If it were desired to create such specific obligations,
this should be done through the Doha Negotiations on Trade Facilita tion, not through the process
of dispute settlement.
47 Accordingly, whereas the US was pe rfectly entitled to opt for a system of
advance rulings designed as it is, the EC is equally entitled to design its BTI system differently.
Question 137 (a)
First of all, the EC notes that the US reply to the Panel's Question provides no answer to
the remarks made by the EC in paragraphs 108 to 109 of its SWS, namely that the letter to the
Ornata GmbH in Exhibit US-50 seemed to have no relation to the administrative protest decided
by the Main Customs Office Bremen in its letter in Exhibit US-23.
In contrast, the EC had not contested that both letters may concern importations of the
same type of product. However, since there is no substantive incons istency between the two
decisions of the German authorities, both of wh ich excluded classification of the products because
of the absence of a layer of textile flock visible to the naked eye, 48 it is still not clear to the EC
what point the US tried to make by introducing th e second case. As regards the BTI issued by the
Dutch, Irish and UK customs authorities, the EC has already explained that the goods examined by
the German authorities did not correspond to the ones described in the BTI, which uniformly
described the products as visibly flocked.49
In this regard, the US reply also refers again to the affidavit by Mark J. Berman, President
of Rockland Industries, which it presented with its second oral statement as Exhibit US-79.
However, as the EC has already remarked, 50 this affidavit has no evidentiary value whatsoever.
First, the affidavit (point 5) states that "that the product addressed in the ZPLA letter was
produced by Rockland and sold to Ornata GmbH. Ho wever, the EC never contested this point. In
contrast, the affidavit provides no answer as to whether the products for which the BTI were
issued by the Dutch, Irish and UK authorities also were products of Rockland.
Second, the question for the correct classification of the product is not whether the product
"incorporates textile flocking as part of the coating process", but whether there is a layer of textile
flocking visible to the naked eye. This is hard ly a question which can be answered through the
presentation of an affidavit sworn by the President of the producer of the good. This is also
illustrated by the fact that US Customs itself had difficulty classifying the good, and had to have
recourse to repeated laboratory examinations.51

47 It is recalled that advance rulings are a su bject matter of the Doha Negotiations on Trade
Facilitation, and that the US has made a number of proposals in this regard (EC First Written Submission,
para. 227).
48 In its Reply to Panel Question No. 137 (a), para. 55, the US claims that the Main Customs Office
Bremen excluded Rockland’s product "on the ground that the product had plastic in its coating, regardless of
whether textile flocking or other elements were mixed into that coating". This is yet another new
interpretation of the decision by the US, which however has no basis in the text of the decision (cf. EC First
49 EC First Written Submission, para. 335 et seq.
50 EC Closing Statement, para. 16.
51 Cf. EC First Written Submission, para. 345.

Third, Mr Berman cannot be regarded as a credible witness for the purposes of the present
case. The US has contested any doubts as to th e credibility of Mr Berman by arguing that Mr
Berman has no interest in the outcome of this WTO dispute.
52 While it may be true that Mr
Berman has no direct interest in the outcome of this WTO dispute, it is equally true that Mr
Berman has a clear interest in a favourable cl assification of BDL. It is therefore hardly
conceivable that Mr Berman would swear an affida vit which would have negative implications for
the tariff classification of Rockland's products.
Accordingly, the affidavit produced by th e United States has no evidentiary value
whatsoever. The United States has failed to show that there is any lack of uniformity regarding the
classification of BDL in the EC.
Question 137 (b)
As regards Regulation 493/2005, which suspe nds the duty rates on certain types of LCD
monitors, the US maintains that this regulation is not satisfactory because it is merely a temporary
solution which does not resolve th e underlying classification issue. 53 In response to the EC
explanations that the EC will, at the latest be fore the expiration of Regulation 493/2005, take the
necessary measures to ensure the continuation of un iform administration, the US simply states that
it is "aware of no provision that compels this outcome". Moreover, the US argues that "traders
organize their business affairs with a long-term view", and may therefore be making their
shipping decisions already in anticipation of the s ituation which might exist after the expiration of
Regulation 493/2005.
In the view of the EC, these criticisms are unfounded. A WTO complaint cannot be based
on speculation about future actions or omission of a WTO Member. It is therefore entirely
irrelevant whether any provisi on "compels" the EC to take the necessary measures after the
expiration of Regulation 493/2005. What matter s is whether the EC will actually do so, and only
if it fails to ensure uniform administration coul d the US possibly formulate a claim, but not in
anticipation of a possible failure to do so.
The reference to the long-term planning on the pa rt of traders is equally irrelevant for the
purposes of Article X:3 (a) GATT. The EC of course appreciates that traders have an interest in a
stable trading environment. However, Artic le X:3 (a) GATT is a provision which requires
uniform administration. It is not a provision which prohibits legislative changes, or which protects
expectations of traders as regards the continuation of certain measures. Accordingly, the question
as to what measures the EC will adopt after the expiration of Regulation 493/2005 in order to
ensure uniform administration is not prejudged by Article X:3 (a) GATT.
Subsequently, the US turns to the issue of monitors not covered above the size threshold
of Regulation 493/2005, and in this context refers to its Second Oral Statement and to Exhibits
US-75 to US-78.54
In this respect, the EC would note that certain of the measures referred to by the US date
from July 2005, and are thus outside the Panel's terms of reference. 55 Moreover, as the EC has
said previously, the classification of LCD monitors is a recent and ongoing issue which is kept
under close review by the EC institutions. 56 On the basis of ongoing consultations with the
customs authorities of the member States as well as with concerned industry, the services of the

52 US Reply to Panel Question No. 137 (a), footnote 39.
53 US Reply to Panel Question No. 137 (b), para. 56.
54 US Reply to Panel Question No. 137 (b), paras. 56, 58-60.
 55 Exhibit US-77 and US-78. Cf. already above, seventh para. of the Comments on US Reply to
Panel Question No. 124.

European Commission have prepared a draft classification regulation.
57 This measure will be
submitted for the opinion of the Customs Code Committee at its meeting of December 16, 2005.58
The US now also submits a very recent letter of 6 December 2005 from the European
industry association (EICTA) to the European Commi ssion in which that association is protesting
envisaged adoption of a classification regula tion for the monitors concerned, expressing
disagreement with the envisaged classification. 59 The EC fails to see how this letter supports the
US submission. In fact, in its letter, EICTA specifically calls on the Commission to postpone the
discussion of the classification regulation. This may be understandable from the point of view of
EICTA, which is in disagreement with th e Commission on the question of the substantive
classification. What is not understandable is wh y the United States believes that this letter from
the relevant industry association, which calls for the postponement of a measure which will
contribute to uniform administration, supports its own submission that the EC is not doing to
ensure uniform administration.
With reference to EICTA's letter, the US ha s also criticized that the Commission has not
consulted with industry over the draft regulation.
60 In this respect, the EC would remark that
whether, how and when a WTO Member consults with industry prior to the adoption of a
regulatory measure has nothing to do with the requirement of uniform administration under
Article X:3 (a) GATT. In addition, it is not corr ect to state that the Commission has not consulted
with industry. The Commission services have vari ously consulted with industry, and EICTA has
also had the occasion to present its views regardi ng the classification of LCD Monitors with DVI
before the Customs Code Committee. 61 For the information of the Pa nel, the EC also attaches the
response of the European Commission to the letter of EICTA (Exhibit EC-165).
Question 137 (c)
While in paragraph 61 of its replies, the US repeats selective quotations previously made
relating to control standards and working practices, and the treatment of traders with operators in
several member States, it is not evident that th ese references are appropriate in responding to the
Panel's question; in any event the EC has alre ady addressed in its First Written Submission the
issue of the treatment of traders. The EC would al so like to mention again that it is in the field of
audit that most practical issues relating to common control standards and working practices arise,
and the EC developments in relation to audit have already been described.
With regard to the third assertion by the US in paragraph 61, the EC would like to
emphasize that although EC law does not at present provide for Community-wide valuation
decisions, this current situation does not in itself cause a lack of uniform administration, nor could
it by itself demonstrate a lack of uniform administration in the context of GATT Article X;3(a).
Question 137 (d)
In its reply to the Panel's question, the US refers to a "requirement of prior approval"
applied "in practice. 62 In this regard, it should be pointed out that the reference to such a
requirement comes from an ambiguously worded p assage in the Report of the Court of Auditors
from 2000.63 The EC would like to inform the Panel that on the basis of a survey of the practices

57 Exhibit EC-163.
58 Exhibit EC-164.
59 US Reply to Panel Question No. 137 (b), para. 59, and Exhibit US-81.
60 US Reply to Panel Question No. 137 (b), para. 59.
61 Cf. Exhibit EC-84, in which EICTA acknowledges the possibility to present its views at the
Nomenclature Committee meeting of 8 November 2004.
62 US Reply to Panel Question No. 137 (d), para. 62.
63 Cf. EC First Written Submission, para. 395.

of the customs authorities of all member States, it can confirm that no member State applies,
neither in law nor in practice, a requirement of prior approval with respect to the conditions under
which a sale other than the last sale may be u sed as the basis for establishing the transaction value
for customs valuation purposes. The United States has not provided any evidence to the contrary.
Accordingly, the United States claim is unfounded.
Question 137 (e)
The US does not explain the meaning of the terms "outer parameters" on which it bases its
short answer to this question. However, the EC would like to point out that the US First Written
Submission has not proven that the EC custom s authorities administer the local clearance
procedure in a non-uniform manner. The US First Written Submission only shows that the US has
relied upon confusing informati on from unknown sources. Moreover, all along the proceedings,
the US has neither rebutted the arguments advan ced by the EC in its First Written Submission
64
nor attached any evidence to that purpose, t hough these deficiencies were already highlighted by
the EC in its First Oral Statement. 65 In its answer to this Panel's Question, the US fails again to
react.
Question 138
In respect of this question, the EC would cl arify that it has never contented that "audit
procedures" are part of valuation rules. Audit procedures may in principle serve to verify the
correct application of numerous customs rules, including, but not only, valuation rules. The EC
has responded to the US arguments on audits in the context of the discussion of customs valuation
because this is the context in which the question wa s raised by the US, namely with reference to
the Report of the Court of Auditors on customs valuation.
66 Similarly, as the Panel has remarked,
in its Second Oral Statement, the US once again dealt with the issue of audits in the section
dealing with valuation rules.67
However, the EC does contest that rules regarding auditing for customs purposes fall
under Article X:1 GATT. Article X:1 GATT covers only those laws and regulations which pertain
to the matters referred to in this provision. Mo reover, the US has not in any way demonstrated
that there is any lack of uniformity as regard s auditing for customs purposes in the EC. The US
has repeatedly referred to "different audit provisi ons" in the member States, but has never made
clear what it understands by these provisions, nor in which they would differ. The US has also not
provided any proof that the conduct of customs audits in practice is non-uniform in the EC.
68
Question 139
As a matter of clarification, the EC woul d like to underline that the French and UK
documents referred to in the US arguments do not cons titute "law". Their nature is simply that of
guidance, which must be always interpreted in line with Community legislation, as constituted in
this case by the CCC and the Implementing Regulation.

64 EC First Written Submission, paras. 419 to 427.
66 Cf. EC First Written Submission, footnote 197.
68 As regards the EC Customs Audit Guide, the US has criticised that this guide was only "recently
finalised" and is "merely intended as an aid to memb er States" (US Second Oral Statement, para. 67).
However, the EC does not see why the fact that the Gu ide is recent and non-binding should mean that it is
irrelevant. Moreover, as the EC has explained in Reply to Panel Question No. 167, there are also other best
practice guidelines concerning relevant questions of ri sk analysis and risk management (EC Reply to Panel
Question No. 167, para. 62).

The United States challenges what it considers to be a divergence between the French and
the UK guidance concerning processing under customs control. The EC has already explained in
its submissions that there is no divergence be tween both documents and gives some further
arguments in its comments to Question No. 140. Moreover, as the EC has equally explained,
69 it
would be for the US to prove that there is any divergent application of the conditions for
processing under customs control. The US has brought no such proof.
Question 140
Contrary to what the US claims,70 the EC finds no internal ambiguity within EC law on the
economic conditions. Article 133 CCC sets up the ec onomic conditions to grant an authorization
for processing under customs control by requiring , in one sentence, the fulfilment of "the
necessary conditions for the procedure to help create or maintain a processing activity in the
Community without adversely affecting the essentia l interests of Community producers of similar
goods (economic conditions)". Article 502 (3) of the Implementing Regulation repeats those
economic conditions by using the first part of the sentence. The fact, as alleged by the US, that the
Implementing Regulation generally gives a more detailed elaboration of the provisions of the CCC
is irrelevant, because what counts is the wa y in which the specific regulatory framework
concerning processing under customs control is dist ributed between both pieces of legislation.
Thus, the full list of conditions to grant an au thorization is laid down in the CCC, not in the
Implementing Regulation, and it is clear that the former text prevails because of its higher
hierarchal status.
Finally, the US is wrong in claiming that th e French guidance only requires the "creating
or maintaining a processing activity in the Community". 71 The EC refers to its Second Written
Submission for that purpose. 72 Further to those arguments, the EC would like to add that the
second subparagraph in paragraph 78 and paragraph 79 of the French guidance underline the
obligation upon the requesting party to provide information on the lack of adverse effects on the
essential interests of Community producers of similar goods.
73
Question 141
Without prejudice to the analytical framework used by the US for examining the EC's
obligation under Article X:3 (b) GATT, the EC not es that the US makes no allegations regarding
the scope of review required under that provision.
The US confirms that its allegations regardi ng Article X:3 (b) relate to the requirement
that tribunals or procedures must govern the practi ce of the agencies entrusted with administrative
enforcement.74 The EC's supplementary arguments on this issue will be developed in its
comments related to Question No. 142.

 69 EC Second Written Submission, para. 181 et seq.
70 US Reply to Panel Question 140, paras. 74 to 76.
71 US Reply to Panel Question 140, para. 77.
72 EC Second Written Submission, paras. 178 to 180.
73 Paragraph 78, second subparagraph, provides that "[p]ar conséquent [a reference to the essential
control included] ".
la raison économique du recours au régime sollicité". It is important to underline that the economic reason
includes the essential interests requirement, as it derives from the second subparagraph in paragraph 78 of
the French guidance.
74 US Reply to Panel Question No. 141, para. 81.

Question 142 (a) and (b)
The US claim that review at the member Stat e level does not comply with the requirement
in Article X:3 (b) GATT that decisions taken by first instance courts shall govern the practice of
the agencies entrusted is based on a very restric tive literal and contextual interpretation of that
provision.
In the EC's view the US position is based on a radical interpretation of Article X:3 (b)
GATT, with the only objective of attacking the EC judicial system. This conduct is in direct
contradiction with the obligation, under Article 31 (1) of the Vienna Convention, to interpret
treaties in good faith. Furthermore, the Panel Report on US-Gambling noted that "the principle of
good faith in the process of interpretation underlies the concept that interpretation should not lead
to a result which is manifest absurd or unreasonable".
75 The EC has already explained that the US
interpretation does not correspond to the legal tr aditions of most, if not all, of the WTO
Members.76 Therefore, the US interpretation of the requirement "govern the practice" in
Article X:3 (b) GATT should be rejected as unreasonable.
The EC insists, first, that in developing th e literal interpretation of the term "govern", the
US makes a selection that is not acceptable. 77 That term covers not only binding instruments or
relations (control, regulate, determine, constitute a la w, rule or standard), but also some others that
are not binding, like "influence" or "serve to decide". 78 The EC considers that these two meanings
are more in accordance with the position that first in stance courts play in most legal orders of the
WTO Members, and, in any case, in those Members not having centralized courts for first instance
review of administrative decisions in customs matters, including the EC.
79 The US has not
rebutted these arguments.
Second, the contextual interpretation of Article X:3 (b) GATT applied by the US (i.e.: its
pretended link with subpara graph (a) in Article X:3) 80 is also wrong. The EC has already given
several reasons backing that assertion. 81 Moreover, the relevant context for the interpretation of
Article X:3 (a) is not the following subparagraph (b), but paragraph 1 in Article X, to which
Article X:3 (a) makes a specific reference. Paragraph 1 includes "judicial decisions of general
application" among the instruments to be administered uniformly in accordance to paragraph 3 (a).
This evidences that Article X GATT covers two t ypes of judicial decisions: those of general
application, whose uniform administration is requir ed under paragraph 3 (a), and those adopted by
first instance review courts, where uniform ad ministration through all the WTO Member is not
required. This contextual interpretation explai ns why there is no link be tween subparagraphs (a)
and (b) in Article X:3 GATT. Moreover, as the EC has underlined in the previous argument, the

77 EC Second Oral Statement, paras. 94 and 95.
78 The US has not attached the pages of The New Shorter Oxford Dictionary to which it refers in its
Second Written Submission, para. 104. For ease of refe rence, the EC provides the relevant pages (Exhibit
EC-166).
79 See some examples in EC Second Oral Statement, para. 96.
80 The link made by the US between subparagraphs (a) and (b) in Article X:3 GATT is much more
astonishing if we consider that in Canada – Wheat , Appellate Body Report, paras. 79 et seq, the US
sustained the view that subparagraph (a) and subparagraph (b) of Article XVII:1 GATT contained separate,
independent obligations. The Appellate Body, and before the Panel, rejected this interpretation on the basis
of the text and the context of these provisions, mainly because of the specific reference that the latter makes
to the former. In the current case, the situation is just the opposite, because, as the EC has already explained
in its Second Written Submission, para. 223, Artic le X:3 (b) GATT does not make any reference to
subparagraph (a), unlike subparagraph (c), which contains an explicit link to subparagraph (b).
81 EC First Written Submission, para. 461, EC First Oral Statement, paras. 60 and 69, EC Reply to
Panel Question No 87, para. 172, EC Second Oral Statement, para. 100, and EC Second Written Submission,
paras. 222 et seq.

limited effect thus acknowledged to decisions given by first instance courts is more in accordance
with their position in most of the legal orders of the WTO Members.
The arguments developed by the US in relation to the notion of "decision" show also its
unilateral interpretation of other legal systems. C ontrary to what the US claims, in most of the
WTO Members a review court is not entitled to decide under what heading a good should be
classified. Due to historic reasons, the powers of the courts are limited to the annulment of
administrative decisions.
82 This clearly limits the possibility to enforce judicial decisions on those
agencies that are outside the geographical scope , which could not meaningfully apply those
decisions as binding. The use of the plural form all through Article X:3 (b) GATT is precisely a
recognition of this equilibrium between the executive and judicial branches of government.
Question 142 (c)
The United States does not take a position in this dispute as to whether review is "prompt"
in the case of first instance review by member St ate courts where there is no reference to the ECJ
for a preliminary ruling. Though the US underlines that "this is not to say that the United States
concedes that such review is prompt",
83 the fact is that this caveat is irrelevant for the purposes of
this dispute. In the absence of a US claim concerning these reviews, the Panel should not make a
determination on the matter.
The claim is, therefore, limited to first instance reviews by EC member States courts
where there is reference to the ECJ. It should be recalled that, on questions of interpretation, first
instance member States courts are not required to refer to the ECJ.
The US considers that national reviews in such cases are not prompt because "just to get a
preliminary question put before the ECJ a trader may have to go through an administrative appeals
process […], followed by multiple layers of court review, which itself may take years" and "[i]f
the question should happen to get referred to the EC J, it will take 19 to 20 months on average for
the question to be decided".
84
The EC cannot agree with these two arguments.
First, the EC considers that the time it tak es to go through non-independent administrative
appeals cannot be taken into account for the purpose of assessing "promptness" in the review
under Article X:3 (b) GATT. The reason is that th is kind of administrative appeal (those decided
by bodies that are not independent of the agencies entrusted with administrative enforcement) are
covered not by Article X:3 (b) GATT but by Artic le X:3 (c), which allows the WTO Members to
keep them, if they in fact provide for an objective and impartial review of administrative action.
Second, with respect to the time that preliminary references to the ECJ take, the US claims
that it "would fail to satisfy the requirement of pr omptness if the EC were contending that review
by the ECJ satisfies its obligation under Article X:3 (b)". As this is not the case, the EC considers
that the claim is inexistent.
However, as a subsidiary argument, the EC w ould like to point out that the US considers
that "prompt" means "without delay", that "wha t it means for action to be taken without delay

82 See, for example, the explanations of the EC sy stem and its member States given in the EC First
Written Submission, para. 176, and EC Reply to Panel Question No. 71, para. 127.
83 US Reply to Panel Question No 142, para. 90. The US reference to Mr. Vermulst's publication is
out of context, because the author did not make an analysis in the context of Article X:3 (b) GATT.
84 US Reply to Panel Question No 142, para. 91.

necessarily will depend on context", and that "t he word 'prompt' does not, by itself, connote a
particular passage of time that will be relevant in all contexts".
85
The application of those criteria to those cases where a EC member State first instance
court refers to the ECJ must necessarily lead to the conclusion that the review is prompt, because
there are no delays: preliminary reference procee dings before the ECJ are integrated in the
proceedings before the national court in order to cooperate in the resolution of a dispute by the
national court.
Question 143
The EC takes note that the United States is not challenging the ECJ review pursuant to
Article 230 of the EC Treaty.
The observations of the US on preliminary refe rences to the ECJ are outside the scope of
the Panel's question and the EC refers to its add itional submission to Part III of the US Second
Oral Statement.86
Question 144
The EC firmly rejects the United States' c onsideration of the European Convention on
Human Rights as "a due-process type ob ligation of a very general nature". 87 The US observation
reflects its lack of familiarity with the European system for the protection of Human Rights, whose
respect is ensured by the European Court of Huma n Rights, as the EC has explained in an answer
to a Panel's question.88
Moreover, the EC rejects the US assertion that it has admitted that the European
Convention on Human Rights is not "operationalized" in the customs context. Article 6 (1) of the
Convention, which lays down the right to a fair trial by an independent and impartial tribunal
established by law, encompass the right to prompt judicial protection in all sectors,
89 with the only
exception of civil service cases.
Anyhow, the EC would like to insist that, to its knowledge, no WTO Member (not, in any
case, the United States90) has inscribed in its legislation a precise provision requiring first instance
independent review to be prompt.
Question 145
The EC has already explained that, contrary to the requirement in Article X:3 (b) GATT,
administrative review in the US undertaken by the Office of Regulations and Rulings is not
independent, because the Office is part of US Cust oms and Border Protection, which is the agency
in the US entrusted with administrative enforcement in customs matters.
91
In any case, assuming, for the sake of argument, that such review decisions come under
Article X:3 (b), their effect do not comply with the US interpretation of the provision as used by
the US to challenge the EC system. The US critic izes that first instance national decisions in the
EC do not bind the other member States agencies. However, further review decisions by the
Office are described by the US as being only an "authority" for the disposition of identical goods

85 US Reply to Panel Question No. 40, para. 152.
86 EC Additional Submission, Section III C .
87 US Reply to Panel Question No. 144, para. 94.
88 EC Reply to Panel Question No. 170, para. 89.
89 EC Reply to Panel Question No. 74, paras. 134 to 136, and to Panel Question No 70, para. 89.
90 EC Reply to Panel Question No. 74, para. 138.

by other persons.
92 This term reflects that "further review" decisions in the US do not produce
binding effects, which is a situation equivalent to the one existing between the different national
courts and agencies in the EC.93
As the US claims that "decisions issued unde r the further review procedure have the same
force and effect as advance ruling decisions", 94 the EC refer, for further arguments, to its
comments on the US answer to Question No. 136.
QUESTIONS POSED TO BOTH PARTIES
Question 173
The EC considers that the US response to the Panel's question is entirely insufficient, and
manifests a fundamental weakness in the US case.
Instead of providing the Panel with an answer as to how the Panel should establish
whether, as the US claims, the EC system "necessar ily" leads to a lack of uniformity contrary to
Article X:3 (a) GATT, the US vaguely refers to "some unusual aspects" of Article X:3 (a)
GATT.95 As regards the question whether it is necessar y to have regard to specific instances of
non-uniform administration, the US answers that "while it is difficult to answer that question in the
abstract, it need not be answered in the present case".
The EC fundamentally disagrees. There is nothing so unusual about Article X:3 (a) GATT
that the normal rules regarding an objective assess ment of the facts pursuant to Article 11 DSU
should not longer apply. Accordingly, the normal evidentiary requirements for establishing that a
Member's law as such violates WTO obligations, as set out by the Appellate Body in US – Carbon
Steel, also apply in the present case.
96 This means in particular that the US is required to support
its claim of an as-such incompatibility of the EC 's system of customs administration with solid
evidence of an actual pattern of non-uniform administration. For the details, the EC would refer to
its own reply to the Panel's Question No. 173.
The only case law to which the US refers is the Panel Report in Canada – Wheat Exports
and Grain Imports. 97 However, contrary to the US statement, what is remarkable about this report
is not that the Panel "entertained" the US claim ag ainst the Wheat Board regime, but rather that it
rejected it because the United States had failed to prove that the Wheat Board in fact necessarily
would act in a way contrary to Article XVII GATT. 98 Accordingly, Canada – Wheat Exports and
Grain Imports is another illustration that as-such clai ms about another Member's laws cannot
simply be based on speculation about the possible effects of another WTO Member's system, but
need to be supported by hard evidence based on their actual application.
Question 176
In response to the Panel's question, the US is claiming that the EC is proposing that
Article X:3 (a) GATT should be interpreted "in light of the constitutional structures of the

92 US Reply to Panel Question No. 145, para. 96, in fine.
93 EC Second Oral Statement, paras. 98 and 99, and EC Closing Statement, para. 30.
94 US Reply to Panel Question No. 145, para. 96.
95 US Reply to Panel Question No. 173, para. 97.
96 Appellate Body Report, US – Carbon Steel, para. 157.
97 US Reply to Panel Question No. 173, para. 97.
98 Panel Report, Canada – Wheat Imports and Grain Exports , para. 6.148. As confirmed by the
Appellate Body, Canada – Wheat Imports and Grain Exports, para. 196.

Members, including the EC".
99 As the EC has remarked, it is not arguing in any way it is subject
to different standards than other WTO Members 100
However, the Panel's question did no t concern Article X:3 (a) GATT, but
Article XXIV:12 GATT. As the EC has explained in its own reply to the Panel's Question, this
provision is clearly applicable to the EC. More over, as the EC has explained in response to the
Panel's Question No. 158, the provision must ha ve a useful meaning. In the context of
Article XXIV:12 GATT, it is inevitable that it mu st be considered whether the WTO Member in
question has regional or local governments and authorities within its territories which have
responsibilities for implementing the provisions of the GATT. If it does, then the Member in
question must take "reasonable measures" to ensu re compliance. What is a reasonable measure
must be determined by weighing the internal difficulties of ensuring compliance against the
consequences of non-observance of WTO obligations for trading partners.
101
The United States, by simply denying that Article XXIV:12 GATT could have any
relevance for the present dispute, in essence fails to give Article XXIV:12 GATT any useful
meaning. This being said, the EC does not advocate any reading of Article XXIV:12 GATT which
would amount to a special standard for the EC , or which would jeopardize the compliance by
WTO Members with a federal structure with thei r WTO obligations. It merely emphasizes that
measures which would require a radical change in the federal balance of a WTO Member, such as
the creation of a centralized customs agency, a customs court, and the harmonization of laws
within that WTO Member, cannot be regarded as "reasonable measures" within the meaning of
Article XXIV:12 GATT.