Document: WT/DS269/R Page C-1 ANNEX C RESPONSES TO QUESTIONS BY THE PANEL AND OTHER PARTIES Contents Page Annex C-1 Responses by Brazil to Questions posed by the Panel after the First Substantive Meeting (14 October 2004) C-2 Annex C-2 Responses by Brazil to Questions posed by the Panel and the European
Date: 14 October 2004
Document codes: WT/DS269/R
Complainant: Brazil
Respondent: EU
Third parties: China, Thailand, U.S.
Dispute stage: Appellate Body
Agreements cited: Art. II:1, XXIII  GATT 1994

ANNEX C

RESPONSES TO QUESTIONS BY THE PANEL AND OTHER PARTIES

Contents Page
Annex C-1 Responses by Brazil to Questions posed by the Panel after the First
Substantive Meeting (14 October 2004)
C-2
Annex C-2 Responses by Brazil to Questions posed by the Panel and the European
Communities after the Second Substantive Meeting (2 December 2004)
C-31
Annex C-3 Comments by Brazil on the European Communities' Responses to
Questions after the Second Substantive Meeting (9 December 2004)
C-44
Annex C-4 Responses by Thailand to Questi ons posed by the Panel after the First
Substantive Meeting (14 October 2004)
C-59
Annex C-5 Responses by Thailand to Questions posed by the Panel and the
European Communities after the Second Substantive Meeting
(2 December 2004)
C-70
Annex C-6 Comments by Thailand on the European Communities' Responses to
Questions after the Second Substantive Meeting (9 December 2004)
C-76
Annex C-7 Responses by the European Co mmunities to Questions posed by the
Panel, Brazil and Thailand after the First Substantive Meeting
(14 October 2004)
C-80
Annex C-8 Responses by the European Co mmunities to Questions posed by the
Panel and Brazil after the Second Substantive Meeting
(2 December 2004)
C-106
Annex C-9 Comments by the European Communities on the Complainants'
Responses to Questions following the Second Substantive Meeting
(9 December 2004)
C-125
Annex C-10 Responses by China to Questi ons posed by the Panel after the First
Substantive Meeting (14 October 2004)
C-130
Annex C-11 Responses by the United States posed by the Panel after the First
Substantive Meeting (14 October 2004)
C-132
Annex C-12 Responses by the World Customs Organization to Questions posed by
the Panel after the First Substantive Meeting (29 October 2004)
C-134
Annex C-13 Responses by the World Customs Organization to Questions posed by
the Panel after the Second Substantive Meeting (2 December 2004)
C-142
Annex C-14 Comments by Brazil, Thailand and the European Communities on the
Responses by the World Customs Organization to the Questions posed
by the Panel after the Second Substantive Meeting (16 December 2004)
C-145

ANNEX C-1

RESPONSES BY BRAZIL TO QUESTIONS POSED BY THE PANEL
AFTER THE FIRST SUBSTANTIVE MEETING

(14 October 2004)

FOR BRAZIL

1. In its Panel request, Brazil identifies "the measures at issue" as EC Regulation
1223/2002 and EC Commission Decision of 31 January 2003. Is Brazil challenging these
measures as independent and autonomous measures? If not, please explain.

 In the request for the establishment of a Pane l, Brazil identified the following as the specific
measures at issue:

 (1) Commission Regulation (EC) No. 1223/2002, published in the Official Journal of the
EC on 9 July 2002, concerning the classification of certain goods in the Combined
Nomenclature (CN); and

 (2) EC Commission Decision of 31 January 2003, published in the Official Journal of the
EC on 12 February 2003, concerning the valid ity of certain binding tariff information
(BTI) issued by the Federal Republic of Germany.

 These are the measures being challenged.

 Nonetheless, Brazil considers that certain measures, namely Regulations No. 1871/2003 and
No. 2344/2003, came to pass as a result of the ch anges in classification and tariff treatment brought
about by Regulation No. 1223/2002 and Commission D ecision of 31 January 2003. To be exact,
because Regulation No. 1223/2002 and EC Commissi on Decision modified – or gave a new
interpretation to – the scope and definition of pr oducts falling under subheading 0207.14.10 so as to
include "other salted meat" of subheading 0210.99.39; the EC was required to adjust the then existing
definition of "salted meat" of heading 0210 in its Combined Nomenclature to avoid conflict with the
new interpretation of the definition and scope of subheading 0207.14.10. This change in the
definition of "salted meat" of heading 0210 occurred by means of Regulations No. 1871/2003 and No.
2344/2003. These measures were published in the EC 's Official Journal a little over a month after
Brazil made its formal request for the establishment of a Panel.

 Brazil considers that if Regulation No. 1223/2002 and Commission Decision of 31 January
2003 are found to be inconsistent with the EC's obligations under Article II of the GATT 1994 and the
Panel recommends that the EC bring these measu res into conformity; Regulations No. 1871/2003 and
No. 2344/2003, which stem from Regulation No . 1223/2002 and Commission Decision, would
consequently also have to be brought into conformity.

 In line with our understanding, the Panel in Argentina – Footwear concluded that measures
not listed in the panel request or legal acts that occur subsequent to the listed measure may properly
fall within a Panel's terms of refe rence if they are "closely related" to a measure listed in the Panel
request.
1 The Implementation Panel in Australia – Salmon 2 and the Panel in Japan – Film 3 also

1 WT/DS121/R, paras. 8.23 to 8.46.
2 WT/DS18/RW, para. 7.10.
3 WT/DS44/R, para. 10.8.

considered "closely related measures", "implementing measures" or measures which have a "clear
relationship" to be within the terms of reference.

 Moreover, the Panel in EC – Bananas III
4 established that the identification of the general
banana "regime" was sufficient to permit the complainants' challenge against "subsequent" legislation.
Regulations No. 1871/2003 and No. 2344/2003 were issued after the establishment of the Panel in the
present case, therefore, these regulations could no t have been mentioned in the request for
establishment of the Panel. Paragraph 8.34 of the panel report in Argentina – Footwear (EC)
mentions that: " Argentina's procedural objections concern modifications of the definitive safeguard
measure which is a situation quite similar to the "subsequent EC legislation, regulations and
administrative measures ... which implement, s upplement and amend [the EC banana] regime" and
were found to be within that panel's terms of reference."

 Regulations No. 1871/2003 and No. 2344/2003 "f urther refine and implement the basic
regulation"5: EC Regulation No. 1223/2002. Therefore, in order to secure a positive solution to the
dispute, as required by article 3.7 of the DSU, these Regulations also fall within the Panel's terms of
reference and shall also be brought into conformity if found to be in violation of the WTO Agreement.

2. Brazil is requested to provide proof of its assertion in paragraph 3 of its first written
submission that it commenced exporting salt ed chicken to the EC in 1998 in response to
requests from the European processing industry.

 Brazil is providing in Exhibit BRA-29 corresponde nces, invoices, bills of lading and purchase
orders of sales of salted chicken meat from Brazil to the EC dated as far back as 1998. Brazil stresses
that all documents contained in Exhibit BRA-29 and a ll information therein (including names of
importers and processors ) are highly sensitive and confidential and should be treated as such during
and after these proceedings.

 We understand that the EC does not dispute that Brazil effectively started exporting salted
chicken to the EC, in 1998, under heading 0210. We understand that the EC is questioning whether
there is "demand" in Europe for the product salted ch icken meat. In that regard and in addition to
Exhibit BRA-29, Brazil is submitting Exhibit BRA-30 with letters from European companies attesting
why they prefer salted chicken meat over unsalted chic ken meat. We note that the last two letters in
Exhibit BRA-30 show precisely the opposite situation: European companies that sell chicken meat for
direct consumption and cannot use salted meat for that end-use. Brazil again emphasises that all
letters and information contained in Exhibit BRA-30, specially names of importers and processors, are
confidential
 and should be treated as such during and after these proceedings.

3. With reference to paragraphs 50, 177 and 178 of its first written submission, Brazil is
requested to provide copies of BTIs that prove that the specific products at issue in this dispute
(i.e. frozen boneless chicken cuts with a salt content of more than 1.2%) were classified under
heading 0210.90.20 up until the enactment of EC Regulation 1223/2002.

 To the best of Brazil's knowledge, binding tari ff information (BTI) means tariff information
issued by customs authorities of EC Member Stat es that is binding on the administration of all
Community Member States.
6 Once BTIs are issued, they are in troduced into a data-base run by the
EC Commission and are legally valid in all Member States, regardless of the issuing Member State.
The holder of a BTI, the person in whose name the binding information is issued, must be able to

4 WT/DS27/R, para. 7.27.
5 Id.
6 Article 5.1 of Commission Regulation (EEC) No. 2454/93, of 2 July 1993, laying down provisions for
the implementation of Council Regulation (EEC) No. 2913/92 establishing the Community Customs Code.

prove that for tariff purposes the goods declared corr espond in every respect to those described in the
information.
7 BTIs are generally valid for a period of six years, counting from the date they are
issued.8

 Considering the above, Brazil notes that BTI is information that EC authorities and BTI
holders (importers) have easy access to; it is not information that non-EU producers/exporters or the
Brazilian Government can easily obtain. Brazil st resses that the Communities are the only Party to
this dispute that has full and immediate access to the BTIs issued by its Member States and that, under
Article 13 of the DSU, the Panel has the right to request this information from the EC. In Canada –
Aircraft, the Appellate Body concluded that Members are " under a duty and an obligation to 'respond
promptly and fully' to requests made by panels for information under Article 13.1 of the DSU ."
 9 In
addition, the Appellate Body made clear that adve rse inferences could and should be drawn in case of
refusal to cooperate: " a refusal to provide information request ed by the panel may lead to inferences
being drawn about the inculpatory character of the information withheld."10

 Nonetheless, in seeking to provide the Panel a proper response, Brazil was able to attain
copies of some BTIs issued for frozen boneless chicke n cuts with a salt content of more than 1.2%
from Brazil that were classified under subheading 0210.99.39. 11 Furthermore, Brazil points out that
Thailand submitted as Exhibits THA-24(b) and THA-24( c) BTIs for frozen salted chicken with a salt
content of over 1.2% under subheading 0210.99.39 that also came from Brazil.

 Moreover, Brazil again recalls that the EC has not denied that BTIs classifying the product at
issue under heading 0210 have been issued since Brazil started exporting it to the European market.

 We also recall that at the first meeting of th e Panel with the parties, Brazil asked the EC for
means of accessing BTIs issued by the Member States. The EC delegation did not offer any
indication of what Brazil could do, or would have to do, to obtain such information.

4. In paragraph 102 of Brazil's first wri tten submission, Brazil relies upon scientific
literature which it says indicates that when used "in conjunction with other preserving
processes, such as refrigeration, dissection (sic) and smoking (…) salt exerts a good microbicidal
effect at concentrations as low as 1-3%". Could Brazil comment on the fact that the reference
to "smoking" in this quotation indicates that smoking, being one of the terms contained in
heading 0210 of the EC Schedule, is used as a preservative.

 Brazil has previously provided that it is possibl e for some meat, prepared by salting, drying or
smoking, to also be preserved by those processes.
12 We have also submitted that salting is a
preparation process that may serve many purposes, including – but not limited to – preservation. 13 In
addition, preservation is not an absolute and unequi vocal concept. A produc t may undergo a process
that allows preservation for entirely different time spans: from a few hours to indefinite duration.
Therefore, and within our understanding, prepara tion by smoking may in some cases also serve to
preserve meat for varying spans of time but that is certainly not the only or main reason why meat is
smoked.

7 Article 12.3.4 of Council Regulation (EEC) No. 2913/92 establishing the Community Customs Code.
8 Article 12.4 of Council Regulation (EEC) No. 2913/92 establishing the Community Customs Code.
9 WT/DS70/AB/R, para. 187.
10 Id, para.204.
11 Exhibit BRA-31.
12 Brazil's First Written Submission, para. 40.
13 Brazil's First Written Submission, para. 23.

 In Exhibit BRA-16, we have submitted some literature regarding the process of smoking and
its characteristics. In particular, we have provided that " smoking is understood as the process of
applying smoke to food products, in which the smo ke is produced by the incomplete combustion of
some previously selected woods. Smoked products can be defined as being those products which (…)
are submitted to smoking process in order to co nfer them a characteri stic aroma and flavor , in
addition to a longer shelf life, by means of partial de hydration. The smoking process is not solely
used with the purpose of preservi ng food, but also as part of a technology capable of conferring on
smoked products organoleptic characteristics su ch as a pleasing color, flavor, and aroma . (…). They
obtain an aroma and taste which are char acteristic of smoked meat products ".14 We have also
provided that " even though the majority of smoked meat products present greater stability and a
longer shelf-life (…); still, in order to preven t alterations, other means of preservation are
required."15 We have also cited in our oral statement that some smoked processes are insufficient to
inhibit outgrowth of certain poisonous organisms an d to avoid risk some smoked fish must remain
frozen from the time of production to cooking and/or consumption.16

 But perhaps more important and revealing is the fact that some EC Member States concede
that salting and/or smoking is what gives meat its character even when freezing is required to preserve
the product. In that sense, Brazil is submitting as Exhibit BRA-32 extract from the minutes of an EC
Customs Code Committee meeting that unequivocally show that Denmark and other Member States
consider that bacon, which is salted/smoked and frozen, should "remain" classified in heading 0210,
even when frozen. If, as propo sed by the EC, freezing is what confers the character (and
classification) of a product then why is salted/smoke d bacon that requires freezing to be classified
under heading 0210? We know why. Bacon is classified under heading 0210 because the
salting/smoking process is what gives the product its character and not the fact that it was frozen.

5. With respect to the 1991 US tariff classi fication ruling on the classification of
mechanically de-boned chicken meat from Canada referred to by Brazil in paragraph 79 of its
first written submission:

 (a) Brazil is requested to provide furth er explanation of how this ruling supports
the view that the products at issue which are both frozen and salted should be
classified under heading 0210 rather than heading 0207 of the EC Schedule.

 As provided in our First Submission, the 1991 US ruling relates to mechanically deboned
chicken meat, which is marketed " either fresh or frozen and with or without cure".
17 In other words,
the products at issue in that case were: cured fresh meat; fresh meat without cure; cured frozen meat;
and frozen meat without cure. The ruling provided that fresh chicken meat, not cured, and frozen
chicken meat, not cured , should be classified under subhead ings 0207.39.0020 and 0207.41.0000,
respectively, of the Harmonised Tariff Schedule of the US (HTSUS). 18 Based on this ruling, it is safe
to say that the authority considered that only fresh or frozen chicken meat that had not been cured fell
under heading 0207. The ruling further established that chicken that has been cured (whether fresh
or frozen) should be classified under subheading 0210.90.2000 of the HTSUS.19

 This ruling was provided as an example that unprepared poultry meat falls under heading
0207 and prepared poultry falls under heading 0210. We understand that the same reasoning applies

14 Literature on the Action of Salt in Meat. João Andrade Silva at page 175. Exhibit BRA-16.
15 Literature on the Action of Salt in Meat. John C. Forrest at page 247. Exhibit BRA-16.
16 Brazil's Oral Statement at the First Substantive Meeting, para. 42.
17 Paragraph 2 of Ruling NY 869661. Exhibit BRA-15.
18 Paragraphs 3 and 5 of Ruling NY 869661. Exhibit BRA-15.
19 Paragraph 7 of Ruling NY 869661. Exhibit BRA-15.

in the instant case. Salted chicken cuts are prep ared poultry meat and should be classified under
heading 0210, irrespective of whether it is fresh, chilled or frozen.

 (b) With respect to the definition of "curing" in Annex 2 of the EC's first written
submission, does Brazil agree with that definition? Further, does Brazil agree
that, given the definition of "curing", the ruling suggests that salted meats
falling within heading 0210 must be preserved?

 Brazil does not agree with the EC's interpretation that the term "cure" can only
 refer to a
treatment designed to preserve meat. 20 The term "cure", for example, also means "to prepare or alter
esp. by chemical or physical processing for keeping or use ".21 Brazil understands that, much like
salting, curing was an ancient form of preservation of foodstuff; but, nowadays, its exclusive use for
preservation is relatively rare. 22 We do not affirm this because we "think" this is so. We affirm this
because scientific literature says so.

 Below we provide several passages, from severa l authors, that confirm that even though
curing was originally used for preservation, this is no longer its chief purpose. Today, curing is less
known for its preservative effect than for imparting special properties on meat, such as: flavor, colour,
yield, etc. By and large, for cured products to be preserved they must be held in cool or refrigerated
conditions.

 What is in a Cure

 The most frequently used curing agents are s odium chloride, nitrate, nitrite, sugar, spices,
glycerin, etc., where salt is the fundamental curing agent. 23 In fact, " salt (…) is the only ingredient
necessary for curing".24

 The Modern Use of Cure / Curing Process

 " From a historical point of view , curing of meat may be defined as the process of adding salt
(ClNa) to meat with the purpose of preservation. The exact origin of the cure is lost in time. (…) The
term 'curing' of meat eventually came to mean the addition of salt , sugar, nitrate and/or nitrite. (…)
With the arrival of an efficient commercial refrigeration and the almost universal domestic
refrigerator, the need to preserve meat by curing has greatly decreased and other factors, such as
flavor, color and yield are today of greater importance than the preserving effect obtained."25

 This view is shared by other authors that state that: " With the arrival of modern food
preservation methods, particularly tho se based on low temperatures, salting lost m u c h o f i t s
importance as a food preservation process ; however, the application of salt, separately or together
with other substances, is s till largely used in order to cure the product, which is characterized by
food organoleptic modifications, greatly pleasing to consumers.",26 and that "(…) the objective of the
process of curing is not to preserve meat in a similar state as that of the fresh product. It is more, the

20 EC's First Written Submission, para. 117.
21 The Merriam Webster's Collegi ate Dictionary – Tenth Edition , Merriam-Webster, Incorporated,
1993, p. 284 (emphasis added).
22 EC's First Written Submission, paras. 37 and 39.
23 Literature on the Action of Salt in Meat. José Evangelista at page 409. Exhibit BRA-16.
24 Literature on the Action of Salt in Meat. Montan a Meat Processors Convention at page 11. Exhibit
BRA-16.
25 Literature on the Action of Salt in Meat. James F. Price at pages 393 and 394. Exhibit BRA-16.
26 Literature on the Action of Salt in Meat. José Evangelista at page 408. Exhibit BRA-16.

value of the cured meat depends on the different organoleptic quality it acquires as a consequence of
that process."27

 Today's Cured Products Cannot Be Preserved Without Cooling / Refrigeration

 US meat processors also concur that meat curing no longer serves to preserve meat. In
particular, they provide that " meat curing was used originally
 almost entirely as a means of
preserving meat during times of plenty to carry over to times of scarcity. (…) The almost universal
availability of home refrigerators has, ho wever, greatly altered the reasons for curing. Today, cured
meat products are generally mild-cured and must be stored under refrigeration."28

Specifically with respect to preservation, the literature provides that " (…) in current practice, where 2
to 3% of salt is added so that the cured product presents a pleasing taste, the salt lacks a significant
preserving effect in products with a humidity content of 60% or more ",29 and that " during storage,
cured meats are usually altered mainly by changes experienced in co lor, followed by the consequent
rancidity of fat oxidation and, in third place, by the action of microorganisms".30

 For the Panel to assume and narrowly interpret that "curing" in the 1991 US ruling meant for
purposes of preservation, it would have to ignore the above mentioned literature and the fact that, in
that case, the salt and sodium nitrite concentrations in the cure varied according to customers' needs 31
and not to the need of preservation.

FOR THE COMPLAINANTS:

9. Why did the parties decide to bring this dispute to the WTO rather than the World
Customs Organization?

 Brazil decided to bring the present dispute to the WTO, and not the WCO, because it
understands this to be a case of less favourable tariff treatment, within the meaning of Article II of the
GATT 1994, and not a reclassification case per se. In particular, this is a case of duties being imposed
on imports of salted chicken meat in excess of the duty provided for that product in Schedule LXXX.
As Brazil pointed out during the first meeting with th e parties, this is precisely the position taken by
the EC during the proceedings of EC – Computer Equipment : "(…) the EC considered that (…) the
case was about duty treatment and not about product classification. A decision of the WCO could not
affect the balance of concession s of the respective parties agreed upon during the Uruguay Round .
(…) Customs classification , thus, was only the background for such tariff negotiations , but not its
subject matter. If it were differen t, tariff negotiations would be carried out in the framework of the
WCO and not in the WTO. (…) ".32

 In examining whether the EC has violated Ar ticle II of the GATT 1994, the Panel will have to
assess the meaning and scope of the tariff concession for "salted meat" of he ading 0210 in Schedule
LXXX. This is done according to the rules of treat y interpretation in the Vienna Convention. As
context within the rules of the Vienna Convention, the Harmonized System and its Explanatory Notes
are a relevant part in the holistic exercise of interp retation. However, the meaning and scope of tariff

27 Literature on the Action of Salt in Meat. R.A. Lawrie at pages 301 and 302. Exhibit BRA-16.
28 Literature on the Action of Salt in Meat. Montan a Meat Processors Convention at page 10. Exhibit
BRA-16.
29 Literature on the Action of Salt in Meat. Miguel Cione Pardi at page 723. Exhibit BRA-16.
30 Literature on the Action of Salt in Meat. R.A. Lawrie at pages 301 and 302. Exhibit BRA-16.
31 Paragraph 2 of Ruling NY 869661. Exhibit BRA-15.
32 EC – Computer Equipment , Panel Report, WT/DS62/R, WT/DS67/R, WT/DS68/R, para. 5.13
(emphasis added).

concessions at the WTO are not necessarily the same as the meaning and scope of HS headings and
subheadings.

 Furthermore, and to the best of Brazil's knowledge, decisions by the HS Committee of the
WCO – decisions arising from dispute settlement included – are not binding and Brazil knows of no
effective mechanisms that guarantee implementation or enforcement of decisions in that forum. We
remind the Panel that Members ultimately bring cases to the WTO so as to obtain relief for trade that
is being curtailed in a manner that is inconsistent with the obligations assumed at the WTO.

 As a last note, Brazil recalls that prior to its request for consultations at the WTO, it sought
guidance and clarification from the WCO with resp ect to the meaning of headings 0207 and 0210, in
view of the case at issue. At that time, the WCO provided no clarifications with respect to the
interpretation of these headings and simply direct ed Brazil to the WCO dispute settlement provision
found in the HS Convention.
33

10. The complainants are requested to indicate in specific terms which products they are
claiming have been accorded less favourable treatment under Article II of the GATT 1994? In
particular, are the products at issue: (a) fro zen, boneless, salted chicken cuts; (b) frozen,
boneless, salted chicken cuts with a salt conten t of 1.2% or more; (c) frozen, boneless, salted
chicken cuts with a salt content between 1.2% – 1.9%; (d) frozen, boneless, salted chicken cuts
with a salt content between 1.2% – 3%; and/or (e) any other category of chicken cuts. In
addition, could the complainants indicate whether or not the products at issue have been deeply
and homogenously impregnated with salt.

 The products that have been accorded less fa vourable treatment under Article II of the GATT
1994 are frozen, boneless, salted chicken cuts, deeply and homogeneously impregnated with salt in all
parts with a total salt content of not less than 1.2% by weight. This is the product at issue: "salted
meat" of heading 0210, as defined by the EC in Additional Note 7 of Chapter 2 of the Combined
Nomenclature prior to the conclusion of Schedule LXXX.

 That this product is deeply and homogeneously impregnated with salt is a fact that has not
been disputed by the parties and has actually been acknowledged by the EC. In Exhibits THA-22 and
THA-23, Thailand presented minutes of meetings of the EC Customs Code Committee on the tariff
classification of salted and frozen poultry meat. In the minute of the meeting of 25 January 2002, the
Committee reported with respect to poultry meat from Brazil and Thailand that the issue " concerns
more specifically imports of chicken breast meat, boneless, frozen and with 1.2% to 1.4% by weight of
added salt. According to the information received
, the salting meets the criteria established by the
Additional Note 7 of Chapter 2 of the CN ."34 More precisely, in the extract from the minutes of the
meetings held from 18 to 19 February 2002, the Committee assured that " Member States who had
carried out analysis of the products confirmed that the salt was evenly distributed throughout the
meat and the salt content was not less than 1.2% by weight, i.e., the salting met the criteria laid down
in Additional Note 7 to Chapter 2 . Hence, the frozen and salted products in question were
classifiable under heading 0210."35

 There is, therefore, no doubt that when fro zen, boneless, salted chicken cuts from Brazil and
Thailand were imported into the EC they were deeply and homogeneously impregnated with salt in all
parts with a total salt content of not less than 1.2% by weight.

33 Exhibit BRA-28.
34 Exhibit THA-22 (emphasis added).
35 Exhibit THA-23 (emphasis added).

11. The complainants are requested to indi cate whether or not they are seeking to
specifically challenge EC Commission Regulations 1871/2003, 1789/2003 and 2344/2003 in these
proceedings. If so, they are requested to i ndicate the basis for such a challenge making
reference to their respective Panel requests.

 As provided in our response to question no. 1 above, the cited in the request for the
establishment of the panel are Regulation No. 1223/2002 and EC Commission Decision of
31 January 2003.

 Still, Brazil understands that Regulations No. 1871/2003, No. 1789/2003 and No. 2344/2003
follow and actually result from the classification and tariff changes promoted by Regulation No.
1223/2002 and EC Commission Decision of 31 Janua ry 2003. Once Regulation No. 1223/2002 and
Commission Decision of 31 January 2003 changed th e scope and definition of the products falling
under subheading 0207.14.10 so as to include "other salted meat" of subheading 0210.99.39, the EC
was forced to change the then ex isting definition of "salted meat" of heading 0210 as provided in its
Combined Nomenclature. This change in the defi nition of "salted meat" of heading 0210 came about
through Regulations No. 1871/2003 and No. 2344/2003.

 In sum, even though these Regulations were not cited in the request for establishment of the
panel, Brazil understands, as a logical conseque nce, that if Regulation No. 1223/2002 and EC
Commission of 31 January 2003 are found to be inc onsistent with Article II of the GATT 1994 and
the EC is asked to bring these measures into confor mity; the new definition for the term "salted meat"
of heading 0210, as introduced by Regulation No . 1871/2003 and currently found in Regulation No.
2344/2003, would also have to be brought into conf ormity. As pointed out in the response to question
one, these measures "further refine and implemen t the basic regulation" – EC Regulation Nº
1223/2002 – and are therefore within the Panel's terms of reference.

12. Assuming that freezing has a permanen t and irreversible impact upon meat, is there
some way to distinguish that impact from the impact that salting, brining, drying and smoking
have on meat?

 For the sake of argument, if we were to assume that " freezing has a permanent and
irreversible impact upon meat ", what distinguishes it from salting, brining, drying or smoking is that,
different from those other processes, freezing does not alter the basic characteristics of meat.

 This conclusion is not only supported by common sense – since frozen salted meat when
thawed will still be salted meat used for the same purposes as prior to freezing – but also by the
discussion incurred by the EC in another instan ce, an anti-dumping and anti-subsidy proceeding
concerning imports of salmon from Norway, Chile and the Faeroe Islands.
36

 In that case, the issue raised was whether fresh and frozen salmon should be distinguished for
the purpose of that investigation. After assessing the various types and presentations of salmon, the
EC Commission considered that " (…) freezing
 of salmon was [not] sufficient to alter the basic
characteristics of the product . Rather than adding value to the product that was appreciated by
certain users, it was considered that one of the main reasons for freezing the product was to facilitate
its transport to the Community."37

 From the above, it seems that the Commission considers that freezing does not have a
permanent and irreversible impact upon meat, at le ast not to the extent that will change the basic
characteristics of the product. Salting/brining/ drying/smoking, on the other hand, do. We have

36 Exhibit BRA-26.
37 Recital (19) of Regulation No. 930/2003. Exhibit BRA-26.

provided in paragraphs 81 to 89 of our First Written Submission, in paragraph 26 of our Oral
Statement, and in Exhibit BRA-16 specific information, with literary support, on the action of salt and
the changes it promotes on meat.

13. Brazil and Thailand suggest in their oral statements for the first substantive meeting
(paragraph 16 in the case of Brazil and paragraphs 8 and 53 in the case of Thailand) that, for
the purposes of the Panel's analysis under Article II of the GATT 1994, the decisive criterion for
characterising the products at issue are the objective characteristics of the product at the time
of importation. What role, if any, do Braz il and Thailand consider that production processes,
end-uses and the perspective of end-users should play in the characterisation of the products at
issue for the purposes of the Panel's analysis under Article II?

 Brazil considers that production processes, end-u ses, and the perspective of end-users should
not play a role in the characterisation of the produc t frozen salted chicken cuts for the purposes of an
Article II analysis.

 Here, we take a moment to remind the Panel members that the issue before them is not
whether Brazil's exports to the EC of frozen sal ted chicken cuts, which are evenly and deeply
impregnated with over 1.2% of salt, are identical to or interchangeable with frozen chicken cuts that
are not salted. They are not
, but that is beside the point here. The question before the Panel is
whether frozen salted chicken cuts, which are in fact evenly and deeply impregnated with over 1.2%
of salt, correspond to the scope and definition of "salted meat" of heading 0210 in EC's Schedule
LXXX. If they do, then the EC's treatment of the product under heading 0207 is a violation of
Article II of the GATT 1994.

 In its question, the Panel articulates that fo r Brazil and Thailand the decisive criterion for
characterising the product at issue are the "objective characteristics" of the product at the time of
importation. That assertion is correct. But, more importantly
, it is the EC that considers the
"objective characteristics" of a product to be a decisive criterion for classification. 38 According to the
EC, this criterion serves a dual purpose, it ensures: legal certainty and ease of verification by customs
authorities.39

 When, prior to the conclusion of the Uruguay Round, the EC defined the objective
characteristics of "salted meat" in Regulation No . 535/94; the EC was, in fact, providing legal
certainty that meat deeply and evenly impregnated with salt in all parts with a total salt content of
more than 1.2% was "salted meat" for the purposes of heading 0210.

 To a large extent, Brazil has included the argumen ts cited in the question simply to pre-empt
or rebut the EC's allegation that the sa lted chicken cuts and the chicken cuts in natura are identical or
interchangeable. In the event the Panel finds that it needs to address this issue, Brazil stands by the
evidence it provided showing that the two products are neither identical, nor interchangeable.

14. The complainants are requested to provide details regarding the processes to which the
products at issue are subjected prior to being ex ported to the EC. In particular, please provide
details including supporting material regarding:

 (a) the physical processes that are a pplied to the products at issue;

 (b) the effects of these processes on the products at issue;

38 Exhibit EC-12, pages 969 and 977 (paragraph 10); Exhibit THA-18, page 1276; and Exhibit
BRA-27.
39 Exhibit EC-12, pages 982 and 983 (paragraph 6); Exhibit BRA-27 (fourth paragraph after point 3).

 (c) the time taken to complete these processes; and

 (d) the costs and benefits that such processes entail.

(a) the physical processes that are applied to the products at issue

 Brazil would start by emphasising that the information provided in this answer, especially that
contained in Exhibit BRA-33, is sensitive to the Brazilian industry and is to be treated as confidential
in all phases of these proceedings.

 Brazilian producers and exporters of salted ch icken meat essentially use two salting methods:
dry salting (manual / tumbling) or brine (immersion / injection). The most common method used by
Brazilian producers is the dry salting. Below, th e Panel will find information regarding these two
salting methods.

 Dry salting – After chicken meat has been cleaned and put in the production line, cuts are
selected, weighed and left to rest in a cooling ch amber, at a controlled temperature, for a certain
period. Cooling is done throughout this process to facilitate salt penetration at subsequent stages.
Very low temperatures, however, deter salt penetr ation; while very high temperatures facilitate
microbial development.
40 After the chicken cuts have rested , salt is applied on the surface of the
meat. The contact of the dry salt with the meat is done by manual friction of salt on the meat surface
to cause superficial dilacerati ons of the connective tissue. 41 These dilacerations cause an increase in
the osmotic pressure and favour salt penetration. 42 Mere sprinkling or depositing salt in the meat
surface does not produce an effective penetration. 43 After chicken cuts have been manually salted,
they are directed to a tumbling barrel (tumbler). Me at is then tumbled/massaged for a certain period
to promote even and thorough salt impregnation. Afte r tumbling, the salted cuts are once again left to
rest in a cooling chamber, at a controlled temperat ure, for a certain period. As observed, cooling
throughout the salting process facilitates salt impregna tion. The product is then put in a freezing
tunnel, packaged and put in cardboard boxes for sh ipment. In general, this salting process takes
approximately 30 to 40 hours.

 Brazil is providing as Exhibit BRA-33 a more de tailed description, with pictures, of the dry
salting process carried out by one Brazilian producer of salted chicken meat. Brazil reiterates that all
information contained in Exhibit BRA-33 shall receive confidential treatment.

 Brine – Brine is a simpler method of salting. It may be done by immersion in a saline
solution for a certain period or by intra-muscular or intra-arterial long needle injection to faster
distribute the brine in the tissues' inner portion.
44 We further point out other factors that may also
influence salt penetration: thickness of meat (better/quicker penetration in thinner pieces); temperature
applied during the process; and, the size of salt crystals.45

40 Literature on the Action of Salt in Meat. Miguel Cione Pardi at pages 724 and 725; João Andrade
Silva at page 184. Exhibit BRA-16.
41 Literature on the Action of Salt in Meat. Miguel Cione Pardi at pages 723 and 724; João Andrade
Silva at page 184. Exhibit BRA-16.
42 Literature on the Action of Salt in Meat. João Andrade Silva at page 184. Exhibit BRA-16.
43 Id.
44 Literature on the Action of Salt in Meat. Miguel Cione Pardi at page 725; João Andrade Silva at
page 184. Exhibit BRA-16.
45 Literature on the Action of Salt in Meat. Miguel Cione Pardi at pages 724 and 725; João Andrade
Silva at page 184. Exhibit BRA-16.

(b) the effects of these processes on the products at issue

 The effects of salt on meat are many. Ho wever, from a purely commercial perspective,
salting is good because it reduces "drip loss". "Drip lo ss" is the inability of the muscle tissue to retain
water; it occurs from the moment chicken is slaughte red until after meat is thawed for usage. "Drip
loss" represents weight loss of the product, which may translate into lower quality meat (reduction in
softness and juiciness) and possible reduction in pric es of the product sold. Accordingly, "drip loss"
is a substantial economic problem for the chicken i ndustry. In particular, the process of freezing and
thawing greatly increases "drip loss". Frozen chicke n meat (salted or not) will have to be thawed
prior to usage, be it for direct consumption or for the further processing industry. If salting reduces
"drip loss", it is quite reasonable that importers / further processing industry would prefer salted over
unsalted meat. This is one of the main reasons why European clients request and import salted
chicken meat from Brazil, because the presence of salt reduces "drip loss".
46

 Obviously the salting also affects the organoleptic characteristics of the product, which are a
crucial element defining the basic characteristics of the product (flavor and texture). Salt also
promotes other changes, such as in the meat's wate r activity and protein, which make it more suitable
and appropriate for the further processing industry. This is evident from the scientific literature
provided by Brazil in Exhibit BRA-16 and is also at tested by the declarations contained in Exhibit
BRA-30.

(c) time taken to complete these processes

 As indicated in section "a" above, the salting process may take from 30 to 40 hours.

(d) the costs and benefits that such processes entail

 The benefits of the salting process have been outlined in section "b" above. The costs
associated with the process include: raw material (chicken cuts and salt); the acquisition and
maintenance of the necessary equipment (tumblers); allocation of facilities necessary to conduct the
several stages of the process (refrigerating room fo r example); labour used in the manual part of the
process; utilities; and, also the expenses incurred by the increase of time of production by 30 to 40
hours.

15. Are the processes applied to the products at issue when they are exported to the EC
from Brazil and Thailand the same as those processes applied to the products at issue when they
are exported to other countries?

 The salting processes applied by Brazilian producers may vary depending on the producer.
Usually, salting occurs by tumbling or by needle injection.
47 However, each producer/manufacturing
plant applies only one of these processes on chicken meat to obtain salted chicken cuts. Therefore,
the salting process of any given producer would not change according to the intended export market.
 The three major export markets for chicken m eat products from Brazil are: the Middle East,
Asia, and Europe. The market pr ofile and product demand in these th ree regions is different. In
particular, two major reasons drive exports of salted chicken cuts from Brazil to the European market.

 The first one is that the EC is the only ma rket where the Brazilian product is significantly
used for further processing. As the EC itself admits , the salted chicken cuts are used by the further
processing industry. Although the Communities have deceitfully argued that the salted cuts and the in
natura cuts are interchangeable, this is simply not true. The interchangeability alleged by the EC may

46 Exhibit BRA-30.
47 We observe that tumbling or needle injection is just one step of the salting process.

occur only in the further processing market. The salte d product cannot be sold to the final consumer
or to the "foodservice industry" (supermarkets, restaura nts, hotels, etc.). Almost all of Brazil's other
mentioned major markets – in the Middle East a nd Asia – import non-prep ared, cuts or whole,
chicken for the foodservice industry.

 The second reason is that the structure of the Schedules of the other major importers of
Brazilian poultry make imports of the salted chicken cu ts unattractive, even if the product were to be
used by the further processing industry. Brazil refe rs the Panel to the table contained in Exhibit
BRA-37. That table shows that, of the other 17 relevant markets of WTO Members for the Brazilian
poultry industry only three, like the EC, have a higher tariff concession for heading 0207 as compared
to heading 0210: Czech Republic, Japan, and South A frica. The situation is essentially the same for
Saudi Arabia and Russia, which are not WTO Member s yet. By and large, these markets do not use
the imported product in the further processing industry to any significant extent. The vast majority, if
not all of the in natura poultry imported from Brazil go to the foodservice industry of those countries.
The same happens in Bahrain, Cuba, Hong Ko ng, Paraguay, Singapore, and the United Arab
Emirates, which have bound identical tariffs for h eadings 0207 and 0210. The other eight importers
(Angola, Argentina, China, Egypt, India, Oman, Qa tar, and Korea) have in their Schedules higher
tariffs for heading 0210 than for 0207.

16. The complainants are requested to provide details of their classification practice in
relation to imports and exports of the products at issue.

 Brazil does not
 import salted chicken cuts. Thus, there is no classification practice in relation
to imports of this product. In fact, 2002 and 2003 import statistics show that the only chicken
products imported into Brazil during that period were dehydrated chicke n meat from the US under
subheading 0210.99 and frozen chicken hearts from Argentina under subheading 0207.14.

 With respect to Brazil's inconsistent export classification practice of frozen salted chicken the
following observations are in order.

 Firstly, there are no export duties assessed on exports of frozen salted chicken meat nor on
frozen chicken meat in natura. In situations where duties do no t have to be assessed, authorities are
usually less rigorous when it comes to classifica tion and will not always ascertain whether goods
declared by a producer/exporter correspond to what is actually being exported. Thus, because in most
cases imports
 are subject to duties, import classification practice turns out to be a more reliable and
accurate source of classification information. It is an unfortunate but true situation. On the other
hand, producers of salted chicken meat are concerne d with selling their products. To do so, they will
produce and sell according to customer demand. They are not particularly alert to classification issues
when this has no impact whatsoev er on their commercial operations or profits, which is the case of
export classification in Brazil. For instance, Brazilian producers have exported the product at issue,
frozen salted chicken, and described it as spiced/spicy chicken, which – if one were strictly concerned
with classification – would fall under heading 1602 a nd not under heading 0210. Because importers
are the ones paying duties, they are the ones "tuned in to" such requirements. That is precisely why
import classification is more accurate than export cl assification. There is a natural classification
mechanism of "checks and balances" that is done by customs authorities and importers. In Brazil,
export statistics mostly reflect the classification attri buted by the exporter (or by its customs agent) to
the product that is being shipped abroad. Customs authorities at the border are not as attentive as with
imports, and certainly would not conduct tests to check whether the fro zen chicken cuts are in natura
or whether they are, in fact,
 evenly and deeply impregnated with over 1.2% of salt.

 Second, we do not believe that Brazil's classifica tion practice is relevant for the interpretation
of Schedule LXXX. Here, we note that the cla ssification practice we are talking about is " any

subsequent practice in the application of the t reaty which established the agreement of the parties
regarding its interpretation".
48

 In the present case, the rules of interpretation are being applied to interpret the EC's tariff
concessions for heading 0210 under Schedule LXXX. In other words, the treaty language being
examined is that of Schedule LXXX. Schedule LXXX is the EC's
 Schedule of Commitments and not
Brazil's, Thailand's or any other Member's Schedule of Commitment. It is the understanding of the
scope and meaning of the tariff concessions assumed by the EC in Schedule LXXX that is precisely at
issue here. Even though all Members must agree on the scope of a tariff concession made by the EC
in Schedule LXXX, that tariff concession applies only to the EC. There may well be situations where
Schedules of different Members are identical in all respects, including with regard to their domestic
legislation. But this is not the case here. How then can the classification of other WTO Members,
even those that do not trade frozen salted chicken cu ts, be relevant to the interpretation of Schedule
LXXX?

 In this case, the EC's subsequent 4-year cl assification practice under heading 0210 of salted
chicken meat secured the common agreement parties had at the time Schedule LXXX was concluded
that for purposes of the EC's tariff concessi on for heading 0210, "salted meat" was " meat (…) which
has been deeply and homogeneously impregnated with salt in all parts, having a total salt content not
less than 1.2% by weight".
49

17. Could the complainants comment on the fa ct that Explanatory Notes to Chapters 2 and
16 of the Harmonized System characterise both preservation and preparation as "processes".

 In providing examples of meat that falls under Chapter 16 and not under Chapter 2, the HS
Explanatory Notes to Chapter 2 explicitly list " meat (…) otherwise prepared or preserved by any
process not provided for in this Chapter (…) .50 Accordingly, the HS Explanatory Notes to Chapter 16
also provide that " This Chapter does not cover meat (…) prepared or preserved by the processes
specified in Chapter 2 (…)" .51 From the language of these notes, it is clear that processes under both
Chapters are grouped either as preparation or as preser vation processes. We call attention to the fact
that the only heading under Chapter 2 that explicitly appli es to meat "prepared" by certain processes
(salted, in brine, dried or smoked) is heading 0210.52

 We note that the fact that the terms "preserved" and "prepared" are both characterised as
"processes" in no way prejudices their meanings or makes them similar. A process is simply a
"continuous and regular action or succession of ac tions, taking place or carried on in a definite
manner" (see answer to question 67). To preserve a product is a process, to prepare a product is a
process, to package a product is a process, to clear a product through customs is a process. The fact
that all these actions are "processes" does not make them in any way similar or even related.

 Furthermore, if as proposed by the EC, Chap ter 2 of the HS was structured exclusively
according to methods of preservation, there would be no need for the explicit reference in the notes to
Chapter 2 and to heading 0210 of preparation pro cesses and the term "prepared". Yet, these notes
clearly and intentionally provide for preparation processes (different from preservation processes) and
further establish that salting, brining, drying and smoking are such processes.

48 Article 31.3 (b) of the Vienna Convention.
49 Exhibit BRA-6.
50 Exhibit BRA-24 (emphasis added).
51 EC's First Written Submission, para. 142 (emphasis added).
52 Exhibit BRA-24.

18. The complainants are requested to co mment on the advice provided by the WCO
Secretariat as set out in paragraph 29 of the EC 's oral statement during the first substantive
meeting concerning the classification of fish under Chapter 3 of the Harmonized System.

 To begin with, Brazil understands that a lette r of advice or opinion provided by the WCO
Secretariat as a response to an inquiry made by a customs authority does not constitute an official
WCO position or interpretation of the Harmonize d System nomenclature. As the EC itself
recognized, such letter " (…) is, of course, not the same as a cl assification ruling or opinion made by
the Harmonized System Committee ".53 In fact, the WCO Secretariat discloses that in the event the
customs authority does not agree with the views presen ted in its letter of advice, the Secretariat is
ready to re-examine the question on the basis of further inform ation provided by the customs
authority.

 On this note, the Panel should bear in mind that the Appellate Body in EC – Computer
Equipment considered that " decisions
 of the WCO may be relevant "54 in the interpretation of tariff
concessions in Schedule LXXX. If, as suggested by the Appellate Body, WCO decisions, which are
taken by the HS Committee and approved by the Customs Co-operation Council, are questionable
(may) as relevant means of interpretation, then opini ons given by the WCO Secretariat are even more
so.

 Even though Brazil has not had the benefit of examining the precise terms in which the
questions posed by the Cypriot authority were made and the factual circumstances surrounding that
inquiry; Brazil will endeavour nonetheless to comment on the advice concerning the classification of
frozen salted fish and to make a correlation between that product and the one at issue in this case.

 In doing so, the first thing that stands out is the Cypriot authorities' primary concern as to
"whether there is a minimum percentage of salt for salted fish on the final product and if there is any
different percentage for salted fillets and salted fish in the whole". The immediate and direct response
provided by the WCO Secretariat to this concern was that: "The Nomenclature does not
 offer any
specific criteria as to the salt content n eeded to constitute 'salted fish' (…)". 55 The Panel will be able
to verify that this is also true for salted meat of Chapter 02. The HS Nomenclature does not offer any
specific criteria as to the salt conten t needed to constitute salted meat of heading 0210. However, and
this is the catch, the EC's Combined Nomenclatu re at the time of the conclusion of the Uruguay
Round negotiations did offer a very specific criteria as to the salt content needed to constitute "salted
meat" of heading 0210. At the time of the Uruguay Round, "salted meat" of heading 0210 was "meat
(…) which has been deeply and homogeneously impre gnated with salt in all parts, having a total salt
content not less than 1,2% by weight ". This was the specific criteria needed to constitute "salted
meat" of heading 0210, established by the EC by means of Additional Note 8 of Chapter 2 of the
Combined Nomenclature. This criteria existed in the EC's Combined Nome nclature when Schedule
LXXX was concluded and remained there until Regulation No. 1871/2003 changed it.

 The letter of advice goes on to state that fish sprinkled with salt water or packed with salt as a
temporary preservative during transportation are classified as fresh, chilled or frozen fish under
headings 0302 and 0303.
56 We agree. It could not be otherwise, since this is exactly what is provided
in the Explanatory Notes to these headings. Let's see. For heading 0302, the HS Explanatory Notes
state that: " This heading covers fish, fresh or chilled, wh ether whole, headless, gutted, or in cuts
containing bones. However, the heading does not in clude fish fillets and other fish meat of heading

53 EC Oral Statement at the First Substantive Meeting, para. 27.
54 EC – Computer Equipment , Appellate Body Report, WT/DS62/AB/R, WT/DS67/AB/R,
WT/DS68/AB/R, para. 90 (emphasis added).
55 Exhibit EC-19 (emphasis added).
56 Id.

03.04. The fish may be packed with salt or ice or sprinkled with salt water as a temporary
preservative during transport . (…) ".57 For heading 0303, the notes state that: " The provisions of the
Explanatory Note to heading 03.02 apply, mutatis mutandis, to the products of this heading".58 Under
Chapter 02 of the HS, similar language is found only in the HS Explanatory Notes to that chapter.
Specifically, the Explanatory Not es to Chapter 2 provide that: " This Chapter covers meat and meat
offal in the following states only, whether or not they have been previously scalded or similarly
treated by not cooked: (1) Fresh (including meat and meat offal, packed with salt as a temporary
preservative during transport) (…) ".59 With respect to this note, the Panel can confirm that Brazil has
already specifically commented this language in paragraphs 139 through 143 of its first written
submission. We do not intend to repeat those ar guments but will remind the Panel that: 1) the salt
reference in this note relates to fresh and not frozen meat; and 2) the packing of fresh meat with salt as
a temporary preservative for purposes of transportation is quite different from the addition of salt to a
product, through a process of preparation, that renders the product deeply and homogeneously
impregnated with salt (and irreversibly different from the unsalted product).

 Nowhere do the Harmonized System and its Expl anatory Notes provide that Chapter 02, or
Chapter 03 for that matter, is structured according to methods of preservation. In fact, we have found
no WCO decisions on the subject.

 The letter from the WCO Secretariat further indi cates that the fish in question was subjected
to a "normal" salting process before freezing and th at it was not clear what exactly was meant by
"normal" process. What was clear was the guidanc e provided that if the "normal" process mentioned
by the Cypriot authority covered " packed with salt or sprinkled with salt water as a temporary
preservative during transport " it was classifiable in heading 0303. In the present case, the salting
process applied to chicken meat deeply and evenly impregnates
 the meat with salt. Hence, this
process does not qualify as "packed with salt or sprinkled with salt water".

 In the end of its letter, the WCO Secretaria t cautiously volunteered that "salted" fish
classifiable in heading 0305 is not normally lightly salted to render it necessary for freezing and
declared to be unaware of frozen fish, which had been really salted and still required freezing to be
preserved. This statement of the Secretariat is not supported by the facts however. Brazil has
provided in paragraphs 40 through 43 of its oral statement examples of how there are meat, including
fish, that have been salted and/or smoked that still n eed to be kept in cool or refrigerated conditions
for purposes of preservation.

 More importantly, the EC itself seems to cons ider that frozen salted/dried/smoked fish should
be classified under heading 0305 and not under headings 0303 or 0304. In Exhibit BRA-34, Brazil is
providing information on existing BTIs issued by an EC customs authority classifying frozen
salted/dried Alaska Pollack (a type of cod fish ) and frozen salted/smoked salmon under heading 0305
of the EC Combined Nomenclature and not under h eadings 0303 or 0304, even though these products
are frozen.

 Most importantly, the letter of the Secretariat merely expresses the technical opinion of one
individual (Mr. I. Kusahara, who signs the letter) or possibly more. This opinion does not bind WCO
Members in any way and has no legal value. This is perfectly illustrated if we take a look at other
similar letters of the Secretariat.

 Brazil brings to the attention of the Panel a nother letter of advice from the WCO Secretariat,
also regarding the meaning of the term "salted". This time, however, it is the term "salted" of

57 Exhibit EC-20 (emphasis added).
58 Id.
59 Exhibit BRA-24 (emphasis added).

heading 0210.60 This time, unlike the EC, that selected a letter dated September 1997, Brazil refers to
a letter much closer to us: one that is dated May 200 3, slightly over a year ago. The letter in question
is signed by Mr. Holm Kappler, Head of the Nomenclature and Classification Directorate, the same
area where Mr. Kusahara worked when he signed his letter seven years ago. Mr. Kappler's letter was
in response to a question posed by the Bulgar ian Customs Administration on whether imports " de
poitrines de l'espece porcine, desosees, congelees, qu i avant la congelation ont subis un salage en
surface (sic)"61 should be classified under subheading 0203.29 or subheading 0210.12. In that case,
and the authority believed, guided by the language under Additional Note 7 of Chapter 2 of the EC
Combined Nomenclature, that the product should be classified under heading 0203 because it was not
deeply and homogeneously impregna ted with salt. The importer, on the other hand, argued that the
product was classified under heading 0210 because the total salt content was approximately 1.9% by
weight. Faced with this dilemma, the authority requested advice from the WCO Secretariat.

 Before we go any further, we highlight that the authority's inquiry in that case was founded
precisely on the fact that the product only met part of the description / criterion for "salted meat" of
heading 0210, found in Additional No te 7 of Chapter 2 of the CN. In the case at hand, there is no
doubt. Frozen salted chicken cuts exported from Brazil fully met the definition of "salted meat" of
heading 0210 under the Combined Nomenclature. Th e Panel can verify this by looking at Exhibits
THA-22 and THA-23, which show that EC Member St ates carried out analysis of the products that
confirmed that the salting met the criteria laid down in Additional Note 7 of Chapter 2; and by
looking at the BTIs provided in Exhibit BRA-31.

 Back to the question posed by the Bulgarian au thority, the first and foremost advice provided
by the Secretariat was that "En ce qui concerne le terme "salé", aucun texte official ni Note
63 The Secretariat
was clear: there is no official definition in the Harmonized System and its Explanatory Notes for the
term "salted". This, we recall, was in May 2003.

 The Secretariat went even further and acknow ledged that the EC Combined Nomenclature
had a specific criterion to define salted meat of heading 0210 and that the Bulgarian authority should
turn to the EC for clarification. Here, we draw attention to the fact that the authority specifically
asked for guidance with respect to the salting de gree and method of heading 0210. Yet, in the
exchange of letters and opinions neither the Bulgar ian Authority nor the WCO Secretariat considered
or even raised the point that salting had to preserve the product for it to merit classification under
0210. It seems reasonable that if, as the EC suggests, heading 0210 of the Harmonized System only
covered meat that was preserve d (as opposed to prepared) by salting, drying or smoking, the WCO
Secretariat, and the Bulgarian authority itself, would have mentioned this in their letters. But the truth
is that they did not.

 In fact, if Mr. Kappler had the same understa nding of the EC or, apparently, of Mr. Kusahara,
his answer should have been quite simple: if the product is frozen, then the salting is not intended for
long-term preservation and, therefore, it must be classified under heading 0207. That was not the
conclusion of Mr. Kappler however, who ended his le tter stating that the Secretariat was not in a
position to decide on the classification of the product.

60 Exhibit BRA-35.
61 Id (emphasis added).
62 Id (emphasis added).
63 Id (emphasis added).

 More significantly, Mr. Kappler (i) notes that Bulgaria bases its tariff classification on the
Combined Nomenclature (CN) of the EC; (ii) indicat es that the CN has a definition of "salted meat";
and (iii) refers the Bulgarian Administration to the Communities: " vous devriez vous adresser à la

FOR ALL PARTIES

56. Do the parties agree that the relevant time at which the meaning of headings of the EC
Schedule – LXXX – should be assessed is the ti me at which that Schedule was annexed to the
Marrakech Protocol on 15 April 1994? If not, at what time/during what period should such an
assessment be made?

 To be exact, the relevant time at which th e meaning of headings in Schedule LXXX should
and could have been assessed was on 15 April 1994, when the Contracting Parties signed the Final
Act of the Uruguay Round and at which time Member s' schedules of concessions were annexed to the
Marrakech Protocol. In principle, 15 April 1994 was the last opportunity a Contracting Party had to
refuse or accept adherence to the Protocol.

 Members were also afforded a specific period to verify the scope and meaning of tariff
concessions in other Members' Schedules. In this regard, the Appellate Body in EC – Computer
Equipment confirmed that " (…) a process of verification of tariff schedules took place from 15
February through 25 March 1994 , which allowed Uruguay Round participants to check and control,
through consultations with their negotiating partners, the scope and definition of tariff concessions."64

 We underline that, from 15 February until 25 March of 1994, Members were given the
opportunity to check and control the scope and defi nition of each others tariff concessions. It was
prior
 to the end of this verification process, that the EC issued Regulation No. 535/94 with its
definition of "salted meat" of heading 0210. Mo re precisely, Regulation No. 535/94, of 9 March
1994, was published in the EC's Official Journal on 11 March 1994 and came into force 21 days after
publication, ironically enough on 1 April 1994.

 The EC itself recognizes that Regulation No. 535/94 was published within the period for
verification of tariff schedules, but argues that sa id Regulation only entered into force after the
verification period had ended.
65 With this statement, it seems the EC is arguing that even though it
made its definition of "salted meat" public prior to the end of the verification period, because
Regulation No. 535/94 only entered into force after that period its definition of "salted meat" of
heading 0210 did not exist at that time.

 In this regard, we draw attention to the f act that previous WTO and adopted GATT panels
"have always considered that mandatory legislation of a Member, even if not yet in force or not
applied, can be challenged by another WTO Member". 66 If mandatory legislation not yet in force can
be challenged by another WTO Member; it seems th at the EC's definition of "salted meat" in
Regulation No. 535/94, that was public but not in fo rce during the period of verification of schedules,
could also have been challenged by a negotiating part ner during the period of verification. After all,
this was to be the EC's understanding of what constitutes "salted meat" of heading 0210 in its
Schedule LXXX. The rationale here is that even though the EC's definition of "salted meat" of

64 EC – Computer Equipment , Appellate Body Report, WT/DS62/AB/R, WT/DS67/AB/R,
WT/DS68/AB/R, para. 109 (emphasis added).
65 EC's First Written Submission, para. 200.
66 Turkey – Restrictions on Imports of Textiles and Clothing Products, Panel Report, WT/DS34/R,
para. 9.37 and footnote 263; and United States – Taxes on Petroleum and Certain Imported Substances, Panel
Report, BISD 34S/136, paras. 5.2.1-5.2.2 (emphasis added).

heading 0210 was not yet in force, thus not applicable to current trade, it would be applicable to future
trade. Publication of what the EC considered to be "salted meat" of h eading 0210 gave negotiating
partners the predictability needed to plan future trade. Thus, the mere knowledge by the EC's
negotiating partners of what the EC considered to be "salted meat" of heading 0210 was enough for
purposes of check and control of the scope and definition of tariff concessions.

57. Was the EC Schedule in question negotiated on the basis of series of offers and requests
or, rather, was it based on a unilateral offer that was made by the EC?

 As stated in our First Written Submission, Brazil has not found any specific document on the
preparatory work of Schedule LXXX with respect to headings 0207 and 0210. 67 Nevertheless,
regardless of whether Schedule LXXX was negotiated b ased on a series of offers and requests or on a
unilateral offer by the EC, all offers made by a Member throughout a negotiating process are, in a
sense and ultimately, unilateral and it is up to the nego tiating partners to either accept or decline that
Member's offer. Thus, in either situation – ser ies of offers and requests or a unilateral offer –
Members negotiating tariff concessions must take ac count of each other's definition of the products
being negotiated. The tariff concessions and corres ponding definitions were accepted by the other
Members when they signed the Marrakech Agreement.

58. Was EC Regulation 535/94 enacted in response in whole or in part to requests made of
the EC by other Members during the conclusion of the Uruguay Round for clarification
regarding the headings in the EC Schedule at issue in this case?

 The manner in which the above question has been framed leads Brazil to believe that perhaps
it has not been clear with respect to its arguments regarding Regulation No. 535/94. Brazil has
presented Regulation No. 535/94 in its First Writte n Submission as EC legislation on customs
classification that existed at the time of th e conclusion of the Uru guay Round negotiations.
68 To us,
Regulation No. 535/94 is part of the circumst ances surrounding the conclusion of Schedule LXXX,
within the meaning of Article 32 of the Vienna Convention.

 We have presented Regulation No. 535/94 in this way based on the Appellate Body's
acknowledgement that "If the classification practice of the importing Member at the time of tariff
negotiations is relevant in interpreting tariff concessions in a Member's Schedule, surely that
Member's legislation on customs classification at that time is also relevant ."69 The reason the
Appellate Body found it so obvious that an importi ng Member's classification legislation, at the time
of tariff negotiations, was relevant in the interpre tation of tariff concessions is because a Member's
legislation sheds light as to the scope and definition of the tariff commitment that Member undertook.

 That being so, we turn to the Panel's questi on. Brazil understands that Regulation No. 535/94
was not enacted as a response to requests made by Members to the EC for clarification regarding
heading 0210 in Schedule LXXX. Regulation No. 535/94 was enacted as a re sponse to a case that
seems quite similar to the one at issue here: whet her salted and frozen meat should be classified under
heading 0207 or under heading 0210. As a result of that case, the EC amended its Combined
Nomenclature and inserted a very specific criterion th at had to be met for meat to be considered
"salted meat" of heading 0210. That criterion did not include the term or concept of preservation or
long-term preservation.

67 Brazil's First Written Submission, para. 166.
68 Brazil's First Written Submission, paras. 166 to 176.
69 EC – Computer Equipment , Appellate Body Report, WT/DS62/AB/R, WT/DS67/AB/R,
WT/DS68/AB/R, para. 94 (emphasis added).

59. Are there any GATT Schedules of WTO Members other than the EC's in which
headings identical or similar to the headings at issue in this case exist? If so, please provide
details of such Schedules and information regar ding the classification practices of such
Members in respect of those headings. If possibl e, the parties are requested to indicate how
such Members classify the products at issue in this case.

 In Exhibit BRA-37 we are providing the tariff concessions for heading 0210 found in the
Schedules of some WTO Members.
70 Specifically, the concessions submitted are for countries that
are major import markets of chicken products from Brazil. To the best of our knowledge, there are no
significant markets, other than the EC, that import frozen salted chicken cuts for further processing.
Thus, we were not able to obtain classification practice of other Members on imports of frozen salted
chicken meat.

 Nonetheless, the Panel will note that there are some slight variances among descriptions of
heading 0210 and its subheadings in some Schedules.
71 Nonetheless, based on the nature of the
question posed by the Panel, we would like to re iterate that a Member's tariff concession is not
interpreted merely by what is provided in the tari ff line of its Schedule. The Appellate Body has
shown that other factors, besides the words employed in the text, are also relevant in the interpretation
of a tariff concession in a Member's Schedule, incl uding a Member's classification legislation at the
time of tariff negotiations.72

60. The parties are requested to provide details regarding the processes to which the
products at issue are subjected upon importation to the EC and prior to final consumption. In
particular, please provide details including supporting material regarding:

 (a) the physical processes that are a pplied to the products at issue;
 (b) the effects of these processes on the products at issue;
 (c) the time taken to complete these processes; and
 (d) the costs and benefits that such processes entail.

 Brazil submits that the informa tion requested is not information that belongs to the Brazilian
Government or to the Brazilian producers/export ers of salted chicken m eat and is, thus, not
information to which Brazil has easy or complete ac cess to. We further note that salted chicken cuts
are used as raw material in the processing of a wide variety of va lue-added chicken products. This
means that frozen salted chicken cuts are further processed in many different ways. Consequently, the
information we provide in this response is a ge neral overview of some of the processes to which
frozen salted chicken cuts are submitted in the making of value-added chicken products.

 In the processing of cooked / breaded chic ken products, frozen salted chicken cuts are
thawed, tumbled / blended with seasoning, left to rest (to mature), pre-dusted / battered / breaded, pre-
fried, cooked, frozen and packed. Depending on the product, this process may present some
variations. Frozen salted chicken cuts may be thawed, ground, tenderised with seasoning, mixed with
other ingredients in a mixer, formed, pre-dusted / battered / breaded, pre-fried, cooked, frozen and
packed. They may also be thawed, ground, mixed with other ingredients in a mixer, formed, pre-
dusted / battered / breaded, pre-fried, pre-cooked, frozen and packed.

70 We note that Exhibit BRA-37 also provides the tariff applied by Russia and Saudi Arabia, which are
not WTO Members, but are major importing markets of Brazilian chicken products.
71 We note that the Republic of Korea provides for a "meat of poultry" subheading within heading 0210
of its Schedule. The US and Canada, although not liste d in Exhibit BRA-37, also provide in their Schedule a
"meat of poultry" subheading within heading 0210.
72 EC – Computer Equipment , Appellate Body Report, WT/DS62/AB/R, WT/DS67/AB/R,
WT/DS68/AB/R, para. 94.

 In the processing of marinated chicken, frozen salted chicken cuts are thawed, tumbled /
blended with seasoning, left to rest (to mature), packed and frozen.

 In the processing of sausages and chicken de li products, frozen salted chicken cuts are
thawed, ground, mixed with other ingredients in a mixer, left to rest (to mature), pressed, tied,
weighed, packed and frozen. Depending on the pr oduct, this process may present some variations.
Frozen salted chicken cuts may be thawed, ground, mixed with other ingredients in a mixer, pressed,
cooked / smoked / chilled and packed. They may also be thawed, ground, mixed with other
ingredients in a mixer, emulsified, pressed, cooked, chilled, dyed, dried, packed, pasteurised and
packed a second time. They may also be thawed, ground, cut in a cutter, pressed, cooked, chilled and
packed.

 In the processing of chicken burgers, the fro zen salted chicken cuts are thawed, ground,
mixed with other ingredients in a mixer, formed, frozen, enveloped and packed. In the processing of
chicken meatballs and alike, the frozen salted chic ken cuts are thawed, ground, mixed with other
ingredients in a mixer, formed, frozen and packed.

 Regarding the descriptions above, we observe tha t: 1) the first step in all processes is always
the thawing of frozen salted chicken meat; 2) ther e is no de-salting stage in all processes described
(salted cuts are not de-salted for further proces sing); and, 3) the reference to seasoning does not
include salt.

 The effect of these processes on the product at issue is that salted chicken cuts are
transformed into elaborated chicken products (cooked / breaded / delicatessen / etc). By and large,
value-added chicken products are more expensive than less elaborate chicken products. Because
salted chicken cuts are used as ra w material in the making of a wide range of products, the time to
complete these processes varies greatly. That said, we believe that a period of 24 to 48 hours is the
time usually taken to complete these processes.

61. If boneless chicken cuts have been deep ly and homogeneously salted, can they be de-
salted?

 Brazilian salted chicken cuts, which are deeply and evenly impregnated with a salt content of
over 1.2%, cannot be completely de-salted. For th e Panel's benefit, Brazil is providing as Exhibit
BRA-36 a brief explanation on sa lting methods and the effect of desalting salted chicken meat,
written by Professor Dr. Nelcindo N. Terra,
73 pursuant to information gathered from international
scientific literature.

 In addition, we ask the Panel to think about the EC's suggestion that salted chicken meat
exported from Brazil can be de-salte d and that the salting process can be largely reversed before meat
is consumed.
74 If this were true, then the Panel should ask itself: Why haven't Brazilian producers and
exporters simply raised the salt content in meat so as to meet the EC's new definition of "salted meat"
of heading 0210? After all, if it is possible to si mply de-salt the product after it has been imported so
that it goes back to being the same unsalted product, with the same properties, that existed prior to
salting; then why haven't producers/exporters already done this? The answer is simple.

73 Dr. Nelcindo Nascimento Terra is a Professor at the Federal University of Santa Maria (UFSM), in
the State of Rio Grande do Sul (RS) – Brazil. Professor Terra belongs to the Department of Science and
Technology of Food Products of UFSM and has taught classes on meat technology.
74 EC's First Written Submission, paras. 25 and 43.

 The salting process carried out by Brazilian prod ucers irreversibly renders the product salted,
different from the product without salt.
75 Some de-salting is possible. However, Brazilian chicken
meat deeply impregnated with salt cannot be completely desalted to the point that it goes back to
being unsalted chicken with the same basic characteris tics and use that existed prior to salting. Once
deeply and evenly impregnated with salt, chicken meat will always present itself as salted meat, even
after desalting. Brazil has no knowledge of any Europ ean importer that de-salts the product. As far
as our inquiries went, we found that processors may ad apt the mixture of ingredients or the recipes in
order to take into account the fact that the chicken cuts are already salted.

 What's more, because desalting entails the additi on of water to meat for a certain period, when
part of the salt is removed by the water, certain im portant muscle proteins, v itamins and minerals are
also removed. As a result, the desalting process depletes meat of fundamental characteristics and
sometimes even leaves it inadequate to be used as raw material for the processing of meat products.

62. What is/would be the process used to salt boneless chicken cuts so as to ensure long-term
preservation of the cuts?

 Salting for "long-term preservation" is a con cept created by the EC, which has actually not
been defined. Brazil, therefore, is not able to respond what is / would be the salting process necessary
to ensure long-term preservation.

 What we can attest is that frozen salted ch icken cuts exported from Brazil to the EC were
deeply and homogeneously impregnated with salt in all parts with a total salt content of over 1.2% by
weight and, therefore, met the criterion set out in the EC's Combined Nomenclature for "salted meat"
of heading 0210.

63. What end-products other than chicken nugge ts use the products at issue as an input?

 Salted chicken cuts are used as raw material in the processing of seve ral value-added chicken
products, such as: cooked, breaded, battered, ma rinated chicken products (e.g., patties, fingers,
nuggets, meatballs); chicken wieners, sausages and ot her deli products; prepared meals, entrees, pies;
etc.

64. Have the products at issue been salted with common salt? Does the term "salted" in the
EC Schedule relate to the addition of common salt or does it include the addition of other salts
as well?

 Brazilian salted chicken cuts exported to the EC are impregnated with common salt. Brazil
would rather not volunteer comments on whether, in abstract, the term "salted" of heading 0210 in
Schedule LXXX only relates to preparation by usage of common salt or whether it can also relate to
salt preparation that includes the addition of other salts.

65. Does chilling/freezing subsequent to salting, brining, drying or smoking for long-term
preservation mean that the product in question should be categorised under heading 0207?

 No. Chilling or freezing are processes applied to me at that merely serve to preserve it in the
same manner, or with the same basic characteris tics, as prior to chilling or freezing. Meat will
fundamentally possess the same basic characteristics and be used for the same purposes before and
after freezing. For example, salted chicken meat after thawing will be the same salted chicken meat
that existed prior to freezing. The possibility th at freezing may cause irreversible changes of a

75 Brazilian First Written Submission, paras. 83 and 141.

microscopical nature, normally imperceptible to cons umers, does not mean that the essential or basic
characteristics of the product have changed.

 On the other hand, salting, brining, drying an d/or smoking are processes that have such an
impact on meat that they change the characteristics of the product. We have presented in Exhibit
BRA-16 literature on the action and impact of salt on meat and the different properties it conveys. In
Exhibit BRA-36, we are providing an explanation, based on scientific literatu re, regarding different
salting methods and the effect of desalting on meat, specifically that the salting process cannot be
completely reversed and that desalting depletes meat of inherent and important properties.

 Heading 0210 is a specific heading for meats th at have been prepared by certain processes:
salting, brining, drying or smoking. These processes confer the characteristic of the product and,
consequently, its classification. Thus, once meat is salted, it does not matter whether it remains fresh
or is kept chilled or frozen, for all purposes that meat is and will remain salted meat.

66. In interpreting headings 0207 and 0210 of the EC Schedule, should the ordinary
meaning of all the terms in those headings be assessed as a whole or, rather, should the terms
other than "frozen" in heading 0207 (i.e. "fres h" and "chilled") and the terms other than
"salted" in heading 0210 (i.e. "in brine", "dri ed" and "smoked") be treated as context for the
interpretation of the terms that appear to be directly at issue – i.e. "frozen" and "salted". Will
the result of the interpretative exercise differ de pending upon which approach is adopted? If
so, please explain making specific reference to the headings at issue in this case.

 Brazil has provided the ordinary meanings of all the relevant terms in heading 0207 ("fresh",
"chilled" and "frozen") and heading 0210 (" salted", "in brine", dried" and "smoked")
76 because it
believes that what is under examination by the Pane l is the scope and meaning of the tariff concession
of heading 0210 in Schedule LXXX. Accordingly, heading 0210 is composed of terms other than
salted that must be interpreted as well. Furthermor e, the measures at issue, namely Regulation No.
1223/2002 and EC Commission Decision, relate to th e inclusion of "salted meat" within heading
0207. Thus, the scope and meaning of (all terms of) that heading must also be examined.

 Brazil does not consider that the result in th e interpretative exercise will differ whether the
other terms of headings 0207 and 0210 are assessed as ordinary meaning or as context.

67. Can products that fall within the scope of heading 0207 of the EC Schedule be
considered as having undergone a "process"? If so , please explain what is meant by "process".
Can the processes to which products falling within the scope of heading 0207 are subject, if any,
be distinguished from those to which products falling within the scope of heading 0210 are
subject? If so, how?

 Dictionaries define the term "process" as "a continuous and regular action or succession of
actions, taking place or carried on in a definite manner"
77 or "a series of operations performed in the
making or treatment of a product". 78 The Panel will note that the defi nition of the term "process" is a
wide-ranging one.

 Within that very broad definition, and asi de from fresh meat, products under heading 0207
may be considered as having undergone a process; th at is, a series of actions taken to chill or freeze

76 Brazil's First Written Submission, paras. 71 to 75.
77 The Shorter Oxford English Dictionary on Histor ical Principles – Third Edition, Oxford at the
Clarendon Press, 1944, p. 1590.
78 The American Heritage College Dictionary – Third Edition, Houghton Mifflin Company, 1993,
pages 1090 and 1091.

meat. Chilling and freezing are carried out to pr eserve meat. Brazil does not know of any other
reason for chilling or freezing meat. Thus, freezing serves to preserve meat so that after thawing it
remains basically the same, and used for the same purposes, as prior to freezing.

 Products under heading 0210 are also consider ed to have undergone a process. In other
words, a series of operations that turn in natura meat into salted, dried or smoked meat. Salting,
drying or smoking of meat is done for several reasons, including: to confer organoleptic
characteristics to meat; to give it special processi ng properties (extraction of proteins, reduced drip
loss, increased yields); and, to preserve it. Differe nt from thawing, after meat is de-salted it will not
present the same basic characteristics, and will not serve the same purposes, as it did prior to salting.

68. If some or all products that fall within the scope of heading 0207 of the EC Schedule can
be considered as having undergone a "process", what is the purpose of that process? What is
the purpose of the processes to which products falling within the scope of heading 0210 are
subject?

 Please refer to the response to question no. 67 above.

69. To what extent, if at all, is the purpose of a process to which a product is subject
relevant to the interpretation of: (a) heading 020 7 of the EC Schedule; and (b) heading 0210 of
the EC Schedule? Should the purpose take prece dence over the process in either case? If so,
please explain why and in what circumstances. In the case of both headings, if there are
multiple purposes underlying the processes in question, which purpose should take precedence?

 For Brazil, the purpose of the processes to whic h the products under h eadings 0207 and 0210
are subject to is not relevant in the interpretation of the meaning and scope of these headings.

 For instance, the process of salting or smoking meat may serve more than one purpose. One
may salt, dry or smoke meat because they want to preserve it. One may also salt, dry or smoke meat
because they want a product with special orga noleptic qualities (or with special processing
properties). Heading 0210 of Schedule LXXX does not qualify the purpose of the process of
salting/bring/drying/smoking. Likewise, Chapter 2 and heading 0210 of the Harmonized System also
do not qualify the purpose of the processes in that h eading. They simply qualify the processes of
heading 0210 as preparation process. The "salted meat" definition in Regulation No. 535/94 (and in
the EC's Combined Nomenclature) also clearly
 did not qualify the purpose of the salting process.
That definition merely qualified the salting pr ocess as that which leaves meat deeply and
homogeneously impregnated with over 1.2% of salt, and not as that which preserves meat for long-
term. We understand the EC tried to introduce [a narrow] purpose for salting by means of Regulation
No. 1223/2002 and Regulation No. 1871/2003.

 Based on the above, Brazil considers that pur pose should not and could not take precedence
over process.

70. Does the order of steps/activity entailed in a process to which a product is subject play a
role in the classification of that product? Please explain making reference to the products at
issue in this case.

 The order of steps/activity may be relevant only to the extent that it changes the basic
characteristics of the end product. As described in the response to question no. 14 and in Exhibit
BRA-33, Brazilian chicken cuts are first subject to a salting process and then frozen. Hence, when the
product is frozen, chicken cuts have already been deeply and homogeneously im pregnated with salt.
After frozen salted cuts are thawed, they go back to being salted chicken cuts with the same

characteristics and use that existed prior to freezing. Therefore, the product is salted chicken that has
been frozen.

 From the scientific literature submitted in E xhibit BRA-16, we understand that temperature
influences salt penetration. Specifically, " very low temperatures (…) hinders salt penetration "
79 and
"the higher the temperature, the quicker the penetrat ion. However, higher temperatures are liable to
a greater microbial growth ".80 If freezing ( very low temperatures ) prevents or inhibits salt
penetration, than we understand it is possible that salt will not deeply and homogeneously impregnate
the meat if salting occurs after the product is frozen.

71. Are there different degrees to which meat can be dried, smoked or soaked in brine? If
so, is it the case that meat products can only be classified under heading 0210 if the degree of
drying, smoking or soaking in brine has exceeded a pa rticular level? If so, what are those levels
and how are they determined?

 Yes, there are different degrees to which meat can be dried, smoked or soaked in brine.
However, when a Member specifically defines a criterion (or degree) of salting, drying or smoking for
meat to fall under heading 0210, at the time it commits to a tariff related to that product, that Member
is providing predictability to other Members of wh at constitutes meat of h eading 0210 and what tariff
will be applied to it.

 In that sense, Brazil understands that there is not just one universal value (degree) that is
applied across the board to every Schedule of Commi tment. In the case of the EC, the salting value
(degree) that was applicable to Schedule LXXX was th at existing at the time of its conclusion. That
is, that meat be deeply and homogeneously impregnate d with salt in all parts with a total salt content
not less than 1.2% by weight.

72. Does the reference to "poultry" in headin g 0207 of the EC Schedule make it more
"specific" within the meaning of General Rule of Interpretation 3(a) of the Harmonized System
than heading 0210, which refers more generally to meat"? Please explain.

 The short answer is no. The reference to poultry in heading 0207 does not make it more
specific than heading 0210.

 However, before adequately addressing the ques tion, we would first like to remind the Panel
that based on the examination of the terms of h eadings 0207 and 0210 and their relative Section and
Chapter notes, Brazil does not consider frozen salted chicken cuts to be a product that prima facie
falls under two or more headings.
81 For us, frozen salted chicken cuts fall under heading 0210.

 As stated in paragraph 70 of our First Wr itten Submission, the EC in its measures – and
apparently throughout this proceeding – does not di spute the fact that both subheadings 0207.41.10
and 0210.90.20 include chicken meat. Hence, ther e is no question that chicken meat is a product
covered by both subheadings. The HS Explanatory Notes explain that heading 0210 applies to all
kinds of meat , meaning that a variety of m eats are classified under that h eading. This includes meat
of swine, bovine animals, horses, lambs, goats, geese, turkeys, chicken and others. In other words,
because the term "meat" under headin g 0210 includes all kinds of meat, it would be just the same to
state that heading 0210 refers to meat of swine, bovine animals, horses, lambs, goats, geese, turkeys,
chicken, etc.

79 Literature on the Action of Salt in Meat. João Andrade Silva at page 184. Exhibit BRA-16.
80 Literature on the Action of Salt in Meat. Miguel Cione Pardi at page 724. Exhibit BRA-16.
81 Brazil's First Written Submission, para. 147.

 However, what is under dispute here is the in terpretation and reach of the terms "salted" in
heading 0210 and "frozen" in heading 0207 of Schedu le LXXX. In this case, the term "salted" more
specifically describes the product "frozen salted chicken cuts" than the term "frozen".

 We have provided in paragra phs 150 to 156 of our First Wr itten Submission, the reasons why
salted meat is more specific than frozen meat. Salt co nfers special properties to meat. In particular, it
changes the organoleptic characteristics (flavor an d texture) of meat and provides special and
important properties that favour processing (protein extr action, reduced drip loss and increased yield).
These properties also have an impact on consumer perception of the product and the buyer of chicken
meat must know and be able to identify whether the meat being bought has been salted or not.

73. Is the Harmonized System "context" under Article 31.2 of the Vienna Convention? If
so, please explain by demonstrating how the various elements in Articles 31.2(a) or 31.2(b) are
fulfilled.

 In EC – Computer Equipment , the Appellate Body considered that the Panel in that case had
failed to " examine the context of Schedule LXXX
 (…) in accordance with the rules of treaty
interpretation set out in the Vienna Convention "82 and was, thus, " (…) puzzled by the fact that the
Panel, in its efforts to interpret the terms of Schedule LXXX, did not consider the Harmonized System
and its Explanatory Notes (…) ".83 The Appellate Body believed, as does Brazil, that a proper
interpretation of Schedule LXXX should include an examination of the Harmonized System and its
Explanatory Notes.

 Taking the above into consideration, Brazil considers that the Harmonized System and its
Explanatory Notes are context under Article 31.2(b) of th e Vienna Convention. Article 31.2(b)
establishes that context, for purposes of treat y interpretation, is also comprised of " any instrument
which was made by one or more parties in connecti on with the conclusion of the treaty and accepted
by the other parties as an instrument related to the treaty ". The Harmonized System and its
Explanatory Notes fulfil the elements in that Article in the following manner:

1. " Any instrument which was made by one or more parties (…) " – the
Harmonized System Convention, with the HS nomenclature, was an instrument made
by various parties to the WTO Agreement.
2. " (…) in connection with the conclusion of the treaty (…) " – The Harmonized
System was made "in connection with" the conclusion of the WTO Agreement, in the
sense that it relates to the WTO Agreemen t – because tariff negotiation were held on
its basis – and not in the sense that it was concluded at the same time as the WTO
Agreement.
3. " (…) accepted by the other parties as an instruments related to the treaty " –
Even though not all WTO Members are parties to the Harmonized System, all WTO
Members accepted that the Harmonized System would be used as basis for the
negotiations of schedules of commitments.

82 EC – Computer Equipment , Appellate Body Report, WT/DS62/AB/R, WT/DS67/AB/R,
WT/DS68/AB/R, para. 88 (emphasis added).
83 Id, para. 89.

74. Assuming that the Harmonized System qualifies as "context" for the interpretation of
the EC Schedule under Article 31.2 of the Vienna Convention , to what extent if at all can the
General Rules for the interpretation of the Ha rmonized System be used to determine the
meaning of the headings in question?

 Relevant part of Article 1(a) of the Harm onized System Convention provides that: "(…) the
"Harmonized System", means the Nomenclature comprising the h eadings and subheadings and their
related numerical codes, the Section, Chapter and Subheading notes and the General Rules for the
interpretation of the Harmonized System (…)". 84 Therefore, the General Rules for the interpretation
of the Harmonized System are part of the Harmon ized System and, consequently, also qualify as
context for the interpretation of headings under Schedule LXXX.

 We call the Panel's attention to the fact th at Article 1(a) of the HS Convention does not
include the Explanatory Notes as part of the Harmonized System. We point this out to show that the
Appellate Body, in EC Lan- Equipment , knowing that Explanatory Notes were not part of the HS,
intentionally gave them the same interpretative we ight and status as that given to the Harmonized
System.
85 We know the Appellate Body fully understood the legal nature of HS Explanatory Notes,
for this was discussed during the proceedings of that case. 86 Nonetheless, the Appellate Body
understood that an examination of the Explanatory Notes was also relevant in the interpretation of
Schedule LXXX.

75. How are the following to be categorised, if at all, within the framework of Articles 31
and 32 of the Vienna Convention : (a) 1981 Explanatory Note to heading 02.06 of the EC's
Common Customs Tariff; (b) the 1983 Explanatory Note for subheadings 0210.11-31 and
0210.11-39 of the EC's Common Customs Tariff; (c) the 1983 Dinter judgement of the ECJ; (d)
the 1993 Gausepohl judgement of the ECJ; and (e) the December 1994 Explanatory Note to
subheadings 0210.11.11 and 0210.11.19 to the EC's Combined Nomenclature?

 None of the items mentioned in question no . 75 above are to be categorized within the
framework of Articles 31 and 32 of the Vienna Convention.

 We understand that the Appellate Body in EC – Computer Equipment acknowledged that EC
customs classification legislation – in other words, the Combined Nomenclature – at the time of the
Uruguay Round negotiations was relevant in the in terpretation of tariff concessions in Schedule
LXXX.
87 The Appellate Body, however, did not say that the Explanatory Notes to the Combined
Nomenclature, specially those dating 10 years prior to the conclusion of the Uruguay Round, could be
considered as part of the "circumstances of [the] conclusion" of the WTO Agreement. 88 We further
highlight the fact that CN Explanatory Notes are in struments that are not legally binding and that the
European Court of Justice itself has at times consid ered their content not to be in accordance with
actual provisions of the Combined Nomenclature.89

 Likewise, Brazil fails to see how ECJ Cour t cases prior to the conclusion of the Uruguay
Round could qualify as "circumstances of [the] conclusion" of the WTO Agreement. In fact, Brazil, a

84 Exhibit BRA-20 (emphasis added).
85 EC – Computer Equipment , Appellate Body Report, WT/DS62/AB/R, WT/DS67/AB/R,
WT/DS68/AB/R, para. 89.
86 EC – Computer Equipment , Appellate Body Report, WT/DS62/AB/R, WT/DS67/AB/R,
WT/DS68/AB/R, para. 38.
87 EC – Computer Equipment , Appellate Body Report, WT/DS62/AB/R, WT/DS67/AB/R,
WT/DS68/AB/R, para. 94.
88 Id.
89 Exhibit THA-18, page 1284.

country based on the civil law system, understands th at a Member is not required to know another
Member's entire case-law and non-binding instruments, such as CN Explanatory Notes, at the time of
tariff negotiations. For that purpose, it would suffi ce to know that Member's customs classification
legislation. This is exactly what the Appellate Body in EC – Computer Equipment understood.

76. Can the Harmonized System be consid ered as comprising "relevant rules of
international law" within the meaning of Article 31.3(c) of the Vienna Convention? If so, please
explain by demonstrating how the various elements in Article 31.3(c) have been fulfilled.

 No. Please refer to Brazil's response to question no. 73, where we provide that the
Harmonized System and its Explanatory Notes are c ontext within the meaning of Article 31.2(b) of
the Vienna Convention.

77. Apart from the issue of timing, what is the difference, if any, in the nature of evidence of
classification practice that must be adduced to prove the existence of "subsequent practice"
within the meaning of Article 31.3(b) of the Vienna Convention as compared to the nature of
evidence that is needed regarding classification practice for the purposes of Article 32 of the
Vienna Convention?

 In the case at hand, Brazil understands that there are two moments with respect to
classification practice. One, prior to the conclu sion of the Uruguay Round negotiations. Another,
subsequent to it.

 We know that prior to the conclusion of tariff negotiations, the EC did not import salted
chicken meat under heading 0210. We also know that there was some debate regarding whether
frozen and salted meat should be classified under h eading 0210 or not, and that there was no specific
classification legislation in the EC that define d or established a criterion for "salted meat" of
heading 0210.

 It was prior
 to the conclusion of tariff negotiations, more precisely during the verification of
tariff schedules, that the EC issued Regulation No. 535/94 with a very specific definition for the
product "salted meat" of heading 0210 in its Combin ed Nomenclature. This definition was the EC's
understanding of what constitutes "salted meat" of heading 0210 and negotiating partners – exporting
Members – accepted and understood that the tariffs being negotiated for h eading 0210 in Schedule
LXXX (and not for every Member's Schedule) applied to the products that fit the definition of "salted
meat" as set forth in the EC's Combined Nomenclature.

 This was a landmark, intended to clarify, once and for all, when salted frozen meat – of any
type – was to be classified under heading 0210.

 Subsequent to it, after the conclusion of the Uruguay Round, exporting Members began
exporting salted chicken meat under heading 0210 in accordance with the definition introduced in the
EC's Combined Nomenclature by means of Regul ation No. 535/94. Customs authorities in the EC
accepted and classified the product frozen salted chic ken cuts, which met the criterion set out in
Regulation No. 535/94, as "salted meat" of heading 0210. Authorities classified in this manner for a
period of over 6 years (4 years for the Brazilian product and 6 for the Thai). EC legislation
classification for "salted meat" of heading 0210 re mained as provided in the end of the Uruguay
Round until the measures at issue – Regulati on No. 1223/2002 and EC Commission Decision –
became effective. In other words, from 1995 until 2002, the EC maintained its classification
legislation with respect to "salted meat" of h eading 0210 as it was when it negotiated its tariff
concessions under Schedule LXXX. Consequently, from 1996 to 2002, the EC classified imports of
frozen salted chicken cuts under heading 0210.

 As stated in the response to question no. 16 above, what is under examination is the meaning
and scope of the tariff concession for heading 02 10 under Schedule LXXX. Schedule LXXX is the
EC's, and not some other Member's, Schedule of Commitment. Consequently, subsequent
classification practice must be that of the EC based on its Schedule of Commitment. It may be the
case that for some tariff concessions Members' Sche dules are similar or identical and, in that sense,
classification practice of some or all Members is relevant to establish the meaning and scope of a
tariff concession. However, this is not the case for "salted meat" of heading 0210 in Schedule LXXX.
For heading 0210, the EC inserted a specific definition that differs from that found in most if not all
Member's Schedule. Therefore, relevant classification practice must be that of the EC's for purposes
of interpretation of the tariff concession for heading 0210 of Schedule LXXX.

78. Do the parties consider that the WTO Mo dalities for the Establishment of Specific
Binding Commitments under the Reform Progra mme issued on 20 December 1993 amounts to
"preparatory work" within the meaning of Article 32 of the Vienna Convention? If so, please
explain why and indicate the significance parties attach to this document?

 The last paragraph of page 1 of th e December 1993 WTO Modalities Paper explicitly
provides that: "The revised text is being re-issued on the understanding of participants in the Uruguay
Round that these negotiating modalities shall not be used as basis for dispute settlement
proceedings under the MTO Agreement (sic)."90 Members, therefore, unequivocally expressed their
intention not to use the referred Paper as basis for di spute settlement proceedings under the WTO
Agreement.

 We recall that the WTO dispute settlement syst em also serves "(…) to clarify the existing
provisions of those agreements in accordance with customary rules of interpretation of public
international law".
91 In other words, the mechanism is u sed to clarify WTO law according to public
international rules of interpretation. Since the rules that may be applied in interpreting the meaning of
a concession are the rules of interpretation in th e Vienna Convention (Articles 31 and 32), Members
determined that the Modalities Paper may not be used as "preparatory work" within the meaning of
Article 32 for purposes of this dispute settlement proceeding.

 In addition, we point out that "preparatory work " is to be used in the interpretation of a treaty
– in this case Schedule LXXX – and not in the interpretation of the EC's import practice at the
conclusion of the Uruguay Round. We state this beca use it seems that this is precisely what the EC
does when it associates the Modaliti es Paper to its import practice of frozen chicken and salted meat
at the conclusion of the Uruguay Round.
92

79. What common essential feature(s) do the pa rties consider characterise products that fall
under:
 (a) Chapter 2 of the Harmonized System?
 (b) heading 0207 of the EC Schedule?
 (c) heading 0210 of the EC Schedule?

 For products falling under Chapter 2 of the Harmonized System, the common essential
feature is that they are meat or edible meat offal. The common feature of products falling under
heading 0207 of Schedule LXXX is that they relate to poultry meat or edible offal that have not been
prepared. With respect to heading 0210 of Sc hedule LXXX, the common feature of products
thereunder is that they refer to meat or edible meat offal that have been prepared by salting, brining,
drying or smoking.

90 Exhibit EC-9 (emphasis added).
91 Article 3.2 of the DSU.
92 EC's First Written Submission, para. 53.

80. In paragraph 20 of its oral statement during the first substantive meeting, Brazil
submits that "[i]mporting Members have ample margin to define their offers in such a way that
their interests are fully protected". Does this mean that, in the process of making tariff
commitments, Members must be taken to have anti cipated, or at least, assumed responsibility
for all possible changes in trade patterns?

 Although Members can anticipate some
changes in trade patterns, Brazil does not think it is
possible for Members to fully anticipate and assume all possible changes in trade patterns when they
are negotiating tariff concessions. After all, trade fl ow is something that has always been and always
will be dynamic, with new patterns developing to fit fresh market demands and existing rules.

 At the time tariffs are negotiated, Members defi ne their offers and their obligations in terms
that best suit their needs. There is no doubt about that . A Member, however, cannot possibly
thoroughly foresee what its needs will be ten or more years from the date it negotiated its tariffs. It is
precisely because trade flow is dynamic that it is possible, and even likely, that some new and
unexpected trade pattern will develop in a way that is contrary to or that does not suit a Member's
need. This is something all WTO Members are subject to.

 In fact, the WTO Agreements recognise this possibility and provide ways for Members to
address unexpected trade patterns. One avenue is the Agreement on Safeguards, when an unexpected
surge of imports of a given product occurs. A Member may also resort to anti-dumping or
countervailing measures when dumped or subsidised imports increase in volume and injury to the
domestic industry ensues. A Member may even modify its Schedule of Concessions under the
provisions of Article XXVIII. However, what a Member cannot do is unilaterally change its
commitments simply because a new trade pattern has emerged and the corresponding concession in its
Schedule no longer suits its needs.

ANNEX C-2

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

(2 December 2004)

QUESTIONS POSED BY THE PANEL

FOR BRAZIL:

81. In its reply to Panel question No. 77, Brazil submits that the definition of the term
"salted" in Regulation 535/94 comprised the EC 's understanding of what constitutes "salted
meat" of heading 02.10 and negotiating pa rtners – exporting Members – accepted and
understood that the tariffs being negotiated for he ading 02.10 in the EC Schedule (and not for
every Member's Schedule) applied to the products th at fit the definition of "salted meat" as set
forth in the EC's Combined Nomenclature. Pl ease provide evidence of such "acceptance" and
"understanding".

 In EC – Computer Equipment, the Appellate Body concluded that "(…) the fact that Members'
Schedules are an integral part of the GATT 1994 indi cates that, while each Schedule represents the
tariff commitments made by one Member, th ey represent a common agreement among all Members ".
1
Brazil reiterates that this "common agreement among all Members" was reached on 15 April 1994
when Members agreed to and signed the Marrakech Protocol. Regulation No. 535/94, with the EC's
understanding/definition of "salted meat" of heading 0210, was published in the EC's Official Journal
prior to 15 April 1994, more precisely on 11 March 1994. Thus, the Marrakech Protocol itself is the
ultimate evidence that negotiating partners accepted the term "salted meat" in Regulation No. 535/94
as the definition of "salted meat" of heading 0210 in Schedule LXXX.

 Brazil also understands that Members were given an opportunity, prior to 15 April 1994, to
verify each others schedules so as to "check an d control" the scope and definition of tariff
concessions. This opportunity to verify sche dules ended on 25 March 1994 and Members had until
this date to raise, discuss and resolve issues with respect to the scope and definition of specific tariff
concessions. Regulation No. 535/94 provided, on 11 March 1994, the EC's definition of "salted meat"
of heading 0210 within the Combined Nomenclature and, consequently, within Schedule LXXX. Had
Brazil, or any other WTO Member, an objection or issue regarding the EC's definition of "salted
meat" they had until 25 March 1994 to bring it up and discuss it with the EC.

 But, where no objections or issues were ra ised, there was no need or reason to expressly
acknowledge acceptance of specific concessions nego tiated. An implicit acknowledgement would
naturally occur on 25 March 1994, at the end of the pe riod for verification of schedules. This was the
case for the tariff concession of heading 0210. Brazil did not, and did not have to, express a formal
acceptance of the scope and meaning of each and every ta riff line of special interest to Brazil. In this
sense, what the Panel is asking is that Brazil provide the impossible proof of a negative: that Members
did not object to the scope of heading 0210 in Schedule LXXX. We have searched and found no
document expressing Brazil's "acceptance" of the sc ope and definition of h eading 0210 of Schedule

1 EC – Customs Classification of Certain Computer Equipment , WT/DS62/AB/R, WT/DS67/AB/R,
WT/DS68/AB/R, para. 109 (emphasis added).

LXXX, nor of any other tariff line. This obviously does not mean that Brazil was oblivious to the
definition and scope of headings of Schedule LXXX, some of them re lated to crucial Brazilian export
items. This simply means that, during the verifi cation period, Brazil found no reason to object to the
definition and scope of those headings. The actual evidence of acceptance of the definition of "salted
meat", as set forth in the EC's Combined Nomencla ture, is the signature of the Marrakech Agreement
by Brazil and by all WTO Members on 15 April 1994.

82. In its reply to Panel question No. 60, Brazil notes that, upon importation into the EC,
the products at issue are "seasoned" and/or "m ixed with other ingredients". Please provide
proof that "seasoning" and "mixing with other ingredients" does not entail the addition of salt.

 Brazil reiterates that it is the objective characteristic of the product at the time of importation
that is of relevance for purposes of classification. In the case at hand, Brazil has already shown that
frozen salted chicken cuts met the objective charact eristics of meat of heading 0210 laid down in
Additional Note 7 of Chapter 2, inserted in the Co mbined Nomenclature by means of Regulation No.
535/94.
2 In other words, frozen salted chicken cuts from Brazil and Thailand were, in actual fact,
deeply and homogeneously impregna ted in all parts with a minimum salt content of 1.2% by weight
when they entered the EC. This is not disputed by the EC. Accordingly, how a product is further
handled after importation is not relevant for purposes of classification.

 That said, we turn to the Panel's request. As a preliminary observation, we note that salted
chicken cuts are used by European processors as raw material for a wide variety of value-added
chicken products. Consequently, specific information regarding the composition of formulations used
in the many different processes is sensitive commerc ial information that belongs to the European
processing industry and to which the Brazilian govern ment and producers/exporters of salted chicken
cuts do not have complete and ready access to.

 The information Brazil was able to obtain is th at, when salted cuts are used, salt is not added
in the processing of value-added chicken products. To support this information, we refer to Exhibit
BRA-30 with letters from European companies attes ting that processors do not need to add salt to
their formulations because the cuts are already salted.
3 Brazil is also submitting, as Exhibit BRA-41,
further confirmation from European processors that no additional salt – other than that found in the
salted cuts – was included in the processing of chic ken meat. We note that all information contained
in Exhibit BRA-41, particularly names of importe rs and processors, is considered confidential and
should be treated as such during and after these proceedings.

FOR THE COMPLAINANTS:

84. How do Brazil's and Thailand's exporters de scribe the products at issue on their
exportation documentation when exported to the EC?

 Brazil has submitted as Exhibit BRA-29 a number of correspondences, invoices, bills of
lading and purchase orders of sales of salted chicke n cuts from Brazil to the EC for the period 1998
through 2002. By means of these documents, the Panel is able to assess how Brazilian exporters
described the product at issue when exported to the EC.

 Specifically, in Exhibit BRA-29(a) the product was described in a 1998 invoice as " chicken
breast, halves, skinless, boneless, without innerfille t, without medallion, uncalibrated, exe kg packed,
frozen, spiced with salt". In Exhibit BRA-29(d), we provided a 2001 invoice and bill of lading for the
same transaction with the following product description: " pechuga de pollo sin hueso y sin piel

2 Exhibits THA-22 and THA-23.
3 Exhibit BRA-30. Second and third letters in the Exhibit.

sazonada con sal congelada " (chicken breast boneless and skinl ess seasoned with salt frozen). In
Exhibit BRA-29(e), the product was described in a 2000 invoice as " frozen chicken half breast
boneless skinless salted ". In Exhibit BRA-29(f), we submitted a 2001 invoice, bill of lading and
purchase order for the same transaction describing the product as "frozen boneless, skinless, innerfillet
breast salt content 1,3% by weight ". In Exhibit BRA-29(g), we submitted another set of documents
for a 2001 transaction (invoice, bill of lading, purchase order) with the same product description as
that found in Exhibit BRA-29(f). In Exhibit BRA- 29(h) we provided an invoice, bill of lading and
purchase order for a 2002 transaction, describing the product as " frozen chicken breast, boneless,
skinless, single without innerfillet salted 1,2% to 1,5%".

 Brazil is also submitting in Exhibit BRA- 42 additional export doc umentation with the
description of the product at issue. Specifically, Exhibit BRA-42(a) contains a 1998 pro-forma
invoice, where the product at issue is described as " frozen chicken breast, boneless skinless, in halves,
without inner fillet, without middle cartilage, wi thout medallion, 80 GM UP, salted 1,2 / 1,5%
tumbled, 7,5 kg block blue foil, mini container of 570 kg ". In Exhibit BRA-42(b), the product
described in a 1999 pro-forma invoice is " chicken breast, frozen, half breasts, skinless, boneless,
without middle cartilage, without innerfillet, w ithout medallion, salted, normal sizes 80G UP and
small sizes, packed in 7,5 kg blocks / blue foil, in mini containers of 570 kg ". Still with respect to the
invoice in Exhibit BRA-42(b), we call attention to th e fact that the field titl ed "shipment" in that
invoice describes the product as salted chicken breast. We are also providing, in Exhibit BRA-42(c),
a 2001 bill of lading, describing the product as " Brazilian fresh frozen chicken breast, butterfly, with
innerfillet, boneless, skinless, without tendon, salted (1,2 pct – 1,6 pct)". Regarding this bill of lading,
we note that in it the reported customs classifica tion code for the product was NCM 0210.90. Still
regarding Exhibit BRA-42(c), we are also presenting the export registration (RE) of that transaction
with the customs code NCM 0210.90 reported under field No. 10 and the export receipt for that
transaction. Similarly, we are submitting in Exhibit BRA-42(d) another 2001 bill of lading that
describes the product as "frozen salted chicken breast, in halves, boneless, skinless, without innerfillet,
min. 1,2% max. 1,6% salt, max. 2% water ", the export registration (RE) for that transaction with the
customs code for the product declared as NCM 0210.90, and the corresponding export receipt for the
transaction. In Exhibit BRA-42(e), we have pr ovided the following documentation related to one
2001 sales transaction: invoice, bill of lading, packi ng list, certificate of origin, animal and public
health certificate (in Portuguese and English), additional declaration, and purchase order
confirmation. In all documents of Exhi bit BRA-42(e) the product is described as " chicken breast
fillets, boneless, skinless, salted, matured, without innerfillet, tumbled, minimum 140 G UP per piece,
salt 1,2 – 1,5%, layer packed, polyliner cartons of 15 kg".

 Brazil stresses that all documents contai ned in Exhibits BRA-29 and BRA-42 and all
information therein (including names of im porters and processors) are highly sensitive and
confidential and should be treated as such during and after these proceedings.

85. Please explain the export classification proce ss for the products at issue. In particular,
is this undertaken by domestic customs authorities and/or by exporters?

 Based on pertinent regulations and also on in formation obtained from Brazilian authorities as
well as producers/exporters of salted chicken cuts, Brazil is providing the fo llowing general overview
of the export classification process for all chicken products, including the one at issue.

 First, the exporter negotiates and defines w ith the importer/processor the terms and conditions
of a specific sales transaction. Such process entails the definition of market destination, product
description, quantity, price, payment conditions, sh ipment conditions and te rm, and other negotiated
variables. The exporter then sends a pro-forma invoice to the importer/processor with an account of
the negotiated transaction, including a description of the product. In sequence, the exporter receives a

confirmation of the pro-forma invoice from the importer. The exporter then directs an order for
production.

 In sequence, the exporter arranges shipment details (date and carrier) and sends the product
from the production unit to the loading port. At this point, the exporter generates the invoice with
information such as: quantity, price, product d escription (sometimes with the corresponding customs
classification code in the Mercosul Common Nomenc lature – NCM), name and address of producer,
name and address of customer, loading and dischar ge port, terms and cond itions of payment and
shipment, etc. In addition, the exporter also prep ares other documents required for shipment, such as:
packing list and certificates (quality, sanitary).

 After the container has been sterilised, the e xporter – or his customs broker – registers the
export transaction by filling out a document titled Registro de Operações de Exportação (RE) in an
on-line registration system called Sistema Integrado de Comércio Exterior (SISCOMEX). Through
SISCOMEX, the Brazilian government is able to cont rol all import and export transactions in Brazil.
The government entities that manage and are respons ible for SISCOMEX are: the Secretariat of
Foreign Trade ( Secretaria de Comércio Exterior – SECEX),
4 the Federal Revenue Services
(Secretaria da Receita Federal – SRF), 5 and Brazil's Central Bank ( Banco Central do Brasil –
BACEN). The objective of the export registrati on in SISCOMEX is to monitor/control all
merchandise being shipped, thus assuring that what has been invoiced for export is effectively what is
being shipped abroad. The RE contains informa tion about the specific export transaction, such as:
name and taxpayer registration number of the e xporter; exporter's production and dispatching units;
name, address and country of importer; paymen t and shipment terms and conditions; value of
transaction; customs classification code (NCM) of the product exported; 6 product description;
quantity; etc. The SISCOMEX software checks whet her all fields have been properly filled out. If
this is the case, the RE is issued by the system. Article 8 of Portaria SECEX No. 15, of 17 November
2004, holds the exporter responsible for the information entered into the RE.

 Next, the exporter – usually the customs broker – puts together an export declaration, called
Declaração de Despacho de Exportação (DDE), comprised of the invoice, an extract of the RE, and a
request for shipment from the Departme nt of Animal Products Inspection ( Departamento de Inspeção
de Produtos de Origem Animal – DIPOA).
7 These documents are submitted to the Federal Revenue
Services at the loading port. The Federal Reve nue Services then may immediately release the
merchandise for shipment or it may select it for inspection. Selection for inspection in case of exports
is very rare and, when it does occur, it is usually because the declared value of the merchandise is well
below market price, the product description is vague or inexact, or when documentation appears to
have been tampered with.

 At this stage, the merchandise is released a nd ready for shipment. The exporter, in turn, has
already sent shipment instructions to the ship owner, who – upon shipment confirmation of the
merchandise – issues the bill of lading. The ship owner's customs broker has approximately 48 hours
after the issuance of the bill of lading to register shipment data in SISCOMEX. There is simultaneous
cross checking of information within SISCOMEX between the information provided by the exporter
in the DDE and the shipment data registered by the customs broker in SISCOMEX.

4 SECEX belongs to the Brazilian Ministry of Development, Industry and Foreign Trade (Ministério do
Desenvolvimento, Indústria e Comércio Exterior – MDIC).
5 SRF belongs to the Brazilian Ministry of Finance (Ministério da Fazenda – MF).
6 In Exhibits BRA-42(c) and BRA-42(d), the customs classification code (NCM) for the product is
reported as 0210.90 in field No. 10 of the RE.
7 DIPOA belongs to the Brazilian Ministry of Agriculture ( Ministério da Agricultura, Pecuária e
Abastecimento – MAPA).

 If DDE matches the bill of la ding, a notation/registration is issued, an export receipt is
generated and the merchandise is released by SISCOMEX for shipment.

86. In paragraphs 14 and 36 of its second written submission, the EC submits that low levels
(0.5%) of salt are regarded in the industry as sufficient for the purposes of preventing "drip
loss". According to the EC, there is no need fo r a salt content of 1.2% or above for such
purposes. The EC argues that, therefore, even if drip loss were relevant, it does not require that
the salt content be greater than 0.5%. Please comment.

 In their second written submission, the Communities asserted that a level of 0.5% of salt is
regarded by the industry as sufficient to prevent "dri p loss" and, thus, according to the EC there is no
need to impregnate meat with a salt content of 1.2% or more. 8 We stress that, once again in these
proceedings, the EC makes an allegation that is unsubstantiated by evidence.

 Brazil, on the other hand, has provided letters from European companies attesting that salted
chicken meat exported from Brazil to the EC – that is, meat impregnated with a minimum 1.2% of salt
– is favoured over unsalted chicken meat precisely because it reduces "drip loss".
9 Thus, what the
Panel has before it is the industry's confirmation that a 1.2% salt content in chicken meat effectively
reduces "drip loss".

 In addition, Brazil has provided technical litera ture explaining that water-holding capacity is
the ability of meat to retain water
10 and that "drip loss" is the flipside of water-holding capacity. In
other words, it is the inability of the muscle tissue to retain water, and with it protein. In connection,
the literature also provides that meat treated with increasing quantities of salt becomes initially
voluminous, greatly increasing the amount of retained water. 11 In simple terms, the more salt you add
to the meat the greater the water-holding capacity and the lower the "drip loss". But there is a limit to
the correlation between the increase in quantities of sa lt and the reduction in "drip loss". When meat
absorbs about 5% of salt, a state of maximum "dri p loss" inhibition is reached and, with this, the
amount of retained water also reaches its peak. 12 By continuing to add salt, the volume of meat and
retained water decreases and when it reaches a sa lt concentration of 10 to 12%, the process is
inverted; that is, the muscle bundles have their volume reduced and the meat starts losing its own
water.
13

 Translated to the case at hand, the higher the salt content (up to 5%), the lower the "drip loss".
Thus, according to the evidence before the Panel, if 0.5% of salt can reduce "drip loss", a 1.2% salt
content can reduce "drip loss" even more. For the processing industry , the prevention or reduction of
"drip loss" in salted meat is a good thing because it m eans that more water and protein is retained in
the final processed product.

 At any rate, the Panel should not lose track of the most important point here: that it was the
EC that established the objective characteristics for "salted meat" of heading 0210 as meat deeply and
homogeneously impregnated with a minimum 1.2% of salt by weight. It is undisputed that salted

8 EC's Second Written Submission, paras. 14 and 36.
9 Exhibit BRA-30.
10 Literature on the Action of Salt in Meat. Montana Meat Processors Convention, page 7. Exhibit
BRA-16. Aguirre, S.E., Ingredientes que Aumentan la Capacidad de Retención de Agua em Productos
Cárnicos, first paragraph. Exhibit BRA-38.
11 Literature on the Action of Salt in Meat. Miguel Cione Pardi at page 724; João Andrade Silva at
page 183. Exhibit BRA-16.
12 Literature on the Action of Salt in Meat. Miguel Cione Pardi at page 724; João Andrade Silva at
page 183. Exhibit BRA-16.
13 Literature on the Action of Salt in Meat. Miguel Cione Pardi at page 724; João Andrade Silva at
page 183. Exhibit BRA-16.

chicken cuts exported from Brazil a nd Thailand to the EC met this obj ective characteristic at the time
of importation. That salted chicken meat impregnate d with 1.2% of salt in effect reduces "drip loss"
is one commercial reason why there is demand for th e product in the EC. However, what determines
classification under heading 0210 is that the produc t met the objective characteristics set out in the
EC's nomenclature at the time of importation.

FOR ALL PARTIES

118. What is the distinction between "pres ervation" and "long-term preservation"?

 Brazil has provided that the verb "preserve" m eans to "maintain (a thing) in its existing
condition" or "to prevent (organic bodies) from decaying or spoiling".
14 Brazil understands that the
concept of preservation is not absolute and unequivocal and that a product may undergo processes that
allow preservation for entirely different time spans. With that in mind, we affirm that "long-term
preservation" is a term not found or defined in the Harmonised System nomenclature, in Brazil's
classification nomenclature and legislation, nor in the EC's Combined Nomenclature.

 Furthermore, we remind the Panel that "l ong-term preservation" was a term created and
introduced by the EC, which has never really been properly defined in this dispute. At one point, the
EC seems to have qualified it as preser vation for "many" or "several" months,
15 but Brazil is not
certain since in the Annex to Regulation No. 1223/2002 the term appears to mean preservation for one
year (12 months). 16 Still, recital (4) of Regulation No. 1871/2003 suggests that the term is
preservation for a period other than transportation. 17 I n Gausepohl, the discussed terminology for
long-term preservation was " preservation considerably exceeding the time required for
transportation".18 In that case, we recall that the time required for transporting the meat in question
was only one hour but it was preserved for up to two days, a period that was regarded by the Advocate
General as considerably exceeding th e time required for transportation. 19 Additional confusion as to
the meaning of "long-term preservation" was in troduced by the EC when it provided that
salted/dried/smoked meats may be "further preserved" by other means – such as chilling or freezing –
and still fall under heading 0210, 20 while arguing at the same time that what determines classification
under heading 0210 is that salting/drying/smoking ensures long-term preservation.

 Based on the absence of a legitimate defin ition for the term and taking into account the
various meanings provided in the paragraph above, Brazil submits that it cannot establish a distinction
between the terms "preservation" and "long-term preservation".

119. At the time the EC concluded its Schedule, was there evidence of the existence of trade
in meats under heading 02.10 which, through salting, were preserved for less than a few
months?

 In all likelihood, when the EC concluded Schedule LXXX there wa s trade under heading
0210 of meats prepared with salt, which were also preserved by that salting for a period inferior to a
few months. The trade of products such as ch illed or frozen bacon and Parma ham under heading
0210 is not a recent practice. However, the questions that remain are: 1) whether a salt content of

14 Brazil's First Written Submission, para. 76.
15 EC's Second Written Submission, para. 41; Exhibit EC-5.
16 Exhibit BRA-08.
17 Exhibit BRA-10.
20 EC's Replies to the Panel's Questions, paras. 54, 57 and 79; EC's Second Written Submission,
para. 30.

1.2% alone preserved meats for a period of a few months, as suggested by the EC; 2) whether these
salted meats were also frozen – for further preser vation – when traded under heading 0210; and 3)
whether the same salted meat was preserved for different time spans, depending on the distance
between exporting and importing country.

 Brazil searched the World Customs Organi sation's (WCO) Harmonised System Commodity
Database On-Line to find out what kinds of salted meat were traded under heading 0210 at the time
the EC concluded its Schedule. We point out that the WCO On-line Database consists of a
combination of databases obtained from Member administrations, private companies, international
organisations, etc. It is designed to help user s determine the classification of commodities in the
Harmonised System and is part of the complement ary publications and databases of the Harmonised
System. Unfortunately, the On-line Database is onl y available for the 1996 and 2002 version of the
Harmonised System. In any event, we are submitting in Exhibit BRA-43 part of the list found in the
HS On-line Database of salted meat classified under subheading 0210.90 (1 996 HS version). The
Panel will note that "salted meat of chicken" and " salted meat of poultry" are included in this list as
examples of products that fall under subheading 0210.90.

 The list is also suggestive because it contains a number of products that fail to meet the
absurd criterion proposed by the EC for classifica tion under heading 0210: a "preparation that places
meat in a recognisably different state, nor mally one which is identified by a name."
21 Products such
as salted edible offal of reindeer, salted meat of be avers, salted frogs' legs, sal ted meat of pigeons, or
salted meat of hares, to cite just a few, are hardly "instantly recognisable in the sense that bacon or
charque are instantly recognisable." 22 Yet, as the list clearly shows, these are products that are
normally traded under heading 0210.90.

120. With respect to Brazil's suggestion in its reply to Panel question No. 3 that the Panel
should draw adverse inferences regarding the EC's failure to provide certain information
requested of it by the Panel, is there any basis for the Panel drawing similar inferences
regarding Brazil's and Thailand's refusal to pr ovide export classification practice for the
headings at issue?

 Brazil has stated in its response to question No. 3 that Binding Tariff Information (BTI) is
information that EC authorities and importers ha ve easy access to and, consequently, it is not
information that non-EC producers/exporters or th e Brazilian Government can easily obtain.
Consequently, only the Communities in these procee dings have full and immediate access to BTIs
issued by its Member States and only the Communities can effectively provide this information to the
Panel.

 In question No. 53, the Panel requested that th e EC provide copies of the relevant BTIs or
other material to support the assertion that other customs offices – apart from those in Hamburg,
Rotterdam and in the United Kingdom – did not classify the product at issue under subheading
0210.90. As a response, the EC provided an unrelated BTI for ham, not chicken, of subheading
0210.11.31 and, therefore, failed to provide the info rmation requested by the Panel: relevant BTIs, or
other supporting material, demonstrating that other EC customs offices did not classify the product at
issue under subheading 0210.90. Apparently, even the Panel acknowledges that the EC failed to
provide this information for it is once again requesting it in question No. 117.

 In contrast, Brazil has not refused to provide export classification practice for the headings at
issue. We recall that in question No. 16 the Panel asked that the Complainants provide details of their
classification practice in relation to imports and exports of the product at issue. This is precisely what

21 EC's Second Written Submission, para. 35.
22 EC's Second Written Submission, para. 36.

Brazil did. First, we informed that there is no import classification practice for salted chicken cuts
because we do not import this product. Then, we further provided that our export classification
practice of frozen salted chicken was inconsistent. That is, while sometimes the Brazilian exporter or
its customs agent correctly classified exports of salted chicken cuts under heading 0210,
23 Brazil
concedes that other exports of the product at issue were incorrectly classified under heading 0207. In
this regard, we also explained why such export practice was inconsistent. A point, however, that
should not escape the Panel is that Brazil does not beli eve that its classification practice is relevant for
the interpretation of Schedule LXXX. We have ex tensively provided the reasons why in our response
to questions Nos. 16 and 77, in our second written s ubmission, and in our second oral statement, and
will not replicate our arguments here.24

 In short, Brazil would like to make clear that it has not refused to provide information on its
export classification practice of salted chicken cuts a nd, thus, believes there is no basis for the Panel
to draw adverse inferences on any information and/or response it has provided.

121. What relative weight should the Panel acco rd to inferences that may be drawn for the
headings at issue in this case from:

 (a) the structure of Chapter 2 of the HS and its predecessors;

 (b) the Explanatory Notes that are rele vant to Chapter 2 of the HS and to its
predecessors; and

 (c) General Interpretative Rule 3 of the HS.

 Given that the EC and Brazil have different view s as to how Chapter 2 of the HS is structured,
the inferences that can be drawn for the headings at issue, and the weight that should be accorded to
such inferences, must be based on what is explicitly provided in the HS and in its predecessors. In
this sense, the EC's view that Ch apter 2 of the HS is structured according to methods of preservation
finds no support in the language of the HS nor in form er nomenclatures. It is simply a point of view
of the EC that is not validated by the language in the HS.

 In contrast, there is clear and unequivocal langua ge in the HS Explanatory Notes to Chapter 2
and heading 0210 that clarify that the structure of Chapter 2 is based on methods of preservation and
preparation, and that the processes of heading 0210 are preparation – and not preservation –
processes. Clear language on the structure of Chap ter 2 is also found in nomenclatures preceding the
HS, which can be of assistance to the Panel in unde rstanding how the HS was originally structured.
For example, in the 1937 Draft Customs Nomencla ture of the League of Nations, Chapter 2 was
structured so as to place in natura meat at the beginning of the Chapter and "simply prepared" meat at
the end.
25 The 1937 Draft also explained why the terms "fresh", "chilled" and "frozen" – terms related
to preservation – were placed as tertiary items with in a heading and not as separate headings. There
was a real concern that fundamental distinctions not be made between "fresh", "chilled" and "frozen"
because countries might be compelled to introduce in their classification nomenclature subdivisions
that would lead to discrimination being made between the same meat – preserved by different
methods – coming from different parts of the world. 26 This was not a concern for salted meat because
salt preparation was not considered a method of preservation. That is why salted meat was placed in a
separate heading within Chapter 2.

23 Exhibits BRA-42(c) and BRA-42(d) illustrate the point that some exports of the product at issue
were classified under subheading 0210.90 when they left Brazil.
24 Brazil's Second Written Submission, paras. 75 and 76; Brazil's Second Oral Statement, paras. 40-48.
25 Brazil's Second Written Submission, paras. 36 and 37; Exhibit BRA-40.
26 Brazil's Second Written Submission, paras. 38 – 41; Exhibit BRA-40.

 As to the weight the Panel should accord to inferences drawn from HS Explanatory Notes to
Chapter 2, we have provided that, in EC – Computer Equipment, the Appellate Body believed that a
proper interpretation of Schedule LXXX should have included an examination of the Harmonised
System and its Explanatory Notes. 27 In this dispute, all parties agree that both the HS and
Explanatory Notes are relevant in the interpretati on of the terms of Schedule LXXX. Specifically,
Brazil and the EC consider that the HS and Explanatory Notes are context. 28 Specifically regarding
Explanatory Notes, we note that the Appellate Body in Computer Equipment intentionally gave them
the same interpretative weight and status as that given the HS. 29 We know this because in that case
the US cautioned the Appellate Body of the inte rpretative value that should be given to these notes. 30
Although warned by the US, the Appellate Body cons idered the Explanatory Notes to be just as
relevant as the HS itself in the interpretation of Schedule LXXX.31

 Similarly, with respect to General Interpretative Rule 3 of the HS, Brazil has provided that it
is part of the HS. We call to mind that the Harmonised System is made up of " (…) the Nomenclature
comprising the headings and subheading and their related numerical codes, the Sections, Chapter
and Subheading notes and the General Rules for the interpretation of the Harmonized System (…) ".
32
Because it is part of the HS, General Rule 3 is al so part of the context of Schedule LXXX. Even
though Brazil does not consider that the product at issue may prima facie fall under two or more
headings of the HS (to us it is unequivocally a pro duct of heading 0210), if General Rule 3 is applied
it should be used as part of context – alongside th e other rules of treaty interpretation – in the
interpretative exercise of the Panel.

122. Do the parties consider that actual knowl edge during negotiations of a document or
instrument is necessary on the part of some/all negotiators involved in the negotiation of a treaty
in order for it to qualify for consideration as "preparatory work" and/or "circumstances of
conclusion" of a treaty under Article 32 of the Vienna Convention? If so, please provide support
for this view. If not, please provide support for this view.

 To properly respond, Brazil finds it necessary to qualify the phrase "actual knowledge" found
in the Panel's question.

 If "actual knowledge" means that all negotiators must have been, in effect, aware of the
existence and content of certain documents and in struments during negotiations, then the response is:
"No". Actual knowledge of a document or instrume nt is not necessary on the part of some/all
negotiators in order for these in struments to be considered as "preparatory work" and/or
"circumstances of conclusion" within the meaning of Article 32 of the Vienna Convention. For
example, instruments or documents may be drafte d during the negotiations of a treaty without the
participation of all States, contracting parties to th at treaty. One cannot presume that such documents
are not part of the historical background of the treaty negotiated simply because some States did or
were not able to [fully and equally] participate in the discussion or drafting of such documents.

27 EC – Computer Equipment , Appellate Body Report, WT/DS62/AB/R, WT/DS67/AB/R,
WT/DS68/AB/R, para. 89.
28 EC's First Written Submission, para. 107; EC's Replies to the Panel's Questions, paras. 95 and 102;
EC's Second Oral Statement, para. 28 ; Brazil's Replies to the Panel's Ques tions, Question 73; Brazil's First Oral
29 EC – Computer Equipment , Appellate Body Report, WT/DS62/AB/R, WT/DS67/AB/R,
WT/DS68/AB/R, para. 89.
30 EC – Computer Equipment , Appellate Body Report, WT/DS62/AB/R, WT/DS67/AB/R,
WT/DS68/AB/R, para. 38.
31 EC – Computer Equipment , Appellate Body Report, WT/DS62/AB/R, WT/DS67/AB/R,
WT/DS68/AB/R, para. 89.
32 Article 1(a) of the Harmonized System Convention. Exhibit BRA-20 (emphasis added).

 On the other hand, if "actual knowledge" means that certain documents and instruments were
publicly available and, thus, potentially accessible to all negotiators during negotiations, then the
response is: "Yes". For a document or instrument to qualify for consideration as "preparatory work"
and/or "circumstances of conclusion", that document or instrument must have been published. That
is, States should have had the possibility of consulting these documents or instruments during
negotiations if they wished to do so. Quite logically, one cannot possibly call upon documents or
instruments that have not been published, or which are concealed, as historical documents associated
with the negotiation of a treaty.

 To better illustrate the distinction indicated in the above paragraphs, we quote Sir Ian Sinclair,
regarding supplementary means of interpretation:
33

"(…) the better view would still appear to be that recourse to travaux préparatoires
does not depend on the participation in the drafting of the text of the State against
whom the travaux are invoked. To hold otherwise would disrupt the unity of a
multilateral treaty, since it would imply t hat two different methods of interpretation
should be employed, the one for States who participated in the travaux préparatoires
and the other for States who did not so participate. One qualification should,
however, be made. The travaux préparatoires should be in the public domain so
that States which have not participated in the drafting of the text should have the
possibility of consulting them . Travaux préparatoires which are kept secret by the
negotiating States should not be capable of being invoked against subsequently
acceding States." (emphasis added)
 In the case at hand, we note that Regulation No . 535/94 was available in the public domain as
of 11 March 1994, and all EC negotia ting partners had the possibility of consulting the Communities'
understanding/definition of "salted meat" of heading 0210 prior to the conclusion of Schedule LXXX.

QUESTIONS POSED BY THE EUROPEAN COMMUNITIES

 Brazil is asked to identify and cite the specific sentences of its Exhibits which it considers
supports the following claims:

• "Brazil has provided evidence that salt at such [1.2-3%] levels has some preservative
effect on meat" (Para. 2 of Brazil's Second Oral Statement);

 Brazil has already identified and cited in footnot e 1 of its closing statement the specific pages
in the technical literature, provided in Exhibit BRA-16, which support the fact that 1.2 to 3% of salt in
meat has some
 preservative effect. In the spirit of coopera tion, we reproduce below some of the cited
passages in Exhibit BRA-16.

Meat Science Foundations
John C. Forrest at page 246

"(…) the reduction of water activity to a level sufficient for an effective preservation
requires a salt concentration in the fin ished product of 9-11%, a quantity
considerably higher than the 2-3
% usually found in commercially processed
products. Although some micro-organisms are inhibited by these [2-3%] salt
concentrations, the water activity is still sufficiently high so as to tolerate the growth

33 The Vienna Convention on the Law of Treaties, Second edition, Sir Ian Sinclair, Manchester
University Press, 1984, page 144.

of molds, yeasts and halophilic bacteria (s alt lovers). Thus, on todays commercially
processed meat products, salt only exerts a limited preserving effect, whereas these
products need other methods of preservatio n in order to have their shelf-life
extended." (emphasis added)
Chemical Food Preservation – Characteristics, Uses, Effects
E. Lück at page 84

"In these cases [as a preservative], common salt exerts a good microbial effect at
concentrations as low as 1-3%. These relatively small additions reduce water
activity to prevent the growth of important putrefaction bacteria, such as those in
sausages, hams, and salted meats." (emphasis added)
Meat Science, Technology and Hygiene
Miguel Cione Pardi at pages 722 and 723

"a) on sufficiently high concentrations, salt inhibits the microbial growth by
increasing the osmotic pressure of the envir onment, with the consequential reduction
of water activity (aa);
b) on concentrations between 1% and 3% of salt, a good antimicrobial action is
exerted, in view of a reduction in the water activity (aa);
c) the growth of some bacteria is inhibited on low concentrations such as 2% , while
others, like yeasts and molds, are capable of growing in salt concentrations which
may reach even the saturation point; whereas halophiles in general require
concentrations higher than 10% NaCl;
d) in order for the product to be properly preserved, it should contain between 50 and
55% of water, and between 9 and 11% of salt , that is, an aqueous phase almost
saturated with salt;
e) the preserving effect of salt diminishes significantly when its concentration on the
aqueous phase of cured meat is lower than 5.5%;
d) in current practice, where 2 to 3% of salt is added so that the cured product
presents a pleasing taste , the salt lacks a significant preserving effect in products
with a humidity content of 60% or more; (…) " (emphasis added)
Topics on Food Technology
João Andrade Silva at pages 182 and 183

"In sufficiently high concentrations, salt i nhibits microbial growth by increasing the
osmotic pressure of the environment, with the consequent reduction of the water
activity; low concentrations of salt between 1.0 to 3.0%, already exert a significant
antimicrobial action, due to the reduction in the water activity of the environment .
(…) " (emphasis added)
"(…) On cured meats, the salt preserving effect is dramatically reduced, when its
concentration is lower than 5.5% , on the aqueous phase. The preservation of
products with salt concentrations lower than this value should be made by means of
refrigeration (cooling). (…) " (emphasis added)

• "Salt extracts proteins, increases water-holding capacity and yield, improves bind
and texture and reduces 'drip loss' after thawing' (para. 17 of Brazil's Second Oral
Statement)

 Throughout these proceedings, Brazil has identifie d and cited in its submissions, statements
and responses, passages that validate the facts pr ovided in paragraph 17 of Brazil's second oral
statement. Specifically, we direct the Panel to paragraphs 85 - 87 and f ootnotes 75 - 79 of Brazil's
first written submission; paragraph 26 and footnotes 15 - 19 of Brazil's first oral statement; and,
paragraph 15 and footnotes 20 - 22 of Brazil's sec ond written submission. These passages, as well as
paragraph 17 of Brazil's second oral statement, are supported by: Exhibit BRA-16, scientific
literature on the action of salt in meat; Exhibit BRA-30, letters from European companies declaring
their preference of salted over unsalted chicken cuts because it leaves meat more tender and reduces
drip loss (better yields); Exhibit BRA-36, a brie f account provided by Professor Dr. Nelcindo Terra
of the effect of salt on poultry meat, the diffe rent methods of salting poultry meat, and the
consequence of desalting meat; and, Exhibit BRA-38, supporting information on the action of salt and
different salting methods.

 For ease of reference, Brazil has reproduced below extracts in the scientific literature
provided in Exhibit BRA-16 that confirm the statement in paragraph 17.

Meat Science, Technology and Hygiene
Miguel Cione Pardi at page 721

"Salt (sodium chloride) is used on prepa red meats due to its important binding
attributes, aroma/flavour and preservation. One of the purposes of NaCl is to
extract the myofibril proteins. The extraction and solubilization of these muscle
proteins contribute to the binding of meat particle in order to emulsify the fat and
increase the WHC (water holding capacity) . Thus, it reduces the losses occurred
when the product is cooked and improves the quality and texture of the product .
When the raw product is cooked, the fat, wa ter, and other constituents are attracted
inside the coagulated meat protein matrix to form acceptable products with respect
to yield, softness, humidity, texture, and overall quality (SCHMIDT et al (13);
ACTON et al (2)). (…) " (emphasis added)
Science of Meat and Meat Products
James F. Price at pages 381–385

"The binding mechanism of meat systems is complex and not completely understood.
Nonetheless, the more relevant factors that determined the efficiency of the bind
are: the protein extraction, the mechanic al labour, the presence and concentration
of added salts, the pH and the heating temperature (Trout and Schmidt, 1984). "
(emphasis added)
"(…) The mechanisms by which salt increases the binding capacity of the protein
matrix are: (a) by increasing the number of protein extracted ; (b) by altering the
ionic force and the pH of the environment so that the stable protein matrix by the
final heat forms a coherent three dimensional structure.
An explanation of how salts increase the gel force was proposed by Siegel and
Schmidt (1979a, 1979b), who demonstrated, by electronic microscope sweepings, that
when myosin and actomyosin are heated in saline solutions of high ionic force,
proteins formed a three-dimensional fram ework of fibers. Without these added salts,
the same proteins formed a spongy struct ure with little force (Siegel et al., 1979).

Thus, they concluded that the addition of salts was necessary for meat proteins to
form a stable three-dimensional net." (emphasis added)
Topics on Food Technology
João Andrade Silva at page 181

"One of the most important roles of salt , in the meat product industry, is the
extraction of myofibril proteins . The extraction and solubilization of these muscle
proteins contribute to the emul sification of fats and to the increase in its water
holding capacity , thus reducing weight losses when the product is cooked,
contributing to the improvement of the quality and texture of the product. (…) ”
(emphasis added)
Ingredients in Processed Meat Products
Montana Meat Processors Convention at page 11

"(…) Salt is used in most inst ances as a flavour enhancer but it is also important to
water binding ability of meat and extraction of meat proteins necessary for the
manufacture of boneless or chopped and formed hams. When salt is added to meat it
causes swelling of the myofibrils (Hamm, 1960). With the addition of salt the
isoelectric point (lowest water holding capacity) is shifted to a more acidic pH,
increasing the water binding ability of meat
 at its normal ultimate pH of 5.5-5.6
(Hamm 1960).
Salt improves water binding but also is necessary to extract proteins in the
manufacture of boneless hams. Salt solubilizes actin and myosin to form the glue
between muscle pieces so boneless products appear as once piece and aids in the
sliceability of the finished product. Increasing levels of salt will extract more
muscle proteins but the amount that can be used is limited by the taste of the product.
(…) " (emphasis added)
 Regarding the "drip loss" effect, we note that the EC itself asserted that the issue arises in
respect of frozen food and that it concerns, more specifically, the loss of protein when thawing. 34
Accordingly, salted meat is more attractive to pr ocessors because further pr ocessed products, that use
it as raw material, are able to retain more water and protein.

34 EC's Second Written Submission, paras. 14 and 36.

ANNEX C-3

COMMENTS BY BRAZIL ON THE EUROPEAN COMMUNITIES' RESPONSES TO
QUESTIONS AFTER THE SECOND SUBSTANTIVE MEETING

(9 December 2004)

QUESTIONS POSED TO THE EUROPEAN COMMUNITIES

Question 91

 We begin by pointing out that the Communiti es failed to provide a response to the Panel's
question as to how a product is dealt with by cust oms officials when it is not obvious that a product
has been preserved by one of the means mentioned in heading 0210.

 Furthermore, we recall that the EC has cl aimed throughout these proceedings that the product
at issue does not qualify as salted meat of head ing 0210 because the salting in question does not
ensure long-term preservation. In responding this question, the EC states that it is "normally obvious"
to customs officials what kind of salted/dried/smoked meat has been preserved, since the preservation
techniques referred to in heading 0210 leave meat with specific characteristics that are readily
detectable. Yet, for a period of over 6 years it was "normally obvious" to EC customs officials that
the product at issue was classified under heading 0210. Apparently, the product at issue presented
specific characteristics (saltiness), readily detected by EC customs officials, which put it under
heading 0210.

 In connection, the EC provided in response to question No. 89 that in assessing the objective
characteristics of a product customs officials carry out certain steps in their inspection/analyses.
Among these steps is " the physical inspection of the product, in particular its temperature, smell,
taste
, colour ". There is no doubt that, upon inspection, the product at issue is readily detected as
"salted meat", especially because of the salty taste of the product.

 The EC also points out laboratory analysis of product samples as another possible means of
inspection in the assessment of the objective characteristics of a product. Such analysis is undertaken
to verify conformity with customs specifications. In the instant case, EC Member States effectively
carried out analysis of frozen salted chicken cuts that confirmed that the product at issue met the
objective characteristics criterion laid down in Additional Note 7 to Chapter 2 of the CN. 1 That is,
customs officials actually verified that the product conformed to customs specifications.

Question 93

 The EC has provided that "Regulation 535/94 sets a minimum salt content, a pragmatic rule,
below which it cannot be considered that a prod uct is salted for preservation". For the sake of
argument, if we were to consider this a true stat ement, it seems logical that the EC would only set a
1.2% minimum salt content in heading 0210 if there was some kind of meat that, in effect, was
preserved [for long-term] with this salt percentage . Otherwise, why would the EC set the minimum
salt threshold at 1.2%? Yet, the EC has provided that it does not
 know of any type of meat that
deeply and homogeneously impregnated with 1.2% of salt can be preserved for many or several
months without chilling or freezing. 2 In another response, the EC also replied that "in order to be
preserved with salt, meat should be deeply and homogeneously impregnate d with a level of salt

1 Exhibits THA-22 and THA-23.
2 EC's Response to Brazil's Questions Following the Second Substantive Meeting, Question 2 para. 2.

sufficient to ensure long-term preservation, i.e., much higher than 3%". 3 From these responses, it is
clear to us that - different from what has been argued by the EC - the 1.2% threshold in Regulation
No. 535/94 was not a pragmatic minimum salt cont ent rule below which a product is not salted for
preservation (in order words, at or above which it could be salted for long-term preservation).

 Besides, Regulation No. 535/94 does not
 mention "preservation" or "long-term preservation".
The EC would like the Panel to believe that " the requirement of preservation (…) flows directly from
heading 0210 of the Combined Nomenclature" and it is implicitly contained in Regulation No. 535/94.
That is simply not true. Until the advent of Regulation No. 1871/2003, "long-term preservation" was
not a concept/notion/requirement found anywhere in the Combined Nomenclature. One cannot, as
the EC implies, interpret that it was an assumed c oncept within the CN because it was covered by the
HS. This is also not true. "Long-term preservation" was not, and is not, covered or even referred to
in the HS, especially with respect to salted meats of heading 0210. We have fully demonstrated this
during these proceedings.

 The truth of the matter is that Regula tion No. 535/94 simply set out the objective
characteristics criterion a product had to meet in or der to qualify as salted meat of heading 0210. In
this regard, the EC does not dispute that the produc t at issue met the objective characteristics criterion
for salted meat of heading 0210: the product was de eply and homogeneously impregnated with salt in
all parts with a minimum 1.2% of salt by weight.

Question 96

 It is undisputed that the EC classifies Parma ham, prosciutto and jamón serrano under heading
0210,
4 even when chilled or frozen. The packages provided in Exhib it THA-25 are proof that these
products need to be preserved by chilling. Brazil has also provided that Danish salted/smoked bacon
is classified under heading 0210, even when frozen. 5 The EC itself has conceded that
salted/dried/smoked meat that has been sliced – su ch as the case of Parma ham and prosciutto - is
vulnerable to surface contamination unless measures [chilling/freezing] are taken to protect the meat. 6
With respect to salted/smoked bacon, the EC also admitted that it is frozen because it is sliced and put
into consumer packs ready for retail sale. To the EC , the fact that it has been refrigerated to permit a
longer shelf-life does not alter its classification under heading 0210.7

 Now, the EC is altogether denying that it has ever said that these types of products require
additional means of preservation. In doing so, it refe rs to an opinion provided by Professor Karl-Otto
Honikel stating that Parma ham, prosciutto and jamón serrano are shelf-stable for many months at
ambient temperatures and that, even when sliced, these products are shelf-stable, 8 although in this
regard neither the EC nor Professor Honikel venture to state for how long. Perhaps, they could be
shelf-stable without refrigeration for weeks, days or hours. Curiously, that information has not been
provided. Still, Professor Honikel explains that moulds and yeasts may grow on unchilled sliced
salted/dried/smoked meat and form unpleasant looking spots on the meat surface.
9 According to the
Professor, this is the reason why sliced raw hams are chilled during storage or display. In other
words, these products are chilled or frozen during storag e or display to prevent the growth of moulds

3 EC's Response to Panel's Questions Following the Second Substantive Meeting, Question 88 para, 4.
4 We observe that the EC did not provide the classification of the products mentioned by the Panel
when imported into the EC and that Exhibit EC-31 is the EC's Refund Nomenclature and not the EC's
Combined Nomenclature.
5 Exhibits BRA-32 and BRA-39.
6 EC's Second Written Submission, para. 43.
7 EC's Second Written Submission, para. 45.
8 Exhibit EC-32.
9 Exhibit EC-32.

and yeasts, microorganisms that deteriorate meat. In particular, we note that the formation of
unpleasant looking spots in meat is part of the de terioration process. Thus, chilling and freezing are
indeed applied to Parma ham, prosciutto, jamón serrano and bacon in order to ensure preservation.

 Here, the Panel should keep in mind that if, as claimed by the EC, preservation is what really
structures Chapter 2, and the processes of heading 0 210 are those that ensure long-term preservation,
then salted/dried/smoked meat – such as Parma ham or bacon – that are actually preserved or further
preserved (for transportation, storage, display, etc) by chilling/freezing cannot be classified under
heading 0210, as has been the EC's regular practice in respect to these products. In practice, not even
the EC considers that [long-term] preservation is what bestows classification under heading 0210.

 Brazil would also like to take this opport unity to make a few overall comments regarding
Exhibit EC-32. First, the EC outright declares that Brazil has referred or cited to Professor Karl-Otto
Honikel in the material it has presented in these proceedings. Brazil invites the Panel to check and
verify whether any of the technical information it has provided to the Panel is authored by Professor
Karl-Otto Honikel.
10 It is not. Second, the opinion provi ded by Professor Honikel in Exhibit EC-32
is not supported by any bibliography that can be verified by the Complainants or the Panel. Third, the
bulk of the technical literature Brazil has provi ded in these proceedings was presented on 3 August
2004, in Exhibit BRA-16, together with Brazil's first written submission. The Communities had the
opportunity, if they wanted, to present technical expert opinion on the action of salt in meat in its first
written submission or at a subsequent stage – at th e first substantive meeting, in response to the
Panel's questions, or in their second written submissi on. Yet, the Communities chose to provide this
information at the last opportunity possible, maki ng it impossible for the Complainants - within the
limited time frame to provide comments - to fully and technically address a nd rebut the information
presented in Exhibit EC-32. For that reason, and based on item 14 of the Panel's Working Procedure,
Brazil requests that the Panel disregard Exhibit EC-32.

Question 97

 Regarding the above response, a fe w clarifications are in order.

 More than once, the EC tries to pass off th e idea that changes in red colouring is a meat
characteristic brought about by salting when used for preservation.
11 Just to set the record straight, we
remind the Panel that the product at issue is salted ch icken meat. In other words, it is white - and not
red - meat and, thus, irrespective of the amount of salt impregnated, will never present a "customary
red colour". Likewise, salted frogs' legs, salted meat of ducks, salted meat of geese, salted meat of
pigeons, salted meat of rabbits, and many othe r salted white meats listed in the WCO's HS
Commodity DataBase as meats falling under subheadi ng 0210.90 will not present a red colour after
salting, as suggested by the EC. The EC seems to imply that only red meat can qualify as salted meat
of heading 0210. This is not true.

 The second clarification relates to the EC's proposition that Brazil has purposely claimed at a
late stage in the proceedings that 1.2 to 3.0% of salt is enough to preserve meat. This is also not
 true.
Brazil has, since its first written submission, been upfront about the action of salt in meat.12 In fact, in

10 Please note that in the article titled "Microstru cture and Biochemistry of Avian Muscle and its
Relevance to Meat Processing Industries", authored by Thayne R. Dutson and Ann Carter, found in Exhibit
BRA-38, an article regarding bovine meat written by Pr ofessor Honikel, and others, is merely cited in the
references section of that article.
11 EC's Response to Panel's Questions Following Second Substantive Meeting, paras. 18 and 31. In
these paragraphs the EC cites to paragraph 116 of its First Written Submission but Brazil fails to understand
how that paragraph supports the EC's contention.
12 Brazil's First Written Submission, paras. 83-87 and para. 102.

responding to EC question No. 1, following the second substantive meeting, Brazil not only indicated
and cited to the passages in the technical literature that support the fact that 1.2 to 3.0% of salt has
some preservative effect, but also reproduced parts of those passages for the EC. 13 But what is even
more ludicrous is the allegation that we have made a new claim late in the proceedings. Brazil recalls
that it was forced to clarify the issue precisely because the EC had misl ed the Panel into thinking that
Brazil had claimed that cuts salted at such levels could not be preserved. 14 We were not making a
new claim, as proposed by the Communities, but clarifying a misconception created by the EC.

 We further clarify additional false impressions that the Panel may be under with respect to
Exhibit EC-32. Professor Karl-Otto Honikel states in that Exhibit that " in the raw and chilled state
3% salt is too low to prevent spoilage for more than a few days ".
15 We agree. In fact, we have pretty
much said this already: at concentrations of 1 to 3% common salt exerts a good antimicrobial action
but for the product to be properly/adequately preser ved salt concentration of 9 to 11% is needed.
16
That concentrations of 1 to 3% of salt have some preservative effect on chicken meat is apparently not
disputed, since even the EC's authority on the s ubject has acknowledged that it can preserve chicken
meat for a few days.17 Brazil is not of the view that salting of heading 0210 must ensure preservation.
Nonetheless, even under the assumption that it must, we recall that in Gausepohl long-term
preservation was a two-day period. 18 If long-term preservation was a two-day period in Gausepohl
and Professor Honikel has asserted that salted chic ken meat is preserved for a few days without
refrigeration, then it seems that the product at issue qualifies as salted meat of heading 0210,
according to the EC's criterion, and freezing takes place only as a means of further preservation of the
product.

 Still regarding Exhibit EC-32, Professor Honi kel asserts that "there is no technological
advantage of salting meat before freezing as frozen (salted or unsalted) chicken breast if used for meat
products will be used in slight frozen state. So drip loss is of no concern."
19 In other words, what the
Professor is saying is that drip loss has no effect if meat is not thawed. For the most part, we agree
with this assessment. We do not, however, agree with the Professor's contention that frozen salted
chicken cuts are not thawed prior to processing. In response to question No. 60 posed by the Panel,
we have informed that the first step in all furt her processes is always the thawing of frozen salted
chicken meat. Moreover, the processors themselves have declared that drip loss reduction of salted
chicken meat is beneficial to them. 20 In actual fact, drip loss is a concern. The Communities, and
Professor Honikel, have not even attempted to prove th at it is not. We must point out that not only is
Professor Honikel's assertion regardin g drip loss of a commercial nature rather than a technical one
("chicken breast if used for meat products will be used in a slight frozen state"), but it is
unsubstantiated by any evidence. This alone puts in question the impartiality and objectivity of
Professor Honikel's "expert" opinion.

 The last point of clarification deals with the EC's assertion that Brazil has interpreted that any
amount of salting, drying or smoking would be suffi cient for a product to qualify under heading 0210
of the HS. Brazil has never
 said this. For example, we unders tand that sprinkling meat with salt –
which is not the case at hand – is not sufficient to qualify meat as salted under heading 0210. This is
explicitly provided for in the HS. On the other ha nd, the HS does not provide a specific salt criterion
or threshold for meat to fall under heading 0210. This is something that countries may insert in their

13 Brazil's Response to EC's Questions Following the Second Substantive Meeting, Question No. 1.
14 Brazil's Second Oral Statement, para. 2 and EC's Second Written Submission, para. 33.
15 Exhibit EC-32.
16 Brazil's Response to EC's Question Following Second Substantive Meeting, Question No. 1.
17 Exhibit EC-32.
19 Exhibit EC-32.
20 Exhibits BRA-30 and BRA-41.

own classification nomenclatures. The EC, for example, included in its Combined Nomenclature, and
consequently in Schedule LXXX, a specific criteri on and salt threshold for meat to qualify as salted
under heading 0210. Obviously, the HS does not cont ain the definition of salted meat of heading
0210, as set out in Additional Note 7 to Chapter 2 of the CN. That is something the EC inserted in its
CN, which does not exist in the HS and, as fa r as we know, in any other Member's national
nomenclature.
21

Question 98

 In its reply, the EC provides that the reas on meat, which has been preserved for long-term,
should be further preserved is so that it may be prese rved for an even longer term. We know that the
EC considers the distinction between "preservation" and "long-term preservation" to be irrelevant to
this case, 22 but we believe it is of the utmost relevance. If we do not know what "long-term
preservation" means – or how long is long-term - how do we know where to draw the line between
"long-term preservation" and "further preservation" for purposes of classification under heading
0210? The EC's response provides no clarity or predictability for importers and exporters.

 According to the EC, slicing meat affects/dimini shes the meat's shelf-life to the point that it
needs to be [further] preserv ed by chilling or freezing.
23 Well, within the EC's reasoning that long-
term preservation imparts classification under head ing 0210, salted/dried/sm oked sliced products
should be classified under a heading other than 0210, for the salting/drying/smoking is no longer
sufficient to ensure long-term preservation. If ther e were any logic to the EC's position with respect
to long-term preservation, this would have to be th e practice of the EC with respect to Parma ham and
bacon. But the truth is that it is not.

 In addition, the fact that HS Explanatory Notes to Chapter 2 explicitly envisage preservation
techniques for meat falling under heading 0210 is perfectly aligned with our understanding that
heading 0210 comprises meats that have been prepared, and not preserved, by salting/drying/smoking.
Prepared meats will always be classified under heading 0210 despite of the preservation method
applied to it.

Question 99

 Brazil clarifies that it has simply stated that one letter of advice from the WCO Secretariat on
a product that is different, and classified under a different heading (0305) and Chapter, from the
product at issue cannot be seriously considered as re levant subsequent practice in the application of
heading 0210 of Schedule LXXX.

Question 100

 We begin by stressing our concern regarding Pr ofessor Honikel's opinion in Exhibit EC-32
and the Communities' understanding of it. Brazil has submitted in Exhibits BRA-16, BRA-30 and
BRA-41 evidence that 1.2 to 3.0% has some preserva tive effect on meat, that drip loss does occur and
that it is a real concern to the industry. The Communities' understanding, based on Professor
Honikel's assessment, that the technical articles a nd letters are simply incorrect, once again puts in
question the objectivity and impartiality of the opinion provided in Exhibit EC-32.

21 Brazil's Second Oral Statement, paras. 46-48.
22 EC's Response to Brazil's Question Following the First Substantive Meeting, Question 2 para. 6;
EC's Response to Panel's Questions Following the Second Substantive Meeting, Question No. 118 para. 75.
23 EC's Second Written Submission, para. 43.

 That said, Brazil agrees that meat that has b een salted/dried/smoked is undeniably different
from in natura meat, that is, from meat that has not b een prepared by those processes. This is
basically the difference between meat of heading 0207 and meat of heading 0210, one is unprepared
meat of poultry and the other is meat prepared by salting, drying or smoking. We have claimed this
from day one, 24 and maintained this positi on throughout these proceedings. 25 However, we do not
believe that criterion such as "recognizably diffe rent", "instantly recognizable" or "readily
identifiable" are valid in the classification of goods. For one, these standards are not provided for
under the HS or the CN.26

 In yet another attempt to exclude salted chic ken cuts from heading 0210, the Communities put
forward that meats of heading 0210 have names, ei ther general (bacon) or specific (Parma ham).
Apparently, to the EC, the fact that salted chicken cu ts do not have a [general or specific] name is an
indication that it does not belong to heading 0210. This contention is absurd. First, because there are
no classification rules or standards applied anywhere in the world that support such an illogical
criterion for classification. Second, because Brazil has provided in Exhibit BRA-41 examples of
salted meats that fall under subheading 0210.90 of the HS, as provided in the WCO's On-line
Database, and none of the listed salte d meats have "names". In fact, we have observed that the salted
meats in the WCO On-line Database also do not meet the EC's crite rion of "recognizably different",
"instantly recognizable" or "readily identifiable" products.

Question 102

 First off, the EC has not
 shown that the notion of preservation, or long-term preservation, is at
the heart of heading 0210 in the HS, in Sche dule LXXX or in the CN. Nothing in these
nomenclatures signal that preservation is what im parts classification under heading 0210. On the
contrary, the explicit language of the HS and its Explanatory Notes unequivocally demonstrates that
preparation is what determines classification unde r heading 0210. Since 1937, the structure of
Chapter 2 instructs us that salted meats are not salted for purposes of preservation. If salting served to
preserve meat, then it would have been inserted as a tertiary item/subheading, within a heading,
alongside fresh, chilled and frozen meat. But salted/ dried/smoked meat has al ways been a separate
product, found under a separate heading.

 Furthermore, the Communities appear to have duc ked the Panel's question. Is a shelf-life of
many months at ambient temperatures long-term preser vation? It seems that this is the EC's position,
but we are not quite sure, since it fails to expressly say so. Another point that would require
clarification is whether meat preserved for a few days at ambient temperature is also considered long-
term preservation for purposes of heading 0210. We call to mind that in Gausepohl two days was
sufficient to meet the long-term preservation cr iterion. Thus, the criterion in that case was not

preservation for many or several months. In connection, we asked the Communities to indicate where
in Gausepohl, or under Community law, is the principle of long-term preservation defined/provided as
preservation for many or several months. Instead of pointing out passages in Gausepohl, or under
Community law, the EC vaguely responded that it had already given ample guidance as to how the
criterion of long-term preservation is enshrined in Community law.
27 This [lack of] response in itself
is indication that the notion of long-term preservation, especially in the sense of preservation for many
or several months, is not enshrined in Community law, either by way of legislation or even by way of
case-law (as alleged by the EC).

24 Brazil's First Written Submission, paras. 76-96.
25 Brazil's Response to Panel's Questions Following the First Substantive Meeting, Question No. 79.
26 Brazil's Second Oral Statement, para. 31.
27 EC's Response to Brazil's Question Following the Second Substantive Meeting, Question 3 para. 3.

Question 105

 The Communities acknowledge that its classificat ion of goods is based on the product's
objective characteristics, which are based on their composition and properties and verified by
laboratory examination. They go on to assert that the state of frozen salted/dried Alaska Pollack and
frozen salted/smoked salmon
28 can be established by laboratories by determining the moisture content
and water activity. Brazil does not know whethe r the moisture content and water activity are
objective characteristics criterion provided in the CN for these products (salted/dried Pollack and
salted/smoked salmon). What Brazil knows is that the objective characteristics criterion for salted
meat of heading 0210 – until the advent of the me asures being challenged - was simply that it be
deeply and homogeneously impregnated with salt in all parts with a minimum salt content of 1.2% by
weight. That criterion was established in the CN. Laboratories verified that salted chicken cuts
conformed to it.

Question 106

 We agree in part with the response provided by the EC. We agree that many elements of
Chapter 2 of the 1937 Geneva Draf t were carried into the CCCN. We agr ee that item/heading
division according to the type of animal was follo wed in the 1937 Geneva Draft and the CCCN. We
also agree that the terms "chilled" and "frozen" – terms that indicate means of refrigeration – are
linked to the term "preserved" in the 1937 Draft, the CCCN and the HS, whereas the terms "salted",
"dried" and "smoked' are not. The EC failed to not e, however, that products within Chapter 2, as well
as within the entire structure of the three nome nclatures (HS, CCCN and 1937 Draft), are placed
according to their degree of processing.

 Item 18 indeed corresponds to CCCN headin g 0206 and HS heading 0210. The phrase
"cooked and simply prepared" in Item 18 is, in fact, no longer provided in heading 0210, but the term
"prepared" deliberately remains in the Explanatory Notes to heading 0210 and Chapter 2 of the HS.
The EC suggests that term "preparation" in the HS Explanatory Notes was inadvertently left behind in
Chapter 2 and heading 0210 when the term "cooked" was moved into Chapter 16. This allegation is
ludicrous. One cannot reasonably believe that a mo dification of such prominence (transfer of cooked
meat into another heading and Chapter) was not fu lly discussed and known by the Contracting Parties
to the HS Convention. Furthermore, if the term "prepared" was actually left behind in the
Explanatory Notes to Chapter 2 and heading 0210, as proposed by the Communities, this could have
been "corrected" in the various amendments made to the HS. Yet, no Contracting Party to the HS has
ever requested such a correction or raised the issue in that forum.

Question 107

 At this stage in the proceedings, the EC cannot seriously purport to have never submitted that
Chapter 2 is structured according to methods of pr eservation. Just to cite a few places in which the
EC has advanced this position, we ask the Panel to look at: recital (3) of Regulation No. 1871/2003;
29
paragraphs 76 and 138 of the EC's first written su bmission; paragraph 4 of the EC's second written
submission; and also paragraphs 42 and 58 of the EC's response to the Panel's question following the
second substantive meeting. Specifically, in paragra ph 138 of its first submission, the EC declared
that: " (…) an examination of Chapter 2 as a whole shows that it is divided into different forms of
preservation, and not into meat which has undergone no process and meat which has."30

28 Products described in the information on the existing BTIs provided in Exhibit BRA-34.
29 Exhibit BRA-10.
30 EC's First Written Submission, para 138 (emphasis added).

 Interesting enough, the two particular characteris tics of salted meats mentioned by the EC in
response to question No. 107 are not related to prese rvation: 1) salted meats are markedly different
from meat that have not been processed by salting; and 2) salted meats were so similar to each other
that they could be treated under a common head ing. The Communities' conclusion that these
characteristics arise from the fact that meats are prese rved is merely a contention put forward by them
alone that finds no support on the structure and language of the successive nomenclatures.

 The Panel should also note that the EC provid es all sorts of explanations in response to the
Panel's question except the one that is explicitly stat ed in the Explanatory Notes to the 1937 Draft.
The terms "fresh", "chilled" and "frozen" were place d as tertiary items within a heading - and not as
separate headings - because of a concern that if fundamental distinctions were made among these
terms, discrimination would take place concerning the same kind of meat - preserved by different
methods - coming from different parts of the world. No such concern existed for salted meat because
salting was not considered a method of preservation.

Question 108

 Succinctly put, the concept of preservation is not
 reflected in Regulation No. 535/94. No
WTO Member looking at Regulation No. 535/94 could pr esume that, as suggested by the EC, it set a
minimum salt content below which it could not be considered that a product was salted for
preservation. Anyone that read Regulation No. 535/94, including the EC's own customs authorities,
would arrive at the logical conclusion that the regulation simply set out the objective characteristics a
product had to meet to qualify as salted meat of heading 0210.

 Furthermore, the EC errs when it states that Regulation No. 535/94 did not need to explicitly
restate that heading 0210 was based on the concept of preservation. For one, the verb "restate" gives
off the idea that long-term preserva tion was already a concept inserted in or associated with heading
0210 of the CN, when we know that "preservation" or "long-term preservation" were never provided
in or associated with heading 0210 of the CN, or the HS for that matter. If Regulation No. 535/94
wished to introduce the concept of "preservation"/"long-term preservation" in heading 0210 of the CN
it had to explicitly do so, which it did not.

 Finally, the European Court's conclusion in Gausepohl that, from the scheme of Chapter 2,
the meat covered under that chapter is either fr esh/chilled or that which has undergone one of the
processes required to ensure long-term preservation, finds no
 support in the Combined Nomenclature
or the Harmonized System. Again, the CN h as never provided that "preservation"/"long-term
preservation" is what determines the "scheme" of Chap ter 2. On the contrary, the direct and express
language found in the HS Explanatory Notes to Ch apter 2 prove that classification is bestowed
according to preservation and preparation. In turn, the HS Explanatory Notes to heading 0210
establish that for that heading preparation is what imparts classification.

Question 109

 Exhibit EC-34 offers no
 support to the EC's opinion that the principle of "long-term
preservation" was well-entrenched in the EC as of 1 September 1986. On the contrary, the response
provided by the EC is again a classic example of tautology. Let's see. According to the EC, its 1986
Common Customs Tariff reproduces the headings of the CCCN – the nomenclature predecessor to the
HS. Heading 0206 of the CCCN, says the EC, ensh rines the principle of preservation. Thus, the
notion of long-term preservation was already included in heading 0206 of the EC's 1986 Common
Customs Tariff. The only problem with this "logical" response is that nothing
 in the structure or
language of the 1937 Draft, the CCCN or the HS support or even suggest that the salting of salted
meats (of heading 0206 of the CCN or 0210 of the HS) is that which ensures long-term preservation.

The principle of "long-term preservation" was not
 found under these classification nomenclatures,
was not found in the EC's Common Customs Tariff, and was not found in Schedule LXXX.

Question 111

 From the response given, we understand that the EC preferred not
 to comment on the fact that
the Advocate General in Dinter did not consider smoking to be a preservation process. In paragraph
90 of our second submission, we cited to the Advocate General in Dinter precisely to make the point
that the principle of "long-term preservation" is not a well-entrenched/enshrined principle related to
the interpretation of heading 0210 of the Combined Nomenclature, as the EC would like the Panel to
believe. Further support of our vi ew is found in the 6-year classification practice by EC customs
officials of frozen salted chicken cuts under heading 0210.

Question 112

 In this dispute, the EC seems to have established that the principle of "long-term
preservation", supposedly well-entrenched in Communit y law, means shelf-stable for many or several
months at ambient temperature. When asked exactly where in Gausepohl, or in Community law, one
could find this definition, the EC vaguely replied that it had already given ample guidance as to how
the principle is enshrined in Community law.
31

 Now, the EC provides that the "long-term preservation" principle used by the Court in
Gausepohl was that found in the CN Explanatory Notes to swine meat (subheadings 0210.11.11 and
0210.11.19). We have already explained why Explanatory Notes – non-binding instruments – of a
specific subheading cannot be applied mutatis mutandis to another subheading without an explicit
provision indicating so.
32 Nonetheless, we draw attention to part of that Explanatory Note that
provides that " (…) the period of such preservation must considerably exceed the time required for
transportation."33 Nowhere is it stated that the period exceeding transportation is equal to many or
several months. In Gausepohl, the period considerably exceeding the time required for transportation
– in other words, the long-term preservation period - was only two days. Salted chicken, as attested
by Professor Honikel,34 can also be preserved for that same period and, accordingly, may be preserved
for long-term if transported from Switzerland to Germ any, for example. We recall that the EC has
also provided that a salted/dried/smoked product can be further preserved by chilling/freezing and still
fall under heading 0210. So, if the product at i ssue is considered preserved for long-term from
Switzerland to Germany, it is only fair that from Brazil to Germany the same product also be
considered preserved for long-term, even if further preserved by chilling or freezing.

Question 113

 In Gausepohl, the Bundesfinanzhof considered that the case raised a problem as to the
interpretation
 of the Community legislation in question – heading 0210 of the Combined
Nomenclature – and, therefore, decided to refer the question to the Court of Justice under Article 177
of the EEC Treaty.35

31 EC's Response to Brazil's Questions Following the Second Substantive Meeting, Question No. 3
para. 3.
32 Brazil's Second Written Submission, paras. 92-94.
34 Exhibit EC-32.

 Article 177 of the EC treaty provides that:

"The Court of Justice shall have jurisdiction to give preliminary rulings concerning:
(a) the interpretation of this Treaty;
(b) the validity and interpretation of acts of the institutions of the Community
and of the ECB;
(c) the interpretation of the statutes of bodies established by an act of the
Council, where those statutes so provide.
Where such a question is raised before any court or tribunal of a Member State, that
court or tribunal may, if it considers that a decision on the question is necessary to
enable it to give a judgement, request the Court of Justice to give a ruling thereon.
Where any such question is raised in a ca se pending before a court or tribunal of a
Member State against whose decisions there is no judicial remedy under national
law, that court or tribunal shall bring the matter before the Court of Justice. "
(emphasis added)
 A Commentary on the EEC Treaty provides that " Article 177 defines the Court's authority to
decide questions of Community law arising in national tribunals ".36 In explaining about the varying
scope of the Court's authority, the Commentary states that " the Court may have only the power to
construe the law, but may not be authorized to apply th e law to the established facts. This is what the
Court has construed to be its task under Article 177."37

 In Gausepohl, the law that the Court was asked to construe was Council Regulation (EEC)
No. 2658/87, of 23 July 1987, establishing the EC's Combined Nomenclature. 38 T h e C o m b i n e d
Nomenclature, we recall, is made up of: 1) the HS nomenclature; 2) Community subdivisions (CN
subheadings); and 3) preliminary provisions, additional section or chapter notes and footnotes relating
to the CN subheadings. 39 Measures relating to the application of or the amendment to the Combined
Nomenclature shall be adopted by the Commission .40 The Commission, for example, can adopt a
Regulation that inserts an additional note in a Chapter of the Combined Nomenclature. Regulation
No. 535/94 is such an example.41

 At this stage in these proceedings, the Panel has had the opportunity to verify that, until the
arrival of Regulation No. 1871/2003, "long-term preservation" was not
 explicitly provided for in the
Combined Nomenclature. Thus, when the Court in Gausepohl was asked to construe the CN, "long-
term preservation" was not a part of the nomenclatur e. We must stress that, in responding to the
Panel, the EC's entire reasoning is based upon an in correct premise: that the concept of "long-term
preservation" was included in the scope of headi ng 0210 of the Combined Nomenclature when the
ECJ made its judgement in Gausepohl. We repeat, nowhere in the Combined Nomenclature, or in the
HS, is the concept of "long-term preservation" provided for.

36 The Law of the European Community, A Commentary on the EEC Treaty (Volume 5) , Lexis Nexis,
Mathew Bender (Original Authors: Hans Smit and Peter Herzog), page 5-313.
37 The Law of the European Community, A Commentary on the EEC Treaty (Volume 5), Lexis Nexis,
Mathew Bender (Original Authors: Hans Smit and Peter Herzog), page 5-314 (emphasis added).
38 Exhibit BRA-23, Article 1.1 of Regulation No. 2658/87.
39 Exhibit BRA-23. Article 1.2 of Regulation No. 2658/87.
40 Exhibit BRA-23. Articles 9 and 10 of Regulation No. 2658/87.
41 Exhibit BRA-6.

 We warn the Panel that this is not an issue of hierarchy of norms, as the EC suggests.

 The EC errs when it states that the Court confirmed
 the scope of heading 0210 in the CN.
Confirmation implies validation of something that already existed, and the reality was that
"preservation" or "long-term preservation" did not ex ist under heading 0210 of the CN. The fact that
Additional Note 7 to Chapter 2 was inserted in th e CN by means of a Commission Regulation, an
inferior legal act to the Council Regulation that est ablished the CN, has absolutely nothing to do with
the issue. The EC tries to convince the Panel into thinking that it does.

 The Communities push on. They provide that any Commission Act must necessarily be read
together at all times with the superior norm, in this case the Council Act establishing the Combined
Nomenclature. We agree. Commission Regulation No. 535/94 is in perfect harmony with what is
provided under heading 0210 of the CN. In fact, we believe that "long-term preservation" was
purposely left out of Regulation No. 535/94 so that it could be harmoniously read together with the
Combined Nomenclature, part of which is based on the Harmonized System. The interpretation of the
Court was simply incorrect. Brazil recalls that the ECJ has the authority to interpret an Act of the
Council, such as the CN, but it does not have the aut hority to interpret the HS. An interpretation by
the ECJ on the HS, or based on the HS, is still a unilateral interpretation and by no means an
authoritative interpretation of that multilateral agreement.

 Nonetheless, even if we were to consider that the Court's interpretation was correct – which it
isn't - the standard applied in that case for preserva tion was a period in excess of the time required for
transportation. In Gausepohl, the time required for transporting the meat in question was only one
hour, but it was preserved for a time that considerab ly exceeding transportation: two days. However,
this does not seem to be the EC's standard for "long- term preservation" in this case (many or several
months).

Question 114

 Based on the EC's response to question No. 115, Brazil is still of the position that a
Regulation on the interpretation of a particular heading in the CN takes precedence over a Court
judgement, delivered prior to said Regulation, on the interpretation of the same heading.

 The EC asserts that a Commission Regulation mu st be compatible with Community law and
the international obligations of the Community. Well, Regulation No. 535/94 was. Taking into
account that the Combined Nomenclature did not
 provide that salting of heading 0210 was a
preserving process and that, on the contrary, the HS act ually provides that it is a preparation – and not
a preservation - process, the objective criterion set out in Regulation No. 535/94 was compatible with
Community law and the EC's international obligations under the HS Convention.

 To make its point, the EC provides a hypothetical that is simply incoherent. It says that a
change in the HS Convention to establish a salt th reshold of 1.2% and above for heading 0210 could
trigger a challenge of Regulation No. 1871/2003 (w ith long-term preservation requirement), based on
the incompatibility with heading 0 210 of the CN, which could in tu rn lead to a reversal of the
"standing" case law on the interpretation of heading 0210. In the EC's example, it starts with the HS
Convention (international obligation), goes on to Commission Regulation No. 1871/2003, providing
the objective characteristics of salted meat of he ading 0210 in the CN, and then to the Court's
interpretation of heading 0210 in the CN. However, in the case before the Panel there were no
measures (Regulations) that set out the objective characteristics of salted meat of heading 0210 in the
CN when the Court in Gausepohl interpreted heading 0210 of the CN. The ECJ made an
interpretation that was not based on explicit text provisions of: 1) Regulatio ns interpreting heading
0210 of the CN; 2) the CN; or 3) the HS. The ECJ's interpretation was strictly a subjective
assessment of the meaning of these texts.

 The EC further affirms that there was no change in the superior norm looked at in Gausepohl,
but that is simply not correct. First, the superior norm during Gausepohl, namely heading 0210 of the
HS, did not provide that salting of heading 0210 was that which ensured long-term preservation. The
concept didn't - and doesn't - even exist in the HS. The EC it self acknowledges that " the word
‘preservation' is not to be found in HS heading 0210."42 Second, the other superior norm looked at in
Gausepohl, namely heading 0210 of the CN, was in fact changed, or clarified to say the least. The
change was brought about by Regulation No. 535/94 and did not include the concept of "preservation"
or "long-term preservation".

Question 115

 Brazil notes that the EC has confirmed that Additional Note 6(a) takes precedence over the
Dinter judgement. In connection, we cite a very important passage of the judgement in Van de Kolk,
which upheld Additional Note 6(a): "(…) it must be pointed out that that judgement [Dinter] was
delivered in different circumstances from those in the present case; there was no provision in a
regulation on the interpretation of the Common Customs Tariff (…) ".43

 Applied to the case at hand, the Gausepohl judgement was also delivered in different
circumstances. At that time, there were no provi sions in a regulation on the interpretation of salted
meats of heading 0210 of the Combined Nomenc lature. Regulation No. 535/94 was precisely the
regulation that gave the interpretation of salted m eats of heading 0210 of the CN, and in doing so did
not include "preservation" or "long-term-preservation". Additional Note 7 of Chapter 2 of the CN did
not change the scope of the Chapters, Sections an d headings of the CN. It merely specified the
objective criteria to be taken into account for classifying salted meat under heading 0210.

Question 116

 Brazil would like to clarify that the condition of "long-term preservation" did not
 exist in the
Combined Nomenclature until it was introduced in the CN by Regulation No. 1871/2003. The EC
throughout these proceedings has not been able to cite to any provision within the CN, past EC
classification nomenclatures or anywhere in Community legislation where the condition is defined or
even referred to.

Question 117

 The EC has once again failed to provide BTIs, or any supporting material , to back-up the
allegation that other customs offices within th e EC did not classify the product at issue under
subheading 0210.90. The ham-related BTI provided by the EC in Exhibit EC-26 is certainly not
evidence that frozen salted chicken cuts were classified by certain EC customs offices under heading
0207 and not under heading 0210. On the other ha nd, Brazil and Thailand have provided copies of
BTIs issued for frozen boneless salted chicken cuts with a salt content of more than 1.2% under
subheading 0210.99.39. 44 Brazil has also shown that since 1998 it exported frozen salted chicken
meat to the EC under heading 0210 to different po rts of discharge of various EC Members States,
including Germany, the Netherlands, Spain, Italy, and the United Kingdom.45

 The Communities talk about the " dangers of relying on BTIs as comprehensive indication of
customs practice" but have not presented even one BTI – or any other documentation – that would

42 EC's Response to Panel's Question Following Second Substantive Meeting, para. 75.
43 Exhibit THA-35. Judgement of the ECJ in case C-233/88, Van de Kolk, para. 15 (emphasis added).
44 Exhibits BRA-31 and THA-24.
45 Exhibits BRA-29 and BRA-42.

give the Panel some
 indication that certain customs offices classified the product under heading 0207
– and not under heading 0210 - from 1996 through 2002.

 The EC tries to justify its failure to provide th e requested information by explaining that it is
possible under Community law to withdraw an appli cation for a BTI where the outcome is considered
unfavourable by the importer. Yet, Articles 6 and 8 of Commission Regulation No. 2454/93 sets forth
that applications for binding information are made in writing
 and that a copy of the application for
binding tariff information, a copy of the notifi cation and the facts shall be transmitted to the
Commission without delay by the customs authorities of the Member States concerned. It seems that
even if an application was withdrawn by the im porter, the Commission – or customs authorities of
Member States - would at least have access to the written application and/or the forms mentioned in
Articles 6 and 8.

QUESTIONS POSED TO ALL PARTIES

Question 118

 We call the Panel's attention to the fact that the EC has conceded that the "word ‘preservation'
is not to be found in HS heading 0210. " Unfortunately, the EC insists that its law on classification
contains the term "long-term preservation". That is not true. "Long-term preservation" has never
been associated with or included in heading 0210 of the Combined Nomenclature, or in Chapter 2 of
the CN for that matter. We have asked the Communities to show us where we could find the
definition of that concept in Gausepohl or under Community law and the EC was not able to do so.

 It now appears that, to the EC, "preservati on" and "long-term preservation" have the same
meaning. Based on this response, it is still not clear whether the EC understands the term
"preservation" to mean shelf-stability for many or several months at ambient temperature. We recall
that the ordinary meaning of the verb "preserve" is to "maintain (a thing) in its existing condition" or
"to prevent (organic bodies) from decaying or spoiling",
46 and no time frame is associated with the
ordinary meaning of the term. In fact, such ti me frame could vary from a few minutes or hours to
possibly years.

Question 120

 The EC has, in effect, failed
 to provide the requested BTIs – or any other supporting material
- in Response to question No. 53 (not question No. 34 , as stated by the EC). Also, and as a point of
clarification, Brazil has not conceded to the existence of export classification practice as alleged by
the EC in its statistics and sample documents. 47 Brazil has simply confirmed that its export
classification practice of frozen salted chicken was inconsistent : sometimes the product was correctly
classified under heading 0210 and sometimes it was incorrectly classified under heading 0207. To
that effect, we even submitted export documentati on in Exhibits BRA-42(c) and BRA-42(d) that
demonstrate that some exports of frozen salted chicken were classified under subheading 0210.90
when they left Brazil.

 We have provided the evidence in Exhibits BRA-42(c) and BRA-42(d) even though the Panel
did not make a specific request that such documentati on be presented. On the other hand, a very
specific request was made [twice] to the EC and it failed to comply with it.

46 Brazil's First Written Submission, para. 76.
47 Brazil is unaware of any sample documentation submitted by the EC regarding Brazil's export
classification practice of the product at issue.

Question 121

 Again, the EC misconstrues what Brazil has ar gued. To Brazil, the product at issue does not
prima facie fall under two or more headings of the HS. 48 Undeniably, it is a product of heading 0210.
The Panel, of course, may resort to General Rule 3 if it understands that the product falls under two or
more headings of the HS. In the event that General Rule 3 is applie d, we have explained that, as part
of context, the Panel should use it in conjunction with the other rules of treaty interpretation.

 A small but important correction that must also be made is that the WCO Secretary General
did refer to the HS Explanatory Notes, and highlight ed their importance, in the letter of advice dated
25 October 2004. According to the Secretary General, HS Explanatory Notes provide the official
interpretation of the HS. Obviously, they shed light and supply valuable insight as to the meaning of
heading 0210 in the HS. The EC itself has provided that the " Harmonized System is relevant insofar
as it sets forth headings and provides Chapter and Explanatory Notes
 that elucidate the meaning of a
heading".49 Besides, the Appellate Body gave HS Expl anatory Notes the same interpretative weight
as that given to the HS itself.

Question 122

 We begin by quoting a passage from the above res ponse: "At the same time is clear that any
documents relied upon in an interp retation of WTO obligations accordi ng to Article 32 of the Vienna
Convention must have been in the public domain or accessible to WTO Members." Brazil, in its
response, has advanced a similar position: for a doc ument or instrument to qualify as "preparatory
work" and/or "circumstances of conclusion" it mu st have been published so that States had the
possibility of consulting them during negotiations if they wish to do so.

 That said, we turn to the following considerations.

 As of 11 March 1994, Brazil and all other ne gotiating Members had knowledge of Regulation
No. 535/94 for this was the date the regulation was pub lished in the Official Journal of the EC. This
date preceded both 15 April 1994 and 25 March 1994, when the period for verification of schedules
came to an end. Knowledge of Regulation No. 5 35/94 meant knowledge of what was effectively and
expressly provided in that regulation, and "long-term preservation" was not
 therein included. The
Communities claim that if Brazil had [actual or presumed] knowledge of Regulation No. 535/94 it
must also have had knowledge of " the preservation criterion at the heart of Community law ". Yet,
the preservation criterion was not a part and had never been inserted in the Combined Nomenclature,
and the Harmonized System for that matter. The criterion was never at the heart of Community law.

 In a rather ironic fashion, the EC declares that if Brazil "pretends" knowledge of Regulation
No. 535/94, because it suddenly took upon itself the burden to screen developments in the EC, it
could not deny the existence of the "long-term pre servation" requirement that was well-enshrined in
the CN as interpreted by "several" judgements of the Court of Justice, since these judgements too
were publicly available.

 Well, as a point of clarification, Brazil does not "pretend" to have had knowledge of
Regulation No. 535/94. As was the case during the Uruguay Round, the Brazilian Mission in Brussels
is tasked with monitoring legislative developments in the EC through the publication of legislative

48 Brazil's First Written Submission, para. 147. Braz il's Second Written Submission, para. 49. Brazil's
Response to the Panel's Questions Following the Second Substantive Meeting, Question No. 121.
49 EC's Response to the Panel's Question Following the First Substantive Meeting, Question No. 76
para. 102 (emphasis added).

acts in the EC's Official Journal. Monitoring and verification of Court judgements, however, have
never
 been a part of that job, and it still is not.

 Going back to the response, we repeat that the "long-term preservation" requirement was not,
and could not have been, well-enshrined in the CN simply because that "requirement" had never been
included in the CN. But, even if we assume – for the sake of argument – that Brazil and other
negotiating Members had knowledge of the Dinter and Gausepohl judgements and of the Court's
understanding of the alleged "long-te rm preservation" requirement in heading 0210, we point out that
the Court's assessment in those cases was not
 supported by any provision found in the Combined
Nomenclature or in the Harmonized System. As we have demonstrated in these proceedings,
Chapter 2 is not structured according to methods of preservation and heading 0210 does not
encompass meat that has been salted for long-term preservation. Therefore, the Court's assessment
regarding the "scheme" of Chapter 2 and the qualif ication of heading 0210 in those cases was simply
incorrect.

 Furthermore, the Dinter and Gausepohl judgements did not
 establish or define "long-term
preservation", especially not in the sense of shelf- life stability of many or several months. In
particular, in the case of Gausepohl, the standard was a period considerably exceeding transportation,
which in practice was two days. Well, two days are quite different from many or several months. If,
even to this date, the EC cannot provide a consis tent definition for "long-term preservation", how can
it expect the Panel and the Complainants to believe that it was a "well-enshrined"
concept/notion/requirement in Community law that di d not need to be explicitly stated in Regulation
No. 535/94.

ANNEX C-4

RESPONSES BY THAILAND TO QUESTIONS POSED BY THE PANEL
AFTER THE FIRST SUBSTANTIVE MEETING

(14 October 2004)

FOR THAILAND

7. Thailand is requested to provide proof of its assertion in paragraphs 7 and 53 of its first
written submission that it commenced exporting salted chicken to the EC in 1996 in response to
requests from European food processors.

 See Exhibit THA–26.

8. Thailand argues in paragraphs 74-75 of its first written submission that a "frozen"
product can be returned to its original state without any change in its physical or chemical
characteristics. Thailand is requested to justif y this argument in light of information contained
in page 2 of Exhibit THA-14 to the effect that fr eezing causes the cell walls of food to rupture,
thereby making poultry softer when it is thawed.

 The article in Exhibit THA-14 discusses the "changes in food texture during freezing" and
notes that the textural changes that resu lt from freezing "are most noticeable in fruits and vegetables
that have a high water content." Therefore, fruits and vegetables, such as lettuce and celery, which
have a high water content, will be adversely affected by freezing as they would wilt and turn limp. In
contrast, with respect to products that will be cooke d before being eaten, the "textural changes due to
freezing are not as apparent … because cooking also so ftens cell walls." Therefore, frozen boneless
chicken cuts that will be thawed before being c ooked will not be as changed or affected by the
freezing.

FOR THE COMPLAINANTS

12. Assuming that freezing has a permanen t and irreversible impact upon meat, is there
some way to distinguish that impact from the impact that salting, brining, drying and smoking
have on meat?

 If one were to assume that freezing may have such an impact on meat, the most appropriate
way of distinguishing the effect of freezing from th at of salting, brining, drying and smoking is to
examine the effect on the taste. As meat is des tined for human consumption, it is the effect on taste
that is most relevant to the ultimate consum er. A frozen boneless chicken cut, once thawed and
cooked, will taste the same as a fresh boneless chic ken cut once cooked. However, a chicken cut that
is salted, put in brine, dried or smoked would taste quite different having undergone such a process.

13. Brazil and Thailand suggest in their oral statements for the first substantive meeting
(paragraph 16 in the case of Brazil and paragraphs 8 and 53 in the case of Thailand) that, for
the purposes of the Panel's analysis under Article II of the GATT 1994, the decisive criterion for
characterising the products at issue are the objective characteristics of the product at the time
of importation. What role, if any, do Braz il and Thailand consider that production processes,
end-uses and the perspective of end-users should play in the characterisation of the products at
issue for the purposes of the Panel's analysis under Article II?

 None. These are factors to determine th e likeness of products under GATT Article III, a
concept which is not at issue in this dispute. The information provided in these answers with respect
to the production process, end-uses and the perspective of end-users are meant to give the panel a full
picture of the facts of the case. However, Thailand's legal case does not rest on this information.

 This dispute concerns the tariff treatment to be provided to the product at issue and, therefore,
requires an examination of the EC's concession in heading 0210 and the assessment of whether the
product at issue has the physical characteristics of the product described in the EC's Schedule of
Concessions.

14. The complainants are requested to provide details regarding the processes to which the
products at issue are subjected prior to being ex ported to the EC. In particular, please provide
details including supporting material regarding:

 (a) the physical processes that are a pplied to the products at issue;

 Most salted chicken from Thailand is produced using the "tumbling" method. Under this
process, chicken is cut into different sizes, following the customers' orders the chicken cuts are then
mixed with salted water in the vacuum tumble machine. The tumbling takes around 20 minutes.
Salted chicken can be tested for its level of salt. Th e test is carried out by using a special instrument
which can determine the level of salt. Thailand w ill elaborate further on the processes in its second
written submission.

 (b) the effects of these processes on the products at issue;

 The addition of salt reduces the level of wate r activity and prevents the growth of micro-
organisms. Salt also breaks up the protein in the meat. Both protein and salt help reduce moisture
loss when cooked and makes the meat juicier.

 (c) the time taken to complete these processes; and

 The tumbling process takes between 15 and 30 minutes.

 (d) the costs that such processes entail.

 The costs are as follows:

Thai workers' wages: US$4.83/day or US$0.07-0.10/kg
(200 baht/day or 3-4 baht/kg)
Cost of salt (common salt) - salt obtained
from underground salt deposits located in
the Northeast of Thailand
US$67-70/metric tonne
Total cost of production US$180-200/metric tonne

15. Are the processes applied to the products at issue when they are exported to the EC
from Brazil and Thailand the same as those processes applied to the products at issue when they
are exported to other countries?

 Thailand exports salted frozen chicken only to the EC as there are no orders for the product
from countries other than the EC. Orders differ from country to country depending on consumer
demand and importers' requirements. For example, in the case of orders from Japanese importers for

cooked chicken meat, the importers will provide a recipe and have th e exporters cook the meat at the
plant.

16. The complainants are requested to provide details of their classification practice in
relation to imports and exports of the products at issue.

 Thailand has never imported salted frozen chic ken, and has therefore, never classified the
product at issue for customs purposes. The classification of products for exportation is not relevant to
determine the classification practice of a Member. What is relevant is the practice of Members in
implementing their tariff concessions on salted meat.

17. Could the complainants comment on the fa ct that Explanatory Notes to Chapters 2 and
16 of the Harmonized System characterise both preservation and preparation as "processes".

 It is not correct to state that the HS char acterises "preservation and preparation as processes."
Rather, they are the purposes for which a particular process is undertaken. For example, a product
may be smoked by a particular process in order to achieve the purpose of preparation. This
interpretation is based on the actual wo rding of the notes. In particular, the Explanatory Note to
Chapter 2 makes a reference to "prepared or preserved by any process". The Chapter Note to Chapter
16 makes a reference to "prepared or preserved by the processes specified in Chapter 2 or 3 or
heading 05.04." Thailand considers that this is an acknowledgement that the purposes of
preservation and preparation may be achieved by the processes which are specified in Chapter 2,
Chapter 3 and in heading 05.04. Please see answer to question 48(c) for further details.

FOR ALL PARTIES

56. Do the parties agree that the relevant time at which the meaning of headings of the EC
Schedule – LXXX - should be assessed is the time at which that Schedule was annexed to the
Marrakech Protocol on 15 April 1994? If not, at what time/during what period should such an
assessment be made?

 Thailand agrees that the relevant time that th e meanings of the headings of EC's Schedule
LXXX should be assessed is 15 April 1994, namely the time the Schedule was annexed to the
Marrakech Protocol. 15 April 1994 is the date on which the EC assumed its commitments under the
Uruguay Round. In this regard, Thailand notes that in United States – Import Prohibition of Certain
Shrimp and Shrimp Products, the Appellate Body stated that the ke y date for the interpretation of the
treaty at issue was 1994, which was the time at Members assumed their obligations under the WTO
Agreement. In particular, the Appellate Body exam ined the term "exhaustible natural resources" in
GATT Article XX(g) in the light of the wording of the Preamble of the WTO Agreement (Appellate
Body Report, WT/DS58/AB/R, para. 129). The WTO Agreement was signed by Members in
Marrakesh on 15 April 1994. Therefore, this is the relevant date on which to ascertain the meaning
of the obligations and, in particular in this case, the concessions, entered into by the EC.

 As noted in Thailand's First Written Submis sion, Regulation 535/94 – which provided the
following clear definition of the products falling u nder heading 0210 – had been published and was in
force prior to 15 April 1994.

"For the purposes of heading 0210, the terms 'meat and edible meat offal, salted, in
brine,' mean meat and edible meat offa l deeply and homogenously impregnated with
salt in all parts, having a total salt content of not less that 1,2% by weight."

59. Are there any GATT Schedules of WTO Members other than the EC's in which
headings identical or similar to the headings at issue in this case exist? If so, please provide
details of such Schedules and information regar ding the classification practices of such
Members in respect of those headings. If possibl e, the parties are requested to indicate how
such Members classify the products at issue in this case.

 Thailand is in the process of gathering this info rmation and, with the indulgence of the Panel,
will provide this information shortly.

60. The parties are requested to provide details regarding the processes to which the
products at issue are subjected upon importation to the EC and prior to final consumption. In
particular, please provide details including supporting material regarding:

 The information received from EC importers on a general basis pertaining to the product at
issue is the following:

 (a) the physical processes that are a pplied to the products at issue;

 The products at issue undergo several processes such as cutting, cooking, marinating, coating
and any combination of these processes. There is no uniform process that the majority of processors
use.

 (b) the effects of these processes on the products at issue;

 The effect that these processes have in general is to change the quality of the product to fulfil
the wishes of the consumer.

 (c) the time taken to complete these processes; and

 The time taken to complete these processes varies from few hours to less than a day.

 (d) the costs that such processes entail.

 The cost for these processes varies widely.

61. If boneless chicken cuts have been deep ly and homogeneously salted, can they be de-
salted?

 The product cannot be thoroughly de-salte d. In para. 79 of Thailand's First Written
Submission, Thailand stated "unlike the chilling or freezing of chicken which may easily be reversed,
the salting of chicken homogenously in all parts cannot be thoroughly removed."

66. In interpreting headings 0207 and 0210 of the EC Schedule, should the ordinary
meaning of all the terms in those headings be assessed as a whole or, rather, should the terms
other than "frozen" in heading 0207 (i.e. "fres h" and "chilled") and the terms other than
"salted" in heading 0210 (i.e. "in brine", "dried " and "smoked") be treated as context for the
interpretation of the terms that appear to be directly at issue – i.e. "frozen" and "salted". Will
the result of the interpretative exercise differ de pending upon which approach is adopted? If
so, please explain making specific reference to the headings at issue in this case.

 In its First Written Submission, Thailand has a dopted the approach of examining the ordinary
meaning of all the terms in headings 0207 and 0210. Therefore, Thailand has adopted the first of the

two interpretive approaches put forward in this qu estion. However, in our view, the result will not
differ depending on which of the two approaches are adopted.

67. Can products that fall within the scope of heading 0207 of the EC Schedule be
considered as having undergone a "process"? If so , please explain what is meant by "process".
Can the processes to which products falling within the scope of heading 0207 are subject, if any,
be distinguished from those to which produc ts falling within the scope of heading 0210 are
subject? If so, how?

 A process is defined in the New Shorter Oxford English Dictionary as, inter alia, "[a] thing
that goes on or is carried on; a continuous series of actions, events or changes; a course of action, a
procedure; esp. a continuous and regular ac tion or succession of actions occurring or performed in a
definite manner; a systematic series of actions or operations directed to some end, as in
manufacturing, printing, photography, etc." (page 2364.) Heading 0207 covers products that are
"fresh, chilled, or frozen." If a product is fresh it cannot be said to have undergone a process.
Chilling and freezing may be considered as processes. Of the three states (fresh, chilled or frozen)
listed in this note to heading 0207, Thailand is of the view that chilling and freezing relate to a process
to ensure the purpose of preservation.

 The processes in heading 0207 can be clearly distinguished from process es in heading 0210.
The processes in heading 0207 relate to the temper ature of the product. The note to heading 0207
states:

This heading covers only fresh, chilled or frozen meat and edible offal of domestic
poultry which, when live are classified in heading 01.05.
 In contrast, the processes in heading 0210 relate to the preparation of the product rather than
its temperature. The note to heading 0210 states:

This heading note applies to all kinds of meat and edible meat offal which have been
prepared as described in the heading , other than pig fat, free of lean meat, and
poultry fat, not rendered or otherwise ex tracted (heading 02.09). The heading
includes streaky pork and similar meats interl arded with a high proportion of fat, and
fat with an adhering layer of meat, provided they have been p repared as describedin
the heading. (Emphasis added).
 During the first substantive meeting of the Pane l with the parties, after the delegate of
Thailand read out the first sentence of the note, th e EC commented that it was an Explanatory Note
which was used to delineate the coverage between heading 02.09 and heading 02.10. The fact that the
note makes reference to the delineation between two sub-headings does not detract from the intrinsic
value of the description that is used in that note. Furthermore, the phrase "prepared as described in
the heading" appears in both the first and the second sen tence of the note. The note is clear in both its
first and second sentence that the terms "… salted, in brine, dried or smoked …" are descriptions of
the manner in which meat and meat offal have been prepared. In other words, the sub-heading
covers meat and meat offal which have been prep ared as des cribed in the heading, namely by the
process of being salted, put in brine, dried or smoke d. Preparation is not related to a temperature-
based factor.

68. If some or all products that fall within the scope of heading 0207 of the EC Schedule can
be considered as having undergone a "process", what is the purpose of that process? What is
the purpose of the processes to which products falling within the scope of heading 0210 are
subject?

 Insofar as the purpose of the process is relevant to the scope of the EC's concession on 0210
in Schedule LXXX, the purpose of the processes in 0207 (chilling or freezing) would be that of
preservation. The purpose of the processes to wh ich products falling under h eading 0210 are subject
would be that of preparation.

 This is confirmed by the EC's own Additiona l Note 6 which states that: "products falling
within heading No. 0210 to which seasoning has been added during the process of preparation remain
classified therein, provided that the addition of seasoning has not changed the character of the
product"(emphasis added). This Add itional Note 6, which clearly refers to products in heading 0210
as having undergone a process for the purpose of preparation, has been included in the EC's
Combined Nomenclature since at least 1992 until 2003. Thailand is submitting the 1992 and 1993
Combined Nomenclature of the EC as Exhibits TH A- 27 and 28 respectively. (Thailand notes that the
1994 Combined Nomenclature has already been submitted as Exhibit THA-8 and BRA-7.) Thailand
notes that this definition is still in the 2003 version of the Combined Nomenclature.

69. To what extent, if at all, is the purpose of a process to which a product is subject
relevant to the interpretation of: (a) heading 0207 of the EC Schedule; and (b) heading 0210 of
the EC Schedule? Should the purpose take prece dence over the process in either case? If so,
please explain why and in what circumstances. In the case of both headings, if there are
multiple purposes underlying the processes in question, which purpose should take precedence?

 The purpose of the process to which a product is s ubject is not relevant to the interpretation of
either heading 0207 or heading 0210 of the EC's Sc hedule. As the European Court of Justice has
stated, "[t]he decisive criterion for the customs classification of goods must generally be looked for in
their objective characteristics and properties … " (Case 55/75, Belgium State v. Vandertaelen, 1975
E.C.R. 1647. Cited in Exhibit THA-18 at p. 1278.) Therefore, in either heading, the purpose should
not take precedence over the process or the objective characteristics of the product.

 As the process takes precedence over the purpose, it is not relevant whether there may be
multiple purposes underlying a particular process for the classification of a product.

71. Are there different degrees to which meat can be dried, smoked or soaked in brine? If
so, is it the case that meat products can only be classified under heading 0210 if the degree of
drying, smoking or soaking in brine has exceeded a pa rticular level? If so, what are those levels
and how are they determined?

 Yes, there are different degrees to which a meat produ ct can be dried, smoked, or put in brine.

 As Thailand has noted in its First Written S ubmission, the EC had provided a definition of
"salted" in Additional Note 7 in Chapter 2 of its Combined Nomenclature which set a minimum
quantitative level that a product had to meet in order to be classified as salted under heading 0210. In
a similar vein, the EC provided a definition of "dried or smoked" in Additional Note 2(E) in the same
Chapter which provides that:

For the purposes of subheadings 0210 11 31, 0210 11 39, 0210 12 19 and 0210 19 60
to 0210 19 89, products in which the wate r/protein ratio in the meat (nitrogen
content x 6,25) is 2,8 or l ess shall be considered as 'dried or smoked.' The nitrogen
content shall be determined according to ISO method 937-1978.

 As with the definition for the coverage under for 0210, this definition only specifies the
quantitative level that must be met for a product to be considered as "dried or smoked". Thailand
notes that the structure of Additional Note 2(E) is th e same as that of Additional Note 7, namely that
the classification of a product as "dried or smoked" or "salted" is dependent on a neutral and objective
criterion. For a product to be considered as "dried or smoked" it must have a specific water/protein
ratio. Similarly, for a product to be considered as "salted" it had to have a minimum salt content of
1.2% homogenously and deeply impregnated in the meat product. These are criteria for determining
whether a product would fall under heading 0210 that could be easily assessed by a Customs Officer
at the border.

 Thailand further notes that there is no requireme nt in Additional Note 2(E) that the product
must be dried or smoked for the purposes of long-term preservation.

73. Is the Harmonized System "context" under Article 31.2 of the Vienna Convention? If
so, please explain by demonstrating how the various elements in Articles 31.2(a) or 31.2(b) are
fulfilled.

 Articles 31(2) of the Vienna Convention reads as follows:

The context for the purpose of the interpretation of a treaty shall comprise, in addition
to the text, including its preamble and its annexes:
a) any agreement relating to the treaty which was made between all the parties
in connexion with the conclusion of the treaty;
b) any instrument which was made by one or more parties in connexion with the
conclusion of the treaty and accepted by the other parties as an instrument related to
the treaty.
 Thailand does not consider that the Harmonized System is context within the meaning of
Articles 31(2)(a) or 31(2)(b) as it does not fulfil the criteria set out in sub-paragraphs (a) or (b).

 Thailand notes that in the EC – Computer Equipment , the Appellate Body did express the
view that the Harmonized System should have been taken into consideration by the Panel "in its effort
to interpret the terms of Schedule LXXX." (WT/DS/62/AB/R, WT/DS67/AB/R, WT/DS68/AB/R,
para. 89). However, the Appellate Body did not specify the provision in the Vienna Convention under
which the Harmonized System should be taken into account. Thailand is of the view that it may not
be necessary for the Panel to specify the provision in Article 31 under which it is considering the
Harmonized System.

74. Assuming that the Harmonized System qualifies as "context" for the interpretation of
the EC Schedule under Article 31.2 of the Vienna Convention , to what extent if at all can the
General Rules for the interpretation of the Ha rmonized System be used to determine the
meaning of the headings in question?

 Under the assumption made by the Panel in this question, Thailand considers that the General
Rules for the Interpretation of the Harmonized System must be used to determine the meaning of a
particular heading. Article 1 of the Harmonized System Convention defines the Harmonized System
as comprising, inter alia, the General Rules for the Interpretation of the Harmonized System.
Article 3.1(a) obliges Contracting Parties to en sure that its "Customs tariff and statistical
nomenclatures shall be in conformity with the Harmonized System." Furthermore, as stated in
paragraph 104 of Thailand's Firs t Written Submission, the EC and Thailand as Contracting Parties to

the Harmonized System Convention have agreed in Article 3 "to apply the General Rules for the
Interpretation of the Harmonized System. "

 Even if the Panel were to consider the Harmonized System under a provision other than
Article 31(2) of the Vienna Convention , it would still need to rely upon the General Rules for the
Interpretation of the Harmonized System because they are an integral part of the Harmonized System
for the foregoing reasons.

75. How are the following to be categorised, if at all, within the framework of Articles 31
and 32 of the Vienna Convention : (a) 1981 Explanatory Note to heading 02.06 of the EC's
Common Customs Tariff; (b) the 1983 Explanatory Note for subheadings 0210.11-31 and
0210.11-39 of the EC's Common Customs Tariff; (c) the 1983 Dinter judgement of the ECJ; (d)
the 1993 Gausepohl judgement of the ECJ; and (e) the December 1994 Explanatory Note to
subheadings 0210.11.11 and 0210.11.19 to the EC's Combined Nomenclature?

 Thailand considers that (a), (b) and (c) ca nnot be categorised within the framework of
Articles 31 and 32 of the Vienna Convention because they existed prior to the launch of the Uruguay
Round. Thailand considers that (d) cannot be categorised under Articles 31 and 32 as prior to the
conclusion of the treaty, there was specific legisl ation passed in Regulation 535/94 which clarified
the very issue addressed in the Gausepohl case and made clear that classification under heading 0210
should be based on the product meeting specific criter ia. Thailand considers that (e) should not be
considered under Articles 31 and 32 because it relates to a type of meat which is not at issue in this
proceeding. As Thailand suggested in its questions to the EC, the normal practice in the EC is not to
apply provisions of one Explanat ory note to another, unless it is so stated that it shall apply mutatis
mutandis.

 In contrast, Thailand wishes to clarify that Regulation 535/94 should be considered in
interpreting the terms of the EC's concession under heading 0210. First, Regulation 535/94 was
published on 9 March 1994 and entered into force on 1 April 1994. Article 1 of this Regulation stated
that "The following additional note shall be inser ted in Chapter 2 of the Combined Nomenclature
annexed to Regulation (EEC) No 2658/87":

For the purposes of heading 0210, the term " salted" means meat or edible meat offal
which has been deeply and homogenously impr egnated with salt in all parts, having a
total salt content not less than 1.2% by weight.
Article 2 states that:

This Regulation shall enter into force on [1 April 1994] … and shall be binding in its
entirety and directly applicable in all Member States.
 Second, Thailand notes that the definition of "salted" set out in Regulation 535/94 was
inserted in the Combined Nomenclature as an "A dditional Note" and not an "Explanatory Note." As
noted in Thailand's Oral Statement at the First Subs tantive Meeting of the Panel with the parties, the
European Court of Justice has explained that "an Additional Note decided upon by the Council
becomes part of the heading to which it refers a nd has the same binding effect whether it constitutes
an authentic interpretation of the heading or supplements it." (Case 38-75, Douaneagent der NV
Nederlandse Spoorwegen v Inspecteur der invoerrc hten en accijnzen, 19 November 1975, ECR 1975,
page 01439, at para. 10.) Therefore, Additional No te 7 provided a clear definition of "salted" for
purposes of heading 0210 and was a binding part of the heading 0210 in the EC's Combined
Nomenclature as of the conclusion of the WTO Agreement.

 The interpretation set out in the Additiona l Note was binding and constituted the EC's
understanding, under its own laws, of its commitments in heading 0210 of Schedule LXXX.

76. Can the Harmonized System be consid ered as comprising "relevant rules of
international law" within the meaning of Article 31.3(c) of the Vienna Convention? If so, please
explain by demonstrating how the various elements in Article 31.3(c) have been fulfilled.

 The Harmonized System could theoretically be considered as comprising a relevant rule of
international law applicable in the relations between the parties within the meaning of
Article 31(3)(c). As Thailand noted in response to this question orally during the First Substantive
Meeting of the Panel with the parties, in EC – Computer Equipment , in responding to the Appellate
Body's question, the EC stated that: "on the basis of Article 31(3)(c) of the Vienna Convention, the
International Convention on the Harmonized Commodity Description and Coding System (footnote
omitted) … and its Explanatory Notes (footnote omitted) would be re levant in interpreting the
obligations of the European Communities under Schedule LXXX vis-à-vis WTO Members which are
also Members of the World Customs Organisa tion (the 'WCO')" (Appellate Body Report, EC –
Computer Equipment, para. 13).

 Thailand notes however that in this case, in paragraph 107 of its First Written Submission, the
EC has suggested the Harmonized System as "context" within the meaning of the Vienna Convention
which would suggest that it should be considered under Article 31(1) or Article 31(2) since these are
the only two provisions in the Vienna Convention referring to context.

 Thailand stated in its first written submission th at the Harmonized System must be considered
in an Article 31 analysis, but did not specify under which provision it should fall.

78. Do the parties consider that the WTO Mo dalities for the Establishment of Specific
Binding Commitments under the Reform Progra mme issued on 20 December 1993 amounts to
"preparatory work" within the meaning of Article 32 of the Vienna Convention? If so, please
explain why and indicate the significance parties attach to this document?

 The WTO Modalities for the Establishment of Specific Binding Commitments under the
Reform Programme issued on 20 December 1993 may theoretically be considered as "preparatory
work" within the meaning of Article 32 of the Vienna Convention. From the reference to this
document in paragraph 63 of the EC's First Submis sion, it would appear that the EC is citing the
Modalities paper in order to demonstrate that the Harmonized System was an important tool in the
agricultural negotiations. However, it is unclear to Thailand what is the probative value of this
document as a supplementary means of interpre tation. Thailand notes that the Agreement of
Agriculture, which is part of the treaty of the WT O Agreement, makes clear in its Annexes that the
product coverage is listed by HS Codes. Tha iland does not consider this document to be of
significance in these proceedings.

 Thailand considers it is important to emphasise th at it is the concession made by the EC in its
Schedule LXXX, and not the heading in the HS, that must be interpreted by the Panel.

79. What common essential feature(s) do the pa rties consider characterise products that fall
under:

 (a) Chapter 2 of the Harmonized System?

 The title of Chapter 2 indicates that it covers "meat and edible meat offal." The Chapter does
not cover products falling under 02.01 to 02.08 a nd 02.10, which are unfit or unsuitable for human

consumption. Therefore, the common essential feature w ithin this Chapter is that the product must be
meat or meat offal which is fit or suitable for human consumption.

 The General Chapter Note which provides the distinction between meat and meat offal of
Chapter 2 and that of Chapter 16 states the following:

This Chapter covers meat and meat offal in the following states only:
1) fresh
2) chilled
3) frozen
4) salted, in brine, dried or smoked.
 Therefore, the total coverage of Chapter 2 is for meat and meat offal in any of these four
states.

 (b) heading 0207 of the EC Schedule?

 Heading 0207 covers meat and edible offal, of the poultry of heading 0105, fresh, chilled or
frozen.

 The note to 0207 provides that: "[t]his headi ng covers only fresh, chilled or frozen meat and
edible offal of domestic poultry which, when live, are classified in heading 0105."

 Therefore, it is textually clear that head ing 0207 covers meat and edible offal in three of the
four states that are covered by Chapter 2 (as per the General Chapter Note).

 The common essential feature of "chilled and frozen" in this heading is that of preservation.

 (c) heading 0210 of the EC Schedule?

 Heading 0210 covers meat and edible meat offa l, salted, in brine, dried or smoked; edible
flours and meals of meat or meat offal.

 The note to 0210 states that: "[t]his heading note applies to all kinds of meat and edible meat
offal which have prepared as described in the head ing, other than pig fat, free of lean meat, and
poultry fat, not rendered or otherwise extracted (heading 0209). The heading includes streaky pork
and similar meats interlarded with a high proportion of fat, and fat with an adhering layer of meat,
provided they have been prepared as described in the heading. "

 Therefore, it is textually clear that heading 0210 covers meat and edible meat offal that is in
the fourth state i.e., salted, in brine, dried or smoked, that are covered by Chapter 2 (as per the
General Chapter Note).

 Furthermore, Thailand notes that the Chapter Note to Chapter 16 excludes products that are
"prepared or preserved by the processes specified in Chapter 2 or 3 or heading 0504." As noted
above, Chapter 2 covers products in four states: (i) fresh, (ii) chilled, (iii) frozen or (iv) salted, in
brine, dried or smoked. Chapter 3 covers fi sh and crustaceans, molluscs and other aquatic
invertebrates which are fresh, chilled, or frozen, sal ted, in brine, dried or smoked. Heading 0504
covers guts, bladders, and stomachs of animals (other than fish) whole and pieces thereof. (Thailand

notes that this is the complete heading in the EC's Schedule wher eas the HS heading in full is as
follows: guts, bladders, and stomachs of animals (o ther than fish) whole and pieces thereof, fresh,
chilled, frozen, salted, in brine, dried or smoked.) These are the only processes specified in Chapter 2
and 3 and heading 0504. Out of these processes, it is undisputed that fresh does not refer to meat that
is subject to preservation, and that chilled and frozen do refer to preservation. The question is
whether "salted, in brine, dried or smoked" are for the purpose of preservation or preparation. To
refer to these as being carried out for the purpose of preservation would have the effect of rendering
the terms "or prepared" in the Chap ter Note to Chapter 16 inutile. b ecause that would in effect mean
that there was no process for the purpose of preparation specified in Chapter 2, Chapter 3 or
heading 0504. The correct interpretation would be to refer to "salted, in brine, dried or smoked" as
processes for the purposes of preparation. This reading would give meaning to all the terms in the
General Note to Chapter 16.

 Thailand submits that this latter reading is in conformity with the EC's own understanding
that the type of processes covered in Chapter 2 include processes carried out for the purposes of
preparation and preservation.

 In the EC's Combined Nomenclature of December 1994 (Commission Regulation (EC)
No. 3115/94 of 20 December 1994, Exhibits THA- 8 and BRA-7), Additional Note 6 stated that:
"Products falling within heading No. 0210 to which seasoning has been added during the process of
preparation remain classified therein provided that the addition of seasoning has not changed the
character of the product."

 The EC has been consistent in its understa nding that products in heading no. 0210 undergo a
process of preparation. This consistent understanding has been reflected in every annual issuance of
the EC's Combined Nomenclature from at least 1992 to 2003.

ANNEX C-5

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

(2 December 2004)

QUESTIONS POSED BY THE PANEL

FOR THAILAND:

83. Please reconcile the statement in paragraph 44 of Thailand's oral statement at the first
substantive meeting and in its reply to Panel quest ion No. 16 that only the classification practice
of Members in implementing their tariff concessions is relevant with its statement in
paragraph 68 of its second written submission th at the unilateral classification practices of
Members cannot be considered as subsequent practice establishing "the agreement of the
parties" regarding the interpretation of the tariff heading at issue.

 Paragraph 44 states that the classification practice of Members in implementing their tariff
concessions is relevant [for the purpose of elucida ting their understanding of the scope of that tariff
concession.] This statement was made to highlig ht the importance of classification practice on
importation with respect to a tariff concession as compared to the classification of exports for
statistical purposes.

 However, Thailand never considered the unilateral classification of a Member in
implementing its tariff concessions to be "subsequent practice" within the meaning of Article 31(2)(b)
of the Vienna Convention regarding the interpretati on of the tariff heading at issue. "Subsequent
practice" within the meaning of Article 31(2)(b) must establish the agreement of the parties.

The two statements made by Thailand can, therefore, be reconciled as they address different points.

FOR THE COMPLAINANTS

84. How do Brazil's and Thailand's exporters de scribe the products at issue on their
exportation documentation when exported to the EC?

 The product is described as "Fresh Frozen Boneless Chicken Meat (Boneless Skinless
Breast)" and is specified by the shipping company as 0207 on their exportation documentation.

85. Please explain the export classification proce ss for the products at issue. In particular,
is this undertaken by domestic customs authorities and/or by exporters?

(1) Exporters must obtain a permit (R-9 form) fro m the Department of Live Stocks to export
animal carcass. The R-9 form is used to obtai n an export declaration form from the Customs
Department.

(2) A shipping company is hired by the exporters to handle the customs export procedures and
paperwork. The shipping company will also fill out the description of the product and its
customs classification heading in the export d eclaration form. Salted chicken exported from
Thailand to the EC is classified by the sh ipping company as 0207. The export declaration

form as filled out by the shipping company will be submitted to Customs officials for further
appropriate export procedures.

(3) The export declaration form is in turn used to obtain a health certificate from the Department
of Live Stocks. The health certificate is require d by the EC for Thai salted chicken exports to
the EC. The certificate indicates whether the product is fresh chicken or meat preparation or
cooked chicken.

86. In paragraphs 14 and 36 of its second written submission, the EC submits that low levels
(0.5%) of salt are regarded in the industry as sufficient for the purposes of preventing "drip
loss". According to the EC, there is no need fo r a salt content of 1.2% or above for such
purposes. The EC argues that, therefore, even if drip loss were relevant, it does not require that
the salt content be greater than 0.5%. Please comment.

 The salt content of 1.2% that was specified in Regulation 535/94 in 1994 was not based on a
requirement to prevent "drip loss." The "drip loss" factor is a concept that was first introduced during
the course of these proceedings. The "drip loss" factor is an important technical reason why importers
prefer salted chicken. However, the amount of salt that may or may not be required for "drip loss" to
be prevented is an ex post facto consideration and is not relevant to the issue before the Panel, namely,
the scope of the EC's tariff concession of headi ng 0210 at the time of the conclusion of the WTO
Agreement.

FOR THE EUROPEAN COMMUNITIES

93. Do the products at issue in this case meet the criteria set out in EC Regulation 535/94?

 Yes.

 Even EC Commissioner Fischler has acknowledged th at the products at issue meet the criteria
set out in Regulation 535/94. He stated in response to the question posed by the European Member of
Parliament, Mr. Albert Maat, "[t]he Honourable Memb er assumes that the meat in question is lightly
salted and the salt may be shaken off. This fact woul d not be in conformity with the definition in the
Combined Nomenclature which reads: 'For the pur poses of heading 0210, the terms 'meat and edible
meat offal, salted, in brine' mean meat and edib le meat offal deeply a nd homogeneously impregnated
with salt in all parts, having a total salt content not less than 1.2% by weight'. The Commission is
however not aware that imported salted poultry me at does not comply with this definition."
(Exhibit THA-4).

108. In paragraph 119 of its second written subm ission, the EC submits that throughout the
Uruguay Round negotiations, EC law on classification under heading 02.10, including
Regulation 535/94, was based on the concept of preservation. Please explain where the concept
of preservation is reflected in Regulation 535/94.

 The concept of preservation is not reflected in Regulation 535/94. The EC has explicitly
acknowledged this omission in para graph 87 of its First Written Submission, where it stated: "…
Regulation 535/94 did not need to refer to the concept of preservation nor to the judgment of the EC."

114. Please comment on Brazil's and Thailand's submission in paragraphs 56 and 8
respectively of their oral statements at the second substantive meeting that the legal effects of an
ECJ judgement may be reversed or altered by a ch ange in the law, including the enactment of a
new Regulation.

 In response to a question posed by Thailand with respect to the difference between the
European Court of Justice's judgement in Dinter and the subsequent Regulation which enacted
Additional Note 6(a), the EC stated that "the EC exercises its legislative powers carefully, with a view
to ensuring that there is no conflict. Should any su ch conflict occur, there can be no doubt that the
judgements of the Court of Justice would prevail." The EC then cited the French Republic v.
Commission case to the effect that the Commission is not authorized to "alter the subject-matter of the
tariff headings which have been defined on the b asis of the Harmonized System … whose scope the
Community has undertaken not to modify."
1 Thailand agrees that the EC cannot alter the subject
matter of the tariff headings. For example, if the EC enacted a Regulation which altered the definition
of "salted meat" in heading 0210 to include widgets , then the European Court of Justice could strike
down that Regulation as ultra vires as the EC would have exceeded its legislative competence in
passing such a Regulation. In such a situation, the judgement of the Court of Justice would prevail.

 However, this is not the situation in the case before the Panel.

 Regulation 535/94 (enacted as Additional Note 7) did not alter the subject matter of the tariff
headings which have been defined on the basis of the Harmonized System. Rather, Regulation 535/94
merely specified the criteria to be taken into acc ount for classifying certain goods under a particular
heading, in this case, heading 0210.

 In Gijs van de Kolk-D ouane Expéditeur BV , the European Court of Justice reviewed an
Additional Note that did not change the scope of the chapters, sections and headings of the
nomenclature, but merely specified the criteria to be taken into account for classifying certain goods
under a particular heading of the Common Custom Tariff …
2 In that case, the European Court of
Justice held that the validity of the Additional Note was not affected.

 In a similar manner, Thailand submits that th e previous Additional Note 7 does not change
the scope of the tariff headings in the Combined Nomenclature – it merely specified the criteria to be
taken into account for classifying certain goods. Th erefore, the validity of the Additional Note 7 is
not affected.

 Thailand submits that the legal effects of th e European Court of Justice's judgment in the
Gausepohl case were modified by the provisions of Additio nal Note 7, which specified the criteria to
be taken into account for classifying products under heading 0210.

FOR ALL PARTIES

118. What is the distinction between "pres ervation" and "long-term preservation"?

 Following the First Substantive Meeting with the Parties, Brazil posed the following question
to the EC: "Is there a difference between 'preservation' and 'long-term preservation'? If so, what is it?"
The EC's response was that "[t]he question is not re levant to this dispute since no one maintains that
the product at issue qualifies under either criterion."

1 Replies of the European Communities to questions posed by the Complainants at the First Substantive
Meeting of the Parties. EC Reply to Thailand's Question 1, 14 October 2004.
2 C-233/88, Gijs van de Kolk-Douane Expéditeur BV v Inspecteur der Invoerrecten en Accijnzen ,
8 February 1990, ECR [1990] page I-00265, para. 18. Exhibit THA-35.

 The EC has repeatedly stated that "preserva tion lies at the heart of Chapter 2". (Thailand has
never agreed that preservation is the key factor for determining classification under Chapter 2)
However, the EC has never stated that " long-term preservation" lies at the heart of Chapter 2.
Nevertheless, in Regulation 1223/ 2002 and in Regulation 1871/2003, the EC introduced the concept
of long-term preservation as being the decisive criterion for determining the classification of a
product.

 However, as the EC has indicated throughout the course of these proceedings, it does not have
a clear understanding itself of the standard to be used to assess "long-term preservation." Indeed, the
EC has acknowledged that this determination would have to be resolved by individual EC customs
officials within strict time-frames on a case-by-case basis, on a shipment-by-shipment basis, without
any specific guidelines on the percentage of salti ng which would suffice to achieve the purpose of
"long-term preservation." From the EC's own statem ents at the First Substantive Meeting with the
Parties, a customs officer would have to determine that the product would need to be preserved for a
period of between "a few" and "several months."

 Thailand notes that in its oral reply to a question posed by the Panel during the Second
Substantive Meeting, the EC stated that the analys is of what is meant by long-term preservation for
the purpose of classifying the product under heading 0210, would have to be carried out on "a
product-by-product basis and on a case-by-case basis." Such an approach fails to provide security
and predictability to traders with respect to the trade concessions negotiated by the EC under
Schedule LXXX.

119. At the time the EC concluded its Schedule, was there evidence of the existence of trade
in meats under heading 02.10 which, through salting, were preserved for less than a few
months?

 In its First Written Submission, the EC provided information in Table 2 (page 22) which
indicated that there was trade in meat under heading 02.10.90.20 in 1994 in the amount of 21 metric
tonnes. However, there is no indication of the le ngth of time for which the salted meat products were
preserved, e.g., a few days, a few months etc.

 Thailand notes that the Panel has previously re quested the EC "to provide details of the salt
content of the products classified as 'other salted m eats' with respect to the statistics provided in
Table 1 (page 21)." The EC did not provide such details and instead replied:

Table 1 of the EC's First Written Submissi on refers to imports during the period 1986
to 1993. The import declarations in resp ect of imports are not held centrally, but
rather with the Member State customs author ities. It is unlikely that declarations
from this period are still available, and it is moreover, unlikely that such declarations
would mention the salt content of the goods in question. The EC has not been able to
find documents attesting to the salt content of these products.
3
 It is not clear to Thailand why the EC has not requested this information directly from the
Member State customs authorities.

 In any event, Thailand notes th at the meat in question in the Gausepohl case contained salt at
the level of 0.71% (internal salt content 0.48%).
4 We further note that the Oberfinanzdirektion had

3 EC's Replies to Panel's Questions Following the First Substantive Meting with the Parties,
14 October 2004. Question 35.
4 Paragraph 2 of the Report of the Hearing in Case 33/92. Exhibit EC-14.

issued a Binding Customs Tariff Notice on 9 May 1989 classifying meat of bovine animals with a
total salt content of 0.71% (internal salt conten t 0.48%) under subheading 0210 20 90 of the
Combined Nomenclature. This fact by itself is an indication that there was trade in salted meat that
was preserved for less than a few months. In that case, it was submitted that such a level of salt would
not preserve the meat for an extended period of time.

120. With respect to Brazil's suggestion in its reply to Panel question No. 3 that the Panel
should draw adverse inferences regarding the EC's failure to provide certain information
requested of it by the Panel, is there any basis for the Panel drawing similar inferences
regarding Brazil's and Thailand's refusal to pr ovide export classification practice for the
headings at issue?

 No. Thailand never refused to provide the in formation. Thailand has maintained a legal
argument throughout these proceedings that the classi fication practices of Th ailand for statistical
purposes is not relevant for determining the scope of the EC's concession on heading 0210 at the
conclusion of the WTO Agreement.

 However, in response to the Panel's request, Th ailand has now provided the information in its
response to question 84 and, therefore, there is no need for the Panel to draw adverse inferences.

121. What relative weight should the Panel acco rd to inferences that may be drawn for the
headings at issue in this case from:

 (a) the structure of Chapter 2 of the HS and its predecessors;

 (b) the Explanatory Notes that are rele vant to Chapter 2 of the HS and to its
predecessors; and

 (c) General Interpretative Rule 3 of the HS.

(a) The structure of the headings in the EC's Schedule of Concessions (which is the same as the
structure of Chapter 2 of the Harmonised System and the same as the structure of Chapter 2 of
the EC's Combined Nomenclature) should be taken into account by the Panel in its
application of Article 31(1) of the Vienna C onvention as part of the "context" following an
examination of the "ordinary meaning" of the te rms of the treaty at issue. The structure of
Chapter 2 in the predecessor nomenclatures serves as useful background to the interpretation
of the current Chapter 2 in the various agreements.

(b) The Note to Chapter 16 (which is not an Explan atory Note) is relevant to Chapter 2 of the HS.
As explained in greater detail in Section B. 3 of Thailand's Second Written Submission, the
Note to Chapter 16 (which is legally bindi ng) excludes products that are prepared or
preserved by the processes specified in Chapter 2 or 3 or heading 0504. This means that the
products in Chapter 2 undergo processes for the purpose of preservation or of preparation.
Thailand has submitted that products in head ing 0210 undergo processes for the purpose of
preparation.

 The Explanatory Notes to Chapter 2 should also be given weight by the Panel. The Appellate
Body has specifically stated in EC – Computer Equipment that: "[w]e believe, however, a
proper interpretation of Schedule LXXX should have included an examination of the
Harmonized System and its Explanatory Notes ." (Emphasis added. Para. 89). In interpreting
Schedule LXXX, the Appellate Body could have ch osen to not accord the Explanatory Notes
of the Harmonized System the same weight as the HS itself. However, the Appellate Body
made clear that the Harmonized System and its Explanatory Notes must be used in an

interpretation of the EC's Schedule LXXX. Th erefore, the Panel should not give the HS
Explanatory Notes less weight than the Appellate Body has recommended.

(c) The General Rule of Interpretation 3 of th e HS may be taken into account as part of the
Harmonized System. Article 1(a) of the Harmonized System Convention provides that the
Harmonized System "means the Nomenclature comprising the headings and subheadings and
their related numerical codes, the Secti on, Chapter and Subheading Notes and the General
Rules for the interpretati on of the Harmonized System , set out in the Annex to this
Convention." (Emphasis added.)

122. Do the parties consider that actual knowl edge during negotiations of a document or
instrument is necessary on the part of some/all negotiators involved in the negotiation of a treaty
in order for it to qualify for consideration as "preparatory work" and/or "circumstances of
conclusion" of a treaty under Article 32 of th e Vienna Convention? If so, please provide
support for this view. If not, please provide support for this view.

 No. Thailand does not consider that actual knowledge during negotiations of a document or
instrument is necessary on the part of some or all ne gotiators in order for that document or instrument
to qualify as "circumstances of the conclusion." From a practical perspective, it would be extremely
difficult to prove "actual knowledge" among all negotia tors. However, negotiators are expected to
have deemed knowledge of the legislation in another Me mber's jurisdiction at the time of the
conclusion of the treaty.

QUESTION POSED BY THE EUROPEAN COMMUNITIES

 In para. 5 of its closing statement of 18 November 2004, Thailand opines that Additional
Note 6(b) means "that products in heading 0210 undergo a process of preparation". How does
Thailand explain that none of the parties in the Gausepohl case relied on this note to argue that
the beef had been "prepared" and should therefore qualify under heading 0210, and that the
Court did not consider it in its interpretation of heading 0210?

Reply

 Thailand is not aware of the reasons why neither the parties nor the Court in the Gausepohl
case relied on Additional Note 6(b) which stated that "that products in heading 0210 undergo a
process of preparation".

 Thailand is aware, however, that Additiona l Note 6(b) was introduced by Regulation
No 3678/83 of 23 December 1983 (Commission Regulation (EEC) No 3678/83 of 23 December 1983
on the tariff classification of certain types of seasoned meat and amended Regulation (EEC)
No 950/68 on the Common Customs Tariff, O.J. L 366/ 53). The note was at that time numbered as
Additional Note 6(c) and provided:

"However, products falling within subheadings 02.06 B I, 02.06 C I a) and
02.06 C II a) to which seasoning has been added during the process of preparation
continues to fall within the said subheadi ngs provided that the addition of seasoning
has not changed their character of product falling within heading No 02.06."
 In Thailand's view, as the Additional Note 6(b) was duly published and was in force at the
time of the Gausepohl case, the parties and the Court could have relied on the provisions of this Note
to the effect that "that products in heading 0210 undergo a process of preparation".

ANNEX C-6

COMMENTS BY THAILAND ON THE EUROPEAN COMMUNITIES'
RESPONSES TO QUESTIONS AFTER THE SECOND SUBSTANTIVE MEETING

(9 December 2004)

QUESTIONS POSED TO THE EUROPEAN COMMUNITIES

Question 87

 In Thailand's view, the meaning of the headings in the EC Schedule must be assessed as of
the time of the conclusion of the WTO Agreement. The meaning of "salted" in heading 0210 in the
EC's Schedule at that time was defined by Regul ation 535/94 which had been published on 11 March
1994 and entered into force in the EC's Combined Nomenclature on 1 April 1994. As the Appellate
Body stated in EC - Computer Equipment, "… the fact that Member's Schedules are an integral part of
the GATT 1994 indicates that, while each Schedule re presents the tariff commitments made by one
Member, they represent a common agreement among all Members." (para. 109) A treaty interpreter
must assess the scope of the tariff commitment the EC made on heading 0210 when it concluded the
WTO Agreement on 15 April 1994 in order to ascertain the EC's WTO obligations. The
determination of whether there is a violation of the EC's obligations must be made on the basis of the
situation existing at the date of the establishment of the Panel.

 Furthermore, in this particular case, nego tiators at the conclusion of the WTO Agreement
could have been expected to have deemed knowledge of the legislation in the EC, such as Regulation
535/94, which was published and in force at the time of the conclusion of the treaty. Negotiators
could not have been expected to be aware of every Court judgement in the EC because each
judgement related to the specific fact situation before the Court. For example, the operative part of
the ruling in the Gausepohl case on which the EC seeks to rely in this case only pertains to the
interpretation of heading 0210 with respect to bovine meat. Therefore, the Court's interpretation of
heading 0210 in Gausepohl is of little use to traders exporting salte d chicken or other types of meat to
the EC. Amendments made by legislation, on the other hand, are more generally applicable in a
variety of situations. Regulation 535/94, which applies to all types of meat falling under heading
0210 is more general and therefore more informative to traders who export different types of meat.

 Members did agree in the M odalities Agreement to use the level of duties applied as of
1 September 1986. It is very common to agree at the beginning of multilateral trade negotiations on a
date in the past that would be used to determin e the tariff levels to whic h any agreements on tariff
reductions would be applied. This ensures that no participant in the negotiations can increase its
"bargaining chips" in the course of a Round. This agreement to use the level of duties can not be
taken to mean that the scope of the EC's Schedul e should be determined as of the beginning of the
Round. However, the content of the agreement finally reached must be determined by the
circumstances prevailing at the conclusion of the agreement.

 Indeed, the Vienna Convention makes clear in Ar ticle 31 that it is the terms of the treaty (as
they have been negotiated) that must be interpreted and in Article 32 that it is the circumstances of the
conclusion of the treaty to which recourse may be sought. The Vienna Convention does not have any
reference to the circumstances at the launch of the negotiations of the treaty.

Question 97

 The EC states that it "knows of no meat that is preserved by the use of common salt alone." It
then notes that it had previously referred to bacon as the only meat product that is preserved by salting
alone, but now states that it is more accurate to refer to bacon as "cured" rather than "salted" because a
combination of common salt NaCL, sodium nitrate and nitrate are used in the process (para. 19).
However, the terms of the heading 0210 do not contai n the term "cured" but only refer to "salted, in
brine, dried or smoked." So, the EC's answer oddly implies that meat which has been treated with
common salt cannot be considered under the term 'sa lted' and that bacon which is regularly classified
as "salted meat" under heading 0210 should not be cons idered as "salted" but "cured" even though the
term "cured" does not appear in heading 0210. The EC's interpretation does not make sense.

 In addition, the EC has obtained an expert's opinion which states that a minimum of 7% salt
in meat is necessary to preserve the meat (Exhibit EC-32). (Thailand notes that there is a seeming
inconsistency between this expert opinion and that provided in the Gausepohl case by the Federal
Office for Meat Research which stated that 4-5% sal t was necessary to preserve the meat). In any
event, during the course of the First Substantive Mee ting with the Parties, the EC stated that meat
salted at the level of 3% or more would have no co mmercial market in the EC. Therefore, the EC is
requiring that meat be salted for the purposes of pr eservation at such high levels that the meat would
be inedible and unsuitable for human consumption. Thailand notes that the Note to Chapter 2 states
that "[t]his chapter does not cover … products of the kinds described in headings 0201 to 0208 or
0210, unfit or unsuitable for human consumption." Th ailand submits that meat salted at the level of
7% would be "unfit or unsuitable for human consump tion." Therefore, the EC is seeking to establish
criteria for "salted meat" (i.e., 7% salt content) that , if applied, would render the product ineligible for
coverage under Chapter 2.

Question 100

 There is no legal or evidentiary basis for the EC's alternative argument that preparation must
"place the meat in a recognisably different state." The EC cites its Exhibit-5 as support to state that all
the meats that "all the meats that we are aware of as being classified under heading 02.10 share this
characteristic." However, Thailand notes that this Exhibit is entitled a ' Non-Exhaustive List of
Traditional European salted and dried/smoked meat products." This would imply that there are other
products which are not on this lis t which could nevertheless fall under heading 0210. Further,
Thailand notes the evidence that Brazil has submitted in BRA-43 which contains a partial list of the
products listed in the HS on-line Database of salted meat classifiable under subheading 0210.90 (1996
HS version). This list includes products such as 'sa lted meat of chicken' which are not presented in a
'recognisably different state' and do not have a 'gen eral' or 'specific' name such as bacon or Parma
ham. Yet, the Harmonized System Database confirms the fact that 'salted meat of chicken' is a product
falling under heading 02.10.

Question 102

 In Thailand's view, the EC has not shown that the notion of preservation is "at the heart" of
heading 02.10 in the Harmonised System, the EC's Schedule and the EC's Combined Nomenclature.
If, indeed, that were the case with the Harmoni sed System, then the WCO would have presumably
mentioned that point in its replies to the Panel's firs t set of questions. The EC would also have not
introduced in 1983 Additional Note 6(a) in its Co mbined Nomenclature which stated that: "…
products falling within subheadi ng 02.06 [the predecessor to heading 02.10] … to which seasoning
has been added during the process of preparation continues to fall within the said subheadings…"

Question 109

 Thailand notes that the EC is unable to provi de the Panel with any additional evidence to
buttress its general and oft-repeated assertion that 'EC law and practice support the principle of long-
term preservation'. Indeed, the EC submits onl y the EC's Common Customs Tariff for 1986 which
reproduces the headings of the CCCN. The EC's so le argument is that the heading 02.06 of the
CCCN contains effectively the same wording of head ing 02.10, which according to the EC "enshrine"
the principle of preservation. It remains unclear to Thailand how the mere wording of heading 0210
"enshrines" the principle of preservation. Ind eed, Thailand has demonstrated throughout these
proceedings how the term 'salted' in heading 0210 refers to a process undertaken for the purpose of
preparation.

 Moreover, the EC has only cited one only European Court of Justice case prior to
1 September 1986 which referred to the principl e of preservation governing classification under
Chapter 2, namely the Dinter case. Gausepohl which is the only other European Court of Justice case
which refers to preservation (albeit in the context of the classification of bovine meat) refers only to
Dinter.

Question 113

 Thailand notes that the Court in Gausepohl provided its interpretation of heading 0210 with
respect to bovine meat only, and therefore cannot be viewed as the Court's interpretation for all meat
falling under heading 0210.

 Furthermore, Thailand submits that the cont ent of Regulation 535/94 has been enacted many
times as a Council Regulation through the annual issu ance of the EC's Combined Nomenclature.
Thailand also submits that Additional Note 7 does not change the scope of the sections or headings in
Chapter 2.

 The Commission has the power to enact a Re gulation such as Regulation 535/94 specifying
criteria to be taken into consideration for classifying goods under heading 0210.

Question 114

 The EC's explanation of the relationship between the Dinter case, Additional Note 6(a) and
the effect of the judgement in the Van de Kolk case is misleading.

 In the Dinter case (judgment issued on 17 March 1983), the Court held that "a criterion as
subjective as taste may not be used to assess th e seasoning of meat." On 23 December 1983, the
Commission introduced Regulation 3678/83 on the clas sification of certain types of seasoned meat
which provided in Additional Note 6(a) that " '[s]ea soned meat' shall be uncooked meat that has been
seasoned either in depth or over the whole surface of the product with seasoning either visible to the
naked eye or clearly distinguishable by taste." Additional Note 6(a) was then incorporated in the EC's
Common Customs Tariff through Council Regulation 3400/84. The original customs issue in the van
der Kolk case was that classification under heading 16.02 was disallowed because the chicken product
has not been seasoned over the whole surface and was not distinguishable by taste. The product was
therefore classified under heading 02.02 and the importer then became liable for tariff duties under
this heading.

 The importer then appealed to the Tarief commissie which then questioned whether the
Additional Note 6(a) was in conformity w ith the criteria for the Brussels Convention on
Nomenclature (a previous method of classifying goods prior to the introduction of the Harmonized
System). The issue before the European Court of Justice was:

First, whether the Council had exceeded its discretionary powers to interpret the
Common Customs Tariff when it adopted Additional Note 6(a) and,
Second, whether Additional Note 6(a) modifi ed the scope of the chapters, sections
and headings of the Brussels Nomenclature.
 To both these questions the Court answered in the negative. For the purposes of this present
dispute it is worth examining in detail the reasons for the Court's ruling in van der Kolk . First, the
Court noted that in Dinter it held that a criterion as subjective as taste could not be used for
classification purposes. However, the Court then went on to point out that that judgement was
delivered under two different circumstances: firs t, there was no regulation interpreting the Common
Customs Tariff and second, there was no ISO standard to confirm the objectivity of sensory testing.
(Contrary to what the EC states, there is not indica tion in the Court's judgment that the ISO standard
was the "key change in circumstance.") The Court held that the Council did not infringe its
discretionary authority in establishing that "taste" could be used for classification purposes. Second,
the Court held the Additional Note 6(b) did not change the scope of the chapters, sections and
headings of the Brussels Nomenclature. Therefore, the Court in van der Kolk upheld the validity of
Additional Note 6(a) which the EC has confirmed curre ntly applies. In other words, the Court upheld
the validity of Additional Note 6(a) because it was not ultra vires the authority of the Commission or
the Council.

 Regulation 535/94 (Additional Note 7) may be analysed using the same approach as the Court
used in its review of the validity of Additiona l Note 6(b). First, Thailand submits that the
Commission was within its discretionary powers to enact Regulation 535/94. Second, Thailand
submits that Regulation 535/94 does not change the scope of the chapters, sections and headings of
the Harmonized System or of the EC's Combined No menclature or the EC's Schedule. It merely
specified the objective criteria to be taken into account for classifying goods under heading 0210.

 Thailand disagrees that the definition of "sa lted meat" as a meat product containing 1.2% salt
deeply and homogenously impregnated in all parts could be considered as altering the scope of the
heading 0210. The EC refers only to its argument that salting at this level does not ensure
preservation. Yet the EC has failed to prove that sa lting in heading 0210 means "preservation." It has
still not been able to point to any EC case-law other than Dinter and Gausepohl i n s u p p o r t o f i t s
assertion. It has only cited the headings of the CCCN and the HS without clearly demonstrating how
salting means "preservation."

Question 121

 With respect to the first paragraph in the EC 's response, Thailand does not agree that "all
parties to this dispute are agreed General Interpretativ e Rule 3 is not applicable in this case." Thailand
refers the Panel to its discussion of GRI 3 in its First Written Submission (pages 33-35), its Second
Written Submission (pages 12-14) and its Opening Stat ement at the Second Substantive Meeting with
the Parties (paras. 24-25).

ANNEX C-7

RESPONSES BY THE EUROPEAN COMMUNITIES
TO QUESTIONS POSED BY THE PANEL, THAILAND AND BRAZIL
AFTER THE FIRST SUBSTANTIVE MEETING

(14 October 2004)

QUESTIONS POSED BY THE PANEL

FOR THE EUROPEAN COMMUNITIES

19. What is the legal effect of EC Commission Decision of 31 January 2003? In particular

 (a) Is the legal effect confined to the revocation of certain BTI notices issued by
Germany or is the legal effect broader? If the latter, please explain.

 Article 1 of Commission Decision 2003/97/EC of 31 January 2003 limits its effect to the
revocation of the BTIs listed in the Annex thereto.

 (b) Is the legal effect restricted to Germany or do some or all aspects of the Decision
apply more generally to all EC member states? If the latter, please explain.

 Article 249 of the EC Treaty (which regulates the competences of the EC and its institutions)
states "A decision shall be binding in its entirety upon those to whom it is addressed". Article 2 of
Commission Decision 2003/97/EC states that the "Deci sion is addressed to the Federal Republic of
Germany". Consequently, the legal effect of Co mmission Decision 2003/97/EC is restricted to
Germany.

 (c) Can recitals in EC Commission Decisions have legal effect? If so, please explain
what the legal effect is, if any, of recitals 7 and 8 of the EC Commission Decision
of 31 January 2003 as regards the int erpretation and application of EC
Commission Regulation 1223/2002?

 Article 253 of the EC Treaty requires that Co mmunity legislative acts "state the reasons on
which they are based". The recitals to Co mmission Decision 2003/97/EC therefore provide the
reasons for which the decision was adopted. However, the legal effect of the decision flows from its
operative part.

20. With respect to EC Commission Regulati ons 1871/2003 and 2344/2003: a) How does the
EC characterise their legal effect(s) as regards frozen chicken cuts that have been deeply and
homogeneously impregnated with salt with a salt content of 1.2% or more in comparison with
the legal effect(s) associated with EC Comm ission Regulation 1223/2002 and EC Commission
Decision of 31 January 2003?

 The EC would first note that neither of these Regul ations are in the Panel's terms of reference.
Commission Regulation (EC) No. 1871/2003 inserts into Additional Note 7 to Chapter 2 of the EC's
Combined Nomenclature the phrase "provided it is the salting which ensures long-term preservation",
in order to clarify and confirm, that in order fo r a meat to qualify as "salted" under 02.10 the salting
must be sufficient to ensure preservation. This Regulation amended the text of the Combined
Nomenclature in force in 2003. Commission Regulation (EC) No. 2344/2003 makes a series of

amendments to the text of the Combined Nomencla ture for 2004, including those insertions included
in Regulation 1871/2003.

 Additional Note 7 applies to heading 02.10 of the Combined Nomenclature in general. That
is, it applies to all meats which are presented for import under 02.10. By contrast, Commission
Regulation 1223/2002 concerns the cl assification of the specific goods described in column 1 of the
annex to that Regulation i.e. "boneless chicken cuts , frozen and impregnated with salt in all parts.
They have a salt content by weight of 1.2 to 1.9% . The product is deep-frozen a nd has to be stored at
a temperature of lower than -18°C to ensure a shelf-life of at least one year". Similarly, Decision
2003/97/EC concerns the specific products identified in the BTIs listed in the Annex to that Decision.

 (b) Could frozen chicken cuts that have been deeply and homogeneously
impregnated with salt with a salt conten t of 1.2% or more be classified under
heading 0210.90.20 of the EC Combined Nomenclature as a result of the
application of Commission Regulations 1871/2003 and 2344/2003? If so,
please explain under what circumstances or subject to what conditions. If not,
please explain under what heading of the Combined Nomenclature such
products would be classified.

 Classification under 02.10 would only be possible if the goods in question were salted for
preservation.

21. In paragraph 1 of the EC's first written submission and in paragraph 4 of its oral
statement during the first substantive meeting, the EC submits that the product at issue is no
more than "salty chicken". Could the EC further elaborate on what it means by this
characterisation of the products at issue.

 The expression "salty chicken" means that salt is added in the product at issue as an ingredient
with the result that such chicken tastes of salt, as opposed to chicken that is preserved by salting.
However, it is never consumed by the end-user as "salty chicken" because it is, as the Complainants
explain, always transformed into further processed products, where salt is merely one ingredient.

22. Could the EC comment on arguments made by Brazil and Thailand in their oral
statements during the first substantive meet ing (paragraph 20 in the case of Brazil and
paragraphs 47 and 49 in the case of Thailand) that exporters are within their rights to "seek the
path of least resistance" and to develop products to minimize their costs, including tariffs.

 The EC does not question the right of exporters to design products in a way that they come
under a particular tariff heading. Sometimes this is successful, sometimes this fails. In any event, the
decisive question is whether or not the product fa lls under the scope of the specific tariff line. The
product exported by Thailand in 1996 and Brazil in 1998, i.e., frozen boneless chicken cuts with
added salt between 1.2%-2.9% salt does not bring the product within the scope of heading 02.10.
Therefore, Brazil's and Thailand's attempt to "seek the path of least resistance" was not successful.

23. Are there any guidelines for EC customs officers to assist them in determining whether
or not salting achieves long-term preservation or do customs officers make this assessment on a
case-by-case basis?

 There are no specific guidelines as to when sa lting achieves long-term preservation. Such
guidelines as are necessary would be specified in th e Additional Notes or Explanatory Notes to the
Combined Nomenclature. However, in practice su ch guidelines have never been necessary, because
there has never been a problem in applying 02.10 (with the exception of the facts at issue in the
Gausepohl case and in the present dispute) since there has been little dispute as to the type of product

which falls under 02.10.

24. The EC is requested to explain what is meant by the reference to "character" in the
Annex to EC Regulation 1223/2003 and recital 7 of EC Commission Decision of
31 January2003.

 These two references refer to the fact that th e product at issue does not fall under the scope of
tariff heading 02.10. In other words, it does not ha ve the necessary characteristics (preservation by
salting) to fall under 02.10.

25. Is there any mechanism in place in the EC that would prevent the duty levied on
imports of the products covered by EC Commis sion Regulation 1223/2002 and EC Commission
Decision of 31 January 2003 from exceeding 15.4% ad valorem?

 Such products fall under heading 0207 and are subject to the duties applicable to these tariff
lines under the EC's Common Customs Tariff. The EC currently has no mech anism in place which
would subject the products covered by Regulation 1223/2002 and Decision 2003/97/EC but which fall
under heading 0207 to a duty not exceeding 15.4% ad valorem. However, in the EC's view, it is not
necessary to have such a mechanis m in place because the product at issue is not entitled to benefit
from the EC's concession of a 15.4% ad valorem rate under 02.10.

26. With respect to paragraph 45 of its first written submission, if there is no literature on
the percentage of salt required to preserve chicken, how can the EC be sure that the
impregnation with salt of boneless chicken cuts so that they have a salt content of between 1.2 –
3% does not result in long-term preservation?

 The EC understands that there is no dispute betw een the parties that a salt content of between
1.2 and 3% is insufficient to ensure preservation. Neither Brazil nor Thailand have pretended that the
specific product at issue has been salted for preserva tion purposes. In addition, , Brazil considers that
"salted chickens cuts [..] are adequately preser ved by salt contents ra nging from 9-11% and above".
1
The EC considers from the general literature which it has examined that the salt content necessary to
ensure preservation will vary with the type of m eat, the cut of that meat and other environmental
factors which may have an effect on spoilage mechanisms.

27. In paragraph 45 of its first written submis sion, the EC says that there is a "lack of
practice of salting poultry for preservation." Despite the absence of such practice, the EC has
suggested throughout its first written submission th at products will only be classified as salted
under heading 0210 if the salt has been used as a preservative. Further, the measures that have
been challenged by the complainants suggest that a salt content of more than 3% is needed in
order to preserve boneless chicken cuts. Is the EC effectively submitting that there is no trade in
boneless chicken cuts with a salt content of more than 3%? Is there any trade into the EC of
salted chicken cuts under heading 0210.90.20? If so, please provide details of such trade.

 The EC is not aware of any trade in boneless chicken cuts with a salt content of more than
3%. The EC is not aware that any such product has been traded under heading 0210.90.20 (as it
appears in the EC's Schedule). As far as the EC is aware, there is no commercial practice of salting
chicken for preservation.

28. Could the EC respond to the suggestion ma de by Brazil and Thailand in paragraphs 55
and 44 respectively of their oral statements during the first substantive meeting that export
classification practice is less relevant than impo rt classification practice given the fact that
exported goods are not subject to levying.

 Brazil and Thailand claim that "customs cla ssification of products for exportation is not
relevant to determine the customs classification practice of a Member."
2 The Complainants'
distinction between classification for products for export and import finds no basis in law, and is
simply intended to divert attention from their own classification practices. Classification of imports
and exports should follow the same principles. Th is is recognised in Article 3.1(a) of the HS
Convention which requires that the customs tariff and sta tistical nomenclatures shall be in conformity
with the HS. The Preamble of the HS Convention envisages the promotion of "as close a correlation as
possible between import statistics and export trade statistics and production statistics". A market
access negotiator needs to rely on accurate export/import data in negotiating tariff concessions. GATT
contracting parties recognised this in their decision of 1983 on the Harmonized System in which they
noted:

In addition to the benefits for trade facilita tion and analysis of trade statistics, from a
GATT point of view adoption of the Harmoni zed System would help ensure greater
uniformity among countries in customs classification and thus a greater ability for
countries to monitor and protect the value of tariff concessions.
3
 As the Appellate Body held, tariff negotiati ons are a process of "give and take" between
exporting and importing Members. 4 A common basis of understanding for the classification of the
goods is therefore necessary. The Co mplainants are wrong, therefore, to suggest that classification on
export is any less relevant than classification on import.

29. In paragraph 25 of its first written submission, the EC questions why the tumbling
procedure for adding between 1.2 and 3% salt takes place in Thailand. In paragraph 48 of its
oral statement during the first substantive meeting, Thailand explains that the relevant costs are
lower in the EC. Could the EC comment on Thailand's explanation.

 The EC understands the Panel's reference is to costs being lower in Thailand and not the EC.

 The EC's question remains pertinent and valid because the tumbling process carried out in
Thailand is by necessity replicated in the EC. The European processing industry will tumble or inject
the same chicken, in order to adjust the salt c ontent (if necessary), add spices, other ingredients and
ultimately redundant additional working process, designe d, as far as the EC is aware, only for exports
to the EC and only to avoid the tariff which frozen ch icken attracts in the EC (as compared to salted
meats). Thus, even if Thai labour costs are lower, the tumbling in Thailand does not serve to cut the
costs of processing of chicken.

 As further elaborated in response to Pane l question 60, the processing industry in general
prefers not to have the product tumbled or inject ed in the exporting country because this gives the
exporter the chance to increase the weight of th e chicken through the addition of water, hence
inflating the price.

3 Decision of the Contracting Parties of 12 July 1983 (L/5470/Rev.1) GATT Concessions under the
Harmonized Commodity Description and Coding System GATT, BISD, Thirtieth Supplement, pp. 17-21 at
para. 1.2. Quoted in the EC's First Written Submission at para. 61.
4 Appellate Body Report, EC – Computer Equipment, para. 109.

30. In paragraph 33 of its oral statement during the first substantive meeting, the EC refers
to a US customs ruling of November 1993, noting that the ruling found that the product a tissue
fell under heading 0201 or 0202 (depending upon whether it was fresh or frozen) rather
than under heading 0210. Could the EC refer to the specific aspects of that ruling that support
the view that frozen meat that has been de eply and homogeneously impregnated with salt
should be classified under heading 0207 rather than under heading 0210 of the EC Schedule.

 The 1993 US ruling concerns the "tariff classification of fresh or frozen boneless beef, with
3 per cent added salt, from New Zealand". The salti ng process is described in the ruling as follows:
"This meat is being tumbled, to get the myosin out of the meat and thus enhance its absorption ability.
While the meat is being tumbled, some three per cent by weight of salt will be added, and tumbling
continued until all the salt has been absorbed".

 The EC understands that this treatment resu lts in the beef being "deeply and homogenously
impregnated with salt", but that it does not preserve the meat. In other words, the meat in question
was in the same state as the produc t at issue. This meat was classified by the US customs under 0201
or 0202 which are the headings for beef that corre spond to heading 0207 for chicken. Thus the logic
of the decision entirely supports the EC's conclusions.

31. What is meant by the expression " impregnated with salt" in the challenged measures?
Please explain the process(es) that chicken would have to be subjected to and/or the qualities
possessed by such chicken in order to qualify as having been impregnated with salt.

 The expression "impregnated with salt" only appear s in the product description in column 1 of
the Annex to Regulation 1223/2002 and in recital 1 to Decision 2003/97/EC. In Regulation 1223/2002
the phrase is used to describe the pr oduct at issue, and this descripti on is carried into recital 1 to
Decision 2003/97/EC.

 The phrase "impregnated with salt" appears as a legislative requirement in Regulation 535/94
(and in the ECJ's judgment in the Gausepohl case) where it is intended to distinguish products which
have been salted for the purposes of preservation fro m those which have been simply sprinkled with
salt. The types of process envisaged by this phrase ar e those leading to the preservation of the product
by salting.

32. What is the difference, if any, between meat that has been "impregnated" with salt and
meat that has been "deeply and homogeneou sly impregnated" with salt. Is the process
associated with the latter different from the former? If so, please explain.

 The word "homogeneously" is intended to signify that the salt has been spread evenly through
the meat. The EC understands that it is not suffici ent for the preservation of a product by salting to
simply impregnate it with salt (even deeply) in one part – the whole piece of meat must be salted,
otherwise spoilage will spread from the unsalted to the salted part. It may thus be the case that meat
merely impregnated with salt will not be salted for preservation.

33. Does the EC characterise EC Commission Regulations 1789/2003 and 2344/2003 as
annual revisions to the EC Combined Nomenc lature within the meaning of Article 12 of
Regulation 2658/87? If so, why were two annual rev isions published in 2003? If not, please
explain how these Regulations should be characterised.

 Commission Regulation (EC) No. 1789/2003 reproduces the complete version of the
Combined Nomenclature (see recital 6 thereto) for the year 2004. It replaces the entirety of Annex I to
Council Regulation (EC) No. 2658/97, and was adopt ed on 11 September 2003, with entry into force
on 1 January 2004. Commission Regulation (EC) No. 2344/2003 of 30 December 2003 makes certain

changes to the complete version of the Combined Nomenclature for 2004 annexed to Regulation
1789/2003 in order to take account of changes to the Combined Nomenclature in force in 2003 which
were made after 11 September 2003.

 Regulation 1871/2003 of 23 October 2003 was one su ch change. This explains the reference
to Additional Note 7 to Chapter 2 in the Annex to Regulation 2344/2003.

34. In paragraph 94 of its first written s ubmission, the EC states that the product
description contained in EC Regulation 1 223/2002 corresponded to product descriptions
contained in BTIs. The EC is requested to provide copies of the BTIs upon which EC
Regulation 1223/2002 was based.

 Recital 4 and Article 2 refer to the existen ce of BTIs which were inconsistent with the
classification ruling set out in the Annex to Re gulation 1223/2002. Regulat ion 1223/2002 was not
explicitly based on specific BTIs, but rather was in tended to correct erroneous interpretations which
had formed the basis for BTIs. The EC has provided, as Exhibit EC-24, a number of relevant BTIs,
which show that the salt content in such BTIs ranged from 1.2 to 1.9%.

35. With respect to the statistics referred to in Table 1 (page 21) of the EC's first written
submission, the EC is requested to provide details of the salt content of the products classified
as "other salted meats".

 Table 1 of the EC's first written submission re fers to imports during the period 1986 to 1993.
The import declarations in respect of imports are not held centrally, but rather with the Member State
customs authorities. It is unlikely that declarati ons from this period are still available, and it is,
moreover, unlikely that such declarations would mention the salt content of the goods in question. The
EC has not been able to find documents attesting to the salt content of these products.

36. The EC suggests in paragraph 43 of its first written submission that the process of
salting can be reversed. Can the same be said of me at that has been in brine, dried or smoked?
Please explain providing supporting evidence.

 It is the EC's understanding that the process of preservation caused by drying or smoking
products cannot be reversed. This is because the processes bring about irreversible chemical and
physical changes in the meat.

37. The EC is requested to explain what it means in paragraphs 43 and 135 of its first
written submission that salting can be "largely" reversed. In particular, providing sufficient
support, the EC is requested to indicate the extent to which salting can be reversed.

 The EC understands that, as a matter of theo ry, common salt (sodium chloride, NaCl) that has
been added to meat can be entirely removed, th rough a process of osmosis. Such removal, however,
would require sophisticated techni ques and would be expensive. It is not, therefore, commercially
used. On the other hand, there has been a practice of reducing the salt level in imported salted chicken
cuts by tumbling them with unsalted chicken while adding other ingredients, as mentioned in regard
to Panel Question 60 and 61.

 The EC refers the Panel, for an example of desalting, to the description provided of the
desalting of salted cod provided in the EC's First Written Submission (see para. 39 and footnote 27).

 As far as the EC is aware, the preservation of meat by "salting" often involves the use not
only of sodium chloride, but also of sodium nitr ate and nitrite. The latter combine with the muscle

pigment, myoglobin, to form the red-coloured n itrosomyoglobin. This process cannot be reversed.
Residual sodium chloride could be reduced by osmosis.

38. Could the EC provide support for the view expressed in recital 4 of EC Regulation
1871/2003 that all processes listed in heading 021 0 are for the purpose of ensuring longterm
preservation.

 Regulation 1871/2003 was not one of the measur es identified by the Complainants in their
requests for establishment of the Panel. That said, the interpretative exerci se the EC was undertaking
in the recitals of Regulation 1871/2003 is simila r to that before the Panel. Moreover, the view
expressed in recital 4 corresponds to the arguments the EC has made before the Panel – in line with its
consistent position – on the conclusions for the inte rpretation of the term "salted" which must be
drawn from the context of the term "salted"; i.e. the terms "in brine", "dried" and "smoked". As the
EC has set out in its First Written Submission (par as. 127- 139) and its Oral Statement (paras. 10-16),
the ordinary meaning of all of these terms refers to methods to preserve meats, as opposed to methods
designed to add ingredients. In the current case, Brazilian and Thai exporters are simply adding
ingredients – such a process does not bring the product at issue under 02.10.

39. The EC is requested to comment on the observation made by Thailand in paragraph 13
et seq of its oral statement at the first substantive meeting that, in cases where the EC wanted to
make preservation a relevant criterion in its Schedule, it did so expressly.

 The EC is not convinced by Thailand's ar gument that because in other instances the HS
explicitly uses the term preservation, a reference to "frozen" in 0207, and all the processes mentioned
in 02.10 cannot be a reference to preservation proc esses. The terms "frozen" and "dried", "salted",
smoked, "in brine" necessarily imply that the meat is preserved. There is consequently, no need to
explicitly mention it as it would be redundant. The a contrario reading suggested by Thailand is
baseless. Indeed, Thailand contradicts itself. In its First Written Submission, it stated that the term
"frozen" in the EC's schedule refers to "products preserved by [...] refrigeration", yet the term
"preservation" is not mentioned with respect to the term "frozen" in the EC's Schedule.
5

 Moreover, a closer examination of chapter 8 wh ich Thailand refers to, supports the EC's view
that the processes described in 02.10 are meant for long-term preservation. The wording of 08.14 is
vital in this respect. It states:

Peel of citrus fruit or melons (inclu ding watermelons), fresh, frozen, dried or
provisionally preserved in brine, in sulphur water or in other preservative solutions.
 Heading 08.14 juxtaposes peel of citrus fruit or melons that are "frozen" or "dried" to those
that are "provisionally preserved" in brine. As noted a moment ago, the expressions "frozen" and
"dried" imply that the fruits are preserved through the processes of freezing and drying. Where the
preservation is only provisional, this has to be expressly indicated.

40. In paragraph 80 et seq of its first written submission, the EC refers to the Gausepohl
judgement of the ECJ, which it argues stands for the proposition that the figure of 1.2% salt
content was conceived of as a minimum salt co ntent above which it was possible that a meat
product could be preserved by salting alone. On what basis was the figure of 1.2% conceived?
Presumably, the ECJ had meat products in mind for which a 1.2% salt content would suffice
for their preservation. If so, what is the meat to which the ECJ was referring?

 In order to respond to the question, it is u seful to recall the procedural background to the
Gausepohl case. That case arose from two classification decisions issued by the Hamburg Customs
authorities that classified "beef with a salt content of 0.71 and 1,2 %" under 0202. The importer
Gausepohl brought legal proceedings against the Hamburg authorities arguing that the meat ought to
be classified as "salted" under 02.10. The the Ge rman Bundesfinanzhof was obliged to stay the
proceeding and to seek a preliminary ruling from the Eu ropean Court of Justice (ECJ) as the decision
required an interpretation of the Combined Nomenclature, a Community law instrument. In doing so,
the Bundesfinanzhof referred two specific questions to the ECJ (and it is for the referring courts to
formulate them). The first question concerns the proper classification of the consignment at issue.
However, the Bundesfinanzhof, also considered it u seful to obtain more clarity generally about the
interpretation of heading 02.10, because the sec ond question enquires about the necessary salt content
and other conditions that "must be fulfilled for meat of bovine animals to be classifiable as salted
under heading 02.10".
6

 Neither Gausepohl, nor the responding German customs authority, nor Belgium and the
European Commission (as interveners), nor the Bund esfinanzhof itself had any doubt that the process
of salting mentioned under 02.10 must lead to preservation. 6 However, significant doubts were
expressed as to the possibility of fi xing positively a salt content at whic h all meat can be considered
preserved. It was submitted that this decision is to be taken on a case to case basis.7 Advocate General
Tesauro considered that the minimum salt cont ent can only be determined by "a process of
elimination" (para.5) and he emphasised that a minimum salt content of 1.2% ought not to be regarded
as decisive. The Commission accepted during the pro ceeding the need for some reference point for
customs authorities in form of a minimum percentage of salt below which it can be excluded that beef
is salted to ensure long term preservation.8

 The ECJ therefore, in para. 13 of its J udgement undertook to determine the minimum
percentage for meat to be classified under 02.10. The Court considered the different minimum salt
contents suggested by the participants; 4-5% by the European Commission based on advice from the
Kulmbach Federal Office for Meat Research, 2% by Germany and 1.2% by Belgium. The 1.2%
threshold was simply the lowest (para. 14) indicated by any interested party and significantly below
the one suggested by the scientific expertise as nece ssary to ensure preservation. The Court states in
paragraphs 14 and 15 that:

The documents before the Court show th at various different figures have been
adopted by the authorities of the Member States. They do, however, suggest that the
minimum total salt content required for the long-term preservation of meat may
be set at 1.2%. That percentage shou ld, therefore, as proposed by the Belgian
Government in its written observations and by the Commission at the heading, be

6 Report for the hearing case C-33/92 (Exhibit EC-14), paras. 12 (BFH); 14 (German customs
authorities), para. 20 (Gausepohl the plaintiff); 22 (Belgian Government) and 27 (Commission).
7 Report for the hearing case C-33/92, paras. 22 and 25 (Belgian Government), paras. 31 and 37 and 39
(Commission).
8 Opinion of Mr Tesauro, Case C-33/92, para. 7.

adopted as the minimum total salt content re quired for meat to be classified under
heading 0210.
9
 By consequence the Court considered that it can be in all cases excluded that salting below
1.2% can lead to long-term preservation.

41. Could the EC explain what significance should be attached to the Dinter and Gausepohl
judgements, if any, following enactment of EC Regulation 1223/2002 and EC Commission
Decision of 31 January 2003.

 The EC has explained in its First Written Submi ssion (paras. 64 et seq.) the principles of EC
law regarding customs classification issues, in partic ular the EC addressed the status of the various
instruments. Furthermore, in its Oral Statement (para. 36) the EC emphasized that the Commission
does not have the power to "alter the subject-matter of the tariff headings which have been defined on
the basis of the Harmonized System established by the Convention".
10 Within the EC the authoritative
source of interpretations of the Harmonized System is the European courts, and in particular the
European Court of Justice. In the EC's First Wr itten Submission it explained the legal significance of
the Dinter and Gausepoh judgements. As regards the scope of tari ff headings (which is the issue that
confronts us) that significance cannot have been cha nged by the measures in question. In other words,
Regulation 1223/2002 and Decision 2003/97/EC (lik e Regulation 535/94) should be read in
conjunction with this case-law of the Court. All th ree acts confirm and/or apply the meaning of the
terms in 02.10 as interpreted by the Court.

42. If, as is submitted by the EC in para. 72 et seq of its first written submission, the
principle that products falling within heading 021 0 must be salted for the purposes of long-term
preservation is so well-entrenched in the EC, wh y was it felt necessary to enact EC Commission
Regulation 1871/2003? What events/circumstances triggered the decision to enact this
Regulation?

 Commission Regulation 1871/2003 was designed to "clarify and confirm" (see recital 5) the
appropriate meaning of the term "salted" in head ing 02.10. The events which triggered the decision
were the erroneous classification decisions of certa in Member States customs offices with respect to
the product at issue. It was considered that, in addition to dealing with the specific product in
Regulation 1223/2002 and Decision 2003/97/EC, it was also appropriate to clarify, in general terms,
the correct interpretation of heading 02.10, in line with the EC's consistent position on this matter.

43. In his reply to a question that was posed by a member of the European Parliament in
November 2001 regarding imports of salted poultry into the EC, EC Agriculture Commissioner
Fischler replied that "For the purposes of head ing 0210 [of the EC's Combined Nomenclature ],
the terms 'meat and edible meat offal, salted, in brine mean meat and edible meat offal, deeply
and homogeneously impregnated in all parts havi ng a salt content of not less than 1.2% by
weight'." (See Exhibit BRA—2). Please explain in this regard why "preservation" was not
mentioned when clarifying products falling within the scope of heading 0210?

 The EC notes that the Commissioner was simply answering a question concerning lightly and
superficially salted chicken. The answer – a quote from the Additional Note – was sufficient to deal
with this issue. A complete explanation of EC law on the matter was not necessary in that context.

9 Exhibit EC-14.
10 Case C-267/94 French Republic v Commission ECR [1995] I-4845, para. 20 (Exhibit EC-22).

44. With respect to paragraph 3 of the EC's closing statement during the first substantive
meeting, what is the specific principle to which the EC is referring? Further, how is this
principle applied? Is the answer different depe nding upon where the products originate from?
Does the EC provide any advance rulings in this regard?

 The principle the EC is referring to is that of preservation. As the EC has noted elsewhere, the
application of the principle has rarely been pr oblematic because it is normally obvious whether a
product has been preserved by one of the means men tioned in 02.10. The EC applies this principle
irrespective of the origin of imports.

45. The EC is requested to comment on the excerpt of the Minutes of the EC's Customs
Code Committee of 25 January 2002 contained in paragraph 27 of Thailand's oral statement at
the first substantive meeting indicating that the definition of "salting" for the purposes of EC
Regulation 535/94 deliberately excluded certain elements of the ECJ's judgement in Gausepohl,
including the requirement that salting be for the purpose of long-term preservation.

 The EC strongly disagrees with the implication behind the comment in Thailand's oral
statement. It implies that the reason that Regulation 535/94 did not refer to the concept of preservation
was because the EC had made a policy decision no l onger to interpret 02.10 in such a way. However,
Thailand provides no grounds for considering that su ch an abrupt U-turn in position had taken place
(it should be noted that Regulation 535/94 was adopted only a few months after the Court has
rendered its judgment in Gausepohl where all parties had unequivocal ly considered that heading
02.10 referred to salting for preservation). It can on ly attempt to "spin" the minutes of a Customs
Code Committee meeting 8 years after the event. Th e reality is that had the EC decided that the
criterion of preservation was no longer relevant, it w ould have had to go to the WCO and either have
the HS Nomenclature amended or, at a minimum, a classification decision adopted. Failing such a
development, the Court of Justice has made it cl ear that the Commission cannot, of its own volition,
change the headings of the Combined Nomenclatu re. As already noted, in Case 267/94 the Court of
Justice held that the Commission's authority to adopt additional notes:

does not authorize it to alter the subject-matte r of the tariff headings which have been
defined on the basis of the harmonized sy stem established by the Convention whose
scope the Community has undertaken, under Article 3 thereof, not to modify.
11
 Second, the EC does not agree with the implie d interpretation of Thailand. Thailand appears
to suggest that the phrase "the criterion of salti ng for the purpose of long-term preservation has not
been introduced" in the minutes of the Meeting s uggests that the notion of preservation had been
entirely excluded from the EC's customs classification legislation. This phrase, seen in context, simply
states that the notion does not appear in Additional note 7 (which is undisputed).

 The EC would like to clarify the situation by addressing the reasons why the Commission
adopted Commission Regulation 535/94. As noted the rulings of the Court of Justice are binding on
the Commission and constitute the authoritative in terpretation of the Combined Nomenclature. The
Commission considered it necessary at that time to insert specific additional notes in respect of
aspects of Court rulings that were not yet spelled out in the CN in the form of a Note, and were not
readily apparent from an interpretation of the headings.

 In Gausepohl the Court interpreted heading 02.10 as requiring salting for preservation. That
was uncontested between the parties and already reflected in several Explanatory Notes, which the
Court considered in its interpre tation. Given that the require ment of preservation was already
reflected in the Combined Nomenclature in various ways (the ordinary meaning of the heading 02.10,

11 Case C-267/94 French Republic v Commission ECR [1995] I-4845, para. 20 (Exhibit EC-22).

its context and the Explanatory Notes) and give n that this was entirely undisputed between all
interested parties, there was simply no need to restate the obvi ous. It should be borne in mind that
Explanatory Notes are in the first place directed to the customs authorities of the Member States who
are responsible for the actual application of th e Combined Nomenclature. Such notes only address
problems that have arisen in implementation or are somewhat unclear. The criterion of preservation
was neither disputed nor unclear.

 Finally, the EC would note that the minutes reflect preparatory discussion for Regulation
1871/2003, not for any of the measures at issue, nor of Regulation 535/94. They are not legislative
acts of the Community, nor do they represent the reasons justifying legislative action by the
Community, nor are they authoritative interpretations of Community acts.

46. The EC is requested to comment on the excerpt of the Minutes of the Meeting of the EC
Customs Code Committee of 18–19 February 2002 set out in paragraph 30 of Thailand's first
written submission.

 The EC understands that the reference is to paragraph 39 of Thailand's Submission. The
meeting in question was part of the discussions l eading up to the adoption of Regulation 1223/2002.
Some Member States reported that they had classi fied the product at issue under heading 02.10. (as
described in the EC's First Written Submission, para s. 91 and 92). The statement in question merely
recalls this factual situation.

47. Could the EC specifically point to the aspect s of the ECJ cases to which it refers, namely
Dinter and Gausepohl, that support the view that the minimum salt content needed to qualify a
meat under heading 0210 may vary from meat to meat.

 The EC has explained in its First Written Subm ission (para. 84) and in its response to Panel
Question 40 how the Gausepohl judgement supports the conclusion that the 1.2 percent salt rule was
intended as a minimum to be taken into account alongsid e the criterion of long-term preservation. It is
implicit in such a principle that the amount of sa lt required for such preservation will vary from meat
to meat. If there were no such variation then the necessary percentage could be calculated and
published.

48. In paragraph 41 of its first written submissi on, the EC indicates that products preserved
by salting (or a combination of salting, drying and smoking) are popular primarily by virtue of
their taste and other characteristics. Which characteristic(s) of the products at issue are the
most important for the consumer/end-user?

 In making this statement, the EC had in mind meats (such as Parma ham) which are preserved
by salting, etc., and which are popular with consumer s, who appreciate their characteristics of taste,
texture and such like, as well as their long life.

 With respect to the product at issue, the Compla inants admit that frozen boneless chicken cuts
with a salt content of between 1.2 and 3% is in tended exclusively for further processing and is not
consumed as such by household consumers. In cont rast to meats traditionally traded under heading
02.10, it is used to produce further processed chicke n products. The main physical characteristic of
the meat sought by the industrial consumers is its suitability for further processing. Generally
speaking, such processors prefer meat to which no ingredients have been added. They may, however,
be ready to accept meats to which ingredients have been added, provided that the later addition of
ingredients during further processing is not impaired . The sole characteristic which interested the
European processing industry about the product at issue was that it was provided at a cheap price, due
to it being imported under 02.10.

49. The EC is requested to comment on Braz il's argument in paragraph 95 of its first
written submission that the two 1999 US classifi cation rulings to which it refers show that
frozen smoked salmon is to be classified under heading 0305 concerning, inter alia, fish that has
been salted, in brine, dried or smoked rather than heading 0303 concerning frozen fish.
Similarly, the EC is requested to comment on Brazil's argument in paragraph 96 of its first
written submission that, in the US, bacon that has been salted/smoked but also frozen will be
treated as salted/smoked bacon rather than frozen bacon. In particular, could the EC comment
on any inferences that may be drawn from these rulings in relation the headings of the EC
Schedule at issue in this case?

 The EC considers that the evidence Br azil cites to equally support its position.
12 In both cases
the meat has been smoked or cured which are processes used for preserving meats. These processes
were not undertaken simply to add ingredients as with the product at issue.

 The EC has shown that the shelf life of preser ved meats is many months (Exhibit EC-5) at
ambient temperatures. Operators may choose to attempt to extend that shelf-life (e.g. so that they can
warehouse the product for longer) by cooling or even freezing the product. There is no suggestion that
these products needed to be preserved by freezing.

 In any event, this evidence can only be releva nt to the interpretation of the EC's Schedule to
the extent that it can be qualified as relevant subsequent practice.

50. Under which heading – 0303 or 0305 – does the EC classify frozen smoked salmon?
Please provide relevant supporting material.

 The EC has not had to consider this issue at central level. However, in researching this
question, the EC found only one BTI in which frozen smoked salmon was classified under 03.05.
This BTI was issued by the German authorities, and is exhibited as Exhibit EC-25. The operative part
of it reads:

Salmon Salmo Salar frozen[.] Vacuum-sealed in plastic foil with various labels (e.g.,
"Grande Luxe R"/"genuine smoked salmon" ('echter Räucherlachs')/"Ambach telijk-
gerookte Zalm- nit Noorwegen"). Accordi ng to the claimant, the merchandise is
salted - with salt added ready for consump tion -, smoked, frozen and sliced salmon
filet in a customary packaging with conten t varying in weight. The appearance, smell
and taste have not given rise to any indication that this information would not be
correct.
13
 In the case of this BTI, the customs author ities checked that the product had gone through a
process of preservation (i.e. smoking) by checking the products appearance, smell and taste.
Apparently, the German customs authorities could immediately see that the product was one that had
undergone one of the processes in 03.05 to ensure preservation. That it had been frozen to keep longer
was irrelevant. As the EC has noted in its response to the previous question, operators may attempt to
extend the shelf-life of the product they produce by e.g. cooling, freezing or vacuum-packing the
product. Because the fish at issue in that BTI is s liced, thereby, creating a larger surface area exposed
to the air (and hence to microbes) the operator may also have decided to vacuum pack it and freeze it
to ensure that it kept longer.

12 The EC objects to Brazil's purported reliance on a bill of lading as proving classification. A bill of
lading is not a document produced by a governmental authority and is not probative of classification.
13 Exhibit EC-25. Unofficial translation into English.

51. In paragraph 29 of the EC's first written submission, the EC submits that there is no EC
industry producing chicken with an added salt content. Could the EC further explain these
comments in light of the question that was pose d by Albert Maat to the EC Commission in
November 2001 (Exhibit BRA-2) and the informat ion note from the Italian delegation to the
Agriculture and Fisheries Council in January 2003 (Exhibit BRA-3).

 The question posed by Albert Maat and th e information note from the Italian delegation
suggest that there is an influx of chicken on the EC market due to a misapplication of heading 02.10.
Specifically, both consider that the chicken which entered under 02.10 was lightly salted and therefore
would have to be excluded from the scope of 02. 10 according to the Explan atory Note inserted in
1994. They also noted that this product serves the same purpose as the unsalted frozen chicken,
imports of which had declined proportionately.

 In para. 29 of its First Written Submission, th e EC notes that the Community industry neither
produces chicken meat that is lightly salted nor th e product at issue in this dispute (deeply and
homogenously impregnated with 1.2-2.9% salt). Th e above comments reinforce the conclusion that
there is no demand from the EC processing industry for frozen boneless chicken cuts with added salt
as a "new product".

52. With respect to the data submitted in Ta bles 2 and 3 (pages 22-23) of its first written
submission, the EC is requested to provide the same statistics at the 8 digit level.

 Table 2 does cover 8 digit level. The EC resp ectfully refers the Panel to footnotes 47 and 48
to the EC's First Written Submission. The referenc e in Table 2 to 02.07 and 02.10 was intended to
avoid having to repeat the changes in the 8 dig it nomenclature which took place during the period
represented on the table.

 The date in Table 3 is derived from GTAN databa se, which is a private database, to which the
European Commission has a subscription. GTAN does not , however, provide the data at 6 digit level.
The EC provided EC import data at four digit level to ensure comparability.

 As the EC pointed out during the questi on and answer session with the Panel, the
Complainants will be in a position to provide 8 dig it statistics of their exports under the two relevant
tariff lines in the period covered by Table 3 (1990-2003) . The data at 8 digit level of imports into the
EC can be found in Table 2.

53. In paragraphs 91–92 of its first written submission, the EC observes that, apart from
EC member state customs authorities in Hamburg, Rotterdam and various offices, other
customs offices did not classify the product at issue under heading 0210.90. The EC is requested
to provide copies of the relevant BTIs or other ma terial to support the assertion regarding those
other customs offices.

 In paragraph 92 of its First Written Submission, the EC stated that the interpretation of
heading 02.10 as applying to products which were salted, but not for preservation, was only followed
in a few Member States. A significant volume of trade of products classified under 02.10 which were
salted, dried or smoked for preservation continued. For the large part, the classification of such
products under heading 02.10 was uncontroversial, and so did not lead to requests for BTIs. However,
there are some examples of BTIs showing that the in terpretation given to 02.10 was only in respect of
products which were salted, dr ied or smoked for preservation. The EC has exhibited as
Exhibit EC-26 a BTI issued by the Spanish authorities, clear ly referring to the necessity that in order
for a product (in that case salted and dried) to be classified under 02.10 it must be preserved. The
operative part of that BTI states:

 Ham from the domestic pork species, conserved throughout a combination of a previous
salting treatment followed by a drying one, partiall y without bone (without the "shin-bone"). It is
presented in individual packs sealed in vacuum.14

54. In paragraphs 12 and 91 of its first wri tten submission, the EC acknowledges that the
product at issue had been classified under he ading 0210 by some customs offices. Could the EC
provide further details as to: (i) the period durin g which this classification practice existed; and
(ii) what volume of total imports of the products at issue were affected by this "mistaken
classification" of the products at issue. If the product at issue had been classified under heading
0210 by some customs offices for some time (i.e. possibly as early as 1996), why did the EC wait
until 2002 to address the problem of "mistaken cl assification" through the enactment of EC
Regulation 1223/2002?

 The EC notes, first of all, that it does not accept that the erroneous classifications by certain
customs offices could have altered the EC's intern ational obligations, nor that it could constitute
practice which might be relevant in the sense of Articles 31 or 32 of the Vienna Convention.

 As Brazil and Thailand have explained, these imports started in 1996, and continued until the
entry into force of the measures at issue. Statisti cs as to the volume of imports under the tariff line at
issue have been presented in Table 2 of the EC's First Written Submission.

 The EC did not wait until 2002 to address the problem. In fact, it only became evident to
Commission officials that there was an issue of mistaken classification during 2001. This was
because, first of all, the tariff line under which the imports were classified was "salted meats, other".
The Commission could not tell what products were entering under this heading, and it was not until
2000 that there was a substantial leap in the statis tics (imports tripled) (the statistics only being
available from late 2000 into 2001). Even then, it was still not known that such products were not
salted for preservation – this only became appare nt after further investigation. Against this
background, the EC would also note that roughly 30,000 BTIs are issued each year, (there are
currently approximately 167,000 valid BTIs), th at there were substantial problems communicating
BTIs (as a result of a lack of interoperability of computer systems) and that the Commission only has
one official, and two administrative assistants mon itoring all issues with respect to the first 40
chapters of the Combined Nomenclature.

55. Why was an opinion of the EC Customs Code Committee not provided in relation to EC
Regulation 1223/2002? What legal significance, if any, would have been attached to such an
opinion had it been provided? What is the legal si gnificance, if any, of the fact that an opinion
was not provided in time in relation to EC Regulation 1223/2002?

 The Customs Code Committee is a committee of Member States representatives responsible
for monitoring the adoption of detailed secondary (delegated) legislation by the European
Commission (the system is known as the "comitology" system). The Committee is asked to vote for or
against a particular proposal. A qualified majority vo te is required in order for the Committee to issue
either a positive or negative opinion (for the necess ary majority, see Article 205 of the EC Treaty).
The adoption of a positive opinion, or the failure to arrive at an opinion, means that the proposal will
be adopted. Only in the event of a negative opinion will the matter be examined by the Council of the
European Union. The legal effects of the absence of such an opinion are therefore purely institutional
and not of relevance for the adjudication of this dispute.

14 Exhibit EC-26. Unofficial translation.

FOR ALL PARTIES

56. Do the parties agree that the relevant time at which the meaning of headings of the EC
Schedule – LXXX – should be assessed is th e time at which that Schedule was annexed
to the Marrakech Protocol on 15 April 1994? If not, at what time/during what period
should such an assessment be made?

 It is our view that the Panel is tasked to assess the meaning of the concession as of the date of
Panel establishment according to Artic les 3.2 and 11 of the DSU so as to take account of all relevant
interpretative means under Article 31 of the Vienna Convention such as, e.g., subsequent practice.

 Clearly, events after 15 April 1994 cannot possibl y be circumstances of the conclusion within
the meaning of Article 32 of the Vienna Convention.

57. Was the EC Schedule in question negotiated on the basis of series of offers and requests
or, rather, was it based on a unilateral offer that was made by the EC?

 Agricultural tariffs were established on th e basis of the "Modalities Agreement" (Exhibit
EC-9). The modalities established therein set out a specific formula for converting the level of
protection provided by non-tariff barriers into "ordinary customs duties". Entering into the Uruguay
Round, the EC did not have bindings for any of the ta riff lines at issue. Pursuant to paragraph 3 of the
Modalities Agreement, the EC bound its tariffs on "oth er salted meat" at 15.4 %, on the basis of the
applied rate of duty on 1 September 1986. In resp ect of frozen poultry, the EC converted previous
non-tariff barriers, through the process of "tariffication" into the tariffs which were eventually bound.
The base period for the tariffication process wa s 1986-1988 (see Annex 3 of the Modalities
Agreement). The levels of tariffs thus bound refl ected the level of protection which had previously
existed. Departures from this procedure could be negotiated, but none are relevant for the present
case. The offer was not unilateral, but rather w as one part of the framework for offers by all
participants in the Uruguay Round.

58. Was EC Regulation 535/94 enacted in response in whole or in part to requests made of
the EC by other Members during the conclusion of the Uruguay Round for clarification
regarding the headings in the EC Schedule at issue in this case?

 No. It was enacted in res ponse to the ECJ's judgment in Gausepohl. That it was enacted
during the spring of 1994 is purely coincidental. As noted in the EC's response to question 57, the
relevant date for the EC's tariff concessions on salted meat was 1 September 1986, a full 8 years
earlier. It is not plausible, therefore, to prete nd that the common intention of the negotiating parties
could be affected by this Regulation, or by any other such unilateral acts
15, absent some evidence from
the Complainants (such as a footnote in the EC's Schedule) to the contrary.

59. Are there any GATT Schedules of WTO Members other than the EC's in which
headings identical or similar to the headings at issue in this case exist? If so, please provide
details of such Schedules and information regar ding the classification practices of such
Members in respect of those headings. If possible, the parties are requested to indicate how such
Members classify the products at issue in this case.

 Because the headings in question are derived from the Harmonized System, which was very
widely adopted among the parties to the Urugua y Round negotiations, the EC assumes that the
Schedules of most, if not all, other WTO Members are identical in so far as the headings in Chapter 2

15 As explained in the hypothetical set out in the EC's Oral Statement to the First Substantive Meeting
of the Panel.

are concerned. The EC has checked a number of Sc hedules (including those of the Brazil, Thailand
and the US) and found this to be true.

 The EC has already reported the practice of other Members on this issue in so far as it can be
discovered. In particular, the only countries which have any practice of classifying the product at issue
are Brazil, Thailand and the EC. Brazil and Thailand classify it for export in the same manner as the
EC considers it should be classified. Moreover, the EC has already provided the Panel with evidence
that the US classifies a materially identical product in the same way as the EC does.

60. The parties are requested to provide details regarding the processes to which the
products at issue are subjected upon importation to the EC and prior to final consumption. In
particular, please provide details including supporting material regarding:

 (a) the physical processes that are a pplied to the products at issue;
 (b) the effects of these processes on the products at issue;
 (c) the time taken to complete these processes; and
 d) the costs and benefits that such processes entail.

 The EC has provided a series of photographs w ith commentary in Annex 1 to this document.
These illustrate that the addition of salt between 1.2% and 1,9% by the e xporter is economically
nonsensical. As acknowledged by the Complainants, the product at issue is only sold to the processing
industry. The processing industry will necessarily a pply a tumbling process whereby the salt, spices
and water are massaged into the meat. The cost of salt is negligible. The pr ocessor can therefore add
the salt according to its own recipe when tumbling it. This does not entail any significant extra cost.
To the contrary, in order to cover its production costs, the processing industry needs to add water
when tumbling the meat. The processing industry has therefore an economic interest in keeping as
much control of the chicken meat as possible in terms of ingredients and water content.

61. If boneless chicken cuts have been d eeply and homogeneously salted, can they be
desalted?

 If salted chicken is tumbled with unsalted chic ken the percentage of salt will tend to an
average. The processing industry has used this system to arrive at a desired salt content while at the
same time introducing other ingredients. Because most of the processed products at issue are
marinated products, the industry will add 8, 10 or 15% water and other spices. This automatically
reduces the salt content of the meat. However, the EC does not know whether these processes are
effective for chicken with more than 3% salt. Mo reover, the EC understands that where the salt used
is not common salt it may be more difficult, if not impossible, to desalt the product.

62. What is/would be the process used to salt boneless chicken cuts so as to ensure long-term
preservation of the cuts?

 There are a number of possible techniques for salting of meat. The EC gave examples of such
a technique being used for charque in the FAO document exhibited in Exhibit EC-8. The other article
in Exhibit EC-8 also mentions that the salt ma y be absorbed through a process of tumbling or
injection (noting that these techniques are commonplace in the meat industry) before being stacked
with salt for a number of days. The stacking technique is similar to the technique mentioned in respect
of Parma Ham in Exhibit EC – 6.

63. What end-products other than chicken nugge ts use the products at issue as an input?

 The Complainants will be better placed to res pond to this question, because their exporters
should be aware what the product at issue is processe d into. As far as the EC is aware, the product at
issue could be used for the preparation of any processed chicken product.

64. Have the products at issue been salted wi th common salt? Does the term "salted" in the
EC Schedule relate to the addition of common salt or does it include the addition of other salts
as well?

 The Complainants will be better placed to answ er this question. However, the EC understands
that the product at issue has been salted with co mmon salt. The term "salted" in the EC's Schedule
would cover salting by other salts. Indeed, the EC understands that it is relatively uncommon for only
common salt to be used for the preservation of products which are commercially traded.

65. Does chilling/freezing subsequent to salting, brining, drying or smoking for long-term
preservation mean that the product in question should be categorised under heading 0207?

 No. The processes listed in heading 02.10 put the m eat in a particular state; that is they are
preserved by one of the processes mentioned in 02.10. It retains that state whether or not it is
subsequently chilled or frozen, or if the shelf-life is extended by any other means. (The EC notes the
practical difficulties that would arise if mere chilling or unchilling could alter classification. All it
would require would be to alter the temperature of a container by a few degrees. It is significant that
changing the temperature of meat between normal a nd chilled does not change its classification under
headings 02.01 to 02.09.).

66. In interpreting headings 0207 and 0210 of the EC Schedule, should the ordinary
meaning of all the terms in those headings be assessed as a whole or, rather, should the terms
other than "frozen" in heading 0207 (i.e. "fres h" and "chilled") and the terms other than
"salted" in heading 0210 (i.e. "in brine", "dried " and "smoked") be treated as context for the
interpretation of the terms that appear to be directly at issue – i.e. "frozen" and "salted". Will
the result of the interpretative exercise differ depending upon which approach is adopted? If so,
please explain making specific reference to the headings at issue in this case.

 In the present case the EC has classified the product in questi on under heading 02.07 because
it was poultry meat. The Complainants have objected to this decision on the sole ground that, they
say, it should be classified under heading 02.10 as "salted" . In order to succeed they must prove that it
falls under this heading. The EC does not need to prove that the product at issue falls under 02.07.

 In the present context, therefore, the term "sa lted" is to be examined in its context. The
immediate context is the heading of 02.10. In its Submission and Oral Statement the EC has shown
how Article 31 of the Vienna Convent ion, and in particular the principles of 'ordinary meaning' and
'context' lead to the conclusion that these terms ha ve in common the notion of preservation. Whatever
precise interpretation is given to that notion, not even the Complainants argue that it is met by chicken
with 3 percent added salt.

67. Can products that fall within the scope of heading 0207 of the EC Schedule be
considered as having undergone a "process"? If so , please explain what is meant by "process".
Can the processes to which products falling within the scope of heading 0207 are subject, if any,
be distinguished from those to which produc ts falling within the scope of heading 0210 are
subject? If so, how?

 The EC does not believe that an analysis of the term 'process' th at is separate from the
particular operations mentioned or implied in headings 02.07 and 02.10 provides assistance in solving
the present dispute. The EC notes that the word "pro cess" has a very broad meaning. In particular, the
EC submits that the meaning of the term "salted" is not greatly illuminated by the fact that it is
described as a "process". Likewise, to the extent relevant, neither "c hilling" nor "freezing" would be
any better understood by having this term applied to them.

68. If some or all products that fall within the scope of heading 0207 of the EC Schedule can
be considered as having undergone a "process", what is the purpose of that process? What is
the purpose of the processes to which products falling within the scope of heading 0210 are
subject?

 The processes of chilling and freezing meat that are mentioned in heading 0207 are intended,
by reducing the temperature and thereby slowing or stopping chemical and biological processes in the
meat, to prevent changes, notably deterioration, occurring in it.

 The processes of salting, etc., mentioned in head ing 02.10 are equally intended to slow or stop
the deterioration and decay of the meat. While the purpose of this process is to preserve the meat,
these processes may also have incidental effects wh ich makes them of interest to individual producers
and consumers in varying degrees.

69. To what extent, if at all, is the purpose of a process to which a product is subject
relevant to the interpretation of: (a) heading 0207 of the EC Schedule; and (b) heading 0210 of
the EC Schedule? Should the purpose take precede nce over the process in either case? If so,
please explain why and in what circumstances. In the case of both headings, if there are multiple
purposes underlying the processes in question, which purpose should take precedence?

 (a) As regards heading 0207, clearly the processes referred to there – chilling and freezing –
have a purpose, but the EC does not see that this has any implications for the interpretation of heading
02.10. The three states are instantly detectable, and there is no need to address the issue of purpose in
order to decide whether meat is chilled or frozen.

 (b) As regards heading 02.10, the EC's view is that the approach to its interpretation should be
governed by the rules stated in the Vienna Convention. The EC has already demonstrated the results
of applying these rules, and one way of describing th e results would be to say that the purpose of the
processes of salting, etc., is significant, since the conc lusion of the analysis is that these processes are
ones intended to preserve the meat. The EC does not see how it could be said in this context that the
purpose takes precedence over the process. The purpose helps define the process, which might
otherwise be presented as simply the addition of some salt, or some exposure to smoke or drying. As a
practical matter for customs authorities what is important is that preserved meats have particular
physical characteristics which h are readily identifiable.

 By speaking of multiple purposes the EC understands the Panel to be referring to the fact that
preserved meats are popular not merely because of their resistance to deterioration but also because of
their taste, texture, appearance, etc. The EC do es not think that these qualities can be meaningfully
separated, or priorities established between them. Th e EC does not know any way of giving to meat

the latter group of qualities other than by subjecting it to the process of preservation. Similarly, if they
are preserved by salting, etc., they will acquire those qualities.

 The point that the EC is trying to make is th at there is little to be gained in resolving the
present dispute by trying to contrast the purpose of 'chilling' and 'freezing' in heading 02.07 (or in any
of headings 02.01 to 02.08) with that of 'salting' etc., in heading 02.10.

70. Does the order of steps/activity entailed in a process to which a product is subject play a
role in the classification of that product. Pl ease explain making reference to the products at
issue in this case.

 The EC does not believe it can have been the in tention of the drafters of Chapter 2 to make
the interpretation of the headi ngs depend on the order in whic h the relevant processes had been
applied. What is relevant, in the EC's view, is the state the product is in at the time of importation.

 As a matter of fact, in the present case, the pr oduct is immediately frozen after the addition of
salt. Indeed, as pointed out in response to Panel Ques tions 29 and 60, to respect the ingredient list of
the final processed product an additional tumbling process has to be applied after defrosting.

71. Are there different degrees to which meat can be dried, smoked or soaked in brine? If
so, is it the case that meat products can only be classified under heading 0210 if the degree of
drying, smoking or soaking in brine has exceeded a particular level. If so, what are those levels
and how are they determined?

 The degree of drying, etc., that is necessary to preserve meat varies from one kind to another.
As explained in our First Written Submission (para. 37) the level of 'water activity' (Aw) is an
important indicator of the degree of preservation achieved, and this can be measured with some
precision. However, the use of sodium nitrite also has direct preservative effect, as does smoke, and
neither of these lend themselves to precise measur ement. As the EC explained in its Closing
Statement at the First Substantive meeting with the Panel, in practice problems have rarely arisen in
the case of preserved meats. The products are we ll-established and well-known; the basic products
have existed for many centuries if not millenia. As th e table in Exhibit EC-5 shows, their shelf life is
many months. That they qualify under heading 02.1 0 has never been in doubt. Indeed it is obvious
that it was precisely for such products that heading 02.10 was created. It is on the basis of extensive
experience with these products that the EC developed its criterion of long-term preservation.

72. Does the reference to "poultry" in headin g 0207 of the EC Schedule make it more
"specific" within the meaning of General Rule of Interpretation 3(a) of the Harmonized System
than heading 0210, which refers more generally to meat"? Please explain.

 The EC is unconvinced that the application of General Rule of Interpretation 3(a) of the
Harmonized System is of possible assistance in the interpretative process to determine the meaning of
the term "salted" under the heading 02.10 (which is the interpretative task at stake). General Rule of
Interpretation 3(a) concerns the classification of a product that falls prima facie under two different
headings, and therefore gives as an initial interpre tative task the question of the scope of the two
different, potentially applicable, headings.
16

 That said, the factual answer to the Panel's question is straightforward. All poultry is meat,
but not all meat is poultry. If the scope of the two were to be represented by circles, the circle

16 Contrary to what Thailand asserts in para. 29 of its Oral Statement, the EC nowhere acknowledged
that the product corresponds at the same time to the wording of the heading 0207 (frozen) and to the wording of
the heading 0210(salted).

representing for poultry would be entirely within that for meat. Consequently the reference to 'poultry'
is more specific.

 The EC also refers to its response to Panel Question 74.

73. Is the Harmonized System "context" under Ar ticle 31.2 of the Vienna Convention? If so,
please explain by demonstrating how the various elements in Articles 31.2(a) or 31.2(b) are
fulfilled.

 The EC believes that there may be several base s in Article 31 of the Convention for using the
Harmonized System to interpret the EC's Schedule and that decision has to be taken on a case-by-case
basis. For the reasons provided in response to Panel Question 76 the EC considers the Harmonized
System and its Chapter and Explanatory notes to be context within the meaning of Article 31(3)(c) of
the Vienna Convention.

74. Assuming that the Harmonized System qualifies as "context" for the interpretation of
the EC Schedule under Article 31.2 of the Vienna Convention, to what extent if at all can the
General Rules for the interpretation of the Ha rmonized System be used to determine the
meaning of the headings in question?

 The meaning of the heading 02.10 and specifically the term "salted" therein has to be
interpreted in accordance with Article 3.2 of th e DSU by applying the customary rules of treaty
interpretation set forth in Articles 31, 32 of the Vienna Convention, in particular ordinary meaning,
context, purpose and subsequent practice.

 The EC notes that Thailand relies on General Rule for Interpretation 3(c) of the Harmonized
System to argue that if goods cannot be classified by reference to Rule 3(a) or Rule 3(b) then they
shall be classified under the heading which occurs la st in numerical order among those which equally
merit consideration.
17

 The EC fails to understand how Thailand can rely on such a mechanistic rule for classification
in order to determine the meaning of the heading in question. Both Brazil and Thailand continuously
argue that this is not a classification dispute an d indeed both Complainants refused the EC's
suggestion, made at the consultation stage, to bring this dispute to the WCO to the extent that it relates
to classification.

 In any event, Article 3.2 of the DSU does not allow for the application of a mechanistic non
liquet rule that ensures a result in da y-to-day classification practice as spelled out in General Rule for
Interpretation 3(c) to determine the meaning of one heading. Article 3.2 of the DSU read in
conjunction with Articles 31 and 32 of the Vienna Convention require consideration of all
interpretative materials, in particular supplementary means to determine the meaning of the schedule.
In a non liquet situation, the general rules on burden of pr oof in WTO law would require the Panel to
err on the side of the defendant.

75. How are the following to be categorised, if at all, within the framework of Articles 31
and 32 of the Vienna Convention: (a) 1981 Explanatory Note to heading 02.06 of the EC's
Common Customs Tariff; (b) the 1983 Explanatory Note for subheadings 0210.11-31 and
0210.11-39 of the EC's Common Customs Tariff; (c) the 1983 Dinter judgement of the ECJ; (d)
the 1993 Gausepohl judgement of the ECJ; and (e) the December 1994 Explanatory Note to
subheadings 0210.11.11 and 0210.11.19 to the EC's Combined Nomenclature?

 (a)-(d) form part of the EC's practice, to be considered under Article 32 of the Vienna
Convention as circumstances of conclusion.

 (e) To the extent that it is subsequent prac tice, it is relevant under Article 31 (3)(b) of the
Vienna Convention.

76. Can the Harmonized System be consid ered as comprising "relevant rules of
international law" within the meaning of Article 31.3(c) of the Vienna Convention? If so, please
explain by demonstrating how the various elements in Article 31.3(c) have been fulfilled.

 Paragraph 3(c) of Article 31 of the Vienna Convention says that there "shall be taken into
account together with the context … any relevant rule s of international law applicable in the relations
between the parties". For this purpose the "relevant rules of international law" include those of treaties
to which the parties are also party.
18 The Convention establishing the Harmonized System is an
international treaty to which the vast majority of WTO Members are parties and use it as a basis for
negotiating tariff concessions. The Harmonized System is relevant insofar as it sets forth headings and
provides for Chapter and Explanatory Notes that eluc idate the meaning of a heading. As described in
our First Written Submission, and as stated by the Appellate Body in EC – Computer Equipment , the
Harmonized System and its Chapter and Explanatory notes provide, therefore, relevant context for the
interpretation of the EC Schedule.19

77. Apart from the issue of timing, what is the difference, if any, in the nature of evidence of
classification practice that must be adduced to prove the existence of "subsequent practice"
within the meaning of Article 31.3(b) of the Vi enna Convention as comp ared to the nature of
evidence that is needed regarding classification practice for the purposes of Article 32 of the
Vienna Convention?

 The EC believes that there is a fundamental difference in the way practice may be used in
these two situations. In the case of subsequent practi ce (Article 31.3(b)), the practice is used both as
evidence that the parties intended they should be bound by what they are practising, and as evidence
of the nature and scope of the obligation. (The EC has already described in its First Written
Submission (para. 170) the need for 'concordant, common and consistent' practice among the parties.)

 In the second situation – that of prior practice as one of the 'circumstances of conclusion' of a
treaty mentioned in Article 32 – only the second of these statements is true. The practice itself
provides no evidence whatsoever as to whether the par ties intended to bind themselves to observe that
practice in future. That intention must be establis hed entirely from other sources. If, on the basis of
those sources, that intention is established then th e practice will provide evidence as to the content of
the obligation.

18 Sinclair, op. cit., p. 117, citing Official Records, Second Session, 13th plenary meeting (Fleischauer).
19 First Written Submission by the EC, para. 107; Ap pellate Body Report, EC – Computer Equipment,
para. 89.

78. Do the parties consider that the WTO Mo dalities for the Establishment of Specific
Binding Commitments under the Reform Programme issued on 20 December 1993 amounts to
"preparatory work" within the meaning of Article 32 of the Vienna Convention? If so, please
explain why and indicate the significance parties attach to this document?

 The EC considers the Modalities Agreement to be at the very least a "preparatory work"
because its sets out the parameters of the negotiations . However, given that it already fixes particular
dates and methodologies later reflected in the Schedul es, it has a status as context under Article 31 of
the Vienna Convention.

79. What common essential feature(s) do the pa rties consider characterise products that fall
under:

 (a) Chapter 2 of the Harmonized System?

 The essential features are spelled out by the head ings and chapter title. Thus, in the case of the
Chapter, the essential features are summed up in the phrase 'Meat and edible meat offal'.

 (b) Heading 0207 of the EC Schedule?

 The essential common feature of heading 0207 – Meat and edible offal, of the poultry of
heading 01.05, fresh, chilled or frozen – is that it concerns poultry meat, other than preserved meat
falling within heading 02.10.

 (c) Heading 0210 of the EC Schedule?

 In the case of heading 02.10 the common essential f eature is that it is meat or edible offal
preserved by one of the listed processes.

80. In paragraph 20 of its oral statement during the first substantive meeting, Brazil
submits that "[i]mporting Members have ample margin to define their offers in such a way that
their interests are fully protected". Does this mean that, in the process of making tariff
commitments, Members must be taken to have anti cipated, or at least, assumed responsibility
for all possible changes in trade patterns?

 The EC is unclear as to the precise meaning of the phrase in Brazil's statement. The EC
accepts that trade flows may change after tari ff commitments are made. This does not mean,
however, that such trade developments are without parameters. Any new tr ade flows must fall under
the scope of the tariff commitment they claim. In the present case, the new trade flow does not fall
under the EC's tariff commitment in respect of salted meat.

QUESTIONS POSED BY THAILAND

1. In the course of the first substantive meetin g with the parties, the EC suggested that the
European Court of Justice rulings are binding on the Commission and that they provide an
authentic interpretation of the EC's Common Cu stoms Tariff. Could the EC inform the Panel
whether the European Commission may make an amendment to the EC's Combined
Nomenclature that are based on classification cri teria for a product different from the criteria
that the Court of Justice used to resolve a dispute on the classification of that product prior to
the amendment? Thailand notes that in the Dinter case
20 concerning the classification of
seasoned meat, the Court ruled:

 Heading 16.02 of the Common Customs Tariff must be interpreted as meaning that it
also includes poultrymeat to which salt and peppe r have been added even if the pepper can be
detected only microscopically . (emphasis added).

 Following the Dinter judgment, Thailand understands that the Commission inserted an
additional note 6(a) into Chapter 2 of the EC's Common Customs Tariff:

 "Seasoned meat" of poultry, swine or bovine animals – excluding the products described
at (c) below – falls within subheadings 16.02 B +, 16.02 B III a) and 16.02 B III b) 1 aa)
respectively. "Seasoned meat" shall be uncooked meat that has been seasoned either in depth
or over the whole surface of the product with seaso ning either visible to the naked eye or clearly
distinguishable by taste.

 Is it correct that Additional Note 6(a) effectively reversed the finding of the Court in
Dinter by requiring that the seasoning only be visi ble to the naked eye or clearly distinguishable
by taste (namely, the objective characteristics of the product) rather than requiring that the
seasoning (the pepper) could only be detectable microscopically? Could the EC advise whether
it is the Court's ruling in the Dinter case or Additional Note 6(a) that currently governs the
customs classification of products falling under heading 16.02?

 The EC fails to see a conflict between the Dinter judgment and the additional note which
Thailand refers to. In that judgment, the Court ruled that meat to which pepper has been added, even if
only visible microscopically, should be classi fied under Chapter 16 as seasoned meat. In the
Additional Note, the first criterion is whether the peppe r is visible to the naked eye. In the event that
the pepper is not visible (and thus could only potentially be seen microscopically), then the customs
official should taste it to determine whether pepper is present. While this does not require the customs
official to check the meat with the aid of a microscope it does requi re him to check that pepper is
present, even when it cannot be seen . The EC therefore disagrees with Thailand's contention that the
EC has reversed the judgment of the ECJ.

 As a matter of fact, the EC exercises its legisl ative powers carefully, with a view to ensuring
that there is no conflict. Should any such conflict occur, there can be no doubt that the judgments of
the Court of Justice would prevail. This is obvious from the Court's judgment in Case C-267/94 in
which the Court held:

20 EC First Written Submission, para. 76. Reference to Case C-175/82 Dinter v Hauptzollamt Köln-
Deutz ECR [1983] p. 969. Exhibit EC-12.

does not authorize it to alter the subject-matte r of the tariff headings which have been
defined on the basis of the harmonized sy stem established by the Convention whose
scope the Community has undertaken, under Article 3 thereof, not to modify.21
2. In para. 37 of its Oral Statement at the First Substantive meeting with the Parties, the
EC states: "... had Regulation 535/94 meant that in order to qualify under 02.10 it was
sufficient to add salt which was insufficient to preserve the product, one would logically have
expected that the EC's Explanatory Notes, which referred to the concept of preservation, to be
modified to remove any reference to preservat ion. This was not the case. The following
Explanatory Notes have remained in place:

 [reference to 0210 1111 to 0210 1119, 0210 1131 and 0210 1139]."

 Thailand notes that these Explanatory Not es cover domestic swine meat, namely hams
and shoulders and cuts thereof, with bone in. Could the EC advise whether it is the EC's
practice to provide specifically in the Explan atory Notes whether a certain rule applies also,
mutatis mutandis, to other products? For example, Thailand notes that the Explanatory Note to
subheading 0210 1211 [bellies and cu ts of domestic swine, salted, in brine] provides as follows:
"The Explanatory Notes to subheadings 0210 11 11 and 0210 11 19, apply, mutatis mutandis."
It is Thailand's understanding that there is no similar Explanatory Note for subheading
0210 99 39 (salted meat). Could the EC, therefore, explain the relevance of the Explanatory
Notes it cites in para. 37 of its Oral Stat ement for the purposes of interpreting subheading
0210 99 39?

 In citing these notes the EC wished to show th at at the time of the Uruguay Round the notion
of preserving was intrinsic to the EC's understanding of the meats in heading 02.10. That the specific
notes refer to pigmeat is irrelevant for the purposes of this dispute. They incontrovertibly show that
the EC interpreted the term "salted" at the time of the Uruguay Round as referring to salting for
preservation, irrespective of the specific product which the note concerned.

 The notes in question were designed to draw a distinction between pigmeat preserved in
different ways: on the one hand solely by salting or pickling in brine, on the other by drying or
smoking (whether or not combined with salting or pi ckling). The distinction is made for various cuts
of pigmeat, and is therefore repeated, using the phrase mutatis mutandis. This distinction was relevant
to pigmeat only, so there would have been no point in applying it to other kinds of meat.

QUESTIONS
 POSED BY BRAZIL

1. For purposes of heading 0210, what does th e phrase "long-term preservation" mean?

 The term can best be understood by examining the types of meat that are regularly classified
under heading 02.10. In its First Written Submission the EC has provided a table giving examples of
these.

2. Is there a difference between preservation and "long-term preservation"? If so, what is
it?

 The question is not relevant to this dispute since no one maintains that the product at issue
qualifies under either criterion.

21 Case C-267/94 French Republic v Commission ECR [1995] I-4845, para. 20 (Exhibit EC-22).

3. How long is "long-term preservation"?

 See answer to question 1.

4. Is fresh meat of heading 0207 meant for "long-term preservation"? If not, how long
must meat last before spoiling in order to be classified as fresh?

 The EC does not understand the first question. The EC regards this and the following two
questions as excessively theoretical and making no u seful contribution to the present case. All parties
have accepted that the crucial question is under what conditions products qualify under heading 02.10.
It is the terms of this heading which must be interpreted.

5. Is chilled meat of heading 0207 meant for "l ong-term preservation"? If not, how long
must chilled meat last before spoiling in order to be classified as chilled?

 See answer to question 4.

6. Is frozen meat of heading 0207 meant for long -term preservation? If not, how long must
 frozen meat last before spoiling in order to be classified as frozen?

 See answer to question 4.

7. At the time of importation, how can cust oms authorities assess whether certain meat of
 Chapter 2 is preserved or preserved for long-term?

 The classification of products under headi ng 02.10 normally presents no problems, since the
qualifying products are well-established.

8. Is "deeply and homogeneously impregnated wi th salt" related to how long a product is
preserved? If so, how much salt is it needed to impregnate meat for preservation?

 The EC understands that preservation by salt al one, a very unusual mode of preservation, is
assisted if the product is 'deeply and homogeneously impregnated with salt'. The amount of salt is
likely to vary according to the kind of meat. The EC notes that Brazil itself considers a salt content of
9-11% is necessary for preservation.

9. Taking into account the total imports, of Brazil to the EC, of frozen boneless chicken
cuts impregnated with over 1.2% of salt from 1998 until the enactment of Regulation
No. 1223/2002, please provide the percentage of imports of this product that entered the EC
under heading 0207 and the percentage that entered under heading 0210.

 Table 2 of the EC's First Written Submission gives data concerning imports under headings
02.07 and 02.10 from Brazil during the years in questi on. It can probably be assumed that virtually all
the meat entered under heading 02.10 consisted of such chicken cuts.

10. In paragraph 92 of the EC's First Written Submission, the Communities state that
"given the commercial importance of some of those customs offices (Hamburg, Rotterdam)
substantial trade entered the Community" under he ading 0210. Based on this assertion and on
the allegation that imports of frozen chicken cu ts impregnated with over 1.2% of salt entered
the EC under heading 0207 through some customs offices, please provide the EC's
understanding of what constitutes "substantial trade".

 The EC meant that relatively significant vol umes of the product at issue were imported
through certain EC countries – corresponding to those where the customs offices were located.

11. In Gausepohl, it seems that the minimum 1.2% salt content required for long-term
preservation of meat was established based on written observations made by the Belgian
Government. Provide the studies or reports used in that case that indicate that the 1.2% salt
threshold is sufficient to ensure long-tem preservation.

 The European Court of Justice did not consider that 1.2% was sufficient to ensure long-term
preservation. The Court did not have a study before it suggesting this. Rather, it clearly stated that
1.2% salt content would be an a ppropriate minimum, below which it would not even be necessary to
enquire whether the meat in question had been salted for preservation.

 See the EC's response to Panel Question 40.

12. If freezing is a process that can be "largely reversed", does that mean that meat after
thawing will be identical or similar to what it was prior to freezing? Please explain.

 No, it cannot be sold as fresh meat. Freezing a nd thawing of the meat brings about specific
changes, as attested by the literature cited by Brazil and Thailand. Evidently, fresh, chilled and frozen
meat can all be used by the processing industry to manufacture processed chicken products.

13. If not, how does freezing and thawing change the character of meat?

 See answer to question 12.

14. Can meat after thawing still be used fo r the same purposes as prior to freezing?

 See answer to question 12.

ANNEX C-8

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

(2 December 2004)

QUESTIONS POSED BY THE PANEL

FOR THE EUROPEAN COMMUNITIES

87. In EC's reply to Panel question No. 56, the EC argues that the Panel is tasked to assess
the meaning of its concessions as of the date of Panel establishment according to Articles 3.2 and
11 of the DSU, namely on 7 and 21 November 2003. However, in para. 97 et seq of its second
written submission and in paragraph 72 of its or al statement at the second substantive meeting,
the EC submits that the relevant date for interpre tation of the EC's tariff concessions on salted
meat was the commencement of the Uruguay Round negotiations, i.e. 1 September 1986. Could
the EC clarify the apparent inconsistency betwee n these statements and clearly indicate when it
considers the EC concessions in question should be interpreted.

1. In the EC's view, Question 56 ('the relevant ti me at which the meaning of headings of the EC
Schedule – LXXX – should be assessed') has no single answer. The 'relevant time' depends on what
precise issue is being discussed.

2. The EC reconfirms its view that in interp reting the EC schedule by applying Article 31 of the
Vienna Convention the meaning of the concessions must be assessed as of the date of Panel
establishment. Thus, for example, subsequent pr actice within the meaning of Article 31(3)(b) or
relevant rules of international law within the mean ing of Article 31(3) (c) must be assessed as of that
moment.

3. The date for considering EC law is another issue. In so far as such law is relevant to
determining the scope of the EC's Schedule within the context of Article 32 of the Vienna Convention,
the common intention of the parties was expressed in the Modalities Agreement to use the level of
parties' duties (or bindings) in 1986 as a base point.

88. With respect to the EC's reply to Panel qu estion No. 32, is the EC suggesting that meat
that has been "impregnated with salt" will necessarily be salted for the purposes of
preservation? If not, please elaborate upon the reply.

4. No. In order to be preserved with sa lt, meat should be deeply and homogenously
 impregnated
with a level of salt sufficient to ensure long- term preservation, i.e., much higher than 3%. 1
Impregnation with salt is a necessary but not suffici ent condition. Whether the meat is salted for the
purpose of preservation depends in particular on the level of salt content.

1 See already EC Responses to Panel Questions 32 following the first substantive meeting and
footnote 11 of the Second Oral Statement.

89. What inspections and/or analyses do EC customs officials undertake to ascertain the
objective characteristics of the products at issue?

5. When a product arrives at the border, customs officials carry out:

• inspection of customs and sanitary documents accompanying the good, also of any BTI;

• physical inspection by customs officers of container, packaging, labelling;

• physical inspection of the product, in particular its temperature, smell, taste, colour;

• if necessary, samples are sent to laboratory for analytical control to verify conformity of
product with customs specifications.

6. The relevant legal provisions are contained in Articles 68 to 70 of the EC Customs Code,
Regulation 2913/92, which provide as follows:

Article 68
For the verification of declarations which they have accepted, the customs authorities
may:
(a) examine the documents covering the declaration and the documents
accompanying it. The customs authorities ma y require the declarant to present other
documents for the purpose of verifying the accuracy of the particulars contained in
the declaration;
(b) examine the goods and take samples for analysis or for detailed examination.
Article 69
1. Transport of the goods to the places where they are to be examined and
samples are to be taken, and all the handling necessitated by such examination or
taking of samples, shall be carried out by or under the responsibility of the declarant.
The costs incurred shall be borne by the declarant.
2. The declarant shall be entitled to be present when the goods are examined
and when samples are taken. Where they de em it appropriate, the customs authorities
shall require the declarant to be present or represented when the goods are examined
or samples are taken in order to provid e them with the assistance necessary to
facilitate such examination or taking of samples.
3. Provided that samples are taken in accordance with the provisions in force,
the customs authorities shall not be liable for payment of any compensation in respect
thereof but shall bear the costs of their analysis or examination.
Article 70
1. Where only part of the goods covered by a declaration are examined, the
results of the partial examination shall be taken to apply to all the goods covered by
that declaration. However, the declarant may request a further examination of the
goods if he considers that the results of the partial examination are not valid as
regards the remainder of the goods declared.

2. For the purposes of paragraph 1, where a declaration form covers two or
more items, the particulars relating to each item shall be deemed to constitute a
separate declaration.
90. The EC is requested to respond to the co mment made in Brazil's reply to Panel question
No. 13 and in paragraph 11 of its oral statement at the second substantive meeting that the EC
considers the "objective characteristics" of a product to be a decisive criterion for classification.

7. It is true that under Community law in impl ementing the HS the objective characteristics of a
product are decisive for classification. However, as noted before, the issue of classification is
different from the determination of the scope of a Schedule for the purpose of Article II of the GATT
1994.

91. In the EC's reply to Panel question No. 44, the EC submits that the application of the
principle of preservation has rarely been proble matic because it is "normally" obvious whether
a product has been preserved by one of the mean s mentioned in heading 02.10. What is meant
by "normally" obvious? Further, please explain how a product is dealt with by customs officials
when it is not obvious that a product has been preserved by one of the means mentioned in
heading 02.10?

8. The EC used 'normally' in the sense of 'usually'. The EC meant simply that customs officials,
applying the inspections and analyses mentioned in the EC's response to Panel Question 89 above,
would have no difficulty in telling that a partic ular product has been preserved. The preservation
techniques referred to in heading 02.10 leave the meat with specific characteristics (e.g., colour,
saltiness, dryness) that are readily detectable (e.g., in Parma ham). In fact, as the EC has pointed out,
this heading is not one that in practice creates diffi culties, as evidenced by the very small number of
instances in which it features in official records, either national or international, as an issue.

92. In its reply to Panel question No. 50, referri ng to a BTI concerning the classification of
frozen smoked salmon, the EC submits that th e German customs authorities could immediately
see that the product in question there was one th at had undergone one of the processes listed in
heading 03.05 to ensure preservation. The EC also submits that the customs authorities
checked that the product had gone through a pr ocess of preservation (i.e. smoking) by checking
the products appearance, smell and taste. Pl ease specifically identify the investigations
undertaken by the customs authorities in that ca se to enable them to be convinced that the
product was classifiable under heading 03.05? Are these investigatio ns commonplace with
respect to products that are sought to be classified under heading 03.05?

9. The EC's answer to Panel Question 50 rela ted to the procedure followed by the German
Customs Authorities in issuing one binding tariff in formation. The application covered only one type
of product and included the following particulars:

• a detailed description of the goods permitting their identification and the determination of
their classification in the Combined Nomenclature;

• the composition of the goods and any methods of identification used to determine their
classification;

• samples and labelling which may assist the German Customs Authorities in determining
the correct classification.

10. Actually the goods were packed, vacuum-sealed in plastic foil with the following labelling
"Grande Luxe R/genuine smoked sal mon". It is well known that smoking is one the oldest way of
preserving food, and in particular salmon. Smoking gi ves the salmon flesh or fillets a 'fruity' flavour
and taste which can be instantly recognized. Smoking imparts a distinctive character to the product.

11. The product at issue was examined by the German Customs Authorities in the Hamburg
Customs Laboratory. Colour, smell and taste were readily identified as giving a flavour and taste
indicating that the product had been smoked. In doing so the Authorities followed the Customs
Laboratory Guide issued by the World Customs Organization. The Guide recommends an initial
screening analysis of the good which consists of th e examination of the appearance and nature of the
sample. This examination is based on the sense of sight, smell and hearing. In that case the German
Customs Authorities were in a position to decide immediately that the good had undergone a smoking
process covered by heading 03.05.

93. Do the products at issue in this case meet the criteria set out in EC Regulation 535/94?

12. No. As the EC has explained in its vari ous submissions, Regulation 535/94 sets a minimum
salt content, a pragmatic rule, below which it cannot be considered that a product is salted for
preservation. The requirement of preservation th at flows directly from heading 02.10 of the
Combined Nomenclature as interpreted by the Court in standing case law stands undisturbed by
Regulation 535/94 (See also responses to Panel Ques tions 113-114). Conseque ntly, in order to be
classified under heading 02.10 a product has to meet the criteria of Regulation 535/94 and be salted in
order to ensure its preservation as required by the Combined Nomenclature, heading 02.10. This was
the case when Regulation 535/94 was enacted, and remains the case today.

13. The EC does not dispute that the products at issue were deeply and homogeneously
impregnated with salt in all parts. However, Brazi l and Thailand themselves restrict their claims to
products containing more than 1.2% salt. They adm it that such salt content does not suffice to ensure
long-term preservation.

94. In its reply to Panel question No. 25, the EC submits that the products covered by EC
Regulation 1223/2002 and EC Commission Deci sion 2003/97/EC of 31 January 2003 fall under
heading 02.07 of the EC Schedule and are subjec t to the duties applicable to these tariff lines
under the EC's Common Customs Tariff. Could the EC indicate precisely what those duties
are.

14. The products in question fall under CN subheading 0207.14.10 and the import duties
applicable to these products are 102.4€ per 100 kilogr am. In addition, these products may be subject
to the special safeguard mechanism provided for in Article 5 of the Agreement on Agriculture . The
EC also notes that it has a Tariff Rate Quota (TRQ ) covering this tariff line of 15,500 tonnes from
which Brazil and Thailand benefit, am ong others. The in-quota rate is 0. This TRQ has already been
the subject of WTO dispute settlement between Brazil and the EC.

95. Please comment on the price data for the pr oducts at issue referred to in paragraph 57
of Brazil's first written submission and in par agraph 11 of Thailand's first written submission.
In particular, does the EC accept that these were the applicable prices at the relevant time for
imports of the products at issue from Brazil and Thailand respectively?

15. The EC does not dispute the pricing data provided by the Complainants.

96. In paragraph 19 of Thailand's oral statement at the first substantive meeting and
paragraph 37 of Thailand's second written submi ssion, Thailand submits that salted products
require an additional means of preservation. In support, Thailand refers to Exhibits
THA-25(a), 25(b) and 25(c), which include pa ckages of Parma ham, prosciutto and jamón
serrano. Which heading of the EC's Combined Nomenclature are these products classified
under? Please provide all necessary evidence in support.

16. Only very small quantities of dried or sm oked hams, bone-in or boneless, are imported into
the EC (2001: 250 tonnes; 2002: 240 tonnes; 20 03: 235 tonnes). The Community classifies these
products upon export, under heading 0210.11.31 for hams, bone-in, and under 0210.19.81 for
boneless hams. The latter heading applies if the hams in question are sliced.

17. The EC is providing extracts from its agri cultural exports nomenclature (Exhibit EC-31),
which is based on the HS, and refers explicitly to 'Prosciutto di Parma' (which is commonly known as
Parma ham) and 'Prosciutto di San Daniele' unde r these subheadings. There is no specific provision
for 'jamón serrano' in this nomenclature, but it would be included under the same subheadings. The
EC does not agree with Thailand that these types of products require additional means of preservation
and is providing an expert opinion from Professor Dr. Karl-Otto H onikel, an international authority
also referred to by the Complainants (see Exhib it EC-32). These products are shelf-stable for months
– they can be seen hanging in tap as bars throughout the world. Sl icing contaminates the surface with
moulds, yeast or other microbes, nevertheless, the slic ed product is still stable at ambient temperature.
In practice the sliced products are chilled as yeasts/moulds but not microbes could start growing on
the cut surface and the attractiveness of the product for the consumer is lessened.

97. With respect to the EC's replies to Panel questions No. 48 and 71 and paragraph 36 of
its oral statement at the second substantive meeting, is the list of products set out in Exhibit
EC-5 an exhaustive list of all products traditiona lly traded under heading 02.10? If not, please
identify any other products that are traded under that heading. Please identify with all
necessary proof the salt content of each of those products which are described as "salted".

18. In the table in Exhibit EC-5 the EC include d representative examples of the various kinds of
salted, dried and smoked meat. Th e list cannot be comprehensive since there are numerous small
producers of ham similar to the examples give, which is cured, in some cases smoked, and then air
dried in varying degrees and styles. On the other ha nd, the EC would wish to add bacon to the list.
This also occurs in a range of forms, and in particular may or may not be smoked. The EC has
described it as the only meat product that is preserved by salting alone,
2 but it would be more accurate
to speak of 'curing' since a combination of comm on salt (NaCl) and sodium nitrite and nitrate are
used. The latter have an additional preservative effect , and bring about the changes that give the meat
its characteristic red colouring.3

19. The common salt content of the various meats is indicated in the table in Exhibit EC-5, where
it is relevant to preservation, although the EC emphasi ses that in none of these cases, nor in the case
of bacon, does salting with common salt provide the sole basis for preservation. In fact, the EC knows
of no meat that is preserved by the use of common salt alone. In contrast, that is the only treatment
given to chicken which is the subject of this dispute. Brazil claims that the level of salt in this chicken
is enough to preserve it. To counter this claim, made at a late stage in the proceedings,
4 the EC has
obtained an expert's opinion (Exhibit EC-32) which confirms that a minimum of 7% salt in the meat is
necessary for this purpose. The expert, Professor Dr. Ka rl-Otto Honikel, is a leading authority in this
field and cited as an authority in the material presented by Brazil in support of its assertions.

20. It should be said that the volume of trade in these products is small. EC imports under
heading 02.10 on average about 2,000 tonnes per year, about half of which cons ist of preserved beef
from Switzerland (' viande de grison' ). However, while frozen salte d chicken cuts were being
classified under this heading the annual vol ume of imports rose over one hundredfold. 5 This episode
is instructive. The Complainants pretend that their arguments are sp ecific to the EC's Schedule on the
basis that they involve Regulation 535/94. 6 In fact they invoke this Regulation only in order to
confirm their interpretation of heading 02.10 in the Schedule following the use of the Harmonised
System as context. On their interpretation, which amounts to an interpretation of HS heading 02.10,
any amount of salting, drying or smoking would be sufficient for a product to qualify under this
heading. Brazil's own evidence 7 shows how classification under this heading secures significant tariff
reduction for chicken cuts under many national tariff schedules. Furthermore, the Complainants'
interpretation is not limited to chicken cuts, but applies to all meats. If this interpretation were
adopted, wherever a Member's Schedule has a lower tariff for a meat under heading 02.10 than it has
for the corresponding meat in headings 02.01 to 02 .08 that Member could expect the same dramatic
distortion of trade through the use of slightly salte d, etc., meat that the EC experienced from salted
frozen chicken.

98. Please respond to Brazil's question posed in paragraph 29 of its oral statement at the
second substantive meeting on why it is necessa ry to "further preserve" products that are
classified under heading 02.10 if they have al ready been subjected to a process to ensure long-
term preservation.

21. One short answer to the question why meat that has been preserved for the long-term (by
salting, drying, etc.) should be further preserved (by chilling or even freezing) is so that it may be
preserved for an even longer term. The EC has listed
8 various factors which affect the life or
presentation of preserved meat. In particular, such meat is no longer stored in the fashion originally
intended, and it is often sliced in preparation for retail sale (see Exhibit EC-32).

22. The use of additional preservation techniques fo r meat falling with heading 02.10 is explicitly
envisaged in the HS Explanatory Notes to Chapte r 2 which provide that vacuum packing (Modified
Atmosphere Packing) does not alter the classification of a product under Chapter 2.
 9

99. In paragraph 40 of its seco nd written submission, the EC submits that the examples of
products referred to by the complainants to suppo rt their argument that salted products may
not necessarily be preserved by salt ing alone are almost all of fish rather than meat. The EC is
requested to explain in precise terms what diff erences exist between fish and meat to warrant
different conclusions in this regard.

23. The EC made this point in order to illustra te that the products which the Complainants had
identified as being preserved by one of the processes in heading 02.10 were mostly fish products and
not meat products. The EC was not suggesting that different conclusions should necessarily be drawn
from fish products than would be drawn from meat products.

24. Rather, the EC would point out that it is Brazil that specifically rejects that analogies can be
drawn from Chapter 3 of the HS. In the context of its comments on the WCO letter to the Cypriot

5 EC First Written Submission, para. 58, Table 3.
6 E.g., Thailand Second Oral Statement, para. 20.
7 Exhibit BRA-37.
8 E.g., Second Written Submission, para. 43.

authorities
10 Brazil argues that salted frozen fish is a produc t that is different from the product at issue
and cannot therefore 'be seriously considered by the Panel as relevant subse quent practice'. However,
Brazil appears in two minds on the issue, since it also uses examples of the classification of frozen
fish in support of its arguments.11

25. In the EC's view the overall structure of Chapter 3 is similar to that of Chapter 2, so that the
WCO's comments on fish are of significance to the present dispute.

100. In paragraph 35 of its second written subm ission, the EC submits that, even if the
complainants were correct that heading 02.10 depends upon preparation rather than
preservation, all existing practice suggests that it must be preparation which places the meat in
a "recognisably different state". Is the EC suggesting that preservation may not be necessary
for classification under heading 02.10 provided th at the state of the product in question has
been recognisably changed? If not, please ex plain what the EC meant by this comment.
Further, please explain how the EC interprets "recognisably different state".

26. The EC made these comments by way of presen ting an alternative argument should the Panel
not accept that all the processes referred to in head ing 02.10 involve preservation of the meat. In the
EC's view the change of state is brought about by preservation, but that there is such a change is
undeniable. By the phrase 'recognisably different' we m ean in particular that the meat is obviously
different from raw meat in appearance and textur e. A Customs officer examining the goods would
have no difficulty recognising them for what they we re. We can say that all the meats which we are
aware of as being classified under heading 02.10 shar e this characteristic (see the table in Exhibit
EC-5). Furthermore, all such meats have names, ei ther general (like 'bacon') or specific (like 'Parma
ham'). Frozen chicken with added salt shares none of these characteristics. Not only does it look like
chicken meat when arriving at the border, more over, as confirmed by the expert opinion from
Professor Dr. Karl-Otto Honikel (Exhibit EC-32), th e effect of salting between 1.2 and 3% has none
of the effects (preservation and drip loss) claimed by the Complainants to distinguish it from unsalted
chicken meat.

101. In its reply to Panel question No. 69, the EC suggests that the purpose underlying the
states referred to in heading 02.07 is irrelevant b ecause those states are "instantly detectable".
In contrast, the EC submits that the purpose und erlying the states referred to in heading 02.10
is significant. Does the EC consider that pur pose is important for heading 02.10 because the
states referred to therein are considered not to be "instantly recognisable"? If so, how does the
EC reconcile this with its submission in its rep ly to Panel question No. 69 that, as a practical
matter, for customs authorities, what is import ant is that preserved meats have particular
physical characteristics which are readily identifi able. If not, please explain in precise terms
why purpose is significant for heading 02.10 but not for heading 02.07.

27. The EC finds this question difficult to answer because it seems to imply a dichotomy between
meat that is chilled or frozen, and that which is salte d, etc., within the meaning of heading 02.10. As
the EC has pointed out, meat in heading 02.10 can also be chilled or frozen, and will not lose its
classification for that reason. Consequently, the stat us of these terms in Chapter 2 is not the same.
Once meat is found to be salted, etc., it will be classified under heading 02.10.
12 But finding that the
meat is frozen does not determine which heading is appropriate; for this one must know more about
it.13

11 E.g., Brazil First Written Submission, para. 94.
12 Leaving aside heading 02.09.
13 To be precise, this would exclude heading 02.01, and several subheadings.

28. As regards 'purpose', the EC regards it as unde niable that heading 02.10 was created to cover
meats that had been processed in particular ways ( salting, etc.) in order to put them in a preserved
state.14 Meats in this state are 'readily identifiable' as such, and one could also say 'instantly
recognizable'.

102. In its reply to Panel question No. 49, the EC submits that the shelf life of preserved
meats is many months at ambient temperatures. Is the EC submitting that ensuring a shelf-life
of many months amounts to lo ng-term preservation? If not, what is meant by long-term
preservation in the context of heading 02.10 of the EC Schedule?

29. The EC has shown that the notion of preserva tion is at the heart of heading 02.10 in the
Harmonised System, the EC's Schedule and the EC 's Combined Nomenclature. The Complainants
have not established that the product at issue meets th is criterion, and their clai ms must therefore fail.
The EC has observed that meats that are preserved for several months are clearly preserved for the
purposes of heading 02.10. See also the EC's response to Panel Question 118.

103. In its reply to Panel question No. 14, Brazil describes the salting methods used by
Brazilian producers and exporters of salted chicke n meat. Which, if any, of those methods
result in the deep and homogeneous impregnation of salt?

30. Dry tumbling, tumbling in brine, and injection, can achieve such impregnation.

104. With respect to the EC's reply to Panel qu estion No. 64, which salts are used to preserve
the products that the EC considers typically fall under the scope of heading 02.10?

31. Sodium chloride, sodium nitr ate, sodium nitrite. Unless nitrates and nitrites are used the
preserved meat will not have its customary red colour.
15 The EC does not know of any meat that is
preserved with sodium chloride (common salt) alone.

105. Please comment on Brazil's reply to Pane l question No. 18 and Exhibit BRA-34, which
Brazils says indicate that the EC itself considers that frozen salted/dried/smoked fish should be
classified under heading 03.05 and not under headings 03.03 or 0304.

32. Once the fish is sufficiently salted, etc., to pr eserve it, whether it is also frozen or not will not
affect its customs classification. The EC has always based the classification of goods on their
"objective characteristics" which are mostly based on their composition or properties, which can be
established by laboratory examination whether in a Customs laboratory or a private laboratory. The
state of the products at issue as being salted or in brine, dried or smoked for long term preservation
can be established by laboratories by determining the moisture content and water activity.

33. For instance, frozen salted or in brine herri ng filets were classified on a case by case basis as
either 03.05 or 03.04 (Exhibit EC-33).

106. In paragraph 42 of second written submission, the EC has identified the CCCN as the
predecessor to the Harmonized System. To what extent is the structure and rationale of
Chapter 2 of the CCCN different from or similar to that of the equivalent Chapter in the
Geneva Nomenclature?

34. Many of the elements of Chapter 2 of th e Geneva draft were carried into the CCCN.

14 See, e.g., the discussion of the evolution of the terms.
15 See EC First Written Submission, para. 116

35. The strategy of dealing with most meat on an animal-type base (beef, sheep, pig, etc.) is
followed in both (but 'Dead game', Item 15 in th e Geneva draft, has no equivalent in the CCCN).
Whether or not the meat was frozen is not a factor in the CCCN, although it was so in the Geneva
draft (and became so again in the HS). It is no teworthy that the word 'preserved' is linked to
refrigeration (Item 13, also in Item 19), a practice that is carried over into the Notes of the CCCN
(and HS).

36. Item 17 'Bacon' in the Geneva draft is best understood by reading the accompanying
Explanatory Notes, from which it becomes clear that it actually corresponds to CCCN heading 02.05
(and HS heading 02.09) on pig and poultry fat.

37. Item 18 is corresponds to CCCN heading 02. 06 (HS heading 02.10), except that the phrase
'cooked or otherwise simply prepared' disappeared. The EC has addressed this point in its Second Oral
Statement.
16 Cooked meats were moved into Chapter 16 of the CCCN, but traces of the word
'prepared' remained in the Explanatory Notes (and continued in those of the HS).

107. If, as submitted by the EC, the process es listed in heading 02.10 are for long-term
preservation and Chapter 2 is structured acco rding to preservation methods, what is the
rationale for categorizing the processes listed in heading 02.10 – "salted", "in brine", "dried",
or "smoked" – under a separate heading instead of as a tertiary item under each of the headings
preceding it (i.e. headings 02.01 through 02.08) together with "fresh", "chilled" or "frozen"?

38. By way of introduction, the EC observes that, d espite repeated assertions of the Complainants
to the contrary, it has not submitted that Chapter 2 is 'structured according to preservation methods'.
Nevertheless, preservation is clearly an important feature of the Chapter.

39. It is evident from the structures of the successive nomenclatures – 1937, CCCN, HS – that the
drafters regarded meats that had been salted, etc., as having two particular characteristics. Firstly, they
were markedly different to meats that had not been processed in these ways, so much so that they
were not even included in the sam e headings. Secondly, they were so similar to each other that they
could be treated under a common heading. Both of these characteristics arise from the fact the meats
are preserved; meat that has been only slightly salted, or dried, etc., is not significantly different from
unprocessed meat, and such meat from one animal bears no particular resemblance to slightly salted,
etc., meat from another animal.

40. The importance of freezing meat has altered over the years (it was not a feature of the
CCCN), but even in the HS it is evidently not rega rded as such a radical process as preservation by
salting, etc., since it is reflected by a categorization that is made only within animal types, and in most
cases by means of subheadings.

41. The EC believes that these considerations provide the answer to the Panel's question.

108. In paragraph 119 of its second written subm ission, the EC submits that throughout the
Uruguay Round negotiations, EC law on classification under heading 02.10, including
Regulation 535/94, was based on the concept of preservation. Please explain where the concept
of preservation is reflected in Regulation 535/94.

42. Regulation 535/94 did not need to explicitly restate that heading 02.10 is based on the concept
of preservation. As put succinctly by the European Court in the Gausepohl case:

16 Para. 42.

It is […] clear from the scheme of that ch apter that, for tariff classification purposes
the meat covered by it is either fresh or ch illed meat of bovine animals or meat that
has undergone one of the various processes required for long-term preservation. 17
43. As noted in our response to Panel question 40 at the first meeting, this was undisputed
between all relevant Member States, the Court, Commission and the importer himself.

44. The EC explained in its response to Pa nel Question 93, that Regulation 535/94 sets a
minimum salt content, a pragmatic rule, below which it cannot be cons idered that a product is salted
for preservation (see also response to Panel Questi on 113). Consequently, in order to be classified
under heading 02.10 a product has to meet the criteri a of Regulation 535/94 and be salted in order to
ensure its preservation.

109. In paragraph 107 of its second written subm ission, the EC submits that, in respect of
heading 02.10 of the EC Schedule, as at 1 Sept ember 1986, the EC's law and practice supported
the principle of long-term preservation. Apart from the 1983 Dinter judgement and the 1981
Explanatory Note to the CCT to which the EC has already referred, what other support exists
for the view that, as at 1 September 1986, the principle of long-term preservation was well-
entrenched in the EC?

45. Although prior to the Uruguay Round the EC had few bindings on agricultural products, its
nomenclature was exactly based on the CCCN (the Member States were parties to the treaty
establishing the CCCN, and bound by that to observe its terms). Heading 02.06 of the CCCN contains
effectively the same wording as HS heading 02.10, and both of them, as the EC has established,
enshrine the principle of preservation. This is re flected in Regulation 3331/8 5, which contains the
EC's Common Customs Tariff for 1986, and reproduces the headings of the CCCN. Relevant extracts
from this are presented as Exhibit EC-34. The same CCCN-based nomenclature had been in use in the
EC since 1960 if not earlier. Consequently the principle of long-term preservation was well-
entrenched in the EC and conf irmed already as early as 1983 in Dinter.
18 Any other measures could
have only restated the preservation requirement but not modified it.

110. Are ECJ judgments published? If so, ho w and when? Are they publicly accessible?
Please indicate the means through which such judgments were publicly accessible as at: (a) 1
September 1986; (b) 15 December 1993; and (c) 15 April 1994.

46. The judgments of the European Court of Justi ce are delivered in open court (Article 37 of the
Statute of the Court and Article 64, paragraph I, of the Rules of Procedure of the Court).

47. On the day of delivery, the judgments are accessible to the public outside the courtroom and
will be sent by the Registry to anyone upon request after delivery.

48. According to Article 68 of the Rules of Procedure of the Court , the Registrar arranges for the
publication of reports of cases before the Court a nd in principle all judgments are published in the
European Court reports.

49. From the middle of the 1970's the Court's judgments have been accessible in a Community
law database (CELEX) run by the Communities' Publications Office.

17 Para. 10. See EC First Written Submission, para. 82 for full extract from judgment.
18 See Judgement in Case 175/82 Dinter (Exhibit EC-12), para. 6 as well as the description of the
import of that case law by Advocate General Tesauro, in C-33/92 Gausepohl (Exhibit EC-14), para. 4. The
standing case law was reconfirmed in the Court in Gausepohl (Exhibit EC-14), para. 16.

50. In addition, the Court notifies both the co mmencement of a legal proceeding as well as the
judgment rendered and its conclusions in the Offi cial Journal of the European Communities. To
illustrate this, the EC attaches as Exhibit EC- 35 the excerpts from the Official Journal in cases Dinter
and Gausepohl.

51. The above means of publications existed at a ll dates specified by the Panel. From 1997 on all
judgements have also been made available on the Court's own website (www.curia.eu.int).

111. Please comment on Brazil's contention in paragraph 90 of its second written submission
that the Advocate-General in the Dinter case considered smoking to be a preparation process.

52. The EC understands that Brazil in paragraph 90 of its second submission attempts to provide
counterevidence to the EC's explanation that th e notion of preservation was at the heart of its
classification practice on heading 02.10. The onl y legal document Brazil refers to is Advocate
General Mancini's opinion in Dinter, that is the independent legal opinion provided to the Court
during the proceeding, which the Court is in no way bound to follow.

53. The document Brazil refers to if at all conf irms the EC position. First, Advocate General
Mancini in para. 3 of his opinion distinguishes be tween the addition of salt under chapter 2 as "the
better to preserve the product" as opposed to adding of salt by way of seasoning. That is, he expressly
states that "salting" for the purposes of heading 02.10 clearly requires salting for preservation.
Second the case concerned seasoning with salt and peppe r and not smoking. Moreover, the Court in
its judgment (which is the final and binding) aut hority confirmed that chapter 2 "comprises poultry
meat which has undergone a preserving process" (para. 6).

112. With respect to the EC's reply to Panel qu estion No. 47, please explain why and how it is
implicit in the Gausepohl judgement that the amount of salt required for preservation will vary
from meat to meat.

54. The Court in Gausepohl found support for its interpretation of heading 0210 to require salting
for long-term preservation in an Explanatory Note relating to swine meat.
19 As noted in the Report
for the Hearing (para. 33) that Ex planatory Note to the Combined Nomenclature states that the salt
content "may vary considerably between different types and cuts of meat".

113. In cases where an ECJ judgement is issued to clarify a particular Regulation, under EC
law, is it necessary to read that judgement in conjunction with a Regulation enacted after the
issuance of the judgment which was expressly enacted to amend the first Regulation upon which
the judgement was based?

55. There is no procedure under which the European Court of Justice is tasked to "clarify a
particular Regulation". Under the EC Treaty, a Regulation can either be directly attacked in an action
for annulment (Article 230 of the EC Treaty) or it can be examined by th e Court in the context of a
preliminary ruling proceeding and be found invalid (Article 234 of the EC Treaty ). The legal
consequence is under both proceedings that the Regulation is invalid and no longer in effect ex tunc
(unless otherwise specifically indicated by the Court).

56. A later act that replaces the invalidated act is self-standing and contains the motivation for its
adoption in accordance with Article 253 of the EC Treaty. It is therefore generally not necessary to
read it in context with a judgement that invalid ated the preceding act, unless specific reference is
made to that judgement in the motivation clauses.

19 Judgement of the Court in Case C-33/92 Gausepohl (Exhibit EC-14), para. 12.

57. If the EC understands correctly, the Panel is in terested in the relationship between judgements
such as Gausepohl which interprets the Combined Nomenc lature and a later Commission Regulation
inserting an Additional Note. However, this is an issue of hierarchy of norms as opposed to a
question of hierarchy between Court judgements and Commission Regulations.

58. In Gausepohl, for example, the Court confirmed the scope of heading 02.10 in the Combined
Nomenclature (a Council Regulation). The later addition by the Commission of Additional Note 7
through Commission Regulation 535/94 is a legal act which is inferior to the Combined
Nomenclature (Council Regulation). The Commi ssion is not entitled to modify, through a
Commission Regulation, the content of the scope of a tariff heading laid down in the Combined
Nomenclature (Council Regulation implementing th e Harmonised System). Therefore, any
Commission act must necessarily be read together at all times with the superior norm (the Combined
Nomenclature) and its interpretation by the Court. In other words, the scope of heading 02.10 which
on the basis of its wording and structure already compels a requirement of preservation as confirmed
by the Court in Gausepohl stands entirely undisturbed by any legal act subsequently adopted by the
Commission. Indeed, as noted by Advocate General Tesauro in its opinion in Gausepohl:

Chapter 2 of the Combined Nomenclature, as the case-law of the Court confirms,
comprises meat which has undergone a preserving process that may consist of
freezing or salting inter alia.
20
59. It is the Commission act that must be read harmoniously with the Council act and its
interpretation by the Court, not the other way round. To the extent there was a conflict ( quod non),
the scope of heading 02.10 in the Combined Nomenclature as interpreted by the Court would prevail.

114. Please comment on Brazil's and Thailand's submission in paragraphs 56 and 8
respectively of their oral statements at the second substantive meeting that the legal effects of an
ECJ judgement may be reversed or altered by a ch ange in the law, including the enactment of a
new Regulation.

60. In the above-mentioned paragra phs, the Complainants continue their attempt to justify their
selective reliance on Commission Regulation 535/95 and their misinterpretation of the import of that
Regulation. Specifically, the Complainants' arguments, as the EC understands them, are as follows:

61. Brazil argues with reference to a Community law book that the legal effect of an ECJ
judgement may be reversed or a ltered by a change in the law, including the enactment of a new
Regulation, and that therefore superseding legisla tion is not subject to the findings of the ECJ under
previous "different circumstances".
21

62. Thailand attempts to deduce from the judgement of the ECJ in Van de Kolk that "in a situation
of 'conflict' between a Court judgement and a subsequent Commission Regulation, the European
Court of Justice has itself made clear that the subsequent Regulation will prevail".22

63. As will be explained below, both propositions are entirely misconceived.

64. With respect to Brazil's point, the EC notes, at the outset, that Brazil has not provided the
Panel with the original quote from the Community la w authority to which it refers in footnote 62 to
support its statement. The EC exhibits the rele vant page 495 of the Community law book, where
Lasok describes the legal effects of Court judgements as follows:

20 C-33/92 Gausepohl, Opinion of Advocate General Tesauro (Exhibit EC-14), para. 4.
21 Brazil's second oral statement, para. 56.
22 Thailand's second oral statement, para. 8.

The legal effect of a judgement of the Cour t may in principle be reversed or altered
by a change in the law administered by th e Court, such as by an amendment of the
Treaties.
23
65. This quote does not stand for the proposition of Brazil that the adoption of a Commission
Regulation (such as 535/94) followi ng a Court Judgement (such as Gausepohl) reverses the legal
import of the earlier judgement. To the contrary, L asok confirms the EC's explanation in response to
Panel Question 113 that there is no rule of conflict whereby a later legislative act of the Commission
or Council supersedes any previous Court Judgement. Lasok refers to a situation where the Court
examined the compatibility of a measure with norms administered by the Court. Lasok refers
particularly to the EC Treaty, because it trumps all other norms under Community law. A Council
Regulation must also be compatible with principl es of Community law, and international obligations
of the Community. A Commission Regulation must be compatible with all these acts, plus with all
Council Regulations. To illustrate this with a hypothetical, if the HS Convention was altered so as to
provide that all meat products with a salt cont ent above 1.2% are covered by heading 0210, an
importer could attack Commission Regulation 1871/ 2003 as being incompatible with heading 02.10
of the Combined Nomenclature, and the C ourt would reverse its standing case law on the
interpretation of heading 02.10. The situation in Gausepohl and Commission Regulation 535/94 is
not such. There was no change in the superior norm looked at in Gausepohl, i.e., heading 02.10 of the
HS and or the Combined Nomenclature. The onl y legislative change was a Commission Regulation
introducing a minimum salt content below which a preser vative effect can be excluded. As explained
in response to question 113, the legal effect of such Commission Regulation can never be to change
the scope of the heading 02.10 in the higher ranking Council Regulation as interpreted by the Court.

66. To explain why Thailand's attempt to assimilate Commission Regulation 535/94 to the
Council Regulation 3400/84 and a very specific sequen ce of cases is wrong, it is useful to briefly
recap this sequence of cases and regulations.

67. In Dinter the Court was faced with a customs decision that classified peppered and salted
poultry under chapter 2. The customs authority refu sed to consider it as seasoned within the meaning
of chapter 16 of the CN because the salt and pe pper were neither organol eptically nor optically
perceptible. The Court applied a general prin ciple of interpretation according to which the
classification under the Customs Tariff must be sought in the objective characteristics and properties
of the product.
24 The Court considered such sensory test as subjective and not capable of meeting the
requirement of a classification based on objective characteristics.

68. Shortly after Dinter the Council inserted Additional Note 6a, which requires organoleptic and
optical test for the determination of seasoning.

69. That Additional No te was challenged in Van de Kolk as being incompatible with the principle
of classification based on objective characteristics as interpreted in Dinter and the Convention on the
Nomenclature (the predecessor of the HS). The Court found that the Council had not violated those
norms for the following reasons:

[…] it must be pointed out that that judgement was delivered in different
circumstances from those in the present cas e; there was no provision in a regulation
on the interpretation of the Common Customs Tariif and at the time of the national
authorities' inspection of the goods Standard ISO 4120 had not yet been devised.

23 Lasok, The European Court of Justice Practice and Procedure (2 nd ed., London, 1994), p. 495
(Exhibit EC-36).
24 Judgement of the ECJ in Case C- 175/82Dinter (Exhibit EC-12), para. 9.

In those circumstances, it must be concl uded that in laying down the abovementioned
criteria, the Council did not infringe the principle of legal certainly and did not
otherwise exceed the discretionary power conferred on it in that field.
Nor is the note at issue contrary to th e Convention on the Nomenclature under which
the Contracting Parties undertake not to make changes in the chapter or section notes
in a manner modifying the scope of the chap ters, sections and h eadings (Article II
(b)(ii)).
Additional Note 6(a) does not change the scope of the chapters, sections and headings
of the Nomenclature. It merely specifies the criteria to be taken into account for
classifying certain goods under a particular heading of the Common Customs Tariff
in accordance with the interpretation given in relation to that heading by the Customs
Council.
25
70. Contrary to what Thailand argues in para. 8 of its second oral statement, the reference by the
Court to the fact that the Council had legislated cannot be misunderstood to mean that the Court was
bound by the Council's Regulation. This is en tirely non sensical, because the impugned measure at
issue before the Court was precisely that C ouncil Regulation inserting Additional Note 6a! The
Court's reference to the Council legislation as part of the change of circumstances merely reflects
judicial self-restraint from second guessing the C ouncil's technical Regulation that provides for
uniform standards on sensory testing throughout the Community on the basis of an ISO standard.
However, the key change of circumstances noted by the Court was the ISO standard which confirmed
the objectivity of sensory testing thereby rendering the Court's criticism in Dinter moot.

71. Moreover, Thailand conveniently ignores that Council Regulation 3400/84 was also
scrutinised for whether it modified the scope of th e heading contrary to the Communities obligations
under the Convention on the Nomenclature. In Van de Kolk , the Court only upheld the Additional
Note providing for sensory tests as inserted by th e Council because it merely concerns the technical
means for an objective assessment of the characterist ics of a product, but does not alter the scope of
the headings concerned. By contrast, the insertion of a criterion that all meat products with a salt
content exceeding 1.2 % can be considered as " salte d" under heading 02.10 ev en if such salting does
not ensure preservation would significantly alte r the scope of heading 02.10 as consistently
interpreted by the Court in Dinter and Gausepohl. The EC refers to its response to Question 97 and
Exhibit EC-32.

115. Which of Additional Note 6(a) to the Combined Nomenclature or the Dinter judgement
take precedence regarding the appropriate criterion to be used to identify whether or not a
meat is "seasoned" for the purposes of Chapter 16 (i.e. detection through sensory perception or
by microscopic means)?

72. Currently Additional Note 6a as upheld in Van de Kolk applies. As the Court confirmed in
that case, its criticism of sen sory techniques made in Dinter has been superseded by a change of
circumstances and is therefore moot. Yet (to avoid any misunderstanding) it should be noted that the
legal effect of the Dinter judgement providing a preliminary ruling on compatibility with Community
law of the German authority's classification decision in that particular case and providing a number of
legal interpretations including the interpretation of heading 0210 remain otherwise valid.

25 Judgement of the ECJ in Case C-233/88 Van de Kolk (Exhibit THA-35), paras. 16-18.

116. The minutes of a meeting of the EC Customs Code Committee in February 2002
(Exhibit THA-23) indicate that the Committee considered it necessary to amend Additional
Note 7 to Chapter 2 "to introduce the condition of 'long-term preservation'" (emphasis added).
Why was such an introduction necessary in light of what the EC has submitted regarding the
importance and effect of the Dinter and Gausepohl judgements?

73. As explained in responses to Questions 113, it was not necessary under Community law to
"introduce" a new legal concept of "preservation" or "long-term preservation", because that concept
already existed. The term "introduce" in that context describes the act of inserting a clarification
which the Commission had not considered necessary with a view to standing case law interpreting
heading 0210 as requiring salting for long-term preservation ( Dinter and Gausepohl). However, the
experience of erroneous national BTIs made it desira ble to restate the meaning of heading 02.10 as
interpreted in Dinter and Gauspohl. The EC recalls its response to Panel Question 45 following the
first meeting clarifying that minutes of the EC Customs Code Committee have no legal effect
whatsoever.

117. Please provide copies of BTIs of instances wh ere the products at issue were classified
under heading 02.07 rather than heading 02.10 before the introduction of Regulation 1223/2002
and Commission Decision 2003/97 of 31 January 2003.

74. The EC can identify no such BTIs. However, the EC repeats the warning that it gave in
para. 51 of its Second Written Submission about the dangers of relying on BTIs as comprehensive
indication of customs practice. The EC would add that it is possible under Community law to
withdraw an application for a BTI where the outcome is considered unfavourable by the importer.
The absence of such BTIs has therefore no legal c onsequences, in particular on the scope of heading
02.10 of the Combined Nomenclature as interpreted by the Court as requiring long-term preservation.
In any event, the EC recalls that it has provided some examples of BTIs interpreting 02.10 as covering
meats preserved by some of the techniques mentioned therein (Exhibit EC-25).

118. What is the distinction between "pres ervation" and "long-term preservation"?

75. The EC believes that the distinction posited in the questions is not relevant for this case.
Whereas EC law on classification contains the term 'long- term preservation', the word 'preservation' is
not to be found in HS heading 02.10. Rather, the EC has shown that heading 02.10 has at its heart a
concept which the EC in these proceedings has termed 'preservation' but which it might have as easily
have referred to as 'long-term pres ervation'. Consequently, the distin ction which the Panel refers to
has no bearing on this dispute. 'Long-term preservation' is the phrase that the EC has used to represent
the preservation criterion that is inherent in headin g 02.10, whether in the Harmonised System, or the
EC's Schedule, or the EC's Combined Nomenclature.

119. At the time the EC concluded its Schedule, was there evidence of the existence of trade
in meats under heading 02.10 which, through salting, were preserved for less than a few
months?

76. Trade in salted chicken appears to have be gun only in 1996 (Thailand) and followed by Brazil
in 1998. The salted beef that was at issue in the Gausepohl case was not classified under
heading 02.10. The EC is not aware of any other trade in products of this type.

120. With respect to Brazil's suggestion in its reply to Panel question No. 3 that the Panel
should draw adverse inferences regarding the EC's failure to provide certain information
requested of it by the Panel, is there any basis for the Panel drawing similar inferences
regarding Brazil's and Thailand's refusal to pr ovide export classification practice for the
headings at issue?

77. The EC notes there are a number of conditions for drawing of adverse inferences. The first
one is refusal by the party who has evidence to c ooperate. The EC never refused or failed to co-
operate. The EC provided the requested BTIs in Response to Question 34 (Exhibit EC-24).

78. Since both Complainants con ceded the existence of export classification practice as alleged
by the EC in its statistics and sample document s and in any event failed to cast doubt on the EC's
substantiated allegations by providing counter-evidence, the Pane l can consider this point undisputed
without drawing adverse inferences. That said, th e EC considers that the conditions for drawing of
adverse inferences against the Complainants would be fulfilled, because the Complainants failed to
provide counterevidence despite the specific request of the Panel to do so.

121. What relative weight should the Panel acco rd to inferences that may be drawn for the
headings at issue in this case from:

 (a) the structure of Chapter 2 of the HS and its predecessors;

 (b) the Explanatory Notes that are rele vant to Chapter 2 of the HS and to its
predecessors; and

 (c) General Interpretative Rule 3 of the HS.

79. All parties to the dispute are agreed that Gene ral Interpretative Rule 3 is not applicable in the
present case. The mere existence of a controversy regarding the classification of a product does not
mean that the condition for applying that Rule is sa tisfied. From the point of view of the EC, there is
ample basis for reaching a clear interpretation of heading 02.10 vis-à-vis the product at issue.

80. Regarding the relative weight to be accorded to the elements mentioned in points (a) and (b),
the EC observes that, in its view, the question is h ypothetical since all the factors mentioned lead in
this case to the same conclusion. However, were the question to arise the EC notes, first, that
Explanatory Notes are not legally binding documents , and are therefore necessarily of a subsidiary
status. It is significant that the WCO did not refer to them in its letter of advice. Secondly, the HS
Explanatory Notes are reproduced neither in the EC 's Schedule nor in its Combined Nomenclature,
nor in its Explanatory Notes. In contrast, the terms of Chapter 2, and consequently its structure, are
found in both the Schedule and the CN.

81. Finally, the EC refers to its observations on the pertinence of GIR3.

82. For these reasons it is the EC's view that the structure of Chapter 2 and its predecessors is of
most relevance among the factors mentioned.

122. Do the parties consider that actual knowl edge during negotiations of a document or
instrument is necessary on the part of some/all negotiators involved in the negotiation of a treaty
in order for it to qualify for consideration as "preparatory work" and/or "circumstances of
conclusion" of a treaty under Article 32 of th e Vienna Convention? If so, please provide
support for this view. If not, please provide support for this view.

83. Under public international law, the precise de gree and nature of the knowledge of preparatory
documents and circumstances of the conclusions vari es between different types of treaties, and is
assessed on a case to case basis depending on the st atus of the parties as original or acceding
Members.
26 As regards WTO law, the EC believes th at the fundamental criterion of the 'common
intention' of the parties, as emphasised by the Appellate Body,27 has an important bearing on the issue.
The term common intention assumes "knowledge" of the parties. Yet, it is not conceivable that the
interpretation of WTO obligations and concessions depends on the proof of actual knowledge of all
market access negotiators. Neith er can the interpretation of oblig ations differ between original
Members and Members that acceded later. At the sam e time is clear that any documents relied upon
in an interpretation of WTO obligati ons according to Article 32 of the Vienna Convention must have
been in the public domain or accessible to WTO Members.

84. The EC considers that the Panel need not d ecide whether "actual" or "presumed" knowledge
is determinative for the purpose of this case. The common intention of the parties negotiating the
Uruguay Round Agreements was to respect the HS nomenclature and to use the level of parties' duties
or bindings in 1986 as a base point. This is reflected in the Modalities Agreement.

85. Indeed, the only document that has been re ferred to by any party in this dispute as
'preparatory work' has been the Modalities Agreemen t, and there is no doubt that this was known to
all the negotiating parties during the Round.
28

86. Even if the Panel were to consider that un ilateral developments of EC law as of 15 April 1994
were relevant in the interpretation of the EC's sch edule as "circumstance of the conclusion", it would
need to dismiss Brazil's assertion that both its nego tiators and those of other parties had (actual or
presumed knowledge of Regulation 535/94 but not of the preservation criterion at the heart of
Community law.29 First it should be pointed out that Brazil provided no supporting evidence for its
statement that it had knowl edge of Regulation 353/94. 30 Moreover, it is significant that Thailand,
which also participated in the negotiations, has made no such claim. If Brazil was aware of the
implications of Regulation 535/94 in early 1994 then it is perhaps surprising that it was another four
years before Brazilian exporters began their exports of frozen sa lted chicken (1998), while Thailand
started already in 1996.

26 The ICJ relied on presumed knowledge (something a party ought to have known) in its Advisory
Opinion of 8 June 1960 – Constitution of the Maritime safety Comm ittee of the inter-governmental Maritime
Consultative Organization, ICJ Reports 1960, p. 170. However, see also the rulings referred to and criticised by
Sinclair, The Vienna Convention on the Law of Treaties, (2nd Edition, Manchester 1984), pp. 141-147.
27 Appellate Body Report, EC – Computer Equipment, paras. 88 and 93.
28 The EC recalls that it has also argued that th e Modalities Agreement should be considered under
Article 31 of the Vienna Convention. In this respect it would like to draw the attention of the Panel to a decision
of an arbitral panel established pursuant to Article 2008 of the North American Free Trade Agreement which
suggested that the Modalities Agreement is part of the travaux préparatoires and circumstances of conclusion of
the WTO Agreement on Agriculture, as well as being part of the context under Article 31(2): Tariffs Applied by
Canada to Certain US-Origin Agricultural Products , http://www.nafta-sec-alena.org/app/DocRepository/1/
30 In delivering its Second Closing Statement Brazil's representative explained the system that it
applied for monitoring national developments, but did not indicate how it had been used during the Uruguay
Round.

87. In any event, the EC has demonstrated that even as of 15 April 1994, the requirement of
salting for the purpose of long-term preservation w as well-enshrined in Community law and remained
entirely undisturbed by Commission Regulation 535/ 94 (See in particular Responses to Panel
Questions 113 and 114). If Br azil pretends knowledge of Commi ssion Regulation 535/94 because it
suddenly took upon itself the burden to screen unilate ral developments in the EC, it cannot deny the
existence of the long-term preservation requirement which was well-enshrined in the interpretation of
heading 02.10 of the Combined Nomenclature as in terpreted by several judgements of the Court of
Justice. As detailed in Response to Panel Qu estion 110 all of these judgements were publicly
available and even notified in summary in the Offici al Journal which is read by the Brazilian embassy
in Brussels (as Brazil explained to the Panel at the second hearing).

88. Brazil cannot have it both ways. If it relies on Community law as of that date, it must accept
the entire body of EC law as publicly accessible at that moment. If Brazil considers it too
burdensome to continuously follow the development of complex bodies of law such as the Common
Customs Tariff, it cannot selectively rely on one particular element such as Commission
Regulation 535/94 taken entirely out of context.

QUESTIONS POSED BY BRAZIL

1. In paragraph 17 of the second oral statement, the EC states that it is "not distinguishing
between products on the basis of their purposes, but on their essential characteristics at the time
they are examined by the customs authorities" . Please clarify whether the phrase "essential
characteristics" is the same as the phrase "objec tive characteristics". If these phrases do not
have the same meaning, please explain why.

1. The EC does not see any significant difference between the two expressions.

2. Is there any type of meat that deeply and homogeneously impregnated with 1.2% of salt
can be preserved for "many" or "several" months without chilling or freezing? If so, please
provide the types of meat.

2. The EC assumes that Brazil is speaking of common salt (sodium chloride) such as was used
in the subject matter of this dispute. The EC does not know of any such meat.

3. Please indicate where in the Gausepohl case, or under Community law, is the principle
of long-term preservation defined as preservation for "many" or "several" months.

3. Because of the paucity of disputes on this i ssue the matter has not been the subject of a
specific definition. The EC has given ample guidan ce to Brazil and the Panel as to how the criterion
of long-term preservation is enshrined in Community law.

4. How does the EC reconcile its position that further extension of a product's shelf-life
does not change classification under heading 0210 with the reasons set out under the Annex to
Regulation No. 1223/2002 that salted chicken cuts is meat frozen for long-term preservation? In
other words, if freezing for further preser vation is allowed under heading 0210, and does not
change classification under that heading, why are salted chicken cuts, which are frozen for
further preservation, not classified under heading 0210?

4. Regulation 1223/2002 described the product wh ich it was regulating as 'chicken meat frozen
for long-term conservation'. The word 'further' was not used in the Regulation, and in particular it did
not describe the meat as 'frozen for further pr eservation'. The EC therefore does not understand the
questions which Brazil poses.

5. Brazil provided Schedule LXXX in Exhibit BRA-1. Please inform whether the tariff
item numbers 0207.41.10 and 0210.90.20 expressed in column no. 1 of Schedule LXXX were
taken from or are the same as those in the EC 's Combined Nomenclature. If they were not
taken from or are not the same as the ones found in the EC's Combined Nomenclature, please
provide the nomenclature from which these tariff item numbers were taken from.

5. The EC believes that it demonstrated the para llel nature of the Combined Nomenclature and
Schedule LXXX in Annex 1 to its First Written Submission.

ANNEX C-9

COMMENTS BY THE EUROPEAN COMMUNITIES
ON THE COMPLAINANTS' RESPONSES TO QUESTIONS
FOLLOWING THE SECOND SUBSTANTIVE MEETING

(9 December 2004)

I. INTRODUCTION
1. The European Communities thanks the Panel for providing it with an opportunity to comment
on the answers provided by Brazil and Thailand to the Questions from the Panel and the EC following
the second substantive meeting.

2. The invitation by the Panel to comment, as the European Communities understands it, is
confined to new factual or lega l arguments made by the Complain ants in response to the further
questions from the Panel. The Complainants have , however, largely repeated points made already
before. Therefore, the fact that the European Communities does not specifically comment on them
does not mean that they are no longer disputed by the European Comm unities. The European
Communities refers the Panel to its positions on facts and legal arguments as previously expressed. In
addition, the European Communities has sought to li mit its comments to new elements that appear
relevant to the Panel's deliberations.

COMMENTS ON BRAZIL'S ANSWERS TO THE PANEL'S AND EC'S QUESTIONS

Question 81

3. Brazil persists in the pretence that the Ur uguay Round 'verification period' covering the
months preceding 15 April 1994 was used for negotia ting modifications to parties' draft schedules,
and claims that Regulation 535/94 constituted such a modification.

4. As the EC has explained,
1 the purpose of the verification period was to ensure that Members'
schedules complied with the concessions they had made during the negotiations that ended on 15
December 1993. The kind of issue to which negotia tors' attention was directed is reflected in the
issues raised by countries participating in th e following meeting of the Trade Negotiations
Committee, on 30 March 1994. 2 None of these issues concerned aspects of national practice. On the
contrary, all the points made by participants in the discussion on the verification process concerned
matters that were apparent in the texts of the Sche dules. In particular, there were suggestions that the
concessions appearing in those texts did not reflect the commitments made by the participants in the
course of the negotiations. In the agricultural sector, above all, the particularly complex nature of the
changes being made prevented participants using the verification stage for other purposes.

5. For this and other reasons detailed in our second submission,
3 the assumption of the parties
must have been that national de velopments would not change the substance of the concessions, at
least unless they were brought to the attention of the negotiators.

1 EC Second Written Submission, paras. 108 et seq.
2 MTN.TNC/43, 1994 (Exhibit EC-37). For example, the US complained that the Korean Schedule did
not reflect the commitment made during the negotiations regarding the 'chemical harmonization initiative', and
that the EC did not intend to commence the implementation of its agriculture concessions until mid-1995.
3 EC Second Written Submission, paras. 94 et seq.

6. Notwithstanding this, Brazil opines that had any party an "objection or an issue regarding the
EC's definition of "salted meat" they had until 25 March 1994 to bring it up and discuss it with the
EC". As the EC has shown, Brazil was also aware of the Gausepohl and Dinter judgements of the
European Court of Justice. Had Brazil been of th e view that Regulation 535/94 altered the definition
of "salted meat", and that such a definition formed part of the EC's concessions, it surely would have
been prudent for Brazil to check with the EC that its understanding of Regulation 535/94 is correct, in
the light of those judgements. Brazil admits that it never requested such clarification.

Question 82

7. The EC's argument is that to operate a separa te process of salting is economically inefficient,
and has no technical advantages. The first point we have made already,
4 and the second point is made
in Professor Honikel's opinion (Exhibit EC-32).

8. Brazil and Thailand were shipping to the EC over 200,000 tonnes of frozen salted chicken in
2001, and Brazil has evidenced this with invoices a nd other shipping documents. However, for the
period following the disappearance of the tariff a dvantage in 2002/03 there are no such documents,
although total imports of frozen chicken continued at the same level. All th at Brazil has produced to
support a supposed continuing demand for salted chicken are assertions from traders. Furthermore, the
most recent examples (Exhibit BRA-41) refer exclus ively to past behaviour, and give no indication
that the firms continue to import frozen salted chicken. There are no invoices or similar documents.

9. Processors who intend to add salt to chicken ma y be content to receive chicken that is already
salted. But the cost saving is minimal, since the processors ordinary operations permit the addition of
salt with minimal cost.

10. The supposed advantage of salting in preventing dr ip loss is irrelevant in regard to meat that
is to be further processed, because (as noted by Prof. Honikel) the processor cuts up the meat before it
is unfrozen.

Question 86

11. Brazil asserts that the chicken meat currently exported to the EC is 'impregnated with a
minimum of 1.2% salt', but it has provided no suppor ting evidence. None of the letters in BRA-30 or
BRA-41 that assert the existence of a demand for salte d chicken mentions the concentration of salt in
the meat. This is especially notable in those that claim specific advantages for salt.

Question 118

12. Brazil apparently believes that the present pro ceedings consist of an indictment of the EC for
making use of a criterion of 'long-term preserva tion' which it says is insufficiently precise.
Paradoxically, Brazil at the same time maintains that the appropriate criterion for heading 02.10 is an
indeterminate degree of salting, smoking or drying.

13. The real issue is quite different. It is simply whether chicken covered by the two EC measures
– i.e., with up to 3% salt – was entitled to treatme nt under heading 02.10 of the EC's Schedule. The
Complainants have not established that it was.

14. The EC has shown that the central criterion of heading 02.10 is one of preservation. However,
even if it were merely one of 'preparation', that would nevertheless imply a definite change of state.

Question 119

15. Contrary to Brazil's statement, the EC has not suggested that 'a salt content of 1.2% alone
preserved meats for a period of a few months'.

16. With regard to the WCO list presented as Exhibit BRA-43, the EC does not deny that,
somewhere in the world, there may at some time have been trade in 'salted meat of chicken', any more
than it denies the existence of trade in 'salted edible offal of Tibetan yak' and 'salted meat of beavers'.
What it does say is that it has no knowledge of such trade. Furthermore, far from throwing any doubt
on the criterion of preservation that lies at the heart of heading 02.10, the items on the list give support
to it. The exotic nature of many of the meats suggests that trade would not have developed had it
depended on the availability of re frigeration to preserve the meat. In other words, the salting must
have brought about the preservation of the meat.

17. Brazil says that the various salted meats on the list are not recognisably different from their
unprepared forms, but its claim is mere assertion si nce its knowledge of the meats derives exclusively
from the list, and that provides no descriptions. Nor does Brazil even have support for its claim that
the meats on the list do not have individual names. It is quite evident that the list does not make use of
such names. For example, under heading 0210.20 ther e is an entry for 'dried beef'. There is no
mention of 'charque', 'jerky' or 'viande de grison', although that is in practice how such meat is known.

Question 121

18. Brazil refers to a concern in the 1937 Nomenc lature that whether m eat was fresh or frozen
should not be a major distinction. What it cannot expl ain is why that concern did not extend to salted,
etc., meat, if, as it claims, such meat was not preserved in this way. If the salting, etc., had not
preserved the meat, then it would require exactly the same treatment as fresh meat. However, the
Nomenclature does not mention the possibility of re frigeration for such products. To say 'this was not
a concern for salted meat because salt meat was not considered a method of preservation' is nonsense.

Question 122

19. Brazil cites Sinclair selectively in order to give tendenti ous support for its case. It fails to
make clear that the topic being discussed in the ex tract is the very specific one of the status of
preparatory work in regard to parties that join an existing multilateral treaty. For the benefit of the
Panel the EC presents the learned author's comments in full (Exhibit EC-38). As noted by the EC in
its own response to Panel Question 122 (footnote 26), there is mixed jurisprudence on the issue and
the author notes that his view is at odds with some international judicial authority.

20. The Panel will note the extract the author takes from the majority opinion in the Young Loan
arbitration. Although this case also concerned accession to a multilateral agreement, the opinion
voices considerations of a more general character on what is preparatory work:

A further prerequisite if material is to be considered as a component of travaux
préparatoires is that it was actually accessible and k nown to all the original parties.
Drafts of particular articles, preparatory documents and proceedings of meetings from
which one member or some members of th e contracting parties were excluded cannot
serve as an indication of common intentions and agreed definitions unless all the
parties had become familiar with the documents or material by the time the treaty was
signed.
21. Thus, preparatory works are exemplified as "drafts of particular articles, preparatory
documents and proceedings of meetings".

22. Under the vague criterion of 'circumstances of conclusion', Brazil seeks to infiltrate material
that would never qualify as 'preparatory work'. In fact, if unilaterally produced documents could
qualify as having influence on the interpretation of treaties merely by being pronounced to be
'circumstances of conclusion', the whole concept of 'preparatory work' would risk being undermined.

23. The EC refers to its response to Panel Ques tion 122 where it highlighted again that the only
preparatory document submitted in this dispute is the Modalities Agreement the purpose of which was
precisely to avoid disparity in the interpretation of the schedules through late r reference to shifting
'circumstances of conclusion'.

24. On a more general note, the EC observ es that although in the present instance the
interpretation proposed by the Complainants has focused on the benefit it accords to their exporters,
the same interpretation would extend to all WTO Members and in respect of all measures adopted
unilaterally during the Uruguay Round negotiations wh ether by the EC or other Members. Brazil's
only qualification is that it should be established la ter that they had been published somewhere at
some point before the signing. Apparently the evening before would have been sufficient.

25. Finally, the EC observes that, as usual in addressing such questions, Brazil is unable to
explain, and indeed makes no attempt to explain, how its reference to Regul ation 535/94 can be said
to confirm the interpretation of the Schedule that it deri ves from the analysis of its ordinary meaning
and context. Its continuing silence on this central issue speaks volumes.

Brazil's Response to EC Question

26. The extracts that Brazil has made from its supporting literature only serve to underline the
fact that chicken impregnated with up to 3% salt is not preserved. Nothing that Brazil has presented in
any way answers Professor Honikel's conclusion (Exhibit EC-32) that the minimum salt content for
preservation of meat is 7%.

COMMENTS ON THAILAND'S ANSWERS TO PANEL'S AND EC'S QUESTIONS

Question 118

27. Contrary to Thailand's assertion, the EC has never said that 'preservation lies at the heart of
Chapter 2'. Rather, it has said on several occasions that this notion lies at the heart of heading 02.10.

Question 119

28. To put the record straight regarding inform ation on imports, the EC would like to make clear
that the volumes of 'other salted meat' imported pr ior to the use of this subheading by frozen salted
chicken (that is, prior to 1996) were extremely sma ll. In most years it seems likely that the volume in
question was achieved by the import of a single cont ainer. In this case, there is also a significant
chance that the figure was the result of a record ing error. Even if, after very considerable
administrative effort, the date and location of th e import could have been determined, there would
have been no guarantee that the salt content of the particular consignment would have been recorded,
even supposing the relevant records were still in existence.

29. As regards Thailand's comments on the Gausepohl case, the EC notes that, although the
Oberfinanzdirektion initially issued a Binding Customs Tari ff notice under subheading 0210 20 90, it
later rescinded this and substitu ted a classification under subhead ing 0202 30 90. The EC does not
know why the initial ruling was made, but is certain that Thailand assumes too much in saying that it
implies the existence of trade in salted meat preserv ed for less than a few months. In any event, the

EC does not claim to know whether or not there was some trade in slightly salted meat. It merely
denies that it would have been classifiable as salted, etc., meat under what is now heading 02.10.

Thailand's Response to EC Question

30. The EC notes that Thailand fails to explain wh y Additional Note 6(b) was not referred to in
the Gausepohl case, if it stood for the proposition that heading 0210 referred simply to methods of
preparation. Thailand can do no more than say that it was "not aware" why the note was not cited,
and that the parties and the Court "could have relied on it". The reason it clear. It was undisputed in
the EC (importers, Member States and Commission) that heading 0210 applied to meats which had
been preserved, and it was undisputed that additional note 6(b) could not affect that understanding.

ANNEX C-10

RESPONSES BY CHINA TO QUESTIONS POSED BY THE PANEL

(14 October 2004)

 China appreciates this opportunity to respond to th e Panel's questions posed to third parties on
30 September 2004.

1. Has the product at issue in this case ever been imported to and/or exported from China?
If so, please provide the details of classificati on practices that have been adopted by China
concerning such product.

 To China's best knowledge, China had imports and exports under subheading 02109000 of
Customs Import and Export Tariff of the People's Republic of China ("Customs Tariff") in 2000 and
2001, and had no imports and exports under the same subheading since 2002. Descriptions of goods
for imports and exports under subheading 02109000 read as follows:

"Other, including meat and meat offal, salted, in brine, dried or smoked; edible flours
and meals of meat or meat offal."
 China had imports and exports under subheading 02071400 of Customs Tariff in 2000, and
China had no imports and exports under the same subheading since 2001. Descriptions of goods for
imports and exports under subheading 02101400 read as follows:

"Chicken cuts and offal, frozen."
 For the Panel's information, relevant HS code and description of goods of China's Schedule of
Concessions – Schedule CLII read as follows:

HS Description
0210 Meat and edible meat offal, salted, in brine, dried or smoked; edible
flours and meals of meat or meat offal
02109000 - Other, including edible flours and meals of meat or meat offal
0207 Meat and edible offal, of the poultry of heading No. 0105, fresh, chilled
or frozen"
02071400 - Of fowls of the species Gallus domesticus
-- Cuts and offal, frozen

2. In paragraph 16 of its third party submission, China states that the only situation that
chicken meat that has been both frozen and sa lted could fall under heading 0207 is when frozen
chicken meat is "packed with salt as a temp orary preservative during transport" rather than
"impregnated with salt in all parts" with a mini mum salt content of 1.2%. With regard to this
statement, how does China consider chicken meat impregnated with salt in all parts could be
distinguished from chicken meat packed wi th salt as a temporary preservative during
transport?

 The above-mentioned hypothetical reasoning in China's third party submission is intended to
highlight the lack of textual support from the Harmonized System and its Explanatory Notes in the
EC's reasoning as adopted in its Commission Regulation (EC) No. 1871/2003 of September 11, 2003.

 As explained in its third party submission, China notes that the note to Chapter 2 of the
Harmonized System and its Explanatory Notes explicitly provides that fresh (meat) includes meat and
meat offal, packed with salt as a temporary preservative during transport . Besides, there are no
identical or similar provisions or terms explaining the terms "chilled" or "frozen" in the note to
Chapter 2 of the Harmonized System and its Explanatory Notes. Therefore, China understands that
the note to Chapter 2 in the Harmonized System and its Explanatory Notes can not be understood as to
imply that frozen meat also includes meat and meat offal, packed with salt as a temporary preservative
during transport . Furthermore, even conceding that the reasoning for fresh meat could be read to
apply equally to frozen meat (this concession is only made by China for argumentative purpose),
frozen meat shall include meat and meat offal, packed with salt as a temporary preservative during
transport only and nothing else.

 China thanks this Panel for granting this oppor tunity to present its views on issues related to
this proceeding, and hopes that this Panel will finds the above points helpful.

ANNEX C-11

RESPONSES BY THE UNITED STATES
TO QUESTIONS POSED BY THE PANEL

(14 October 2004)

 The United States appreciates this opportunity to respond to the Panel's questions about
certain statements concerning the United States that the parties to this dispute made in their
submissions. With respect to its answers to all these questions, the United States would like to recall
its observation that this dispute concerns not customs classification as such, but rather tariff treatment
– and in particular whether the European Communiti es ("EC") is providing tariff treatment to certain
products that is less favorable than that provide d for in its schedule of tariff concessions for the
Uruguay Round, Schedule LXXX.
1 Consequently, the United States has not taken a view on the
correct customs classification of the frozen boneless chicken cuts in dispute. 2 Turning now to the
specific questions of the Panel:

1. With respect to the 1991 US tariff classi fication ruling on the classification of
mechanically de-boned chicken meat from Canada referred to by Brazil in paragraph 79 of its
first written submission, does the US agree with Br azil's assertion that it is possible to imply
from that ruling that meat that has been frozen and cured should not be classified under
heading 0207?

 With respect to the 1991 US tariff classificati on ruling referred to by Brazil in paragraph 79
of its first written submission, the United States agrees that the product that was the subject of that
ruling was classified under heading 0210. We also note, however, that the ruling does not pertain to
the product that is at issue in this dispute.

2. The US is requested to comment on Braz il's argument in paragraph 95 of its first
written submission that the two 1999 US classifi cation rulings to which it refers show that
frozen smoked salmon is to be classified under heading 0305 concerning, inter alia, fish that has
been salted, in brine, dried or smoked rather than heading 0303 concerning frozen fish. In
particular, is Brazil's interpretation of these ru lings correct? If so, is this interpretation
consistent with long-standing classification pr actice in the United States? Please provide all
relevant support.

 The two rulings to which Brazil refers in paragraph 95 of its first submission both classify
frozen smoked salmon under heading 0305. The United States observes that neither of the rulings
specifically discusses heading 0303 or heading 0304 (the heading referred to Brazil in paragraph 94 of
its first submission), or analyzes why the fish is classified under heading 0 305 rather than heading
0303 or heading 0304. Moreover, neither of the rulings specifically discusses whether the
classification decision was based on the preparati on or the preservation process to which the product
was subject. Thus, the United States is not in a position to confirm Brazil's interpretation of the
rulings reflected in paragraphs 94 and 95 of its first written submission.

1 Third-Party Oral Statement of the United States, para. 2.
2 Id. at para. 7.

3. The US is requested to comment on Braz il's argument in paragraph 96 of its first
written submission that, in the US, bacon that has been salted/smoked but also frozen will be
treated as salted/smoked bacon rather than frozen bacon. In particular, is Brazil's assertion
correct as a general principle in the United States?

 In support of its statements in paragraph 96 of its first submission, Brazil refers to a bill of
lading, in which the importer clai ms tariff treatment for its frozen sliced bacon product under heading
0210. The United States notes that an importer's claim for tariff treatment under a particular
subheading does not represent an official statem ent by US customs authorities on the correct
classification of the product. In a 1996 ruling, ho wever, US customs authorities ruled that frozen
bacon from Denmark was properly classified under heading 0210.
3

4. During the first substantive meeting, the EC referred to a US customs ruling of
November 1993 (exhibited in EC-21) and noted that the ruling found that the product at issue
fell under heading 0201 or 0202 (depending on wh ether it was fresh or frozen) rather than
under heading 0210. Could the US indicate whether it agrees with the view expressed by the EC
that this ruling stands for the proposition th at frozen meat that has been deeply and
homogeneously impregnated with salt should be classified under heading 0207 rather than
under heading 0210 of the EC Schedule.

 With respect to the 1993 ruling referred to by the EC, the United States notes that US customs
authorities described the product at issue there as "sim ilar to fresh beef sprinkled and packed in salt,"
whereas the product in this case is described as "deeply and evenly impregnated" with salt.
4 It is not
clear how similar the two products ar e, and thus the United States is not in a position to confirm the
proposition stated in the final sentence of this Question.

3 New York Ruling Letter NY A80393 (March 7, 1996), as modified by Customs Ruling Letter HQ
960585 (July 20, 1998). See Exhibit US-1
4 New York Ruling Letter NY A80393 (March 7, 1996), as modified by Customs Ruling Letter HQ
960585 (July 20, 1998). See Exhibit US-1.

ANNEX C-12

RESPONSES BY THE WORLD CUSTOMS ORGANIZATION
TO QUESTIONS POSED BY THE PANEL
AFTER THE FIRST SUBSTANTIVE MEETING

(29 October 2004)

 This is with reference to your letter of 30 September 2004 requesting the WCO to respond to
nine questions posed in connection w ith the WTO Dispute Settlement Panel on European
Communities – Customs Classification of Fr ozen Boneless Chicken Cuts pursuant to the requests by
Brazil in document WT/DS269/3 and Thailand in document WT/DS286/5.

 The WCO Secretariat's response is set out belo w. For ease of reference, the questions have
been reproduced and the response follows immediately after each question:

1. What factors and material are considered when deciding the heading under which a
product should be classified, including factors and material considered when interpreting the terms
of headings and any relevant Explanatory Notes? In general terms, how are such factors and
material assessed and applied to the product in question?

 First of all, it should be pointed out that classification in the Harmonized System (HS) is
based on the wording of the legal texts, i.e., the terms of the headings and any relative Section,
Chapter and Subheading Notes and the General In terpretative Rules of the Harmonized System.
Furthermore, the HS Explanatory Notes (the offici al interpretation of the Harmonized System), read
in conjunction with the legal texts, are taken into consideration.

Note: The Explanatory Notes to the Harmonized System normally follow the systematic order of that
instrument. They provide a comment ary on the scope of each headin g, giving a list of the main
products included and excluded, together with technical descriptions of the goods concerned (their
appearance, properties, method of production and uses) and practical guidance for their identification.

 When goods are classified in the Harmonized Sy stem, it is always done on the basis of the
objective characteristics of the produc t at the time of importation. The factor which determines the
essential character of a product will vary from one produc t to another. It could, for example, be the
nature of a material or the role of the constituent material. The determination of the essential character
of a product can be done in several ways. The most obvious is through a visual inspection of the
product, including indications on the packing. Reference can also be made to accompanying
documents. In some cases, however, laboratory analysis may be required.

In the absence of clear criteria in the HS legal texts or in the HS Explanatory Notes, it is the
normal perception that a term or an expression should reflect the common meaning, which would
normally be the same as that used in trade. Theref ore, in such cases the attributed lexicographic and
commercial definitions could be applied when determining the characteristics of a product.

Since headings 02.07 and 02.10 cover "frozen" a nd "salted" products, respectively, it would
have to be determined whether the product at issu e has essentially the character of a "frozen" or of a
"salted" product. It would probably be straightfo rward to determine whether or not the product is
"frozen", whereas recourse to laboratory analysis mi ght be required to determine whether it can be
regarded as a "salted" product within the meaning of heading 02.10.

With regard to lexicographic definitions, th e Tenth Revised Edition (2001) of the Concise
Oxford Dictionary describes the term "freeze" ("frozen") as "be or cause to be very cold" and as a sub-
sense "store at a very low temperature as a means of preservation", whereas the term "salted' refers to
"season or preserve with salt".

2. What is the rationale behind the product coverage of the 4-digit heading and the 6-digit
heading levels in the Harmonized System?

 When the HS was developed, the principal objective was to meet the needs of all those
concerned with world trade (Customs, international trade statistics, transport, etc.). Consequently,
almost 60 countries and more than 20 internatio nal and national organisations (including GATT,
UNCTAD, ISO, ICC, ICS, and IATA) took part in the activities by making proposals, commenting on
proposals or participating in the decision making procedure by other means.

In general, the HS was developed from th e former "CCC Nomenclature" (Customs
Co-operation Council Nomenclature – CCCN
) that was applied by a large number of countries before
the HS entered into force on 1 January 1988, as we ll as the United Nations Standard International
Trade Classification (SITC), Rev. 2, which was co rrelated to the CCCN. However, account was also
taken of a wide range of other national Customs tariffs or statistical nomenclatures based on the
CCCN (Japan, Latin American Free Trade Associati on, EC's statistical nomenclature (NIMEXE), for
example) as well as classification systems not based on the CCCN (such as the Customs Tariffs of
USA and Canada). Furthermore, several transport nomenclatures were consulted.

The separate identification of goods or group of goods was, as a general rule, approved only if
there was agreement amongst participants that the goods or group of goods were significant in
international trade.

Consequently, the rationale behind the product co verage in the HS was to meet the needs of
those involved in international trade by including goods or groups of goods with a significant volume
of international trade, taking into consideration the structure of the nomenclatures consulted.

3. What is the rationale underlying the descriptio ns used in the various headings contained in
Chapter 2 of the Harmonized System? Among other things, why is it that, in relation to pig fat
covered under heading 02.09, no distinction is draw n between, on the one hand, frozen pig fat and,
on the other, salted pig fat? In other words, why were separate headings not considered necessary
for frozen pig fat and salted pig fat?

Chapter 2 of the Harmonized System is based on the structure of the CCCN. For information,
it should be noted that the CCCN, which had been used since 1959, was, to some extent, based on the
former "Geneva Nomenclature". The structure of Chapter 2 in the Geneva Nomenclature, the CCCN
and the HS is set out in the Annex to this reply.

 However, the historical development of the two HS headings at issue (02.07 and 02.10) has
been as follows:

 Item 14 Dead poultry. (Geneva Nomenclature)

02.02 Dead poultry (that is to say, fowls, ducks, geese, turkeys and guinea fowls)
and edible offals thereof (except liver), fresh, chilled or frozen. (CCCN)

02.07 Meat and edible offal, of the poultry of heading 01.05, fresh, chilled or
frozen. (HS)

Item 18 Meat, salted, dried, smoked, cooked, or otherwise simply prepared. (Geneva
Nomenclature)

02.06 Meat and edible meat offals (except poultry liver), salted, in brine, dried or
smoked. (CCCN)

02.10 Meat and edible meat offal, salted , in brine, dried or smoked; edible
flours and meals of meat or meat offal. (HS)

With regard to the questions relating to "pig far' covered by heading 02.09, reference should
also be made to the Annex. As can be seen, this heading was (subject to minor editorial amendments)
copied directly from the CCCN, and since no request s for further subdivisions in the HS had been
received, all "pig fat, free of lean meat" was grouped under this heading.

4. What has been the history of interpretation of headings 03.03, 03.04 and 03.05 of the
Harmonized System?

The Harmonized System Committee has not cons idered any classification issues related to
headings 03.03, 03.04 or 03.05 in the past.

The Secretariat, however, has considered the cl assification of "frozen, salted fish" in 1997 at
the request of one of its Members. The product at issue was described as "frozen, salted fish which
was salted before freezing, not only as a temporar y preservative during transportation but through a
normal salting process".

In its response, the Secretariat noted that the Nomenclature does not offer any specific criteria
as to the salt content needed to constitute "salted fish ". In general, fish sprinkled with salt water or
packed with salt or fish lightly salted as a tempor ary preservation during transportation is classified as
fresh, chilled or frozen fish.

The Secretariat subsequently concluded that salte d fish, classifiable in heading 03.05, did not
need to be frozen since salt was added in such a way that it penetrated into the product and preserved
it. The Secretariat further indicated that it was not aw are of fish which had been salted in this way but
still needed to be frozen in order to be preserved. Finally, the Secretariat expressed its doubts as to
whether fish that had been slightly salted and subsequently frozen was classifiable in heading 03.05.

5. What is the relationship between, on the one hand, headings 03.03 and 03.04 of the
Harmonized System and heading 03.05 on the other hand, if any?

The Secretariat would like to extend this ques tion to include heading 03.02 as well, because
headings 03.02 and 03.03 cover fish
 that are whole, headless, gutted, or in cuts containing bones or
cartilage, whereas heading 03.04 covers fish fillets and other fish meat without bones . For the whole
fish etc. a distinction has been made according to the processing, i.e., heading 03.02 covers fresh and
chilled fish, whereas heading 03.03 covers frozen fish.

However, this distinction has not been made in heading 03.04 for fish fillets and other fish
meat without bones, since this heading covers fresh, chilled and frozen products.

In heading 03.05 no distinction has been made between fish and fish cuts with bones in and
fish fillets. Consequently, this heading covers all dried, salted or smoked fish and fish meat , including
fillets.

The structure of these headings also stems from the CCCN. For example, the text of HS
heading 03.05 is exactly the same as that of CCCN heading 03.02. The only change was the inclusion
of a new product group "flours, meals and pellets of fish, fit for human consumption".

6. In the context of headings 02.07 and 02.10, would "specific" in General Rule of
Interpretation 3(a) be relevant and in what way?

Provided that the product at issue cannot be classified in accordance with General
Interpretative Rule (GIR) 1, i.e., according to the terms of the headings and any relative Section or
Chapter Notes, GIR 3 would have to be applied.

GIR 3(a) reads:

The heading which prov ides the most specific description shall be preferred to
headings providing a more general description. However, when two or more headings
each refer to part only of the materials or substances contained in mixed or composite
goods or to part only of the items in a set put up for retail sale, those headings are to
be regarded as equally specific in relation to those goods, even if one of them gives a
more complete or precise description of the goods. (emphasis added).

It is not possible to lay down hard and fast rules by which to determine whether one heading
more specifically describes the goods than anothe r. However, the Explanatory Notes to the
Harmonized System provide the following guidelines in this respect:

(a) A description by name is more sp ecific than a description by class (e.g.,
shavers and hair clippers, with self-contained electric motor, are classified in
heading 85.10 and not in heading 84.67 as tools for working in the hand with
self-contained electric motor or in heading 85.09 as electro-mechanical
domestic appliances with self-contained electric motor).
(b) If the goods answer to a description wh ich more clearly identifies them, that
description is more specific than one where identification is less complete.

 Examples of the latter category of goods are:
(1) Tufted textile carpets, identifiable for use in motor cars,
which are to be classified not as accessories of motor cars in
heading 87.08 but in heading 57.03, where they are more
specifically described as carpets.
(2) Unframed safety glass consisti ng of toughened or laminated
glass, shaped and identifiable fo r use in aeroplanes, which is
to be classified not in heading 88.03 as parts of goods in
heading 88.01 or 88.02 but in heading 70.07, where it is
more specifically described as safety glass.
It should be noted that, in the Secretariat's vi ew, the second part of GIR 3(a), indicating that
"when two or more headings each refer to part only of the materials or substances contained in mixed
or composite goods or to part only of the items in a set put up for retail sale, those headings are to be
regarded as equally specific in relation to those goods, even if one of them gives a more complete or
precise description of the goods " cannot be applied in this case, si nce it is not a "mixed or composite
good".

With regard to the product at issue, it could be argued that:

• heading 02.07 provides the most spec ific description since it refers to "meat of poultry,
frozen", whereas heading 02.10 refers to "meat, salted", in general;

or

• the reference to the specific ty pe of meat (poultry) in heading 02.07 should not be taken
into consideration since it is the processing (freezing and salting) that matters when
determining the classification in the case at i ssue, giving rise to a possibility of 02.10
providing a more specific description.

7. From whose perspective are the "specific" characteristics of a product judged, i.e.
consumers and/or producers or should such an assessment be made by reference to the objective
intrinsic qualities of a product? If the latter, how are the intrinsic qualities of a product identified?
What would be the intrinsic qualities attached to products covered by headings 02.07 and 02.10 of
the Harmonized System?

When a product is classified in the Harmonized System, it is always done on the basis of the
objective characteristics of the produc t at the time of importation and on the basis of the terms of the
headings and any relative Section or Chapter Notes.

In the absence of clear criteria in the HS le gal texts or in the HS Explanatory Notes,
lexicographic and commercial definitions could also be applied when determining the characteristics
of a product.

The Secretariat is not certain as to what is meant by the expression "intrinsic qualities".
However, it has interpreted it to mean "essential character", which is a commonly known expression
in connection with tariff classification (cf. for example GIR 3(b)).

As the Explanatory Note to GIR 3(b) (item (VIII) on page 4) stipulates, "the factor which
determines essential character will vary as between different kinds of goods. It may, for example, be

determined by the nature of the material or componen t, its bulk, quantity, weight or value, or by the
role of a constituent material in relation to the use of the goods."

It is to be noted, however, that GIR 3(b) onl y relates to (i) mixtures, (ii) composite goods,
consisting of different materials, (iii) composite goods consisting of differe nt components and (iv)
goods put up in sets for retail sales. Given that the pr oduct in question does not fall in any of the four
categories, Rule 3(b), in the view of the Secretariat, would not operate.

In order to be classified in heading 02.07, th e product should have the character of "frozen
poultry meat" and it should not be more specifically covered by another heading in the Nomenclature.
Similarly, a product classifiable in heading 02.10 shou ld have (related to the Panel-case) the character
of a "salted" product and it should not be more specifically covered by another heading in the
Nomenclature.

See also the response to Question 1 above.

8. The WCO is requested to provide details of classification practice with respect to headings
02.07 and 02.10 of the Harmonized System.

The Harmonized System Committee has not cons idered any classification issues related to
headings 02.07 and 02.10 in the past.

The Secretariat, however, received a Request for Classification Advice for a similar product
in February 2003 from one of its Members (none of the countries involved in the WTO Panel Case).
However, due to lack of precise information about the processing, the Secretariat was not in a position
to express its opinion on the classification.

9. The WCO is requested to provide details of classification practice with respect to headings
03.03 and 03.05 of the Harmonized System.

Please refer to the response to Question 4 above.

ANNEX

Development of Chapter 2

The Geneva-Nomenclature had the following structure with regard to "meat":

Item 13 Butcher's meat (i.e., beef, veal, mutton, Iamb, pork and horse).
Item 14 Dead poultry.
Item 15 Dead game.
Item 16 Other fresh, chilled or frozen meat, excluding bacon.
Item 17 Bacon.
Item 18 Meat, salted, dried, smoked, cooked, or otherwise simply prepared.

Chapter 2
 of the CCCN (from 1959) was structured as follows:

02.01 Meat and edible offals of the animals falling within heading No. 01.01, 01.02,
01.03 or 01.04, fresh chilled or frozen.

02.02 Dead poultry (that is to say, fowls, ducks, geese, turkeys and guinea fowls)
and edible offals thereof (except liver), fresh, chilled or frozen.

02.03 Poultry liver, fresh, chilled, frozen, salted or in brine.

02.04 Other meat and edible meat offals, fresh, chilled or frozen.

02.05 Pig fat free of lean meat and poultry fat (not rendered or solvent-extracted),
fresh, chilled, frozen, salted, in brine, dried or smoked.

02.06 Meat and edible meat offals (except poultry liver), salted, in brine, dried or
smoked.

Chapter 2
 of the Harmonized System has the following structure:

02.01 Meat of bovine animals, fresh or chilled.

02.02 Meat of bovine animals, frozen.

02.03 Meat of swine, fresh, chilled or frozen.

02.04 Meat of sheep or goats, fresh, chilled or frozen.

02.05 Meat of horses, asses, mules or hinnies, fresh, chilled or frozen.

02.06 Edible offal of bovine animals, sw ine, sheep, goats, horses, asses, mules or
hinnies, fresh, chilled or frozen.

02.07 Meat and edible offal, of the pou ltry of heading 01.05, fresh, chilled or
frozen.

02.08 Other meat and edible meat offal, fresh, chilled or frozen.

02.09 Pig fat, free of lean meat, and poultry fat, not rendered or otherwise extracted,
fresh, chilled, frozen, salted, in brine, dried or smoked.

02.10 Meat and edible meat offal, salted, in brine, dried or smoked; edible flours
and meals of meat or meat offal.

The principal changes from CCCN Chapter 2 to HS Chapter 2 can be described as follows:

 1. CCCN heading 02.01 was split into six new HS headings (02.01 to 02.06), with offals
of the animals mentioned in the first five new HS headings grouped separately in new
HS heading 02.06.

 2. Fresh, chilled and frozen poultry liver falling within CCCN heading 02.03 was
grouped with the fresh, chilled or frozen pou ltry meat and other edible poultry offal
of CCCN heading 02.02 to form new HS heading 02.07.

 3. The reference within brackets in CCCN heading 02.05 (HS heading 02.09) to
"solvent extraction" was deleted in or der to complement the provisions of
heading 15.01 which had been amended to re flect that "pig or poultry fat" of that
heading is always first rendered and then either pressed or solvent-extracted.

 4. The words "(except poultry liver)" were deleted from CCCN heading 02.06
(HS heading 02.10), with the result that HS heading 02.10 will cover (i) poultry liver
salted or in brine of CCCN heading 02.03 and (ii) dried and smoked poultry livers
which were classified in CCCN heading 16.02. In addition, a specific reference to
"edible flours and meals of meat or meat offal" was inserted in new HS heading
02.10; this did not, however, result in a change in scope.

ANNEX C-13

RESPONSES BY THE WORLD CUSTOMS ORGANIZATION
TO QUESTIONS POSED BY THE PANEL
AFTER THE SECOND SUBSTANTIVE MEETING

(2 December 2004)

 This is with reference to your letter of 19 November 2004 requesting the World Customs
Organization Secretariat to respond to five additi onal questions posed in connection with the WTO
Dispute Settlement case on European Communities – Customs Cla ssification of Frozen Boneless
Chicken Cuts.

 The WCO Secretariat's response is set out below. For ease of reference, the questions have
been reproduced the response immediately following each question.

10. Please provide an illustrative list of the kinds of pr oducts the WCO Secretariat considers
would clearly qualify for classification under heading 02.10.

 On the basis of the text of h eading 02.10, the Secretariat would li ke to note that this heading
covers all kinds of edible meat and meat offal salte d, in brine, dried or smoked, other than products
covered in heading 02.09. Some ex amples are also provided in the pe rtinent part of the Explanatory
Note to heading 02.10 (on page 21). The other group of products included in the said heading
comprises edible flours and meals of meat or meat offal. Thus, products such as salted or smoked
bacon, ham or shoulder, as well as salted or smoked ed ible offal such as feet, tails, livers, throats and
tongues would, in the opinion of the Secretariat, clearly fall in heading 02.10.

11. Could or do practicalities associated with verification of criteria in tariff headings affect the
way in which interpretation of tariff headings and classifications are undertaken by the WCO?

 The Secretariat understands your question as fo llows: whether or not practical aspects of
verification of classification criteria are taken into account for the purposes of classification of
commodities by the WCO (i.e., the Harmonized System (HS) Committee and the WCO Council).

 In this respect it should be noted that when such practical aspects are recognised as being
applicable worldwide, they may be incorporated in the HS Nomenclature provisions or in the
Explanatory Notes on the basis of respective deci sions by the HS Committee. These decisions, are
subsequently approved by the WCO Council. Hence, practical aspects of verification of classification
criteria are taken into account for the purposes of classification of commodities at the HS level once
they have become part of the legal text or of th e Explanatory Notes (see, for example, testing methods
for coated paper or paperboard in the General Explanatory Note to Chapter 48 (on page 871)).

12. What was the rationale for the reference to the term "provisionally preserved" in
heading 08.14? What importance should be attached to this reference, if any, for other headings in
the HS for which the term "preserved" has not been explicitly mentioned?

 Having consulted the background documents, the Secretariat would like to inform you that
heading 08.14 was originally included in the Customs Co-operation Counc il Nomenclature (CCCN)
dated 1950 as heading 08.13 which read: "Peel of me lons and citrus and other fruit, fresh, frozen,
dried, in brine, in sulphur water, or in othe r temporary preservative solution." However, in the 1955
Nomenclature this text was replaced with the following: "Peel of melons and citrus fruit, fresh, frozen,
dried, or provisionally preserved in brine, in su lphur water or in other preservative solutions."

However, no information has been traced by the S ecretariat so far as to the rationale behind this
amendment of the heading text.

 In the 2002 edition of the HS Nomenclature h eading 08.14 covers "peel of citrus fruit or
melons (including watermelons) fre sh, frozen, dried or provisionally preserved in brine, in sulphur
water or in other preservative solutions". The same products having been preserved by processes other
than those specified in the headi ng text (for instance, by vinegar, acetic acid or sugar), would be
covered by Chapter 20. The Secretariat understands that the term "provisionally preserved" serves to
distinguish between finished products of Chapter 20, on the one hand, and peel of citrus fruit or
melons subjected only to certain preservation pro cesses, but not further prepared, on the other. This
reference is apparently intended to widen the scope of heading 08.14 to include not only fresh, frozen
and dried products but also those provisionally preserved by processes listed in the heading text. It is
to be noted that brine and sulphur water are exam ples of preservative solutio ns for the products of
heading 08.14.

 By virtue of General Interpretative Rule 1, "c lassification shall be determined according to the
terms of the headings and any relative Section or Chapter notes". Thus, in the absence of an explicit
provision that the term "preserved" has a certain bear ing on headings other than 08.14, this term has
no importance for the classification of products in other headings of the Nomenclature, unless the
same term is found in the text of a heading as is the case with heading 08.12, for example.

13. With respect to the 1997 letter from the WCO Secretariat to Cypriot Customs authorities
(WCO Ref. 97.N.971 – Ma/FI):

 (a) Please explain what was meant by a "normal salting process"?

 (b) Insofar as the WCO Secretariat expressed doubts as to whether fish that had been
slightly salted and subsequently frozen was classifiable in heading 03.05, please
explain what is meant by "slightly salted"?

 (c) As regards the WCO Secretariat's statement that it was unaware of frozen fish
which had been really salted and still required freezing to be preserved:

(i) What is meant by "really salted"?
(ii) Does the statement indicate that, if fish existed that had been "really
salted" but was not preserved, it would, nevertheless, be classifiable under
heading 03.05?
 (d) Does the WCO consider that the analysis in this letter would have differed had the
product in question been chicken? If so, in what respects?

14. Please comment on a letter dated 2003 from the WCO Se cretariat to Bulgarian Customs
authorities (WCO Ref. 03NL0217 – GI/FI). In particular, in this letter, is the WCO Secretariat
suggesting that the ordinary meaning of a tariff heading may be determined according to relevant
national legislation ? If not, please explain why and how th e WCO Secretariat considered the EC's
Combined Nomenclature to be relevant in the context of the issue before the WCO Secretariat in
that case.

 With respect to questions 13 and 14 in your letter, I note that they are related to
correspondence between two WCO Members and the WC O Secretariat. This kind of correspondence
should, in my view, not be taken into account by third parties unless the parties involved have

expressed their approval in using the information cont ained in that correspondence. I am not aware of
such approval and will, therefore, refrain from commenting on the questions at issue.

 Furthermore, the correspondence at issue appears not to be relevant with respect to the scope
of certain HS headings referred to in your letter and consequently not relevant with regard to the
appropriate classification of the pr oduct under consideration. Moreover, both requests did not provide
the information necessary for the Secretariat to gi ve a firm opinion vis-à-vis the appropriate HS
classification.

Harmonized System Dispute Settlement

 For my part, it appears that the case before your panel concerns a classification question
involving several Contracting Parties to the HS Convention. In this connection, I would like to call
your attention to the provisions of Article 10 of the said Convention, which stipulates that "any
dispute between Contracting Parties concerning the interpretation or application of this Convention
shall, so far as possible, be settled by negotiatio n between them" and "any dispute which is not so
settled shall be referred by the Parties to the di spute to the Harmonized System Committee which
shall thereupon consider the dispute and make recommendations for its settlement.

 That being the case, and taking into account the fact that the parties involved, which are all
Contracting Parties to the HS Convention, have not followed all the provisions of Article 10 referred
to above, I suggest that the settlement procedure laid down in the HS Convention should be followed
first before your panel may make its decision.

 If the HS Contracting Parties involved in this dispute are not prepared or not able to follow
this procedure, the WTO may wish to request the WCO Secretary Ge neral to take the necessary steps
with a view to inserting this issue on the agenda of the HS Committee.

 The next session of the HS Committee is sche duled from 14 to 24 March 2005. If the matter
is to be included in the agenda for this sessi on, please provide the WCO Secretariat with all
information required for the HS Committee to arrive at a classification decision regarding the product
under consideration. It would be appreciated to receive this information as soon as possible (and
preferably by mid-January 2005), thus allowing th e WCO Secretariat to prepare and publish the
respective working document in good time.

ANNEX C-14

COMMENTS BY BRAZIL, THAILAND AND THE EUROPEAN COMMUNITIES
ON THE RESPONSES BY THE WORLD CUSTOMS ORGANIZATION
TO THE QUESTIONS POSED BY THE PANEL AFTER
THE SECOND SUBSTANTIVE MEETING

(16 December 2004)

COMMENTS BY BRAZIL

 In accordance with the timetable established by the Panel in " European Communities –
Customs Classification of Frozen Boneless Chicken Cuts " (WT/DS269 and 286), please find attached
Brazil's Comments on the Responses by the WCO to Questions posed by the Panel.

Question 10

 When asked to provide an illust rative list of the products that clearly fall under heading 0210,
the WCO Secretariat's first and immediat e response was that heading 0210 covers all kinds
 of edible
meat salted, in brine, dried or smoked. Clearly, all kinds of meat cannot be reduced to a limited
number, as proposed by the EC (Parma ha m, prosciutto, jamón serrano, bacon).1 We have shown that
other salted/dried/smoked meats - such as rabbit m eat; turkey meat; goat meat; duck meat; chicken
meat; etc. - also fall under heading 0210.2

 In sequence, the Secretariat informed th at some examples of products covered by
heading 0210 are provided in the Explanatory Note to heading 0210 and pointed out that " products
such as salted or smoked bacon, ham, shoulder would (…) clearly fall under heading 0210 ".
Regarding this part of the Secretariat's res ponse, Brazil merely observes that the mentioned
Explanatory Note refers to bacon, ham or shoulder as examples of smoked meat.
3 These examples
were listed by the Secretariat precisely because they are explicitly provided in the HS Explanatory
Note to heading 0210. These products, however, in no way make up an exhaustive list of products
falling under heading 0210. In this regard, we ha ve provided a more comprehensive list - taken from
the WCO's HS Commodity Database – of examples of salted meat falling under subheading 0210.90
of the HS (1996 version). According to the HS Commodity Database, salted meat of chicken clearly
qualifies for classification under heading 0210.

Question 11

 Brazil would like to focus on the last part of the WCO Secretariat's response, which provides
that "practical aspects of verification of classification criteria are taken into account for purposes of
classification of commodities at the HS level once they have become part of the legal text or of the
Explanatory Notes " (emphasis added). We remind the Panel that the Secretariat informed in an

1 EC's First Written Submission, para. 41; Exhibit EC-5; EC's Closing Statement Following First
Substantive Meeting, para. 4; EC's Replies to Panel's Questions Following the First Substantive Meeting,
para. 91; EC's Replies to Brazil's Questions Following the First Substantive Meeting, paras. 5 and 11; EC's
Second Written Submission, paras. 35 and 36; EC's Second Oral Statement, para. 36.
2 Exhibit BRA-43.
3 Exhibit BRA- 24 and Exhibit EC-27.

earlier response that, to date, the HS Committee had not considered any classification issues related to
headings 0207 and 0210.
4 Thus, in the absence of HS Committee decisions on practical aspects of
verification of classification criteria to be taken in to account for purposes of classification of products
under heading 0210, classification must be based simply on the wording of the legal text read in
conjunction with the HS Explanatory Notes.
5 Regarding HS Explanatory Notes, we reproduce below
part of a response provided by the WCO to the Panel:6

"Notes: The Explanatory Notes to the Harmonized System normally follow the systematic order of that
instrument. They provide a commentary on the scope of each heading, giving a list of the
main products included and excluded, together with technical descriptions of the goods
concerned (their appearance, properties, method of production and uses) and practical
guidance for their identification" (emphasis added)

 We stress that nowhere
, absolutely nowhere, in the legal text or in the HS Explanatory Note
to heading 0210 are the criteria proposed by the EC in the verification of products under heading 0210
provided for ("readily detectable", "instantly recognizable", "recognizably different"). On the
contrary, the only guidance provided in that Explanator y Note is that it applies to all kinds of meat
which have been prepared as described in the heading. Furthe rmore, the criteria proposed by the EC
are by no means "recognized as being applicable worldwide".

Question 12

In the case at hand, and as advanced by the WCO Se cretariat, in the absence of an explicit provision
that the term "preserved" has a certain influence on headings other than 0814 of the HS, the term
"preserved" of heading 0814 has no
 importance for the classification of salted meat in heading 0210,
unless that same term ("preserved") was found in the te xt of heading 0210. The term "preserved" is
not found in the text of heading 0210. In fact, neither the text of heading 0210 nor the Explanatory
Note to that heading refers to the terms "preserve d" or "preservation". In contrast, the Explanatory
Note to heading 0210 explicitly states that meat covered under that heading 0210 is that which has
been "prepared" by salting, brining, drying and smoking.

Questions 13 and 14

 To the WCO Secretariat, the correspondence mentioned in questions Nos. 13 and 14 – letters
of advice to customs authorities on the classifica tion of frozen salted fish under headings 0303 or
0305 and on the classification of frozen salted sw ine meat under headings 0203 or 0210 – are not

relevant to the scope of headings 0207 and 0210 of the HS and, consequently, not relevant with regard
to the appropriate classification of the product under consideration: frozen salted chicken cuts.

 Apparently, the Secretariat understands that these letters of advice are not
 relevant because
they dealt with products different from the one before the Panel. We agree. Within the context of
interpretation of tariff concessions, we have stated th at a letter of advice on a product that is different
from the product at issue cannot be seriously cons idered as relevant subsequent practice in the
application of heading 0210 of Schedule LXXX (Article 31.3(b) of the Vienna Convention).7

 Nonetheless, we stress the fact that the WC O Secretariat letter to the Bulgarian customs
authorities, mentioned in question No. 14, dealt precisely with classification under heading 0210 and

4 WCO's Response to Panel's Questions, Question 8.
5 WCO's Response to Panel's Questions, Question 1.
6 Id.
7 Brazil's Comments to the EC's Response to Questions Following the Second Substantive Meeting,
Question No. 99.

Additional Note 7 of Chapter 2 of the CN without ever mentioning the EC's so-called "well-
enshrined" concept of preservation.

Harmonized System Dispute Settlement

 With regard to the WCO Secretariat's consider ations regarding the dispute before the Panel
and the HS dispute settlement, Brazil has the following comments.

 Brazil is fully aware of the dispute settlement provisions of Article 10 of the HS Convention.
Prior to our request for consultations at the WTO we sought guidance and clarification from the WCO
with respect to the meaning of headings 0207 and 0210. At that time, the WCO provided no
clarifications with respect to the interpretation of the mentioned headings and simply directed Brazil
to the WCO dispute settlement provisions found in Article 10 of the HS Convention.

 Brazil was, thus, aware of the settlement pro cedures at the WCO but deliberately chose not to
pursue them. In the course of these proceedings, we have explained why Braz il decided to resort to
the WTO's - and not WCO's - dispute settlement.
8

 The WCO's Secretariat does not seem to realize that the case at issue is not a classification
case. It is a case of less favourable tariff treatment within the meaning of Article II of the GATT
1994. Specifically, it is a case of duties being impos ed on imports of salted chicken meat in excess of
the duty provided for that product in Schedule LXXX. WCO Secretariat fails to understand the nature
of the instant dispute when it reduces it to "classi fication questions involving several Contracting
Parties to the HS Convention".

 In assessing whether the EC has violated Article II, the Panel must examine Schedule LXXX
according to the rules of treaty interpretation found in the Vienna Convention. As already advanced,
the HS and its Explanatory Notes are definitely re levant context in the interpretation of Schedule
LXXX, but are only
 one part of the interpretative exercise the Panel must undertake. In turn, WCO
decisions may be relevant in the interpretation of Sc hedule LXXX but as subsequent practice in the
application of the treaty.9

 We share the EC's opinion that "given the institutional frameworks of the two organizations,
it is obviously important that the nature of WTO dispute proceedings should remain distinct from
decision making in the WCO". 10 The two dispute settlement mechanisms are distinct in terms of
obligations, timeframes, scope and procedures.

 Most striking is the WCO Secretariat's advise to the Panel that, if the parties to this dispute
are not prepared or able to follow the settlement procedure laid down in the HS Convention, " the
WTO may wish to request the WCO Secretary Genera l to take the necessary steps with a view to
inserting this issue on the agenda of the HS Committee."

 The WCO Secretariat is obviously unaware of the nature of the WTO as reflected in its
constituent agreements. It apparently ignores that the WTO is a Member-driven organization that does
not have the power, or mandate, to act on behalf of its Members – certainly not on behalf of Brazil.
Nor has any WTO representative or body been empow ered to solve a dispute concerning two or more
WTO Members outside the scope of the WTO.

8 Brazil's Response to the Panel's Question Following the First Substantive Meeting, Question No. 9.
9 WT/DS62/AB/R, WT/DS67/AB/R, WT/DS68/AB/R, para. 90.
10 EC's Second Oral Statement, para. 13.

 It is also not clear to us who exactly is the WTO agent that would request the insertion of
"this issue in the agenda of the HS Committee". Th e WCO Secretariat could not possibly be referring
to the Panel, unless it is unfamiliar with the provisi ons of the DSU. Obviously, while the Panel has
the right to seek information and technical advice from any individual or body which it deems
appropriate, as provided under Artic le 13.1 of the DSU, it does not
 have the right to abdicate its
function. A function that was conferred to it by the Members. Article 11 of the DSU establishes that
the Panel's function is to assist the DSB in di scharging its responsibilities under the DSU and the
covered agreements. Accordingly, it is the Panel's task – and not the HS Committee's - to make an
objective assessment of the matter before it, including the assessment of the facts of the case and the
applicability of and conformity w ith the covered agreements. In the present case, the Panel is
perfectly able to carry out its function in interpre ting the precise obligations that derive from heading
0210 of Schedule LXXX.

 The WCO Secretariat seems to think that if the HS Committee arrives at a classification
decision, the Panel will then – and only then – be able to make its own (" I suggest that the settlement
procedure laid down in the HS Convention should be followed first before your panel may make its
decision"). As shown above, this is not so: this case is about the interpretation of tariff concessions. In
this connection, we recall that the Appellate Body in EC – Computer Equipment considered that in
interpreting tariff concessions in Schedule LXXX, decisions of the WCO
 may be relevant merely as
subsequent practice in the application of Schedule LXXX.11

COMMENTS BY THAILAND

 Thailand wishes to make the following comments on the letter dated 2 December 2004 from
the Secretary-General of the World Customs Or ganization (WCO) responding to the Panel's five
additional questions posed in connection with the referenced proceedings.

 In its response to question 12 concerning the im portance of the term "provisionally preserved"
in HS heading 08.14, the WCO states that the referen ce to this term is apparently intended to widen
the scope of heading 08.14 to include products provisionally preserved by processes listed in the
heading text, namely those preserved in preservative solutions, such as brine or sulphur water. The
WCO confirms the importance of the General Rule of Interpretation 1 which states that "classification
shall be determined according to the terms of the headings and any relative Section or Chapter Notes."
Thailand notes that the European Co mmunities has stated in its response to question 118 posed by the
Panel that "… the word preservation is not to be found in HS heading 02.10." The EC nevertheless
continues to insist that heading 02.10 "has at its heart a concept which the EC in these proceedings
has termed 'preservation' but which it might as easily have referred to as 'long-term preservation.'"
However, the WCO has made clear that classification must be determined on the basis of the terms of
the headings and not on any general concepts of preservation or long-term preservation that a party
believes to be at the heart of a h eading. The term "salted" appears in the heading text of 0210. The
EC has itself provided a clear definition for the objective criteria to be taken into account for
classifying goods as "salted" under heading 0210, namely the definition set out in Regulation 535/94.

 On a more general note, Thailand wishes to e xpress its strong concerns with the suggestion of
the WCO Secretary-General that parties to this dispute should follow the settlement procedures laid
down in the HS Convention before the Panel makes its decision, or failing the decision of the parties
to take this step, that the WTO should "request the WCO Secretary-General to take the necessary
steps" to place this issue on the agenda of the ne xt HS Committee meeting. As Thailand has stated
throughout these proceedings, this dispute involves the less favourable treatment accorded by the EC
as a result of the classification of the product at is sue and not the customs classification of the product

11 WT/DS62/AB/R, WT/DS67/AB/R, WT/DS68/AB/R, para. 90.

per se in the Harmonized System. The main issue in this dispute, therefore, is the scope of the EC's
obligations under its Schedule of Concessions at th e time the EC agreed to be bound by the WTO
Agreement. As the United States noted in its third-party oral statement, " … in analyzing the meaning
of the terms of the relevant concession, one must consider evidence of how the EC understood those
terms at the time the EC made the concession." Therefore, in Thailand's view, the issue in this dispute
is not whether salted chicken that is frozen falls within heading 0210 of the Harmonized System,
which the WCO may be competent to assess. The issu e is whether salted chicken that is frozen falls
within the terms of heading 0210 (as the EC underst ood the heading in 1994) of the EC's Schedule of
Concessions, a matter which the WCO is not competent to assess.

 Thailand is requesting the Panel to find that th e EC is in violation of its WTO obligations by
providing less favourable treatment within the m eaning of GATT Article II by imposing ordinary
customs duties on the product at issue in excess of those set forth in the EC's Schedule of
Concessions. Thailand notes that Article 23 of the DSU provides that when Members seek redress of
a violation of obligations under the covered agreements, they shall have recourse to, and abide by, the
rules and procedures of the WTO dispute settlement system.

 Furthermore, Thailand submits that the Panel's terms of reference require that it examine the
matter referred to it by the Complainants in the lig ht of the relevant provisions of the GATT. As
provided in Article 11 of the DSU, the function of panels is to assist the DSB in discharging its
responsibilities under the DSU and the covered agreem ents. The fact that the WCO has a dispute
settlement mechanism for customs cl assification matters does not mean that the Panel is absolved
from its responsibility to examine the matter in the li ght of the relevant provisions and to make the
appropriate recommendations to assist the DSB to make its rulings.

 Thailand trusts that the positive resolution of this dispute will remain within the jurisdiction
of the WTO dispute settlement system.

COMMENTS BY THE EUROPEAN COMMUNITIES

 Thank you for your letter dated 7 Decembe r 2004, transmitting the WCO responses to the
second set of questions and inviting the EC to comment on them.

 As regards the WCO's response to questions 13/14, the EC can confirm that, after having
initially become aware of the 1997 letter from the WCO to the Cypriot authorities when examining
the WCO's archives, it sought and obtained the agre ement of the Cypriot customs authorities before
submitting the correspondence to the Panel.
12

 The EC believes that such correspondence is re levant because the structure of Chapter 03 is
similar in all material respects to that of Chap ter 02. The WCO's letter to the Cypriot authorities
clearly displays the WCO's understanding that the term "salted" in heading 0305 concerned those
products which had been salted for preservation.

 Finally, the EC reserves the right to comment further on the issues raised in the final four
paragraphs of the WCO's letter in the event that any form of initiative is proposed in that respect.

12 The EC would note that the Republic of Cyprus is now a Member of the EC, although in 1997 it was
fully responsible for conducting its own customs and trade policy.