142. Brazil submitted that the EC had misunderstood the nature of the claim under Article X. Brazil's claim under Article X was related to the administration of all the trade in frozen chickens, both within and outside the TRQ. Referring to the Appellate Body's finding concerning the Licensing Agreement in Banana III ⁸⁵, Brazil claimed that the Appellate Body did not state that Article X was redundant when examining a Member's obligations. It stated that if a licensing system was found to be inconsistent with the Licensing Agreement there was no need to compare these practices with the terms of Article X. The finding of the Appellate Body in Banana III was in relation to an EC regime for the importation of bananas where there was no over quota trade. The main concern of the Appellate Body was, therefore, the examination of the TRQ licensing regime. This was, however, not the situation with respect to frozen chickens. There was over quota trade. There were, therefore, two distinct sets of rules applicable on the importation of frozen chickens from Brazil and both sets of measures were within the terms of reference of this Panel. Citing parts of Article X⁸⁶, Brazil submitted that the objective of Article X was clear: trade regulations had to be published so that traders (as well as governments) could become acquainted with them and rely on them. Once they were published, they should be administered in a reasonable manner so that traders were not subject to arbitrary behaviour. Mere publication was not, therefore, the only requirement. The underlying requirement was that publication had to be done in such a way that traders could know and be certain which trade rules applied. The applicable trade rules should not be applied in an arbitrary manner. In the opinion of Brazil, the EC regime for the importation of frozen chicken did not meet the requirements of reasonableness and certainty for traders set out in some detail in Articles X:1 and X:3(a) of GATT. An exporter of frozen chickens to the EC did not know what trade rules applied to any one particular consignment of product exported. There was no certainty.

143. Brazil further argued that the obligation of uniformity, impartiality and reasonableness was not confined to ensuring, when more than one set of rules was applicable to imports of the same product, that each different set of rules was administered reasonably. There was nothing in the text of Article X to justify such a restrictive interpretation. The requirement of reasonableness applied as between the sets of applicable rules. The arbitrary nature of the administration of the frozen chicken trade rules and the lack of knowledge on the part of the trader as to which rules applied was particularly acute when price safeguards were applied. Under the of set rules applicable to imports within the TRQ, the trader did not have to be concerned with the price at which the product was exported or sold on the EC market, whereas under those applicable to the non-quota trade, the trader was obliged to ensure that a particular price was maintained both at the border and on the EC market. If the exporter did not maintain that price under one set of rules, the exporter was penalized by an additional duty while under the other set of rules the exporter was not. Brazil concluded, therefore, that the inability of the exporter to know which trade rules applied to a particular consignment of the same goods imported into the EC was a breach of the terms of Article X. A finding that the TRQ licensing rules were inconsistent with the terms of the Licensing Agreement would not address this inconsistency. Brazil's claim under Article X was separate from, and in addition to, its claims under the Licensing Agreement. There was nothing in the finding of the Appellate Body in Banana III which precluded the examination of the EC's frozen chicken import rules under this Article.

144. EC replied that imports outside the TRQ were not subject to any licensing procedure, although certain of them were subject to the special safeguard provisions. Brazil made claims for a provision which was concerned principally with transparency. The EC submitted that it had complied fully with the requirements of Article X as far as the special safeguard regime was concerned and underlined that Brazil did not allege that any specific aspects of this regime, the entirety of which had been published in the Official Journal, was contrary to the transparency requirements of Article X.

Article II of GATT

145. Brazil noted that schedules were provided for in Article II of GATT and were designed to reflect the commitments that Members made in respect of each other. If a schedule did not reflect the commitments made under a covered agreement (in Brazil's case Article XXVIII of GATT), the question to be addressed by this Panel was the extent to which a Member could be required to honour its commitments. The Appellate Body in Banana III ⁸⁷ examined the extent to which the EC's Schedule in respect of bananas was consistent with Article XIII of GATT. The Appellate Body recalled the Sugar Headnote case ⁸⁸ and quoted that panel as saying "... Article II permits contracting parties to incorporate into their Schedules acts yielding rights under the General Agreement but not acts diminishing obligations under that Agreement". The Appellate Body then quoted paragraph 3 of the Marrakesh Protocol ⁸⁹ and found that Members could not diminish rights in their schedules. Schedules had to reflect the commitments made by Members and, to the extent that they did not, the schedules were subject to multilateral review by the Members. Brazil claimed that the EC had not reflected in its Schedule the commitments made with Brazil within the terms of Article XXVIII of GATT.

146. The EC replied that except for preferential treatment justified under Article XXIV of GATT or Article IX of the WTO Agreement ⁹⁰, the concessions that were contained in each Member's schedule, established pursuant to Article II of GATT, were the only commitments with respect to the level of duties and other charges imposed on or in connection with importation by which that Member was bound under the WTO. The text of Article II of GATT, and in particular its paragraph 1, was the expression of this basic principle which had far-reaching implications for the entire WTO system of agreements. The mere idea, suggested by Brazil's complaint, of the existence of additional obligations in relation to the duties and other charges imposed on or in connection with importation of a specific set of products, which did not flow from any preferential agreement justified under Article XXIV of GATT or Article IX of the WTO Agreement and not inserted in the schedules, ran counter to the clear provisions of Article II of GATT. More importantly, such a suggestion would introduce in the WTO system the unpredictability and instability which that provision was designed to prevent.

147. Brazil argued that the issuance of licences in uneconomic quantities, and the trade in these licences for value, meant that a payment had to be made to obtain licences in economic quantities prior to import. This payment or charge was in addition to that provided for in the EC's Schedule which set out that within the poultry TRQ no duty should be payable. According to Brazil, in practice, a duty of between two and three German Marks per kilo was payable prior to imports being effected. It was, therefore, in all respects, a charge payable in association with import and was a clear breach of the requirement in Article II that no charges in addition to those provided for in the schedule be payable.

148. The EC submitted that the GATT (and other WTO agreements) were international agreements concluded between sovereign states and organizations which were binding between those parties. International responsibility for the violation of these agreements could only be engaged, except where otherwise explicitly provided, when the violation could be attributed directly to a Member as a result of a governmental measure. This was clearly the case for Article II:1(b) of GATT where a reference was made to other duties and charges "imposed at the date of this Agreement or those directly and mandatorily required to be imposed thereafter by legislation in force in the importing territory on that date." (emphasis added) This was confirmed by Article 19 of the DSU which indicated that "where a panel or the Appellate Body concludes that a measure is inconsistent with a covered agreement, it shall recommend that the Member concerned bring the measure into conformity with that agreement." (emphasis added) The EC stressed that there was no legislation or any legislative requirement whatsoever within the EC legal system which imposed extra charges on top of the ordinary duties and other duties and charges which were bound in its Schedule. Any payment or charge in relation to economic transactions concerning those import licences were strictly private and responsibility for such charges could not be attributed to the EC. Moreover, Article 5, paragraph 3 of Regulation 1431/94, stated expressly that import licences to be used for the Community poultry meat TRQ were not transferable. The EC urged the Panel, therefore, to reject the claims from Brazil in this respect as totally unfounded and unjustified (see also paragraphs 146 and 150).

149. Brazil agreed that GATT (and other WTO agreements) were international agreements as between sovereign States. They gave rise to international obligations as between States. Brazil did not agree, however, that because the GATT was an international agreement and as the speculative charges for licences were not imposed by law, that the EC had no responsibility or obligations in respect of the extra charges that were in fact payable. Brazil was of the view that the EC's obligations in relation to Article II were not only in connection to mandatory legislation but also to "all other duties or charges of any kind imposed on or in connection with the importation in excess of those imposed on the date of the Agreement". The scope and object of the Article was not, in the view of Brazil, therefore restricted to mandatory legislation. Brazil noted that the number of licence holders was increasing as well as the incidence of speculation. The EC had accepted the need to prevent speculation. However, in Brazil's opinion, the legislative attempts to prevent speculation had not been successful.

150. Citing Article II:1(a) and (b) ⁹¹ of GATT, the EC submitted, Article I:1 of GATT applied equally to bound and unbound rates. ⁹² This wording matched the explicit reference in Article I:1 of GATT. ⁹³ It flowed from this, the EC argued, that the current bound rates in the EC Schedule, including in-quota tariff rates, were the only obligations of the Community with respect to the level of duties to be applied to imported products, with the exceptions already mentioned above. The EC was obliged to apply to the results of an Article XXVIII negotiation the MFN principle which benefited all the other Members.

Article III

151. Brazil submitted that the EC regime for the administration of the TRQ had the effect of imported products being treated in a manner that was less favourable than that accorded to like domestic products. Domestic products did not require a licence for the sale on the domestic market whereas products imported within the TRQ did so require. On the assumption that licences were a valid mechanism for the administration of TRQs, Members were still obliged to ensure that the administration of licensing systems were such that they did not act as de facto measures giving rise to less favourable treatment. In the opinion of Brazil, the EC had failed to ensure that this obligation was respected. The issuing of licences in uneconomic amounts, the tolerance of illegal speculation in licences, the failure to ensure that exporters knew which importers were in possession of licences, and lack of knowledge of which trade regime was applicable to any one import consignment had, in combination, the effect that the imported products were competing on less favourable terms with domestic products. In addition, Brazil said, the granting of import licences to exporters which were domestic producers accorded a benefit to domestic production which imported products did not enjoy. Each of these elements by themselves, and in combination, had the effect, in the view of Brazil, of placing the imported product in a less favourable position than the domestic product in clear breach of the terms of Article III of GATT.

152. The EC replied that the administration of a TRQ was effected through border measures, to which some provisions of the GATT were applicable ⁹⁴, and not by internal measures to which other provisions applied, in particular Article III. This clear distinction corresponded, according to a long tradition in the interpretation of the General Agreement, to the acknowledged common will and understanding of the CONTRACTING PARTIES to the GATT and, by virtue of the Marrakesh protocol to the WTO Agreement, of all Members of the WTO, as confirmed in the panel report on Italian Discrimination against Imported Agricultural Machinery. ⁹⁵ A similar approach had already been suggested by the panel report on Belgian Family Allowances (Allocations familiales). The import licensing rules managing the frozen poultry meat TRQ, the EC stressed, were border measures "par excellence" and could not violate Article III of GATT, concerned only with internal measures, i.e. measures applicable after the products concerned had cleared through customs. The EC denied that any link whatsoever could be made, in substance or in the formalities, between this case and the so-called Banana III case in regard to Article III. The EC recalled that that panel and the Appellate Body had confirmed the value of the long-standing interpretation of the GATT which distinguished border measures and internal measures.

153. Brazil submitted that the payments charged by importers on the speculative sale of import licences was similar in nature to a special fee payable on imports only. Moreover, to the extent that EC legislation did provide that EC traders who exported domestic product were entitled to import licences, there was a breach of the terms of Article III. In the opinion of Brazil, it was no defence for the EC to claim that the export qualification for licence entitlement had been removed. Licence entitlement was based on past imports. Illegality in the past allocation of import rights carried forward into the present. 1997 licences were allocated on the basis of past performance in the two previous years for which statistics were available, namely 1995 and 1996. The export criteria for the allocation of import licences resulted in a current inconsistency with Article III.

154. The EC replied that apart from some unsubstantiated allegations concerning practices relating to the administration of the poultry meat TRQ, Brazil did not indicate any reason that could justify the claim that EC legislation applicable to the poultry products subject to this dispute after those products had cleared customs, treated imported poultry products in a less favourable way than domestic products. Moreover, the claim that granting import licences for the poultry meat TRQ to exporters was in breach of Article III was not only totally unsupported by motivation but showed a poor reading of the EC legislation. Whilst Article 3(a) of Regulation 1431/94 indicated that "Applicants for import licences must be natural or legal persons who, ... can prove ... that they have imported or exported not less than ... of products within the scope of Regulation (EEC) No. 2775/75 ...", Commission Regulation 1244/95 amended that provision, eliminating any reference to exporters who were no longer entitled to apply for import licences. Thus, EC said, Brazil's claim related to a situation which as a matter of fact no longer existed and which in consequence could not entail any nullification and/or impairment of Brazil's rights under the WTO. In summary, Article III of GATT was, in the opinion of the EC, not applicable to the issue raised by Brazil. The allegations by Brazil should therefore be dismissed.

IV. ARGUMENTS PRESENTED BY THIRD PARTIES

Terms of Reference

155. Referring to the Panel's terms of reference (see paragraph 4 above), the United States submitted that the "covered agreements" were defined in Article 1.1 of the DSU as "the agreements listed in Appendix 1 to this Understanding". The list of such agreements in Appendix 1 was a closed list, which did not include the Brazil-EC bilateral agreement. The Brazil-EC bilateral agreement was also not one of the instruments included within GATT 1994, according to the GATT 1994 incorporation clause. The terms of that agreement, and the issue of whether EC actions had violated those terms, were therefore, in the opinion of the United States, not within the terms of reference of this Panel. The United States submitted that under Article 31(3)(c) of the Vienna Convention, the Panel should take into account "any relevant rules of international law applicable in the relations between the parties"; those "rules of international law" may include the bilateral agreement that was reached under Article XXVIII:4. The bilateral agreement could thus serve as a means of clarifying the concessions if the concessions were ambiguous.

156. Brazil contested the view expressed by the United States, concerning the terms of reference. This Panel had standard terms of reference under Article 7 of the DSU which made specific mention of Articles XXVIII, X, III and II of GATT, the Agreement on Agriculture and the Licensing Agreement. It was clear to both parties that this Panel had to consider the nature of the EC's commitment under Article XXVIII, as reflected in the Oilseeds Agreement. Referring to the section related to Terms of Reference in the Handbook of GATT⁹⁶, Brazil submitted that the terms of reference were defined by the complaining party which unilaterally defined the subject matter of the dispute. It was not a bilateral system. Brazil had clearly stated that it wished this Panel to consider the EC's commitments under the Article XXVIII Oilseeds Agreement and the extent to which they were not reflected in the EC's Schedule under Article II. Brazil had not only cited Articles XXVIII and II in its complaint but had also made reference to the issues which this Panel should consider so as to be able to determine the EC's obligations and Brazil's rights. Panels should examine the complaint in the light of the relevant GATT provisions. This forestalled objections as to ultra vires in a case where a panel chose to base its findings on provisions not specifically relied on by the parties. Thus, the Panel had discretion as to what to take into consideration when examining a complaint.

157. The reference to provisions of the GATT had always, according to the author of the Handbook, been interpreted to mean not only the covered agreements but also the whole WTO legal system including secondary and supplementary GATT law. ⁹⁷ Brazil maintained that the agreement agreed within the framework of Article XXVIII and submitted by the EC to the CONTRACTING PARTIES was supplementary GATT law within the terms of the standard terms of reference. In the view of Brazil, Article 7.2 of the DSU confirmed the broad scope of the standard terms of reference by providing that "Panels shall address the relevant provisions in any covered agreement or agreements cited by the parties to the dispute". Thus, panels had to look to covered agreements and "agreements cited by the parties". Brazil had cited Article XXVIII of GATT and the Oilseeds Agreement adopted within the framework of that Article. Article 3.2 of the DSU provided that the dispute settlement system of the WTO "serves to preserve the rights and obligations of Members under the covered agreements and to clarify the existing provisions of those agreements". Brazil's claim was that the EC had not complied with its obligations under Article XXVIII of a covered agreement. Those obligations were set out in the Oilseeds agreements. To know what those obligations were, the Panel had to consider the Oilseeds Agreement.

158. Brazil submitted further that there was nothing in the terms of Articles 7 and 10 of the DSU, in the Working Procedures contained in Annex 3 to the DSU, or in the standard terms of reference themselves, which gave interested third parties the right to question the terms of reference of a panel. Interested third parties may be heard by Panels within the terms of Article 10 of the DSU and Article 6 of the Working Procedures. Article 10 did not limit the issues which could be raised by interested third parties. However, more importantly, it did not give third parties the right to override the terms of reference of the Panel or to determine the proper interpretation of those terms when they had been accepted by the parties. The object of the WTO dispute settlement procedures as set out in Article 3 of the DSU, was to secure a positive solution to a dispute.

159. The EC submitted that the Panel was certainly entitled, in accordance with Article 10.2 of the DSU to take into consideration any relevant element that a third party submitted to its appreciation as long as this element was within the terms of reference of the Panel as adopted by the DSB. The EC considered that it was within the terms of reference of the Panel to take account of the arguments advanced in the US statement; however, the EC was not convinced that the Panel needed to address this issue prior to dealing with the questions raised by the EC concerning the application of Article 59(1) or, in the alternative, of Article 30(3) and 31 of the Vienna Convention. The EC considered that both these lines of argument would lead the Panel to the inevitable conclusion that what was applicable and applied was the current Uruguay Round EC Schedule of commitments which provided for a MFN frozen poultry meat TRQ. Consequently, the Article XXVIII Oilseeds Agreement as such was simply not relevant.

Article XXVIII of GATT

160. The United States submitted that Article XXVIII was a conditional provision which permitted a Member to legally renegotiate (modify or withdraw) its concessions at certain times on the condition that certain procedures were complied with in which case it was released from its obligations under Article II with respect to that concession. However, if there was no agreement, the modifying Member could go ahead and change its applied tariff, and the initial negotiating right holders, principal suppliers and substantial suppliers then were free to make counter-withdrawals on a timely basis. The only provision in Article XXVIII that spoke to the level of compensation was Article XXVIII:2, which was merely precatory in nature. Consequently, the United States did not see the possibility that a Member could be found to have "violated" Article XXVIII except if it had refused to negotiate with a party having rights, such as an initial negotiating right holder. The United States further submitted that nothing in the text of Article XXVIII provided any exception to Articles I or XIII. The negotiating history also confirmed that Article XXVIII concerned the unwinding or substitution on an MFN basis of concessions that were negotiated on an MFN basis. ⁹⁸ Tariff compensation provided under Article XXVIII had consistently been provided on an MFN basis, as it was required to by Article I:1. Parallel conclusions had to be drawn for tariff rate quotas and the requirements of Article XIII.

161. Brazil had not even shown, the United States argued, that it had a reasonable expectation that the entire TRQ for frozen poultry was assigned exclusively to Brazil. The bilateral agreement between Brazil and the EC referred to a "global quota" for poultry meat equal to 15,500 tonnes. Nothing in the language of the bilateral agreement committed the EC to a specific quota of 15,500 tonnes exclusively to Brazil. Indeed, the contemporaneous excerpts from various EC publications that Brazil had appended to its initial Panel submission supported the view that the tariff quota was intended to be available on a non-discriminatory basis. In addition, the General Agreement and the WTO provided no legal support for any expectation that concessions pursuant to Article XXVIII proceedings could be provided other than on a non-discriminatory basis. In the appellate proceedings in Banana III, the United States continued, the Community had argued that its market access concessions made pursuant to the Agreement on Agriculture permitted it to act inconsistently with Article XIII of the GATT 1994. The Appellate Body observed that with respect to concessions, a Member could yield rights and grant benefits, but could not diminish its obligations. The Appellate Body explained that this interpretation was confirmed by paragraph 3 of the Marrakesh Protocol. ⁹⁹

Article XIII of GATT

162. Thailand was of the view that any Member's agricultural tariff schedule under the Uruguay Round negotiations was part and parcel of that Member's schedule in accordance with paragraph 1 of the Marrakesh Protocol. ¹⁰⁰ In this respect, the allocation of tariff quotas was governed by, and had to be consistent with, the provisions of Article XIII of the GATT 1994, especially Article XIII:2. Nothing in the GATT, or any other WTO Agreement, provided any special treatment to the tariff quotas derived from a negotiation under Article XXVIII of GATT. Referring to Article XIII:2(d), Thailand submitted that the interest of Thailand as a Member with a substantial interest in supplying poultry to the EC market had to be taken into account, and the allocation of the annual tariff quota of 5,100 tonnes to Thailand by the EC, if done in accordance with the provisions of Article XIII:2(d) would be consistent with the GATT. Once a quota had been established, Thailand said, the manner in which the applying country administered the quota was also very important and subject to the provision of Article XIII:2(d). The Member applying the restriction, in this case the EC, was obligated to administer those quotas in such a way that they were fully utilized. Thailand submitted that it had experienced difficulties in utilizing fully its quota due to, in Thailand's view, the excessive formalities and measures imposed by the EC, such as the fragmentation of the import quantity allotted to importers and the imposition of safeguard measures based upon its own representative price. Thailand believed that these formalities and measures were not consistent with the EC’s obligations under the last sentence of Article XIII:2(d), and should be so held by this Panel. Thailand submitted further that the Agreement on Agriculture did not change the rules regarding the allocation of tariff quotas as contained in Article XIII, especially Article XIII:2(d) of GATT as set out in the Banana III panel report. ¹⁰¹ The Appellate Body's decision in the same Banana III case confirmed that Article XIII, in particular Article XIII:2(d), governed the allocation of tariff quotas.

163. The United States submitted that no evidence had been presented to suggest that the non-discrimination provision in Article XIII was superseded by concessions negotiated pursuant to Article XXVIII. The report of the Appellate Body in Banana III provided, in the view of the United States, useful guidance on the nature of the non-discrimination obligation under Article XIII. There, the Appellate Body found that Article XIII required the non-discriminatory administration of quantitative restrictions and that paragraph 5 of Article XIII also applied to tariff quotas (paragraph 160). As most, if not virtually all, tariff quotas were the result of negotiated concessions, it was implicit in the legal conclusion of the Appellate Body that the origin of a particular tariff quota had no effect on the applicability of the non-discrimination obligation. A review of the bilateral agreement between the EC and Brazil incorporating their resolution of the Oilseeds dispute reflected that the parties did not agree to a method of allocating the tariff rate quota. The text of Article XIII:2(d) was clear - there was an obligation to allocate a share to Members having a substantial interest. Brazil had not identified any provision of the WTO Agreements that would permit the entire TRQ to be assigned to Brazil. In fact, the Appellate Body in Banana III found that Article XIII could not be construed to permit such a result.

The Licensing Agreement

164. Thailand submitted that a tariff quota of 5,100 tonnes of poultry meat was allocated to Thailand by the EC in 1994. This amount was also confirmed during the Uruguay Round negotiations. Therefore, Thailand’s production and export plan for frozen poultry meat had been adjusted accordingly. Thailand was, however, of the view that there were uncertainty in utilizing the tariff quota and no flexibility in the quota arrangement due to (i) the lack of information concerning which importers were granted a quota and the amount of quota granted to each importer; and (ii) the allocation of import licence to each applicant in each quarter was fragmented. According to Regulations 774/94, 1431/94, 641/95 and 997/97, as last amended by Regulation 1514/97, import licences of no more than 10 per cent of the quarterly quota would be allocated to each applicant. If the quantities for which licences had been applied exceeded the quarterly quota, a reduction coefficient was applied to the quantities requested. For example, in the second quarter of 1997, the tariff quota allocated to Thailand was 1,275 tonnes. The amount of import licences was 127.5 tonnes per applicant. In the case where import applications exceeded the quarterly quota, a reduction coefficient was applied, at 4.9 per cent, and each importer would be granted import licences for 6.25 tonnes. This amount was, in the opinion of Thailand, not commercially meaningful. Referring to the administration of import licences, Thailand was of the view that the provisions of the Licensing Agreement should apply. Those provisions included, inter alia, Article 3.2, 3.3 and 3.5(h). In view of these provisions, Thailand considered that the EC import licensing procedures concerning the frozen poultry meat quota administration were inconsistent.

165. The United States submitted that the Appellate Body found in Banana III ¹⁰² that import licensing procedures for the administration of tariff quotas were subject to the Licensing Agreement. The EC did not dispute these conclusions. The EC licensing system for frozen poultry meat was thus subject to the requirement of Article 1.3 of the Licensing Agreement, which provided that Members had to ensure that the administrative procedures used to implement licensing regimes were not operated inappropriately so as to give rise to trade distortions. This general prohibition was repeated in Article 3.2 which provided that non-automatic licensing should not have trade restrictive or distortive effects on imports additional to those caused by the imposition of the restriction. If the EC's administration of the licensing regime for frozen poultry discouraged imports of poultry meat from Brazil by virtue of the alleged eligibility restrictions on licence applicants, the volume limitations imposed in individual licences, and a general lack of procedural transparency, it would seem that the Community's licensing regime then was in contravention of Articles 1.3 and 3.2 of the Licensing Agreement. If indeed the Community had conditioned access to its import TRQ on performance as an exporter, as asserted by Brazil, in the view of the United States, the Community's administration of the TRQ did introduce trade distortions which would contravene Articles 1.3 and 3.2 of the Licensing Agreement. Similarly, if licences were granted only for small, "uneconomic quantities", the licensing system was likely to have restricted trade inappropriately in contravention of paragraphs 3.2, 3.5(i) and 3.5(j) of Article 3 of the Licensing Agreement.

The Agreement on Agriculture

166. Thailand submitted that the Appellate Body had confirmed the decision and reasoning of the panel in Banana III that the Agreement on Agriculture did not change the rules regarding the allocation of tariff quotas as contained in Article XIII of the GATT¹⁰³, concluding that "For these reasons, we agree with the Panel's conclusion that the Agreement on Agriculture does not permit the European Communities to act inconsistently with the requirements of Article XIII of the GATT 1994". In light of the above, Thailand requested the Panel to find that all of the tariff quota allocations was governed by and had to be consistent with Article XIII of GATT and that the EC's administration system of the tariff quota was not consistent with the provisions of Article XIII:2(d) last sentences, and the Licensing Agreement, especially its Article 3.

167. In the view of the United States, the language of the Agreement on Agriculture did not provide support for either of the conditions claimed by Brazil to be prerequisites to the exercise of the safeguard provisions pursuant to Article 5 of the Agreement. First, Article 5, which incorporated all of the pertinent language with respect to the safeguard measures applicable under that Agreement, contained no reference to any injury criteria. Clearly, if the negotiators had intended for such a precondition to apply, it would have been expressly specified in the Agreement. Second, Article 5.1(b) stated that the relevant import price for purposes of activation of the special safeguard should be determined on the basis of the c.i.f. import price of the imports in question. There was no suggestion in the language of Article 5 that any price other than the c.i.f. price was to be used for comparison with the applicable "trigger" or reference price. The more troublesome question posed by the EC's implementation of special safeguard provisions, in the view of the United States, was the possibility that the Community was using some amalgam of internal prices and external prices in establishing the "entry price" that was subject to comparison with the so-called "trigger" or reference price. If this was the prevailing situation, then the EC could be imposing special safeguard duties based on a methodology that was inconsistent with that expressly prescribed in Article 5 of the Agreement on Agriculture.

168. In conclusion, the United States submitted, this Panel should find that Brazil had failed to provide evidence that the bilateral agreement between Brazil and the EC justified any expectation that the EC would issue a tariff rate quota relating to frozen poultry meat that would be for the exclusive benefit of Brazil. In addition, it was clear that the EC could not have granted a tariff rate quota exclusively to Brazil with respect to frozen poultry meat without violating the obligations of Articles I, II, and XIII of GATT. The Panel should also give serious consideration to whether the licensing regime established by the EC to administer the pertinent tariff rate quota had served inappropriately to distort or restrict trade, thereby violating the Licensing Agreement. Finally, in the view of the United States, the EC might have violated the special safeguard provision of Article 5 of the Agreement on Agriculture by adopting a mechanism for establishing the applicable "c.i.f. entry" price that was inconsistent with the express language of Article 5.1(b).

To continue with European Communities - Measures Affecting the Importation of Certain Poultry Products, Chapter IV, Article II section 169

⁸⁵ "the Panel, in our view should have applied the Licensing Agreement first, since this agreement deals specifically, and in detail, with the administration of import licensing procedures. If the Panel had done so, then there would have been no need for it to address the alleged inconsistency with Article X:3(a) of the GATT 1994."

⁸⁶ Article X:1 provided in part that "Laws, regulations (etc.) ... shall be published promptly in such a manner as to enable governments and traders to become acquainted with them."

Article X:3(a) provided that: "Each contracting party shall administer in a uniform, impartial and reasonable manner all its laws, regulations, decisions and rulings of the kind described in paragraph 1 of this Article."

⁸⁷ Appellate Body Report on Banana III, op. cit.

⁸⁸ Panel Report on Sugar, op. cit.

⁸⁹ "The implementation of the concessions and commitments contained in the schedules annexed to this Protocol shall, upon request, be subject to multilateral examination by the Members. This would be without prejudice to the rights and obligations of Members under Agreements in Annex 1A of the WTO Agreement."

⁹⁰ See the Panel Report on Newsprint.

⁹¹ Article II:1(a): "Each contracting party shall accord to the commerce of the other contracting parties treatment no less favourable than that provided for in the appropriate Part of the appropriate Schedule annexed to this Agreement." Article II:1(b): "the products described in Part I of the Schedule relating to any contracting party, ... , shall, ... , be exempt from ordinary custom duties in excess of those set forth and provided therein".

⁹² Panel Report on Spain - Tariff Treatment of Unroasted Coffee, adopted 11 June 1982, BISD 28S/102, paragraph 4.3.

⁹³ "With respect to custom duties and charges of any kind imposed on or in connection with importation or exportation ... any advantage, favour, privilege or immunity granted by any contracting party to any product originating in or destined for any other country shall be accorded immediately and unconditionally to the like products originating in or destined for the territories of all other contracting parties". (emphasis added).

⁹⁴ Like Article I:1, Article II, XIII and the Licensing Agreement.

⁹⁵ "It was considered, moreover, that the intention of the drafters of the Agreement was clearly to treat the imported products in the same way as the like domestic products once they have cleared through customs. Otherwise, indirect protection could be given". BISD 7/S 60, adopted on 23 October 1958.

⁹⁶ Handbook of WTO/GATT Dispute Settlement, op.cit., p. 12.

⁹⁷ Ibid, p.13.

⁹⁸ "It was agreed that there was no intention to interfere in any way with the operation of the most-favoured-nation clause. This Article is headed "Modification of Schedules". It refers throughout to concessions negotiated under paragraph 1 of Article II, the Schedules, and there is no reference in the Article to Article I, which is the Most-Favoured-Nation clause. ... the intent is clear: that in no way should this Article interfere with the operation of the Most-Favoured-Nation clause." (Chairman's summing up in the Tariff Agreement Committee, 1948, EPCT/TAC/PV/18, p. 46, cited at p. 947, Analytical Index/Guide to GATT Law and Practice (1995 ed.))

⁹⁹ "The implementation of the concessions and commitments contained in the schedules annexed to this Protocol shall, upon request, be subject to multilateral examination by the Members. This would be without prejudice to the rights and obligations of Members under the Agreements in Annex 1A of the WTO Agreement". (emphasis added)

¹⁰⁰ Paragraph 1 of the Marrakesh Protocol to the GATT 1994 stated that "... (t)he schedule annexed to this Protocol relating to a Member shall become a Schedule to GATT 1994 relating to that Member on the day on which the WTO Agreement enters into force for that Member ...".

¹⁰¹ The Panel Report on Banana III, op. cit., paragraphs 7.124, 7.125, and 7.126.

¹⁰² Paragraphs 193-194.

¹⁰³ The Appellate Body's reasons with respect to this matter appear in paragraphs 157 and 158 of its report.