(c) Discretion with respect to the timing of determination and other issues relating to time frames

4.670  The European Communities considers that the DSU does not provide Members with the assurance that the DSB will adopt findings on their complaints within that time frame. The DSU allots to each stage in the dispute settlement proceeding a minimum or maximum period of time.³⁵⁴

4.671  The European Communities claims that according to Article 5.4 of the DSU, "the complaining party must allow a period of 60 days after the date of receipt of the request for consultations before requesting the establishment of a panel". The request for the establishment of the panel must be submitted at least 10 days before the meeting of the DSB.³⁵⁵ Since the DSB normally meets at monthly intervals, the first meeting at which the request for the establishment of the panel can be considered will thus take place between 10 days and one month after the end of the consultation period.

4.672  The European Communities states that Article 6.1 of the DSU provides that, upon request, "a panel shall be established at the latest at the DSB meeting following that at which the request first appears as an item on the DSB's agenda …" and that "a meeting for this purpose shall be convened for this purpose within 15 days of the request …".

4.673 Further, the European Communities argues that according to Article 20 of the DSU, the maximum period between the establishment of the panel and the adoption of the Appellate Body report is normally 12 months. However, this maximum period is extended by up to three months if the panel makes use of its right under Article 12.9 of the DSU to delay the circulation of its report and by a further period of up to 30 days if the Appellate Body extends its proceedings in accordance with Article 17.5 of the DSU. The total period thus is 15 months plus 30 days, or about 16 months.

4.674  The European Communities then considers that even on the assumption that all the Dispute Settlement organs of the WTO act within the period of time allotted to them under the DSU, a period of 19 � months is at the disposal for the normal operation of a given dispute settlement procedure. This is without prejudice to the possibility for the parties, and in particular for the complainant, to extend, at their discretion, these deadlines beyond the 19 1/2 months period allocated to the dispute settlements organs.

4.675  The European Communities then concludes that the USTR is therefore mandated by Section 304(a)(2)(A) to make a determination on the United States' denial of rights under a WTO agreement within a time frame that is shorter than the time frame within which it can reasonably expect DSB findings on that matter.

4.676  The European Communities, however, stresses that this is the most important issue in this respect, a possible delay in the dispute settlement proceedings does not give the United States the right to revert to unilateralism. As a result of the Uruguay Round, the United States has undertaken an unqualified and unconditional international obligation not to revert to unilateral determinations and actions. As was already mentioned in para. 10 above, the deal was struck on the basis of a concession by the European Communities and other Uruguay Round participants allowing for binding dispute settlement against a commitment by the United States to refrain from unilateral determinations and section 301-type trade restrictions without multilateral authorization. By imposing an obligation upon USTR to determine in all cases within 18 months of the request for consultations whether the United States' WTO rights are being denied without awaiting the conclusion of the relevant DS procedures, the United States is clearly in breach of this unconditional obligation, and in particular of Article 23.2(a) of the DSU.

4.677  The United States responds that even if the European Communities were permitted to assume that the USTR's determination under Section 304(a)(1) will always be affirmative, its analysis of the time frames under Section 304(a)(2)(A) and whether they conflict with those in the DSU is incorrect. The United States specifically considered DSU time frames when Sections 301 - 310 were amended in 1994, and these time frames are compatible with those in Section 304(a)(2)(A).³⁵⁶

4.678  The United States goes on to argue that the European Communities focuses on whether the USTR's determination must, because of the 18-month time frame in Section 304(a)(2), occur before DSB adoption of panel and dispute settlement findings in those instances in which dispute settlement proceedings require the maximum period provided for in the DSU. According to the European Communities, because Section 303 requires that the USTR request consultations on the date a Section 302 investigation is initiated, and because a determination must be made no later than 18 months after the investigation is initiated, the USTR must necessarily make its determination before DSB adoption in some cases.

4.679  In the view of the United States, the EC's claim is based on its conclusion that, under the DSU, the maximum period from a request for consultations until DSB adoption of panel and Appellate Body findings is 19 � months. The European Communities assumes not only that the panel and Appellate Body require the maximum time authorized under the DSU for their deliberations and report preparations, but that DSB meetings are held on the final day allowed under the DSU to establish the panel, to adopt the panel report (and thereby establish the deadline for an appeal), and to adopt the Appellate Body report.

4.680  The United States argues that the European Communities has however simply miscalculated the deadlines under the DSU. First, the European Communities has erroneously assumed that the normal period for panel proceedings may be extended by three months pursuant to DSU Article 12.9, rather than the actual figure of two months or less.³⁵⁷ Thus, even if the EC's other assumptions were correct, the maximum period for dispute settlement proceedings under Article 20 would be between 17 months and three weeks and 18 � months, and not 19 � months.³⁵⁸

4.681  The United States further claims that even this 18 � month time frame is longer than that provided for in the DSU. This is because the European Communities assumes a longer period than it may (1) between the completion of consultations and the DSB meeting at which the panel request first appears on the agenda, and (2) between circulation of the panel report and the DSB meeting at which the report is scheduled for adoption (which establishes the deadline for an appeal). With respect to the DSB meeting at which the panel request first appears on the agenda, the European Communities ignores footnote 5 to DSU Article 6.1, which requires a DSB meeting to be convened to consider panel establishment within 15 days of a request.³⁵⁹ Thus, the European Communities may not assume that the first DSB meeting after the consultation period will take place 30 days after the conclusion of the consultation period, or that the period for establishment of the panel will require one and a half months, rather than one month.

4.682  The United States considers that likewise, the European Communities ignores the fact that a Member may, at any time, request that a DSB meeting be held.³⁶⁰ Both for this reason and because DSB meetings generally take place on a monthly basis, the European Communities may not assume that the DSB meeting at which the panel report is scheduled for adoption will take place 60 days after circulation.

4.683  The United States points out that while it is not unreasonable for the European Communities to assume that certain aspects of the dispute settlement schedule are beyond the control of the United States (consultation period under Article 4.7, panel deadline under Article 12.9, Appellate Body deadline under Article 17.5), the European Communities may not assume that the United States would not act to expedite the dispute settlement schedule were this necessary to ensure that US determinations under Section 304 are fully consistent with US DSU obligations.³⁶¹ Thus, for purposes of comparing Section 301 time frames with the maximum period provided for dispute settlement proceedings under the DSU, the relevant period is 16 months and 20 days.³⁶²

4.684  The United States further argues that even if it were assumed that the United States could not expedite the DSB meeting schedule, and that the maximum period under the DSU for dispute settlement proceedings were more than 18 months, the European Communities would still be incorrect in concluding that Section 304(a)(2)(A) precludes the USTR from issuing her determination after DSB adoption of Appellate Body findings. This is because the United States may, under US law, request WTO dispute consultations prior to initiating a Section 302 investigation. Nothing in Sections 301-310 prevents this, and the USTR has in fact done so.³⁶³

4.685  The United States then states that Section 302(a)(2) provides the USTR 45 days from the filing of a petition to determine whether she will initiate an investigation, during which period the USTR is free to request dispute settlement consultations.³⁶⁴ Moreover, under Section 302(b), the USTR is free to self-initiate an investigation at any time; in such a case, there is nothing preventing the USTR from first requesting dispute settlement consultations.³⁶⁵

4.686  The United States emphasises that to meet its burden with respect to Section 304(a)(2)(A), the European Communities must demonstrate that it would not be possible³⁶⁶ under the 18-month time frame in that section for the USTR to issue a WTO-consistent determination. In addition to the reasons set forth above with respect to the determination itself and the EC's miscalculation of DSU deadlines, the European Communities has failed to meet its burden because it has not established why the USTR could not initiate a Section 301 investigation several weeks after a US request for WTO dispute settlement consultations, thereby allowing for DSB adoption of panel and Appellate Body findings within the 18-month period provided for under Section 304(a)(2)(A).

4.687  The United States further claims that even if it were assumed that Sections 301-310 preclude the USTR from requesting consultations prior to initiating a Section 302 investigation, that the USTR could not expedite the DSB meeting schedule, and that the maximum period for dispute settlement were 18 � months, this would still mean that the USTR would always have the benefit of circulated Appellate Body findings when she makes her determination.³⁶⁷ Moreover, in light of the negative-consensus rule of DSU Article 17.14, the USTR would also know that the DSB would adopt the reports of the panel and/or Appellate Body when it meets, and would also know the date of that meeting.³⁶⁸

4.688  In the view of the United States, the goal of Article 23.1 is to ensure that WTO Members resort to multilateral dispute settlement procedures, and it is difficult to understand how this goal would be frustrated if the United States were to follow such procedures through to their conclusion and state what every WTO Member would already know – that US WTO rights had been denied, and that the DSB would shortly adopt that conclusion. Thus, even if (as is not the case) the USTR were required under US law to make an unqualified affirmative determination under Section 304(a)(1) based on favorable, but unadopted, panel and Appellate Body findings, such a determination would not be inconsistent with the goal of Article 23 – multilateral determinations of violations.

4.689  The United States further stresses that nothing in Sections 301-310 compels the USTR to make a determination that US agreement rights have been denied in the absence of adopted Appellate Body or panel findings, nor do Sections 301-310 compel the USTR to wait until the initiation of a Section 302 investigation to request dispute settlement consultations. Moreover, the European Communities is incorrect in claiming that the time frames for dispute settlement under the DSU are longer than 18 months. The European Communities has therefore not demonstrated that Section 304(a)(2)(A) precludes the USTR from fully complying with the letter and spirit of DSU Article 23.

4.690  In response to the Panel's question on the precise basis under Section 304, or any other legal basis, for the United States to argue that unless WTO procedures are completed, the USTR is precluded from making a determination of violation, the United States argues that Section 304(a)(1) requires that determinations under that section be made "on the basis of the investigation initiated under Section 302 and the consultations (and the proceedings, if applicable, under section 303)". The "proceedings" under Section 303 are dispute settlement proceedings.³⁶⁹ Moreover, such proceedings would be "applicable" in any case involving a trade agreement, since Section 303 requires that dispute settlement procedures under a trade agreement be invoked in any case involving a trade agreement, if no mutually acceptable resolution has been achieved.³⁷⁰

4.691  The United States notes that Section 304(a)(2) specifies the timing of the USTR's determinations under Section 304(a)(1). Under this provision, the USTR must make her determination under Section 304(a)(1) by the earlier of 30 days after the conclusion of dispute settlement proceedings or 18 months after initiation of an investigation. The 18-month time frame permits the USTR to base her determination on adopted panel and Appellate Body findings in all cases.³⁷¹ The United States specifically considered DSU time frames when amending Section 304 in 1994 to ensure the compatibility of Section 304 time frames with those in the DSU.³⁷²

4.692  The United States examines the numerous assumptions on which the EC argument rests. US Exhibit 10 summarizes these assumptions. The United States argues that for each EC claim, all of the EC's assumptions must be correct for it to prevail, but none of them is correct.

4.693  In the view of the United States, the first set of EC assumptions relates to its claim that Section 304 mandates a violation of DSU Article 23.2(a). The European Communities argues that Section 304 requires the USTR to make a determination that US trade agreement rights have been violated within 18 months of initiation of a Section 302 investigation, while the DSU provides for a longer period for completion and adoption of panel and Appellate Body proceedings in some instances.

4.694  The United States notes that these EC assumptions relate to the time frames in Section 301 and the DSU. However, because Section 304 does not mandate an affirmative determination, these time frames are simply not relevant to the Panel's decision. Nevertheless, even were this not so, the 18-month time frame in the statute would not prevent the USTR from complying to the letter with DSU rules and procedures. The EC's calculation of the time by which a panel may extend its proceedings is incorrect by one month. Moreover, the European Communities ignores the fact that DSB meetings normally are held monthly and instead assumes that DSB meetings would not be held until the final day permitted under the DSU. The European Communities also assumes that the United States would not attempt to affect the schedule of DSB meetings. Finally, the European Communities ignores the fact that Sections 301-310 do not preclude the USTR from initiating dispute settlement proceedings before initiating a Section 301 investigation. Thus, wholly apart from the fact that the European Communities cannot assume that the USTR will always make an affirmative determination, the time frames in the US statute do, in fact, permit the USTR to base her determination on adopted panel and Appellate Body findings. The DSU time frames were negotiated with this 18-month time frame in mind, and the European Communities and others were well aware of this fact during the Uruguay Round.

4.695  The European Communities notes that the European Communities and the United States differ on certain timeframes under the DSU.

4.696  The European Communities notes that as to this time frame, the United States claims that the total length is 18 months while the European Communities claims that the total length is 19 � months. This difference arises from different assumptions on the length of time it takes to establish and compose Panels.

4.697  The European Communities rebuts the US assumption that all the panels that it requests the DSB to establish are composed as a result of two special meetings of the DSB convened in accordance with Article 6.1 of the DSU. This provision provides that, upon request,

"a Panel shall be established at the latest at the DSB meeting following that at which the request first appears as an item on the DSB's agenda …". and that "a meeting for this purpose shall be convened for this purpose within 15 days of the request …".

4.698  The European Communities indicates that it interprets the terms "for this purpose" to refer to the second meeting of the DSB at which the panel must be established. This is in conformity with the consistent practice of the WTO Members and of the DSB. The complainant can thus not request two special DSB meetings benefiting from the compulsory reduced time of convocation, as the United States assumes, but only one. Since the DSB normally meets once a month (but not necessarily every month, as during August and at the end of the year DSB meetings are rarely held), the complainant can for these reasons not expect the establishment of the Panel until one month + 15 days have lapsed.

4.699  The European Communities notes that the United States claims that it can at any time request a special meeting of the DSB. However, the United States has a right to a special meeting (i.e. benefiting from the compulsory reduced time of convocation) only in the circumstances foreseen in the DSU and can therefore not count on two special DSB meetings.

4.700  Moreover, the European Communities points out that the United States makes the assumption that it will in all cases request two special meetings in anticipation of later delays. The US assumption is based on a logical non-sequitur. The anticipation of the delays would be put in practice without knowing whether any delay at all would appear in the course of the procedure. The panelists in the EC – Hormones (US) case, for example, could not have anticipated the duration of the procedure before they actually started it and recognised the need to request expert advice on extremely sensitive and complicated scientific issues brought to their attention. Consequently, the US assumption could only be credible if it could show that it pursued a systematic policy of shortening the procedural deadlines by anticipation. However, the United States has not shown (and cannot show) it pursued such a systematic practice.

4.701  The European Communities further notes that the second source of discrepancy can be found in the different assumptions regarding the length of the extension period under Article 12.9 of the DSU.

4.702  The European Communities recalls that the United States assumes that the composition of the Panel takes one month and that the actual extension provided for under Article 12.9 is therefore only two months.

4.703  The European Communities argues that here it assumed that the Panel is composed shortly after it has been established (for instance, there was no disagreement on the composition between the parties). Under the EC's assumption, the two starting dates for calculating the six-month and the nine-month periods referred to in Article 12.9 are close to one another so that the period of extension available to the Panel effectively remains three months.

4.704  The European Communities is further of the view that the United States' claims are based on a misrepresentation of the discretion available to the United States under the legislation at issue. Under Sections 301-310, the USTR must determine within specified time frames whether United States' rights under a WTO agreement are being denied and whether a failure to implement DSB recommendations has occurred.³⁷³

4.705  The European Communities challenges the US claim that the USTR has the right not to make any determination at all or to decide to postpone the determination so as to await the completion of WTO proceedings. There is nothing in the text of Sections 301-310 to support this claim. The explicit requirements to make a determination within a specified time frame whether the United States' WTO rights are being denied or a failure to implement DSB recommendations has occurred would be completely frustrated if they were deemed fulfilled by a decision to postpone the determination.

4.706  The European Communities maintains that it is irrelevant whether the USTR has decided in a few individual cases to postpone her determination beyond the deadlines foreseen in Sections 301-310. Both parties agree that the issue in this dispute is the legislation of the United States, not its actual application. The European Communities would like to recall in this context the following ruling of the GATT panel on United States - Measures Affecting Alcoholic and Malt Beverages (Beer II):

"Even if Massachusetts may not currently be using its police powers to enforce this mandatory legislation, the measure continues to be mandatory legislation which may influence the decisions of economic operators. Hence, a non-enforcement of a mandatory law in respect of imported products does not ensure that imported beer and wine are not treated less favourably than like domestic products to which the law does not apply" .³⁷⁴

4.707  The European Communities recalls the arguments that the United States presented to the WTO panel on India - Patents (US):

"The mailbox system … had a rationale common to many other WTO obligations, ‘namely to protect expectations of the contracting parties as the competitive relationship between their products and those of other contracting parties'. The Superfund report had established clearly the importance of ‘creat[ing] the predictability needed to plan future trade.' … Despite India's claim that it had decided for the moment not to enforce the mandatory provisions of ... its Patent Act ... that 'measure continues to be mandatory legislation, which may influence the decisions of economic operators.' The economic operators in the present case - potential patent applicants - had no confidence that a valid mailbox system had been established ... To paraphrase the Beer II panel, a non-enforcement of a mandatory law that violated a WTO obligations did not ensure that the obligation was not being broken".³⁷⁵

4.708  The European Communities then argues that the provisions of Sections 301-310 stipulating WTO-inconsistent action would thus remain WTO-inconsistent even if the USTR did not enforce them at all.³⁷⁶

TO CONTINUE WITH UNITED STATES – SECTIONS 301-310 OF THE TRADE ACT OF 1974