May 11, 1989
GATT PANEL RULINGS ON APPLES AND PEARS AND TIMBER.GENEVA, MAY 9 (BY CHAKRAVARTHI RAGHAVAN) – The GATT Council will be seized Wednesday of three new panel rulings involving import restrictions on apples and pears and tariffs on lumber. The three involve disputes between Chile and the European Community, the U.S. and Norway, and Canada and Japan. The panels ruled against the EC and Norway, and in favour of Japan. One panel upheld Chile’s complaint that restrictions imposed by the European Community last year over imports of dessert apples from Chile were illegal. The panel has ruled that the Community restrictions were contrary to the prohibitions against Quantitative Restrictions (QRS) in the general agreement and that the measures were not covered by the permissible exceptions to this rule. The European Community introduced import licensing of dessert apples in February 1988, and on April 12 suspended import licenses of apples from Chile until April 29. On April 20, the EC suspended till August 31 issuance of import licenses for tonnages exceeding specified levels. Chile complained to GATT, after unsuccessful bilateral consultations with the EC, and the matter was referred to a panel, which submitted its report to the parties on March 23 this year, and has now been circulated to the GATT membership after the usual one-month period. The EC market for dessert apples is organised through domestic intervention, including buying of apples when prices fall below fixed levels, and an import regime for licensing or additional import duties as the internal market support requires. The EC had sought to justify its restrictions on the ground of excess production (and apples in storage) in 1986/87 and 1987/88 (7.4 million and 6.4 million tons. Respectively), and that when the EC quotas were imposed, the level allowed from Chile 142.131 tons, had already been exceeded. The other Southern Hemisphere suppliers to the EC market are Argentina, South Africa and New Zealand, accounting together with Chile for 500.000 tons. Chile had complained that the restrictions violated the prohibitions on QRS in article XI, that the quotas violated article XIII in that they were discriminatory, and that the administrative arrangements had not been published and hence violated article X. Claiming violation of other commitments too, Chile has claimed compensation for losses suffered by Chilean exporters. The panel said that the EC restrictions had not been saved by either of the two relevant exceptions in article XI. These exceptions enable restrictions or agricultural products necessary for enforcement of government measures that operate to restrict production and marketing of like domestic products or to remove temporary surplus of like domestic product. The panel also ruled that the administration of the quotas by the EC had been discriminatory and that the imports had been restricted through use of a back-dated import restriction. These, the panel said, were inconsistent with the EEC obligations under articles X and XIII. The second panel report, also on agricultural products and their imports, found against Norway over restrictions on imports of apples and pears from the U.S. Norway has seasonal import restrictions through a licensing scheme established in 1958. The U.S. claimed that the Norwegian restrictions violated GATT provisions prohibiting licensing programme restricting imports, and were not covered by any of the exceptions. Norway claimed that the royal decree establishing the restrictions implemented its 1934 act and this pre-dated GATT and was hence saved by the "grandfather clause" in GATT protocol of provisional application. Under this protocol, signatories only committed themselves to apply part II of GATT (which includes article XI) "to the fullest extent not inconsistent with existing legislation". The panel rejected this contention. For this saving to apply, the panel said, the "existing legislation" must be legislation in a formal sense, pre-date the protocol and be mandatory in character by its term or expressed intent. The Norwegian law permitting the royal decree, the panel said, allowed the king to decide on the prohibition of any imports, and gave the king discretion in this regard. There was nothing in the act, which mandated import restrictions on apples and pears, and hence the restrictions were illegal and not saved by the grandfather clause. The panel recommended that Norway should be asked to bring its measures into conformity with GATT. The third panel ruling on a Canadian complaint against Japan was over Japanese import duties on "dimension lumber", which term includes spruce, pine and fir, and largely used in platform house constructions in the U.S. and Canada. This type of timber was introduced by U.S. and Canada to the Japanese construction industry. The Japanese tariff schedules on various types of timber have been in place since 1962, and tariffs are based on lumber species, size and processing characteristics. Canada’s complaint to GATT was that its exports of dimension lumber were subject to an eight percent tariff. While what it contended were "comparable" products entered Japan duty-free. Canada had claimed that its lumber industry had suffered 90 million dollar lost sales between 1974-1987, and estimated a further 355 million loss over the next five years. Japan’s defence was that "dimension lumber" was not a term found in any customs classification, and its won classifications and the duties were originally based on domestic production and supply needs, and that lumber from pine, spruce or fir wood were inferior in lumber quality. The panel agreed that while "dimension lumber" might be a standard to measure lumber quality and size, it did not belong to any internationally recognised customs classification. The GATT, the panel noted left wide discretion to national authorities in customs classification and structure of tariffs. Any Contracting Party challenging the classification of another had to show the tariff was being used as discrimination, and this had not been done by Canada.