Jun 23, 1998

DSB ADOPTS APPELLATE BODY REPORT ON US-EC LAN TARIFFS

Geneva, 22 June (Chakravarthi Raghavan) -- The Dispute Settlement Body of the World Trade Organization adopted Monday the report of a panel, modified by the appellate body, over the US complaint about the tariff treatment by some EC members of Local Area Network (LAN) equipment and personal computers with multimedia capability.  

The appellate body had effectively overturned the panel's ruling which had found in favour of the US. This is the first dispute where the panel findings had been more or less reversed. The appellate body had only left in place the panel's finding in favour of the US on some procedural aspects.  

The dispute related to the EC tariff concessions in its GATT schedule -- whether the LAN and PCs with multimedia capability should be treated as automatic data processing (ADP) machiines carrying lower duties or as telecommunications equipment carrying higher duties.  

The panel had found that the EC's treatment of PCs with multimedia capability did not violate the tariff bindings and schedules.  

But on LAN equipment, the panel had said that the US was entitled to "legitimate expectations" that the EC would continue to treat LAN as ADP machines.  

But the appellate body reversed the panel's ruling on this, finding the legal reasoning of the panel erroneous. In particular the appellate body turned down the panel view that the meaning of the tariff concession could be determined in the light of the "legitimate expectations" of an exporting member.  

The appellate body found that the "legitimate expectations" concept had been developed in the GATT in the context of "non-violation" complaints, and the concept could not be invoked in cases involving complaints of actual violation of a GATT obligation.  

Trade officials however noted that under the Information Technology Products accord, duties on these goods will be zero from year 2000, and the panel ruling and the modification would have no practical effect.

At the DSB Monday, the US expressed concern that the appellate body report had not resolved the dispute and had not answered the question whether the EC had violated its tariff bindings. The ruling had also left some substantial uncertainties, and had ignored the basic tariff negotiating practice in the GATT.  

Action on an EC request for a panel against Korea over some safeguard measures against imports of dairy products was put off to the next meeting (if the EC again brings it up). Korea blocked the panel reference this time.  

The EC had made the original request to the DSB for a panel in January, but had withdrawn the request at that time, giving the prospect of bilateral solutions. It has now renewed the request for a panel.

Korea, in blocking the reference, complained that the agreement reached with the EC in bilateral consultations could not be implemented because of inability of the EC to carry its member-states, and this raised questions about the credibility of the EC and its negotiating capacity.  

Another issue before the DSB, and one a panel was set up, was a US complaint against Australia under the subsidy's agreement which enables a panel to be set up on the first occasion when the request comes, and for such a panel to rule within three months, in respect of prohibited subsidies.  

The US complaint related to purported Australian subsidies to producers and exporters of automotive leather.  

While a panel was named, there was a considerable procedural discussion over the US request for the panel, given the fact that on the same issue the US had sought and got a panel established in January 1998, but the panel has not started functioning (since the panellists have not been agreed and named).  

The US request for the new panel had said it was withdrawing its earlier request, while Australia in a note to the DSB had questioned the US asking for a new panel for the same claim already before a panel.  

The procedural discussion turned around whether the US could terminate the earlier panel proceedings, merely by withdrawing its earlier request, and whether the US in fact was trying to alter the terms of reference of the panel through this second request.  

According to some trade officials, the earlier US request had been on the basis of Art. 4 of the Subsidies and Countervailing duties agreement, while the latest is under Art. 3.  

The US complained that under the proposed EC measures to comply with the WTO ruling on bananas, measures now pending before the EC Council of Ministers, the fundamental discriminatory provisions about different sources of banana imports would be maintained.  

The EC however made no substantive comment beyond noting that under the DSU procedures, its first statement about intentions to comply with the ruling was only due at a DSB meeting on or after 7 July.  

Under other business, Japan complained of the lengthy time difference between circulation of panel rulings to parties, and its circulation to other members, citing the ruling of the panel in the Indonesian car dispute case where the parties had been provided the ruling, but members had not got it.  

The delay is attributed to the need to translate the ruling in all the official languages of the WTO. 

Japan suggested that the ruling in at least the language in which it was given to the parties should be simultaneously circulated to other members.  

Argentina announced it had reached an accord with the US on the time for implementation of the ruling against it on tariffs on textiles and apparel and on the statistical tax. The former would be implemented by 19 October and the statistical tax ruling by January 1999.  

Cuba complained that the US-EC accord (on the Helms Burton law dispute) had not yet been notified to the WTO. The EC however said the London accord was part of a continuing process which was not yet final.  

The DSB chair also noted that a panel ruling, under the DSU, had to be adopted by consensus within 60 days of the circulation of the report, unless the parties to the dispute announced their decision to appeal. The 60-day period would end on 14 July in the shrimp-turtle case, and he suggested a DSB meeting on 10 or 13 July for adopting the report, unless any of the parties notified their appeal.