OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE
Executive Office of the President
Washington, D.C. 20508
www.ustr.gov.

WTO APPELLATE BODY REJECTS EU APPEAL ON U.S. BANANAS DUTIES

The Office of the U.S. Trade Representative announced today that the World Trade Organization Appellate Body has rejected a European Union appeal claiming that U.S. tariffs now in place in the Bananas dispute violate WTO rules. The effect of today's ruling is that the United States will not need to make any changes in the tariffs imposed on European imports in response the EU's WTO-inconsistent banana import regime.

"We are pleased that the Appellate Body has upheld the panel in rejecting the EU's claims. The U.S. tariffs now in place as a result of the Bananas dispute are consistent with WTO procedural requirements. As we have said repeatedly, the Bananas dispute can and should be resolved through EU compliance with WTO rules, not through endless litigation," said U.S. Trade Representative Charlene Barshefsky.

The EU's complaint addressed the U.S. announcement of March 3, 1999 that it would change bonding requirements on certain imports from EU countries. The United States took this step in order to ensure that it could, from that date, collect any duties that might be applied after a WTO arbitrator in the Bananas dispute completed a report on the level of harm to the U.S., which had been scheduled for March 2. Because the March 3 bonding requirements were a temporary measure in place only until WTO proceedings finished on April 19, 1999, no action by the United States is required. In fact, the Appellate Body concluded that the panel erred when it recommended that the United States bring into compliance a measure which no longer exists.

In addition to rejecting EU arguments relating to tariffs now in place, the Appellate Body also rejected EU arguments that the United States violated WTO procedural rules by not requesting separate panels to determine whether, and by how much, the EU banana regime harmed U.S. exports. The EU had argued that because only one panel considered both questions, current U.S. duties on bananas are inconsistent with WTO rules. The EU has presented this argument to several WTO adjudicatory bodies, including the Appellate Body; none have accepted it.

Background

The United States Customs Service requires that importers post bonds to ensure that they pay all duties which may be due and meet other U.S. legal requirements. The U.S. action on March 3, 1999 consisted of changing those bonding requirements on certain imports from EU countries to ensure that higher duties could be collected following completion of WTO proceedings authorizing duty increases. Those proceedings were not completed until April 19, 1999.

The EU argued that the U.S. action discriminated against imports from EU countries and imposed charges in violation of various provisions of the General Agreement on Tariffs and Trade 1994. The EU also argued that the United States violated various provisions of the WTO Dispute Settlement Understanding by acting against the EU before WTO proceedings were complete. Finally, the EU argued that the United States and the Bananas arbitrator failed to follow procedural rules, rendering all U.S. Bananas tariffs WTO-inconsistent.

In July, the WTO panel agreed with the EU that the United States acted prematurely in changing bonding requirements on March 3, but it rejected the EU argument that the tariffs now in place are WTO-inconsistent because of WTO procedural requirements. The panel supported the U.S. position on these procedural requirements, and disagreed with the EU that the WTO panel in Bananas was incorrect in applying them. These procedures prevent a non-implementing party such as the EU from engaging in endless litigation to delay compliance or the consequences of non-compliance.