EC Selected Customs Matters First Written Submission

EC – Selected Customs Matters First Written Submission

DS 315 of the European Communities

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European Communities - Selected Customs Matters

(WT/DS315)

First Written Submission

of the

European Communities

Geneva, 16 August 2005

EC – Selected Customs Matters First Written Submission

DS 315 of the European Communities

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TABLE OF CONTENTS

Table of WTO and GATT cases referred to in this submission iv

GLOSSARY v

I. Introduction 1

II. Procedural background 2

III. Factual Background 4

A. General Principles of the EC Legal System 5

1. The EC Institutions and the EC Legislative Process 6

2. The Implementing Powers of the European Commission 7

3. The Legal Effect of Community law 10

4. The Commission, the Member States, and the Execution of Community law 12

B. The Administration of EC Customs Law 14

1. The Basic Principles of the EC Customs Union 15

2. The EC’s International Commitments in the Field of Customs Administration and Cooperation 16

3. The Legislative Framework of the EC Customs Union 17

(a) The Common Customs Tariff 17

(b) The Community Customs Code 19

4. The Commission, the Member States, and the Customs Code Committee 20

5. Tariff Classification 23

(a) Classification Regulations 24

(b) HS Explanatory Notes and Opinions 26

(d) Opinions of the Customs Code Committee 27

(e) Binding Tariff Information 28

6. Customs Valuation 32

(a) EC Valuation Rules 32

(b) The Uniform Application of EC Valuation Rules 33

7. Processing under Customs Control 35

8. Local Clearance Procedure 36

9. Penalties for Violations of Customs Law 38

10. EC Customs Cooperation 39

11. Budgetary and Financial Aspects 41

12. The Continuous Evolution of EC Customs Law 43

C. Judicial Control in EC law 43

1. The EC Court system 44

2. Judicial Protection in the EC legal system 46

3. Preliminary rulings: the Court of Justice and the uniform interpretation and application of Community law 48

4. Judicial review of customs decisions 51

D. The US System in comparison 53

1. The Administration of US Customs Law 53

2. Review of customs decisions in US law 55

IV. The US Claims under Article X:3 (a) GATT 57

A. The Requirements of Article X:3 (a) GATT 57

1. Article X:3 (a) GATT concerns the administration of customs laws, not the customs laws themselves 58

2. Article X:3 (a) GATT does not prescribe the ways in which WTO Members must administer their customs laws 60

3. Article X:3 (a) GATT lays down minimum standards 62

4. The meaning of “uniform administration” 63

B. The Burden of Proof 65

C. General Issues Underlying the US Claims under Article X:3 (a) GATT 67

1. The fact that EC customs law is administered by the customs authorities of EC Member States is compatible with Article X:3 (a) GATT 68

2. The EC has measures in place to ensure the uniform administration of EC customs laws throughout the EC 70

3. Some necessary corrections regarding the role and functioning of the Customs Code Committee 72

4. The role of the Court of Justice in ensuring uniformity in the administration of EC customs law 76

D. The US Claims under Article X:3 (a ) GATT 78

1. Tariff Classification 79

(a) The ECJ and Tariff Classification 80

(b) Binding Tariff Information 82

i) The US comments are irrelevant for assessing the EC’s compliance with Article X:3 (a) GATT 82

ii) The alleged risk of BTI shopping 83

iii) The alleged difficulties of detecting and correcting divergent BTIs 85

iv) The legal effect of BTI 88

i) Blackout Drapery Lining 90

ii) LCD Monitors 95

2. Customs Valuation 99

(a) The uniform administration of valuation rules in the EC 99

i) EC valuation rules do not leave a high degree of discretion to customs authorities 100

ii) Article X:3 (a) GATT does not require binding valuation rulings 101

iii) The EC administers its valuation rules in a uniform manner 102

(b) Report 23/2000 of the EC Court of Auditors 104

i) The Significance of Report 23/2000 of the EC Court of Auditors 104

ii) The Issues raised by the US in connection with the Report of the Court of Auditors 106

3. Processing under customs control 112

4. Local clearance procedure 114

5. Penalties for Violations of Customs Law 117

(a) Penalty provisions are not covered by Article X:3 (a) GATT 117

(b) Article X:3 (a) GATT does not require the harmonisation of Member States’ penalty provisions 118

V. The US Claim under Article X:3 (b) GATT 122

A. The requirements of Article X: 3(b) GATT 122

1. Nature of the control 124

2. Time requirement: prompt review 125

B. The EC provides for prompt review of customs decisions 126

1. The claim regarding the absence of an EC customs court 126

2. Promptness in the review 128

VI. conclusion 130

Table of WTO and GATT cases referred to in this submission

Short Title / Full Case Title and Citation of Case
Argentina – Hides and Leather / Panel Report, Argentina – Measures Affecting the Export of Bovine Hides and Import of Finished Leather, WT/DS155/R and Corr.1, adopted 16February2001
Canada – Gold Coins / GATT Panel Report, Canada – Measures Affecting the Sale of Gold Coins, L/5863, 17 September 1985
EC–BananasIII / Appellate Body Report, European Communities – Regime for the Importation, Sale and Distribution of Bananas, WT/DS27/AB/R, adopted 25September1997, DSR1997:II,591
EEC – Dessert Apples / GATT Panel Report, European Economic Community – Restrictions on Imports of Dessert Apples – Complaint by Chile, L/6491, adopted 22June1989, BISD36S/93
EC–Hormones / Appellate Body Report, EC Measures Concerning Meat and Meat Products (Hormones), WT/DS26/AB/R, WT/DS48/AB/R, adopted 13February1998, DSR1998:I,135
EC–Poultry / Appellate Body Report, European Communities – Measures Affecting the Importation of Certain Poultry Products, WT/DS69/AB/R, adopted 23July1998, DSR1998:V,2031
EC – Trademarks and Geographical Indications (Australia) / Panel Report, European Communities – Protection of Trademarks and Geographical Indications for Agricultural Products and Foodstuffs, Complaint by Australia, WT/DS290/R, adopted 20 April 2005
EC – Trademarks and Geographical Indications (US) / Panel Report, European Communities – Protection of Trademarks and Geographical Indications for Agricultural Products and Foodstuffs, Complaint by the United States, WT/DS174/R, adopted 20 April 2005
US – Corrosion-Resistant Steel Sunset Review / Panel Report, United States – Sunset Review of Anti-Dumping Duties on Corrosion-Resistant Carbon Steel Flat Products from Japan, WT/DS244/R, adopted 9 January 2004, as modified by the Appellate Body Report, WTDS244/AB/R
US – Hot-Rolled Steel / Panel Report, United States – Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan, WT/DS184/R, adopted 23August2001 as modified by the Appellate Body Report, WT/DS184/AB/R, DSR 2001:X, 4769
US – Shrimp / Appellate Body Report, United States – Import Prohibition of Certain Shrimp and Shrimp Products, WT/DS58/AB/R, adopted 6November1998, DSR1998:VII,2755
US – Wool Shirts and Blouses / Appellate Body Report, United States – Measure Affecting Imports of Woven Wool Shirts and Blouses from India, WT/DS33/AB/R and Corr.1, adopted 23May1997, DSR1997:I,323

GLOSSARY

BOI Binding Origin Information

BTI Binding Tariff Information

CCC Community Customs Code

CIS Customs Information System

CN Combined Nomenclature

Comitology Decision Council Decision 1999/468/EC of 28 June 1999 laying down the procedures for the exercise of implementing powers conferred on the Commission

Commission, EC Commission Commission of the European Communities

Council, EC Council Council of the European Union

Court of Justice, European Court of Justice Court of Justice of the European Communities

Customs Code Committee Committee established by Articles 247a (1) and 248a (1) of the CCC

Customs Valuation Agreement Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade 1994

DSU Understanding on Rules and Procedures Governing the Settlement of Disputes

EBTI European Binding Tariff Information

EC European Communities

ECR European Court of Justice, Reports of Cases before the Court

EC Treaty Treaty establishing the European Community

EU Treaty Treaty on European Union

FWS First Written Submission

GATT General Agreement on Tariffs and Trade 1994

HS Convention International Convention on the Harmonised Commodity and Coding System

HTSA Harmonized Tariff Schedule of the United States Annotated

Implementing Regulation Commission Regulation (EEC) No 2454 of 2 July 1993 laying down provisions for the Implementation of the CCC

Kyoto Convention International Convention on the Simplification and Harmonisation of Customs Procedures

Member States, EC Member States Member States of the European Union

Official Journal Official Journal of the European Union

Taric Integrated Tariff of the European Communities

US United States

USTR United States Trade Representative

WCO World Customs Organisation

WTO World Trade Organization

WTO Agreement Marrakesh Agreement Establishing the World Trade Organization

EC – Selected Customs Matters First Written Submission

DS 315 of the European Communities

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I. Introduction

1. This submission provides the response of the European Communities (EC) to the first written submission filed by the United States on 12 July 2005.

2. In its first submission, the US alleges that the EC does not fulfil its obligations under Article X:3 (a) of the GATT by failing to administer its customs laws in a uniform manner. Moreover, the US alleges that the EC does not comply with its obligations under Article X:3 (b) GATT by not providing judicial, arbitral or administrative tribunals or procedures for the prompt review and correction of administrative action relating to customs matters.

3. These claims of the United States are unfounded. First, the US does not provide evidence that the EC fails to administer its customs laws in a manner contrary to Article X:3 (a) GATT. Indeed, apart from a small number of isolated and misleading examples, the US FWS provides very little information about the actual administration of EC customs law. Since it does not provide any evidence to the effect that the EC administers its customs laws in a non-uniform manner, the US fails to establish a prima facie case in support of its claims.

4. Second, the focus of the United States case is not on the actual administration of EC customs laws, but on the EC system of customs administration. Put simply, the United States objects to the fact that the EC administers EC customs laws not through an EC customs agency, but through the national administrations of its Member States. Similarly, the US objects to the fact that judicial review of customs decisions in the EC is provided not through “EC-level tribunals”, but through tribunals of the EC Member States. With these claims, the United States is putting into question fundamental structural elements of the EC legal order, without providing a shred of proof that these structural elements are indeed incompatible with the requirements of Article X:3 (a) and (b) GATT.

5. Third, the US interpretation of Article X:3 (a) and (b) GATT is without basis in the text of these provisions. According to the United States, Article X:3 (a) and (b) GATT seems to prescribe in detail the way in which a WTO Member must implement its customs laws. The EC does not believe that this is the objective underlying Article X:3 GATT. Article X:3 GATT is a provision laying down minimum standards for the administration of customs law, not a legal basis for the harmonisation of the systems of customs administration of WTO Members.

6. In the present submission, the EC will refute in detail the US claims. The present submission is divided into four main parts which are structured as follows:

· In the first Part (II), the EC will briefly comment on the procedural history of the present case.

· In the second Part (III), the EC will introduce a number of general principles of the EC legal system and provide an overview of the EC system of customs law and administration as well as a description of the EC mechanisms of judicial interpretation and judicial review.

· In the third Part (IV), the EC will discuss the US claims under Article X:3 (a) GATT.

· In the fourth Part (V), the EC will discuss the US claims under Article X:3 (b) GATT.

II. Procedural background

7. On 21 September 2004, the US addressed a request for consultations to the EC regarding:[1]

(a) the nonuniform administration by the European Communities of laws, regulations, judicial decisions and administrative rulings of the kind described in Article X:1 of the GATT 1994 pertaining to the classification and valuation of products for customs purposes and to requirements, restrictions or prohibitions on imports, and

(b) the failure of the European Communities to institute judicial, arbitral or administrative tribunals or procedures for the purpose, inter alia, of the prompt review and correction of administrative action relating to customs matters.

8. The US consultation request did not identify any concrete examples of non-uniform administration of EC customs laws. Prior to the consultation request, the US had never raised these issues in any other bilateral or multilateral forum.

9. The consultations were held in Geneva on 16 November 2004. During the consultations, the US asked a long list of questions regarding the interpretation and application of EC instruments in the field of customs administration. The EC tried to duly respond to all questions raised by the US. In contrast, the US failed to identify any concrete examples of non-uniform application of EC customs laws. In fact, the consultations confirmed that the US case is essentially seeking a major overhaul of the EC system, including notably the establishment of a sort of EC customs agency, as well as of EC-level customs tribunals. Since these requests are unacceptable to the EC, the consultations failed to resolve the dispute.

10. The essentially systemic nature of the US case is also illustrated by the lukewarm reaction of traders to the US case. In response to a request for input by the United States Trade Representative following the consultation request, USTR received a mere three submissions (Exhibit EC-1 “U.S. dispute on EU customs garners little industry reaction”). Only one of these submissions is referred to in the US FWS.[2] Of the other two submissions, one was unsubstantiated, one unhelpful to the US case since it provided an example of the uniform application of EC classification rules.