USTR - WTO Appellate Body Finds Against EU Customs Law Administration
                 
The Office of the United States Trade Representative

WTO Appellate Body Finds Against EU Customs Law Administration
11/13/2006


WASHINGTON
— The WTO Appellate Body issued a report today confirming that the European Union (EU) fails to administer in a uniform manner its rules on the customs classification of liquid crystal display monitors.  The report upheld a June 16, 2006 finding by a WTO dispute settlement panel.  Additionally, the Appellate Body agreed with the United States that that panel erred in declining to consider the broader question of whether the EU’s system of customs administration as a whole is inconsistent with WTO rules requiring the uniform administration of customs laws.

In this dispute, the United States claimed that the administration of EU customs law by 25 different agencies (one for each of the EU’s Member States), coupled with a lack of any procedures or mechanisms to reconcile the divergences that inevitably occur on important matters including classification and valuation, is a violation of the EU’s obligation to administer its customs laws in a uniform manner.

Deputy U.S. Trade Representative John Veroneau made the following statement regarding the Appellate Body report:

“Today’s Appellate Body report reinforces that the EU is subject to the same rules as other WTO Members.  The EU’s internal decisions about how to organize itself do not excuse it from or diminish its obligations to other WTO Members.  Like every other WTO Member, the EU must administer its customs law uniformly across its territory.  Today’s report confirms the panel’s finding that the EU does not do so when it comes to the classification of LCD monitors.

“We would have preferred the original panel to have made a broader finding about the EU’s system as a whole.  In that regard, we are pleased that in today’s report, the Appellate Body reversed the panel’s decision to limit its findings to particular instances of administration of EU customs law.  The EU’s administration of its rules on LCD monitors is indicative of how the system as a whole operates.  Had the panel considered the EU system as a whole, it should have reached that conclusion.

“The United States welcomes the Appellate Body’s report and looks forward to the EU’s compliance with its findings.”

The lack of uniform administration of EU customs law poses a significant barrier to trade, especially to the small- and medium-sized exporters that lack the resources to navigate a system that the original panel found to be “complicated and, at times, opaque and confusing.”  That barrier became more daunting when the EU grew from 15 to 25 members and will become even more so when it grows to 27 members.

Background

In this dispute, the United States challenged: (1) the lack of uniform administration of EU customs law, and (2) the lack of an EU tribunal or other procedure for the prompt review and correction of customs administrative actions whose decisions apply throughout the EU.  The United States argued that these features of the EU’s customs law administration and review system are inconsistent with Articles X:3(a) and X:3(b) of the General Agreement on Tariffs and Trade 1994, respectively.

In its June 16, 2006 report, a dispute settlement panel agreed with the United States in part, finding the EU to be in breach of its Article X:3(a) obligation of uniform administration in three particular areas, including with respect to the classification of LCD monitors.  However, the panel declined to reach the broader question of whether the EU’s system as a whole is inconsistent with Article X:3(a).  In August, the United States and the EU each appealed from different aspects of the panel report.

In today’s report, the Appellate Body upheld the panel’s finding that the EU is in breach of Article X:3(a) with respect to its administration of rules pertaining to the classification of LCD monitors. 

Additionally, the Appellate Body found that the panel erred in declining to consider the broader question of whether the EU’s system as a whole is inconsistent with Article X:3(a).