Worldwide: In WTO Dispute With The European Union Over Poultry, China Wins Narrow Victory

On March 28, 2017, a World Trade Organization ("WTO") panel (the "Panel") issued its report in European Union – Measures Affecting Tariff Concessions on Certain Poultry Meat Products.1 The dispute concerned the modification of tariff concessions on certain poultry products by the European Union ("EU"). The poultry products included prepared turkey meat, cooked chicken meat, processed chicken meat, and processed duck, geese and guinea fowl meat. These modifications were implemented after negotiations had been held under Article XXVIII of the GATT 1994. The EU had modified its concessions on the relevant poultry products through two distinct negotiations that resulted in two "modification packages."2

Importantly, in response to an outbreak of avian influenza (bird flu) in China, the EU had adopted several sanitary and phytosanitary measures ("SPS measures") that prevented importation of certain poultry products from China in February 2004.3 The WTO-consistency of these SPS measures was not challenged by China in this dispute. Instead, China challenged the modification of tariff concessions on certain poultry products adopted by the EU. Essentially, China claimed that by not taking the existence of these SPS measures into account in the renegotiation of the EU's tariff rate quota ("TRQ") involving these products, the EU "cemented these SPS measures in stone" and prevented China from ever obtaining a significant share of the EU's poultry market. China considered that the measures adopted by the EU were inconsistent with the EU's obligations under Articles I, II, XIII and XXVIII of the GATT 1994. After consultations failed to resolve the dispute, the Panel was established on July 20, 2015.

In its Report the Panel rejected the majority of China's claims. For example, it declined to find that the EU had acted inconsistently with its obligations under Articles I, II and XXVIII of the GATT 1994. However, the Panel did find that the EU had acted inconsistently with Article XIII of the GATT 1994 by not recognizing that China held a substantial interest in supplying the products under tariff lines 1602 39 29 and 1602 39 80.

The Panel's Findings with Respect to Tariff Lines 1602 39 29 and 1602 39 80 Under Article XIII:2(d) and the Chapeau of Article XIII:2 of the GATT 1994 and the Interpretation of the Term "Special Factors"

China had argued that by not recognizing China as a WTO member (a "Member") holding a substantial interest in supplying the products covered by tariff lines 1602 39 29 and 1602 39 80, and by failing to seek agreement with China on the allocation of the TRQs, the EU had acted inconsistently with Article XIII:2(d) of the GATT 1994.4 The Panel therefore had to assess whether China was indeed a Member holding a substantial interest in supplying these products and whether, as China had argued, the SPS measures constituted "special factors" that "may have affected trade" in the relevant product. The Panel declined to find that the SPS measures themselves constituted "special factors" "insofar as they apply equally to imports from all Members in the same situation."5 However, the Panel considered that "changes in the import shares held by different Members that have occurred between the end of the representative period selected and the time of the TRQ being allocated" may need to be taken into account as "special factors." Consequently, the Panel found that China's increased ability to export poultry products under certain tariff lines following the relaxation of the SPS measures in July 2008 was a "special factor" within the meaning of Article XIII:2(d) and that the EU had acted inconsistently with that provision by not recognizing China as a Member holding a substantial interest in supplying the relevant products. For essentially the same reasons, the WTO Panel found that the EU had acted inconsistently with the chapeau of Article XIII:2 by not allocating a greater "all others" share of the TRQs under the relevant tariff lines.6

The Panel's Findings with Respect to Articles I, II, XIII:4 and XXVIII of the GATT 1994

China had also brought claims under three other provisions of the GATT 1994. All of these claims were rejected by the Panel.

ARTICLE XIII:4

In addition to its claims under Article XIII:2, China argued that by refusing to enter into "meaningful consultations" with China, the EU violated its obligations under Article XIII:4 of the GATT 1994. The Panel found that there were insufficient agreed facts concerning the conduct of the consultations to determine whether the EU had indeed failed to do so. Accordingly, the Panel held that China had failed to discharge its burden of proof on this point and had failed to demonstrate that the EU had indeed violated its obligations under this provision.7

ARTICLE XXVIII:1 AND ARTICLE ARTICLE XXVIII:1 AND ARTICLE XXVIII:2

China further claimed that by refusing to recognize China's "principal supplying interest" and "substantial interest" in the concessions at issue in the First and Second Modification Packages, the EU violated Article XXVIII:1 of the GATT 1994. According to China, different and more recent import reference periods should have been used because these would have provided a more accurate reflection of China's supplying interest. The Panel assessed whether changes in import shares oblige the importing Member to reappraise which Members hold a principal or substantial supplying interest. Relying, inter alia, on GATT/WTO practice, the Panel found that such a legal obligation does not exist.8 Therefore, the Panel rejected China's claim under Article XXVIII:1.

China further claimed that the TRQs adopted as part of the First and Second Modification Packages did not "maintain a general level of reciprocal and mutually advantageous concessions" not less favorable to trade than those provided for in the GATT 1994 prior to the negotiations within the meaning of Article XXVIII:2. In China's view, the TRQs should have reflected "future trade prospects" calculated in accordance with paragraph 6 of the Understanding on the Interpretation of Article XXVIII.9 Accordingly, the EU should have calculated these prospects on the basis of what import levels would have been in the absence of the SPS measures. The Panel did not accept China's argument that the SPS measures constituted "discriminatory quantitative restrictions" and, therefore, rejected China's claim that the EU had acted inconsistently with Article XXVIII:2 of the GATT 1994.10 Similarly, the Panel rejected China's claim that the EU was obliged to calculate the total amount of the TRQs based on the import levels over the three years preceding the conclusion of the Article XXVIII negotiations.

ARTICLE I

In addition to its claims under Articles XIII and XXVIII, China also claimed that by allocating all, or the vast majority, of the TRQs to Brazil and Thailand, the EU accorded an advantage to the products originating in these countries that was not accorded immediately and unconditionally to the like product originating in China. Thereby, according to China, the EU acted inconsistently with the MFN-treatment obligation in Article I:1 of the GATT 1994. The Panel did not agree with China's argumentation on this point and found that it had failed to demonstrate that "any elements of the TRQ allocation fall within the scope of Article I:1."11

ARTICLE II

Finally, China also claimed that the higher out-of-quota tariff rates violated Article II:1 of the GATT 1994 as they exceeded the bound rates inscribed in the EU's Schedule of Concessions. Essentially, China claimed that WTO certification of the changes to a schedule arising from modifications is a prerequisite for the entry into force of such changes. The Panel rejected this argument and found that nothing prevents a Member from implementing the changes agreed upon in Article XXVIII negotiations prior to such certification. Therefore, the Panel was unable to uphold China's claim that the EU violated Article II by giving effect to the modifications arising from the negotiations prior to the changes being reflected in the authentic text of its schedule through certification.12

Relevance of the Findings in the Panel Report

The importance of the Panel Report in EU – Poultry is twofold. First, the Panel Report provides an interpretation of Article XIII of the GATT 1994, which deals with TRQs, and of Article XXVIII, which deals with the modification of the schedules of Members. These provisions may become relevant in the context of Brexit.When the United Kingdom formally leaves the EU, the EU may be required to renegotiate the value of its tariff concessions with other Members. Similarly, it may have to adjust its TRQs. The Panel's interpretation of both provisions could be highly relevant in this regard. Second, the Panel Report interprets the term "special factors" in the sense of Article XIII of the GATT 1994. It thereby clarifies the standard of proof that a Member claiming that it has a substantial supplying interest in the product concerned has to fulfil in order to be recognized as such. It also clarifies that the existence of regulatory measures (such as SPS measures) does not, in and of itself, constitute a "special factor." However, the increase in imports that occurs after the relaxation of such SPS measures is a special factor that should be taken into account by the Member imposing the TRQ when it reassesses the allocation of that TRQ. This interpretation will be relevant in other disputes involving TRQs.

Footnotes

1. Panel Report, European Union –Measures Affecting Tariff Concessions on Certain Poultry Meat Products, WT/DS92/R, 28 March, 2017 (hereinafter: EU – Poultry). https://docs.wto.org/dol2fe/Pages/FE_Search/FE_S_S009-DP.aspx?language=E&CatalogueIdList=235301,235302&CurrentCatalogueIdIndex=0&FullTextHash=&HasEnglishRecord=True&HasFrenchRecord=True&
HasSpanishRecord=True

2. The "First Modification Package" covered products under tariff lines 0210 99 39, 1602 31, and 1602 32 19 and was initiated in 2006. The "Second Modification Package" included tariff lines 1602 20 10, 1602 32 11, 1602 32 30, 1602 32 90, 1602 39 21, 1602 39 29, 1602 39 40 and 1602 39 80, and was initiated in 2009. Tariff subheadings 1602 39 40 and 1602 39 80 were combined in 2012 to create a new tariff subheading, 1602 39 85.

3. Panel Report, EU – Poultry, para. 7.87.

4. Panel Report, EU – Poultry, paras. 3.1 and 7.344.

5. Panel Report, EU – Poultry, paras. 7.337-7.343.

6. Panel Report, EU – Poultry, paras. 7.388-7.406.

7. Panel Report, EU – Poultry, paras. 7.494-7.495.

8. Panel Report, EU – Poultry, para. 7.227.

9. Panel Report, EU – Poultry, para. 7.258.

10. Panel Report, EU – Poultry, para. 7.262.

11. Panel Report, EU – Poultry, para. 7.450.

12. Panel Report, EU – Poultry, para. 7.551.

Originally published 28 March 2017

Visit us at mayerbrown.com

Mayer Brown is a global legal services provider comprising legal practices that are separate entities (the "Mayer Brown Practices"). The Mayer Brown Practices are: Mayer Brown LLP and Mayer Brown Europe – Brussels LLP, both limited liability partnerships established in Illinois USA; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales (authorized and regulated by the Solicitors Regulation Authority and registered in England and Wales number OC 303359); Mayer Brown, a SELAS established in France; Mayer Brown JSM, a Hong Kong partnership and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. "Mayer Brown" and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.

© Copyright 2017. The Mayer Brown Practices. All rights reserved.

This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions