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ON THIS PAGE:
> Japan — Alcoholic Beverages, II p. 22, DSR 1996:I, p. 97
at 114—115
> EC — Computer Equipment, paras. 89—90
> EC — Chicken Cuts, para. 195
> EC — Chicken Cuts, paras. 197—199
> EC — Chicken Cuts, para. 224
> EC — Chicken Cuts, para. 230
> EC — Chicken Cuts, para. 246
> China — Auto Parts, para. 149
> China — Auto Parts, paras. 151—152
> China — Auto Parts, para. 155
> China — Auto Parts, paras. 164, 166
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H.1.1 Japan — Alcoholic Beverages II, p. 22, DSR 1996:I, p. 97
at 114-115
(WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/R) back to top
Uniform classification in tariff nomenclatures
based on the Harmonized System (the “HS”) was recognized in GATT
1947 practice as providing a useful basis for confirming “likeness”
in products. However, there is a major difference between tariff
classification nomenclature and tariff bindings or concessions made by
Members of the WTO under Article of the GATT 1994. …
… tariff bindings that include a wide range of
products are not a reliable criterion for determining or confirming
product “likeness” under Article III:2.
H.1.2 EC — Computer Equipment, paras. 89-90 back to top
(WT/DS62/AB/R, WT/DS67/AB/R, WT/DS68/AB/R)
… We believe, however, that a proper
interpretation of Schedule LXXX should have included an examination of
the Harmonized System and its Explanatory Notes.
… we consider that in interpreting the tariff
concessions in Schedule LXXX, decisions of the WCO may be relevant …
H.1.3 EC — Chicken Cuts, para. 195 back to top
(WT/DS269/AB/R, WT/DS286/AB/R,
WT/DS269/AB/R/Corr.1,
WT/DS286/AB/R/Corr.1)
The Harmonized System is not, formally, part of
the WTO Agreement, as it has not been incorporated, in whole or in part,
into that Agreement. Nevertheless, the concept of “context”, under
Article 31, is not limited to the treaty text — namely, the WTO
Agreement — but may also extend to “any agreement relating to the
treaty which was made between all the parties in connection with the
conclusion of the treaty”, within the meaning of Article 31(2)(a) of
the Vienna Convention, and to “any instrument which was made by one or
more parties in connection with the conclusion of the treaty and
accepted by the other parties as an instrument related to the treaty”
within the meaning of Article 31(2)(b) of the Vienna Convention.
…
H.1.4 EC — Chicken Cuts, paras. 197-199 back to top
(WT/DS269/AB/R, WT/DS286/AB/R,
WT/DS269/AB/R/Corr.1,
WT/DS286/AB/R/Corr.1)
We note that, in 1983, the GATT Contracting
Parties took a Decision setting out guidelines and “special procedures”
to facilitate the “wide adoption of the Harmonized System”; later,
in 1991, they took a Decision on Procedures to Implement Changes in the
Harmonized System. The close link between the Harmonized System and the
WTO agreements is also clear. A number of WTO agreements that resulted
from the Uruguay Round negotiations use the Harmonized System for
specific purposes; the Agreement on Rules of Origin (in Article 9), the
Agreement on Subsidies and Countervailing Measures (in Article 27), and
the Agreement on Textiles and Clothing (in Article 2 and the Annex
thereto) refer to the Harmonized System for purposes of defining product
coverage of the agreement or the products subject to particular
provisions of the agreement.
This close link to the Harmonized System is
particularly true for agricultural products. Annex 1 to the Agreement on
Agriculture, which forms an integral part of that Agreement, defines the
product coverage of that Agreement by reference to headings of the
Harmonized System, both at the level of whole chapters and at the
four-digit level in respect of specific products. Moreover, it is
undisputed that the Uruguay Round tariff negotiations for agricultural
products were held on the basis of the Harmonized System and that all
WTO Members have followed the Harmonized System in their Schedules to
the GATT 1994 with respect to agricultural products.
The above circumstances confirm that, prior to,
during, as well as after the Uruguay Round negotiations, there was broad
consensus among the GATT Contracting Parties to use the Harmonized
System as the basis for their WTO Schedules, notably with respect to
agricultural products. In our view, this consensus constitutes an “agreement”
between WTO Members “relating to” the WTO Agreement that was “made
in connection with the conclusion of” that Agreement, within the
meaning of Article 31(2)(a) of the Vienna Convention. As such, this
agreement is “context” under Article 31(2)(a) for the purpose of
interpreting the WTO agreements, of which the EC Schedule is an integral
part. In this light, we consider that the Harmonized System is relevant
for purposes of interpreting tariff commitments in the WTO Members’
Schedules.
H.1.5 EC — Chicken Cuts, para. 224 back to top
(WT/DS269/AB/R, WT/DS286/AB/R,
WT/DS269/AB/R/Corr.1,
WT/DS286/AB/R/Corr.1)
… we agree with Thailand that the Panel
incorrectly characterized the Note to Chapter 16 as an “Explanatory
Note”, rather than as a “Chapter Note”. We also agree with the
general proposition that the Chapter Notes to the Harmonized System,
which are binding, may have greater probative value than the Explanatory
Notes to the Harmonized System, which are non-binding. However, we do
not believe that the inaccurate characterization of the Note “undermin[es]”
the Panel’s overall analysis of the Notes to the Harmonized System, as
claimed by Thailand. Indeed, Thailand has not explained how the Panel’s
analysis would have been different had the Panel correctly characterized
the Note at issue as a “Chapter Note”. Nor is it clear to us how the
Panel’s conclusion with respect to the term “salted” in heading
02.10 would have changed by assigning greater weight to the Chapter Note
to Chapter 16.
H.1.6 EC — Chicken Cuts, para. 230 back to top
(WT/DS269/AB/R, WT/DS286/AB/R,
WT/DS269/AB/R/Corr.1,
WT/DS286/AB/R/Corr.1)
Before the Panel, the question arose as to the
permissibility of using the criterion of preservation in Members’
Schedules. In this respect, we note that the [World Customs
Organization], in a letter to the Panel, stated that “[w]hen goods are
classified in the Harmonized System, it is always done on the basis of
the objective characteristics of the product at the time of importation.”
We believe, therefore, that it is possible to apply the criterion of “preservation”,
provided that is discernible as an objective characteristic at the time
of the importation of the product. In this context, we note that there
are instances in the Harmonized System where the criterion of “provisional
preservation” is used, suggesting that the criterion of “preservation”
is not intrinsically objectionable under the Harmonized System. As a
result, we are of the view that the Harmonized System does not, in
principle, rule out the concept of “preservation” under the term “salted”
in heading 02.10. The question whether the tariff commitment in heading
02.10 of the EC Schedule is characterized exclusively by the concept of
“preservation” is a separate question which we address below. In
that respect, we observe that, within the parameters required by the
Harmonized System, Members have certain flexibility to structure and
negotiate further specifications in their particular tariff commitments.
H.1.7 EC — Chicken Cuts, para. 246 back to top
(WT/DS269/AB/R, WT/DS286/AB/R,
WT/DS269/AB/R/Corr.1,
WT/DS286/AB/R/Corr.1)
We agree with the Panel that, in characterizing a
product for purposes of tariff clas-sification, it is necessary to look
exclusively at the “objective characteristics” of the product in
question when presented for classification at the border. At the same
time, we note that the European Communities provides examples indicating
that product descriptions including a criterion of “preservation”
may qualify as “objective characteristics” under the Harmonized
System. The European Communities considers that, accordingly, the
criterion of preservation is not intrinsically uncertain, given its use
in other parts of the Harmonized System. In this sense, we consider that
the Harmonized System does not preclude the use of a criterion of
preservation, as such, provided that the conditions mentioned in
paragraph 230 above are met. Therefore, the application of such a
criterion would not necessarily be in conflict with the objectives of
security and predictability of the WTO Agreement and the GATT 1994
(including Schedules of tariff commitments).
H.1.8 China — Auto Parts, para. 149 back to top
(WT/DS339/AB/R, WT/DS340/AB/R, WT/DS342/AB/R)
The negotiators of the WTO Agreement used the
Harmonized System as the basis for negotiating Members’ Schedules of
Concessions, and included express references to the Harmonized System in
certain covered agreements for purposes of defining product coverage of
those agreements or specific provisions thereof. It follows that the
Harmonized System is context for purposes of interpreting the covered
agreements, in particular for the classification of products under
Schedules of Concessions and for defining the product coverage of
certain covered agreements. This is what the Appellate Body found in EC
— Chicken Cuts. Yet this does not answer the question of whether the
Harmonized System is context that is relevant to the determination of
whether a charge is an ordinary customs duty or an internal charge.
H.1.9 China — Auto Parts, paras. 151-152 back to top
(WT/DS339/AB/R, WT/DS340/AB/R, WT/DS342/AB/R)
… for a particular provision, agreement or
instrument to serve as relevant context in any given situation, it must
not only fall within the scope of the formal boundaries identified in
Article 31(2), it must also have some pertinence to the language being
interpreted that renders it capable of helping the interpreter to
determine the meaning of such language. Because WTO Members’ Schedules
of Concessions were constructed using the nomenclature of the Harmonized
System, the Harmonized System is apt to shed light on the meaning of
terms used in these Schedules. It does not, however, automatically
follow that the Harmonized System was context relevant to the
interpretative question faced by the Panel in its analysis of the
threshold issue in this dispute.
If the question before the Panel were whether auto
parts could, consistently with China’s Schedule of Concessions, be
classified as complete motor vehicles, then the Panel would have been
required to interpret the relevant entries in China’s Schedule, and
the Harmonized System would have been context relevant to that task.
However, this was not the question before the Panel, at least not at
this stage of its analysis. Rather, in dealing with the threshold
question, the interpretative task of the Panel was to identify the scope
and meaning of Article II:1(b) and Article III:2 of the GATT 1994,
including ascertaining the meaning of the term “ordinary customs
duties” in order to appreciate the types of charges that can
constitute such ordinary customs duties.
H.1.10 China — Auto Parts, para. 155 back to top
(WT/DS339/AB/R, WT/DS340/AB/R, WT/DS342/AB/R)
… The Harmonized System categorizes products,
and the characteristics of particular products are relevant to how they
are categorized. We recognize, as China argues, that classification, and
hence the tariff rate applied, might, in some circumstances, vary
depending on the condition of goods at the moment of importation. Since
different categories of products are subject to different bound and
applied tariff rates, the classification of a given product may affect
the amount of the duty imposed. Accordingly, classification issues have
some bearing on the question of whether a Member applying such a duty is
in conformity with its obligation, under Article II:1(b), not to impose
duties in excess of the bound rate set out in the Member’s Schedule
for the product concerned. Yet this issue (whether a duty applied to a
product by virtue of its classification is consistent with Article
II:1(b)) is separate from the issue of whether a charge falls under the
first sentence of Article II:1(b) at all (as opposed to under Article
III:2). It is not evident to us how classification rules are relevant to
the latter issue. While it is true, as China argues, that the “classification
of the product necessarily precedes the determination of which ‘ordinary
customs duty’ applies”, it is not the case that classification of
the product (even if properly done) necessarily precedes a determination
of whether the charge that applies is an ordinary customs duty.
H.1.11 China — Auto Parts, paras. 164, 166 back to top
(WT/DS339/AB/R, WT/DS340/AB/R, WT/DS342/AB/R)
In sum, we see the Harmonized System as context
that is most relevant to issues of classification of products. The
Harmonized System complements Members’ Schedules and confirms the
general principle that it is “the ‘objective characteristics’ of
the product in question when presented for classification at the border”
that determine their classification and, consequently, the applicable
customs duty. The Harmonized System, and the product categories that it
contains, cannot trump the criteria contained in Article II:1(b) and
Article III:2, which distinguish a border measure from an internal
charge under the GATT 1994. Among WTO Members, it is these GATT
provisions that prevail, and that define the relevant characteristics of
ordinary customs duties for WTO purposes. Thus, even if the Harmonized
System and GIR 2(a) would allow auto parts imported in multiple
shipments to be classified as complete vehicles based on subsequent
common assembly, as China suggests, this would not per se affect the
criteria that define an ordinary customs duty under Article II:1(b). In
any case, the Panel did not accept the broad interpretation of GIR 2(a)
suggested by China. Rather, the Panel remarked that its findings on the
meaning of “as presented” in GIR 2(a) did not appear to contradict
its finding as to the meaning of “on their importation” in Article
II:1(b).
…
Based on all of the above, we consider that a
determination of whether a particular charge falls under Article II:1(b)
or Article III:2 of the GATT 1994 must be based on a proper
interpretation of these two provisions. The Harmonized System does not
provide context that is relevant to the threshold question or to the
assessment of the respective scope of application of “ordinary customs
duties” in the first sentence of Article II:1(b) and “internal
charges” in Article III:2 of the GATT 1994 that must be undertaken in
answering that question. It follows that the Panel did not err in
interpreting the term “ordinary customs duties” in the first
sentence of Article II:1(b) of the GATT 1994 without relying on the
rules of the Harmonized System, in general, or GIR 2(a), in particular.
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