March 9, 2005 Leave a comment
On 5 February 1996, Ecuador, Guatemala, Honduras, Mexico and the United States acting jointly and severally, requested consultations with the European Communities regarding the EC regime for the importation, sale and distribution of bananas.
As we all have learnt in last class, the consultation between Complaining party and Respondent party is necessary to the Procedure of Panel Report. Which means that only by failing a consultation between two parties can resort the case to Panel.
On 14, 15 March, 1996, consultations were held but left an unsatisfied result. Then a panel was established by the said countries to resolve the matter.
So here the question is WHAT IS THE MATTER?
To know a better fact of this case, a basic introductory of the importation, sale and distribution of bananas of EC regime would be necessary.
I would like to introduce some concepts. ACP countries, countries from African, Caribbean, Pacific region, which signed Fourth Lomé Convention with EC. Under this agreement, the importation of bananas is regulated.
BFA stands for Framework Agreement on Bananas, an agreement between EC and Colombia, Costa Rica, Venezuela and Nicaragua concerning the size of the basic tariff quota, the in-quota tariff (ECU 75 per tonne), country-specific allocations and transferability of those allocations.
ECU is a monetary unit, which later is replaced by Euro.
In 1994, the EC was the world’s second largest importer of bananas. All of importation is under charge of common market organization for bananas, which replace the various national banana import regimes.
Basically, it establishes three categories of imports:
(i) Traditional imports from twelve ACP countries;
(ii) Non-traditional imports from ACP countries which are defined as both any quantities in excess of traditional quantities supplied by traditional ACP countries and any quantities supplied by ACP countries which are not traditional suppliers of the EC; and
(iii) Imports from third (non-ACP) countries.
What are difference treatments between these 3 categories?
For the 1st category, it is all duty free. No tariff at all.
2nd category. Duty free in a certain amount, for the quantities exceeding the amount, ECU 693 per ton for out of quota importation.
3rd one, ECU 75 per ton for in-quota importation. ECU 793 per ton for out-of-quota importation.
Did you see the difference treatment between this 3 categories? Yes, kind of discriminatory, isn’t it? At least, it is not according to MFN.
Also, all the importation of bananas subjects to the licensing procedures.
For the 1st category, ACP imports, it requires a certificate of country of origin.
But 2nd and 3rd categories, subject to:
(i) allocation of licences based on three operator categories;
(ii) allocation of licences according to three activity functions;
(iii) export certificate requirements for imports from Costa Rica, Colombia and Nicaragua; and
(iv) a two-round quarterly procedure to administer licence applications.
It is much easier for traditional ACP imports license and more difficult and complicated for the 2nd and 3rd categories.
Above all are the basic facts of the case, also the reason why US, along with other countries filed a suit against the EC. US is not a traditional banana producer, but a banana industry investor.
The arguments are concerning about 3 issues:
1. tariff issue.
The tariff quota’s tariff structure was challengeable because it imposed differential rates as between third-country bananas on the one hand, and non-traditional ACP bananas on the other.
A serious contradiction to the GATT’s most fundamental guarantee of "non-discriminatory tariff treatment" set forth in Article I:1.
2. allocation issue.
EC is allocating the market share of bananas to the countries from which bananas are imported.
To get straight, some countries, basing on the Lome Convention and BFA agreement, some countries get more favourable treatments in importation from EC, while others don’t.
3. import licensing issue.
As I told you before, in the fact introductory, the licensing systems is highly complex, which creates:
(i) Highly unfavourable conditions of application for categories 2 and 3 comparing to the simple procedure of category 1.
(ii) even between categories 2 and 3, a more favourable condition including the in-quota quantity, tariff rate is granted to the ACP countries than third countries.
It is very clear now that case is concerning about the discriminatory treatment. A very contradiction to the fundamental principle of then GATT.