WORLD TRADE
ORGANIZATIONWT/DS62/AB/R
WT/DS67/AB/R
WT/DS68/AB/R
5 June 1998
(98-2271)
Appellate Body
EUROPEAN COMMUNITIES - CUSTOMS CLASSIFICATION
OF CERTAIN COMPUTER EQUIPMENT
AB-1998-2
Report of the Appellate BodyWT/DS62/AB/R
WT/DS67/AB/R
WT/DS68/AB/R
Page 1
WORLD TRADE ORGANIZATION
APPELLATE BODY
European Communities - Customs
Classification of Certain Computer
Equipment
European Communities, Appellant
United States, Appellee
Japan, Third ParticipantAB-1998-2
Present:
Beeby, Presiding Member
Ehlermann, MemberLacarte-Muró, Member
I. Introduction
1. The European Communities appeals from certain issues of law covered in the Panel Report,
European Communities - Customs Classifi cation of Certain Computer Equipment1 (the "Panel
Report") and certain legal interpretations developed by the Panel in that Report.  The Panel wasestablished to consider complaints by the United  States against the European Communities, Ireland
and the United Kingdom concerning the tariff treatment of Local Area Network ("LAN") equipmentand personal computers with multimedia capability ("PCs with multimedia capability").
2  The United
States claimed that the European Communities, Ireland and the United Kingdom accorded to LANequipment and/or PCs with multimedia capability tr eatment less favourable than that provided for in
Schedule LXXX of the European Communities
3 ("Schedule LXXX") and, therefore, acted
                                                     
1WT/DS62/R, WT/DS67/R and WT/DS68/R, 5 February 1998.
2The United States submitted three requests for the establishment of a panel:  European Communities -
Customs Classification of Certain Computer Equipment , WT/DS62/4, 13 February 1997;  United Kingdom -
Customs Classification of Certain Computer Equipment , WT/DS67/3, 10 March 1997;  and Ireland - Customs
Classification of Certain Computer Equipment , WT/DS68/2, 10 March 1997. At its meeting of 20 March 1997,
the Dispute Settlement Body (the "DSB") agreed to modify, at the request of the parties to the dispute, the terms
of reference of the Panel established against the European Communities, so that the panel requests by the United
States contained in documents WT/DS67/3 and WT/DS68/2 might be incorporated into the mandate of the Panelestablished pursuant to document WT/DS62/4.  See WT/DS62/5, 25 April 1997.
3Schedule LXXX of the European Communities, Final Act Embodying the Results of the Uruguay
Round of Multilateral Trade Negotiations , done at Marrakesh, 15 April 1994.WT/DS62/AB/R
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inconsistently with their obligations under Article II:1 of the General Agreement on Tariffs and
Trade 1994  (the "GATT 1994").
2. The Panel Report was circulated to the Members of the World Trade Organization (the
"WTO") on 5 February 1998.  The Panel reached the conclusion that:
... the European Communities, by failing to accord imports of LAN
equipment from the United States treatment no less favourable than
that provided for under heading 84.71 or heading 84.73, as the casemay be, in Part I of Schedule LXXX, acted inconsistently with the
requirements of Article II:1 of GATT 1994.
4
The Panel made the following recommendation:
The Panel recommends that the Dispute Settlement Body request the
European Communities to bring its tariff treatment of LAN
equipment into conformity with its obligations under GATT 1994.5
3. On 24 March 1998, the European Communities notified the DSB6 of its intention to appeal
certain issues of law covered in the Panel Report and legal interpretations developed by the Panel,pursuant to paragraph 4 of Article 16 of the Understanding on Rules and Procedures Governing the
Settlement of Disputes  (the "DSU"), and filed a Notice of Appe al with the Appellate Body, pursuant to
Rule 20 of the  Working Procedures for Appellate Review  (the " Working Procedures ").  On
3 April 1998, the European Communities filed an appellant's submission.
7  On 20 April 1998, the
United States filed an appellee's submission8 and on the same day, Japan filed a third participant's
submission.9  The oral hearing, provided for in Rule 27 of the Working Procedures , was held on
27 April 1998.  At the oral hearing, the participants and the third participant presented their argumentsand answered questions from the Division of the Appellate Body hearing the appeal.
                                                     
4Panel Report, para. 9.1.
5Panel Report, para. 9.2.
6WT/DS62/8, WT/DS67/6 and WT/DS68/5, 24 March 1998.
7Pursuant to Rule 21(1) of the Working Procedures.
8Pursuant to Rule 22 of the Working Procedures .
9Pursuant to Rule 24 of the Working Procedures .WT/DS62/AB/R
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II. Arguments of the Participants
A. Appellant - European Communities
4. The European Communities requests the Appellate Body to review a number of errors of law
and certain legal interpretations developed by the Panel.  The European Communities submits that thePanel erred in law when it rejected the proced ural objections of the European Communities
concerning the lack of specificity of the request for the establishment of a panel of the United States,thus hampering the rights of defence of the res ponding Member and violating Article 6.2 of the DSU.
The European Communities asserts that the Panel al so erred in considering that the meaning of a
particular heading of the Schedule of a WTO Member should be read in the light of the "legitimateexpectations" of an exporting Member outside the context of a non-violation complaint underArticle XXIII:1(b) of the GATT 1994.  The European Communities also asserts that the Panel erred infinding that Article II:5 of the GATT 1994 confirms this view.  Subordinately, the EuropeanCommunities argues that even if the notion of "legitimate expectations" was relevant in the context ofa violation complaint under Article XXIII:1(a) of the GATT 1994, those leg itimate expectations
should not be based on the classification practices for individual importers and individualconsignments, or on the subjective perception of a number of exporting companies of an exportingMember.  The European Communities submits that the Panel also erred in considering that, in anycase, the onus of clarifying the scope of a tariff concession during a multilateral tariff negotiationunder the auspices of the GATT/WTO shall necessarily be on the importing Member.  The EuropeanCommunities asserts that by so doing, the Panel has created new rules on the burden of proof whichare inconsistent with the ones applicable to WTO dispute settlement procedures.
1. Request for the Establishment of a Panel
5. The European Communities submits that the Panel erred in finding that the measures under
dispute and the products affected by such measures were sufficiently identified by the United States toinclude measures other than Commission Regulation (EC) No. 1165/95 as far as it concerns LANadapter cards.
10  The European Communities asserts that the findings of the Panel are based on several
legal errors.  First, the Panel disregarded the requirement under Article 6.2 of the DSU providing thatthe request for the establishment of a panel shall "identify the specific measures at issue".  Second, thePanel misapplied the established procedural requirement according to which the product coverage of aclaim has to be specified prior to the commencement of the Panel's examination.  Third, neglecting
                                                     
10Commission Regulation (EC) No. 1165/95 of 23 May 1995 concerning the classification of certain
goods in the combined nomenclature, Official Journal No. L 117, 24 May 1995, p. 15.WT/DS62/AB/R
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these procedural requirements which the European Communities invoked before the Panel results in a
serious violation of the rights of defence of the European Communities and, as such, constitutes abreach of the demands of due process that are implicit in the DSU.
6. With respect to the identification of the specif ic measures at issue, the European Communities
submits that the request of the United States for the establishment of a panel does not meet theminimum standards contained in Article 6.2 of the DSU.  The European Communities asserts that inEuropean Communities - Regime for the Importation, Sale and Distribution of Bananas
11 ("European
Communities - Bananas "), the Appellate Body confirmed that the measures at issue in that dispute
were adequately identified under Article 6.2 of the DSU by referring to the basic EC regulation atissue, by place and date of publication, in the request for the establishment of a panel.  The EuropeanCommunities states that this reading of Article 6.2 of the DSU, pursuant to which the request must atleast specify one basic legal measure, is fully in line with the general rules of interpretation of publicinternational law.  In the view of the European Communities, the request of the United States for theestablishment of a panel only identifies one specific measure, namely Commission Regulation (EC)No. 1165/95, which is said to "reclassify" LAN adapter cards and which, unlike the regulation at issuein European Communities - Bananas , is not a basic measure on which all the other actions
complained about are founded.  In response to a question asked at the oral hearing, the EuropeanCommunities expressly accepted that the application of a tariff in an individual case on a consignmentis a measure within the meaning of Article 6.2 of the DSU.  However, in the view of the EuropeanCommunities, the measures in question are only vaguely described in the request of the United Statesfor the establishment of a panel.  The type of measure, the responsible authority, the date of issue orthe reference are not clearly defined.  Furthermore, the European Communities argues that it is evenunclear how many of these alleged measures are under dispute.
7. The European Communities also submits that under the minimum standard laid down in
Article 6.2 of the DSU, relating to the identification of specific measures, it is also necessary toclearly define the product coverage of a claim raised in the framework of a dispute settlementprocedure.  The European Communities asserts that the Panel erroneously distinguished the presentcase from EEC - Quantitative Restrictions Against Im ports of Certain Products from Hong Kong
12
("EEC - Quantitative Restrictions Against Hong Kong ") when holding that no new product was added
by the United States in the course of the proceedings, and that the definition of LAN equipmentprovided by the United States, in responding to a question by the Panel, was an elucidation of theproduct coverage already specified in the request of the United States for the establishment of a panel.
                                                     
11Adopted 25 September 1997, WT/DS27/AB/R.
12Adopted 12 July 1983, BISD 30S/129.WT/DS62/AB/R
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According to the European Communities, this reasoning is based on at least two flawed assumptions:
first, that LAN equipment and PCs with multimedia capability could each be considered as a singleproduct;  and, second, that the explanations of the United States before the Panel concerning productcoverage were an "elucidation" rather than an unlawful "curing" of the defective product descriptionin the request for the establishment of a panel.
8. With respect to the first assumption, the European Communities submits that LAN equipment
is not a single product but a wide variety of different products used in a local area network.
Furthermore, the United States has not been consistent regarding the definition of LAN equipment inthe course of the panel proceedings.  The European Communities also asserts that, like LANequipment, PCs with multimedia capability are not a single product category.  It is further argued bythe European Communities that using such broad product categories when defining the scope of aclaim is equivalent to adding the convenient phra se "including but not necessarily limited to" in the
request for the establishment of a panel.  In the view of the European Communities, the AppellateBody in India - Patent Protection for Pharmaceutical and Agricultural Chemical Products
13 ("India -
Patents ") vigorously rejected the use of this kind of loose language when holding that "the convenient
phrase, 'including but not necessarily limited to', is simply not adequate to 'identify the specificmeasures at issue and provide a brief summary of the legal basis of the complaint sufficient to presentthe problem clearly' as required by Article 6.2 of the DSU".
14
9. The European Communities submits that the second assumption on which the Panel based itsreasoning was that the United States elucidated the product coverage of its panel request.  TheEuropean Communities argues that the Panel appeared to agree that the United States had left theprecise scope of the dispute in the dark and, after the first meeting of the Panel with the parties,allowed the United States to provide a definitive list of products with respect to which it alleged therehad been a violation. The European Communities asserts that the Panel accepted this list as an"elucidation" and sufficient specification of the product coverage, thus regarding the vague productdefinition of the United States as cured.  In the view of the European Communities, this finding of thePanel amounts to an error in law.
10. The European Communities asserts that in any judicial or quasi-judicial procedure, it is an
essential procedural right of the responding party to be aware of the case held against it, and that the
WTO dispute settlement system can only produce acceptable solutions to conflicts between WTOMembers if this fundamental rule of due process is adequately observed.  The European Communities
                                                     
13Adopted 16 January 1998, WT/DS50/AB/R.
14Ibid., para. 90.WT/DS62/AB/R
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submits that the Appellate Body should, therefore, guarantee this essential procedural right by
continuing to interpret Article 6.2 of the DSU strictly.
2. "Legitimate Expectations" in the Interpretation of a Schedule
11. According to the European Communities, the existence of a common  intention forms the basis
for the mutual consent of the signatories to be bound by an international agreement.  This common
intention finds its authentic expression in the text of the treaty, not in the subjective expectations ofone or other of the parties to the agreement.  Th e European Communities states that the rules of the
Vienna Convention on the Law of Treaties
15 (the " Vienna Convention ") on the interpretation of
international agreements are based on this fundamental consideration.  Furthermore, the EuropeanCommunities asserts that the report in  Panel on Newsprint
16 is based on the correct assumption that a
Schedule is an agreed commitment between the contracting parties and is not just the unilateralperception of one of the Members involved in the multilateral negotiations.  The EuropeanCommunities also submits that "protocols and certifications relating to tariff concessions" are anintegral part of the GATT 1994
17 and, therefore, are part of an international multilateral agreement
which is the result of a "meeting of the minds" and not the sum of subjective perceptions orexpectations.
12. The European Communities asserts that the complaint of the United States was founded only
on the allegation that the European Communities had violated its obligations under Article II:1 of theGATT 1994, which indicates that the claim was based only on Article XXIII:1(a) of the GATT 1994.
The European Communities also submits that it appears that, when presenting its legal position, theUnited States used the notion of "reasonable expectations" and "legitimate expectations" assynonymous. The European Communities states that the Panel has not drawn any particularconclusion from the varied definitions of this notion and has apparently, albeit implicitly, decided toconsider that the two definitions can be used indifferently to describe the same concept.  In the viewof the European Communities, the same approach was used by the Appellate Body, inparagraphs 41-42 of its Report in India - Patents  and, therefore, the European Communities suggests
that for the sake of this appeal, the Appellate Body continues to consider the notion of "legitimateexpectations" used by the Panel and the parties to this dispute as equivalent to that of "reasonableexpectations".
                                                     
15Done at Vienna, 23 May 1969, 1155 U.N.T.S. 331; 8 International Legal Materials 679.
16Adopted 20 November 1984, BISD 31S/114.
17See paragraph 1(b)(i) of the language of Annex 1 A incorporating the GATT 1994 into the Marrakesh
Agreement Establishing the World Trade Organization  (the " WTO Agreement "), done at Marrakesh, Morocco,
15 April 1994.WT/DS62/AB/R
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13. The European Communities submits that the Panel erred in law by not considering the object
and purpose of the tariff concession in Schedule LXXX with respect to the products concerned butrather a supposed and erroneous object and purpose of Article II of the GATT 1994, i.e., theprotection of "legitimate expectations".  In the view of the European Communities, the Panel shouldhave proceeded, pursuant to Article 31 of the Vienna Convention , with the interpretation of the words
used in Schedule LXXX in the light of their  object and purpose and within their  context.  The
European Communities asserts that the context of the Schedule must include the negotiations, thelegal situation in both the exporting and importing Members (including the classification practice ofthe United States during the entire period of the negotiations), the EC internal legislation applicable tosuch tariff treatment, the EC customs nomenclature ex isting at the time of the drafting of the Schedule
and so on.  Responding to a question asked by the Appellate Body during the oral hearing, theEuropean Communities stated that on the basis of Article 31(3)(c) of the Vienna Convention , the
International Convention on the Harmonized  Commodity Description and Coding System
18 (the
"Harmonized System ") and its Explanatory Notes19 would be relevant in interpreting the obligations of
the European Communities under Schedule LXXX vis-à-vis  WTO Members which are also Members
of the World Customs Organization (the "WCO").
14. The European Communities argues that the Pane l limited itself to an unmotivated affirmation
that the context to be considered pursuant to Article 31 of the Vienna Convention  was only Article II
of the GATT 1994, and has proceeded to the totally separate and not directly relevant interpretation ofthe object and purpose of Article II and not of the Schedule.  The European Communities asserts that
"even more erroneously, [the Panel's] interpretation of Article II has been achieved through thereference to previous case law in a non-violation case, notwithstanding the fact that the presentprocedure is only concerned with a violation complaint".
20  Therefore, the context that the present
Panel considered to be relevant for the interpretation of Schedule LXXX in a violation complaint hasbeen deduced from the interpretation of Article II in a non-violation complaint.  The EuropeanCommunities further asserts that in paragraph 36 of the Appellate Body Report in  India - Patents , the
Appellate Body clearly indicates that the concept of the protection of reasonable expectations ofcontracting parties relating to market access was developed in the context of non-violation complaintsunder Article XXIII:1(b) of the GATT. Thus, according to the European Commun ities, the Panel's
finding in paragraph 8.23 contradicts this interpretation and "melds the legally-distinct bases for
                                                     
18Done at Brussels on 14 June 1983.
19Explanatory Notes to the Harmonized Commodity Description and Coding System , Customs
Cooperation Council, Brussels, 1986.
20Appellant's submission of the European Communities, para. 50.WT/DS62/AB/R
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'violation' and 'non-violation' complaints under Article XXIII of the GATT 1994 into a uniform cause
of action"21 which is not consistent with Article XXIII.
15. It is further argued by the European Communities that, independently of the legal issues that
were at stake in the two dispute settlement procedur es, there is an extraordinary resemblance in the
legal approach followed by the panel in India - Patents  and that followed by the present Panel.  The
European Communities submits that as in India - Patents , this Panel:  (i) was not about an
Article XXIII:1(b) "non-violation" complaint but only about an Article XXIII:1(a) "violation"complaint; (ii) was not about a violation complaint concerning Articles III or XI of the GATT;(iii) was not concerned with the affectation of competitive relationship between imported anddomestic products, but rather with the tariff treatment of certain products compared to the concessionsscheduled by the European Communities in the WTO;  and (iv) has considered the "legitimateexpectations" of the parties not by examining whether they were reflected in the words of the treaty --
Schedule LXXX in this case -- but rather by "imputing" into the treaty considerations and subjective"understandings" which the Panel has considered to be the expectations of a Member and of privatecompanies involved in the trade of the covered products and which were never reflected in thewording of the Schedule.
16. The European Communities also submits that the Panel's findings lead to "absurd practical
consequences".
22  The European Communities questions how it is possible to determine the content of
MFN tariff treatment on the basis of the "legitimate expectations" of one Member among all WTO
Members.  If the "legitimate expectations" of that Member diverges from the "legitimateexpectations" of other Members, the consequence w ould be that a Member, in order to know exactly
what is the tariff treatment to grant a given product, would have to verify the potentially divergent"legitimate expectations" of all other WTO Members.  This is at odds with the aim affirmed by thePanel to protect the predictability and stability of the tariff treatment of that particular product.Moreover, in the view of the European Communities, the balance  of mutual concessions among
Members, which is the result of the successive rounds of tariff negotiations in the framework of theGATT/WTO, would be severely upset:  the "legitimate expectations" of one Member would, throughthe MFN provision, apply to all other Members whose balance of reciprocal concessions was basedon substantially different and variable "legitimate expectations".  The European Communities furtherclaims that, if the Panel's findings on this point were upheld, the whole purpose of Article II of the
GATT 1994 and of the Members' Schedules would be altered.  In the view of the European
Communities, a tariff concession bound by a Member in its Schedule would no longer define a limit
                                                     
21Appellate Body Report, India - Patents , adopted 16 January 1998, WT/DS50/AB/R, para. 42.
22Appellant's submission of the European Communities, para. 54.WT/DS62/AB/R
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to the duty applicable upon importation of a given product, but would rather be determined by a
unilateral perception of the advantages expected by the exporting Member.
17. The European Communities submits that the Panel violated the rules of interpretation of
Articles 31 and 32 of the Vienna Convention  and Articles 3.2 and 19.2 of the DSU by affirming that
"[although] in nearly all instances, the ordinary meaning of the terms of the actual description in atariff schedule accurately reflects and exhausts the content of the legitimate expectations ... [i]t mustremain possible, at least in principle, that parties have legitimately formed expectations based on otherparticular supplementary factors".
23  According to the European Communities, what the Panel appears
to pronounce here is the power to add elements which are not present in the text of the Scheduleswhereas, under Articles 3.2 and 19.2 of the DSU, a panel is required simply to clarify the provisionsof the covered agreements.  The European Communities submits that this would inevitably alter thevery nature of the panel procedure which would be seen as replacing, or attempting to replace, thesignatories of the WTO Agreement.
18. It is further claimed by the European Communities that the Panel erred by stating that the
importance of "legitimate expectations" in interpreting tariff commitments can be confirmed by thetext of Article II:5 of the GATT 1994.  The European Communities submits that the Panel made twocontradictory statements.  On the one hand, the Panel stated that Article II:5 confirms the existence ofthe "legitimate expectations" in Article II:1.  One the other hand, however, it stated that Article II:5 isa provision for the special bilateral procedure regarding tariff classification, which is not directly atissue in this case.  In the view of the European Communities, there is a clear non-sequitur  between the
affirmation of the inapplicability of Article II:5 to the present case and its use for the interpretation ofa different provision which is declared applicable to this case.  According to the EuropeanCommunities, either Article II:5 is relevant and applicable to the present case, in particular for theinterpretation of Schedule LXXX, or it is not.  It cannot be both at the same time.  It is further arguedby the European Communities that the only relevance of Article II:5 of the GATT 1994 could havebeen in the context of a procedure aimed at requesting a compensatory adjustment, which was neverpursued by the United States.  Thus, according to the European Communities, if the Panel was of the
opinion that Article II:5 was relevant, it should have come to the conclusion that it was only relevantin establishing that the United States had never correctly followed it.  Alternatively, the EuropeanCommunities argues that Article II:5 is simply irrelevant.
19. The European Communities also submits that Article II:5 does not prove the existence of a
notion of "legitimate expectations" in Article II of the GATT 1994 or, more generally, in the tariff
                                                     
23Panel Report, para. 8.26.WT/DS62/AB/R
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treatment of a given product under the Schedule of a Member.  The European Communities notes that
the words "believes to have been contemplated" a nd "contemplated" in the first and second sentence
of this provision are highlighted in the Panel Report and, therefore, argues that the Panel attached aspecial value to them in order to support its findings.  The European Communities cannot see howthese words, read in their context, could in any way be assimilated to the notion of "legitimateexpectations" that was developed in the context of non-violation cases.  In the view of the EuropeanCommunities, there is nothing in the words "believes"  or "contemplated" that indicates any reference
to an objective entitlement to a tariff treatment th at would be different from the one that derives from
the objective  interpretation of the content of the Schedule of the importing Member.
20. In the event that the Appellate Body considers that the notion of "legitimate/reasonable
expectations" is relevant in the context of a violation dispute under Article XXIII:1(a) of theGATT 1994, the European Communities submits the following arguments for its consideration.According to the European Communities, the core of the Panel's argument regarding the notion of"legitimate expectations" can be summarized as follows:  during a multilateral trade negotiation, thetariff treatment of a given product subject to negotiation is considered with respect to the "actualnormal" tariff treatment at the time of the negotiation, unless there is a "manifestly anomalous"treatment that would indicate "the contrary".  Therefore, the meaning of the tariff treatment which isbound in the importing Member's Schedule must correspond to the "actual normal" tariff treatment atthe time of the negotiation.  Otherwise, there will be a breach of the "legitimate expectations" of theexporting Member and, therefore, a violation of Article II:1 of the GATT 1994.
21. The European Communities submits that the Panel's reasoning is affected by errors in law and
in logic in at least three respects.  First, the European Communities argues that a duty imposed at a
level which is currently lower than the duty bound in a Schedule does not constitute a right for theMembers which temporarily benefit from the reduction.  Second, the European Communities submitsthat it is not correct to assert, as the Panel does, that the current duty treatment is taken as the basis forthe negotiations and, therefore, that treatment will be continued unless such treatment is manifestlyanomalous or there is information readily available to the exporting Member that clearly indicates thecontrary.  Third, the European Communities argues that elements of subjective judgement such as
"normally based", "manifestly anomalous", "information readily available" and "clearly indicates" arenot legal elements that must, or even can, be taken into account when interpreting a Member'sSchedule and/or Article II of the GATT 1994.  These subjective appreciations are not included inArticles 31 and 32 of the Vienna Convention .  Thus, in the view of the European Communities,
irrespective of the existence of any normality or abnormality, or of information readily or not readilyWT/DS62/AB/R
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available, the actual or current tariff treatment of a certain product could not be considered as an
obligation under Article II if it cannot be demonstrated that it is reflected in the Schedule.
22. The European Communities also submits th at the Panel should not have dealt with
classification issues as the WTO system does deal with these issues in the covered agreements.According to the European Communities, there is no obligation under the GATT to follow anyparticular system for classifying goods, and a Member has the right to introduce in its customs tariffnew positions or sub-positions as appropriate.  The European Communities also argues that "[w]hatthe Panel has de facto  done here is weighing the number of individual  EC classification  decisions
presented as evidence by the US against the opposite EC individual classification  decisions presented
as evidence by the EC in order to achieve the result that the former are correct and the latter are not".
24
The European Communities asserts that this is nothing less than a classification decision by the Panelin spite of the fact that the Panel itself rightly considers classification issues to be outside its terms ofreference.
3. Clarification of the Scope of Tariff Concessions
23. The European Communities submits that the Panel erred in considering that the onus of
clarifying the scope of a tariff concession during a multilateral tariff negotiation under the auspices ofthe GATT/WTO shall necessarily be placed on the side of the importing Member.  In the view of theEuropean Communities, the issue at stake in this dispute is not whether a requirement of clarificationwas on the United States or on the European Communities, but rather whether the agreement, whichthe United States claims it reached with the European Communities and other WTO Members, oncertain tariff treatment of LAN equipment, really existed and was reflected in Schedule LXXX.
24. The European Communities asserts that the Panel dedicated three pages to the totally
irrelevant issue of the burden of "clarification", which is treated separately from the issue of whetherthe United States has proven its assertion that Schedule LXXX contains an obligation to provide tarifftreatment lower than the one applied.  It is furthe r argued by the European Communities that the Panel
cannot rely on two contradictory assertions at the same time.  Either  the burden of proof and the
burden of clarification are different notions, in which case the Panel should have explained to theparties and to the Members of the WTO how this is relevant in the present dispute, or the burden of
clarification is identical with the notion of burden of proof or has, in any case, a bearing on the burdenof proof in such a way as to determine a different distribution of that burden between the party whichasserts and the party which responds.
                                                     
24Appellant's submission of the European Communities, para. 82.WT/DS62/AB/R
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25. The European Communities submits that in this second scenario, the Panel has in fact created
a newly invented rule on the burden of proof.  According to this burden of proof, "the exporting
Member that could show the existence of practices  on the current classification of individual
shipments by some 'prevailing' customs authorities of a Member would have proved its assertion thata tariff treatment was agreed  in the Schedule, ... irrespective of whether it has actually proved  that the
existence of the agreement  on a certain tariff treatment was actually reflected in the text of the
agreement (or of the agreed Schedule).  The burden of clarifying the content of the Schedule is on theimporting Member:  as a result, that Member is to blame for any misunderstanding".
25
26. The European Communities cannot agree with th is newly invented rule.  This rule would
allow the Member who asserts that a certain agreement was passed on the tariff treatment of a givenproduct to shift the burden of proof to the responding Member without any need to submit evidencerelated to the words of the agreement.  In the view  of the European Communities, the result of such an
"easy" shift of the burden of proof on the responding Member would be that, failing any writtendocument, it would find itself in the practical impossibi lity of rebutting that assumption.  An assertion
would amount to a proof, and an almost unrebutta ble one, which is fundamentally at odds with the
finding of the Appellate Body in United States - Measure Affecting Imports of Woven Wool Shirts and
Blouses from India  
26 ("United States - Shirts and Blouses ").
B. Appellee - United States
27. The United States endorses the findings and conclusions of the Panel.  The United States
submits that the Panel was correct in determining that the request of the United States for theestablishment of a panel sufficiently identified the measures and products at issue.  The United Statesalso asserts that regardless of whether the Appellate Body accepts the Panel's reasoning andinterpretation of "legitimate expectations", the findings of the Panel Report support its ultimateconclusion that the impairment of treatment resulting from actions of customs authorities in theEuropean Communities is inconsistent with Article II:1 of the GATT 1994.  The United States alsosubmits that the Panel correctly followed the standard laid down by the Appellate Body in
United States - Shirts and Blouses  and that, contrary to the arguments of the European Communities,
the Panel did not establish a new burden of proof rule.
                                                     
25Appellant's submission of the European Communities, para. 88.
26Adopted 23 May 1997, WT/DS33/AB/R.WT/DS62/AB/R
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1. Request for the Establishment of a Panel
28. The United States asserts that the Panel correctly followed the guidance of the Appellate
Body decision in European Communities - Bananas  in determining that the United States sufficiently
identified the measures and products at issue.  According to the United States, the meaning of the term"specific measures", as used in Article 6.2 of the DSU, was addressed in European Communities -
Bananas  where the panel found that the panel request complied with the requirements of Article 6.2
of the DSU because the measures contested by the complainants were "adequately identified", eventhough they were not listed explicitly.  In the view  of the United States, the panel and Appellate Body
decisions in European Communities - Bananas  "teach that the specificity requirement of Article 6.2
will be met if the responding party is provided sufficient notice and identification of the measure(s) atissue, even if those measures are not specifically identified".
27
29. It is further argued by the United States that its panel request identified both the timing andnature of the measures at issue which, in the application since June 1995 by the customs authorities inthe European Communities, consist of tariffs to LAN equipment higher than those provided for inSchedule LXXX.
28  The United States also submits that as of March 1997, both the European
Communities and the United States agreed that Member State customs authorities were applying thehigher tariff rates, under heading 85.17, to imports of LAN equipment.  Accordingly, in the view of
the United States, the European Communities has never had any basis to claim that it lacked sufficientinformation about the measures the United States sought to have modified at the time of theestablishment of the panel.  In applying the "adequate" or "sufficient" notice test of European
Communities - Bananas , the United States submits that the European Communities had clear notice
from the explicit terms used in the panel requests of  the United States that the complaint concerned
the application of higher tariffs for LAN equipment by customs authorities of Member States.  Sincethe panel request identified the same measures which the European Communities acknowledged itscustoms officials were applying, the European Communities suffered, in the view of the UnitedStates, no prejudice, let alone prejudice sufficient to rise to the level of a violation of due process.
30. The United States submits that there is no basis for the assertion of the European
Communities that the description of the United States of "all types of LAN equipment" and theallegedly inappropriate "curing" of the request for the establishment of a panel have led to a "seriousviolation of the European Communities' rights of defence".  According to the United States, these
                                                     
27Appellee's submission of the United States, para. 33.
28We note that the United States also argued with regard to its two additional requests for the
establishment of a panel (WT/DS67/3 and WT/DS68/2) that they also identified both the timing and nature ofthe measures at issue (appellee's submission of the United States, paras. 34 and 35).WT/DS62/AB/R
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arguments ignore the fact that the term, LAN equipmen t, is a recognized term of the trade and that,
beginning as early as the pre-consultation stage of this dispute through the panel proceedings, theEuropean Communities was made sufficiently aware of which products were the subject of thedispute.  According to the United States, the argu ment of the European Communities also ignores the
many contacts between officials of the European Communities and the United States prior to thesubmission of the panel request, in which the term, LAN equipment, was routinely used and
understood.  The United States disagrees with the European Communities regarding the need forparties to exhaustively detail every conceivable sub-grouping of more broader categories of productswhich are detailed in a request for the establishment of a panel.  In the view of the United States, theappropriate standard to be applied to product coverage should be similar to that applied by the panelin European Communities - Bananas  to the specificity of measures: whether the products are
"sufficiently identified".  According to the United States, applying the logic followed in European
Communities - Bananas , such a test would be met if the complaining party identifies the general
product grouping of the products concerned in terms of the ordinary meaning in a commercialcontext.
31. The United States submits that the Panel was correct when it stated that the more detailed
definition of LAN equipment, provided by the United States to the Panel in response to a question,was an "elucidation" of the product coverage already specified in the requests of the United States forthe establishment of a panel.  According to the United States, the present case is quite different fromthe situation in European Communities - Bananas  and India - Patents  with respect to the addition of a
new claim.  In the request for the establishment of a panel against the European Communities
29, the
United States first defined the parameters of the products at issue -- all LAN products -- and thenprovided examples of some types of LAN products.  The United States submits that it need not haveprovided any such examples to have complied with Article 6.2 of the DSU because the term LANproducts is a sufficiently precise term of the trade.  Nor should the United States or any other WTOMember be required to exhaustively enumerate all product category sub-groups in its panel request.The United States also asserts that since its request for the establishment of a panel properly identifiedLAN equipment, the Panel was correct in distinguishing the present case from the panel decision inEEC - Quantitative Restrictions Against Hong Kong .
32. In the view of the United States, if the arguments of the European Communities on the
specificity of product definition are accepted, there inevitably will be long, drawn-out proceduralbattles at the early stage of the panel process in every proceeding.  The United States submits that
                                                     
29See footnote 2 of this Report.WT/DS62/AB/R
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according to the theory of the European Communities , a complaining party would be required to list
each and every product in detail in its panel request.
2. "Legitimate Expectations" in the Interpretation of a Schedule
33. The United States submits that the attack of the European Communities on the Panel's
reasoning places form over substance.  In the view  of the United States, the substance of the findings
of the Panel is its fact-finding which supports the conclusion that the ordinary meaning of "automaticdata-processing machines and units thereof" includes LAN equipment.  The Panel found that themeaning of the text of the concession in heading 84.71 can include LAN equipment and that, as amatter of fact, Member State customs authorities treated LAN equipment as automaticdata-processing machines ("ADP machines") during the Uruguay Round and that the EuropeanCommunities had given the United States and other trading partners reason to believe that thistreatment would be continued.  It is further argued by the United States that during the panelproceeding, the European Communities did not produce or prove facts demonstrating that LANequipment was intended to be included in the binding in heading 85.17 of Schedule LXXX.
30
34. Thus, in the view of the United States, regardless of whether the Appellate Body accepts thePanel's reasoning and interpretation of "legitimate expectations", the findings of the Panel Reportsupport its ultimate conclusion that the European Communities, by failing to accord to imports ofLAN equipment treatment no less favourable than that provided for in headings 84.71 or 84.73 ofSchedule LXXX
31, has acted inconsistently with its obligations under Article II:1 of the GATT 1994.
The United States argues that the Panel's reasoning was correct but that, even if the Appellate Bodyshould reverse certain aspects of this reasoning, the Appellate Body should affirm the Panel's ultimateconclusion.
35. The United States submits that the Panel has properly interpreted the obligations of the
European Communities under Schedule LXXX and Article II of the GATT 1994 in accordance withArticles 31 and 32 of the Vienna Convention .  The text of the concession in heading 84.71 of
Schedule LXXX provides that this concession applies to "automatic data processing machines andunits thereof".  According to the United States, the ordinary meaning of "automatic data processingmachines and units thereof" includes computers and computer systems, as well as units of computers
                                                     
30Heading 85.17 relates to "electrical apparatus for line telephony or line telegraphy, including such
apparatus for carrier-current line systems" (hereinafter referred to as "telecommunications equipment").
31Heading 84.71 relates to "automatic data-processing machines and units thereof ..." and heading
84.73 relates to "parts and accessories (other than covers, carrying cases and the like) suitable for use solely orprincipally with machines of heading Nos. 84.69 to 84.72"  (hereinafter referred to together as "ADP machines").WT/DS62/AB/R
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such as computer networking equipment, i.e., LAN equipment. The United States submits that the
function of LAN equipment is not "line telephony or li ne telegraphy" but that of facilitation of shared
processing and storage of data within a computer  network or an extended computer system.  The
Panel found that the text of this concession can include LAN equipment and that to the extent the
ordinary meaning of the concession is ambiguous, that ordinary meaning can be clarified by thepractice of the importing Member.  In the view of the United States, these findings are eminentlyreasonable and are consistent with prior GATT and WTO practice.  They can and should be affirmed.
36. The United States asserts that an important f actor in determining the "ordinary meaning" of a
term used in a Schedule is how the negotiating Members treated the particular product at issue -- inthis case, how the European Communities, the United  States and interested third parties treated LAN
equipment.  According to the United States, while the Panel's analysis in paragraphs 8.23-8.28 labelssuch treatment as an element of "legitimate expecta tions", this label is not essential to the Panel's
conclusion.  The United States submits that regardless of the label, what is important is that the factualfindings of the Panel, concerning the actual treatment of LAN equipment during the Uruguay Round,
amount to a determination that the parties assumed and intended that the concession under heading84.71 in Schedule LXXX would cover LAN equipment.
37. The United States argues that "factual indicia" of "legitimate expectations" which the Panel
actually considered can also be regarded as the factual context of the concessions in Schedule LXXXas facts indicating the object and purpose of the concessions in Schedule LXXX, or as a"supplementary means of interpretation" admissible under Article 32 of the Vienna Convention .
According to the United States, whether the Panel's analysis was phrased as an interpretation of"legitimate expectations", or whether it was an interpretation of the intentions and understandings ofthe negotiating parties, the conclusion is the same.  The United States submits that the important pointhere is that the intentions of the United States, as well as the third parties in this dispute, were arelevant factor for the Panel to consider in inte rpreting the ordinary meaning of the terms used in
Schedule LXXX.
38. Responding to a question asked by the Appellate Body during the oral hearing, the
United States asserted that the  Harmonized System  and its Explanatory Notes  could be deemed as part
of the "circumstances of the conclusion" of the WTO Agreement  within the meaning of Article 32 of
the Vienna Convention  and, therefore, could be used as a "supplementary means of interpretation" of
Schedule LXXX.  However, the United States also submitted that the Explanatory Notes  are not
generally treated as binding because they contain certain contradictions and are occasionally outdated.WT/DS62/AB/R
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Thus, the United States considered that although the Explanatory Notes  are relevant under Article 32
of the Vienna Convention , they should be treated with caution.
39. The United States submits that the European Communities argues that the text is the only
permissible input for interpreting a Schedule.  Accord ing to the United States, such a position leads to
the conclusion that whenever a treaty interpreter cannot determine whether a given product fallswithin the exact product composition of a concession on the basis of the text of that concession, theimporting Member can make this determination unilat erally.  If this is the case, then the tariff
obligations provided for under Articles II:1(a) and (b) of the GATT 1994, and the tariff concessions inthe Schedules, would be reduced to inutility.
40. The United States further argues that the Panel properly considered the concept of "legitimate
expectations" of WTO Members in analysing whether LAN equipment is included within the scope ofthe EC's concession in heading 84.71.  The United States believes that the Panel properly relied on theconcept of "legitimate expectations" and that the decision in India - Patents  does not require the
rejection of the Panel's use of "legitimate expectations" as a factor in its analysis of whether theEuropean Communities is in violation of its obligations under Article II of the GATT 1994.
41. The issue, as the United States sees it, is really whether the "legitimate expectations" of an
exporting Member are a relevant factor in determin ing the intentions of the negotiators and thus in
determining the ordinary meaning of the terms used in the concession in heading 84.71 ofSchedule LXXX.  The United States submits that the Panel properly used the concept of "legitimateexpectations" in determining and clarifying the intenti ons of the parties in this case.  According to the
United States, such an interpretation is supported by the text and context of Article II, as well as itsobject and purpose.  In the view of the United States, the concept of "legitimate expectations" isentirely relevant in the context of any dispute concerning the application of actual tariff concessions.Contrary to the argument of the European Communities, the United States submits that the Panel'sanalysis has nothing to do with a "melding" of a basis for complaint under Articles III or XI of theGATT and a basis for a "non-violation nu llification or impairment" complaint.
42. The United States argues that the argument of the European Communities confuses and
distorts the Appellate Body's reasoning in India - Patents , and that it twists this reasoning into an
instrument for undermining the enforcement of bargai ned-for tariff concessions.  In the view of the
United States, the conclusions argued by the European Communities are by no means ordained by theAppellate Body's findings and conclusions in India - Patents .  The United States asserts that the
European Communities has attempted to conflate the concept of "legitimate expectations", as used byWT/DS62/AB/R
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the Panel, with the concept of "reasonable expectations" in the context of Article XXIII:1(b) of the
GATT.  The United States submits that these concepts are not the same thing.  The phrases mayexhibit accidental linguistic convergence, but are legally and historically distinct and deal withdifferent situations.  In the view of the United States, it is both possible and necessary to distinguishbetween the concepts employed in enforcing obligations under Articles III or XI of the GATT, theconcepts involved in a "non-violation nullification or impairment complaint" and the concept of"legitimate expectations" employed by the Panel in the present dispute.  According to theUnited States, all three concepts are intellectually and historically distinct and independent.  Theyneed not be distorted and conflated in the manner advocated by the European Communities.
43. The United States submits that as the Appellate Body pointed out in India - Patents , panels
considering violation complaints concerning Articles III and XI of the GATT have developed theconcept of protecting the expectations of contracting parties concerning the competitive relationshipbetween their products and the products of other contracting parties.  According to the United States,Article II of the GATT 1994 is different in nature from Article III.  The obligations of Article II only
apply to the extent that a Member has made tariff bindings in a Schedule.  The United States assertsthat Article II also has nothing to do with guaranteeing the equality of opportunity with regard tocompetitive conditions.  The provisions of Article II permit and recognize the existence of tariffs and"other duties and charges" imposed at the border which imply an intentional competitive  inequality
between imports and like domestic products.
44. According to the United States, as  the Appellate Body has noted in  India - Patents , the
non-violation provision of Article XXIII:1(b) was aimed at preventing contracting parties from usingnon-tariff barriers, or other policy measures, to negate the benefits of negotiated tariff concessions.Like Article II of the GATT 1994, the non-violation remedy under Article XXIII:1(b) recognizes the
existence of tariff barriers at the border, as well as the terms, conditions or qualifications of tariffconcessions, which create intentional competitive inequality  between imports and like domestic
products.  Thus, the United States submits that Ar ticle II and the non-violation remedy are broadly
alike in that they both protect bargained-for market access and the integrity of Schedules.  However,Article II protects and enforces the tariff concession itself.  According to the United States, tariffconcessions safeguard the right to a particular tariff rate, and a Member's responsibility to charge aduty no higher than the level bound in its Schedule, on products covered by the tariff binding inquestion.
45. The United States submits that the Panel, in the present dispute, used "legitimate
expectations" as an interpretative aid to determine what the concession in heading 84.71 means, asWT/DS62/AB/R
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well as whether LAN equipment was meant to be within the product composition of heading 84.71.  If
it is further argued by the United States that, on the other hand, the concept of "actions that could notreasonably have been anticipated" or "reasonable expectations" has been used in non-violation casesto answer the question that Article XXIII:1(b) raises, namely what GATT-legal impediments tomarket access an importing Member may impose without taking away the value of the concession (asopposed to violating the obligation to maintain the co ncession itself).  Therefore, in the view of the
United States, "legitimate expectations" are relevant in the interpretation of obligations underArticle II of the GATT 1994, and actions which "could not reasonably have been anticipated" arerelevant in the application of the non-violation remedy under Article XXIII:1(b).  However, these twoconcepts apply under different conditions and for different purposes.  The United States argues thatthe concept of "legitimate expectations" is entirely relevant in the context of any dispute concerningthe violation of tariff concessions;  the Panel's analysis has nothing to do with a "melding" of a basisfor complaint under Articles III or XI of the GATT  and a basis for a "non-violation nullification or
impairment" complaint.
46. It is further argued by the United States that the context of the Uruguay Round Schedules, as
defined by Article 31(2) of the  Vienna Convention , clearly includes the GATT 1994 and, in particular,
Article II thereof.  The United States submits that the text of Article II:5 of the GATT 1994 is,therefore, a relevant part of this context and the Panel properly interpreted the meaning of tariffobligations in the light of Article II:5.  According to  the United States, in the text of Article II:5 the
"treatment provided for" is to be understood as the "treatment contemplated by a concession".  TheUnited States asserts that the term used in Article II:5 is "contemplated" and that such a provision
does not require that treatment has been "discussed" or "expressly agreed".  In the view of theUnited States, the ordinary meaning of "contemplate" in this context is "to expect";  the "treatment" inquestion must be the treatment by the importing Member which was contemplated at the time.  Thus,the United States concludes that the "treatment" provided by a concession is the treatment legitimatelyexpected by the trading partners of the Member making the concession.  According to theUnited States, in the present case, that treatment is the treatment these products were known to bereceiving in the European Communities, openly and legally, at the time the binding was negotiated.
47. The United States asserts that it properly invoked Article II:5 of the GATT 1994 and
complied with all its procedural requirements.  However, discussions under Article II:5 stopped shortwhen, as the European Communities itself recogn izes, the European Communities refused to agree
that the treatment contemplated was that clai med by the United States.  According to the
United States, it was this refusal that prevented an y negotiations under Article II:5 with regard to a
compensatory adjustment. Therefore, in the view of the United States, having frustrated theWT/DS62/AB/R
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procedures of Article II:5, the European Communiti es may not claim them as a defence to its own
violation of Article II:1.
48. The United States disagrees with the altern ative argument of the European Communities that
the Panel erred in relying on particular types of evidence, namely Binding Tariff Information ("BTIs")and actual trade data, as a factual basis for its findings of fact concerning actual tariff treatment duringthe Uruguay Round and the "legitimate expectations " based on that treatment.  According to the
United States, the European Communities distorts the Panel Report by arguing that the Panel foundthat the tariff treatment bound in Schedules must correspond to the actual tariff treatment, or else thereis a breach of the "legitimate expectations" of the exporting Member and therefore a violation ofArticle II:1 of the GATT 1994.  The United States submits that the substance of the Panel's findingsamounted to an interpretation of the ordinary meaning of the concession in heading 84.71, on thebasis of its text, context, object and purpose.  Thus, in the view of the United States, the Panel has, inessence, interpreted the intentions of the parties and has determined what, in fact, the actual tariff
treatment of LAN equipment was as a factor in evaluating those intentions.
49. The United States asserts that the European Communities is arguing that, when interpreting a
Schedule, the only evidence that may be taken into account is the text of the Schedule itself.  TheUnited States submits that this "text only" approach not only contradicts the guidance of the Vienna
Convention  and the Appellate Body, with regard to the interpretation of treaties, but also leads to
establishing the right of an importing Member to arbitrarily change the duty treatment of productswhenever the text of the relevant concession is ambiguous.
50. According to the United States, the Panel did not use BTIs in order to determine how LAN
equipment should be classified.  Rather, it used BTIs as a form of factual evidence concerning theactual tariff treatment of certain products during a particular historical period.  Therefore, theUnited States submits that the Panel properly relied on the evidence before it, including BTIs,affidavits by exporters and actual trade data, as a basis for its findings of fact concerning the actualtariff treatment of LAN equipment during the Uruguay Round and the legitimate expectations basedon that treatment. In the view of the United States, the Panel's fact-finding was within the scope of its
discretion under Article 11 of the DSU and, because these findings are factual, they do not fall withinthe permissible scope of an appeal under Article 17.6 of the DSU.WT/DS62/AB/R
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3. Clarification of the Scope of Tariff Concessions
51. According to the United States, when the Panel rejected the assertion of the European
Communities that the exporting Member bears the burden of clarifying the product composition ofconcessions during tariff negotiations, the Panel did not, as the European Communities suggests,create a new rule on the burden of proof in dispute settlement proceedings.  Rather, the Panelcorrectly followed the standard laid down by the Appellate Body in United States - Shirts and
Blouses .  The United States submits that the Panel examined first, whether the United States had
presented factual information sufficient to raise the presumption that its claim concerning the actualtreatment of LAN equipment during the Uruguay Round was true and, second, whether the EuropeanCommunities had presented evidence sufficient to rebut that presumption once raised.  In the view ofthe United States, the Panel correctly found that the United States had raised such a presumption as amatter of fact and that the European Communities had failed to rebut that presumption.
52. Regarding the argument of the European Communities that the Panel Report dedicates three
pages to the totally irrelevant issue of the burden of clarification, the United States submits that itfinds this claim curious because it is in this section of the Panel Report
32 that the Panel addressed the
purported defence of the European Communities that the United States should have clarified, duringthe negotiations, where LAN equipment would be classified.  If the Panel had accepted this defencefrom the European Communities, the Panel would ha ve imposed, according to the United States, a
new rule limiting the scope of proof that could be brought forward by an exporting Member, in thissituation, by restricting the exporting Member to textual arguments concerning the meaning of theterms in Schedule LXXX.  Thus, the United States argues that if any change in the burden of proof issuggested, that suggestion comes from the European Communities and not the Panel or theUnited States.
53. The United States submits that the European  Communities is wrong in asserting that the
Panel's findings permitting exporting Members to present evidence of tariff treatment of individualshipments, practices of current classification and other such evidence, would permit the exportingMember to shift the burden of proof to the resp onding Member without any need to submit evidence
related to the words of the agreement.  The United  States asserts that it submitted to the Panel
evidence concerning the meaning of the term ADP machines in Schedule LXXX and the variousproducts falling within that definition based on treatment by the WCO, the European Communitiesand industry.  According to the United States, it never argued to the Panel -- and does not assertnow -- that it could sustain its burden of proof in this case without setting out the meaning of the
                                                     
32Panel Report, paras. 8.48-8.55.WT/DS62/AB/R
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terms of the agreement.  The United States sustained its burden of demonstrating that the term ADP
machines included all types of LAN equipment.
C. Third Participant - Japan
54. Japan submits that the Panel's legal reasoning regarding "legitimate expectations" and the
requirement of clarification was correct and, therefore, requests that the European Communitiesrespect the conclusion of the Panel and bring its tariff treatment of LAN equipment into conformitywith its obligations under the GATT 1994.
55. Japan asserts that "[g]enerally, ... the importing Member is obliged to identify products and
relevant duties in its tariff schedules ... if the importing Member requests to limit or determine a scopeof the tariff concession and relevant duties for the products, which are not classified under the headingof the Harmonized System Committee (HSC) of the CCC and therefore classified differently inseveral countries".
33  It is further argued by Japan that, "[i]n particular, the classification of the LAN
equipment among the Members of the EC was not identical before the Uruguay Round.  In otherwords, the common classification of the LAN equipment within the Members of the EC had not beenestablished before the Uruguay Round, and the responsibility, the EC was required to discharge in thiscontext, was inevitable".
34
56. Japan submits that it agrees with the Panel th at a tariff commitment is an instrument in the
hands of an importing Member, in the light of its function to protect its own industry.  Therefore, inthe view of Japan, "[i]f the importing Member wishes to prove the expectations of the exportingMember, that a certain practice of its tariff classification will continue, are not legitimate, theimporting Member as the effective bearer of its rights and responsibilities, will be in a position tocorrectly identify products and relevant duties in its tariff schedules, including such limitations ormodifications as it intends to apply.  Otherwise, no proof will be required to deny the legitimateexpectations of the exporting Member that the tariff classification will continue and the predictabilityof protection through the imposition of tariffs would not be maintained".
35
                                                     
33Japan's third participant's submission, para. 8.
34Ibid.
35Japan's third participant's submission, para. 9.WT/DS62/AB/R
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III. Issues Raised in this Appeal
57. The appellant, the European Communities, raises the following issues in this appeal:
(a) Whether the measures in dispute, and the products affected by such measures, were
identified with sufficient specificity by the United States in its request for the
establishment of a panel under Article 6.2 of the DSU;
(b) Whether the Panel erred in interpreting Schedule LXXX, in particular, by reading
Schedule LXXX in the light of the "legitimate expectations" of an exporting Member,and by considering that Article II:5 of the GATT 1994 confirms the interpretativevalue of "legitimate expectations";  and
(c) Whether the Panel erred in putting the onus of clarifying the scope of a tariff
concession during a multilateral tariff negotiation conducted under the auspices of theGATT/WTO, solely on the importing Member.
IV. Request for the Establishment of a Panel
58. The first issue that we have to address is whether the measures in dispute, and the products
affected by such measures, were identified with su fficient specificity by the United States in its
request for the establishment of a panel under Article 6.2 of the DSU.
59. Article 6.2 of the DSU provides, in part, that the request for the establishment of a panel shall:
... identify the specific measures at issue and provide a brief summary
of the legal basis of the complaint sufficient to present the problem
clearly.  ...WT/DS62/AB/R
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60. The Panel considered that:
... the substance of the present case is the actual tariff treatment by
customs authorities in the European Communities and the evaluation
of that treatment in the light of the tariff commitments inSchedule LXXX.
36
The Panel found that:
Viewed from this perspective, ... the United States has sufficiently
identified the measures subject to the dispute, which concerns tariff
treatment of LAN equipment and multimedia PCs by customs
authorities in the European Communities.37
61. The Panel found that the definitions given by the United States of the terms, LAN equipment
and PCs with multimedia capability, are "sufficiently specific for the purposes of our consideration ofthis dispute".
38
62. The European Communities appeals these findings and submits that:
The Panel erred where it found that the measures under dispute and
the products affected by such measures were identified sufficientlyspecifically by the United States to include measures other than
Commission Regulation (EC) No. 1165/95 as far as it concerns Local
Area Network (LAN) adapter cards.
39
63. According to the European Communities, the request of the United States for the
establishment of a panel:
... identifies one specific measure, namely Commission Regulation
(EC) No. 1165/95 ... [relating to] LAN adapter cards.  The otheralleged measures are only vaguely described, without clearly
identifying the type of measure, the responsible authority, the date of
issue and the reference.
40
                                                     
36Panel Report, para. 8.12.
37Ibid.
38Panel Report, paras. 8.9-8.10.
39Notice of Appeal of the European Communities, para. 1.
40Appellant's submission of the European Communities, para. 19.WT/DS62/AB/R
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64. We note that the request of the United States for the establishment of a panel reads in relevant
part:
Since June 1995, customs authorities in the European Communities,
including but not limited to those in the United Kingdom and Ireland,
have been applying tariffs to imports of all types of LAN equipment -including hubs, in-line repeaters, converters, concentrators, bridges
and routers - in excess of those provided for in the EC Schedules.
Those products were previously dutiable as automatic
data-processing equipment under category 8471, but, as a result of
the customs authorities' action, are now subject to the higher tariff
rates applicable to category 8517, "telecommunications apparatus".
In addition, since 1995, customs authorities in the EuropeanCommunities, particularly those in the United Kingdom, have
increased tariffs on imports of certain personal computers ("PCs")
from 3.5 per cent to 14 per cent, which is above the rate provided for
in the EC Schedules.  These increases have resulted from the
reclassification of PCs with multimedia capability from category8471 to other categories with higher duty rates.
41
65. We consider that "measures" within the meaning of Article 6.2 of the DSU are not only
measures of general application, i.e., normative rules, but also can be the application of tariffs bycustoms authorities.
42  Since the request for the establishment of a panel explicitly refers to the
application of tariffs on LAN equipment and PCs with multimedia capability by customs authoritiesin the European Communities, we agree with the Panel that the measures in dispute were properlyidentified in accordance with the requirements of Article 6.2 of the DSU.
66. With respect to the products affected by such measures, we note that the European
Communities and the United States disagree on the scope of the terms, LAN equipment and PCs withmultimedia capability.  Regarding LAN equipment, the disagreement concerns, in particular, whethermultiplexers and modems are covered by this term.
67. We note that Article 6.2 of the DSU does not explicitly require that the products to which the
"specific measures at issue" apply be identified.  However, with respect to certain WTO obligations,in order to identify "the specific measures at issue", it may also be necessary to identify the productssubject to the measures in dispute.
                                                     
41WT/DS62/4, 13 February 1997.
42In an answer to a question at the oral hearing, the European Communities expressly accepted that "the
application of a tariff in an individual case on a consi gnment is a measure" within the meaning of Article 6.2 of
the DSU.WT/DS62/AB/R
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68. LAN equipment and PCs with multimedia capacity are both generic terms.  Whether these
terms are sufficiently precise to "identify the specific measure at issue" under Article 6.2 of the DSUdepends, in our view, upon whether they satisfy the purposes of the requirements of that provision.
69. In European Communities - Bananas , we stated that:
It is important that a panel request be sufficiently precise for two
reasons: first, it often forms the basis for the terms of reference of the
panel pursuant to Article 7 of the DSU; and, second, it informs thedefending party and the third parties of the legal basis of the
complaint.
43
70. The European Communities argues that the lack of precision of the term, LAN equipment,
resulted in a violation of its right to due process which is implicit in the DSU.  We note, however, thatthe European Communities does not contest that the term, LAN equipment, is a commercial termwhich is readily understandable in the trade.  Th e disagreement between the European Communities
and the United States concerns its exact definition and its precise product coverage.
44  We also note
that the term, LAN equipment, was used in the consultations between the European Communities andthe United States prior to the submission of the request for the establishment of a panel
45 and, in
particular, in an "Information Fiche" provided by the European Communities to the United Statesduring informal consultations in Geneva in March 1997.
46  We do not see how the alleged lack of
precision of the terms, LAN equipment and PCs with multimedia capability, in the request for theestablishment of a panel affected the rights of defence of the European Communities in the course  of
the panel proceedings.  As the ability of the European Communities to defend itself was notprejudiced by a lack of knowing the measures at issue, we do not believe that the fundamental rule ofdue process was violated by the Panel.
71. The United States has stressed that "if the EC arguments on specificity of product definition
are accepted, there will inevitably be long, drawn-out  procedural battles at the early stage of the panel
                                                     
43Appellate Body Report, adopted 25 September 1997, WT/DS27/AB/R, para. 142.
44Answer of the European Communities to a question at the oral hearing.
45See, for example, the letter from the Vice-President of the Commission of the European
Communities, Sir Leon Brittan, to the United States Trade Representative, Ambassador Michael Kantor, dated7 December 1995 (first submission of the United States to the Panel, Attachment 26); and the letter from theUnited States Trade Representative, Ambassador Michael  Kantor, to the Vice-President of the Commission of
the European Communities, Sir Leon Brittan, dated 8 March 1996 (first submission of the United States to the
Panel, Attachment 28).
46"Information Fiche" attached to letter from the Head of Permanent Delegation of the European
Commission to the International Organizations in Geneva, Ambassador R.E. Abbott, to the Chargé d'Affaires of
the United States to the WTO, Mr. A.L. Stoler, 13 March 1997 (first submission of United States to the Panel,Attachment 23).WT/DS62/AB/R
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process in every proceeding.  The parties will contest every product definition, and the defending
party in each case will seek to exclude all products that the complaining parties may have identifiedby broader grouping, but not spelled out in 'sufficient' detail".
47  We share this concern.
72. We agree with the Panel that the present case should be distinguished from EEC -
Quantitative Restrictions Against Hong Kong .  The request of the United States for the establishment
of a panel refers to "all types of LAN equipmen t".  Individual types of LAN equipment were only
mentioned as examples.  Therefore, unlike the panel in EEC - Quantitative Restrictions Against Hong
Kong , we are not confronted with a situation in which an additional product item was added in the
course of the panel proceedings.48  This is not a case in which an attempt was made to "cure" a faulty
panel request by a complaining party.49
73. In conclusion, we agree with the Panel that the request of the United States for theestablishment of a panel fulfilled the requirements of Article 6.2 of the DSU.
V. "Legitimate Expectations" in the Interpretation of a Schedule
74. The European Communities also submits that the Panel erred in interpreting Schedule LXXX,
in particular, by:
(a) reading Schedule LXXX in the light of the "legitimate expectations" of an exporting
Member;  and
                                                     
47Appellee's submission of the United States, para. 50.
48In paragraph 30 of the panel report in  EEC - Quantitative Restrictions against Hong Kong,  the panel
stated:
The Panel considered that just as the terms of reference must be agreed between the
parties prior to the commencement of the Panel's examination, similarly the product
coverage must be clearly understood and agreed between the parties to the dispute.
We have already noted that Article 6.2 of the DSU does not require that the products at issue be
specified in a request for the establishment of a panel.  Also, Article 7 of the DSU provides that panels shallhave standard terms of reference, unless the parties to the dispute agree otherwise within 20 days from theestablishment of the panel.
49We recall that in our report in European Communities - Bananas , para. 143, we found that:
If a claim  is not specified in the request for the establishment of a panel, then a faulty
request cannot be subsequently 'cured' by a complaining party's argumentation in itsfirst written submission to the panel or in any other submission or statement madelater in the panel proceeding.WT/DS62/AB/R
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(b) considering that Article II:5 of the GATT 1994 confirms the interpretative value of
"legitimate expectations".
Subordinately, the European Communities submits th at the Panel erred in considering that the
"legitimate expectations" of an exporting Member  with regard to the interpretation of tariff
concessions should be based on the classification practices for individual importers and individualconsignments, or on the subjective perception of a number of exporting companies of that exportingMember.
75. Schedule LXXX provides tariff concessions for ADP machines under headings 84.71 and
84.73 and for telecommunications equipment under heading 85.17.  The customs duties set forth inSchedule LXXX on telecommunications equipment are generally higher than those on ADPmachines.
50  We note that Schedule LXXX does not contain any explicit reference to "LAN
equipment" and that the European Communities currently treats LAN equipment astelecommunications equipment.  The United States, however, considers that the EC tariff concessionson ADP machines, and not its tariff concessions on telecommunications equipment, apply to LANequipment.  The United States claimed before the Panel, therefore, that the European Communitiesaccords to imports of LAN equipment treatment less fa vourable than that provided for in its Schedule,
and thus has acted inconsistently with Article II:1  of the GATT 1994.  The United States argued that
the treatment provided for by a concession is th e treatment reasonably expected by the trading
partners of the Member which made the concession.
51  On the basis of the negotiating history of the
Uruguay Round tariff negotiations and the actual tariff treatment accorded to LAN equipment bycustoms authorities in the European Communities during these negotiations, the United States arguedthat it reasonably expected the European Communities to treat LAN equipment as ADP machines, notas telecommunications equipment.
76. The Panel found that:
... for the purposes of Article II:1, it is impossible to determine
whether LAN equipment should be regarded as an ADP machine
purely on the basis of the ordinary meaning of the terms used inSchedule LXXX taken in isolation.  However, as noted above, the
meaning of the term "ADP machines" in this context may be
determined in light of the legitimate expectations of an exporting
Member.
52
                                                     
50See Panel Report, paras. 2.10 and 8.1.
51See Panel Report, para. 5.15.
52Panel Report, para. 8.31.WT/DS62/AB/R
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77. In support of this finding, the Panel explained that:
The meaning of a particular expression in a tariff schedule cannot be
determined in isolation from its context.  It has to be interpreted in
the context of Article II of GATT 1994 ...  It should be noted in thisregard that the protection of legitimate expectations in respect of
tariff treatment of a bound item is one of the most important
functions of Article II.
53
The Panel justified this latter statement by relying on the panel report in European Economic
Community - Payments and Subsidies Paid to Processors and Producers of Oilseeds and RelatedAnimal-Feed Proteins
54 ("EEC - Oilseeds "), and stated that:
The fact that the Oilseeds  panel report concerns a non-violation
complaint does not affect the validity of this reasoning in cases where
an actual violation of tariff commitments is alleged.  If anything,
such a direct violation would involve a situation where expectationsconcerning tariff concessions were even more firmly grounded.
55
78. The Panel also relied on Article II:5 of the GATT 1994, and stated that:
Although Article II:5 is a provision for the special bilateral procedure
regarding tariff classification, not directly at issue in this case, the
existence of this provision confirms that legitimate expectations are a
vital element in the interpretation of Article II and tariff schedules.56
79. Finally, the Panel observed that its proposition that the terms of a Member's Schedule may be
determined in the light of the "legitimate expectations" of an exporting Member:
... is also supported by the object and purpose of the WTO
Agreement and those of GATT 1994.  The security and predictability
of "the reciprocal and mutually advantageous arrangements directed
to the substantial reduction of tariffs and other barriers to trade"
(expression common in the preambles to the two agreements) cannotbe maintained without protection of such legitimate expectations.
This is consistent with the principle of good faith interpretation under
Article 31 of the Vienna Convention.
57
                                                     
53Panel Report, para. 8.23.
54Adopted 25 January 1990, BISD 37S/86, para. 148.
55Panel Report, para. 8.23.
56Panel Report, para. 8.24.
57Panel Report, para. 8.25.WT/DS62/AB/R
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80. We disagree with the Panel's conclusion that the meaning of a tariff concession in a Member's
Schedule may be determined in the light of the "legitimate expectations" of an exporting Member.First, we fail to see the relevance of the EEC - Oilseeds  panel report with respect to the interpretation
of a Member's Schedule in the context of a violation complaint made under Article XXIII:1(a) of theGATT 1994.  The EEC - Oilseeds  panel report dealt with a non-violation complaint under
Article XXIII:1(b) of the GATT 1994, and is not legally relevant to the case before us.  ArticleXXIII:1 of the GATT 1994 provides for three legally-distinct causes of action on which a Membermay base a complaint;  it distinguishes between so-called violation  complaints, non-violation
complaints and  situation complaints under paragraphs (a), (b) and (c).  The concept of "reasonable
expectations", which the Panel refers to as "legitimate expectations", is a concept that was developedin the context of non-violation  complaints.
58  As we stated in India - Patents , for the Panel to use this
concept in the context of a violation complaint "melds the legally-distinct bases for 'violation' and'non-violation' complaints under Article XXIII of the GATT 1994 into one uniform cause of action"
59,
and is not in accordance with established GATT practice.
81. Second, we reject the Panel's view that Article II:5 of the GATT 1994 confirms that
"legitimate expectations are a vital element in the interpretation" of Article II:1 of the GATT 1994 andof Members' Schedules.
60  It is clear from the wording of Article II:5 that it does not support the
Panel's view.  This paragraph recognizes the possibility that the treatment contemplated  in a
concession, provided for in a Member's Schedule, on a particular product, may differ from thetreatment accorded  to that product and provides for a compensatory mechanism to rebalance the
concessions between the two Members concerned in such a situation.  However, nothing inArticle II:5 suggests that the expectations of only the exporting Member can be the basis for
interpreting a concession in a Member's Schedule for the purposes of determining whether thatMember has acted consistently with its obligations under Article II:1.  In discussing Article II:5, thePanel overlooked the second sentence of that provision, which clarifies that the "contemplatedtreatment" referred to in that provision is the treatment contemplated by both Members.
82. Third, we agree with the Panel that the security and predictability of "the reciprocal and
mutually advantageous arrangements directed to the substantial reduction of tariffs and other barriersto trade" is an object and purpose of the WTO Agreement , generally, as well as of the GATT 1994.
61
However, we disagree with the Panel that the maintenance of the security and predictability of tariff
                                                     
58See Appellate Body Report, India - Patents , adopted 16 January 1998, WT/DS50/AB/R, paras. 36
and 41.
59Adopted 16 January 1998, WT/DS50/AB/R, para. 42.
60See Panel Report, para. 8.24.
61See Panel Report, para. 8.25.WT/DS62/AB/R
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concessions allows the interpretation of a concession in the light of the "legitimate expectations" of
exporting Members, i.e., their subjective  views as to what the agreement reached during tariff
negotiations was. The security and predictability of tariff concessions would be seriously underminedif the concessions in Members' Schedules were to be interpreted on the basis of the subjective viewsof certain exporting Members alone.  Article II:1 of the GATT 1994 ensures the maintenance of thesecurity and predictability of tariff concessions by requiring that Members not accord treatment lessfavourable to the commerce of other  Members than that provided for in their Schedules.
83. Furthermore, we do not agree with the Panel that interpreting the meaning of a concession in
a Member's Schedule in the light of the "legitimate expectations" of exporting Members is consistentwith the principle of good faith interpretation under Article 31 of the Vienna Convention .  Recently, in
India - Patents , the panel stated that good faith interpretation under Article 31 required "the protection
of legitimate expectations".
62  We found that the panel had misapplied Article 31 of the Vienna
Convention  and stated that:
The duty of a treaty interpreter is to examine the words of the treaty
to determine the intentions of the parties.  This should be done in
accordance with the principles of treaty interpretation set out inArticle 31 of the Vienna Convention .  But these principles of
interpretation neither require nor condone the imputation into a treaty
of words that are not there or the importation into a treaty of concepts
that were not intended.
63
84. The purpose of treaty interpretation under Article 31 of the Vienna Convention is to ascertain
the common  intentions of the parties.  These common  intentions cannot be ascertained on the basis of
the subjective and unilaterally determined "expectations" of one of the parties to a treaty.  Tariff
concessions provided for in a Member's Schedule -- the interpretation of which is at issue here -- arereciprocal and result from a mutually-advantageous negotiation between importing and exportingMembers.  A Schedule is made an integral part of the GATT 1994 by Article II:7 of the GATT 1994.
Therefore, the concessions provided for in that Schedule are part of the terms of the treaty.  As such,the only rules which may be applied in interpreting the meaning of a concession are the general rulesof treaty interpretation set out in the Vienna Convention .
                                                     
62Panel Report, India - Patents , adopted 16 January 1998, WT/DS50/R, para. 7.18.
63Appellate Body Report, India - Patents , adopted 16 January 1998, WT/DS50/AB/R, para. 45.WT/DS62/AB/R
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85. Pursuant to Article 31(1) of the Vienna Convention , the meaning of a term of a treaty is to be
determined in accordance with the ordinary meaning to  be given to this term in its context and in the
light of the object and purpose of the treaty.  Article 31(2) of the Vienna Convention  stipulates that:
The context, for the purpose of the interpretation of a treaty shall
comprise, in addition to the text, including its preamble and annexes:
(a) any agreement relating to the treaty which was made
between all the parties in connexion with the
conclusion of the treaty;
(b) any instrument which was made by one or more
parties in connexion with the conclusion of the treaty
and accepted by the other parties as an instrument
related to the treaty.
Furthermore, Article 31(3) provides that:
There shall be taken into account together with the context:
(a) any subsequent agreement between the parties
regarding the interpretation of the treaty or the
application of its provisions;
(b) any subsequent practice in the application of the
treaty which establishes the agreement of the partiesregarding its interpretation;
(c) any relevant rules of international law applicable in
the relations between the parties.
Finally, Article 31(4) of the Vienna Convention  stipulates that:
A special meaning shall be given to a term if it is established that the
parties so intended.
86. The application of these rules in Article 31 of the Vienna Convention  will usually allow a
treaty interpreter to establish the meaning of a term.
64  However, if after applying Article 31 the
meaning of the term remains ambiguous or obscure, or leads to a result which is manifestly absurd orunreasonable, Article 32 allows a treaty interpreter to have recourse to:
... supplementary means of interpretation, including the preparatory
work of the treaty and the circumstances of its conclusion.
                                                     
64R. Jennings and A. Watts (eds.), Oppenheim's International Law , 9th ed., Vol. I (Longman, 1992),
p. 1275.WT/DS62/AB/R
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With regard to "the circumstances of [the] conclusion" of a treaty, this permits, in appropriate cases,
the examination of the historical background against which the treaty was negotiated.65
87. In paragraphs 8.20 and 8.21 of the Panel Report, the Panel quoted Articles 31 and 32 of theVienna Convention  and explicitly recognized that these fundamental rules of treaty interpretation
applied "in determining whether the tariff treatmen t of LAN equipment ... is in conformity with the
tariff commitments contained in Schedule LXXX".
66  As we have already noted above, the Panel,
after a textual analysis 67, came to the conclusion that:
... for the purposes of Article II:1, it is impossible to determine
whether LAN equipment should be regarded as an ADP machine
purely on the basis of the ordinary meaning of the terms used inSchedule LXXX taken in isolation.
68
Subsequently, the Panel abandoned its effort to interpret the terms of Schedule LXXX in accordance
with Articles 31 and 32 of the Vienna Convention  .69  In doing this, the Panel erred.
88. As already discussed above, the Panel referred to the context  of Schedule LXXX70 as well
as to the object and purpose  of the WTO Agreement  and the GATT 1994, of which Schedule LXXX is
an integral part.71  However, it did so to support its proposition that the terms of a Schedule may be
interpreted in the light of the "legitimate expectat ions" of an exporting Member.  The Panel failed to
examine the context of Schedule LXXX and the object and purpose of the WTO Agreement  and the
GATT 1994 in accordance with the rules of treaty interpretation set out in the Vienna Convention.
89. We are puzzled by the fact that the Panel, in its effort to interpret the terms of
Schedule LXXX, did not consider the Harmonized System  and its Explanatory Notes .  We note that
during the Uruguay Round negotiations, both the European Communities and the United States wereparties to the Harmonized System .  Furthermore, it appears to be undisputed that the Uruguay Round
                                                     
65I. Sinclair, The Vienna Convention on the Law of Treaties , 2nd ed., (Manchester University Press,
1984), p. 141:
... the reference in Article 32 of the Convention to the circumstances of the
conclusion of a treaty may have some value in emphasising the need for theinterpreter to bear constantly in mind the historical background againstwhich the treaty has been negotiated.
66Panel Report, para. 8.22.
67See Panel Report, para. 8.30.
68Panel Report, para. 8.31.
69As discussed above in paragraphs 76-84, the Panel relied instead on the concept of "legitimate
expectations" as a means of treaty interpretation.
70See Panel Report, paras. 8.23-8.24.
71See Panel Report, para. 8.25.WT/DS62/AB/R
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tariff negotiations were held on the basis of the Harmonized System's  nomenclature and that requests
for, and offers of, concessions were normally made in terms of this nomenclature.  Neither theEuropean Communities nor the United States argued before the Panel
72 that the Harmonized System
and its Explanatory Notes  were relevant in the interpretation of the terms of Schedule LXXX.  We
believe, however, that a proper interpretation of Schedule LXXX should have included anexamination of the Harmonized System  and its Explanatory Notes .
90. A proper interpretation also would have included an examination of the existence and
relevance of subsequent practice.  We note that the United States referred, before the Panel, to thedecisions taken by the Harmonized System Committ ee of the WCO in April 1997 on the classification
of certain LAN equipment as ADP machines.
73  Singapore, a third party in the panel proceedings, also
referred to these decisions.74  The European Communities observed that it had introduced reservations
with regard to these decisions and that, even if th ey were to become final as they stood, they would
not affect the outcome of the present dispute for two reasons: first, because these decisions could notconfirm that LAN equipment was classified as ADP machines in 1993 and 1994;  and, second,because this dispute "was about duty treatment and not about product classification".
75  We note that
the United States agrees with the European Communities that this dispute is not a dispute on thecorrect  classification of LAN equipment, but a dispute on whether the tariff treatment accorded to
LAN equipment was less favourable than that provided for in Schedule LXXX.
76  However, we
consider that in interpreting the tariff concessions in Schedule LXXX, decisions of the WCO may berelevant;  and, therefore, they should have been examined by the Panel.
91. We note that the European Communities stated that the question whether LAN equipment
was bound as ADP machines, under headings 84.71 a nd 84.73, or as telecommunications equipment,
                                                     
72We recall, however, that in reply to our questions at the oral hearing, both the European Communities
and the United States accepted the relevance of the Harmonized System  and its Explanatory Notes   i n
interpreting the tariff concessions of Schedule LXXX.  See paras. 13 and 38 of this Report.
73See Panel Report, para. 5.12.
74As noted in para. 6.34 of the Panel Report, Singapore pointed out, before the Panel, that:
... the WCO's HS Committee had recently decided that LAN equipment was
properly classifiable in heading 84.71 of the HS.  The HS Committee had
specifically declined to adopt the pos ition advanced that heading 85.17 was
the appropriate category ... The EC had suggested that the HS Committeedecision was intended solely to establish the appropriate HS classificationfor future imports.  It ignored that the language interpreted by the HS
Committee was the same language appearing in the EC's HS nomenclature
and in the EC's concession schedule at the time of the negotiations andafterwards.
75Panel Report, para. 5.13.
76See Panel Report, para. 5.3.WT/DS62/AB/R
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under heading 85.17, was not addressed during the Uruguay Round tariff negotiations with the United
States.77  We also note that the United States asserted that:
In many, perhaps most, cases, the detailed product composition of
tariff commitments was never  discussed in detail during the tariff
negotiations of the Uruguay Round ...78  (emphasis added)
and that:
The US-EC negotiation on Chapter 84 provided an example of how
two groups of busy negotiators dealing with billions of dollars of
trade and hundreds of tariff lines relied on a continuation of the
status quo .79 (emphasis added)
This may well be correct and, in any case, seems central to the position of the United States.
Therefore, we are surprised that the Panel did not examine whether, during the Tokyo Round tariffnegotiations, the European Communities bound LAN equipment as ADP machines or astelecommunications equipment.
80
92. Albeit, with the mistaken aim of establishing whether the United States "was entitled tolegitimate expectations"
81 regarding the tariff treatment of LAN equipment by the European
Communities, the Panel examined, in paragraphs 8.35 to 8.44 of the Panel Report, the classificationpractice regarding LAN equipment in the European Communities during the Uruguay Round tariffnegotiations.  The Panel did this on the basis of certain BTIs and other decisions relating to thecustoms classification of LAN equipment, issu ed by customs authorities in the European
Communities during the Uruguay Round.
82  In the light of our observations on "the circumstances of
[the] conclusion" of a treaty as a supplementary means of interpretation under Article 32 of theVienna Convention
83, we consider that the classification practice in the European Communities during
the Uruguay Round is part of "the circumstances of [the] conclusion" of the WTO Agreement and may
be used as a supplementary means of interpretation within the meaning of Article 32 of the Vienna
Convention .  However, two important observations must be made:  first, the Panel did  not examine the
                                                     
77See Panel Report, para. 5.28.
78Appellee's submission of the United States, para. 26.
79Panel Report, para. 5.31.
80We note that in paragraph 8 of its third participant' s submission, Japan stated that: "[i]n particular, the
classification of the LAN equipment among the Members of the EC was not identical before the Uruguay
Round".
81Panel Report, para. 8.60.
82The lists of the BTIs and classification decisions in the form of a letter, submitted by the parties and
considered by the Panel, were attached to the Panel Report as Annex 4 and Annex 6 thereof.
83See para. 86 of this Report.WT/DS62/AB/R
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classification practice in the European Communities during the Uruguay Round negotiations as a
supplementary means of interpretation  within the meaning of Article 32 of the Vienna Convention84;
and, second, the value of the classification practice as a supplementary means of interpretation issubject to certain qualifications discussed below.   
93. We note that the Panel examined the classification practice of only the European
Communities
85, and found that the classification of LAN equipment by the United States during the
Uruguay Round tariff negotiations was not relevant.86  The purpose of treaty interpretation is to
establish the common  intention of the parties to the treaty.  To establish this intention, the prior
practice of only one of the parties may be relevant, but it is clearly of more limited value than the
practice of all parties.  In the specific case of the interpretation of a tariff concession in a Schedule, theclassification practice of the importing Member, in fa ct, may be of great importance.  However, the
Panel was mistaken in finding that the classification practice of the United States was not relevant.
94. In this context, we also note that while the Panel examined the classification practice during
the Uruguay Round negotiations, it did not consider the EC legislation on customs classification ofgoods that was applicable at that time.  In particular, it did not consider the "General Rules for theInterpretation of the Combined Nomenclature" as set out in Council Regulation 2658/87 on theCommon Customs Tariff.
87  If the classification practice of the importing Member at the time of the
tariff negotiations is relevant in interpreting tariff concessions in a Member's Schedule, surely thatMember's legislation on customs classification at that time is also relevant.
95. Then there is the question of the consistency  of prior practice.  Consistent prior classification
practice may often be significant.  Inconsistent classification practice, however, cannot be relevant in
interpreting the meaning of a tariff concession.  We note that the Panel, on the basis of evidencerelating to only five out of the then 12 Member States
88, made the following factual findings with
regard to the classification practice in the European Communities:
                                                     
84It examined the actual classification practice to determine whether the United States could have
"legitimate expectations" with regard to the tariff treatment of LAN equipment.
85See Panel Report, paras. 8.36-8.44.
86See Panel Report, para. 8.60.  We note that in paragraph 8.58 of the Panel Report, the Panel stated
that the classification of LAN equipment by other WTO Members was not relevant either.
87Title I, Part I of Annex I of Council Regulation  (EEC) No. 2658/87 of 23 July 1987, Official Journal
No. L 256, 7 September 1987, p. 1.
88With regard to the manner in which the Panel evaluated the evidence regarding classification practice
during the Uruguay Round tariff negotiations, we note that in paragraph 8.37 of the Panel Report, the Panelaccepted certain BTIs submitted by the United States as relevant evidence, while in footnote 152 of the PanelReport, it considered similar BTIs submitted by the European Communities to be irrelevant.WT/DS62/AB/R
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To rebut the presumption raised by the United States, the European
Communities has produced documents which indicate  that LAN
equipment had been treated as telecommunication apparatus by othercustoms authorities in the European Communities.
89  (emphasis
added)
... it would be reasonable to conclude at least that the practice
[regarding classification of LAN equipment] was not uniform in
France during the Uruguay Round.90
Germany appears to have consistently treated LAN equipment astelecommunication apparatus.
91
... LAN equipment was generally  treated as ADP machines in Ireland
and the United Kingdom during the Uruguay Round.92  (emphasis
added)
As a matter of logic, these factual findings of the Panel lead to the conclusion that, during the
Uruguay Round tariff negotiations, the practice regarding the classification of LAN equipment bycustoms authorities throughout the European Communities was not consistent.
96. We also note that in paragraphs 8.44 and 8.60 of the Panel Report, the Panel identified Ireland
and the United Kingdom as the "largest" and "major" market for LAN equipment exported from theUnited States.  On the basis of this assumption, the Panel gave special importance to the classificationpractice by customs authorities in these two Member States.  However, the European Communitiesconstitutes a customs union, and as such, once goods are imported into any Member State, theycirculate freely within the territory of the entire customs union.  The export market, therefore, is theEuropean Communities, not an individual Member State.
97. For the reasons set out above, we conclude that the Panel erred in finding that the "legitimate
expectations" of an exporting Member are releva nt for the purposes of interpreting the terms of
                                                     
89Panel Report, para. 8.40.
90Panel Report, para. 8.42.
91Panel Report, para. 8.43.
92Panel Report, para. 8.41.  In this paragraph, the Panel stated that the only direct counter-evidence
against the claim of the United States that customs authorities in Ireland and the United Kingdom consistentlyclassified LAN equipment as ADP machines during the Uruguay Round negotiations is a BTI issued by the UKcustoms authority to CISCO, classifying one type of LAN equipment (routers) as telecommunications apparatus.The Panel dismisses the value of this BTI as evidence on the basis that it "became effective only a week or sobefore the conclusion of the Uruguay Round negotiations [15 December 1993]".  Similarly, in footnote 152 of
the Panel Report, the Panel did not consider other BTIs issued by the UK customs authorities to be relevant
because they became valid after the conclusion of the Uruguay Round negotiations.  We note, however, that allof these BTIs became valid in December 1993 or February 1994, i.e., before the end of the verification process,to which all Schedules were submitted and which took place between 15 February 1994 and 25 March 1994
(MTN.TNC/W/131, 21 January 1994).  Therefore, in our view, the Panel should have considered these BTIs.WT/DS62/AB/R
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Schedule LXXX and of determining whether the European Communities violated Article II:1 of the
GATT 1994.  We also conclude that the Panel misinterpreted Article II:5 of the GATT 1994.
98. On the basis of the erroneous legal reasoning developed and the selective evidence
considered, the Panel was not justified in coming to the conclusion that the United States was entitledto "legitimate expectations" that LAN equipm ent would be accorded tariff treatment as ADP
machines in the European Communities
93 and, therefore, that the European Communities acted
inconsistently with the requirements of Article II:1 of the GATT 1994 by failing to accord imports ofLAN equipment from the United States treatment no less favourable than that provided for inSchedule LXXX.
94
99. In the light of our conclusion that the "legitimate expectations" of an exporting Memberare not relevant in determining whether the European Communities violated Article II:1 of theGATT 1994, we see no reason to examine the subordinate claim of error of the EuropeanCommunities relating to the evidence on which the "legitimate expectations" of exporting Memberswere based.
VI. Clarification of the Scope of Tariff Concessions
100. The last issue raised by the European Communities in this appeal is whether the Panel erred
in placing the onus of clarifying the scope of a tariff concession during a multilateral tariffnegotiation, held under the auspices of the GATT/WTO, solely on the importing Member.
101. In paragraph 8.60 of the Panel Report, the Panel concluded that:
We find that the United States was entitled to legitimate expectations
that LAN equipment would continue to be accorded tariff treatment
as ADP machines in the European Communities, based on the actualtariff treatment during the Uruguay Round, particularly in Ireland and
the United Kingdom ...  We further find that the United States was
not required to clarify the scope  of the European Communities' tariff
concessions  on LAN equipment ...  (emphasis added)
                                                     
93See Panel Report, para. 8.60.
94See Panel Report, para. 9.1.WT/DS62/AB/R
WT/DS67/AB/R
WT/DS68/AB/R
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Prior to this conclusion, the Panel stated the following:
... we find that the European Communities cannot place the burden of
clarification on the United States in cases where it has created,
through its own practice, the expectations regarding the continuationof the actual tariff treatment prevailing at the time of the tariff
negotiations.  It would not be reasonable to expect the US
Government to seek clarification when it had not heard any
complaints from its exporters, who were apparently satisfied with the
current tariff treatment of LAN equipment in their major export
market -- Ireland and the United Kingdom.
95
102. The European Communities appeals these findings, and argues that:
... the Panel erred where it considered that, in any case, the onus
of clarifying the scope of a tariff concession during a multilateral
tariff negotiation ... shall necessarily be put on the side of the
importing Member.  By doing so, the Panel has created and applied a
new rule on the burden of proof in the dispute settlement procedure
which is outside its terms of reference and is beyond the powersof a panel.
96
103. We do not agree that the Panel has created and applied a new rule on the burden of proof.
The rules on the burden of proof are those which we clarified in United States - Shirts and Blouses .97
104. The Panel's findings in paragraphs 8.55 and 8.60 on the "requirement of clarification" are
linked to the Panel's reliance on "legitimate expectations" as a means of interpretation of the tariffconcessions in Schedule LXXX.  They serve to complete and buttress the Panel's conclusion that "theUnited States was entitled to legitimate expectations that LAN equipment would continue to beaccorded tariff treatment as ADP mach ines in the European Communities".
98
                                                     
95Panel Report, para. 8.55.
96Notice of Appeal of the European Communities, para. 4.
97Adopted 23 May 1997, WT/DS33/AB/R, p. 14.  See also, Appellate Body Report, EC Measures
Concerning Meat and Meat Products (Hormones) , adopted 13 February 1998, WT/DS26/AB/R,
WT/DS48/AB/R, paras. 97-109.
98Panel Report, para. 8.60.WT/DS62/AB/R
WT/DS67/AB/R
WT/DS68/AB/R
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105. We note that the Panel's findings in paragraphs 8.55 and 8.60 on the "requirement of
clarification" were, in fact, the Panel's response to the question whether:
... the exporting Member has any inherent obligation to
seek clarification when it has been otherwise given a basis to expect
that actual tariff treatment by the importing Member willbe maintained.
99
106. We also note the Panel's references100 to the panel report in Panel on Newsprint  and the
report by the Group of Experts in Greek Increase in Bound Duty .101  In both of these reports, the
conclusions on the obligations of the importing contracting party under Article II:1 of the GATT 1994were reached on the basis of the ordinary meaning of the wording of the respective Schedules.  Thesereports also assume that the tariff concessions made by the importing contracting party would havehad to be limited by "conditions or qualifications" if they were to be interpreted restrictively.  That thePanel reads these two reports in this way is evident from the Panel's concluding remark that "thesecases ... confirm that the onus of clarifying tariff commitment  is generally placed on the importing
Member" (emphasis added).
102
107. However, the case before us raises a different problem.  The question here is whether theEuropean Communities has committed itself to treat LAN equipment as ADP machines underheadings 84.71 or 84.73, rather than as telecommunications equipment under heading 85.17 ofSchedule LXXX.  We do not believe that the "requirement of clarification", as discussed by the Panel,is relevant to  this question.
                                                     
99Panel Report, para. 8.48.
100See Panel Report, paras. 8.51-8.54.
101L/580, 9 November 1956.  We note that while the panel report in Panel on Newsprint  was adopted
by the CONTRACTING PARTIES, the report by the Group of Experts in Greek Increase in Bound Duty  was
not.
102Panel Report, para. 8.54.WT/DS62/AB/R
WT/DS67/AB/R
WT/DS68/AB/R
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108. The Panel also based its conclusions on the "requirement of clarification" on a certain
perception of the nature of tariff commitments.  The Panel stated:
... that a tariff commitment is an instrument in the hands of an
importing Member which inherently serves the importing Member's
"protection needs and its requirements for the purposes of tariff andtrade negotiations". ...  It is for this reason that it behooves the
importing party, as the effective bearer of its rights and
responsibilities, to correctly identify products and relevant duties in
its tariff schedules, including such limitations or modifications as it
intends to apply.
103
109. We do not share this perception of the nature of tariff commitments.  Tariff negotiations are a
process of reciprocal demands and concessions, of "give and take".  It is only normal that importingMembers define their offers (and their ensuing oblig ations) in terms which suit their needs.  On the
other hand, exporting Members have to ensure that their corresponding rights are described in such amanner in the Schedules of importing Members that their export interests, as agreed in thenegotiations, are guaranteed.  There was a special arrangement made for this in the Uruguay Round.For this purpose, a process of verification of tari ff schedules took place from 15 February through
25 March 1994,  which allowed Uruguay Round participants to check and control, throughconsultations with their negotiating partners, the scope and definition of tariff concessions.
104  Indeed,
the fact that Members' Schedules are an integral part of the GATT 1994 indicates that, while eachSchedule represents the tariff commitments made by one Member, they represent a common
agreement among all Members.
110. For the reasons stated above, we conclude that the Panel erred in finding that "the United
States was not required to clarify the scope of the European Communities' tariff concessions on LANequipment".
105  We consider that any clarification of the scope of tariff concessions that may be
required during the negotiations is a task for all interested parties.
                                                     
103Panel Report, para. 8.50.
104MTN.TNC/W/131, 21 January 1994.  See also Marrakesh Protocol to the General Agreement on
Tariffs and Trade 1994 , para. 3.
105Panel Report, para. 8.60.WT/DS62/AB/R
WT/DS67/AB/R
WT/DS68/AB/R
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VII. Conclusions
111. For the reasons set out in this Report, the Appellate Body:
(a) upholds the finding of the Panel that the request of the United States for the
establishment of a panel met the requirements of Article 6.2 of the DSU;
(b) reverses the findings of the Panel that the United States was entitled to "legitimate
expectations" that LAN equipment would be accorded tariff treatment as ADPmachines in the European Communities and, therefore, that the EuropeanCommunities acted inconsistently with the requirements of Article II:1 of theGATT 1994 by failing to accord imports of LAN equipment from the United Statestreatment no less favourable than that provided for in Schedule LXXX;  and
(c) reverses the ancillary finding of the Panel that the United States was not required to
clarify the scope of the European Communities' tariff concessions on LANequipment.WT/DS62/AB/R
WT/DS67/AB/R
WT/DS68/AB/R
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Signed in the original at Geneva this 19th day of May 1998 by:
_________________________
Christopher Beeby
Presiding Member
_________________________ _________________________
Claus-Dieter Ehlermann Julio Lacarte-Muró
Member Member