(a) through Special Milk Classes 5(d) and (e) - and this for all of the dairy products in dispute (butter, cheese and "other milk products") and for both marketing years at issue (1995/1996 and 1996/1997) - has acted inconsistently with its obligations under Article 3.3 and Article 8 of the Agreement on Agriculture by providing export subsidies as listed in Article 9.1(a) and Article 9.1(c) of that Agreement in excess of the quantity commitment levels specified in Canada's Schedule; and
(b) by restricting the access to the tariff-rate quota for fluid milk to (i) consumer packaged milk for personal use and (ii) entries valued at less than C$20, acts inconsistently with its obligations under Article II:1(b) of GATT 1994.
We recommend that the Dispute Settlement Body requests Canada: (i) to bring its dairy products marketing regime into conformity with its obligations in respect of export subsidies under the Agreement on Agriculture; and (ii) to bring its tariff-rate quota for fluid milk into conformity with GATT 1994.
(a) whether the Panel erred in its interpretation and application of Article 9.1(a) of the Agreement on Agriculture, in particular, with respect to:
i) the expression "direct subsidies, including payments-in-kind", and
ii) the expression "governments or their agencies";
(b) whether the Panel erred in its interpretation and application of Article 9.1(c) of the Agreement on Agriculture, in particular, with respect to:
i) the term "payments", and
ii) the expression "financed by virtue of governmental action";
(c) whether the Panel erred in its interpretation and application of the term "export subsidies" in Article 10.1 of the Agreement on Agriculture; and
(d) whether the Panel erred in finding that Canada has acted inconsistently with its obligations under Article II:1(b) of the GATT 1994 by restricting access to the tariff-rate quota for fluid milk to consumer packaged milk for personal use, valued at less than C$20, imported under the authority of General Import Permit No. 1.
… established and operate within a legal framework set up by federal and provincial legislation. These boards exercise powers in respect of inter-provincial and external trade delegated to them by the federal government through the CDC, as well as powers delegated to them by provincial authorities. Three of these boards (Alberta, Nova Scotia and Saskatchewan) are, according to Canada, agencies of the provincial government. Orders or regulations issued by the provincial marketing boards can be enforced before the Canadian courts. In most provinces, individual decisions by the boards are subject to appeal to a provincial supervisory board or commission (of which Canada recognizes the governmental nature).69 (emphasis added)
It is precisely because the boards receive the authority from the governments to regulate certain areas themselves that their actions become governmental. What is important though is that Canadian governments maintain the ultimate control and supervision of most, if not all, of the boards' activities. These governments define, and approve changes to, the boards' mandates and functions.70 (underlining added)
… the ordinary meaning of the word "payment" includes both the act of remunerating a person with money and the act of remunerating a person with its equivalent in kind, a so-called "payment in kind".86
… payments-in-kind made under Classes 5(d) and (e) do not directly involve a charge on the public account. The cost of selling milk at a reduced price for export is not borne by the government. It is borne by the milk producers …92 (underlining added)
In Part I of Canada's Schedule to GATT 1994, Canada established a tariff-rate quota for fluid milk (HS 0401.10.10 and 0401.20.10) of 64,500 tonnes. In-quota imports are subject, initially, to a maximum duty of 17.5 per cent (a rate to be decreased to 7.5 per cent in 2001). Fluid milk imports outside of the 64,500 tonnes tariff-rate quota bear an initial rate of duty equal to 283.8 per cent, declining to 241.3 per cent in 2001. In its Schedule, Canada specified under 'Other terms and conditions' that '[t]his quantity [64,500 tonnes] represents the estimated annual cross-border purchases imported by Canadian consumers'.102
The words "[t]his quantityrepresents the estimated annual …" are, in our view, introducing "terms" related to the quantity of the quota – i.e., describing the way the size of the quota was determined – rather than setting out "conditions" as to the kind of imports qualified to enter Canada under this quota. In particular, the ordinary meaning of the word "represent" in this context does not, in our view, call to mind the setting out of specific restrictions or conditions.107 (emphasis in original)
Even if the phrase could be said to include restrictions on access to the tariff-rate quota, we do not see how the two conditions at issue in this dispute could be read into this phrase. First, the restriction that only entries valued at less than C$20 qualify for the tariff-rate quota can nowhere be found in Canada's Schedule. Nowhere is any reference made to a maximum value per entry. … [I]n our view, the ordinary meaning of the words "cross-border purchases" by "consumers" in this context does not warrant the conclusion that only consumer packaged milk for personal use can enter under the tariff-rate quota. An imported good, by definition, crosses a border. Also, the dictionary meaning of "consumer" is not restricted to a person buying for personal use in small retail packages. All dictionary definitions of "consumer" referred to by the parties include wider definitions without these restrictions.108 (emphasis in original)
… Canada, by restricting the access to the tariff-rate quota for fluid milk to (i) consumer packaged milk for personal use and (ii) entries valued at less than C$20, acts inconsistently with its obligations under Article II:1(b) of GATT 1994.112
… if after applying Article 31 the meaning of the term remains ambiguous or obscure, or leads to a result which is manifestly absurd or unreasonable, 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.
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.115
Any person … [to] import into Canada from any country … any dairy products for the personal use of the importer and his household not exceeding $20 in value for each importation. (emphasis added)
Signed in the original at Geneva this 23rd day of September 1999 by:
Florentino Feliciano Julio Lacarte-Muró