COMMISSION
OF THE EUROPEAN Brussels, 0 2 XII 1992
COMMUNITIES

F.H.J.J. ANDRIESSEN
VICE-PRESIDENT
with special responsibility for External 
Relations and Commercial Policy

Dear Carla,

I wrote to you on 15 October and on 5 November last year to explain how we intended to handle the question of the 1987 bilateral agreement under art. XXIV:6, in particular the continuation of the benefits of that agreement for 1992. It now seems inevitable that we have to address the same question for next year.

I now propose therefore that the Community extend the concessions set out in the agreement by autonomous decision for a further 12 months until the end of December 1993, in the same way as was agreed last year. I can also confirm that the concessions set out in the annexes and understandings will continue to be fully applied through the whole of 1993, equally, in the same way as was agreed last year.

This approach would continue to maintain the substance of the agreement, and allow for further time to conduct the review as foreseen in part III of the agreement, which is to take account of the results of the Uruguay Round. I can confirm that we intend to carry out this review as soon as possible. We certainly expect to continue consultations not later than 30 June, and to achieve a final and mutually satisfactory understanding in good time before the end of 1993, for the trade to know the basis of its future operations.

If you so wish, a joint notification to the GATT could once again be made using the text of the letter sent jointly to Mr. Dunkel on 12 November 1991 by

Ambassadors Yerxa and Tran Van Thinh, with the appropriate data changes.

Yours sincerely,

The Honourable Carla A. HILLS
United States Trade Representative
WASHINGTON DC 20506
United States of America

European Union: Corn Gluten Feed and Malt-Barley Sprouts

Exchange of Letters (1992)

COMMISSION
OF THE EUROPEAN Brussels, 04 XII, 1992
COMMUNITIES

F.H.J.J. ANDRIESSEN
VICE-PRESIDENT
with special responsibility for External Relations
and Commercial Policy

Dear Carla,

Following meetings between US and EC Commission officials in Brussels this week, I am now able to respond to your letter of November 23.

I can confirm Ray's and my agreement with the annexes on peace, internal support, export credits and credit guarantees, and non-grain feed ingredients attached to your letter. The flexibility on export subsidies, as agreed in Blair House, was confirmed during discussions between Guy Legras and Joe O'Mara this week. A text will be supplied next week.

I attach documents resolving outstanding issues with respect to corn gluten feed and malt spout pellets. These will replace the annexes on these subjects attached to your November 23 letter.

Finally, I would note that we have agreed to extend for 1993 the concessions set out in the 1987 bilateral agreement on enlargement.

With your agreement, I believe we can now proceed expeditiously to conclude a Uruguay Round agreement before the end of the year.

Yours sincerely,

The Honorable Carla A. HILLS
United States Trade Representative
WASHINGTON DC 20506
United States of America

Resolution of Outstanding Corn Gluten Feed Issues

It is agreed the at the following understandings and undertakings will resolve the outstanding issues pertaining to the duty free entry of corn gluten feed into the Community. As a result of these, no further delay of entries will occur, outstanding bonds will be released, levy demands rescinded and normal customs clearance procedures will be utilized.

1. Screening/Cleanings

Screenings/cleanings of corn used to manufacture starch corresponding to normal trading standards are an acceptable constituent of corn gluten feed and their inclusion does not alter the product's classification as a residue of starch manufacture (Combined Nomenclature of the EC 2303.10.19). Such screenings/cleanings may only be derived by corn wet mills from corn subsequently used for the manufacture of starch and starch products, and can not comprise more than 15% by weight of the corn gluten feed produced, it being understood that, for the use of yellow number 2 corn, the figure is up to 10%.

2. Steep water

Steep water derived from the corn wet milling process and currently used in the manufacture of alcohol and other starch derived products which utilise steep water as part of their manufacturing process is properly classified as a residue of starch manufacture and is a proper constituent of corn gluten feed (see tariff number above). It is recognised that the steep water used for such a process should not result in an increase in the feed value of the resultant corn gluten feed. If the steep water is used for the production of new starch derived products, the two parties agree to decide whether the resultant steep water can be considered as a proper constituent of corn gluten feed; this decision will be based on an examination of the value and the volume of the products from steep water added to corn gluten feed.

3. Microscopic analysis

The Corn Refiners Association has indicated its intention to work with the EC Commission in a collaborative study, operated in accordance with norms of international standardization bodies, to determine the feasibility of a semi-quantitative method of microscopic analysis for corn germ meal and screenings/cleanings in corn gluten feed, as well as inter-laboratory agreement on tests for the chemical requirements of the Memorandum of Understanding of October 15, 1991 (MOU). Pending successful completion of the study and mutual agreement on testing procedures, microscopic analysis will not be used to determine the amount of corn germ meal and screenings/cleanings in corn gluten feed. The two sides agree to meet to review the situation regarding microscopic analysis by 31 December 1993.

4. Certification

The Corn Refiners Association and the Federal Grain Inspection Service are discussing certifying conformity of industry-certified wet milled corn gluten feed with the starch, fat and protein requirements of the MOU. As soon as arrangements between the Corn Refiners Association and the Federal Grain Inspection Service are finalised, the Federal Grain Inspection Service is prepared to issue certificates certifying conformity of corn gluten feed with such requirements. The wet millers will certify that their products are in conformity with the provisions above regarding screenings/cleanings (see paragraph 1 above) and steep water (see paragraph 2 above) in corn gluten feed.

Resolution of Malt Sprout Pellets Classification

1. Malt spout pellets, of the quality currently exported to the EC from the United States, will be classified under HS 2309 beginning January 1, 1993.

2. Malt sprout pellets landed prior to January 1, 1993 will be assessed a zero duty. All variable levies and bonds charged against shipments entered prior to January 1, 1993 will be refunded.

3. An Interim tariff rate quota will be established for entries of 35,000 metric tons at zero duty from January 1, 1993 through March 31, 1993. Shipments of malt sprout pellets that have been landed but not entered prior to January 1, 1993 will not be counted against the interim quota.

4. For entries from April 1, 1993 through December 31, 1993, a tariff quota will be established for 85,000 metric tons at zero duty.

5. For subsequent years an annual tariff quota will be established for 120,000 metric tons at zero duty.

THE UNITED STATES TRADE REPRESENTATIVE
Executive Office of the President
Washington, D.C. 20506

DEC 4 1992

The Honorable Frans Andriessen
Vice President of the Commission
of the European Communities
200 Rue de la Loi
1049 Brussels, Belgium

Dear Frans:

I appreciate your letter of December 2, 1992 in which you indicate your willingness to extend fully the concessions set out in the 1987 "Agreement for the Conclusion of Negotiations Between the United States and the European Community under GATT Article XXIV:6" including its annexes and understandings through the end of 1993, which I understand to include all the benefits of that agreement.

I hope that the consultations due to begin by June 30, 1993 will lead to a final and mutually satisfactory solution in good time before the end of 1993. Finally, I agree with your proposal that we follow the same approach as last year in submitting a joint notification to the GATT informing the Director General and the Contracting Parties of these developments.

These actions constitute a satisfactory temporary resolution of this matter. I hope a lasting solution will be found next year.

Sincerely,

/S/

Carla A. Hills

CHANGES TO DRAFT FINAL ACT⁽¹⁾
REQUIRED BY US / EC BLAIR HOUSE AGREEMENT⁽²⁾

Part A

Part I

Article 1 - Definition of Terms

In this Agreement, unless the context otherwise requires:

"AMS" and "Aggregate Measurement of Support" -- mean the annual leve1 of support, expressed in monetary terms, provided for an agricultural product in favor of the producers of the basic agricultural product or non-product-specific support provided in favor of agricultural producers in general, calculated in accordance with the provisions of Annex 5 to Part B of this Agreement [refer to the aggregate measurement as specified in the Schedules of domestic support commitments and related supporting material];

"Equivalent Commitment"⁽³⁾ means the annual level of support, expressed in monetary terms, provided to producers of a basic agricultural product through the application of one or more measures, the calculation of which in accordance with the AMS methodology is impracticable and so is determined in accordance with the provisions of Annex 6 or Part B of this Agreement [are as specified in the Schedules of domestic support commitments and the related supporting material];

"Total AMS" and "Total Aggregate Measurement of Support" mean the sum of all domestic support provided in favor of agricultural producers, other than support provided under programs that qualify as exempt from reduction under this Agreement, calculated as the sum of all AMS calculations for basic agricultural products, all non-product-specific AMS calculations and all equivalent commitments for agricultural products.

Part IV

Article 6 - Domestic Support Commitments

1. The domestic support reduction commitments of each Member contained in its Schedule of commitments shall apply to all of its domestic support measures in favor of agricultural producers with the exception of domestic measures which are not subject to reduction in terms of the criteria set out in Part A, Annex 2 [to this Agreement]. The commitments are expressed in terms of Total Aggregate Measurement of Support [and of equivalent commitments]. The constituent data and methods employed in the calculation of these commitments shall be incorporated into the Schedules of domestic support commitments by reference to the relevant tables of supporting material.

2. Investment subsidies which are generally available to agriculture in developing country Members and input subsidies generally available to low-income or resource poor producers in developing country Members shal1 be exempt from domestic support reduction commitments that would otherwise be applicable to such measures, as shall domestic support to producers in developing country Members to encourage diversification from growing illicit narcotic crops.

3. A Member shall be considered to be in compliance with its domestic support reduction commitments in any year [where the product-specific and non-product-specific AMS values for support, or the equivalent commitments, do] in which its domestic support in favor of agricultural producers expressed in terms of Total AMS does not exceed the corresponding commitment levels specified in the Schedule of domestic support commitments of the Member concerned.

4. As long as product-specific domestic support which would otherwise be required to be included in a Member's calculation of Total AMS and by such inclusion be subject to reduction does not exceed 5 per cent of the total value of production of a basic product [in the case of product-specific support], there shall be no requirement to include such support in the calculation of the Member's Total AMS [undertake the reduction of that support, and], similarly, as long as non-product-specific domestic support which would otherwise be required to be included in a Member's calculation of Total AMS and by such inclusion be subject which would otherwise be required to be included in a Member's calculation of Total AMS and by such inclusion be subject to reduction does not exceed 5 percent of the value of that Member's total agricultural production [in the case of a non-product-specific AMS], there shall be no requirement to include such support in the Member's calculation of Total AMS [undertake the reduction of that support]. For developing country Members, the percentage under this paragraph shall be 10 per cent.

5. (a) Direct payments under production-limiting programs shall not be subject to the commitment to reduce internal support if;

(i) payments are based on fixed area and yields; or

(ii) payments are made on 85 percent or less of the base level of production; or

(iii) livestock payments are made on a fixed number of head.

(b) The exemption from the reduction commitment for direct payments meeting the above criteria shall be reflected by the exclusion of the value of those direct payments in a Member's calculation of its current Total AMS.

Article 7 - General Disciplines on Domestic Support

1. Each member shall ensure that any domestic support measures in favor of agricultura1 producers which are not subject to reduction commitments because they qualify under the criteria set out in Part A, Annex 2 are maintained in conformity therewith [with the criteria set out in Annex 2 to this Agreement].

2. Any domestic support measure in favor of agricultural producers, including any modification to such measure, and any measure that is subsequently introduced that cannot be shown to satisfy the criteria in Part A, Annex 2 [to this Agreement] or to be exempt from reduction by reason of any other provision of this Agreement shall be included in the Member's calculation of its Total AMS [coverage of the applicable AMS or equivalent commitment. Where no applicable AMS or equivalent commitment exists the support in question shall not exceed the de minimis level set out in Article 6 (4)].

[3. The domestic subsidies listed in Annex 2 to this Agreement shall be considered as non-actionable for the purposes of countervailing duties, but not otherwise, provided that such subsidies are in conformity with the general and specific criteria relating thereto as prescribed in that Annex.]

Article 9 - Export Subsidy Reduction Commitments

2. Except as provided in paragraph 5(c) of Annex 8 to Part B of this Agreement, reduction commitments for any year of the implementation period; as specified in Schedules, represent:

(a) in the case of outlay reduction commitments, the maximum level of expenditure that may be allocated or incurred in that year in connection with the export subsidies listed in this Article; and

(b) in the case of export quantity reduction commitments, the maximum quantity of an agricultural product, or group of such products, in respect of which export subsidies listed in this Article may be granted in that year.

Article 10 - Prevention of Circumvention
of Export Competition Commitments

1. Export subsidies not listed in Article 9(1) of this Agreement shall not be applied in a manner which results in, or which threatens to lead to, circumvention of export subsidy commitments; nor shall non-commercia1 transactions be used to circumvent such commitments.

2. Members undertake to work toward the development of internationally agreed disciplines to govern the provision of [not to provide] export credits, export credit guarantees or insurance programs and, after agreement on such disciplines, to provide export credits, export credit guarantees or insurance programs only in conformance therewith [otherwise than in conformity with internationally agreed disciplines].

3. Any Member which claims that any quantity exported in excess of a reduction commitment level is not subsidized must establish that no export subsidy, whether listed in Article 9 or not, has been granted in respect of the quantity of exports in question.

4. Member donors of international food aid shall ensure:

(a) that the provision of international food aid is not tied directly or indirectly to commercial exports of agricultural products of recipient countries;

(b) that internationa1 food aid transactions, including bilateral food aid which is monetized, shall be carried out in accordance with the FAO "Principles of Surplus Disposal and Consultative Obligations" including, where appropriate, the system of Usual Marketing Requirements (UMRs);

(c) that such food aid shall be provided to the extent possible in fully grant form or on terms no less concessional that those provided for in Article IV of the Food Aid Convention 1986.

Part IV

Article 12 - Due Restraint [Serious Prejudice]

(Where reduction commitments on domestic support and export subsidies are being applied in conformity with the terms of this Agreement, the presumption will be that they do not cause serious prejudice in the sense of Article XVI:1 of the General Agreement.]

During the implementation period, notwithstanding the provisions of the GATT 1993 and the Agreement on Subsidies and Countervailing Measures ("Subsidies Agreement"):

1. Domestic support measures that conform fully to the provisions of Part A, Annex 2 shall be:

(a) non-actionable subsidies for purposes of countervailing duties;*

(b) exempt from actions based on Article XVI of the GATT 1993 and Part III of the Subsidies Agreement; and

(c) exempt from actions based on non-violation nullification or impairment of the benefits of tariff concessions accruing to another Member under Article II of the GATT 1993, in the sense of Article XXIII:l(b) of the GATT 1993.

2. Domestic support measures⁽⁴⁾ that conform fully to the provisions of Part B, paragraph 8, including direct payments that conform to the requirements of subparagraph 2 thereof, as reflected in each Member's Schedule of Commitments, shall be:

(a) exempt from the imposition of countervailing duties* unless a determination of injury or threat thereof is made in accordance with Article VI of the GATT 1993 and Part V of the Subsidies Agreement, and due restraint shall be shown in initiating any countervailing duty investigations;

(b) exempt from actions based on Article XVI:1 of the GATT 1993 or Articles 5 and 6 of the Subsidies Agreement, provided that such measures do not grant support to a specific commodity in excess of that decided during the 1992 marketing year; and

(c) exempt from actions based on non-violation nullification or impairment of the benefits of tariff concessions accruing to another Member under Article II of the GATT 1993, in the sense of Article XXIII:1(b) of the GATT 1993, provided that such measures do not grant support to a specific commodity in excess of that decided during the 1992 marketing year.

3. Export subsidies that conform fully to the provisions of Part V of Part A, as reflected in each Member's Schedule of Commitments, shall be:

(a) subject to countervailing duties* only upon a determination of injury or threat thereof based on volume, effect on prices, or consequent impact in accordance with Article VI of the GATT 1993 and Part V of the Subsidies Agreement, and due restraint shall be shown in initiating any countervailing duty investigations; and

(b) exempt from actions based on Article XVI of the GATT 1993 or Articles 3, 5 and 6 of the Subsidies Agreement.

* "Countervailing duties" are those covered by Article VI of the GATT 1993 and Part V of the Subsidies Agreement.

Article 17 - Review of the Implementation of Commitments

1. Progress in the implementation of commitments negotiated under the Uruguay Round reform programme shall be reviewed.

2. The review process shall be undertaken on the basis of notifications submitted by Members in relation to such matters and at such intervals as shall be determined, as well as on the basis of such documentation as the MTO Secretariat may be requested to prepare in order to facilitate the review process.

3. In addition to the notifications to be submitted under paragraph 2, any new domestic support measure, or modification of an existing measure, for which exemption from reduction is claimed shall be notified promptly. This notification shall contain details of the new or modified measure and its conformity with the agreed criteria as set out either in Part A, Annex 2 [of this Agreement] or in Part B, paragraph 8(b).

4. In the review process members shall give due consideration to the influence of excessive rates of inflation on the ability of any member to abide by its domestic support commitments.

5. The review process shall provide any opportunity for members to raise any matter relevant to the implementation of commitments under the reform programme as set out in this Agreement.

6. Any member may bring to the attention of the members any measure which it considers ought to have been notified by another member.

Article 18 - Consultations and Dispute Settlement

1. The provisions of Articles XXII and XXIII of the GATT 1993, as elaborated and applied by the MTO Understanding on Rules and Procedures Governing the Settlement of Disputes shall apply to consultations and the settlement of disputes under this Agreement.

[2. On the basis of the commitments undertaken in the framework of this Agreement, Members will exercise due restraint in the application of their rights under the General Agreement in relation to products included in the reform programme.]

Part B

Specific Modalities; Domestic Support

8. (a) All domestic support in favor of agricultural producers, with the exception of measures [exempted from reduction under Annex 4] meeting the criteria set out in Part A, Annex 2, shall be [reduced] subject to commitments expressed and implemented through Aggregate Measures of Support as defined in Annex 5, or, where the calculation of an AMS is not practicable, through equivalent commitments as defined in Annex 6. The base period shall be the years 1986 to 1988. Total AMS shall be calculated as the sum of the value of all Aggregate Measures of Support and equivalent commitments. The Total AMS shall be reduced during the period of implementation in equal annual installments and shall be bound, at the end of the period, at a level 20 percent below the base period level. Credit shall be allowed in respect of actions undertaken since the year 1986. (The reduction commitment shall be expressed and implemented through Aggregate Measures of Support (AMS) as defined in Annex 5, or through equivalent commitments as defined in Annex 6 where the calculation of an AMS is not practicable, and shall be implemented in equal installments.]

(b) Direct payments under production-limiting programs shall not be subject to the commitment to reduce internal support if:

(i) payments are based on fixed area and yields; or

(ii) payments are made on 85 percent or less of the base level of production; or

(iii) livestock payments are made on a fixed number of head.

The exemption from the reduction commitment for direct payments meeting the above criteria shall be reflected by the exclusion of the value of those direct payments in a Member's calculation of its current Total AMS.

9. Where any domestic support measure cannot be shown to satisfy the criteria set out either in Part A, Annex 2 or in Part B, paragraph 8(b) [in Annex 4], it shall be subject to the reduction commitment in paragraph 8(a) above.

10. As long as product-specific domestic support which would otherwise be required to be included in a Member's calculation of its Total AMS and by such inclusion be subject to reduction does not exceed 5 per cent of the total value of production of a basic product [in the case of product-specific support], there shall be no requirement to include such support in the calculation of the Member's Total AMS [undertake the reduction of that support, and], Similarly, as long as non-product-specific domestic support which would otherwise be required to be included in a Member's calculation of its Total AMS and by such inclusion be subject to reduction does not exceed 5 percent of the value of that Member's total agricultural production [in the case of sector-wide AMS], there shall be no requirement to include such support in the Member's calculation of Total AMS [undertake the reduction of that support]. For developing country Members, the percentage under this paragraph shall be 10 per cent.

Specific Modalities: Export Competition

11. The export subsidies listed in Annex 7 shall be subject to budgetary outlay and quantity commitments. Outlays and quantities shall be reduced from the year [1993] 199 to the year [1999] by 36 per cent and 21 [24] percent respectively. The base period shall be the year 1986 to the year 1990. These commitments shall be established in accordance with the modalities prescribed in Annex 8.

Annex 8 MODALITIES OF EXPORT COMPETITION COMMITMENTS

5. (a) Each Member shall, prior to the conclusion of the implementation period, reduce:

(i) its budgetary outlays for export subsidies for each agricultural product or group of products specified in Annex 7 by 36 percent of the base period level; and

(ii) the quantities of each agricultural product or group of products specified in Annex 7 benefitting from export subsidies by 21 percent of the base period level.

(b) Except as provided in subparagraph (c), in implementing the reduction commitments under subparagraph (a), each Member's budgetary outlays and quantities shall be no greater than the following percentages of the base period level:

(c) In any of the second through fifth years of the implementation period, each Member may exercise flexibility in implementing subparagraph (b) as follows. The Member's budgetary outlays and quantities for a given year may exceed those specified under subparagraph (b) by an additional 3 percent and 1.75 percent of the base period level respectively, provided that:

(i) the cumulative amount of the budgetary outlays and quantities for such product from the beginning of the implementation period through such year is not greater than 3 percent and 1.75 percent of the base period level respectively above the cumulative amount that would have resulted from the application of subparagraph (b);

(ii) the total budgetary outlay for export subsidies for such product or groups of products and the quantity of such product or groups of products benefitting from export subsidies over the entire implementation period are no greater than the totals that would have resulted from the application of subparagraph (b); and

(iii)the Member's final bound budgetary outlay and quantity commitments for each agricultural product or group of products at the conclusion of the implementation period is no greater than 64 percent and 79 percent of the base period levels, respectively.

[In the first year of the implementation period base levels shall be reduced by an amount corresponding to the reduction that would be applicable under implementation on the basis of equal installments. Thereafter commitment levels for any year of the implementation period shall be reduced by at least half that reduction applicable under implementation on the basis of equal annual installments. Commitment levels in the final year of implementation shall be established at levels that ensure that the overall reduction during the implementation period is no less than if annual commitment levels has been established on the basis of equal annual installments.]

1. All deletions from Draft Final (revised Dunkel Text) are framed in brackets; all new materials are underlined.

2. This document only incorporates changes to reflect the Blair House agreement and does not incorporate other drafting changes that may be necessary to clarify ambiguities in the Dunket Text.

3. Because the parties have agreed to make domestic support commitments on a Total AMS basis, rather than on a product-specific AMS basis, the term "equivalent commitment" appears no longer to be appropriate and should be changed to a term such as "equivalent calculation."

4. To be correct, references to domestic support measures and export subsidies for purposes of paragraphs 2(a) and 3(a) must be revised to refer to "subsidized imports that benefit from" domestic support measures and export subsidies.

Last modified: Friday, November 18, 2005