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FINAL REPORT OF THE PANEL UNDER CHAPTER 18 OF THE CANADA-UNITED STATES FREE TRADE AGREEMENT


Article 1807
Secretariat File No.
XXX-99-9999-99

IN THE MATTER OF:

Canada's Landing Requirement for Pacific Coast Salmon and Herring

Panel:

    Jim H. Branson

    Robert E. Hudec

    Donald M. McRae (Chair)

    Frank Stone

    Donald D. Tansley


TABLE OF CONTENTS

I. INTRODUCTION

II. BACKGROUND

III. TERMS OF REFERENCE

IV. FACTUAL ASPECTS

1. Salmon
2. Herring

V. ARGUMENTS OF THE PARTIES

1. Article XI:1
2. Article XX(g)

VI. THE ARTICLE XI:1 ISSUE

VII. THE ARTICLE XX(g) ISSUE

1. The Appropriate Legal Standard
2. The Conservation Rationale for the Landing Requirement
3. The Landing Requirement's Contribution to Data Collection

a) Alternatives to a Landing Requirement
b) The Contribution of the Landing Requirement and of the Alternatives

i) Biological Sampling
ii) Deterrence of False Reporting
iii) In-Season Management
iv) Administrative Advantages

c) Summary Assessment of the Landing Requirement's Contribution to Data Collection

4. Conclusions

VII. SUMMARY OF CONCLUSIONS

ANNEX A


I. Introduction

1.01 The Panel was established by the Canada-United States Trade Commission under Chapter 18 of the Free Trade Agreement between Canada and the United States (hereafter "FTA") in accordance with an exchange of letters between the United States Trade Representative, Carla A. Hills, and Canada's Minister for International Trade, John C. Crosbie, dated May 23 and May 29, 1989.

1.02 In their exchange of letters, the Parties agreed on the following schedule:

June 1, 1989 - panel selection completed

June 9, 1989 - U.S. files initial brief

June 23, 1989 - Canada files reply brief

July 6, 1989 - hearing

July 13, 1989 - Parties file supplemental briefs

August 4, 1989 - initial panel report completed

August 14, 1989 - Parties objections filed

September 1, 1989 - final report completed

In all other respects, it was agreed that the provisions of Article 1807 of the FTA were to apply.

1.03 On June 8, the Parties agreed that the Panel should be composed of Jim H. Branson, Robert E. Hudec, Waldo E. Johnson, Donald M. McRae (Chair) and Frank Stone. Milos Barutciski was appointed by the Chair as assistant to the Panel. The United States brief was duly filed on June 9 and the Canadian brief on June 23. The hearing was held in Ottawa from July 6 to 8. The Parties submitted their supplemental briefs on July 13 and 17. Prior to the hearing the Panel submitted written questions to the Parties and then submitted further written questions on July 10 and July 19. Replies were received from the Parties on July 25.

1.04 The Panel subsequently requested an extension of the time limits and the Parties agreed as follows:

September 5, 1989 - initial panel report completed

September 29, 1989 - final report completed

1.05 On September 5, the Panel filed its initial report with the Parties whose comments were submitted to the Panel on September 15. The participants were saddened to learn of the death of Panel member Wally Johnson on September 14. On September 21, the Parties requested the Chair to rule on whether Canada had the right to appoint a panelist to replace Dr. Johnson. The Chair ruled (Annex A) that Canada did have the right to appoint a replacement panelist and on September 28, Canada appointed Donald D. Tansley to the Panel. The Parties indicated that they wished to receive the final report by October 16. On October 10, the Chair advised the Parties, pursuant to Part V:3 of the Model Rules of Procedure for Chapter 18 Panels, that notwithstanding the appointment of a replacement panelist, the matter would not be reheard.

II. Background

2.01 Prior to April 25, 1989, pursuant to regulations under the Canadian Fisheries Act,1 the export from Canada of unprocessed herring and of unprocessed sockeye and pink salmon was prohibited. This prohibition went back as far as 1908 in respect of herring and sockeye salmon, although it had been removed for some period in the case of sockeye and introduced at different times for pink, coho and chum salmon and then removed again for coho and chum. In late 1986, the United States complained to the Council of the General Agreement on Tariffs and Trade (GATT) that this "processing in Canada" requirement violated the provisions of the GATT, and on November 4, 1987, a panel constituted under Article XXIII:2 of the GATT concluded that "the export prohibitions on certain unprocessed salmon and unprocessed herring were contrary to Article XI:1 and were justified neither by Article XI:2(b) nor by Article XX(g)."2

2.02 On March 21, 1988, Canada advised the United States that it would accept the adoption by the GATT Council of the report of the GATT Panel and would act to remove the export restrictions.3 At the same time, it was stated that the "Government of Canada believes that our conservation and management goals cannot be met unless we continue to have a landing requirement".4 The United States responded that such a requirement would seem to be "designed to have the same effect as the GATT illegal export restrictions."5

2.03 On April 25, 1989, Canada revoked its regulations prohibiting the export of unprocessed herring and unprocessed sockeye and pink salmon. At the same time, new regulations were introduced under the Fisheries Act6 requiring the landing in Canada of all roe herring, sockeye and pink salmon caught commercially in Canadian waters (species that were subject to the previous "process in Canada" rule) and the landing in Canada of all coho, chum and chinook salmon caught commercially in Canadian waters (species that were not subject to the previous "process in Canada" rule). Under these regulations, salmon and roe herring must be off-landed at a licensed "fish landing station" in British Columbia or onto a vessel or vehicle ultimately destined for such a landing station. The regulations provide for the completion of catch reports, the reporting of landings by landing station operators to the Department of Fisheries and Oceans, (DFO) and for on-site examination and biological sampling by DFO officials at landing stations.

2.04 The difference of view between the two governments on this landing requirement was not resolved through consultations and in advising the United States of the adoption of the new regulations the Canadian Minister for International Trade indicated that the matter could only be resolved in accordance with the GATT or the FTA by reference to the dispute settlement procedures of either of these agreements.7 The United States response on May 23, 1989 led to the creation of this Panel.

III. Terms Of Reference

3.01 The exchange of letters between the Parties of May 23 and 30, 1989, sets out the terms of reference for the Panel as follows:

The issue before the panel shall be whether the landing requirement is incompatible with Article 407 of the FTA and, if so, whether the requirement is a measure subject to an exception applicable under Article 1201. To resolve that issue, the panel shall consider whether the landing requirement is a measure prohibited by GATT Article XI (which FTA Article 407 incorporates in the FTA) and, if so, whether the requirement is subject to an exception under GATT Article XX (which FTA Article 1201 incorporates into the FTA).8

IV. Factual Aspects

4.01 The landing requirement which is the subject of this dispute relates to salmon and roe herring caught in the Canadian fishing zone off British Columbia.

1. Salmon

4.02 Five species of salmon inhabit North American waters on the Pacific coast: sockeye, pink, chinook, coho and chum. All five species are found in British Columbia waters where there are approximately 4,500 individual stocks. The salmon begin their life cycle in fresh water streams, rivers, lakes, artificial hatcheries and spawning channels, and then migrate to the ocean where they feed and mature. Depending on the species, salmon will spend one or more years in the ocean following which they return to their place of origin to spawn and die.

4.03 Salmon migrate considerable distances in the Pacific Ocean -- in some cases up to several thousands of miles. The migratory routes of salmon from British Columbia, Alaska and Washington overlap both within and outside the 200 mile economic zones of Canada and the United States. Salmon originating in several Canadian rivers enter the ocean in the United States, and salmon originating in each country pass through and are harvested in the waters of the other. As a result of these migration patterns, each country's fishermen regularly intercept salmon originating in the other country's waters.

4.04 Until 1985, the two countries dealt with the interception problem of Fraser River sockeye and pink salmon through a bilateral agreement, the Fraser River Convention. In 1985, that Convention was replaced by the Pacific Salmon Treaty which applies to all Pacific salmon species and stocks which are subject to interception by the other party or which affect the management of the stocks of the other party. The Treaty establishes the obligation of each Party to "conduct its fisheries and its salmon enhancement programs so as to: (a) prevent overfishing and provide for optimum production; and (b) provide for each Party to receive benefits equivalent to the production of salmon originating in its waters" (Article III:1). The Treaty also requires that the parties co-operate in management, research and enhancement in fulfilling these objectives.

4.05 Salmon in British Columbia waters are harvested by purse seines, gillnets and troll (hook and line) gear. Net fisheries (purse seines and gillnets) are generally located in inshore areas whereas troll gear is generally used further offshore. Although the species composition of catch differs as between the three main gear types, all types are capable of catching all five species of salmon.

4.06 Salmon fisheries are highly regulated in both Canada and the United States and participants must be licensed by relevant government authorities. Although there are some differences in detail, in each country government fisheries managers regulate season openings and closings, allocate areas to particular gear types and set allowable harvest levels on the basis of fishing plans developed annually.

4.07 Fishing plans are prepared in advance of each season with a view to maximizing harvest levels while conserving stocks in the long term. The pre-season plans are prepared on the basis of historical data gathered during previous seasons, including catch statistics and the results of biological sampling. Planning is complicated by the different catch rates and species composition for each gear type and area. Since salmon from many different stocks are harvested in most fisheries, the plans are generally designed to maximize harvest of abundant stocks and minimize harvest of depleted or threatened stocks.

4.08 Once a season is opened, government fisheries managers monitor catch rates and composition by gathering information from various sources. Fleet size and capacity is closely monitored for each area. Catch estimates by species, weight and number are obtained through periodic radio communications ("hails") with harvesters on the fishing grounds and tenders collecting harvests from fishing vessels. In-season landings are verified by communication with landing station operators and processors as well as on-site inspections of landings by fisheries officials. Biological sampling is carried out both on the fishing grounds and at landing sites. The information gathered from these sources is used by fisheries managers to make in-season adjustments to the fishing plan and to close or extend seasons accordingly.

4.09 After a season ends, fisheries officials update in-season catch estimates using the complete set of catch and landing reports which have by that time become fully available. They perform extensive analysis of the tags and biological samples taken during the season. This data is then used in conjunction with historical data from previous seasons to establish fishing plans for the following season.

2. Herring

4.10 Pacific herring is harvested primarily for the roe which is marketed principally in Japan. Herring spend their entire life cycle in salt water. Every spring, the herring migrate from offshore areas to spawn in near shore areas. Otherwise, they display relatively limited migratory patterns. Herring caught in Canadian waters generally remain within the Canadian two-hundred mile fishing zone and thus Canadian stocks are not intercepted by United States fishermen nor are United States stocks intercepted by Canadian fishermen. Unlike the salmon fishery, which is composed of approximately 4500 stocks, the roe herring fishery targets on relatively few stocks.

4.11 Herring fisheries are located on or near the spawning ground and are prosecuted with both purse seines and gillnets. Due to the high concentration of fish during the spawning season, herring are extremely vulnerable to overharvesting. Herring fisheries are therefore strictly regulated in both Canada and the United States.

4.12 Fishing plans are prepared in advance of each season on the basis of historical data and pre-season surveys. The plans determine what areas will be opened and estimate the allowable catch level for each area and gear type. Test fishing is conducted on the fishing grounds immediately prior to the season in order to monitor the roe-to-fish-weight ratio. The season is opened when the optimum ratios of roe to fish weight occur (at least ten per cent). Herring fisheries last a very short time - from minutes to hours for a purse seine fishery and up to several days for a gillnet fishery.

4.13 During the herring season fisheries officials monitor catch rates closely. Fleet size and capacity are determined by on-site inspection of the fishing grounds. Fishermen and tender operators provide periodic catch estimates by radio ("hails") and fisheries officials make occasional on-site inspections of fishing and tender vessels. Due to the extremely short duration of purse seine fisheries, landing data are not used to make in-season management decisions. In the case of gillnet fisheries, which can last up to several days, Canadian fisheries officials verify and use landing data, to the extent it becomes available, to make in-season management decisions.

4.14 On the basis of the information gathered during the season, fisheries officials determine when the allowable catch rates have been attained and close the fisheries accordingly. After the season is closed, hailed catch estimates are verified against landing data and coded wire tags and biological samples taken during the season are analysed. This information is used in conjunction with historical data for the purpose of preparing fishing plans for the following season.

V. Arguments Of The Parties

1. Article XI:1

5.01 The United States argued that the Canadian landing requirement is an export restriction contrary to Article XI. Although, in the United States view, "the new herring and salmon regulations are carefully worded to avoid the appearance of creating direct export prohibitions or restrictions", their "clear effect is to restrict exports".9 Indeed, the United States argued, the impact of the landing requirement is solely on exports since herring and salmon purchased by Canadian processors must of necessity be landed in Canada in any event. The United States argued that a requirement to land in Canada constitutes a restriction because it imposes additional burdens on United States buyers relating to the extra time involved in transporting the fish, extra cost involved in landing and unloading, possible dockage fees, and product deterioration resulting from off-loading and reloading. In the view of the United States, all of these factors combine to place United States processors at a competitive disadvantage in relation to their Canadian counterparts and to deny them the potential benefits from the elimination of the "process in Canada" rule.

5.02 Canada argued that the landing requirement is not a prohibition or restriction on the "exportation" or "sale for export" of herring and salmon to the United States within the meaning of Article XI. United States buyers are free to procure unprocessed salmon and herring under the same terms and conditions as Canadian buyers. Article XI, in Canada's view, forbids only border measures that prohibit or restrict trade or other measures that discriminate between domestic sales and sales for export. The landing requirement is not a border measure nor does it discriminate between domestic and export sales. Canada also argued that in practice the landing requirement will not impose additional burdens on United States processors. Canada considered United States arguments in this regard to be speculative and not based on evidence. Canada pointed to Canadian experience which, it claimed, shows that off-loading onto trucks or water tenders for re-shipment to a processing plant is very common without economic loss through delay or product deterioration from extra handling.

2. Article XX(g)

5.03 The United States argued that the Canadian landing requirement serves no useful conservation objective and hence it cannot be regarded as "primarily aimed" at the conservation of the herring and salmon stocks, as Article XX(g) interpreted by the GATT Panel on Canada - Measures Affecting Exports of Unprocessed Herring and Salmon, requires. In the United States view, the context in which the landing requirement was established and the extension of it to the previously unrestricted stocks of coho, chum and chinook, are evidence of the lack of a scientific purpose in the landing requirement. The rejection by Canada of United States proposals to provide the information to be obtained from landing by alternative less trade-restricting means is said to be a further indication that the landing requirement does not have a real conservation objective. The United States also argued that Canada's data-collection justification had been rejected by the GATT Panel and that rejection is equally applicable here, that Canada relies on data provided by the United States under the Pacific Salmon Convention and on data exchange with the United States on other fisheries, and that in any event Canada does not get and does not need access to 100% of the catch for biological sampling purposes. In these circumstances, according to the United States, the Canadian landing requirement is a disguised restriction on international trade.

5.04 Canada argued that as it is an essential component of its conservation regime for herring and salmon, the landing requirement is "primarily aimed" at the conservation of the stocks in question. The right to conserve and manage these resources is, Canada argued, a right that derives from its status as a coastal state recognized under the international law of the sea as embodied in the 1982 Convention on the Law of the Sea, and the right to require the landing of the catch is linked to conservation under that Convention. Canada argued that in fact a landing requirement provides the best information for conservation purposes in that it is inherently more accurate than "hailed" information; it allows for consistent verification and enforcement measures, and it provides access to 100% of the catch for biological sampling purposes. Canada rejected the view that it should be required to rely on the United States for the data it needs for conservation purposes, citing specific instances where such data could not be relied on, and arguing that there are practical impediments to enforcement where information is obtained or even gathered by Canadian officials from within the United States.

To Continue with The Article XI:1 Issue


1 R.S.C. 1985, c.F-14, as am.

2 Canada - Measures Affecting Exports of Unprocessed Herring and Salmon (L/6268) 20 November 1987, para.5.1.

3 Letter of Canadian Minister for International Trade, Pat Carney, to United States Trade Representative Clayton Yuetter, March 21, 1988, Canadian Submission, Annex A.

4 Ibid.

5 Letter of United States Trade Representative Clayton K. Yeutter to Canadian Minister for International Trade John C. Crosbie, dated May 2, 1988. United States Submission, Annex S.

6 Pacific Herring Fishery Regulations, amendment, SOR/89-217, Canada Gazette Part II, Vol.123, No.10, pp.2384-2385; Pacific Commercial Salmon Fishery Regulations, amendment, SOR/89/219, Canada Gazette Part II, Vol.123, No.10, pp.2390-2391.

7 Letter of Canadian Minister for International Trade, John C. Crosbie to United States Trade Representative Carla Hills, dated April 25, 1989. Supplementary Canadian Submission, Annex E.

8 GATT Article XI is headed "General Elimination of Quantitative Restrictions". Paragraph (1) provides as follows: No prohibitions or restrictions other than duties, taxes or other charges, whether made effective through quotas, import or export licences or other measures, shall be instituted or maintained by any contracting party on the importation of any product of the territory of any contracting party or on the exportation or sale for export of any product destined for the territory of any other contracting party. Article 407 of the FTA, which incorporates implicitly GATT Article XI, is headed "Import and Export Restrictions". Paragraph (1) provides: Subject to the further rights and obligations of this Agreement, the Parties affirm their respective rights and obligations under the General Agreement on Tariffs and Trade (GATT) with respect to prohibitions or restrictions on bilateral trade in goods. GATT Article XX, which is headed "General Exceptions" provides: Subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade, nothing in the Agreement shall be construed to prevent the adoption or enforcement by any contracting party of measures:...(g) relating to the conservation of exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic production or consumption;.... Article 1201 of the FTA, which is headed "General Exceptions" provides: Subject to the provisions of Articles 409 and 904, the provisions of Article XX of the General Agreement on Tariffs and Trade (GATT) are incorporated into and made part of this Part of this Agreement.

9 United States Submission, p.18.