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

3. The Landing Requirement's Contribution to Data Collection

7.14 Recognizing that there is a conservation need for high quality data from the salmon and roe herring fisheries, the Panel considered that the central question was whether and to what extent the landing requirement contributed to meeting that need. The Panel did not understand the United States to dispute that a landing requirement is related to the production of higher quality data. The issue raised by the United States was whether there is any conservation reason for choosing a landing requirement applicable to 100% of the catch over alternative methods that are arguably as effective but less trade-restricting. The United States argument was not that Canada is legally required to choose a less restrictive alternative as such. Rather, it claims that having had a choice between employing a landing requirement and a less restrictive method, Canada chose the more restrictive landing requirement for reasons of trade policy rather than conservation. Canada disputed this, arguing that its choice of the landing requirement was based on the inadequacy of alternative methods for collecting data on exports. Thus, the Panel concluded that in order to assess the contribution to data collection made by the landing requirement itself, the Panel must assess the relative contribution that could be made by alternative methods.

(a) Alternatives to a Landing Requirement

7.15 The Panel considered that the first step was to identify which of the alternative data-collection methods were in fact reasonably available to Canada. The United States claimed that Canada could obtain as much high-quality data as it wants from United States sources with no major difficulty. Canada argued that a coastal state cannot be expected to make its conservation regime dependent on cooperation by a foreign state. In Canada's view, data-collection methods dependent on cooperation by the United States must, therefore be excluded from consideration.

7.16 The Panel recognized that Canada and the United States are already committed to an extensive cooperative relationship, under the Pacific Salmon Treaty, in the management of transboundary salmon fisheries, and that as a practical matter they cannot effectively manage these fisheries without such cooperation. Nevertheless, in view of the rights and obligations of a coastal state with regard to fisheries management under the law of the sea, and particularly in view of the level of friction that tends to characterize international relations in fisheries matters around the world, the Panel could not accept the contention that GATT Article XX(g) required such cooperation. The Panel agreed with Canada's position that a state could not be obliged to make its fisheries conservation and management regime dependent on cooperation with another state.

7.17 Consequently, in identifying reasonable alternatives, the Panel excluded several kinds of cooperative arrangements suggested in United States arguments. The Panel excluded arrangements depending on active cooperation by United States officials in performing Canadian-requested functions such as sampling, inspection or documentation, arrangements relying on the use of United States data as a primary source, and arrangements relying on United States enforcement of Canadian laws or enforcement of its own laws at Canada's request.

7.18 At the same time, however, the Panel also concluded that governments would not be justified in excluding from consideration any and all arrangements involving some transborder element. The issue in each case should be whether the transborder element is within the effective control of the government in question. The Panel was persuaded that other means of collecting data on exports that did not require reliance on United States cooperation were available to Canada. The Panel was not called upon to judge which of several possible alternatives would be optimal, but in its view the following elements could be considered as typical of the possibilities:

• Canada could exempt exports from the landing requirement conditional upon compliance with requirements that would serve the same or similar data-collection functions. For example:
• Vessels wishing to haul fish directly to export markets could be required to register in advance with area managers, and to give notice of intended purchase, including the buyer and the place of landing.

• Such vessels could also be required to present appropriate undertakings assuring prompt tramsmission of landing data.

• Exemption from the landing requirement could also be dependent on undertakings from the export buyers themselves -- for example, that the buyers would transmit true copies of their national landing reports (or Canadian landing reports, or both), that they would admit and cooperate with Canadian inspectors, and that they would comply with other relevant laws and regulations applicable to Canadian buyers.

• Canada could require that export vessels report before leaving the ground, giving catch data and exact destination, and make themselves available for on-board inspection of catches or cargo by Canadian officials.

• Canada could sanction violation of these undertakings (and protect itself from further violations) by refusing to allow violators to be excused from the landing requirement in the future.

• Canada would also have effective jurisdiction against vessels used for direct export, all of which must by law be of Canadian registry.

(b) The Contribution of the Landing Requirement and of the Alternatives

7.19 In the light of these alternatives, the Panel endeavoured to make some assessment of the extent to which the quality of the data yielded by a landing requirement applying to 100% of the catch would be superior to the quality of data that could be obtained by alternative methods. In order to do this the Panel considered the three principal elements of the data collection process advanced by Canada as the reasons for the landing requirement:

• The ability to perform statistically valid biological sampling;

• The ability to deter false reporting of catch data by fishermen and fish buyers; and

• The ability to obtain information needed for effective in-season management.

In addition, the Panel also considered the administrative advantages that might be claimed for the present landing requirement.

(i) Biological Sampling

7.20 Canada argued that valid biological sampling data requires that Canadian inspectors have access to 100% of the catch, and that exports must be landed in Canada in order to provide such access. Canada's position rests on the theory of random sampling which requires that all parts of the population to be sampled have an equal probability of being sampled. The United States argued that good statistical practice does not require access to 100% of the population if there is no logical reason to believe that the missing part is nonrepresentative. The United States claimed to follow this practice in its own biological sampling, stating that it did not seek access to sample salmon and roe herring exports from Alaska to Canada -- exports which represent roughly 3% and 10-17% respectively of the Southeast Alaska catches.

7.21 After considering the arguments of the Parties, including answers to supplemental questions and supporting authorities provided, the Panel concluded that Canada's insistence on the necessity of access to 100% of the catch was not supportable. It was not disputed that the theory of random sampling does accept the validity of data based on less-than-100%-access if the part withheld from access is otherwise representative of the whole. The authorities cited to the Panel also tended to support the view that judgments about representativeness can be made on the basis of logical analysis.²³ No reason was offered for believing that the fish in vessels destined for export would differ in any systematic way from the general population caught in the same fishery or in the same sampling stratum, nor was any other example cited of a biological sampling programme requiring 100% access.

7.22 The Panel recognized, however, that the risk of error cannot be excluded when part of the population is not available for sampling, and that the risk increases with the size of the missing part. The Panel agreed that at some percentage that risk would become too large to be acceptable, but deferred any attempt to quantify that percentage until it had analyzed the other data collection functions.²⁴

(ii) Deterrence of False Reporting

7.23 The Parties agreed that fishermen have several incentives to under-report catches. While sales documents governing payment for the fish create a first line of defence against such under-reporting, both Parties acknowledged that buyers and sellers can sidestep that defence if buyers are willing to commit fraud by making under-the-table payments for unrecorded fish. The Parties agreed that further enforcement is needed to deter such fraud and that the key to deterrence is a credible threat of discovery and subsequent sanctions.

7.24 Canada argued that a landing requirement produces the most credible threat for a Canadian fisherman, because even though not every vessel is inspected by a government inspector, every vessel is subject to the risk of such inspection. Canada contended that an equivalent threat would not be created for vessels permitted to go directly to the United States because the United States does not rely on spot checking by officials as a detection device, and, even if discovery does occur, Canada would be dealing in a foreign jurisdiction which creates many barriers to legal prosecution.

7.25 The Panel was not persuaded that, at least where export levels were low, allowing exports to depart without landing would create a significant difference in deterrence. Without any need to rely on enforcement in a foreign juridiction, Canada has the power to monitor unlanded exports on its own, and to sanction false reporting; Canada can require that traders seeking to be excused from a landing requirement undertake substitute arrangements for adequate data-collection; and Canada has the power to sanction violations of these undertakings by refusing to allow violators to be excused from the landing requirement in the future. Canada also has effective jurisdiction over vessels used for direct export.

7.26 The Panel was also not persuaded that there would be a meaningful decline in deterrence because of particular United States detection methods. Deterrence depends on the subjects' perceptions of the likelihood of being caught. That likelihood is provided by the investigations, prosecutions and convictions that do occur in the United States, where law enforcement maintains a visible presence.

(iii) In-Season Management

7.27 Canada informed the Panel that area managers used landing data for in-season management of fisheries of longer duration. The data is used to calculate the total catch that has taken place up to that point, so that managers can make decisions about whether to close a fishery or to make other adjustments. Canada argued that failing to obtain landing data from unlanded exports would impair this in-season management process.

7.28 The Panel was not, however, convinced that the absence of landing reports from unlanded exports would make a significant difference for in-season management at least where export volumes were low. In the Panel's view, none of the evidence supplied by Canada demonstrated that in-season managers required comprehensive data on all landings. Often, the entire catch is not landed at the time of decision, and managers extrapolate from what landing data they have, using CPUE calculations.²⁵ The Panel did not believe that where unlanded export volumes were low, the quality of these extrapolations would be affected significantly by whether the partial share of the catch being used as the base did or did not include a part of the export share as well. Even where in-season managers are able to have 100% of the catch-to-date landed in time, the Panel was still not persuaded that the quality of their management decisions will be affected by the difference between having an actual landing count of the missing exports, as opposed to a count based on hail reports and/or CPUE data applied to them. The descriptions of in-season management provided by the Parties did not suggest that in-season management decisions turn on such fine degrees of accuracy.

7.29 The Panel also considered that some of its conclusions reached earlier were equally applicable to in-season management. To the extent that deterrence against false reporting helps to ensure accurate hail reports to in-season managers, the earlier conclusion that deterrence would not be significantly reduced in the absence of the landing requirement similarly means that the reliability of hail reports should not be significantly reduced. Likewise, the earlier conclusion that reliable sampling data can be obtained without requiring access to 100% of the catch would apply to sampling for in-season management as well.

(iv) Administrative Advantages

7.30 The Panel also considered whether a landing requirement applicable to 100% of the salmon and herring catch offered other advantages over alternative means of data collection. It concluded that there were a number of administrative or regulatory factors which could well provide the basis for a preference, by fisheries officials, for adopting such a landing requirement instead of alternatives such as those indicated above. The landing requirement has the advantage of being simpler to operate than these alternative data-collection procedures. There are fewer types of behaviour to monitor, and fewer special arrangements needed. The 100% landing requirement also avoids the need to make as many contentious decisions. Finally, data collection practices based on access to 100% of the catch had become an established way of doing things for Canadian fisheries officials, at least with respect to pink and sockeye salmon and roe herring.

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

7.31 The Panel acknowledged that the administrative advantages of a 100% landing requirement would be given some weight in deciding whether to adopt such a measure. In the Panel's judgment, however, such advantages would not have enough importance to be determinative by themselves. In the Panel's view, the actual conservation benefits of the current landing requirement, in terms of data quality, would be the decisive issue.

7.32 After reviewing the three main issues of biological sampling, deterrence and in-season management, the Panel concluded that the contribution of the current landing requirement to data quality would vary according to the volumes of exports that would otherwise not be landed. If such volumes were quite small (and assuming that they were not unrepresentative of the fishery or the sampling stratum involved) then it would be difficult to find any meaningful improvement in overall data quality from what would be obtained if those exports were not required to land. Even at somewhat larger volumes the impact of the landing requirement on the overall level of data quality would depend on just how much importance that particular portion of the data had to the sampling or management functions in question, and, to the extent it was important, on the quality of data available by alternative means if these exports were not landed. On the other hand, the Panel accepted that beyond certain levels in the volumes of unlanded exports, lack of direct access to those exports could impair the integrity of sampling and management functions.

7.33 The Panel was unable to identify a specific percentage of unlanded exports at which the landing requirement would or would not make a significant difference in data quality. The Panel considered that the need for direct access to unlanded exports would vary according to the nature of the fishery in question. Fisheries which involve many stocks, and particularly those in which the relative composition of stocks varies over the duration of the fishery or in particular sub-areas, would generally require access to a rather high percentage of the total catch. Other fisheries involving relatively few stocks, such as some of the roe herring fisheries, would not require as high a percentage.

7.34 Recognizing that the choice of a particular percentage figure would be to a certain extent arbitrary, nevertheless the Panel considered that it was necessary to give some indication of the quantitative dimensions. After considering the risk of error in each of the three main elements of the data collection process relied on by Canada, the Panel concluded that the 100% landing requirement would seldom have a significant impact on overall data quality in cases where the volume of unlanded exports from a particular fishery would otherwise have been in a range of up to 10-20%.²⁶ In such circumstances, differences between the quality of data obtained under a landing requirement applying to 100% of the catch and the quality that could be obtained under reasonably available alternatives would be rather small. By themselves, such differences would not provide a very strong conservation reason for adopting the landing requirement in lieu of the available alternatives. If, on the other hand, the volumes of unlanded exports were in excess of 10-20% of the catch from a particular fishery, the Panel was of the view that requiring some or all of those exports to land could have significant conservation benefits.

4. Conclusions

7.35 As the Panel has already noted, the critical question was whether the conservation benefits and other advantages of a landing requirement applicable to 100% of the salmon and herring catch would have been considered large enough to be worth the commercial inconvenience which such a landing requirement imposes. And, as the Panel has stated, conservation benefits must be assessed in terms of both economic and non-economic values accorded to conservation. Likewise, the proper trade-neutral criterion for assessing commercial inconvenience must be whether the 100% landing requirement would have been adopted if the commercial inconvenience imposed on export buyers had been imposed on Canadian buyers.

7.36 The Panel concluded that the answer to the question whether the advantages of a 100% landing requirement outweighed its commercial inconvenience would have depended in the first instance on the volume of unlanded salmon and herring exports expected to occur in each fishery, or group of fisheries, in the absence of a landing requirement. The Panel recognized that the information available at the time the landing requirement was adopted contained little relevant data upon which to base a projection of such exports. Due to the previous export restriction, there was no data at all on past exports of roe herring or pink and sockeye salmon. Exports of the three previously unrestricted species of salmon (chinook, coho and chum) had been less than 1% of the total catch in recent years, but as Canada had suggested to the Panel, this low volume may have been due to the burden of having to separate mixed catches under the previous export restriction. There was some recent data for United States exports to Canada²⁷ but neither party considered this data probative. The difficulty of projecting unlanded exports in particular was compounded by the evidence that some part of the export trade might choose to land in Canada for economic reasons.

7.37 The Panel was thus obliged to evaluate whether, under such conditions of uncertainty, the commercial burden of the landing requirement would have been imposed on Canadian buyers for the purpose of protecting the data collection process from the risk of substantial volumes of unlanded exports. The Panel found it difficult to reach a conclusion. It recognized that it is never easy to justify imposing tangible burdens for the purpose of avoiding uncertain risks. This particular risk was difficult to measure. The United States cited a number of factors which made it likely that overall exports would be relatively small in the early years, notwithstanding other factors which could cause exports to grow in the middle to long term. On the other hand, the fact that an export restriction had been imposed in the past was some evidence that a meaningful volume of exports was considered possible.

7.38 On balance, the Panel concluded that the conservation benefits and other advantages that would have been derived from a landing requirement applicable to 100% of the salmon and herring catch would not have justified its adoption as a conservation measure. The Panel's conclusion was influenced by two primary considerations. First, while significant volumes of unlanded exports could not be ruled out for all fisheries, on the basis of the existing evidence the probability that unlanded export volumes of that size would occur in a high percentage of salmon and herring fisheries was remote, especially in the early years.²⁸ Second, the conservation objectives of the landing requirement could have been accomplished by structuring it in a more selective manner; for example, it could have exempted that proportion of the catch from a particular fishery whose direct export would not impair the integrity of the data collection process for that fishery. Accordingly, the Panel concluded that, because it is applicable to 100% of the salmon and herring catch, the present Canadian landing requirement cannot be said to be "primarily aimed at" conservation and thus cannot be considered a measure "relating to the conservation of an exhaustible natural resource" within the meaning of GATT Article XX(g).²⁹

7.39 The Panel's conclusion does not preclude Canada from imposing more selective landing requirements designed to meet specific data-collection needs. Catch information is vital to Canada's management of its salmon and herring fisheries and landing requirements can play an important role in obtaining that information. Moreover, although data-collection needs can only be determined fishery-by-fishery, the Panel's conclusion does not preclude common landing requirements for groups of fisheries with common data needs or common administrative problems. The conservation measures permitted by Article XX(g) include the administrative flexibility common to government conservation programmes generally.

7.40 In the Panel's view, one way that a landing requirement could be considered "primarily aimed at" conservation would be if provision were made to exempt from landing that proportion of the catch whose exportation without landing would not impede the data collection process. Although any such proportion would have to be determined on the basis of the actual data and management needs of each fishery, or group of related fisheries, the Panel was of the view that the 10-20% range referred to earlier could provide appropriate guidance.³⁰

To Continue with Summary Of Conclusions

²³ See J. Gulland, Manual of Methods for Fish Stock Assessment, Part 1: Fish Population Analysis in FAO Manuals in Fisheries Science, No. 4 (1969) pp.23-24; see also J. Gulland, Manual of Sampling and Statistical Methods for Fisheries Biology, Part 3: Sampling the Catch in FAO Manuals in Fisheries Science No. 3 (1966) p.14.

²⁴ Canada placed considerable emphasis on the need for stratification of sampling -- the practice of sometimes dividing the populations to be sampled into smaller sub-populations according to characteristics such as the dates fished, the gear used, and the sub-area within which the fishery took place. With certain catch populations being divided into smaller sub-populations, there would be a greater chance that unlanded exports might be concentrated in a particular sub-population, with the result that the size of the export share could rise to a point where it was too large to omit from sampling altogether. Some members of the Panel were of the view that the most reasonable manner of handling such exceptional cases would be by sending inspectors to the export destination to sample the requisite number of vessels, as Canada already does in the case of West Coast groundfish exports, rather than imposing a landing requirement on all export vessels. The majority of the Panel took the position that, however reasonable this might be, Canada could not be required to rely on being able to conduct inspection activities in a foreign state.

²⁵ CPUE (Catch Per Unit of Effort) is the average catch being made in the particular fishery, during a particular unit of time spent fishing, by that particular type of gear. The size of the total catch can be extrapolated by counting the total number of vessels of each gear type, counting their total days of effort, and multiplying by the relevant CPUE's for the each gear type.  

²⁶ Some Panel members considered that the figure should be no higher than 10%; other Panel members considered that it should be at least 20%.

²⁷ See para. 7.20 above.

²⁸ In conjunction with its comments on the Panel's initial report, Canada submitted data on the volume of certain salmon exports that had taken place in the first six months after adoption of the landing requirement. The Panel considered that this information could be relevant in establishing the need for a landing requirement in the fisheries involved, but did not believe that such partial data, which included only certain salmon fisheries on the south coast of British Columbia and which did not include any data on roe herring fisheries, would itself demonstrate a need for the 100% landing requirement at issue in this proceeding. 

²⁹ One Panel member disagreed with this conclusion and considered that the landing requirement did meet the criterion of being "primarily aimed at" conservation. Nevertheless, he agreed with the views expressed in paragraphs 7.39 and 7.40 and in the final sentence of paragraph 8.02.2.

³⁰ After receiving the initial report, both Parties submitted information about individual fisheries in which they considered the landing requirement to be clearly justified or clearly unjustified. The Panel believed its conclusions did not foreclose such claims, but the information available to it did not enable the Panel to reach any conclusion on these claims.