I. Introduction

1. Japan and the United States appeal from certain issues of law and legal interpretations in the Panel Report in Japan - Measures Affecting Agricultural Products.¹ The Panel dealt with a complaint by the United States relating to the requirement imposed by Japan to test and confirm the efficacy of the quarantine treatment for each variety of certain agricultural products ("the varietal testing requirement").

2. Under the Plant Protection Law of 1950² and the Plant Protection Law Enforcement Regulation³ of the same year, Japan prohibits the importation of eight agricultural products originating from, inter alia, the United States on the ground that they are potential hosts of codling moth, a pest of quarantine significance to Japan. The prohibited products are apples, cherries, peaches (including nectarines), walnuts, apricots, pears, plums and quince. The import prohibition on these products can, however, be lifted if an exporting country proposes an alternative quarantine treatment which achieves a level of protection equivalent to the import prohibition. The exporting country bears the burden of proving that the proposed alternative treatment achieves the required level of protection. In practice, the alternative quarantine treatment proposed is fumigation with methyl bromide, or a combination of methyl bromide fumigation and cold storage. In 1987, Japan's Ministry of Agriculture, Forestry and Fisheries developed two guidelines as model test procedures for the confirmation of the efficacy of this alternative quarantine treatment: the Experimental Guideline for Lifting Import Ban - Fumigation, which outlines the testing requirement applicable to initial lifting of the import prohibition on a product, and the Experimental Guide for Cultivar Comparison Test on Insect Mortality - Fumigation (the "Experimental Guide"), which sets out the testing requirement for approval of additional varieties of that product. The latter requirement is the varietal testing requirement at issue in this dispute.⁴ The United States claimed that this varietal testing requirement was inconsistent with the obligations of Japan under the Agreement on the Application of Sanitary and Phytosanitary Measures (the "SPS Agreement").

3. The Panel Report was circulated to Members of the World Trade Organisation (the "WTO") on 27 October 1998. The Panel found that Japan had acted inconsistently with Articles 2.2, 5.6 and 7 of the SPS Agreement. In paragraph 9.1 of its Report, the Panel concluded that Japan:

In paragraph 9.3 of its Report, the Panel made the following recommendation:

4. On 24 November 1998, Japan notified the Dispute Settlement Body (the "DSB") of its decision to appeal certain issues of law covered in the Panel Report and certain 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 appeal with the Appellate Body pursuant to Rule 20 of the Working Procedures for Appellate Review (the "Working Procedures").⁵ On 4 December 1998, Japan filed an appellant's submission.⁶ The United States also filed an appellant's submission on 9 December 1998.⁷ The appellee's submissions of both participants were filed on 21 December 1998.⁸ On the same day, Brazil and the European Communities filed separate third participant's submissions.⁹

5. The oral hearing in the appeal was held on 19 January 1999.¹⁰ The participants and third participants presented oral arguments and responded to questions put to them by Members of the Appellate Body Division hearing the appeal.

II. Arguments of the Participants

A. Claims of Error by Japan - Appellant

1. Article 2.2 of the SPS Agreement

6. Japan argues that the Panel erred in its interpretation of the term "sufficient scientific evidence" in Article 2.2 of the SPS Agreement, and that, accordingly, its conclusion regarding Article 2.2 must be reversed. Specifically, Japan contends that the Panel erred in failing to interpret the term "sufficient scientific evidence" in relation to the SPS measure in question, in accordance with the rule in Article 31 of the Vienna Convention on the Law of Treaties¹¹, which stipulates that a term must be interpreted in its context.

7. It is Japan's submission that the basic rights and obligations concerning scientific evidence provided in Article 2.2 of the SPS Agreement are, in principle, substantiated in Articles 5.1 and 5.2 of the SPS Agreement. Japan sees these Articles, therefore, as the key operative provisions prescribing specific requirements of an SPS measure as it relates to scientific principles and scientific evidence of Article 2.2. According to Japan, the Panel should have dealt with the issues raised in this dispute under Articles 5.1 and 5.2 since the United States has not provided any evidence which indicates that Japan's measure is patently inconsistent with the requirement under Article 2.2.

8. It is Japan's contention that the measure at issue is an information requirement for approval procedures and that any challenge to an information requirement under Article 2.2 should take into account the unique role of information in the SPS process, and the adequate balance that Article 8 of the SPS Agreement seeks to achieve. According to Japan, an information requirement is justifiable when there is some available information suggesting some risk. The fact that a measure is an information requirement should be considered in the discussion of sufficiency.

9. Japan notes that no language in Article 2.2 suggests that the measure has to be "based on" sufficient scientific evidence. Moreover, in Japan's view, the Panel eventually discarded the requirement of a rational relationship and, instead, based its finding under Article 2.2 on an "actual causal link" between the differences in test results and the presence of varietal differences. Not only does the notion of an "actual causal link" operate as a denial of the precautionary principle, it is also a concept that has no basis in the SPS Agreement.

10. In Japan's view, the Panel failed to give due regard to the precautionary principle, which was recognised in EC Measures Concerning Meat and Meat Products (Hormones) ("European Communities - Hormones")¹² and Australia - Measures Affecting Importation of Salmon ("Australia - Salmon").¹³ Having lawfully established a prohibition on the importation of host plants of codling moth, Japan submits that it is in a position which warrants a precautionary approach and that Japan's varietal testing requirement, therefore, needs to be understood in the context of the precautionary principle, a principle which is echoed by the practice of Member States and reflected in the Codex Alimentarius¹⁴ and the FAO Guidelines for Pest Risk Analysis.¹⁵

2. Article 5.7 of the SPS Agreement

11. Japan asserts that it has fulfilled the obligation under Article 2.2 to ensure that a measure is not maintained without sufficient scientific evidence, but that even if the Panel's contrary finding is to be upheld, the measure maintained by Japan is, in any case, consistent with Article 5.7 of the SPS Agreement. Japan disagrees with the Panel's interpretation according to which Japan has to fulfil the requirements of both the first and second sentences of Article 5.7. According to Japan, the phrase "except as provided for in paragraph 7 of Article 5" in Article 2.2, should be interpreted to refer to the first sentence of Article 5.7, so that a Member should be allowed to claim exemption from the obligation in Article 2.2 when it fulfils the requirements of the first sentence. Japan further asserts that the varietal testing requirement is, in any event, maintained in accordance with the requirements of both the first and second sentences of Article 5.7.

12. With regard to the requirements of the first sentence, Japan rejects the contention of the United States that insufficient scientific evidence within the first sentence of Article 5.7 refers to a situation in which the amount of evidence is insufficient to perform a risk assessment. Japan argues that if this contention is accepted, the concept of "sufficiency" in Article 2.2, and that in Article 5.7, must be interpreted to have different meanings, which, according to Japan, cannot be the case.

13. With regard to the requirement of the second sentence of Article 5.7, "to seek to obtain additional information", Japan contends that this requirement is met by accumulating information through the experience of successful importation of varieties. In Japan's view, the collection of data through experience meets the express text of the requirement. The second sentence of Article 5.7 obligates Members to "seek" to obtain the information, but does not require actual results.

14. With regard to the requirement of the second sentence, "to review" the provisional SPS measure "within a reasonable period of time", Japan argues that reasonableness of a time-period should be judged according to the measure in question, and the time needed for the collection of information. The "reasonable period of time" should allow the time needed for the accumulation of knowledge through experience. Japan also submits that as the obligation regarding sufficient scientific evidence was first created by the SPS Agreement, the reasonable period of time should, therefore, start counting as of January 1995, the date when the SPS Agreement entered into force.

3. Article 7 and Paragraph 1 of Annex B, of the SPS Agreement

15. Japan contends that the "regulations" referred to in the first paragraph of Annex B are limited to legally enforceable instruments and, therefore, exclude the guidelines for varietal testing. Japan notes that the footnote to the first paragraph of Annex B defining the concept of "regulation" makes reference to laws, decrees or ordinances, all of which are considered to be legally enforceable. Japan submits further that the precedents cited by the Panel in support of its arguments, and in particular the Panel Reports in Japan - Trade in Semi-conductors¹⁶ and Japan - Measures Affecting Consumer Photographic Film and Paper¹⁷, are inapposite since they do not concern a publication obligation as set out in Article 7 of the SPS Agreement.

4. Burden of Proof

16. Japan contends that the conclusion reached by the Panel under Article 5.6 of the SPS Agreement, namely, that the determination of sorption levels is an alternative measure within the meaning of Article 5.6, is based on a factual finding which was neither argued nor proven by the party which bore the burden of proof. While the United States proposed "testing by product" as their only alternative measure within the meaning of Article 5.6, the Panel went on to find facts that the United States did not even allege to exist. It is Japan's submission that this finding unjustly exempts the United States from discharging the burden of proof. According to Japan, the Panel's finding is inconsistent with the DSU because it is contrary to the principle of burden of proof established in United States - Measure Affecting Imports of Woven Wool Shirts and Blouses from India ("United States - Shirts and Blouses").¹⁸

17. Japan submits that Articles 11 and 13 of the DSU should not be read to authorise panels to establish facts neither contained in the argument of, nor proven by, the parties to the dispute. In Japan's view, Articles 11 and 13 provide for a very conventional role of a judicial organ. If a panel were free to find material facts despite the absence of any argument or proof by the parties, the burden of proof rule would be deprived of any significance. Japan also argues that in a highly technical case, aggressive fact-finding by a non-expert panel can easily harm an objective assessment of the facts.

18. Japan argues further that if the Panel is allowed to find facts neither argued nor proven by the complainant, the Panel should be obligated in turn to find facts of rebuttal neither argued nor proven by the complainant. Japan, in its written submission, contends that it was not given an opportunity to express its position on whether the determination of sorption levels was a reasonably available measure and significantly less restrictive to trade than the current varietal testing requirement employed by Japan. At the oral hearing, however, Japan said that while it was able to make some comments after having seen the Panel's interim report, it was given very limited time to make comments on the alternative concrete suggestions.

To continue with Article 11 of the DSU

¹WT/DS76/R, 27 October 1998.

²Law No. 151 of 1950, enacted 4 May 1950, most recently amended in 1996.

³Ordinance No. 73 of the Ministry of Agriculture, Forestry and Fisheries, enacted 30 June 1950.

⁴The relevant factual aspects of this dispute are set out in greater detail in the Panel Report in paras. 2.1-2.33, as well as in paras. 6.1-6.119 and 10.1-10.300.

⁵WT/DS76/5.

⁶Pursuant to Rule 21(1) of the Working Procedures.

⁷Pursuant to Rule 23(1) of the Working Procedures.

⁸Pursuant to Rule 22(1) and Rule 23(3) of the Working Procedures.

⁹Pursuant to Rule 24 of the Working Procedures.

¹⁰Pursuant to Rule 27 of the Working Procedures.

¹¹Done at Vienna, 23 May 1969, 1155 U.N.T.S. 331; 8 International Legal Materials 679.

¹²Adopted 13 February 1998, WT/DS26/AB/R, WT/DS48/AB/R.

¹³Adopted 6 November 1998, WT/DS18/AB/R.

¹⁴General Principles for the Use of Food Additives, Codex Alimentarius, Vol. A1, 1995.

¹⁵International Standards for Phytosanitary Measures Part I - Import Regulations, Guidelines for Pest Risk Analysis, Food and Agriculture Organisation Secretariat, 1996.

¹⁶Adopted 4 May 1988, BISD 35S/116.

¹⁷Adopted 22 April 1998, WT/DS44/R.

¹⁸Adopted 23 May 1997, WT/DS33/AB/R.