5. Article 11 of the DSU

19. Japan argues that the Panel's finding under Article 2.2 disregarded or distorted the evidence before it, and thus violates Article 11 of the DSU. It is Japan's contention that there was lack of proper examination of evidence by the Panel, that the Panel cited the experts' opinions in an arbitrary manner and that its evaluation of evidence was contradictory. Japan submits that this is sufficient to reverse the findings of the Panel as it indicates lack of an objective assessment of the facts, as required by Article 11 of the DSU.

B. Arguments of the United States - Appellee

1. Article 2.2 of the SPS Agreement

20. The United States argues that the Panel correctly found that Japan's varietal testing requirement is maintained without sufficient scientific evidence because there was no "objective and rational relationship" between the SPS measure and the scientific evidence as required by Article 2.2 of the SPS Agreement. The United States asserts that Japan's criticism of the Panel's finding ignores the Appellate Body's stricture in European Communities - Hormones¹⁹ that Articles 2.2 and 5.1 of the SPS Agreement should constantly be read together. According to the United States, the Panel did not err in relying on Appellate Body analysis under Article 5.1 when interpreting the obligation not to maintain an SPS measure without sufficient scientific evidence. In any event, the "objective or rational relationship" standard promulgated by the Panel represents no more than a minimal relevancy requirement.

21. With respect to the precautionary principle, the United States argues that Japan overstates the Appellate Body's conclusions in European Communities - Hormones²⁰, and notes that in that case, the Appellate Body cautioned against using the precautionary principle as a ground for justifying SPS measures that are otherwise inconsistent with the obligations of Members set out in particular provisions of the SPS Agreement. The United States notes that even if scientific evidence is insufficient under Article 2.2, a Member may nevertheless adopt a provisional measure if the conditions of Article 5.7 of the SPS Agreement have been met.

22. The United States submits that Japan can only speculate that there may be varietal differences which may affect treatment efficacy. Such speculation gives rise to no more than theoretical uncertainties, and Japan may not justify its measure on this basis.

23. With regard to the relationship between Articles 2.2 and 5.1, the United States argues that while Article 5.1 may help to interpret Article 2.2, nothing in Article 5.1 supports Japan's conclusion that "the direct application of Article 2.2 should be limited to situations patently inconsistent with the requirement of 'sufficiency' ". The United States observes further that Article 5.1 does not itself specify the quantum of scientific evidence required in a risk assessment. Instead, this requirement is found in Article 2.2.

24. The United States disagrees with Japan that its varietal testing requirement is an "information requirement" under "approval procedures" within the meaning of paragraph 1(c) of Annex C to the SPS Agreement. The United States contends that the varietal testing requirement does not seek to obtain relevant information, since it is not designed to provide information relevant to the question whether there are significant sorption differences among varieties.

2. Article 5.7 of the SPS Agreement

25. To Japan's assertion that its varietal testing requirement is consistent with Article 5.7 of the SPS Agreement, the United States counters that Japan's varietal testing requirement does not meet the requirements of that provision. The United States contends that both sentences of Article 5.7 must be satisfied to qualify for the exemption from Article 2.2 of the SPS Agreement. There is, therefore, no basis, according to the United States, for Japan's claim that it may qualify for an exemption from its obligation under Article 2.2 when it meets the requirements of the first sentence of Article 5.7 alone. The reference in Article 2.2 to Article 5.7 is not qualified or limited to only the first sentence of Article 5.7. The second sentence of Article 5.7 limits the ability of Members to maintain provisional measures indefinitely. Without this limitation, Article 2.2 would be drained of content.

26. The United States submits that the information sought and obtained by Japan was not relevant to proving Japan's speculation that varietal sorption differences may exist. In the opinion of the United States, while Article 5.7 may be silent as to specific information collection procedures, it does specifically require Japan to seek the information necessary for a more objective assessment of risk. The obligation to review the measure within a reasonable period of time should not be examined in isolation from the issue of whether a Member is seeking to collect additional information. Japan has not sought to obtain information directly relevant to such a review, and has thereby precluded itself from being in a position to review the varietal testing requirement.

27. According to the United States, Japan is incorrect in claiming that the references to sufficiency in Articles 2.2 and 5.7 must be coextensive. The reference to sufficiency in Article 5.7 relates to the sufficiency of evidence to conduct a risk assessment. At the time the provisional measure is adopted, the information necessary for an objective assessment of risk is lacking. If there was sufficient information to conduct a risk assessment and that assessment indicated that a measure was not justified, a Member that was unable to adopt a measure under Article 5.1 of the SPS Agreement should not then be free to adopt a measure "provisionally" under Article 5.7. Otherwise, the obligation in Article 5.1 would be rendered meaningless.

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

28. The United States argues that the Panel correctly noted that the definition of sanitary and phytosanitary regulations does not provide a requirement that such measures be legally enforceable. It is the United States' submission that Japan's appeal from the Panel's finding under Article 7 of the SPS Agreement rests on an unfounded and unexplained assertion that only prior panel interpretations of Article X of the GATT are relevant to this dispute. Furthermore, the United States asserts that the varietal testing requirement is mandatory, and from the exporter's perspective, this is no different from a measure which is "legally enforceable".

4. Burden of Proof

29. With regard to the issue of alternative measures under Article 5.6 of the SPS Agreement, the United States notes that it emphasised "testing by product" in its Article 5.6 arguments because this alternative meets the requirements of Article 5.6, and because there is no scientific evidence to support even limited sorption testing. This does not change the fact that the claims and proof presented by the United States in this case supported a prima facie case under Article 5.6 with respect to sorption testing. It is the United States' submission that the Panel did not independently embark upon the exploration of factual areas not already addressed, either directly or indirectly, by the United States, nor did they consider legal arguments not specifically advanced by the United States.

30. The United States submits that Japan has not, and cannot, identify any provision in the DSU that supports its contention that panels should be barred from either exploring the facts presented by the parties or reaching a factual finding that is distinct from one advanced by one of the parties should the factual evidence before a panel so justify. In the opinion of the United States, Article 11 of the DSU clearly authorises panels to seek clarification of factual and legal arguments from the parties and to seek the facts necessary to permit an "objective assessment of the matter before it ...". Were this not the case, Article 13 of the DSU would not state that "[e]ach panel shall have the right to seek information and technical advice from any individual or body which it deems appropriate." In the United States' view, therefore, Japan argues for a limitation on panel fact-finding that is not justified by the provisions of the DSU.

31. With respect to Japan's contention that it was not given an opportunity to express its position concerning the alternative measure, the United States argues that Japan had more than adequate opportunities to contest the facts found by the Panel on the basis of the statements of the experts, but chose not to do so.

5. Article 11 of the DSU

32. The United States submits that a finding of violation of Article 11 of the DSU requires a showing that the Panel demonstrated "deliberate disregard", "refused to consider", "wilfully distort[ed]" or "misrepresent[ed]" the evidence before it. According to the United States, Japan has failed to meet this high standard.

C. Claims of Error by the United States - Appellant

1. Article 5.7 of the SPS Agreement

33. The United States argues that should the Appellate Body reverse the Panel's finding on Article 5.7 of the SPS Agreement, it should still come to the conclusion that Japan failed to meet the requirements of Article 5.7 because: the relevant scientific information is, in fact, sufficient; the varietal testing requirement has not been adopted on the basis of available pertinent information; and the varietal testing requirement is not "provisional".

34. It is the United States' contention that for a measure to be imposed on a provisional basis, there must be an insufficient amount of relevant scientific evidence to be able to perform a risk assessment. With regard to the question of quarantine treatment efficacy, and the need for varietal testing, the United States believes that there is a sufficient amount of evidence, so that this case does not present a situation where there is insufficient relevant scientific evidence within the meaning of Article 5.7 of the SPS Agreement. The United States maintains that the varietal testing requirement is anything but provisional. The United States asserts that while Japan's obligation to fulfill the requirements of Article 5.7 may only date from 1 January 1995, this does not change the fact that the measure has been in place for at least 30 years.

2. Article 5.6 of the SPS Agreement

35. The United States submits that the Panel erred in law in failing to find that "testing by product" does not achieve Japan's appropriate level of protection. According to the United States, the Panel adopted a "no hypothetical risk" standard, a standard which erects an insurmountable hurdle for parties seeking to demonstrate that an alternative measure achieves a Member's appropriate level of protection, and a standard which was rejected by the Appellate Body in European Communities - Hormones.²¹ The United States believes, therefore, that the Appellate Body should complete the analysis based on the correct standard and conclude that "testing by product" is an alternative measure within the meaning of Article 5.6 of the SPS Agreement.

36. The United States requests that the Appellate Body modify the Panel's finding under Article 5.6 to clarify that this finding is a finding in the alternative, applicable only if the Appellate Body reverses the Panel's finding under Article 2.2 of the SPS Agreement. The United States believes that a clarification of the relationship between the Panel's findings under Articles 2.2 and 5.6 is necessary in order to avoid confusion in the implementation process and to secure a positive solution to the dispute. According to the United States, the alternative measure identified by the Panel, i.e., "determination of sorption levels", is a form of varietal testing and there is insufficient evidence to maintain any varietal testing. The United States is concerned that the Panel's Article 5.6 finding could lead Japan to conclude that it may adopt the "determination of sorption levels" option even though this option is inconsistent with Article 2.2.

3. Findings on Apricots, Pears, Plums and Quince

37. With regard to apricots, pears, plums and quince, the United States argues that the Panel erred in failing to extend its findings under Articles 2.2 and 5.6 of the SPS Agreement to these four products. According to the United States, the Panel found that the United States failed to establish a prima facie case of inconsistency with Articles 2.2 and 5.6 with regard to these products, on the basis of an absence in the record of information or studies specifically relating to them. However, no such information or studies currently exist.

38. The United States submits that the Panel's finding with respect to apricots, pears, plums and quince is based on contradictory logic and a legally incorrect interpretation of the prima facie case required of the United States. According to the United States, the contradiction in the Panel's reasoning is apparent on the face of its decision. The Panel found that because there was insufficient evidence of the existence or relevance of varietal differences, it could not find that the evidence was insufficient. Furthermore, the United States argues that if the Panel's interpretation is to be upheld, complaining parties would be required to prove a negative based on affirmative evidence, namely, to prove that there is no scientific evidence which supports a measure. This interpretation places an impossible burden on complaining parties, rendering the obligation under Article 2.2 unenforceable. It also requires complaining parties to prove the absence of hypothetical risks, an approach which the Appellate Body has already rejected.

39. The United States argues that it met the burden of proof for all products, since it established that Japan had failed to provide any scientific evidence to support its measure. The Panel appears to have required the United States to provide evidence for each product, thereby specifically disproving Japan's speculation that variety is significant.

40. According to the United States, there is nothing in the Panel's analysis of Article 5.6 of the SPS Agreement which limits its applicability to any set of products within the Panel's terms of reference. The Panel, therefore, erred in limiting the scope of its Article 5.6 finding because there were no studies on the record specifically relating to apricots, pears, plums and quince. The United States submits that the absence of such studies was irrelevant to the Panel's analysis under Article 5.6.

4. Article 5.1 of the SPS Agreement

41. It is the United States' submission that if the Appellate Body does not extend the Panel's finding to apricots, pears, plums and quince, or if the Appellate Body reverses the Panel's finding under Article 2.2 in response to Japan's appeal, it should complete the legal analysis under Article 5.1 of the SPS Agreement and find that the varietal testing requirement violates that provision. The absence of evidence should have led the Panel to find that the varietal testing requirement is not based on a risk assessment in accordance with Article 5.1, and the Appellate Body should find so now.

42. In the view of the United States, it is not sufficient that a risk assessment conclude that there is a possibility of entry. A proper risk assessment must evaluate the likelihood, i.e., the probability of entry. In the absence of scientific evidence relating to apricots, pears, plums and quince, any assessment can go no further than conclude that a hypothetical possibility of such a risk exists. According to the United States, Japan's risk assessment is completely silent as to the risk at issue in this case, namely, the risk of entry, establishment or spread of codling moth due to varietal differences which may affect quarantine treatment efficacy.

43. It is the United States' submission that a risk assessment must evaluate the likelihood of entry, establishment or spread of a pest "according to the SPS measures which might be applied". Japan's risk assessment should have, but did not, discuss the need for, and effectiveness of, varietal testing in reducing risks associated with the entry, establishment or spread of codling moth. Nor did it evaluate or compare the effectiveness of other measures such as product-based testing or integrated pest risk management. Furthermore, the United States asserts that, contrary to what Japan claims, Japan's risk assessment was not conducted in accordance with the FAO Guidelines for Pest Risk Analysis.

44. According to the United States, the above reasoning is applicable to all products; neither Japan's purported risk assessment nor the fact that it fails to address risks associated with varietal differences relates to any specific products.

5. Article 8 and Paragraph 1(c) of Annex C, of the SPS Agreement

45. In the event that the Appellate Body accepts Japan's argument that the varietal testing requirement is an information requirement within the meaning of paragraph 1(c) of Annex C of the SPS Agreement, and finds it consistent with Article 2.2, the United States argues that the Appellate Body should nevertheless find that the measure is inconsistent with Article 8 and paragraph 1(c) of Annex C, which requires Members to limit information requirements to "what is necessary for appropriate control, inspection and approval procedures". The United States disputes that Japan's varietal testing requirement is consistent with this obligation as it is not limited to what is necessary.

D. Arguments of Japan - Appellee

1. Article 5.7 of the SPS Agreement

46. With regard to Article 5.7 of the SPS Agreement, Japan argues that none of the arguments advanced by the United States counter any of the arguments advanced by Japan in its appellant's submission. Japan notes that while the United States attempts to define sufficiency in Article 5.7 to mean an insufficient amount of relevant scientific evidence to be able to perform a risk assessment, the concept of sufficiency should be interpreted to be common in both Article 2.2 and Article 5.7. Japan also notes that the Panel itself acknowledged that there is some scientific evidence to satisfy the requirement of the first sentence of Article 5.7.

2. Article 5.6 of the SPS Agreement

47. Japan argues that the United States' claim with respect to the alternative measure is a factual claim that is not subject to appellate review, as it deals exclusively with the evaluation of evidence by the Panel.

48. According to Japan, the United States makes nine arguments which are mainly an attempt to question Japan's appropriate level of protection, but fails, as a matter of factual proof, to establish a case of inconsistency with Article 5.6 of the SPS Agreement. The level of protection by itself cannot be inconsistent with the SPS Agreement in the absence of discrimination or a disguised restriction on international trade.

49. Japan also disputes the United States' claim that the finding under Article 5.6 would necessarily be alternative to the finding under Article 2.2. According to Japan, the United States attempts to equate "appropriate level of protection" which the importing Member may establish with "scientific justification". Japan submits that "sufficiency" of scientific evidence within the meaning of Article 2.2 must be ascertained in relation to the measure in question, which implies that the same scientific evidence may be sufficient for a certain purpose, but not for another. According to Japan, the finding of the Panel on Article 2.2 is limited to the varietal testing requirement as described in paragraphs 2.23 and 2.24 of the Panel Report. There can be other varietal measures which the Panel would find consistent with Article 2.2. Japan asserts, therefore, that the Panel's findings under Article 2.2 and those under Article 5.6 are not mutually inconsistent.

To continue with Findings on Apricots, Pears, Plums and Quince

¹⁹European Communities - Hormones, supra, footnote 12.

²⁰Ibid.

²¹European Communities - Hormones, supra, footnote 12.