A. Article 2.2 (Cont.)

We also stated:

80. Finally, it is clear that Article 5.7 of the SPS Agreement, to which Article 2.2 explicitly refers, is part of the context of the latter provision and should be considered in the interpretation of the obligation not to maintain an SPS measure without sufficient scientific evidence. Article 5.7 allows Members to adopt provisional SPS measures "[i]n cases where relevant scientific evidence is insufficient" and certain other requirements are fulfilled.³³ Article 5.7 operates as a qualified exemption from the obligation under Article 2.2 not to maintain SPS measures without sufficient scientific evidence. An overly broad and flexible interpretation of that obligation would render Article 5.7 meaningless.

81. We note Japan's argument that the requirement in Article 2.2 not to maintain an SPS measure without sufficient scientific evidence should be interpreted in light of the precautionary principle. In our Report in European Communities - Hormones³⁴, we stated that the precautionary principle finds reflection in the preamble, Article 3.3 and Article 5.7 of the SPS Agreement and that this principle:

82. We do not agree with Japan's proposition that direct application of Article 2.2 of the SPS Agreement should be limited to situations in which the scientific evidence is "patently" insufficient, and that the issue raised in this dispute should have been dealt with under Article 5.1 of the SPS Agreement. There is nothing in the text of either Articles 2.2 or 5.1, or any other provision of the SPS Agreement, that requires or sanctions such limitation of the scope of Article 2.2. On the contrary, Article 2.2 sets out, as the title of Article 2 indicates, "Basic Rights and Obligations". In our Report in European Communities - Hormones, we agreed with a statement by the panel in that case that Article 5.1 may be viewed as a specific application of the basic obligations contained in Article 2.2.³⁵ This statement can not possibly be interpreted as support for limiting the scope of Article 2.2 "in favour" of Article 5.1. Furthermore, we note that we said the following in our Report in European Communities - Hormones:

83. We also do not agree with Japan's contention that the Panel "in the end" applied a standard different from its "rational relationship" standard, i.e., the "actual causal link" standard. We understand the Panel to refer, in paragraph 8.42 of its Report, to the absence of an actual causal link between test differences in CxT and LD50 values and varietal differences as an illustration or a strong indication of the absence of a rational relationship between the SPS measure and the scientific evidence.

84. In the light of the above considerations based on the text and context of Article 2.2 of the SPS Agreement, we agree with the Panel that the obligation in Article 2.2 that an SPS measure not be maintained without sufficient scientific evidence requires that there be a rational or objective relationship between the SPS measure and the scientific evidence.³⁷ Whether there is a rational relationship between an SPS measure and the scientific evidence is to be determined on a case-by-case basis and will depend upon the particular circumstances of the case, including the characteristics of the measure at issue and the quality and quantity of the scientific evidence.

85. We, therefore, reject Japan's appeal on this issue and uphold the Panel's finding in paragraph 8.43 of the Panel Report that the varietal testing requirement as it applies to apples, cherries, nectarines and walnuts is maintained without sufficient scientific evidence within the meaning of Article 2.2 of the SPS Agreement.

B. Article 5.7

86. As already discussed above, Article 2.2 of the SPS Agreement stipulates that Members shall not maintain SPS measures without sufficient scientific evidence "except as provided for in paragraph 7 of Article 5." In support of its varietal testing requirement, Japan invoked Article 5.7 before the Panel.

Article 5.7 of the SPS Agreement reads as follows:

87. The Panel found that Japan had not fulfilled the requirements contained in the second sentence of Article 5.7. It did not examine whether Japan's varietal testing requirement met the requirements of the first sentence of Article 5.7. In this connection, the Panel stated:

88. Japan appeals the Panel's finding under Article 5.7. According to Japan, the Panel erred in its application of Article 5.7 and in its finding that the requirements of the second sentence of Article 5.7 were not fulfilled.

89. Article 5.7 of the SPS Agreement sets out four requirements which must be met in order to adopt and maintain a provisional SPS measure. Pursuant to the first sentence of Article 5.7, a Member may provisionally adopt an SPS measure if this measure is:

Pursuant to the second sentence of Article 5.7, such a provisional measure may not be maintained unless the Member which adopted the measure:

These four requirements are clearly cumulative in nature and are equally important for the purpose of determining consistency with this provision. Whenever one of these four requirements is not met, the measure at issue is inconsistent with Article 5.7.

90. Japan's proposition that the wording "except as provided for in paragraph 7 of Article 5" in Article 2.2 refers only to the first sentence of Article 5.7, and that a Member should, therefore, be allowed to claim exemption from the obligation under Article 2.2 when it fulfils the requirements of the first sentence, is without basis in the text of either Article 2.2 or Article 5.7. On the contrary, Article 2.2 refers to Article 5.7 as a whole and Article 5.7 links the first and second sentence with the words "[i]n such circumstances" (emphasis added).

91. We, therefore, conclude that the Panel did not err in its application of Article 5.7 by first examining whether the varietal testing requirement meets the requirements of the second sentence of Article 5.7. Having established that the requirements of the second sentence of Article 5.7 are not met, there was no need for the Panel to examine the requirements of the first sentence.³⁹

92. As to the question whether the Panel erred in finding that Japan has not acted consistently with the requirements of the second sentence of Article 5.7, we note that the first part of the second sentence stipulates that the Member adopting a provisional SPS measure "shall seek to obtain the additional information necessary for a more objective assessment of risk". Neither Article 5.7 nor any other provision of the SPS Agreement sets out explicit prerequisites regarding the additional information to be collected or a specific collection procedure. Furthermore, Article 5.7 does not specify what actual results must be achieved; the obligation is to "seek to obtain" additional information. However, Article 5.7 states that the additional information is to be sought in order to allow the Member to conduct "a more objective assessment of risk". Therefore, the information sought must be germane to conducting such a risk assessment, i.e., the evaluation of the likelihood of entry, establishment or spread of, in casu, a pest, according to the SPS measures which might be applied. We note that the Panel found that the information collected by Japan does not "examine the appropriateness" of the SPS measure at issue and does not address the core issue as to whether "varietal characteristics cause a divergency in quarantine efficacy".⁴⁰ In the light of this finding, we agree with the Panel that Japan did not seek to obtain the additional information necessary for a more objective risk assessment.

93. The second part of the second sentence of Article 5.7 stipulates that the Member adopting a provisional SPS measure shall "review the ... measure accordingly within a reasonable period of time." In our view, what constitutes a "reasonable period of time" has to be established on a case-by-case basis and depends on the specific circumstances of each case, including the difficulty of obtaining the additional information necessary for the review and the characteristics of the provisional SPS measure. In the present case, the Panel found that collecting the necessary additional information would be relatively easy.⁴¹ Although the obligation "to review" the varietal testing requirement has only been in existence since 1 January 1995, we agree with the Panel that Japan has not reviewed its varietal testing requirement "within a reasonable period of time".⁴²

94. We, therefore, uphold the Panel's finding that even if the varietal testing requirement were considered to be a provisional measure adopted in accordance with the first sentence of Article 5.7, Japan has not fulfilled the requirements contained in the second sentence of Article 5.7.

C. Article 5.6

95. Article 5.6 of the SPS Agreement prohibits SPS measures that are more trade-restrictive than required to achieve a Member's appropriate level of protection. According to the footnote to Article 5.6, a measure is considered more trade-restrictive than required if there is another SPS measure which:

As we have stated in our Report in Australia - Salmon, these three elements are cumulative in nature.⁴⁴

96. The United States argued before the Panel that the "testing by product" of the efficacy of the quarantine treatment is such an alternative measure within the meaning of Article 5.6. The Panel agreed with the United States that "testing by product" is a measure which is reasonably available, taking into account technical and economic feasibility.⁴⁵ It also agreed that "testing by product" is significantly less restrictive to trade than the varietal testing requirement.⁴⁶ On the remaining element under Article 5.6, the Panel concluded, however, that:

97. The United States appeals this finding. According to the United States, the Panel erred in law by failing to find that "testing by product" achieves Japan's appropriate level of protection. The United States asserts that in concluding that the statement by Dr. Ducom, one of the experts advising the Panel⁴⁸, is sufficient to preclude a finding that "testing by product" achieves Japan's appropriate level of protection, the Panel effectively adopted a "no hypothetical risk" standard.⁴⁹ According to the United States, we rejected such a standard in our Report in European Communities - Hormones. Furthermore, the United States contends that a "no hypothetical risk" standard erects an insurmountable hurdle for parties seeking to demonstrate that an alternative measure achieves a Member's appropriate level of protection.⁵⁰

98. Contrary to what the United States asserts, the Panel did not base its conclusion with regard to "testing by product" under Article 5.6 exclusively on Dr. Ducom's statement. The Panel explicitly stated, in paragraph 8.84 of the Panel Report⁵¹, that it carefully examined all the evidence before it in light of the opinions received from its experts and that it subsequently came to the conclusion that it was not convinced that there was sufficient evidence to find that "testing by product" would achieve Japan's appropriate level of protection. It appears to us that the United States' appeal in essence challenges the Panel's consideration and weighing of the evidence before it. As we stated in our Report in Australia - Salmon, a panel's consideration and weighing of the evidence before it relates to its assessment of the facts and, therefore, falls outside the scope of appellate review under Article 17.6 of the DSU.⁵²

99. Furthermore, we fail to understand how the Panel would have "effectively" adopted a "no hypothetical risk" standard by concluding that Dr. Ducom's statement⁵³ is sufficient to preclude a finding that "testing by product" does not achieve Japan's appropriate level of protection.

100. We, therefore, reject the United States' appeal from the Panel's finding under Article 5.6 with regard to "testing by product".

101. Apart from appealing the Panel's finding under Article 5.6 with regard to "testing by product", the United States also requests a modification of the Panel's finding under Article 5.6 with regard to the "determination of sorption levels" in order to clarify that this finding is a finding in the alternative, relevant only if the Appellate Body were to reverse the Panel's finding under Article 2.2. In paragraph 131 of this Report, however, we reverse the Panel's finding under Article 5.6 with regard to the "determination of sorption levels". We, therefore, see no further need to address the alternative argument raised here by the United States concerning the relationship between the Panel's finding of inconsistency under Article 2.2 and its finding of inconsistency under Article 5.6.

D. Article 7 and Paragraph 1 of Annex B

102. Article 7 of the SPS Agreement, that is captioned "Transparency", reads:

Paragraph 1 of Annex B of the SPS Agreement stipulates:

103. In paragraph 8.111 of the Panel Report, the Panel found:

In paragraph 8.116 of the Panel Report, the Panel subsequently concluded that:

104. Japan appeals this finding. According to Japan, the "regulations" referred to in paragraph 1 of Annex B are limited to legally enforceable instruments. Japan contends that the varietal testing requirement, as set out in the Experimental Guide⁵⁴, is not a legally enforceable instrument and does, therefore, not fall within the scope of application of the publication requirement of paragraph 1 of Annex B.

105. We consider that the list of instruments contained in the footnote to paragraph 1 of Annex B is, as is indicated by the words "such as", not exhaustive in nature. The scope of application of the publication requirement is not limited to "laws, decrees or ordinances", but also includes, in our opinion, other instruments which are applicable generally and are similar in character to the instruments explicitly referred to in the illustrative list of the footnote to paragraph 1 of Annex B.

106. The object and purpose of paragraph 1 of Annex B is "to enable interested Members to become acquainted with" the sanitary and phytosanitary regulations adopted or maintained by other Members and thus to enhance transparency regarding these measures. In our opinion, the scope of application of the publication requirement of paragraph 1 of Annex B should be interpreted in the light of the object and purpose of this provision.

107. We note that it is undisputed that the varietal testing requirement is applicable generally. Furthermore, we consider in the light of the actual impact of the varietal testing requirement on exporting countries, as discussed by the Panel in paragraphs 8.112 and 8.113 of the Panel Report, that this instrument is of a character similar to laws, decrees and ordinances, the instruments explicitly referred to in the footnote to paragraph 1 of Annex B.

108. For these reasons, we agree with the Panel that the varietal testing requirement, as set out in the Experimental Guide , is a phytosanitary regulation within the meaning of paragraph 1 of Annex B, and, therefore, uphold the Panel's finding that Japan has acted inconsistently with this provision and with Article 7 of the SPS Agreement.

To continue with Article 5.1

³²Ibid.

³³See infra, para. 89.

³⁴European Communities - Hormones, supra, footnote 12, para. 124.

³⁵European Communities - Hormones, supra, footnote 12, para. 180.

³⁶European Communities - Hormones, supra, footnote 12, para. 250.

³⁷Panel Report, paras. 8.29 and 8.42.

³⁸Panel Report, para. 8.59.

³⁹In European Communities - Measures Affecting the Importation of Certain Poultry Products, adopted 23 July 1998, WT/DS69/AB/R, para. 135, we stated that "[j]ust as a panel has the discretion to address only those claims which must be addressed in order to dispose of the matter at issue in a dispute, so too does a panel have the discretion to address only those arguments it deems necessary to resolve a particular claim. So long as it is clear in a panel report that a panel has reasonably considered a claim, the fact that a particular argument relating to that claim is not specifically addressed in the 'Findings' section of a panel report will not, in and of itself, lead to the conclusion that that panel has failed to make the 'objective assessment of the matter before it' required by Article 11 of the DSU."

⁴⁰Panel Report, para. 8.56.

⁴¹Ibid.

⁴²Panel Report, para. 8.58.

⁴³Australia - Salmon, supra, footnote 13, para. 194.

⁴⁴Australia - Salmon, supra, footnote 13, para. 194.

⁴⁵Panel Report, para. 8.78.

⁴⁶Panel Report, para. 8.79.

⁴⁷Panel Report, para. 8.84.

⁴⁸Paragraph 8.83 of the Panel Report reads in relevant part as follows:

⁴⁹Appellant's Submission of the United States, para. 38.

⁵⁰Appellant's Submission of the United States, para. 39.

⁵¹See supra, para. 96.

⁵²Australia - Salmon, supra, footnote 13, para. 261.

⁵³See supra, footnote 48.

⁵⁴See supra, para. 2.