AUSTRALIA - MEASURES AFFECTING IMPORTATION OF SALMON
- RECOURSE TO ARTICLE 21.5 BY CANADA -

2. Sanitary measures based on a risk assessment

7.72 Regarding the requirement in Article 5.1 that sanitary measures be based on a risk assessment, the Appellate Body in EC - Hormones stated the following:

"We believe that Article 5.1, when contextually read as it should be, in conjunction with and as informed by Article 2.2 of the SPS Agreement, requires that the results of the risk assessment must sufficiently warrant - that is to say, reasonably support -- the SPS measure at stake. The requirement that an SPS measure be 'based on' a risk assessment is a substantive requirement that there be a rational relationship between the measure and the risk assessment" (emphasis added).¹⁹²

7.73 As noted earlier, whereas the definition of risk assessment as such does not, in our view, call for an examination of the link between the risk assessment and the sanitary measure finally selected¹⁹³, the obligation to base sanitary measures on a risk assessment requires that there be a rational relationship between the risk assessment and the measures selected.

7.74 Canada claims that the new measures applying to salmonids set out in AQPM 1999/51 of 19 July 1999 and AQPM 1999/69 of 20 October 1999 cannot be said to be based on the 1999 IRA, first of all, because the 1999 IRA was only issued in its final form on 12 November 1999, i.e, after the publication of the new measures.

7.75 In response to an Australian objection against considering the 1995 Draft Report on the ground that it was only a draft risk assessment not representing official government policy, we noted in the original panel report that

"to the extent [reports] constitute relevant available scientific information which was submitted to the Panel, we consider it our task to take this evidence into account. We consider that, for purposes of our examination, the scientific and technical content of these reports and studies is relevant, not their administrative status (i.e. whether they are official government reports or not)".¹⁹⁴

7.76 We hold the same view in respect of the 1999 IRA that was published in July 1999. We note that the final form of the 1999 IRA, though only edited and published in book form on 12 November 1999, is still dated July 1999 and that, according to AQPM 1999/80 - entitled "Publication of the Final Report of the Import Risk Analyses on Non-Viable Salmonids and Non-Salmonid Marine Finfish" -- and the concordance table it sets forth, the amendments made in the final 1999 IRA "do not alter the substance or the conclusions of the report as announced on 19 July".

7.77 On these grounds, we find that the fact that the 1999 IRA was only published in final form subsequent to the date the new sanitary measures were taken, does not, in this case, preclude the measures from being based on the 1999 IRA. All substantive elements of the risk assessment we looked at earlier were already included in the draft 1999 IRA of July 1999, i.e. before the new measures were taken.¹⁹⁵

7.78 Canada further claims that there is no rational relationship between the 1999 IRA and the Australian requirements that salmonids may not be released from quarantine unless they are "consumer-ready". AQPM 1999/69 clarifies that under Australia's new regime

"consumer-ready product is product that is ready for the householder to cook/consume, including:

• cutlets - including central bone and external skin but excluding fins - of less than 450 g in weight;
• skinless fillets - excluding the belly flap and all bone except the pin bones - of any weight;
• skin-on fillets - excluding the belly flap and all bone except the pin bones - of less than 450 g in weight;
• eviscerated, headless 'pan-size' fish of less than 450 g in weight; and
• product that is processed further than the stage described above.

Salmonid product that is not in consumer-ready form (such as head-off, gilled, eviscerated fish of greater than 450 g in weight) must be processed to a consumer-ready stage at an AQIS-approved processing plant before release from quarantine".¹⁹⁶

The same definition of "consumer-ready" product is also reproduced at the end of the 1999 IRA on salmonids.¹⁹⁷

7.79 None of the experts advising the Panel is able to find a justification in the 1999 IRA for this requirement that salmonids be "consumer-ready" in the sense defined above before they can be released from quarantine (hereafter the "consumer-ready requirements").¹⁹⁸

7.80 We note that in the disease-by-disease evaluation of "Key Risk Factors" and "Risk Management Measures" for the seven "higher priority" diseases that would not achieve Australia's ALOP, reference is made to disease agents that can be found in the viscera, head, gills, brain, skin mucus, blood and remnants of the anterior kidney on the skeleton. Each time, however, it is stated that evisceration, removal of head and gills and thorough cleaning and washing of external and internal surfaces to remove skin mucus and visceral remnants, respectively, would significantly reduce risk. At the end of each disease-specific assessment -- in the series of "Risk Management Measures" proposed in addition to evisceration against the specific disease -- the removal of head and gills and thorough washing of external and/or internal surfaces (among other measures) is, therefore, suggested.

7.81 In five of the seven disease-specific assessments reference is made also to the risk related to commercial processing of imported salmonids in Australia. This risk is stated to be associated mainly, if not exclusively, with waste disposal of the salmon parts just mentioned. Even though the "Risk Management Measures" referred to in the previous paragraph (removal of head and gills and thorough washing) would seem to effectively exclude the importation of those parts of the salmonid, two additional "Risk Management Measures" are proposed in five of the seven disease-specific assessments in order to address the risk related to commercial processing and waste disposal of these salmonid parts: first, to permit only approved premises - subject to controls on waste disposal -- to commercially process imported salmonids in Australia; and, second, to permit release from quarantine of only what is referred to as "consumer-ready product", i.e. product that is not likely to be further commercially processed. No explanation is provided as to why these additional requirements are needed in light of the fact that most, if not all, of the salmon parts of concern in respect of commercial processing already have to be removed under other "Risk Management Measures"; nor is it explained, in any of the disease-specific assessments, what should be considered as "consumer-ready product", on what basis and for what reasons.

7.82 Only in the overall conclusion on the totality of measures to be imposed on salmonid imports is the definition of "consumer-ready product", as quoted above, provided. This definition refers, for the first time in the 1999 IRA, to criteria such as removal of certain bones, fins, belly flap and external skin for product of more than 450 g in weight. Nowhere in the 1999 IRA could we find further reference, explanation or assessment of any of these criteria.¹⁹⁹ In particular, nowhere in the 1999 IRA could we find the rationale for the 450 g weight limitation for skin-on salmon.

7.83 On these grounds, we find that there is no rational relationship between, on the one hand, the consumer-ready requirements and, on the other hand, the 1999 IRA. Since the 1999 IRA is the only risk assessment referred to by Australia in support of its new measures, we thus find that the consumer-ready requirements are not based on a risk assessment, contrary to Article 5.1.

3. The Panel's conclusion under Article 5.1

7.84 On the basis of our considerations and findings above, we conclude that:

(1) the 1999 IRA meets the three requirements of a risk assessment in the sense of Article 5.1 and paragraph 4 of Annex A;

(2) the fact that the 1999 IRA was only published in final form subsequent to the date the new sanitary measures were taken does not, in this case, preclude the measures from being based on the 1999 IRA; and

(3) AQPM 1999/51 and 1999/69 -- to the extent they set forth the consumer-ready requirements specified above -- are not based on a risk assessment, contrary to Article 5.1.

7.85 Moreover, by maintaining sanitary measures, in casu the consumer-ready requirements, in violation of the specific requirement to base such measures on a risk assessment set forth in Article 5.1, we find that Australia has, by implication, also acted inconsistently with its more general obligation in Article 2.2 to "ensure that any sanitary � measure is applied only to the extent necessary to protect human, animal or plant life or health, is based on scientific principles and is not maintained without sufficient scientific evidence, except as provided for in paragraph 7 of Article 5".

E. ARBITRARY OR UNJUSTIFIABLE DISTINCTIONS IN APPROPRIATE LEVELS OF PROTECTION IN THE SENSE OF ARTICLE 5.5 OF THE SPS AGREEMENT

7.86 We next examine Canada's claim under Article 5.5. In the original panel report we stated²⁰⁰, and the Appellate Body agreed²⁰¹, that

"three elements are required in order for a Member to act inconsistently with Article 5.5:

- the Member concerned adopts different appropriate levels of sanitary protection in several 'different situations';

- those levels of protection exhibit differences which are 'arbitrary or unjustifiable'; and

- the measure embodying those differences results in 'discrimination or a disguised restriction on international trade' ".

7.87 Canada makes two general comparisons under Article 5.5: firstly, Australia's treatment of imported, dead salmonids as compared to Australia's treatment of imported, dead non-salmonids and live ornamental fish; secondly, Australia's treatment of imported, dead salmonids as compared to its treatment of dead domestic fish, both salmonids and non-salmonids.

7.88 We recall that Canada bears the burden of demonstrating that the comparisons it refers to meet all three elements under Article 5.5.

1. The first element of Article 5.5

7.89 For the reasons set out in the Panel and Appellate Body reports in the original dispute, we confirm that we can compare the different fish categories referred to by Canada as "different situations" in the sense of the first element of Article 5.5.²⁰² Australia does not contest this. It is not contested, more particularly, that the situations referred to by Canada under Article 5.5 - i.e. fresh chilled or frozen salmon from Canada, on the one hand, and imports of non-salmonids, live ornamental fish and dead Australian fish, on the other hand - involve a risk of entry, establishment or spread of the same or a similar disease, or a risk of the same or similar associated potential biological and economic consequences. As a result, these situations have some common elements sufficient to render them comparable under Article 5.5. Whether or not Australia adopts different ALOP's in respect of these "different situations" is an issue we address under the second element of Article 5.5.

2. The second element of Article 5.5

7.90 In respect of the second element of Article 5.5 - arbitrary or unjustifiable distinctions in ALOP's -- we note that the arguments and evidence submitted by Canada remain general with the exception of one specific comparison, imports of salmonids compared to imports of pilchards, to which we revert later. Canada compares imports of salmonids at issue here to entire categories of fish - imports of non-salmonids, live ornamental fish and dead Australian fish - that include not only a wide variety of different fish but also of different diseases. Canada basically refers to the difference in measures Australia applies to these different categories of fish and, on that ground, requires Australia to justify the differential treatment. Whereas this approach may have been appropriate in the original dispute -- where certain rather substantial differences in treatment existed without apparent justification -- the circumstances in this case have changed.

7.91 We recall that as a result of DSB recommendations and rulings in the original dispute, Australia now has a risk assessment not only on salmonids but also on non-salmonids and live ornamental fish in support of the new measures it imposes.²⁰³ On that basis, Australia not only imposed a less trade restrictive import regime in respect of salmonids at issue here, but also tightened, or will tighten, the import restrictions for non-salmonids, including in particular herring for use as bait²⁰⁴ and live ornamental finfish²⁰⁵ referred to in the original dispute.

7.92 Two of the three experts advising the Panel are of the view that Australia's treatment of, on the one hand, imports of salmonids and, on the other hand, imports of non-salmonids and live ornamental finfish, achieves the same or similar levels of protection. They also consider that the differential treatment accorded by Australia to these different categories of fish is scientifically justified.²⁰⁶

7.93 Even though no stricter controls have been imposed on the internal movement of dead Australian fish as a result of the adoption of DSB recommendations, we note Australia's explanation that the risk related to the internal movement of Australian fish is different, and of a lesser magnitude, than that related to imports of salmonids. For one thing, the diseases associated with the movement of fish within Australia are per force already present (i.e. endemic) in Australia. Even if certain diseases are only present in some parts of Australia, the presence of internal waterways may make it difficult to contain these diseases. Since the diseases of concern in respect of imports of salmonids are, in contrast, not present in (i.e. exotic to) Australia, they are per definition different from those associated with Australian fish and may be - and, according to Australia, are - of more concern both in terms of risk of introduction of the disease and its potential impact.²⁰⁷

7.94 Referring thus to: (1) the generality of Canada's arguments and evidence; (2) the increased convergence in the treatment provided by Australia to the different categories of fish referred to by Canada; and (3) the apparent justification for this differential treatment put forward by Australia, we find that - with the exception further examined below -- Canada has not met its burden of demonstrating that in this case the second element under Article 5.5 is met.

7.95 The only comparison referred to by Canada that, we believe, warrants further examination is that between imports of salmonids at issue here and imports of whole, uneviscerated pilchards for use as bait or fish feed. There, Canada did refer to a specific fish species and specific diseases of concern, and further substantiated its claim.

7.96 Two of the three experts advising the Panel are of the view that the differential treatment accorded by Australia to salmonid imports as opposed to imports of pilchards is scientifically justified.²⁰⁸

7.97 Canada is correct when it points out that the import restrictions applied to salmonids for human consumption are stricter than those applied to pilchards for use as bait or fish feed²⁰⁹ even though, in general terms, one would expect that more risk arises from imports of whole fish introduced directly into waterways as bait or fish feed, than from eviscerated salmonids for human consumption. However, when focusing on the specific risks related to pilchard imports, it becomes apparent that as compared to the 15 "higher priority" diseases identified in the 1999 IRA for salmonids, only two diseases are, according to Canada, associated with pilchards: herpes virus and Viral Haemorrhagic Septicaemia Virus (VHSV).

7.98 Herpes virus is not a disease associated with salmonids. Moreover, it is, according to Australia, already present in (i.e. endemic to) all marine waters of Australia where pilchards are found and unique to Australian and New Zealand marine waters.²¹⁰

7.99 VHSV, on the other hand, is associated with pilchards and salmonids and is one of the 15 "higher priority" diseases identified in the 1999 IRA. It is not one of the seven diseases, though, that, according to the 1999 IRA, requires measures additional to evisceration for Australia's ALOP in respect of salmonids to be met. Australia submits that since VHSV is associated with colder water temperatures and Australia normally sources its Pacific pilchards from warmer southern waters where VHSV is not reported, less risk of VHSV is associated with pilchards than with salmonids.²¹¹ Australia further points out that there is no evidence of transmission of VHSV from pilchards to salmonids. We note also that the 1999 IRA considers the consequences of the establishment of marine European strains of VHSV and all strains of VHSV from North America to be "low" due primarily to the limited impact that these strains of VHSV would have on salmonids and other finfish species in Australia.²¹²

7.100 We note, in addition, that some import restrictions do apply also for imports of pilchards. They can only be imported with an import permit and a health certificate, even though the conditions linked thereto are more lenient than those in respect of salmonid imports.

7.101 For the reasons stated above and after careful consideration of all arguments and evidence submitted to us by the parties and the experts advising the Panel, we find that Canada has not convinced us that the differential treatment accorded by Australia to salmonids and pilchards -- and any difference in ALOP that may result therefrom -- is "arbitrary or unjustifiable" in the sense of the second element of Article 5.5.

3. The third element of Article 5.5

7.102 Even though we found earlier that the second element of Article 5.5 is not met -- and given the cumulative nature of Article 5.5 no violation of Article 5.5 can thus be found -- in order to complete the analysis of Article 5.5 we turn now to the third element of Article 5.5. Before a violation of Article 5.5 arises, any arbitrary or unjustifiable distinction in ALOP needs to result in "discrimination or a disguised restriction on international trade".

7.103 In this respect, we note that all but one of the three "warning signals" and both "additional factors" retained by the Appellate Body in the original dispute that led to its finding that the third element of Article 5.5 was met, are no longer present or at least of less importance here. We have not been convinced in this case that Australia maintains "arbitrary or unjustifiable" distinctions in ALOP's - the first warning signal in the original case -- nor a priori that any such distinctions were "rather substantial" - the second warning signal in the original case.

7.104 Also the first "additional factor" - the substantial, but unexplained change in conclusion between the 1995 Draft Report (recommending to allow importation under certain conditions) and the 1996 Final Report (recommending to continue the import prohibition) - has lost most of its weight here. The difference between the 1995 Draft Report and the 1999 IRA - both allowing importation under certain, albeit sometimes different, conditions -- is no longer that substantial nor completely unexplained.²¹³ Finally, also the second "additional factor" - the absence of controls on the internal movement of salmon products within Australia compared to the treatment given to imports of salmon - has lost most of the little weight it was assigned by the Appellate Body.²¹⁴ This is so because: (1) the import prohibition on salmonids is now replaced by a regime where imports are allowed under certain conditions; and (2) of our finding above that the differential treatment between the internal movement of salmon and imports of salmon does not appear to be arbitrary or unjustifiable.²¹⁵

7.105 Accordingly, only the third "warning signal" referred to by the panel and the Appellate Body in the original case is maintained, namely the fact that some of the measures at issue here are also not based on a risk assessment, in breach of Articles 5.1 and 2.2 of the SPS Agreement. We believe, however, that these violations of Articles 5.1 and 2.2, in and of themselves, are not sufficient for us to find that the third element under another provision, Article 5.5, is met.

7.106 We note, finally, that Australia submits some positive evidence that indicates that its new regime on imports of salmonids does not result in discrimination or a disguised restriction on international trade inspired to avoid import competition, but is rather a quarantine measure to protect Australia against diseases. Salmon from New Zealand is generally considered to be amongst the most competitive in the Australian market. Nevertheless, given the low disease status of New Zealand that is similar to that of Australia, imports of salmonids from New Zealand are subject to less restrictions than any other salmonid imports. We realize that, as Canada argues, there may also be other reasons that explain the greater access offered to New Zealand salmon.²¹⁶ However, without ruling on the relevance of these other reasons, New Zealand's low disease status -- in this case prevailing over the competitiveness of New Zealand salmon -- seems to us, on the basis of the evidence on record, to be crucial.

7.107 For the reasons stated above we find that Canada has not met its burden of demonstrating that in this case the third element of Article 5.5. is met.

4. The Panel's conclusion under Article 5.5

7.108 On the basis of our findings above, we conclude that Canada has not met its burden of demonstrating that either the second or the third element of Article 5.5 are present. We thus find that Australia has not acted inconsistently with Article 5.5.

F. DISCRIMINATION IN THE SENSE OF ARTICLE 2.3, FIRST SENTENCE, OF THE SPS AGREEMENT

7.109 Canada claims that Australia's import requirements for salmonids from Canada, on the one hand, and the absence of internal control measures imposed on the internal movement of dead, Australian fish, on the other hand, constitute discrimination between Canada and Australia in the sense of Article 2.3, first sentence.

7.110 The first sentence of Article 2.3 provides:

"Members shall ensure that their sanitary � measures do not arbitrarily or unjustifiably discriminate between Members where identical or similar conditions prevail, including between their own territory and that of other Members".

7.111 In our view, three elements, cumulative in nature, are required for a violation of this provision:

(1) the measure discriminates between the territories of Members other than the Member imposing the measure, or between the territory of the Member imposing the measure and that of another Member;

(2) the discrimination is arbitrary or unjustifiable; and

(3) identical or similar conditions prevail in the territory of the Members compared.

7.112 In respect of the first element we only note the following. Given: (1) the Panel and Appellate Body finding²¹⁷ in the original dispute that discrimination contrary to Article 5.5 by implication entails discrimination contrary to Article 2.3, first sentence; and (2) that under Article 5.5 different situations including different products can be compared²¹⁸, we are of the view that - contrary to what Australia argues -- discrimination in the sense of Article 2.3, first sentence, may also include discrimination between different products, e.g. not only discrimination between Canadian salmon and New Zealand salmon, or Canadian salmon and Australian salmon; but also discrimination between Canadian salmon and Australian fish including non-salmonids, as referred to by Canada in this case.

7.113 However, on the basis of our examination above of the differential treatment accorded by Australia to imports of salmonids and dead fish moving within Australian borders - where we found that Canada had not convinced us that this differential treatment resulted in arbitrary or unjustifiable distinctions in ALOP's²¹⁹ - we find that Canada has not met its burden of demonstrating that any discrimination made by Australia between these two categories of fish is "arbitrary or unjustifiable" in the sense of the second element of Article 2.3, first sentence. For the reasons mentioned there, we also harbour doubts as to whether "identical or similar conditions" in the sense of the third element of Article 2.3, first sentence, prevail in the territories of both Canada and Australia in respect of the situations compared. We note, for example, the substantial difference in disease status between Canada and Australia.

7.114 We thus find that Australia has not acted inconsistently with Article 2.3, first sentence.

G. SANITARY MEASURES SHALL NOT BE "MORE TRADE-RESTRICTIVE THAN REQUIRED" IN THE SENSE OF ARTICLE 5.6 OF THE SPS AGREEMENT

7.115 We next examine Canada's claim that there are other, less trade-restrictive measures available that meet all three elements of Article 5.6. As we found in the original dispute²²⁰, a sanitary measure is "more trade-restrictive than required", contrary to Article 5.6, if there is another measure which:

(1) is "reasonably available taking into account technical and economic feasibility";

(2) "achieves [Australia's] appropriate level of sanitary ... protection"; and

(3) is "significantly less restrictive to trade" than the sanitary measure contested.

7.116 The three elements of Article 5.6 are cumulative in nature and it is for Canada to demonstrate that they are met in this case.

7.117 Referring to the Appellate Body report on Japan - Varietals, it is for Canada "to establish a prima facie case that there is an alternative measure that meets all three elements under Article 5.6 in order to establish a prima facie case of inconsistency with Article 5.6".²²¹ Pursuant to the same report, a panel is "entitled to seek information and advice from experts and from any other relevant source it chooses � to help understand and evaluate the evidence submitted and the arguments made by the parties, but not to make the case for a complaining party".²²²

7.118 In its reports on Canada - Aircraft²²³ and India - Quantitative Restrictions²²⁴, the Appellate Body specified, however, that a panel is not precluded from considering expert advice or evidence submitted by the defending party until the complaining party has established a prima facie case. As noted in Canada - Aircraft, "[a] panel may, in fact, need the information sought in order to evaluate evidence already before it in the course of determining whether the claiming or the responding Member, as the case may be, has established a prima facie case or defence".²²⁵

7.119 In this case, Canada has referred to a number of options that, in its view, would meet the three elements under Article 5.6.

7.120 First, Canada argues that any one or several of the measures now applied might suffice. Canada refers to options such as evisceration, inspection and grading or restriction of imports to non-spawning, adult salmonids.²²⁶ Canada submits, in particular, that evisceration, thorough washing both inside and outside to remove residual tissues and mucus on the skin, thorough bleeding of the salmon and removal of the gills combined with inspection and grading - according to Canada, the selection and primary processing undertaken by Canada in the ordinary course of processing salmon for human consumption -- would be an option fulfilling the three elements of Article 5.6.²²⁷

7.121 Second, Canada argues that the measures recommended in the 1995 Draft Report, allowing the importation of salmon under less stringent conditions than the current ones -- e.g. not prohibiting the importation of whole fish with the viscera, head, fins and tail removed nor prohibiting the importation of skin-on fillets and steaks of 450 grams or more -- would fulfil the three elements of Article 5.6.²²⁸

7.122 Third, Canada refers to the measures Australia applies domestically in respect of the internal movement of Australian fish (i.e. no restrictions at all unless for live fish), arguing that these measures would be valid options under Article 5.6.²²⁹

7.123 Fourth, Canada argues that, instead of imposing the current consumer-ready requirements, it would be significantly less trade restrictive and technically and economically feasible to ensure that imported salmon product imported in any form for further processing is only processed in facilities that do not discharge untreated waste.²³⁰ In this respect, Canada considers that New Zealand's packaging requirements - allowing imports without an import permit for salmon packaged for retail sale or sale to the hotel, restaurant or institutional (HRI) trade including whole, eviscerated salmon of any size if individually wrapped -- although still more trade-restrictive than required, would nevertheless be significantly less trade restrictive than Australia's current measures.²³¹

7.124 Considering the arguments and evidence submitted by Canada under all four options, in particular the fourth one relating to the need for consumer-ready requirements, in light of the expert advice we received, we find that Canada has established a prima facie case that there are other measures that meet all three elements of Article 5.6.

7.125 Given our finding above that Australia's new measures are, indeed, based on a risk assessment (the 1999 IRA) except for the consumer-ready requirements, we shall focus our examination on the fourth option Canada puts forward. More specifically, we shall examine whether the option of not imposing the consumer-ready requirements or imposing a different definition of "consumer-ready product", would meet the three elements of Article 5.6.

7.126 We recall that Australia does not allow the release from quarantine of product that is not "consumer-ready" and that this type of product is defined as follows:

"consumer-ready product is product that is ready for the householder to cook/consume, including:

• cutlets - including central bone and external skin but excluding fins - of less than 450 g in weight;
• skinless fillets - excluding the belly flap and all bone except the pin bones - of any weight;
• skin-on fillets - excluding the belly flap and all bone except the pin bones - of less than 450 g in weight;
• eviscerated, headless 'pan-size' fish of less than 450 g in weight; and
•  product that is processed further than the stage described above.

Salmonid product that is not in consumer-ready form (such as head-off, gilled, eviscerated fish of greater than 450 g in weight) must be processed to a consumer-ready stage at an AQIS-approved processing plant before release from quarantine".²³²

7.127 We next examine the three elements of Article 5.6, starting with the most controversial one, namely the question of whether any other measures would meet Australia's ALOP.

1. Is there another measure that "achieves [Australia's] appropriate level of sanitary ... protection"?

7.128 We note that our examination of whether there are other measures that achieve Australia's ALOP in the sense of Article 5.6 is hampered in two respects.

7.129 First, although, according to the Appellate Body²³³, Australia determined its ALOP with sufficient precision to apply Article 5.6, we find it rather difficult to evaluate whether any of the options before us would also meet Australia's somewhat vaguely determined level of "a high or very conservative level of protection aimed at reducing risk to very low levels, while not based on a zero-risk approach".²³⁴ We are of the view, however, that this should not prevent us from carrying out the task. As noted by the Appellate Body, "[o]therwise, a Member's failure to comply with the implicit obligation to determine its appropriate level of protection - with sufficient precision - would allow it to escape its obligations under this Agreement and, in particular, its obligations under Articles 5.5 and 5.6".²³⁵ We note, parenthetically, that a more explicit and in particular a quantitative expression of a Member's ALOP would greatly facilitate the consideration of compliance with not only Article 5.6 but with other provisions of the SPS Agreement as well.

7.130 Second, we recall that the 1999 IRA only provides the definition of "consumer-ready product", as quoted above, in the overall conclusion on the totality of measures to be imposed on salmonid imports. As noted earlier, this definition refers, for the first time in the 1999 IRA, to criteria such as removal of certain bones, fins, belly flap and external skin for product of more than 450 g in weight. However, the 1999 IRA does not indicate the rationale for these criteria nor does it explain or assess these criteria. We note that, in addition, the 1999 IRA does not identify or assess any other possible definitions of "consumer-ready product".

7.131 On the one hand, this lack of assessment and evidence in the 1999 IRA indicates that the consumer-ready requirements may be without scientific or other objective justification and may actually not further reduce risk. On the other hand, this lack of assessment and evidence also means that the 1999 IRA is not particularly helpful in arriving at a decision as to whether other definitions of "consumer-ready product" would meet Australia's ALOP. Nevertheless, on the basis of other factual elements provided to us by the parties and the experts advising the Panel, we have been able to complete our examination under Article 5.6 in accordance with the objectivity standard set out in Article 11 of the DSU.

(a) No consumer-ready requirements

7.132 We examine, first, whether the current regime without any consumer-ready requirements would also achieve Australia's ALOP of "a high or very conservative level of protection aimed at reducing risk to very low levels, while not based on a zero-risk approach".

7.133 According to Australia, the primary reason for imposing the consumer-ready requirements is "the pest/disease risk presented by the creation of substantial concentrations of waste material (skin, fins, flaps, bones, etc) from commercial processing of imported salmon".²³⁶ Answering Panel Question 20, Australia further explains the imposition of the consumer-ready requirements as follows:

"To control risk associated with commercial processing, AQIS applies controls over commercial plants processing imported salmonid products with regard to location, waste disposal and related matters. To ensure that imported salmonids were not commercially processed in non-approved premises, only consumer-ready product will be permitted to be released from quarantine" (emphasis added).

7.134 We note that -- as Canada submits under the first option referred to above²³⁷ -- evisceration, thorough washing both inside and outside to remove residual tissues and mucus on the skin, thorough bleeding of the salmon and removal of the gills combined with inspection and grading - without the additional consumer-ready requirements -- would already significantly reduce risk. As mentioned earlier, the 1999 IRA itself refers only to disease agents to be found in the viscera, head, gills, brain, skin mucus, blood and remnants of the anterior kidney on the skeleton. Indeed, for each disease, the 1999 IRA itself states that evisceration, removal of head and gills and thorough cleaning and washing of external and internal surfaces to remove skin mucus and visceral remnants, respectively, would significantly reduce risk.

7.135 We further recall that none of the experts advising the Panel is able to find a justification in the 1999 IRA for these consumer-ready requirements.²³⁸

7.136 In respect of the specific requirement that skin-on product over 450 g may not be released from quarantine because of the risk associated with significant quantities of waste products, in casu, salmon skin, that may result from further commercial processing of such product, we note the following statement by Dr. McVicar:

"Washing of carcasses is a requirement to decrease surface levels of infection in product, and this will undoubtably remove much of the [skin] mucus with associated infection. However, the extent to which this reduction is achieved under normal factory conditions has not been quantified. As salmonid skin is not a blood rich organ and its actual tissues are not recognised as a significant site of infection of the diseases of concern to Australia, it is unlikely that salmonid skin or washed skin surfaces are important areas of infection risk in gutted carcasses.

�

It is my view, based on current knowledge on the diseases of concern to Australia, that the removal of skin from Canadian salmon is unlikely to make a significant contribution to risk reduction".²³⁹

7.137 There is thus evidence before us that salmon product certified and processed in a way that meets all Australian requirements other than the consumer-ready requirements may not represent risk, or only a negligible degree of risk, even if such product is commercially processed in Australia. As a result, it may be that not imposing consumer-ready requirements at all would also meet Australia's ALOP of "a high or very conservative level of protection aimed at reducing risk to very low levels, while not based on a zero-risk approach". Although we take no final position on this specific question, we do consider that the evidence referred to above is crucial for our finding below that there are other measures that would meet Australia's ALOP.

(b) Different consumer-ready requirements

7.138 Assuming, therefore, that -- contrary to the evidence referred to above -- commercial processing of salmonid imports does represent a risk exceeding Australia's ALOP and that such risk would be appropriately reduced by only releasing "consumer-ready product" from quarantine, we need to examine next whether any of the other approaches or definitions of "consumer-ready product" referred to by Canada would achieve the same objective as the current regime does.

7.139 In other words, we examine, secondly, whether the current regime with different consumer-ready requirements than those imposed now, would also achieve Australia's ALOP of "a high or very conservative level of protection aimed at reducing risk to very low levels, while not based on a zero-risk approach".

7.140 We note that this examination does not involve the weighing of scientific evidence in the narrow sense. What we are basically examining here is whether there would be other ways to identify product that is most likely to be directly sold to consumers without further commercial processing. To release from quarantine only skin-on product weighing less than 450 g, as Australia now does, may be one way of ensuring that no further commercial processing of imports takes place. However, after careful examination of all evidence and arguments on record in respect of consumption patterns of salmon, we consider that there are other, less trade restrictive, measures available to achieve the same objective.²⁴⁰

7.141 We have, indeed, been convinced that also a significant share of skin-on product weighing more than 450 g is likely to be directly consumed - without further commercial processing -- by households and, in particular, the hotel, restaurant and institutional sector.²⁴¹ We realize, at the same time, that another share of such product may be commercially processed. We are of the view, however, that there are ways to keep out that share or, at least, to ensure that it be commercially processed in a controlled manner.

7.142 First, as Canada pointed out by reference to current New Zealand requirements under the fourth option outlined above²⁴², instead of imposing weight limitations, Australia could restrict release from quarantine to salmon product that has been individually and commercially packaged in a way that makes it unattractive for commercial processors to further process the product. In our view, it is, indeed, very unlikely that commercial processors will prefer to buy individually and commercially packaged salmon, unwrap the package and process it, instead of, for example, importing salmon in bulk form and further process it following restrictions on waste disposal.

7.143 Second, Australia could condition the issuance of an import permit on the specific end-use of the salmon product. For example, only if proof is given that the product will be imported for retail sale, not for further commercial processing, could an import permit be issued and product be released from quarantine. In contrast, if product is to be imported for further processing, the current Australian requirement that such further processing take places in certified facilities before release from quarantine, could apply. As noted by Canada under the fourth option set out above²⁴³, Australia could ensure more generally that salmon product imported in any form for further processing is only processed in facilities that do not discharge untreated waste.²⁴⁴

7.144 We referred above to several options without deciding that one of these would necessarily meet Australia's ALOP. We have been convinced, however, that there are other measures available, be it the options discussed above taken separately or a combination thereof, that would meet Australia's ALOP. We leave it up to Australia, preferably in close cooperation with Canada and other trading partners, to select and identify the details of such other measure(s).

7.145 For all the reasons stated above, we thus find that the first element of Article 5.6 is met.

2. Is there another measure that is "reasonably available taking into account technical and economic feasibility"?

7.146 We agree with Canada that since one can assume that current Australian requirements are "reasonably available taking into account technical and economic feasibility", also a regime without the consumer-ready requirements - as referred to in paragraphs 7.134-7.137 above -- would be so. Given that inspection and control to release from quarantine only product that meets the consumer-ready requirements would no longer be necessary, a regime without the consumer-ready requirements would be even more reasonably available in the sense of Article 5.6.

7.147 We also consider that to require individual and commercial packaging before release from quarantine -- as referred to above under different consumer-ready requirements²⁴⁵ -- would be reasonably available in the sense of Article 5.6. The fact that New Zealand imposes similar requirements is evidence in support thereof.

7.148 To condition import permits and release from quarantine on the end-use of the product²⁴⁶ could raise a problem of control, i.e. how to ensure that the product once released form quarantine is actually used as specified in the import permit. We note that the current requirement of only releasing product that has been processed in certified facilities may give rise to similar concerns, i.e. how to ensure that the product is not diverted and processed in other, non-certified facilities. In addition, to condition import permits or health certificates on origin, as Australia does, may not be that different in terms of control from conditioning it on end-use. In any event, to avoid the imposition of costly and technically difficult control measures to fully ensure appropriate end-use, this alternative could be combined with other measures that, in combination, would meet Australia's ALOP.

7.149 For the reasons stated above, we thus find that the second element of Article 5.6 is met. In this respect paragraph 7.143 applies mutatis mutandis.

3. Is there another measure that is "significantly less restrictive to trade"?

7.150 We note, first, that all options referred to above would result in significantly more salmon product being allowed for direct release from quarantine, e.g. also skin-on salmon weighing more than 450 g that is individually and commercially packaged and/or stated in the import permit to be imported for direct retail sale. Secondly, on the basis of arguments and evidence on record, we consider that there is an Australian demand for such product, in particular skin-on salmon weighing more than 450 g for use in the hotel, restaurant and institutional sector.²⁴⁷ We consider also that households, in particular families of three or more, may prefer to buy one larger piece or whole salmon instead of individual pieces weighing less than 450 grams²⁴⁸ Canada also pointed out that, in other export markets, its principal salmon exports are whole, eviscerated salmon.

7.151 The increased market access that would result under the alternatives outlined above would be significant and, in our view, warrants the search for other measures by Australia. There may, indeed, be some truth in the statement by Mr. Vaile, Australia's Trade Minister, of 20 July 1999 that

"� the requirements that AQIS is going to put on any product being imported it [sic] may make it unviable for countries like Canada to export salmon to Australia and uncompetitive against the Australian product".²⁴⁹

7.152 For the reasons stated above, we find that the third element of Article 5.6 is also met. In this respect paragraph 7.143 applies mutatis mutandis.

4. The Panel's conclusion under Article 5.6

7.153 On the basis of our findings above, we conclude that Australia has acted inconsistently with Article 5.6. We recall that in so doing we do not impose any specific alternative upon Australia. We have been convinced, however, that there are other, significantly less trade restrictive, measures which are reasonably available, be it the options discussed above taken separately or a combination thereof, that would meet Australia's ALOP. We leave it up to Australia, preferably in close cooperation with Canada and other trading partners, to select and identify the details of such other measure(s).

H. INFORMATION REQUIREMENTS CONTRARY TO PARAGRAPH 1(C) OF ANNEX C TO THE SPS AGREEMENT

7.154 Canada next invokes Article 8 that requires Members to "observe the provisions of Annex C in the operation of control, inspection and approval procedures". It refers, in particular, to paragraph 1(c) of Annex C. This provision requires that

"Members shall ensure, with respect to any procedure to check and ensure the fulfilment of sanitary � measures, that:

�

(c) information requirements are limited to what is necessary for appropriate control, inspection and approval procedures".

7.155 The allegedly unnecessary information requirements referred to by Canada are the requirements to prove that: (1) fish are derived from a population for which there is a documented system of health monitoring and surveillance; (2) fish are not juveniles or sexually mature adults; and (3) fish are not derived from a population slaughtered as an official disease control measure.

7.156 In our view, however, all three Australian requirements referred to are substantive sanitary measures in their own right, i.e. risk reduction measures allegedly needed to achieve Australia's ALOP, not procedures or information requirements "to check and ensure the fulfilment of sanitary � measures" that are subject to paragraph 1(c) of Annex C. Canada does not make any claim of inconsistency in respect of these three requirements under any other provisions of the SPS Agreement.

7.157 We thus find that Australia has not acted inconsistently with Paragraph 1(c) of Annex C or Article 8.

I. THE TASMANIAN MEASURE OF 24 NOVEMBER 1999

7.158 We recall that the Tasmanian measure which we decided to examine in this case following our preliminary rulings of 6 December 1999²⁵⁰ and our further considerations above²⁵¹, declares a large part of Tasmania as a so-called "protected area" into which fresh chilled or frozen salmon may only be moved if, to the satisfaction of the Chief Veterinary Officer, the salmon has been sourced from an area which is free from six specified diseases. Canada acknowledges that it is not free from all of the specified diseases, so that fresh chilled or frozen salmon from Canada is effectively banned from importation into the relevant parts of Tasmania.

7.159 Canada claims that this Tasmanian measure nullifies Australia's federal measures taken to comply with DSB recommendations in that it restricts importation into most of Tasmania of even the limited range of salmon product than can be imported under the federal regime. Canada claims that the Tasmanian measure is inconsistent with Articles 5.1, 2.2, 5.6 and 8 of the SPS Agreement.

7.160 The Tasmanian measure is, according to its own terms, imposed "for the purpose of preventing the introduction into the [protected] area" of six specific diseases. The six diseases referred to are all "high priority" diseases in respect of which imports of eviscerated salmonids would, according to the 1999 IRA, not meet Australia's ALOP. However, the 1999 IRA concludes that the risk related to these diseases can be reduced to a level that meets Australia's ALOP by allowing imports of salmonids - even from areas where these diseases have been reported - on condition that certain certification and product related requirements are met. The Tasmanian measure, in contrast, prohibits the importation of all fresh chilled or frozen salmon (including salmon allowed for import under the 1999 IRA conclusions) unless it is sourced from areas that are free from all six diseases of concern.

7.161 Australia does not refer to any risk assessment or scientific evidence other than the 1999 IRA in support of the sanitary measures examined here. Since the Tasmanian measure - imposing a much stricter trade regime than what is called for in the 1999 IRA - finds no rational support in the 1999 IRA, it is not based on a risk assessment, contrary to Article 5.1. There is no other scientific evidence before us that would justify the Tasmanian measure. As a result, it is maintained without sufficient scientific evidence, contrary to Article 2.2.²⁵²

7.162 Given these two findings of violation we do not further examine any other Canadian claim in this respect. We agree with Australia that Canada has not substantiated a claim under Article 13 of the SPS Agreement obliging Members to "formulate and implement positive measures and mechanisms in support of the observance of the provisions of this Agreement by other than central government bodies". We do not, therefore, decide here whether Australia has met this obligation. This does not prevent us, however, from making reference to Article 13 in support of our finding above that the Tasmanian measure is subject to the SPS Agreement and falls under the responsibility of Australia.²⁵³

7.163 In summary, we find that the Tasmanian measure of 24 November 1999 is inconsistent with Articles 5.1 and 2.2 of the SPS Agreement.

VIII. CONCLUSIONS

8.1 In light of the findings above, we reach the following conclusions:

(i) due to the delays in the entry into force of several implementing measures -- beyond the expiration of the reasonable period of time for Australia to implement (6 July 1999) -- no measures taken to comply "existed" in the sense of Article 21.5 of the DSU (1) from 6 July 1999 to 20 October 1999 in respect of Canadian fresh chilled or frozen salmon; (2) from 6 July 1999 to 1 December 1999 in respect of herring for use as bait; and (3) from 6 July 1999 to the present (and, unless changes occur, until 1 May 2000) for live ornamental finfish; as a result, during those periods, Australia failed to bring its measure into compliance with the SPS Agreement as called for in the DSB recommendations and rulings adopted in the original dispute in the sense referred to in Article 22.6 of the DSU;

(ii) even though the 1999 Import Risk Analysis, referred to by Australia in support of its implementing measures, meets the requirements of a risk assessment set out in the SPS Agreement, Australia, by requiring that only salmon product that is "consumer-ready" as specifically defined can be imported into Australia and released from quarantine, is maintaining sanitary measures that are not based on a risk assessment, i.e. the 1999 Import Risk Analysis, contrary to Article 5.1 of the SPS Agreement and, on that ground, is also acting inconsistently with Article 2.2 of the SPS Agreement;

(iii) Australia has not acted inconsistently with its obligations under Article 5.5 of the SPS Agreement;

(iv) Australia has not acted inconsistently with its obligations under Article 2.3, first sentence, of the SPS Agreement;

(v) Australia, by requiring that only salmon product that is "consumer-ready" as specifically defined can be imported into Australia and released from quarantine, is maintaining sanitary measures that are more trade restrictive than required to achieve Australia's appropriate level of sanitary protection, contrary to Article 5.6 of the SPS Agreement;

(vi) Australia has not acted inconsistently with its obligations under paragraph 1(c) of Annex C or Article 8 of the SPS Agreement;

(vii) Australia, by means of a measure enacted by one of its regional governments, the Government of Tasmania, that effectively prohibits the importation of Canadian fresh chilled or frozen salmon into most parts of Tasmania without being based on a risk assessment and without sufficient scientific evidence, is acting inconsistently with its obligations under Articles 5.1 and 2.2 of the SPS Agreement.

8.2 Since Article 3.8 of the DSU provides that "[i]n cases where there is an infringement of the obligations assumed under a covered agreement, the action is considered prima facie to constitute a case of nullification or impairment", we conclude that to the extent Australia has acted inconsistently with the DSU and the SPS Agreement it has nullified or impaired the benefits accruing to Canada under those agreements.

8.3 Given our conclusions above - and without prejudice to Canada's rights under Article 22.6 of the DSU -- we encourage the parties to resume their efforts to reach a mutually acceptable solution consistent with the SPS Agreement and the DSU in order to achieve the prompt settlement of this dispute.

8.4 We recommend that the Dispute Settlement Body request Australia to bring its measures into conformity with its obligations under the DSU and the SPS Agreement.

253 See paras. 7.12 and 7.13 above as well as footnote 147 thereto. Obviously, the fact that Australia itself objects to the Tasmanian measure cannot mean that the measure is no longer subject to the provisions of the SPS Agreement.

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