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

J. ARTICLE 8 AND ANNEX C

Canada

4.349 Australia's measures impose information requirements that are not limited to what is necessary for appropriate control, inspection and approval procedures, contrary to Article 8 and Annex C.1(c) of the SPS Agreement . Australia's certification requirement is part of a procedure to check and ensure the fulfilment of sanitary measures within the meaning of Annex C. More precisely, it falls under paragraph 1(c) of Annex C as an information requirement for control, inspection and approval procedures. The requirement that consignments of salmonid product must be accompanied by official certification confirming that the exported fish fully meet Australia's import conditions is a procedure to ensure the fulfillment of Australia's sanitary measures, within the meaning of paragraph 1 of Annex C.

4.350 To the extent that the information required in the certificate relates to the fulfillment of certain conditions, those conditions may themselves be measures, or parts of measures. However, the information that must be provided regarding the fulfilment of those conditions or measures may also fall within Article 8 and paragraph 1(c) of Annex C. The official certification requirement for salmonids in turn imposes certain information requirements. Australia's information requirements are not limited to what is necessary for appropriate control, inspection and approval procedures, contrary to paragraph 1"(c)of Annex C and, by extension, Article 8, of the SPS Agreement .

4.351 There are three reasons for this. First, consignments of non-salmonids that are not in "consumer-ready" form do not have to fulfil any of these three information requirements. Moreover, consignments of non-salmonids that are in "consumer-ready" form do not have to fulfil any information or certification requirements at all. There is no rational reason for this distinction. For example, as Canada has shown, Australia's determination that imports of non-salmonids pose an acceptable risk with respect to the disease agent VERV is predicated on those imports not being juvenile fish. Yet Australia does not require information that non-salmonid imports are not juveniles.

4.352 Second, these information requirements find no support in international standards as reflected in the OIE Code. Section 1.3.2 of the 1999 Draft Report leaves the impression that exporting countries should be prepared to supply importing countries with information of the sort required by AQPM 1999/51 in accordance with the OIE Code. The Report fails to explain that the OIE Code recommends the provision of this information for exports of live fish or their gametes only. The OIE Code also contains a model international fish health certificate for dead, uneviscerated fish.¹²⁶ However, the OIE Code prescribes no documentation or certification for dead, eviscerated fish products because such products are considered to pose a minimal risk of disease establishment.¹²⁷

4.353 Third, the certification and information requirements for salmonids in AQPM 1999/51 are part of measures that are themselves inconsistent with Articles 2.2, 2.3, 5.1, 5.5 and 5.6 of the SPS Agreement . The certification and information requirements, therefore, cannot be considered necessary for appropriate control, inspection and approval procedures.

4.354 Australia seems to imply in its rebuttal submission that the obligations in subparagraph (c) of Annex C, paragraph 1 are limited to information requirements for additives or contaminants in food, beverages or feedstuffs.¹²⁸ Clearly, the wording of subparagraph (c) is illustrative rather than exclusive. Subparagraph (c) requires that information requirements be limited to what is necessary, "including" for the approval of additives or the establishment of tolerances for contaminants. There is no basis for Australia's contention that subparagraph (c) does not apply to approval procedures in the present case.

Australia

4.355 In the present dispute, the information requirements of certification not only implement but also directly reflect the risk management measures identified in the 1999 IRA. In these circumstances, Annex C.1(c) does not attach any additional requirements to the substantive provisions of the Agreement. Canada must establish that the underlying risk management measures are not appropriate control, inspection and approval procedures.

4.356 Canada identifies three "information requirements" allegedly of concern to it in regard to certification: (a) that the fish are derived from a population for which there is a documented system of health monitoring and surveillance; (b) that the fish are not juveniles or sexually-mature adults; and (c) that the fish are not derived from a population slaughtered as an official disease control measure. Canada advises that it does not export juvenile or sexually-mature salmonids for human consumption; and that it does not process for human consumption fish slaughtered for disease control purposes. Canada therefore cannot claim that conditions (b) or (c) impose any constraint on its commercial opportunities in the Australian market.

4.357 In relation to condition (a), Canada found no difficulty in certification for its salmon. The 1999 IRA also states that for countries with an established history of exporting animals, fish and animal products to Australia, AQIS recognises the appropriate government agencies in relation to fish health (monitoring and surveillance) and the approval and control of fish processing plants (provision of export certification).

4.358 As one of the very few OIE member countries with exceptional fish health status, Australia is justified to extend the general principles of the OIE while at the same time meeting WTO obligations.

V. SUMMARY OF THIRD PARTY SUBMISSIONS

A. EUROPEAN COMMUNITIES

5.1 The European Communities indicated that it was limiting its comments to legal issues which in its view were of systemic importance for the interpretation and proper functioning of the DSU and the SPS Agreement .

Appropriateness of Article 21.5 proceeding

5.2 The European Communities welcomed that the parties had agreed that this dispute about compliance with DSB rulings and recommendations should be resolved by recourse to Article 21.5 instead of Article 22.6 of the DSU. The European Communities considered that this approach was the correct application of the legal requirements of the DSU.

Terms of reference and scope of the Panel

5.3 The European Communities considered that there was merit in Australia's arguments that the Panel's mandate was restricted to examining the existence or consistency with a covered agreement of measures "taken to comply with the recommendation and rulings" of the DSB in this case. The European Communities deemed that there were important systemic reasons¹²⁹ to confine the mandate of an Article 21.5 panel to examining the measures taken to comply on matters for which the DSB had made recommendations and rulings, excluding any claims about other measures.

5.4 The European Communities made a distinction between, on the one hand, old and new facts and evidence, i.e. those that existed at the time the original Panel decided the case, as opposed to those resulting from the implementation measures; and, on the other hand, old and new claims and arguments, i.e. those that existed (but failed to be invoked by Canada) at the time the original Panel decided the case, as opposed to those resulting directly from the implementation measures. The European Communities argued that claims Canada made based on old facts and evidence should be outside the scope of this Panel. Similarly, old claims on which neither the Panel nor the Appellate Body had made legal findings in the original proceeding were also outside the scope of this Panel. It followed that Canada could only advance claims directly related to the measures taken by Australia to comply with the legal findings and recommendations of the DSB in this case.

Rights of third parties

5.5 The European Communities noted that the Panel request had not been preceded by Article 4 DSU consultations. The EC warned against the development of such a practice, which was not in conformity with the DSU and which might, in certain cases, affect rights of defence and the rights of interested third parties.

Nature of implementing measures

5.6 The European Communities agreed with Australia that implementation might require legal and/or administrative action, depending on the circumstances of each specific case. The European Communities argued that the findings of panels addressed specific measures and, consequently, implementation should correct the aspects of those measures found to be inconsistent. The term "measure" had a wide meaning in the SPS context. Accordingly, the implementing measures should be decided on a case by case basis taking into account the constitutional and legislative requirements of the Member concerned. What was legally important in terms of implementation and compliance, however, was to satisfy in legal terms the rationale of the findings and recommendations of the DSB. How this was to be achieved technically was a matter for the complying Member.

Nature and results of risk assessment

5.7 The European Communities agreed with Australia that Canada could not fault Australia's risk assessment methodology by simply arguing that another approach, for example a quantitative approach, would have been more correct and legally acceptable. In addition, the European Communities argued that Canada could not fault Australia's new risk assessment by simply comparing its findings with those of the previous risk assessments (e.g. of 1995) which had been found to be inconsistent with Article 5. The essential point to keep in mind was whether Canada's claims put into question the accuracy of the scientific basis of Australia's new risk assessment or whether they simply pointed out alternative plausible scientific conclusions which might have been drawn from the same scientific evidence. In the view of the European Communities, Canada had not fulfilled its burden of proof to show that there was no rational relationship between Australia's implementation measures and the scientific basis of its risk assessment.

5.8 The European Communities agreed with Australia that, in principle, the chosen level of protection indicated the nature of the necessary measures, not the other way round. The European Communities also agreed with both parties that setting this level of protection was an autonomous right or a prerogative. Yet, in view of Australia's still somewhat unclear level of protection, the European Communities was not sure that Australia had demonstrated that there was a rational relationship between provisions on "consumer-ready form" (particularly the skin-off and weight requirements) and the risk assessment. In the absence of the relevant documentation, the European Communities was not in a position to express a clear and definitive view, although the latest explanations provided by Australia appeared to indicate that this requirement might be scientifically justified.

Nature of the measure necessary to achieve the appropriate level of protection

5.9 In the view of the European Communities, this case raised an important question on the relationship between risk, appropriate level of protection, and the nature of a measure that was not more trade restrictive than required. Both parties, but mainly Australia, discussed individual types of fish and illnesses, but then generalized their conclusions by applying them to more or all types of fish and diseases. The European Communities argued that this was not very helpful in the exercise of identifying alternative, less trade restrictive measures, in the sense of Article 5.6.

B. NORWAY

5.10 According to Norway, the question before the Panel was whether Australia had brought its measure into conformity with its obligations under the Agreement. In Norway's view, AQPM 1999/51 went a long way towards remedying the inconsistencies with the SPS Agreement , but in practice constituted a continued discrimination of imported salmon.

The requirements of a risk assessment

5.11 Norway agreed with Canada that Australia employed vague notions of the likelihood of entry of the different diseases, using qualitative terms such as "high" and "low". Furthermore, Australia scarcely quantified the consequences of disease introduction and used vague terms regarding what measures might achieve its desired level of protection, their effect on disease introduction and their relative effectiveness. This vagueness made it exceedingly difficult to judge whether there really was a risk of disease introduction through importation of eviscerated salmon and if any of the additional measures would noticeably reduce risk.

5.12 Norway recalled the Appellate Body's statement regarding the precision with which a level of protection must be established. Although a Member may use qualitative terms, the Appellate Body stated that:

"[�] This does not mean, however, that an importing Member is free to determine its level of protection with such vagueness or equivocation that the application of the relevant provisions of the SPS Agreement , such as Article 5.6, becomes impossible. It would obviously be wrong to interpret the SPS Agreement in a way that would render nugatory entire articles or paragraphs of articles of this Agreement and allow Members to escape from their obligation under this Agreement."¹³⁰.

5.13 Norway argued that this requirement of precision also applied to the other elements of the risk assessment process that a Panel must be able to judge or evaluate in order to establish whether a Member had fulfilled its obligation under the Agreement. Norway concluded that Australia had failed to meet the requirements for a risk assessment in Article 5.1.

5.14 In Norway's view, the scientific studies undertaken in many countries and relevant OIE recommendations showed that the Australian measures went beyond what was necessary. Furthermore, Norway found it difficult to understand that none of these studies allowed Australia to make its risk assessment more quantitative.

The requirement that a measure be based on a risk assessment, be based on scientific principles and not be maintained without sufficient scientific evidence

5.15 Norway considered that Article 5.1, which required that measures be based on a risk assessment, should be read in conjunction with the basic obligation in Article 2.2, which required that all measures be based on scientific principles and not be maintained without sufficient scientific evidence. Norway noted that the documents referred to in AQPM 1999/51 were all marked "drafts". Thus the first element of this requirement, that there actually exist a risk assessment, was somewhat doubtful.

5.16 Assuming that a risk assessment existed, Norway did not dispute that Australia's measures were mentioned in the 1999 IRA. However, Article 5.1 read in conjunction with Article 2.2 required that there be a scientific foundation for establishing that a given measure would reduce the risk. The effectiveness of the measures evaluated by Australia in the 1999 IRA was only described in very general terms. This was also the case for the evaluation of the relative effectiveness of the different measures. Thus in Norway's view, the scientific underpinning for choosing a cocktail of measures with respect to salmon did not seem to meet this requirement.

The requirement that a measure be necessary and not more trade restrictive than required

5.17 Norway submitted that the level of protection must satisfy not only the requirement that it be precise enough to allow a meaningful comparison of measures, but also the basic requirement that it relate to a specific risk. It should be clear that the level of protection must relate to the risk of introduction of a disease, as it was the consequences (biological and economic) of such disease introduction against which a country wanted to protect itself. Norway welcomed the fact that Australia used disease-based risk assessment and disease-based risk management. However, Australia's level of protection did not apply to a particular disease, but to all salmon. While Australia's theoretical approach was correct - relating the risk to disease introduction - it did not seem to apply this approach in practice.

5.18 Norway argued that it was not clear that there was a need for different measures against other finfish imported inter alia for human consumption and containing the same diseases as salmonids. Taking A. salmonicida as an example, the pattern for disease introduction from non-viable salmonids and other non-viable finfish would in both cases be through waste introduced into the aquatic environment. The consequences for Australian salmon growers would be identical regardless where the bacteria came from. The likelihood of these bacteria being in imported fish did not seem to differ radically between salmon and other finfish, which were also imported in much larger quantities without evisceration, and so generally represented a much greater risk. According to Norway, Australia did not substantiate that the likelihood of disease spreading was different for one type of fish-waste as opposed to waste from other fish once it contained the bacteria. On the contrary, the 1999 IRA noted explicitly that infection could be transmitted horizontally. Yet, the conclusions in the 1999 IRA were radically different for the two kinds of fish, and the measures chosen were much more burdensome for salmon. Whether or not the intent was to protect Australian salmon farmers from competition, this was clearly the effect.

5.19 Norway emphasized one element of the Australian measure which seemed unrelated to the risk reduction purportedly desired by Australia. Norway found it difficult to see how a requirement that fish and fillets be "not more than 450 grams" and "pan size" had a relevant bearing on the risk, and found that Australia gave no rational explanation in the 1999 IRA. Since restaurants and hotels normally required fish and fillets of greater size, Norway argued that this requirement served only to protect this market for Australian product, and thus violated Articles 2.2 and 5.6.

5.20 In response to a question from Australia regarding alternatives to the 450 gram requirement, Norway argued that further processing in Australia would presumably include smoking or canning. With respect to smoking, the problem of waste did not necessarily arise, as smoked salmon in whole sides was often traded with skin on. Furthermore, if Australia instead required that all domestically smoked salmon fulfil the same requirements as imports of smoked salmon, the problem could not arise. (Norway did not advocate such restrictions on smoking, however). Australia had not substantiated that waste (e.g. skin, bones, gills) from normally traded eviscerated fish represented a quarantine risk that required such a restriction. Furthermore, if processing facilities were a problem, strict controls of these installations would achieve the same result with less restrictions on trade.

5.21 Norway noted that food preparation in restaurants - which always demanded large fillets of more than 450 grams, could not be deemed as further processing. A normal portion of skin-on fish fillet for one person would be between 250 and 300 grams. Under the Australian requirement, it was impossible for a family of two or more persons to prepare a salmon dinner without buying several portions instead of one larger piece. The 450 gram requirement therefore seemed irrational and could only be considered completely arbitrary.

C. UNITED STATES

5.22 The United States first addressed the procedural issue of the relationship between Articles 21.5 and 22 of the DSU. The United States argued that the Panel need not and should not rule on this issue, since it had been left to the ongoing negotiating process to resolve, consistent with Article 3.2 of the DSU.

5.23 A second procedural issue concerned the broad and inclusive approach taken by the Panel in defining the scope of the proceeding, with which the United States agreed. The United States considered the Panel's approach to be the only one consistent with the purpose of the WTO dispute settlement system as reflected in Articles 3 and 21 of the DSU: the prompt settlement of disputes.

5.24 The United States welcomed the progress in the implementation of the DSB rulings and recommendations Australia had made since July 1999, which allowed importation of salmon fillets or cutlets in "consumer-ready" form. The United States reported that Australia and the United States had agreed in November 1999 upon the terms for certification of US salmonid products to be exported to Australia. However, this certification would still not permit the importation of fresh or frozen salmon with skin or bones in a portion greater than 450 grams unless they were to be further processed in quarantine to a consumer-ready form at a certified Australian processing facility. The United States remained concerned about this size limitation, particularly as no processing facilities had as yet been certified to be able to conduct the further processing required.

5.25 Australia's 450 gram limitation denied US exporters the opportunity they had elsewhere around the world to sell salmon whole to importers, who then cut or process the fish to the specifications of the market. Headed, eviscerated and gilled Pacific and Atlantic salmon, either cultured or wild, weighed from 2 to 20 kg, with the average typically in the 2 to 10 kg range. Boneless fillets from the average fish would range from 800 to 4000 grams According to the ABARE report, Salmon Imports into Australia (Australia's exhibit U), whole fresh fish which was gilled and gutted constituted half of the Australian market for salmon, while salmon for smoking, which used whole fish as well, constituted between 20 and 25 per cent of domestic production. The balance - approximately a quarter of the market - was sold primarily as fillets and steaks (including bulk packs of these), which was the lower end of the market. Thus, US salmon exports were relegated to serving less than a quarter of the market - and even there, they could not compete with domestic fillets or steaks exceeding 450 grams.

5.26 The United States agreed with Canada that there was no scientific basis for this significant restriction on trade. The United States argued that a July 1999 regulation could not be based on a risk analysis that had only been completed in November 1999. (Earlier versions of the 1999 IRA were labelled "draft"). Government limitation on the size of imported product could not be expected to change the overall risk of pathogen introduction, if such a risk existed.

5.27 The United States cited the quantitative risk assessment prepared by New Zealand (Stone et al., 1997), which estimated that the risk of introducing Aeromonas salmonicida into New Zealand in a whole, eviscerated fish, with a 99 per cent confidence interval, conservatively would be less than one in a million per tonne of imported fish. This assessment was based on the import of cultured or wild salmonids from anywhere in the world. If considering only wild Pacific salmon, the estimated odds of introduction of Aeromonas salmonicida , with a 95 per cent confidence interval, was a hundred times less likely, or one in a billion per tonne imported. The quantitative risk assessment performed by New Zealand, and clinical data gathered by United States and Canadian researchers, indicated that the bacteria and viruses of concern to Australia were very unlikely to be introduced in headed, gilled and eviscerated salmon products of any size.

5.28 The pathogen screening by United States and Canadian researchers was based on whole fish, and the quantitative assessment conducted by New Zealand was based on head-on eviscerated fish, both of which presented a higher likelihood of harbouring pathogens than the fillets in question. Accordingly, the likelihood of importing pathogens in a skin-on fillet of any weight was even smaller than the New Zealand statistic provided for the fish in the studies mentioned above, of one in a billion per tonne imported. Given the relatively lower projected volumes of import (the entire Australian market being less than 10,000 tonnes) the risk of introducing a salmonid pathogen into Australia for all practical purposes approached zero.

5.29 According to the United States, this conclusion was bolstered even further by the fact that all of the studies mentioned were conducted on fish that had not been frozen. The risk of introduction of exotic pathogens into Australia would be further minimized by the freezing of salmon or salmon products prior to export. Most pathogens were significantly reduced by freezing, while cooking would kill all pathogens.

5.30 In response to a question from Australia regarding whether New Zealand's risk assessment constituted a basis for risk management by Australia, the United States explained that it had referenced the New Zealand risk assessment in the context of supporting United States and Canadian researchers who noted the similarity of pathogen-free findings in whole fish. The United States agreed with Canada that although the New Zealand packaging requirements were unnecessary and trade restrictive, they were less trade restrictive than the regulations Australia had implemented.

5.31 In response to a second question from Australia regarding alternatives to the 450 gram limitation, the United States noted that the burden of proof was on the complaining party to identify a measure that satisfied the requirements of Article 5.6, and any alternative identified by the United States would not be relevant to the Panel's findings. Since some salmon greater than 450 grams would not be further processed in Australia, but consumed directly by the end user, Australia's measure was more trade-restrictive than required, since it restricted trade in product that did not pose the alleged risk.

5.32 The United States explained that it sought the opportunity to sell salmon that was not only in fillet form, but salmon that was headed, gilled and gutted. Even in the case of fillets, it was commercially preferable to sell fillets skin-on, as the skin helped to maintain the physical integrity of the salmon, reduce moisture loss and increase storage life of the product. Fillets of salmon produced in the United States typically weighed between 800 and 1500 grams, although King salmon fillets could weigh as much as 4000 grams. Typical European requests were for 800 to 1200 gram and 1200 to 1600 gram fillets. Furthermore, fillets purchased by the consumer would be cooked skin-on, which would kill pathogens found on or in the skin. Headed and gutted product would also frequently be cooked as it was, thereby killing any pathogens if they were present.

5.33 With regard to Australia's concern over commercial wastes, the United States concurred with Canada that processing facilities in an environment with a conservative level of protection would require treatment of waste products for any fisheries products.

5.34 The United States proposed that a less trade restrictive measure would allow the direct importation of any salmon product, regardless of weight, for direct consumer consumption and purchase by the retail sector, distributors and institutional users. With respect to salmon destined for further processing, the United States did not believe there was any risk from the importation of headed and gutted product or the resultant waste from processing commercial volumes of fish. However, any response to alleged risks from processing should not be dealt with through size or volume restrictions on imports, but rather through requirements that the processing facility dispose of its wastes through a municipal sewage system or by heat-treating the wastes at a rendering facility.