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World Trade
Organization

WT/DS18/AB/R
20 October 1998
(98-0000)
Original: English

Australia - Measures Affecting Importation of Salmon

Report of the Appellate Body

(Continued)


164. Australia contends that this second "warning signal" is effectively no different in character from the first "warning signal" and should therefore be discounted.125 We note, however, that in this case the degree of difference in the levels of protection (prohibition versus tolerance) is indeed, as the Panel stated, "rather substantial". We, therefore, consider it legitimate to treat this difference as a separate warning signal.

165. The third "warning signal" the Panel considered was the inconsistency of the SPS measure at issue with Articles 5.1 and 2.2 of the SPS Agreement. The Panel considered that its earlier finding of inconsistency with Articles 5.1 and 2.2:

... may, together with other factors, lead to the conclusion that the measure at issue results in a "disguised restriction on international trade". Indeed, considering these violations of Articles 5.1 and 2.2 it would seem that the measure at issue constitutes an import prohibition, i.e., a restriction on international trade, "disguised" as a sanitary measure. We do stress, however, that this additional "warning signal" as such cannot be sufficient to conclude that the measure results in a "disguised restriction on international trade".126

166. Australia objects to the use of this inconsistency as a warning signal in the context of the third element of Article 5.5.127 It argues that inconsistency with Article 5.1 cannot "presume" or pre-empt a finding under Article 5.5. We note that a finding that an SPS measure is not based on an assessment of the risks to human, animal or plant life or health - either because there was no risk assessment at all or because there is an insufficient risk assessment - is a strong indication that this measure is not really concerned with the protection of human, animal or plant life or health but is instead a trade-restrictive measure taken in the guise of an SPS measure, i.e., a "disguised restriction on international trade". We, therefore, consider that the finding of inconsistency with Article 5.1 is an appropriate warning signal for a "disguised restriction on international trade".

167. The first "additional factor" considered by the Panel is the fact that the two substantially different SPS measures that Australia applies (import prohibition versus import tolerance) lead to discrimination between salmon, on the one hand, and herring used as bait and live ornamental finfish on the other. In the Panel's view, the concept of "disguised restriction on international trade" in Article 5.5 includes, among other things, restrictions constituting arbitrary or unjustifiable discrimination between certain products.128

168. Australia contends that this first "additional factor" is merely a combination of the first two "warning signals" and does not, therefore, constitute additional "evidence". Furthermore, Australia argues that this first "additional factor" is based on an inappropriate analogy to Article III of the GATT 1994 and a wrong concept of discrimination which, in the context of Article 5.5, means, in its view, discrimination between countries.129 According to Australia, the first "additional factor" should therefore be excluded.

169. We believe that the first "additional factor" should indeed be excluded from the examination of the third element of Article 5.5. All "arbitrary or unjustifiable distinctions" in levels of protection will lead logically to discrimination between products, whether the products are the same (e.g., discrimination between imports of salmon from different countries or between imported salmon and domestic salmon) or different (e.g., salmon versus herring used as bait and live ornamental finfish). The first "additional factor" is therefore not different from the first warning signal, and should not be taken into account as a separate factor in the determination of whether an SPS measure results in a "disguised restriction on international trade".

170. The second "additional factor" considered by the Panel was the substantial, but unexplained change in conclusion between the 1995 Draft Report (which recommended allowing the importation of ocean-caught Pacific salmon under certain conditions) and the 1996 Final Report (which recommended continuing the import prohibition). The Panel suggested that the decisive reason for the reversal of the 1995 draft recommendation "might well have been inspired by domestic pressures to protect the Australian salmon industry against import competition".130

171. Australia argues that the Panel erred in considering this difference as a factor to be taken into account in the examination of the third element of Article 5.5. Australia contends that the Panel has incorrectly accorded a draft recommendation the status of an SPS measure and that no provision of the SPS Agreement requires WTO Members to implement draft recommendations absent new scientific evidence. Moreover, Australia argues that the Panel refused to consider its arguments and evidence on the role of draft reports and recommendation in the decision-making process of governments. Australia contends that the Panel mischaracterized the reasons for the introduction of QP86A. In Australia's view, the Panel also erred in speculating about the presence and role of lobbying in Australia's decision to adopt the 1996 Final Report.131

172. We consider Australia's arguments to be without merit. First, we note that paragraph 1 of Annex A of the SPS Agreement defines a sanitary measure of the type relevant in this dispute as a measure applied to protect animal life or health within the territory of a Member from risks arising from the entry, establishment or spread of diseases. In the light of this definition, the Panel was correct to consider the recommendation of the 1995 Draft Report to allow under certain conditions the importation of ocean-caught Pacific salmon to be a recommendation of an SPS measure.

173. Second, we note that the Panel did not at any point state that WTO Members are obliged to implement draft recommendations absent new scientific evidence. It did not introduce such obligation. We note that the Panel explicitly acknowledged that the substantial but unexplained reversal of the 1995 draft recommendation does not constitute, in itself, sufficient proof that the measure results in a disguised restriction on trade.132 The Panel merely considered that this factor "can be taken into account cumulatively with other factors" in the examination under the third element of Article 5.5. We agree with the Panel. We do not share Australia's criticism on the Panel's use of the 1995 Draft Report, which the Panel used correctly as "part of the architecture" or "part of a process"133 leading to the 1996 Final Report. We also do not see the relevance of the historical reasons for the introduction of QP86A in 1975 to the examination of the substantial changes in conclusion between the 1995 Draft Report and the 1996 Final Report.

174. The third "additional factor" considered by the Panel was the absence of controls on the internal movement of salmon products within Australia compared to the prohibition of the importation of ocean-caught Pacific salmon.134 The Panel did not come to a conclusion on the existence or nature of this alleged difference, but considered that its doubts whether Australia applies similarly strict sanitary standards, "though probably not conclusive as such, can also be taken into account, cumulatively with other factors, in [its] decision on whether the measure at issue results in a 'disguised restriction on international trade'."135

175. Australia contends that the Panel erred in implying that consistency with Article 5.5, requires either restrictions on the internal movement of salmon products within Australia or, alternatively, that Australia apply import zoning to grant access to Australia for ocean-caught Pacific salmon.136

176. We note that, as acknowledged by Australia137, the Panel did not conclude that the alleged absence of internal controls constituted a violation of Article 5.5 or any other provision of the SPS Agreement. The Panel merely stated its doubts on whether Australia applies similarly strict sanitary standards on the internal movement of salmon products within Australia as it does on the importation of salmon products and considered that as a factor which can be taken into account in the examination under the third element of Article 5.5. We consider that these doubts do not carry much weight, but we agree with the Panel that they can nevertheless be taken into consideration.138

177. In the above analysis, we have upheld the Panel's findings on the first, second and third "warning signals" as well as its findings on the second and third "additional factors". We have only reversed the Panel's finding on the first "additional factor". We consider, however, that this reversal does not affect the validity of the Panel's conclusion in paragraph 8.159 of its Report, that the "warning signals" and "other factors", considered cumulatively, lead to the conclusion that the distinctions in the levels of protection imposed by Australia result in a disguised restriction on international trade.

178. We, therefore, uphold the Panel's finding that, by maintaining the measure at issue, Australia has acted inconsistently with its obligations under Article 5.5, and, by implication, Article 2.3 of the SPS Agreement.139

D. Article 5.6 of the SPS Agreement

179. We next consider the question of whether the Panel erred in finding that the SPS measure at issue is "more trade-restrictive than required" to achieve Australia's appropriate level of protection, and, therefore, that Australia has acted inconsistently with Article 5.6 of the SPS Agreement.

180. After noting that Article 5.6 must be read in context and, in particular, in light of Article 2.2 of the SPS Agreement140, the Panel turned its attention to the footnote to Article 5.6.141 In the Panel's view, this footnote defines an SPS measure to be "more trade-restrictive than required" only if there is another SPS 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.

The Panel viewed these three elements as cumulative in nature.142

181. Applying this three-pronged test to the facts in this case, the Panel first recalled that the 1996 Final Report identifies five potential quarantine policy options, ranging from heat treatment to simple evisceration, which are:

1. Permit the importation of product effectively heat treated for pathogens of concern

  • product might be heat treated prior to export, or
  • heat treated on arrival prior to general distribution

2. Implement the recommendations of the BRS report "Aquatic Animal Quarantine in Australia: Report of the Scientific Working Party on Aquatic Animal Quarantine" in part or in full [allowing imports of salmon but, inter alia, with certain certification and inspection requirements and only as eviscerated, filleted flesh].

3. Permit the importation of retail-ready fillets, for distribution in raw form under specified conditions.

4. Implement the recommendations of AQIS's 1995 draft IRA, that is, permit the importation of headless, gilled, eviscerated product under specified conditions.

5. Permit importation of product that complies with current international standards for trade in salmon product for human consumption, that is, OIE recommends that product be eviscerated and that no other risk reduction measures need be taken.143

182. The Panel then examined whether any of the latter four quarantine policy options (options 2 to 5, "the four options") meet the three elements of the test under the footnote to Article 5.6. The Panel excluded option 1 since it speaks of the heat-treatment requirement which the Panel considered to be the SPS measure against which the other four options are to be examined.

183. On the first element of the test under Article 5.6, i.e., whether there is an alternative SPS measure which is "reasonably available, taking into account technical and economic feasibility", the Panel noted that the four options were described in the 1996 Final Report as options "which merit consideration", and found that "this implies that the 1996 Final Report put forward the four alternatives ... as technically or economically feasible policy options". The Panel, therefore, concluded that the first element of the test under Article 5.6 is met.144

184. On the second element, i.e., whether any of these four quarantine policy options "achieves Australia's appropriate level of sanitary protection", the Panel started from the premise that:

... the level of protection implied or reflected in a sanitary measure or regime imposed by a WTO Member can be presumed to be at least as high as the level of protection considered to be appropriate by that Member.145

On the basis of this premise, it stated that:

... To determine whether any of the alternative measures meet Australia's appropriate level of protection, we should [...] examine whether these alternatives meet the level of protection currently achieved by the measure at issue.146

According to the Panel, Australia's "appropriate level of protection" with respect to ocean-caught Pacific salmon can, therefore, be presumed to be at least as high as the level of protection implied in the measure currently imposed, which in the view of the Panel is in effect and from a sanitary perspective the heat-treatment requirement.147

185. Following this reasoning and focusing its attention on the second quarantine policy option, i.e., certification, inspection, evisceration and filleting, the Panel found that there are alternative SPS measures which would meet Australia's appropriate level of protection.148 It, therefore, concluded that the second element of the test under Article 5.6 is met.149

186. On the third element, i.e., whether any of the four quarantine policy options is significantly less restrictive to trade than the SPS measure currently applied, the Panel pointed out that these four alternative quarantine policy options would "allow imports" of ocean-caught Pacific salmon, albeit under specific conditions, whereas the SPS measure currently applied amounts to an "outright prohibition". The Panel, therefore, concluded that the third element of the test under Article 5.6 is also met.150

187. Having found that all three elements of the test under Article 5.6 are fulfilled, the Panel reached the conclusion that Australia, by maintaining the measure at issue, has acted inconsistently with Article 5.6.151

188. We note that, in the examination of Canada's claim under Article 5.6, the Panel referred to its earlier ruling152 that "the measure in dispute is inconsistent with Article 2.2", and, therefore, the Panel decided that it "shall not further address the legal relationship between Articles 5.6 and 2.2".error on the SPS measure at issue, Australia argues that the Panel erred in considering that heat treatment "constitutes" the level of protection for fresh, chilled or frozen salmon. According to Australia, its appropriate level of protection is "explicit in the measure currently imposed, i.e., the import prohibition on fresh, chilled or frozen salmon."153

189. Australia appeals from the finding of inconsistency with Article 5.6. Australia does not disagree with the three-pronged legal test under Article 5.6 as set out by the Panel. Australia argues, however, that the Panel erred in law, particularly in the way in which it examined the second element of the test under Article 5.6, i.e., whether any of the four options achieves Australia's appropriate level of protection.154

190. According to Australia, the Panel incorrectly characterized the existing measure which currently achieves Australia's appropriate level of protection. Australia asserts that the Panel has effectively determined that Australia's appropriate level of protection for fresh, chilled or frozen salmon can be met by certain heat-treatment conditions.155 In line with its claim of error on the SPS measure at issue, Australia argues that the Panel erred in considering that heat treatment "constitutes" the level of protection for fresh, chilled or frozen salmon. According to Australia, its appropriate level of protection is "explicit in the measure currently imposed, i.e., the import prohibition on fresh, chilled or frozen salmon."156

191. We recall that we have already concluded that the SPS measure at issue is not the heat-treatment requirement, but rather is the import prohibition on fresh, chilled or frozen salmon.157 As we observed in the context of our examination of Article 5.1 of the SPS Agreement, the measure to be examined under the SPS Agreement is, therefore, the import prohibition. The Panel had to examine under Article 5.6 whether the import prohibition is "not more trade-restrictive than required" to achieve Australia's appropriate level of protection. Instead, the Panel examined whether the heat-treatment requirement is "not more trade-restrictive than required". Because of this error, we reverse the Panel's finding in paragraph 8.183 that Australia, by maintaining the SPS measure at issue, has acted inconsistently with Article 5.6.

To continue with Article 5.6 of the SPS Agreement


125Australia's appellant's submission, para. 217.

126Panel Report, para. 8.151.

127Australia's appellant's submission, paras. 218 and 273 - 276.

128Panel Report, para. 8.153.

129Australia's appellant's submission, paras. 219 and 277 - 280.

130Panel Report, para. 8.154.

131Australia's appellant's submission, paras. 281 - 289.

132Panel Report, para. 8.154.

133Panel Report, footnote 418.

134Panel Report, para. 8.155.

135Panel Report, para. 8.158.

136Australia's appellant's submission, para. 290.

137Ibid.

138That such doubts can be taken into consideration in the examination of the existence of discrimination in the context of Article 5.5 does not prejudice the question of whether or not there is a violation of Article 2.3, first sentence. This point will be taken up in Section F of Part V of this Report.

139Panel Report, para. 8.160.

140Panel Report, para. 8.165.

141Panel Report, para. 8.167.

142Panel Report, para. 8.167.

143Panel Report, para. 8.168, which incorporates the list of quarantine policy options found in the 1996 Final Report, p.62. "IRA" refers to "Import Risk Analysis".

144Panel Report, para. 8.171.

145Panel Report, para. 8.173.

146Panel Report, para. 8.173. See also para. 8.175, where the Panel said:

We recall, ... that to determine whether any of the alternative measures meet Australia's appropriate level of protection, we should examine whether these alternatives meet the level of protection currently achieved by the measure in place (in effect, the heat treatment requirements in the 1988 Conditions) ...

147Panel Report, para. 8.173.

148Panel Report, para. 8.176.

149Panel Report, para. 8.181.

150Panel Report, para. 8.182.

151Panel Report, para. 8.183.

152Panel Report, para. 8.99.

153Panel Report, para. 8.165.

154We note that Australia also claims with regard to the first element of the test under Article 5.6 that the Panel misapplied the rules on burden of proof. We deal with this claim in Part VI of this Report.

155Australia's appellant submission, para. 306.

156Australia's appellant submission, para. 311.

157Supra., para. 105.