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Japan - Measures Affecting Agricultural Products

Report of the Panel

(Continued)


    IV. Arguments of the Parties

    A. The scope of the Dispute

  1. The United States recalled that following the establishment of the Panel, Japan had raised questions concerning the scope of the dispute. 20 The United States reiterated that the scope of the dispute at issue, consistent with the request of the United States for the establishment of the Panel on 18 November 199721, was the prohibition by Japan of the importation of any variety of an agricultural product on which Japan claimed that the pest codling moth might occur until such time as the variety had been separately tested with respect to the efficacy of treatment with methyl bromide or treatment with methyl bromide and cold storage.
  2. The United States noted that varietal testing applied to potential US fruit exports largely in instances that involved codling moth. The facts submitted by the United States were therefore limited to varietal testing of quarantine treatment efficacy against codling moth on certain products, using the preferred treatment of MB fumigation or a two-component treatment of MB fumigation and cold storage. The scope of the dispute thus concerned the prohibition by Japan on the importation of any variety of an agricultural product on which Japan claimed the pest codling moth could occur until such time as the variety had been separately tested with respect to the efficacy of treatment with methyl bromide or methyl bromide and cold storage.
  3. In its first submission, Japan raised two issues in respect of the scope of the dispute: (1) relevant provisions of the WTO agreements on which the complaining party�s claim was based, and (2) the factual scope of the complaint. Japan argued that in its request for bilateral consultations22, the United States had not clearly identified the relevant provisions and the covered agreements. The United States had stated that relevant provisions "include, but are not limited to" Articles 2, 4, 5 and 8 of the SPS Agreement, Article XI of GATT 1994 and Article 4 of the Agreement on Agriculture. The US request for the establishment of a panel had expanded the legal basis to "include, but are not limited to" Article 7 of the SPS Agreement. 23 Thereafter, the first written submission of the United States (of 19 February 1998) focused only on Articles 2.2, 5.1, 5.2, 5.6, 7 and 8, on Annex B, paragraph 1, and on Annex C, paragraph 1 (c) and (h). Moreover, Japan noted that although the United States referred to Article XI of GATT 1994 and to Article 4 of the Agreement on Agriculture in a footnote, it did not even attempt to offer a prima facie case in that regard.
  4. Japan argued that the Panel should find that the phrase "including but not necessarily limited to" did not constitute part of its terms of reference 24 in light of the recent Appellate Body ruling in India � Patent Protection for Pharmaceutical and Agricultural Chemical Products ("India - Pharmaceuticals"), which held that the phrase failed to comply with the requirement under Article 6.2 of the DSU. 25
  5. Japan argued, furthermore, that the Panel should also eliminate Article 7 of the SPS Agreement from the scope of its investigation, because that article was mentioned by the United States for the first time in its request for establishment of a panel, and no consultation had been held on that particular provision.
  6. In regard to the description of the scope of the dispute by the United States, Japan requested that the United States clarify if there was any fruit other than "apples, cherries, nectarines and walnuts" which the United States believed was covered by the complaint. Japan noted that for those four products there was no disagreement between the parties as to the efficacy of the current treatment being applied to the approved varieties. Hence, if the scope of the dispute were limited to those fruits, the matter before the Panel was a highly practical question of how effective the same treatment would be for varieties which had not been approved so far. In addition, Japan requested the United States to clarify if the scope of the examination by the Panel was limited to MB treatment or treatment with methyl bromide and cold storage.
  7. The United States claimed that Japan had misunderstood the Appellate Body Report on India � Pharmaceuticals. In that report, the Appellate Body found that the use of the phrase "including but not necessarily limited to" was "not sufficient to bring a claim relating to Article 63 [of the TRIPS Agreement] within the terms of reference of the Panel". 26 Accordingly, the findings of the India - Pharmaceuticals Report applied in a situation where a complainant made a claim with respect to a provision of an agreement that was not identified in the request for a panel. 27 The current dispute did not present the Panel with a similar situation. The United States had not made any claim with respect to any provision of an agreement that had not been specifically identified in its request for the Panel at issue. If at some time Japan were to believe that the United States had made such a claim, then Japan could have presented its arguments to the Panel and the United States would have had the opportunity to respond. The United States argued that Japan was seeking a finding in the abstract apparently based on a hypothetical situation, a finding that furthermore would be inconsistent with the practice of judicial economy supported by panels and the Appellate Body. 28
  8. In respect of Article 7 of the SPS Agreement, the United States claimed that Japan was in error in stating that no consultation was held on Article 7 of the SPS Agreement. In fact, Article 7 had been specifically mentioned in the US statement at those consultations. 29 In the course of the US discussions with Japan concerning Japan�s measures at issue, and also considering Japan�s answers to questions before the consultations, it became clear to the United States that these measures were not transparent and were not clearly set forth anywhere. It was only in the consultations, where Japan provided an oral explanation of the way in which some of its measures operated, that the United States had been able to begin to understand the legal basis and scope of Japan�s measures.
  9. The United States noted that a consultation request had to provide an "identification of the measures at issue and an indication of the legal basis for the complaint" (DSU Article 4.4). However, nothing in the DSU required that a Member had to ascertain all of the possible legal claims and relevant provisions of the WTO agreements before the Member could even request consultations. In this context, the United States noted that the Panel in European Communities - Regime for the Importation, Sale and Distribution of Bananas stated:
  10. "[as to the argument that] consultations must lead to an adequate explanation of the Complainants� case, we cannot agree. Consultations are the first step in the dispute settlement process. While one function of the consultations may be to clarify what the case is about, there is nothing in the DSU that provides that a complainant cannot request a panel unless its case is adequately explained in the consultations. � Ultimately, the function of providing notice to a respondent of a complainant�s claims and arguments is served by the request for establishment of a panel and by the complainant�s submissions to that panel." 30

  11. The United States stated that one of the purposes of consultations was to foster a better understanding of the relevant measures and concerns of the various Members in order to promote a satisfactory adjustment of the matter. Consultations were often the first time that the Member maintaining the measure provided a detailed description of the measure and relevant facts and legal documents. Consultations were not a "dress rehearsal" or "moot court" for the panel process requiring Members to have worked out all of their claims and positions in advance and presenting them in the consultations for the other side to practice its prepared responses.
  12. The United States noted that the DSU reflected the difference between requests for panels and requests for consultations by using different terms for each. With respect to panels, the DSU required that a request for the establishment of a panel provide a "brief summary of the legal basis of the complaint sufficient to present the problem clearly". 31 However, with respect to consultations, the DSU merely required that requests for consultations give "an indication" of the legal basis for the complaint. 32 Moreover, if a matter had indeed been discussed in consultations, as had been the case with respect to the US claim under Article 7 of the SPS Agreement, the responding party had even less basis to claim unfair surprise. For the above reasons, there was no basis for the Panel to find that the US claim under Article 7 of the SPS Agreement fell outside the scope of the panel proceeding. 33
  13. The United States reiterated that the dispute covered the prohibition by Japan on the importation of any variety of an agricultural product on which Japan claimed that the pest codling moth could occur. In this regard, the United States noted that Japan was best positioned to provide a comprehensive list of products to which its measures applied. Due to the lack of transparency of Japan�s measures, the United States had had difficulty in ascertaining the full range of agricultural products involved. According to the "List of Plants Subject to Import Prohibition" submitted by Japan in response to US questions in connection with the consultations, the United States understood that Japan�s varietal testing requirements, as they pertained to the pest codling moth, also applied to at least the following products: "apricot, cherry, ... plum, pear, quince and peach, ... and apple, ... and fresh fruits and nuts in shell of walnut". 34 The United States requested further clarification from Japan as to whether there were other products that were or could be subject to this import prohibition. For the purposes of the dispute at issue, the relevant treatments were treatment with methyl bromide or treatment with methyl bromide and cold storage.
  14. Japan explained that the Japanese Government had long since published in the Official Gazette the list of plants subject to import prohibition, namely eight plant products which were host plants of codling moth: apricot, plum, pear, quince, apple, walnut, peach including nectarine and cherry. However, Japan maintained that from a practical point of view, the products to be covered by the current Panel had to be limited to four: apples, cherries, nectarines and walnuts. Japan noted that no data had been provided nor any mention been made of any product other than these four products in the US submissions; hence, the other four products should be excluded from the scope the dispute.
  15. The United States noted that while it had thus far referenced only four products for which it had negotiated entry on some varieties - apples, cherries, walnuts and nectarines - the principles that applied to these products applied equally to the other four products named in the relevant regulation. The United States had an interest in exporting to Japan also plums, pears, quince, peaches and apricots, and had, in fact, requested permission to export to Japan one variety of plums. The omission of the latter products from the debate had only to do with the fact that these had not yet been proposed for export to Japan. Japan�s measure was an import prohibition or restriction with respect to these products as well, and the United States had specifically included in its claims all products subject to Japan�s measure. Moreover, unlike cherries, nectarines and walnuts, Japan had not pointed to a scientific study regarding any of these other products - presumably because there were no studies that supported its theory of variety affecting efficacy of treatment.
  16. The Panel made a preliminary ruling on these matters at its first substantive meeting with the parties on 2 April 1998. The ruling is contained in paragraph 8.4.

To continue with The measure at issue


20 This was contained in a letter from Japan to the Chairman of the Panel, dated 13 January 1998.

21 WT/DS76/2.

22 WT/DS76/1.

23 WT/DS76/2.

24 WT/DS76/3.

25 WT/DS50/AB/R, adopted 19 December 1997, paragraph 90.

26 Ibid, paragraph 90.

27 The United States noted that it had been described in the Appellate Body Report on India - Pharmaceuticals as "there is a failure to identify a specific provision of an agreement that is alleged to have been violated", WT/DS50/AB/R, paragraph 91.

28 In this respect, the United States recalled the Appellate Body Report in United States - Measure Affecting Imports of Woven Wool Shirts and Blouses from India, adopted 23 May 1995, p.18.

29 The United States referred to US Exhibit 31, p.5.

30 WT/DS27/R/USA, adopted 25 September 1997, paragraph 7.20.

31 Article 6.2 of the DSU.

32 Article 4.4 of the DSU.

33 In this respect, the United States agreed with the findings of the Panel in European Communities - Regime for the Importation, Sale and Distribution of Bananas: "Consultations are, however, a matter reserved for the parties. The DSB is not involved; no panel is involved; and the consultations are held in the absence of the Secretariat. In these circumstances, we are not in a position to evaluate the consultation process in order to determine if it functioned in a particular way. While a mutually agreed solution is to be preferred, in some cases it is not possible for parties to agree upon one. In those cases, it is our view that the function of a panel is only to ascertain that consultations, if required, were in fact held or, at least, requested". (WT/DS27/R/USA, paragraph 7.19)

34 Japan clarified that the term "fresh fruits" related solely to walnuts. Furthermore, nectarine was a variety of peach, this was subsequently confirmed by all three experts advising the panel � therefore the term: "peaches, including nectarines" (Section VI of this report deals with the Panel's consultation with scientific experts).