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Japan - Measures Affecting Agricultural Products

Report of the Panel

(Continued)


    C. Application of the SPS Agreement

  1. The United States argued that the SPS Agreement applied to "all sanitary and phytosanitary measures which might, directly or indirectly, affect international trade" (Article 1.1). In this sense, Japan's measures were phytosanitary measures50, as defined by the SPS Agreement in Annex A, and directly or indirectly affected international trade.
  2. According to the United States, the definition demonstrated that whether a measure was a sanitary or phytosanitary measure depended on the purpose of the measure. Japan had stated that the purpose of varietal testing was to protect plant life or health within Japan from the establishment and spread of certain pests that could cause harm to its agriculture. 51 In order to export varieties to Japan, the exporting country had to obtain certification that it had met Japanese requirements.
  3. As the definition of a "sanitary or phytosanitary measure" in Annex A of the SPS Agreement specifically listed "testing procedures" as being included in sanitary and phytosanitary measures, Japan's measure at issue was a phytosanitary measure. The United States further argued that Japan's measure was a "procedure to check and ensure the fulfilment of sanitary or phytosanitary measures" (chapeau to Annex C of the SPS Agreement). In addition, the United States was of the view that as a phytosanitary measure, it was subject to all of the requirements of Articles 2, 5, and 7 of the SPS Agreement. As an Annex C measure, it was also subject to all of the requirements of Article 8 and Annex C of the SPS Agreement.
  4. Japan's measure applied to imports of certain agricultural products such as apples, cherries, walnuts, and nectarines. It prohibited the importation of any agricultural product that had been identified by Japan as a host to a quarantine pest. The ban was only lifted upon a showing that a quarantine treatment for a pest achieved Japan's level of protection for each variety of the agricultural product, irrespective of the fact that an effective quarantine treatment had been accepted for another variety of the same product. Therefore, the Japanese requirement of varietal testing adversely affected international trade.
  5. Japan did not dispute that the measure at issue was covered by the SPS Agreement. Japan argued that the requirement of demonstration of efficacy was consistent with international practice. There was nothing in the SPS Agreement which prevented enforcement of that requirement.
  6. D. Burden of Proof

  7. The United States claimed that Japan had failed to present "minimally sufficient evidence" as to why variety mattered in regard to MB quarantine treatment. Instead, Japan insisted that the exporting country had to provide evidence as to why variety did not matter. This was clearly contrary to the obligations of the SPS Agreement. The United States accepted that it had the burden to establish a prima facie case that the measure of varietal testing was inconsistent with the SPS Agreement In this dispute, the United States maintained that it had shown that Japan's measure was not based on scientific evidence and a risk assessment, that all available scientific and empirical evidence indicated that differences among varieties did not affect efficacy of treatment against codling moth; that the testing of efficacy of quarantine treatment by product alone achieved Japan�s level of protection against the risk of entry, establishment and spread of codling moth; and that testing and treatment by product was a significantly less trade restrictive measure available to Japan. The United States had met its burden of proof. As the Appellate Body in EC Measures Concerning Meat and Meat Products ("EC - Hormones") stated, "when the prima facie case is made, the burden of proof moves to the defending party, which must in turn counter or refute the claimed inconsistency".52
  8. Japan contended that the United States had not submitted any demonstration that the proposed product-by-product approach would be effective for all varieties. The requirement of demonstration, which was the exercise of domestic authority under the Plant Protection Law, was not only reasonable in light of the disparity of information but was consistent with established international practice. Furthermore, Japan noted that there was no disagreement between the parties in this respect; the United States had accepted this principle in that it had stated that it was reasonable for the importing country to require the exporting country to propose and substantiate the efficacy of an approach that achieved the importing country�s level of phytosanitary protection (paragraph 4.50). There was nothing in the SPS Agreement which prevented enforcement of the requirement of demonstration as such; it was not per se inconsistent with the SPS Agreement. It was the responsibility of an applicant to prove safety (or absence of harm) of a medicinal product, for example; it was not the obligation of Member governments under the SPS Agreement to disprove safety. No Member government of the WTO allowed the applicant the luxury of obtaining governmental approval of a drug, food additive or phytosanitary treatment simply because inefficacy and/or danger thereof had not been proven. Nor was it Japan's obligation to scientifically demonstrate that varieties resulted in different degrees of efficacy of a treatment by, for example, conducting large-scale tests at Japan's expense. Such interpretation of the provisions of the SPS Agreement was tantamount to denial of the requirement of demonstration by the exporting government. The issue was rather whether or not the importing authorities had acted in conformity with the Agreement in perceiving the risk presented by the eventual importation of a different variety. Japan claimed that there was data which suggested the possible presence of varietal difference in efficacy of a treatment which gave rise to the concern. Hence, the requirement under the SPS Agreement of scientific evidence or a risk assessment was fully met. Insofar as the requirement of demonstration was thus consistent with the SPS Agreement, the exporting government had to show, with scientific evidence, that a given treatment would be effective for the proposed varieties.
  9. Japan noted that it did not impose a particular measure, as long as a proposed alternative method demonstrated efficacy equivalent to the import prohibition. 53 For instance, for lemons, grapefruits and ponkan oranges, Japan had approved importation on a product-by-product basis (although the relevant pest, fruit fly, and the relevant treatment, cold treatment, were not covered by the terms of reference of the current dispute). This was because most of these citrus varieties had been developed by somatic mutation, such as bud mutation, and their varietal differences were not known to be significant.
  10. Japan argued that the United States had not submitted any relevant evidence in this regard. Nor had any convincing argument to support the absence of varietal differences been made. In order for the United States position to prevail under Articles 2.2 and 5.1, it had to prove that the varietal risk was either non-existent or insignificant in light of scientific evidence and/or a risk assessment. It was not sufficient for the United States to prove that there were risks other than those resulting from varietal differences including "natural variation". The United States had repeated arguments that (i) laboratory test results were unreliable and that (ii) the existing treatment had been effective so far. In doing so, the United States had failed to show that Japan was not abiding by the requirement of scientific basis or evidence. Hence, Japan urged the Panel to apply the burden of proof principle which was stated in the EC - Hormones case correctly. The United States had failed to make a prima facie case.
  11. The United States stressed that it was important not to confuse the fact that the exporter would typically assume the burden of meeting the importing country's concerns with the question of the burden of proof for dispute settlement purposes. The United States had always accepted that in the current proceeding it bore the burden of presenting facts and arguments sufficient to establish a presumption that Japan's measure was inconsistent with the cited WTO Agreements. However, this did not alter the fact that Japan was required to have sufficient scientific evidence to maintain its measure and to base its measure on a risk assessment. The United States had proven that Japan did not have sufficient scientific evidence or a risk assessment to justify its assumption that variety mattered. The United States did not need to prove that there were no varietal differences that mattered for purposes of treatment efficacy. This was a fundamental issue of burden of proof under the SPS Agreement; in EC � Hormones, the European Communities claimed that it could ban meat because it was not proven that there was no risk. This approach had not been accepted by the Appellate Body.
  12. The United States noted that as a general proposition, assuming that a product proposed for export was indeed a potential host for a pest appropriately determined to be a pest of quarantine significance, it was reasonable for the importing country to require the exporting country to propose and substantiate the efficacy of an approach that achieved the importing country�s level of phytosanitary protection. As Japan acknowledged, such a proposal could involve eradication of the pest from the territory, establishment of a pest-free area, or a disinfestation treatment (paragraph 4.29). The United States maintained, however, that such an approach could also involve integrated pest-management practices and a systems approach, which did not necessarily involve a disinfestation treatment. Indeed, the United States had long proposed integrated pest-management practices for codling moth in conjunction with MB fumigation and, in the case of apples, cold treatment. The United States believed it had established the efficacy of this approach for apples, cherries, nectarines, and walnuts.
  13. In the absence of a recognized pest-free area, it was the experience of the United States that Japan did not permit importation of any varieties of the relevant products without demonstration of the efficacy of the applicable MB quarantine treatment for codling moth on each and every variety. This rigid criterion for demonstration of efficacy was not a reasonable procedural requirement.
  14. The United States noted that in connection with Japan's claims regarding lemons, grapefruits and ponkan oranges, Dr. Ducom (an expert advising the Panel54) had stated that there was no scientific basis for distinguishing these products from the products at issue in considering whether product-based testing was feasible. Further, the United States pointed out that the treatments developed for each product had been uniformly effective for the entire commodity.
  15. Japan noted in respect of integrated pest management or other techniques, that while they were effective to reduce the level of infestation, they did not eliminate the risk of the pest to the level equivalent to an import prohibition. Disinfestation had been chosen in the light of these considerations, and not because pre- or post-harvest techniques were irrelevant.
  16. E. Articles 2.2, 5.1 and 5.2

    1. General

  17. The United States argued that the Japanese varietal testing requirement was maintained without sufficient evidence in contravention of Article 2.2. Furthermore, it was not based on an assessment of risk in contravention of Articles 5.1 and 5.2. The SPS Agreement indicated in Article 2.2 that a Member was not allowed to maintain a phytosanitary measure "without sufficient scientific evidence" and a measure had to be "based on scientific principles". Article 5.1 stated that a Member had to ensure that its phytosanitary measure was based on an assessment, "as appropriate to the circumstances, of the risks to ... plant life or health".
  18. In relation to risk assessment, the United States recalled that the Appellate Body Report on EC - Hormones had made it clear that Article 5.1 could "be viewed as a specific application of the basic obligations contained in Article 2.2 of the SPS Agreement". 55 Thus, the United States argued, Article 2.2 and Article 5.1 of the SPS Agreement were necessarily linked together. Under Articles 5.1 and 5.2 of the SPS Agreement, Japan was required to base its SPS measure, in this instance variety-by-variety testing for quarantine efficacy, on a risk assessment. Such an assessment was important in establishing whether the measure was "based on scientific principles", and was not "maintained without scientific evidence" (Article 2.2).
  19. The United States stressed its request that the Panel make findings with respect to both Article 2.2 and Article 5.1 of the SPS Agreement. In the view of the United States, the heart of the dispute was the fact that Japan�s measure did not merely lack an assessment of risk, it lacked sufficient scientific evidence to support the measure. This had also been stressed by the Appellate Body's statement in EC - Hormones that "Articles 2.2 and 5.1 should constantly be read together. Article 2.2 informs Article 5.1: the elements that define the basic obligation set out in Article 2.2 impart meaning to Article 5.1". 56 Furthermore, in that dispute, where the Panel made a finding under Article 5.1 but not Article 2.2, the Appellate Body expressed that it was "surprised by the fact that the Panel had not begun its analysis of this whole case by focusing on Article 2 that is captioned �Basic Rights and Obligations,� an approach that appears logically attractive". 57
  20. The United States stressed that a failure to make a finding with respect to Article 2.2 could lead to confusion rather than furthering the objective of "providing security and predictability to the multilateral trading system". 58 If the Panel were to make a finding on all of the elements necessary to make a determination with respect to Article 2.2 (which in this dispute would be inherent in a finding with respect to Article 5.1), and yet not actually make that determination, it could be perceived by some as implying that Japan�s ban was not maintained without sufficient scientific evidence. This negative implication would be inaccurate. Japan's measure did not merely lack a risk assessment, it was not supported by scientific evidence. In that regard, the lack of sufficient scientific evidence was a more fundamental and fatal flaw than the lack of a risk assessment, and thus was a more important finding than a finding under Article 5.1.

To continue with Article 2.2


50 Relating to the protection of the life or health of plants.

51 In the Government of Japan's response to Question 2 of US Consultation Questions, Japan had stated that "GOJ designates pests and diseases, which do not exist in Japan but which could conceivably cause serious damage to agriculture if outbreak were to occur, and prohibits imports of their host plants". (US Exhibit 3)

52 WT/DS/26/AB/R, adopted 13 February 1998, paragraph 98.

53 MB fumigation, cold treatment, vapor heat treatment, dry heat treatment, phosphine fumigation and a combination of these alternatives were an example of specific disinfestation measures which Japan had already approved.

54 See Section VI of this report in respect of the Panel's consultation with scientific experts. The experts advising the Panel are listed under paragraph 6.4.

55 Op. cit., p.72, paragraph 180.

56 Ibid.

57 Ibid., paragraph 250.

58 Article 3.2 of the DSU.