3. Article 5.1

143. The United States recalled that Article 5.1 of the SPS Agreement required WTO Members to "ensure that their sanitary or phytosanitary measures were based on an assessment, as appropriate to the circumstances, of the risks to human, animal or plant life or health, taking into account risk assessment techniques developed by the relevant international organizations".
144. The United States noted that in bilateral consultations, Japan had asserted that it had conducted a risk assessment according to the procedures set out in the FAO PRA Guidelines (these procedures are described in paragraphs 2.29 and below). ¹²⁷ The document provided to the United States subsequent to the consultations, however, did not support this assertion. In the view of the United States, Japan had not followed the FAO guidelines. ¹²⁸ The document which Japan described as a "risk assessment" merely asserted that codling moth was a pest of quarantine significance. ¹²⁹ This was not in dispute. What was in dispute was whether the measure taken by Japan to ensure its level of protection was based on scientific principles, maintained with sufficient scientific evidence, and based on an assessment of risk. On this point, the Japanese document was silent. In other words, Japan's consideration of factors such as the ability of the pest to survive in Japan's climate, the biology of the moth as it related to crop seasons in Japan, the ability of the pest, once it had entered Japan, to infest and harm crops, or, the costs of such harm - were only relevant to the determination that codling moth was a quarantine pest. It was the practice of lifting the import ban only upon a showing that the same quarantine treatment was effective for every variety of a product that was the phytosanitary measure at issue. The United States had seen no assessment of that measure.
145. Japan argued that it had conducted a full-scale risk assessment in 1996 to ensure that current plant quarantine measures, and import prohibition in particular, were scientifically justified. This risk assessment was fully consistent with the PRA Guidelines established by the FAO. In this process, Japan had evaluated the "likelihood or entry, establishment or spread of a pest � within the territory � according to the � phytosanitary measures which might be applied, and of the associated potential biological and economic consequences�" (SPS Agreement, Annex A, paragraph 4) Furthermore, Japan stressed that an individual risk assessment of a particular plant was performed whenever an exporting government requested the lifting of an import prohibition of the product, or other modification of quarantine measures.
146. The immediate impetus for the full-scale risk assessment had come in 1995, when the FAO adopted the PRA Guidelines. In this risk analysis, Japan's objective had been to identify particularly dangerous pests which might not be countered by the normal screening process and which were likely to cause serious damage, and to effectively prevent their introduction by means of import prohibition or otherwise. In order to ensure objectivity of the analysis, Japan had sought advice on the selection of relevant factors and the pest risk assessment procedure from 28 researchers belonging to various national laboratories. Further professional input to the draft procedure was given by an Expert Committee in June and September 1996. The committee advised on the standards by which phytosanitary measures were chosen according to the level of the risk. This advice and internal review resulted in a numerical evaluation standard. The 12 members of the expert committee were those recommended by the Japanese Society of Applied Entomology ¹³⁰ and Zoology and the Phytopathological Society of Japan (six experts in entomology and nematology and six experts in plant pathology).
147. Following the procedure developed with academic input, Japan identified 117 species of agricultural/forestry pests on the basis of documentary evidence as those which could cause a serious damage once they were introduced into the Japanese territory, and analyzed the risk of each of them. Through this process, the 15 quarantine pests, including codling moth, were found not to be adequately detectable by the normal inspection procedure. Japan therefore decided to maintain an import prohibition on host plants of these pests. Furthermore, Japan concluded that ten quarantine pests were detectable by growing-site inspection of the government by the exporting country. ¹³¹ While their risk of introduction and damage was comparable to that of the 15 species, as from April 1998, host plants of these pests were allowed to be imported into Japan subject to completion of the growing-site inspection.
148. With regard to codling moth, Japan described the 3-stage process as follows: Stage 1 of the analysis consisted of the re-evaluation of 117 specific pests, initiated in 1996. In terms of the PRA Guidelines, the initiation was justified as the result of "[a] policy decision ¼ to revise phytosanitary regulations or requirements concerning specific pests".¹³²
149. In Stage 2, Japan developed a relative, numerical evaluation standard which graded pests from "a" (high) to "c" (low), and assessed each factor of the analysis according to the standard. Valuation was objectively based on Japanese and foreign literature.
150. First, the guidelines required an assessment of the pest�s establishment potential in light of biological suitability of the PRA area and a pest's survival capability. In light of the Japanese environmental conditions and the abundance of host plants, as well as known characteristics of the codling moth, Japan's analysis found that codling moth had a grade "a" establishment potential.
151. Second, in respect of the spread potential, the Guidelines required an assessment of possible spread in light of biological factors such as suitability of the natural and/or managed environment for natural spread of the pest, movement with products or conveyances, or potential natural enemies of the pest in the PRA. In the present case, codling moth showed a relatively low reproductive capacity and was graded "b" in terms of spread potential.
152. Third, the PRA Guidelines required consideration of factors affecting economic consequences of the pest introduction and spread. In this analysis, type of damage, crop losses, loss of export markets, increases in control costs, environmental damage, or perceived social costs such as unemployment were incorporated in the Japanese analysis of pests. Host plants (apples, cherries and other fruits) of the insect were produced in great quantity in Japan. The potential substantial damages led Japan to conclude that the insect was graded "a" in terms of economic importance.
153. Factors which affected the introduction potential were enumerated in the "partial checklist" in paragraph 2.3 of the PRA Guidelines. ¹³³ Codling moth was capable of surviving the transportation stage, hidden inside the fruits which would be imported in large quantities. Factors affecting establishment (e.g., number and frequency of consignments of the product, intended use of the product) had to also be considered. ¹³⁴ In respect of these factors, codling moth ranked high, and grade "a" was given to the insect.

Table 13 Overall Risk Grading of Pests Based on the Score of Grades
Score of Grades in Stage 2 Analysis	Overall Risk Grading
a for "potential economic importance" and at least two a's for the other potentials	A (very high risk)
At least one a	B (high risk)
No a	C (low risk)
All c's	D (very low risk)

154. In summary, as outlined above in respect of the Stage 2 analysis, codling moth was graded "b" in terms of spread potential after establishment, but was given grade "a" in the rest of the Stage 2 analysis. Subsequently, Japan performed overall grading of the risk the pest posed and found that the insect�s overall risk was grade "A" (very high risk). It thus met the requirement of a quarantine pest under this stage of the analysis, and Japan decided to proceed to Stage 3.
155. Under Stage 3 of the PRA Guidelines, pest risk management entailed the task of choosing appropriate phytosanitary measures against quarantine pests identified through the Stage 2 analysis. Possible phytosanitary measures were enumerated in paragraph 3.1 of the Guidelines. Notably, the Japanese inspection process, disinfection/disinfestation or import prohibition defined under the Plant Protection Law all appeared in the menu of options under the PRA Guidelines (paragraph 2.30).
156. The choice of an appropriate phytosanitary measure (or measures) was based on efficacy and impact of these options, and, for this purpose, paragraph 3.2 of the PRA Guidelines identified 9 factors which were relevant to the efficacy and impact, and required that these be considered in the policy choice (paragraph 2.32). In order to incorporate these factors in an operational model, Japan first developed a standard decision tree of five questions to evaluate the degree of difficulty (or ease) in managing the risk of the pest, with the results expressed in five levels from A1 to C.
157. These assigned levels reflecting the degree of difficulty (or ease) in managing the risk of the pest were then combined with the grades of overall risk (A to D) determined by Stage 2. Resulting combinations, which appeared in the left two columns of the Table 14 below were linked to specific risk management measures in the right column, in order to prevent the pest�s introduction into the Japanese territory.
158. In the case of codling moth, Japan recalled that newly hatched larvae were known to enter into fruits, and it was virtually impossible to detect these larvae by normal visual means. Growing-site inspection was equally ineffective because the insect penetrated the products in the post-harvest stage. Finally, post-entry inspection was impractical because it would destroy the product's commercial value. Thus the insect was classified in "LEVEL A1" according to the decision tree.
159. Under the PRA (Stage 2) and the study of management options (Stage 3), the overall risk of the codling moth was evaluated to be A (very high risk), and the level of difficulty of management was in the highest bracket, A1. Japan found it to be impossible to properly manage the risk of the pest by means other than import prohibition, and decided to maintain the measure.

Table 14 Choice of Appropriate Phytosanitary Measures Based on Overall Risk Grading and Levels of Management Difficulty
Overall Risk Grading	Levels of Management Difficulty	Quarantine Measures
A	A1	Import prohibition of host plants
	A2	Growing site inspection
	B1	Post-entry quarantine inspection
	B2	Import inspection by specific techniques
B	B1	Post-entry quarantine inspection
	B2	Import inspection by specific techniques
	C	Normal import inspection
C	B2	Import inspection by specific techniques
	C	Normal import inspection
D	-	(Non-quarantine pests)
Note: Even though other combinations of risk evaluation and difficulty may exist theoretically, Japan noted that there were no known examples. Therefore, the above combinations exhausted all practical possibilities.

160. The United States restated that the document which Japan asserted was its assessment of risk under Article 5.1 of the SPS Agreement, merely addressed whether the codling moth was a pest of quarantine significance. That was not in dispute. However, the Appellate Body Report in EC - Hormones made it clear that Article 5.1, relating to assessment of risk, "may be viewed as a specific application of the basic obligations contained in Article 2.2 of the SPS Agreement". Japan had been unable to provide a risk assessment relating to the varietal testing measure because there was no scientific basis warranting the measure.
161. In other words, Japan had been unable to provide a risk assessment because there was no scientific evidence that warranted testing by variety to achieve effective quarantine treatment against codling moth. In particular, there was no scientific evidence supporting the necessity of varietal testing (as opposed to testing by product) for quarantine treatment efficacy against codling moth with MB and/or MB fumigation and cold storage. Japan contended that it was possible that varietal differences within the same agricultural product might affect the efficacy of the treatment. ¹³⁵ Faced with the uniformly lethal efficacy of the quarantine treatment in all confirmatory tests and the dearth of scientific evidence in support of varietal testing, Japan had offered descriptions of dose-response variation in support of the measure. However, these descriptions ignored the conclusions of the scientific studies done on quarantine treatments for codling moth, and abundant US empirical evidence that there were no differences among varieties that affected efficacy of quarantine treatment. The uniform success of treatments accepted by Japan also belied this notion. ¹³⁶ The United States noted that none of the small-scale dose-mortality studies and studies relating to CxT cited by Japan constituted a risk assessment. Japan had never claimed otherwise. At most, these studies were designed to provide data relevant to a risk assessment.
162. The United States noted that in its submission Japan had indicated that it performed an individual risk assessment each time a country requested that the import ban be lifted for the product (paragraph 4.145). Yet, for years the United States had sought the lifting of the ban for certain products only to be thwarted by the varietal testing requirements of Japan. While Japan had indicated that it was open to proposals other than varietal testing, experience had shown that there was little flexibility to accept an equally effective alternative. The United States was unaware of any individual risk assessment that had been done for apples, cherries, nectarines, or walnuts.
163. Japan maintained that an overall risk assessment relating to varietal testing had been conducted. Japan held that the efficacy of any proposed alternative disinfestation treatment of host plants had to be demonstrated by the exporting country. In fact, Japan stressed that the element which needed to be based on a risk assessment was the substantive requirement that efficacy of disinfestation treatment be demonstrated. The United States had not challenged the necessity of confirmation. Falling short of such proof, Japan assumed that the initial risk assessment continued to govern in respect of the pest and its host plants, and varietal testing would continue to apply. In other words, the "risk assessment" relating to varietal testing was performed as part of the overall risk assessment of the pest.
164. In terms of the PRA Guidelines, lifting of import prohibition could be understood as an alteration of the quarantine measure (which constituted part of the "risk management" to be performed in Stage 3 under the terminology of the PRA Guidelines, see paragraph 4.155). ¹³⁷ It was the element of "biological effectiveness" (paragraph 4.156) of the proposed treatment that Japan considered in requiring demonstration of the absence of varietal difference of treatment efficacy.
165. Moreover, the "risk assessment" relating to varietal testing was made each time Japan determined if a proposed treatment would ensure the required level of protection against the risk of codling moth:

1. when an exporting government sought approval of additional varieties (of apples, for example), Japan investigated what alternative measure would achieve the required level of protection;
2. it was the responsibility of the exporting government to demonstrate that a treatment (e.g., the existing treatment for other varieties) would achieve the level of protection;
3. available data suggested that efficacy of a treatment could vary depending on the varieties;
4. other factors listed in Article 5.2 were also considered to verify if any new information was available; and,
5. unless new discoveries in the above process had lead to a different conclusion, the exporting government had to positively demonstrate either that varietal differences would not affect the efficacy of a treatment, or that the treatment they proposed would achieve the level of protection for other varieties by tests ("varietal testing").

166. Japan further argued that the Appellate Body in EC � Hormones, had discarded the notion of a "minimum procedural requirement" from Article 5.1. Accordingly, all that was required was that an SPS measure be based on a risk assessment which might be carried out by anyone. The fact that the risk assessment had taken into account all relevant scientific factors and was consistent with FAO PRA guidelines had been affirmed by Mr. Taylor.
167. The United States noted that Dr. Heather had explained that an assessment of the risk associated with varietal differences, if any, would focus on two elements: (i) the interaction between the physical and physiological characteristics of the product and the fumigant which resulted in higher sorption in one variety than another; and, (ii) higher susceptibility of the product to pest which resulted in consistently higher levels of infestation risk on one variety than another. There was no indication in the document submitted by Japan (Japan, Exhibit 9) that either of these factors had been considered. Furthermore, the United States recalled that Mr. Taylor had stated that the risk assessment was sufficient to justify a measure to ensure that the pest was kept out of Japan, and not the product. In other words, if an efficacious treatment had been established, Japan would not be justified to continue to ban the product.
168. The United States also noted that, while compliance with the FAO Guidelines was not dispositive in the case at issue, Japan itself had admitted in its submission that the risk assessment it submitted related only to Stage 2 of the FAO Guidelines. Consideration of the need for quarantine requirements such as Japan's varietal testing requirement would fall under Stage 3. The United States noted that section 3.3 of the FAO Guidelines emphasized that "it is not justified to complete only Stages 1 and 2 and then take phytosanitary measures without [completion of Phase 3]." However, Japan had done precisely this.
169. The United States concluded that no risk assessment existed with respect to the question of whether differences in varietal characteristics could affect treatment efficacy. The varietal testing requirement was thus not based on a risk assessment as required by Article 5.1. This was valid even if Japan's Exhibit 9 was considered a risk assessment as that exhibit was not rationally related to the varietal testing measure and did not reasonably support it since it contained no assessment of risks attributable to varietal differences affecting treatment efficacy. Hence, as Japan had not assessed the risk, consistent with Articles 5.1 and 5.2 of the SPS Agreement, it had no basis to make a scientific determination about the potential for entry and establishment of codling moth in Japan. Because the varietal testing requirement was not based on a risk assessment under Article 5.1, it necessarily was not based on sufficient scientific evidence under Article 2.2 and was inconsistent with that obligation as well.

To continue with Article 5.2

¹²⁷ Japan's response to Question 3 of US Consultation Questions. (US Exhibit 3)

¹²⁸ The United States noted that reference to the FAO Guidelines was not intended to establish a particular risk assessment framework, nor did it imply that failure to comply with the FAO guidelines necessarily constituted a violation of the SPS Agreement.

¹²⁹ Japan, Exhibit 9.

¹³⁰ Entomology: the study of insects.

¹³¹ (i) Sugar beet nematode; (ii) false root-knot nematode; (iii) banana burrowing nematode; (iv) Fusarium wilt of pea; (v) bacterial wilt of beans; (vi) watermelon bacterial fruit blotch; (vii) Stewart�s wilt; (viii) Goss�s bacterial wilt and blight; (ix) broad bean stain virus and (x) broad bean true mosaic virus.

¹³² PRA Guidelines, Item 8, paragraph 1.2 .

¹³³ The factors are: (i) opportunity for contamination of products or conveyances by the pest; (ii) survival of the pest under the environmental conditions of transport; (iii) ease or difficulty of detecting the pest at entry inspection; (iv) frequency and quantity of pest movement into the PRA area by natural means, and (v) frequency and number of persons entering from another country at any given port of entry.

¹³⁴ The checklist further enumerated: (i) number of individuals of a given pest associated with the means of conveyance; (ii) intended use of the product and (iii) environmental conditions and availability of hosts at the destination and during transport in the PRA area.

¹³⁵ In response to US Question 4 in consultations, Japan had stated: "It is possible there may be variation in the efficacy of disinfestation even if the same quarantine treatment is applied to different varieties. For that reason GOJ requires that the efficacy of quarantine standards be confirmed". [emphasis added]. (US Exhibit 3)

¹³⁶ US Exhibit 2.

¹³⁷ Japan noted that a conditional lifting of the import prohibition corresponded to an alteration of the measure from "prohibition of entry of specific commodities from specific origins" to "definition of requirements to be satisfied before export".