B. European Communities

The factual and scientific aspects of the case

11. The European Communities noted that it would comment on the factual and scientific aspects of the case on the basis of its experience in its attempts to export fresh fruits and vegetables to Japan. The task was particularly difficult as the first written submissions of the parties contained several conflicting statements on a number of crucial scientific issues. The following aspects of the dispute would be addressed:

1. the issue of varietal testing of quarantine treatment efficacy against codling moth;
2. the questions raised by the practice of Japan to require varietal testing for certain types of fruits and pests;
3. the complexity and lack of transparency of the Japanese system of procedures for granting import authorization for fruits and vegetables; and,
4. the hindrance to trade which could be a consequence of such repeated varietal testing as applied by Japan.

12. The European Communities noted that it had experienced a number of difficulties in its attempts to export fruits and vegetables to Japan and that many of these difficulties arose from a variety of causes linked to the system of phytosanitary measures enacted by the Japanese authorities. The European Communities was directly affected by the measures which the Panel was being asked to consider: for example, authorization was granted in August 1997, after several years of testing and discussion, to allow France to export Golden Delicious apples to Japan. However, if France wished to export any other variety of apple in light of consumer reaction to its Golden Delicious already shipped, the whole approval procedure would have to start anew.
13. The European Communities wished to underline that it did not contest the right of Japan, or of any other Member, to protect plants within its territory from the introduction of harmful pests. Indeed, the European Communities operated its own system of measures to protect plant health in full accord with the terms of the SPS Agreement.
14. At issue was the conformity with the SPS Agreement of the requirement for varietal testing to prove the efficiency of disinfestation for quarantine pests. In this regard, the European Communities questioned the scientific basis of Japan's application of varietal testing for these purposes. While the application of particular treatments could vary a little for different varieties of the same fruit or vegetable, for example, due to the inherently different physical characteristics of the varieties (as in the example of mangoes pointed out by Japan), the European Communities questioned the need of requiring a completely new series of tests for a different variety of the same fruit or vegetable. Varietal testing could be justified if the characteristics and other properties of the varieties in question were such that differences could be expected which were relevant for the objective to be achieved. However, it appeared to the European Communities that the measure in question was applied to an extent beyond that which was necessary to protect plant life and health.
15. The European Communities second concern with regard to varietal testing was the apparent lack of consistency in its application by the Japanese authorities. The attention of the Panel had been drawn by the United States to the requirement of varietal testing in relation to apples, cherries, nectarines and walnuts. However, for other varieties of pests and fruits and vegetables import authorization seemed to have been granted without reference to full varietal testing. In the experience of the European Communities, import prohibition in certain instances was lifted for all varieties at once, while it was evident from the facts of the dispute at issue that this was not the case for other products. The European Communities was unaware of any explanation on the part of Japan of such a differentiated application.
16. A third issue that the European Communities raised concerned the low degree of transparency and high degree of complexity of the particular part of the Japanese phytosanitary regulatory system at issue. The European Communities had asked, in recent deregulation requests, for a flow chart of approval procedures for import authorization of plants and plant products. Japan had also been asked to simplify and provide greater transparency of approval procedures for fresh fruit and vegetables. To date, these requests had not been fulfilled. In fact, the import authorization procedure was not clearly defined from beginning to end and normally proceeded on a step-by-step basis, with Japan defining the successive steps; as soon as one hurdle was overcome another appeared on the list. The whole process usually took several years, even before a trial shipment was allowed. Moreover, it involved extensive series of tests, numerous visits to Tokyo for discussions with Japanese experts, public hearings and extended on-site inspections by Japanese experts in the country wishing to export. It was likely that the chances of exporting agricultural products to Japan would be improved if Japan were willing to make available the phytosanitary protocols which it had negotiated with one country to any other interested Member of the WTO.
17. The system of varietal testing as applied by Japan appeared to impede trade. The heavy procedural requirements of Japan imposed a considerable burden on the exporting country, both in terms of manpower, time and money. Under the system of varietal testing, exporters had to take the risk of selecting a particular variety and endure a lengthy and complex procedure to gain approval. Yet, if the initial assessment of Japanese consumer reaction were proven wrong, then the investment of time, money and manpower would be wasted and the procedure had to be started all over again for another variety. This appeared to be further compounded by the fact that Japan did not seem to allow for testing and approval procedures to take place for several varieties at the same time. All this represented a serious deterrent to those exporters wishing to gain a foothold in the Japanese market for particular types of fruits and vegetables which had not been previously exported to that market.

Comments on the legal aspects of the case

Burden of proof

18. The European Communities considered that the dispute raised the issue of burden of proof. This was a particularly complex problem in cases where science and law interacted. The allocation of the burden of proof was an important legal question which could directly affect the outcome of a dispute settlement procedure. It was recalled that the Appellate Body had pointed out that the initial burden rested on the complaining party, which had to establish a prima facie case of inconsistency with a particular provision of the SPS Agreement. When the prima facie case was made, the burden of proof moved to the defending party, which had to counter or refute the claimed inconsistency. ¹⁵⁸
19. "Burden of proof" was an ambiguous term. It was important to distinguish between: (1) burden of producing evidence, (2) burden of persuasion, and (3) minimally sufficient evidence. These concepts applied to very different aspects of fact-finding and responded to very different situations.
20. First, with respect to any factual issue, there could be various burdens of producing evidence placed on parties. Under the DSU structure, a panel was not an investigative institution with the capacity to generate its own evidence. There had to be rules concerning which party had to produce evidence before the Panel and how much evidence had to be produced in order for the party not to suffer adverse findings by default. Initially, a complaining party had to "present evidence and argument sufficient to establish a presumption" (prima facie case) that a Member had acted inconsistently with its obligations under the SPS Agreement. ¹⁵⁹ That is, the complaining party had to produce sufficient evidence on any factual issue essential to its claim that a violation was occurring. ¹⁶⁰ Evidence had to be produced: (i) that was sufficient to support its requested finding, and (ii) that would be sufficient to persuade the Panel that what was claimed was true, if no counter-evidence were to be produced. A prima facie case had, therefore, to be of sufficient weight to persuade the Panel and of sufficient quality to pass appellate review for reasonableness.
21. Second, the Panel would have to assess all the evidence for and against any factual proposition and should adopt the proposition as a finding only if the evidence supported the proposition. What was required was a determination by the Panel that the proposition at issue was more likely to be true than false. On any factual issue there had to be a "default rule" for making a finding when the weight of evidence was in "equipoise" - that is, when it appeared to the Panel that the evidence for a proposition seemed equal in weight to the evidence for its negation. The party with the burden of persuasion was the party who had to suffer an adverse finding unless it persuaded the Panel to its view by a preponderance of the evidence. It did not seem correct, however, to speak (despite the practice and conventional wisdom) of any definitive or permanent "shift" in the burden of proof in such a case, because the proof obligations of both parties continued ("back and forth") throughout the entire litigation process.
22. Third, a panel was not authorized to make a finding if there was not, in the record before it, minimal evidence that any reasonable person would consider necessary to support such a finding.
23. In the present case, the United States argued effectively that the confirmatory tests were the relevant indicator of efficacy of quarantine treatment. Japan contested this by arguing that its policy of requiring confirmation on a varietal basis was supported by available evidence that suggested a possible presence of varietal difference in the efficacy of disinfestation treatment (MB fumigation). This was a scientific question and it was not clear whether the Panel would be able to resolve it, even with the assistance of scientific experts.
24. Japan also contested the US argument that it required complete testing and review of each variety. Yet, Japan did not deny that large-scale testing was required for initial lifting of the import prohibition as well as for additional approval, if the results of the dose-mortality tests were unsatisfactory. Japan did not deny that on-site confirmatory tests for one representative variety was required for additional varieties, even if dose-mortality tests were confirmed. Japan also admitted that dose-mortality tests were required in all cases for all varieties for initial and additional lifting of the import prohibition. Nevertheless, Japan had not provided, in the view of the European Communities, any reasonable response to the US argument that it (or any other country that applied a quarantine treatment for codling moth on fruit to be exported to Japan) had never had to modify a quarantine treatment for codling moth for varieties of the same commodity. The reply of Japan that they had accepted that the proposed treatment (on Hartley walnuts) would disinfest codling moth to the satisfactory level (not because varietal differences were irrelevant) was not convincing. Japan needed to bring forward minimally sufficient evidence to convince the Panel that varietal differences did affect, for each product in question, the fumigation efficacy. It did not seem enough to argue that this was a reasonable hypothesis or argument, as posited by Japan.
25. Moreover, the European Communities pointed out that it did not share the interpretation made by Japan of the EC - Hormones case. Contrary to what Japan appeared to argue, the European Communities had not "only asserted that safety of hormones was not proven beyond doubt". ¹⁶¹ The Appellate Body Report on EC - Hormones clarified that the European Communities did "indeed show the existence of a general risk of cancer" and that its studies were "relevant but do not appear to be sufficiently specific to the case at hand". ¹⁶² It was clear also from other parts of the Appellate Body Report on EC - Hormones that the issue there concerned the incorrect interpretation made by the United States and the panel of the concept of risk under Article 5.1 of the SPS Agreement, as requiring a certain magnitude or threshold level of risk to be demonstrated in the risk assessment. ¹⁶³
26. The European Communities considered that what Japan needed to prove in this particular case, in light of the evidence brought by the United States, was that its risk assessment sufficiently warranted or reasonably supported the SPS measure at stake. ¹⁶⁴ It was necessary for Japan to establish the rational link between the measure and its risk assessment.

The Panel's role in reviewing the scientific judgments made by WTO Members

27. Under the DSU rules, the Panel had to decide whether the Japanese measures were based on a risk assessment as appropriate to the circumstances (Article 5.1). The Panel should also judge whether these measures were based on scientific principles and were maintained with sufficient scientific evidence (Article 2.2). In this regard none of the parties to the dispute had attempted to shed any light on the interpretation to be given to the concept of "sufficient scientific evidence" in Article 2.2 of the SPS Agreement.
28. In respect of the standard of review the European Communities noted that the Appellate Body had clarified in EC - Hormones that the Panel should make "an objective assessment of the facts". ¹⁶⁵ A panel could not conduct its own risk assessment. With respect to any of the many scientific issues involved in the risk assessment conducted by a WTO Member, a panel could not substitute its own scientific judgment for that of the WTO Member applying an SPS measure. It appeared also that panels should not substitute the scientific judgment of individual scientists or experts, which might be chosen by it in accordance with Article 11 of the SPS Agreement, with that of the WTO Member that carried out the risk assessment. A panel's mandate in considering the evidence invoked by a WTO Member maintaining an SPS measure was not to determine whether it agreed that such evidence constituted the "best evidence" available, but merely to determine whether that Member's risk assessment sufficiently warranted or reasonably supported the measure at hand.

Arbitrary, unjustifiable or disguised restriction on international trade

29. In accordance with Articles 2.3 and 5.6 of the SPS Agreement, the European Communities believed that the United States bore the burden of showing that the Japanese measures were arbitrary, unjustifiable or constituted a disguised restriction on international trade. In particular, the United States had to show that there was another reasonably available measure which was less restrictive on trade and which could achieve the level of protection chosen by Japan.
30. In this respect the European Communities observed that, with regard to the varieties of apples, cherries, nectarines and walnuts of US origin which had already been approved for export to Japan, the same varieties coming from another WTO Member should also be allowed to be imported into Japan on the same conditions. As Article 2.3 of the SPS Agreement provided, Members should not arbitrarily or unjustifiably discriminate between Members where identical or similar conditions prevail. Therefore, another WTO Member wishing to export the same varieties of products to Japan should be given the opportunity to show that indeed identical or similar conditions prevailed in respect of the varieties in question.

Conclusion

31. The European Communities was of the view that the varietal testing system of Japan was too cumbersome and appeared to be applied in a manner which was more restrictive than necessary to achieve its stated objective. The Japanese system was also characterized by lack of transparency which could further impede trade in such products.

C. Hungary

32. Hungary noted that Article 2.1 of the SPS Agreement clearly stipulated the right of Members to take phytosanitary measures which were necessary for the protection of plant life or health. Nevertheless this right was conditional upon the fulfilment of all relevant provisions of the Agreement. Pursuant to Article 2.2, Members were obliged to "...ensure that any ...phytosanitary measure is applied only to the extent necessary to protect ... plant life or health, is based on scientific principles and is not maintained without sufficient scientific evidence...". An exception to the latter provision was provided for in Article 5.7.
33. According to its submission, Japan had conducted a full-scale risk assessment concerning the plant quarantine measures in operation, including with respect to codling moth. However there was no indication as to whether, in accordance with Article 5.1, any risk assessment of the varietal testing of codling moth had been performed. Indeed, Japan's main argument with regard to the scientific rationale of varietal testing seemed to relate to the variation of the CxT values between varieties (in MB fumigation test on codling moth). Japan apparently interpreted this variation as an indicator of the degree of efficacy of the fumigation treatment.
34. It was Hungary's view that Japan had neither been able to show unequivocally that variation of CxT values was a direct function of varietal differences nor had Japan established unambiguously that differences in CxT values necessarily affected the efficacy of the fumigation treatment at issue. At the very least this had been partly acknowledged by Japan when it argued the possibility of a "presence of varietal difference in the efficacy of disinfestation treatment". ¹⁶⁶ Also, Japan had stated that its policy was based only "on a scientific hypothesis". ¹⁶⁷ On the basis of available scientific knowledge, Hungary agreed with US arguments which questioned the scientific justification of varietal testing, in that: (i) minor differences in CxT values between varieties did not indicate differences in varieties of a single commodity; (ii) test-to-test variation of one variety was as great as that found between varieties; and, (iii) studies had indicated that the same variety of a commodity could show variations in dose-mortality tests from crop year to crop year, or even according to the stage of ripening of the particular variety. Hungary believed that the fact that there had not, to date, been any instance where the complaining party had had to modify a quarantine treatment for codling moth for varieties of the same commodity was of particular relevance to the dispute as it appeared to constitute strong evidence of the effectiveness of the established fumigation treatment across the different varieties of fruits. On the basis of the Japanese line of reasoning, it would be just as natural to expect numerous cases where modifications of treatment would have been required.
35. Hungary maintained that the evidence put forward by the United States clearly demonstrated that the varietal testing requirement was inconsistent with the obligations set out in Article 2.2 of the SPS Agreement. As an alternative justification of the measure, Japan briefly invoked Article 5.7 of the Agreement, but failed to meet the criteria set out therein as the relevant scientific evidence was not "insufficient" but simply did not exist. The lack of a specific risk assessment appeared to support the impression that there had been no "objective assessment of risk" specifically in regard to varietal testing. Moreover, the long period since the requirement of varietal testing had been applied should have allowed Japan either to scientifically underpin or eliminate this testing requirement "within a reasonable period of time".
36. In summary, on the basis of the two first submissions by the parties as well as Hungary's own knowledge of the matter, it was Hungary's view that the Japanese authorities a priori assumed the existence of "varietal differences" with regard to basic and processed agricultural products which then supposedly justified the requirement of separate testing of products not considered to be the "same". Hungary was not aware of any scientific basis for the "same-product" concept which seemed to be contrary to Article 2.2. Furthermore, there was, in Hungary's view, no provision in the Agreement, not even Article 5.7, that would allow WTO Members to introduce or maintain phytosanitary measures on the basis of hypotheses, assumptions or assertions. Neither could any support for this position be found in the report of the Appellate Body in EC � Hormones. Such interpretation would prevent the SPS Agreement from fulfilling its basic role, that of ensuring that SPS measures were not applied for reasons unrelated to the protection of sanitary and phytosanitary health. A contrary interpretation would open the door for effectively misusing SPS measures as disguised restrictions on trade.
37. Finally, Hungary noted in respect of control, inspection and approval procedures that although there was no specific time period established in the SPS Agreement, Annex C paragraph 1(a) required that "such procedures are undertaken and completed without undue delay". As had been stated by the complaining party and borne out by Hungary's own experience, the testing and approval process for a given variety took anywhere from 2 to 4 years to complete. This could hardly be qualified as being a reasonable delay. The extremely long time involved in such procedures added up to the unusually heavy burden countries wishing to export agricultural products had to shoulder when trying to comply with SPS requirements applied by Japan. Hungary believed that the procedural aspects of an SPS measure also deserved a high degree of attention when judging their conformity with the SPS Agreement, as they themselves could act as a disguised restriction of trade which was prohibited under the Agreement.

To continue with Panel's Consultation with Scientific Experts

¹⁵⁸ EC - Hormones, paragraphs 98, 108-109.

¹⁵⁹ The United States � Measures Affecting Imports of Woven Wool Shirts and Blouses from India, WT/DS33/AB/R, adopted on 23 May 1997.

¹⁶⁰ Appellate Body Reports on EC - Hormones and Indian Woven Wool Shirts and Blouses.

¹⁶¹ This was, according to the European Communities, the wrong interpretation of EC arguments made by the panel.

¹⁶² Op. cit., paragraph 200.

¹⁶³ Op. cit., paragraphs 184-186. The European Communities noted that this discussion was linked to the concept of "zero risk" policy, which was not summarized at all in the Appellate Body Report on EC - Hormones.

¹⁶⁴ Op. cit., paragraph 193.

¹⁶⁵ Ibid., paragraph 117.

¹⁶⁶ Japan's first submission, paragraph 154.

¹⁶⁷ Ibid.