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29 May 2002


  Original: English


Report of the Panel



1. Introduction

5.49 Ecuador has trade and systemic interests in this dispute because its sardine exports are adversely affected by the EC Regulation and because it considers that this case offers an opportunity to clarify important aspects of the proper application of the TBT Agreement.

5.50 Ecuador argues that the fundamental incompatibility of the EC Regulation with Article 2.4 of the TBT Agreement leads to additional discrimination that in turn is inconsistent with Article 2.2 and 2.1 of the TBT Agreement and Articles I:1 and III:4 of the GATT 1994.

2. Retroactive application of the TBT Agreement

5.51 Ecuador disagrees with the European Communities' argument that Codex Stan 94 is not relevant because the measure set forth in the Regulation at issue predates the entry into force of Codex Stan 94. Ecuador argues that on the strength of such an argument, any WTO Member could be exempted from countless obligations on the grounds that WTO-incompatible measures predating the entry into force of international rules or the WTO Agreements themselves need not be amended or adjusted to new international commitments. Ecuador contends that if the EC Regulation was not compatible at the time the TBT Agreement came into force, the European Communities was under the obligation to bring it in line with all WTO Agreements, in pursuance of Article XVI of the WTO Agreement.

3. Article 2.4 of the TBT Agreement

5.52 Ecuador argues that WTO Members have the obligation to comply with Article 2.4 of the TBT Agreement and are therefore required to bring their technical regulations into conformity with international standards where they exist and are relevant.

5.53 With regard to the burden of proof, Ecuador submits that the initial burden of proof lies with the complaining party to establish if the measure which is challenged presents a case of inconsistency with Articles 2.4 and 2.2 of the TBT Agreement. Ecuador submits that Peru has demonstrated that an international standard exists (the Codex Stan 94), that it is relevant and that the European Communities is not using this standard. Therefore, the European Communities has the obligation to base the application of its technical regulation on Codex Stan 94. Ecuador contends that the European Communities has, in turn, to respond to Peru's arguments and justify why the international standard has not been used. Ecuador notes that the European Communities has provided no evidence that the standard in question was irrelevant. Hence, Ecuador sees no justification for the European Communities' failure to apply a relevant international standard.

5.54 Ecuador further argues that Codex Stan 94 is adequate to fulfil the legitimate objectives pursued by the EC Regulation, because it does not mislead the consumers. Ecuador notes that Codex Stan 94 clearly stipulates that sardines of species other than Sardina Pichardus shall be described as "X" sardines; this would be the case of the name "Pacific sardine" used for sardines of the species Sardinops sagax. Moreover, Ecuador asserts that the text of the Codex Stan 94 in Spanish is quite clear in that countries can choose to use the denomination "sardines X", where "X" is the country of origin or a geographical area, with the name of the species or the common name.

4. Article 2.2 of the TBT Agreement

5.55 Ecuador argues that the EC Regulation creates an unnecessary obstacle to trade, contrary to Article 2.2 of the TBT Agreement.

5.56 In Ecuador's view, the EC Regulation serves protectionist purposes with trade-distorting effects beyond those already affecting the sector as a result of fisheries subsidies in the form of Community aid to offset marketing costs for products such as sardines. Ecuador notes the European Communities' argument that its Regulation has the "aim of ensuring consumer protection through market transparency and fair competition". In practice, Ecuador argues, this aim is not being met; indeed, the EC Regulation allows no competition in that it excludes from the market other types of sardines that would be able to compete effectively under an "X" trade description affording the consumer freedom of choice and the transparency that a label based on a relevant international standard such as the Codex Stan 94 could provide.

5. Article 2.1 of the TBT Agreement

5.57 With regard to Article 2.1 of the TBT Agreement, Ecuador argues that the EC Regulation is inconsistent with the national-treatment principle because sardines of a trade description other than Sardina Pichardus are accorded less favourable treatment by differentiating between the species of fish and between the origin of the product. According to Ecuador, Peru is correct in arguing that these are "like" products, primarily because canned sardines of the species pilchardus and of the species sagax sagax are identical products in terms of their physical characteristics - especially flavour, texture and nutritional value - and because they are interchangeable in terms of use and consumption. In Ecuador's view, this is borne out by the fact that sardines of species other than Sardina Pichardus were successfully marketed in the European Communities prior to the entry into force of the EC Regulation, as demonstrated by both Peru and Canada and also by the statistics provided by the European Communities.

6. Articles I:1 and III:4 of the GATT 1994

5.58 Finally, Ecuador considers that the foregoing analysis proving discrimination by the European Communities within the context of the TBT Agreement is also applicable for the determination of inconsistency of the EC Regulation with Articles I:1 and III:4 of the GATT 1994.

7. Final remarks

5.59 In the light of the above considerations, Ecuador submits that the Panel must find that the EC Regulation is in violation of the European Communities' obligations under WTO Agreements and recommend that the European Communities bring its measure into conformity with those obligations.


1. Introduction

5.60 The United States indicates that there are a number of sardine species that are harvested in the United States, but that are not exported to the European Communities because of the restrictive labeling requirements in the European Communities. They are, however, sold to many parts of the rest of the world. These species include Clupea Harengus, Sardinops caeruleus, Sardinops sagax, Harengula jaguana, Sardinella and Sardinella longiceps. The United States has no regulations requiring the use of specific names for these fish species. There is, however, a general requirement that labels should not be false or misleading. All of these fish either can be, or actually are, marketed in the United States under the name "sardines", among other names.

5.61 The United States endorses Peru's request that the Panel exercise judicial restraint upon finding that the EC Regulation breaches Article 2.4 of the TBT Agreement, and not reach Peru's other claims. According to the United States, panels should address those claims necessary to resolve the dispute, and, as Peru recognizes, that can be accomplished through consideration of Article 2.4 alone.

5.62 Concerning the burden of proof, the United States submits that, as recognized by the Appellate Body in US - Wool Shirts and Blouses, EC - Hormones and other reports, the complaining party has the burden of presenting evidence and arguments sufficient to make a prima facie demonstration of each claim that the measure at issue is inconsistent with a provision of a covered agreement.21 This burden is not shifted to the responding party simply because the obligation identified is characterized as an "exception".22 However, the responding party would have the burden with respect to an "affirmative defense" that a breach of an obligation is justified by a separate provision that would excuse the breach.23

2. Application of the TBT Agreement

5.63 The United States argues that the TBT Agreement applies in full to technical regulations in place on or after 1 January 1995, regardless of whether the regulation was put in place before that date. It further argues that labeling requirements that are "mandatory" and "apply to a product, process or production method" constitute "technical regulations."

3. Article 2.4 of the TBT Agreement

5.64 The United States argues that the EC Regulation is inconsistent with Article 2.4 of the TBT Agreement and that it is not based on the Codex Stan 94, an international standard for purposes of the TBT Agreement. It notes that although Codex Stan 94 specifically provides for the label "X sardines", the EC Regulation specifically prohibits that label, with no plausible justification for contradicting the standard.

5.65 Concerning the question of whether Codex Stan 94 is a relevant international standard, the United States notes that relevancy does not refer to the timing of the international standard, but only to its subject matter - i.e., whether an international standard is apposite, pertinent or germane to the issue for which the technical regulation is required. The United States argues that the reference to "their completion is imminent" in Article 2.4 of the TBT Agreement in relation to "relevant international standards" makes clear that the question of relevance is separate from the question of the date on which the international standard came into existence.

5.66 Concerning the requirement of Article 2.4 of the TBT Agreement, that Members "shall use [relevant international standards] as a basis for" their technical regulations, the United States recalls Canada's argument that the phrase "as a basis for" should be construed consistently with "based on". The United States submits that the Appellate Body defined the term as "[a] thing is commonly said to be 'based on' another thing when the former 'stands' or is 'founded' or 'built' upon or 'is supported by' the latter."24 It argues that this statement by the Appellate Body does not mean that the technical regulation must "conform" to the terms of the relevant international standard, but it does mean that a Member's technical regulation must be founded upon or supported by the standard, insofar as the standard is "relevant," not "ineffective" and not "inappropriate."

5.67 The United States further argues that there is no reason why the application of Codex Stan 94, in particular permitting other species to be marketed as "X" sardines, would be an ineffective or inappropriate means for meeting the European Communities' stated objectives of consumer protection, transparency and fair competition. To the contrary, according to the United States there is ample evidence indicating that the Regulation at issue undermines the European Communities' objectives, since European consumers have in fact come to know the Peruvian product as a form of sardines and are likely to be confused by the use of other names. Indeed, the use of a proper descriptor prior to the term "sardines," as provided for in the international standard, appears to be a very effective means to assure transparency and protect the consumer.

5.68 In the view of the United States, Codex Stan 94 does not anticipate a country choosing between "X Sardines" and the common name of the species. Rather, under the standard, a country permits the named sardine species to be sold as "X Sardines", where "X" is a country, a geographic area, a species, or the common name of the species. The United States argues that under the standard, the product could be labelled, for example, "Peruvian sardines", "Pacific sardines", or "Atlantic herring sardines". The standard does not envision the "common name" as an alternative to "X sardines", only as an option for "X" in the name "X Sardines." This interpretation is clear in the English version of Codex Stan 94, but is even more clear in the French version, which states that species other than Sardina Pichardus shall be called "'X Sardines', 'X' designating a country, a geographic area, a species, or the common name".25

4. Article 2.2 of the TBT Agreement

5.69 Concerning Article 2.2 of the TBT Agreement, the United States argues that in order for a Member to show that a government's technical regulation is more trade-restrictive than necessary to fulfill a legitimate objective, it would need to show that there is another measure that is reasonably available, that would fulfill the regulating Member's legitimate objectives, and that is significantly less restrictive to trade.

5.70 The United States considers that in this case there are clear alternatives which meet these requirements. In addition to simply removing the technical regulation, allowing other species to be marketed as "X sardines" would fulfill the European Communities' objectives of consumer protection, transparency and fair competition. The alternative is reasonably available, since there are no impediments to such a change, nor would there be any disruption to markets where consumers are already accustomed to seeing the products at issue referred to as "sardines." Finally, the alternative would be significantly less trade restrictive, inasmuch as there is now a complete ban on the marketing of several species as "sardines," with or without a qualifier. Further, the United States argues that there is no requirement under Article 2.2 to demonstrate a trade restrictive effect as such; the only requirement is to show that a measure is more trade restrictive than necessary. With respect to this dispute, there is no doubt that a measure prohibiting the use of the term "sardines" in connection with sardine products is trade restrictive.

5. Remarks on implementation

5.71 Finally, the United States argues that the Panel should refrain from offering a specific suggestion on how the European Communities should comply in this case. This case is not unusual in this regard, and the European Communities, like other Members, has the right to determine how it will bring its measure into compliance.


1. Introduction

5.72 Venezuela submits that its participation as a third party in this dispute is based on a systemic interest relating to the correct interpretation of the TBT Agreement, in particular Article 2.4. Venezuela submits that it also has a genuine trade interest, inasmuch as the conditions for the marketing of canned sardines on the European market, as set out in the EC Regulation, are prejudicial to Venezuelan exports of sardines to that market, which is a major destination for Venezuela's export industry.

2. Remarks on the term "sardines"

5.73 Venezuela argues that from the standpoint of statistical data, the term "sardines", in the broad sense, has been used to cover species other than Sardina Pichardus. Organizations such as the FAO classify under the same heading species of the genera Sardina, Sardinops, Opisthonema, Clupea and Sardinella, inter alia.26 The FAO also groups sardines, sardinella and brisling or sprat production, import and export statistics in a single table, which is not confined to the species Sardina Pichardus.27 Likewise, the word "sardines" is used to identify various species, according to relevant European and international publications.28 In the view of Venezuela, the above facts point to the universality of the term "sardines".

5.74 Venezuela also submits that the broad use of a name is not exclusive to sardines; on the contrary, there is a variety of other examples. Mussels, for instance, are known under the scientific names of Mytilus edulus, Perna Perna and Perna viridis, but "mussel" is the common trade description for all these species. Another example given by Venezuela is tuna, whose trade description includes bluefin tuna (Tunnus thynnus), yellowfin tuna (Tunnus albacares), bigeye tuna (Tunnus obesus) and skipjack tuna (Katsuwonus pelamis). Thus, Venezuela argues that the use of generic nomenclature to justify trade descriptions is not relevant and that probably the case of the European sardines is the only one where attempts have been made to match the trade description with the scientific name. Even where both terms obviously coincide, it is not possible to argue exclusivity in respect of a trade description, because this practice is not in universal use.

5.75 Venezuela further argues that scientific names of species may vary over time as a result of taxonomic revision. Thus, species of the genus Sardinops were initially named Sardina spp, as was the case of Sardinops caeruleus, which is a synonym for Sardina sagax and Alausa californica, and the species Sardinops neopilchardus, which is a synonym for Sardinella neopilchardus. Similarly, Sardina pilchardus and Sardinella aurita were initially described as belonging to the genus Clupea - the former in 1792 under the name Clupea pilchardus and the latter in 1810 under the name Clupea allecia, a term which is also used for the Australian sardine pilchard.

3. Article 2.4 of the TBT Agreement

5.76 Venezuela argues that the labelling requirements for preserved sardines laid down in the EC Regulation do not comply with Article 2.4 of the TBT Agreement because they disregard the relevant international standards. In its view, the EC Regulation, as a technical regulation, must not only recognize but also apply international standards such as those established in Codex Stan 94.

5.77 Venezuela argues that the term "as a basis" in Article 2.4 of the TBT Agreement should be interpreted to mean "shall be based on, in such a way as not to contradict any of its aspects". Therefore, Venezuela argues that the EC Regulation cannot be considered to "be based on" Codex Stan 94 because the EC Regulation does not provide for the possibility of canned products prepared from other species of sardines (other than Sardina Pichardus) to include the word "sardines" to indicate the species from which the canned product is prepared. On the contrary, Codex Stan 94 stipulates that the common name "sardines" may be used for products made from species other than Sardina Pichardus, provided that (a) the name is supplemented by an indication identifying the country of origin, the geographical area in which the species is to be found or the name of the species, or (b) the product is made under the common name in the language of the member State of the European Communities in which it is sold.

5.78 Venezuela submits that the Codex Alimentarius is the source of standards, codes of practice and internationally accepted guidelines that have become a global benchmark for food consumers, producers and manufacturers, national food control agencies and the international food trade. Venezuela also points out that Codex's contribution to the international harmonization of food standards, by providing for the protection of consumer health and guaranteeing fair practices, is indisputable.

5.79 Venezuela contends that species of different genera are marketed under the name "X sardines" in almost every country in the world, and points out that, in the past, the name was acceptable for describing different genera, including in some countries of the European Communities. In Venezuela's view, the European Communities' argument that if Sardinops sagax products were to be marketed as "X sardines", they would benefit from the reputation enjoyed by another product (namely sardines) and the customer would be misled, is without merit. Contrary to the European Communities' assumption that the term "sardines" is used exclusively at the European level, Venezuela indicates that Latin America and North America have given the name "sardines" to a finished product prepared from a different raw material which, however, possesses similar organoleptic characteristics. Moreover, in Venezuela, the term "sardines" is used to describe a product prepared essentially from the raw material Sardinella aurita. For example, in Venezuela's view, it would be hard to imagine consumers of caviar (i.e., a finished product), for example, being misled by the product's presentation under the name Iranian, Russian or American caviar, knowing as everyone does, that each involves a different type of sturgeon.

5.80 Venezuela argues that in view of the above-mentioned facts and, given the similarities between the species, all that would need to be done in order to distinguish one product from another from the standpoint of the objectives of the EC Regulation would be to use the common name "sardines", accompanied by a reference to its geographical area of origin - in other words, to use the name "X sardines", as provided for in the Codex Stan 94. Consumers purchasing products prepared from X sardines would thus know that these were made from sardines of a species other than the type found in European waters.

5.81 Venezuela also emphasizes that the legitimate objectives set forth in the TBT Agreement are to promote achievement of the goals of the GATT 1994 and to ensure that technical regulations and rules, including those relating to labelling, do not create unnecessary barriers to international trade. Venezuela argues that the objective of the EC Regulation is to enhance the profitability of sardine production in the Community, the market outlets therefor, as well as to facilitate disposal of its products, is not compatible with the above objectives.29 Venezuela considers that, if it is a matter of fulfilling the objective laid down in the EC Regulation, there are other trade mechanisms, within the framework of the WTO, that can be used to that end, such as the application of tariff regimes and more specific tariff regulations.

4. Article 2.2 of the TBT Agreement

5.82 Venezuela submits that the objectives of the EC Regulation can be achieved by means of a less trade-restrictive measure. Venezuela argues that the EC Regulation has a restrictive impact given that it prevents countries that prepare products from fish of species similar to Sardina Pichardus from marketing such products under a name containing the word "sardines", although this is allowed by the relevant international standard. Venezuela is of the opinion that this diminishes the value of the products for the European customer, since their perceived value of a product using a scientific name as a commercial name bears no relation to the true quality of the product. This fact places those products at a disadvantage in competition with like European products. This type of measure is discriminatory in terms of where the sardines were caught, by reserving exclusivity of the trade description for products of European origin.

5. Remarks on implementation

5.83 If the Panel decides to suggest any action to the European Communities, Venezuela requests that the European Communities should be required to bring its Regulation into line with the WTO Agreement and to agree that its Regulation be based on the Codex Alimentarius, in other words, that it be made sufficiently broad to include similar types of sardines, including the Venezuelan sardine Sardinella aurita.

21 European Communities - Measures Concerning Meat and Meat Products ("EC - Hormones"), WT/DS26/AB/R, WT/DS48/AB/R, adopted 13 February 1998, DSR 1998:I, paras. 104 - 109.

22 Appellate Body Report, EC - Hormones, para. 104.

23 Appellate Body Report, EC - Hormones, para. 109.

24 Appellate Body Report, EC - Hormones, para. 163.

25 "Sardines X", "X" désignant un pays, une zone géographique, l’espèce ou le nom commun de l’espèce …".

26 See FAO Yearbook of Fishery Statistics, Catches and Landings, Vol. 80, 1995, pp. 308 ff.

27 See FAO Yearbook of Fishery Statistics, Commodities, Vol. 89, p. 102.

28 See Multilingual Illustrated Dictionary of Aquatic Animals and Plants, and www.fishbase.org.

29 Based on the introductory remarks to Council Regulation Nº 2136/89 of 21 June 1989.

To continue with VI. INTERIM REVIEW

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