TWN
Info Service on WTO and Trade Issues (Jun15/11)
15 June 2015
Third World Network
WTO upholds ruling in US-India agricultural product dispute
Published in SUNS #8038 dated 10 June 2015
Geneva, 9 Jun (Kanaga Raja) -- The Appellate Body (AB) of the World
Trade Organisation (WTO) has largely upheld an earlier panel ruling
that found that Indian prohibitions on the importation of certain
agricultural products, mainly that of poultry, from the United States
on account of concerns about avian influenza were inconsistent with
its WTO obligations.
[The US had raised the dispute on the basis that low pathogenicity
avian influenza is most commonly found in the United States, and while
there have been outbreaks in recent months, a general import ban is
not warranted, and any import ban should be limited to areas where
the outbreaks occur.]
In a ruling issued on 4 June, the AB recommended that the Dispute
Settlement Body (DSB) request India to bring its measures, found in
its Report, and in the Panel Report as modified by its Report, to
be inconsistent with the Sanitary and Phytosanitary Measures (SPS)
Agreement, into conformity with its obligations under that Agreement.
[In a comment on this ruling at the International Economic Law and
Policy Blog, Prof. Sungjoon Cho of the Chicago-Kent faculty of law
has said that the AB's stance in this case on India's ALOP (Appropriate
Level of Protection) "might not dovetail with its previous ruling
on the same issue".
[In his comment, the US trade academic notes that in this appeal by
India, "the AB viewed that the panel must substantiate not the
complainant's articulation of ALOP (5.220) but the respondent's ALOP
based on the totality of arguments and evidence (5.221). Notably,
the AB emphasized that articulating ALOP is ‘both a privilege and
an OBLIGATION of then responding Member' (emphasis added, 5.221).
Likewise, the AB opined that the panel should not defer completely
to the responding Member's own characterization of ALOP (5.222). Nonetheless,
the AB remains ambiguous as to whether a panel must identify the responding
Member's ALOP based on the SPS measure at issue (5.226)."
[The AB's stance in this case, Prof Sungjoon Cho says, might not dovetail
with its previous ruling on the same issue. He recalls that "the
AB was more deferential to the responding Member (the EU) in identifying
ALOP in the Hormones dispute. In that case, the AB seemed to agree
with the Hormones panel in inferring the EU's ALOP (such as the "level
of protection in respect of natural hormones when used for growth
promotion") directly from the SPS measures at issue (the import
ban on hormone-treated beef) (para. 218).]
India appealed certain issues of law and legal interpretations that
were developed in the Panel Report. Providing some background to the
dispute, the AB said that the dispute concerns measures consisting
of prohibitions that India imposes on the importation of various agricultural
products, primarily poultry products, because of concerns related
to avian influenza (AI). India maintains its AI measures through two
legal instruments - The Live-Stock Importation Act, as amended (Livestock
Act), and Statutory Order 1663(E)5 (S. O. 1663(E)).
India requested the AB to reverse the Panel's finding that India's
AI measures are inconsistent with Article 2.2 of the SPS Agreement
because they are not based on scientific principles and are maintained
without sufficient scientific evidence. India also requested reversal
of the Panel's finding that India's AI measures are inconsistent with
Articles 5.1 and 5.2 of the SPS Agreement because they are not based
on a risk assessment, appropriate to the circumstances, taking into
account risk assessment techniques developed by the relevant international
organizations and the factors set forth in Article 5.2. In the event
that the AB reverses the Panel's finding under Article 2.2 of the
SPS Agreement, India requested the AB to complete the legal analysis
and find that India's AI measures are consistent with that provision.
The AB addressed India's first claim of error, namely, that the Panel
erred in interpreting and applying Article 2.2 of the SPS Agreement
by failing to distinguish between Article 2.2 and Article 5.1 of the
SPS Agreement as independent legal provisions setting out distinct
obligations.
Following its analysis, the AB found that, by failing to consider
whether the presumption of inconsistency with Article 2.2 that flowed
from its finding that India's AI measures are inconsistent with Articles
5.1 and 5.2 was rebutted by the arguments and evidence presented by
India, the Panel erred in its application of Article 2.2 to India's
AI measures with respect to the import prohibitions on fresh meat
of poultry and eggs from countries reporting LPNAI (low pathogenicity
notifiable avian influenza). Therefore, the AB reversed in part, the
Panel's findings that India's AI measures are inconsistent with Article
2.2 of the SPS Agreement, because they are not based on scientific
principles and are maintained without sufficient scientific evidence,
insofar as those findings concern India's import prohibitions on fresh
meat of poultry and eggs from countries reporting LPNAI. The AB also
found that India has not established that the Panel acted inconsistently
with its duty to conduct an objective assessment of the matter pursuant
to Article 11 of the DSU.
Having reversed, in part, the Panel's finding that India's AI measures
are inconsistent with Article 2.2 of the SPS Agreement, insofar as
that finding relates to the import prohibitions on fresh meat of poultry
and eggs from countries reporting LPNAI, the AB then considered India's
request to complete the legal analysis and find that its AI measures
are consistent with Article 2.2.
According to the AB, the parties, thus, presented competing evidence
to the Panel in support of their positions. "There are, therefore,
no undisputed facts on the record that would assist us in completing
the legal analysis. We further note that the Panel did not consider
or address the evidence adduced by India in order to establish that
its AI measures are not maintained without sufficient scientific evidence,
within the meaning of Article 2.2 or the evidence to the contrary
put forward by the United States."
"The Panel thus made no factual findings on the competing evidence
before it that would provide us with a sufficient basis for our analysis.
In these circumstances, we find that we are unable to complete the
legal analysis and assess the consistency of India's AI measures with
Article 2.2 of the SPS Agreement with respect to the import prohibitions
on fresh meat of poultry and eggs from countries reporting LPNAI,"
the AB said.
"Finally, we wish to state that our reversal, in part, of the
Panel's finding of inconsistency of India's AI measures with Article
2.2 ... is based on a failure by the Panel to consider the arguments
and evidence presented by India to establish that its AI measures
are consistent with Article 2.2. We neither examine, nor make any
ruling on the issue of whether the arguments and the evidence that
India presented with respect to fresh meat of poultry and eggs could
have rebutted the presumption of inconsistency flowing from a violation
of Articles 5.1 and 5.2 by establishing that, with respect to those
two product categories, its AI measures are based on scientific principles
and are not maintained without sufficient scientific evidence."
In its conclusions on this issue, the AB said that it had found that
the Panel did not err in its interpretation of Articles 2.2, 5.1,
and 5.2 of the SPS Agreement, and, in particular, in its understanding
of the relationship between Article 2.2, on the one hand, and Articles
5.1 and 5.2, on the other hand. However, it had also found that, by
failing to consider whether the presumption of inconsistency with
Article 2.2 that flowed from its finding that India's AI measures
are inconsistent with Articles 5.1 and 5.2 was rebutted by the arguments
and evidence presented by India, the Panel erred in its application
of Article 2.2 to India's AI measures with respect to the import prohibitions
on fresh meat of poultry and eggs from countries reporting LPNAI.
Consequently, the AB had reversed, in part, the Panel's finding that
India's AI measures are inconsistent with Article 2.2 of the SPS Agreement
because they are not based on scientific principles and are maintained
without sufficient scientific evidence, insofar as those findings
concern India's import prohibitions on fresh meat of poultry and eggs
from countries reporting LPNAI. In addition, given the absence of
uncontested evidence on the Panel record, or of relevant factual findings
by the Panel, the AB had found that it was unable to complete the
legal analysis and assess the consistency with Article 2.2 of the
SPS Agreement of India's AI measures with respect to the import prohibitions
on fresh meat of poultry and eggs from countries reporting LPNAI.
The AB had also found that India has not established that the Panel
acted inconsistently with its duty to conduct an objective assessment
of the matter pursuant to Article 11 of the DSU. Having rejected India's
claim under Article 11 of the DSU pertaining to the Panel's finding
that India's AI measures are inconsistent with Articles 5.1 and 5.2
of the SPS Agreement, and given that, in any event, compliance with
the requirements of Article 2.2 cannot exclude the application of
Articles 5.1 and 5.2, the AB upheld the Panel's findings that India's
AI measures are inconsistent with Articles 5.1 and 5.2 of the SPS
Agreement.
The AB then addressed India's appeal of the Panel's findings that
India's AI measures are inconsistent with Article 3.1 of the SPS Agreement
and that India is not entitled to benefit from the presumption of
consistency of its AI measures with the other relevant provisions
of the SPS Agreement and the GATT 1994, as provided for under Article
3.2 of the SPS Agreement.
On whether the Panel erred under Article 11.2 of the SPS Agreement
and Article 13.2 of the DSU in its consultation with the World Organisation
for Animal Health (OIE), the AB said that it does not consider that
either Article 11.2 of the SPS Agreement or Article 13 of the DSU
imposes constraints on a panel's consultation with experts, including
with any relevant international organizations, and it saw no basis
for understanding Article 11.2 of the SPS Agreement to circumscribe
the authority or discretion a panel enjoys under Article 13 of the
DSU in SPS disputes.
For these reasons, it disagreed that Article 11.2 of the SPS Agreement
limits the permissible scope of a panel's consultations with an international
organization in the manner suggested by India. To the contrary, these
provisions apply cumulatively and harmoniously in SPS disputes, and
reinforce the comprehensive nature of a panel's fact-finding powers.
The AB therefore found that the Panel did not act inconsistently with
Article 11.2 of the SPS Agreement or Article 13.2 of the DSU in consulting
with the OIE regarding the meaning of the OIE Code.
The AB further rejected India's claim that the Panel acted inconsistently
with its duties under Article 11 of the DSU by failing to conduct
its own assessment of the meaning of the OIE Code, including by failing
to do so in accordance with customary rules of treaty interpretation.
"We have rejected India's claims that the Panel failed to conduct
an objective assessment under Article 11 of the DSU by: (i) failing
to conduct its own assessment of the meaning of the OIE Code, including
by failing to apply customary rules of treaty interpretation; (ii)
disregarding arguments and evidence provided by India pertaining to
the meaning of the OIE Code; and (iii) reaching findings regarding
the meaning of the OIE Code that lack support in the evidence on the
record. We therefore find that India has not established that the
Panel acted inconsistently with its duty to conduct an objective assessment
of the matter pursuant to Article 11 of the DSU in its assessment
of the meaning of the OIE Code."
In its conclusions on this issue, the AB said that it had found that
the Panel did not act inconsistently with Article 11.2 of the SPS
Agreement and Article 13.2 of the DSU in consulting with the OIE regarding
the meaning of the OIE Code, and had also found that India has not
established that the Panel acted inconsistently with its duty to conduct
an objective assessment of the matter pursuant to Article 11 of the
DSU in its assessment of the meaning of the OIE Code.
Accordingly, the AB upheld the Panel's findings that India's AI measures
are inconsistent with Article 3.1 of the SPS Agreement, and that India
is not entitled to benefit from the presumption of consistency of
its AI measures with other relevant provisions of the SPS Agreement
and the GATT 1994 as provided for under Article 3.2 of the SPS Agreement.
Having upheld the Panel's findings, the AB said that it need not address
India's consequential request that it complete the legal analysis
in respect of Articles 3.1 and 3.2 of the SPS Agreement.
The AB then addressed India's request for it to reverse the Panel's
findings that India's AI measures are inconsistent with Articles 6.1
and 6.2 of the SPS Agreement. India argued that the Panel: (i) erred
in its interpretation of the relationship between Article 6.1 and
Article 6.3 of the SPS Agreement; (ii) erred in its application of
Article 6.2 of the SPS Agreement to India's AI measures; and (iii)
failed to make an objective assessment of the matter, as required
by Article
11 of the DSU.
The AB said that it had found that the Panel did not err in interpreting
the relationship between Article 6.1 and Article 6.3 of the SPS Agreement,
and that the Panel did not err in its application of Article 6.2 by
not relying solely on Sections 3 and 3A of the Livestock Act in assessing
whether India's AI measures recognize the concepts of disease-free
areas and areas of low disease prevalence in respect of AI. Finally,
the AB had found that India has not established that the Panel failed
to conduct an objective assessment of the matter pursuant to Article
11 of the DSU.
Having found that India has not demonstrated that the Panel erred
in its assessment of the United States' claims under Article 6 of
the SPS Agreement, the AB upheld the Panel's findings that India's
AI measures are inconsistent with Articles 6.1 and 6.2 of the SPS
Agreement.
India appealed certain findings made by the Panel in the context of
its analysis of the United States' claims under Article 5.6 and Article
2.2 of the SPS Agreement. India argued that the Panel erred in its
application of Article 5.6 of the SPS Agreement to India's AI measures.
Additionally, India claimed that the Panel failed to make an objective
assessment of the matter, as required by Article 11 of the DSU. For
these reasons, India requested the AB to reverse the Panel's finding
that India's AI measures are significantly more trade restrictive
than required to achieve India's appropriate level of protection and
are therefore inconsistent with Article 5.6 of the SPS Agreement.
India also requested the AB to reverse the Panel's finding that India's
AI measures are consequentially inconsistent with Article 2.2 of the
SPS Agreement because they are applied beyond the extent necessary
to protect human and animal life or health.
India submits that, in the present case, any alternative measure has
to fulfil the appropriate level of protection as reflected in the
measure at issue (i. e. S. O. 1663(E)). According to India, the United
States identified India's appropriate level of protection based on
India's domestic control measures, instead of on the measure at issue.
Therefore, the United States ultimately did not fulfil its burden
of presenting an alternative measure that fulfils India's appropriate
level of protection and India asserts that, consequently, the United
States failed to make a prima facie case.
Before assessing the specific claim of error raised by India, the
AB recalled how the issue of the identification of India's appropriate
level of protection developed during the Panel proceedings. Before
the Panel, the United States argued, based on India's "domestic
surveillance and control measures" (particularly, India's NAP
2012628) that India's appropriate level of protection is "quite
low". In response, India submitted that the United States' claim
had no merit because the United States had identified the wrong appropriate
level of protection by referring to the NAP 2012 rather than S. O.
1663(E).
The Panel undertook a review of India's written and oral submissions,
and noted that India had alluded to the "prevention of ingress
of LPNAI and HPNAI" and to "country freedom from NAI"
as its appropriate level of protection. As it was not convinced that
either of these represented India's appropriate level of protection,
the Panel proceeded to examine other evidence on the record, including
the measures at issue, in order to determine India's appropriate level
of protection with greater precision. Having done so, the Panel concluded
that India's appropriate level of protection is "very high or
very conservative".
On appeal, India argued, in essence, that the United States did not
fulfil its burden of identifying an alternative measure that fulfils
India's appropriate level of protection, because it sought to identify
India's appropriate level of protection on the basis of India's domestic
control measures, instead of on the measure at issue.
India's arguments, in the AB's view, raise two related questions.
The first question is whether the United States is required to identify
India's appropriate level of protection on the basis of the measures
at issue in order to succeed in its claim under Article 5.6. More
generally, India's arguments also raise the question of whether the
fact that the United States, as complainant, bears the burden of proving
a claim of inconsistency with Article 5.6 means that, in order to
succeed in such claim, the Panel had to accept the United States'
articulation of India's appropriate level of protection and use this
characterization in the course of its reasoning.
The AB began by pointing out that there is a distinction between the
burden of proof borne by a complainant in establishing a claim under
Article 5.6 of the SPS Agreement, on the one hand, and the analysis
that must be undertaken by a panel in assessing such a claim, on the
other hand. In order to establish a claim under Article 5.6, a complainant
must put forth arguments and evidence in respect of all relevant elements
under this provision, including the respondent's appropriate level
of protection and the level of protection of the proposed alternative
measure.
At the same time, the panel examining such claim is charged with,
inter alia, identifying the level of protection of the Member whose
SPS measure is challenged and the level of protection of the proposed
alternative measure. In conducting this examination, the panel is
not constrained to verifying only whether or not the complainant's
allegations in this regard are substantiated. This is particularly
so with respect to a responding Member's appropriate level of protection.
The AB recalled that the Appellate Body has established that the specification
of such appropriate level of protection is both a prerogative and
an obligation of the responding Member. For these reasons, typically
a panel adjudicating a claim under Article 5.6 of the SPS Agreement
would be expected to accord weight to the respondent's articulation
of its appropriate level of protection. This will be particularly
so in circumstances where that appropriate level of protection was
specified in advance of the adoption of the SPS measure, where the
appropriate level of protection is specified with sufficient precision,
and where it has been consistently expressed by the responding Member.
At the same time, this does not mean that a panel must defer completely
to a respondent's characterization of its own appropriate level of
protection. Rather, in examining a claim under Article 5.6 of the
SPS Agreement, a panel is required to ascertain the respondent's appropriate
level of protection on the basis of the totality of the arguments
and evidence on the record.
First, the AB recalled that the Panel considered that it needed to
identify India's appropriate level of protection in order to conduct
an assessment of the United States claims under the SPS Agreement.
This, in the AB's view, suggests that the Panel correctly understood
that it was required to identify India's appropriate level of protection
in order to adjudicate the claims before it. Moreover, the Panel did
not limit its analysis to the United States' argumentation regarding
India's appropriate level of protection. Rather, in line with the
understanding that a responding Member has an obligation to specify
the level of SPS protection it wishes to achieve, the Panel requested
India to identify its appropriate level of protection.
"Moreover, we highlight that the Panel, correctly in our view,
did not defer completely to India's characterization of its own appropriate
level of protection, but, instead, decided to ascertain such level
of protection on the basis of the totality of the evidence on the
record."
In its analysis, the Panel took into account India's assertion that
its appropriate level of protection is "achieved by" and
"reflected in S. O. 1663(E)", as well as India's particular
AI situation and the manner in which AI is transmitted, and concluded
that India's appropriate level of protection is "very high or
very conservative".
To the AB, these considerations show that the Panel adopted a proper
approach in adjudicating the claim under Article 5.6 of the SPS Agreement.
Furthermore, to the extent that India's arguments suggest that the
Appellate Body has held that a complainant - and a panel - must identify
the responding Member's appropriate level of protection on the basis
of the SPS measure at issue, the AB does not consider this to be an
accurate characterization of the Appellate Body's jurisprudence. To
the contrary, the Appellate Body has explained that such an approach
is not desirable because it may lead to a circular analysis, even
if it may be necessary to adopt such an approach in certain circumstances,
in particular, "where a Member does not determine its appropriate
level of protection, or does so with insufficient precision."
Therefore, said the AB, India is not correct in arguing that "it
is an accepted jurisprudence" that the appropriate level of protection
must always be discerned from the measure at issue. In the light of
the above considerations, the AB did not agree with India that the
United States was required to identify India's appropriate level of
protection on the basis of the measures at issue in order to succeed
in its claim under Article 5.6 of the SPS Agreement. Accordingly,
the AB found that the Panel did not err in finding that the United
States had identified alternative measures that would achieve India's
appropriate level of protection.
The AB disagreed with India's contention that the Panel failed to
identify the product-specific recommendations in the OIE Code for
the corresponding product in question and the applicability of the
same in the event of the occurrence of HPNAI (highly pathogenic notifiable
avian influenza) or NAI (notifiable avian influenza). The AB accordingly
found that the Panel did not fail to identify the alternative measures
with precision. The AB found that India has not established that the
Panel acted inconsistently with its duty to conduct an objective assessment
of the matter pursuant to Article 11 of the DSU in its analysis of
the consistency of India's AI measures with Article 5.6 of the SPS
Agreement.
In its conclusions, the AB said that it had found that the Panel did
not err in finding that the United States had identified alternative
measures that would achieve India's appropriate level of protection,
and that the Panel did not fail to identify the alternative measures
with precision. Finally, it had found that India has not established
that the Panel acted inconsistently with its duty to conduct an objective
assessment of the matter pursuant to Article 11 of the DSU in its
analysis of the consistency of India's AI measures with Article 5.6
of the SPS Agreement.
In the light of these findings, the AB upheld the Panel's finding
that India's AI measures are inconsistent with Article 5.6 of the
SPS Agreement because they are significantly more trade restrictive
than required to achieve India's appropriate level of protection,
with respect to the products covered by Chapter 10.4 of the OIE Code.
Having upheld the Panel's finding under Article 5.6, the AB found
it unnecessary to address India's request for reversal of the Panel's
finding that India's AI measures are consequentially inconsistent
with Article 2.2 of the SPS Agreement.
India appealed certain aspects of the Panel's assessment of the United
States' claim under Article 2.3, first sentence, of the SPS Agreement.
India requested reversal of the Panel's finding that there is insufficient
evidence on the record to support a finding that LPNAI is exotic to
India, as well as its finding that the discrimination that India maintains,
through its AI measures, against foreign products on account of LPNAI
is arbitrary or unjustifiable, contrary to Article 2.3, first sentence,
of the SPS Agreement. In particular, India asserted that the Panel
acted inconsistently with Article 11 of the DSU in the consultations
with individual experts on India's disease situation in respect of
LPNAI.
On appeal, the AB noted, India does not challenge any aspect of the
Panel's interpretation of Article 2.3, first sentence, of the SPS
Agreement or its application of that provision to India's AI measures.
Instead, the three claims of error raised by India on appeal are all
claims that the Panel failed to make an objective assessment, and
thereby acted inconsistently with Article 11 of the DSU, in its analysis
of the United States' claims under Article 2.3, first sentence, with
respect to the second form of discrimination alleged by it, and, in
particular, with respect to the Panel's analysis of whether such discrimination
is "arbitrary or unjustifiable".
The AB did not accept India's argument that, by virtue of the OIE
Code, the Panel was required to accept as definitive India's self-assessment
of being LPNAI free. Thus, it rejected India's claim, under Article
11 of the DSU, that the Panel failed to make an objective assessment
of the matter before it by setting "terms of reference"
for individual experts, and posing questions to them, that went beyond
the scope of the OIE Code.
The AB rejected India's claim that the Panel acted inconsistently
with Article 11 of the DSU by requiring India to prove that LPNAI
is exotic to India. It also rejected India's claim that the Panel
acted inconsistently with Article 11 of the DSU because the questions
posed by the Panel to the individual experts amounted to an improper
delegation of its function to make the factual determination of whether
LPNAI is exotic to India to the experts.
In its conclusions, the AB said that it had rejected each of the three
claims of error raised by India in this part of its appeal. It found
that India has not established that the Panel acted inconsistently
with its duty to conduct an objective assessment of the matter pursuant
to Article 11 of the DSU in its assessment and findings with respect
to the United States' claim relating to the second "form"
of discrimination under Article 2.3, first sentence, of the SPS Agreement
and, more specifically, in its consultations with the individual experts
regarding the issue of whether LPNAI is exotic to India, or by requiring
India to prove that LPNAI is exotic to India.
Accordingly, the AB upheld the Panel's finding that India's AI measures
are inconsistent with Article 2.3, first sentence, of the SPS Agreement
because they arbitrarily or unjustifiably discriminate between WTO
Members where identical or similar conditions prevail. +