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TBT-SPS key principles, practices and
jurisprudencean overview
Lauro LOCKSTrade and Environment Division
World Trade Organization (WTO)
Free trade?Freer trade.
Transparency !
Removing distortions to trade
(but not all …!)
Giving room for opportunities,
choice
Platform for: implementation,
disputes resolution, negotiation
WTO brief
TARIFFS VS. NTMS
Trade Policies
Tariffs Non-TariffMeasures
Customs duties levied on goods object of import or export and that limit its market access:
Ad-valorem: calculated as a % of goods price; Specific: calculated as a fixed amount based on quantity; Mixed: part ad-valorem part specific.
Laws, regulations, policies or practices of a country which may or may not restrict the market access of an imported good:
BUT there is no agreed upon definition in the WTO!
Wide range of NTMs !
Essentially, anything that is not a tariff.
Quotas, contingency measures (antidumping, countervailing duties, safeguards), subsidies, services measures (domestic regulation), intellectual property (patent,
trademarks, copyrights), sanitary and Phytosanitary (SPS) measures and Technical Barriers to Trade (TBT) measures
Definition
There is a problem with transparency
(compared to tariffs, NTMs are more opaque, difficult to quantify, difficult to negotiate (for tariffs you can use numbers and formulas,
but how does one negotiate a reduction of NTMs?), less predictable
Characteristics
The effects on trade are complex …
… it is difficult to assess the impact(s), and
difficult to compare across countries.
Characteristics
What are Technical & Sanitary/Phytosanitary
Barriers to Trade?-
Motor vehicles to be equipped with seat belts
Cigarette labelling
Safety Human health
Bottled water for human consumption: Specifications on content, bottling and labelling requirements
Consumer information
TBT ???.....
TBT/SPS deal with everyday consumer
products
Cosmetics
Toys
ElectronicsChemicals
Medical devices
Food products
Alcoholic beverages
TBT/SPS: why do they matter?• Advance societal objectives:
– keeping everyone safe and healthy; preserving the environment; supping consumers with better product quality and information
• Enable progress: – facilitating technological changes, including connectivity/interoperability even more important
XXI Century (AI, "internet of all things", 4th industrial revolution etc.)
– science-based SPS measures ensure optimal health protection and minimal trade disruption, use of international standards for new technologies allows resource pooling e.g., for risk assessments, data requirements
• Build prosperity: – US Dept. Comm.: 92% of global goods exports can be linked to TBT notifications– UNCTAD 2017: TBTs as the most frequent NTMs, affecting 65% of world trade in terms of value,
and 35% of product lines– Similarly, for SPS UNCTAD finds a lower coverage (about 20%, concentrated mainly on agricultural
products), but an extremely high frequency (highest number of NTMs applied)– A tariff hinders trade, a standard can stop trade all together. – Lack of alignment adds significant costs: e.g., NTMs add around 26-27% to the cost of trade in
the automotive sector between the EU and US
• Avoid frictions: TBTC/SPSC as the only fora where TBT/SPS issues/measures are discussed/disciplined (and frictions even sometimes resolved) at a global scale
– TBTC/SPSC’s STC (specific trade concerns) practice represents a closer contact point between the WTO and stakeholders, including private sector
promotion of
international standards
respecting regulatory
autonomy to fulfill
legitimate policy
objectives
avoidance of
unnecessary/discriminatory
obstacles to international
trade
TBT/SPS Agreements
TBT and SPS Agreementscoverage
• TBT Agreement
– Technical regulations, conformity assessment procedures, standards
– Product safety, environmental protection, quality …
• SPS Agreement
– SPS measures (control, inspection and approval procedures)
– Food safety, animal and plant life and health
key disciplines of the TBT Agreement
Technical Assistance and S&D Treatment
Transparency
Equivalence and Mutual Recognition
Harmonization
Avoidance of unnecessary obstacles to trade
Non - Discrimination
Dispute Settlement
1. Non-discrimination
2. Scientific justification
• Harmonization (closed list)
• risk assessment
• consistency
• least trade-restrictiveness
3. Equivalence
4. Regionalization
5. Transparency
6. Technical assistance/special treatment
7. Dispute Settlement
8. Control, inspection and approval procedures
key disciplines of the SPS Agreement
SPS vs. TBT
How to determine whether a measure falls under the:
SPS Agreement
OR
TBT Agreement
OR
any other WTO Agreement?
23
Human or risks arising from additives,
animal health contaminants, toxins or disease
organisms in food, drink, feedstuff
A measure taken to protect:
Human life plant- or animal-carried diseases
Animal or pests, diseases, disease-causing
plant life organisms
Territory of other damage caused by entry,
Member establishment or spread of pests
from
from
from
from
SPS Agreement defines SPS measures through objectives (Annex A)
TBT Agreement refers to “legitimate objectives”
“inter alia”
• National security requirements
• Prevent deceptive practices
• Protect human health and safety
• Protect animal and plant health
• Protect the environment
but there could be others…
It applies to all:
– technical regulations (mandatory)
– standards (voluntary)
– conformity assessment procedures
TBTSPS
But: its provisions do not apply to SPS measures (TBT Article 1.5)
TBT Agreement defines three types of measures (Annex 1)
For all products, industrial and
agricultural
• Cigarette package labelling signalling health risks
• TBT/SPS Measure?
SPS or TBT Measure?Health Protection Measures
• Regulation requiring that all milk products be pasteurized
A regulation/legislation could consist of twocomponents:
One falling under the SPS Agreement
Another falling under the TBT Agreement
Example:
This regulation defines the quality, safety, packaging and labelling requirements for fresh domestic and imported blackberries for consumption in Costa Rica.
SPS or TBT ? Article 1.5
28
36
TBT Committee Meetings: 2019
5-7 March 2019 TBT informal and formal meetings- Thematic session on: Good Regulatory Practiceand Conformity Assessment Procedures
18-20 June 2019 TBT informal and formal meetings- Transparency: Ninth Special Meeting on Procedures for Information Exchange (funding for participation of Enquiry Points)
12-14 November 2019 TBT informal and formal meetings- Thematic sessions: Standards and Conformity Assessment Procedures
Members & Observers
Members decide who is in their delegations…
For TBT and SPS: importance of capital-based experts
ISO, IEC, Codex, WHO, FAO, WB, OECD....
Two main themes of Committee work
review of measures“specific trade concerns”
(mostly based on notifications)
Information exchange on cross-cutting issues (harmonization, transparency, …): leading to
decisions and recommendations
1 2
Specific Trade Concerns: peer review of measures
A specific trade complaint raised by Members in the SPS/TBTCommittee in relation to SPS/TBT measures maintained by otherMember(s).
Usually about getting further information on the measure orquestioning its consistency with SPS/TBT Agreements
(whether draft notified measures or measures currently in force)
45
1
Specific Trade Concerns
Improved transparency and information exchange (e.g. status of implementation, product coverage)
Applying multilateral peer pressure – forum to elevate concerns without resorting to WTO dispute settlement
Awareness-raising about the use and non-use of international standards
Resolution of trade concerns (including through bilateral meetings on margins of Committee)
health/safety-related TBT issues(a few examples)
• Nutrition information labeling
• Used medical equipment
• Toxic materials in Toys
• Tobacco-control measures (additives, GHWs, etc.)
• Alcohol-control measures (labelling, HWs/GHWs etc.)
• Categorization of Chemical Compounds as Endocrine Disruptors
• Pharmaceuticals (TRs and CAPs)
• Banning Chromium V in leather products
• Breast Milk Substitute (labelling, packaging)
…. AND ….
Specific Trade Concerns(a sea of diff. issues)
Health (nutrition, tobacco, alcohol labelling; list above)
High-tech (cybersecure, IoTs, drones, autonomous vehicles etc.)
Environment (eco-labelling, carbon footprint, energy-saving labelling, etc.)
Animal welfare (cloning, humane slaughtering, etc.)
Morality and religion (halal standards, etc.)
Safety/Quality (used medical devices etc)
Consumer protection/info (COOL, “canola” etc.)
Competition/trade facilitation (equivalence in vehicle safety standards, etc)
Etc.
promotion of international standards
allowing for regulatory
autonomy to fulfill
legitimate objectives
avoidance of
unnecessary/discriminatory
obstacles to international
trade
TBT Agreement
The TBT Agreement Applies to All Products
Technical Regulations
StandardsConformity Assessment Procedures
…including industrial and agricultural products (Art. 1.3)
The following are notcovered by the TBT Agreement:- Services- Government
procurement- SPS measures
Coverage of the TBT Agreement
• Technical Regulations
Scope of the TBT Agreement
• Conformity Assessment Procedures
• Standards
Document which lays down product characteristics or theirrelated processes and production methods, (…), with whichcompliance is mandatory.
Document approved by a recognized body, that provides,for common and repeated use, rules, (…) for products orrelated processes and production methods, with whichcompliance is not mandatory.
Any procedure used, directly or indirectly, to determinethat relevant requirements in technical regulations orstandards are fulfilled.
Disciplines of the TBT Agreement
Technical Assistance and S&D Treatment
Transparency
Equivalence and Mutual Recognition
Harmonization
Avoidance of unnecessary obstacles to trade
Non - Discrimination
Dispute Settlement
WTO
Request clarification from Enquiry Point
…… Bilateral consultations …..
Specific Trade ConcernsRaised in the Committees
D I S P U T E S
Comments on notifications
≈ 720 “STCs”
≈ 30,000TBT notifications
(regular)
57 consult. requests
8 (key) disputes (Panel/AB repts.)
+ 3 on-going
TBT SPS≈ 20,000
SPS notifications(regular)
≈ 515 “STCs”
Good Offices of the Chair“New” procedure:
G/SPS/61
50 consult. requests
13 disputes (Panel /AB repts.)
+ 2 on-going
Dispute avoidance & resolution in the TBT and SPS Committees/Agreements
There have been 57 TBT disputes (corresponding to around 42 separate matters)
"TBT dispute" for the purpose of this presentation means any Request ofConsultation containing at least one claim based on the TBT Agreement irrespectiveof whether: (i) the TBT claim was the main claim or not; (ii) the TBT claim wasraised together with claims under other Agreements; (iii) the TBT claim waspursued or not after consultations; (iv) the TBT claim was object or not of a findingsby a Panel or the AB.
While developed (28) and developing (29) countries have lodged asimilar number of TBT disputes, the vast majority (41) of TBT disputeshave been against developed countries.
In fact, the last 20 TBT disputes lodged since 2008, only 4 were not bydeveloping countries !!
Jointly, US and Canada are the most frequent TBT complainants (20 of57). The EU, normally a top user of the WTO DS system as acomplainant, has only filed 4 disputes with TBT claims (and the lastwas almost 20 years ago!).
Canada has never had a measure challenged under the TBTAgreement in a WTO dispute. On the other hand, more than 40% ofall disputes with TBT claims have been lodged against the EU and/or amember state (24).
SOME TBT DS STATS: developing v. developed Members
- EC – Asbestos (Canada)
- EC – Sardines (Peru)
- [EC – TMs/GIs (Australia)]- US – Clove (Indonesia)
- US – Tuna II (Mexico)
- US – COOL (Mexico/Canada)
- EC – Seal Prod. (Norway/Canada)
- Australia – Plain Pack (Hon, DR, Cub, Ind)
- Russia – Railway Equip (Ukraine)
CONCLUDED TBT DISPUTES(with adopted panel and/or AB reports)
European Communities –Trade Description of Sardines
EC – SARDINES
Sardina Pilchardus(Eastern North Atlantic, Mediterranean Sea , Black Sea)
Sardinops Sagax(Eastern Pacific: Peru, Chile)
71
EU – Palm Oil (biofuels) (Indonesia, Malaysia)
Indonesia DS593: Panel estab 2020/comp 2021 – proceedings ongoingIndonesia DS600: Panel estab 2021 – composition pending
US – Origin Marking Requirement (HK, China)
DS597: Panel estab/comp 2021 – proceedings ongoing
CURRENT ONGOING DISPUTES(with panel estab./composed)
How does the TBT Agreement achieve a balance?
Basic Principles and Disciplines
Key principles in the TBT Agreement
(Preamble, TBT Agreement)
1) Non-discrimination2) Prevention of unnecessary obstacles to international trade3) Harmonization4) Transparency5) Special and differential treatment and technical assistance
• Technical Regulations
Scope of the TBT Agreement
• Conformity Assessment Procedures
• Standards
Document which lays down product characteristics or theirrelated processes and production methods, (…), with whichcompliance is mandatory.
Document approved by a recognized body, that provides,for common and repeated use, rules, (…) for products orrelated processes and production methods, with whichcompliance is not mandatory.
Any procedure used, directly or indirectly, to determinethat relevant requirements in technical regulations orstandards are fulfilled.
EC — Biotech
MEASURE – EC “Novel Foods” Regulation 258/97
three separate purposes
1- "food safety" purpose
2 - avoid "mislead consumers" purpose
and …
3- "nutritionally disadvantageous“ purpose
“to ensure that novel foods, including foods containing or consisting of GMOs, not differfrom foods which they are intended to replace to such an extent that their normalconsumption would be ‘nutritionally disadvantageous’ for the consumer.”
“Indeed, conceptually, it makes sense to distinguish the two situations. The normal consumption of a novel food may be nutritionally disadvantageous for the consumer if it does not provide the body with nutrients in the right quantity or of the right quality. This fact alone would not mean, however, that the relevant novel food would present a danger for the consumer.”
EC — BIOTECH
THE KEY ISSUE whether a law, or a requirement contained therein, may,if it meets the applicable conditions, be considered to incorporate an SPSmeasure as well as a distinct measure which falls to be assessed under aWTO agreement other than the SPS Agreement, such as theTBT Agreement. (para. 7.150)
EU POSITION Article 1.5 of the TBT Agreement means that a singlemeasure that, at the same time, falls within the scope of theSPS Agreement and within the scope of the TBT Agreement falls to beconsidered only under the SPS Agreement. (para. 7.156)
EC — BIOTECH
PANEL (paras. 7.149 and 7.162 to 7.174)
SPS Annex A(1) indicates that for the purposes of determining whether aparticular measure constitutes an "SPS measure" regard must be had tosuch elements as the purpose of the measure, its legal form and itsnature.
The purpose element is addressed in Annex A(1)(a) through (d) ("anymeasure applied to").
The form element is referred to in the second paragraph of Annex A(1)("laws, decrees, regulations").
the nature of measures qualifying as SPS measures is also addressed inthe second paragraph of Annex A(1) ("requirements and procedures,including, inter alia, end product criteria; processes and productionmethods; testing, inspection, certification and approval procedures;[etc.]").
European Communities —Measures Prohibiting the
Importation and Marketing of Seal Products
(EC – Seal Products)
Parties
Complainants:
CanadaNorway
Respondent:
EU (formerly EC)
Third Parties:
• Argentina; China; Colombia; Ecuador; Iceland; Japan; Mexico; Russian Federation; United States
What is the measure?
The “EU Seal Regime” generally prohibit the import andplacing on the market of seal products.
The EU Seal Regime provides for certain exceptions to theprohibition if certain conditions are met, including for:
• seal products derived from hunts conducted by Inuit orindigenous communities (IC exception);
• seal products derived from hunts conducted for marineresource management purposes (MRM exception);
• Seal products brought by travellers under certain limitedcircumstances (Travellers exception)
The EU Seal Regime
What is the measure?
"products, either processed or unprocessed,deriving or obtained from seals, including meat,oil, blubber, organs, raw fur skins and tanned furskins, as well as articles (such as clothing andaccessories, and omega-3 capsules) made fromfur skins and oil."
products at issue
What is the measure?Definition of “technical regulation” under Annex 1.1
Document which lays down product characteristics ortheir related processes and production methods,including the applicable administrative provisions, withwhich compliance is mandatory. It may also include ordeal exclusively with terminology, symbols, packaging,marking or labelling requirements as they apply to aproduct, process or production method.
What is the measure?The EU measure does not lay down “product characteristics”
AB: The part of the measure that regulates the placingon the EU market of “pure” seal products does notprescribe or impose any "characteristics“ and cannottherefore be a TBT measure.
But what about the part that prohibits seal-containingproducts? Could it be a TR to the extent that it imposes,in the negative, certain characteristics on all products byproviding that they may not contain seal?
What is the measure?The EU measure does not lay down “product characteristics”
The AB disagreed with Panel and said NO ….
“… when the prohibitive aspects of the EU Seal Regime areconsidered in the light of the IC and MRM exceptions, itbecomes apparent that the measure is not concerned withbanning the placing on the EU market of seal products assuch." Instead, "it establishes the conditions for placing sealproducts on the EU market based on criteria relating to theidentity of the hunter or the type or purpose of the huntfrom which the product is derived." (AB, para. 5.58)
What is the measure?
The AB reversed the Panel's finding that the EU SealRegime lays down “product characteristics” within themeaning of Annex 1.1.
The AB however declined to complete the legal analysisand thus did not rule on whether the EU Seal Regimelays down “related processes and production methods”within the meaning of Annex 1.1, given that thisquestion had not been sufficiently explored by thePanel and the participants.
Is the EC Seal Regime a technical regulation ?
What is the measure?Definition of “technical regulation” under Annex 1.1
“We see no basis in the text of Annex 1.1, or in prior AppellateBody reports, to suggest that the identity of the hunter, thetype of hunt, or the purpose of the hunt could be viewed asproduct characteristics” (AB, para. 5.45)
“… it does not appear plausible that a measure that purportedlydistinguishes between seal products on the basis of criteriarelating to the identity of the hunter and the purpose of thehunt would be ‘technical’ in nature or have ‘technical’ content.”(AB, footnote 942)
• Technical Regulations
Scope of the TBT Agreement
• Conformity Assessment Procedures
• Standards
Document which lays down product characteristics or theirrelated processes and production methods, (…), with whichcompliance is mandatory.
Document approved by a recognized body, that provides,for common and repeated use, rules, (…) for products orrelated processes and production methods, with whichcompliance is not mandatory.
Any procedure used, directly or indirectly, to determinethat relevant requirements in technical regulations orstandards are fulfilled.
United States — Measures Concerning the Importation,
Marketing and Sale of Tuna and Tuna Products
(US– Tuna II)
Parties
Complainant:
Mexico
Respondent:
United States
Third Parties:
• Argentina; Australia; Brazil; Canada; China; Ecuador; European Communities; Guatemala; Japan; Korea, Republic of; New Zealand; Chinese Taipei; Thailand; Turkey; Venezuela, Bolivarian Republic of
The Phenomenon of Tuna-Dolphin Association
•Under certain circumstances schools of mature tuna swim beneath schools of dolphins
The Phenomenon of Tuna-Dolphin Association
•It occurs frequently in the Eastern Tropical Pacific Ocean (ETP), and rarely in other oceanic regions
/ ETP
The Fishing Technique Known as “Setting on Dolphins”
•Consists of encircling dolphin schools with purse-seine nets to catch the tuna swimming underneath
The Fishing Technique Known as “Setting on Dolphins”
•Both, dolphins and tunas are encircled with purse-seine net
The Fishing Technique Known as “Setting on Dolphins”
•“Because of the regular and sustained association
between dolphins and yellowfin tuna in the ETP, in
the late 1950s, fishing boats began using purse seine
nets to catch yellowfin tuna in a process referred to
as “setting on dolphins”
• “From 1959 to 1976, setting on dolphins in the
ETP is estimated to have caused the death of at least
five million dolphins”
• “From 1960 to 1972… more than 100,000
dolphins were killed annually by the US fleet” alone
observable: death / harmnon observable: mother-
calf separation
non observable: reduced reproduction
The Fishing Technique Known as “Setting on Dolphins”
Other fishing techniques
Trawlers Driftnets Long-line
FADs Pole fishing
FAD Fishing -http://www.youtube.com/watch?v=VVbp7PijR6Y
Measures at Issue(DPCIA law, an implementing regulation, and a court ruling)
Establish conditions or requirements for use of the “dolphin-safe” label
Label not necessary to import or sell tuna products
No setting on dolphins (“SOD”)
Prohibits any reference to dolphins or othermarine mammals on a label for tuna productsif the tuna was caught in a manner that doesnot comply with the conditions establishedby the measure
Basic Claims of the PartiesTB
T
Technical regulation: Annex 1.1
Discriminatory: Article 2.1
Unnecessary Obstacle to Trade: Article 2.2
Not based on relevant international standard: Article 2.4
TBT
Voluntary measure
Non-discriminatory
Necessary to fulfil legitimate objectives
No international standard orineffective/ inappropriate
M
E
X
I
C
O
U
N
I
T
E
D
S
T
A
T
E
S
Was the Measure a TR?
• The panel examined three elements:1. "Whether the US dolphin-safe labelling provisions apply
to an identifiable group of products";
2. "Whether they lay down one or more productcharacteristic"; and
3. "Whether compliance with them is mandatory withinthe meaning of Annex 1."
Panel Report, US – Tuna II, paras. 7.50-7.55.
Was the Measure a TR?
• The panel examined three elements:1. "Whether the US dolphin-safe labelling provisions apply
to an identifiable group of products";
2. "Whether they lay down one or more characteristics ofthese products";
Panel Report, US – Tuna II, paras. 7.56-7.62, 7.73-7.74
YES
YES
"tuna products"
'labelling requirements'
Was the Measure a TR?
• Whether compliance with the measures"mandatory":1. Mexico = mandatory
2. The United States = voluntary
3. The panel considered that compliance is "mandatory"within the meaning of Annex 1.1, "if the document inwhich they are contained has the effect of regulating in alegally binding or compulsory fashion thecharacteristics at issue, and if it thus prescribes orimposes in a binding or compulsory fashion that certainproduct must or must not possess certain characteristics(…) or labels (…)."
Panel Report, US – Tuna II, para. 7.111.
Was the Measure a TR?
• Whether compliance with the measures"mandatory":4. The panel concluded that the measure was a TR as it
determined that "the US tuna labelling measures (…)prescribe and impose the conditions under which aproduct may be labelled dolphin-safe."
5. The AB agreed and said that "… while it is possible tosell tuna products without a 'dolphin-safe' label inthe United States, any 'producer, importer, exporter,distributor or seller' of tuna products must complywith the measure at issue in order to make any'dolphin-safe' claim." (para. 196)
YES
How does the TBT Agreement achieve a balance?
Basic Principles and Disciplines
Key principles in the TBT Agreement
(Preamble, TBT Agreement)
1) Non-discrimination2) Prevention of unnecessary obstacles to international trade3) Harmonization4) Transparency5) Special and differential treatment and technical assistance
Non-discriminationtechnical regulations/standards
“…treatment no less favourable than that accorded to like products of national origin and to like products
originating in any other country” (Art. 2.1)
Technical regulations Article 2.1
TBT Measure Discipline
StandardsParagraph D of Annex 3 (Code of Good Practice)
National Treatment Most Favored Nation
United States – Measures Affecting the Production and
Sale of Clove Cigarettes
(US – Clove Cigarettes)
Parties
Complainant:
Indonesia
Respondent:
United States
Third Parties:
• Brazil; Colombia; Dominican Republic; European Union; Guatemala; Mexico; Norway; Turkey
What is the measure?
United States
Family Smoking Prevention Tobacco Control Act of 2009 (FSPTCA)
Signed into law 22 June 2009
Section 907(a)(1)(A)
Panel Report 2.4-2.8; “House Report” refers to a report prepared by the House Energy and Commerce
Committee
"Consistent with the overall intent of the bill to protect the public health, including by reducing the number of children and adolescents who smoke cigarettes, section
907(a)(1) is intended to prohibit the manufacture and sale of cigarettes with certain 'characterizing flavors' that
appeal to youth."
"... a cigarette or any of its component parts (including the tobacco, filter, or paper) shall not contain, as a
constituent (including a smoke constituent) or additive, an artificial or natural flavor (other than tobacco or
menthol) or an herb or spice, including strawberry, grape, orange, clove, cinnamon, pineapple, vanilla, coconut, licorice, cocoa, chocolate, cherry, or coffee, that is a
characterizing flavor of the tobacco product or tobacco smoke."
Panel Report 2.4; The measure at issue is Section 907(a)(1)(A) of the Federal Food, Drug and Cosmetic Act ("FFDCA"), which was added to the FFDCA by Section 101(b) of the Family Smoking
Prevention and Tobacco Control Act ("FSPTCA").
Panel Report 2.8; The Food and Drug Administration ("FDA"), the U.S. agency empowered with tobacco control and regulation, issued a document entitled "Guidance for Industry and FDA Staff, General Questions and Answers on the Ban of Cigarettes that Contain Characterizing Flavors" on 23 December 2009.
Smoking is the leading cause of preventable death in the United States, claiming over 400,000 lives each year.
Panel Report 2.8; The Food and Drug Administration ("FDA"), the U.S. agency empowered with tobacco control and regulation, issued a document entitled "Guidance for Industry and FDA Staff, General Questions and Answers on the Ban of Cigarettes that Contain Characterizing Flavors" on 23 December 2009.
An important way to reduce the death and disease caused by smoking is to prevent children and adolescents from starting to smoke
Nearly all US smokers use regular and menthol cigarettes: 25% of the smoking
population smokes menthol
Panel Report 2.25
From 2007 – 2009
virtually all clove cigarettes
imported into United States were from Indonesia
(value: USD 16.2 million in 2007, 14.8 million in 2008 and 7.5 million in 2009)
Panel Report 2.26-27
Produced by blending varieties of tobacco leaf (60%-80%) with ground cloves, clove buds, or clove oil (20%-40%)
imparting a distinguishing flavor
Indonesia is the predominate producer and importer of clove cigarettes to the US (0.1% market share in the US)
Smoked by youth
Panel Report 2.25-2.27, 7.157-7.171, 7.319, 7.387-7.391
Produced by blending varieties of tobacco leaf (90%) with menthol oil (1%)
imparting a distinguishing flavor
Menthol cigarettes have ≅ 25% market share in the US: “tens of millions … chemically and psychologically addicted [to menthol cigarettes]”
Smoked by youth
Panel Report 2.25-2.27, 7.157-7.171, 7.319, 7.387-7.391
“like products”
physical characteristics;
product end-use;
consumers' tastes and habits; and
product tariff classification.
Panel
physical characteristics;
product end-use;
consumers' tastes and habits; and
product tariff classification.
Appellate Body
legitimate objective(health)
legitimate objective(health)
Panel Report, 7.119
…the declared legitimate public health objective … i.e., the reduction of youthsmoking, must permeate and inform our likeness analysis.
likeness is based on competitive relationship (traditional approach) between products, but regulatory objectives still matter…
AB Report, 108-112
Panel Report 7.147
physical properties
(7.149-7.190)
(the United States did not appeal this)
Panel: yes, similar (both contain tobacco and
additive with characterizing flavor)
end use
(7.191-7.199)
Panel: ... both clove and menthol cigarettes have the
same end-use, i.e., to be
smoked. [Yes, like.]
("to be smoked" does not exhaustively describe the functions of cigarettes ... We consider, however, that,
based on the Panel's findings referred to above, it can be concluded that both clove and menthol cigarettes share the end-uses of "satisfying an
addiction to nicotine" and "creating a pleasurable experience associated with the taste of the cigarette and the aroma of the smoke". [Yes, like.] (ABR 129-
132)
consumers’ tastes …
(7.200-7.232)
Panel: ... "same basket" … “The inevitable conclusion is that both
menthol and clove cigarettes appeal to youth because of the presence of an
additive that gives them a characterizing flavour having the effect of masking the
harshness of tobacco.” [Yes, like].
(The Panel's consideration of consumer tastes and habits was too limited... [but nevertheless]
... sufficiently substitutable. [Yes, like]. (ABR
144-145)
Tariff classification
(7.233-7.239)
Panel: both clove and menthol cigarettes are classified as:
2402.20 Cigarettes (Containing Tobacco)
[Yes, like].
(the United States did not appeal this)
Like
physical properties
(7.149-7.190)
end use
(7.191-7.199)
consumers’ tastes …
(7.200-7.232)
tariff classificaiton
(7.233-7.239
AB: Upheld, but for different reasons
(1)
Which are the products to be compared?
imported clove cigarettes domestic menthol cigarettes.
Panel Report 7.278
(2)
Are the products at issue treated differently and, if so, is this different treatment to the detriment of imported products?
Clove cigarettes are banned while mentholcigarettes are excluded from the ban (different treatment). Imported clove
cigarettes are banned while the like domestic menthol cigarettes are allowed to remain in the market (detriment).
Panel Report 7.279 - 81
(3)
Does this less favourable treatment (detrimental impact on imports) stem exclusively from a legitimate regulatory
distinction?
AB Report, 181-182
Is the measure even-handed, in the light of design, architecture,
revealing structure, operation, and application
• Both clove cigarettes and menthol cigarettes are appealing to youth due to flavouring that masks the harshness of the tobacco. Justification for banning cloves under legitimate objective equally applies to menthol…
• Reasons given by the US for exemption of menthol cigarettes (avoiding withdrawal symptoms for millions of domestic menthol smokers) does not suggest a legitimate regulatory distinction...
Legitimate Regulatory Distinction?
• Prohibited products consist primarily of clove cigarettes imported from Indonesia, while the like products that are actually permitted under this measure consist primarily of domestically produced menthol cigarettes (three domestic brands dominate the US market for menthol cigarettes).
Even handed?
AB Report, 223-225
NO
NO
Article 2.1
Discrimination
“like product” “less favourable treatment”
AB Report, 234
…inconsistent with Article 2.1 of the TBT Agreement because it
accords to imported clove cigarettes less favourable treatment than that accorded to like menthol cigarettes of national origin.
YES YES
United States’ measure did violate Article 2.1
• first dispute to address whether a CAP was “discriminatory”under TBT 5.1.1
• concerned Russian measures regarding the application of itsCAPs for railway products to suppliers from Ukraine.
• suspensions of existing certificates held by Ukrainianproducers, as well as rejections of applications from Ukrainianproducers for new certificates.
Under some Russian CAP schemes, producers were subject to:
(i) periodic inspection (including “on-site”) of production byRussian inspectors in order to maintain certificates; and
(ii) the testing of product samples for new applications forcertification.
Ukrainian certificates were suspended or rejected – while thosefrom Russian and European producers were not – becauseRussian inspectors could not safely conduct in Ukraine the CAPsnecessary for renewing existing certificates or issuing new onesfor Ukrainian railway equipment.
Non-discriminationCAPs
“…so as to grant access for suppliers of like productsoriginating in the territories of other Members underconditions no less favourable than those accorded tosuppliers of like products of national origin or originating inany other country, in a comparable situation; …”
Conf Assessment Procedures Article 5.1.1TBT Measure Discipline
Key legal/factual issue: “in a comparable situation” (1)
Panel/AB legal test on how to assess whether a CAP grants access underconditions no less favourable “in a comparable situation”.
This analysis should focused on:
• factors having a bearing on the conditions for grantingaccess to conformity assessment in that specific case
• the ability of the regulating member to ensurecompliance with the requirements in the underlyingtechnical regulation or standard.
Key legal/factual issue: “in a comparable situation” (2)
• AB, however, found that the Panel erred in its application of thatlegal standard to the particular circumstances of the case.
• It disagreed with the way the Panel had examined and givenimportance to the different factors that were relevant, in thatcase, for establishing the existence of a “comparable situation”.
• For the AB, the Panel erred because it:
(i) did not “focus sufficiently” on aspects specific to thesuppliers that claimed to have been granted access underless favourable conditions or to the location of the suppliers’facilities;
(ii) instead, “relied too much” on information concerning“the security situation in Ukraine generally”. TheAppellate Body thus reversed the Panel’s conclusion thatthese Russian measures did not violate Article 5.1.1.
reversed but did not complete the analysis
Article 2.2 TBT AGREEMENT
Members shall ensure that technical regulations are notprepared, adopted or applied with a view to or with the effect ofcreating unnecessary obstacles to international trade. For thispurpose, technical regulations shall not be more trade-restrictivethan necessary to fulfil a legitimate objective, taking account ofthe risks non-fulfilment would create. Such legitimate objectivesare, inter alia: national security requirements; the prevention ofdeceptive practices; protection of human health or safety, animalor plant life or health, or the environment. In assessing suchrisks, relevant elements of consideration are, inter alia: availablescientific and technical information, related processingtechnology or intended end-uses of products.
Unnecessary obstacles to trade
“Members shall ensure that technical regulations are not prepared, adopted or applied with a view to or with the effect of creating unnecessary obstacles to international trade. For this purpose, technical regulations shall not be more trade-
restrictive than necessary to fulfil a legitimate objective, taking account of the risks non-fulfilment would create.” (Art. 2.2)
Technical regulations Article 2.2
Conformity Assessment Procedures
Article 5.1.2
TBT Measure Discipline
StandardsParagraph E of Annex 3 (Code of Good Practice)
Unnecessary obstacles to trade: legitimate objectives
“…Such legitimate objectives are, inter alia: national security requirements; the prevention of deceptive
practices; protection of human health or safety, animal or plant life or health, or the environment.
(Art. 2.2)
Assessing Risk of Non-Fulfilment
Article 2.2
“…relevant elements of consideration are, inter alia:available scientific and technical information, related
processing technology or intended end-uses of products.”
Australia's tobacco "plain packaging" measures (TPP measures)
set out requirements on the manner in which
all tobacco products (cigarettes, cigars etc.) and their packs
shall appear for sale in the Australian market
• The TPP measures were enacted in 2011, and took effect fully from 1 December 2012;
• Australia was the first country to implement a tobacco plain packaging measure;
• The TPP measures’ requirements mandate, inter alia, “standardized” size, font, andlocation of brand names, variant names, and other marks on retail tobacco packaging;the colour, dimensions and shape of tobacco packaging; the material from whichpackages may be made; and the manner in which tobacco packaging may open;
• They also regulate and “standardize” the appearance of tobacco products themselves,including in respect of cigars, the appearance of brand and variant names;
• The TPP measures were implemented in conjunction with mandatory large graphichealth warnings, which were not challenged in these proceedings;
• The TPP measures themselves also indicate that they were also meant to implementcertain obligations undertake by Australia under the WHO FCTC.
LEGITIMATE OBJECTIVES TPP MEASURES AS IDENTIFIED BY THE PANEL
“… we understand the objective pursued by Australia by means ofthe TPP measures to be to …
improve public health by reducing the use of, and exposure to, tobacco products.” (para. 7.232)
• FCTC adopted in 2003 and entered into force in 2005
• 181 FCTC Parties // 164 WTO Members [as of Oct 2018]
the majority of FCTC Parties (around 83% or 150 out of 181) arealso WTO Members; and
the majority of WTO Members (around 93% or 153 out of 164)are also FCTC Parties
• Among the five parties to these disputes
Australia and Honduras are FCTC Parties
Dominican Republic, Cuba and Indonesia are not FCTC Parties(Cuba has signed it, but never ratified it)
• FCTC COP is the governing body of, and comprises all parties to, theFCTC
• FCTC served by a Secretariat, which is hosted in the WHO, with an
independent workplan and budget adopted by the COP
GUIDELINES TO ARTICLE 11 AND ARTICLE 13 OF THE FCTC
both refer to, and recommend the implementation byFCTC Parties of, certain “demand-side” tobacco-controlmeasures, including …
measures tobacco with "plain packaging" requirements
Procedural history of the disputes (1)
FIVE (later only FOUR) complainants
–Ukraine [later dropped complaint and left dispute]
–Honduras
–Dominican Republic
–Cuba
–Indonesia
Procedural history of the disputes (2)
• The WTO Director-General composed five panels in May 2014
• Mr Alexander ERWIN (S. Africa)
• Mr François DESSEMONTET (Switzerland)
• Ms Billie MILLER (Barbados)
• Interim report issued to the parties on 2 May 2017
• Final report issued to the parties on 25 September 2017
• Final report circulated to Members (public) on 28 June 2018
Procedurally, these disputes were unique, inter alia because:
• Parties submitted several hundreds of exhibits
• 40 WTO Members participated as third parties
• 41 amicus curiae submissions were received by the Panel
• the Panel consulted with WIPO (in accordance with theestablished practice) and the WHO/FCTC Secretariats onrelevant matters relating to conventions adopted andadministered under their auspices.
Procedural history of the disputes (3)
Procedural history of the disputes (4)
CURRENT SITUATION - Panel reports
– Adopted by DSB with respect to Cuba’s and Indonesia’s disputes
– Appealed to AB with respect to Honduras’ and DR’s disputes
Panel report results in a nutshell (1)
MAIN CLAIMS - TPP measures:
• unnecessary under TBT Art 2.2 (more trade-restrictive thannecessary)
• unjustifiable under TRIPS Art 20 (unjustifiably encumber theuse of trademarks)
OTHER CLAIMS - TPP measures also inconsistent with:
• various other provisions of TRIPS concerning trademarks andGIs
• GATT Art IX (“marks of origin”)
Panel report results in a nutshell (2)
PANEL’S ULTIMATE FINDINGS/CONCLUSIONS
complainants did not succeed to prove that TPP measures were inconsistent with
TBT, TRIPS or GATT
A bit more on TBTSummary Article 2.2 Findings on TBT (1)
TBT Art. 2.2
Members shall ensure that technical regulations are notprepared, adopted or applied with a view to or with the effect ofcreating unnecessary obstacles to international trade. For thispurpose, technical regulations shall not be more trade-restrictivethan necessary to fulfil a legitimate objective, taking account ofthe risks non-fulfilment would create. Such legitimate objectivesare, inter alia: national security requirements; the prevention ofdeceptive practices; protection of human health or safety,animal or plant life or health, or the environment. In assessingsuch risks, relevant elements of consideration are, inter alia:available scientific and technical information, related processingtechnology or intended end-uses of products.
A bit more on TBTSummary Article 2.2 Findings on TBT (2)
TBT Art. 2.2 “test”“relational analysis” + “comparative analysis”= not more trade-restrictive than necessary
1."relational analysis" of three factors:• the degree of contribution made by the challenged measure to its
legitimate objective(s);
• the trade-restrictiveness of the challenged measure; and
• the nature of the risks at issue and the gravity of consequences thatwould arise from non-fulfilment of the objective(s) pursued throughthe challenged measure.
A bit more on TBTSummary Article 2.2 Findings on TBT (3)
TBT Art. 2.2 “test” (cont.)
2. “comparative analysis" of the challenged measureand possible alternative measures that:
• are reasonably available;
• can make a contribution to the objective(s) equivalent to that of thechallenged measure, taking account of the risks non-fulfilment wouldcreate; and
• are less trade-restrictiveness than the challenged the measure.
A bit more on TBTSummary Article 2.2 Findings on TBT (4)
A “threshold” question: TBT or TRIPS? or both?
“ … in principle, the TBT and TRIPS Agreements may apply concurrently and cumulatively to different
aspects of the same measures. … the TBT and TRIPS Agreements should be interpreted
harmoniously.” (para. 7.88)
The TPP measures are a technical regulation subject to the TBT Agreement,including with respect to their aspects regulating the use of trademarks ontobacco products and packaging, which may also fall within the scope of theTRIPS Agreement
A bit more on TBTSummary Article 2.2 Findings on TBT (5)
TPP MEASURES - "relational analysis" • the objective pursued by the measures - the improvement of public
health by reducing the use of, and exposure to, tobacco products , islegitimate.
• On the basis of its review of extensive body of evidence, the Panelconcluded that the TPP measures, as applied in combination with othertobacco control measures maintained by Australia (including enlargedgraphic health warnings implemented concomitantly with plainpackaging, and pre-existing restrictions on advertising for tobaccoproducts), are capable of contributing, and do in fact contribute, to itsobjective of improving public health by reducing the use of, andexposure to, tobacco products.
• The Panel, also based on extensive evidence, agreed with complainantsthat the TPP measures were trade-restrictive, even when non-discriminatory.
A bit more on TBTSummary Article 2.2 Findings on TBT (6)
TPP MEASURES - "relational analysis" Risks non-fulfilment would create requires, said the Panel, identifying two aspects(below) and, “… in light of the objective of the TPP measures and taking into accountin particular the available scientific and technical evidence,” concluded that:
1. the nature of such risks
“… the nature of the risks non-fulfilment of the objective would create is thatpublic health would not be improved as the use of, and exposure to, tobaccoproducts would not be reduced.“
2. the gravity of the consequences of non-fulfilment of the objectives
“… the public health consequences of not fulfilling this objective are particularlygrave.”
A bit more on TBTSummary Article 2.2 Findings on TBT (7)
TPP MEASURES - “comparative analysis"
Four alternatives proposed by complainants:
(1) raising the minimum legal purchasing age,
(2) raising taxation levels,
(3) improved social marketing campaigns, and a
(4) "pre-vetting" mechanism to evaluate individual features on a case-by-case basis.
The Panel concluded that none of these alternatives, either individually or“cumulatively”, would make an equivalent contribution to Australia'sobjective, particularly in light of the fact that, applied as a substitute to plainpackaging, they would not adequately address those aspects of Australia'scomprehensive tobacco control regime that are addressed by plainpackaging.
A bit more on TBTSummary Article 2.2 Findings on TBT (8)
TPP MEASURES – presumption of conformity with Art. 2.2 (invoked by Australia)
The second sentence of Article 2.5 of the TBT Agreement provides as follows:
Whenever a technical regulation is prepared, adopted or applied for one ofthe legitimate objectives explicitly mentioned in paragraph 2, and is inaccordance with relevant international standards, it shall be rebuttablypresumed not to create an unnecessary obstacle to international trade.
A bit more on TBTSummary Article 2.2 Findings on TBT (9)
TPP MEASURES – presumption of conformity (Art. 2.5, second sentence)
• first time this "presumption" has been invoked by a party andassessed by a panel.
• the Panel concluded that the TPP measures did pursue one of thelegitimate objectives explicitly mentioned in Article 2.2, namely:"human health".
• the main element of contention was whether the "document" citedby Australia – "Guidelines to Article 11 and Article 13 of the FCTC“ –constituted a "relevant international standard" for tobacco plainpackaging
• first question: whether the FCTC Guidelines is "standard", as definedin Annex 1.2 of the TBT Agreement
A bit more on TBTSummary Article 2.2 Findings on TBT (10)
TPP MEASURES – presumption of conformity (Art. 2.5, second sentence)
• The Panel concluded that the aspects of the FCTC Guidelines identifiedby Australia were not, taken in isolation, a "standard", as defined inTBT
• For the Panel, these Guidelines serve the specific purpose of facilitatingthe implementation of FCTC obligations by signatories tothat Convention, and are, in that context, but one of variouscomponents of a comprehensive range of tobacco control measuresaddressed in that Convention and intended to be implemented andoperate together.
• Thus, there was no need to assess is Guidelines "international" or “relevant”
The Panel thus concluded that the TPP measures could not benefit from Article 2.5's rebuttable presumption of consistency with TBT Art. 2.2
A bit more on TBTSummary Article 2.2 Findings on TBT (11)
TPP MEASURES – presumption of conformity (Art. 2.5, second sentence)
BUT … even if FCTC Guidelines not an internationalstandards under TBT it may still be relevant – as “evidence offact” – under other aspects of the TBT 2.2 claim, or claimsunder other WTO Agreements (TRIPS).
– the FCTC and its related instruments (including its Guidelines) were givenextensive consideration – as "evidence of fact" – by the Panel in its analysis ofother aspects of the claims before it: under TBT Article 2.2 (e.g."contribution", "alternatives" etc.); and TRIPS Art. 20.
– the Panel recalled that previous WTO disputes had relied on non-WTOtreaties (including the FCTC, in US-Clove) as "evidence of fact" supporting agiven factual finding made by the Panel and/or AB.
– Complainants: pre-implementation TPP literature suffered from seriousmethodological flaws and lacked the scientific rigour and objectivityrequired to form a reliable evidentiary base for a policy intervention
– Australia: TPP measures are based upon a wealth of evidence supportingtheir effectiveness
The Panel, based on an extensive analysis, found that the studies formingthe TPP literature came from respected and qualified sources, focussed onrelevant outcomes and had not been shown to be, overall, somethodologically flawed that they should be dismissed in their entirety asan unreliable evidentiary base in support of tobacco plain packaging
FACTUAL FINDINGS – TBT-TRIPS (1)
evidence on the design –TPP literature
• Credible evidence had been presented, emanating from recognized sources,that PP of tobacco products may reduce their appeal, by minimizing the abilityof various branding features to create positive associations with tobaccoproducts that could have an influence on smoking behaviours, includingsmoking initiation, cessation and relapse
• Credible evidence had been presented, emanating from recognized sources,that PP of tobacco products may increase the salience of GHWs, by makingthem easier to see, more noticeable, and perceived as more credible and moreserious
• Not persuaded that the complainants had demonstrated that theTPP measures, by their design, would not be capable of reducing the ability oftobacco packaging to mislead consumers about the harmful effects ofsmoking
FACTUAL FINDINGS – TBT-TRIPS (2)
evidence on the design –The Three Mechanisms
• Panel not convinced TPP measures would not be capable of contributingto Australia's objectives through the operation of the three mechanisms
• While individual studies may suffer from certain limitations, the Panelwas not persuaded that they could not be considered reputable scienceand relied upon as relevant in relation to the anticipated impact of TPPon the measured outcomes, including a reduction in the appeal oftobacco products, an increased effectiveness of GHWs and reducing theability of packaging to mislead consumers about the harmful effects ofsmoking
FACTUAL FINDINGS – TBT-TRIPS (3)
overall conclusion evidence ondesign, structure and the intended operation
Harmonization – The establishment, recognition and application of common sanitary and phytosanitary measures by different Members.
SPS Agreement - HarmonizationDefinition in Annex A:2
• Art. 3.1: Members “shall base” SPS measures on the relevant international standards
• Art. 3.2: Measures which “conform to” the international standards are “deemed necessary to protect … health” and “presumed to be consistent” with SPS Agreement and GATT
• Art. 3.3: Members may have measures with higher ALOP than international standards – but … in accordance with Art.5 (risk assessment)
SPS Agreement - HarmonizationArticle 3 and Annex A:3
206
Standard-setting organizations
food safetyCODEX
plant healthIPPC
animal healthOIE
Codex = Joint FAO/WHO Codex Alimentarius CommissionOIE = World Organization for Animal HealthIPPC = International Plant Protection Convention (FAO)
SPS Agreement - HarmonizationArticle 3 and Annex A:3
SPS: Scientific justificationArticles 3 & 5
Risk assessmentOR
Measures must be based on:
International standards
Members shall ensure that their SPS measures are based on – an assessment, as appropriate, of the risks to
human, animal or plant life or health,
– taking into account risk assessment techniques developed by the relevant international organizations.
208
Risk assessmentArticle 5.1
… role for “Three Sisters”!
“relevant” international standards
Members shall use…
… as a basis for
technical regulations
(Art. 2.4)
conformity assessment procedures
(Art. 5.4)
except!when ineffective or
inappropriate for policy objectives
(e.g. fundamental climatic or geographical factors, ortechnological problems)
Presumption of not creating an unnecessary barrier to trade when requirements are in accordance with “relevant” international standards
(Art. 2.5)
TBT Agreement: using international standards
(mandatory)
(voluntary)
“Where technical regulations are required and relevant international standards exist or their completion is
imminent, Members shall use them, or the relevant parts of them, as a basis for their technical regulations… (Art. 2.4)
Technical regulations Article 2.4
Conformity Assessment Procedures
Article 5.4
TBT Measure Discipline
StandardsParagraph F of Annex 3 (Code of Good Practice)
Harmonization
SPS
Which standards?
• Transparency
• Openness
• Impartiality and consensus
• Relevance and effectiveness
• Coherence
• Development dimension
TBT Committee Decision on Principles for the Development of International Standards, Guides and Recommendations
(November 2000, G/TBT/9)
“Six Principles”
European Communities –Trade Description of Sardines
EC – SARDINES
Sardina Pilchardus(Eastern North Atlantic, Mediterranean Sea , Black Sea)
Sardinops Sagax(Eastern Pacific: Peru, Chile)
213
United States — Measures Concerning the Importation,
Marketing and Sale of Tuna and Tuna Products
(US– Tuna II)
AUSTRALIA – CERTAIN MEASURES CONCERNING
TRADEMARKS, GEOGRAPHICAL INDICATIONS AND OTHER PLAIN PACKAGING REQUIREMENTS APPLICABLE TO TOBACCO PRODUCTS AND
PACKAGING
(Australia – Tobacco Plain Packaging)