Indonesian
measures on chicken from Brazil held WTO-illegal
Published in SUNS #8556 dated 19 October 2017
Geneva, 18 Oct (Kanaga Raja) - A dispute panel at the World Trade
Organisation (WTO) has largely ruled that measures imposed by Indonesia
on imports of certain chicken meat and chicken products from Brazil
are inconsistent with Indonesia's obligations under the WTO.
In a ruling issued on 17 October, the Panel concluded, to the extent
that the measures at issue are inconsistent with certain provisions
of the GATT 1994 and the SPS (Sanitary and Phytosanitary Measures)
Agreement, they have nullified or impaired benefits accruing to Brazil
under those agreements.
The Panel, with the exception of the measure referred to in para 8.1.d
(vi) of the Panel report, recommended that Indonesia bring its measures
into conformity with its obligations under Articles III:4 and XI:1
of the GATT 1994 and Article 8 and Annex C(1)(a) of the SPS Agreement.
(Para 8.1.d (vi) refers to the Panel's finding that the application
windows and the validity periods, as a single measure, have ceased
to exist, and the Panel thus refrained from making a recommendation
in respect of this measure.)
One Panellist on the three-member panel voiced a separate opinion
on the approach taken by the Panel in its analysis of one of the issues
in the dispute (see below).
BACKGROUND
On 15 October 2015, Brazil had requested the establishment of a panel
in this dispute and at its meeting on 3 December 2015, the Dispute
Settlement Body (DSB) agreed to establish the panel.
On 22 February 2016, Brazil requested the Director-General to determine
the composition of the panel, and on 3 March 2016, the Director-General
accordingly composed the Panel.
The Panel decided to accept late requests from both Oman and Qatar
to participate as third parties to the dispute. Both requests had
been filed over three months after the panel had been established.
According to the Panel, on 28 April 2016 and 23 May 2016, Oman and
Qatar respectively requested to join as third parties. On 25 May 2016,
the Panel consulted with the parties.
Neither Member provided an explanation for the timing of its request,
according to the Panel report.
Brazil took the view that neither request should be accepted, while
Indonesia had no objections to the requests.
On 3 June 2016, the Panel informed Oman, Qatar, and the parties of
its decision to accept the requests. On 6 June 2016, the Panel informed
the other third parties of its decision to accept the requests.
In its ruling on this issue, the Panel underlined that accepting these
requests recognizes the limited experience of the requesting Members
but should not be taken as encouragement to other Members to disregard
the long- standing norm of indicating third-party interest at the
DSB meeting where the panel is established or within 10 days thereafter.
According to the Panel report, Brazil made claims against two categories
of measures: (i) an alleged general prohibition on the importation
of chicken meat and chicken products; and (ii) specific restrictions
and prohibitions on the importation of chicken meat and chicken products.
In its panel request, Brazil described the alleged general prohibition
as follows:
Indonesia imposes several prohibitions or restrictions on the importation
of chicken meat and chicken products which, combined, have the effect
of a general prohibition on the importation of these products, as
follows:
a. Indonesia does not allow the importation of animal and animal products
not listed in the appendices of the relevant regulations. With regard
to chicken, the list only contemplates HS codes referred to as whole
chicken, fresh or chilled and frozen. The HS codes for chicken meat
cut into pieces are not described in any of the "positive lists"
which contain the products that can be imported into Indonesia's territory;
b. Domestic food production (including "staple food", which
encompasses chicken meat and chicken products) and national food reserve
are prioritized over food import, which is only authorized as an exception,
when domestic food supply in Indonesia is not considered "sufficient"
by the government;
c. Imports of essential and strategic goods may be prohibited and/or
restricted and prices may be controlled by the Indonesian government.
Thus, import and export operations may be postponed by the Minister
of Trade during a force majeure event. As chicken meat and chicken
products fit into the categories of essential and strategic goods,
even if they were allowed to enter into Indonesia, their effective
importation would be subject to the discretion of the Minister of
Trade;
d. The Indonesian government limits the importation of chicken meat
and chicken products to certain intended uses. The importation of
chicken meat and chicken products shall only be allowed to meet the
needs of "hotel, restaurant, catering, manufacturing, other special
needs, and modern market";
e. Indonesia has unduly refused to examine and approve the Health
Certificates for poultry products (including chicken meat and chicken
products) proposed by Brazil since 2009;
f. Indonesia imposes prohibitions and/or restrictions to importation
through its Import Licensing Regime. In order to import chicken meat
and chicken products, importers must obtain import licenses after
several approval and overlapping authorization stages, covered by
different regulations and authorities; and
g. Indonesia establishes an import prohibition through different regulations
regarding halal slaughtering and labelling requirements for imported
chicken meat and chicken products.
In addition to the alleged general prohibition on the importation
of chicken meat and chicken products, Brazil also challenged a number
of individual measures. Four of those individual measures, albeit
described in slightly different terms in their own section of the
panel request, correspond to items (a), (d), (e), and (f) of the previous
section.
They pertain respectively to (i) the non-inclusion of certain chicken
products in the list of products that may be imported; (ii) the limitation
of imports of chicken meat and chicken products to certain intended
uses; (iii) Indonesia's alleged undue delay in the approval of health
certificates for chicken products; and (iv) Indonesia's import licensing
regime.
In addition, Brazil challenged two more individual measures:
a. Surveillance and implementation of halal slaughtering and labelling
requirements for imported chicken meat and chicken products established
by different Indonesian regulations, which are much stricter than
the surveillance and the implementation of halal requirements applied
to the domestic production in Indonesia; and
b. Restrictions on the transportation of imported products by requiring
direct transportation from the country of origin to the entry points
in Indonesia.
The Panel noted that during the proceedings, certain legal instruments
underlying a number of the measures at issue were either revoked or
revoked and replaced.
The Panel highlighted the two legal instruments that are central to
this dispute, as identified by Brazil in its panel request, and the
corresponding legal instruments that revoked and replaced them:
* Panel request ("first set of legal instruments"): MoA
139/2014 of 23 December 2014 and MoT 46/2013 of 30 August 2013;
* First written submission ("second set of legal instruments"):
MoA 58/2015 of 25 November 2015 and MoT 05/2016 of 28 January 2016;
* Second written submission ("third set of legal instruments"):
MoA 34/2016 of 15 July 2016 and MoT 59/2016 of 15 August 2016.
The Panel noted that the two main legal instruments underlying these
measures changed twice over the course of the proceedings.
The second set was adopted shortly after the establishment of the
Panel and before the first submission was due.
The third set was adopted after the end of the period foreseen for
answers to questions by the Panel following the first meeting of the
Panel with the parties.
Based on the changes enacted through the third set of legal instruments,
Indonesia takes the view that three of the challenged measures that
existed under the first set of legal instruments have expired. Brazil
contests the expiry claimed by Indonesia and presents arguments in
support of its claims in respect of relevant provisions in the third
set of legal instruments.
On this issue, the Panel said subject to the Panel having jurisdiction,
it will start with a review of the measures as enacted by the second
set of legal instruments.
"We will make findings on these measures before addressing the
issue, where relevant, of whether they have expired as argued by Indonesia.
... Where Indonesia has so argued, we will examine the issue of expiry."
The Panel said: "In addition to reviewing the measures as enacted
through the second set of legal instruments, we will, jurisdiction
permitting, review Brazil's claims with respect to the measures as
enacted through the third set of legal instruments, where Brazil has
made arguments to this effect and where we have found that the measure
has not expired."
(One Panellist voiced a different view over this approach and issued
a separate opinion. See below.)
ARTICLE XX(B) and (D) OF GATT 1994
Amongst other claims, the Panel also addressed Indonesia's defence
under Article XX(b) and (d) of the GATT 1994, essentially arguing
that the intended use requirement serves to ensure that frozen chicken
is not sold in markets without proper refrigeration facilities. Brazil
rejects the defence submitting that Indonesia has not met its evidentiary
burden.
According to the Panel report, Indonesia argues that the intended
use requirement serves to prevent a risk to human health in terms
of food safety which, it argues, arises from improper thawing and
re-freezing of previously frozen chicken.
Brazil considers that there is no meaningful connection between the
measure and its purported objective and that the measure is not necessary.
Indonesia's argument generally is that freezing and thawing increases
microbial growth and facilitates product deterioration. While Indonesia's
argument initially emphasized the issue of re-freezing thawed chicken,
its subsequent submissions focus on the issue of improper thawing,
and in particular thawing in tropical temperatures as these are the
temperatures found in Indonesia's outdoor traditional markets.
Following its analysis, the Panel considered that Indonesia has demonstrated
the existence of a risk arising from thawing frozen chicken at tropical
temperatures. It further considered that while Brazil has submitted
a scientific publication demonstrating that there is no such risk,
that publication, at best, represents a divergent view.
The existence of a divergent view would not prevent Indonesia from
relying on the above view which, as the evidence shows, happens to
be the currently prevailing view in science, the Panel said.
The Panel, therefore, found that Indonesia has established that there
is a risk to human health arising from thawing meat at tropical temperatures.
On this basis, it found that there is a relationship between the intended
use requirement and the objective of protecting human health.
On whether the intended use requirement is necessary to protect human
health, the Panel however found that the intended use requirement
is not provisionally justified under Article XX(b).
The Panel also addressed Indonesia's claim under Article XX(d). Indonesia
submits that the intended use requirement secures compliance with
relevant provisions in Indonesian law which require that imported
food must be safe. In addition, Indonesia refers to consumer protection
pointing to the risk of consumers mistaking thawed chicken for fresh
chicken when buying chicken in the traditional market.
On whether the intended use requirement is necessary to secure compliance
with such laws and regulations, the Panel found that the intended
use requirement is not provisionally justified under Article XX(d).
In conclusion, it found that the intended use requirement is inconsistent
with Article XI of the GATT 1994 and is not justified under Article
XX of the GATT 1994.
The Panel also addressed Brazil's claims that Indonesia has caused
an undue delay with respect to the approval of a veterinary certificate
for the importation of poultry from Brazil into Indonesia.
The Panel said throughout these proceedings Indonesia has confirmed
that the reason for not proceeding with the review of both country
of origin and business unit approval is that the relevant information
on halal requirements was still outstanding.
Brazil, for its part, at the second meeting with the Panel, confirmed
that to date, it has not submitted any halal information to Indonesia.
The Panel examined (1) whether Indonesia's refusal to examine and
approve the veterinary health certificate for poultry products proposed
by Brazil is subject to Annex C(1) of the SPS Agreement; (2) whether
it amounts to a delay; and (3) whether such delay is undue.
Indonesia indicates that the procedure has not moved forward because
of Brazil's failure to submit the relevant halal assurance questionnaire.
In addition, both parties agree that halal slaughtering requirements
are not SPS related.
"The legal question we are confronted with is whether a Member
may delay the completion of an SPS approval procedure because of outstanding
non-SPS related information that it requires the applicant to submit.
If the answer is in the affirmative, then Indonesia would be correct
in arguing that the delay is attributable to Brazil and is therefore
justified. If the answer is in the negative, Brazil would be correct
in arguing that Indonesia is unjustifiably holding back the relevant
SPS approval procedure," said the Panel.
The Panel subsequently concluded that a Member may not delay the completion
of an SPS approval procedure because non-SPS related information,
which the Member requires the applicant to submit, is outstanding
from an application. Accordingly, it found that the delay is not justified
and, is therefore undue.
The Panel noted that given the scope of Brazil's claim, this finding
applies to the approval procedure relevant to obtain the veterinary
health certificate, which is part of the country of origin approval
procedure.
This procedure is bundled with the business unit approval procedure,
which has an SPS component as well as the halal component at issue,
it said.
"We emphasize that our finding does not concern or affect Indonesia's
right to impose halal requirements as a pre-marketing condition for
the importation of chicken. We also note that Brazil has not contested
this right. We recognize that a Member has the right to impose halal
requirements in a manner consistent with its WTO obligations."
On the basis of the foregoing, the Panel found that Indonesia has
caused an undue delay in the approval of the veterinary health certificate
inconsistent with Article 8 and Annex C (1)(a) of the SPS Agreement.
SEPARATE OPINION OF ONE PANELLIST
In a separate opinion, one Panellist said : "I am unable to agree
with the analysis and findings concerning these measures as set out
in paragraphs 7.77 to 7.94 above and 7.103 to 7.452 above and the
conclusions and recommendations set out in paragraphs 8.1(b); 8.1(c);
and 8.1(d) iii to viii."
In the current dispute, the Panellist noted, three of the measures
challenged were amended twice after the request for the establishment
of the panel.
The measures concern (i) a limitation on importation of chicken cuts;
(ii) a limitation on the destination allowed for imports of chicken
meat; and (iii) the period for application and period of validity
of import recommendations and import approvals.
The two amendments were introduced through subsequent replacements
of the entire regulations of the Minister of Agriculture (MoA) and
of the Minister of Trade (MoT) that contain the legal framework applicable
to imports of carcass, meat and processed products into Indonesia.
Pursuant to these changes, it was the Panellist's view that the Panel
should start its analysis by addressing three questions: (1) What
are the amended measures? (2) What is the Panel's jurisdiction over
the amended measures? and (3) How does the Panel address an allegation
by the respondent regarding "expiry of the original measures"?
Thereafter, to the extent that the Panel determines that it has jurisdiction
over the measure(s) as amended it should examine the amended measures
in light of the claims made by the complainant.
To establish whether the Panel has jurisdiction over the amended measures,
the Panel must review the content of the measures as described in
the panel request vis-a-vis the content of the amended measures challenged
by Brazil. The factual circumstances of the case provide additional
elements that complement the analysis, in particular the overall structure
of the legal framework, the fact that the amendments were adopted
by a replacement of the entire MoA and MoT regulations with changes
limited to the three measures covered by the dispute, and the timing
of the changes which coincide with the Panel's proceedings, said the
Panellist.
In some conclusions following an explanation of the Panellist's reasoning,
it was the Panellist's view, that the sequence of determining the
content of the amended measure challenged, followed by a determination
of jurisdiction over the measure is key to a clear and comprehensive
examination by the panel.
An approach where the jurisdiction over an amended measure is only
asserted after the panel determines that the measure (original) has
not expired because the amended measure contains a similar restriction
creates the risk that the panel focuses its examination on an issue
that may no longer be the problem. Upon the amendment, the source
of impairment is the measure as amended rather than the original measure.
At that stage and to the extent that the complainant develops claims
against the amended measure, the panel needs to examine the modified
measure as defined by the complainant.
"This is important because it is possible that the amended measure
resolves some problems while creating other problems. So long as the
amended measure is covered by the panel's jurisdiction and the claim
is covered by the legal basis identified in the panel request, the
measure to be examined is the measure as amended."
In summary, it was the Panellist's view that in the present case pursuant
to the amendment of the measures and the allegation by Brazil that
the amended measures are in breach of the provisions of the covered
agreements indicated in the panel request, the Panel is required to
determine whether it has jurisdiction over the amended measures (as
defined by the complainant) and thereafter make findings and recommendations
concerning the measures as amended.
Altering this sequence with an examination of whether the "old
measure" has expired because the "new measure removes the
old problem" risks focusing the Panel's examination on a measure
that is no longer the source of the alleged impairment.
In addition, it risks changing the examination of the amended measure
into an examination that does not consider the amended measure in
its integrity and as identified by the complainant, said the Panellist.
OVERALL CONCLUSIONS AND RECOMMENDATIONS
a. In respect of Indonesia's request for a preliminary ruling:
i. the Panel finds that the alleged general prohibition/overarching
measure is properly within the terms of reference of the Panel, and
in particular, that (a) Brazil's panel request provides a brief summary
of the complaint sufficient to present the problem clearly, (b) the
measure described in Brazil's first written submission is not altered
to the point of falling outside the terms of reference of the Panel,
and (c) the alleged general prohibition is properly identified in
Brazil's panel request;
ii. the Panel finds that the panel request does not contain a challenge
to the import licensing regime "as a whole", and such measure
is therefore not within the terms of reference of the Panel;
iii. the Panel finds that Brazil's claims with regard to other prepared
or preserved chicken meat are identified in Brazil's panel request
and are therefore within the terms of reference of the Panel;
iv. the Panel takes note of Brazil's statement that it is not making
any claims under Article 1 of the Agreement on Import Licensing Procedures
and therefore sees no need to rule that Brazil is precluded from making
such claims.
b. In respect of the positive list requirement:
i. the Panel finds that the positive list requirement as enacted through
MoA 58/2015 and MoT 05/2016 is inconsistent with Article XI of the
GATT 1994;
ii. the Panel finds that the positive list requirement as enacted
through MoA 58/2015 and MoT 05/2016 is not justified under Article
XX(d) of the GATT 1994;
iii. the Panel considers that having found that the positive list
requirement as enacted through MoA 58/2015 and MoT 05/2016 is inconsistent
with Article XI of the GATT 1994 and is not justified under the general
exception in Article XX(d) of the GATT 1994, it is not necessary to
address Brazil's claim under Article 4.2 of the Agreement on Agriculture
in order to secure a positive solution to this dispute;
iv. the Panel finds that the positive list requirement has not ceased
to exist by virtue of the relevant provisions in MoA 34/2016 and MoT
59/2016;
v. the Panel finds that since the positive list requirement, as enacted
through MoA 34/2016 and MoT 59/2016, continues to apply in the same
manner as enacted through MoA 58/2015 and MoT 05/2016, the Panel's
findings on Article XI and XX(d) of the GATT 1994, in respect of the
measure as enacted through MoA 58/2015 and MoT 05/2016, also apply
to this measure as enacted through MoA 34/2016 and MoT 59/2016.
c. In respect of the intended use requirement:
i. in respect of the intended use requirement as enacted through the
relevant provisions in MoA 58/2015, the Panel finds that:
(1) Article III:4 of the GATT 1994 is not applicable because of the
absence of an equivalent domestic measure;
(2) the intended use requirement is inconsistent with Article XI of
the GATT 1994;
(3) the intended use requirement is not justified under Article XX(b)
or Article XX(d) of the GATT 1994;
(4) having found that the intended use requirement is inconsistent
with Article XI of the GATT 1994, it is not necessary to address Brazil's
claim under Article 4.2 of the Agreement on Agriculture in order to
secure a positive solution to this dispute;
ii. the intended use requirement has not ceased to exist by virtue
of the amendments made to through the relevant provisions in MoA 34/2016;
iii. in respect of the intended use requirement as enacted through
the relevant provisions in MoA 34/2016, the Panel finds that:
(1) Article III:4 of the GATT 1994 is applicable, because there is
an equivalent measure applied to like domestic products;
(2) the intended use requirement with respect to its cold storage
requirement is not inconsistent with Article III:4 of the GATT 1994;
(3) the intended use requirement with respect to its enforcement provisions
is inconsistent with Article III:4 of the GATT 1994;
(4) the intended use requirement with respect to its enforcement provisions
is not justified under the general exceptions in Article XX(b) or
Article XX(d) of the GATT 1994.
(5) having found that the intended use requirement with respect to
its enforcement provisions is inconsistent with Article III:4 of the
GATT 1994, it is not necessary to address Brazil's claim under Article
XI:1 of the GATT 1994 and Article 4.2 of the Agreement on Agriculture
in order to secure a positive solution to this dispute.
d. In respect of Indonesia's import licensing procedures:
i. the Panel finds that the positive list requirement is in the nature
of an import licensing rule and is therefore not subject to the Import
Licensing Agreement;
ii. the Panel finds that the intended use requirement is in the nature
of an import licensing rule and is therefore not subject to the Import
Licensing Agreement;
iii. the Panel finds that the application windows, the validity periods
and the fixed licence terms, as enacted through MoA 58/2015 and MoT
05/2016, are inconsistent with Article XI:1 of the GATT 1994;
iv. the Panel finds that the application windows, the validity periods
and the fixed licence terms, as enacted through MoA 58/2015 and MoT
05/2016, are not justified under Article XX(d) of the GATT 1994;
v. the Panel considers that having found that the application windows,
the validity periods and the fixed licence terms, as enacted through
MoA 58/2015 and MoT 05/2016, are inconsistent with Article XI of the
GATT 1994, it is not necessary to address Brazil's claim under Article
4.2 of the Agreement on Agriculture and Article 3.2 of the Import
Licensing Agreement in order to secure a positive solution to this
dispute;
vi. the Panel finds that the application windows and the validity
periods, as a single measure, have ceased to exist; the Panel thus
refrains from making a recommendation in respect of this measure;
vii. regarding the new validity period, as enacted through MoA 34/2016,
the Panel finds that Brazil failed to demonstrate that this measure
is inconsistent with Article XI:1 of the GATT 1994, Article 4.2 of
the Agreement on Agriculture and Article 3.2 of the Import Licensing
Agreement;
viii. the Panel finds that because of the almost identical language
in the relevant provisions governing the fixed licence terms, the
Panel's findings on Article XI and XX(d) of the GATT 1994, in respect
of this measure as enacted through MoA 58/2015 and MoT 05/2016, also
apply to this measure as enacted through MoA 34/2016 and MoT 59/2016;
ix. the Panel finds that Brazil failed to make a prima facie case
that the following aspects of Indonesia's import licensing regime
are WTO-inconsistent: (1) MoT's power to determine the amount of imported
goods in the MoA Import Recommendation, as enacted through MoA 58/2015;
and (2) the denial of import licences to secure price stabilization.
e. In respect of the undue delay in the approval of the veterinary
health certificate:
i. the Panel finds that Indonesia has caused an undue delay in the
approval of the veterinary health certificate inconsistent with Article
8 and Annex C (1)(a) of the SPS Agreement.
f. In respect of the halal labelling requirements:
i. the Panel finds that Brazil failed to demonstrate that Indonesia's
implementation of its halal labelling requirements is inconsistent
with Indonesia's obligations under Article III:4 of the GATT 1994.
g. In respect of the transportation requirement:
i. the Panel finds that Brazil failed to demonstrate that the direct
transportation requirement, as enacted through Article 19(a) of MoA
34/2016, is inconsistent with Article XI:1 of the GATT 1994 and Article
4.2 of the Agreement on Agriculture.
h. In respect of the general prohibition:
i. the Panel finds that Brazil failed to make a prima facie case,
because it did not demonstrate the existence of the alleged unwritten
measure.