Brazil — Retreaded Tyres, Report of the Panel, 12 June 2007

Short Title	Full Case Title and Citation
Argentina – Footwear (EC)	Appellate Body Report, Argentina – Safeguard Measures on Imports of Footwear ("Argentina – Footwear (EC)"), WT/DS121/AB/R, adopted 12 January 2000, DSR 2000:I, 515.
Argentina – Hides and Leather	Panel Report, Argentina – Measures Affecting the Export of Bovine Hides and Import of Finished Leather, WT/DS155/R and Corr.1, adopted 16 February 2001, DSR 2001:V, 1779
Australia – Salmon	Appellate Body Report, Australia – Measures Affecting Importation of Salmon, WT/DS18/AB/R, adopted 6 November 1998, DSR 1998:VIII, 3327
Canada – Autos	Appellate Body Report, Canada – Certain Measures Affecting the Automotive Industry ("Canada – Autos"), WT/DS139/AB/R, WT/DS142/AB/R, adopted 19 June 2000, DSR 2000:VI, 2985.
Canada – Dairy	Appellate Body Report, Canada – Measures Affecting the Importation of Milk and the Exportation of Dairy Products ("Canada – Dairy"), WT/DS103/AB/R, WT/DS113/AB/R and Corr.1, adopted 27 October 1999, DSR 1999:V, 2057.
Canada – Wheat Exports and Grain Imports	Panel Report, Canada – Measures Relating to Exports of Wheat and Treatment of Imported Grain, WT/DS276/R, adopted 27 September 2004, upheld by Appellate Body Report, WT/DS276/AB/R, DSR 2004:VI, 2817
Chile – Price Band System	Appellate Body Report, Chile – Price Band System and Safeguard Measures Relating to Certain Agricultural Products ("Chile – Price Band System"), WT/DS207/AB/R, adopted 23 October 2002, DSR 2002:VIII, 3045.
Dominican Republic – Import and Sale of Cigarettes	Appellate Body Report, Dominican Republic – Measures Affecting the Importation and Sale of Cigarettes, WT/DS302/AB/R, adopted 19 May 2005.
EC – Asbestos	Appellate Body Report, European Communities – Measures Affecting Asbestos and Asbestos-Containing Products, WT/DS135/AB/R, adopted 5 April 2001, DSR 2001:VII, 3243
EC – Asbestos	Panel Report, European Communities – Measures Affecting Asbestos and Asbestos-Containing Products, WT/DS135/R and Add.1, adopted 5 April 2001, modified by Appellate Body Report, WT/DS135/AB/R, DSR 2001:VIII, 3305
EC – Bananas III	Appellate Body Report, European Communities – Regime for the Importation, Sale and Distribution of Bananas, WT/DS27/AB/R, adopted 25 September 1997, DSR 1997:II, 591
EC – Hormones	Appellate Body Report, EC Measures Concerning Meat and Meat Products (Hormones), WT/DS26/AB/R, WT/DS48/AB/R, adopted 13 February 1998, DSR 1998:I, 135
EC – Hormones (US) (Article 22.6 – EC)	Decision by the Arbitrators, European Communities – Measures Concerning Meat and Meat Products (Hormones), Original Complaint by the United States – Recourse to Arbitration by the European Communities under Article 22.6 of the DSU, WT/DS26/ARB, 12 July 1999, DSR 1999:III, 1105
EC – Tariff Preferences	Panel Report, European Communities – Conditions for the Granting of Tariff Preferences to Developing Countries, WT/DS246/R, adopted 20 April 2004, modified by Appellate Body Report, WT/DS/246/AB/R, DSR 2004:III, 1009
EEC – Parts and Components	GATT Panel Report, European Economic Community – Regulation on Imports of Parts and Components, L/6657, adopted 16 May 1990, BISD 37S/132
India – Autos	Panel Report, India – Measures Affecting the Automotive Sector, WT/DS146/R, WT/DS175/R and Corr.1, adopted 5 April 2002, DSR 2002:V, 1827
Korea – Various Measures on Beef	Appellate Body Report, Korea – Measures Affecting Imports of Fresh, Chilled and Frozen Beef, WT/DS161/AB/R, WT/DS169/AB/R, adopted 10 January 2001, DSR 2001:I, 5
Mexico – Taxes on Soft Drinks	Appellate Body Report, Mexico – Tax Measures on Soft Drinks and Other Beverages, WT/DS308/AB/R, adopted 24 March 2006
Mexico – Telecoms	Panel Report, Mexico – Measures Affecting Telecommunications Services, WT/DS204/R, adopted 1 June 2004, DSR 2004:IV, 1537
Thailand – Cigarettes	GATT Panel Report, Thailand – Restrictions on Importation of and Internal Taxes on Cigarettes, DS10/R, adopted 7 November 1990, BISD 37S/200
Turkey – Textiles	Appellate Body Report, Turkey – Restrictions on Imports of Textile and Clothing Products ("Turkey – Textiles"), WT/DS34/AB/R, adopted 19 November 1999, DSR 1999:VI, 2345.
Turkey – Textiles	Panel Report, Turkey – Restrictions on Imports of Textile and Clothing Products, WT/DS34/R, adopted 19 November 1999, modified by Appellate Body Report, WT/DS34/AB/R, DSR 1999:VI, 2363
US – Carbon Steel	Appellate Body Report, United States – Countervailing Duties on Certain Corrosion-Resistant Carbon Steel Flat Products from Germany ("US – Carbon Steel"), WT/DS213/AB/R and Corr.1, adopted 19 December 2002, DSR 2002:IX, 3779.
US – Corrosion-Resistant Steel Sunset Review	Appellate Body Report, United States – Sunset Review of Anti-Dumping Duties on Corrosion-Resistant Carbon Steel Flat Products from Japan ("US – Corrosion-Resistant Steel Sunset Review"), WT/DS244/AB/R, adopted 9 January 2004, DSR 2004:I, 3.
US – Gambling	Appellate Body Report, United States – Measures Affecting the Cross-Border Supply of Gambling and Betting Services, WT/DS285/AB/R, adopted 20 April 2005
US – Gasoline	Appellate Body Report, United States – Standards for Reformulated and Conventional Gasoline, WT/DS2/AB/R, adopted 20 May 1996, DSR 1996:I, 3
US – Gasoline	Panel Report, United States – Standards for Reformulated and Conventional Gasoline, WT/DS2/R, adopted 20 May 1996, modified by Appellate Body Report, WT/DS2/AB/R, DSR 1996:I, 29
US – Line Pipe	Appellate Body Report, United States – Definitive Safeguard Measures on Imports of Circular Welded Carbon Quality Line Pipe from Korea, WT/DS202/AB/R, adopted 8 March 2002, DSR 2002:IV, 1403
US – Line Pipe	Panel Report, United States – Definitive Safeguard Measures on Imports of Circular Welded Carbon Quality Line Pipe from Korea, WT/DS202/R, adopted 8 March 2002, modified by Appellate Body Report, WT/DS202/AB/R, DSR 2002:IV, 1473.
US – Section 337 Tariff Act	GATT Panel Report, United States Section 337 of the Tariff Act of 1930, L/6439, adopted 7 November 1989, BISD 36S/345
US – Shrimp	Appellate Body Report, United States – Import Prohibition of Certain Shrimp and Shrimp Products, WT/DS58/AB/R, adopted 6 November 1998, DSR 1998:VII, 2755
US – Shrimp (Article 21.5 – Malaysia)	Appellate Body Report, United States – Import Prohibition of Certain Shrimp and Shrimp Products – Recourse to Article 21.5 of the DSU by Malaysia, WT/DS58/AB/RW, adopted 21 November 2001, DSR 2001:XIII, 6481
US – Taxes on Automobiles	GATT Panel Report, United States – Taxes on Automobiles, DS31/R, 11 October 1994, unadopted
US – Tuna (EEC)	GATT Panel Report, United States – Restrictions on Imports of Tuna, DS29/R, 16 June 1994, unadopted
US – Tuna (Mexico)	GATT Panel Report, United States – Restrictions on Imports of Tuna, DS21/R, 3 September 1991, unadopted, BISD 39S/155
US – Upland Cotton	Appellate Body Report, United States – Subsidies on Upland Cotton ("US – Upland Cotton"), WT/DS267/AB/R, adopted 21 March 2005.
US – Wool Shirts and Blouses	Appellate Body Report, United States – Measure Affecting Imports of Woven Wool Shirts and Blouses from India, WT/DS33/AB/R and Corr.1, adopted 23 May 1997, DSR 1997:I, 323

1.1.

On 20 June 2005, the European Communities requested consultations with Brazil under Article XXII:1 of the General Agreement on Tariffs and Trade 1994 (the "GATT 1994") and Article 4 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (the "DSU") regarding Brazil's imposition of measures that adversely affect exports of retreaded tyres from the European Communities to the Brazilian market.¹

1.2.

Consultations were held on 20 July 2005. These consultations have allowed a better understanding of the measures at issue and the respective positions but have not led to a satisfactory resolution of the matter.

1.3.

On 17 November 2005, the European Communities requested the establishment of a panel. At its meeting on 28 November 2005, the Dispute Settlement Body ("DSB") deferred the establishment of a panel until a second request had been made by the European Communities.²

1.4.

At its meeting on 20 January 2006, the DSB established a panel pursuant to the request of the European Communities in document WT/DS332/4, in accordance with Article 6 of the DSU.³

1.5.

At that meeting, the parties to the dispute agreed that the panel should have standard terms of reference. The terms of reference are, therefore, the following:

"To examine, in the light of the relevant provisions of the covered agreements cited by the European Communities in document WT/DS332/4, the matter referred to the DSB by the European Communities in that document, and to make such findings as will assist the DSB in making the recommendations or in giving the rulings provided for in those agreements."

1.6.

On 6 March 2006, the European Communities requested the Director-General to compose the panel. On 16 March 2006, the Director-General composed the panel as follows:

Chairman: Mr Mitsuo Matsushita

Members: Mr Donald M. McRae

Mr Chang-Fa Lo

1.7.

Argentina, Australia, China, Cuba, Guatemala, Japan, Korea, Mexico, Paraguay, Chinese Taipei, Thailand and the United States reserved their third-party rights.

1.8.

On 22 June 2006, the Panel received an unsolicited amicus curiae brief from Humane Society International. On 4 July 2006, the Panel received another unsolicited amicus curiae brief from a group of organizations.⁴ At the first substantive meeting, Brazil informed the Panel of its decision to include the two amicus curiae briefs as part of its exhibits.⁵

1.9.

On 23 June 2006, the Panel received a letter from the Center for International Environmental Law ("CIEL"), requesting that the Panel consult with the parties to consider the possibility of web-casting the first substantive meeting of the Panel, to be held on 5-7 July 2006. Parties were invited to offer any views they might have in respect of this letter. In light of the views expressed by the parties, the Panel decided that the substantive meeting with the parties, as well as the related third-party session, would be held in closed sessions in accordance with the Working Procedures adopted by the Panel at the beginning of the proceedings.

1.10.

The Panel met with the parties on 5-7 July 2006 and on 4 September 2006. The Panel met with third parties on 6 July 2006.

1.11.

The Panel submitted the Interim Report to the parties on 12 March 2007. The Panel submitted the Final Report to the parties on 23 April 2007.

2.1.

This dispute concerns retreaded tyres which are produced by reconditioning used tyres by stripping the worn tread from a used tyre's skeleton (casing) and replacing it with new material in the form of a new tread and, sometimes, new material covering also parts or all of the sidewalls.

2.2.

Retreaded tyres can be produced through a number of different methods all encompassed by the generic term "retreading." These methods are: (i) top-capping, which consists in replacing only the tread; (ii) re-capping, which entails replacing the tread and part of the sidewall; and (iii) remoulding or "bead to bead" method, which consists of replacing the tread and the sidewall including all or part of the lower area of the tyre.⁶

2.3.

There are different types of retreaded tyres which correspond to the different types of casings used to produce them, namely: passenger car retreaded tyres, commercial vehicle retreaded tyres, aircraft retreaded tyres and other. Under international standards, passenger car tyres may be retreaded only once.⁷ By contrast, commercial vehicle and aircraft tyres may be retreaded more than once.

2.4.

Under the Harmonized System nomenclature, retreaded tyres are classified under HS heading 4012 "Retreaded or used pneumatic tyres of rubber; solid or cushion tyres, tyre treads and tyre flaps, of rubber", and in particular under four sub-headings: 4012.11, which refers to retreaded tyres of a kind used on motor cars, including station wagons and racing cars; 4012.12, which includes the kind of retreaded tyres used on buses or lorries; 4012.13, which refers to the kind used on aircraft; and 4012.19, which comprises all other types of retreaded tyres. Consequently, for international trade purposes, retreaded tyres are to be distinguished from both used tyres and new tyres. Used tyres are classified under the HS sub-heading 4012.20, whereas new tyres are classified under HS heading 4011.

2.5.

On 17 November 2005, the European Communities requested the establishment of a panel in relation to the following measures of Brazil:⁹

(a) The imposition of an import ban on retreaded tyres, notably by virtue of Portaria 14 of 17 November 2004 of the Secretariat of Foreign Trade of the Brazilian Ministry of Development, Industry and International Commerce (SECEX) that prohibits the issuance of import licenses for retreaded tyres.

(b) The adoption of a set of measures banning the importation of used tyres, which are sometimes applied against imports of retreaded tyres. In a footnote to this paragraph, the European Communities identifies the following measures banning the importation of used tyres: Portaria No. 8 of the Department of Foreign Trade Operations (DECEX) of 13 May 1991; Portaria DECEX 18 of 19 July 1992; Portaria 138-N of the Brazilian Institute of the Environment and of Renewable Resources (IBAMA) of 22 December 1992; Portaria 370 of the Ministry of Industry, Commerce and Tourism (MICT) of 28 November 1994; Interministerial Portaria 3 of 12 September 1995 of the Ministry of Industry, Commerce and Tourism and of the Ministry of the Economy; Resolution 23 of the National Council of the Environment (CONAMA) of 12 December 1996, and CONAMA Resolution 235 of 7 January 1998.

(c) The imposition, by virtue of Presidential Decree 3919 of 14 September 2001, of a fine of 400 BRL per unit on the importation, as well as the marketing, transportation, storage, or keeping in deposit or warehouses of imported, but not of domestic retreaded tyres.

(d) The maintenance of measures at the level of Brazilian States which prohibit the sale of imported retreaded tyres. For instance, Law 12,114 of 5 July 2004 of Rio Grande do Sul which bans the commercialisation of used tyres, as which are considered inter alia retreaded tyres that have been manufactured outside of Brazil from the casings of used tyres and imported into Brazil.

(e) The exemption of retreaded tyres imported from other MERCOSUR countries from the import ban by means of Portaria SECEX 14 of 17 November 2004 and from the above-mentioned financial penalties by virtue of Presidential Decree No. 4592 of 11 February 2003, in response to the ruling of a MERCOSUR panel established at the request of Uruguay.

2.6.

The European Communities also noted that for each of the measures referred to above, its request also covers any amendments, replacements, extensions, implementing measures or other related measures.

2.7.

In its first written submission, the European Communities identifies Article 40 of Portaria SECEX 14 of 17 November 2004 ("Portaria SECEX 14/2004") as the current legal basis of the ban on the importation of retreaded tyres in Brazil. Article 40 reads as follows:

"Article 40 – An import license will not be granted for retreaded and used tyres, whether as a consumer product or feedstock, classified under NCM code 4012, except for remoulded tyres, classified under NCM codes 4012.11.00, 4012.12.00, 4012.13.00 and 4012.19.00, originating and proceeding from the MERCOSUR Member States under the Economic Complementation Agreement No. 18.

Sole paragraph – Imports originating in and coming from MERCOSUR must comply with the technical regulations adopted by the National Institute for Metrology, Standardization and Industrial Quality (INMETRO) for the product in question and with the regulations under MERCOSUR rules of origin and regulations of the environmental authorities."¹⁰

2.8.

Portaria SECEX 14/2004 was preceded by a number of regulations that previously prohibited the importation of retreaded tyres. These measures are:

(a) Portaria SECEX 8 of 20 September 2000, the first measure in Brazil explicitly banning the importation of "retreaded tyres" classified under heading 4012 of the MERCOSUR Common Nomenclature (NCM); and

(b) Portaria SECEX 17 of 1 December 2003, which replaced Portaria SECEX 8/2000, prohibiting the issuance of licenses for imports of retreaded tyres and excluding from this prohibition only the remoulded tyres originating in other MERCOSUR countries.

2.9.

Before the importation of retreaded tyres was expressly banned by means of Portaria SECEX 8/2000, Brazil adopted several measures dealing with the importation of used goods, including used tyres. The European Communities indicated in its first written submission that these measures included the following:¹¹

(a) Portaria DECEX 8 of 13 May 1991, in force in the version of Portaria MICT 370 of 28 November 1994, which prohibits the importation of used consumer goods, including 'used tyres', and

(b) Resolution CONAMA 23 of 12 December 1996, establishing that inert waste is free from import restrictions except for the importation of used tyres, which is therefore prohibited.

2.10.

On 14 September 2001, through Presidential Decree 3,919, Brazil amended Decree 3,179 of 21 September 1999, which provides for the specific sanctions applicable to conduct and activities harmful to the environment, and other provisions. The amendment introduced Article 47-A, which subjects the importation as well as the marketing, transportation, storage, keeping or warehousing of imported used and retreaded tyres to a fine of R$400/unit. Article 1 of Presidential Decree 3,919 provides:

"Art. 1. The following article is added to Decree 3,179 of September 21, 1999:

'Article 47-A. Importing used or retreaded tyres:

Fine of R$ 400.00 (four hundred reais) per unit.

Sole paragraph: The same penalty shall apply to whosoever trades, transports, stores, keeps or maintains in a depot a used or retreaded tyre imported under such conditions. (NR)'"¹²

2.11.

On 5 July 2004, Rio Grande do Sul issued Law 12,114, prohibiting the commercialization of imported used tyres within its territory, which includes imported retreaded tyres as well as retreaded tyres made in Brazil from imported casings. This Law, however, does not prohibit the marketing of retreaded tyres produced in Brazil from domestic casings. Article 1 of Law 12,114 reads:

"Art. 1. It is forbidden to sell imported used tyres in the State of Rio Grande do Sul.

Sole paragraph. An imported used tyre is considered for the purposes hereof as follows:

I – the simple carcass of the used tyre from any other country;

II – the carcass of a used tyre that has been retreaded by top-capping, remoulding or recapping processes abroad and imported in this condition;

III – the carcass of a used tyre from any other country and retreaded in Brazil by any of the industrial processes mentioned in the preceding item."¹³

2.12.

On 28 November 2005, the state of Rio Grande do Sul amended Law 12,114 through Law 12,381, which allows the importation and marketing of imported retreaded tyres provided that the importer proves to have destroyed tenused tyres in Brazil for every retreaded tyre imported. Law 12,381, however, requires the destruction of only oneused tyre per imported tyre in the case of imports of used tyre casings. Article 1 of Law 12,381 reads:

"Article 1 – The sole paragraph of Article 1 of Law 12,114 of 5 July 2004, prohibiting the sale of used tyres imported into the State and from other sources becomes paragraph 1, and the following paragraphs 2 and 3 are added:

§1° – …

§2° – The following shall be permitted:

I – the import of a used tyre carcass where importers can demonstrate that they will collect on Brazilian territory and destroy, in an environmentally adequate manner, 1 (one) existing used tyre on the domestic territory for each used tyre carcass to be imported;

II – the import of a carcass of a tyre retreaded by means of top-capping, remoulding, or recapping, outside of Brazil, where importers can demonstrate that they will collect within the domestic territory and destroy, in an environmentally-adequate manner, 10 (ten) existing used tyres within the domestic territory for each used tyre carcass to be imported.

§ 3º – tyre retreaders shall have the right to import one used tyre carcass for each used or retreaded tyre exported without having to comply with the environmental counterpart referred to in part I of paragraph 2 of this Article."¹⁴

2.13.

After the adoption of Portaria SECEX 8/2000, the first measure explicitly banning the importation of "retreaded tyres", Uruguay requested, on 27 August 2001, the initiation of arbitral proceedings under MERCOSUR against this Brazilian measure. On 9 January 2002, the MERCOSUR arbitral tribunal decided that the import ban on retreaded tyres imposed by Portaria SECEX 8/2000 was incompatible with MERCOSUR Decision 22/2000, which requires MERCOSUR partners not to introduce new restrictions to commerce among themselves.

2.14.

Following this arbitral award, Brazil eliminated the ban for remoulded tyres imported from MERCOSUR countries by means of Portaria SECEX 2 of 8 March 2002. Article 1 of Portaria SECEX 2/2002 provides:

"Art. 1. The import license for remoulded tyres is hereby authorized, classified under NCM codes 4012.1100, 4012.1200, 4012.1300 and 4012.1900, when proceeding from MERCOSUR member States under the Economic Complementation Agreement no. 18."¹⁵

2.15.

This exception was maintained in Portaria SECEX 17 of 1 December 2003, and it is currently contained in Article 40 of Portaria SECEX 14/2004, transcribed above.

2.16.

Similarly, through Presidential Decree 4,592 of 11 February 2003, Brazil exempted retreaded tyresimported from other MERCOSUR countries from the financial penalties set out in Presidential Decree 3,919. Article 1 of Presidential Decree 4,592 reads as follows:

"Article 1: Article 47-A of Decree 3,179 of 21 September 1999 shall apply with the addition of the following paragraph, and the current sole paragraph shall be renumbered as (1):

paragraph (2) – Imports of retreaded tyres classified under heading MCN 4012.1100, 4012.1200, 4012.1300 and 4012.1900, originating in the MERCOSUR member countries under Economic Complementation Agreement No. 18 shall be exempt from payment of the fine referred to in this Article."¹⁶

3.1.

The European Communities requests the Panel to find that:¹⁷

(a) Brazil has acted inconsistently with Article XI:1 of GATT 1994 by instituting and maintaining a prohibition and restriction other than a duty, tax or other charge on the importation of a product of the territory of another Member, made effective through import licences and other measures.

(b) Brazil has acted inconsistently with Article XI:1 and/or Article III:4 of GATT 1994 by instituting and maintaining a restriction other than a duty, tax or other charge on the importation of a product of the territory of another Member, made effective through a fine imposed on the importation of retreaded tyres in the amount of 400 BRL per unit.

(c) Brazil has acted inconsistently with Article III:4 and/or Article XI:1 of GATT 1994 by imposing a fine in the amount of 400 BRL per imported retreaded tyre that is marketed (sold), transported, stored, kept or kept in deposit or warehouses. Thereby, Brazil has failed to accord, to products of the territory of the European Communities imported into the territory of Brazil, treatment no less favourable than that accorded to like products of national origin in respect of laws, regulations and requirements affecting their internal sale, offering for sale, purchase, transportation, distribution or use.

(d) Brazil has acted inconsistently with Article I:1 of GATT 1994 by eliminating the import ban and the above-mentioned financial penalties for retreaded tyres imported from other MERCOSUR countries, while maintaining those measures for other imports, notably from the European Communities. Thereby, Brazil has failed to accord an advantage granted, with respect to rules and formalities in connection with importation, and with respect to matters referred to in paragraph 4 of Article III, to products originating in other countries immediately and unconditionally to the like products originating in the territory of the European Communities.

(e) By applying the above-mentioned import ban on retreads as well as the financial penalty on every unit of retreaded tyres imported from the European Communities, but not to those imported from other MERCOSUR countries, Brazil acts inconsistently with Article XIII:1 of GATT 1994, because it applies a prohibition and restriction on the importation of a product of the territory of another Member, although the importation of the like product of all third countries is not similarly prohibited or restricted.

3.2.

The European Communities also requests the Panel to recommend, in accordance with Article 19.1 of the DSU, that Brazil bring its measures into conformity with the covered agreements.¹⁸

3.3.

In turn, Brazil requests the Panel to dismiss all the claims made by the European Communities in its first written submission and to find that:¹⁹

(a) Brazil's import ban on retreaded tyres (contained in Portaria SECEX 14/2004) is justified by Article XX(b) of the GATT because it is a measure necessary to protect human, animal and plant life and health.

(b) The anti-circumvention fines (applied pursuant to Decree 3,919 of 14 September 2001) are justified by Article XX(b) and (d) of the GATT because they are necessary to protect human and animal life and health and the environment, and to secure compliance with the import ban, which itself is not inconsistent with the GATT.

(c) The limited exemption of MERCOSUR countries from Brazil's import ban (made effective through Portaria SECEX No. 14 of 17 November 2004) is authorized by Article XXIV, because it was adopted pursuant to Brazil's obligations under MERCOSUR – a customs union that is consistent with Article XXIV.

(d) The limited exemption of MERCOSUR countries from the ban is also justified by Article XX(d), because it is necessary to secure compliance with Brazil's obligation under MERCOSUR, which itself is not inconsistent with the GATT.

(e) The state measure of Rio Grande do Sul (Law 12,114 of 5 July 2004) is justified by Article XX(b) of the GATT 1994 because it is a measure necessary to protect human, animal and plant life and health.

3.4.

Brazil also states that in any event, it is not necessary for the Panel to reach an independent conclusion on the state measures because these measures do not have any independent legal effect.²⁰

4.1.

The arguments presented by the parties in their written submissions and oral statements are reflected below. This Part contains arguments of the parties as summarized in Parties' executive summaries and includes additional arguments taken from submissions and replies to questions as suggested by the Parties in their comments to this Part. Further arguments are contained in the replies and comments on replies annexed to the Panel report.

4.2.

The European Communities submits that Article 40 of Portaria SECEX 14/2004 provides that no import licences shall be granted for the importation of retreaded tyres into Brazil; however, such import licences are necessary in order to import retreaded tyres into Brazil. Therefore, the European Communities claims that Portaria SECEX 14/2004 prohibits the importation of retreaded tyres of any other WTO Member, including the European Communities, into Brazil. Accordingly, the European Communities claims that Brazil imposes a prohibition on the importation of retreaded tyres incompatible with Article XI:1 of GATT 1994.²¹ The European Communities notes that Brazil has not contested that its import ban on retreaded tyres violates Article XI:1.²²

4.3.

Brazil claims that Article XX exceptions "relate to all of the obligations under the General Agreement,"²³ and thus allow Brazil to maintain the ban even if it is prima facie inconsistent with Article XI:1.²⁴ Brazil submits that the European Communities questions the right of Brazil to adopt a ban that seeks to avoid the generation of unnecessary dangerous waste and reasonably deal with the disposal challenge – even though it recognizes the adverse health and environmental effects caused by waste tyre accumulation and disposal.²⁵

4.4.

Brazil claims that the ban on retreaded tyres is justified by Article XX(b) of GATT 1994.²⁶ Brazil submits that a Member invoking Article XX(b) must show: (i) that the measure falls within the scope of paragraph (b); and (ii) that the measure is applied in a manner that is consistent with the chapeau of Article XX.²⁷ Brazil claims that it meets that burden of proof.²⁸

4.5.

Brazil recognizes and shares the systemic concern that findings upholding an import ban, when necessary, should not lead to abuse of the general exceptions of Article XX. Because of the unique facts of this case, however, Brazil argues that there is no risk that a finding in favour of the ban could serve as a basis for other Members to invoke Article XX to justify an import ban that is not a legitimate measure necessary to protect human health and the environment.²⁹

4.6.

Brazil argues that this dispute presents a number of complex legal issues as well as fundamental facts that underlie those issues.³⁰ First, Brazil contends that this dispute cannot be seen outside its broader context: it involves legitimate concerns about health and environment issues, particularly sensitive for developing countries.³¹ Brazil argues that the market for retreaded tyres in developed countries is small and getting smaller and the number of undesirable tyre casings that must be disposed of is getting higher. Brazil submits that consumers in developed countries tend to look with disfavour on retreaded tyres, considering them to be less safe even though retreaded tyres must be made to exacting safety applications. Brazil submits further that consumers in developing countries, including Brazil, are very price-oriented and therefore are more likely to buy retreaded tyres than consumers in the developed world.³² Moreover, Brazil explains that from an exporting country point of view, every exported casing and every exported retread is a disposal problem also to be exported. Brazil stresses, on the other hand, that from an importing developing country point of view, along with the retreaded tyres comes the disposal problem. Brazil argues that it has enough disposal problems and does not need to import more.³³

4.7.

Second, Brazil stresses the necessity to protect life and health.³⁴ However, Brazil contends that while it is often easy to identify the steps that must be taken to protect health and the environment, it is not always easy to take them. Brazil argues further that the "polluter pays" principle may be a sound environmental principle, but the reality is that most polluters do not want to pay, and frequently they are in a position to delay – or entirely block – measures intended to protect health and the environment. Brazil is no different from any other country in this regard. Brazil argues that there are those in Brazil who want to import retreaded tyres and who want to import casings and they have strong allies and advance their interests through the political process and the judicial system. Brazil submits that the European Communities tried to convey to the Panel the false idea that Brazil has a permissive attitude towards the imports of used tyres.³⁵

4.8.

The European Communities claims that the import ban cannot be justified under Article XX. It also claims that it is well-established case-law that the burden of proof in relation to any defence based on Article XX rests on the responding party, in this case Brazil.³⁶

4.9.

Brazil claims that the import ban is justified by Article XX(b) because it is a measure necessary to protect human life and health and the environment and it protects Brazil's public and the environment from dangers caused by waste tyres.³⁷ Brazil argues that the import ban avoids the unnecessary generation of additional tyre waste, and its accumulation and disposal, which presents well-recognized dangers to public health and the environment.³⁸

4.10.

The European Communities argues that the import ban does not fulfil the conditions of Article XX(b).³⁹ The European Communities argues that it is for Brazil, as the WTO Member invoking an exception to its WTO obligations, to demonstrate that the requirements of Article XX(b) are met.⁴⁰ The European Communities submits that according to the Panel Reportin US – Gasoline and Panel and Appellate Body Reports in EC – Asbestos, the party invoking Article XX(b) must prove, first, that the policy pursued falls within the range of policies designed to protect human life or health, and, second, that the inconsistent measures for which the exception is invoked are necessary to fulfil the policy objective.⁴¹ TheEuropean Communities contends that the general explanations provided by Brazil as well as the facts on record do not fulfil these two requirements.⁴² According to the European Communities, the present proceedings have shown that Brazil has failed to discharge this burden with respect to every single requirement of Article XX(b).⁴³ The European Communities recalls the Appellate Body's statement in EC – Asbestos that the words "policies designed to protect human life or health" imply the existence of a health risk.⁴⁴

Introduction

Policy objective

4.11.

Brazil claims that the import ban is designed to reduce waste tyre volumes, and by so doing, to reduce the incidence of cancer, dengue, reproductive problems, environmental contamination, and other associated risks.⁴⁵ Brazil further claims that the ban falls squarely "within the range of policies designed to protect" human health and the environment because it is designed to avoid the unnecessary generation of tyre waste, and consequently, reduce the health and environmental risks that flow from waste tyre accumulation and disposal.⁴⁶

4.12.

Brazil claims that no one questions that waste tyres are a considerable environmental burden, and the fewer of them around, the better.⁴⁷ Brazil argues that waste tyre accumulation threatens public health and the environment because waste tyres:⁴⁸ (i) fuel epidemics of mosquito-borne diseases; and (ii) release toxic chemicals and heavy metals into the environment.⁴⁹ Brazil also submits that accumulated tyres must be collected and disposed of because they fuel mosquito-borne diseases and create fire hazards.⁵⁰ Concerning the European Communities' claim that Brazil never explained the risks to animal or plant health or life resulting from the accumulation of waste tyres, Brazil directs the European Communities' attention to the submission of the Humane Society, which was incorporated into the record as Exhibit BRA-98.⁵¹

4.13.

Brazil states that because waste tyre disposal presents health risks that cannot be eliminated, only non-generation of waste tyres allows Brazil to achieve its chosen level of protection.⁵² Brazil argues⁵³ that the import ban is necessary because it prevents the unnecessary generation of a dangerous waste and, consequently, reduces the risks of its disposal.⁵⁴

4.14.

Brazil notes that the European Communities also admits that "waste tyres... pose a significant environmental and public health problem in Brazil".⁵⁵ Brazil submits that the parties agree that the accumulation of waste tyres presents risks to human health and the environment and that measures to reduce the accumulation of tyre waste are legitimate responses to these risks.⁵⁶ Brazil also submits that the European Communities has recognized that "measures designed to prevent the incidence of [diseases such as cancer and dengue] do potentially fall within the scope of Article XX(b)"⁵⁷ and that⁵⁸ "measures aiming to reduce the accumulation of waste tyres can constitute a legitimate response to health problems arising from waste tyres".⁵⁹

4.15.

In other words, it is Brazil's view that the European Communities does not dispute that Brazil can – in conformity with its WTO obligations – pursue a waste tyre reduction policy to minimize the risks associated with waste tyres, including the imposition of a ban on imports of retreaded tyres. Brazil contends that the European Communities' claims that (i) Brazil is pursuing a goal other than health and environmental protection, and (ii) that Brazil's waste tyre management policy is not the most appropriate means of achieving its stated goal, are unfounded.⁶⁰

4.16.

Brazil recalls the Panel's statement in EC – Asbestos that "a policy that seeks to reduce exposure to a risk should fall within the range of policies designed to protect human life or health, insofar as a risk exists."⁶¹ Brazil also recalls the Appellate Body's statements that WTO Members "have a large measure of autonomy"⁶² to determine their own environmental policies, and that "the preservation of human life and health through the elimination, or reduction" of health risks is a value that is "both vital and important in the highest degree."⁶³

4.17.

The European Communities notes Brazil's claim that Article XX(b) is a provision that "preserves the ability of Members to prohibit imports that endanger human life or health and the environment". However, the European Communities argues that according to its wording, Article XX(b) covers only measures which are necessary to protect human, animal, or plant life or health. In turn, a measure designed to protect other concerns, including issues of environmental protection not related to human, animal or plant life or health, cannot be justified under Article XX(b).⁶⁴ The European Communities also points out that Brazil regularly and even primarily refers to issues of environmental protection without any direct link to human, animal or plant life or health.⁶⁵

4.18.

The European Communities is of the view that the analogy Brazil has attempted to draw with the prohibition of asbestos at issue in EC – Asbestos is entirely unfounded since asbestos fibres are immediately and directly harmful to human health, particularly as regards risks resulting from exposure to asbestos.⁶⁶ The European Communities argues that this is not comparable to retreaded tyres, which do not constitute any particular health risk.⁶⁷ The European Communities recalls that in EC – Asbestos the Appellate Body came to the conclusion that the objective pursued by the measure is the preservation of human life and health through the elimination, or reduction, of the well-known, and life-threatening, health risks posed by asbestos fibres. However, the European Communities argues that the present case is far removed from this situation as there are no "well-known and life-threatening health risks" posed by retreaded tyres. The European Communities therefore contends that it is for Brazil to establish how its measure contributes to the prevention of such risks, and the mere importance of the protection of life and health cannot absolve it from this task.⁶⁸

4.19.

The European Communities argues that it has already explained that the real aim of the import ban on retreaded tyres is not the protection of life and health but the protection of Brazil's domestic industry.⁶⁹

Factual description

4.20.

Brazil explains that retreading, a process that involves replacing the tyre's worn-out tread with a new tread, extends the tyre's lifespan by giving what would otherwise be a waste tyre an additional life. By retreading the tyres it consumes, Brazil claims that it directly reduces the number of additional waste tyres that would accumulate and which would have to be disposed of in its territory. Brazil is of the view that there is no effective disposal method to deal with over 40 million waste tyres generated every year in Brazil that is both environmentally sound and economically viable. Brazil submits that unlike new tyres, passenger car retreaded tyres – which in recent years comprised nearly all of European Communities' exports to Brazil – cannot be retreaded again and must be collected and disposed of in Brazil after just a single use. Brazil further submits that at the end of their useful life, these imported retreaded tyres – which cannot be retreaded again – become waste tyres that accumulate in Brazil by the millions.⁷⁰

4.21.

Brazil contends that the first written submission of the European Communities reveals a fundamental misunderstanding of what this case is about. Brazil explains that it prohibits imports of retreaded tyres not because they are somehow less safe, but because they have a shorter lifespan: passenger car retreaded tyres cannot be retreaded again and commercial vehicle retreaded tyres have fewer remaining lifecycles; thus, while retreaded tyres are not waste, they do become waste sooner. Brazil contends that the European Communities ignores the central issue: that the import ban avoids the unnecessary generation of dangerous tyre waste that must be disposed of in Brazil and, consequently, reduces the risks that flow from the accumulation and disposal of that waste.⁷¹ Brazil contends that the European Communities agrees that retreading "prevent[s] a used tyre from being discarded needlessly."⁷² However, Brazil claims that a country benefits from retreading only if it retreaded tyres consumed within its territory and that by retreading and exporting its tyres, the European Communities reduces its own waste burden, not Brazil's.⁷³

4.22.

The European Communities claims that Brazil has tried to create the impression that the present case is about human life and health and the environment. The European Communities contends that this is not correct, as the present proceedings concern a product, namely retreaded tyres.⁷⁴ The European Communities claims that there is no disagreement that retreaded tyres are new products which, when produced in accordance with the existing international standards, are as safe and durable as new tyres. The European Communities submits that tyre retreading is a mature and accepted technology, which is practiced in many countries worldwide, including in the European Communities and Brazil. The European Communities also notes that retreaded tyres are traded, and there are accepted UNECE standards facilitating such trade.⁷⁵

4.23.

The European Communities argues that Brazil puts used and retreaded tyres in the same basket, while this case is only about retreaded tyres.⁷⁶ Moreover, the European Communities explains that there are no differences between retreaded tyres and new tyres that would be relevant for the question at issue. The European Communities further submits that neither of them spread diseases among countries and continents: both types of tyres are products the production of which involves the use of high temperatures, pressures and solvents, eliminate viruses, bacteria or insects.⁷⁷ Moreover, the European Communities argues that the risks produced by burning or disposed tyres might exist in relation to used or end-of-life tyres but are totally misplaced when referring to retreaded tyres, which are stored, sold and then installed in vehicles, in the same way as new tyres.⁷⁸

Mosquito-borne diseases

4.24.

Brazil notes that the European Communities has questioned the genuineness of the cited health risks and has even requested a confirmation that "dengue or malaria cases in Brazil are linked to the presence of waste tyres".⁷⁹ Brazil recalls the European Communities' acknowledgement, just two years ago, and in the context of this very dispute that⁸⁰ "[c]learly, waste tyres... pose a significant environmental and public health problem in Brazil".⁸¹ Brazil notes that these risks suddenly became less "clear" to the European Communities.⁸²

4.25.

Brazil explains that when discarded and stockpiled, tyres create ideal breeding grounds for mosquitoes that carry dengue, yellow fever, malaria, and other dangerous diseases. Brazil submits that research indicates that tyres may, in fact, be the mosquitoes' favourite breeding site. Brazil refers to a study of mosquito specimen in Londrina, State of Paraná which observed, for example⁸³, that "[t]ires have been a preferred breeding site", possibly because of their "similarities with tree holes".⁸⁴ Brazil also refers to a 1997 study that examined aedes aegypti colonization in the State of São Paulo and found that:⁸⁵

Positive larvae were collected... mainly at tyre repair shops, tyre stockpiles and reprocessing units,... and deposits.... Tyres were the main culprits for the passive spread of mosquito, which occurs through intense tyre commerce... With the presence of mosquitoes that transmit both dengue and yellow fever, the region began to undergo the risk of epidemics.⁸⁶

4.26.

Brazil submits that transportation of waste tyres also spreads mosquitoes and, with them, diseases. However, in some cases, transportation cannot be avoided, as for example in the Amazon region, which has only few disposal facilities because of its fragile ecosystem. Brazil notes the European Communities' argument that in regions, such as the Amazon, the import ban will not make a difference because (i) few people live there, producing little waste; and (ii) tyres will be disposed of after a single use because such regions have no retreading industry.⁸⁷ Brazil claims that the argument is clearly flawed: the Amazon's population is over 20 million (with 14 million living in cities), and the region has some 119 retreaders.⁸⁸ Brazil notes that the risks of waste tyre transportation are well recognized.⁸⁹ One of the examples Brazil cites in support is a Japanese study that states:

"In the northernmost limit of the mosquito, Higashiyama located on the eastern side of Tohoku district, there is a cement plant in which used tires are used for fuel and raw materials. These tires, which could be infested with mosquitoes, are frequently transported from large cities nearby. It has been shown that this kind of economic activity has a strong connection to the spread of Ae. albopictus."⁹⁰

4.27.

Brazil submits that three out of four dengue types co-circulate in Brazil today, which increases the likelihood of complications and the introduction of type 4 is a great threat.⁹¹ Brazil also explains that because of their shape and presence in rainy locations, tyres contribute to the proliferation of mosquitoes that carry dengue. Brazil's National Program for Dengue Control, which works to identify the mosquito-breeding sites and educate the population, recognizes deposits of tyre waste as "strategic points", and inspects and fumigates them.⁹² Based on his personal experience and on the results obtained so far in the National Dengue Control Program, Dr. Giovaninni Evelim Coelho from Brazil's Ministry of Health states that the import ban is necessary to prevent the spread of the disease and removing the ban will greatly increase the risk of epidemics.⁹³

4.28.

Over the last decade, Brazil submits that it has suffered from severe epidemics of dengue, a disease that the World Health Organization (WHO) has recognized as "a major international public health concern"⁹⁴, and which is a viral disease that can cause high fever, muscle and joint pain, haemorrhage, circulatory failure, and even death in the event of complications.⁹⁵ Brazil submits that waste tyres fuelled Brazil's dengue epidemic, which peaked first in 1998 with 528,388 cases, and again in 2002 with 794,000 cases. Brazil explains that it collected discarded tyres and fumigated tyre stockpiles in the course of its R$4.5 billion (US$2 billion) dengue-control effort, but these measures can only mitigate, not eliminate, the risks.⁹⁶ Brazil submits that between 1998 and 2002, 70 per cent of the reported dengue cases in the Americas occurred in Brazil.⁹⁷

4.29.

Brazil submits that the European Communities has requested a confirmation that the dengue epidemic in Brazil is indeed linked to the presence of waste tyres. In its second written submission, Brazil notes that it provided several studies that confirm this well-recognized fact. Brazil also notes that one such study⁹⁸, conducted in the State of São Paulo, found positive larvae mainly at tyre shops and stockpiles, and noted that tyres were the "the main culprits" for the spread of mosquitoes, and that the presence of mosquitoes created the risks of dengue and yellow fever epidemics.⁹⁹

4.30.

Brazil contends, contrary to the European Communities' suggestion that dengue had nothing to do with tyres, allegedly because the import ban did not produce an immediate reduction in dengue¹⁰⁰, that the progression of the epidemic depends on many factors in addition to the waste tyre volumes, such as prevalence of other containers, transportation of mosquitoes to new areas, and introduction of new types of the dengue virus. Brazil explains that an import ban by itself cannot solve the dengue problem, but it plays an important part in the solution. Brazil submits that the WHO and the government of the United States both advise targeting waste tyres.¹⁰¹ Brazil notes that the European Communities, in the alternative, blames Brazil's dengue problem on the historic waste tyre accumulation. However, Brazil points out that new volumes also contribute to dengue because tyres must be stockpiled before disposal and sometimes must be transported. Finally, in addition to the import ban, Brazil submits that it is collecting tyres, teaching the public about dengue prevention, and carrying out mosquito surveillance.¹⁰²

4.31.

Moreover, Brazil submits that mosquitoes that breed in tyres also transmit yellow fever, which is, with its high fatality rate (over 33% in Brazil since 1999), significantly more dangerous than dengue.¹⁰³ Brazil explains that thus far yellow fever in Brazil has been confined to sparsely populated areas, but the risk of urbanization, aided by waste tyre accumulation and transportation, is real.¹⁰⁴

4.32.

The European Communities notes that Brazil has incorrectly claimed that the European Communities itself recognised the public health risks of waste tyre accumulation in Brazil in the Trade Barriers Regulation Committee (TBR) Report issued by the European Commission.¹⁰⁵ The European Communities contends that this report does not refer to public health risks of waste tyres generally, but to risks arising from tyres that "litter the countryside", i.e. to risks arising from improperly managed tyres.¹⁰⁶

4.33.

The European Communities argues that from Brazil's submissions, it is not possible to understand how the life and health of plants are at risk due to mosquito-borne diseases, and Brazil has never explained the animal species that are in danger of being infected by mosquitoes breeding in waste tyres.¹⁰⁷

The release of toxic chemicals and heavy metals into the environment

4.34.

Brazil submits that the European Communities has argued that the risks of waste tyre accumulation and disposal are essentially make-believe. Brazil notes that the European Communities has questioned the dangers of tyre fires and has even requested a confirmation of "their real negative effects on health" in Brazil. Brazil submits that the European Communities has argued that tyre fires are low-risk because they are difficult to ignite, yet the United Kingdom's own Health Protection Agency¹⁰⁸ has explained that the major hazard of tyre dumps is the toxic releases during fires, noting that "[a]rson is a common problem; the cause of over half of the fires in the United Kingdom."¹⁰⁹ Brazil submits that the emissions from tyre fires cause premature mortality, reduced lung function, suppression of the immune system, kidney problems, learning disabilities, partial blindness, respiratory problems, heart and chest problems, and cancer.¹¹⁰

4.35.

Brazil argues that this case turns mostly on facts, which the European Communities has persistently chosen to either misrepresent, minimize, or outright ignore. For Brazil, another example of the European Communities' reckless disregard of the facts in this case is its suggestion that the risk of tyre fires in Brazil is – for some unexplainable reason – less probable in Brazil than in the United Kingdom, Canada, or the United States; or that leaching of dangerous substances from tyre waste is less likely to occur in Brazil than in other parts of the world. Brazil argues that there may be many differences between the European Communities and Brazil, but it is safe to assume that the way natural laws apply in their respective territories is not one of them. Brazil notes that the European Communities' logic is that unless a Member has the misfortune of experiencing, first-hand, a particular environmental or sanitary catastrophe, it does not have the right to take preventive action; that clearly cannot be the case.¹¹¹

4.36.

The European Communities claims that Brazil has never made any effort to explain the negative consequences of tyre fires on the life and health of animals and plants in Brazil.¹¹² Moreover, the European Communities submits that the fire risks described by Brazil appear to be related to an incorrect management of end-of-life tyres, as explained in a document prepared in December 1999 by a Technical Working Group of the Basel Convention.¹¹³

4.37.

Brazilargues that the European Communities' claim that fires are but a consequence of improper management has no merit.¹¹⁴ Brazil argues that the Basel Tyre Guidelines state that even with proper control, stockpiling "can be used only for temporary storage before an end-of-life tyres [sic] is forwarded to a recovery operation," and that "landfilling and stockpiling are the least desired options."¹¹⁵

4.38.

Brazil recalls the Appellate Body's statement that "determination of whether a measure, which is not 'indispensable', may nevertheless be 'necessary'" involves "weighing and balancing a series of factors"¹¹⁶, including: (i) the importance of the interests protected by the measure; (ii) the contribution of the measure to the end pursued; (iii) the trade impact of the measure; and (iv) the existence of reasonably available alternative measures.¹¹⁷

4.39.

Brazilargues that the ban is necessary because no other measure can prevent the unnecessary generation of waste tyres. Brazil submits that the required weighing and balancing of factors (interest protected, necessity, trade impact, and availability of alternatives) clearly demonstrates that the ban is necessary.¹¹⁸ Brazil has established that: the ban protects interests that are vital and important in the highest degree; no reasonably available alternative to the ban exists; it does not restrict trade unfairly; it makes a significant contribution to the goal pursued; and therefore, it is necessary within the meaning of Article XX(b).¹¹⁹

4.40.

Brazil also argues that the strength of one factor may compensate for the relative weakness of another factor. Brazil refers to the Appellate Body's statement in EC – Asbestos that¹²⁰ "[t]he more vital or important the common interests or values pursued, the easier it would be to accept as 'necessary' measures designed to achieve those ends."¹²¹ While the analysis does not stop at the interest protected, Brazil argues that the protection of human health and the environment is an interest so fundamental, that it weighs substantially in favour of a finding of necessity.¹²²

4.41.

Should it be accepted, for the sake of argument, that retreaded tyres pose a risk to human health, the European Communities argues that Brazil has still to prove that the import ban is necessary to protect human health, as interpreted by the Appellate Body in Korea – Various Measures on Beef, EC – Asbestos and Mexico – Taxes on Soft Drinks.¹²³ The European Communities further argues that it cannot be maintained that the measure is "necessary" for the purposes of protecting human life and health.¹²⁴

4.42.

The European Communities also recalls the Appellate Body's statement that the determination of whether a measure is "necessary" involves a process of "weighing and balancing" a number of factors: first, the importance of the interests protected by the measure; second, the contribution of the measure to the end pursued; third, the impact of the measure on import trade; and, fourth, the existence of alternative measures.¹²⁵ The European Communities also notes the Appellate Body's confirmation in Korea – Various Measures on Beef that "necessity" is a high standard located considerably closer to the pole of "indispensable" than to that of "making a contribution to". In the present case, the European Communities is of the view that Brazil has not even demonstrated that its ban is making a contribution to the prevention of public health problems.¹²⁶

4.43.

Moreover, the European Communities contends that Brazil is not correct to state that "the strength of one factor may compensate for the relative weakness of the other". The European Communities argues that Brazil seems to hope that the mere invocation of human life and health would be enough to render its measure immune to further legal scrutiny. However, for the European Communities, the process of weighing and balancing must be carried out taking into account all relevant factors, not just the objectives stated by Brazil.¹²⁷

Importance of the interests protected by the measure

4.44.

Brazil claims that it has demonstrated – and the European Communities has not contested – that the interests protected by the import ban (protection of human, animal, and plant life and health) are fundamental; indeed, so fundamental, that they weigh substantially in favour of the necessity of the measure.¹²⁸ Brazilargues that the ban seeks to protect human health and the environment¹²⁹, values that are "both vital and important in the highest degree."¹³⁰ Because the import ban is designed to achieve these policy goals, Brazil claims that the ban is "necessary."¹³¹

4.45.

The European Communities contests that these interests are protected by the import ban and also claims that the ban was adopted with the objective of protecting the manufacturers of new and retreaded tyres located in Brazil and not human, animal or plant life and health.¹³²

Contribution of the measure to the end pursued

4.46.

Brazil states that the contribution of the import ban lies in the fact that it prevents the unnecessary generation of additional waste tyres that must be collected and disposed of in Brazil and thereby reduces the health and environmental dangers caused by waste tyre accumulation and disposal.¹³³ Brazil states that unlike new tyres, retreaded tyres are shorter-lifespan products that become waste sooner. This is so, Brazil explains, because imported passenger car retreaded tyres cannot be retreaded again,¹³⁴ and imported commercial vehicle retreaded tyres have fewer remaining lifecycles.¹³⁵

4.47.

Brazil argues that only non-generation of waste tyres, which requires an import ban on shorter-lifespan tyres, can achieve Brazil's chosen level of protection.¹³⁶ To be justified under Article XX(b), Brazil is of the view that the measure must "contribute, at least to some extent,"¹³⁷ to addressing the health concerns, and "[t]he greater the contribution, the more easily a measure might be considered 'necessary'."¹³⁸ For Brazil, the import ban contributes to protecting human health and the environment far more than just "to some extent" – no other practical alternative can prevent unnecessary creation of additional waste.¹³⁹ Brazil argues that the ban's contribution to achieving this goal is significant because no other practical alternative can prevent the unnecessary generation of tyre waste.¹⁴⁰ Brazil explains that the fact that not all tyres can be retreaded after their initial use does not undermine the ban's contribution because it is never possible to retread alltyres. Brazil points out that the goal is not to achieve the impossible (i.e., full retreadability), but to reduce waste to the greatest extent possible.¹⁴¹

4.48.

The European Communities argues that Brazil must show that the import ban on retreaded tyres makes a contribution to the protection of human, animal or plant life or health. The European Communities claims that Brazil tries to avoid this question by engaging in speculation about why the European Communities wishes to export to Brazil. The European Communities points out that these comments are beside the point for the purposes of Article XX(b) and recalls that under WTO rules, it is not the exporting Member which has to justify why it exports a good; rather, it is for the importing Member to justify why it has decided to restrict imports.¹⁴²

4.49.

The European Communities claims Brazil has failed to demonstrate that the import ban on retreaded tyres makes a contribution to the protection of human, animal or plant life or health.¹⁴³ The European Communities argues that the importance of life and health by itself is not sufficient to establish that a measure is necessary for the purposes of Article XX(b); rather, a Member must also show that its measure contributes to the achievement of the stated goals, and is proportionate in this respect given notably its trade impact and the availability of other reasonably available alternatives.¹⁴⁴

4.50.

The European Communities recalls the Appellate Body's statement in Korea – Various Measures on Beef, that "a 'necessary' measure is … located significantly closer to the pole of 'indispensable' than to the opposite pole of simply 'making a contribution to'".¹⁴⁵ In the view of the European Communities, the import ban does not even meet the threshold of "making a contribution to"; in any event, it is certainly far from being "indispensable".¹⁴⁶ The European Communities argues that the importation of retreaded tyres does not in any way increase the number of waste tyres to be disposed of in Brazil. For this reason, the European Communities claims that the import ban on retreaded tyres cannot be necessary for preventing any risks which might be associated with the disposal of waste tyres.¹⁴⁷

4.51.

The European Communities notes Brazil's claim that the import ban on retreaded tyres contributes to the protection of human life and health because it reduces the number of waste tyres in Brazil, which in turn could pose a problem to human life and health. However, the European Communities is of the view that the contribution alleged by Brazil is based on several assumptions which Brazil needs to prove: (i) that the ban reduces the number of waste tyres having to be disposed of in Brazil, and (ii) that such a reduction, even if it were established, reduces risks to human life and health.¹⁴⁸ For the European Communities, the import ban does not even make a contribution to the reduction of the accumulation of waste tyres in Brazil, or to the reduction of any health problems associated therewith and in any event, the contribution is not significant.¹⁴⁹

4.52.

Moreover, the European Communities argues that even where a measure makes some contribution, it is necessary to assess the significance of this contribution in order to be able to properly conduct the process of "weighing and balancing" required under Article XX(b). The European Communities recalls that in Dominican Republic – Import and Sale of Cigarettes the Appellate Body held that the limited effectiveness of a measure was a relevant factor for concluding that the measure was not "necessary".¹⁵⁰

Whether the ban reduces the accumulation of waste tyres in Brazil

4.53.

Brazil argues that for every retreaded tyre that is not imported into Brazil, there is a higher likelihood that one more used tyre will be collected in Brazil, retreaded, and reused, thereby eliminating the risks of having to collect and dispose of one additional tyre. Brazil submits that more than 55 million used tyres were collected and retreaded in Brazil between 2001 and 2005. Had the import ban not been imposed, Brazil contends that millions of retreaded tyres would have entered Brazil to become waste after a single use, and millions of used tyres consumed in Brazil would not have been retreaded, exacerbating the waste tyre problem.¹⁵¹ Brazil maintains that a high number of tyres used in Brazil are retreadable and are retreaded.¹⁵²

4.54.

Brazil argues that it has demonstrated that the import ban, in fact, reduces the amount of waste tyres that must be disposed of in Brazil. It notes that between 1999 and 2005, annual imports of retreaded tyres into Brazil fell from 18,455 tonnes to 1,727 tonnes. Brazil further notes that any reduction in the importation of shorter-lifespan products, such as retreaded tyres, necessarily also leads to a corresponding reduction in the volume of waste tyres generated in the importing country, and, consequently, a reduction in the associated health and environmental risks.¹⁵³

4.55.

Brazil further argues that because the ban on used tyres and the ban on retreaded tyres both make an independent contribution to the waste tyre reduction goals, imports of casings through preliminary injunctions do not negate the ban's contribution.¹⁵⁴ Brazil states that so long as it continues to retread the tyres it consumes, fewer imported retreaded tyres will mean more suitable casings and less waste. Brazil notes, however, that because eliminating used tyre imports would further reduce tyre waste, it has vigorously opposed the injunctions.¹⁵⁵

4.56.

According to the European Communities, Brazil has not demonstrated that the import ban on retreaded tyres reduces significantly the accumulation of waste passenger car tyres in Brazil.¹⁵⁶ The European Communities argues that an increase in the number of waste tyres to be disposed of in Brazil could result only if the sale of an imported retreaded tyre were to replace either (a) the sale of a new tyre, which will then be retreaded, or (b) the sale of a retreaded tyre made from a casing originating in Brazil. However, the European Communities claims that neither has been established by Brazil.¹⁵⁷

4.57.

Moreover, the European Communities submits that retreaded passenger car tyres produced in Brazil are made overwhelmingly from imported casings.¹⁵⁸ The European Communities argues that imported retreaded tyres will compete with domestically produced retreaded tyres.¹⁵⁹ The European Communities claims that an imported retreaded tyre will replace either a new tyre which will generally not be retreaded, or a domestic retreaded tyre which typically has been produced with an imported casing.¹⁶⁰ In either event, the European Communities is of the view that importation does not lead to an increase in the number of passenger car tyres arising in Brazil¹⁶¹ and that the import ban does not contribute at all to the reduction of waste tyres accumulating in Brazil.¹⁶²

4.58.

The European Communities contends that Brazil claims, first, that Brazil retreads a comparatively high percentage of domestically-consumed tyres, and, second, that the ban has substantially contributed to the reduction of tyre waste by eliminating imports of used tyres that cannot be retreaded. The European Communities notes that the second argument is irrelevant for our case because the European Communities does not challenge the import ban on used tyres that cannot be retreaded, though one has to observe that the importation of used tyres has not been eliminated, but has skyrocketed.¹⁶³

4.59.

The European Communities notes that Brazil has exclusively relied on the fact that such tyres, unlike new tyres, cannot be retreaded again.¹⁶⁴ For the European Communities, this fact would only matter if passenger car tyres would be retreaded in Brazil to any significant extent.¹⁶⁵ The European Communities claims that only an insignificant percentage of passenger car tyres used in Brazil is actually retreaded.¹⁶⁶ The European Communities notes Brazil's claim that "for every retreaded tyre that is not imported into Brazil, there is one more used tyre that is collected in Brazil and retreaded". However, for the European Communities, this statement could be true only if 100 per cent of all new tyres consumed in Brazil were retreaded; this is not the reality in Brazil.¹⁶⁷

Data on retreading activities in Brazil

4.60.

Brazil contends that it has presented¹⁶⁸ hard suitability data, aggregated by Mazola – a company that selects casings for Brazil's leading tyre retailer, DPaschoal – which shows that about 30 per cent of Brazilian casings are retreadable¹⁶⁹, and Brazil's Exhibit BRA-95 also demonstrates that domestic casings are indeed being retreaded.¹⁷⁰ Brazil submits that an updated version of the report by the Brazilian Association of the Retreading Industry (ABR), which separates the data by tyre type, shows that most passenger car retreaded tyres are made from domestic casings.¹⁷¹ Brazil claims that it has always produced more retreaded tyres than it has imported casings and that the gap necessarily has to have been filled by domestic casings. Brazil argues that under the most conservative scenario, which assumes that all imported casings were retreaded, some 70 per cent of passenger car retreaded tyres were made from domestic casings as recently as 2002. Brazil points out that the rate did not decline until 2004 and 2005, when very high numbers of casings were imported.¹⁷²

4.61.

The European Communities submits that Brazil tries to defend the supposedly high retreading rate of domestic casings, on two grounds: first, with the data aggregated by Mazola on unusable automobile tyres in Brazil, and, second, with the report provided by ABR, to prove that domestic casings are indeed being retreaded and that the European Communities overstates the extent to which Brazilian retreaders use imported casings.¹⁷³

4.62.

Concerning the first argument, the European Communities notes Brazil's claim that about 30 per cent of passenger car tyres in Brazil remain suitable for retreading. The European Communities submits that in support of this statement, Brazil has not been able to provide any other evidence than a table prepared by a private company, Mazola. However, it is not clear to the European Communities that this table indeed reflects only passenger car tyres, as Brazil claims, and how the term "unusable" is to be understood. The European Communities is of the view that it does not appear that this term only excludes tyres which are "retreadable", but rather it might also exclude tyres which can be used for other purposes, including mid-life tyres, or tyres than can be used for material recycling. The European Communities also remarks that Mazola collects used tyres left by customers at DPaschoal, which is the largest distributor of Goodyear tyres in Brazil. The European Communities submits that it is not clear to which extent figures collected in this context are representative for Brazil overall. Moreover, for the European Communities, information provided by a company associated with new tyre retailers does not appear credible for the purposes of the present proceedings.¹⁷⁴

4.63.

Brazil argues that the purported link between the interests of new tyre manufacturers and Mazola is too attenuated: The suitability figures that Brazil has introduced do not come from Goodyear, and not even from DPaschoal, but from Mazola – a third party with no direct link to the sales of new or retreaded tyres. Brazil adds that the 30 per cent suitability figure provided by Mazola offers a representative sample of the market at large. Brazil explains that Mazola has been selecting tyres suitable for retreading for the last 15 years – something it would not have been able to do had there not been suitable Brazilian casings.¹⁷⁵ Brazil also notes that the best testament to the retreadability of Brazil's tyres may be the fact that Brazilian retreaders have retreaded tyres since the 1950s, long before imported casings ever became available.¹⁷⁶

4.64.

Concerning the second argument, the European Communities points out that even if a small proportion of Brazilian passenger car tyres are retreadable, this does not mean that all of these tyres are as a matter of fact retreaded. The European Communities notes Brazil's claims that in 2005 "Brazilian retreaders processed about 18 million used tyres"¹⁷⁷ and that, according to information provided by ABR in 2005, Brazilian retreaders produced 18.7 million retreaded tyres.¹⁷⁸ However, the European Communities notes that Brazil does not say from where these used tyres originate. As the European Communities has set out, Brazilian retreaders operate very largely with tyres imported from third countries: in 2005, Brazil imported, largely for the purposes of retreading, 10.5 million used tyres, out of which 8.4 million were from the European Communities.¹⁷⁹

4.65.

Brazil responds that the European Communities vastly overstates the extent to which Brazilian retreaders use imported used tyres in their production. It notes that between 2001 and 2005, more than 84 million tyres were retreaded in Brazil, but only 27 million used tyres were imported; not all of those imported used tyres were suitable for retreading, but even if they had been, some 57 million tyres (two-thirds) would have still been retreaded from domestic casings.¹⁸⁰

4.66.

In Exhibit BRA-162, Brazil provides calculations that compare Brazil's retread production with used tyre imports. The calculations set forth a conservative scenario, which assumes that all imported casings were retreadable and were, in fact, retreaded, as well as what Brazil calls a realistic scenario, based on the estimates by the Brazilian retreaders that only two-thirds of the imported casings are retreaded.¹⁸¹ Brazil states that the figures show that regardless of the scenario, anywhere from 83 to 89 per cent of all retreaded tyres made in Brazil were made from domestic casings in 2001 and 2002. Brazil adds that according to the calculations, the overall retreading rate from domestic casings peaked in 2003 at some 44 per cent under the realistic scenario, or 35 per cent under the conservative scenario. To Brazil, this means that of all potentially retreadable used tyres in Brazil, as much as 44 per cent were not only suitable for retreading, but were, in fact, retreaded.¹⁸²

4.67.

The European Communities notes Brazil's argument that even if Brazil had retreaded all of the 10.5 million used tyres it imported in 2005, this still would have accounted for only 56 per cent of all tyres retreaded in Brazil.¹⁸³ However, the European Communities argues that Brazil overlooks that the number of 18.7 million retreaded tyres indicated by ABR is an aggregate number for truck, bus and passenger car tyres, out of these 18.7 million retreaded tyres, 7.9 million were truck/bus tyres and 10.8 million were passenger car tyres. As to the origin of the casings used, the European Communities notes that ABR indicates that 20 per cent of the truck and bus casings retreaded in Brazil are imported and 80 per cent are domestic. In contrast, for passenger car tyres, the European Communities submits that ABR indicates that "the large majority, but not the totality of passenger car casings reformed in Brazil are imported". The European Communities notes that this information thus fully confirms the European Communities' view that the retreading of domestic passenger car casings represents only a very small proportion of used car tyres arising in Brazil.¹⁸⁴

4.68.

The European Communities recalls that the ABR's report indicates that the large majority of passenger car casings retreaded in Brazil are imported. Therefore, in the European Communities' view, the evidence provided by Brazil shows the contrary of what Brazil pretends.¹⁸⁵

4.69.

Brazil first notes that the ABR report confirms that 80 per cent of truck and bus tyres were made with domestic casings in 2005. Brazil then notes that while the report estimates that the majority of the passenger car retreaded tyres were made with imported casings in 2005, this happened only because Brazilian retreaders were able to import a very high number of casings that particular year. Brazil argues that in the previous years, when used tyre imports were substantially lower, passenger car, truck and bus retreaded tyres in Brazil were made for the most part with domestic casings.¹⁸⁶

4.70.

Brazil argues that the ABR production data plainly demonstrates that a high proportion of passenger car retreaded tyres in Brazil is made from domestic casings. Brazil states that according to the ABR numbers, between 2001 and 2005, Brazilian retreaders produced some 43.7 million passenger car retreaded tyres, but during the same period these retreaders imported only 27.3 million casings. Brazil points out that the European Communities agrees that at least 15 per cent of the imports are discarded as "technical losses."¹⁸⁷ Brazil argues that even if the remaining 85 per cent were all retreaded (which, Brazil argues, is unlikely) and truck and bus tyres accounted for roughly 15 per cent of the imports, imported casings would have been used to produce just 19.8 million of the 43.7 million passenger car retreaded tyres made between 2001 and 2005. To Brazil, this means that at least 23.9 million, or 55 per cent of passenger car retreaded tyres made in Brazil necessarily had to be made from domestic casings.¹⁸⁸

4.71.

Brazil adds that from 2001 to 2003, before the imports of used tyres increased, this proportion was even higher. Brazil provides a table with these calculations from 2001 to 2005.¹⁸⁹ Brazil notes that the table shows that even under the most conservative assumptions, as much as 74 per cent of passenger car retreaded tyres in Brazil were made from domestic casings.

Suitability of Brazilian used tyres for retreading

4.72.

Brazil submits that the European Communities incorrectly claims that the import ban does not reduce waste tyre volumes because tyres used in Brazil are not suitable for retreading.¹⁹⁰ Brazil argues that the European Communities has built its case on flawed conclusions and, sometimes, outright misrepresentations, as for example that tyres used in Brazil are not retreadable when, in fact, they not only are retreadable, but are in fact retreaded in high numbers.¹⁹¹ Brazil wishes to recall that the rational explanation for the use of imported casings in lieu of domestic casings for retreading is not due to deficiencies in suitability of domestic casings, but rather to how cheap imported casings are, due to their negative value in Europe.¹⁹² Brazil states that about 30 per cent of Brazilian casings are retreadable. Brazil points out that this retreadability level is quite high compared to the available figures for countries such as the United Kingdom, France, Australia, and the United States.¹⁹³

4.73.

The European Communities claims that Brazilian authorities have recognised that Brazilian passenger car tyres are generally no longer suitable for retreading after use, as is illustrated by the fact that Brazilian retreaders have to import foreign tyres as necessary primary matter.¹⁹⁴ The European Communities notes that Brazil has attempted to reject the relevance of the fact that Brazilian retreaders need to import foreign casings by claiming that foreign casings have "no value", or even "negative value"; this is manifestly untrue. The European Communities submits that a retreadable casing is a valuable resource for any retreader, which has a positive value, as it has been explicitly confirmed in a report by CEMPRE, a recycling initiative of Brazilian industry, and a number of invoices documenting purchases of large quantities of casings by the biggest Brazilian retreader, BS Colway S.A. in Europe.¹⁹⁵

4.74.

Moreover, for the European Communities, there is no rational explanation for the considerable efforts spent by Brazilian retreaders on obtaining casings abroad other than the fact that these casings are not available in Brazil and this is a further illustration of the unsuitability of Brazilian casings for retreading.¹⁹⁶ The European Communities submits that Brazil has made an attempt to explain the import of casings providing two reasons: first, they are substantially cheaper than the domestic ones, and, second, the existence of an excess capacity in the Brazilian retreading industry. The European Communities notes that Brazil also claims that "the Federal Government has worked vigorously to safeguard the integrity of the ban" and has explained the judicial decisions issued in 2006.¹⁹⁷

4.75.

Brazil also notes that to the extent that there may be an apparent shortage in suitable domestic casings, that shortage is a reflection of excess capacity in the Brazilian retreading industry – not of low rates of suitability.¹⁹⁸

4.76.

Concerning the argument on the lower price, the European Communities argues that it is already a step back from the previous statements by Brazil that used tyres have a "negative value" in Europe. In any case, the European Communities argues that the imported casing price quoted by Brazil in its second written submission (US$3) is wrong because it does not reproduce the price reflected in Exhibit BRA-147, which is around US$7. The European Communities submits that this price should be incremented by 15 per cent (i.e. around US$1) to take into account the technical losses in retreading tyres from abroad, plus the cost for the import retreader to discard these unretreadable casings that have become waste tyres and the costs of obtaining courts injunctions. The European Communities submits further that the final price therefore appears to be higher than the average price of a domestic casing, according to the prices given by Brazil in its second written submission, which are US$7 to US$9.¹⁹⁹

4.77.

Brazil notes that in the European Communities, used tyres are a liability – the European Communities pays an average of €1.2 to dispose of a waste tyre. Brazil states that if exports to Brazil ended, many more used tyres would have to be disposed of in the European Communities at a higher cost.²⁰⁰ Brazil adds that imported casings that begin with a negative value are substantially cheaper than domestic casings, and, in fact, the value of these casings is so low that the importers typically do not insure the shipments.²⁰¹

4.78.

Brazil argues that domestic casings are 2-3 times more expensive than imported casings.²⁰² Brazil points out that Brazilian retreaders estimate that the cost of a domestic casing is between US$7 and US$ 9.²⁰³ At the same time, Brazil argues, the official figures (Exhibit BRA-158) indicate that an average final cost of an imported casing, which includes freight and taxes, is US$3.7.²⁰⁴ Brazil explains that the figure includes commercial vehicle casings, which are far more expensive than passenger car casings. Brazil further states that of this total amount, freight costs average a little more than one dollar, and that the legal costs involved in obtaining injunctions are very low.

4.79.

The European Communities notes Brazil's argument that "collecting casings in Brazil is more burdensome and expensive than importing them", since used tyres have a "negative value" in Europe. However, it is not clear to the European Communities why it should be more burdensome to collect casings in Brazil rather than collecting them in Europe and shipping them several thousand miles to Brazil.²⁰⁵ The European Communities also notes that the fact that the market share of retreaded tyres has declined in the European Communities and in other countries has nothing to do with these tyres being "inferior". Rather, for the European Communities this development is largely due to competition of increasingly cheap low-quality new tyres, some of which can no longer even be retreaded after use. The European Communities submits that Brazil also refers to the fact that the European Communities has a trade surplus in retreaded tyres. However, the European Communities points out that this is no reason under WTO law for restricting trade. In any event, it should be noted that the European Communities allows the importation of retreaded tyres.²⁰⁶

4.80.

Concerning the argument relating to the currently unused capacity of the Brazilian retreading industry, the European Communities is of the view that it does not support the Brazilian argument because this capacity, which is idle at a time when 10 million casings are imported for retreading, confirms the low level of retreadability of Brazilian casings. The European Communities argues that there is no reason why the unused capacity should increase demand for imported casings, rather than domestic casings, if retreadable domestic casings were available in Brazil.²⁰⁷

4.81.

With respect to excess capacity, Brazil points out that over the past several years, production of retreaded tyres has increased by 33 per cent and that it is possible, in principle, that retreaders now require more suitable casings than Brazil generates, even with its very high suitability levels, to sustain these higher production levels.²⁰⁸ Brazil states that if Brazilian retreaders indeed cannot operate at full capacity on Brazilian casings alone, excess capacity is the only plausible conclusion because Brazil has already achieved some of the highest suitability and retreadability rates reported by any country – a third of the total waste arisings are retreaded according to the retreaders' numbers.²⁰⁹ However, Brazil argues, it is the Brazilian retreaders that bear the risk of any excess increase in capacity. Brazil states that it has no interest in helping the retreading industry sustain its growth rates if it requires importing shorter-lifespan casings that will have to be disposed of in Brazil.²¹⁰

4.82.

Furthermore, the European Communities submits that it can be assumed that the sale of retreaded tyres, including both imported and domestic, will to some extent compete with the sale of new tyres. In this respect, the European Communities points out that the import ban would only make a contribution to the reduction of the number of waste tyres arising in Brazil if it could be shown that these new tyres are actually being retreaded after having been used. The European Communities argues that this depends on a number of factors: to which extent new tyres sold in Brazil are of a kind that is suitable for retreading after use; to which extent tyres are typically suitable for retreading after use in Brazil; and to which extent retreadable casings in Brazil are actually retreaded.²¹¹

4.83.

The European Communities claims that it has provided evidence that certain types or brands of new tyres are not retreadable due to the quality or construction of the casing. Accordingly, contrary to Brazil's reply to the Panel's question No. 12, the European Communities contends that it cannot be assumed that all new tyres sold in Brazil are necessarily of such a kind as can be retreaded after use. Moreover, the European Communities also notes that, contrary to what Brazil seems to assume, the observance of international standards for new tyres does not necessarily guarantee the retreadability of the product.²¹²

4.84.

Brazil notes that new tyres sold in Brazil (whether manufactured domestically or imported) are high-quality tyres that comply with strict technical and performance standards that are based on international standards. Brazil argues that tyres manufactured in accordance with these standards have the potential to be retreaded.²¹³ Brazil believes that this fact is best demonstrated by the high rate of retreadability in Brazil.²¹⁴ Brazil also notes that neither Brazil nor any other country, as far as Brazil understands, employs any measures "to prevent imports of cheap low quality new tyres." Brazil states that it is not aware of a means to distinguish between new tyres that are capable of being retreaded and those that are not before the tyres have actually been used.²¹⁵

Retreading rate of Brazilian tyres

4.85.

Brazil points out that the European Communities' entire case depends on it being able to demonstrate that new tyres used in Brazil cannot be retreaded again, and, therefore, present the same health and environmental risks as imported retreaded tyres. Brazil states that the European Communities has failed to prove this point.²¹⁶

4.86.

Brazil argues that, in contrast, it has demonstrated that tyres used in Brazil not only are retreadable, but have been and are being retreaded in high numbers.²¹⁷ Brazil states that the rate of retreading from domestic casings was 25 per cent in 2005 and 32 per cent in 2003 and 2004 under the realistic scenario, and 9 per cent in 2005 and 26 per cent in 2003 under the conservative scenario.²¹⁸ Brazil adds that, in comparison, Italy retreads just 14 per cent of its tyres; Germany, 11 per cent; United States, 9 per cent; Belgium and Sweden, 4 per cent; and Austria, Hungary, Czech Republic and Slovak Republic do not retread at all.²¹⁹

4.87.

The European Communities submits that confirmation for the view that the retreading of domestic passenger car casings represents only a very small proportion of used car tyres arising in Brazil, can also be found in a recent overview of the Brazilian tyre market, which indicates the rate of retreading of all types of tyres in Brazil in 2005 as 9.9 per cent (which is an aggregate figure including both car and truck tyres):²²⁰ accordingly, given this very low rate of retreading of domestic passenger car tyres in Brazil, Brazil cannot claim that the importation of passenger retreaded tyres leads to any significant increase in the accumulation of waste tyres in Brazil.²²¹ The European Communities submits that since the retreading of truck tyres in Brazil occurs with a much higher frequency than for car tyres, this means that the effective retreading rate for passenger car tyres must lie appreciably below 9.9 per cent.²²²

4.88.

The European Communities submits that in its second oral statement, Brazil has presented tables concerning the rate of retreadability of Brazilian passenger car tyres, according to which a conservative estimate would be a rate of retreadability in 2005 of 9 per cent. For the European Communities, the methodology according to which this table has been prepared is not clear. Accordingly, on the basis of the data contained in the LAFIS report on "Brazil – Car Parts and Vehicles: Tyres" (Exhibit EC-92) which gives the rate of retreading as 9.9 per cent for passenger and truck tyres combined, the European Communities submits that the rate of retreading for passenger car tyres must be considerably lower than 9 per cent.²²³

4.89.

Brazil also criticizes the European Communities' reliance on the LAFIS Report and the 9.9 per cent retreading rate that it allegedly contains.²²⁴ Brazil points out that the actual reading of the report reveals that the number comes from the controversial IPT study, which accounted for just half of the total waste tyre arisings.²²⁵ Brazil states that the study's methodology was so flawed that the author was requested to redo it. Specifically, Brazil explains that the study surveyed only "retailers and tire repair shops"²²⁶ and did not account for retreadable tyres that were retained by owners even though they comprise a third of the total waste arisings. Neither did it account for a large part of commercial tyres because these tyres do not typically pass through the retailers or tyre repair shops.

4.90.

Nevertheless, Brazil contends that should the European Communities choose to rely on this report, it should then also accept another one of the report's conclusions: that the rate of technical suitability is almost 50 per cent.²²⁷

4.91.

The European Communities notes that Brazil has criticised the 9.9 per cent indicated in the LAFIS Report as based on "a controversial IPT study", and argued that this study reflects only the views of new tyre manufacturers. The European Communities notes that, strikingly, at the same time, Brazil asks the Panel to rely on the tables provided by the company Mazola, which is equally associated with the new tyre manufacturers and retailers. For the European Communities, it appears that Brazil regards studies only as controversial when they do not suit its purpose, whereas it would claim that all evidence submitted by itself is uncontroversial. The European Communities argues that the fact that Brazilian casings generally are not retreadable is also confirmed by Exhibit BRA-157, in which the ABR confirms that due to the conditions of the Brazilian roads, a great loss of casings occurs already in the original lifespan, leading to a lack of retreadable casings in Brazil.²²⁸

4.92.

Brazil states that even in its criticism of Brazil's sources the European Communities is inconsistent: having just contested the reliability of the ABR report in its response to Panel question No. 107, the European Communities proceeds to cite the report in its response to the same question in support of its low suitability argument. Brazil points out, however, that Exhibit BRA-157, which the European Communities cites in support, is the updated ABR report.²²⁹

4.93.

In addition, Brazil points out that the European Communities has offered no evidence in support of its argument of poor road conditions. Brazil also states that the European Communities misses an important point: regardless of the road conditions in Brazil's countryside, most tyres – and especially passenger car tyres – are used in urban areas, where the roads are just as good as the roads in wealthier countries.²³⁰

4.94.

The European Communities submits that to demonstrate that the import ban on retreaded tyres reduces the accumulation of passenger car waste tyres in its territory, Brazil has attached to its second written submission a study prepared by a Brazilian economist, Professor Nastari, President of Datagro Limitada. The European Communities argues that its assessment of this study shows that it is weak in terms of economics and full of inconsistencies because the basic data are used wrongly or wrong assumptions are made. The European Communities argues that one of the main weaknesses of the study is that it assumes a rate of actual retreading of domestic casings between roughly 44 per cent and 92 per cent in Brazil, which is far too high. The European Communities submits that this mistake in the size of a key variable, results in a gross overestimation of the contribution which retreading of domestic casings makes to waste reduction in Brazil, and accordingly an overestimation of the contribution which imports of passenger cars retreaded tyres would make to waste accumulation.²³¹

4.95.

In any event, the European Communities claims that a rate of retreading of 9 per cent, claimed by Brazil in its second oral statement, is already considerably lower than the original 30 per cent claimed by Brazil, let alone the even higher numbers used in the study prepared by Professor Nastari. To the extent that the table provided by Brazil indicates higher numbers for earlier years, the European Communities is of the view that this does not reflect the importations of used tyres into Brazil, but the fact that the Brazilian retreading industry is now operating in compliance with standards – Portaria INMETRO 133 – which impose exacting requirements on the quality of the casings to be used.²³²

4.96.

Brazil argues that the European Communities' criticism of the expert study is most probably due to a partial and incomplete understanding of the demonstration presented in the diagrams that depict the hypothetical cases in which imports of retreaded and/or used tyres would be allowed. In addition, Brazil states that it has demonstrated in Exhibit BRA-162 that the vast majority of tyres retreaded in Brazil were made from domestic casings.²³³

4.97.

Brazil argues that the evidence plainly demonstrates that the 9.9 per cent figure does not represent the actual rate of retreading, as the European Communities claims.²³⁴ Brazil states that on the contrary, the rate of retreading for passenger car tyres, using only domestic casings, was, under the more realistic scenario, 25 per cent in 2005 and 32 per cent in 2003 and 2004.²³⁵ Brazil points out that at least for the year 2005, Brazil used hard numbers – not assumptions – to arrive at the number of imported casings that were actually retreaded. Brazil states that this number was the 2005 destination estimate by BS Colway, cited in the "Raupp Opinion".²³⁶ According to this number, Brazil states, of the 11 million casings that were imported into Brazil in 2005, only 7 million were used to make retreaded tyres in 2005. Therefore, Brazil states that the realistic scenario for 2005 is based exclusively on hard numbers, and contrary to the European Communities' suggestion,²³⁷ at least 50 per cent of passenger car retreaded tyres necessarily had to have been made from domestic casings that year. Brazil concludes that this puts the rate of retreading for the passenger car tyres alone at 25 per cent for 2005 – substantially higher than the rate achieved by the European Communities itself.

4.98.

Finally, Brazil contests the European Communities' argument that the imports of used tyres into Brazil have increased because the stricter new regulation – Portaria INMETRO 133 – rendered Brazilian casings that were previously retreadable no longer suitable for retreading.²³⁸ Brazil points out that the European Communities first made this argument only in its responses to the Panel's questions following the second meeting of the parties. Brazil notes that in its first written submission, the European Communities dedicated three paragraphs to the discussion of Portaria INMETRO 133 and its equivalent for commercial vehicles²³⁹, but did not once suggest that the portaria created a shortage of suitable casings; in its second written submission, the European Communities did not mention the regulation at all.²⁴⁰ Brazil argues that the European Communities' belated invocation of the portaria, at the close of the proceedings, should be seen for what it is – a last minute attempt by the European Communities to bolster its faltering argument.

The INMETRO technical note 83/2000

4.99.

The European Communities argues that it has submitted evidence which proves that Brazilian tyres are not retreadable after use. According to Technical Note 83/2000 of the Brazilian standardisation authority, INMETRO, Brazilian tyres are generally no longer suitable for retreading after use, which explains why Brazilian retreaders have to import foreign tyres as necessary raw material for their business²⁴¹, and the use of Brazilian casings for retreading is not economically viable.²⁴² The European Communities notes that the same view has also been expressed by the Governor of the State of Paraná.²⁴³

4.100.

Brazil argues that the European Communities' reliance on Technical Note INMETRO 83/2000, is misplaced for two reasons: it does not reflect INMETRO's position and it talks of economic viability, and not about availability of suitable casings.²⁴⁴ Specifically, Brazil explains that the note's only function was to memorialize INMETRO's communications with representatives of Brazil's retreading industry. The views that the note reflects are not the official views of Brazil's authorities, as the European Communities suggests, but the views of the domestic retreaders.²⁴⁵

4.101.

Brazil states that INMETRO took the unusual step of specifically repudiating the note because domestic retreaders used it in courts and in the media to support the low suitability argument, as does the European Communities.²⁴⁶ According to Brazil, INMETRO has made clear that the note "had no validity whatsoever" and that any technical note is but an "opinion, not binding the Administration or private parties to its motive or conclusions, unless approved by... Regulations."²⁴⁷

4.102.

Finally, Brazil argues that the note did not mention suitability at all – it only stated that obtaining domestic carcasses was not economically viable. To Brazil, economic viability is not the same as the actual suitability of domestic casings – it merely refers to the higher costs of obtaining domestic casings.²⁴⁸ Brazil also notes that the Governor of Paraná did not confirm the alleged low suitability independently, but merely made a reference to the contested INMETRO note.²⁴⁹

4.103.

The European Communities notes Brazil's argument that Technical Note 83/2000 speaks merely of "economic viability", but does not make a statement about the suitability of Brazilian casings. However, the European Communities submits that Brazil does not offer any explanation for this lack of economic viability, other than the lack of suitable casings. The European Communities is of the view that if the price of suitable casings is excessively high, this must be due to the fact that such casings are scarce. However, the European Communities contends that given the fact that Brazil itself claims that 40 millions of waste tyres arise every year in its territory, this scarcity would seem to indicate that only a very small proportion of these waste tyres seem to be suitable for retreading.²⁵⁰

4.104.

The European Communities submits that Brazil has attempted to diminish the significance of the INMETRO Technical Note. First, the European Communities notes that Brazil claimed that the note "merely memorializes the position of the industry's stakeholders" and does not reflect INMETRO's position. However, the European Communities explains that the note is an official document issued by INMETRO, and is signed by three officials of INMETRO in that capacity. For the European Communities, if the note in addition reflects the position of industry stakeholders, this would seem to increase its relevance rather than diminish it.²⁵¹

4.105.

Second, the European Communities notes Brazil's claim that this note has been subsequently "revoked" by INMETRO through a technical note of 9 June 2005, because domestic retreaders used it in Court and in the media to support the low suitability argument, as the European Communities does now. The European Communities claims that the repudiation of the Note, which is made for the purposes of avoiding its use in litigation against the government, lacks all credibility. In any event, for the European Communities the Technical Note contains a statement of fact, the "repudiation" of which does not mean that the statement was wrong.²⁵²

4.106.

According to Brazil, this particular note was issued by a committee of INMETRO, which consisted of various stakeholders, including industry representatives. Brazil notes that the final rule, issued by INMETRO itself made no mention of low suitability,²⁵³ and, consequently, INMETRO's pronouncement on the subject, confirmed the suitability of domestic casings.²⁵⁴

4.107.

Brazil clarifies that the repudiation of the note was not a revocation – the note could not have been revoked because it had no legal effect in the first place. Brazil uses the term "repudiation" to refer to the INMETRO's efforts to stop the misrepresentation and misuse of the note by Brazilian retreaders. Brazil states that it repudiated the note not to avoid its use against Brazil in the present WTO proceedings – as the European Communities claims²⁵⁵ – but because domestic retreaders misused the note in injunction proceedings to argue that used tyre imports should be permitted because no domestic casings were available.²⁵⁶

Imports of used tyres as a result of domestic court rulings²⁵⁷

4.108.

Brazil submits that it bans imports of not only retreaded, but also used tyres. Brazil explains that its reason is simple: used tyres will have to be discarded and disposed of either on arrival, or after a single use. Brazil argues that the prohibition also ensures that Brazilian retreaders process only casings collected in Brazil, thereby helping to solve the disposal problem of Brazil, not the disposal problem of other countries. Brazil submits that Brazilian retreaders have sought and, in some cases, have obtained preliminary injunctions that allowed some used tyres to come in spite of the ban. For these retreaders, Brazil explains that the legal fees are a small price to pay for foreign casings that are substantially cheaper – cheaper because in the European Communities they have no value. Brazil argues that they are a liability in the European Communities, not an asset, and one typically must pay to get rid of them.²⁵⁸ Brazil notes that the European Communities has based its argument on claims made by Brazilian retreaders, who invoke low suitability to convince courts to authorize imports²⁵⁹ and expend²⁶⁰ "resources [to] obtain the right to import retreadable casings".²⁶¹ Brazil argues that the reason they do this is simple – imported casings are 2-3 times less expensive.²⁶²

4.109.

While some tyres retreaded in Brazil have been made from used tyres imported through these preliminary injunctions, Brazil argues that it has successfully reversed the vast majority of injunctions in courts, and it is confident that injunctions will soon be denied ad portas.²⁶³ Brazil explains that these preliminary injunctions were issued in ex parte proceedings. Brazil notes that when the government had an opportunity to present its case, the courts reversed their initial grant of the injunction in two-thirds of the cases. Brazil submits that on appeal the government prevailed in 92 per cent of the cases. With such an overwhelming precedent, Brazil is of the view that fewer and fewer Brazilian courts are issuing these injunctions. While some imports continue to come in as a result of the previously-issued orders, Brazil argues that the tide has now turned, ambiguities about the ban's legal effect have been all but removed, and the imports will soon end.²⁶⁴

4.110.

Brazil stresses that circumvention of the import ban through preliminary injunctions is but a temporary phenomenon. For Brazil, a decision guided by what will soon become a non-factor would simply mean that once the imports stop a year from now, the Government of Brazil would have to come back to Geneva and repeat the same arguments.²⁶⁵ Brazil notes the European Communities' claim that used tyre imports negate the contribution of the import ban.²⁶⁶ Brazil argues that imports of casings through preliminary injunctions do not detract from the ban's contribution (and will soon end).²⁶⁷ In Brazil's view, so long as Brazil continues to retread the tyres it consumes, fewer imported retreaded tyres will mean more suitable casings and less waste.²⁶⁸ After all, it would be absurd to suggest that the WTO-compatibility of the French ban on imports of asbestos would be negated if a judge somewhere in France were to authorize a single importation of asbestos.²⁶⁹

4.111.

However, because eliminating used tyre imports would further reduce waste, Brazil explains that it has vigorously opposed the injunctions. As a result, Brazil argues that the trend has turned around. So far in 2006, Brazil submits that all High Court decisions and the vast majority of the lower court decisions came out against the injunctions.²⁷⁰ Brazil submits further that the Federal Supreme Court is expected to uphold the import ban soon.²⁷¹ Brazil notes that the President of the Republic has authorized and the Solicitor General has filed a constitutional action in Federal Supreme Court on 21 September 2006.²⁷² Brazil explains that this challenge action, Allegation of Violation of Fundamental Precept, has the power to revoke all the judicial decisions that have allowed the importation of used tyres into Brazil and preclude future judicial decisions permitting new imports. Brazil stated that the preliminary injunction requested by the President in this action would be decided in a matter of days.²⁷³

4.112.

Brazil stresses that the Brazilian Government is fighting each and every case to fully guarantee the effectiveness of the import ban. Brazil explains that the judiciary has been overwhelmingly successful in reversing those wrong decisions. However, Brazil's task has not been made easier by the willingness of others to export their tyre disposal problem to Brazil.²⁷⁴

4.113.

Brazil submits that while the European Communities is eager to consider a counter-factual in the case of Brazil's new tyre industry – which proves nothing – it refuses to consider that same counter-factual in the case of used tyres. In other words, Brazil argues that while the European Communities argues that the import ban does not make a contribution because used tyres continue to be imported through the court injunctions, it refuses to consider how many more used tyres would be imported in the absence of the ban.²⁷⁵ Brazil recalls a saying: "Nemo auditur propriam turpitudinem allegans" – One is not entitled to base a claim on its wrongdoing.²⁷⁶

4.114.

The European Communities submits that Portaria SECEX 14/2004 bans the importation of used tyres in Brazil.²⁷⁷ However, the European Communities submits that the importation of the tyres takes place despite the ban on the basis of court injunctions, which have been obtained by Brazilian retreaders.²⁷⁸

4.115.

The European Communities argues that Brazil has not contested any of these essential facts.²⁷⁹ The European Communities notes Brazil's confirmation that the main reason for the injunctions is that the import ban "restricts access to supplies of raw material necessary for domestic retreaders to carry on their business".²⁸⁰ Brazil's defence has merely been that these injunctions have been "erroneous" and are opposed by the government.²⁸¹ The European Communities notes that Brazilian retreaders have confirmed that they need to import foreign casings in order to be able to conduct their retreading business in Brazil. Moreover, the European Communities points to the considerable efforts which Brazilian retreaders have invested in order to gain the right, through judicial injunctions, to import casings into Brazil.²⁸² However, the European Communities argues that the relevant fact is that the importations are taking place, and are being allowed by Brazilian courts, for which Brazil is responsible under international law.²⁸³

4.116.

The European Communities argues that under public international law, every State is responsible for the acts of its organs. The European Communities submits that as underlined by the Appellate Body, every WTO Member is therefore responsible for the acts of all emanations of all its departments of government, including its courts. Moreover, the European Communities argues that according to Exhibit BRA-86, it is explicitly acknowledged that at the point the appeal is decided, "imports are already authorized and can no longer be de facto reverted".²⁸⁴

4.117.

The European Communities submits that Brazil has also tried to dismiss the large-scale importations of used tyres as a "temporary phenomenon" and claimed that "imports would soon come to a halt". In this respect, the European Communities recalls that future developments are of no relevance for the evaluation of the measure at issue in the present dispute, because the facts have to be assessed as they stood when this Panel was established. Moreover, it should be noted that the importation of used casings has been continuing since 2000, and that the numbers have been increasing steadily.²⁸⁵

4.118.

In addition, the European Communities argues that it does not see the basis on which Brazil claims that the granting of injunctions be ended. The European Communities submits that Brazil referred to an unidentified court proceeding which is currently pending before the Brazilian Supreme Court, and indicated that "the Government anticipates that the Federal Supreme Court will put an end to the loophole that have [sic] allowed millions of used tyres to be imported into Brazil". The European Communities does not see how Brazil can make predictions as to how the Supreme Court will decide in the future. The European Communities notes that as the Appellate Body has confirmed in US – Shrimp (Article 21.5 – Malaysia), speculation about the outcome of pending cases in national courts would be incompatible with the duty of Panels to make an objective assessment of the facts, as required by Article 11 of the DSU.²⁸⁶

4.119.

Moreover, the European Communities argues that the question is not only whether new injunctions are being issued; as Brazil itself has noted, imports are also continuing "because some of the previously-issued injunctions remain in effect". The European Communities argues that Brazil has not explained how a reversal of the practice of Brazilian courts in the future would affect those injunctions which are in force and no longer subject to an appeal. The European Communities submits that, in this context, the Brazilian retreader Pneuback has obtained an injunction which entitles it to import used tyres as raw material for its retreading business. The European Communities submits that this injunction has been upheld by the Brazilian Supreme Court, and is now no longer subject to any further possibility of appeal. The European Communities further submits that the biggest Brazilian retreader, BS Colway had obtained a decision by the President of the Superior Tribunal of Justice of 12 December 2003 entitling it to import casings as indispensable raw material. The European Communities notes that the Superior Tribunal of Justice subsequently rejected three appeals by the government against the decision by President Naves. Moreover, the European Communities submits that in a decision of 22 May 2006, the Federal Regional Tribunal of the Second Region of Brazil confirmed the right of Colway to continue importing used tyres.²⁸⁷

4.120.

The European Communities submits that Brazil has tried to liken its ban to the ban on asbestos at issue in the EC – Asbestos case by arguing that this ban would not have been negated if a "judge somewhere in France were to authorize a single importation" of asbestos. The European Communities claims that this scenario has nothing to do with the present case, where Brazil allows the importation of millions of used tyres, and in addition produces retreaded tyres itself. The European Communities does not believe that the ban on asbestos would have been upheld in similar conditions.²⁸⁸

4.121.

Brazil notes the European Communities' argument that some injunctions have exhausted judicial review. However, Brazil explains that the case of Pneuback, which the European Communities cites as an example, is subject to further appeal, and is in fact being appealed. Meanwhile, Brazil notes that, in describing the BS Colway case, the European Communities completely ignored the substantive March 2006 ruling – in favour of the government – and noted only the subsequent stay pending the appeal.²⁸⁹

Whether the reduction of the accumulation of waste tyres can reduce risks to human life and health

4.122.

Brazil argues that its campaign against dengue, which designated tyre waste reduction as a key target, has been the primary reason for the declining incidents of dengue in recent years. Brazil makes the point that by shrinking the waste tyre volumes, the import ban reduces the amount of waste tyres that will be stockpiled or illegally dumped, and, consequently, reduces mosquito breeding grounds.²⁹⁰

4.123.

The European Communities argues that even if Brazil had established that its ban makes a contribution to the reduction of waste tyres, this is not yet enough for Article XX(b). The European Communities is of the view that Brazil would also have to prove that this reduction in waste tyres leads to the reduction of problems for human life and health.²⁹¹ This also, the European Communities claims that Brazil has failed to show.²⁹² The European Communities contends that Brazil cannot simply evoke the existence of such health problems currently and it is not clear that there would be any additional impact on public health caused by the importation of retreaded tyres.²⁹³

4.124.

As the European Communities claims to have shown that the human life and health problems to which Brazil has referred, e.g. dengue mosquitoes breeding in tyres, are first of all not exclusively due to waste tyres, and secondly, to the extent that they are, they are related to the millions of tyres which are, according to Brazil's submissions, littering the Brazilian countryside despite the ban.²⁹⁴ The European Communities considers that only historic waste tyres (i.e. those discarded before the import ban on retreaded tyres was adopted) might continue producing health risks in Brazil.²⁹⁵ For the European Communities, any health problems which might be caused by waste tyres in Brazil are not attributable to the importation of retreaded tyres, but to the 100 million waste tyres scattered throughout the country, which are the heritage of an insufficient waste management policy.²⁹⁶ The European Communities contends therefore that the import ban is not a necessary measure to put an end to those possible health risks.²⁹⁷

4.125.

The European Communities claims that waste tyres management problems, such as large amounts of scattered tyres throughout the country and tyre fires, are not attributable to the importation of retreaded tyres because imports of retreaded tyres were banned in 2000 and the health problems continue.²⁹⁸ The European Communities points out that it is not clear that any additional amounts of waste tyres which might be created by the removal of the ban would lead to an increase in the health problems referred to by Brazil.²⁹⁹ The European Communities notes that Brazil reacts by alleging that "prohibiting retread imports clearly cannot eliminate the health and environmental harms in their entirety because tyre waste will continue to be generated". For the European Communities, it seems very difficult to reconcile this affirmation with the requirement, as declared by the Appellate Body in Korea – Various Measures on Beef, that the contribution of the measure has to be significant, this term meaning close to indispensable.³⁰⁰

4.126.

The European Communities submits that the system established by Resolution CONAMA 258/1999 aims at putting an end to this historic problem, though the slow pace it establishes to collect waste tyres and its insufficient implementation weakens its efficiency.³⁰¹ The European Communities is of the view that this situation is irrespective of the number of retreaded tyres imported into Brazil. The European Communities submits that more imported retreaded tyres will not increment the risks described by Brazil, because these risks do not depend on the number of discarded tyres but on their correct management and other questions linked mainly to the health problems that Brazil is trying to solve.³⁰²

4.127.

The European Communities claims that Brazil has not demonstrated that the import ban contributes significantly to the prevention of life and health problems in Brazil. To succeed in that demonstration, the European Communities submits that Brazil would have to prove that a possible increase in the number of waste tyres arising from imported retreaded tyres would also lead to an increase in the life and health problems arising from mosquito-borne diseases, tyre fires and toxic leaching from "stockpiled and illegally dumped tyres". The European Communities submits further that Brazil cannot simply evoke the existence of such health problems in order to justify the need for the import ban on retreaded tyres.³⁰³

4.128.

Brazil argues that after suggesting that dengue has nothing to do with tyres, the European Communities turns around and says that in case it does, the blame lies not with new tyre accumulation, but with "the 100 million waste tyres scattered throughout the country, which are the heritage of an insufficient waste management policy."³⁰⁴ Brazil argues that the argument is manifestly flawed. It explains that new tyre accumulation contributes to the volumes of waste tyres in the environment and correct management alone will not eliminate the risks in their entirety. Brazil states that even if it collected all of its waste tyres – and it is doing its best to do that – these tyres would still have to be transported to the disposal location and temporarily stockpiled until their disposal. According to Brazil, both the transportation and the stockpiling would involve risks of dengue. Brazil states that, in addition, collection does not eliminate disposal risks.³⁰⁵

In relation to dengue

4.129.

Brazil contends that there are only a few legal issues that are in dispute in this case. Unfortunately for the European Communities, this case turns mostly on facts, which the European Communities has persistently chosen to either misrepresent, minimize, or outright ignore. Brazil submits that a good example – but certainly not the only one – is the European Communities' pretension that waste tyres are not an important factor in the spread of dengue.³⁰⁶ Brazil notes that based on that patently wrong factual premise, the European Communities concludes that Brazil's import ban does not make a contribution to the protection of human health and the environment.³⁰⁷

4.130.

Brazil submits that according to the European Communities tyre waste reduction may not actually help to combat dengue in Brazil. While Brazil agrees that eliminating waste tyres alone would not solve the dengue problem³⁰⁸, Brazil states that waste tyres receive special attention because of their great potential for breeding and disseminating mosquitoes and to ignore them would be irresponsible.³⁰⁹ Brazil further submits that while waste tyres are one of mosquitoes' most common breeding grounds, they are not the only ones. Brazil explains that this is why Brazil targets all of the key containers in its campaign against dengue. Brazil also promotes changes in the habits of its population through advertising and carries out mosquito surveillance.³¹⁰

4.131.

Brazil also explains that waste tyres receive special attention because they have a great potential for breeding and disseminating mosquitoes: of over one thousand Brazilian municipalities surveyed, waste tyres were the most important breeding place in a quarter of them, and either the second or third most important breeding place in the remaining municipalities.³¹¹ For Brazil, to ignore waste tyres would be irresponsible.³¹²

4.132.

In relation to the dengue problem, the European Communities submits that Brazil has explained that dengue cases jumped from 107,168 in 2004 to 214,171 in 2005, five years after the adoption of the import ban on retreaded tyres. The European Communities argues that assuming that the average life of a passenger tyre is five years, the dengue cases should have dropped down in 2005 instead of increasing. In the same way, for the European Communities, the peak in imported retreaded tyres that occurred in 1998 should have produced an increase five years later, in 2003/2004, compared with the situation in the preceding years. The European Communities argues that the figures provided by Brazil show just the opposite.³¹³

4.133.

The European Communities claims that the incidence of dengue cases in Brazil is, therefore, not related to changes in the number of waste tyres present in Brazil, let alone to the number of imported retreaded tyres. Rather, it is the view of the European Communities that it must be assumed that the number of dengue cases must be related to other factors, such as viral patterns and behaviour, or meteorological conditions.³¹⁴ Moreover, the European Communities submits that waste tyres, and less, therefore, those arising from imported retreaded tyres, are not the only element in dengue control, as it derives from the National Dengue Control Programme, adopted on 24 July 2002 by the Brazilian Health Ministry. The European Communities further submits that in its intervention before the Consumer, Environment and Minority Protection Committee on 14 April 2002 a representative of the Minister of Health explained that "even if we were to eliminate all tyres from Brazil we would still not prevent transmission of [dengue]".³¹⁵

4.134.

The European Communities notes that Brazil submits a number of scientific papers that are mainly focused on the relation between tyres and breeding sites for mosquitoes which transmit dengue and yellow fever. However, the European Communities notes that these studies consider that waste tyres are not the only reason for the current epidemiological situation related to these two diseases in Brazil. The European Communities argues that there is even scientific evidence, attached to Brazil's submissions, demonstrating the importance of several other breeding sites. Moreover, the European Communities notes that the World Health Organization has confirmed that relatively small numbers of "key containers", which are not limited to waste tyres, may produce the great majority of the adult mosquitoes that trigger disease outbreaks. For the European Communities, this demonstrates that a reduction in waste tyres would not necessarily reduce the incidence of dengue.³¹⁶

4.135.

Brazil argues that the European Communities continues to embrace a simplistic view that a decrease in retreaded tyre imports should immediately reduce dengue and other risks. According to Brazil, it is elemental that the progression of the dengue epidemic depends on many factors, in addition to imports of retreaded tyres and the consequent increase in waste volumes. Brazil states that these factors include the prevalence of other key containers that breed mosquitoes, transportation of the mosquitoes to new areas, and introduction of new types of the virus. Brazil maintains that while prohibiting imports of the shorter-lifespan retreaded tyres cannot, by itself, solve the dengue problem, it does play a key role in the solution.³¹⁷

4.136.

Brazil points out that the WHO advises countries to target "key containers" because a "relatively small numbers of 'key containers' (e.g. old tyres, water storage containers) may produce the great majority of the adult mosquitoes that trigger disease outbreaks."³¹⁸ Brazil also notes that the US Center for Disease Control and Prevention likewise emphasizes that "infestation may be contained through programs of surveillance, removal of breeding sites (especially tires), interruption of interstate dispersal of tires, and judicious use of insecticides."³¹⁹

4.137.

Brazil adds that it is not sitting idly on the sidelines, waiting for the import ban to solve its dengue problem. Brazil says that it is actively collecting tyres that have been discarded in the environment: it has helped private companies set up tyre collection centresandlaunched a comprehensive campaign against dengue, which promotes habits that would reduce the number of all key containers used by mosquitoes.³²⁰

In relation to tyre fires

4.138.

Brazil explains that waste tyres in stockpiles and dumps often ignite, producing devastating consequences³²¹ for human health and the environment and generating pyrolytic oil and noxious plumes that contain hazardous chemicals and heavy metals.³²² Brazil also explains that accumulation of waste tyres in stockpiles and illegal dumps creates a risk of tyre fires and toxic leaching, which have substantial adverse effects on human health and the environment.³²³ Brazil contends that tyre fires are difficult to extinguish and can burn for weeks, months, and even years – a fire in Powys, Wales³²⁴ has been burning for 17 years.³²⁵ In Brazil, the State of Minas Gerais alone has experienced 338 tyre-related fires since 2000.³²⁶

4.139.

Concerning waste tyre fires on Brazil's territory, the European Communities claims that Brazil recognizes that it has no statistics;³²⁷ Brazil only explained that tyre fires are a genuine threat in Brazil as they are elsewhere in the world.³²⁸ However, the European Communities argues that as the Appellate Body declared in US – Wool Shirts and Blouses, the mere assertion of a claim cannot amount to proof. The European Communities argues further that risks from waste tyre fires depend very much on the location, dimension, distribution, and existence of fire prevention and extinction measures.³²⁹ The European Communities considers that a reference to some specific cases of waste tyre fires that occurred in the past in the United States and the United Kingdom, or a general reference to waste tyres fires in Brazil without providing information on their location, origin/causes, dimension and duration and an assessment of their real negative effects on health, are not enough to meet the burden of proof that Brazil has under Article XX(b).³³⁰ The European Communities argues that the risk of a fire occurring should be considered as low, taking into account that tyres are very difficult to ignite. The European Communities explains that the fact that, in the case of a fire, the negative consequences on health may be important does not imply that the risk of fire from waste tyres is high. Besides, for the European Communities, it should not be forgotten that there are means of minimising the negative consequences of a fire if the preventive measures to which the European Communities made reference in its first oral statement are taken.³³¹

4.140.

The European Communities submits that the problems which Brazil seems to have with tyre fires reflect difficulties of fighting the causes of such fires. The European Communities argues that even if it were the case that a certain incidence of such fires was statistically unavoidable, Brazil's problems again seem to be in the first place related to the lasting problem of waste tyres that are still not adequately disposed of. In such a situation, the European Communities is of the view that where Brazil incidentally has not been able to solve its problems in a measurable way six years after the imposition of the import ban, it should not be allowed to maintain an import ban which makes no significant contribution to such solution.³³²

4.141.

In respect of leaching of hazardous substances from tyres, the European Communities notes that a study attached by Brazil shows the results of the leaching behaviour under extreme conditions not corresponding to field trials. In any case, the European Communities argues that only trace quantities of cadmium and lead were found and the report admits that the amounts of zinc could result from surface contamination of the tyres. The European Communities argues that a second report, with very general observations in relation to field trials, shows that groundwater quality was not deteriorated. Moreover, the European Communities notes that Brazil has provided no explanations and evidence on leachate from waste tyres in its territory.³³³

4.142.

Brazil states that it has provided information on tyre fires in the States of Paraná, Minas Gerais and in the Federal District.³³⁴ Brazil explains that it has not been able to obtain information on tyre fires in other states because fire brigades of those states do not maintain records that distinguish between tyre fires and other fires. Brazil notes, however, that unavailability of these records does not mean that tyre fires do not occur in other states.³³⁵

4.143.

Brazil argues that there is no need to assess the negative effect on human, animal or plant life or health of tyre fires specifically in Brazil because there is extensive evidence of the risks resulting from fires all over the world. Brazil states that fires in Brazil are no different from fires elsewhere.³³⁶ Brazil states that the European Communities' argument is based on what is referred to as the problem of induction, i.e., reasoning that just because experience shows that event A has always followed event B, it does not mean that it will do so again. Brazil argues that Governments cannot base their decisions on this reasoning: prudent governments believe that if stockpiles of used tyres can be set on fire by lightning or arson elsewhere, the same can happen in their territory; likewise, prudent governments also believe that if those fires emitted deadly pollutants elsewhere, the same will happen in their territory.³³⁷ Brazil notes that it was aware of the devastating tyre fires in Wales, in California, in Ontario, and in many other locations, both in Brazil and in other countries.³³⁸ Brazil adds that it was also aware of studies showing the toxic risks of such fires.³³⁹

4.144.

Brazil states that no prudent government could or would have ignored such warnings with the unsound reasoning that, simply because tyres caught fire elsewhere, and simply because those fires emitted deadly toxins into the atmosphere elsewhere, there is no basis on which to conclude that the same could happen in its territory. Brazil concludes that it saw those warning signs and acted on them – responsibly and prudently.³⁴⁰

Contribution of the import ban on retreaded tyres for commercial vehicles and aircraft

4.145.

Brazil argues that commercial vehicle retreaded tyres pose the same type of health and environmental risk as passenger car retreaded tyres.³⁴¹ Brazil explains that retreaded tyres in both categories have fewer remaining lifecycles and become waste sooner. Brazil adds that the level of risk from the commercial vehicle retreaded tyres is frequently higher than that from the passenger car retreaded tyres because (1) commercial vehicle retreaded tyres are substantially heavier and, thus, produce more waste, and (2) a commercial vehicle retread that is imported closer to the end of its useful life could have less than 20 per cent of its useful life left compared to the 50 per cent in the case of the passenger car retread.³⁴²

4.146.

The European Communities argues that Brazil also bans retreaded tyres for commercial vehicles and for aircraft, which can be retreaded more than once³⁴³, depending on the specific conditions of their use.³⁴⁴ In fact, the European Communities makes the point that it is not even clear whether Brazil is invoking Article XX(b) in respect of these tyres.³⁴⁵ The European Communities argues that Brazil has made no effort to demonstrate the effect of its ban as regards a reduction of the waste from truck and aircraft tyres.³⁴⁶ However, for the European Communities a separate demonstration of the contribution of the import ban on truck and aircraft tyres would be most necessary, since such tyres can be retreaded multiple times, and therefore contribute less to the accumulation of waste tyres than passenger car tyres.³⁴⁷ Moreover, the European Communities notes that Brazil refers merely to the fact that passenger car tyres "have made up nearly all of the European Communities' retread exports to Brazil in recent years".³⁴⁸ However, the European Communities points out that it challenges Brazil's import ban on retreaded tyres as such and as a whole. It further argues that the WTO-compatibility of an import restriction does not depend on whether and in what quantity imports have taken place, or might take place if the ban was removed.³⁴⁹

4.147.

The European Communities notes that it is true that the retreading of truck and also of aircraft tyres appears to occur in Brazil. However, the European Communities submits that this fact is more than offset by the fact that truck and aircraft tyres can be retreaded more than once, and in the case of aircraft tyres sometimes up to 10 times or more. Moreover, the European Communities remarks that truck and aircraft tyres are typically retreaded without any change in ownership.³⁵⁰ Accordingly, the European Communities argues that trade in such tyres is not likely to occur at a large scale, and where it occurs, it is not likely to have a significant net impact on the amounts of waste tyres to be disposed of.³⁵¹ Finally, the European Communities submits that it seems that Brazil does not retread all of its truck and aircraft tyres.³⁵²

4.148.

The European Communities argues that Brazil's arguments as regards tyres for commercial vehicles and aircraft are weaker than as regards passenger car tyres.³⁵³ The European Communities points out that it is not clear why the importation of retreaded tyres for commercial vehicles and aircraft should increase the amount of waste tyres to be disposed of in Brazil. On the contrary, the European Communities submits that certain low-quality new truck tyres, even though conforming to the applicable technical regulations/standards, cannot be retreaded at all after first use. In this sense, the European Communities argues that the importation of a retreaded truck tyre made from a good-quality casing is even preferable, since such retreaded tyres can normally be retreaded again.³⁵⁴

4.149.

The European Communities notes that Brazil has tried to defend its ban on truck and aircraft retreaded tyres by arguing that such tyres "nevertheless have fewer remaining lifecycles before they, too, must be collected and disposed of". However, for the European Communities this statement is largely conjectural, and does not allow evaluating the precise contribution made by Brazil's ban to the reduction of waste tyres. The European Communities recalls that there are no legal limits on the number of times a truck or aircraft tyre may be retreaded again. The European Communities submits that conservative estimates based on the practice of retreaders indicate that commercial vehicle tyres can be retreaded up to three or four times, whereas aircraft tyres can be retreaded up to eight times. However, the European Communities submits further that it is not excluded that in individual cases, a tyre can be retreaded even more frequently.³⁵⁵

4.150.

The European Communities argues that Brazil is thus banning the importation of retreaded truck and aircraft tyres which have been retreaded only once, and can still be retreaded multiple times. The European Communities explains that such a ban does not make any demonstrable contribution to the reduction of the amount of waste tyres accruing in Brazil. The European Communities submits that this is all the more so since the proportion of Brazilian truck tyres actually retreaded still seems to be considerably below 100 per cent.³⁵⁶

4.151.

The European Communities notes that Brazil has also referred to the fact that commercial vehicle tyres are substantially heavier than passenger car tyres, and thus produce more waste. The European Communities notes further that while it may be true that truck tyres (but not necessarily aircraft tyres) are heavier than passenger car tyres, it is also true that truck tyres typically reach a far higher mileage compared to passenger car tyres. Moreover, the European Communities submits that the number of truck tyres in Brazil appears to be far inferior to that of passenger car tyres. Accordingly, the European Communities argues that the assumption that truck tyres somehow create "more waste" than passenger car tyres is not accurate.³⁵⁷

4.152.

Finally, the European Communities submits that Brazil imported basically no retreaded truck and aircraft tyres from the European Communities before the imposition of the ban. The European Communities notes that Brazil chose to impose a ban on these products even though there was hardly any trade, and therefore certainly no waste management problem created by such trade.³⁵⁸

4.153.

Brazil notes that while it is certainly true that commercial vehicle tyres can be retreaded more than once, all things being equal, when imported, they will have at least one-fewer lifecycle remaining. Consequently, they too will turn into waste sooner than new tyres and augment Brazil's waste tyre burden.³⁵⁹ Brazil argues that the harm is even greater when a commercial vehicle retread is imported close to its end of life, because it might have to be disposed of after a single use, whereas a new tyre could have served 3-4 lifecycles. Finally, Brazil notes that because a commercial vehicle tyre is substantially heavier than a passenger car tyre, it will produce exponentially more waste with every unused lifecycle than a passenger car tyre.

Quantification of the contribution

4.154.

The European Communities notes Brazil's argument that it cannot be asked to quantify the reduction in the number of waste tyres accumulating in Brazil due to the import ban. The European Communities points out that in EC – Asbestos the Appellate Body was referring to the risks to human life or health as such and noted that where direct risks to human life and health are concerned, it may not be possible to evaluate such risks in purely quantitative terms, such as numbers of persons dead or sick, or in terms of threshold values for exposure to certain substances. The European Communities is of the view that this has nothing to do with the present case, where, before even addressing the question of risks to human life and health, Brazil must prove its assertion that removing the import ban would result in "higher volumes of waste tyres" to be disposed of in Brazil. The European Communities notes that "higher volumes" is clearly a quantitative concept, and therefore requires a quantification of the volumes of waste tyres at issue.³⁶⁰

4.155.

The European Communities notes Brazil's claim that there are 40 million tyres which become waste in Brazil every year and that there are currently "over 100 million waste tyres scattered around the country". The European Communities believes that if it is possible to provide this information, it must also be possible to provide information on by how many tyres the import ban reduces the number of waste tyres accruing in Brazil.³⁶¹ In the absence of this information, the European Communities does not see how the Panel could even begin to assess the contribution which the import ban might make to the prevention of risks for human life and health resulting from waste tyres. Clearly for the European Communities, such an assessment requires that the impact of the import ban is put into a relationship to the number of waste tyres already accumulating in Brazil.³⁶²

4.156.

Overall, the European Communities notes that Brazil has resoundingly failed to quantify the contribution made by its ban to the reduction of waste tyres. In this context, the European Communities notes that Brazil still contests that it must proceed to such a quantification, and even argues that it is immaterial whether there are five hundred fewer waste tyres or five million. For the European Communities, this argument is manifestly wrong. The European Communities argues that imposing an import ban on retreaded tyres just because of five hundred waste tyres, when there are already 100 million of waste tyres in Brazil, would manifestly be disproportionate.³⁶³

4.157.

The European Communities recalls that in response to the Panel's question No. 40 on how much less waste Brazil accumulates as a result of the import restriction, Brazil answered by simply recalling the numbers of retreaded tyres imported into Brazil per year. Accordingly, the European Communities argues that Brazil seems to maintain its untenable view that every imported retreaded tyre leads to an additional waste tyre to be disposed of in Brazil. With these statements, it is the European Communities' view that Brazil fails to discharge its burden of proof under Article XX as a justification under Article XX cannot be based merely on conjecture and untested assumptions.³⁶⁴

4.158.

Brazil notes that the European Communities and some third parties have asked Brazil to quantify by how much the import ban reduces the waste tyre risks.³⁶⁵ Brazil objects to the European Communities' argument that quantification of the contribution is "a necessary precondition in the contribution analysis required by Article XX(b)".³⁶⁶ Brazil contends that it is common sense that while some risks can be easily quantified, others cannot; that is the reason why the Appellate Body in EC – Asbestos has recognized that "a risk may be evaluated either in quantitative or qualitative terms".³⁶⁷

4.159.

In the EC – Asbestos case, Brazil recalls that the Appellate Body categorically rejected the argument that a "quantification" of risks is necessary and made it clear that "there is no requirement under Article XX(b)... to quantify, as such, the risk to human life or health."³⁶⁸ For Brazil, there is absolutely nothing in the text of Article XX(b) that requires quantification, and the Appellate Body has explicitly held that there is "no requirement" to quantify the risk.³⁶⁹ Brazil argues that this holding was in no way limited to concepts that are difficult to quantify. Brazil explains that the more waste tyres there are, the higher the risks. Brazil argues that these risks are reduced every time the generation of a waste tyre is avoided and it is immaterial for the analysis of the contribution under Article XX(b) whether there are five hundred fewer tyres or five million.³⁷⁰

4.160.

Brazil states that when an imported retread displaces a Brazilian retread made from a domestic casing, one less suitable domestic casing will be retreaded, and when imported retreaded tyres displace new tyres, they increase the waste tyre volumes by about a third (Brazil's rate of retreading). Brazil states that waste reduction lies between these two points and, regardless of whether it is closer to one or the other, it is substantial. Brazil also explains that a more precise quantification of the waste reduction requires a complex calculation of price elasticities, which, as a practical matter, is impossible. According to Brazil, calculation of elasticities requires collection of detailed economic data that simply does not exist for this industry, or for many others. Brazil states, however, that it is obvious that imported shorter-lifespan retreaded tyres become waste sooner than new tyres, and thereby increase the waste volumes.³⁷¹

4.161.

While it is impossible to give the exact count of mosquitoes, dengue cases, tyre fires, or dioxins that every imported retread would create, Brazil is of the view that one fact remains self-evident: higher volumes of waste tyres bring about an increase in the risks that flow from their accumulation and disposal. For Brazil, the logic could not be more straightforward: if elimination of tyre stockpiles helps control mosquitoes and tyre fires, then the fewer waste tyres will mean less dengue and fewer fires; if waste tyre disposal harms public health and the environment, then fewer tyres disposed will mean less harm. In this context, Brazil refers to the British Environment Agency, which said that when it comes to dealing with tyre waste, the best one can do is "to prevent or reduce its production".³⁷²

4.162.

Brazil argues that the import ban does precisely that – it prevents unnecessary generation of a dangerous waste and whether the imports involve passenger car, truck, or airplane retreaded tyres makes absolutely no difference. For Brazil, a retreaded tyre, no matter the type, will always have fewer remaining lifecycles and a shorter lifespan than a retreadable new tyre³⁷³, and the fact remains that imports of retreaded tyres increase waste tyre volumes, and with them the associated risks. Brazil claims that without the import ban, Brazil could not effectively eliminate these risks.³⁷⁴

Impact of the measure on international trade

4.163.

Brazil argues that, while the import ban, by definition, will always be restrictive, this does not make the measure unnecessary.³⁷⁵ Brazil argues that what is relevant is that the ban's trade impact is not unfair or inequitable, because Brazil's waste tyre program also imposes substantial burdens³⁷⁶ on domestic manufacturers:³⁷⁷ it subjects domestic tyre manufacturers and importers to costly disposal obligations³⁷⁸ and significantly raises production costs for domestic retreaders by banning imports of foreign casings.³⁷⁹ Moreover, Brazil argues that the unique facts of the present case justify Brazil's measures. Brazil points out that unlike other waste streams, tyres cannot be recycled into new tyres and cannot be landfilled. Brazil argues that because their disposal presents significant risks, the less tyre waste generated, the better.³⁸⁰

4.164.

Brazil notes the European Communities' point that even though it has a tyre disposal problem, it has not found it necessary to impose an import ban. Brazil argues that what the European Communities conveniently leaves out – or overlooks – is that it does not have a significant market for retreaded tyres and, therefore, does not face imports of retreaded tyres. Brazil further argues that it is disingenuous for the European Communities, therefore, to suggest that the conditions prevailing in Brazil and in the European Communities are alike.³⁸¹

4.165.

Brazil also points out that a number of countries besides Brazil have restricted used and retreaded tyre imports. According to Brazil, Argentina, Bangladesh, Bahrain, Nigeria, Pakistan, Thailand, and Venezuela all prohibit imports of both used and retreaded tyres; Morocco, Macedonia, Saint Vincent and the Grenadines and Jordan demand previous import licenses for used and retreaded tyres.³⁸²

4.166.

The European Communities argues that when assessing the necessity of the measure, the impact of the measure on the import trade is the most severe that a WTO Member can adopt³⁸³, as the Appellate Body observed in US – Gasoline.³⁸⁴ The European Communities argues that this characteristic makes it impossible to consider as "necessary" the measure challenged in this case.³⁸⁵ The European Communities contends that this element is important in the weighing and balancing analysis to assess whether the import ban can be regarded as "necessary" for the protection of life and health.³⁸⁶ The European Communities recalls the Appellate Body's statement in Korea – Various Measures on Beef that "a measure with a relatively slight impact upon imported products might more easily be considered as 'necessary' than a measure with intense or broader restrictive effects".³⁸⁷ The European Communities argues that not only does Brazil not clearly reply to these arguments, but also the fact that its domestic producers may be required to comply with other costly obligations is irrelevant for the "necessity" test set out in Korea – Various Measures on Beef.³⁸⁸ Moreover, the European Communities submits that Resolution CONAMA 258/1999 expressly includes imported retreaded tyres in the recovery programme and imposes on importers of retreaded tyres the highest disposal burden. The European Communities is also of the view that some extra costs incurred by the domestic industry in Brazil are not equivalent to an import ban. The European Communities explains that the protection created by Brazil's import ban has caused considerable harm to the retreading industry of the European Communities.³⁸⁹

4.167.

The European Communities notes that the only reaction by Brazil concerning the impact on international trade in its first oral statement is that "in other cases, import bans have been found to be justified under Article XX". The European Communities argues that this reference to EC – Asbestos is incorrect, because it does not take into account that the measure in that case was not primarily an import ban, which is the only measure in the present case, but that it was a general ban on the product, including an internal prohibition on the production, processing and marketing, coupled with export and import bans. The European Communities explains that in contrast Brazil has banned imports of retreaded tyres, whereas both the domestic production and marketing, as well as the exportation of retreaded tyres, remain allowed.³⁹⁰

4.168.

The European Communities submits that Brazil has taken the radical step of banning the importation of a product which it produces and exports itself, including to the European Communities. The European Communities points out that with this measure, Brazil is almost alone. The European Communities and the overwhelming majority of WTO Members do not restrict the importation of retreaded tyres, which are traded freely between many countries. The European Communities submits that following the two disputes initiated by Uruguay, this is the case even within MERCOSUR.³⁹¹

4.169.

The European Communities contends that due to the import ban, many European retreaders have lost an important market for their products. The European Communities submits that simultaneously, Brazil allows the importation of retreaded tyres from MERCOSUR countries, and the production in Brazil of retreaded tyres, most of which are produced with used tyres imported from the European Communities. Accordingly, retreaders of the European Communities have been injured twice. The European Communities explains that retreading firms are typically small and medium enterprises, which cannot easily adjust to the loss of an important market. The European Communities further submits that as a consequence, Brazil's ban has driven several firms into closure, or has forced them to cut jobs.³⁹²

Burden of proof

4.170.

The European Communities claims that it is upon Brazil to prove that there are no reasonably available alternatives to the import ban on retreaded tyres.³⁹³ The European Communities notes Brazil's claim that the burden of identifying a reasonably available alternative is incumbent upon the European Communities as complaining party and that the European Communities has not met this burden of proof. The European Communities contends that this claim is unfounded and relies on a distorted reading of the WTO case law. The European Communities recalls that in its Report in US – Gambling, the Appellate Body placed the burden of proof to demonstrate that an alternative is not reasonably available not on the complaining party, but on the responding party. The European Communities argues that the latter is only relinquished from the obligation to identify the universe of alternative measures, which shall be advanced by the complaining party or may also be identified by the responding party.³⁹⁴

4.171.

The European Communities argues that there are alternative measures to the import ban on retreaded tyres that Brazil could take to improve the management of waste tyres on its territory³⁹⁵ and that the European Communities has presented several such alternatives in its first written submission and first oral statement.³⁹⁶ The European Communities explains that further to measures to ensure and increase retreading, it has concentrated its arguments on three alternatives, each of them including several possibilities: controlled stockpiling and landfilling; energy recovery; and material recycling.³⁹⁷ Moreover, the European Communities notes that Brazil has also referred in its first written submission to some alternatives.³⁹⁸

4.172.

The European Communities contests Brazil's statement that the European Communities wishes to flood Brazil with waste tyres. To the extent that Brazil is referring to the exportation of retreadable casings, the European Communities notes that it has already explained that such casings are not waste, and that their importation is precisely for that reason, allowed by Brazilian courts. To the extent that Brazil refers to actual waste tyres, the legislation of the European Communities in fact prohibits the exportation of such tyres to countries which do not allow such imports. Moreover, the European Communities points out that it has not challenged Brazil's ban on the importation of used tyres.³⁹⁹

4.173.

Therefore, the European Communities argues that the application of the Appellate Body's interpretation to the present case implies that the burden of proving that those alternatives are not reasonably available rests with Brazil.⁴⁰⁰ The European Communities claims that Brazil has not met this burden⁴⁰¹ in relation to neither measures reducing the number of waste tyres in Brazil nor measures improving the management of waste tyres.⁴⁰² However, in order to assist the Panel in the resolution of the case, the European Communities develops further arguments to support the existence of waste tyres management activities that are WTO-consistent alternatives to the import ban.⁴⁰³

4.174.

Brazil is of the view that the main point of disagreement between the parties is whether the ban is necessary to protect human health and the environment and this question comes down largely to whether there is a reasonably available alternative.⁴⁰⁴ Brazil contends that an alternative measure is not "reasonably available" if it is merely theoretical, if it imposes an "undue burden," if it does not achieve the "desired level of protection,"⁴⁰⁵ or if its result or outcome is uncertain.⁴⁰⁶ Brazil argues further that the complaining party⁴⁰⁷, i.e. the European Communities, bears the burden of identifying a less trade-restrictive measure that is reasonably available.⁴⁰⁸

4.175.

Brazil claims that the European Communities has not met its burden of proof because it has not identified a disposal method that is safe, adequate, and viable.⁴⁰⁹ Moreover, Brazil submits that no third party has proposed a viable alternative to the ban on retreaded tyres for reducing the number of waste tyres that must be disposed of and that remains the case. Brazil notes that the European Communities has acknowledged that it has not had time to carry out a full assessment of the alternative measures. In addition, Brazil submits that some of the third parties made confused statements on this issue and in response to questions they replied that they would go back to capitals for further information.⁴¹⁰

4.176.

Brazil claims that the import ban is "necessary" because no alternative measure can eliminate the risks caused by the unnecessary generation of waste tyres⁴¹¹ and no alternative to the import ban is reasonably available.⁴¹² Brazil contends that while some disposal methods are less harmful than others, these methods cannot handle high volumes of waste tyres.⁴¹³

Measures presented as alternatives

Measures to reduce the number of waste tyres

4.177.

The European Communities argues that Brazil has not done all it could to reduce the number of waste tyres accumulating in Brazil.⁴¹⁴ The European Communities argues that, strikingly, Brazil does not even have a system of mandatory vehicle inspections in place which could contribute to ensuring that used tyres remain retreadable after their use. Even more strikingly, the European Communities submits that Brazil allows the importation of huge amounts of used tyres into Brazil, most of which are used for retreading, but some of which are even discarded immediately.⁴¹⁵

4.178.

Brazil submits that the import ban on retreaded tyres avoids the unnecessary generation of additional waste tyres and, therefore, reduces the volume of waste tyres that must be incinerated or disposed of through methods that pose health and environmental risks.⁴¹⁶ Brazil also argues that the incontrovertible fact is that the fewer tyres Brazil must dispose of, the better. Brazil contends that the import ban is the most important vehicle for increasing retreadability of local casings because imported retreaded tyres reduce the number of retreadable tyres in Brazil.⁴¹⁷ Brazil points out that imports of tyres that cannot be retreaded again "prejudice efforts to address the used tyre issue,"⁴¹⁸ as the British Used Tyre Working Group has recognized.⁴¹⁹ Brazil also notes that it has already implemented a number of measures that encourage non-generation⁴²⁰ and that it has a system of vehicle inspections.⁴²¹

Measures to ensure that Brazilian tyres remain retreadable after use

4.179.

The European Communities notes that one of the main obstacles to the retreading of domestic tyres in Brazil remains the low suitability of Brazilian passenger car tyres for retreading. Therefore, for the European Communities measures to ensure that Brazilian tyres remain retreadable after use constitute one reasonable alternative to reduce the amount of waste tyres in Brazil.⁴²²

4.180.

The European Communities argues that Brazil could take further measures to reduce the number of waste tyres, such as: (i) measures to promote the use of retreaded tyres, e.g. in public procurement⁴²³; (ii) measures to reduce the use of tyres for individual transport, e.g. by promoting public transport⁴²⁴ or campaigns on better driving habits⁴²⁵; and (iii) measures to ensure regular inspections of automobiles.⁴²⁶ The European Communities contends that Brazil has so far not responded to these reasonable alternatives.⁴²⁷

4.181.

The European Communities submits that one effective measure to be taken in this context are regular inspections of automobiles, including their tyres, since in this way it can be ensured that tyres are replaced before they reach or surpass the minimum thread depth, and thus at a time when they are typically still retreadable.⁴²⁸ The European Communities notes that Brazil has referred to a draft bill (5,979/2001) which would replace state-specific vehicle safety requirements with national standards. Therefore, for the European Communities, Brazil recognises that it does not currently have a system of regular mandatory vehicle inspections in place. The European Communities submits that there is no system in place that would ensure that tyres are replaced before they become so worn that they can no longer be retreaded.⁴²⁹

4.182.

The European Communities notes that Brazil merely argues that a system of mandatory inspections might be introduced in the future. At the point of time of the Panel's establishment, the European Communities submits that the establishment of a system of mandatory vehicle inspections is a reasonably available alternative, which has not been used by Brazil. For the European Communities, whether Brazil will implement such a system in the future is therefore irrelevant for the purposes of the present discussion.⁴³⁰ The European Communities notes further that there is no guarantee that Brazil will indeed implement a system of mandatory inspections.⁴³¹ The European Communities submits that Brazil has provided no firm indication as to when the bill will be adopted, or as to when the mandatory inspection system would finally take effect throughout Brazil.⁴³²

4.183.

Brazil submits that it has introduced demanding manufacturing standards for new tyres, which assure that more tyres remain suitable for retreading after the first use. Brazil explains that the National Code of Traffic (Law 9,503/1997) establishes a system of mandatory vehicle inspections in Brazil.⁴³³ Brazil points out that the Code requires examination of the vehicle's safety, including tyres, and its compliance with emission rules. Brazil explains that under the law, states have the jurisdiction to develop and enforce safety standards and inspection procedures in their individual territories and, at present, that is what happens. Brazil further explains that the Legislature is currently considering a bill to establish uniform federal inspection standards (Bill 5,979/2001) (Exhibit BRA-167).⁴³⁴

4.184.

Brazil also notes that the absence of nationwide rules at present does not mean that Brazilian states and municipalities cannot in the interim use local rules to carry out regular inspections – they can and they do. In addition, Brazil notes that the inspections are not limited to the annual inspections: vehicles are inspected when first licensed, when their ownership changes, and also when the vehicle owner moves to a different state. Brazil points out that according to the National Traffic Department, 30 per cent of the Brazilian automobile fleet is annually inspected because of a change in ownership or the owner's move to a different state.⁴³⁵

4.185.

Brazil also notes that it is developing an annual vehicle inspection plan designed to increase the frequency of tyre replacement, and consequently the number of suitable casings.⁴³⁶ Brazil notes that the European Communities proposes four alternatives to achieve the non-generation goal: "better vehicles maintenance," "educational campaigns on better driving habits," promotion of public transportation, and public procurement rules to encourage use of retreaded tyres.⁴³⁷ Brazil submits that it has already implemented a number of measures that encourage non-generation: (i) a public transportation campaign is hardly necessary, however, in developing countries such as Brazil, where most of the population do not own cars and already use public transportation; and (ii) public procurement rules are also unnecessary because Brazil already has a substantial demand for retreaded tyres.⁴³⁸ However, Brazil argues that these "alternatives" will not allow Brazil to achieve its chosen level of protection, because the goal is to prevent as much waste as possible and, without the ban, some waste that could have been prevented would not be prevented.⁴³⁹ Therefore, Brazil argues that measures such as these complement the import ban, but they cannot replace it.⁴⁴⁰

Measures against imports of used tyres⁴⁴¹

4.186.

The European Communities argues that Brazil has not taken effective measures to prevent the constant and growing flow of used tyres into Brazil.⁴⁴² The European Communities claims that Brazil imports a growing number of used tyres.⁴⁴³ In 2005 alone, the European Communities submits that Brazil imported a total of 10.5 million tyres from third countries, including 8.4 million from the European Communities⁴⁴⁴ and in the first seven months of 2006, another 4.5 million casings have been imported.⁴⁴⁵ The European Communities contends that a large majority of these tyres are used for the fabrication of retreaded tyres in Brazil. However, unlike in the case of importation of retreaded tyres, the European Communities argues that a small proportion of the imported used tyres, because they are unsuitable for retreading or for other reasons, will get discarded immediately.⁴⁴⁶ Accordingly, the European Communities submits that, following the logic of Brazil, the importation of used tyres should be prevented even more urgently than the importation of retreaded tyres.⁴⁴⁷

4.187.

In response to Brazil's claims that the importation of used tyres will soon end, the European Communities submits that presently ongoing legislative developments are moving in the direction of permitting the importation of casings (and retreaded tyres). The European Communities contends that two such draft laws enjoy considerable support in Brazil's Federal Chamber and the Federal Senate, respectively. The European Communities further submits that draft law 203/91 was approved by the Special National Waste Policy Commission by a majority of 22 votes against 4 votes. The European Communities also submits that draft law 216/03 on 16 December 2005 was approved by the Federal Senate's Social Affairs Commission in a vote of 18 against one, with only one abstention.⁴⁴⁸ The European Communities submits that Brazil only claims that "the Federal Government has worked vigorously to safeguard the integrity of the ban" and explains the judicial decisions taken in 2006.⁴⁴⁹

4.188.

However, the European Communities contends that the reality is that injunctions are in force under which Brazilian retreaders continue to import casings for retreading in Brazil. For the European Communities, Brazil's assurances that Brazilian courts are no longer or, in the future, would no longer grant injunctions, and that the importation of casings would stop, remain contradicted by the facts. The European Communities notes that it has already provided evidence challenging Brazil's statement that all 2006 decisions in the High Court upheld the government's position. The European Communities argues that although Brazil stresses its judicial victories over several importers of used tyres, the biggest retreaders of the country continue to operate with the permission to import the casings needed for their production.⁴⁵⁰

4.189.

Brazil submits that to further promote retreading of tyres it consumes it prohibits imports of used tyres, compelling its retreaders to process casings from domestic and imported new tyres collected within Brazil's territory.⁴⁵¹

Waste management measures

Controlled stockpiling and landfilling

4.190.

The European Communities understands controlled stockpiling as the activity consisting of storing waste tyres in adequate installations, which are designed to prevent fires and pests (including mosquitoes). The European Communities argues that stockpiling is different from "landfilling" in that the latter consists in discarding large amounts of waste tyres directly on or into the ground. The European Communities explains that landfilling has been normally done by tossing waste into piles, a method that requires little effort or handling by a site operator but also requires the most storage space and where randomly stacked tyres are a greater fire risk because they expose more tyre surface area and create greater volumes or air between other tyres than other stacking methods.⁴⁵²

4.191.

The European Communities further explains that waste tyres are stockpiled in several ways. The European Communities submits that besides the random stacks system, which is common in landfills but rarely used in controlled stockpiling because of storage space and handling requirements, the alternative methods of storing tyres at waste tyres facilities are: barrel stacks, laced stacks, bundling and shredding. For the European Communities, all these, to a different degree, take advantage of space, reduce interior spaces decreasing potential insect habitats and exposes less surface area of the tyres to a fire.⁴⁵³

4.192.

The European Communities does not agree with Brazil's argument that stockpiling is a dangerous⁴⁵⁴ and unsound disposal method because it poses substantial hazards⁴⁵⁵, provides breeding grounds for mosquitoes and contaminates the soil through the leaching of hazardous substances. However, for the European Communities, this is a description of the hazards arising from improperly managed installations, which could be avoided by implementing properly the Basel Convention Technical Guidelines and the California Code of Regulations.⁴⁵⁶ The European Communities notes that Brazil refers as evidence to some documents from the United Kingdom, France, the United States and the European retreaders. The European Communities argues that those documents do not refer to properly managed installations, but to illegal dumps or historic landfills. The European Communities is of the view that they cannot, therefore, serve to contradict the European Communities' position on this question.⁴⁵⁷ Moreover, the European Communities claims that it has no relevance that the Basel Guidelines signal that stockpiling can be used only for temporary storage before a waste tyre is forwarded to a recovery operation.⁴⁵⁸ The European Communities argues that stockpiling plays an important role acting as a buffer to other disposal operations and its duration and capacity can be adjusted to the specific needs of the relevant country.⁴⁵⁹

4.193.

The European Communities argues that stockpiling allows the management of waste tyres in a controlled and surveyed manner, thus reducing, or even eliminating in well designed and managed installations, the risks arising from mosquitoes and fires. For the European Communities, relevant evidence of their non-dangerous nature is the fact that waste tyre stockpiling installations are not subject to compulsory environmental impact assessment in Brazil and under the only existing international agreement on environmental impact assessment: the Espoo Convention of 25 February 1991 on Environmental Impact Assessment in a Transboundary Context.⁴⁶⁰

4.194.

Brazil claims that stockpiling is a dangerous practice that is no longer accepted as a legitimate waste tyre management solution. Brazil argues that stockpiling is not a disposal method at all because it does not eliminate tyre waste. In addition, Brazil submits that stockpiling presents a risk of mosquitoes, toxic leaching, and dangerous emissions during fires.⁴⁶¹ Brazil draws the attention of the Panel to Exhibit BRA-25, which contains images of tyre stockpiles and tyre fires and shows that stockpiling is hardly safe. Brazil argues that the European Communities' cavalier treatment of these well-recognized risks exemplifies its treatment of all disposal alternatives.⁴⁶²

4.195.

Brazil notes the European Communities' claim that these "hazards aris[e] from improperly managed installations" and refers the Panel to the management practices outlined in the Basel Tyre Guidelines and the California regulations.⁴⁶³ Brazil notes that the European Communities says that the Basel Tyre Guidelines endorse stockpiling.⁴⁶⁴ However, in reality, Brazil contends that the Basel guidelines are explicit that even with proper control, stockpiling "can be used only for temporary storage before an end-of-life tyres is forwarded to a recovery operation," and that "landfilling and stockpiling are the least desired options".⁴⁶⁵ Moreover, Brazil submits that California's Tyre Recycling Act⁴⁶⁶ names among its key objectives "[c]leanup, abatement, or other remedial action related to waste tyrestockpiles."⁴⁶⁷

4.196.

Brazil notes that the European Communities points to a number of documents and reports that Brazil has supposedly misread.⁴⁶⁸ Brazil submits some information on the content of those reports concerning stockpiling – a disposal method that is entirely environmentally sound, according to the European Communities:⁴⁶⁹ (i) the British Environment Agency, in its publication "Tyres in the Environment" (Exhibit BRA-1), says that "[s]tockpiled tyres... are a fire risk..." and "[f]ires in the past have caused severe air and water pollution, so we need to reduce this risk"⁴⁷⁰; and (ii) the Basel Tyre Guidelines.⁴⁷¹

4.197.

Brazil submits that the environment agencies of the European Communities member States recognize the dangers of stockpiling and are working to eliminate stockpiles.⁴⁷² Brazil submits further that the United Kingdom, for example, has a Stockpile Working Group to provide guidance for clearance of stockpiles.⁴⁷³ Brazil also notes that in the United States, most states prohibit new tyre stockpiles and require stockpile owners and operators to cease accepting new tyres and to develop plans to eliminate the stockpiles.⁴⁷⁴

4.198.

The European Communities notes that controlled landfilling is also an alternative and that Brazil accepts landfilling of grinded or cut tyres, and, therefore, this must also be considered as an alternative in Brazil to the import ban.⁴⁷⁵ The European Communities submits that Article 1 of Joint Resolution SMA/SS 1/2002 of 5 March 2002 conditions final tyre disposal in waste landfills to previous decharacterization by grinding or cutting the tyre and to the previous mixing of these parts with household waste or its spread over the latter.⁴⁷⁶ The European Communities submits that the penultimate recital of this Joint Resolution reminds that Resolution CONAMA 258/1999, stipulates that final disposal of waste tyres shall be carried out through environmentally sound measures. Consequently, for the European Communities, it has to be concluded that Brazil considers landfilling of shredded tyres as creating no environmental risks. The European Communities argues that the statement made by Brazil that "shredding of tyres … does not prevent potential leaching of harmful organic chemicals" and heavy metals contradicts its own legislation and must be considered unfounded.⁴⁷⁷

4.199.

With respect to landfilling, Brazil is not sure what the European Communities means by "controlled" landfilling, but landfilling of any kind is prohibited in the European Communities since July 2006.⁴⁷⁸ Brazil submits that both Brazil and the European Communities prohibit landfilling of tyres⁴⁷⁹ because they damage the landfill's structure and can leach harmful contaminants into the environment.⁴⁸⁰ Brazil is of the view that there is no good reason why Brazil should accept something that the European Communities has rejected. Brazil notes the European Communities' claim that Brazil permits landfilling, but the regulation the European Communities cites is a provisional state measure with no nation-wide application that was adopted in response to an acute dengue crisis in the state.⁴⁸¹

Energy recovery and waste co-incineration

Activities of energy recovery and waste co-incineration

4.200.

The European Communities contends that both parties in this dispute allow energy recovery through the co-incineration of waste tyres.⁴⁸² The European Communities submits that in Brazil, Resolution CONAMA 264 of 26 August 1999 is the relevant measure.⁴⁸³ The European Communities submits that energy recovery is one of the best waste management practices mentioned in the OECD report on "Improving Recycling Materials".⁴⁸⁴ The European Communities submits that the percentage of energy recovery from waste tyres has jumped in Europe from 11 per cent in 1994 to 30 per cent in 2003.⁴⁸⁵

4.201.

The European Communities notes that Brazil has concentrated its arguments on co-incineration in cement kilns, though co-incineration can also take place in other installations, like paper mills or steel furnaces.⁴⁸⁶ The European Communities contends that co-incineration of waste tyres or tyre-derived fuel in different installations (cement kilns, pulp and paper mills, electric arc furnaces for the manufacture of high-carbon steel products, and utility and industrial boilers) is considered a safe activity throughout the world. For the European Communities, that explains its expansion in several countries, like the United States, Australia, Japan or the European Communities.⁴⁸⁷

4.202.

The European Communities notes Brazil's acknowledgement that it has licensed some 46 companies to process waste tyres, and, presumably, several of them use waste tyres as fuel.⁴⁸⁸ For the European Communities, it is regrettable that Brazil did not provide a useful answer to the second part of the Panel's question No. 43 (What types of disposal methods are used by the Brazilian companies that are authorized to process waste tyres in Brazil?)and refused to answer to the European Communities' question No. 17 (concerning the 46 companies authorised to process waste tyres).⁴⁸⁹ The European Communities considers that the information requested is relevant to assess to what extent energy recovery is a reasonable alternative in Brazil, which the European Communities claims it is.⁴⁹⁰

4.203.

The European Communities submits that the authorities in Brazil seem to encourage energy recovery as an alternative. In its response to the Panel's question No. 43, the European Communities notes that Brazil admitted that co-processing in cement kilns and co-processing with bituminous schist are disposal methods usually approved by state environmental authorities in the framework of the implementation of Resolution CONAMA 258/1999.⁴⁹¹ In any case, for the European Communities, it is clear that energy recovery plays already an important role in Brazil. The European Communities submits that the report "Panorama dos Resíduos Sólidos no Brasil" (Solid Waste Panorama in Brazil) states that, in 2004, 56,06 per centof waste tyres in Brazil were used to produce alternative fuel.⁴⁹² The European Communities has already explained that, in view of its capacities as country and its important participation in the cement and paper mills industries and energy, Brazil cannot claim to have difficulties in implementing energy recovery as an alternative measure. The European Communities points out that according to the World Bank country fiche, Brazil's industrial sector represents 40 per cent of its economy, and the publication "World Steel in Figures" by the International Iron and Steel Institute, ranks Brazil in the ninth post among the major steel-producing countries in 2005.⁴⁹³

4.204.

Brazil argues that outside of landfilling, only incineration can handle the large existing volumes of waste tyres, but incineration produces harmful emissions that can cause cancer, as well as a variety of respiratory, reproductive, and immune system problems.⁴⁹⁴ Brazil points out, for example, that the US EPA study found that a "well-designed, well-operated, and well-maintained combustion device" could mitigate the added harm from the TDF emissions; however, "it is not likely that a [well-designed] solid fuel combustor without add-on particulate controls could satisfy air emission regulatory requirements in the United States," and "there is serious concern that emissions [from poorly designed or primitive combustion devices] would be more like those of an open tire fire than a well-designed combustor."⁴⁹⁵

Safety of energy recovery and waste co-incineration

4.205.

Brazil argues that it is entitled to opt for the highest level of protection, and that is precisely what Brazil is doing.⁴⁹⁶ Brazil explains that Brazil, the European Communities, and other WTO Members continue to incinerate tyre waste not because the practice is safe, but because landfilling and stockpiling are even more dangerous, and the less risky disposal methods cannot absorb the volumes generated.⁴⁹⁷ Brazil argues that incineration of waste tyres in cement kilns and similar facilities does not allow Brazil to achieve its chosen level of protection.⁴⁹⁸ Brazil claims that while there is clearly an overwhelming consensus on the dangers of incineration, Brazil needs only to show that it is relying, in good faith, on qualified and respected, even if divergent, opinion.⁴⁹⁹ Brazil notes that the European Communities admits that⁵⁰⁰ "some governments and scientific communities have expressed concern about incinerating waste tyres".⁵⁰¹

4.206.

The European Communities argues that Brazil distorts the European Communities' arguments in order to give the impression that co-incineration in cement kilns is dangerous. The European Communities notes that Brazil continues with the surprising affirmation that dumping is a less harmful disposal method than incineration. The European Communities contends that contrary to what Brazil claims co-incineration will continue to be used in the medium term until recycling is fully developed, especially in the current international scenario of petrol prices. For the European Communities, this explains why, in 2004, 56.06 per cent of waste tyres in Brazil were used to produce alternative fuel. Moreover, the European Communities notes that Brazil has not alleged that co-incineration is not an adequate system to eliminate tyres, as mosquito-breeding places, or to reduce open tyre fires.⁵⁰²

4.207.

The European Communities argues that Brazil has not demonstrated either that co‑incineration of waste tyres increases emissions of hazardous substances. The European Communities claims that all its evidence is based on studies issued ten years ago or more, precisely when the discussions to regulate co-incineration started, and the studies correspond to installations using old technology, like the wet cement kilns, or burning other fuels.⁵⁰³

4.208.

Brazil states that the incineration was not safe ten years ago, and it still is not safe today. Brazil further argues that the studies provided by Brazil are the most recent studies available on the subject. Brazil states that the European Communities has only been able to provide one study that is more recent, which specifically addresses the safety of waste tyre incineration.⁵⁰⁴ That very study, according to Brazil, reported significant increases in dioxin emissions during the incineration of waste tyres. Brazil also notes that a British report, dated 2002, prepared with the British Government's participation, observed that "public and regulatory concern over emissions makes consents [to incinerate tyres] difficult to obtain."⁵⁰⁵

Emissions of dioxins, furans and other persistent organic pollutants (POPs)

4.209.

Brazil notes that the European Communities concedes that⁵⁰⁶ incineration "can lead to emissions of dioxins, furans and other persistent organic pollutants".⁵⁰⁷ Brazil submits further that the European Communities yet argues that (i) safety of incineration is beside the point because Brazil permits it; and (ii) emission controls could make it safe.⁵⁰⁸ Brazil claims that both arguments are flawed.⁵⁰⁹

4.210.

First, Brazil and other countries permit incineration not because it is safe, but because other, less risky methods cannot absorb the existing volumes of tyre waste, even if used in combination. According to the European Environment Agency, incineration is appropriate only "if no other outlet is possible".⁵¹⁰ Brazil notes that the European Communities makes a half-hearted attempt at defending the safety of incineration. However, the studies it cites support Brazil's arguments.⁵¹¹ Brazil submits that the study prepared for the cement industry describes tests conducted at 16 German kilns since 1989 and reports a 1,233 per cent to 3,900 per cent increase in dioxin emissions when tyres are burned.⁵¹² Brazil notes that the study also acknowledges that burning alternative fuels, such as tyres, could result in release of heavy metals.⁵¹³ Brazil further notes that two other studies cited by the European Communities do not measure dioxin emissions at all, and one admits that tyre material in material recycling uses leaches lead, nickel, chromium and cadmium.⁵¹⁴

4.211.

Brazil argues that incineration produces harmful emissions (including dioxins, furans, and lead) that cause cancer, affect the immune system, and lead to reproductive problems.⁵¹⁵ Brazil notes that it has explained in detail why incineration of waste tyres is harmful, even under controlled conditions. Brazil submits that Ontario banned incineration until it realized that there was no other way to reduce stockpiling of its tyre waste. Brazil argues that not a single study introduced by the European Communities supports its ambitious claim that incineration is entirely safe – instead, the studies document increases in dioxin emissions and leaching. Brazil points out that if waste tyres were indeed the safe and valuable fuel that the European Communities claims they are, it would seem that they would be in high demand; however, they are not.⁵¹⁶ Brazil notes that cement kilns still charge gate fees to accept tyres and, as the British Used Tyre Working Group correctly points out, "[t]he speed of regulatory approval for cement works to consume used tyres as a replacement fuel has to date been extremely slow."⁵¹⁷

4.212.

Brazil submits that to downplay the risks of dioxins, the European Communities explains that "[d]ioxins are found widely in the environment and the main source of exposure is via diet."⁵¹⁸ However, Brazil notes that as the United States EPA explains in Exhibit BRA-31, dioxins enter the food chain from the emissions in the atmosphere, accumulate in the animal tissue, and are then passed on to the person who consumes the animal's meat. Brazil submits that the European Communities also argues that there is a tolerable exposure level, as established by the WHO.⁵¹⁹ Brazil submits further that however the United States Government report, cited by the European Communities, reveals that the United States EPA disagreed that such a threshold existed, and notes that the WHO recommended that "every effort... be made to reduce exposure to the lowest possible level."⁵²⁰ Brazil notes that, in addition, the same US report underlines that every time the WHO has returned to the issue, it has lowered the tolerable intake level for dioxins.⁵²¹ Finally, Brazil argues that the European Communities is flatly wrong when it states that dioxins are not one of the 12 POPs targeted for elimination under the Stockholm Convention; a quick look at the Annex C and Article 5 makes this clear.⁵²²

4.213.

Brazil notes that the European Communities casually dismissed the hazards presented by a deadly chemical⁵²³ by stating that dioxins are released from back-yard barbecues.⁵²⁴ Brazil argues that the level of dioxins released from a cement kiln – even properly operated, state-of-the-art cement kiln – is far greater than the amount released from any barbecue. If the European Communities has contrary information, Brazil would be pleased to receive it.⁵²⁵

4.214.

Second, Brazil contends that stricter emission standards can mitigate, but not eliminate the health and environmental harm caused by incineration.⁵²⁶ Brazil further argues that such emission standards require cost-prohibitive upgrades.⁵²⁷ Brazil submits that zero-level emissions, in principle, could eliminate the risks of incineration. However, Brazil argues that, in practice, demanding such standards will render incineration no longer technically or economically viable, and the waste previously incinerated will have to be landfilled or stockpiled, which is even more harmful. Brazil submits that because these risks are unavoidable, the only way to reduce them is to reduce the volumes of tyres that must be disposed of.⁵²⁸

4.215.

Brazil argues that the decision on whether a steel mill or paper mill will use tyres as fuel is a decision that the private operator of the mill will make based on various economic variables, including the cost of the fuel (in the case of tyres, most charge a fee to accept the tyres to burn), plus the cost of the burning process. Brazil submits that the higher the restrictions on that process, the higher the cost of compliance. In Brazil's view, the result is that if Brazil set the emissions standards high enough to meet its desired level of protection, the cost of meeting those standards would be so high that the operators would choose an alternative source of fuel. Paragraph 49 of Brazil's first written submission provides an example of an European Communities member State, where the use of tyres as fuel declined after the emission standards were raised. Brazil noted that in Austria, the energy recovery market share declined from 70 to 40 per cent in 2000 after introduction of stricter environmental regulations.⁵²⁹

4.216.

Brazil submits that the issue, therefore, is not whether Brazilian incinerators can afford the safest technology available to reduce emissions, but whether incineration of waste tyres would continue to make business sense if expensive investments were required, especially in developing countries like Brazil. Brazil points out that with the present state of technology, the fewer tyres are incinerated, the more tyres will have to be stockpiled and landfilled – at an even greater health and environmental cost.⁵³⁰

4.217.

Brazil argues that the European Communities has built its case on flawed conclusions and, sometimes, outright misrepresentations, as for example the fact that it portrayed a deadly chemical ‑ dioxin ‑ as a benign substance. In addition, Brazil is of the view that by downplaying the risks of waste tyre accumulation and disposal in Geneva, the European Communities has contradicted its own environmental officials in Brussels.⁵³¹

4.218.

To respond to Brazil's arguments that energy recovery produces "dangerous, harmful emissions, even under its most controlled conditions", the European Communities notes that in its first oral statement several reasons to support this alternative were provided.⁵³² The European Communities notes that it is true that burning wastes – if not properly done – can lead to emissions of dioxins, furans and other POPs; however, the incineration or co-incineration of waste destroys POPs in the waste input. The European Communities submits that the practice of waste co-incineration can also be considered in the light of the Basel Convention, which adopted in 2004 General Technical Guidelines for the Environmentally Sound Management of wastes consisting of, containing or contaminated with POPs. The European Communities submits that cement kiln co-incineration is included in the guidelines as one appropriate technology for the destruction and irreversible transformation of the POPs content in waste.⁵³³ The European Communities submits further that the technology and equipment for ensuring the respect of those emissions limits exists, and the Brazilian cement, steel and paper mills companies can surely afford the investments, if they have not done it yet. Brazil has submitted no evidence to the contrary.⁵³⁴

4.219.

The European Communities submits that Brazil has acknowledged that stricter emissions standards will produce fewer emissions. The European Communities submits that, of course, emission limits are set up to protect human health and the environment against risks that are significant, not against those that are insignificant. The European Communities contends that our societies are very far away from the technological and economic levels ensuring zero risk. The European Communities has the strictest standards in the world: its dioxin emissions limits, for example, are five times lower than those in Brazil.⁵³⁵ In the European Communities, incineration of tyres must meet at least the standards of the waste incineration Directive 2000/76/EC, which ensures a high level of health protection.⁵³⁶

4.220.

The European Communities notes that Brazil reacted to the European Communities' arguments by saying that the European Communities was "casually dismissing the hazards presented by a deadly chemical" (dioxins). The European Communities notes that no arguments were advanced by Brazil in relation to the increased use of this alternative in the European Communities, Brazil and elsewhere and the positive role that cement kiln co-incineration of waste tyres plays in the destruction of the POPs content in waste.⁵³⁷

4.221.

The European Communities explains that dioxins are formed in very small quantities when organic materials such as oil, wood, grease and plastics are burnt. The European Communities explains that the EC fiche on emission values from the group of activities to which cement clinkers belong shows that dioxin total emissions to air per year in the European Communities amount to 0.0322 kg, which represents 4 per cent of the dioxins emission in the European Communities. The European Communities notes that the WHO considers that TCDD (the most hazardous dioxin) does not affect genetic material and there is a level of exposure below which cancer risk would be negligible. The European Communities further submits that the WHO has recommended a monthly tolerable intake of 70 picograms per kilogram of body weight.⁵³⁸

4.222.

Moreover, the European Communities stresses that Brazil has slipped into its submissions some inaccuracies on dioxins as hazardous substance; namely, the statements that dioxins are harmful no matter how small the amount and that the Stockholm Convention on POPs has listed dioxins among 12 contaminants targeted for elimination.⁵³⁹. The European Communities points out that dioxins do not form part of the 12 contaminants whose production, use and trade are prohibited or must be eliminated according to Article 3 of the POPs Convention. The European Communities explains that dioxins are included in Annex C to the Convention, with other chemicals whose total releases from anthropogenic sources must be reduced, according to Article 5 of the Convention, with the goal of their continuing minimization and, where feasible, ultimate elimination. Dioxins levels have been decreasing in recent years, mainly due to the reduction in emissions to the air from industrial installations. The European Communities is actively working on further reductions: Directive 2000/76/EC sets up 0.1 ng/Nm³ for incineration and co-incineration plants, compared to the 0.5 ng/Nm³ set up in the Brazilian Resolution CONAMA 316 of 29 October 2002 on procedures and criteria for the operation of thermal waste treatment systems.⁵⁴⁰

4.223.

Finally, the European Communities notes that the reports mentioned by Brazil in its first written submission are not representative of the current situation of energy recovery as an alternative and, in some cases, the use by Brazil of those reports is biased. The European Communities argues that the most recent scientific evidence shows that incineration of waste tyres in cement kilns does not influence or affect the emissions of dioxins and furans, reduces SO2 emissions and does not increment emissions for lead, nickel, chromium and cadmium.⁵⁴¹

Material recycling

4.224.

The European Communities contends that material recycling of waste tyres for different purposes is considered a safe activity throughout the world. For the European Communities, that explains its expansion in several countries, like the United States, Australia or the United Kingdom. The European Communities submits that authorities in Brazil also seem to encourage material recycling as an alternative. The European Communities notes that in its response to the Panel's question No. 43, Brazil states that the production of rubber asphalt and rubber products and appliances are disposal methods usually approved by state environmental authorities in the framework of the implementation of Resolution CONAMA 258/1999. The European Communities submits that according to a recent press article found on the website of the Brazilian Ministry of the Economy, the company "Ecovias" is applying rubber asphalt on 146 kilometres of road in São Paulo and the company "Greca" one of its providers, with three asphalt installations in Rio Grande do Sul, Paraná and São Paulo, is constructing another one in Minas Gerais.⁵⁴²

4.225.

The European Communities notes however that Brazil considers that material recycling is not an acceptable option. However, for the European Communities the reports attached as exhibits by Brazil show that material recycling or reuse is well expanded; this is reflected in figure 4.3 of the OECD report, which shows that recycling of waste tyres has jumped in Europe from 6 per cent in 1994 to 28 per cent in 2003.⁵⁴³ The European Communities submits that Brazil repeats that material recycling is not always economically and technically viable, and can only absorb a fraction of the waste tyres arising in Brazil. The European Communities argues that Brazil insists in assessing this alternative in isolation.⁵⁴⁴

4.226.

In any case, the European Communities is of the view that Brazil still has to explain its capacities in this respect and, more notably, to comment on the report "Panorama dos Residuos Sólidos no Brasil" (Solid Waste Panorama in Brazil) that states that, "[i]n 2004, of the 146 thousand tonnes of unusable tyres,... 17.65 per cent [were] rolled into sheeting, [and] 19.65 per cent [used] for rubber goods and material".⁵⁴⁵ Finally, the European Communities argues that among the environmental health actions foreseen in its chapter 5.1, the National Dengue Control Programme, adopted on 24 July 2002 by the Brazilian Health Ministry, refers to 100,000 grinders for shredding tyres, which will be provided to the municipalities to support the use of tyres as raw material for the construction of houses.⁵⁴⁶

4.227.

The European Communities notes Brazil's claims that material recycling of rubber remains "largely experimental and their environmental impact unknown", that rubber-asphalt can cause occupational hazards and that civil engineering applications pose negative environmental effects. The European Communities claims that these claims are inaccurate. The European Communities notes that the report attached by Brazil to its first written submission concludes that "no definitive results were obtained indicating that rubber asphalt exposures are more hazardous than conventional asphalt exposures". The European Communities submits that, in regard to civil engineering, a report produced by HR Wallingford Ltd., in March 2005, for the United Kingdom Department of Trade and Industry and the Environment Agency explains the different re-uses of tyres in port, coastal and river engineering and concludes that the overall risk of damage to the environment and human health is expected to be reduced to low or to near zero.⁵⁴⁷

4.228.

Brazil also argues that material recycling applications – though often safer – are not always the best solution. Brazil submits that an industry association⁵⁴⁸ that supports material recycling nevertheless recognizes that "[e]ach potential civil engineering use brings with it a particular set of technical, environmental and economic constraints".⁵⁴⁹ Brazil states, for example, that rubber asphalt has yet to gain wide acceptance and concerns about emissions during paving and resurfacing remain.⁵⁵⁰ Brazil explains that material recycling is preferred to stockpiling and incineration because it is generally safer and extracts the greatest environmental benefit from the waste tyre, next to retreading. Brazil explains, however, that material recycling does not have the capacity to absorb the existing volumes.⁵⁵¹

4.229.

Brazil submits that the European Environment Agency, for example, advises member States that "[r]etreading and recycling of tyres should be encouraged and increased, in preference to combustion and energy recovery".⁵⁵² However, Brazil explains that material recycling cannot absorb the existing volumes. Brazil argues that in the European Communities, it helps dispose of just slightly over a quarter of the tyre waste.⁵⁵³ Brazil submits that the European Environment Agency notes:⁵⁵⁴ "Too many tyres are still being landfilled or burnt.... [C]ompliance with the EC Directives on land-filling and waste combustion emissions will require considerable investment in new retreating and recycling facilities".⁵⁵⁵

4.230.

Brazil submits further that because the vulcanization process that gives a tyre its rigid physical properties cannot be effectively reversed, true recycling is impossible.⁵⁵⁶ Brazil explains that devulcanization is cost-prohibitive, results in pollution and produces poor-quality rubber with limited demand and applications – tyre manufacturers simply cannot recycle an old tyre into a new one.⁵⁵⁷ Brazil explains that pyrolysis (self-contained breakdown of the tyre material in an oxygen-free environment) remains experimental and expensive.⁵⁵⁸ Brazil contends that civil engineering uses, such as construction of artificial reefs and landfill lining, can help dispose of only a small fraction of the existing volumes and their environmental impact remains unknown. Brazil notes that adding shredded waste tyres to asphalt has yet to gain wide acceptance and concerns about emissions during paving and resurfacing remain.⁵⁵⁹ Brazil submits that in the European Communities, rubber asphalt applications⁵⁶⁰ help dispose of less than one per cent of waste tyres.⁵⁶¹

4.231.

Brazil notes the European Communities' argument that the report "Panorama dos Residuos Sólidos no Brazil" allegedly proves that Brazil successfully disposes of all of its tyres. Brazil states that all that the report does, however, is quote the highly controversial IPT study, commissioned by Brazil's new tyre manufacturers.⁵⁶² Brazil points out that the methodology of the IPT study was so flawed that the manufacturers requested that the study be redone.⁵⁶³ Brazil explains that the problem with the report is that, while it accounted for the disposal of 100 per cent of the tyres that were in fact disposed of by the business entities surveyed, the quantity disposed of by these businesses was less than half of all waste tyre arisings in that particular year. In addition, Brazil states, according to the report, more than half of the tyres were incinerated, and incineration, as Brazil has explained, presents health and environmental risks.⁵⁶⁴

Other measures

Resolution CONAMA 258/1999 and the Rodando Limpo programmes in various Brazilian states

4.232.

The European Communities submits that the Brazilian legislation itself contains one alternative measure to the import ban on retreaded tyres:⁵⁶⁵ the collecting and disposal system set up by Resolution CONAMA 258/1999, as amended in 2002⁵⁶⁶, and makes it mandatory for domestic producers of new tyres and importers of new and retreaded tyres to provide for the safe disposal of waste tyres in specified proportions.⁵⁶⁷ The European Communities is of the view that this disposal scheme, if it were enforced correctly, would eliminate the eventual health hazards created by waste tyres. The European Communities argues that schemes like this are even more effective than an import ban, since they cover all waste tyres. For the European Communities, this would also correspond to the modern waste management policies adopted around the world, where different types of recycling and recovery schemes have been established to limit or eliminate the landfilling or uncontrolled disposal of certain wastes.⁵⁶⁸

4.233.

The European Communities claims that Brazil has not explained so far how waste tyre collection from consumers is organised in its territory. It seems to the European Communities that no obligations are imposed on garages or specialist tyre retailers to collect and correctly manage waste tyres in the replacement activities. The European Communities submits that Brazil has only referred to the system established by Resolution CONAMA 258/1999, which institutes an obligation on new tyres producers and importers and on importers of retreaded tyres. However, the European Communities argues that Brazil is not ensuring the correct implementation of the CONAMA scheme, as can clearly be deduced from the very high figures of incidents of non-compliance.⁵⁶⁹

4.234.

Moreover, the European Communities submits that an alternative measure could consist in destroying waste tyres beyond the mandatory controlled disposal programme adopted by Resolution CONAMA 258/1999. Thus, in the State of Paraná, the European Communities notes that there is a voluntary multi-sector programme called "Paraná Rodando Limpo" ("Paraná Rolling Clean"), in which more than 10 million old tyres have so far been disposed of, thus eliminating the waste tyre problem in that State. The European Communities submits that equivalent programmes are now being implemented in Pernambuco and Paraíba. The European Communities argues that nothing prevents Brazil from applying to the whole Union a programme that has been put in place in several of its States.⁵⁷⁰ The European Communities also notes that Brazil has not explained why these programmes could not be applied to the whole Union.⁵⁷¹

4.235.

The European Communities submits that tyre collection, transport and interim storage, are activities necessary to ensure the various recycling, recovery and other disposal practices. The European Communities argues that these activities should be carried out in a way ensuring that tyres are free of adult mosquitoes or their larvae and eggs. The European Communities submits that Brazil's own exhibits reflect the need to ensure a proper handling of tyres, where it is explained that tyres "should be properly discarded, covered or stacked in a shed … so that they cannot be filled with water".⁵⁷²

4.236.

The European Communities argues that Resolution CONAMA 258/1999 and the import ban are measures having different objectives and are not, contrary to Brazil's opinion, "the complementary and indivisible foundations of the national strategy for waste tyre management". In reality, the European Communities is of the view that the import ban renders obsolete some of the obligations explicitly imposed by the Resolution CONAMA to collect and dispose of a certain number of waste tyres, namely those relating to the importers of retreaded tyres.⁵⁷³

4.237.

Finally, the European Communities notes Korea's suggestion that Brazil could foresee retreading as a possibility to fulfil the obligations under Resolution CONAMA 258/1999.⁵⁷⁴ In addition, the European Communities argues that imposing disposal obligations on the importers of retreaded tyres could be another alternative, provided that such disposal obligations are proportionate to the contribution that retreaded tyres make to the additional waste burden in Brazil. The European Communities argues further that this is already the case under Resolution CONAMA 258/1999, which imposes on importers of retreaded tyres the highest disposal burden. The European Communities contends that Brazil has not explained why proportionate disposal obligations are not a sufficient means of addressing any waste implications that imported retreaded tyres might have.⁵⁷⁵

4.238.

Brazil notes at the outset that the alternative measure must be likely to secure the goals of the contested measure, yet do so in a manner that is less trade-restrictive.⁵⁷⁶ Brazil notes that the European Communities has pointed to Resolution CONAMA 258/1999 as an alternative measure. Brazil explains, however, that Resolution CONAMA 258/1999 imposes the obligation on tyre manufacturers and importers of collecting and ensuring the "environmentally appropriate final disposal of unusable tyres in Brazil."⁵⁷⁷ According to Brazil, the Resolution specifies that manufacturers and importers (or third parties contracted by manufacturers or importers) must collect and dispose of a certain number of waste tyres, in proportion to the number of imported or locally manufactured new tyres or imported reconditioned tyres.⁵⁷⁸ Brazil notes that the Resolution does not specify which disposal methods are considered environmentally appropriate; it does identify, however, the methods that are prohibited (i.e., dumping of waste tyres in landfills, the sea, rivers, lakes or streams, derelict land or wetlands and open burning).⁵⁷⁹

4.239.

Brazil states that Resolution CONAMA 258/1999 is but one component of Brazil's comprehensive waste management program, which complements – but cannot substitute for – the import ban.⁵⁸⁰ Brazil points out that even when the collection and disposal methods conform to the environmental legislation in force, in accordance with Resolution CONAMA 258/1999, they pose health and environmental risks. Brazil notes that while effective and timely collection may help control mosquito-borne diseases, the collected tyres must still be disposed of – and there is no known completely safe way to do that with the volumes involved. For this reason, Brazil explains, although collection is a vital part of Brazil's program, it is not an "alternative" to the disposal or the non-generation of additional waste.⁵⁸¹

4.240.

Brazil explains that because the collection and final disposal of waste tyres have significant adverse effects on human health and the environment, Brazil's waste tyre management program emphasizes non-generation because to rely solely on collection and disposal of waste tyres would not as effectively avoid or mitigate the health and environmental risks. Brazil states that because the Resolution is a collection, the Resolution, by itself, does not achieve the desired level of protection sought by the import ban and it is therefore not an alternative measure that is "reasonably available" to Brazil.⁵⁸²

4.241.

Brazil also adds that between the moment a waste tyre is collected and the moment it is disposed of, it must be transported (spreading diseases along the way) to a disposal facility, stockpiled (posing the risks of accidental fires, soil and water course contamination, etc.), and only then disposed of. Thus, even if huge strides were made in technology so that the harmful effects of the known disposal methods were eliminated, collection, transport and stockpiling themselves would pose health and environmental risks.⁵⁸³

4.242.

The European Communities notes Brazil's claim that collection schemes, such as Resolution CONAMA 258/1999 and Paraná Rodando Limpo, are not alternatives because they are not non-generation instruments. For the European Communities, this reflects a fundamental misunderstanding by Brazil of the nature of the requirement about existing alternatives. The European Communities contends that these are not alternatives equal to a hypothetical non-generation waste measure (the import ban), but alternatives, even if they manage waste, which would allow Brazil to attain the same objectives it pretends to achieve with the import ban: the protection of life and health from mosquito-borne diseases, tyre fires and leaching.⁵⁸⁴

Imposition of Fines

4.243.

The European Communities argues that Brazil's imposition of fines for the non-compliance with the CONAMA scheme is not a sign of serious enforcement, but the opposite. The European Communities submits that an official IBAMA press release of June 2005 gives evidence of fines against 8 companies. The European Communities further submits that the total amount of unfulfilled tyre disposal obligations is around 340 thousand tonnes, i.e. nearly 70 million waste (passenger) tyres. Therefore, the European Communities submits that these fines result in an amount of R$0.30 per tyre (R$60 per tonne), which is extremely low and much lower than the saving, namely the cost of disposal. In this context, the European Communities finds it interesting to note that the Senate draft 216/2003 proposes to increase this fine to R$400 per non-disposed tyre.⁵⁸⁵

4.244.

Brazil notes the European Communities' suggestion to increase the fines for failure to satisfy the disposal obligations because it would allegedly cost tyre manufacturers less to pay the fine than to dispose of the required number of used tyres.⁵⁸⁶ Brazil argues that the European Communities misunderstands the operations of fines: first, they are discretionary, and fines for the second offence may well be higher; second, they do not relieve the companies of having to satisfy the obligations.⁵⁸⁷ Brazil contends that the fines do not substitute for the obligations themselves because they are but a penalty for non-compliance.⁵⁸⁸

4.245.

To reinforce the import ban on used and retreaded tyres, Brazil explains that it imposes a R$400 per unit fine⁵⁸⁹ for importation of used and retreaded tyres, as well as marketing, transporting, and storing of such imports.⁵⁹⁰ To stimulate tyre collection and disposal, Brazil submits that it has established rigid tyre collection and disposal obligations. Brazil requires manufacturers and importers of new tyres to collect and dispose of five scrap tyres for every four new or imported tyres. Brazil explains that the importers must also furnish appropriate disposal plans to receive import licenses.⁵⁹¹ Brazil claims that it has strictly enforced these obligations and has fined violators R$20.5 million (approximately US$8.8 million).⁵⁹²

Combination of various disposal measures within a waste tyre management programme

4.246.

The European Communities argues that Brazil has not done all it could to improve the management of waste tyres in Brazil.⁵⁹³ The European Communities submits that alternatives such as collection, controlled stockpiling, shredded tyres landfilling, material recovery and energy recovery, must form part of a policy scheme, a plan or a programme, to improve the management of waste tyres on its territory.⁵⁹⁴ The European Communities claims that stockpiling, incineration and material recycling, plus landfilling in those countries accepting it, can play a relevant role in waste tyre management provided the existence of adequate waste tyre collection from consumers, as it has been underlined in the two reports by the Atech Group and by the United Kingdom Environment Agency and by Japan, in its submissions as third party in this case.⁵⁹⁵

4.247.

The European Communities submits further that these alternatives cannot be organised in isolation or rejected one by one, as Brazil continues doing, just because each one does not ensure alone that all waste tyres are properly managed. The European Communities argues that all options should be implemented with a policy scheme, not in isolation, in order to ensure a sound management of waste tyres.⁵⁹⁶ The European Communities notes Brazil's claim that it has a comprehensive waste tyre management policy, where it includes the import ban; however, it has attached no documents to prove it.⁵⁹⁷ Moreover, the European Communities claims that Brazil has not explained yet whether such a scheme exists for the whole of its territory.⁵⁹⁸

4.248.

Brazil explains that it has implemented a comprehensive management program to protect its population and its environment from the dangers caused by waste tyres. Brazil's ban on imports of used and retreaded tyres⁵⁹⁹ is a central element of that program because it prevents creation of tyre waste.⁶⁰⁰ Brazil submits that it classifies tyres as a "special" waste because they are difficult to collect and to dispose of. The waste tyre management policy is governed by the principles of non-generation, reduction, reutilization and recycling. Resolution CONAMA 258/1999 and the prohibition on used and retreaded tyres are two complementary and inseparable pillars of this policy.⁶⁰¹

4.249.

Brazil contends that its public authorities have helped private companies set up collection centres and stepped up their own collection efforts. However, collection by itself does not address the disposal problem. Brazil works actively to develop viable and safe disposal methods: it funds research on rubber asphalt, it has established emission rules for tyre incineration, it has licensed some 46 companies to process waste tyres, and its state-owned Petrobras is testing a pyrolysis unit.⁶⁰²

4.250.

Brazil submits that as the European environmental authorities struggle with waste tyre disposal, the European Communities' representatives in Geneva seem to think that there is an easy answer: a combination of stockpiling, landfilling, material recycling, and cement kilns.⁶⁰³ Brazil contends that the combination of stockpiling, incineration, and material recycling is not an alternative because material recycling has limited disposal capacity, and stockpiling and incineration are dangerous.⁶⁰⁴

4.251.

Moreover, Brazil argues that the combination of the three disposal alternatives proposed by the European Communities does not enable Brazil to safely dispose of waste tyres: material recycling – the least risky of the three – cannot absorb the existing volumes – as the European Communities openly admits⁶⁰⁵; and the remainder must be incinerated or stockpiled, both of which are harmful. Brazil argues that it is thus impossible to dispose of waste tyres without producing adverse health and environmental effects.⁶⁰⁶

Alternative measures and chosen level of protection

4.252.

The European Communities argues that Brazil has adopted a measure which, despite the existence of other available alternatives, unfairly and disproportionately burdens imported products compared to domestic products.⁶⁰⁷ For the European Communities, most of the health risks to which Brazil refers arise from improperly discarded or managed tyres. The European Communities contends however that such risks can be avoided through the establishment of appropriate collection and disposal programmes.⁶⁰⁸ The European Communities argues that to the extent that appropriate collection and disposal programmes are not properly enforced – and this is the sole responsibility of Brazil –, Brazil can therefore not justify the imposition of a ban on the products of other WTO Members.⁶⁰⁹ Moreover, the European Communities is of the view that the evidence shows that Brazil greatly exaggerates the difficulties of waste tyre management in its territory.⁶¹⁰ Thus, the report "Panorama dos Residuos Sólidos no Brasil" (Solid Waste Panorama in Brazil) states that "[i]n 2004, of the 146 thousand tonnes of unusable tyres, 56.06 per cent were used to produce alternative fuels, 17.65 per cent rolled into sheeting, 19.65 per cent for rubber goods and material and 6.64 per cent for export".

4.253.

The European Communities submits that it has shown that there are numerous alternatives for properly managing and disposing of waste tyres, including stockpiling, shredded tyres landfilling, material recycling, and energy recovery. The European Communities contends that Brazil's response to each of these alternatives has been to analyse and dismiss them one by one in isolation. However, as the European Communities has shown, the alternatives must be evaluated and implemented not in isolation, but as part of a coherent policy. Accordingly, the European Communities contends that a single alternative does not have to absorb all the waste tyres arising in Brazil.⁶¹¹

4.254.

The European Communities claims that the alternatives that it has presented allow ensuring the objectives of protection of life and health from mosquito-borne diseases, tyre fires and leaching. For the European Communities, collection, controlled stockpiling, shredded tyres landfilling, material recovery and energy recovery, which will be applied to all waste tyres, not only to those arising from imported retreaded tyres, contribute importantly to the fight against diseases, tyre fires and leaching.⁶¹²

4.255.

Brazil is still waiting for someone to establish that there is an alternative way to reduce the level of tyre casings that must be disposed of in Brazil. Until they do, Brazil contends that the import ban remains necessary.⁶¹³ Brazil claims that its chosen measure – the import ban on the shorter-lifespan used and retreaded tyres – is the only known waste tyre management option that does not endanger human health and the environment because it prevents the unnecessary creation of additional waste tyres, thereby eliminating the adverse health and environmental effects of their collection and disposal.⁶¹⁴

4.256.

Because no known disposal method is simultaneously safe, adequate, cost-effective and economically viable to deal with the high volume of waste tyres, Brazil prohibits importation of the shorter-lifespan retreaded tyres to prevent the unnecessary generation of tyre waste.⁶¹⁵ Brazil contends that every known method capable of dealing with the existing volumes carries with it serious risks and adverse effects on human health and the environment.⁶¹⁶ Brazil argues that to this day neither Brazil nor any other country has discovered a safe, effective, and economical disposal method. Until such method emerges, Brazil contends that retreading of tyres that Brazil consumes and prohibiting imports of tyres that must be disposed of after a single use remains the only way to minimize the risks associated with waste tyre accumulation and disposal.⁶¹⁷

4.257.

Brazil claims that it cannot achieve the level of protection it has chosen without prohibiting imports of shorter-lifespan tyres because without the import ban, some generation of waste tyres that could have been prevented would not, in fact, be prevented.⁶¹⁸ Thus, in Brazil's view only non-generation of waste tyres, which requires an import ban on shorter-lifespan tyres, can achieve Brazil's chosen level of protection.⁶¹⁹

4.258.

Brazil argues that the alternatives suggested by the European Communities will not allow Brazil to achieve its chosen level of protection, which is to reduce the waste tyre risks to the maximum extent possible⁶²⁰, and to do that Brazil must reduce the volumes of waste tyres generated as much as possible.⁶²¹ Brazil notes that because the disposal capacity of material recycling is limited, the European Communities advises Brazil to combine it with incineration and stockpiling.⁶²² However, Brazil is of the view that both incineration and stockpiling present significant risks.⁶²³ Brazil argues that to limit these risks to the maximum extent possible, Brazil must prevent the unnecessary generation of tyre waste to reduce the volumes that must be incinerated.⁶²⁴

4.259.

Brazil submits that collection and disposal obligations alone do not achieve the desired level of protection and are not an available alternative.⁶²⁵ The obligations complement – but cannot substitute for – the import ban, because they do not help avoid generation of additional waste tyres that must be disposed of in Brazil.⁶²⁶ Because transportation, stockpiling, and the eventual disposal present unavoidable health and environmental dangers, they cannot reduce the risks of waste tyre accumulation and disposal as effectively as the import ban does, and thus cannot achieve Brazil's desired level of protection.⁶²⁷

4.260.

Brazil submits that it has demonstrated that the import ban is necessary within the meaning of Article XX(b) to reduce the accumulation of tyre waste and the associated risks because no reasonably available alternatives exist.⁶²⁸

Other issues

The European Communities' management of waste tyres

4.261.

Brazil submits that in the European Communities itself: 20 per cent of the tyre waste continues to be landfilled, despite a formal prohibition; illegal dumping remains a big problem; funding for stockpile remediation is difficult to secure; the consumer demand for retreaded tyres remains low; and material recycling remains limited.⁶²⁹ Brazil argues that the positions taken by the European Communities before this Panel contradict its statements made in Brussels, which support Brazil's position.⁶³⁰

4.262.

Brazil submits that when the European Landfill directive prohibited landfilling of whole tyres from 2003 and shredded tyres from 2006, the European Environment Agency⁶³¹ expressed concern that some EU Members "still [had] to find alternative outlets for more than two thirds of their waste tyres to meet the target".⁶³² Brazil submits that in 2004, only nine of the EU 25 countries recovered at least 90 per cent of the annual arisings; the remaining 16 recovered less than 61 per cent, with seven of them recovering anywhere between zero and 25 per cent.⁶³³ Brazil submits further that⁶³⁴ today a fifth of waste tyres in the European Communities are still landfilled.⁶³⁵ Brazil submits that the Environment Agency notes that:⁶³⁶ "[t]oo many tyres are still being land-filled or burnt" and that "compliance with the EC Directives... will require considerable investment".⁶³⁷ In light of this data, Brazil argues that it is hardly surprising to hear the Chairman of the British Environment Agency admit:⁶³⁸ "[a]s a nation, we have a problem with the disposal of tyres".⁶³⁹

4.263.

Brazil further submits that a report by the European Tyre and Rubber Manufacturers' Association provides that the enlarged European Union faces the "challenge of managing, in an environmentally sound manner, more than 3.2 million metric tons of used tyres,"⁶⁴⁰ at the annual cost of at least €600 million, which translates into €1.2 per passenger car tyre equivalent. Brazil submits that the specific challenges include:⁶⁴¹ unavailability of landfilling, guaranteeing ecological treatment, promoting efficient and sustainable disposal solutions, remedying the historic stockpiles, and controlling exportation to low-income countries.⁶⁴²

4.264.

Brazil submits that the United States faces similar challenges. Brazil notes that a rubber industry official⁶⁴³ has remarked that "[the United States] is a fully developed economy, although to look at some experiences involving scrap tyres one might think otherwise".⁶⁴⁴ Brazil notes that this data squarely contradict the European Communities' claim that the available disposal options, when "implemented within a policy scheme, not in isolation, [can] ensure a sound management of waste tyres."⁶⁴⁵ Brazil argues that if this disposal capacity were indeed available, nothing should prevent the European Communities members from achieving full recovery.⁶⁴⁶

4.265.

Brazil submits that the European Communities apparently considers exports a legitimate disposal alternative. Brazil notes that Exhibit EC-92 states: "In practice, there is still no economically viable way to reduce the dumping of used tyres.... Thus, the cheapest solution in Europe has been to try to export them to developing countries".⁶⁴⁷ Brazil notes that the European Communities considers⁶⁴⁸ exports a legitimate means of reducing its waste tyre burden.⁶⁴⁹ Brazil submits that within the European Communities, however, the British Used Tyre Working Group⁶⁵⁰ has expressed consternation that tyres were being imported into the United Kingdom, "with the UK ultimately being responsible for their disposal," and expressed concern that "the UK is continuing to be the tyre dump of Europe".⁶⁵¹ Brazil argues that its ban on used and retreaded tyres is based on this very concern: Brazil does not want to receive shorter-lifespan tyres and "ultimately [be] responsible for their disposal" and Brazil does not want to be "the tyre dump of Europe."⁶⁵²

4.266.

Finally, Brazil points out that the European Communities dismissed the well-established environmental principle of non-generation as nothing more than a political statement.⁶⁵³ In the same manner, Brazil submits that the European Communities dismissed the well-recognized risks of waste management and disposal.⁶⁵⁴

4.267.

The European Communities notes that Brazil claims that a good illustration that the alternatives do not exist is the European Communities' continued challenges with managing its growing volumes of tyre waste. The European Communities argues that Brazil does not take into account that 6 European Communities member States already recycle and recover 100 per cent of their waste tyres. Moreover, the European Communities claims that it is not true that some 20 per cent of waste tyres are still being landfilled. This was the situation in 2004, two years before the complete landfilling prohibition entered into force. Furthermore, the European Communities points out that it has not adopted an import ban on retreaded tyres. Accordingly, the European Communities is not obliged to explain its waste tyres management policy or the policy of its 25 member States, which is not at issue in the present dispute.⁶⁵⁵

4.268.

The European Communities contests Brazil's statement that the European Communities wishes to flood Brazil with waste tyres. To the extent that Brazil is referring to the exportation of retreadable casings, the European Communities notes that it has already explained that such casings are not waste, and that their importation is precisely for that reason, allowed by Brazilian courts. To the extent that Brazil refers to actual waste tyres, the legislation of the European Communities in fact prohibits the exportation of such tyres to countries which do not allow such imports. Moreover, the European Communities points out that it has not challenged Brazil's ban on the importation of used tyres.⁶⁵⁶

4.269.

Brazil submits that the European Communities makes the point that even though it has a tyre disposal problem, it has not found it necessary to impose an import ban. Brazil responds that what the European Communities conveniently leaves out – or overlooks – is that it does not have a significant market for retreaded tyres and, therefore, does not face imports of retreaded tyres.⁶⁵⁷

4.270.

Brazil points out that in Europe, most consumers have refused to purchase retreaded tyres, largely because they perceive retreaded tyres as inferior. Brazil notes that this perception remains in place even though retreaded tyres must comply with stringent quality controls comparable to the new tyre standards.⁶⁵⁸

Economic and environmental costs of disposal of waste tyres

4.271.

Moreover, Brazil argues that the disposal of waste tyres carries high economic and environmental costs. Brazil submits that the basic fact remains that waste tyres are a liability:⁶⁵⁹

"At present, in most of the world, a basic fact of life about scrap tyres is that they are a waste material...; that is, it costs money to have them removed from the point of generation.... In addition to these direct management costs, scrap tyres can also generate indirect social costs...".⁶⁶⁰

4.272.

Brazil explains that it authorizes certain disposal methods, but each method creates a new set of environmental problems. Brazil argues that incineration can handle large volumes of waste tyres, but it produces higher emissions of dioxins, furans, and heavy metals than conventional fuels. Brazil submits that the co-processing with bituminous schist, a form of pyrolysis, is still experimental, with unknown environmental impact and limited capacity. Brazil explains that rubber asphalt applications remain limited in Brazil, as in other countries and recycling involves high costs and produces low quality material with limited demand. Brazil submits that these disposal methods are all used in Brazil, but they are not, in any manner, alternative measures to the non-generation achieved by the import ban. Brazil further submits that beyond disposal, collection and transportation of used tyres are also a challenge because of Brazil's geographic characteristics.⁶⁶¹

4.273.

Brazil submits that the European Communities argues that waste tyres are a valuable resource. However, Brazil notes that, to quote the European tyre industry, they are, in fact, "waste with a negative value (collection and recovery/disposal cost)."⁶⁶² Brazil claims that the European Communities, in its arguments before the Panel, has constructed an alternate reality where waste tyres are a valuable resource, where waste tyre accumulation has no relation to disease, where dioxins are benign, and where a developing country like Brazil could safely dispose of all of its waste tyres if it only were as efficient and competent as the European Communities. For Brazil, the alternate reality the European Communities paints is wholly divorced from the real world.⁶⁶³

4.274.

For the European Communities, the fact that all alternatives may have some environmental disadvantages is unavoidable, and not specific to waste tyres. The European Communities is of the view that there is hardly any waste which can be disposed of in a way which is environmentally entirely neutral. In addition, the European Communities submits that none of the disadvantages or costs to which Brazil has referred are so significant as to rule out these alternatives, as illustrated by the fact that all of the alternatives discussed are used in many countries, including in Brazil. Finally, for the European Communities these disadvantages or costs still would appear to be lower than the risks to human life and health resulting from improperly managed tyres.⁶⁶⁴

4.275.

The European Communities argues that there are different options available also for developing countries, as explained in the OECD Report on Improving Recycling Markets, the Basel Convention Technical Guidelines on the Identification and Management of Used Tyres, the Report of the United Kingdom Environment Agency on Transport and Management of Waste Tyres and the report on Tyre Piles Fires, prepared by Environmental Engineering and Contracting, Inc.⁶⁶⁵ Moreover, the European Communities notes that the OECD report on "Improving Recycling Materials" explains that incineration, energy recovery, rubber recycling and retreading are best waste management practices for waste tyres.⁶⁶⁶

4.276.

Besides, the European Communities claims that any measure establishing a scheme to ensure that waste tyres are disposed correctly would be coherent with Principle 16 of the Rio Declaration on Environment and Development. Indeed, waste tyre disposal schemes allow charging the environmental costs on the relevant operators/consumers, while ensuring, at the same time, a high level of environmental protection with no distortion of international trade.⁶⁶⁷

4.277.

The European Communities is of the view that the ruling of the present Panel will have considerable implications on how retreaded tyres will be regarded in the future. For the European Communities, if Brazil were to prevail with the argument that banning retreaded tyres is necessary to protect human life and health, other countries may equally feel encouraged to impose similar bans. The European Communities claims that this would mean that retreaded tyres would become a product which might be increasingly excluded from international trade and such a situation would be extremely harmful to the public perception of retreaded tyres. The European Communities considers that such a result would be diametrically opposed to the interests of environmental protection and responsible waste management.⁶⁶⁸

4.278.

The European Communities also notes that Brazil's arguments concerning Article XX(b) have implications that go beyond retreaded tyres. The European Communities contends that contrary to the assertions of Brazil, retreaded tyres are not unique in having implications from the point of view of waste management. The European Communities notes that all products eventually turn into waste, and many products which are commonly traded today turn into waste which is as or even more problematic than waste tyres. The European Communities argues that if it were possible to ban the importation of products simply because of the fact that they eventually turn into waste which may be difficult to dispose of, then many products might in the future become affected by similar trade bans.⁶⁶⁹

4.279.

The European Communities notes that Brazil admits that the general exceptions of Article XX should not be abused and that "the import ban does not restrict trade unfairly or inequitably". The European Communities notes further that the reason given by Brazil for this presentation is that the facts of this case are unique, because "tyres differ from most other waste streams".⁶⁷⁰ The European Communities does not agree with this conclusion. The European Communities points out that the policy rationale that Brazil has applied to justify the ban could perfectly be used by other WTO Members to ban the importation of products with a shorter life than other competing goods that are also produced domestically.

4.280.

The European Communities argues that international trade in cars, electric and electronic equipment, toys, furniture, clothing and other goods could thus be limited by an extended application of Article XX(b).⁶⁷¹ Moreover, the European Communities notes that similar arguments to those made by Brazil in respect of retreaded passenger car tyres could also be made with respect to other goods which have a perfectly predictable lifespan: WTO Members could decide to ban the importation of beverages bottled in plastic bottles rather than reusable glass bottles taking into account that plastic bottles are also used by mosquitoes as breeding places and, if they burn, the smoke plume also contains hazardous substances.⁶⁷²

4.281.

As for commercial and airplane tyres, the European Communities submits that these products do not have a predictable life span. Accordingly, the European Communities argues that if Brazil is allowed to ban imported truck and aircraft tyres, there is no reason why other Members could not ban low quality electronic goods on the basis that these are likely to have a shorter life span than high-quality ones.⁶⁷³

4.282.

Brazil notes the European Communities' argument that waste tyres are no different from other products, and that, therefore, finding that Brazil's import ban is justified would pave the way for other WTO Members to abuse Article XX exceptions. Brazil contends that all the products pointed out by the European Communities are clearly distinguishable from waste tyres – i.e. the uniqueness of the product – because none of those products mentioned by the European Communities pose a similar set of collection and disposal problems. Brazil notes that for instance, unlike waste tyres, plastic bottles can be easily recycled. Brazil also notes that the European Communities has an end-of-life directive for cars; however even the European Communities does not have an end-of-life directive for waste tyres. Brazil explains that many internal discussions took place in Brazil on this issue to try and find a product that presents waste management challenges similar to those of waste tyres, but no such product could be found. Brazil notes that the European Communities also failed to do so.⁶⁷⁴

4.283.

Brazil contends that the waste tyre problem is not black and white. For Brazil, every solution presents its own set of risks. The dilemma that Brazil faces is essentially this: does it risk exposing its population to dengue or to cancer? Brazil submits that choices such as this are best avoided, as much as possible, by avoiding the generation of tyre waste as much as possible. In Brazil's view, the import ban allows Brazil to accomplish this goal. Brazil argues that the Panel should, therefore, dismiss all of the claims made by the European Communities.⁶⁷⁵

4.284.

Therefore, Brazil claims that the foregoing makes it clear that Brazil's import measures are "necessary" within the meaning of Article XX(b).⁶⁷⁶

4.285.

Brazil does not rely on Article XX(g) as a possible defence for the import ban on retreaded tyres.

Brazil — Retreaded Tyres

Documents of the case

Lawyers, other representatives, expert(s), tribunal’s secretary

Report of the Panel

TABLE OF CASES CITED IN THIS REPORT

I. INTRODUCTION

A. COMPLAINT OF THE EUROPEAN COMMUNITIES

B. ESTABLISHMENT AND COMPOSITION OF THE PANEL

C. PANEL PROCEEDINGS

II. FACTUAL ASPECTS

A. PRODUCTS AT ISSUE

B. MEASURES AT ISSUE⁸

1. The Import prohibition on retreaded tyres

2. Fines on importation, marketing, transportation, storage, keeping or warehousing of retreaded tyres

3. State Law restrictions on the marketing of imported retreaded tyres

4. Exemption of MERCOSUR countries from the import ban and the fines

III. FINDINGS AND RECOMMENDATIONS REQUESTED BY THE PARTIES

IV. ARGUMENTS OF THE PARTIES

A. THE BAN ON THE IMPORTATION OF RETREADED TYRES

1. Article XI:I of GATT 1994

2. Article XX of GATT 1994

(a) Paragraph b) of Article XX

(i) Introduction

(ii) To protect human, animal, or plant life or health

(iii) Necessity of the measure

(iv) Existence of reasonably available alternatives

(v) Conclusion on Article XX(b)

(b) Paragraph g) of Article XX

Donald M. McRae	Member
Mitsuo Matsushita	President
Chang-Fa Lo	Member