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Report of the Panel

LIST OF REPORTS CITED IN THIS REPORT

Short TitleFull Case Title and Citation
Australia – Salmon Appellate Body Report, Australia – Measures Affecting Importation of Salmon, WT/DS18/AB/R, adopted 6 November 1998, DSR 1998:VIII, 3327
Australia – Salmon Panel Report, Australia – Measures Affecting Importation of Salmon, WT/DS18/R and Corr.1, adopted 6 November 1998, as modified by Appellate Body Report WT/DS18/AB/R, DSR 1998:VIII, 3407
Australia – Salmon (Article 21.5 – Canada) Panel Report, Australia – Measures Affecting Importation of Salmon – Recourse to Article 21.5 of the DSU by Canada, WT/DS18/RW, adopted 20 March 2000, DSR 2000:IV, 2031
Argentina – Footwear (EC) Appellate Body Report, Argentina – Safeguard Measures on Imports of Footwear, WT/DS121/AB/R, adopted 12 January 2000, DSR 2000:I, 515
Argentina – Footwear (EC) Panel Report, Argentina – Safeguard Measures on Imports of Footwear, WT/DS121/R, adopted 12 January 2000, as modified by Appellate Body Report WT/DS121/AB/R, DSR 2000:II, 575
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
Border Tax Adjustments GATT Report of the Working Party on Border Tax Adjustments, L/3464, adopted 2 December 1970, BISD 18S/102
Brazil – Aircraft Appellate Body Report, Brazil – Export Financing Programme for Aircraft, WT/DS46/AB/R, adopted 20 August 1999, DSR 1999:III, 1161
Brazil – Aircraft Panel Report, Brazil – Export Financing Programme for Aircraft, WT/DS46/R, adopted 20 August 1999, as modified by Appellate Body Report WT/DS46/AB/R, DSR 1999:III, 1221
Brazil – Desiccated Coconut Appellate Body Report, Brazil – Measures Affecting Desiccated Coconut, WT/DS22/AB/R, adopted 20 March 1997, DSR 1997:I, 167
Brazil – Desiccated Coconut Panel Report, Brazil – Measures Affecting Desiccated Coconut, WT/DS22/R, adopted 20 March 1997, upheld by Appellate Body Report WT/DS22/AB/R, DSR 1997:I, 189
Brazil – Retreaded Tyres Appellate Body Report, Brazil – Measures Affecting Imports of Retreaded Tyres, WT/DS332/AB/R, adopted 17 December 2007, DSR 2007:IV, 1527
Brazil – Retreaded Tyres Panel Report, Brazil – Measures Affecting Imports of Retreaded Tyres, WT/DS332/R, adopted 17 December 2007, as modified by Appellate Body Report WT/DS332/AB/R, DSR 2007:V, 1649
Canada – Continued Suspension Appellate Body Report, Canada – Continued Suspension of Obligations in the EC – Hormones Dispute, WT/DS321/AB/R, adopted 14 November 2008
Canada – Continued Suspension Panel Report, Canada – Continued Suspension of Obligations in the EC – Hormones Dispute, WT/DS321/R, adopted 14 November 2008, as modified by Appellate Body Report WT/DS321/AB/R
Canada – Periodicals Appellate Body Report, Canada – Certain Measures Concerning Periodicals, WT/DS31/AB/R, adopted 30 July 1997, DSR 1997:I, 449
Canada – Periodicals Panel Report, Canada – Certain Measures Concerning Periodicals, WT/DS31/R and Corr.1, adopted 30 July 1997, as modified by Appellate Body Report WT/DS31/AB/R, DSR 1997:I, 481
Canada – Pharmaceutical Patents Panel Report, Canada – Patent Protection of Pharmaceutical Products, WT/DS114/R, adopted 7 April 2000, DSR 2000:V, 2289
Canada – Wheat Exports and Grain Imports Appellate Body Report, Canada – Measures Relating to Exports of Wheat and Treatment of Imported Grain, WT/DS276/AB/R, adopted 27 September 2004, DSR 2004:VI, 2739
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, WT/DS207/AB/R, adopted 23 October 2002, DSR 2002:VIII, 3045 (Corr.1, DSR 2006:XII, 5473)
Chile – Price Band System Panel Report, Chile – Price Band System and Safeguard Measures Relating to Certain Agricultural Products, WT/DS207/R, adopted 23 October 2002, as modified by Appellate Body Report WT/DS207AB/R, DSR 2002:VIII, 3127
China – Publications and Audiovisual Products Appellate Body Report, China –Measures Affecting Trading Rights and Distribution Services for Certain Publications and Audiovisual Entertainment Products, WT/DS363/AB/R, adopted 19 January 2010
China – Publications and Audiovisual Products Panel Report, China –Measures Affecting Trading Rights and Distribution Services for Certain Publications and Audiovisual Entertainment Products, WT/DS363/R and Corr.1, adopted 19 January 2010, as modified by Appellate Body Report WT/DS363/AB/R
Colombia – Ports of Entry Panel Report, Colombia – Indicative Prices and Restrictions on Ports of Entry, WT/DS366/R and Corr.1, adopted 20 May 2009
Dominican Republic – Import and Sale of Cigarettes Appellate Body Report, Dominican Republic – Measures Affecting the Importation and Internal Sale of Cigarettes, WT/DS302/AB/R, adopted 19 May 2005, DSR 2005:XV, 7367
Dominican Republic – Import and Sale of Cigarettes Panel Report, Dominican Republic – Measures Affecting the Importation and Internal Sale of Cigarettes, WT/DS302/R, adopted 19 May 2005, as modified by Appellate Body Report WT/DS302/AB/R, DSR 2005:XV, 7425
EC – Approval and Marketing of Biotech Products Panel Report, European Communities – Measures Affecting the Approval and Marketing of Biotech Products, WT/DS291/R, WT/DS292/R, WT/DS293/R, Add.1 to Add.9, and Corr.1, adopted 21 November 2006, DSR 2006:III‑VIII, 847
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 – Bananas III (Ecuador) Panel Report, European Communities – Regime for the Importation, Sale and Distribution of Bananas, Complaint by Ecuador, WT/DS27/R/ECU, adopted 25 September 1997, as modified by Appellate Body Report WT/DS27/AB/R, DSR 1997:III, 1085
EC – Bananas III (Guatemala and Honduras) Panel Report, European Communities – Regime for the Importation, Sale and Distribution of Bananas, Complaint by Guatemala and Honduras, WT/DS27/R/GTM, WT/DS27/R/HND, adopted 25 September 1997, as modified by Appellate Body Report WT/DS27/AB/R, DSR 1997:II, 695
EC – Bananas III (Mexico) Panel Report, European Communities – Regime for the Importation, Sale and Distribution of Bananas, Complaint by Mexico, WT/DS27/R/MEX, adopted 25 September 1997, as modified by Appellate Body Report WT/DS27/AB/R, DSR 1997:II, 803
EC – Bananas III (US) Panel Report, European Communities – Regime for the Importation, Sale and Distribution of Bananas, Complaint by the United States, WT/DS27/R/USA, adopted 25 September 1997, as modified by Appellate Body Report WT/DS27/AB/R, DSR 1997:II, 943
EC – Bananas III (Article 21.5 – Ecuador II) / EC – Bananas III (Article 21.5 – US) Appellate Body Reports, European Communities – Regime for the Importation, Sale and Distribution of Bananas – Second Recourse to Article 21.5 of the DSU by Ecuador,WT/DS27/AB/RW2/ECU, adopted 11 December 2008, and Corr.1 / European Communities – Regime for the Importation, Sale and Distribution of Bananas – Recourse to Article 21.5 of the DSU by the United States, WT/DS27/AB/RW/USA and Corr.1, adopted 22 December 2008
EC – Bananas III (Article 21.5 – Ecuador II) Panel Report, European Communities – Regime for the Importation, Sale and Distribution of Bananas – Second Recourse to Article 21.5 of the DSU by Ecuador, WT/DS27/RW2/ECU, adopted 11 December 2008, as modified by Appellate Body Report WT/DS27/AB/RW2/ECU
EC – Commercial Vessels Panel Report, European Communities – Measures Affecting Trade in Commercial Vessels, WT/DS301/R, adopted 20 June 2005, DSR 2005:XV, 7713
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 (Canada) Panel Report, EC Measures Concerning Meat and Meat Products (Hormones), Complaint by Canada, WT/DS48/R/CAN, adopted 13 February 1998, as modified by Appellate Body Report WT/DS26/AB/R, WT/DS48/AB/R, DSR 1998:II, 235
EC – Hormones (US) Panel Report, EC Measures Concerning Meat and Meat Products (Hormones), Complaint by the United States, WT/DS26/R/USA, adopted 13 February 1998, as modified by Appellate Body Report WT/DS26/AB/R, WT/DS48/AB/R, DSR 1998:III, 699
EC – Sardines Appellate Body Report, European Communities – Trade Description of Sardines, WT/DS231/AB/R, adopted 23 October 2002, DSR 2002:VIII, 3359
EC – Sardines Panel Report, European Communities – Trade Description of Sardines, WT/DS231/R and Corr.1, adopted 23 October 2002, as modified by Appellate Body Report WT/DS231/AB/R, DSR 2002:VIII, 3451
EC – Tariff Preferences Appellate Body Report, European Communities – Conditions for the Granting of Tariff Preferences to Developing Countries, WT/DS246/AB/R, adopted 20 April 2004, DSR 2004:III, 925
EC – Tariff Preferences Panel Report, European Communities – Conditions for the Granting of Tariff Preferences to Developing Countries, WT/DS246/R, adopted 20 April 2004, as modified by Appellate Body Report WT/DS/246/AB/R, DSR 2004:III, 1009
EEC – Apples (US) GATT Panel Report, European Economic Community – Restrictions on Imports of Apples – Complaint by the United States, L/6513, adopted 22 June 1989, BISD 36S/135
EEC – Apples I (Chile) GATT Panel Report, EEC Restrictions on Imports of Apples from Chile, L/5047, adopted 10 November 1980, BISD 27S/98
EEC – Animal Feed Proteins GATT Panel Report, EEC – Measures on Animal Feed Proteins, L/4599, adopted 14 March 1978, BISD 25S/49
EEC – Dessert Apples GATT Panel Report, European Economic Community – Restrictions on Imports of Dessert Apples – Complaint by Chile, L/6491, adopted 22 June 1989, BISD 36S/93
Guatemala – Cement I Appellate Body Report, Guatemala – Anti‑Dumping Investigation Regarding Portland Cement from Mexico, WT/DS60/AB/R, adopted 25 November 1998, DSR 1998:IX, 3767
Guatemala – Cement I Panel Report, Guatemala – Anti‑Dumping Investigation Regarding Portland Cement from Mexico, WT/DS60/R, adopted 25 November 1998, as modified by Appellate Body Report WT/DS60/AB/R, DSR 1998:IX, 3797
India – Additional Import Duties Appellate Body Report, India – Additional and Extra‑Additional Duties on Imports from the United States, WT/DS360/AB/R, adopted 17 November 2008
India – Additional Import Duties Panel Report, India – Additional and Extra‑Additional Duties on Imports from the United States, WT/DS360/R, adopted 17 November 2008, reversed by Appellate Body Report WT/DS360/AB/R
India – Autos Appellate Body Report, India – Measures Affecting the Automotive Sector, WT/DS146/AB/R, WT/DS175/AB/R, adopted 5 April 2002, DSR 2002:V, 1821
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
India – Patents (US) Appellate Body Report, India – Patent Protection for Pharmaceutical and Agricultural Chemical Products, WT/DS50/AB/R, adopted 16 January 1998, DSR 1998:I, 9
India – Patents (US) Panel Report, India – Patent Protection for Pharmaceutical and Agricultural Chemical Products, Complaint by the United States, WT/DS50/R, adopted 16 January 1998, as modified by Appellate Body Report WT/DS50/AB/R, DSR 1998:I, 41
India – Quantitative Restrictions Appellate Body Report, India – Quantitative Restrictions on Imports of Agricultural, Textile and Industrial Products, WT/DS90/AB/R, adopted 22 September 1999, DSR 1999:IV, 1763
India – Quantitative Restrictions Panel Report, India – Quantitative Restrictions on Imports of Agricultural, Textile and Industrial Products, WT/DS90/R, adopted 22 September 1999, upheld by Appellate Body Report WT/DS90/AB/R, DSR 1999:V, 1799
Indonesia – Autos Panel Report, Indonesia – Certain Measures Affecting the Automobile Industry, WT/DS54/R, WT/DS55/R, WT/DS59/R, WT/DS64/R and Corr.1 and 2, adopted 23 July 1998, and Corr. 3 and 4, DSR 1998:VI, 2201
Japan – Agricultural Products II Appellate Body Report, Japan – Measures Affecting Agricultural Products, WT/DS76/AB/R, adopted 19 March 1999, DSR 1999:I, 277
Japan – Agricultural Products II Panel Report, Japan – Measures Affecting Agricultural Products, WT/DS76/R, adopted 19 March 1999, as modified by Appellate Body Report WT/DS76/AB/R, DSR 1999:I, 315
Japan – Alcoholic Beverages I GATT Panel Report, Japan – Customs Duties, Taxes and Labelling Practices on Imported Wines and Alcoholic Beverages, L/6216, adopted 10 November 1987, BISD 34S/83
Japan – Alcoholic Beverages II Appellate Body Report, Japan – Taxes on Alcoholic Beverages, WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/R, adopted 1 November 1996, DSR 1996:I, 97
Japan – Alcoholic Beverages II Panel Report, Japan – Taxes on Alcoholic Beverages, WT/DS8/R, WT/DS10/R, WT/DS11/R, adopted 1 November 1996, as modified by Appellate Body Report WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/R, DSR 1996:I, 125
Japan – Apples Appellate Body Report, Japan – Measures Affecting the Importation of Apples, WT/DS245/AB/R, adopted 10 December 2003, DSR 2003:IX, 4391
Japan – Apples Panel Report, Japan – Measures Affecting the Importation of Apples, WT/DS245/R, adopted 10 December 2003, upheld by Appellate Body Report WT/DS245/AB/R, DSR 2003:IX, 4481
Japan – Semi-Conductors GATT Panel Report, Japan – Trade in Semi-Conductors, L/6309, adopted 4 May 1988, BISD 35S/116
Korea – Alcoholic Beverages Appellate Body Report, Korea – Taxes on Alcoholic Beverages, WT/DS75/AB/R, WT/DS84/AB/R, adopted 17 February 1999, DSR 1999:I, 3
Korea – Alcoholic Beverages Panel Report, Korea – Taxes on Alcoholic Beverages, WT/DS75/R, WT/DS84/R, adopted 17 February 1999, as modified by Appellate Body Report WT/DS75/AB/R, WT/DS84/AB/R, DSR 1999:I, 44
Korea – Commercial Vessels Panel Report, Korea – Measures Affecting Trade in Commercial Vessels, WT/DS273/R, adopted 11 April 2005, DSR 2005:VII, 2749
Korea – Dairy Appellate Body Report, Korea – Definitive Safeguard Measure on Imports of Certain Dairy Products, WT/DS98/AB/R, adopted 12 January 2000, DSR 2000:I, 3
Korea – Dairy Panel Report, Korea – Definitive Safeguard Measure on Imports of Certain Dairy Products, WT/DS98/R and Corr.1, adopted 12 January 2000, as modified by Appellate Body Report WT/DS98/AB/R, DSR 2000:I, 49
Mexico – Anti‑Dumping Measures on Rice Appellate Body Report, Mexico – Definitive Anti‑Dumping Measures on Beef and Rice, Complaint with Respect to Rice, WT/DS295/AB/R, adopted 20 December 2005, DSR 2005:XXII, 10853
Mexico – Anti‑Dumping Measures on Rice Panel Report, Mexico – Definitive Anti‑Dumping Measures on Beef and Rice, Complaint with Respect to Rice, WT/DS295/R, adopted 20 December 2005, as modified by Appellate Body Report WT/DS295/AB/R, DSR 2005:XXIII, 11007
Mexico – Corn Syrup (Article 21.5 – US) Appellate Body Report, Mexico – Anti‑Dumping Investigation of High Fructose Corn Syrup (HFCS) from the United States – Recourse to Article 21.5 of the DSUby the United States, WT/DS132/AB/RW, adopted 21 November 2001, DSR 2001:XIII, 6675
Mexico – Corn Syrup (Article 21.5 – US) Panel Report, Mexico – Anti‑Dumping Investigation of High Fructose Corn Syrup (HFCS) from the United States – Recourse to Article 21.5 of the DSUby the United States, WT/DS132/RW, adopted 21 November 2001, upheld by Appellate Body Report WT/DS132/AB/RW, DSR 2001:XIII, 6717
Turkey – Textiles Appellate Body Report, Turkey – Restrictions on Imports of Textile and Clothing Products, 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, as modified by Appellate Body Report WT/DS34/AB/R, DSR 1999:VI, 2363
US – 1916 Act Appellate Body Report, United States – Anti‑Dumping Act of 1916, WT/DS136/AB/R, WT/DS162/AB/R, adopted 26 September 2000, DSR 2000:X, 4793
US – 1916 Act (EC) Panel Report, United States – Anti‑Dumping Act of 1916, Complaint by the European Communities, WT/DS136/R and Corr.1, adopted 26 September 2000, upheld by Appellate Body Report WT/DS136/AB/R, WT/DS162/AB/R, DSR 2000:X, 4593
US – 1916 Act (Japan) Panel Report, United States – Anti‑Dumping Act of 1916, Complaint by Japan , WT/DS162/R and Add.1, adopted 26 September 2000, upheld by Appellate Body Report WT/DS136/AB/R, WT/DS162/AB/R, DSR 2000:X, 4831
US – Canadian Tuna GATT Panel Report, United States – Prohibition of Imports of Tuna and Tuna Products from Canada, L/5198, adopted 22 February 1982, BISD 29S/91
US – Carbon Steel Appellate Body Report, United States – Countervailing Duties on Certain Corrosion‑Resistant Carbon Steel Flat Products from Germany, WT/DS213/AB/R and Corr.1, adopted 19 December 2002, DSR 2002:IX, 3779
US – Carbon Steel Panel Report, United States – Countervailing Duties on Certain Corrosion‑Resistant Carbon Steel Flat Products from Germany, WT/DS213/R and Corr.1, adopted 19 December 2002, as modified by Appellate Body Report WT/DS213/AB/R, DSR 2002:IX, 3833
US – Certain EC Products Appellate Body Report, United States – Import Measures on Certain Products from the European Communities, WT/DS165/AB/R, adopted 10 January 2001, DSR 2001:I, 373
US – Certain EC Products Panel Report, United States – Import Measures on Certain Products from the European Communities, WT/DS165/R and Add.1, adopted 10 January 2001, as modified by Appellate Body Report WT/DS165/AB/R, DSR 2001:II, 413
US – Continued Suspension Appellate Body Report, United States – Continued Suspension of Obligations in the EC – Hormones Dispute, WT/DS320/AB/R, adopted 14 November 2008
US – Continued Suspension Panel Report, United States – Continued Suspension of Obligations in the EC – Hormones Dispute, WT/DS320/R, adopted 14 November 2008, as modified by Appellate Body Report WT/DS320/AB/R
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, WT/DS244/AB/R, adopted 9 January 2004, DSR 2004:I, 3
US – Corrosion‑Resistant Steel Sunset Review Panel Report, United States – Sunset Review of Anti‑Dumping Duties on Corrosion‑Resistant Carbon Steel Flat Products from Japan, WT/DS244/R, adopted 9 January 2004, as modified by Appellate Body Report WTDS244/AB/R, DSR 2004:I, 85
US – Customs Bond Directive Panel Report, United States – Customs Bond Directive for Merchandise Subject to Anti‑Dumping/Countervailing Duties, WT/DS345/R, adopted 1 August 2008, as modified by Appellate Body Report WT/DS343/AB/R, WT/DS345/AB/R
US – FSC (Article 21.5 – EC II) Appellate Body Report, United States – Tax Treatment for "Foreign Sales Corporations" – Second Recourse to Article 21.5 of the DSU by the European Communities, WT/DS108/AB/RW2, adopted 14 March 2006, DSR 2006:XI, 4721
US – FSC (Article 21.5 – EC II) Panel Report, United States – Tax Treatment for "Foreign Sales Corporations" – Second Recourse to Article 21.5 of the DSU by the European Communities, WT/DS108/RW2, adopted 14 March 2006, upheld by Appellate Body Report WT/DS108/AB/RW2, DSR 2006:XI, 4761
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, as modified by Appellate Body Report WT/DS2/AB/R, DSR 1996:I, 29
US – Oil Country Tubular Goods Sunset Reviews Appellate Body Report, United States – Sunset Reviews of Anti‑Dumping Measures on Oil Country Tubular Goods from Argentina, WT/DS268/AB/R, adopted 17 December 2004, DSR 2004:VII, 3257
US – Oil Country Tubular Goods Sunset Reviews Panel Report, United States – Sunset Reviews of Anti‑Dumping Measures on Oil Country Tubular Goods from Argentina, WT/DS268/R and Corr.1, adopted 17 December 2004, as modified by Appellate Body Report W/DS/268/AB/R, DSR 2004:VIII, 3421
US – MFN Footwear GATT Panel Report, United States – Denial of Most-Favoured-Nation Treatment as to Non-Rubber Footwear from Brazil, DS18/R, adopted 19 June 1992, BISD 39S/128
US – Section 211 Appropriations Act Appellate Body Report, United States – Section 211 Omnibus Appropriations Act of 1998, WT/DS176/AB/R, adopted 1 February 2002, DSR 2002:II, 589
US – Section 211 Appropriations Act Panel Report, United States – Section 211 Omnibus Appropriations Act of 1998, WT/DS176/R, adopted 1 February 2002, as modified by Appellate Body Report WT/DS176/AB/R, DSR 2002:II, 683
US – Section 301 Trade Act Panel Report, United States – Sections 301‑310 of the Trade Act of 1974, WT/DS152/R, adopted 27 January 2000, DSR 2000:II, 815
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/34
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 Panel Report, United States – Import Prohibition of Certain Shrimp and Shrimp Products, WT/DS58/R and Corr.1, adopted 6 November 1998, as modified by Appellate Body Report WT/DS58/AB/R, DSR 1998:VII, 2821
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 – Shrimp (Article 21.5 – Malaysia) Panel Report, United States – Import Prohibition of Certain Shrimp and Shrimp Products – Recourse to Article 21.5 of the DSU by Malaysia, WT/DS58/RW, adopted 21 November 2001, upheld by Appellate Body Report WT/DS58/AB/RW, DSR 2001:XIII, 6529
US – Shrimp (Ecuador) Panel Report, United States – Anti‑Dumping Measure on Shrimp from Ecuador, WT/DS335/R, adopted on 20 February 2007, DSR 2007:II, 425
US – Shrimp (Thailand) / US – Customs Bond Directive Appellate Body Report, United States – Measures Relating to Shrimp from Thailand / United States – Customs Bond Directive for Merchandise Subject to Anti‑Dumping/Countervailing Duties, WT/DS343/AB/R, WT/DS345/AB/R, adopted 1 August 2008
US – Stainless Steel (Mexico) Appellate Body Report, United States – Final Anti‑Dumping Measures on Stainless Steel from Mexico, WT/DS344/AB/R, adopted 20 May 2008
US – Stainless Steel (Mexico) Panel Report, United States – Final Anti‑Dumping Measures on Stainless Steel from Mexico, WT/DS344/R, adopted 20 May 2008, as modified by Appellate Body Report WT/DS344/AB/R
US – Upland Cotton Appellate Body Report, United States – Subsidies on Upland Cotton, WT/DS267/AB/R, adopted 21 March 2005, DSR 2005:I, 3
US – Upland Cotton Panel Report, United States – Subsidies on Upland Cotton, WT/DS267/R, Corr.1, and Add.1 to Add.3, adopted 21 March 2005, as modified by Appellate Body Report WT/DS267/AB/R, DSR 2005:II, 299
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, adopted 23 May 1997, and Corr.1, DSR 1997:I, 323
US – Wool Shirts and Blouses Panel Report, United States – Measure Affecting Imports of Woven Wool Shirts and Blouses from India, WT/DS33/R, adopted 23 May 1997, upheld by Appellate Body Report WT/DS33/AB/R, DSR 1997:I, 343

I. INTRODUCTION

1.1.
On 17 April 2009, the People's Republic of China ("China") requested consultations with the United States pursuant to Article 4 of the Understanding on Rules and Procedures Governing the Settlement of Disputes ("DSU"), Article XXII of the General Agreement on Tariffs and Trade1994 ("GATT 1994") and Article 19 of the Agreement on Agriculture concerning measures taken by the United States affecting the importation of poultry products from China. In addition, in its consultations request, China indicated that, if it were demonstrated that any such measure is an SPS measure, China also requested consultations with the United States pursuant to Article 11 of the Agreement on the Application of Sanitary and Phytosanitary Measures ("SPS Agreement").1 China and the United States held consultations on 15 May 2009. However, no mutually agreed solution was found.
1.2.
On 23 June 2009, China requested the establishment of a panel pursuant to Article 6 of the DSU, Article XXIII:2 of the GATT 1994, Article 19 of the Agreement on Agriculture, and Article 11 of the SPS Agreement.2
1.3.
At its meeting on 31 July 2009, the DSB established a panel pursuant to the request of China in document WT/DS392/2, in accordance with Article 6 of the DSU.
1.4.
The Panel's terms of reference are the following:

"To examine, in the light of the relevant provisions of the covered agreements cited by the parties to the dispute, the matter referred to the DSB by China in document WT/DS392/2 and to make such findings as will assist the DSB in making the recommendations or in giving the rulings provided for in those agreements."

1.5.
On 16 September 2009, China requested the Director-General to determine the composition of the panel, pursuant to paragraph 7 of Article 8 of the DSU.
1.6.
On 23 September 2009, the Director-General accordingly composed the Panel as follows:

Chairman: Mr Ole Lundby

Members: Mr Felipe Lopeandía

Mr Mohammad Saeed

1.7.
Brazil, the European Union3, Guatemala, Korea, Chinese Taipei and Turkey reserved their rights to participate in the Panel proceedings as third parties.
1.8.
The Panel held its first substantive meeting with the parties on 15 and 16 December 2009. The session with the third parties was held on 16 December 2009. The second substantive meeting was held on 9 and 10 March 2010.
1.9.
On 1 October 2009, the United States submitted a request for a preliminary ruling pursuant to paragraph 11 of the Panel's working procedures on whether China had requested consultations on its SPS claims. In its oral statement at the first substantive meeting of the Panel with the parties, China also requested a preliminary ruling from the Panel on whether Section 743 of the Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act ("AAA") of 2010 was within the Panel's terms of reference. In a letter of 18 December 2009, the Panel informed the parties that it would not issue a separate decision on the two requests for a preliminary ruling on jurisdiction, but rather would defer its ruling on both requests until issuance of its Report. In response to the Panel's letter, China informed the Panel in a letter dated 7 January 2010 (Exhibit CN-51) that it would not pursue a claim that Section 743 was inconsistent with the United States' WTO obligations in this dispute, but reserved its right to challenge Section 743 in separate dispute settlement proceedings.
1.10.
On 3 May 2010, the Panel issued the descriptive part of its Panel Report to the parties. The Panel issued its interim report to the parties on 14 June 2010. The Panel issued its final report to the parties on 26 July 2010.

II. FACTUAL ASPECTS

A. BACKGROUND

2.1.
This dispute concerns China's pursuit of access to the US market for poultry. According to China, the possibility to access the US market was cut off by legislation passed by the United States Congress ("US Congress") which, restricted the ability of the United States Department of Agriculture ("USDA") and its agency, the Food Safety and Inspection Service ("FSIS") to use funds allocated by the US Congress for the purpose of establishing or implementing a rule permitting the importation of poultry products from China into the United States.4

B. THE MEASURE AT ISSUE

2.3.
Section 727 was accompanied by a Joint Explanatory Statement ("JES") which provides the following :

"There remain very serious concerns about contaminated foods from China and therefore the bill retains language prohibiting FSIS from using funds to move forward with rules that would allow for the importation of poultry products from China into the U.S. It is noted that China has enacted revisions to its food safety laws. USDA is urged to submit a report to the Committees on the implications of those changes on the safety of imported poultry products from China within one year. The Department is also directed to submit a plan for action to the Committees to guarantee the safety of poultry products from China. Such plan should include the systematic audit of inspection systems, and audits of all poultry and slaughter facilities that China would certify to export to the U.S. The plan also should include the systemic audit of laboratories and other control operations, expanded port-of-entry inspection, and creation of an information sharing program with other major countries importing poultry products from China that have conducted audits and plant inspections among other actions. This plan should be made public on the Food Safety and Inspection Service web site upon its completion."7

2.4.
As a matter of United States law, a JES serves to explain the purpose of a given provision in an appropriations bill.8 Section 727 expired on 30 September 2009.

C. THE UNITED STATES' REGIME FOR THE IMPORTATION OF POULTRY

2.5.
On 28 August 1957, the US Congress adopted the Poultry Products Inspection Act ("PPIA"), which is set forth in Title 21 of the United States Code ("USC").9 This statute has been subsequently amended on numerous occasions. In the PPIA, the US Congress sets out the general legal framework governing all aspects of trade in poultry products, both imported and domestically produced.10 Because poultry, among other food products, falls within the competency of the USDA11, the US Congress delegated to the Secretary of Agriculture ("the Secretary") the duty to set out detailed rules and regulations relating to the inspection of poultry and poultry products.12 The Secretary promulgated regulations13 establishing the conditions under which poultry products are allowed to be imported in the United States14 which are contained in the US Code of Federal Regulations ("CFR").15
2.6.
The Secretary has established an "equivalence" based regime for gaining permission to import poultry into the United States. The FSIS, which is an agency of the USDA, implements and enforces the regulations on poultry importation.16 The FSIS authorizes the importation of poultry products into the United States on a country-by-country basis.17 Countries wishing to export poultry products to the United States have to first request a determination of eligibility by the FSIS. The FSIS will then establish whether an applicant's poultry inspection system is equivalent to that of the United States in order to allow the importation of its poultry products.18
2.7.
If the FSIS determines that an applicant country's poultry inspection system is equivalent to that of the United States, it publishes rules allowing the importation of poultry products from that country in the Federal Register. Subsequent to that initial determination, the FSIS also does annual reviews to determine if approved countries' poultry safety standards continue to be equivalent to those of the United States. The FSIS also re-inspects imported products to ensure that they meet the United States' poultry safety standards. The procedures followed by the FSIS in order to determine the equivalence between the countries' poultry inspection systems are explained in detail below.
2.8.
The equivalence process starts by an applicant country making a request for eligibility to export poultry products to the United States.19 After the equivalence request has been submitted, the FSIS will evaluate the equivalence of the applicant country's poultry inspection system. If the FSIS determines that the applicant country's system is equivalent, the applicant country must certify establishments as fit to export. After the applicant country commences exporting, the FSIS conducts ongoing equivalence verifications. The process includes:

(1) Initial equivalence determination: In this first stage the FSIS determines whether the poultry inspection system of the applicant country is equivalent to the inspection system of the United States own poultry safety measures.20 If FSIS makes a preliminary determination that the systems are equivalent, it publishes a proposed rule in the Federal Register. If, after reviewing the comments it receives, FSIS makes a final determination that the country's system is equivalent, the FSIS publishes a final rule in the Federal Register and adds the applicant to the list in the CFR of countries eligible to export poultry products to the United States.21

(2) Certification of establishments: During this second stage, the eligible applicant country must certify individual establishments as fit to export to the United States; and,

(3) Ongoing equivalence verification: In this third stage, the eligible applicant country submits to an ongoing (typically annual) equivalence process to maintain eligibility to export to the United States.22

2.9.
These three stages are discussed in greater detail below.

1. First Stage : Initial equivalence determination

2.10.
As explained above, in this initial stage, the FSIS investigates whether the poultry inspection system of the applicant country is equivalent to that of the United States.23 This first stage is triggered by the request of an exporting country to obtain authorization to export poultry products to the United States. The application has to include copies of all the laws and regulations on which its own poultry inspection system is based.24
2.11.
Once eligibility for importation of poultry is requested, an initial equivalency evaluation is conducted25 including three sequential steps: (a) a document review, (b) an on-site audit, and (c) the publication of the proposed and final rules in the Federal Register and the country's addition to the list in the CFR.

(a) Document review

2.12.
The first step in the initial equivalence stage is the evaluation of the applicant country's laws, regulations and other written information related to the applicant's poultry inspection system. As indicated above, further to the application for authorization to import, the applicant country is asked to provide the FSIS with copies of the laws and regulations on which its poultry inspection system is based. Once this stage is successfully concluded, the FSIS moves onto the second stage of the process, the on-site audit.

(b) On-site audit

2.13.
During the on-site audit, a team of FSIS experts verify that the applicant's regulatory system has satisfactorily implemented all the laws, regulations, and other inspection or certification requirements that the FSIS had found to be equivalent during the document review step.26

(c) Publication in the Federal Register

2.14.
The third step is the publication of the final rule allowing the importation of poultry products from certified establishments in the applicant country. After both the document review and the on-site audit steps have been satisfactorily completed, the FSIS publishes a draft rule in the Federal Register that announces the results of the first two steps and proposes to add the applicant country to the list of eligible exporters in the CFR. Upon receipt and consideration of public comments, the FSIS makes a final decision about equivalence based upon all available information and, if favourable, publishes a final rule in the Federal Register announcing the applicant country's eligibility.27

2. Second Stage : Certification of establishments for export by the eligible exporting country

2.15.
Once the initial equivalence determination stage has been completed, the applicant country must conduct inspections of establishments wishing to export to the United States.28 Only those establishments that are determined by the applicant country's authorities to fully meet the entire equivalent sanitary requirements may be certified to export to the United States.29 The applicant country authorities must ensure ongoing compliance with the equivalent sanitary requirements, especially with respect to establishments that are exporting to the United States.30 The applicant country notifies the FSIS of the certification by transmitting a certification list according to the form specified in the CFR.31 This certification must be renewed annually.32

3. Third Stage : Ongoing equivalence verification

2.16.
The regulations require that ongoing reviews be conducted by the FSIS.33 The purpose of the ongoing equivalence verification is to maintain eligibility for exportation.34 Like an initial equivalence determination, the ongoing equivalence verification is conducted in three stages:35 (i) a recurring document analysis, (ii) further on-site audits, and (iii) continuous port-of-entry re‑inspections of poultry products shipped to the United States from the eligible exporting country.36

D. CHINA'S REQUEST FOR EQUIVALENCE

2.17.
China requested an initial equivalence determination to export poultry products to the United States on 20 April 2004.37 Further to this request, the FSIS conducted an initial equivalence audit, the objective of which was to "evaluate the performance of China's Central Competent Authority ('CCA') with respect to controls over the slaughter and processing establishments proposed for certification by the CCA as eligible to export poultry products to the United States."38 The final report concerning this audit was issued on 17 May 2005.39 The report found a number of deficiencies in some processing and slaughter plants40, and as a consequence, the FSIS sent a letter to China proposing a follow-up equivalence audit to check whether the deficiencies identified in the slaughter system during the December 2004 audit had been corrected.41 The FSIS conducted the second initial equivalence audit on China's poultry slaughter inspection system in July and August 2005, and on 4 November 2005 issued its Final Report.42
2.18.
On the basis of the Report of the first on-site audit, on 23 November 2005, the FSIS proposed to amend the Federal Poultry Products Inspection regulations43 to add China to the list of countries eligible to export processed poultry products to the United States, provided that the poultry products processed in certified establishments in China came from poultry slaughtered in the United States or certified establishments in other countries eligible to export poultry to the United States.44
2.19.
On 24 April 2006, the FSIS published notification in the Federal Register that it would be adding China to the list in the CFR of countries eligible to export processed poultry products not slaughtered in China as described above. As noted above, China also applied for equivalence with respect to its inspection system for slaughtered poultry. The April Federal Register Notice only covered processed poultry and did not propose allowing the importation of poultry slaughtered in China.45
2.20.
Two weeks after publication of the Federal Register Notice, on 9 May 2006, the FSIS sent China a letter outlining the remaining two steps that had to be completed before China could export processed poultry products to the United States.46 According to this letter, China needed to: (i) submit to the FSIS a list of establishments certified by the Chinese inspection services as satisfying the requirements for exporting processed poultry products to the United States, and (ii) submit product labels by certified establishments in China for review by the Labelling Consumer Protection Staff of the FSIS.47
2.21.
In June 2006, based in part on previous on-site audit of the slaughtered poultry operations in China, the FSIS made a preliminary determination that China's poultry inspection system for domestically slaughtered poultry was equivalent to United States standards.48 Notwithstanding, the FSIS did not publish a draft rule in the Federal Register requesting public comments on China's slaughtered poultry operations or announcing the results of the document review and the on-site audit.
2.22.
At this point, the FSIS had thus determined that China's poultry production system was equivalent to that of the United States for processed poultry products from the United States or another country that the FSIS had determined was equivalent to the United States. At the same time, FSIS had determined that China's inspection system for slaughtered poultry was preliminarily equivalent pending further evaluation through the rulemaking process.
2.23.
On 20 December 2007, the FSIS sent a letter to China requesting the annual certification of establishments eligible to export processed meat or poultry products to the United States.49 Six days later, on 26 December 2007, the Consolidated Appropriations Act of 2008 entered into force.50
2.24.
This Act contained the AAA of 2008 which provided the funds for the USDA and its agencies, such as the FSIS, to execute their activities.51 In particular, Section 733 of the AAA of 2008 restricted the use of funds to establish or implement any rule allowing poultry products from China to be imported into the United States.52 Section 733 which expired on 30 September 2008, is not a measure at issue in this dispute.53
2.25.
The funding restriction established by Section 733 was maintained by Division A of the Consolidated Security, Disaster Assistance, and Continuing Appropriations Act of 2009.54
2.26.
Nearly two years after the United States' first request, on 12 March 200855, China sent the list of certified establishments to the FSIS.56 On 23 July 2008, the FSIS published the list of countries eligible to export poultry products to the United States. China was included as eligible to export processed poultry products. For certain countries, indicated with shading in the table, eligibility was suspended for animal health reasons (directing readers to see country specific notes) or pending equivalence re-verification. The country specific note for China states that "FY 2008 appropriation legislation bars FSIS from spending funds on import of poultry from China."57
2.27.
On 28 February 2009, China's National People's Congress Standing Committee enacted a new food safety law.58
2.28.
On 11 March 2009, the US Congress enacted the Omnibus Appropriations Act.59 This Act contained the AAA of 2009. Section 727 of the AAA of 2009, which is the measure being challenged by China in this dispute, shared the same wording of Section 733 and thus restricted the use of funds to establish or implement any rule allowing poultry products from China to be imported into the United States.
2.29.
Upon its expiry at the end of the 2008-2009 Fiscal Year on 30 September 2009, the funding restriction instituted by Section 727 was continued by Division B of the Legislative Branch Appropriations Act (Continuing Appropriations Resolution) of 2010.60 Division B also expired once the AAA of 2010 entered into force on 21 October 2009.61 This new AAA of 2010 included Section 743 a measure that also relates to funding of FSIS activities relating to China's application for equivalency of its poultry inspection system. In particular, Section 743 allows that funding to establish or implement a rule permitting the importation of poultry products from China can be restored if the Secretary complies with certain conditions set forth in that provision. As noted above, China has decided not to pursue a claim with respect to Section 743 in this dispute.62
2.30.
As noted in paragraph 2.3 above, Section 727 was accompanied by a JES which listed two actions that the US Congress expected the FSIS to take. In particular, the JES urged the USDA to submit a report to the Committees on the implications of the recent changes to China's food safety law within one year. The JES also "directed" the USDA to submit a plan for action to the Committees to guarantee the safety of poultry products from China and stated that the plan should be made public on the FSIS web site upon its completion.
2.31.
With respect to how it complied with the requests in the JES, the United States noted that two months after the passage of Section 727, the FSIS had sent a letter to the Chinese authorities requesting "information to understand the nature and implication of revisions in food safety laws, regulations, and inspection and control procedures enacted since 2006."63 At the first substantive meeting of the Panel with the parties, China indicated that it did not respond to this letter because it had already initiated dispute settlement proceedings at the WTO.
2.32.
Additionally, the United States informed the Panel that the USDA had sent a document to the US Congress which it argues is the action plan called for in the JES. The one-page document, which is undated and not on official USDA letterhead, is entitled "FSIS Action Plan for Creation of Congressionally-Mandated China Poultry Inspection System Reports".64 According to this document, the FSIS had to review the changes to the Chinese food safety law, and develop a plan of action to guarantee the safety of poultry products from China.

III. PARTIES' REQUESTS FOR FINDINGS AND RECOMMENDATIONS

3.1.
China requests the Panel to find that Section 727 is inconsistent with:

(i) Article I:1 of the GATT 1994, because it fails to extend the advantage of the opportunity to export to the United States immediately and unconditionally to like poultry products from China65;

(ii) Article XI:1 of the GATT 1994, because it imposes import restrictions that limit competitive opportunities for poultry products from China66;

(iii) Article 4.2 of the Agreement on Agriculture, because it imposes a quantitative restriction on poultry products from China67;

(iv) Article 2.3 of the SPS Agreement68, because it arbitrarily and unjustifiably discriminates against China69;

(v) Article 5.5 of the SPS Agreement, because the higher level of sanitary protection applied to China is arbitrary and unjustifiable, resulting in discrimination70;

(vi) Article 5.1 and 5.2 of the SPS Agreement, because it is not based on a risk assessment within the meaning of Article 5.1 that takes into account the factors in Article 5.271;

(vii) Article 2.2 of the SPS Agreement, because it is not maintained based on scientific evidence72;

(viii) Article 5.6 of the SPS Agreement, because it is inconsistent with the obligation that SPS measures not be unduly trade-restrictive73; and

(ix) Article 8 of the SPS Agreement, because the delay resulting from its application is unjustifiable, or undue.74

3.2.
Given that Section 727 has expired, China further requests the Panel to issue a recommendation that the United States does not revert to language similar to that in Section 727 in its future legislation.75
3.3.
The United States requests that the Panel rejects China's claims in its entirety.76

IV. ARGUMENTS OF THE PARTIES

A. EXECUTIVE SUMMARY OF THE FIRST WRITTEN SUBMISSION OF CHINA

1. Introduction

4.1.
A series of US measures over the past three years have grossly violated China's most fundamental rights under the GATT 1994, i.e. the rights to most-favoured nation treatment and to trade without quantitative restrictions. The result of these measures is that the US rules and procedures regulating the import of poultry products are applied to every WTO Member except China. The United States has enacted these measures despite the fact that Chinese poultry is eligible for export to a number of WTO Members with high levels of sanitary and phytosanitary protection, such as Japan, Korea, and the European Communities, and was found by the United States authorities, in April 2006, as deserving inclusion among an elite list of countries eligible to export poultry to the US.
4.2.
China emphasises that it has not initiated this dispute to force the United States to import its poultry products. However, in preventing China from even being considered under the normal approval rules and procedures, the United States is arbitrarily discriminating against Chinese poultry and violating a number of its obligations under WTO rules.

2. The measures at issue

(a) Section 727 of the Agriculture Appropriations Act 2009

4.3.
The first set of measures challenged in this dispute is Section 727 of the Agriculture Appropriations Act 2009 and any replacement measures, subsequent closely-related measures or future closely-related measures. Among such measures are the 2010 Continuing Appropriations Resolution, and Section 743 of the Agriculture Appropriations Act 2010. As Section 743 had not yet been signed into law at the time China submitted its First Written Submission, China does not fully address it in this submission, but is of the initial view that Section 743 violates the same WTO provisions as Section 727 and the moratorium. China reserves the right to more fully challenge, in later submissions, the compliance of Section 743 with the United States' WTO obligations.
4.4.
Section 727 is contained in an appropriations act that allocated 'funds' for fiscal year 2009 (1 October 2008 – 30 September 2009). It prohibits appropriated funds from being used to establish or implement a rule allowing poultry products to be imported from China.77
4.5.
A 'rule' is first used to formally establish a given country's eligibility to export poultry products to the United States.78 Rules then also provide the basis for the procedures used to implement and maintain eligibility. They are established and implemented by the sole government department competent to establish or implement rules relating to the importation of poultry – the US Department of Agriculture (USDA) and its subordinate food safety agency, the Food Safety Inspection Service (FSIS). As Section 727 means that no funds can be expended by the sole executive branch department responsible for creating and implementing these rules on poultry imports from China, Section 727 limits the competitive opportunities for Chinese poultry products and effectively restricts imports of Chinese poultry products to zero.
4.6.
Yet, at the same time, the USDA and FSIS can expend funds to implement existing rules and establish new rules permitting the import of poultry from all other WTO Members. It is this arbitrary and blatant discrimination against China as compared to other WTO Members (and US poultry producers) that violates a number of WTO provisions.

(b) Ongoing moratorium on the establishment or implementation of authorization for the importation of poultry products from China

4.7.
The second measure at issue is the ongoing moratorium on: (a) the consideration of applications for approval, (b) the granting of approval, and (c) the implementation of approval, for the import of poultry products from China under the US system for regulating the importation of poultry products. The moratorium was initiated following the enactment of Section 733 of the Agriculture Appropriations Act2008 and has been maintained by several successive measures. It has operated on a multi-year basis in much the same way as Section 727 has operated during the 2009 fiscal year. Thus, the practical effect of the moratorium is to limit China's competitive opportunities for Chinese poultry products, and to restrict imports of Chinese poultry products to zero, as compliance with the rules is a legal pre-requisite for the importation of poultry products into the United States. As the ongoing moratorium denies only China the right to benefit from the opportunity to export poultry products to the United States, the moratorium is inconsistent with a number of WTO provisions.

3. US regulations and procedures applicable to the authorization of poultry products

(a) US regulations and procedures

4.8.
The Poultry Products Inspection Act (PPIA) constitutes the legislative basis for the import and inspection procedures relating to the import of poultry products into the United States. Under the PPIA, the Secretary of Agriculture is authorized to make rules to implement the PPIA.79 These rules are detailed in section 381,196 of Title 9 of the Code of Federal Regulations (CFR), and are enforced by FSIS.
4.9.
In accordance with 9 CFR § 381,196, eligibility to export poultry products to the United States requires completing three sequential steps. First, in a 3 – 5 year procedure known as an "initial equivalence determination", the FSIS investigates whether the food safety measures of the exporting country are equivalent to those employed by the United States.80 The FSIS investigation includes a document review stage and on-site audits. If equivalence is confirmed, this step culminates in the establishment of a rule in the CFR stating that the country is eligible to export poultry products to the United States. Second, the eligible exporting country must certify individual establishments as fit to export to the United States. Finally, the third step involves a procedure known as "ongoing equivalence verification" whereby the eligible exporting country submits to an ongoing program to maintain eligibility to export to the United States. Like the initial equivalence determination, it involves document reviews and on-site audits; it also involves port-of-entry re-inspection of goods at the US border by FSIS.

(b) Application of procedures before and after the moratorium

(i) China

4.10.
China completed its first initial equivalence determination in April 2006. FSIS then established a rule placing China on the list of eligible importing countries for processed poultry products. This rule related only to poultry slaughtered elsewhere and processed in China, as the equivalence determination did not extend to Chinese slaughter inspection systems. However, the measures at issue prevent the FSIS from using any funds to implement this rule, and thus no action has been taken by FSIS on its ongoing equivalence procedures.
4.11.
A second initial equivalence determination concerning poultry slaughtered in China was ongoing when the moratorium began in 2007. Reviews and audits had been completed, and FSIS concluded that China's poultry slaughter inspection system was equivalent to the US system. However, FSIS never issued a proposed rule due to the measures at issue.

(ii) All other WTO Members

4.12.
While China's progress through its initial equivalence determination on slaughtered poultry was halted, FSIS imposed no similar moratorium for other WTO Members. There are nearly 20 other Members currently in various stages of their equivalence determinations. Furthermore, there are nine other countries and territories currently authorized to export poultry products to the United States.81 FSIS has remained very active with respect those countries, including, e.g. conducting audits in eligible exporting countries.

4. Legal analysis and argument

4.13.
The United States' refusal to apply its normal FSIS approval procedures for imported poultry products with respect to China, while continuing to consider, grant, and implement authorization to import poultry products from other WTO Members, constitutes arbitrary and unjustifiable discrimination. Section 727 and the ongoing moratorium, which form the basis for the non-application of normal approval procedures, eliminate any competitive opportunities for China's poultry products in the United States. These measures, including the replacement measures, subsequent closely-related measures, and future closely-related measures, violate a number of WTO provisions.

(a) Section 727 and the moratorium each violate Article I:1 of GATT 1994

4.14.
By denying only Chinese poultry products the opportunity to be exported to the United States (through blocking Chinese access to FSIS procedures), the measures at issue fail to accord poultry products originating in China immediately and unconditionally the advantages accorded to like poultry products originating in all other Members. Consequently, they violate GATT Article I:1.
4.15.
Advantage : Poultry products from all WTO members have the competitive opportunity to be exported to the United States (the advantage), if produced under an equivalent food safety system and if that finding is maintained by ongoing FSIS procedures – except Chinese poultry products. This is a denial of an advantage within the meaning of Article I:1.
4.16.
Like Product: Section 727 and the moratorium apply exclusively to poultry products imported from China – i.e. they apply an origin-based product distinction. A hypothetical like product analysis is appropriate for measures that impose an origin-based distinction.82
4.17.
Unconditionally : Section 727 and the moratorium apply their conditions solely to Chinese poultry products, removing Chinese poultry from any chance to access the US market. Section 727 and the moratorium thus do not operate on an MFN basis, and do not unconditionally accord advantages to the like products of all WTO Members, in violation of Article I:1.

(b) Section 727 and the moratorium each violate Article XI:1 of GATT 1994

4.18.
GATT Article XI:1 requires Members to eliminate any 'prohibitions' or 'restrictions' on the importation of any product from any other Member. Section 727 and the moratorium each violate Article XI:1 because they impose restrictions on importation that negatively impact the competitive opportunities for poultry products from China. Each measure also violates Article XI:1 by instituting de facto prohibitions on imports of poultry from China.
4.19.
While other WTO Members may seek and obtain authorization under FSIS rules in order to export poultry products to the United States, China cannot, as a result of the measures at issue. FSIS authorization is a necessary precondition for the importation of any poultry products into the United States. Thus, the measures at issue each eliminate China's competitive opportunities in the US poultry market, constituting "restrictions" on Chinese imports within Article XI:1. Also, to the extent that the practical impact of the measures is an import ban on Chinese poultry products, the measures each institute import prohibitions in violation of Article XI:1, by precluding the possibility of gaining the necessary FSIS authorization, therefore restricting the importation of such products from China to zero.

(c) Section 727 and the moratorium each violate Article 4.2 of the Agreement on Agriculture

4.20.
Article 4.2 of the Agreement on Agriculture prohibits Members from instituting quantitative restrictions on agricultural products including poultry products. Section 727 and the moratorium are both inconsistent with Article 4.2 of the Agreement on Agriculture because the measures result in the maintenance of quantitative restrictions on the importation of poultry products from China. The measures at issue each prohibit the application of FSIS approval procedures to China, making it impossible for China to obtain the authorization that is required in order to export poultry products. Thus, the volume of Chinese poultry products that may be imported is set at zero, and the practical impact is the maintenance of restrictions equivalent to an import ban, a violation of Article 4.2.

(d) Claims under the Agreement on the Application of Sanitary and Phytosanitary Measures

4.21.
China understands that the United States has not notified the measures at issue to the WTO, as it would have been expected to do under Article 7 of the SPS Agreement if it considered them SPS measures. Nevertheless, to the extent that the measures may be considered to be sanitary and phytosanitary (SPS) measures within the SPS Agreement, China advances the following arguments.

(i) To the extent they are SPS measures, the measures are inconsistent with Article 2.3 of the SPS Agreement

4.22.
Article 2.3 of the SPS Agreement prohibits Members from arbitrarily or unjustifiably discriminating between Members where identical or similar conditions prevail. As Section 727 and the moratorium discriminate between China and all other WTO Members without justification, Section 727 and the moratorium violate Article 2.3.
4.23.
There is a three-part test to establish a violation of Article 2.3. First, the measure discriminates between the territory of the Member imposing the measure and that of another Member, or between two other Members. In this case, the measures at issue restrict only China from seeking and obtaining authorization to export poultry products to the United States – clear discrimination against China. Second, the discrimination is arbitrary or unjustifiable. In this case, there is no scientific evidence, risk assessment, or other justification for treating Chinese poultry products differently from those of other WTO Members.
4.24.
Third, identical or similar conditions prevail in the territory of the Members compared83, i.e. China and all other poultry-exporting WTO Members. A key "condition" that is "identical" is the scope and effectiveness of FSIS procedures, as applied to poultry products from all WTO Members. These rules are capable of determining whether poultry products from any Member are safe for importation into the United States. There is nothing unique to China with respect to the functioning and effectiveness of these rules. Thus, the measures at issue arbitrarily and unjustifiably discriminate against China in violation of Article 2.3.

(ii) To the extent they are SPS measures, the measures are inconsistent with Article 5.5 of the SPS Agreement

4.25.
Article 5.5 of the SPS Agreement prohibits Members from applying different levels of sanitary protection to comparable situations. The higher level of SPS protection applied by the United States to China, reflected in Section 727 and the moratorium, is arbitrary and unjustifiable and results in discrimination, in violation of Article 5.5.
4.26.
There are three cumulative conditions that must be met in order to establish a violation of Article 5.5. First, the Member applies different levels of protection in different situations. In this case, the 'different situations' are (a) the importation of poultry products from China, to which the United States applies restrictions resulting in an import ban; and (b) the importation of poultry products from all other WTO Members, to which the United States applies the FSIS equivalence procedures, reflective of a lower level of SPS protection. Second, the levels of protection show arbitrary or unjustifiable differences in their treatment of different situations. The application of such a high level of sanitary protection to China alone is arbitrary and unjustifiable. China could have the world's best food safety system, but the measures at issue would still operate to exclude Chinese poultry products from the consideration, granting, or implementation of authorization to export to the United States. Thus, the distinction in levels of sanitary protection is arbitrary and unjustifiable. Third, these arbitrary or unjustifiable differences lead to discrimination or a disguised restriction on trade. Because the United States applies FSIS equivalence procedures to every other WTO Member while applying restrictions resulting in an import ban to China, the difference in sanitary protection results in "discrimination", fulfilling the third cumulative element and establishing a violation of Article 5.5.84

(iii) To the extent they are SPS measures, the measures are inconsistent with Article 5.1 and 5.2 of the SPS Agreement

4.27.
Article 5.1 requires Members to ensure that any SPS measures are based on a risk assessment, and Article 5.2 sets out the criteria which Members must take into account when conducting said risk assessment. There is no publicly-available documentation indicating that Section 727 and the moratorium are based on any risk assessment addressing Chinese poultry, let alone a risk assessment within the meaning of Article 5.1 and 5.2. Furthermore, available evidence suggests that the measures at issue would not be supported by the likely conclusions of a risk assessment conducted pursuant to Article 5.1 and 5.2. Indeed, the USDA had concluded in 2006, prior to the moratorium, that Chinese poultry products are safe for importation. In addition, since December 2007, Chinese poultry has been exported to other Members applying high levels of SPS protection, including the EC, Japan and Korea.

(iv) To the extent they are SPS measures, the measures are inconsistent with Article 2.2 of the SPS Agreement

4.28.
Article 2.2 requires that Members ensure that SPS measures are maintained on the basis of sufficient scientific evidence. As Section 727 and the moratorium are maintained without any scientific basis, the measures violate Article 2.2. The Appellate Body has interpreted Article 2.2 to require "a rational and objective relationship between the SPS measure and the scientific evidence".85 Nothing in the texts or legislative contexts of the measures, or in publicly-available documentation, indicates that the measures at issue were enacted on the basis of any scientific evidence, let alone evidence sufficient to meet the standards of Article 2.2 of the SPS Agreement.

(v) To the extent they are SPS measures, the measures are inconsistent with Article 5.6 of the SPS Agreement

4.29.
Article 5.6 requires that SPS measures are not more trade-restrictive than necessary. The measures at issue are inconsistent with the obligation in Article 5.6, as they are significantly more trade-restrictive than necessary. The footnote to Article 5.6 clarifies that a measure is more trade-restrictive than required if: First, there is another measure reasonably available to the Member imposing the SPS measure. In this case, the alternative measure is the FSIS equivalence procedures. It is technically and economically feasible, as it is applied on a regular basis to all other WTO Members. Second, the alternative measure achieves the Member's appropriate level of SPS protection. The FSIS procedures clearly meet the US' "appropriate level of protection" for poultry imports as the US applies it to all WTO Members except for China. Third, the alternative measure is significantly less restrictive to trade than the contested measure.86 The application of the FSIS procedures would be significantly less trade-restrictive than the measures at issue, as it would provide the possibility of obtaining authorization to export to the US instead of a restriction automatically resulting in an import ban. As the alternative measure meets all three criteria, the measures at issue violate Article 5.6.

(vi) To the extent they are SPS measures, the measures are inconsistent with Article 8 of the SPS Agreement

4.30.
Article 8 requires that Members observe the provisions of Annex C when applying control, inspection, and approval procedures. The United States, in unduly delaying the application of the FSIS procedures to Chinese poultry imports by instituting Section 727 and the moratorium, has violated Article 8 of the SPS Agreement. Annex C(1)(a) obliges Members to "undertake and complete" the procedures for assessing compliance with an SPS requirement "without undue delay" or "with no unjustifiable loss of time".87 Section 727 and the moratorium unduly delay the application of the normal FSIS procedures to China. The delay cannot be justified on any ground, constituting a violation of Article 8.

5. The US Preliminary Ruling Request must fail, as consultations pursuant to the SPS Agreement were requested and held

4.31.
In its Preliminary Ruling Request, the United States contends that any claims made by China pursuant to the SPS Agreement are outside the scope of the Panel's terms of reference, as the claims were presented in the alternative/conditionally. However, China's consultations request specifically invoked Article 11 and devoted fully 303 of the 989 words of the request to claims under the SPS Agreement. Alternative claims are also "very common in WTO dispute settlement".88 Furthermore, had China's claims under the SPS Agreement been raised without presenting them in the alternative/conditionally, it could have been used as an admission against China's interests. Any efforts by the United States to place China in that untenable position must fail, as must any reading that would render over 30% of this critical document entirely meaningless.
4.32.
Furthermore, nowhere in its preliminary ruling request does the United States allege that its due process rights have been impacted by China's consultations request and in fact, the United States seems to acknowledge that its request has nothing to do with due process rights.89 Given that a key purpose of a consultations request is that a responding member "is fully informed about [the complainant's] intention" (providing for due process)90, this is a notable admission.

(a) China's consultations request clearly invoked Article 11 of the SPS Agreement

4.33.
Consultations in this dispute were, in fact, requested pursuant to Article 11 of the SPS Agreement. The core of the US argument appears to relate to China's use of the phrase "if it were demonstrated that any such measure is an SPS measure". However, that phrase simply shows that China was contemplating a "bilateral diplomatic dialogue" to better delineate the dispute. Also, under Article 4.2 of the DSU, "sympathetic consideration" must be given to "any representations" made by China – including those framed as alternative arguments.
4.34.
Contrasting the requirements of Article 4.4 of the DSU (on consultations requests) with the heightened requirements of Article 6.2 (on panel requests) also shows China has fully met its obligations under Article 4.4 states that a consultations request "shall give... an indication of the legal basis for the complaint". In contrast, 6.2 states that a panel request must "provide a brief summary of the legal basis of the complaint sufficient to present the problem clearly". The heightened burden for panel requests reflects the understanding that the legal bases of a claim often evolve during consultations. The Article 4.4 requirement to provide an "indication" (a "hint, suggestion"91) was clearly met, as by devoting over 30% of the document to SPS claims, there is no doubt that China provided the United States with the requisite "hint" that the SPS Agreement was at issue in consultations.

(b) Pursuant to its consultations request, China actually consulted regarding the SPS Agreement, and in a manner fully consistent with Article 4 of the DSU

4.35.
China actually consulted on the SPS Agreement. China provided the United States with over 40 questions to be answered during consultation, including at least 8 that sought to clarify whether the measures at issue were considered SPS measures by the United States.92 The panel in Korea – Commercial Vessels accepted questions posed in consultations as "alone... sufficient for us to conclude that the parties consulted on the entirety of the measure".93
4.36.
Furthermore, the US assertion that its representatives explained during consultations that the United States "was not consulting pursuant to Article 11 of the SPS Agreement"94 is irrelevant to the Panel's terms of reference. A responding party can not unilaterally control the jurisdiction of a panel. Indeed, Article 4.3 of the DSU provides that where a respondent refuses consultations a complainant may proceed morequickly to a panel. It does not indicate that a refusal somehow makes it impossible for the complainant to establish a panel with terms of reference that encompass measures stated in their consultations requests.
4.37.
For the foregoing reasons, China requests the Panel to reject the US preliminary ruling request and determine that China's claims under the SPS Agreement are properly within the Panel's jurisdiction.

B. EXECUTIVE SUMMARY OF THE FIRST WRITTEN SUBMISSION OF THE UNITED STATES

1. Introduction

4.38.
In 2007, adulterants added to pet food ingredients by Chinese producers led to the deaths of thousands of US domestic animals. In 2008, adulterants added to milk by Chinese processors sickened hundreds of thousands of persons, and led to the deaths of over a dozen children. The contamination of these products was not allowed under China's food safety laws. Rather, these food safety crises arose from massive failures in China's system of food safety enforcement. Earlier this year China attempted to address these and other enforcement failures by adopting a comprehensive overhaul of its food safety regime.
4.39.
In response to failures of food safety enforcement in China, and in the context of pending administrative proceedings concerning the authorization of the import of poultry products from China, the US Congress enacted Section 727. Section 727 imposed a six and a half month funding restriction that prevented the establishment or implementation of rules approving the importation of poultry products from China, thereby ensuring an additional time period for review of food safety issues relating to China. Section 727 expired on 30 September 2009, and the funding restriction has been lifted as of 12 November 2 009. Accordingly, US food safety regulators no longer face any restriction on the establishment or implementation of such rules.
4.40.
The temporary, now-expired, funding restriction was a measured reaction to China's major problems of food safety enforcement. Section 727 falls squarely within the GATT Article XX(b) exception for measures necessary to protect human or animal life or health and meets the elements of the Article XX chapeau. It imposes no arbitrary or unjustifiable discrimination between countries where the same conditions prevail; indeed, no other country subject to a US poultry-product safety assessment had major crises of food safety enforcement. And Section 727 was not an instance of a disguised restriction on trade. In fact, the US poultry industry opposed it. Thus, Section 727 is not inconsistent with any US obligations under the GATT 1994.
4.41.
The United States disagrees with most of the factual and legal assertions in China's first written submission and has two over-arching comments. First, China's submission repeatedly asserts that "This is a case about arbitrary discrimination." China, however, is well aware of its own problems of food safety enforcement, and of the food safety rationale for the temporary restriction imposed by Section 727. Yet, China's submission addresses none of these issues – indeed, it misleadingly implies that Section 727 was adopted only for "budgetary" reasons. Thus, despite its repeated assertions of "arbitrary discrimination," China's submission fails to explain why any alleged discrimination resulting from Section 727 was arbitrary or unjustifiable. Instead, China runs away from the food safety issues that lie at the core of this dispute.
4.42.
Second, China's submission repeatedly mischaracterizes Section 727 as "denying access" to the US procedures for authorizing the import of poultry products. Yet Section 727 had no such effect. Instead, it allowed ongoing work on the evaluation of food safety issues involving poultry products from China, and only restricted the establishment or implementation of rules authorizing importation. Even in the absence of Section 727, China has no basis for asserting that China necessarily would have succeeded in obtaining such authorizations. In any event, the restriction on the establishment or implementation of rules authorizing importation has now been removed, and the ongoing work continues. Thus, China overstates the effect of Section 727.
4.43.
Finally, any claims by China under the SPS Agreement are not within the Panel's terms of reference. In its submission, China fails to rebut the fundamental point that China did not request consultations on any claims under the SPS Agreement. The United States has offered to cooperate on a procedural way forward in the event China would wish to consult on any SPS claims. However, China – perhaps for the same reason that its submission fails even to acknowledge any relationship between Section 727 and food safety – has denied the offer. This is China's choice. But China cannot have it both ways – it cannot refuse to consult on SPS issues, while at the same time request that the Panel issue findings under the SPS Agreement.

2. Section 727 is the only measure at issue in this dispute

4.44.
The argumentation in China's submission is addressed to alleged inconsistencies between Section 727 and provisions of the WTO Agreement. However, China also asserts that two other measures – an alleged "moratorium" and Section 743 of the 2010 appropriations bill – are inconsistent with the WTO Agreement. These assertions do not and cannot expand the scope of this proceeding. The alleged "moratorium" does not exist, and the subsequent appropriations provision is not in the Panel's terms of reference.
4.45.
China alleges the existence of "the moratorium". In particular, China alleges the existence of a measure that "indefinitely suspends: (a) the consideration of applications for approval, (b) the granting of approval, and (c) the implementation of approval for the import of poultry products from China under the United States system for regulating the importation of poultry products". No such measure ever existed.
4.46.
China puts forth only two types of evidence to support its allegation, and neither shows the existence of an indefinite moratorium. First, China cites two related pieces of legislation: Section 733 (affecting fiscal year 2008) and Section 743 (affecting fiscal year 2010). Section 733 contains the same language as Section 727 and is also of limited duration. The fact that a time-limited funding restriction was created twice does not show the existence of an "indefinite" suspension of approvals. There is no basis for deriving a separate, distinct measure from the existence of discrete, time-limited measures. Moreover, Section 743 lifts any funding restriction. Thus, China fails to show the existence of an indefinite moratorium on approvals. The only other evidence China cites to support its allegation is that FSIS has not yet authorized the importation of poultry from China. This absence of an authorization is not separate from Section 727.
4.47.
Finally, the alleged second measure was not identified in China's consultations request. As the Appellate Body has explained, DSU Articles 4 and 6 "set forth a process by which a complaining party must request consultations, and consultations must be held, before a matter may be referred to the DSB for the establishment of a panel". Although these provisions do not "require a precise and exact identity between the specific measures that were the subject of consultations and the specific measures identified in the request for the establishment of a panel", the Appellate Body has emphasized that any such measures not precisely identified must not "change the essence of the [measures identified in the request for consultations]". The so-called "moratorium" of indefinite duration does not, however, constitute such a measure whose "essence" is the same as the explicitly time-limited restriction in Section 727.
4.48.
China's attempt to bring this second measure before this Panel also runs afoul of the Appellate Body's concern that a complaining party must "not expand the scope of the dispute" in its panel request beyond the matter identified in the consultations request. The allegation of the "moratorium" would indeed expand the scope of the dispute beyond the measure identified in the request for consultations. Accordingly, the United States respectfully requests the Panel to find that the alleged "moratorium" is outside the terms of reference of this Panel proceeding.
4.49.
China's submission states that China has the "initial view" that Section 743 violates WTO provisions, and "that [China] reserves the right to more fully challenge, in later submissions, the compliance of Section 743 with the United States' WTO obligations". The States does not understand how or why China would argue that Section 743 is WTO-inconsistent as Section 743 has resulted in a removal of the funding restriction contested by China. In any event, however, Section 743 is not within the Panel's terms of reference.
4.50.
Here, China issued its consultation request on April 17, 2009, and Section 743 was adopted on 21 Oct ober 2009 – over six months later. Furthermore, the language of 743 evolved over time. The version enacted differed from versions under consideration at the time of panel establishment. Accordingly, China's request for consultations did not (and could not) specifically identify Section 743, and it was impossible for the parties to consult on its provisions.
4.51.
Finally, although Section 743 is generally related to Section 727 in that it also involves funding for the implementation and establishment of rules governing importation of poultry products from China, Section 743 plainly changes the essence of Section 727. While Section 727 imposed a temporary funding restriction, the enactment of Section 743 has resulted in a removal of the restriction. Indeed, the fact that China's first submission only manages to state cursory, "initial views" on the WTO-consistency of Section 743 highlights the fundamental differences between the newly adopted Section 743 and Section 727.

3. China mischaracterizes the legal effect of Section 727 in US domestic law

4.52.
China asserts that Section 727 has the effect of banning imports of poultry from China. Further, China asserts "This funding restriction means that FSIS cannot engage in activities related to the establishment or implementation of any rule allowing Chinese poultry to enter the United States". China's characterization of the measure is incorrect as it fails to take account of the "scope and meaning" of legislative conditions contained in appropriations legislation in US law generally, and of the particular conditions contained in Section 727 specifically.
4.53.
When Congress inserts funding restrictions into appropriations legislation, it is exercising its oversight power over the executive branch. As such, each funding restriction is limited to its terms and only applies to the fiscal year covered by the appropriation. In addition, the funding restriction does not amend or modify the permanent law administered by an executive agency, and therefore, it does not prevent the agency from taking actions related to the prohibited act as long as the agency does not take the prohibited act itself.
4.54.
Accordingly, Section 727 was limited to preventing USDA from "establishing" or "implementing" a rule allowing the import of poultry from China for a temporary period during the 2009 fiscal year. Section 727 did not create a permanent funding restriction or prohibit FSIS from using funds to implement or establish a rule after its expiration. There are no longer any restrictions on FSIS's ability to "use funds to implement or establish a rule allowing poultry products to be imported from China".
4.55.
Section 727 also did not ban imports of poultry from China. Even without Section 727, USDA procedures required a review of the prior equivalence determination before imports of processed poultry could have been authorized due to a substantial time period between the 2006 processed poultry rule and China's designation of facilities eligible to export to the United States. With respect to slaughtered poultry, USDA had not completed an equivalence determination. Thus, the most that China can allege is that Section 727 prevented USDA from taking final actions during fiscal year 2009 that might have otherwise occurred; China has no basis for alleging how, if at all, any final actions would have differed during that period.
4.56.
Finally, Section 727 did not prevent FSIS from engaging in activities under the Poultry Products Inspection Act ("PPIA") related to the establishment or implementation of a rule allowing China to export poultry to the United States. Rather, Section 727 directed FSIS to engage in work related to China's equivalency application, and FSIS did in fact engage in this work during the 2009 fiscal year.

4. Of the three claims presented by China, the Panel need only consider the claim under Article XI of the GATT 1994

4.57.
The Panel's consideration of China's Article XI claim (and any needed defense under Article XX(b)) would serve to resolve this dispute. Accordingly, the Panel should not and need not make substantive findings under China's Article I or Agreement on Agriculture claims.
4.58.
China has not provided any basis for the Panel to make a finding under Article I:1. China's Article I claim misses the point, because it fails to recognize that Section 727 has no independent meaning, but only has meaning in the context of the overall operation of an equivalency-based food-safety regime under the PPIA. China does not challenge the PPIA, nor the right of a WTO Member to establish such equivalency-based regimes for the purposes of ensuring food safety. Yet, under an equivalency-based regime, products of different WTO Members are necessarily treated differently. Products of Members found to be equivalent may be imported, while similar products of Members not yet found equivalent may not be imported.
4.59.
Section 727 temporarily prevented USDA from implementing or establishing a rule finding equivalence for poultry imports from China to ensure that additional safety issues could be evaluated. Section 727 is specific to one WTO Member, but so are many actions taken in implementing an equivalency-based food-safety regime. For example – a finding of equivalence, a failure to make a finding of equivalence, and a delay in making a finding to allow for further evaluation – all affect products of some WTO Members differently than apparently similar products of others. Thus, Section 727 is not inconsistent with MFN obligations because any differential treatment results from the underlying adoption of an equivalency-based regime that differentiates among WTO Members based on each Members' particular food safety status.
4.60.
China's Article I claim also lacks essential legal and factual argumentation. China provides no explanation for why poultry products from China are "like products" to poultry products from other WTO Members, including those authorized to export poultry products to the United States. While China correctly notes that some panels have considered that a measure that distinguishes between products solely on the basis of origin can be considered to provide less favourable treatment to certain like products without the need for a separate "like product" analysis, none of those reports has applied this approach to a situation like this one. Health and safety systems vary from country to country and equivalency-based regimes respond to this fact. To be sure, China may believe that its poultry products present no particular safety issues as compared to products from any other WTO Member. But if so, that is an unsupported factual allegation which the United States does not accept, and there is no basis to assume it is true. Moreover, China conveniently ignores disputes such as EC-Asbestos, in which a panel examined issues of "likeness" in the context of products with different levels of safety.
4.61.
However, the Panel need not address factual and legal issues under Article I to reach a resolution of this dispute. In particular, the core of this dispute involves whether Section 727 is justified by legitimate concerns with human and animal life and health. The most appropriate analytic framework to consider these issues is to examine the measure under Article XI, followed (if necessary) by findings under Article XX(b). If the measure is justified by Article XX(b), such a finding would excuse any alleged breach of Article I. It would not promote the resolution of this dispute to venture into issues under Article I concerning its application to equivalency-based regulatory regimes or to the likeness of products with different levels of safety.
4.62.
China has the burden of establishing the elements of the alleged breach of Article XI:1. However, if the Panel were to find the existence of an import restriction, such a finding would not be unusual or a matter of systemic concern. The nature of many health and safety regulations is to impose import restrictions. As Article XX(b) states, "nothing in [the GATT 1994] shall be construed to prevent the adoption or enforcement... of measures necessary to protect human, animal or plant life and health". Section 727 meets all of the requirements of Article XX(b).
4.63.
Article 4.2 of the Agreement on Agriculture prohibits certain measures with respect to agricultural products. Article 4.2 provides that, with certain exceptions not relevant here, "Members shall not maintain, resort to, or revert to any measures of the kind which have been required to be converted into ordinary customs duties". Footnote 1 to the Agreement on Agriculture provides an illustrative list of measures subject to the prohibition in Article 4.2, as well as an illustrative list of measures to which the prohibition does not apply.
4.64.
Footnote 1 specifically excludes from the scope of Article 4.2 "measures maintained under... general, non-agriculture-specific provisions of [the] GATT 1994". Section 727 is a measure that the United States maintains consistently with GATT Article XX(b), which is a "general, non-agriculture-specific provision" of the GATT 1994. Therefore, Article 4.2 does not apply to Section 727, and the United States did not act inconsistently with Article 4.2.

5. Section 727 is justified pursuant to GATT Article XX(b)

4.65.
To justify a measure under Article XX(b), the Appellate Body has explained that the responding party must demonstrate the measure (1) falls under the scope of the Article XX(b) exception and (2) satisfies the requirements of the Article XX chapeau. Two elements must be met for a measure to fall under the scope of the Article XX(b) exception: (1) the policy in respect of the measure for which the provision is invoked must fall within the range of policies designed to protect human, animal, or plant life or health; and (2) the inconsistent measure for which the exception is invoked must be necessary to fulfil the policy objective.
4.66.
To determine whether a measure pursues a policy objective of protecting human and animal life and health, the Panel should first consider whether a risk to human and animal life and health exists. If a risk is found to exist, the Panel should determine whether the policy objective underlying the measure is to reduce that risk. If so, the Panel should conclude that the measure's policy falls within the range of policies designed to protect human and animal life or health in accordance with Article XX(b).
4.67.
It is clear that there is a risk to human and animal life and health from the importation of poultry products from China. This risk results from the inherent danger of consuming poultry not produced under sanitary conditions or inspected for contaminants, the risk from the import of poultry infected with avian influenza, and the particular risk that exists when importing food from China due to China's history of food safety scandals and longstanding systemic issues.
4.68.
First, notwithstanding country of origin, it is well established that poultry products can contain pathogenic bacteria and contaminants which can pose a potential risk to human life and health. Because it is impossible for FSIS to test all products at the border, FSIS's equivalence process is designed to ensure that poultry products are "subject to inspection, sanitary, quality, species verification, and residue standards that achieve a level of sanitary protection equivalent to that achieved under US standards and have been processed in facilities and under conditions that achieve a level of sanitary protection equivalent to that achieved under US standards" before they are allowed to be imported into the United States. It is noteworthy that FSIS's equivalence process under the PPIA is not being challenged by China.
4.69.
It is also well established that imported poultry can pose a risk to human and animal life and health if the poultry is infected with a serious disease, such as avian influenza. If poultry or poultry products infected with this disease entered the United States, this could significantly threaten human and animal life and health. Again, it is noteworthy that China is not challenging APHIS's restrictions on the import of poultry from regions such as China that are classified as a region where the highly pathogenic avian influenza HPAI subtype H5N1 is considered to exist.
4.70.
Third, the risk is exacerbated by significant problems with China's food safety system. China's food safety issues have been the subject of numerous studies by international agencies, governmental bodies, and academics noting China's disorganized governmental structure and its ongoing systemic problems with smuggling, corruption, and the inadequate enforcement of food safety laws. China has also been the source of multiple food safety scandals, many of which have occurred recently and have been directly related to China's systemic problems.
4.71.
FSIS's experience with China during the equivalency process also highlighted problems with China's food safety system. FSIS found deficiencies in two of the four processing plants and serious sanitation problems in all three slaughter plants it visited in 2004. In addition, all four slaughter plants FSIS visited during 2005 failed to meet US standards.
4.72.
Section 727 was enacted with the policy objective of protecting against this risk to human and animal life and health posed by the importation of poultry products from China. The first sentence of the Joint Explanatory Statement ("JES") accompanying Section 727 makes that clear: "There remain very serious concerns about contaminated foods from China and therefore the bill retains language prohibiting FSIS from using funds to move forward with rules that would allow for the importation of poultry products from China into the U.S.". Similarly, the Committee Report accompanying the FY 2008 appropriations act also clearly demonstrates that Section 727's purpose is to protect human and animal life and health.
4.73.
Statements by Section 727's author, Representative DeLauro, also indicate the measure was enacted to address this risk: "It is clear that the 2006 FSIS declaration that China's safety and inspection system was, quote, equivalent to the US system for processed poultry products, was based on trade goals. From a public health and safety perspective, the equivalency determination was deeply flawed and cannot be relied on to protect US consumer's safety."
4.74.
Section 727 was also necessary to protect human and animal life and health from this risk. Imports of poultry from China pose a severe risk as a result of the broad systemic problems with China's food safety system. These problems include smuggling, corruption, and the inadequate enforcement of China's food safety laws, issues that FSIS is not typically faced with when making equivalency determinations. Moreover, many food safety scandals have originated in China in recent years, including the melamine scandal that occurred in 2008 after FSIS issued a final rule on the equivalency of China's poultry processing system. Finally, some members of Congress were concerned about the process FSIS followed and believed that FSIS had not spent enough time considering the particular problems with food safety in China.
4.75.
Given this situation, it was necessary to pause the equivalency process so that FSIS could thoroughly consider the particular risks posed by poultry products from China as well as the implications of recent food safety scandals and the overhaul of China's food safety regime that resulted from them.
4.76.
The congressional enactment of Section 727 played a role analogous to an administrator or supervisor in a governmental agency who has the responsibility of reviewing (and, where appropriate, questioning) a decision made within the agency and asking for it to be considered at greater length in light of recent developments before moving forward. In fact, had a USDA administrator taken the same action as Congress did here to pause the process and evaluate the facts after becoming aware of new food safety scandals, it is unlikely that this dispute would be before this Panel. The administrator's action would have been viewed as reasonable and routine.
4.77.
Likewise, Section 727 was reasonable and routine. Congress had many legitimate health and safety reasons to be concerned about the import of poultry products from China and was taking the necessary action to ensure that all of these issues were addressed before FSIS moved further. Accordingly, Section 727 was necessary to protect human and animal life and health.
4.78.
The Panel should reach the same conclusion if it follows the method used by past panels when faced with the question of whether a measure is necessary. Other panels have engaged in "a process of weighing and balancing a series of factors," which include (1) the importance of the interests or values at stake; (2) the contribution made by the measure to its objective; and (3) the trade restrictiveness of the measure.
4.79.
The first factor strongly weighs in favour of a determination that Section 727 was necessary. Section 727 was enacted to protect human and animal life and health from the risk posed by the import of poultry from China, including protection from the risks of eating poultry products not prepared in sanitary conditions or contaminated with disease. In Brazil-Tyres, the panel noted "the objective of protecting human health and life against life-threatening diseases... is both vital and important in the highest degree." The United States agrees. The risks posed to human life and health by consuming potentially contaminated poultry from China is of utmost importance as is the need to protect animal life and health from the threat of avian influenza.
4.80.
The second factor also favours a determination that Section 727 was necessary. Section 727 has directly contributed to the protection of human and animal life and health by ensuring FSIS did not implement or establish a rule without focusing on the risks posed by China's food safety system or reexamine the issue in light of China' recent food safety scandals. Further, Section 727 also directed FSIS to develop an action plan to address food safety issues with China. As a result, Section 727 materially contributed to its objective of protecting human and animal life and health from the risk posed by consuming imported poultry products from China.
4.81.
Section 727's limited trade restrictiveness also favours a determination that it was necessary. Because Section 727 was an appropriations measure, it did not change the underlying law and only applied temporarily. As the funding restriction has been lifted, FSIS is now able to move forward on implementing the rule for processed poultry products or establishing a rule for cooked poultry products if it determines that this is the appropriate action to take under the PPIA.
4.82.
Section 727 also only applied to the implementation or establishment of a rule regarding the importation of poultry products from China. It did not restrict FSIS from taking actions related to the importation of poultry products, such as the development of an action plan that contemplated the possibility of future imports and was designed to allow FSIS to move forward expeditiously when the funding restriction was lifted.
4.83.
Additionally, even in Section 727's absence, it is highly unlikely that China could have exported any significant quantity of poultry products to the United States. While FSIS's equivalency determination for China's processed poultry inspection system would allow imports of processed poultry product from China (including raw processed as well as cooked processed poultry product), China would only be able to export poultry that was fully cooked due to APHIS's restrictions on countries with avian influenza. Moreover, since FSIS has not found China's slaughter inspection system equivalent, any cooked poultry exports from China would have to be produced from poultry slaughtered in the United States or another country with an equivalent slaughter inspection system. Trade under these circumstances is likely to be limited.
4.84.
To justify a measure under Article XX(b), the responding party must also show that the measure meets the requirements of the Article XX chapeau. To do so, the Appellate Body has explained that the responding party must demonstrate that its measure (1) is not a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail; or (2) a disguised restriction on international trade.
4.85.
Previous Appellate Body reports have explained that a measure will be considered to be applied in a manner that results in arbitrary or unjustifiable discrimination if: (1) the application of the measure results in discrimination; (2) the discrimination is arbitrary or unjustifiable in character; and (3) the discrimination occurs between countries where the same conditions prevail.
4.86.
These conditions are not met. Although Section 727 only applies to imports from China, it did not discriminate against Chinese products in an arbitrary or unjustifiable way. To show that any discrimination to a particular country is not "arbitrary or unjustifiable," past panels have required the responding party to show that its action is not "capricious or random." The panel in Brazil-Tyres also noted that an analysis under this element should focus "on the cause of the discrimination, or the rationale put forward to explain its existence." Thus, a responding party must provide a rationale for the measure that is not capricious, random, or indefensible.
4.87.
There was a strong rationale for Section 727. There are many legitimate concerns about China's food safety system, and the equivalency process needed to be paused to give FSIS additional time to consider and address these concerns, including the food safety scandals that occurred after the final determination was made on a rule for processed poultry. Given this situation, it was certainly not arbitrary or capricious for Congress to exercise its oversight role.
4.88.
In addition, there is no other country where the same conditions prevailed as they did for China at the time Section 727 was enacted. Besides China, there was no other country as far along in the equivalency process with recent food safety scandals and systemic problems with smuggling, corruption, and enforcement. Since no other country has presented the same set of challenges that the US government faced with regard to China at the time of Section 727's enactment, there is no other country where it can be said that the same conditions prevail.
4.89.
Finally, the evidence clearly demonstrates that Section 727 is not a disguised restriction on trade. The text of the measure, which states "There remain very serious concerns about contaminated foods from China and therefore the bill retains language prohibiting FSIS from using funds to move forward with rules that would allow for the importation of poultry products from China into the U.S." clearly indicates that the measure's policy objective, or intent, was to protect human and animal life and health from the risk of poultry from China.
4.90.
Further, the fact that the JES directs FSIS to take actions related to the rulemaking also demonstrates the measure was not enacted with protectionist intent. If Section 727's intent were to restrict trade, it would not have included language setting the stage for expeditious action on China's equivalency application as soon as it expired. Statements by members of Congress further support the view that the policy objective of the measure was to protect human and animal life and health, not to protect a domestic industry. In this respect, the widespread opposition to the measure from the US poultry industry is relevant. On 30 April 2009, 56 companies and trade associations representing the domestic industry wrote a letter to President Obama asking him to oppose Section 727. If Section 727's purpose were to protect the domestic industry, it is unlikely that many of the industry's most influential members would be opposed.

6. China has not made a prima facie case in support of its claims under the SPS Agreement

4.91.
China's SPS claims are outside the Panel's terms of reference. Further, China fails to make a prima facie case in support of its claims.
4.92.
In particular, China fails to demonstrate – or even to assert – that Section 727 is an SPS measure subject to the SPS Agreement. To demonstrate that a measure is inconsistent with a particular provision of the SPS Agreement, it is necessary first to show that the measure is an SPS measure that is subject to the particular provision with which an inconsistency is claimed. China makes no such showing with respect to Section 727 or any of SPS provisions it cites.
4.93.
Indeed, China frames its complaint by asserting that, "to the extent that Section 727 and the moratorium may be considered to be sanitary and phytosanitary measures within the meaning of the SPS Agreement, such measures would be inconsistent with Articles 2.3, 5.5, 5.1, 5.2, 2.2, 5.6 and 8 of the SPS Agreement." In other words, China claims merely that if Section 727 is subject to the cited provisions of the SPS Agreement, then it would be inconsistent with them. But China does not assert that Section 727 is, in fact, subject to any of these provisions. Rather, China expressly avoids making such any assertion.
4.94.
China explains that it framed its claims under the SPS Agreement as conditional claims or claims in the alternative. According to China, it considered that the United States might invoke Article 2.4 of the SPS Agreement in order to defend Section 727, and if so, it would be for the United States to "meet the threshold requirement of demonstrating that the measures at issue are sanitary or phytosanitary measures." The United States does not agree that the invocation of Article 2.4 by a responding party in a dispute would shift the burden of proof with respect to the complaining party's claims, as China appears to assert. However, the Panel need not decide this issue since the United States is not invoking Article 2.4 of the SPS Agreement.
4.95.
Because China has chosen not to assert, let alone prove, one of the essential elements of a prima facie case in support of its claims, the United States does not address those claims. However, the United States reserves its right to respond to any further assertions in this regard, should China choose to make them.

7. Reply to China's response and third party comments on US Preliminary Ruling request of 1 October

4.96.
Although China states that it intended to make claims under the SPS Agreement in the alternative (that is, if the United States invoked Article 2.4 of the SPS Agreement as a defense), it is undeniable that China's consultations request does not request consultations to pursue alternative claims, but makes the request for consultations conditional on future developments. This is the defect in China's consultations request with respect to the SPS Agreement, and China's subsequent attempts at clarification cannot cure the jurisdictional requirement set forth in DSU Article 1.1 that consultations must be requested pursuant to the consultation and dispute settlement provision of each covered agreement for which dispute settlement is sought.
4.97.
Many other Members have properly invoked the consultation and dispute settlement provisions of a covered agreement to pursue alternative claims under that agreement. Canada recently requested consultations with the United States pursuant to a number of provisions, including Article 11 of the SPS Agreement, in order to pursue claims that certain measures were inconsistent with, "in the alternative, Articles 2, 5 and 7 of the SPS Agreement." The United States had no objection to the invocation of the consultation and dispute settlement provision of a covered agreement in order to pursue an alternative claim under that agreement. It is the failure actually to invoke the consultation and dispute settlement provision of a covered agreement that gives rise to the jurisdictional problem with China's consultation and panel request here.
4.98.
There is no basis for China's assertion that the United States is pursuing a preliminary ruling merely to delay the proceedings. The United States alerted China to the deficiency in China's consultation request at the earliest possible moment, at which point China could have submitted an amended consultation request clearly requesting consultations under Article 11 of the SPS Agreement and indicating that it was raising its SPS claims in the alternative. That would have been the end of the matter. Even if China did not agree with the United States, China could have nonetheless decided that the most pragmatic way forward would be to amend its consultations request to put an end to the matter once and for all.
4.99.
The issue presented by China's consultations request is not a mere technicality. In raising the deficiency of China's consultations request, the United States is pursuing an important systemic concern. If China's approach were to be accepted, it could lead to more and potentially greater confusion in future disputes. A responding party and potential third parties would be unable to divine what the exact legal issues will be in a dispute. The DSU provisions are clear and were agreed – a complaining party's consultations request "shall give the reasons for the request, including identification of the measures at issue and an indication of the legal basis for the complaint." A complaining party is not free to say that it is not using as the basis for its complaint a particular covered agreement only to say later that it is. Clarity in the request for consultations is important for the overall operation of the dispute settlement system.
4.100.
Finally, China argues that it provided an "indication" of the legal basis for its complaint under the SPS measures. While the United States does not agree with that assertion, more fundamentally, that is not the relevant issue before the Panel. The core issue before the Panel is whether, in its consultations request, China brought this dispute "pursuant to the consultation and dispute settlement provisions" of the SPS Agreement. China did not.

C. EXECUTIVE SUMMARY OF THE OPENING ORAL STATEMENT OF CHINA AT THE FIRST SUBSTANTIVE MEETING OF THE PANEL

1. Introduction and background

4.101.
This is a case about arbitrary discrimination. A series of measures over the past two years have prevented only China from accessing US poultry import approval procedures. These include Section 733 and Section 727 of theAgriculture AppropriationsActs of 2008 and 200995, respectively, both of which have prohibited the relevant government agency from using any funds to "establish or implement a rule allowing poultry products to be imported into the United States from the People's Republic of China". Sections 733, 727, and the latter's replacement, Section 743 of the Agriculture Appropriations Act 2010, reference the "establishment or implementation of a rule". This phrase implicates all of the Food Safety Inspection Service's (FSIS) "equivalence" procedures – the procedures that are essential prerequisites for exporting poultry to the United States. During the past two years, Section 727 and Section 733 have foreclosed any opportunity for China to secure and maintain such status, therefore denying China the opportunity to access the US poultry market.
4.102.
FSIS is the only US entity with both the legal authority and the institutional capability to evaluate the food safety regime for poultry in exporting countries. It does so by examining five broad risk areas. FSIS, after applying its procedures to China, determined that it met all FSIS requirements and established a rule permitting imports of processed poultry products, making China one of just 10 countries to have successfully completed these procedures. FSIS was in the process of both maintaining that approval and applying the initial procedures to China's poultry slaughter inspection system when Congress abruptly removed China's access to the procedures. This all occurred as the United States was steadily increasing its consumption of Chinese food products, importing $5.2 billion worth in 2008 alone.96 This discrimination violates various provisions of the WTO Agreements and cannot be cured by recourse to the exception in GATT Article XX(b).

2. Section 727 of the Agriculture Appropriations Act 2009

(a) Section 727 is inconsistent with Articles 2.2, 2.3, 5.1, 5.2, 5.5, 5.6, and 8 of the SPS Agreement

4.103.
Having stated repeatedly in its first written submission that the purpose of Section 727 is the protection of human life and health97, there is no doubt that the United States has demonstrated that Section 727 is an SPS measure as defined in the SPS Agreement.98

(i) Relationship between the SPS Agreement and GATT Article XX(b)

4.104.
Both the SPS Agreement and GATT Article XX(b) prohibit the enactment of health-related measures in a manner that arbitrarily or unjustifiably discriminates among WTO Members. As the European Union correctly points out in its third‑party submission99, the provisions of the SPS Agreement provide relevant and immediate context for interpreting Article XX(b). Thus, the evidence and arguments supporting China's claims under the SPS Agreement are highly relevant and applicable to the rebuttal of the US defence under XX(b).

(ii) Section 727 is inconsistent with Articles 5.5 and 2.3 of the SPS Agreement

4.105.
Article 5.5 of the SPS Agreement prohibits Members from applying different levels of sanitary protection to comparable situations without justification. The higher level of SPS protection applied by the United States to Chinese poultry products, reflected in Section 727, is arbitrary and unjustifiable and results in discrimination, in violation of Article 5.5.
4.106.
In particular, Section 727 requires the United States to apply an "ALOP" to Chinese poultry that is different from the ALOP that is applied to, first, other food products imported from China and, second, to poultry products imported from any other WTO Member. This distinction in ALOPs in both situations is arbitrary and unjustifiable, and it results in discrimination against China. The ALOP that the United States applies to Chinese poultry products is stricter than zero tolerance, whereas the ALOP applied by the United States to both other Chinese food imports and poultry imports from other WTO Members is significantly lower. With respect to the rationale for applying an ALOP of less than zero tolerance to Chinese poultry products, the United States has provided no scientific evidence or justification for singling out poultry products from China for different treatment. This distinction in ALOPs results in discrimination, confirmed on the basis of the various warning signs developed by the Appellate Body. Having demonstrated Section 727's inconsistency with Article 5.5, China requests that the Panel also find a violation of Article 2.3, in accordance with Appellate Body case law.100

(iii) Section 727 is inconsistent with Articles 2.2, 5.1, and 5.2 of the SPS Agreement

4.107.
Article 5.1 of the SPS Agreement requires that SPS measures be based on the conclusions of a scientific risk assessment that takes into account the factors in Article 5.2. As discussed in China's first written submission101, there is no publicly available indication that Section 727 was enacted on the basis of scientific evidence demonstrating that Chinese poultry products pose any specific health threat, as required under Article 2.2, or on the basis of an Article 5.1-consistent risk assessment. Therefore, China requests the Panel find that Section 727 is inconsistent with Articles 2.2, 5.1 and 5.2 of the SPS Agreement.

(iv) Section 727 is inconsistent with Article 5.6 of the SPS Agreement

4.108.
Article 5.6 requires that Members' SPS measures not be more trade restrictive than required to achieve their appropriate level of sanitary protection. To establish a violation of Article 5.6, a Member must demonstrate that there is an alternative SPS measure that is reasonably available, achieves the Member's appropriate level of protection, and is significantly less trade restrictive.102 An alternative measure that meets all of these criteria is the application to China of the normal FSIS poultry import approval procedures.

(v) Section 727 is inconsistent with Article 8 of the SPS Agreement

4.109.
Section 727 is inconsistent with Article 8 of the SPS Agreement because it leads to "undue delay" in the completion of conformity assessment procedures for the importation of Chinese poultry products. Section 727, together with its predecessor Section 733, delayed the application of FSIS procedures to China by 2 years. The prohibition imposed under Section 727 on Chinese access to FSIS approval procedures is without scientific or other justification, and it results in arbitrary and unjustifiable discrimination against Chinese poultry products. The delay created by Section 727 in the application of FSIS procedures to China is therefore unjustifiable, or "undue".

(b) Section 727 is inconsistent with Article I:1 of GATT 1994

4.110.
Section 727 violates Article I of GATT 1994 as it has denied only Chinese poultry products the possibility of obtaining the necessary import approval under FSIS procedures.
4.111.
Hypothetical like product analyses are appropriate when a measure imposes a de jure origin-based distinction.103 Thus, the "like products" for the purposes of this analysis are the "poultry products" of any other Member whose poultry products inspection system could have been evaluated (and possibly found to be equivalent) under the FSIS procedures. To the extent that the United States claims104 that Chinese processed poultry is not "like" processed poultry produced in any other WTO Member due to alleged vague "differences in safety", it has presented no evidence to support that assertion.

(c) The United States concedes that Section 727 is inconsistent with GATT Article XI:1 and Article 4.2 of the Agreement on Agriculture

4.112.
China demonstrated in its first written submission that Section 727 violates Article XI:1 and Article 4.2. The United States appears to concede these violations105, but argues that they can be justified under Article XX(b) of GATT 1994. This defence, however, must fail.

(d) Inconsistency of Section 727 with GATT 1994and the Agreement on Agriculture cannot be justified on the basis of GATT Article XX(b)

4.113.
To justify a measure under the exceptions in Article XX, it must meet the requirements of both the specific exception invoked and the chapeau.106 The requirements of neither are met in this case.

(i) Section 727 is not "necessary" within the meaning of GATT Article XX(b)

4.114.
The United States has not met its burden of demonstrating that Section 727 falls within the scope of the exception in paragraph XX(b). The Appellate Body has identified the factors that must be considered when determiningwhether a measure at issue is "necessary" for the achievement of its stated objective under the relevant exception in Article XX.107 Analysis of these factors demonstrates that Section 727 was not necessary for its objective – the protection of human life and health from "contaminated foods".
4.115.
First, any contribution of Section 727 to this objective was insignificant. The United States claims that Section 727 was necessary to protect against contaminated foods, but it targets only one product – a product for which the United States gave no evidence of China-specific problems and which was expected to be imported in low quantities. While blocking the import of Chinese poultry, the United States continued to import massive quantities of other foods from China, any of which could have in theory been contaminated. Moreover, the FSIS procedures were entirely capable of identifying any problems with Chinese poultry and preventing importation if there was cause to do so. Second, Section 727's insignificant contribution does not outweigh its extreme trade-restrictiveness. The Appellate Body has confirmed that a measure as trade-restrictive as an import ban may be justified under Article XX(b), but only if its contribution to its stated objective is "material".108Third, there is an alternative measure available to the United States – the FSIS procedures. This alternative measure is reasonably available and would allow the United States to achieve the level of sanitary protection normally applied to imported poultry. Finally, the United States illogically instituted Section 733 in December 2007, just when China was scheduled to undergo an equivalence maintenance audit – a process that would have required FSIS to examine any allegedly "unique" risk posed by Chinese poultry that the United States claims justified Sections 733 and 727. Based on the above, Section 727 was not "necessary" and therefore does not fall within the exception in paragraph (b).

(ii) Section 727 does not comply with the chapeau of GATT Article XX

4.116.
The United States has also not met its burden of demonstrating that Section 727 fulfils the requirements of the chapeauof Article XX. The application of Section 727 has resulted in both unjustifiable discrimination and arbitrary discrimination between countries where similar or identical conditions prevail, within the meaning of Article XX. Section 727 has blatantly discriminated against China, as compared to every other WTO Member similarly seeking to obtain FSIS approval for poultry products. The discrimination resulting from Section 727 is arbitrary for several reasons. First, there is no indication that it was enacted based on any scientific evidence regarding risks posed by Chinese poultry. Also, the United States has failed to demonstrate why it singled out poultry, as opposed to other food products from China, or why it singled out Chinese poultry, as opposed to poultry from other WTO members. China is one of just 10 countries with a poultry inspection system that has been deemed equivalent, yet its poultry is treated as more dangerous than poultry from all other WTO Members, including those without any or without anyeffective food safety laws.

3. Section 743 of the Agriculture Appropriations Act of 2010

4.117.
China believes that Section 743 is a subsequent, closely-related measure to Section 727 that continues the US policy embodied in Section 727 of subjecting the import of only Chinese poultry products to discriminatory restrictions. On balance, Section 727 and Section 743 have the same substance, essence, and/or legal implications. The Panel should find that Section 743 is within its jurisdiction, and then provide China with the opportunity to detail the substantive violations caused by Section 743.
4.118.
The US first written submission challenges China's assertion that Section 743 is within the Panel's terms of reference. China thus believes that it would be in the interest of all of the participants in this proceeding for the Panel to make a preliminary ruling with respect to whether Section 743 is within the Panel's jurisdiction.

4. Request for enhanced third party rights

4.119.
China does not believe that this dispute merits enhanced third party rights.

D. EXECUTIVE SUMMARY OF THE CLOSING STATEMENT OF CHINA AT THE FIRST SUBSTANTIVE MEETING OF THE PANEL

4.120.
Mr Chairman, distinguished Members of the Panel, during the past two days, China has explained that Section 727 and Section 733 served to prevent the experts at FSIS from doing their job for nearly two years, but only with respect to China. Because FSIS is the only US government entity with both the legal authority and institutional capability to evaluate the food safety regime of Chinese poultry and to authorize poultry imports, these measures have served to foreclose China from having even the possibility of importing poultry into the United States. And they have done so without any regard to the actual safety and health risks of Chinese poultry, the facilities in which that poultry is processed, or the Chinese poultry inspection system.
4.121.
At the same time, every other WTO Member that wished to import poultry into the United States continued to have full access to the standard FSIS procedures, including countries in which there was actual evidence of specific problems with poultry processing and safety. For example, as I mentioned yesterday, Mexico continued to access the FSIS procedures even after audits revealed a number of unsanitary conditions in Mexican poultry processing and slaughter establishments that pointed to the systemic failure by Mexican officials to enforce food safety laws.109 n fact, US-origin poultry has its own risks, and China has identified a survey finding Salmonella and/or Campylobacter in about two-thirds of chickens tested in the United States.110 Scientific and other evidence does not support the conclusion that there is a health threat specific to poultry from China that is not also present in any other WTO Members.
4.122.
China has explained in great detail why Sections 727 and 733 are inconsistent with the US obligations under the SPS Agreement, the GATT 1994, and the Agreement on Agriculture, based on the total absence of scientific evidence or risk assessment supporting these measures, the fact that they were not "necessary" within the meaning of Article XX(b), and the arbitrary and unjustifiable discrimination inherent in, and resulting from, these measures.
4.123.
In response, the United States has argued that Section 727 was "adopted in the context of an ongoing food safety equivalency process" and that it was an "intermediate" "step in an ongoing review of the equivalency of China's food safety enforcement system as applicable to poultry products."111 Mr Chairman, distinguished members of the Panel, this is an incredible statement. As China has explained, it is FSIS that performs the "ongoing food safety equivalency processes" with respect to poultry for the US Government, and it is FSIS that performs all of the steps in those ongoing reviews of equivalency, including reinspection of products at the US border. In stark contrast, Section 727 and its predecessor were extraordinary actions taken by the US Congress that suddenly and unexpectedly terminated any "ongoing" process that FSIS was conducting with respect to China, by taking away FSIS's funding for these purposes for several years.
4.124.
In attempting to justify Sections 727 and 733 as qualifying as an exception under GATT Article XX(b), the United States repeated its allegations about generalized problems with China's food safety regime, citing to a number of reports on the topic.112 Yet, given that the value of imports of food products from China has increased dramatically from $1 billion in 1999 to $5.2 billion in 2008113, the United States is in no position to argue that the treatment of Chinese poultry is not arbitrary when it fails to present any evidence demonstrating why such poultry is somehow riskier than the other Chinese food products that are imported in massive quantities.
4.125.
Next, the United States dedicated a substantial portion of its opening statement yesterday to telling us about alleged problems with Chinese-origin spinach, baby formula, seafood, turbot fish, pork, pet food, milk, and eggs, and cited to ten exhibits in support.114 But these allegations are completely irrelevant to this case – which is a dispute about arbitrary measures that are specifically targeted at poultry, and only poultry.
4.126.
The United States does mention generalized concerns related to the avian flu and its impact on poultry115, but again does not explain why China should be treated differently than every other country that has avian flu issues, all of which have access to the normal FSIS procedures. Nor did it provide any evidence whatsoever – other than the unsupported statements in a Congressional Committee Report – to contradict the finding by FSIS that China was fully capable of exporting poultry that was not affected by the avian flu, findings that FSIS made when it first promulgated the rule allowing China to export processed poultry after years of detailed reviews, audits, and inspections.116
4.127.
The only other evidence that the United States described yesterday that specifically related to Chinese poultry involved a reference to one instance of alleged smuggling of poultry, none of which was found to pose any health risk to US consumers.117 Yet, as China explained yesterday, there is simply no basis for the United States to conclude that cutting off funding for FSIS equivalence rulemaking is somehow "necessary" to control smuggling from China, or that alleged smuggling justifies in any way the arbitrary discrimination established by Section 727. This is clear from the FSIS response during its 2006 rule-making with respect to processed poultry from China, that "[t]his rule is not expected to have any impact on illegal entry of products"118 because "U.S. Customs and Border Protection, rather than FSIS, addresses smuggling" and "acts as a first line of defense for all products entering the country."119
4.128.
In the end, although the United States would like to believe, as it states, that its "evidence makes clear" that "the importation of potentially unsafe poultry from China may pose a significant risk to human and animal life and health"120, the most cursory review of this so-called "evidence" reveals a lack of any connection to problems that are in any way specific to Chinese poultry or China's poultry inspection system.
4.129.
Why, one might ask, does the United States have nothing specific to say about the health and safety risks that could arise from importing Chinese poultry as a result of alleged deficiencies in the Chinese inspection system? The answer is simple. For almost two years, the people at FSIS with the capability to develop any such evidence have been precluded from doing so as a direct result of Section 727 and Section 733. I recall that, yesterday, the United States provided the Panel with the definition of "arbitrary", a term that is critical to evaluating both China's SPS claims and the United States' GATT Article XX(b) defense. Arbitrary is defined as something that is "based on mere opinion or preference as opposed to the real nature of things".121 With respect to evaluating the safety of Chinese poultry products, FSIS is the only agency with the institutional capability and scientific expertise to determine the "real nature of things", and they were foreclosed from making that determination in the year leading up to the imposition of Section 727, and beyond. It follows that Congress was instead acting "based on mere opinion or preference" of some of its Members, and that such action was, by definition, "arbitrary".
4.130.
In its efforts to defend Section 727 as a measure that is not "arbitrary" pursuant to the Article XX chapeau, the United States emphasised at paragraph 50 of its opening statement that "there is no other country that had been as far along in the equivalency process" where "the same conditions prevail." In essence, the United States was asserting that there was some sense of urgency with respect to Chinese equivalence that made it appropriate for Section 727 to single out China. But, several minutes earlier, in paragraph 23 of the same statement, the United States contradicted itself, stating that "even in the absence of Section 727, FSIS would not have necessarily allowed China to export poultry to the United States." In fact, there was no sense of urgency in view of how "far along in the equivalency" process China had gone. This is because, for a variety of reasons, more than two years had passed since the most recent on-site audits of the poultry safety and control system had last taken place in China, in August 2005.122 As a result, at the time that Section 727 and its predecessor were enacted and in force, FSIS, in the exercise of its normal equivalence rule-making procedures, would have been required to analyse and conduct on-site audits of China's poultry safety and control regime before Chinese poultry could enter the United States. Through such audits, FSIS would have naturally evaluated and examined, inter alia, any allegedly unique risks posed by China, and any alleged food "safety scandals".
4.131.
Consequently, the United States once again fails in its attempt to characterize China's situation as unique, as it has previously failed when trying to distinguish China by discussing health and safety concerns such as avian flu, bacteria, and contaminants that are all inherent in other countries that have never lost access to FSIS procedures.
4.132.
Yesterday, the United States pointed out that "while Section 727 was in effect, 56 major US companies and trade associations representing the domestic industry wrote a letter to President Obama asking him to oppose an extension of Section 727."123 In particular, the industry argued in the letter that "Section 727 and its predecessors effectively bar FSIS from conducting a necessary and appropriate risk assessment on whether imports of cooked chicken from China pose any risk to American consumers."124
4.133.
Mr Chairman, distinguished Members of the Panel, the companies that signed on to that letter (including through the various trade associations) include many profit-seeking companies that are in the business of selling poultry products in US markets. Other than the US Government, these companies have the greatest knowledge of the capabilities of FSIS, and they would also have the greatest commercial risk from advocating the removal of legislation that genuinely protected the safety of the poultry sold in the United States. If US consumers were to fear the safety of any poultry sold in US grocery stores and restaurants as a result of a scare related to imported Chinese poultry, it would certainly have spillover effects on the demand for US-origin poultry.125 Consequently, the US industry letter actually supports China's arguments that Section 727 was not "necessary", and that the normal FSIS procedures constitute an alternative SPS measure that achieves the United States' appropriate level of protection, and is significantly less trade restrictive.
4.134.
Yesterday, in its latest attempt to distract the Panel from the substantive problems with Section 727 and Section 733, the United States asked a series of questions to China to identify precisely when China believed that it was first "demonstrated" that the US measures were SPS measures. China believes that this question is entirely irrelevant to the issue of whether its consultation request properly requested consultations under Article 11 of the SPS Agreement. That is because China's consultations request not only specifically invoked Article 11 of the SPS Agreement, but it also included potential violations of specific provisions of that agreement, namely Articles 2.1, 2.2, 2.3, 5.1-5.5, and 8 of the SPS Agreement, and a brief statement of the basis for those violations. China framed its SPS claims just like any other arguments in the alternative, and China's understanding of the true objective of the US measures has evolved during the course of this dispute. An argument in the alternative can not be a proper basis for disrupting the ability of China to achieve a "prompt settlement of" this dispute that is "essential to the effective functioning of the WTO and the maintenance of a proper balance between the rights and obligations of Members", pursuant to Article 3.3 of the DSU.
4.135.
With respect to the question of whether Section 743 falls within the scope of the terms of reference, China provided a list of five key reasons why Section 743 has the same substance, essence, and/or legal implications as Section 727.126 In response, the United States emphasised that "because Section 743 was drafted and adopted after consultations were held, it was impossible for consultations to be held on the measure."127 But China notes that the lack of consultations in this situation can not be a determining factor, or else future measures could never fall within the scope of the terms of reference of any dispute, which would be contrary to Appellate Body precedent.128
4.136.
Finally, in closing, I would like to recall one of the key points that China made yesterday. Even if, during the term of Sections 727 and 733, every scientist in the world had independently concluded that China's poultry inspection system and, in turn, Chinese poultry products were the safest in the world, Section 727 would have still operated to exclude Chinese poultry products from obtaining FSIS import approval and therefore, from being exported to the United States. The United States has not disputed this conclusion. In China's view, it is inconceivable that such an arbitrary measure, with such a dramatic trade effect, could be consistent with the disciplines of the GATT 1994, the SPS Agreement, and the Agreement on Agriculture. It clearly is not.

E. EXECUTIVE SUMMARY OF THE ORAL STATEMENT OF THE UNITED STATES AT THE FIRST SUBSTANTIVE MEETING OF THE PANEL

4.137.
China's submission and oral statement overlook two important facts: first that Section 727 was adopted in the context of an ongoing food safety equivalency procedure, and second that Section 727 and was of only limited duration and effect. A proper examination of Section 727 under relevant WTO rules requires both of these facts to be fully taken into account.
4.138.
First, under the US system for ensuring the safety of imported poultry products, FSIS must determine that the exporting country has a poultry inspection system that achieves the same level of sanitary protection as the US system. The equivalency determination is not addressed to the food safety of particular products, but to the equivalency of the inspection system of the exporting country. China does not contest the right of a WTO Member to adopt an equivalency-based food safety system. However, China argues that Section 727 was "discriminatory" simply because it mentions China. This argument ignores the fundamental point that Section 727 was addressed to China because the measure was an exercise of Congressional oversight over the ongoing equivalency procedure involving China's poultry inspection system. An action taken in the context of an equivalency review of a particular country's food safety inspection system will, by its very nature, make explicit reference to that country. The country-specific nature inherent in an equivalency review does not automatically raise questions of "discrimination".
4.139.
Second, Section 727, on its face, was of only limited duration and effect. Neither Section 727, nor any other US measure, imposed an indefinite restriction on the completion of the equivalency procedures applicable to China's poultry inspection system. Rather, Section 727 applied for a period of less than seven months, and was intended to ensure that China's lax food safety enforcement was properly considered. The measure has expired, and under a separate measure – Section 743 – the funding restriction has been removed. Section 727 also applied only to the establishment or implementation of equivalency rules for Chinese poultry; it did not prohibit – and indeed contemplated – the consideration of issues related to China's food safety enforcement system during the period subject to the measure.
4.140.
Thus, to the extent that China establishes that the measure is inconsistent with any discipline of the GATT 1994, the question is not – as China seems to frame it – whether a Member may impose an indefinite import ban. Rather, the question is whether the measure actually at issue, which was limited in both time and substantive effect and which was adopted for the purpose of ensuring the consideration of a legitimate food safety issue, may be justified under GATT Article XX.
4.141.
Finally, the mere fact that a measure implicates food safety does not dictate whether or how such a measure is covered by the SPS Agreement. To the contrary, the SPS Agreement – in its Annex A – contains a specific and detailed definition of covered measures. And as illustrated in the EC – Approval and Marketing of Biotech Products dispute, even if a measure is covered by Annex A, it is far from trivial to determine how each of the differing SPS obligations apply to any particular measure.
4.142.
Along these lines, it is up to China, as the complaining party, to allege how and why a measure is covered by the SPS Agreement if it wishes to receive DSB findings under that agreement. In this dispute, China has not chosen to make the case that Section 727 is covered by the SPS Agreement. In fact, China's request for consultations plainly states that "China does not believe that the US measures at issue restricting poultry products from China constitute SPS measures within the meaning of the SPS Agreement".
4.143.
China, however, has alleged that the US measure is subject to, and is inconsistent with, disciplines under the GATT 1994. As a result, the United States has presented its defense of the measure under the relevant provisions of the GATT 1994. Had China requested consultations under the SPS Agreement, and had China made a prima facie case of how and why the US measure fell under the SPS Agreement, the United States would have presented its defense under that framework. But the United States, as responding party, cannot be expected to present a defense based on claims never consulted upon and with respect to which China has failed to make even a prima facie case.
4.144.
China asserts that two other measures – an "indefinite moratorium" and the subsequently enacted Section 743 – also are inconsistent with the WTO Agreement. Section 727, however, is the only measure within the terms of reference of the Panel. China has no basis for the allegation of the separate, distinct measure that it calls "the moratorium". In particular, China's citation to a provision in the 2008 appropriations bill does not establish an indefinite moratorium. The fact that Congress enacted a time-limited funding restriction twice does not show the existence of an "indefinite" suspension of approvals. Moreover, Section 743 disproves China's claim as it has resulted in a lifting of the funding restriction.
4.145.
In addition, contrary to China's assertions, Section 743 is not a measure that the Panel may examine for conformity with the covered agreements because it is not within the Panel's terms of reference as part of the "matter" referred to the Panel by the DSB. First, the parties did not consult on its provisions. Second, Section 743 plainly changes the "essence" of Section 727.
4.146.
China also mischaracterizes the effect of Section 727 by failing to take account of the "scope and meaning" of provisions contained in US appropriations legislation generally, and of the particular conditions contained in Section 727 specifically. US domestic law dictates that a congressional funding restriction is limited to its explicit terms. Funding restrictions do not amend or modify the underlying law administered by an executive agency. Accordingly, these restrictions do not prevent the agency from taking actions related to the prohibited act as long as the agency does not take the prohibited act itself. Further, unless the funding restriction states otherwise, it only applies to the fiscal year covered by the appropriations bill in which it is contained.
4.147.
Thus, Section 727's legal meaning was limited to preventing USDA from "establishing" or "implementing" a rule allowing poultry products from China to be imported into the United States for a temporary six and a half month period during the 2009 fiscal year. Section 727 did not create a permanent funding restriction that would impact FSIS's ability to establish and implement rules related to equivalency after its expiration. And indeed, as a consequence of Section 743, the funding restriction on FSIS has been lifted.
4.148.
Further, Section 727 did not prohibit FSIS from using funds to engage in activities under the PPIA related to an equivalency rulemaking for China. To the contrary, Section 727 directed FSIS to engage in this work, and it did so during 2009. FSIS reviewed its documentation with regard to China's equivalency application, it sent a letter to China requesting additional information on its new food safety law, and it provided an equivalency action plan to Congress. FSIS could have done even more work, including the PPIA's document analysis step, but its work was thwarted by China's failure to respond to its letter requesting additional information.
4.149.
Finally, Section 727 did not ban imports of poultry from China. Rather, the import prohibition was imposed by the PPIA, a measure not at issue in this dispute. And even in the absence of Section 727, FSIS procedures would not have necessarily allowed China to export poultry to the United States. For neither processed or slaughtered poultry was it a foregone conclusion that FSIS would find China's inspection system to be equivalent.
4.150.
Thus, the most China can allege is that Section 727 prevented FSIS from taking final actions to specifically establish or implement equivalency rules during fiscal year 2009 that might have otherwise occurred. China has no basis for alleging how, if at all, any final actions would have differed during the period covered by Section 727 had this measure not been enacted.
4.151.
In any event, Section 727 is justified pursuant to GATT Article XX(b).
4.152.
Section 727's policy objective falls within Article XX(b)'s range of policies. First, it is well known that poultry can contain bacteria, contaminants, and other additives and substances that pose a risk to human life and health. Thus, if China's authorities fail to enforce its laws to ensure that its poultry is produced under equivalent conditions, then the life or health of US consumers would potentially be at risk. Similarly, avian influenza-infected poultry can pose a risk to animal and human life and health. And entry of infected poultry from China could occur if Chinese authorities did not adequately enforce the law to ensure that poultry had been cooked or otherwise processed sufficiently to kill the disease.
4.153.
The risk posed by China's lax enforcement of its food safety laws is further highlighted by critical reports on China's systemic problems and the series of food safety crises that have plagued China in recent years. For example, the Asian Development Bank noted that "unsafe food in the PRC remains a serious threat to public health," and indicated that "there is a pressing need for further reform". Similarly, the World Health Organization's food safety chief characterized China's food safety system as "disjointed", noting that this feature of the system helped prolong the melamine crisis. Finally, a study by Global Health Governance pointed out that the reluctance of local officials in China "to enforce standards or regulations set at the provincial or national level makes it unlikely that food safety can be ensured consistently across the country." The report also stated: "corruption within the Chinese government poses a further challenge" to food safety as this problem "extends from grass-roots cadres to the highest levels."
4.154.
In addition, numerous high-profile crises have occurred, threatening the life and health of consumers and leading to frequent bans on Chinese products. Most notably, in 2007, the use of melamine in China to adulterate feed and gain bigger profits led to the deaths of numerous US household pets, with unofficial figures indicating the practice responsible for the death of up to 4,000 cats and dogs. In 2008, it was discovered that Chinese producers were using melamine in products intended for human consumption, such as baby formula, milk, and eggs. Consumption of melamine-tainted products led to over 300,000 illnesses and the deaths of at least 14 infants. The World Health Organization dubbed China's melamine crisis "one of the largest food safety events the agency has had to deal with in recent years".
4.155.
China's central government even recently acknowledged the extent of its problems with food safety. For example, China's Ministry of Health stated that "China's food security situation remains grim, with high risks and contradictions". And as a result of these problems, China was forced to enact a new food safety law earlier this year.
4.156.
These many broad-ranging food safety crises raise serious questions about China's ability to enforce its laws. And the question of enforcement is of particular importance in the context of an equivalency regime where the United States must rely on China to enforce its laws to ensure that the poultry it is exporting to the United States is safe.
4.157.
With these risks in mind, the US Congress enacted Section 727. The measure and its Joint Explanatory Statement ("JES") make clear that its policy objective was to protect against the risk posed to human and animal life and health from potentially unsafe poultry from China. In fact, the JES accompanying Section 727 states: "There remain very serious concerns about contaminated foods from China and therefore the bill retains language prohibiting FSIS from using funds to move forward with rules that would allow for the importation of poultry products from China into the U.S." Similar language was also included in the Committee Report accompanying Section 733.
4.158.
Section 727 was necessary to achieve this important policy objective in light of the severe risks posed by the importation of potentially unsafe poultry from China. China's food safety system suffers from broad systemic problems, problems that FSIS is not typically faced with when making an equivalency determination. These include widespread smuggling, corruption, and the lax enforcement of China's food safety laws. Furthermore, China has experienced numerous food safety crises in recent years, such as the devastating melamine crisis that occurred shortly after FSIS had made a final determination about China's poultry processing system.
4.159.
The conclusion that Section 727 was necessary is bolstered by the analysis that past panels have used when addressing whether a measure was "necessary" in the context of Article XX(b). Other panels have often found it helpful to weigh and balance the importance of the interests or values at stake, the contribution made by the measure to its policy objective, and the trade restrictiveness of the measure. In the instant dispute, these factors all support the conclusion that Section 727 was necessary.
4.160.
First, the need to protect human life and health from the risk posed by consuming potentially unsafe poultry is of the utmost importance, as is the need to protect animal life and health from the threat of avian influenza. Second, there is a direct relationship between Section 727's policy objective and its contribution to food safety. Section 727 directly contributed to the protection of human and animal life and health by ensuring that FSIS did not establish or implement equivalency rules that would allow for potentially unsafe poultry to be imported into the United States. In addition, Section 727 set up a process by which FSIS could further evaluate the rules in light of China's systemic problems and recent food safety crises. Finally, Section 727 was temporary and did not stop work related to China's equivalency application, and it was explicitly designed to allow FSIS to move forward with the implementation and establishment of equivalency rules when the funding restriction was lifted.
4.161.
Section 727 also meets the conditions of the Article XX chapeau. Section 727 was not discriminatory because there is no other country where the same conditions prevail as they did for China at the time the measure was enacted. No other country as far along in the equivalency process had experienced food safety crises of such a serious magnitude. Neither had any country in that situation suffered from the systemic problems that plagued China's food safety system.
4.162.
Even if the Panel considers Section 727 discriminatory, it was not applied in an arbitrary or unjustifiable manner. The BrazilRetreaded Tyres Appellate Body Report noted that whether a measure is applied in a way that is "arbitrary or unjustifiable" should focus "on the cause of the discrimination, or the rationale put forward to explain its existence". Section 727's application was not arbitrary or unjustifiable because there was a strong rationale for the measure's treatment of China that directly relates to the measure's policy objective – namely the many legitimate concerns about China's food safety system.
4.163.
Section 727 is also not a disguised restriction on trade. First, the text of the explanatory statement accompanying the measure explicitly indicates that the measure's policy objective was to protect human and animal life and health, not to protect a domestic industry. Further, if Section 727's objective were to restrict trade, it would not have included language instructing FSIS to set the stage for expeditious action on the implementation and establishment of the equivalency rules as soon as the funding restriction was lifted. Statements by members of Congress directly involved with Section 727's enactment also support this view, as does the US poultry industry's widespread opposition to the measure.
4.164.
The United States believes that any SPS claims by China are not within the Panel's terms of reference. DSU Article 1.1 states that consultations must be requested pursuant to the consultation and dispute settlement provisions of each covered agreement for which dispute settlement under the DSU is sought. But here, China's request for consultations plainly states that "China does not believe that the US measures at issue restricting poultry products from China constitute SPS measures within the meaning of the SPS Agreement".
4.165.
China's ex post facto explanation that it wanted to invoke claims under the SPS Agreement as "alternative claims" is unavailing. First, regardless of what China subjectively intended, the governing document is the request for consultations itself, which does not request consultations in order to pursue alternative claims, but asserts that the US measures at issue are not SPS measures. Second, Members routinely invoke alternative claims by stating just that: that particular claims are presented "in the alternative". China in its request for consultations could have, but did not, present SPS claims in the alternative.
4.166.
The issue presented by China's consultations request is not a mere technicality. In raising the deficiency of China's consultations request, the United States is pursuing an important systemic concern. A complaining party should not be free to claim that it is not invoking the dispute settlement provisions of a covered agreement and then later claim that it did. China's approach could lead to greater confusion in future disputes. The DSU provisions are clear and were agreed upon – a complaining party's consultations request "shall give the reasons for the request, including identification of the measures at issue and an indication of the legal basis for the complaint". As stated in the US preliminary ruling request, clarity in the request for consultations is important for the overall operation of the dispute settlement system.
4.167.
Finally, the United States agrees with China that the Panel should not accept the EU's request that the Panel alter its working procedures in order to provide enhanced third party rights. The present dispute is not comparable to past cases where panels have granted enhanced third-party rights. For example, in ECBananas III and EC – Tariff Preferences, the panel granted enhanced rights because third parties had substantial trade interests in the measure at issue in the dispute. And in ECHormones, the panel granted enhanced rights to what were essentially co-complainants in parallel proceedings. But here, the basis for the EU's request is that issues under the SPS Agreement may be further developed after the first substantive meeting. The United States submits that this rationale cannot suffice as the basis for granting enhanced third party rights. It is a common element of nearly every dispute that the legal and factual issues continue to develop after the first substantive meeting. Indeed, if this were not the case, the DSU's requirement for a second substantive meeting would be pointless.

F. EXECUTIVE SUMMARY OF THE SECOND WRITTEN SUBMISSION OF CHINA

1. Introduction and summary

4.168.
The Parties' responses to the Panel's questions confirmed certain undisputed facts:

· Securing and maintaining on an annual basis an equivalent status under FSIS rules is the essential prerequisite for exporting poultry to the United States.

· During the past two years, Section 727 and Section 733 foreclosed for China – but not any other WTO Member – any opportunity to secure and maintain equivalence status and, consequently, any opportunity to access the US poultry market.

· The termination of China's access to the full range of FSIS rule-making procedures began with the implementation of Section 733 in December 2007 and has continued until at least 12 November 2009.

· There was no possibility that poultry from China could have been imported into the United States at any time between December 2007 and 12 November 2009 without FSIS first conducting a detailed audit and examination of China's poultry safety and inspection regime.

· During the period from December 2007 through 12 November 2009, FSIS rules-based equivalence procedures continued to be available to countries (a) affected by highly pathogenic avian influenza, (b) that failed to adequately enforce their food safety laws, and/or (c) where FSIS found "systemic failures" in food safety inspection procedures, including those previously found to be equivalent.

· Chinese exports of non-poultry products to the US market increased considerably throughout the December 2007 – 12 November 2009 period, without Congress ever suspending China's access to normal import procedures applied by the FDA.129

4.169.
China has previously establishedthat Section 727 violates the GATT 1994, the Agreementon Agriculture and the SPS Agreement130, and that Section 727 cannot be justified under Article XX(b) of GATT 1994. The arguments set forth by China to rebut the US Article XX(b) defence also support China's SPS claims.

2. The United States cannot sustain its argument that China and the United States did not consult under the SPS Agreement

4.170.
The United States continues to elevate form over substance in addressing the Panel's jurisdiction over the SPS claims, maintaining its assertion that China did not request consultations pursuant to Article 11 of the SPS Agreement. However, China's consultations request specifically invoked Article 11 and listed potential violations of specific provisions of that Agreement. Furthermore, the United States has not claimed that China's consultations request affected US due process rights with respect to the SPS Agreement claims. This leaves the United States' argument as one that is purely formalistic.

3. China has established prima facie claims under Articles I:1 and XI:1 of GATT 1994and the Agreement on Agriculture

(a) China's claims under Article I:1 of GATT 1994

4.171.
In enacting Section 727, the United States withheld an advantage it accorded to all other WTO Members by denying only Chinese poultry products the opportunityto access FSIS procedures and, thus, the possibility of being exported to the United States. China has repeatedly demonstrated that "like products" in this dispute are "poultry products" hypothetically capable of accessing the procedures and being exported to the United States. While China has established a prima faciecase, the United States has never presented a rebuttal.

(b) China's claims under Article XI:1 of GATT 1994

4.172.
Section 727 is inconsistent with Article XI:1 of GATT 1994, because it imposes import restrictions that negatively impact the competitive opportunities for Chinese poultry products, and also imposes a de facto import prohibition on such products. The United States effectively concedes a violation of Article XI:1, as the only defence it presents is under Article XX(b).

(c) China maintains its claim under Article 4.2 of the Agreement on Agriculture

4.173.
China is confused by the US statements asserting that China indicated that it would no longer pursue its claim under Article 4.2 of the Agreement on Agriculture. China did no such thing. China has established a prima facie case that Section 727 is inconsistent with Article 4.2, because the measure results in the maintenance of quantitative restrictions on the import of Chinese poultry products.131 The United States has not rebutted China's prima facie case other than asserting a defence under Article XX(b) of GATT 1994, which lacks any merit.

4. The United States has not established that Section 727 falls within the exception under Article XX(b) of GATT 1994

(a) Introduction

(i) Section 727 is not "necessary" to the protection of human life and health under paragraph (b) of Article XX

4.174.
Section 727 does not fall within the scope of the exception in GATT Article XX(b) because, inter alia, it is not "necessary" for the protection of human or animal life and health.132
4.175.
First, Section 727 (and Section 733 before it) prohibited the entry of just one of the many types of food products that were imported from China between December 2007 and November 2009 in ever-increasing amounts. During the time that these measures were in effect there was no evidence of any food safety problems related to Chinese processed poultry. Second, there was no imminent risk posed by Chinese poultry as importation was never "imminent" during the period of December 2007 – November 2009. FSIS was required to conduct audits of China's poultry processing inspection system, and Chinese poultry could only have been imported following a multi-month, science-based confirmation by FSIS that the system remained equivalent to that of the United States. Similarly, China would have had to obtain an initial equivalence determination by FSIS to export other types of poultry. Sections 727 and 733 were thus not even remotely "necessary" to protect US consumers from any alleged imminent danger. A less trade-restrictive approach that would have achieved the US' preferred level of protection would have been application of the standard FSIS procedures, correctly described by the United States in its responses to the Panel's questions as being "based on science".133 In sum, Section 727 does not fall within the scope of Article XX(b), as it is not "necessary" for the achievement of its stated objective.

(ii) Section 727 does not fulfil the requirements of the chapeau to Article XX

4.176.
The United States also has failed to establish that Section 727 does not result in "arbitrary or unjustifiable discrimination between countries where the same conditions prevail", within the meaning of the chapeauof Article XX. China has demonstrated that the de jure discrimination against China in Section 727 is arbitrary for several reasons, including: the lack of scientific risk assessment for the measure; the absence of evidence that China's processed poultry inspection system was deficient; the different treatment accorded to other WTO Members such as Mexico; the different treatment accorded to non-poultry food products from China relative to Chinese poultry products; and the lack of evidence that Chinese poultry was more likely to be contaminated or that such contamination was less likely to be detected in China as opposed to in other Members.134

(b) Various US Arguments related to its Article XX(b) defence are unsupported by the evidence and legally erroneous

4.177.
In its responses to questions, the United States raised various arguments in an attempt to justify Section 727 under Article XX(b) of GATT 1994. China addresses each one below.

(i) China did not have access to normal PPIA/FSIS procedures, by the explicit terms of Section 727 and its predecessor

4.178.
The United States claims that Section 727 did not deny China's access to the PPIA, allowing FSIS to conduct activities "related to" China's equivalence. These claims are irrelevant, however, as the explicit terms of Section 727 prohibit any action that could result in the establishment or implementation of an equivalence rule for China. An FSIS document specifically states that equivalence verification is "pending" for China because "FY 2008 appropriation legislation bars the FSIS from spending funds on import of poultry from China".135
4.179.
Yet the United States now suggests that, when read in light of the JES, Section 727 permitted FSIS to take a number of equivalence-related actions.136 This is a unjustified, post hoc attempt to rewrite the unambiguous, explicit wording of Section 727. Furthermore, legislative history only has a limited role under US law; only if the textual meaning is unclear should an advocate examine the legislative history. China notes that the interpretation of a domestic measure is a question of fact for the Panel. However, even if the Panel elects to refer to the JES, it only confirms the extent to which Congress restricted the role for the FSIS in relation to China's poultry equivalence. Consistent with the text of Section 727, it does not authorize any funding for FSIS to implement or establish a rule in respect of China. At most, it permits two limited activities: first, USDA is "urged" to "submit a report" on China's food safety laws and, second, USDA is "directed" to submit a "plan of action" to guarantee the safety of poultry products from China. Neither activity actually forms a part of the equivalence procedures and neither permits the establishment or implementation of a rule.
4.180.
Finally, the United States suggests that the 12 May 2009 letter to China requesting documentation regarding China's general food safety laws was a normal part of FSIS's equivalence process under the PPIA. But nothing in that letter states that the information was needed for a equivalence procedures – instead, it references the report that FSIS was "urged" to submit to Congress under the JES. The letter did not, and could not, create any expectation in China that submitting the requested information would result in the establishment or implementation of an equivalence rule.137
4.181.
In sum, it is misleading and incorrect for the United States to now suggest that FSIS was taking steps to maintain China's equivalency status for processed poultry and to establish its equivalency for domestically-slaughtered poultry by creating a "plan" starting in May 2009. Even under the most expansive interpretation, the preparation by FSIS of a "plan of action" or a "Report to Congress" does not come close to fulfilling the many procedures necessary to secure and maintain equivalence. Even if FSIS theoretically could have performed work "related to" China's equivalence determinations, the explicit terms of Section 727 manifestly excluded the possibility of FSIS finalizing or maintaining a finding of equivalence for China, due to the restriction on funding for establishing or implementing a rule in Section 727.

(ii) Section 727 was not necessary because there were no "imminent" imports of Chinese poultry at the time it was enacted

4.182.
The United States repeatedly argues that Section 727 was "necessary" within the meaning of Article XX(b) because no other country that was allegedly "imminently" able to export poultry products had recently experienced food safety crises. However, after claiming that Chinese imports were "imminent" at the time that Section 727 (and presumably 733) was enacted, the United States contradicts itself, pointing out that China was not in a position to immediately export poultry products when funding was restricted as FSIS would have to conduct an equivalence maintenance audit for processed poultry and finalize a rule for slaughtered poultry before the relevant poultry products could enter the United States.
4.183.
Equivalence maintenance audits include in-country meetings with officials, on-site inspections, and analysis of information about China's inspection system. If FSIS found the system to be somehow deficient, it would suspend or withdraw equivalence. Similarly, the finalization of a rule also involves several procedural steps. At a minimum, the as-yet-uncompleted steps would include the publication of a proposed rule, review of comments, and a final decision by FSIS, followed by – if positive – the publication of a final rule in the CFR. If started at the beginning, an initial equivalence determination would take three to five years of resource intensive work before a rule may be finalized.
4.184.
The United States confirms why FSIS was uniquely placed to determine whether general Chinese problems with food safety were actually impacting China's poultry inspection system. It stated: "[u]nder its applicable statute and regulations, FSIS is permitted to consider any issue relevant to the equivalency of another country's poultry inspection system when it is making an equivalency determination".138First, it is clear from this passage that the FSIS already had the ability to consider the issues of concern to the United States in the course of its procedures. Thus, it is those procedures, not Section 727, that would be "necessary" to determine whether China's processed poultry safety and inspection system is reliable. Thus Section 727 cannot be considered "necessary" within the meaning of Article XX(b). Second, if it were true that China had such severe food safety problems, logically that should have made it easier for FSIS to find and reject or withdraw equivalence. Third, FSIS procedures are "based on science".139 Yet Sections 733 and 727 cut off funding allowing FSIS scientists to conduct audits of China'sinspection regime. It is illogical to assert that Section 727 was necessary to ensure FSIS would fully consider these serious issues as, by removing FSIS funding, Section 727 ensured that FSIS scientists and experts could not examine these alleged problems in any comprehensive manner leading to an equivalence rule.

(iii) FSIS equivalence procedures for poultry are not inherently more risky for human life and health than non-equivalence safety and inspection procedures

4.185.
The United States argues that equivalence systems involve significant risk, and that systemic enforcement problems would be of particular importance in the context of equivalence due to the reliance placed on the exporting country. However, contrary to the US suggestion, FSIS is not permitted to blindlyrely on the exporting country. Foreign poultry cannot enter the United States unless the scientific experts at FSIS affirmatively grant – and regularly confirm the maintenance of – equivalence. Under the procedures, FSIS officials must confirm that the applicant country's poultry inspection regime achieves sanitary results equivalent to those of the US system. Without such an initial determination – which takes several years to obtain and which has only been achieved by 10 countries – foreign poultry cannot enter the United States. Furthermore, the initial equivalence determination is constantly re-verified on an ongoing basis, through reviews, audits, and re-inspection. Indeed, the United States has pointed out that, in the absence of Section 727 and 733, FSIS would have audited China's inspection system before any imports from China could have entered the United States.
4.186.
Moreover, there is no evidence that non-equivalence-based systems, such as those employed by FDA, are inherently less risky than FSIS equivalence procedures. The active involvement of FSIS inspectors and scientists in the establishment and annual maintenance of equivalence, coupled with enforcement of a poultry safety and inspection system by the exporting country, does not create a greater risk to human life or health than FDA rules and procedures regulating the importation of non-poultry food products. To the contrary, FDA procedures generally regulate the safety of imports of many food products by relying on individual exporting companies to certify compliance with FDA's import requirements.140 For the vast majority of imported food products, FDA does not appear to conduct any "in-country" audits prior to exportation to the United States. Furthermore, FDA inspectors are not present at every port-of-entry. The fact that FDA rules generally do not employ equivalence procedures does not mean that FDA procedures can guarantee less risk to human life or health than FSIS procedures related to equivalence. Thus, the US argument that Sections 733 and 727 were necessary because the FSIS system is somehow more vulnerable than other import procedures cannot be sustained. To the contrary, the targeting of poultry was both unnecessary and constituted arbitrary and unjustified discrimination.

(iv) US arguments alleging a fear of a breach of APHIS Regulations and avian influenza do not support a conclusion that Section 727 is necessary

4.187.
The United States incorrectly contends that Sections 727 and 733 were necessary because of a risk that China's poultry inspection system could not protect against the spread of poultry diseases such as highly pathogenic avian influenza (HPAI).
4.188.
China's approval to export poultry to the EU is limited to processed poultry in a hermetically sealed container that has been heated to at least 70 degrees. This reflects current science and OIE recommendations about avian influenza, including the understanding that processing (cooking) kills the H5N1 virus and that cooked poultry cannot transmit the virus. China had obtained FSIS authorization in 2006 to export only processed poultry to the United States (and even then, only poultry slaughtered in the United States or an equivalent country). Thus, there was no need for Sections 733 and 727 to protect domestic US poultry from the risk of avian influenza, since: (a) the virus is not transmitted via cooked poultry; and (b) China could not have exported anything other than cooked processed poultry to the United States at that time, due to its limited FSIS authorization and APHIS avian flu restrictions.
4.189.
There was also no "imminent" risk from avian influenza, as FSIS audits were required before even fully-cooked poultry could be exported. "Animal diseases" and "enforcement" are two of the five risk areas evaluated by FSIS auditors. When audits were conducted in 2004 and 2005, a period during which HPAI was a major worldwide concern, the FSIS found "no deficiencies" in China's handling of poultry diseases with respect to processed poultry, and was satisfied with China's ability to enforce its poultry safety regulations. Had this not been the case, FSIS would have denied equivalence for processed poultry. In addition, if Sections 733 and 727 had not been enacted, FSIS would have conducted a maintenance audit before China could have exported any processed poultry to the United States under the 2006 rule. Had inspectors uncovered problems during this audit, FSIS could have withheld the confirmation of equivalence, and no Chinese poultry would have entered the United States. Furthermore, if the US poultry industry was concerned that Chinese poultry could have posed a risk to US animals, or to consumer confidence, it would have opposed the removal of Section 727. It did not. China also notes that more than 80 countries have been affected by avian influenza, including some facing significant problems in regulating food safety. The US Congress did not block access to FSIS procedures for these or any other countries – only for China.

(v) The United States references anecdotal news reports on eggs and animal feed, but provides no evidence of food safety problems related to processed poultry

4.190.
The United States submitted two further exhibits (US-62 and 63), to support its claim that Section 733 and 727 were "necessary" to respond to poultry-related food safety issues in China. However, both exhibits relate to feed for poultry raised and (possibly) slaughtered in China. Under the terms of the established processed poultry rule, China could only export poultry that had been raised and slaughtered in the United States (or another equivalent country). Alleged food safety crises that related to contents of the feed given to birds raised in China could therefore not have affected: (a) the health at slaughter of poultry raised in the United States or other equivalent countries; or (b) the safety of processed poultry from China. China also notes that there is no evidence that the US Congress took these cases of alleged contamination into account when enacting Sections 727 and 733.

(vi) The United States fails to demonstrate that china is different than all other countries in a manner that justifies arbitrary discrimination

4.191.
A key element of the US Article XX(b) defence is establishing that the same conditions do not prevail between China and other countries eligible for normal FSIS procedures. The United States has this burden and it has not met it. It asserts generally that the same conditions do not prevail for China because no other WTO Member that had the scope and type of alleged food safety problems as China was so far along in the equivalence process, but it provides no credible evidentiary support.141

Pool of countries to assess whether "same conditions" prevail

4.192.
It is proper for the Panel to compare China to everyother WTO Member to assess "same conditions", as each had the opportunityto seek, achieve, and maintain equivalence. Every WTO Member except China had the right to access normal FSIS procedures and to possibly obtain authorization to export poultry if they obtained and maintained equivalent status. Only China was irrebuttably presumedto not be equivalent. However, even if the pool of Members are those that had applied for or had already been granted equivalency, China was still in the same position as these other countries, as elaborated below.

Issue of "imminent" imports of Chinese poultry

4.193.
The United States acknowledges that China is "similarly situated" in "some ways" to WTO Members that had applied for equivalence. However, it then incorrectly asserts that only China was in the position of imminently being able to export poultry products and had recently experienced food safety crises. As China has demonstrated above, the United States admits that China was not in a position to imminently export poultry products at the time that Section 733 or 727 were enacted. Thus, during the pendency of those provisions, China arguably posed less of a risk than other "equivalent" countries, such as Mexico – which was exporting poultry to the United States when FSIS concluded that it was experiencing "systemic failures" in its poultry inspection regime. Thus, evenif the US' unsupported allegations of risks were true, such risks would appear to be the "same" as the actual risks posed by Mexico's "systemic failure".

Applicability of US – Shrimp

4.194.
China is similarly situated to any WTO Member seeking access to FSIS procedures to secure an equivalence determination or to maintain a prior finding of equivalence, under the rationale of the Appellate Body's decision in US – Shrimp. In that case, the 'same conditions prevailing' 'between countries' were that each of the shrimp producing countries sought to be certified to export shrimp to the US market. The Appellate Body found that the different treatment of exporting countries desiring certification in order to gain access to the United States shrimp market constituted unjustifiable discrimination within the meaning of the chapeau of Article XX. The Appellate Body made a similar finding on arbitrary discrimination. It saw no need toexamine the conditions within each of those countries in making these findings.
4.195.
These findings are highly relevant and analogous to this dispute. Like in US – Shrimp, the only way to obtain the right to export to the US market is to have access to and comply with FSIS regulations, and all applicants are in the same position because all expect that these regulations will be applied consistent with due process and in a transparent and timely manner. China is in the same position as other Members who seek access to equivalence procedures.

Poultry risk factors in countries seeking to export poultry to the United States

4.196.
Even assuming arguendo that the "same conditions" are those inside the applicant or equivalent countries, China was still in the same position as these other countries. Poultry contaminants are common to many poultry-producing countries, including countries with significant resources allotted to food safety such as the US, EU, and Japan. As to the alleged threat from avian influenza, in terms of the application of APHIS and FSIS rules, all other countries have generally been treated the same – except China. No other country has ever had extraordinary congressional action bar its access to FSIS procedures. To the contrary, Israel, affected by HPAI in 2008, exported 1,957,215 pounds of poultry that year to United States.
4.197.
While it provided no evidence of systemic issues relating to China's poultry inspection system, the United States argues that no other country allegedly experienced systemic failures in food safety. The evidence in Exhibit CN-28, an audit report from Mexico, directly contradicts this, showing FSIS found "systemic failures" in three enforcement-related risk areas. Yet Mexico's access to FSIS procedures was never blocked by extraordinary action by Congress, and Exhibit CN-72 shows that poultry products were imported from Mexico during that time.
4.198.
This evidence strongly supports China's assertions that normal FSIS procedures are a reasonable, and less trade-restrictive, alternative to Section 727. FSIS is clearly capable of identifying and working through a wide range of problems, even systemic failures. This evidence also strongly contradicts US arguments that Sections 727 and 733 did not "arbitrarily" or "unjustifiably" discriminate against China. It is not credible for the United States to argue that Mexico somehow presented a far less serious problem to human life and health. In addition, what is relevant for the purposes of the "same conditions" element of the Article XX chapeauis that both China and Mexico export or seek to export poultry to the United States, both have achieved a rule of equivalence for processed poultry, and FSIS procedures and resources are capable of conducting a full examination of each country's poultry inspection system. In sum, the United States cannot meet its burden under the chapeauof Article XX to establish that the same conditions do not prevail between China and other countries seeking to take advantage of FSIS procedures and potentially export to the United States.

5. China's claims under the SPS Agreement

4.199.
The United States has not yet presented a substantive defence of the SPS claims. It claims it will do so in its second written submission. China will respond to any such defences asserted by the United States if and when they are made.

G. EXECUTIVE SUMMARY OF THE SECOND WRITTEN SUBMISSION OF THE UNITED STATES

1. Introduction

4.200.
Section 727 was justified under GATT Article XX(b). The measure, which was enacted in the context of an ongoing equivalence determination, was necessary to protect human and animal life and health against the risk posed by Chinese poultry. Section 727 was necessary to ensure FSIS thoroughly considered China's systemic food safety problems, its widespread food safety crises, and its enactment of a new food safety law before "implementing" or "establishing" rules that would allow China to export its potentially dangerous poultry to the United States.
4.201.
Throughout this dispute, China has attempted to distract the Panel from the question of Section 727's necessity for poultry. For example, China implies that Section 727 was not necessary because it did not apply more broadly to all Chinese products; however, this argument ignores the fact that poultry was the only product subject to an equivalence determination when Section 727 was enacted. Similarly, China downplays the relevance of its many food safety crises, but ignores the concerns that they raise about its ability to enforce its food safety laws. Finally, China argues that Section 727 is arbitrarily or unjustifiably discriminatory while ignoring distinctions between China and others who have tried to export poultry to the United States.
4.202.
The US submission will focus on the key issues that China has chosen to ignore. In doing so, the United States will rebut China's flawed arguments and again demonstrate Section 727's justification under GATT Article XX(b).
4.203.
In addition, the United States will address China's arguments, first submitted in its oral statement at the first substantive meeting, that Section 727 is subject to the SPS Agreement and inconsistent with certain SPS Agreement obligations. Any claims by China under the SPS Agreement are not within the Panel's terms of reference. Further, China has failed to show either that the SPS Agreement provisions cited by China apply to Section 727, or that Section 727 is inconsistent with those provisions. Finally, as China's substantive arguments under its SPS claims are essentially the same as those presented in connection with Article XX(b) of the GATT 1994, there is no need for the Panel to address these additional claims under the SPS Agreement.

2. Section 727 is justified under GATT Article XX(b)

4.204.
Section 727 was justified under GATT Article XX(b). Section 727 was within the scope of the XX(b) exception because it was necessary to protect against the risk posed by the importation of Chinese poultry. At the same time, Section 727 was consistent with the chapeau because it was not applied against China in a manner resulting in arbitrary or unjustifiable discrimination, nor was it a disguised restriction on international trade.
4.205.
The United States has demonstrated that Section 727 falls under the scope of the Article XX(b) exception because its policy objective was to protect human and animal life and health from the risk posed by Chinese poultry. Since China has not challenged this element, the United States will focus on issues related to Section 727's necessity.
4.206.
Section 727 was necessary to protect against the risk posed by the importation of Chinese poultry. China has struggled with corruption, smuggling, and the lax enforcement of its food safety laws. In addition, avian influenza exists in China, and China has suffered numerous food safety crises in past years. As a result, China was in the process of overhauling its food safety law when Section 727 was enacted. At the same time, China was also in the midst of an ongoing equivalence proceeding for poultry. Therefore, Section 727 was necessary to ensure that FSIS fully considered China's systemic food safety problems before "establishing" or "implementing" rules that would allow China to export poultry products to the United States.
4.207.
This conclusion is consistent with the analysis used by the Appellate Body to determine whether a measure is necessary, which involves a weighing and balancing of multiple factors (importance of the policy objective, contribution of the measure to its policy objective, trade restrictiveness). All of these factors support Section 727's necessity.
4.208.
Section 727 directly contributed to the protection of human and animal life and health by ensuring FSIS did not implement" or "establish" rules related to China's equivalence without fully considering the systemic problems with China's food safety system and their relevance to China's poultry inspection system. Before China's equivalence application, FSIS had never before been confronted with a situation that presented such severe systemic problems with food safety law enforcement or such numerous and widespread food safety crises. Therefore, Section 727 was necessary to ensure FSIS adequately dealt with these unique issues.
4.209.
To help accomplish this task, the JES accompanying Section 727 specifically directed FSIS on how to move forward with China's equivalence determinations. In accordance with the JES, FSIS developed an action plan shortly after Section 727 took effect. FSIS implemented the action plan's first three steps during 2009. FSIS reviewed and summarized all of its documentation related to China's equivalence application and reached out to China via letter on May 12, 2009. This letter included a summary of the documents FSIS had uncovered and requested that China provide any changes to its relevant food safety laws to FSIS for review.
4.210.
FSIS needed updated documentation from China to complete the document review step, a normal part of the equivalence process under the PPIA. However, because China did not provide the requested information, FSIS has not been able to complete its document review or any of the action plan's subsequent steps, such as the on-site audits, which are also part of the PPIA. If China had provided this information, FSIS could have taken further actions under the PPIA.
4.211.
In response to its experience evaluating China's equivalence and Section 727, FSIS has reconsidered the extent to which the agency communicates with US trading partners and the extent to which it considers food safety issues that do not directly involve meat, poultry, or egg products. In the past, FSIS limited its equivalence evaluations to the information provided by the country regarding its food regulatory systems for meat, poultry, or egg products. Now, FSIS has expanded the scope of its equivalence review to consider information that does not directly involve the products it regulates but have a bearing on the integrity of the country's food safety system. This new process will apply to China's equivalence review as well as the review of other countries. FSIS believes that this will help address some of the issues raised by China's equivalence application and US consumers will be better protected as a result.
4.212.
During 2009, FSIS took other steps to improve the equivalence process. For initial equivalence determinations, FSIS revised the Self‑Assessment Tool it asks exporting countries to submit as a part of their initial application. Similarly, for ongoing monitoring of equivalent countries, FSIS improved its audit methodology to better ensure the ongoing adequacy of system controls after a country has been found equivalent. FSIS believes these new processes will be more effective and has requested all of its trading partners, including China, adhere to them.
4.213.
In response to the issues raised by China's equivalence application, the rest of the US Government has also taken action to evaluate and address the risks posed by Chinese poultry imports. In June 2009, the House Agriculture Appropriations Subcommittee held a hearing to examine "the process the US Department of Agriculture used to determine China's equivalency to export processed poultry to the United States." USDA also released a report in June 2009 thoroughly examining the safety of food imported from China. Further, in March 2009, President Obama created a Food Safety Working Group focused on enhancing US food safety laws, including improving the United States' ability to ensure the safety of imported food from China and other countries. These actions all made a material contribution to the protection of human and animal life and health, the vitally important policy objective of Section 727.
4.214.
China argues that its widespread food safety crises are not relevant to Section 727's necessity. The United States disagrees. In fact, China's melamine crisis and many other non-poultry crises are relevant to an equivalence decision because they raise questions about a country's ability to enforce its food safety laws. And enforcement problems are particularly troubling in the context of an equivalence regime. The reason for this is that after FSIS has made its initial equivalence determination for a particular exporting country, it relies on that country to enforce its laws to ensure that the US level of sanitary protection is being met. And if the exporting country fails to enforce its laws, it could pose a direct risk to the life and health of those who consume the poultry produced in potentially dangerous conditions.
4.215.
China argues that Section 727's necessity is undermined by the fact that the measure did not apply to other Chinese products. In essence, China's argument appears to be that a Member may not take action to protect life or health from the risk posed by a particular product until after that Member has evaluated the risks posed by all products, and any action must be comprehensive with respect to all products. But of course nothing in Article XX(b) says this, nor does Article XX(b) say that a Member must delay action to protect life or health until after such a comprehensive approach can be put in place. Not only does China's approach have no basis in the text of Article XX(b), but it does not make sense to say that Members agreed that they could not apply measures to protect life or health with respect to particular products, but only with respect to all products. It is clear that the delays inherent in such an approach, and the resultant risks to life and health, would not be acceptable to Members.
4.216.
In addition, there were several very good reasons why Section 727 applied only to poultry. First, poultry is subject to FSIS's equivalence regime, which is different from FDA's regime for ensuring the safety of the products under its jurisdiction, which include all of the food products China has exported to the United States to date. While FSIS and FDA share a similar goal – namely, ensuring that imported food is safe – they use different legal frameworks to achieve this goal.
4.217.
Under FSIS's equivalence system, countries desiring to export an FSIS-regulated product to the United States must apply to FSIS for approval. FSIS's approval process examines whether a country's inspection system achieves the same level of sanitary protection as the US system. If FSIS determines that the foreign country's system is equivalent, the country is then approved to export that product to the United States. Although FSIS conducts follow-up audits, FSIS generally relies on the exporting country to enforce its laws to ensure that its inspection system continues to achieve the US level of sanitary protection after the initial determination is made. If a country fails to enforce its laws, this level of sanitary protection may not be maintained.
4.218.
By contrast, FDA does not require an exporting country's system to be found equivalent to the US regulatory system prior to allowing the entry of food products. Rather, FDA approaches compliance on a firm‑by‑firm basis, and any firm whose products comply with applicable FDA requirements can ship to the United States. When the product reaches the US border, it is then examined for violations of FDA requirements. If a violation is found, FDA works with the firm to have the product brought into compliance. If the product cannot be brought into compliance, it is re‑exported or destroyed.
4.219.
These differences between the regulatory regimes are relevant to the question of Section 727's necessity. The reason is that China's lax enforcement of its food safety laws raise particular concerns in the context of an equivalence regime that relies on the exporting country to enforce its laws to ensure that the US level of sanitary protection is maintained that may not be raised in other contexts. Thus, Section 727 was necessary in the context of FSIS's equivalence regime to ensure that China did not export potentially unsafe poultry to the United States.
4.220.
Second, China had never before tried to export a product under FSIS's jurisdiction to the United States, and before China's poultry application, FSIS had never before been faced with a review of any food inspection system within China. Therefore, FSIS was not accustomed to dealing with a country with such severe food safety problems. Given the unique nature of the task FSIS was facing, Section 727 was necessary to ensure the agency more thoroughly considered its ultimate determination on the equivalence of China's poultry inspection systems. Further, because poultry was the only product from China with a pending equivalence application, Section 727 was targeted to only affect the equivalence of poultry products.
4.221.
Third, China's poultry industry has suffered from food safety crises. For instance, in 2008, melamine was found in animal feed that was consumed by chickens in China and in eggs laid by Chinese chickens. As a result of this, China's Health Secretary stated that China would begin testing chicken meat for melamine. Similarly, in 2006, ducks and hens in China's Hebei and Zhejiang Provinces were fed carcinogenic red dye so their red-yolk eggs would sell for a higher price. Poultry from China was also smuggled into the United States in 2006. Further, China is a country where avian influenza is known to occur. This is of particular concern due to China's problems with lax food safety enforcement. Under APHIS regulations to prevent the spread of avian influenza, any poultry exported to the United States must be fully cooked or otherwise processed sufficiently to kill the avian influenza virus. Thus, China's poor enforcement track record raised concerns about whether Chinese authorities would enforce APHIS's requirements to protect against the potential spread of avian influenza.
4.222.
Finally, Section 727 is not the only measure that the United States has taken to address the risk posed by unsafe Chinese imports. In fact, FDA has issued import alerts against Chinese products that it has determined are unsafe, including red melon seeds, bean curd, dried fungus and mushrooms, fresh garlic, honey, farm-raised fish, wheat gluten, rice protein products, shrimp, eel and milk products. FDA refuses a much higher proportion of food from China than other countries. Further, FDA in 2007 also negotiated a Memorandum of Understanding (MOU) with China to address its concerns about the melamine crisis.
4.223.
Despite the numerous problems FDA has had with Chinese imports, China continually refers to its increasing exports of these products in an attempt to undermine Section 727's necessity. For example, China rhetorically asks why the US Congress did not cut out funding to allow the import of products regulated by FDA. Putting aside whether China believes it would be advisable to take this action, the implication that the United States has not acted against other unsafe Chinese products is simply untrue. The United States will and does take appropriate measures to protect human life and health when it is necessary to do so. For example, while Section 727 was necessary to achieve this goal in the context of poultry, FDA's import alerts and an MOU were necessary in the context of other Chinese food products.
4.224.
If China's export statistics prove anything, it is that the United States is willing to trade with China when it can be confident that the products China is exporting are safe. That said, the fact remains that FDA's treatment of products under its jurisdiction is simply not relevant to whether Section 727 was necessary to protect against the risk posed by poultry imports from China. The Panel need not examine whether the United States could have or did take additional steps to address concerns about other Chinese food products. The only question before the Panel is whether Section 727 was necessary to protect human and animal life and health based on concerns about Chinese poultry. As the United States has demonstrated, this was the case.
4.225.
While the United States bears the burden to demonstrate that Section 727 was necessary in accordance with Article XX(b), it does not have to "show in the first instance, that there are no reasonable alternatives to achieve its objective." Rather, the complaining party must put forward a reasonably available WTO-consistent alternative. In the instant dispute, China has failed to present a reasonably available alternative that achieves the US level of protection, which requires that processed and slaughtered poultry be safe. China's proposed alternative – "the application of normal FSIS procedures" – is not an alternative at all. Rather, China's suggestion that the US adopt this so-called "alternative" is simply another way of saying that Section 727 was not necessary in the first place. In this sense, China is making a circular argument.
4.226.
Section 727 also complies with the Article XX(b) chapeau because it is not applied in a manner that results in arbitrary or unjustifiable discrimination against China nor is it a disguised restriction on trade. Because China does not appear to be challenging Section 727 as a disguised restriction on trade, the United States will focus its discussion on the issue of discrimination.
4.227.
Section 727 did not discriminate against China in an arbitrary or unjustifiable manner. At the time the measure was enacted, Chinese poultry was the subject of an ongoing equivalence review. An action taken in the context of an equivalence review of a particular country's food inspection system will, by its very nature, make explicit reference to that country. The country-specific nature that is inherent in an equivalence review does not, as China seems to argue, automatically raise questions of arbitrary or unjustifiable discrimination.
4.228.
In addition, Section 727 did not deny China access to the PPIA. The legal impact of an appropriations restriction is limited to its explicit terms. Section 727 states that "None of the funds made available in this Act may be used to establish or implement a rule allowing poultry products to be imported into the United States from... China." Section 727's legal effect is limited to prohibiting the "establishment" or "implementation" of equivalence rules for Chinese poultry, nothing more. In accordance with the action plan accompanying Section 727, FSIS was permitted to engage in activities related to the equivalence rulemaking during fiscal year 2009. This includes actions that are part of the PPIA. Therefore, China was not discriminated against vis-a-vis other WTO Members because it was not denied access to the PPIA.
4.229.
China also argues that it was discriminated against because the United States is not applying the same ALOP to Chinese poultry as it is applying to poultry from other WTO Members. China's assertion is untrue. In general, the United States requires that poultry be safe. However, requiring the same ALOP for all Members who are seeking to export poultry products to the United States does not mean that all of these Members will have identical experiences with the equivalence process. Some Members will take a long period of time to achieve equivalence, while others may never be found equivalent. These different experiences by Members seeking to export poultry products to the United States make sense. In order to ensure that its ALOP is met, the United States may have to take different steps in different circumstances in order to respond to the particular challenges that each application presents.
4.230.
China also compares itself with those WTO Members who have achieved equivalence for their poultry inspection systems and are currently eligible to export poultry products to the United States in an attempt to show discrimination. However, Section 727 did not arbitrarily or unjustifiably discriminate against China vis-a-vis these Members because the same conditions did not prevail in any of them as prevailed in China when Section 727 was enacted.
4.231.
From a broad standpoint, China is unlike any of the other Members whose poultry inspection systems have been found equivalent with that of the United States. The reason for this is that none of these Members have experienced widespread food safety crises that have raised fundamental concerns about the Member's ability to enforce its laws. In addition, none of these countries have dealt with an issue like the melamine crisis, which the head of the World Health Organization dubbed "one of the largest food safety events the agency has had to deal with in recent years." Thus, it is not accurate to say that the same conditions that prevail in these Members prevailed in China at the time that China was going through the equivalence process.
4.232.
Another distinction between China and these Members is that many of them had been trading with the United States under an "equal to" regime for many years without significant incident before their applications for equivalence were considered. Indeed, FSIS's equivalence process only dates to 1995 and the adoption of the Uruguay Round Agreements Act. Before that time, Canada, France, Great Britain, Israel and Hong Kong had already been exporting poultry products to the United States under FSIS's old regime and all of these countries had a history of supplying safe products without incident. Thus, at the time these WTO Members were subject to FSIS's equivalence process to determine whether they could continue to import poultry products to the United States, FSIS already had confidence in their systems for ensuring the safety of the poultry that they produced. Therefore, their situations were different from China's, which had never before exported poultry to the United States when it applied for equivalence in 2004.
4.233.
Many of these Members also had a history of exporting meat products to the United States at the time they applied for equivalence for poultry. For example, Chile was found eligible to export meat products to the United States in 2005 before it was found eligible to export poultry in 2007. Thus, at the time FSIS was examining Chile's poultry inspection system, it already had familiarity with Chile's inspection controls and had confidence that Chile could be relied upon to enforce its law to ensure that the poultry it exported to the United States was produced in conditions that met the US level of sanitary protection. Similarly, both Australia and New Zealand had exported meat products at the time they were found equivalent for ratites.
4.234.
Among the equivalent Members that China compares itself with, it singles out Mexico as a Member who has had problems with food safety enforcement. While it is true that FSIS found some deficiencies during audits of Mexico's meat and processed poultry system, it is not unusual to find at least some deficiencies during audits of food regulatory systems. In general, when deficiencies are found, the Member is advised of the deficiencies and then initiates appropriate corrective actions. During the next audit, FSIS verifies the effectiveness of the corrective actions taken by the country. This is the process that was followed after the Mexico audits. Because Mexico took immediate and appropriate actions, FSIS continues to have confidence in the ability of Mexico's meat and poultry inspection system to produce products for export to the United States that are wholesome and not adulterated. Further, the United States is also not aware of such widespread crises in Mexico as have occurred in China and is not aware of any broad systemic problems that raise significant questions about Mexico's ability to enforce its own laws to the extent that they do with China. Finally, it is notable that Mexico is still not equivalent for slaughtered poultry.
4.235.
China was also not discriminated against vis-a-vis other countries that China alleges have food safety enforcement problems. For example, China notes that "in Bangladesh, reports indicated that two children died and more than forty people were sickened with viral encephalitis contracted from eating poultry." The reason this comparison does not prove discrimination is simple – unlike China, Bangladesh has not filed an equivalence application for poultry and is not actively seeking to export to the United States. As a result, even if Bangladesh's food safety problems, and in particular its problems with enforcement, were established and shown to be of the same magnitude as China's, China is not being discriminated against vis-a-vis Bangladesh.
4.236.
Finally, China was not discriminated against vis-a-vis all 151 other WTO Members. First of all, as the United States has explained, China continued to have access to the PPIA. Second, only a small subset of these 151 Members had submitted an equivalence application and shown an interest in exporting poultry to the United States. Further, among the 28 Members seeking to export to the United States, none of them was as far along in the process as China when Section 727 was enacted. Finally, among the majority of those Members who have submitted equivalence applications for poultry, and certainly among those whose have made significance progress, the United States is not aware of problems of the same magnitude as exist in China. China even cites one of these Members, Korea, as an example of a Member "known for requiring strict levels of sanitary protection." This fact alone would seem to distinguish Korea from China.
4.237.
Thus, although China may compare itself to numerous other Members and claim that it is being discriminated against when compared with these Members, this is simply not the case. Section 727 was not applied against China in a manner that resulted in arbitrary or unjustifiable discrimination. To the contrary, the measure was justified by legitimate concerns that existed with regard to China, and the measure did not arbitrarily or unjustifiably discriminate against China vis-a-vis any other WTO Member.

3. China has failed to show that Section 727 results in a breach of any obligation under the SPS Agreement

4.238.
In it oral statement, China for the first time alleged that Section 727 was enacted for food safety purposes and is subject to several different obligations of the SPS Agreement. As the complaining party, China has the burden of proving that Section 727 meets the definition of an SPS measure and of explaining how each SPS provision cited applies to the measure. But China has not met its burden, and China mainly relies on inapposite provisions of the SPS Agreement.
4.239.
In particular, the central provisions of the SPS Agreement on equivalence processes are contained in Article 4, Equivalence. Article 4 recognizes that Members may adopt equivalence-based regimes to ensure the achievement of their ALOP, and provides certain obligations with respect to equivalence-based systems. Equivalence systems are premised on the differential treatment of products from different WTO Members. That is, under Article 4.1, importing Members need only accept the equivalence of SPS measures in exporting countries if the exporting Member objectively demonstrates that the measures meet the importing Member's appropriate level of protection. Likewise, under Article 4.2, recognition agreements need not be reached with all Members. The existence of SPS Article 4 helps show that China's basic approach is flawed. The question is not whether China is treated differently than other Members – indeed, the course of proceedings and the outcome of each equivalence determination necessarily will be based on the specific facts and circumstances of the exporting Member's SPS measures.
4.240.
To the extent that China wished to invoke disciplines under the SPS Agreement, China had the option of claiming a breach of the fundamental equivalence provision under Article 4. China, however, chose not to cite Article 4. Instead, China cited other SPS provisions that are unrelated to equivalence determinations, or that, at most, do not add anything to the issues under Article XX that have been briefed by the parties.
4.241.
Articles 2.2 and 5.1. China has not shown that Article 2.2 and 5.1 of the SPS Agreement apply to a measure – such as 727 – specifying the process to be used in the course of an ongoing equivalence determination. China's logic is vastly over-simplistic, ignores the context provided by the language of other provisions of the SPS Agreement, and (if applied) would result in absurd and often circular interpretations. As the panel discussed at length in the EC Approval and Marketing of Biotech Products dispute, the SPS Agreement cannot be applied in such a "mechanistic fashion".
4.242.
Consider, for example, a procedure or requirement adopted in the course of conducting a risk assessment being undertaken in the application of a food safety measure. By the type of mechanistic reading adopted by China, the risk assessment procedure would itself be an SPS measure, and would need to be based on scientific evidence and a risk assessment under Articles 2.2. and 5.1. And on it would go: any secondary procedure adopted to find a scientific basis for the initial risk assessment procedure would itself require a scientific basis. This absurd result cannot be the proper way to interpret the broad scope of Articles 2.2/5.1 ("any SPS measure"), combined with the broad definition of "SPS measure" in Annex A.
4.243.
In EC Approval and Marketing of Biotech Products, the panel addressed this interpretive issue by examining the context of other SPS Articles, and finding that Article 5.1 was intended to require a scientific basis not for any measure that might fall under Annex A, but only for measures "applied for achieving the relevant Member's appropriate level of sanitary or phytosanitary protection". Applying this type of reasoning to the present dispute, it is the PPIA itself – not Section 727 – which achieves the US ALOP by requiring equivalence of the regulatory regimes of exporting Members. Section 727 does not itself provide the level of protection; rather, Section 727 is a procedural requirement adopted in the course of an ongoing equivalency review. As such, the SPS Agreement cannot be mechanistically interpreted – as China suggests – as requiring that this measure be based on sufficient scientific evidence or a risk assessment.
4.244.
Moreover, the process of determining equivalence for an exporting Member's SPS measures is not the same as the process of performing a risk assessment of products imported from another Member. The determination that poultry poses a risk of being unsafe, and therefore that measures are needed to protect against that risk, pre-dates Section 727 and applies regardless of origin. Indeed, it is not contested in this dispute that imported poultry can pose a risk of being unsafe. Accordingly, the issue is not whether there is a basis for measures to ensure that poultry is safe. The only real issue is whether the proper procedure was being followed to make the determination as to whether China's measures are equivalent to US measures for poultry. This is not an issue for Article 2.2 or 5.1, but rather for Article 4.
4.245.
Article 2.3. It is uncertain whether Article 2.3 is intended to apply to every procedural requirement adopted in the course of operating SPS measures, or whether – like Articles 2.2 and 5.1 – Article 2.3 should be applied to substantive SPS measures intended to achieve the importing Member's ALOP. Similarly, it is unclear whether, in the context of equivalency-based regimes, Article 2.3 was intended to apply in addition to the main SPS equivalence provision (Article 4.1). As noted, by their very nature, equivalence-based regimes must discriminate between different Members. Article 4.1 provides a specific type of claim that exporting Members may bring: namely, that they have objectively demonstrated equivalence to the importing Member's SPS measures. China's submissions have addressed none of these issues.
4.246.
In the context of this dispute, the Panel has no need to reach any issue under Article 2.3. The language of Article 2.3 mirrors the language of the Article XX chapeau, and the United States has already explained why the US measure meets the chapeau requirements. Similarly, China's Article 2.3 arguments are essentially the same as China's position regarding the application of the Article XX chapeau. Thus, in the context of this particular dispute, the Panel would have no need to address Article 2.3 because the very same issues have been examined under the Article XX chapeau.
4.247.
Article 5.5. China's argument as to why Section 727 is inconsistent with obligations under Article 5.5 of the SPS Agreement is without merit – it fundamentally misconstrues the SPS Agreement and the US measure at issue. China has not shown, and cannot show, that Section 727 resulted in distinctions in levels of protection in different situations. The PPIA establishes the level of protection for poultry, not Section 727: the basic question evaluated under the PPIA is whether each exporting Member's poultry safety system will result in the same level of protection as the US system. And indeed, this is the fundamental description of "equivalence" provided under Article 4 of the SPS Agreement.
4.248.
China's Article 5.5 argument also confuses the concepts of the ALOP and the measures applied to achieve the ALOP. A disagreement about whether, for example, a measure results in arbitrary discrimination under Article 2.3 or the Article XX chapeau does not automatically create a claim under Article 5.5 of the SPS Agreement. In short, under China's approach, any difference in the measures applied by a Member to various products would by definition mean that there is a distinction in the ALOP sought to be achieved by that Member. China's approach is incorrect – the SPS Agreement is clear that these two concepts are separate and distinct.
4.249.
Article 5.6. The response of the United States to China's Article 5.6 claim is similar to that with respect to China's SPS Article 2.3 claim: China has not shown that Article 5.6 applies to a procedural requirement adopted in the context of an equivalency determination. Article 5.6 does not appear to apply to every procedural requirement adopted in the course of operating SPS measures. Instead, it appears to apply to substantive measures "establishing or maintaining" the importing Member's ALOP. In addition, it is difficult to see how the language of Article 5.6 applies in the context of equivalence determinations. In an equivalence regime, it is the exporting Member that chooses the SPS measures intended to achieve a level of protection, and the question for the importing Member is whether those measures achieve the result of equivalence. In this context, it is hard to apply Article 5.6, which turns on whether SPS measures chosen by the importing Member are more trade restrictive than required.
4.250.
Article 8 and Annex C. China's arguments regarding alleged "undue delay" under Article 8 and Annex C(1)(a) of the SPS Agreement fail to show that Section 727 breaches those provisions. Article 8 and Annex C of the SPS Agreement apply to "control, inspection, and approval procedures," which do not include equivalence determinations described under SPS Article 4. In addition, China's Annex C "undue delay" claim adds very little, if anything, to the substance of China's arguments. Rather, China's Annex C argument is conclusory, merely stating that "China has already demonstrated, in connection with its other claims", that Section 727 is lacking in "justification" and results in "discrimination". But to the contrary, as the United States has shown, Section 727 falls squarely within the Article XX(b) exception and is both necessary under the meaning of Article XX(b), and not discriminatory under the meaning of the chapeau.

H. EXECUTIVE SUMMARY OF THE OPENING ORAL STATEMENT OF CHINA AT THE SECOND SUBSTANTIVE MEETING OF THE PANEL

1. Section 727 is inconsistent with the SPS Agreement

4.251.
Section 727 and its predecessor violate multiple provisions of the SPS Agreement. The US response to China's SPS claims generally does not address the substance of China's SPS claims. The United States has never stated that Section 727 is not an SPS measure and it acknowledges that the purpose of its "law", Section 727, is the protection of the life and health of US consumers from potentially contaminated foods.

(a) Section 727 is not an intermediate step in FSIS equivalence procedures

4.252.
Section 727 is not an "intermediate" step in an "equivalence review". The CFR and FSIS documents describe the equivalence process in detail and neither refers to Congressional action blocking the application of procedures to a country for a potentially unlimited period of time. The PPIA is a separate law from Section 727. Thus, legal questions such as whether the SPS Agreement applies to every incremental step, or "secondary procedure", taken to apply an SPS measure – are not before this Panel.
4.253.
The US "intermediate" step argument appears to be based on EC – Approval and Marketing of Biotech Products the reasoning from which is inapplicable to Section 727 for at least five key reasons. First, this Panel is not faced with a situation where the normal process for product approval has been delayed for all producers – only China. Second, unlike the measure in EC – Approval and Marketing of Biotech Products, Section 727 is clearly a "law". Third, as 727 applies a "less than zero tolerance" ALOP to poultry from China, it clearly implies a particular level of protection. Fourth, China had already been granted equivalence by FSIS for processed poultry, and thus the key "pre‑marketing approval requirement" had been satisfied and 727 is clearly the source of the ban. Fifth, 727 set out a "particular mode or course of action" and, with the JES, established its own "procedures".

(b) 727 is subject to Articles 2.2, 2.3, 5.1, 5.2, 5.5, 5.6, and 8 of the SPS Agreement

4.254.
The United States claims that equivalence procedures are only subject to a limited subset of obligations in the SPS Agreement, primarily Article 4. On this basis, the United States claims that Articles 2.2, 2.3, 5.1, 5.6, and 8 do not apply to Section 727; according to the United States, only Article 4 should apply to Section 727.
4.255.
Section 727 cannot be considered part of the FSIS equivalence procedures. Even assuming it was in arguendo, and if the US Article 4 argument were accepted, it would mean that even the basic rights and obligations in Article 2 of the SPS Agreement would not apply to equivalence measures. This would create an enormous gap in the SPS disciplines. SPS measures can take a variety of forms, and equivalence measures are not singled out for special treatment under Annex A(1). Nothing in Article 4 explicitly exempts equivalence-related SPS measures from any of the other disciplines in the Agreement. And where the drafters intended to establish an exception to the disciplines of the SPS Agreement, such exceptions are made explicit in the text, e.g., Articles 2.2 and 3.1.
4.256.
The US argument would transform Article 4 into a safe haven allowing Members to apply equivalence-related SPS measures in, for example, a discriminatory manner, or without scientific justification. But Members cannot avoid fundamental obligations in the SPS Agreement (such as Article 2) by inserting the word "equivalence" in an SPS measure. Furthermore, China's challenge is not to the PPIA or the FSIS equivalence procedures. China's challenge is to Section 727, a measure wholly distinct from the US equivalence procedures, which prevents importation of Chinese poultry.

(c) China has sustained its burden of proving a violation of Article 5.5 of the SPS Agreement

4.257.
Unlike China's other claims, the United States appears to accept that Section 727 is subject to Article 5.5 of the SPS Agreement, and therefore addresses the substance of that claim. These US arguments, however, fail to rebut China's prima facie case.

(i) The two situations identified by China are comparable under Article 5.5 of the SPS Agreement

4.258.
The United States asserts that China has not shown that Section 727 resulted in distinctions in levels of protection in different but comparable situations, and argues that "it is the PPIA that establishes the level of protection for imported poultry", not 727. However, 727 is legally distinct from the PPIA, and it reflects the strict ALOP applicable to only China.
4.259.
Different situations may be compared if "they present some common element or elements sufficient to render them comparable". In EC – Hormones, the Appellate Body found that situations involving the same substance and the same health risk were "comparable". In Australia – Salmon, the Appellate Body found that in comparing different situations "it is sufficient for these situations to have in common a risk of entry, establishment or spread of one disease of concern". This confirms that the two sets of situations described by China are comparable under Article 5.5, based on common potential contaminants. These situations are: first, the importation of poultry versus non-poultry products from China; and, second, the importation of Chinese poultry versus poultry from other WTO Members.
4.260.
First, in relation to poultry products, the United States has mentioned pathogenic bacteria such as Salmonella and Campylobacter as potential contaminants. It has also discussed avian flu. It is undisputed that these contaminants are not unique to China. Based on the shared risk of their transmission, these situations are "comparable" under Article 5.5.
4.261.
Second, Chinese poultry and Chinese non-poultry foods also share one or more potential contaminants. Per the logic of the JES and US arguments, any food product from a country experiencing an alleged food safety crisis could be contaminated, including with the same contaminant. For instance, Salmonella, which the United States has cited in connection with poultry, can also affect other food products. The shared risk of transmission of the same contaminant via the importation of different food products from China thus renders the second set of situations "comparable" under Article 5.5.
4.262.
China is not arguing that any time a different measure is imposed in respect of different but comparable situations, there is necessarily a violation of Article 5.5. Instead, Article 5.5 prohibits the application of arbitrary or unjustifiable distinctions in ALOP in different but comparable situations, if such distinctions results in discrimination. China has demonstrated that in this case, the distinction in ALOPs is arbitrary and unjustifiable.

(ii) The United States applies distinct ALOPs to comparable situations

4.263.
The United States asserts that the ALOP for all imported poultry, including poultry from China, is that reflected in the PPIA. But this facile assertion ignores the fact that normal FSIS procedures were not, and could not be, applied to China for two years.
4.264.
Because the United States has not specified the ALOP for Section 727, China has deduced that Section 727 reflects a level of sanitary protection of lower than zero risk tolerance. Even if Chinese poultry was the safest poultry in the world Section 727 would still prevent its importation into the US. In contrast, all other WTO Members have the possibility, under normal FSIS procedures, of obtaining equivalence and exporting to the United States. Section 727 (and 733) thus resulted in a much stricter ALOP than that normally considered appropriate for imported poultry under the PPIA: that imported poultry must be "safe".
4.265.
The US ALOP has also not been specified in respect to non-poultry food products. China has deduced it based on the SPS measure applied to them: the FDA import procedures. FDA procedures continued to be funded and active while 727 and 733 were in effect. During this period, over $5 billion of non-poultry food products were imported from China. These continued imports necessarily reflect a less strict ALOP than 727's less than zero tolerance.

(d) In addition to Article 5.5, Section 727 is inconsistent with Articles 2.2, 2.3, 5.1, 5.2, 5.6, and 8 of the SPS Agreement

4.266.
The US asserted that Articles 2.2, 2.3, 5.1, 5.6, and 8 do not apply to 727 because it is an "intermediate measure", and offers no substantive defences to China's claims under these provisions. China refers the Panel to its earlier arguments and addresses just two issues here:
4.267.
First, China confirms that it has brought a separate claim under Article 5.2. Second, Section 727 violates Article 8 because it resulted in an unjustifiable delay of nearly two years in the appraisal of China's compliance with the US requirements for imported poultry.
4.268.
The United States incorrectly claims that Article 8 and Annex C do not apply to Section 727, based on the argument that equivalence procedures are only subject to Article 4. Apart from the fact that Section 727 is not part of any US equivalence procedures, Annex C does indeed apply to Section 727. China agrees with the US that the list of measures covered by Article 8 is "inclusive rather than exhaustive".

(e) SPS violations cannot be justified on the basis of GATT Article XX(b)

4.269.
The SPS Agreement provides specific "obligations which are not already imposed by GATT", and which are "additional" to the requirements of Article XX of GATT. There is no presumption of consistency with the SPS Agreement for measures that are found to be consistent with GATT Article XX(b). Therefore, even if the US demonstrated that Section 727 fell within Article XX(b), this would not be sufficient to defend against China's SPS claims.

(i) Violations of GATT 1994 and of the Agreement on Agriculture cannot be justified under Article XX(b)

(f) Section 727 was not "necessary"

4.270.
A "necessary" measure is one that is close to "indispensable" for the achievement of an objective. Section 727 does not meet that test. First, there were no imminent poultry imports from China. Second, Section 727 actually undermines the protection of US consumers by denying funding to the ver