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Report of the Panel

TABLE OF CASES CITED IN THIS REPORT

Short TitleFull Case Title and Citation
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
Argentina – Poultry Anti‑Dumping Duties Panel Report, Argentina – Definitive Anti‑Dumping Duties on Poultry from Brazil, WT/DS241/R, adopted 19 May 2003, DSR 2003:V, 1727
Border Tax AdjustmentsReport of the Working Party on Border Tax Adjustments, L/3464, adopted on 2 December 1970, BISD 18S/97
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
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 – 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 – Autos Appellate Body Report, Canada – Certain Measures Affecting the Automotive Industry, WT/DS139/AB/R, WT/DS142/AB/R, adopted 19 June 2000, DSR 2000:VI, 2985
Canada – Autos Panel Report, Canada – Certain Measures Affecting the Automotive Industry, WT/DS139/R, WT/DS142/R, adopted 19 June 2000, as modified by Appellate Body Report WT/DS139/AB/R, WT/DS142/AB/R, DSR 2000:VII, 3043
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 – 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, as upheld by Appellate Body Report WT/DS276/AB/R, DSR 2004:VI, 2817
Chile – Alcoholic Beverages Appellate Body Report, Chile – Taxes on Alcoholic Beverages, WT/DS87/AB/R, WT/DS110/AB/R, adopted 12 January 2000, DSR 2000:I, 281
Chile – Alcoholic Beverages Panel Report, Chile – Taxes on Alcoholic Beverages, WT/DS87/R, WT/DS110/R, adopted 12 January 2000, as modified by Appellate Body Report WT/DS87/AB/R, WT/DS110/AB/R, DSR 2000:I, 303
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 – Asbestos Appellate Body Report, European Communities – Measures Affecting Asbestos and Asbestos‑Containing Products, WT/DS135/AB/R, adopted 5 April 2001, DSR 2001:VII, 3243
EC – Asbestos Panel Report, European Communities – Measures Affecting Asbestos and Asbestos‑Containing Products, WT/DS135/R and Add.1, adopted 5 April 2001, as modified by Appellate Body Report WT/DS135/AB/R, DSR 2001:VIII, 3305
EC – Bananas III Appellate Body Report, European Communities – Regime for the Importation, Sale and Distribution of Bananas, WT/DS27/AB/R, adopted 25 September 1997, DSR 1997:II, 591
EC – 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 – Bananas III (Article 21.5 – US) Panel Report, 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/RW/USA and Corr.1, adopted 22 December 2008, as upheld by Appellate Body Report WT/DS27/AB/RW/USA
EC – Chicken Cuts Appellate Body Report, EuropeanCommunities – Customs Classification of Frozen Boneless Chicken Cuts, WT/DS269/AB/R, WT/DS286/AB/R, adopted 27 September 2005, and Corr.1, DSR 2005:XIX, 9157
EC – Chicken Cuts (Brazil) Panel Report, EuropeanCommunities – Customs Classification of Frozen Boneless Chicken Cuts, Complaint by Brazil, WT/DS269/R, adopted 27 September 2005, as modified by Appellate Body Report WT/DS269/AB/R, WT/DS286/AB/R, DSR 2005:XIX, 9295
EC – Chicken Cuts (Thailand) Panel Report, EuropeanCommunities – Customs Classification of Frozen Boneless Chicken Cuts, Complaint by Thailand, WT/DS286/R, adopted 27 September 2005, as modified by Appellate Body Report WT/DS269/AB/R, WT/DS286/AB/R, DSR 2005:XX, 9721
EC – Computer Equipment Appellate Body Report, European Communities – Customs Classification of Certain Computer Equipment, WT/DS62/AB/R, WT/DS67/AB/R, WT/DS68/AB/R, adopted 22 June 1998, DSR 1998:V, 1851
EC – Computer Equipment Panel Report, European Communities – Customs Classification of Certain Computer Equipment, WT/DS62/R, WT/DS67/R, WT/DS68/R, adopted 22 June 1998, as modified by Appellate Body Report WT/DS62/AB/R, WT/DS67/AB/R, WT/DS68/AB/R, DSR 1998:V, 1891
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 – IT Products Panel Report, European Communities and its member States – Tariff Treatment of Certain Information Technology Products, WT/DS375/R, WT/DS376/R, WT/DS377/R, adopted 21 September 2010
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
EC – Trademarks and Geographical Indications (Australia) Panel Report, European Communities – Protection of Trademarks and Geographical Indications for Agricultural Products and Foodstuffs, Complaint by Australia, WT/DS290/R, adopted 20 April 2005, DSR 2005:X, 4603
EC – Trademarks and Geographical Indications (US) Panel Report, European Communities – Protection of Trademarks and Geographical Indications for Agricultural Products and Foodstuffs, Complaint by the United States, WT/DS174/R, adopted 20 April 2005, DSR 2005:VIII, 3499
EC – Tube or Pipe Fittings Appellate Body Report, European Communities – Anti‑Dumping Duties on Malleable Cast Iron Tube or Pipe Fittings from Brazil, WT/DS219/AB/R, adopted 18 August 2003, DSR 2003:VI, 2613
EC – Tube or Pipe Fittings Panel Report, European Communities – Anti‑Dumping Duties on Malleable Cast Iron Tube or Pipe Fittings from Brazil, WT/DS219/R, adopted 18 August 2003, as modified by Appellate Body Report WT/DS219/AB/R, DSR 2003:VII, 2701
EC and certain member States – Large Civil Aircraft Appellate Body Report, European Communities and Certain Member States – Measures Affecting Trade in Large Civil Aircraft, WT/DS316/AB/R, adopted 1 June 2011
EC and certain member States – Large Civil Aircraft Panel Report, European Communities and Certain Member States – Measures Affecting Trade in Large Civil Aircraft, WT/DS316/R, adopted 1 June 2011, as modified by Appellate Body Report, WT/DS316/AB/R
EEC – Animal Feed Proteins GATT Panel Report, EEC – Measures on Animal Feed Proteins, L/4599, adopted 14 March 1978, BISD 25S/49
Egypt – Steel Rebar Panel Report, Egypt – Definitive Anti‑Dumping Measures on Steel Rebar from Turkey, WT/DS211/R, adopted 1 October 2002, DSR 2002:VII, 2667
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 reversed 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, as 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
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 – Film Panel Report, Japan – Measures Affecting Consumer Photographic Film and Paper, WT/DS44/R, adopted 22 April 1998, DSR 1998:IV, 1179
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, as upheld by Appellate Body Report WT/DS245/AB/R, DSR 2003:IX, 4481
Korea – Various Measures on Beef Appellate Body Report, Korea – Measures Affecting Imports of Fresh, Chilled and Frozen Beef, WT/DS161/AB/R, WT/DS169/AB/R, adopted 10 January 2001, DSR 2001:I, 5
Korea – Various Measures on Beef Panel Report, Korea – Measures Affecting Imports of Fresh, Chilled and Frozen Beef, WT/DS161/R, WT/DS169/R, adopted 10 January 2001, as modified by Appellate Body Report WT/DS161/AB/R, WT/DS169/AB/R, DSR 2001:I, 59
Mexico – Taxes on Soft Drinks Appellate Body Report, Mexico – Tax Measures on Soft Drinks and Other Beverages, WT/DS308/AB/R, adopted 24 March 2006, DSR 2006:I, 3
Mexico – Taxes on Soft Drinks Panel Report, Mexico – Tax Measures on Soft Drinks and Other Beverages, WT/DS308/R, adopted 24 March 2006, as modified by Appellate Body Report WT/DS308/AB/R, DSR 2006:I, 43
Mexico – Telecoms Panel Report, Mexico – Measures Affecting Telecommunications Services, WT/DS204/R, adopted 1 June 2004, DSR 2004:IV, 1537
Thailand – Cigarettes GATT Panel Report, Thailand – Restrictions on Importation of and Internal Taxes on Cigarettes, DS10/R, adopted 7 November 1990, BISD 37S/200
Thailand – Cigarettes (Philippines) Appellate Body Report, Thailand – Customs and Fiscal Measures on Cigarettes from the Philippines, WT/DS371/AB/R, adopted 15 July 2011
Thailand – Cigarettes (Philippines) Panel Report, Thailand – Customs and Fiscal Measures on Cigarettes from the Philippines, WT/DS371/R, adopted 15 July 2011, as modified by Appellate Body Report WT/DS371/AB/R
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, as 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, as upheld by Appellate Body Report WT/DS136/AB/R, WT/DS162/AB/R, DSR 2000:X, 4831
US – Anti-Dumping and Countervailing Duties (China) Appellate Body Report, United States – Definitive Anti-Dumping and Countervailing Duties on Certain Products from China, WT/DS379/AB/R, adopted 25 March 2011
US – Anti-Dumping and Countervailing Duties (China) Panel Report, United States – Definitive Anti-Dumping and Countervailing Duties on Certain Products from China, WT/DS379/R, adopted 25 March 2011, as modified by Appellate Body Report WT/DS379/AB/R
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 – Continued Suspension Appellate Body Report, United States – Continued Suspension of Obligations in the EC – Hormones Dispute, WT/DS320/AB/R, adopted 14 November 2008, DSR 2008:X, 3507
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, DSR 2008:XI, 3891
US – COOL (Canada) US – COOL (Mexico)United States – Certain Country of Origin Labelling (COOL) Requirements , WT/DS384, WT/DS386
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 – DRAMS Panel Report, United States – Anti‑Dumping Duty on Dynamic Random Access Memory Semiconductors (DRAMS) of One Megabit or Above from Korea, WT/DS99/R, adopted 19 March 1999, DSR 1999:II, 521
US – FSC (Article 21.5 – EC) Appellate Body Report, United States – Tax Treatment for "Foreign Sales Corporations" – Recourse to Article 21.5 of the DSU by the European Communities, WT/DS108/AB/RW, adopted 29 January 2002, DSR 2002:I, 55
US – FSC (Article 21.5 – EC) Panel Report, United States – Tax Treatment for "Foreign Sales Corporations" – Recourse to Article 21.5 of the DSU by the European Communities, WT/DS108/RW, adopted 29 January 2002, as modified by Appellate Body Report WT/DS108/AB/RW, DSR 2002:I, 119
US – Gambling Appellate Body Report, United States – Measures Affecting the Cross‑Border Supply of Gambling and Betting Services, WT/DS285/AB/R, adopted 20 April 2005, DSR 2005:XII, 5663 (Corr.1, DSR 2006:XII, 5475)
US – Gambling Panel Report, United States – Measures Affecting the Cross‑Border Supply of Gambling and Betting Services, WT/DS285/R, adopted 20 April 2005, as modified by Appellate Body Report WT/DS285/AB/R, DSR 2005:XII, 5797
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 – Lead and Bismuth II Appellate Body Report, United States – Imposition of Countervailing Duties on Certain Hot‑Rolled Lead and Bismuth Carbon Steel Products Originating in the United Kingdom, WT/DS138/AB/R, adopted 7 June 2000, DSR 2000:V, 2595
US – Lead and Bismuth II Panel Report, United States – Imposition of Countervailing Duties on Certain Hot‑Rolled Lead and Bismuth Carbon Steel Products Originating in the United Kingdom, WT/DS138/R and Corr.2, adopted 7 June 2000, as upheld by Appellate Body Report WT/DS138/AB/R, DSR 2000:VI, 2623
US – Section 337 Tariff Act GATT Panel Report, United States Section 337 of the Tariff Act of 1930, L/6439, adopted 7 November 1989, BISD 36S/345
US – Shrimp Appellate Body Report, United States – Import Prohibition of Certain Shrimp and Shrimp Products, WT/DS58/AB/R, adopted 6 November 1998, DSR 1998:VII, 2755
US – Shrimp 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, as upheld by Appellate Body Report WT/DS58/AB/RW, DSR 2001:XIII, 6529
US – Steel Plate Panel Report, United States – Anti‑Dumping and Countervailing Measures on Steel Plate from India, WT/DS206/R and Corr.1, adopted 29 July 2002, DSR 2002:VI, 2073
US – Superfund GATT Panel Report, United States – Taxes on Petroleum and Certain Imported Substances, L/6175, adopted 17 June 1987, BISD 34S/136
US – Tuna II (Mexico)United States – Measures Concerning the Importation, Marketing and Sale of Tuna and Tuna Products, WT/DS381
US – Tyres (China) Panel Report, United States – Measures Affecting Imports of Certain Passenger Vehicle and Light Truck Tyres from China, WT/DS399/R, circulated 13 December 2010 [appeal pending]
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, as upheld by Appellate Body Report WT/DS33/AB/R, DSR 1997:I, 343
US – Zeroing (EC) (Article 21.5 – EC) Appellate Body Report, United States – Laws, Regulations and Methodology for Calculating Dumping Margins ("Zeroing") – Recourse to Article 21.5 of the DSU by the European Communities, WT/DS294/AB/RW and Corr.1, adopted 11 June 2009
US – Zeroing (EC) (Article 21.5 – EC) Panel Report, United States – Laws, Regulations and Methodology for Calculating Dumping Margins ("Zeroing") – Recourse to Article 21.5 of the DSU by the European Communities, WT/DS294/RW, adopted 11 June 2009, as modified by Appellate Body Report WT/DS294/AB/RW
US – Zeroing (Japan) (Article 21.5 – Japan) Appellate Body Report, United States – Measures Relating to Zeroing and Sunset Reviews – Recourse to Article 21.5 of the DSU by Japan, WT/DS322/AB/RW, adopted 31 August 2009
US – Zeroing (Japan) (Article 21.5 – Japan) Panel Report, United States – Measures Relating to Zeroing and Sunset Reviews – Recourse to Article 21.5 of the DSU by Japan, WT/DS322/RW, adopted 31 August 2009, as upheld by Appellate Body Report WT/DS322/AB/RW

I. INTRODUCTION

1.1.
On 7 April 2010, Indonesia 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"), Article 11 of the Agreement on the Application of Sanitary and Phytosanitary Measures ("SPS Agreement") and Article 14 of the Agreement on Technical Barriers to Trade ("TBT Agreement") with respect to "the measure applied by the Government of the United States regarding the ban of clove cigarettes".1 Indonesia and the United States held consultations on 13 May 2010. However, no mutually agreed solution was found.
1.2.
On 9 June 2010, Indonesia requested the establishment of a panel pursuant to Article 6 of the DSU.2
1.3.
At its meeting on 20 July 2010, the DSB established a panel pursuant to the request of Indonesia in document WT/DS406/2, 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 Indonesia in document WT/DS406/2 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 9 September 2010, the parties agreed to the following composition of the Panel:

Chairman: Mr Ronald Saborío Soto

Members: Mr Ichiro Araki

Mr Hugo Cayrús

1.6.
Brazil, Colombia, Dominican Republic, the European Union, Guatemala, Mexico, Norway and Turkey have reserved their rights to participate in the Panel proceedings as third parties.
1.7.
The Panel held its first substantive meeting with the parties on 13 and 14 December 2010. The session with the third parties was held on 14 December 2010. The second substantive meeting was held on 15 February 2011.
1.8.
On 13 April 2011, the Panel issued the descriptive section of its draft report to the parties. The Panel issued its Interim Report to the parties on 27 May 2011. The Panel issued its Final Report on 24 June 2011.

II. FACTUAL ASPECTS

A. INTRODUCTION

2.3.
The parties disagree on a number of factual issues. To the extent it is necessary for the Panel to resolve those disputed factual issues, it will do so in its Findings.

B. THE MEASURE AT ISSUE

2.4.
The measure at issue is Section 907(a)(1)(A) of the Federal Food, Drug and Cosmetic Act ("FFDCA"), which was added to the FFDCA by Section 101(b) of the Family Smoking Prevention and Tobacco Control Act ("FSPTCA").4 Section 907(a)(1)(A) reads as follows:

"SEC. 907. TOBACCO PRODUCT STANDARDS.

(a) IN GENERAL.—

(1) SPECIAL RULES.—

(A) SPECIAL RULE FOR CIGARETTES.—Beginning 3 months after the date of enactment of the Family Smoking Prevention and Tobacco Control Act, a cigarette or any of its component parts (including the tobacco, filter, or paper) shall not contain, as a constituent (including a smoke constituent) or additive, an artificial or natural flavor (other than tobacco or menthol) or an herb or spice, including strawberry, grape, orange, clove, cinnamon, pineapple, vanilla, coconut, licorice, cocoa, chocolate, cherry, or coffee, that is a characterizing flavor of the tobacco product or tobacco smoke. Nothing in this subparagraph shall be construed to limit the Secretary's authority to take action under this section or other sections of this Act applicable to menthol or any artificial or natural flavor, herb, or spice not specified in this subparagraph."5

2.5.
The FSPTCA became law in the United States on 22 June 2009.6 As its text provides, Section 907(a)(1)(A) entered into force three months after the enactment of the FSPTCA, i.e., on 22 September 2009.
2.6.
The Panel notes that the objective of Section 907(a)(1)(A) is not set forth in the FSPTCA itself. However, both parties have referred the Panel to a report prepared by the House Energy and Commerce Committee ("House Report") after favourably reporting the legislation out of that Committee.7 The House Report explains the meaning of each section of the FSPTCA and articulates both the objectives of the FSPTCA overall, and of Section 907(a)(1)(A) in particular. According to the House Report:

"The objectives of [the FSPTCA] are to provide the Secretary with the proper authority over tobacco products in order to protect the public health and to reduce the number of individuals under 18 years of age who use tobacco products."8

2.7.
The House Report explains the purpose of Section 907(a)(1) in particular:

"Consistent with the overall intent of the bill to protect the public health, including by reducing the number of children and adolescents who smoke cigarettes, section 907(a)(1) is intended to prohibit the manufacture and sale of cigarettes with certain 'characterizing flavors' that appeal to youth."9

2.8.
In addition, the Food and Drug Administration ("FDA"), which as explained in Section II.C.1(b) below is the U.S. agency empowered with tobacco control and regulation, issued a document entitled "Guidance for Industry and FDA Staff, General Questions and Answers on the Ban of Cigarettes that Contain Characterizing Flavors" ("FDA Guidance") on 23 December 2009. This FDA Guidance is non-binding, although it represents the FDA's "current thinking on the topic".10 According to the FDA Guidance, the rationale for the prohibition of cigarettes with characterizing flavours imposed by Section 907(a)(1)(A) is the following:

"Smoking is the leading cause of preventable death in the United States, claiming over 400,000 lives each year. An important way to reduce the death and disease caused by smoking is to prevent children and adolescents from starting to smoke. Studies have shown that 17 year old smokers are three times as likely to use flavored cigarettes as are smokers over the age of 25. In addition to being more attractive to young people, flavored products make it easier for new smokers to start smoking by masking the unpleasant flavor of tobacco. Studies have also demonstrated that young people believe that flavored tobacco products are safer than unflavored tobacco products.

Flavored cigarettes are just as addictive and have the same types of harmful effects as regular cigarettes. Removing these flavored products from the market is important because it removes an avenue that young people can use to begin regular tobacco use. Congress specifically enacted the ban on sale of cigarettes and their component parts, such as filters and papers, which contain certain characterizing flavors. The removal from the market of cigarettes that contain certain characterizing flavors is an important step in the Nation's efforts to reduce the burden of illness and death caused by tobacco products as authorized by the FSPTCA, signed by President Obama on June 22, 2009."11

2.9.
According to the FDA Guidance, Section 907(a)(1)(A) applies to all flavoured tobacco products that meet the definition of a cigarette in Section 900(3) of the FFDCA, even if they are not labelled as cigarettes.12 Section 900(3) of the FFDCA defines the term "cigarette" as follows:

"(3)Cigarette

The term 'cigarette'—

(A) means a product that—

(i) is a tobacco product; and

(ii) meets the definition of the term 'cigarette' in section 3(1) of the Federal Cigarette Labeling and Advertising Act; and

(B) includes tobacco, in any form, that is functional in the product, which, because of its appearance, the type of tobacco used in the filler, or its packaging and labeling, is likely to be offered to, or purchased by, consumers as a cigarette or as roll-your-own tobacco.

(4)Cigarette tobacco

The term 'cigarette tobacco' means any product that consists of loose tobacco that is intended for use by consumers in a cigarette. Unless otherwise stated, the requirements applicable to cigarettes under this subchapter shall also apply to cigarette tobacco."13

2.10.
Subsection (ii) refers to a provision of the Federal Cigarette Labeling and Advertising Act, which defines the term "cigarette" as follows:

"(1) The term "cigarette" means—

(A) any roll of tobacco wrapped in paper or in any substance not containing tobacco, and

(B) any roll of tobacco wrapped in any substance containing tobacco which, because of its appearance, the type of tobacco used in the filler, or its packaging and labeling, is likely to be offered to, or purchased by, consumers as a cigarette described in subparagraph (A)."14

2.11.
The FDA clarifies in its FDA Guidance that the ban contained in Section 907(a)(1)(A) also applies to flavoured loose tobacco and rolling papers and filters intended to be used in roll-your-own cigarettes.15

C. FACTUAL CONTEXT

1. The United States' legislative regime for tobacco control

(a) History of tobacco–control measures in the United States

2.12.
The marketing and selling of tobacco products in the United States was not extensively regulated during the first half of the 20th century. In 1957, the U.S. Surgeon General declared that there was a causal relationship between smoking and lung cancer. A subsequent report prepared in 1964 by the Advisory Committee to the Surgeon General quantified the health damages caused by cigarette smoking and submitted that smoking increased the possibilities of developing three particular diseases: lung cancer, emphysema and coronary heart disease.16
2.13.
As a result of the findings of the above-mentioned Report, the United States enacted its first major federal legislation for tobacco products: the Federal Cigarette Labeling and Advertising Act. This piece of legislation mandated, for the first time, the inclusion of a health warning label on cigarettes.17 The United States further regulated tobacco products over the following decades. In the 1990s, the FDA and the U.S. Congress investigated the U.S. tobacco industry "concerning the industry's knowledge of, and efforts to conceal, the dangers of cigarettes, as well as their efforts to market cigarettes to children".18
2.14.
These investigations led to private litigation against tobacco companies, as well as lawsuits by several states initiated to recover the tobacco-related costs incurred by the public health system. By the mid-1990s, nearly every state in the United States had brought a lawsuit against the tobacco industry. To settle the litigation, the five largest U.S. tobacco companies (Brown and Williamson Tobacco Corporation, Lorillard Tobacco Company, Phillip Morris Incorporated, RJ Reynolds Tobacco Company and Commonwealth Tobacco Company) signed a Master Settlement Agreement ("MSA") with the states. Among other things, this Agreement: (i) established annual payments to the States totalling USD 206 billion through 2025; (ii) prohibited brand-name sponsorships and advertising that target young people; and (iii) dissolved certain tobacco industry promoting organizations.19 This MSA did not ban any type of cigarettes and did not address flavoured cigarettes in particular.20
2.15.
In the early 2000s, several companies, and in particular RJ Reynolds, began to market a new variety of cigarettes with characterizing flavours, such as vanilla, chocolate/mint, lime, spice, watermelon, toffee and liquor.21 Illinois and New York considered that this contravened the MSA's prohibition against marketing cigarettes to youth. This led RJ Reynolds to sign a Consent Agreement with the MSA-signatory states (the "2006 Consent Agreement"), in which it committed to remove from the market those flavoured cigarettes it sold at the time. The 2006 Consent Agreement still allowed RJ Reynolds the possibility of developing new brands of flavoured cigarettes in the future.22
2.16.
The FSPTCA was the result of years of legislative effort by the U.S. federal government.23 In 1996, the FDA asserted authority to regulate tobacco products and issued regulations (later adopted in large part as part of the FSPTCA), including one establishing 18 as the national minimum age to purchase tobacco products and another banning free samples of tobacco products except in adult-only venues.24 In 1997, before the regulations were fully implemented, U.S. tobacco companies challenged the FDA's regulatory authority and in 2000 the U.S. Supreme Court invalidated the FDA's rules, finding that the U.S. Congress had not granted the FDA the authority to regulate cigarettes and smokeless tobacco as customarily marketed.25
2.17.
The U.S. Supreme Court reasoned that the FDA's statutory charge was to ensure that drugs are "safe and effective" for the market, and if tobacco products were to fall under the FDA's jurisdiction, the FDA would be forced to ban all tobacco products based on the FDA's findings that the products were unsafe and dangerous; therefore, the U.S. Supreme Court concluded that because the U.S. Congress had foreclosed a ban on all tobacco products, it could not have intended that the products would fall under FDA regulatory authority.26
2.18.
In response, the U.S. Congress developed legislation specifically to grant authority to the FDA, and directed the FDA to apply a different standard to tobacco products from that applied to any other product or device that it regulates. Following the 2000 Supreme Court ruling that the "safe and effective" standard could not be applied to tobacco products without requiring their removal from the market, the U.S. Congress authorized the FDA to regulate tobacco products "as appropriate for the protection of the public health".27 A bill containing a ban on cigarettes with characterizing flavours other than tobacco or menthol was introduced for consideration in the U.S. Senate and House of Representatives in 2004.28 The legislation went through various iterations over the period 2004-2009, prior to the final version of the legislation being enacted into U.S. law in 2009.29

(b) The scope of the FSPTCA

2.19.
The FSPTCA was enacted in 2009 with a view to protecting public health by providing the FDA with authority to regulate tobacco products.30 In addition to being the first piece of U.S. federal legislation31 banning the production and sale of cigarettes with certain characterizing flavours, the FSPTCA imposes significant restrictions and requirements on how tobacco products are manufactured, marketed, distributed and sold, and it also empowers the FDA to adopt additional regulations as appropriate.32
2.20.
The FSPTCA regulates the manufacture of tobacco products by, for example, empowering the FDA to set new product standards to reduce or eliminate harmful ingredients and additives or otherwise modify the design and characteristics of tobacco products if it is determined that such regulation is appropriate to protect the public health.33
2.21.
In addition, the FSPTCA regulates marketing by, for example, establishing a range of advertising restrictions and requirements34, requiring graphic warning labels and other disclosures35, and by authorizing the FDA to establish additional standards and restrictions related to the labelling, advertising, and promotion of tobacco products.36
2.22.
The FSPTCA also regulates the distribution and sale of tobacco products by, for example, establishing a federal minimum age of 18 for the sale of cigarettes37, and generally banning free samples.38 The legislative history of the FSPTCA explains that:

"Past efforts to restrict the advertising and marketing of tobacco products to youth have failed to adequately curb tobacco use by adolescents. [The FSPTCA] provides the FDA with the authority it needs to promulgate comprehensive restrictions on the sale, promotion, and distribution of tobacco products, actions that most public health experts agree can significantly reduce the number of people who start to use tobacco and significantly increase the number of people who quit using tobacco."39

2.23.
The FSPTCA directed the FDA to establish two new entities: the Center for Tobacco Products ("CTP") in the FDA, which is responsible for implementing the FSPTCA, and the Tobacco Products Scientific Advisory Committee ("TPSAC"), a 12-member body charged with advising the CTP on issues related to nicotine yields and other safety, dependence, or health issues related to tobacco products.40 As regards menthol cigarettes, which are specifically excluded from the prohibition imposed by Section 907(a)(1)(A), the FSPTCA directed the TPSAC "to deliver a report to FDA on the public health impact of menthol in cigarettes within a year of the committee's formation establishment".41 The March 2011 TPSAC Report, which was delivered to the FDA on 18 March 201142, recommends to the FDA that the "[r]emoval of menthol cigarettes from the marketplace would benefit public health in the United States".43 The TPSAC Report also made suggestions for further assessment in respect of the contraband of menthol cigarettes and recommended research to address gaps in understanding of menthol cigarettes and public health. The FDA will further consider the recommendations given by the TPSAC.44

2. The market for cigarettes in the United States

2.24.
Tobacco consumption in the United States is significant. Around 2045 to 2646 per cent of the U.S. adult population and 1247 to 1948 per cent of the U.S. youth population are smokers. Sales of cigarettes in the United States amounted to approximately 360 billion units in 200749, 346 billion units in 2008 and 317 billion units in 2009.50
2.25.
From the data submitted by the parties, the Panel understands that the vast majority of U.S. smokers use two types of cigarettes: regular cigarettes and menthol cigarettes.51 In particular, approximately one-quarter of the smoking population smokes menthol cigarettes.52 Clove cigarette consumption accounted for approximately 0.1 per cent of the U.S. market between 2000 and 2009.53
2.26.
Imports of clove cigarettes into the United States accounted for approximately 470 million cigarettes in 2007, 430 million cigarettes in 2008 and 220 million cigarettes in 2009.54 The value of these imports was approximately USD 16.2 million in 2007, USD 14.8 million in 2008 and USD 7.5 million in 2009.55 During these three years virtually all clove cigarettes were imported from Indonesia.56
2.27.
The Panel understands that, although the vast majority of clove cigarettes consumed in the United States appears to come from Indonesia, there was at least one U.S. company, Nat Sherman, that manufactured a clove-flavoured cigarette prior to the entry into force of the FSPTCA.57
2.28.
As regards cigarettes with other characterizing flavours covered by Section 907(a)(1)(A), there is no evidence of any sizeable market share in the United States prior to the implementation of the ban in 2009.58

3. International efforts to curb smoking: The Framework Convention on Tobacco Control

2.29.
During the proceedings the parties have referred to the Framework Convention on Tobacco Control ("FCTC"), an international treaty administered by the World Health Organization ("WHO"), as part of the current international efforts to curb smoking.59 The FCTC was negotiated in response to concerns about a globalized tobacco epidemic, exacerbated by increasing international trade in tobacco and foreign direct investment.60 The treaty aims to reduce demand and supply of tobacco. It contains national reporting requirements and strategies to facilitate structural adjustment for people whose livelihoods depend on tobacco production. The FCTC entered into force in 2005. At present, there are 172 parties. The United States is a signatory61 to the FCTC62 but Indonesia is not.63
2.31.
The Partial Guidelines provide, among other things, that "[f]rom the perspective of public health, there is no justification for permitting the use of ingredients, such as flavouring agents, which help make tobacco products attractive".65 The WHO Partial Guidelines define "attractiveness" in terms of "factors such as taste, smell or other sensory attributes, ease of use, flexibility of the dosing system, cost, reputation or image, assumed risks and benefits, and other characteristics of a product designed to stimulate use".66 By way of background to this recommendation, the WHO Partial Guidelines state that: "[r]egulating ingredients aimed at reducing tobacco product attractiveness can contribute to reducing the prevalence of tobacco use and dependence among new and continuing users", and that the WHO Partial Guidelines "recommend that restrictions apply to as many as possible of the features that make tobacco products more attractive to consumers".67
2.32.
These WHO Partial Guidelines recommend, among other things, that the "[p]arties should regulate, by prohibiting or restricting, ingredients that may be used to increase palatability in tobacco products".68 Targeted ingredients include those: (i) that are used to increase palatability; (ii) that have colouring properties; (iii) that are used to create the impression that products have health benefits; and (iv) those associated with energy and vitality. Among the ingredients that increase palatability listed in the WHO Partial Guidelines are sweeteners (e.g. glucose, molasses, honey and sorbitol), masking agents (e.g. benzaldehyde, maltol, menthol and vanillin), and spices and herbs (e.g. cinnamon, ginger and mint).

III. PARTIES' REQUESTS FOR FINDINGS AND RECOMMENDATIONS

3.1.
In its Panel Request, Indonesia requests the Panel to find that Section 907(a)(1)(A) is inconsistent with69:

(a) Article 2.1 of the TBT Agreement and, alternatively, Article III:4 of the GATT 199470, because it results in treatment that is less favourable to imported clove cigarettes than that accorded to a like domestic product, menthol cigarettes;

(b) Article 2.2 of the TBT Agreement because it is more trade-restrictive than necessary to fulfil a legitimate objective;

(c) Article 2.5 of the TBT Agreement because the United States did not respond to questions from Indonesia seeking an explanation and justification for the ban submitted during bilateral discussions held 27 August 2009 and through the TBT Committee on 20 August 2009 (G/TBT/W/323);

(d) Article 2.8 of the TBT Agreement because the ban on cigarettes with characterizing flavours is based on descriptive characteristics;

(e) Article 2.9 of the TBT Agreement because the United States did not comply with the requirements of Articles 2.9.1, 2.9.2, 2.9.3, and 2.9.4 of the TBT Agreement when adopting a technical regulation that has a significant effect on the trade of Indonesia;

(f) Article 2.10 of the TBT Agreement because, in the event the United States believed there was a justification for not following the procedures in Article 2.9 of the TBT Agreement, it did not provide the Secretariat with notification of the measure and the urgent nature of the problem;

(g) Article 2.12 of the TBT Agreement because the United States failed to allow for a reasonable interval of time between the date of publication of the measure and the date that the measure went into effect; and

(h) Article 12.3 of the TBT Agreement because the ban on cigarettes with characterizing flavours created an unnecessary barrier to exports from Indonesia, a developing country.

3.2.
The United States requests that the Panel reject Indonesia's claims in their entirety.71

IV. ARGUMENTS OF THE PARTIES

4.1.
The arguments of the parties, as set out in their submissions provided to the Panel, are attached to this Report in Annexes A, C and D (See List of Annexes, at pages xv and xvi of this Report).

V. ARGUMENTS OF THE THIRD PARTIES

5.1.
The arguments of the third parties, as set out in their submissions provided to the Panel, are attached to this Report in Annex B (See List of Annexes, at pages xv and xvi of this Report).

VI. INTERIM REVIEW

A. GENERAL

6.1.
On 27 May 2011, the Panel issued its Interim Report to the parties. On 10 June 2011, Indonesia informed the Panel that it did not intend to request a review of any precise aspects of the Interim Report. The United States did submit a written request for the review of precise aspects of the Interim Report. On 17 June 2011, Indonesia submitted comments on a number of requests for review presented by the United States. Neither party requested an interim review meeting.
6.2.
In accordance with Article 15.3 of the DSU, this section of the Panel Report sets out a discussion of the arguments made at the interim review stage. The Panel has modified certain aspects of its Report in the light of the parties' comments wherever it considered appropriate. Finally, the Panel has made a limited number of editorial corrections to the Report for the purposes of clarity and accuracy. References to sections, paragraph numbers and footnotes in this Section VI relate to the Interim Report. Where appropriate, references to paragraphs and footnotes to the Final Report are included.

B. UNITED STATES' COMMENTS ON THE INTERIM REPORT

1. Factual aspects

6.3.
The Panel notes that the United States put forward a number of requests for review of the language in Section II of this Report which had already been subject to the parties' review as part of the Descriptive Part. We note that the United States did not take advantage of the two-week period provided by the Panel to comment on the Descriptive Part in order to suggest those particular changes. Nevertheless, the Panel has decided to accept some of the United States' requests for changes in Section II of this Report in order to ensure the accuracy of the description of the facts in this Report.
6.4.
Regarding paragraph 2.13 of the Interim Report, the United States suggests to the Panel that the third and fourth sentences be amended to read:

"The United States further regulatedTtobaccoproducts were further regulated over the following decades., but it was not until Inthe 1990s that the United States intensified its efforts to battle tobacco-related diseases. With that objective in mind, the FDA and the U.S. Congress investigated the U.S. tobacco industry 'concerning the industry's knowledge of, and efforts to conceal, the dangers of cigarettes, as well as their efforts to market cigarettes to children'.[18]"

6.5.
The United States submits that this change provides greater clarity and accuracy regarding the history of U.S. tobacco regulation. According to the United States, support for such changes may be found in paragraphs 80 and 81 of the United States' first written submission.
6.6.
Indonesiadoes not object to the change proposed by the United States.
6.7.
The Panel accepts the United States' suggestion and has accordingly amended the language in paragraph 2.13 of the Final Report.
6.8.
Regarding paragraph 2.14 of the Interim Report, the United States suggests to the Panel that the first two sentences be amended to read:

"These investigations led to private litigation against tobacco companies, as well as lawsuits by several states initiated by several U.S. states against the tobacco industry with a view to recovering the tobacco‑related costs incurred by the public health system. The outcome of these proceedings was the signature of a By the mid-1990s nearly every state in the United States had brought a lawsuit against the tobacco industry. To settle the litigation, the five largest U.S. tobacco companies (Brown and Williamson Tobacco Corporation, Lorillard Tobacco Company, Phillip Morris Incorporated, RJ Reynolds Tobacco Company and Commonwealth Tobacco Company) signed a Master Settlement Agreement ('MSA') with the states between these States and the five largest U.S. tobacco companies (Brown and Williamson Tobacco Corporation, Lorillard Tobacco Company, Phillip Morris Incorporated, RJ Reynolds Tobacco Company and Commonwealth Tobacco Company)."

6.9.
The United States submits that this change provides greater clarity and accuracy regarding the history of U.S. tobacco regulation. According to the United States, support for this change may be found in paragraphs 82 and 83 of the United States' first written submission.
6.10.
Indonesiadoes not object to the change proposed by the United States.
6.11.
The Panel accepts the United States' suggestion and has accordingly amended the language in paragraph 2.14 of the Final Report.
6.12.
Regarding paragraph 2.16 of the Interim Report, the United States suggests to the Panel that the final sentence be amended to read:

"In 1997, before the regulations were fully implemented, U.S. tobacco companies challenged the FDA's regulatory authority and in 2000 the U.S. Supreme Court invalidated the FDA's rules, finding that the U.S. Congress had not granted the FDA the authority to regulate cigarettes and smokeless tobacco as customarily marketed. [25]"

6.13.
The United States submits that this change ensures consistency with other references to the U.S. Congress in the Interim Report.
6.14.
Indonesiadoes not object to the change proposed by the United States.
6.15.
The Panel accepts the United States' suggestion and has accordingly amended the language in paragraph 2.16 of the Final Report.
6.16.
Regarding paragraph 2.21 of the Interim Report, the United States suggests to the Panel that the paragraph be amended to read:

"In addition, the FSPTCA regulates marketing by, for example, establishing a range of advertising restrictions and requirements [34], requiring graphic warning labels and other disclosures [35], and by authorizing the FDA to establish additional standards and restrictions related to the labelling, advertising, and promotion of tobacco products. [36]"

6.17.
The United States submits that legislation adopted prior to the FSPTCA required certain warning labels on tobacco products and that this change clarifies that the FSPTCA specifically required graphic warning labelling.
6.18.
Indonesiadoes not object to the change proposed by the United States.
6.19.
The Panel accepts the United States' suggestion and has accordingly amended the language in paragraph 2.21 of the Final Report.
6.20.
Regarding paragraph 2.23 of the Interim Report, the United States suggests to the Panel that the paragraph be amended to read:

"The March 2011 TPSAC Report, which was delivered to the FDA on 18 March 2011 [42], recommends to the FDA that the '[r]emoval of menthol cigarettes from the marketplace would benefit public health in the United States'. [43] The TPSAC Report also made suggestions for further assessment. The FDA will further consider the recommendations given by the TPSAC. [44]"

6.21.
The United States argues that the TPSAC Report linked its recommendation to a discussion of specific areas for further assessment. The United States submits that this change provides greater accuracy and completeness. The United States argues that support for this change may be found in paragraph 12 of the United States' response to Panel question No. 115(a) and in Chapter 8 of the TPSAC Report (Contraband, Evasion, Illegal production and importation of menthol cigarettes, After Market Mentholation, Potential Menthol Black Market, and Other Considerations).
6.22.
Indonesia objects to the addition proposed by the United States. In particular, Indonesia argues that the United States could be suggesting that the "further assessment" includes the TPSAC's recommendation to ban menthol. In its view, however, Chapter 8 of the TPSAC Report suggests two areas where further assessment was suggested: (i) the development of a black market for menthol cigarettes depending on what action the FDA pursues in response to the report; and (ii) "gaps in understanding of menthol cigarettes and public health". Indonesia suggests amending the text of paragraph 2.23 as follows:

"The TPSAC Report also made suggestedions for further assessment of the potential development of a black market and further research to address gaps in understanding of menthol cigarettes and public health."

6.23.
Having considered the comments of both parties, the Panel has inserted in paragraph 2.23 of the Final Report the sentence proposed by the United States and completed the reference in line with Indonesia's comments, following the language used in the TPSAC Report. The sentence in question reads as follows: "The TPSAC Report also made suggestions for further assessment in respect of the contraband of menthol cigarettes and recommended research to address gaps in understanding of menthol cigarettes and public health."

2. Whether Section 907(a)(1)(A) is inconsistent with Article 2.1 of the TBT Agreement

6.24.
Regarding paragraph 7.60 of the Interim Report, the United States suggests to the Panel that the final sentence be amended to read:

"In its second written submission, the United States argues that the relevant physical characteristics that differentiate clove cigarettes from menthol and regular cigarettes are: (i) the nearly equal mixture of tobacco and clove; (ii) the 'special sauce' contained in them; and (iii) the existence presence of eugenol.[169]"

6.25.
The United States submits that this change provides greater clarity.
6.26.
Indonesia does not object to the change proposed by the United States.
6.27.
The Panel accepts the United States' suggestion and has accordingly amended the language in paragraph 7.60 of the Final Report.
6.28.
Regarding paragraph 7.64 of the Interim Report, the United States suggests to the Panel that the paragraph be amended to read:

"The United States accuses Indonesia of failing to prove that Indonesian clove cigarettes and regular or menthol cigarettes are viewed as 'interchangeable' in the market, and of presenting unreliable data to suggest that clove cigarettes have a pattern of use similar to tobacco or menthol cigarettes, just on a smaller scale.[183] In fact, in contrastcontrary to clove cigarettes, menthol cigarettes are not predominantly a starter cigarette for youth in the United States because they are used by adults in large numbers. [84]"

6.29.
The United States submits that this change reflects the nuance in its argument. The United States contends that support for this change may be found in paragraphs 38 and 39 of the United States' response to Panel question No. 91. According to the United States, it maintained that menthol cigarettes are not "starter" cigarettes in the same way as clove and other flavoured cigarettes given that clove and other flavours are used far more prevalently during the period of initiation than at any other time, while menthol cigarettes are used heavily by adults. The United States argues that it maintained that, notwithstanding, menthol cigarettes, like all cigarettes, can be starter cigarettes for any particular individual.
6.30.
Indonesia argues that the paragraphs to which the United States refers focus more on the use of clove cigarettes by youth and indicate only with respect to menthol cigarettes that the pattern of use is different, concluding that "rates of use among young people and older adults are much more even." Accordingly, Indonesia requests that the new language proposed by the United States be revised to read:

"In contrast to clove cigarettes, menthol cigarettes are not predominantly a starter cigarette for youth in the United States because rates of use among young people and older adults are much more even."

6.31.
Having considered the comments of both parties, the Panel has amended the language in paragraph 7.64 of the Final Report as follows: "In contrast to clove cigarettes, menthol cigarettes are not predominantly a starter cigarette for youth in the United States. According to the United States, rates of use of regular and menthol cigarettes among young people and older adults are much more even.72"
6.32.
Concerning paragraph 7,139 of the Interim Report, the United States suggests to the Panel that the first sentence be amended to read:

"However, we disagree with the United States in that the identification of the like domestic product in a panel request merely amounts in all cases to argumentation in this dispute."

6.33.
The United States argues that this change clarifies its position. According to the United States, it had argued that the identification of the domestic "like product" is an aspect of the argumentation in support of (or in opposition to) a national treatment claim of a party. The United States contends that it does not consider that "in all cases" the identification of the like domestic product is, necessarily, an aspect of argumentation and not an aspect of the claim itself. The United States argues that support for such a clarification may be found in paragraph 7 of the United States' response to Panel question No. 83.
6.34.
Indonesia objects to the change suggested by the United States on the grounds that paragraph 7 of the United States' response to Panel question No. 83 does not narrow the United States' contention only to the facts of this dispute.
6.35.
Having considered the United States' suggestion and Indonesia's comments thereon, the Panel agrees with Indonesia that paragraph 7 of the response73 of the United States to Panel question No. 83 does not appear to support the United States' request. On the contrary, the language of the relevant paragraph indicates that the United States was making a general statement that applies in all cases. The Panel therefore declines to include the words "in this dispute" at the end of the relevant sentence. Nevertheless, the Panel has deleted the words "in all cases" in order to better reflect the language in paragraph 7 of the relevant response. The relevant sentence of paragraph 7,139 of the Final Report reads as follows: "However, we disagree with the United States in that the identification of the like domestic product in a panel request merely amounts to argumentation".
6.36.
Regarding paragraph 7,170 of the Interim Report, the United States suggests to the Panel that the second sentence be amended to read:

"Indonesia submits that menthol cigarettes also have their own flavouring agents, which are referred to as 'sauce' or 'casing'.[366] In this regard, the United States argues that the special sauce used by Indonesian clove cigarettes is not the same 'casing' used in all cigarettes, including menthol cigarettes [367], because clove cigarette manufacturers specifically design and market the sauce for its unique appeal whereas manufacturers of menthol and regular cigarettes do not."

6.37.
The United States submits that this change clarifies that it had argued that the differences between the "casing" of regular or menthol cigarettes and the "special sauce" in clove cigarette include the "special sauce" that is part of the marketing and unique appeal of clove cigarettes. The United States argues that support for this change may be found in paragraph 19 of the United States' response to Panel question No. 87.
6.38.
Indonesia objects to the change proposed by the United States. In its view, paragraph 19 says nothing about marketing and nothing about menthol or regular cigarettes. Indonesia contends that there is no evidence in the record to support the United States' claim that menthol and regular cigarette manufacturers do not market the taste or flavour achieved by the casing or flavourings used in regular and menthol cigarettes. To more accurately reflect paragraph 19 of the United States' response to Panel question No. 87, Indonesia suggests the following language replacing that proposed by the United States: "because clove cigarette manufactures use a special recipe essential to the specific flavor of clove cigarettes."
6.39.
Having considered the United States' suggestion and Indonesia's comments thereon, the Panel is of the view that paragraph 19 of the United States' response to Panel question No. 8774 does not contain the language proposed by the United States. The Panel therefore declines to make the change suggested by the United States, but has nevertheless added the following language from that response to the text of paragraph 7,170 of the Final Report: "The United States explains that the flavour imparted by the sauce is part of the essential flavour and identity of the products."
6.40.
Regarding paragraph 7,183 of the Interim Report, the United States suggests to the Panel that the paragraph be amended to read:

"As regards the toxicity, both parties agree that all of these cigarettes are harmful to health and may cause death. Both parties initially agreed that their relative toxicity is not an issue in this dispute. However, tIn addition, the United States appears to have changed its position in its second written submission, where it has maintained that certain additives contained in clove cigarettes, such as eugenol and coumarin, are uniquely harmful to health. [386]"

6.41.
The United States submits that this change clarifies its position throughout the proceedings. The United States argues that support for this change may be found in paragraphs 164 and 166 of the United States' first written submission. According to the United States, it consistently argued, including in its first submission, that all cigarettes are harmful and may cause death but that clove cigarettes also pose unique risks for health. The United States contends that it elaborated upon the unique risks for health of clove cigarettes in rebuttal to the arguments of Indonesia and in response to questions from the Panel. According to the United States, in doing so, it did not change its position.
6.42.
Indonesia objects to the change suggested by the United States. In particular, Indonesia notes that the addition of the word "uniquely" is not supported by the text referenced in the United States' first written submission. For Indonesia, evidence provided by both parties demonstrates that the effect of numbing the throat is not unique to the eugenol in clove cigarettes as menthol has this same property and coumarin is not specifically banned as an additive from cigarettes. Indonesia refers to footnote 210 of the United States' first written submission, Exhibit US‑73 at 705 and 708, and Exhibit IND-21, as support for its position.
6.43.
Having considered the United States' suggestions and Indonesia's comments thereon, the Panel declines to make the changes proposed by the United States. The Panel is of the view that the language in paragraph 7,183 of the Final Report correctly reflects the argumentation presented by the United States.
6.44.
Regarding paragraph 7,203 of the Interim Report, the United States suggests to the Panel that the paragraph be amended to read:

"The United States considers that the relevant consumers are all the potential and current smokers in the United States and defines 'potential' consumers as young people within the age of initiation. The United States defines 'current' smokers as including older adults. The United States submits that patterns of use by both young people within the age window of initiation and older adults should be evaluated and considered in the 'consumer tastes and habits' criterion of the like product analysis, and in relationship to the public health basis for the measure."

6.45.
The United States argues that this change provides a more complete summary of its argument related to relevant consumers for purposes of the analysis of the like product. The United States submits that support for this change may be found in paragraph 42 of the United States' response to Panel question No. 92 and paragraph 17 of in the United States' comments on Indonesia's response to Panel question No. 92. According to the United States, its argument concerning the relevance of "current" consumers, including adults, in the analysis of the like product is as important as its argument concerning "potential consumers".
6.46.
Indonesiaobjects to the change proposed by the United States. In particular, Indonesia contends that the paragraphs cited by the United States in support of the suggested change do not contain the definition of "current" smokers proposed by the United States. In its view, both the initial response from the United States and its comments on Indonesia's response emphasized the need to include "potential" consumers, as reflected in the Panel's Report.
6.47.
Having considered the United States' suggestion and Indonesia's comments thereon, the Panel agrees with Indonesia that the paragraphs referenced by the United States do not include a definition of "current smokers". We do however agree with the United States in that it has argued the relevance of the patterns of use in the likeness analysis, in particular, under the 'consumer tastes and habits' criterion. The Panel has therefore added the following sentence to the text of paragraph 7,203 of the Final Report: "The United States submits that the patterns of use as between young people in the window of initiation and older, regular smokers should be evaluated and considered in the consumer tastes and habits criterion of the like product analysis, and in relation to the public health basis for the measure."
6.48.
Regarding paragraph 7,272 of the Interim Report, the United States suggests to the Panel that the paragraph be divided into two paragraphs and be amended to read:

"According to the United States, the Panel should compare the treatment accorded to all imported cigarettes (to the extent that they are like), and not just clove cigarettes, with the treatment accorded to all domestically‑produced cigarettes (to the extent that they are like). From this point of view, the United States emphasizes that Section 907(a)(1)(A) applies to both imported and domestic cigarettes with characterizing flavours, which comprise a small category of cigarettes in general. At the same time, the ban does not apply to regular and menthol cigarettes of any origin, including regular cigarettes imported from Indonesia, and both imported and domestic menthol cigarettes.

[New Paragraph 7,273]

In itsthe United States' view, Indonesia is incorrect that Section 907(a)(1)(A) accords less favourable treatment 'if one Indonesian import is included among the prohibited characterizing flavours and one U.S. produced cigarette is not'.[494] For the United States, the "best treatment" approach advocated by Indonesia is inconsistent with the language of Article III:4 of the GATT 1994 and Article 2.1 of the TBT Agreement. Rather, it submits, as established by the Appellate Body in EC ‑ Asbestos, the relevant comparison is between the group of 'like' imported products and the group of 'like' domestic products. [495] According to the United States, the Appellate Body recognized that a Member may draw distinctions between products determined to be 'like' without affording protection to domestic production or according less favourable treatment to imported products. [496]"

6.49.
The United States submits that this change clarifies its position. The United States submits that support for this change may be found in paragraphs 54‑56 of the United States' opening oral statement at the second substantive meeting of the Panel. According to the United States, it argued that the treatment of all products determined to be "like" – including both imported and domestic – provides relevant evidence to the less favourable treatment analysis. The United States contends that it argued that the Panel should consider regular tobacco cigarettes imported from Indonesia, as well as menthol cigarettes which are imported, and other flavoured cigarettes from any origin.
6.50.
Indonesia does not object to the change suggested by the United States.
6.51.
The Panel accepts the change proposed by the United States and has amended the language in paragraph 7,272 of the Final Report accordingly. The Panel however prefers to keep one single paragraph.
6.52.
Regarding paragraph 7,289 of the Interim Report, the United States suggests to the Panel that the second sentence be amended to read:

"The United States has told this Panel that it was not including menthol cigarettes, which we have found to be like to clove cigarettes for the purpose of Article 2.1 of the TBT Agreement, because of doing so without further assessment would not be appropriate for the public health, because of issues including the potential impact on itsthe health care system and the potential development of a black market and smuggling onf menthol cigarettes. [518]"

6.53.
The United States argues that this change reflects more accurately its position. The United States argues that support this change may be found in paragraphs 107‑110 of the United States' first written submission, paragraphs 9 to 32 of the United States' second written submission, and paragraphs 34 and 35 of the United States' response to Panel question No. 92(b). According to the United States, it argued that it would be inappropriate to ban menthol without further assessment, given that banning such a heavily used, addictive product could have negative consequences for the public health and be unachievable, unfeasible or ineffective.
6.54.
Indonesia objects to the change suggested by the United States. Indonesia first points out that the United States' citation in support of its view is incorrect as it believes that the relevant question on this subject is Panel question No. 90(b), not 92(b). Second, Indonesia contends that none of the sources to which the United States refers the Panel in support of its proposed new language discusses the possibility of banning menthol cigarettes subject to "any further assessment." In its view, the sections of the U.S. submissions referred to by the United States defend the approach contained in Section 907 and attempt to provide a justification for exempting menthol cigarettes. The United States' response to Panel question No. 90(b) indicates that this decision was the result of "pragmatic, reasonable weighing." For Indonesia, none of the U.S. statements referenced by the United States, including its response to Panel question No. 90(b), paragraph 34, give any indication that the ban on flavourings would be re-evaluated and potentially expanded to include menthol after "further assessment." In fact, it submits, paragraph 53 indicates that it was "not feasible" and there was no intention of banning most cigarettes. As a result, the Panel should not accept the addition of the phrase, "doing so without further assessment would not be appropriate for the public health, because of issues including."
6.55.
Having considered the United States' suggestion and Indonesia's comments thereon, the Panel accepts the change proposed by the United States and accordingly amends paragraph 7,289 of the Final Report. In the Panel's view, Indonesia is not correct in arguing that the United States has not referred to the need for further assessment in respect of menthol cigarettes in its submissions. In particular, we note that paragraph 34 of the United States' first written submission reads: "The United States further argued that "[a]lthough menthol cigarettes are not banned, they are, like all cigarettes, unquestionably harmful products. The general public's use of menthol cigarettes, and the methods of advertising and marketing of the product by cigarette companies, remain a significant concern of Congress, FDA, as well as health advocates, and continues to be the subject of intense study in the United States. In particular, Congress, in Section 907(e) of the FSPTCA, instructed a statutorily-created committee, the Tobacco Products Scientific Advisory Committee ("TPSAC"), to 'issue a report and recommendation on the issue of the impact of the use of menthol in cigarettes on the public health, including such use among children, African-Americans, Hispanics, and other racial and ethnic minorities.' TPSAC's review of the issue is ongoing." Furthermore, in paragraphs 21 and 23 of its second written submission, the United States argues that "the prohibition of the heavily-used tobacco and menthol flavoured products may cause negative consequences" and that it "assign[ed] menthol-flavored cigarettes to intensive study by the TPSAC to better understand the public health issues related to possible future restrictions". However, Indonesia is correct that the United States wrongly referred to paragraphs 34 and 35 of the United States' response to Panel question No. 92(b). It should be paragraphs 34 and 35 of the United States' response to Panel question No. 90(b).

3. Whether Section 907(a)(1)(A) is inconsistent with Article 2.2 of the TBT Agreement

6.56.
Regarding paragraph 7,319 of the Interim Report, the United States suggests to the Panel that footnote 584 be amended to read:

"The Panel notes that the United States has argued that its position that the objective of Section 907(a)(1)(A) includes the consideration of negative consequences for the public health is supported by the text of section 907(a)(1)(A) itself, as well as other provisions of section 907, including section 907(b)(2). As the United States has discussed, section 907(b)(2) requires FDA to consider the negative consequences of any proposed new tobacco product standard, or proposed revision to or revocation of an existing standard, prior to approving, revising, or revoking such a standard. United States' response to Panel question Nos. 60, 100."

6.57.
The United States argues that this change summarizes more accurately its position regarding the objective of Section 907(a)(1)(A). According to the United States, not only the text of Section 907(a)(1)(A), but also other provisions of Section 907 support its position whereby the objective includes the consideration of negative consequences.
6.58.
Indonesiadoes not object to the change proposed by the United States.
6.59.
The Panel agrees that the additional text proposed by the United States would more accurately summarize its position on what the objective of Section 907(a)(1)(A) is. Accordingly, the Panel has made this change to footnote 588 of the Final Report.
6.60.
Regarding paragraph 7,321 of the Interim Report, the United States suggests to the Panel that footnote 590 be amended to read:

"The United States understands that the complaining party does not establish a breach of Article 2.2 by proving the existence of an alternative measure that fulfills the importing Member's legitimate objective at the level the Member considers appropriate that is less trade restrictive, but only by a de minimis amount. See U.S. First Written Submission, para. 263 (citing to Letter from Peter D. Sutherland, Director‑General of the GATT, to Ambassador John Schmidt, Chief U.S. Negotiator (December 15, 1993), Exhibit US‑79). However, as all of the alternative measures that Indonesia has offered do not ban trade in any flavoured cigarettes, the United States considers that the issue of whether Article 2.2 embodies a 'significantly less trade‑restrictive' standard would 'not appear to arise in this dispute.' United States' response to Panel question No. 57, para. 130."

6.61.
The United States argues that this change summarizes more accurately its argument.
6.62.
Indonesiadoes not object to the change proposed by the United States.
6.63.
The Panel agrees that the additional text proposed by the United States would more accurately summarize its argument. Accordingly, the Panel has made this change to footnote 594 of the Final Report.
6.64.
Regarding paragraphs 7,362 and 7,363 of the Interim Report, the United States suggests to the Panel that the following language be inserted following the second sentence of paragraph 7,363:

"The United States further notes that while Article XX(b) focuses on whether a measure is necessary to protect human, animal, or plant life or health, Article 2.2 applies more broadly to any legitimate objective, and focuses on whether the degree of trade restriction is necessary rather than whether the measure is necessary to fulfill an objective. One way in which these examples are significant is that not only those technical regulations that can be considered 'necessary' are consistent with the requirements of Article 2.2. In the U.S. view, Article 2.2 does not limit a Member's ability to apply technical regulations that the Member considers desirable rather than necessary. In addition, and we noted above, [Interim Report, paragraph 7,323] the United States argued that these differences mean that the 'material contribution' element of the Article XX(b) jurisprudence is not part of the Article 2.2 analysis. Rather, the test of Article 2.2 is different – whether the measure is more trade restrictive than necessary to achieve the legitimate objective at the level sought by the Member."

6.65.
The United States argues that this change ensures that its argument is accurately presented. The United States submits that support for this change may be found in the United States' response to Panel question No. 103(a), paragraphs 78‑79, the United States' second written submission, paragraphs 181‑182 and the United States' response to Panel question No. 55, paragraphs 121‑125.
The United States disagrees with the Panel's statement, in paragraph 7,362, that "the United States has not actually identified any significant differences between the tests that have been developed under Article XX(b) of the GATT 1994 and Article 5.6 of the SPS Agreement, or any aspect of the Article XX(b) jurisprudence relating to the interpretation of the term ‘necessary' that would be inapplicable to Article 2.2 of the TBT Agreement." The United States argues that it has. For example, while both Articles XX(b) of the GATT 1994 and 2.2 of the TBT Agreement use the term "necessary", the remainder of the two provisions are very different. According to the United States, the use of one word in common is not enough to indicate that it is appropriate to apply interpretative concepts which are used in one context in the other one. The United States contends that Article XX(b) of the GATT 1994 focuses on whether a measure is necessary to protect human, animal, or plant life or health. Article 2.2 of the TBT Agreement applies more broadly to any legitimate objective, and focuses on whether the degree of trade restriction is necessary rather than whether the measure is necessary to fulfil an objective. According to the United States, not only those technical regulations that can be considered "necessary" are consistent with the requirements of Article 2.2 of the TBT Agreement. The United States argues that Article 2.2 of the TBT Agreement does not limit the ability of a Member to apply technical regulations that it holds desirable rather than necessary. Additionally, and as acknowledged in paragraph 7,323 of the Interim Report, the United States submits that it argued that such differences mean that the "material contribution" element of the jurisprudence on Article XX(b) of the GATT 1994 is not part of the analysis concerning Article 2.2 of the TBT Agreement. Instead, according to the United States, the test of Article 2.2 of the TBT Agreement is different: whether a measure is more trade restrictive than necessary to achieve the legitimate objective at the level sought by the Member.
6.67.
Indonesiadoes not object to the change proposed by the United States.
6.68.
The Panel understands the United States to be requesting the addition of new language in paragraph 7,363 to reflect its argument that the question under Article XX(b) of the GATT 1994 is whether the measureitself is necessary, whereas under Article 2.2 the question is whether the degree of trade-restrictiveness is necessary. The Panel agrees with the United States that this U.S. argument could be more clearly reflected in the Report. However, the Panel considers that inserting the additional text suggested by the United States following the first sentence of paragraph 7,363 could create some confusion as to which argument the Panel is responding to in the remaining part of paragraph 7,363. Accordingly, the Panel has added the following new text to existing footnote 662 of the Final Report in order to reflect and respond to this U.S. argument:

"Based on this difference in wording between Article XX(b) of the GATT 1994 and Article 2.2 of the TBT Agreement, the United States further argues that there is another significant difference between these provisions, which is that the question under Article XX(b) is whether the measureitself is necessary, whereas under Article 2.2 the question is whether the degree of trade-restrictiveness is necessary (United States' second written submission, para. 181; United States' response to Panel question No. 55, para. 123). We agree with the United States that Article XX(b) is drafted in terms of whether the trade-restrictive measure is necessary to fulfil its objective, whereas Article 2.2 is drafted in terms of whether the degree of trade-restrictiveness of that measure is necessary to fulfil its objective. However, the United States has not explained why or how an analysis framed in terms of the necessity of the 'trade-restrictiveness' of a trade-restrictive measure would be significantly different from an analysis framed in terms of the necessity of that trade-restrictive measure. For example, the United States' arguments in this case suggest that a Panel analysing the necessity of the degree of trade-restrictiveness of a trade-restrictive measure under Article 2.2 (as opposed to the necessity of a trade-restrictive measure) would still need to consider the extent to which that measure makes a 'contribution' to its objective. In this regard, we recall that the United States recognizes that '[w]hile Article 2.2 does not require that the measure fulfill its objective, it is difficult to believe that a measure fails to fulfill its objective completely – that is to say, a measure that does not even make a marginal contribution to its objective – could be found consistent with Article 2.2.' (United States' response to Panel question No. 103(a))."

6.69.
Regarding paragraph 7,365 of the Interim Report, the United States suggests to the Panel that a new footnote at the end of the first sentence be added to read:

"New footnote 661:

The Panel notes that the United States further contends that the 1993 letter from Peter D. Sutherland, Director‑General of the GATT, to Ambassador John Schmidt, Chief U.S. Negotiator, Exhibit US‑79, provides additional support, as a supplemental means of interpretation under Article 32 of the Vienna Convention, that TBT Article 2.2 should be interpreted similarly to SPS Article 5.6, specifically that a measure cannot be considered more trade-restrictive than necessary in the absences of a reasonably available alternative measure that is significantly less-trade restrictive."

6.70.
The United States argues that this change summarizes more accurately its argument. The United States contends that support for such changes may be found in the United States' second written submission, paragraph 178.
6.71.
According to the United States, the letter of the 1993 GATT Director-General (Exhibit US‑79) offers additional support, as supplementary means of interpretation under Article 32 of the VCLT, that Article 2.2 of the TBT Agreement should be interpreted similarly to Article 5.6 of the SPS Agreement, and, more in detail, that a measure cannot be considered more trade-restrictive than necessary without a reasonably available alternative measure that is significantly less-trade restrictive.
6.72.
Indonesiadoes not object to the change proposed by the United States.
6.73.
The Panel agrees that the additional text proposed by the United States would more accurately summarize its argument. Accordingly, the Panel has added a new footnote 665 at the end of the first sentence of paragraph 7,365 of the Final Report containing the text proposed by the United States.
6.74.
Regarding paragraph 7,392 of the Interim Report, the United States suggests to the Panel that the paragraph be amended to read:

"Accordingly, we do not consider that the survey data numbers provided by Indonesia offer a sufficient very solid basis for determining that whether the ban on clove cigarettes does not makes a material contribution to the objective of reducing youth smoking."

The United States submits that this change is needed because the Panel found that Indonesia's own evidence establishes that clove cigarettes are disproportionally used by people aged 17 and younger (see e.g. paragraphs 7,390‑7,391 of the Interim Report) and to ensure that the statement of the Panel is not misread on this point.
6.76.
Indonesiadoes not object to the change proposed by the United States.
6.77.
The Panel agrees with the United States that the statement contained in paragraph 7,392 of the Interim Report could be misread. For the sake of greater clarity, the Panel has amended the language in paragraph 7,392 of the Final Report in the manner proposed by the United States.
6.78.
Regarding paragraph 7,426 of the Interim Report, the United States suggests to the Panel that the final sentence be amended to read:

"More importantly, however, is that it is not clear that the laws implemented to date by other countries should serve as some kind of benchmark for the United States or any other sovereign WTO Member, particularly where Indonesia has not established the objectives of these foreign measures and at what level those measures fulfill their respective objectives, and whether the objectives of the foreign measures are the same as the U.S. objective and that the foreign countries seek to achieve that objective at the same level the United States does."

The United States argues that Panel's argumentation in paragraph 7,426 is well founded. The United States submits that this change improves the argumentation by offering a more explicit explanation concerning why this is so in this case.
6.80.
Indonesiadoes not object to the change proposed by the United States.
6.81.
The Panel considers that the additional language proposed by the United States is helpful in explaining the point being made in the final sentence of paragraph 7,426. Accordingly, the Panel has amended paragraph 7,426 of the Final Report as proposed by the United States.

4. Whether the United States has acted inconsistently with Article 12.3 of the TBT Agreement

6.82.
Regarding paragraph 7,608 of the Interim Report, the United States suggests to the Panel that the first sentence be amended to read:

"As to The United States submits that the as regards the legal standard at issue, the United States submits that it is not sufficient for Indonesia to simply say that "something" more than what the United States has done is required Indonesia will only say that "something" more than what the United States has done is required, without explaining what that "something" more is exactly. [993] It is not sufficient to simply say that "something" more than what the United States has done is required. [994]"

6.83.
The United States argues that this change corrects a possible mistake in the first sentence and more effectively reflects its argument.
6.84.
Indonesiadoes not object to the change proposed by the United States.
6.85.
The Panel agrees with the United States' drafting suggestion. Accordingly, the Panel has made this change to paragraph 7,608 of the Final Report.
6.86.
Also regarding paragraph 7,608 of the Interim Report, the United States suggests to the Panel that footnotes 993 and 994 be combined to read:

"Footnote 993

United States' oral statement at the second substantive meeting of the Panel, para. 106; United States' response to Panel question No. 112, para. 118.

Footnote 994

United States' response to Panel question No. 112, para. 118."

6.87.
The United States argues that this change is needed in connection with the suggested modification to paragraph 7,608.
6.88.
Indonesiadoes not object to the change proposed by the United States.
6.89.
The Panel accepts the change proposed by the United States and has combined both footnotes into footnote 998 to paragraph 7,608 of the Final Report.

5. Miscellaneous

6.90.
In addition to the substantive comments presented above, the United States offered two typographical suggestions. The Panel has accommodated the United States' suggestions.

VII. FINDINGS

A. INTRODUCTION

7.2.
At the outset, this Panel would like to emphasize that measures to protect public health are of the utmost importance, and that the WTO Agreements fully recognize and respect the sovereign right of Members to regulate in response to legitimate public health concerns.
7.3.
We note that the WTO seeks to promote general well-being through trade liberalization and recognizes the right of WTO Members to adopt measures to protect public health. In fact, WTO Members have a large measure of autonomy to determine their own policies to protect human health. This autonomy is only circumscribed by the need to ensure that the means chosen for realizing those policies are consistent with WTO rules. These rules require Members to ensure that those means be non-discriminatory, and otherwise in accordance with the provisions of the WTO Agreements. The sixth preambular recital of the TBT Agreement is explicit in this regard:

"Recognizing that no country should be prevented from taking measures necessary to ensure the quality of its exports, or for the protection of human, animal or plant life or health, of the environment, or for the prevention of deceptive practices, at the levels it considers appropriate, subject to the requirement that they are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail or a disguised restriction on international trade, and are otherwise in accordance with the provisions of this Agreement".

7.5.
Furthermore, we are aware of the important international efforts to curb smoking within the context of the WHO FCTC and its WHO Partial Guidelines.77
7.6.
The task before us is to objectively assess whether Section 907(a)(1)(A) is in conformity with U.S. obligations pursuant to the provisions of the WTO Agreements within our terms of reference. We recall the words of the Appellate Body when it acknowledged that the objective of preserving human life and health "is both vital and important in the highest degree"78, and that "few interests are more 'vital' and 'important' than protecting human beings from health risks".79

B. ORDER OF ANALYSIS

7.7.
Before commencing our analysis of Indonesia's legal claims, we would like to explain our decision to follow a certain order of analysis.
7.8.
If we examine Indonesia's Panel Request, we observe that Indonesia puts forward claims under Articles III:4 and XX of the GATT 1994, Articles 2.1, 2.2, 2.5, 2.8, 2.9 (including 2.9.1, 2.9.2, 2.9.3, and 2.9.4), 2.10, 2.12 and 12.3 of the TBT Agreement and, conditionally upon the United States asserting that Section 907(a)(1)(A) is an SPS measure, Articles 2, 3, 5 and 7 of the SPS Agreement.80
7.9.
In its first written submission, though, Indonesia clarified that its claim under Article III:4 of the GATT 1994 is an alternative claim to that under Article 2.1 of the TBT Agreement.81 It further explained that its claim under Article XX of the GATT 1994 was a rebuttal of a potential defence by the United States.82 In addition, no analysis or request for findings was made in respect of its conditional SPS claims.
7.10.
In response to a number of questions posed by this Panel aimed at clarifying the scope of its mandate, and in later submissions, Indonesia confirmed that: (i) its claim under Article III:4 of the GATT 1994 is as an alternative to its national treatment claim under Article 2.1 of the TBT Agreement; (ii) it is not claiming a violation of Article XX of the GATT 1994 by the United States; and (iii) it believes the measure is a technical regulation subject to the TBT Agreement, not an SPS measure subject to the SPS Agreement.83
7.11.
Additionally, we also observed that while in its Panel Request Indonesia brought claims under Articles 2.9.1, 2.9.2, 2.9.3 and 2.9.4 of the TBT Agreement, subsequently it only presented arguments and evidence with respect to its claims under Articles 2.9.2 and 2.9.3 of the TBT Agreement. We therefore understand Indonesia to have abandoned its claims under Articles 2.9.1 and 2.9.4 of the TBT Agreement and we will thus not examine them.84
7.12.
The question before us therefore is whether there is a particular sequencing of the legal claims that should be followed in examining Indonesia's claims. Further to the Appellate Body Report in US – Zeroing (EC) (Article 21.5 – EC), we understand that panels are not bound by the order of claims made by the complainant. As put by the Appellate Body, "in fulfilling its duties under Article 11 of the DSU, a panel may depart from the sequential order suggested by the complaining party, in particular, when this is required by the correct interpretation or application of the legal provisions at issue".85 Nevertheless, it is customary for panels to follow the order of the claims presented by the complainant, unless they believe it inappropriate.
7.13.
We recall that the panel in India – Autos explained that it is important to first consider if a particular order is compelled by principles of valid interpretative methodology, which, if not followed, might constitute an error of law.86 That panel also pointed out that the order selected for examination of the claims may also have an impact on the potential to apply judicial economy.87 For the Appellate Body, it is the nature of the relationship between the provisions that will determine in each case whether there is a prescribed order of analysis.88
7.14.
As the United States has not asserted that Section 907(a)(1)(A) is an SPS measure and Indonesia refrained from arguing its SPS claims, we will not examine them. Hence, we do not need to decide between Indonesia's SPS and TBT claims as the starting point of our analysis.89 In addition, given that Indonesia's claim under Article III:4 of the GATT 1994 is an alternative claim to that under Article 2.1 of the TBT Agreement, there is no issue as to which covered agreement, the TBT Agreement or the GATT 1994, must be addressed first.
7.15.
There is nevertheless a threshold issue that we must address before entering into an examination of Indonesia's claims under the TBT Agreement. Indeed, we need to consider whether the TBT Agreement applies to Section 907(a)(1)(A). We note that Indonesia argued that Section 907(a)(1)(A) is a technical regulation. We shall therefore begin by examining whether Section 907(a)(1)(A) is a "technical regulation" within the meaning of Annex 1.1 of the TBT Agreement and thus whether the obligations embodied in Indonesia's claims under the TBT Agreement apply.
7.17.
We will however make an exception to that numerical order with our examination of Articles 2.9.2 and 2.9.3, and 2.10 of the TBT Agreement, as we will first examine Indonesia's claim pursuant to Article 2.10 of the TBT Agreement. As we will explain in more detail in Section VII.I.2 below, Article 2.10 of the TBT Agreement applies only when a Member is departing from the general obligations established in Article 2.9 of the TBT Agreement. We will therefore first examine whether the conditions of urgency described in Article 2.10 are present in this dispute and, if we find that these conditions are not present, we will continue and examine Indonesia's claims under Articles 2.9.2 and 2.9.3 of the TBT Agreement.
7.18.
Finally, we note that Indonesia made certain statements to the effect that Section 907(a)(1)(A) violates the above-mentioned provisions of the TBT Agreement and the GATT 1994 "both on its face and as applied".91 The Panel attempted to clarify Indonesia's position in this respect as those statements could be understood to mean that Indonesia is advancing both "as such" and "as applied" claims in respect of Section 907(a)(1)(A).92 Notwithstanding, Indonesia has not clearly explained to us how its "as applied" claims would differ, if at all, from its "as such" claims.93 Indeed, we are unable to identify anything in Indonesia's argumentation that relates to Section 907(a)(1)(A) "as applied", as distinguished from its "as such" claims pertaining to Section 907(a)(1)(A). We ourselves are unable to see how the "as such"/"as applied" distinction is of importance in the present case.94 Accordingly, we have decided not rely on the "as such"/"as applied" distinction in analysing Indonesia's claims, and we thus do not present any separate analyses of, or findings on, Section 907(a)(1)(A) "as applied".
7.19.
We shall therefore commence our analysis by examining whether Section 907(a)(1)(A) is a technical regulation within the meaning of Annex 1.1 of the TBT Agreement.

C. WHETHER SECTION 907(A)(1)(A) IS A "TECHNICAL REGULATION" WITHIN THE MEANING OF ANNEX 1.1 OF THE TBT AGREEMENT

1. Arguments of the parties

7.20.
Indonesia submits that Section 907(a)(1)(A) is a "technical regulation" as defined in Annex 1.1 of the TBT Agreement.95 Recalling the Appellate Body's guidance in EC – Asbestos, Indonesia submits that Section 907(a)(1)(A) applies to an "identifiable group of products" (i.e., certain flavoured cigarettes, and especially clove cigarettes), lays down "product characteristics" (i.e., it prohibits the addition of characterizing flavours, except menthol), and compliance with the prohibition is "mandatory".96 Indonesia observes that the United States does not dispute that Section 907 is a "technical regulation".97
7.21.
The United States acknowledges that "the measure is a technical regulation"98. However, the United States submits that its view as to the nature of Section 907(a)(1)(A) as a technical regulation should not change the standard of review of the Panel, which is to make an objective assessment based on the facts presented as to whether the measure at issue is a technical regulation.99

2. Analysis by the Panel

(a) Introduction

7.22.
Indonesia claims that the United States has acted inconsistently with Articles 2.1, 2.2, 2.5, 2.8, 2.9, 2.10, 2.12, and 12.3 of the TBT Agreement. We note that, by their own terms, these provisions apply to "technical regulations".100 This means that, if Section 907(a)(1)(A) is nota "technical regulation" within the meaning of the TBT Agreement, these provisions would not apply to that measure. Thus, a threshold issue in our examination of Indonesia's claims under the TBT Agreement is whether Section 907(a)(1)(A) is a "technical regulation".

(b) The legal provision at issue

7.23.
Article 1.2 of the TBT Agreement provides that "for the purposes of this Agreement the meaning of the terms given in Annex 1 applies". Annex 1.1 of the TBT Agreement defines a "technical regulation" as follows:

"Document which lays down product characteristics or their related processes and production methods, including the applicable administrative provisions, with which compliance is mandatory. It may also include or deal exclusively with terminology, symbols, packaging, marking or labelling requirements as they apply to a product, process or production method."

7.24.
We note that the definition of the term "technical regulation" in Annex 1.1 of the TBT Agreement has already been examined by the Appellate Body: first in EC – Asbestos, and then again in EC – Sardines.101 In those cases, the Appellate Body set out three criteria that a document must meet to fall within the definition of "technical regulation" in Annex 1.1:

"... First, the document must apply to an identifiable product or group of products. The identifiable product or group of products need not, however, be expressly identified in the document. Second, the document must lay down one or more characteristics of the product. These product characteristics may be intrinsic, or they may be related to the product. They may be prescribed or imposed in either a positive or a negative form. Third, compliance with the product characteristics must be mandatory. As we stressed in EC – Asbestos, these three criteria are derived from the wording of the definition in Annex 1.1...."102

7.25.
The Panel will therefore proceed to analyse whether Section 907(a)(1)(A) constitutes a "technical regulation" within the meaning of Annex 1.1 of the TBT Agreement by examining these three criteria.

(c) Elements of the definition of a technical regulation

(i) First element: Whether Section 907(a)(1)(A) applies to an "identifiable product or group of products"

7.26.
In EC – Asbestos, the Appellate Body elaborated on the first element of the definition of a "technical regulation":

"A 'technical regulation' must, of course, be applicable to an identifiable product, or group of products. Otherwise, enforcement of the regulation will, in practical terms, be impossible. This consideration also underlies the formal obligation, in Article 2.9.2 of the TBT Agreement, for Members to notify other Members, through the WTO Secretariat, of 'the products to be covered' by a proposed 'technical regulation'. (emphasis added) Clearly, compliance with this obligation requires identification of the product coverage of a technical regulation. However, in contrast to what the Panel suggested, this does not mean that a 'technical regulation' must apply to 'given' products which are actually named, identified or specified in the regulation. (emphasis added) Although the TBT Agreement clearly applies to 'products' generally, nothing in the text of that Agreement suggests that those products need be named or otherwise expressly identified in a 'technical regulation'. Moreover, there may be perfectly sound administrative reasons for formulating a 'technical regulation' in a way that does not expressly identify products by name, but simply makes them identifiable – for instance, through the 'characteristic' that is the subject of regulation."103

7.28.
We therefore find that Section 907(a)(1)(A) applies to an "identifiable product or group of products" and it thus meets the first element of the definition of a "technical regulation".

(ii) Second element: Whether Section 907(a)(1)(A) lays down one or more "product characteristics"

7.29.
In EC – Asbestos, the Appellate Body stated that "[t]he heart of the definition of a 'technical regulation' is that a 'document' must 'lay down' – that is, set forth, stipulate or provide – 'product characteristics'".106 The Appellate Body explained that the term "product characteristics" in Annex 1.1 of the TBT Agreement should be interpreted in accordance with its ordinary meaning:

"... The word 'characteristic' has a number of synonyms that are helpful in understanding the ordinary meaning of that word, in this context. Thus, the 'characteristics' of a product include, in our view, any objectively definable 'features', 'qualities', 'attributes', or other 'distinguishing mark' of a product. Such 'characteristics' might relate, inter alia, to a product's composition, size, shape, colour, texture, hardness, tensile strength, flammability, conductivity, density, or viscosity. In the definition of a 'technical regulation' in Annex 1.1, the TBT Agreement itself gives certain examples of 'product characteristics' – 'terminology, symbols, packaging, marking or labelling requirements'. These examples indicate that 'product characteristics' include, not only features and qualities intrinsic to the product itself, but also related 'characteristics', such as the means of identification, the presentation and the appearance of a product...."107

7.30.
In EC – Sardines, the Appellate Body recalled the above-quoted passage, and emphasized that product characteristics include not only "features and qualities intrinsic to the product", but also those that are related to it, such as means of identification.108
7.31.
Section 907(a)(1)(A) lays down "product characteristics". Indeed, a measure that prohibits cigarettes from containing certain constituents or additives with a "characterizing flavour" is by definition a measure that lays down one or more "product characteristics". Among other things, the flavour of a cigarette is not only a "feature" (and probably also a "quality" and "attribute") of that product, but a feature that is "intrinsic to the product itself". Section 907(a)(1)(A) also clearly "relate[s]... to a product's composition", as it states that no cigarette may contain, as a constituent or additive, any artificial or natural flavour that is a characterizing flavour (other than tobacco or menthol). In other words, the "composition" of a cigarette cannot be such as to give rise to a characterizing flavour (other than tobacco or menthol).
7.32.
In our view, the fact that Section 907(a)(1)(A) lays down product characteristics in the negative form ("a cigarette... shall not contain") does not alter the conclusion that Section 907(a)(1)(A) lays down product characteristics. We find support for our conclusion in the fact that the measures at issue in EC – Asbestos and EC – Sardines both laid down product characteristics in negative form, and both were found to be "technical regulations" within the meaning of Annex 1.1 of the TBT Agreement.
7.33.
We recall that, in EC – Asbestos, the Appellate Body found that the measure at issue was "formulated negatively – products containing asbestos are prohibited", and that "in effect, the measure provides that all products must not contain asbestos fibres".109 The Appellate Body explained that:

"Product characteristics' may, in our view, be prescribed or imposed with respect to products in either a positive or a negative form. That is, the document may provide, positively, that products must possess certain 'characteristics', or the document may require, negatively, that products must not possess certain 'characteristics'."110

7.34.
We also recall that the panel in EC – Sardines found that by requiring the use of only the species Sardina pilchardus as preserved sardines, the measure at issue "in effect lays down product characteristics in a negative form".111 The panel in EC – Sardines considered that a technical regulation within the meaning of Annex 1.1 of the TBT Agreement "may prescribe or impose product characteristics in either a positive or negative form".
7.35.
In our view, the fact that Section 907(a)(1)(A) does not expressly define what constitutes a "characterizing flavour" does not alter the conclusion that the measure regulates product characteristics.112 In the passage from EC – Asbestos quoted above, the Appellate Body indicated that the "characteristics" of a product include "any objectively definable" features, qualities, attributes, or other distinguishing mark of a product. The absence of any express definition of "characterizing flavour" in the measure does not mean that the characteristic at issue is not "objectively definable". In addition, while Section 907(a)(1)(A) does not define the terms "characterizing flavour", it does provide a number of illustrative examples of characterizing flavours that are prohibited – including strawberry, grape, orange, clove, cinnamon, pineapple, vanilla, coconut, licorice, cocoa, chocolate, cherry or coffee.
7.36.
We therefore find that Section 907(a)(1)(A) lays down one or more "product characteristics" and it thus meets the second element of the definition of a "technical regulation".

(iii) Third element: Whether compliance with the product characteristics is mandatory

7.37.
The third element of the definition of a "technical regulation" is that the measure lays down product characteristics with which compliance is "mandatory".113 In EC – Asbestos, the Appellate Body made the following observations about the requirement that a document lay down product characteristics with which compliance is "mandatory":

"The definition of a 'technical regulation' in Annex 1.1 of the TBT Agreement also states that 'compliance ' with the 'product characteristics' laid down in the 'document' must be 'mandatory '. A 'technical regulation' must, in other words, regulate the 'characteristics' of products in a binding or compulsory fashion..."114

7.38.
In EC – Sardines, both the panel and the Appellate Body concluded that the measure at issue set forth product characteristics that were "mandatory". The conclusion was based on the fact that the measure at issue stated that the requirements contained therein were "binding in its entirety and directly applicable in all Member States".115 In this regard, the panel in EC – Trademarks and Geographical Indications (Australia) noted that the word "mandatory" means "obligatory in consequence of a command, compulsory".116
7.40.
We therefore find that Section 907(a)(1)(A) lays down product characteristics with which compliance is "mandatory" and it thus meets the third element of the definition of a "technical regulation".

(d) Conclusion

7.41.
For these reasons, the Panel finds that Section 907(a)(1)(A) is a "technical regulation" within the meaning of Annex 1.1 of the TBT Agreement. The Panel will now turn to examine Indonesia's claims under Articles 2.1, 2.2, 2.5, 2.8, 2.9, 2.10, 2.12, and 12.3 of the TBT Agreement.

D. WHETHER SECTION 907(A)(1)(A) IS INCONSISTENT WITH ARTICLE 2.1 OF THE TBT AGREEMENT

1. Arguments of the parties

7.42.
Indonesia claims thatSection 907(a)(1)(A) is inconsistent with Article 2.1 of the TBT Agreement "because the measure results in treatment that is 'less favourable' to imported clove cigarettes than that accorded to a like domestic product, menthol cigarettes".120 In its first submission, though, Indonesia submits that Section 907(a)(1)(A), "both on its face and as applied", violates Article 2.1 because it accords 'less favorable' treatment to imports of clove cigarettes than it accords to a like domestic product – that is, regular and menthol cigarettes."121 Indonesia argues that clove cigarettes are "like" "all other domestically produced cigarettes, generally, and menthol cigarettes, in particular"122, because they share the same physical properties, end-uses, consumer preferences and tariff classification. In response to a question from the Panel, Indonesia clarified that it requests the Panel first to conduct a like product analysis of clove cigarettes vis-à-vis menthol and tobacco-flavoured cigarettes produced in the United States. In the event that the Panel decides to limit the likeness analysis to cigarettes with a particular "characterizing flavour", Indonesia argues, clove cigarettes are "like" domestic menthol cigarettes.123
7.43.
Indonesia argues that, in the context of Article 2.1 of the TBT Agreement, a determination of likeness is fundamentally a determination about the nature and extent of a competitive relationship among products, as established by jurisprudence on Article III:4 of the GATT 1994. Indonesia's reasoning is based on the fact that the GATT 1994 and the TBT Agreement are each context for the interpretation of the other.124 At the same time, Indonesia suggests that "a case-by-case analysis of likeness in the context of a different measure reasonably could conclude that all cigarettes are not like for the purpose of that particular measure".125
7.44.
As regards the Border Tax Adjustments criteria126, Indonesia first submits that clove cigarettes and domestically-produced cigarettes, including menthol cigarettes, have the same physical characteristics.127 According to Indonesia, both types of cigarettes contain cured and blended tobacco in a paper wrapper with a filter and are considered "class A" cigarettes for U.S. tax purposes. Indonesia further adds that clove and menthol cigarettes share more properties because they contain tobacco and an added ingredient (i.e., herb or spice). Finally, Indonesia argues that there is no evidence that clove cigarettes are more toxic or pose greater health risks than domestically-produced regular or menthol cigarettes and, thus, there is no difference in their physical characteristics.128 In fact, Indonesia argues that in the present dispute, "the relative toxicity of clove and domestic cigarettes is not an issue".129
7.45.
Furthermore, Indonesia clarifies that the so-called "candy flavour" cigarettes (e.g., chocolate, strawberry) may not be "like" regular, menthol or clove cigarettes, because they may pose greater health risks as they encourage youth to start smoking.130 Indonesia has indicated that it "is not asking the Panel to include candy-flavoured cigarettes in its like product analysis".131
7.46.
Second, Indonesia submits that clove cigarettes have the same end-uses as domestically produced cigarettes, especially menthol cigarettes, because they are all used to smoke tobacco.132 Indonesia disagrees with the United States that cigarettes have two other end-uses: (i) satisfying the addiction to nicotine; and (ii) creating a pleasurable experience associated with the taste of the cigarette and aroma of the smoke. On the contrary, argues Indonesia, the delivery of nicotine is a consequence of smoking tobacco, and "providing a pleasurable experience" does not qualify as an end-use, but is rather a consumer behaviour.133
7.47.
Third, with respect to "consumer preferences", Indonesia argues that most consumers perceive regular, menthol and clove cigarettes as alternative means of smoking.134 Indonesia also points out that smokers most frequently choose regular or menthol cigarettes and use clove cigarettes as a "special occasion" cigarette.135 In its second written submission, "Indonesia disputes that clove cigarettes are used only as an occasional cigarette"136, as certain adults have reported smoking them more than other cigarettes. In essence, Indonesia contends that smokers are willing to substitute clove, menthol and tobacco cigarettes to achieve the same end-use of smoking.137 In fact, "[t]he relative proportion of time that consumers use clove versus menthol or regular cigarettes does not have to be equal".138
7.48.
For Indonesia, all cigarettes are in a competitive relationship with one another for access to channels of distribution, shelf space, and market share.139 Indonesia clarifies that the Panel should confine its evaluation of consumers' tastes and habits to U.S. consumers.140 Indonesia further clarifies that the relevant consumers for the likeness analysis are smokers, with no analysis by age group.141 In case the Panel decides to proceed with an analysis by age group, Indonesia contends that the proper groups should be "youth" (under 18) and "adults" (18 and over).142 Indonesia also contends that the "pre-smoking" youth population should not be included among the relevant consumers for the likeness analysis.143 As regards the smoking preferences of youth, Indonesia concludes that clove cigarettes are not "overwhelmingly" used by young smokers, as menthol cigarettes are much more popular with youth.144 For Indonesia, the relevant evidence demonstrates that clove cigarettes do not appeal to youth.145
7.49.
Finally, Indonesia submits that clove cigarettes and domestically-produced cigarettes have the same international tariff classification at the 6-digit level.146 The tariff classification of cigarettes containing tobacco, which covers both clove cigarettes and U.S. cigarettes, is HS07 24.02.20. Moreover, the United States' 8-digit level tariff classification is irrelevant for the present dispute, as comparisons among countries are done only at the 6-digit level.147
7.50.
Regarding the "less favourable treatment" element, Indonesia argues that the treatment accorded to imported clove cigarettes is less favourable than that accorded to domestically-produced cigarettes.148 Indonesia submits that a ban on clove cigarettes, which are mainly imported from Indonesia, but not on regular or menthol cigarettes, which are mainly locally produced, creates unequal conditions of competition in the U.S. market.149 Indonesia clarifies that, although facially neutral, Section 907(a)(1)(A) results in de facto discrimination against imported products.150 Additionally, Indonesia argues that a violation can be established "by showing that there are some imported products that are treated less favourably than the most favourably treated domestic like product".151
7.51.
According to Indonesia, while menthol- and tobacco-flavoured cigarettes are mainly produced in the United States, clove cigarettes were mainly imported from Indonesia. Thus, Indonesia explains that "the treatment accorded to all cigarettes imported from all countries is irrelevant to this dispute".152
7.52.
Indonesia notes that it has not argued that if a single imported product is restricted by a measure and a single domestic product is not, less favourable treatment may be identified. According to Indonesia, in the case at hand almost all the clove cigarettes subject to the ban were imported, while the vast majority of cigarettes not subject to the ban were "like" cigarettes produced domestically. Indonesia argues that this is, in particular, the case of menthol cigarettes, given that only a negligible part of those cigarettes is imported in the United States.153
7.53.
Indonesia argues that the fact that Section 907(a)(1)(A) may also affect cigarettes produced in the United States "does not save the measure". In fact, Indonesia contends that, as such, Section 907(a)(1)(A) applies almost exclusively with regard to imported cigarettes.154 Indonesia also contends that the allegation of the United States, according to which the vast majority of cigarettes imported are still allowed under Section 907(a)(1)(A), is not relevant. Indonesia argues that the treatment of products imported from other countries is not an issue before the Panel.155
7.54.
Indonesia posits that, contrary to the position of the United States whereby Indonesia must demonstrate that cigarettes containing clove are subject to different treatment on the basis of their national or foreign origin, no panel or Appellate Body report "has ever required both a 'less favorable treatment' test and a second 'based on national origin' test".156 Indonesia argues that, contrary to the position of the United States, the "less favourable treatment" analysis under Articles 2.1 of the TBT Agreement and III:4 of the GATT 1994 does not require a separate analysis focused on whether a measure is applied "so as to afford protection to domestic production".157
7.55.
The United States submits that Indonesia's claim under Article 2.1 of the TBT Agreement is based on a flawed analysis and insufficient evidence.158 The United States contends that the national treatment obligation contained in Article 2.1 "[is] not intended to prevent legitimate measures, such as section 907(a)(1)(A), that establish neutral product standards based on public health criteria".159
7.56.
According to the United States, Section 907(a)(1)(A) is intended to eliminate the availability of the types of cigarette used primarily by youth, often as a "starter cigarette."160 It further contends that the most credible evidence demonstrates that cigarettes with a characterizing flavour other than tobacco or menthol (and including clove), are overwhelmingly smoked by youth and are not smoked by adults in appreciable numbers.161 The United States does not disagree with Indonesia's general assertion that clove cigarettes are smoked by a small fraction of the population while menthol cigarettes are smoked in much larger numbers. However, in its view, the relevant point with respect to Section 907(a)(1)(A) is that of the small amount of the population that smokes cloves, it is especially youth to whom they appeal.162
7.57.
The United States explains that banning clove cigarettes and other flavoured cigarettes does not present the same public health risk in the United States as banning regular or menthol cigarettes.163 It argues that the public health effects of removing precipitously a cigarette which tens of millions of people smoke regularly have not been sufficiently evaluated to justify a ban and that is why Section 907(a)(1)(A) does not ban regular or menthol cigarettes.164 The United States explains that precipitously banning tobacco and menthol cigarettes would risk producing negative consequences for the smokers, the U.S. health care system, or society as a whole through an expansion of the black market for cigarettes.165
7.58.
The United States argues that Indonesian clove cigarettes are not like U.S.-manufactured tobacco or menthol cigarettes as clove cigarettes are not in a competitive relationship with tobacco or menthol cigarettes and are not substitutable or interchangeable among retailers or consumers.166 The United States submits that, even though the TBT Agreement does not contain an equivalent to Article III:1 of the GATT 1994, it is still possible to base the "likeness" analysis on the nature and extent of the competitive relationship between the products at issue.167 According to the United States, in the case at hand, like in EC – Asbestos, the dissimilarities between clove, tobacco and menthol cigarettes are directly related to the diverse perceptions of the product by consumers and the public health risk involved.168
7.59.
The United States notes that Section 907(a)(1)(A) makes distinctions among a group of broadly similar products – cigarettes – based on factors relevant to the legitimate objective of protecting public health. Accordingly, a "likeness" determination, in addition to focusing on the competitive relationship of the products, will need carefully to parse the significance of traits that are generally shared among all cigarettes and traits that are significant with respect to the public health provision at issue.169 The United States specifies that the public health basis of Section 907(a)(1)(A) should be considered for the "likeness" analysis under both the GATT 1994 and the TBT Agreement, as there are certain "contextual principles" that inform the national treatment obligation under both agreements.170
7.60.
Accordingly, the Panel should accord weight to the physical characteristics of the products at issue and the consumer tastes and preferences that are relevant to the public health basis upon which Section 907(a)(1)(A) differentiates among products.171 In its second written submission, the United States argues that the relevant physical characteristics that differentiate clove cigarettes from menthol and regular cigarettes are: (i) the nearly equal mixture of tobacco and clove; (ii) the "special sauce" contained in them; and (iii) the presence of eugenol.172
7.61.
The United States further argues that the unique taste and physical properties of menthol influence consumer choices. Whereas clove cigarette smokers enjoy the unique experience of cloves as a starter cigarette or "from time to time," smokers of menthol cigarettes tend to choose menthols as their daily cigarette.173 Additionally, with respect to the toxicity and addictiveness of the cigarettes at issue, the United States makes two main clarifications. First, in the present dispute the relative toxicity of cigarettes is not the basis for the public health distinctions made between them, even though, in general terms, the toxicity of cigarettes is an aspect of their physical properties.174 Second, despite the fact that all cigarettes contain nicotine and are thus addictive, the health effects must be analysed on the basis of both the health effects of an individual smoker and the overall public health consideration. This last aspect focuses on the possibility that certain types of cigarettes might increase the use of cigarettes and tobacco products by the population as a whole. Accordingly, the United States argues that clove cigarettes are different because they are used disproportionately by youth and therefore, serve as "trainer cigarettes".175 The United States contends that Indonesia appears to agree with the United States that cigarettes which are specifically appealing to youth involve a particular health risk and can be regulated in a more restrictive manner than tobacco and menthol cigarettes.176
7.62.
Contrary to Indonesia's conclusion on end-use, the United States submits that cigarettes have a number of end-uses and are not just used to "smoke tobacco." In its view, cigarettes have at least two other end-uses in the United States, which clove, menthol and tobacco cigarettes serve in differing degrees:177 (i) the end-use of satisfying an addiction to nicotine178, and (ii) the end-use of creating a pleasurable experience associated with the taste of the cigarette and the aroma of the smoke.179 The United States further submits that the first end-use – delivering nicotine to the body – is not the most relevant one, because if that were the case, all cigars, pipes and cigarettes would be like products.180
7.63.
Regarding the criterion of consumer tastes and habits, the United States argues that Indonesia presented no evidence to demonstrate that clove cigarettes seek to compete with tobacco or menthol cigarettes, or that consumers view them as substitutable.181 The United States clarifies that the relevant consumers are all the "potential and current smokers in the United States". The United States contends that the potential consumers are young people within the age of initiation and that such persons, more likely than adults, find clove cigarettes appealing.182 For the United States, consumers clearly differentiate between the products at issue in this case:183 clove cigarettes are marketed, sold and used as a "special occasion" tobacco product, while tobacco and menthol cigarettes are marketed, sold and used as a daily, regular cigarette; clove cigarettes are smoked overwhelmingly by young people, who tend to be novice smokers, and tobacco and menthol cigarettes are used regularly by a large population of young people, but especially adults, who smoke them regularly.184 In fact, the United States submits, rather than competition among products, there is in fact an overlap and likely symbiosis since clove cigarettes not only attract new users to tobacco, but are used as a supplemental, special occasion cigarette among those who already smoke.185
7.64.
The United States accuses Indonesia of failing to prove that Indonesian clove cigarettes and regular or menthol cigarettes are viewed as "interchangeable" in the market, and of presenting unreliable data to suggest that clove cigarettes have a pattern of use similar to tobacco or menthol cigarettes, just on a smaller scale.186 In fact, in contrast to clove cigarettes, menthol cigarettes are not predominantly a starter cigarette for youth in the United States. According to the United States, rates of use of regular and menthol cigarettes among young people and older adults are much more even.187 The United States further clarifies that the consumers' tastes and habits analysis should be confined to the U.S. market, as consumers outside the United States are not relevant for deciding any of the factual or legal issues in this dispute.188
7.65.
As regards the tariff classification, the United States argues that "clove cigarettes are treated differently than all 'other' cigarettes at the 8-digit level under the U.S. GATT 1994 Schedule".189
7.66.
As regards the less favourable treatment analysis, the United States submits that Section 907(a)(1)(A) on its face is "origin-neutral" and that Indonesia does not appear to dispute this fact.190 According to the United States, Section 907(a)(1)(A) does not draw a line between imported and domestic products, but between products on the basis of the patterns of use of different cigarettes by consumers in the United States and related public health considerations.191 For the United States, Indonesia has not met its burden to prove de facto discrimination. Indonesia, it argues, asserts without analysis that "there is no question that a ban on one product but not other like products creates unequal conditions of competition and is 'less favorable' treatment" and that "a ban on clove cigarettes but not menthol or tobacco cigarettes creates unequal conditions of competition in the U.S. market and is, accordingly, 'less favorable' treatment." Indonesia does not, however, demonstrate that the allegedly different treatment is based on the national origin of clove cigarettes.192
7.67.
According to the United States, Indonesia is incorrect when insinuating that the "less favourable treatment" analysis is simply an issue of looking at which cigarettes are banned and which ones are not banned. The United States submits that all relevant evidence should be examined, including the objective aim of the measure and whether the alleged detrimental effects to imported products depend on their national origin.193
7.68.
Moreover, the United States argues that Indonesia is incorrect when it states that Section 907(a)(1)(A) accords less favourable treatment if one Indonesian import is included among the prohibited characterizing flavours and one U.S.-produced cigarette is not. In fact, argues the United States, the "best treatment" approach advocated by Indonesia is inconsistent with the language of GATT Article III:4 and Article 2.1 of the TBT Agreement. Rather, as established by the Appellate Body in EC – Asbestos, the relevant comparison is between the group of "like" imported products and the group of "like" domestic products.194 This is so because the Appellate Body recognized that a Member may draw distinctions between products determined to be "like" without affording protection to domestic production or according less favourable treatment to imported products.195 The United States also refers to the findings of the Appellate Body in Dominican Republic – Import and Sale of Cigarettes and of the panel in EC – Approval and Marketing of Biotech Products. According to the United States, the Appellate Body and the panel in those reports found that "where an alleged detrimental effect on an imported product is not attributable to its foreign origin, but to some other factor, that effect is not evidence of less favourable treatment".196
7.69.
The United States points out that Indonesia has failed to prove that Section 907(a)(1)(A) accords less favourable treatment to Indonesian products because: (i) it ignores the fact that this regulation affects U.S.-produced cigarettes and (ii) it has not adduced any evidence to demonstrate that any detriment to clove cigarettes is dependent on the foreign origin of the product.197

2. Analysis by the Panel

(a) Introduction

7.70.
The question before the Panel therefore is whether Section 907(a)(1)(A) is inconsistent with the national treatment obligation under Article 2.1 of the TBT Agreement. In particular, Indonesia is claiming that Section 907(a)(1)(A) violates Article 2.1 because it accords less favourable treatment to imports of clove cigarettes than it accords to a like domestic product, which it defines in its Panel Request as menthol cigarettes.198
7.71.
As we observe in several instances throughout this Report, we face an issue of first impression. Indeed, the only report that has addressed Article 2.1 thus far is the panel report in EC – Trademarks and Geographical Indications (Australia),which briefly examined this provision.199
7.72.
We shall commence by examining the legal provision at issue to ascertain the applicable legal test.

(b) The legal provision at issue

7.73.
Article 2.1 of the TBT Agreement provides that:

"Members shall ensure that in respect of technical regulations, products imported from the territory of any Member shall be accorded treatment no less favourable than that accorded to like products of national origin and to like products originating in any other country."

7.74.
Hence, Article 2.1 of the TBT Agreement requires WTO Members to provide imported products with "treatment no less favourable than that accorded to like products of national origin". We note that Article 2.1 also includes an MFN obligation, but in this dispute there is no claim in respect of this element of Article 2.1.
7.75.
We recall that in Korea – Various Measures on Beef,when interpreting Article III:4 of the GATT 1994200, the Appellate Body established a three-tier test for a finding of violation under that provision:

"For a violation of Article III:4 to be established, three elements must be satisfied: that the imported and domestic products at issue are 'like products', that the measure at issue is a 'law, regulation or requirement affecting the internal sale, offering for sale, purchase, transportation, distribution, or use'; and that the imported products are accorded 'less favourable' treatment than accorded to like domestic products."201

7.76.
The language of Article 2.1 of the TBT Agreement is very similar to that of Article III:4 of the GATT 1994,the difference being that under the former, the national treatment obligation is restricted to a particular type of measure, i.e., technical regulations, while Article III:4 of the GATT 1994 encompasses a larger group of measures, i.e., "laws, regulations and requirements affecting their internal sale, offering for sale, purchase, transportation, distribution or use".
7.77.
The panel in EC – Trademarks and Geographical Indications (Australia) followed a similar approach to that of the Appellate Body without referring to the existing jurisprudence under Article III:4 of the GATT 1994. The panel reasoned as follows:

"The Panel considers that the essential elements of an inconsistency with Article 2.1 of the TBT Agreement are, as a minimum, that the measure at issue is a 'technical regulation'; that the imported and domestic products at issue are 'like products' within the meaning of that provision; and that the imported products are accorded 'less favourable' treatment than that accorded to like domestic products."202

7.78.
We also note that both parties appear to follow this line of analysis as regards the main elements of a violation under Article 2.1 of the TBT Agreement.203
7.79.
With respect to the second element in the analysis, we recall that we have already found that Section 907(a)(1)(A) is a technical regulation within the meaning of Annex 1.1 of the TBT Agreement.204 We shall thus proceed to examine the two remaining elements of the test in turn.

(c) Whether imported clove cigarettes and the domestic cigarettes at issue are "like products" within the meaning of Article 2.1 of the TBT Agreement

(i) Interpreting likeness under Article 2.1 of the TBT Agreement

7.80.
As indicated above, at the time of writing this Report, examining the concept of likeness under Article 2.1 of the TBT Agreement remains an issue of first impression, as the only report that has addressed this provision until now,-- the panel report in EC – Trademarks and Geographical Indications (Australia) --did not enter into an analysis of likeness given its findings that the complainant had not made a prima facie case of "less favourable treatment".205
7.81.
The Panel is therefore tasked with interpreting for the first time the concept of likeness under Article 2.1 of the TBT Agreement. There seem to be two alternative approaches to interpreting this provision: on the hand, it could be argued that the jurisprudence under Article III:4 of the GATT 1994 is directly transposable to Article 2.1 of the TBT Agreement, based on the similarity of their respective language; on the other hand, it could be argued that the concept of likeness must be interpreted in the context of the TBT Agreement without directly transposing the jurisprudence on Article III:4 of the GATT 1994.
7.82.
We sought the parties' views on this and they suggested that, in order to interpret Article 2.1 of the TBT Agreement, we should take into account both the jurisprudence under Article III:4 of the GATT 1994 and the context of the TBT Agreement. The United States, in particular, asks the Panel to take into account the "public health objectives" of Section 907(a)(1)(A) when interpreting likeness under Article 2.1 of the TBT Agreement. We note, however, that in their submissions, the parties rely heavily on the jurisprudence under Article III:4 of the GATT 1994. We also note that parties suggest that we incorporate the traditional likeness criteria of the GATT Working Party on Border Tax Adjustments.206
7.83.
The central interpretative issue for us in this regard is whether a determination of "likeness" under Article 2.1 of the TBT Agreement is fundamentally about the nature and extent of a competitive relationship between the products being compared, as is the case with a determination of "likeness" in the context of Article III:4 of the GATT 1994. This issue has important consequences in this case. Accordingly, we shall set out the arguments of the parties, followed by our own reasoning on this issue, in detail.

Parties ' arguments on the interpretation of "like products" in the context of Article 2.1 of the TBT Agreement

7.84.
The parties' position on the interpretation of this provision has evolved during the proceedings. It is thus worth explaining the parcours followed by each party in this respect.
7.85.
We recall that Indonesiaput forward in its Panel Request national treatment claims under both Article 2.1 of the TBT Agreement and Article III:4 of the GATT 1994. In its first written submission, Indonesia appears to adjust its approach and declares that its claim under Article III:4 of the GATT 1994 is an alternative claim to that under Article 2.1 of the TBT Agreement. Accordingly, Indonesia first addresses the claim under Article 2.1 of the TBT Agreement, being the provision more specific to the dispute. However, after explaining that the obligation to accord national treatment has been addressed by various WTO panels and the Appellate Body on a number of occasions in the context of Article III:4 of the GATT 1994207, Indonesia bases its argumentation under Article 2.1 of the TBT Agreement almost exclusively on Article III:4 jurisprudence.208
7.86.
In response to a question from the Panel209, Indonesia contends that, although it is possible to address the claims under Articles 2.1 of the TBT Agreement and III:4 of the GATT 1994 together, the Panel should be cautious if it chooses that approach because "these claims/provisions are not identical".210 For example, it explains that claims under Article III:4 of the GATT 1994 need not establish that the measure at issue is a technical regulation.211 However, Indonesia submits that the analysis of "likeness" under Article 2.1 of the TBT Agreement is a determination about the nature and extent of a competitive relationship between and among products, as established by the Appellate Body in EC – Asbestos in respect of Article III:4. Also responding to a question from the Panel212, Indonesia submits that, although Article 2.1 of the TBT Agreement does not contain a specific reference to a "general principle" similar to the one found in Article III:1 of the GATT 1994, "the GATT 1994 and the TBT Agreement are each context for the interpretation of the other". Accordingly, "Indonesia believes the Panel should consider the competitive relationship between the products at issue as relevant in its likeness analysis under Article 2.1 of the TBT Agreement".213 Thus while seemingly endorsing the idea that what matters is a "competitive relationship" between the products at issue, Indonesia at the same times suggests that "a case-by-case analysis of likeness in the context of a different measure reasonably could conclude that all cigarettes are not like for the purpose of that particular measure".214
7.87.
In its second written submission, Indonesia points out that "[t]he United States agrees with Indonesia that TBT Article 2.1 should be interpreted similarly to GATT Article III:4".215 Nevertheless, Indonesia stresses that "these are two separate claims grounded in separate agreements and separate treaty obligations, and giving rise to separate rights".216 Specifically, Indonesia argues that the elements for establishing a breach of these provisions are the same, except that Article III:4 "does not require that a measure be a technical regulation, but instead 'a law, regulation or requirement affecting the internal sale, offering for sale, purchase, transportation, distribution or use of the imported and domestic products'".217 According to Indonesia, as stated by many panels and the Appellate Body, claims under the more specific of the two agreements should be analysed first.218
7.88.
In its first written submission, the United States does not acknowledge that Indonesia indicated in its first written submission that its claim under Article III:4 of the GATT 1994 is an alternative claim to that under Article 2.1 of the TBT Agreement and commences its argumentation with Article III:4 of the GATT 1994 "for analytic clarity".219 The United States, however, notes that "certain textual and contextual differences should be taken into account in the Panel's analysis of 'likeness' and 'less favourable treatment' under Article 2.1 of the TBT Agreement".220 In particular, the United States refers to three specific differences between the TBT Agreement and the GATT 1994: first, the language in the preamble of the TBT Agreement,which establishes that "no country should be prevented from taking measures necessary... for the protection of human... life or health":221 second, the fact that the obligation contained in Article 2.1 applies "in respect of" a technical regulation:222 and finally, the "like product" analysis should "distinguish between characteristics that make a product or group of products identifiable for purposes of the regulation, and characteristics that demonstrate a competitive relationship or substitutability in the marketplace".223
7.89.
In its oral statement at the first substantive meeting, the United States submits that "[t]he national treatment obligation contained in Article 2.1 of the TBT Agreement should be interpreted similarly to Article III:4 of the GATT 1994". The United States further argues that "each Agreement provides context for the other, and the analyses developed under Article III are relevant to an interpretation of Article 2.1".224 However, in its oral statement, the United States also submits that in the context of analysing whether the products at issue in this case are "like products", a relevant factor in this case "is the degree to which differences among the regulated products directly relate to the public health objectives of Section 907(a)(1)(A)".225 The United States reiterates that "those product differences that relate to these public health objectives are relevant to the 'like product' analysis".226
7.90.
In response to a question from the Panel, the United States argues that, although it is possible for the Panel to address the national treatment claims together, "each claim is separate and the individual elements of each particular claim must be satisfied".227 It says however in response to another question from the Panel that a determination of likeness under Article 2.1 of the TBT Agreement is "fundamentally a determination about the nature and extent of a competitive relationship between and among products". Accordingly, the United States does not consider the absence of "an Article III:1 analog in the TBT Agreement to be a basis for adopting a fundamentally different view of 'likeness' in the TBT Agreement".228 Finally, the "likeness" analysis under both Agreements should be informed by the specific context of the TBT Agreement by considering "not only the nature of the competitive relationship among and between products but also the nature of the public health basis upon which the technical regulation at issue is based".229

The Panel's approach to interpreting "like products" in the context of Article 2.1 of the TBT Agreement

7.91.
We must decide how we will approach the interpretation of the national treatment component of Article 2.1 of the TBT Agreement, in particular with respect to our "likeness" analysis. We see several options open to us. First, we could interpret Article 2.1 of the TBT Agreement following Article III :4 of the GATT 1994 jurisprudence. Under this approach, the jurisprudence under Article III:4 of the GATT 1994, which is mainly focussed on the nature and extent of a competitive relationship between the domestic and imported products at issue, would be directly transposable in its entirety to Article 2.1 of the TBT Agreement, based on the similarity of their respective language.
7.92.
Second, we could interpret Article 2.1 of the TBT Agreement in the context of the provision itself and that of the TBT Agreement, without transposing any of the jurisprudence on Article III:4 of the GATT 1994, as this is but one of the concepts of "like products" found in the WTO Agreement. Under this approach, one would not focus on the competition-based approach that has been developed in the jurisprudence on Article III:4 of the GATT 1994.
7.93.
Third, we could follow the approach suggested by the parties, which consists of interpreting Article 2.1 of the TBT Agreement taking into account both the jurisprudence under Article III:4 of the GATT 1994 and the context of the TBT Agreement. We could also follow the United States' suggestion to take into account the "public health objectives" of Section 907(a)(1)(A) when interpreting likeness under Article 2.1 of the TBT Agreement.
7.94.
The starting point in any interpretation of a legal provision in a treaty is, as directed by Article 31(1) of the Vienna Convention on the Law of Treaties ("VCLT")230, the ordinary meaning of the terms.231 Accordingly, we commence our examination by examining the terms of Article 2.1 of the TBT Agreement.
7.95.
We recall that the first option we envisaged above favours an interpretation of the terms of Article 2.1 of the TBT Agreement following Article III:4 of the GATT 1994 jurisprudence. The extent to which the interpretations developed in the context of Article III:4 of the GATT 1994 may be simply transposed to Article 2.1 of the TBT Agreement is not clear to us, especially since the latter provision has not yet been interpreted in depth by panels or the Appellate Body. Certainly, Article 2.1 of the TBT Agreement appears to be modelled on Article III:4 of GATT 1994.232 Indeed, both refer to imported products: "The products of the territory of any contracting party imported into the territory of any other contracting party" in the case of Article III:4 of the GATT 1994, and "products imported from the territory of any Member" in the case of Article 2.1 of the TBT Agreement. They both also impose an identically worded obligation on Members to provide in respect of those imports "treatment no less favourable than that accorded to like products of national origin".
7.96.
However, we observe that both provisions differ in respect of the kinds of measures regulated by each provision. While Article 2.1 of the TBT Agreement applies only to technical regulations; Article III:4 of the GATT 1994 applies to a broader group of measures that would subsume technical regulations.233 As we will discuss below, such difference should certainly be accorded some significance.
7.97.
Given the similarity, and in some instances, identity, of the language of both national treatment provisions, the use of interpretations developed in the context of Article III:4 may seem relatively straightforward with respect to the likeness aspect of Article 2.1 of the TBT Agreement. In fact, as we indicated above, the parties generally appear to be persuaded that the jurisprudence developed under Article III:4 of the GATT 1994, in particular that relating to the competition approach to analysing likeness, is directly transposable to an analysis under Article 2.1 of the TBT Agreement. Indonesia defends the position whereby the analysis of "likeness" under Article 2.1 of the TBT Agreement is a determination about the nature and extent of a competitive relationship between and among products, as established by the Appellate Body in EC – Asbestos in respect of Article III:4.234 The United States is also of the view that the national treatment obligation contained in Article 2.1 of the TBT Agreement is to be interpreted similarly to Article III:4 of the GATT 1994.235
7.98.
While we agree with the parties that the similarity in wording must be given weight, we do so cautiously because, as noted by the Appellate Body in EC – Asbestos, even to the extent that the terms used are identical, they "must be interpreted in light of the context and of the object and purpose, of the provision at issue, and of the object and purpose of the covered agreement in which the provision appears".236 The Appellate Body further said that "while the meaning attributed to the term 'like products' in other provisions of the GATT 1994, or in other covered agreements, may be relevant context in interpreting Article III:4 of the GATT 1994, the interpretation of 'like products' in Article III:4 need not be identical, in all respects, to those other meanings."237 The same may be said of the term "like product" under Article 2.1 of the TBT Agreement in relation to Article III:4 jurisprudence.
7.99.
In our view, it is far from clear that it is always appropriate to transpose automatically the competition-oriented approach to likeness under Article III:4 of the GATT 1994 to Article 2.1 of the TBT Agreement because that approach was developed by the Appellate Body in EC – Asbestos on the basis of the general principle in Article III:1 of the GATT 1994, which does not have an equivalent in the TBT Agreement. In EC – Asbestos, the Appellate Body stressed the relevance of the "general principle" articulated in Article III:1 as expressed in Article III:4 and how it informs the interpretation of the concept of like products in Article III:4. According to the Appellate Body238, "the term 'like product' in Article III:4 of the GATT 1994 must be interpreted to give proper scope and meaning to" the "general principle" articulated in Article III:1 of the GATT 1994, enunciated by the Appellate Body in Japan – Alcoholic Beverages II as follows:

"The broad and fundamental purpose of Article III is to avoid protectionism in the application of internal tax and regulatory measures. More specifically, the purpose of Article III 'is to ensure that internal measures 'not be applied to imported and domestic products so as to afford protection to domestic production'. Toward this end, Article III obliges Members of the WTO to provide equality of competitive conditions for imported products in relation to domestic products. … Article III protects expectations not of any particular trade volume but rather of the equal competitive relationship between imported and domestic products. …".239

7.100.
As observed by the Appellate Body in EC – Asbestos, "there must be consonance between the objective pursued by Article III, as enunciated in the 'general principle' articulated in Article III:1, and the interpretation of the specific expression of this principle in the text of Article III:4."240 For the Appellate Body, this interpretation "must, therefore, reflect that, in endeavouring to ensure 'equality of competitive conditions', the 'general principle' in Article III seeks to prevent Members from applying internal taxes and regulations in a manner which affects the competitive relationship, in the marketplace, between the domestic and imported products involved, 'so as to afford protection to domestic production.'"241
7.101.
The Appellate Body thus explained that "a determination of 'likeness' under Article III:4 is, fundamentally, a determination about the nature and extent of a competitive relationship between and among products."242 However, as the Appellate Body acknowledged, "there is a spectrum of degrees of 'competitiveness' or 'substitutability' of products in the marketplace, and … it is difficult, if not impossible, in the abstract, to indicate precisely where on this spectrum the word 'like' in Article III:4 of the GATT 1994 falls."243 It further clarified that "[it is] not saying that all products which are in some competitive relationship are 'like products' under Article III:4."244
7.102.
When asked by the Panel about this issue, both parties considered that it is not necessary to have similar language to that of Article III:1 of the GATT 1994 within the TBT Agreement in order to transpose the competition-driven jurisprudence under Article III:4 of the GATT 1994 into Article 2.1 of the TBT Agreement.245 The United States goes further and contends that it does not consider the absence of "an Article III:1 analog in the TBT Agreement to be a basis for adopting a fundamentally different view of 'likeness' in the TBT Agreement".246
7.103.
In our view, the absence in the TBT Agreement of language such as that in Article III:1 of the GATT 1994 has meaning for our interpretive exercise. Even if the GATT 1994 were considered to serve as context for Article 2.1 of the TBT Agreement, it would not be the immediate context of that provision. As we will discuss below, we consider that an interpreter should first asses the immediate context of the provision subject to interpretation before reaching for an interpretative aid that is further removed.
7.104.
We also find support in the Appellate Body's accordion image of likeness. The Appellate Body in Japan – Alcoholic Beverages II cautioned the interpreter on the use of the four general criteria of the Border Tax Adjustment Working Group and did so by illustrating likeness as an accordion that "stretches and squeezes" depending on the context and the covered agreement in which it appears:

"No one approach to exercising judgment will be appropriate for all cases. The criteria in Border Tax Adjustments should be examined, but there can be no one precise and absolute definition of what is 'like'. The concept of 'likeness' is a relative one that evokes the image of an accordion. The accordion of 'likeness' stretches and squeezes in different places as different provisions of the WTO Agreements are applied. The width of the accordion in any one of those places must be determined by the particular provision in which the term 'like' is encountered as well as by the context and the circumstances that prevail in any given case to which that provision may apply."247

7.105.
Accordingly, the "accordion" of like products as envisaged by the Appellate Body allows, and potentially mandates, different interpretations of the term "like products" under Article III:4 of the GATT 1994 and Article 2.1 of the TBT Agreement.248
7.106.
We also emphasize, as we pointed out before, that despite the similarity in wording, Article 2.1 of the TBT Agreement and Article III:4 of the GATT 1994 differ in that the former only applies to technical regulations, whereas the latter applies to a much broader range of instruments. This is relevant in interpreting this provision. In particular, the obligation in Article 2.1 of the TBT Agreement applies "in respect of" a technical regulation. As the United States argues, the ordinary meaning of the term "in respect of" is "be directed to; refer to; relate to; deal with; be concerned with." We recall that the United States has asked the Panel to take into account this textual difference with Article III:4 of the GATT 1994 in analysing Article 2.1 of the TBT Agreement.249
7.107.
Recalling the Appellate Body findings in EC – Asbestos whereby, even to the extent that the terms used are identical, they "must be interpreted in light of the context … of the provision at issue"250, and Article 31(2) of the VCLT, which provides that the context for the purpose of interpreting a treaty comprises the text of the Agreement, including its preamble and annexes, we turn to the immediate context of the national treatment obligation in Article 2.1 of the TBT Agreement, namely Article 2.1 of the TBT Agreement itself, as well as the TBT Agreement as a whole.
7.108.
Annex 1 of the TBT Agreement sets out the definition of technical regulation for the purposes of the TBT Agreement and thus serves as context for the interpretation of Article 2.1 of that Agreement. We recall that a technical regulation is defined as a "[d]ocument which lays down product characteristics... with which compliance is mandatory". Section 907(a)(1)(A)251 does lay down, in negative form252, a product characteristic with which compliance is mandatory: cigarettes cannot have a characterizing flavour. An exception is made for those cigarettes with tobacco or menthol as a characterizing flavour.253
7.109.
The fact that Section 907(a)(1)(A) is a technical regulation and has as its immediate purpose to regulate product characteristics (characterizing flavours) for certain types of products (cigarettes) should have some weight, and potentially great weight, in the determination of whether the products at issue are like. Indeed, cigarettes with characterizing flavours are regulated by Section 907(a)(1)(A) as a single group of products.
7.110.
In response to a question from the Panel, the United States explained that a Senate commentary in the legislative record of Section 907(a)(1)(A) clarifies that "[w]hile the term 'characterizing flavor' is undefined in the legislation, it is intended to capture those additives that produce a distinguishing flavor, taste, or aroma imparted by the product."254 Therefore, for the purpose of being regulated and thus prohibited under Section 907(a)(1)(A), a cigarette must have an additive that produces a distinguishing flavour, taste or aroma. Under this interpretative approach, the fact that cigarettes contain such additives should figure in the likeness determination more so than competition-related or other criteria, as it is that precise feature that determines whether or not a cigarette falls within the scope of application of the technical regulation at issue, i.e., Section 907(a)(1)(A).
7.111.
We recall that Article 31(1) of the VCLT directs an interpreter to look into the object and purpose of the treaty, in this case the TBT Agreement. As the United States explains255, the Preamble to the TBT Agreement sets out its object and purpose. In particular, the second preambular recital of the TBT Agreement indicates the purpose of the Members as "[d]esiring to further the objectives of GATT 1994". The United States reads this as meaning that the Members contemplated that the TBT Agreement is consistent with the GATT 1994, and its provisions should be read in the context of furthering the objectives of the GATT 1994.
7.112.
We note that "to further" means to "help the progress or development of (something); promote".256 This may be interpreted as meaning that jurisprudence on Article III:4 of the GATT 1994 cannot simply be transposed to Article 2.1 of the TBT Agreement, as the latter is meant to be a development - a step forward - from the disciplines of the GATT 1994, including Article III:4. However, it may also suggest that the TBT Agreement serves to "promote" the GATT 1994 and in that sense it could be argued that Article III:4 jurisprudence could be transposed to Article 2.1.
7.113.
The Preamble further provides in its sixth recital that Members "recogniz[e] that no country should be prevented from taking measures necessary ¼ for the protection of human, animal or plant life or health, of the environment, or for the prevention of deceptive practices, at the level it considers appropriate[¼]."257 For the United States, this statement confirms the general right of Members to take measures for legitimate objectives, including to protect human health, even when those measures affect or even restrict international trade, so long as certain conditions are met. In its view, this statement recognizes the legitimacy and WTO‑consistency of technical regulations that are adopted to meet objectives such as to protect human health or the environment.258
7.114.
In our view, the sixth preambular recital combined with the necessity requirement in Article 2.2 of the TBT Agreement259 could justify a different interpretation of likeness under Article 2.1 of the TBT Agreement from that developed under Article III:4 of the GATT 1994, given the nature of the measures contemplated under the TBT Agreement.
7.115.
The United States also argues that this means that the "likeness" analysis under both the GATT 1994 and the TBT Agreement should be informed by the specific context of the TBT Agreement by considering "not only the nature of the competitive relationship among and between products but also the nature of the public health basis upon which the technical regulation at issue is based".260 In particular, the United States has asked the Panel to "carefully parse the significance of traits that are generally shared among all cigarettes and traits that are significant with respect to the public health objective of the measure at issue."261 The United States tells us that the public health basis of Section 907(a)(1)(A) should be considered for the "likeness" analysis under Article 2.1 of the TBT Agreement, "as there are certain 'contextual principles' that inform the national treatment obligation".262 We note that this position goes further than that explained above about taking into account the immediate purpose of Section 907(a)(1)(A) as a technical regulation, which is to regulate cigarettes with characterizing flavours.
7.116.
We agree that, in the context of the TBT Agreement and in the light of its object and purpose expressed by the preambular recitals referred to above, we must bear in mind the significance of the public health objective of a technical regulation and how certain features of the relevant products, their end-uses as well as the perception consumers have about them, must be evaluated in the light of that objective. In the present case, the declared legitimate public health objective of Section 907(a)(1)(A), i.e., the reduction of youth smoking, must permeate and inform our likeness analysis.
7.117.
On the basis of the considerations above, we conclude that our approach to interpreting Article 2.1 of the TBT Agreement must ensure that the TBT Agreement is addressed first as immediate context of Article 2.1 of the TBT Agreement. The jurisprudence under Article III:4 of the GATT 1994, which provision also serves as context albeit not immediate, may also be considered. In our view, such jurisprudence is relevant because Article III:4 of the GATT 1994 shares almost identical wording with Article 2.1 of the TBT Agreement.
7.118.
As put by the Appellate Body in EC – Asbestos, however, we acknowledge that even to the extent that the terms used are identical, they "must be interpreted in light of the context and of the object and purpose, of the provision at issue, and of the object and purpose of the covered agreement in which the provision appears".263 Paraphrasing the Appellate Body, while the meaning attributed to the term "like products" in other provisions of the WTO Agreements may be relevant in interpreting Article 2.1 of the TBT Agreement, the interpretation of like products in Article 2.1 need not be identical, in all respects, to those other meanings. This approach to interpreting Article 2.1 finds support in the Appellate Body's accordion image described above.
7.119.
From our considerations above, we do not believe that the interpretation of Article 2.1 of the TBT Agreement, in the circumstances of this case where we are dealing with a technical regulation which has a legitimate public health objective, should be approached primarily from a competition perspective. We rather think that the weighing of the evidence relating to the likeness criteria should be influenced by the fact that Section 907(a)(1)(A) is a technical regulation having the immediate purpose of regulating cigarettes with a characterizing flavour for public health reasons. As explained above, we must pay special notice to the significance of the public health objective of a technical regulation and how certain features of the relevant products, their end-uses as well as the perception consumers have about them, must be evaluated in light of that objective. In the present case, the declared legitimate public health objective of Section 907(a)(1)(A), i.e., the reduction of youth smoking, must permeate and inform our likeness analysis. As we will explain in more detail below, this is particularly relevant in the consideration of the physical characteristics that are important for the immediate purpose of Section 907(a)(1)(A) of regulating cigarettes with characterizing flavours, as well as the consumer tastes and habits criterion where the perception of consumers, or rather potential consumers, can only be assessed with reference to the health protection objective of the technical regulation at issue.
7.120.
We shall therefore proceed with our likeness analysis bearing in mind our considerations above. We start by setting out the traditional likeness criteria.

(ii) The traditional likeness criteria

7.121.
The Report of the GATT Working Party on Border Tax Adjustments outlines an approach for analysing "likeness" that has since been followed and developed by panels and the Appellate Body.264 This approach consists, essentially, of employing four general criteria in analysing "likeness":

(a) the properties, nature and quality of the products;

(b) the end-uses of the products;

(c) consumers' tastes and habits – more comprehensively termed consumers' perceptions and behaviour – in respect of the products; and

(d) the tariff classification265 of the products.266

7.122.
We recall that, in EC – Asbestos,the Appellate Body asserted thatthe four general criteria "provide a framework for analysing the 'likeness' of particular products on a case-by-case basis".267 The Appellate Body further clarified that these criteria are "simply tools to assist in the task of sorting and examining the relevant evidence" and that they are "neither a treaty-mandated nor a closed list of criteria".268 The Appellate Body also warned that, even though each criterion addresses, in principle, a different aspect of the products at issue to be examined separately, these criteria are interrelated.269
7.123.
In this regard, we acknowledge our duty to examine, in each case, all of the pertinent evidence before us.270 We recall that the Appellate Body enjoined panels to, once all the relevant evidence has been examined, determine whether "that evidence, as a whole, indicates that the products in question are 'like' in terms of the legal provision at issue."271 Consequently, it would be for us, once we have examined all the evidence presented by the parties, to determine whether the products at issue are "like" in terms of Article 2.1 of the TBT Agreement.

(iii) Likeness analysis of the products concerned

Relevant domestic and imported products for the purpose of the likeness analysis in this case

7.124.
The first step in a likeness examination is to identify the domestic and imported products that must be compared. We note that this issue arises both in the "likeness" step of the national treatment analysis, and then again in the "less favourable treatment" step of such an analysis.
7.125.
The identification of the products which the Panel needs to compare for the purpose of its likeness analysis under Article 2.1 of the TBT Agreement is an issue that, in the present case, appears to touch upon our terms of reference. Indeed, if we examine Indonesia's Panel Request, which, as we explain below, demarcates our terms of reference, we observe that it defines the domestic like product as "menthol cigarettes". In fact, we see no reference in Indonesia's Panel Request to a type of cigarette other than clove or menthol cigarettes.
7.126.
In particular, Indonesia's Panel Request states that "banning clove cigarettes in the United States while exempting menthol cigarettes from the ban is inconsistent", inter alia, with "Article III:4 of the GATT 1994 because the measure provides treatment to an imported product, clove cigarettes, that is 'less favourable' than that accorded to a like domestic product, menthol cigarettes" (emphasis added).272
7.127.
Likewise, Indonesia's Panel Request claims that the measure at issue273 is inconsistent with "TBT Article 2.1 because the measure results in treatment that is 'less favourable' to imported clove cigarettes than that accorded to a like domestic product, menthol cigarettes".274 (emphasis added)
7.128.
In its first written submission, however, Indonesia introduces a new category of domestic cigarettes in its national treatment claims argumentation. While, at first, Indonesia refers to this new category of domestic cigarettes mostly as "regular" cigarettes,275 from its second written submission onwards, Indonesia mainly uses the term "tobacco-flavoured"276 cigarettes, and on occasion, "regular-flavoured"277 cigarettes or "regular tobacco flavour".278
7.129.
We note that Indonesia's argumentation also evolved in parallel to the use of different terminology for this new category of domestic cigarettes. While in its first written submission, the domestic product for the purpose of comparison presented by Indonesia were both regular and menthol cigarettes, its likeness argumentation was mainly focused on a comparison between clove and menthol cigarettes.279 However, in response to a question from the Panel, Indonesia requested us to first conduct a like product analysis of clove cigarettes, on the one hand, and menthol- and "tobacco-flavoured" cigarettes, i.e., regular cigarettes, produced in the United States, on the other hand. And, "only ifthat analysis does not lead to a determination of likeness, would it be necessary for the Panel to analyse the likeness of clove cigarettes, on the one hand, and menthol-flavoured cigarettes produced in the United States, on the other hand".280
7.130.
Indonesia was not alone in the use of different terminology to refer to the new category of domestic cigarettes. The United States also followed a mixed approach, using both "regular"281 and "tobacco-flavoured"282 cigarettes, although it used the term "regular" more often. The United States used the terms "regular tobacco"283 and "regular tobacco-flavoured"284 cigarettes as well.
7.131.
The parties have therefore often used the terms "regular" and "tobacco-flavoured" cigarettes interchangeably in this dispute. We find this to be susceptible of causing confusion as to which product is being addressed. Indeed, referring to tobacco-flavoured cigarettes may confuse the reader into believing that cigarettes such as clove-flavoured or menthol-flavoured cigarettes do not contain tobacco. In fact, all cigarettes contain tobacco, but flavoured cigarettes such as menthol cigarettes, kreteks, bidis, etc., contain, as well, an additive that imparts the characterizing flavour that Section 907(a)(1)(A) speaks of or, as the international community argues285, that which increases palatability. As put by Indonesia, "cigarettes may contain a variety of ingredients and flavors that are added to the tobacco …".286 We have therefore decided to use the term "regular" cigarettes as we think it better describes the fact that they do not include additional characterizing flavours.
7.132.
When we asked the parties whether we would be exceeding our terms of reference if we conducted a likeness analysis between, on the one hand, clove cigarettes and, on the other hand, both menthol and regular cigarettes produced in the United States, Indonesia said we would not.287 Indonesia explains that it referred to menthol cigarettes in its Panel Request as an example of a like product produced domestically.288 Indonesia however also explains that, at the beginning of the proceedings, it was convinced that clove cigarettes produced in Indonesia were "like" cigarettes containing menthol produced in the United States but that, later on, it realised that imported cigarettes containing clove are like both menthol and regular cigarettes.289 Indonesia further argues that referring only to domestic menthol cigarettes in its Panel Request did not prejudice the United States.290
7.133.
The United States agrees with Indonesia in that the Panel could include domestic regular cigarettes in the likeness analysis without exceeding its terms of reference. For the United States, a panel request must identify the relevant measure or measures and the claims which are raised. The United States contends that the Appellate Body has made a distinction between "claims" and "arguments" in reviewing a panel request according to Article 6.2 of the DSU.291 The United States argues that the domestic products to be considered in the likeness analysis are elements related to the argumentation of the disputing parties in support of or opposition to the national treatment claim and should be set out in the written and oral submissions of the parties. Hence, according to the United States, the domestic products which are used as the basis of the argument would not be part of the terms of reference of a panel.292

The properties, nature and quality of the products concerned

7.149.
The Report of the GATT Working Party on Border Tax Adjustments established that the first criterion that should be analysed when assessing "likeness" is the properties, nature and quality of the products. In EC – Asbestos, the Appellate Body clarified that this first criterion covers the physical qualities and characteristics of the products.311 In that same dispute, the Appellate Body instructed panels to "examine fully the physical properties of products" and, in particular, as it was in the context of an Article III:4 of the GATT 1994 analysis, to "examine those physical properties of products that are likely to influence the competitive relationship between products in the marketplace".312
7.150.
As we explained before, we are bound to examine likeness under Article 2.1 of the TBT Agreement in its own context and that of the TBT Agreement. As we also explained, the absence of similar wording to that of the general principle in Article III:1 of the GATT 1994 in the TBT Agreement makes us reluctant to import a competition-approach analysis in our interpretation. We do however transpose the above conclusions from the Appellate Body in our analysis under Article 2.1 of the TBT Agreement as the Panel's duty to examine those physical properties that are of relevance to the immediate purpose of Section 907(a)(1)(A), namely the presence of a characterizing flavour in the cigarettes.
7.151.
The Appellate Body further explained that the different "likeness" criteria are interrelated. For example, as regards the physical properties of a product, the Appellate Body observed that they shape and limit the end-uses to which the products can be devoted, and that tariff classification clearly reflects the physical properties of a product.313
7.152.
Nevertheless, the Appellate Body called for a separate and thorough examination of each criterion and thus underscored the importance of a full examination of the physical characteristics of a product by the panel:

"Although not decisive, the extent to which products share common physical properties may be a useful indicator of 'likeness'. Furthermore, the physical properties of a product may also influence how the product can be used, consumer attitudes about the product, and tariff classification. It is, therefore, important for a panel to examine fully the physical character of a product. We are also concerned that it will be difficult for a panel to draw the appropriate conclusions from the evidence examined under each criterion if a panel's approach does not clearly address each criterion separately, but rather entwines different, and distinct, elements of the analysis along the way."314

7.153.
The Appellate Body insisted that the separate analysis of the physical characteristics criterion must not be intermingled with the examination of end-uses.315 It is also worth noting that products with quite different physical properties may, in some situations, be capable of performing similar or identical end-uses, but this does not mean that they are equivalent. In the view of the Appellate Body, although the end-uses may be "equivalent ", the physical properties of the products may not be thereby affected and the products would thus remain different.316
7.154.
It is worth emphasizing the relevance of the health risk-related features in a likeness examination317, which the Appellate Body has situated within the realm of the physical properties of the products at issue.318 In our case, though, it is medically proven and conceded by the parties that all cigarettes are toxic. In general terms, both parties agree that the relative toxicity of clove, menthol and regular cigarettes is not an issue in this dispute.319 The United States confirms this view but appears to suggest that clove cigarettes may be more dangerous than other cigarettes. We will cover this in more detail when concluding on the comparison of the various products at issue.
7.155.
Accordingly, we will proceed to examine the physical properties of imported clove cigarettes and domestic menthol cigarettes on the basis of the evidence provided by the parties. We recall that the parties to this dispute have framed the national treatment analysis in terms of categories of cigarettes (i.e., clove, menthol and regular cigarettes), instead of individual cigarette brands.320 Accordingly, the evidence that they have submitted focuses on general features attributable to each category, rather than the exact ingredients that a given cigarette brand may contain. Such information is, in fact, proprietary to the manufacturer.321
7.156.
The question before the Panel is, in line with the Appellate Body in EC – Asbestos, "the degree or extent to which products must share qualities or characteristics in order to be 'like products'".322 We recall that Section 907(a)(1)(A) is a technical regulation that regulates cigarettes having a characterizing flavour, which may be understood as having an additive that produces a distinguishing flavour, taste or aroma. The presence of such an additive should therefore be part of the characteristics that a cigarette must have to be "like" for the purpose of this dispute.

Properties, nature and quality of clove cigarettes

7.157.
From the evidence presented by the parties, we can conclude that clove cigarettes are composed of tobacco combined with flavouring substances, which is presented to the consumer in a paper wrapper with a filter.323 Clove cigarettes are, as is the case of menthol cigarettes, "Class A" cigarettes for U.S. tax purposes and comply with the U.S. definition324 of cigarette.325
7.158.
Clove cigarettes are generally manufactured with 60 per cent to 80 per cent tobacco content.326 Additionally, clove cigarettes usually contain a blend of different types of tobacco.327 In terms of the types of tobacco that compose the blend, Indonesia submits that the tobacco composition is usually the following: (i) Virginia/bright tobacco, which is flue cured, accounts for approximately 25 per cent to 50 per cent; (ii) Oriental tobacco, which is sun-cured, ranges from 25 per cent to 35 per cent; (iii) Burley tobacco, which is air-cured, accounts between 0 per cent and 10 per cent; and (iv) Java tobacco (the local Indonesian tobacco), which is sun-cured, is present from 20 per cent to 30 per cent.328 Indonesia further explains that Java tobacco is similar to Burley tobacco, but the former is sun-cured instead of air-cured.329 The United States, by contrast, submits that clove cigarettes usually contain Virginia and Java tobacco, each making up approximately 30 per cent of the content of the cigarette.330
7.159.
As regards additives, clove cigarettes contain approximately 20 per cent to 40 per cent cloves331, either in the form of clove buds or ground/minced332 cloves. As the United States argues, it seems that the clove additive can also be clove oil, or any combination of the three (i.e., clove buds, minced cloves and clove oil).333 We also understand that ground cloves contain about 20 per cent clove oil.334
7.160.
Clove cigarettes generally include a "sauce" as part of the flavouring ingredients chosen by each manufacturer.335 In fact, the United States submits, this "sauce" is touted by manufacturers as a distinguishing physical feature of clove cigarettes.336 Indonesia clarifies that this "sauce" contains "vanilla, sugars, mint, licorice, fruit concentrates and liquors".337
7.161.
We note that the parties have extensively argued about the presence of eugenol in clove cigarettes and the resulting toxicity of clove cigarettes. The United States points out that eugenol is one of the active ingredients in clove oil and defines it as "a common topical anesthetic used in dental procedures".338 The United States contends that clove cigarettes are sweetly aromatic, and smoking the product may cause some numbing of the mouth to occur.339 The United States reasons that eugenol has the effect of removing much of the unpleasantness of cigarette smoking for new smokers340, which makes "[t]he clove cigarette... nearly ideal in design as a 'trainer' cigarette for capturing young people as smokers."341 The United States argues that evidence shows that clove cigarettes involve unique health risks to individual users.342 According to the United States, eugenol is suspected of causing aspiration pneumonia or direct lung toxicity.343
7.162.
Indonesia does not deny that clove cigarettes contain eugenol and explains that clove oil is known chemically as eugenol344, and that eugenol can be found in clove buds.345 With respect to the allegations by the United States on the numbing effects of eugenol, Indonesia specifies that there is no scientific research on humans to prove that eugenol in clove smoke numbs the throat. Rather, Indonesia argues, more recent studies cast doubt on the proposition that eugenol desensitizes the throat. Further, Indonesia submits that the same allegation of numbing the throat has been made regarding the use of menthol in cigarettes.346
7.163.
We note that both parties agree that the Polzin paper347, a study on certain ingredients of Indonesian clove cigarettes, shows that 19 of 33 clove cigarette brands analysed contained coumarin.348 According to the United States, coumarin is a chemical linked to hepatoxicity in humans which is no longer found in most cigarettes. In one study, the United States explains, 64 per cent of clove cigarette brands tested contained coumarin at levels between 9.2 and 215μg per cigarette. By contrast, only a single brand of 68 conventional cigarettes available in the United States had detectable levels of coumarin. The United States stresses that coumarin is banned as a food-flavouring agent in the United States, and is currently listed by the FDA among "Substances Generally Prohibited from Direct Addition or Use as Human Food".349 It does however admit that coumarin has not been banned as an additive in cigarettes.350 Indonesia puts forward a number of arguments on the toxicity and presence of coumarin in the cigarettes at issue. First, it notes that not all clove cigarettes contain coumarin, while some U.S. menthol and regular cigarettes do contain this ingredient. Second, coumarin is simply a natural constituent of many types of tobacco. Finally, Indonesia stresses that the United States itself allows coumarin as an additive in cigarettes.351 Indonesia adds that the U.S. Secretary of Health and Human Services ("HHS") is required to report to Congress any ingredient in cigarettes that may pose health risks to smokers, and that the HHS has not done so with eugenol nor coumarin.352
7.164.
Finally, Indonesia clarifies that clove cigarettes also contain other components inherent to cloves, such as benzyl acetate, methyl salicylate, trans anethole and methyl eugenol.353
7.165.
The United States argues that evidence shows that clove cigarettes involve unique health risks to individual users.354 Indonesia responds that there is no evidence that clove cigarettes are more toxic or pose greater health risks355 than domestically-produced regular or menthol cigarettes and thus, because there is no difference in toxicity, there is no difference in their physical characteristics.356

Properties, nature and quality of menthol cigarettes

7.166.
From the evidence presented by the parties, we can conclude that menthol cigarettes are composed of approximately 90 per cent of tobacco by weight. As regards the type of tobacco, generally menthol cigarettes are made from a blend of Virginia, Maryland burley, Oriental and reconstituted tobacco.357 The March 2011 TPSAC Report specifies that "[m]enthol cigarettes are typically blended using more flue-cured and less burley tobacco … because some of the chemicals in burley tobaccos create an incompatible taste character with menthol."358
7.167.
The main additive in menthol cigarettes is menthol oil. Menthol is a chemical compound extracted from the peppermint plant (Mentha piperita), the corn mint (Mentha arvensis) or produced by synthetic or semi-synthetic means.359 According to the March 2011 TPSAC Report, some cigarette manufacturers only use natural menthol oil, while others use a mixture of natural and synthetic menthol. The March 2011 TPSAC Report establishes that menthol is added to cigarettes in the following ways: (a) by spraying the cut tobacco during blending; (b) by applying it to the pack foil; (c) by injecting it into the tobacco stream; (d) by injecting it into the filter; (e) by inserting a crushable capsule in the filter; (f) by placing a menthol thread in the filter; (g) any combination of the above. In any event, menthol diffuses throughout the cigarette, irrespective of the original place of application.360
7.168.
According to the March 2011 TPSAC Report, menthol is added to cigarettes both as a characterizing flavour (higher levels of menthol) and for other taste reasons (lower levels of menthol). These other taste reasons include brightening the flavour of tobacco blends and/or smoothing the taste of the blend.361 Further, menthol may have cooling, analgesic or irritating properties362, and is reported to reduce sensitivity to noxious chemicals, including nicotine.363 In fact, adds the March 2011 TPSAC Report, "smokers report that menthol reduces irritation and that menthol cigarettes are less harsh and smoother than non-menthol cigarettes."364
7.169.
This additive amounts to approximately 1 per cent of the ingredients contained in the cigarette, although the specific amount varies from brand to brand. In this regard, Indonesia argues that the menthol content is reported to range up to 3 percent365, while the United States specifies that some menthol brands may have "slightly more or less than 1 per cent of menthol oil".366 In terms of menthol levels, the United States highlights that such levels in brands marketed as menthol cigarettes range between 0.15-0.58 mg/cigarette.367 The March 2011 TPSAC Report specifies that "[i]n a recent survey of 48 U.S. menthol cigarette brands and sub-brands, the average menthol content in cigarettes by weight was 2.64 mg/cigarette, with a range from 1.61 to 4.38 mg."368
7.170.
Indonesia submits that menthol cigarettes also have their own flavouring agents, which are referred to as "sauce" or "casing".369 In this regard, the United States argues that the special sauce used by Indonesian clove cigarettes is not the same "casing" used in all cigarettes, including menthol cigarettes.370 The United States explains that the flavour imparted by the sauce is part of the essential flavour and identity of the products.371 Indonesia replies that it has never argued that the "sauce" or "casing" in clove cigarettes is identical to that used in menthol or regular flavoured cigarettes; rather, it has submitted that each brand of cigarettes has a unique proprietary blend of ingredients that give them a unique taste.372
7.171.
Regarding its health effects, Indonesia argues that menthol has been claimed to have numbing properties. This seems to be confirmed by the March 2011 TPSAC Report, which establishes that the effects that appear to appeal to menthol smokers include cooling effects, antiseptic effects, numbing and anaesthetic effects.373 Further, the parties dispute whether menthol cigarettes also contain eugenol and coumarin.374 As mentioned before, Indonesia argues that menthol cigarettes also contain these additives375, whereas the United States refutes that on the basis of a study conducted in 2010 showing that none of the "regular" or menthol cigarette brands contained either eugenol or coumarin.376 In response to this argument, Indonesia argues that the real reason why eugenol and coumarin were not detected in the study conducted in 2010 is "because the United States 'rigged' the system so that eugenol and coumarin would not be detected"377 by setting higher limits of detection for these ingredients.

A comparison of the properties, nature and quality of clove and menthol cigarettes

7.172.
We proceed now to compare the physical properties, nature and qualities of both types of relevant cigarettes.
7.173.
We note that Indonesia argues that clove cigarettes and domestically-produced cigarettes, including menthol cigarettes, have the same physical characteristics.378 In its second written submission, Indonesia nuances this position by asserting that "[a]lthough Indonesia agrees that the ingredients in a clove cigarette differ in some respects from the ingredients in menthol- and tobacco-flavoured cigarettes, these difference[s] are not determinative".379
7.174.
The United States responds that Indonesia only addresses a few generic characteristics when arguing that the cigarettes at issue are alike, and thus ignores the characteristics most relevant to the marketplace.380 The United States further submits that "the key interpretive task is to determine which similarities and differences are significant and relevant to determining likeness in this particular case, and for this task, the context of the provisions and Agreements at issue and the factual circumstances of the case are essential".381 Accordingly, for the United States, the likeness analysis should consider not only the nature of the competitive relationship, but also the basis upon which Section 907(a)(1)(A) is based.382
7.175.
Before addressing the comparison between clove and menthol cigarettes, we consider it important to address the definition of "characterizing flavour", as it is one of the core elements of Section 907(a)(1)(A). As mentioned above, in response to a question from the Panel, the United States explained that a Senate commentary in the legislative record of Section 907(a)(1)(A) clarifies that "[w]hile the term 'characterizing flavor' is undefined in the legislation, it is intended to capture those additives that produce a distinguishing flavor, taste, or aroma imparted by the product."383 This, in our view, shows that, for the purpose of being regulated by Section 907(a)(1)(A), a cigarette must have an additive that produces a distinguishing flavour, taste or aroma. Accordingly, as explained in Section VII.D.2(c)(i) above, the Panel will give greater weight in the likeness analysis to the fact that a cigarette contains an additive which produces a distinguishing flavour, taste or aroma.
7.176.
From the arguments and evidence presented by the parties and described above pertaining to the description of the properties, nature and quality of clove and menthol cigarettes, we are able to reach the following conclusions.
7.177.
First, in general, clove and menthol cigarettes are made of tobacco combined with additives contained in a paper wrapper. The predominant ingredient in all of them is thus tobacco in quantities that range from 60 to 90 per cent. The exact content of tobacco, the types of tobacco used, and the additives included change from brand to brand of cigarettes within each type of cigarette.
7.178.
Second, although both clove and menthol cigarettes are predominantly composed of tobacco, what appears to differentiate both from regular cigarettes384 is the presence of an additive, which results in a distinguishing flavour, taste or aroma, other than plain tobacco. This additive is, or is extracted from, an herb or a spice. The fact that clove cigarettes contain a substantial amount of clove buds385 and menthol cigarettes only contain approximately 1 per cent of menthol oil does not change the conclusion that in both instances, whatever brand we may examine, the presence of such additives substantially transforms the flavour of the cigarette.
7.179.
Third, the addition of a "sauce" is not exclusive to clove cigarettes, as all cigarettes include a different combination of ingredients that give each cigarette brand a particular and distinct taste. In other words, each brand has its own specific composition of ingredients and additives that is generally considered proprietary information.
7.180.
Several differences are however present between clove and menthol cigarettes, namely, in general, clove cigarettes contain Java tobacco, eugenol and coumarin, while menthol cigarettes generally do not contain these components in significant quantities or at all. However, these differences appear to us as minor or secondary, because the main trait of these types of cigarettes is that they contain additives that produce characterizing flavours to the cigarette and reduce the harshness of tobacco.
7.181.
Further, the United States argues that menthol and the clove buds contained in clove cigarettes are completely different physical products.386 This is important, argues the United States, because dried clove buds impart a sweet and spicy flavour and aroma and are often used in baked goods, candies, and beverages.387 Indonesia, in contrast, submits that clove cigarettes and menthol cigarettes both contain tobacco and an added ingredient (i.e., an herb or spice) with soothing properties. Indonesia submits that both clove oil and menthol are widely used in consumer products and are recognized as having an anaesthetic effect.388
7.182.
This, in our view, demonstrates that regardless of the specific flavour of the additive (clove or menthol), the main trait of these types of cigarettes remains the same: they contain an additive that substantially imparts flavour to the cigarette and reduces the harshness of tobacco. This fact is reinforced by the alleged numbing properties of both clove and menthol. We consider that these similarities are highly significant in the context of this dispute, in light of the fact that the immediate purpose of Section 907(a)(1)(A) is to regulate certain tobacco products with additives that provide them with a characterizing flavour with the public health objective of reducing youth smoking. We find support for this conclusion in a WHO Study entitled "The Scientific Basis of Tobacco Product Regulation" which establishes the following:

"Certain additives (menthol in manufactured cigarettes, eugenol in kreteks [i.e. clove cigarettes]) are added specifically to reduce the smoke harshness and enable the smoker to take in more dependence-causing and toxic substances. Many smokers smoke kreteks [i.e. clove cigarettes] and menthol cigarettes, which are often marketed as less toxic; and the added ingredients possibly contribute to the perception that the cigarettes are less noxious and harmful".389

7.183.
As regards the toxicity, all of these cigarettes are harmful to health and may cause death. Both parties initially agreed that their relative toxicity is not an issue in this dispute. However, the United States appears to have changed its position in its second written submission, where it maintained that certain additives contained in clove cigarettes, such as eugenol and coumarin, are harmful to health.
7.184.
Nonetheless, the evidence filed by the United States suggesting that the presence of eugenol and coumarin in clove cigarettes makes them more harmful to health does not lead us to a different conclusion in terms of toxicity. Regardless of whether eugenol and coumarin might allegedly cause further health problems, the principal reason why cigarettes create health risks is the inhalation of combusted substances, which may cause different types of cancer, different types of cardiovascular disease and various respiratory diseases and harms, among others.390
7.185.
Besides the alleged harmful effects of additives, the United States argues that "[c]ompared to conventional (menthol or regular) cigarettes, clove cigarettes deliver more tar, nicotine, and carbon monoxide under machine-smoked conditions".391 Moreover, submits the United States, certain studies indicate that people inhale more deeply when smoking clove cigarettes, increasing the amount of nicotine extracted from each cigarette, making it possible for the smoker to achieve comparable blood concentrations of nicotine, even though clove cigarettes contain less nicotine per cigarette than do conventional brands.392 Indonesia contests this by arguing that the Malson study393 acknowledged that estimates from machine smoking are not reliable indicators of delivery and rather, focused on clinical tests on human subjects showing that clove cigarettes produce identical increases in heart rate, blood pressure, plasma nicotine levels, and exhaled carbon monoxide.394
7.186.
In our view, this debate over the additional effects of clove cigarettes does not substantially alter the conclusion that clove and menthol cigarettes are harmful to health for the same reason: the inhalation of combusted substances. As mentioned above, the parties agree that, in general, cigarettes are harmful to human health and may cause cancer and several cardiovascular and respiratory diseases.395
7.187.
Therefore, we find that, overall, the physical properties of both groups of cigarettes are similar. The main reason is that they share their main traits as cigarettes, i.e., having tobacco as a main ingredient, and an additive which imparts a characterizing flavour, taste and aroma, and reduces the harshness of tobacco. We find useful guidance in the Appellate Body Report in EC–Asbestos, where the Appellate Body held that the degree or extent to which products must share qualities or characteristics is a relevant inquiry under the "likeness test".396 Thus, products do not have to be identical in every respect.
7.188.
This conclusion is further reinforced by taking into account the measure at issue, Section 907(a)(1)(A), which is a technical regulation with the immediate purpose of regulating cigarettes with a characterizing flavour. In this context, we find relevant that clove and menthol cigarettes share common physical properties to a substantial extent as they both contain tobacco and an additive that provides them with a characterizing flavour.
7.189.
We recall that the United States has asked us to take into account the health objective of Section 907(a)(1)(A) when analysing likeness. As we explained before, we agree that the legitimate objective of reducing youth smoking that is behind the adoption of Section 907(a)(1)(A) should be taken into account in our analysis. Precisely, Section 907(a)(1)(A) prohibits the presence of characterizing flavours in cigarettes on health grounds. We find support in this to conclude that the presence of additives in both clove and menthol cigarettes, which provide them with characterizing flavours, should weigh heavily in our likeness analysis.
7.190.
Notwithstanding the above conclusion, we will weigh these similarities and differences between clove and menthol cigarettes with all the evidence on the other "likeness" criteria to make an overall determination of whether the products at issue could be characterized as "like".397 Accordingly, we will weigh the evidence under this first criterion with the end-uses to which the products can be devoted and the consumer perceptions towards these products. In other words, we will examine the evidence on the physical properties of clove and menthol cigarettes with "first, the extent to which products are capable of performing the same, or similar, functions (end-uses), and, second, the extent to which consumers are willing to use the products to perform these functions (consumers' tastes and habits)".398

The end-uses of the products

7.191.
The Appellate Body has defined this criterion as "the extent to which products are capable of performing the same, or similar, functions (end-uses)".399 In the context of an analysis of Article III:4 of the GATT 1994, the Appellate Body has ruled that the end-use criterion involves certain of the key elements relating to the competitive relationship between products in so far as "the extent to which products are capable of performing the same, or similar, functions (end-uses)". The Appellate Body notes that "evidence of this type is of particular importance under Article III of the GATT 1994, precisely because that provision is concerned with competitive relationships in the marketplace. If there is – or could be – no competitive relationship between products, a Member cannot intervene, through internal taxation or regulation, to protect domestic production." Accordingly, for the Appellate Body, evidence about the extent to which products can serve the same end-uses is highly relevant in a likeness analysis under Article III:4 of the GATT 1994.400 A question for the Panel is whether this is also the case for an analysis under Article 2.1 of the TBT Agreement. As we have explained before, we are not persuaded that a fundamentally competition-based analysis would always be the correct approach in analysing likeness under Article 2.1 of the TBT Agreement.
7.192.
The Appellate Body warns panels not to confuse the analysis of the end-use criterion with the analysis of the physical characteristics of the products401 and that of consumer tastes and habits. In regard to the latter, the Appellate Body explains that end use deals with the extent to which two products are capable of performing the same functions, while consumer tastes and habits deals with "the extent to which consumers are willing to use the products to perform these functions".402
7.193.
As the Appellate Body explained, "[i]t is only by forming a complete picture of the various end-uses of a product that a panel can assess the significance of the fact that products share a limited number of end-uses."403
7.194.
The Appellate Body has ruled that the evidence on the end-uses (and of consumer preferences) of the products is especially relevant in cases where the evidence relating to properties, nature and quality of the products indicates that the products at issue are physically quite different.404 We do not consider this to be the case in this dispute.
7.195.
Indonesia 's argument on the end-use criterion is rather succinct: "[t]he end use of all cigarettes, including clove and menthol cigarettes, is the same – that is, they are used to smoke tobacco."405 The United States, however, submits that cigarettes actually have a number of end-uses and are not just used to "smoke tobacco." In its view, cigarettes have at least two other end-uses in the United States, which clove, menthol and tobacco cigarettes serve in differing degrees:406 (i) the end-use of satisfying an addiction to nicotine407, and (ii) the end-use of creating a pleasurable experience associated with the taste of the cigarette and the aroma of the smoke.408 The United States adds that "[r]egular and occasional use of cigarettes could be described as different "end-uses" in the United States".409 Further, argues the United States, their "regular market" has been dominated by tobacco-flavoured and menthol cigarettes. In addition to this market, there is an "occasional cigarette market" composed of cigarettes that are smoked less prevalently, which seek to appeal to novice smokers and to regular young smokers by creating the impression of a "special" or "indulgent" smoking experience.
7.196.
Indonesia contests that delivery of nicotine is a distinct end-use and considers it a consequence of the end-use of smoking tobacco since all tobacco products contain nicotine.410 In any event, Indonesia argues, the United States has not demonstrated that the end-uses of clove cigarettes and menthol- or tobacco-flavoured cigarettes are different. With respect to the United States' proposed end-use of satisfying an addiction to nicotine, Indonesia submits that all three cigarettes at issue deliver nicotine when smoked and that the amount of nicotine delivered from a cigarette is determined by how much smoke is drawn from a cigarette.411 Indonesia further explains that (i) smokers expose themselves to as much smoke as necessary to obtain a specific, satisfying quantity of nicotine412, and (ii) the United States itself provided a study showing that subjects' nicotine blood levels and heart rates were exactly the same after smoking a clove cigarette and a regular cigarette.
7.197.
As regards the second end-use proposed by the United States of "providing a pleasurable experience", Indonesia argues that this is not an end-use, but a consumer behaviour. Indonesia refers to the Appellate Body Report in EC – Asbestos413where it clarified that end use deals with the extent to which two products are capable of performing the same functions, while consumer tastes and habits deals with the extent to which consumers are willing to use products to perform these functions. For Indonesia, the United States' comments regarding the appeal of flavours fall more properly into consumer tastes and habits than end-use.
7.198.
In our view, Indonesia's succinct and pointed argument is correct: the end-use of a cigarette is to be smoked.414 We consider that the end-uses the United States presents pertain rather to the resulting effects from smoking. People smoke cigarettes for many reasons; we could certainly include the two mentioned by the United States. But that does not mean that cigarettes have several end-uses. For example, the end-use proposed by the United States of satisfying an addiction to nicotine is a circular proposition. Indeed, smokers become addicted to nicotine as a consequence of smoking cigarettes. As to the second end-use proposed by the United States, "creating a pleasurable experience associated with the taste of the cigarette and the aroma of the smoke", assuming for the sake of argument that smoking some types of cigarettes is a more pleasurable experience than smoking other types of cigarettes, this does not alter the fact that the end-use of these products is the same, i.e., to be smoked. In any event, as we said above, both clove and menthol cigarettes contain nicotine and both contain additives that mask the harshness of tobacco.
7.199.
Our conclusion under this criteria therefore is that both clove and menthol cigarettes have the same end-use, i.e., to be smoked.

Consumers ' tastes and habits in respect of the products

7.200.
In EC – Asbestos, the Appellate Body defined "consumer preferences" as the "extent to which consumers are – or would be – willing to choose one product instead of another to perform those end‑uses".415 The obvious question would appear to be to which extent smokers are, or would be, willing to choose clove cigarettes over menthol cigarettes, for the same end-use, i.e., that of smoking.
7.201.
However, if we examine this criterion in the light of the immediate purpose of Section 907(a)(1)(A) of regulating the content of cigarettes with the legitimate objective of reducing youth smoking, the question may need to be phrased differently. Indeed, as we will explain in more detail when we examine Indonesia's claim under Article 2.2 of the TBT Agreement, Section 907(a)(1)(A) responds to a decision of the United States to reduce youth smoking. This leads to the question of which consumers the tastes and habits of we are to examine: all smokers in the United States?; only young smokers?; or potential consumers, i.e., youth who do not yet smoke and those who do so sporadically and have not yet become addicted?
7.202.
We asked the parties which consumers we need to take into account in our examination, their responses diverge. Indonesiais of the view that the relevant consumers for the likeness analysis are smokers, with no analysis by age group.416 It nevertheless argues that, in case the Panel decides to proceed with an analysis by age group, the proper groups should be "youth" (under 18), and "adults" (18 and over).417 In its view, the "pre-smoking" youth population should not be included between the relevant consumers for the likeness analysis.418
7.203.
The United States considers that the relevant consumers are all the potential and current smokers in the United States and defines "potential" consumers as young people within the age of initiation. The United States submits that the patterns of use as between young people in the window of initiation and older, regular smokers should be evaluated and considered in the consumer tastes and habits criterion of the like product analysis, and in relation to the public health basis for the measure.419
7.204.
We therefore have as a first option considering that the relevant consumers are smokers. If we choose to follow this option, the next question that arises is whether we should consider the relevant U.S. market for cigarettes in general, or whether we should focus on particular segments of the market on the basis of age differentiation. This issue seems to be of particular importance because the declared objective of Section 907(a)(1)(A) is reducing youth smoking.
7.205.
The second option is to consider as the relevant consumers the "pre-smoking" youth population -- in other words, the youth that have not yet taken up smoking but could potentially experiment with cigarettes. This option is in line with the objective of Section 907(a)(1)(A) –i.e reducing youth smoking -- because the group that we understand is subject to the regulation are youth who are starting or may start to smoke.
7.206.
In our view, the legitimate objective of the technical regulation at issue, Section 907(a)(1)(A), i.e., reducing youth smoking, delimits the scope of the consumers whose tastes and habits we should examine under this criterion, all the more so as we are to examine how consumers perceive the cigarettes at issue. The aim of the measure is to stop youth from becoming smokers and dissuade those who are currently sporadic smokers of these type of more attractive cigarettes from smoking. It is thus obvious to us that we need to consider youth in examining this criterion. Furthermore, we agree with the United States that we should also consider potential consumers, i.e., youth that do not as yet smoke or that do so sporadically and thus is not addicted.
7.207.
We recall that, according to the Appellate Body, in reference to the general principle in Article III:1 of the GATT 1994, a determination of "likeness" under Article III:4 is an overall determination of the extent of a competitive relationship between and among products. For the Appellate Body, to the extent that consumer preferences affect the "competitive relationship" of the products on the marketplace, they should be considered. As we have said before, we do not think that the competition-based jurisprudence should be automatically transposed onto a likeness analysis of Article 2.1 of the TBT Agreement. However, we believe we can glean some useful guidance from previous analyses under Article III of the GATT 1994 when analysing consumer preferences.
7.208.
We recall that, in EC – Asbestos, the Appellate Body rejected Canada's argument that consumers' tastes and habits were irrelevant in that dispute because "the existence of the measure has disturbed normal conditions of competition between the products".420 When demand on the market has been influenced by regulatory barriers to trade or to competition, a Member still has to analyse consumers' tastes and habits, perhaps by submitting evidence regarding substitutability from some relevant third market, or evidence of latent, or suppressed, consumer demand in that market.421 It therefore appears that, to the extent that the competitive relationship is distorted by the measures at issue themselves, this could be taken into account, provided that it is explained and analysed. In other words, the "likeness" test is intended to ascertain that the products to be compared would normally be expected to be in a strong competitive relationship, and factors that distort this expected relationship in reality, such as a measure at issue, may be taken into account (while the subsequent "less favourable treatment" test would determine whether this competitive relationship has in fact been adversely affected by the measures, to the detriment of the imported products). The ban imposed further to Section 907(a)(1)(A), which removes clove cigarettes from the United States' market, obviously constitutes a distortion of the competitive relations in the market as it eliminates competition.
7.209.
Bearing this in mind, we note that the evidence on consumer preferences submitted by the parties may not provide clear guidance in this regard. On the one hand, Indonesia argues that "smokers are known to switch among clove, menthol and tobacco cigarettes, which shows that they are, in fact, willingly substituting the products to achieve the same end use of smoking".422 Subsequently, Indonesia asserts that "almost 90 per cent of youth smokers (under 18 years of age) are not using clove cigarettes".423 The United States, on the other hand, submits in its first written submission that clove cigarettes are especially appealing to youth, while adults prefer to smoke tobacco and menthol cigarettes regularly.424 In its second written submission, the United States focuses its argumentation on the fact that "[y]oung people within the window of initiation are enticed by the appealing physical characteristics of clove cigarettes, and do not view them as interchangeable with tobacco or menthol cigarettes".425
7.210.
We observe that, in order to support these arguments, both parties rely on a series of surveys addressing smoking patterns in the United States.426 These surveys, however, do not share the same research parameters. Indeed, they examine different age groups427, pose different questions428 and are based on different methodological approaches.429 Therefore, as the information from the different surveys presented by the parties is not directly comparable, we consider that we cannot rely on the information they provide on market shares for the purposes of analysing the consumers' tastes and habits criterion.430
7.211.
Having said this, we note that the Appellate Body stated that the "extent to which consumers are – or would be – willing to choose one product instead of another to perform those end-uses, is highly relevant evidence in assessing 'likeness' of [] products".431 An analysis of consumer preferences would thus involve determining the substitutability of one good with another one. The concept of substitutability and substitutable (as contained in Article III:2, 2nd sentence of the GATT 1994) is based on the potential of a consumer substituting something with another. Thus actual or current substitution is not required; on the contrary, the concept rather seems to reflect "the extent to which consumers are... willing to use the products to perform these functions"432.
7.212.
We also recall that, as the Appellate Body acknowledged, "there is a spectrum of degrees of 'competitiveness' or 'substitutability' of products in the marketplace, and... it is difficult, if not impossible, in the abstract, to indicate precisely where on this spectrum the word 'like' in Article III:4 of the GATT 1994 falls."433 The Appellate Body also said, though, that "[it is] not saying that all products which are in some competitive relationship are 'like products' under Article III:4."434
7.213.
An example that may serve to illustrate this point is found in the following analogy that builds on that proposed by Indonesia435 between Coca-Cola and Pepsi. In principle, Coca-Cola consumers are very loyal to this soft-drink. However, if a Coca-Cola consumer takes a Virgin flight, it might substitute Coca-Colawith Virgin Cola, even though it would not be its main choice, as there is only Virgin cola on offer. This means that, for this consumer, these products are, to some extent, substitutable. A similar situation might be possible in the context of cigarettes. Smokers are very loyal to their brand, but if there is no possibility of getting cigarettes of that brand, they would likely smoke what is available. We nevertheless asked the parties about the relevance of brand loyalty in our analysis of likeness under this criterion and their response was that it is not relevant. In this respect, the United States argues that in the present dispute, brand loyalty is not significant in the likeness analysis.436 According to Indonesia, given that consumers are willing to substitute the flavours among clove, menthol and tobacco cigarettes, brand loyalty does not prevent such cigarettes from being substitutable.437
7.214.
In our view, it is appropriate to examine the substitutability of clove and menthol cigarettes from the perspective of the relevant group of consumers which, as we explained above, includes young smokers and those ready to become smokers. For them, arguably, any cigarette would likely be fine to start smoking. We note that, as explained further below, the evidence submitted by the parties shows that flavoured cigarettes, a category that includes both menthol and clove cigarettes, are particularly appealing to youth. Therefore, for the purpose of determining how youth perceive cigarettes and whether they would be willing to replace or substitute one or other cigarette to start smoking, we find relevant the fact that both types of cigarettes appeal to youth.
7.215.
We recall the explanation for implementing Section 907(a)(1)(A) found in the House Report on the FSPTCA438, which reads "[c]onsistent with the overall intent of the bill to protect the public health, including by reducing the number of children and adolescents who smoke cigarettes, [Section 907(a)(1)(A)] is intended to prohibit the manufacture and sale of cigarettes with certain 'characterizing flavors' that appeal to youth".439
7.216.
Furthermore, according to the FDA Guidance440, explaining the rationale for the prohibition of cigarettes with characterizing flavours imposed by Section 907(a)(1)(A), flavoured cigarettes "[i]n addition to being more attractive to young people, flavored products make it easier for new smokers to start smoking by masking the unpleasant flavor of tobacco. Studies have also demonstrated that young people believe that flavored tobacco products are safer than unflavored tobacco products."441
7.217.
The evidence submitted by the parties further shows that both types of cigarettes at issue, precisely because of their characterizing flavour which helps mask the harshness of tobacco, appeal to youth and are better vehicles for youth to start smoking than regular cigarettes.
7.218.
For example, the WHO Study entitled "The Scientific Basis of Tobacco Product Regulation", submitted by the United States, indicates that "[s]tudies based on the tobacco industry's internal documents suggest that flavouring agents may also play an important role in the industry's targeting of young and inexperience smokers".442 That Study also says that "[m]enthol has been used to target new smokers across different ethnic groups".443
7.219.
The Study entitled "Tobacco Policy Trend Alert on the Marketing of Candy‑Flavored Cigarettes", submitted by the United States, concludes that "… numbers and industry documents clearly indicate that flavored cigarettes appeal to younger smokers and, combined with tobacco-company advertising for these products, target minors".444
7.220.
We recall that the WHO Study entitled "The Scientific Basis of Tobacco Product Regulation" explains how menthol and eugenol derived from cloves are added to cigarettes "specifically to reduce the smoke harshness and enable the smoker to take in more dependence-causing and toxic substances." This study also stresses the fact that menthol and clove cigarettes are often marketed as less toxic and concludes that "the added ingredients possibly contribute to the perception that the cigarettes are less noxious and harmful".445
7.221.
Interestingly, the U.S. National Survey on Drug Use and Health Report entitled "Use of Menthol Cigarettes", submitted by Indonesia, indicates that: "[m]enthol may mask the harshness of cigarette smoke and thereby make it easier for adolescents to start smoking".446 This is also the conclusion reached by the above-mentioned "Tobacco Policy Trend Alert on the Marketing of Candy‑Flavored Cigarettes", submitted by the United States, which concludes that "[b]ecause of its cooling effect on the mouth and throat, menthol helped mask the harshness of cigarette smoke".447
7.222.
Moreover, an article in a specialized medical journal entitled "Clove Cigarettes: the Basis for Concern Regarding Health Effects", submitted by the United States, states "[c]love cigarettes appeal to adolescents experimenting with smoking practices and may influence the development of later smoking habits".448
7.223.
Furthermore, the March 2011 report from the TPSAC to the FDA449 corroborates our understanding that menthol cigarettes are particularly appealing to youth.
7.224.
For example, the March 2011 TPSAC report concludes that the industry developed menthol marketing to appeal to youth:

"[T]he section on youthful imagery in menthol marketing and the studies of industry documents described in this section confirm that the industry developed menthol marketing to appeal to youth. This is particularly true of the Newport brand, but that strategy was also adopted by other tobacco companies. Marketing messages positioned menthol cigarettes as an attractive starter product for new smokers who are unaccustomed to intense tobacco taste and/or high levels of menthol. Empirical studies provide further evidence of targeting: youth pay attention to and are attracted to menthol cigarette advertising. Cigarette advertising, including menthol advertising, has a greater impact on the brand choice of adolescents than it does for adult smokers."450

7.225.
The March 2011 TPSAC report also points out that menthol cigarettes appeal to youth and starting smokers because of their sensory effects:

"[T]he evidence suggests that youth choose menthol cigarettes, particularly at lower menthol yields, mainly because of the relative ease of smoking a menthol cigarette for the naive smoker and because they perceive menthol to be less harmful than non‐menthol cigarettes….Taken together, the various lines of evidence support an appeal of menthol cigarettes to youth and starting smokers because of their sensory effects."451

7.226.
The March 2011 TPSAC report also indicates that "[t]he evidence is sufficient to conclude that a relationship is more likely than not that the availability of menthol cigarettes increases the likelihood of addiction and the degree of addiction in youth smokers."452
7.227.
Furthermore, under the chapter "Public Health Impact", the March 2011 TPSAC report concludes, inter alia, that the availability of menthol cigarettes increases initiation among youth, i.e., the number of smokers, and therefore represents an adverse impact on public health in the United States:

"TPSAC does conclude that the availability of menthol cigarettes has led to an increase in the number of smokers and that this increase does have adverse public health impact in the United States. TPSAC found evidence that the availability of menthol cigarettes increases initiation; of particular concern was the high rate of menthol cigarette smoking among youth and the trend over the last decade of increasing menthol cigarette smoking among 12 to 17 year olds, even as smoking of non‐menthol cigarettes declines. TPSAC also concluded that cessation is less likely to be successful among smokers of menthol cigarettes. Thus, the availability of menthol cigarettes increases initiation and reduces cessation, thereby increasing the number of people who are smoking. This increase in the number of smokers represents an adverse impact of the availability of menthol cigarettes on public health."453

7.228.
We note that, with regard to the March 2011 TPSAC report, the United States recognizes that "the report is mentioned in the U.S. legislation; the parties referred to it in their submissions to the Panel; and the issuance of the report was widely reported in the media".454 We are of the view that we may rely upon the March 2011 TPSAC report for the purpose of corroborating our findings as this would be consistent with Articles 11 and 13 of the DSU.
7.229.
The WHO Partial Guidelines reinforce our understanding. Indeed, they appear to show that the scientific community perceive cigarettes including additives that increase palatability, i.e., those which Section 907(a)(1)(A) refers as having a characterizing flavour, as part of a same basket or category of cigarettes that attract consumers. In this regard, the WHO Partial Guidelines argue that "[r]egulating ingredients aimed at reducing tobacco product attractiveness can contribute to reducing the prevalence of tobacco use and dependence among new and continuing users". They thereforerecommend, among other things, that the "[p]arties should regulate, by prohibiting or restricting, ingredients that may be used to increase palatability in tobacco products".455 Targeted ingredients include those that are used to increase palatability. Among the ingredients that increase palatability listed in the WHO Partial Guidelines we find masking agents such as menthol as well as spices and herbs, which include mint and may cover clove.
7.231.
The inevitable conclusion is that both menthol and clove cigarettes appeal to youth because of the presence of an additive that gives them a characterizing flavour having the effect of masking the harshness of tobacco. Indeed, the above reports, studies and academic articles show that additives such as clove, menthol, vanilla, chocolate, coffee, etc. which provide a certain characterizing flavour to cigarettes are internationally thought to increase palatability and thus attract youth. We observe that the WHO studies and the WHO Partial Guidelines support the view that youth are attracted to cigarettes with flavours that increase palatability and the studies do not differentiate between categories of flavours in terms of whether they attract more or less youth; rather, they are all put in the same basket as appealing to youth. These studies are therefore based on the premise that youth is generally attracted to cigarettes with characterizing flavours or additives that increase palatability. In simple terms, all these flavoured cigarettes are perceived as vehicles to start smoking. This view is shared by the FDA Guidance461 and to a certain extent, by the various explanatory comments on the reasons behind the adoption of Section 907(a)(1)(A) found in the House Report.

The tariff classification of the products

7.233.
The last criterion is that of the tariff classification of the products. For the Appellate Body in EC – Asbestos, "[t]ariff classification clearly reflects the physical properties of a product."462 However, it did clarify that, even when the customs classification of the products being compared is the same, "this indication of 'likeness' cannot, on its own, be decisive."463
7.234.
Indonesia submits that clove cigarettes and domestically-produced cigarettes have the same international tariff classification at the 6-digit level464 which, in response to a question, it indicates as being 2402.20.465 Further, to rebut an argument presented by the United States, Indonesia clarifies that any difference in tariff classification at the 8-digit level is irrelevant, as only the 6-digit level classification can be compared internationally.466
7.235.
In its first written submission, the United States has no comment on Indonesia's statement that clove cigarettes and domestically-produced cigarettes have the same international tariff classification, except to note that the Appellate Body emphasized that tariff classification, on its own, cannot be decisive.467 Subsequently, in its second written submission, the United States argues that "clove cigarettes are treated differently than all "other" cigarettes at the 8-digit level under the U.S. GATT 1994 Schedule".468
7.236.
Cigarettes are classifiable under Chapter 24 of the Harmonised System, in Heading 2402 for "Cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes". We have found three relevant HS 6-digit codes for cigarettes, namely:

"240210 Cigars, Cheroots, Cigarillos (Containing Tobacco)

240220 Cigarettes (Containing Tobacco)

240290 Other Cigars, Cheroots, Cigarillos, Cigarettes"

7.237.
Therefore, the 6-digit heading for clove, menthol and regular cigarettes is 2402.20.
7.238.
Under the heading of tariff classification, the United States further submits that the fiscal treatment of two different products should have very little weight in the "like product" analysis when the domestic measure under consideration is adopted not for fiscal purposes, but in order to protect human health.469 However, to the extent it is relevant, the United States notes that Indonesia apparently does not treat clove cigarettes "like" imported tobacco or menthol cigarettes for domestic tax purposes.470
7.239.
We do not see the relevance of Indonesia's taxation policy in the assessment of this criterion. We are to examine whether the tariff classification of these types of cigarettes is similar. In this regard, the Appellate Body has pointed out that in examining this criterion, panels should normally have regard to the tariff nomenclatures based on the Harmonized System.471 In this respect, we find that both clove and menthol cigarettes are classified under HS Subheading 2402.20.

(iv) Conclusion on likeness

7.240.
We have found above that clove and menthol cigarettes are physically similar and both include an additive that provides them with a characterizing flavour. We have also said that the presence of such an additive is especially relevant if examined in the context of the immediate purpose of Section 907(a)(1)(A), which is a technical regulation aimed at regulating cigarettes which include such additives.
7.241.
We have also found that both clove and menthol cigarettes share the same end-use of smoking.
7.242.
We have further found that the perception of the consumers at issue in this case, i.e., young smokers and potential young smokers, is that flavoured cigarettes are similar for the purpose of starting to smoke.
7.243.
Finally, we have found that clove and menthol cigarettes are classified under the same 6-digit HS code, namely 2402.20.
7.244.
As we have explained throughout our findings, the Panel has reached the above conclusions bearing in mind that the measure at issue is a technical regulation with the immediate purpose of regulating cigarettes having a characterizing flavour with a view to attaining the legitimate objective of reducing youth smoking. As we have explained, we believe that such legitimate objective must permeate and inform our likeness analysis. In the weighing of these criteria, we have therefore carefully considered the relevance of those traits that are significant for the public health objective of Section 907(a)(1)(A), i.e., to reduce youth smoking.
7.245.
We consider that our basic approach to "likeness" in this case is consistent with a very helpful hypothetical presented by the United States at the second meeting of the Panel, and reiterated in response to a question from the Panel:

"Certain products may be considered like in certain contexts but not in others. For example, as the United States noted at the Second Substantive Meeting with Panel, cups made from paper, plastic and aluminum might be considered 'like' products regardless of these physical differences with respect to a tax or other fiscal measure. They all serve the same end-use of holding liquids, and may be viewed as interchangeable by consumers in this context. The different materials used in the cups may be considered to be less important in the like product analysis in this situation. However, the same cups might not be considered 'like' with respect to a measure regulating products that can be used safely in microwave ovens. In that case, the different materials used to make the cups would be more relevant, as aluminum may not be safely used in a microwave. This difference would effect whether consumers viewed each cup as suitable for use in a microwave and would be relevant to measures regulating which cups could be used in microwaves. In this context, the different materials used would be significant differences among the cups. The particular measure at issue is relevant to whether the different physical properties of the cup mean that one cup is not 'like' another cup."472

7.246.
We think that clove cigarettes and menthol cigarettes may be considered "like" in certain contexts but not in others. For example, these two kinds of cigarettes might not be considered "like" in the context of a hypothetical measure regulating products on the basis of characteristics that clove cigarettes and menthol cigarettes do not have in common, for example whether they contain eugenol (clove cigarettes do, and most menthol cigarettes do not). Along the same lines, they might not be considered "like" in the context of a hypothetical tax or fiscal measure based on the type of tobacco they contain (clove cigarettes tend to contain Java sun-cured tobacco, menthol cigarettes do not). However, these same two types of cigarettes might be considered "like" in the context of other measures that regulate products on the basis of characteristics that clove and menthol cigarettes do have in common, for example a hypothetical measure distinguishing between various tobacco products on the basis of whether or not those products are carcinogenic (which clove cigarettes and menthol cigarettes both are).
7.247.
The measure at issue in this case plainly regulates cigarettes on the basis of a characteristic that clove cigarettes and menthol cigarettes have in common, which in the words of Section 907(a)(1)(A), is the shared characteristic that they "contain, as a constituent … or additive, an artificial or natural flavor … or an herb or spice … that is a characterizing flavor". In the context of this particular measure, which regulates tobacco products on the basis of this particular characteristic – which may be regarded as perhaps the defining feature of each type of product – we find it very difficult to see how clove cigarettes and menthol cigarettes would not be considered to be "like". As discussed in our findings, we are aware that there are certain differences between clove cigarettes and menthol cigarettes. These differences may well lead to the conclusion that these two products are not "like" in the context of different measures. However, in the context of the measure at issue in this dispute, these differences are less significant, and less relevant. In other words, contrary to what the United States argues473, those differences do not relate to the public health objective of the measure at issue and therefore, are not relevant to the like product analysis in this case. In our view, the similarities related to the public health objective of Section 907(a)(1)(A) are highly relevant to the like product analysis in the circumstances of this case.
7.248.
Accordingly, given our conclusions above, we find that clove cigarettes and menthol cigarettes are like products for the purpose of Article 2.1 of the TBT Agreement.

(d) Whether imported clove cigarettes are accorded less favourable treatment than that accorded to like products of national origin

(i) Introduction

7.249.
The fact that Section 907(a)(1)(A) differentiates between like products is not in itself sufficient to violate the national treatment obligation embodied in Article 2.1 of the TBT Agreement. Indeed, we must also find that Section 907(a)(1)(A) accords to imported clove cigarettes "less favourable treatment" than it accords to the like domestic product, i.e., menthol cigarettes.474
7.250.
There are two preliminary issues that we need to clarify before examining this element of the national treatment test in detail. The first is the interpretative approach of the Panel, and the second is the nature of Indonesia's allegation of less favourable treatment.

(ii) The Panel's approach to interpreting the less favourable treatment test under Article 2.1 of the TBT Agreement

7.251.
As with "likeness", the concept of "less favourable treatment" has been interpreted in the context of Article III:4 of the GATT 1994. This jurisprudence reflects a competition-based analysis which rests upon explicit references to the general principle embodied in Article III:1 of the GATT 1994. We are therefore again facing the question of whether we are to follow that jurisprudence, or rather interpret this concept in the context of the TBT Agreement and in the light of the legitimate objective475 of Section 907(a)(1)(A).
7.252.
The parties have argued their respective positions regarding this element of the national treatment claim by invoking different aspects of the jurisprudence developed by the Appellate Body in the context of Article III:4 of the GATT 1994.476
7.253.
As we explained above, the wording of Article 2.1 of the TBT Agreement appears to be modelled on that of Article III:4 of GATT 1994. They both impose a similarly worded obligation upon Members to provide imported products "treatment no less favourable than that accorded to like products of national origin". However, this obligation applies only to technical regulations, and that, as we have also said before, is most significant to the interpretation of Article 2.1 of the TBT Agreement in the present case.
7.254.
While we agree with the parties that the similarity in wording must be given weight, we do so cautiously because, as noted by the Appellate Body in EC – Asbestos, even to the extent that the terms used are identical, they "must be interpreted in light of the context and of the object and purpose, of the provision at issue, and of the object and purpose of the covered agreement in which the provision appears".477
7.255.
We think that our approach to interpreting "likeness" under Article 2.1 of the TBT Agreement should also apply, for the same reasons, to our analysis of whether imported clove cigarettes were accorded "less favourable treatment" than that accorded to the domestic like product, i.e., menthol cigarettes. We explained before that, in our view, the legitimate objective of reducing youth smoking must permeate and inform our likeness analysis. We will follow a similar approach in our examination of this element.

(iii) De jure versus de facto discrimination

7.256.
We note that there has been a significant evolution, or perhaps clarification, in Indonesia's argumentation under this test. Initially, Indonesia appeared to allege de jure discrimination in its first written submission, notwithstanding Section 907(a)(1)(a) being facially origin-neutral. Indonesia did not mention de facto discrimination in its first written submission. The United States responded that Indonesia had not met its burden to demonstrate that clove cigarettes are accorded less favourable treatment based on their national origin.478 The United States recalled that Article III:4 forbids Members from according less favourable treatment "on a de jure or de facto basis" to imported products as compared to domestic products, and nevertheless proceeded to refute a potential de facto discrimination claim in its first written submission.
7.257.
In response to a question from the Panel, and following the third party submissions, Indonesia alleged that Section 907(a)(1)(A) results in de facto discrimination against imported products. Indonesia emphasized that while menthol cigarettes (and regular cigarettes) are produced domestically in the United States, clove cigarettes, which were banned, were predominantly imported from Indonesia. According to Indonesia, this means that virtually all domestically produced cigarettes with relevant market shares were unaffected by the ban imposed by Section 907(a)(1)(A).479
7.258.
Indonesia points out (in reference to Brazil's oral statement480) that the panel in Canada – Pharmaceutical Patents explained that "[d]e facto discrimination is a general term describing the legal conclusion that an ostensibly neutral measure transgresses a non-discrimination norm because its actual effect is to impose differentially disadvantageous consequences on certain parties, and because those differential effects are found to be wrong or unjustifiable."481
7.259.
Indonesia also refers to Norway's oral statement482 to further elaborate on the existing jurisprudence on de facto discrimination. It points out that panels and the Appellate Body have examined the design, structure and operation of the measure when assessing de facto discrimination.483 It also highlights that panels and the Appellate Body have found de facto discrimination if domestically produced products tended to be subject to more favourable treatment than like imported products.484
7.260.
We observe that Section 907(a)(1)(A) does not explicitly ban certain kinds of cigarettes on the basis of origin, but rather on the type of characterizing flavour a cigarette has. De jure less favourable treatment would therefore be excluded. In addition, Indonesia's Panel Request does not contain any indication that its claim is limited to de jure less favourable treatment; the Panel Request merely states that the measure at issue violates Article 2.1 of the TBT Agreement because it "results in treatment that is 'less favorable' to imported clove cigarettes than that accorded to a like domestic product, menthol cigarettes." In addition, the United States has not argued that it was prejudiced in any way by the evolution in Indonesia's argumentation, and addressed the issue of de facto discrimination at some length in its first written submission.
7.261.
Under these circumstances, we decide to examine Indonesia's claim as consisting of an allegation of de facto less favourable treatment.

(iv) The less favourable treatment test under Article 2.1 of the TBT Agreement

7.262.
As explained above, the concept of "less favourable treatment" has not been interpreted in the context of Article 2.1 of the TBT Agreement except very briefly by the panel in EC – Trademarks and Geographical Indications (Australia).485 As also explained above, this concept has been interpreted in a national treatment context by panels and the Appellate Body with respect to Article III:4 of the GATT 1994.
7.263.
The concept of "less favourable treatment" with respect to Article III:4 of the GATT 1994 was first interpreted by the GATT panel in US – Section 337 Tariff Act as calling for "effective equality of opportunities" for imported products486 and this same line of interpretation has been followed by later panels and the Appellate Body.487
7.264.
In Korea – Various Measures on Beef, the Appellate Body observed that "whether or not imported products are treated 'less favourably' than like domestic products should be assessed … by examining whether a measure modifies the conditions of competition in the relevant market to the detriment of imported products."488
7.265.
We note that, as with the concept of "like product", the Appellate Body in EC – Asbestos interpreted "less favourable treatment" in Article III:4 of the GATT 1994 in light of the general principle in Article III:1, and thus considered that "[t]he term 'less favourable treatment' expresses the general principle, in Article III:1, that internal regulations 'should not be applied … so as to afford protection to domestic production'."
7.266.
The Appellate Body has explained that, "[i]f there is 'less favourable treatment' of the group of 'like' imported products, there is, conversely, 'protection' of the group of 'like' domestic products."489 As put by the Appellate Body in EC –Asbestos, "a WTO Member may draw distinctions between products which have been found to be 'like', without, for this reason alone, according to the group of 'like' imported products 'less favourable treatment' than that accorded to the group of 'like' domestic products."490 Therefore, the fact that distinctions of treatment are made between different products does not necessarily constitute "less favourable" treatment. Furthermore, there may be cases where the application of formally identical legal provisions would in practice accord less favourable treatment to imported product.491 Hence, "less favourable treatment" would seem to exist, at least in respect of Article III:4 of the GATT 1994, where the imported product is placed at a competitive disadvantage on the domestic market as a result of the measure.
7.267.
Accordingly, under Article III:4 of the GATT 1994, whether "treatment less favourable" is accorded to imported products compared to like domestic products rests essentially on an assessment of the conditions of competition on the market. We observe, however, that the examination of whether the measure at issue provides for "effective equality of competitive opportunities" needs not be based on the actual effects of the measure in the market.492
7.268.
Therefore, we understand from the above jurisprudence under Article III:4 of the GATT 1994 that what should be considered is whether the equality of competitive conditions between imported and domestic products is affected.493 The Appellate Body indicated in Korea – Various Measures on Beef that imported products are treated less favourably than like products if a measure modifies the conditions of competition in the relevant market to the detriment of imported products.494 However, as observed by the Appellate Body in Dominican Republic – Import and Sale of Cigarettes, "the existence of a detrimental effect on a given imported product resulting from a measure does not necessarily imply that this measure accords less favourable treatment to imports if the detrimental effect is explained by factors or circumstances unrelated to the foreign origin of the product, such as the market share of the importer in this case."495 Hence, it is not sufficient to find inconsistency with Article III:4 solely on the basis that the measure at issue adversely affects the conditions of competition for an imported product. The complainant must also show that those adverse effects are related to the foreign origin of the product at issue.
7.269.
Overall, the Appellate Body's jurisprudence on the less favourable treatment element under Article III:4 of the GATT 1994 imparts the following guidance: (i) the less favourable treatment test relates to the impact of the measure on the competitive relationship of groups of imports versus groups of domestic like products; (ii) less favourable treatment will exist if the measures modify these conditions of competition to the detriment of the group of imported like products; (iii) a panel is required to consider whether the detrimental effect(s) can be explained by factors or circumstances unrelated to the foreign origin of the product, and (iv) no separate demonstration that the measures are applied "so as to afford protection" is required.

Which are the products to be compared

7.270.
Before proceeding further, we must first determine which are the products to be compared for the purpose of the analysis of less favourable treatment, i.e., which are the domestic products and which the imported products for the purpose of the less favourable treatment test.
7.271.
When asked by the Panel, Indonesia submitted that, for purposes of the "less favourable treatment" analysis, the imported product is only clove cigarettes and the domestic product(s) would only be any type of cigarette not banned by Section 907(a)(1)(A) that the Panel found to be "like" clove cigarettes (e.g., menthol- or tobacco-flavoured cigarettes). Indonesia notes that it has not raised any claims with respect to the treatment of clove cigarettes as compared to "candy"-flavoured cigarettes.496 For Indonesia, when arguing in the context of Article III:4 of the GATT 1994, a violation can be established by showing that there are some (i.e., the least favourably treated) imported products that are treated less favourably than some (i.e., the most favourably treated) domestic like product. According to Indonesia, in the present case, the relevant comparison is whether imported clove cigarettes are "like" any domestic cigarettes that were not banned, namely menthol- or tobacco-flavoured cigarettes. According to Indonesia, it is not necessary for the Panel to consider whether clove cigarettes are treated less favourably than domestic cigarettes that were also banned or than imported cigarettes that were not banned.497
7.272.
According to the United States, the Panel should compare the treatment accorded to all imported cigarettes (to the extent that they are like), and not just clove cigarettes, with the treatment accorded to all domestically-produced cigarettes (to the extent that they are like). From this point of view, the United States emphasizes that Section 907(a)(1)(A) applies to both imported and domestic cigarettes with characterizing flavours, which comprise a small category of cigarettes in general. At the same time, the ban does not apply to regular and menthol cigarettes of any origin, including regular cigarettes imported from Indonesia, and both imported and domestic menthol cigarettes. In the United States' view, Indonesia is incorrect that Section 907(a)(1)(A) accords less favourable treatment "if one Indonesian import is included among the prohibited characterizing flavours and one U.S. produced cigarette is not".498 For the United States, the "best treatment" approach advocated by Indonesia is inconsistent with the language of Article III:4 of the GATT 1994 and Article 2.1 of the TBT Agreement. Rather, it submits, as established by the Appellate Body in EC–Asbestos, the relevant comparison is between the group of "like" imported products and the group of "like" domestic products.499 According to the United States, the Appellate Body recognized that a Member may draw distinctions between products determined to be "like" without affording protection to domestic production or according less favourable treatment to imported products.500
7.274.
We nonetheless believe that for the purposes of the "less favourable treatment" analysis, Indonesia is correct in its conclusion that the comparison should be between: (i) imported clove cigarettes (as opposed to all kinds of cigarettes imported into the United States from all countries); and (ii) the domestically produced cigarettes that the Panel has found to be "like" products, i.e., menthol cigarettes.
7.275.
Our reasoning, which is quite different from the legal argument advanced by Indonesia, is fairly simple and straightforward. Article 2.1 of the TBT Agreement calls for a comparison of "products imported from the territory of any Member" with "like products of national origin".502 These provisions refer to the products imported from the territory of "any other Member", and not "Members" or "other Members" more generally. The imported products in this case are the products imported from the territory of Indonesia. And it appears to be common ground between the parties that the vast majorityof cigarettes that were imported from Indonesia into the United States were clove cigarettes.503
7.276.
In our view, it is not the case, as the United States implies, that "one Indonesian import is included among the prohibited characterizing flavours and one U.S. produced cigarette is not". Rather, the vast majorityof Indonesia exports of cigarettes to the United States are included among the characterizing flavours banned by Section 907(a)(1)(A). We note that this would be in line with the Appellate Body's findings in EC-Asbestos. In our view, the comparison between the group of like imported products with the group of like domestic products encompasses situations when "the vast majority of imports" are accorded less favourable treatment.
7.277.
On the domestic side, we recall that we have found that menthol cigarettes are "like" clove cigarettes for the purpose of Article 2.1 of the TBT Agreement because, inter alia, they both contain an additive that provides them with a characterizing flavour which makes them appealing to youth. We have not entered into an analysis of whether domestic regular cigarettes are "like" imported clove cigarettes as we consider that we would be exceeding our terms of reference.
7.278.
We will therefore proceed to examine whether the United States accorded imported clove cigarettes less favourable treatment than that accorded to domestic menthol cigarettes.

Whether the products at issue are treated differently

7.279.
Once we have identified the products which we will compare, the next step should be to determine whether the products at issue are treated differently. In the present dispute, the obvious conclusion is that the treatment cannot be more different. Clove cigarettes are banned while menthol cigarettes are excluded from the ban.
7.280.
We therefore conclude that the products at issue are treated in a fundamentally different manner.

Whether the different treatment is to the detriment of imported products

7.281.
We recall that the Appellate Body's jurisprudence for Article III:4 of the GATT 1994 explains that it is not sufficient to find that the treatment is different, but that it must be found that the different treatment modifies the conditions of competition to the detriment of the imported products.504 We agree that it should not be sufficient per se to find that domestic products and imported like products are treated differently but such different treatment must result on imported products being treated less favourably. In this case, there is an obvious conclusion: imported clove cigarettes are banned while the like domestic menthol cigarettes are allowed to remain in the market.

Whether that less favourable treatment is related to the national origin of the imports

7.282.
The parties disagree on how to interpret the Appellate Body's findings in Dominican Republic – Import and Sale of Cigarettes, whereby there is no less favourable treatment where the detrimental effect is explained by factors or circumstances unrelated to the foreign origin of the product. The United States interprets these findings as calling for a two-step analysis in order to find less favourable treatment: (i) it must be determined that like imported and domestic products have been treated differently based on national origin, and (ii) it must be determined whether such different treatment accords less favourable treatment to the imported product. The United States further relies on the Appellate Body's approach in Korea – Various Measures on Beef in support of this two-step approach.505 The United States explains that the Appellate Body in Korea – Various Measures on Beef initially found that the Korean measure at issue provided different treatment to imported and domestic products by requiring them to be distributed through separate distribution channels. After the initial finding of different treatment, the Appellate Body turned to examine whether this different treatment meant that imported products were treated less favourably based on the national origin of the product. The Appellate Body concluded that because the Korean measure itself imposed on retailers the "necessity of making a choice" between domestic and imported beef, it limited the marketing opportunities for imported beef, and thereby modified the conditions of competition to the detriment of this product.
7.283.
For the United States, whether a measure accords less favourable treatment turns on how the measure treats imported products as compared to domestic products. For this purpose, it argues, the Appellate Body has examined whether the measure alters the conditions of competition to the detriment of imported products as compared to domestic products – but has made clear that a measure does not alter the conditions of competition to the detriment of imported products when the alleged detriment is "explained by factors or circumstances unrelated to the foreign origin of the products."506 The United States argues that while there is no single approach or necessarily decisive factor in reaching a legal conclusion of "less favourable treatment" – and different factors are significant given particular facts and circumstances – the guiding principle to the analysis is that a measure must not single out imports based on national origin so as to afford protection to domestic product.507 According to the United States, where an alleged detrimental effect on an imported product is not attributable to its foreign origin, but to some other factor, that effect is not evidence of less favourable treatment.508
7.284.
The United States submits that this reasoning also holds with respect to Article 2.1 of the TBT Agreement, which, in its view, must be interpreted so as to permit technical regulations based on legitimate product distinctions – even where those distinctions may have a different impact on different products. For the United States, Indonesia seeks to remove any analytic task by boiling down the "less favourable treatment" analysis to a mechanical question of whether a measure applies to any import and not to any like domestic product. In its view, this approach is insufficient as the essence of national treatment obligations is whether a measure accords less favourable treatment to imported products as compared to domestic products, and that question requires an examination of all relevant facts.509 According to the United States, the "less favourable treatment" analysis is not simply a matter of looking at which cigarettes are banned and which are not banned, without also examining all relevant evidence, including the objective purpose of the measure and whether the alleged detrimental effects to imports depend on their national origin.510
7.285.
Indonesia disagrees with the United States' characterization of "less favourable treatment" and argues that no panel or Appellate Body report has ever required both a "less favourable treatment" test and a second "based on national origin" test in Article III:4 of the GATT 1994.511 According to Indonesia, the formulation of the United States would eliminate the concept of de facto discrimination.512 Indonesia says that it agrees with Brazil that the United States are misreading the Appellate Body's ruling in Dominican Republic – Import and Sale of Cigarettes by taking a single sentence out of its factual context.513 As Brazil noted, it argues, the Appellate Body in that dispute was not making a broad and unqualified assertion that a measure is consistent with Article III:4 of the GATT 1994 if its detrimental effects are unrelated to the foreign origin of the product in question. It simply stated that detrimental effects to imported products are not, ipso facto, tantamount to discrimination, as other characteristics of these effects are also pertinent to the evaluation of whether a less favourable treatment has been accorded to imported products.514 As Indonesia and third parties have explained, domestic and imported products can be treated differently, but that treatment will be "less favourable" if it has the effect of modifying the conditions of competition to the detriment of the imported products.515 Indonesia urges the Panel to reject the notion proposed by the United States that Section 907(a)(1)(A) must discriminate "based on national origin" in order to result in "less favorable treatment" to imported clove cigarettes.516 According to Indonesia, it is not its burden to demonstrate that imports of the same product from different countries or imports of different products are treated in a less favourable manner than domestic products. Indonesia argues that the treatment of imported products from other countries is not before the Panel.517
7.286.
We recall that we are dealing with a technical regulation, Section 907(a)(1)(A), with the immediate purpose of banning cigarettes containing an additive which provides them with a characterizing flavour. The reason behind Section 907(a)(1)(A) is attaining the legitimate objective of reducing youth smoking. We also recall the explanation for Section 907(a)(1)(A) in the House Report on the FSPTCA518 which reads "[c]onsistent with the overall intent of the bill to protect the public health, including by reducing the number of children and adolescents who smoke cigarettes, [Section 907(a)(1)(A)] is intended to prohibit the manufacture and sale of cigarettes with certain 'characterizing flavors' that appeal to youth".519
7.287.
It is in that context that we should examine whether imported clove cigarettes are treated less favourably than domestic menthol cigarettes, i.e., whether they are discriminated against. We find useful the Appellate Body's definition of what discrimination is and how it can manifest in Canada – Wheat Exports and Grain Imports:

"…When viewed in the abstract, the concept of discrimination may encompass both the making of distinctions between similar situations, as well as treating dissimilar situations in a formally identical manner. The Appellate Body has previously dealt with the concept of discrimination and the meaning of the term "non-discriminatory", and acknowledged that, at least insofar as the making of distinctions between similar situations is concerned, the ordinary meaning of discrimination can accommodate both drawing distinctions per se, and drawing distinctions on an improper basis. Only a full and proper interpretation of a provision containing a prohibition on discrimination will reveal which type of differential treatment is prohibited. In all cases, a claimant alleging discrimination will need to establish that differential treatment has occurred in order to succeed in its claim."520

7.288.
The preambular language of the WTO Agreement comes to our mind in this respect: "[b]eing desirous of contributing to these objectives by entering into reciprocal and mutually advantageous arrangements directed to the substantial reduction of tariffs and other barriers to trade and to the elimination of discriminatory treatment in international trade relations." As put by the Appellate Body in US – Shrimp: "[a]s this preambular language reflects the intentions of negotiators of the WTO Agreement, we believe it must add colour, texture and shading to our interpretation of the agreements annexed to the WTO Agreement".521 We do not think that it was the intention of the negotiators to allow Members to regulate products in a discriminatory manner.
7.289.
The TBT Agreement allows Members to regulate products for the purpose of attaining a legitimate objective, in this case, a public health objective of reducing youth smoking. The United States has told this Panel that it was not including menthol cigarettes, which we have found to be like to clove cigarettes for the purpose of Article 2.1 of the TBT Agreement, because doing so without further assessment would not be appropriate for the public health, because of issues including the potential impact on the health care system and the potential development of a black market and smuggling of menthol cigarettes.522 These reasons which the United States has presented as constituting a legitimate objective by themselves, appear to us as relating in one way or another to the costs that might be incurred by the United States were it to ban menthol cigarettes. Indeed, the United States is not banning menthol cigarettes because it is not a type of cigarette with a characterizing flavour that appeals to youth523, but rather because of the costs that might be incurred as a result of such a ban. We recall that at the time of the ban, there were no domestic cigarettes with characterizing flavours other than menthol cigarettes which accounted for approximately 25 per cent of the market524 and for a very significant proportion of the cigarettes smoked by youth in the United States.525 It seems to us that the effect of banning cigarettes with characterizing flavours other than menthol is to impose costs on producers in other Members, notably producers in Indonesia, while at the same time imposing no costs on any U.S. entity.
7.290.
We are not saying that the United States is not allowed to adopt measures such as Section 907(a)(1)(A) to regulate products for public health reasons; on the contrary, that is permitted provided it respects the boundaries set forth in Article 2.2 of the TBT Agreement such as not being a measure more trade restrictive than necessary to fulfil a legitimate objective. We are saying that if the United States chooses to do so, it must not accord less favourable treatment to imported clove cigarettes than that it accords to the like domestic menthol cigarettes for reasons of avoiding potential costs. In this case, the United States has adopted a technical regulation in order to attain the legitimate objective of reducing youth smoking, but at the same time limited the product scope of that technical regulation in order to minimize, or even to eliminate, the potential costs it may incur while triggering costs to producers of like products of other Members.
7.291.
The object and purpose of Article 2.1 of the TBT Agreement is to prohibit discrimination between imported products and like domestic products in respect of technical regulations. In our view, this purpose would be defeated if Members were allowed to remove their domestic products from the application of those same regulations to avoid potential costs that it might otherwise incur.

(v) Conclusion on less favourable treatment

7.292.
We therefore conclude that, by banning clove cigarettes while exempting menthol cigarettes from the ban, Section 907(a)(1)(A) does accord imported clove cigarettes less favourable treatment than that it accords to domestic menthol cigarettes, for the purpose of Article 2.1 of the TBT Agreement.

(e) Overall conclusion on Indonesia's claim under Article 2.1 of the TBT Agreement

7.293.
Having concluded that (i) Section 907(a)(1)(A) is a technical regulation within the definition of Annex 1.1 of the TBT Agreement; (ii) clove cigarettes and menthol cigarettes are like products for the purpose of Article 2.1 of the TBT Agreement and (iii) by banning clove cigarettes while excepting menthol cigarettes from the ban, Section 907(a)(1)(A) does accord imported clove cigarettes less favourable treatment than that it accords to domestic menthol cigarettes, for the purpose of Article 2.1 of the TBT Agreement, we find that Section 907(a)(1)(A) is inconsistent with Article 2.1 of the TBT Agreement.
7.294.
Having found that Section 907(a)(1)(A) is inconsistent with Article 2.1 of the TBT Agreement, we will therefore not examine Indonesia's alternative claim under Article III:4 of the GATT 1994.

E. WHETHER SECTION 907(A)(1)(A) IS JUSTIFIED UNDER ARTICLE XX(B) OF THE GATT 1994

1. Arguments of the parties

7.295.
The United States submits that Section 907(a)(1)(A) is justified under Article XX(b) of the GATT 1994.526
7.296.
The United States submits that Indonesia has failed to establish that Section 907(a)(1)(A) is inconsistent with Article III:4 of the GATT 1994. However, the United States submits that "should the Panel reach the issue of GATT exceptions", the application of Section 907(a)(1)(A) would be justified under Article XX(b) of the GATT 1994.527 The United States clarifies that it is not invoking Article XX of the GATT as a defence with respect to the claims raised by Indonesia under the TBT Agreement528, and the Panel therefore does not need to make a finding on the availability of Article XX to justify a violation of a provision of the TBT Agreement.529
7.297.
The United States submits that Section 907(a)(1)(A) falls within the scope of Article XX(b).530 According to the United States, Section 907(a)(1)(A) was enacted in order to protect human life and health from the risk posed by smoking and was necessary to ensure that products that are predominantly used as "starter" products by youth, leading to years of addiction, health problems, and possibly death, cannot be sold in the United States.531 The United States recalls that, 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". In this case, all of the factors weigh in favour of a determination that Section 907(a)(1)(A) is necessary. First, "the interest at stake is of fundamental importance".532 Second, Section 907(a)(1)(A) is "directly contributing" to the protection of human life and health, and there is a "genuine relationship of ends and means between the objective pursued and the measure at issue".533 Third, the context in which Section 907(a)(1)(A) was enacted – namely, the unacceptably high youth smoking rates such that severe restrictions were required – is relevant in assessing the "trade restrictiveness" of the measure, which under the circumstances is limited.534
7.298.
The United States submits that Section 907(a)(1)(A) also meets the requirements of the chapeau to Article XX.535 First, the United States argues that there is "no differential treatment at all", and therefore cannot be any "discrimination," arbitrary, unjustified, or otherwise.536 However, even if Section 907(a)(1)(A) were found to "discriminate," such conduct could not be considered "arbitrary" or "unjustified".537 Finally, the evidence demonstrates that Section 907(a)(1)(A) is not a "disguised restriction" on trade.538
7.299.
Indonesiaargues that the measure at issue is "not condoned" by Article XX of the GATT 1994 because it "constitutes a restriction on international trade masquerading as a measure necessary to protect human health".539 In addition, Indonesia submits that Article XX(b) of the GATT 1994 cannot be invoked in respect of any violations of the TBT Agreement.540
7.300.
Indonesia submits that it has already demonstrated, in the context of its analysis of the measure under Article 2.2 of the TBT Agreement, that: (a) the measure is not "necessary" to achieve the level of protection sought by the FSPTCA541; and (b) less trade-restrictive measures were reasonably available to the United States.542
7.301.
Indonesia submits that even if the measure is somehow "necessary" to protect youth from smoking, it is still a "disguised restriction" on international trade within the meaning of the chapeau to Article XX.543 In Indonesia's view, this is so because by "tailoring the ban on 'characterizing flavours' in such a way that virtually no domestic cigarettes, including those most popular with youth, were removed from the market, the United States was able to generate the appearance of cracking down on youth smoking without actually inflicting any real harm on U.S. tobacco companies or eliminating any domestically produced cigarettes popular with youth".544

2. Analysis by the Panel

(a) Introduction

7.302.
The arguments of the parties raise two main issues. The first is whether it is necessary for the Panel to determine whether Section 907(a)(1)(A) is justified under Article XX(b) of the GATT 1994. If so, then the second issue is whether Section 907(a)(1)(A) is justified under Article XX(b) of the GATT 1994.
7.303.
We shall commence our analysis by setting out the text of Article XX(b) of the GATT 1994. We will then address the issue of whether we need to determine whether Section 907(a)(1)(A) is justified under Article XX(b) of the GATT 1994. Depending on our conclusion, we may or may not continue our analysis of the U.S. defence under Article XX(b) of the GATT 1994.

(b) The legal provision at issue

7.304.
Article XX of the GATT 1994 is entitled "General Exceptions". Together with its chapeau, Article XX(b) reads as follows:

"Subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade, nothing in this Agreement shall be construed to prevent the adoption or enforcement by any contracting party of measures:

(b) necessary to protect human, animal or plant life or health".

(c) Whether it is necessary for the Panel to determine whether Section 907(a)(1)(A) is justified under Article XX(b) of the GATT 1994

7.305.
As explained above, the first issue that we need to consider is whether it is necessary for us to determine whether Section 907(a)(1)(A) is justified under Article XX(b) of the GATT 1994.
7.306.
We recall that the Panel has found that Section 907(a)(1)(A) is inconsistent with Article 2.1 of the TBT Agreement. More specifically, we have found that Section 907(a)(1)(A) accords clove cigarettes (a product imported from Indonesia) less favourable treatment than that accorded to a like product of national origin (i.e., menthol cigarettes).545
7.307.
We also recall that, having reached this conclusion, we decided not to examine Indonesia's alternative claim under Article III:4 of the GATT 1994546, and, therefore, we have made no finding of violation in respect of this provision. It follows that there is no need for the Panel to consider the question of whether a violation of that provision could be justified under Article XX(b) of the GATT 1994. Thus, as a consequence of our decision to not examine Indonesia's claim of violation of Article III:4 of the GATT 1994, we refrain from considering the United States' defence, under Article XX(b) of the GATT 1994, to the alleged violation of Article III:4 of the GATT 1994.547
7.308.
As regards the violation of Article 2.1 of the TBT Agreement, the United States has made clear that it "is not invoking Article XX of the GATT 1994 as a defense for the claims raised by Indonesia under the TBT Agreement".548 Under the circumstances, we understand the United States to be of the view that the Panel does not need to make a finding on the availability of Article XX to justify a violation of a provision of the TBT Agreement.549
7.309.
Our task is to make an objective assessment of the matter before us.550 It is not for us to broaden the matter beyond that submitted to us by the parties. Therefore, we will not embark on an enquiry into Article XX(b) of the GATT 1994.

(d) Conclusion

7.310.
For these reasons, the Panel concludes that it is not necessary to address the question of whether Section 907(a)(1)(A) is justified under Article XX(b) of the GATT 1994. Accordingly, the Panel refrains from doing so.

F. WHETHER SECTION 907(A)(1)(A) IS INCONSISTENT WITH ARTICLE 2.2 OF THE TBT AGREEMENT

1. Arguments of the parties

7.311.
Indonesia claims that Section 907(a)(1)(A) is inconsistent with Article 2.2 of the TBT Agreement because it is more trade-restrictive than necessary to achieve the objective and level of protection sought by the United States, and is thus an unnecessary obstacle to trade.551
7.312.
Indonesia asserts that the objective of the ban on clove cigarettes is to reduce youth smoking. Indonesia relies upon a statement in the House Report that Section 907(a)(1)(A) is "intended to prohibit the manufacture and sale of cigarettes with certain 'characterizing flavours' that appeal to youth".552 Indonesia submits that the "youth" in question are minors (i.e., persons under the age of 18), and not, as the United States argues, minors and also young adults.553 Indonesia also objects to the United States' attempt to treat the alleged justification for excluding menthol cigarettes from the scope of the ban as a second "objective" of Section 907(a)(1)(A).554 However, Indonesia argues that regardless of whether the Panel accepts Indonesia's or the United States' formulation of the objective, the ban on clove cigarettes is still more trade-restrictive than necessary to achieve its objective because both parties include "reducing youth smoking" in their objectives and that is where the United States' defence fails.555
7.313.
Indonesia suggests that the ban on clove cigarettes does not have a "legitimate" objective, arguing that it is a "disguised restriction" on international trade and a "wolf disguised in the sheep's clothing" of public health.556 Indonesia clarifies that while the objective of Section 907(a)(1)(A) "as stated" in the FSPTCA and the House Report (i.e., to reduce youth smoking) is a "legitimate" objective within the meaning of Article 2.2 of the TBT Agreement, the "measure itself" is a disguised restriction on international trade.557 More specifically, Indonesia asserts that the United States did not include menthol cigarettes in Section 907(a)(1)(A) because Philip Morris opposed it, that the exclusion of menthol cigarettes from the ban was the result of a political compromise, and the real concern was getting a deal on the FSPTCA through the U.S. Congress while also avoiding the potential loss of jobs in the United States if menthol cigarettes were banned.558
7.314.
Indonesia submits that for the purpose of analysing whether the measure is "more trade-restrictive than necessary" to fulfil its objective, the Panel should be guided by the existing jurisprudence relating to Article XX(b) of the GATT 1994.559 Indonesia notes that all the third parties that addressed Article 2.2 of the TBT Agreement in their submissions and statements before the Panel supported Indonesia's conclusion on this point.560 According to Indonesia, the United States overemphasizes the significance of the contextual differences between Article 2.2 and Article XX(b), and the United States provides no convincing reason why the Panel should not look to interpretations of Article XX(b) for its analysis of Article 2.2.561 Indonesia disagrees with the United States that Article 2.2 should be interpreted to incorporate the "significantly less trade-restrictive" language from footnote 3 to Article 5.6 of the SPS Agreement.562 However, Indonesia considers that the application of that standard would probably not have any practical consequences in the present case, because all of the alternative measures it identifies would be "significantly" less trade restrictive than the measure applied by the United States.563
7.315.
Indonesia further argues that the ban on clove cigarettes is "more trade-restrictive than necessary" because it "greatly exceeds the level of protection sought" by the United States.564 Indonesia asserts that the level of protection sought by the United States through the FSPTCA is "not a dramatic reduction in the number of youth who smoke", but rather "sufficient regulation to deter, but not prohibit, the use of tobacco products by adolescents".565 Indonesia submits that a ban "is the most trade-restrictive regulatory tool available and in certain circumstances may be the only option for achieving a health objective, for example where the level of protection needed is the elimination of risk".566 Indonesia reasons that although the FSPTCA does not identify the level of protection sought, the provisions of the law convey a much lower level of protection desired than the high level claimed by the United States.567
7.316.
Indonesia further argues that the ban on clove cigarettes is "more trade-restrictive than necessary" because it makes no material contribution to the objective of reducing youth smoking.568 Indonesia submits that the question the Panel must consider is "whether banning clove cigarettes, but not menthol or regular cigarettes, contributes to a reduction in the level of smoking by adolescents".569 Indonesia submits that in "large measure, the answer to this question depends on whether clove cigarettes are more like those cigarettes smoked by adults, which are excluded from the ban, or whether they are more like the 'candy' flavors designed and marketed to attract kids to smoke".570 Indonesia then proceeds to argue that: (i) clove cigarettes pose no greater health risk than other cigarettes571; (ii) youth do not smoke clove cigarettes in significant numbers572; (iii) other flavoured tobacco products popular with youth are not banned by the FSPTCA573; and (iv) the available scientific evidence shows that banning clove cigarettes, but not menthol or regular cigarettes, will do little to deter youth from smoking.574 Indonesia concludes that the banning clove cigarettes "is unlikely to have any impact whatsoever on youth smoking", and does not even rise to the minimum level of "making a contribution to" to the objective of the FSPTCA.575 Indonesia emphasizes that in "assessing the question of the necessity of the measure, the Panel would have to consider what contribution Section 907(a)(1)(A) could possibly make toward reducing youth smoking when menthol and regular cigarettes are not banned."576Indonesia emphasizes thatby prohibiting only a "tiny sliver" of the cigarettes smoked by youth, the measure cannot make a "material contribution" to the objective of reducing youth smoking, and is therefore more trade-restrictive than necessary to fulfil this objective.577
7.317.
Indonesia submits that is not required to prove that an alternative to the ban on clove cigarettes was reasonably available, given that the ban does not actually fulfil its objective.578 However, Indonesia argues that even if the ban on clove cigarettes makes some kind of contribution to the objective of reducing youth smoking, it still cannot be considered "necessary" because there are less trade-restrictive measures were reasonably available to limit the availability of clove cigarettes to youth.579 In this regard, Indonesia surveys: (i) the other provisions of the FSPTCA, which are applicable to menthol and regular cigarettes, designed to reduce the ability of cigarette companies to engage in practices that target and attract youth580; (ii) the steps that the FSPTCA expressly prevents FDA from taking (e.g. raising the smoking age) that would significantly reduce youth smoking and not be particularly trade-restrictive581; (iii) certain non-trade restrictive measures in a 2006 consent agreement between R.J. Reynolds and several State Attorneys General concerning new products that health advocates alleged were designed and marketed to attract youth582; (iv) non-trade restrictive measures adopted by certain other countries, including Australia and Singapore, to address youth smoking583; and (v) various measures set out in the WHO Framework Convention on Tobacco Control aimed at preventing cigarette sales to minors.584 In its second written submission, Indonesia submits that it does not have to show that its proposed alternatives are "significantly" less trade restrictive, as the United States improperly imports this language from footnote 3 to Article 5.6 of the SPS Agreement.585
7.318.
The United States submits that Indonesia's claim under Article 2.2 of the TBT Agreement should be rejected.
7.319.
As to the objective that Section 907(a)(1)(A) pursues, the United States submits that the ban on clove and certain other flavoured cigarettes "is intended to fulfil the objective of reducing the rate of young people becoming smokers by eliminating certain products from the market place that have particular appeal to young people."586 The United States rejects Indonesia's contention that the objective of the ban is to reduce smoking prevalence of only people age 17 and younger, and asserts instead that the objective is to reduce smoking of all people within the "window of initiation" (i.e., people ages 12-26).587 In addition, the United States stresses that Section 907(a)(1)(A) has a second objective, which is to avoid the potential negative consequences associated with banning products to which tens of millions of adults are chemically and psychologically addicted due to the potential but unknown consequences for the health of the individual users or the overall population.588 According to the United States, "Indonesia repeatedly mischaracterizes the objective of Section 907(a)(1)(A) as 'reducing youth smoking'", and that is a "gross oversimplification of the objective of Section 907(a)(1)(A)".589 According to the United States, the practical implications of defining the objective simply in terms of "reducing youth smoking", without consideration of possible negative consequences, is that "this limitation may result in a different pool of alternative measures with which the challenged measure is compared".590
7.320.
The United States disputes that the measure is a "disguised restriction" on international trade.591 According to the United States, nothing in the text, design, architecture, or revealing structure of Section 907(a)(1)(A) supports Indonesia's allegation that the measure did not ban menthol cigarettes simply because a particular U.S. company opposed it. The extensive legislative history of the FSPTCA provides no support to Indonesia, and its evidence on this point – one media report – merely quotes one politician speculating as to his personal view of the legislation.
7.321.
On the question of whether the ban on clove cigarettes is "more trade-restrictive than necessary", the United States submits that the jurisprudence relating to Article XX(b) of the GATT 1994 is not relevant to Article 2.2 of the TBT Agreement, and terms the opposing view as involving a "radical approach".592 In its view, the Panel should instead apply the test found in Article 5.6 and footnote 3 of the SPS Agreement, and require Indonesia to demonstrate that: (i) there is a reasonably available alternative measure; (ii) that fulfils the objective of the measure at the level that the Member imposing the measure considers appropriate; and (iii) is "significantly" less trade restrictive.593 However, in response to a question from the Panel, the United States acknowledges that the issue of whether Article 2.2 embodies a "significantly less trade-restrictive" standard would "not appear to arise in this dispute".594
7.322.
The United States disagrees that the ban on clove cigarettes greatly exceeds the level of protection sought by the United States. The United States acknowledges that if the measure at issue "goes beyond the chosen level of protection", a less trade-restrictive measure may likewise fulfil the Member's legitimate objective.595 However, Indonesia's understanding of the level of protection sought by the United States is erroneous.596 Given the U.S. Government's long and frustrating experience in trying to limit youth smoking, the "high" level of protection sought by the United States is evidenced by the measure applied – a complete ban.597 The level at which the United States considers is appropriate to protect public health is to eliminate from the market, not simply restrict access to, those products that are disproportionately used by young people.598
7.323.
The United States submits that Indonesia's argument regarding the existence of a "material contribution" to the fulfilment of the objective is unfounded.599 The United States considers that while this question is legally irrelevant to the analysis under Article 2.2 of the TBT Agreement600, banning clove cigarettes does indeed make a material contribution to the objective of reducing youth smoking.601 Whether the challenged measure makes a material contribution should be judged on its own terms, not in comparison with alternative measures.602 The WHO has endorsed the view that clove cigarettes disproportionately appeal to young people and therefore present the same public health concern as the other cigarettes banned under Section 907(a)(1)(A), and the survey data tracking actual clove cigarette usage by young people confirms that, in fact, young people within the window of initiation disproportionately use clove cigarettes, as they do other characterizing flavours, such as chocolate, cherry, coconut, etc.603 In addition, the fact that a particular "trainer" product, such as clove cigarettes, does not have a large market share does not change this calculation; products that appeal disproportionately to young people have particular public health concerns, regardless of their market share, and the product's elimination will make a material contribution to a reduction in smoking of young people.604 While one might hypothesize that the United States could have designed a measure that sought to eliminate or reduce smoking among young people to a greater degree than Section 907(a)(1)(A), nothing in the TBT Agreement requires Members to seek to fulfil their legitimate objectives to the maximum extent possible, nor at any particular level.605 The United States asserts that clove cigarettes do in fact attract youth to smoking.606 According to the United States, the evidence shows that clove cigarettes, like cigarettes flavoured with chocolate, vanilla, and the like, are overwhelmingly favoured by teenagers and young adults people rather than adults.607
7.324.
With respect to the existence of less trade-restrictive measures, the United States submits that Indonesia's mere listing of a number of different restrictions drawn from other parts of the FSPTCA, the 2006 RJ Reynolds Consent Agreement, the laws of Singapore and Australia, and the FCTC does not satisfy Indonesia's burden of proving that there is a less trade-restrictive measure that would achieve the U.S. objective at the level of protection that the United States finds appropriate.608 In its second written submission, the United States submits that Indonesia continues to make vague references to dozens of different measures that apply to all cigarettes, such as advertising restrictions. Indonesia does not adduce any evidence that any of these measures fulfil the legitimate objective at the level the United States considers appropriate. It has, therefore, not met its burden of establishing a prima facie case that Section 907(a)(1)(A) is more trade-restrictive than necessary to fulfil its objective.609 Furthermore, the alternative measures Indonesia identifies would not in fact fulfil the objectives of Section 907(a)(1)(A) at the level the United States considers appropriate: those alternatives would all continue to allow trainer cigarettes with characterizing flavours of candy, fruit, liquor, etc. to remain on the market. The United States submits that it already imposes significant restrictions on the advertising, marketing, and sale of cigarettes610, and that many of the potentially alternative measures proposed by Indonesia are already in place in the United States.611

2. Analysis by the Panel

(a) Introduction

7.325.
The fundamental issue before us is whether the United States' ban on clove cigarettes612 is more trade-restrictive than necessary to fulfil a legitimate objective, taking account of the risks non-fulfilment would create, in violation of Article 2.2 of the TBT Agreement.
7.326.
There are a number of points of disagreement between the parties in respect of this claim. The main points of disagreement between the parties are as follows. First, the parties disagree on whether Indonesia has correctly identified the objective of the ban on clove cigarettes. Second, the parties appear to disagree on whether the objective pursued by the United States through the ban on clove cigarettes is legitimate. Third, the parties disagree on whether jurisprudence relating to Article XX(b) of the GATT 1994 is relevant to the interpretation of the "more trade-restrictive than necessary" standard in Article 2.2 of the TBT Agreement. Fourth, the parties disagree on whether the ban on clove cigarettes exceeds the level of protection sought by the United States. Fifth, the parties disagree on whether the ban on clove cigarettes makes a material contribution to the objective of reducing youth smoking. Finally, the parties disagree on whether there are less-trade restrictive alternative measures that would make an equivalent contribution to the achievement of the objective pursued at the level of protection sought by the United States. In our view, some of these issues are to a certain extent interrelated.
7.327.
We will begin by setting out the text of the legal provision at issue.

(b) The legal provision at issue

7.328.
Article 2.2 of the TBT Agreement states:

"Members shall ensure that technical regulations are not prepared, adopted or applied with a view to or with the effect of creating unnecessary obstacles to international trade. For this purpose, technical regulations shall not be more trade-restrictive than necessary to fulfil a legitimate objective, taking account of the risks non-fulfilment would create. Such legitimate objectives are, inter alia: national security requirements; the prevention of deceptive practices; protection of human health or safety, animal or plant life or health, or the environment. In assessing such risks, relevant elements of consideration are, inter alia: available scientific and technical information, related processing technology or intended end-uses of products."

7.329.

We note that Article 2.2 of the TBT Agreement has been discussed in several prior613 panel and Appellate Body reports, but only briefly.614 In EC – Asbestos, the panel noted that "the criteria on the preparation, adoption or application of technical regulations in Article 2.2 of the TBT Agreement are very similar to those in Article XX of the GATT 1994. The preamble to the TBT Agreement in fact repeats some of the wording of Article XX of the GATT."615 In EC – Sardines, the panel observed that:

"Article 2.2 and this preambular text affirm that it is up to the Members to decide which policy objectives they wish to pursue and the levels at which they wish to pursue them. At the same time, these provisions impose some limits on the regulatory autonomy of Members that decide to adopt technical regulations: Members cannot create obstacles to trade which are unnecessary or which, in their application, amount to arbitrary or unjustifiable discrimination or a disguised restriction on international trade. Thus, the TBT Agreement, like the GATT 1994, whose objective it is to further, accords a degree of deference with respect to the domestic policy objectives which Members wish to pursue. At the same time, however, the TBT Agreement, like the GATT 1994, shows less deference to the means which Members choose to employ to achieve their domestic policy goals...."616

7.330.
In this case, the parties agree that the first sentence of Article 2.2 of the TBT Agreement sets out a general principle, the meaning of which is explained and defined in the second sentence of Article 2.2. In other words, the parties agree that the first sentence of Article 2.2 does not create a separate and distinct obligation from that found in the second sentence.617 We see no reason to disagree618, and will proceed with our analysis on this understanding.
7.332.
The parties also seem to agree that the nature of the analysis to be conducted under Article 2.2 of the TBT Agreement is different from that to be conducted under Article 2.1 of the TBT Agreement.623 Again, we see no reason to disagree. The main issues under Article 2.1 in this case are whether clove cigarettes and menthol cigarettes are "like" products, and if so, whether clove cigarettes are accorded "less favourable treatment" than that accorded to menthol cigarettes. The main issue under Article 2.2 in this case is whether the ban on clove cigarettes is "more trade-restrictive than necessary" to fulfil the legitimate objective of reducing youth smoking. Thus, our finding that the measure is inconsistent with Article 2.1 does not prejudge the answer to the question of whether the measure is consistent with Article 2.2.
7.333.
The terms of Article 2.2 of the TBT Agreement provide that to be consistent with that provision, a technical regulation must: (i) pursue a "legitimate objective"; and (ii) not be more trade-restrictive than "necessary" to fulfil that legitimate objective (taking into account the risks non-fulfilment would create). Thus, Article 2.2 appears to call for a two-step analysis. It is under the general framework of this two-step analysis that we will address the disputed issues identified above.

(c) Whether the ban on clove cigarettes pursues a legitimate objective

7.334.
In this section, we are faced with two different albeit related questions. The first is whether Indonesia has correctly identified the objective of the ban on clove cigarettes. The second is whether the objective pursued by the United States through the ban on clove cigarettes is legitimate.

(i) Whether Indonesia has correctly identified the objective of the ban

7.335.
In Brazil – Retreaded Tyres, the Appellate Body indicated that it would "begin by identifying the objective pursued by the Import Ban".624 In our view, the identification of the objective pursued is the logical starting point in the analysis under Article 2.2 of the TBT Agreement, because it serves as the reference point for the purpose of analysing whether a measure is "more trade-restrictive than necessary" to achieve its objective.625

(ii) Whether the objective of the ban on clove cigarettes is "legitimate"

7.344.
Having determined the objective pursued by the United States when enacting Section 907(a)(1)(A), we proceed to examine its legitimacy. We recall that Article 2.2 of the TBT Agreement provides that technical regulations shall not be more trade-restrictive than necessary to fulfil a "legitimate" objective, taking account of the risks non-fulfilment would create. Article 2.2 explains that such "legitimate" objectives are, inter alia: "national security requirements; the prevention of deceptive practices; protection of human health or safety, animal or plant life or health, or the environment". As observed by the panel in EC – Sardines,although the elaboration of the objectives of a measure is a prerogative of the Member establishing that measure, "[p]anels are required to determine the legitimacy of those objectives".641 The Appellate Body supported this conclusion by stating that it shared the view of the panel that this part of the analysis "implies that there must be an examination and a determination on the legitimacy of the objectives of the measure".642
7.345.
In this case, Indonesia suggests that the ban on clove cigarettes does not have a "legitimate" objective, arguing that the measure is a "disguised restriction" on international trade and a "wolf disguised in the sheep's clothing" of public health.643 Indonesia clarifies that while the objective of the Section 907(a)(1)(A) "as stated" in the FSPTCA and the House Report (i.e., to reduce youth smoking) is a "legitimate" objective within the meaning of Article 2.2 of the TBT Agreement, the "measure itself" is a disguised restriction on international trade.644 According to Indonesia, the United States did not include menthol cigarettes in Section 907(a)(1)(A) because Philip Morris opposed it. Indonesia submits that the exclusion of menthol cigarettes from the ban was the result of a political compromise, and the real concern was getting a deal on the FSPTCA through the U.S. Congress while also avoiding the potential loss of jobs in the United States if menthol cigarettes were banned.645
7.346.
As the party challenging the legitimacy of the identified objective, Indonesia carries the burden to establish that the objective concerned is not "legitimate" within the meaning of Article 2.2 of the TBT Agreement.

(d) Whether the ban on clove cigarettes is "more trade-restrictive than necessary" to fulfil the legitimate objective of reducing youth smoking

(i) Whether jurisprudence developed under Article XX(b) of the GATT 1994 is relevant to the interpretation of the "more trade-restrictive than necessary" standard in Article 2.2 of the TBT Agreement

(ii) Whether Indonesia has demonstrated that the ban on clove cigarettes exceeds the level of protection sought by the United States

(iii) Whether Indonesia has demonstrated that the ban on clove cigarettes makes no "material contribution" to the objective of reducing youth smoking

Introduction

Whether clove cigarettes pose a greater health risk than other cigarettes

Whether youth smoke clove cigarettes in insignificant numbers

Whether the United States' failure to ban other flavoured tobacco products most popular with youth demonstrates that banning clove cigarettes makes no "material contribution" to reducing youth smoking

Whether the available scientific evidence shows that banning clove cigarettes will do little to deter youth from smoking

Conclusion

(iv) Whether Indonesia has demonstrated that there are less-trade restrictive alternative measures that would make an equivalent contribution to the achievement of the objective at the level of protection sought by the United States