Agreement on Sanitary and Phytosanitary Measures (SPS Agreement): In a Nutshell

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1 Agreement on Sanitary and Phytosanitary Measures (SPS Agreement): In a Nutshell SPS Agreement recognizes the right of Members of the World Trade Organization to take SPS measures: Article 2.1 When is a Member's measure subject to the SPS Agreement? When the measure is a Sanitary and Phytosanitary (SPS) measure When the measure may affect international trade When is a measure considered to be an SPS measure? SPS measure: defined in paragraph 1 of Annex A of the SPS Agreement. Whether a measure is an SPS measure or not depends on: Measure s purpose or aim (sub para (a) to (d)) Form of the measure (as described in second paragraph i.e. all relevant laws, decrees and regulations); and Nature of the measure (as set out in the second paragraph, i.e. requirements and procedures including, inter alia, end product criteria, processes and production methods etc): Key to determination EC Biotech (Panel): general de facto moratorium on biotech approvals neither a requirement nor a procedure, rather application of approval procedures: not covered by second paragraph of Annex A.1. Are there any restrictions on rights of Members to impose SPS measures? Right to take SPS measures not unfettered: subject to disciplines under Articles 2.2 and 2.3. Member can take SPS measure if it fulfills the following: 1. Necessity requirement: Measure is applied only to the extent necessary to protect human, animal or plant life and health 2. Scientific Disciplines: Any SPS measure should be based on scientific principles and not maintained without sufficient scientific evidence, except as provided for in Article 5.7.

2 Evidence: to be distinguished from information used in Article 5.7 therefore excludes not only insufficiently substantial information, but also non-demonstrated hypothesis: Japan Apples (Panel) Sufficient scientific evidence: requires a rational relationship between the SPS measure and the scientific evidence. Scientific means that the evidence should be gathered through scientific methods and should exclude information not gathered through a scientific method. More serious the risks to life or health, the less demanding the requirement of sufficient scientific evidence. (EC Hormones (AB) panels to bear in mind that responsible, representative governments commonly act from perspectives of prudence and precaution where risks of irreversible, eg. Life threatening, damage to human health are concerned. Japan Apples (Panel): also included the proportionality criterion into Article 2.2. Further it stated, scientific evidence to be sufficient, must confirm the existence of a risk.) 3. No arbitrary or unjustifiable discrimination or disguised restriction on trade: mentioned in Article 2.3. For measure to be violative of Article 2.3, three cumulative requirements to be met: a. The measure discriminates between the territories of Members other than the Members imposing the measure, or between the territory of the Members imposing the measure and another Member b. The discrimination is arbitrary and unjustifiable, and c. Identical or similar conditions prevail in the territory of the Members compared (Australia Salmon (Panel Article Canada)) With one of the aims of the SPS Agreement being harmonization of international standards, what are the options available to a Member looking to impose SPS measures? Under Article 3 of the SPS Agreement, Members have three autonomous options with regard to international harmonized standards, each with own consequences. Members may choose to: Base their SPS measures on international standards according to Article 3.1

3 Conform their SPS measures to international standards under Article 3.2, or Impose SPS measures resulting in a higher level of protection than would be achieved by the relevant international standard in terms of Article 3.3 Each are equally available option and Members are not penalized for choosing the last option (EC Hormones (AB)) When and how is a Member required to base/conform its SPS measures according to international standards? A Member is required to either base or conform to international standards when such a standard exists. (except if covered under Article 3.3) The international standards referred here are standards set by international organizations, such as Codex Alimentarius Commission with respect to food safety, the World Organisation for Animal health (formerly called the International Office of Epizootics (OIE)) for animal health, and the Secretariat of the International Plant protection Convention in relation to plant health. What is the difference between basing and conforming SPS Measures according to international standards? A measure is based on an international standard when it stands or is founded or built upon or supported, by the international standard. An SPS measure based on an international standard need not conform to that standard, since not all of elements of the standard have to be incorporated into the measure. A measure conforms to international standard if such a measure embodies the international standard completely and, for practical purposes, converts it into a municipal standard. To conform to is more demanding than to base on. Measures conforming to international standards are presumed to be consistent with the SPS Agreement and GATT Such presumption not available in case a measure is based on international standards. The burden of proof lies on the complaining party to demonstrate a violation of the SPS Agreement under both cases, but burden heavier in case of conformity. When can a Member deviate from international standards?

4 A Member can deviate from international standards if it chooses measure resulting in higher level of protection than that achieved by the international standard under Article 3.3 of the SPS Agreement. Right to deviate from the international standards is not an unqualified absolute right. This right is an autonomous right under the SPS Agreement and not an exception from a general obligation under Article 3.1 What are the conditions that a Member needs to fulfill to impose higher level of protection than that achieved by international standards? Article 3.3 lays down two alternative conditions when a higher standard can be imposed, namely: Either there must be a scientific justification for the SPS measure (defined in the footnote as a scientific examination and evaluation in accordance with the rules of the SPS Agreement) Or the measure must be a result of the level of protection chosen by the Member in accordance with Article 5.1 through 5.8. (Article 5.1 deals with risk assessment) Is a Member, which chooses to impose higher level of protection on the basis of scientific justification, required to conduct a risk assessment as stated in Article 5.1? The Appellate Body in EC Hormones has noted that the difference between the two alternative conditions is not clear and Article 3.3 is evidently not a model of clarity in drafting and communication. It is however clear that under both the alternative conditions a risk assessment in terms of Article 5.1 is required. Even though, condition based on scientific justification does not speak of Articles 5.1 through 5.8, nevertheless the examination and evaluation would appear to partake the nature of risk assessment requirement under Article 5.1 and defined in paragraph 4 of Annex A of the SPS Agreement. What is risk assessment? Article 5.1 obliges Members to base their SPS measures on a risk assessment. The Panel in EC - Biotech held that to determine if there is a violation of Article 5.1, two distinct issues must be addressed:

5 a. Whether there is a risk assessment within the meaning of the SPS Agreement; and b. Whether the SPS measure at issue is based on this risk assessment. There are two types of risk assessment as defined in paragraph 4 of Annex A of the SPS Agreement: First is applicable to measures aimed at risks from pests or diseases. Second is applicable to SPS measures aimed at food borne risks. What are the requirements for conducting a risk assessment for measures aimed at risks from pests or diseases? There are three requirements (based on EC Salmon (Panel)) that needs to be followed in such a risk assessment: Identify the pests or disease whose entry, establishment or spread a Member wants to prevent, as well as the potential biological and economic consequences associated with the entry, establishment or spread of such pests/diseases; Evaluate the likelihood of entry, establishment or spread of these pests or diseases and the associated biological and economic consequences; and Evaluate the likelihood of entry, establishment or spread of these pests or diseases according to the SPS measures that might be applied. What are the requirements for conducting a risk assessment for measures aimed at food borne risks? Two requirements (based on EC- Hormones) to be fulfilled: Identify the adverse effects on human or animal health (if any) arising from the additive, contaminant, toxin or disease-causing organism in food/beverage/feedstuffs at issue; and If such adverse health effects exist, evaluate the potential of occurrence of these effects. What are the differences between the two types of risk assessments? The requirements for the second type of risk assessment in relation to food borne risks do not include an evaluation of associated biological and economic consequences

6 While the risk assessment in relation to pests and disease risks requires an evaluation of the likelihood that the risk may materialize, the second type requires only an evaluation of the potential for adverse effects. Neither likelihood nor potential imply that the risk assessed must be quantified or that a certain threshold level of risk be shown. However the word likelihood implies a higher degree of potentiality than the word potential The risk assessment for pests or diseases must evaluate the likelihood according to the SPS measures which might be applied, thus not limited to an examination of the measure already in place. Are there any other requirements that a Member should keep in mind while conducting risk assessment? The Appellate Body and the Panel in the various disputes have made the following general observations: The risk assessment must show proof of an actual risk and not just a theoretical uncertainty (EC Hormones (AB)). Risk assessment may go beyond the controlled laboratory conditions and take into account the actual potential for adverse effects in the real world where people live and work and die (EC Hormones (AB)). The risk assessment must be specific to the particular type of risk at issue in the case and not merely show a general risk of harm (EC Hormones (AB)). Article 5.1 does not oblige Members to carry out their own risk assessments. Instead they may rely on risk assessments carried out by other Members or an international organization (EC Hormones (AB)). Since Article 5.1 is to be read together with Article 2.2 which requires that SPS measures must not be maintained without sufficient scientific evidence, the subsequent evolution of the scientific evidence must be assessed as this may be an indication that the risk assessment should be reviewed or a new risk assessment undertaken (Japan Apples (Panel)). Does the SPS Agreement specify any methodology of risk assessment that the Members need to follow? Although the SPS Agreement does not lay down any methodology of risk assessment to be followed by Members, other than to require them take account of

7 risk assessment techniques developed by international organizations, it does specify certain factors that Members must take into account in their risk assessment Article 5.2 of the SPS Agreement lists certain scientific and technical factors that Members must consider when assessing risks. These are: Available scientific evidence; Relevant processes and productions methods; Relevant inspection, sampling and testing methods; Prevalence of specific diseases or pests; Existence of pest or disease free areas; Relevant ecological and environmental conditions; and Quarantine or other treatment. What does the requirement that SPS measure be based on risk assessment mean? Based on risk assessment means that there must be a rational relationship between the measure and the risk assessment and the risk assessment must reasonably support the measure. The risk assessment must be shown to have been taken into account by the Member imposing the SPS measure and that the SPS measure must conform to the risk assessment. Can an SPS measure be based on a divergent view rather than mainstream scientific opinion? It is permissible for an SPS measure to be based on divergent view rather than mainstream scientific opinion. The Appellate Body in EC Hormones stated that: We do not believe that a risk assessment has to come to a monolithic conclusion that coincides with the scientific conclusion or view implicit in the SPS measure. The risk assessment could set out both the prevailing view representing the mainstream of scientific opinion as well as the opinions of the scientists taking a divergent view. Article 5.1 does not require that the risk assessment must necessarily embody only the view of the relevant scientific community. In some cases, the very existence of divergent views presented by qualified scientists who have investigated the particular issue at hand may indicate a state of scientific uncertainty. Sometimes the divergence may indicate a roughly equal balance of

8 scientific opinion, which may itself be a form of scientific uncertainty. In most cases, responsible and representative governments tend to base their legislative and administrative measures on "mainstream" scientific opinion. In other cases, equally responsible and representative governments may act in good faith on the basis of what, at a given time, may be a divergent opinion coming from qualified and respected sources. By itself, this does not necessarily signal the absence of a reasonable relationship between the SPS measure and the risk assessment; especially where the risk involved is life-threatening in character and is perceived to constitute a clear and imminent threat to public health and safety. Determination of the presence or absence of that relationship can only be done on a case-to-case basis, after account is taken of all considerations rationally bearing upon the issue of potential adverse health effects. (Para 194) However, this was clarified by the Panel in EC Biotech, where the Panel stated that an SPS measure cannot be said to be based on a divergent opinion in a risk assessment if that risk assessment sets out a single opinion with which the Member concerned disagrees. To the extent that the Member disagrees with some or all of the conclusions contained in such an assessment, it would be necessary for the Members to explain, by reference to their existing assessment, how and why they assess the risks differently and to provide their revised or supplemental assessment of the risks. What is the level of protection that a Member establishing an SPS measure can take? A Member is free to impose the level of protection deemed appropriate by it. There is a clear recognition that it is the prerogative of the Member imposing the SPS measure to choose the level of protection of human, animal or plant life or health Two provisions of the SPS Agreement deals with the choice of an appropriate level of protection: Article 5.4 provides that Members should take into account the objective of minimizing negative trade effects when choosing the level of protection Article 5.5 consists of two elements: First - the goal (for the future) of achieving consistency in the application of the concept of appropriate level of sanitary or phytosanitary protection

9 In EC Hormones, the Appellate Body recognized that countries establish their levels of protection ad hoc as risks arise, thus absolute consistency in levels of protection is not realistic, and also not required by Article 5.5 Second - Legal obligation to avoid arbitrary or unjustifiable distinctions in the levels of protection deemed appropriate in different situations, if these distinctions lead to discrimination or disguised restrictions on trade. When can a violation of Article 5.5 (described above) arise? Three cumulative requirements must be met before a violation of Article 5.5 of SPS Agreement exists: 1. The Member has set different levels of protection in different situations different situations must be comparable; 2. The levels of protection show arbitrary or unjustifiable differences in their treatment of different situations; Panels and the Appellate Body examine whether reasons exist to justify the differences in levels of protection, eg: whether different levels of risks are at issue in the different situations compared, whether the difficulty of controlling the risk differs in each case or whether the degree of government interventions necessary to achieve the same level of protection differs in each situation. 3. These arbitrary or unjustifiable differences lead to discrimination or disguised restrictions on trade. Three warning signals identified in case law, which are not conclusive in their own right but taken together and with other factors may support the finding that the third element of the test under Article 5.5 is met. These are: The arbitrary character of the differences in the levels of protection (i.e. second elements is met) The existence of rather substantial differences in the levels of protection; and The absence of scientific justification (based on earlier findings of violation of Articles 2.2 and 5.1), which indicates that the measure is s disguised restriction on trade.

10 Does the SPS Agreement contain any rule relating to the choice of SPS measure to achieve the chosen level of protection? The SPS Agreement contains rules regarding the choice of an SPS measure to achieve the chosen level of protection. Article 5.3 lists certain economic criteria such as damage in terms of loss of production or sales that Members must consider in their choice of the SPS measure. This rule however applies to SPS measures for the protection of life and health of animals and plants. Article 5.6 provides that Members shall ensure that the measures are not more trade restrictive than required to achieve their appropriate level of SPS protection, taking into account technical and economic feasibility. Footnote to Article 5.6 states that a measure is not more trade restrictive than required unless there is another measure, reasonable available taking into account technical and economic feasibility, that achieves the appropriate level of SPS protection and is significantly less restrictive to trade. Can a Member impose any SPS measure when there is insufficient scientific evidence? Article 5.7 of the SPS Agreement provides for the possibility to take, under certain conditions, provisional SPS measures where scientific evidence is insufficient. Four cumulative requirements (Japan Agricultural Products II (AB)) to be met, i.e. the measure must: 1. Be imposed in respect of a situation where relevant scientific evidence is insufficient; Japan Apples (AB): Article 5.7 is triggered not by existence of scientific uncertainty, but rather by the insufficiency of scientific evidence. Scientific evidence will be insufficient if does not allow, in qualitative or quantitative terms, the performance of an adequate assessment of risks as required under Article Be adopted on the basis of available pertinent information 3. Not be maintained unless the Member seeks to obtain additional informational necessary for a more objective assessment of risk; Information sought must be germane to conducting a risk assessment. 4. Be reviewed accordingly within a reasonable period of time.

11 Reasonable period of time has to be established in a case-by-case basis and depends in the specific circumstances of each case, including the difficulty of obtaining the additional information necessary for review and the characteristics of the provisional SPS measure. As on 06/06/2014 Trade Policy Division Phone No: