On April 13, 2022, a WTO Panel issued its report in the dispute Costa Rica — Measures Concerning the Importation of Fresh Avocados from Mexico (DS524). The dispute was initiated by Mexico against certain import restrictions imposed by Costa Rica aimed at mitigating the risk posed by Mexican avocados infected with avocado sunblotch viroid (ASBVd), a disease affecting avocado trees and fruit. 1
Factual Background & Measures at issue
In April 2015, Costa Rica temporarily halted the import of avocados from various countries, prescribing a pest risk analysis for the ASBVd, which Costa Rica asserted was not present in Costa Rican territory.
In July 2015, through Resolution DSFE-002-2018, Costa Rica, imposed import obligations specific to Mexico, requiring certification that the product originated from an ASBVd-free production site previously recognized by the State Phytosanitary Service of Costa Rica. Thereafter, in January 2018, through Resolution DSFE-003-2018 imposed similar requirements on the import of avocados from any other country in which ASBVd is prevalent (collectively, Resolutions). Both Resolutions were based on a pest risk analysis conducted by the Costa Rican State Phytosanitary Service (through Reports ARP-002-2017 and ARP-006-2016, hereinafter Risk Assessment Reports) and also based on a Manual NR-ARP-PO-01_M-01 (the Manual), which served as a guidance on the conducting of a pest risk analysis.
Mexico alleged that the two Resolutions, Risk Assessment Reports and Manual violated the WTO Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement) as well as the General Agreement on Tariffs and Trade 1994 (GATT).2
Legal Issues before the Panel
a. Whether the measures constituted sanitary or phytosanitary measures covered by the SPS Agreement?
The Panel concluded that the Resolutions were SPS measures as they (i) aimed at achieving the objective of protecting plant life or health from disease in line with paragraph 1(a) of Annex A to the SPS Agreement3 and (ii) they may affect international trade within the meaning of Article 1.14 of the SPS Agreement.5 However, the Panel found that the Risk Assessment Reports and manual contained technical and scientific information and guidance on phytosanitary requirements to be applied but did not in themselves impose such requirements.6 Hence, these were not SPS measures.
b. Whether Costa Rica complied with its risk assessment obligations under the SPS Agreement?
The Panel stated that an assessment of the compliance of such risk assessment obligations will encompass the satisfaction of legal standards under Articles 5.17 , 5.28 , 5.39 and 2.210 of the SPS Agreement.11 Further, Articles 5.2 and 5.3 are specific provisions under the general mandate of Article 5.1 of the SPS Agreement.12
The Panel noted that Costa Rica failed to consider, in its assessment, the available scientific evidence or the prevalence of specific diseases or pests for a variety of reasons, including focusing only on main areas of production, insufficient surveillance of ASBVd in Costa Rica, deficiencies in sampling methodology, insufficient evidence to support the probability of spread of ASBVd in Costa Rica, etc., and thus acted inconsistently with Articles 5.1 and 5.2 of the SPS Agreement.13
Further, the Panel found that Costa Rica acted inconsistently with Article 5.3 of the SPS Agreement by failing to take into account the relevant biological and economic consequences of the measure.14
Lastly, the Panel held that since Articles 5.1 and 5.2 of the SPS Agreement constitute a specific application or a more specific elaboration of the basic obligation set out in Article 2.2, which mandates the imposition of SPS measures only to the extent necessary and based on scientific principles, and found that hence, Costa Rica acted inconsistently with Article 2.2 of the SPS Agreement by failing to ensure that its measures are based on scientific principles.15
c. Whether Costa Rica has complied with its obligations under Article 5.6 of the SPS Agreement concerning trade restrictiveness?
Mexico alleged that there were alternative measures that were reasonably available to Costa Rica, and the measures selected were more trade-restrictive than required to achieve Costa Rica's appropriate level of protection (ALOP), thereby violating Article 5.616 of the SPS Agreement.17
The Panel acknowledged that WTO Members may define their own appropriate level of protection (ALOP) and that Costa Rica had specified its ALOP prior to the adoption of the SPS measures, with sufficient precision.18 It further stated that Mexico failed to demonstrate that its suggested alternatives achieved Costa Rica's ALOP.19 The Panel, therefore concluded that Costa Rica has not acted inconsistently with Article 5.6 of the SPS Agreement.20
d. Whether Costa Rica's levels of protection exhibit arbitrary or unjustifiable discrimination or disguised trade restrictions?
Mexico contended that Costa Rica adopted different levels of phytosanitary protection in at least three different but comparable situations:21
- Fresh avocados imported for consumption from countries where ASBVd is present vis-à-vis domestic Costa Rican avocados in which ASBVd is likely to be present.
- Fresh avocados imported from Mexico vis-à-vis avocados imported from certificate-issuing countries where ASBVd is present.
- Fresh avocados imported for consumption in which ASBVd is present vis-à-vis avocado plants for planting.
Mexico thus alleged violation of Articles 5.522 and 2.323 of the SPS Agreement by creating arbitrary or unjustifiable distinctions in the levels of protection that Costa Rica considers to be appropriate in different situations. Further the Panel found the other two situations to be discriminatory as well.24
e. Whether Costa Rica has acted inconsistently with its obligations under the SPS Agreement regarding adaptation to regional conditions?
Mexico alleged that the measures imposed by Costa Rica are inconsistent with Article 6.125 of the SPS Agreement as these were not sufficiently adapted to the sanitary or phytosanitary characteristics of both the countries of origin and the country of destination. In order to assess such characteristics of a region, it is important to consider factors such as the level of prevalence of specific diseases or pests, the existence of eradication or control programmes, and appropriate criteria or guidelines which may be developed by the relevant international organizations.26
The Panel however concluded that Mexico failed to demonstrate that Costa Rica did not take into account regional factors to assess the sanitary or phytosanitary characteristics of a region and therefore its measures are not inconsistent with Article 6.1 of the SPS Agreement.27
f. Whether Costa Rica has acted inconsistently with its obligations under GATT 1994?
Mexico alleged violation of Article XI:128 of the GATT 1994 which prohibits quantitative restrictions. Apart from this, Mexico also alleged violation of the National Treatment principle under Article III:4 of the GATT basis that the Resolutions accorded a less favourable treatment to imported avocados than that accorded to the like product of national origin.29 Costa Rica however asserted that the said Resolutions don't constitute a violation under the provisions of GATT 1994 and even if they do, the same will fall under the exceptions covered by Article XX(b)30 of GATT 1994, as the measures are necessary to protect human, animal or plant life or health and do not unjustifiably discriminate or constitute a disguised restriction on international trade.31
The Panel noted that since it has already found the measures imposed by Costa Rica to be inconsistent with the provisions of the SPS Agreement, it is not necessary for it to now make any findings under the GATT 1994 to resolve the dispute.32
Further, the Panel held that Costa Rica acted inconsistently with Article 1.1 and 2.133 of the SPS
Agreement, on the basis of its analysis above, as the same relate to general conformity with the SPS Agreement.34
The Panel Report shows that the WTO is continuing its trend of treating SPS Agreement as a shield rather than a sword. This simply means that the measures under SPS Agreement must be defended on an affirmative basis and that they are not simply an elaboration of Article XX(b) of GATT, wherein the burden of proof to show that the measures do not fall under any of the exceptions is on the respondent.35 Indeed, India too has experienced a similar outcome in the case of India — Agricultural Products, wherein its SPS measures were struck down under many of the same provisions of the SPS Agreement. Countries applying SPS measures in the future hence must be mindful of the high threshold that needs to be met with respect to the requirements of evidence and scientific analysis.
With respect to next steps, while both Mexico and Costa Rica are party to the Multi-Party Arbitral Provisional Appeal Procedure36, Costa Rica decided not to appeal the report. Costa Rica's decision not to appeal provides glimmers of hope for the continuity of an enforceable multilateral dispute settlement system, however the degree of compliance remains to be seen.
KEY TRADE REMEDIAL UPDATES
|DGTR (Directorate General of Trade Remedies)|
|Anti-dumping Duty (AD) Sunset Review (SSR)||Anti-dumping Duty (AD) Sunset Review (SSR)||Anti-dumping Duty (AD) Sunset Review (SSR)||Initiation of Circumvention Inquiry of the AD & CVD orders|
|USA (Department of Commerce/International Tarde Commission)|
|Glycine||China||AD SSR||Final determination of likelihood of continuation or recurrence of dumping|
|Preserved Mushrooms||France, Netherlands, Poland & Spain||AD||Initiation of AD investigation|
|White Grape Juice Concentrate||Argentina||AD & Countervailing Duty (CVD)||Initiation of AD & CVD investigation|
|Seamless Refined Copper Pipe and Tube||China & Mexico||Injury Determination||Determination of likelihood of continuation or recurrence of material injury|
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1 WTO Panel Report on Costa Rica – Measures Concerning the Importation of Fresh Avocados from Mexico, WT/DS524/R, available at: https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds524_e.h tm
2 SPS Agreement, available at: https://www.wto.org/english/tratop_e/sps_e/spsagr_e.htm
3 Paragraph 1(a), Annex A to the SPS Agreement; para 7.91, Panel Report, available at: https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds524_e.h tm
4 Article 1.1, SPS Agreement
5 para 7.104, Panel Report
6 para 7.132 & 7.216, Panel Report
7 Article 5.1, SPS Agreement
8 Article 5.2, SPS Agreement
9 Article 5.3, SPS Agreement
10 Article 2.2, SPS Agreement
11 para 7.391, Panel Report
12 para 7.395, Panel Report
13 para 7.1687 (q), Panel Report
14 para 7.1687 (r), Panel Report
15 para 7.1734, Panel Report
16 Article 5.6, SPS Agreement
17 para 7.1738, Panel Report
18 para 7.1792, Panel Report
19 para 7.1892, Panel Report
20 para 7.1938, Panel Report
21 para 7.1940, Panel Report
22 Article 5.5, SPS Agreement
23 Article 2.3, SPS Agreement
24 paras 7.2178 & 7.2179, Panel Report
25 Article 6.1, SPS Agreement
26 para 7.2180, Panel Report
27 para 7.2258, Panel Report
28 Article XI:1, GATT 1994, available at: https://www.wto.org/english/docs_e/legal_e/gatt47_01_e.htm#arti cleXI
29 paras 7.2310 & 7.2311, Panel Report
30 Article XX(b), GATT 1994
31 para 7.2315, Panel Report
32 para 7.2319, Panel Report
33 Article 2.1, SPS Agreement
34 para 7.2304, Panel Report
35 The Rules that Swallowed the Exceptions: The WTO SPS Agreement and its relationship to GATT Articles XX And XXI, Hal S. Shapiro, Arizona Journal of International and Comparative Law, Vol. 24, No. 1 2007, available at: http://arizonajournal.org/wp-content/uploads/2015/11/Shapiro-article.pdf
36 WTO Understanding on rules and procedures governing the settlement of disputes, available at: https://www.wto.org/english/tratop_e/dispu_e/dsu_e.htm#25
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