DISPUTE SETTLEMENT

DS: Indonesia — Measures Concerning the Importation of Chicken Meat and Chicken Products

This summary has been prepared by the Secretariat under its own responsibility. The summary is for general information only and is not intended to affect the rights and obligations of Members.

  

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Current status

 

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Key facts

 

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Summary of the dispute to date

The summary below was up-to-date at

Consultations

Complaint by Brazil.

On 16 October 2014, Brazil requested consultations with Indonesia concerning certain measures imposed by Indonesia on the importation of meat from fowls of the species Gallus domesticus and products from fowls of the species Gallus domesticus.

Brazil claims that the measures are inconsistent with:

  • Articles 2.2, 2.3, 3.1, 5, 5.1, 5.2, 5.5, 5.6, 8 and Annex C of the SPS Agreement;
     
  • Articles 2.1, 2.2, 2.4, 5.1 and 5.2 of the TBT Agreement;
     
  • Articles 4.2 and 14 of the Agreement on Agriculture;
     
  • Articles 1.3, 3.2, 3.3 of the Agreement on Importing Licensing Procedures;
     
  • Articles 2.1 and 2.15 of the Agreement on Preshipment Inspection;
     
  • Articles III:4, X:1, X:3 and XI:1 of the GATT 1994.

On 31 October 2014, Australia, New Zealand, Chinese Taipei and the United States requested to join the consultations. On 3 November 2014, the European Union requested to join the consultations. Subsequently, Indonesia informed the DSB that it had accepted the requests of Australia, the European Union, New Zealand, Chinese Taipei and the United States to join the consultations.

On 15 October 2015, Brazil requested the establishment of a panel. At its meeting on 28 October 2015, the DSB deferred the establishment of a panel. At the next meeting of the DSB on 25 November 2015, Indonesia objected to the establishment of the panel because a corrigendum to the panel request had been circulated at the request of Brazil. Given Indonesia's objection, Brazil requested that the establishment of the panel be deferred to the next meeting. In the absence of Brazil's objection, the DSB deferred the establishment of a panel.

 

Panel and Appellate Body proceedings

At its meeting on 3 December 2015, the DSB established a panel. Argentina, Australia, Canada, Chile, China, the European Union, India, Japan, Korea, New Zealand, Norway, Oman, Paraguay, Qatar, the Russian Federation, Thailand, Chinese Taipei, Viet Nam, and the United States have reserved their third-party rights.

On 22 February 2016, Brazil requested the Director-General to compose the panel. On 3 March 2016, the Director-General composed the panel.

On 31 August 2016, the Chairperson of the panel informed the DSB that the panel expected to issue its final report to the parties by early April 2017, in accordance with the timetable adopted after consultation with the parties. On 31 March 2017, the Chair of the panel informed the DSB that, due to the complexity of the dispute, the panel expected to issue its final report to the parties by early May 2017, in accordance with the revised timetable adopted after consultation with the parties.

On 17 October 2017, the panel report was circulated to Members.

Background

This dispute concerns imports of chicken meat and chicken products into Indonesia, which have effectively dropped to almost zero since 2006 (chicken cuts), and 2009 (whole chicken). Brazil made claims against two categories of measures:

  1. an alleged (unwritten) general prohibition resulting from the combined operation of several different trade-restrictive measures (constitutive elements); and
     
  2. six individual trade-restrictive measures pertaining to the following:
    1. the non-inclusion of certain chicken products in the list of products that may be imported;
       
    2. the limitation of imports of chicken meat and chicken products to certain intended uses;
       
    3. Indonesia's alleged undue delay in the approval of veterinary health certificates for chicken products from Brazil; 
       
    4. certain aspects of Indonesia's import licensing regime;
       
    5. surveillance and implementation of halal slaughtering and labelling requirements for imported chicken meat and chicken products established by different Indonesian regulations; and
       
    6. restrictions on the transportation of imported products by requiring direct transportation from the country of origin to the entry points in Indonesia.

Four of the six individual trade-restrictive measures (from (a) to (d) above) were also constitutive elements of the alleged (unwritten) general prohibition.

The two main legal instruments underlying the measures at issue were revoked and replaced twice during the course of the panel proceedings. Brazil requested the Panel to examine the measures as identified in its Panel request and as enacted through the second and third sets of legal instruments. Indonesia claimed that through the third set of legal instruments three of the measures have expired. The Panel reviewed the measures as described in Brazil's first written submission (second set of legal instruments) and also considered the third set of legal instruments, both to (1) assess the issue of expiry, and (2) review the new provisions under Brazil's claims, jurisdiction permitting. One of the panelists disagreed with this approach. That panelist's separate opinion is included in the Panel report.

Panel's findings

Brazil developed claims pursuant to Articles III:4 and XI of the GATT 1994, Article 4.2 of the Agreement on Agriculture, Article 3.2 of the Agreement on Import Licensing Procedures, and Article 8 and Annex C(1)(a) of the SPS Agreement. Indonesia invoked defences under Article XX of the GATT 1994, relating to food safety and the enforcement of halal requirements and of consumer protection.

The Panel commenced with a review of the claims against each of the six individual trade restrictive measures and then examined those against the alleged (unwritten) general prohibition.

The Panel found that the non-inclusion of certain chicken products in the list of products that could be imported into Indonesia, qualified as a 'legal ban' and was inconsistent with Article XI of the GATT 1994. Furthermore, the Panel in weighing and balancing all factors of the “necessity test” under Article XX(d) of the GATT 1994 found that this measure was not justified under Article XX of the GATT 1994. The Panel also found that the measure did not cease to exist by virtue of the enactment of the third set of legal instruments and continues to apply in the same manner. The Panel applied judicial economy to Brazil's claim under Article 4.2 of the Agreement on Agriculture.

With respect to the limitation of imports of chicken meat and chicken products to certain intended uses, the Panel found that this measure operates as a restriction on imports within the meaning of Article XI of the GATT 1994 and is not justified under Article XX of the GATT 1994. Further, the Panel found that the measure had not ceased to exist with the enactment of the third set of legal instruments, as the allowed uses were still limited. In assessing the consistency of this measure, as enacted through the third set of legal instruments, the Panel commenced its analysis with Article III:4 of the GATT 1994, in light of the existence of an equivalent domestic measure. The Panel bifurcated its analysis in accordance with the two components of the measure as enacted through the third set of legal instruments, i.e. the requirement that chicken be sold in places with cold storage facilities and the provisions concerning the measure's enforcement. The Panel did not find the cold storage requirement to be inconsistent with Article III:4 of the GATT 1994. However, the Panel found that the enforcement provisions are inconsistent with Article III:4 of the GATT 1994 because these provisions resulted in a competitive disadvantage for imported products. The Panel also found that Indonesia did not make a prima facie case to justify the breach of Article III:4, and thus found the enforcement provisions to be not justified under Article XX(b) of the GATT 1994. Given its findings under Article III:4 of the GATT 1994, the Panel applied judicial economy and did not analyse the measure as enacted through the third set of legal instruments under Article XI of the GATT 1994 and Article 4.2 of the Agreement on Agriculture.

Brazil challenged certain aspects of Indonesia's import licensing regime as being inconsistent with Article XI:1 of the GATT 1994 and Article 4.2 of the Agreement on Agriculture on one hand and Article 3.2 of the Import Licensing Agreement, on the other hand.

  1. Application windows and the validity periods: The Panel found that the single measure consisting of the application windows and the validity periods, as enacted through the second set of legal instruments, was inconsistent with Article XI:1 of the GATT 1994 and not justified under Article XX(d) of the GATT 1994. In analysing the measure, as enacted through the third set of legal instruments, the Panel found that the application windows and the validity periods, as a single measure, had expired. However, in evaluating the new validity period, as enacted through the third set of legal instruments, the Panel found that Brazil had failed to make a prima facie case.
     
  2. Fixed licence terms: The Panel found that the fixed licence terms, in respect of the limitation on the ports of entry and the quantity of imported products, as enacted through the second set of legal instruments, were inconsistent with Article XI:1 of the GATT 1994 and not justified under Article XX(d) of the GATT 1994. In respect of this measure as enacted through the third set of legal instruments the Panel found that the fixed licence terms continued to apply in the same manner as in second set of legal instruments and therefore, its prior findings on Article XI and XX(d) of the GATT 1994, continued to be applicable in this respect.
     
  3. Discretionary import licensing: Lastly, with respect to Brazil's claim on discretionary import licensing, the Panel found that Brazil failed to make a prima facie case in relation to one of the alleged discretionary aspects of Indonesia's import licensing regime and also found that it lacked jurisdiction to analyse the other two allegedly discretionary aspects of Indonesia's import licensing regime.

The Panel exercised judicial economy and did not address the claims under Article 4.2 of the Agreement on Agriculture and Article 3.2 of the Import Licensing Agreement.

On Brazil's claim that there was an undue delay in the approval of the veterinary health certificate, the Panel noted that a Member may not delay the completion of an SPS approval procedure based on an outstanding non-SPS information from an applicant. The Panel found that since Indonesia was holding up the approval process due to non-submission of information relating to halal assurances (non SPS information) by Brazil, it had caused undue delay in the approval of the veterinary health certificate, inconsistent with Article 8 and Annex C(1)(a) of the SPS Agreement.

With respect to the measure concerning surveillance and implementation of halal slaughtering and labelling requirements for imported chicken meat and chicken products established by different Indonesian regulations, the Panel found that Brazil had failed to demonstrate less favourable treatment between fresh domestic chicken and frozen imported chicken, within the meaning of Article III:4 of the GATT 1994.

With respect to the transportation requirement, the Panel found that Brazil had failed to demonstrate how the measure constituted a violation of Article XI of the GATT 1994 or Article 4.2 of the Agreement on Agriculture. The Panel concluded that, read together with other provisions in the relevant Indonesian laws and regulations, the impugned provision allows transit (including transhipment).

The Panel found that Brazil had not demonstrated the existence of alleged (unwritten) general prohibition. Based on the evidence submitted by Brazil, the Panel concluded that Brazil had not sufficiently demonstrated that there is a link between a policy objective of self-sufficiency, as alleged by Brazil and the specific trade-restrictive measures taken by Indonesia or future implementation of such a policy objective through adoption of trade restrictive measures.

At its meeting on 22 November 2017, the DSB adopted the panel report.

 

Reasonable period of time

At the DSB meeting on 22 November 2017, Indonesia informed the DSB that it would need a reasonable period of time to bring the measures found to be inconsistent into conformity with its WTO obligations. On 15 December 2017, Indonesia informed the DSB that it required a reasonable period of time to comply with the DSB's recommendations and rulings. Indonesia indicated that the 45-day deadline established in Article 21.3(b) of the DSU to reach a mutually agreed reasonable period of time was due to expire on 6 January 2018 and that, in the light of the Ministerial Conference in Buenos Aires and the WTO year-end closure, it may be necessary for the parties to extend the deadline.

On 11 January 2018, Brazil informed the DSB that it accepted to extend the deadline established in Article 21.3(b) of the DSU until the regular DSB meeting to be held on [28] February 2018.

On 7 February 2018, Indonesia and Brazil informed the DSB that in order to allow sufficient time for them to discuss a mutually agreed period or for an arbitration to be completed, they had agreed on deadlines for arbitration under Article 21.3(c) of the DSU.

On 15 March 2018, Indonesia and Brazil informed the DSB that they had agreed that the reasonable period of time to implement the DSB's recommendations and rulings would be 8 months. Accordingly, the reasonable period of time is set to expire on 22 July 2018.

On 27 July 2018, Brazil and Indonesia informed the DSB of Agreed Procedures under Articles 21 and 22 of the DSU (sequencing agreement).

 

Compliance proceedings

On 13 June 2019, Brazil requested the establishment of a compliance panel. At its meeting on 24 June 2019, the DSB agreed to refer to the original panel, if possible, the matter raised by Brazil. Australia, Canada, China, the European Union, India, Japan, Korea, New Zealand, Norway, the Russian Federation, Saudi Arabia, and the United States reserved their third-party rights. Due to the unavailability of the Chair of the original panel, the compliance panel was composed with a panel member from the original panel as Chairperson and a new panel member.

On 11 February 2020, the Chair of the panel informed the DSB that in accordance with the panel's timetable adopted following consultation with the parties, the panel estimated that it would issue its final report to the parties in the third quarter of 2020. On 14 August 2020, the Chair of the panel informed the DSB that it had accepted a request from Brazil to suspend its work pursuant to Article 12.12 of the DSU until 12 September 2020, to which Indonesia had no objections. On 15 September 2020 and on 8 October 2020, the Chair of the p anel informed the DSB that it accepted additional requests from Brazil to further suspend its work until 8 October 2020 and 7 November 2020, respectively, to which Indonesia had no objections.

On 10 November 2020, the compliance panel report was circulated to Members.

Measures at issue

In June 2019, Brazil requested the Dispute Settlement Body (DSB) to establish a panel that would examine Indonesia's compliance with DSB's recommendation and rulings with respect to four measures concerning imports of poultry products from Brazil.

Key findings

The Panel found that Indonesia continued to unduly delay the SPS approval for Brazil's poultry products contrary to Article 8 and Annex C(1)(a) of the SPS Agreement. The panel established that the delay in reviewing Brazil's application could not be excused by any of the reasons raised by Indonesia, such as internal schedules and unavailability of experts. According to the Panel, a WTO Member has to ensure that the design of internal procedures and available resources guarantee processing applications for an SPS approval without undue delay.

The Panel rejected Brazil's claim that a requirement for chicken products to be listed in the relevant laws or regulations to be allowed for importation was, in its current version, a prohibition or a restriction on imports within the meaning of Article XI:1 of the GATT 1994. In the Panel's view, as long as the specific chicken products were on the list, there was no legal impediment to their importation that could be viewed as an import ban. The Panel was also of the view that Brazil did not show that the mere possibility to take products off the list could restrict imports of poultry. To the Panel, such possibility did not follow from the measure itself, but rather from the general competence of the relevant Indonesian executive to regulate. With respect to an earlier version of the measure, the Panel found that because one product was missing from the list and could not be imported, it amounted to an import prohibition within the meaning of Article XI:1 of the GATT 1994.

The Panel also held that some modalities of sales and distribution of poultry products in Indonesia were discriminatory. The majority of the Panel found that the measure subjected importers to sanctions for selling poultry products to buyers without cold storage facilities, where no such sanctions applied to domestic producers. To the majority of the Panel, this amounted to less favourable treatment inconsistent with Article III:4 of the GATT 1994. One member of the Panel disagreed with the majority, reasoning that the relevant sanctions applied only to the importer's own cold storage facilities. That Panel member agreed with Indonesia that the cold storage obligations further down the distribution chain are regulated by Indonesia's food safety provisions and that they apply equally to domestic and imported poultry products.

Finally, the Panel rejected Brazil's claim that importers could not respond to changing market conditions by modifying certain terms of an import licence, namely the quantity of products and the port of entry. According to the Panel, Brazil did not show, as it claimed, that the amendment procedure introduced by Indonesia did not give importers a genuine opportunity to modify licence terms. The Panel also found the amendment procedure not to be costly and burdensome enough to prevent or dissuade importers from applying for modifications to import licence terms.

On 17 December 2020, Indonesia notified the DSB of its decision to appeal to the Appellate Body certain issues of law and legal interpretations in the panel report. On 22 December 2020, Brazil notified the DSB of its decision to cross-appeal.

 

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