Summary of key findings
Section 907(a)(1)(A) of the United States Federal Food, Drug, and Cosmetic Act (“FFDCA”) prohibits the production and sale in the United States of cigarettes with characterizing flavours (such as clove, strawberry, grape, orange, cinnamon, pineapple, vanilla, coconut, liquorice, cocoa, chocolate, cherry, or coffee), but does not prohibit regular or menthol cigarettes.
The Panel in this dispute found Section 907(a)(1)(A) to be inconsistent with the national treatment obligation of Article 2.1 of the TBT Agreement because it prohibits imported clove cigarettes from Indonesia, but does not prohibit “like” domestic menthol cigarettes. The Panel also found that by allowing an interval of less than six months between the publication and the entry into force of Section 907(a)(1)(A), the United States acted inconsistently with Article 12.2 of the TBT Agreement. On appeal the United States claimed that the Panel erred in finding that clove and menthol cigarettes are like products and in finding that Section 907(a)(1)(A) accords less favourable treatment to imported clove cigarettes than that accorded to like domestic products within the meaning of Article 2.1 of the TBT Agreement. The United States also claimed that the Panel erred in finding that the United States acted inconsistently with Article 2.12 of the TBT Agreement.
The Appellate Body ultimately upheld the Panel’s findings that Section 907(a)(1)(A) is inconsistent with Article 2.1 of the TBT Agreement and that the United States acted inconsistently with Article 2.12 of the TBT Agreement. The Appellate Body, however, disagreed with the Panel’s interpretation of “like products” and “treatment no less favourable” in Article 2.1 of the TBT Agreement.
The Appellate Body disagreed with the Panel that “like products” in Article 2.1 of the TBT Agreement should be interpreted based on the regulatory purpose of the technical regulation at issue. The Appellate Body considered that the determination of whether products are “like” within the meaning of Article 2.1 of the TBT Agreement is a determination about the competitive relationship between the products, based on an analysis of the traditional “likeness” criteria, namely, physical characteristics, end uses, consumer tastes and habits, and tariff classification. The Appellate Body considered that the regulatory concerns underlying a measure, such as the health risks associated with a product, may be relevant to the determination of “likeness” to the extent they have an impact on the competitive relationship between the products. Based on this interpretation of the concept of “like products”, the Appellate Body agreed with the Panel that clove cigarettes and menthol cigarettes are “like products” within the meaning of Article 2.1 of the TBT Agreement.
The Appellate Body interpreted the obligation to accord “treatment no less favourable” in Article 2.1 of the TBT Agreement as not prohibiting detrimental impact on imports that stems exclusively from a legitimate regulatory distinction. In determining whether a measure’s detrimental impact on imports constitutes less favourable treatment a panel must carefully scrutinize the particular circumstances of the case, that is, the design, architecture, revealing structure, operation, and application of the technical regulation at issue, and, in particular, whether that technical regulation is even handed. Based on this interpretation of “treatment no less favourable”, the Appellate Body found that the design, architecture, revealing structure, operation, and application of Section 907(a)(1)(A) strongly suggest that the detrimental impact on competitive opportunities for clove cigarettes reflects discrimination against the group of like products imported from Indonesia.
Finally the Appellate Body upheld the Panel’s finding that by allowing only three months between the publication and the entry into force of Section 907(a)(1)(A), the United States acted inconsistently with Article 2.12 of the TBT Agreement, which, when interpreted in the context of paragraph 5.2 of the Doha Ministerial Decision on Implementation Related Issues and Concerns, requires a minimum of six months between the publication and the entry into force of a technical regulation. In reaching this conclusion, the Appellate Body agreed with the Panel that paragraph 5.2 of the Doha Ministerial Decision constitutes a “subsequent agreement between the parties” within the meaning of Article 31(3)(a) of the Vienna Convention on the Law of Treaties.
Electronic cigarettes
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