Can't Fly the Coop: Indonesia- Chicken (Recourse to Article 21.5)
On 10th November 2020, a Panel Report (Art. 21.5) was circulated in “Indonesia – Measures Concerning the Importation of Chicken Meat and Chicken Products” (DS484). Brazil had filed a complaint against Indonesia for non-compliance with the Panel Report issued previously under this dispute.
Indonesia had imposed measures on the importation of chicken meat and chicken products, which were found to be in violation of Article XI and Article III:4 of GATT 1994. Indonesia informed the Dispute Settlement Body that it would need a reasonable period of time to comply with its recommendations and rulings. The agreed reasonable period of time was 8 months. Indonesia did make certain changes in its import regime, however, Brazil filed a complaint of non-compliance, and sought recourse under Article 21.5 of the Dispute Settlement Understanding. In particular, the issues identified by the Panel and the manner in Indonesia attempted to remedy the issues is are as follows:
What is ‘undue delay’ under Annex C of the SPS Agreement?
Under the SPS Agreement, violation of Annex C entails a violation of Article 8. Annex C (1)(a) requires that procedures to check and ensure fulfilment of sanitary measures must be undertaken without undue delay.
Indonesia stated that the delay between the time when Brazil’s updated questionnaire response was received (3rd October 2018) and the committee was formed (17th June 2019) was caused was due to the fact that the offices were understaffed. However, the Panel noted that the existence of a small number of officials in the Desk Review Team, or the unavailability of the Expert Committee owing to busy schedules could not be used as reasons to delay approval of traded products.
It was expounded that it is the Members' responsibility to allocate resources to the institutional framework that they create, so that they are in a position to discharge the obligations they have assumed under the WTO Agreements. Indonesia has the responsibility to make sure that there is enough capacity to proceed without delay. Therefore, the relatively small number of desk review officials or busy work-schedules does not exonerate Indonesia. The very essence of the obligation in Annex C(1)(a) is timeliness; as a result, the gravamen of a violation of this obligation arises from the time lost. Members cannot pursue a ‘business-as-usual’ approach, but must prioritize to ensure that the approval procedure advances without further delays as these additional delays, even if one might consider ‘normal’ are unjustifiable in this context and are, therefore, undue.
Lack of resources coupled with issues of the design/set-up of the process itself was the reason that Brazil’s request could not processed. Such delay was said to be unjustifiable; therefore undue and violates Annex C (1) (a) and Article 8 of the SPS Agreement.
Does ‘uncertainty’ in legislation amount to a restriction in imports?
Brazil claimed that access to the Indonesian market is uncertain. This uncertainty related to the alleged possibility that Indonesia's authorities may add or remove products from the positive list as they please; thus, discouraging the importers from selling foreign chicken in Indonesia and in effect, limiting its importation.
However, this uncertainty did not stem from the design of the measure itself; rather from the undefined discretion the Indonesian authorities allegedly enjoyed in deciding on the addition or removal of products from the list. It was stated that the general competence of the Indonesian executive to regulate cannot be regarded as a restriction on importation as such uncertainty should be based on the measure’s design and not on the power of the legislators to modify or replace or remove a product. It was the Panel’s view that this is an impermissible interference with Members' legislative and executive prerogatives. Hence, the list in its current version, did not amount to a restriction under Article XI:1 of GATT.
Does an importer being bound by a specific ‘end-use’ of the imported product amount to a treatment less favourable?
Under the terms of the intended use requirement at issue, the importer would have to state a specific end-use, which was listed as covering ‘hotel, restaurant, catering, industry, market and/or virtually any place having cold storage facilities. The importer would have to be bound to that specific end-use once importation has occurred. However, it was stated that Indonesia maintained a whole list of all possible purpose uses which had a cold storage unit; thereby allowing an importer to freely choose from the list.
This was in violation of Article III:4 as
(1) imported and domestic frozen chicken meat were like products;
(2) the measure affected the sales and use of imported chicken meat in the Indonesian market; and
(3) the domestic sellers could sell chicken without respecting the cold storage requirement and did not face a comparable sanction. There was no sanction placed at all on the domestic sellers of chicken
On this basis, it was found that there is a less favourable treatment of imported frozen and chilled chicken meat and chicken products in respect of sanctions applying to a breach of the cold storage requirement on sales in the market.
But does it really?
One of the members of the Panel did not agree with the violation of Article III:4. In accordance with his opinion, maintenance of a cold chain is an important safety and health issue; too important to be reduced to a minor element of the intended use requirement. A break in such a chain could promote growth of pathogenic microorganisms or bacterial toxins leading to health hazards and cannot be considered as merely ‘deviating from the limitation on the allowed uses’.
Additionally, it was pointed out that the references to ‘hotels, catering or markets’ in the Indonesian legislation were simply enumerations of examples of places where cold storage is expected and would fit for distribution of chilled/frozen chicken. The cold storage requirement was not data or information that the importer submitted when applying for an Import Approval, consequently the proof of sanctions applied to imported products in breach of cold storage was not practical. Hence, when the requirement was merely descriptive in nature and did not even constitute as a licence condition for Import Approval, it could not be effectively concluded to be in violation of Article III:4 of GATT.
Please note: The current Panel Report has been appealed by Indonesia.