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IX. INTERIM REVIEW
9.1 On19December 1997, theUnited States andJapan requested thePanel toreview, inaccordance
withArticle 15.2oftheDSU, precise aspects oftheinterim report thathadbeenissued totheparties
on5December 1997. Neither theUnited States norJapan requested thatafurther meeting ofthePanel
withtheparties beheld. Inaletter dated 12January 1998, theUnited States submitted aresponse
tocertain ofJapan'scomments ontheinterim report. Inaletterdated 21January 1998, Japan responded
tosome oftheUScomments onitscomments.
9.2 Following comments byJapan onthedescriptive part,wemodified paras. 2.5,2.9,2.14, 2.226,
5.412, 6.309, 6.334, 6.441 and6.466.
9.3 TheUnited States expresses itsstrong disagreement withthePanel'slegal findings and
conclusions. TheUnited States reiterates thattheJapanese Government undermined thebenefits the
United States legitimately expected would flowfromaseries oftariff concessions itbargained forin
good faithoveraperiod ofmore than30years. Japan isfurther charged withhaving frustrated the
intent oftheGATT negotiation process byenacting aseries ofmeasures thatallegedly havecreated
aninterlocking webofprotection thathasbeendifficult todetect andunderstand evenafterthreeyears
ofintensive investigation andresearch. Inlightofthecomprehensive nature ofitsobjections, theUnited
States deems itimpossible tocomment onaparagraph-by-paragraph basis andrather elaborates on
some ofthemajor deficiencies that,initsview, pervade theinterim report.
9.4 First, theUnited States criticizes thatthePanel failed toacknowledge thecombined operation
andeffects oftheliberalization countermeasures which, intheUSview, directly affected thefindings
onArticle XXIII:1(b) andArticle III.TheUnited States alleges thatasaresult ofthecombination
ofmeasures, rather thanofanysingle measure, Japan created amarket structure andmaintained it
untiltoday thatkeeps foreign photographic materials outoftheJapanese market. Inourview, this
criticism isunfounded, asweconsidered theevidence andarguments oftheparties oncombined effects
ofthemeasures inparas. 10.350-10.367 ofthefindings.
9.5 Second, theUnited States argues thattheinterim report construes the"detailed justification"
requirement asimposing aheightened evidentiary standard innon-violation cases, while fortheUnited
States itisrather apleading requirement, i.e.,ascreen todismiss inadequately articulated non-violation
claims fromapanel'sconsideration. TheUnited States emphasizes thatthefactthatArticle XXIII:1(b)
provides foranexceptional remedy doesnotjustify requiring aquantum ofproof thatishigher than
theoneapplied under other GATT articles. Werecall thatinpara. 10.84 westated that"atthisstage
oftheproceeding, theissue iswhether suchameasure hascaused nullification orimpairment, i.e.,
whether ithasmade more thanademinimis contribution tonullification orimpairment." Inourview,
wedidnotapply the"detailed justification" requirement asaheightened evidentiary standard. In
response totheUScomments wemodified, interalia,thelanguage ofparas. 10.50, 10.60, 10.61,
10.80, 10.111, 10.126, 10.140, 10.153, 10.166, 10.184, 10.198, 10.219, 10.232, 10.258, 10.271,
10.286, 10.303, 10.308, 10.309, 10.317, 10.319, 10.331, 10.338, 10.346, 10.357 and10.363 inorder
tomake thisclearer.
9.6 Third, intheUSview, many ofthePanel'sfactual findings ignore evidence thattheUnited
States deems substantial. Inparticular, theUnited States denies thatJapan'sinterference inthe
distribution system wasforthepurpose ofmodernization. TheUnited States claims tohaveprovided
thePanel withasubstantial quantity ofevidence concerning protectionist intent, theeffects oftheunique
circumstances ofthegovernment-industry concerted adjustment system, andthepeculiarities ofthe
Japanese distribution system inthefilmsector. Wereject theUScharacterization ofourfindings on
thisissue asignoring substantial evidence.WT/DS44/R
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9.7 Fourth, theUnited States submits that,while itwasaware oftheLarge Stores Law, Premiums
LawandAntimonopoly LawatthetimeoftheTokyo andUruguay Rounds, itcould notanddidnot
know theextent towhich Japan'sclosed distribution system forphotographic materials wastheresult
ofthecombined effect ofthedistribution measures, orthatthedistribution countermeasures, theLarge
StoresLaw,andthepromotioncountermeasuresworkedtogethertoimpedemarketaccess,andtoprevent
price andother types ofcompetition inthemarket. TheUnited States emphasizes thatnotice ofthe
existence oftheselawsandtheiressential provisions wasnottantamount tonotice oftheactual operation
ofthemeasures. While weexplicitly accepted thataMember might notappreciate theeffect ofthe
application ofameasure atthetimeofitspublication, inourview, theUnited States ingeneral failed
todemonstrate thatitshould notbecharged withsuchknowledge inthiscase.
9.8 Fifth, theUnited States argues thatthePanel'sruling thatacomplaining party ischarged with
knowledge oftheresponding government 'smeasures asofthedateoftheirpublication suggests arule
ofcaveat emptor which would operate asadeterrent toconcluding tariff negotiations inthefuture.
IntheUSview, thiswould imply forcountries 'negotiators theneedtoundertake asector-by-sector
investigationofgreatmagnitudebeforeacceptinganyconcession,lesttheybechargedwith"anticipation"
ofnon-transparent administrative measures thatcould potentially impair thebenefits ofthatconcession.
TheUnited States believes thatnocountry iscapable ofsuchamassive effort inthecourse of
comprehensive multilateral negotiations because countries would faceserious difficulties detecting the
many measures thatmaynullify orimpair tariff concessions forthehundreds ofproducts under
consideration. Wereject theUScharacterization ofthetestwedeveloped inthisarea. Itisaccurate
thatweoperated onthepresumption thatingeneral aMember 'sknowledge ofameasure shallbe
assumed asofthedateofitspublication. Additionally, however, wealsoexplicitly accepted thatthis
presumption could beovercome ifaMember demonstrates thatforspecific reasons itcould nothave
reasonably anticipated ameasure. Incontrast, thelatitude toshow otherwise intheapproach suggested
bytheUnited States could, inourview, leadtoconclusions thatmight undermine thesecurity and
predictability ofthemultilateral trading system.
9.9 Finally, theUnited States agrees withthePanel thatameasure neednotprovide forbenefits
orimpose legally binding obligations orthesubstantive equivalent forpurposes ofnon-violation
complaints,andthatthe"incentives/disincentivestest"developedbythepanelonJapan-Semiconductors
isnottheexclusive testorouter limitofwhat mayconstitute ameasure under Article XXIII:1(b).
TheUnited States further requests thePanel tomake clearthatthebinding nature ofameasure isa
relevant -albeit notdispositive -factor inananalysis ofwhether something isameasure. Weagree
withtheUnited States thatthetestisnotexclusive andwhere appropriate wehaveclarified ourposition
inthegeneral partofthefindings andinourexamination ofspecific "measures" atissue.
9.10 Japan emphasizes thatitscomments wereingeneral designed tofurther improve thefactual
findings andthelegalreasoning insupport oftheconclusions reached bythePanel initsinterim report.
9.11 Most ofJapan'sspecific comments concern thePanel'sdiscussion ofwhich items complained
against aretobeconsidered tobemeasures within themeaning ofArticle XXIII:1(b). Inparticular,
Japan requests thePanel toexplain what testsother thanthe"incentive/disincentive test"suggested
bythepanel onJapan -Semiconductors arerelevant inthisrespect. InJapan'sview, there isno
substantial difference between thetestsdeveloped bythepanel onJapan -Semiconductors andthepanel
onJapan -Agricultural Products because theformer isthemereelaboration ofthelatter. Japan further
proposes clarification thatthePanel'stest(s) focus onthealleged measures themselves andhowthese
measures operate, notonthealleged consequences ofthemeasures, i.e.,actions taken byprivate parties
ortradeflows. Specifically, inJapan'sview, theJapan -Semiconductors casedidnotdealwithprivate
actions thatwere deemed tobegovernmental, butwithmeasures which were actually taken bythe
Japanese Government. Weadjusted paras. 10.49 and10.50 tomake ourreading ofthepanel reports
onJapan -Semiconductors andJapan -Agricultural Products ontheissue ofwhat constitutes a
governmental measure clearer.WT/DS44/R
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9.12 Japan deems itinappropriate tocharacterize thegovernment-business relationship inJapan as
oneofahighdegree ofcooperation andcollaboration. Inparticular, itobjects tothePanel using such
a"simplification" inthecontext ofagenerally applicable testtodetermine whatconstitutes ameasure.
Rather, Japan proposes thatthePanel discuss suchspecific circumstances onlywhen thegeneral test
isapplied toindividual cases. Wemodified thereasoning inpara. 10.49 without changing ourbasic
approach ofdiscussing thegovernment-business relationship inboththegeneral partofthefindings
aswellasinthecontext ofourexamination ofthespecific "measures" indispute.
9.13 Furthermore, Japan proposes clarification thatitis"continuing administrative guidance" issued
toperpetuate theunderlying policies which isactionable asameasure, notarevoked government action
persewhich ceases toexistandthuscannot beineffect. Weclarified para. 10.59 accordingly.
9.14 Inprinciple, Japan favours thePanel'sapproach ofmaking affirmative assumptions withrespect
tosome elements andthenproceeding toconsider other elements inorder tocomplete theexamination
ofalltheother elements thatariseinthecontext ofanon-violation claim. However, inJapan'sview,
thisapproach does notrequire thePanel tomake anyfindings onthose elements which involve
insufficient orconflicting evidence. Insuchcases, Japan argues, thedoubt should goagainst theparty
thatbears theburden ofproof. Consequently, thePanel iscalled ontolimit itself tostating its
assumption without making afinding onwhether anitemconstitutes ameasure within theambit of
Article XXIII:1(b). Inresponse, wemodified para. 10.60 toread"wewilltakeanexpansive view
ofwhatconstitutes ameasure ...". However, where weconsidered theevidence tobesufficient, we
havemadefindingsastowhichofthespecificmeasuresindisputeconstitutemeasureswithinthemeaning
ofArticle XXIII:1(b), rather thanlimiting ourselves tostating assumptions assuggested byJapan.
9.15 Moreover, Japan requests thePanel tomodify itsfinding thatreasonable expectations may
inprinciple continue toexistinrespect oftariffconcessions insuccessive rounds ofArticle XXVIIIbis
negotiations. Japan reiterates itsposition thatonlybenefits accruing fromtheUruguay Round tariff
concessions arerelevant inthiscasebecause thelatesttariffnegotiation should bedeemed tohavecreated
anewexpectation concerning thebalance oftariff concessions, andtohavereplaced anyreasonable
expectation thatarose under aprior tariff negotiation. InJapan'sview, thepanel onEEC-Oilseeds
focused ontheissue ofwhether ornotanewbalance ofconcessions (i.e.aglobal reassessment of
thevalue ofalltheEEC'sconcessions) wascreated, andnotontheissue oftheprocedures and
formalities under which thetariff negotiation wascarried out. Weadded language topara. 10.68,
reflecting theEEC-Oilseeds panel'sfinding that"thebalance ofconcessions negotiated in1962 ...
wasnotaltered" inthatcase. However, thisargument isnotdeterminative forourfinding inpara.
10.70. Thus, wecontinue toconsider thatreasonable expectations mayco-exist inrespect oftariff
concessions insuccessive rounds ofArticle XXVIIIbis negotiations.
9.16 Further Japanese comments refertotheissue ofthecausation ofnullification orimpairment
ofbenefits accruing from tariff concessions byameasure within themeaning ofArticle XXIII:1(b).
Japan points outthatitdoesnotadvocate andhasnotadvocated a"butfor"standard ofcausation.
Rather, inJapan'sview, aclearlinkage between themeasure atissue andthealleged nullification or
impairment must beproven witha"detailed justification" inorder toestablish thenecessary causal
connection. Inresponse toJapan'scomment, weadjusted para. 10.84. Finally, Japan advocates a
higher standard ofcausation thanthePanel'sstandard ofa"more thanademinimis contribution" which,
inJapan'sview, understates therequisite degree ofcausal connection under Article XXIII:1(b). We
disagree withJapan'sposition and,accordingly, havenotaltered thetextonthispoint.
9.17 Asregards thedistribution measures atissue, Japan urges thePanel tomake clearthatboth
thecharacterization ofthe1967 Cabinet Decision, theSixth andSeventh Interim Reports andthe
1969 Survey asmeasures within themeaning ofArticle XXIII:1(b), anditsstatement thatthealleged
measures arestillineffect, areassumptions, notfindings. Wecarefully reviewed ourreasoning andWT/DS44/R
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havemade appropriate modifications tomake clearer where wemade findings andwhere weproceeded
onassumptions.
9.18 Japan emphasizes thatthe1967 Cabinet Decision waspublished inKampo (i.e.theJapanese
Government 'sOfficial Gazette) on21June1967, prior totheconclusion oftheKennedy Round on
30June1967. Accordingly, inJapan'sview, theUnited States should havereasonably anticipated
the1967 Cabinet Decision prior totheKennedy Round. TheUnited States responds thatitdidnot
havetheopportunity orforesight tore-open thenegotiations onindividual products ninedaysprior
totheconclusion oftheKennedy Round onthebasis ofthepublication ofthismeasure inJapanese.
Accordingly, theUnited States requests thePanel tomaintain itsfinding thattheUnited States could
nothavereasonably anticipated the1967 Cabinet Decision because oftheproximity intimeofthat
measure 'spublication totheconclusion oftheround ofmultilateral tariff negotiations. Inview of
theparties 'comments andinapplying thetestdeveloped inparas. 10.79-10.81, wemodified paras.
10.103, 10.106, 10.247 and10.251.
9.19 Japan disagrees withthePanel'sfindings concerning thegovernmental attributability ofthe
1970Guidelines andthe1971Basic Plan. Inthealternative, Japan contends thatnon-binding suggestions
could haveasimilar effect atbest-butnotthesame effect -aslegally binding measures. Wemaintain
ourfindings thatthetwoabove-mentioned items aretobeconsidered measures within themeaning
ofArticle XXIII:1(b). However, weaccepted Japan'salternative proposal andclarified thatnon-binding
suggestions could haveasimilar effect tolegally binding measures. Consequently, wemodified paras.
10.49, 10.161 and10.180.
9.20 Further, Japan makes detailed proposals onhowtomake thePanel'sreasoning withregard
tothealleged "continuing effect" ofcertain "measures" (i.e., the1967 Cabinet Decision, theSixth
andSeventh Interim Reports, the1969 Survey, the1970 Guidelines, the1971 Basic Planandthe
1975 Manual) more uniform. Welargely accepted these suggestions andharmonized thelanguage
ofparas. 10.123, 10.137, 10.150, 10.163, 10.181 and10.195.
9.21 Astotheimpact oftheLarge Stores Lawonthecompetitive relationship between domestic
andimported products, itisJapan'sposition thatbenefits oftariffconcessions accruing under Article II
consistofthelegitimateexpectationthatmarketaccessopportunities,orimprovedcompetitiveconditions,
forimports created bythetariffconcessions willnotbefrustrated asaresult ofanygovernment measure.
InJapan'sview, however, thebenefits under Article IIdonotinclude expectations concerning market
evolution, because changes inthemarketplace situation canresult fromvarious factors suchasmarket
forces andprivate practices, regardless oftheexistence ofalleged governmental measures. Wemodified
para. 10.232 inorder toclarify ourreasoning onthispoint.
9.22 Withrespect totheestablishment oftheFairTrade Promotion Council in1982, Japan continues
todenythatthePromotion Council constitutes afairtradecouncil established under afaircompetition
codewiththeapproval oftheJFTC pursuant toArticle 10ofthePremiums Law. According toJapan,
theFairTrade Promotion Council wasestablished byprivate businesses having noconnection with
Japanese governmental entities. Weemphasize thatourfinding wasnotbased onwhether thecreation
ofthePromotion Council wasapproved bytheJFTC, butonourassessment thatincertain cases the
relationship between thePromotion Council andtheJFTC wassufficiently closeforafinding thatactions
ofthePromotion Council aretobedeemed attributable totheJapanese Government.
9.23 Inregardofthe1982Self-RegulatingMeasuresonFairnessinTradeandthe1984Self-Regulating
Standards, Japan reiterates itsargument thatthese "measures" havenotbeenapproved bytheJFTC
asfaircompetition codes. InJapan'sview, especially the"measures" relating todispatched employees
lieoutside thescope ofregulations onpremiums andmisleading representations. Japan further argues
thattheinteraction between theJFTC andtheindustry during theformation ofthe1982Self-Regulating
Measures wasnotintensive. Consequently, Japan contends thatthese "measures" aretootangentiallyWT/DS44/R
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connected totheJFTC toattribute them totheJapanese Government within themeaning of
Article XXIII:1(b). Moreover, evenassuming thatasufficient connection totheJapanese Government
isproven, Japan points outthatthe1982 Self-Regulating Measures arenotviewed byprivate parties
aslegally binding. Totheextent thatprivate parties arenotfreetodemand thedispatch ofemployees
fromsuppliers, Japan submits thatthisisadirect result oftheapplication oftheAntimonopoly Law
itself, andnotbecause the1982Self-Regulating Measures could beassimilated toagovernment measure.
Inrespectofthe1984Self-RegulatingStandards,theJFTCmerelyrespondedtotheFairTradePromotion
Council 'sinquiry astothelawfulness oftheseStandards under theAntimonopoly andPremiums Laws.
Thus, inJapan'sview, the1984 Self-Regulating Standards arenotattributable totheJapanese
Government because theJFTC 'srelation tothese Standards istooremote. Wecarefully reviewed
ourfindings onthisissueinlightofthearguments raised, butwerenotpersuaded ofaneedtomodify
them inlinewithJapan'sposition.
9.24 Japan generally objects tothePanel'sconclusion thatfaircompetition codes andindividual
activities offairtradecouncils constitute governmental measures within theambit ofArticle XXIII:1(b).
Inparticular, Japan points outthattheapproval ofafaircompetition codebytheJFTC doesnotimply
anydelegation ofquasi-governmental authority toaprivate bodysuchasafairtradecouncil. Moreover,
according toJapan, JFTC approval doesnotgrant immunity from thesubstantive provisions ofthe
Antimonopoly Law, and,ifindividual actions falloutside thecode, theyarefullyactionable under
thatLaw. Japan alsoreiterates itsargument thatafairtrade council doesnothaveanyauthority over
non-members whoarenotobligated tojointhecouncil. InJapan'sview, agovernment should not
beheldresponsible foranyaction ofprivate associations merely because itgives approval incertain
aspects. Having reviewed ouranalysis ofthisissue, weseenoreason tomodify ourreasoning on
these points.
9.25 Inaddition, Japan requests thePanel tomake anexplicit finding thatthe1987 Retailers Fair
Competition Code onlycovers cameras andrelated products butdoesnotapply tophotographic film
andpaper. Japan notes that-regardless ofwhether ornotafaircompetition codeistobeassimilated
toagovernment measure -theJFTC hastheauthority tointerpret thescope ofapproval under the
Premiums Lawandhasnever allowed andhasnointention toallow theapplication oftheRetailers
Code tofilmorpaper. Moreover, Japan submits thatanindustry member 'sstatement quoted inZenren
Tsuho ("...Iwillendeavour tomake bothphotosensitive materials anddevelopment andprinting fall
under thecode") proves thattheRetailers Code didnotapply tophotographic filmorpaper. However,
weconsidered thattheevidence before uswasnotconclusive anddecided tomerely assume thatthe
Retailers Code might alsoapply tophotographic filmandpaper.
9.26 Inourexamination oftheclaims raised under Article III,wereasoned thattheterms laws,
regulations andrequirements inthatarticle should beinterpreted asencompassing asimilarly broad
range ofgovernment action, andaction byprivate parties thatmaybeassimilated togovernment action,
asthose actions covered bytheterm measure inArticle XXIII:1(b). InJapan'sview, theterm
requirement mustmean something different frommeasure ,theformer being probably narrower than
thelatter. ThePanel isrequested toexplain thedifference between these twoterms inmore detail,
especially withrespect tothe1967 Cabinet Decision, the1971 Basic Planandthe1970 Guidelines,
andtolimititself tomerely assuming thatthese items arerequirements inthemeaning ofArticle III.
Inresponse toJapan'scomment, wemodified paras. 10.376 and10.377.
9.27 Finally, Japan suggests thatthediscussion ofwhether the"measures" indispute accord less
favourable treatment toimported products incontravention ofArticle IIIbeelaborated. InJapan's
view, thiscould bedone byrepeating, orreferring to,thePanel'sexamination ofwhether vertical
integration andsingle-brand distribution ingeneral, andthe1970Guidelines andthe1971Basic Plan
inparticular, havecaused anupsetting ofthecompetitive relationship between domestic andforeign
products inthemeaning ofArticle XXIII:1(b). InlinewithJapan'scomment, wedecided toexpand
ourreasoning inpara.10.381, inparticular withrespect tothetwospecific measures mentioned above.WT/DS44/R
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9.28 Inresponse toothercomments byJapan, wecorrected factual inadequacies, especially inparas.
10.103, 10.104, 10.106, 10.128, 10.146, 10.160, 10.207, 10.208, 10.211, 10.247, 10.249 and10.296.
Inaddition, where wefound merit inspecific suggestions made byJapan, weadjusted paras. 10.87,
10.148, 10.194, 10.205. 10.298, 10.299, 10.302, 10.316, 10.345, 10.353.