Document: WT/DS44/R Page 364 IX. INTERIM REVIEW 9.1 On 19December 1997, the UnitedStates and Japan requested the Panel toreview, in accordance with Article 15.2 of the DSU, precise aspects of the interim report that had been issued to the parties on 5 December 1997. Neither the United States nor Japan requested that a further meeting of the Panel with the parties be held. In a letter dated 12 January 1998, the United States submitted a response to certain of Japan's comments on the interim report. In a letter dated 21 January 1998, Japan responded to some of the US comments on its comments. 9.2 Followingcomments byJapan on the descriptivepart, we modified paras. 2.5, 2.9, 2.14, 2.226, 5.412, 6.309, 6.334, 6.441 and 6.466. 9.3 The United States expresses its strong disagreement with the Panel's legal findings and conclusions. The United States reiterates that the Japanese Government undermined the benefits the United States legitimately expected would flow from a series of tariff concessions it bargained for in good faith over a period of more than 30 years. Japan is further charged with having frustrated the
Date: 5 December 1997
Document codes: WT/DS44/R
Complainant: U.S.
Respondent: Japan
Third parties: EU, Mexico
Dispute stage: Panel
Agreements cited: Art. III:1, III:4, X:1, X:3, XXIII:1(b)  GATT 1994

IX. INTERIM REVIEW
9.1 On 19December 1997, the UnitedStates and Japan requested the Panel toreview, in accordance
with Article 15.2 of the DSU, precise aspects of the interim report that had been issued to the parties
on 5 December 1997. Neither the United States nor Japan requested that a further meeting of the Panel
with the parties be held. In a letter dated 12 January 1998, the United States submitted a response
to certain of Japan's comments on the interim report. In a letter dated 21 January 1998, Japan responded
to some of the US comments on its comments.
9.2 Followingcomments byJapan on the descriptivepart, we modified paras. 2.5, 2.9, 2.14, 2.226,
5.412, 6.309, 6.334, 6.441 and 6.466.
9.3 The United States expresses its strong disagreement with the Panel's legal findings and
conclusions. The United States reiterates that the Japanese Government undermined the benefits the
United States legitimately expected would flow from a series of tariff concessions it bargained for in
good faith over a period of more than 30 years. Japan is further charged with having frustrated the
intent of the GATT negotiation process by enacting a series of measures that allegedly have created
an interlocking web of protection that has been difficult to detect and understand even after three years
of intensive investigationand research. In lightof the comprehensive nature of itsobjections, the United
States deems it impossible to comment on a paragraph-by-paragraph basis and rather elaborates on
some of the major deficiencies that, in its view, pervade the interim report.
9.4 First, the United States criticizes that the Panel failed to acknowledge the combined operation
and effects of the liberalization countermeasures which, in the US view, directly affected the findings
on Article XXIII:1(b) and Article III. The United States alleges that as a result of the combination
of measures, rather than of any single measure, Japan created a market structure and maintained it
until today that keeps foreign photographic materials out of the Japanese market. In our view, this
criticism is unfounded, as we considered the evidence and arguments of the parties on combined effects
of the measures in paras. 10.350-10.367 of the findings.
9.5 Second, the United States argues that the interim report construes the "detailed justification"
requirement as imposing a heightened evidentiary standard in non-violation cases, while for the United
States it is rather a pleading requirement, i.e., a screen to dismiss inadequately articulated non-violation
claims from a panel's consideration. The United States emphasizes that the fact that Article XXIII:1(b)
provides for an exceptional remedy does not justify requiring a quantum of proof that is higher than
the one applied under other GATT articles. We recall that in para. 10.84 we stated that "at this stage
of the proceeding, the issue is whether such a measure has caused nullification or impairment, i.e.,
whether it has made more than a de minimis contribution to nullification or impairment." In our view,
we did not apply the "detailed justification" requirement as a heightened evidentiary standard. In
response to the US comments we modified, inter alia, the language of paras. 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 and 10.363 in order
to make this clearer.
9.6 Third, in the US view, many of the Panel's factual findings ignore evidence that the United
States deems substantial. In particular, the United States denies that Japan's interference in the
distribution system was for the purpose of modernization. The United States claims to have provided
the Panel with a substantial quantity of evidence concerning protectionist intent, the effects of the unique
circumstances of the government-industry concerted adjustment system, and the peculiarities of the
Japanese distribution system in the film sector. We reject the US characterization of our findings on
this issue as ignoring substantial evidence.

9.7 Fourth, the United States submits that, while it was aware of the Large Stores Law, Premiums
Law and Antimonopoly Law at the time of the Tokyo and Uruguay Rounds, it could not and did not
know the extent to which Japan's closed distribution system for photographic materials was the result
of the combined effect of the distribution measures, or that the distribution countermeasures, the Large
Stores Law, and the promotion countermeasures worked together to impede market access, and to prevent
price and other types of competition in the market. The United States emphasizes that notice of the
existence of these laws and their essential provisions was not tantamount to notice of the actual operation
of the measures. While we explicitly accepted that a Member might not appreciate the effect of the
application of a measure at the time of its publication, in our view, the United States in general failed
to demonstrate that it should not be charged with such knowledge in this case.
9.8 Fifth, the United States argues that the Panel's ruling that a complaining party is charged with
knowledge of the responding government's measures as of the date of their publication suggests a rule
of caveat emptor which would operate as a deterrent to concluding tariff negotiations in the future.
In the US view, this would imply for countries' negotiators the need to undertake a sector-by-sector
investigation of great magnitude before accepting any concession, lest they be charged with "anticipation"
of non-transparent administrative measures that could potentially impair the benefits of that concession.
The United States believes that no country is capable of such a massive effort in the course of
comprehensive multilateral negotiations because countries would face serious difficulties detecting the
many measures that may nullify or impair tariff concessions for the hundreds of products under
consideration. We reject the US characterization of the test we developed in this area. It is accurate
that we operated on the presumption that in general a Member's knowledge of a measure shall be
assumed as of the date of its publication. Additionally, however, we also explicitly accepted that this
presumption could be overcome if a Member demonstrates that for specific reasons it could not have
reasonably anticipated a measure. In contrast, the latitude to show otherwise in the approach suggested
by the United States could, in our view, lead to conclusions that might undermine the security and
predictability of the multilateral trading system.
9.9 Finally, the United States agrees with the Panel that a measure need not provide for benefits
or impose legally binding obligations or the substantive equivalent for purposes of non-violation
complaints, and that the "incentives/disincentives test" developed by the panel on Japan - Semiconductors
is not the exclusive test or outer limit of what may constitute a measure under Article XXIII:1(b).
The United States further requests the Panel to make clear that the binding nature of a measure is a
relevant - albeit not dispositive - factor in an analysis of whether something is a measure. We agree
with the United States that the test is not exclusive and where appropriate we have clarified our position
in the general part of the findings and in our examination of specific "measures" at issue.
9.10 Japan emphasizes that its comments were in general designed to further improve the factual
findings and the legal reasoning in support of the conclusions reached by the Panel in its interim report.
9.11 Most of Japan's specific comments concern the Panel's discussion of which items complained
against are to be considered to be measures within the meaning of Article XXIII:1(b). In particular,
Japan requests the Panel to explain what tests other than the "incentive/disincentive test" suggested
by the panel on Japan - Semiconductors are relevant in this respect. In Japan's view, there is no
substantial difference between the tests developed by the panel on Japan - Semiconductors and the panel
on Japan - Agricultural Products because the former is the mere elaboration of the latter. Japan further
proposes clarification that the Panel's test(s) focus on the alleged measures themselves and how these
measures operate, not on the alleged consequences of the measures, i.e., actions taken by private parties
or trade flows. Specifically, in Japan's view, the Japan - Semiconductors case did not deal with private
actions that were deemed to be governmental, but with measures which were actually taken by the
Japanese Government. We adjusted paras. 10.49 and 10.50 to make our reading of the panel reports
on Japan - Semiconductors and Japan - Agricultural Products on the issue of what constitutes a
governmental measure clearer.

9.12 Japan deems it inappropriate to characterize the government-business relationship in Japan as
one of a high degree of cooperation and collaboration. In particular, it objects to the Panel using such
a "simplification" in the context of a generally applicable test to determine what constitutes a measure.
Rather, Japan proposes that the Panel discuss such specific circumstances only when the general test
is applied to individual cases. We modified the reasoning in para. 10.49 without changing our basic
approach of discussing the government-business relationship in both the general part of the findings
as well as in the context of our examination of the specific "measures" in dispute.
9.13 Furthermore, Japan proposesclarification that it is"continuing administrative guidance" issued
to perpetuate the underlying policies which is actionable as a measure, not a revoked government action
per se which ceases to exist and thus cannot be in effect. We clarified para. 10.59 accordingly.
9.14 In principle,Japan favoursthe Panel's approach of making affirmative assumptions withrespect
to some elements and then proceeding to consider other elements in order to complete the examination
of all the other elements that arise in the context of a non-violation claim. However, in Japan's view,
this approach does not require the Panel to make any findings on those elements which involve
insufficient or conflicting evidence. In such cases, Japan argues, the doubt should go against the party
that bears the burden of proof. Consequently, the Panel is called on to limit itself to stating its
assumption without making a finding on whether an item constitutes a measure within the ambit of
Article XXIII:1(b). In response, we modified para. 10.60 to read "we will take an expansive view
of what constitutes a measure ...". However, where we considered the evidence to be sufficient, we
have made findings as to which of the specific measures in dispute constitute measures within the meaning
of Article XXIII:1(b), rather than limiting ourselves to stating assumptions as suggested by Japan.
9.15 Moreover, Japan requests the Panel to modify its finding that reasonable expectations may
in principle continue to exist in respect of tariff concessions in successive rounds of Article XXVIIIbis
negotiations. Japan reiterates its position that only benefits accruing from the Uruguay Round tariff
concessions are relevant inthiscase because the latesttariff negotiationshouldbe deemed tohave created
a new expectation concerning the balance of tariff concessions, and to have replaced any reasonable
expectation that arose under a prior tariff negotiation. In Japan's view, the panel on EEC - Oilseeds
focused on the issue of whether or not a new balance of concessions (i.e. a global reassessment of
the value of all the EEC's concessions) was created, and not on the issue of the procedures and
formalities under which the tariff negotiation was carried out. We added language to para. 10.68,
reflecting the EEC - Oilseeds panel's finding that "the balance of concessions negotiated in 1962 ...
was not altered" in that case. However, this argument is not determinative for our finding in para.
10.70. Thus, we continue to consider that reasonable expectations may co-exist in respect of tariff
concessions in successive rounds of Article XXVIIIbis negotiations.
9.16 Further Japanese comments refer to the issue of the causation of nullification or impairment
of benefits accruing from tariff concessions by a measure within the meaning of Article XXIII:1(b).
Japan points out that it does not advocate and has not advocated a "but for" standard of causation.
Rather, in Japan's view, a clear linkage between the measure at issue and the alleged nullification or
impairment must be proven with a "detailed justification" in order to establish the necessary causal
connection. In response to Japan's comment, we adjusted para. 10.84. Finally, Japan advocates a
higher standard of causation than the Panel's standard of a "more than a de minimis contribution" which,
in Japan's view, understates the requisite degree of causal connection under Article XXIII:1(b). We
disagree with Japan's position and, accordingly, have not altered the text on this point.
9.17 As regards the distribution measures at issue, Japan urges the Panel to make clear that both
the characterization of the 1967 Cabinet Decision, the Sixth and Seventh Interim Reports and the
1969 Survey as measures within the meaning of Article XXIII:1(b), and its statement that the alleged
measures are still in effect, are assumptions, not findings. We carefully reviewed our reasoning and

have made appropriate modifications to make clearer where we made findings and where we proceeded
on assumptions.
9.18 Japan emphasizes that the 1967 Cabinet Decision was published in Kampo (i.e. the Japanese
Government's Official Gazette) on 21 June 1967, prior to the conclusion of the Kennedy Round on
30 June 1967. Accordingly, in Japan's view, the United States should have reasonably anticipated
the 1967 Cabinet Decision prior to the Kennedy Round. The United States responds that it did not
have the opportunity or foresight to re-open the negotiations on individual products nine days prior
to the conclusion of the Kennedy Round on the basis of the publication of this measure in Japanese.
Accordingly, the United States requests the Panel to maintain its finding that the United States could
not have reasonably anticipated the 1967 Cabinet Decision because of the proximity in time of that
measure's publication to the conclusion of the round of multilateral tariff negotiations. In view of
the parties' comments and in applying the test developed in paras. 10.79-10.81, we modified paras.
10.103, 10.106, 10.247 and 10.251.
9.19 Japan disagrees with the Panel's findings concerning the governmental attributability of the
1970Guidelinesand the1971BasicPlan. In thealternative, Japan contendsthatnon-bindingsuggestions
could have a similar effect at best - but not the same effect - as legally binding measures. We maintain
our findings that the two above-mentioned items are to be considered measures within the meaning
of ArticleXXIII:1(b). However, we accepted Japan'salternativeproposaland clarified thatnon-binding
suggestions could have a similar effect to legally binding measures. Consequently, we modified paras.
10.49, 10.161 and 10.180.
9.20 Further, Japan makes detailed proposals on how to make the Panel's reasoning with regard
to the alleged "continuing effect" of certain "measures" (i.e., the 1967 Cabinet Decision, the Sixth
and Seventh Interim Reports, the 1969 Survey, the 1970 Guidelines, the 1971 Basic Plan and the
1975 Manual) more uniform. We largely accepted these suggestions and harmonized the language
of paras. 10.123, 10.137, 10.150, 10.163, 10.181 and 10.195.
9.21 As to the impact of the Large Stores Law on the competitive relationship between domestic
and imported products, it is Japan's position that benefits of tariff concessions accruing under Article II
consist of the legitimate expectation that market access opportunities, or improved competitive conditions,
for imports created by the tariff concessionswill notbe frustrated as a resultof any government measure.
In Japan's view, however, the benefits under Article II do not include expectations concerning market
evolution, because changes in the marketplace situation can result from various factors such as market
forces and privatepractices, regardlessof the existence of alleged governmental measures. We modified
para. 10.232 in order to clarify our reasoning on this point.
9.22 With respect to the establishment of the Fair Trade Promotion Council in 1982, Japan continues
to deny that the Promotion Council constitutes a fair trade council established under a fair competition
code with the approval of the JFTC pursuant to Article 10 of the Premiums Law. According to Japan,
the Fair Trade Promotion Council was established by private businesses having no connection with
Japanese governmental entities. We emphasize that our finding was not based on whether the creation
of the Promotion Council was approved by the JFTC, but on our assessment that in certain cases the
relationshipbetweenthe PromotionCounciland the JFTC wassufficientlyclose fora findingthatactions
of the Promotion Council are to be deemed attributable to the Japanese Government.
9.23 In regard of the 1982 Self-Regulating Measures on Fairness in Trade and the 1984 Self-Regulating
Standards, Japan reiterates its argument that these "measures" have not been approved by the JFTC
as fair competition codes. In Japan's view, especially the "measures" relating to dispatched employees
lie outside the scope of regulations on premiums and misleading representations. Japan further argues
that the interaction between the JFTC and the industry during the formation of the 1982 Self-Regulating
Measures was not intensive. Consequently, Japan contends that these "measures" are too tangentially

connected to the JFTC to attribute them to the Japanese Government within the meaning of
Article XXIII:1(b). Moreover, even assuming that a sufficient connection to the Japanese Government
is proven, Japan points out that the 1982 Self-Regulating Measures are not viewed by private parties
as legally binding. To the extent that private parties are not free to demand the dispatch of employees
from suppliers, Japan submits that this is a direct result of the application of the Antimonopoly Law
itself,andnotbecausethe 1982Self-RegulatingMeasures couldbeassimilatedtoa governmentmeasure.
In respect of the 1984 Self-Regulating Standards, the JFTC merely responded to the Fair Trade Promotion
Council's inquiry as to the lawfulness of these Standards under the Antimonopoly and Premiums Laws.
Thus, in Japan's view, the 1984 Self-Regulating Standards are not attributable to the Japanese
Government because the JFTC's relation to these Standards is too remote. We carefully reviewed
our findings on this issue in light of the arguments raised, but were not persuaded of a need to modify
them in line with Japan's position.
9.24 Japan generally objects to the Panel's conclusion that fair competition codes and individual
activities of fair trade councils constitutegovernmental measures withinthe ambit of ArticleXXIII:1(b).
In particular, Japan points out that the approval of a fair competition code by the JFTC does not imply
any delegation of quasi-governmental authority toa private body suchas a fair trade council. Moreover,
according to Japan, JFTC approval does not grant immunity from the substantive provisions of the
Antimonopoly Law, and, if individual actions fall outside the code, they are fully actionable under
that Law. Japan also reiterates its argument that a fair trade council does not have any authority over
non-members who are not obligated to join the council. In Japan's view, a government should not
be held responsible for any action of private associations merely because it gives approval in certain
aspects. Having reviewed our analysis of this issue, we see no reason to modify our reasoning on
these points.
9.25 In addition, Japan requests the Panel to make an explicit finding that the 1987 Retailers Fair
Competition Code only covers cameras and related products but does not apply to photographic film
and paper. Japan notes that - regardless of whether or not a fair competition code is to be assimilated
to a government measure - the JFTC has the authority to interpret the scope of approval under the
Premiums Law and has never allowed and has no intention to allow the application of the Retailers
Code to film or paper. Moreover, Japan submits that an industry member's statement quoted in Zenren
Tsuho ("... I will endeavour to make both photosensitive materials and development and printing fall
under the code") proves that the Retailers Code did not apply to photographic film or paper. However,
we considered that the evidence before us was not conclusive and decided to merely assume that the
Retailers Code might also apply to photographic film and paper.
9.26 In our examination of the claims raised under Article III, we reasoned that the terms laws,
regulations and requirements in that article should be interpreted as encompassing a similarly broad
range of government action, and action by private parties that may be assimilated to government action,
as those actions covered by the term measure in Article XXIII:1(b). In Japan's view, the term
requirement must mean something different from measure, the former being probably narrower than
the latter. The Panel is requested to explain the difference between these two terms in more detail,
especially with respect to the 1967 Cabinet Decision, the 1971 Basic Plan and the 1970 Guidelines,
and to limit itself to merely assuming that these items are requirements in the meaning of Article III.
In response to Japan's comment, we modified paras. 10.376 and 10.377.
9.27 Finally, Japan suggests that the discussion of whether the "measures" in dispute accord less
favourable treatment to imported products in contravention of Article III be elaborated. In Japan's
view, this could be done by repeating, or referring to, the Panel's examination of whether vertical
integration and single-brand distribution in general, and the 1970 Guidelines and the 1971 Basic Plan
in particular, have caused an upsetting of the competitive relationship between domestic and foreign
products in the meaning of Article XXIII:1(b). In line with Japan's comment, we decided to expand
our reasoning in para. 10.381, in particular with respect to the two specific measures mentioned above.

9.28 In response to other comments by Japan, we corrected factual inadequacies, especially in paras.
10.103, 10.104,10.106, 10.128,10.146, 10.160,10.207,10.208,10.211, 10.247,10.249 and 10.296.
In addition, where we found merit in specific suggestions made by Japan, we adjusted paras. 10.87,
10.148, 10.194, 10.205. 10.298, 10.299, 10.302, 10.316, 10.345, 10.353.