Document: WT/DS332/R Page 247 ANNEX 11 RESPONSES OF PARTIES TO QUESTIONS FROM THE PANEL
Date: 27 September 2001
Document codes: WT/DS332/R
Complainant: EU
Respondent: Brazil
Third parties: Argentina, Australia, China, Cuba, Guatemala, Japan, South Korea, Mexico, Paraguay, Taiwan, Thailand, U.S.
Dispute stage: Appellate Body
Agreements cited: Art. I:1, III:4, XI:1, XIII:1  GATT 1994

ANNEX 11
RESPONSES OF PARTIES TO QUESTIONS FROM THE PANEL

I. FOLLOWING THE FIRST SUBSTANTIVE MEETING OF THE PANEL
A. THE PRODUCTS AT ISSUE
Question 1. To both parties.
The Panel notes that different terms are used by the parties to designate retreaded tyres and the
material from which they are made :
 (a) "retreaded,"
 (b) "recycled,"
 (c) "reconditioned,"
 (d) "top-capped,"
 (e) "recapped,"
 (f) "remoulded tyres,"
 (g) "used tyre carcasses"
 (h) "casings"
 (i) "used tyres"
(see e.g. Brazil's first written submission parag raphs 15, Exhibits EC -29, EC-34, BRA-72 and
BRA-84).
Could you please define these terms, and clarify which of these terms designate retreaded tyres, which
of them designate types of retreaded tyres, and whic h of them designate the material from which
retreaded tyres are made?

Response of the European Communities
1. "Retreaded tyres" are the product at is sue in the present dispute. As the
European Communities has explained in its first wr itten submission, retreaded tyres are new products
which are produced by reconditioning used tyres th rough the addition of new material replacing the
worn tread.2
2. Since retreaded tyres are produced using a used tyre casing, it can be argued that they
constitute part of a group of "recycled", "reconditioned" or "remanufactured" goods. 3 H o w e v e r , i t
should be noted that these terms are not sufficiently precise for the purposes of the present dispute.
For instance, the term "recycled tyre" could also refer to a tyre produced partially from recycled
rubber or other materials. Accordingly, the European Communities would suggest referring
exclusively to "retreaded tyres" as the product at issue in the present case.
3. Retreaded tyres can be produced through a num ber of different processes. According to
UNECE Regulations 108 and 109, there are three me thods for retreading new tyres, namely top-
capping (replacement of the tread), re-capping (replace ment of the tread and with the new material
extending over part of the sidewall) and bead to bead (replacement of the tread and renovation of the
sidewall including all or part of the lower area of the tyre).
4 The Brazilian technical regulation
contained in Portaria 133 of 27 September 2001 mentions the same three methods, namely top-

1 Footnotes in this section are those of the parties.
2 European Communities' first written submission, para. 2.
3 For a definition of this latter term, which is used interchangeably with reconditioning, cf.
Communication from the United States, TN/MA/W/18/Add.11 (Exhibit EC-65).
(Exhibit EC-7).

capping (recapagem), reca pping (recauchutagem) and remoulding (remoldagem).
5 A s t h e
European Communities has explained in its first wri tten submission, there are also different methods
for applying the new tread, namely the cold and the hot method. 6 Regardless of the method used, the
resulting new tyre is to be regarded as a "retreaded tyre" and must meet the required specifications.
4. The European Communities notes that the Brazilian legislation does not always appear to use
these terms in a consistent manner. In particular, Article 40 of Portaria Se cex 14/04 (Exhibit EC-29)
bans the importation of "pneus recauchutados e usados", whereas it exempts from this ban "pneus
remoldados" imported from MERCOSUR countries. The European Communities understands that
the term "recauchutados" in Article 40 is not intended to refer only to retreaded tyres produced by the
specific method of recapping, but all retreaded tyres, and that this is also how the ban has been
applied. This finds further confirmation in Decree 3.919 of 14 September 2001 (Exhibit EC-34),
which imposes a fine on the importation and internal marketing etc. of any "pneu usado ou
reformado", i.e. for all retreaded tyres. Pneu refo rmado is also the generic term used in Portaria
INMETRO No. 133.
7
5. As far as the term "remoldado" in Artic le 40 of Portaria 14 is concerned, the
European Communities notes Brazil's statements that the MERCOSUR exemption applies narrowly
only to the one type of retreaded tyre that is called "remoldado" in Portaria 133. 8 In the light of the
inconsistent terminology used in the Brazilian le gislation, the European Communities finds this
explanation doubtful. In this context, it is wort h pointing out that Decree 4.592 (Exhibit EC-42)
exempts from said fines "pneumáticos reformados", i.e. all retreaded tyres, originating in
MERCOSUR countries. In any event, such a distin ction between remoulded and other retreaded tyres
would be arbitrary, since there are no differences be tween these tyres in terms of their effects for
human life or health.
6. Used tyres are to be distinguished from retread ed tyres. As the European Communities has
explained, a retreaded tyre is a new product intended to be placed on the vehicles in exactly the same
way as a new tyre. This is also illustrated by the differences in tariff classification: retreaded tyres are
classified under HS subheadings 4012.11, 4012.12 , 4012.13 and 4012.19, whereas used tyres are
classified under subheading 4012.20.
7. The term "used tyres" includes tyres which have undergone some use, but which may still be
safely used on a vehicle (mid-life tyres). Moreover, the term used tyres also includes tyres which may
no longer be used on a vehicle, since they no longer meet the minimum tread requirements, but which
are suitable for being retreaded. Such tyres may be referred to as "retreadable casings" or "retreadable
carcasses". Finally, the term also includes used tyres which are no longer usable nor retreadable, but
which are destined for recycling, recovery or disposal.
Response of Brazil
8. Retreaded tyres, for purposes of international tr ade, are tyres classified under the following
HS subheadings: 4012.11, 4012.12, 4012.13, and 4012. 19. Brazil's internal regulations refer to
retreaded tyres as "pneus reformados" (translate d in Exhibit EC-11 as "reconditioned tyres") and
include them in the general category of used tyres. See Technical Regulation annexed to Portaria
INMETRO 133/2001, para. 3.28 (Exhibit EC-11).

5 Exhibit EC-11, paras. 3.29-3.31. The terms used in the translation of this section provided by the
European Communities should be adjusted as indicated above.
6 European Communities' first written submission, para. 28.
7 Exhibit EC-11, point 3.28.
8 Brazil’s first oral statement, para. 64.

9. Recycled tyres, a term used in Exhibit BRA- 72, is an incorrect translation of "pneus
reformados", which should have been translated as "retreaded tyres" or "reconditioned tyres". The
term "recycled", when referring to tyres, descr ibes devulcanized rubber (material obtained from a
used tyre through devulcanization). A retreaded tyre is not a recycled good, but a reconditioned good,
because it adds approximately 30 per cent of new material to 70 per cent of used material.
10. Reconditioned tyres is a term that Brazil's intern al regulations use to describe retreaded tyres,
as defined in Brazil's Response to Question 1(a).
11. Top-capped tyres are one of the three types of retreaded tyres. The top-capping process
involves replacing the tread of a tyre. Brazil's technical regulations refer to the process of top-capping
as "recapagem" (translated in Exhibit EC-11 as "recapping"). See Technical Regulation annexed to
12. Recapped tyres are one of the three types of retreaded tyres. The recapping process involves
replacing the tread and the shoulder of the used tyre. Brazil's technical regulations refer to the process
of recapping as "recauchutagem" (translated in Exhibit EC-11 as "retreading"). See Technical
Regulation annexed to Portaria INMETRO 133/2001, para. 3.30 (Exhibit EC-11).
13. Remoulded tyres are one of the three types of retreaded tyres. The remoulding process
involves replacing the tread, the shoulders, and the si dewall areas of the used tyre. Brazil's technical
regulations refer to this process as "remoldagem" (translated in Exhib it EC-11 as "remoulding"). See
Technical Regulation annexed to Portaria INMETRO 133/2001, para. 3.31 (Exhibit EC-11).
14. Used tyre carcass is the structural part of a u sed tyre, made up of one or more layers with
overlaying plies, to which the new tread is applied in the course of retreading. See Technical
Regulation annexed to Portaria INMETRO 133/2001, para. 3.7 (Exhibit EC-11).
15. Casings is a term that describes used tyres in the context of future retreading.
16. Used tyres are, for purposes of international tr ade, tyres classified under the HS subheading
4012.20. In Brazil's internal regulations – note that there is no requirement that internal regulations
follow the HS system – used tyres are defined as ty res that have undergone some form of use and/or
wear and tear. This is a general category that embraces retreaded tyres, part-worn tyres and waste
tyres that may be suitable for retreading or must be disposed of. See the Technical Regulation
annexed to Portaria INMETRO 133/2001, paragraph 4.2 (Exhibit EC-11).
Question 2. To Brazil.
In paragraph 184 of its first written submission, Braz il states that "[B]ecause the tribunal limited its
decision to remoulded tyres, Brazil likewise limited th e scope of exemption and continued to prohibit
MERCOSUR imports of tyres retreaded by other means (which is why the exemption from the ban is
only limited)". A similar statement is made at paragraph 77 of the same submission.

What other types of retreaded tyres, if any, from MERCOSUR Member countries remain subject to
Brazil's import prohibition? W hat proportion of other MERCOSUR countries' production remains
covered by the import ban?

Response of Brazil
17. There are three different types of retreaded tyr es: remoulded, recapped, and top-capped. The
MERCOSUR dispute referred only to remoulded tyres and, therefore, Brazil lifted the ban for this
category only. The importation of recapped a nd top-capped tyres produced in other MERCOSUR
countries remains prohibited. Brazil has no information on the proportion of tyres retreaded by means

of recapping or top-capping in Argentina, Paragua y, and Uruguay. However, because remoulding is
the most complex of the retreading processes, it is safe to assume that a country that produces
remoulded tyres likewise has the capability to produce recapped and top-capped retreads.
Question 3. To both parties.
Do the Parties agree that the products at issue in this case are retreaded tyres classified under NCM
codes 4012.11, 4012.12, 4012.13 and 4012.19? (see refe rences in European Communities' first
written submission paragraphs 16, 40 and 44, and Brazil's first written submission paragraph 16).

Response of the European Communities
18. Yes.
Response of Brazil
19. Brazil agrees.
Question 4. To both parties.
What are the differences, if any, among "co mmercial", "passenger" and "truck and aircraft"
retreaded tyres? Does the scope of the products at issue in this case en compass all these different
types of retreaded tyres? (see references in European Commun ities' first written submission
paragraph 26 and Brazil's first written submission paragraph 16).

Response of the European Communities
20. The difference between retreaded tyres for passenger cars, commercial vehicles, and aircraft
lies in the different technical standards that apply to their production. 9 One significant resulting
difference is that passenger car tyres may only be re treaded once, whereas no similar limitation exists
for tyres for commercial vehicles and aircraft. 10 A further difference is that the age of a casing for a
passenger car tyre may not exceed 7 years when it is being retreaded, whereas no similar restriction
exists for commercial vehicle and aircraft tyres.
11
21. Article 40 of Portaria Secex prohibits the issu ing of import licences for retreaded tyres falling
under the heading 4012. This heading covers retreaded tyres of a kind used on motor cars
(subheading 4012.11), of a kind used on buses or lo rries (subheading 4012.12), of a kind used on
aircraft (subheading 4012.13), and other (subheading 4012.19). The ban thus applies to all retreaded
tyres for passenger cars, commercial vehicles, and aircraft. As the European Communities has
confirmed, it challenges the import ban as such, a nd with respect to all of the retreaded tyres
covered by it.
12
Response of Brazil
22. While there are many technical and market diffe rences, the functional difference relevant to
this dispute is that unlike passenger car tyres, comm ercial vehicle, truck, and aircraft tyres can be
retreaded more than once. The scope of the produc ts at issue in this cas e encompasses all these types
of retreaded tyres. All types of retreaded tyres ar e similar in one important aspect: when imported,
they have a shorter remaining lifespan than new tyres.

9 Cf. European Communities' first written submission, paras. 18, 23.
10 European Communities' first written submission, para. 26.
11 European Communities' first written submission, para. 26, fn. 18.
12 European Communities' first oral statement, para. 32.

Question 5. To Brazil.
Is it Brazil's position that "commercial" and "passe nger" retreaded tyres pose the same type and level
of health and environmental risk? (see Brazil's first written submission, paragraph 4)

Response of Brazil
23. Commercial vehicle retreads pose the same ty pe of health and environmental risk as
passenger retreads. Retreaded tyres in both cate gories have fewer remaining lifecycles and become
waste sooner. The level of risk from the commercia l vehicle retreads is frequently higher than that
from the passenger retreads because (1) commercial vehicle retreads are substantially heavier and,
thus, produce more waste, and (2) a commercial retread that is imported closer to the end of its useful
life could have less than 20 per cent of its useful life left compared to the 50 per cent in the case of the
passenger car retread.
24. In its first written submission, Brazil referred mainly to passenger car retreads simply because
these retreads represent virtually all of the European Communities' exports to Brazil. Brazil's analysis
applies equally to the commercial vehicle retreads, however.
Question 6. To both parties.
Is there any difference between imported and dom estic retreaded tyres, and between MERCOSUR
and non-MERCOSUR retreaded tyres, that w ould be significant for the purposes of these
proceedings, including with respect to their "liken ess" within the meaning of Articles I.1, III.4,
and XIII?

Response of the European Communities
25. No.
Response of Brazil
26. There is no difference with respect to the "lik eness" of the products, within the meaning of
Articles I:1, III:4, and XIII. There is an impor tant functional difference, however, between the
domestic and imported retreaded tyres. Domestic retreads help solve the waste tyre problem by
extending the lifespan of tyres used domestically, which would otherwise have to be disposed of
immediately. Imported retreads, on the other hand, exacerbate the waste tyre problem because they
either cannot be retreaded at all (passenger car ty res) or have fewer remaining lifecycles (commercial
vehicle tyres).
Question 7. To both parties.
Do the Parties agree that retreaded tyres are to be distinguished from used tyres? (see references in
European Communities' first written submission paragraphs 17 and 39, and Brazil's first written
submission paragraph 16)
If so, please explain in detail how they differ.

Response of the European Communities
27. Yes. The European Communities can refer the Panel to its response to Question 1 above.
Response of Brazil
28. Brazil agrees that retreaded tyres are to be distinguished from used tyres for purposes of
international trade. See Brazil's Responses to Questions 1 and 30.

Question 8. To Brazil.
Does Brazil export any retreaded or used tyres? If so, please provide relevant data.

Response of Brazil
29. The amounts of Brazil's used and retreaded tyre exports are de minimis:
Brazil's exports of used and retreaded tyres, in tonnes
 2000 2001 2002 2003 2004 2005
Used Tyres 0 73.6 0.39 20.3 1.3 11.4
Retreaded Tyres 30.9 4.1 20.9 9.3 0.9 14.2
Source: Sistema Alice/MDIC

Question 9. To the European Communities.
In paragraph 45 of your first written submission, you highlight the benefits arising from retreaded
tyres. In your view, do these benefits arise also for countries importing retreaded tyres ? If so, how ?

Response of the European Communities
30. In the view of the European Communities, th ese advantages benefit all countries, including
the importing country.
31. Retreading of tyres leads first of all to savings in terms of energy and materials (such as
rubber and oil). These resources are scarce, and are tr aded on a global scale. Accordingly, savings of
these scarce resources is in the interest of all countries.
32. Similarly, reductions of emissions in comparis on to the production of new tyres will lead to a
reduction in air pollution, notably in relation to CO 2 emissions, one of the six greenhouse gases
covered by the Kyoto Protocol to the United Nations Framework Conven tion on Climate Change. 13
Since air pollution and global warming are universal concerns, these effects are in the interest of all
countries, including the importing member.
33. As further background, the European Comm unities provides a recent submission from the
United States, which explains more broadly the environmental benefits of remanufacturing in terms of
energy consumption, use of materials, and reduction of pollution (Exhibit EC-65).
Response of Brazil
34. The benefits from retreading that the European Communities describes in paragraph 45 of its
first submission do not occur in the territory of countries importing retreaded tyres. As Brazil
explained in paragraph 8 of its Oral Statement, a country that retreads the tyres it consumes reduces
its waste tyre burden. Brazil could benefit from the European Communities' retreading activities only
if the European Communities tyre manufacturers retread ed casings that had been collected in Brazil.
Because this is not the case, Brazil realizes no be nefit from the retreading activities that take place in
the European Communities. On th e contrary, retreaded tyre imports from the European Communities
exacerbate Brazil's waste tyre problem because these tyres have a shorter lifespan.

13 Exhibit EC - 66.

Question 10. To the European Communities.
In paragraph 18 of your first written submission, you refer to two regulations developed by the
UNECE. In light of the fact that Brazil is not a Member of UNECE, could you please clarify what
role such regulations should play in these proceedings ?

Response of the European Communities
35. The UNECE regulations lay down the technical st andards according to which retreaded tyres
for passenger vehicles (UNECE Regulation 108) an d commercial vehicles (UNECE Regulation 109)
are produced.
36. The UNECE Regulations are adopted by the administrative committee established by the
UNECE Vehicles Agreement (Exhibit EC-5). Th e UNECE Vehicles Agreement currently has
44 Members representing countries from many regi ons of the world, and constitutes the most
important standard-setting body for automobiles.
37. Even though Brazil is not a party to the UNECE Agreement, it has used the
UNECE Regulations as the basis for the preparation of its own technical standard for retreaded tyres
for passenger vehicles, and seems to be prepared to do the same with respect to retreaded tyres for
commercial vehicles.14 Since there appears to be no disagreement on this point between the parties,
the Panel may assume that UNECE Regulations 10 8 and 109 constitute an appropriate technical
standard for the production of retreaded tyres.
38. UNECE Regulations 108 and 109 are also rele vant context for the evaluation of the
justification of Brazil's import ban. In accordance with the fourth recital of its preamble, the objective
of the Vehicles Agreement is to "facilitate the use in their countries of the vehicles, equipment and
parts, where approved according to these prescrip tions by the competent authorities of another
contracting party". A major objective underlying the ag reement is thus to facilitate trade in vehicles,
equipment and parts which are in accordance wi th the Vehicles Agreement and the Regulations
adopted under it.
39. The fact that the Contracting Parties adopted technical regulations for retreaded tyres
indicates that they assumed that trade would occur in these products. It is clear that if Brazil was
correct, and WTO Members were free to ban the importation of retreaded tyres, this would
significantly reduce the useful value of UNECE Regula tions 108 and 109. The fact that there exist
accepted international standards for the production of re treaded tyres is thus a further indication that
there is no justification for banning the importation of this product.
Response of Brazil
40. UNECE regulations establish technical standards for retreaded tyres. Brazil agrees with the
European Communities that retreaded tyres manufac tured in conformity with the UNECE standards
are safe. Their safety, however, is immaterial to th is dispute: Brazil prohibits imports of retreaded
tyres not because they are somehow less safe, but because they have a shorter remaining lifespan. See
UNECE No. 108, para. 6.2 (Exhibit BRA-2) ("passe nger car tyres which have been previously
retreaded shall not be accepted for further retreading").

14 European Communities' first written submission, paras. 21-22.

Question 11. To the European Communities.
In paragraph 28 of your first oral statement, y ou refer to the existence of "cheap low quality new
tyres, some of which can no longer even be retreade d". Could you please clarify whether different
categories of new tyres exist, that are more or less retreadable ? Does this factor have any particular
relevance to the issues under consideration in these proceedings ?

Response of the European Communities
41. Not all new tyres are, but virtue of the way in which they are constructed, necessarily suitable
for being retreaded after their first use. The exis tence of low-quality tyres which are not suitable for
retreading is regularly identified by the retreading industry as a constraint which limits the availability
of casings suitable for retreading.
42. For instance, the European Retread Manufact urers Association provides the following
explanations:15
"Of the tyres rejected because of poor servi ce repairs and casing integrity failures,
around 64% were because of material failu re making the casing unsuitable for further
retreading. This included those tyres that have been retreaded as many times as is
possible and served out their useful life. However, in excess of 35% of the repair and
integrity rejects were classified as "unwante d", due to their size or load specifications
or unsuitability of certain tyre brands fo r retreading. A substantial proportion of new
tyres on the road are therefore not seen as being suitable to retread because the basic
build is not sufficiently durable."
43. The same problem is also highlighted by the UK Environment Agency: 16
"The cost of many new tyres imported to the UK is similar to the price of a retreaded
tyre, but the imported tyre may not be high quality and often cannot be retreaded .
The motorist is likely to buy a new tyre rath er than a retreaded tyre if there is little
difference in cost."
44. In a report prepared of the Department of the Environment of Australia, the following
statements can be found:17
"While developments in tyre manuf acturing technology have resulted in
improvements in the life of tyres, the life of the casing appears to have followed the
opposite trend, with evidence suggesting casing life is decreasing. Industry
representatives have suggested that 'cheap' imported tyres are not generally suitable
for retreading. It should also be noted th at, increasingly, some locally produced tyres
have also been identified as unsuitable for retreading."
45. In a study produced by a team from the University of Lund, Sweden, the following factors are
mentioned as limiting the rate of retreading in Sweden:18
"design/manufacture of most passenger car tyres without consideration of the need for
retreading;

17 Exhibit EC-68, Section 8.4.2.
18 Exhibit EC-69, p. 12.

ready availability of low cost and quality of tyres which are unsuitable for retreading;
[...]"
46. In a study of the University of Missouri, the following statements can be found:19
"Tyre retreading and remanufacturing offers one of the best opportunities to reduce
the number of tyres requiring disposal. Tyre type determines the future life of a tyre.
Radial passenger tyres, unlike the bias ty re, are not easily retreaded. New radials
require retreaders to retool to state-of-the-art equipment. Generally, low-cost
passenger tyre imports cannot be retreaded."
47. Similar statements are also found specifically with respect to truck tyr es. For instance, in a
recent publication, Marco Mandrioli, marketing director of a retreading business, makes the following
statements:
20
"Tyres and Accessories: How Detrimental are imports of low-budget truck tyres from
the far east to the European retreading business?
Marco Mandrioli: In addition to the poor qua lity of those imported products, the true
issue is that they are not retreadable. This fact increases the lack of casings for
retreading."
48. The question whether new tyres are in all cases retreadable is relevant for assessing the
contribution which Brazil's import ban makes to th e reduction of waste tyres in Brazil. Brazil's
defence is based on the assumption that all new tyr es can be retreaded, whereas retreaded tyres cannot
be retreaded again. The statements above show that this assumption does not hold true for all new
tyres. The situation is even more striking for truc k tyres, since a retreaded tyre, which is made from a
good-quality casing, is frequently still retreadable se veral times, whereas a low-quality new tyre is
not.
49. In order to show that its ban on the importation of retreaded tyres contributes to a reduction of
waste tyres in Brazil, Brazil would therefore have to show the following:
(a) to which extent new tyres sold in Brazil are of a kind that is suitable for retreading
after use;
(b) to which extent tyres typically are suitable for retreading after use in Brazil;
(c) and to which extent retreadable casings in Brazil are actually retreaded.
50. Accordingly, the quality and retreadability of new tyres sold in Brazil is an essential element
in the demonstration of the contribution of Brazil's import ban to its stated goals.
51. Moreover, the fact that Brazil restricts the importation of retreaded tyres, whereas it does not
take similar measures against low-quality new tyres is further evidence that the ban constitutes an
arbitrary and unjustifiable discrimination against imported retreaded tyres.

19 Exhibit EC-70.
20 Exhibit EC-71, p. 13.

Question 12. To Brazil.
In paragraph 28 of its first oral statement, th e European Communities refers to the existence of
"cheap low quality new tyres, some of which can no longer even be retreaded". Could you please
comment on the types of new tyres used in Brazil an d whether such distinctions are relevant on the
Brazilian market ?

Response of Brazil
52. New tyres sold in Brazil (whether manufactured domestically or imported) are high-quality
tyres that comply with strict technical and pe rformance standards that ar e based on international
standards. Tyres manufactured in accordance with th ese standards have the potential to be retreaded.
New tyres sold in Brazil are not "cheap low quality new tyres" with no potential for future retreading.
B. RETREADING ACTIVITIES IN BRAZIL
Question 13. To Brazil.
Are used tyres from the European Communities or other sources currently being imported into
Brazil? (see suggestion in European Communities' first written submission pa ragraphs 52, 82, 132,
147 and 155, and Brazil's first writte n submission paragraphs 76 and 153) If so, what is the legal
basis for such imports?

Response of Brazil
53. Brazil prohibits imports of used tyres. See Portaria SECEX 14/04 (Exhibit BRA-84).
However, used tyres from the European Communities and other sources have entered Brazil
exclusively through preliminary injunctions issued by Brazilian courts. These preliminary injunctions
were issued in ex parte proceedings, initiated by Brazilian retreaders that prefer cheaper foreign
casings. When the government had an opportunity to present its case during the merits stage, the
courts reversed the initial grant of an injunction in 67 per cent of the cases. On appeal, courts ruled
against the injunction in 92.5 per cent of the cases.
Question 14. To Brazil.
What are the legal rights that the companies clai m are affected by the import ban in making their
requests for preliminary injunction?

Response of Brazil
54. Petitioners have typically advanced the following legal arguments in requests for preliminary
injunctions:
(a) A portaria is not an appropriate instrument to restrict constitutionally-protected
rights; a legislative act is required to ban used tyre imports;
(b) The government agency that imposed the initial ban (DECEX) lacked the
constitutional authority to do so;
(c) Prohibiting imports of used, but not new tyres violates the constitutional principle of
isonomy, in that it favours importers of new tyres over importers of used tyres;
(d) The import ban interferes with the constituti onal principle of free enterprise because
it restricts access to supplies of raw materi al necessary for domestic retreaders to
carry on their business.

55. Brazil's Federal Supreme Court has already rejected the first three arguments, and the
Government of Brazil anticipates that the Court will soon reject the remaining argument, at which
point the injunctions will effectively end. So far, there is a large number of trial court decisions that
affirm the compatibility of the import ban with the principles of legality, isonomy, and free enterprise.
See Exhibit BRA-86.
Question 15. To Brazil.
According to Brazil, in 92.5 % of the cases in wh ich preliminary injunctions have been ordered, the
appeals court has upheld the impor t ban (see Brazil's first written submission paragraph 153). What
happened in the rest of cases other than those 92.5% of the cases?

Response of Brazil
56. In the remaining cases, the appellate courts ha ve either upheld the grant of a preliminary
injunction, or reversed the previous denial of the injunction. Note that an appellate court ruling on
preliminary injunctive relief has no effect on the outcome of the case on the merits – it only deals with
the narrow issue of whether the petitioning party made a showing sufficient to obtain a preliminary
injunction.
Question 16. To Brazil.
Are all used tyres currently imported into Brazil being retreaded ? If not, what is the utilisation of the
remaining imported used tyres?

Response of Brazil
57. While the government of Brazil does not main tain these data, information presented in a
public hearing in the Brazilian Senate by the president of BS Colway, Brazil's largest importer of used
tyres, indicates that a large number of imported casi ngs arrive unsuitable for retreading. In 2005,
Brazilian retreaders imported almost 11 million casi ng, of which only 6 million were retreaded or
stocked for later use by the importers. The remaining casings were either illegally sold or disposed of.
See Exhibit BRA-94. Because the preliminary injuncti ons authorize the importation of used tyres
only as raw material, the Government of Brazil has imposed heavy fines for illegal sales of used tyres.
Question 17. To Brazil.
Could you please comment on the statement made by the European Communities in paragraph 36 of
its first oral statement?

Response of Brazil
58. Suitability figures aggregated by Mazola are the best available estimate of how many tyres
collected in Brazil are suitable for retreading. Only the private sector keeps this kind of information,
and no country, including Brazil, can provide a pr ecise suitability figure. The Government of Brazil
sought out other sources in addition to Mazola, but no other company kept record of the actual
numbers of suitable tyres.
59. Brazil believes that the Mazola figures are bot h reliable and representative. Mazola selects
suitable casings for Brazil's leading retailer of ty res, DPaschoal, which operates in more than
200 Brazilian cities in seven states, accounting for 78 pe r cent of the Brazilian fleet of motor vehicles.
Because of the company's extensive footprin t, a sample based on DPaschoal's numbers is
representative of used tyre collections in Brazil. The suitability data are also reliable because they
were not prepared for purposes of this dispute, but are Mazola's internal data.
60. Contrary to the European Communities' sugges tion, Mazola figures do not contradict any
statements made by the Brazilian authorities. See Brazil's Response to Question 25.

Question 18. To Brazil.
How many injunctions are currently in force, that allow imports of used tyres from the
European Communities, and what volu mes of imports does this represent? Is there a possibility that
retreaders in Brazil may import (more) used tyres in the future by submitting new injunction requests?
On what basis do you argue in par agraph 51 of your first oral statement that future requests for
injunctive relief will soon be denied ad portas?

Response of Brazil
61. The cases related to the importation of used and retreaded tyres brought against the Federal
Union are decided by the members of the Federal Judiciary. There are 988 federal judges in Brazil
who adjudicate the cases in the first in stance. At the appellate level, the country is divided into five
regions and each has an Appeals Court. There ar e 133 federal justices acting in the five Appeals
Courts. To obtain the information required by the Panel, the Brazilian Government is consulting these
Appeals Courts. Brazil will provide this information as soon as possible.
62. The evolution of the Brazilian case law on the s ubject supports Brazil's statement that future
requests for injunctions will soon be denied ad portas . As Brazil explained in the response to
Question 14, the Federal Supreme Court and all Federal Appeals Courts have already rejected most of
the arguments used by importers to obtain the pr eliminary injunctions. Imports of used tyres
continue, for the most part, not because courts are issuing more injunctions, but because some of the
previously-issued injunctions remain in effect. While nothing prevents domestic retreaders from
submitting requests for new preliminary injunctions, fewer and fewer courts are now willing to grant
them.
63. One of these imports authorizations is curren tly on the threshold of being analyzed by the
Federal Supreme Court. In 2003, the larger importer of used tyres into Brazil obtained such an
authorization to import used tyres as raw material . On March 10th 2006, the 2nd Regional Federal
Tribunal ruled in favor of the Gove rnment and reversed the decision which granted the authorization.
On May 17th, the importer presented an "Extraordina ry Appeal" so as to submit the dispute to the
Federal Supreme Court. The "Extraordinary Appeal " is now under consideration by the president of
the 2nd Regional Federal Tribunal, which must analy ze whether the appeal fulfills all the procedural
requirements. Therefore, it is highly probable th at in the next few months the Supreme Court will
adjudicate the issue. Given the overwhelming prevalence of decisions recognizing the legitimacy of
the ban, the Government anticipates that the Fede ral Supreme Court will put an end to the loophole
that have allowed millions of used tyres to be imported into Brazil.
Question 19. To Brazil.
Could you please clarify what is, in your view, the relevance to the Panel's assessment of the fact that
imports of used tyres are taking place, under cour t injunctions? Given that these imports are taking
place under court injunctions (as opposed, for instanc e, to illegal trafficking), can they be considered
to be taking place lawfully?

Response of Brazil
64. The fact that imports of used tyres are taking place under preliminary injunctions issued by
some courts in Brazil is relevant to demonstrate that, in the absence of governmental intervention,
domestic retreaders will continue to import high volumes of cheap casings instead of collecting and
retreading tyres that have been used in Brazil. The fact that local retreaders are desperately seeking to
circumvent the import ban through court injunctions demonstrates, therefore, that the ban is necessary
to induce local retreaders to coll ect waste tyres accumulated in Brazil for retreading, rather than
importing used tyres – many of which are disc arded upon importing for not being suitable for
retreading – which only exacerbates the waste tyre accumulation problem.

65. The imports of used tyres under preliminary inj unctions can be considered to be taking place
lawfully in a procedural sense in that the issuing courts had the legal power to do so. Nevertheless,
the fact that imports of used tyres are taking pl ace under procedurally correct court injunctions does
not mean that those injunctions were properly gran ted as a matter of substantive law. As Brazil has
stated numerous times in this proceeding, in two th irds of the cases, the courts that issued the
injunctions concluded that they were in error to do so and reversed their own original decisions.
Moreover, in 92.5 per cent of the remaining cases, th e court of appeals has overruled the court of
lower instance and lifted the injunction. Courts ha ve taken notice of this precedent and will soon stop
granting these ex parte injunctions altogether.
Question 20. To both parties.
Could you please provide further evidence in support of the claims that Brazi lian used tyres are or
are not suitable for retreading? (see positions in European Communities' first written submission
paragraphs 81 and 85, and Brazil's first written submission paragraphs 79 and 108)

Response of the European Communities
66. First of all, the European Communities would lik e to remark that as regards the conditions of
Article XX(b), the burden of proof is on Brazil. This means inter alia that Brazil must demonstrate
the contribution its import ban makes to the reduction of waste tyres in Brazil. Therefore, it is for
Brazil to prove whether and to which extent tyres used in Brazil are retreadable, and are actually
retreaded.
67. This remark notwithstanding, the European Co mmunities can refer the Panel to the evidence
it has already submitted in para. 81 and 82 of its firs t written submission. Notably, it is recalled that
INMETRO, as the Brazilian Standard Setting Author ity, has confirmed that the use of Brazilian
domestic casings for retreading is not viable (Exhibit EC-45). In addition, the European Communities
has referred to Brazilian court judgments in which the importation of used casings was authorised as
"indispensible primary matter" for domestic retreaders (Exhibit EC-46).
68. In addition, the European Communities submits, as Exhibit EC-72, a video produced by the
Brazilian retreaders association ABIP and ABR. In this video, which documents the ongoing debate
in Brazil on the prohibition of the importation of used tyres, several Brazilian retreaders testify that
they require the importation of used tyres in order to be able to carry out their retreading business in
Brazil. For instance, Ademir Serafin, President of the Association of Retreaders of the State of Sao
Paolo, declares the following:
21
"We need good quality casings in order to supply the domestic market, casings that
are not available currently, jeopardising our activity [...]"
69. The European Communities would also remark that there is no plausible explanation why
Brazilian retreaders should dispense considerable res ources in order to be obtain the right to import
retreadable casings, if such casings were readily ava ilable in Brazil. Brazil's efforts to argue that
importing casings is cheaper than procuring them domestically are unconvincing. Overall, the
considerable and sustained effort by Brazilian re treaders to obtain the importation of used casings
provides convincing evidence that retreadable casings are not available in sufficient quantity in Brazil.
Response of Brazil
70. Statistics on the retreadability of casings are scar ce all over the world. There are no official
sources for this information neither in Brazil nor anyw here else. When available, such information is
always provided by the private sector, typically by collectors and retreaders. The Government of

21 Exhibit EC-72, minute 8:35.

Brazil has researched intensively to obtain precise data on the retreadability of domestic casings and
found no source other than Dpaschoal and Mazola . As Brazil explained in its response to
Question 17, Brazil believes that the Mazola suitability figures are representative and reliable.
71. Indirect evidence also suggests that the share of retreaded tyres made from domestic casings
is quite high. According to the industry data , between 2001 and 2005, more than 84 million tyres
were retreaded in Brazil. In the same period, just 27 million used tyres were imported. Many
imported casings are not suitable for retreading, but even if all imported casings had been retreaded
between 2001 and 2005, 57 million retreads would have still been manufactured from domestic
casings. See Exhibit BRA-95.
72. Finally, Brazil has a robust retreading industry that dates back to the 1950s. The industry
relied solely on domestic casings before the imported casings began to come in 1990s. At the time,
domestic retreaders reported no problems with finding suitable casings in Brazil.
Question 21. To Brazil.
Brazil submits in paragr aphs 76 and 153 of its first written subm ission that while domestic court
proceedings are pending on the importation of us ed tyres, the Brazilian government has worked
vigorously to stop the importation of both retrea ded and used tyres (see Brazil's first written
submission paragraph 76). Could Brazil explain what specific efforts have been made by the
Brazilian government in this regard?

Response of Brazil
73. Brazil is a democratic country where the rule of law prevails. Because the importation of
used tyres occurs only through the judicial decisions, the only measure the Government can employ to
oppose these imports is to present its perspective in the course of the proceedings and appeal when
necessary. That is what the government has done with significant success so far. Every time a
domestic retreader requested an injunction, the Go vernment of Brazil has actively opposed it, once
notified of the pending case. The Government partic ipated in the proceedings through its various
agencies, including DECEX and IBAMA. See Exhibit BRA-86.
74. In addition, the very regulation that the European Communities now challenges,
Portaria SECEX 8/2000 (subsequently incorporated into Portaria SECEX 14/2004), was adopted in an
effort to stop the injunctions. See Brazil's Response to Question 29.
Question 22. To the European Communities.
Please clarify whether th e increase in the imports of used tyres between 2003 and 2005 described in
paragraph 79 of the European Communities' first writte n submission is entirely attributable to import
authorized under the injunctions granted by Brazilian courts?

Response of the European Communities
75. The European Communities understands that th is is the case. However, since the
administration of Brazilian law is the responsibility of the Brazilian authorities, it is primarily for
Brazil to explain the reasons for which the importations were allowed.

Question 23. To the European Communities.
In paragraph 80 of your first writte n submission, you indicate that EU exports of retreaded tyres to
Brazil have declined dramatically to reach "close to zero". In light of the import prohibition affecting
imports of retreaded tyres from the European Communities, could you please clarify what the small
amount of imports that does take place corresponds to ?

Response of the European Communities
76. According to Brazil's data base Alice, on whic h the graph provided in paragraph 79 of the
European Communities' first written submission was based, Brazil still imported, in 2005, 302,435 kg
of retreaded tyres from the European Communities. The extractions from the Brazilian data base are
provided as Exhibit EC-73.
77. The European Communities does not know what is the exact reason for these numbers. To
the knowledge of the European Communities, the im port ban on retreaded tyres is generally applied
against all imports from non-MERCOSUR countries, as ev idenced by the dramatic decline in imports
from the European Communities since 2000. Th e European Communities suggests asking the
question to Brazil as the WTO Member applying the import ban.
Question 24. To Brazil.
On the Brazilian market for tyres, what is the di stribution between sales of new and retreaded tyres?
How is that distribution affected, if at all, by the existence of the import ban?

Response of Brazil
78. Between 2000 and 2005, the distribution in the market share of new and retreaded tyres in
Brazil changed as following:
 New tyres (domestic): decreased from 54.2% to 50.8%.
 New tyres (imported): increased from 6.6% to 9.1%.
 Retreaded tyres (domestic): increased from 34.3% to 39.7%.
 Retreaded tyres (imported): decreased from 4.9% to 0.4%.
79. The data demonstrate that new tyre manufact urers in Brazil have not benefited from the
import ban – their market share fell, while the market share of imported new tyres has increased.
80. The data on new tyres were provided by the new tyre manufacturers association, ANIP, and
refers to sales in the domestic market. The data on domestic retreaded tyres were provided by the
retreaders association, ABR, and refers to production, which, due to negligible exports, is practically
equal to domestic market sales. The import data we re provided by the Ministry of Development,
Industry and Foreign Trade.

Question 25. To Brazil.
Please comment on the following passage of a Tec hnical Note of 3 October 2000 of INMETRO cited
by the European Communities at paragraph 81 of its first written submission and mentioned again in
paragraph 35 of the European Communities' first oral statement:

 "the national tyre reconditioning industry, mainly the remoulded tyre industry, needs to
import used tyres in order to use the carcasses as ra w material. It is widely confirmed that using
domestic used tyres to obtain the carcasses is economically unviable given our conditions of use".

Response of Brazil
81. There are two reasons why the European Communities' reliance on Technical Note
INMETRO 83/2000 is misplaced: first, the note me rely memorializes the position of the industry's
stakeholders as stated to INMETRO. It does not reflect INMETRO's position; and second, the note
talks of economic viability, not about availability of suitable casings:
(e) Legal effect
The note's only function was to memori alize INMETRO's communications with
representatives of Brazil's retreading industry. The views that the note reflects are not the
official views of Brazil's authorities, as the Eu ropean Communities suggests, but the views of
the domestic retreaders. The note is not based on any independent investigation by
INMETRO and is by no means a fi nal rule or a statement of INMETRO's official position.
INMETRO's actual position was formalized in Ru le No. 13 of 23 January 2004, which made
no mention of suitability.
The European Communities' reliance on the note is particularly disingenuous because
INMETRO has repudiated the document. See Nota Técnica INMETRO DQUAL 15/2005
(Exhibit BRA-96). INMETRO took the unusual step of specifically repudiating the note
because domestic retreaders used it in courts and in the media to support the low suitability
argument, as the European Comm unities does now. In its letter to one of the retreaders,
INMETRO threatened legal action should such misuse continue. In that letter, INMETRO
expressed concern that the retreader's use of th e note created an appearance that a quasi-
governmental agency shared the retreader's position on suitability. INMETRO has made clear
that the note "had no validity whatsoever" and that any technical note is but an "opinion, not
binding the Administration or private parties to its motive or conclusions, unless approved
by... Regulations." See Notificação INMETRO/DQUAL 10/2005 (Exhibit BRA-97).
(f) Economic viability
In addition, the note did not mention suitability at all – it only stated that obtaining domestic
carcasses was not economically viable. Economic viability is not the same as the actual
suitability of domestic casings – it merely refers to the higher costs of obtaining domestic
casings.
Question 26. To Brazil.
Could you please comment on the statement made by the European Communities in paragraph 39 of
its first oral statement about the origin of the used tyres retreaded in Brazil?

Response of Brazil
82. The rationale behind the import ban on retreaded and used tyres was to compel the Brazilian
retreaders to use only casings collected in the count ry, and thus to carry out the waste management
policy designed by the environmental authorities. However, due to the preliminary injunctions,

Brazil's retreaders processed not only domestic, but also foreign casings. The European Communities'
own numbers, however, do not support its assertion th at Brazilian retreaders operate largely with
imported casings. Even if Brazil retreaded all of the 10.5 million casings imported in 2005, this
would have accounted for just 56 per cent of tyres retreaded in Brazil that year. See Exhibit BRA-95.
The actual percentage is even lower because, as explained in response to Question 16, many imported
casings are not suitable for retreading and are discarded after pre-selection.
C. THE IMPORT PROHIBITION
Question 27. To the European Communities.
Could you please clarify whether you are seeking a ruli ng only in respect of Portaria No. 14, or also
in respect of other measures? (see reference in European Communities' first written submission
footnote 34 to 59).

Response of the European Communities
83. As regards the prohibition on imports of re treaded tyres, the European Communities is
primarily seeking a ruling in respect of Portaria S ecex No. 14, which it unders tands to constitute the
current legal basis of the ban.
84. However, the European Communities notes that Brazil has, in the past, claimed that
prohibitions on the importation of used goods equally apply to retreaded tyres. 22 During the first
substantive meeting with the Panel, Brazil equally referred occasionally to retreaded tyres as a type of
used tyre.23
85. As the European Communities has already set out, retreaded tyres are not to be considered as
used tyres. However, if the Brazilian authoriti es were to apply the current measures banning the
importation of used goods 24 also to retreaded tyres even if Po rtaria Secex No. 14 were amended by
removing retreaded tyres from the import ban, then this would equally constitute a violation of
Brazil's WTO obligations.
86. The European Communities would suggest asking Brazil for a clarification on this issue.
Should Brazil reply that it would apply the measure s banning importation of used goods to retreaded
tyres, then the European Communities would equally request a ruling with respect to those measures,
but only to the extent that they were to apply to imports of retreaded tyres.
Question 28. To Brazil.
The relevant Brazilian measures concerning the import prohibition on retreaded tyres have been
revised twice respectively in 2003 and 2004 following th e introduction of the first regulation to this
effect (i.e. Portaria SECEX No. 8) in 2000 ( see reference in European Communities' first written
submission paragraphs 53-55). Could Brazil explain the purpose of these revisions?

Response of Brazil
87. Portarias SECEX 17/2003 and 14/2004 were adopted with the purpose of consolidating
foreign trade regulations in a single legal documen t to improve transparency and facilitate foreign
trade operations. These portarias simply mirror the text of Portaria SECEX 8/2000 and Portaria
SECEX 2/2002, which introduced the MERCOSUR exemption.

22 European Communities' first written submission, para. 71, on Brazil’s defense before the
MERCOSUR Arbitral Tribunal.
23 Brazil’s first oral statement, para. 26: "used tyres, including retreaded ones".
24 European Communities' first written submission, para. 59, fn. 34.

Question 29. To Brazil.
Brazil states in paragraph 65 of its first written subm ission that the imports of retreaded tyres in its
territory continuously increased until 1998, when it clarified that its existing import ban on used
consumer goods included retreaded tyres. Please explain how specifically Brazil 'clarified' its
policy? Does it mean that imports of retreade d tyres were banned by Brazil even before 2000 when
Portaria SECEX No. 8 was established?

Response of Brazil
88. Yes, Brazil has banned imports of used and retreaded tyres since Portaria DECEX No. 8 of
10 May 1991. However, because that regulation dea lt with used consumer goods in general, and did
not explicitly name tyres or any other goods, so me courts and customs authorities erroneously
concluded that it did not apply to retreaded ty res or used tyres imported as raw materials for
retreading. To safeguard the integrity of the prohibition, Brazil adopted Portaria SECEX 8/2000,
which explicitly prohibited imports of retreaded a nd used tyres, whether imported as part-worn tyres
or raw material for retreading.
Question 30. To Brazil.
Please clarify the meaning of the terms "used and retreaded tyres" in Article 40 of Portaria No. 14.

Response of Brazil
89. Because Portaria SECEX 14/2004 is a fo reign trade regulation, it employs the
HS terminology. Thus, the terms "used" and "retread ed tyres" refer, respectively, to HS tariff lines
4012.20 and 4012.11, 4012.12, 4012.13, and 4012.19.
Question 31. To the European Communities.
In paragraph 56 of your first written submission, you cite Article 40 of Portaria No. 14 as referring to
"retreaded used tyres". It appears that the original text version of this provision refers to "retreaded
and used tyres". Could you please clarify what products are, in your understanding, covered under
this provision (i.e. on the one hand, used tyres, and on the other hand, retreaded tyres, or tyres that
are both used and retreaded)?

Response of the European Communities
90. In the translation provided by the European Co mmunities, the text "retreaded used tyres"
should be corrected to read "retreaded and used ty res", in conformity with the Portuguese original.
The European Communities understands Article 40 of Po rtaria No. 14 to apply both to used tyres and
to retreaded tyres.
Question 32. To Brazil.
Article 40 of Portaria No. 14, as cited by th e European Communities at paragraph 56 of its first
written submission, refers to "imports of retreaded used tyres to be used as consumer goods or raw
materials…". Could you please clarify whether any ot her uses of the tyres at issue would be possible?
If so, what uses? Specifically, can retreaded tyres be imported for purposes other than being used as
consumer goods?

Response of Brazil
91. No other uses exist. Retreaded tyres are impor ted to be used only as consumer goods. The
language "to be used as consumer goods or raw ma terials" modifies the term "used tyres". The
language clarifies that used tyre imports are prohi bited whether they are imported as part-worn tyres
for additional use "as is" (consumer goods) or as raw material for retreading. The purpose of this
language is to remove any ambiguity about the legality of importing used tyres for retreading.

Question 33. To Brazil.
Brazil did not provide, in its first writte n submission any specific responses to the
European Communities' claims that the import prohibition, the fines on importation and marketing,
the state measure and the MERCOSUR exemptions are in consistent with vari ous provisions of the
GATT (i.e. Article XI:1, Article III:4, Article I:1 and Article XIII:1). Does this mean that Brazil
concedes the European Communities' claims in th is respect and that the Panel can accept the
European Communities' arguments in respect of these claims?

Response of Brazil
92. Brazil does not contest that the measures in question are prima facie inconsistent with Articles
I:1, III:4, XI:1, and XIII:1. Nevertheless, Brazil ha s demonstrated that the measures are justified by
Articles XX(b) and (d), and XXIV, and therefore are not inconsistent with the those provisions. To
the extent that the European Communities claims th at the fines violate Article III:4, Brazil does not
acknowledge any inconsistency because the fines are an cillary to the import ban and, therefore, are a
prima facie violation of article XI:1, not article III:4.
D. A
RTICLE XX(B) DEFENCE AND THE EXISTENCE OF ALTERNATIVE MEASURES
Question 34. To the European Communities.
Do you accept that there are human health risks associated with waste tyres (see paragraph 16 of
your first oral statement)? If so, could you please cl arify whether, in your view, this is sufficient for
the measures at issue to fall within the scope of Article XX(b) ?

Response of the European Communities
93. Waste tyres are considered as inert waste in the Brazilian legislation 25 and they are classified
as non-hazardous waste in the European Communities' legislation. 26 Health risks may arise from
waste tyres only in case of incorrect management. So me of the arguments advanced by Brazil in this
case prove this assertion: only abandoned tyres or tyres negligently placed in monofills may become
breeding places for mosquitoes and only accidents or arsons in badly designed or uncontrolled
monofills cause smoke plumes.
94. Besides, in our case, the ban is not related to w aste tyres but to retreaded tyres, which, as the
European Communities has explained, are new product s made with recycled material. Thus, the ban
has no direct relationship with the interests protected, which are life and health in this case.
95. Finally, as the European Communities explained in its first written submission and its first
oral statement and Korea in its third party submission, the import ban is not designed to protect the
interest at stake because of three flaws in the design of the system: first, not all new tyres sold in
Brazil are retreadable or retreaded; second, tyres ot her than passenger car tyres, whose import ban is
also banned, are retreadable several times, and, thir d, the import ban is not applied to retreaded tyres
from MERCOSUR countries. Moreover, confirmation that import bans on retreaded tyres are not
related to environmental protection can also be fou nd in the rulings, awards and submissions made by
Brazilian and MERCOSUR authorities mentioned in paragraphs 130 to 133 a nd 164 to 166 of the
European Communities' first written submission.
96. For all these reasons, the European Communities cannot accept that Brazil´s assertion that the
aim of the ban is to protect life and health is su fficient for the measures at issue to fall within the
scope of Article XX(b). The justification is apparent and not real.

25 Article 1 (b) and 4 of Resolution CONAMA No 23 of 12 December 1996, Exhibit EC – 33.
26 Code 16 01 03 of the Index in relation to paragraph 4 of the Annex to Commission Decision
2000/532/EC of 3 May 2000 establishing a list of wastes, Exhibit EC - 74.

Question 34bis. To Brazil.
Could you please clarify what are the exact envi ronmental risks posed by the disposal of tyres
(Brazil's first written submission paragraphs 18 and 29-37)?

Response of Brazil
97. Stockpiling, one of the disposal methods that the European Communities endorses, leads to
propagation of mosquitoes that carry diseases, such as dengue, yellow fever, malaria, and West Nile
virus. These diseases impact both humans and animals. Stockpiled tyres can also catch fire, and the
pyrolytic oil released during tyre fires contamin ates surface water, soil, and groundwater. This
contamination damages animal and plant life. Dioxi ns and other pollutants released during tyre fires
impact the health of animals in the same manner th at they impact human health. The same pollutants
are released during incineration in cement kilns, another method the European Communities endorses.
While stockpiling and incineration are the dispo sal methods that cause the most harm to the
environment, they are not the only ones. Studies have shown, for example, that artificial reefs made
of waste tyres (a civil engineer ing use) produce toxic leachate that harms rainbow trout and other
forms of aquatic life. See Exhibit BRA-1. See also Non-Party Submission by Humane Society
International (Exhibit BRA-98) for additional information.
Question 35. To Brazil.
Could you clarify how exactly the environmental ri sks that you identify relate to the protection of
"human, animal or plant life or he alth" within the meaning of Article XX(b)? (see statements in e.g.
Brazil's first written submission paragraphs 4, 6, 20, 21 and 22).

Response of Brazil
98. Please see answer to Question 34bis.

Question 36. To Brazil.
Could you please clarify what exactly is the level of protection you are seeking to achieve through the
import prohibition on retreaded tyres?

Response of Brazil
99. Brazil seeks to achieve a high level of protec tion through the import ban. The level of
protection sought is achieved by avoiding the gene ration of additional tyre waste to the extent
possible. The reduction of any amount of tyre waste contributes to the end pursued. As a legal
matter, WTO Members have the right to set the leve l of protection they deem appropriate and are not
required to quantify that level in exact terms, since, as a practical matter, such quantification would be
very difficult, if not impossible. See Appellate Body Report, EC – Asbestos, at para. 167.
Question 37. To both parties.
Could you please elaborate on whether policies to address tyre waste by "non-generation of
additional waste" are a generally recognized means of addressing the risks arising from waste tyres?
Could you please also indicate the extent to which policies based on the "lifecycle" of the product are
a generally recognized means of dealing with waste management issues? In addressing this question,
please cite any relevant international standards or reference studies, as well as specific illustrations
of the application of such policies.

Response of the European Communities
100. In relation to waste management, the reduction principle has only been recognised in
Article 4(2)(a) Basel Convention, but limited to the waste streams covered by the Convention

(hazardous waste and households waste) and subject to taking into account social, technological and
economic aspects. The Rio Declaration adopted in June 1992 does not mention the principle27, though
a reference can be found in Chapter 21, heading A, of Agenda 21, but only limited to the adoption of
programmes to reduce the production of agrochemical wastes, containers a nd packaging materials,
which do not meet hazardous characteristics.28 Waste tyres are not mentioned.
101. This notwithstanding, the European Communiti es agrees that reduction of waste is, besides
reuse, recycling, and recovery, one of the means of addressing waste management issues. However,
this is a guiding principle and does not mean that reduction of waste should, under all environmental
and economic conditions, be preferre d to other waste management opti ons. Such an approach would
imply the prohibition of products that produce or turn into waste, which is not feasible for most
products, including tyres. For the same reason, an im port restriction cannot simply be justified by the
desire to reduce waste from imported products.
102. As regards the second part of the question, th e European Communities is not aware of any
relevant international standards on the lifecycle of products. In 1994, the European Communities
adopted Directive 94/62 on packaging and packag ing waste, whose Article 4 requires the Member
States to take preventive measures to reduce waste. This Directive also contains recycling and
recovery targets that take into account the overall environmental benefits of these options over the life
cycle of the concerned materials. Articles 7 and 8 lay down provisions on return, collection, recovery,
marking and identification systems. Other specific obligations in relation to other waste streams are
found in Articles 4 (product design) and 5 (separate collection) of Directive 2002/96 on waste
electrical and electronic equipment and in Article 4 (prevention) and 5 (collection) of Directive
2000/53 on end-of life vehicles. None of these Di rectives establishes import ban as a measure to
reduce waste production. The European Communi ties has not adopted specific measures on waste
tyres, with the exception of the ban to landfill used tyres laid down in Article 5(3)(d) of Directive
1999/31 on the landfill of waste, which is aimed at increasing the reuse, recycling and recovery of
used tyres.
103. Moreover, the European Communities would add that the present case concerns the
justification of an import ban under Article XX(b ). This requires Brazil to demonstrate the its
measure is necessary for the protection of human, an imal or plant life or health, and that it is in
accordance with the requirements of the chapeau of Article XX. The European Communities does not
see that considerations regarding the life-cycle of pr oducts, and of tyres in particular, are relevant in
this context.
Response of Brazil
104. Yes, policies to address tyre waste by "non-gen eration of additional w aste" are a generally
recognized means of addressing the risks arising from waste tyres.
105. See EU Council Directive 75/442/EEC, of 15 July 1975, on Waste, Art. 3.1(a) (Exhibit BRA-
105) – "Member States shall take appropriate steps to encourage the prevention, recycling and
processing of waste, the extraction of raw material s and possibly of energy therefrom and any other
process for the re-use of waste".
106. See EU Community Strategy for Waste Management, Communication from the Commission,
COM(96)399 final, 30 July 1996, para. 20 (Exhibit BRA-106) – "The Commission therefore confirms
the hierarchy of principles established by the strategy document of 1989 that prevention of the
generation of waste shall remain the first priority, followed by the recovery of waste and finally by the
safe disposal of waste".

27 Exhibit EC-53.
28 Exhibit EC-75.

107. See EU Council Directive 1999/31/EC, of 26 April 1999, on the landfill of waste, Recital (8)
(Exhibit BRA-42) – "Whereas both the quantity and hazardous nature of waste intended for landfill
should be reduced where appropriate".
108. See EU Directive 2000/53/EC of the Europ ean Parliament and of the Council, of
18 September 2000, on end-of-life Vehicles, Recital (4) (Exhibit BRA-43) – "In order to implement
the precautionary and preventive principles and in line with the Community strategy for waste
management, the generation of waste must be avoided as much as possible".
109. See EU Directive 2000/53/EC of the Europ ean Parliament and of the Council, of
18 September 2000, on end-of-life Vehicles, Recital (11) (Exhibit BRA-43) – "It is important that
preventive measures be applied from the conception phase of the vehicle onwards and take the form,
in particular, of reduction and control of hazardous substances in vehicles, in order to prevent their
release into the environment, to facilitate recycling and to avoid the disposal of hazardous waste. In
particular the use of lead, mercury, cadmium and hexavalent chromium should be prohibited. These
heavy metals should only be used in certain appli cations according to a list which will be regularly
reviewed. This will help to ensure that certain materials and components do not become shredder
residues, and are not incinerated or disposed of in landfills".
110. See EU Directive 2000/53/EC of the Europ ean Parliament and of the Council, of
18 September 2000, on end-of-life Vehicles, Art. (1) (Exhibit BRA-43) – "This Directive lays down
measures which aim, as a first priority, at the prev ention of waste from vehicles and, in addition, at
the reuse, recycling and other forms of recovery of end-of life vehicles and their components so as to
reduce the disposal of waste, as well as at the improvement in the environmental performance of all of
the economic operators involved in the life cycle of vehicles and especially the operators directly
involved in the treatment of end-of life vehicles".
111. See EU Directive 2000/76/EC of the Europ ean Parliament and of the Council, of
4 December 2000, on the incineration of waste, R ecital (8) (Exhibit BRA-34) – "The Communication
from the Commission on the review of the Community Strategy for waste management assigns
prevention of waste the first priority, followed by re use and recovery and finally by safe disposal of
waste; in its Resolution of 24 February 1997 on a Community Strategy for waste management (6),
the Council reiterated its conviction that waste preven tion should be the first priority of any rational
waste policy in relation to minimising waste production and the hazardous properties of waste."
112. See EU Decision nº 1600/2002/EC of the European Parliament and of the Council, of
22 July 2002, laying down the Sixth Community Environment Action Programme, Recital (5)
(Exhibit BRA-107) – "Greater focus on prevention and the implementation of the precautionary
principle is required in developing an approach to protect human health and the environment".
113. See EU Decision nº 1600/2002/CE of the European Parliament and of the Council, of
22 July 2002, laying down the Sixth Community Environment Action Programme, Art. (8)
(Exhibit BRA-107) – "The aims set out in Article 2 should be pursued by the following objectives:
(...) Achieving a significant overall reduction in the volumes of waste ge nerated through waste
prevention initiatives, better resource efficiency a nd a shift towards more sustainable production and
consumption patterns; a significant reduction in the quantity of waste going to disposal and the
volumes of hazardous waste produced while avoiding an increase of emissions to air, water and soil".
114. See Environment Agency (UK), Tyres in the Environment, at § 4.1 (Exhibit BRA-1) – "The
most efficient way of dealing with waste is to find ways to prevent or reduce its production in the first
place. It is currently only possible to produce tyres with a limited lifespan, and there will always be
used tyres to deal with. But there are ways to reduce the number of tyres we use and therefore the
quantity of waste generated".

115. See also Non-Party Submission by Center for International Economic Law (Exhibit BRA-99).
Question 38. To the European Communities.
In paragraph 84 of your first oral statement, you indicate that Brazil has numerous alternatives at its
disposal, "including measures aiming to reduce the a ccumulation of waste tyres". In light of this
statement, could you please clarify :
 (a) whether you consider that measures aimi ng to reduce the accumulation of waste tyres
can, as a matter of principle, constitute a legitimate response to the health problems
arising from waste tyres ; and
 (b) what alternatives you are referring to, other than an import ban, as far as retreaded
tyres are concerned ?

Response of the European Communities
116. The European Communities considers that, as a matter of principle, measures aiming to
reduce the accumulation of waste tyres can constitute a legitimate response to health problems arising
from waste tyres, provided that the reduction measu res are not discriminatory and that the necessary
measures have been taken to manage all waste tyres streams correctly. Otherwise, the measures may
hide the protection of non-legitimate interests.
117. Paragraph 84 of the European Communities' first oral statement refers to measures aiming at
reducing the accumulation of waste tyres that ar e mentioned in paragraphs 57 to 67 of the
European Communities' FOS. In relation to tyres th at have already been retreaded, any policy aiming
at a longer safe use of retreaded tyres will contribute to the reduction in the accumulation of waste
tyres. Better vehicles maintenance, including t echnical inspection, as well as educational campaigns
on better driving habits are two examples of this kind of policies. In addition, Brazil might also adopt
measures which reduce the use of cars in Brazil, for instance through the promotion of public
transport in urban areas.
Question 39. To the European Communities.
Please comment on the following passage of the EC directive on Incineration of Waste cited at
paragraph 75 of Brazil's first written submission:

 "waste prevention should be the first priority of any rational waste policy in relation to
minimizing waste production and the hazardous properties of waste."

Response of the European Communities
118. This passage cited by Brazil in its first written submission is taken from recital 8 of Directive
2000/76 on the incineration of waste and forms part of a policy declaration made by the Council of
Ministers of the European Communities in its Resolution of 24 February 1997 on a Community
Strategy for waste management.
119. The recital makes a reference to the first in the hierarchy of policy principles in waste
management in the European Communities: reduce, reuse, recycle and recover. These principles are
guidance for the European Communities and the EC Member States when adopting legislation on
those waste streams requiring specific legislati on. However, as the European Communities has
already explained in its answer to Question 37, this does not mean that policies to reduce waste should
preferred to other waste management options at a ll cost, nor that the reduction of waste justifies
restrictions imposed on imported products.

Question 40. To Brazil.
What is the precise impact of the restriction on the importation of retreaded tyres, on the generation
of additional waste in Brazil? In answering this question, please indicate as precisely as possible
how much less waste Brazil accumulates, on an an nual basis, as a result of the import restriction?
How is this calculated?

Response of Brazil
120. The precise impact of Brazil's restriction on the importation of retreaded tyres on the
generation of additional waste in Brazil is clearly indicated by the following figures:
Brazil: Importation of Retreaded Tyres
(in tonnes)

Year Imported Retreaded Tyres
1999 18,455
2000 17,597
2001 8,181
2002 3,610
2003 1,507
2004 2,274
2005 1,727

121. The importation of retreaded tyres into Brazil in 2005 corresponded to less than 10 per cent of
the volume in 1999, the year before the adoption of Portaria SECEX 8/2000. As Brazil has largely
demonstrated in this dispute, retreaded tyres are short lifespan products and their importation
generates unwanted additi onal volumes of waste tyres in the territory of the importing country.
Therefore, any reduction in the importation of such product necessarily also leads to a corresponding
reduction in the volume of waste tyres generated in the importing country.
122. Brazil never doubted that restricting the im portation of retreaded tyres would reduce the
generation of waste tyres in its territory. In fact , that is exactly why it banned imports of retreaded
tyres, as well as of used tyres. The precise calculation of how much less waste tyres Brazil
accumulated in the last years as a result of the import restriction applied on retreaded tyres is not an
easy task. To obtain such figures – which would al ways be estimates – reflecting the non-generation
of wastes in the Brazilian territory, it would be necessar y to work with different trade flow scenarios,
from the most conservative to the most explosive one. Moreover, since Brazil's measure is a non-
generation measure, any calculation of the benefits to the Brazilian environment of the restriction
should take into account what would happen if the measure was not in place.
123. The European Communities does not deny that it ex pects to export a lot of retreaded tyres to
Brazil in case the ban is removed and that is ex actly why it is challenging Brazil's measures in this
dispute. Brazil will be flooded with retreaded tyres from the European Communities and other
countries if it is forced to lift the ban. Sin ce retreaded tyres are short-lifespan products which
generate wastes earlier than new tyres, an opening of the Brazilian market to imports of such products
is certain to increase the generation of dangerous unwanted rubber wastes in Brazil.
124. Although Article XX does not require any kind of quantification, Brazil will do its best to
present to the Panel, as soon as possible, estimates as precise as possible on how much less tyre waste
it accumulates as a result of the import ban on retreaded tyres.

Question 41. To Brazil.
The European Communities argues, in paragraph 127 of its first written submission, that the import
ban on retreaded tyres does not reduce the rate of accumulation of waste tyres, inter alia because :

 "... it can be assumed that practically every potential sale of an imported retreaded tyre is
currently, due to the import ban, substituted by a sale in Brazil of a new (domestic or imported) tyre
or of a domestic retreaded tyre, most likely manufactured from an imported used tyre… ".

Please comment on this assertion.

Response of Brazil
125. The assertion is wrong. It is based on the assu mption that virtually all tyres retreaded in
Brazil are manufactured from imported used tyres. This is not the case. See Exhibit BRA-95. As
explained in the response to question 20, between 2001 and 2005, more than 84 million tyres were
retreaded in Brazil. In the same period, only 27 million used tyres were imported. Not all of the
imported casings are suitable for retreading, and even if they were, some 57 million tyres would have
still been retreaded from domestic casings.
Question 42. To the European Communities.
Please comment on Brazil's arguments in paragraph 55 of its first oral statement, including the
conclusions of the report of the British Used Tyre Working group cited by Brazil in that paragraph.

Response of the European Communities
126. Contrary to what Brazil claims in paragraph 55 of its first oral statement, paragraph 11.5 of
that report does not refer to the problems raised by imports of retreaded tyres. The report refers, on
the contrary, to the existence, within the Eu ropean Communities single market, where goods (waste
included) flow freely across borders of the EC Me mber States, of different national regimes on the
management of waste tyres. This is not the issue at stake in the case before the Panel.
Question 43. To Brazil.
Under CONAMA Resolution 258, are the di sposal plans submitted by tyre importers and
manufacturers approved by the Brazilian authorities? If so, what types of disposal methods do such
authorities usually approve? What types of dispos al methods are used by the Brazilian companies
(46 according to Brazil) that are authorized to process waste tyres in Brazil? (see statement in
Brazil's first written submission paragraphs 71 and 74).

Response of Brazil
127. Under CONAMA Resolution 258, before they can import tyres, the importers must
demonstrate that they have already disposed of the amount of waste tyres corresponding to the
number of tyres they intend to import. Manufactur ers must present annual reports of their production
and demonstrate that they have disposed of the corresponding amount of wastes in the same period.
128. The disposal methods are not proposed by the importers and manufacturers. Rather, they are
licensed by state environmental authorities accordi ng to their assessment of the best disposal
alternatives available. The disposal methods usually approved by these authorities are: co-processing
in cement kilns, co-processing with bituminous schis t (a form of pyrolysis), rubber asphalt, rubber
products and appliances (sandals, shoes, carpets).

Question 44. To Brazil.
Could Brazil provide more information on the waste tyre disposal schemes implemented in the States
of Paraná, Pernambuco and Paraíba, including on the amount of tyres disposed of under these
schemes and the disposal methods used? (see ref erences in European Communities' first written
submission paragraph 113).

Response of Brazil
129. These programs are collection schemes that private companies have introduced to meet the
obligations of CONAMA Resolution 258. Under these programs, private companies typically
compensate people to collect waste tyres and take them to ecopontos (collection points for waste
tyres). According to the participating companies, mo st of the collected tyres are then incinerated in
cement kilns.
130. These programs are not innovative waste tyre disposal solutions – they are merely collection
initiatives implemented by the private sector to comply with federal collection and disposal
obligations. While these programs may reduce waste tyre accumulation risks, they do not in any way
reduce or eliminate the disposal risks.
Question 45. To Brazil.
Are there any disposal obligations for vehicle own ers in Brazil in relation to their new and retreaded
tyres after the end of their life cycles?

Response of Brazil
131. No. Brazil has opted to attribute collection and disposal obligations in relation to tyres to
manufacturers and importers and has re inforced these obligations by h eavy fines. Brazil believes that
it is more effective, from an enforcement perspec tive, to impose such post-consumption obligations
on importers and manufacturers than on the consumers.
Question 46. To the European Communities.
Please comment on Brazil's comments on the availab ility of alternative measures at paragraph 54 of
its first oral statement, especia lly the existence of a "gap between supply and demand" in respect of
certain disposal methods.

Response of the European Communities
132. Brazil's comment refers to the availability of alternative measures in relation to material
recycling, namely two disposal methods: civil engineering and the construction of playgrounds.
Though there are other material recycling methods , the European Communities would like to point
out that Brazil insists on the tactic of eliminating alternative methods one by one by claiming, among
other arguments, that the disposal capacity of each of these methods is very limited. The
European Communities considers that, even if in resp ect of a certain disposal method there could be a
gap between supply and demand, this cannot imply th at the method is discarded as irrelevant for the
purposes of protecting the interest that the measur e at issue is pretended to pursue. As the
European Communities explained in paragraph 72 of its first oral statement, all options should be
implemented within a policy scheme, not in isola tion, in order to ensure a sound management of
waste tyres. Brazil's arguments show that this kind of policy scheme does not exist for its territory.

Question 47. To the European Communities.
Could you please clarify what is, in your view, th e relevance of circumstances specific to the country
implementing the measures, in an assessment of the availability of alternative measures under
Article XX(b), including:

 (a) Technical and financial constraints; and

 (b) Specific geographical conditions.

Please also indicate which such circumstances are relevant in this case and how they might affect the
availability to Brazil of the alternative measures you have identified.

Response of the European Communities
133. Circumstances specific to a country implementi ng measures that are clai med to be justified
under Article XX(b) are relevant for assessing the availa bility of alternative measures. It is not easy
to list those circumstances, but those mentioned in the question should be taken into account.
134. However, the European Communities considers that Brazil cannot claim to have difficulties in
implementing alternative measures to the import ba n on retreaded tyres. According to the World
Bank's classification, Brazil is a low middle inco me country, but its gros s national product in 2003
amounted to 1,556,182 million R$ (around 565,885 million €). 29 Brazil is a country with a
functioning political system and administration and a civil society capable of reacting to the problems
arising from waste management, as it is shown in the presentation prepared by Mr Marco Antonio
Borzino, Solid Waste Programme Coordinator in the Ministry of Environment in Brazil,
30 where it is
explained that many cities in Brazil are developing projects with non-governmental organisations and
with garbage pickers associations to ensure envir onmentally sound management of solid wastes. The
programme "Paraná Rodando Limpo" and similar pr ogrammes implemented in some other States in
Brazil also prove the initiative and capacity of the Brazilian society and companies to contribute to the
correct management of waste tyres.31
135. Moreover, Brazil is the 12 th cement producer in the world, with 58 cement installation and a
production of 34 million tons in 2003, as explaine d by the "Sindicato Nacional da Indústria do
Cimento" in its 2004 Report. 32 It also has 111 paper mills located in its territory, 45% of the paper
mills in Central and South America, according to the 2004 Guide to Paper Mills across the Globe. 33
Finally, the "Paraná Rodando Limpo" programme counts with the participation of "Petróleo Brasileiro
S.A." (Petrobras), a partially state-owned company in the energy sector, one of the most important in
the world with a capitalisation of 28,680,653 thousand € in 2006, 34 and net earnings of 49,675 billion
€ in 2005. 35 Besides its financial capacity, Petrobras has developed its own technology and has the
capacity to transform 400 tons of tyres a day into oi l and gas in its installation in São Mateus do Sul
(Paraná).
136. Therefore, the European Communities believes that there are no technical constraints
preventing Brazil from using the different alternatives for the disposal of waste tyres.

29 Exhibit EC – 76.
30 Exhibit EC – 77.
31 The European Communities has already referred to th ese programmes in para. 113 of its first written
submission and in para. 73 of its first oral statement.
32 Exhibit EC – 78.
33 Exhibit EC – 79.
34 Exhibit EC - 80.
35 Exhibit EC - 81.

137. In relation to the geographical conditions, Brazil has claimed that the huge size of its territory
creates difficulties in managing waste tyres. Th e European Communities considers that whereas
managing waste tyres might be a problem for small and micro States, this is not the case for countries
of the size of Brazil, which, moreover, has 83 % of urban population.
36 If the argument is that there
are large, isolated and virgin regions in Brazil, as the Amazon, the first flaw in that argument would
be that Brazil is not expected to deal with a huge number of waste tyres in that region, due to the
extreme low population density (less than 1 inhabitant per km² in general terms) and the very limited
road infrastructure, as evidenced in the maps from the Brazilia n Institute for Geography and
Statistics.37 Moreover, these regions will not have a retr eading industry, which will often mean that
new tyres become waste tyres after their first life, in the same way as retreaded tyres. Finally, the
problems of the distribution and transportation of tyres into and from such regions pose themselves
one way or another, no matter what kind of tyres are involved.
Question 48. To the European Communities.
What is the position of the European Communities in relation to Brazil's statement that incineration of
waste tyres produces health and environmental risks even if it is carried out under controlled
conditions? (see position in Brazil's first written submission paragraphs 43 and 122).

Response of the European Communities
138. Incineration of tyres under controlled conditi ons does not represent a significant risk for
health and environment. In the European Comm unities, and surely also in Brazil, operational
conditions, technical requirements and emission lim it values for plants incinerating waste guarantee a
high level of environmental and huma n health protection. Otherwise, incineration of tyres in kilns
would have been prohibited, which is not the case either in the European Communities or in Brazil.
The 2006 Report by the European Tyre & Rubber Manufacturers' Association 38 and the 2004 Report
of the "Sindicato Nacional da Indústria do Cimento" in Brazil 39 show clearly that co-incineration of
waste tyres in cement kilns are common practice in both WTO Members.
139. Moreover, as the document on "Formation and Re lease of POPs in the Cement Industry"
acknowledges,40 the most recent scientific evidence has s hown that incineration of waste tyres in
cement kilns does not influence or affect the emi ssions of dioxins and furans, as compared with the
combustion of conventional fuels. Finally, SO² em issions may be reduced when waste tyres are co-
incinerated with conventional fuels due to their lo wer sulphur content (1% in tyres versus around 5%
in coal and petcoke). A study performed by IV L Swedish Environmental Research Institute Ltd
reached the conclusion that "the u tilization of used tyres [is] envir onmentally beneficial compared to
the use of 'virgin' raw materials" and that replacing co al as a fuel in the cement kiln with used tyres
was the second best scenario out of th e six that were assessed in the study. 41 This study also
concludes that, for lead, nickel, chromium and cadmi um, exactly the same result is obtained as for the
fossil energy use.

36 Exhibit EC - 82.
37 Exhibit EC – 83.
38 Exhibit EC – 84.
39 Exhibit EC – 85; at p. 44, the report states th at "O co-processamento na s fábricas de cimento
brasileiras é crescente, tendo aumentado 22 per cent en tre 2002 e 2003" (Co-incineration in Brazilian cement
kilns is increasing, having grown 22 per cent between 2002 and 2003).
40 Exhibit EC – 86.
41 Exhibit EC - 87.

Question 49. To Brazil.
Please comment on the argument made by the Eur opean Communities, in paragraph 92 of its first
oral statement, that "what is an arbitrary or unjustifiable discrimination must be established in
relation to the objectives of the measure at issue".

Response of Brazil
140. There is no defined set of factors on the basis of which it may be determined whether a
measure is being applied in an arbitrary or unjustif iable manner. The objective of the chapeau is to
prevent abuse of the exceptions contained in paragraphs (a) through (j) of Article XX. It is concerned
with the manner in which the measure is applied. Any and all factors that would help determine
whether the Member acted in good faith and had good cause for applying the measure in the manner
that it did are relevant. Which are those factors can only be determined on a case by case basis and in
light of the specific facts and circumstances of each case.
141. The objective of the measure at issue may be one of the many factors taken into account when
determining whether a measure provisionally justifie d under Article XX is be ing applied in a manner
that is not consistent with the chapeau of Article XX. Also relevant in this case are the reasons and
circumstances that led Brazil to exempt MERCOSUR countries from the import ban. The fact that the
exemption of MERCOSUR countries was introduced to comply with MERCOSUR provisions, as
interpreted by an arbitral award, demonstrates that Brazil is not acting capriciously or in bad faith in
how it applies the import ban and has not abused its right to take measures that are necessary to
protect human, animal or plant life or health.
Question 50. To Brazil.
Please comment on the European Communities' argume nts in paragraph 93 of its first oral statement
regarding:

 (a) Article XXIV:8(a) of GATT 1994; and

 (b) Article 34 of the Vienna Convention on the Law of Treaties.

Response of Brazil
(a) Article XXIV:8(a) of GATT 1994
142. The MERCOSUR exemption is not incompa tible with Article XXIV:8(a), as the
European Communities claims. The relevant part of Article XXIV:8(a) – the parenthetical – gives
Members that are part of a customs union the right to maintain duties and other restrictive regulations
between the constituent territories, based inter alia on the general exceptions in Article XX, and still
meet the requirement under Article XXIV:8 that restri ctions be eliminated with substantially all the
trade between the constituent territories. Artic le XXIV:8(a) cannot possibly be interpreted as
imposing an obligation on Members to maintain trad e restrictions between the constituent territories
by invoking Article XX. A Member may be requi red under a regional trade agreement to eliminate
trade restrictions between the c onstituent territories, without exception, and still exercise its right
under Article XX to take measures th at are necessary to protect human health and the environment,
including an import ban.
143. Contrary to the European Communities' sugg estion, WTO Members cannot justify otherwise
inconsistent measures by simply concluding agre ements with other Members that provide for
discriminatory treatment. First, the European Co mmunities is assuming that Members would act in
bad faith by trying to circumvent its obligati ons under the GATT by relying on an exception.
However, Members are presumed to act in good faith. See EC – Hormones (US) (Article 22.6 – EC),

para. 9. Moreover, that hypothetical agre ement between the Members that the European
Communities refers to would still have to meet th e requirements of Article XXIV for it to justify
discriminatory treatment that is contrary to Article I:1. Article XXIV contains safeguards ensuring
that only bona fide customs union parties could invoke the Article to justify prima facie-
discriminatory treatment. In other words, in the European Communities' hypothetical, countries
attempting to discriminate against other WTO members would have to prove that they have
liberalized substantially all trade among themselv es and substantially harmonized duties and trade
regulations for non-parties – all without raising ou tside trade barriers. By imposing such a high
burden, Article XXIV ensures against any potential abuse.
144. In this case, it is clear that the presumption of bad faith on which the European Communities
bases its argument is not present. The European Communities cannot possibly be suggesting that
MERCOSUR, the second biggest customs union in th e world, was designed and executed with the
sole purpose of discriminating in favor of MERC OSUR retreaders. The European Communities'
argument is both far-fetched and o ffensive. The European Communities' reliance on an extreme
hypothetical reveals that it cannot formulate a well-founded rebuttal argument based on the facts of
this case. It simply has no grounds to counter the concrete facts that fully support Brazil's invocation
of Article XXIV as a justification for its limited MERCOSUR exemption.
(b) Article 34 of the Vienna Convention on the Law of Treaties (VCLT)
145. Brazil's defense is in no way contrary to Artic le 34 of the VCLT, which provides that "[a]
treaty does not create either obligations or rights for a third State without its consent" (emphasis
added). The Treaty of Asunción does not create any rights or obligati ons whatsoever for the
European Communities. The European Communities' reading of Article 34 is incorrect when it
substitutes the word create with the word affect, as if it indicated rights and obligations of a third State
under other treaties. Clearly this is not the mean ing of Article 34 of the VCLT. In any case, the
Treaty of Asunción is not affecting the rights and obligations of the European Communities under the
GATT, because Brazil, under Articles XX and XXIV , has the right to exempt MERCOSUR countries
from the import ban. In other words, Brazil is si mply exercising its rights under the GATT to take
measures that are necessary to protect human health a nd the environment, provided that it applies that
measure in a manner that is not arbitrarily or unjustifiably discriminatory – which Brazil does.
Question 51. To the European Communities.
Please clarify how exports of used tyres "to ot her MERCOSUR countries" (see your first oral
statement, paragraph 97) contribute to a disguised restriction on international trade that would
benefit the Brazilian industry. Is it your position that imports of European Communities' used tyres to
Brazil and other MERCOSUR countries is an advant age to Brazil's retreaded tyre industry and a
disadvantage to the European Communities' retreaded tyre industry?

Response of the European Communities
146. The chapeau of Article XX refers only to a dis guised restriction on international trade without
requiring the existence of an advantage to traders in the importing country and a simultaneous
disadvantage in the exporting country. However, in our case, these two conditions are met. The
import ban on retreaded tyres protects Brazilian re treaders and Brazilian manufacturers of new tyres
from the competition of imported retreads and it has excluded European Communities and other
WTO Members exporters from the Brazilian market.
147. The continuing import of used tyres into Brazil from the European Communities (and other
WTO Members) contributes to the protection of the Brazilian domestic retreaders by ensuring them
the supply of the material necessary to continue its production of retreaded tyres, i.e. by enabling them
to produce and sell the retreads that can no longer be imported

148. Moreover, a disguised restriction to the benefit of imports from a particular country lies in the
fact that retreads may no longer be imported into Brazil from the European Communities, but they can
be imported from other MERCOSUR countries. The export of used tyres from the
European Communities to other MERCOSUR countries, notably Uruguay, is also relevant in this
context, since these tyres are used to produce retreade d tyres, which are then exported to Brazil. This
further increases the trade diversion created by the Brazilian ban, which benefits retreaders located
both in Brazil and in other MERCOSUR countries.
Question 52. To Brazil.
How does Article 50(d) of the Montevideo Treaty differ from Article XX(b) of GATT 1994?

Response of Brazil
149. Article 50 of the Treaty of Montevideo (1980) provides:
"No provision under the present Treaty shall be interpreted as precluding the adoption
and observance of measures regarding:
(a) Protection of public morality;
(b) Implementation of security laws and regulations;
(c) Regulation of imports and exports of arms , munitions, and other war materials and,
under exceptional circumstances, all other military equipment;
(d) Protection of human, animal and plant life and health;
(e) Imports and exports of gold and silver in bullion form;
(f) Protection of national treasures of artistic, historical or archeological value; and
(g) Exportation, use and consumption of nuclear materials, radioactive products or any
other material used for the development and exploitation of nuclear energy."
Question 53. To the European Communities.
Please comment on Brazil's argument, at paragraph 64 of its first oral statement, that the application
of the exemption for MERCOSUR imports is not arbitrary because it is included in the measure itself.

Response of the European Communities
150. The European Communities considers that what matters in interpreting the chapeau of
Article XX is the practical effects of the measure. One possibility is when the laws and regulations
are applied in a discriminatory manner by the administration or the judiciary. Brazilian courts
granting injunctions for the import of used tyres is an example mentioned in this case. But if the
discrimination is already lay down in the law itsel f and applied accordingly, this situation is also
covered by the chapeau. A different interpretation would allow to circumvent the requirements of the
chapeau and to diminish the role played by th e principle of good faith that, according to the
Appellate Body,
42 is at the origin of the chapeau.

42 Appelate Body Report, US – Shrimps, para. 158, already mentioned in European Communities' first
written submission, para. 144.

Question 54. To both parties.
Is the consistency of the MERCOSUR exempti ons under Article XXIV of GATT 1994 a relevant
consideration in assessing whether "a rbitrary or unjustifiable discrimination" within the meaning of
the chapeau of Article XX exists in the application of the import ban as a result of these exemptions?

Response of the European Communities
151. No. Justification under Article XXIV and th e assessment of an unjustifiable discrimination
under the chapeau of Article XX are separate exercise s. The assessment of the chapeau is only related
to the specific interests protected in letters a) to j) in Article XX. Because Articles XX and XXIV are
self-standing exceptions, the fulfilment of one canno t be a sufficient or necessary requirement for
satisfying the other.
Response of Brazil
152. No. Brazil and the European Communities agreed that it is not a relevant consideration in
their responses to the Panel's questions during the first substantive meeting of the Panel.
E. MEASURES AT STATE LEVEL
Question 55. To Brazil.
In light of the fact that an import prohibition is in place at the federal level, could you please clarify
what was the purpose of the State of Rio Grande do Sul's imposition of measures relating to the
importation and marketing of imported retreaded tyres?

Response of Brazil
153. The State of Rio Grande do Sul adopted the m easures in question in an attempt to prevent
imports of remoulded tyres from the bordering Urugua y, after the federal government authorized such
imports. As the federal governme nt understands, Rio Grande do Sul authorities were concerned that
the imports would increase the amount of tyre wast e in the state, and the associated risks for the
environment and public health.
Question 56. To Brazil.
Could Brazil clarify its statement during the first substantive meeting with the Panel that the state
laws at issue have no legal effect?

Response of Brazil
154. In Brazil, only the Federal Government can re gulate importation of products and issue import
licenses. Without an import license, which is issued by DECEX, no good can enter the country. State
measures that purport to regulate imports have no effect because states do not issue import licenses,
and the federal government will fo llow federal – not state – regula tions, in determining whether a
license should issue. Because Rio Grande do Sul ca nnot effect an import ban on its own, the state
measures at issue have no legal effect.

Question 57. To Brazil.
Does Law No. 12.381 establish an exception to the import prohibition set out in paragraph 1 of
Article 1 of Law No. 12.114 of the Brazilian State Rio Grande do Sul of 5 July 2004 (see
Exhibits EC-35, EC-37, BRA-80 and BRA-81)?

Response of Brazil
155. The amendments introduced by Law 12.381, permitting imports under certain conditions,
seem to conflict with Article 1 of La w 12.114, which prohibits imports of used tyres. It is not clear
whether the amendments intended to lift the import prohibition. In any even t, this is irrelevant
because these state measures have no legal effect: Article 22 (VIII) of Brazil's Constitution
(Exhibit BRA-100) gives the federal government excl usive power to regulate foreign and interstate
trade (see answers to questions 61 and 62).
Question 58. To Brazil.
Please clarify the meaning of the terms "imports" and "importation" in Laws No. 12.114 and 12.381.
Could this refer to the importation from another st ate in Brazil to the Brazilian State of Rio Grande
do Sul? Is it possible for the State of Rio Grande Do Sul to prohibit the circulation of retreaded tyres
in the state?

Response of Brazil
156. The terms "imports" and "importation" refer to the importation from other countries into
Brazil. These terms do not apply to trade among Br azilian states. Under Brazilian law, a state cannot
prohibit the circulation of goods within its terr itory. Interstate commerce falls within the exclusive
jurisdiction of the federal government, under Article 22 (VIII) of the Brazil's Constitution.
Question 59. To Brazil.
Do the marketing restrictions imposed by Law No. 12 .114 and/or the disposal obligations established
by Law No. 12.381 apply to retreads from other MERCOSUR countries?

Response of Brazil
157. The marketing restrictions imposed by Law 12.114 and the disposal obligations established
by Law 12.381 were intended to apply to retr eads from every country, including the MERCOSUR
countries. In fact, these state laws seem to ha ve been passed in reaction to the exemption of
MERCOSUR countries from the national import ban. In any event, these state measures have no
legal effect. See Brazil's Responses to Questions 61 and 62.
Question 60. To Brazil.
Have any retreaded tyres from the European Commun ities been imported into the Brazilian State Rio
Grande do Sul since the introduction of Law 12.381?

Response of Brazil
158. Approximately 27 tons of retreaded tyres entered Brazil through Rio Grande do Sul since
December 2005, the month following the introduction of Law 12.381. Brazil has no information on
their eventual destination, nor does it have info rmation on how many of these imports came from the
European Communities (Brazil does not disaggregate or igin information by port). However, nearly
all retreaded tyres imported into Brazil during those months came from Paraguay and Uruguay. If any
retreaded tyres from the European Communities did enter Brazil through Rio Grande do Sul, this
would have been a direct result of the preliminary injunctions, not of operation of the state measures.

Question 61. To Brazil.
Please explain what kind of demons tration by importers on their collection and disposal of used tyres
is necessary to satisfy the requirements under Law 12.381.

Response of Brazil
159. Brazil has no information on collection and disposal requirements contemplated by the state
legislators. Ultimately, there are no requirements in any state law that importers can satisfy in order
to obtain a permission to import, because only the fe deral government can regulate foreign trade and
grant import licenses (see Brazil's Response to Question 62). If importers attempted to obtain licenses
to import based on State Law 12.381, the federa l body responsible for granting such licenses
(DECEX) would deny the request, whether the fe deral import ban existed or not, and the likely
outcome of this situation would be a declarati on of the unconstitutionality of State Law 12.381 by the
Federal Supreme Court. This has not happened yet because Law 12.381 lacks any practical effect,
given the existence of the federal import ban.
Question 62. To Brazil.
Please comment on the European Communities' assertion, at paragraph 110 of its first oral statement,
that Brazil has offered no proof for its statement that to the extent that the state measure conflicts with
the federal measure, the federal measure will prevail. In addressing this question, please clarify the
legal basis for the hierarchy of norms that you refer to between state and federa l measures in Brazil.
Setting aside the question of the hierarch of norms between state and federal measures in Brazil, is a
specific court ruling required to have the state meas ures at issue declared null and void? Could you
identify a competent state court, if any, that is responsible for enforcing federal laws?

Response of Brazil
160. Technically, this is not a matter of hierarchy of norms, but rather a matter of jurisdiction.
Under Article 22 (VIII) of Brazil's Constitution, the federal government enjoys exclusive jurisdiction
to legislate on foreign and interstate trade. A Braz ilian state, therefore, is constitutionally prohibited
from legislating on matters of foreign trade, unless a supplementary federal law ("lei complementar")
authorises it to legislate upon a specific question relate d to such matter (Article 22, sole paragraph).
There is no supplementary law in the present case.
161. Article 23 (VI) of the Constitution gives stat es and the federal government concurrent
jurisdiction over environmental protection. Thus, Rio Grande do Sul can legislate, for instance, on
matters related to disposal of waste, but not on the importation. Consequently, every aspect of the Rio
Grande do Sul measures that relates to foreign or interstate trade is unconstitutional, and the federal
measures prevail.
162. In order to have the state measures at issue declared null and void, a specific court ruling –
i.e., a ruling by the Federal Supreme Court in an unconstitutionality ac tion ("ação direta de
inconstitucionalidade", cf. Art. 102 (I) (a) of the C onstitution) – is required. A declaration by the
Supreme Court on the unconstitutionality of a law or a provision in this type of a proceeding has erga
omnes retroactive effects. While lower courts can also rule on constitutionality, their rulings will
apply only inter partes.
163. Every court in Brazil, be it a federal court or a state court, is responsible for enforcing federal
laws. The jurisdiction of different state courts varies according to the subject matter and to the
geographic location, but federal laws are valid in the entire country and must be enforced by every
court. If a decision by a state court in any way cont radicts a federal law, such decision will be subject
to a special appeal ("recurso especial") to the High Court of Justice (cf. Art. 105 (III) (a) and (b) of the
Federal Constitution).

Question 63. To the European Communities.
The European Communities cites Law No. 12.381 of the Brazilian State Rio Grande do Sul of
28 November 2005 as follows:

 "where importers can demonstrate that they will collect on Brazilian territory and destroy, in
an environmentally sound manner, 1 (one) used t yre on Brazilian territory for each used tyre carcass
to be imported"? (Exhibit EC-37 and the Eu ropean Communities' first written submission
paragraph 63)

Could you please clarify whether you meant "ten" used tyres?

Response of the European Communities
164. Yes, in the translation of Article 1 §2 II of La w 12.381, the reference to should be to "10 (ten)
used tyres". The quotation in paragraph 63 of the European Communities' first written submission
should be corrected accordingly.
Question 64. To the European Communities.
In paragraph 187 of your first written submission, you refer to the requirement of having to dispose of
ten "retreaded tyres". Could you please clarify whether you meant "used tyres"?

Response of the European Communities
165. Yes, in paragraph 187, the reference should be to "used tyres" instead of "retreaded tyres".
F. FINES
Question 65. To the European Communities.
Please clarify how the fines on marketing relate to importation. Could you please clarify whether you
consider that these fines fall at the same time within the scope of Articles XI.1 and III:4?

Response of the European Communities
166. As the European Communities has set out in its first written submisison, 43 the fines on the
marketing, transportation, storage, keeping or warehousing of imported retreaded tyres aim to
complement and enforce the import ban. To this extent, they are ancillary to the ban and fines on
importation. Moreover, despite their apparently in ternal nature, there is no doubt that their intended
and real effect is to restrict the importation of retreaded tyres. Accordingly, Presidential Decree
No. 3919 as a whole is to be regarded as contrary to Article XI:1.
167. In the alternative, should the Panel consider th at unlike the fines on importation, the fines on
marketing, transportation, storage, keeping or warehousing of retreaded tyres do not as such constitute
a restriction on importation, then the European Communities submits that Presidential Decree
No 3919 to this extent is incompatible with Article III:4.44

43 European Communities' first written submission, para. 174.
44 European Communities' first written submission, para. 175 et seq.

Question 66. To Brazil.
The European Communities claims in paragraph 172 of its first written submission that the level of
the fines (i.e. 400 reals per unit) ex ceeds the "normal per unit value" of retreaded tyres. Is this
correct? What is the "normal per unit value" in Brazil, for :
 (a) domestically produced retreaded tyres;
 (b) imported retreaded tyres; and,
 (c) new tyres, either importe d or domestically produced?

Response of Brazil
168. The fines were intended to exceed the per unit value of most tyres because, as the
European Communities correctly pointed out, they are a "punitive measure intended to sanction a
violation of the import ban imposed by Brazil". See European Communities' first written submission,
at para. 172. Nevertheless, if this information may be of assistance to the Panel, Brazil can roughly
estimate average prices (note that the actual price depends on many factors, such as the tyre type,
brand, size, type of car, type of terrain, and the point of sale):
(a) Domestically produced retreaded tyres for passenger cars – R$ 100-280, trucks –
R$ 450-930.
(b) Information to be provided if available
(c) New tyres for passenger cars, whether impor ted or domestically produced – R$ 150-
550, trucks – R$ 560-1300.
Question 67. To both parties.
If the fines on importation and marketing can be c onsidered as ancillary to the import prohibition,
what would a finding of GATT 1994 violation in resp ect of the import prohibition imply as to the
GATT-consistency of the fines? (European Communi ties' first written submission paragraph 174 and
Brazil's first written submission paragraph 157)

Response of the European Communities
169. A finding of violation in respect of the import ban would necessarily entail that the fines on
importation and marketing are equally incompatib le with the GATT. For further detail, the
European Communities refers the Panel to paragraphs 102 to 106 of its first oral statement.
Response of Brazil
170. The fines would likewise be inconsistent.
G. MERCOSUR EXEMPTIONS
Question 68. To Brazil.
Which MERCOSUR countries, and in what proporti on, export retreaded tyres and used tyres into
Brazil? What annual volumes of imports does this represent?

Response of Brazil
171. Only Uruguay and Paraguay export remoulded ty res to Brazil. In 2005, Paraguay exported
850 tonnes and Uruguay exported 574 tonnes, for a total of 1,424 tonnes. In comparison, some
18,455 tonnes of retreaded tyres were imported into Brazil in 1999, the year before Portaria SECEX
8/2000 went into effect.

172. The trade of used tyres between MERCOSUR count ries is negligible. In 2003, there were no
exports of such tyres by MERCOSUR countries to Brazil. In 2004, Argentina exported 23 tonnes and
Uruguay exported 7 tonnes of used tyres to Brazil, which accounted for less than 0.05 per cent of the
total volume of used tyre imports.
Question 69. To both parties.
Does the exemption from the import ban on retre aded tyres for MERCOSUR countries apply equally
to retreaded tyres produced with imported carca sses and retreaded tyres produced with domestic
MERCOSUR carcasses?

Response of the European Communities
173. Yes.
Response of Brazil
174. Yes. After a retreaded tyre is produced, it is not possible to identify th e origin of the carcass
used.
Question 70. To Brazil.
What is the potential for tyres in itially used or retreaded in the Eu ropean Communities, or in other
non-MERCOSUR countries, to be imported into Brazil as a result of the MERCOSUR exemption?

Response of Brazil
175. It is possible for tyres used in the European Communities to be remoulded in a MERCOSUR
country and then exported to Brazil because Brazil has no control over remoulded tyre production in
other MERCOSUR members. However, it should be noted that only Paraguay and Uruguay export
remoulded tyres to Brazil. The production capacity of these countries is fairly limited. Therefore, the
actual volume of tyres initially used in the European Communities that could be imported into Brazil
through MERCOSUR is very small when compared to the volume that could have been imported
directly from the European Communities and other countries if the import ban did not exist.
176. It is not possible for tyres retreaded by means other than remoulding (no matter the origin of
casings) to enter Brazil because the import ban continu es to apply to such imports. Finally, it is not
possible for tyres retreaded in the European Communities to enter Brazil through other MERCOSUR
countries. If an importer from another MERCOSUR c ountry attempted to import a tyre retreaded in
the European Communities and then export it to Brazil as a MERCOSUR tyre, this circumvention
would violate the MERCOSUR rules of origin.
Question 71. To the European Communities.
During the first substantive meeting with the Pane l, the European Communities stated that Uruguay's
main retreaded tyres producers use only 10% of domestic casings. Do you have any evidence in
support of this statement?

Response of the European Communities
177. The information that only 10% or even fewe r of the carcasses used by SERISUR S.A.
presently originate in Uruguay or other MERCOSUR countries was communicated orally on
28 March 2006 (and confirmed again on 19 July 20 06) by Mr. Gustavo ALBANO, the responsible
Director of Serisur, the main Uruguyan company producing retreaded tyres (and only exporter to
Brazil at the moment), to Mr. Lothar Ehring, Admi nistrator in the Directorate-General for Trade of
the European Commission.

178. This information is confirmed in a very r ecent newspaper article (Exhibit EC-88), which
states (in English translation) that "Serisur produces about 60.000 tyres per month, working with
carcasses which originate in Europe, Japan and the US, and Brazilian rubber".
179. This equally finds information in the MERCO SUR arbitral award of 25 October 2005 in the
dispute between Argentina and Uruguay, which me ntions that Uruguay produces retreaded tyres from
carcasses "generally imported from developed countries".
45 Further confirmation also lies in the sharp
rise in the importation of used tyres by Uruguay since 2002, 46 the year in which the Brazilian ban was
lifted on MERCOSUR countries, which is due to th e increased demand for retreadable casings by
Uruguyan retreaders.
Question 72. To Brazil.
Among retreaded tyres imported into Brazil from MERCOSUR countries:
 (a) how many are made from tyres not initia lly used in Brazil? What proportion of such
imports does this represent?
 (b) how many are made from tyres initia lly used in non-MERCOSUR countries? What
proportion of such imports does this represent?

Response of Brazil
180. Brazil does not have information on the origin of casings used in the production of retreaded
tyres by other MERCOSUR countries. After a retreade d tyre is produced, it is not possible to identify
the origin of the casing used.
Question 73. To Brazil.
What options were available to Brazil in ord er to implement the MERCOSUR Ad Hoc tribunal's
ruling of 9 January 2002?

Response of Brazil
181. The MERCOSUR Ad Hoc Tribunal concluded that the Brazilian legislation – Portaria
SECEX 8/2000 – was "incompatible with MERCOSUR re gulations", and specifically, with Decision
CMC 22/2000, which prohibited new restrictions on tr ade. The tribunal required Brazil to "adapt its
internal legislation in view of such incompatib ility". Apart from non-compliance, the only alternative
available to Brazil was to exempt MERCOSUR member states from the import ban.
182. Some third parties have suggested that one of the options available to Brazil to comply with
the MERCOSUR ruling was to exempt all WTO members from the import ban, i.e., eliminate the
import ban. This is clearly not a reasonable opti on because it would have forced Brazil to abandon its
policy objective and its level of protection, which is to reduce unnecessary generation of tyre waste to
the maximum extent possible. To preserve its policy objective, Brazil implemented the decision of the
MERCOSUR tribunal as narrowly as possible. The dispute involved remoulded tyres, and Brazil
exempted MERCOSUR imports of remoulded tyres only. Permitting imports of top-capped and re-
capped tyres from MERCOSUR would not have re duced waste to the maximum extent possible
because it would have permitted imports of shorter-lifespan products that Brazil did not have to allow.
An exemption of all WTO members would have far exceeded what was necessary under the
MERCOSUR tribunal's ruling and would not have allowed Brazil to reduce unnecessary generation of
tyre waste to the maximum extent possible.

45 Exhibit EC-43, para. 101.
46 Cf. European Communities' first written submission, para. 84.

Question 74. To Brazil.
Did Brazil attempt to use the procedure contained in Article 22.1 of the Protocol of Brasilia to
request a clarification as to how Brazil should comp ly with the MERCOSUR ad hoc tribunal's ruling
of 9 January 2002?

Response of Brazil
183. No. Article 22.1 of the Protocol of Brasília provides for a procedure to obtain (i) clarification
on the content of an award or (ii) an interpreta tion on how a decision should be complied with. The
award was clear and there was no need for an Article 22.1 clarification. As Brazil explained in its
response to question 73, there were no alternatives to implementing the ruling, other than exempting
MERCOSUR members from the import ban.
Question 75. To Brazil.
In paragraph 169 of your first wr itten submission, you indicate that MERCOSUR is consistent with
Article XXIV, because:

 MERCOSUR parties have eliminated duties and ot her restrictive regulations with respect to
substantially all the trade within MERCOSUR. A nd they apply substantially the same duties to the
trade with non-Members.

Could you please elaborate on this argument ? Spec ifically, could you explain how "substantially all
the trade" within MERCOSUR is covered and how yo u apply "substantially the same" duties to trade
with non-Members?

Response of Brazil
184. The European Communities has recognized, duri ng the first substantive meeting with the
Panel, that MERCOSUR is a customs union. Theref ore, it is unnecessary for the Panel to examine
whether MERCOSUR meets the Article XXIV requirements for customs unions.
185. In any event, MERCOSUR is currently unde r examination in the Committee on Regional
Trade Agreements. The WTO Secretariat has already concluded that MERCOSUR meets the
requirements of Article XXIV:5(a). See WT/COMTD/1/Add.15.

Question 76. To the European Communities.
Please comment on Brazil's argument, in paragraph 70 of its first oral statement, that the
European Communities has recognized MERCOSUR as a customs union, as evidenced by its
engagement in "bi-regional FTA negotiations" with MERCOSUR. Is the European Communities'
position that it recognizes MERCOSUR as a customs union regardless of whether it meets the
conditions under the provisions of Article XXIV:8 and 5?

Response of the European Communities
186. The European Communities has not contested that MERCOSUR, in accordance with Article 1
of the Treaty of Asuncion, involves the establishment of a customs union. The
European Communities would also like to confir m that it is supportive of efforts of regional
integration worldwide, including of MERCOSUR.
187. However, the question in the present case is not merely whether MERCOSUR is a customs
union in a general sense, but whether it is fully in accordance with the conditions of

Article XXIV:5 (a) and 8 (a). As the European Communities has remarked, it is for Brazil, as the
party invoking Article XXIV, to demonstrate that these conditions are met.
47
188. The negotiations between the European Co mmunities and MERCOSUR are of no relevance
in this context. Since 2000, the European Communities and MERCOSUR have been in the process of
negotiating a bi-regional association agreement. This regional approach reflects inter alia the fact that
MERCOSUR has a common external tariff and a common external trade policy. However, this is
unrelated to the question whether the MERCOSU R agreements itself is in compliance with
Article XXIV.
Question 77. To the European Communities.
How do you reconcile the statement you made in parag raphs 121 and 122 of your first oral statement
with the ruling in the US – Line Pipe case that you cited in footnote 106 of your first written
submission?

Response of the European Communities
189. In US – Line Pipe , the Panel expressed doubt as to whethe r the necessity test formulated by
the Appellate Body in Turkey – Textiles should also apply in circumstances other than Turkey
- Textiles, notably where "where the alleged violatio n of GATT 1994 arises from the elimination of
'duties and other restrictive regulations of commerce' between parties to a free-trade area."48
190. The European Communities does not share these doubts. In the view of the
European Communities, there is no indicati on that the necessity test applied in Turkey – Textiles
would apply only in cases where the restriction is i mmediately and solely imposed on imports, but not
to cases where the restriction is first imposed on all goods, and then subsequently selectively removed
for goods from within the customs union. 49 This is also the view the European Communities defended
before the Appellate Body in US – Line Pipe.50
191. It is also noteworthy that the question in US – Line Pipe was a highly specific one, namely
whether the United States could include, in the co ntext of a safeguards investigation, Canada and
Mexico in the analysis of serious injury while excluding the same countries from the application of
the safeguards measure. The Appellate Body concl uded that this absence of "parallelism" between
the investigation and the effects of the measure was incompatible with Articles 2 and 4 of the
Safeguards Agreement.
51 For this reason, the Appellate Body did not rule on the question of whether
Article 2.2 of the Safeguards Agreement, or Article XXIV, would allow to exclude Members of a free
trade area from the scope of a safeguards measure. 52 Moreover, the Appellate Body also declared the
findings of the Panel with respect to Article XXIV to be "moot and having no legal effect".53
192. Finally, it is worth mentioning that safeguard s are addressed in Article XIX, an exception
which, unlike Article XX, is not mentioned in th e list of exceptions in Article XXIV:8(a)(i).
Therefore, even if it were permissible, under Article XXIV, to exempting imports from within a
customs union from a safeguards measure, 54 this would not mean that the same is true for measures
under Article XX.

47 European Communities' first oral statement, para. 118.
48 Panel Report on US – Line Pipe, para. 7.148.
49 Cf. European Communities' first oral statement, para. 121-122.
50 Cf. Appellate Body Report on US – Line Pipe, para. 66.
51 Appellate Body Report on US – Line Pipe, para. 197.
52 Appellate Body Report on US – Line Pipe, para. 198.
53 Appellate Body Report on US – Line Pipe, para. 199.
54 On this question, cf. also footnote 1 to Article 2 of the Agreements on Safeguards.

Question 78. To the European Communities.
In paragraph 129 of your oral statement you suggest that measures adopted years after the
conclusion of the customs union cannot be necessary for its formation. Does this imply that no
measure adopted by parties to a customs union af ter its formation could ever be justified under
Article XXIV?

Response of the European Communities
193. The European Communities does not wish to suggest that only measures which are adopted at
one single point in time, defined as the "formation of the customs union", can be justified under
Article XXIV.
194. In the view of the European Communities, the formation of a customs union may also be, and
typically is, a gradual process. This is recognised in Article XXIV:5 (c), which allows the adoption of
interim agreements necessary for the formation of a customs union within a reasonable length of
time.55 Therefore, in the view of the European Co mmunities, a measure may also be regarded as
adopted on the formation of the customs union if it is adopted at a later point than the initial formation
of a customs union, provided it is necessary for the formation of the customs union, and is adopted
within a reasonable period of time.56
195. However, as the European Co mmunities has remarked in its first oral statement, 57 this is not
the case for the measures adopted by Brazil. When MERCOSUR was concluded in 1991, trade
between MERCOSUR countries in retr eaded tyres was unrestricted. It is only later that Brazil
decided to restrict trade, only in order to then still later remove the rest riction for its MERCOSUR
Members. Such an erratic policy course can hardly be regarded as part of the "gradual formation of a
customs union". Accordingly, given the speci fic circumstances of the case, the MERCOSUR
exemption cannot be regarded as introduced "upon the formation of a customs union".
Response of Brazil
196. The Panel's question illustrates the difficulty with overextending the analysis of Turkey -
Textiles to cover measures of internal liberalization that do not raise outside trade barriers, as the
panel in US – Line Pipe recognized. GATT members intended Article XXIV to be an effective tool of
regional liberalization, not its death knell.
Question 79. To Brazil.
In paragraph 22 of its first oral statement, the European Communities argues that the sequencing of
the measures which result in a discrimination betw een goods originating within the customs union,
and goods from outside the customs union, does not change the standards applicable under
Article XXIV:5. Could you please comment?

Response of Brazil
197. Brazil notes that paragraph 22 does not refe r to sequencing of the measures, rather
paragraph 122 does. Brazil will respond to the European Communities' arguments in paragraph 122.
198. In the present case, the sequencing of measures demonstrates that Brazil did not engage in
unjustifiable and arbitrary discrimination. Brazil maintained an import prohibition that applied to
imports of all countries. When Uruguay challenged the prohibition in MERCOSUR, Brazil

55 Paragraph 3 of the Understanding on the Interpreta tion of Article XXIV of the GATT 1994 provides
that the "reasonable length of time should exceed 10 years only in exceptional cases".
56 Cf. also Panel Report on Argentina – Footwear (EC), para. 8.98.
57 European Communities' first oral statement, para. 129.

vigorously defended the ban before the MERCOSU R Ad Hoc Tribunal. It was only after the
MERCOSUR tribunal ruled against Brazil, that Brazil exempted MERCOSUR members from the
ban, and only to the minimum extent required. If anything, the sequencing of Brazil's measures
demonstrates that Brazil's goal has always been inte nt in protecting public health and the environment
by applying the import ban as rigorously and comprehensively as possible.
Question 80. To both parties.
Could you please clarify what, in your view th e phrase "except, where n ecessary, those permitted
under Articles XI, XII, XIII, XIV, XV and XX" (e mphasis added) in Artic le XXIV:8(a) means?
Specifically, could you please clarify how, in your view, "necessity" is to be assessed under this
provision, in relation to measures permitted under Article XX?

Response of the European Communities
199. The quoted phrase makes it clear that in order to fulfil the requirement to liberalise
"substantially all trade" within a customs union, it is not necessary to also abolish the measures which
are permitted, inter alia, by Article XX.58
200. Of course, this does not mean that Article XXIV:8(a) requires the maintenance of restrictive
regulations of commerce between Members of a customs union. This is expressed by the words
"where necessary" within the brackets in Article XXIV:8(a). However, where restrictive regulations
are not necessary for the purposes of Article XX, and therefore abolished between Members of the
customs union, they must be abolished for all Memb ers, and not just those members of the customs
union.
201. In conclusion, the discriminatory application of a measure justified under Article XX cannot
be justified as necessary for the formation of a customs union.
Response of Brazil
202. As Brazil explained in its response to Question 50, the phrase "where necessary" gives WTO-
Members that are part of a customs union the right to maintain duties and other restrictive regulations
between the constituent territories, based inter alia on the general exceptions in Article XX, and still
meet the requirement under Article XXIV:8 that restri ctions be eliminated with substantially all the
trade between the constituent territories. However, Article XXIV:8 does not require or impose the
obligation on customs union members to maintain trad e restrictions by invoking Article XX. That
interpretation of the parenthetical in Article XXIV: 8(a) would contradict the very purpose behind the
formation of customs unions – which is to elimin ate trade barriers among members – and be contrary
to Article XXIV, which encourages the highest leve l of internal liberalization ("eliminated with
respect to substantially all the trade").
Question 81. To Brazil.
Please comment on the European Communities' assertion, in paragraph 134 of its first oral statement,
that "contrary to the claims of Brazil, (legisla tive) Decree (88/1992) does not contain the obligation
set out in Article 21.2 of the Protocol of Bras ilia, but merely approves the protocol on behalf of
Brazil".

Response of Brazil
203. Incorporation of international treaties into Brazilian law is a complex process that requires the
participation of the Executive and Legislative powers. The first step is the conclusion (signature) of
the treaty by the President of the Republic, w ho has the exclusive power to do so under

58 Cf. also Panel Report on Argentina – Footwear (EC), para. 8.96.

Article 84(VIII) of the Federal Constitution. The tr eaty must then be approved through a Legislative
Decree by the National Congress, which has the excl usive competence to decide conclusively on
international treaties, in accordance with Artic le 49(I) of the Constitution. Once approved, the
President will act again and promulgate a decree, which will be published in the Official Journal
together with the text of the treaty translated to the Portuguese language. At that point, the treaty
becomes a part of Brazil's domestic law. Incorporat ed international treaties are equal in hierarchy to
other laws in the Brazil's legal system. A priv ate party can even bring a legal action based on
provisions of an incorporated international treaty ( see, e.g. , Articles 102 (III) (b), 105 (III) (a) and
109 (III) of the Federal Constitution).
204. The Protocol of Brasília was approved by th e National Congress through Legislative Decree
88/1992 (Exhibit BRA-76), and subsequently it wa s promulgated and published by Decree 922 of
10 September 1993 (Exhibit BRA-101). While Legisl ative Decree 88/1992 may not "contain" the
obligation set out in Article 21.2 of the Protocol of Brasília, Decree 922/1993 certainly does, and the
Protocol of Brasília is undoubtedly a part of the Brazil's domestic law. Therefore, the
European Communities' assertions in paragraph 134 of its oral statement with respect to the status of
the Protocol of Brasília in Brazilian law are absolutely incorrect.
Question 82. To Brazil.
Please comment on the European Communities' ar gument, at paragraph 137 of its first oral
statement, that the exemptions are not "securing comp liance" with the ruling of the Arbitral Tribunal
by anyone else and that, rather, Brazil was simply itself complying with its obligations.

Response of Brazil
205. The European Communities' argument attempts to differentiate between municipal laws that
bind private parties (whether physical or juridical) and laws that bind the State or its organs. There is
no basis for that differentiation. Neither the text of Article XX(d) nor the WTO jurisprudence
provides basis for such a distinction. In Mexico – Soft Drinks , the Appellate Body distinguished
between laws that regulated domestic conduct and laws that sought to secure compliance with
"international obligations of another WTO Member". See Appellate Body Report, Mexico -
Soft Drinks, para. 70 (emphasis added). It ruled that laws in the latter category could not be justified
under XX(d). It made no similar finding with respect to municipal laws that secured compliance with
the government's own international obligations. On the cont rary, the Appellate Body unequivocally
stated that that for purposes of Article XX(d),
"the terms "laws or regulations" cover rul es that form part of the domestic legal
system of a WTO Member, including rules deriving from international agreements
that have been incorporated into the domestic legal system of a WTO Member or
have direct effect according to that WTO Member's legal system."
Appellate Body Report, Mexico – Soft Drinks, para. 79 (emphasis added).
206. This clear and unambiguous language leaves no ro om to argue that Article XX(d) applies
only to laws regulating private conduct, especially gi ven that most international agreements obligate
governments, and not private parties.

Question 83. To the European Communities.
Is your argument in paragraph 137 of your first oral statement related to your position that Brazilian
Decree (88/1992) does not clearly show that the provisions of the MERCOSUR Agreement are
incorporated into the Brazilian domestic laws and regulations?

Response of the European Communities
207. No. In order to successfully invoke Article XX(d), Brazil has to show a) that the obligation to
comply with the ruling of the MERCOSUR arbitral tribunal is contained in a "law and regulation"
within the meaning of Article XX(d), and b) that its measure is necessary to "secure compliance" with
this law or regulation.
208. The argument made by the European Communitie s in para. 137 relates to the second of these
conditions. As the European Communities has expl ained, to "secure compliance" with a law or
regulation means to "enforce" this law or regulation as regards other actors, typically natural or legal
persons.59 With the adoption of the MERCOSUR exemption, Brazil was not "securing" compliance
by anyone else, but simply complying itself with its international obligation. Brazil's measure
therefore does not fall within the scope of Article XX(d).
Response of Brazil
209. Brazil notes that its commitments under MERCO SUR, including the Protocol of Brasília,
have been incorporated into the domestic law. See Brazil's Response to Question 81.
Question 84. To the European Communities.
In light of your observations, at paragraph 137 of your first oral statement in respect of Brazil's
invocation of Article XX(d), could you please comm ent on the statement by the Appellate Body in
Mexico – Soft Drinks that the terms "laws or regulations" in Article XX(d) "cover rules that form part
of the domestic legal system of a WTO Member, including rules deriving from international
agreements that have been incorporated into the domestic legal system of a WTO Member". ?

Response of the European Communities
210. At the outset, the European Communities would r ecall that its argument in paragraph 137 of
its FOS does not concern the meaning of the term "l aws or regulations", but the meaning of the term
"to secure compliance" in Article XX(d).
211. As regards the meaning of the term "laws and regulations", the European Communities agrees
with the Appellate Body that such laws or regulati ons include international agreements when they are
incorporated into the domestic legal order of the WT O Member in such a way as to be enforceable as
against individuals.60
212. The reason for this interpretation is that international agreements may deal with matters which
require enforcement in the internal legal order of WTO Members. An example would be international
agreements dealing with the protection of intellect ual property rights, such as trademarks, copyrights,
or geographical indications. If such an agreement, rather than being transposed through internal

59 European Communities' first oral statement, para. 135.
60 Before the Panel in Mexico – Soft Drinks, the European Communities expressed its views as follows
(Panel Report on para. 5.51, emphasis added):
At a general level, the European Communities would not exclude that an international agreement
concluded by a WTO Member might also constitute a "law or regulation" within the meaning of
Article XX(d) of the GATT 1994, provided that the agreem ent is directly applicable in the internal legal
order of such member, and is therefore capable of being directly enforced on individuals.

legislation, is directly applicable in the domestic legal order, then it may also be the subject of
enforcement measures within the meaning of Article XX(d).
213. However, this does not mean that the internati onal obligations containe d in an international
agreement equally become "laws or regulations" with in the meaning of Article XX(d). Accordingly,
Article XX(d) cannot be invoked when a Member, rather than enforcing an international agreement in
its internal order, simply complies with its international obligations.
H. REQUEST FOR SPECIFIC INFORMATION
Question 85. To Brazil.
Could Brazil provide an English translation of the pa rts of The National Code of Traffic, which are
meant to contribute to the promotion of better tyre care?

Response of Brazil
214. See Exhibit BRA-102.
Question 86. To Brazil.
Could Brazil provide an English translation of the MERCOSUR ad hoc tribunal ruling
(Exhibit BRA-74)?

Response of Brazil
215. See Exhibit BRA-103.

II. FOLLOWING THE SECOND SUBSTANTIVE MEETING OF THE PANEL
A. GENERAL
Question 87. To Brazil.
Does Brazil have a system of regular mandatory vehicle inspections in place (see Brazil first written
submission, paragraph 82 and EC second written submission, paragraph 78)?

Response of Brazil
216. Yes. The National Code of Traffic (Law No. 9.503/1997) (Exhibit BRA-102) establishes a
system of mandatory vehicle inspections in Brazil. The Code requires examination of the vehicle's
safety, including tyres, and its compliance with emission rules. Under the law, states have the
jurisdiction to develop and enforce safety standard s and inspection procedures in their individual
territories and, at present, that is what happens . However, the Executive has submitted a bill to
establish uniform federal inspection standards (B ill 5.979/2001) (Exhibit BRA-167). The bill is
presently being considered by the legislature.
217. The absence of nationwide rules at present does not mean that Brazilian states and
municipalities cannot in the interim use local rules to carry out regular inspections. They can and they
do, as Brazil noted in its response to the European Communities' Question 8. In addition, the
inspections in Brazil are not limited to the annual in spections. Every vehicle in Brazil is inspected
when it is first licensed, when its ownership chang es, and also when the vehicle owner moves to a
different state. According to the National Traffic Department, 30 per cent of the Brazilian automobile
fleet is annually inspected because of a change in ownership or the owner's move to a different state.

Comments of the European Communities
218. In its reply to the Panel's Question, Brazil claims that it has a system of regulatory mandatory
vehicle inspections in place. However, this clai m is unsupported by the evidence provided by Brazil,
and incompatible with Brazil's own statements on this issue.
219. In its reply, Brazil claims that the Nationa l Code of Traffic Law (Law No. 9.503/1997,
Exhibit BRA-102) establishes a system of mandatory ve hicle inspections in Brazil. However, this is
not true. Article 104 of the said law merely announces that vehicles " will have their safety […]
evaluated via inspection, which will be mandatory". As Brazil itself clarifies, there are currently no
rules at the federal level in Brazil which would establish such a system, and relevant inspection
procedures therefore must be laid down by the Brazilian states and municipalities.
220. As regards the rules existing at the level of Br azilian states, Brazil has also clarified in its
reply to the European Communities' question No. 8 and 9 that only one out of its 27 States, namely
the State of Rio de Janeiro, has a system of mandatory regular vehicle inspections.
61 Accordingly, it is
simply not true that there exists a system of mandatory regular vehicle inspections throughout Brazil.
221. Brazil has also once again referred to a draf t law which would establish a uniform federal
inspection scheme, and has finally produced a copy of this bill (Bill 5.797/2001, Exhibit BRA-167).
However, it is noted that this bill, which dat es from 2001, is still not adopted, and it is not clear
whether and when it will be. Moreove r, what matters is the date of establishment of the Panel, and at
that date, Brazil clearly had no mandatory system of regular vehicle inspections in place.
222. Brazil has also argued that every vehicle in Brazil is inspected when its ownership changes, or
when the owner moves to a different state, an d has claimed that 30 per cent of the Brazilian
automobile fleet is annually inspected for this reason. 62 However, Brazil has provided no evidence to
prove that such inspections are indeed mandatory and effectively carried out throughout the territory
in Brazil. Moreover, it seems highly unlikely that 30% of the Brazilian automobile fleet would be
affected by a change in ownership or a move to a different state every year. Since Brazil has not
provided any proof to substantiate its assertion, it can therefore not be assumed that such inspections
would serve as a substitute for regular vehicle inspections.
223. In conclusion, it is recalled that Brazil has it self recognised that "automotive inspections are
an important instrument to increase the num ber of retreadable casings in the country". 63 Accordingly,
Brazil has failed to take a reasonably available a lternative to the import ban on retreads, which would
have resulted in a reduction of the number of waste tyres arising in Brazil.
Question 88. To Brazil.
Could Brazil provide examples of tyre fires that took place in Brazil, their dimension and an
assessment of their negative effect on human, anima l or plant life or health (see EC second written
submission, paragraph 60)?

Response of Brazil
224. Brazil has provided information on tyre fires in the States of Paraná, Minas Gerais and in the
Federal District in paragraph 36 of its first wr itten submission Brazil has not been able to obtain
information on tyre fires in other states because fi re brigades of those states do not maintain records
that distinguish between tyre fires and other fires. Unavailability of these records does not mean, of
course, that tyre fires do not occur in other states.

61 European Communities' second written submission, para. 78 and fn. 73.
62 Brazil's answer to panel question No. 87, para. 2.
63 Brazil's answer to European Communities' question No. 8.

225. There is no need to assess the negative effect on human, animal or plant life or health of tyre
fires specifically in Brazil because there is extensiv e evidence of the risks resulting from fires all over
the world. Fires in Brazil are no different fro m fires elsewhere. The European Communities'
argument with regard to tyre fires in paragra phs 60 and 61 of its second written submission is
specious. It is based on what is referred to as th e problem of induction, i.e., reasoning that just
because experience shows that even t A has always followed event B, it does not mean that it will do
so again. Governments cannot base their decisions on this reasoning. Prudent governments believe
that if stockpiles of used tyres can be set on fire by lightning or arson elsewhere, the same can happen
in their territory. Likewise, prudent governments also believe that if those fires emitted deadly
pollutants elsewhere, the same will happen in their territory.
226. When, in the 1990s, Brazil set out to combat dengue and other mosquito-borne diseases by,
among other things, collecting the used tyres that were scattered over its vast territory, Brazilian
officials also realized that simply collecting and stockpiling them was no panacea. Not only do
stockpiles risk contaminating the soil and ground water through leaching, and becoming breeding
grounds themselves for mosquitoes, th ey also can catch fire through lightning or criminal behaviour.
Brazil was aware of the devastating tyre fires in Wales, 64 in California, 65 in Ontario, 66 and in many
other locations, both in Brazil and in other countri es. Brazil was also aware of studies showing the
toxic risks of such fires.
227. No prudent government could or would have ignored such warnings with the unsound
reasoning that, simply because tyres caught fire el sewhere, and simply because those fires emitted
deadly toxins into the atmosphere elsewhere, there is no basis on which to conclude that the same
could happen in its territory. Brazil saw those warning signs and acted on them, responsibly and
prudently.
Comments of the European Communities
228. Contrary to the claims of Brazil in its answ er to this question from the Panel, Brazil has
provided no relevant information on tyre fires in its territory. The only information given is limited to
the number of tyres fires in two states and in the Federal District, without giving information, as the
European Communities h as already pointed out, 67 on their location, origin/causes, dimension and
duration and an assessment of their real negative effects on health. Brazil has also admitted that it has
not been able to obtain information on tyre fires in other states.
229. This already shows that tyre fires in Brazil do not appear to have the dimensions of the tyres
fires in the United Kingdom, United States, and Canada to which Brazil has referred in its
submissions.68 Otherwise, it would have been very easy for Brazil to attach, in relation to waste fires
in its territory, similar reports and press clippings to those that it has found for tyre fires abroad. The

64 See Health Protection Agency (UK), Chemi cal Hazard and Poisons Report 8 (2003)
(Exhibit BRA-10).
65 Mike Martinez, "Cleanup of Tr acy tyre fire ending soon," Oakland Tribune , January 3, 2006
(Exhibit BRA-35); California Environmental Protection Ag ency (US), Integrated Wa ste Management Board,
Five-Year Plan for the Waste Tyre Recycling Management Program 18 (2003) (Exhibit BRA-36).
66 Laurent Simon & Thierry C. Pauchant, Developing the Three Levels of Learning in Crisis
Management: A Case Study of Hagersville Tyre Fire, Review of Business, Fall 2000, at 7 (Exhibit BRA-139).
67 European Communities' second written submission, para. 60. The EC had already asked Brazil to
provide information on these issues at the beginning of the proceeding: see European Communities' Question
No 13.
68 It is quite important to point out that the fires mentioned by Brazil in its answer involved several
million of tyres: 10 million tyres in Powys (Wales) (E xhibit BRA-10), 7 million tyres in Tracy (California),
5 million in Westly (California) (Exhibit BRA–36) and in Hagersville (Ontario) 14 million tyres
(Exhibit BRA-139). In another tyre fire in Wyandot (Ohio), 26 million tyres were involved (Exhibit BRA-38, at
p. 2).

dimension of the site in number of tyres is an important element to assess the adverse effects of tyre
fires. Thus, Exhibit BRA-10 shows in its table 1, at page 8, that in two more reduced waste fires, one
in Washington (Pennsylvania) with 1.7 million ty res, and the other in Gila River Reservation
(Arizona) with 3 million tyres, no adverse environmental effects were reported. In another tyre fire in
Cheshire (England), with 500,000 tyres, the only adverse effect was limited to the site.
230. Brazil claims that prudent governments are entitled to rely on inductive inference in order to
conclude that, if tyres fires occur and have negativ e effects in other parts of the world, it will also
happen in their respective territory. But this argu ment does not take into account that the adverse
consequences arising from waste tyres depend on the variables mentioned above. Neither the risk of
fires occurrence is the same between different countri es, because the vast majority of fires are due to
arson,
69 which is an event very much depending on social factors.
231. In any case, it is astonishing to learn that Br azil does not keep records of the tyres fires
occurred in its territory, as all prudent governments do. That information is essential to prevent and
fight future fires, and the evidence attached by Brazil to its submissions reflects clearly that
preoccupation.70
232. The European Communities would finally recall that tyre fires are a problem that is not
related to the importation of retreads, but to the management of tyre waste. Given the numbers
involved, the resumption of trade in retreaded tyres would in the worst case have a small impact on
the overall quantity of the tyre waste that arises. Al so for that reason, Brazil has not demonstrated in
any manner the connection between the importation of retreaded tyres and the frequency, magnitude
or harmful effects of tyre fires.

Question 89. To Brazil.
Could Brazil comment on a statement made by a rep resentative of the Brazilian Minister of Health on
14 April 2002 before the Consumer, Environment and Minority Protection Committee explaining that
"even if we were to eliminate all tyres from Brazil we would still not prevent transmission of
[dengue]"? (see EC second written submission, paragraph 59)

Response of Brazil
233. The statement is correct. As Brazil explaine d in paragraphs 125-130 of its second written
submission and in paragraph 91 of its second oral st atement, waste tyres are one of the three major
contributors to the dengue epidemic in Brazil. Reducing the accumulation of waste tyres by itself will
not eliminate dengue because doing so would eliminat e only one of the mosquito sources. This is
why, in addition to collecting tyres, Brazil's campaign against dengue also targets other key
containers. The campaign also educates the public about dengue prevention, carries out mosquito
surveillance, monitors mosquito resistance to insecticides, and offers guidance on treatment of dengue
patients.

69 Table 1 of Exhibit-BRA-10, at p. 8, shows that, out of the 11 tyres fires listed there, only in one there
were no data available concerning its cause; for the other 10 the cause is "arson suspected" or "arson a potential
cause".
70 Thus, the document "Tyre Pile Fires", attached as Exhibit BRA-29, at p. D-1, explains that "[t]he
extinguishment of the last flame is by no means the end of activities at a tyre pile fire. Part D of this volume
describes the post-fire activities. These post-fire activitie s include […] and 3) preparation of reports describing
the fire fighting activities, health and safety concerns , environmental concerns, and lessons learned during the
entire fire process".

234. Nevertheless, it is important to underline that waste tyres are the favourite breeding site for
mosquitoes, as Brazil extensively demonstrated in paragraphs 17 to 32 of its second written
submission. The European Communities argued in its SOS that other containers are much more
relevant to dengue control and, in support, presented a study of aedes aegypti in two neighbourhoods
in Manaus, Brazil (Exhibit EC-124). Yet even this study – with its very limited scope – proves that
tyres are highly relevant. It specifically states at page 6 that among the positive containers, " Tyre,
Flask, Construction Material and Storage groups stood out," and that "[t]he tyre group [] showed very
high averages at Praça 14."
Comments of the European Communities
235. Brazil's answer to this question is, first of all, in contradiction with what the Brazilian
Minister for Environment explained at the first substantive meeting with the Panel. Now Brazil argues
that "waste tyres are the favourite breeding site for mosquitoes". 71 According to the Minister, only in
25 per cent of the 1.140 municipalities having notif ied dengue cases in 2003, were tyres the most
important breeding place for dengue-carrying mosquito es. However, this statement has also to be
taken with great prudence because Brazil has never submitted to the Panel the survey conducted by
the Minister of Health on which this assertion was made.
236. In any case, the reports on which Brazil based its assertions in paragraphs 17 to 32 of its
second written submission are not valid to demonstrate that waste tyres are generally the predominant
breeding site for mosquitoes. The report attach ed as Exhibit BRA-109 was conducted in 1985 and is
limited to 14 city blocks in the municipality of Sao José do Rio Preto (state of Sao Paulo). The survey
enclosed as Exhibit BRA-110 was carried out also in a municipality of the state of Sao Paulo and
positive values for tyres only represen ted 11,9 per cent of the containers. The report attached as
Exhibit BRA-111 is limited to two islands on the rive r Paraná and positivity of tyres was nearly equal
to the one of tins. The report attached as Exhi bit BRA-112 only used waste tyres as collecting places,
which were set up as traps in the municipality of Nova Iguaçu (Rio de Janeiro). The surveys enclosed
as Exhibit BRA-113 and BRA-114 only used waste tyres and bamboos as collecting places, which
were set up in forests in the municipalities of Cambé and Londrina (Panará).
237. Finally, even if tyres were considered, quod non, as the main breeding place for mosquitoes, it
is clear that the elimination of waste tyres as br eeding places will not depend on the maintenance of
the import ban on retreaded tyres but on a better ma nagement of waste tyres arising from all sources
in Brazil, not only those arising from imported retread ed tyres. As the Eur opean Communities stated
in its second written submission, the relevance of w aste tyres arising from imported retreaded tyres in
the fight against dengue must be minimal.72
Question 90. To both Parties.
What is the average life of a passenger tyre in Brazil? (see EC second written submission,
paragraph 57)

Response of Brazil
238. There is no official estimate of the average life of a passenger tyre in Brazil. INMETRO
clarifies that the durability of a tyre depends on ma ny factors, such as the region's terrain, road
quality, and climate.
239. Brazil's tyre industry estimates that a 175/30 passenger car tyre lasts about 60,000 km or
about six years. Mazola estimates that a 165/70 tyre lasts about 40,000 km or four years. Given that

71 Brazil’s answer to panel question No. 89, para. 8.
72 European Communities' second written submission, para. 59, in fine.

retreading regulations in Brazil and in the Europ ean Communities prohibit tyres that are older than
seven years from being retreaded, it is safe to assume that a tyre seldom lasts longer than seven years.
Response of the European Communities
240. The average life of a tyre, when expressed in y ears, is the average total number of kilometres
which a car drives with a tyre before it is repl aced, divided by the average number of kilometres
driven by a passenger car per year.
241. The number of five years referred to in paragraph 57 of the European Communities' second
written submission, was, as is made clear in the paragraph itself, a mere assumption adopted for the
purposes of analysing the information on the numbe rs of dengue cases provided by Brazil. The
European Communities notes that Br azil used the same assumption of a lifespan of five years in its
Exhibit BRA-162.
73
242. In the European Communities, according to in formation received from the tyre industry, the
average number of kilometres which are driven w ith a passenger car tyre before it is replaced is
between 60.000 and 75.000 kilometres. Accordi ng to the European Automobile Manufacturers
Association, the average number of kilometres driven per passenger car in the European Communities
is around 15,000 kilometres per year. On this basis, the average lifespan of a passenger car tyre in
Europe may be assumed to be between four and five years.
243. The European Communities does not have specifi c information regarding the same numbers
for Brazil, and considers that these are for Braz il to provide. However, the European Communities
notes that according to information received from Brazilian retreaders, the average mileage of a
passenger car tyre in Brazil is around 45,000 km. This lower mileage of Brazilian tyres would appear
to reflect the rougher road conditions in Brazil a nd the accordingly higher wear of tyres to which
Brazilian retreaders have equally referred.74
244. Assuming an average number of 15,000 kilometres driven per year, the average life of a tyre
in Brazil may therefore be somewhat shorter than in the European Communities.
Comments of the European Communities
245. As regards the average number of kilometres dr iven with a tyre in Brazil, Brazil indicates a
maximum mileage between 40.000 and 60.000 kilometr es depending on the tyre type. While it is not
clear how representative the tyre types indicated by Brazil are, and to which extent these numbers take
into account risks of tyres being damaged due to ro ad conditions, it is noteworthy that even according
to Brazil's own figures, the average mileage of passenger car tyres in Brazil appears to be lower than
in the European Communities. This confirms implicit ly the fact that there is a higher factor of wear
and tear on tyres in Brazil due to the local road conditions.
246. As regards the number of kilometres driven by a vehicle per year in Brazil, Brazil appears to
use an average of 10.000 km. According to Brazilia n retreaders, however, it would appear that this
number is closer to 15.000 km. Accordingly, the lif espan of tyres in years in Brazil would appear to
be somewhat lower than the one indicated in Brazil's reply.
247. Finally, Brazil argues that because passenger car tyres which are older than seven years may
not be retreaded, "it is safe to assume that a tyre seldom lasts longer than seven years". This is not
correct. The seven-year maximum is purely a li mitation on the age of the casing used in the
retreading process, after which the casing can be used again for a number of years. Accordingly, it is

73 Cf. Exhibit BRA-162, Note (2), which refers to new tyre and new vehicle exports, "5 yrs prior".
74 Exhibit BRA-157, para. 6.

clear that if a tyre is not used much, it may effectively last much longer than 7 years. Similarly, if a
tyre is retreaded again after having been in use for 6.5 years, it will also normally achieve a total
lifespan of far longer than 7 years, when adding up the lifespans of the new and the retreaded tyre.

Question 91. To Brazil.
Are all new tyres imported in Brazil retreadable? Does Brazil have measures in place to prevent
imports of cheap low quality new tyres?

Response of Brazil
248. As Brazil pointed out in its Response to Questi on 12 from the Panel, all new tyres sold in
Brazil – whether produced domestically or imported – are high-quality tyres that comply with strict
technical and performance standards. They are not "cheap low quality new tyres" with no potential
for future retreading. This is best demonstrated by the high rate of retreadability in Brazil.
249. Neither Brazil nor any other country, as far as Brazil understands, employs any measures "to
prevent imports of cheap low quality new tyres." Brazil is not aware of a means to distinguish
between new tyres that are capable of being retread ed and those that are not before the tyres have
actually been used.
Comments of the European Communities
250. In its reply to the Panel's question, Brazil clai ms that all new tyres so ld in Brazil are "high-
quality tyres" which can be retreaded. At the same time, Brazil also concedes that "it is not aware of a
means to distinguish between new tyres that are capable of being retreaded and those that are not".
75
251. This statement is entirely unsubstantiated and at the same time contradictory. In reply to the
Panel's Question No. 11, the European Communitie s has produced ample evidence that not all new
tyres are retreadable. Brazil has not refuted this evidence in any way. Moreover, the
European Communities does not see how Brazil can clai m that all new tyres sold in Brazil can be
retreaded, if at the same time it recognises that it cannot distinguish between tyres which can and such
which cannot be retreaded. The European Communiti es would like to clarify that new tyres that are
not be retreadable from the outset nevertheless manage to satisfy the "strict technical and performance
standards" which exist in Brazil, in the Eur opean Communities and elsewhere, and which do not
include the question of retreadability.
252. The European Communities would like to clarify that it is not asking Brazil to ban the
importation of certain types or brands of new tyr es. However, the European Communities challenges
Brazil's unfounded assumption that all new tyres can always be retreaded, whereas passenger car
retreads tyres cannot. Obviously, to the extent that Brazil allows the importation and domestic
production of certain new tyre types or brands that a priori are not suitable for retreading, this
constitutes an additional discrimination against imported retreaded tyres, which are banned.
Moreover, the unsuitability of certain new tyres will also have the effect of reducing the rate of
retreading, which, contrary to Brazils' assertion, is very low in Brazil for passenger car tyres.

Question 92. To Brazil.
In its answer to Panel's Question n° 18, you indica ted that "some of the previously-issued injunctions
remain in effect". Could you please clarify how long these could remain in place and what you expect
their continued impact on imports of used tyres to be?

75 Brazil's answer to panel question No. 91, para. 12.

Response of Brazil
253. The injunctions that are still in effect can be , and are being, challenged through a number of
appeals or actions for rescission. They can also be challenged on c onstitutional grounds and the
President's Chief of Staff is presently in the pr ocess of initiating one of these constitutional actions.
See Exhibit BRA-168, Exhibit BRA-169. As a result of such constitutional actions, Brazil expects
that the Federal Supreme Court will annul these inj unctions in the very near future. As Brazil
explained in paragraphs 135-141 of its second written submission, imports of used tyres through
preliminary injunctions – both existing and new – will soon end. While Brazil cannot provide the
Panel with a specific date when the last injunction import will take place, it believes that imports of
used tyres by means of preliminary injunctions will become de minimis in the near future.
Comments of the European Communities
254. At the outset, the European Communities would lik e to recall that Brazil's measures must be
evaluated as in existence at the time of the establishm ent of the Panel. This also includes the question
of whether the import ban makes a contribution to the reduction of the number of waste tyres in
Brazil, and of whether Brazil has taken other reasonable available alternatives to the ban.
255. As the European Communities has demonstrated in its previous submissions,
76 high numbers
of used tyres are being imported into Brazil, on the basis of court injunctions, for the purpose of being
retreaded in Brazil. As the European Communities has explained, the importation of large amounts of
used tyres reduces the contribution that the ban coul d make to the reduction of waste tyres arising in
Brazil, and equally signifies that Brazil has not take n other available measure to the ban. For this
reason, the European Communities considers that Brazil's unsupported assurances that the importation
of used tyres on the basis of court injunctions w ill soon cease are legally irrelevant for the evaluation
to which the Panel must proceed in the present case.
256. In its reply to the Panel's question, as in its previous submissions, Brazil has not contested that
the injunctions are in force, and that the importati on of used tyres occurs in the amounts indicated by
the European Communities. Rather, Brazil has claime d that the injunctions "can be, and are being,
challenged through a number of appeals or actions", including "actions for recission" or actions on
constitutional grounds. On this basis, Brazil renews its assurance that imports of used tyres through
preliminary injunctions "will soon end".77
257. In this respect, it must be noted that Brazil's statements relate to decisions which Brazilian
courts might take in the future. There is no way of knowing when and how Brazilian courts might
decide any of the appeals or actions which might be introduced in the future. However, as the
Appellate Body has confirmed, speculation about fu ture court decisions cannot be a basis for the
objective assessment of the facts to which a Panel must proceed in accordance with Article 11 DSU.78
258. It must also be noted that contrary to Brazil's explicit claims, 79 there is no indication that any
of the appeals or actions in question have alread y been introduced. As Exhibits BRA-165, BRA-168,
and BRA-169, Brazil has merely introduced techni cal notes prepared by Legal Advisers to the
Brazilian President which expressly recommend that cer tain actions be introduced. However, Brazil
has not submitted any proof that such actions have already been commenced.

76 European Communities' second written submission, para. 81 et seq; European Communities' second
77 Brazils' answer to panel question No. 92, para. 13.
78 Appellate Body Report on US – Shrimp (Article 21.5 – Malaysia) , para. 95; for the full citation, cf.
European Communities' second written submission, para. 87.
79 Brazil's answer to panel question No. 92, para. 13, and para. 99 of Brazil's second oral statement.

259. Moreover, the notes in question were prepared during the Panel proceedings and as recently
as 25 August 2006 (Exhibit BRA-165) or 15 September 2006 (Exhibits BRA-168 and BRA-169).
Moreover, as is clear from the content of the notes, notably the references to the agency requesting
these notes and the frequent references to the ong oing WTO proceedings, the notes were prepared
specifically because of the ongoing WTO dispute and for the purposes of submission to the present
Panel. This fact significantly undermines the credib ility of the legal analysis contained in these notes.
In fact, if indeed the legal actions recommended in those notes were promising, the question would
arise why they have not been initiated earlier by the Brazilian government.
260. As regards the specific actions addressed by the notes, Exhibit BRA-165 recommends a
"recissory action" and a "declaratory action of non-ex istence of legal relation" against the final court
decision confirming an injunction held by the Brazilian retreader Pneuback to import used tyres. It is
noted that a "recissory action" is an exceptional legal remedy directed at decisions which have
become res judicata . This is explicitly acknowledged in Exhibit BRA-165, which explains that a
"recissory action is the legal and procedural remedy for dismissing a legal decision that can no longer
be attacked through appeals".
261. For this reason, Exhibit BRA-165 explicitly confirms the European Communities' earlier
submission that the injunctions held by Pneuback are res judicata,
80 and disproves Brazil's statement
that "the case is far from closed", that it is "subject to further appeal and is being appealed by the
Brazilian government" and that the "European Communities is misinformed on these proceedings". 81
The legal action envisaged by Brazil also shows the irrelevance of the comment made by Brazil that
the "injunction involved an entirely different measure – a 15 years old ban on imports of used
goods".82 What matters is not how old the injunction is, but whether it is still in force and can be used
to import used tyres. Otherwise, it would not be clear why Brazil is considering a recissory action and
an action of non-existence of legal relation against this injunction.
262. Finally, it should also be noted that given thei r character as exceptional remedies, a recissory
action and a nullity action can only succeed under very narrow conditions. 83 This exceptional
character of the remedy makes it even more doubtful whether it would succeed if it were introduced.
263. As regards the action for non-compliance w ith fundamental constitutional principles
considered in Exhibits BRA-168 and 169, this appears to be an even more exceptional remedy with an
equally uncertain outcome. In fact, the action recommended is based on the assumption that the
injunctions at issue would violate certain general principles of the Brazilian constitution, such as the
right to an ecologically balanced environment (Ar ticle 225 of the Brazilian Constitution), or the right
to health (Article 196 of the Constitu tion). It is manifest that the outcome of an action based on such
general principles is highly uncertain at best.
264. What is far more interesting about Exhibit BRA -168, however, is that it contains a list of
24 Brazilian retreaders who hold inju nctions which entitle them to import used tyre casings. The
same exhibit also contains a list of cases in whic h the requests for injunctions have been rejected,
which however is notably shorter than the first. Wi th this exhibit, Brazil therefore disproves its own
claim that the injunctions are an isolated phe nomenon, that the Brazilian government has been

80 European Communities' second written submission, para. 89.
81 Brazil's second oral statement, para. 99. This is incidentally also proven by Exhibit BRA-161, which
concludes that "the decision that granted the injunction and ensured the right of Pneuback to import used tyres in
order to carry out its [commercial] activities is still in effect".
82 Brazil's second oral statement, para. 99.
83 For the recissory action, cf. Article 485 of the Brazilian Civil Procedural Code, referred to in
Exhibit BRA-165.

successful in fighting the injunctions, and that the European Communities was "cherry-picking" its
examples.
84
265. Finally, the European Communities would also like to comment on the specific case of the
importer BS Colway. It is noteworthy that Colway is equally referred to in Exhibit BRA-168 as one of
the companies benefiting from an injunction. This disproves the contrary impression Brazil has tried
to create in its second oral statement, where it cl aimed that the European Communities had ignored a
March 2006 ruling which was positive for the government. 85 In fact, the ruling referred to by Brazil
was a ruling by a mid-level court which does not affect the validity of the injunction in force.86
266. In conclusion, the European Communities submits that Brazil did not give a credible answer
to the Panel's question of how long the existing in junctions could remain in place and what their
continued impact on imports of used tyres can be expected to be. The facts suggest that these
injunctions could remain in effect for a very long time and especially, but not only, those of the two
largest Brazilian retreaders and im porters of casings, BS Colway and Pneuback, are likely to ensure a
large-scale ongoing importation of used tyres into Brazil.
Question 93. To Brazil.
In its answer to Panel's Question n° 16, Brazil said : "Because the preliminary injunctions authorize
the importation of used tyres only as raw material, the Government of Brazil has imposed heavy fines
for illegal sales of used tyres."
Do retreading companies that import used tyres sell these (as used tyres) and if yes to whom?

Response of Brazil
267. Brazil estimates that at least nine per cent of the used tyres imported as raw material for
retreading are sold to the general public as part-worn (used) tyres. See Exhibit BRA-94. Such sales
are illegal in Brazil and are subject to fines of R$ 400 per tyre under the Pr esidential Decree 3.179 -
the same regulation that imposes fines for imports of retreaded tyres. In 2005, Brazil fined Brazilian
retreaders a total of R$ 22.7 million for resale of imported used tyres as part-worns. See Exhibit
BRA-69.
Comments of the European Communities
268. In reply to this question, Brazil informs the Panel that on the basis of Exhibit BRA-94, it
believes Brazilian retreaders in 2005 sold 9% of the imported 11 million imported used tyres as part-
worn tyres, i.e. 1 million tyres. At the same time, Brazil refers to the information contained in Exhibit
BRA-69 concerning fines imposed by Brazil, which indicates 59,885 as the number of imported tyres
for which fines were imposed in 2005. The European Communities does not know what explains this
discrepancy in the numbers provided by Brazil, but they either undermine the credibility of the
information provided, or cast serious doubt on the e fficiency with which Brazil enforces its relevant
legislation.
269. The European Communities would also point out that the sale of mid-life imported used tyres
to consumers for direct use as such seems to be a side-effect of the importation of casings (by way of
court injunctions). It would not exist if Brazil allowed the importation of retreads instead of the
casings, and in comparison the effect of such imports and sales on waste accumulation can be

84 Brazil's second oral statement, para. 101.
85 Brazil's second oral statement, para. 101; cf. equally Brazil's second written submission, para. 140.
86 Exhibit BRA-151 admits that the decision of 7 Ma rch 2006 is not valid at present and confirms that
that BS Colway maintains its import right based on the 22 May 2006 decision by the vice-president of the
Regional Federal Court of the Second Region, which prevails.

presumed to be more negative. According to Brazil's own response, this phenomenon of mid-life
sales to consumers continues to exist, despite the above-mentioned fines.
Question 94. To Brazil.
In its answer to Panel's Question n°60, Brazil sa id : "If any retreaded tyres from the European
Communities did enter Brazil through Rio Grande do Sul, this would have been a direct result of the
preliminary injunctions, not of operation of the state measures."
Have preliminary injunctions been granted for the import of retreaded tyres?

Response of Brazil
270. Yes, a few preliminary injunctions that perm itted limited imports of retreaded tyres have
indeed been granted, but the volumes imported through these injunctions have been minimal.
Question 95. To Brazil.
The European Communities submits in paragraph 91 of its second written submission that "presently
ongoing legislative developments in both houses of the Brazilian legislature are moving, with quite
some support, in the direction of formally permitting, not prohibiting, the importation of casings (and
retreads)" and mentions inter alia bill 216/03 approved by the Social Affairs Committee of the
Brazilian Senate. Could Brazil explain the legal status of these "legislative developments"?

Response of Brazil
271. The European Communities' discussion of wh at may happen to draft bills 203/1991 and
216/2003 is speculative and has no legal relevance. Nevertheless, Brazil will briefly discuss these
bills to respond to the Panel's question.
272. At the outset, Brazil notes that one measure dates back to 2003 and another to 1991, as the
bill numbers indicate, but neither has become law to this date. Bill 216/2003 was introduced by a
Senator from Paraná, the home state of Brazil's larg est retreader. As Brazil has explained, Brazilian
retreaders actively pursue imports of used tyres because these imports are substantially cheaper.
273. Brazil's Executive has actively op posed the bills from the start and will veto them if they
manage to clear the legislative hurdles. These b ills are very unlikely to be enacted, which would
require them to be approved by both the Senate and the House of Representatives and then signed by
the President. To this date, neither of the bills h as been passed even by one of the houses. Supporters
of Bill 216/2003 managed to get th e bill approved by the Social A ffairs Committee. Instead of
scheduling a vote by the full Senate, the President of the Senate has scheduled public hearings on the
bill because of the bill's health and environmental ra mifications. Even if the bill is passed by the
Senate, it will then need to be p assed by the House of Representatives and avoid the president's veto.
Because this scenario is very unlikely, the Eur opean Communities' conclusion that Brazil will soon
lift its ban on imports of used and retreaded tyr es has no basis. Had the European Communities truly
believed in what it claims, it is puzzling why it wo uld even continue its WTO challenge, instead of
just letting Brazil's legislative process take its course.
Comments of the European Communities
274. In its reply to the Panel's question, Braz il has argued that the European Communities'
reference to the two draft bills is "speculative and has no legal relevance".87
275. At the outset, the European Communities would ag ree with Brazil that the two draft laws are
not yet in force, and for this reason do not affect the measures at issue in the present dispute, which

87 Brazil's answer to panel question No 95, para. 16.

must be evaluated as in force at the time of the Pa nel's establishment. For this reason, the draft bills
are of no relevance to the recommendations wh ich the Panel must make in accordance with
Article 19(1) DSU.
276. This being said, it is somewhat surprising to see Brazil insisting on the irrelevance of future
developments when it itself has repeatedly referre d to future measures it claims it will adopt, for
instance as regards the enforcement of the import ba n on used tyres, the establishment of a mandatory
system of vehicle inspections, or the removal of the MERCOSUR exemption.
277. In fact, the European Communities referred to the bills in particular in response to the
Brazilian claim that it would soon end the importation of used tyres.
88 M o r e o v e r , t h e
European Communities believes that these legislative developments are useful context for the Panel in
evaluating the ban's justification under Article XX(b) . It is significant that at a time when the
Brazilian government is defending the ban as indispen sable for the protection of life and health in
Brazil, bills aiming at the revocation of the ba n are finding considerable support among Brazilian
legislators, including of a specialised body such as the Special National Waste Policy Commission of
Brazil, where an overwhelming majority of th e deputies oppose the government's position as well as
the kind of arguments which Brazil has submitted to this Panel.
278. This being said, the European Communities has no certainty that any bill revoking the import
ban will indeed be adopted, which is why it was fo rced to initiate the pr esent dispute settlement
proceedings.
Question 96. To Brazil.
In relation to the video contained in Exhibit EC –73:
 (a) Please clarify what the "Raupp opinion" is and what its relevance to these
proceedings might be;
 (b) Please comment on the suggestion made in the document that the Brazilian
retreading industry can only function at 60% of its capacity using domestic
carcasses.

Response of Brazil
279. The exhibit is a 12-minute video produced by Brazil's largest retreader, BS Colway, to
persuade Brazilian legislators to support Bill 216/2003 that would have permitted imports of used and
retreaded tyres. See Brazil's Response to Questi on 95 of the Panel. The Raupp Opinion is the
amended version of this bill, in troduced by Senator Waldir Raupp. The amended bill reflects the
position of Senator Raupp alone, not of Brazil's Governme nt or legislature. It is not a law and thus
has no legal relevance.
280. The video offers valuable evidence, however, th at directly contradicts the argument on which
the European Communities has based its case – that tyres used in Brazil are not suitable for
retreading. The video states: "Nowadays, 60 per cent of the raw material used by the Brazilian
retreaders are domestic casings." This is an eff ective admission by the Brazilian retreaders that of
some 18.7 million retreaded tyres made in Brazil in 2005, at least 60 per cent, or 11.2 million retreads
were made from domestic casings. If 80 per cent, or 6.2 million of truck tyres in 2005 were made
from domestic casings, as ABR states
89, this means that the remaining 5 million domestic casings
were used to make passenger car retreads, and that of the 10.8 million passenger car retreads, at least
46 per cent were made from domestic casings in 2005. This directly contradicts the

88 European Communities' second written submission, paras. 91-92.

European Communities' claims that "Brazilian u sed tyres are not suitable for being retreaded" 90 and
that "retreaded passenger car tyres produced in Brazil are made overwhelmingly from imported
casings."
91
281. With respect to part (b), if Brazilian retread ers indeed cannot operate at full capacity on
Brazilian casings alone, this is a dir ect consequence of excess capacity, as Brazil explained in
paragraph 119 of its SWS. This is the only plausible conclusion because Brazil has already achieved
some of the highest suitability and retreadability rat es reported by any country – a third of the total
waste arisings are retreaded according to the retreaders' numbers (roughly 32 million used tyres are
generated in Brazil every year, and based on th e 60-per cent figure in the video and the ABR
production numbers, 11 million of them are retreaded).
Comments of the European Communities
282. As regards the first part of the Panel's question, the European Communities would like to
clarify that contrary to Brazil's reply, the Raupp opinion does not merely reflect the opinion of
Senator Raupp, since it was approved by the Federa l Senate's Social Affairs Commission with a
majority of 18 to 1.
92 For the more general relevance of this opinion, the European Communities
refers to its comments on Brazil's reply to the Panel's Question No. 95.
283. As regards the second part of the Panel's Ques tion, Brazil avoids a meaningful response by
stating that "if Brazilian retreaders cannot operate at full capacity on Brazilian casings alone, this is a
direct consequence of excess capacity". 93 This is a circular response which avoids addressing the
central issue, namely the problems in the supply of retreadable casings which is the underlying cause
of the low level of capacity utilisation. This lo w capacity utilisation makes Brazil's statement that
"Brazil has already achieved some of the highest suitability and retreadability rates reported by any
country" entirely implausible. In fact, Brazil s uggests essentially that Brazilian retreaders have been
acting in an economically irrational fashion by building up capacity which even under the best of
scenarios they could not expect to use. The European Communities su bmits that a far more plausible
explanation for the presently unused capacity is th e one it has already offered, namely that the
adaptation of Brazilian industry to the standards of INMETRO Portaria 133 has led to a higher
demand for good quality casings, which are not available in Brazil.94
284. In relation to the Video contained in Exhibit EC-73, Brazil also claims that the video states
that "Nowadays, 60 per cent of the raw material used by the Brazilian retreaders are domestic
casings".95 However, the video contains no such statemen t. The video reports a statement by Roberto
de Oliveira, Marketing Director of ABR, who states the following:96
National casings are already being u sed. Due to the bad conditions of
the country's roads and highways, we have only been able to use
enough to meet 60% of our need , that is, our segment operates with
40% idleness.
285. Accordingly, the needs to which reference is made is the overall production capacity, which is
used only at 60 per cent. However, as is not contested, the Brazilian retreading industry uses large
numbers of imported used casings to reach even this 60% capacity utilisation. Contrary to Brazil's

90 European Communities' first written submission, para. 81.
91 European Communities' second written submission, para. 33.
92 European Communities' second written submission, para. 91 and Exhibit EC-101.
93 Brazil's answer to panel question No. 96, para. 21.
94 European Communities' answer to panel question No. 107, para. 30.
95 Brazil's answer to panel question No. 96, para. 20.
96 Exhibit EC-73, minute 8:18 (emphasis added).

claim, the statement does not confirm that 60% of casings used by the retreading industry are of
domestic origin.
286. For this reason, Brazil's calculations
97 are based on a fatal misunderstanding of what the 60 %
stand for. The result of allegedly 46 % of passe nger retreads being made from domestic casings is
accordingly flawed. Such a result would also contradict the evidence adduced by Brazil in
Exbihit BRA-95, stemming from ABR, which "believes that the large majority, but not the totality, of
passenger car casings reformed in Brazil are imported, and is unable to precise the percentage of
casings that is effectively obtained in the local market."
287. Moreover, it is also noted that the ABR represen tative speaks of capacity for the industry as a
whole, i.e. including both truck and passenger car tyres. In this context, it must be recalled that the
use of domestic casings for passenger car tyres is far lower than for truck tyres.
Question 97. To Brazil.
Please comment on the Euopean Communities' statement in paragraph 85 of its second oral statement
that "the technology and equipment for ensuring the respect of [dioxin] emission limits exist, and the
Brazilian cement, steel and paper mills companies c an surely afford the investments, if they have not
done it yet".

Response of Brazil
288. As Brazil explained in paragraphs 78-93 of its second written submission, properly operated,
stateof-the-art cement kilns can only mitigate – not completely eliminate – health and environmental
harm. Because harm from incineration cannot be a voided, no matter how high the standards, it is
necessary to reduce – as much as possible – the volume of tyres that must be incinerated. As Brazil
pointed out in paragraphs 74, 85, and 95 of its second written submission, the European Environment
Agency itself recognizes the dangers of incineratio n and advises member States to incinerate waste
tyres only "if no other outlet is possible."98
289. There is also a practical side to setting permi ssible emission levels. As Brazil explained in
paragraph 14 of its Concluding Statement in the Second Panel Meeting, neither the European nor
Brazilian governments can require cement kilns, pape r mills, and other facilities to incinerate waste
tyres. These facilities are private businesses that will incinerate tyres only if the incineration makes
business sense. As the emission standards increase , costs of incinerating tyres increase, and the
number of incinerators willing to accept tyres decr eases. The OECD report (Exhibit EC-16) states at
page 140 that introduction of strict environmental laws caused the use of incineration to decline in
several OECD countries. In Austria, for example, the share of incineration dropped from the original
share of 70 per cent to 40 per cent.99
290. Governments, therefore, face the difficult task of setting the standards high enough to reduce
the unavoidable risks of incineration to a level they believe is acceptable under the circumstances, yet
low enough to ensure that incinerators continue to accept waste tyres, which would otherwise have to
be landfilled or stockpiled – at an even greater health and environmental cost. The issue, therefore, is
not whether Brazilian incinerators can afford the saf est technology available, but whether incineration
of waste tyres would continue to make business sense if expensive investments were required. This
especially is a concern in a developing country with fewer resources available.

97 In paragraph 20 of Brazil's answer to panel question No. 96.
98 European Environment Agency, Waste from Road Vehicles 2 (2001) (Exhibit BRA-108).
99 OECD Environment Directorate, Improving Recycling Markets 140 (2005) (Exhibit EC-16).

Comments of the European Communities
291. Brazil has eluded the answer to this Question fro m the Panel and has decided to continue its
evasive tactics in relation to co-incineration as an alternative, which Brazil insists in citing wrongly as
"incineration".100 Instead of providing information to the Panel on the state of the installation co-
incinerating or capable of co-incinerating waste tyres in its territory, Brazil repeats that co-
incineration produces health and environmental harm and that the Brazilian government can neither
require these installations to co-incinerate waste tyres nor to increase the emission standards because
the number of installations willing to accept tyres would decrease.
292. The European Communities will respond in relation to the harms caused by co-incineration in
its comments on Brazil's answer to Question 123 from the Panel.
293. For the rest, it is quite surprising to learn that the Brazilian government has no regulatory
powers to require cement kilns, paper mills and othe r facilities to co-incinerate waste tyres. This is
not a question of business sense but one more related to the protection of the general interest, notably
life and health. If it is true that Brazil is confr onted with such important life and health challenges
related to waste tyres as it has described in its s ubmissions before the Panel, making compulsory co-
incineration of waste tyres would be among the best solutions to those problems.
294. This is not a question related to the level at which emission standards for co-incinerating
installations should be laid down. Brazil has already adopted those standards, and the
European Communities has to presume that the level chosen by Brazil is sufficient to protect its
population and environment. In any event, it is the level which Brazil has chosen in reality.
295. The only questions are whether Brazil has these in stallation in its territory, whether they are
capable of and still have unused capacity to co-incin erate waste tyres, and, if some investments are
needed, whether these are financially acceptable.
296. Brazil has not provided any information in this r espect and it has limited itself to attaching, as
Exhibit BRA-166 to its second oral statement, a lis t with the names and addresses of the companies
that are authorized to dispose of waste tyres. This list gives a hint of the halting policy that Brazil has
in relation to co-incineration: out of the 9 indust rial groups producing cement in Brazil and listed in
Exhibit EC-78,
101 only 4 have an authorisation to co-incinerate waste tyres. 102 Brazil has not provided
any information about the reasons for this gap, which evidences on the face that Brazil's cement
industry has unused capacity to co-incinerate more w aste tyres than it currently does, a point that is
also made in the video contained in Exhibit EC –73.
297. Finally, Brazil cannot defend its policy by arguing that it is a developing country. 103 T h e
European Communities has already demonstrated that Brazil is one of the world's foremost producers
of cement, paper and steel. 104 It is worth noting that, in the European Communities, only Spain and
Italy produce separately more cement than Braz il. The companies in those three sectors have
sufficient resources to face the inv estments needed to built or upgrad e installations where waste tyres
can be co-incinerated. Moreover, financing in Brazil of these investments are ensured by the gate fees

100 The differences between "co-incineration" and "incinerations" have been explained by the European
Communities in its answer to panel question No. 125, para. 61.
101 These groups are: Joao Santos, Votorantim, Cimpor, Lafarge, Camargo Correa, Soeicom, Holcim,
CP Cimento and Itambé.
102 CP Cimento, Cimpor, Lafarge and Votorantim, the latter also controls Cimento Poty, Cimento Rio
Branco and Cimento Tocantins.
103 Brazil’s answer to panel question No. 97, para. 24, in fine.
104 European Communities' answer to panel question No. 47, para. 61, and European Communities'
second written submission, para. 127.

that, in order to comply with their disposal obligations under Resolution CONAMA No. 258/99,
producers and importers of tyres have to pay to th ose industrial installations for accepting waste tyres
for co-incineration.
Question 98. To Brazil.
Please clarify whether th e increase in the imports of used tyres between 2003 and 2005 described in
paragraph 79 of the European Communities' first writte n submission is entirely attributable to import
authorized under the injunctions granted by Brazilian courts?

Response of Brazil
298. Yes, the described increase is attributable sole ly to imports authorized under preliminary
injunctions granted by Brazilian courts.
B. TRADE DATA
Question 99. To Brazil.
Could you please comment on the European Communities' statement in footnote 151 to
paragraph 178 of its second written submission clam ing that the graph submitted by Brazil in
paragraph 148 of its first written submission actually shows an increase in the total number of new
tyre sales?

Response of Brazil
299. The increase in the sales of new tyres in Brazil was caused not by the import ban, but by the
fact that there are simply more cars on Brazilia n roads. From 2001 to 2005, the Brazilian fleet
expanded from 32 million registered motor vehicles to 42 million, according to the National Traffic
Department (see table below). During this period, the re placement market expanded by 9.4 million,
or 22 per cent, from about 42.7 million to 52.1 million. During the same period, sales of new tyres
produced in Brazil increased by only 900,000, or a mere five per cent. The European Communities'
suggestion that these sales increased by "a few millions " in footnote 151 is untrue and misleading.
Even if one counts 1999 and 2000 – for which Br azil does not have retread production information to
calculate the market size – the sales of domestic tyr es increased by only 1.6 million, or nine per cent.
At the same time, imports of new tyres more than doubled from 1999 to 2005.

Comments of the European Communities
300. The European Communities notes that Brazil's reply essentially confirms the comment made
by the European Communities in footnote 151 to paragraph 178 of its second written submission,
namely that there was an increase in the sale of new domestic replacement tyres in Brazil from 1999
to 2005 of 1.6 million. It should be noted that if one compares 2004 with 1999, the increase is even of
the magnitude of 3.3 million. 105 Accordingly, Brazil's claims in paragraph 148 that the figures had
remained stable were inaccurate.
301. As regards the relative magnitude of the cha nge, Brazil suggests that 1.6 million additional
new tyres represents an insignificant increase. This is a remarkable contrast to Brazil's statements
regarding the justification of the ban, where it has claimed that even an additional number of
500 waste tyres was sufficient to justify the import ban on retreaded tyres.106
302. This contradiction also becomes apparent in the fact that Brazil's total imports of retreaded
tyres in 2000 were in the order of 2 million tyres, and thus not of a very different magnitude from the
change in the number of new tyres which Brazil now tries to dismiss as insignificant.
Question 100. To both parties.
What is an appropriate method to calculate the number of individual tyres contained in one ton of
retreaded tyres? Can the same calculation method be applied in the case of used tyres? Is the
difference between passenger car and commercial tyres relevant for this calculation?

Response of Brazil
303. According to the EC-commissioned report on implementation of the Landfill Directive, the
approximate weights are as follows:
 new car tyre – 8 kg, used car tyre – 6.5 kg;
 new bus/truck tyre – 60 kg, used bus/truck tyre – 52.5 kg.
See Exhibit BRA-41, at p. 124.
304. The difference between passenger car and commercial tyres is relevant because commercial
vehicle tyres are substantially heavier. However, because the weight of different types of commercial
vehicle tyres can vary significantly, the industry's trend has been to calculate the number of waste
tyres using passenger tyre equivalents (PTEs), also referred to as equivalent passenger units (EPUs).107
Response of the European Communities
305. The appropriate method to calculate the number of individual tyres contained in one ton of
retreaded tyres is to divide 1000 kilograms by the average weight of a tyre in kilograms.
306. This general method can be applied for any type of tyre, including used tyres and new tyres.
Similarly, it can be applied to passenger, truck and aircraft tyres.
307. However, when applying the method, and as w ill be explained in response to the following
two questions, it has to be taken into account that there are considerable differences in the average

105 See the table in para. 26 of Brazil's responses to the panel's second set of questions. Apart from the
small fall in 2001, 2005 is the first year in that row where sales fell (by 1.7 million).
106 Brazil's second oral statement, para. 78.
107 See, e.g., Commonwealth Department of Environment (Australia), A National Approach to Waste
Tyres 39-I (2001) (Exhibit BRA-8).

weight of passenger, truck, and aircraft tyres. A ccordingly, the conversion has to be done separately
for each of these categories.
308. Moreover, there are also differences in the aver age weight of new and used tyres. According
to information received from both European and Brazilian retreaders, the difference in weight
between a new and used tyre can be around 25% to 30%, depending on the degree of use of the tyre.
The difference in weight tends to be relatively mo re important for truck tyres than for passenger car
tyres. Accordingly, when carrying out the convers ion, it must be taken into account whether this
conversion is done for new tyres, used tyres, or end- of-life tyres. In contrast, it does not appear that
there are significant differences in weight between new tyres and retreaded tyres.
309. When establishing the average weight of tyres, it must furthermore be noted that there may be
considerable differences in the average weight of tyres even within the same category, such as
passenger, truck and aircraft tyres. Moreover, as the European Communities will also explain, there
may also be differences between countries in the averag e weight of a particular category of tyre (such
as a passenger car tyre), depending on the car and tyre models typically used in the market.
Question 101. To the European Communities.
Could you please comment on Brazil's statement in paragraph 47 of its second written submission
that the average weight of one passenger car tyre is approximately 6.5 kilograms?

Response of the European Communities
310. The European Communities notes that in para graph 47 of its second written submission,
Brazil speaks of waste passenger car tyres in th e European Communities. The European Communities
considers that whereas 6.5 kilograms may be a r oughly accurate average for waste passenger car tyres
in Brazil, this number may be somewhat too low for the European Communities.108
311. As for Brazil, which is the relevant market, th e Brazilian retreader Colway has indicated that
popular new car tyres have around 8 kg and high perform ance car tyres have around 10 kg of weight.
Taking into account a loss of around 25 % to 30 % of their weight after being used, Colway suggests a
weight of used passenger car tyres of around 6 kg to 6.5 kg, on average.
109
312. The European Retreads Manufacturers Association (RMA) advises that in the
United Kingdom, 130 tyres correspond to one ton of scrap car tyres, which gives a weight of 7.7 kg
per car tyre. As an explanation for this higher wei ght, one must bear in mind that car and tyre sizes
are on average somewhat larger in Europe.
Question 102. To both parties.
What is the average weight of truck, buses and aircraft tyres?

Response of Brazil
313. As Brazil explained in its response to Question 1 00 of the Panel, the weight of truck/bus tyres
varies depending on the type of the vehicle. The typical weight of truck/bus tyres is generally
assumed to be 52.5-60 kg. The weight of an aircraft tyre can vary significantly, from as low as 14 kg
to as high as about 120 kg, depending on the type of the aircraft.

108 For this reason, the average disposal cost of 1.2€ indicated by Brazil is somewhat overstated.
109 It is noted, however, that Art. 4(c) of Instrução Normativa IBAMA n° 08/02 (Exhibit EC-48) defines
5 kg as the weight equivalent for one automobile (car) tyre for the purposes of "fiscalisation and control" in the
context of the CONAMA 258/99 tyre disposal scheme.

Response of the European Communities
314. According to the Brazilian retreader Colway, the average weight of used truck and bus tyres
is around 45 to 50 kg in Brazil. 110 In the European Communitie s, the Retreads Manufacturers
Association (RMA) advises that 18 used truck tyres correspond to one ton of truck tyres, resulting in a
weight of 55.6 kg for a used truck tyre. Once again, this difference in average weights between the
European Communities and Brazil reflects th e fact that that new truck tyres in the
European Communities are somewhat larger on average.
315. As regards aircraft tyres, one must note that their sizes not only vary between those below the
nose (smaller) and those below the wings (bigger, a nd called "principal") on the same aircraft, but
there are also very different sizes corresponding to diffe rent aircraft models. In general, the average
weight of an aircraft tyre would therefore not app ear to be very meaningful, given that the variation
between the sizes and weights of airplanes (from glider to Airbus A380) is of a totally different order
of magnitude than for cars, trucks and buses.
316. This remark notwithstanding, Goodyear Avia tion Tyres informed the European Communities
that Aircraft tyres can weigh from 5 kg to 130 kg depending on the tyre size. A typical fully worn
aircraft tyre may have lost up 10 % of its weight in service, varying from size to size and design to
design. The European Tyre and Rubber Manufactur ers Association (ETRMA) supplied the following
information on two typical aircraft types:
 Airbus 320: principal tyre: 207 lb; nose tyre: 52 lb (1 lb = 0.4536 kg);
 Boeing 737 new generation: principal: 185 lb; nose: 39 lb.
317. While a weighted average can theoretically still be calculated, the European Communities has
no such information on the general market, either in the EU or in Brazil, because this would imply
knowing either the total number and total weight of all aircraft tyres sold, or the respective numbers
and weights of the various types of aircraft tyres sold. 111 More easily, one can calculate an average
from trade statistics, for instance in a given year (2003) Brazil imported 40 retreaded aircraft tyres
weighing 3.5 tonnes (average 87.5 kg), and exported 54 retreaded ai rcraft tyres weighing 1 tonne
(average 18.5 kg). If one takes the European Comm unities trade statistics for imports and exports of
new and retreaded aircraft tyres, it seems more cauti ous to speak of an average weight of 20-40 kg.
However, due to the small sample sizes and possible va riations between tyres, it is not clear that these
numbers are representative for the entire market.
Question 103. To both parties.
Brazil indicates in paragraph 47 of its second s ubmission that a passenger car tyre weighs
approximately 6.5 kilograms. Would it be correct to assume, on that basis, that the importation of
6,500 tons of tyres could be considered to represent the importation of 1 million passenger car tyres?

Response of Brazil
318. Yes.

110 Once again, Art. 4(e) of Instrução Normativa IBAMA n° 08/02 (Exhibit EC-48) uses a slightly
lower figure, namely 40 kg, as the weight equivalent for one truck or bus tyre for the purposes of "fiscalisation
and control" in the context of the CONAMA 258/99 tyre disposal scheme.
111 It its noteworthy that IBAMA Instruction 8/2002 (Exhibit EC-48) does not stipulate a standard
weight conversion for aircraft tyres, which is due to the fact that the CONAMA 258/99 collection and disposal
system does not cover aircraft tyres, but only tyres for automotive vehicles and bicycles (cf. Articles 1 and 2 of
Resolution CONAMA 258/1999, Exhibit EC-47).

Response of the European Communities
319. As the European Communities has explained in its Reply to the Panel's Question No. 101, the
figure of 6.5 kilograms is a roughly accurate average for waste passenger car tyres in Brazil. It is not
the accurate number for new or retreaded passenger car tyres in Brazil, nor for new, retreaded, or
waste passenger car tyres in the Eu ropean Communities. Subject to this clarification, the Panel's
calculation is correct.
Question 104. To the European Communities.
Is the figure of 2 million retreaded tyres impor ted to Brazil from the European Communities
mentioned in footnote 151 to paragraph 178 of your second written submissi on equivalent to the
14,000 tons of retreaded tyres you referred to in paragraph 80 of your first written submission?

Response of the European Communities
320. At the outset, the European Communities woul d note that Footnote 151 is a reference to
paragraph 175 (not 178) of its second written submission. In the footnote, the European Communities
speaks of the Brazilian imports of retreads being "i n the order of 2 million when the [import] ban was
introduced" in 2000. This "order" was given b ecause those imports were 2.00 million in 2000,
2.02 million in 1999, 3.33 million in 1998, 2.25 million in 1997, and 0.97 million in 1996.112
321. This is not equivalent to the 14,000 tonn es of imported retreads in para. 80 of the
European Communities' first written submission (and re flected in the graph in para. 79). The reason
is that "imports in the order of 2 million in 2000" refers to all imports of retreads, whereas the "close
to 14,000 tonnes" refers to imports from the European Communities only (13,559.10 tonnes exactly)
in 2000. Equivalence would be attained by taking the total weight of all retread imports
(17,598 tonnes) or the number of EC imports in units (1,582,984).

Question 105. To Brazil.
Is Brazil aware of the reasons why the Brazili an Association of Retreaders (ABR) was able to
estimate the proportion of domestic casings used by domestic truck and bus tyre retreaders, but it was
unable to provide the same information in relation to domestic passenger car tyres? Is it feasible to
determine the proportion of domestic casings used by passenger car retreaders in Brazil? If so, can
Brazil provide the Panel with this information since 2000 (broken down by year)?

Response of Brazil
322. Brazil is not aware of the reasons why ABR did not estimate the proportion of passenger car
retreads produced with domestic tyres. It seems th at if the retreaders can provide this number for
truck and bus retreads, they should be able to do th e same for passenger car retreads. The reason for
this refusal may be that because the actual sh are of passenger car retreads made from domestic
casings is very high, providing this information would contradict the low suitability claims that these
retreaders make before Brazilian courts and legislature.
323. While the ABR reports do not provide a specific proportion figure, the production data
provided in the reports plainly demonstrates that a high proportion of passenger car retreads in Brazil
are made from domestic casings. According to the ABR numbers, between 2001 and 2005, Brazilian
retreaders produced some 43.7 million passenger car retreads. However, during the same period these
retreaders imported 27.3 million casings. The Europ ean Communities agrees that at least 15 per cent

112 According to official Brazilian import statistics (ALICE).

of the imports are discarded as "technical losses." 113 These technical losses are common in every
market (e.g., in the United Kingdom they reach 30 per cent).114
324. To avoid argument over proper assumptions, Brazil assumes that the remaining 85 per cent
were retreaded (although the actual share of imports that are retreaded is even lower, as admitted by
Brazilian retreaders in Exhibit BRA-94). This means that even if all imports were passenger casings
and the highest possible number of them was retreade d, even then, they would have been used to
produce just 23.2 million of the 43.7 million retreads between 2001 and 2005.
325. In reality, the proportion of imported passenger c asings used is even lower, not only because
far more than just 15 per cent of imported casings are unsuitable for retreading, but also because some
of the imports are truck and bus casings. It is impo ssible to tell what share of imported casings were
passenger car tyres because used passenger car and truck/bus tyres share the same HS subheading –
4012.20. The ABR numbers suggest that roughly 15 per cent are truck/bus tyres and the rest are
passenger car tyres.
115 This only leaves 19.8 million passenge r car casings that were imported and
could have, in principle, been retreaded. This m eans that at least 23.9 million, or 55 per cent of
passenger car retreads made in Brazil necessarily had to be made from domestic casings.
326. From 2001 to 2003, before the imports of used tyres substantially increased, this proportion
was even higher. The table below provides the cal culations employed above for each year, from 2001
to 2005. The table shows that even under the most conservative assumptions, as much as 74 per cent
of passenger retreads in Brazil were made from domestic casings. Brazil cannot provide the Panel
with the information for 2000 because the Govern ment of Brazil has no independent access to the
retread production data and the ABR did not provide it.

113 See European Communities' second oral statement, at para. 33.
114 See Used Tyre Working Group (UK), Sixth Report of the Used Tyre Working Group, at para. 14.1
(2003) (Exhibit BRA-55).
115 Information Regarding the Tyre Retreading Sector in Brazil (prepared by Associação Brasileira do
Segmento de Reforma de Pneus), at para. 5 (Exhibit BRA-95).

Comments of the European Communities
327. In its reply to the Panel's question, Brazil begins by questioning the good faith of the
Brazilian retreading association ABR for not provid ing information on the share of domestic casings
used for retreading of passenger car tyres.
328. In this respect, it is recalled that it is Br azil which has introduced the statements by ABR
contained in Exhibits BRA-95 and BRA-157 into the present dispute, and which has relied on various
statements contained in these exhibits. It is not admissible for Brazil to rely selectively on certain
parts of its own exhibits, and to qu estion the credibility of other parts of the same exhibit. In passing,
it should also be noted that there may be certain r easons for why ABR may not be able to provide the
information in question, not least the large number of retreaders in Brazil, the large number of
injunctions in force, and the unverified figures for total production.
329. Subsequently, Brazil attempts to recalculate th e rate of domestic tyre utilization, using a
similar methodology to the one applied in Exhibit BRA-162. At a general level, the
European Communities can therefore refer to the comme nts it has already provided in this regard in
response to the Panel's Question No. 107. However, Brazil's reply exposes an additional number of
inaccuracies and incorrect assumptions, which the European Communities would like to point out
hereunder.
330. First of all, Brazil once again relies on the production figures provided by ABR in
Exhibit BRA-157.
116 However, the European Communities h as already shown that these productions
figures are based on a number of unverified assumptions, and therefore do not appear reliable.117
331. Second, Brazil assumes that only 85% of imported casings are being retreaded, the rest being
technical losses.118 In this respect, Brazil relies on Exhibit BRA-94. In this respect, it must first of all
be noted that this exhibit indicates technical losses as amounting only to 1 million out of 11 million
tyres, i.e. less than 10 per cent. Also, it is not ed that Exhibit BRA-94 provides for information only
for one single year, namely 2005. In contrast, Brazil has provided no corresponding information for
the other years covered in its calculations.
332. Moreover, in support of its assumption of a low rate of retreading of imported casings, Brazil
argues that there are rates of technical losses of up to 30% which are common for every market.
119
However, whereas this may true for industries which use local casings, this can certainly not be true
for the rates of retreading of imported casings, which are already specifically pre-selected for their
retreadability.
120
333. Finally, Brazil refers to the fact that from 2001 to 2003, before the imports of used tyres
substantially increased, the proportion of use of domes tic tyres was substantially higher. However, as
the European Communities has already explained, 121 this reflects the earlier utilisation of sub-standard
casings not compatible with the standards of Port aria 133, to which the Brazilian retreading industry
has been adapting since their promulgation. The pr oportion of domestic casings in the production of
retreads from 2001 to 2003 is therefore no longer relevant for the situation today.

116 Brazil's answer to panel question No. 105, para. 32.
117 European Communities' answer to panel question No. 107, para. 24.
118 Brazil's answer to panel question No. 105, para. 32-33.
119 Brazil's answer to panel question No. 105, para. 32.
120 Cf. the invoices contained in Exhibit EC-91, which identify the good as "tyre casings (Class A) for
retreading process (raw material), selected according portaria INMETRO nr. 133/01".
121 European Communities' answer to panel question No. 107, para. 29-30.

334. Third, Brazil makes the assumption that 15% pe r cent of the imported tyre casings are truck
tyre casings.122 In support for this assumption, Brazil refers to para. 5 of Exhibit BRA-95. However,
the quoted passage deals with a completely different issue when it states that "out of the 8 million
[cargo] tyres retreaded in 2003, approximately 85% were recapped and 15 % were top-capped".
Accordingly, Brazil's assumption that 15% of imported casings are truck casings is not based on any
evidence.
335. For all the reasons, as well as the reasons already set out in the European Communities' Reply
to the Panel's Question No. 108, Brazil has not demo nstrated that domestic passenger car casings are
currently being used in significant numbers for the production of retreaded tyres in Brazil.
Question 106. To Brazil.
How do you reconcile your position that domestic casings are retreadable and that there is a waste
tyre accumulation problem in Brazil with the st atement made by the Brazilian Association of
Retreaders (ABR) in the document submitted as Ex hibit BRA-95, that "In 2004... there was a supply
shortage of casings in Brazil, leaving [the Brazilian] tyre retreading sector vulnerable"?

Response of Brazil
336. At the outset, Brazil notes that it submitted the ABR report because it is the only source of
information on retread production in Brazil. Braz il has no reason to doubt the reliability of the
production figures, but it expressly disagrees with th e report's suggestions that few Brazilian casings
are suitable for retreading.
337. There is no evidence that there was indeed a shortage of domestic casings in 2004, as ABR
claims. As a general matter, Brazilian retreaders' claims of unavailability of retreadable domestic
casings are unfounded, as figures provided in Brazil' s response to Questions 96 and 105 of the Panel
plainly demonstrate.
338. In its entirety, the statement quoted states : "In 2004, when their export numbers were
excellent (see ANIP numbers), there was a supply s hortage of casings in Brazil, leaving our tyre
retreading sector vulnerable." First, by singling out y ear 2004, the statement se ems to suggest that in
previous years, there was no shortage of domestic casings. Second, the statement is internally
inconsistent. It blames high leve ls of exports and, by implicati on, lower domestic sales of new tyres
in 2004 for a shortage of casings in the same year. However, casi ngs retreaded in 2004 would have
come from new tyres produced in prior years – not in 2004 – because a tyre is used for several years
before it is retreaded. Brazil therefore expresses reservations about the statement's credibility.
339. These reservations notwithstanding, it is possibl e, in principle, that there may be fewer
domestic casings in Brazil than necessary to fu lly utilize the production capacity of domestic
retreaders. As Brazil explained in paragraph 119 of its second writte n submission and in its response
to Question 96, however, this would merely be a consequence of excess capacity in the industry, not
of the lack of suitable casings.
Comments of the European Communities
340. In its reply to the Panel's Question, Brazil agai n cherry-picks on the information provided by
ABR by expressing its trust in those figures that su it Brazil's defence and disagreeing with those that
do not. After all the information which the Europe an Communities has submitted in relation to the
suitability of Brazilian passenger ca sings for retreading, it is astonishing that Brazil asserts that
"[t]here is no evidence that there was indeed a s hortage of domestic casings in 2004". Contrary to
Brazil's claim, its responses to Questions 96 and 1 05 do not demonstrate that "Brazilian retreaders'

122 Brazil's answer to panel question No. 105, para. 34.

claims of unavailability of retreadable domestic casings are unfounded", also because of the flaws on
which these responses are based.
123
341. Brazil also draws baseless a contrario conclusions from ABR's remarks in relation to casing
shortages in 2004, to the effect that there ther efore would have been no casing shortages in the
previous years. In paragraph 6, the new ABR Exhibit BRA-157 makes general statements, not related
to a specific year, on the scarcity of good quality Brazilian casings, which is indeed the unanimous
position of the Brazilian retreading industry. 124 The European Communities has drawn the Panel's
attention in its closing statement at the second oral hearing.125
342. Regarding Brazil's statements in relation to the "excess capacity" existing in the Brazilian
retreading industry, it is interesting to note that Brazil's judgment of what is "excess" is premised on
the number of casings which the domestic market can supply, or rather cannot supply. Brazil omits
the existing and unsatisfied demand for higher numbers of retreads that could be produced and sold in
Brazil at the current prices. Given their success on the domestic market, it is not inconceivable that
the quite competitive Brazilian retreaders would also be capable of exporting more retreads in the
future. This presupposes of course that they are freed from their current capacity utilisation
constraints. The European Communities would also refer to its above comments on Brazil's circular
arguments on excess capacity.
126
Question 107. To the European Communities.
Please comment on the following elements presented by Brazil in its second oral statement:
 (a) the figures contained in Exhibit No. 162 on the number of tyres retreaded in Brazil
made from domestic casings, in the years 2001 to 20 05, as referred to in paragraph 57 ff. of Brazil's
oral statement;
 (b) the arguments in paragraph 61 of Brazil's oral statement relating to the proportion of
retreads made in Brazil made from domestic casings and the proportion of
retreadable used tyres actually being retreaded.

Response of the European Communities
343. The calculations contained in Exhibit BRA-162, to which Brazil refers in paragraphs 57 et
seq. of its second oral statement, are based on (i) ove rall casings imports; (ii) retreader's estimates on
the internal destination of imported casings; ( iii) ABR's new information on the production of
retreads in Brazil in Exhibit BRA-157; and (iv) used tyre arisings in Brazil.
344. Whereas the European Communities does not contest Brazil's numbers as regards the
importation of used tyres into Brazil, the European Communities submits that the further assumptions
and factors used in the equations are partially incorrect, and partially based on unverifiable
assumptions.
345. As regards the internal destination of im ported casings, Brazil di stinguishes between a
"conservative scenario", in which all imported casings are retreadable, and a "realistic scenario",
according to which only "approximately two-th irds" of the imported casings are retreaded. 127 A s
footnote 51 to Brazil's SOS clarifies, this assumption is supposed to be based on the information
provided by Brazilian retreaders in Exhibit BRA-94.
128 However, as the European Communities has

123 Cf. the European Communities' comments on Brazil's answer toquestions 96 and 105.
124 See, for instance, the video contained in Exhibit EC –73.
126 See the European Communities' comments on Brazil's response to panel's question No. 96.
127 Brazil’s second oral statement, para. 58.
128 This information is also part of the Parecer Raupp, whic h the European Communities submitted as
Exhibit EC-22.

already pointed out,129 Exhibit BRA-94 in no way confirms Brazil's submission that only two thirds of
imported casings are retreaded. In fact, of the 11 million casings mentioned in Exhibit BRA-94, only
1 million, i.e. less than 10%, are mentioned as "los t" (presumably due to lacking retreadability), with
another million being sold as mid-life tyres. The pe rcentage of imported casings that are retreaded
can therefore not be 67 %, but would have to be around 90 %, based on Brazil's own source. This
misrepresentation invalidates entirely the calculati ons in the fourth table of Exhibit BRA-162 and all
percentages which Brazil quotes in the context of what it calls the "realistic scenario".
346. As regards the production of retreaded tyres in Brazil, Brazil relies on an "updated version" of
a report of the Brazilian retreaders association, which provides production figures for retreaded car
and truck tyres. 130 In relation to these figures, it is necessary to point out that these figures are
estimates based on unreliable assumptions and unclear me thodology. In fact, at the end of para. 2 of
the ABR Exhibit BRA-157, it is indicated that the production figures are the result of calculations
with:
 the weight of the rubber produced by the rubber industry divided by a weight factor
for each tyre kind. First of all, it is not clear what is meant by "weight of the rubber produced
by the industry", which specific industry is re ferred to, and where this industry is located.
Second, given the considerable divergences betwee n tyre types, it seems questionable to rely
on numbers resulting from calculations with the raw material produced and undisclosed
weight factors.
 national production of new tyres in Braz il, multiplied by a "recapability index" for
truck and bus tyres, i.e. the number of tim es which ABR assumes, based on its experience, a
truck tyre is retreaded, on average. The num bers which ABR gives are thus based on an
assumed rate of retreading. Brazil then uses these ABR numbers to demonstrate the actual
rate of retreading and the share of domestic retreads that are made from domestic casings.
This is not a proper methodology, because if the i nput into an equation is an assumption, then
the effective reverse calculation cannot return a proven empirical number for the same
variable.
 an ABR census. However, there is no information about this census and its quality,
notably the size of the sample and the questions and answers, and therefore no possibility to
verify the accuracy of the results of this census.
347. As regards the used tyre arisings in Brazil c ontained in the last two tables of Exhibit BRA-
162, Brazil assumes an average life of 5 years, whic h, as the European Communities has explained in
response to the Panel's Question No. 90, may be somewhat too high. Since the overall market for new
tyres is slowly expanding, the figures of casings arisings may therefore have been slightly
underestimated. The production numbers themselves appear identical to the ones in the LAFIS
report,131 but they seem to omit light trucks/vans (" camionetas"), which are roughly as many as the
numbers for truck tyres (3-4 million per year). Th e calculations on arisings also make a number of

129 European Communities' second written submission, footnotes 43 and 75.
130 Brazil’s second oral statement, para. 58, referrin g to Exhibit BRA-157. Contrary to Brazil’s claim,
the only difference between Exhibit BRA-157 and the ea rlier report of the Brazilian Retreaders Association
ABR (Exhibit BRA-95) is not that the numbers for truck and passenger car retreaded tyres have been
disaggregated. Rather, the accompanying text contains ma rked differences. In addition, it is noted that in
Exhibit BRA-157, two paragraphs (paragraphs 7 and 8) seem to be missing.
131 Exhibit EC-92, p. 4.

assumptions that are questionable, notably that ¾ of Brazilian truck retreads can be retreaded again
(Note 4 at the end of Exhibit BRA-162).
132
348. Overall, with the exception of the number of imported used tyres, the calculations contained
in Exhibit BRA-162 are full of inaccuracies and unpr oven assumptions. For this reason, Exhibit
BRA-162 is inadequate for the purpose of establishi ng the rate of retreading of passenger car and
truck tyres as well as the share of domestic casings in retreads manufactured in Brazil.
349. On this basis, the European Communities maintains its view, which is based on the LAFIS
report, that the rate of retreading of passenger car tyres in Brazil must be considerably below 9.9%,
which is the overall rate of retr eading indicated in this report. 133 Brazil has argued that this number
was based on a "controversial" IPT study commissi oned by the new tyre producers in Brazil which
"was so flawed that the author was asked to redo it". 134 Brazil equally indicates that the new study has
not yet been completed. 135 The European Communities has not commissioned the study in question,
and is not in a position to verify the methodology a nd input used in the preparation of the study.
However, the European Communities notes that the study at issue was prepared independently of the
present proceedings, whereas Brazil has presented calculations which were prepared at a late stage in
the present proceedings, and specifica lly for the purposes of the use in dispute settlement. It appears
therefore that apart from their general methodol ogical and factual inadequacy, Brazil's numbers
cannot claim a higher degree of credibility than those prepared by independent parties in Brazil.
350. Accordingly, Brazil's statement in para. 61 of its SOS that the overall rate of retreading in
Brazil is as high as 44% lacks all credibility. 136 Moreover, after announcing its inflated rate of
retreading, Brazil triumphantly declares that its rate of retreading is "at least three times the rate of the
EC countries".137 However, this statement, rather than supporting Brazil's case, in fact underlines the
lack of credibility of Brazil's calculations. A ccording to the evidence pr esented by Brazil itself, 138
there is a strong fatigue factor affecting Brazilian ca sings due to factors in Brazil such as road quality,
consumer habits, poor tyre maintenance, and the lack of inspections. Moreover, if Brazil really had so
many good domestic casings, one wonders why Br azil continues to import huge quantities of casings
for the purposes of retreading, rather than exporting casings.
351. Moreover, it must also be noted that the results presented in Exhibit BRA-162 show a
constant decline of the rate of retreading from 2000 to 2005. For instance, even according to Brazil's
calculations in the conservative scenario, the rate of retreading for passenger car tyres declined from
21% in 2000 to 9% in 2005, and for truck tyres from 77% to 60%. Brazil has attributed this decline to
the importation of casings. 139 However, the importation of casings is itself due to the lack of
retreadable casings which comply with the sta ndards imposed by Portaria INMETRO 133, which in
turn reflect the requirements for tyre retreading set out in UNECE Regulation 108.140

132 In note 3 to Exhibit BRA-162, the weight of a new passenger car tyre is indicated as 852,76 kg,
which appears to be a further mistake.
133 European Communities' second written submission, para. 45 and Exhibit EC-92, p. 11.
134 Brazil's second oral statement, para. 72. It is noted that Brazil provides a study by IPT as
Exhibit BRA-159. This study is dated July 2004. In contrast, the LAFIS report refers to a study commissioned
by the Brazilian association ANIP in 2005 (Exhibit EC-92, p. 11). It is therefore not clear that the study
provided by Brazil is the one to which the LAFIS report refers.
135 Brazil's second oral statement, para. 24.
136 In addition, the European Communities notes that it is not very meaningful to calculate an overall
retreading rate for truck and car tyres, given the important differences between these two markets.
137 Brazil's second oral statement, para. 61.
139 Brazil's second oral statement, para. 5
140 The European Communities explained these requirements in para. 25 of its first written submission.

352. In other words, the declining rate of retreadi ng reflects the gradual adaptation of the Brazilian
retreading industry to the higher standards of Portaria 133. For this reason, higher rates of retreading
in earlier years are no longer relevant, because they reflect the use of casings which were not in
compliance with the relevant standards, and will theref ore not be able to continue in the future. To the
extent that retreading of domestic passenger casings continues in small numbers, this reflects the use
of sub-standard casings by smaller Brazilian retread ers who are not able to import suitable casings
from abroad.141
353. As regards the retreading of truck tyres, it is recalled that INMETRO is still working on the
adoption of the relevant technical standard. 142 Accordingly, it is likely that the higher – albeit
declining – rate of retreading of truck tyres ma y reflect a high use of sub-standard casings which
would not comply with the requirements for tyre retreading under UNECE Regulation 109. In this
context, it is noted that retreaded tyres produced with sub-standards casings will not have the same
durability and safety as retreaded tyres, which, like retreaded tyres produced in the
European Communities, are produced with good-quality casings.
143
Comments of Brazil
354. The European Communities' entire case depends on its being able to demonstrate that new
tyres used in Brazil cannot be retreaded again, and, therefore, present the same health and
environmental risks as imported retreads. The Eur opean Communities has failed to prove this point.
It has offered no evidence to support this unlikely hypothesis, with the exception of some self-serving
statements made by Brazilian retreaders. 144 Brazil, on the other hand, has extensively demonstrated
that tyres used within its territory (domestic casi ngs) are both suitable for retreading and are, in fact,
retreaded. In its Exhibit BRA-162, Brazil presented specific figures showing that a very high number
of Brazilian casings are retreadable and are retreaded.
355. To calculate the share of Brazilian retread s made with domestic casings, Brazil deducted
imported casings that would have been retreaded from the total number of retreads produced in Brazil.
Brazil then divided the number of retreads made from domestic casings by the total used tyre arisings
to arrive at the rate of retreading of exclusively domestic casings. The European Communities, in its
response to Question 107, did not contest the import numbers.
145 Neither did it actively contest the
waste arisings, noting only that they "may [] have been slightly underestimated." 146 The two aspects
that the European Communities did challenge were the retread production figures in the ABR report
(both the original and the updated versions) and the proportion of impor ted casings that are, in fact,
retreaded.
(i) ABR report and production numbers

356. With respect to the ABR report, the Europ ean Communities questions its methodology and
also suggests that it is not credible because it was pr epared "specifically for the purposes of the use in

141 In this context, it is noteworthy that Brazil k eeps postponing the definitive entry into force of
Portaria INMETRO 133/2001. Portaria INMETRO 163 of 3 July 2006 (Exhibit EC-125) postpones the entry
into force of Portaria INMETRO 133/2001 to 1 January 2007, which is already the third such postponement (cf.
European Communities' first written submission, para. 20).
142 European Communities' first written submission, para. 22.
143 In addition, it is also recalled that retreading of truc k and aircraft tyres generally occurs without
change in ownership (cf. European Communities' closing st atement, para. 24). For truck tyres, this is explicitly
confirmed in Exhibit BRA-95, para. 6; for aircraft tyres, cf. Exhibit EC-23.
144 See Brazil’s second oral statement, at para. 63.
145 See European Communities' answer to panel question No. 107, at para. 22.
146 See European Communities' answer to panel question No. 107, at para. 25.

dispute settlement."
147 The European Communities' criticism of the ABR report in its latest set of
responses represents a remarkable reversal of th e European Communities' own position in its second
written submission and second oral statement, where it enthusiastically endorsed the findings of the
ABR report. In paragraph 44 of its second written submission, the European Communities employed
the very figures it now challenges to argue that Brazilian passenger casings are not retreadable. It also
cited ABR's belief that "the large majority, but not the totality of passenger car casings reformed in
Brazil are imported."148 The European Communities then concluded:
"This information thus fully confirms th e European Communities' view that the
retreading of domestic passenger car casings, to the extent it occurs at all, represent
only a very small proportion of used car tyres arising in Brazil."149
357. In paragraph 29 of its second oral statement, the European Communities again noted, "It is,
however, worth recalling that the ABR's report indi cates that the large majority of passenger car
casings retreaded in Brazil are imported."
358. Having apparently recognized that the ABR re port hurts its case more than it helps, the
European Communities has now gone from endorsing the report to criticizing it for questionable
methodology and bias. However, even in its cr iticism the European Comm unities is inconsistent:
having just contested the reliability of the ABR re port in paragraphs 24 a nd 27 of its response to
Question 107, the European Communities proceeds to cite the report in paragraph 28 in support of its
low suitability argument. Instead of explic itly referring to the report, however, the
European Communities this time only makes a vague reference to "the evidence presented by Brazil."
The exhibit number in the footnote reveals, how ever, that the evidence the European Communities
refers to is none other than the updated ABR re port (Exhibit BRA-157). The European Communities
also cites the report to support its argument in response to Question 90, at paragraph 4.
359. At the outset, Brazil reminds the Panel that Br azilian retreaders have vigorously opposed the
import ban on used and retreaded tyres and clashed with the Government in countless legal disputes.
In the present WTO dispute, Brazilian retreader s support the European Communities – not Brazil –
and have no reason to help the G overnment of Brazil make its case in the WTO. Judging by the
European Communities' responses to the second set of the Panel's questions, at least one of these
retreaders, has assisted the European Communities in this very dispute.
360. With this in mind, Brazil has no reason to su spect that the report's methodology is anything
but sound. First, no entity is more familiar with Brazil's retreaded tyre market than the retreaders
themselves, and if they have chosen a particular method to calculate production, they must have done
so because it is the best available method. Second, the ABR report includes statements that not only
contradict Brazil's arguments, but actua lly support the arguments made by the
European Communities. As noted above, the Eu ropean Communities has actively relied on these
statements to build its own case. Had the retreade rs indeed sought to present distorted numbers, those
numbers would have favoured the European Communities, not Brazil, just as the narrative that
accompanies the numbers favours the European Comm unities. Brazil again points out, however, that
the ABR production numbers contradict ABR's assertions of low suitability made in the narrative.
361. For the very same reason, the fact that the ABR report was prepared after the
European Communities initiated the present proceedi ng in no way undermines the reliability of the
figures presented in the report. In addition, the production statistics that the European Communities

147 European Communities' answer to panel question No. 107, at para. 27.
148 See European Communities' second written submission, at para. 44, citing ABR Report, at para. 6
(Exhibit BRA-95).
149 European Communities' second written submission, at para. 44.

now challenges have been collected for many year s. Only the narrative part of the report was
prepared after the establishment of the panel.
362. Brazil would have liked to be able to pr esent retreadability figures from an independent
source that were not accompanied by self-serving a nd unfounded claims. However, Brazil is not
aware of another source that provides this kind of data.
363. The LAFIS survey of tyre industry (Exhibit EC -92) – which the European Communities still
endorses150 – supports the ABR numbers. The survey st ates that some 10.5 million remoulded tyres
were made in 2004. 151 According to the 2005 estimate of the destinations of imported casings
("Raupp Opinion," Exhibit EC-22, at 4), of all the ca sings that were retreaded, about 57 per cent were
remoulded and the rest were top-capped or re-cappe d. If the remoulded tyre production mirrored the
utilization of imported casings – that is, if 10.5 million remoulds amounted to 57 per cent of the
retread production – then the total retread produc tion would have been 18.4 million. The ABR puts
the total at 18.6 million. 152 Applying the proportion of remoulded tyres given in the ABR report
would give a slightly higher production figure.153
364. The European Communities' dramatic shift of positions on the ABR report illustrates the
willingness that the European Co mmunities has exhibited throughout this dispute to make any
argument convenient at the moment, even if that argument has no basis in fact and even if it
contradicts the European Communities' own prior statements made before this Panel and in other fora.
In this dispute, the European Communities has offered studies that it claimed proved that incineration
was safe, but as Brazil pointed out in paragraphs 86-92 of its second written submission, if those
studies proved anything, it is that incineration is dangerous. The European Communities then pointed
to the Stockholm Convention and said that dioxins – dangerous chemicals released during incineration
– were not among the 12 persistent organic pollutant s that the Convention targeted for elimination,
when, in fact, they patently are. 154 The European Communities claime d in its second oral statement
that its Exhibit No. 124 demonstrated that tyres ha d nothing to do with dengue, but that very exhibit
said that "[t]he tyre group [] showed very high averages" of dengue-positive larvae at one of the
surveyed locations. 155 The European Communities has even st ated that it sees no harm in Brazil
relying on landfilling, even thoug h the European Communities itsel f categorically prohibits the
practice.156
(ii) LAFIS/IPT Report

365. In its responses, the EC continues to argue that the 9.9 per cent figure presented in the LAFIS
report is the rate of retreading in Brazil. 157 The LAFIS report explicitly states at page 11 that the
source of the 9.9 per cent figure is the IPT study, commissioned by Brazil's National Tyre
Manufacturers' Association (ANIP) (Exhibit BRA-159). It is noteworthy that the European
Communities chose not to rebut arguments that Brazil made in its SOS about the flaws of the study,
despite the fact that the study is the actual source of the 9.9 per cent figure and is the only remaining
source that – in the European Communities' interpretation – supports the claims of low suitability.
158

150 See European Communities' response to panel question No. 107, para. 27.
151 See LAFIS, Brazil – Car Parts and Vehicles: Tyres 4 (2006) (Exhibit EC-92).
152 See ABR Report, at 1 (Exhibit BRA-95).
153 See ABR Report, at 2 (Exhibit BRA-95).
154 See European Communities' second written submission, para. 117; Brazil’s second oral statement,
para. 40.
155 See Brazil’s response to panel question No. 89, para. 8.
156 See European Communities' second written submission, para. 107.
157 See European Communities' response to panel question No. 107, para. 27.
158 See Brazil’s second oral statement, at paras. 24, 72.

366. As Brazil explained in paragraph 24 of its sec ond oral statement, the study accounted for just
a half of the used tyres generated in Brazil in that pa rticular year. It surveyed only "retailers and tyre
repair shops"
159 and did not account for retreadable tyres th at were retained by owners even though
they comprise a third of the total waste arisings. Neither did it account for a large part of commercial
tyres because these tyres do not typically pass through the retailers or tyre repair shops.
367. The study first concludes – in a direct cont radiction to the European Communities' low
suitability argument – that some 47 per cent of used ty res in Brazil can be retr eaded or even used as
part-worns (i.e. still usable) (Figure 4). Of these, the study – by design – only accounts for 9.9 per
cent – which are those tyres that pass through tyre retailers, repair shops, and ultimately junk yards.
The remaining 37 per cent are retained by the owner and are, in most cases, sold to retreaders and
retreaded. The very reason owners keep these tyres is because they have value, whether as
retreadable casings or part-worns. The study doe s not specify the share of these tyres that are
retreaded because it has no way of documenting it, gi ven that it only surveys tyre repair shops and
retailers.
368. The study also leaves out another important group of used tyres – commercial vehicle tyres.
As the EC itself pointed out, "retreading of truck an d aircraft tyres generally occurs without change in
ownership,"160 that is, companies do not sell used tyres and buy retreads – rather they retread their own
tyres. For this reason, most commercial vehicle tyr es would not have been captured by the IPT study.
This squarely contradicts the European Communi ties' earlier suggestion, in its second written
submission, that "since the retreading of domestic truc k tyres occurs to a much higher extent than for
car tyres, it must be assumed that the percentage of Brazilian passenger car tyres which are being
retreaded is considerably lower than 9.9%, and most likely de minimis."161
369. This evidence plainly demonstrates that the 9. 9 per cent figure does not represent the actual
rate of retreading, as the European Communities clai ms. The actual rate of retreading in Brazil is
much higher, as reflected in Exhibit BRA-162.
(iii) Portaria 133

370. The European Communities began this dispute by arguing – with no qualifications – that tyres
used in Brazil cannot be retreaded.
162 In response, Brazil pointed out that before 2004 – the first of the
two years when high volumes of used tyres were imported – domestic retrea ders had no difficulty
finding suitable domestic casings and the vast ma jority of Brazilian retreads were made from
domestic casings.163
371. To explain away this incontrovertible fact , the European Communities has invented a new
argument: it now claims that imports of casi ngs increased in 2004 and 2005 because Portaria
INMETRO 133 imposed rigid standards on casings, rendering Brazilian casings no longer suitable for
retreading. First, Brazil notes that this is the firs t time that the European Communities has even made
this argument. In its first written submission, th e European Communities dedicated three paragraphs
to the discussion of Portaria INMETRO 133 and it s equivalent for commercial vehicles (paragraphs
20-22), but did not once suggest that the portaria created a shortage of suitable casings. In its second
written submission, the European Communities di d not mention the regulation at all. The
European Communities' belated invocation of the portaria, at the close of the proceedings, should be

159 See IPT Study, Section 3 (Exhibit BRA-159).
160 European Communities' response to panel question No. 108, at ftn. 24.
161 European Communities' second written submission, at para. 45.
162 See European Communities' first written submission, at para. 81.
163 See Brazil’s second oral statement, at paras. 56-61; see also Exhibit BRA-162.

seen for what it is – a last-minute attempt by the European Communities to bolster its faltering
argument.
372. Second, Portaria INMETRO 133 is not a recent development. It has been in effect since 2001.
Used tyre imports, on the other hand, did not become substantial until 2004 – some three years later.
Had the portaria in fact had something to do with the suita bility of domestic casings, imports of used
tyres would have reached the 2004 levels much earlier. Finally, Brazil is not aware of any times when
Brazilian retreaders and other opponents of the import ban argued in any court or forum that the
portaria made finding suitable domestic casings difficu lt, even though such arguments could, in
principle, strengthen the retreaders' case in favour of the imports.
373. In its response to Question 107, the European Communities again repeat s its claim that the
allegedly poor conditions of Braz ilian roads contribute to the allegedly low retreadability rate.
However, the European Communities has offered no evidence in supp ort of its argument, with the
exception of the INMETRO Technical Note 83, which, as Brazil has explained, merely restated the
arguments made by the Brazilian retreader s and did not reflect INMETRO's views.
164 T h e
European Communities also misses an important poin t: regardless of the road conditions in Brazil's
countryside, most tyres – and especially passenger car tyres – are used in urban areas, where the roads
are just as good as the roads in wealthier countries.
374. The European Communities argues in its response:
"To the extent that retreading of domestic passenger casings continues in small
numbers, this reflects the use of sub-standard casings by smaller Brazilian retreaders
who are not able to import suitable casings from abroad.165"
375. Evidence already presented by Brazil aptly rebuts this statement. In addition, Brazil points
out that European Communities' ow n exhibits contradict this assertion. According to the LAFIS
report, some 10.5 million remoulded tyres were made in 2005. 166 Of this amount, 6.5 million were
made with Brazilian casings. 167 Remoulding is a fairly new retreading technology that requires
substantial investment and better quality casings. Most small retreaders would not pay for the new
equipment and better casings when they can conti nue re-capping or top-capping tyres with equal
success. For this reason, remoulding is typically carried out by more well-established and financially-
able companies. This means that in 2005, at l east six million Brazilian retreads – a third of the total
production – were made by fairly well-established businesses from high-quality casings.
376. Not only is the quoted statement manifestly untrue, but it also illustrates the condescending
attitude toward Brazil the European Communities has exhibited throughout this dispute. To the
European Communities, everything about Brazil seems to be sub-standard, be it Brazil's casings,
Brazil's roads, habits of Brazil's drivers, Brazil's regulations, its waste tyre management practices,168 or
its dengue control efforts 169 – all in direct contrast with the wa ys of the European Communities. In
reality, however, it was Brazil – not the European Communities – that first prohibited the landfilling
of waste tyres and that achieved some of the highest rates of retreading.
(iv) Conservative vs. realistic scenarios

164 See Brazil’s response to panel question No. 25.
165 European Communities' response to panel question 107, at para. 30 (emphasis added).
166 See LAFIS, Brazil – Car Parts and Vehicles: Tyres 4 (2006) (Exhibit EC-92).
167 See Raupp Opinion, at 4 (Exhibit EC-22).
168 See, e.g., European Communities' second written submission, at para. 55.
169 See European Communities' second written submission, at para. 57-59.

377. The European Communities challenges the two-thir ds figure that Brazil used to estimate the
proportion of the imported casings that were actually retreaded. At the outset, Brazil points out that
the European Communities' criticism applies only to the realistic scenario because the conservative
scenario assumed that all imported casings were re treaded – precisely to avoid an argument over this
particular assumption. The conservative scenario likewise showed that a substantial number of
retreads were made from domestic casings. In a ddition, Brazil has revised the conservative scenario
in its second set of responses to account for the Eu ropean Communities' admission in its second oral
statement that at least 15 per cent of imported casings are discarded as technical losses.
170 This means
that even under the most conservative estimates, only 85 per cent of the imported casings are
retreaded. Brazil included the revised numbers in its table at paragraph 35 of the second set of
responses. The revised conservative scenario shows that between 2001 and 2005, some 55 per cent of
retreads – on average – were made from Brazilian casi ngs. In 2002, that number reached 74 per cent.
This alone conclusively demonstrates that Brazilian casings are retreadable and are retreaded.
378. Even the revised conservative scen ario, however, is too conserva tive. First, Brazil pointed
out in its response to Question 105 of the Panel that technical losses are common in every market. In
the United Kingdom, these losses reach 30 per cent. 171 There is no reason to believe that casings
imported into Brazil are any different from casi ngs imported into the United Kingdom. Second, at
least for the year 2005, Brazil used hard numbers – not assumptions – to arrive at the number of
imported casings that were actually retreaded. Th is number was the 2005 destination estimate by BS
Colway, cited in the "Raupp Opinion," at page 4 (E xhibit EC-22). According to this number, of the
11 million casings that were imported into Brazil in 2005, only 7 million were used to make retreaded
tyres in 2005. Therefore, the realistic scenario for 2005 is based exclusivel y on hard numbers, and
contrary to the European Communities' suggestion,
172 at least 50 per cent of passenger car retreads
necessarily had to have been made from domestic casi ngs that year. This puts the rate of retreading
for the passenger car tyres alone at 25 per cent for 2005 – again, substantially higher than the rate
achieved by the European Communities itself. Finally, to recall, in the video that the
European Communities submitted as Exhibit No. 72 , Brazilian retreaders admit that 60 per cent of
tyres retreaded in Brazil are made with domestic casings.
379. To summarize, the evidence estab lishes that the scenario that applies the 2005 destination
figures to previous years best reflects the reality. Nevertheless, even the most conservative scenario –
assuming that only 15 per cent of the imported casings are not retreaded – demonstrates that most of
the Brazilian retreads are made from domestic casings . For this reason, the European Communities'
argument that Brazilian casings are not retreadable is plainly wrong.
(v) Price of casings

380. In its second set of responses to the Panel, the European Communities once again asks
rhetorically:
"[I]f Brazil really had so many good domestic casings, one wonders why Brazil
continues to import huge quantities of casings for the purposes of retreading, rather
than exporting casings."
173
381. Brazil has already demonstrated in paragra ph 117 of its SWS and in paragraph 63 of its
second oral statement that Brazilian retreaders prefer imported casings not because there is a shortage

170 See European Communities' second oral statement, at para. 33.
171 See Used Tyre Working Group (UK), Sixth Report of the Used Tyre Working Group, at para. 14.1
(2003) (Exhibit BRA-55).
172 See European Communities' answer to panel question No. 107, at para. 29.
173 See European Communities' answer to panel question No.107, at para. 28.

of domestic casings, but because the imports are s ubstantially cheaper. In fact, since 2004, imported
casings have become even less expensive than domes tic casings for a number of reasons: increasingly
more stringent – and expensive – waste tyre disp osal obligations in the European Communities;
exchange rate variations (R$3.9 per US$ 1 in Octo ber 2002 to R$ 2.3 per US$ 1 in October 2005);
and a higher demand for domestic casings, caused by an opening of a retreading plant in the state of
Paraná, Brazil, claimed to be the largest in the worl d. This is a point the European Communities fails
to address.
382. The European Communities ignores the dynamics of the market. Demand for foreign casings
is not static. Cheaper imports reduce production costs and, thereby, lower the price of retreads. The
lower price, in turn, increases th e demand. To produce enough retreads to satisfy the higher demand,
some imports may be necessary, which increases the volumes of shorter-lifespan tyres in Brazil. As
Brazil has already explained in paragraph 119 of its second written submission, however, the
Government's goal is to retread as many used tyres generated in Brazil as possible, not to satisfy the
artificially high demand on retreaded tyres at the expe nse of public health and the environment. The
most recent evidence of this commitment to human health and the environment is the presentation by
the President of Brazil, on 21 September 2006, of a Supreme Court action that would end imports of
used tyres through preliminary injunctions. See Exhibit BRA-173.
383. These facts conclusively demonstrate that th e data and the assumptions that underlie the
retreadability figures in Brazil's Exhibit No. 162 are highl y reliable. For this reason, the high rates of
retreadability of Brazilian casings demonstrated by the exhibit are fully accurate.
Question 108. To both parties.
Could you please clarify the extent to which new tyres and retreaded tyres compete on the Brazilian
market?

Response of Brazil
384. Brazil notes that new and retreaded tyres do not compete in the new car market because
retreaded tyres are not fitted on new vehicles. New and retreaded tyres do compete in the replacement
market, but the detailed market data necessary to measure the extent of the competition by
econometric analysis do not exist. See Brazil's second oral statement, at para. 81. As Brazil
understands, imported retreaded tyres compete with domestic retreads, and all retreaded tyres
(domestic and imported) compete with new tyres in the replacement market. Brazil also understands
that if the price of a retreaded tyre is sufficiently low, Brazilian consumers tend to prefer a retread
over a new tyre.
Response of the European Communities
385. At the outset, the European Communities would like to note that in Brazil, new tyres and
retreaded tyres compete only in the replacement market, since new cars may not be fitted with
retreaded tyres.
174
386. As regards the market for replacement tyres, it is clear that there is a close competitive
relationship between new tyres and retreaded tyres given their identical end uses and their comparable
quality in terms of durability and safety. 175 However, the relationship between the products will also
be affected by other factors, including the differenc e in price, the price-sensitivity of the consumer,
and the perception of the consumer of the product.

174 Cf. Brazil’s first written submission, para. 148.
175 Cf. already European Communities' second written submission, para. 33. According to Brazil’s
answer to panel question No. 24, the market share of retr eaded tyres in Brazil rose slightly from 39.2 per cent in
2000 to 40.1 per cent in 2005.

387. The European Communities does not have data that would permit to define the competitive
relationship between new and retreaded tyres in the Brazilian market in more quantitative terms. The
European Communities considers that it would be for Brazil, as the party invoking an exception to its
WTO obligations, to establish the relevant facts. However, in its second oral statement, Brazil has
already indicated that the relevant economic data for the Brazilian market has not been collected, and
that precise calculation of the relevant price elasticities is therefore impossible.
176 H o w e v e r , t h i s
information would be required in order to estab lish the precise contribution Brazil's ban might make
to the prevention of waste tyres in Brazil. 177 For this reason also, Brazil has failed to discharge its
burden of proof in this regard.
Comments of the European Communities
388. In its reply to the Panel's question, Brazil once again confirms that the precise data to evaluate
the competition between new and retreaded tyres in the Brazilian market is not available. As the
European Communities has already pointed out, this data would be necessary to evaluate the precise
existence and extent of the contribution of the im port ban to the reduction of waste tyres in Brazil. 178
Accordingly, this constitutes anot her reason why Brazil has not discharged its burden of proof in this
regard.
Question 109. To the European Communities.
Does the European Communities agree to the translations provided by Brazil of the Brazilian laws
and regulations pertinent to this case?

Response of the European Communities
389. Where the European Communities has noted a discrepancy, it has pointed this out. 179
However, the European Communities is not in a position to verify all translations provided by Brazil.
Accordingly, the fact that the European Commun ities has not commented on a specific translation
does not mean that the translation is necessarily accurate.
C. IMPORT BAN
Question 110. To the European Communities.
Please comment on the arguments presented by Brazil in it answer to question 35 of the Panel, in
relation to animal and plant life or health, and on the arguments contained in the submission by the
Humane Society International, su bmitted by Brazil as Exhibit BRA-98, in respect of risks to animal
health or life.

Response of the European Communities
390. The arguments by Brazil in relation to animal and plant health or life refer to two of the risks
that Brazil claims it aims at reducing with the import ban (some mosquito-borne diseases and
pollution from waste tyre fires) and to two of the existing alternatives to the import ban (co-
incineration in cement kilns and construction of arti ficial reefs). The Humane Society International
argues only on the three first issues.
391. Exhibit BRA-98 and Brazil's own submissions to the Panel contain only very general
arguments in relation to animal and plant life or health, making it difficult to address them
specifically. However, the European Communiti es will comment on these arguments, while recalling

176 Brazil's second oral statement, para. 81.
177 Cf. Exhibit EC-122, para. 22.
178 European Communities' answer to panel question No. 108, para. 34.
179 Cf. European Communities' second written submission, footnote 174.

at the same time that the lack of precision of Brazil's arguments must weigh to Brazil's detriment,
taking into account that Brazil has the burden of proof in relation to the defence under Article XX(b).
392. Moreover, while Brazil supports its arguments w ith some documents, which are attached to
its submissions, that is not the case of the Humane Society International, which has attached none of
the documents that it refers to as evidence.
393. In relation to the mosquito-borne diseases , it is clear that they do not pose any threat to plant
life or health. Brazil and the Humane Society seem to acknowledge that the diseases only affect
human and animals. 180 However, Brazil does not identify th e animal species affected by dengue,
yellow fever, malaria and West Nile virus, probably because its first written submission was limited to
the consequences of the first three diseases on humans only. 181 The difficulty of that identification is
obvious in relation to malaria, which only has humans as hosts. According to the evidence provided
by Brazil, "humans are the main amplifying host of the [dengue] virus, although studies have shown
that in some parts of the world monkeys may beco me infected and perhaps serve as a source of virus
for uninfected mosquitoes". 182 Similarly, in relation to yellow fever, Brazil's evidence shows that
"humans and monkeys are the principal animals to be infected" and that "in tropical rainforests,
yellow fever occurs in monkeys that are infected by wild mosquitoes".183 Brazil has not explained the
dispersion of these two diseases among monkeys in Braz il, but, in any case, they seem to be infected
in their natural environment, independently of th e presence of waste tyres. Brazil has provided no
evidence on how the West Nile Virus affects animals.
394. The submission by the Humane Society Internatio nal also refers generally to the fact that
some mosquito-borne diseases affect animal populations. 184 The four studies on which it seems to
base its arguments are not attached, making it impossible for the European Communities to respond to
them. The submission also refers to Aedes albopictus as "an aggressive biter that attacks livestock,
amphibians, reptiles and birds",185 but it does not seem that these bites have negative consequences for
the life and health of these species.
395. In relation to hazardous emissions arising from waste tyre fires, neither Brazil nor the
Humane Society International explain and, even less, demonstrate, how they affect animal and plant
life or health. Their main argument seems to be that, because those emissions are hazardous, they
necessarily produce negative consequences on fauna and flora. This inference is wrong and based on
no risk assessment of the potential fires, 186 including an analysis of the dimension and location of the
site, and on no study of the "critical loads" of the ha bitats potentially affected or "critical levels" of
concentrations of pollutants in the air. 187 It does not take into account either the dispersion in the air

180 Brazil’s answer to panel question No. 35, second sentence, and the Humane Society International
submission, paras. 22 to 25.
181 Brazil’s first written submission, section III.A.1. Moreover, Brazil refers to four diseases in its
answer to the Panel question, though the West Nile wa s not mentioned in its first written submission, paras. 22
to 28.
182 Exhibit BRA-13, p. 1, at the bottom.
183 Exhibit BRA-22, p. 1, at the bottom, and p. 2, first bullet point.
184 To the four diseases mentioned by Brazil in its answer to the Panel question, the Humane Society
International adds, without further explanation, "filarosis" and "canine heart worm".
185 The Humane Society International submission, para. 25.
186 An example of an elementary risk assessment for the seven most important waste tyres sites in the
UK may be found in Exhibit BRA-136, at p. 10.
187 Article 1 of the Protocol to the 1979 Convention on Long-range Transboundary Air Pollution to
Abate Acidification, Eutrophication and Ground-level Ozone, signed in Gothenburg on 30 November 1999
defines "critical load" as the "quantitative estimate of an exposure to one or more pollutants below which
significant harmful effects on specified sensitive elements of the environment do not occur, according to present
knowledge", and "critical levels" as "concentrations of pollutants in the atmosphere above which direct adverse

of those emissions or the measures that should be implemented, once a fire has occurred, to fight
against it and to avoid pollution of surface waters . Moreover, some of the arguments, like those
related to soil and groundwater pollution, are not n ecessarily related to the protection of animal and
plant life or health but to the protection of the environment.
396. In relation to co-incineration in cement kilns
, Brazil claims that "the same pollutants [as in
tyre fires] are released", a statement that does not take into account the huge differences in the level of
emissions arising from both activities. The Humane Society International affirms "that the U.S.
Environmental Protection Agency found that controlled burns using waste tyres in poorly-designed
combustors caused serious concern that air emissions would be more like those from the open burning
of tyres rather than a well-designed and managed combustor".
188 This is a question of the technology
used and a regulatory question, and the European Communities is not proposing to co-incinerate
waste tyres in poorly-designed combustors. More over, neither Brazil nor the Humane Society
International explain how state-of-the-art combusto rs co-incinerating waste tyres in compliance with
regulatory emission standards would damage fauna a nd flora more than if they did not burn waste
tyres, but only coal or peat coke. As the European Communities has already explained, 189 the
evidence presented by Brazil in this respect corresponds to installations using old technology, like the
wet cement kilns, or burning other fuels.190
397. Finally, Brazil's argument that artificial reefs made of waste tyres produce leachate that harms
rainbow trout and other forms of aquatic life has already been answered by the
European Communities in paragraph 132 of its second written submission and Exhibit EC-106. The
report produced by HR Wallingford Ltd., in March 2005, for the UK Department of Trade and
Industry and the Environment Agency concluded that the overall risk of damage to the environment of
waste tyres in port, coastal and river engineering is expected to be reduced to near zero. More
specifically, the study concluded that, in relatio n to leachates from waste tyres used for those
purposes, "the magnitude of consequences is esti mated to be negligible, except where slow or
stationary waters are the receptor where it might be estimated to be mild".
191
Question 111. To Brazil.
Please clarify the current legal status of :
 (a) Portaria DECEX No. 8 in light of the subsequent amendment by Portaria MICT No.
 370;
 (b) Presidential Decree No. 3.179 as amen ded by Presidential Decrees No. 3.919 and
No. 4.592; and
 (c) Law No. 12.114 of the State of Rio Grande do Sul in light of the subsequent
amendment by Law No. 12.381?

Response of Brazil
398. Portaria DECEX No. 8, as amended by Portaria MICT No. 370/94, is legally in force, with
the exception of its Articles 19 to 21 and 29 to 32, which were revoked by Article 55(II) of Portaria
SECEX No. 17/03. The parts revoked do not affect trade in used or retreaded tyres.
399. Presidential Decree No. 3.179, as amended by Pr esidential Decrees No. 3.919 and No. 4.592,
is legally in force.

effects on receptors, such as human beings, plants, eco systems or materials, may occur, according to present
knowledge" (Exhibit EC-126).
188 The Humane Society International submission, para. 20.
189 European Communities' second oral statement, para. 84.
190 European Communities' second written submission, para. 118 and footnote 119.
191 Exhibit EC-103, section 7.3.2., at p. 105.

400. State Law No. 12.114, as amended by Law No. 12 .381, is formally in force, at present.
However, as Brazil explained in its responses to Ques tions 56, 57, and 62 from the Panel, the law has
no legal effect because Brazilian states have no author ity to regulate interstate or international trade
under Brazil's Constitution. State authorities simply cannot authorize or prohibit imports because
import licenses are issued by the federal government, not by the states. Neither can state authorities
impede sales of imported products. If they attempted to restrict these sales, Brazil's Executive or a
private party would have easily obtained an injunction against the state.
401. Finally, the European Communities is flatly wrong to suggest that the state law could affect
an import ban because it could be considered a disposal measure.
192 Even if the disposal provisions of
the measure were enforceable, the import-related pr ovisions are exclusively within the jurisdiction of
the Federal Government and have no effect.
Comments of the European Communities
402. As regards Law No. 12.114 of the State of Rio Gr ande do Sul, Brazil repe ats its earlier claim
that this law "has no legal effect". This statemen t is plainly wrong. In this respect, the European
Communities can refer to its earlier submissions.193
403. Brazil also claims that the European Communities is wrong to suggest "that the state law
could affect an import ban because it could be considered a disposal measure". 194 T h e
European Communities is surprised by this objec tion, because it has made no such argument. The
European Communities has not argued that the stat e law "affects" the import ban. Rather, the
European Communities has argued that to the extent that the ban imposes disposal obligations, these
obligations may be considered to fall under the c oncurrent jurisdiction of the Brazilian states for
environmental protection, and th erefore not be unconstitutional. 195 The European Communities notes
that Brazil has never contested this argument of th e European Communities, and even in its reply to
the Panel's question has again conceded that the disposal obligations might be enforceable.196
404. The European Communities notes that the challe nged State law of Rio Grande do Sul is a
separate measure from the import ban, which could remain in force even if the ban were removed. In
this case, the discriminatory disposal obligations contained in the State Law would still negatively
affect, or even make impossible, the marketing of im ported retreaded tyres in Rio Grande do Sul. For
this reason, the Panel should equally rule on the State measure.
Question 112. To Brazil.
Please confirm whether Portaria DECEX No. 8 and Resolution No. 23 are currently legally in force.
If so, does the import prohibition on used tyres as stipulated in Article 4 of Resolution No. 23 also still
apply to "retreaded tyres"?

Response of Brazil
405. Portaria DECEX 8/1991 is in force. See Brazil's response to Question 111. CONAMA
Resolution 23, which is also in force, regulates management and importation of wastes into Brazil.
Used tyres – traded under code 4012.20 and expressly referred to in Annex 10 of Resolution 23 – are
wastes while retreaded tyres are not. For this r eason, there was no nominal reference to retreaded
tyres in the resolution. It does not mean, however, that Brazil permitted the importation of retreaded

192 See European Communities' second oral statement, at para. 115.
193 European Communities' second oral statement, para. 114 et seq.; European Communities' second
written submission, para. 198.
194 Brazil's answer to panel question No. 111, para. 44.
195 European Communities' second oral statement, para. 115.
196 Brazil's answer to panel question No. 111, para. 44.

tyres before the adoption of the 2000 import ban or that retreaded tyres do not pose specific
environmental risks. According to the Brazilian legislation, retreaded tyres are used goods, imports of
which were prohibited by Portaria DECEX 8/1991.
Comments of the European Communities
406. In its reply to this question, Brazil confirms th at it considers that retreaded tyres are used
goods the importation of which is prohibite d by Portaria Decex 8/1991. While the
European Communities does not agree that retreaded tyres are used goods, the
European Communities considers that the Panel, on the basis of Brazil's interpretation of Brazilian
law, should find that Portaria Dece x 8/1991 is equally incompatible w ith Article XI:1, to the extent
that it bans the importation of retreads.
Question 113. To Brazil.
Are import licenses required under Portaria SECEX No . 14 for the importation of retreaded tyres? If
so, under what provision of Portaria SECEX No. 14 are such import licenses required?

Response of Brazil
407. Import licenses are only issued by the federal government as provided for in Portaria SECEX
No. 14. Article 40 of the portaria explicitly provides that import licenses will not be granted for the
importation of retreaded and used tyres, excep t for remoulded tyres from MERCOSUR countries.
Import licenses for used and retreaded tyres have been issued only when ordered by the courts. Had
imports of used and retreaded tyres been permitt ed, import licenses would have been required under
Articles 9(II)(e) and 35 of Portaria SECEX No. 14. These provisions provide for "non-automatic
licensing" for used goods, which means that import licenses are required to import these products.
Comments of the European Communities
408. The European Communities notes that Brazil's reply confirms the European Communities'
understanding of the Brazilian law as set out in paragraph 57 of the European Communities' first
written submission.

Question 114. To Brazil.
Could you clarify how exactly the environmental ri sks that you identify relate to the protection of
"human, animal or plant life or he alth" within the meaning of Article XX(b)? (see statements in e.g.
Brazil's first written submission paragraphs. 4, 6, 20, 21 and 22).

Response of Brazil
409. As Brazil explained in more detail in paragraphs 29-35 of its FWS, tyre fires release pyrolytic
oil, which contains numerous toxic chemicals and heavy metals. This oil contaminates the ground
over which it travels, and destroys the plant life. When the oil contaminates waterways, it harms fish
and other life that exists within those waterways (often resulting in fish kills). The pollutants from the
pyrolytic oil are also passed on to animals that drink the contaminated water.
410. Tyre fires also emit plumes that contain a number of hazardous substances, including dioxins
and furans. Harms from these emissions, includi ng cancer, reproductive problems, and reduced
immune function (described in Brazil's FWS, at paragraphs 32-33), are not unique to humans and are
equally experienced by animals. See Humane Society Brief, at para. 15 (Exhibit BRA-98).
411. Finally, mosquitoes that breed in waste tyres tr ansmit diseases that affect animals, just as they
do humans. See Humane Society Brief, at paras. 22, 24. 50. Brazil notes that this particular response

addresses only the risks to human, animal or plant lif e or health caused by the accumulation of waste
tyres. The risks caused by the disposal of waste tyres are summarized in Brazil's response to
Question 115 from the Panel.
Comments of the European Communities
412. Brazil has explained in its first written submission that tyres fires release pyrolytic oil and a
number of other hazardous substances, but it has not demonstrated the negative consequences of those
substances on animal and plant life or health . The reason for the ab sence of evidence on these
questions is that the main negative consequences of tyre fires normally affect some specific elements
of the environment, namely soil, surface water a nd groundwater, which are not already as such within
the scope of Article XX(b).
413. Release of pyrolytic oil will produce environmental pollution if the site is incorrectly
designed or if fire-fighters do not contain pyrolyti c oil flows. This pollution may have harmful
impacts on animal life only if a watercourse or lake with fish life runs or is located close and downhill
to the site. The European Communities is not aware of any scientific evidence about cancer,
reproductive problems or reduced immune function experienced by animals due to the hazardous
substances in tyre fires plumes. Nor has Brazil provided a single piece of evidence in that respect.
414. In relation to mosquitoes, Brazil merely states, relying on the Humane Society Brief, that they
transmit diseases that affect animals, w ithout explaining which these animals are.
197 The
European Communities has already explained that the evidence presented by Brazil only identifies
monkeys as a species capable of being infected with dengue and yellow fever, though they seem to be
infected in their natural environment, independently of the presence of waste tyres.198
Question 115. To Brazil.
Could you indicate what are the exact risks to ani mal and plant life and health posed by the different
disposal options, including information on possible direct harmful impacts?

Response of Brazil
415. Certain material recycling uses have been repor ted to harm the animal life. Studies have
shown, for example, that artificial reefs made of waste tyres (a civil engineering use) produce toxic
leachate that harms rainbow trout and other forms of aquatic life, as described in a report by the
British Environment Agency. 199 The report also notes that when waste tyres are used on silage
clamps, tyres degrade, at which point the rubbe r compound breaks down and wires become exposed.
According to the agency, "[t]he wire is a direct dang er to livestock, and the crumb gets into the silage
and, in larger pieces, can also pose a risk to cattle."200
416. The most serious risks, however, are caused by toxic pollutants, such as dioxins and heavy
metals, that are released when waste tyres are inci nerated and when stockpiled tyres catch fire. These
risks include cancer, reduced immune function, respiratory problems, miscarriage, and birth defects,
among many others. See Humane Society Brief, at para. 15. The Humane Society Brief, at
paragraph 16, also explains that particulate matte r released during incineration and tyre fires makes
water bodies acidic by decreasing their pH balance and changing their nutrient balance, with a
consequent negative effect on the animals and plants that live in those water bodies. Emissions of
particulate matter also deplete soil of its nutrien ts, which damages sensitive forests and farm crops,
and also negatively affects the diversity of ecosystems.

197 Brazil’s answer to panel question No. 114, para. 49.
198 European Communities' answer to panel question No. 110, para. 39.
199 See Environment Agency (UK), Tyres in the Environment, at Section 4.3 (Exhibit BRA-1).
200 See id.

Comments of the European Communities
417. Once again, Brazil responds to a question with vague explanations unsupported by evidence
and without rebutting the evidence provided by the European Communities.
418. In relation to artificial reefs, the European Communities has already explained that the overall
risk of damage to the environment of waste tyres in port, coastal and river engineering is nearly zero
and has provided a recent report to prove it.
201 Brazil has not rebutted the report and continues to rely
on an older report, prepared in 1998, by the Engl and and Wales Environment Agency, which refers to
laboratory studies in Canada. The European Commun ities is also surprised to find that Brazil's only
argument relies on the harm produced to the rainbow trout, which is an invasive fish in Brazil and that
is only a native species in North America (Exhibit EC-127). Brazil has not provided any information
on the possible negative consequences on animals and plants of the civil engineering use of waste
tyres in its territory.
419. The European Communities considers that Br azil's comments on the risks of using waste
tyres on silage clamps are irrelevant. This is a relatively unimportant alternative, although Brazil has
not provided information on its farm ers' practices on this matter. Moreover, irrespective of the risks
posed to livestock by this use, farmers will certainly continue with this longstanding cheap practice.
420. The general and unsubstantiated comments by Br azil in relation to the risks posed by co-
incineration, including the explanations given by the Humane Society Brief on risks from particulate
matter, have already been answered in the European Communities' response to Question 110 from the
Panel.202 The European Communities would like to point out that Brazil uses here, again, the incorrect
term "incineration".
Question 116. To both parties.
Assuming that there may be situati ons where risks are identified in rela tion to both 'human health or
life' and 'animal or plant health or life', what would be the implication of the existence of such distinct
risks, if any, for the analysis of Article XX(b), in cluding in the "weighing and balancing" of different
factors?

Response of Brazil
421. While, in theory, the risks to "animal or plant hea lth or life" and "human health or life" can be
distinguished, in reality, environmental degradation and harms to human life or health usually go hand
in hand, as is in the case of waste tyres. Contamina tion of plants affects not only plant life and health,
but also the life and health of animals and humans th at consume the plants. In a similar manner, both
animals and humans breathe the air contaminated by toxic compounds released during incineration or
tyre fires. They also drink water contaminated by the pyrolytic oil and toxi c leachate. In addition,
many pollutants, such as dioxins, also move up the food chain and are ultimately passed on to animals
that consume other animals, and to humans that consume animal meat.
422. Thus, the magnitude of the risks involved in the present case and the reality that risks to both
human health and the environment are present means th at the policy pursued has even more weight in
this case and is therefore highly relevant for the Article XX(b) analysis.

201 Report produced by HR Wallingford Ltd., in March 2005, for the UK Department of Trade and
Industry and the Environment, to which the EC has referr ed in its SWS, para. 132, and attached as Exhibit EC-
106. The EC mentioned also this report in its answer to panel question No. 110, para.43.
202 European Communities' answer to panel question No. 110, para. 42.

Response of the European Communities
423. A precise and specific analysis of the negative consequences on the interests protected arising
from the different risks from waste tyres (diseases, ty re fires and leaching) is important to carry out a
correct assessment of the contribution that the import ban really makes. The analysis is also important
in order to evaluate the different alternatives to the import ban. In both cases, an exact study of the
different negative consequences will contribute to a clear explanation of these two factors when
weighing and balancing them to verify whether the import ban is "necessary".
424. This should be done by diffe rentiating between human life and health, on one side, and
animal and plant life or health, on the other. The main reason for this distinction is that human life and
health is generally a more important value, which merits a separate valuation.
425. For the same reason, the risks should also be asse ssed separately in relation to life or health in
both groups. For example, while dengue is related to human life and health, though not to the same
extent, there is no evidence on record proving that human life has ever been in danger as a result of
waste tyre fires.
Comments of Brazil
426. The European Communities in its response stat es: "[T]here is no evidence on record proving
that human life has ever been in danger as a result of waste tyre fires." This is an example of the
flagrant disregard for facts – disregard that th e European Communities has demonstrated throughout
the proceeding.
427. Brazil has extensively documented the dangers that tyre fires pose to human health in
paragraphs 29-37 of its first wr itten submission. To quote from a report by the US Environmental
Protection Agency, cited by Brazil in its or al and written statements and submitted as
Exhibit BRA-26:
"Air emissions from open tyre fires have been shown to be more toxic (e.g.,
mutagenic) than those of a combustor, regardless of the fuel. Open tyre fire
emissions include "criteria" pollutants, such as particulates, carbon monoxide (CO),
sulfur oxides (SOx), oxides of nitrogen (NOx), and volatile organic compounds
(VOCs). They also include "non-criteria" hazardous air pollutants (HAPs), such as
polynuclear aromatic hydrocarbons (PAHs), dioxins, furans, hydrogen chloride,
benzene, polychlorinated biphenyls (PCBs); and metals such as arsenic, cadmium,
nickel, zinc, mercury, chromium, and vana dium. Both criteria and HAP emissions
from an open tyre fire can represent significant acute (short-term) and chronic (long-
term) health hazards to firefighters and nearby residents . Depending on the length
and degree of exposure, these health effects could include irritation of the skin, eyes,
and mucous membranes, respiratory effect s, central nervous system depression, and
cancer.
Open tyre fire emissions are estimated to be... 13,000 times more mutagenic than
coal-fired utility emissions with good combustion efficiency and add-on controls."
203
428. Brazil has also introduced into evidence reports and statements by the environmental agencies
of the European Communities' Member States that recognize the dangers of tyre fires to human
health. The British Environment Agency, for example, notes:

203 Environmental Protection Agency (US), Air Em issions from Scrap Tyre Combustion (viii)-(ix)
(1997) (Exhibit BRA-26).

"Tyres ... can be a fire risk affecting th e air with toxic fumes, and watercourses,
which fire quench waters can run into. Some landfill tyre fires have been burning for
years."
204
Comments of the European Communities
429. Brazil's answer to this question is partial and too general. It is partial because, as in other
Brazilian responses, the answer does not deal with the negative consequences of mosquito-borne
diseases for plants and animals. The European Communities has already explained that neither plants
not animals seem to be affected by dengue, yellow fever or malaria.205
430. The answer is also too general because, first, it does not take into account the low level of
emissions from co-incineration installations comp lying with regulatory standards or the remedial
actions taken in case of waste tyre fires. In this la tter context, it is absurd to claim that animals and
humans will drink water contaminated by pyrolytic oil. If that pollution takes place, the first initiative
adopted by the relevant authorities should be to ta ke all measures necessary to avoid the consumption
of polluted water.
431. The answer does not explain either any specifi c links between the different pollutants and
their consequences on plants and animals. As an ex ample, plants are not affected by dioxins, they
only serve as deposit to this subs tance, and the negative consequences of dioxins on animals have
only been studied in laboratory animals for the purposes of research in relation to humans.
432. In reality, even if it were considered, for the sake of argument, that the policy pursued by the
import ban on retreaded tyres is the protection of human, animal or plant life and health, quod non, the
interests protected are not as wide as Brazil pretends . Nor is the magnitude of the risks involved in
relation to co-incineration and open fires high, cont rary to the exaggerated statement made by Brazil
in its answer.
Question 117. To Brazil.
Please comment on the following arguments of the European Communities in its second oral
statement, in relation to the economic analysis pr ovided by Brazil on the impact of the import ban on
the reduction of the number of waste tyres in Brazil:
 (a) the assumption of a rate of retreading of domestic casings between 44% and 92%
(para. 36 of the second EC oral statement);
 (b) the lack of coverage of truck and aircraft tyres (para. 38 of the second EC oral
statement).

Response of Brazil
(a)
433. The economic analysis provided by Brazil consid ered actual data for the period of analysis
collected from reliable sources, identified in Table 1 of the report. For the period 2002-2003, the
average share of retreaded tyres in the replacement market (what the study refers to as "retreading
rate") was 42.4 per cent, which is obtained in the following manner:
(Retreaded tyres in Brazil, in tonnes) / (New tyres domestic sales, in tonnes + New
imported tyres, in tonnes) = (53,642/(97,355+29,045) = 0.424 or 42.4%

204 Environment Agency (UK), TyreWatch Program (Exhibit BRA-39).
205 European Communities' answer to panel question No. 110, para. 39.

434. The criticism presented by the European Communiti es is most probably due to a partial and
incomplete understanding of the demonstration presented in the diagrams that depict the hypothetical
cases in which imports of retreaded and/or used tyres would be allowed. In addition, as Brazil
demonstrates in Exhibit BRA-162, the vast majori ty of tyres retreaded in Brazil were made from
domestic casings.
435. Diagrams 7 to 9, which refer to the scenario "Imports allowed: ne w+retreaded", should be
viewed as a depiction of the immediate impact of a lifting of the ban on imports of retreaded tyres. In
that scenario, in a first stage, there would be an oversupply of retreaded tyres (the sum of those
retreaded in Brazil and imported), as the volume of retreaded tyres in period t1 – depicted in the
diagram – is a function of new tyre sales in year t0. In the following years, and as the market adjusts
to a smaller sale of new tyres (our graphical dem onstration is not a dynamic model, with multi-period
interrelations or adjustments), the total number of retreaded tyres would fall, with a latter
corresponding increase in the number of new tyre sales, until a new equilibrium is found.
436. Nonetheless, what is relevant for the Panel to analyze and conclude is that in spite of these
intertemporal adjustments, which are expected to occur as any change in policy occurs, the equation
of waste volume will hold for the entire period, fro m the initial phase until the end of the adjustment
period:
Waste volume = R+RI+(N-R)
where,
R is the number of tyres retreaded in Brazil,
RI is the number of retreaded tyres imported, and
N is the total number of new tyre sales.
437. Therefore, if the parcel denominated R ends up smaller after the intertemporal adjustments,
the parcel (N-R) becomes larger, which is exactly what has been described during the last Panel
meeting – as imports of used tyres were allowed temporarily by judicial decision, the rate of
retreading from domestic casings reduced, and the wa ste volume increased. This is explained by the
fact that it is much easier, and less costly, fo r a retreading company to source its raw material
(casings) in a concentrated manner, at import deliver y ports of entry, than to collect them in a
continental size country such as Brazil. After the market adjustments mentioned above had happened,
which is the basis of the observation made by the European Communities, Diagram 9 could be
depicted in the following way:

438. Thus, it can be observed that allowing for impor ts of retreaded tyres will increase the total
waste volume, as indicated by the equation above, an d the impact of additional waste volume can be
visualized by the areas indicated in this diagram. The demonstration of how retreaded tyre imports
affect 'waste volume' holds for the initial period depicted in the economic analysis, as well as for the
end of the adjustment period, as indicated above.
(b)
439. The economic analysis concentrated on passenge r car tyres since they represent the majority
of imports in the period of analysis (2002-03):

Comments of the European Communities

440. In its response, Brazil first speaks of "the aver age share of retreaded ty res in the replacement
market (what the study refers to as 'retreading rate')". 206 This is incorrect, because the "study" speaks
of the retreading rate as being the R/N ratio between retreads made in Brazil from domestic casings
(R) and new tyres sold in Brazil (N).
207 This was a useful rough definition for the concept of
"retreading rate" because it expresses, over time, th e percentage of formerly new tyres that are
retreaded after being used on Brazilian roads. 208 The "share of retreaded tyres in the replacement
market" which Brazil now speaks about 209 would be R/(N+R-N fitted on new cars ). Brazil however
maintains R/N in its calculation 210 and therefore makes two further mist akes if it intends to designate
the "share of retreaded tyres in the replacement market": Brazil first overlooks that the entire
replacement market, the denominator, has to include sales of retreads. Second, Brazil overlooks those
new tyres that are fitted on new cars in Brazil which do not belong to the replacement market.
441. As said, R/N would be roughly correct if Brazil in reality speaks not of the market share but
of the ratio between retreads made in Brazil from domestic casings (R) and new tyres sold in Brazil
(N), which is what Exhibit BRA-146 consistently does. In that case, too, however, the numbers which
Brazil uses and obtains in its calculation, are inco rrect, as the European Communities will show in the
following explanation.
442. By dividing the tonnage of tyres "retreaded in Brazil" by the total tonnage of new tyres sold in
Brazil, as listed in Table 1 of Exhibit BRA-146, Brazil arrives at a ratio of 42.4 %.
211 As the European
Communities identified in the analysis on the "study " contained in Exhibit BRA-146, submitted to the
Panel as Exhibit EC-122, the question remains wh ether the quantity of domestic passenger car
retreads produced in Brazil in Table 1 (53,642 tonnes in 2002/2003, on average) includes those
retreads that are made in Brazil with imported casi ngs (i.e. whether it stands for R or for R+UI, in
Exhibit BRA-146). The tonnages for 2002 and 2003 in Table 1 of Exhibit BRA-146 correspond,
respectively, to the 7.5 and 9 million passenger car retreads produced in Brazil reported by ABR in
Exbihits BRA-95 and BRA-157 (when using the argua bly too low conversion factor of 6.5 kg per
retreaded tyre). ABR's production numbers, clearly, designate the totality of that retread production
in Brazil, in other words, it includes the retreads made with imported casings (i.e. R+UI).
443. Therefore, Brazil is fatally mistaken in its calcu lation that arrives at a result of 42.4 % as the
"retreading rate" of Brazilian casings. In its calcu lation, Brazil thereby effectively misrepresents the
large number of imported casings as Brazilian casings. This turns the facts on their head because
casings that are imported into Brazil to be retreaded by definition cannot increase the rate at which
domestic casings are retreaded.
444. Specifically on Diagrams 7-9 of Exhibit BRA-146, Brazil's new illustration "after market
adjustments" seems to accept th e European Communities' criticism (in para. 12 of Exhibit EC-122)
that Diagrams 7-9 grossly overestimate the total ma rket share of retreads and underestimates the sales
of new tyres which directly contribute to the accumulation of waste (which is effectively N+RI).
212
However, Brazil continues to overestimate the number of imports of passenger car retreads and thus
the contribution which they could possibly make to waste accumulation. Indeed, Brazil is assuming
that imports would take over most of the sales of retreads in Brazil and that the domestic industry

206 Brazil's answer to panel question No. 117, para. 55.
207 See para. 5.c on p. 1 of Exhibit BRA-146, as we ll as "Retreading Rate = R/N" in each of the
Diagrams.
208 If one disregards the imprecision of this equation due to second hand cars that flow on to and away
from the Brazilian market with their tyres, as well as d ynamic effects such as an expanding fleet or changes in
the respective market shares of new and retreaded tyres.
209 Brazil's answer to panel question No. 117, para. 55.
210 Ibid.
211 Brazil's reply answer to panel question No. 117, para. 55, in fine.
212 Brazil's answer to panel question No. 117, paras. 57 et seq.

would be marginalised.
213 This is not plausible given that th e Brazilian retreading industry appears to
be quite competitive.
445. There are further important points on which Brazil's new graphical illustration 214 distorts the
picture of the impact which the lifting of the impor t ban would have. For instance, it is assumed in
the graph that the (overestimated) importation of re treads would cause a reduction in the retreading of
domestic casings and that this would increase w aste accumulation. This overlooks the fact which
Brazil even mentions, namely that Brazil presently imports large numbers of casings for its production
of retreads. Brazil's presentation is therefore e qually incoherent as the legal reality on the ground,
where Brazil closed the market for imported retreads, allegedly in order to reduce waste, and at the
same time imports large numbers of casings for retreading.
446. On this latter point, Brazil claims that the growing importation of casings led to a reduced rate
of retreading of domestic casings, 215 whereas it seems at least as true that the total production of
retreads grew considerably in Brazil over the past y ears, with particular growth in the remoulding
industry which produces high-quality retreads from imported casings, already conforming to the
Portaria 133 requirements. The European Co mmunities already repeatedly contested Brazil's
allegations that it is easier or less costly for domestic retreaders to import the casings rather than to
collect them "in a continental size country such as Brazil".
216 The European Communities would
recall again that the importation of casings does not free a retreader from collecting casings in Brazil,
on the contrary, the prior collection and disposal of domestic used tyres is a pre-requisite to the
importation of casings (see Article 12A of CONAMA Resolution 258, as amended by
Resolution 301).
447. Thus, Brazil's new graph appears to be another illustration without support in real economic
facts. The illustration expresses inaccurate and debatable assumptions and interdependences that are
not economically coherent. Many points of criticism explained at le ngth in Exhibit EC-122 remain
fully valid in relation to the new graph and need not be repeated.
448. The European Communities would emphasise the very important fact that Brazil in its reply
does not at all respond to the Panel's question, whic h was an explicit invitation to Brazil to comment
on the European Communities' argument that Brazil's "study" assumed rates of retreading between
44 % and 92 %. This can only be taken as admission by Brazil that the Exhibit BRA-146 is indeed
flawed on these important points. Nor does Brazil respond on the many other weaknesses of Exhibit
BRA-146, which the European Communities has explained in Exhibit EC-122.
449. In the absence of a reply by Brazil to the Pane l's specific question, and in case this is of
interest to the Panel, the European Communities would like to explain how it arrived, in its analysis in
Exhibit EC-122, at the percentages of the retread ing rate R/N which Exhibit BRA-146 displays. The
European Communities took at face value the quan tities represented in the graphs and obtained the
assumed retreading rates R/N by dividing the width of R in millimetres by the width of N in
millimetres in each of the graphs. To take the ex ample of the "roughly 84 %" in Diagrams 13-15, N
was measured to be ca. 19.8 mm wide and R ca. 16.8 mm. 168/198 results in 0.8485.
450. In this context, it is worth adding that even in Brazil's "realistic scenario" in Exhibit BRA-
162, page 1, the incorrectness of which the Eur opean Communities explained in its reply to the
Panel's question no. 107, the retreading rate of Brazilian passenger car tyres is between 25 % and

213 See R and RI in the graph in para. 59 of Brazil's answer to panel question No. 117.
214 Ibid.
215 Brazil's answer to panel question No. 117, para. 59.
216 Ibid.

32 %, i.e. much lower than the lowest retreading rate assumed, even more wrongly, in Exhibit BRA-
146. That "study" therefore remains completely unprobative for the purposes of this dispute.
451. Finally, in relation to the Panel's sub-question b), Brazil does not give a response, other than
recalling the fact that most imports of retreads were passenger tyres. This response does not do
justice to the European Communities' claims in th is dispute, where the European Communities raised
"as such" claims of WTO violations in relation to Brazil's import ban on retreads in its entirety.
Irrespective of the numbers of past imports, the me thodology of any demonstration therefore matters.
As the European Communities pointed out in it s opening statement at the second substantive
meeting,217 a separate demonstration of the contribution of the import ban on truck and aircraft tyres
would be necessary, since such tyres can be retreaded multiple times, and therefore contribute less to
the accumulation of waste tyres than passenger car ty res. Also, it seems that Brazil does not retread
all of its truck and aircraft tyres.
Question 118. To both parties.
 (a) In your view, is the measure's contribu tion to the objective pursued, as envisaged by
the Appellate Body in the context of determini ng the necessity of a measure under Article XX(b),
intended to reflect the "actual" contribution of the measure in fact or does it relate rather to the
measure's capacity, by design, to contribute to the objective?
 (b) In this context, please clarify how the MERCOSUR exemption and the used tyre
imports taking place pursuant to court injunctions should be considered by the Panel in the context of
its analysis of the contribution of the measure to the objective under Article XX(b).
 (c) Please also clarify whether the MERC OSUR exemption and the used tyre imports
taking place pursuant to court injunctions should be considered by the Panel in the context of its
analysis under paragraph (b) of Article XX, or under the chapeau of that provision, or both?

Response of Brazil
452. The contribution analysis may involve both an evaluation of the measure's capacity, by
design, to contribute to the desired objective and an evaluation of the actual contribution of the
measure.
453. An effective contribution analysis will require an examination of the design of the measure –
that is, whether the measure is capable of making a contribution – and the actual effect of the measure
– that is, whether the measure actually contributes to achieving the goal pursued and, if so, to what
extent.
454. Brazil explained in paragraph 96 of its second oral statement that while used tyre imports may
detract somewhat from the overall contribution made by the import ban, they in no way negate that
contribution. Moreover, the used tyre imports thro ugh injunctions are not part of the design of the
measure. On the contrary, they are an attempt to undermine the measure's design and application.
455. In practice, with the exception of 2004 and 2005, imports of used tyres through preliminary
injunctions have not been particularly high, and th e vast majority of retreads made in Brazil were
made from domestic casings. See Brazil's response to Question 105 from the Panel.
456. In addition, an import ban on retreaded tyres a nd an import ban on used tyres are functionally
separate measures. Less-than-perfect effectivene ss of the ban on used tyres does not negate the
effectiveness of the ban on retreaded tyres. Wit hout the ban on retreaded tyres, the volumes of waste
would have been even higher.

217 Para. 38.

457. Third, it is relevant that Brazil's measure – by design – prohibits imports of both retreaded and
used tyres. The measure, therefore, is designed to achieve the maximum level of waste reduction.
458. The MERCOSUR exemption is properly an alyzed under Article XXIV and not under
Article XX(b), including the contribution analysis . See Brazil's response to Question 131 from the
Panel. Nevertheless, should the Panel consider th e exemption in its analysis of the import ban's
contribution, Brazil notes that any effect that the MERCOSUR exemption might have on the actual
contribution of the import ban is not significant, because the volumes of waste tyres imported from
MERCOSUR are very small. In 2005, Brazil im ported a meagre 157,473 retreaded tyres from
MERCOSUR. To compare, in the years preceding the 2000 import ban, anywhere between 2 million
and 3.3 million retreaded tyres were being impor ted into Brazil – 13 to 21 times the MERCOSUR
imports.
459. The MERCOSUR exemption is more relevant for the analysis under the chapeau of
Article XX, but even in respect of the chapeau , the exemption does not lead to arbitrary or
unjustifiable discrimination. The design of the ME RCOSUR exemption is relevant to show that the
original ban contained no exemptions and applie d erga omnes, and that the MERCOSUR exemption
was introduced later to comply with a ruling by a MERCOSUR tribunal. This demonstrates that
Brazil's measures do not discriminate between MERCOSUR and non-MERCOSUR countries in a
manner that is unjustifiable or arbitrary. It also demonstrates that by complying with the tribunal's
ruling, Brazil did not raise trade barriers to third parties, but merely relaxed restrictions for its customs
union partners.
Response of the European Communities
(a)
460. The Appellate Body has clarified that one of the aspects to be considered in determining
whether a measure is "necessary" is the "ext ent to which the measure contributes to the realization of
the end pursued".
218 The reference by the Appellate Body to the "realization" of the end pursued
makes it clear that the contribution of the measure cannot be a purely theoretical or potential
contribution. Rather, it must be demonstrated that the measure makes a real and verifiable
contribution.
461. The design of the measure as such is therefore not sufficient to establish whether a measure
makes a contribution. Rather, it must also be verified whether, in the concrete conditions it is applied,
and taking into account other possible measures whic h might apply, the measure can make a real
contribution to the end pursued. On the other hand, the design of the measure must of course not be
such as to prevent the measure from achieving its stated goal.
(b)
462. Both the MERCOSUR exemption and the used tyre imports taking place pursuant to court
injunctions are relevant for the contribution of the measure, and should be considered by the Panel in
this context.
463. Both facts are relevant because the contribution of the ban to the reduction of any problems
for human life and health resulting from waste ty res depends, at the very first level, on the
contribution that the ban is making to the reduction of the number of waste tyres in Brazil. However,
as the European Communities has already explained, 219 the ban will make such a contribution only to

218 Appellate Body Report on Korea – Beef, para. 163 (emphasis added).
219 European Communities' second written submission, para. 32.

the extent that it results in the replacement of an imported retreaded tyre either with a new tyre which
will be retreaded or with a retreaded tyre which has been produced from a domestic casing.
464. As regards the MERCOSUR exemption, this exemption is relevant because none of the
retreaded tyres imported from MERCOSUR are made with casings imported from Brazil (and most
are in fact made with casings imported from the European Communities). 220 Accordingly, to the
extent that an imported retreaded tyre from th e European Communities would compete with and
replace a retreaded tyre imported from MERCOSUR, th e import ban has no effect on the reduction of
waste tyres in Brazil.
465. The importation of used tyres is equally releva nt since the large majority of these tyres are
used to produce retreaded tyres made in Brazil.221 Once again, to the extent that an imported retreaded
tyre replaces a domestic retreaded tyre produced wi th an imported casing, the ban cannot have the
effect of reducing the number of waste tyres arising in Brazil.
(c)
466. The MERCOSUR exemption and the used ty re imports taking place pursuant to court
injunctions should be taken into account by the Panel both in the context of its analysis under
paragraph (b) of Article XX and under the chapeau of that provision.
467. As the European Communities h as explained, both factors are relevant for determining
whether the ban makes a contribution to the reducti on of waste tyres in Brazil. Similarly, as the
European Communities has equally explained, banni ng the importation of used tyres is a reasonable
alternative to the import ban on retreaded tyres. 222 Finally, the existence of the MERCOSUR
exemption is also relevant under the chapeau of Article XX since it amounts to discrimination
between countries where the same countries pr evail, namely MERCOSUR countries and other
WTO Members.223 Moreover, the importation of EC casings for the purposes of retreading in Brazil
equally amounts to discrimination, in this case between Brazil and other WTO Members, including
the European Communities, and is therefore equally incompatible with the chapeau.
224
Comments of Brazil
468. In its second set of responses Brazil noted that the President's Chief of Staff had directed the
Union's Solicitor General to initiate actions for resciss ion of the injunctions currently in effect. Brazil
reports to the Panel that the President of the Re public has signed and the Solicitor General has filed
one of these actions in Federal Supreme Court on 21 September 2006. Th is challenge action,
Allegation of Violation of Fundamental Precept, has the power to revoke all the judicial decisions that
have allowed the importation of used tyres into Brazil and preclude future judicial decisions
permitting new imports. The preliminary injunction re quested by the President in this action will be
decided in a matter of days. Brazil attaches doc uments to this proceeding as Exhibit BRA-173 and
Exhibit BRA-174.
469. On a separate topic of the Rio Grande do Sul la w, Brazil reports that the General Prosecutor
of the Republic has presented to the Federa l Supreme Court the Unconstitutionality Action
recommended by the Chief of Staff Minister (Exhibit BRA-169). The Unconstitutionality Action
received the identifying code ADIN3801 in the Federal Supreme Court.

220 Cf. European Communities' first written submission, para. 83-84.
221 Cf. European Communities' second written submission, footnote 43.
222 European Communities' second written submission, para. et seq.
223 European Communities' second written submission, para. 151 et seq.
224 European Communities' second written submission, para. 167 et seq.

Comments of the European Communities
470. In its Reply to the Panel's Question, the Eur opean Communities has explained that what is
relevant is whether the measure makes a real contribution to the end pursed. The
European Communities has equally explained that the MERCOSUR exemption and the imports of
used tyres are relevant both for the Panels' anal ysis under Article XX(b), and under the chapeau of
Article XX.
471. As regards the imports of used tyres, Brazil has denied the relevance of these imports because
used tyre imports are not "part of the design of the measure".
225 However, as the
European Communities has explained, what matters for the contribution analysis is not only the
design, but also the practical application and effect of the measure. If an imported retreaded tyre
merely replaces a domestic retreaded tyre which is pr oduced with an imported casing, then the ban to
this extent makes no contribution to the reducti on of the number of waste tyres in Brazil.
Accordingly, the relevance of the importation of used tyres cannot be denied.
472. Moreover, Brazil has claimed that "with the exception of 2004 and 2005, imports of used
tyres have not been particularly high". 226 In this context, the European Communities would remark
that the numbers of imported used tyres for 2000 to 2005 were as follows (from January to July 2006,
imports of casings were 4.54 million):227
2000 2001 2002 2003 2004 2005
1,407,618 2,396,898 2,659,704 4,240,474 7,564,360 10,478,466

473. The European Communities has stressed on many occasions how much these imports have
increased in the recent past. The European Comm unities, however, does not see on what basis Brazil
qualifies these numbers as "not particularly high" for the years other than 2004 and 2005, also against
the background that Brazil imported 2-3 million retrea ded tyres per year before it imposed the import
ban. In addition, the European Communities has alr eady remarked that the rising numbers of imports
are a reflection of the adaptation by Brazilian industry to the higher standards of Portaria
INMETRO 133. The earlier higher utilisation of domestic casings is therefore no longer
representative for the current situation. Finally, Brazi l's measure must be evaluated as of the time of
the Panel's establishment. The most relevant figur e is therefore the one for the last calendar year
before the Panel's establishment, namely 2005, a nd in that year, Brazil imported 10.5 million used
tyres.
474. As regards the MERCOSUR exemption, Brazil argues that this exemption is properly
analyzed under Article XXIV and not under Article XX.
228 The European Communities disagrees
with this statement. As the European Communities has shown, the MERCOSUR exemption is first of
all relevant as regards the contribution analysis, sin ce, to the extent that an imported retreaded tyre
replaces a retreaded tyre imported from MERCOSUR which is not produced from a casing originating
in Brazil, the ban does not contribute to the reduction of waste tyres in Brazil.229
475. Brazil also has doubted the relevance of the MERCOSUR exemption for the contribution
analysis by arguing that in 2005, Brazil imported "a meagre 157,573 retreaded tyres" from
MERCOSUR. The European Communities finds this reference to 157,573 tyres as "meagre"

225 Brazil's answer to panel question No. 118, para. 64.
226 Brazil's answer to panel question No. 118, para. 65.
227 According to Brazilian official ALICE statistics, which Brazil has also submitted in this dispute.
228 Brazil's answer to panel question No. 118, para. 68.
229 European Communities' answer to panel question No. 118, para. 51.

surprising considering that at the same time, Brazi l has argued that even 500 additional waste tyre
would justify the imposition of the import ban on retreaded tyres.230
476. The point is also one of legal principle and of the design of Brazil's measure, given that
imports of retreads from MERCOSUR are permitted without any quantitative limitation. The fact that
they are currently fewer than imports from the European Communities have been before the import
ban rather seems to be due to supply, not demand constraints, or to questions of competitiveness of
the Uruguayan and Paraguayan retreaders, as compared to Brazilian retreaders. Other than that, it is
absolutely possible that MERCOSUR imports of retr eads will increase in the future. Uruguay's more
recent challenge of Argentina's import ban suggests that its industry has the willingness and capability
to increase its production and exportation.
477. Moreover, it should be noted that the MERCOSUR tyres are only one factor, and in fact the
smallest, which reduces the effectiveness of the ban. The bigger factors are in fact the large number
of retreaded tyres produced in Brazil with impor ted casings, plus the fact that the overwhelming
majority of domestic passenger car casings in Brazil are not retreaded after their first use. Due to
these factors seen in combination, the contribution of the ban to the reduction of waste passenger car
tyres is in fact minimal at best.
478. Brazil concedes that the MERCOSUR exemption is "more relevant" under the chapeau, but
repeats its statement that the "original design" of the measure did not include the exemption, and that
this exemption was only introduced to comply with a MERCOSUR arbitral tribunal.
231 As regards the
argument that the exemption was only introduced in 2002, i.e. two years after the ban was adopted,
the European Communities fails to see the relevance of this argument. The European Communities is
not challenging the ban as in force in 2000, but as in force at the time of estab lishment of the Panel.
At that date, the MERCOSUR exemption was in for ce and therefore needs to equally be taken into
account by the Panel. As regards the argument that the compliance with the MERCOSUR arbitral
tribunal means that the measure does not constitute arbitrary and unjustifiable discrimination, the
European Communities has already rebutted this ar gument in its earlier submissions, to which it
hereby refers.232
Question 119. To both parties.
Please elaborate on the manner in which the "weighing and balancing" under Article XX(b) is to be
conducted. Specifically, what c onsiderations should guide the Panel in assessing the relative weight
to be given to the different factors in this process?

Response of Brazil
479. The weighing and balancing exercise requires th at the relative strength or weakness to be
given to the factors be informed by the circumst ances of the case and, in particular, by the value
pursued by the impugned measure. Indeed, the consid eration of the interest protected by the import
ban must be given prominence in the weighing and balancing exercise. This factor – listed first
among the four factors by the Appellate Body – pr ovides context for the weighing and balancing of
the other factors. Thus, a measure that seeks to safeguard government revenue, for example, is likely
to carry less weight than a measure that seeks to protect human health and the environment – values
that the Appellate Body has called "vital and important in the highest degree ."
233 What this means in
practical terms is that when a measure protects a less important interest, the panel will be more

230 Brazil's second oral statement, para. 78.
231 Brazil's answer to panel question No. 118, para. 69.
232 Cf. European Communities' second oral statement, para. 92 et seq.; European Communities' second
233 Appellate Body Report on EC – Asbestos, at para. 172 (emphasis added).

exacting in its examination of the remaining factors. Conversely, when a measure protects an interest
that is "vital and important in the highest degr ee" – such as protection of human health and the
environment – the panel should ascribe more weight to that factor and relatively less weight to the
remaining factors, such that the measure is more likely to be found to be "necessary" within the
meaning of Article XX(b) even if the trade impact is higher, or the degree of "necessity" is closer to
the pole of making a contribution than to the pole of indispensable.
480. The Appellate Body has reliably adhered to this principle. It held in European Communities
– Asbestos that "the more vital or important th e common interests or values pursued, the easier it
would be to accept as 'necessary' measures designed to achieve those ends."
234 In Korea – Various
Measures on Beef, the Appellate Body issued a similar holding within the context of Article XX(d).235
481. Availability of less restrictive alternatives is another factor that provides context to the
weighing and balancing analysis. Where less restri ctive alternatives are available, a more exacting
scrutiny is appropriate with respect to the remaining factors. However, where no such alternatives are
reasonably available – as is the case in the present dispute – a panel should exercise great caution to
avoid finding against the only measure available, th ereby leaving the WTO Member with no tools at
its disposal to counter the threat to public health and the environment.
482. The two remaining factors are contribution and tr ade impact. With respect to the contribution,
the Appellate Body has rightly said that "[t]he gr eater the contribution, the more easily a measure
might be considered to be 'necessary.'" 236 This means that the strength of this particular factor –
contribution – may offset the relative weakness of othe r factors, just as the strength of another factor
would have offset the relative weakness of contribu tion. The contribution needs not be absolute or
infallible. On the contrary, the Appellate Body has explained that the measures must "contribute, at
least to some extent, to addressing these concerns." 237 This sensible standard ensures that a panel will
not find a measure unnecessary because of its failure to achieve a level of contribution that is
unattainable in the real life.
483. Finally, with respect to the trade impact of the measure, a less restrictive impact may favor a
finding of necessity 238, but a more restrictive impact would not preclude such a finding. The
European Communities incorrectly argues that it woul d: "[The highest negative impact of the import
ban] makes it impossible to consider as 'necessary' the measure challenged in this case." 239 T h e
European Communities would have b een correct only if the trade imp act were the sole determinative
factor of the measure's necessity. However, the A ppellate Body has made it abundantly clear that
trade impact is but one of several factors that must be weighed and balanced. 240 Not only does the
European Communities' argument have no basis in the WTO jurisprudence, but it also represents a
complete about-face from the European Communities' position in EC – Asbestos , in which the
European Communities argued that the French total import ban on asbestos was, in fact, necessary.

234 See Appellate Body Report on EC – Asbestos, at para. 172.
235 See Appellate Body Report on Korea – Various Measures on Beef, at para. 162.
236 Appellate Body Report on Korea – Various Measures on Beef, at para. 49.
237 Appellate Body Report on US – Gambling, at para. 6.494 (emphasis added).
238 See Appellate Body Report on Korea – Various Measures on Beef, at para. 163.
239 See European Communities' first written submission, at para. 115 (emphasis added).
240 See Appellate Body Report on Korea – Various Measures on Beef , at para. 164; Appellate Body
Report on EC – Asbestos , at para. 172; Panel Report on Canada – Wheat Exports and Grain Imports , at
para. 6.223; Appellate Body Report on US – Gambling , at paras. 306, 307; Appellate Body Report on

Response of the European Communities
484. "Weighing and balancing" of the four factors that the Appellate Body has identified to assess
the "necessity" requirement in Article XX(b) should st art by verifying the importance of each of the
factors individually in the context of the case at issue. In this respect, an important weight should be
given to the fact that the risks Brazil pretends to eliminate or reduce are linked not to retreaded tyres,
which is the product affected by Brazil's import ba n, but to improperly managed waste tyres from all
origins.
485. The European Communities would recommend that this process be carried out in the order
followed by Brazil in its first written submission: 241 the interest protected by the import ban, the
contribution of the import ban to the protection of that interest, trade impact of the import ban and
alternatives to it, in order to move from the factor s that are more closely linked to measure to those
that are more separated from it.
486. All factors have a relative weight, in the sense that no single one of them can generally be
decisive by itself to determine whether the measure is necessary or not to achieve the aims that Brazil
is claiming to achieve. However, a measure, like th e import ban before the Panel, that is not closely
linked to life and health protection, that plays no significant role in that protection, that has an
extremely severe impact on import trade, and for wh ich alternatives are available, cannot merit being
considered as "necessary" for the purposes of Article XX(b).
Comments of Brazil
487. In its response to the Panel's question, the EC again asserts that "the risks Brazil pretends to
eliminate or reduce are linked not to retreaded tyr es, which is the product affected by Brazil's import
ban, but to improperly managed waste tyres from all origins." 242 As Brazil has extensively
demonstrated throughout these proceedings, retreaded tyres are shorter-lifespan products that increase
the volumes of tyres waste that accumulate and must be disposed of in Brazil. Certain health and
environmental risks inherent to waste tyre accumu lation and disposal – specifically, those arising
from transportation, temporary stockpiling, and in cineration – cannot be eliminated through "proper
management." It is, therefore, necessary to reduce the waste tyre volumes to reduce these risks.
488. The fact that the risks posed by retreaded tyr es may be indirect does not make these risks less
significant or the measures taken to reduce these risks less legitimate. Neither the GATT nor the
WTO jurisprudence have required a direct link betw een the product and the health and environmental
risks it causes for a measure designed to address these risks to be justified under Article XX(b).
Comments of the European Communities
489. At the outset, the European Communities woul d point out that Brazil's Answer to the
Question from the Panel changes the order in whic h the different elements of the "weighing and
balancing" under Article XX(b) were analysed by the Appellate Body in Korea – Various Measures
on Beef : interests protected, contribution, trade effects and alternatives, 243 which was followed by
Brazil in its first written submission. 244 Brazil now places the alternative assessment before the
contribution, separating in that way the three el ements of the "weighing a nd balancing" that are
closely linked to the measure and giving a more prom inent place to the analysis of alternatives, which
should only be initiated once the analysis of the different facets of the measure is completed.

241 Brazil’s first written submission, para. 97.
242 See European Communities' answer to panel question No. 119, at para. 55.
243 Appellate Body Report on Korea – Various Measures on Beef, paras. 162 to 166.
244 Brazil's first written submission, para. 97 and paras. 99 to 129.

490. For the rest, the European Communities and Br azil do not agree on the assessment of each of
the four elements in this case. The European Co mmunities considers that the interests protected by
the import ban are not human, animal and plant life or health but the Brazilian tyre industry.
245 The
European Communities would highlight that Brazil h as not once in this dispute even tried to rebut
certain evidence in this respect, notably the stat ements by Brazil's Advocacia-Geral, including that
"SECEX Portaria No 08/2000 prohibits the importati on of 'retreaded' tyres not for the defence of
public health and the environment, but to protect national trade and industry." 246 The
European Communities is also of the view that Brazil has not demonstrated that the ban has
significantly contributed to protect life and health. 247 The European Communities has proved that the
import ban is the most restrictive trade measure that a WTO Member can take and that the comparison
that Brazil makes of the case before the Panel and EC – Asbestos is completely misleading.248 Finally,
the existence of reasonably availa ble alternatives, which would solve the eventual risks not only
arising from imported retreaded tyres but also from tyres of all origins, has been sufficiently explained
by the European Communities.249
Question 120. To the European Communities.
In paragraphs 21 and 49 of your oral statem ent, you referred to the notion of "significant"
contribution, with reference to the Korea – Beef case. Could you please clarify this notion and the
role that it should play, in your view, in the Panel's assessment?

Response of the European Communities
491. In Korea – Beef , the Appellate Body clarified that th e process of weighing and balancing in
order to establish whether a measure is necessary "prominently" includes the contribution of the
measure to the end pursued.250 Moreover, the Appellate Body also held that in order to be necessary, a
measure had to be "located significantly closer to the pole of 'indispensable' than to the opposite pole
of simply 'making a contribution to'". 251 On this basis, it is clear that a measure which makes no
significant contribution to the end pursued cannot be regarded as necessary within the meaning of
Article XX (b).
492. Brazil's argument in the present case has been that waste tyres present risks for human life
and health, and that the importation of retreaded ty res increases the number of waste tyres in Brazil,
and thereby the health risks resulting from such tyr es. At the same time, however, Brazil has claimed
that it is "immaterial whether there are five hundred fewer tyres or five million".252
493. In a situation where Brazil itself acknowle dges that it has over 100 million improperly
managed waste tyres littering the countryside, 253 it is not reasonable for Brazil to claim that an
additional amount of 500 tyres will make any diff erence from the point of view of human life and
health. This is why the European Communities has insisted that as a first step in the contribution

245 See, inter alia, the European Communities' comment to Brazil's answer to panel question No. 129.
246 See para. 164 of the European Communities' first written submission.
247 See, inter alia , the European Communities' comment to the Brazil's answer to panel question
No. 12.
248 European Communities' first written submission, paras. 114 to 115, European Communities' first
oral statement, paras. 49 to 52, European Communities' second written submission, paras. 63 to 65, and
European Communities' second oral statement, paras. 51 to 58.
249 European Communities' first written submission, paras. 110 to 113, European Communities' first
oral statement, paras. 53 to 82, European Communitie s' second written submission, paras. 66 to 143, and
European Communities' second oral statement, paras. 59 to 89.
250 Appellate Body Report on Korea – Beef, para. 164.
251 Appellate Body Report on Korea – Beef, para. 161.
252 Brazil's second oral statement, para. 78.
253 Brazil’s first written submission, para. 17.

analysis, Brazil must quantify the contribution, in terms of reduction of waste tyres, made by its
import ban on retreaded tyres.254 Only once this contribution has been established is it then possible to
determine what kind of contribution the ban might ma ke to the prevention of problems for human life
and health, and whether this contribution is likely to be significant.
Comments of Brazil
494. In its response to Question 120 the European Communities continues to assert that the
measure's contribution must be "significant" for a measure to be necessary within the meaning of
Article XX. As a factual matter, Brazil has demons trated that the contribution is indeed significant. 255
As a legal matter, however, Brazil has pointed out in its response to Question 121 that neither the text
of the WTO Agreements nor the WTO jurisprudence establish a requirement that the contribution of a
measure be "significant."
495. The European Communities argues that it is "not reasonable" for Brazil to claim that even a
small reduction in the waste tyre volumes contribut es to protecting human health when some waste
tyres remain in the environment. First, the probl em of tyres being dumped in the environment is not
unique to Brazil – EC member States face the same problem. 256 Second, the European Communities
completely ignores the fact that Brazil has already made substantial progress in collecting waste tyres
scattered in the environment. Brazil's co llection and disposal initiatives, such as ecopontos, Paraná
Rodando Limpo, and CONAMA Resolution 258, ensure th at tyres that are already in the environment
will be collected and tyres that reach their end of life will be disposed of properly. The resolution's
goal of reducing the historic accumulation – in a ddition to the new arisings – is evident in its
requirement to collect and dispose of more tyres th an produced. To recall, Brazil's chosen level of
protection requires Brazil to do everything possible to reduce the waste tyre risks. For this reason,
Brazil must continue to collect the waste tyres al ready in the environment and must also reduce the
overall waste tyre volumes. As Brazil has demonstrated, it is doing both.
496. Finally, Brazil emphasizes that the challenge d measures protect human life and health –
undoubtedly the most important interest that a government measure can protect. The
European Communities' insistence on quantifying th e ban's contribution would effectively require
Brazil to demonstrate that a sufficiently high number of lives were saved and cases of disease
prevented for the ban to be justified. This re quirement would be plainly at odds with the WTO
Members' right to choose a level of protection they consider appropriate. If a reduction in waste tyre
volumes saves lives, regardless of the number, Brazil has the right under the WTO to take measures to
achieve that reduction. The European Communiti es, however, seems to believe that there is a
threshold below which the right of its exporters to sh ip retreaded tyres to Brazil matters more than the
lives of Brazil's citizens. Brazil refuses to put a price tag on the lives of its citizens.

254 European Communities' second written submission, para. 26 et seq.
255 See Brazil’s answer to panel question No. 121, at para. 77.
256European Tyre & Rubber Manufactur ers’ Association, End-of-life Tyres: A Valuable Resource with
a Wealth of Potential 4 (2006) (Exhibit EC-84) (Exhibit BRA-126).

Question 121. To Brazil.
In paragraph 11 of your second oral statement, you indicate that the ban makes a "significant
contribution". Could you please clarify whether yo u agree with the view that the contribution made
by the measure to the objective should be "significant" (see above the question to the
European Communities)? Please elaborate on your position in light of your arguments in your
second oral statement that "...it is immaterial whether there are five hundred fewer tyres or five
million. ..." (paragraph 78) and "[S]o long as Brazil continues to retread some of the tyres it
consumes rather than import them, the ban contribut es to the goal of reducing the tyre waste to be
disposed of" (paragraph 96).

Response of Brazil
497. The European Communities' argument that Brazil must demonstrate a "significant
contribution" incorrectly assumes that necessity is a sta tic concept. It is not. Rather, inherent in the
notion of weighing and balancing is the flexibility necessary to take into account the specific facts and
circumstances. Indeed, the Appellate Body in Korea – Various Measures on Beef pointed out that
there is "a range of degrees of necessity" that lie on a continuum between "making a contribution" and
being "indispensable." 257 The Appellate Body explained that "[t]he more vital or important those
common interests or values are, the easier it would be to accept [the measure] as 'necessary.'"258 Thus,
when a measure pursues an important objective, the necessity is closer to the "making a contribution"
pole.
498. Neither the text of the WTO Agreements nor the WTO jurisprudence establish a requirement
that the contribution of a measure be "significant, " as the European Communities claims. As Brazil
explained in its Response to Question 119 from the Panel, a measure will satisfy the contribution
requirement if it contributes " to some extent ."259 The WTO Contracting Parties – undoubtedly well
aware of the fact that government measures seldom achieve perfect efficiency – did not require a
significant contribution. To require such a showing could have the effect of finding against legitimate
measures that the WTO Members intended to permit.
499. In any event, Brazil has demonstrated that the import ban in fact makes a significant
contribution to reducing the risks of waste tyre ac cumulation and disposal in Brazil. While it is
impossible to precisely quantify the waste reduction achieved by the import ban 260, Brazil has noted in
its response to Question 40 from the Panel that impor ts of the shorter-lifespan retreads have shrunk to
just one-tenth of the pre-ban levels. Without the import ban, increasingly higher volumes of retreaded
tyres would have been imported into Brazil.
500. Throughout the dispute, the European Communities has argued – incorrectly – that Brazil
must quantify the contribution made by the import ba n. Brazil included the statement cited ("it is
immaterial whether there are five hundred fewer tyres or five million") merely to illustrate that such
quantification is unnecessary. This is so because Braz il's chosen level of protection requires Brazil to
reduce the volumes of tyre waste to the maximum extent possible, in the same way that France
decided to reduce the risks cau sed by asbestos to the maximum extent possible. The
Appellate Body261 – and indeed the European Communities itself 262 – have recognized that when it
comes to selecting the level of protection, a WTO Member can set that level as low or as high as it
finds appropriate. Every additional waste tyre that Brazil could have avoided increases the number of

257 See Appellate Body Report on Korea – Various Measures on Beef, at para. 161 (emphasis added).
258 See Appellate Body Report on Korea – Various Measures on Beef, at para. 162.
259 Appellate Body Report on US – Gambling, at para. 6.494 (emphasis added).
260 See Brazil’s second oral statement, at para. 81.
261 See Appellate Body Report on US – Gambling , at para. 308; Appellate Body Report on EC –
Asbestos, at para. 174.
262 See European Communities' second written submission, at para. 12.

waste tyres that will have to be temporarily stockp iled, transported, and ultimately incinerated in
Brazil. Because each of these ac tivities presents well-recognized risks to human health and the
environment, even as few as five hundred waste ty res would increase the risk. This increase would
"involve a continuation of the very risk" that Braz il seeks to reduce, even if that risk is low 263 – and
thus prevent Brazil from achieving its chosen level of protection because as long as there are some
waste tyres that could have been avoided, there is also a risk that could have been avoided. To require
Brazil to demonstrate a particular level of waste reduction would effectively amount to choosing, for
Brazil, the level of protection that the Brazilian pub lic should be afforded. This choice belongs to
Brazil, not to the European Communities.
501. Notwithstanding the validity of the illustration, the actual waste reduction achieved by the
import ban is in millions of waste tyres, not in hundreds, as Brazil explained above.
502. The second part of the cited statement ("So long as Brazil continues...") merely refers to the
fact that Brazil must retread tyres it consumes for the ban to make a contribution to waste reduction.
On this, Brazil and the European Communities agree. 264 Brazil has demonstrated that it retreads a
high number of tyres that it uses. Therefore, th e ban makes a significant contribution to the goal of
protecting Brazil's population from the risks of waste tyre accumulation and disposal.
Comments of the European Communities
503. With its peculiar interpretation of the contri bution element within the necessity analysis
Brazil departs from the Appellate Body in Korea – Various Measures on Beef , where it was clearly
stated that "a 'necessary' measure is […] located significantly closer to the pole of 'indispensable' than
to the opposite pole of simply "making a contribution to" (emphasis added). 265 It was on the basis of
this wording that the European Co mmunities has referred to this element, in a short way, as requiring
a "significant contribution", i.e.: a contribution that is significantly closer to the pole of indispensable
than to the opposite pole of simply making a contribution to.
504. On the contrary, Brazil pretends that, when a measure pursues an important objective, the
necessity is closer to the "making a contribution" po le and that a measure will satisfy the contribution
requirement if it contributes "to some extent". With that interpretation Brazil does not take into
account that the Appellate Body explained in Korea – Various Measures on Beef that the "necessity"
requirement found in Article XX(d) is less flexible textually than Article XX(g), which requires a
measure "relating to the conservation of exhaustible natural resources". Brazil interpretation of the
"necessity" requirement in Article XX(d) blurs this difference with Article XX(g) and virtually
merges two requirements that are expressed in diffe rent Treaty language: a measure that contributes
"to some extent" to achieve a certain objective is , in fact, a measure that is "related to" the
achievement of that objective. Both ideas are the two sides of a same coin, and that is not what
Article XX pretends when it uses different terms in (b) [and (a) and (d)] and (g).
505. Finally, the European Communities would recall that, contrary to what Brazil claims, the
import ban does not make a significant contribution to reducing the risks arising from waste tyres. It is
not even clear if it makes a contribution. Brazil has neve r quantified the contribution made by the
import ban and has used the excuse that it pertains to Brazil to choose the level of protection. This
argument does not take into account that a minimal contribution of the import ban to the reduction of
the number of waste tyres in Brazil would also impl y that the import ban would be disproportionate.

263 Appellate Body Report on EC – Asbestos, at para. 174.
264 See European Communities' second written submission, at para. 34.
265 Appellate Body Report on Korea – Various Measures on Beef, para. 164.

For further explanations, the European Communitie s refers to its previous submissions on these
issues, where its arguments were developed at greater length.
266
Question 122. To Brazil:
Please comment on the European Communities' statem ent at paragraph 69 of its oral statement of
4 September 2006. Please clarify, in this cont ext, what potential role you see, as a matter of
principle, for non-generation, management and disp osal options respectively, as alternatives to the
import ban.

Response of Brazil
506. The European Communities' statement at pa ragraph 69 addresses the risks of waste tyre
accumulation – not the risks of disposal. As Brazil explained throughout this dispute, waste tyre
collection in fact reduces the accumulation risks, but th e collected tyres must then be disposed of and,
at present, it is impossible to dispose of the existing volumes without harming human health and the
environment.
267
507. Contrary to what the European Communities suggests, Brazil's objectives are not only to
reduce mosquito-borne diseases, tyre fires, and leac hing, but also to reduce the risks of waste tyre
transportation and, especially, the risks of danger ous emissions that occur when waste tyres are
incinerated. Brazil has extensively demonstrated that only reduction of the overall waste tyre volumes
can achieve these objectives. Essentially, the more ty re waste there is, the more tyre waste must be
incinerated – and incineration is harmful. A compar able solution would, therefore, have to reduce the
waste tyre volumes (e.g., by improving rates of re treading or reducing the overall use of tyres by
encouraging public transportation) and not only help collect or dispose of waste tyres.
508. Brazil has chosen to reduce the waste tyre risks to the maximum extent possible. Because the
risks of waste tyre accumulation and disposal increase with waste tyre volumes, Brazil seeks to reduce
these risks by reducing the waste tyre volumes by as much as possible. To do that, Brazil must avoid
the generation of every tyre that can be avoided. As Brazil explained in paragraph 51 of its second
oral statement, the non-genera tion solutions proposed by the European Communities could be
alternatives only if Brazil sought to reduce wast e tyre volumes by a particular amount, and these
solutions allowed Brazil to achieve that specific re duction. However, the chosen level of protection
requires Brazil to reduce waste tyre volumes to th e maximum extent possible. Other non-generation
options proposed by the European Communities do not allow Brazil to attain this objective. They are,
therefore, not alternatives within the meaning of Article XX(b) because without the import ban, some
tyre waste that could have been prevented would no t, in fact, be prevented. They are additional
measures and, as Brazil explained in paragraph 104 of its secnd written submission, it has already
implemented a number of measures that promote non-generation.
Comments of the European Communities
509. The European Communities would like to clarify that its statement at paragraph 69 of its
second oral statement is not limited to "waste tyre accumulation", as Brazil has misinterpreted, but to
all alternatives where waste tyres are managed, in cluding those consisting in recycling and energy
recovery.
510. Brazil states in its answer to this question that it "has extensively demonstrated that only
reduction of the overall waste tyres volume can ach ieve these objectives", which are the reduction of

266 European Communities' first written submission, paras. 107 to 109 and 127 to 128,
European Communities' first oral statement, paras. 21 to 48, European Communities' second written submission,
paras. 17 to 62, European Communities' second oral statement, paras. 21 to 50 .
267 See Brazil’s first written submission, at para. 120; Brazil’s second written submission, at para. 40.

mosquito-borne diseases, tyres fires, leaching an d emissions from co-incineration (once again
wrongly referred to as "incineration").
511. The European Communities has explained several times, and will continue to explain in its
comment to Brazil's Reply to Question No. 123, that co-incineration of waste tyres does not increase
emissions to the air of hazardous substances.
512. Leaching from waste tyres, either stockpiled or landfilled, does not pose a risk for life and
health because it occurs in very limited quantities a nd, in any case, it is harmless for the environment.
Brazil did not prove the contrary with the two doc uments attached to its second written submission 268,
as the European Communities explained in its second oral statement. 269 Here, again, the
European Communities has to recall that Brazil ha s provided no evidence on leachates from waste
tyres in its territory.
513. For the rest, it is quite difficult to understand Brazil's argumentation. If the reduction of waste
tyres by means of the import ban on retreaded tyres aims at reducing these problems (mosquito-borne
diseases and tyre fires), how is it possible that, six years after the adoption of the import ban, Brazil
has not been capable of attaining those reductions? The occurrence of dengue cases (and tyre fires, it
seems) continues irrespective of the adoption and enforcement of the import ban on retreaded tyres. It
suffices to have a look to the table of dengue cases attached by Brazil to one of its answers to the
questions posed by the European Communities.
270 This shows that the Brazilian policy, which seems
to be limited to non-generation measures, is not capab le to solve the problems that Brazil claims to be
fighting. Brazil should try again to have recourse to waste tyre recycling and energy recovery. In
other words, Brazil should have maintained in appl ication the obligations imposed to importers of
retreaded tyres by Resolution CONAMA No. 258/99 to collect and dispose of a certain number of
waste tyres. This would have been more coherent with Principle 16 of the Rio Declaration on
Environment and Development, as the European Co mmunities already explained in its first written
submission.
271
Question 123. To Brazil.
Please comment on the European Communities' argument s in paragraph 84 of its oral statement of
4 September 2006. Please address specifically co-incineration, as referred to by the
European Communities.

Response of Brazil
514. First, the incineration was not safe ten years ago, and it still is not safe today. The studies
provided by Brazil are the most recent studies ava ilable on the subject. The European Communities
has only been able to provide one study that is mo re recent, which specifically addresses the safety of
waste tyre incineration (Exhibit EC-86). That very study, as Brazil pointed out in paragraphs 86-89 of
its second written submission, reported signifi cant increases in dioxin emissions during the
incineration of waste tyres. In addition, as Br azil pointed out in paragraph 35 of its second oral
statement, a British report, dated 2002, prepared with the British Government's participation, observed
that "public and regulatory concern over emissions makes consents [to incinerate tyres] difficult to

268 Brazil's second written submission, para. 61.
269 European Communities' second oral statement, para. 47.
270 Brazil’s answer to the EC question No. 11, a).
271 European Communities' first written submission, paras. 138 and 139, and Exhibit EC-53.

obtain."
272 Finally, the European Communities' own Envi ronment Agency declared just five years
ago, that waste tyres should be incinerated only "if no other outlet is possible."273
515. Second, it is naïve – if not outright misleading – for the European Communities to suggest
that a single EC directive 274 would turn incineration into a beni gn, environmentally-friendly disposal
method overnight, and would, thereby, solve the waste tyre disposal problem that the rest of the world
continues to grapple with. In reality, the directive ha s not done this. To begin, the directive's stricter
atmospheric emission standards will not become mandatory until 2008. 275 Further, contrary to the
European Communities' suggestion, even the new k ilns will typically have to be fitted with the
necessary equipment "to use end-oflife tyres as supplem entary fuel, and still be in compliance with
the atmospheric emission standards due to come into force in 2008."276
516. Third, as Brazil explained in paragraph 93 of its second written submission and in
paragraph 14 of its concluding statement at the Second Panel Meeting, stricter emission standards
may reduce harmful emissions from waste tyre incinera tion, but cannot eliminate it. The stricter the
standards, the fewer incinerators will agree to burn ty res. Until there is a safer disposal option that
can handle the existing waste tyre volumes, as Brazil has noted in its response to Question 97 of the
Panel, governments simply cannot set emission standa rds at so high a level that incineration becomes
economically unviable.
517. Finally, Brazil has provided the list of companies authorized to process waste in Brazil as
Exhibit BRA-166.
Comments of the European Communities
518. Brazil's insistence in considering co-incineration (not "incineration", as Brazil refers to) as an
unsafe practice that is based on a handful of old documents produced by various sources. Moreover,
Brazil has misrepresented the study by SINTEF pres ented by the European Communities so that an
isolated study in relation to the rank of emissions of different substitute fuels is elevated to a general
rule,277 omitting to quote what the SINTEF study says in the lines that followed directly thereafter:
Many other and more recent studies have concluded that the use of
alternative fuels and raw materials doesn't influence or affect the
emissions of PCDD/Fs (see chapter 6) . In general, it seems that the
ranges of PCDD/Fs emission concentration resulting from the use of
conventional fuels such as coal a nd petcoke overlap with the ranges
obtained with the use of secondary fuel, regardless of the type of
secondary fuel (emphasis added).278

272 A. B. Hird et al., Tyre Waste and Resource Management: A Mass Balance Approach 3 (2002)
(Exhibit BRA-56).
273 European Environment Agency, Waste from Road Vehicles 2 (2001) (Exhibit BRA-108) (emphasis
added).
274 Directive 2000/76/EC of the European Parliament and of the Council of 4 December 2000 on the
Incineration of Waste (Exhibit BRA-34)
275 See id. at II.1.
276 European Tyre & Rubber Manufacturers’ Association, End-of-life Tyres: A Valuable Resource with
a Wealth of Potential 4 (2006) (Exhibit EC-84) (Exhibit BRA-126).
277 Brazil's second written submission, para. 88.
278 Formation and Release of POPs in the Cement Industry, 23 January 2006, Exhibit EC-86, at p. 97.

519. The following paragraph at the same page of the SINTEF study is also revealing:
The UNEP Standardized Toolkit for Identification and Quantification
of Dioxin (2003) and Furan releases gives the following summary
about the effect of waste feeding:
"[…] It should be noted that the higher emissions measured in the
USA were from wet kilns whereas the lower emissions (several
hundred measurements) from Eur opean cement kilns were obtained
from plants using the dry process".
520. This paragraph is sufficient evidence to show that those reports from the USA that Brazil
attached to its first and second written submissions are not studies on the current state of the cement
industry,
279 which now prefers to use the dry process because of its far lower fuel consumption.280
521. Moreover, the SINTEF study concludes that:281
The PCDD/F data presented in this report shows that:
• Most cements kilns can meet an emission level of 0.1 ng TEQ/Nm³
if primary measures are applied;
• Co-processing of alternative fuels and raw materials, fed to the
main burner, kiln inlet or the precalciner does not seem to influence
or change the emissions of POPs;
• Data from dry preheater cement kilns in developing countries
presented in this report show very low emission levels, much lower
than 0.1 ng TEQ/Nm³.
522. Finally, Brazil refers again in its answer to a British report and to a declaration by the
European Environment Agency taking them out of context. Thus the British report, prepared by a
consultant in 2000/01 with 1998 as the base year for the study, does not reflect the current situation of
co-incineration in the United Kingdom. The statem ent from the European Environment Agency is
just a reflection of the hierarchy in the waste management principles and not a rejection of co-
incineration as an unsafe alternative.
523. The European Communities comments on paragr aphs 86 and 87 of Brazil's response to
question no. 123 are integrated in the European Communities' comments to the answer provided by
Brazil to Question 97 from the Panel.
524. Finally, the European Communities does not understand the reference that Brazil makes to the
European Communities Waste Incineration Directive in its answer to the Question from the Panel,
because the Directive is not mentioned in paragr aph 84 of the European Communities' second oral
statement, to which the Panel's Question refers. In any case, the European Communities would like to
clarify that the emission standards laid down by the Directive applied for new plants as from
28 December 2002 and for existing plants as from 28 December 2005.
282 The date mentioned by the

279 Those studies are attached by Brazil as Exhibits BRA-26, BRA-48, BRA-49, BRA-50, BRA-51,
BRA-141 and BRA-142.
280 The different technological processes in cement production are explained in the SINTEF Study,
Exhibit EC-86, at pp. 33 to 41.
281 Exhibit EC-86, at p. 179.
282 Article 20 of Directive 2000/76/EC (Exhibit BRA-34).

European Tyre & Rubber Association in its publicati on is, therefore, incorrect. Neither is correct the
reference made by Brazil to this publication, wh ich does not declare that "even the new kilns will
typically have to be fitted with the necessary equi pments", as Brazil writes, but instead states that
"new kilns are increasingly equipped to use end-of-lif e tyres as supplementary fuel". This is another
example of the multiple distortions that Brazil has committed in its submissions and on which the
European Communities already alerted the Panel in its Closing Statement at the second meeting.
283
Question 124. To Brazil.
Please comment on the European Communities' ob servations in paragraph 74 of its second oral
statement in relation to the 100% recycle and recovery rate achieved in 6 EC member States.

Response of Brazil
525. The European Communities' admission that only six of its 25 member States have achieved
full recycling-recovery of their waste tyres forcef ully reinforces the point made by Brazil throughout
this dispute – that there is no good way to safely dispose of the existing volumes of waste tyres. If
more than three-fourths of the European Communi ties states, with the wealth of resources and
technology available to them, have not been able to achieve full recovery, how can the
European Communities expect Brazil, a developing count ry, to achieve it? In addition, out of the six
member states that have achieved full recove ry, only two – Denmark and Finland – have
accomplished this without a substa ntial reliance on incineration. These two countries, together,
account for just 2.3 per cent of the European Co mmunities' population, and presumably for 2.3 per
cent of the European Communities' waste tyre arisings . Overall, nearly a third of used tyres in the
European Communities continues to be incinerated.284
526. The European Communities also claims in paragr aph 74 that "it is not true that, as today,
some 20% of waste tyres are still being landfilled," and asserts that it was "the situation in 2004."
However, the very report the European Commun ities relies on and Brazil cites (Exhibit EC-84),
published in 2006, states, "At present, landfilling still accounts for 20%."285
Comments of the European Communities
527. The European Communities has already stated sev eral times during this proceeding that its
measures are not within the scope of the case before the Panel. This case is about the import ban on
retreaded tyres adopted by Brazil and not abou t the waste tyre management policy of the
European Communities or its 25 Member States.
528. In any case, as the European Communities already explained in its second written submission,
neither the European Communities nor any of its 25 member States have adopted an import ban on
retreaded tyres.286 Therefore, the European Communities and its members States remain free to decide
on the different management alternatives concerni ng waste tyres and they are under no obligation to
achieve full recycling and recovery of waste tyres. Thus, to use the situation in the 25 member States,
as Brazil does to prove that full recovery is not possi ble, does not take into account that not all the
member States have declared waste tyre recovery as one of the first priorities in their waste
management policies. Most of the EC member States have given preference to the correct
management of those waste tyres streams for which there is a EC compulsory regulatory framework,
like waste oils, batteries, sewage sludge, packaging, vehicles, and electric and electronic equipment.

284 Id. at Annex II.
285 See id. at 6 (emphasis added).
286 European Communities' second oral statement, para. 74.

529. Finally, the European Communities does not shar e Brazil's rejection of co-incineration as one
of the recycling and recovery alternatives. 287 This position of Brazil contradicts the explanation given
in its response to the Panel's question No. 43, where it declared that the disposal methods to be used
under CONAMA Resolution 258 "are licensed by stat e environmental authorities according to their
assessment of the best disposal alternatives available" and that "[t]he disposal methods usually
approved by these authorities are: co-processing in cement kilns […]". This latter answer corresponds
to the consideration of energy recovery as an "e nvironmentally appropriate disposal of unusable
tyres", which is enshrined in Article 1, sole pa ragraph, letter c) of the IBAMA Ruling No 8 of
15 May 2002 (Exhibit EC – 48).
Question 125. To the European Communities.
In paragraph 74 of your second oral statement, yo u indicate that 6 EC member States "already
recycle and recover 100% of their waste tyres". C ould you please clarify what you mean by "recycle
and recover"?

Response of the European Communities
530. By "recover" the European Communities mean s "energy recovery", which is the waste
disposal method where waste tyres replace a percenta ge (around 15% to 20%) of the ordinary fuel in
some industrial installations (cement kilns, steel fu rnaces and paper mils are the installations to which
the European Communities has referred in this case). This process is also called "co-incineration" and
must be differentiated from "incineration", where w aste is burnt not as a fuel but just to reduce its
volume or to eliminate or reduce its content in hazardous substances. Waste being incinerated
pertains normally to the categories of municipal/household or hospital and other clinical wastes.
531. "Recycle" is the term used by the European Communities in the context of paragraph 74 of its
second oral statement to describe some other wast e tyres management methods, notably retreading
and material recycling (including civil engineeri ng applications). "Landfilling" does not belong to
this category.
Comments of Brazil
532. Because the definition and the scope of the te rms "recycle" and "recover" sometimes vary,
depending on the source, an analysis of specific dispo sal options offers a more meaningful picture of
waste tyre disposal in a given country. The statis tics included in Annex I and II of the Exhibit EC-84
(also introduced as Exhibit BRA-126) provide deta iled data on waste tyre disposal within the
EC member States. Brazil has already pointed out that according to these statistics, only two
EC members – Denmark and Finland – have been ab le to achieve full recycling/recovery without
substantial reliance on incineration. 288 At the same time, several EC members continue to landfill
waste tyres and the majority continue to incinera te waste tyres. Spain, for example, recycled
42 kilotonnes of its waste tyres, incinerated 52 kilotonnes, and landfilled 144 kilotonnes. Poland
recycled 10 kilotonnes, incinerated 56 kilotonnes, and landfilled 57 kilotonnes. Some member States
landfilled all of their waste tyres. This reinforces Brazil's point that there is no good way to safely
dispose of the existing volumes of tyre waste. Fo r this very reason, Brazil prohibits imports of the
shorter-lifespan retreads.

287 Once again, in its answer to panel question No. 124, Brazil uses the term "incineration" instead of
the correct one, which is "co-incineration".
288 See Brazil’s answer to panel question No. 124, at paragraph 88.

Question 126. To Brazil.
In response to the Panel's question 54, you had indi cated that the consistency of the MERCOSUR
exemptions under Article XXIV was not a relevant consideration for the purposes of assessing
whether an "arbitrary or unjustifiable discrimination" exists under the chapeau of Article XX. In
paragraph 107 of your second oral statement, you indicated that "Brazil's different treatment of its
MERCOSUR partners is explicitly authorized under Ar ticle XXIV and, therefore, cannot be arbitrary
and unjustifiable" (emphasis added). Could you pl ease clarify whether you now consider that the
measure's status under Article XXIV is a relevant or necessary considerati on in the analysis of the
import ban under the chapeau of Article XX?

Response of Brazil
533. There is no inconsistency between Brazil's re sponse to Question 54 from the Panel and its
position in paragraph 107 of its second oral statement. In its response to the Panel's question, Brazil's
point was that a measure's compliance with the chapeau does not depend on the measure's justification
under Article XXIV. The European Communiti es agreed. A measure that does not meet
Article XXIV requirements can nevertheless meet the requirements of the chapeau if it is neither
"arbitrary or unjustifiable" nor a "disguised restri ction on international trade." However, when a
measure does fulfil the requirements of Article XXIV, all else being equal, it is necessarily consistent
with the chapeau because a measure expressly permitted under the WTO agreements cannot be
"arbitrary or unjustifiable" or a "disguised restriction." This is the point that Brazil made in
paragraph 107 of its second oral statement.
Comments of the European Communities
534. In response to the Panel's Question, Brazil argues that "when a measure does fulfil the
requirements of Article XXIV, all else being equal, it is necessarily consistent with the chapeau
because a measure expressly permitted under the WTO agreements cannot be "arbitrary or
unjustifiable" or a "disguised restriction".
289
535. This response is incorrect. As Brazil h as itself recognised, Artic les XX and XXIV are
independent exceptions, and the fulfilment of the co nditions of one does not depend on the fulfilment
of the conditions of the other. Accordingly, there is no basis for assuming that a measure which is
compatible with Article XXIV would for that reason also be compatible with Article XX.
536. Moreover, it is also recalled that, as the European Communities has shown 290, the
MERCOSUR exemption is not justified under Article XXIV. One of the reason why the exemption is
not justified is precisely that Article XXIV:8 does not require elimination of internal trade restrictions
which are justified under Article XX. In other word s, if the measure were justified under Article XX,
it could not at the same time be justified under Ar ticle XXIV. Brazil is thus turning the logical
relationship between the two provisions on its head.
537. Accordingly, Article XXIV is of no rele vance to the analysis under the chapeau of
Article XX. This means at the same time that if Brazil's analysis were correct, and the compliance
with an international agreement were sufficient to exclude arbitrary or unjustifiable discrimination
under the chapeau of Article XX, this would have to apply to all international agreements, not just to
those justified under Article XXIV. As th e European Communities has already remarked, 291 Brazil's
interpretation would therefore result in a considerable weakening of the chapeau of Article XX.

289 Brazil's answer to panel question No. 126, para. 90.
290 European Communities' second oral statement, para. 127 et seq.; European Communities' second
291 European Communities' second written submission, para. 157.

Question 127. To both parties.
In your view, what role do the intent and the e ffect of a measure play in assessing whether it is
applied in a manner which would constitute a disguised restriction on international trade?

Response of Brazil
538. The Appellate Body observed in Japan – Alcoholic Beverages that the aim of a measure may
not be easily ascertained. 292 Brazil agrees with the Appellate Body and does not believe that there
exists a ready formula to help determine whethe r a measure is applied in a manner which would
constitute a disguised restriction on international trade.
539. Both the intent and the effect of a measure can play a valuable role in the analysis under the
chapeau of Article XX. The Appellate Body in US – Shrimp held that "the chapeau of Article XX is,
in fact, but one expression of the principle of good faith." 293 The examination of the measure's
language – without reference to the broader context – will often be insufficient to determine whether a
Member is acting in good faith. The measure's inte nt and effect provide that valuable context and
permit a panel to gain a better understanding of what the Member seeks to achieve through the
challenged measure.
540. The relative value of the intent of the measure, on the one hand, and its effect, on the other,
depends on the nature of the specific measure at issue. The intent frequently provides valuable insight
into the purpose behind the measure, which, in turn , allows a greater understanding of the manner in
which the measure is applied. When it is abundantly clear that there is no intent to protect an industry
or restrict trade to the benefit of national sectors, then there can be no doubt that the measure is
applied in good faith and is not a disguised restriction. In other cases, the measure's effect may
provide more valuable insight. Therefore, the sp ecific facts of the case should determine factors that
are most relevant to the "disguised restriction" analysis under the chapeau.
541. In the present case, the intent of the measure proves especially valuable to understanding why
Brazil exempts MERCOSUR countries from the import ba n. The instrument that presently contains
the import ban – Portaria SECEX 14/2004 – does not explain the reasons behind the MERCOSUR
exemption. However, the initial regulations that implemented the exemption – Portaria SECEX
2/2002 and Presidential Decree No. 4.592/2003 – clear that the exemption was introduced to comply
with the ruling by the MERCOSUR Ad Hoc Tribunal.
Response of the European Communities
542. Both elements, intent and effect, should be ta ken into account to asses s whether a measure is
applied in a manner which would constitute a disguised restriction on international trade. As the
Appellate Body explained in US – Shrimp , the "chapeau" of Article XX is an expression of the
principle of good faith in international law.
294 This requires that all aspects of the relevant measure
have to be considered in order to prevent the a buse of the exceptions of Article XX. Thus, the
conclusion that a measure is applied in a ma nner which constitutes a disguised restriction on
international trade can be drawn because of a meas ure's intent, and it can also be drawn from the
effects of the way in which a measure is applied. In the present dispute, the European Communities
has submitted that both are the case.

292 See Appellate Body Report on Japan – Alcoholic Beverages, at 30.
293 See Appellate Body Report on US – Shrimp, at para. 158.
294 Appellate Body Report on US – Shrimp, para. 158.

Comments of the European Communities
543. The European Communities does not agree with Brazil on the special value that it gives to the
intent of the measure, which is driven by Brazil's peculiar understanding of the case.
544. As the European Communities will explain agai n in its comments to Brazil's answer to
Question No. 129 from the Panel, the import ban has th e intent to protect the Brazilian tyre industry
through a measure that eliminates exports of re treaded tyres from the European Communities and
other WTO members to Brazil. The fact that Brazil is constantly trying to dress up the protective
measure as an initiative to protect life and health only confirms that the restriction is disguised.
545. In the same way, the intent of the MERCO SUR exemption from the import ban cannot make
the exemption compatible with the chapeau of Artic le XX. A correct application of the good faith
principle in this case would have implied that, following the MERCOSUR award, Brazil would have
lifted the import ban on retreaded tyres for all WTO Members.
Question 128. To the European Communities.
The European Communities referred, in its second oral statement (para. 102), to the "distortion of
international trade" in the context of assessing the exi stence of a disguised restriction to international
trade under the chapeau of Article XX. Could you pl ease clarify this notion and how it relates to the
notion of "disguised restriction on international trade"?

Response of the European Communities
546. As explained to the Panel at the second meeti ng, the European Communities used the term
"distortion" only to avoid repetition of the word "restriction". To avoid confusion, the GATT term
"restriction" has been used in the final version of the European Communities second oral statement.
547. Among other things, the European Communities has identified a "disguised restriction on
international trade" in the fact that the effect of Brazil's measures is the replacement of imported
retreads from the European Communities with retread s made in Brazil (predominantly with imported
casings) or imported from Uruguay (where they are pr edominantly made with imported casings), as
well as with new tyres (most of which are made in Brazil).295
Question 129. To Brazil.
In paragraph 110 of your second oral statement, you submit that "[a statement by a trade official on
the major objective of Brazil's 1991 broader ban on all used goods] was not about the 2000 import
ban on used and retreaded tyres and contained no mention of retreaded tyres." Please elaborate on
your argument in light of your answer to panel question 29 that "B razil has banned imports of used
and retreaded tyres since Portaria DECEX No. 8 of 10 May 1991. ... To safeguard the integrity of the
prohibition, Brazil adopted Portaria SECEX 8/2000, which explicitly prohibited imports of retreaded
and used tyres, whether imported as part -worn tyres or raw material for retreading.

Response of Brazil
548. Brazil has, in fact, banned imports of used and retreaded tyres since 1991. This original ban
was effected through a measure that applied to all used goods and did not single out used and
retreaded tyres, or any other type of good (Portaria DECEX 8/1991). The European Communities
argues that the statement "clearly" demonstrated that Brazil banned used and retreaded tyre imports to
protect national industries.
296 This could not be further from the truth. In its SOS, Brazil called the

295 European Communities' second written submission, para. 172 et seq.; European Communities'
second oral statement, para. 100 et seq.
296 See European Communities' second written submission, at para. 178.

attention of the panel to the fact that the st atement presented by the European Communities dealt
exclusively with the 1991 ban on all used goods and made no specific mention of used or retreaded
tyres.
549. Regardless of any statement that may have been made by a trade official before the Brazilian
National Congress, and wrongly used by the Europe an Communities in these proceedings, what is
relevant in this case is that Brazil clearly demonstr ated that there is a legitimate environmental and
health rationale behind the import ban. As th e International Court of Justice affirmed in Namibia
(Legal Consequences), in a statement cited by the Appellate Body in US – Shrimp, at paragraph 130,
ftn. 109: "[a legal] instrument has to be interpre ted and applied within the framework of the entire
legal system prevailing at the time of the interpre tation." Today, there can be no question that the
purpose behind the import ban is to protect public health and the environment from harms caused by
waste tyre accumulation and disposal.
Comments of the European Communities
550. Brazil's explanation that the statement presente d by the European Communities in paragraph
178 of its SWS dealt exclusively with the 1991 ban on all used goods and made no specific mention
of used or retreaded tyres is immaterial. In making that general reference to used goods the official of
the Ministry of Development, Industry and Foreign Trade was also covering and referring to retreaded
tyres, whose importation, as Brazil has acknowle dged, was banned in 1991 because they were
considered by Brazil as used goods. Indeed, Brazil has always insisted that the 2000 import ban on
used and retreaded tyres merely served to clarify the prohibition already contained in the 1991 ban.
297
551. Moreover, the European Communities has already explained that the Advocate-General of the
Union also declared that "[…] SECEX Portaria 8/ 2000 prohibits the importation of 'retreaded' tyres
not for the defence of public health and the envir onment, but to protect national trade and industry". 298
It is worth noting that, to this date, Brazil has not once even commented on this and other statements
by its own Advocacia-Geral. Other statements and documents, which are referred to in paragraph 10
of the European Communities SOS, also make clear that the real aim of the import ban on retreaded
tyres is not the protection of life and health but the protection of Brazil's domestic industry.
552. Finally, as the European Communities has manif ested in several occasions, this protectionist
objective can be detected not only through the statements of different officials but also in the structure
of the Brazilian legislation.299
553. Against that background, the European Communities cannot share Brazil optimistic statement
that "[t]oday there can be no question that the purpose behind the import ban is to protect public
health and the environment from harms caused by waste tyre accumulation and disposal". 300 What the
European Communities can understand is Brazil's desi re, for reasons of litigation tactics, to present
the facts as though this were the case. The historic facts, however, clearly show that the opposite is
true.

297 Brazil's first written submission, paras. 65 and 77.
298 European Communities' first written submission, para. 164, and European Communities' second
written submission, para. 178. The document were this declaration is made is Exhibit EC-52, para. 51.
299 See European Communities' first written submission, para. 162, and European Communities' second
oral statement, paras. 11 and 12.
300 Brazil’s answer to panel question No. 129, para. 96, in fine.

D. S
TATE MEASURES
Question 130. To Brazil.
Law No. 12.114 and Law No. 12.381 of Rio Grande do Sul use the term "carcass". Please clarify the
meaning of "carcass" as used in these laws. For example, Article 1, Sole paragraph II of Law
No. 12.114 refers to "the carcass of a used tyre recycled by retread, remoulding or recapping
processes abroad and imported in that condition". (underline added) What is the scope of the product
encompassed by this provision, retreaded tyres or u sed tyre carcasses in the sense of "the structural
part of a used tyre" as defined by Brazil in its response to the Panel's question 1?

Response of Brazil
554. The word carcass refers to the structural part of a used tyre. This is the sense of Article 1,
paragraphs I, II and III of Law 12.114. Nevertheless, paragraph II refers to carcass of a used tyre that
has been 'recycled' by means of remoulding, retreadi ng or recapping. The carcass of a used tyre that
has been remoulded, retreaded or recapped is a retreaded tyre.
E. EXEMPTIONS
Question 131. To both parties.
Brazil submits in its second submission that th e exemption is a separate measure because it was
introduced at a later time than the import ban due to an arbitral award issued by an international
tribunal and is justified under different GATT provisions than the import ban. The
European Communities, for its part, makes separat e claims in respect of the import ban and the
exemption. In light of these elements, could you please clarify what is the relevance, if any, of the fact
that the import ban and the exemption are contained in the same legal instrument (i.e. Article 40 of
Portaria 14)? In answering this question, please address the impact this factors should have, in your
view, on:
 (a) the Panel's assessment of the justific ation of the import ban under Article XX;
 (b) the Panel's examination of the European Communities' separate claim in relation to
the exemption.

Response of Brazil
555. The import ban and the MERCOSUR exemption are distinct legal instruments that should be
analyzed separately. As Brazil has explained, the import ban is properly examined under
Article XX(b), while the MERCOSUR exemption is examined under Articles XXIV and XX(d). The
fact that a finding against the exemption under Article XXIV does not affect the analysis of the import
ban under Article XX, as Brazil explained in its re sponse to Question 54, by itself demonstrates that
the two are separate instruments.
556. While the import ban and the limited MERCOSUR exemption are presently contained in the
same measure – Portaria 14/2004 – functionally, they are separate legal instruments, adopted at
different times and for different reasons. The ban in its current form was enacted in 2000. The
exemption was implemented two years later through two new measures – Portaria SECEX 2/2002 and
Presidential Decree No. 4.592/2003. However, ev en if the two were adopted through the same
measure, it would be formalistic to focus on that i rrelevant fact to access the consistency of these two
distinct legal instruments. Portaria SECEX 14/ 2004 – the current measure that contains both the
import ban and the exemption – merely consolidat ed the thenexisting import regulations, as Brazil
explained in paragraph 77 of its first written submission.
557. The European Communities agrees that the MERCOSUR exemption is a distinct legal
instrument that requires an independent analysis . In its panel request, the European Communities

challenged separately "Brazil's exemption of retreaded tyres imported from other MERCOSUR
countries from the import ban by means of Portar ia No. 14 of 17 November 2004... and from the
above-mentioned financial penalties by virtue of Pr esidential Decree No. 4592 of 11 February 2003,
in response to the ruling of a MERCOSUR pa nel established at the request of Uruguay." 301 The fact
that the European Communities lists the MERCOSU R exemption separately is an implicit admission
by the European Communities that it is relevant that the exemption is a separate legal instrument and
that it should be analyzed separately under differe nt provisions. Finally, the European Communities
has also treated the exemption as a distinct lega l instrument in both its first and second written
submissions, arguing that neither Article XXIV nor Article XX(d) justified the exemption.
Response of the European Communities
558. As the European Communities has explained in Reply to the Panel's Question No. 118, the
MERCOSUR exemption is a relevant fact for th e Panel's assessment under Article XX(b), both in
terms of the necessity of the measure and in terms of the measure's compliance with the chapeau. The
European Communities does not consider that the f act that the import ban and the exemption are now
contained in the same measure, namely Article 40 of Portaria No. 14, is of any relevance to the
Panel's analysis in the present context.302
559. Similarly, the European Communities does not consider the fact that the ban and the
exemption are contained in the same instrument to be relevant for the Pa nel's examination of the
European Communities' separate claim in relation to the exemption. The same measure, or aspects
thereof, may violate several obligations of the cove red agreements. In the present case, Article 40 of
Portaria No. 14 violates, on the one hand, Article XI :1, and, on the other, Articles XIII:1 and I:1, and
the European Communities has challenged each of these violations with a separate claim, as is normal
litigation practice. The European Communities does not see what further relevance should be
attached to whether the ban and the exemption are c ontained in the same measure, or, as used to be
the case before the entry into force of Po rtaria Secex No. 17 of 1 December 2003, 303 in two separate
measures.
Comments of the European Communities
560. In its reply to the Panel's Question, Brazil appears to suggest that the MERCOSUR exemption
should be examined under Articles XXIV and XX(d) . While the European Communities agrees that
the MERCOSUR exemption is the subject of separa te claims under Articles XIII:1 and I:1, the
European Communities would like to emphasise that this does not mean that the MERCOSUR
exemption should not also be taken into account in the Panel's analysis under Article XX. In this
respect, the European Communities can refer to its reply to the Panel's Question No. 118, as well as to
its comments on Brazil's reply to the same question.

301 See Brazil – Measures Affecting Imports of Retreaded Tyres , Request for the Establishment of a
Panel by the European Communities, WT/DS332/4, 18 November 2005, at 1-2.
302 As regards Brazil’s argument that Portaria 40 was not "applied" in a discriminatory fashion because
it itself contained the discrimination, the EC refers to its SWS, para. 153 et seq.
303 Cf. European Communities' first written submission, para. 73.

Question 132. To Brazil.
Please comment on the European Communities' ar guments in relation to the compliance of
MERCOSUR with the conditions of Articles XXIV: 5 and 8. In addressing this question, please
address specifically:
 (a) the comments in paragraph 136 of the European Communities' oral statement
concerning the coverage of "substantially all" the intra-MERCOSUR trade; and
 (b) the comments in paragraph 139 of the Eu ropean Communities' oral statement on the
adoption of non-tariff measures affecting extra-MERCOSUR imports and exports.

Response of Brazil
561. Brazil demonstrated in paragraphs 166 of its FWS and 169-175 of its second written
submission that MERCOSUR meets the requirements of Article XXIV:5 and 8. As Brazil explained
in its second written submission, the Committ ee on Regional Trade Agreements (CRTA) has
completed its factual inquiry on MERCOSUR. 304 During the April 2006 meeting of the CRTA, the
Committee Chairman noted that the Committee "seemed to have exhausted its factual inquiry," that
the Secretariat would begin drafting the report on the examination of MERCOSUR, and that the
examination would soon be concluded. 305 In meetings of the CRTA, the European Communities has
asked Brazil about how certain aspects of th e customs union operate, but has not made any
substantive objections.
562. In the context of this dispute, however, the European Communities argues that sugar and
automotive sectors have not been fully liberal ized. Nevertheless, as Argentina, acting as
MERCOSUR's president pro tempore, pointed out at the April meeting, sugar's share of the intra-
MERCOSUR trade is minimal – 0.001 per cent of the total. Argentina also explained that
MERCOSUR members are in the process of liber alizing the intra-MERCOSUR trade in the
automotive sector under the MERCOSUR Automobile Policy. 306 The bilateral agreements between
MERCOSUR members have already led, in practice, to duty-free trade in almost one hundred per cent
of the commerce in the auto sector.
563. With respect to measures that affect extra-MERCOSUR imports and exports, Argentina, in its
role as MERCOSUR's president pro tempore, submitted evidence to the CRTA indicating that
MERCOSUR applies common external tariff to products in over 90 per cent of the tariff lines and has
a specific timetable in place to cover the remaining categories of products by 2008. 307 It can hardly be
disputed that harmonizing external tariffs and re gulations affecting more than 90 per cent of tariff
lines amounts to application of "substantially th e same duties and other regulations" under Article
XXIV:8. Brazil also notes that extra-regional trade has increased by 239 per cent since the founding
of MERCOSUR.308
564. The European Communities al so argues that MERCOSUR parties maintain "non-tariff
barriers." The "non-tariff barrier" presented by the European Communities is the import ban on
retreaded tyres, which is the subject to this dis pute. We note again that the ban was initially applied
erga omnes, that it was not imposed on non-member s as one step in the formation of MERCOSUR,
and that it is justified by Article XX(b).

304 See Brazil’s second written submission, at paras. 174-175.
305 See WT/COMTD/1/Add.16, at para. 14 (Exhibit BRA-170).
306 See WT/COMTD/1/Add.17, at 2 (Exhibit EC-121). See also Exhibit BRA-171 and
Exhibit BRA-172.
307 See WT/COMTD/1/Add.17, at 2 (Exhibit EC-121).
308 See WT/COMTD/1/Add.16 (Exhibit BRA-170).

565. Brazil is puzzled why the European Communities is making these arguments now before this
Panel rather than before the CRTA – the very body tasked with reviewing the customs union, and also
the body that has meticulously examined countl ess documents in the course of its inquiry into
MERCOSUR and developed an in-dep th understanding of the relevant issues. At the time of the
April 2006 meeting, the Chairman of the CRT A gave WTO Members until 28 April 2006 to submit
any additional questions concerning the ex amination of MERCOSUR. This gave the
European Communities and other WTO Members yet another opportunity to request more
information or challenge MERCOSUR's cons istency with Article XXIV. However, the
European Communities has only asked MERCOSUR partie s to clarify operation of certain aspects of
the customs union, and has not substantively obj ected to the custom union's consistency with
Article XXIV. Not only has the European Co mmunities not challenged MERCOSUR's consistency
before the CRTA, it began negotiations of a bi-regional free trade agreement with MERCOSUR. It is
not clear how the European Communities expects to conclude a bi-regional free trade agreement with
what it now claims not to be a properly-constituted cu stoms union. The fact of the matter is that the
European Communities' actions in Brussels and before the CRTA belie the arguments of the
European Communities' litigation team in the context of this dispute.
566. In its Second Written Submission
309, Brazil respectfully pointed the Panel to documents
submitted by the MERCOSUR parties to the CR TA, which provide additional details on the
MERCOSUR integration. The Panel can rely on th e information contained in these documents, just
as the panel in US – Line Pipe relied on the information submitted by the parties to the North
American Free Trade Agreement (NAFTA) to conclude that the United States had established a prima
facie case that NAFTA is in conformity with Article XXIV:5(b) and (c), and with
Article XXIV:8(b).310 The panel in US – Line Pipe also noted that the fact that the CRTA had not yet
issued a final decision that NAFTA is in complianc e with Article XXIV:8 was not sufficient to rebut
the prima facie case established by the United States.311
567. Brazil has met its burden and adduced sufficient evidence to establish a prima facie case that
MERCOSUR meets the requirements contained in Articles XXIV:5(a) and 8(b). The
European Communities has not rebutted the presumption of conformity that Brazil has established.312
Comments of the European Communities
568. In its reply to the Panel's Question, Braz il first notes that the Chairman of the CRTA
concluded, during the April meeting of the Committee, that the Committee "seemed to have exhausted
its factual inquiry" of MERCOSUR, and that the S ecretariat would now begin drafting the report on
the examination.313 With these remarks, Brazils appears to wa nt to suggest that this examination has
resulted in a finding of compatibility of MERCOSUR with Article XXIV, which the Panel should not
further question.
569. This suggestion is far removed from reality. First of all, the CRTA merely conducted a
factual analysis of MERCOSUR, not a "substantive", legal analysis. Second, the CRTA did not reach
any conclusions as regards the compatibility of ME RCOSUR with Article XXIV, and is not likely to
reach any such conclusions in the near future. As all WTO Members know, the CRTA's contrary
suggestion notwithstanding, the Secretariat does not draft any reports on the examination of regional

309 See Brazil’s second written submission, at para. 173.
310 Panel Report on US – Line Pipe, at paras. 7.142-144.
311 Panel Report on US – Line Pipe, at paras. 7.144.
312 See Appellate Body Report on US – Wool Shirts and Blouses , at 13; more recently, Appellate Body
Report on Canada – Dairy (Article 21.5 – New Zealand and US II), at para. 66.
313 Brazil's answer to panel question No. 132, para. 101.

trade agreements, whose factual examination is concluded.
314 Therefore, the factual examination of
MERCOSUR in the CRTA is of no relevance for the a ssessment of the fulfilment of the conditions of
Article XXIV by the Panel in the present dispute.
570. Brazil also claims that the European Commun ities, in the meetings of the CRTA, did not
make any "substantive objections" against MERCOSUR. 315 With this remark, Brazil appears to want
to suggest that the European Communities has conceded in the CRTA that MERCOSUR is
compatible with Article XXIV. This allegation is entirely unsubstantiated. Throughout the many
years that MERCOSUR was discussed in the CRTA, the European Communities and other
WTO Members raised numerous factual questions that were related to the compatibility of
MERCOSUR with Article XXIV. At no point did the European Communities recognise that
MERCOSUR was compatible with Article XXIV. Th e fact that the European Communities and other
WTO Members, after more than 10 years of inc onclusive discussions in the CRTA, allowed the
factual examination of MERCOSUR to end does not mean that the European Communities and other
WTO Members accepted the compliance of MERCOSU R with Article XXIV. Accordingly, the
attempt of Brazil to prevent an assessment of MERC OSUR by the present Panel with reference to the
discussions in the CRTA must fail.
571. Brazil has also repeated its earlier argument that by negotiating a bi-regional free trade
agreement with MERCOSUR, the European Comm unities has recognised that MERCOSUR is in
compliance with Article XXIV. 316 The European Communities has al ready shown that this argument
is unfounded.317 The European Communities would add that in the context of the negotiations, which
are not yet completed, the European Communities has encouraged MERCOSUR to further accelerate
and develop its internal integration, for instan ce through the completion of its customs union.
Accordingly, the European Communities does not see in which way the bi-regi onal negotiations have
a bearing on the question whether MERCOSUR is in compliance with Article XXIV or not.
572. In its reply, Brazil has also suggested that "t he EC's actions in Brussels and before the CRTA
belie the arguments of the EC's litigation t eam in the context of the present dispute". 318 T h e
European Communities considers that this remark is entirely inappropriate. Apart from the fact that
there is no contradiction between European Co mmunities policy and the European Communities'
submissions in the present dispute, it should be r ecalled that the European Commission, which is the
European Communities institution responsible fo r representing the European Communities in the
WTO, has decided to bring the present case against Brazil. 319 The European Commission has equally
decided to appoint the agents which are representing it in the present case. It is therefore inadmissible
for Brazil to suggest that the submissions of th e European Communities before the Panel might not
reflect the position of the European Communities.
573. As regards specifically the requirement that MERCOSUR must liberalise "substantially all"
intra-MERCOSUR trade, Brazil has responded th at MERCOSUR Members "are in the process of
liberalizing the intra-MERCOSUR trade in the auto motive sector", and has claimed that bilateral

314 The last annual report of the CRTA confirms this: it says that for "49 RTAs the factual examination
has concluded (see Attachment 2); no progress was made, however, on the completion of the corresponding
examination reports" (WT/REG/15, of 3 November 2005, para. 5).
315 Brazil's answer to panel question No. 132, para. 101.
316 Brazil's answer to panel question No. 132, para. 105.
317 European Communities' second written submission, para. 219.
318 Brazil's answer to panel question No. 132, para. 106.
319 Cf. European Communities' first written submission, para. 7 and Exhibit EC-3. It is equally noted
that the TBR Report (Exhibit EC-2), on which the Commission's decision was based, stated on p. 30 that "it
would be for Brazil to demonstrate that MERCOSUR is in compliance with paragraphs 5 and 8 of
Article XXIV".

agreements between MERCOSUR Members have led to duty-free trade in almost 100% per cent of
the commerce in the auto sector.320
574. In this regard, the European Communities first notes that it is not clear why MERCOSUR
countries, more than 10 years after the formation of MERCOSUR, are still "in the process of
liberalising trade in the automotive sectors". As the European Communities has explained, and Brazil
has not contested, MERCOSUR can no longer claim to be entitled to a transition period leading to the
formation of a customs union.
321 Accordingly, the process of liberalisation should already have been
concluded.
575. As regards the bilateral agreements to whic h Brazil refers, the European Communities notes
that Brazil has not provided copies of these agreements, nor explained how and to which extent they
liberalise trade. In fact, it does not appear that the agreements in question have the affect of fully
liberalising trade. As an example, the Eur opean Communities submits the recent automobile
agreement between Argentina and Brazil, which w as signed in June 2006 (Exhibit EC-128). Since 1
July 2006, Brazil and Argentina are allowed to e xport duty-free up to USD 2.1 per dollar imported, a
value which will be further decreased to USD 1.95 per dollar imported form 1 July 2007 to 30 June
2008.322 Trade exceeding these values will be subject to the existing preferential tariffs: 70 % of the
common external tariff (CET) for automob iles and 75 % of the CET for auto parts. 323 In other words,
the agreement establishes a form of managed trade in automobiles and imposes quantitative
limitations on duty-free trade, which cannot be regarded as a full liberalisation of trade in this sector.
576. As regards the other sector not currently libera lised, namely sugar, Brazil argues that sugar's
share in intra-MERCOSUR trade is minimal. 324 However, this very fact is due to, and in fact
illustrates, the absence of full liberalisation in MERCOSUR. It should not be forgotten that Brazil is a
major and very competitive producer of sugar. However, it currently does not export significant
amounts to its MERCOSUR countries due to high tariff ra tes. It appears likely that if trade in sugar
were liberalised within MERCOSU R, the share of sugar in intra-MERCOSUR trade would be far
higher than what it is today.
577. As regards the requirement in Article XXIV:8 (a ) (ii) to apply substantially the same duties
and other regulations of commerce to trade with ot her countries, Brazil argues that the application of
the same duties to 90% of the tariff lines is sufficient for complying with this requirement. 325 I n
addition to the fact that Brazil has not supp orted its 90 % allegation in any fashion, the
European Communities does not see on what preceden t such a 90-per cent rule would be based. In
this context, it is recalled that the Appellate Body in Turkey – Textiles held that the flexibility in
Article XXIV:8 (a) (ii) was limited, and that this provision requires "something closely approximating
'sameness'".326
578. Moreover, it is also recalled that Article XXI V:8 (a) (ii) requires application of the "same
regulations of commerce". The Appellate Body h as clarified that "comparable trade regulations
having similar effects" do not meet this standard, but that a higher degree of 'sameness' is required. 327
In the present case, Brazil has not even alleged, let alone demonstrated, that MERCOSUR countries

320 Brazil's answer to panel question No. 132, para. 102.
321 European Communities' second oral statement, para. 138.
322 Cf. Article 12 of the Agreement (Exhibit EC-128).
323 Cf. Article 14 of the Agreement (Exhibit EC-128).
324 Brazil's answer to panel question No. 132, para. 102.
325 Brazil's answer to panel question No. 132, para. 103.
326 Appellate Body Report on Turkey – Textiles, para. 50.
327 Appellate Body Report on Turkey – Textiles, para. 50.

apply the same regulations of commerce to trade with third countries, as clearly illustrated clearly by
the import ban on retreaded tyres at issue in the present dispute.
328
579. Also, Brazil has not provided any response wh atsoever to the European Communities'
arguments on the "not on the whole higher" require ment in Article XXIV:5(a) in relation to other
regulations of commerce (for both exports and impo rts). The European Communities is also not
aware of any response to its argument regarding the in ternal liberalisation in relation to export duties
and other restrictive regulations of commerce (on exports and imports). 329
580. Finally, Brazil has also again referred vaguely to its submissions to the CRTA, and has asked
to the Panel adopt the same approach as the Panel in US – Line Pipe and conclude that Brazil has
made a prima facie case that MERCOSU R is compatible with Article XXIV. 330 As the
European Communities has already explained 331, this blanket reference to unspecified documents
submitted to the CRTA is not a sufficient way of discharging Brazil's burden of proof. Moreover, the
situation in the current dispute is not comparable to US – Line Pipe . In US – Line Pipe , Korea had
argued that NAFTA could not be considered as compatible with Article XXIV because the CRTA had
not yet issued a final decision to this effect.
332 In contrast, Korea had not contested that NAFTA was
compatible with Article XXIV. This cont rasts strongly with the present case, where the
European Communities has repeatedly insisted that Brazil has not demonstrated compliance with the
requirements of Article XXIV, and in addition has identified a number of specific open questions
regarding the compatibility of MERCOSUR with Article XXIV.
581. The European Communities would also like to r ecall that the Appellate Body has clarified
that, when examining a measure to be justified under Article XXIV, a Panel is expected to require the
party invoking Article XXIV to establish that all of the conditions of this provision are fulfilled. 333
The Panel should therefore reject Brazil's attempts to escape its burden of proof, and find that Brazil
has not demonstrated that the MERCOSUR exemption is compatible with Article XXIV.

328 In Brazil's answer to panel question No. 132, para. 103, Brazil notes that the import ban was initially
applied "erga omnes". However, apart form the fact that this is no longer th e case, this is entirely irrelevant for
the purposes of Article XXIV:8 (a) (ii) GATT. What matters is that at least two Members of MERCOSUR,
namely Uruguay and Paraguay, are not applying a similar ban to trade with third countries.
329 Cf. European Communities' second oral statement, para. 139; European Communities' second
written submission, para. 221.
330 Brazil's answer to panel question No. 132, para. 106.
331 European Communities' second oral statement, para. 132.
332 Panel Report on US – Line Pipe, para. 7.143.
333 Appellate Body Report on Turkey – Textiles, para. 59.

ANNEX 2
RESPONSES OF BRAZIL TO QUESTIONS FROM THE EUROPEAN COMMUNITIES
FOLLOWING THE FIRST SUBSTANTIVE MEETING

Question 1.
In paragraph 9 of its first oral statement, Braz il explains the rationale of its import ban as follows:
"However, retreaded tyres are products that will become waste sooner than new tyres because they
have a shorter remaining lifespan". Does Brazil cons ider that the same rationale could also justify
import bans or marketing restrictions against other types of new products which produce waste which
is difficult to dispose of, if it can be demonstr ated that they have a shorter lifespan than other new
goods for which they are substitutable (e.g. low- quality electronic consumer goods which have a
shorter lifespan than comparable high-quality goods)?

1. Tyre waste differs from other waste streams in several important aspects. See Brazil's first
oral statement, at paras. 80-82. These unique characteristics of tyre waste are what makes the import
ban necessary in this specific factual situation. While Brazil cannot hypothesize on whether import
bans on other products would conform to the WTO requirements, it notes that, unlike most products,
retreads have a measurable and predictable difference in their remaining lifespan.
Question 2.
Does Brazil submit that all new tyres can be ret readed? Does Brazil agree that there are certain
types of new tyres which are typically not suitable for retreading after use? If yes, has Brazil taken
measures to restrict the importation and/or marketing of such tyres?
2. Information available indicates that between 10 and 30 per cent of new tyres are retreadable
after the first use in countries such as the Unite d Kingdom, France, the United States, Australia and
Brazil. See Brazil's first written submission, para. 79 and ftn. 125. Whether a tyre is retreadable after
its first use depends on the condition of that use. Because it is impossible to predict whether a new
tyre will be retreadable at the end of its first lif ecycle, restricting importation of the potentially non-
retreadable new tyres would require an import ban on all new tyres. This would be unduly restrictive.
Retreaded tyres, on the other hand, require no conjecture or speculation about the potential
retreadability: passenger car retreads will not be su itable for further retreading, and commercial
vehicle retreads will have fewer remaining lifecycles. For this reason, Brazil places no restrictions on
imports of new tyres, but prohibits imports of retreaded tyres.
Question 3.
What is the average market price in Brazil of a retreadable casing for a) a passenger car tyre; b) a
truck tyre?
3. Brazil does not collect average market prices fo r retreadable or non-retreadable passenger car
and truck casings.
Question 4.
What has been the market share of retreaded tyres in the market for passeng er car replacement tyres
in Brazil over the last ten years?
4. There are no official statistics on the market share of retreaded tyres in the market for
passenger car replacement tyres in Brazil over the last ten years.

Question 5.
It appears that Brazilian government has recently withdrawn a bill (6.136/05) which would have
codified the import ban on used and retreaded tyres in an act of the Brazilian parliament. Can Brazil
explain the reasons for this withdrawal?
5. The Presidency of the Republic submitted to the National Congress a bill on the
environmental management of tyres (see Exhibi t EC-30) under a special legislative procedure
denominated "constitutional urgency" (Brazil's Constitution, Art. 64, para. 1). The referred bill would
consolidate in a norm of superior hierarchy the disciplines on waste tyre management in Brazil, which
are currently dispersed in rules of low hierarchy (portarias, resolutions and decrees).
6. The Brazilian importers of used tyres, howeve r, managed to convince some congressmen to
request the annexation of the referred bill to anothe r draft law on management of solid wastes, which
is under debate in the Parliament since 1991. Because such procedural manoeuvre would create
unexpected obstacles to the approval of the cited bill, the Government decided to withdraw its
proposal. The Executive is now evaluating the appropr iate legal instrument to resubmit the draft law
to the National Congress.
Question 6.
Recently, the Social Affairs Committee of the Braz ilian Senate approved a bill (216/03) which would
authorise the importation of both used and retreaded tyres into Brazil. Similarly, the Special
Commission on National Waste Policy has approved a b ill (203/1991) which equally implies that the
importation of used and retreaded tyres is permissibl e, subject to the fulfilment of certain disposal
obligations. How do these legislative developments relate to Brazil's statements that
 (a) the import ban on retreaded tyres is an essential element of its waste management
policy (e.g. Brazil's FWS, para. 18)?
 (b) that the ban on used tyres is an essentia l element of Brazil's waste tyre management
program, which will be enforced without exception in the future (Brazil's FWS, para. 154)?
7. The "legislative developments" referred to have not changed Brazilian law and do not relate
to Brazil's statements concerning the ban and its enforcement.
Question 7.
In paragraph 79, Brazil claims t hat its retreaders "process about 18 million used tyres, equivalent to
a substantial part of the tyres consumed in Braz il each year". Can Brazil, with adequate proof,
provide the following information:
 a) that 18 million is the total number of retreaded tyres produced at present in Brazil
per year?
 b) how many of these used tyres are impo rted, how many are domestic? how many of
these tyres are passenger car tyres, how many are commercial vehicle or aircraft tyres?

8. The information available to Brazil is present in Exhibit BRA-94. See also Brazil's Response
to Panel's Questions 16 and 20.

Question 8.
In para. 82 of its FWS, Br azil states that the National Code of Tr affic has "increased the frequency of
tyre replacement". Could Brazil explain, with adequat e evidence, what is the average frequency, in
kilometers, of tyre replacement in Brazil for pa ssenger vehicles, how this has evolved over the past
and how these developments are related to the National Code of Traffic?
9. According to the Brazilian Code of Traffic (L aw No. 9503 of 23 September 1997), the owner
of a vehicle in Brazil must obtain an approval at the safety inspection, to be carried out by the
competent state authorities, in order to obtain the mandatory annual licensing certificate (Article 130).
Bill No. 5979/2001, currently before the National Congr ess, establishes general rules to be applied by
the States in such activities and provides for mandato ry biannual inspections for vehicles used in the
transport of students and annual inspections for the others. ABNT (The Brazilian Association on
Technical Rules) has already approved rules to be applied at the technical automotive inspection,
among which is the NBR 14.040-1998 (Vehicular Safety Inspection – Light and Heavy Vehicles).
10. Although the general rules to be complied with by the States in the annual inspections are still
under examination by the National Congress, the State of Rio de Janeiro – with a fleet of around
3.2 million vehicles – anticipated the implementation of the regular inspections foreseen by the Code
of Traffic. Because these automotive inspections are an important instrument to increase the number
of retreadable casings in the country, the step ta ken by one of the most populated States of the
Federation has certainly contributed to an increased frequency of tyre replacement in the country.
The same is expected to happen all over the country as soon as the National Congress approves the
general rules necessary to implement annual automotive inspections in all States.
11. Moreover, the adoption of the Code of Traffic in 1997 permitted the approval by Brazil of a
MERCOSUR regulation (GMC Resolution 75/1997) that aims to harmonize the regimes of
automotive inspections for heavy vehicles in the international transport of cargo and passengers. This
MERCOSUR regulation was introduced in the Braz ilian legal system by means of Deliberation
CONTRAN nº 35, of 4 June 2002. The strict compliance with the MERCOSUR and Brazilian
regulations relating to inspections on heavy vehicl es has also contributed to the increased frequency
of tyre replacement in the country.
12. Brazil does not maintain the requested informati on on a kilometre by kilometre basis, nor is
Brazil aware of any government that does so.
Question 9.
In para. 82 of its FWS, Brazil refers to a Bill before congress (No. 5.979/ 2001) which will replace
state-specific vehicle safety requirements with national standards.
 (a) Can Brazil provide copy of this Bill?
 (b) How will this bill improve the suit ability of domestic used tyres for retreading?
 (c) Why has this bill, which dates from 2001, not yet been adopted?
 (d) Can Brazil explain what standards are currently applicable to vehicle inspections as
regards tyres?

13. Brazil will provide a copy of the bill.
14. According to the Brazilian Code of Tra ffic (Law No. 9503 of 23 September 1997), the
jurisdiction to verify and inspect vehicles regardi ng their safety conditions (including tyres) remains
with the state's traffic authorities. Bill 5.979 set s the general rules needed to implement the annual
technical automotive inspection in all Brazilian States. In Brazil's view, the annual technical

automotive inspection, when fully implemented, will increase the number of retreadable casings in the
national territory because owners will need to re place tyres more frequently than they do now and
keep them in a better condition.
15. The Bill has not been approved until now becaus e congressmen have not yet agreed on some
important aspects of the proposal as, for example, the level of gradualism that must be observed in the
implementation of the mandatory annual inspections.
16. Because the general rules to be applied by th e Brazilian States are still under consideration of
the National Congress, the States are applying their own technical guidelines in mandatory
inspections, which occur when a vehicle is first licensed or when the ownership of a vehicle changes.
Question 10.
In its first written submission and first oral st atement Brazil qualifies waste tyres as dangerous waste
(see, for example, paragraphs 20 of the first written submission and 6 of the first oral statement) or as
hazardous waste (paragraph 44 of the first writte n submission: "burning tyres and other hazardous
wastes"). Could Brazil explain how this qualification matches with the classification of waste tyres as
"inert waste" and not as "hazardous waste" in Article 4 in relation to Article 1 of CONAMA
Resolution No 23 of 12 December 1996 (Exhibit EC-33) a nd with the fact that waste tyres destined to
recovery, recycling and reclamation are not cons idered as hazardous waste in Annex IX, number
B3140, to the Basel Convention on the Control of Transboundary Movements of Hazardous Wastes
and their Disposal?
17. Waste tyres are not "hazardous waste" within the meaning of the Basel Convention or Brazil's
internal regulations, such as CONAMA 23/1996. Ra ther, waste tyres are a dangerous waste. Brazil
uses the term "dangerous" in reference to the dangerous effects of waste tyre accumulation and
disposal, such as those described in the Tyres in the Environment report by the British Environment
Agency (Exhibit BRA-1).
Question 11.
In paragraphs 24 and 26 of its fi rst written submission, Brazil gi ves data on the reported cases in
Brazil due to dengue until 2002 and declares that dengue cases increased in Brazil in the late 90's.
 (a) Can Brazil provide more recent data (i.e.. : from 2003 onward) concerning the number of
reported cases in Brazil due to dengue, and
 (b) Can Brazil explain why the increased imports of retreaded tyres in 1998 had an
incidence in the higher number of dengue cases in the same year, as Brazil states in the last
sentence of paragraph 26 of its first written submission?
 (c) Can Brazil explain the relationship be tween dengue occurrence and the importation of
retreaded tyres in light of the results of the programme Paraná rodando limpo?
18. a)
1992 1993 1994 1995 1996 1997 1998
1,658 7,388 56,584 137,317 187,762 249,239 528,388

1999 2000 2001 2002 2003 2004 2005
209,668 239,870 428,117 794,000 346,118 107,168 214,171

19. b) Paragraph 26 reads:
"During the 1990s, the disease's rapid prolifer ation in Brazil seemed to coincide with
increased used and retreaded tyre imports. In 1992, Brazil imported 5,862 tonnes of
used and retreaded tyres and had 1,658 reported cases of dengue. As the imports
increased six-fold by 1998, the dengue incidence skyrocketed to 528,388 cases".
20. The paragraph does not suggest that retreaded tyre imports during 1998 produced an increase
in the dengue cases in the same year. Rather, the paragraph describes a trend of the growing dengue
numbers that followed increased imports of used and retreaded tyres throughout the 1990s.
21. c) The programme Paraná Rodando Limpo is a private-sector program that complements
Brazil's comprehensive effort to stamp out dengue by reducing the accumulation of waste tyres and
eliminating other sources of mosquitoes, such as open water containers. Brazil described this effort in
paragraphs 70-73 of its First Written Submission, and again, in its Oral Statement. The campaign has
contributed to reducing the sources of mosquitoes and the incidence of dengue in the state of Paraná.
Question 12.
Are there any epidemiological studies showing that dengue or malaria cases in Brazil are linked to
the presence of waste tyres in th e relevant areas of dispersion of these two diseases? To what extent
have former retreaded tyres, which have become waste, contributed in the past to the accumulation of
waste in those areas? Please, provide any supporting evidence, notably studies.
22. The studies referred to by the European Communities do exist and Brazil is selecting the most
relevant and translating them into English, in order to present before the Panel as soon as possible.
Question 13.
In paragraph 36 of its first written submission, Brazil gives some figures on tyre fires in Brazil.
Could Brazil provide detailed info rmation on the location, origin/c auses, dimension and duration of
those fires and other tyre fires in the last ten years?
23. Brazil does not have statistics for the past ten years that set forth the detailed information
requested. Brazil provided that information in para graph 36 of its first written submission to make
clear that tyre fires are a genuine threat in Braz il as they are elsewhere in the world, including the
European Communities. See Brazil's first written submission, para. 34; see also Exhibit BRA-10,
at 8.
Question 14.
Are there any studies assessing the real negative consequences on human hea lth and flora and fauna
of waste tyres fires which have occurred in the past in Brazil? Please, provide them.
24. All of the health information available to Brazil, including information from the World Health
Organization and member States of the European Co mmunities, has made clear that there indeed are
"real negative consequences" – indeed, potentially deadly consequences – "on human health and flora
and fauna of waste tyre fires" in the areas in which they occur. Brazil is surprised that the
European Communities would seem to doubt that this is the case.

Question 15.
Are waste tyres stockpiling installations subject in Brazil to compulsory environmental impact
assessment (EIA), in any case? If not, please, pr ovide the criteria for deciding when an EIA is
requested in Brazil. In both cases, please provide the relevant domestic legislation.
25. Brazil has presented exhaustive evidence on the health and environmental risks that flow from
the stockpiling of waste tyres. Stockpiling is a da ngerous disposal method, as Basel Tyre Guidelines,
as well as the European Communities' own reports recognize. Brazil is surprised that the
European Communities would advise Brazil to stockpile waste tyres, while doing its best to divert its
own tyres away from stockpiles.
Question 16.
Does the Brazilian legislation lay down emission limits for dioxins in relation to cement kilns, other
kilns or waste incinerators? Pl ease, provide those emission limits and a copy of the specific legal
provisions on this issue.
26. See Exhibit BRA-104.
Question 17.
In paragraph 74 of its first written submission, Brazil declares that it "has licensed some 46
companies to process waste tyres". Could Brazil provide information on the following:
 (a) list of these companies, specifying th e processing operations they carry out in
relation to waste tyres and the location of th e installations where these processing operations
take place, and
 (b) number of waste tyres processed by each of these companies in the last ten years,
disaggregated by installations and year by year?

27. Brazil believes that the information requested is not relevant to the issues before the Panel and
that its production in the limited time available to answer these questions is unduly burdensome. If
the Panel requests this information, however, Brazil will do its best to supply it.
Question 18.
With reference to 137 and 164 of Brazil's first written submission, why did Brazil, before the
MERCOSUR Arbitral Tribunal in the dispute se ttlement proceedings instituted by Uruguay against
the import ban on retreaded tyres, not invoke Article 50 (d) of the Treaty of Montevideo, which allows
the application of measures regardi ng the protection of human, anima l and plant life and health?
Were there any legal impediments that prevented the in vocation by Brazil of this provision, and if so,
what were they?
28. As Brazil explained in paragr aphs 77 and 137 of its First Wr itten Submission, the dispositive
question in the case was whether Portaria 8/2000 was a new import restriction, in violation of the
Decision CMC 22/2000. While there was no legal impe diment to the invocation of Article 50(d) of
the Treaty of Montevideo, reliance on the article did not seem necessary at the time because this was a
straight-forward question of legislative history. Br azil's attorneys believed that they needed only to
show that the import prohibition had been in effect since 1991, and the 2000 regulation merely
clarified the scope of that prohibition.

Question 19.
In para. 177 of its first written submission, Br azil refers to MERCOSUR as a "properly-notified
customs union within the meaning of Article XXIV" . Which document constitutes the notification
within the meaning of Article XXIV:7(a)?
29. Brazil and its MERCOSUR partners notified th e customs union to the GATT with document
L/6985. Brazil is not aware of any notificatio n requirements in Article XXIV with which the
MERCOSUR parties did not comply nor, in the more than ten years since that notification, has any
such requirement been brought to their attention.

Question 20.
In para. 187 of its first written submission, Brazil claims that to the extent the State law of Rio Grande
do Sul conflicts with the federal measure, the federal measure will prevail and trump the measure.
 (a) Could Brazil explain whether, and to which extent, it believes that the State law of
Rio Grande do Sul conflicts with Brazilian federal law?
 (b) If there is a conflict, could Brazil exp lain what are the consequences, in Brazilian
law, of this conflict? Has the Brazilian govern ment taken any action to prevent application of
the State law?
 (c) If the federal ban on the impor tation of retreaded tyres were removed, what
consequences would this have for the application of the State law?
 (d) How does Article 1 of the State law, which seems to prohibit the marketing of
imported retreaded tyres, relate to Article 2 of the same law, which seems to authorise this
marketing subject to certain disposal conditions?

30. See Brazil's responses to the Panel's Questions 55-62.

ANNEX 3
1
RESPONSES OF THIRD PARTIES TO QUESTIONS FROM THE PANEL FOLLOWING
THE FIRST SUBTANTIVE MEETING

Question 1. To the United States.
In paragraph 10 of your third party submissi on, you argue that the Understanding on the
Interpretation of Article XXIV "makes clear that satisfaction of the notification requirement contained
in Article XXIV:7(a) is a prerequisite to demons trating that a regional arrangement is a customs
union or free-trade area consistent with Article XXIV". Could you please clarify:
 (a) on what legal basis you claim that the legal consequence of a failure to notify an
interim arrangement under Article XXIV:7(a) is to prevent a customs union member to
demonstrate in a panel proceeding that the cu stoms union in question is compatible with
Article XXIV:5?
 (b) what is, in your view, the relevance of the fact that WTO Members agreed, as
expressed in the terms of reference adopted fo r the examination of MERCOSUR, to examine
MERCOSUR under Article XXIV (as well as the Enabling Clause), and that the examination
of MERCOSUR has in fact been conducted under that provision?
 (c) what is the relevance of the fact t hat MERCOSUR parties did notify the agreement,
although under a separate provision?
 (d) can the fact that MERCOSUR is subject to examination before the CRTA be
considered as satisfying the notification requirement?

Response of the United States
a)
1. The United States would like to note at the outset that it agrees with Chinese Taipei that, if the
Panel concludes that the import ban and fines ar e not consistent with the provisions of the
GATT 1994 identified by the European Communities, and further concludes that these measures are
not permissible under Article XX(b), the Panel may exercise judicial economy with respect to Brazil's
argument regarding Article XXIV.
2. With regard to the Panel's question, paragraph 1 of the Understanding on the Interpretation of
Article XXIV of the General Ag reement on Tariffs and Trade 1994 ("Understanding") provides that
"[c]ustoms unions, free-trade areas, and interim ag reements leading to the formation of a customs
union or free-trade area, to be consistent with Article XXIV, must satisfy, inter alia, the provisions of
paragraphs 5, 6, 7 and 8 of that Article." Therefor e, in order to be consis tent with Article XXIV, a
customs union must satisfy the provisions of pa ragraph 7 of that artic le, which contains the
notification obligation. Failure to notify in acco rdance with paragraph 7 does not merely render a
customs union inconsistent with that paragraph; ra ther, under paragraph 1 of the Understanding, such
a customs union is not "consistent with Article XXIV" as a whole. Thus, the special provisions
applicable to customs unions under Article XXIV, including paragraph 5, are not available to it.
3. The text of Article XXIV and the Understanding both reflect the fact that, as an institutional
matter, notification obligations are important com ponents of the WTO agreements. Notification of a
customs union under paragraph 7 triggers a comprehe nsive review process described in Article XXIV
as well as the Understanding. Members that opt not to subject a customs union of which they are a
part to the procedures contained in Article XXIV and the Understanding through the formal

1 Footnotes in this section are those of third parties.

notification process are not entitled to invoke that provision as a waiver of the WTO obligations it
addresses.
b)
4. While the MERCOSUR countries have consen ted to, and MERCOSUR is currently the
subject of, a form of review in the Committee on Regional Trade Agreements, this process does not
constitute notification consistent with paragraph 7 of Article XXIV. In the compromise reached
between Members to initiate the re view, Members, including Brazil, did not agree that such review
was pursuant to the terms of paragraph 7.
5. Paragraph 7 of Article XXIV and the Unde rstanding contain several requirements for
Members notifying under that provision not specified in the terms of reference in the MERCOSUR
review. For example, paragraph 7 includes the oblig ation to provide information to Members so that
they may make reports and recommendations "as th ey may deem appropriate", and the obligation not
to maintain or put into force a customs union agreemen t if the parties "are not prepared to modify it in
accordance with" such recommendations. Article XXI V:7. Likewise, the Understanding contains
several additional provisions governing reviews of no tifications made pursuant to paragraph 7, none
of which are specified in the MERCOSUR terms of reference.
6. Thus, it would be inappropriate to view the MERCOSUR review as sufficient to satisfy the
notification requirement contained in paragraph 7 of Article XXIV.
c)
7. The fact that MERCOSUR parties notified the agreement pursuant to the Enabling Clause is
irrelevant for purposes of determining whether MERCOSUR is a customs union consistent with
Article XXIV. Nothing in the text of Article XXIV or the Understanding supports the conclusion that
notification under the Enabling Clause satisfies th e requirement to notify under paragraph 7 of
Article XXIV.
d)
8. No. As noted above, in the compromise reached between Members, Members did not agree
that such review was pursuant to the terms of paragraph 7, and th at review is be ing conducted under
terms of reference that are not the same as the text of Article XXIV and the Understanding.
Question 2. To Japan.
In paragraph 27 of Japan's third party submission, it calls for the Panel to "examine the applicability
of Article XX(b) taking full account of a risk analysis based on a great deal of scientific evidence
issued by credible international bodies and experts." Could you identify some examples of individuals
or organizations who in your opinion could be considered as "credible international bodies and
experts" on the matters of this dispute?

Response of Japan
9. While Brazil bears the burden to prove, with su fficient data including credible international
bodies' or experts' risk assessment data, its assertion that all the methods for disposal of waste tyres,
including energy recovery through incineration, ar e not safe, adequate or cost-effective, Japan's
opinion is that credible international organizati ons include the World Health Organization and the
United Nations Environmental Program, both of which deal with the issue of toxic air pollutants
among others.

Question 3. To Australia.
In paragraph 8 of your oral statement, you state that "Australia encourages to evaluate carefully the
factual evidence before it, including by drawing on expert opinion as necessary." On what specific
issues does Australia consider that the Panel needs to seek expert views?
Response of Australia
10. Australia's remark was intended to be general in nature, under scoring the complex nature of
the issues before the Panel related to determining the application of Article XX to the measures at
issue.
11. We see expert opinion as being of potential value to the Pane l in determining whether the
Brazilian ban on retreaded tyre imports is necessary to protect human health, including in relation to
the following questions:
(a) What is the impact of the disposal of retreaded tyres on human health?
(b) Does the import ban actually reduce the total number of tyres to be disposed of in
Brazil? This goes to the question of the capacity of the import ban to achieve the
policy objective cited by Brazil, and the extent to which it is necessary to achieve that
objective.
(c) Do any health risks related to the wast e disposal of retreaded tyres increase in
proportion to the volume of tyres disposed of?
12. Possible assessment by experts may also be rele vant to any consideration by the Panel of
whether alternative measures are available to Brazi l to protect human health which would have less
trade restrictive effects.
Question 4. To China.
In paragraph 18 of its third party submission and in paragraph 7 of its oral statement, China asks the
Panel to consider that Brazil is a developing count ry. Could you please elaborate on the context in
which the Panel should consider that Brazil is a developing country in relating to the issues presented
in this case?
Response of China
13. It might be said that favorable differentiati on toward developing counties is one of the
fundamental policies of the multilateral trading system . With respect to environmental protection, the
preamble of Marrakesh Agreement especially stat es that WTO should "seeking both to protect and
preserve the environment and sustainable development and to enhance the means for doing so in a
manner consistent with their respective need s and concerns at different levels of economic
development."(Emphasis added)
14. The guideline is relevant in pa rticular when conducting the necessity test of Article XX(b). It
is fair to argue that developed countries might ha ve adequate technological and financial resources to
recycle waste products, and therefore it might not be "necessary" for them to restrict the trade of waste
or retreaded products to dealing with the envir onmental problems. But for developing countries
lacking such advantages, certain rigorous measure w ith trade restrictive effect might be needed to
achieve the same goal.

Question 5. To Korea.
Korea states in paragraph 38 of its written submissi on that "[T]he Article XX exceptions of the GATT
1994 can justify those measures that are inconsistent with the other provisions of the GATT 1994 and
make them excusable, not consistent." What is the legal basis for the position that a GATT
inconsistent measure that is 'excused' under Article XX cannot qualify as "law s or regulations which
are not inconsistent with the provisions of [GATT 1994]".
Response of Korea
15. The legal basis for Korea's above position can be found in the textual interpretation of
Article XX(d). Article 31 of the Vienna C onvention on the Law of Treaties provides for
interpretation in accordance with th e ordinary meaning of the terms of the treaty in their context and
in the light of its object and purpose.
16. The chapeau of Article XX provides that "nothing in [GATT 1994] shall be construed to
prevent the adoption or enforcement by any cont racting party of measures…" and Article XX(d)
continues to state "…necessary to secure compliance with laws or regulations which are not
inconsistent with the provisions of [GATT 1994] [emphasis added]." Looking at the ordinary
meaning of such terms of Article XX(d), Korea co nsiders that the scope of "[GATT 1994]" in the
chapeau of Article XX and Article XX(d) would be the same.
17. Considering the context, object and purpose of Article XX which provides for "general
exceptions" to the GATT 1994, "[GATT 1994]" in the chapeau of Article XX would refer to the
substantive provisions of the GATT 1994, excludi ng Article XX grounds for excuses. Thus, the
"provisions in [GATT 1994]" of Article XX(d) must also refer to the same, meaning that the "laws
and regulations" in Article XX(d) must be cons istent with the substantive provisions of the
GATT 1994. However, Article XX presupposes a measu re's inconsistency w ith such substantive
provisions of the GATT and does not make such GATT inconsistent measures consistent.
18. Therefore, Korea considers that the textual interpretation of Article XX(d) leads to the
conclusion that GATT inconsistent measures jus tified under Article XX cannot qualify as "laws or
regulations that are not inconsistent with the provisions of [GATT 1994]."
Response of the United States
19. Without taking a position on whether the measure at issue satisfies the cr iteria in Article XX,
the United States offers the following observati ons. The chapeau to Article XX provides that
"nothing in this Agreement sha ll be construed to prevent the adoption or enforcement by any
contracting party of" the type of measures listed there. Thus, if a measure satisfies the criteria of
Article XX, it may be adopted and enforced. In other words, there is no inconsistency with the
GATT 1994. The question under the covered agreements is whether a measure is consistent or
inconsistent. Nowhere does the GATT 1994 or the c overed agreements refer to a measure as being
"excused." There is no textual basis for establishing a third category of "excused" measures.
20. If Korea's position were accurate, then a number of consequences would flow which would
appear to be difficult to reconcile with the plain text of Article XX, and the fact that Members may
adopt and enforce measures meeting Article XX's cr iteria. For example, under Article 19.1 of the
Understanding on Rules and Procedures Go verning the Settlement of Disputes , a panel or the
Appellate Body would be required to find that the measure, even though it satisfies the requirements
of Article XX, is "inconsistent" with a covered agreement and therefore recommend that it be brought
into conformity with the covered agreement. If a Member may maintain the measure, then how could
it be required to bring it into conformity?

Question 6. To Japan.
In paragraph 18 of its oral statement, Jap an states "Brazil made serious efforts to convince
MERCOSUR countries in the course of the Ad Hoc Tr ibunal proceeding…" What is the basis of this
statement?
Response of Japan
21. In the course of the MERCOSUR Tribunal case in question, Brazil tried to justify its import
ban to be consistent with its obligation under MERCOSUR agreement. This Brazilian justification of,
or defense for, its measure during the trial itself s hould be deemed as "serious effort" in terms of the
Appellate Body Report in US – Shrimp.2
22. It was desirable for Brazil to have consulte d with major retreaded-tyre exporting countries
that are not MERCOSUR countries when Brazil lifted the import ban for MERCOSUR countries in
accordance with the Ad Hoc Tribunal in 2002. By that time, Brazil had exhausted the discussion
concerning the import ban in question with MERCO SUR countries and, at the same time, it should
have been fully aware of the necessity to justify th e import ban under Article XX in the light of its
obligation under the WTO Agreements. However, Brazil did not exploit its opportunity to seek
consultations with non-MERCOSUR countries.
Question 7. To Japan.
How do you define "recycling"?
Response of Japan
23. Recycling" is generally to make an effective u se of a used product, with or without additional
processing to it, in a way usually different from its original use.
24. Specifically, (i) thermal recycling and (ii) material recycling are the two typical ways of
recycling waste tyres in Japan.
25. Thermal recycling accounts for the most part of r ecycling of waste tyres in Japan. Under this
method, tyres are utilized as fuels for producing cement, steel and paper.
26. Under the material recycling method, tyres are utilized as materials for road paving, retreaded
tyre, and reclaimed rubber, etc.
Question 8. To Japan.
In paragraph 36 of its written subm ission, Japan states "Other example is recycling used retreaded
tyres. In Japan, most of used tyres are recycled in various ways, about half of them are for fuels."
Can this be attributable to the fact that Japan is an advanced country and thus more likely to have
most of used tyres recycled?
Response of Japan
27. In Japan, nearly 90% of waste tyres are recycled . In order to achieve such a relatively high
recycling rate, it is indispensable to establish syst ems ensuring appropriate collection and disposal of
waste tyres. We believe that such systems can be introduced in many countries including Brazil,
regardless of whether they are advanced countries or not, for the following reasons.

2 Appellate Body Report on United States – Shrimp, para. 171.

28. An appropriate collection system is particularly important in recycling because collecting is
the first step of recycling. In Japan, waste tyres ar e legally required to be collected through particular
routes prescribed by law. When individual users wish to dispose of waste tyres, they must bring them
to "designated dealers", such as tyre retailers, se rvice stations, car dealers, car repair shops,
automobile parts retailers. Then "designated dealers" shall transfer tyres they received to "waste tyre
colletors". When relevant companies, such as tr ansportation companies, wish to dispose of waste
tyres, they shall bring them to "waste tyre collect ors" directly. "Waste tyre collectors" shall then
transport those tyres to "interim disposal contractor s", who send them to "final disposal contractors"
after having finished a half-way disposal process on the tyres they received.
29. Thus, waste tyres are required to be collected in the end at the places of disposal contractors
under law. Introducing such a collection system do es not require any particular advanced technology
or cost.
30. The above-mentioned collection system works in collaboration with a system for ensuring
appropriate disposal. Specifically, Japan adopts a "manifest system", under which the origin of a
waste tyre and each process of its disposal can be tracked by referring to slips called "manifests".
Under the system, each one who participates in th e process of disposal, such as a transportation
company, a waste tyre collector and a disposal cont ractor mentioned in paragraph 9 above, is required
to keep a corresponding slip of a manifest coupon wh ich contains necessary disposal information.
When the final stage of disposal is completed, a "final slip" is delivered back to the person who
originally disposed of tyres (a transportation compan y, for example), in order to confirm that the tyres
have been appropriately disposed of. This system is designed to prevent illegal disposal of waste
tyres and to promote their appropriate disposal. This kind of system does not require particular
technology or cost, either.
31. Regarding a disposal method itself, thermal recycling is mainly employed in Japan. As stated
in paragraph 6 in the answer to Question 7 above, under the thermal recycling method, waste tyres are
utilized as fuels for burning in kilns to manufacture products such as cement, steel and paper. Japan
considers that kilns are not expensive facilities for industrial manufacturers and are often found
installed in factories in many countries to pr oduce products such as cement, and that burning waste
tyres as fuels in kilns does not require advanced technique.
32. Concerning the safety of incinerating tyres in k ilns, Brazil argues in paragraph 122 of its first
written submission that "… the inevitable conse quence of [incineration for energy recovery] is
dangerous, harmful emissions, even under its most controlled conditions".
33. Setting aside the question whether Brazil has pr ovided enough data showing that incineration
for energy recovery results in "dangerous and ha rmful" emissions "even un der its most controlled
conditions" or whether Brazilian industrial manufacturer s cannot afford such incineration facilities, in
the light of the composition of tyre material, we do not believe that incineration of waste tyres
necessarily generates dangerous and harmful emissi ons. According to the Japan Automobile Tyre
Manufacturers Association (JATMA), which consists of domestic major tyre manufacturing
companies and also deals with th e issue of waste tyre disposal including hazardous emissions, raw
material weight composition of an average tyre is as follows:
Material Ratio
Rubber 50.2%
Carbon Black 25.7%
Tyre cord 13.5%
Compounding ingredients 5.9%
Bead wire 4.7%

34. The JATMA has experimental data rega rding the emissions resulting from burning
compounding ingredients of above-mentioned average tyres. In their experiment, they have
incinerated waste tyres in a kiln and analyzed gas generated from such incineration. The result of the
analysis shows that the quantity of dangerous a nd harmful emission from the incineration is very
subtle and far below a safety standard for human health.
3
35. Therefore, we believe that incineration is an efficient and safe recycling method available not
only for Japan but also for Brazil.
Question 9. To Chinese Taipei.
In paragraph 7 of its written submission, Chinese Taipei states "[i]f the import ban and the fines are
determined by the Panel to be inconsistent with provisions of the GATT, the exemption could not
stand on its own as a separate measure. In this event, the Panel should exercise judicial economy on
Brazil's Article XXIV defence for the exemption." Could you please elaborate on this statement.
Response of Chinese Taipei
36. The Appellate Body in Australia – Salmon clarified that,
"[t]he principle of judicial economy has to be applied keeping in mind the aim of the
dispute settlement system. This aim is to resolve the matter at issue and 'to secure a
positive solution to a dispute.' 176 To provide only a partial resolution of the matter at
issue would be false judicial economy. A panel has to address those claims on which
a finding is necessary in order to enable the DSB to make sufficiently precise
recommendations and rulings so as to a llow for prompt compliance by a Member
with those recommendations and rulings 'in order to ensure effective resolution of
disputes to the benefit of all Members.'
177" 4
176DSU, Article 3.7.
177DSU, Article 21.1.
37. Furthermore, in United States – Shirts and Blouses, the Appellate Body stated,
"[n]othing in [Article 11 of DSU] or in previous GATT practice requires a panel to
examine all legal claims made by the complaining party…Given the explicit aim of
dispute settlement that permeates the DSU, we do not consider that Article 3.2 of the
DSU is meant to encourage either panels or the Appellate Body to "make law" by
clarifying existing provisions of the WTO Agreement outside the context of resolving
a particular dispute. A panel need only address those claims which must be addressed
in order to resolve the matter in issue in the dispute."
5 (underline original)
38. The Appellate Body thus makes it clear that while the Panel may indeed address every claim
and defense raised by the complainant and the r espondent, the Panel has the discretion to only
examine those claims and defenses necessary to assist the DSB in making recommendations and
rulings that ensure prompt compliance and effective resolution of the dispute.

3 For example, as to dioxin emissions, the standard is set at 5 ng/m 3 for waste incinerators with burning
capacity of less than 2,000 kg under a relevant Japanese law.
4 Appellate Body Report on Australia – Salmon, para. 223.
5 Appellate Body Report on United States – Wool Shirts and Blouses, pp. 18-19.

39. In the present case, the complainant, the Eu ropean Communities, has chosen to base its
complaint on four separate measures of Brazil. On e of the measures is an exemption for retreaded
tyres from MERCOSUR countries from the applica tion of import ban and fines that Brazil has
imposed on retreaded tyres from other countries. The verb "to exempt", from which the noun
exemption derives its meaning, is defined as to "[g]rant immunity… from a liability to which other are
subject."
6 (emphasis original) An exemption, by this definition, is tied to a liability, which in this case
are the import ban and the fines, measures from wh ich the exemption exempts. Without the import
ban and the fines, the exemption is meaningless and cannot stand on its own as an independent
measure.
40. If the Panel finds the import ban and the fines to be inconsistent with provisions of GATT and
the conditions under Article XX have not been met, it would not be helpful to the resolution of the
dispute for the Panel then to decide on the WTO c onsistency of the exemption, because the measures
from which the exemption derive its existence have themselves already been found to be inconsistent.
Under such a circumstance, the Panel would be justified in exercising judicial economy.