UNITED STATES – MEASURES AFFECTING THE PRODUCTION AND SALE OF CLOVE CIGARETTES
Document: Report of the Appellate Body
Date: 4 April 2012
Document codes: WT/DS406/AB/R
Complainant: Indonesia
Respondent: U.S.
Third parties: Brazil, Colombia, Dominican, EU, Guatemala, Mexico, Norway, Turkey
Dispute stage: Mutually Agreed Solution
Agreements cited: Art. III:4, XX  GATT 1994Art. 2.1, 2.2, 2.5, 2.8, 2.9, 2.10, 2.12, 2.3  Technical Barriers to Trade (TBT)Art. 2, 3, 5, 7  Sanitary and Phytosanitary Measures (SPS)

UNITED STATES – MEASURES AFFECTING THE PRODUCTION
AND SALE OF CLOVE CIGARETTES

AB-2012-1

Report of the Appellate Body

APPELLATE BODY

United States, Appellant
Indonesia, Appellee

Brazil, Third Participant
Colombia, Third Participant
Dominican Republic, Third Participant
European Union, Third Participant
Guatemala, Third Participant
Mexico, Third Participant
Norway, Third Participant
Turkey, Third Participant
 AB-2012-1

 Present:

 Oshima, Presiding Member
 Ramírez-Hernández, Member
 Van den Bossche, Member

I. Introduction
1. The United States appeals certain issues of law and legal interpretations developed in the
Panel Report, 1 (the
"Panel Report"). The Panel was established on 20 July 2010 to consider a complaint by Indonesia
with respect to a measure adopted by the United States that prohibits cigarettes with characterizing
flavours, other than tobacco or menthol.
2. Before the Panel, Indonesia claimed that the United States acted inconsistently with its
substantive and procedural obligations under the Agreement on Technical Barriers to Trade (the
"TBT Agreement") and the General Agreement on Tariffs and Trade 1994 (the "GATT 1994"). In
particular, Indonesia claimed that Section 907(a)(1 )(A) of the United States Federal Food, Drug and
Cosmetic Act2 (the "FFDCA")—as amended by the Family Smoking Prevention and Tobacco Control
Act3 (the "FSPTCA")—was inconsistent with Articles 2.1, 2.2, 2.5, 2.8, 2.9, 2.10, 2.12, and 12.3 of
the TBT Agreement. Alternatively, Indonesia claimed that Section 907(a)(1)(A) was inconsistent with
Article III:4 of the GATT 19944, and could not be justified under Article XX(b) thereof.5

1WT/DS406/R, 2 September 2011.
2Codified at United States Code, Title 21, Chapter 9, section 387g(a)(1)(A).
3United States Family Smoking Prevention and Tobacco Control Act, Public Law No. 111-31,
123 Stat. 1776 (22 June 2009) (Panel Exhibit US-7).
4Panel Report, para. 3.1.
5Panel Report, para. 7.299 (referring to Indone sia's first written submission to the Panel,
paras. 114-127).

3. The Panel Report was circulated to Members of the World Trade Organization (the "WTO")
on 2 September 2011. The Panel found that Section 9 07(a)(1)(A) was inconsistent with Article 2.1 of
the TBT Agreement because it accorded to imported clove ciga rettes less favourable treatment than
that accorded to like menthol cigarettes of national origin.
6 Having found that Section 907(a)(1)(A)
was inconsistent with Article 2.1 of the TBT Agreement, the Panel declined to rule on
Indonesia's alternative claim under Article III:4 of the GATT 1994 and on the United States' related
defence under Article XX(b) of the GATT 1994.7
4. The Panel further found that the United States acted inconsistently with Article 2.9.2 of the
TBT Agreement by failing to notify to WTO Members, thr ough the Secretariat, the products to be
covered by the proposed Section 907(a)(1)(A), togeth er with a brief indication of its objective and
rationale, at an appropriate early stage when amendments and comments were still possible. 8 T h e
Panel also found that the United States acted inconsistently with Article 2.12 of the TBT Agreement
by not allowing an interval of no less than six mont hs between the publication and the entry into force
of Section 907(a)(1)(A).9
5. Conversely, the Panel rejected Indonesia's claims under Articles 2.2, 2.5, 2.8, 2.9.3, 2.10,
and 12.3 of the TBT Agreement. More specifically, the Panel found that Indonesia failed to
demonstrate that Section 907(a)(1)(A) was inconsistent with Article 2.2 of the TBT Agreement to the
extent that its ban on clove cigarettes was more trad e restrictive than necessary to fulfil the legitimate
objective of reducing youth smoking, taking account of the risks non-fulfilment would create .10 The
Panel also concluded that Indonesia failed to demonstrate that the United States had acted
inconsistently with Article 2.5 of the TBT Agreement, because Indonesia did not request the United
States to explain the justification for Section 907( a)(1)(A) "in terms of Articles 2.2 and 2.4 of the
TBT Agreement".11 Similarly, the Panel found that Indonesia failed to demonstrate that it would be
"appropriate" to formulate the technical regulation in Section 907(a)(1)(A) in terms of "performance"
rather than design or descriptive characteristics, within the meaning of Article 2.8 of the
TBT Agreement.12
6. The Panel further found that Indonesia failed to demonstrate that the United States had acted
inconsistently with Article 2.9.3 of the TBT Agreement, because Indonesia did not request the

6Panel Report, paras. 7.293 and 8.1(b).
7Panel Report, paras. 7.294, 7.310, 8.3, and 8.4.
8Panel Report, paras. 7.550 and 8.1(f).
9Panel Report, paras. 7.595 and 8.1(h).
10Panel Report, paras. 7.432 and 8.1(c).
11Panel Report, paras. 7.461, 7.463, and 8.1(d).
12Panel Report, paras. 7.497, 7.498, and 8.1(e).

United States to provide particulars or copies of Section 907(a)(1)(A) while it was still in draft form.13
The Panel also found that, in the absence of any ev idence or arguments that "urgent problems of
safety, health, environmental protection or natio nal security" arose or threatened to arise upon
adoption of Section 907(a)(1)(A), Article 2.10 of the TBT Agreement would not be applicable to the
present dispute.14 Finally, the Panel found that Indonesia failed to demonstrate that the United States
had acted inconsistently with Article 12.3 of the TBT Agreement by failing to take account of the
special development, financial, and trade needs of Indonesia in the preparation and application of
Section 907(a)(1)(A).15
7. Accordingly, the Panel recommended that the Di spute Settlement Body (the "DSB") request
the United States to bring Section 907(a)(1)(A) into conformity with its obligations under Articles 2.1,
2.9.2, and 2.12 of the TBT Agreement.16
8. On 5 January 2012, the United States notified the DS B of its intention to appeal certain issues
of law covered in the Panel Report and certain legal interpretations developed by the Panel, pursuant
to Articles 16.4 and 17 of the Understanding on Rules and Procedures Governing the Settlement of
Disputes (the "DSU"), and filed a Notice of Appeal 17 and an appellant's submission pursuant to
Rules 20 and 21, respectively, of the Working Procedures for Appellate Review 18 (the " Working
Procedures"). On 23 January 2012, Indonesia filed an appellee's submission. 19 On 26 January 2012,
Brazil, Colombia, the European Union, Mexico, No rway, and Turkey each filed a third participant's
submission.20 On the same date, the Dominican Republic and Guatemala notified their intention to
appear at the oral hearing as third participants.21
9. On appeal, the United States claims that the Panel erred in finding that the United States acted
inconsistently with Article 2.1 of the TBT Agreement. In particular, the United States claims that the
Panel erred in finding that imported clove ciga rettes and domestic menthol cigarettes were like
products within the meaning of Article 2.1. The United States also challenges the Panel's finding that
Section 907(a)(1)(A) accords to imported clove cigarettes less favourable treatment than that accorded
to domestic like products. The United States claims further that the Panel acted inconsistently with
Article 11 of the DSU in reaching these findings. Th e United States also claims that the Panel erred
in finding that the United States acted in consistently with Article 2.12 of the TBT Agreement by not

13Panel Report, paras. 7.549, 7.551, and 8.1(g).
14Panel Report, para. 7.507.
15Panel Report, paras. 7.649 and 8.1(i).
16Panel Report, para. 8.6.
17WT/DS406/6 (attached as Annex I to this Report).
18WT/AB/WP/6, 16 August 2010.
19Pursuant to Rule 22 of the Working Procedures.
20Pursuant to Rule 24(1) of the Working Procedures.
21Pursuant to Rule 24(2) of the Working Procedures.

allowing an interval of no less than six months between the publication and the entry into force of
Section 907(a)(1)(A). The United States conditi onally appeals the Panel's reliance on the
jurisprudence developed under Article XX(b) of the GATT 1994 in its assessment of
Indonesia's claims under Article 2.2, should Indonesia appeal the Panel's finding that the United States
did not act inconsistently with Article 2.2 of the TBT Agreement. Indonesia did not raise an other
appeal of any issues under Article 2.2 of the TBT Agreement. Therefore, the condition on which the
United States bases its appeal of the Panel's findings under Article 2.2 is not met.
10. Two amicus curiae briefs were received by the Appellate Body in relation to this appeal: on
24 January 2012 from the Campaign for Tobacco-Free Kids, the American Academy of Pediatrics, the
American Cancer Society, the American Cancer Society Cancer Action Network, the American Lung
Association, the American Medical Association, and the American Public Health Association; and on
26 January 2012 from the O'Neill Institute for Nationa l and Global Health Law at the Georgetown
University Law Center. The Appellate Body Divisi on hearing the appeal gave the participants and
third participants an opportunity to express their views on the amicus curiae briefs referred to above.
The Division did not find it necessary to rely on these amicus curiae briefs in rendering its decision.
11. On 25 January 2012, the Presiding Member of the Division received a letter from the
Director-General of the World Health Organizati on (the "WHO") expressing interest and offering
technical assistance in this appeal in areas cove red by the WHO's mandate. The Division thanked the
WHO Director-General for her letter, and indicat ed that it would reflect on the need for such
assistance. The Division asked the participants a nd third participants to comment on the letter from
the WHO. Of the participants, the United States submitted comments, and of the third participants,
the European Union commented. In the light of the fact that the parties had placed a considerable
amount of materials regarding WHO legal instrument s and the WHO's work in the area of tobacco
control on the Panel record, and mindful of its ma ndate on appeal under Article 17.6 of the DSU, the
Division did not deem it necessary to request assistance from the WHO.
12. The oral hearing in this appeal was held on 9 and 10 February 2012. The participants and
six of the third participants (Brazil, Colombia, Guatemala, Mexico, Norway, and Turkey) made oral
opening statements. The participants and third pa rticipants subsequently responded to questions
posed by the Members of the Division hearing the appeal.

II. Arguments of the Participants and the Third Participants
A. Claims of Error by the United States – Appellant
1. Article 2.1 of the TBT Agreement – "Like Products"
13. The United States claims on appeal that the Pa nel erred in its interpretation and specific
application of the term "like products" under Article 2.1 of the TBT Agreement, and requests the
Appellate Body to reverse the Panel's findings in th is respect. In particular, while agreeing with the
overall approach adopted by the Panel in its lik e product analysis—that is, one that determines
likeness based on the traditional "likeness" criteria, and in the light of the legal provision at issue and
of the public health nature of the measure being challenged 22—the United States contends that the
Panel conducted an "incomplete and flawed" analysis with respect to two of the traditional "likeness"
criteria, namely, end-uses and consumer tastes and habits.23
(a) End-Uses
14. The United States claims that the Panel erred by failing to perform a complete analysis of the
different end-uses of clove and menthol cigarett es and by concluding that the end-use for both
products is "to be smoked". 24 In the United States' view, the Panel improperly dismissed the possible
different end-uses presented by the United States—t hat is, satisfying an addi ction to nicotine, and
creating a pleasurable experience associated with the taste of the cigarette and aroma of the smoke25—
and erroneously based its ultimate conclusion on an "overly narrow analysis".26
15. The United States submits that a panel, when c onducting an end-use analysis, must consider
the different uses of the products in question and not just the use that is a "common denominator"
between the products. In this regard, the United St ates relies on statements of the Appellate Body in
EC – Asbestos that "a panel must also examine the other, different end-uses for products" and that "[i]t
is only by forming a complete picture of the various end-uses of a product that a panel can assess the
significance of the fact that products share a limited number of end-uses." 27 According to the
United States, it is undisputed that both clove and menthol cigarettes are used for smoking, but the
Panel improperly limited its analysis to consid ering only such common use between the products
while ignoring other relevant end-uses. Menthol cigarettes, the United States posits, are used to

22United States' appellant's submission, paras. 37 and 41.
27United States' appellant's submission, para. 45 (quoting Appellate Body Report, EC – Asbestos ,
para. 119 (original emphasis)).

"satisfy the nicotine addictions of millions of sm okers in the United States", whereas clove cigarettes
are primarily used "for experimentation and special social settings" and generally are not smoked to
satisfy nicotine addiction in the US market.
28
16. The United States further takes issue with the Pa nel's rejection of the different end-uses of
clove and menthol cigarettes based on the argument that these end-uses are related to the reasons why
a person might smoke a cigarette, and maintains that the Panel erred in finding that end-uses and
consumer tastes and habits are "mutually exclusive concepts".
29 Referring to the Appellate Body
report in EC – Asbestos, the United States notes that, although cons umer tastes and habits constitute a
"likeness" criterion separate from end-uses, consum er preferences are nonetheless relevant to how
products are capable of being used. 30 However, the United States contends that the Panel incorrectly
considered end-uses "absent the relevant, real-world context" 31 of how the products at issue are used
in the relevant market. Clove and menthol ciga rettes have different and "multi-faceted" end-uses—
that is, "habitual use and satisfying addi ction versus occasional, experimental use" 32—which cannot,
in the United States' view, be reduced to the simple , undisputed fact that both types of cigarettes are
used for smoking. This is particularly true, the United States adduces, where the public health context
relates to the different ways in which cigarettes are used in the re levant market. According to the
United States, the Panel erred by failing to consid er the "complete picture" and by disregarding
evidence relating to such differences in use.33
(b) Consumer Tastes and Habits
17. The United States claims that the Panel failed to perform a complete analysis of consumer
tastes and habits related to cl ove and menthol cigarettes. In the United States' view, the Panel
first made a legal error by excluding the tastes and habits of current adult consumers from its analysis.
The United States further contends that the Panel act ed inconsistently with Article 11 of the DSU by
refusing to examine evidence on how consumers in the relevant market use clove and menthol
cigarettes.34
18. First, the United States maintains that the Panel erred in determining that it need not examine
the tastes and habits of current adult consumers as pa rt of its analysis. In the United States' view, by
disregarding how current consumers perceive and u se the products at issue, the Panel erroneously

30United States' appellant's submission, para. 47 (quoting Appellate Body Report, EC – Asbestos ,
para. 102).

limited the scope of consumer tastes and habits to one aspect of the public health basis for
Section 907(a)(1)(A) of the FFDCA—use by young pe ople—and failed to capture the other aspect—
use by adult smokers—thereby nullifying consumer tastes and habits as a meaningful criterion. 35
Consistent with the principle stated by the Appellate Body in EC – Asbestos , the Panel was required
to examine evidence related to each of the criteri a set forth in the GATT Working Party report in
Border Tax Adjustments , and to weigh " all of the relevant evidence". 36 Accordingly, the United
States claims that the Panel committed a fundamental error in excluding, a priori, an essential element
from the analysis of consumer tastes and habits.37
19. Moreover, the United States posits that, given the pa rticular nature of this dispute, the tastes
and habits of current adult consumers are highl y relevant. First, Section 907(a)(1)(A) draws
regulatory distinctions among cigarettes based not only on their appeal to potential smokers, but based
on their uses by current adult smokers as well. Banni ng cigarettes that are used by adults on a regular
basis entails a risk of "straining the health care system or exacerbating the illicit market". 38 Second,
clove and other banned flavoured cigarettes are used in very small numbers and almost exclusively by
young people, thus being "trainer" or "starter" cigarettes, whereas menthol cigarettes are consumed by
20 to 26 per cent of adult smokers in the United States. 39 Consequently, the Un ited States argues, the
products at issue pose different public health cha llenges: clove cigarettes present a unique risk to
young, uninitiated smokers, while menthol cigare ttes also have a significant impact on adults. 40
Finally, the particular flavour matters, in the sen se that adult smokers seldom use clove-flavoured
cigarettes and do not perceive them to be like menthol cigarettes.41
20. The United States further claims that the exclusion of current adult consumer tastes and habits
cannot be justified by the Panel's finding on the d eclared legitimate objective of Section 907(a)(1)(A)
to prevent new young smokers from becoming addicted to cigarettes.42 Albeit agreeing with the Panel
that the characteristics of the products at issue must be examined in the light of the public health basis
of the measure at issue 43, the United States contends that there is no textual basis in Article 2.1 of the
TBT Agreement to limit the consideration of the public hea lth distinctions to the immediate objective

36United States' appellant's submission, para. 56 (quoting Appellate Body Report, EC – Asbestos ,
paras. 109 (in turn referring to GATT Working Party Report, Border Tax Adjustments ) and 113 (original
emphasis)).
39United States' appellant's submission, para. 58 (referring to Panel Report, paras. 2.24, 2.25,
and 7.391).
42United States' appellant's submission, para. 59 (referring to Panel Report, paras. 7.116, 7.119, 7.201,
and 7.206).
43United States' appellant's submission, para. 59 (referring to Panel Report, paras. 7.245-7.249).

of the measure.
44 Rather, technical regulations inevitably reflect a balancing of other considerations
relevant to public welfare—in this case, the add itional health concerns associ ated with heavily used
cigarettes, such as possible increases in unregulated black market cigarettes or strain on the healthcare
system.45 The United States submits that the Panel ba sed its exclusion of cu rrent adult consumers on
a narrow view of the measure's objective, which w as actually targeting a group of tobacco products
"that uniquely appeal to youth" without precluding access by adults to those cigarettes that are "most
heavily used in the U.S. market". 46 Even assuming that the Panel was correct to limit its assessment
of the product distinctions on the basis of the primary legitimate objective of Section 907(a)(1)(A)—
that is, the "reduction of youth smoking"—the United States contends that, precisely because of the
measure's distinction between adult and youth smoking behaviour, the Pa nel was required to take into
account the comparative patterns of use in the relevant market.47
21. Second, the United States claims that the Pane l acted inconsistently with Article 11 of the
DSU by disregarding critical evidence on how consumers use and perceive the products48, and thereby
came to a "fatally flawed" conclusion on consumer tastes and habits. 49 In the United States' view, the
Panel improperly disregarded critical survey evidence submitted by both parties on the basis that it
was not clear and that the information presented therein was "not directly comparable", without duly
examining such evidence accord ing to its probative force. 50 According to the United States, the
survey data were particularly relevant becau se the data provided evidence on how consumers and
potential consumers "used and perceived different cigarettes in the United States ".51 In addition, the
United States argues that the Panel based its c onclusions entirely on speculation and conjecture,
without any evidentiary support on the record, and ul timately concluded that, for potential consumers,
arguably, "any cigarette would likely be fine to start smoking".52 However, the United States submits,
the reports used as evidence by the Panel "do not tell the whole story", because they focus on
cigarettes with characterizing flavours, but do not present the whole picture as to how cigarettes
actually are used and perceived in the United St ates, the relevant market in this dispute. 53 According

46United States' appellant's submission, para. 61. (original emphasis)
50United States' appellant's submission, para. 67 (quoting Panel Report, para. 7.210). The United States
also stresses that, in the section of the Panel Report devoted to its analysis under Article 2.2 of the
TBT Agreement, the Panel did rely upon the information provided in the surveys on market share. ( Ibid.,
para. 66)
51United States' appellant's submission, para. 67. (original emphasis)
53United States' appellant's submission, para. 69 (referring to United States' response to Panel

to the United States, the handling of the evidence by the Panel falls short of an objective assessment
of the facts and is therefore incompatible with the Panel's duty under Article 11 of the DSU.54
2. Article 2.1 of the TBT Agreement – "Treatment No Less Favourable"
22. The United States claims that the Panel erre d in finding that Section 907(a)(1)(A) of the
FFDCA accords to imported clove cigarettes less favourable treatment than that accorded to like
domestic products, and requests the Appellate Body to reverse this finding. The United States also
requests the Appellate Body to find that the Pane l acted inconsistently with Article 11 of the DSU
when it found: (i) that there were no domestic cigarettes with characterizing flavours other than
menthol at the time of the ban; and (ii) that Section 907(a)(1)(A) imposes no costs on any US entity.
23. First, the United States argues that the Panel erroneously limited the scope of the products to
be compared for the purposes of its less favourab le treatment analysis to one banned imported
product—Indonesian clove cigarettes—and one non-banned like domestic product—menthol
cigarettes—thereby reaching the "flawed conclusion" that Indonesian clove cigarettes are treated less
favourably than like domestic products. 55 Referring to the Appellate Body report in EC – Asbestos ,
the United States posits that "the relevant analysis is how the measure treats like imported products, as
a group, and like domestic products, as a group". 56 Accordingly, the Panel was required to consider
the "treatment of all domestic and importe d cigarettes with characterizing flavors". 57 However, in the
United States' view, the Panel improperly exclude d, with respect to like domestic products, the
treatment accorded by the measure to domestic cigare ttes with other characterizing flavours and, with
respect to like imported products, the treatment ac corded to menthol cigarettes from other countries. 58
According to the United States, a proper less favourable treatment analysis that considers all cigarettes
that meet the criteria of "like products" demonstr ates that Section 907(a )(1)(A) bans only products
comprising "a very small market segment in the Un ited States", and "does not alter the conditions of
competition" as between like imported products, as a group, and like domestic products, as a group.59
24. For the United States, the reference to treatment accorded to the products imported from the
territory of "any other Member" in Article 2.1 does not compel the conclusion that only the treatment

54United States' appellant's submission, para. 69 (quoting Appellate Body Report, EC – Hormones ,
para. 133).
56United States' appellant's submission, para. 75 (referring to Appellate Body Report, EC – Asbestos ,
57United States' appellant's submission, para. 77. (original underlining) Albeit disagreeing with the
Panel's conclusion that clove and menthol cigarettes are like products, the United States stresses that "other
cigarettes with characterizing flavors … would meet the Panel's criteria and thus belong to the category of
cigarettes deemed by the Panel to be like products." (Ibid., para. 78 (referring to Panel Report, para. 7.247))
59United States' appellant's submission, paras. 80 and 81. (original underlining)

accorded to the complaining Member's products are relevant.
60 In the United States' view, the main
purpose of a de facto less favourable treatment analysis is to assess whether Section 907(a)(1)(A)
legitimately draws distinctions among like products or whether it creates "a proxy for singling out the
like products of the complaining Member for less favorable treatment". 61 In order to make such an
assessment, the analysis should consider the entire range of like products addressed by the measure.
The question of less favourable treatment is not answer ed by the sole fact that clove cigarettes were
banned while a single like domestic product (menthol cigarettes) was not. In this case, the United
States contends that the ban affected some importe d and domestic products, but "did not affect other
domestic and imported like products".62
25. In addition, to the extent that the Panel took the view that it was limited by its terms of
reference to consider only the products mentioned in Indonesia's request for the establishment of a
panel63, the United States claims that the Panel erred in concluding that Indonesia, as the complaining
party, "set the field of products to be compared"64—that is, "imported clove cigarettes versus domestic
menthol cigarettes".65 While defining which measures and clai ms a panel may consider, the terms of
reference do not define the scope of the relevant pr oducts to analyze with respect to a discrimination
claim, nor do they limit which defences a responding party may invoke. 66 The United States notes
that the question of which products should be comp ared in the less favourable treatment analysis was
a point of argument between the parties in the pr esent dispute, and stresses that the complainant
cannot a priori limit the scope of the comparison by its selection of products in its panel request.
26. Second, the United States takes issue with the Pa nel's statement that, "at the time of the ban,
there were no domestic cigarettes with characterizing flavours other than menthol." 67 T h e
United States submits that such a statement reflect s a "mis-application of the legal standard" under
Article 2.1 of the TBT Agreement.68 The Panel "improperly restrict[ed] the legal analysis" when it
limited the comparison to only products that were on the market at the time the ban went into effect,
without regard to the years preceding or forthcoming. Article 2.1 of the TBT Agreement does not
contain any "rigid temporal limitation" to the evidence a panel may consider in conducting a less
favourable treatment analysis. 69 Therefore, the Panel should have taken into account the fact that

62United States' appellant's submission, para. 85. (original underlining)
63Request for the Establishment of a Panel by Indonesia, WT/DS406/2.
emphasis)).

there were domestic cigarettes with characterizing flavours other than menthol in the years preceding
the effective date of the ban. 70 Moreover, the Panel incorrectly dismissed the fact that
Section 907(a)(1)(A) was enacted specifically "to respond to an emerging trend of products" that
US producers "were actively exploring". 71 In that respect, the United St ates stresses that the focus of
Section 907(a)(1)(A) was "primarily U.S. production" , and that it is not unusual that producers will
stop investing in products "even be fore the ban goes into effect". This should not be construed,
however, as evidence that US production "was not affected".72
27. Third, the United States claims that the Panel failed to make an objective assessment of the
facts, in violation of Article 11 of the DSU, by ignoring unrebutted evidence showing that cigarettes
with characterizing flavours other than menthol were marketed in the United States at the time of the
ban. The facts on record do not support the Panel' s finding that there were no domestically produced
flavoured cigarettes—other than menthol—at the time of the ban. In particular, the United States
recalls that the Panel had already found that: (i) there was at least one domestically produced brand of
clove cigarettes on the market prior to the ban 73; (ii) the list of cigarettes authorized for sale in 2008
and 2009 in several US states included at least 20 different brands of domestic flavoured cigarettes
other than menthol; and (iii) by 2008, just one year before the ban went into effect, at least
four US companies were producing flavoured cigarettes.74
28. Fourth, the United States claims that the Panel erred in concluding that any detriment to the
competitive conditions for clove cigarettes in the US market could not be explained by factors
unrelated to the foreign origin of the products. Even assuming arguendo that the Panel had properly
identified the like imported and domestic products to be compared, its analysis of whether the less
favourable treatment accorded to clove cigarettes w as related to the origin of the imported products
was in error.75
29. For the United States, under Article 2.1 of the TBT Agreement, a technical regulation may
impose costs or burdens associated with imported products as compared to like domestic products
without necessarily according less favourable treatment to the imported product, where these burdens

70United States' appellant's submission, para. 92 (referring to Indonesia's first written submission to the
Panel, footnote 29 to para. 22; United States' first written submission to the Panel, para. 51; ACNielson 2008
Data on Flavored Cigarettes in the United States (Panel Exhibit US-52); Examples of Cigarettes Certified for
Sale in the United States as of 2009 (Panel Exhibit US-6 2); New York List of Fire -Safe Certified Cigarettes as
of 20 January 2009 (Panel Exhibit US-63); and Maine List of Fire-Safe Certified Cigarettes as of 29 July 2009
(Panel Exhibit US-64)).
71United States' appellant's submission, para. 93. (original emphasis)
74United States' appellant's submission, paras. 97 and 98 (quoting Panel Report, paras. 2.27, 2.28, and
footnote 524 to para. 7.289, in turn quoting Panel Exhibits US-52 and US-62 (supra, footnote 70)).

are explained by a factor or circumstance other than the origin of the products.
76 In this regard, the
United States stresses that there are a number of prior WTO reports in which a detrimental effect on
an imported product was not related to its origin, but rather to other factors—such as the product's
particular market share or import profile, a difference in the real or perceived safety of the products at
issue, or the choices of the producers themselves, as private actors. 77 According to the United States,
the Panel failed to consider any arguments or evid ence bearing upon other relevant factors (unrelated
to origin) that could have explained the detrim ent to the competitive situation of imported clove
cigarettes.78
30. In the United States' view, in finding that the reason for excluding menthol cigarettes from the
ban under Section 907(a)(1)(A) related to "the cost s that might be incurred by the United States were
it to ban menthol cigarettes" 79, the Panel failed to examine whethe r the detriment to the competitive
situation of clove cigarettes was related to their origin. 80 Besides the fact that "it is unclear" what the
Panel meant by "costs", the United States submits that the text of Article 2.1 requires panels to focus
on the comparative treatment of products. Therefore, Article 2.1 contains "no basis" for a comparison
of costs imposed on foreign producers with those avoided by "any U.S. entity". 81 In any case, the
United States posits, the Panel's finding does not show that any detrimental effect to the competitive
conditions for clove cigarettes compared to menthol cigarettes was related to the national origin of
imported products. In fact, the costs incurred by the United States if it were to ban menthol
cigarettes—that is, "the potential impact on the h ealth care system and the potential development of a
black market and smuggling of menthol cigarettes" 82—would remain unaltered regardless of where
menthol cigarettes were produced, and even if all menthol cigarettes were imported.83
31. In addition, the United States claims that the Panel acted inconsistently with its duties under
Article 11 of the DSU by finding, wit hout an appropriate evidentiary basis 84, that
Section 907(a)(1)(A) does not impose " any costs on any U.S. entity".85 The United States recalls that
Article 11 requires a panel to refrain from issuing "affirmative findings that lack a basis in the

76United States' appellant's submission, para. 101 (referring to Panel Report, para. 7.269; Appellate
Body Report, Dominican Republic – Import and Sale of Cigarettes , para. 96; and United States' second written
submission to the Panel, paras. 137-144).
77United States' appellant's submission, para. 102 (referring to Appellate Body Report, Dominican
Republic – Import and Sale of Cigarettes , para. 96; Panel Report, EC – Approval and Marketing of Biotech
Products, para. 7.2514; Panel Report, US – Tuna II (Mexico) , paras. 7.331, 7.332, and 7.340; and
United States' second written submission to the Panel, paras. 138 and 140).
78United States' appellant's submission, paras. 103 and 104.
85United States' appellant's submission, para. 109. (original emphasis)

evidence contained in the panel record". 86 In this dispute, the United States posits, there was no basis
for the Panel to conclude that the measure avoids costs to any US entity, as underscored by the fact
that the Panel "barely cited the record". 87 According to the United States, the Panel ignored the fact
that the United States Food and Drug Administrati on (the "FDA") was charged with enforcing the
measure, thereby incurring "costs" as a US entity. 88 Moreover, the Panel did not take into account
that the effect of the measure on US production w as "pre-emptive and closed off a potential market
that U.S. producers were actively exploring", nor did it consider that, by reducing youth smoking,
Section 907(a)(1)(A) reduces demand for all cigarettes and thus "shrinks the U.S. adult cigarette
market".89
3. Article 2.12 of the TBT Agreement – "Reasonable Interval"
32. The United States claims that the Pane l's analysis under Article 2.12 of the TBT Agreement
contains three errors that led it to find, incorrec tly, that the United States acted inconsistently with
Article 2.12. First, the United States argues that the Panel attributed an incorrect "interpretative
value" to the Doha Ministerial Decision on Implementation-Related Issues and Concerns90 (the "Doha
Ministerial Decision") in interpreting the meaning of Article 2.12. Second, the United States argues
that the Panel incorrectly found that Indonesia had established a prima facie case of inconsistency
with Article 2.12. Lastly, the United States argues that, regardless of whether the Panel was correct in
finding that Indonesia had established a prima facie case of inconsistency with Article 2.12, the Panel
incorrectly determined that the United States did not rebut Indonesia's arguments.
91
33. The United States first claims that the Panel attr ibuted an incorrect "interpretative value" to
paragraph 5.2 of the Doha Ministerial Decisi on by treating paragraph 5.2 as though it were an
authoritative interpretation adopted by the Minister ial Conference pursuant to Article IX:2 of the
Marrakesh Agreement Es tablishing the World Trade Organization (the " WTO Agreement"), despite
not having found that it has this legal status. The United States further argues that the legal value of
paragraph 5.2 of the Doha Ministerial Decision is, at most, a "means of supplemental interpretation"
under Article 32 of the Vienna Convention on the Law of Treaties 92 (the " Vienna Convention ").93
Therefore, while paragraph 5.2 of the Doha Minist erial Decision may be used to confirm the meaning
of the term "reasonable interval" in Article 2.12 of the TBT Agreement, it may not be applied as a

86United States' appellant's submission, para. 110 (quoting Appellate Body Report, Canada – Wheat
90Decision of 14 November 2011, WT/MIN(01)/17.
92Done at Vienna, 23 May 1969, 1155 UNTS 331; 8 International Legal Materials 679.

"rule" that can be relied upon as the exclusive basi s for concluding that the term "reasonable interval"
means "not less than six months".
94
34. According to the United States, the Doha Ministerial Decision "preceded by several months"95
a TBT Committee decision that took note of paragra ph 5.2 of the Doha Ministerial Decision and,
therefore, the Ministerial Conference could not have acted on a recommendation of the Council for
Trade in Goods, as Article IX:2 of the WTO Agreement requires for the adoption of multilateral
interpretations of agreements contained in Annex 1 to the WTO Agreement.
35. Second, the United States claims that the Panel incorrectly found that Indonesia had
established a prima facie case of inconsistency with Article 2.12 where it did not establish that the
interval period was unreasonable in the light of the impact on the ability of exporting Members to
adapt to the requirements of Section 907(a)(1)(A) of the FFDCA.
96 The United States submits that
Indonesia never provided any evidence or legal argument that demonstrates that the three-month
period allowed by the United States prejudiced the ability of any foreign producer, including
Indonesian producers, to adapt to the requirements of Section 907(a)(1)(A).97
36. The United States argues further that, "[e]ven assuming arguendo that the Panel was correct
in deciding that the elements of the prima facie case could be drawn exclusively from paragraph 5.2",
the Panel erred in finding that In donesia had succeeded in establishing a prima facie case under the
terms of that paragraph 98, because Indonesia would have had to establish "with evidence and
argument" that Section 907(a)(1)(A) presents a "nor mal" situation and does not constitute one of the
non-urgent cases where it would be reasonable to have a shorter interval. 99 The United States submits
that Indonesia would also have had to establish that "allowing an interval period of at least six months
would not render the fulfillment of the objective pursued by Section 907(a)(1)(A) ineffective".100
37. According to the United States, the Panel b ased its finding that Indonesia had established a
prima facie case entirely on a "single" statement made by Indonesia that "neither the Act itself nor any
other statement by the United States indicates that having [Section 907(a)(1)(A)] enter into force
90 days after signing was necessary to fulfill the objectives of the Act". 101 According to the
United States, "Indonesia's assertion does not demons trate what the Panel cl aimed Indonesia needed

omitted)
99United States' appellant's submission, paras. 135 and 138.
101United States' appellant's submission, para. 147 (quoting Panel Report, para. 7.587, in turn quoting
Indonesia's first written submission to the Panel, para. 145).

to prove—that a six month interval period would be effective in fulfilling the legitimate objective of
Section 907(a)(1)(A)".102
38. Third, the United States claims that, even if Indonesia did establish a prima facie case, the
Panel improperly found that the United States did not rebut that prima facie case. According to the
United States, "no matter what weight" 103 is attributed to the Doha Ministerial Decision, Indonesia
was required to establish a prima facie case under the terms of Article 2.12 of the TBT Agreement. In
the United States' view, the evidence and argument be fore the Panel on whether the interval period
chosen allowed time for Indonesian producers to adapt their products to the requirements of
Section 907(a)(1)(A) showed that "the difference be tween the three and six month interval periods
had no impact on Indonesian producers". 104 According to the United Stat es, the fact that "Indonesian
producers, even 16 months after the enactment of the FSPTCA, had not adjusted their product lines to
produce tobacco or menthol-flavoured cigarettes" 105 is sufficient evidence to rebut the prima facie
case that the Panel found Indonesia to have established. Accordingly, the Panel committed legal error
in finding that "the United States has not rebutted" Indonesia's prima facie case.106
B. Arguments of Indonesia – Appellee
1. Article 2.1 of the TBT Agreement – "Like Products"
39. Indonesia requests the Appellate Body to rej ect the United States' appeal against the
Panel's finding that clove and menthol cigarettes are like products within the meaning of Article 2.1 of
the TBT Agreement. In Indonesia's view, the United States' objection is not about the legal findings of
the Panel, but about the appropriate weight to give to certain evidence and findings of fact. According
to Indonesia, in many of its claims, the United States is simply attempting to disguise its disagreement
with the Panel's findings of fact as legal error. 107 Indonesia also recalls that the United States did not
appeal the Panel's conclusion that clove an d menthol cigarettes share similar physical
characteristics.108

102United States' appellant's submission, para. 149. (footnote omitted)
104United States' appellant's submission, para. 152. (original emphasis)

(a) End-Uses
40. Indonesia takes issue with the United States' c ontention that the Panel "over-simplified" its
analysis in finding that the end-use of both products at issue is "to be smoked".
109 In Indonesia's view,
the United States' claim that clove and menthol cigarettes have different end-uses because clove
cigarettes are smoked only occasionally while menthol cigarettes are used regularly by addicted
smokers has no merit and should be rejected by the A ppellate Body. At the outset, Indonesia recalls
that, in Philippines – Distilled Spirits , the United States correctly noted that "there is no support for
the [] proposition that a product consumed on special occasions cannot be in competition with a
routinely purchased product".110
41. Indonesia first submits that the Panel examined end-uses pursuant to prior guidance from the
Appellate Body. In particular, in accordan ce with the Appellate Body's guidance in EC – Asbestos ,
the Panel noted that the definition of "end-uses" is "the extent to which two products are capable of
performing the same function".111 According to Indonesia, in its finding with respect to end-uses, the
Panel also properly gave special consideration to the fact that Section 907(a)(1)(A) of the FFDCA is a
public health measure aimed at addressing youth smoking. In Indonesia's view, moreover, even
assuming arguendo that the end-uses put forward by the United States were pertinent ones, the United
States presented no evidence showing that clove a nd menthol cigarettes were not both capable of
performing the end-uses of satisfying a nicotine addiction and creating a pleasurable experience. 112 In
addition, Indonesia contends that the Panel did not dismiss out-of-hand the possibility that products
may have more than one end-use, but rather simply concluded that the products at issue in the present
case did not have the specific end-uses suggested by the United States.113
42. Second, Indonesia submits that the Panel di d not ignore the alternative end-uses for the
products at issue proposed by the United States, but rather went to great lengths to consider the
evidence regarding end-uses, including those additi onal end-uses put forth by the United States.
According to Indonesia, the Panel addressed the questi on of whether "regular use" is different from
"occasional use", and carefully laid out in its Re port the United States' argument that delivering
nicotine to addicted smokers must be consider ed as a separate end-use. However, the Panel
eventually found that the United States ' argument on end-uses was "circular".
114 Indeed, Indonesia

110Indonesia's appellee's submission, para. 68 (quoting Appellate Body Reports, Philippines – Distilled
Spirits, para. 71).
111Indonesia's appellee's submission, para. 71 (referring to Panel Report, para. 7.191, in turn referring to
Appellate Body Report, EC – Asbestos, para. 117). (original emphasis)

argues, the Panel simply was not persuaded by the merits of the argument of the United States 115 and
proceeded to conclude—based on evidence showing that both clove and menthol cigarettes were
capable of delivering nicotine 116—that the end-use of both types of cigarettes was "to be smoked". 117
Although the United States asserted that there w as an "occasional"-use cigarette market, it provided
little evidence in support of this claim. 118 Accordingly, Indonesia subm its that the Panel did not
commit errors of law or fail to make an objec tive assessment of the evidence, and requests the
Appellate Body to uphold the Panel's conclusion th at clove and menthol cigarettes share the same
end-use of "being smoked".119
(b) Consumer Tastes and Habits
43. Indonesia first submits that the Panel did not comm it a legal error in its analysis of consumer
tastes and habits, but rather conducted a thorough an alysis, acted consistently with guidance from the
Appellate Body and, after weighing all the evidence on the record, concluded that consumer tastes and
habits are similar with respect to clove and menthol cigarettes. In Indonesia's view, the United States
simply disagrees with the Panel's conclusion. 120 According to Indonesia, when presenting its claims
of error, the United States ignored the Appellate Body's view that it is not necessary to show actual
substitution by consumers when assessing "the exte nt to which consumers perceive and treat the
products as alternative means of performing particular functions in order to satisfy a particular want or
demand".121 Indonesia contends that the United Stat es failed to present evidence showing that
consumers, whether adult or youth, would be unwilling to substitute clove and menthol cigarettes for
the end-use of smoking. Indonesia argues that the United States is wrong in presuming that consumer
tastes and habits must be identical to be like, cons idering that the Appellate Body found that products
that are close to being perfectly substitutable can be like products. Indonesia further submits that
there is sufficient evidence on record supporting the fact that young smokers and pre-smoking youth
view clove and menthol cigarettes "as at least close to substitutable".122
44. Indonesia disagrees with the Unite d States' claim that the Panel erred by failing to include
addicted adult smokers in the comparison of consumer tastes and habits. In its view, the Panel's first
obligation was to determine the objective of the measure, and then determine which consumers to

118Indonesia's appellee's submission, para. 78 (referring to United States' response to Panel
Question 41, paras. 104-106).
121Indonesia's appellee's submission, para. 81 (quoting Appellate Body Report, EC – Asbestos ,
para. 101). (emphasis added by Indonesia omitted)
122Indonesia's appellee's submission, para. 82 (referring to Appellate Body Reports, Philippines –

compare "in light of the context and the object and purpose of the provision at issue" and of the
measure.
123 Indonesia recalls that the United States in itially agreed with the Panel's focus on the
public health aspects of Section 907(a)(1)(A), and only subsequently took issue with the Panel's
linkage "of the consideration of likeness under Ar ticle 2.1 with the objective of the measure". 124
According to Indonesia, the Panel did not fail to c onsider Section 907(a)(1)(A) as an integral whole.
Rather, in the light of the measure's objective of reducing youth smoking, th e Panel concluded that
"the perception of consumers, or rather potentia l consumers, can only be assessed with reference to
the health protection objective of the technical regulation at issue".125
45. Indonesia further submits that, contrary to what the United States alleges, the Panel did not
exclude current consumers from its analysis, since it did include current young smokers. According
to Indonesia, what the Panel did was not to include the tastes and habits of adults in its analysis 126, but
to lay out very carefully the basis for its decision to focus on current and pre-smoking youth. 127
Indonesia notes that the Panel est ablished that the purpose of S ection 907(a)(1)(A) was to reduce
youth smoking, whereas it rejected that a second obj ective of the measure was to avoid the potential
negative consequences or costs associated with banni ng products to which tens of millions of adults
are chemically and psychologically addicted.128 Accordingly, the Panel evaluated the consumer tastes
and habits of youth, following the guidance set out by the Appellate Body to consider the "particular
provision in which the term 'like' is encountered as well as by the context and the circumstances that
prevail in any given case to which that provision may apply".129
46. Second, Indonesia submits that, in considering evidence regarding consumer tastes and habits,
the Panel did not exceed its discretion as the trier of facts, and made an objective assessment of the
facts in accordance with Article 11 of the DSU. Indonesia notes, at the outset, that the United States
inaccurately cited to the Panel Report when adduc ing that the Panel focused only on potential young
smokers.130 On the contrary, Indonesia posits, the Panel specifically identified the consumers at issue

123Indonesia's appellee's submission, para. 83 (quoting Appellate Body Report, EC – Asbestos ,
paras. 88 and 89). (emphasis added by Indonesia omitted)
124Indonesia's appellee's submission, para. 84 (referring to United States' appellant's submission,
para. 60).
126Indonesia's appellee's submission, para. 87 (referring to United States' appellant's submission,
para. 54).
128Indonesia's appellee's submission, paras. 90 and 91.
129Indonesia's appellee's submission, para. 92 (quoting Appellate Body Report, Japan – Alcoholic
Beverages II, p. 21, DSR 1996:I, 97, at 114).
130Indonesia's appellee's submission, para. 100 (referring to United States' appellant's submission,
para. 64).

in this case as " young smokers and potential young smokers". 131 In addressing the United States'
specific claims, Indonesia argues that the Panel did not wilfully disregard or distort evidence. Rather,
in Indonesia's view, the Panel carefully reviewed the survey evidence and devoted two paragraphs and
five footnotes in its Report to explain that th e survey data did not provide clear guidance on
comparing consumer tastes and habits, given that the research parameters varied from survey to
survey.132 Indonesia contends that the Panel's approa ch to the survey evidence hardly amounts to
excluding it a priori but, rather, that the Panel, acting within its discretion, simply did not place the
same importance on the evidence concerning addicted adult smokers as did the United States.133
47. Indonesia further submits that the Panel did not make affirmative findings of fact that were
not grounded on evidence. In Indonesia's view, while not relying on certain evidence put forward by
the United States, the Panel identified and relied on other evidence on the record proving that both
clove and menthol cigarettes were "trainer" or "starter" cigarettes that appeal to youth.
134 According
to Indonesia, the Panel methodically described a number of sources of evidence (the FDA, the
American Lung Association, the WHO, the Nati onal Survey on Drug Use and Health, and the
Tobacco Products Scientific Advisory Council) indi cating that flavoured cigarettes appeal to youth
and novice smokers because their characterizing flavours mask the harshness of tobacco. It was based
on this evidence that the Panel concluded that all these flavoured cigarettes are perceived as vehicles
to start smoking.135
48. Lastly, Indonesia adds that the Panel did not co mmit an egregious error in declining to accord
the same weight as the United States sought regarding the addiction rates of use of clove and menthol
cigarettes by youth and adults. Referring to Appellate Body reports in EC – Bed Linen (Article 21.5 –
India), Australia – Salmon , and Canada – Wheat Exports and Grain Imports , Indonesia highlights
that panels are given "great latitude" 136 in determining what evidence to consider in evaluating the
validity of claims and that a panel's decision not to rely on some of the facts submitted by one of the
parties would not by itself constitute legal error. 137 In conclusion, Indonesia requests the Appellate
Body to reject the United States' claims with respect to the Panel's findings on consumer tastes and

131Indonesia's appellee's submission, para. 100 (quoting Panel Report, para. 7.232). (emphasis added by
Indonesia)
132Indonesia's appellee's submission, para. 104 (referr ing to Panel Report, paras. 7.209 and 7.210 and
footnotes 426-430 thereto).
135Indonesia's appellee's submission, paras. 112-114.
137Indonesia's appellee's submission, paras. 115-117 (referring to Appellate Body Report, EC – Bed
Linen (Article 21.5 – India) , para. 177; Appellate Body Report, Australia – Salmon , para. 267; and Appellate
Body Report, Canada – Wheat Exports and Grain Imports, para. 186).

habits, and to uphold the Panel's de termination that clove and menthol cigarettes are like products for
purposes of Article 2.1 of the TBT Agreement.
138
2. Article 2.1 of the TBT Agreement – "Treatment No Less Favourable"
49. Indonesia claims that the Panel did not err in finding that, under Section 907(a)(1)(A) of the
FFDCA, imported clove cigarettes are treated less favourably than domestic menthol cigarettes for the
purposes of Article 2.1 of the TBT Agreement. In particular, Indonesia contends that the Panel did not
commit error in identifying the products to be compar ed for its less favourable treatment analysis, and
properly found that the less favourable treatment a ccorded to clove cigarette s cannot be explained by
factors unrelated to their foreign origin. Indonesi a further maintains that the Panel did not fail to
make an objective assessment of the facts in evaluating the evidence before it, thereby acting
consistently with Article 11 of the DSU.
50. First, Indonesia argues that the United States misinterprets the Appellate Body report in EC –
Asbestos and the panel report in US – Tuna II (Mexico) as requiring the Panel to have included
treatment of cigarettes with characterizing flavours other than clove and menthol in its less favourable
treatment analysis.
139 While the panels in both of the a bove disputes had conducted an initial like
product analysis of a group of products 140, the scope of the like produc ts to be considered in
evaluating less favourable treatment was limited to the imported and domestic products at issue, and
did not extend to "other potentially 'like' products in general". 141 Since the products at issue in this
dispute had been identified as being imported clove cigarettes and domestically produced menthol
cigarettes in the United States, the Panel correctly assessed likeness only as between these
two categories of products and, as a consequence, properly identified those products for comparison
in its less favourable treatment analysis. 142 Moreover, because neither party argued before the Panel
that clove cigarettes were like ci garettes with other characterizing flavours, had the Panel included
cigarettes with characterizing flavours other than clove and menthol in its analysis, it would have
made a finding on a claim that was not before it, thus acting inconsistently with Article 11 of the
DSU.143
51. Indonesia further rejects the United States' cont ention that the Panel incorrectly narrowed the
scope of products to be compared on the basis of its terms of reference. Indonesia dismisses this

139Indonesia's appellee's submission, para. 121 (referring to United States' appellant's submission,
para. 77).
143Indonesia's appellee's submission, paras. 140 and 141; see also para. 142 (quoting Appellate Body
Report, Chile – Price Band System, para. 173).

argument as speculative and emphasizes that the Panel re ferred to its terms of reference in the context
of its like products analysis. 144 The Panel never contemplated that flavoured cigarettes other than
clove and menthol cigarettes could be included in the like products analysis, which would be
consistent with its terms of re ference. Moreover, Indonesia's pa nel request and its subsequent
submissions demonstrate that Indonesia raised no claims and made no arguments with respect to
cigarettes with characterizing flavours other than clove or menthol. 145 Accordingly, the question of
whether the Panel's terms of reference "could ha ve allowed a finding of likeness" between clove
cigarettes and other flavoured cigarettes "is moot". 146 Indonesia considers that, "absent a finding of
likeness between clove and cigarettes with other ch aracterizing flavors", the Panel could not have
included these other flavoured cigarettes in its less favourable treatment analysis.147
52. Second, Indonesia argues that the Panel did not exceed its discretion when considering the
effect of Section 907(a)(1)(A) on those products that existed at the time the measure went into effect.
Indonesia characterizes the United States' ar gument in this respect as "irrelevant" 148, and adds that the
Panel acted within the limits of its discretion in determining the time period for which a comparison
was to be made. While Indonesia agrees that there is "no rigid temporal limitation" 149 on the
timeframe for analyzing less favourable treatment, neith er is there a mandate to consider any specific
timeframe for this analysis. 150 Moreover, Indonesia submits that the United States is arguing that the
Panel should have assessed the treatment of the imported product—clove ci garettes—and a domestic
product that had not been found to be like—other flavoured cigarettes. However, the "relevant
comparison" had to be whether the measure at is sue modified the conditions of competition "to the
detriment of imported clove cigarettes as compared to menthol cigarettes, which were not banned".151
53. Third, Indonesia disagrees with the United Stat es' claim that the Panel acted inconsistently
with Article 11 of the DSU by failing to consider evidence demonstrating that cigarettes with
characterizing flavours other than clove or menthol were being sold in the United States at the time
the measure went into effect. According to Indonesia, because the appropriate products for
comparison in the less favourable treatment analysis were clove and menthol cigarettes, the existence
of other flavoured cigarettes at the time the ban was imposed is immaterial. Furthermore, Indonesia

144Indonesia's appellee's submission, paras. 147 and 148 (referring to United States' appellant's
submission, para. 86; and Panel Report, paras. 7.124-7.127).
145Indonesia's appellee's submission, paras. 149 and 150 (referring to Indonesia's panel request, pp. 1-2;
and Indonesia's responses to Panel Questions 27 and 85).
149Indonesia's appellee's submission, para. 152 (quoting United States' appellant's submission, para. 89).
150Indonesia's appellee's submission, para. 152; see also para. 154 (quoting Panel Report, US – Tuna II
(Mexico), paras. 7.299 and 7.300).

submits that the Panel did consider and weigh the evidence submitted by the United States regarding
the availability of other flavoured cigarettes, but eventually did not find it compelling.
152 Indonesia
also points out that evidence on the record showed that the domestically produced brand of clove
cigarettes "accounted for a negligible share of all clove cigarettes sold in the United States". 153 I n
Indonesia's view, the fact that the Panel did not place the same weight on su ch evidence as did the
United States does not amount to a violation of Article 11 of the DSU.
54. Fourth, Indonesia takes issue with the United States' claim that the Panel applied the incorrect
legal framework in determining whether the less fa vourable treatment accorded to clove cigarettes
could be explained by factors unrelated to their fo reign origin. Indonesia observes that the Appellate
Body jurisprudence regarding Article III:4 of th e GATT 1994 provides useful guidance in the present
dispute154 and that, under that provision, a less favourable treatment analysis only involves
determining whether a measure has the effect of modifying the conditions of competition to the
detriment of imported products. 155 According to Indonesia, the United States' claim that no less
favourable treatment exists when the detrimental eff ect on an imported product is not attributable to
its foreign origin, but to some other factor, is based on a "misreading" of the Appellate Body report in
Dominican Republic – Import and Sale of Cigarettes .156 On this basis, Indonesia posits, the
United States is "attempt[ing] to create a new criterion" when it suggests that a finding of less
favourable treatment under Article 2.1 of the TBT Agreement would be possible only if a measure's
detrimental effects are tied to the forei gn origin of the imported product at issue.
157 In fact, no panel
or Appellate Body report has ever required u nder Article III:4 of the GATT 1994 "both 'a less
favourable treatment' test and a second test 'based on national origin'". 158 In other words, Indonesia
contends that the Panel's conclusion that importe d clove cigarettes are treated less favourably than
domestic menthol cigarettes—because the former are banned from the US market, whereas the latter

152Indonesia's appellee's submission, paras. 158 and 162 (referring to Panel Report, footnote 524 to
para. 7.289).
153Indonesia's appellee's submission, para. 164 (referring to Panel Report, paras. 2.26 and 2.27; and
letter dated 25 March 2008 from the President of the Tobacco Merchants Association, Inc. (Panel
Exhibit IND-12)).
154Indonesia's appellee's submission, para. 169 (referring to Panel Report, para. 7.269, in turn referring
to Appellate Body Report, Korea – Various Measures on Beef , para. 137; and Appellate Body Report,
Dominican Republic – Import and Sale of Cigarettes, para. 96).
155Indonesia's appellee's submission, para. 172 (referring to Indonesia's opening statement at the first
Panel meeting, paras. 26 and 58; Indonesia's response to Panel Question 52; and Indonesia's second written
156Indonesia's appellee's submission, para. 173 (referring to Appellate Body Report, Dominican
Republic – Import and Sale of Cigarettes, para. 96).
157Indonesia's appellee's submission, para. 174 (referring to Brazil's oral statement at the Panel meeting
with the third parties, para. 11; and Indonesia's second written submission to the Panel, para. 98).
158Indonesia's appellee's submission, paras. 179-181 (quoting Appellate Body Report, Korea – Various
Measures on Beef , para. 135; and Appellate Body Report, Thailand – Cigarettes (Philippines) , paras. 128
and 134; and referring to Panel Report, Mexico – Taxes on Soft Drinks, paras. 8.114-8.122).

are not—is per se sufficient to make a finding that the United States acted inconsistently with
Article 2.1 of the TBT Agreement.159
55. In addition, Indonesia disagrees with the United St ates' claim that the Panel failed to make an
objective assessment of the facts as required by Article 11 of the DSU when it found that
Section 907(a)(1)(A) did not impose any costs on an y US entity without an adequate evidentiary
basis. Indonesia contends that there was evidence on the record demonstrating that: (i) the exception
for menthol cigarettes under the measure at issue w as the result of a political compromise with the
US tobacco industry and an effort to protect domestic jobs 160; and (ii) that the sole reason for
excluding menthol cigarettes from the ban was to spare the United States from the costs it might
otherwise incur.161 In evaluating and weighing such evidence, the Panel assessed the facts within the
limits of its discretion, and thus did not act inconsistently with Article 11 of the DSU.
3. Article 2.12 of the TBT Agreement – "Reasonable Interval"
56. Indonesia submits that the Panel assigned the corr ect interpretative value to paragraph 5.2 of
the Doha Ministerial Decision, and properly found that Indonesia established a prima facie case of
inconsistency with Article 2.12 of the TBT Agreement, which the United States failed to rebut.162
57. First, Indonesia contends that the United States incorrectly claims that the Panel declined to
formally determine whether paragraph 5.2 of th e Doha Ministerial Decision is an "authoritative
interpretation" adopted by the Ministerial Conference pursuant to Article IX:2 of the WTO Agreement.
According to Indonesia, the Panel "clearly conclude d" that paragraph 5.2 of the Doha Ministerial
Decision is "a binding interpretation". 163 Moreover, Indonesia disagrees with the United States that
the Ministerial Conference, in adopting paragra ph 5.2, did not act upon the recommendation of the
Council for Trade in Goods, as Article IX:2 of the WTO Agreement requires. According to Indonesia,
the preamble of the Doha Ministerial Decision indicates that the Decision and the interpretations
contained therein were adopted on the basis of disc ussions carried out within the General Council and
the WTO subsidiary bodies.

160Indonesia's appellee's submission, para. 187 (refe rring to Indonesia's seco nd written submission to
the Panel, para. 118; S. Saul, "Cigare tte Bill Treats Menthol with Leniency", New York Times , 13 May 2008
(Panel Exhibit IND-87); and S. Saul, "Bill to Regulate Tobacco Moves Forward", New York Times ,
3 April 2008 (Panel Exhibit IND-88)).
161Indonesia's appellee's submission, para. 189 (referring to Panel Report, para. 7.289, in turn quoting
United States' first written submission to the Panel, pa ras. 23-25; and United States' response to Panel
Questions 40, 89, and 109).

58. In response to the United States' argument that the Doha Ministerial Decision is "at most"
164 a
supplementary means of interpretation w ithin the meaning of Article 32 of the Vienna Convention ,
Indonesia submits that the Panel properly determined that paragraph 5.2 of the Doha Ministerial
Decision is a "subsequent agreement between the par ties" within the meaning of Article 31(3)(a) of
the Vienna Convention.165 Moreover, Indonesia argues that the Pa nel did not err in its interpretation
of the term "normally" in paragraph 5.2 of the D oha Ministerial Decision. According to Indonesia,
the Panel correctly concluded that the term "norma lly" must be interpreted as meaning "under normal
or usual conditions; as a rule".166
59. Second, Indonesia submits that the Panel did not err in finding that Indonesia had established
a prima facie case of inconsistency with Article 2.12 of the TBT Agreement. According to Indonesia,
the United States incorrectly argues that the Panel b ased its finding that Indonesia had established a
prima facie case "exclusively" on the basis of the text of paragraph 5.2 of the Doha Ministerial
Decision.167 Indonesia contends that the Panel Report cl early shows that the Panel considered both
Article 2.12 of the TBT Agreement and paragraph 5.2 of the Doha Ministerial Decision. 168 Indonesia
contends that this is "categorically stated" by the Panel when it noted that "Indonesia ha[d] persuaded
the Panel that, in the light of Article 2.12 of the TBT Agreement and paragraph 5.2 of the Doha
Ministerial Decision, an interval of less than si x months was not reasonable in the circumstances of
this case".169
60. In response to the United States' argumen t that Indonesia provided no evidence or
argumentation that the three-month interval peri od prejudiced the ability of Indonesian producers to
adapt to the requirements of Section 907(a)(1)(A) of the FFDCA, Indonesia contends that it adduced
sufficient argument and evidence to establish a presumption that the United States had acted
inconsistently with its obl igation under Article 2.12. 170 According to Indonesia, it did "establish[] a
prima facie case that the 90-day interval provided by the United States was significantly shorter than
the 6 months" normally required. 171 Indonesia submits that, following the elements stipulated in
Article 2.12 of the TBT Agreement, as well as in the binding interpretation of the term "reasonable
interval" in paragraph 5.2 of the Doha Ministerial Decision, Indonesia set forth in its written and oral
submissions, as well as in its Panel exhibits, lega l arguments and evidence to raise the presumption

164Indonesia's appellee's submission, para. 205 (quoting United States' appellant's submission,
para. 126).
166Indonesia's appellee's submission, paras. 220 and 221.
167Indonesia's appellee's submission, para. 223 (referring to United States' appellant's submission,
para. 128).

that its claim against the United States under Article 2.12 was true.172 Accordingly, Indonesia submits
that the Panel did not commit a legal error in finding that Indonesia had established a prima facie case
of inconsistency with Article 2.12 of the TBT Agreement.
61. Third, with regard to the United States' clai m that, even assuming that the Panel correctly
found that Indonesia had established a prima facie case, the Panel committed legal error in finding
that the United States had not rebutted Indonesia's prima facie case, Indonesia responds that, since it
had made out a prima facie case, the onus shifted to the United States "to bring forward evidence and
arguments to disprove the claim". 173 Since the 90-day interval provided by the United States was
significantly shorter than the six months normally re quired, the burden shifted to the United States to
refute the claimed inconsistency. According to Indonesia, the Panel correctly stressed that the
United States had failed to explain why it deemed that allowing a longer interval period between the
publication and the entry into force of Section 907(a)(1)(A) would not have been effective in fulfilling
the objective pursued by the measure, while a three-month interval was. 174 Indonesia also posits that
the United States did not explain why six months woul d have been ineffective, especially taking into
account that it did not notify Section 907(a)(1)(A) as an urgent measure pursuant to Article 2.10 of the
TBT Agreement.175
62. According to Indonesia, the Panel weighed a nd balanced the evidence and arguments on the
record and, while it was "convinced of the validity of the claim advanced by Indonesia", it "was not
convinced by the rebuttal argumen ts" presented by the United States. 176 In Indonesia's view,
therefore, the Panel acted consistently with its du ties since, "in the absence of effective refutation by
the defending party, a panel, as a matter of law, is required to rule in favor of the complaining party
presenting the prima facie case".177
C. Arguments of the Third Participants
1. Brazil
63. Brazil generally agrees with the views expressed by the Panel concerning the legal standard
for the assessment of likeness under Article 2.1 of the TBT Agreement. For Brazil, the absence of a
provision similar to Article III:1 of the GATT 1994, co mbined with the sixth recital of the preamble

173Indonesia's appellee's submission, para. 240 (quoting Appellate Body Report, US – Wool Shirts and
Blouses, pp. 16-17, DSR 1997:I, 323, at 338).
176Indonesia's appellee's submission, para. 242. (underlining omitted)
177Indonesia's appellee's submission, para. 243 (referring to Panel Report, para. 7.591, in turn referring
to Appellate Body Report, EC – Hormones , para. 104; Appellate Body Report, Japan – Agricultural
Products II, paras. 98 and 136; and Appellate Body Report, Japan – Apples, para. 159).

of the TBT Agreement, seems to indicate that the objectives of a technical regulation should play an
important role in ascertaining the characteristics of products alleged to be like.
178 Despite there being
no direct reference in Article 2.1 of the TBT Agreement to the legitimate objectives of the technical
regulation, Brazil notes that the use of an overarching analytical concept to inform all paragraphs of a
provision is an issue that has alread y been accepted in WTO jurisprudence. 179 In Brazil's view, the
objective pursued by a Member adopting a technical regulation is a central element of the likeness
analysis under Article 2.1, given its context and object and purpose.180 However, Brazil posits, it does
not seem reasonable to require a panel to examine the intentions of the regulator and its implications
that go beyond the explicit legitimate objective of a measure. The objectives pursued through
technical regulations must be assessed as objectively as possible 181, looking at the measure's structure,
architecture, and design. 182 Once the legitimate objectives pursued by a Member are properly
revealed, Brazil is of the view that they should in form the likeness analysis under Article 2.1 of the
TBT Agreement.
64. Brazil further notes that the United States pursues an interpretation of the term "treatment no
less favourable" that would require evidence of or igin-based detrimental effects to the imported
product as a prerequisite for showing de facto discrimination. 183 Accordingly, Brazil explains, the
United States considers that if any factor, other th an the foreign origin of the product, were found to
be the basis for the discrimination, there would be no violation of Article 2.1 of the TBT Agreement.
In Brazil's view, both under Article III:4 of the GATT 1994 and under Article 2.1 of the
TBT Agreement, a key question is to what extent the application of a measure results in less
favourable treatment to the like imported product, regardless of the measure's stated objective. 184 The
difference between these two provisions is that, while under Article 2.1 of the TBT Agreement the
measure's objectives are relevant in defining whether the products at issue are like, under Article III:4
of the GATT 1994, likeness is asses sed from a competition perspective. 185 Under both provisions,
Brazil contends, once the imported and domestic products are found to be like, the manner in which
the measure is applied and the prevailing circumst ances of the relevant market for the affected
products are more important in a less favourable treatment determination than the measure's

178Brazil's third participant's submission, para. 8.
179Brazil's third participant's submission, para . 11 (referring to Appellate Body Report, EC – Asbestos,
180Brazil's third participant's submission, para. 14.
181Brazil's third participant's submission, para. 17.
182Brazil's third participant's submission, para . 20 (referring to Appellate Body Report, Japan –
Alcoholic Beverages II, p. 29, DSR 1996:I, 97, at 120; Appellate Body Report, Chile – Alcoholic Beverages ,
paras. 61 and 62; and Appellate Body Report, Dominican Republic – Import and Sale of Cigarettes, para. 112).
183Brazil's third participant's submission, para. 23 (referring to United States' appellant's submission,
paras. 101-106).
184Brazil's third participant's submission, para. 28 (referring to Appellate Body Report, Japan –
Alcoholic Beverages II, p. 28, DSR 1996:I, 97, at 119).
185Brazil's third participant's submission, para. 29.

objectives. According to Brazil, this conclusion is even more relevant in the context of an analysis of
a de facto discrimination.186
2. Colombia
65. Colombia submits that the Panel erred in its le gal interpretation of paragraph 5.2 of the Doha
Ministerial Decision. In its view, the Panel decided to give the Doha Ministerial Decision the status
of an authoritative interpretation because it was agre ed by all WTO Members meeting in the form of
the Ministerial Conference, the highest ranking body of the WTO.
187 According to Colombia,
however, this legal conclusion is incorrect. Colomb ia notes that the Ministerial Conference did not
act on the basis of a recommendation by the Council overseeing the functioning of the
TBT Agreement as mandated by Article IX:2 of the WTO Agreement, and, consequently, the first
condition of Article IX:2 was not present in this case. 188 Furthermore, the Panel dismissed this
condition on the basis that it was only a formal requirement. Colombia considers such reasoning to be
in error: first, because the procedural nature of a condition does not mean that it can be overlooked189;
and, second, because the fact that all Members agreed on a certain interpretation is not sufficient to
conclude that such interpretation was ad opted pursuant to Article IX:2 of the WTO Agreement. With
respect to the latter point, Colombia submits that neither the Ministerial Conference nor the General
Council have the authority to disregard the previ ously given consent by all WTO Members embodied
in the covered agreements. 190 Colombia further is of the view that the Appellate Body should clarify
whether the Doha Ministerial Decision could be cons idered to constitute, pursuant to Article 31(3)(a)
of the Vienna Convention , a "subsequent agreement between th e parties" on the interpretation of
Article 2.12 of the TBT Agreement.191
3. European Union
66. The European Union first submits that the term "like product" appears to be used by the
parties and the Panel in two different ways. The first use relates to the "comparison between the
import and domestic sides" (the "horizontal line") 192, while the second use concerns the "relationship
among the things that are to be considered t ogether" as a product on both the import and domestic
sides (the "vertical line").193 In the European Union's view, th e "horizontal line" comparison requires
the import and domestic categories to be described in terms that are identical in all respects, otherwise

186Brazil's third participant's submission, para. 30.
188Colombia's third participant's submission, para. 10.
189Colombia's third participant's submission, para. 14.
190Colombia's third participant's submission, para. 15.
191Colombia's third participant's submission, para. 19.
192European Union's third participant's submission, para. 17. (original underlining)
193European Union's third participant's submission, para. 18. (original underlining)

one cannot meaningfully test for de facto discrimination.
194 The "vertical line" comparison, on the
other hand, does not require that all things within the set of a "product" be identical in all respects
because the comparison is made on the basis of a market definition (that is, by reference to
cross-elasticity of supply and demand), hence quite heterogeneous things can be taken together as a
single product. 195 The European Union is of the view that, to determine whether there is de facto
discrimination, it is necessary to consider whether th e regulatory distinction is related to the foreign
origin of the product.196 For this reason, the European Union contends that even if clove and menthol
cigarettes would be reasonably grouped together as part of a "product", this does not mean that the
situation in respect of menthol cigarettes and yout h smoking, and clove cigarettes and youth smoking,
is necessarily the same or similar.
197
67. With respect to the less favourable treatment analysis under Article 2.1 of the
TBT Agreement, the European Union stresses that the relationship between trade and regulation is
complex.198 In its view, the problem is to distinguish between the exercise of regulatory autonomy
that is acceptable, and that which is not. 199 This necessarily entails looking at whether the design of
the measure is, expressly or by proxy, related to the foreign origin of the regulated products. The
European Union also considers that any "counterva iling explanations" should be considered together
with the inquiry into whether ther e is some relation with foreign origin, because such an approach
provides for the most flexibility when consideri ng a wide range of potential factual situations. 200 In
addition, the European Union raises concerns regard ing the Panel's approach in allocating the burden
of proof under Article 2.1 of the TBT Agreement.201 In particular, according to the European Union,
the Panel seems to reason that, because both menthol and clove cigarettes app eal to youth, the only
plausible explanation for the failure to extend the ban to menthol cigarettes is de facto
discrimination.202 However, this reasoning overlooks the possibility advocated by the United States
that the attractiveness of clove cigarettes to yout h is more pronounced than in the case of menthol
cigarettes.203 The European Union contends that the Panel did not explain how Indonesia had
discharged its burden of proving that the situatio n with respect to menthol cigarettes and youth
smoking was the same as or similar to the situation with respect to clove cigarettes. 204 If Indonesia

194European Union's third participant's submission, para. 19.
195European Union's third participant's submission, para. 20.
196European Union's third participant's submission, para. 21.
197European Union's third participant's submission, para. 23.
198European Union's third participant's submission, para. 32.
199European Union's third participant's submission, para. 33.
200European Union's third participant's submission, para. 44.
201European Union's third participant's submission, para. 51.
202European Union's third participant's submission, para. 54.
203European Union's third participant's submission, para. 54 (referring to United States' appellant's
submission, paras. 32-36, 54, 55, and 61-63).
204European Union's third participant's submission, para. 56.

failed to provide evidence in that respect, th e European Union wonders how Indonesia may be
considered to have discharged its burden of proof with respect to an alleged "in fact" breach of
Article 2.1 of the TBT Agreement.205
68. Lastly, with respect to Article 2.12 of the TBT Agreement, the European Union considers that
paragraph 5.2 of the Doha Ministerial Decision is re levant either pursuant to Article 31(3)(a) of the
Vienna Convention, or as a fact.206 It further contends that Indonesia had the burden of proving, under
Article 2.12 of the TBT Agreement , that the time actually allowed by the measure was not
reasonable.207 With respect to the question of whether or not six months would be ineffective in
fulfilling the legitimate objective pursu ed, the European Union finds nothing in the Doha Ministerial
Decision that expressly reverses the burden of proof. 208 It recalls, in that regard, that the Appellate
Body in EC – Sardines placed the burden of proof on the complainant under Article 2.4 of the
TBT Agreement.209
4. Mexico
69. Mexico submits that it is difficult to incorpor ate the objective of a technical regulation into
the like products analysis. In its view, when the purpose of a technical regulation is to protect the
highest values, such as human life or health, the analys is of the four criteria will itself be sufficient to
reach a correct interpretation of likeness becau se "the product differences themselves will have
inspired the objective of the technical regulation, and not the opposite". 210 Mexico contends, in
particular, that the consumer tastes and habits crite rion needs to be approached very carefully because
regulatory intervention by a Member can "shape consumer perceptions". 211 Moreover, Mexico
submits that the creation of sub-categories of like products on the basis of different end-uses, as
suggested by the United States, could lead to circum vention of the disciplines in Article 2.1 of the
TBT Agreement.212 Mexico further stresses that, if regulator y distinctions could be used to determine
like products, this could "render the concept of de facto discrimination meaningless".213
70. With respect to the Panel's less favourable tr eatment analysis, Mexico disagrees with the
United States that the group of like imported pr oducts should include like imported products from all
WTO Members and not just from the complaining Member. According to Mexico, the term "any

205European Union's third participant's submission, para. 57.
206European Union's third participant's submission, para. 62.
207European Union's third participant's submission, para. 63.
208European Union's third participant's submission, para. 66.
209European Union's third participant's submission, para. 67 (referring to Appellate Body Report, EC –
Sardines, paras. 259-282).
210Mexico's third participant's submission, para. 15.
211Mexico's third participant's submission, para. 16.
212Mexico's third participant's submission, paras. 17-19.
213Mexico's third participant's submission, para. 21.

[Member]" under Article 2.1 of the TBT Agreement provides "considerable flexibility" when assessing
conformity with this provision, and hen ce the focus can be on like products from " one Member, some
Members or all Members".
214 In Mexico's view, the Panel co rrectly focused on the treatment
accorded to like products from Indonesia. In addition, contrary to the United States' argument that the
Panel should have compared the treatment accord ed to imported and like domestic products as a
group, Mexico submits that the Panel's "efficient approach" to applying the "group" comparison when
determining less favourable treatment was "not a legal error". 215 On the contrary, the Panel properly
found that the "vast majority" of imports of Indon esian cigarettes with characterizing flavours were
banned while "all or almost all" of the US cigare ttes with characterizing flavours were excluded from
the ban.216
71. Mexico lastly addresses three additional issues concerning the less favourable treatment
analysis. First, it agrees with the Panel's reasoning that a measure is discriminatory when it minimizes
the costs for the domestic producers while triggeri ng costs to the foreign producers. In Mexico's
view, the Panel's approach is also applicable to any case where the technical regulation is designed in
such a way that, either de facto or de jure, avoids or minimizes costs for the domestic producers and
triggers costs to the foreign producers. 217 Second, with respect to the United States' argument that
there is no temporal limitation on the analysis of de facto less favourable treatment 218, Mexico posits
that the date of a panel's establishment is "the key date" when assessing whether de facto
discrimination exists.219 Mexico considers that, although past and possibly future events may inform
an assessment of de facto discrimination at the time of the establishment of the panel, "great care must
be taken when incorporating such facts into the assessment". 220 Third, Mexico is concerned with the
interpretation that the non-discriminati on obligations in Article 2.1 of the TBT Agreement are not
violated if the adverse impact is primarily the result of factors "unrelated to the foreign origin of the
product".221 According to Mexico, de facto discrimination precisely occurs, by its very nature, when
the challenged measure does not, on its face, discriminate on the basis of origin.

214Mexico's third participant's submission, para. 40. (original emphasis)
215Mexico's third participant's submission, para. 43.
216Mexico's third participant's submission, para. 48 (referring to Panel Report, paras. 7.276-7.279).
217Mexico's third participant's submission, paras. 53 and 54.
218Mexico's third participant's submission, para. 56 (referring to United States' appellant's submission,
paras. 91-94).
219Mexico's third participant's submission, para. 57.
220Mexico's third participant's submission, para. 59.
221Mexico's third participant's submission, para. 65 (quoting United States' appellant's submission,
para. 101; and referring to Panel Report, para. 7.259, in turn referring to Appellate Body Report, Dominican
Republic – Import and Sale of Cigarettes, para. 96).

5. Norway
72. Norway agrees with the United States that a pane l's terms of reference are not limited by the
products listed in a panel request. 222 In this regard, Norway is not convinced by the Panel's reasoning
that "the identification of the specific products at issue in a panel request pe rtains to the claim at
issue".223 In Norway's view, since the product scope of the likeness analysis may influence the
outcome of a discrimination claim, a panel should be entitled to define "the product scope of its own
analysis" to determine the existence of discriminati on, "without being subject to limitations chosen by
the complainant, for whatever reason, in its panel request".224
73. With respect to the analysis of less favourab le treatment, Norway first notes that the Panel
compared " one like product (i.e. clove cigarettes), from one source (i.e. Indonesia), to one like
domestic product in the United States (i.e. menthol cigarettes)". 225 In its view, however, the Panel
should have compared the impact of the measure at issue on " all like imported products, from all
WTO Members" vis-à-vis its impact "on all like domestic products". 226 According to Norway, the
correct starting point for the analysis should be "the entire group of products identified as like
products".227 Second, Norway disagrees with the United States' assertion that , because its measure
distinguishes between cigarettes "on the basis of an origin-neutral criterion derived from a legitimate
regulatory purpose", it is WTO-consistent.228 In Norway's view, the United States appears to "stretch
the Appellate Body's statement in Dominican Republic – [Import and Sale of ] Cigarettes too far" 229,
to circumstances that differ from those prevaili ng in that dispute. A proper assessment of de facto
discrimination turns on whether the like importe d products are predominantly subject to less
favourable treatment, while like domestic products are predominantly subject to more favourable
treatment. If there is such de facto discrimination, whether a measure's policy objective justifies that
discrimination belongs more properly to the analysis under an applicable exception.230

222Norway's third participant's submission, para. 5.
224Norway's third participant's submission, para. 7.
225Norway's third participant's submission, para. 12 (referring to Panel Report, paras. 7.274 and 7.275).
(original emphasis)
226Norway's third participant's submission, para. 12. (original emphasis)
227Norway's third participant's submission, para. 13 (referring to Panel Report, US – Tuna (II) (Mexico),
para. 7.295, in turn referring to Appellate Body Report, EC – Asbestos, para. 100). (original underlining)
228Norway's third participant's submission, para. 15. (original emphasis)
229Norway's third participant's submission, para . 20 (referring to Appellate Body Report, Dominican
Republic – Import and Sale of Cigarettes, para. 96).
230Norway's third participant's submission, para. 21.

6. Turkey
74. Turkey considers that the Panel did not commit a legal error in its general interpretation of the
term "like products" in Article 2.1 of the TBT Agreement. In its view, the Panel properly considered
the TBT Agreement as immediate context while also taki ng into account the jurisprudence on
Article III:4 of the GATT 1994. 231 Turkey thus contends that th e Panel correctly found that the
declared legitimate public health objective of th e measure, namely, reducing youth smoking, "must
permeate and inform [its] likeness analysis". 232 Regarding the general assessment of the criteria for
determining likeness, Turkey notes that the Appellate Body has rejected a "one-fits-all" approach and
has advocated a case-by-case analysis. 233 As for the end-use criterion, Turkey believes that a
competition-based approach to determine liken ess should not be as influential under the
TBT Agreement as under Article III of the GATT 1994. In stead, the public health aspect of the
measure "creates the immediate context". 234 With respect to consumer tastes and habits, Turkey
considers the Panel's focus on the relevant group of consumers—young smokers—not to be
erroneous. In its view, it is not necessary to s how that consumers are " actually substituting one
product for the other"; rather, it is sufficient to show that consumers "can potentially substitute"
them.235
75. Turkey further submits that the Panel did not co mmit legal error in limiting its analysis to a
comparison between treatment of menthol cigare ttes and clove cigarettes under Section 907(a)(1)(A)
of the FFDCA. In its view, the Panel was under an obligation to make a comparison between the
products specified in its terms of reference becau se, "at least in this case", the product specification
was part of Indonesia's claim itself. 236 In addition, Turkey notes that, in a less favourable treatment
analysis, detrimental effects stemming from factors ot her than the origin of a product are "an essential
issue".237 In assessing this key issue, Turkey contends , the critical benchmark is whether imported
and domestic products are treated equally, taking account of all economic and social factors. Turkey
therefore considers that the Panel was corr ect in concluding that the purpose of the TBT Agreement
would be defeated if Members were "allowed to remove their domestic products" from the application
of technical regulations "to avoid potential costs that it might otherwise incur".238

231Turkey's third participant's submission, para. 4 (referring to Panel Report, para. 7.117).
233Turkey's third participant's submission, para. 7 (quoting Appellate Body Report, EC – Asbestos ,
para. 101).
234Turkey's third participant's submission, para. 11.
235Turkey's third participant's submission, para. 15.
236Turkey's third participant's submission, paras. 18 and 19.
237Turkey's third participant's submission, para. 21.

III. Issues Raised in This Appeal
76. The following issues are raised in this appeal:
(a) Whether the Panel erred in finding that Section 907(a)(1)(A) of the FFDCA is
inconsistent with Article 2.1 of the TBT Agreement, and in particular:
(i) Whether the Panel erred in finding that clove cigarettes and menthol
cigarettes are like products within th e meaning of Article 2.1 of the
TBT Agreement, and in particular:
- whether the Panel performed an incomplete analysis of the different
end-uses of the products at issue;
- whether the Panel erred in its analys is of consumer tastes and habits;
and
- whether the Panel acted inconsistently with Article 11 of the DSU in
its assessment of consumer tastes and habits;
(ii) Whether the Panel erred in finding th at Section 907(a)(1)(A) accords to
imported clove cigarettes less favourable treatment than that accorded to
domestic menthol cigarettes within the meaning of Article 2.1 of the
TBT Agreement, and in particular:
- whether the Panel improperly narrowed the product scope of its
analysis by comparing treatment accorded to imported clove
cigarettes and to domestic menthol cigarettes;
- whether the Panel erred in assessing less favourable treatment at the
time the ban on flavoured cigarettes came into effect;
- whether the Panel erred in finding that the detrimental impact on
competitive opportunities of imported clove cigarettes could not be
explained by reasons unrelated to the foreign origin of those
products; and
- whether the Panel acted inconsistently with Article 11 of the DSU in
finding that Section 907(a)(1)(A) accords to imported clove

cigarettes less favourable treatment than that accorded to domestic
menthol cigarettes; and
(b) Whether the Panel erred in finding that, by failing to allow an interval of not less than
six months between the publication and the entry into force of Section 907(a)(1)(A)
of the FFDCA, the United States acted inc onsistently with Article 2.12 of the
TBT Agreement, and in particular:
(i) whether the Panel attributed an in correct "interpretative value" to
paragraph 5.2 of the Doha Ministerial Decision in interpreting the term
"reasonable interval" in Article 2.12 of the TBT Agreement; and
(ii) whether the Panel incorrectly foun d that Indonesia had established a
prima facie case of inconsistency with Article 2.12 of the TBT Agreement
that the United States failed to rebut.
IV. Background
77. Before commencing our analysis of the issues of law and legal interpretations raised in this
appeal, we briefly outline certain pertinent facts a nd background information. This dispute concerns
Section 907(a)(1)(A) of the United States Federal Food, Drug and Cosmetic Act
239 (the "FFDCA").
Section 907(a)(1)(A) was added to the FFDCA by S ection 101(b) of the Family Smoking Prevention
and Tobacco Control Act240 (the "FSPTCA")241, and became law on 22 June 2009.242
78. Under Section 907(a)(1)(A), beginning thr ee months after the enactment of the FSPTCA
—that is, as from 22 September 2009:
… a cigarette or any of its components (including the tobacco, filter,
or paper) shall not contain, as a constituent … or additive, an
artificial or natural flavour (other than tobacco or menthol) or an herb
or spice, including strawberry, grape, orange, clove, cinnamon,
pineapple, vanilla, coconut, liquorice, cocoa, chocolate, cherry, or
coffee, that is a characterizing flavour of the tobacco product or
tobacco smoke.
79. The specific objective of Section 907(a)(1)(A) is not set forth in the FSPTCA itself.
However, a report prepared by the House Energy and Commerce Committee
243 (the "House Report")

239Supra, footnote 2.
240Supra, footnote 3.
241Panel Report, para. 2.4.
242Panel Report, para. 2.5 (referring to Indonesia's fi rst written submission to the Panel, footnote 1 to
para. 1).
243H.R. Rep. No. 111-58, Pt. 1 (2009) (Panel Exhibits IND-2 and US-67).

articulates both the objectives of the FSPTCA overall, and of Section 907(a)(1)(A) in particular.
According to the House Report, "[t]he objectives of [the FSPTCA] are to provide the Secretary with
the proper authority over tobacco products in orde r to protect the public health and to reduce the
number of individuals under 18 years of age who use tobacco products." 244 The House Report also
explains the purpose of Section 907(a)(1)(A) as follows:
Consistent with the overall intent of the bill to protect the public
health, including by reducing the number of children and adolescents
who smoke cigarettes, Section 907( a)(1)(A) is intended to prohibit
the manufacture and sale of cigarettes with certain 'characterizing
flavors' that appeal to youth.
245
80. According to the Guidance for Industry and FDA Staff 246 ("FDA Guidance"),
Section 907(a)(1)(A) applies to all flavoured tobacco products 247 that meet the definition of a
"cigarette" in Section 3(1) of the Fede ral Cigarette Labeling and Advertising Act248, that is: "(A) any
roll of tobacco wrapped in paper or in any substa nce not containing tobacco"; or "(B) any roll of
tobacco wrapped in any substance containing tobacco which, because of its appearance, the type of
tobacco used in the filler, or its packaging and labeling, is likely to be offered to, or purchased by,
consumers as a cigarette described [under] (A)." 249 The ban contained in Section 907(a)(1)(A) also
extends to flavoured loose tobacco and rolling papers, and filters intended to be used in
"roll-your-own" cigarettes.250
81. The Panel identified the products at issue in this dispute as being clove cigarettes and menthol
cigarettes.251 Clove cigarettes are composed of tobacco combined with flavouring additives, which is
presented to the consumer in a paper wrapped with a filter. 252 More specifically, clove cigarettes are
generally manufactured with 60 to 80 per cent t obacco content, usually resulting from a blend of

244House Report, p. 14.
245House Report, p. 37.
246"General Questions and Answers on the Ban of Cigarettes that Contain Characterizing Flavors
(Edition 2)", 23 December 2009 (Panel Exhibit IND-41).
247The Panel noted that, in referring to cigarettes not containing any characterizing flavours, the parties
often used the terms "regular" and "tobacco-flavoured" cigarettes interchangeably, and found this ambiguity to
be "susceptible of causing confusion". The Panel observed that referring to tobacco-flavoured cigarettes may
confuse the reader into believing th at cigarettes such as clove-flavoured or menthol-flavoured cigarettes do not
contain tobacco. In fact, all cigarettes contain tobacco, but "flavoured" cigarettes such as menthol, kreteks,
bidis, and so on, contain, as well, an additive that impa rts a characterizing flavour to cigarettes. Therefore, the
Panel decided to use the term "regular" cigarettes, and not "tobacco-flavoured" cigarettes, as it better describes
the fact that they do not include additional characterizing flavours. (Panel Report, para. 7.131)
248United States Code, Title 15, Chapter 36.
249FDA Guidance, answer to Question 2.
250FDA Guidance, answers to Questions 3 and 4.
251Panel Report, para. 7.147.
252Panel Report, para. 7.157 (referring to Indonesia's first written submission to the Panel, para. 54;
and Indonesia's second written submission to the Panel, para. 67).

different varieties of tobacco.
253 As for the additives, clove cigarettes contain approximately 20 to 40
per cent cloves, either in the form of clove buds or ground/minced cloves. 254 They also generally
include a "sauce" as part of the flavouri ng ingredients chosen by each manufacturer 255, as well as
other components inherent to cloves, such as benzyl acetate, methyl salicylate, trans-anethole, and
methyl eugenol. 256 Before the Panel, the parties did not dispute that clove cigarettes contain
eugenol257—a substance that the United States defined as "a common topical anesthetic used in dental
procedures"258—and they also agreed that the Polzin paper, a study on certain ingredients of
Indonesian clove cigarettes, shows that 19 of 33 clov e cigarette brands analyzed contained coumarin,
a flavouring additive.259
82. Menthol cigarettes, in contrast, have approximately 90 per cent tobacco content by weight and
are composed of a blend of Virginia, Maryla nd burley, Oriental, and reconstituted tobacco. 260 The
Panel noted that the March 2011 report by the To bacco Products Scientific Advisory Committee to
the FDA 261 (the "March 2011 TPSAC Report") specifies that "[m]enthol cigarettes are typically
blended using more flue-cured a nd less burley tobacco … because some of the chemicals in burley
tobaccos create an incompatible taste character with menthol." 262 The main additive in menthol
cigarettes is menthol oil, a chemical co mpound extracted from the peppermint plant ( Mentha
piperita), the corn mint plant ( Mentha arvensis), or produced by synthetic or semi-synthetic means.
Menthol is added to cigarettes in several different ways 263 and diffuses throughout the cigarette,
irrespective of the means of application. 264 According to the March 2011 TPSAC Report, menthol is
added to cigarettes both as a characterizing fla vour and for other taste reasons, which include
brightening the flavour of tobacco blends and/or smoothing the taste of the blend. Menthol amounts

253Panel Report, para. 7.158 (referring to S. Farrer, "Alternative Cigarettes May Deliver More Nicotine
Than Conventional Cigarettes" (August 2003) 18(2) National Institute on Drug Abuse (NIDA) Notes (Panel
Exhibit IND-29); United States' first written submission to the Panel, para. 163; and Indonesia's and United
States' responses to Panel Question 33).
254Panel Report, para. 7.159.
255Panel Report, para. 7.160 (referring to United States' first written submission to the Panel, para. 165).
256Panel Report, para. 7.164 (referring to Indonesia's response to Panel Question 30).
257Panel Report, para. 7.162.
258Panel Report, para. 7.161 (quoting United States' first written submission to the Panel, para. 38).
259Panel Report, para. 7.163 (referring to Polzin et al., "Determination of eugenol, anethole, and
coumarin in the mainstream cigarette smoke of Indonesian clove cigarettes" (October 2007) 45(10) Food
& Chemical Toxicology (Panel Exhibit US-45); and Indonesia's and United States' responses to Panel
Question 34).
260Panel Report, para. 7.166 (referring to United States' response to Panel Question 31). The Panel
noted that Indonesia did not provide any specific information in that respect. (Ibid., footnote 357 to para. 7.166)
261Available at http://www.fda.gov/downloads/A dvisoryCommittees/CommitteesMeetingMaterials/
TobaccoProductsScientificAdvisoryCommittee/UCM247689.pdf.
262Panel Report, para. 7.166.
263The different ways in which menthol is added to cigarettes are the following: (a) by spraying the cut
tobacco during blending; (b) by applying it to the pack foil; (c) by injecting it into the tobacco stream; (d) by
injecting it into the filter; (e) by inserting a crushable capsule in the filter; (f) by placing a menthol thread in the
filter; or (g) any combination of the above. (Panel Report, para. 7.167)
264Panel Report, para. 7.167.

to roughly 1 per cent of the content of the cigare tte, although the specific amount varies from brand to
brand.265 Moreover, menthol may have cooling, analgesic, or irritating properties, and is reported to
reduce sensitivity to noxious chemicals, including nicotine.266
83. In this Report, we first consider the United St ates' claim that the Panel erred in finding that
clove and menthol cigarettes are like products within the meaning of Article 2.1 of the
TBT Agreement. We then address the United States' claim that the Panel erred in finding that the
United States acted inconsistently with Article 2.1 of the TBT Agreement by according to imported
clove cigarettes less favourable treatment than that accorded to domestic menthol cigarettes. Lastly,
we consider the United States' claim that the Panel erred in finding that, by not allowing a period of
not less than six months between the publication and the entry into force of Section 907(a)(1)(A), the
United States acted inconsistently with Article 2.12 of the TBT Agreement.
V. Article 2.1 of the TBT Agreement
A. Introduction
84. The Panel found that Section 907(a)(1)(A) of the FFDCA is a "technical regulation" within
the meaning of Annex 1.1 of the TBT Agreement, and that it is inconsistent with Article 2.1 of the
TBT Agreement because it accords to imported clove cigare ttes less favourable treatment than that
accorded to like menthol cigarettes of national origin.
267 In particular, the Panel found that "clove
cigarettes and menthol cigarettes are 'like products' for the purpose of Article 2.1 of the
TBT Agreement"
268, and that, "by banning clove cigarettes while exempting menthol cigarettes from
the ban, Section 907(a)(1)(A) does accord importe d clove cigarettes less favourable treatment than
that accorded to domestic menthol cigarettes, for the purpose of Article 2.1 of the TBT Agreement".269
85. The United States appeals the Panel's finding that Section 907(a)(1)(A) is inconsistent with
Article 2.1 of the TBT Agreement, and argues that the Panel erred in finding that clove and menthol
cigarettes are like products and th at Section 907(a)(1)(A) accords to imported clove cigarettes less
favourable treatment than that accorded to like pro ducts of national origin within the meaning of
Article 2.1 of the TBT Agreement. We address separately in this Report the United States' claims in
respect of the Panel's findings on like products and on less favourable treatment under Article 2.1 of

265According to Indonesia, the menthol content can range up to 3 per cent. (Panel Report, para. 7.169
(referring to Indonesia's response to Panel Question 32))
266Panel Report, para. 7.168 (referring to March 2011 TPSAC Report, pp. 18-20 and 22).
267Panel Report, paras. 7.293, 8.1(a), and 8.1(b).
268Panel Report, para. 7.248.
269Panel Report, para. 7.292.

the TBT Agreement. Before doing so, however, we consider Article 2.1 as a whole in its context and
in the light of the object and purpose of the TBT Agreement.
86. Article 2.1 of the TBT Agreement provides that, with respect to their central government
bodies:
Members shall ensure that in respect of technical regulations,
products imported from the territory of any Member shall be
accorded treatment no less favourable than that accorded to like
products of national origin and to like products originating in any
other country.
87. Article 2.1 of the TBT Agreement contains a national treatment and a most-favoured nation
treatment obligation. In this dispute, we are called upon to clarify the meaning of the national
treatment obligation. For a violation of the na tional treatment obligation in Article 2.1 to be
established, three elements must be satisfied: (i) the measure at issue must be a technical regulation;
(ii) the imported and domestic pr oducts at issue must be like pr oducts; and (iii) the treatment
accorded to imported products must be less favourable than that accorded to like domestic products.
The United States' appeal concerns only the second and the third elements of this test of
inconsistency, namely, whether the products at issu e are like and whether the treatment accorded to
clove cigarettes imported from Indonesia is less fa vourable than that accorded to like domestic
products in the United States.
270
88. In sections V.B and V.C of this Re port, we interpret Article 2.1 of TBT Agreement and, in
particular, the terms "like products" and "treatment no less favourable". However, before engaging in
this interpretative effort, we wish to make some observations of general import on: the preamble of
the TBT Agreement; the definition of "technical regulation"; the relevance of Article III:4 of the
GATT 1994 in interpreting Article 2.1 of the TBT Agreement; and the absence among the provisions
of the TBT Agreement of a general exception provision similar to Article XX of the GATT 1994.
89. The preamble of the TBT Agreement is part of the context of Article 2.1 and also sheds light
on the object and purpose of the Agreement. We find guidance for the interpretation of Article 2.1, in
particular, in the second, fifth, and sixth recitals of the preamble of the TBT Agreement.
90. The second recital links the TBT Agreement to the GATT 1994. It states:
Desiring to further the objectives of GATT 1994;

270We recall that it was not disputed before the Panel that Section 907(a)(1)(A) is a technical regulation
and that the United States has not appealed the Panel's finding that Section 907(a)(1)(A) is a technical regulation
within the meaning of Annex 1.1 to the TBT Agreement (Panel Report, paras. 7.21 and 7.41).

91. While this recital may be read as suggesting that the TBT Agreement is a "development" or a
"step forward" from the disciplines of the GATT 1994 271, in our view, it also suggests that the
two agreements overlap in scope and have si milar objectives. If this were not true, the
TBT Agreement could not serve to "further the objectives" of the GATT 1994. The second recital
indicates that the TBT Agreement expands on pre-existing GATT disciplines and emphasizes that the
two Agreements should be interpreted in a coherent and consistent manner.
92. The fifth recital reflects the trade-liberalization objective of the TBT Agreement by expressing
the "desire" that technical regulations, technical standards, and conformity assessment procedures do
not create unnecessary obstacles to international trade. It states:
Desiring however to ensure that technical regulations and standards,
including packaging, marking and labelling requirements, and
procedures for assessment of conformity with technical regulations
and standards do not create unnecessary obstacles to international
trade;
93. We see the fifth recital reflected in those TBT provisions that aim at reducing obstacles to
international trade and that limit Members' right to regulate, for instance, by prohibiting
discrimination against imported products (Article 2. 1) or requiring that technical regulations be no
more trade restrictive than necessary to fulfil a legitimate objective (Article 2.2).
94. The objective of avoiding the creation of unnecessary obstacles to international trade through
technical regulations, standards, and conformity assessment procedures is, however, qualified in the
sixth recital by the explicit recognition of Member s' right to regulate in order to pursue certain
legitimate objectives. The sixth recital states:
Recognizing that no country should be prevented from taking
measures necessary to ensure the quality of its exports, or for the
protection of human, animal or plant life or health, of the
environment, or for the prevention of deceptive practices, at the
levels it considers appropriate, subject to the requirement that they
are not applied in a manner which would constitute a means of
arbitrary or unjustifiable discrimination between countries where the
same conditions prevail or a disg uised restriction on international
trade, and are otherwise in accordance with the provisions of this
Agreement;
95. We read the sixth recital as counterbalancing the trade-liberalization objective expressed in
the fifth recital. The sixth recital "recognizes" Members' right to regulate versus the "desire" to avoid
creating unnecessary obstacles to international trade, expressed in the fifth recital. While the
fifth recital clearly suggests that Members' right to regulate is not unbounded, the sixth recital affirms

271Panel Report, para. 7.112.

that such a right exists while en suring that trade-distortive effects of regulation are minimized. The
sixth recital suggests that Members' right to regulate should not be constrained if the measures taken
are necessary to fulfil certain legitimate policy objec tives, and provided that they are not applied in a
manner that would constitute a means of arbitrar y or unjustifiable discrimination or a disguised
restriction on international trade, and are othe rwise in accordance with the provisions of the
Agreement. We thus understand the sixth recita l to suggest that Members have a right to use
technical regulations in pursuit of their legitimat e objectives, provided that they do so in an
even-handed manner and in a manner that is othe rwise in accordance with the provisions of the
TBT Agreement.
96. The balance set out in the preamble of the TBT Agreement between, on the one hand, the
desire to avoid creating unnecessary obstacles to in ternational trade and, on the other hand, the
recognition of Members' right to regulate, is not, in principle, different from the balance set out in the
GATT 1994, where obligations such as national treat ment in Article III are qualified by the general
exceptions provision of Article XX.
97. We observe that Article 2.1 of the TBT Agreement applies only in respect of technical
regulations, which are defined in Annex 1.1 as "[d]ocument[s] which lay[] down product
characteristics or their related processes and production methods, including the applicable
administrative provisions, with which compliance is mandatory".
272 Product characteristics laid down
in a technical regulation may themselves be relevant to the determination of whether products are like
within the meaning of Article 2.1. Thus, we cons ider that, in the case of technical regulations, the
measure itself may provide elements that are relevant to the determination of whether products are
like and whether less favourable treatment has been accorded to imported products.
98. The definition of technical regulations as documents laying down product characteristics
gives an indication that, under the TBT Agreement, measures making distinctions based on product
characteristics are in principle permitted. However, the fact that a technical regulation defines a
product's characteristics with a view to fulfilling a legitimate policy objective does not mean that it
may do so by treating imported products less favourably than like domestic products.
99. We note that the language of the national tr eatment obligation of Article 2.1 of the
TBT Agreement closely resembles the language of Article III:4 of the GATT 1994. Article III:4 of the
GATT 1994 reads, in relevant part:

272The second sentence of Annex 1.1 r eads as follows: "It may also in clude or deal exclusively with
terminology, symbols, packaging, marking or labelling requirements as they apply to a product, process or
production method".

The products of the territory of any Member imported into the
territory of any other Member shall be accorded treatment no less
favourable than that accorded to like products of national origin in
respect of all laws, regulations and requirements affecting their
internal sale, offering for sale, pur chase, transportation, distribution
or use.
100. The national treatment obligations of Article 2.1 and Article III:4 are built around the same
core terms, namely, "like products" and "treatment no less favourable". We further note that technical
regulations are in principle subject not only to Article 2.1 of the TBT Agreement, but also to the
national treatment obligation of Article III:4 of the GATT 1994, as "laws, regulations and
requirements affecting the internal sale, offering for sale, purchase, transportation, distribution or use"
of products. The very similar formulation of the provisions, and the overlap in their scope of
application in respect of technical regulations, c onfirm that Article III:4 of the GATT 1994 is relevant
context for the interpretation of the national treatment obligation of Article 2.1 of the
TBT Agreement.
273 We consider that, in interpreting Article 2.1 of the TBT Agreement, a panel should
focus on the text of Article 2.1, read in the context of the TBT Agreement, including its preamble, and
also consider other contextual elements, such as Article III:4 of the GATT 1994.274
101. Finally, we observe that the TBT Agreement does not contain among its provisions a general
exceptions clause. This may be contrasted with the GATT 1994, which contains a general exceptions
clause in Article XX.
102. With these observations of general import in mind, we turn to the United States' appeal of the
Panel's findings that clove and menthol cigarett es are like products, and that Section 907(a)(1)(A)
accords imported clove cigarettes from Indonesia less fa vourable treatment than that accorded to like
domestic menthol cigarettes, within the meaning of Article 2.1 of the TBT Agreement.
B. The Panel's Finding that Clove Cigarettes and Menthol Cigarettes are
"Like Products" within the Meaning of Article 2.1 of the TBT Agreement
103. We begin our analysis by addressing the Pane l's interpretation of the concept of "like
products" under Article 2.1 of the TBT Agreement. We then turn to the Un ited States' claims that the

273We recall that, in EC – Asbestos , the Appellate Body found that the terms used in one provision
"must be interpreted in light of the context, and of the ob ject and purpose, of the provision at issue, and of the
object and purpose of the covered agreement in which the provision appears" and that the meaning attributed to
the same terms in other provisions of the same agreement or in other covered agreements, may also be relevant
context. (Appellate Body Report, EC – Asbestos, paras. 88-89)
274In setting out its interpretative approach to Article 2.1 of the TBT Agreement, the Panel considered
that, "[e]ven if the GATT 1994 were considered to serve as context for Article 2.1 of the TBT Agreement, it
would not be the immediate context of that provision" and that "an interpreter should first assess the immediate
context of the provision subject to interpretation befo re reaching for an interpre tative aid that is further
removed." (Panel Report, para. 7.103)

Panel erred in its interpretation and application of the "likeness" criteria of end-use and consumer
tastes and habits, as well as to its claim that the Pa nel acted inconsistently with Article 11 of the
DSU in its assessment of consumer tastes and habits. The United States does not appeal the Panel's
findings concerning the products' physical characteristics and tariff classification.
1. "Like Products" under Article 2.1 of the TBT Agreement
104. The Panel found that clove cigarettes and ment hol cigarettes are like products within the
meaning of Article 2.1 of the TBT Agreement.275 The Panel reached this conclusion after having
evaluated the traditional "likeness" criteria (physical characteristics, end-uses, consumer tastes and
habits, and tariff classification), "bearing in mind that the measure at issue is a technical regulation,
with the immediate purpose of regulating cigarettes having a characterizing flavour, with a view to
attaining the legitimate objective of reducing youth smoking". 276 Before addressing the United States'
appeal of the Panel's specific findings in respect of the "likeness" criteria of end-uses and consumer
tastes and habits, we first consider the Panel's appr oach to interpreting "like products" in the context
of Article 2.1 of the TBT Agreement.
105. The Panel considered that "it is far from clea r that it is always appropriate to transpose
automatically the competition-oriented approach to likeness under Article III:4 of the GATT 1994 to
Article 2.1 of the TBT Agreement" in the absence of a general principle such as that expressed in
Article III:1 of the GATT 1994. 277 The Panel also noted that, despite the similarity in wording,
Article 2.1 of the TBT Agreement and Article III:4 of the GATT 1994 differ in that the former only
applies to technical regulations whereas the latte r applies to a much broader range of measures. 278
The Panel stated that Article III:4 of the GATT 1994 could not be regarded as immediate context to
Article 2.1 of the TBT Agreement and noted that the Appellate Body's reference to an "accordion" of
"likeness" allows, and potentially mandates, different interpretations of the term "like products" under
Article III:4 of the GATT 1994 and Article 2.1 of the TBT Agreement.279
106. The Panel turned to what it considered the i mmediate context of the term "like products" in
Article 2.1 of the TBT Agreement, namely, Article 2.1 itself and the TBT Agreement as a whole, and to
that Agreement's object and purpose as set out in its pr eamble. The Panel considered that the fact that
Section 907(a)(1)(A) of the FFDCA is a technical re gulation within the meaning of Annex 1.1 of the
TBT Agreement, which has the immediate purpose of regulating cigarettes with characterizing
flavours with the view to attaining the legitimat e objective of reducing youth smoking, should have

275Panel Report, para. 7.248.
276Panel Report, para. 7.244.
277Panel Report, para. 7.99.
278Panel Report, para. 7.106.
279Panel Report, para. 7.105.

"some weight and potentially cons iderable weight" in the determination of whether the products at
issue are like. 280 The Panel also noted that the sixth recital of the preamble of the TBT Agreement,
which recognizes Members' right to take measure s for legitimate objectives, and Article 2.2 could
justify a different interpretation of "likeness" under Article 2.1 of the TBT Agreement from that
developed under Article III:4 of the GATT 1994.281
107. The Panel thus found that, in the circumstances of this case, the interpretation of Article 2.1 of
the TBT Agreement should not be approached primarily from a competition-oriented perspective, but
that the weighing of the evidence relating to the "lik eness" criteria should be influenced by the fact
that Section 907(a)(1)(A) is a technical regula tion having the immediate purpose of regulating
cigarettes with a characterizing fl avour for public health reasons. 282 Having developed this
interpretative approach, the Panel tu rned to the analysis of the trad itional "likeness" criteria, namely,
the physical characteristics of the products, end- uses, consumer tastes and habits, and tariff
classification. The Panel gave particular weight to the health objective of Section 907(a)(1)(A) in its
assessment of the products' physical characteristics and of consumer tastes and habits.283
108. We agree with the Panel that the interpretation of the term "like products" in Article 2.1 of the
TBT Agreement should start with the text of that provision in the light of the context provided by
Article 2.1 itself, by other provisions of the TBT Agreement, and by the TBT Agreement as a whole.
We also agree that the relevant context includes the fact that Article 2.1 applies to technical
regulations, which are documents laying down the ch aracteristics of products. We further note that
the preamble of the TBT Agreement recognizes Members' right to regulate through technical
regulations. As explained below, however, we are not persuaded that these contextual elements and
the object and purpose of the TBT Agreement suggest that the interpretation of the concept of "like
products" in Article 2.1 of the TBT Agreement cannot be approached from a competition-oriented
perspective.
109. As we have observed above, the balance that the preamble of the TBT Agreement strikes
between, on the one hand, the pursuit of trade liberali zation and, on the other hand, Members' right to
regulate, is not, in principle, different from the balance that exists between the national treatment
obligation of Article III and the general exceptions provided under Article XX of the GATT 1994.
The second recital of the preamble links the two Agreements by expressing the "desire" "to further the
objectives of the GATT 1994", while the "recognition" of a Member's right to regulate in the
sixth recital is balanced by the "desire" expressed in the fifth recital to ensure that technical

280Panel Report, para. 7.109.
281Panel Report, para. 7.114.
282Panel Report, para. 7.119.
283Panel Report, para. 7.119.

regulations, standards, and conformity assessmen t procedures do not create unnecessary obstacles to
international trade. We note, however, that in the GATT 1994 this balance is expressed by the
national treatment rule in Article III:4 as qualified by the exceptions in Article XX, while, in the
TBT Agreement, this balance is to be found in Article 2.1 it self, read in the light of its context and of
its object and purpose.
110. The Panel was also of the view that the ab sence of a provision like Article III:1 of the
GATT 1994 in the TBT Agreement would prevent the transposition of the GATT competition-oriented
approach to likeness to Article 2.1 of the TBT Agreement.
284 Article III:1 provides that internal fiscal
and regulatory measures "should not be applied to imported or domestic products so as to afford
protection to domestic production". We observe, in this respect, that, in EC – Asbestos, the Appellate
Body considered that the "general principle" articulated in Article III:1 of the GATT 1994 "seeks to
prevent Members from applying internal taxes a nd regulations in a manner which affects the
competitive relationship, in the marketplace, between the domestic and im ported products involved ,
'so as to afford protection to domestic production'". 285 However, the Appellate Body did not base its
conclusion that "likeness" in Article III:4 is about the "nature and extent of a competitive relationship
between and among products" 286 exclusively on the "general princi ple" expressed in Article III:1.
Rather, the Appellate Body further clar ified that "the word 'like' in Article III:4 is to be interpreted to
apply to products that are in … a competitive rela tionship", because it is "products that are in a
competitive relationship in the marketplace [that] could be affected through treatment of imports 'less
favourable' than the treatment accorded to domestic products".287
111. We agree that the very concept of "treatment no less favourable", which is expressed in the
same words in Article III:4 of the GATT 1994 and in Article 2.1 of the TBT Agreement, informs the
determination of likeness, suggesting that likeness is about the "nature and extent of a competitive
relationship between and among products". Indeed , the concept of "treatment no less favourable"
links the products to the marketplace, because it is only in the marketplace that it can be determined
how the measure treats like imported and domestic pr oducts. We note, however, that, in determining
likeness based on the competitive relationship be tween and among the products, a panel should
discount any distortive effects that the measure at issue may itself have on the competitive
relationship, and reserve the consideration of such effects for the analysis of less favourable treatment.
In such cases, a panel should determine the nature and the extent of the competitive relationship for

284Panel Report, para. 7.99.
285Appellate Body Report, EC – Asbestos, para. 98. (original emphasis)
287Appellate Body Report, EC – Asbestos, para. 99. (original emphasis)

the purpose of determining likeness in isolation from the measure at issue, to the extent that the latter
informs the physical characteristics of the products and/or consumers' preferences.
112. In the light of the above, we disagree with the Panel that the text and context of the
TBT Agreement support an interpretation of the concept of "likeness" in Article 2.1 of the
TBT Agreement that focuses on the legitimate objectives a nd purposes of the technical regulation,
rather than on the competitive relationship between and among the products.
113. We further observe that measures often pursue a multiplicity of objectives, which are not
always easily discernible from the text or even fro m the design, architecture, and structure of the
measure. Determining likeness on the basis of the regulatory objectives of the measure, rather than on
the products' competitive relationship, would require the identification of all the relevant objectives of
a measure, as well as an assessment of which obj ectives among others are relevant or should prevail
in determining whether the products are like. It seems to us that it would not always be possible for a
complainant or a panel to identify all the objectives of a measure and/or be in a position to determine
which among multiple objectives are relevant to the determination of whethe r two products are like,
or not.288
114. The appeal by the United States of the Panel's determination of consum er tastes and habits,
which we address further below, highlights the diffi culties that arise when attempting to determine
likeness based on the regulatory purposes of the meas ure rather than on the competitive relationship
between and among products. The Panel relied on th e objective of the measure at issue, which it
identified as reducing youth smoking, to de termine the likeness of the products. 289 The United States
questions the basis for the Panel's narrow focus on the immediate objective of the measure290 and cites
to other regulatory objectives related to health cons iderations associated with heavily used cigarettes
to draw further distinctions between menthol and clove cigarettes.291
115. Measures, such as technical regulations, may have more than one objective. However, a
panel that is tasked with determining whether tw o products are like may not be able to reach a
coherent result if, in determining likeness, it has to rely on various possible regulatory objectives of
the measure. If a panel were to focus on one of the objectives of a measure to the exclusion of all
others that are equally important, it may reach a so mewhat arbitrary result in the determination of
what are the like products at issue which, in turn , has implications for the determination of whether

288See Panel Report, Japan – Alcoholic Beverages II, para. 6.16.
289Panel Report, para. 7.119.
291The United States cites to "possible countervailing public health factors" associated with banning
heavily used cigarettes, such as "possible increases in unregulated black market cigarettes or strain to the
healthcare system". (United States' appellant's submission, para. 61)

less favourable treatment has been accorded. Moreover, we note that a purpose-based approach to the
determination of likeness does not, necessarily, leave more regulatory autonomy for Members,
because it almost invariably puts panels into the po sition of having to determ ine which of the various
objectives purportedly pursued by Members are more important, or which of these objectives should
prevail in determining likeness or less favourable treatment in the event of conflicting objectives.
116. More importantly, however, we do not consider that the concept of "like products" in
Article 2.1 of the TBT Agreement lends itself to distinctions betw een products that are based on the
regulatory objectives of a measure. As we see it, the concept of "like products" serves to define the
scope of products that should be compared to establish whether less favourable treatment is being
accorded to imported products. If products that are in a sufficiently strong competitive relationship to
be considered like are excluded from the group of like products on the basis of a measure's regulatory
purposes, such products would not be compared in order to ascertain whether less favourable
treatment has been accorded to imported products. This would inevitably distort the less favourable
treatment comparison, as it would refer to a "marketplace" that would include some like products, but
not others. As we consider further below in respec t of the United States' appeal of the Panel's less
favourable treatment finding, distin ctions among products that have b een found to be like are better
drawn when considering, subsequently, whether le ss favourable treatment has been accorded, rather
than in determining likeness, because the latter appr oach would alter the scope and result of the less
favourable treatment comparison.
117. Nevertheless, in concluding that the determ ination of likeness should not be based on the
regulatory purposes of technical regulations, we are not suggesting that the regulatory concerns
underlying technical regulations may not play a role in the determination of whether or not products
are like. In this respect, we recall that, in EC – Asbestos , the Appellate Body found that regulatory
concerns and considerations may play a role in applying certain of the "likeness" criteria (that is,
physical characteristics and consumer preferences) and, thus, in the determination of likeness under
Article III:4 of the GATT 1994.
118. In EC – Asbestos , the Appellate Body found that, in examining whether products are like,
panels must evaluate all relevant evidence, includi ng evidence relating to the health risks associated
with a product, which was the underlying concern of the challenged measure in that dispute. The
Appellate Body found that such evidence would not be examined as a separate criterion but, rather,
under the traditional "likeness" criteria. In particular, the Appellate Body stated that a product's health
risks are relevant to the determination of the competitive relationship between products, and
addressed health risks as part of the products' physical characteristics and of the tastes and habits of

consumers.292 In respect of physical characteristics, the Appellate Body considered that a panel
should examine fully the physical properties of produc ts, in particular, those physical properties that
are likely to influence the competitive relationshi p between products in the marketplace. These
include those physical properties that make a product toxic or otherwise dangerous to health. 293 In
respect of consumer tastes and habits, the Appellate Body found that the health risks associated with a
product could influence the preference of consumers.294
119. Similarly, we consider that the regulatory con cerns underlying a measure, such as the health
risks associated with a given product, may be releva nt to an analysis of the "likeness" criteria under
Article III:4 of the GATT 1994, as well as under Article 2.1 of the TBT Agreement, to the extent they
have an impact on the competitive relationship between and among the products concerned.
120. The interpretation of the concept of "likeness" in Article 2.1 has to be based on the text of that
provision as read in the context of the TBT Agreement and of Article III:4 of the GATT 1994, which
also contains a similarly worded national treatment obligation that applies to laws, regulations, and
requirements including technical regulations. In the light of this context and of the object and purpose
of the TBT Agreement, as expressed in its preamble, we consider that the determination of likeness
under Article 2.1 of the TBT Agreement, as well as under Article III:4 of the GATT 1994, is a
determination about the nature and extent of a competitive re lationship between and among the
products at issue. To the extent that they are rele vant to the examination of certain "likeness" criteria
and are reflected in the products' competitive rela tionship, regulatory concerns underlying technical
regulations may play a role in the determination of likeness.
121. With this interpretative approach in mind, we now turn to the claims by the United States that
the Panel committed errors in its assessments of th e end-uses of clove and menthol cigarettes and of
the tastes and habits of consumers of clove and me nthol cigarettes, as well as to the United States'
claim that the Panel acted inconsistently with Ar ticle 11 of the DSU in its assessment of consumer
tastes and habits. We begin by examining the Pane l's finding that clove and menthol cigarettes have
the same end-use.

293The Appellate Body noted that a characteristic of chrysotile asbestos fibres was that the microscopic
particles and filaments of these fibres were carcinogenic for humans when inhaled. Thus, the Appellate Body
concluded that the carcinogenicity, or toxicity, constitu ted a defining aspect of the physical properties of
chrysotile asbestos fibres as opposed to polyvinyl alcohol, cellulose, and glass (PCG) fibres, which did not
present the same health risk. (Appellate Body Report, EC – Asbestos, para. 114)
294The Appellate Body found that the health risks associated with chrysotile asbestos fibres influenced
the behaviour of both manufacturers (who incorporate fibres into another product) and ultimate consumers. The
Appellate Body noted that a manufacturer cannot ignore the preferences of the ultimate consumers of a product
and, if the risks posed by a particular product are sufficiently great, the ultimate consumers may simply cease to
buy that product. (Appellate Body Report, EC – Asbestos, para. 122)

2. End-Uses
122. In examining the end-uses of clove and menthol cigarettes, the Panel found that both clove
and menthol cigarettes have the same end-use, that is, "to be smoked" 295, and disagreed with the
United States that the end-uses of a cigarette incl ude "satisfying an addi ction to nicotine" and
"creating a pleasurable experience associated with the taste of the cigarette and the aroma of the
smoke". The Panel considered that the end-uses pres ented by the United States relate to the reasons
why people smoke, but that does not mean that cigarettes have several end-uses.
296 In particular, the
Panel considered that the United States' comments on the appeal of flavours to certain smokers relate
more properly to consumer tastes and habits than to end-use.297
123. The United States claims that a panel, when conducting an end-use analysis, must consider
the different uses of the products and not just the u se that is a "common denominator" of the products
in question.298 According to the United States, it is undis puted that both clove and menthol cigarettes
are used for smoking, but the Panel improperly limit ed its analysis to considering only this common
use between the products while ignoring other rele vant end-uses. Menthol cigarettes, the United
States posits, are used to "satisfy the nicotine addic tions of millions of smokers in the United States",
whereas clove cigarettes are primarily used "for experimentation and special social settings" and
generally are not smoked to satisfy nicotine addiction in the US market.
299
124. Indonesia responds that the Panel did not err in finding that the end-use of clove and menthol
cigarettes is "to be smoked". In Indonesia's view, moreover, even assuming arguendo that the
end-uses put forward by the United States were pertinent ones, the United States presented no
evidence showing that clove and menthol cigarettes were not both capable of performing the end-uses
of satisfying a nicotine addiction and creating a pleasurable experience.300
125. We observe that end-uses describe the possible f unctions of a product, while consumer tastes
and habits reflect the consumers' appreciation of these functions. In EC – Asbestos , the Appellate
Body described end-uses as "the extent to which products are capable of performing the same, or
similar, functions" and consumer t astes and habits as "the extent to which consumers are willing to

295Panel Report, para. 7.199.
296Panel Report, para. 7.198.
297Panel Report, para. 7.197.

use the products to perform these functions". 301 That a product is not principally used to perform a
certain function does not exclude that it may nevertheless be capable of performing that function.
126. The Appellate Body has also considered that, while each criterion addresses, in principle, a
different aspect of the products involved, which shoul d be examined separately, the different criteria
are "interrelated"302 and "not mutually exclusive", so that certain evidence may well fall under more
than one criterion. 303 Thus, in our view, that consumers smoke to satisfy an addiction or that they
smoke for pleasure are relevant to the examinati on of both end-uses and consumer tastes and habits,
although different aspects are addressed in the analysis of these two separate "likeness" criteria.
127. We do not consider that it is correct to charact erize "satisfying an addiction to nicotine" and
"creating a pleasurable experience associated with the taste of the cigarette and the aroma of the
smoke" as consumer tastes and habits and not end-u ses. To the extent that they describe possible
functions of the products, rather than the consumers' appreciation of these functions, they represent, in
fact, different end-uses of the products at issue, ra ther than consumer tastes and habits. Consumer
tastes and habits should indicate to what extent consumers are willing to su bstitute clove cigarettes
and menthol cigarettes to "satisfy an addiction to nicotine" and/or to "create a pleasurable experience
associated with the taste of the cigarette and the aroma of the smoke".
128. We also recall that, in EC – Asbestos , the Appellate Body found that the panel had not
provided a complete picture of the various end-uses of the different fibres at issue, because its analysis
was based on a "small number of applications" for wh ich the products were substitutable, and because
it had failed to examine other, different end-uses fo r the products. The Appellate Body noted that it is
only by forming a complete picture of the various end-uses of a product that a panel can assess the
significance of the fact that products share a limited number of end-uses.
304
129. An analysis of end-use should be comprehe nsive and specific enough to provide meaningful
guidance as to whether the products in question are like products. It is not disputed that both clove
and menthol cigarettes are "to be smoked". Ne vertheless, "to be smoked" does not exhaustively
describe the functions of cigarettes. As a consequen ce, to find, as the Panel did, that the end-use of
both clove and menthol cigarettes is "to be smoked" does not, in our view, provide sufficient guidance
as to whether such products are like products within the meaning of Article 2.1 of the TBT Agreement.

301Appellate Body Report, EC – Asbestos, para. 117. (emphasis added)
303Appellate Body Reports, Philippines – Distilled Spirits , para. 131. In that dispute, the Appellate
Body considered that factors such as the perceptibility of differences among the products and the products'
presentation and labelling concern both physical ch aracteristics and consumer tastes and habits. ( Ibid.,
paras. 128 and 132)

Also cigars, loose tobacco, and herbs share the sa me end-use of being "sm oked", although this does
not say much as to whether all these products are like.
305
130. In our view, the Panel did not perform an analysis of the end-uses of clove and menthol
cigarettes that was sufficiently comprehensive and sp ecific to provide significant indications as to the
likeness of these products. We agree with the United States that there are more specific permutations
and functions of "smoking", which ar e relevant to the end-uses of cigarettes, such as "satisfying an
addiction to nicotine" and "creating a pleasurable e xperience associated with the taste of the cigarette
and the aroma of the smoke". The Panel should have considered these permutations and functions in
its evaluation of whether the products at issue ar e like. We also note, however, the argument by
Indonesia that, even assuming that the end-uses put forward by the United States were "legitimate
end-uses", the United States did not show that clove and menthol cigarettes were not both capable of
performing the functions of "satisfying an addi ction to nicotine" and "creating a pleasurable
experience associated with the taste of the cigarette and the aroma of the smoke".306
131. The United States argues on appeal that menthol cigarettes are used to satisfy the nicotine
addictions of millions of smokers in the United States, while clove cigarettes are primarily used for
experimentation and special social settings and generally are not used to satisfy addiction. The Panel,
however, found that "both menthol and clove cigarettes appeal to youth because of the presence of an
additive that gives them a characterizing flavour having the effect of masking the harshness of
tobacco".307 Both types of cigarettes are capable of pe rforming a social/experimentation function and,
thus, share the end-use of "creating a pleasurable e xperience associated with the taste of the cigarette
and the aroma of the smoke". At the same time, both clove and menthol cigarettes are capable of
performing the function of "satisfying an addicti on to nicotine", considering that both types of
cigarettes contain nicotine, whose addictiveness is scientifically proven.
308 The fact that more
"addicts" smoke menthol than clove cigarettes does not mean that clove cigarettes cannot be smoked
to "satisfy an addiction to nicotine". As we have observed above, what matters in determining a
product's end-use is that a product is capable of performing it, not that such end-use represents the
principal or the most common end-use of that product.

305Similarly, to state that the end-use of alcoholic beverages is "to be drunk" would not distinguish
alcoholic beverages from water, milk, or orange juice that are also consumed by drinking. In contrast, in
Philippines – Distilled Spirits , the specific end-use of alcoholic bevera ges was described as "thirst quenching,
socialization, relaxation, pleasant intoxication". (Appellate Body Reports, Philippines – Distilled Spirits ,
307Panel Report, para. 7.231.
308In its response to Panel Question 37, the United States notes that, "[w]ith respect to the addictive
effects of regular, menthol and clove cigarettes, all of these products contain nicotine and are thus addictive."
(United States' response to Panel Question 37, para. 85)

132. In the light of the above, we disagree with the Panel that the end-use of cigarettes is simply
"to be smoked" and agree with the United States th at there are more specific end-uses of cigarettes
such as "satisfying an addiction to nicotine" and "creating a pleasurable experience associated with
the taste of the cigarette and the aroma of the sm oke". We consider, however, that, based on the
Panel's findings referred to above, it can be concluded that both clove and menthol cigarettes share the
end-uses of "satisfying an addiction to nicotine" and "creating a pleasurable experience associated
with the taste of the cigarette and the aroma of the smoke". Accordingly, we consider that the more
specific products' end-uses put forward by the United States also support the Panel's overall finding
that clove and menthol cigarettes are like products.
3. Consumer Tastes and Habits
133. In addressing consumer tastes and habits in resp ect of clove and menthol cigarettes, the Panel
stated that the legitimate objective of Secti on 907(a)(1)(A) of the FFDCA, namely, reducing youth
smoking, delimited the scope of the consumers whose tastes and habits should be examined under this
criterion.309 Accordingly, the Panel considered it appropr iate to examine the substitutability of clove
and menthol cigarettes from the perspective of the relevant group of c onsumers, which included
young smokers and those ready to become smokers (potential consumers). 310 The Panel found that
the evidence submitted by the parties showed that bot h clove and menthol cigarettes, because of their
characterizing flavours, which help to mask the ha rshness of tobacco, appeal to youth and are better
vehicles for youth to start smoking than regular cigarettes. 311 Therefore, the Panel concluded that,
from the point of view of the consumers at issue in this case, menthol-flavoured and clove-flavoured
cigarettes are "similar for the purpose of starting to smoke".312
134. The United States claims that the Panel erred in considering the tastes and habits of only
young smokers and potential young smokers, and not of current adult smokers. The United States
notes that Section 907(a)(1)(A) makes regulatory distinctions among cigarettes based not only on their
appeal to young and potential smokers, but al so on their use by current adult smokers. 313 The United
States argues that nothing in the text of Article 2.1 of the TBT Agreement provides a basis for the
Panel to have limited its consid eration of the public health dis tinctions drawn under the measure
according to what the Panel construed to be the immediate objective of the measure.314

309Panel Report, para. 7.206.
310Panel Report, para. 7.214.
311Panel Report, para. 7.217.
312Panel Report, para. 7.232.

135. The United States contends that a like product an alysis under Article 2.1 must take account of
the regulatory distinctions drawn under the measure at issue, which are not limited to the immediate
or primary objective of a measure, but that often reflect a balancing of other considerations relevant to
the public welfare. In particular, the United Stat es argues that, even though the primary or immediate
purpose of Section 907(a)(1)(A) is to reduce yout h smoking, the measure was developed based on a
consideration of the health benef its, risks, and consequences to th e population as a whole, including
the possible negative consequences of banning a type of cigarette, such as menthol cigarettes, to
which millions of adults are chemically and psychologically addicted.
315
136. We have disagreed with the Panel's approach to interpreting the concept of "likeness" in
Article 2.1 of the TBT Agreement in the light of the regulatory obj ectives of the measure, rather than
based on the competitive relationship between and among the products. 316 In particular, we have
observed that the context of the TBT Agreement and its object and purpose do not suggest that the
regulatory objectives of a technical regulation should play a role that is separate from the
determination of a competitive relationship between and among products. We have also noted that
determining likeness primarily in the light of th e regulatory objectives of the measure is further
complicated by the fact that measures, including t echnical regulations, often have multiple objectives.
In contrast, we have considered that the de termination of likeness under Article 2.1 of the
TBT Agreement is a determination about the nature a nd the extent of a competitive relationship
between and among products, and th at the regulatory concerns that underlie a measure may be
considered to the extent that they have an impact on the competitive relationship.
317
137. In the light of the above, we also consider th at the Panel was wrong in confining its analysis
of consumer tastes and habits to those consumer s (young and potential young smokers) that are the
concern of the objective of the regulation (to reduce youth smoking). In an analysis of likeness based
on products' competitive relationship, it is the mark et that defines the scope of consumers whose
preferences are relevant. The proportion of youth and adults smoking different types of cigarettes
may vary, but clove, menthol, and regular cigarette s are smoked by both young and adult smokers.
To evaluate the degree of substitutability among th ese products, the Panel should have assessed the
tastes and habits of all relevant consumers of the products at issue, not only of the main consumers of
clove and menthol cigarettes, particularly where it is clear that an important proportion of menthol
cigarette smokers are adult consumers.

315United States' appellant's submission, para. 62. The United States cites in particular to "possible
increases in unregulated black market cigarettes or strain to the healthcare system". (United States'
appellant's submission, para. 61)
316Section V.B.1 of this Report.
317See supra, para. 119.

138. Moreover, without at this stage entering into the merits of the other objectives of the
regulation advocated by the United States, the Panel' s approach discounts the f act that the technical
regulation at issue may also have other objectives that concern other actual and potential consumers of
the products at issue. Therefore, we disagree with the Panel that the legitimate objective of
Section 907(a)(1)(A), that is, reducing youth smoki ng, delimits the scope of the consumers whose
tastes and habits should be examined to young smokers and potential young smokers.318
139. Having determined that the Panel was wrong in co nfining its analysis of consumer tastes and
habits to young and potential young smokers, we now consider whether the Panel's failure to evaluate
the tastes and habits of current adult consumers of menthol cigarettes undermines the proposition that
there is a sufficient degree of substitutability be tween clove and menthol cigarettes to support an
overall finding of likeness under Article 2.1 of the TBT Agreement.
140. The United States claims that "[e]vidence co mparing the tastes and habits of younger,
potential smokers and the tastes and habits of older, established smokers is directly relevant to the
issue of consumer tastes and habits", because clove cigarettes are smoked disproportionately by
youth, while menthol cigarettes are smoked mo re evenly among young and adult smokers.
Accordingly, the United States argues, clove ciga rettes present a unique risk to young, uninitiated
smokers and have little to no impact on adults, wh ile menthol cigarettes are a risk to young,
uninitiated smokers, but also have a significant impact on adults.319
141. Indonesia submits that the United States failed to present evidence showing that consumers,
whether adult or youth, would be unwilling to subs titute clove and menthol cigarettes for the end-use
of smoking. Indonesia argues that the United States is wrong in presuming that consumer tastes and
habits must be identical to be like, considering that the Appellate Body found that products that are
close to being perfectly substitutable can be like products . Indonesia contends that there is sufficient
evidence on record supporting the fact that yo ung smokers and pre-smoki ng youth view clove and
menthol cigarettes "as at least close to substitutable".320
142. We consider that, in order to determine wh ether products are like under Article 2.1 of the
TBT Agreement, it is not necessary to demonstrate that the products are substitutable for all consumers
or that they actually compete in the entire market. Rather, if th e products are highly substitutable for
some consumers but not for others, this may also support a finding that the products are like. In
Philippines – Distilled Spirits , the Appellate Body considered that the standard of "directly

318Panel Report, paras. 7.206.
320Indonesia's appellee's submission, para. 82 (referring to Appellate Body Reports, Philippines –
Distilled Spirits, para. 149).

competitive or substitutable" relating to Article III:2, second sentence, of the GATT 1994 is satisfied
even if competition does not take place in the whole ma rket but is limited to a segment of the market.
The Appellate Body found that "it was reasonable for the [p]anel to draw, from the Philippines'
argument that imported distilled spirits are only ava ilable to a 'narrow segment' of its population, the
inference that there is actual competition between imported and domestic distilled spirits at least in the
segment of the market that the Philippines admitted has access to both imported and domestic distilled
spirits".
321 In that same dispute, the Appellate B ody found that Article III:2, second sentence, does
not require that competition be assessed in relation to the market segment that is most representative
of the "market as a whole", and that Article III of the GATT 1994 "does not protect just some
instances or most instances, but rather, it protects all instances of direct competition".322
143. Although the Appellate Body's finding in Philippines – Distilled Spirits concerned the
second sentence of Article III:2 of the GATT 1994, we consider this interpretation of "directly
competitive or substitutable products" to be relevant to the concept of "likeness" in Article III:4 of the
GATT 1994 and 2.1 of the TBT Agreement, since likeness under these provisions is determined on the
basis of the competitive relationshi p between and among the products. 323 In our view, the notion that
actual competition does not need to take place in th e whole market, but may be limited to a segment
of the market, is separate from the question of the degree of competition that is required to satisfy the
standards of "directly competitive or substitutable products" and "like products".
144. The Panel's consideration of cons umer tastes and habits was too limited. At the same time,
the mere fact that clove cigarettes are smoked di sproportionately by youth, while menthol cigarettes
are smoked more evenly by young and adult smoke rs does not necessarily affect the degree of
substitutability between clove and me nthol cigarettes. The Panel found that, from the perspective of
young and potential young smokers , clove-flavoured cigarettes and menthol-flavoured cigarettes are
similar for purposes of starting to smoke.
324 We understand this as a finding that young and potential
young smokers perceive clove and me nthol cigarettes as sufficiently substitutable. This, in turn, is
sufficient to support the Panel's finding that those products are like within the meaning of Article 2.1
of the TBT Agreement, even if the degree of substitutability is not the same for all adult smokers.

321Appellate Body Reports, Philippines – Distilled Spirits, para. 220.
322Appellate Body Reports, Philippines – Distilled Spirits, para. 221 (referring to Panel Report, Chile –
323In EC – Asbestos , the Appellate Body, while not defining th e precise scope of th e concept of "like
products" in Article III:4, found that Article III:4 applie s to products that are in a competitive relationship and
that "the scope of 'like' in Article III:4 is broader th an the scope of 'like' in Article III:2, first sentence".
(Appellate Body Report, EC – Asbestos, para. 99)
324Panel Report, para. 7.232.

145. In the light of the above, we are of the view that, while the Panel should not have limited its
analysis of consumer tastes and habits to youn g and potential young smokers to the exclusion of
current adult smokers, this does not undermine th e Panel's finding regarding consumer tastes and
habits and its ultimate finding of likeness. This is so because the degree of competition and
substitutability that the Panel found for young and potential young smokers is sufficiently high to
support a finding of likeness under Article 2.1 of the TBT Agreement.
146. Finally, we turn to the claim by the United St ates that the Panel acted inconsistently with
Article 11 of the DSU when it reached the conclusi on that clove cigarettes and menthol cigarettes are
perceived similarly by the consumers at issue in th is case, and that it disregarded critical evidence on
how consumers actually use and perceive the products at issue in the relevant market.325
147. The United States emphasizes that clove cigare ttes are smoked disproportionately by young,
novice smokers while menthol cigarettes are smoked more evenly by young people and adults. It
recalls that both parties presented evidence—in part icular a set of surveys—aimed at shedding light
on the tastes and habits of consumers in the United St ates in respect of clove and menthol cigarettes.
However, the United States argues, the Panel disr egarded this evidence after having erroneously
concluded that it could not "rely on the information provide[d]" in the surveys on the basis that this
information was "not directly comparable". 326 The United States submits that the survey data before
the Panel were "directly relevant to the question" before it because the data provided evidence on how
consumers and potential consumers "used and perceived different cigarettes in the United States "327,
that is, the relevant market. The United States further argues that, after disregarding this evidence, the
Panel proceeded to base its c onclusions "entirely on speculation and conjecture", without any
evidentiary support as to how consumers in the relevant market actually use the cigarettes at issue.328
148. Indonesia responds that, given that the research pa rameters varied from survey to survey, the
Panel properly concluded that the survey data di d not provide clear guidance on "consumer tastes and
habits". In its view, the Panel's approach to that evidence "hardly amounts to excluding it a priori".329
Instead, the Panel "clearly articulated the difficu lties it encountered in comparing the survey data" 330
and simply did not place the same weight on the evidence as did the United States. Indonesia further
argues that the Panel identified and relied on eviden ce showing that both clove and menthol cigarettes

327United States' appellant's submission, para. 67. (original emphasis)

are "trainer" or "starter" cigarettes that appeal to youth.
331 Based on this evidence on record, the Panel
properly found that "all these flavoured cigarettes are perceived as vehicles to start smoking".332
149. We observe that Article 11 of the DSU requires a panel to make an objective assessment of
the matter before it, including an objective assessment of the facts of the case. Thus, Article 11
requires a panel to "consider all the evidence pres ented to it, assess its cr edibility, determine its
weight, and ensure that its factual findings have a proper basis in that evidence."
333 In addition, panels
"are not required to accord to factual evidence of the parties the same meaning and weight as do the
parties."334 In this respect, the Appellate Body will not "interfere lightly" with a panel's fact-finding
authority, and will not "base a finding of inconsiste ncy under Article 11 simply on the conclusion that
[it] might have reached a different factual finding". 335 Instead, for a claim under Article 11 to
succeed, the Appellate Body must be satisfied that the panel has exceeded its authority as the initial
trier of facts. As the initial trier of facts, a pa nel must provide "reasoned a nd adequate explanations
and coherent reasoning" 336, must base its finding on a sufficient evidentiary basis 337, and must treat
evidence with "even-handedness". 338 Moreover, a participant claiming that a panel disregarded
certain evidence must explain why the evidence is so material to its case that the panel's failure to
address such evidence has a bearing on the objectivity of the panel's factual assessment.339
150. Both the United States and Indonesia relied on a series of surveys addressing smoking
patterns in the United States in order to support their respective arguments. 340 The Panel observed,

333Appellate Body Reports, Philippines – Distilled Spirits , para. 135 (quoting Appellate Body Report,
Brazil – Retreaded Tyres , para. 185, in turn referring to Appellate Body Report, EC – Hormones , paras. 132
and 133).
335Appellate Body Reports, Philippines – Distilled Spirits , para. 136 (quoting Appellate Body Report,
US – Wheat Gluten, para. 151).
336Appellate Body Report, US – Upland Cotton (Article 21.5 – Brazil), footnote 618 to para. 293.
337See Appellate Body Report, US – Carbon Steel, para. 148.
338Appellate Body Report, US – Upland Cotton (Article 21.5 – Brazil), para. 292.
339See Appellate Body Report, EC – Fasteners (China), para. 442.
340Indonesia relied on the following four surveys: (i) the 2006-2008 National Survey on Drug Use and
Health; (ii) the 2009 Western Watts Survey; (iii) the 2009 Monitoring the Future Survey; and (iv) a
2010 telephone survey conducted by Opinion Research Corporation. (Panel Report, footnote 426 to para. 7.210
(referring to National Survey on Drug Use and Health 2006-2008, "Essential Facts About Clove Cigarettes"
(Panel Exhibit IND-3); Western Wa tts Data Collection, "Clove Ciga rettes Attitude, Awar eness and Usage
Survey", 16-19 February 2009 (Panel Exhibit IND-26); L.D. Johnston et al., "Smoking continues gradual
decline among U.S. teens, smokele ss tobacco threatens a comeback," University of Michigan News Service ,
14 December 2009 (Panel Exhibit IND-33); and Op inion Research Corporation, Teen CARAVAN Study
No. 719381, 23-26 September 2010 (Panel Exhibit IND-34))) The United States based its arguments on
two surveys: (i) the 2002-2003 National Survey on Drug Use and Health; and (ii) the National Youth Tobacco
Survey. (Panel Report, footnote 426 to para. 7.210 (referring to FDA Survey Assessment, "Patterns of Use
Among Menthol, Clove, and Other Flavored Cigarettes (Panel Exhibit US-53)))

however, that these surveys "do not share the same research parameters"341; instead, they "examine[d]
different age groups", "pose[d] different questi ons", and were "based on different methodological
approaches".342 Consequently, in the Panel's view, the in formation contained in the different surveys
was "not directly comparable". On this basis, the Panel reached the conclusion that it could not "rely
on the information [that the surveys] provide on market shares for the purposes of analyzing the
consumers' tastes and habits criterion" 343, and that "the evidence on consumer preferences submitted
by the parties may not provide clear guidance" as to whether clove and menthol cigarettes are
substitutable from the perspective of young smokers and potential young smokers.344
151. We acknowledge that extracting meaningful information from surveys that differ
considerably in terms of research parameters might not be an easy task. Likewise, we do not suggest
that panels must always be capable of engaging in sophisticated statistical exercises to solve data
discrepancies that ultimately cannot be resolved. However, the fact that evidence relied on by the
parties may be difficult to compare cannot excuse the panel from examining it. A panel has the
obligation to "consider all the evidence presented to it" 345, and it should at least attempt to extract
potentially relevant information contained therein. It is only after such an examination that a panel
might be able to provide "reasoned and adequate explanations"346 as to why it cannot or chooses not to
rely on specific evidence submitted by the parti es. In our view, a panel cannot determine a priori that
some pieces of evidence are not reliable for the purposes of its analysis solely on the basis of a
difference in the parameters and methodology used.
152. We recall, however, that not every error allegedly committed by a panel amounts to a
violation of Article 11 of the DSU. A participant claiming that a panel ignor ed certain evidence must
explain why that evidence is so material to its case that the panel's failure to address such evidence
has a bearing on the objectivity of the panel's factual assessment. 347 In that respect, the United States
submits that, because the Panel did not examine the evidence related to consumers' tastes and habits,
the Panel's finding with respect to this criterion "was fatally flawed".348 In the United States' view, the
survey data presented by the parties "show that consumers and potential cons umers use and perceive

341Panel Report, para. 7.210.
342Panel Report, para. 7.210.
343Panel Report, para. 7.210.
344Panel Report, para. 7.209.
345Appellate Body Reports, Philippines – Distilled Spirits , para. 135 (quoting Appellate Body Report,
Brazil – Retreaded Tyres , para. 185, in turn referring to Appellate Body Report, EC – Hormones , paras. 132
and 133).
346Appellate Body Report, US – Upland Cotton (Article 21.5 – Brazil), footnote 618 to para. 293.
347Appellate Body Report, EC – Fasteners (China), para. 442.

clove and menthol cigarettes differently—even thou gh they are both cigarettes with characterizing
flavors that appeal to youth".
349
153. We have considered above, in respect of the cl aim by the United States that the Panel erred in
the application of the consumer tastes and habits criterion, that, although the Panel should not have
limited its analysis to young and potential young c onsumers, to the exclusion of current adult
consumers, this did not affect its finding that th ere is sufficient substitutability between clove and
menthol cigarettes to support its overall finding that the products are like. The Panel's findings show
that, while clove and menthol cigarettes do not compete in the whole market, these products are
substitutable for young and potential young consumers.
154. Therefore, in our view, the fact that the Pane l did not rely on evidence demonstrating that
clove cigarettes are disproportionally smoked by yo uth while menthol cigarettes are smoked by both
youth and adults, does not have mate rial consequences for the Panel's finding on consumer tastes and
habits. This is so because the Panel found that ther e is a sufficient degree of substitutability, at least
in some segments of the market, between clove and menthol cigarettes, to support a finding of
likeness under Article 2.1 of the TBT Agreement.
155. In sum, we are not persuaded that the reasons advanced by the Panel for not relying on the
surveys submitted by the parties justify the cursory treatment given by the Panel to these surveys.
Even if this evidence was not directly comparable or based on different methodological approaches,
the Panel was required to consider this evidence and extract relevant information that it contained.
The Panel did not provide an adequate explanation as to why this was not possible. Nevertheless, in
our view, the Panel's error does not amount to a viol ation of Article 11 of the DSU, considering that
the evidence that the Panel did not engage with doe s not have material consequences for the Panel's
finding that consumer tastes and habits indicate th at clove and menthol cigarettes are sufficiently
substitutable in certain segments of the market, a nd does not, therefore, undermine the Panel's finding
that clove and menthol cigarettes are like products under Article 2.1 of the TBT Agreement.
4. Conclusion on "Like Products"
156. We have disagreed with the Panel's interpre tation of the concept of "like products" in
Article 2.1 of the TBT Agreement, which focuses on the purposes of the technical regulation at issue,
as separate from the competitive relationship betwee n and among the products. In contrast, we have
concluded that the context provided by Artic le 2.1 itself, by other provisions of the TBT Agreement,
by the TBT Agreement as a whole, and by Article III:4 of the GATT 1994, as well as the object and

purpose of the TBT Agreement, support an interpretation of the concept of "likeness" in Article 2.1
that is based on the competitive relationship between and among the products and that takes into
account the regulatory concerns underlying a technical re gulation, to the extent that they are relevant
to the examination of certain likeness criteri a and are reflected in the products' competitive
relationship.
157. As a consequence of our interpretative appr oach to the concept of "like products" in
Article 2.1 of the TBT Agreement, we have also disagreed with the Panel's decision to examine the
extent of substitutability of clove and menthol ci garettes from the perspective of a limited group of
consumers, that is, young smokers and potential yo ung smokers. We have, nevertheless, considered
that the Panel's error does not vitiate the conclusion that there is a sufficient degree of substitutability
between clove and menthol cigarettes to support an overall finding of likeness under Article 2.1 of the
TBT Agreement. We have also determined that the Panel' s decision that it could not rely on certain
evidence submitted by the parties did not amount to an error under Article 11 of the DSU.
158. In respect of end-use, we have disagreed with the Panel's conclusion that the end-use of clove
and menthol cigarettes is simply "to be smoked". Nevertheless, we have considered, based on the
Panel's findings, that both clove and menthol cigarettes are capable of performing the more specific
end-uses put forward by the United States, that is, "s atisfying an addiction to nicotine" and "creating a
pleasurable experience associated with the taste of the cigarette and the aroma of the smoke". 350 We
have thus concluded that the different end-uses of clove and menthol cigarettes support the Panel's
overall finding of likeness.
159. Finally, we observe that the United States has not appealed the Panel's findings regarding the
physical characteristics and the tariff classification of clove and menthol cigarettes. The Panel found
that clove and menthol cigarettes are physically similar as "they share their main traits as cigarettes,
that is, having tobacco as a main ingredient, and an additive which imparts a characterizing flavour,
taste and aroma, and reduces the harshness of tobacco"
351; and that they are both classified under
subheading 2402.20 of the Harmonized Commodity Description and Coding System.352
160. In the light of all of the above, while we disag ree with certain aspects of the Panel's analysis,
we agree with the Panel that th e "likeness" criteria it examined support its overall conclusion that
clove and menthol cigarettes are like products within the meaning of Article 2.1 of the
TBT Agreement. Therefore, we uphold, albeit for different reasons, the Panel's finding, in

351Panel Report, para. 7.187.
352Panel Report, para. 7.239.

paragraph 7.248 of the Panel Report, that clove cigarettes and menthol cigarettes are like products
within the meaning of Article 2.1 of the TBT Agreement.
C. The Panel's Finding that Section 907(a)(1)(A) of the FFDCA Accords Imported Clove
Cigarettes Less Favourable Treatment than That Accorded to Domestic Menthol
Cigarettes, within the Meaning of Article 2.1 of the TBT Agreement
1. Introduction
161. In this section, we address the United States ' appeal of the Panel's finding that the
United States acted inconsistently with Article 2.1 of the TBT Agreement by according to clove
cigarettes imported from Indonesia less favourable tr eatment than that accorded to domestic like
products.
162. Having concluded that clove and menthol cigare ttes are like products within the meaning of
Article 2.1 of the TBT Agreement, the Panel undertook a four-step an alysis to determine whether
Section 907(a)(1)(A) of the FFDCA accords to clove cigarettes imported from Indonesia less
favourable treatment than that accorded to like domestic products. First, the Panel sought to
determine the products to be compared in its analysis. 353 The Panel found that Article 2.1 called for a
comparison between treatment accorded to, on the one hand, clove cigarettes imported from
Indonesia, and, on the other hand, domestic menthol cigarettes. 354 Second, the Panel determined that
under Section 907(a)(1)(A) clove and menthol ciga rettes are treated differently, in that clove
cigarettes are banned while menthol cigarettes are excluded from the ban. 355 Third, the Panel found
that such difference in treatment modifies the c onditions of competition to the detriment of the
imported products, insofar as impor ted clove cigarettes are banned wh ile domestic menthol cigarettes
are allowed to remain in the market. 356 Fourth and finally, the Panel rejected the United States'
argument that such detrimental impact could be "exp lained by factors or circumstances unrelated to
the foreign origin of the products" 357, because Section 907(a)(1)(A) imposes costs on foreign
producers, notably producers in Indonesia, while at the same time imposing no costs on any
US entity.358
163. On appeal, the United States claims th at the Panel improperly narrowed the product scope of
its analysis by focusing exclusively on treatme nt accorded to imported clove cigarettes and to

353Panel Report, para. 7.270.
354Panel Report, paras. 7.275-7.277.
355Panel Report, paras. 7.279 and 7.280.
356Panel Report, para. 7.281.
357Panel Report, para. 7.283 (referring to United States' second written submission to the Panel,
para. 127, in turn referring to Appellate Body Report, Dominican Republic – Import and Sale of Cigarettes ,
para. 96).
358Panel Report, para. 7.289.

domestic menthol cigarettes. The United States pos its that the Panel should have compared the
treatment accorded to the group of imported and to the group of domestic like products. The
United States also claims that the Panel improperly narrowed the temporal scope of its analysis by
focusing exclusively on the effects of Section 907( a)(1)(A) on domestic like products at the time the
ban on flavoured cigarettes came into effect. The United States claims further that the Panel erred in
finding that the less favourable treatment accorded to imported clove cigarettes was related to the
origin of the products, because Section 907(a)(1)(A ) imposes costs on foreign producers while at the
same time imposing no costs on any US entity. Fina lly, the United States claims that the Panel acted
inconsistently with Article 11 of the DSU in reaching these findings.
164. Indonesia responds that the Panel properly identif ied the products to be compared in its less
favourable treatment analysis, and did not err in establishing the appropriate timeframe for its
comparison. Indonesia also asserts that the Panel correctly found that the less favourable treatment
accorded to clove cigarettes could not be explained by factors unrelated to the foreign origin of the
imported products. Finally, Indonesia claims that the Panel acted in accordance with Article 11 of the
DSU in performing its analysis.
165. Before turning to the specific issues raised by the United States on appeal, we find it useful to
interpret the "treatment no less favourable" requirement of Article 2.1 of the TBT Agreement in the
light of the conflicting interpretations of this phrase offered by the participants on appeal.
2. "Treatment No Less Favourable" under Article 2.1 of the TBT Agreement
166. Referring to the Appellate Body's interp retation of Article III:4 of the GATT 1994 359, the
United States and Indonesia agree that the "treatment no less favourable" standard of Article 2.1 of the
TBT Agreement requires a panel to determine whether the technical regulation at issue modifies the
conditions of competition in the relevant market to the detriment of the imported products. However,
Indonesia considers that the existence of any detrimental effect on competitive opportunities for
imported products is sufficient to establish less favourable treatment under Article 2.1. 360 In contrast,
the United States argues that the existence of a detrimental effe ct on competitive opportunities for
imports is necessary, but not sufficient, to establis h a violation of Article 2.1. Referring to the
Appellate Body report in Dominican Republic – Import and Sale of Cigarettes , the United States

359See Appellate Body Report, Korea – Various Measures on Beef, para. 137.

argues that Article 2.1 requires further inquiry into whether "the detrimental effect is explained by
factors or circumstances unrelated to the foreign origin of the product".
361
167. Article 2.1 of the TBT Agreement provides that, with respect to their central government
bodies:
Members shall ensure that in respect of technical regulations,
products imported from the territory of any Member shall be
accorded treatment no less favourable than that accorded to like
products of national origin and to like products originating in any
other country.
168. As already set out above, for a violation of th e national treatment obligation in Article 2.1 to
be established, three elements must be satisfied: (i) the measure at issue must be a "technical
regulation"; (ii) the imported a nd domestic products at issue must be like products; and (iii) the
treatment accorded to imported products must be le ss favourable than that accorded to like domestic
products. In this part of its appeal, the Un ited States challenges only the Panel's finding that
Section 907(a)(1)(A) of the FFDCA violates the nati onal treatment obligation provided in Article 2.1
of the TBT Agreement, insofar as it accords to imported clove cigarettes less favourable treatment than
that accorded to like domestic products.
169. The "treatment no less favourable" requirement of Article 2.1 of the TBT Agreement applies
"in respect of technical regulations". A technical regulation is defined in Annex 1.1 thereto as a
"[d]ocument which lays down product characterist ics or their related processes and production
methods … with which compliance is mandatory". As such, technical regulations are measures that,
by their very nature, establish distinctions between products according to their characteristics or their
related processes and production meth ods. This suggests, in our view, that Article 2.1 should not be
read to mean that any distinction, in particular those that are based exclusively on particular product
characteristics or their related processes and production methods, would per se accord less favourable
treatment within the meaning of Article 2.1.
170. We next observe that Article 2.2 of the TBT Agreement provides, in relevant part, that:
Members shall ensure that technical regulations are not prepared,
adopted or applied with a view to or with the effect of creating
unnecessary obstacles to international trade. For this purpose,
technical regulations shall not be more trade-restrictive than
necessary to fulfil a legitimate objective, taking account of the risks
non-fulfilment would create.

361United States' appellant's submission, para. 101 (referring to Panel Report, para. 7.269; and
Appellate Body Report, Dominican Republic – Import and Sale of Cigarettes, para. 96).

171. The context provided by Article 2.2 suggests that "obstacles to international trade" may be
permitted insofar as they are not found to be "unn ecessary", that is, "more trade-restrictive than
necessary to fulfil a legitimate objective". To us, this supports a reading that Article 2.1 does not
operate to prohibit a priori any obstacle to international trade. Indeed, if any obstacle to international
trade would be sufficient to establish a violation of Article 2.1, Article 2.2 would be deprived of its
effet utile.
172. This interpretation of Article 2.1 is buttressed by the sixth recital of the preamble of the
TBT Agreement, in which WTO Members recognize that:
… no country should be prevented from taking measures necessary
to ensure the quality of its exports, or for the protection of human,
animal, or plant life or health, of the environment, or for the
prevention of deceptive practices, at the levels it considers
appropriate, subject to the requirement that they are not applied in a
manner that would constitute a mean s of arbitrary or unjustifiable
discrimination between countries wh ere the same conditions prevail
or a disguised restriction on international trade, and are otherwise in
accordance with the provisions of this Agreement.
173. The language of the sixth recital expressly acknowledges that Members may take measures
necessary for, inter alia, the protection of human life or health, provided that such measures "are not
applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination" or a
"disguised restriction on international trade" and ar e "otherwise in accordance with the provisions of
this Agreement". We consider that the sixth recital of the preamble of the TBT Agreement provides
relevant context regarding the ambit of the "treatment no less favourable" requirement in Article 2.1,
by making clear that technical regulations may pursu e the objectives listed therein, provided that they
are not applied in a manner that would constitute a means of arbitrary or unjustifiable discrimination
between countries where the same cond itions prevail, or a disguised r estriction on international trade,
and are otherwise in accordance with the provisions of the TBT Agreement.
174. Finally, as noted earlier
362, the object and purpose of the TBT Agreement is to strike a balance
between, on the one hand, the objective of trade liber alization and, on the other hand, Members' right
to regulate. This object and purpose therefore s uggests that Article 2.1 should not be interpreted as
prohibiting any detrimental impact on competitiv e opportunities for imports in cases where such
detrimental impact on imports stems exclusively from legitimate regulatory distinctions.
175. Accordingly, the context and object and purpose of the TBT Agreement weigh in favour of
reading the "treatment no less favourable" requirement of Article 2.1 as prohibiting both de jure and

362Supra, paras. 94 and 95.

de facto discrimination against imported products, wh ile at the same time permitting detrimental
impact on competitive opportunities for imports that stems exclusively from legitimate regulatory
distinctions.
176. Like the participants, we also find it useful to consider the context provided by the other
covered agreements. In particular, we note that th e non-discrimination obligation of Article 2.1 of the
TBT Agreement is expressed in the same terms as that of Article III:4 of the GATT 1994.
363 In the
context of Article III:4, the "treatment no less fa vourable" requirement has been widely interpreted by
previous GATT and WTO panels and by the Appe llate Body. Beginning with the GATT panel in
US – Section 337 Tariff Act, the term "treatment no less favourable" in Article III:4 was interpreted as
requiring "effective equality of opportunities for imported products". 364 Subsequent GATT and
WTO panels followed a similar approach, and f ound violations of Article III:4 in cases where
regulatory distinctions in enforcement procedures 365, distribution channels 366, statutory content
requirements367, and allocation of import licenses 368 resulted in alteration of the competitive
opportunities in the market of the regulating Member to the detriment of imported products vis-à-vis
domestic like products.
177. In Korea – Various Measures on Beef , the Appellate Body agreed that the analysis of less
favourable treatment under Article III:4 focuses on th e "conditions of competition" between imported
and domestic like products. 369 The Appellate Body further clarified that a formal difference in
treatment between imported and like domestic products is:
… neither necessary, nor sufficient, to show a violation of
Article III:4. Whether or not imported products are treated "less
favourably" than like domestic products should be assessed instead
by examining whether a measure modifies the conditions of
competition in the relevant market to the detriment of imported
products.
370 (original emphasis)
178. Subsequently, in EC – Asbestos , the Appellate Body explained th at imports will be treated
less favourably than domestic like products when regulatory distinctions disadvantage the group of

363Article III:4 of the GATT 1994 reads:
The products of the territory of any Member imported into the territory of
any other Member shall be accorded tr eatment no less favourable than that
accorded to like products of nationa l origin in respect of all laws,
regulations and requirements affecting their internal sale, offering for sale,
purchase, transportation, distribution or use.
364GATT Panel Report, US – Section 337 Tariff Act, para. 5.10.
365GATT Panel Report, US – Section 337 Tariff Act, para. 5.20.
366GATT Panel Report, Canada – Provincial Liquor Boards (US), paras. 5.12-5.16.
367Panel Report, US – Gasoline, para. 6.10.
368Panel Reports, EC – Bananas III, paras. 7.179-7.180.
369Appellate Body Report, Korea – Various Measures on Beef, para. 136.
370Appellate Body Report, Korea – Various Measures on Beef, para. 137.

imported products vis-à-vis the group of domestic li ke products. The Appellate Body reasoned that
the "treatment no less favourable" clause of Article III:4:
… expresses the general principle, in Article III:1, that internal
regulations "should not be applied … so as to afford protection to
domestic production." If there is "less favourable treatment" of the
group of "like" imported products, th ere is, conversely, "protection"
of the group of "like" domestic pr oducts. However, a Member may
draw distinctions between products which have been found to be
"like", without, for this reason alone, according to the group of "like"
imported products "less favourable treatment" than that accorded to
the group of "like" domestic products.371 (original emphasis)
179. Thus, the "treatment no less favourable" standa rd of Article III:4 of the GATT 1994 prohibits
WTO Members from modifying the conditions of comp etition in the marketplace to the detriment of
the group of imported products vis-à-vis the group of domestic like products.372
180. Although we are mindful that the meaning of the term "treatment no less favourable" in
Article 2.1 of the TBT Agreement is to be interpreted in the light of the specific context provided by
the TBT Agreement, we nonetheless consider these previous fi ndings by the Appellate Body in the
context of Article III:4 of the GATT 1994 to be instructive in assessing the meaning of "treatment no
less favourable", provided that the specific context in which the term appears in Article 2.1 of the
TBT Agreement is taken into account. Similarly to Article III:4 of the GATT 1994, Article 2.1 of the
TBT Agreement requires WTO Members to accord to the group of imported products treatment no less
favourable than that accorded to the group of like domestic products. Article 2.1 prescribes such

372We disagree with the United States to the extent that it suggests that Dominican Republic – Import
and Sale of Cigarettes stands for the proposition that, under Article III:4, panels should inquire further whether
"the detrimental effect is unrelated to the foreign origin of the product". (United States' appellant's submission,
para. 101 (referring to Appellate Body Report, Dominican Republic – Import and Sale of Cigarettes , para. 96))
Although the statement referred to by the United States, wh en read in isolation, could be viewed as suggesting
that further inquiry into the rationale for the detrimental impact is necessary, in that dispute the Appellate Body
rejected Honduras' claim under Article III:4 because:
… the difference between the per-unit co sts of the bond requirement alleged
by Honduras is explained by the fact that the importer of Honduran
cigarettes has a smaller market shar e than two domestic producers (the
per-unit cost of the bond requirement being the result of dividing the cost of
the bond by the number of cigarette s sold on the Dominican Republic
market).
(Appellate Body Report, Dominican Republic – Import and Sale of Cigarettes, para. 96)
Thus, in that dispute, the Appellate Body merely held that the higher per unit costs of the bond
requirement for imported cigarettes did not conclusively demonstrate less favourable treatment, because it was
not attributable to the specific m easure at issue but, rather, was a function of sales volumes. In Thailand –
Cigarettes (Philippines) , the Appellate Body further clarified that for a finding of less favourable treatment
under Article III:4 "there must be in every case a genuine relationship between the measure at issue and its
adverse impact on competitive opportunities for imported versus like domestic products to support a finding that
imported products are treated less favo urably". (Appellate Body Report, Thailand – Cigarettes (Philippines) ,
para. 134) The Appellate Body esch ewed an additional inquiry as to wh ether such detrimental impact was
related to the foreign origin of the products or explained by other factors or circumstances.

treatment specifically in respect of technical regula tions. For this reason, a panel examining a claim
of violation under Article 2.1 should seek to ascer tain whether the technical regulation at issue
modifies the conditions of competition in the market of the regulating Member to the detriment of the
group of imported products vis-à-vis the group of like domestic products.
181. However, as noted earlier, the context and object and purpose of the TBT Agreement weigh in
favour of interpreting the "treatment no less favourab le" requirement of Article 2.1 as not prohibiting
detrimental impact on imports that stems exclusively from a legitimate regulatory distinction. Rather,
for the aforementioned reasons
373, the "treatment no less favourable" requirement of Article 2.1 only
prohibits de jure and de facto discrimination against the group of imported products.
182. Accordingly, where the technical regulation at issue does not de jure discriminate against
imports, the existence of a detrimental impact on competitive opportunities for the group of imported
vis-à-vis the group of domestic like products is not dispositive of less favourable treatment under
Article 2.1. Instead, a panel must further analyze whether the detrimental impact on imports stems
exclusively from a legitimate regulatory distinction rather than reflecting discrimination against the
group of imported products. In ma king this determination, a panel must carefully scrutinize the
particular circumstances of the case, that is, the design, architecture, revealing structure, operation,
and application of the technical regulation at issue, and, in particular, whether that technical regulation
is even-handed, in order to determine whether it discriminates against the group of imported products.
3. Product Scope of the "Treatment No Less Favourable" Comparison
183. We now turn to the specific issues raised by the United States on appeal. We begin with the
United States' appeal of the scope of products cons idered by the Panel to determine whether imported
clove cigarettes are treated less favourably than US domestic like products within the meaning of
Article 2.1 of the TBT Agreement.
184. Before the Panel, Indonesia argued that the "treatment no less favourable" requirement of
Article 2.1 calls for a comparison between, on the one hand, treatment accorded to imported clove
cigarettes and, on the other hand, treatment accord ed to any like domestic cigarettes that are not
banned by Section 907(a)(1)(A) of the FFDCA (that is , menthol or regular cigarettes, but not other
flavoured cigarettes, which are prohibited under Section 907(a)(1)(A)). 374 The United States
responded that the Panel should compare treatme nt accorded under Section 907(a)(1)(A) to all

373See supra, paras. 97-101.
374Panel Report, para. 7.271.

imported cigarettes (to the extent they are like) a nd not just clove cigarettes, with the treatment
accorded to all domestically produced like cigarettes.375
185. The Panel determined that the comparison s hould be between the treatment accorded to
imported clove cigarettes and that accorded to th e domestically produced cigarettes that it had earlier
found to be like products, that is, menthol cigarettes. It reasoned that:
Article 2.1 of the TBT Agreement calls for a comparison of "products
imported from the territory of any Member" with "like products of
national origin". These provisions refer to the products imported
from the territory of " any other Member", and not "Members" or
"other Members" more generally. The imported products in this case
are the products imported from the territory of Indonesia. And it
appears to be common ground between the parties that the vast
majority of cigarettes that were imported from Indonesia into the
United States were clove cigarettes.
376 (original emphasis; footnote
omitted)
On the domestic side, we recall that we have found that menthol
cigarettes are "like" clove cigarette s for the purpose of Article 2.1 of
the TBT Agreement because, inter alia, they both contain an additive
that provides them with a characterizing flavour which makes them
appealing to youth. We have not en tered into an analysis of whether
domestic regular cigarettes are "like" imported clove cigarettes as we
consider that we would be exceeding our terms of reference.
377
186. On appeal, the United States claims that the Panel erred in a priori limiting its less favourable
treatment comparison to one imported product (Ind onesian clove cigarettes) and one domestic like
product (menthol cigarettes). Referring to the Appellate Body report in EC – Asbestos and the panel
report in US – Tuna II (Mexico) , the United States argues that Article 2.1 required the Panel to
compare the treatment accorded to all im ported and domestic like products as a group. 378 F o r t h e
United States, a proper comparison would have dem onstrated that Section 907(a)(1)(A) does not alter
the conditions of competition between imported and domestic like products as a group.379
187. With respect to the imported products, the Unite d States argues that the Panel erred in failing
to consider the treatment accorded to menthol cigarettes imported from other countries. 380 According
to the United States, the reference to imported products of "any other Member" in Article 2.1 does not
justify the Panel's focus on Indonesian clove cigarettes, because Article 2.1 aims at discerning

375Panel Report, para. 7.272.
376Panel Report, para. 7.275.
377Panel Report, para. 7.277.
378United States' appellant's submission, paras. 75-77 (referring to Appellate Body Report, EC –
Asbestos, para. 100; and quoting Panel Report, US – Tuna II (Mexico), para. 7.295).

legitimate regulatory distinctions from those that ser ve as a proxy for singling out the like products of
the complaining Member
381 for less favourable treatment.
188. With respect to like domestic products, the Unite d States argues that the Panel erred in failing
to consider the treatment accorded to domestic flavoured cigarettes. 382 To the extent that the Panel
limited its analysis to domestic menthol cigarettes by virtue of the product scope of Indonesia's panel
request, the United States maintains that a panel's terms of reference do not limit the scope of the
products to be considered in a discrimination claim.383
189. For its part, Indonesia responds that the Panel did not err in comparing the treatment accorded
to imported clove cigarettes with the treatment a ccorded to domestic menthol cigarettes. Indonesia
argues that the Panel correctly limited its less fa vourable treatment comparison to those imported and
domestic products that it reviewed in its likeness analysis. 384 Whereas the Appellate Body in EC –
Asbestos and the panel in US – Tuna II (Mexico) engaged in a likeness analysis on the basis of groups
of products, the Panel in this case correctly limited its analysis to the specific products at issue,
namely, imported clove cigarettes and domestic menthol cigarettes. 385 Indonesia further maintains
that the Panel did not rely on its terms of refe rence to limit the product scope of its less favourable
treatment comparison, but rather on its determination of the scope of its likeness analysis.386
190. Article 2.1 provides that "products imported from the territory of any Member" 387 shall be
accorded treatment no less favourable than that accord ed to "like products of national origin and like
products originating in any other country". The te xt of Article 2.1 thus calls for a comparison of
treatment accorded to, on the one hand, products imported from any Member alleging a violation of
Article 2.1, and treatment accorded to, on the ot her hand, like products of domestic and any other
origin. Therefore, for the purposes of the less fa vourable treatment analysis, treatment accorded to
products imported from the complaining Member is to be compared with that accorded to like
domestic products and like products of any other origin.
191. In determining what are the "like products of na tional origin and like products originating in
any other country", a panel must seek to establish, based on the nature and extent of the competitive
relationship between the products in the market of the regulating Member, the products of domestic
(and other) origin(s) that are like the products imported from the complaining Member. In

384Indonesia's appellee's submission, paras. 138 and 139.
385Indonesia's appellee's submission, paras. 123-130.
386Indonesia's appellee's submission, paras. 147 and 148.
387Emphasis added.

determining what the like products at issue are, a pa nel is not bound by its te rms of reference to limit
its analysis to those products identified by the complaining Member in its panel request. Rather,
Article 2.1 requires the panel to identify the dom estic products that stand in a sufficiently close
competitive relationship with the products imported from the complaining Member to be considered
like products within the meaning of that provision.
192. To be clear, a panel's duty under Article 2.1 to identify the products of domestic and other
origins that are like the products imported fro m the complaining Member does not absolve the
complainant from making a prima facie case of violation of Article 2.1. Ordinarily, in discharging
that burden, the complaining Member will iden tify the imported and domes tic products that are
allegedly like and whose treatment needs to be compared for purposes of establishing a violation of
Article 2.1. The products identified by the comp laining Member are the starting point in a panel's
likeness analysis. However, Article 2.1 requires panels to assess objectively, on the basis of the
nature and extent of the competitive relationship be tween the products in the market of the regulating
Member, the universe of domestic products that ar e like the products imported from the complaining
Member.388
193. Once the imported and domestic like products ha ve been properly identified, Article 2.1
requires a panel dealing with a national treatment claim to compare, on the one hand, the treatment
accorded under the technical regulation at issue to all like products imported from the complaining
Member with, on the other hand, that accorded to all like domestic products. However, the national
treatment obligation of Article 2.1 does not require Members to accord no less favourable treatment to
each and every imported product as compared to each and every domestic like product. Article 2.1
does not preclude any regulatory distinctions betwee n products that are found to be like, as long as
treatment accorded to the group of imported products is no less favourable than that accorded to the
group of like domestic products. As noted by the Appella te Body in the context of Article III:4 of the
GATT 1994:
[A] Member may draw distinctions between products which have
been found to be "like", without, for this reason alone, according to
the group of "like" imported products "less favourable treatment"
than that accorded to the group of "like" domestic products. 389
(original emphasis)
194. In sum, the national treatment obligation of Ar ticle 2.1 calls for a comparison of treatment
accorded to, on the one hand, the group of products imported from the complaining Member and, on
the other hand, the treatment accorded to the grou p of like domestic products. In determining what

388See Appellate Body Report, EC and certain member States – Large Civil Aircraft, para. 1131.

the scope of like imported and domestic products is, a panel is not limited to those products
specifically identified by the complaining Member. Rather, a panel must objectively assess, based on
the nature and extent of their competitive relationship, what are the domestic products that are like the
products imported from the complaining Member. Once the universe of imported and domestic like
products has been identified, the treatment acco rded to all like products imported from the
complaining Member must be compared to th at accorded to all like domestic products. The
"treatment no less favourable" standard of Article 2.1 does not prohibit regulatory distinctions
between products found to be like, provided th at the group of like products imported from the
complaining Member is treated no less favourably than the group of domestic like products.
195. Against this analytical framework, we turn to th e United States' specific allegations of error.
The United States essentially claims that the Panel impermissibly narrowed the scope of products to
be compared for the purpose of assessing Indonesi a's claim that Section 907(a)(1)(A) violates the
national treatment obligation of Article 2.1.
196. With respect to the group of imported products, th e United States claims that the Panel erred
in failing to include in its analysis treatment accorded to menthol cigarettes imported into the United
States from all Members. We cannot agree. As noted earlier, the national treatment obligation of
Article 2.1 calls for a comparison of treatment a ccorded to the group of like products imported from
the Member alleging a violation of Article 2.1, and treatment accorded to the group of like domestic
products. It follows that the Panel did not err in finding that a determination of Indonesia's claims
under Article 2.1 required an examination of whet her Section 907(a)(1)(A) accords to the group of
products imported from Indonesia less favourable treatment than that accorded to the group of like
products of US origin.
390
197. In determining the group of pr oducts imported from Indonesia who se treatment needed to be
compared with the treatment a ccorded to like domestic products, the Panel found that it was
uncontested that the "vast majority" of cigarettes that were imported from Indonesia into the United
States were clove cigarettes. 391 The Panel also observed that only "a small percentage of non-clove
cigarettes" was imported from Indonesia into the United States. 392 Accordingly, the Panel did not err
in finding that the group of products imported from Indonesia essentially consisted of clove cigarettes.
198. With respect to the group of like domestic produc ts, the United States' challenge focuses on
the Panel's exclusion of domestically produced flav oured cigarettes from its less favourable treatment

390Panel Report, paras. 7.275-7.276.
391Panel Report, para. 7.275.
392Panel Report, footnote 503 to para. 7.275 (referring to United States' response to Panel Question 81,
in turn referring to World Trade Atlas, Indonesia Ci garette Exports to the United States, 1998-2009 (Panel
Exhibit US-134)).

analysis. The Panel felt bound by its terms of refe rence to limit its likeness analysis to two categories
of products regulated under Section 907(a)(1)(A)— imported clove cigarettes and domestic menthol
cigarettes393—and accordingly limited its less favourable treatment analysis to a comparison of the
treatment accorded to those two product groups. 394 The Panel did not address domestic flavoured
cigarettes at either the likeness or the less favourable treatment stage of its analysis.
199. We note, however, that the United States does not challenge on appeal the Panel's exclusion
of domestically produced flavoured cigarettes from the likeness stage of its analysis. Rather, the
United States' challenge focuses exclusively on the Panel's exclusion of domestically produced
flavoured cigarettes from the less favourable treatme nt stage of the Panel's analysis. Because
Article 2.1 expressly limits the scope of the less favourable treatment comparison to imported and
domestic like products, in the absence of specific findings by the Panel that domestically produced
flavoured cigarettes other than menthol are like cl ove cigarettes, we cannot determine whether the
Panel erred in failing to include domestically pr oduced flavoured cigarettes in its less favourable
treatment comparison.
200. Even assuming, for the sake of argument, that the Panel had found that domestic flavoured
cigarettes are like clove cigarettes imported from I ndonesia, we are not persuaded that this would
have changed the Panel's ultimate conclusion that Section 907(a)(1)(A) modifies the conditions of
competition to the detriment of the group of im ported products vis-à-vis like domestic products.
Aside from the Panel's finding that, "at the time of the ban, there were no domestic cigarettes with
characterizing flavours other than menthol cigarettes" 395 in the US market—which is challenged by
the United States and addressed below—the Panel did not have evidence on the record that flavoured
cigarettes other than menthol cigarettes had "any si zeable market share in the United States prior to
the implementation of the ban in 2009". 396 To the contrary, in response to a Panel question, the
United States confirmed that the non-clove-flavour ed cigarettes banned unde r Section 907(a)(1)(A)
"were on the market for a relatively short period of time and represented a relatively small market
share".397 Therefore, we consider it safe to assume that, given their relatively low share in the
US market, the inclusion of domestically produced flavoured cigarettes in the comparison would not
have altered the Panel's ultimate conclusion that the group of like domestic products essentially
consisted of domestic menthol cigarettes.

393Panel Report, para. 7.147.
394Panel Report, para. 7.277.
395Panel Report, para. 7.289.
396Panel Report, para. 2.28.
397United States' response to Panel Question 17, para. 43.

4. Temporal Scope of the "Treatment No Less Favourable" Comparison
201. To the extent that the Panel's exclusion of domestic flavoured cigarettes other than menthol
cigarettes from its analysis stemmed from its finding th at those products were not on the market at the
time when the ban came into effect, the United Stat es submits that this constitutes legal error. In
particular, the United States claims that the Panel erred in a priori excluding from its analysis
evidence concerning the effects of Section 907( a)(1)(A) of the FFDCA on domestic like products
prior to the entry into force of the ban on flavour ed cigarettes. Moreover, the United St ates claims
that the Panel acted inconsistently with Article 11 of the DSU in ignoring evidence demonstrating that
there were domestic flavoured cigarettes other than menthol cigarettes on the US market at the time of
the ban.398
(a) Application of Article 2.1 of the TBT Agreement
202. The United States argues that Article 2.1 of the TBT Agreement does not establish a rigid
temporal limitation in relation to the evidence that a panel may consider in performing a less
favourable treatment analysis. For this reason, th e United States argues that the Panel should have
taken into account evidence demonstrating that ther e were domestically produced flavoured cigarettes
on the market "in the years closely preceding the effective date of the ban". 399 Section 907(a)(1)(A)
was enacted specifically to respond to an "emergi ng trend of products", and closed off a "potential
market" that US producers were ac tively exploring as recently as 2008. 400 Therefore, the fact that the
ban on flavoured cigarettes went into effect before US producers were able to "saturate" the market
with those products should not be construed as evid ence that US producers were not affected by the
ban.401
203. Indonesia responds that the United States' ap peal of the relevant timeframe for the
Panel's analysis is irrelevant, because the Panel pr operly compared only the treatment accorded to the
products found to be like in th is dispute—imported clove and dom estic menthol cigarettes—both of
which were on the market before the ban went into effect. 402 Indonesia agrees with the United States
that Article 2.1 establishes "no rigid temporal limitation" on the timeframe of the analysis, and affords
panels discretion in selecting the appropriate period.403

398United States' appellant's submission, paras. 97 and 98.
403Indonesia's appellee's submission, para. 152 (quoting United States's appellant's submission,
para. 92).

204. The United States' challenge is directed at the Panel's statement that:
… at the time of the ban , there were no domestic cigarettes with
characterizing flavours other than menthol cigarettes which
accounted for approximately 25 per cen t of the market and for a very
significant proportion of the cigarettes smoked by youth in the
United States. (emphasis added; footnote omitted)
205. In the present dispute, the Panel's mandate was established by its terms of reference, as
defined in Indonesia's panel request. These terms of reference required the Panel to determine
whether Section 907(a)(1)(A) was consistent with various provisions of the TBT Agreement and of the
GATT 1994 at the date of the Panel's establishment. Accordingly, the Panel was required to assess
whether there existed a violation of those Agre ements at that time and, if so, to make a
recommendation that the United States bring its measure into compliance. It follows that, in relation
to Indonesia's claim under Article 2.1 of the TBT Agreement, the Panel was required to assess, as of
the date of its establishment, whether Section 907( a)(1)(A) is a technical regulation that accords to
products imported from Indonesia less favourable treatment than that accorded to like domestic
products.
206. We agree with the participants that Article 2.1 does not establish a rigid temporal limitation
on the evidence that the Panel could review in asse ssing Indonesia's claim under Article 2.1. Nothing
in Article 2.1 enjoins panels from taking into account evidence pre-dating the establishment of a panel
to the extent that such evidence informs the panel's assessment of the consistency of the measure at
that point in time. This is particularly so in the case of a de facto discrimination claim, where a panel
must base its determination on the totality of fact s and circumstances before it, including the design,
architecture, revealing structure, operation, and ap plication of the technical regulation at issue.
Therefore, evidence that Section 907(a)(1)(A) had "chilling" regulatory effects on domestic producers
of flavoured cigarettes prior to the entry into force of the ban on those cigarettes could be relevant in
the Panel's assessment of Indonesia's claim under Article 2.1.
207. In the present dispute, it is not clear that the Pa nel considered Article 2.1 to prohibit review of
evidence pre-dating the entry into force of Section 907(a)(1)(A). As noted earlier, the Panel did not
explain why it did not include domestic flavoured cigarettes other than menthol cigarettes in the group
of like domestic products. In any event, the Panel's st atement that, "at the time of the ban, there were
no domestic cigarettes with characterizing flavours other than menthol" on the US market, was not the
basis for the Panel's exclusion of domestic flavour ed cigarettes from the less favourable treatment
analysis. Rather, it was the basis for its finding that Section 907(a)(1)(A) imposes "costs on producers
in other Members, notably producers in Indonesia, while at the same time imposing no costs on any

US entity."
404 This finding by the Panel is challenged by the United States on appeal, and addressed
in subsection V.C.5 of this Report.
(b) Article 11 of the DSU
208. The United States claims that the Panel acted in consistently with Article 11 of the DSU in
disregarding evidence demonstrating that, at the time of the ban , domestic flavoured cigarettes other
than menthol cigarettes were marketed in the United States.405
209. Indonesia responds that the Panel did consider the evidence submitted by the United States in
this regard but was ultimately not persuaded by it. 406 According to Indonesia, in weighing the
evidence before it, the Panel did not act inconsistently with Article 11 of the DSU.
210. We recall that Article 11 of the DSU requires a panel to "consider all the evidence presented
to it, assess its credibility, determine its weight, and ensure that its factual findings have a proper basis
in that evidence". 407 Within these parameters, "it is generally within the discretion of the [p]anel to
decide which evidence it chooses to utilize in making findings" 408, and panels "are not required to
accord to factual evidence of the parties the same meaning and weight as do the parties".409
211. We observe that, in finding that "at the time of the ban there were no domestic cigarettes with
characterizing flavours other than menthol ciga rettes which accounted for 25 per cent of the
market"410, the Panel noted:
The United States argues that there is evidence showing that
U.S.-produced cigarettes with char acterizing flavours were on the
market in 2008 and 2009 (United St ates' second written submission,
para. 132). In this regard, the Un ited States points to exhibits US-52
and US-62. In our view, none of the exhibits submitted demonstrate
that U.S.-produced flavour cigarettes were being sold on the market
as of the entry into force of Section 907(a)(1)(A). Exhibit US-52
only contains the "known and possible 'flavored' cigarette brands sold
in the United States" as of 2008. Thus, it does not shed light upon
the brands of cigarettes present in the U.S. market at the time
Section 907(a)(1)(A) entered into force. Exhibit US-62 lists the
flavoured cigarette brands that were certified as "fire-safe" brands in
the States of New York and Maine as of 2009. Although this exhibit

404Panel Report, para. 7.289.
405United States' appellant's submission, paras. 97 and 98.
406Indonesia's appellee's submission, paras. 158 and 162.
407Appellate Body Reports, Philippines – Distilled Spirits , para. 135 (quoting Appellate Body Report,
Brazil – Retreaded Tyres , para. 185, in turn referring to Appellate Body Report, EC – Hormones, paras. 132
and 133).
410Panel Report, para. 7.289.

extends until the entry into force of Section 907(a)(1)(A), it does not
demonstrate which brands and types of cigarettes were actually being
sold on the U.S. market on that date. Rather, it merely lists the
brands cigarettes certified as "fire-safe". We therefore stand by our
conclusion.
411
212. Thus, it appears that the Panel did not di sregard the evidence that, according to the
United States, demonstrated the presence of domesti cally produced flavoured cigarettes other than
menthol cigarettes on the US market at the time of th e ban. Rather, the Panel reviewed that evidence
but was ultimately not persuaded by it. In determin ing the weight to be attributed to the evidence
before it, the Panel did not act inconsistently with Article 11 of the DSU. In particular, the Panel did
not exceed its authority under Article 11 of DSU mere ly by attributing to the evidence a weight and
significance different from that attributed to it by the United States.
5. Detrimental Impact on Imported Products
213. Finally, the United States claims that, even if the Appellate Body were to agree with the
comparison undertaken by the Panel in its less fa vourable treatment analysis, the Panel nonetheless
erred in finding that the detrimental effect on co mpetitive opportunities for imported clove cigarettes
was not "explained by factors unrelated to the foreign origin of those products".412
214. The United States does not challenge on appeal the Panel's findings that Section 907(a)(1)(A)
of the FFDCA accords different treatment to im ported clove cigarettes and to domestic menthol
cigarettes, and that such differential treatment is to the detriment of the imported product, insofar as
clove cigarettes are banned while menthol cigarettes are permitted. 413 Accordingly, the Panel's
conclusion that Section 907(a)(1)(A) modifies the c onditions of competition in the US market to the
detriment of imported clove cigarettes stands.
215. However, as noted earlier 414, the existence of a detrimental impact on competitive
opportunities in the relevant market for the grou p of imported products vis-à-vis the group of
domestic like products is not sufficient to establish a violation of the national treatment obligation
contained in Article 2.1 of the TBT Agreement. Where the technical regulation at issue does not
de jure discriminate against imports, a panel must carefully scrutinize the particular circumstances of
the case, that is, the design, architecture, revea ling structure, operation, and application of the
technical regulation at issue, and, in particular, wh ether that technical regulation is even-handed, in

411Panel Report, footnote 524 to para. 7.289.
412United States' appellant's submission, para. 99 (referring to Appellate Body Report, Dominican
Republic – Import and Sale of Cigarettes, para. 96).
413Panel Report, paras. 7.279-7.281.
414See supra, paras. 174 and 175.

order to determine whether the detrimental impact on imports stems exclusively from a legitimate
regulatory distinction rather than reflects discrimination against the group of imported products.
216. Before the Panel, the United States argued that the exemption of menthol cigarettes from the
ban on flavoured cigarettes is unrelated to the or igin of the products, because it addresses two distinct
objectives: one relates to the potential impact on the US health care system associated with the need
to treat "millions" of menthol cigarette addicts with withdrawal symptoms; and the other relates to
the risk of development of a black market and sm uggling to supply the needs of menthol cigarette
smokers.
415
217. The Panel considered that "the potential impa ct on the health care system and the potential
development of a black market and smuggling of menthol cigarettes" 416 did not constitute legitimate
objectives, because:
These reasons which the United States has presented as constituting a
legitimate objective by themselves, appear to us as relating in one
way or another to the costs that might be incurred by the
United States were it to ban menthol cigarettes. Indeed, the
United States is not banning menthol cigarettes because it is not a
type of cigarette with a characterizing flavour that appeals to youth,
but rather because of the costs that might be incurred as a result of
such a ban. We recall that at the time of the ban, there were no
domestic cigarettes with characteriz ing flavours other than menthol
cigarettes which accounted for a pproximately 25 per cent of the
market and for a very significant proportion of the cigarettes smoked
by youth in the United States. It seems to us that the effect of
banning cigarettes with characterizing flavours other than menthol is
to impose costs on producers in othe r Members, notably producers in
Indonesia, while at the same time imposing no costs on any
U.S. entity.
417 (footnotes omitted)
218. On appeal, the United States claims that the Pa nel erred in concluding that any detriment to
the competitive opportunities for imported clove cigarettes could not be explained by factors unrelated
to the foreign origin of the products. 418 In addition, the United States claims that the Panel failed to
make an objective assessment of the matter under Artic le 11 of the DSU in finding that there were no
costs imposed on any US entity.419

416Panel Report, para. 7.289.
417Panel Report, para. 7.289.

(a) Application of Article 2.1
219. We begin with the United States' claim that th e Panel erred in concluding that any detriment
to the competitive opportunities for imported clove cigarettes could not be explained by factors
unrelated to the foreign origin of the products. 420 The United States argues that, "even where a
technical regulation adversely affects the competitive situation of imported products compared to like
domestic products, this does not c onstitute less favourable treatment when the detrimental effect is
unrelated to the foreign origin of the product." 421 According to the United States, many factors affect
the costs associated with a technical regulation, such as transportation costs, production methods, the
age of the producer's facility, size, efficiency, pr oductivity, and marketing strategy. As a result,
Article 2.1 does not prohibit the imposition of co sts on imported products as compared to domestic
products, where those costs are not related to the origin of the product. 422 The Panel did not examine
the "architecture, structure and design" of Secti on 907(a)(1)(A), including the fact that it allows
Indonesia to import and sell regular and menthol cigarettes in the United States. 423 For the United
States, reference to unspecified "costs" on forei gn producers does not establish that the effects of
Section 907(a)(1)(A) on competitive opportunities for im ported products are rela ted to their origin. 424
The United States underscores that the costs that Section 907(a)(1)(A) allegedly avoids would be
incurred by the US regulatory enforcement and h ealth care systems (and not by domestic menthol
cigarette producers), even if all menthol cigarettes were imported.
425
220. For Indonesia, the Panel's finding that Section 907(a)(1)(A) modifies the conditions of
competition in the United States to the detriment of imported clove cigarettes vis-à-vis domestic
menthol cigarettes was sufficient to establish a violation of Article 2.1.
426 Although Indonesia
maintains that an additional "national origin " test was not required, Indonesia argues that,
nevertheless, the Panel was correct in concludi ng that Section 907(a)(1)(A) had a "discriminatory
intent", because menthol cigarettes accounted for 25 per cent of the market, and for a significant
proportion of the cigarettes smoked by youth in the United States. 427 The Panel correctly rejected the
potential costs on the US health care and enforcem ent systems as "legitimate reasons" for exempting
menthol cigarettes from the ban on flavoured cigarett es. The Panel also appr opriately found that the

disproportionate allocation of costs betw een Indonesian and US entities evidenced de facto
discrimination against imports.
428
221. At the outset, we agree with the United States that the Panel did not clearly articulate its
reasons for concluding that "the effect of banning cigarettes with characterizing flavours other than
menthol is to impose costs on producers in other Memb ers, notably producers in Indonesia, while at
the same time imposing no costs on any US entity." 429 To the extent that actual or potential costs are
relevant to the analysis of less favourable treatme nt under Article 2.1, the Panel did not elaborate on
why, in its view, Section 907(a)(1)(A) does not impose costs "on any US entity" beyond observing
that, "at the time of the ban, there were no domes tic cigarettes with characterizing flavours other than
menthol cigarettes"
430 on the US market.431
222. Nonetheless, we are not persuaded that th e Panel erred in ultimately finding that
Section 907(a)(1)(A) is inconsistent with Article 2.1. By design, Section 907(a)(1)(A) prohibits all
cigarettes with characterizing flavours other than toba cco or menthol. In relation to the cigarettes that
are banned under Section 907(a)(1)(A), the Panel ma de a factual finding that "virtually all clove
cigarettes" that were imported into the United Stat es in the three years prior to the ban came from
Indonesia.432 The Panel also noted that the "vast majority" of clove cigarettes consumed in the United
States came from Indonesia. 433 Although the United States stated th at it was "unable to attain market
share data for all non-clove produc ts banned under Section 907(a)(1)(A)" 434, the Panel did not find
evidence that these products had "any sizeable ma rket share in the United States prior to the
implementation of the ban in 2009". 435 In response to a Panel question, the United States confirmed
that non-clove-flavoured cigarettes banned under Section 907(a)(1)(A) "were on the market for a
relatively short period of time and represented a relatively small market share".436

428Indonesia's appellee's submission, paras. 184-185.
429Panel Report, para. 7.289.
430Panel Report, para. 7.289.
431Moreover, to the extent that the Panel's finding could be read as suggesting that reducing potential
costs of regulation per se constitutes an illegitimate regulatory objective, we disagree. Nothing in Article 2.1
prevents a Member from seeking to mi nimize the potential costs arising from technical regulations, provided
that the technical regulation at issue does not overtly or covertly discriminate against imports.
432Panel Report, para. 2.26 (referring to Indonesia's first written submission to the Panel, para. 18;
United States' first written submission to the Panel, para. 35; World Trade Atlas, United States – Imports, Clove
Cigarette Market Share Data (Panel Exhibit US-100); and World Trade Atlas, Indonesia Cigarette Exports to
the United States, 1998-2009 (Panel Exhibit US-134)).
433Panel Report, para. 2.27. The Panel nonetheless was able to identify at least one US company that
manufactured clove cigarettes prior to the entry into force of the FSPTCA. (Ibid. (referring to United States' first
written submission to the Panel, para. 35))
434Panel Report, footnote 58 to para. 2.28.
435Panel Report, para. 2.28.
436United States' response to Panel Question 17, para. 43.

223. With respect to the cigarettes that are not banned under Section 907(a)(1)(A), the record
demonstrates that, in the years 2000 to 2009, between 94.3 and 97.4 per cent of all cigarettes sold in
the United States were domestically produced 437, and that menthol cigarettes accounted for about
26 per cent of the total US cigarette market. 438 Information on the record also shows that
three domestic brands dominate the US market fo r menthol cigarettes: Kool, Salem (Reynolds
American), and Newport (Lorillard), with Marlboro having a smaller market share.439
224. Given the above, the design, architecture, revea ling structure, operation, and application of
Section 907(a)(1)(A) strongly suggest that the detr imental impact on competitive opportunities for
clove cigarettes reflects discrimina tion against the group of like products imported from Indonesia.
The products that are prohibited under Section 907( a)(1)(A) consist primarily of clove cigarettes
imported from Indonesia, while the like products that are actually permitted under this measure
consist primarily of domestically produced menthol cigarettes.
225. Moreover, we are not persuaded that the de trimental impact of Section 907(a)(1)(A) on
competitive opportunities for imported clove cigarettes does stem from a legitimate regulatory
distinction. We recall that the stated objective of Section 907(a)(1)(A) is to reduce youth smoking.
One of the particular characteristics of flavoured cigarettes that makes them appealing to young
people is the flavouring that masks the harshness of the tobacco, thus making them more pleasant to
start smoking than regular cigarettes.
440 To the extent that this partic ular characteristic is present in
both clove and menthol cigarettes 441, menthol cigarettes have the same product characteristic that,
from the perspective of the stated objective of Sec tion 907(a)(1)(A), justified the prohibition of clove
cigarettes. Furthermore, the reasons presented by the United States for the exemption of menthol
cigarettes from the ban on flavoured cigarettes do not, in our view, demonstrate that the detrimental
impact on competitive opportunities for imported clove cigarettes does stem from a legitimate
regulatory distinction. The United States argues th at the exemption of menthol cigarettes from the
ban on flavoured cigarettes aims at minimizing: (i) the impact on the US health care system
associated with treating "millions" of menthol cigare tte smokers affected by withdrawal symptoms;

437Cigarettes: Domestic and Imported, 2000-2009 (Panel Exhibit US-31).
438United States' first written submission to the Pa nel, para. 27 (referring to US Federal Trade
Commission, Cigarette Report for 2006 , Table 1A (2009) (Panel Exhibit US-29); and P.S. Gardiner, "The
African Americanization of menthol cigarette use in the United States" (February 2004) 6(1) Nicotine
& Tobacco Research S55 (Panel Exhibit US-30)).
439See United States' first written submission to the Panel, para. 29 and P.S. Gardiner, "The African
Americanization of menthol cigarette use in the United States" (February 2004) 6(1) Nicotine & Tobacco
Research S55 (Panel Exhibit US-30), p. 58.
440Panel Report, paras. 7.216-7.221.
441Panel Report, para. 7.221 (referring to "Use of Menthol Cigarettes", The National Survey on Drug
Use and Health Report, 19 November 2009 (Panel Exhibit IND-66); and American Lung Association, Tobacco
Policy Trend Alert, From Joe Camel to Kauai Kolada – the Marketing of Candy-Flavored Cigarettes (2006)
(Panel Exhibit US-35), p. 1, available at <http://slati.lungusa.org/reports/CandyFlavoredUpdatedAlert.pdf>).

and (ii) the risk of development of a black mark et and smuggling of menthol cigarettes to supply the
needs of menthol cigarette smokers. Thus, according to the United States, the exemption of menthol
cigarettes from the ban on flavoured cigarettes is justified in order to avoid risks arising from
withdrawal symptoms that would afflict menthol cigarette smokers in case those cigarettes were
banned. We note, however, that the addictive in gredient in menthol cigarettes is nicotine, not
peppermint or any other ingredient that is exclus ively present in menthol cigarettes, and that this
ingredient is also present in a group of products that is likewise permitted under Section 907(a)(1)(A),
namely, regular cigarettes. Therefore, it is not cl ear that the risks that the United States claims to
minimize by allowing menthol cigarettes to remain in the market would materialize if menthol
cigarettes were to be banned, insofar as regular cigarettes would remain in the market.
226. Therefore, even though Section 907(a)(1 )(A) does not expressly distinguish between
treatment accorded to the imported and domestic like products, it operates in a manner that reflects
discrimination against the group of like products im ported from Indonesia. Accordingly, despite our
reservations on the brevity of the Panel's analysis, we agree with the Panel that, by exempting menthol
cigarettes from the ban on flavoured cigarettes, Section 907(a)(1)(A) accords to clove cigarettes
imported from Indonesia less favourable treatment th an that accorded to domestic like products,
within the meaning of Article 2.1 of the TBT Agreement.
(b) Article 11 of the DSU
227. Finally, the United States argues that the Pane l acted inconsistently with Article 11 of the
DSU because it found that Section 907(a)(1)(A) avoids costs on any US entity, in the absence of any
basis in the Panel record that would have allowed it to reach such conclusion.
442 The United States
argues that the measure imposed enforcemen t costs on the United States Food and Drug
Administration (the "FDA"), and on domestic produ cers of cigarettes with characterizing flavours
whose potential market was closed off. By reducing youth smoking, Section 907(a)(1)(A) also
reduces subsequent demand for cigarettes. Therefor e, it also shrinks the "adult" cigarette market,
which is comprised almost entirely of domestic producers.443
228. Indonesia responds that the Panel did not act in consistently with Article 11 of the DSU in
reaching its finding, which is supported by evidence showing that the exemption of menthol cigarettes
from the ban was the result of a political compromise with the US tobacco industry.444

229. We recall that, in EC – Fasteners (China) , the Appellate Body considered that "[i]t is …
unacceptable for a participant effectively to recast its arguments before the panel under the guise of an
Article 11 claim" and that "a claim that a panel fa iled to comply with its duties under Article 11 of the
DSU must stand by itself and should not be made me rely as a subsidiary argument or claim in support
of a claim that the panel failed to apply corr ectly a provision of the covered agreements." 445 With
these considerations in mind, we turn to review the United States' appeal that the Panel acted
inconsistently with Article 11 of the DSU in fi nding that Section 907(a)(1)(A) imposed no costs on
any US entity.
230. As noted above, we believe that the Panel did not fully explain the basis for the statement that
Section 907(a)(1)(A), while impos ing "costs" on foreign producers, imposed "no costs on any
US entity". However, the Panel's statement should be read in the light of the fact that, in
paragraph 7.289 of its Report, the Panel considered the costs imposed on producers "at the time of the
ban" and that it equated the concept of "entity" wi th that of "producer", thus comparing the costs
imposed on producers in Indonesia with the costs imposed on US producers, to the exclusion of
government entities such as the FDA.
231. It seems to us that the United States' claim is concerned with the Panel's less favourable
treatment comparison, rather than with the allege d absence of evidence in the Panel record justifying
the lack of costs on any US entity. We note that the United States argues that the Panel erred, under
Article 2.1 of the TBT Agreement, in limiting the scope of its less favourable treatment analysis to the
effects of Section 907(a)(1)(A) on all domestic cigarettes at the time the measure entered into force, to
the exclusion of flavoured cigarettes that were produc ed in the United States before the ban came into
force.446 In our view, the United States' argument that the Panel erred in not considering the impact of
Section 907(a)(1)(A) on US producers before the entr y into force of the ban also implies that the
Panel was wrong in stating that the measure imposed no costs on any US producers. We thus
consider that the claim by the United States that the Panel violated Article 11 of the DSU because it
found that Section 907(a)(1)(A) imposed "no costs on any US entity" is subsidiary to its claim that the
Panel erred in concluding that Section 907(a)(1)(A ) accords less favourable treatment to imported
clove cigarettes than to like menthol cigarettes of na tional origin within the meaning of Article 2.1 of
the TBT Agreement.
232. In the light of the above, we do not consider that the Panel acted inconsistently with
Article 11 of the DSU in finding that Section 90 7(a)(1)(A) accords imported clove cigarettes less

445Appellate Body Report, EC – Fasteners (China) , para. 442. See also Appellate Body Report, US –
Steel Safeguards, para. 498; and Appellate Body Report, Chile – Price Band System (Article 21.5 – Argentina),
para. 238.

favourable treatment than that accorded to domes tic menthol cigarettes, within the meaning of
Article 2.1 of the TBT Agreement.
6. Conclusion on "Treatment No Less Favourable"
233. Given the above, we uphold, albeit for different reasons, the Panel's finding, in
paragraph 7.292 of the Panel Report, that, by banning clove cigarettes while exempting menthol
cigarettes from the ban, Section 907(a)(1)(A) of the FFDCA accords imported clove cigarettes less
favourable treatment than that accorded to domes tic menthol cigarettes, within the meaning of
Article 2.1 of the TBT Agreement.
D. Conclusions under Article 2.1 of the TBT Agreement
234. In the light of the foregoing c onsiderations with regard to the Panel's findings on likeness and
less favourable treatment, we therefore uphold, albeit for different reasons, the Panel's finding, in
paragraphs 7.293 and 8.1(b) of the Panel Report, that Section 907(a)(1)(A) of the FFDCA is
inconsistent with Article 2.1 of the TBT Agreement because it accords to imported clove cigarettes
less favourable treatment than that accorded to like menthol cigarettes of national origin.
235. In reaching this conclusion, we wish to clarify the implications of our decision. We do not
consider that the TBT Agreement or any of the covered agreements is to be interpreted as preventing
Members from devising and implementing public health policies generally, and tobacco-control
policies in particular, through the regulation of the content of tobacco products, including the
prohibition or restriction on the use of ingredients that increase the attractiv eness and palatability of
cigarettes for young and potential smokers. Moreover, we recognize the importance of
Members' efforts in the World Health Organization on tobacco control.
236. While we have upheld the Panel's finding that the specific measure at issue in this dispute is
inconsistent with Article 2.1 of the TBT Agreement, we are not saying that a Member cannot adopt
measures to pursue legitimate health objectives such as curbing and preventing youth smoking. In
particular, we are not saying that the United States cannot ban clove cigarettes: however, if it chooses
to do so, this has to be done consistently with the TBT Agreement. Although Section 907(a)(1)(A)
pursues the legitimate objective of reducing youth smoking by banning cigarettes containing flavours
and ingredients that increase the attractiveness of t obacco to youth, it does so in a manner that is
inconsistent with the national treatme nt obligation in Article 2.1 of the TBT Agreement as a result of
the exemption of menthol cigarettes, which similarly contain flavours and ingredients that increase the
attractiveness of tobacco to youth, from the ban on flavoured cigarettes.

VI. Article 2.12 of the TBT Agreement
A. Introduction
237. We turn now to the United States' appeal of the Panel's finding that, by failing to allow a
period of not less than six months between the publication and the entry into force of
Section 907(a)(1)(A) of the FFDCA, the United States acted inconsistently with Article 2.12 of the
TBT Agreement.
238. The FSPTCA was enacted on 22 June 2009. The me asure at issue, Section 907(a)(1)(A),
entered into force three months thereafter. Before the Panel, Indonesia argued that paragraph 5.2 of
the Doha Ministerial Decision on Impl ementation-Related Issues and Concerns
447 ("the Doha
Ministerial Decision")—which defined the term "reasonable interval" in Article 2.12 of the
TBT Agreement as at least six months—constitutes a legally binding interpretation pursuant to
Article IX:2 of the WTO Agreement. Thus, according to Indonesia, by not allowing a reasonable
interval of at least six months between the publication and the entry into force of
Section 907(a)(1)(A), the United States acted inconsis tently with its obligations under Article 2.12 of
the TBT Agreement.448 The Panel framed the question before it as whether the United States acted
inconsistently with its obligations under Article 2.12 by allowing an interval of three months between
the enactment of the FSPTCA and the entry into for ce of Section 907(a)(1)(A). In particular, the
Panel considered whether, as Indonesia claimed, Article 2.12 "obliged the United States to allow as a
minimum a period of six months between the publication and the entry into force of
Section 907(a)(1)(A)".449
239. In its analysis of Indonesia's claim under Article 2.12 of the TBT Agreement, the Panel
considered the interpretative value of paragraph 5.2 of the Doha Ministerial Decision. The Panel took
the view that, although the United States and Indonesia disagreed on the categorization of
paragraph 5.2 as an authoritative inte rpretation under Article IX:2 of the WTO Agreement, it would
"be guided by [the Doha Ministerial Decision] in its interpretation of the phrase 'reasonable interval'
as [the Doha Ministerial Decision] was agreed by all WTO Members meeting in the form of
Ministerial Conference, the highest ranking body of the WTO". Moreover, the Panel stated that, in its
view, "paragraph 5.2 of the Doha Ministerial Decision could be considered as a subsequent agreement

448Panel Report, para. 7.552.
449Panel Report, para. 7.561. (original emphasis)

of the parties", within the meaning of Article 31(3)(a) of the Vienna Convention, on the interpretation
of the term "reasonable interval" in Article 2.12 of the TBT Agreement.
450
240. The United States claims on appeal that: (i) the Panel attributed an incorrect "interpretative
value" to paragraph 5.2 of the Doha Ministerial De cision in its interpretation of Article 2.12 of the
TBT Agreement; and (ii) the Panel erred in finding that Indonesia had established a prima facie case
of inconsistency with Article 2.12 of the TBT Agreement, that the United States failed to rebut.
B. The Interpretative Value of Paragraph 5.2 of the Doha Ministerial Decision
241. We recall that, with regard to the interpretative value of paragraph 5.2 of the Doha Ministerial
Decision, the Panel stated that it "must be guided by [paragraph 5.2] in its interpretation of the phrase
'reasonable interval', as [paragraph 5.2] was agr eed by all WTO Members meeting in the form of
Ministerial Conference, the highest ranking body of the WTO".451
242. According to the United States, the Panel "d eclined to formally determine" whether
paragraph 5.2 constitutes an author itative interpretation of Article 2. 12, "only saying that it 'must be
guided' by paragraph 5.2" because it was agreed by all WTO Members meeting in the form of
Ministerial Conference, the highest ranking body of the WTO. 452 The United States submits that,
despite not having found that paragraph 5.2 has the legal status of an authoritative interpretation
adopted pursuant to Article IX:2 of the WTO Agreement, the Panel erred by applying paragraph 5.2 as
a "rule" that amended the text of Article 2.12 of the TBT Agreement.453 The United States claims that
the legal value of paragraph 5.2 is at most a supplementary means of interpretation within the
meaning of Article 32 of the Vienna Convention.454
243. Indonesia responds that "the Panel did establish that paragraph 5.2 of the Doha Ministerial
Decision is a binding interpretation as per Article IX:2 of the WTO Agreement", and that it may also
be considered a subsequent agreement between the pa rties, within the meaning of Article 31(3)(a) of
the Vienna Convention, on the interpretation of the term "reas onable interval" in Article 2.12 of the
TBT Agreement.455
244. In paragraph 7.575 of its Report, the Panel stat ed that the wording of paragraph 5.2 of the
Doha Ministerial Decision " appears to suggest that the intention of the Ministerial Conference, and
thus the highest level organ of the WTO where all Members meet, was that paragraph 5.2 is

450Panel Report, para. 7.576.
451Panel Report, para. 7.576.
455Indonesia's appellee's submission, para. 222. (original emphasis)

binding".456 On appeal, Indonesia relies on this latter st atement made by the Panel and argues that the
Panel found that paragraph 5.2 of the Doha Minist erial Decision is a binding interpretation "as per"
Article IX:2 of the WTO Agreement.457
245. In paragraph 7.576 of its Report, the Panel stated that, although the United States and
Indonesia disagreed on the categorization of paragraph 5.2 of the Doha Ministerial Decision as an
authoritative interpretation under Article IX:2 of the WTO Agreement, it would be "guided by
[paragraph 5.2] in its interpretation of the phrase 'reasonable interval', as it was agreed by all
WTO Members meeting in the form of Ministerial Conference, the highest ranking body of the
WTO". On appeal, the United States relies on this statement of the Panel and argues that the Panel
did not find that paragraph 5.2 constitutes an aut horitative interpretation adopted by the Ministerial
Conference pursuant to Article IX:2 of the WTO Agreement.
458
246. As we see it, in paragraph 7.575 of its Repor t, the Panel identified certain features of the
Doha Ministerial Decision that suggest that Members intended to adopt a "binding" interpretation of
the term "reasonable interval" in Article 2.12 of the TBT Agreement. The Panel's statement in
paragraph 7.575 was, by its own terms, tentative. Moreover, the Panel's statement was not followed
by any "finding" that paragraph 5.2 constitutes an in terpretation adopted pursuant to Article IX:2 of
the WTO Agreement. Thus, we do not agree with Indonesia that the Panel found that paragraph 5.2 of
the Doha Ministerial Decision "is a binding interpretation as per Article IX:2 of the
WTO Agreement".459
247. Despite our conclusion that the Panel did not formally determine whether paragraph 5.2 of the
Doha Ministerial Decision constitutes a multilatera l interpretation under Article IX:2 of the
WTO Agreement, we will consider, nevertheless, whether paragr aph 5.2, in fact, has that legal status.
Before doing so, we set forth some general consid erations on the role a nd function of multilateral
interpretations adopted pursuant to Article IX:2 of the WTO Agreement.

456Emphasis added.

248. Article IX:2 of the WTO Agreement provides:
The Ministerial Conference and th e General Council shall have the
exclusive authority to adopt interpre tations of this Agreement and of
the Multilateral Trade Agreements. In the case of an interpretation of
a Multilateral Trade Agreement in Annex 1, they shall exercise their
authority on the basis of a recommendation by the Council
overseeing the functioning of that Agreement. The decision to adopt
an interpretation shall be taken by a three-fourths majority of the
Members. This paragraph shall not be used in a manner that would
undermine the amendment provisions in Article X.
249. In EC – Bananas III (Article 21.5 – Ecuador II) / EC – Bananas III (Article 21.5 – US) , the
Appellate Body opined that multilateral interpreta tions adopted pursuant to Article IX:2 of the
WTO Agreement are "meant to clarify the meaning of existing obligations, not to modify their
content".
460 Article IX:2 establishes that a decision to adopt a multilateral interpretation can only be
taken by Members sitting in the form of the Minist erial Conference or the General Council, and that
such decisions must be taken by a three-fourths ma jority of Members. With regard to decisions
adopting multilateral interpretations of a Multilatera l Trade Agreement contained in Annex 1 to the
WTO Agreement, Article IX:2 requires the Ministerial Conf erence or the General Council to exercise
its authority on the basis of a recommendation by the Council overseeing the functioning of that
Agreement. Thus, while Article IX:2 confers upon the Ministerial Conference and the General
Council the exclusive authority to adopt multilateral interpretations of the WTO Agreement, the
exercise of this authority is situated within defined parameters established by Article IX:2.
250. Multilateral interpretations adopted pursuant to Article IX:2 of the WTO Agreement have a
pervasive legal effect. Such interpretations are bi nding on all Members. As we see it, the broad legal
effect of these interpretations is precisely the r eason why Article IX:2 subjects the adoption of such
interpretations to clearly articulated and strict decision-making procedures.
251. Turning to the question of whether paragraph 5.2 of the Doha Ministerial Decision can be
characterized as a multilateral interpretation of Article 2.12 of the TBT Agreement, we recall that
Article IX:2 of the WTO Agreement establishes two specific requirem ents that apply to the adoption
of multilateral interpretations of the Multilateral Trade Agreements contained in Annex 1 to the
WTO Agreement: (i) a decision by the Ministerial Conference or the General Council to adopt such
interpretations shall be taken by a three-fourths majo rity of Members; and (ii) such interpretations
shall be taken on the basis of a recommendation by the Council overseeing the functioning of the

460Appellate Body Reports, EC – Bananas III (Article 21.5 – Ecuador II) / EC – Bananas III
(Article 21.5 – US), para. 383.

relevant Agreement. Thus, we will consider whet her the decision to adopt paragraph 5.2 conforms
with these specific decision-making procedures.
252. With regard to the first requirement, the Pa nel observed that the Ministerial Conference
decided on the matters addressed in the Doha Ministerial Decision by consensus . The issue of
whether the first requirement was met has not been raised in this appeal. With regard to the
second requirement, the Panel noted that, "it appears that when adopting the Doha Ministerial
Decision, the Ministerial Conference did not comply with the preliminary requirement under
Article IX:2 of the WTO Agreement" to exercise its authority on the basis of a recommendation from
the Council for Trade in Goods.461 The Panel stated, further, that "it could be argued" that the absence
of this "formal requirement" is insufficient to conc lude that paragraph 5.2 of the Doha Ministerial
Decision is not an authoritative interp retation under Article IX:2 of the WTO Agreement.462 O n
appeal, the United States argues that "[a] panel is not authorized to waive the requirements of
Article IX:2 or to impose on Members an interpretation that is not adopted in the manner required."463
253. We do not agree with the Panel to the exte nt that it suggested that the absence of a
recommendation from the Council for Trade in Goods "i s insufficient to conclude that paragraph 5.2
of the Doha Ministerial Decision is not an auth oritative interpretation under Article IX:2 of the
WTO Agreement".464 While Article IX:2 of the WTO Agreement confers upon the Ministerial
Conference and the General Council the exclusive authority to adopt multilateral interpretations of the
WTO Agreement, this authority must be exercised within the defined parameters of Article IX:2. It
seems to us that the view expressed by the Panel does not respect a specific decision-making
procedure established by Article IX:2 of the WTO Agreement. In our view, to characterize the
requirement to act on the basis of a recommendati on by the Council overseeing the functioning of the
relevant Agreement as a "formal requirement" neither permits a panel to read that requirement out of a
treaty provision, nor to dilute its effectiveness.
254. Although the Panel's reasoning may be read as s uggesting that the Ministerial Conference
could dispense with a specific requirement established by Article IX:2 of the WTO Agreement, the
terms of Article IX:2 do not suggest that compliance with this requirement is dispensable. In this
connection, we recall that, pursuant to Article IX:2 of the WTO Agreement, the Ministerial
Conference or the General Council " shall" exercise their authority to adopt an interpretation of a
Multilateral Trade Agreement c ontained in Annex 1 to the WTO Agreement "on the basis of a

461Panel Report, para. 7.574 (referring to United States' response to Panel Question 6, para. 5).
(emphasis added)
462Panel Report, para. 7.575.
464Panel Report, para. 7.575.

recommendation" by the Council overseeing the functioning of that Agreement. We consider that the
recommendation from the relevant Council is an esse ntial element of Article IX:2, which constitutes
the legal basis upon which the Ministerial Conferen ce or the General Council exercise their authority
to adopt interpretations of the WTO Agreement. Thus, an interpretation of a Multilateral Trade
Agreement contained in Annex 1 to the WTO Agreement must be adopted on the basis of a
recommendation from the relevant Council overseeing the functioning of that Agreement.
255. We note that, before the Panel, Indonesia relie d on paragraph 12 of the Doha Ministerial
Declaration
465 and on the preamble of the Doha Ministerial Decision, and argued that the
interpretation of Article 2.12 of the TBT Agreement was reached on the basis of discussions carried
out within the General Council and the WTO subsidiary bodies. 466 Whereas the content of
paragraph 5.2 of the Doha Ministerial Decision might very well have been based on discussions
within the Committee on Technical Barriers to Trade, we are not persuaded that this is sufficient to
establish that the Ministerial Conference exercised its authority to adopt an interpretation of the
TBT Agreement on the basis of a recommendation from the Council for Trade in Goods. Accordingly,
we find that, in the absence of evidence of th e existence of a specific recommendation from the
Council for Trade in Goods concerning the interpretation of Article 2.12 of the TBT Agreement,
paragraph 5.2 of the Doha Ministerial Decision does not constitute a multilateral interpretation
adopted pursuant to Article IX:2 of the WTO Agreement.467
256. In the light of our finding that paragraph 5.2 of the Doha Ministerial Decision does not
qualify as a multilateral interpretation within the meaning of Article IX:2 of the WTO Agreement, we
address whether, as the Panel found, paragraph 5.2 "could be considered as a subsequent agreement of
the parties within the meaning of Article 31(3)(a) of the [ Vienna Convention], on the interpretation of
'reasonable interval' [in] Article 2.12 of the TBT Agreement".468
257. We note that, in response to questioning at the oral hearing, the United States argued that a
decision by the Ministerial Conference that does not conform with the specific decision-making
procedures established by Article IX:2 of the WTO Agreement cannot constitute a "subsequent
agreement between the parties" within the meaning of Article 31(3)(a) of the Vienna Convention. We
observe that multilateral interpretations a dopted pursuant to Article IX:2 of the WTO Agreement, on

465Adopted on 14 November 2001, WT/MIN(01)/DEC/1.
466Panel Report, para. 7.574 (referring to Indonesia's response to Panel Question 6, para. 27).
467In reaching this finding, we are not saying that the Ministerial Conference failed to comply with a
specific decision-making procedure es tablished by Article IX:2 of the WTO Agreement. Rather, we are saying
that the absence of a recommendation from the Council for Trade in Goods concerning the interpretation of
Article 2.12 of the TBT Agreement supports a conclusion that paragraph 5.2 of the Doha Ministerial Decision
does not constitute a multilateral interpretation adopted pursuant to Article IX:2 of the WTO Agreement.
468Panel Report, para. 7.576. (footnote omitted)

the one hand, and subsequent agreements on interpre tation within the meaning of Article 31(3)(a) of
the Vienna Convention , on the other hand, serve different functi ons and have differe nt legal effects
under WTO law. Multilateral interpreta tions under Article IX:2 of the WTO Agreement provide a
means by which Members—acting through the hi ghest organs of the WTO—may adopt binding
interpretations that clarify WTO law for all Me mbers. Such interpretations are binding on all
Members, including in respect of all disputes in which these interpretations are relevant.
258. On the other hand, Article 31(3)(a) of the Vienna Convention is a rule of treaty interpretation,
pursuant to which a treaty interpreter uses a s ubsequent agreement between the parties on the
interpretation of a treaty provision as an interpretativ e tool to determine the meaning of that treaty
provision. Pursuant to Article 3.2 of the DSU, pa nels and the Appellate B ody are required to apply
the customary rules of interpretation of public in ternational law—including the rule embodied in
Article 31(3)(a) of the Vienna Convention —to clarify the existing provisions of the covered
agreements. Interpretations deve loped by panels and the Appellate Body in the course of dispute
settlement proceedings are binding only on the parties to a particular dispute. 469 Article IX:2 of the
WTO Agreement does not preclude panels and the Appe llate Body from having recourse to a
customary rule of interpretation of public internatio nal law that, pursuant to Article 3.2 of the DSU,
they are required to apply.
259. We also recall that, in EC – Bananas III (Article 21.5 – Ecuador II) / EC – Bananas III
(Article 21.5 – US) , the Appellate Body stated that "multilate ral interpretations are meant to clarify
the meaning of existing obligations" 470, and that "multilateral interp retations adopted pursuant to
Article IX:2 of the WTO Agreement are most akin to subsequent agreements within the meaning of
Article 31(3)(a) of the Vienna Convention ".471 Thus, given the specific function of multilateral
interpretations adopted pursuant to Article IX:2, a nd the fact that these interpretations are adopted by

469In US – Stainless Steel (Mexico), the Appellate Body stated:
It is well settled that Appellate Body reports are not binding, except with
respect to resolving the particular dispute between the parties. This,
however, does not mean that subsequent panels are free to disregard the
legal interpretations and the ratio decidendi contained in previous Appellate
Body reports that have been adopted by the DSB.
…
Thus, the legal interpretation embodied in adopted panel and Appellate
Body reports becomes part and parcel of the acquis of the WTO dispute
settlement system. Ensuring "security and predictability" in the dispute
settlement system, as contemplated in Article 3.2 of the DSU, implies that,
absent cogent reasons, an adjudicatory body will resolve the same legal
question in the same way in a subsequent case.
(Appellate Body Report, US – Stainless Steel (Mexico), paras. 158 and 160 (footnotes omitted))
470Appellate Body Reports, EC – Bananas III (Article 21.5 – Ecuador II) / EC – Bananas III
(Article 21.5 – US), para. 383.
471Appellate Body Reports, EC – Bananas III (Article 21.5 – Ecuador II) / EC – Bananas III

Members sitting in the form of the highest organs of the WTO, such interpretations are most akin to,
but not exhaustive of, subsequent agreements on interpretation within the meaning of Article 31(3)(a)
of the Vienna Convention.
260. We consider, therefore, that a decision adopted by Members, other than a decision adopted
pursuant to Article IX:2 of the WTO Agreement, may constitute a "subsequent agreement" on the
interpretation of a provision of a covere d agreement under Article 31(3)(a) of the Vienna Convention.
Accordingly, we turn to the issue of whether para graph 5.2 of the Doha Ministerial Decision can be
considered to be a subsequent agreement, w ithin the meaning of Article 31(3)(a) of the Vienna
Convention, on the interpretation of the term "reas onable interval" in Article 2.12 of the
TBT Agreement.
261. Article 31(3)(a) of the Vienna Convention provides:
There shall be taken into account, together with the context:
(a) any subsequent agreement be tween the parties regarding the
interpretation of the treaty or the application of its provisions[.]
262. Based on the text of Article 31(3)(a) of the Vienna Convention, we consider that a decision
adopted by Members may qualify as a "subsequent agreement between the parties" regarding the
interpretation of a covered agreement or the applicati on of its provisions if: (i) the decision is, in a
temporal sense, adopted subsequent to the relevant covered agreement; and (ii) the terms and content
of the decision express an agreement between Members on the interpretation or application of a
provision of WTO law.
263. With regard to the first element, we note that the Doha Ministerial Decision was adopted by
consensus on 14 November 2001 on the occasion of the Fourth Ministerial Conference of the WTO.
Thus, it is beyond dispute that paragraph 5.2 of the Doha Ministerial Decision was adopted
subsequent to the relevant WTO agreement at issue, the TBT Agreement. With regard to the
second element, the key question to be answered is whether paragraph 5.2 of the Doha Ministerial
Decision expresses an agreement between Members on the interpretation or application of the term
"reasonable interval" in Article 2.12 of the TBT Agreement.
264. We recall that paragraph 5.2 of the Doha Ministerial Decision provides:
Subject to the conditions specified in paragraph 12 of Article 2 of the
Agreement on Technical Barriers to Trade, the phrase "reasonable
interval" shall be understood to mean normally a period of not less
than 6 months, except when this would be ineffective in fulfilling the
legitimate objectives pursued.

265. In addressing the question of whether paragraph 5.2 of the Doha Ministerial Decision
expresses an agreement between Members on the interp retation or application of the term "reasonable
interval" in Article 2.12 of the TBT Agreement, we find useful guidance in the Appellate Body reports
in EC – Bananas III (Article 21.5 – Ecuador II) / EC – Bananas III (Article 21.5 – US) . The
Appellate Body observed that the International La w Commission (the "ILC") describes a subsequent
agreement within the meaning of Article 31(3)(a) of the Vienna Convention as "a further authentic
element of interpretation to be taken into account together wi th the context". According to the
Appellate Body, "by referring to 'a uthentic interpretation', the ILC reads Article 31(3)(a) as referring
to agreements bearing specifically upon the interpretation of the treaty. "472 Thus, we will consider
whether paragraph 5.2 bears specifically upon the interpretation of Article 2.12 of the TBT Agreement.
266. Paragraph 5.2 of the Doha Ministerial Decisi on refers explicitly to the term "reasonable
interval" in Article 2.12 of the TBT Agreement and defines this interval as "normally a period of not
less than 6 months, except when this would be in effective in fulfilling the legitimate objectives
pursued" by a technical regulation. In the light of the terms and content of paragraph 5.2, we are
unable to discern a func tion of paragraph 5.2 other than to interpret the term "reasonable interval" in
Article 2.12 of the TBT Agreement. We consider, therefore, that paragraph 5.2 bears specifically
upon the interpretation of the term "reas onable interval" in Article 2.12 of the TBT Agreement. We
turn now to consider whether paragraph 5.2 of th e Doha Ministerial Decision reflects an "agreement"
among Members—within the meaning of Article 31(3)(a) of the Vienna Convention —on the
interpretation of the term "reasonable interval" in Article 2.12 of the TBT Agreement.
267. We note that the text of Article 31(3)(a) of the Vienna Convention does not establish a
requirement as to the form which a "subsequent ag reement between the parties" should take. We
consider, therefore, that the term "agreement" in Article 31(3)(a) of the Vienna Convention refers,
fundamentally, to substance rather than to form. Thus, in our view, paragraph 5.2 of the Doha
Ministerial Decision can be characterized as a "s ubsequent agreement" within the meaning of
Article 31(3)(a) of the Vienna Convention provided that it clearly expresses a common understanding,
and an acceptance of that understanding among Member s with regard to the meaning of the term
"reasonable interval" in Article 2.12 of the TBT Agreement. In determining whether this is so, we find
the terms and content of paragraph 5.2 to be disp ositive. In this connection, we note that the
understanding among Members with regard to the meaning of the term "reasonable interval" in
Article 2.12 of the TBT Agreement is expressed by terms—" shall be understood to mean "—that
cannot be considered as merely hortatory.

472Appellate Body Reports, EC – Bananas III (Article 21.5 – Ecuador II) / EC – Bananas III

268. For the foregoing reasons, we uphold the Panel's finding, in paragraph 7.576 of the Panel
Report, that paragraph 5.2 of the Doha Minist erial Decision constitutes a subsequent agreement
between the parties, within the meaning of Article 31(3)(a) of the Vienna Convention , on the
interpretation of the term "reasonable interval" in Article 2.12 of the TBT Agreement.
269. In the light of our characterization of paragraph 5.2 of the Doha Ministerial Decision as a
subsequent agreement between the parties with in the meaning of Article 31(3)(a) of the Vienna
Convention, we turn now to consider the meaning of Article 2.12 of the TBT Agreement in the light of
the clarification of the term "reasonable interval" pr ovided by paragraph 5.2. We observe that, in its
commentaries on the Draft articles on the Law of Treaties, the ILC states that a subsequent agreement
between the parties within the meaning of Article 31(3)(a) "must be read into the treaty for purposes
of its interpretation".
473 As we see it, while the terms of paragraph 5.2 must be "read into"
Article 2.12 for the purpose of interpreting that provision, this does not mean that the terms of
paragraph 5.2 replace or override the terms contai ned in Article 2.12. Rather, the terms of
paragraph 5.2 of the Doha Ministerial Decision cons titute an interpretative clarification to be taken
into account in the interpretation of Article 2.12 of the TBT Agreement.
270. Article 2.12 of the TBT Agreement provides:
Except in those urgent circumstances referred to in paragraph 10,
Members shall allow a reasonable interval between the publication of
technical regulations and their entry into force in order to allow time
for producers in exporting Members, and particularly in developing
country Members, to adapt their products or methods of production
to the requirements of the importing Member.
271. Paragraph 5.2 of the Doha Ministerial Decision provides:
Subject to the conditions specified in paragraph 12 of Article 2 of the
Agreement on Technical Barriers to Trade, the phrase 'reasonable
interval' shall be understood to mean normally a period of not less
than 6 months, except when this would be ineffective in fulfilling the
legitimate objectives pursued.
272. We note, as did the Panel, that Article 2.12 of the TBT Agreement explains that "the reason
for allowing an interval between the publication and the entry into for ce of a technical regulation is to
allow time for producers in exporting Members, and particularly in developing country Members, to

473Draft articles on the Law of Treaties with commentaries . Text adopted by the ILC at its
eighteenth session, in 1966, and submitted to the United Nations General Assembly as a part of the
Commission's report covering the work of that session (at para. 38). The ILC report, which also contains
commentaries on the draft articles, appears in the Yearbook of the International Law Commission, 1966, Vol. II,
p. 221, para. 14.

adapt their products or methods of production" to the requirements of the importing Member's
technical regulation.474 In our view, the term "normally" in pa ragraph 5.2 relates to the rationale of
the obligation articulated in Article 2.12 of the TBT Agreement. Seen in this light, the term
"normally" provides the interpretative link between Ar ticle 2.12, on the one hand, and paragraph 5.2,
on the other hand. Thus, we consider that, taking into account the interpretative clarification provided
by paragraph 5.2 of the Doha Ministerial Decision, Article 2.12 of the TBT Agreement establishes a
rule that "normally" producers in exporting Members require a period of "not less than 6 months" to
adapt their products or production methods to the requirements of an importing Member's technical
regulation.
273. On appeal, the United States argues that the use of the term "normally" in paragraph 5.2 of the
Doha Ministerial Decision does not support the conclusion that paragraph 5.2 represents a rule.475 We
observe that the ordinary meaning of the term " normally" is defined as "under normal or ordinary
conditions; as a rule". 476 In our view, the qualification of an obligation with the adverb "normally"
does not, necessarily, alter the characterization of that obligation as constituting a "rule". Rather, we
consider that the use of the term "normally" in pa ragraph 5.2 indicates that the rule establishing that
foreign producers require a minimum of "not less than 6 months" to adapt to the requirements of a
technical regulation admits of derogation under certain circumstances.
274. The obligation imposed on Members by Article 2.12 to provide a "reasonable interval"
between the publication and the entr y into force of their technical regulations carefully balances the
interests of, on the one hand, the exporting Member whose producers might be affected by a technical
regulation and, on the other hand, the importing Me mber that wishes to pursue a legitimate objective
through a technical regulation. With regard to the former, Article 2.12 of the TBT Agreement, as
clarified by paragraph 5.2 of the Doha Ministeria l Decision, establishes a rule that, "normally",
producers in exporting Members require a period of at least six months to adapt their products or
production methods to the requirements of the im porting Member's technical regulation. Thus,
Article 2.12 presumes that foreign producers in ex porting Members, and particularly in developing
country Members, require a minimum of at least six months to adapt to the requirements of an
importing Member's technical regulation.
275. With regard to the interests of the importi ng Member, we recall that paragraph 5.2 of the
Doha Ministerial Decision tempers the obligation to provide a "reasonable interval" of not less than
six months between the publication and the entry into force of a technical regulation by stipulating

474Panel Report, para. 7.582.
476Shorter Oxford English Dictionary , 6th edn, A. Stevenson (ed.) (Oxford University Press, 2007),
Vol. 2, p. 1945.

that this obligation applies "except when this would be ineffective in fulfilling the legitimate
objectives pursued" by the technical regula tion. Thus, while Article 2.12 of the TBT Agreement
imposes an obligation on importing Members to provide a "reasonable interval" of not less than
six months between the publication and entry into force of a technical regulation, an importing
Member may depart from this obligation if this inte rval "would be ineffective to fulfil the legitimate
objectives pursued" by the technical regulation.
C. The Panel's Finding that the United States Ac ted Inconsistently w ith Article 2.12 of
the TBT Agreement
276. We turn now to consider the United States' claim that the Panel erred in finding that Indonesia
had established a prima facie case of inconsistency with Article 2.12 of the TBT Agreement that the
United States failed to rebut. The United States a dvances, essentially, two arguments in support of its
claim that the Panel incorrectly f ound that Indonesia had established a prima facie case of
inconsistency with Article 2.12 of the TBT Agreement. First, the United States argues that the Panel
erred in finding that Indonesia had established a prima facie case because Indonesia did not establish
that the three-month interval between the publicati on and entry into force of Section 907(a)(1)(A) of
the FFDCA was unreasonable in the light of its impact on the ability of Indonesian producers to adapt
to the requirements of that measure.
477 Second, the United States argues that, even assuming
arguendo that the Panel was correct in d eciding that the elements of a prima facie case may be drawn
exclusively from paragraph 5.2 of the Doha Minist erial Decision, the Panel erred in finding that
Indonesia had "succeeded in making such a case".478
277. According to the United States, in view of th e elements contained in paragraph 5.2 of the
Doha Ministerial Decision, Indonesia "would have to establish with evidence and argument" a prima
facie case that: (i) "urgent circumstances" did not exist; (ii) the interval period was less than
six months; (iii) "this is a 'normal' situation"; a nd (iv) allowing an interval of at least six months
would not render the fulfilment of the objectiv e pursued by Section 907(a)(1)(A) ineffective. 479
Indonesia, in response, argues that it did establish "a prima facie case that the 90-day interval
provided by the United States was significantly shorter than the 6 months" normally required.480
278. The United States and Indonesia do not agree on the elements of a prima facie case that a
complaining Member is required to establish under Article 2.12 of the TBT Agreement. Moreover, it
appears that the divergence stems from the fact that the United States and Indonesia attribute a
different interpretative value to pa ragraph 5.2 of the Doha Ministeria l Decision. In this connection,

477United States' appellant's submission, paras. 132-134.

we note that the United States argues that the elements of a prima facie case of inconsistency with
Article 2.12 are to be drawn from the text of Article 2.12, but that, "[e]ven assuming arguendo that
the Panel" could draw the elements of a prima facie case from paragraph 5.2, the Panel erred in
finding that Indonesia had made such a case.481
279. We do not consider that the elements of a prima facie case of inconsistency with Article 2.12
of the TBT Agreement are to be drawn exclusively from eith er the terms of Article 2.12, on the
one hand, or of paragraph 5.2 of the Doha Minist erial Decision, on the other hand. Article 2.12
imposes an obligation on importing Members to allow a "reasonable interval" between the publication
and the entry into force of their technical regulati ons. We recall our finding above that paragraph 5.2
of the Doha Ministerial Decision constitutes a subs equent agreement between the parties, within the
meaning of Article 31(3)(a) of the Vienna Convention, on the interpretation of the term "reasonable
interval" in Article 2.12 of the TBT Agreement. Thus, it seems to us that the elements of a prima facie
case of inconsistency with Article 2.12 of the TBT Agreement are to be drawn from a proper
interpretation of Article 2.12, taking into account—pursuant to Article 31(3)(a) of the Vienna
Convention—the interpretative clarification provided by the terms of paragraph 5.2 of the Doha
Ministerial Decision.
280. We further recall our finding above that Article 2.12 of the TBT Agreement, properly
interpreted in the light of paragraph 5.2 of the Do ha Ministerial Decision, establishes a rule that,
"normally", producers in exporting Members require a period of at least six months to adapt their
products or production methods to the requirements of the importing Member's technical regulation.
Based on our interpretation of Article 2.12 of the TBT Agreement, we consider that a prima facie case
of inconsistency with Article 2.12 is establishe d where it is shown that an importing Member has
failed to allow an interval of not less than six m onths between the publication and the entry into force
of the technical regulation at issue.
281. In accordance with the general rules on burden of proof reflected in US – Wool Shirts and
Blouses, we consider that, under Article 2.12 of the TBT Agreement, it is for the complaining Member
to establish that the responding Member has not allowed an interval of not less than six months

between the publication and the entry into fo rce of the technical regulation at issue.
482 If the
complaining Member establishes this prima facie case of inconsistency, it is for the responding
Member to rebut the prima facie case of inconsistency with Ar ticle 2.12. We recall that, in US –
Wool Shirts and Blouses, the Appellate Body stated that "precisely how much and precisely what kind
of evidence" will be required to establish a prima facie case "will necessarily vary from measure to
measure, provision to provision, and case to case". 483 We consider that, similarly, this reasoning
applies with regard to the quantity and nature of evidence required to rebut a prima facie case of
inconsistency.
282. The text of Article 2.12 of the TBT Agreement read in the light of paragraph 5.2 of the Doha
Ministerial Decision provides an indication of the nature of evidence that is required to rebut a prima
facie case of inconsistency with that provision. First, Article 2.12 of the TBT Agreement excludes
from the obligation to provide a "reasonable interval " between the publication and the entry into force
of technical regulations "those urgent circumstances" referred to in Article 2.10 of the
TBT Agreement. Thus, where "urgent problems of safety, health, environmental protection or national
security" arise for a Member that is implementing a technical regulation, a period of six months or
more cannot be considered to be a "reasonable interv al" within the meaning of Article 2.12. Second,
Article 2.12 expressly states that the rationale for providing a "reasonable interval" between the
publication and the entry into force of a technical regulation is "to allow time for producers in
exporting Members, and particularly in developing country Members, to adapt their products or
methods of production" to the requirements of the importing Member's technical regulation. If these
producers can adapt their products or production methods to the requirements of an importing
Member's technical regulation in less than six months, a period of six months or more cannot be
considered to be a "reasonable interval" within th e meaning of Article 2.12. Third, paragraph 5.2
allows an importing Member to depart from the obligation to provide a "reasonable interval" of,
"normally", not less than six months between the pub lication and entry into force of their technical
regulation, if this interval would be "ineffectiv e to fulfil the legitimate objectives pursued" by its
technical regulation. Therefore, a period of "not less than six months" cannot be considered to be a
"reasonable interval", within the meaning of Article 2.12, if this period would be ineffective to fulfil
the legitimate objectives pursued by the technical regulation at issue.

482In US – Wool Shirts and Blouses , the Appellate Body outlined the general rules on burden of proof
by stating that:
… the burden of proof rests upon the party, whether complaining or
defending, who asserts the affirmative of a particular claim or defence. If
that party adduces evidence sufficient to raise a presumption that what is
claimed is true, the burden then shifts to the other party, who will fail unless
it adduces sufficient evidence to rebut the presumption.
(Appellate Body Report, US – Wool Shirts and Blouses, p. 14, DSR 1997:I, 323, at 335)
483Appellate Body Report, US – Wool Shirts and Blouses, p. 14, DSR 1997:I, 323, at 335.

283. Thus, in the light of the above, we consider that, in order to rebut a prima facie case of
inconsistency with Article 2.12 of the TBT Agreement, a responding Member that has allowed an
interval of less than six months between the publica tion and entry into force of its technical regulation
must submit evidence and argument sufficient to establish either: (i) that the "urgent circumstances"
referred to in Article 2.10 of the TBT Agreement surrounded the adoption of the technical regulation at
issue; (ii) that producers of the complaining Memb er could have adapted to the requirements of the
technical regulation at issue within the shorter interval that it allowed; or (iii) that a period of "not
less than" six months would be ineffective to fulfil the legitimate objectives of its technical regulation.
284. The Panel found that Indonesia had made a prima facie case that "allowing at least six months
between the date of publication of Section 907(a)(1 )(A) and its entry into force would not render the
fulfilment of the objective pursued by Section 907(a)(1)(A) ineffective."484 Thus, in the Panel's view,
the burden was on Indonesia to establish a prima facie case of inconsistency with Article 2.12 of the
TBT Agreement that included establishing that a period of at least six months between the publication
of Section 907(a)(1)(A) and its entry into force would not render the fulfilment of the objective
pursued by Section 907(a)(1)(A) ineffective. The United States argues that Indonesia failed to
establish such a prima facie case. Relying on the Appellate Body's ruling on the burden of proof
under Article 2.4 of the TBT Agreement in EC – Sardines, the United States argues on appeal that the
burden rests with the complaining Member to a dduce sufficient evidence and argument to establish
that an interval of not less than six months w ould be effective in fulfilling the objectives of the
technical regulation at issue.
485
285. In EC – Sardines, the Appellate Body was considering the allocation of the burden of proof in
the context of a claim of incons istency with Article 2.4 of the TBT Agreement. As we see it, the fact
that two provisions manifest a degree of structural similarity does not, necessarily, support a
conclusion that the allocation of the burden of proof in respect of each provision must be identical.486
286. We recall our view expressed above that the elements of a prima facie case of inconsistency
with Article 2.12 of the TBT Agreement are to be drawn from a proper interpretation of Article 2.12,
taking into account—pursuant to Article 31(3)(a) of the Vienna Convention —the interpretative
clarification provided by the terms of paragraph 5.2 of the Doha Ministerial Decision. In much the

484Panel Report, para. 7.592.
485United States' appellant's submission, para. 143 (referring to Appellate Body Report, EC – Sardines,
para. 288).
486We are not saying that the fact that the burden of proof is allocated in a particular manner with
respect to a particular provision of the covered agreements is not a relevant consideration in discerning how the
burden of proof is allocated under a similar provision of the covered agreements. Rather, we are saying that the
conceptual or structural similarity between two provisions does not, by itself, necessitate a conclusion that the
burden of proof in respect of both provisions must be allocated in an identical manner.

same way, the manner in which the burden of proof is allocated under Article 2.12 of the
TBT Agreement must be informed by an interpretation that properly canvasses the text, context, and
object and purpose of Article 2.12. In our view, the burden of proof in respect of a particular
provision of the covered agreements cannot be understood in isolation from the overarching logic of
that provision, and the function which it is designed to serve. On the contrary, it is by having regard
for the function and rationale of a particular provi sion that an adjudicator can, adequately, assess the
manner in which the burden of proof should be allocated under that provision.
287. We recall that Article 2.12 of the TBT Agreement explains that the reason for allowing an
interval between the publication and the entry into force of a technical regulation is "to allow time for
producers in exporting Members, and particularly in developing country Members, to adapt their
products or methods of production" to the requi rements of the importing Member's technical
regulation. By its own terms, Article 2.12 si ngles out producers in exporting Members, and
particularly in developing country Members, as th e beneficiaries of a "reasonable interval" between
the publication and the entry into force of an impo rting Member's technical regulation. Thus, the
concept of a "reasonable interval" within the meani ng of Article 2.12 is meant to provide a degree of
certainty to producers in exporting Members, and par ticularly in developing country Members, with
regard to the time within which an importing Me mber's technical regulation can reasonably be
expected to enter into force.
288. Paragraph 5.2 of the Doha Ministerial Decisi on provides interpretative clarification of the
concept of a "reasonable interval" within the mean ing of Article 2.12 by establishing a rule that
producers in exporting Members require a period of at least six months to adapt their products or
production methods to the requirements of the im porting Member's technical regulation. Thus,
paragraph 5.2 enhances the degree of certainty that the concept of a "reasonable interval" is meant to
provide to producers in exporting Members, and par ticularly in developing country Members, with
regard to the time within which an importing Me mber's technical regulation can reasonably be
expected to enter into force.
289. The rule in Article 2.12, as clarified by paragr aph 5.2 of the Doha Ministerial Decision, is
expressly designed to allow producers in the complain ing Member, and in particular in a complaining
developing country Member, sufficient time to ad apt their products or production methods to the
requirements of the responding Member's technical regulation. Thus, it seems to us that, where a
responding Member seeks to deviate from this rule, wh ich, by its own terms, singles out producers in
the complaining Member as the beneficiaries of a "reasonable interval" between the publication and
the entry into force of a technical regulation, the responding Member must shoulder the burden of
establishing a prima facie case that the conditions under which derogations from the rule are

permitted are extant. Thus, we disagree with th e Panel that it was for Indonesia to establish a prima
facie case that a period of at least six months betw een the publication of Section 907(a)(1)(A) and its
entry into force would not render the fulfilment of the objective pursued by Section 907(a)(1)(A)
ineffective. Instead, we consider that, under Article 2.12 of the TBT Agreement, as clarified by
paragraph 5.2 of the Doha Ministerial Decision, the burden rests upon the responding Member to
make a prima facie case that an interval of not less than six months "would be ineffective to fulfil the
legitimate objectives pursued" by its technical regulation.
290. In sum, under Article 2.12 of the TBT Agreement, as clarified by paragraph 5.2 of the Doha
Ministerial Decision, a complaining Member is required to establish a prima facie case that the
responding Member has failed to allow for a period of at least six months between the publication and
the entry into force of the technical regulation at issue. If the complaining Member establishes such a
prima facie case, the burden rests on the responding Member that has allowed for an interval of less
than six months between the publication and the entry into force of its technical regulation to establish
either: (i) that the "urgent circumstances" referred to in Article 2.10 of the TBT Agreement
surrounded the adoption of the technical regulation at issue; (ii) that producers of the complaining
Member could have adapted to the requirements of th e technical regulation at issue within the shorter
interval that it allowed; or (iii) that a period of "not less than" six months would be ineffective to
fulfil the legitimate objectives of its technical regulation.
291. In order to establish a prima facie case of inconsistency w ith Article 2.12 of the
TBT Agreement, Indonesia was required to establish that the United States did not allow an interval of
at least six months between the publication and the entry into force of the technical regulation at issue.
In this connection, we note the Panel's finding that the actual interval allowed by the United States
between the publication and the entry into force of Section 907(a)(1)(A) was a "90-day period or a
three-month period".
487 Thus, we agree with the Panel that Indonesia established a prima facie case of
inconsistency with Article 2.12 of the TBT Agreement.
292. In order to rebut the prima facie case of inconsistency with Article 2.12 of the TBT Agreement
made by Indonesia, the United States was require d to submit evidence and argument sufficient to
establish either: (i) that the "urgent circumstances" referred to in Article 2.10 of the TBT Agreement
surrounded the adoption of Section 907(a)(1)(A); (ii) that producers in Indonesia could have adapted
to the requirements of Section 907(a)(1 )(A) within a three-month interval; or (iii) that a period of
"not less than" six months would be ineffe ctive to fulfil the legitimate objectives of
Section 907(a)(1)(A).

487Panel Report, para. 7.567.

293. With regard to whether the "u rgent circumstances" referred to in Article 2.10 of the
TBT Agreement surrounded the adoption of Section 907(a)(1 )(A), we note that the Panel found that
"[i]n the absence of any evidence or argument th at such urgent problems of safety, health,
environmental protection or national security arose or threatened to arise upon adoption of
Section 907(a)(1)(A)", it could "onl y conclude that these urgent circumstances were not present".
488
Thus, the United States did not contend that the "urg ent circumstances" referred to in Article 2.10
surrounded the adoption of Section 907(a)(1)(A).
294. With regard to the question of whether produ cers in Indonesia could have adapted to the
requirements of Section 907(a)(1)(A) within a three-month period, the United States argued before the
Panel that "Indonesian producers have been a nd are able to market tobacco-flavoured and
menthol-flavoured cigarettes in the United States' market", and that "Indonesian producers, even
16 months after the enactment of [Section 907(a )(1)(A)] have not adjusted their product lines to
produce tobacco or menthol-flavoured cigarettes." 489 Thus, according to the United States, whether it
waited "three months or six months after the measu re's enactment to allow it to enter into force
appears not to have affected Indonesia producers in any way". 490 On appeal, the United States
submits that "[t]his evidence and argument" was sufficient to rebut the prima facie case that the Panel
found Indonesia to have established. 491 We are not persuaded that the evidence and argument
submitted by the United States before the Panel was sufficient to establish that producers in Indonesia
could have adapted to the requirements of Secti on 907(a)(1)(A) within a three-month period.
Contrary to what the United States argues, the fact that Indonesian producers had not adjusted to the
requirements of Section 907(a)(1)(A) sixteen months after its entry into for ce is evidence that points
in the direction of Indonesian producers requiring a significantly longer period than the three months
allowed by the United States. Thus, the United St ates failed to establish that producers in Indonesia
could have adapted to the requirements of Section 907(a)(1)(A) within a three-month period.
295. We turn now to consider whether the United St ates established, with sufficient evidence and
argument, that a period of at least six months between the publication and the entry into force of
Section 907(a)(1)(A) would be ineffective in fulfilling the legitimate objective pursued by
Section 907(a)(1)(A). We note that the Panel stated that the United States had not explained "why it
deemed that allowing a 90 day/three month interval between the publication and entry into force of
Section 907(a)(1)(A) was not ineffective in fulfillin g the objective pursued by Section 907(a)(1)(A),
while a six month interval would be".
492 Before the Panel, the United States argued that the

488Panel Report, para. 7.507.
489Panel Report, para. 7.583 (referring to United States' first written submission to the Panel, para. 303).
490Panel Report, para. 7.583.
492Panel Report, para. 7.593.

FSPTCA "directly addresses a serious problem—youth smoking" and that "Congress intended to limit
this behaviour as much as practicable". 493 While the arguments advanced by the United States before
the Panel identify the legitimate objective of Sec tion 907(a)(1)(A), these arguments are insufficient to
establish that allowing a period of not less than si x months between the publication and entry into
force of Section 907(a)(1)(A) would have been ineffective to fulfil the legitimate objective of
Section 907(a)(1)(A).
296. Thus, while we disagree with the Panel that it was for Indonesia to establish a prima facie
case that an interval of at least six months betw een the publication of the FSPTCA and the entry into
force of Section 907(a)(1)(A) would not render the fulfilment of the objective pursued by
Section 907(a)(1)(A) ineffective, we nevertheless sh are the Panel's view that the United States failed
to establish that an interval of at least six mont hs between publication and entry into force would be
ineffective in fulfilling the legitimate objective pur sued by Section 907(a)(1)(A). Accordingly, we
agree with the Panel that the Un ited States failed to rebut the prima facie case of inconsistency that
Indonesia established under Article 2.12 of the TBT Agreement.
297. In the light of the foregoing reasons, we uphold, albeit for different reasons, the Panel's
finding, in paragraphs 7.595 and 8.1(h) of the Panel Report, that, by failing to allow an interval of not
less than six months between the publication and the entry into force of Section 907(a)(1)(A) of the
FFDCA, the United States acted inconsistently with Article 2.12 of the TBT Agreement.
VII. Findings and Conclusions
298. For the reasons set out in this Report, the Appellate Body:
(a) With respect to Article 2.1 of the TBT Agreement:
(i) upholds, albeit for different reasons, the Panel's finding, in paragraph 7.248
of the Panel Report, that clove cigarettes and menthol cigarettes are "like
products" within the meaning of Article 2.1 of the TBT Agreement;
(ii) finds that the Panel did not act inconsis tently with Article 11 of the DSU in
its analysis of consumer tastes and habits;
(iii) upholds, albeit for different reasons, the Panel's finding, in paragraph 7.292
of the Panel Report, that, by banning clove cigarettes while exempting
menthol cigarettes from the ban, Section 907(a)(1)(A) of the FFDCA accords
imported clove cigarettes less favourable treatment than that accorded to

493Panel Report, para. 7.588 (referring to United States' first written submission to the Panel, para. 302).

domestic menthol cigarettes, within the meaning of Article 2.1 of the
TBT Agreement;
(iv) finds that the Panel did not act inconsis tently with Article 11 of the DSU in
its less favourable treatment analysis; and, therefore,
(v) upholds, albeit for different reasons, the Panel's finding, in paragraphs 7.293
and 8.1(b) of the Panel Report, that Section 907(a)(1)(A) of the FFDCA is
inconsistent with Article 2.1 of the TBT Agreement because it accords to
imported clove cigarettes less favourable treatment than that accorded to like
menthol cigarettes of national origin; and
(b) With respect to Article 2.12 of the TBT Agreement:
(i) upholds the Panel's finding, in paragra ph 7.576 of the Panel Report, that
paragraph 5.2 of the Doha Ministerial Decision constitutes a subsequent
agreement between the parties, within the meaning of Article 31(3)(a) of the
Vienna Convention, on the interpretation of the term "reasonable interval" in
Article 2.12 of the TBT Agreement; and
(ii) upholds, albeit for different reasons, the Panel's finding, in paragraphs 7.595
and 8.1(h) of the Panel Report, that, by failing to allow an interval of not less
than six months between the publication and the entry into force of
Section 907(a)(1)(A) of the FFDCA, the United States acted inconsistently
with Article 2.12 of the TBT Agreement.
299. The Appellate Body recommends that the DSB re quest the United States to bring its measure,
found in this Report, and in the Panel Report as modifi ed by this Report, to be inconsistent with the
TBT Agreement, into conformity with its obligations under that Agreement.

ANNEX I

10 January 2012

 (12-0103)
 Original: English

Notification of an Appeal by the United States
under Article 16.4 and Article 17 of the Understanding on Rules
and Procedures Governing the Settlement of Disputes (DSU),
and under Rule 20(1) of the Working Procedures for Appellate Review

 The following notification, dated 5 January 2012 , from the Delegation of the United States, is
being circulated to Members.

Pursuant to Article 16 of the Understanding on Rules and Procedures Governing the
Settlement of Disputes ("DSU") and Rule 20 of the Working Procedures for Appellate Review , the
United States hereby notifies its decision to appeal to the Appellate Body certain issues of law
covered in the Report of the Panel in (WT/DS406/R) ("Panel Report") and certain legal interpretations developed by the
Panel.

1. The United States seeks review of the Pane l's conclusion that Section 907(a)(1)(A)
of the Family Smoking Prevention and Tobacco Control Act (the "Tobacco Control Act"),
1 is
inconsistent with Article 2.1 of the Agreement on Technical Barriers to Trade (the
"TBT Agreement").2 The United States appeals this finding based on a series of erroneous legal
interpretations developed by the Panel, and on failure by the Panel to make an objective assessment of
the facts of the case as called for by Article 11 of the DSU.

2. The United States seeks review of the Panel's finding that clove cigarettes and menthol
cigarettes are like products.
3 In making this erroneous findi ng, the Panel erred in its legal
interpretation of Article 2.1 by excluding, a priori, evidence related to particular criteria and failing to
analyze each criteria completely. 4 Specifically the Panel erred by failing to perform a complete
analysis of the end-uses 5 of clove cigarettes and menthol cigarettes and failing to perform a complete

1The Tobacco Control Act was adopted June 2009 an d it went into effect September 2009 as an
amendment to the Federal Food, Drug and Cosmetic Act, 21 U.S.C. §387g(a)(1)(A).
2See, e.g., Panel Report, paras. 7.293, 8.1(b).
4See, e.g., Panel Report, paras. 7.116, 7.119, 7.197-199, 7.206, 7.209-210, 7.214, 7.230-231.
5See, e.g., Panel Report, paras. 7.197-199.

analysis of consumer tastes and habits.
6 In developing this faulty lega l interpretation, the Panel also
acted inconsistently with Article 11 of the DSU by failing to make an objective assessment of the
facts in the case by refusing to consider certain evidence related consumer tastes and habits.7

3. The United States also seeks review of the Panel's finding that Section 907(a)(1)(A) accords
less favorable treatment to imported clove cigarettes.
8 In making this finding, the Panel erred in its
legal interpretations that the only products to be compared are imported clove cigarettes and domestic
menthol cigarettes,9 and that the effect of Section 907(a)(1)(A) on U.S. production can be assessed by
looking only at what products were on the market at the time the measure went into effect. 10 T h e
Panel also erred by applying an incorrect legal framework to assess whether the alleged detriment to
the competitive conditions for clove cigarettes coul d be explained by factors or circumstances
unrelated to the foreign origin of the products. 11 In developing these fau lty legal interpretations, the
Panel also acted inconsistently with Article 11 of the DSU by failing to make an objective assessment
of the facts of the case in finding that at the time of the ban, there were no domestic cigarettes with
characterizing flavors other than menthol cigarettes, 12 and that Section 907(a)(1)(A) imposes no costs
on any U.S. entity.13

4. The United States seeks review by the Appella te Body of the Panel's conclusion and related
findings that by not allowing an interval of no l ess than six months between the publication and the
entry into force of Section 907(a)(1)(A), the United States acted inconsistently with Article 2.12 of the
TBT Agreement.
14 This conclusion is in error and is based on erroneous findings on issues of law and
legal interpretations with respect to Article 2.12 of the TBT Agreement.15

5. Finally, the United States also makes a conditio nal appeal regarding the Panel's legal analysis
with respect to Indonesia's claims under Article 2. 2 of the TBT Agreement. Should Indonesia seek
review by the Appellate Body of the Panel's findings with respect to Indonesia's claims under
Article 2.2, the United States seeks review by the Appellate Body of the Pa nel's finding that it could
draw upon jurisprudence develope d under Article XX(b) of the General Agreement on Tariffs and
Trade 1994 when assessing the consistency of Section 907(a)(1)(A) with the requirement that
technical regulations "not be more trade-r estrictive than necessary to fulfill a legitimate
objective …".
16 While the United States agrees with th e ultimate conclusion in the Panel Report
regarding Indonesia's claims under Article 2.2 of th e TBT Agreement, the United States considers the
Panel's analysis on this particular aspect to be based on erroneous findings on issues of law and
related legal interpretations with respect to Article 2.2 of the TBT Agreement.

6See, e.g., Panel Report, paras. 7.116, 7.119, 7.206-7.232.
9See, e.g., Panel Report, paras. 7.274, 7.277.
11See, e.g., Panel Report, paras. 7.269, 7.286-7.291.
14See e.g., Panel Report, paras. 7.595, 8.1(h).
15See e.g., Panel Report, paras. 7.561-7.595.
16Panel Report, paras. 7.351-7.369.