EUROPEAN UNION AND CERTAIN MEMBER STATES – CERTAIN MEASURES CONCERNING PALM OIL AND OIL PALM CROP-BASED BIOFUELS REPORT OF THE PANEL
Document: REPORT OF THE PANEL
Date: 5 March 2024
Document codes: WT/DS600/R
Complainant: Malaysia
Respondent: EU, France, Lithuania
Third parties: Argentina, Australia, Brazil, Canada, China, Colombia, Costa Rica, Ecuador, El Salvador, Guatemala, Honduras, India, Indonesia, Japan, South Korea, Norway, Russia, Saudi Arabia, Singapore, Thailand, Turkey, Ukraine, United Kingdom, U.S.
Dispute stage: Panel
Agreements cited: Art. I:1, III:2, III:4, X:3(a), XI:1  GATT 1994Art. 3, 5  Subsidies and Countervailing Measures (SCM)Art. 2.1, 2.2, 2.4, 2.5, 2.8, 2.9, 5.1.1, 5.1.2, 5.2, 5.6, 5.8, 12.1, 12.3  Technical Barriers to Trade (TBT)

EUROPEAN UNION AND CERTAIN MEMBER STATES – CERTAIN
MEASURES CONCERNING PALM OIL AND
OIL PALM CROP-BASED BIOFUELS
REPORT OF THE PANEL

LIST OF ANNEXES
ANNEX A
WORKING PROCEDURES OF THE PANEL
Contents Page
Annex A-1 Working Procedures of the Panel 4
ANNEX B
ARGUMENTS OF THE PARTIES
Contents Page
Annex B-1 Integrated executive summary of the arguments of Malaysia 12
Annex B-2 Integrated executive summary of the arguments of the European Union 41
ANNEX C
ARGUMENTS OF THE THIRD PARTIES
Contents Page
Annex C-1 Integrated executive summary of the arguments of Australia 62
Annex C-2 Integrated executive summary of the arguments of Brazil 65
Annex C-3 Integrated executive summary of the arguments of Canada 69
Annex C-4 Integrated executive summary of the arguments of Colombia 74
Annex C-5 Integrated executive summary of the arguments of Costa Rica 79
Annex C-6 Integrated executive summary of the arguments of Ecuador 82
Annex C-7 Integrated executive summary of the arguments of Indonesia 86
Annex C-8 Integrated executive summary of the arguments of Japan 91
Annex C-9 Integrated executive summary of the arguments of the Republic of Korea 96
Annex C-10 Integrated executive summary of the arguments of the Russian Federation 99
Annex C-11 Integrated executive summary of the arguments of Ukraine 102
Annex C-12 Integrated executive summary of the arguments of the United Kingdom 108
Annex C-13 Integrated executive summary of the arguments of the United States 112

TABLE OF CASES CITED IN THIS REPORT
Short Title Full Case Title and Citation
Argentina – Financial
Services
Panel Report, Argentina – Measures Relating to Trade in Goods and Services,
 and Add.1, adopted 9 May 2016, as modified by Appellate Body
Report , DSR 2016:II, p. 599
Argentina – Footwear (EC) Panel Report, Argentina – Safeguard Measures on Imports of Footwear,
WT/DS121/R, adopted 12 January 2000, as modified by Appellate Body Report
WT/DS121/AB/R, DSR 2000:II, p. 575
Argentina – Hides and
Leather
Panel Report, Argentina – Measures Affecting the Export of Bovine Hides and
the Import of Finished Leather, WT/DS155/R and Corr.1, adopted
16 February 2001, DSR 2001:V, p. 1779
Argentina – Import
Measures
Appellate Body Reports, Argentina – Measures Affecting the Importation of
Goods, WT/DS438/AB/R / WT/DS444/AB/R / WT/DS445/AB/R, adopted
26 January 2015, DSR 2015:II, p. 579
Argentina – Import
Measures
Panel Reports, Argentina – Measures Affecting the Importation of Goods,
WT/DS438/R and Add.1 / WT/DS444/R and Add.1 / WT/DS445/R and Add.1,
adopted 26 January 2015, as modified (WT/DS438/R) and upheld (WT/DS444/R
/ WT/DS445/R) by Appellate Body Reports WT/DS438/AB/R / WT/DS444/AB/R
/ WT/DS445/AB/R, DSR 2015:II, p. 783
Australia – Apples Panel Report, Australia – Measures Affecting the Importation of Apples from
New Zealand, WT/DS367/R, adopted 17 December 2010, as modified by
Appellate Body Report WT/DS367/AB/R, DSR 2010:VI, p. 2371
Australia – Tobacco Plain
Packaging (Honduras)
Appellate Body Report, Australia – Certain Measures concerning Trademarks,
Geographical Indications and other Plain Packaging Requirements applicable to
Tobacco Products and Packaging, WT/DS435/AB/R and Add.1, adopted
29 June 2020
Australia – Tobacco Plain
Packaging
Appellate Body Reports, Australia – Certain Measures concerning Trademarks,
Geographical Indications and other Plain Packaging Requirements applicable to
Tobacco Products and Packaging, WT/DS435/AB/R and Add.1 (Honduras) /
WT/DS441/AB/R and Add.1 (Dominican Republic), adopted 29 June 2020
Australia – Tobacco Plain
Packaging
Panel Reports, Australia – Certain Measures concerning Trademarks,
Geographical Indications and other Plain Packaging Requirements applicable to
Tobacco Products and Packaging, WT/DS435/R, Add.1 and Suppl.1 (Honduras)
/ WT/DS441/R, Add.1 and Suppl.1 (Dominican Republic) / WT/DS458/R, Add.1
and Suppl.1 (Cuba) / WT/DS467/R, Add.1 and Suppl.1 (Indonesia),
WT/DS458/R and WT/DS467/R adopted 27 August 2018, DSR 2018:VIII, p.
3925, and WT/DS435/R and WT/DS441/R adopted 29 June 2020, as upheld by
Appellate Body Reports WT/DS435/AB/R / WT/DS441/AB/R, DSR 2018:VIII, p.
3925
Brazil – Aircraft Panel Report, Brazil – Export Financing Programme for Aircraft, WT/DS46/R,
adopted 20 August 1999, as modified by Appellate Body Report WT/DS46/AB/R,
DSR 1999:III, p. 1221
Brazil – Retreaded Tyres Appellate Body Report, Brazil – Measures Affecting Imports of Retreaded Tyres,
WT/DS332/AB/R, adopted 17 December 2007, DSR 2007:IV, p. 1527
Brazil – Retreaded Tyres Panel Report, Brazil – Measures Affecting Imports of Retreaded Tyres,
WT/DS332/R, adopted 17 December 2007, as modified by Appellate Body
Report WT/DS332/AB/R, DSR 2007:V, p. 1649
Brazil – Taxation Appellate Body Reports, Brazil – Certain Measures Concerning Taxation and
Charges, WT/DS472/AB/R and Add.1 / WT/DS497/AB/R and Add.1, adopted
11 January 2019, DSR 2019:I, p. 7
Brazil – Taxation Panel Reports, Brazil – Certain Measures Concerning Taxation and Charges,
WT/DS472/R, Add.1 and Corr.1 / WT/DS497/R, Add.1 and Corr.1, adopted
11 January 2019, as modified by Appellate Body Reports WT/DS472/AB/R /
WT/DS497/AB/R, DSR 2019:II, p. 345
Canada – Aircraft Appellate Body Report, Canada – Measures Affecting the Export of Civilian
Aircraft, WT/DS70/AB/R, adopted 20 August 1999, DSR 1999:III, p. 1377
Canada – Aircraft Panel Report, Canada – Measures Affecting the Export of Civilian Aircraft,
WT/DS70/R, adopted 20 August 1999, upheld by Appellate Body Report
WT/DS70/AB/R, DSR 1999:IV, p. 1443
Canada – Autos Appellate Body Report, Canada – Certain Measures Affecting the Automotive
Industry, WT/DS139/AB/R, WT/DS142/AB/R, adopted 19 June 2000, DSR
2000:VI, p. 2985
Canada – Autos Panel Report, Canada – Certain Measures Affecting the Automotive Industry,
WT/DS139/R, WT/DS142/R, adopted 19 June 2000, as modified by
Appellate Body Report WT/DS139/AB/R, WT/DS142/AB/R, DSR 2000:VII, p.
3043
Canada – Periodicals Appellate Body Report, Canada – Certain Measures Concerning Periodicals,
WT/DS31/AB/R, adopted 30 July 1997, DSR 1997:I, p. 449

Short Title Full Case Title and Citation
Canada – Wheat Exports
and Grain Imports
Appellate Body Report, Canada – Measures Relating to Exports of Wheat and
Treatment of Imported Grain, WT/DS276/AB/R, adopted 27 September 2004,
DSR 2004:VI, p. 2739
Chile – Alcoholic Beverages Panel Report, Chile – Taxes on Alcoholic Beverages, WT/DS87/R, WT/DS110/R,
adopted 12 January 2000, as modified by Appellate Body Report
WT/DS87/AB/R, WT/DS110/AB/R, DSR 2000:I, p. 303
Chile – Price Band System Appellate Body Report, Chile – Price Band System and Safeguard Measures
Relating to Certain Agricultural Products, WT/DS207/AB/R, adopted
23 October 2002, DSR 2002:VIII, p. 3045 (Corr.1, DSR 2006:XII, p. 5473)
China – Auto Parts Appellate Body Reports, China – Measures Affecting Imports of Automobile
Parts, WT/DS339/AB/R / WT/DS340/AB/R / WT/DS342/AB/R, adopted
12 January 2009, DSR 2009:I, p. 3
China – Auto Parts Panel Reports, China – Measures Affecting Imports of Automobile Parts,
WT/DS339/R, Add.1 and Add.2 / WT/DS340/R, Add.1 and Add.2 /
WT/DS342/R, Add.1 and Add.2, adopted 12 January 2009, upheld
(WT/DS339/R) and as modified (WT/DS340/R / WT/DS342/R) by
Appellate Body Reports WT/DS339/AB/R / WT/DS340/AB/R / WT/DS342/AB/R,
DSR 2009:I, p. 119
China – GOES Panel Report, China – Countervailing and Anti-Dumping Duties on Grain
Oriented Flat-Rolled Electrical Steel from the United States, WT/DS414/R and
Add.1, adopted 16 November 2012, upheld by Appellate Body Report
WT/DS414/AB/R, DSR 2012:XII, p. 6369
China – Publications and
Audiovisual Products
Appellate Body Report, China – Measures Affecting Trading Rights and
Distribution Services for Certain Publications and Audiovisual Entertainment
Products, WT/DS363/AB/R, adopted 19 January 2010, DSR 2010:I, p. 3
China – Rare Earths Appellate Body Reports, China – Measures Related to the Exportation of Rare
Earths, Tungsten, and Molybdenum, WT/DS431/AB/R / WT/DS432/AB/R /
WT/DS433/AB/R, adopted 29 August 2014, DSR 2014:III, p. 805
China – Rare Earths Panel Reports, China – Measures Related to the Exportation of Rare Earths,
Tungsten, and Molybdenum, WT/DS431/R and Add.1 / WT/DS432/R and Add.1
/ WT/DS433/R and Add.1, adopted 29 August 2014, upheld by Appellate Body
Reports WT/DS431/AB/R / WT/DS432/AB/R / WT/DS433/AB/R, DSR 2014:IV,
p. 1127
China – Raw Materials Appellate Body Reports, China – Measures Related to the Exportation of Various
Raw Materials, WT/DS394/AB/R / WT/DS395/AB/R / WT/DS398/AB/R, adopted
22 February 2012, DSR 2012:VII, p. 3295
China – Raw Materials Panel Reports, China – Measures Related to the Exportation of Various Raw
Materials, WT/DS394/R, Add.1 and Corr.1 / WT/DS395/R, Add.1 and Corr.1 /
WT/DS398/R, Add.1 and Corr.1, adopted 22 February 2012, as modified by
Appellate Body Reports WT/DS394/AB/R / WT/DS395/AB/R / WT/DS398/AB/R,
DSR 2012:VII, p. 3501
China – X-Ray Equipment Panel Report, China – Definitive Anti-Dumping Duties on X-Ray Security
Inspection Equipment from the European Union, WT/DS425/R and Add.1,
adopted 24 April 2013, DSR 2013:III, p. 659
Colombia – Ports of Entry Panel Report, Colombia – Indicative Prices and Restrictions on Ports of Entry,
WT/DS366/R and Corr.1, adopted 20 May 2009, DSR 2009:VI, p. 2535
Colombia – Textiles Appellate Body Report, Colombia – Measures Relating to the Importation of
Textiles, Apparel and Footwear, WT/DS461/AB/R and Add.1, adopted
22 June 2016, DSR 2016:III, p. 1131
Colombia – Textiles Panel Report, Colombia – Measures Relating to the Importation of Textiles,
Apparel and Footwear, WT/DS461/R and Add.1, adopted 22 June 2016, as
modified by Appellate Body Report WT/DS461/AB/R, DSR 2016:III, p. 1227
EC – Approval and
Marketing of Biotech
Products
Panel Reports, European Communities – Measures Affecting the Approval and
Marketing of Biotech Products, WT/DS291/R, Add.1 to Add.9 and Corr.1 /
WT/DS292/R, Add.1 to Add.9 and Corr.1 / WT/DS293/R, Add.1 to Add.9 and
Corr.1, adopted 21 November 2006, DSR 2006:III, p. 847
EC – Asbestos Appellate Body Report, European Communities – Measures Affecting Asbestos
and Asbestos-Containing Products, WT/DS135/AB/R, adopted 5 April 2001, DSR
2001:VII, p. 3243
EC – Asbestos Panel Report, European Communities – Measures Affecting Asbestos and
Asbestos-Containing Products, WT/DS135/R and Add.1, adopted 5 April 2001,
as modified by Appellate Body Report WT/DS135/AB/R, DSR 2001:VIII, p. 3305
EC – Bananas III Appellate Body Report, European Communities – Regime for the Importation,
Sale and Distribution of Bananas, WT/DS27/AB/R, adopted 25 September 1997,
DSR 1997:II, p. 591

Short Title Full Case Title and Citation
EC – Bananas III
(Guatemala and Honduras)
Panel Report, European Communities – Regime for the Importation, Sale and
Distribution of Bananas, Complaint by Guatemala and Honduras,
WT/DS27/R/GTM, WT/DS27/R/HND, adopted 25 September 1997, as modified
by Appellate Body Report WT/DS27/AB/R, DSR 1997:II, p. 695
EC – Bananas III (US) Panel Report, European Communities – Regime for the Importation, Sale and
Distribution of Bananas, Complaint by the United States, WT/DS27/R/USA,
adopted 25 September 1997, as modified by Appellate Body Report
WT/DS27/AB/R, DSR 1997:II, p. 943
EC – Hormones Appellate Body Report, European Communities – Measures Concerning Meat
and Meat Products (Hormones), WT/DS26/AB/R, WT/DS48/AB/R, adopted
13 February 1998, DSR 1998:I, p. 135
EC – IT Products Panel Reports, European Communities and its member States – Tariff
Treatment of Certain Information Technology Products, WT/DS375/R /
WT/DS376/R / WT/DS377/R, adopted 21 September 2010, DSR 2010:III,
p. 933
EC – Poultry Appellate Body Report, European Communities – Measures Affecting the
Importation of Certain Poultry Products, WT/DS69/AB/R, adopted 23 July 1998,
DSR 1998:V, p. 2031
EC – Sardines Appellate Body Report, European Communities – Trade Description of Sardines,
WT/DS231/AB/R, adopted 23 October 2002, DSR 2002:VIII, p. 3359
EC – Sardines Panel Report, European Communities – Trade Description of Sardines,
WT/DS231/R and Corr.1, adopted 23 October 2002, as modified by
Appellate Body Report WT/DS231/AB/R, DSR 2002:VIII, p. 3451
EC – Seal Products Appellate Body Reports, European Communities – Measures Prohibiting the
Importation and Marketing of Seal Products, WT/DS400/AB/R /
WT/DS401/AB/R, adopted 18 June 2014, DSR 2014:I, p. 7
EC – Seal Products Panel Reports, European Communities – Measures Prohibiting the Importation
and Marketing of Seal Products, WT/DS400/R and Add.1 / WT/DS401/R and
Add.1, adopted 18 June 2014, as modified by Appellate Body Reports
WT/DS400/AB/R / WT/DS401/AB/R, DSR 2014:II, p. 365
EC – Selected Customs
Matters
Appellate Body Report, European Communities – Selected Customs Matters,
WT/DS315/AB/R, adopted 11 December 2006, DSR 2006:IX, p. 3791
EC – Selected Customs
Matters
Panel Report, European Communities – Selected Customs Matters,
WT/DS315/R, adopted 11 December 2006, as modified by Appellate Body
Report WT/DS315/AB/R, DSR 2006:IX, p. 3915
EC – Tariff Preferences Panel Report, European Communities – Conditions for the Granting of Tariff
Preferences to Developing Countries, WT/DS246/R, adopted 20 April 2004, as
modified by Appellate Body Report WT/DS246/AB/R, DSR 2004:III, p. 1009
EC – Trademarks and
Geographical Indications
(Australia)
Panel Report, European Communities – Protection of Trademarks and
Geographical Indications for Agricultural Products and Foodstuffs, Complaint by
Australia, WT/DS290/R, adopted 20 April 2005, DSR 2005:X, p. 4603
EC and certain member
States – Large Civil Aircraft
Appellate Body Report, European Communities and Certain Member States –
Measures Affecting Trade in Large Civil Aircraft, WT/DS316/AB/R, adopted
1 June 2011, DSR 2011:I, p. 7
EC and certain member
States – Large Civil Aircraft
Panel Report, European Communities and Certain Member States – Measures
Affecting Trade in Large Civil Aircraft, WT/DS316/R, adopted 1 June 2011, as
modified by Appellate Body Report WT/DS316/AB/R, DSR 2011:II, p. 685
EU – Biodiesel (Indonesia) Panel Report, European Union – Anti-Dumping Measures on Biodiesel from
Indonesia, WT/DS480/R and Add.1, adopted 28 February 2018, DSR 2018:II,
p. 605
EU – Energy Package Panel Report, European Union and its member States – Certain Measures
Relating to the Energy Sector, WT/DS476/R and Add.1, circulated to WTO
Members 10 August 2018, appealed 21 September 2018
Guatemala – Cement II Panel Report, Guatemala – Definitive Anti-Dumping Measures on Grey Portland
Cement from Mexico, WT/DS156/R, adopted 17 November 2000, DSR 2000:XI,
p. 5295
India – Agricultural Products Appellate Body Report, India – Measures Concerning the Importation of Certain
Agricultural Products, WT/DS430/AB/R, adopted 19 June 2015, DSR 2015:V,
p. 2459
India – Agricultural Products Panel Report, India – Measures Concerning the Importation of Certain
Agricultural Products, WT/DS430/R and Add.1, adopted 19 June 2015, as
modified by Appellate Body Report WT/DS430/AB/R, DSR 2015:V, p. 2663
India – Autos Panel Report, India – Measures Affecting the Automotive Sector, WT/DS146/R,
WT/DS175/R, and Corr.1, adopted 5 April 2002, DSR 2002:V, p. 1827
India – Solar Cells Panel Report, India – Certain Measures Relating to Solar Cells and Solar
Modules, WT/DS456/R and Add.1, adopted 14 October 2016, as modified by
Appellate Body Report WT/DS456/AB/R, DSR 2016:IV, p. 1941

Short Title Full Case Title and Citation
Indonesia – Autos Panel Report, Indonesia – Certain Measures Affecting the Automobile Industry,
WT/DS54/R, WT/DS55/R, WT/DS59/R, WT/DS64/R, Corr.1 and Corr.2, adopted
23 July 1998, and Corr.3 and Corr.4, DSR 1998:VI, p. 2201
Indonesia – Chicken Panel Report, Indonesia – Measures Concerning the Importation of Chicken
Meat and Chicken Products, WT/DS484/R and Add.1, adopted
22 November 2017, DSR 2017:VIII, p. 3769
Indonesia – Import
Licensing Regimes
Appellate Body Report, Indonesia – Importation of Horticultural Products,
Animals and Animal Products, WT/DS477/AB/R, WT/DS478/AB/R, and Add.1,
adopted 22 November 2017, DSR 2017:VII, p. 3037
Japan – Alcoholic
Beverages II
Appellate Body Report, Japan – Taxes on Alcoholic Beverages, WT/DS8/AB/R,
WT/DS10/AB/R, WT/DS11/AB/R, adopted 1 November 1996, DSR 1996:I, p. 97
Japan – Alcoholic
Beverages II
Panel Report, Japan – Taxes on Alcoholic Beverages, WT/DS8/R, WT/DS10/R,
WT/DS11/R, adopted 1 November 1996, as modified by Appellate Body Report
WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/R, DSR 1996:I, p. 125
Japan – Film Panel Report, Japan – Measures Affecting Consumer Photographic Film and
Paper, WT/DS44/R, adopted 22 April 1998, DSR 1998:IV, p. 1179
Japan – Semi-Conductors GATT Panel Report, Japan – Trade in Semi-Conductors, L/6309, adopted
4 May 1988, BISD 35S/116
Korea – Alcoholic Beverages Appellate Body Report, Korea – Taxes on Alcoholic Beverages, WT/DS75/AB/R,
WT/DS84/AB/R, adopted 17 February 1999, DSR 1999:I, p. 3
Korea – Commercial Vessels Panel Report, Korea – Measures Affecting Trade in Commercial Vessels,
WT/DS273/R, adopted 11 April 2005, DSR 2005:VII, p. 2749
Korea – Dairy Appellate Body Report, Korea – Definitive Safeguard Measure on Imports of
Certain Dairy Products, WT/DS98/AB/R, adopted 12 January 2000, DSR 2000:I,
p. 3
Korea – Radionuclides Appellate Body Report, Korea – Import Bans, and Testing and Certification
Requirements for Radionuclides, WT/DS495/AB/R and Add.1, adopted
26 April 2019, DSR 2019:VII, p. 3653
Korea – Various Measures
on Beef
Appellate Body Report, Korea – Measures Affecting Imports of Fresh, Chilled
and Frozen Beef, WT/DS161/AB/R, WT/DS169/AB/R, adopted 10 January 2001,
DSR 2001:I, p. 5
Korea – Various Measures
on Beef
Panel Report, Korea – Measures Affecting Imports of Fresh, Chilled and Frozen
Beef, WT/DS161/R, WT/DS169/R, adopted 10 January 2001, as modified by
Appellate Body Report WT/DS161/AB/R, WT/DS169/AB/R, DSR 2001:I, p. 59
Mexico – Taxes on Soft
Drinks
Panel Report, Mexico – Tax Measures on Soft Drinks and Other Beverages,
WT/DS308/R, adopted 24 March 2006, as modified by Appellate Body Report
WT/DS308/AB/R, DSR 2006:I, p. 43
Philippines – Distilled Spirits Appellate Body Reports, Philippines – Taxes on Distilled Spirits,
WT/DS396/AB/R / WT/DS403/AB/R, adopted 20 January 2012, DSR 2012:VIII,
p. 4163
Philippines – Distilled Spirits Panel Reports, Philippines – Taxes on Distilled Spirits, WT/DS396/R /
WT/DS403/R, adopted 20 January 2012, as modified by Appellate Body Reports
WT/DS396/AB/R / WT/DS403/AB/R, DSR 2012:VIII, p. 4271
Russia – Railway Equipment Appellate Body Report, Russia – Measures Affecting the Importation of Railway
Equipment and Parts Thereof, WT/DS499/AB/R and Add.1, adopted
5 March 2020
Russia – Railway Equipment Panel Report, Russia – Measures Affecting the Importation of Railway
Equipment and Parts Thereof, WT/DS499/R and Add.1, adopted 5 March 2020,
as modified by Appellate Body Report WT/DS499/AB/R
Russia – Tariff Treatment Panel Report, Russia – Tariff Treatment of Certain Agricultural and
Manufacturing Products, WT/DS485/R, Add.1, Corr.1, and Corr.2, adopted
26 September 2016, DSR 2016:IV, p. 1547
Thailand – Cigarettes
(Philippines)
Appellate Body Report, Thailand – Customs and Fiscal Measures on Cigarettes
from the Philippines, WT/DS371/AB/R, adopted 15 July 2011, DSR 2011:IV,
p. 2203
Thailand – Cigarettes
(Philippines)
Panel Report, Thailand – Customs and Fiscal Measures on Cigarettes from the
Philippines, WT/DS371/R, adopted 15 July 2011, as modified by Appellate Body
Report WT/DS371/AB/R, DSR 2011:IV, p. 2299
Thailand – Cigarettes
(Philippines)
(Article 21.5 – Philippines)
Panel Report, Thailand – Customs and Fiscal Measures on Cigarettes from the
Philippines – Recourse to Article 21.5 of the DSU by the Philippines,
WT/DS371/RW and Add.1, circulated to WTO Members 12 November 2018,
appealed 9 January 2019
Turkey – Pharmaceutical
Products (EU)
Final Panel Report as issued to the parties in Turkey – Certain Measures
Concerning the Production, Importation and Marketing of Pharmaceutical
Products, attached to Türkiye's notice of recourse to arbitration (WT/DS583/12
and Add.1)
US – Animals Panel Report, United States – Measures Affecting the Importation of Animals,
Meat and Other Animal Products from Argentina, WT/DS447/R and Add.1,
adopted 31 August 2015, DSR 2015:VIII, p. 4085

Short Title Full Case Title and Citation
US – Anti-Dumping and
Countervailing Duties
(China)
Appellate Body Report, United States – Definitive Anti-Dumping and
Countervailing Duties on Certain Products from China, WT/DS379/AB/R,
adopted 25 March 2011, DSR 2011:V, p. 2869
US – Clove Cigarettes Appellate Body Report, United States – Measures Affecting the Production and
Sale of Clove Cigarettes, WT/DS406/AB/R, adopted 24 April 2012, DSR
2012:XI, p. 5751
US – Clove Cigarettes Panel Report, United States – Measures Affecting the Production and Sale of
Clove Cigarettes, WT/DS406/R, adopted 24 April 2012, as modified by
Appellate Body Report WT/DS406/AB/R, DSR 2012:XI, p. 5865
US – Continued Zeroing Appellate Body Report, United States – Continued Existence and Application of
Zeroing Methodology, WT/DS350/AB/R, adopted 19 February 2009, DSR
2009:III, p. 1291
US – Continued Zeroing Panel Report, United States – Continued Existence and Application of Zeroing
Methodology, WT/DS350/R, adopted 19 February 2009, as modified as
Appellate Body Report WT/DS350/AB/R, DSR 2009:III, p. 1481
US – COOL Appellate Body Reports, United States – Certain Country of Origin Labelling
(COOL) Requirements, WT/DS384/AB/R / WT/DS386/AB/R, adopted
23 July 2012, DSR 2012:V, p. 2449
US – COOL Panel Reports, United States – Certain Country of Origin Labelling (COOL)
Requirements, WT/DS384/R / WT/DS386/R, adopted 23 July 2012, as modified
by Appellate Body Reports WT/DS384/AB/R / WT/DS386/AB/R, DSR 2012:VI,
p. 2745
US – COOL
(Article 21.5 – Canada and
Mexico)
Appellate Body Reports, United States – Certain Country of Origin Labelling
(COOL) Requirements – Recourse to Article 21.5 of the DSU by Canada and
Mexico, WT/DS384/AB/RW / WT/DS386/AB/RW, adopted 29 May 2015, DSR
2015:IV, p. 1725
US – COOL
(Article 21.5 – Canada and
Mexico)
Panel Reports, United States – Certain Country of Origin Labelling (COOL)
Requirements – Recourse to Article 21.5 of the DSU by Canada and Mexico,
WT/DS384/RW and Add.1 / WT/DS386/RW and Add.1, adopted 29 May 2015,
as modified by Appellate Body Reports WT/DS384/AB/RW / WT/DS386/AB/RW,
DSR 2015:IV, p. 2019
US – Corrosion-Resistant
Steel Sunset Review
Appellate Body Report, United States – Sunset Review of Anti-Dumping Duties
on Corrosion-Resistant Carbon Steel Flat Products from Japan,
WT/DS244/AB/R, adopted 9 January 2004, DSR 2004:I, p. 3
US – Countervailing and
Anti-Dumping Measures
(China)
Appellate Body Report, United States – Countervailing and Anti-Dumping
Measures on Certain Products from China, WT/DS449/AB/R and Corr.1, adopted
22 July 2014, DSR 2014:VIII, p. 3027
US – Countervailing and
Anti-Dumping Measures
(China)
Panel Report, United States – Countervailing and Anti-Dumping Measures on
Certain Products from China, WT/DS449/R and Add.1, adopted 22 July 2014, as
modified by Appellate Body Report WT/DS449/AB/R, DSR 2014:VIII, p. 3175
US – FSC Appellate Body Report, United States – Tax Treatment for "Foreign Sales
Corporations", WT/DS108/AB/R, adopted 20 March 2000, DSR 2000:III,
p. 1619
US – FSC Panel Report, United States – Tax Treatment for "Foreign Sales Corporations",
WT/DS108/R, adopted 20 March 2000, as modified by Appellate Body Report
WT/DS108/AB/R, DSR 2000:IV, p. 1675
US – FSC
(Article 21.5 – EC)
Appellate Body Report, United States – Tax Treatment for "Foreign Sales
Corporations" – Recourse to Article 21.5 of the DSU by the
European Communities, WT/DS108/AB/RW, adopted 29 January 2002, DSR
2002:I, p. 55
US – FSC
(Article 21.5 – EC)
Panel Report, United States – Tax Treatment for "Foreign Sales Corporations" –
Recourse to Article 21.5 of the DSU by the European Communities,
WT/DS108/RW, adopted 29 January 2002, as modified by Appellate Body
Report WT/DS108/AB/RW, DSR 2002:I, p. 119
US – Gambling Appellate Body Report, United States – Measures Affecting the Cross-Border
Supply of Gambling and Betting Services, WT/DS285/AB/R, adopted
20 April 2005, DSR 2005:XII, p. 5663 (and Corr.1, DSR 2006:XII, p. 5475)
US – Gambling Panel Report, United States – Measures Affecting the Cross-Border Supply of
Gambling and Betting Services, WT/DS285/R, adopted 20 April 2005, as
modified by Appellate Body Report WT/DS285/AB/R, DSR 2005:XII, p. 5797
US – Gasoline Appellate Body Report, United States – Standards for Reformulated and
Conventional Gasoline, WT/DS2/AB/R, adopted 20 May 1996, DSR 1996:I, p. 3
US – Gasoline Panel Report, United States – Standards for Reformulated and Conventional
Gasoline, WT/DS2/R, adopted 20 May 1996, as modified by Appellate Body
Report WT/DS2/AB/R, DSR 1996:I, p. 29
US – Hot-Rolled Steel Panel Report, United States – Anti-Dumping Measures on Certain Hot-Rolled
Steel Products from Japan, WT/DS184/R, adopted 23 August 2001 modified by
Appellate Body Report WT/DS184/AB/R, DSR 2001:X, p. 4769

Short Title Full Case Title and Citation
US – Lamb Panel Report, United States – Safeguard Measures on Imports of Fresh, Chilled
or Frozen Lamb Meat from New Zealand and Australia, WT/DS177/R,
WT/DS178/R, adopted 16 May 2001, as modified by Appellate Body Report
WT/DS177/AB/R, WT/DS178/AB/R, DSR 2001:IX, p. 4107
US – Large Civil Aircraft
(2nd complaint)
Appellate Body Report, United States – Measures Affecting Trade in Large Civil
Aircraft (Second Complaint), WT/DS353/AB/R, adopted 23 March 2012, DSR
2012:I, p. 7
US – Large Civil Aircraft
(2nd complaint)
Panel Report, United States – Measures Affecting Trade in Large Civil Aircraft
(Second Complaint), WT/DS353/R, adopted 23 March 2012, as modified by
Appellate Body Report WT/DS353/AB/R, DSR 2012:II, p. 649
US – Origin Marking
(Hong Kong, China)
Panel Report, United States – Origin Marking Requirement, WT/DS597/R and
Add.1, circulated to WTO Members 21 December 2022, appealed
26 January 2023
US – Poultry (China) Panel Report, United States – Certain Measures Affecting Imports of Poultry
from China, WT/DS392/R, adopted 25 October 2010, DSR 2010:V, p. 1909
US – Ripe Olives from Spain Panel Report, United States – Anti-Dumping and Countervailing Duties on Ripe
Olives from Spain, WT/DS577/R and Add.1, adopted 20 December 2021
US – Shrimp Appellate Body Report, United States – Import Prohibition of Certain Shrimp
and Shrimp Products, WT/DS58/AB/R, adopted 6 November 1998, DSR
1998:VII, p. 2755
US – Shrimp (Ecuador) Panel Report, United States – Anti-Dumping Measure on Shrimp from Ecuador,
WT/DS335/R, adopted on 20 February 2007, DSR 2007:II, p. 425
US – Softwood Lumber IV Appellate Body Report, United States – Final Countervailing Duty Determination
with Respect to Certain Softwood Lumber from Canada, WT/DS257/AB/R,
adopted 17 February 2004, DSR 2004:II, p. 571
US – Softwood Lumber VII Panel Report, United States – Countervailing Measures on Softwood Lumber
from Canada, WT/DS533/R and Add.1, circulated to WTO Members
24 August 2020, appealed 28 September 2020
US – Tax Incentives Panel Report, United States – Conditional Tax Incentives for Large Civil Aircraft,
WT/DS487/R and Add.1, adopted 22 September 2017, as modified by
Appellate Body Report WT/DS487/AB/R, DSR 2017:V, p. 2305
US – Tuna II (Mexico) Appellate Body Report, United States – Measures Concerning the Importation,
Marketing and Sale of Tuna and Tuna Products, WT/DS381/AB/R, adopted
13 June 2012, DSR 2012:IV, p. 1837
US – Tuna II (Mexico) Panel Report, United States – Measures Concerning the Importation, Marketing
and Sale of Tuna and Tuna Products, WT/DS381/R, adopted 13 June 2012, as
modified by Appellate Body Report WT/DS381/AB/R, DSR 2012:IV, p. 2013
US – Tuna II (Mexico)
(Article 21.5 – Mexico)
Appellate Body Report, United States – Measures Concerning the Importation,
Marketing and Sale of Tuna and Tuna Products – Recourse to Article 21.5 of the
DSU by Mexico, WT/DS381/AB/RW and Add.1, adopted 3 December 2015, DSR
2015:X, p. 5133
US – Tuna II (Mexico)
(Article 21.5 – Mexico)
Panel Report, United States – Measures Concerning the Importation, Marketing
and Sale of Tuna and Tuna Products – Recourse to Article 21.5 of the DSU by
Mexico, WT/DS381/RW, Add.1 and Corr.1, adopted 3 December 2015, as
modified by Appellate Body Report WT/DS381/AB/RW, DSR 2015:X, p. 5409
and DSR 2015:XI, p. 5653
US – Tuna II (Mexico)
(Article 21.5 – Mexico II)
Panel Reports, United States – Measures Concerning the Importation, Marketing
and Sale of Tuna and Tuna Products – Recourse to Article 21.5 of the DSU by
the United States, WT/DS381/RW/USA and Add.1 / United States – Measures
Concerning the Importation, Marketing and Sale of Tuna and Tuna Products –
Second Recourse to Article 21.5 of the DSU by Mexico, WT/DS381/RW2 and
Add.1, adopted 11 January 2019, as upheld by Appellate Body Report
WT/DS381/AB/RW/USA / WT/DS381/AB/RW2, DSR 2019:III, p. 1315
US – Upland Cotton Appellate Body Report, United States – Subsidies on Upland Cotton,
WT/DS267/AB/R, adopted 21 March 2005, DSR 2005:I, p. 3
US – Upland Cotton
(Article 21.5 – Brazil)
Appellate Body Report, United States – Subsidies on Upland Cotton – Recourse
to Article 21.5 of the DSU by Brazil, WT/DS267/AB/RW, adopted 20 June 2008,
DSR 2008:III, p. 809
US – Washing Machines Panel Report, United States – Anti-Dumping and Countervailing Measures on
Large Residential Washers from Korea, WT/DS464/R and Add.1, adopted
26 September 2016, as modified by Appellate Body Report WT/DS464/AB/R,
DSR 2016:V, p. 2505
US – Wool Shirts and
Blouses
Appellate Body Report, United States – Measure Affecting Imports of Woven
Wool Shirts and Blouses from India, WT/DS33/AB/R, adopted 23 May 1997, and
Corr.1, DSR 1997:I, p. 323

TABLE OF EXHIBITS REFERRED TO IN THIS REPORT
Panel
Exhibit
Short Title (if
applicable)
Title
EU-3,
MYS-92
Status Report (2019) Report From the Commission to the European Parliament, the
Council, the European Economic and Social Committee and the
Committee of the Regions on the status of production expansion
of relevant food and feed crops worldwide, COM/2019/142 final
EU-8 RED II Proposal European Commission, Commission Staff Working Document,
Impact Assessment accompanying the proposal for a directive of
the European Parliament and of the Council on the promotion of
the use of energy from renewable sources (recast)
(30 November 2016), SWD(2016) 418 final, Parts 1/4 to 4/4
EU-11 J. Miettinen, C. Shi, and S.C. Liew, "Land Cover Distribution in the
Peatlands of Peninsular Malaysia, Sumatra, and Borneo in 2015
with Changes since 1990", Global Ecology and Conversation, Vol.
6 (2016), 67
EU-12 White Paper Nr. 17 by J. Miettinen et al., "Historical Analysis and
Projection of Oil Palm Plantation Expansion on Peatland in
Southeast Asia" (International Council on Clean Transportation,
2012)
EU-13 European Commission, Proposal for a Directive of the European
Parliament and of the Council on the promotion of the use of
energy from renewable sources (recast), COM(2016) 767 final
(30 November 2016)
EU-17 Directive 2003/30/EC Directive 2003/30/EC of the European Parliament and of the
Council of 8 May 2003 on the promotion of the use of biofuels or
other renewable fuels for transport, OJ L 123, 17.5.2003, p. 42–
46 (ES, DA, DE, EL, EN, FR, IT, NL, PT, FI, SV) [consolidated
version]
EU-18 European Parliament
Report FINAL A5-
0244/2002
Report of the Parliament on the proposal for a directive of the
European Parliament and of the Council on the promotion of the
use of biofuels for transport (COM(2001) 547 – C5-0684/2001 –
2001/0265(COD)), 20 June 2002, FINAL A5-0244/2002
EU-19 RED I Directive 2009/28/EC of the European Parliament and of the
Council of 23 April 2009 on the promotion of the use of energy
from renewable sources and amending and subsequently repealing
Directives 2001/77/EC and 2003/30/EC, OJ 2009 L 140, p. 16
EU-25 Fuel Quality Directive Directive 2009/30/EC of the European Parliament and of the
Council of 23 April 2009 amending Directive 98/70/EC as regards
the specification of petrol, diesel and gas-oil and introducing a
mechanism to monitor and reduce greenhouse gas emissions and
amending Council Directive 1999/32/EC as regards the
specification of fuel used by inland waterway vessels and repealing
Directive 93/12/EEC [consolidated version]
EU-26 Impact Assessment (2012) Working Document of the European Commission, "Impact
Assessment – Accompanying the document: Proposal for a
Directive of the European Parliament and of the Council amending
Directive 98/70/EC relating to the quality of petrol and diesel fuels
and amending Directive 2009/28/EC on the promotion of the use
of energy from renewable sources", SWD(2012) 343 final,
17 October 2012
EU-28 Study Report (2017) Wageningen Economic Research, Netherlands Environmental
Assessment Agency (PBL), Wageningen Environmental Research,
and National Renewable Energy Centre (CENER), Study Report on
Reporting Requirement on Biofuels and Bioliquids stemming from
the Directive (EU) 2015/1513 (European Commission, 2017)
EU-32 ISO 14067:2018 ISO 14067:2018 (Greenhouse gases – Carbon footprint of
products – Requirements and guidelines for quantification)
EU-121,
MYS-212
UFOP Global Market
Supply 2019/2020
UFOP, "Global Market Supply 2019/2020, European and world
demand for biomass for the purpose of biofuel production in
relation to supply in the food and feedstuff markets"
EU-123 J. Xu et al., "PEATMAP: Refining estimates of global peatland
distribution
based on a meta-analysis", Catena, Vol. 160 (2018), 134
EU-128 USDA FAS, "GAIN Biofuels Annual 2019: EU-28", 15 July 2019
EU-131 USDA FAS, "GAIN Biofuels Annual: European Union",
22 June 2021

Panel
Exhibit
Short Title (if
applicable)
Title
EU-132 ETC/CME Eionet Report, Greenhouse gas intensities of road
transport fuels in the EU in 2018 - monitoring under the Fuel
Quality Directive, November 2020
EU-133 ETC/CME Eionet Report, Greenhouse gas intensities of transport
fuels in the EU in 2019 - monitoring under the Fuel Quality
Directive, October 2021
EU-134 Commission Regulation
(EC) 193/2009
Commission Regulation (EC) No 193/2009 of 11 March 2009
imposing a provisional anti-dumping duty on imports of biodiesel
originating in the United States of America, OJ 2009 L 67
EU-135 Commission Implementing Regulation (EU) 2019/244 of
11 February 2019 imposing a definitive countervailing duty on
imports of biodiesel originating in Argentina, OJ 2019 L 40, p. 1
EU-137 Biodiesel Standards in various EU member States (website
accessed 25 April 2021)
EU-138 Moser, "Influence of
Blending Canola, Palm,
Soybean, and Sunflower
Oil Methyl Esters on Fuel
Properties of Biodiesel"
B.R. Moser, "Influence of Blending Canola, Palm, Soybean, and
Sunflower Oil Methyl Esters on Fuel Properties of Biodiesel",
Energy & Fuels, Vol. 22 (2008), 4301. See row 12 in Table 3:
Canola (rapeseed) and palm oil biodiesel in a volume ratio of 3:1
EU-139 Commission Implementing Regulation (EU) 2019/1344 of
12 August 2019 imposing a provisional countervailing duty on
imports of biodiesel originating in Indonesia, OJ 2019 L 212, p. 1
EU-140 Arbeitsgemeinschaft Qualitätsmanagement Biodiesel e.V., "Cold
Properties of Biodiesel"
EU-141 Austria's reporting under Article 7a of the Fuel Quality Directive
for 2019
EU-142 Czech Republic's reporting under Article 7a of the Fuel Quality
Directive for 2019
EU-143 Denmark's reporting under Article 7a of the Fuel Quality Directive
for 2018
EU-144 Excerpt from the website of Preem, a Swedish fuel company
EU-145 Midttun, Knut Myrum Næss, and Proadpran Boonprasurd Piccini
"Biofuel Policy and Industrial Transition—A Nordic Perspective" in
Energies 2019, 12(14), 2740
EU-146 Eni press release of 15 April 2021: "Eni: New Systems Installed at
the Venice Biorefinery to Eliminate Palm Oil Entirely"
EU-147 Press article from Argusmedia of 11 September 2020: "Spain's
climate bill threatens biofuel projects: Repsol"
EU-148 Total's webpage (accessed on 22 April 2021): "GRANDPUITS: A
ZERO-CRUDE PLATFORM BY 2024"
EU-149 Total's webpage (accessed on 22 April 2021): "LA MÈDE: A
MULTIPURPOSE FACILITY FOR THE ENERGIES OF TOMORROW"
EU-150 Press article of 1 April 2021 from Le Monde « Total condamné à
une raffinerie »
EU-157 Gaveau D. &co., Slowing deforestation in Indonesia follows
declining oil palm expansion and lower oil prices, Research
Square, 15 January 2021
EU-161 Draft Commission
Implementing Regulation
Draft Commission Implementing Regulation on rules to verify
sustainability and greenhouse gas emissions saving criteria and
low indirect land-use change-risk criteria, Brussels, internal
document dated 29 June 2021
EU-164 ISO 13065:2015 ISO 13065:2015 (Sustainability criteria for bioenergy)
EU-165 Excerpt of ISO/IEC Directives, Part 2 – Principles and rules for the
structure and drafting of ISO and IEC documents, ninth edition,
2021
EU-166 Finkbeiner Study M. Finkbeiner, Indirect land use change (iLUC) within life cycle
assessment (LCA) – scientific robustness and consistency with
international standards (Association of the German Biofuel
Industry, 2013)
EU-169 Excerpt from RSB website, "RSB Low ILUC Risk Biomass Module"
EU-170 Excerpt from UPM website, "All UPM BioVerno products are
certified" (accessed on 26 November 2021)
EU-172 President Juncker's reply of 14 May 2019 to a letter from PM
Mahathir to President Juncker on the RED II Delegated Act
EU-174 Letter of European Commissioner for Climate Action and Energy of
26 July 2018

Panel
Exhibit
Short Title (if
applicable)
Title
EU-190 French parliamentary report, Working Group on Biofuels, "Tax
regime of biofuels" ("Fiscalité des biocarburants")
EU-191 DGEC, "Panorama 2019 -
Biofuels incorporated in
France"
DGEC, "Panorama 2019 - Biofuels incorporated in France"
("Panorama 2019 - Biocarburants incorporé en France"), 2019
EU-196 Article 9 of the French Finance Law 2020-935 of 30 July 2020
EU-197 French Government
Circular of 18 August 2020
Circular by the French Government of 18 August 2020 on the
incentive tax relating to the incorporation of biofuels (TIRIB),
NOR: ECOD2020901C (Circulaire du 18 août 2020 Taxe incitative
relative à l'incorporation de biocarburants (TIRIB), Articles 52 and
53
EU-198 Amendment nr. I-694 rect. bis. of 21 November 2020 to the
French Finance Law for 2021 (Amendement N° I-694 rect. bis de
EU-199 Article 266 quindecies - Code des douanes - Légifrance
EU-205 French Parliament Report
n. 2609
Report of the French Parliament n. 2609 of 22 January 2020, p.
52.
EU-213 Webpage from the European Commission's (DG Energy) website:
Voluntary schemes
EU-214 Commission decision C (2016) 5817 of 8 September 2016 in Case
M.7963 - ADM/Wilmar/Olenex JV
EU-216 Veblen Institute, Amicus Curia submission
EU-219 Commission Implementing
Decisions on Voluntary
Schemes
Commission Implementing Decisions of 8 April 2022 recognising
voluntary schemes covering low ILUC-risk certification set up by
Bonsucro EU (2022/60), International Sustainability & Carbon
Certification (ISCC) EU (2022/602) and the Roundtable on
Sustainable Biomaterials (RSB) EU RED (2022/607)
EU-221 N. Khasanah et al., "Aboveground carbon stocks in oil palm
plantations and the threshold for carbon-neutral vegetation
conversion on mineral soils", Cogent Environmental Science, Vol.
1:1 (2015), 1
EU-222 Guillaume, T., Kotowska, M.M., Hertel, D. et al. Carbon costs and
benefits of Indonesian rainforest conversion to plantations. Nat
Commun 9, 2388 (2018)
EU-225,
MYS-89
IPCC Report, "Climate
Change and Land"
IPCC Report on "Climate Change and Land" (including the
Summary for Policymakers)
EU-227 "Oilseeds and oilseed products" OECD-FAO Agricultural Outlook
2021-2030 (agri-outlook.org), p. 7.
EU-231 K.G. Austin et al., "Shifting patterns of palm oil driven
deforestation in Indonesia and implications for zero-deforestation
commitments", Land Use Policy, Vol. 69 (2017), 416
EU-232 Gaveau, D.L.A., Sheil, D., Husnayaen, Salim, M.A., Arjasakusuma,
S., Ancrenaz, M., Pacheco, P., Meijaard, E., 2016. Rapid
conversions and avoided deforestation: examining four decades of
industrial plantation expansion in Borneo. Nature - Scientific
Reports 6, 32017
EU-249 Page, S. E., Morrison, R., Malins, C., Hooijer, A., Rieley, J. O., and
Jauhiainen, J.: Review of peat surface greenhouse gas emissions
from oil palm plantations in Southeast Asia (ICCT White Paper
15), International Council on Clean Transportation, Washington,
2011
EU-250 Hooijer, A., Page, S., Jauhiainen, J., Lee, W. A., Lu, X. X., Idris,
A., and Anshari, G.: Subsidence and carbon loss in drained
tropical peatlands, Biogeosciences, 9, pp. 1053–1071.
EU-251 Jukka Miettinen et al, From carbon sink to carbon source:
extensive peat oxidation in insular Southeast Asia since 1990,
Environ. Res. Lett., 12 024014, 2017
EU-253 Couwenberg, J., Dommain, R. and Joosten, H., Global Change
Biology (2009) Greenhouse gas fluxes from tropical peatlands in
South East Asia. doi: 10.1111/j.1365-2486.2009.02016
EU-254 D.L.A. Gaveau et al., "Rise and fall of forest loss and industrial
plantations in Borneo (2000–2017)", Conservation Letters, Vol.
12:3 (2018), 1
EU-259 DG Energy Voluntary schemes (accessed on 25 April 2022)
EU-261 T. Seljak, M. Buffi, A. Valera-Medina, C.T. Chong, D. Chiaramonti,
T. Katrasnik, "Bioliquids and their use in power generation – A
technology review", Renewable and Sustainable Energy Reviews
129 (2020) 109930

Panel
Exhibit
Short Title (if
applicable)
Title
EU-262 Nils Hinrichsen, Commercially available alternatives to palm oil in
Lipid Technology, March–April 2016, Vol. 28, No. 3–4
EU-294 [Cuypers et al. 2013] Cuypers, D., Geerken, T., Gorissen, L.,
Peters, G., Karstensen, J., Prieler, S., … vVn Velthuizen, H.
(2013). The impact of EU consumption on deforestation:
Comprehensive analysis of the impact of EU consumption on
deforestation
EU-324 THEN24, "TotalEnergies will no longer use palm oil from 2023"
EU-329 Commission Implementing
Regulation (EU) 2022/996
Commission Implementing Regulation (EU) 2022/996 of
14 June 2022 on rules to verify sustainability and greenhouse gas
emissions saving criteria and low indirect land-use change-risk
criteria C/2022/3740
MYS-11 UFOP Global Market
Supply 2020/2021
 UFOP, Global Market Supply 2020/2021, European and world
demand for biomass for the purpose of biofuel production in
relation to supply in food and feedstuff markets
MYS-14 Greenea, "Is HVO the Holy Grail of the world biodiesel market?"
MYS-17 Oil World Annual 2021
MYS-19 T. Mielke, "World Markets for Vegetable Oils: Status and
Prospects", in M. Kaltschmitt (ed.), Energy from Organic Minerals
(Biomass), 2019
MYS-20 K. Azly Zahan and M. Kano, "Biodiesel Production from Palm Oil,
Its By-Products, and Mill Effluent: A Review", Energies, Vol. 11
(2018), 2132
MYS-21 FAO/WHO, Codex Standard for Named Vegetable Oils (CODEX-
STAN 210 - 1999), SECTION 2. Codex Standards for Fats and Oils
from Vegetable Sources (fao.org) Section 2, Codex Alimentarius,
Volume 8, Fats, oils and related products, Second Edition (2001)
MYS-36 Letter by the Director General of the Directorate-General
Environment, Education, Transport and Energy of the Council of
the European Union of 11 April 2018
MYS-40 Malaysian Palm Oil Council (MPOC), Comments on EC Commission
Delegated Regulation (EU Ref Ares (2019)762855-08/02/2019)
MYS-42 HS Nomenclature, 2017, Chapter 38
MYS-43 Eurostat, Energy from renewable sources – SHARES
MYS-44 Letter of DG Trade to DG
Energy
Letter dated 23 March 2018 from Jean-Luc Demarty, Director-
General of DG TRADE to Dominique Ristori, Director-General of
DG ENER, Ref. Ares (2018) 1615972 – 23/03/2018
MYS-45 Finkbeiner Expert Opinion M. Finkbeiner, Report, Expert Opinion on Indonesia's WTO dispute
– EU renewable energy targets, 15 December 2020
MYS-50 Draft Delegated Regulation Draft of the Commission Delegated Regulation …/… supplementing
Directive (EU) 2018/2001 of the European Parliament and of the
Council as regards the determination of high indirect land-use
change-risk feedstock for which a significant expansion of the
production area into land with high carbon stock is observed and
the certification of low indirect land-use change-risk biofuels,
bioliquids and biomass fuels, C (2019) 2055 final (13 March 2019)
MYS-51 Contract notice by the European Commission, Belgium – Brussels:
Support for the implementation of the Provisions on ILUC Set out
in the Renewable Energy Directive, 2019/S 131-320816, OJ/S
S131 and the Call for Tenders by the European Commission,
Support for the Implementation of the Provisions on ILUC Set out
in the Renewable Energy Directive, N° ENER/C2/2018-462
MYS-52 ISO/IEC 17007:2010 ISO/IEC 17007:2010 (Conformity assessment – Guidance for
drafting normative documents suitable for use for conformity
assessment)
MYS-53 United Nations, World Economic Situation and Prospects 2021,
Statistical Annex, (United Nations, 2021), Table C "Developing
economies by region"
MYS-54 UNCTADSTAT, Development status groups and composition:
Developing economies
MYS-60 Deutsche Gesellschaft für Fettwissenschaft, "Physical properties of
fats and oils"
MYS-62 Regulation (EU)
2018/1999
Regulation on the governance of the energy union and climate
action (EU/2018/1999)
MYS-77 USDA FAS, "GAIN Report, Biofuels Annual: EU-28", 15 July 2015
MYS-79 Transport and Environment, "The trend worsens: More palm oil for
energy, less for food"

Panel
Exhibit
Short Title (if
applicable)
Title
MYS-90 RED II Directive (EU) 2018/2001 of the European Parliament and of the
Council of 11 December 2018 on the promotion of the use of
energy from renewable sources, OJ L 328, 21.12.2018
MYS-91 Delegated Regulation Commission Delegated Regulation (EU) 2019/807 of
13 March 2019 supplementing Directive (EU) 2018/2001 of the
European Parliament and of the Council as regards the
determination of high indirect land-use change-risk feedstock for
which a significant expansion of the production area into land with
high carbon stock is observed and the certification of low indirect
land-use change-risk biofuels, bioliquids and biomass fuels, OJ L
133, 21.5.2019
MYS-102 European Parliament
Resolution of 4 April 2017
European Parliament, Resolution on palm oil and deforestation of
rainforests, 4 April 2017, (2016/2222(INI)), OJ 2018 C 298, p. 2
MYS-104 Vijay V., Pimm S.L., Jenkins C.N., Smith S.J., The Impacts of Oil
Palm on Recent Deforestation and Biodiversity Loss, Plos One,
27 July 2016
MYS-113 European Technology and Innovation Platform,
"Transesterification to biodiesel"
MYS-119 Moser, "Biodiesel
Production, Properties, and
Feedstocks"
B. R. Moser, "Biodiesel Production, Properties, and Feedstocks", in
D. Tomes, P. Lakshmanan, D. Songstad (eds), Biofuels: Global
Impact on Renewable Energy, Production Agriculture, and
Technological Advancement (Springer, 2011)
MYS-123 Concawe, "Guidelines for handling and blending FAME"
MYS-126 SAE International, "HVO as
a Renewable Diesel Fuel"
SAE International, "Hydrotreated Vegetable Oil (HVO) as a
Renewable Diesel Fuel: Trade-off between NOx, Particulate
Emission, and Fuel Consumption of a Heavy-Duty Engine"
MYS-127 L.P. Lindfors, "High Quality Transportation Fuels from Renewable
Feedstock", Neste Oil Corporation Espoo, Finland, XXIst World
Energy Congress Montreal, Canada September 12-16, 2010
MYS-131 ETIP Bioenergy, "Hydrogenated vegetable oil (HVO)"
MYS-139 USDA FAS, "GAIN Biofuels Annual: European Union", 22 June,
2021
MYS-140 Council Implementing
Regulation (EU)
1194/2013
Council Implementing Regulation (EU) No 1194/2013 of
19 November 2013 imposing a definitive anti-dumping duty and
collecting definitively the provisional duty imposed on imports of
biodiesel originating in Argentina and Indonesia, OJ L 315,
26.11.2013, p. 2
MYS-141 Commission Implementing Regulation (EU) 2019/2092 of 28
November 2019 imposing a definitive countervailing duty on
imports of biodiesel originating in Indonesia, OJ L 317, 9.12.2019
MYS-152 ISEAS Perspective, Serina Rahman, Malaysian Independent Oil
Palm Smallholders and their Struggle to Survive 2020
MYS-163 Basiron, Y and Yew F.K., "Land use impacts of the livestock and oil
palm industries", Journal of Oil Palm, Environment & Health 2015
MYS-168 ILUC Directive Directive (EU) 2015/1513 of the European Parliament and of the
Council of 9 September 2015 amending Directive 98/70/EC
relating to the quality of petrol and diesel fuels and amending
Directive 2009/28/EC on the promotion of the use of energy from
renewable sources, OJ L 239, 15.9.2015
MYS-181 Article 266 quindecies of
the French Customs Code
Article 266 quindecies of the French Customs Code (Code des
douanes), as modified by Article 192 of Loi n° 2018-1317 du 28
juin 2019 portant sur la taxe incitative relative à l'incorporation de
biocarburants, JORF no 0133 of 9 June 2019, no. 13; Ministère de
incitative relative à l'incorporation de biocarburants
MYS-229 RaboResearch, Global Canola Opportunities in the Sustainable-
Fuel Future: Is Australia Fit and Ready?
MYS-233 Low ILUC-risk certification: Pilot report and recommendations
Malaysia, Oil palm yield increase, February 2021
MYS-238 USDA FAS, "GAIN EU Oilseeds and Products Annual",
21 April 2022
MYS-241 ISO 14044:2017 ISO 14044:2017 (Environmental management – Life cycle
assessment – Requirements and guidelines)
MYS-242 ISO 14040:2016 ISO 14040:2016 (Environmental management – Life cycle
assessment – Principles and framework)
MYS-245 Press article,
11 October 2019
Reuters, In blow to Total, France upholds law banning palm oil
from biofuel scheme, 11 October 2019

Panel
Exhibit
Short Title (if
applicable)
Title
COL-11 Kalsom et al (Malaysian Palm Oil Board), the Effect of Soyabean
Oil Price Changes on Palm Oil Demand in China.
IDN-1 Examples of EU member States' measures restricting oil palm
crop-based biofuel
IDN-2 Delzeit et al, Kiel Working
Paper No. 2203
R. Delzeit, T. Heimann, F. Schünemann and M. Söder, "Who
benefits really from phasing out palm oil-based biodiesel in the
EU", Kiel Working Paper No. 2203, Kiel Institute for the World
Economy, December 2021
IDN-13 Eurostat, Consumption of renewable energy in the transport
sector in the EU-27 in 2011-2019
IDN-20 IPCC, Refinement to the 2006 IPCC Guidelines for National
Greenhouse Gas Inventories (2019), Volume 1: General Guidance
and Reporting, Chapter 8. Reporting Guidance and Tables,
considered in May 2019 during the IPCC's 49th Session and
adopted/accepted on 12 May 2019
IDN-25 M. Weisse & E. Goldman, "The World lost a Belgium-sized Area of
Primary Rainforests Last Year"

TABLE OF ABBREVIATIONS USED IN THIS REPORT
Abbreviation Description
BTL biomass-to-liquids biofuels
CEPA Indonesia-EFTA Comprehensive Economic Partnership Agreement
CFP carbon footprint
CFPP cold-filter plugging point
Delegated Regulation Commission Delegated Regulation (EU) 2019/807 of 13 March 2019
supplementing Directive (EU) 2018/2001 of the European Parliament and of
the Council as regards the determination of high indirect land-use change-risk
feedstock for which a significant expansion of the production area into land
with high-carbon stock is observed and the certification of low indirect land-
use change-risk biofuels, bioliquids and biomass fuels, OJ 2019 L 133, p. 1
DLUC direct land use change
DSB Dispute Settlement Body
DSU Understanding on Rules and Procedures Governing the Settlement of Disputes
ESO European Standards Organisation
FAME Fatty Acid Methyl Esters
FLEGT European Union's Forest Law Enforcement, Governance and Trade
Fuel Quality Directive Directive 2009/30/EC
GATT 1994 General Agreement on Tariffs and Trade 1994
GHG greenhouse gas
HVO Hydrotreated Vegetable Oil
ILUC indirect land use change
ILUC Directive Directive 2015/1513
IPCC Intergovernmental Panel on Climate Change
ISCC International Sustainability and Carbon Certification
ISO International Organization for Standardisation
ISO 13065:2015 ISO standard 13065:2015 entitled "Sustainability criteria for bioenergy"
ISO 14040:2016 ISO standard 14040:2016 entitled "Environmental management — Life cycle
assessment — Principles and framework"
ISO 14044:2017 ISO standard 14044:2017 entitled "Environmental management — Life cycle
assessment — Requirements and guidelines"
ISO 14067:2018 ISO standard 14067:2018 "Greenhouse gases – Carbon footprint of products
– Requirements and guidelines for quantification"
IUU Illegal, Unreported and Unregulated
LCA life cycle analysis
LUC land use change
MFN Most-Favoured Nation
OED Oxford English Dictionary
PME palm methyl ester
POIG Palm Oil Innovation Group
PPM processes and production methods
RED I Directive 2009/28/EC on the promotion of the use of energy from renewable
sources
RED II Directive (EU) 2018/2001 of the European Parliament and of the Council of
11 December 2018 on the promotion of the use of energy from renewable
sources (recast), OJ 2018 L 328, p. 80
RME rapeseed methyl ester
RSPO Roundtable on Sustainable Palm Oil
RSPO IP RSPO "Identity Preserved"
RSPO SG RSPO "Segregated"
SBME soybean methyl ester
SCM Agreement Agreement on Subsidies and Countervailing Measures
SPS Agreement WTO Agreement on the Application of Sanitary and Phytosanitary Measures
TBT Agreement Agreement on Technical Barriers to Trade
TICPE internal consumption tax on energy products
TIRIB Taxe Incitative Relative à l'Incorporation de Biocarburant
UCO used cooking oil
UNCTAD United Nations Conference on Trade and Development
VAT value added tax
VPAs Voluntary Partnership Agreements
WESP World Economic Situation and Prospects
WTO World Trade Organization

1 INTRODUCTION
1.1 Complaint by Malaysia
1.1. On 15 January 2021, Malaysia requested consultations with the European Union, France and
Lithuania pursuant to Article 4 of the Understanding on Rules and Procedures Governing the
Settlement of Disputes (DSU), Article XXII of the General Agreement on Tariffs and Trade 1994
(GATT 1994), Article 14 of the Agreement on Technical Barriers to Trade (TBT Agreement) and
Article 30 of the Agreement on Subsidies and Countervailing Measures (SCM Agreement) regarding
the measures and claims set out below.1
1.2. Consultations were held on 17 March 2021 but failed to resolve the dispute.
1.2 Panel establishment and composition
1.3. On 15 April 2021, Malaysia requested the establishment of a panel pursuant to Articles 4.7
and 6 of the DSU, Article XXIII of the GATT 1994, Article 14.1 of the TBT Agreement and Article 30
of the SCM Agreement.2 At its meeting on 28 May 2021, the Dispute Settlement Body (DSB)
established a panel pursuant to the request of Malaysia in document WT/DS600/6, in accordance
with Article 6 of the DSU.3
1.4. The Panel's terms of reference are the following:
To examine, in light of the relevant provisions of the covered agreements cited by the
parties to the dispute, the matter referred to the DSB by Malaysia in document
WT/DS600/6 and to make such findings as will assist the DSB in making the
recommendations or in giving the rulings provided for in those agreements.4
1.5. On 19 July 2021, Malaysia requested the Director-General to determine the composition of the
panel, pursuant to Article 8.7 of the DSU. On 29 July 2021 the Director-General, composed the Panel
as follows:
Chairperson: Mr Manzoor AHMAD
Members: Ms Sarah PATERSON
Mr Arie REICH
1.6. Argentina, Australia, Brazil, Canada, China, Colombia, Costa Rica, Ecuador, El Salvador,
Guatemala, Honduras, India, Indonesia, Japan, the Republic of Korea, Norway, the
Russian Federation, the Kingdom of Saudi Arabia, Singapore, Thailand, Türkiye, Ukraine, the United
Kingdom and the United States notified their interest in participating in the Panel proceedings as
third parties.5
1.3 Panel proceedings
1.3.1 General
1.7. After consulting with the parties, the Panel adopted its Working Procedures and timetable on
13 September 2021.6 Both were modified as needed in the course of the proceedings.
1.8. Following consultations with the parties, the Panel held a single substantive meeting with the
parties on 10-13 May 2022. A session with the third parties took place on 11 May 2022. For reasons
related to the COVID -19 pandemic, as elaborated further below, the substantive meeting of the

1 Request for consultations by Malaysia, WT/DS600/1.
2 Request for the establishment of a panel by Malaysia, WT/DS600/6 (Malaysia's panel request).
3 DSB, Minutes of the meeting held on 28 May 2021, WT/DSB/M/452.
4 Constitution note of the Panel, WT/DS600/7, para. 2.
5 Constitution note of the Panel, WT/DS600/7, para. 5.
6 See the Panel's Working Procedures in Annex A-1.

Panel with the parties and the third -party session was held in a hybrid format. On 22 March 2023,
the Panel issued the descriptive part of its Report to the parties. The Panel issued its Interim Report
to the parties on 29 September 2023. The Panel issued its Final Report to the parties on
15 December 2023.
1.3.2 Format of the substantive meeting of the Panel with the parties
1.9. In light of the prevailing sanitary conditions linked to the COVID -19 pan demic, the Panel
provided in its initial Working Procedures for a possibility to hold substantive meetings with the
parties and the third -party session through remote participation, on which it consulted with the
parties.
1.10. In light of recent evolutions in t he sanitary conditions and associated restrictions, the Panel
proposed on 8 April 2022 to hold the substantive meeting of the Panel, including the third -party
session, in person at the World Trade Organi zation (WTO) premises in Geneva. 7 Following
consultations with the parties and third parties, the Panel confirmed that the substantive meeting
would be held in a hybrid format, allowing for participation through remote means in addition to in-
person presence.8 To that end, the Panel shared with the parties and third parties a note on the
modalities of remote participation in the substantive meeting.9
1.3.3 The ongoing separate panel proceedings in DS593
1.11. Following the decision to compose this Panel of the same panelists as the Panel in EU – Palm
Oil (Indonesia) (DS593), Malaysia, acting as the complainant in this dispute and in its capacity as a
third party in DS593, requested on 5 August 2021 harmonization of the two Panels' timetables. 10
Following that request, the Panels in both disputes invited the parties to participate in a joint
organizational meeting in order to seek further views of the parties on the possible harmonization
of the two proceedings and the possibility and extent of any exchange of information between the
parties.11 This joint organizational meeting with remote participation was held on 1 September 2021.
1.12. In its written communications and in the statement made at the joint organizational meeting,
Malaysia submitted that the appointment by the Director-General of the same panelists to serve on
the two Panels established to examine complaints relating to the same matter calls, by virtue of
Article 9.3 of the DSU, for harmonization of these Panels' timetables. 12 In Malaysia's view,
harmonization of the Panels' timetables would ensure, as far as possible, consistency between the
Panel reports and that both complaints are "dispensed with by the Panels effectively and
expediently".13 In practical terms, Malaysia proposed postponing the second substantive meeting in
DS593 until it could be held together with the second substantive meeting in DS600.14 According to
Malaysia, harmonizing the timeframes of the two proceedings would not cause undue delays to the
proceedings in DS593 and would be fully in line with the letter and the spirit of Article 9.3 of the
DSU.15 Malaysia also considered that granting enhanced third-party rights to the parties to the two
disputes would allow exchange of information between the two proceedings.16
1.13. The European Union, the respondent in both disputes, expressed support for the request by
Malaysia to harmonize the panel proceedings in DS593 and DS600. 17 The European Union pointed
out that such harmonization efforts would allow Malaysia and the European Union the time necessary
to present and defend their positions and ensure consistency in the outcomes of the two disputes,

7 Panel communication to the parties and the third parties (8 April 2022).
8 Panel communication to the parties and the third parties (15 April 2022).
9 Note on the modalities of remote participation in the substantive meeting (24 April 2022).
10 Malaysia's communication (5 August 2021), para. 7. The discussion that follows focuses on requests
and communications that form part of the record in DS600.
11 Panel communication to the parties regarding the joint virtual meeting in DS593 and DS600
(19 August 2021).
12 Malaysia's communication (25 August 2021), para. 7; Malaysia's statement at the joint meeting with
the Panel, paras. 4-5.
13 Malaysia's communication (25 August 2021), para. 10; Malaysia's statement at the joint meeting with
14 Malaysia's statement at the joint meeting with the Panel, para. 6.
15 Malaysia's communication (6 September 2021).
16 Malaysia's statement at the joint meeting with the Panel, para. 7.
17 European Union's communications (5 August 2021 and 3 September 2021).

which relate to the same matter. 18 According to the European Union, the phrase "to the greatest
extent possible" in Article 9.3 of the DSU expresses a preference for harmonizing the timetables of
disputes that concern the same matter and where the same persons serve as panelists. 19 The
European Union observed that "the fact that there might not be a situation in whi ch harmonization
was decided which is identical to the present situation " does not preclude harmonizing the
proceedings in DS593 and DS600, especially given the disruptive impact of the COVID-19 pandemic
on the work of the WTO and its Members.20 In the European Union's view, "[i]t would be appropriate
for the Panels in DS593 and DS600 to delay issuing their final Reports in either case until such time
as they have sufficient knowledge of the arguments of the parties in both cases so as to ensure that
no inconsistency arises between the two Reports and both proceedings are conducted effectively
and in an efficient way."21 Finally, the European Union reiterated its objection to granting enhanced
third-party rights in DS593 to Malaysia, as this, in the European Union's view, would give Malaysia
"an unfair advantage against the European Union in DS600".22
1.14. Indonesia objected to the request for harmonization of the two proceedings and to providing
a possibility for an exchange of information between the parties to the two disputes. Indonesia
recognized that panels enjoy a margin of discretion in deciding whether and how timetables should
and can be harmonized.23 Indonesia observed, however, that such a decision should balance various
interests, including the need for the prompt settlement of disputes, protecting due process rights of
the parties, ensuring an objective assessment of the matter, as well as the preference for efficiency
and ensuring consistent rulings where separate panels are established to examine complaints related
to the same matter.24 Indonesia relied on the practice of previous panels and the fact that 10 months
separate the establishment of the two Panels to argue that, on balance, harmonizing the two
proceedings would unduly interfere with Indonesia's right to a prompt resolution of the dispute, as
reflected in Articles 3.3, 12.8, and 12.9 of the DSU. 25 Indonesia also observed that ordering the
exchange of information between the parties to both disputes, or holding a joint meeting would, in
effect, result in granting enhanced third-party rights to Malaysia in DS593, to which both Indonesia
and the European Union objected.26 Indonesia argued in this regard that "Article 9.3 of the DSU does
not envisage the exchange of information between parties in different disputes concerning a similar
matter and being heard by more than one panel".27
1.15. Following a carefu l consideration of the parties' views and after weighing the relevant
considerations relating to the possibility of harmonizing the timetables of the proceedings in DS593
and DS600, the Panel considered that under the circumstances, a degree of coordinatio n could at
that stage be assured by having the second substantive meeting in DS593 follow the filing of the
first written submissions in DS600, without prejudice to any later decisions of the Panels in both
disputes relating to further harmonization. In ex ercising its discretion in this respect, the Panel
sought to balance the various objectives of the dispute settlement system, including all parties' due
process rights, the objective of prompt settlement of disputes expressed in Article 3.3 of the DSU
and the objective of promoting, as relevant, consistency in rulings relating to the same matter,
consistent with the spirit of Article 9.3 of the DSU.28 The Panel confirmed this approach in a further
communication to the parties, explaining that the substantiv e meetings in both proceedings would
be held separately, while accommodating in each proceeding the opportunities arising from the
exercise of third-party participation rights accorded by the DSU.29

18 European Union's communication (3 September 2021).
19 European Union's communication (6 September 2021), para. 1.
20 European Union's communication (6 September 2021), para. 2.
21 European Union's communication (6 September 2021), para. 6.
22 European Union's communication (5 August 2021).
23 Indonesia's communication (20 August 2021), paras. 8-9.
24 Indonesia's communication (20 August 2021), paras. 8-9; Indonesia's statement at the joint meeting
25 Indonesia's communication (20 August 2021), paras. 11-14; Indonesia's statement at the joint
meeting with the Panel, paras. 18-21.
26 Indonesia's statement at the joint meeting with the Panel, para. 25.
27 Indonesia's statement at the joint meeting with the Panel, para. 25.
28 Panel communication to the parties regarding the possible harmonization of the panel proceedings in
DS593 and DS600 (13 September 2021).
29 Panel communication to the parties (6 December 2021). This communication addressed Malaysia's
request of 11 November 2021 for an update on the potential harmonization of the proceedings in DS593 and
DS600.

1.3.4 The holding of a single substantive meeting
1.16. At the joint organizational meeting held on 1 September 2021, the Panel explored with the
parties the possibility of holding a single substantive meeting of the Panel with the parties, which
would follow two rounds of written submissions. During the meeting, both Malay sia and the
European Union stated that they would be in a better position to comment on this option after the
first round of written submissions was completed. 30 In addition, Malaysia stated in writing that it
remained open to any possible ways of expediti ng the proceedings, and that it would give due
consideration to any such possible action while preserving its rights under the DSU and, in particular,
under Article 12.4 thereof.31
1.17. In its communication of 6 December 2021 informing the parties that it would not be feasible
to fully harmonize the timetables of the proceedings in DS593 and DS600, the Panel also explained
that it remained mindful of the objective of promoting coherence in the conduct of the two
proceedings, as well as the objective of prompt settlement of disputes as stated in Articles 3.3, 12.8
and 12.9 of the DSU. 32 In that connection, the Panel noted that at that point it had received the
parties' first written submissions and invited the parties to clarify their positions on the possibility of
holding a single substantive meeting preceded by a second round of written submissions.33
1.18. In its response to the Panel's communication, Malaysia expressed support for holding a single
substantive meeting and requested that the proceedings in DS593 and DS600 be harmonized
partially, notably with respect to the issuance of the interim and the final reports. 34 The
European Union was also supportive of holding a single substantive meeting, on the condition that
such meeting would be held in person.35
1.19. On 27 January 2022, the Panel shared with the parties a proposed revised timetable of the
proceedings including a single substantive meeting preceded by the consecutive filing of the parties'
second written submissions. 36 Malaysia objected to the proposed cons ecutive filing of the parties'
second written submissions on the grounds that Article 12.6 of the DSU requires that "[a]ny
subsequent written submissions shall be submitted simultaneously."37 According to Malaysia, unlike
the timelines indicated in Appendix 3 to the DSU, the Panel cannot deviate from the rules set out in
the main body of the DSU, including those contained in the last sentence of Article 12.6.38
Commenting on Malaysia's observations, the European Union noted that it is not uncommon to have
staggered submissions in proceedings with only one panel hearing, including in compliance
proceedings under Article 21.5 of the DSU.39 The European Union argued that following Malaysia's
suggestion would lead to a situation where the last document submitted prior to the second written
submissions would be the European Union's first written submission. Therefore, without further
reactions from Malaysia, there would be not much the European Union could add to the arguments
it had already made in the first written submission to advance the debate at that stage of the
proceedings.40 Against this background, the European Union emphasized the importance of sending
questions sufficiently in advance of the substantive meeting, if the Panel were to opt for a

30 See Panel communication to the parties (6 December 2021).
31 Malaysia's comments on Indonesia's oral statement at the joint organizational meeting
(6 September 2021).
32 Panel communication to the parties (6 December 2021).
33 Panel communication to the parties (6 December 2021).
34 Malaysia's communication regarding the possibility of holding a single substantive meeting
(17 December 2021). Malaysia's comments on the European Union's communication regarding the possibility of
holding a single substantive meeting (10 January 2022).
35 European Union's communication regarding the possibility of holding a single substantive meeting
(17 December 2021); European Union's comments on Malaysia's communication regarding the possibility of
holding a single substantive meeting (10 January 2022).
36 Panel communication to the parties regarding the proposed revisions to the timetable
(27 January 2022).
37 Malaysia's comments on the Panel's communication regarding the proposed revisions to the timetable
(31 January 2022).
38 Malaysia's comments on the Panel's communication regarding the proposed revisions to the timetable
(31 January 2022).
39 The European Union's comments on Malaysia's comments on the Panel's communication regarding the
proposed revisions to the timetable (3 February 2022).
40 The European Union's comments on Malaysia's comments on the Panel's communication regarding the
proposed revisions to the timetable (3 February 2022).

simultaneous filing of the second written submissions. 41 In response to the European Union's
comments, Malaysia reiterated its strict opposition to a sequential filing of the second submissions,
questioning the extent to which "staggering" of written submissions is common in panel proceedings
and noting the clear language of Article 12.6 of the DSU, as well as the fact that the current
proceedings are outside the context of Article 21.5 of the DSU.42 Following this exchange of views,
the Panel informed the parties that it would hold a single substantive meeting with the parties,
preceded by a simultaneous filing of the second written submission and that any questions the Panel
might ask at the substantive meeting, if any, would be sent to the parties sufficiently in advance.43
1.3.5 Unsolicited amicus curiae brief
1.20. On 25 April 2022, the Panel received from the Veblen Institute an unsolicited amicus curiae
brief, which had been sent to the director of the Legal Affairs Division of the WTO and then
transmitted to the Panel. On 28 April 2022, the Panel forwarded the document to the parties, inviting
them to share any views they had in relation to the relevance and admissibilit y of the brief at the
upcoming substantive meeting of the Panel with the parties.44
1.21. On 5 May 2022, Malaysia objected in writing to the amicus curiae brief and reserved the right
to comment further on the matter orally during the substantive meeting or in writing. 45 Malaysia
noted the Appellate Body's finding that a panel's discretionary power to seek information and
technical advice under Article 13 of the DSU extends to unsolicited amicus curiae briefs. Malaysia
submitted that such discretion is, however, predicated on due process considerations and that an
amicus curiae brief can be filed as long as it does not come at the cost of unduly delaying the panel
process.46 Against this background, Malaysia objected to considering and accepting the amicus
curiae brief submitted by the Veblen Institute, because, in Malaysia's view , it did not contain any
new relevant information, it had been submitted at a late stage of the proceedings and admitting it
would prejudice Malaysia's procedural rights and position in the proceedings, including as a
developing-country Member.47 Malaysia also expressed a concern that admitting the amicus brief
would put the Panel at peril of being flooded with other unsolicited amicus curiae briefs at a later
stage of the proceedings.48
1.22. The European Union, without providing written comments on the relevance and admissibility
of the amicus curiae brief submitted by the Veblen Institute, subsequently included it as an exhibit
to its opening statement at the substantive meeting of the Panel. 49 The parties made no further
comments relating to its relevance or admissibility.
2 FACTUAL ASPECTS
2.1. The products at issue in this dispute are certain oil crop-based biofuels (e.g. palm oil -based
biofuels) produced from oil crop feedstocks (e.g. palm oil). Oil crop biofuel feedstocks can be used
to produce ester biodiesel (Fatty Acid Methyl Esters, or "FAME") and hydrogenation -derived
renewable diesel (H ydrotreated Vegetable Oil, or "HVO"). Both FAME and HVO are admissible as
renewable content that can be used to meet the requirements of RED II (which are elaborated further
below).
2.2. The measures at issue comprise measures adopted by the European Union, Fra nce and
Lithuania. The EU measures challenged by Malaysia 50 are part of the European Union's renewable
energy policy, and, in particular what the European Union refers to as its "Biofuels regime" (EU

41 The European Union's comments on Malaysia's comments on the Panel's communication regarding the
proposed revisions to the timetable (3 February 2022).
42 Malaysia's response to the European Union's comments on Malaysia's comments on the Panel's
communication regarding the proposed revisions to the timetable (10 February 2022).
43 Panel communication to the parties regarding the revised timetable (14 February 2022).
44 Panel communication to the parties regarding the amicus curiae brief (28 April 2022).
45 Malaysia's objection to the amicus curiae brief submitted by the Veblen Institute (5 May 2022).
46 Malaysia's objection to the amicus curiae brief submitted by the Veblen Institute (5 May 2022)
(referring to Appellate Body Reports, US – Shrimp, para. 107; EC – Seal Products, para. 1.15).
47 Malaysia's objection to the amicus curiae brief submitted by the Veblen Institute (5 May 2022).
48 Malaysia's objection to the amicus curiae brief submitted by the Veblen Institute (5 May 2022).
49 European Union's opening statement at the meeting of the Panel, fn 1; Veblen Institute, Amicus Curia
submission, (Exhibit EU-216).
50 See Malaysia's panel request, paras. 10, 12 and 17.

Biofuels regime).51 The Panel therefore first describes below this regulatory context in which these
measures were adopted, before turning to a description of the specific aspects challenged by
Malaysia.52 Finally, the Panel briefly describes some of the key concepts relevant to an understanding
of these measures.
2.3. This section focuses on the measures at issue in this dispute. Measures and initiatives taken by
Malaysia to regulate land use, land use change, deforestation, and related factual aspects regarding
the cultivation of oil crops are addressed insofar as necessary in the context of the Panel's assessment
in section 7 of this Report.
2.1 Overall EU-wide regulatory context
2.4. The European Union identifies several legal instruments as comprising the EU Biofuels regime,
including53:
a. Directive (EU) 2018/2001 of the European Parliament and of the Council of
11 December 2018 on the promotion of the use of energy from renewable sources
(recast), OJ 2018 L 328, p. 80 (RED II)54;
b. Regulation (EU) 2018/1999 of the European Parliament and of the Council of
11 December 2018 on the Governance of the Energy Union and Climate Action, amending
Regulations (EC) No 663/2009 and (EC) No 715/2009 of the European Parliament and of
the Council, Directives 94/22/EC, 98/70/EC, 2009/31/EC, 2009/73/EC, 2010/31/EU,
2012/27/EU and 2013/30/EU of the European Parliament and of the Council, Council
Directives 2009/119/EC and (EU) 2015/652 and repealing Regulation (EU) No 525/2013
of the European Parliament and of the Council, OJ 2018 L 328, p. 1 (Regulation (EU)
2018/1999)55; and
c. Commission Delegated Regulation (EU) 2019/807 of 13 March 2019 supplementing
Directive (EU) 2018/2001 of the European Parliament and of the Council as regards the
determination of high indirect land -use change -risk feedst ock for which a significant
expansion of the production area into land with high-carbon stock is observed and the
certification of low indirect land-use change-risk biofuels, bioliquids and biomass fuels, OJ
2019 L 133, p. 1 (Delegated Regulation).56
2.5. The Panel will first describe below some of the EU legal instruments that preceded the adoption
of RED II and the Delegated Regulation and provide relevant background to their adoption.
2.2 Background to the specific measures at issue
2.2.1 Directive 2003/30/EC, RED I a nd relevant amendments concerning indirect land -
use change (ILUC)
2.6. The European Parliament and the Council adopted Directive 2003/30/EC "on the promotion of
the use of biofuels or other renewable fuels for transport " on 8 May 2003.57 Directive 2003/30/EC
established the legal framework in relation to biofuels and other renewable fuels in the transport
sector.58
2.7. Directive 2003/30/EC stated that there is a link between energy consumption in the transport
sector and greenhouse gas (GHG) emissions and that increased use of biofuels is a means to address

51 European Union's first written submission, para. 14.
52 The descriptions contained in this section are without prejudice to any of the Panel's subsequent
determinations with respect to the identification or contents of the specific measures at issue in this dispute.
53 European Union's first written submission, paras. 15-19.
54 RED II, (Exhibit MYS-90).
55 Regulation (EU) 2018/1999, (Exhibit MYS-62).
56 Delegated Regulation, (Exhibit MYS-91).
57 Directive 2003/30/EC, (Exhibit EU-17).
58 European Union's first written submission, para. 196. The European Union refers to it as the "first
'biofuels' directive".

those concerns.59 Moreover, it contained indicative targets for EU member States as regards the
quantities of biofuels that should be placed on their energy markets 60 and established that
mandatory targets would be considered if the national indicative targets were not achieved.61
2.8. Directive 2003/30/EC was replaced by Directive 2009/28/EC on the promotion of the use of
energy from renewable sources (RED I).62 RED I was adopted by the European Parliament and the
European Council on the basis of a proposal submitted by the European Commission.63
2.9. RED I introduced overall binding targets for the share of energy from renewable sources in the
gross final consumption of energy in EU member States, including in the transport sector.64
2.10. In RED I, "biofuel" is defined as "liquid or gaseous fuel for transport produced from biomass"
and "energy from renewable sources " is defined as "energy from renewable non -fossil sources".65
RED I introduces a 20% mandatory target for the overall share of energy from renewable sources
in the European Union's gross final consumption of energy by 202066, and a 10% mandatory target
for energy from renewable sources in the final consumption of energy in all forms of transport in an
EU member State by the same date.67
2.11. RED I also established, in respect of each EU member State, a national overall target for the
share of energy from renewable sources in 2020. 68 RED I prescribed that EU member States adopt
national renewable energy action plans for the purpose of meeting those targets.69
2.12. Under RED I, biofuels were only eligible to be taken into account in achieving these targets if
they met certain sustainability criteria and GHG emissions savi ngs levels.70 The introduction of the
sustainability criteria is explained in Recital 69 of RED I, partially reproduced below:
The increasing worldwide demand for biofuels and bioliquids, and the incentives for their
use provided for in this Directive, sho uld not have the effect of encouraging the
destruction of biodiverse lands. Those finite resources, recognised in various
international instruments to be of value to all mankind, should be preserved. Consumers
in the Community would, in addition, find it m orally unacceptable that their increased
use of biofuels and bioliquids could have the effect of destroying biodiverse lands. For
these reasons, it is necessary to provide sustainability criteria ensuring that biofuels
and bioliquids can qualify for the in centives only when it can be guaranteed that they
do not originate in biodiverse areas or, in the case of areas designated for nature
protection purposes or for the protection of rare, threatened or endangered ecosystems
or species, the relevant competent authority demonstrates that the production of the
raw material does not interfere with those purposes. […]
2.13. Article 17 of RED I set out the sustainability criteria for biofuels and bioliquids. In order to
meet the sustainability criteria, biofuels were requ ired to represent a 35% reduction in GHG
emissions as compared with fossil fuels. 71 In addition, raw material obtained from land with high
biodiversity value could not be taken into account for the purposes of meeting the targets. 72
Article 17(3) stated that land with "high biodiversity value" is land with the status of either forest or
other wooded land, areas designated by law for nature protection purposes and highly biodiverse

59 Directive 2003/30/EC, (Exhibit EU-17), Recitals (3) to (6), and (22).
60 European Union's first written submission, para. 199; Directive 2003/30/EC, (Exhibit EU-17),
Article 3(1).
61 Directive 2003/30/EC, (Exhibit EU-17), Article 4(2); European Union's first written submission,
para. 199.
62 RED I, (Exhibit EU-19).
63 European Union's first written submission, para. 206; European Parliament Report,
FINAL A5-0244/2002, (Exhibit EU-18).
64 Articles 3(1) and 3(4), Annex I, RED I.
65 Article 2(i) and (a) of RED I.
66 Article 3(1) of RED I.
67 Article 3(4) of RED I.
68 Article 3(1) of and Annex I to RED I.
69 Article 4(1) of RED I.
70 Article 17(2) of RED I.
71 Article 17(2) of RED I.
72 Article 17(3) of RED I.

grassland meeting certain criteria. Pursuant to Article 17(4) of RED I, biofuels may not be counted
towards the targets if produced from raw materials from land with high -carbon stock. Lastly,
Article 17(5) provided that biofuels would not be counted if made from raw material obtained from
land that was peatland.
2.14. In 2009, the European Council and the Parliament adopted Directive 2009/30/EC (Fuel Quality
Directive). The Fuel Quality Directive aimed at addressing the GHG intensity of different fuels by
obliging EU member States to require suppliers to reduce life cycle GHG emissions per unit of energy
from fuel and energy supplied by up to 10% by 31 December 2020.73 Furthermore, the biofuels
covered by the Fuel Quality Directive are subject to the same sustainability criteria as under RED I.
Similarly, compliance with the criteria was a precondition for biofuels to count towards the GHG
emissions reductions targets.74
2.15. In 2015, RED I and the Fuel Quality Directive were amended by Directive 2015/1513 (ILUC
Directive).75 One of the stated purposes of the ILUC Directive was to "address the impact of indirect
land use change given that current biofuels are mainly produced from crops grown on existing
agricultural land".76 The ILUC Directive also implemented the outcomes of a review of ILUC risk
contemplated by Article 19 of RED I.77 The preamble of the ILUC Directive stated that when indirect
land use change involves the co nversion of land with high -carbon stock, it can lead to significant
GHG emissions and as such it could negate some or all of the GHG emission savings of individual
biofuels.78
2.16. In addition, RED I contemplated addressing GHG emissions relating to ILUC at a l ater stage,
following a review of the impact of ILUC on GHG emissions.79 A review was conducted in 2012, which
included an impact assessment for different policy options to address ILUC in the context of the
European Union's policy promoting renewable ener gy sources and limiting GHG emissions. 80 This
was the main objective of the ILUC Directive, which amended RED I and defined ILUC for the
purposes of the EU Biofuels Regime.81 ILUC was described as follows in the ILUC Directive:
Where pasture or agricultura l land previously destined for food and feed markets is
diverted to biofuel production, the non-fuel demand will still need to be satisfied either
through intensification of current production or by bringing non -agricultural land into
production elsewhere. The latter case constitutes [ILUC] and when it involves the
conversion of land with high carbon stock it can lead to significant greenhouse gas
emissions. […]82
2.17. The ILUC Directive introduced a limitation on the share of biofuels produced from food or feed
crops that could be counted towards meeting renewable energy targets. The preamble of the ILUC
Directive explains this limitation as follows:
To prepare for the transition towards advanced biofuels and minimise the overall indirect
land-use change impacts, it is appropriate to limit the amount of biofuels and bioliquids
produced from cereal and other starch-rich crops, sugars and oil crops and from crops

73 Fuel Quality Directive, (Exhibit EU-25), Article 1(5), p. 12.
74 European Union's first written submission, para. 228; Fuel Quality Directive, (Exhibit EU-25),
Article 1(6), p. 18.
75 ILUC Directive, (Exhibit MYS-168).
76 ILUC Directive, (Exhibit MYS-168), Recital (4), p. 2.
77 European Union's first written submission, para. 228; see also ILUC Directive, (Exhibit MYS-168),
Recitals (16) and (28), pp. 4 and 6.
78 ILUC Directive, (Exhibit MYS-168), Recitals (4) and (5), p. 2.
79 Malaysia's first written submission, para. 323; European Union's first written submission, para. 222.
See also RED I, (Exhibit EU-19), Article 19(6), p. 41, which states in relevant part as follows:
The Commission shall, by 31 December 2010, submit a report to the European Parliament and to
the Council reviewing the impact of indirect land-use change on greenhouse gas emissions and
addressing ways to minimise that impact. The report shall, if appropriate, be accompanied, by a
proposal, based on the best available scientific evidence, containing a concrete methodology for
emissions from carbon stock changes caused by indirect land-use changes, ensuring compliance
with this Directive, in particular Article 17(2).
80 European Union's first written submission, para. 230.
81 Malaysia's first written submission, para. 333; European Union's first written submission, para. 230.
82 Malaysia's first written submission, para. 325 (referring to ILUC Directive (Exhibit MYS-168),
recital (4), p. 2).

grown as main crops primarily for energy purposes on agricultural land that can be
counted towards targets set out in this Directive, without restricting the overall use of
such biofuels and bioliquids. […]83
2.18. The ILUC Directive also envisaged that "provisional mean values of estimated ILUC emissions"
should be included in the reporting of GHG emissions from biofuels and bioliquids under RED I84 and
that the European Commission should review the effectiveness of the measures introduced by the
ILUC Directive "based on the best and latest available scientific evidence, in limiting the impact of
indirect land-use change greenhouse gas emissions and addressing ways to further minimize that
impact".85
2.19. The ILUC Directive introduced an amendment to RED I to require EU member States to limit
the amount of biofuels and bioliquids produced from cereal and other starch-rich crops, sugars and
oil crops and from crops grown as main crops primarily for energy purposes on agricultural land to
7% of the final consumption of energy in transport in the EU member State in 2020.86 Furthermore,
additional definitions were established, including for "low indirect land-use change-risk biofuels".87
2.20. In November 2016, the European Commission presented a proposal for a "recast" Directive.
This proposal includes an impact assessment, in which various policy options are envisaged, "to
promote the decarbonisation and energy diversification of transport fuels, while addressing Indirect
Land Use Change (ILUC) associated to food-based biofuels".88
2.21. In 2017, a study report (Study Report (2017)) was submitted by the European Commission
pursuant to RED I as amended by the ILUC Directive, "to gather comprehensive information on, and
to provide systematic analysis of the latest available scientific research and the latest available
scientific evidence on indirect land use change (ILUC) greenhouse gas emissions associated with
production of biofuels and bioliquids".89
2.2.2 RED II
2.22. RED II is a "recast" of RED I.90 As RED I did, RED II establishes a common framework for the
promotion of renewable energy in the European Union.91
2.23. The subject-matter of RED II is described in Article 1, which reads as follows:
This Directive establishes a common framework for the promotion of energy from
renewable sources. It sets a binding Union target for the overall share of energy from
renewable sources in the Union's gross final consumption of energy in 2030. It also lays
down rules on financial support for electricity from renewable sources, on
self-consumption of such electricity, on the use of energy from renewable sources in
the heating and cooling sector and in the transport sector, on regional cooperation
between Member States, and between Member States and third countries, on
guarantees of origin, on administrative procedures and on information and training. It
also establishes sustainability and greenhouse gas emissions saving criteria for biofuels,
bioliquids and biomass fuels.

83 Recital 17 to the ILUC Directive. (emphasis added) The same text is also found in Recital 80 to
RED II, with the addition of a reference to "direct and indirect" land-use change impacts. (See also Malaysia's
first written submission, para. 324.)
84 Recital 21 to the ILUC Directive.
85 Recital 34 to the ILUC Directive.
86 Article 2(2)(b)(iv) of the ILUC Directive.
87 Article 2(1)(w) of the ILUC Directive.
88 RED II Proposal, (Exhibit EU-8), pp. 16-17.
89 Study Report (2017), (Exhibit EU-28).
90 European Union first written submission, para. 249.
91 RED II, (Exhibit MYS-90).

2.2.2.1 General requirements
2.24. The terms "energy from renewable sources" or "renewable energy" are defined in Article 2(1)
of RED II as:
energy from renewable non-fossil sources, namely wind, solar (solar thermal and solar
photovoltaic) and geothermal energy, ambient energy, tide, wave and other ocean
energy, hydropower, biomass, landfill gas, sewage treatment plant gas, and biogas.
2.25. RED II requires EU member States to ensure that at least 32% of the energy consumed in
the European Union by 2030 is energy from renewable sources.92 EU member States are to achieve
this target collectively through national contributions set out in integrated national energy and
climate plans.93 Article 3(1) of RED II provides that:
Member States shall collectively ensure that the share of energy from renewable sources
in the Union's gross final consumption of energy in 2030 is at least 32%. The
Commission shall assess that target with a view to submitting a legislative proposal by
2023 to increase it where there are further substantial costs reductions in the production
of renewable energy, where needed to meet the Union's international commitments for
decarbonisation, or where a significant decrease in energy consumption in the Union
justifies such an increase.
2.26. Article 7 of RED II lays down general rules for the calculation of the share of energy "from
renewable sources" for the purposes of EU member States' national contributions. Pursuant to the
first subparagraph of Article 7(1) of RED II, the gross final consumption of energy from renewable
sources in each member State shall be calculated as the sum of:
(a) gross final consumption of electricity from renewable sources;
(b) gross final consumption of energy from renewable sources in the heating and
cooling sector; and
(c) final consumption of energy from renewable sources in the transport sector.
2.27. With regard to (a), (b) and (c) above, gas, electricity and hydrogen from renewable sources
shall be considered only once for the purposes of calculating the share of gross final consumption of
energy from renewable sources.94
2.2.2.2 Requirements relating to the use of renewable energy in the transport sector
2.28. Pursuant to Article 25(1) of RED II:
In order to mainstream the use of renewable energy in the transport sector, each
Member State shall set an obligation on fuel suppliers to en sure that the share of
renewable energy within the final consumption of energy in the transport sector is at
least 14 % by 2030 (minimum share) in accordance with an indicative trajectory set by
the Member State and calculated in accordance with the method ology set out in this
Article and in Articles 26 and 27. The Commission shall assess that obligation, with a
view to submitting, by 2023, a legislative proposal to increase it in the event of further
substantial costs reductions in the production of renewable energy, where necessary to
meet the Union's international commitments for decarbonisation, or where justified on
the grounds of a significant decrease in energy consumption in the Union.
2.29. Pursuant to Article 7(4) of RED II, for the purposes of point (c ) of the first subparagraph of
paragraph 1 (i.e. the transport sector), the following requirements shall apply:

92 Article 3(1) of RED II.
93 Article 3(2) of RED II.
94 Article 7(1) of RED II.

(a) Final consumption of energy from renewable sources in the transport sector shall
be calculated as the sum of all biofuels, biomass fuels a nd renewable liquid and
gaseous transport fuels of non-biological origin consumed in the transport sector.
However, renewable liquid and gaseous transport fuels of non -biological origin
that are produced from renewable electricity shall be considered to be part of the
calculation pursuant to point (a) of the first subparagraph of paragraph 1 only
when calculating the quantity of electricity produced in a Member State from
renewable sources.
(b) For the calculation of final consumption of energy in the tra nsport sector, the
values regarding the energy content of transport fuels, as set out in Annex III,
shall be used. For the determination of the energy content of transport fuels not
included in Annex III, Member States shall use the relevant European Standards
Organisation (ESO) standards in order to determine the calorific values of fuels.
Where no ESO standard has been adopted for that purpose, Member States shall
use the relevant International Organization for Standardisation (ISO) standards.
2.30. Biofuels are defined as "liquid fuel for transport produced from biomass ".95 Bioliquids are
defined as "liquid fuel for energy purposes other than for transport, including electricity and heating
and cooling, produced from biomass ".96 Biomass fuels are defined as "gaseous and solid fuels
produced from biomass".97
2.31. Article 25(1) of RED II further provides that EU member States may set such obligation by
means of, inter alia, measures targeting volumes, energy content or GHG emissions, provided that
it is demonstrated that the minimum shares are achieved.
2.32. Article 27 of RED II contains calculation rules with respect to the minimum shares of
renewable energy in the transport sector referred to in the first and fourth subparagraphs of
Article 25(1).
2.2.2.3 Requirements applicable to biofuels, bioliquids and biomass fuels
2.33. The final paragraph of Article 7(1) of RED II provides that biofuels, bioliquids and biomass
fuels can only be taken into account in this calculation if they fulfil certain sustainability and
greenhouse gas (GHG) emission savings criteria.
2.34. The sustainability criteria are laid out in Article 29 of RED II. Pursuant to Article 29 biofuels,
bioliquids and biomass fuels produced from agricultural biomass:
a. shall not be made from raw material obtained from l and with a high biodiversity value,
namely land that has the status of either a primary forest and other wooded land, highly
biodiverse forest and other wooded land which is species-rich and not degraded and areas
designated for nature protection purposes; or for the protection of rare, threatened or
endangered ecosystems or species recognised by international agreements unless
evidence is provided that the production of that raw material did not interfere with those
nature protection purposes.98
b. shall not be made from raw material obtained from land with high -carbon stock, namely
land that had one of the following statuses in January 2008 and no longer has that status99:
i. wetlands, namely land that is covered with or saturated by water permanently or for
a significant part of the year;

95 Article 2(33) of RED II.
96 Article 2(32) of RED II.
97 Article 2(27) of RED II. Biomass is in turn defined as "the biodegradable fraction of products, waste
and residues from biological origin from agriculture, including vegetal and animal substances, from forestry and
related industries, including fisheries and aquaculture, as well as the biodegradable fraction of waste, including
industrial and municipal waste of biological origin" (Article 2(24) of RED II).
98 Article 29(3) of RED II.
99 Article 29(4) of RED II.

ii. continuously forested areas, namely land spanning more than one hectare with trees
higher than five metres and a canopy cover of more than 30 %, or trees able to reach
those thresholds in situ;
iii. land spanning more than one hectare with trees higher than five metres and a canopy
cover of between 10 % and 30 %, or trees able to reach those thresholds in situ,
unless evidence is provided that the carbon stock of the area before and after
conversion is such that, when the methodolo gy laid down in Part C of Annex V is
applied, the conditions laid down in paragraph 10 of this Article would be fulfilled.
c. shall not be made from raw material obtained from land that was peatland in January
2008, unless evidence is provided that the cultivation and harvesting of that raw material
does not involve drainage of previously undrained soil.100
2.35. Article 29(10) of RED II also sets out the following GHG emission savings criteria:
10. The greenhouse gas emission savings from the use of biofuels, bioliquids and
biomass fuels taken into account for the purposes referred to in paragraph 1 shall be:
(a) at least 50 % for biofuels, biogas consumed in the transport sector, and bioliquids
produced in installations in operation on or before 5 October 2015;
(b) at least 60 % for biofuels, biogas consumed in the transport sector, and bioliquids
produced in installations starting operation from 6 October 2015 until
31 December 2020;
(c) at least 65 % for biofuels, biogas consumed in the transport sector, and bioliquids
produced in installations starting operation from 1 January 2021;
(d) at least 70 % for electricity, heating and cooling production from biomass fuels
used in installations starting operation from 1 January 2021 until
31 December 2025, and 80 % for installations starting operation from
1 January 2026.
An installation shall be considered to be in operation once the physical production of
biofuels, biogas consumed in the transport sector and bioliquids, and the physical
production of heating and cooling and electricity from biomass fuels has started.
The greenhouse gas emission savings from the use of biofuels, biogas consumed in the
transport sector, bioliquids and biomass fuels used in installations producing heating,
cooling and electricity shall be calculated in accordance with Article 31(1).
2.36. To determine the GHG emission savings of biofuels, the European Union applies a life cycle
analysis (LCA). Annex V of RED II details the LCA methodology for calculating GHG emissions from
the production and use of biofuels.101 This methodology includes consideration of the GHG emissions
from carbon stock changes caused by land use change (LUC). 102 These LUC-related emissions are
calculated by considering: (1) the carbon stock per unit area associated with the reference land use
(prior to the land use change); (2) the carbon stock per unit area associated with the actual land

100 Article 29(5) of RED II.
101 Annex V of RED II also sets out typical and default values for calculating the GHG emission savings of
biofuels, bioliquids and biomass fuels. For instance, the default value of GHG emission savings of palm oil
biodiesel is 19% if processed with open effluent pond, and 45% if processed with methane capture at oil mill.
RED II also stipulates that "[t]he Commission shall review, by 31 December 2020, guidelines for the calculation
of land carbon stocks drawing on the 2006 IPCC Guidelines for National Greenhouse Gas Inventories – volume
4 and in accordance with Regulation (EU) No 525/2013 and Regulation (EU) 2018/841 of the European
Parliament and of the Council. The Commission guidelines shall serve as the basis for the calculation of land
carbon stocks for the purposes of this Directive". See Annex V(C)(10) to RED II (fns omitted).
102 See Annex V of RED II.

use; (3) the productivity of the crop (measured as biofuel energy per unit area); and (4) whether
biomass is obtained from restored degraded land.103
2.37. Article 30 of RED II further provides for "Verification of compliance with the sustainability and
greenhouse gas emissions saving criteria". Article 30(1) provides, in part, that:
Where biofuels, bioliquids and biomass fuels, or other fuels that are eligible for counting
towards the numerator referred to in point (b) of Article 27(1), are to be taken into
account for the purposes referred to in Articles 23 and 25 and in points (a), (b) and (c)
of the first subparagraph of Article 29(1), Member States shall require economic
operators to show that the sustainability and greenhouse gas emissions saving criteria
laid down in Article 29(2) to (7) and (10) have been fulfilled. […]
and that:
For those purposes, they shall require economic operators to use a mass balance system
[…]104 The mass balance system shall ensure that each consignment is counted only
once in point (a), (b) or (c) of the first subparagraph of Article 7(1) for the purposes of
calculating the gross final consumption of energy from renewable sources and shall
include information on whether support has been provided for the production of that
consignment, and if so, on the type of support scheme.
2.38. RED II further distinguishes between "advanced biofuels ", defined as biofuel s that are
produced from the feedstock listed in Part A of Annex IX of RED II105, and those biofuels not produced
from feedstock listed in Part A of Annex IX of RED II. Biofuels made from food and feed crops are
not listed in Part A of Annex IX. These are so-called "conventional" biofuels.
2.39. The calculation rules for biofuels include:
a. a minimum target share of advanced biofuel set at 0.2% of the final consumption of energy
in the transport sector in 2022, 1% by 2025 and 3.5% by 2030106; and

103 See Annex V(C)(7) of RED II. See also section 2.7 below on Conventional biofuel production and land
use change.
104 Pursuant to Article 30(1) of RED II, the mass balance system is one which:
(a) allows consignments of raw material or fuels with differing sustainability and greenhouse gas
emissions saving characteristics to be mixed for instance in a container, processing or logistical
facility, transmission and distribution infrastructure or site; (b) allows consignments of raw
material with differing energy content to be mixed for the purposes of further processing,
provided that the size of consignments is adjusted according to their energy content; (c) requires
information about the sustainability and greenhouse gas emissions saving characteristics and
sizes of the consignments referred to in point (a) to remain assigned to the mixture; and (d)
provides for the sum of all consignments withdrawn from the mixture to be described as having
the same sustainability characteristics, in the same quantities, as the sum of all consignments
added to the mixture and requires that this balance be achieved over an appropriate period of
time.
105 Article 2(34) of RED II; Part A of Annex IX of RED II lists down the following:
(a) Algae if cultivated on land in ponds or photobioreactors; (b) Biomass fraction of mixed
municipal waste, but not separated household waste subject to recycling targets under point (a)
of Article 11(2) of Directive 2008/98/EC; (c) Biowaste as defined in point (4) of Article 3 of
Directive 2008/98/EC from private households subject to separate collection as defined in point
(11) of Article 3 of that Directive; (d) Biomass fraction of industrial waste not fit for use in the
food or feed chain, including material from retail and wholesale and the agro-food and fish and
aquaculture industry, and excluding feedstocks listed in part B of this Annex; (e) Straw; (f)
Animal manure and sewage sludge; (g) Palm oil mill effluent and empty palm fruit bunches; (h)
Tall oil pitch; (i) Crude glycerine; (j) Bagasse; (k) Grape marcs and wine lees; (l) Nut shells; (m)
Husks; (n) Cobs cleaned of kernels of corn; (o) Biomass fraction of wastes and residues from
forestry and forest-based industries, namely, bark, branches, pre-commercial thinnings, leaves,
needles, tree tops, saw dust, cutter shavings, black liquor, brown liquor, fibre sludge, lignin and
tall oil; (p) Other non-food cellulosic material; (q) Other ligno-cellulosic material except saw logs
and veneer logs.
106 Article 25(1) of RED II.

b. a maximum share for biofuels made from food and feed crops.107
2.40. The detail of the calculation rules in respect of biofuels made from food and feed crops is
described below, when setting out the measures at issue that are challenged by Malaysia in these
proceedings.
2.3 The specific EU measures at issue
2.41. Article 26 of RED II contains specific rules for the calculation of EU member State's final
consumption of energy from renewable sources in respect of biofuels from food and feed crops.
2.42. Food and feed crops are defined as "starch-rich crops, sugar crops or oil crops produced on
agricultural land as a main crop excluding residues, waste or ligno -cellulosic material and
intermediate crops, such as catch crops and cover crops, provided that the use of such intermediate
crops does not trigger demand for additional land".108
2.43. These rules set limits on the contribution that such biofuels can make to the consumption
targets described above.109 The rules described below are the main subject-matter of this dispute.
2.3.1 7% maximum share of biofuels made from food and feed crops
2.44. The limit on the contribution that biofuels made from food or feed crops may be counted as
making to meeting EU renewable energy targets was first introduced in the ILUC Directive110 and
was maintained in RED II.
2.45. Article 26(1) of RED II reads as follows:
For the calculation of a Member State's gross final consumption of energy from
renewable sources referred to in Article 7 and the minimum share referred to in the first
subparagraph of Article 25(1), the share of biofuels and bioliquids, as well as of biomass
fuels consumed in transport, where produced from food and feed crops, shall be no
more than one percentage point higher than the share of such fuels in the final
consumption of energy in the road and rail transport s ectors in 2020 in that Member
State, with a maximum of 7% of final consumption of energy in the road and rail
transport sectors in that Member State.
Where that share is below 1 % in a Member State, it may be increased to a maximum
of 2 % of the final consumption of energy in the road and rail transport sectors.
Member States may set a lower limit and may distinguish, for the purposes of
Article 29(1), between different biofuels, bioliquids and biomass fuels produced from
food and feed crops, taking into account best available evidence on indirect land -use
change impact. Member States may, for example, set a lower limit for the share of
biofuels, bioliquids and biomass fuels produced from oil crops.
Where the share of biofuels and bioliquids, as well as o f biomass fuels consumed in
transport, produced from food and feed crops in a Member State is limited to a share
lower than 7 % or a Member State decides to limit the share further, that Member State
may reduce the minimum share referred to in the first su bparagraph of Article 25(1)
accordingly, by a maximum of 7 percentage points.

107 Article 26(1) of RED II.
108 Article 2(40) of RED II. Starch-rich crops are defined as "crops comprising mainly cereals, regardless
of whether the grains alone or the whole plant, such as in the case of green maize, are used; tubers and root
crops, such as potatoes, Jerusalem artichokes, sweet potatoes, cassava and yams; and corm crops, such as
taro and cocoyam". (Article 2(39) of RED II.)
109 See para. 2.28 above.
110 See para. 2.16 above.

2.46. These rules are referred to by Malaysia as "the 7% limit"111 and by the European Union as a
"7% maximum share".112
2.3.2 The "high ILUC-risk cap" and the "high ILUC-risk phase-out"
2.47. RED II also caps the contribution that "high ILUC-risk" biofuels may make to meeting the EU
gross final consumption of energy from renewable sources target in the transport sector. This is
described by the parties as "the high ILUC-risk cap", or "cap".
2.48. RED II also gradually decreases the contribution that "high ILUC-risk" biofuels may be counted
as making to renewable energy targets. This is described by the parties as the "high ILUC -risk
phase-out", or "the phase-out".
2.49. Malaysia refers to these two rules as distinct measures, i.e. "the high ILUC-risk cap" and the
"high ILUC-risk phase-out".113
2.50. Article 26(2) of RED II provides as follows:
For the calculation of a Member State's gross final consumption of energy from
renewable sources referred to in Article 7 and the minimum share referred to in the first
subparagraph of Article 25(1), the share of high indirect land-use change-risk biofuels,
bioliquids or biomass fuels produced from food and feed crops for which a significant
expansion of the production area into land with high-carbon stock is observed shall not
exceed the level of consumption of such fuels in that Member State in 2019, unless they
are certified to be low indirect land-use change-risk biofuels, bioliquids or biomass fuels
pursuant to this paragraph.
From 31 December 2023 until 31 December 2030 at the latest, that limit shall gradually
decrease to 0%.
By 1 February 2019, the Commission shall submit to the European Parliament and to
the Council a report on the status of worldwide production expansion of the relevant
food and feed crops.
By 1 February 2019, the Commission shall adopt a delegated act in accordance with
Article 35 to supplement this Directive by setting out the criteria for certification of low
indirect land-use change-risk biofuels, bioliquids and biomass fuels and for determining
the high indirect land-use change-risk feedstock for which a significant expansion of the
production area into land with high -carbon stock is observed. The report and the
accompanying delegated act shall be based on the best available scientific data.
By 1 September 2023, the Commission shall review the criteria laid down in the
delegated act referred to in the fourth subparagraph based on the best available
scientific data and shall adopt delegated acts in accordance with Article 35 to amend
such criteria, where appropriate, and to include a trajectory to gradually decrease the
contribution to the Union target set in Article 3(1) and to the minimum share referred
to in the first subparagraph of Article 25(1), of high indirect land -use change -risk
biofuels, bioliquids and biomass fuels produced from feedstock for which a significant
expansion of the production into land with high-carbon stock is observed.
2.51. The Delegated Regulation, which was adopted on 13 March 2019 to implement Article 26(2)
of RED II , contains the criteria to determine which crops are "high ILUC risk ". Article 3 of the
Delegated Regulation, which sets forth the cumulative criteria that apply, and which refers to the
Annex and the review mechanism in Article 7 of the Delegated Regulation, reads as follows:

111 Malaysia's first written submission, para. 385.
112 European Union's first written submission, para. 541.
113 Malaysia's first written submission, para. 387.

Article 3
Criteria for determining the high indirect land-use change-risk feedstock for which a
significant expansion of the production area into land with high carbon stock is
observed
For the purpose of determining the high indirect l and-use change-risk feedstock for
which a significant expansion of the production area into land with high-carbon stock is
observed, the following cumulative criteria shall apply:
(a) the average annual expansion of the global production area of the feedstock since
2008 is higher than 1 % and affects more than 100,000 hectares; and
(b) the share of such expansion into land with high-carbon stock is higher than 10%,
in accordance with the following formula:
𝑥ℎ𝑐𝑠 = 𝑥𝑓 +2,6𝑥𝑝
𝑃𝐹
where
xhcs = share of expansion into land with high-carbon stock:
xf = share of expansion into land referred to in Article 29(4)(b) and (c) of RED II:
xp = share of expansion into land referred to in Article 29(4)(a) of RED II including
peatland:
PF = productivity factor.
PF shall be 1,7 for maize, 2,5 for palm oil, 3,2 for sugar beet, 2,2 for sugar cane
and 1 for all other crops.
The application of the criteria in points (a) and (b) above shall be based on the
information included in the Annex, as revised in accordance with Article 7.
2.52. This criterion is to be taken together with the values contained in the Annex to the Delegated
Regulation, as reproduced below in Table 1.

Table 1: Values contained in the Annex to the Delegated Regulation
 Average
annual
expansion of
production
area since
2008 (kha)
Average
annual
expansion of
production
area since
2008 (%)
Share of expansion
into land referred
to in
Article 29(4)(b)
and (c) of Directive
(EU) 2018/2001
Share of expansion
into land referred
to in
Article 29(4)(a)
of Directive
(EU) 2018/2001
Cereals
Wheat – 263.4 – 0.1% 1% —
Maize 4 027.5 2.3% 4% —
Sugar crops
Sugar cane 299.8 1.2% 5% —
Sugar beet 39.1 0.9% 0.1% —
Oil crops
Rapeseed 301.9 1.0% 1% —
Palm oil 702.5 4.0% 45% 23%
Soybean 3 183.5 3.0% 8% —
Sunflower 127.3 0.5% 1% —
Source: The Delegated Regulation.
2.53. A Status Report presented together with the Delegated Regulation provides information linked
to the criteria set out in the Delegated Regulation. 114 In particular, the Status Report explains the
data on feedstock expansion and the sources of this data, contained in the Annex of the Delegated
Regulation, and elaborates upon the methodology used and the design of the formula.115
2.54. Palm oil-based biofuel is currently the only conventional biofuel that, on the application of the
formula, qualifies as "high-ILUC-risk".116 This result was obtained by considering the double
threshold of the average annual expansion of the global production area as per Article 3(a) of the
Delegated Regulation, and by applying the formula as per Article 3(b) of the Delegated Regulation.117
The data on feedstock expansion can be found in the Annex of the Delegated Regulation. Table 2,
prepared by the Panel based on information contained in the Delegated Regulation, illustrates these
calculations by applying the formula to each feedstock.

114 Status Report (2019), (Exhibit MYS-92).
115 The parties disagree on the scientific basis on which the Status Report relies.
116 European Union's first written submission, para. 733; Malaysia's first written submission, para. 939.
117 When the formula is applied, the data on feedstock expansion, reported in the Status Report, are
considered as variables that are combined with the fixed values and constants (the productivity factor and the
2.6 peat multiplier).

Table 2: Illustration of calculations under the Delegated Regulation
 Article 3(a) Article 3(b)
Average
annual
expansion
of
production
area since
2008 (kha)
Average
annual
expansion
of
production
area since
2008 (%)
Xf Xp PF Formula applied to
each feedstock
Cereals
Wheat – 263.4 – 0.1% 1% — 1 Average annual
expansion of production
area since 2008 <1% and
100 kha
Maize 4 027.5 2.3% 4% — 1.7 2.35 = 4+2.6(0)
1.7
Sugar crops
Sugar cane 299.8 1.2% 5% — 2.2 2.27 = 5+2.6(0)
2.2
Sugar beet 39.1 0.9% 0.1% — 3.2 Average annual
expansion of production
area since 2008 <1% and
100 kha
Oil crops
Rapeseed 301.9 1.0% 1% — 1 1 = 1+2.6(0)
1
Palm oil 702.5 4.0% 45% 23% 2.5 41.92 = 45+2.6(23)
2.5
Soybean 3 183.5 3.0% 8% — 1 8 = 8+2.6(0)
1
Sunflower 127.3 0.5% 1% — 1 Average annual
expansion of production
area since 2008 <1%
Source: The Delegated Regulation
2.55. Article 7 of the Delegated Regulation sets forth a review clause that is also a relevant part of
the legislative framework. It provides:
Article 7
Monitoring and Review
The Commission shall, by 30 June 2021, review all relevant aspects of the report on
feedstock expansion, in particular the data on feedstock expansion, as well as the
evidence on the factors justifying the small holders provision in Article 5(1), and, if
appropriate, amend this Regulation. This revised report shall be submitted to the
European Parliament and the Council and become the basis for the application of the
criteria set out in Article 3.
The Commission shall review thereafter the data included in the report in light of
evolving circumstances and latest available scientific evidence.
2.56. Article 7 of the Delegated Regulation thus provides that the list of crops that are considered
as "high ILUC-risk" is reviewed based on newly collected scientific data to be included in a revised
and updated report. The monitoring and review mechanism establish es the commitment to collect

and use the latest available scientific data 118, and to update the variables in the calculation of the
formula in Article 3 and the criteria for low ILUC-risk certification under Article 5(1). In other words,
Article 7 establishes the commitment to collect the newest available scientific data, based on which
the list of crops that are qualified as "high ILUC-risk" following the application of the formula may
be updated, as well as the criteria for low ILUC-risk certification for smallholders.
2.3.3 Low ILUC-risk certification
2.57. RED II also introduces the concept of "low ILUC-risk biofuels", which is defined as follows in
its Article 2(37):
'low indirect land-use change-risk biofuels, bioliquids and biomass fuels' means biofuels,
bioliquids and biomass fuels, the feedstock of which was produced within schemes which
avoid displacement effects of food and feed-crop based biofuels, bioliquids and biomass
fuels through improved agricultural practices as well as through the cultivation of crops
on areas which were previously not used for cultivation of crops, and which were
produced in accordance with the sustainability criteria for biofuels, bioliquids and
biomass fuels laid down in Article 29;
2.58. Article 26(2) of RED II provides that biofuels made from "high ILUC-risk" feedstock are not
included in the cap and/or phase-out if they are certified to be "low ILUC-risk" biofuels, bioliquids or
biomass fuels pursuant to this paragraph. Such biofuels remain however still subject to the 7% limit/
maximum share.
2.59. The Delegated Regulation implements Article 26(2) of RED II by laying down the criteria for
certifying low ILUC-risk biofuels, bioliquids and biomass fuels. Article 4 of the Delegated Regulation
introduces general criteria for the certification of "low ILUC-risk":
Article 4
General criteria for certification of low indirect land-use change-risk biofuels, bioliquids
and biomass fuels
1. Biofuels, bioliquids and biomass fuels may only be certified as low indirect land -
use change-risk fuels if all the following criteria are met:
(a) the biofuels, bioliquids and biomass fuels comply with the sustainability and
greenhouse gas emissions saving criteria set out in Article 29 of Directive (EU)
2018/2001;
(b) the biofuels, bioliquids and biomass fuels have been produced from additional
feedstock obtained through additionality measures that meet the specific criteria
set out in Article 5;
(c) the evidence needed to identify the additional feedstock and substantiate claims
regarding the production of additional feedstock is duly collected and thoroughly
documented by the relevant economic operators.
2. The evidence in point (c) of paragraph 1 shall at least include information on the
additionality measures taken to produce additional feedstock, the delineated areas on
which these measures have been applied and the average yield achieved from the land
where these measures have been applied over the 3-year period immediately preceding
the year when the additionality measure was applied.
2.60. Article 2(5) of the Delegated Regulation defines additionality measure, one of the low ILUC -
risk certification criteria listed in Article 4, as "any improvement of agricultural practices leading, in
a sustainable manner, to an increase in yields of food and feed crops on land that is already used
for the cultivation of food and feed crops; and any action that enables the cultivation of food and

118 Concerning in particular the data on feedstock expansion, as well as the evidence on the factors
justifying the smallholders provision in Article 5(1) of the Delegated Regulation.

feed crops on unused land, including abandoned land, for the production of biofuels, bioliquids and
biomass fuels".
2.61. Article 5 of the Delegated Regulation sets out the conditions that additionality measures must
meet in order to satisfy the requirements for certification under Article 4(b) of the Delegated
Regulation. This provision provides as follows:
Article 5
Additionality measures
1. Biofuels, bioliquids and biomass fuels may only be certified as low indirect land -
use change-risk fuels if:
(a) the additionality measures to produce the additional feedstock meet at least one
of the following conditions:
(i) they become financially attractive or face no barrier preventing their
implementation only because the biofuels, bioliquids and biomass fuels
produced from the additional feedstock can be counted towards the targets
for renewable energy under Directive 200 9/28/EC or Directive (EU)
2018/2001;
(ii) they allow for cultivation of food and feed crops on abandoned land or
severely degraded land;
(iii) they are applied by small holders;
(b) the additionality measures are taken no longer than 10 years before the
certification of the biofuels, bioliquids and biomass fuels as low indirect land -use
change-risk fuels.
2.62. Article 6 of the Delegated Regulation introduces auditing and verification requirements for
certification of low ILUC-risk biofuels. This provision provides as follows:
Article 6
Auditing and verification requirements for certification of low indirect land-use change-
risk biofuels, bioliquids and biomass fuels
1. For the purpose of certifying low indirect land-use change-risk biofuels, bioliquids
and biomass fuels, economic operators shall:
(a) submit reliable information substantiating their claims ensuring that all
requirements set out in Articles 4 and 5 have been duly fulfilled;
(b) arrange for an adequate standard of independent auditing of the information
submitted and an adequate level of transparency reflecting the need for public
scrutiny of the auditing approach; and
(c) provide evidence that audits are conducted.
2. The auditing shall verify that information submitted by economic opera tors is
accurate, reliable and protected against fraud.
3. In order to demonstrate that a consignment is to be considered as a low indirect
land-use change-risk biofuel, bioliquid or biomass fuel, economic operators shall use
the mass balance system set out in Article 30(1) of Directive (EU) 2018/2001. Voluntary
schemes may be used to demonstrate compliance with the criteria set out in Articles 4
to 6 in accordance with Article 30 of Directive (EU) 2018/2001.

2.63. On 14 June 2022, the European Commission, in a ccordance with Article 30(8) of RED II,
adopted Implementing Regulation (EU) 2022/996 on rules to verify sustainability and GHG emissions
saving criteria and low ILUC-risk criteria.119 The absence of an implementing regulation on low ILUC-
risk certification (or other specific implementing rules necessary to make low ILUC-risk certification
operational) up until this date is one ground on which Malaysia challenges low-ILUC-risk certification.
2.64. A further issue of contention between the parties is the role of voluntary certification schemes
and to what extent they have been recognized by the European Commission. Voluntary schemes
require approval by the European Commission pursuant to Article 30(6) of RED II. Three such
decisions were pend ing during part of these proceedings, eventually receiving final approval on
8 April 2022.120 The content of these decisions is debated amongst the parties.
2.4 Summary of main relevant rules in RED II
2.65. In summary, RED II includes the following rules relevant to calculating the targets for the
consumption of renewable energy sources, including the rules relevant to the contribution of
biofuels:
a. an EU-wide binding consumption target of at least 32% renewable energy by 2030, to be
achieved collectively by EU member States121;
b. an overall target for the share of renewable energy to be used in the transport sector is
set at 10% by 2020 and 14% by 2030122;
c. biofuels, bioliquids and biomass fuels can only be taken into account in the calculation of
this target if they fulfil certain sustainability and GHG emission savings criteria123;
d. the contribution of biofuels made from food and feed crops (i.e. "crop-based" or
"conventional" biofuels) to meeting these targets shall not exceed 1 percentage point more
than the share of such fuels in the final consumption of energy in the transport sector in
the relevant EU member State in 2020, up to a maximum contribution of 7% of the total
energy consumed in the transport sector ("7% limit" or "7% maximum share")124;
e. where the share of biofuels, bioliquids, and biomass fuels produced from food and feed
crops consumed in transport in a member State is limited to less than 7% or a member
State decides to limit it further, that member State may reduce the overall target described
at b. above accordingly, by a maximum of 7%125;
f. a minimum target share of "advanced" biofuel as a percentage of the total energy
consumed in the transport sector is also established, which is set at 0.2% in 2020, 1% by
2025 and 3.5% by 2030126;
g. the contribution to t he targets of biofuels made from food or feed crops for which a
significant expansion of the production area into land with high carbon stock is observed
("high ILUC-risk biofuels") shall not exceed the level of consumption of such fuels in that
member State in 2019 (the high ILUC-risk cap); as of 31 December 2023, this contribution
will have to be gradually reduced to 0% by 2030 at the latest (the high ILUC -risk phase-
out)127;

119 C/2022/3740, OJ L 168, 27.6.2022, p. 1–62. Commission Implementing Regulation (EU) 2022/996,
(Exhibit EU-329). See European Union's response to Panel question No. 61, para. 394.
120 The European Union provided this information in its comments on the descriptive part of the Report
but did not submit the documents themselves.
121 Article 3(1) of RED II; European Union's first written submission, para. 21.
122 Article 25(1) of RED II.
123 Article 7(1) of RED II.
124 Article 26(1) of RED II.
125 Article 26(1) of RED II.
126 Article 25(1) of RED II.
127 Article 26(2) of RED II; Status Report (2019), (Exhibit MYS-92), p.5.

h. high ILUC-risk biofuels meeting certain requirements may be certified as low ILU C-risk
("low ILUC -risk certification ") are not subject to the cap and/or phase -out otherwise
applicable to biofuels produced from high ILUC-risk crops.128
2.66. Figure 1 below, prepared by the Panel based on the provisions of RED II, summarizes the
combined operation of these requirements.
Figure 1: Overview of EU renewable energy targets and requirements
 in the transport sector under RED II

Source: Based on the provisions of RED II
2.5 French TIRIB measure
2.67. The specific French measure challenged by Malaysia concerns an annual tax payable by
entities that release fuel for consumption within the territory of France. 129 The tax is known as the
TIRIB (Taxe Incitative Relative à l'Incorporation de Biocarburant, meaning: incentive tax concerning
the incorporation of biofuels).130
2.68. As described by the parties, the TIRIB is set out in the following legal instruments:131
a. Article 266 quindecies of the French Customs Code, as modified by Law No. 2018-1317 on
28 December 2018, Law No. 2019-1479 on 28 December 2019, and Law No. 2020-1721
on 29 December 2020;
b. Article 6 of Law No. 220-935 of 30 July 2020 on amending finances for 2020;
c. Article L. 661-1 to 661-9 of the Energy Code;
d. Decree No. 2019-570 of 7 June 2019 regarding the incentive tax relating to the
incorporation of biofuel;
e. Decision of 23 November 2011 modified, in respect of the application of Order No. 2011-
1105 of 14 September 2011 and Decree No. 2011-1468 of 9 November 2011, relating to
the sustainability of biofuel and bioliquid;
f. Decision of 2 May 2012 relating to the energy content of biofuels and bioliquids;

128 Status Report (2019), (Exhibit MYS-92), p.5.
129 Malaysia's panel request, paras. 25-28.
130 Malaysia's first written submission, para. 375; European Union's first written submission, para. 1422.
131 Malaysia's first written submission, para. 402 and fn 312 to para. 400 (including hyperlinks to
instruments, and submitted as Exhibit MYS-181).
0%
2%
4%
6%
8%
10%
12%
14%
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
Share in EU transport energy
2020 renewable
energy target
2030 renewable
energy target
7% conventional biofuel maximum share
3.5% advanced biofuel target
1% advanced biofuel target High ILUC-risk conventional
biofuel cap and phase-out

g. Circular of 18 August 2020 – The incentive tax relating to the incorporation of biofuels
(TIRIB).
2.69. Entities that release fuel for consumptio n within the territory of France are liable to pay the
TIRIB as an additional tax that varies in relation to the extent to which the energy content of the
fuel released achieves established incorporation targets for qualifying energy sources, as detailed
below.132 The TIRIB is applied in addition to the value added tax (VAT) and the internal consumption
tax on energy products (TICPE).133 Unlike the TIRIB, which taxes fuel released for consumption at a
variable rate according to the fuel energy source content, the TICPE is directly proportional to the
volume of taxed fuel regardless of content and the VAT is directly proportional to the total value of
the fuel released for consumption.134
2.70. The amount of the TIRIB depends on the amount and composition of the fuel released by the
entity and is determined according to the following formula135:
X hL * rate € / hL * (IT% - AI%) = Y €
Where: X is the amount of fuel released measured in hectolitres
rate is a periodically adjustable amount of euros per hectolitre
IT% is a periodically adjustable target for the incorporation of a certain
percentage of energy in the fuel mix from qualifying sources of energy
AI% is the actual percentage of energy in the fuel mix from the qualifying
sources of energy
Y is the amount, expressed in euro, of tax owed by the entity releasing the
fuel for consumption in the territory of France
2.71. The rate and the incorporation target percentages are specified in Part IV of Article 266
quindecies of the Customs Code. 136 In 2020, the applicable rate was EUR 101 per hectolitre, and
this was increased to EUR 104 per hectolitre in 2021.137 In 2020, the incorporation target was 8%
for diesel and 8.2% for petrol, and the petrol incorporation target was increased to 8.6% in 2021.138
2.72. The application of the above formula results in a tax rate that varies in direct proportion to
the factor (IT% - AI%), which is the difference between the targeted energy incorporation of
qualifying fuel and the actual incorporation of qualifying fuel. This aspect of the TIRIB is illustrated
in the following examples using the 2020 incorporation target for diesel (8% ) and the established
2020 rate (EUR 101 per hectolitre):
a. If the incorporation target is achieved, then the factor (IT% - AI%) will be zero and the
amount of the TIRIB will be EUR zero per hectolitre. (This is true regardless of the
particular target percentage or rate used.)

132 Malaysia's first written submission, paras. 375-377; European Union's first written submission,
paras. 1437-1441.
133 European Union's first written submission, paras. 1432-1435. Prior to releasing fuel for consumption
in France, and entity may purchase and store fuels from various sources to be blended into a fuel mix to be
released for consumption without incurring these fuel taxes under a regime in which fuel in designated
warehouses is suspended from tax prior to release for consumption. Malaysia's first written submission,
para. 377, fn 292.
134 European Union's first written submission, para. 1434.
135 Malaysia's first written submission, paras. 376, 1034-1038; European Union's first written
submission, para. 1440.
136 Malaysia's first written submission, paras. 375-376, 1034-1038; Article 266 quindecies of the French
Customs Code (Code des douanes), (Exhibit MYS-181).
137 Malaysia's first written submission, paras. 375-376, 1034-1038; Malaysia's response to Question
No. 193.
138 Ibid.

b. In contrast, if no qualifying fuel is incorporated, then the factor (IT% -AI%) will be equal
to the incorporation target, which in 2020 was 8% for diesel, resulting in a TIRIB of EUR
8.08 per hectolitre (101 * (8% - 0%) = EUR 8.08 per hectolitre).
c. If the qualifying fuel content accounts for 2% of the energy in the fuel, then the factor
(IT% - AI%) will be 6%, resulting in a TIRIB of EUR 6.06 per hectolitre (101 * (8% - 2%)
= EUR 6.06 per hectolitre).
d. If the qualifying fuel content accou nts for 6% of the energy in the fuel, then the factor
(IT% - AI%) will be 2%, resulting in a TIRIB of EUR 2.02 per hectolitre (101 * (8% - 6%)
= EUR 2.02 per hectolitre).
2.73. Article 266 quindecies of the French Customs Code provides that, for the purposes of the
TIRIB, qualifying sources of energy in the fuel mix for achieving the incorporation target are
renewable energy sources and that energy from biofuels is renewable if it meets the sustainability
and GHG emission savings criteria that are in line with RED II and the Delegated Regulation.139
2.74. Article 266 quindecies of the French Customs Code, provides that "palm oil-based products
are not considered to be biofuels" starting from 1 January 2020.140 The Circular of 18 August 2020
states that palm oil-based products are excluded, from 2020, from the full benefit of the tax
advantage regardless of their mode of production.141 The Circular of 12 June 2019, which preceded
and was replaced by the Circular of 18 August 2020, stated that this was to exclude products based
on palm oil not only from the scope of biofuels but also from that of renewable energy. 142 The
exclusion of palm oil -based biofuel from qualifying sources of energy for TIRIB purposes was
presented as a measure taken for environmental purposes.143
2.75. Additionally, Law No. 2020-935 of 30 July 2020 on amending finances for 2020 provided that
the energy derived from certain biofuel (FAME with a cold -filter plugging point (CFPP) of at most -
10°C) would be counted at 120% of its actual value for the purposes of contributing to the
incorporation target with respect to the calculation of the TIRIB payable between 1 August 2020 and
31 December 2020.144 The Circular of 18 August 2020 states that to qualify for the 120% of actual
value treatment the certif icates of incorporation "must indicate that the biofuels received are not
produced from palm oil or meet a CFPP of not more than -10°C for FAME".145
2.6 Lithuania's measures
2.76. In addition to the EU -wide measures and the French measure, Malaysia challenges a
Lithuanian law "transposing EU rules on ILUC ".146 The relevant paragraphs of Malaysia's panel
request are presented under a sub -heading entitled "Lithuania's Law No XI -1375 on renewable
energy", and state:
29. In view of the provisions of the RED II and the Delegate d Regulation, Lithuania has
amended its law on renewable energy to reflect the revised EU rules on ILUC.

139 Article 266 quindecies of the French Customs Code, (Exhibit MYS-181); Article 266 quindecies - Code
140 Malaysia's first written submission, para. 378 fn 293; see also Article 266 quindecies of the French
Customs Code, (Exhibit MYS-181), p.19.
141 Circular by the French Government of 18 August 2020 on the incentive tax relating to the
incorporation of biofuels (TIRIB), NOR: ECOD2020901C (Circulaire du 18 août 2020 Taxe incitative relative à
l'incorporation de biocarburants (TIRIB), Articles 52 and 53, (Exhibit EU-197).
142 Article 266 quindecies of the French Customs Code, (Exhibit MYS-181).
143 European Union's first written submission, para. 1436 (referring to Exhibit EU-190).
144 Malaysia's first written submission, para. 1046; European Union's first written submission,
paras. 1526-1528 (referring to Exhibits EU-196, EU-197, EU-198).
145 Malaysia's first written submission, para. 1046; European Union's first written submission,
paras. 1526-1528 (referring to Exhibits EU-196, EU-197, EU-198). In addition, Amendment nr. I-694 rect. bis.
of 21 November 2020 to the French Finance Law for 2021 (Amendement N° I-694 rect. bis de 21 novembre
2020 de la loi de finances pour 2021), (Exhibit EU-198) by which the described treatment was extended to
March 2021, states this would extend a support measure for the biodiesel sector.
146 Malaysia's first written submission, paras. 380-381.

30. Lithuania, like any other EU member State, will still theoretically allow the
importation of high ILUC -risk feedstocks or biofuels, bioliquids, and biomass fuels
produced therewith. By 2030, however, the share of fuels produced from feedstocks
considered by the EU as high ILUC-risk feedstocks are to gradually decrease to 0%
for the calculation of Lithuania's gross final consumption of energy from renewable
sources referred to in Article 7 of the RED II and the minimum share referred to in
the first subparagraph of Article 25(1) of the RED II.
31. Malaysia understands that Lithuania's measure is set up and implemented through
the following legal instruments:
i. Lithuania's Law No XI-1375 on renewable energy, as amended by Law No XIII-
2869 amending Articles 1, 2, 3, 4, 5, 6, 11, 13, 14, 16, 17, 20, 20(1), 22, 25,
28, 29, 35, 37, 38, 39, 46, 48, 49, 55, 58, 59, 60, 61, 62, 63, 63, 64 and the
Annex of Law No XI -1375 on renewable energy, repealing Article 11(1) and
adding Article 20(2) of 28 April 2020.
ii. Any annexes thereto, amendments, supplements, replacements, renewals,
extensions, implementing measures or any other related measures, and any
exemptions applied.
2.77. A footnote to the above-quoted subparagraph (i) of the panel request contains a hyperlink to
the text of the Lithuanian law at issue in the original language.
2.7 Conventional biofuel production and land use change
2.78. A key concept underlying the definitions of "high ILUC-risk" and "low ILUC-risk" used in the
EU measures described above is land use change (LUC). Land use change can be direct (DLUC) or
indirect (ILUC).147
2.7.1 Land use change (LUC)
2.79. According to a Report on "Climate Change and Land " by the Intergovernmental Panel on
Climate Change (IPCC) the term "land use" refers to "[t]he total of arrangements, activities and
inputs applied to a parcel of land. "148 This IPCC report, furthermore, describes the term "land use
change" as "[t]he change from one land use category to another".149
2.80. In ISO standard 14067:2018 "Greenhouse gases – Carbon footprint of products –
Requirements and guidelines for quantification " (hereinafter "ISO 14067:2018 "), "land use " is
defined as:
human use or management of land within the relevant boundary.
Note 1 to entry: In this document, the relevant boundary is the boundary of the system
under study.
Note 2 to entry: Land use is often referred to as 'land occupation' in life cycle
assessment (LCA).150
2.7.2 Direct land use change (DLUC)
2.81. ISO 14067:2018 defines Direct Land Use Change (DLUC) as : a "change in the human use of
land within the relevant boundary " where "the relevant boundary is the boundary of the system

147 Malaysia's first written submission, paras. 3 and 412; European Union's first written submission,
paras. 32-35.
148 IPCC Report, "Climate Change and Land", (Exhibit MYS-89), p.817.
149 IPCC Report, "Climate Change and Land", (Exhibit MYS-89), p.817.
150 ISO 14067:2018, (Exhibit EU-32), Clause 3.1.7.4.

under study". It also notes that "land use change happens when there is a change in the land -use
category as defined by the IPCC (e.g. from forest land to cropland)."151
2.7.3 Indirect land use change (ILUC)
2.82. As described above, the concept of ILUC is relied upon in RED II and the Delegated Regulation
in the context of placing a general limit on the share of biofuels produced from feed and food crop
that may contribute to EU renewable energy targets (the "7% limit"), first introduced in the ILUC
Directive, and also through the concepts of "high ILUC-risk" and "low ILUC-risk" feedstock that
underpin the "cap and phase-out" and related requirements.
2.83. ILUC is described as follows in Recital 81 of RED II: "Indirect land-use change occurs when
the cultivation of crops for biofuels, bioliquids and biomass fuels displaces traditional production of
crops for food and feed purposes. Such additional demand increases the pressure on land and can
lead to the extension of agricultural land into areas with high-carbon stock, such as forests, wetlands
and peatland, causing additional greenhouse gas emissions."
2.84. ISO 14067:2018 defines "indirect land use change" as:
change in the use of land which is a consequence of direct land use change (3.1.7.5),
but which occurs outside the relevant boundary.
Note 1 to entry: In this document, the relevant boundary is the boundary of the system
under study.
Note 2 to entry: Land use change happens when there is a change in the 'land -use
category' as defined by the IPCC (e.g. from forest land to cropland).
EXAMPLE If land use on a particular parcel of land changes from food production to
biofuel production, land use change might occur elsewhere to meet the demand for
food. This land use change elsewhere is indirect land use change.152
2.85. The IPCC Report on "Climate Change and Land " defines ILUC as "Land use change outside
the area of focus, that occurs as a consequence of change in use or management of land within the
area of focus, such as through market or policy drivers. For example, if agricultural land is diverted
to biofuel pr oduction, forest clearance may occur elsewhere to replace the former agricultural
production."153
2.86. Malaysia challenges the way in which the European Union, in the measures at issue, has made
use of the concept of ILUC and addressed ILUC impacts potentially r esulting from conventional
biofuel production.
3 PARTIES' REQUESTS FOR FINDINGS AND RECOMMENDATIONS
3.1. With regard to the EU measures at issue, Malaysia requests 154 the Panel to find that the
European Union:
a. violates the national treatment and the Most -Favoured Nation (MFN) obligations under
Article 2.1 of the TBT Agreement because the high ILUC -risk cap and the high ILUC -risk
phase-out discriminate between like oil crop -based biofuel of different foreign origin and
between oil palm crop -based biofuel from Malay sia and like oil crop -based biofuel of EU
origin;

151 ISO 14067:2018, (Exhibit EU-32), Clause 3.1.7.5.
152 ISO 14067:2018, (Exhibit EU-32), Section 3.1.7.6.
153 IPCC Report, "Climate Change and Land", (Exhibit MYS-89), p. 817.
154 Malaysia's first written submission, para. 1216.

b. violates Article 2.2 of the TBT Agreement by imposing the 7 % limit and the high ILUC -
risk cap and the high ILUC -risk phase-out with a view to or with the effect of creating
unnecessary obstacles to international trade;
c. violates Article 2.4 of the TBT Agreement by imposing the high ILUC-risk cap and the high
ILUC-risk phase-out without using relevant international standards as a basis;
d. violates Article 2.5 of the TBT Agreement by failing to explain the justi fication for
preparing, adopting or applying the 7 % limit and the high ILUC -risk cap and the high
ILUC-risk phase-out in terms of Articles 2.2 to 2.4 of the TBT Agreement;
e. violates Article 2.8 of the TBT Agreement because the high ILUC -risk cap and the hi gh
ILUC-risk phase -out regulate trade in biofuel based on descriptive characteristics of
product requirements instead of its performance;
f. violates Articles 2.9.2 and 2.9.4 of the TBT Agreement by failing to notify proposals of RED
II and the Delegated Regulation and by having failed to organize a meaningful commenting
process in respect of the proposal for RED II and that for the Delegated Regulation.
g. violates Article 5.1.1 of the TBT Agreement because the conformity assessment procedure
for certifying biof uel as biofuel made from oil palm that is low ILUC -risk discriminates
against Malaysian suppliers of oil palm crop-based biofuel;
h. violates Article 5.1.2 of the TBT Agreement by imposing a conformity assessment
procedure for certifying oil palm crop -based biofuel as low ILUC -risk which creates
unnecessary obstacles to international trade;
i. violates Article 5.2.1 of the TBT Agreement by failing to ensure, when implementing
Article 5.1 of the TBT Agreement, that the conformity assessment procedure for certifying
oil palm crop-based biofuel as low ILUC-risk is undertaken and completed as expeditiously
as possible;
j. violates (i) Article 5.6.1 of the TBT Agreement by failing to publis h a notice at an early
appropriate stage that it proposes to introduce a particular conformity assessment
procedure, in such a manner as to enable interested parties in Malaysia and other WTO
Members to become acquainted with it; (ii) Article 5.6.2 of the TBT Agreement by failing
to notify proposals of RED II and the Delegated Regulation; and (iii) Article 5.6.4 of the
TBT Agreement by having failed to organize a meaningful commenting process in respect
of the proposal for RED II and that for the Delegated Regulation;
k. violates Article 5.8 of the TBT Agreement by failing to promptly publish or otherwise make
available the conformity assessment procedure for certifying oil palm crop -based biofuel
as low ILUC-risk;
l. violates Articles 12.1 and 12.3 of the TBT Agreement by failing to take into account the
circumstances specific to developing countries, in preparing and applying the technical
regulations and the conformity assessment procedure at issue;
m. violates Article I:1 of the GATT 1994 because the high ILUC -risk cap, the high ILUC -risk
phase-out and low ILUC-risk certification discriminate among palm oil and oil palm crop -
based biofuel and like products originating in third countries;
n. violates Article III:4 of the GATT 1994 because the 7% limit 155, the high ILUC -risk cap,
the high ILUC-risk phase out, and low ILUC -risk certification discriminate between palm
oil and oil palm crop-based biofuel originating in Malaysia and like products of EU origin;

155 In the course of the proceedings, Malaysia confirmed that it does not intend to pursue its claim of
discrimination under Article III:4 of the GATT 1994 with respect to the 7% limit/maximum share. (Malaysia's
response to Panel question Nos. 73 and 76.)

o. violates Article X:3(a) of the GATT 1994 because the high ILUC-risk cap and the high ILUC-
risk phase out are based on/apply the concept of high ILUC risk, for which there is
insufficient scientific support and which cannot be directly observed, measured or
otherwise established156, and because, as regards low ILUC-risk certification, the European
Union has, to date, failed to adopt implementing legislation, providing for detailed rules
that would allow for products to be certified as having low ILUC-risk157; and
p. violates Article XI:1 of the GATT 1994 because the high ILUC-risk cap, the high ILUC-risk
phase out, and low ILUC -risk certification make effective quantitative prohibitions or
restrictions on imports of oil palm crop-based biofuel and palm oil.
3.2. With regard to the French measures, Malaysia requests 158 the Panel to find that the
European Union:
a. violates Article I:1 of the GATT 1994 because the exclusion of petrol and diesel fuels, to
the extent that they contain oil palm crop -based biofuel, from the French biofuel tax
reduction discriminates among like bi ofuels and their feedstocks originating in different
third countries;
b. violates the first sentence of Article III:2 of the GATT 1994 because the exclusion of petrol
and diesel fuels, to the extent that they contain oil palm crop -based biofuel, from the
French biofuel tax reduction while making it available to other like oil crop -based biofuel
of EU origin, discriminates between imported oil palm crop -based biofuel and other like
biofuel of EU origin, by subjecting imported oil palm crop -based biofuel to internal taxes
in excess of those applied to like domestic products;
c. violates, in the alternative to Malaysia's claim under the first sentence of Article III:2 of
the GATT 1994, the second sentence of Article III:2 of the GATT 1994 because the
exclusion of petrol and diesel fuels, to the extent that they contain oil palm crop -based
biofuel, from the French biofuel tax reduction, while making it available to other like oil
crop-based biofuel of EU origin, results in oil palm crop -based biofuel being taxed not
similarly to other directly competitive or substitutable oil crop -based biofuel of EU origin,
so as to afford protection to domestic production; and
d. violates Article 5(c) of the SCM Agreement because the exclusion of petrol and diesel fuels,
to the extent th at they contain oil palm crop -based biofuel, from the French biofuel tax
reduction is an actionable subsidy which causes adverse effects to the interests of
Malaysia, in the form of serious prejudice to its interests within the meaning of Articles
6.3(a) and 6.3(c) of the SCM Agreement.
3.3. With regard to Lithuania's measures, Malaysia contends that the measures set out particularly,
but not exclusively, in Article 26 of the RED II and the Delegated Regulation are inconsistent with
the EU's obligations under the TBT Agreement and the GATT 1994. Hence, any implementation by
Lithuania of these measures in its domestic law would also be inconsistent with the same obligations
under the TBT Agreement and the GATT 1994.159
3.4. The European Union requests the Panel to reject all the claims brought by Malaysia against the
EU measures, the French TIRIB reduction and the Lithuanian measures.160
4 ARGUMENTS OF THE PARTIES
4.1. The arguments of the parties are reflected in their executive summaries provided to the Panel
in accordance with paragraph 25 of the Working Procedures adopted by the Panel.161

156 See Malaysia's first written submission, paras. 969 and 1216.
157 See Malaysia's first written submission, paras. 970 and 1216.
158 Malaysia's first written submission, para. 1217.
159 Malaysia's first written submission, para. 1218.
160 European Union's first written submission, para. 1834.
161 See Annexes B-1 and B-2.

5 ARGUMENTS OF THE THIRD PARTIES
5.1. The arguments of Australia, Brazil, Canada, Colombia, Costa Rica, Ecuador, Indonesia, Japan,
the Republic of Korea, the Russian Federation, the United Kingdom, Ukraine and the United States
are reflected in their executive summaries, provided in accordance with paragraph 27 of the Working
Procedures adopted by the Panel (see Annexes C -1 through C-13). Argentina, China, El Salvador,
Guatemala, Honduras, India, Norway, the Kingdom of Saudi Arabia, Singapore, Thailand and Türkiye
reserved their rights to participate in these proceedings as a third party, and did not make a written
submission or present oral arguments to the Panel.
6 INTERIM REVIEW
6.1 Introduction
6.1. On 29 September 2023, the Panel issued its Interim Report to the parties. On 31 October 2023,
Malaysia and the European Union each submitted written requests for the Panel to review aspects
of the Interim Report. On 21 November 2023, Malaysia and the European Union submitted comments
on each other's requests for review. Neither party requested an interim review meeting.
6.2. In accordance with Article 15.3 of the DSU, this section of the Report sets out the Panel's
response to the parties' requests made at the interim review stage.
6.3. Insofar as the paragraph numbering in the Final Report has changed from the Interim Report,
the discussion that follows uses the paragraph numbering of the Final Report as the point of
reference.
6.2 General considerations
6.4. In this subsection, the Panel explains the approach it has taken to certain categories of requests
in a more global manner. The Panel will then proceed to focus on those requests made by Malaysia
and the European Union that raise more subst antive issues which warrant being set out and
discussed individually.
6.5. Certain typographical or formatting errors have been corrected.162 Additionally, certain editorial
improvements have been made to ensure greater consistency, precision and clarity in
terminology.163 A number of paragraphs referencing party arguments on particular points have been
adjusted where a party requested revisions to more precisely and/or fully reflect its position on the
point being summarized. 164 The Panel has also sought to accomm odate requests by a party to
supplement certain footnote citations with additional references to other relevant paragraphs from
its submissions.165 In some instances, consideration of a party's proposed adjustments has resulted
in certain other consequential changes to ensure consistency throughout the Report. The Panel has
also included several additional cross -references, among interrelated findings and subsections of
this Report, to ensure clarity and coherence.166
6.6. In its Report, the Panel has followed the approach of introducing each claim and defence with
an overview of the parties' positions in a manner that serves to concisely identify the issues in
dispute; additional, brief summaries of one or both parties' arguments on particular points have
been included in the course of its analysis where the Panel deems it necessary and appropriate to

162 These include but are not limited to the changes suggested by the parties, in their interim review
163 These include but are not limited to the changes suggested by the parties, in their interim review
comments, to paras. 7.27, 7.95, 7.116, 7.130, 7.560, 7.1438, 7.1446, 7.1454.
164 These include but are not limited to the changes suggested by the parties, in their interim review
comments, to paras. 7.72, 7.89, 7.108, 7.121, 7.234, 7.252, 7.424, 7.427, 7.415, 7.420, 7.468-7.470, 7.560,
7.1026, and 7.1037.
165 These include additions to footnotes accompanying paras. 7.206 and 7.209. The Panel has made
such changes without prejudice to its understanding that, when a panel elects to include footnote citations
referencing one or both parties' submissions on a particular point, a panel is free to provide a pinpoint citation
to the paragraph(s) the Panel considers relevant, as opposed to exhaustively referencing all relevant
paragraphs from the parties' written submissions, oral statements, responses to Panel questions, and/or
associated comments.
166 These include additions to paras. 7.264 and 7.1295.

facilitate an understanding of the Panel's own assessment and reasoning on the issue being
addressed.167 Therefore, while the Panel has sought to accommodate any reque st from a party to
adjust the wording of existing argument summaries to more precisely and/or fully reflect the
arguments made on the point being summarized, the Panel has generally refrained from inserting
substantial amounts of new text, including whole new paragraphs, setting out more detailed
argument summaries.
6.7. Some of Malaysia's comments on the interim report take the form of extended reiterations of
its arguments on issues that have been extensively debated by the parties, and fully considered by
the Panel, sometimes accompanied by a general request that the Panel reconsider its evaluation of
those issues. The Panel considers that such comments generally do not require any specific reply
from the Panel. It is well established that the interim review stage is not a time to "reargue" or
"relitigate" issues 168, in such a way that would require panels to "defend their findings and
conclusions".169 Having said that, insofar as Malaysia is seeking to ensure that its views on certain
of the Panel's findings ar e fully reflected, the Panel sees no impediment to setting out Malaysia's
extended comments in full in this section of the Report.170
6.8. The discussion that follows is structured using the subheadings of this Report in order to provide
context, and for ease of readability. Where a party offers multiple reiterations of the same request,
or otherwise presents multiple comments that relate to the same issue, the Panel addresses them
together to avoid repetition and fragmentation of its discussion.
6.3 Claims in respect of the EU measures
6.3.1 Preliminary considerations
6.9. In the context of the Panel's discussion at paragraphs 7.24 to 7.26 of why it refers to the
high ILUC -risk "cap" and "phase -out" in the singular and analyses it as a single measure, the
European Union observes that "on the multiple occasions on which Malaysia was requested by the
Panel to clarify whether it conceptualised the high ILUC cap an d phase out as individual measures,
Malaysia insisted that it sought distinct findings as regards these 'separate measures'. The European
Union concurs that the Panel has a discretion to reformulate measures. However, in this instance,
both parties advance d their arguments throughout the proceedings on the basis of the
characterisation presented by Malaysia."
6.10. Malaysia does not respond to the European Union's comment.
6.11. The Panel considers that its discussion already clearly reflects and takes into account the
manner in which the parties approached this issue. It is not clear if the European Union is requesting
the Panel to adjust the existing text to further emphasize the manner in which the parties
approached this issue, or if the European Union is taking iss ue with some aspect (and if so, which
aspect) of the Panel's own reasoning on this issue. In these circumstances, the Panel sees no reason
to make any change to paragraphs 7.24 to 7.26.
6.3.2 Article 2.2 – Necessary to fulfil a legitimate objective
6.12. In the context of the Panel's findings on "The identification of the objective pursued" by the
measures at issue, the Panel observes that there are certain internal tensions and ambiguities in
respect of each party's identification of the objective(s) of the measures at issue. The Panel then
sets forth, in paragraph 7.208, a brief exposition of certain statements and arguments presented

167 A panel is not required to fully reproduce all of the parties' arguments as set forth in their submission
and may reference and summarize the parties' arguments only to the extent it deems necessary and
appropriate to facilitate an understanding of the Panel's own assessment and reasoning. (See Panel Report,
India – Solar Cells, para. 6.24, and Panel Report, US – Steel and Aluminium Products (Turkey), para. 6.3.)
168 See e.g. Panel Reports, Japan – DRAMs (Korea), para. 6.2; Japan – Apples (Article 21.5 – US), para.
7.23; US – Poultry (China), para. 6.32; and EU – Energy Package, paras. 6.13, 6.31, 6.36, 6.42, 6.45, 6.47,
6.55.
169 Panel Reports, Japan – DRAMs (Korea), para. 6.2; and Indonesia — Iron or Steel Products (Chinese
Taipei), Annex A-3, para. 2.3.
170 The Panel does not consider it is necessarily under any requirement to provide a lengthy exposition
of a party's comments on an interim report. A panel's assessment of whether it is appropriate to do so is
naturally informed by the circumstances of a particular dispute.

by Malaysia along with the Panel's understanding of how certain of those arguments presented relate
to one another, namely as arguments in the alternative. In a comment on paragraph 7.208, Malaysia
seeks to clarify that its arguments with respect to the alleged specific objectives of the measures at
issue, and the actual objective of protectionism pursued by the European Union, are not " made in
the alternative", but rather follow from each other. It explains that the argument that the measures'
objectives are protectionist follows from the argument that the European Union wishes to limit GHG
emissions by limiting ILUC, which Malaysia cons iders a futile, inappropriate, and discriminatory
attempt given the deficiencies inherent to ILUC and the EU's approach to ILUC.
6.13. The European Union does not respond to Malaysia's comment.
6.14. The Panel has generally sought to accommodate any request by a party to adjust an argument
summary to more precisely and/or fully reflect a party's position on a point being summarized.
However, the purpose of paragraph 7.208 is to set forth the Panel's understanding of how certain of
the arguments presented by the parties on the identification of the measures' objective(s) relate to
one another. The Panel is not convinced that the changes proposed by Malaysia to paragraph 7.208
demonstrate any error in the Panel's understanding. Accordingly, the Panel has not made those
changes.
6.15. In the context of the Panel's findings on "The stated rationale behind the 7% maximum share
and the high ILUC -risk cap and phase -out", Malaysia comments on the conclusion reached by the
Panel in paragraph 7.215. There, the Panel states that "Recitals 80 and 81 of RED II thus set forth
the rationale for addressing ILUC, link the issue of ILUC risks specifically to the issue of GHG
emissions, and explain how the 7% maximum share in Article 26(1) and the high ILUC-risk cap and
phase-out in Article 26(2) , including the concept of low ILUC -risk biofuels, are related to this
rationale". Malaysia submits that the Panel's statement is incorrect. According to Malaysia, "limiting"
and "decreasing" the amount of biofuels produced from oil crops "cannot equate to their phase out
to 0% and the EU's Recitals to the RED II do not contemplate such phase out". Malaysia considers
that the European Union "has not provided any indication of the rationale for the high ILUC -risk
phase out" and respectfully requests the Panel to review its findings in paragraph 7.215 accordingly.
6.16. The European Union observes that Malaysia invites the Panel to revisit its appreciation of the
rationale of the challenged measures. The European Union disagrees and refers the Panel to its
written submissions. The European Union considers that it is manifestly incorrect that it has not
provided any rationale for the phase out of high ILUC -risk feedstock. Indeed, it explains that the
phase out pursues the same objectives as the 7 % maximum share. Howe ver, certain crops used
for biofuel production present particularly significant risks of indirect land -use change of an
environmentally problematic nature, or which would be more likely to lead to high GHG emissions.
Therefore, in light of the EU policy objectives, it is reasonable and legitimate to pursue a regulatory
approach that seeks to distinguish between crops.171
6.17. The Panel sees no reason to change paragraph 7.215. Recital 81 of RED II states that it is
appropriate to require Member States "to set a specific and gradually decreasing limit for biofuels …
produced from food and feed crops for which a significant expansion of the production area into land
with high-carbon stock is observed". It is clear from these and other elements of Recitals 80 and 81
(which are set out in full at paragraph 7.214) that the considerations set forth in those Recitals relate
to the high ILUC -risk cap and phase-out. The essence of Malaysia's comment on paragraph 7.215
seems to be that there is no specific explanation, in R ecitals 80 and 81, of why Article 26(2) of
RED II, which establishes the high ILUC -risk cap and phase-out, provides that the "limit" set forth
in that provision shall gradually decrease "to 0%". The Panel notes that while this may be true, there
is nothing in paragraph 7.215 that states or implies that every specific aspect of the 7% maximum
share as elaborated in Article 26(1) of RED II, and/or the high ILUC -risk cap and phase -out as
elaborated in Article 26(2) of RED II, is individually explained in Recitals 80 and 81 of RED II.
6.18. In the context of the Panel's findings on "The allegation of protectionism in the guise of
environmental protection", both parties comment on paragraph 7.253:

171 The European Union refers to its first written submission, para. 799, and second written submission,
para. 108. The European Union further refers to its first written submission, section 5 and paras. 361–362 and
722-73.

a. The European Union requests that the Panel specifically identify the two trade defence
measures referenced at paragraph 7.253. The European Union reiterates this comment in
relation to paragraph 7.1446, in the context of the separate opinion by one panelist.
b. Malaysia seeks to clarify that it did not seek to argue that there is any direct link between
the trade defence measures and the measures at issue. Rather, the reference to the trade
defence measures was made in the context of providing a holistic overview of the
background to the measures at issue, as well as suggesting as indicative that a long and
controversial history of trade defence measures and protectionist attitudes by the
European Union vis -à-vis oil palm and oil crop -based biofuels cannot be neglected and
should be considered as part of the commercial and policy background against which the
RED II, with its high ILUC -risk cap and phase -out features, were developed. Therefore,
Malaysia respectfully requests the Panel to amend paragraph 7.253 and avoid suggesting
that Malaysia considered there to be a direct link between the trade defence measures
and the measures at issue.
6.19. The parties do not comment on one another's requests.
6.20. The Panel responds to the issues raised as follows:
a. In response to the European Union's r equest, the Panel has added a footnote identifying
the two trade defence measures referenced by Malaysia in the context of paragraphs 206-
208 of its first written submission. The Panel has also made the closely related change
proposed by the European Union to the text of paragraph 7.1446.
b. The Panel recalls that Malaysia has argued that the protectionist motive of the measure is
evidenced by the fact that the European Union "has a long history of enacting trade
barriers" to limit imports of palm oil-based biofuel to protect the EU biofuel industry. The
accompanying footnote in Malaysia's submission cross -references the earlier discussion,
in the same submission, of the two trade defence measures and their effect on palm oil
trade. Paragraph 7.253 addresses th e argument as presented by Malaysia. The text of
paragraph 7.253 does not state or imply that Malaysia's argument is that there is a direct
link between the trade defence measures and the measures at issue. Accordingly, the
Panel sees no basis to make the change requested by Malaysia.
6.21. In the context of the Panel's findings on "The allegation of protectionism in the cover of
environmental protection", Malaysia comments on the Panel's analysis of the resolution of the
European Parliament set out in paragraph 7.259. Malaysia disagrees with the Panel's
considerations in paragraph 7.259 and requests the Panel to review its formulation of the findings
related to the resolution of the European Parliament . Malaysia elaborates the following arguments
and observations:
• Malaysia considers that the express reference to domestically cultivated rape and
sunflower seeds is not merely an illustrative example, but intentionally refers to crops
cultivated in the European Union, and, therefore, indicative of the European Union's actual
objective. While Malaysia is not suggesting that proof of the protectionist and
discriminative objectives of the RED II, and of its 'ingenious' features of the high ILUC -
risk cap and phase -out, can be found in the resolution of the European Parlia ment, the
resolution had clearly set the stage for the actions and policies developed by the European
Commission in the Delegated Regulation.
• Malaysia believed to have convincingly and conclusively demonstrated such protectionist
and discriminatory traits of the EU measures in its pleadings, but it regrets that only one
Panelist understood the overall approach by the European Union and the reality of the
system 'engineered' through the high ILUC -risk cap and phase -out, as well as its real
objectives.
• Malaysia also finds it rather peculiar that, while the Panel appears to generally accept the
validity of the ILUC mechanism as a tool for the European Union to pursue its legitimate
objective, it appears to disregard it when it is used by Malaysia to challenge the premises
of the EU measures and the flawed approach in terms of the likely consequences. In fact,

the Panel indicates that the "reference to domestically cultivated rape and sunflower seeds
appears to be not so much an admission of a protectionist objec tive, but rather an
illustrative example ("such as …") of oil -stock that is not grown in tropical areas where
there is a risk of replacement by other tropical vegetable oils".
• On the basis of the ILUC approach, it should not matter whether rape and sunflower seeds
are "oil-stock that is not grown in tropical areas where there is a risk of replacement by
other tropical vegetable oils". Replacing oil palm-crop based biofuels on the EU market will
surely require greater use of other 'like products', certainly produced from either soya,
rape or sunflower. Whether this comes directly from the expansion of these crops onto
high-carbon stock land or indirectly from the diversion of the use of existing resources
from other end uses to biofuel production, this may well result in future ILUC, including in
possible greater planting of oil palm for its various uses.
• Yet, the European Union, and seemingly also the Panel, do not appear to appreciate this,
weigh it in the overall working of the ILUC approach, and factor it in when assessing the
real nature of the objective being sought by European Union . Such objective is not
environmental protection, but it is domestic protection of its oil crop producers, ingeniously
'camouflaged' as environmental protection and conservati on of exhaustible natural
resources.≥
6.22. The European Union observes that Malaysia invites the Panel to revisit its appreciation of the
evidence. However, both parties presented submissions in respect of the relevance of the European
Parliament's resolution and their respective positions have been evaluated by the Panel. Therefore,
the European Union disagrees that there are grounds for the Panel to revisit its findings in this
paragraph of the Interim Report. It refers the Panel to section 4.4.8 of its first written submission.
6.23. The Panel notes that Malaysia's comments on paragraph 7.259 reiterate its arguments on
issues that have been extensively debated by the parties, and fully considered by the Panel, with a
general request that the Panel reconsider its evaluation of those issues. The Panel considers that
such comments do not require any specific reply from the Panel. Insofar as Malaysia is seeking to
ensure that its views on the Panel's findings are fully reflected, the Panel has accommodated
Malaysia by setting out its comments in full.172
6.24. In the context of the Panel's findings on "The allegation of protectionism in the cover of
environmental protection", Malaysia comments on paragraphs 7.261 and 7.262 concerning the
European Commission's internal legal advice. Malaysia elaborates the following arguments and
observations:
• Malaysia respectfully notes that European Commission 's internal legal advice raised the
issue of WTO inconsistency precisely because the European Commission's Directorate -
General for Trade considered the amendment proposed by the European Parliament to be
protectionist in nature.
• Notably the European Commi ssion's Directorate-General for Trade considered that the
Proposal "appears to violate the non-discrimination obligations under Art. I and Art. III:4
of the General Agreement on Tariffs and Trade (GATT), by establishing an unduly
differential treatment bet ween products which appear to be 'like'". Moreover, the
Commission's internal legal advice details the potential trade effects, considering that a
measure that would disincentivise palm oil as a biofuel feedstock would have "a significant
impact on trade flows".
• Malaysia is well aware that the European Commission's internal legal advice did not
concern the measures at issue as such. However, Malaysia continues to consider this
internal legal advice to be an important element of indicative evidence in the interpretation
of the measures at issue and the objective that they are deemed to pursue.
• More specifically, the European Parliament's resolution set out one of the objectives of the
European Parliament with respect to the RED II, namely, to prohibit the use of palm oil as

172 See para. 6.7 above.

a biofuel feedstock. Such outright prohibition would have been inconsistent with the
European Union's WTO obligations, as suggested by the European Commission's internal
legal advice provided in Exhibit MYS -44. Thus, the European Union was required to find
another way to achieve this same objective and the European Union decided to do so with
an elaborate mechanism related to the ILUC-risk of biofuel feedstocks. And, coincidentally
but unsurprisingly, palm oil ended up being the only biofue l feedstock that is considered
as having a high ILUC risk, whose counting for purposes of the European Union's
renewable energy targets will be phased out across the European Union by 2030.
6.25. The European Union disagrees that the findings require review and underlines that Malaysia's
comment fails to reflect the scope and content of the internal legal advice included in Exhibit MYS -
44, which as the Panel identifies, pertained to amendments that were not adopted by the co -
legislators and which are not include d in RED II. The European Union refers to section 4.47 of its
first written submission.
6.26. The Panel notes that Malaysia's comments on paragraph 7.259 reiterate its arguments on
issues that have been extensively debated by the parties, and fully considered by the Panel, with a
general request that the Panel reconsider its evaluation of those issues. The Panel considers that
such comments do not require any specific reply from the Panel. Insofar as Malaysia is seeking to
ensure that its views on the Panel's fi ndings are fully reflected, the Panel has accommodated
Malaysia's request by setting out its comments in full.173
6.27. In the context of the Panel's findings under Article 2.2 regarding the legitimacy of the objective
of the measures at issue, the Panel recalls the conclusions reached by the Panel in the context of its
analysis of the ISO standards under Article 2.4. In paragraph 7.289 the Panel refers to its earlier
conclusions under Article 2.4. In paragraph 7.290, the Panel "concludes, in light of its findings under
Article 2.4, that the ISO standards referred to by Malaysia do not 'exclude ILUC from being taken
into account' in the context of measures seeking to regulate GHG emissions." In its comments on
paragraphs 7.289 and 7.290 , Malaysia states that it " agrees with and welcomes the Panel's
finding" in paragraph 7.289 that "the standards do not cover ILUC". Malaysia states that it argued
that the discussed ISO standards "do not explicitly and directly address the issue of ILUC and that
it is exactly this circumstance that Malaysia considers as casting significant doubt on the concept of
ILUC". Malaysia adds that "[s]till, the fact that the concept of ILUC is not incorporated into any
existing international standard does undermine the legitimacy of the use of this concept and
measures based on this concept." Malaysia reiterates the same comment in relation to paragraph
7.513 of the Report, where the Panel reiterates its findings under Article 2.4 and Article 2.2 in the
context of its analysis under Article 2.1.
6.28. The European Union disagrees that the finding that there are no existing relevant international
standards relating to ILUC demonstrates that measures based on this concept lack legitimacy. It
refers generally to its written submissions, but further observes that were this the case, it would be
impossible, or "illegitimate" for a member to regulate in the absence of an existing international
standard. This does not reflect the logic and structure of the TBT Agreement.
6.29. The Panel considers it us eful, in the light of Malaysia's comment, to emphasize that the
paragraphs that Malaysia's comments are directed at (i.e. paragraphs 7.289 and 7.513) are
paragraphs of the Report in the context of the Panel's findings under Articles 2.2 and 2.1 that refer
back to the conclusions reached in the context of the Panel's analysis under Article 2.4. Thus, the
statement in paragraph 7.289 (which is that "the standards do not cover ILUC") that Malaysia
characterizes as a "finding" that it "agrees with and welcomes" must be construed accordingly, i.e.
as a restatement of the conclusions reached in the context of Article 2.4. The Panel considers that
Malaysia's reiteration of its argument (i.e. "the fact that the concept of ILUC is not incorporated into
any existing i nternational standard does undermine the legitimacy of the use of this concept and
measures based on this concept") is an issue that has been extensively debated by the parties, and
fully considered by the Panel, and does not require any specific reply.
6.30. In the context of the Panel's findings on "The existence of a risk of ILUC -related GHG
emissions with the production of crop-based biofuels", paragraph 7.304 discusses the IPPC Report
Climate Change and Land. There, the Panel discusses a statement regarding the "low confidence in
attribution of emissions from iLUC to bioenergy" and finds that the "statement read in context

173 See para. 6.7 above.

appears to address only the uncertainty and variability surrounding the attribution of a particular
ILUC effect to a particular feedstock and not, more generally, an assessment of a low confidence in
the proposition that a causal relationship exists between biofuel production as a whole and ILUC
effects". Malaysia elaborates the following arguments and observations:
• Malaysia respectfully dis agrees with this interpretation and points the Panel to the
following explanations contained in the same section of the IPCC Report: "estimates of
emissions from iLUC are inherently uncertain, widely debated in the scientific community
and are highly dependent on modelling assumptions, such as supply/demand elasticities,
productivity estimates, incorporation or exclusion of emission credits for coproducts and
scale of biofuel deployment. In some cases, iLUC effects are estimated to result in emission
reductions. For example, market-mediated effects of bioenergy in North America showed
potential for increased carbon stocks by inducing conversion of pasture or marginal land
to forestland".
• Indeed, the respective paragraph in the IPCC Report then concludes that: "There is a wide
range of variability in iLUC values for different types of biofuels, from –75–55 gCO2 MJ–
1. There is low confidence in attribution of emissions from iLUC to bioenergy".
• In view of the greater context provided in this paragraph of the IPCC Report, namely that
"estimates of emissions from iLUC are inherently uncertain, widely debated in the scientific
community and are highly dependent on modelling assumptions" and that "In some cases,
iLUC effects are estimated to result in emission reduc tions", Malaysia considers that the
reference to "low confidence" must be interpreted as referring to the broader difficulty of
attributing ILUC to biofuel feedstocks.
6.31. The European Union disagrees that this finding should be reviewed. The IPCC report was the
subject of extensive discussion and submission during the proceedings. The European Union refers
to its arguments on these points (including for instance its response to Panel question No. 13).
6.32. The Panel notes that Malaysia's comments on par agraph 7.304 reiterate its arguments on
issues that have been extensively debated by the parties, and fully considered by the Panel. The
Panel considers that such comments do not require any specific reply from the Panel. Insofar as
Malaysia is seeking to ensure that its views on the Panel's findings are fully reflected, the Panel has
accommodated Malaysia's request by setting out its comments in full.174
6.33. In the context of the Panel's findings on "The existence of a risk of ILUC -related GHG
emissions with the production of crop-based biofuels", the final sentence of paragraph 7.306 states
that the EU measures at issue do not distinguish between specific drivers of expansion into land with
high-carbon stock, as explained further in the section addressing Malaysia's claim under Article 2.1.
In its comment on paragraph 7.306, Malaysia disagrees. Malaysia submits that while the measures
indeed only concern ILUC, the measures at issue, as they currently apply, do distinguish between
specific drivers, namely between oil palm crop-based biofuel feedstocks and other crop-based biofuel
feedstocks. If the European Union were interested in addressing the ILUC-risks of all food and feed
crops, the measures at issue, namely the high ILUC -risk cap and phase out, should not o nly apply
to oil palm crop -based biofuels, but to all crop -based biofuels. While the measures do apply to all
crops, only palm oil as a biofuel feedstock is considered by the European Union to be above the
thresholds to be considered high ILUC -risk (per se and as a whole) and the measures unfold their
limiting effect only on palm oil, while any ILUC-risk of other crops is not being addressed.
6.34. The European Union does not consider that these findings require review and disagrees with
the assertion that the ILUC of other conventional biofuels is not addressed. The 7 % maximum share
applies to all biofuels. The formula is applied to all conventional biofuels and hence their risk of ILUC
is assessed.
6.35. The Panel notes that Malaysia's comments on paragraph 7.306 rei terate its arguments on
issues that have been extensively debated by the parties, and fully considered by the Panel. The
Panel considers that such comments generally do not require any specific reply from the Panel, other
than to note that its findings on this issue are set forth in the context of its analysis of Article 2.1

174 See para. 6.7 above.

(as indicated in paragraph 7.306). Insofar as Malaysia is seeking to ensure that its views on the
Panel's findings are fully reflected, the Panel has accommodated Malaysia's request by setting out
its comments in full.175
6.36. In the context of the Panel's findings on "The agricultural activities and associated ILUC and
ILUC-related GHG emissions in question occurring outside of the territory of the European Union",
Malaysia takes issue with paragraph 7.315, which provides in relevant part that the measures seek
to regulate whether and to what extent products supplying the EU transport fuel market can be
counted towards the EU renewable energy targets "and to address the adverse ILUC impacts th at
EU demand for crop-based biofuels could have". Malaysia states that, i n view of the uncertainties
surrounding the concept of ILUC and the hypothetical situation of future "adverse ILUC effects",
Malaysia respectfully requests this part of the sentence to be deleted.
6.37. The European Union objects to the proposed deletion. In the European Union's view, the text
accurately reflects that the measures are seeking to address ILUC effects driven by EU demand.
6.38. The Panel agrees with Malaysia insofar as its comment rests on the premise that panels should
generally refrain from making findings that involve speculation about future and hypothetical
events.176 However, the Panel does not consider that paragraph 7.315, and in particular the
reference to "the adverse ILUC impacts that EU demand for crop-based biofuels could have", involves
speculation about future and hypothetical events. The words "could have" (and not for example
"has" or "is having") simply reflect the degree of uncertainty about the adverse ILUC impacts
associated with EU demand for crop -based biofuels. Accordingly, the Panel has not made any
adjustment to paragraph 7.315.
6.39. In the context of the Panel's overall "Conclusion on the legitimacy of the objective", which is
set out at paragraph 7.317 , Malaysia s tates that it takes issue with respect to the Panel's
considerations related to the alleged objective of limiting the risk of ILUC -related GHG emissions
associated with crop -based biofuels. Malaysia submits that the Panel ignores the discrepancy
between the objective and the way that the measures are being applied, namely that they do not
limit ILUC-related GHG emissions from all crop -based biofuels, but only from oil palm crop -based
biofuel, given that the specific measures at issue effectively only apply to oil palm crop-based biofuel.
Thus, Malaysia submits that the Panel did not assess the measures at issue in their totality and as
applied in practice. Malaysia requests the Panel to review and reconsider the related findings.
6.40. The European Union disagrees that these findings require review, and states that the Panel
has assessed the arguments of the parties concerning the legitimacy of the objectives pursued.
6.41. The Panel notes that Malaysia's comments on paragraph 7.317 reiterate its arguments on
issues that have been extensively debated by the parties, and fully considered by the Panel. The
Panel considers that such comments generally do not require any specific reply from the Panel.
Insofar as Malaysia is seeking to ensure that its views on the Panel's findings are fully reflected, the
Panel has accommodated Malaysia's request by setting out its comments in full.177
6.42. In the context of the Panel's findings on "Risks of non -fulfilment of the objective", Malaysia
makes a comment on the Panel's conclusion at set forth in paragraph 7.342. Malaysia emphasizes
that the "risks that non -fulfilment of the objective would create" and the "contribution to the
objective" are both elements of the weighing and balancing test and must be considered together
and in relation wit h each other. Malaysia considers that, in view of this balancing test, the Panel
cannot come to a conclusion on one element and then consider the other element in light of the
conclusion reached regarding the first element.
6.43. The European Union disagrees that the Panel has erred in its analytical approach (and
references its first written submission, section 7.3.1.2, section 7.3.2, paras 810 -812, and section
7.3.4.2).

175 See para. 6.7 above.
176 See e.g. Panel Report, Saudi Arabia – IPRs, para. 7.82 (citing prior panel and Appellate Body
reports).
177 See para. 6.7 above.

6.44. The Panel disagrees with Malaysia's comment, which appears tantamount to stating that the
Panel cannot reach any individual conclusion on any of the individual elements of the weighing and
balancing test under Article 2.2. The Panel does not see how the task of identifying the risks that
non-fulfilment of the objective would create w ould depend on how those risks, once identified, are
weighed against the measure's contribution to its objective. Moreover, it is normal practice for panels
and the Appellate Body to strive for analytical clarity by stating conclusions on the individual
elements of the weighing and balancing test.
6.45. In the context of the Panel's findings on "Contribution to the objective", Malaysia requests the
Panel to clarify how it comes to the conclusion, in paragraph 7.348, that "the measures are apt to
make a material contribution to the objective of limiting ILUC-related GHG emissions associated with
crop-based biofuels". Malaysia elaborates the following arguments and observations (which it
subsequently reiterates in the context of paragraph 7.1080 , in which the Panel recalls these
findings for purposes of the analysis under Article XX):
• Malaysia particularly takes issue with the mere statement that "The measures have, by
design, a limiting effect on EU demand for and consumption of all crop-based biofuels and
will by 2 030 eliminate RED II -induced EU demand for and consumption of those crop -
based biofuels deemed to be high ILUC -risk", which appears to be the Panel's only basis
for coming to the conclusion that "the measures are apt to make a material contribution
to the objective of limiting ILUC -related GHG emissions associated with crop -based
biofuels".
• Malaysia submits that the measures do not have "a limiting effect on EU demand for and
consumption of all crop -based biofuels and will by 2030 eliminate RED II -induced E U
demand for and consumption of those crop-based biofuels deemed to be high ILUC-risk".
Rather, as already noted above, the measures at issue, as currently conceived and
effectively applied, will only limit EU demand for oil palm crop-based biofuels. In fact, the
measures will not eliminate RED II-induced EU demand for and consumption of high ILUC
risk crop-based biofuels, but will, at least initially and perhaps only temporarily, increase
the planting of certain oil crops other than oil palm, with the perverse effect that there will
first need to be significant further expansion onto high -carbon stock land until, following
an unscheduled review, the European Union may update its Delegated Regulation and
perhaps consider other oil crops as also having a high ILUC risk. A high -ILUC risk that,
paradoxically, these very measures of the EU will have triggered.
• Furthermore, it can also be expected that, given the oil palm's efficiencies in its yield,
compared to other oil crops, comparatively speaking a lot more l and will be required for
planting in order to compensate the absence on the market of oil palm crop-based biofuels,
thereby defeating the very purpose of the EU's measures. Sadly, it appears that this will
only be realised and potentially measured a posteriori, but, seemingly, the European Union
and the majority within the Panel appear to disregard this reality and prefer a purely
legalistic approach to one that truly cared about the environment and climate change
mitigation.
• Malaysia strongly disagrees with the Panel that "the measures are apt to make a material
contribution to the objective of limiting ILUC-related GHG emissions associated with crop-
based biofuels" and believes that this flawed understanding of market dynamic s, of the
EU's measures at issue, and of the future effects of these measures, leads it to wrong
assumptions and wrong conclusions.
• Malaysia respectfully requests the Panel to reconsider its position on this crucial matter.
6.46. The European Union notes that Malaysia is inviting the Panel to reconsider its findings on the
nature and operation of the EU biofuels regime. Malaysia's comments betray that despite the
extensive submissions on these issues, they have failed to appreciate the manner in which the 7%
maximum share and the high ILUC risk phase out is designed precisely to incentivise the Member
States to modify their energy mix and hence, avoid stimulating further consumer demand for
conventional biofuels, including palm oil. The European Union disagrees that the Panel should revisit
its findings on this central point and refers to all previous submissions on this issue.

6.47. The Panel considers that its findings under Article 2.2 already clarify how it comes to the
conclusion that the measures are apt to make a material contribution to the objective of limiting
ILUC-related GHG emissions associated with crop -based biofuels. The Panel notes that Malaysia's
comment on paragraph 7.348, while presented as a request for clarification, essentially reiterates
its arguments on issues that have been extensively debated by the parties, and fully considered by
the Panel. The Panel considers that such comments generally do not require any specific reply from
the Panel. Insofar as Malaysia is seeking to ensure that its views on the Panel's findings are fully
reflected, the Panel has accommodated Malaysia's request by setting out its comments in full.178
6.48. In the context of the Panel's findings on Malaysia's proposed alternative measures, Malaysia
makes similar comments on the fir st, second, third and fifth proposed alternative measures. In
respect of the first proposed alternative, Malaysia comments on the Panel's findings in paragraph
7.377. Malaysia elaborates the following arguments and observations on the first proposed
alternative measure, and then extends those comments to the second, third and fifth proposed
alternatives:
• First of all, Malaysia respectfully requests the Panel to explain how it came to the
conclusion that this proposed alternative "appears to be unrelated to the specific objective
pursued by the 7% maximum share and the high ILUC-risk cap and phase-out".
• Secondly, Malaysia's approach has been to identify an alternative measure to the concept
of ILUC, which Malaysia argued being available in a FLEGT -like system, as successfully
implemented by the European Union vis-à-vis multiple trading partners. It should also be
noted that it appears to Malaysia that the Panel has embraced the EU argument that ILUC
is an adequate concept to attain the European Union's stated objectives. Malaysia has
repeatedly argued that this aggregate approach and the ILUC thresholds are both unfair
and leading to the wrong assumptions and conclusions, notably with unreasonably trade-
restrictive outcomes for certain crops and/or countries. As argued in its submissions,
Malaysia considers that the European Union's approach based on aggregated data on
actual land-use change (DLUC) is not appropriate to forecast the ILUC risk. This ILUC-risk
then applies to an entire crop at a global level, not taking into account local conditions,
legal frameworks, and enforcement mechanisms that set all countries apart in terms of
preventing expansion onto high-carbon stock land. Malaysia has such systems in place, as
it has demonstrated at length in its submi ssions, it has a track record of fighting
deforestation and expansion onto high-carbon stock land, especially in relation to oil palm
cultivation, and, for this reason, advocated for a FLEGT -type approach as an alternative
measure to ILUC.
• Thirdly, what Ma laysia mainly sought to address with its alternative measures was the
trade-restrictiveness of the EU's measures vis-à-vis the trading opportunities of individual
countries and EU trading partners, such as Malaysia.
• In the context of the Panel's findings on Malaysia's second, third, and fifth proposed
alternative measures (and in particular, at paragraphs 7.380, 7.383, and 7.391 )
Malaysia states that in light of the rather mechanical approach followed by the Panel,
Malaysia refers to its commentary on the Panel's analysis of the first alternative proposed
by Malaysia, which applies mutatis mutandis to Malaysia's second, third and fifth proposed
alternative measure. Malaysia also requests the Panel to explain how it came to the
conclusion that each of these proposed alternative measures "appears to be unrelated to
the specific objective pursued by the 7% maximum share and the high ILUC-risk cap and
phase-out".
6.49. The European Union notes that Malaysia is inviting the Panel to reconsider its findings on the
first, second, third and fifth proposed alternative measures. However, both parties presented
submissions in this respect and their respective positions have been evaluated by the Panel (the
European Union refers further to its first written submission, paras. 896-948 and 954-972). Malaysia
also argues that the Panel failed to explain how these proposed alternative measures are unrelated
to the specific objective pursued by the 7% maximum share and the high ILUC-risk cap and phase-
out. Yet, the Panel explained that all these alternative measures appear to be directed at DLUC.
Equally, the European Union observes that Malaysia takes issue with the Panel quoting arguments

178 See para. 6.7 above.

by the European Union. The European Union recalls that th e respective arguments of each party
have been considered and objects to the implication that the Panel should not refer to the European
Union's submissions when setting out its assessment. For all these reasons, the European Union
disagrees that there are grounds for the Panel to revisit its findings in these paragraphs of the
interim report.
6.50. The Panel considers that its findings under Article 2.2 already clarify how it comes to the
conclusion that these proposed alternative measures appear to be unrelated to the specific objective
pursued by the 7% maximum share and the high ILUC-risk cap and phase-out. The Panel notes that
Malaysia's comment on the Panel's findings, while presented as a request for clarification, essentially
reiterates its arguments on is sues that have been extensively debated by the parties, and fully
considered by the Panel. The Panel considers that such comments generally do not require any
specific reply from the Panel. Insofar as Malaysia is seeking to ensure that its views on the Pan el's
findings are fully reflected, the Panel has accommodated Malaysia's request by setting out its
comments in full.179
6.51. In the context of the Panel's findings on Malaysia's fourth proposed alternative measure, i.e.
"Fourth proposed alternative: market access quotas", Malaysia states (following paragraph 7.388)
that it wishes to comment on the Panel's considerations regarding the proposed alternative measure
simplistically titled "market access quotas", which it believes was not properly understood. Malaysia
elaborates the following arguments and observations:
Introduction
• In simple terms, Malaysia believes that, unlike for the other alternative measures that it
had proposed and that the Panel considered as unsuitable alternatives to a system based
on ILUC, i n this case, the reasonably available and less trade -restrictive alternative
measure being proposed would be perfectly in line with the objective being pursued by
the European Union through the ILUC approach. In fact, for the sole purpose of this
argumentation, let us assume that Malaysia agrees with the implementation of the
European Union's measure(s) at issue.
• The high ILUC-risk cap started operating on 1 July 2021, requiring that "the share of high
indirect land-use change-risk biofuels, bioliquids or biomass fuels produced from food and
feed crops for which a significant expansion of the production area into land with high -
carbon stock is observed […] not exceed the level of consumption of such fuels" in any
given EU Member State at the level of 2019. This is the so-called high ILUC-risk cap. The
Panel appears to consider it not to constitute a restriction in the sense of Article XI of the
GATT and the European Union has also repeatedly argued that it is not a ban nor a
restriction in the sense of Artic le XI of the GATT. For purposes of the application of this
alternative measure being proposed by Malaysia, let us assume that Malaysia agrees with
this interpretation.
• The high ILUC-risk cap at the 2019 levels currently applies and will last until 31 December
2023. In essence, the alternative measure proposed by Malaysia foresees that this cap
remain in place indefinitely (unless expanded or repealed), that it not gradually decrease
to 0% between 31 December 2023 and 31 December 2030 at the latest, and that the
opportunities to continue contributing to the EU renewable energy targets through oil palm
crop-based biofuels be guaranteed at the 2019 levels and allocated among the supplying
countries.
• This proposed alternative measure would not do any harm to th e RED II and ILUC legal
framework, would obviously be less trade -restrictive than a complete phase out, is
reasonably available, and would make an equivalent contribution to the chosen objective
of limiting the risk of ILUC-related GHG emissions associated with crop-based biofuels. It
must be underlined that this is particularly true vis -à-vis a perennial crop like oil palm,
which does not need replanting or expansion to continue contributing at the 2019 levels
to the EU market of biofuel feedstocks.

179 See para. 6.7 above.

The alternative measure vis-à-vis the provisional arguments in the Interim Report
• To Malaysia, it seems incredibly simple to understand and to visualise the proposed
alternative measure in terms of its less restrictive effects. More specifically, the proposed
alternative measure would apply for purposes of achieving both the objectives pursued by
the European Union and allow the prevention of the unnecessary and punitive effects on
trade of palm oil-producing countries, safeguarding the socio-economic opportunities that
this trade offers to communities around the world, especially to smallholders. Malaysia
proceeds to address the specific arguments by the Panel and the European Union that led
the Panel to consider this alternative measure as not making "an equival ent contribution
to the objective pursued as compared with the high ILUC -risk cap and phase -out" and,
therefore, as not being a viable alternative measure.
• Firstly, the Panel quotes the European Union as arguing that "maintaining quotas
irrespective of th e association of a certain oil crop biofuel feedstock to a certain
advancement into high -carbon stock land would defeat the purpose of not incentivizing
high ILUC-risk feedstocks". In this regard, Malaysia believes that this is simply not true.
In fact, the high ILUC-risk cap in place is already disincentivising the use of palm oil as a
biofuel feedstock in the EU market. Maintaining access at the 2019 levels does not
incentivise further expansion because the plantations providing for these crops already
exist and shall continue to produce for many years to come as oil palm is a perennial crop.
There is no explanation, either in the RED II, in the Delegated Regulation, or in the
European Union's submissions, as to what specific role the high ILUC-risk phase out (i.e.,
gradual decrease to 0 from 31 December 2023 to 31 December 2030) would play in terms
of removing the incentives to further expansion onto high -carbon stock land (Malaysia
refers to its comments provided in relation to paragraph 7.215 above). The inability to
expand the production and consumption of oil palm crop-based biofuels beyond the 2019
levels already removes any incentive under the RED II. This is particularly the case for
perennial crops, where the plantations already exist and will conti nue to produce,
irrespective of the European Union's policies. Therefore, the high ILUC -risk phase out
appears to be only punitive in nature and an unduly restrictive feature of the ILUC
approach.
• Secondly, the Panel quotes the EU as arguing that the "alt ernative of capping imports of
high ILUC-risk biofuels at a certain level could be realized either by a system of import
restrictions, which would be a violation of Article XI of the GATT 1994, or de facto, a
system of TRQs coupled with out -of-quota prohibitive tariffs, which would violate the EU
tariff schedule and therefore Article II of the GATT 1994". This is incorrect and a
misrepresentation of the alternative measure proposed by Malaysia. In Malaysia's
proposed alternative measure, the system of the s implistically titled "market access
quotas" or, in the European Union's words, "import restrictions", would be in no way
different from what is currently being implemented by the European Union under the high
ILUC-risk cap that is applied until 31 December 2023. As Malaysia understands it, the
European Union has argued and the Panel appears inclined to agree that this system is
not an import restriction, is not a violation of Article XI of the GATT 1994, and, inasmuch
as it appears to be a violation of Arti cle III of the GATT, it is generally allowed under the
justifications provided by Article XX(b) and (g) of the GATT. If this were to be the outcome
of this dispute, the alternative measure proposed by Malaysia would allow the EU to largely
keep its system in place, but minimise the trade-restrictive effects allowing for the cap at
the 2019 levels to remain in place indefinitely and avoiding the unnecessary, unreasonably
restrictive and punitive effects of the high ILUC -risk phase out. In relation to the sec ond
element of the EU's arguments, namely that this alternative measure would be "a system
of TRQs coupled with out -of-quota prohibitive tariffs, which would violate the EU tariff
schedule and therefore Article II of the GATT 1994", Malaysia believes that, again, the
proposed alternative has been misunderstood or intentionally misrepresented by the EU.
Malaysia has not advocated for imports to be subject to TRQs and certainly not for any
novel "in-quota" or "out of quota" tariff levels to be put in place to administer its proposed
alternative measure. Malaysia had loosely compared this system, for illustrative purposes,
to the ones regularly administered by the European Union through TRQs, but, in this case,
clearly, the proposed alternative measure would not regulate importation. Rather, it would
regulate the amounts of oil palm crop -based biofuels allowed to be counted towards the
EU renewable energy targets. Obviously, by allowing oil palm crop -based biofuels to be

counted towards the EU renewable energy targets at the 2019 capped levels, the indirect
trade effects of the EU measures at issue would be less trade-restrictive.
• Thirdly, with respect to the Panel's consideration that "It is not the case that the level of
EU demand for a particular biofuel (e.g . palm oil-based biofuel) is the only variable that
affects whether a feedstock crosses the threshold for being considered as high ILUC-risk",
Malaysia would like to underline that this should then also be considered with respect to
measures taken in respo nse to such determination. Instead, the EU measures at issue
only address biofuel feedstocks and attempt to steer EU demand for particular biofuel
feedstocks. In any event, under this alternative measure proposed by Malaysia, the EU
approach, namely the high ILUC-risk cap, which would prevent any further expansion and
remove any incentive to further increase the cultivation of oil palm crops for purpose of
producing oil palm crop -based biofuels, would be maintained. In simple terms, the
measure at issue, namely the high ILUC-risk cap, would stay in place as currently being
implemented by the European Union, but its de facto trade-restrictive effects would be
minimised, given the removal of the high ILUC-risk phase out. Malaysia believes that this
should be the purpose of the WTO system and this is, in particular, the outcome that the
proposed alternative measure being reviewed by the Panel would deliver.
• Fourthly, Malaysia believes that the argument provided by the Panel, when it states that
it "considers th at the amount of consumption in the European Union at a given point in
time would not be a good indicator of the extent to which EU demand for biofuels and
palm oil feedstock may cause ILUC" is irrelevant vis-à-vis the functioning of the alternative
measure being proposed by Malaysia. Again, in simple terms, the measure at issue,
namely the high ILUC-risk cap, would stay in place as currently being implemented by the
European Union, but its de facto trade-restrictive effects would be minimised, given the
removal of the high ILUC -risk phase out. Maintaining the opportunity of oil palm crop -
based biofuels to be counted towards the EU renewable energy targets at the 2019
(capped) levels indefinitely, would indeed avoid the unnecessary and unreasonably trade-
restrictive / punitive effects of the high ILUC -risk phase out. Malaysia submits that this
would not be an alternative to the entire ILUC approach, nor a complementary addition to
it, clarifies that it would not be an alternative measure to all of the EU's measures at issue,
and notes that it would rather be an alternative to the prohibitive trade-restrictive effects
of the high ILUC-risk phase out, as it would at least allow producing countries to continue
trading at the (capped) levels that were allowed before palm oil started being considered
as having a high ILUC risk.
Conclusion
• Therefore, on the basis of the considerations above, with respect to the conclusion reached
by the Panel that the alternative measure proposed by Malaysia "would not make an
equivalent contribution to the objective pursued as compared with the high ILUC-risk cap
and phase-out", Malaysia respectfully submits that the alternative of the simplistically
titled "market access quotas", based on the high ILUC -risk cap, would be a reasonably
available, less trade-restrictive alternative that would make an equivalent contribution to
the chosen objective of limiting the risk of ILUC -related GHG emissions associated with
crop-based biofuels.
• Malaysia respectfully requests the Panel to review its assessment of this proposed
alternative measure accordingly.
6.52. The European Union notes that Malaysia is repeating its submissions and invites the Panel to
reconsider its findings on the fourth proposed alternative measure, the market access quotas.
However, both parties presented submissions in this respect and their respective positions have
been evaluated by the Panel (the European Union refers to its first written submission, paras. 949-
953). Malaysia argues that the Panel fails to apply its finding that the European Union is not the only
variable that affects whether a feedstock qualifies as high ILUC-risk to the challenged measure that
"would stay in place". Yet, Malaysia disregards the review mechanism provided for in Article 7 of the
Delegated Regulation. Therefore, the European Union disagrees that there are grounds for the Panel
to revisit its findings in these paragraphs of the interim report.

6.53. The Panel has described Malaysia's fourth proposed alternative measure in paragraph 7.384
of this Report. That description is based, and corresponds to, the description of the measu re set
forth in Malaysia's submissions. In its extended comment on this aspect of the Report, Malaysia now
describes this measure in terms that are substantially different. Indeed, Malaysia now argues that
the fourth alternative measure proposed by Malaysia is simply the high ILUC-risk "cap" without the
"phase-out". In these circumstances, the Panel considers it appropriate to limit its reply to the
following observations. The Panel understands Malaysia's argument to be premised on the
understanding that if the European Union were to maintain the high ILUC -risk "cap", without the
"phase-out", this would suffice to prevent any further expansion of, and remove any incentive to
further increase the cultivation of, oil palm crops for the purposes of producing oil palm crop-based
biofuels. The Panel notes that in its reasoning in paragraphs 7.386 to 7.388 it explains that
maintaining a system of market access quotas, as proposed by Malaysia in its fourth proposed
alternative, would not make an equivalent contribut ion to the objective pursued as compared with
the high ILUC -risk cap and phase -out. This reasoning, and the elaboration that follows in those
paragraphs, is also relevant to Malaysia's new version of this alternative measure.
6.54. In the context of the Panel's findings on Malaysia's sixth proposed alternative measure, which
is the EU approach applied in its deforestation-free initiative, Malaysia states that it is confused with
respect to the Panel's reasoning in paragraph 7.395. For Malaysia, the Panel appears to argue that
the alternative measure proposed by Malaysia is not "reasonably available" but it does not expressly
state so and, instead, talks about the idea that the proposed alternative measure "would not negate
or render redundant or immaterial the contribution that the 7% maximum share and the high ILUC-
risk cap and phase -out make to the objective of limiting the risk of ILUC -related GHG emissions
associated with crop -based biofuels". Malaysia argues that, while this may indeed be a complex
undertaking, it would be a less trade -restrictive alternative that would make an equivalent
contribution to the chosen objective of limiting the risk of ILUC -related GHG emissions associated
with crop-based biofuels. The issue of such measure being reasonably availab le is answered, in
Malaysia's view, by the very fact that this approach is currently being rolled out by the European
Union under the Deforestation-Free Products Regulation vis-à-vis not only palm oil, but many other
products considered by the European Uni on to be risky in terms of their potential for deforestation
and forest degradation and could easily be replicated by other jurisdictions around the world.
6.55. The European Union takes note that Malaysia argues that the existence of the "EU
Deforestation Free Products Regulation" demonstrates that its sixth proposed alternative measure
is reasonably available. The European Union respectfully suggests that Malaysia is, in effect, inviting
the Panel to consider additional evidence and objects. In any event, Malaysia's argument implies an
incorrect analytical leap. For the reasons identified by the Panel in its findings, and in line with the
European Union's submissions, the alternative proposed by Malaysia would not address ILUC in an
equivalent manner. To do so i t would need to be replicated in other jurisdictions. The European
Union observes that this is not a matter over which it has regulatory control. This is plainly relevant
when considering whether this alternative measure is reasonably available, to the European Union.
6.56. For reasons already explained by the Panel in paragraph 7.395, the option proposed by
Malaysia would not constitute an "alternative measure" and its apparent rolling out by the European
Union would not change the Panel's assessment in this regard. The Panel notes that its reasoning at
paragraph 7.395, which Malaysia's comment is directed at, applies the approach that is already
explained in paragraph 7.374. There, in paragraph 7.374, the Panel explained that (i) an "alternative
measure" is one that either could not co-exist with a challenged measure as it currently stands, or
that could co -exist but whose implementation alongside the challenged measure would negate or
render redundant or immaterial the contribution that the challenged measure is apt to make to its
objective; and (ii) a "complementary measure" is one that could co-exist with a challenged measure
as it currently stands, and whose implementation alongside the challenged measure would not
negate or render redundant or immaterial the contribution that the challenged measure is apt to
make to its objective.
6.3.3 Article 2.1 – Non-discrimination
6.57. In the context of the Panel's findings on the " De facto nature of the detrimental impact" on
imported palm oil -based biofuel, the European Union tak es issue with the Panel's assessment, at
paragraph 7.488, that "[a]lthough Malaysia has demonstrated that palm oil -, rapeseed oil - and
soybean oil-based biofuels are like, the European Union seems to be comparing only the treatment
of domestically produced and imported palm oil-based biofuel." The European Union objects to this

sentence, and refers the Panel to paragraph 720 of its first written submission where it argues that
"Malaysia must show that the measure (or measures) complained of 'modifies the conditions of
competition' to the detriment of the group of imported products (or the group of foreign products).
This analysis is absent from Malaysia's first written submission. Malaysia's arguments are essentially
limited to bare assertions about the effects of the challenged measure on Malaysian palm oil-based
biofuels." The European Union also references paragraph 90 of its second written submission.
6.58. Malaysia does not respond to the European Union's comment.
6.59. The Panel observes that its reasoning set out in paragraphs 7.486-7.488≥addresses the point
reiterated by the European Union that "palm oil based biofuel is treated identically under the
regulation, irrespective of whether it is produced in the European Union or in any other WTO
Member".180 The Panel also notes the European Union's argument that the Panel must compare the
treatment of the group of imported products with the treatment of "exactly the same group of like
products" of EU and foreign origin.181 The Panel recalls in this regard its findings that Malaysia does
not export (and thus the European Union does not import from Malaysia) rapeseed oil- and soybean
oil-based biofuel. The Panel further understands that the European Union does not import from
Malaysia biofuel made from other crops grown there. This is an important factual consideration that
has to be taken into account when comparing the treatment of imported products with the treatment
of like products of EU and foreign origin. This consideration requires the Panel to assess the
treatment of palm oil-based biofuel, which is the only relevant product imported from Malaysia, with
the treatment of palm oil-, rapeseed oil- and soybean oil-based biofuel, which all are like products
of EU and foreign origin.
6.60. In the context of the Panel's introductory considerations to the "Legitimate regulatory
distinction" step of its analysis, Malaysia comments on the Panel's considerations in paragraph
7.504 with respect to the discussion on the scientific basis for the measures at issue and the related
scientific debate. Malaysia agrees that it is not the Panel's task to "resolve scientific debates on the
basis of the evidence submitted by the parties" and that it is the Panel's task to "determine whether,
considering the entirety of the evidence, there is a reasonable basis for the regulatory distinction
drawn by the high ILUC -risk cap and ph ase-out and the manner in which it is applied". However,
Malaysia believes that the Panel has not fulfilled this task and considers that a more critical review
of the scientific basis, notably as provided in the European Union's Status Report, would have been
in order, given that, inter alia, data for certain crops was not available and was assumed. Malaysia
reiterates the same comment in the context of paragraph 7.550, where it reiterates that there is no
reasonable basis for the regulatory distinction and the manner in which it is applied in the high ILUC-
risk cap and phase-out.
6.61. The European Union disagrees that the Panel has erred either in identifying the test to assess
the scientific evidence, or in its appreciation of whether the European Union demonstrated that there
is a sufficient scientific basis. Malaysia's argument essentially requests that the Panel reconduct its
appreciation of the scientific basis in the Status report as certain assumptions for certain crops were
made. This critique lacks preci sion. Assumptions as such are an inherent aspect of scientific
methodology. As is implicit in Malaysia's comments, assumptions were relied upon in the absence
of available data. The European Union refers to the extensive written submissions on the adequacy
of the scientific basis for the measures.
6.62. The Panel notes that Malaysia's comments on paragraph 7.504 reiterate its arguments on
issues that have been extensively debated by the parties, and fully considered by the Panel, with a
general request that the Panel reconsider its evaluation of the relevant evidence. The Panel considers
that such comments generally do not require any specific reply from the Panel. Insofar as Malaysia
is seeking to ensure that its views on the Panel's findings are fully reflected, the Panel has
accommodated Malaysia's request by setting out its comments in full.182
6.63. In the context of the Panel's findings on "Share of expansion rate into land with high -carbon
stock as proxy of ILUC risk", Malaysia objects to the paraphrasing of Malays ia's arguments in
paragraph 7.523. In that paragraph, the Panel refers to Malaysia's argument according to which it

180 European Union's response to Panel question No. 19, para. 113; European Union's first written
submission, para. 1170.
181 European Union's first written submission, para. 1169.
182 See para. 6.7 above.

is "impossible to establish a causal link between the cultivation of food and feed crops for the
production of biofuel in one geographical location, and the growing of crops in another geographical
location". Malaysia states that it did not criticise "this aspect of the measure as assuming that the
displaced crop is oil palm grown in Malaysia for food purposes, while accepting the global natur e of
agricultural markets".
6.64. The European Union does not respond to Malaysia's comment.
6.65. The Panel notes that in paragraph 575 of its first written submission, Malaysia relies on the
Finkbeiner Expert Opinion. That expert opinion states, among other things, that "[t]here is no
scientific evidence that use of palm oil will likely lead to iLUC of palm oil, if any. The palm oil used
for the biofuel could be replaced by any vegetable oil". 183 Malaysia thus puts forward evidence
criticizing the apparent link established by the high ILUC -risk formula between the observed DLUC
and ILUC within a single crop and referred to in the first sentence of paragraph 7.523. The Panel
further notes that Malaysia's argument that " it is impossible to establish a link between culti vation
of food and feed crops for biofuel production in one geographical location and the growing of crops
in another geographical location" concerns the same issue of causal relationship between DLUC and
ILUC. In the light of the foregoing, the Panel cons iders it appropriate to revise paragraph 7.523 to
clarify that Malaysia "puts forward evidence" criticizing the aspect of the high ILUC -risk cap and
phase-out discussed in paragraph 7.522.
6.66. In the context of the Panel's conclusion in the section on "Share of expansion rate into land
with high-carbon stock as proxy of ILUC risk", at paragraph 7.529, Malaysia states that what it
particularly challenged is the reliance on expansion into peatland as an additional proxy for ILUC, in
addition to expansion into no n-peatland (referring to its second written submission, paragraphs.
139-140). Malaysia still struggles to understand why these different types of direct land use change
have a different bearing on the general ILUC risk. When an oil crop expands onto high-carbon stock
land (DLUC), this does not have an impact on the indirect land use change-risk and the related GHG
emissions. Malaysia, therefore, questions this distinction in the ILUC formula especially considering
that palm oil is the only feedstock that was considered to have a significant expansion into peatland,
which, again, appears to penalise a single, intentionally selected crop.
6.67. The European Union disagrees that the Panel ought to reconsider this aspect of the high ILUC
risk formula. That formula is intended to identify those crops which present a high risk of expansion
on to high -carbon stock land. Peatland is scientifically accepted to have high -carbon stock. (The
European Union refers to its first written submission paras. 427-430).
6.68. The Panel notes that Malaysia's comment concerning the section on "Share of expansion rate
into land with high-carbon stock as proxy of ILUC risk" reiterates its arguments on issues that have
been extensively debated by the parties, and fully considered by the Panel, wit h a general request
that the Panel reconsider its evaluation of the relevant evidence. The Panel considers that such
comments generally do not require any specific reply from the Panel. Insofar as Malaysia is seeking
to ensure that its views on the Panel's findings are fully reflected, the Panel has accommodated
Malaysia's request by setting out its comments in full.184
6.69. In the context of the Panel's findings on "The relationship between the share of crop's
expansion into land with high-carbon stock and EU biofuel demand", Malaysia takes issue with the
Panel's statement in paragraph 7.531 that "[t]he degree of ILUC risk reflects the pressure that the
crop production globally exerts on the agricultural land as a result of an increased demand in any
particular sector. Therefore, whenever demand for a biofuel feedstock increases, it contributes to
that pressure and, by implication, to the risk of ILUC". In particular, Malaysia takes issue with the
absolute formulation of the statement that "whenever demand for a b iofuel feedstock increases, it
contributes to that pressure and, by implication, to the risk of ILUC". Malaysia objects to this
automaticity of linking demand to the ILUC risk. As discussed by the Panel earlier in this paragraph,
Malaysia considers that land use change is linked to many factors and drivers and that the EU's
measures at issue, as currently applied, only concern a single driver, namely the use of palm oil as
a biofuel feedstock.

183 Finkbeiner Expert Opinion, (Exhibit MYS-45), p. 18
184 See para. 6.7 above.

6.70. The European Union sees no inconsistency in the Panel's findings. It has never been disputed
that land use change has many drivers. This does not imply that it is inconsistent or incorrect to find
that "[t]he degree of ILUC risk reflects the pressure that the crop production globally exerts on the
agricultural land as a result of an increased demand in any particular sector. Therefore, whenever
demand for a biofuel feedstock increases, it contributes to that pressure and, by implication, to the
risk of ILUC". The EU Biofuels regime does not purport to a ddress all potential drivers of LUC. It
seeks to address ILUC resulting from demand for conventional biofuels.
6.71. The Panel sees no inconsistency in its findings, and no reason to revise paragraph 7.531.
6.72. In the context of the Panel's findings on "The relationship between the share of crop's
expansion into land with high-carbon stock and EU biofuel demand", Malaysia takes issue with the
Panel's statement in paragraph 7.535 that "The country-specific approach implied by Malaysia's
argument disregards the fact that the concept of ILUC-risk is global". In this regard, Malaysia notes
that this would mean that, whenever a risk (or risk concept) is global, local conditions would not
need to be taken into account. Malaysia elaborates the following arguments and observations:
• The Panel notes that "any regional differences affecting such expansion would be reflected
in the data that is fed into the high ILUC -risk formula". While Malaysia agrees that data
from all coun tries (as available) should be reflected, this is only the case when the
European Union does indeed update the underlying data and, more importantly, the
outcome remains an aggregate, which means that the measures at issue cannot be
tailored to local conditions.
• Malaysia further takes issue with the Panel's considerations with respect to ILUC occurring
elsewhere in the world, namely with the statement that "even if in Malaysia there is a
lower rate of expansion into high-carbon stock land, such expansion may occur elsewhere
in the world as a result of growth in demand for biofuel, and it is for that reason that the
EU's approach is to look at the global picture per type of crop". In this context, Malaysia
would like to underline that any measures aimed at ad dressing such expansion should
focus on where that expansion takes place. Such approach would be in line with
established WTO case law, notably US-Shrimp, in which the Appellate Body insisted that,
in order to avoid that the application of a (provisionally justified) measure constitutes
arbitrary discrimination, the local conditions need to be taken into account. The approach
pursued by the Panel appears to be a flagrant deviation from this established case law,
which Malaysia strongly objects to.
• In this c ontext, Malaysia wishes to draw the Panel's attention to paragraph 158 of its
second written submission, which notes that "Under the EU's aggregate approach that
looks at the past expansion of the average annual global production area of biofuel
feedstocks on land with high -carbon stock, whatever an individual WTO Member, like
Malaysia, does to avoid expansion of agricultural land into high -carbon stock land, would
receive no recognition in the EU's scheme until such time that, globally, the issue has been
successfully addressed and the annual global expansion has been managed. Malaysia has
already underlined the unfairness of such an approach and is very concerned by the policy
orientation of the EU, under which it attempts to justify unilateral action with significant
implications for trade, when action by individual WTO Members may not be sufficient to
address a global problem".
• Malaysia further refers to paragraph 161 of its second written submission, where it noted
that "In simple terms, Malaysia believes that individual producing countries should not be
penalised for a problem that occurs elsewhere or for something that is considered a global
problem". Malaysia continues to believe that a mechanism that relies on aggregate data
concerning an entire crop at global level, punishes all producing countries and not only
those in which problems persist.
6.73. The European Union does not agree that the Panel ought to reconsider these findings. The
European Union does not share the view that the Panel's conclusion can be extrapolated as implying
that "this would mean that, whenever a risk (or risk concept) is global, local conditions would not
need to be taken into account." The European Union refers to its submissions (and references its

first written submission, parag raphs 868 -869; second written submission, para graph 144; and
response to Panel question No. 98).
6.74. The Panel has made some adjustments to the text of paragraph 7.535 in the light of Malaysia's
comments. The Panel notes that much of Malaysia's criticism of th e Panel's findings in
paragraph 7.535 concerns issues that have been extensively debated by the parties, and fully
considered by the Panel, with a general request that the Panel reconsider its assessment. Insofar as
such comments have been addressed by the Panel, they do not require any specific reply. However,
the Panel makes the following observations. The Panel notes that, as elaborated in more detail in
section 7 of this Report, the determination of crops subject to the high ILUC-risk cap and phase-out
seeks to estimate the risk of ILUC for a specific feedstock. This estimation is based on the share of
a feedstock's production area expansion into land with high-carbon stock. It is to be expected that,
as argued by Malaysia, the relative share of a crop's expansion into such type of land will vary from
one country to another. The Panel recalls in this regard that the share of expansion into land with
high-carbon stock operates as a proxy of the risk of ILUC. Given this design of the measure, the risk
of causing ILUC, understood as pressure on agricultural land arising from additional biofuel demand,
does not change depending on the jurisdiction. A higher demand for feedstock resulting from an
increased biofuel demand generates pressure on agricultural land regardless of the geographical
location. The foregoing distinguishes the facts of this dispute from those in US – Shrimp.
6.75. In the context of the Panel's findings on "The alleged protectionist motive of the measure" at
paragraphs 7.543 and 7.544 , Malaysia refers back to its comments made in the context of the
Panel's findings under Article 2.2, and in particular on the trade defence measures, the internal legal
advice shared by the European Commission's DG for Trade, and the Resolution of the European
Parliament. Malaysia underlines that there was a clear sequence of events that led to only palm oil
being considered a high ILUC -risk feedstock subject to the high ILUC -risk cap and phase-out. The
European Parliament's resolution set out one of the objectives of the European Parliament with
respect to the RED II, namely, to prohibit the use of palm oil as a biofuel feedstock. Such outright
prohibition would have been inconsistent with the EU's WTO obligations, as suggested by the
European Commission's internal legal advice (provided in Exhibit MYS-44). Thus, the European Union
was required to find another way to achieve this same objective and it decided to do so with an
elaborate mechanism related to the ILUC -risk of biofuel feedstocks. Coincidentally, but
unsurprisingly, palm oil is the only biofuel feedstock that is considered as having a high ILUC risk,
whose counting for purposes of the EU renewable energy targets will be phased out by 2030.
Malaysia, therefore, very much welcomes the considerations voiced in the separate opinion by one
panelist and invites the whole Panel to reconsider its findings in this regard.
6.76. The European Union does not respond to Malaysia's comment.
6.77. The Panel notes that Malaysia's comment on the Panel's findings refers back to its comments
on Article 2.2, and those comments have already been addressed above. The Panel considers that
Malaysia's reiteration of those comments here does not require any specific reply from the Panel.
Insofar as Malaysia is seeking to ensure that its views on the Panel's findings are fully reflected, the
Panel has accommodated Malaysia's request by setting out its comments in full.185
6.78. In the context of the Panel's findings on "Relative share of expansion rate into land with high-
carbon stock", Malaysia comments on paragraph 7.557 with respect to the discussion on the
absolute and relative expansion of production area of biofuel feedstocks. In this context, Malaysia
underlines the arbitrariness that it sees in the European Union's design of the measures at issue,
notably as they relate to the elements taken into account for the ILUC -risk formula, particularly as
they relate to the absolute expansion into high-carbon stock land. In this respect Malaysia refers to
its first written submission, paragraphs 120-122, and states that the graph contained there is very
illustrative of the facts on the ground, showing the large harvested area for soybean, as compared
to the relatively small harvested area for oil palm. The Panel's statement that it "further observes
that the measure takes into account the absolute expansion of the production area by requiring that
the average annual expansion of the production area affects more than 100 000 hectares" does not
appear able to mitigate these concerns.
6.79. The European Union observes that Malaysia is re-arguing once again its case (and references
paragraphs 120-122 of Malaysia's first written submission). Malaysia claims that the presence of a

185 See para. 6.7 above.

minimum threshold of average annual absolute expansion (100 000 hectares) since 2008 in the
formula would amount to arbitrariness, since oil palm cultivation, in 1980, started on smaller areas
compared to other crops. Malaysia's argument does not consider that the minimum threshold of
average annual absolute expansion is combined, within the formula itself, with a minimum threshold
of average annual relative expansion. There is, in fact, a double threshold to calculate t he global
production area, which is intended to mitigate any possible distortions given by different dynamics
of cultivation, and has the ultimate goal of considering significant only the expansion into land with
high-carbon stock both in terms of the absolute increase of production areas and the relative
increase. The European Union does not consider Malaysia's arguments relevant or necessary. If the
Panel decides to accept Malaysia 's request, the European Union respectfully requests that its own
arguments be reflected as well (as in its first written submission, paras. 113-118).
6.80. The Panel notes that Malaysia's comment on paragraph 7.557 reiterates its arguments on
issues that have been extensively debated by the parties, and fully considered by the Panel, with a
general request that the Panel reconsider its evaluation of the relevant evidence. The Panel considers
that such comments generally do not require any specific reply from the Panel. Insofar as Malaysia
is seeking to ensure that its views on the Panel's findings are fully reflected, the Panel has
accommodated Malaysia's request by setting out its comments in full.186
6.3.4 Article 12.3 – Taking account of special needs
6.81. In paragraph 7.940, the Panel states that it is not apparent how the European Union could
have modified the proposed measures to address Malaysia's concerns without the complete
withdrawal of the measures at issue, and in this connection the Panel notes its finding, in the context
of Article 2.2, that none of the "alternative measures" proposed by Malaysia would have made an
equivalent contribution to the objective of limiting ILUC-related GHG emissions associated with the
production of biofuels from food and feed crops. In a comment on paragraph 7.940, Malaysia refers
the Panel to its interim review comments relating to the Panel's findings, in the context of Article
2.2, on the alternative measures proposed by Malaysia.
6.82. The European Union does not respond to Malaysia's comment.
6.83. The Panel notes that Malaysia's comment on the Panel's findings under Article 12.3 refers
back to its comments on Article 2.2, and those comments have already been addressed above. The
Panel considers that Malaysia's reiteration of those comments here does not require any specific
reply from the Panel.
6.84. In paragraph 7.948, the Panel states that it is not persuaded by Malaysia's argument that
the European Union's decision to not conduct an impact assessment for the Delegated Regulation is
necessarily relevant to whether it complied with its obligation to "take account of" the special needs
of developing country Members and that Malaysia has not demonstrated that any such impact
assessment wo uld have been a central mechanism, let alone the exclusive mechanism, for the
European Union to have taken account of the special development, financial and trade needs of
developing country Members. In a comment on paragraph 7.948, Malaysia clarifies that it did not
argue that the failure to conduct a dedicated impact assessment with respect to the specific
measures at issue was the "exclusive mechanism, for the European Union to have taken account of
the special development, financial and trade needs of d eveloping country Members". However,
Malaysia considers that such impact assessment would have been crucial to determine the likely
impacts of the measure, including for developing countries. In turn, this would have allowed the
European Union to more adequately ensure that the "special development, financial and trade needs"
be indeed taken account of. In Malaysia's view, and arguably in that of the other developing countries
that intervened as third parties in DS600, they were not.
6.85. The European Union observes that Malaysia invites the Panel to revisit its appreciation of the
absence of an impact assessment. The European Union disagrees and refers the Panel to its written
submissions.
6.86. The Panel recalls that, in paragraphs 7.948 and 7.949, it finds that the decision to not conduct
an impact assessment for the Delegated Regulation is not necessarily relevant to whether it complied

186 See para. 6.7 above.

with its obligation to "take account of" the special needs of developing country Members, because
Malaysia has not demonstrated tha t any such impact assessment would have been a central
mechanism, let alone the exclusive mechanism, for the European Union to have taken account of
the special development, financial and trade needs of developing country Members. I n its interim
review com ment, Malaysia asserts that such impact assessment "would have been crucial to
determine the likely impacts of the measure, including for developing countries". The Panel does not
consider that Malaysia's assertion warrants any adjustment to the Panel's findings in this paragraph.
6.3.5 Article XX – General exceptions
6.87. Following paragraph 7.1073 , Malaysia comments on the Panel's findings regarding the
individual elements of Article XX in light of the European Union's argument that "the measures at
issue are jointly held by the three-pillar exceptions approach". Malaysia appreciates the fact that the
Panel did not follow the European Union's "innovative" approach and, instead, based its assessment
on the approach suggested by well -established WTO case law. At the sa me time, Malaysia is
surprised that the Panel does not reflect on the European Union's questionable approach at all.
Malaysia respectfully requests the Panel to comment on this argument, as it would be most helpful
if the Panel were to address and explicitly reject this argument.
6.88. The European Union does not consider it necessary that the Panel comment further on the
European Union's approach. The Panel has evaluated the European Union's claim that the measures
may be justified under Article XX of the GATT 1994.
6.89. The Panel recalls that the European Union's first written submission characterized its defence
under Article XX as "a three -pillar approach", which it explained in the following terms: "[t] he
European Union relies concurrently on Article XX(a), (b) and (g) in the present proceedings. This
means that the three values -based and science -based objectives are intertwined and for our
composite defence to fail it would mean that the three justifications should fail altogether."187 In the
context of its identification of the objective for purposes of Article 2.2 and Article XX, the Panel did
not proceed on the European Union's understanding that there are three intertwined objectives.
Furthermore, the Panel proceeded to conduct a separate examinatio n under each of the
subparagraphs of Article XX invoked, as opposed to seeking to apply these subparagraphs
concurrently. The Panel has also made clear that its examination of the measure under any one of
those subparagraphs would not affect the conclusion s reached in the context of its examination of
the measure under the other subparagraphs (see for example paragraph 7.1090). The Panel
considers it unnecessary to further address the European Union's references to its so-called "three-
pillar approach" and "composite defence".
6.90. Malaysia takes issue with the Panel's findings in paragraph 7.1081, in the context of Article
XX(g), notably with respect to the Panel's consideration that "[t]he formula applies to all crop-based
biofuels, with no differentiation between biofuels made from crops produced in the European Union
and biofuels made from crops produced elsewhere". The formula does, in theory, apply to all crop-
based biofuels, but, in practice, the measures at issue currently only effectively apply to palm oil as
a biofuel feedstock. Furthermore, Malaysia believes that the Panel's comparison "between biofuels
made from crops produced in the European Union and biofuels made from crops produced elsewhere"
is flawed and should not be conducted under the test of A rticle XX(g). That comparison is for the
review under the test of the chapeau to Article XX. In relation to the test under Article XX(g), the
Panel should have compared biofuel made in the European Union (i.e., domestically) from palm oil
as a biofuel feedstock and biofuel made outside of the European Union (i.e., abroad) from palm oil
as a biofuel feedstock. It is clear that the EU measures never intended to discriminate between
domestic and foreign production in that no palm oil is produced domestically in the EU and that the
very intention of the EU measure, once oil palm crop-based biofuels were the only ones determined
to be considered as having a high ILUC risk, was to prevent their product or consumption from any
origin or source.
6.91. The European Union disagrees with Malaysia's assertion that the Panel has misapplied the
analysis under Article XX (g). It refers to its written submissions.
6.92. The Panel understands Malaysia to argue that because the measures at issue currently only
effectively apply to palm o il as a biofuel feedstock, the Panel is wrong to state that t he formula

187 European Union's first written submission, paras. 1329-1330.

"applies to all crop -based biofuels, with no differentiation between biofuels made from crops
produced in the European Union and biofuels made from crops produced elsewhere". The Panel
disagrees. As the Panel has explained at paragraph 7.267, while the application of that formula
based on the data that was before the EU authorities as of 2019 led to the conclusion that palm -oil
based biofuel was, at that time, the only crop -based biofuel that qualified as high ILUC risk, this
does not change the fact that the formula applies generally and equally to all crop -based biofuels
and may, in the future, lead to other oil -based biofuels being determined to qualify as high ILUC -
risk biofuels.
6.93. In the context of the Panel's findings under Article XX(b), the Panel recalls its findings under
Article 2.2 and states that its assessment applies mutatis mutandis to Article XX(b). In a comment
on paragraph 7.1087, Malaysia refers the Panel to its interim r eview comments relating to the
Panel's findings, in the context of Article 2.2, on the alternative measures proposed by Malaysia.
6.94. The European Union does not respond to Malaysia's comment.
6.95. The Panel notes that Malaysia's comment on the Panel's findings und er Article 12.3 refers
back to its comments on Article 2.2, and those comments have already been addressed above. The
Panel considers that Malaysia's reiteration of those comments here does not require any specific
reply from the Panel.
6.4 Claims in respect of the French measure
6.96. Malaysia comments on the Panel's findings in paragraphs 7.1296 and 7.1297 with respect
to the conclusions on Article XX and the French TIRIB measure. Malaysia makes two different
comments:
a. In Malaysia's view, the French TIRIB measure is not directly linked to the EU measures on
ILUC and, therefore, to the arguments made by the European Union in this regard.
b. Malaysia considers the Panel's considerations in paragraphs 7.1296 and 7.1297 to be
contradictory. While paragraph 7.1296 comes to the conclusion that "the European Union's
failure to demonstrate the existence of any provisions or flexibilities for palm oil -based
biofuels to be certified as low ILUC -risk requires the Panel to conclude that the exclusion
of palm oil-based biofuel from the group of qualifying biofuels for purposes of the French
TIRIB measure has been administered in a manner that constitutes arbitrary or
unjustifiable discrimination between countries where the same conditions prevail",
paragraph 7.1297 does not then ref er to this lack of provisions, but again refers to the
finding that "the European Union has failed to conduct a timely review of the data used to
determine which biofuels are high ILUC risk, and has failed to demonstrate the existence
of any provisions or flexibilities for palm oil -based biofuels to be certified as low ILUC -
risk". Malaysia respectfully requests the Panel to clarify its findings with respect to the
French TIRIB measure, notably as they concern the justification under Article XX.
6.97. The European Union disagrees on both points:
a. The European Union disagrees with Malaysia's assertion that the French TIRIB measure is
not directly linked to the EU measures. In this regard, the European Union recalls its own
arguments (in the European Union's first wri tten submission, paras. 1578 -1585), as
follows. The exclusion from the TIRIB reduction of palm oil -based biofuel is designed to
contribute to the same objectives of the EU renewable energy legal framework. The
European Union has also demonstrated that the French civil society and the French
legislator consider the environmental impact of palm oil cultivation in terms of climate
change and loss of biodiversity to be an issue of moral concern. The European Union recalls
that the exclusion from the TIRIB reduction of palm oil-based biofuel is consistent with its
objectives of avoiding that demand for renewable energy contribute to increased
greenhouse gas emissions and that they exacerbate biodiversity loss. Like the European
Union, with its measure France seek s to protect various societal values, notably prevent
climate change, environmental degradation and biodiversity loss and address the related
moral concerns. The objectives pursued by the French measure are therefore also covered
by paragraphs (a), (b) and (g) of Article XX.

b. The European Union disagrees with Malaysia's assertion that there are inconsistencies
between the Panel's conclusions in paragraphs 7.1296 and 7.1297. In fact, the lack of
flexibility provisions for palm oil -based biofuels to be certif ied as low ILUC -risk is a
conclusion of both.
6.98. The Panel responds to Malaysia's comments as follows:
a. The Panel disagrees with Malaysia's view that the French TIRIB measure is not directly
linked to the EU measures. The Panel has already explained, in paragraphs 7.1273-7.1276.
why it considers that the exclusion of palm oil -based biofuel from the group of qualifying
biofuels for purposes of the French TIRIB measure pursues the same objectives as the
high ILUC-risk cap and phase-out. In addition to these explanations, the Panel notes that
the 2020 report on biofuels from the French Parliament explains that, as palm oil -based
biofuels are now considered at the European level as posing a high -ILUC risk, Article 266
quindecies, as worded in the 2019 Finance Law, provides that palm oil-based products are
not considered to be biofuels.188 Moreover, the French Constitutional Court has confirmed
that the exclusion of palm oil -based biofuel from the group of qualifying biofuels for
purposes of the French TIRIB measure responds to concerns about the risk of ILUC-related
GHG emissions associated with crop -based biofuels, and the high ILUC -risk posed by oil
palm cultivation. In the Panel's view, this further confirms that the French TIRIB measure
pursues the sa me objectives as the high ILUC -risk cap and phase -out. It also confirms
that the French legislator relied on RED II and on the Delegated Regulation for considering
that palm oil products pose a high ILUC risk, even when the French legislator decided to
address those concerns by removing palm oil -based products from the definition of
biofuels, making the provisions applicable at the time to high ILUC-risk products (such as
the planned progressive elimination and low ILUC-risk certifications) inapplicable for palm
oil-based products. In the light of Malaysia's comment, the Panel has adjusted paragraphs
7.1275 and 7.1276 to reflect the foregoing.
b. The Panel has added a cross-reference, in paragraph 7.1296, to its earlier findings that (i)
France has relied on RED II and on the Delegated Regulation for considering that palm oil
products pose a high ILUC risk, and (ii) the European Union has failed to conduct a timely
review of the data used to determine which biofuels are high ILUC risk. The Panel considers
that the addition of this cross-reference enhances the clarity and coherence of the findings
in these interrelated sections of the Report and addresses the lack of parallelism
highlighted by Malaysia. The Panel has also added a footnote to paragraph 7.1297 aimed
at clarifying how these findings inform the Panel's assessment of the French TIRIB
measure.
6.5 Separate opinion by one panelist
6.99. The European Union observes that paragraph 7.1442 states that Malaysia challenges the
EU and French measures that single out one particular type of crop-based biofuels – i.e. palm oil-
based biofuel – and "with a view to eliminating that one type of biofuel from the EU renewable
energy market". With respect to the quoted clause of this sentence, the European Union requests
that it be clarified that "this is a contested assertion".
6.100. Malaysia suggests that the sentence could be reformulated in a way that presents it as an
argument of Malaysia.
6.101. The European Union's request is declined. The sentence discussed by the European Union is
in the nature of an introductory statement aimed at distinguishing Malaysia's claims, not a factual
finding by the panelist. Moreover, the separate opinion states at the outset (see paragraph 7.1444)
that the opinion does "not exhaustively identify and analyse all of the evidence that could be referred
to in connection with the issues raised, or repeat all of the arguments and counterarguments of the
parties that have a bearing on these issues".
6.102. The European Union observes that paragraph 7.1448 states that "[t]he measures at issue
in this dispute have been the subject of academic analyses and commentary by various institutions,

188 French Parliament Report n. 2609, (Exhibit EU-205), p. 49.

and some of these studies have been placed on the record". The European Union states that g iven
that reference is made to multiple studies, these multiple studies be referenced in the footnotes.
6.103. Malaysia does not respond to the European Union's comment.
6.104. The European Union's request is declined. The separate opinion states at the outset (see
paragraph 7.1444) that "[t]he difference in view underlying this separate opinion is essentially a
matter of how much weight to give to certain evidence before the Panel. I will not exhaustively
identify and analyse all of the evidence that could be referred to in connection with the issues raised
... Instead, what follows sets forth the basic rationale behind the conclusions I reach by identifying
some of the evidence that I give more weight to than the Panel majority." There is no need to
reference all of the potentially relevant record evidence in the footnotes.
6.105. Regarding the reference to the paper by Delzeit et al included in paragraphs 7.1448 and
7.1455, the European Union states that the Panel member appears to be referring to exhibits from
parallel proceedings in DS593 and Exhibit IDN -2 is not on the record in these proceedings. The
European Union states that it therefore objects to this reference, and requests that references in
this Panel report are mad e exclusively to documents on the record in these proceedings and are
referenced accordingly.
6.106. Malaysia observes that the DSU and the Panel's Working Procedures are silent on the right
of a Panel to make cross -references to a related dispute (i.e., DS593) in which the same Panel is
presiding and, more importantly, in which both of the disputing Parties are a lso involved, either as
a respondent (the European Union) or as a Third Party (Malaysia). Therefore, Malaysia questions the
basis for the EU's comment and respectfully requests the Panel to consider maintaining the text and
references in question.
6.107. The European Union's request is declined, as it is based on a mistaken premise. For greater
clarity, the reference to the paper by Delzeit et al included at paragraphs 7.1448 and 7.1455 is not
a reference to an exhibit from parallel proceedings in DS593. The pape r by Delzeit et al is on the
record in these proceedings (i.e. DS600), as it was submitted as an exhibit (i.e. Exhibit IDN-2) by
Indonesia in its capacity as a third party in DS600.
6.108. The European Union observes that paragraph 7.1449 states that "[t]his evidence must be
assessed holistically, rather than examining each of these statements in isolation from the others".
The European Union requests clarification as to whether the term "this evidence" refers to Delzeit
only. To the extent that it refers to othe r "academic analyses and commentary by various
institutions", the European Union reiterates its request that this is referenced and identified.
6.109. Malaysia does not respond to the European Union's comment.
6.110. For greater clarity, the reference to "this evidence" in paragraph 7.1449 refers to all of the
evidence referenced in the three preceding paragraphs of the separate opinion (i.e. the explicitly
protectionist recommendation contained in the 4 April 2017 resolution of the European Parliament;
the evidence showing that the European Union has a long history of enacting trade barriers to limit
imports of palm oil-based biofuel to protect the EU biofuel industry; and evidence of the anticipated
effect of the high ILUC -risk cap and phase -out on EU production of comp eting vegetable oils and
biofuels when assessing the objective of the measure).
6.111. The European Union states that the second sentence of paragraph 7.1456, wrongly implies
that the formula only looks at relative expansion. The formula examines relative and abs olute
expansion. Whereas Malaysia asserts that the formula looks at relative expansion (Malaysia's first
written submission, para graph 581), the European Union clarified this point and refers to its own
first written submission, paras. 113-115, its response to Panel question No. 38, and the Delegated
Regulation. The European Union requests that this is reformulated so as to accurately reflect that
both relative and absolute expansion are considered.
6.112. Malaysia considers that the panelist is clearly in agreeme nt with Malaysia's assessment of
the ILUC-risk formula and that there is no need for the European Union's proposed insertion.

6.113. The European Union's request is declined. It is understood that the measure takes into
account the absolute expansion of the produ ction area by requiring that the average annual
expansion of the production area affects more than 100 000 hectares (as per Article 3(a) of the
Delegated Regulation). Paragraph 7.1456 states that "the singling out of palm oil -based biofuel,
notwithstanding the seemingly similar risk of ILUC-related GHG emissions associated with soybean,
seems to stem from how the formula seeks to measure ILUC-related GHG emissions on the basis of
relative expansion of land, and the relative share of that expansion into high -carbon stock land."
This sentence does not state that the formula seeks to measure ILUC -related GHG emissions
"exclusively" or "solely" on the basis of relative expansion of land.
6.114. In a comment following paragraph 7.1458, Malaysia states that the separate opinion of
this one panelist voiced in paragraph 7.1458 encapsulates Malaysia's arguments with regard to the
issues on "legitimate objective", "legitimate regulatory distinction", as well as to the principles of
"arbitrary or unjustifiable discrimination" and "disguised restriction on trade". As such, Malaysia
requests the whole Panel to review its related findings and adopt this line of reasoning in reaching
its final conclusions and recommendations.
6.115. The European Union disagrees that the Panel should adop t the reasoning reflected in the
separate opinion of one panelist. That opinion places additional weight on certain evidence, in respect
of which the European Union has made extensive submissions.
6.116. The Panel declines Malaysia's request.
7 FINDINGS
7.1 Claims in respect of the EU measures: the 7% maximum share, the high ILUC-risk cap
and phase-out, and low ILUC-risk certification
7.1.1 Preliminary considerations
7.1. In this preliminary section, the Panel will first set out certain considerations regarding the
definition of the EU measures at issue and will then explain the order of analysis of claims in this
section.
7.1.1.1 Preliminary considerations relating to the definition of the EU measures at issue
7.2. As the Panel has already provided, in section 2 of th is Report, a comprehensive exposition of
the content and context of the measures at issue in this dispute, there is no need to repeat it here.
In this section of the Report, the Panel addresses three issues concerning the definition of the EU
measures at issue:
a. The measures at issue as individual measures distinct from the broader Biofuels regime;
b. The relationship among the measures and related terminology; and
c. Temporal scope issues arising from the gradual implementation of RED II and the
Delegated Regulation.
7.3. The issues above are, to varying extents, cross-cutting in nature. Insofar as there are additional
issues regarding the definition or identification of the EU measures at issue that arise only in the
context of particular claims under the TBT Agreement or the GATT 1994, the Panel addresses them
in the context of the specific claims to which such additional issues pertain.

7.1.1.1.1 The measures at issue as individual measures distinct from the broader Biofuels
regime
7.4. In its submissions, the European Union takes issue with the fact that Malaysia challenges the
7% limit /maximum share189 and the high ILUC-risk cap and phase-out190 as individual "measures"
distinct from what the European Union terms its broader "Biofuels regime".191 Malaysia asks the
Panel to reject the Eu ropean Union's mischaracterization of the measure(s) as the EU "Biofuels
regime", and focus on the specific measures at issue as identified in its panel request and
submissions.192
7.5. The Panel notes that the European Union questions the characterization of the 7% maximum
share and the high ILUC-risk cap and phase-out as individual "measures" primarily in the context of
arguing that the alleged measures are not "technical regulations" within the meaning of Annex 1.1
to the TBT Agreement. However, in the Panel's view, the European Union's argument raises a more
general issue regarding the Panel's terms of reference and the scope and definition of the measures
at issue . Given that t he identification of the relevant measure(s) is fundamental to the Panel's
analysis of many of the issues that follow, the Panel considers it appropriate to address this issue at
the outset.193
7.6. The European Union's arguments on this point seem to weave together two alternative
arguments. The first argument appears to be that the 7% maximum share and the high ILUC -risk
cap and phase-out, as set out in Articles 26(1) and 26(2) of RED II, cannot be assessed as individual
"measures" distinct from the broader "EU Biofuels regime".194 The second argument appears to be
that Malaysia is free to "extract" these different components of one provision (i.e. Article 26 of RED
II) and identify them as distinct "measures", but it does not follow from this definition of the
measures at issue "that those provisions should be scrutinised by the Panel in isolation from their
broader context".195 This second argument would seem to concern how the Panel should analyse the
specific measures at issue, and not whether they can be assessed as individual "measures".196 The
Panel addresses these arguments separately in the interest of analytical clarity.
7.7. Beginning with the European Union's first line of argument, the Panel sees no basis to question
Malaysia's identification of particular aspects of what the European Union refers to as the "Biofuels
regime" as the specific measures at issue for the purposes of defining the subject -matter of its
complaint. The fact that these aspects (incl uding the 7% maximum share and the high ILUC -risk
cap and phase-out) are part of the broader regulatory framework for the promotion of renewable

189 Malaysia refers to this measure as the "7% limit", while the European Union refers to it as the "7%
maximum share". For reasons elaborated in the next section of this Report, the Panel refers to this measure as
the "7% maximum share".
190 Malaysia and the European Union refer to the high ILUC-risk "cap" and "phase-out" in the plural, as
two distinct measures. For reasons elaborated in the next section of this Report, the Panel refers to the high
ILUC-risk cap and phase-out as a single measure.
191 European Union's first written submission, paras. 511-515.
192 See e.g. Malaysia's second written submission, paras. 10-19; opening statement at the meeting with
the Panel, para. 54.
193 The Panel notes that the European Union naturally focuses on the two "measures" alleged to be
"technical regulations" under Article 2 of the TBT Agreement when developing this argument, namely the 7%
maximum share and the high ILUC-risk cap and phase-out. The Panel understands that the European Union's
argument would presumably extend mutatis mutandis to the low ILUC-risk certification measure alleged to
constitute a "conformity assessment procedure" under Article 5 of the TBT Agreement.
194 For instance, the European Union argues that Malaysia "selectively identified only some of the
provisions that constitute the EU Biofuels regime, notwithstanding that those provisions operate in conjunction
with one another, and could only be assessed as a composite whole". (European Union's first written
submission, para. 512.) Consistent with that understanding, throughout its submissions the European Union
generally places quotation marks around the word "measures" whenever referring to the 7% maximum share
and high ILUC-risk cap and phase-out (for instance, it develops this argument under the heading, "Neither the
EU Biofuels regime nor the 'measures' identified by Malaysia are a 'technical regulation'").
195 European Union's first written submission, para. 514.
196 For instance, the European Union does not appear to be arguing that the 7% maximum share and
the high ILUC-risk cap and phase-out are capable of being assessed as individual measures when it argues that
"even though Malaysia has dissected isolated provisions of RED II or part thereof and characterised them as
individual 'measures' for the purpose of the present proceedings, in order to assess and appreciate the
objectives of those 'measures', the EU Biofuels regime must be considered as a composite whole, situated in
the broader legal and policy context of which it forms part." (European Union's first written submission,
para. 163.)

energy in the European Union provided through RED II does not suggest that they could not validly
constitute a challengeable "measure" for the purposes of Malaysia's identification of the subject -
matter of its complaint.
7.8. The Panel recalls that a "measure" challengeable under the DSU may in principle consist of any
act or omission attributable to a Member 197, and sees nothing in Malaysia's analytical approach to
the definition of the measures at issue that "departs from the orthodoxy ".198 The Panel observes
that when a complaining Member challenges one or more measures reflected in one or more written
instruments, such as a law, regulation, or directive, it would almost invariably be expected to identify
one or more specific provisions of the instrument(s) as the relevant measures at issue for the
purposes of defining the subject -matter of its complaint. In other words , a complaining Member
would almost invariably be expected to selectively identify one or more isolated provisions contained
in the relevant written instrument(s) and characterize those provisions as the measure(s) at issue.
Indeed, a complaining Member's failure to single out (or isolate) one or more specific (i.e. selectively
identified) provisions contained in a law, regulation or other instrument could potentially render a
panel request inconsistent with Article 6.2 of the DSU. That provision requires a complaining Member
to identify the specific measures at issue.
7.9. The Panel does not question that the 7% maximum share and the high ILUC -risk cap and
phase-out may be said to "operate in conjunction "199 with one anot her, and with various other
provisions of RED II, the Delegated Regulation, and other aspects of the broader regulatory
framework (which the European Union refers to collectively as its "Biofuels regime"). However, that
circumstance alone does not suffice to establish that all of these aspects of the broader EU "Biofuels
regime" must be examined as "a composite whole"200 in the sense of all of these aspects constituting
a single, inseparable measure. Once again, it is only to be expected that, when a complai ning
Member challenges one or more provisions in a written instrument, the specific provision challenged
as the measure at issue would operate in conjunction with other provisions in the same instrument
and/or closely related instruments. There is nothing in WTO dispute settlement practice to suggest
that, in such circumstances, a complaining Member must identify and challenge a single, inseparable
measure comprising all provisions that "operate in conjunction " with the specific measure that it
seeks to challenge.201
7.10. For these reasons, the Panel concludes that the European Union has not established any basis
to question Malaysia's identification of particular aspects (i.e. the 7% maximum share and the high
ILUC-risk cap and phase-out) of what the European Union refers to as the "Biofuels regime" as the
specific measures at issue for the purposes of defining the subject-matter of its complaint.
7.11. Turning to the European Union's second line of argument described above, the Panel fully
agrees that it does not follow from Malaysia's identification of the relevant aspects of Articles 26(1)
and (2) of RED II as the specific measures at issue "that those provisions should be scrutinised by
the Panel in isolation from their broader context".202 In other words, the Panel accepts that the 7%
maximum share, as reflected in Article 26(1) of RED II, and the high ILUC -risk cap and phase-out,
as reflected in Article 26(2) of RED II and the Delegated Regulation, can only be understood as
components of the broader regulatory framework.
7.12. The Panel recalls that section 2 of this Report already provides a thorough review of the
relevant provisions of RED II, the Delegated Regulation, and that broader regulatory framework.
The Panel recalls that it has quoted or summarized numerous provisions from the following
instruments that comprise the broader EU Biofuels regime other than Articles 26(1) and (2) of RED
II, including:

197 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para. 81.
198 European Union's first written submission, para. 515.
199 European Union's first written submission, para. 512.
200 European Union's first written submission, para. 512.
201 To avoid any possible misunderstanding, the Panel is not suggesting that WTO dispute settlement
practice prevents a complaining Member from asserting that multiple individual measures that it challenges
should be analysed in combination as a single overarching measure. The issue raised by the European Union's
argument presently under consideration is whether a complaining Member is required to expand the scope of
the measures it wishes to challenge by including, as challenged measures, all provisions of the regulatory
framework insofar as they operate in conjunction with the specific measures at issue.
202 European Union's first written submission, para. 514.

• Directive 2003/30/EC on the promotion of the use of biofuels or other renewable fuels for
transport (referring to Recitals (3) to (6), (22), Articles 3(1), 4(2));
• RED I (referring to Articles 3(1), 3(4), Annex I, Articles 2(i) and (a), 17(2), 17(3), 17(5),
19(6));
• Fuel Quality Directive (referring to Articles 1(5), 1(6));
• ILUC Directive (referring to Recitals (4), (5), (16), (17), (21), (28), (34), Articles
2(2)(b)(iv), 2(1)(w));
• the 2012 Impact Assessment, the 2017 Study Report, the RED II Proposal;
• RED II (referring to Articles 1, 2(1), 2(33), 2(32), 2(27), 2(24), 2(34), 2(40), 2(37), 3(1),
3(2), 7(1), 7(4), 25(1), 26(1), 27, 29, 29(3), 29(4), 29(5), 29(10), 30(6), 30(8), Annex V,
30(1), Annex IX);
• Delegated Regulation (referring to Articles 2(5), 3, the Annex, Artic les 4(1)(b), 5, 6, and
7); and
• the 2019 Status Report presented together with the Delegated Regulation.
7.13. Thus, the Panel clearly accepts that in its assessment of the design and operation of the
specific measures at issue, it must take into account other provisions of RED II, the Delegated
Regulation, and the broader regulatory context to the extent that they are relevant to that
assessment. This may include, but is not necessarily limited to, any of the instruments and
documents listed above and described in greater detail in section 2 of this Report. However, the
Panel reiterates that this does not relate to any issue regarding the identification of the challenged
measures as such, but rather to the issue of how the Panel should analyse the specific measures at
issue.
7.14. Moreover, it appears that there is no actual disagreement between the parties in this regard.
In their respective assessments of the 7% maximum share and the high ILUC -risk cap and
phase-out, as reflected in Article 26(1) and (2) of RED II r espectively, Malaysia and the
European Union both refer to numerous other provisions of RED II, the Delegated Regulation, and
the broader regulatory framework. The parties do not always agree on which other provisions are
relevant context for the assessmen t of the measures at issue, or on how certain other provisions
are relevant. But such disagreements pertaining to the relevance and weight of particular aspects
of the context of the measures at issue cannot be taken to imply that Malaysia is arguing that, as a
consequence of its having identified the 7% maximum share and the high ILUC-risk cap and phase-
out as the specific measures at issue, it follows that the Panel must assess the specific measures in
Article 26(1) and (2) of RED II in isolation from all other relevant provisions of RED II, the Delegated
Regulation, or the broader regulatory framework.
7.15. The Panel concludes that the European Union has not established any basis to question
Malaysia's identification of particular aspects of what the European Union refers to as the "Biofuels
regime" as the specific measures at issue for the purposes of defining the subject -matter of its
complaint. The Panel further concludes that there is no disagreement between the parties that, in
its assessment of the specific measures at issue, the Panel must take into account other provisions
of RED II, the Delegated Regulation, or the broader regulatory context to the extent that they are
relevant to the assessment of the design and operation of the specific measures at issue.
7.1.1.1.2 The relationship among the measures and related terminology
7.16. The Panel now turns to the specific measures at issue themselves and sets out certain
considerations regarding their relationship as well as related terminology issues.
7.17. In examining the EU measures the Panel will proceed on a claim-by-claim basis. To the extent
that Malaysia has raised the same claim against different EU measures, this means that the Panel
will group the measures for the purposes of examining that claim. The Panel notes that this is also

the way that Malaysia has presented its claims and that its arguments under such claims to a large
extent do not distinguish between measures.
7.18. A second general observation is that the above considerations concerning the Panel's
assessment of the measures in the broader context of the regulatory regime as a whole also apply
to the relationship between the measures at issue. Beyond this general observation, however, the
Panel will address below certain specific issues of how some of the measures relate to each other.
7.19. Turning to the individual measures, the Panel, taking them one by one, makes the following
observations.
7.1.1.1.2.1 7% maximum share
7.20. Regarding the first measure, the Panel's observations are of a purely terminological nature.
Malaysia's panel request refers to the measure set out in Article 26(1) of RED II as the "7% limit".203
The European Union calls the same measure "the 7% maximum share."
7.21. The Panel sees nothing inherently problematic in referring to the measure as the "7% limit",
or the "7% maximum share", but the Panel will employ the terminology used by the European Union.
This formulation is more closely aligned to the terms used in the text of Article 26(1) itself.
7.22. The Panel sees the potential for significant confusion if the same m easure is referred to in
multiple different ways and therefore this terminology has been harmonized throughout the
Report.204
7.1.1.1.2.2 The high ILUC-risk cap and phase-out
7.23. The Panel now turns to the high ILUC -risk cap and phase -out, reflected in Article 26(2) of
RED II. A first issue concerns the question of whether the high ILUC -risk cap and phase-out are to
be treated as one single measure or two distinct measures, and the related question of whether to
refer to the measure in the singular or in the plural. A second issue concerns the relationship between
this measure, i.e. the high ILUC-risk cap and phase-out, and low ILUC-risk certification.
A single measure or two distinct measures
7.24. In its panel request, Malaysia referred to the high ILUC -risk "cap" and the h igh ILUC-risk
"phase-out" as two measures, and Malaysia follows the same approach in its submissions to the
Panel. The European Union's submissions in this dispute follow suit and refer to the high ILUC -risk
"cap" and the high ILUC -risk "phase-out" as two distinct measures. The Panel notes that whether
two measures (or two aspects of a measure) may be treated as a single measure is a qu estion to
be determined by a panel. That determination should be informed by the formulations used by the
complaining Member and/or the responding Member but is not controlled by how the parties refer
to and characterize the measure(s).205

203 WT/DS600/6, para. 10.
204 The Panel notes that it is common for disputing parties to employ different terminology to describe
the same measure(s), and it is clear that a panel is free to employ the terminology that it deems appropriate,
taking into account a range of considerations such as neutrality, ease of reference, and minimizing the
potential for confusion. See e.g. Panel Reports, US – Origin Marking (Hong Kong, China), fn 13 ("origin
marking requirement" vs "revised origin marking requirement"); Turkey – Pharmaceutical Products (EU),
fn 156 ("localization measure" vs "localisation requirement"); Australia – Tobacco Plain Packaging, fn 170
(noting that the different complaining Members "have used different terms when referring collectively to the
measures at issue"); EU – Energy Package, fn 20 ("government exemption measure" vs "public body
measure"); Argentina – Import Measures ("Restrictive Trade-Related Requirements" or "RTRRs" vs "Trade-
Related Requirements" or "TRRs"), fn 122; EC and certain member States – Large Civil Aircraft, fn 11 and
para. 7.291 ("Launch Aid" vs "member State Financing"); US – Continued Zeroing, fn 4 and paras. 6.26-6.28
(explaining in light of the parties' preferred alternative formulations that the reference to the measure as "the
continued application of the 18 duties" at issue was only intended to facilitate the multiple references that we
make to the measure at issue throughout this Report).
205 In cases involving challenges to a "single" measure comprised of multiple components, panels and
the Appellate Body have generally considered three main factors: (i) the complainant's presentation of its

7.25. The Panel sees several reasons to refer to the high ILUC -risk cap and phase -out in the
singular, and to analyse the high ILUC-risk cap and phase-out as a single measure. As a conceptual
matter, the "phase-out" is essentially the "cap" that is gradually decreased to 0 by the end of 2030,
at the latest. 206 Moreover, the claims that Malaysia presents in its panel request and also in its
submissions regarding the high ILUC-risk "cap" and "phase-out" are the same and apply equally to
both the cap and also to the phase-out. Indeed, in response to a question from the Panel asking
Malaysia to clarify whether it seeks "distinct determinations and findings in respect of each measure
under each of its relevant claims ", Malaysia confirms that "both measures [i.e. the "cap" and the
"phase-out"] are inconsistent with the same obligations" and "this for the same reasons".207 In these
circumstances, it is not clear what would be added by making "distinct" findings, and distinct
determinations, in respect of the two interrelated aspects of the high ILUC -risk cap and phase-out
set out in Article 26(2).
7.26. In these circumstances, the Panel considers it appropriate to refer to the challenged measure
as "the high ILUC-risk cap and phase-out" in the singular. Here again the Panel sees the potential
for significant confusion if the same measure is referred to in multiple different ways and therefore
this terminology has been harmonized throughout the Report.
Relationship to low ILUC-risk certification
7.27. The Panel notes that Malaysia's panel request seems to list the high ILUC-risk cap and phase-
out on the one hand, and low ILUC-risk certification on the other, as two distinct sets of measures.
The Panel will address terminology issues relating to low ILUC -risk certification below. For the
purposes of establishing how low ILUC-risk certification relates to the high ILUC-risk cap and phase-
out the following considerations apply.
7.28. Low ILUC -risk certification operates as an exemption 208 to the high ILUC -risk cap and
phase-out. The extent to which that exemption is to be taken into account in the assessment of the
WTO-consistency of the high ILUC -risk cap and phase -out is a function of the Panel's objective
assessment of its relevance to the assessment of the measure at issue, i.e. the high ILUC -risk cap
and phase-out, under the particular legal standard being applied. The Panel has already stated that
in its assessment of the specific measures at issue, it must take other pr ovisions of RED II, the
Delegated Regulation, or the broader regulatory context into account to the extent that they are
relevant to the assessment of the design and operation of the specific measures at issue.
7.29. By way of illustration, Article 3 of the Dele gated Regulation sets out the formula for the
identification of high ILUC -risk crop. Consequently the Panel must take Article 3 of the Delegated
Regulation into account in its assessment of the design and operation of the high ILUC-risk cap and
phase-out. The reason is that Article 3 of the Delegated Regulation is objectively relevant to the
assessment of the design and operation of the high ILUC-risk cap and phase-out under certain legal
standards being applied in this case, including most notab ly Article 2.1 of the TBT Agreement and
Article XX of the GATT 1994. It must therefore be taken into account, regardless of whether there
is language in the panel request to the effect that the claims directed at the high ILUC-risk cap and
phase-out must take into account Article 3 of the Delegated Regulation.

claim(s) in respect of the constituent components; (ii) the respondent's position; and (iii) the operation of and
relationship between the components to determine whether they are "autonomous or independent", or more
"interdependent" and "integrated". (See Panel Report, Turkey – Pharmaceutical Products (EU), para. 7.7, and
fns 168-176 (referring to Panel Reports, China – Raw Materials; US – COOL; China – Rare Earths, EC – Seal
Products; Argentina – Import Measures; Indonesia – Chicken; and India – Solar Cells); and Appellate Body
Reports, EC – Seal Products; US – Tuna II (Mexico) (Article 21.5 – Mexico); and Argentina – Import Measures,
paras. 5.124 and 5.130-5.131).)
206 This understanding is reinforced by the text of Article 26(2) of RED II, which, in referring to the cap
as the "limit", states that "[f]rom 31 December 2023 until 31 December 2030 at the latest, that limit shall
gradually decrease to 0 %."
207 Malaysia's response to Panel question No. 8, p. 6.
208 Low ILUC-risk certification is an exemption in the sense that low ILUC-risk certification applies only
to individual consignments of biofuels and does not affect the classification of the entirety of the crop in
question as high ILUC risk. See e.g. Delegated Regulation, recital (12) ("… Certified low ILUC-risk biofuels [….]
should be exempted from the limit and gradual reduction set for high ILUC-risk biofuels, […]"). (emphasis
added) See also Delegated Regulation, Article 6.3, confirming that the "consignments" of biofuels are the ones
"to be considered as [low ILUC-risk]".

7.30. Therefore, the Panel concludes that the extent to which the exemption for low ILUC -risk
certification (and any other provisions of RED II, the Delegated Regulation, or the broader regulatory
framework) must be taken into account in its assessment of the high ILUC -risk cap and phase-out
is a function of the Panel's objective assessment of their interrelationship and the particular legal
standards being applied.
7.31. Proceeding now with its assessment of th eir interrelationship and the particular legal
standards being applied, the Panel considers that both the low ILUC -risk criteria and certification
procedure are in principle relevant its assessment of the high ILUC-risk cap and phase -out under
Article 2 of the TBT Agreement and the relevant provisions of the GATT 1994. In particular, the Panel
considers that the potential for low ILUC-risk certification is relevant to the assessment of whether
the high ILUC-risk cap and phase-out is a technical regulation w ithin the meaning of Annex 1.1 to
the TBT Agreement, and if so whether that measure is consistent with Articles 2.1 and 2.2 of the
TBT Agreement. The Panel considers that the low ILUC -risk criteria and certification procedure are
in principle also relevant to the Panel's assessment of the high ILUC-risk cap and phase-out under
the relevant obligations and exceptions in the GATT 1994, including Articles I, III, X:3(a), XI:1, and
XX. There are several considerations that lead the Panel to this conclusion.
7.32. First, it is apparent from the text of RED II and the Delegated Regulation that the opportunity
for low ILUC-risk certification is integral to the high ILUC -risk cap and phase -out in that, together
with the criteria for high ILUC-risk classification, it partly defines the overall scope of application of
the "cap and phase-out" requirements that are provided for in the measure. Indeed, the possibility
of low ILUC -risk certification is incorporated into Article 26(2) itself, which states in its first
paragraph that "the share of [high ILUC-risk biofuels] shall not exceed the level of consumption of
such fuels in that Member State in 2019, unless they are certified to be low indirect land-use change-
risk biofuels".209 The close relationship between the high ILUC-risk cap and phase-out and low ILUC-
risk certification is underscored by the fact that an exemption would not be needed, if the biofuel at
issue did not in the first place constitute high ILUC-risk biofuel, to which the high ILUC-risk cap and
phase-out applies. In other words, the high ILUC-risk cap and phase-out is integrally related to, and
operates in conjunction with, low ILUC-risk certification.
7.33. Second, there have been several prior disputes in which the assessment of the
WTO-consistency of a measure under the GATT 1994 and/or the TBT Agreement took into account
the manner in which any exemptions to the challenged measure were defined and applied. For
example, in US – Shrimp the measure at issue was a US import prohibition on shrimp, and the
Appellate Body's examination of the measure at issue under the chapeau of Article XX of the
GATT 1994 focused on certain deficiencies in the manner that the applicable exceptions and related
certification procedures were applied.210 In EC – Seal Products, the measure at issue was an EU ban
on seal products, and the analysis by both the panel and the Appellate Body turned on the design
and application of the exceptions for Inuit or other indigenous communities and marine resource
management. The panel in EC – Seal Products addressed these exceptions as part of its assessment
under Article 2.1 of the TBT Agreement and then again under Article XX.211 The Appellate Body
followed a similar approach in its analysis under Article XX of the GATT 1994.212
7.34. Third, the parties to t his dispute appear to agree that certain aspects of low ILUC -risk
certification, including at least the low ILUC-risk criteria, are in principle relevant to the Panel's
assessment of the high ILUC-risk cap and phase-out under the TBT Agreement and the GATT 1994.
Among other things, Malaysia's first written submission refers to the low ILUC -risk criteria in the
context of its description of the high ILUC-risk cap and phase-out as the measure at issue213 and, in
the context of its claims against the high ILUC -risk cap and phase -out, argues that the low ILUC -
risk criteria are impracticable and ineffective. According to Malaysia, this serves as additional
evidence that the high ILUC -risk cap and phase -out has a detrimental impact on the competitive
opportunities of oil palm crop-based biofuel in the European Union for the purposes of Article 2.1 of
the TBT Agreement, and also that the high ILUC-risk cap and phase-out has a limiting effect on trade

209 Emphasis added.
210 Appellate Body Report, US – Shrimp, paras. 161-177.
211 Panel Reports, EC – Seal Products, paras. 7.646-7.651 (cross-referencing its analysis under Article
2.1).
212 Appellate Body Reports, EC – Seal Products, paras. 5.316-5.339. The Appellate Body did not make
findings under Article 2.1, because it reversed the panel's finding that the EU Seal Regime was a technical
regulation within the meaning of Annex 1.1 to the TBT Agreement.
213 See e.g. Malaysia's first written submission, paras. 387-388.

for the purposes of Article 2.2 of the TBT Agreement.214 For its part, the European Union notes that
"[t]he low ILUC-risk fuel certification scheme clearly constitutes [an] integral part of the Delegated
Regulation and is relevant to assessing both of the 'measures' Malaysia has identified. "215 In the
context of addressing the trade -restrictiveness of the high ILUC -risk cap and phase -out, the
European Union argues that the trade impact of the measures at issue is minimal in light of inter
alia, the low ILUC-risk certification provisions.216 Both parties cross-reference their arguments under
the TBT Agreement and the GATT 1994.
7.35. For the foregoing reasons, the Panel considers that, in principle, both the low ILUC-risk criteria
and certification procedure could be relevant to, and therefore taken into account in, the Panel's
assessment of the design and operation of the high ILUC-risk cap and phase-out when assessing the
complaining Member's claims against the high ILUC-risk cap and phase-out.
7.36. Having said this, the Panel recalls the explicit distinction in the TBT Agreement between, on
the one hand, disciplines applicable to technical regulations (Articles 2 and 3) and standards
(Article 4 and Annex 3) and, on the other hand, disciplines applicable to procedures for assessment
of conformity with those technical regulations and standards. In at least two prior disputes, panels
have concluded that issues relating to the assessment of conformity with technical regulations do
not fall within the scope of application of Article 2. In both cases, the panels reasoned that any
conclusion to the contrary would improperly disregard the structure of the TBT Agreement and the
different section headings for Articles 2 -4 (Technical Regulations and Standards) and Articles 5 -9
(Conformity with Technical Regulations and Standards).217
7.37. In this dispute, and for reasons elaborated on in section 7.1.3.1 of this Report, the Panel
understands Malaysia to argue that Article 6 of the Delegated Regulation, which the Panel refers to
as the "low ILUC-risk certification procedure", is a "conformity assessment procedure" as defined in
Annex 1.3 to the TBT Agreement and which is thus subject to the disciplines of Article 5 of the
Agreement. The Panel will address in section 7.1.3 of this Report, the claims brought by Malaysia
against this alleged "conformity assessment procedure " under Article 5.1, Article 5.2, Article 5.6,
and Article 5.8 of the TBT Agreement.
7.38. In light of the foregoing, the Panel does not take account of the low ILUC -risk certification
procedure in its assessment of the high ILUC-risk cap and phase-out under the obligations in Article 2
of the TBT Agreement. Even if it were legally appropriate to do this , that would simply result in
duplication of the Panel's analysis and findings under Article 5 of the TBT Agreement, given that the
very same low ILUC-risk certification procedure is fully examined in the context of the claims under
Article 5.1, 5.2, 5.6, and 5.8 of the TBT Agreement.
7.39. Based on all of the foregoing considerations, in its assessment of the claims against the high
ILUC-risk cap and phase -out under Article 2 of the TBT Agreement, the Panel will take account of
the design and operation of the low ILUC -risk criteria (set out in Articles 4 and 5 of the Delegated
Regulation) but will not take account of the low ILUC-risk certification procedure (set out in Article 6
of the Delegated Regulation). The reason, as explained above, is that the low ILUC-risk certification
procedure is the object of the claims under Article 5 of the TBT Agreement.
7.40. Under the GATT 1994, there is no equivalent distinction to the one reflected in the
TBT Agreement between technical regulations and conformity assessment procedures. It is therefore
possible for the Panel's assessment of the high ILUC -risk cap and phase-out under the GATT 1994
to take into account the design and operation of both the low ILUC -risk criteria and the low ILUC -
risk certification procedure. Thus, in its assessment of the claims under Articles XI:1, III:4, I:1 and
X:3(a) of the GATT 1994, the Panel's assessment of the high IL UC-risk cap and phase -out takes
account of the low ILUC-risk certification criteria and procedure insofar as they are challenged under
those provisions.

214 Malaysia's first written submission, paras. 568, 595, 622-626.
215 European Union's first written submission, fn 371.
216 European Union's first written submission, paras. 1391-1394.
217 Panel Reports, EC – Trademarks and Geographical Indications (Australia), paras. 7.510-7.515; and
Russia – Railway Equipment, paras. 7.878-7.879.

7.1.1.1.2.3 Low ILUC-risk certification
7.41. The Panel refers to the above considerations regarding the relationship be tween the high
ILUC-risk cap and phase -out and low ILUC -risk certification. In light of, and in addition to, these
considerations, the Panel considers it useful to clarify the terminology it uses in this Report to refer
to this measure.
7.42. In its findings, the Panel refers to "low ILUC-risk criteria" as the criteria for certification of a
biofuel as low ILUC -risk (found e.g. in Articles 4 and 5 of the Delegated Regulation), and the "low
ILUC-risk certification procedure" being the procedure for certifying a biofuel as low ILUC-risk (found
e.g. in Article 6 of the Delegated Regulation). When the Panel refers to the criteria and the procedure
collectively or generically, the Panel uses the formulation "low ILUC-risk certification" or the "low
ILUC-risk criteria and certification procedure".
7.43. As elaborated on in the context of its findings on the existence of a "conformity assessment
procedure" within the meaning of Annex 1.3 to the TBT Agreement218, the Panel understands the
specific measure challenged by Malaysia for the purposes of the claims under Artic le 5 of the
TBT Agreement to be the low ILUC-risk certification procedure.
7.44. While there is no doubt about what the parties are referring to when using their respective
terminology for the 7% maximum share and the high ILUC-risk cap and phase-out, the same is not
true with respect to their references relating to low ILUC -risk certification and particular aspects
thereof. Therefore, and in contrast to the approach taken to the 7% maximum share and the high
ILUC-risk cap and phase-out, the Panel has not attemp ted to harmonize the use of the terms "low
ILUC-risk criteria", "low ILUC-risk certification procedure ", or "low ILUC-risk certification" or "low
ILUC-risk criteria and certification procedure".
7.1.1.1.3 Temporal scope issues arising from the ongoing implementatio n of RED II and
the Delegated Regulation
7.45. The Panel now turns to certain temporal scope issues arising from the Panel having been
established in May 2021, in the context of the ongoing implementation of RED II and the Delegated
Regulation over the period 2 018-2023. The Panel will begin by setting out a brief chronology of
events as relevant factual background and will then address several issues regarding the ongoing
implementation of RED II and the Delegated Regulation that merit consideration in light of the timing
of the establishment of the panel.
7.46. The Panel recalls that RED II was adopted and entered into force in December 2018. Various
provisions of RED II required or foresaw that further actions to implement its Articles 26(1) and (2)
would be taken at later points in time. In this respect, the Panel notes the following:
a. Although RED II was adopted on 11 December 2018 and entered into force on
24 December 2018, the period for its transposition (including but not limited to
Articles 26(1) and (2)) into national law took almost two and a half years, with a deadline
set at 30 June 2021.219
b. RED I as amended by Directive 2015/1513 had already laid down a 7% maximum share
for accounting conventional biofuels towards both the national renewable energy tar gets
(Article 3(1) second subparagraph) and the transport target (Article 3(4)(d)). These were
targets set for 2020. Therefore, EU member States already had to apply the 7% maximum
share already in 2020. However, insofar as the 7% maximum share provided fo r in
Article 26(1) of RED II could be lower (as a consequence of the revised benchmark based
on the share in 2020), under Article 36(1) of RED II, EU member States were required to
bring it into force no later than 1 July 2021. The text of Article 26(1) of RED II does not
specify any further actions to be taken to implement its provisions.

218 See section 7.1.3.1 of this Report.
219 Article 36 of RED II (entitled "Transposition"), in particular Article 36(1), provides that
"Member States shall bring into force the laws, regulations and administrative provisions necessary to comply
with Articles 2 to 13, 15 to 31 and 37 and Annexes II, III and V to IX, by 30 June 2021."

c. Regarding the high ILUC-risk cap and phase-out, under Article 36(1) of RED II, EU member
States were required to bring it into force no later than 1 July 2021. In contrast to the 7%
maximum share, the text of Article 26(2) of RED II provided for the following intermediate
and/or subsequent actions to take place:
i. The European Commission was required to submit to the European Parliament and to
the Council a report o n the status of worldwide production expansion of the relevant
food and feed crops (i.e. the 2019 Status Report) by 1 February 2019.
ii. The European Commission was required to adopt a delegated act in accordance with
Article 35 of RED II, to supplement RED II by setting out the criteria for certification
of low ILUC -risk biofuels, bioliquids and biomass fuels and for determining the high
ILUC-risk feedstock for which a significant expansion of the production area into land
with high-carbon stock is observed (i.e. the Delegated Regulation) also by 1 February
2019.
iii. The European Commission was required to review the criteria laid down in the
Delegated Regulation and adopt delegated acts in accordance with Article 35 to amend
such criteria, where appropriate, and t o include a trajectory for the high ILUC -risk
"phase-out" provided for in Article 26(2) by 1 September 2023.
iv. From 31 December 2023 until 31 December 2030 at the latest, the cap on high ILUC-
risk biofuels shall gradually decrease to 0% (i.e. the "phase-out").
7.47. As provided for in the text of Article 26(2) of RED II, the European Commission took the
following actions220 in March 2019:
a. The European Commission produced its report on the status of worldwide production
expansion of the relevant food and feed crop s (i.e. the 2019 Status Report). The Status
Report is dated 13 March 2019.
b. The European Commission adopted the Delegated Regulation, supplementing RED II. It
was also adopted on 13 March 2019, and it entered into force on 10 June 2019.221
7.48. The Status Report and the Delegated Regulation provided that the following additional further
actions would be taken by 30 June 2021 in order to implement and apply the high ILUC-risk cap and
phase-out, and the related low ILUC-risk criteria and certification procedures:
a. Article 7 of the Delegated Regulation, entitled "Monitoring and Review "222, required the
European Commission to conduct a review by 30 June 2021 (and also further reviews
thereafter, but without specifying any particular timeframe(s)). More specifically, the
European Commission was to review all relevant aspects of the Status Report, in particular
the data on feedstock expansion, as well as th e evidence on the factors justifying the
"small holders " provision in Article 5(1)223, and, if appropriate, amend the Delegated
Regulation, the revised report becoming the basis for the application of the criteria set out
in Article 3 of the Delegated Regulation.224
b. The Status Report states that measures regarding low ILUC-risk certification "need to be
implementable in practice and avoid excessive administrative burden ", and that
guaranteeing robust compliance verification and auditing "requires an in -depth

220 Article 35 of RED II lays down the conditions for the Commission to adopt the "delegated acts"
specified in RED II, including the delegated acts specified in Article 26(2) thereof.
221 The Panel notes that this Delegated Regulation, which "entered into force" on 10 June 2019
and supplements the RED II by laying down the criteria for determining the high ILUC-risk feedstock and for
certifying low ILUC-risk biofuels, bioliquids and biomass fuels, does not bring forward or otherwise alter the
30 June 2021 deadline for EU member States to transpose RED II (including but not limited to Articles 26(1)
and (2)) into national law.
222 Article 7 of the Delegated Regulation is further described in paras. 2.55-2.56 of the descriptive part
of this report.
223 Article 5(1) of the Delegated Regulation is set out in para. 2.61 of the descriptive part of this report.
224 Article 3 of the Delegated Regulation is set out in para. 2.51 of the descriptive part of this report.

assessment that might not be warranted under certain circumstances and could represent
a barrier for the successful implementation of the approach ".225 The Status Report also
states that "[t]o ensure robust and harmonised implementation, the European Commission
will set out further technical rules regarding concrete verification and auditing approaches
in an Implementing Act in line with Article 30(8) of the RED II. "226 The Status Report
further states that "[t]he Commission will adopt this implementing act by 30 June 2021 at
the latest."227
7.49. The Panel notes that it is undisputed that, notwithstanding these timeframes:
a. The European Commission did not conduct the review required by Article 7 of the
Delegated Regulation by 30 June 2021. Neither had such a review been conducted by the
time that the parties filed their final submissions in this dispute.228
b. The European Commission did not adopt any implementing act 229 for low ILUC -risk
certification by 30 June 2021. However, on 14 June 2022, the European Commission, in
accordance with Article 30(8) of RED II, adopted Implementing Regulation (EU) 2022/996
on rules to verify sustainability and GHG emissions saving criteria and low ILUC risk
criteria.230
7.50. Thus, there has been a gradual implementation o f RED II and the Delegated Regulation, in
relation to the 7% maximum share and the high ILUC -risk cap and phase-out measures, over the
period 2018-2023. Malaysia's panel request is dated 15 April 2021, and the DSB established the
panel on 28 May 2021.231 The relevant events set out above may be summed up as follows in relation
to the timing of the establishment of the panel:
a. By the time of the panel request, RED II had already been adopted and entered into force,
the Status Report underlying the Delegated R egulation had already been produced, and
the Delegated Regulation had also been adopted and entered into force.
b. However, at the time of the panel request and the establishment of the Panel, the
30 June 2021 deadline had not yet passed for:
i. the transposition of RED II (including but not limited to Articles 26(1) and (2)) into
national law;
ii. the review provided for in Article 7 of the Delegated Regulation; and/or
iii. the adoption of an implementing act for low ILUC -risk certification as provided for in
the Status Report and the Delegated Regulation.
c. In addition, the date for the European Commission to set a trajectory for the high ILUC-risk
"phase-out" (1 September 2023), and the deadline for the latest start and the latest end
dates of the "phase-out" itself (31 December 2023 until 31 December 2030), had not yet
been reached.
7.51. Against this background, the Panel will now turn to several issues regarding the ongoing
implementation of RED II and the Delegated Regulation that merit consideration in light of the timing

225 Status Report (2019), (Exhibits EU-3, MYS-92), pp. 16 and 18.
226 The Panel notes that, without specifying any deadline, Article 30(8) of RED II requires the
Commission to "adopt implementing acts specifying detailed implementing rules, including adequate standards
of reliability, transparency and independent auditing and require all voluntary schedules to apply those
standards" in order to ensure compliance with notably "the provisions on low or high direct and indirect
land-use change-risk" biofuel.
227 Status Report (2019), (Exhibits EU-3, MYS-92), p. 18.
228 European Union's response to Panel question No. 56, para. 348.
229 The Panel notes that, while the Status Report refers to an implementing "act", the European Union
also refers to "implementing rules" and an "implementing regulation" in respect of the same action. The
instrument eventually adopted by the European Union is referred to as the "Implementing Regulation".
230 See para. 2.63 above.
231 See para. 1.3 above.

of the establishment of the Panel. The Panel considers that each of these issues merits consideration
taking into account the Panel's duty to determine the scope of the measures and claims properly
before it.
7.52. First, the Panel recalls the 30 June 2021 deadline for the transposition of RED II (including
but not limited to Articles 26(1) and (2) thereof) into national law, and the fact that the latest start
date for the "phase-out" is 31 December 2023. The Panel considers however that none of the se
deadlines gives rise to any jurisdictional impediment to its consideration of the specific measures at
issue. Putting aside questions of what terminology would best characteri ze the status of the
measures before and after the deadline for their transpos ition into national law on 30 June 2021,
the European Union has not suggested that these dates falling after the date of the establishment
of the Panel is a circumstance that precludes the Panel from ruling on the measures.
7.53. As a general principle, a Member's mandatory legislation, even if not yet in force or not
applied, can be challenged by another WTO Member – at the very least when the entry into force or
subsequent application is automatic at a future date and does not de pend on further legislative
action.232 Moreover, the fact that an EU directive requires transposition by its member States does
not mean that the measure set out in that directive would somehow be shielded from scrutiny by a
WTO panel, or not be ripe for co nsideration prior to the transposition deadline.233 Here again, the
Panel notes that the European Union has not suggested otherwise.
7.54. Returning to the measures at issue, the Panel notes that neither the general transposition
date for RED II (30 June 2021) nor the date for the latest start (31 December 2023) of, and the
latest end (31 December 2030) to, the "phase-out" precludes any EU me mber State from
transposing the measures into national law prior to that time. Nor do they preclude any EU member
State from starting to phase out the use of palm oil-based biofuel prior to 31 December 2023.234
7.55. Second, as a separate issue, to which the Panel now turns, is whether it may take into account
factual circumstances and developments arising from the gradual implementation of RED II and the
Delegated Regulation insofar as they evolved in the course of the proceedings, i.e. after the request
for and establishment of the Panel. The issue, in other words, is whether the Panel is precluded, as
a jurisdictional matter, from taking any aspects of the factual situation post-dating the establishment
of the Panel into account in its assessment of the design and operation of the high ILUC-risk cap and
phase-out, as well as the low ILUC-risk certification criteria and procedure.
7.56. The Panel's terms of reference are governed by Malaysia's panel request. Therefore, the terms
of Malaysia's panel request constitute the starting point for the Panel's consideration of whether it
is precluded, as a jurisdictional matter, from taking any aspects of the factual situation post-dating
establishment of the Panel into account in its assessment of the design and operation of the high
ILUC-risk cap and phase-out, and the low ILUC-risk certification criteria and procedure.
7.57. In identifying the "specific measures at issue " for the purposes of Article 6.2 of the DSU,
Malaysia's panel request starts by listing several legal instruments in which those measures are laid
down. That list includes RED II and the Delegated Regulation235 as well as:

232 Panel Reports, China – Auto Parts, fn 202 (referring to Turkey – Textiles, para. 9.37, referring to
GATT Panel Reports in US – Superfund, EEC – Parts and Components and US – Malt Beverages). Along the
same lines, the panel in Russia – Tariff Treatment stated that it saw "no basis on which to exclude from dispute
settlement proceedings a measure that is in force, but which has yet to be applied". (Panel Report, Russia –
Tariff Treatment, para. 7.98)
233 Panel Report, EU – Energy Package, para. 7.394 (where the panel concluded that "having established
that the unbundling measure in the Directive applies in and has regulatory effects throughout the entire EU
territory, we see no reason to assess the WTO consistency of this measure within each individual EU member
State, simply due to the fact that its design and expected operation are such that it requires implementation by
EU member States and allows these member States an element of discretion when implementing it.")
234 In its first written submission, Malaysia asserts that "[w]hile the RED II only foresees a gradual
phase out of high ILUC-risk biofuels from being counted towards the EU's renewable energy targets, a number
of EU member States have been forging ahead, taking measures that go beyond the RED II and exclude oil
palm crop-based biofuel from relevant policies, not providing for exceptions of low ILUC-risk feedstock, or even
from being used as a biofuel at all." (Malaysia's first written submission, para. 86)

any annexes thereto, amendments, supplements, replacements, renewals, extensions,
implementing measures or any other related measures, and any exemptions applied.236
7.58. In addition to this language indicating that the measures at issue include "any … implementing
measures", paragraph 32 of Malaysia's panel request indicates that the legal claims under the
TBT Agreement and the GATT 1994 enumerated thereafter concern the EU measures at issue, "as
embodied and developed in the respective legal and other instruments as specified above in
paragraph 23 and as applied by the relevant authorities".237
7.59. The Panel notes that, as a g eneral rule in WTO dispute settlement proceedings, a panel's
terms of reference require it to assess the WTO -consistency of a challenged measure as it existed
on the date of the Panel's establishment.238 However, previous panels and the Appellate Body have
confirmed that a panel may consider amending or implementing measures enacted after a panel's
establishment. In deciding whether to examine amended or implementing measures, the relevant
question is whe ther that amendment or implementing measure "changes the essence of the
measures" identified in the panel request. 239 The extent to which a reference to "related" or
"implementing" measures in a panel request may serve to bring measures taken after the
establishment of the panel into the scope of a panel's terms of reference is to be assessed "in light
of the circumstances of each particular case".240
7.60. These principles have been developed by panels and the Appellate Body in the context of
considering whether t he "specific measures at issue " identified in a panel request can include
implementing measures taken after the establishment of a panel. However, insofar as WTO dispute
settlement practice allows scope for ruling on measures post-dating the establishment of a panel, it
stands to reason, a fortiori, that a panel is not precluded from taking the factual situation post-dating
establishment of the panel into account in its assessment of the design and operation of a measure
that was in existence at the time of the establishment of the panel.241
7.61. In light of the foregoing, the Panel considers that it is not necessarily precluded, as a
jurisdictional matter, from taking into account factual developments arising from the gradual
implementation of RED II and the Delegated Regulation (insofar as they evolved over the course of
the proceedings, i.e. after the request for and establishment of the Panel) in its assessment of the
design and operation of the high ILUC -risk cap and phase -out. Indeed, both Malaysia and the
European Union refer to certain post-establishment events, such as the review of data envisaged in
Article 7 of the Delegated Regulation and the adoption of the implementing regulation as provided
for in the Status Report and the Delegated Regulation. However, the Panel is not free to do so in a
manner that would "change the essence of the measures" identified in the panel request.
7.1.1.2 Order of analysis
7.62. Having clarified the Panel's approach to several issues concerning the definition of the EU
measures at issue, the Panel now turns to the order of analysis of the multiple legal claims that
Malaysia has raised under the TBT Agreement and the GATT 1994.
7.63. The Panel will first address the order of analysis between the TBT Agreement and the
GATT 1994 and will then address the order of analysis among the multiple claims brought under

236 Malaysia's panel request, para. 23(v). (emphasis added)
237 Malaysia's panel request, para. 32. (emphasis added)
238 Appellate Body Report, US – Clove Cigarettes, para. 205. See also Appellate Body Reports, China –
239 See, for example, Appellate Body Report, Chile – Price Band System, para. 139; Panel Reports,
Argentina – Footwear (EC), para. 8.45; EC – Bananas III (US), para. 7.27, as confirmed by Appellate Body
240 Panel Report, India – Agricultural Products, para. 7.77.
241 Panel Report, Thailand – Cigarettes (Philippines) (Article 21.5 – Philippines), para. 7.809. The panel
in Thailand – Cigarettes (Philippines) (Article 21.5 – Philippines) expressed the same view in a comparable
situation. That panel recalled the approach followed in disputes where changes were introduced to the
challenged measures, or where subsequent events in the course of this proceeding had an impact on the
operation of the measures at issue, and then stated that "the same approach may apply equally in situations
where the challenged measure remains unchanged, but the surrounding factual circumstances relevant to the
assessment of the WTO-consistency of the measure evolve in the course of a proceeding."

those Agreements. In structuring its o rder of analysis, the Panel has accorded due weight to the
manner in which the parties themselves have presented their claims and defences.242
7.1.1.2.1 Between the TBT Agreement and the GATT 1994
7.64. The Panel considers that, in the circumstances of this case, it is app ropriate to order its
analysis to begin with the claims under the TBT Agreement, and then turn to the claims under the
GATT 1994. This is the order of analysis followed by both parties in their submissions, and the Panel
sees no reason to deviate from it.
7.65. The TBT Agreement may be understood as dealing with the measures that it applies to more
specifically and in greater detail than the GATT 1994. As stated in its preamble, the TBT Agreement
is intended to "further the objectives of GATT 1994 " and, in accor dance with the General
interpretative note to Annex 1A, the provisions of the TBT Agreement would prevail over those of
the GATT 1994 to the extent there is a conflict. Moreover, the TBT Agreement contains numerous
specific obligations additional to those imposed under the GATT 1994: Malaysia's claims under
Article 2.4, Article 2.5, Article 2.8, and Article 12.3, for example, have no direct equivalent obligation
under the GATT 1994.
7.66. The Panel further notes that, when presented with claims under the TBT Agreement and the
GATT 1994, considerations similar to those set out above have led previous panels to begin with the
claims under the TBT Agreement.243 While the Panel does not consider that this necessitates the
same order of analysis as a general rule and without regard to the circumstances of a particular
dispute, it confirms that there is no error in this approach.
7.1.1.2.2 Claims under the TBT Agreement
7.67. As for the claims brought under the TBT Agreement, Malaysia has presented a series of legal
claims under Article 2 (technical regulations), Article 5 (conformity assessment procedures), and
Article 12 (special and differential treatment for developing countr y Members). The parties have
addressed those claims in that order, and once again the Panel sees no reason to deviate from it.
7.68. Indeed, the Panel considers that there is an inherent logic in that order of analysis. Whether
the 7% maximum share and high ILUC-risk cap and phase-out are technical regulations is an issue
that would be addressed in the context of resolving the claims under Article 2. The Panel's conclusion
on that issue would, in turn, inform its assessment of the applicability of Article 5, given that a
conformity assessment procedure is by definition, a procedure used to determine that the relevant
requirements in technical regulations (or standards) are fulfilled. The Panel's conclusions under
Article 2 and Article 5 would, in turn, inform the assessment of the applicability of Article 12, and in
particular Article 12.3: this provision concerns the special needs of developing country Members in
the preparation and application of technical regulations and conformity assessment procedures.
7.69. The Panel's order of analysis of the substantive claims under Articles 2.1, 2.2, 2.4, 2.5, 2.8,
and 2.9 of the TBT Agreement is also guided by its assessment of the interrelationship among the
issues raised in connection with those claims. Like the parties, the Panel will begin its analysis of the
claims under Article 2 with the threshold issue that is common to all of them, namely whether the
7% maximum share and the high ILUC -risk cap and phase-out are technical regulations within the
meaning of Annex 1.1 of the TBT Agreement. In respect of the substantive claims, however, the
Panel considers that the interrelationship among the issues raised by the parties under certain of
the substantive claims under Article 2 warrants partially deviating from how the parties sequence
the claims under Article 2 in their submissions. The Panel briefly elaborates below on the reasons
for this.
7.70. The Panel begins its analysis with the claim under Article 2.4 because the Panel's conclusion
on the meaning and relevance of t he four international standards central to that claim will inform
the Panel's analysis of the claims under Articles 2.1 and 2.2. Th is is because Malaysia relies on its

242 See Appellate Body Report, Canada – Wheat Exports and Grain Imports, para. 126.
243 See Panel Reports, EC – Asbestos, paras. 8.16-8.17; EC – Sardines, para. 7.16; US – Clove
Cigarettes, paras. 7.7-7.19; US – Tuna II (Mexico), paras. 7.43 and 7.46; EC – Seal Products, para. 7.69; US –
COOL, para. 7.73; US – COOL (Article 21.5 – Canada and Mexico), paras. 7.3 and 7.6; Australia – Tobacco
Plain Packaging, paras. 7.6 and 7.13.

understanding of the meaning and relevance of those standards when arguing that the high ILUC-
risk cap and phase-out does not reflect any "legitimate regulatory distinction"244 for the purposes of
Article 2.1, and also when arguing that the 7% maximum share and the high ILUC -risk cap and
phase-out are more trade-restrictive than necessary to fulfil a legitimate objective for the purposes
of Article 2.2.245 The meaning and relevance of the four international standards is central to the
claim under Article 2.4 and the parties devote detailed arguments to this issue. The Panel considers
it logical to address the claim under Article 2.4 first and then refer back to its conclusions in the
context of addressing any related arguments about the meaning and relevance of the international
standards in the context of the claim s under Article 2.1 and Article 2.2. Finally, it is worth noting
that the assessment of the claim under Article 2.4 is also relevant for assessing later the
transparency claims under Article 2.9, since the applicability of these obligations depends on whether
a relevant international standard exists, and if one does, whether the measure is in accordance with
such a standard.
7.71. The Panel will next address the claim under Article 2.2, because it considers that its
conclusions on certain issues under that provi sion will necessarily inform its analysis of the claim
under Article 2.1. More specifically, the Panel's identification of the measures' objective(s), and
assessment of whether they constitute a "legitimate objective ", is mandated by the text of
Article 2.2. To the extent that the Panel is required to undertake a similar analysis in the context of
Article 2.1 when assessing whether any detrimental impact on imports stems exclusively from a
"legitimate regulatory distinction ", the Panel considers it logical to refer back to the conclusions
under Article 2.2 in addressing the related issues under Article 2.1. Moreover, if the Panel was to
agree with Malaysia's arguments on the 7% maximum share on grounds that fundamentally
impugned the European Union's objective of limiting the risk of ILUC -related GHG emissions
attributable to conventional biofuel, that would strongly suggest that there is no justification for
further ILUC-based distinctions embodied in "high" and "low" ILUC-risk determinations. This would
thus potentially allow the Panel to exercise judicial economy over the claims under Article 2.2 and
Article 2.1 directed at the high ILUC -risk cap and phase -out. Finally, given that Malaysia has
challenged the 7% maximum share only under Article 2.2, this provides added support to the Panel's
decision to address the claim under Article 2.2 before the claim under Article 2.1.
7.72. As a general principle, panels are free to structure the order of their analysis as they see fit.246
Moreover, the parties have n ot argued that the present case is one in which "there exists a
mandatory sequence of analysis which, if not followed, would amount to an error of law " or "have
repercussions for the substance of the analysis itself ".247 Indeed, the Panel notes that the ordering
of the claims set out above is the same order of analysis that was followed by the panel in EC –
Sardines. In that case, the panel followed the complainant's suggested order of analysis and
addressed the claim under Article 2.4 of the TBT Agreement first, noting that "it would not constitute
an error of law to start the examination of the consistency of the EC Regulation with Article 2.4
followed by Articles 2.2 and 2.1 of the TBT Agreement as necessary since such sequential
examination would not affect the interpretation of the other provisions."248
7.73. As for the remainder of the claims under Article 2 (i.e. Articles 2.5, 2.8, 2.9.2 and 2.9.4),
under Article 5 (i.e. Articles 5.1.1, 5.1.2, 5.2.1, 5.6.1, 5.6.2, 5.6.4, and 5.8), an d under Article 12
(i.e. Articles 12.1 and 12.3), the Panel addresses them sequentially.
7.1.1.2.3 Claims under the GATT 1994
7.74. Regarding the claims under the GATT 1994, Malaysia orders the analysis in its submissions
by addressing Article I:1, Article III:4, Article XI:1, followed by Article X:3(a).
7.75. The Panel notes that it would maintain a degree of parallelism between the sequencing of
claims under the TBT Agreement and the GATT 1994 if it first addresses the claim under Article XI:1

244 Malaysia's first written submission, para. 575.
245 Malaysia's first written submission, paras. 610(i).
246 Appellate Body Report, Canada – Wheat Exports and Grain Imports, para. 126.
247 Appellate Body Report, Canada – Wheat Exports and Grain Imports, para. 109. See also
Panel Reports, EC – Seal Products, para. 7.63; and US – COOL (Article 21.5 – Canada and Mexico), para. 7.3.
248 Panel Report, EC – Sardines, para. 7.18. The Panel further notes that in the present dispute the
European Union made submissions as to the logical order of analysis under the TBT Agreement and specifically
submitted that Article 2.2 should be assessed before Article 2.1. (European Union's second written submission,
paras. 43-49.)

followed by the claims of discrimination under Articles III:4 and I:1 of the GATT 1994. As explained
further above, the Panel orders its analysis of the claims under the TBT Agreement so as to (after
assessing Article 2.4) address the claim under Article 2.2 of the TBT Agreement (more trade-
restrictive than necessary) followed by the claim of discrimination under Article 2.1. While the Panel
does not consider the meaning of the terms "trade-restrictive" in the context of Article 2.2 to be
coextensive with the terms "restrictions … on the importation " of products in Article XI:1 of the
GATT 1994, there is a degree of parallelism between the arguments of the parties in relation to these
terms in this dispute.
7.76. After addressing the c laim under Article XI:1, the Panel will address the claim under
Article III:4. The Panel addresses the claim under the national treatment obligation in Article III:4
before the claim under the most-favoured-nation treatment obligation in Article I:1 because the text
of Article I:1 includes the reference, in the definition of its scope of application, to "all matters
referred to in paragraphs 2 and 4 of Article III ". The Panel considers it is logical to address
Article III:4 first and refer back to its conclusions in the context of addressing that related element
of the legal standard under Article I:1.
7.77. After addressing the claims under Article XI:1, Article III:4, and Article I:1, the Panel will
address the claim under Article X:3(a). The Panel notes that, i nsofar as Malaysia's claim under
Article X:3(a) overlaps with its claims under Article 5 of the TBT Agreement, this ordering of the
analysis of the claims under the GATT 1994 maintains a degree of parallelism with the order of the
claims under the TBT Agreement.
7.1.2 Claims under Article 2 of the TBT Agreement
7.1.2.1 Annex 1.1 – Existence of a "technical regulation"
7.1.2.1.1 Introduction
7.78. Having addressed these preliminary considerations relating to the definition of the EU
measures at issue and the order of analysis of the claims under the TBT Agreement and the
GATT 1994, the Panel now turns to the threshold issue of whether the 7% maximum share and the
high ILUC-risk cap and phase-out are "technical regulations" within the meaning of Annex 1.1 to the
TBT Agreement.249
7.79. Malaysia submits250 that the 7% maximum share and the high ILUC -risk cap and phase-out
are technical regulations within the meaning of the definition in Annex 1.1. Based on the various
elements of this definition, Malaysia argues that Article 26 of RED II and the Delegated Regulation:
(i) are "documents" that apply to an "identifiable group of products "; (ii) that the "composition of
biofuel", and more specifically the quality of being made from food or feed crops (for the 7%
maximum share) or a specific crop determined to be high ILUC risk (for the high ILUC-risk cap and
phase-out) qualifies as a "product characteristic".251; and (iii) that each measure "lays down" such
characteristics, with which compliance is "mandatory", by virtue of the content and nature of RED II
and the Delegated Regulation and the consequence that follows from not being taken into account

249 In addition to disagreeing about whether the 7% maximum share and the high ILUC-risk cap and
phase-out are "technical regulations" within the meaning of Annex 1.1 to the TBT Agreement, the parties
disagree about whether low ILUC-risk certification is, or includes, a "conformity assessment procedure" within
the meaning of Annex 1.3 of the TBT Agreement. This is however a separate threshold issue that is specific to
the claims under Article 5 of the TBT Agreement, and which will be addressed by the Panel in the section of its
Report dealing with the applicability of Article 5. Both of these separate threshold questions would, in turn,
inform the applicability of the claims under Article 12 of the TBT Agreement, which concern special and
differential treatment of developing country Members in the preparation and application of technical regulations
and conformity assessment procedures.
250 Malaysia's first written submission, paras. 489-521; second written submission, paras. 20-28;
responses to the Panel's questions, pp. 43-48; and comments on the European Union's responses to the Panel
questions, pp. 151-153.
251 Malaysia argues in the alternative that if the high ILUC-risk cap and phase-out does not lay down
"product characteristics" because it does not merely apply on the basis of the composition of the biofuels
concerned, but rather is applied based on criteria relating to the manner in which these inputs were produced,
i.e. in a high ILUC-risk manner, then the high ILUC-risk cap and phase-out lays down "related processes and
production methods" within the meaning of Annex 1.1. (Malaysia's first written submission, paras. 504-506)

for achieving EU renewable energy targets (namely that such biofuel is in essence excluded from
the EU renewable energy market).
7.80. The European Union submits252 that neither the EU Biofuels regime nor the specific
"measures" identified by Malaysia, i.e. the 7% maximum share and high ILUC -risk cap and phase-
out, are technical regulations. The European Union does not dispute that, for the purposes of the
definition in Annex 1.1, Article 26 of RED II and the Delegated Regulation are "documents", nor that
the composition of a product may, in principle, constitute a "product characteristic". However, the
European Union challenges Malaysia's approach for assessing the elements of the Annex 1.1
definition against the measures at issue by : (i) rejecting the way it defines the "identifiable group
of products" to which the measures apply; (ii) arguing that the measures at i ssue are not properly
characterized as regulating the "composition of biofuel " (the relevant "product characteristic "
identified by Malaysia), noting that the only differentiation in the "measures" at issue in these
proceedings relates to "the environmental impact of its production process (including of the raw
material used for its production) and not to any product characteristics as such"253; (iii) arguing that
the measures do not "lay down" any product characteristics; and (iv) arguing that compliance is not
"mandatory".
7.81. In addition to these points, t he European Union also argues that Malaysia "selectively
identified only some of the provisions that constitute the EU Biofuels regime, notwithstanding that
those provisions operate in conjunction with one another, and could only be assessed as a composite
whole"; that this "definitional approach is highly artificial"; and that "[i]n line with the case law, an
objective assessment of whether the 'measures' identified by Malaysia are 'technical regulations',
(and therefore fall within the scope of application of the TBT Agreement), requires an assessment
of all the constituent elements of the EU Biofuels regime. "254 The Panel recalls that it has already
addressed this argument in the previous section of its Report because it raises a more general issue
regarding the Panel's terms of reference and the scope and definition of the measures at issue in
this dispute.
7.1.2.1.2 Legal standard
7.82. The obligations in Article 2 apply to measures that constitute "technical regulations" by central
government bodies.255 Article 1.2 provides that "for the purposes of this Agreement the meaning of
the terms given in Annex 1 applies. " Annex 1.1 of the TBT Agreement defines a "technical
regulation" as a:
Document which lays down product characteristics or their related processes and
production methods, including the applicable administrative provisions, with which
compliance is mandatory. It may a lso include or deal exclusively with terminology,
symbols, packaging, marking or labelling requirements as they apply to a product,
process or production method.

252 European Union's first written submission, paras. 511-598; second written submission, paras. 50-59;
responses to the Panel's questions, paras. 409-421; and comments on Malaysia's responses to the Panel
questions, paras. 133-181.
253 The European Union rejects Malaysia's alternative argument that the high ILUC-risk cap and phase-
out lays down "related processes and production methods", because to fall within the scope of Annex 1.1 those
processes and production methods would have to be "related" to "product characteristics". (European Union's
first written submission, paras. 581-589)
254 European Union's first written submission, paras. 512-513.
255 Annex 1.6 of the TBT Agreement defines a "central government body" as the [c]entral government,
its ministries and departments or any body subject to the control of the central government in respect of the
activity in question." It is also accompanied by an Explanatory note clarifying that:
In the case of the European Communities the provisions governing central government bodies apply.
However, regional bodies or conformity assessment systems may be established within the
European Communities, and in such cases would be subject to the provisions of this Agreement on regional
bodies or conformity assessment systems.
Article 3 of the TBT Agreement covers technical regulations by "local government bodies" and those by
"non-governmental bodies". In this dispute no claim was made that the measures are also inconsistent with
Article 3.

7.83. The definition of a "technical regulation" in Annex 1.1 has been interpreted and applied in a
number of prior cases, and both parties present their respective understandings of the applicable
legal standard with reference to prior cases.
7.84. Whether a measure constitutes a technical regulation pursuant to the first sentence of
Annex 1.1 depends on whether it is a "document"256 that meets what has been described as a
"three-tier test"257:
a. it applies to an identifiable product or group of products;
b. it lays down one or more characteristics of the product, or their r elated processes and
production methods (PPM), including the applicable administrative provisions;
c. compliance with which is mandatory.
7.85. These elements are cumulative258, and thus each must be satisfied for a measure to constitute
a technical regulation with in the meaning of Annex 1.1 to the TBT Agreement. The Panel will
elaborate further on the elements of the legal standard in Annex 1.1 as necessary in the course of
its assessment of the issues in dispute.
7.1.2.1.3 'identifiable group of products'
7.86. The first element of the test is whether the measure at issue applies to "an identifiable group
of products".
7.87. For a measure to lay down product characteristics (or related PPMs), it must apply to an
"identifiable product or group of products ".259 While the product or produ cts at issue need not be
expressly named or identified in the document that constitutes the technical regulation, they should
at least be identifiable.260 A product might be identifiable, for instance, through the very
"characteristic" that is the subject of regulation.261
7.88. Malaysia argues that the 7% maximum share and the high ILUC-risk cap and phase-out apply
to two different identifiable groups of products: as stated in Article 26(1) of RED II, the 7% maximum
share applies to "biofuels, bioliquids and biomass fuels produced from food and feed crops"; and as
provided for in Article 26(2), the high ILUC-risk cap and the high ILUC-risk phase-out applies to "oil

256 The parties agree that Article 26 of RED II and the Delegated Regulation are "documents" for the
purposes of Annex 1.1. European Union's first written submission, paras. 500-501. In light of the applicable
legal standard, the Panel sees no reason to disagree. The ordinary meaning of "document" is defined broadly,
as "something written, inscribed, etc., which furnishes evidence or information upon any subject". As a result,
the term covers "a broad range of instruments or apply to a variety of measures". (Appellate Body Report, US
– Tuna II (Mexico), para. 185. See also Appellate Body Reports, US – COOL (Article 21.5 – Canada and
Mexico), fn 708; and Panel Reports, Australia – Tobacco Plain Packaging, paras. 7.291-7.298 (discussing
Annex 1.1 as part of its thorough interpretation of the same term "document" as used in the definition of
"standard" Annex 1.2).)
257 Panel Reports, EC – Seal Products, para. 7.85 (referring to Appellate Body Report, EC – Sardines,
para. 176, in turn referring to Appellate Body Report, EC – Asbestos, paras. 66-70; and Appellate Body
Reports, US – Clove Cigarettes; US – Tuna II (Mexico); and US – COOL); and Australia – Tobacco Plain
Packaging, para. 7.110.
258 Appellate Body Reports, EC – Asbestos, paras. 66-75 (assessing, sequentially and cumulatively, the
measure at issue against the elements forming the definition of "technical regulation" in Annex 1.1); and
EC – Sardines, para. 176 (recalling its previous report in EC – Asbestos and disaggregating the text of
Annex 1.1 into "three criteria" that, each, a document "must meet" in order to fall within that definition of
"technical regulation").
259 If a technical regulation is not applicable to at least an identifiable product or group of products,
"enforcement of the regulation will, in practical terms, be impossible." (Appellate Body Report, EC – Asbestos,
260 Appellate Body Report, EC – Sardines, paras. 176, 182 and 183 (referring to Appellate Body Report,
EC – Asbestos, paras. 66-70).
261 Appellate Body Report, EC – Asbestos, para. 70 ("there may be perfectly sound administrative
reasons for formulating a 'technical regulation' in a way that does not expressly identify products by name, but
simply makes them identifiable – for instance, through the 'characteristic' that is the subject of regulation."
(emphasis original))

palm crop-based biofuel with high ILUC risk ".262 Malaysia adds that it is not relevant that the "EU
Biofuels Regime" may refer to a broader and less clearly identifiable group of products.263
7.89. The European Union challenges Malaysia's approach to defining the "identifiable group of
products" to which the measures apply . Specifically, the European Union argues that Malaysia has
not clearly stated how it defines the relevant "identifiable group of products" and in any event, has
not demonstrated that the relevant "identifiable group of products" may be defined as narrowly as
"biofuel made out of food and feed crops" or as "oil palm crop-based biofuel with high ILUC risk".264
The European Union does not dispute that Article 26 of RED II and the Delegated Regulation make
reference to biofuels made out of food and feed crops 265, but argues that the "measures" at issue
form part of a regime that applies to "advanced biofuels"266 and indeed "all biofuels, bioliquids and
biogas used in the transport sector"267 and that the assessment of the "measures" must take place
in that broader context.
7.90. The Panel first notes that although the parties identify different groups of products as relevant
identifiable pr oducts to which the measure applies for the purposes of this analysis, the
European Union does not in fact suggest that the measures do not apply to an identifiable group of
products. What is in dispute is how broadly or narrowly the relevant group of products should be
defined, for the purposes of determining whether the measures at issue are technical regulations.
7.91. The Panel understands the European Union to argue that the relevant group of products for
the purposes of the analy sis encompasses "advanced biofuels" in addition to "biofuels made from
food and feed crops" (or even more narrowly as "oil palm crop-based biofuel with high ILUC risk"),
and that the Panel's assessment must take place "in the broader context " of the fact t hat the
measure at issue forms part of a regime that applies to "all biofuels, bioliquids and biogas used in
the transport sector ". In the Panel's view, these arguments suggest that the European Union
considers the relevant product group to be the broader category of "biofuels, bioliquids and biogas
used in the transport sector ", of which both "advanced biofuels" and the group of "biofuels made
from food and feed crops " (or even more narrowly as "oil palm crop-based biofuel with high ILUC
risk") identified by Malaysia are a part.
7.92. The Panel recalls that RED II establishes a common framework for the promotion of "energy
from renewable sources ". Within this common framework, RED II lays down rules on the use of
energy from renewable sources in the transport se ctor.268 Article 26, in turn, is entitled "Specific
rules for biofuels, bioliquids and biomass fuels produced from food and feed crops ". The text of
Article 26(1) likewise refers to "biofuels … produced from food and feed crops ", and the text of
Article 26(2) refers to "biofuels … produced from food and feed crops for which a significant
expansion of the production area into land with high -carbon stock is observed ". The Delegated
Regulation elaborates further on particular aspect s in relation to those biofuels that are the object
of Article 26, namely "biofuels made from food and feed crops ". The 7% maximum share and the
high ILUC-risk cap and phase-out are thus provided for in a provision, i.e. Article 26 of RED II, that
by its own terms contains "Specific rules for biofuels, bioliquids and biomass fuels produced from
food and feed crops".269
7.93. The Panel considers that, while there may be more than one way of identifying the group of
products to which the 7% maximum share and the hi gh ILUC-risk cap and phase-out apply270, it is

262 Malaysia's first written submission, para. 494. In para. 494, Malaysia refers variously to "oil palm
crop-based biofuel", "biofuel with high ILUC-risk", and "oil palm crop-based biofuel with high ILUC risk".
263 Malaysia's first written submission, para. 495.
264 European Union's first written submission, para. 518.
265 European Union's first written submission, para. 519.
266 European Union's first written submission, para. 520.
267 European Union's first written submission, para. 526.
268 Article 1 of RED II.
269 Emphasis added.
270 As reflected in Malaysia's arguments, the high ILUC-risk cap and phase-out introduces a further
distinction within the group of "biofuels produced from food and feed crops", namely between biofuels
produced from food and feed crops "for which a significant expansion of the production area into land with
high-carbon stock is observed" (and, by implication, those biofuels produced from food and feed crops for
which no such significant expansion is observed). From this perspective, a more narrowly defined group of
products could be identified for Article 26(2). However, from the perspective that biofuels produced from food

clear that both measures apply to "biofuel produced from food and feed crops ". Accordingly, the
Panel finds that the 7% maximum share and the high ILUC-risk cap and phase-out both apply to an
identifiable group of products.
7.1.2.1.4 "lays down product characteristics"
7.94. The Panel now turns to the second element of the test, which is whether the measures "lay[]
down product characteristics".
7.95. The first issue before the Panel is whether the "composition of biofuel" – and more specifically
the quality of biofuel being produced "from food or feed crops " (for the 7% maximum share) or a
specific food or feed crop determined to be high ILUC risk (for the high ILUC -risk cap and phase -
out) – qualifies as a "product characteristic" within the meaning of Annex 1.1. After setting out
several general observations, the Panel will first address the 7% maximum share before addressing
the high ILUC-risk cap and phase-out.
7.96. As described by the Appellate Body, "[t]he heart of the definition of a 'technical regulation' is
that the 'document' at issue must 'lay down' — that is, set forth, stipulate or provide —
'product characteristics'."271 The term "product characteristics" has been understood to cover "any
objectively definable features, qualities, attributes, or other distinguishing mark of a product " that
may relate to "a product's composition, size, shape, colour, texture, hardness, tensile strength,
flammability, conductivity, density, or viscosity".272
7.97. The Panel therefore considers that the quality of a given product (e.g. biofuel) being produced
(or not) from a specific raw material or input would in principle fall within the broad category of
"product characteristics ". The raw materials and inputs used to produce a product "objectively
define" the features, qualities and attributes of the product in a manner that enables it to be
distinguished.
7.98. The Panel notes that this understanding is consistent with the approach taken in EC –
Sardines. In that case, the measure was found t o be a technical regulation and one "product
characteristic" that it required was that "preserved sardines must be prepared exclusively from fish
of the species Sardina pilchardus."273 The panel considered that the requirement to use exclusively
Sardina pilchardus was a product characteristic as it "objectively defines features and qualities " of
preserved sardines for the purposes of their marketing as preserved sardines and under the trade
description referred to in Article 7 of the EC Regulation.274 The Appellate Body agreed with the
panel's finding that this was an "objectively definable 'feature', 'quality' or 'attribute' " of the
product.275
7.99. The Panel has already concluded, in the previous section, that while there may be more than
one way of identifying t he "group of products " to which the 7% maximum share and the high
ILUC-risk cap and phase-out apply, it is clear that both measures apply to "biofuel produced from
food and feed crops". In the course of its consideration of that issue, the Panel noted that Article 26
is entitled "Specific rules for biofuels, bioliquids and biomass fuels produced from food and feed
crops". Article 26 thus identifies the products to which the 7% maximum share and the high
ILUC-risk cap and phase-out apply by reference to the type of feedstock from which they have been
obtained.276

and feed crops are a subset of the broader group of "biofuels" products (which, as the European Union notes,
also includes "advanced biofuels") the Panel considers that it would also not be inaccurate to identify "biofuels"
more generally as a group of identifiable products to which the 7% maximum share and the high ILUC-risk cap
and phase-out apply.
271 Appellate Body Report, EC – Asbestos, para. 67. (emphasis original)
272 Appellate Body Report, EC – Asbestos, para. 67.
273 Panel Report, EC – Sardines, para. 7.27; and Appellate Body Report, EC – Sardines, para. 190.
275 Appellate Body Report, EC – Sardines, paras. 189-190.
276 The Panel recalls that "food and feed crops" are defined in Article 2(40) of RED II as "starch-rich
crops, sugar crops or oil crops produced on agricultural land as a main crop excluding residues, waste or ligno-
cellulosic material and intermediate crops, such as catch crops and cover crops, provided that the use of such
intermediate crops does not trigger demand for additional land".

7.100. Regarding the 7% maximum share, the text of Article 26(1) refers to "biofuels … produced
from food or feed crops " without any qualification. Thus, Article 26(1) identifies biofuels solely by
reference to what they are produced from (i.e. "food and feed crops"). The quality of a biofuel being
produced from "food or feed crops " would in principle fall within the broad category of "product
characteristics", as that clearly relates to objectively definable features, qualities or attributes of the
product in a manner that enables it to be distinguished from other products, such as advanced
biofuels or fossil fuels. In resp ect of the 7% maximum share, the Panel does not understand the
European Union to argue otherwise.
7.101. Regarding the high ILUC -risk cap and phase -out, the text of Article 26(2) refers more
specifically to "biofuels … produced from food and feed crops for which a significant expansion of the
production area into land with high-carbon stock is observed".277 The text of Article 26(2) itself does
not specify which food and feed crops so qualify, as this determination is based on the criteria in
Article 3 of the Delegated Regulation and the related Annex.
7.102. By its terms, Article 26(2) does not identify biofuels solely by reference to what they are
produced from (i.e. "food and feed crops "), and also identifies the group of products to which it
applies by reference to their relative degree of ILUC risk. The high ILUC-risk cap and phase-out in
Article 26(2) is further subject to an exemption for individual consignments of any biofuels made
from food and feed crops determined to be high ILUC risk, insofar as those consignments are certified
as satisfying the low ILUC-risk criteria. Thus, in contrast to the 7% maximum share in Article 26(1),
the high ILUC -risk cap and phase -out in Article 26(2), and the accompanying exemption for
individual consignments satisfying the low ILUC -risk criteria, do not identify biofuels solely by
reference to what they are made from (i.e. "food and feed crops "). Rather, Article 26(2) explicitly
identifies biofuels by reference to their relative degree of ILUC risk. This is a feature of Article 26(2)
that cannot be disregarded in the context of characterizing the measures at issue under Annex 1.1.
7.103. However, in the Panel's view it remains the case that Article 26(2) identifies the products to
which the high ILUC -risk cap and phase -out apply by reference to the type of feedstock (i.e. raw
materials) from which they have been obtained, i.e. any specific food or feed crop determined to be
high ILUC risk . As already stresse d above, the Panel considers that the quality of a biofuel being
produced (or not) from a specific raw material or input would in principle fall within the broad
category of "product characteristics", regardless of whether the raw materials or inputs are identified
generally as "food or feed crops" (in the case of Article 26(1)) or more specifically as "food and feed
crops for which a significant expansion of the production area into land with high -carbon stock is
observed" (in the case of Article 26(2)).
7.104. The European Union is correct that Article 3 of the Delegated Regulation, establishing the
criteria for determining high ILUC-risk feedstocks, covers matters relating to the observed impacts
of culti vation of specific feed and food crops. 278 Furthermore, the Panel agrees with the
European Union that these criteria do not, in and of themselves, relate to any intrinsic or extrinsic
characteristic of the biofuels produced from feedstocks. 279 However, the Panel notes that it is not
the criteria for the determination of high ILUC-risk crops that the Panel considers to be the relevant
product characteristic in this context. The criteria included in the high ILUC-risk formula in Article 3,
and the Annex to the Delegated Regulation, serve the purpose of designating an entire crop as a
crop from which biofuel cannot be made without its eligibility to count towards EU renewable energy
targets being limited by the high ILUC-risk cap and phase-out. This serves as an intermediate step
in the determination, which ultimately leads to the designation of each crop as either "high ILUC
risk" or not. This determination in turn dictates which biofuels are "high ILUC-risk", based on the
crop from which they are made (i.e. their feedstocks or raw materials). The quality of being produced
from a specific crop is thus the product characteristic that ultimately dictates the application of the
high ILUC-risk cap and phase-out to a particular group of biofuels.
7.105. The Panel observes that the possibility of certifying individual consignments of biofuel from
a particular yield of a crop as low ILUC -risk does not alter the characteristic of a biofuel as being
made from a high ILUC -risk crop: any consignments of biofuel certified as "low ILUC-risk" is still
made from a crop classified as high ILUC risk. The possibility of certification therefore does not
detract from the characterization of the entire crop from which the biofuel is obtained (currently only

277 Emphasis added.
278 European Union's first written submission, para. 559.
279 European Union's first written submission, para. 559.

palm oil) as high ILUC risk. It onl y enables some consignments of high ILUC -risk biofuels, when
made from additional yield obtained in accordance with the criteria set out in Articles 4 and 5 of the
Delegated Regulation, to be eligible to count towards EU renewable energy targets to the same
extent allowed for other biofuels made from food and feed crops.
7.106. In any event, the Panel considers that while low ILUC -risk certification is an important part
of the context that must be taken into account in characteri zing the measures at iss ue for the
purposes of determining the applicability of the TBT Agreement, the limited exemption for low ILUC-
risk certification simply does not shift the "centre of gravity"280 of the measures for the purposes of
characterizing the measures under the TBT Agreement. Only a limited portion of the biofuel made
from high ILUC-risk biofuel will be able to qualify for low ILUC-risk certification. By hypothesis, as a
group, "high ILUC-risk" biofuels have been determined to present a high risk of ILUC, and low ILUC-
risk certification can only be obtained on a consignment -by-consignment basis if it can be
demonstrated that the specific biofuel at issue does not give rise to the same level of risk that
characterizes the entire group of biofuels classified as "high ILUC risk". Leaving aside the parties'
disagreement about whether low ILUC -risk certification is even practicable, the existence of this
limited exemption does not alter what the Panel regards as the core features of the 7% maximum
share and the high ILUC-risk cap and phase-out.
7.107. The Panel therefore concludes that the quality of a biofuel being produced (or not) from
"food or feed crops " (in the case of Article 26(1)) or more specifically as "food and feed crops for
which a significant expansion of the product ion area into land with high -carbon stock is observed"
(in the case of Article 26(2)) qualifies as a "product characteristic" within the meaning of Annex 1.1.
In other words, and at least to that extent, it may be said that the measures at issue relate to the
"composition of biofuels" as argued by Malaysia.
7.108. The Panel recalls that Malaysia argues, in the alternative, that if the high ILUC-risk cap and
phase-out does not lay down "product characteristics" because it does not merely apply on the basis
of the composition of the biofuels concerned, but rather is applied based on criteria relating to the
manner in which these inputs were produced, i.e. in a high ILUC-risk manner, then the high ILUC-risk
cap and phase -out lays down "related processes and production methods " within the meaning of
Annex 1.1.281 The European Union rejects Malaysia's alternative argument that the high ILUC -risk
cap and phase out lays down "related processes and production methods", because to fall within the
scope of Annex 1.1 those processes and production methods would still have to be "related" to
"product characteristics ".282 Having found that Article 26(1) and (2) identify "product
characteristics", the Panel considers it unnecessary to address Malaysia's alternative argument that
the measures identify "related processes and production methods" within the meaning of Annex 1.1.
7.109. The Panel now turns to th e second prong of the element under consideration, which is
whether the 7% maximum share and the high ILUC -risk cap and phase-out "lay down", within the
meaning of Annex 1.1, the product characteristic identified. The Panel recalls that the
European Union submits that Article 26 of RED II does not "provide for " or "stipulate" the
"composition of the products to which they apply", either positively or negatively.283
7.110. The verb "lay down " is defined as "establish, formulate definitely (a principle, a rule);
prescribe (a course of action, limits, etc.) ".284 Accordingly, the verb "lays down ", as used in

280 In China – Auto Parts, the Appellate Body addressed the specific issue of whether a particular charge
falls under the scope of Article II:1(b) or Article III:2 of the GATT 1994, but in the course of doing so offered
guidance of a more general nature. The Appellate Body observed that in some cases this will be a
straightforward exercise, but in others "the picture will be more mixed", and the challenge faced by a panel
more complex. In such circumstances a panel should seek to identify "the leading or core features of the
measure at issue, those that define its 'centre of gravity' for purposes of characterizing" the measure.
(Appellate Body Reports, China – Auto Parts, para. 171.)
281 Malaysia's first written submission, paras. 504-506.
282 European Union's first written submission, paras. 581-589. In this connection, the European Union
reiterates that the measures do not prescribe any "product characteristic" for biofuels made from feed or food
crops and do not prescribe the "composition" of any fuel or manner in which such biofuels or the feedstocks
must be produced in order to be placed on the EU market.
283 European Union's first written submission, para. 548.
284 Appellate Body Reports, EC – Seal Products, para. 5.10 (referring to Shorter Oxford English
Dictionary, 6th edn, A. Stevenson (ed.) (Oxford University Press, 2007), Vol. 1, p. 1562); and

Annex 1.1 of the TBT Agreement means "establishing" or "prescribing" certain product
characteristics (or their related processes or production methods). T he relevant product
characteristics might be prescribed in a "positive" or "negative" form, i.e. the document may provide,
positively, that products must possess certain "characteristics", or might prescribe, negatively, that
products not possess certain "characteristics".285
7.111. The Panel first notes that by its own terms, RED II "lays down rules … on the use of energy
from renewable sources … in the transport sector", for the purposes of meeting EU-wide renewable
energy consumption targets.286 The 7% maximum share and the high ILUC-risk cap and phase-out
are among the rules that RED II, by its own terms, "lays down". Specifically, these measures are
set out in Article 26 of RED II, which, as already emphasized, is entitled "Specific rules for biofuels,
bioliquids and biomass fuels produced from food and feed crops ". Articles 26(1) and (2) are thus
integral and essential components of the calculation rules that define the terms of eligibility of
different types of energy sources in the transport sector to be counted as renewable energy for the
purposes of meeting RED II targets.
7.112. As regards the 7% maximum share, its essential feature and function within this broader
framework is to define and limit the contribution that may be made by biofuels made from "feed and
food crops" to meeting these consumption targets. Article 26(1) identifies the products to which this
requirement applies by reference to a defining product characteristic, namely being produced from
certain types of feedstocks or raw mate rials, i.e. "food and feed crops ". It is the presence of this
characteristic that determines the applicability of the requirement at issue. Considered as a whole
and in the context of other provisions of RED II, the 7% maximum share specifically limits the
eligibility of specific types of biofuels to be counted towards the renewable energy targets in RED II.
Thus, the 7% maximum share effectively defines and prescribes one of the characteristics required
of biofuels for the purposes of meeting the consumption targets in RED II.
7.113. As regards the high ILUC -risk cap and phase -out, its essential feature and function within
this broader framework (i.e. the calculation rules that define the terms of eligibility of different types
of energy sources in the transport sector to be counted as renewable energy for the purposes of
meeting RED II targets) is to limit and gradually eliminate the eligibility of biofuels made from high
ILUC-risk feedstocks to be counted towards those targets. As with Article 26(1), therefore,
Article 26(2) identifies the products to which this requirement applies by reference to a defining
product characteristic, namely being produced from "food and feed crops for which a significant
expansion of the production area into land with high-carbon stock is observed". It is the presence of
this characteristic that determines the applicability of the requirement at issue. Whe n a
determination is made that a biofuel is produced from "food and feed crops for which a significant
expansion of the production area into land with high-carbon stock is observed", that determination
is made in respect of the product generally (as opposed to individual consignments) and thus
becomes a very concrete product characteristic (specifically based on the raw material use d to
produce the product.) Considered as a whole and in the context of other provisions of RED II, the
high ILUC-risk cap and phase-out specifically limits the eligibility of specific types of biofuels to be
counted towards the renewable energy targets in RED II. Thus, like the 7% maximum share, the
high ILUC-risk cap and phase-out also effectively defines and prescribes one of the characteristics
required of biofuels for the purposes of meeting the consumption targets in RED II.
7.114. The European Union submits that a biofuel's eligibility to contribute to renewable energy
consumption targets under RED II depends on a number of factors, including compliance with the
sustainability and GHG emissions savings criteria, and is therefore not determined "solely" by
reference to the raw material used to obtain it.287 The Panel is not persuaded by this argument. The
fact that there are other conditions not challenged in these proceedings that also define the eligibility
of biofuels to contribute to RED II renewable energy consumption targets does not obscure the
specific requirements contained in the 7% maximum share and the high ILUC -risk cap and phase-
out which are at issue.
7.115. In the context of arguing that the measures do not "lay down" any product characteristic,
the European Union submits that if Malaysia's logic were accepted by the Panel, the scope of the
definition of a "technical regulation" under the TBT Agreement would be drastically widened . As a

285 Appellate Body Report, EC – Asbestos, para. 69.
286 Article 1 of RED II. (emphasis added)
287 European Union's first written submission, para. 553.

consequence, any "document" that identified products by reference to the raw materials from which
they are produced and established some legal effects from that identification would constitute a
"technical regulation" because that reference alone would be considered equivalent to "regulating"
the "composition" of the product. Under that logic, according to the European Union, any Member's
WTO schedule, which commonly distinguishes hundreds of products based on their raw materials
and establish es different rates of import duties, would constitute "a conglomerate of tec hnical
regulations".288
7.116. The Panel is not persuaded that the European Union's comparison to WTO schedules is
apposite. The design and operation of the 7% maximum share and the high ILUC -risk cap and
phase-out differ significantly from the European Union's hypothetical situation of a duty rate
attributed to a product based on its raw material input. The reference in Article s 26(1) and (2) of
RED II to the type of feedstock (raw materials) from which the biofuel is produced defines the
product characteristics that dictate whether and to what extent a biofuel may or may not be counted
by EU member States for the purposes of meeting RED II consumption targets. In doing so, it
effectively regulates the product characteristics required of biofuels needed to qualify as renewable
energy on the EU market (and thus eligibility to be counted as contributing towards the mandatory
sectoral target in the transport sector and overall target of renewable energy consumption).
Member's' WTO schedules, in contrast, do not "lay down" (i.e. prescribe) product characteristics in
the sense of Annex 1.1. Among other things, Member's WTO schedules set out tariffs that apply
exclusively to imported products, as opposed to technical regulations that prescribe product
characteristics that apply equally to imported and domestic products. Accepting the
European Union's argument would, in the Panel's view, ignore essential aspects of the design of the
7% maximum share and the high ILUC-risk cap and phase-out and how they operate in their given
regulatory context.
7.117. The Panel notes that the fact that the measures identify the product at issue through the
very product characteristics that are the object of the prescriptions at issue does not imply that they
cannot constitute a technical regulation. As observed by the Appellate Body, the product might be
identifiable through the very "characteristic" that is the subject of regulation.289 Whether the specific
measure at issue is or is not a technical regulation must be determined based on the essential
features of the measure considered as a whole.290
7.118. The Panel concludes that the 7% maximum share and the high ILUC-risk cap and phase-out
"lay down" product characteristics within the meaning of Annex 1.1.
7.1.2.1.5 "with which compliance is mandatory"
7.119. The Panel now turns to the third element of the test, which concerns the terms "with which
compliance is mandatory" in Annex 1.1.
7.120. Annex 1.1 makes clear that "compliance" with those product characteristics (or their related
PPMs) must be "mandatory" for the measure to be a technical regulation. In contrast, a "standard",
as defined in Annex 1.2, is a document "approved by a recognized body, that provides, for common
and repeated use, rules, guidelines or characteristics for products or related processes and
production methods, with which compliance is not mandatory".291 The requirement that compliance
be mandatory means that the document at issue must "prescribe rules" in "a binding or compulsory

288 European Union's first written submission, para. 567.
289 Appellate Body Report, EC – Asbestos, para. 70: "… there may be perfectly sound administrative
reasons for formulating a 'technical regulation' in a way that does not expressly identify products by name, but
simply makes them identifiable – for instance, through the 'characteristic' that is the subject of regulation."
(ibid.). (emphasis original)
290 Appellate Body Report, EC – Asbestos, para. 64 ("the proper legal character of the measure at issue
cannot be determined unless the measure is examined as a whole.").
291 Annex 1.2 to the TBT Agreement. (emphasis added) The definition of a "standard" is also
accompanied by an explanatory note, which states that the "terms as defined in ISO/IEC Guide 2 cover
products, processes and services. This Agreement deals only with technical regulations, standards and
conformity assessment procedures related to products or processes and production methods. Standards as
defined by ISO/IEC Guide 2 may be mandatory or voluntary. For the purposes of this Agreement standards are
defined as voluntary and technical regulations as mandatory documents. Standards prepared by the
international standardizing community are based on consensus. This Agreement covers also documents that
are not based on consensus." (Explanatory note to Annex 1.2 of the TBT Agreement).

fashion".292 In EC – Sardines, the panel and the Appellate Body considered the measure to lay down
product characteristics in a mandatory fashion, because the relevant req uirements were contained
in provisions that were "binding in [their] entirety and directly applicable in all Member States".293
7.121. The European Union submits that as these provisions are measures that have been adopted
by the Union and the Commission respectively, they must be implemented by the EU member States
and in that "narrow sense", the relevant provisions are "mandatory" on the EU member States.294
However, the European Union argues that Article 26 of RED II neither imposes any obligation directly
on palm oil and palm oil-based biofuel producers (or any producers of other food or feedstocks and
the respective biofuels), nor does it fix requirements that the producers of other biofuels and their
raw materials must comply with in order to obt ain some advantage. 295 The European Union also
argues that the 7% maximum share is binding only in the sense of imposing an outer limit.296
7.122. The Panel first notes that it is undisputed that RED II and the Delegated Regulation are
binding legal instruments th at create rights and obligations within the EU legal order. The first
sentence of Article 1 of RED II reads:
This Directive establishes a common framework for the promotion of energy from
renewable sources. It sets a binding Union target for the overall sh are of energy from
renewable sources in the Union's gross final consumption of energy in 2030.297
7.123. Article 3 of RED II provides that "Member States shall collectively ensure that the share of
energy from renewable sources in the Union's gross final consumption of energy in 2030 is at least
32%." The Panel notes that EU member States are required to set national contributions to meet,
collectively, this binding overall EU target.298 It is clear therefore from the terms of RED II that the
renewable energy consumption targets defined are binding on EU member States.299
7.124. Furthermore, the Panel recalls that Article 25(1) of RED II establishes a requirement that EU
member States set an obli gation on fuel suppliers to ensure that a "minimum share" of the total
energy consumption in the transport sector is comp osed of renewable energy. Pursuant to this
provision, which is expressly referenced in Article 26(1) and (2):
In order to mainstream th e use of renewable energy in the transport sector, each
Member State shall set an obligation on fuel suppliers to ensure that the share of
renewable energy within the final consumption of energy in the transport sector is at
least 14% by 2030 (minimum share) in accordance with an indicative trajectory set by
the Member State and calculated in accordance with the methodology set out in this
Article and in Articles 26 and 27.300
7.125. The mandatory nature of the language in Article 25(1) makes clear that in calculat ing
national contributions towards the renewable energy consumption targets, EU member States
cannot derogate from the calculation methodology set out in RED II, including in Article 26. Each EU
member State must therefore observe the limitations imposed b y the 7% maximum share in
calculating its national consumption. The binding effect of the measure extends to fuel suppliers,
whom EU member States must oblige to comply with the calculation methodology, including the 7%
maximum share and the high ILUC-risk cap and phase-out, in their efforts to achieve the 14% target
by 2030.
7.126. The Panel notes the European Union's acknowledgement that the overall consumption
targets in Article 3 and the 14% share of renewable energy in transport in Article 25 of RED II are
mandatory for EU member States at least "in the narrow sense" that they are prescribed by law.301

292 Appellate Body Report, EC – Asbestos, para. 68.
293 Panel Report, EC – Sardines, para. 7.30; and Appellate Body Report, EC – Sardines, para. 194.
294 European Union's first written submission, para. 591.
295 European Union's first written submission, para. 592.
296 European Union's first written submission, para. 594.
297 Emphasis added.
298 Article 3(2) of RED II.
299 Article 2 of RED II.
300 Emphasis added.
301 European Union's first written submission, para. 591.

Furthermore, with respect to the 7% maximum share, the European Union acknowledges that the
effect of Article 26 of RED II is that only a maximum of 7% of an EU member State's use of
conventional biofuels could be counted by that member State as contributing towards the 14%
sectoral target in the transport sector and the 32% overall target of renewable energy consumption.
Similarly, the Panel considers that the high ILUC-risk cap and phase-out requirement is an integral
part of the binding calculation rules that apply to food and feed crop -based biofuels. In the Panel's
view, this makes these requirements, on their face, mandatory, i.e. prescriptions that must b e
complied with by EU member States.302
7.127. The Panel notes the European Union's emphasis on certain flexibilities afforded to
EU member States in deciding how exactly to implement these requirements. The European Union
highlights in this respect that when fra ming obligations on fuel suppliers at the national level, EU
member States may distinguish between different biofuels, bioliquids and biomass fuels produced
from food and feed crops, and choose to promote all conventional biofuels or no conventional
biofuels.303 The Panel understands that Article 26(1) of RED II allows an EU member State meeting
its renewable targets with less than 7% of conventional biofuels to lower its overall target for the
transport sector commensurately; individual EU member States can thus set a lower maximum share
if they wish. The Panel understands that EU member States enjoy similar flexibility with respect to
setting lower maximum shares of biofuels made from high ILUC-risk feedstocks, within the limits of
the high ILUC-risk cap and phase -out. However, the fact that there is flexibility to opt for a lower
level of contribution from biofuels made from food and feed crops than the maximum share
established by and allowed under the 7% maximum share, and also for a lower level of contribution
from biofuels made from high ILUC-risk feedstocks within the limits of the cap and phase-out, does
not modify the binding character of the upper limits defined in Article 26(1).
7.128. The conditions imposed by RED II and the Delegated Regulation therefore define in a binding
manner the terms of eligibility of dif ferent types of fuels, including biofuels, for the purposes of
complying with the binding targets established under RED II. Within this framework, the
7% maximum share and the high ILUC -risk cap and phase -out prescribe in a binding manner the
characteristics required of biofuel products for the purposes of contributing to the European Union's
renewable energy consumption targets in the transport sector. Thus, even though EU member States
can define their renewable energy mix for internal purposes, they are not at liberty to derogate from
or ignore these requirements in fulfilling their obligations under RED II. In this sense, compliance
with the conditions imposed by these two measures relating to the raw materials or inputs of biofuels
for the purposes of e ligibility to count towards the renewable energy consumption targets is
mandatory.
7.129. In the Panel's view, in defining the characteristics required of biofuels to meet the
requirements of RED II, Articles 26(1) and (2) prescribe "in a binding or compulsory fashion"304 the
characteristics required of biofuels [made from food and feed crops] to be eligible to contribute to
the EU market for renewable sources of energy defined by RED II.
7.130. The Panel notes that, as the European Union observes, neither Article 26 of RED II nor the
Delegated Regulation impose rules on the specific composition of biofuels in order for them to be
sold on the EU market. Indeed, it is not disputed that conventional biofuels not eligible to contribute
to RED II targets can be nonetheless le gally sold on the EU market . However, the Panel is not
persuaded that this implies that the 7% maximum share and the high ILUC-risk cap and phase-out
do not lay down product characteristics with which compliance is "mandatory" within the meaning
of Annex 1.1. As the Panel explains below 305, the entirety of the EU conventional biofuel market is

302 The Panel notes that by their nature, these requirements are addressed to EU member States, rather
than to market operators directly. Their binding character, and the binding obligations that they give rise to,
therefore arise for EU member States rather than EU citizens. The European Union relies on this distinction in
stating that Article 26 of RED II does not impose any obligation "directly" on producers. The Panel is not
persuaded however that this consideration affects its assessment of the binding character of the measures.
Ultimately, EU member States will themselves need to implement the requirements imposed on them by RED
II by requiring operators in their respective territories to act so as to ensure compliance with these
requirements.
303 European Union's first written submission, para. 594.
304 Appellate Body Report, EC – Asbestos, para. 68.
305 See section 7.1.2.3.5.1 of this Report.

essentially governed by the RED II regime, in the sense that there is little to no demand for biofuels
that are not eligible to count towards the EU renewable energy targets.
7.131. In US – Tuna II (Mexico), the measure prescribed the eligibility conditions for access to a
voluntary label, and more generally the manner in which any "dolphin-safe" claims could be made
in relation to tuna products. The measure essentially controlled eligibility to use a label, and did not
otherwise prevent any products from being allowed onto the market. It was nonetheless found to
lay down product characteristics w ith which compliance was mandatory (and thus a "technical
regulation"). The Appellate Body observed in the context of the labelling requirement at issue that:
The text of Annex 1.1 to the TBT Agreement does not use the words "market" or
"territory". Nor does it indicate that a labelling requirement is "mandatory" only if there
is a requirement to use a particular label in order to place a product for sale on the
market. To us, the mere fact that there is no requirement to use a particular label in
order to place a product for sale on the market does not preclude a finding that a
measure constitutes a "technical regulation" within the meaning of Annex 1.1. Instead,
in the context of the present case, we attach significance to the fact that, while it is
possible to sell tuna products without a "dolphin-safe" label in the United States, any
"producer, importer, exporter, distributor or seller" of tuna products must comply with
the measure at issue in order to make any "dolphin-safe" claim.306
7.132. Likewise, in EC – Sardines the measure at issue did not condition lawfully placing a product
on the market upon possessing (or not possessing) certain characteristics. Rather, the measure
prescribed, among other things, which species of sardines could be sold as "preserved sardines" on
the EU market. The measure essentially controlled eligibility to use a commercial designation and
did not otherwise prevent any products from being allowed onto the market. It was nonetheless
found to lay down product characteristics with which compliance was mandatory.307
7.133. Thus, in both disputes, compliance with the requirements in the technical regulations at
issue was necessary to gain access to a certain advantage or a certain segment of the market. The
fact that compliance with the requiremen ts addressed in US – Tuna II (Mexico) and EC – Sardines
was not a condition for selling the product lawfully (i.e. a condition to "place a product for sale on
the market", as described by the Appellate Body in US – Tuna II (Mexico)) did not detract from the
conclusion that they constituted technical regulation s. The commonality to these two disputes was
the critical fact that in both situations the measures exclusively, mandatorily and exhaustively
laid down criteria for the eligibility of the produc ts concerned to receive a certain label or be
marketed using a certain term.
7.134. In the Panel's view, the 7% maximum share and the high ILUC-risk cap and phase -out
operate in an analogous manner. As pointed out by the European Union, these measures do not
create a legal impediment to selling or otherwise placing on the EU market biofuels made from food
or feed crops generally or from crops determined to be high ILUC risk. However, they limit access
to a particular segment of the EU market comprising biofuels c onsidered as renewable energy
sources for the purpose of national contributions to EU renewable energy targets in the transport
sector.308 While it is possible to sell food and feed crop -based biofuel, including that made of high
ILUC-risk feedstock, in the European Union, every EU member State must comply with the
"maximum share" and cap on the use of these biofuels, or the gradual phase -out, in calculating its
share of renewable energy consumption to meet the binding targets of RED II. There is no flexibility
for EU member States to ignore these rules in calculating their share of renewable energy, or to
abstain from performing such a calculation.
7.135. This was also a key reason in US – Tuna II (Mexico) that led the Appellate Body to ultimately
conclude that the measure was a technical regulation. In that case, the measure set out "a single
and legally mandated definition of a 'dolphin-safe' tuna product and disallows the use of other labels

306 Appellate Body Report, US – Tuna II (Mexico), para. 196. (emphasis original; fns omitted.)
307 Panel Report, EC – Sardines, para. 7.47; and Appellate Body Report, EC – Sardines, para. 194.
308 In other words, compliance with product characteristics laid down in the technical regulation at issue
in US – Tuna II (Mexico) was required to gain access to the advantages created by the United States'
promotion of dolphin-safe tuna just as compliance with the product characteristics laid down in Articles 26(1)
and (2) is required to gain access to the advantages created by the European Union's promotion of renewable
energy in the transport sector.

on tuna products that do not satisfy this definition [… and that, i]n d oing so, the US measure
prescribes in a broad and exhaustive manner the conditions that apply for making any assertion on
a tuna product as to its 'dolphin-safety', regardless of the manner in which that statement is made[,
and, a]s a consequence, the US m easure covers the entire field of what dolphin -safe means in
relation to tuna products ".309 Similarly here, there is absolutely no flexibility in terms of allowing
alternative criteria for assessing whether biofuels are eligible for the purposes of the 7% maximum
share or the high ILUC-risk cap and phase -out, except from those criteria prescribe d in the
measures. The measures therefore "prescribe in a broad and exhaustive manner the conditions that
apply" for eligibility, thus covering "the entire field of what" eligible biofuels means for attaining RED
II's renewable energy targets. This conclus ion is not modified by the fact that biofuels that do not
meet the requirements for eligibility may be lawfully sold on the market to supply the EU transport
energy market.
7.136. The Panel is mindful that in US – Tuna II (Mexico) , the measure at issue was a lab elling
requirement, and that labelling requirements are expressly identified in the second sentence of
Annex 1.1 as falling within the scope of what may be addressed in a technical regulation. In the
present case, as discussed above, it is not alleged that the measure at issue would be covered by
the second sentence of Annex 1.1. However, this difference does not imply that the reasoning
applied in US – Tuna II (Mexico) cannot also find application here, mutatis mutandis. The relevant
consideration in this respect is that a measure may constitute a technical regulation even if it does
not impose particular product characteristics or requirements as a condition for placing a product on
the market.310
7.137. The Panel observes that limiting the applicability of the r elevant provisions of the
TBT Agreement to measures that condition the ability to lawfully place products on the market would
exclude from the disciplines of the TBT Agreement measures regulating or foreclosing access to a
certain advantage or segment of a market on the basis of the characteristics of a product, without
excluding the possibility of offering it for sale. In the Panel's view, the text and context of the relevant
provisions of the TBT Agreement do not provide a basis for drawing such a distinc tion between
measures that regulate the characteristics required of products to place them on the market
altogether and those that regulate the characteristics required of products to access certain specific
segments of the domestic market. This is also co nsistent, in the Panel's view, with the object and
purpose of the TBT Agreement, as expressed in its preamble, "that technical regulations … do not
create unnecessary obstacles to international trade".
7.138. Based on the above, the Panel finds that the 7% maximum share and the high ILUC-risk cap
and phase-out lay down product characteristics "with which compliance is mandatory " within the
meaning of Annex 1.1.
7.1.2.1.6 Conclusion on Annex 1.1
7.139. The Panel concludes that the 7% maximum share and the high ILUC-risk cap and phase-out
are technical regulations within the meaning of Annex 1.1 to the TBT Agreement.
7.140. The Panel notes that the European Union reiterates its view that the challenged measures
are not technical regulations when responding to each of the claims made under Article 2. The Panel
also appreciates that the way the European Union responds to certain of the claims under Article 2
is informed by its view that the measures are not technical regulations. Ho wever, having already
addressed this issue at the outset, and with a view to avoiding repetition, the remainder of the
Panel's findings proceed on the assumption that the 7% maximum share and the high ILUC-risk cap
and phase-out are technical regulations within the meaning of Annex 1.1 to the TBT Agreement.

309 Appellate Body Report, US – Tuna II (Mexico), para. 199. (emphasis added)
310 The Panel notes that the requirement "with which compliance is mandatory", stated in the first
sentence of Annex 1.1, applies also to the types of measures described in the second sentence. (See e.g.
Panel Report, EC – Trademarks and Geographical Indications (Australia), para. 7.449 (expressing the view that
it would be contrary to the object and purpose of the obligations concerning technical regulations if the
element that "compliance is mandatory" would not apply to the items described in the second sentence); and
Panel Reports, Australia – Tobacco Plain Packaging, fn 979 to para. 7.281 (noting what while Annex 1.1 does
not expressly refer to the "mandatory" nature of the document in its second sentence, it applies equally.)

7.1.2.2 Article 2.4 – Relevant international standards
7.1.2.2.1 Introduction
7.141. Having concluded that the 7% maximum share and the high ILUC -risk cap and phase -out
are technical regulations within the meaning of Annex 1.1, the Panel now turns to the claims under
Article 2 of the TBT Agreement. The Panel begins with the claim under Article 2.4, addressing it
before the claims under Articles 2.2 and 2.1 for reasons already set out in the Panel's discussion of
its order of analysis.
7.142. Malaysia submits311 that the European Union violates Article 2.4 by imposing the high ILUC-
risk cap and phase-out without using relevant international standards as a basis. More specifically,
Malaysia refers to four ISO standards as being the relevant standards for the purposes of its
Article 2.4 c laim, explaining that they set out a methodology for assessing the environmental
performance and sustainability of biofuel. Malaysia contends that this methodology explicitly
excludes ILUC from the assessment. For Malaysia, therefore, the high ILUC-risk cap and phase-out
contradicts the relevant ISO standards and, therefore, the European Union has not used them as a
basis for its technical regulations. Malaysia further submits that these standards are an effective and
appropriate means of fulfilling the Eur opean Union's primary objective, namely, the avoidance of
additional GHG emissions.
7.143. The European Union submits312 that these four ISO standards are neither relevant standards
nor are they effective or appropriate for fulfilling the legitimate objective pur sued through the
measures at issue. More specifically, the European Union argues that the measures address a matter
which is outside of the scope of the four ISO standards as these do not capture ILUC and associated
environmental risks. The European Union submits that because of this fact, it has adopted an
alternative approach in the Delegated Regulation.
7.1.2.2.2 Legal standard
7.144. Article 2.4 sets forth the obligation that:
Where technical regulations are required and relevant international standards exist or
their completion is imminent, Members shall use them, or the relevant parts of them,
as a basis for their technical regulations except when such international standards or
relevant parts would be an ineffective or inappropriate means for the fulfilment of the
legitimate objectives pursued, for instance because of fundamental climatic or
geographical factors or fundamental technological problem.
7.145. Article 2.4 has been interpreted and applied in a number of prior cases, and both parties
present their respective understandings of the applicable legal standard with reference to prior cases.
7.146. Based on the text of Article 2.4, a complainant has to show three elements 313 to establish
that a technical regulation is inconsistent with the obligation:
a. relevant international standards exist, or their completion is imminent;
b. the international standard(s), or the relevant parts thereof, has/have not been used as a
basis for the technical regulation; and
c. the international standard(s), or relevant parts thereof, is/are not an ineffective or
inappropriate means for the fulfilment of the legitimate objectives pursued by the technical

311 Malaysia's first written submission, paras. 692-709; Malaysia's second written submission,
paras. 255-262; Malaysia's responses to the Panel's questions, p. 83-87; and Malaysia's comments on the
European Union's responses to the Panel's questions, p. 233-235.
312 European Union's first written submission, paras. 978-1001; European Union's second written
submission, paras. 161-166; and European Union's responses to the Panel's questions, paras. 716-731.
313 Panel Report, US – Tuna II (Mexico), para. 7.627 (referring to Panel Report, EC – Sardines,
paras. 7.61-7.139 and Appellate Body Report, EC – Sardines, paras. 217-291).

regulation, taking into account fundamental climatic or geographical factors or
fundamental technological problems.
7.147. These elements apply cumulatively, and thus each must be satisfied to establish an
inconsistency with the first sentence of Article 2.4.
7.148. The Panel will elaborate further on the elements of the legal standard in Article 2.4 as
necessary in the course of its assessment of the issues in dispute. As is its prerogative,314 the Panel
will also scrutinize and interpret the meaning of relevant parts of the four ISO standards at issue in
this dispute.
7.1.2.2.3 Description of the general content of the four ISO standards
7.149. The four ISO standards i n respect of which Malaysia makes its claim under Article 2.4 are
the following:
a. ISO standard 14040:2016 entitled "Environmental management — Life cycle assessment
— Principles and framework" (hereinafter "ISO 14040:2016")315
b. ISO standard 14044:2017 entitled "Environmental management — Life cycle assessment
— Requirements and guidelines" (hereinafter "ISO 14044:2017")316
c. ISO standard 14067:2018 entitled "Greenhouse gases – Carbon footprint of products –
Requirements and guidelines for quantification" (hereinafter "ISO 14067:2018")317
d. ISO standard 13065:2015 entitled "Sustainability criteria for bioenergy" (hereinafter "ISO
13065:2015")318
7.150. Article 2.4 refers to "international standards" that are "relevant". With respect to the former
element, the parties agree that these four ISO documents are international standards within the
meaning of this provision. The Panel sees no reason to disagree.319
7.151. The Panel observes that ISO 14040:2016 and ISO 14044:2017 both concern the life cycle
assessment (LCA) of a product and that, given their commonalities, they can be examined together.
ISO 14040:2016 describes the principles and framework of an LCA, whereas ISO 14044:2017

314 In Australia – Tobacco Plain Packaging, the panel, based on certain guidance by the Appellate Body
in India – Agricultural Products (an SPS dispute) on the panel's task in identifying and interpreting international
standards, which it considered applied mutatis mutandis to TBT disputes, stated that "[o]nce the relevant
instruments have been identified, their meaning will also need to be discerned and understood" by the panel.
(Panel Reports, Australia – Tobacco Plain Packaging, para. 7.297. See more generally ibid., paras. 7.295-
7.297.) In India – Agricultural Products, the Appellate Body stated, for instance, that "because the
international standard serves as the benchmark against which a Member's compliance under Article 3 [of the
SPS Agreement] is to be assessed, it is incumbent on a panel to discern the meaning of that standard. In
conducting such an assessment, panels have various means available to them. A panel may be guided by any
relevant interpretative principles, including relevant customary rules of interpretation of public international
law." (Appellate Body Reports, India – Agricultural Products, para. 5.79; and Australia – Tobacco Plain
Packaging, para. 7.296. (emphasis added))
315 ISO 14040:2016, (Exhibit MYS-242).
316 ISO 14044:2017, (Exhibit MYS-241).
317 ISO 14067:2018, (Exhibit EU-32).
318 ISO 13065:2015, (Exhibit EU-164).
319 Pursuant to Annex 1.2, a "standard" is a "[d]ocument approved by a recognized body, that provides,
for common and repeated use, rules, guidelines or characteristics for products or related processes and
production methods, with which compliance is not mandatory". Furthermore, pursuant to Annex 1.4, an
"international body or system" is defined as a "body or system whose membership is open to the relevant
bodies of at least all Members". Further, as the Appellate Body has clarified, an international standard is one
adopted by an "international standardizing body", i.e. a body with "recognized activities in standardization" and
whose membership is open to the relevant bodies of at least all Members. (Appellate Body Report,
US – Tuna II (Mexico), para. 359. See also Panel Reports, Australia – Tobacco Plain
Packaging, paras. 7.278-7.287.) Like the parties, the Panel considers that the ISO standards at issue meet
these definitions and are consistent with the Appellate Body guidance with respect to the meaning of the term
"international standard". See Malaysia's first written submission, para. 697; European Union's response to
Panel question No. 128, para. 724.

specifies requirements and provides guidelines for an LCA. 320 An LCA addresses environmental
aspects and potential environmental impacts of a given product throughout that product's life cycle
– from raw material acquisition through to its production, use, end -of-life treatment, recycling and
final disposal (i.e. cradle-to-grave).321
7.152. The Panel observes that ISO 14040:2016 defines LCA as the "compilation and evaluation of
the inputs, outputs and the potential environmental impacts of a product system throughout its life
cycle".322 A "product system" is in turn defined as a "collection of unit processes with elementary
and product flows, performing one or more defined functions, and which models the life cycle of a
product".323 As ISO 14040:2016 explains, "LCA is conducted by defining product systems as models
that describe the key elements of physical systems. The system boundary defines the unit processes
to be included in the system. "324 Furthermore, ISO 14040:2016 explains that LCA is a "relative
approach, which is structured around a functional unit".325 A "functional" unit is then defined as the
"quantified performance of a product system for use as a reference unit ".326 The functional unit
defines what is being studied and all subsequent analyses are relative to that functional unit.327
7.153. The Panel notes that an expert st udy submitted by the European Union describes LCA as
"the most accepted tool to assess environmental performance of products " and describes
ISO 14040:2016 and ISO 14044:2017 as the "most broadly accepted standards in the field [that]
can be regarded as the 'mother' of almost all other standardization activities".328
7.154. The Panel now turns to ISO 14067:2018, which as noted above is entitled "Greenhouse
gases – Carbon footprint of products – Requirements and guidelines for quantification". It specifies
principles, requirements and guidelines for the quantification and reporting of the carbon footprint
(CFP) of a product, in a manner consistent with the above standards on LCA. 329 ISO 14067:2018
defines the CFP of a product as the "sum of GHG emissions and GHG removals in a product system,
expressed as CO2 equivalents and based on a life cycle assessment using the single impact category
of climate change".330 According to the standard, this quantification is based on an LCA which must
be in conformity with ISO 14044:2017.331
7.155. Finally, ISO 13065:2015, which as noted above is entitled "Sustainability criteria for
bioenergy", specifies principles, criteria and indicators for the bioenergy supply chain to facilitate
assessment of environmental, social and economic aspects of sustainability.332 The standard defines
"bioenergy" as "energy derived from biomass ". That this definition covers biofuels is uncontested
between the parties. 333 The relevant principles, criteria and indicators are set out in separate
chapters of this standard concerning the respective sustainability aspects. As regards environmental
sustainability, the standard defines the relevant principle as reducing anthropogenic GHG emissions
and stipulates, as an indicator, certain calculations of GHG emissions and GHG removals.334 In terms

320 ISO 14040:2016, (Exhibit MYS-242), Clause 1, first sentence (scope), p. 1; and ISO 14044:2017,
(Exhibit MYS-241), Clause 1 (scope), p. 1.
321 ISO 14040:2016, (Exhibit MYS-242), p. iv.
322 ISO 14040:2016, (Exhibit MYS-242), Clause 3.2 (Life cycle assessment), p. 2.
323 ISO 14040:2016, (Exhibit MYS-242), Clause 3.28 (Product system), p. 4.
324 ISO 14040:2016, (Exhibit MYS-242), Clause 5.2.3 (System boundary), p. 12.
325 ISO 14040:2016, (Exhibit MYS-242), Clause 4.1.4 (Relative approach and functional unit), p. 3.
326 ISO 14040:2016, (Exhibit MYS-242), Clause 3.20 (Functional unit), p. 3.
327 ISO 14040:2016, (Exhibit MYS-242), Clause 4.1.4 (Relative approach and functional unit), p. 6,
which states:
LCA is a relative approach, which is structured around a functional unit. This functional unit
defines what is being studied. All subsequent analyses are then relative to that functional unit, as
all inputs and outputs in the LCI and consequently the LC1A profile are related to the functional
unit.
328 Finkbeiner Study, (Exhibit EU-166), p. 13.
329 ISO 14067:2018, (Exhibit EU-32), Clause 1, first sentence (Scope), p. 1.
330 ISO 14067:2018, (Exhibit EU-32), Clause 3.1.1.1 (Carbon footprint of a product), p. 2.
331 ISO 14067:2018, (Exhibit EU-32), Clause 6.1 (General), also Clause 1 (Scope), p. 13 and 1.
332 ISO 13065:2015, (Exhibit EU-164), Clause 1, first sentence (Scope), p. 1.
333 ISO 13065:2015, (Exhibit EU-164), Clause 3.3 (Bioenergy), p. 1.
334 ISO 13065:2015, (Exhibit EU-164), Clause 5.2.1.1.1, p. 13, which states:
Indicator: Provide, in accordance with Clause 6:
a) Sufficient data to allow the calculation of GHG emissions and GHG removals of a life cycle
stage; or

of methodology, the standard stipulates that GHG quantification and reporting shall be undertaken
in accordance with the above standard, i.e. ISO 14067:2018, and thus requires an LCA which must
be in conformity with ISO 14044:2017.335
7.156. In sum, the four ISO standards, read together, provide for an LCA -based quantification of
GHG emissions of biofuels. This is uncontested between the parties.
7.1.2.2.4 How the four ISO standards relate to the issue of ILUC
7.157. The Panel observes that of the four standards, only ISO 14067:2018 directly refers to ILUC.
The Panel therefore first examines relevant language in that standard, before turning to
considerations of whether other more general language in this and the other three standards may
also have a bearing on the issue of ILUC. As noted above, ISO 14067:2018 defines ILUC as "change
in the use of land which is a consequence of direct land use change […], but which occurs outside
the relevant boundary ".336 This definitio n differs somewhat from the manner in which the
European Union has defined ILUC in its measures. 337 However, at the same time, the example
provided in the Notes to the ISO standard's definition is similar to the way the measures define
ILUC.338 The Panel does not see that any such differences in how definitions of ILUC are formulated
in the ISO standard and the measures would affect the present analysis (nor has either party to this
dispute argued so).
7.158. While ISO 14067:2018 refers to ILUC, there is no disagreement between the parties that it
excludes ILUC from the LCA methodology set out therein.339 Indeed, the definition of ILUC in
ISO 14067:2018 describes ILUC as occurring "outside the relevant boundary". As described above,
the (system) boundary "defines the unit processes to be included in the system ". In other words,
ILUC lies outside the scope of what is being studied.
7.159. That ILUC is excluded from the LCA methodology is also clear from the following sentence
in ISO 14067:2018, which states that:
Indirect land use change (ILUC) should be included in CFP studies once an
internationally agreed procedure exists.340

b) Partial carbon footprint of the bioenergy product calculated as the sum of GHG emissions and
removals of one or more processes expressed in gCO2 equivalents per delivered unit; or
c) Life cycle carbon footprint calculated as the sum of GHG emissions and GHG removals
expressed in gCO2 equivalents per MJ energy delivered and functional unit.
335 ISO 13065:2015, (Exhibit EU-164), Clause 6.1 (General), p.20, which states in relevant part:
This clause establishes the requirements for quantifying GHG emissions to address the GHG
principle (see 5.2.1). GHG quantification and reporting shall be undertaken in accordance with
ISO/TS 14067 as supplemented by Clause 6. ISO/TS 14067 specifies principles, requirements
and guidelines for the quantification and communication of the carbon footprint of a product
(CFP), based on International Standards on life cycle assessment (ISO 14040 and ISO 14044)
and on environmental labels and declarations (ISO 14020, ISO 14024 and ISO 14025). It
includes requirements on data and data quality.
336 See para. 2.84 above.
337 "Indirect land-use change occurs when the cultivation of crops for biofuels, bioliquids and biomass
fuels displaces traditional production of crops for food and feed purposes. Such additional demand increases
the pressure on land and can lead to the extension of agricultural land into areas with high-carbon stock, such
as forests, wetlands and peatland, causing additional greenhouse gas emissions." (See para. 2.83 above).
338 The example in ISO 14067:2018, (Exhibit EU-32), Clause 3.1.7.6 (indirect land use change – iLUC),
p. 10:
If land use on a particular parcel of land changes from food production to biofuel production, land
use change might occur elsewhere to meet the demand for food. This land use change elsewhere
is indirect land use change.
339 Malaysia's first written submission, para. 702; second written submission, para. 257; European
340 ISO 14067:2018, (Exhibit EU-32), Clause 6.4.9.5 (Land use change), p. 26.

7.160. The sentence is contained in a Note to Clause 6.4.9.5 of ISO 14067:2018, which stipulates
the inclusion of DLUC in the quantification of GHG emissions.341 Thus, while DLUC is included in that
quantification, ILUC currently is not.
7.161. Both parties elaborate on why ILUC effects are currently not included in the LCA -based
quantification of GHG emissions. Malaysia sees the non-inclusion of ILUC in the LCA methodology as
"a clear recognition that the concept of ILUC is still more conceptual than it is operational .342 The
European Union describes the system boundaries of an LCA as "inherent limitations" of an LCA and
quotes the above expert study, stating that "due to the different nature of ILUC and the material
and energy flow typically assessed in LCA, it is probably wise to try and address and mitigate iLUC
separately from LCA – at least for some time."343
7.162. The Panel considers that the sentence in ISO 14067:2018, quoted above, as well as the
parties' submissions on this point, demonstrate that the question of whether to include ILUC in an
LCA-based quantification of GHG emissions, and if so how, is an open question still the object of
ongoing scientific debate. The Panel understands that it is the existence of this scientific debate that
explains why there is currently no internationally agreed procedure. 344 Furthermore, the prevailing
opinion, to which both parties refer, seems to be that ILUC cannot be measur ed or observed (at
least with sufficient precision to draw conclusions on the levels of ILUC-related GHG emissions ) and
therefore cannot be included in an LCA study. 345 Moreover, the European Union refers to this view
as the reason why it has chosen a diff erent approach from quantification. 346 However, while the
parties appear to agree on the fact of, and the reasons for, the non -inclusion of ILUC in the LCA -
based quantification, they disagree on what the non-inclusion, and in particular the above sentence
in ISO 14067:2018, means.
7.163. To recall, the above sentence in ISO 14067:2018 states that ILUC "should be included in
CFP studies once an internationally agreed procedure exists". Malaysia understands this sentence to
be a "strong and unambiguous rejection of, as things currently stand, including GHG emissions
related to ILUC in the calculation of the carbon footprint of products, including biofuel ".347 In
response to the Panel's question on whether the four ISO standards preclude any and all
consideration of IL UC effects outside the context of CFP quantification under an LCA approach,
Malaysia takes the view that an "operationalised ILUC approach…is clearly counter to the standards
that are in place".348
7.164. For the European Union, ILUC risks and ILUC emissions are not an integral part of the four
ISO standards as they explicitly recommend not to account for GHG emissions related to ILUC in the
context of the LCA of the CFP of products as long as no internationally agreed procedure on how to
calculate such emissions exists.349 The European Union further submits that this sentence in
ISO 14067:2018 cannot be interpreted in any sense as precluding any Member from following a
regulatory approach that takes account of ILUC, whether in the context of an LCA of the CFP of

341 ISO 14067:2018, (Exhibit EU-32), Clause 6.4.9.5 (Land use change), p. 25, states in relevant part:
The GHG emissions and removals occurring as a result of direct land use change (dLUC) within
the last decades (see NOTE 1) shall be assessed in accordance with internationally recognized
methods, such as the IPCC Guidelines for National Greenhouse Gas Inventories and included in
the CFP. The net dLUC GHG emissions and removals shall be documented separately in the CFP
study report. If site-specific data are applied, they shall be transparently documented in the CFP
study report. If a national approach is used, the data shall be based on a verified study, a peer-
reviewed study or similar scientific evidence and shall be documented in the CFP study report.
(fns omitted)
342 Malaysia's response to Panel question No. 130. See also Malaysia's responses to Panel question Nos.
129 and 131.
343 European Union's first written submission, paras. 995 and 998.
344 The Panel notes, in this respect, that Note 6 to Clause 6.4.9.5 of ISO 14067:2018 states that
"[t]here is ongoing research to develop a methodology and data for the inclusion of iLUC in GHG reporting."
(emphasis added)
345 Recital 81 to RED II; Status Report (2019), (Exhibits EU-3, MYS-92), p. 4. See also Malaysia's first
written submission, paras. 64, 438, 452, 575, 576, and 610.
346 European Union's first written submission, para. 999.
348 Malaysia's response to Panel question No. 131, pp. 85-86.
349 European Union's first written submission, para. 989; second written submission, para. 161.

products, or in the context of other methodologies aimed at assessing the environmental impact of
the same products.350
7.165. The Panel therefore understands Malaysia to interpret the sentence in ISO 14067:2018
quoted above as meaning that the standard effectively proscribes, i.e. does not allow, the inclusion
of ILUC before any procedures have been internationally agreed. The Panel considers that the
following two textual considerations speak against such an interpretation.
7.166. The first textual consideration is the sentence itself, and more specifically its wording and
place in the standard. Regarding the wording, the sentence makes a positive statement about the
possibility of including ILUC in the methodology of ISO 14067:2018 in the future, rather than a
negative statement about excluding ILUC from any assessment currently carried out, as suggested
by Malaysia. Indeed, to get to the meaning Malaysia attributes to the quoted sentence, the addition
of the word "only" before "once" would seem necessary, and the word "should" would have to be
replaced by "shall".351 Regarding the placement of the quoted sentence in the standard, the sentence
is contained in a "Note" to the actual clause i.e. Clause 6.4.9.5, which provides for the in clusion of
DLUC in the assessment. Under the ISO's own directives, however, notes to clauses in ISO standards
do not have the function of setting out requirements. 352 Instead, their function is simply that of
"giving additional information intended to assis t the understanding or use of the text of the
document".353
7.167. The second textual consideration that speaks against Malaysia's reading of the sentence in
ISO 14067:2018 quoted above is the existence of other clauses in ISO 14067:2018, which also refer
to ILUC, namely:
a. Clause 6.4.9.8, like Clause 6.4.9.5, is a sub-clause to Clause 6.4.9 ("Treatment of specific
emissions and removals"), and contains a "Summary of requirements and guidance":
i. Table 1 in Clause 6.4.9.8 refers to ILUC as a specific component of GHG emissions
that, in terms of treatment in the CFP, "should be considered for inclusion " and, in
terms of documentation in the CFP study report, "shall be documented separately if
calculated".354
ii. Additionally, Figure 3 to Table 1, which contains an illustration of the specific
components of the CFP and the partial CFP also refers to ILUC emissions and ILUC
removals indicating that they "should be considered separately" and noting that DLUC
and ILUC "can have a positive or negative contribution to the CFP".355
b. Clause 7.2 ( "GHG values in the CFP study report ") requires that GHG emissions and
removals occurring as a result of ILUC "shall be documented separately if calculated".
7.168. These clauses and subclauses show that ISO 14067:2018 already envisages the possible
inclusion of ILUC in a CFP study at present, i.e. even in the absence of internationally agreed

350 European Union's first written submission, para. 992; second written submission, para. 165.
351 The European Union notes that:
The verb "should" in ISO standards "indicates a recommendation" and a recommendation is an
"expression, in the content of a document, that conveys or suggest[s a] possible choice or course
of action deemed to be particularly suitable without necessarily mentioning or excluding others".
(European Union's first written submission, para. 991. (emphasis original)) See also Malaysia's
second written submission, para. 258.
352 See Clause 24.5 of the ISO/IEC Directives, Part 2, Principles and rules for the structure and drafting
of ISO/IEC documents, which states: "Notes shall not contain requirements … or any information considered
indispensable for the use of the document, for example instructions (imperative mood), recommendations … or
permission … Notes should be written as a statement of fact." (The European Union submitted parts of this
document as Exhibit EU-165. The document is available in its entirety at: ISO - Publicly available resources)
353 See the first para. of Clause 24.1 of the ISO/IEC Directives, Part 2, Principles and rules for the
structure and drafting of ISO/IEC documents, which also adds, confirming the understanding that Notes
themselves do not set requirements, the "document [i.e. the standard] shall be usable without the notes."
(emphasis added)
354 Emphasis added.
355 Emphasis added.

procedures. As a consequence, this implies that the inclusion of ILUC, in the absence of
harmonization through a standard, is a methodological choice by the entity preparing the CFP study.
7.169. The Panel notes that in response to the European Union's arguments concerning these
clauses, Malaysia submits that these arguments are unsubstantiated as the European Union "has
provided absolutely no evidence demonstrating that such calculation is even possible".356 The Panel
considers however that this argument does not rebut the point that the very existence of these
clauses proves that ISO 14067:2018, while not itself offering a methodology for d oing so,
acknowledges that ISO standard users, including regulators, may already be accounting for GHG
emissions from ILUC based on their own methodologies.
7.170. Based on these textual considerations, the Panel finds that the above sentence in
ISO 14067:2018 does not address the issue of whether countries may assess ILUC in the absence
of internationally agreed procedures, and if so, how they would do so. The Panel therefore does not
share Malaysia's interpretation under which the standard would effectively proscribe, i.e. not allow,
the inclusion of ILUC before any procedures have been internationally agreed.
7.171. Having assessed the specific references to ILUC in ISO 14067:2018, the Panel now turns to
other, more general language found in the four ISO standards referred to above, that may also have
a bearing on the issue of ILUC.
7.172. The Panel first examines ISO 13065:2105, because its product coverage (bioenergy,
including biofuel) is the most specific amongst the four ISO standards in terms of addressing the
assessment of environmental effects of biofuel. Clause 4.12 of ISO 13065:2015, entitled "Direct and
indirect effects", states:
In developing this International Standard, issues concerning direct and indirect effects
were carefully considered. The aim of this Inte rnational Standard is to provide clear
guidance to produce consistent and replicable results. The term "indirect effects" can
be understood in different ways due to various opinions and definitions. This
International Standard considers the measurable envi ronmental, social and economic
effects that are under the direct control of the economic operator and caused by the
process being assessed. For the purpose of this International Standard, these are
defined as "direct effects". Other effects that do not meet these requirements are not
included in this International Standard.357
7.173. Thus, Clause 4.12 makes clear that only "direct effects" are included in the standard and
defines the latter as "measurable, under the direct control of the economic operator and caused by
the process being analysed ". ILUC effects clearly do not qualify as "direct effects " under this
definition, and thus are not covered by this standard.
7.174. The Panel notes that, in response to a question from the Panel, Malaysia points to the word
"measurable" in this clause, recalling that ILUC effects cannot be measured or observed, which
Malaysia identifies as one of its principal concerns with "the EU's attempts to operationalise the
concept of ILUC". For Malaysia, Clause 4.12 reflects the general notion that a policy is most effective
when its outcomes are predictable.358 The Panel considers that Malaysia's response does not address
whether ISO 13065:2015 prescribes what Members are to do in respect of ILUC. In the Panel's view,
Clause 4.12 makes clear what is not included in the scope of the methodology and therefore, does
not address ILUC, whether positively or negatively.
7.175. In the Panel's view, by not including "indirect effects" such as ILUC in the methodology under
ISO 13065:2015, Clause 4.12 leav es open whether or how such effects would be assessed.
Furthermore, the Panel notes that ISO 13065:2015 also states that "the indicators in this
International Standard might not comprehensively capture all sustainability aspects for all bioenergy
processes."359 Thus, the Panel concludes that ISO 13065:2015, as the most specific standard of the
four at issue in terms of addressing the assessment of environmental effects of biofuel, not only
makes clear that it does not purport to comprehensively address all sustainability aspects of biofuel,

356 Malaysia's second written submission, para. 259.
357 ISO 13065:2015, (Exhibit EU-164), Clause 4.12, p. 13. (emphasis added)
358 Malaysia's response to Panel question No. 132.
359 ISO 13065:2015, (Exhibit EU-164), Introduction, p. vi.

but it also specifically excludes from the scope of its methodology the assessment of "indirect effects"
such as ILUC.
7.176. Turning to the other ISO standards, the Panel observes that they also contain language
qualifying the scope and methodology they set out, and the role they have in a decision/policy -
making process. Thus, ISO 14040:2016 itself describes LCA as just "one of the techniques " that
have been developed for the purpose of better understanding and addressing the environmental
impacts of products. 360 Furthermore, ISO 14040:2016 states that "LCA is one of several
environmental management techniques (e.g. risk assessment, environmental performance
evaluation, environmental auditing, and environmental impact assessment) and might not be the
most appropriate technique to use in all situations. "361 ISO 14044:2017, building on ISO
14040:2016, contains identical language.362
7.177. Furthermore, ISO 14067:2018 states that it "addresses only a single impact category:
climate change" and "does not assess any social or economic aspects or impacts, or any
environmental aspects and related impacts potentially arising from the life cycle of a product ".363
Annex A details the "limitations of the CFP", which it identifies to be the "focus on climate change as
the single impact category, and limitations related to the methodology".364 In particular with regard
to the focus on a single impact category, Annex A points out that "decisions about product impacts
that are only based on a single environmental issue can be in conflict with goals and objectives
related to other environmental issues " and advises that "CFP or partial CFP should not be the sole
component of a decision-making process".365
7.178. For the Pane l, it is clear from these qualifications in the different standards, that the
standards do not purport to confine a regulator to using LCA only and do not purport to
comprehensively or exhaustively address every potential environmental impact.
7.179. In sum, the Panel finds that ISO 13065:2015 generally excludes ILUC effects, as indirect
effects, from its methodology and that ISO 14067:2018 specifically excludes ILUC effects from the
LCA methodology used to quantify GHG emissions. However, neither of these standa rds (nor the
other two standards discussed in this section) contains language that precludes a national regulator
from addressing ILUC through its own approach outside internationally standardized methodologies.
7.1.2.2.5 The requirements of Article 2.4
7.180. Having established that the four ISO standards do not include ILUC in their methodology,
but also do not preclude a national regulator from addressing ILUC through its own methodology,
the Panel now turns to the question whether, in light of this reading, Malaysia's case meets the
requirements of Article 2.4. The first element that Malaysia must demonstrate is that the four
ISO standards, which the Panel noted above qualify as international standards, are "relevant"
international standards within the meaning of Article 2.4.
7.181. Malaysia submits that because the measures at issue are measures which first limit and then
exclude palm oil -based biofuel from being counted toward s the renewable energy consumption
targets on the basis of, essentially, its CFP, the ISO standards for determining the CFP are "relevant"
within the meaning of Article 2.4. Malaysia points specifically to ISO 13065:2015 as the standard
assessing the sustainability of the entire bioenergy supply chain.366
7.182. The European Union submits that the standards are not relevant because the measures at
issue address a matter which is outside the scope of those standards.367 The European Union accepts
that they are partially relevant insofar as they relate to the estimation of direct GHG emissions. The

360 ISO 14040:2016, (Exhibit MYS-242), Introduction, p. v.
361 ISO 14040:2016, (Exhibit MYS-242), Introduction, p. vi.; see also European Union's first written
submission, para. 997.
362 ISO 14044:2017, (Exhibit MYS-241), Introduction, p.vi.
363 ISO 14067:2018, (Exhibit EU-32), Clause 1 (Scope), p. 1.
364 ISO 14067:2018, (Exhibit EU-32), Annex A, p. 33.
365 ISO 14067:2018, (Exhibit EU-32), Annex A, p. 33.
366 Malaysia's first written submission, para. 700.
367 European Union's first written submission, para. 994.

European Union however contends that Malaysia has not demonstrated that the standards in
question are relevant standards for its claim under Article 2.4.368
7.183. The Panel notes that the ordinary meaning of "relevant" has been found by previous panels
to be "bearing upon or relating to the matter in hand; pertinent".369 Furthermore, in the context of
discussing the second element of Article 2.4 ("use as a basis "), the Appellate Body elaborated on
the issue of "relevance". Pointing out that Article 2.4 also refers to "the relevant parts " of
international standards, the Appellate Body relied on this language to "define the appropriate focus
of the analysis " and limit the examination of the standard to those parts. In this regard, the
Appellate Body stated:
[T]he examination must be limited to those parts of the relevant international standards
that relate to the subject -matter of the challenged prescriptions or requirements . In
addition, the examination must be broad enough to address all of those relevant parts;
the regulating Member is not permitted to select only some of the "relevant parts" of
an international standard. If a "part" is "relevant", then it must be one of the elements
which is "a basis for" the technical regulation.370
7.184. The Panel agrees with this interpretation and considers that it reflects a narrow approach to
"relevant" by linking it directly to the challenged aspect of the measure at issue. Thus, the "matter"
that a standard "bears upon or relates to " is the challenged prescription or requirement itself, not
just the product scope or general subject-matter of the measure at issue.371
7.185. Applying this interpretation to the case at hand, the Panel considers that the relevance of
the four ISO standards for the purposes of the claim under Article 2.4 is not determined by the fact
that they apply to biofuel which is the product at issue or that they deal with sustainability issues.
Moreover, their relevance is not determined by the fact that these standards apply to aspects of the
EU Biofuels regime that are not challenged in this proceeding, or that they contain provisions that
define or directly mention ILUC. Instead, their relevance depends on whether they address that
which the Panel understands is being addressed by the challenged measure, namely the taking into
account of ILUC effects. As the Panel has found above, this is not the case as the standards make
clear that they do not cover ILUC.
7.186. In light of this, the Panel finds that the four ISO standards are not "relevant" international
standards for the purposes of Malaysia's claim under Article 2.4. This claim must therefore fail.
7.187. Before concluding, the Panel wishes to make three observations. First, the Panel's finding
that these four ISO standards are not "relevant" within the meaning of Article 2.4 does not in any
way lessen the role that these standards generally play in the discussion on sustainability and
environmental performance of products. Furthermore, in this dispute, while these standards are not
"relevant" under Article 2.4, they play an important role in providing evidence of the debate on ILUC
and the state of that debate, as this section of the Report demonstrates.372

368 European Union's second written submission, para. 163.
369 Panel Reports, EC – Sardines, para. 7.68; and Australia – Tobacco Plain Packaging, para. 7.276 and
fn 962.
370 Appellate Body Report, EC – Sardines, para. 250. (emphasis added)
371 The Panel finds confirmation for this reading in the two cases to date where panels made findings on
the relevance of an international standard. In EC – Sardines, the standard that the panel found to be "relevant"
addressed what was regulated by the challenged measure, namely the product name for sardines. This finding
was upheld by the Appellate Body. (Panel Report, EC – Sardines, paras. 7.98-7.99; Appellate Body Report,
EC – Sardines, paras. 230-233.) In US – Tuna II (Mexico), the standard that the panel found to be "relevant"
addressed the same requirements as the challenged measure, namely the fishing methods allowed for
purposes of the dolphin-safe label. On appeal, the panel's finding on the existence of an international standard
was reversed for different reasons. (Panel Report, US – Tuna II (Mexico), paras. 7.700-7.707; Appellate Body
Report, US – Tuna II (Mexico), para. 399.)
372 The Panel recalls, in this respect, the observation made by the panel in Australia – Tobacco Plain
Packaging that just because a document does not constitute a relevant international standard under the
TBT Agreement, it does not follow that such document is deprived of any other probative value for the
purposes of other obligations in the Agreement. In that case, the Panel found that, while certain WHO FCTC
Guidelines were not relevant international standards under the second sentence of Article 2.5 of the
TBT Agreement (which contains a rebuttable presumption of consistency with Article 2.2), they could still be

7.188. Second, as the findings in this section confirm, the absence of international harmonizat ion
does not mean that countries are prevented from taking action and developing their own approaches
to issues of concern. However, the fact that such national approaches do not fall under the disciplines
of international standards does not mean that they do not fall under any WTO disciplines in terms
of the scientific and evidentiary basis of the measure. In particular, Articles 2.2 and 2.1 which
Malaysia has also raised in this proceeding, impose their own disciplines on technical regulations.373
7.189. Third, the Panel observes that its findings under Article 2.4 are based on international
standards that currently exist. The Panel agrees with a previous panel's view that Article 2.4 is "not
a static obligation and that there is an ongoing obligation to r eassess technical regulations in light
of new international standards that are adopted or revised", and that the obligation in Article 2.3 of
the TBT Agreement contextually supports that view.374
7.1.2.2.6 Conclusion on Article 2.4
7.190. The Panel concludes that Malaysia has failed to establish that the high ILUC -risk cap and
phase-out is inconsistent with the obligation in Article 2.4 of the TBT Agreement to use relevant
international standards as a basis for technical regulations.
7.1.2.3 Article 2.2 – Necessary to fulfil a legitimate objective
7.1.2.3.1 Introduction
7.191. The Panel now turns to the claim under Article 2.2 of the TBT Agreement. The Panel
addresses this claim in the light of its findings under Article 2.4, and prior to addressing the claim
under Article 2.1. The Panel does so for the reasons set out in its discussion of the order of analysis
among the claims under the TBT Agreement.
7.192. Malaysia submits375 that the 7% maximum share and the high ILUC-risk cap and phase-out
violate Article 2.2. Malaysia accepts that the European Union's asserted policy objectives regarding
climate change, biodiversity, and public morals are legitimate, but submits that these are not the
objectives of the specific measures at issue. According to Malaysia, the stated objective of the
specific measures is to limit "GHG emissions by limiting direct and indirect land use change"376 and
the actual objective is protectionism in the cover of environmental protection. Malaysia presents
arguments implying that the stated objective is not "legitimate": it argues that relevant international
standards "exclude ILUC from being taken into account"377; it maintains in the context of its claims
under Article 2.1 that because ILUC can neither be observed nor measured the regulation of ILUC-
related GHG emissions is not "legitimate"378; and in response to the European Union's arguments, it
questions the legitimacy of addressing GHG emissions outside of a Member's own territory. Malaysia
further submits that the measures are trade -restrictive, that the risks of the non -fulfilment of the

(and in fact were used as) evidence of fact under other claims at issue, including Article 2.2 of the
TBT Agreement. Panel Reports, Australia – Tobacco Plain Packaging, paras. 7.403-7.416.
373 It is in the context of these provisions that the Panel will discuss non-standard-specific scientific
arguments with respect to the approach that the European Union has adopted, which Malaysia has referred to
under the present claim.
374 Panel Report, EC – Sardines, para. 7.81. See also paras. 7.78-7.80, 7.82 and 7.86.
375 Malaysia's first written submission, paras. 586-691; second written submission, paras. 29-55, 81-
104, and 210-239; opening statement at the meeting of the Panel, paras. 30-34; responses to the Panel's
questions, pp. 69-82; and comments on the European Union's responses to the Panel's questions, pp. 182-
232.
376 Malaysia's first written submission, paras. 410, 421, 468, 580(ii).
377 Malaysia's first written submission, paras. 610(i).
378 In the context of its arguments on the "contribution" step of the necessity test under Article 2.2 of
the TBT Agreement, Malaysia argues that "ILUC can neither be observed nor measured and, therefore, it is
impossible to attribute ILUC-risks exclusively to oil palm crop-based biofuel"; that "it is impossible to precisely
estimate to what extent, if at all, ILUC GHG emissions occur"; and that "[i]nternational standards on the
carbon footprint of products such as biofuels also exclude ILUC from being taken into account." (Malaysia's first
written submission, para. 610(i).) In the context of its arguments under Article 2.1, Malaysia argues, on those
same grounds, that regulating biofuels on the basis of ILUC-risk is "not legitimate". (Malaysia's first written
submission, paras. 574-577.)

objective would be limited, and that the measures are not apt to make a material contribution379 to
their objective. Malaysia also identifies multiple less trade -restrictive alternative measures
reasonably available to the European Union.
7.193. The European Union submits380 that the Panel should reject the claims under Article 2.2, and
disputes Malaysia's arguments on all of these elements of the legal standard. The European Union
argues that the EU Biofuels regime must be considered as a "composite whole", and the "legitimate
objective" that the measures pursue is the composite objective of mitigating climate change,
preserving biodiversity, and addressing the associated moral concerns of the EU public.381 In addition
to arguing that the measures do not pursue a protectionist objective, the European Union maintains
that the difficulties and limitations in assessing ILUC do not mean that ILUC GHG emissions do not
exist, and submits that there is no territorial limitation in Article 2.2 of the TBT Agreement or
Article XX of the GATT 1994. The European Union also disputes that the measures are "trade-
restrictive", recalls that its composite objective implicates values of high importance in the
European Union, and argues that the measures are apt to make a material contribution to the
composite objective pursued. According to the European Union, the various alternative measures
proposed by Malaysia would either be more trade -restrictive than the measures at issu e or would
not make an equivalent contribution to the composite objective pursued.
7.194. The Panel notes at the outset that there is substantial overlap between the parties'
arguments under the different analytical steps of Article 2.2, and further overlap between certain of
the parties' arguments under Article 2.2 and Article 2.1. For example, Malaysia stresses that ILUC
cannot be observed nor measured when presenting its views on the identification of the measures'
true objective, in the context of addressing the "legitimacy" of regulating ILUC -related GHG
emissions under Article 2.1, and also when addressing the measures' capacity to contribute to that
stated objective. In developing their arguments on these and related issues, both parties cross -
reference cer tain arguments under Article 2.1 in the sections of their submissions addressing
Article 2.2, and vice versa; and the parties also cross -reference sections of their arguments under
Article 2.1 and Article 2.2 in the sections of their submissions addressing the general exceptions in
Article XX of the GATT 1994 (and vice versa). All of these sections cross-reference several up-front
sections of the parties' submissions that set out extended discussions on the validity of the concepts
of ILUC and the scientific basis for the measures at issue, and the history and factual circumstances
surrounding the measures at issue.
7.195. The Panel appreciates that the parties' overlapping arguments under multiple different
elements of these provisions is largely a consequence of apparent overlaps in the legal standards
that apply under these provisions. However, the Panel does not consider that it is under an obligation
to formalistically address the same issues and arguments in the context of every analytical step or
provision where they are repeated. It is well established that a panel has "the discretion to address
only those arguments it deems necessary to resolve a particular claim ".382 The Panel addresses
disputed issues and arguments under the steps in the analysis of Articl e 2.2 and Article 2.1 that it
considers most relevant and appropriate to the issues and arguments raised. Towards that end, the
Panel engages in a holistic reading of the parties' arguments under Article 2.2 and Article 2.1 and
their submissions more gener ally. Where appropriate and useful to enhancing the clarity of its
reasoning, the Panel employs the technique of cross-referencing.
7.196. The Panel notes that there is also substantial overlap between the parties' arguments
concerning the 7% maximum share and t he parties' arguments concerning the high ILUC -risk cap
and phase-out. Insofar as the parties' arguments are the same, or raise the same or similar issues,
the Panel addresses them together to avoid repetition. Naturally, insofar as the parties' arguments

379 Malaysia argues that while it does not contest that the measures at issue may make a contribution to
the achievement of the objectives the European Union alleges to pursue, this contribution, or in other words
the extent to which the measures at issue fulfil their objectives, will be very difficult, if not impossible, to
determine (whether in quantitative or qualitative terms), and will, in any case, be quite limited." (Malaysia's
first written submission, para. 611).
380 European Union's first written submission, paras. 770-977; second written submission, paras. 102-
160; opening statement at the meeting of the Panel, paras. 22-43, 64-98, and 99-121; responses to the
Panel's questions, paras. 518-715; and comments on Malaysia's responses to the Panel's questions,
paras. 223-242.
381 The European Union has referred to three objectives as its multiple intertwined objectives pursued
concurrently, and has also referred to them as comprising a single, composite objective.
382 Appellate Body Report, EC – Poultry, para. 135.

raise issues that are specific to one of the two different measures, this is reflected in the Panel's
reasoning and findings.
7.1.2.3.2 Legal standard
7.197. Article 2.2 sets forth the obligation that:
Members shall ensure that technical regulations are not prepared, ado pted 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. Such legitimate objectives are, inter alia: national security requirements; the
prevention of deceptive practices; protection of human health or safety, animal or plant
life or health, or the environment. In assessing such risks, relevant elements of
consideration are, inter alia: available scientific and technical information, related
processing technology or intended end-uses of products.
7.198. Article 2.2 has been interpreted and applied in a number of prior cases, and both pa rties
present their respective understandings of the applicable legal standard with reference to prior cases.
7.199. Article 2.2 requires technical regulations not to be more trade-restrictive than necessary to
fulfil "a legitimate objective". Thus, the initial steps in the analysis under Article 2.2 would typically383
consist of:
a. the identification of the objective of the measure at issue, and
b. an assessment of whether it is a "legitimate" objective.
7.200. If the measure is aimed at fulfilling a legitimate objective, the next step of the analysis
typically aims to arrive at a "preliminary conclusion"384 about whether the measure is necessary to
fulfil that legitimate objective. This so -called "relational analysis"385 is based on a "weighing and
balancing" of three factors:
a. the trade-restrictiveness of the measure;
b. the risks that non-fulfilment of the objective would create; and
c. the degree of contribution made by the measure to the objective.
7.201. The final step of the necessity test under Article 2.2 consists of a "comparative analysis"386
whereby the challenged measure is compared against possible alternative measures. More
specifically, this step of the analysis entails a comparison of the trade-restrictiveness and the degree
of achievement of the objective by the measure at issue with those of possible alternative measures
that are reasonably available, apt to make an equivalent contribution to the objective of, and less
trade-restrictive than, the challenged measure.

383 See Appellate Body Reports, Australia – Tobacco Plain Packaging, para. 6.3. The Appellate Body has
clarified that, in the context of Article 2.2, "the particular manner of sequencing the steps of this analysis is
adaptable, and may be tailored to the specific claims, measures, facts, and arguments at issue in a given
case." (Appellate Body Reports, US – COOL (Article 21.5 – Canada and Mexico), para. 5.205.) In certain
circumstances, a panel may elect to begin its analysis by considering the "trade-restrictiveness" of the
technical regulation at issue. (See e.g. Panel Reports, US – COOL, para. 7.554 and fn 742.)
384 Appellate Body Reports, US – COOL (Article 21.5 – Canada and Mexico), paras. 5.203-5.204
(referring to Appellate Body Report, Brazil – Retreaded Tyres, para. 156.)
385 Appellate Body Reports, US – COOL, para. 374 (recalling its earlier use of the term "relational
analysis" in Appellate Body Report, US – Tuna II (Mexico), para. 318); and Australia – Tobacco Plain
Packaging, paras. 6.3 and 6.517.
386 The term "comparative analysis" has been used by previous panels and the Appellate Body. See e.g.
Appellate Body Reports, US – COOL (Article 21.5 – Canada and Mexico), para. 5.199; and Australia – Tobacco
Plain Packaging, para. 6.4.

7.202. These steps of the analysis under Article 2.2 generally correspond to the steps of the analysis
followed when applying those exceptions in Article XX of the GATT 1994 that require that a measure
be "necessary" to the fulfilment of a specified objective (these exceptions include Articles XX(a), (b),
and (d)). The first and second steps of the analysis also overlap, to a certain extent, with the
assessment of whether a measure is one "relating to " the conservation of exhaustible natural
resources within the meaning of Article XX(g).387
7.203. The Panel will elaborate further on the elements of the legal standard in Article 2.2 as
necessary in the course of its assessment of the issues in dispute.
7.1.2.3.3 Identification of the objective pursued
7.204. The Panel begins with the identification of the measures' objective(s). The conclusion
reached on this issue will necessarily condition the nature and scope of subsequent steps of the
analysis under Article 2.2. More specifically, the identification of the objective is the logical
prerequisite to assessing whether that objective is a "legitimate objective" and is also a prerequisite
for assessing "the risks non-fulfilment [of the legitimate objective] would create" in accordance with
the text of Article 2.2. Furthermore, the Appellate Body has confirmed that a measure's objective
also serves as "the benchmark against which a panel must assess the degree of contribution made
by a challenged technical regulation, as well as by proposed alternative measures".388
7.205. Malaysia accepts that the European Union's wider policy objectives regarding climate
change, biodiversity, and public morals are legitimate, but submits that the Panel's determination
should focus on the objective of the specific measures at issue. Accor ding to Malaysia, the stated
objective of the specific measures is to limit "GHG emissions by limiting direct and indirect land use
change"389 and the measures' actual objective is protectionism in the cover of environmental
protection.
7.206. The European Union responds that "even though Malaysia has dissected isolated provisions
of RED II or part thereof and characterised them as individual 'measures' for the purpose of the
present proceedings, in order to assess and appreciate the objectives of those 'measures', the
EU Biofuels regime must be considered as a composite whole, situated in the broader legal and
policy context of which it forms part ".390 When seen from this broader perspective, it argues, this
means that the "legitimate objective " that the measures pursue is the composite objective of
mitigating climate change, preserving biodiversity, and addressing the associated moral concerns of
the EU public. 391 The European Union therefore takes issue with Malaysia seeking to define the
objective of the measures in isolation from the broader objectives of RED II and its Biofuels regime,
and with what it sees as Malaysia's disregard of the biodiversity and public morals objectives. The
European Union also disputes Malaysia's assertion that the measures pu rsue a protectionist
objective.392
7.207. The Panel considers that there are certain internal tensions and ambiguities in respect of
each party's identification of the objective(s) of the measures at issue, as briefly elaborated below.
7.208. Malaysia argues that the objective of the measures is to limit "GHG emissions by limiting
direct and indirect land use change"393, yet also asserts that the actual objective of the measures is
protectionism in the cover of environmental protection. The Panel understands these to be
arguments made in the alternative, with Malaysia arguing that, insofar as the Panel bases its

387 The Panel elaborates further on the relationship between the legal standards under Article 2.2 and
Article XX(b) and (g) in the context of its interpretation and application of Article XX.
388 Appellate Body Reports, US – COOL, para. 387.
389 Malaysia's first written submission, paras. 410, 421, 468, 580(ii).
390 European Union's first written submission, para. 163.
391 The European Union has referred in the plural to three objectives as its multiple intertwined
objectives pursued concurrently, and has also referred to them as comprising a single, composite objective. In
its first written submission the European Union referred to the promotion of "energy security" as an objective
pursued. (See e.g. European Union's first written submission, para. 14.) However, the Panel does not
understand the European Union to argue that the Panel needs to address whether the measures challenged by
Malaysia contribute to EU energy security for purposes of Article 2 of the TBT Agreement or Article XX of the
GATT 1994.
392 European Union’s first written submission, paras. 4, 806, 1405.
393 Malaysia's first written submission, paras. 410, 421, 468, 580(ii).

understanding of the objective of the specific measures on their stated purpose as expressed in the
text of RED II and other relevant legal instruments, the objective may thus be understood as limiting
GHG emissions by limiting direct and indirect land use change; but that, insofar as the Panel bases
its understanding of the objective of the specific measures on their legislative history, attendant
circumstances, and other indicators that pertain to the true objective, the true objective is revealed
to be protectionism in the cover of environmental protection . Under either of these alternative
perspectives, the Panel understands Malaysia to argue that the Panel should focus on the specific
measures at issue, not the wider, higher-level objectives of RED II or the EU Biofuels regime.
7.209. The Panel notes that, for its part, the Euro pean Union repeatedly stresses the objective of
the measures cast at a relatively high level of generality and abstraction, i.e. in terms of climate
change, biodiversity and public morals. 394 It identifies the objective of the measures in terms that
do not specifically refer to the concept of ILUC or ILUC -related GHG emissions. Indeed, the
European Union confirms that what it identifies as the objectives of the specific measures at issue
are "not specific to the Delegated Regulation or to RED II, but they are shared by the entirety of the
EU's Biofuels Regime ".395 However, the Panel finds it significant that, at the same time, the
European Union presents various other arguments implying that the objective of the measure may
or even must be understood more specifically in terms of ILUC or ILUC -related GHG emissions. In
this connection, the European Union argues that the alternative measures proposed by Malaysia are
vitiated by the fact that they fail to address ILUC and/or ILUC-related GHG emissions and therefore
are not apt to make an equivalent contribution to the objective pursued.396 The Panel considers that
such arguments are entirely consistent with an approach of defining the objective of the measures
in relatively narrow and direct terms, that is, by focusing on ILUC and/or ILUC -related GHG
emissions, as opposed to the broader and higher-level objectives of climate change, biodiversity and
public morals.397
7.210. In these circumstances, the Panel's task is not a matter of simply choosing between one of
two alternative ways of articulating the objective of the measures at issue. Rather, t he Panel must
undertake an independent and objective assessment of the proper characterization of the measures'
objective, guided by its consideration of the main issues raised by parties in their related
arguments.398
7.211. The Panel will begin its analysis by setting out the stated rationale behind the specified
measures at issue. The Panel then considers the following issues that are raised by the alternative
formulations of the measures' objective presented by Malaysia and the European Union. First, the
Panel considers the European Union's approach of identifying the measures' objective in terms that
focus on the wider objectives of RED II and the EU Biofuels regime. Second, the Panel considers the
European Union's argument that the measures' objective should be formulated by reference to not
only ILUC-related GHG emissions, but also associated biodiversity and EU public morals concerns.
Third, the Panel addresses Malaysia's argument that the measures' legislative history, their
attendant circumstances, and oth er indicators establish that the measures' true objective is
protectionism in the cover of environmental protection.
7.212. Before turning to these issues, the Panel notes that neither party has suggested that the
objective of the 7% maximum share should be defin ed differently from the objective of the high

394 See generally section 5 of the European Union's first written submission.
395 European Union's first written submission, para. 1363.
396 European Union's first written submission, paras. 900 (all of the proposed alternatives are vitiated by
the fact that "they fail to address ILUC"), 940, 944-945, 947 (stating that alternative certification schemes
proposed by Malaysia "do not address ILUC risks" and that "Malaysia should explain what an enhanced
certification scheme would prevent ILUC to an extent equivalent to the EU measures it has challenged"), 958
(observing that "Malaysia seems to constantly provide alternatives without considering the ILUC approach",
959 (reiterating that the RED certification "is irrelevant to ILUC"), 967 and 971 (concluding that "all those
'alternatives' address only certain aspects (e.g. legality, sustainability criteria) and do not extend to ILUC risks"
and that " Malaysia seems to confirm that the alternatives to which it is referring are not real alternatives
because they only deal with DLUC and not with ILUC").
397 The Panel appreciates that such arguments could also be understood as speaking to what constitutes
an "equivalent contribution" to the higher-level objectives relating to climate change, biodiversity and EU public
morals concerns.
398 There is nothing unusual in this regard. As long clarified by the Appellate Body, a panel must always
"independently and objectively assess" the objective of the specific measures at issue without being bound by
either party's characterization of the objective pursued. (Appellate Body Report, US – Tuna II (Mexico),
para. 314).

ILUC-risk cap and phase -out. The parties' arguments relating to the objective of the specific
measures at issue generally do not distinguish between them. The Panel will therefore address these
measures together, except insofar as the parties' arguments draw relevant distinctions that merit
separate consideration of the 7% maximum share and the high ILUC-risk cap and phase-out.
7.1.2.3.3.1 The stated rationale behind the 7% maximum share and the high ILUC -risk
cap and phase-out
7.213. The Panel observes that the rationale behind the measures at issue was explained as early
as 2015, in the form of the ILUC Directive which amended RED I for the stated purpose of
"address[ing] the impact of indirect land-use change given that current biofuels are mainly produced
from crops grown on existing agricultural land ".399 From the earliest explanations of the rationale
behind the E U measures, there is an indication that the European Union's concern is directed at
ILUC-related GHG emissions. According to the ILUC Directive, "when [ILUC] involves the conversion
of land with high carbon stock it can lead to significant greenhouse gas emissions ."400 The Panel
recalls and hereby incorporates by reference the discussion at paragraphs 2.15 to 2.22 of this Report,
which reference the ILUC Directive, the European Commission's 2016 proposal for a "recast"
Directive to address ILUC, and the 2017 Study Report relating to ILUC.
7.214. The Panel further observes that the text of RED II itself, and in particular its Recitals 80 and
81, explains the ILUC-related justification for the measures at issue:
(80) To prepare for the transition towards advanced biofuels and minimize the overall
direct and indirect land -use change impacts , it is appropriate to limit the amount of
biofuels and bioliquids produced from cereal and other starch-rich crops, sugars and oil
crops that can be counted towards the targets laid down in this Directive, without
restricting the overall possibility of using such biofuels and bioliquids. The establishment
of a limit at Union level should not prevent Member States from providing for lower
limits to the amount of biofuels and bioliquids produced fr om cereal and other starch -
rich crops, sugars and oil crops that can be counted at national level towards the targets
laid down in this Directive, without restricting the overall possibility of using such
biofuels and bioliquids.
(81) Directive 2009/28/EC introduced a set of sustainability criteria, including criteria
protecting land with high biodiversity value and land with high-carbon stock, but did not
cover the issue of indirect land-use change. Indirect land-use change occurs when the
cultivation of c rops for biofuels, bioliquids and biomass fuels displaces traditional
production of crops for food and feed purposes. Such additional demand increases the
pressure on land and can lead to the extension of agricultural land into areas with high-
carbon stock, such as forests, wetlands and peatland, causing additional greenhouse
gas emissions. Directive (EU) 2015/1513 of the European Parliament and of the Council
recognises that the magnitude of greenhouse gas emissions -linked indirect land -use
change is capab le of negating some or all greenhouse gas emissions savings of
individual biofuels, bioliquids or biomass fuels. While there are risks arising from indirect
land-use change, research has shown that the scale of the effect depends on a variety
of factors, including the type of feedstock used for fuel production, the level of additional
demand for feedstock triggered by the use of biofuels, bioliquids and biomass fuels, and
the extent to which land with high-carbon stock is protected worldwide.
While the level of greenhouse gas emissions caused by indirect land-use change cannot
be unequivocally determined with the level of precision required to be included in the
greenhouse gas emission calculation methodology, the highest risks of indirect land-use
change have been identified for biofuels, bioliquids and biomass fuels produced from
feedstock for which a significant expansion of the production area into land with high -
carbon stock is observed. It is therefore appropriate, in general, to limit food and feed
crops-based biofuels, bioliquids, and biomass fuels promoted under this Directive and,
in addition, to require Member States to set a specific and gradually decreasing limit for
biofuels, bioliquids and biomass fuels produced from food and feed crops for whic h a

399 ILUC Directive, (Exhibit MYS-168), Recital (4), p. 2.
400 Malaysia's first written submission, para. 325 (referring to ILUC Directive, (Exhibit MYS-168), Recital
(4), p. 2.). (emphasis added)

significant expansion of the production area into land with high -carbon stock is
observed. Low indirect land -use change -risk biofuels, bioliquids and biomass fuels
should be exempt from the specific and gradually decreasing limit.401
7.215. Recitals 80 and 81 of RED II thus set out the rationale for addressing ILUC, link the issue of
ILUC risks specifically to the issue of GHG emissions, and explain how the 7% maximum share in
Article 26(1) and the high ILUC-risk cap and phase-out in Article 26(2), including the concept of low
ILUC-risk biofuels, are related to this rationale.
7.216. The Panel further notes that the Delegated Regulation reiterates that the measures at issue
are taken to address the issue of ILUC, through its 16 Recitals that explain the measures at is sue
by reference to ILUC. The Delegated Regulation recalls that "ILUC can occur when land previously
devoted to food or feed production is converted to produce biofuels, bioliquids and biomass fuels ",
and that "[i]n that case, food and feed demand still ne eds to be satisfied, which may lead to the
extension of agricultural land into areas with high carbon stock such as forests, wetlands and peat
land, causing additional greenhouse gas emissions ."402 It recalls that the "sustainability and
greenhouse gas saving criteria" set out in RED I and carried forward into Article 29 of RED II "do not
account for ILUC emissions".403 It reiterates that the 2015 ILUC Directive:
[N]ot only acknowledged the existence of ILUC emissions, but also recognised, despite
the uncertainty in calculating them, that the magnitude of greenhouse gas emissions
linked to ILUC can lead to negating some or all of the greenhouse gas emissions savings
of individual biofuels , as defined in that Directive, and bioliquids. Therefore, it
introduced an overall limit to the amount of those fuels produced from cereal and other
starch-rich crops, sugars and oil crops and from crops grown as main crops primarily
for energy purposes on agricultural land that can be counted towards targets set out in
Directive 2009/28/EC. That limit consists of a 7% maximum contribution of such fuels
towards the final consumption of energy in rail and road transport in each Member
State.404
7.217. The Delegated Regulation also includes the observation that "the impact of ILUC on the
potential of biofuels, bioliquids and biomass fuels to achieve greenhouse gas emission savings is
particularly pronounced for oil crops ", and that "[r]enewable fuels made from such feedstocks are
therefore widely considered as having a higher ILUC -risk" and that this is reflected in both RED I
and RED II.405 It states that "[t]he report on feedstock expansion also highlights that the impact of
the expansion of the production area of oil crops into land with high -carbon stock on the potential
of biofuels, bioliquids and biomass fuels to achieve greenhouse gas emission savings depends on
several factors."406
7.218. In light of the foregoing, the Panel understands that the stated rationale for the
7% maximum share and the high ILUC -risk cap and phase -out is to limit the risk of ILUC -related
GHG emissions associated with crop-based biofuels.
7.1.2.3.3.2 The wider objectives of the EU Biofuels regime
7.219. The parties approach the analysis of the identification of the objective from different
standpoints. Malaysia focuses on the specific objective of the measures at issue, whereas the
European Union frames its arguments by reference to broad policy objectives common to RED II and
the EU Biofuels regime more generally.
7.220. The Panel notes that the objective of any challenged measure in WTO dispute settlement
proceedings could in principle be formulated and understood either in terms of its relatively narrow
and direct objective, or in terms of one or more higher level objectives which are one or more steps
removed from that relatively narrow and direct objective. For instance, in this case the objective of
the specific measures at issue could in principl e be formulated and understood in terms of the

401 Recitals 80 and 81 of RED II. (emphasis added)
402 Recital 2 of the Delegated Regulation. (emphasis added)
403 Recital 3 of the Delegated Regulation.
404 Recital 4 of the Delegated Regulation. (emphasis added)
405 Recital 8 of the Delegated Regulation. (emphasis added)
406 Recital 9 of the Delegated Regulation. (emphasis added)

relatively narrow and direct objective of limiting the risk of ILUC-related GHG emissions associated
with crop-based biofuels. However, that relatively narrow and direct formulation of the objective of
the specific measures at issue can be understood not as an end in and of itself, but as a means
towards fulfilling the higher -level objective of mitigating climate change, which may in turn be
understood as a means to fulfilling further higher -level objectives relating to the consequences of
climate change on the planet and human, animal or plant life or health.
7.221. There is nothing inherent in the concept of identifying a measure's objective that dictates
the level of immediacy or specificity at which it must be defined. Furthermore, the text of Article 2.2
itself gives examples of legitimate objectives which are cast at a relatively high level of generality
(e.g. "national security requirements", "the prevention of deceptive practices", "protection of human
health or safety, animal or plant life or health ", and "the environment"). In US – Clove Cigarettes,
the panel observed in this regard that "the 'legitimate objectives' explicitly mentioned in the text of
Article 2.2 of the TBT Agreement are formulated at a high le vel of generality " and added that
"defining the objective of [the measure banning flavoured cigarettes] in terms of 'reducing youth
smoking' may already be more specific than required under Article 2.2, which refers generally to the
'protection of human health' as a legitimate objective."407 There are several examples of other panels
referring to the "objective" of a measure at a level of generality commensurate with the level of
generality set out in the text of Article 2.2.408
7.222. On the other hand, the Panel recognizes that framing the analysis under Article 2.2 in terms
of the relatively narrow and direct objective of the specific measure at issue, rather than on broader
objectives that are one or more steps removed from that objective, is an approach that comports
well with certain other considerations. For instance, the direction set out in the text of Article 2.2 to
identify and assess the nature and gravity of "the risks that non -fulfilment [of the legitimate
objective] would create" may be difficult to apply, and not particularly meaningful, if the objective
is identified at a high level of generality. This element of the analysis would seem to presuppose
that the objective is understood in a more particular way, given the related directive set out in the
text of Article 2.2 that "In assessing such risks, relevant elements of consideration are, inter
alia: available scientific and technical information, related processing technology or intended
end-uses of products".
7.223. Furthermore, in a number of case s under Article 2.2, and indeed Article XX of the
GATT 1994, panels have formulated the objective of the measure at issue in a manner that focuses
on its relatively immediate and direct objective. For example, in Brazil – Retreaded Tyres, the panel
identified the objective of the import ban at issue in relatively specific terms as "the reduction of the
exposure to risks arising from the accumulation of waste tyres "409, and it found that this objective
fell within the broader goal of protecting human, animal or plant life or health. In US – Tuna II
(Mexico), the panel identified the objectives of the US dolphin -safe labelling measure as including
the "objective of preventing consumers of tuna products from being deceived by false dolphin -safe
allegations" and stated that measure's objective fell "within the broader goal of preventing deceptive
practices".410
7.224. Additionally, as already noted, the Appellate Body has stated that the identification of a
measure's objective serves as "the benchmark against which a panel must assess the degree of
contribution made by a challeng ed technical regulation, as well as by proposed alternative
measures".411 The Appellate Body stressed that because the identification of the objective pursued
serves that function, "the importance of a panel identifying with sufficient clarity and consisten cy
the objective or objectives pursued by a Member through a technical regulation cannot be
overemphasized".412 These considerations do not necessarily support an approach of identifying a
measure's objective at a high level of generality.

407 Panel Report, US – Clove Cigarettes, fn 635.
408 For instance, in EC – Sardines, the panel identified the objective of the measure in the context of
addressing the claim under Article 2.4 of the TBT Agreement, and identified the "the three legitimate
objectives" pursued by the EC Regulation at issue as "market transparency", "consumer protection" and "fair
competition". (Panel Report, EC – Sardines, para. 7.123.)
409 Appellate Body Report, Brazil – Retreaded Tyres, para. 179.
410 Panel Report, US – Tuna II (Mexico), para. 7.437.
411 Appellate Body Reports, US – COOL, para. 387.
412 Appellate Body Reports, US – COOL, para. 387.

7.225. In light of the foregoing, the Panel does not consider that there is some requisite level of
specificity with which the relevant "objective" must always be defined for the purposes of Article 2.2.
Instead, the Panel will ground its approach on the particular circumstances of this case.
7.226. For the reasons elaborated below, the Panel considers it appropriate to seek to identify the
particular objective of the specific measures at issue, as opposed to the wider objectives of the
RED II as a whole.
7.227. First, the Panel considers th at in this case the European Union's approach of framing the
analysis under Article 2.2 in terms of its higher-level objectives of climate change, biodiversity, and
EU public morals is a corollary of its view that the 7% maximum share and the high ILUC -risk cap
and phase-out cannot be assessed as individual "measures" distinct from what the European Union
terms its broader "Biofuels regime". The Panel has already addressed and rejected this argument.
The Panel has concluded that the European Union has not established any basis to question
Malaysia's identification of particular aspects (i.e. the 7% maximum share and the high ILUC -risk
cap and phase-out) of what the European Union refers to as the "Biofuels regime" as the specific
measures at issue for the purposes of defining the subject-matter of its complaint.413
7.228. Second, the Panel considers that as a general matter, it does not prejudice a r esponding
Member to identify a measure's objective in relatively specific terms. Indeed, to the extent that the
objective of the measures is defined at a very high level of generality in terms of e.g. "climate change
mitigation" and "avoidance of biodivers ity loss ", the range of measures that might validly be
considered as "alternatives" might become commensurately very expansive. Conversely, a narrower
and more specific formulation of the objective by reference to the specific measure at issue will
narrow the range of measures that might validly be considered as "alternatives".
7.229. Third, the Panel notes that w hile the European Union generally refers to its broad policy
objectives for the purposes of establishing that these are "legitimate objectives", at the same time
it also presents various arguments that imply that the objective of the measure may or even must
be understood more specifically in terms of ILUC or ILUC-related GHG emissions. The Panel finds it
highly significant that, as already noted above, t he European Union argues that the alternative
measures proposed by Malaysia are vitiated by the fact that they fail to address ILUC and/or ILUC-
related GHG emissions and therefore are not apt to make an equivalent contribution to the objective
pursued.414 As already observed, such arguments are entirely consistent with an approach of
defining the objective of the measures in relatively narrow and direct terms that focus on ILUC
and/or ILUC-related GHG emissions, as opposed to the broader and higher-level objectives of climate
change, biodiversity and public morals.415
7.230. The Panel understands that t he European Union's concern with identifying the objective in
terms of the specific ILUC-related objective of the challenged measures, as opposed to the broader
policy objectives it pursues through RED II, may stem from the notion that limiting the risk of
ILUC-related GHG emissions caused by conventional biofuel "cannot be understood as an end in
itself, but is rather a means to secure the broader policy goals "416 of climate change mitigation,
environmental protection and biodiversity, and the protection of EU public morals. The Panel accepts
that it is no doubt true that limiting the risk of ILUC-related GHG emissions caused by conventional
biofuel cannot be understood as an end in itself, disconnected from any higher-level objectives and
values. However, the Panel does not consider that focusing on the objective of the specific measures
at issue implies otherwise.
7.231. To the contrary, the assessment of whether the objective of limiting the risk of ILUC-related
GHG emissions associated with crop-based biofuel is a "legitimate objective" under Article 2.2, and
falls within the range of policies covered by one or more of the general exceptions in Article XX,
necessarily involves an assessment of how the objective of limiting the risk of ILUC -related GHG
emissions associated with crop -based biofuel is related to the conservation of exhaustible natural
resources, the protection of human, animal or plant life or health, and env ironmental protection

413 See section 7.1.1.1.1 of this Report.
414 See fn 396 above.
415 The Panel appreciates that such arguments could also be understood as speaking to what constitutes
an "equivalent contribution" to the higher-level objectives relating to climate change, biodiversity and EU public
morals concerns.
416 European Union's first written submission, para. 283.

more generally. However, for analytical clarity the Panel considers that the identification of the
objective of the specific measures at issue is separate from the issue of whether that objective, once
identified, falls within the broader objectives of conserving exhaustible natural resources, protecting
human, animal or plant life or health, or the environment more generally.417
7.232. For these reasons, the Panel agrees with Malaysia that it is appropriate to identify the
objective of the specific measures at issue, as opposed to the wider objectives of RED II or the EU
Biofuels regime as a whole, to serve as the benchmark against which the Panel must assess, for the
purposes of the Article 2.2 claim, the legitimacy of the objective, the risks that its non -fulfilment
would create, the measures' contribution to that objective, and the availability of any less trade-
restrictive alternative measures that would make an equivalent contribution to that objective.
7.233. As set out in the previous section, that objective may be identified as limiting the risk of
ILUC-related GHG emissions associated with crop-based biofuels.
7.1.2.3.3.3 ILUC-related biodiversity and public morals concerns
7.234. Malaysia considers that the principal objective of the measures is specifically to limit "GHG
emissions by limiting direct and indirect land use change" 418, and not a wider set of concerns
emphasized by the European Union relating to biodiversity and EU public morals. In Malaysia's view,
these other alleged objectives are either unrelated, or merely ancillary, to the objective of limiting
ILUC-related GHG emissions.
7.235. The European Union submits that Malaysia's arguments under Article 2.2 wrongly assume
that the EU measures pursue only one objective, i.e. GHG emissions reduction. The European Union
stresses throughout its submissions that the measures at issue pursue the composite objective of
mitigating climate change, preserving biodiversity, and addressing the associated moral concerns of
the EU public.
7.236. The Panel considers that although Article 2.2 refers to "a legitimate objective" in the singular,
there is no reason in principle why a given measure could not pursue several different objectives. In
US – Clove Cigarettes, the panel stated that "it would be entirely possible, both as a factual and a
legal matter, for a single technical regulation to pursue more than one objective."419 On appeal, the
Appellate Body agreed that "measures, such as technical regulations, may have more than one
objective" and that it may not be uncommon for a measure to have "a multiplicity of objectives".420
In EC – Seal Products, the panel accepted that "there is no reason in principle why the measure at
issue could not have several objectives".421
7.237. The Panel also accepts that, in circumstances where a measure pursues a multiplicity of
objectives, those different objectives may reflect competing interests, and that, where this is so, it
may be relevant to the assessment of the measure under the TBT Agreement and the GATT 1994.
For instance, where a measure pursues more than one objective, it will in principle be necessary for
a complaining Member to identify a less trade -restrictive alternative measure that makes an
equivalent contribution to each of those objectives (and not merely one of them) in order to establish
a violation of Article 2.2. The assessment of whether a detrimental impact on imports "stems
exclusively from a legitimate regulatory distinction " under Article 2.1, and the assessment of
whether discrimination i s "arbitrary or unjustifiable " under the chapeau of Article XX of the
GATT 1994, could likewise be distorted if a measure with multiple competing objectives is analysed
as though it had a monolithic objective.
7.238. However, while the Panel does not exclude the possibility that the 7% maximum share and
the high ILUC-risk cap and phase-out could be demonstrated to have more than one objective, and
possibly competing objectives, it is not persuaded that, for the purposes of settling this dispute, it

417 As the first WTO panel to address the general exceptions in Article XX(b) observed, the initial step of
the analysis involves an assessment of whether "the policy in respect of the measures for which the provision
was invoked fell within the range of policies designed to protect human, animal or plant life or health".
418 Malaysia's first written submission, paras. 410, 421, 468, 580(ii).
419 Panel Report, US – Clove Cigarettes, para. 7.342.
420 Appellate Body Report, US – Clove Cigarettes, paras. 113 and 115.
421 Panel Reports, EC – Seal Products, para. 7.400.

would be material to consider that the measures pursue the protection of biodiversity and EU public
moral concerns as separate objectives from the objective to limit the risk of ILUC -related GHG
emissions.
7.239. According to the logic of the European Union's own explanations of how these three
objectives are interlinked, it would appear that any measure that addressed ILUC -related GHG
emissions associated with crop -based biofuels would necessarily address the relevant biodiversity
and EU public morals objectives at the same time and with the same degree of contribution to each
separate objective. Therefore, to the extent that the EU concerns relating to climate change,
biodiversity and EU public morals are properly characterized as different objectives, from the
perspective of the measures at issue these objectives would be entirely complementary.
7.240. In the context of rebutting Malaysia's arguments on possible less trade-restrictive alternative
measures, the European Union argues that Malaysia's arguments wrongly assume that the E U
measures pursue only one objective (GHG emission reduction). According to the European Union,
any alternative measure must address all of these aspects of the composite objective pursued, not
just the objective of addressing GHG emissions or climate change.422
7.241. It appears to the Panel that the fundamental premise of the European Union's rebuttal, as
elaborated further below in the context of assessing the alternative measures proposed, is that the
alternative measures are vitiated insofar as they do not address ILUC associated with crop-based
biofuels. However, the European Union has not explained how there could be a less trade-restrictive
alternative measure that made an equivalent contribution to the objective of limiting ILUC-related
GHG emissions associated with crop-based biofuels, without simultaneously making an equivalent
contribution to the objective of limiting ILUC -related biodiversity loss, and without simultaneously
making an equivalent contribution to protecting EU public morals associated with ILUC-related GHG
emissions and ILUC-related biodiversity loss. The Panel agrees with Malaysia's observation that given
the linkages between what Malaysia considers as the measures' primary objective of "the avoidance
of additional greenhouse gas emissions caused by indirect land -use change " and the other
objectives, "by making an equ ivalent contribution to that primary objective, the alternative
measures would also make an equivalent contribution to the broader objectives that the EU states
to pursue".423
7.242. The Panel is not persuaded by the European Union's argument that it must consider how the
measures pursue the protection of biodiversity and EU public moral concerns as separate objectives
from the objective to limit the risk of ILUC-related GHG emissions.
7.1.2.3.3.4 The allegation of protectionism in the cover of environmental protection
7.243. The Panel now turns to Malaysia's argument that the measures' legislative history, their
attendant circumstances, and other indicators establish that the measures' true objective is
protectionism in the cover of environmental protection. There are differences be tween the
arguments that Malaysia presents with respect to the 7% maximum share and the high ILUC -risk
cap and phase-out. The Panel will therefore examine the two measures in turn.
7.244. Beginning with the 7% maximum share, Malaysia submits that:
the question f or the Panel to answer is, however, whether this primary objective is
indeed the objective pursued by the measures at issue, or whether the true objective
of the high ILUC-risk cap and the high ILUC -risk phase out is to give protection to the
European producers of biofuels other than oil palm crop -based biofuel and European
producers of oil crop feedstock other than palm oil (such as rapeseed oil and soyabean
oil), and the true objective of the 7% limit is to give protection to European producers
of biofuels other than biofuels made of food and feed crops and European producers of
feedstock other than feedstock from food and feed crops . As Malaysia argued above
there are, both in the text of the measures at issue and their negotiating history, strong
indications that providing protection to European producers is an important, even if not
the sole, objective of the measures at issue. The fact that the high ILUC-risk cap and
the high ILUC-risk phase out only apply to oil palm crop-based biofuel and not to other

422 European Union's first written submission, para. 901.
423 Malaysia's second written submission, para. 215.

oil crop-based biofuels, and the fact that the 7% limit applies only to biofuels made of
food and feed crops, indicate that providing protection to European producers of the
biofuels and their feedsto cks not affected by the measures at issue may be the true
objective of these measures.424
7.245. The Panel notes however that despite making this assertion against the 7% maximum share,
in its first written submission Malaysia develops its allegation of protectionism only in respect of the
high ILUC-risk cap and phase-out. In the passage above Malaysia cross-references paragraphs of its
first written submission425 that appear to be directed solely at the high ILUC-risk cap and phase-out
measure in support of its assertion that the "measures at issue" are aimed at "providing protection
to European producers". Its first written submission contains no equivalent arguments, and indeed
no further explicit arguments or elaboration, in relation to the alleged protectionist objective of the
7% maximum share.
7.246. In addition, the arguments that Malaysia presents in the context of seeking to demonstrate
the alleged protectionist motivation of the high ILUC -risk cap and phase-out measure would seem
to contradict its assertion that the 7% maximum share has a protectionist objective. As will be
addressed further below, Malaysia argues that the European Union has singled out palm oil -based
biofuel to shield other types of crop -based biofuels from competition, in order to protect EU
producers of those other types of crop-based biofuels (and/or the food or feed crops used as inputs).
However, the 7% maximum share applies to all crop-based biofuels (including but not limited to
palm oil-based biofuels).
7.247. Insofar as Malaysia's allegation regarding the protectionist objective of the 7% maximum
share is linked to the stated objective of promoting greater use of advanced biofuels 426, the Panel
does not see that a stated policy of promoting advanced biofuels is inconsistent with the objective
of limiting the risk of ILUC -related GHG emissions associated with crop -based biofuels. The Panel
recalls that Recital 80 of RED II states that the rationale for the measures is "[t]o prepare for the
transition towards advanced biofuels and minimize the overa ll direct and indirect land -use change
impacts". Advanced biofuels are not made from crops 427, and therefore do not, under the stated
rationale for the measures, pose any risk of ILUC-related GHG emissions. This means that the very
problems identified specifically in respect of crop -based biofuel production would make the
promotion of advanced biofuels a logical corollary of limiting the consumption of conventional crop-
based biofuels.
7.248. For these reasons, the Panel finds that Malaysia has failed to substantiate its assertion that
the true objective of the 7% maximum share is protectionism in the cov er of environmental
protection or has an objective other than that of limiting the risk of ILUC -related GHG emissions
associated with crop-based biofuels.
7.249. Turning to the high ILUC -risk cap and phase -out, Malaysia argues that the protectionist
objective of the high ILUC -risk cap and phase -out can be inferred from several circumstances,
including: (a) the European Union's history of seeking to limit imports of oil palm crop-based biofuel,
inter alia through illegal trade barriers; (b) the measure's legislative history and the stated intentions
of the European Parliament; and (c) the design and structure of the measure, including in particular
a multitude of elements showing the arbitrariness of the European Union's formula and methodology
that led to the designation of palm oil-based biofuel as high ILUC risk.428

424 Malaysia's first written submission, para. 602(b). (emphasis added)
425 In para. 602(b) of its first written submission, Malaysia cross-references paras. 49-54 and 339-345
of its first written submission.
426 Such an argument appears to be suggested by Malaysia's statement, quoted above, that the true
objective of the 7% limit is to give protection to European producers of biofuels "other than biofuels made of
food and feed crops" and European producers of feedstock "other than feedstock from food and feed crops".
427 Article 2(34) of RED II defines "advanced biofuels" to mean biofuels produced from the feedstock
listed in Part A of Annex IX, which lists various materials including algae, biowaste, nut shells, corn cobs, and
tree bark.
428 Malaysia's first written submission, paras. 49-54 and 339-345.

7.250. The Panel considers that it is well established that panels may make findings based on
inferences and circumstantial evidence 429, particularly in circumstances where direct evidence is
unlikely to exis t. Therefore the Panel does not consider that a complaining Member must adduce
direct evidence in all cases and is open to the possibility that a trade-related measure with a stated
environmental objective would be shown, on the basis of circumstantial evi dence, to serve a
protectionist objective.430 Moreover, the Panel understands that, in line with the Appellate Body's
guidance431, it must consider the inference that might reasonably be drawn on the basis of the
totality of the evidence, rather than focusing on individual pieces of evidence in isolation (which
might become more significant when viewed in their totality). However, for analytical clarity, the
Panel will proceed by examining the specific arguments and catego ries of evidence presented by
Malaysia before turning to its global assessment.
7.251. Malaysia submits, in the context of presenting arguments on the protectionist motive of the
measure in the context of Article 2.1, that the protectionist motive of the measure is evidenced by
the fact that the European Union "has a long history of enacting trade barriers " to limit imports of
palm oil-based biofuel to protect the EU biofuel industry.432
7.252. The European Union responds that Malaysia's reference to an allegedly long h istory of
enacting trade barriers to palm oil "is unsubstantiated and ultimately irrelevant".433
7.253. The Panel considers that any connection between the trade defence measures referenced by
Malaysia434 and the high ILUC-risk cap and phase-out is very attenuated if it exists at all. The Panel
notes that trade defence measures follow investigations that are typically initiated by the domestic
industry and are imposed based on methodologies specifically prescribed by the relevant national
legislation and regulated by the Anti-Dumping and SCM Agreements. The Panel recognizes that the
trade defence measures on imported biofuels taken by the European Union can be viewed as
evidence that domestic EU producers have, at various points, sought protection from imports of
biofuels, including (but not limited to) palm oil-based biofuel. However, there appears to be no
evidence on record of any link between EU trade defence measures and the high ILUC-risk cap and
phase-out. Indeed, according to Malaysia, the effect of the European Union's imposition of anti -
dumping duties on imports of biofuel from Indonesia and Argentina was an increase in Malaysia's
exports of palm oil to the European Union.435 For these reasons, the Panel does not consider that
past trade defence measures adopted by the European Union on imports of biodiesel suggest a
protectionist objective in respect of the high ILUC -risk cap and phase -out, in co ntradiction of the
stated objective of limiting the risk of ILUC -related GHG emission associated with crop -based
biofuels.
7.254. Malaysia notes that in 2017, the European Parliament adopted a Resolution that called on
the Commission to take measures to phase ou t the use of vegetable oils that drive deforestation,

429 See e.g. Appellate Body Reports, Canada – Aircraft, para. 198 (stating that "panels routinely draw
inferences from the facts placed on the record. The inferences drawn may be inferences of fact: that is, from
fact A and fact B, it is reasonable to infer the existence of fact C."); US – Continued Zeroing, para. 357 (stating
that "a panel may have a sufficient basis to reach an affirmative finding regarding a particular fact or claim on
the basis of inferences that can be reasonably drawn from circumstantial rather than direct evidence."); and
Panel Report, Thailand – Cigarettes (Philippines) (Article 21.5 – Philippines), para. 7.778 (stating that "[a]s a
consequence of the applicable evidentiary standard being closer to that of a balance of probabilities, and not
that of certainty or proof beyond a reasonable doubt, it is well established that panels may make findings of
fact based on inferences and circumstantial evidence.")
430 Malaysia notes that the Panel may distinguish "goals that might reasonably be expected to be touted
in a piece of legislation with those that would not. Indeed, Malaysia, takes it for granted that the EU is prudent
enough not to memorialise protectionist motivations in its preambular language, even when the negotiating
history provides evidence to the contrary." (Malaysia's second written submission, fn 13 to para. 39.)
431 See e.g. Appellate Body Report, US – DRAMS, paras. 141-158.
432 Malaysia's first written submission, para. 584.
433 European Union's first written submission, para. 768.
434 See Malaysia's first written submission, paras. 206-208 (identifying two antidumping measures:
Council Implementing Regulation (EU) No 1194/2013 of 19 November 2013 imposing a definitive anti-dumping
duty and collecting definitively the provisional duty imposed on imports of biodiesel originating in Argentina
and Indonesia, OJ L 315, 26.11.2013 (Exhibit MYS-140); and Commission Implementing Regulation (EU)
2019/2092 of 28 November 2019 imposing a definitive countervailing duty on imports of biodiesel originating
in Indonesia, OJ L 317, 9.12.2019 (Exhibit MYS-141).
435 Malaysia's first written submission, para. 208.

including palm oil, as a component of biofuels, preferably by 2020.436 In this resolution, the European
Parliament recommended "finding and promoting more sustainable alternatives for biofuel use, such
as European oils produced from domestically cultivated rape and sunflower seeds ". According to
Malaysia, this statement by the European Parliament evidences the objective that biofuels be
replaced by "domestically cultivated rape and sunflower seeds ", there by "clearly indicating the
economic focus and protectionist agenda of the high ILUC -risk mechanism and the related phase
out".437
7.255. The European Union responds that it is appropriate to describe the European Parliament's
resolution of 4 April 2017 in greater detail to address Malaysia's selective reading of that resolution.
The European Union quotes from several of the recommendations to the European Commission and
the EU member States set out in the resolution, including but not limited to potential I LUC-related
GHG emissions associated with EU biofuel demand. The European Union submits that "[i]t is
abundantly clear that the European Parliament looks into the possible effects of the EU demand of
biofuels on climate change, deforestation and biodiversi ty, from an environmental perspective and
from a moral viewpoint at the same time", and adds that "the only reference to the promotion of EU
domestic crops that can be used for biofuel production comes at the very end of the document and
is motivated by the need to find 'sustainable alternatives."438
7.256. The Panel recalls that the legislative history of a measure is a source of information that may
be taken into account to inform a panel's assessment of its design, structure, and intended
operation.439 However, where evidence is submitted to reflect the subjective intent of legislators as
distinct from the motivations expressed in the resulting legal instrument, an appropriate degree of
caution needs to be exercised in relying on such evidence. 440 Nonetheless, depe nding on the
circumstances of the case, the declared intention of legislators can play an important role.441
7.257. The Panel observes that the resolution of the European Parliament of 4 April 2017 called for
a phase-out of palm oil as a biofuel component preferab ly by 2020. In this 15-page resolution, the
European Parliament conducts an analysis of the climate change, environmental, deforestation and
social implications of palm oil production (and to some extent that of other vegetable crops and
agriculture in general). The European Parliament refers to the "indirect effects of EU biofuel demand
associated with tropical forest destruction" and notes that "once Indirect Land Use Change (ILUC) is
taken into account, crop -derived biofuels can in some cases even result in a net increase in
greenhouse gas emissions, e.g. the burning of habitats with high-carbon stocks like tropical forests
and peatland."442 In this and other respects discussed below, the resolution appears to be fully
consistent with the understanding tha t the objective of the high ILUC -risk cap and phase-out is to
limit the risk of ILUC-related GHG emissions associated with crop-based biofuels.
7.258. In this resolution the European Parliament recognized that simply banning or phasing out
the use of palm oil as a component of biofuels could give rise to replacement tropical vegetable oils
in all probability being grown in the same ecologically sensitive regions as palm oil and which may
have "a much higher impact on biodiversity, land use and greenhouse gas emissions than palm oil
itself". It is in this context that the European Parliament recommends the promotion of "more
sustainable alternatives for biofuel use, such as … oils produced from domestically cultivated rape
and sunflower seeds".443

436 European Parliament Resolution of 4 April 2017, (Exhibit MYS-102).
437 Malaysia's first written submission, para. 50.
438 European Union's first written submission, paras. 275-276.
439 Appellate Body Report, US – Tuna II (Mexico), para. 314; and Panel Report, US – 1916 Act,
440 Panel Reports, US – COOL, para. 7.691; and Appellate Body Reports, US – COOL, para. 420. See
also Appellate Body Reports, Japan – Alcoholic Beverages II, p. 27, DSR 1996: I, 97, at 119; and Chile –
Alcoholic Beverages, para. 62.
441 Panel Reports, Mexico – Taxes on Soft Drinks, para. 8.91 (referring to Appellate Body Report,
Canada – Periodicals, pp. 30-32, DSR 1997:1, p. 449, at pp. 475-476); and EC – Approval and Marketing of
Biotech Products, paras. 7.522-7.523.
442 European Parliament Resolution of 4 April 2017, (Exhibit MYS-102), paras. 76 and 77. It should be
noted that in this Resolution, the European Union "welcomes the fact that Malaysian primary forest levels have
increased since 1990, but remains concerned that current deforestation levels in Indonesia are running at a
rate of -0,5 % total loss every five years" (General considerations, para. 11).
443 European Parliament Resolution of 4 April 2017, (Exhibit MYS-102), paras. 82-83. (emphasis added)

7.259. Thus, by its own terms, the resolution recommends a ban or phase -out of consumption of
palm oil-based biofuel in the European Union for reasons related to the risk of ILUC -related GHG
emissions. It recognizes that the possible unintended consequence could be substitution effects, in
the same sensitive regions, which could have a much higher impact. In this context, it recommends
the promotion of more sustainable alternatives, and contemplates domestically cultivated rape and
sunflower seeds to avoid giving rise to what are referred to in the resolution as "replacement tropical
vegetable oils". This reference to domestically cultivated rape and sunflower seeds appears to be
not so much an admission of a protectionist objective, but rather an illustrative example ( "such as
…") of oil -stock that is not grown in tropical areas where there is a risk of replacement by other
tropical vegetable oils. This is therefore not, in the Panel's view, evidence that the high ILUC -risk
cap and phase -out has an objective other than limiting the risk of ILUC -related GHG emissions
associated with crop-based biofuels.
7.260. The Panel recalls that on 17 January 2018, the European Parliament called for the phasing
out, by 2021, of palm oil -based biofuel for calculating EU renewable energy targets. As with the
resolution of the European Parliament of 2017, the Panel sees nothing in the proposed amendment
that contradicts the understanding that the high ILUC -risk cap and phase-out has the objective of
limiting the risk of ILUC -related GHG emissions associated with crop -based biofuels. The fact that
the proposed amendment singled out palm oil as the only biofuel feedstoc k to be excluded from
counting towards the EU renewable energy consumption targets does not, in itself, speak to whether
such an exclusion would be justified, or call into question the stated objective of limiting ILUC-related
GHG emissions associated with crop-based biofuel.
7.261. The Panel notes that the European Parliament's proposed amendment raised substantive
concerns in the European Commission about the compatibility of those amendments with the
European Union's WTO obligations. Malaysia has submitted as an exhibit, in this connection, to
internal legal advice regarding the consistency of the proposed amendment with EU and WTO law.444
The Panel notes that there is a question of how much weight it should accord to such internal legal
advice in the context of its objective assessment of the matter.445 However, leaving that question to
one side, the Panel considers that the contents of that opinion do not identify any aspect of the
opinion that calls into question, or is inconsistent with, the measure's stated o bjective to limit the
risk of ILUC-related GHG emissions associated with crop-based biofuels.
7.262. Furthermore, while the legal opinion does express concerns about the WTO -consistency of
the proposed amendment that would have phased out palm oil -based biofuel by 2021, the high
ILUC-risk cap and phase -out that was ultimately adopted differs in a material respect from that
proposed amendment. Whereas the proposed amendment would have singled out palm oil-based
biofuel in a way that gave rise to the concerns set out in the legal opinion, the high ILUC -risk cap
and phase -out that was subsequently adopted is directed at any crop -based biofuels that are
classified as high ILUC risk, and is implemented through the Delegated Regulation which sets out a
formula that applies generally and equally to all crop -based biofuels. While the application of that
formula based on the data that was before the European Union authorities as of 2019 led to the
conclusion that palm oil-based biofuel was, at that time, the only crop-based biofuel that qualified
as high ILUC risk, this does not change the fact that the formula applies generally and equally to all
crop-based biofuels and may, in the future, lead to other oil -based biofuels being determined to
qualify as high ILUC-risk biofuels. It is possible that this material difference between the proposed
amendment and the high ILUC -risk cap and phase -out may have actually been informed by the
internal legal advice presented regarding the possible WTO-consistency of the proposed amendment.
7.263. The Panel now turns to Malaysia's argument that a protectionist objective can be inferred
from "a multitude of elements"446 showing the arbitrariness of the EU formula and methodology that
led to the designation of palm oil -based biofuel as hig h ILUC risk. Malaysia lists the following

444 Letter of DG Trade to DG Energy, (Exhibit MYS-44).
445 In Thailand – Cigarettes (Philippines) (Article 21.5 – Philippines), the panel observed, in somewhat
analogous circumstances, that "it is perfectly normal for different individuals or agencies within a government,
or advising a government, to hold different views on certain legal issues. In addition, we consider that it is to
be expected that a Member's view on certain issues may change or evolve over time. … More generally, if a
complaining party considers that certain arguments or analysis contained in an agency's opinions are
compelling, then it may present those arguments or analysis to the Panel – authorship by an organ or agency
of the responding party does not itself contribute to the force of the arguments or analysis." (Panel Report,
Thailand – Cigarettes (Philippines) (Article 21.5 – Philippines), para. 7.52.)
446 Malaysia's first written submission, para. 53.

elements, with an indication that it elaborates on them elsewhere in its submissions: the "science"
referenced in the Status Report, or the lack thereof when data was simply estimated and assumed;
the selection of a reference period that covers the period of the expansion of the oil palm cultivated
area, but conveniently does not cover earlier periods during which the expansion of oil crops other
than palm oil mainly occurred; the consideration of inconsistent data relating to different periods of
time for the various crops and the lack of consistent reliable data, which means that the data used
to calculate the expansion in the context of the Delegated Regulation cannot be considered to be
reliable; the fact that th e European Union infers, from data on past expansion, that the defined
trends would continue; the arbitrary selection of a threshold of 10% for the share of the expansion
of the global production area for a given feedstock into land with high -carbon stock; and the
prohibitively complex rules for the determination and certification of low ILUC-risk biofuels, bioliquids
and biomass fuels, which will, if at all, allow only a very limited amount to be certified.
7.264. The Panel observes that the arguments Malaysia presents here are many of the same
arguments that Malaysia makes under the "legitimate regulatory distinction " step of the analysis
under Article 2.1. The Panel considers that the issues raised by Malaysia are more appropriately
addressed together with other aspects of the design and operation of the measure as part of the
examination of the "legitimate regulatory distinction" step under Article 2.1. In any event, the Panel
considers that even if these issue s were to be addressed in the context of making a finding on
whether the measure has a protectionist objective, the Panel's findings under Article 2.1 do not
provide support for Malaysia's allegation that the high ILUC -risk cap and phase -out has a
protectionist objective.
7.265. The Panel understands Malaysia's overarching argument to be that consideration of all of
the evidence reviewed above demonstrates that the classification of oil palm crop as high ILUC risk
is merely an ex post rationalization, through the invention of the high ILUC -risk concept, to ban
palm oil-based biofuel in line with the earlier protectionist statements of EU lawmakers. As noted at
the outset, the Panel accepts that individual pieces of evidence in isolation may become more
significant when viewed in their totality, insofar as they are interrelated. However, the Panel is not
persuaded that this is the picture that emerges from considering the evidence in its totality in this
case. The Panel fails to see anything in the arguments and evidence of Malaysia that contradicts the
conclusion that the objective of the high ILUC -risk cap and phase -out is to limit the risk of ILUC -
related GHG emissions associated with crop-based biofuels.
7.266. The Panel therefore finds that Malaysia has not substantiated its assertion that the measures'
actual objective is protectionism in the cover of environmental protection.
7.1.2.3.3.5 Conclusion on the identification of the objective
7.267. The Panel understands that the stated rationale for the 7% maximum share and the high
ILUC-risk cap and phase-out is to limit the risk of ILUC-related GHG emissions associated with crop-
based biofuels. The Panel agrees with Malaysia that it is appropriate to identify the objective of the
specific measures at issue, as opposed to the wider objective s of RED II or the EU Biofuels regime
as a whole. The Panel is not persuaded by the European Union's argument that the Panel must
consider how the measures pursue the protection of biodiversity and EU public moral concerns as
separate objectives from the o bjective to limit the risk of ILUC -related GHG emissions. The Panel
finds that Malaysia has not substantiated its assertion that the measures' actual objective is
protectionism in the cover of environmental protection.
7.1.2.3.4 Legitimacy of the objective
7.268. The Panel recalls that the identification of the measures' objective conditions the nature and
scope of subsequent steps of the analysis under Article 2.2, including the assessment of whether it
is a "legitimate objective". The Panel now proceeds to consider wheth er limiting the risk of ILUC -
related GHG emissions posed by crop-based biofuels is a legitimate objective.
7.269. Malaysia presents arguments implying that the stated objective is not "legitimate": it argues
that relevant international standards "exclude ILUC from being taken into account"447; it maintains
in the context of Article 2.1 that because ILUC can neither be observed nor measured the regulation

447 Malaysia's first written submission, paras. 610(i).

of ILUC-related GHG emissions is not "legitimate"448; and it questions the legitimacy of addressing
GHG emissions outside of a Member's own territory.
7.270. The Panel begins by addressing whether the particular objective of limiting the risk of
ILUC-related GHG emissions posed by crop-based biofuels prima facie falls within the scope of one
or more of the legitimate objectives that are reflected in the text of Article 2.2, the Preamble to the
TBT Agreement, and/or Article XX. After conducting that analysis, and before reaching a definitive
conclusion on the legitimacy of the objective pursued, the Panel will address a number of issues that
are raised by Malaysia's arguments and that, in the Panel's view, are pertinent to the appraisal of
the legitimacy of the objective. These issues include: (a) the status of ILUC under current
international standards; (b) the exist ence of a risk of ILUC -related GHG emissions associated with
the production of crop-based biofuels; and (c) the fact that agricultural activities and the associated
ILUC and ILUC -related GHG emissions in question occur outside of the territory of the
European Union.
7.1.2.3.4.1 Relation to the legitimate objectives specified in Article 2.2, the Preamble to
the TBT Agreement, and Article XX
7.271. The Appellate Body has indicated that the objectives expressly listed in Article 2.2 "provide
a reference point for which other ob jectives may be considered to be legitimate in the sense of
Article 2.2" and "objectives recognized in the provisions of other covered agreements may provide
guidance for, or may inform, the analysis of what might be considered to be a legitimate objective
under Article 2.2."449 The Panel considers that the provisions of other covered agreements that may
provide guidance and inform the analysis in this regard would include, most notably, the objectives
set out in the general exceptions of Article XX of the GATT 1994. The Panel now proceeds to address
whether the specific objective of limiting the risk of ILUC -related GHG emissions prima facie falls
within the scope of one or more of the legitimate objectives specified in the text of Article 2.2 and/or
Article XX.
7.272. The Panel consider s that although it is free to develop its own reasoning in light of the
arguments of the parties 450, it is it not free to make a case for either party. In the context of its
assessment of the high ILUC-risk cap and phase-out under Article XX, the Panel would not be able
to consider the applicability of the general exceptions generally, but would be confined to the
particular exceptions invoked by the European Union. Accordingly, the Panel focuses on the specific
subparagraphs of Article XX put forward by the European Union in its submissions.
7.273. First, in the context of Article XX, the European Union argues that the high ILUC -risk cap
and phase -out is justified under Article XX(g), as a measure relating to the conservation of
"exhaustible natural resources".
7.274. The Appellate Body has stated that Article XX(g) covers measures directed at the "the
preservation of the environment, especially of natural resources"451, and in past cases a broad range
of policies have been found to fall within the scope of measures relating to the conservation of
exhaustible natural resources. The Appellate Body has held that the terms "exhaustible natural
resources" must be read "in light of contemporary concerns of the community of nations about the

448 In the context of its arguments on the "contribution" step of the necessity test under Article 2.2 of
the TBT Agreement, Malaysia argues that "ILUC can neither be observed nor measured and, therefore, it is
impossible to attribute ILUC-risks exclusively to oil palm crop-based biofuel"; that "it is impossible to precisely
estimate to what extent, if at all, ILUC GHG emissions occur"; and that "[i]nternational standards on the
carbon footprint of products such as biofuels also exclude ILUC from being taken into account." (Malaysia's first
written submission, para. 610(i).) In the context of its arguments under Article 2.1, Malaysia argues, on those
same grounds, that regulating biofuels on the basis of ILUC-risk is "not legitimate". (Malaysia's first written
submission, paras. 574-577.)
449 Appellate Body Reports, US – Tuna II (Mexico), para. 313; and US – COOL, para. 370.
450 The Appellate Body has stated that "the Panel is not bound by the arguments raised by a party and
can use those arguments freely to develop its own legal reasoning to supports its findings and conclusions in
the matter under consideration. Moreover, if the panel's analysis was shaped solely by the parties' arguments,
the panel may not be able to conduct an objective assessment of the matter, as required under Article 11 of
the DSU." (Appellate Body Reports, Brazil – Taxation, para. 5.171 (referring to Appellate Body Reports,
451 Appellate Body Reports, China – Raw Materials, para. 355.

protection and conservation of the environment "452 and has concluded that "exhaustible natural
resources" covers both living and non -living exhaustible natural resources. 453 In past cases,
measures taken to conserve clean air 454, sea turtles 455, petroleum 456, and various mineral
resources457 have been found to be measures relating to the conservation of "exhaustible natural
resources" under Article XX(g).
7.275. The Panel notes that the conservation of exhaus tible natural resources is not specifically
mentioned as a legitimate objective in either Article 2.2 or the Preamble to the TBT Agreement.
However, both refer to the "the protection of … the environment" and Article XX(g) covers measures
directed at the "the preservation of the environment, especially of natural resources ".458 In other
words, measures taken with the objective of conserving exhaustible natural resources in the sense
of Article XX(g) would in principle fall within the scope of measures to taken to protect "the
environment" in the sense of Article 2.2 and the Preamble to the TBT Agreement.
7.276. The Panel recalls that as set out in Recitals 80 and 81 of RED II, the measures at issue ar e
aimed at limiting the risk of ILUC-related GHG emissions that arise when the cultivation of crops for
biofuels displaces traditional production of crops for food and feed purposes, leading to "the
extension of agricultural land into areas with high -carbon stock, such as forests, wetlands and
peatland, causing additional greenhouse gas emissions".459 Thus, the measures seek to limit the risk
of ILUC-related GHG emissions associated with crop -based biofuels, which would arise when the
cultivation of crops for biofuels displaces traditional production of crops for food and feed purposes
requiring the extension of agricultural land into areas with high -carbon stock, including forests,
wetlands and peatland. The objective of the 7% maximum share and the high ILU C-risk cap and
phase-out therefore prima facie relates to the conservation of an "exhaustible natural resource ",
namely high-carbon stock land (forests, wetlands and peatland). Furthermore, in addition to high -
carbon stock land being an exhaustible natural resource in and of itself, the Panel considers that
measures taken to conserve high -carbon stock land, and thereby avoid the GHG emissions that
would be released through their use, are related to the conservation of a wide range of exhaustible
natural resources that are threatened by increased GHG emissions and climate change.
7.277. The Panel is therefore satisfied that the objective of limiting the risk of ILUC -related GHG
emissions associated with crop-based biofuels prima facie falls within the scope of the objective of
"the conservation of exhaustible natural resources" within the meaning of Article XX(g), and within
the scope of the objective of "the protection … of the environment " under Article 2.2 and the
Preamble to the TBT Agreement and is therefore prima facie a "legitimate objective".
7.278. Second, in the context of Article XX, the European Union argues that the high ILUC-risk cap
and phase-out is justified under Article XX(b), as a measure necessary to protect human, animal or
plant life or health.
7.279. The Panel notes that in past cases, a broad range of policies has been found to fall within
the scope of measures taken for the protection of human, animal and plant life or health. These
include policies relating to the reduction of air pollution as a result o f consumption of gasoline 460,
the reduction of risks arising from the accumulation of waste tyres 461, and even the protection of
monkeys in the wild.462

452 Appellate Body Report, US – Shrimp, para. 129.
453 Appellate Body Report, US – Shrimp, para. 131
454 Appellate Body Report, US – Gasoline, p. 14.
455 Appellate Body Report, US – Shrimp, para. 131.
456 Appellate Body Report, US – Shrimp, para. 128.
457 Appellate Body Report, US – Shrimp, para. 128; and Panel Reports, China – Raw Materials,
para. 7.369.
458 Appellate Body Reports, China – Raw Materials, para. 355.
459 Recital 81 of RED II.
461 Panel Reports, China – Raw Materials, para. 7.479 (referring to Panel Reports, US – Gasoline,
para. 6.21 and Brazil – Retreaded Tyres, paras. 7.108 and 7.115).
462 Panel Report, Brazil – Retreaded Tyres, paras. 7.108 and 7.115.

7.280. The Panel notes that the objective of protecting human, animal or plant life and health is
referred to as a legitimate objective in very similar terms in Article XX(b)463, Article 2.2464, and the
Preamble to the TBT Agreement.465 Panels and the Appellate Body have stated that "few interests
are more 'vital' and 'important' than protecting human beings from health risks, and protecting the
environment is no less important".466
7.281. The Panel recalls that as set out in Recitals 80 and 81 of RED II, the measures at issue are
aimed at limiting the risk of ILUC -related GHG emissions associated with crop -based biofuels. I n
Brazil – Retreaded Tyres , the Appellate Body suggested that "measures adopted in order to
attenuate global warming and climate change " would fall within the scope of Article XX(b) in the
context of providing guidance on how panels should assess certain "complex public health or
environmental problems" under the necessity test in Article XX(b).467 In Brazil – Taxation, the panel
found that "the reduction of CO2 emissions is one of the policies covered by subparagraph (b) of
Article XX, given that it can fall within the range of policies that protect human life or health".468 The
Panel sees no reason to disagree, considering that global warming and climate change pose one of
the greatest threats to life and health on the planet. The objective of limiting the risk of ILUC-related
GHG emissions associated with crop-based biofuels therefore prima facie relates to the protection of
human, animal or plant life or health.
7.282. The Panel is therefore satisfied that the objective of limiting the risk of ILUC -related GHG
emissions associated with crop-based biofuels prima facie falls within the scope of the objective of
protecting human, animal or plant life or health within the meaning of Article XX(b), Article 2.2 and
the Preamble to the TBT Agreement and is therefore prima facie a "legitimate objective".
7.283. In the context of Article XX, the European Union has argued that the high ILUC-risk cap and
phase-out is justified under Article XX(a), as a measure necessary to protect public morals.
7.284. For reasons already set out in the context of the Panel's identification of the objective of the
measures at issue, the Panel is unpersuaded that there is any need to make an additional ruling on
whether the objective of limiting the risk of ILUC-related GHG emissions associated with crop-based
biofuels would fall within the scope of the objective protecting EU public morals. In this connection,
the Panel observes that a finding on whether the h igh ILUC-risk cap and phase -out additionally
pursues a "legitimate objective" of protecting EU public morals would have no impact on the outcome
of the proceedings. If the Panel were to agree with the European Union that the same measure that
pursues the l egitimate objectives of protecting human, animal and plant life and health and the
conservation of exhaustible natural resources also pursues the objective of protecting EU public
morals, this would merely serve to establish an additional basis for the ove rall conclusion that the
measure pursues a legitimate objective for the purposes of Article 2.2. Were the Panel to agree with
Malaysia that the measure does not pursue the objective of protecting EU public morals, this would
not alter the conclusion that t he measure pursues the legitimate objectives of protecting human,
animal and plant life and health and the conservation of exhaustible natural resources.
7.285. In light of the foregoing, the Panel finds that the objective of limiting the risk of ILUC-related
GHG emissions associated with crop -based biofuels is prima facie a "legitimate objective" under
Article 2.2, given that this objective is prima facie within the scope of policies related to the
conservation of exhaustible natural resources (forests, wetlands, and peatland) and the environment
more generally, and is also prima facie within the scope of policies directed to the protection of
human, animal or pla nt life or health. Before reaching a definitive conclusion on the legitimacy of
the objective pursued, however, the Panel considers it necessary to consider and address a number
of issues that are raised by Malaysia's arguments and that, in the Panel's view, are pertinent to the
appraisal of the legitimacy of the objective. While some of these issues are interrelated, the Panel
addresses them sequentially for analytical clarity.

463 Article XX(b) refers to measures necessary "to protect human, animal or plant life or health".
464 Article 2.2 refers to the "protection of human health or safety, animal or plant life or health".
465 The sixth Recital of the Preamble to the TBT Agreement refers to "the protection of human, animal or
plant life or health".
466 Panel Report, Brazil – Retreaded Tyres, para. 7.108. See also Appellate Body Report, Brazil –
Retreaded Tyres, para. 179.
467 Appellate Body Report, Brazil – Retreaded Tyres, para. 151.

7.1.2.3.4.2 The status of ILUC under current international standards
7.286. Article 2.4 of the TBT Agreement provides that Members shall use relevant international
standards as a basis for their technical regulations except when such international standards or their
relevant parts would be an ineffective or inappropriate means for the fulfilment of the legitimate
objectives pursued. Given that Article 2.4 contemplates that there may be situations where basing
a technical regulation on international standards would be an ineffective or inappropriate means for
fulfilling the legitimate objective pu rsued, it follows that the assessment of whether a measure's
objective is "legitimate" cannot be based solely on the measure's relationship to international
standards.
7.287. However, the Panel considers that its appraisal of the legitimacy of limiting the risk of
ILUC-related GHG emissions posed by crop -based biofuels should begin with the manner in which
ILUC is treated under the international standards cited by the parties to the dispute. The reason is
that Malaysia's arguments imply not only that the 7% maxim um share and the high ILUC -risk cap
and phase-out are not based on relevant international standards, but that the very objective of the
measures – i.e. limiting the risk of ILUC -related GHG emission associated with crop-based biofuels
– is at odds with multiple relevant international standards.
7.288. Indeed, if the Panel were to share Malaysia's reading of those standards and find that the
ISO standards referred to "exclude ILUC from being taken into account"469 in the context of measures
seeking to regulate GHG emissions, which is the view that Malaysia asserts in the context of its
arguments under Article 2.2, then this would be highly relevant to the Panel's appraisal of the
legitimacy of the measures' objective of limiting the risk of ILUC -related GHG emissions associated
with crop-based biofuels. As the Panel has already explained when setting out its order of analysis
among the claims under the TBT Agreement, it is for this reason that the Panel began its analysis of
the claims under the TBT Agreement with the claim under Article 2.4.
7.289. The Panel has concluded, in the context of addressing the claim under Article 2.4, that
ISO 13065:2015 generally excludes ILUC effects, as indirect effects, from its methodology and that
ISO 14067:2018 specifically excludes them from the LCA methodology used to quantify GHG
emissions, but that n either of the standards contains language that precludes a regulator from
addressing ILUC through its own approach outside the standardized methodologies. Thus, the Panel
found that the st andards do not cover ILUC and observed that the absence of international
harmonization does not mean that countries are prevented from taking action and developing their
own approaches to issues of concern. In other words, the conclusions reached by the Pa nel in the
context of its analysis of the ISO standards under Article 2.4 do not disturb, and indeed are fully
consistent with, the Panel's assessment that the objective of limiting the risk of ILUC -related GHG
emissions posed by crop -based biofuels is prima facie a legitimate objective for the purposes of
Article 2.2.
7.290. The P anel therefore concludes, in light of its findings under Article 2.4, that the
ISO standards referred to by Malaysia's do not "exclude ILUC from being taken into account" in the
context of measures seeking to regulate GHG emissions.
7.1.2.3.4.3 The existence of a ris k of ILUC -related GHG emissions associated with the
production of crop-based biofuels
7.291. Malaysia presents arguments implying that the stated objective is not "legitimate", on the
grounds that because ILUC can neither be observed nor measured the regulation of ILUC-related

469 Malaysia's first written submission, para. 610(i).

GHG emissions is not "legitimate".470 Among other things, Malaysia states that ILUC is a "is based
on unsubstantiated assumptions".471
7.292. The Panel observes that in the context of Article XX(b), when assessing whether a measure
is taken to protect human, animal or plant life or health, prior panels have often commenced their
analysis by determining the existence of the risk to human, animal or plant life or health (health
risk) that the challenged measure aims to reduce. 472 For instance, in EC – Asbestos, the panel
determined, as the first step in its analysis, whether chrysotile -asbestos posed a risk to human life
or health.473 In Brazil – Retreaded Tyres, the panel began by assessing whether the accumulation
of waste tyres posed risks to human, animal or plant life or health.474 As the panel in EC – Asbestos
observed, "inasmuch as they include the notion of 'protection', the words 'policies designed to protect
human life or health' imply the existence of a health risk."475
7.293. In a more recent case under Article XX, the panel in Turkey – Pharmaceuticals (EU) surveyed
prior rulings under Article XX(b), (a), and (j), and concluded that panels and the Appellate Body
have generally required the regulating Member "to demonstrate, at a mi nimum, that the asserted
risk … was more than a merely hypothetical possibility" and that "in the context of Article XX(b), as
in the context of the other sub-paragraphs of Article XX, a party invoking a general exception must
identify some degree of proba bility that the alleged risk exists ".476 After recalling prior panel and
Appellate Body reports involving the approach taken to measures aimed at limiting risks, the panel
stated that:
The Panel does not consider that there is any rigid or pre -determined th reshold or
evidentiary standard that should be applied in this respect. Insofar as a responding
party presents evidence and arguments demonstrating that there is a substantial degree
of probability of a specified risk to human life or health materializing, it will be easier
for the responding party to discharge its burden of proving that the challenged measure
was taken to protect against that risk, thus qualifying as a measure taken to protect
human life or health under Article XX(b). Conversely, insofar a s a responding party
asserts the existence of a risk without establishing any substantial degree of probability,
such that the risk appears to be theoretical, abstract or otherwise hypothetical, it will
be more difficult for the responding party to dischar ge its burden of proving that the
challenged measure was taken to protect against that risk.477
7.294. The Panel sees no reason to follow a different approach in the context of Article 2.2.
Accordingly, the Panel proceeds to address whether the risk of ILUC -related GHG emissions being
caused by the production of crop-based biofuels is a risk that appears to be theoretical, abstract or
otherwise hypothetical, or is rather a risk that can be established with a substantial degree of
probability. In assessing that issue, the Panel considers that the appropriate standard of review is
whether the European Union had a reasonable basis to conclude that increasing demand for crop -
based biofuels increases the risk of ILUC-related GHG emissions.478

470 In the context of its arguments on the "contribution" step of the necessity test under Article 2.2 of
the TBT Agreement, Malaysia argues that "ILUC can neither be observed nor measured and, therefore, it is
impossible to attribute ILUC-risks exclusively to oil palm crop-based biofuel"; that "it is impossible to precisely
estimate to what extent, if at all, ILUC GHG emissions occur"; and that "[i]nternational standards on the
carbon footprint of products such as biofuels also exclude ILUC from being taken into account." (Malaysia's first
written submission, para. 610(i).) In the context of its arguments under Article 2.1, Malaysia argues, on those
same grounds, that regulating biofuels on the basis of ILUC-risk is "not legitimate". (Malaysia's first written
submission, paras. 574-577.)
471 Malaysia's opening statement at the meeting of the Panel, para. 30.
472 Panel Reports, EC – Asbestos, para. 8.170; Brazil – Retreaded Tyres, para. 7.42; China – Rare
473 Panel Report, EC – Asbestos, paras. 8.170, 8.182, and 8.185-8.194.
474 Panel Report, Brazil – Retreaded Tyres, paras. 7.42, and 7.53-7.93.
475 Panel Report, EC – Asbestos, para. 8.170. See also Appellate Body Reports, EC – Seal Products,
para. 5.197.
476 Panel Report, Turkey – Pharmaceutical Products (EU), para. 7.170.
477 Panel Report, Turkey – Pharmaceutical Products (EU), para. 7.171.
478 The Panel elaborates further on the standard of review in the context of addressing the claim under
Article 2.1, when examining various calculations leading to the classification of palm oil as a high ILUC-risk
feedstock, as well as the underlying data and assumptions.

7.295. The Panel recalls that Recital 81 of RED II, already quoted in full earlier in this section,
explains in relevant part that:
Indirect land-use change occurs when the cultivation of crops for biofuels, bioli quids
and biomass fuels displaces traditional production of crops for food and feed purposes.
Such additional demand increases the pressure on land and can lead to the extension
of agricultural land into areas with high -carbon stock, such as forests, wetla nds and
peatland, causing additional greenhouse gas emissions.
7.296. In the Panel's view, the idea that increasing demand for crop-based biofuels increases the
risk of ILUC-related GHG emissions is a straightforward proposition. Indeed, this proposition appears
to be the logical corollary of certain known facts relating to the production of agricultural goods, and
it does not appear that Malaysia's arguments actually dispute any of those facts.
7.297. The Panel understands that because available agricultural land is li mited, any increased
demand for crop -based biofuels can only be met by: (1) increasing productivity on existing
agricultural land, (2) expanding into non -agricultural land (including high -carbon stock land), or
(3) expanding into existing agricultural land at the expense of cultivation for other purposes.
7.298. The Panel does not understand Malaysia to suggest that increased demand for crop -based
biofuels can be accommodated exclusively through increased productivity yield improvements on
existing agricultural land. According to the Study Report, scientific evidence indicates that the
increase in potential yields, i.e. the yield that can be reached with current technology at optimal
conditions, ranges between 0.6% and 1.1% annually.479 However, there is uncertainty whether this
rate in increase in potential yield could be maintained480, and whether yield increases for some crops
can meet the increased overall levels of demand.
7.299. Furthermore, the Panel observes that even if any increased demand for crop -based biofuel
could be met exclusively by growing more food and feed crops on existing agricultural land, it would
remain the case that by exploiting such productivity gains to supply food and feed crops for the
purpose of producing biofuels, the additional supply of food and feed crops achieved through
productivity gains is not then available to be u sed for food and feed purposes. Thus, unless global
food demand were to remain fixed (or decrease), the utilization of increased yields of food and feed
crops to supply biofuel demand would mean they are not available for, and in this sense diverted
from, use for food and feed purposes.
7.300. The Panel recalls that increased EU demand for crop -based biofuels cannot be met by
expanding biofuel production destined for the EU market into non-agricultural land (including high-
carbon stock land). Under RED I and RED II, any biofuel crops produced in high -carbon stock land
will not be eligible to be counted towards the EU renewable energy targets on account of the
sustainability and GHG emissions criteria in Article 29. Accordingly, suppliers are incentivized to
serve the EU market either by using existing "biofuel" land (either by increasing productivity or
capturing part of the biofuel production destined to non -EU markets) or by expanding biofuel
production into existing "non-biofuel" agricultural land.
7.301. There is therefore a substantial likelihood that increasing demand for crop-based biofuel will
be met, in the case of EU demand for biofuel, by expanding biofuel production into existing
agricultural land at the expense of cultivation for other purposes. Given that th e global demand for
food and feed crops has been increasing and is unlikely to decrease any time soon, it follows that
there is a substantial likelihood that food and feed production displaced by crop -based biofuel
production will expand into non-agricultural land, including into land with high-carbon stock, in the
absence of significant productivity yield improvement.
7.302. The Panel understands that there is no certainty that food and feed production displaced by
crop-based biofuel production will expand into land without a previous history of agricultural
production, such as pasture areas, savannahs, or forests (i.e. non-agricultural land). The Panel also
understands that, where such expansion does occur, the land that will be converted into new
agricultural land will not necessarily be forest, peatland, or other high-carbon stock land that raises

479 Study Report (2017), (Exhibit EU-28), p. 63, referring to Baldos & Hertel, 2016; Burney, Davis, &
Lobell, 2010).
480 Study Report (2017), (Exhibit EU-28), p. 64.

concerns relating to GHG emissions. However, it is clear that a basic driver for deforestation is
increased demand for agricultural commodities.481
7.303. In sum, crop-based biofuel is a product from food and feed crops, using agricultural land,
that can also used for other purposes (e.g. food). If biofuel is produced from food or feedstock
and/or agricultural land previously used for food production, the demand in food must then be met
by food production that expands into non-agricultural land or displaces other crop production, which
in turn expands into non -agricultural land, if global food demand does not decrease, and/or the
productivity does not increase, by a corresponding amount.
7.304. A review of the evidence submitted by the parties on ILUC risks associated with crop-based
biofuels suggests that this issue has received increased attention in the literature, including in peer-
reviewed publications and IPCC reports. The IPCC report on Climate Change and Land notes that
"[b]ioenergy from dedicated crops are in some cases held responsible for GHG emissions resulting
from indirect land use change (iLUC), that is the bioenergy activity may lead to displacement of
agricultural or forest activities into other locations, driven by market -mediated effects". The report
further mentions that "iLUC emissions are potentially more significant for crop -based feedstocks
such as corn, wheat and soybean, than for advanced biofuels from lignocellulosic materials."482 While
the IPCC report contains a statement regarding the "low confidence in attribution of emissions from
iLUC to bioenergy", the findings of the IPCC report appear to be consistent with the findings reported
in the Study Report. 483 Both reports acknowledge the variability, and therefore uncertainty, in the
estimation of ILUC -related GHG emissions attributed to biofuels. This statement read in context
appears to address only the uncertainty and variability surrounding the attributi on of a particular
ILUC effect to a particular feedstock and not, more generally, an assessment of a low confidence in
the proposition that a causal relationship exists between biofuel production as a whole and ILUC
effects.
7.305. Furthermore, the review of existing ILUC modelling studies in the Study Report , which are
concerned with the quantification of GHG emissions, reveals that the modelling estimates of ILUC -
related GHG emissions associated with biofuel demand vary depending on the study design,
methodological approach, parameter assumptions, scenarios considered, omitted factors, definitions
of specific variables and data sources. The existence of large variability in the modelling estimates
makes it difficult to assess with accuracy the specific quantity of ILUC-related GHG emissions by
specific types of conventional biofuel crops. That being said, although the number of modelling
studies on advanced biofuels is limited, available estimates of ILUC-related GHG emissions attributed
to crop -based biofuels ten d to be, on average, larger than the estimates of ILUC -related GHG
emissions associated with advanced biofuels. 484 This is in large part due to the fact that, unlike
conventional biofuels, advanced biofuels do not compete directly with food and feed crop production.
This finding is consistent with the underlying assumption of RED II according to which conventional
biofuels present a higher risk of ILUC-related GHG emissions than advanced biofuels. It follows that,
all other things being equal, the economic m odelling studies corroborate, or at least do not
undermine, the conclusion that an increase in conventional biofuel demand and production increases
the risk of ILUC-related GHG emissions.
7.306. The question of whether ILUC can be directly measured, observed or precisely quantified
does not speak to whether the production of crop-based biofuels creates a risk of ILUC-related GHG
emissions. If an increase in crop-based biofuel is produced from crop land previously used for food
production, demand in food must then be met by food production that expands into non-agricultural
land or displaces other crop production which in turn expands into non -agricultural land, if global
food demand does not decrease, and/or the productivity does not increase, by a corresponding
amount. The existence of a causal link between the risk of ILUC -related GHG emissions and crop -
based biofuel production, and more specifically, the existence of a risk of ILUC -related GHG
emissions arising from increasing EU demand for crop -based biofuels, is more than "theoretical" in
the Panel's view. It is another question to try to assess whether GHG emissions associated with a
particular expansion into high-carbon stock land, or with an expansion rate of a specific crop, could

481 See e.g. European Parliament Resolution of 4 April 2017, (Exhibit MYS-102), para. 4, noting that
"73% of global deforestation arises from the clearing of land for agricultural commodities, with 40% of global
deforestation caused by conversion to large-scale monocultural oil palm plantation".
482 IPCC Report, "Climate Change and Land", (Exhibits EU-225, MYS-89), section 2.6.1.5.
483 Study Report (2017), (Exhibit EU-28).
484 Study Report (2017), (Exhibit EU-28), pp. 8-9.

be attributed to EU biofuel demand. This, however, is not what the measures seek to achieve, as
they do not distinguish between specific drivers of expansion into land with high-carbon stock, as
explained further in the section addressing Malaysia's claim under Article 2.1.
7.307. Therefore, at the present time and subject to future technological developments, the Panel
considers that there is a risk that additional demand for crop -based biofuel increases the risk of
ILUC-related GHG emissions. The Panel does not consider the risk of ILUC -related GHG emissions
being caused by the production of crop -based biofuels to be a risk that appears to be theoretical,
abstract or otherwise hypothetical. Rather, it is a probable risk based on known facts and evidence
presented in this dispute.
7.308. The Panel concludes that there exists a reasonable basis for the European Union to conclude
that increasing demand for crop -based biofuels increases the risk of ILUC -related GHG emissions.
The Panel notes this conclusion leaves open any questions relating to the quantification of ILUC-
related GHG emissions, and it also leaves open all questions relating to whether there is a sound
basis for concluding that different conventional biofuels present different levels of ILUC risk. The
Panel returns to the latter issue in the context of the "legitimate regulatory distinction" step of the
analysis under Article 2.1.
7.1.2.3.4.4 The agricultural activities and associated ILUC and ILUC -related GHG
emissions in question occurring outside of the territory of the European Union
7.309. The Panel notes that the wording of Article 2.2 and Article XX do not speak to any territorial
or jurisdictional limitation on the scope of the measures that may be examined thereunder, and
Malaysia did not initially raise any issue in this regard in the context of presenting its argumen ts
under Article 2.2 (or elsewhere). In its first written submission, the European Union advanced a
series of arguments in support of its view that there is no explicit or implicit territorial limitation in
either Article XX of the GATT 1994 or in Article 2.2 of the TBT Agreement. Malaysia, without
engaging with the European Union's argument directly, stated that it would "draw the Panel's
attention to the well-considered and helpful comments on this issue made by Colombia in its Third
Party Submission"485, where Colombia argues that there is an implied jurisdictional limitation of
Article XX of the GATT 1994.
7.310. In these circumstances, the Panel considers that its appraisal of the legitimacy of the
objective of limiting the risk of ILUC -related GHG emissions posed by crop -based biofuels should
take account of the fact that the agricultural activities and associated ILUC and ILUC -related GHG
emissions in question are mostly expected to occur outside of the territory of the European Union.
7.311. The Panel recalls tha t t he objectives expressly listed in Article 2.2, and also those in
Article XX, provide a reference point for which other objectives may be considered to be legitimate
in the sense of Article 2.2.486 In this connection, the Panel notes that none of the exam ples of
"legitimate objectives" listed in the text of Article 2.2 necessarily have any inherent jurisdictional or
territorial limitation, and it may be difficult to reconcile such a limitation with such objectives as "the
environment". Likewise, the object ives in Article XX(g) (the "conservation of exhaustible natural
resources") and (b) (the protection of "human, animal or plant life or health "), which the Panel
considers particularly relevant to its analysis for reasons already given earlier in this section, do not
have any inherent jurisdictional or territorial limitation. The Panel further notes that while
Annex A(1)(a), (b) and (c) of the Ag reement on the Application of Sanitary and Phytosanitary
Measures (SPS Agreement) specify that SPS measures only include those measures applied to
protect human, animal or plant life or health "within the territory of the Member", there is no similar
textual qualification in Article 2.2 or Article XX (nor, more broadly, is there such a qualification in
the definition of TBT measures in Annexes 1.1, 1.2 and 1.3).
7.312. Past rulings by panels and the Appellate Body under the TBT Agreement and the GATT 1994
have addressed situations in which the challenged measure distinguished between products on the
basis of fishing and harvesting methods occurring outside of its own jurisdiction and territory. These
cases include US – Shrimp, US – Tuna II (Mexico), and EC – Seal Products. These prior cases suggest
that the fact that the interest being protected is situated outside the territory of the Member having

485 Malaysia's second written submission, para. 207.
486 Appellate Body Report, US – Tuna II (Mexico), para. 313.

adopted the measure is not, in itself, an obstacle to the possible justification of a measure under
Article XX of the GATT 1994, or even under the TBT Agreement.
7.313. At the same time, the Panel is mindful that in prior cases, panels and the Appellate Body
have refrained from making any broad interpretative rulings on the existence of any implied
jurisdictional or territorial limitation under Article 2.2 and Article XX. In US – Shrimp and EC – Seal
Products, the Appellate Body assessed whether there was a "sufficient nexus " between the
regulating Member and the activities being regulated.487 The Panel considers it appropriate to follow
a similar approach and focus on relevant case-specific arguments and circumstances.
7.314. The Panel notes that the measures at issue in this dispute are concerned with land use
change as an issue related to GHG emissions, which are linked to climate change. Climate change is
inherently global in nature. Therefore, there is a nexus between EU territory and the objective of
limiting the risk of ILUC-related GHG emissions.
7.315. Moreover, the Panel does not consider that the measures can be characterized as regulating
GHG emissions outside the European Union. The measures seek to regulate whether and to what
extent products supplying the EU transport fuel market can be counted toward s the EU renewable
energy targets, and t o address the adverse ILUC impacts that EU demand for crop-based biofuels
could have. In this respect, the objective of RED II is to promote the use of renewable green energy
in the EU transportation sector for environmental reasons and in particular to lower GHG emissions
and to combat climate change; the European Union has assessed that the resulting increase in EU
demand for crop-based biofuel could undermine that objective; and the measures therefore regulate
EU demand for those products. Finally, the P anel observes that the ILUC -related GHG emissions
from crop-based biofuels that the European Union is seeking to limit do not exclusively arise outside
the European Union's borders and may very well occur also within the European Union's own
territory.
7.316. The Panel finds that there is a sufficient nexus between the regulating Member and the
activities being regulated.
7.1.2.3.4.5 Conclusion on the legitimacy of the objective
7.317. The Panel finds that the objective of limiting the risk of ILUC -related GHG emissions
associated with crop-based biofuels is a "legitimate objective" under Article 2.2, given that this
objective falls within the scope of policies related to the conservation of exhaustible natural resources
(forests, wetlands, and peatland) and the environment more ge nerally, and falls also within the
scope of policies directed to the protection of human, animal or plant life or health. The Panel
concludes, in light of its findings under Article 2.4, that the ISO standards referred to by Malaysia
do not "exclude ILUC from being taken into account" in the context of measures seeking to regulate
GHG emissions. The Panel concludes that there exists a reasonable basis for the European Union to
conclude that increasing demand for crop -based biofuels increases the risk of ILU C-related GHG
emissions associated with crop-based biofuels. The Panel further concludes that there is a sufficient
nexus between the regulating Member and the activities being regulated.
7.318. The Panel therefore finds that the objective of limiting the risk of ILUC-related GHG emissions
associated with crop-based biofuels is a "legitimate objective" for the purposes of Article 2.2.

487 In US – Shrimp, the Appellate Body stated that "[w]e do not pass upon the question of whether
there is an implied jurisdictional limitation in Article XX(g), and if so, the nature or extent of that limitation. We
note only that in the specific circumstances of the case before us, there is a sufficient nexus between the
migratory and endangered marine populations involved and the United States for purposes of Article XX(g)."
(Appellate Body Report, US – Shrimp, para. 133.) In EC – Seal Products the Appellate Body stated that "the EU
Seal Regime is designed to address seal hunting activities occurring 'within and outside the Community' and
the seal welfare concerns of 'citizens and consumers' within the EU member States". On that basis, and taking
into account the participants' agreement that there was a "sufficient nexus" between the public moral concerns
and activities addressed by the measure, on the one hand, and the European Union, on the other hand, the
Appellate Body did not consider it necessary to address this question of "systemic importance" further for
purposes of resolving that dispute. (Appellate Body Reports, EC – Seal Products, para. 5.173.)

7.1.2.3.5 Trade-restrictiveness, risks of non-fulfilment, and contribution to the objective
7.319. Having found that the 7% maximum share and the high ILUC-risk cap and phase -out are
aimed at fulfilling a "legitimate objective", the next step of the Panel's analysis is to arrive at a
"preliminary conclusion "488 about whether the measures are necessary to fulfil that legitimate
objective. This consists of a relational analysis based on a "weighing and balancing" of three factors:
a. the trade-restrictiveness of the measure;
b. the risks that non-fulfilment of the objective would create; and
c. the degree of contribution made by the measure to the objective.
7.320. The parties present opposing arguments in relation to each of these factors. The Panel will
address each factor individually, following which it will set out its weighing and balancing of its
findings under each factor to reach a preliminary conclusion on the necessity of the measures at
issue under Article 2.2.
7.1.2.3.5.1 Trade-restrictiveness
7.321. The Panel begins with the first factor set out above, namely the trade-restrictiveness of the
7% maximum share and the high ILUC-risk cap and phase-out.
7.322. The Panel recalls that, under the applicable legal standard and in accordance with the
ordinary meaning to be given to the terms, a technical regulation is "trade-restrictive" within the
meaning of Article 2.2 insofar as it has "a limiting effect on international trade ".489 In prior cases,
panels and the Appellate Body have confirmed that a demonstration of trade-restrictiveness "could
be based on qualitative or quantitative arguments and evidence, or both, including evidence relating
to the characteristics of the challenged measure as revealed by its design and operation".490 Where
a panel considers that the design and structure of a measure is sufficient to establish that it will
have "a limiting effect on trade", it is not necessary to make findings on the actual trade effects, or
the anticipated effects, of the challenged measure.491
7.323. Malaysia argues that by establishing a limitation on the total quantity of crop-based biofuels
that are eligi ble to count towards the 14% target in the European Union for the transport sector
(with the entirety of EU crop-based biofuel demand being essentially defined by the RED II regime)
the 7% maximum share and the high ILUC-risk cap and phase-out have, by design, a "limiting effect
on trade" insofar as crop-based biofuels are imported into the European Union.492
7.324. The Panel agrees. Under RED II, the overall target for the share of renewable energy to be
used in the transport sector is set at 14% by 2030. The measures at issue establish an express
limitation on the total quantity of crop -based biofuels that are eligible to count towards the 14%
target. It is undisputed that the entirety of the EU conventional biofuel market is essentially governed
by the RED II regime, in the sense that there is little to no demand for biofuels not eligible to count
towards the 14% target. The crop-based biofuels subject to the 7% maximum share include (without
necessarily being limited to) crop -based biofuels imported into the European Union, and palm oil-
based biofuel is also imported into the European Union. It follows that the measures at issue have,
by design, a limiting effect on international trade.

488 Appellate Body Reports, US – COOL (Article 21.5 – Canada and Mexico), paras. 5.203-5.204
(referring to Appellate Body Report, Brazil – Retreaded Tyres, para. 156.)
489 Panel Reports, Australia – Tobacco Plain Packaging, para. 7.1072; and Appellate Body Reports,
Australia – Tobacco Plain Packaging, paras. 6.384-6.386.
490 Panel Reports, Australia – Tobacco Plain Packaging, para. 7.1072; and Appellate Body Reports,
Australia – Tobacco Plain Packaging, paras. 6.384-6.386.
491 Appellate Body Reports, Australia – Tobacco Plain Packaging, paras. 6.392.
492 Malaysia's first written submission, paras. 593-598.

7.325. The European Union presents several arguments aimed at showing that the 7% maximum
share and high ILUC-risk cap and phase-out are not "trade-restrictive" measures.493 For the reasons
that follow, the Panel is unpersuaded by these arguments.
7.326. First, the European Union stresses that the measures at issue do not "ban" the importation
of crop-based biofuels and cannot be treated as equivalent to "elimination of a product from the
market".494 In the context of seeking to establish that the challenged measures do not constitute a
"ban", the European Union observes that biofuels that are not eligible to count towards the target
"are still consumed, albeit in small quantities, in the European Union".495 In addition, it argues that
the low ILUC-risk certification ensures that the use of palm oil -based biofuel can contribute to the
renewable energy targets to the same degree as other conventional biofuels.496
7.327. The Panel considers that the relevance of this a rgument to the question of whether the
measures have a "limiting effect on trade" is unclear, as a measure falling short of a complete ban
can still clearly have a "limiting effect on trade ". Insofar as the European Union's position is that
since Malaysia has argued that the measures at issue (in particular the high ILUC-risk cap and phase-
out) are tantamount to a ban on palm oil -based biofuel, Malaysia needs to demonstrate that these
measures constitute a de facto ban to prove that they are "trade-restrictive"497, the Panel is not
persuaded. The Panel recalls that what needs to be established for the purposes of demonstrating
the trade-restrictiveness of a measure, under Article 2.2 and Article XX, is that the measure has "a
limiting effect on international trade".
7.328. Second, the European Union argues that insofar as it is correct that there is no real market
for biofuel in the European Union outside the RED II regime, such that the biofuels market was
created by the RED regime itself, it follows that the measures are part of a regime that has a trade
restricting effect only for fossil fuels, and a trade enhancing effect for biofuels. It follows from this,
the European Union argues, that the measures set a cap o n the trade-restrictiveness of the public
intervention with respect to fossil fuels. It cannot be the case, the European Union argues, that
"once a Member alters the functioning of the market and restricts trade in certain products [i.e. fossil
fuels] it should do that without any limitation for the trade which was artificially created for other
products" [i.e. biofuels].498
7.329. The Panel considers that the logical implication of the European Union's argument is that
where a Member artificially creates a market for certain products (e.g . biofuels), any limitation on
the eligibility of which products have access to that market, including through a total ban, would not
have any "limiting effect on trade " in those products. By this logic, an amended version of RED II
that immediately set a 0% share for all crop-based biofuels would not be trade-restrictive, and thus
could not be said to be any more "trade-restrictive" than the current measure. The Panel considers
that the disciplines under Article 2.2, and for that matter under Article 2.1 and Article III:4, apply in
the same way irrespective of whether a given market exists only because the government created
it.
7.330. Third, the European Union argues that, in assessing whether the measures at issue have a
"limiting effect on trade ", the Panel sh ould consider whether Malaysia's possible loss of exports to
the EU market "might have been compensated by an increase in exports to India and China ", and
whether the high ILUC -risk cap and phase -out has import -enhancing effects with respect to
conventional biofuels from other WTO Members.499 The European Union relies on the statement by
the panel in Australia – Tobacco Plain Packaging that, in assessing whether a technical regulation
has limiting effects on international trade, "consideration might be given to 'the value or other

493 The European Union's position appears to be that Malaysia has failed to demonstrate that the 7%
maximum share and the high ILUC-risk cap and phase-out are "trade-restrictive" at all. However, the European
Union also presents certain arguments to the effect that the "trade impact" of the measures at issue "is
minimal". (See e.g. European Union's first written submission, para. 1394.) The Panel proceeds on the
understanding that these may be construed as arguments in the alternative, and not as concessions that the
challenged measures are in fact "trade-restrictive" (which would obviate the need for further consideration of
its arguments on that issue).
494 European Union's first written submission, paras. 835-836.
495 European Union's first written submission, para. 837.
496 European Union's first written submission, paras. 839-840.
497 See e.g. European Union's opening statement, paras. 73-78.
498 European Union's first written submission, para. 843. (emphasis added)
499 European Union's first written submission, paras. 847-848.

importance of imports in respect of the importing and/or exporting Members concerned', as well as
'both import-enhancing and import-reducing effects on the trade of other Members'".500
7.331. The Panel does not c onsider that this argument finds support in prior dispute settlement
practice under Article 2.2 or Article XX. Indeed, the panel in Australia – Tobacco Plain Packaging
itself concluded that:
We see no basis in the terms of Article 2.2 to assume, as Austral ia proposes, that the
effects of a technical regulation on international trade, and specifically the existence
and extent of a "trade-restrictive" effect, should be assessed only on the basis of the
effect of the measure on trade of all WTO Members, in all products that are the subject
of the technical regulation. Indeed, we consider that the adoption of that interpretation
would have the effect that a WTO Member could have no recourse to Article 2.2 of the
TBT Agreement in respect of a particular product i n which its trade were being
restricted, in the event that the trade of (an)other Member(s) increased. Further,
following Australia's logic, in order to succeed in a claim under Article 2.2, a Member
would in all cases need to establish the existence of a limiting effect not only in respect
of its own exports, but in respect of the entirety of exports from all Members. This
interpretation would, in our view, diminish the rights of Members under Article 2.2.501
7.332. The Panel further notes that the specific paragr aph of that panel report that contains the
sentence relied upon by the European Union in developing its argument reiterates that "the
'trade-restrictiveness' of a technical regulation need not be assessed only on the basis of the effect
of the measure on t rade between all WTO Members, in all products that are the subject of the
technical regulation."502
7.333. The foregoing considerations apply equally to the 7% maximum share and the high ILUC -
risk cap and phase-out. While it is evident that the 7% maximum share is less trade-restrictive than
the high ILUC -risk cap and phase -out, both measures are "trade-restrictive" for the purposes of
Article 2.2 because they establish a limitation on the total quantity of crop -based biofuels that are
eligible to count towards the 14% target in the European Union, with the entirety of EU conventional
biofuel demand being essentially defined by the RED regime. The measures thereby have, by design,
a "limiting effect on trade" insofar as crop-based biofuels are imported into the European Union.503
The fact that the European Union has created the market in question does not modify this
assessment.
7.1.2.3.5.2 Risks of non-fulfilment of the objective
7.334. Having found that the 7% maximum share and the high ILUC -risk cap and phase -out are
trade-restrictive, the Panel now turns to the second factor that is taken into account in the weighing
and balancing step of the analysis, which is "the risks that non -fulfilment [of the objective] would
create".
7.335. The Appellate Body has explained504 that Article 2.2 does not prescribe further a particular
methodology for assessing "the risks non -fulfilment would create " or define how they should be
"tak[en] account of". In some contexts, it might be possible and appropriate to seek to determine
separately the nature of the risks, on the one hand, and to quantify the gravity of the consequences
that would arise from non -fulfilment, on the other hand; in other contexts, however, it might be
difficult, in practice, to determine or quantify those elements separately with preci sion. In such
contexts, it may be more appropriate to conduct a conjunctive analysis of both the nature of the
risks and the gravity of the consequences of non-fulfilment, in which "the risks non-fulfilment would

500 European Union's first written submission, paras. 785 and 847-848 (quoting Panel Reports, Australia
– Tobacco Plain Packaging, para. 7.1088.)
501 Panel Reports, Australia – Tobacco Plain Packaging, para. 7.1078.
502 Panel Reports, Australia – Tobacco Plain Packaging, para. 7.1088. (emphasis original)
503 The Panel recalls that, where the design and structure of the measure is sufficient to establish that it
will have a limiting effect on trade, it is not necessary to make findings on the actual trade effects, or the
anticipated effects, of the challenged measure. (See e.g. Appellate Body Reports, Australia – Tobacco Plain
Packaging, para. 6.392.)
504 Appellate Body Reports, US – COOL (Article 21.5 – Canada and Mexico), para. 5.218.

create" are assessed in qualitative terms. The Appellate Body has confirmed that "the manner of
such consideration is adaptable to the particularities of a given case."
7.336. Malaysia argues that "the measures at issue, at best, only make a limited contribution to
the primary objective being pursued by the EU, and, therefore, the risks and consequences that
non-compliance with these measures would create are also limited."505
7.337. The European Union, referring to its broad policy objectives, submits in relation to this
element of the analysis that "climate change, biodiversity and related moral concerns are regarded
as values of high importance in the European Union and embedded into its constitutional fabric."506
The European Union also argues that the nature of the risks and the fact that the consequences are
far-reaching and difficult to predict with certainty, as they pertain to climate change, biodiversity
destruction and absence of protection of EU public morals, mean that a qualitative analysis would
be more suitable to a quantitative one.507
7.338. The Panel has found that the objective of the 7% maximum share and the high ILUC -risk
cap and phase -out is to limit the risk of ILUC -related GHG emissions associated with crop -based
biofuels. Having so identified the objective of the m easures, the Panel considers that the risk that
the non-fulfilment of that objective would create is that the GHG emissions savings expected to
result from the promotion of crop-based biofuels through RED II would be partially undermined, or
even completely negated, by their ILUC-related GHG emissions.
7.339. The Panel reaches this conclusion based on several different considerations. First and
foremost, this understanding of the risks that non -fulfilment of the objective would create
corresponds to the understanding that is expressly set out in the ILUC Directive, Recital 81 of RED
II, and the Delegated Regulation. In the context of setting forth the stated rationale for the measures
at issue, Recital 81 of RED II, which has already been quoted in full earlier in this section of the
Report, recalls that the ILUC Directive "recognises that the magnitude of greenhouse gas emissions-
linked indirect land-use change is capable of negating some or all greenhouse gas emissions savings
of individual biofuels, bioliquids or biomass fuels ". This is repeated in Recital 4 o f the Delegated
Regulation.
7.340. Additionally, the parties themselves appear to share the same understanding. In its
submissions, the European Union refers to this potential consequence. 508 Malaysia likewise states,
in the context of addressing "the risk non -fulfilment would create ", that "[t]he consequence of
refraining from taking necessary steps towards this objective ", which Malaysia formulates as
"avoiding additional GHG emissions by lim iting direct and indirect land -use change ", would be
"greater GHG emissions and the partial or even total voiding of the GHG reductions achieved with
the RED II".509
7.341. The Panel is not of the view that consideration of "the risks that non -fulfilment [of the
objective] would create" necessitates the quantification of the risks, or an attempt to establish the
degree of probability of those risks materializing. Rather, and as the Appellate Body has explained510,
in some contexts it may be possible to quantify the gravity of the consequences that would arise
from non-fulfilment, whereas in other contexts this may be assessed in qualitative terms. The Panel
notes that in some cases, prior panels have identified "the risks of non-fulfilment" of the objective
in terms of one or more simple corollaries flowing from the objective identified. For example, in
Australia – Tobacco Plain Packaging , the panel found that the objective of the measures was
"to improve public health by reducing the use of, and exposure to, tobacco products", and found
that "the nature of the risk of not fulfilling the TPP measures' legitimate objective" was that "public
health would not be improved, as the use of, and exposure to, tobacco products would not be
reduced."511

505 Malaysia's first written submission, para. 628.
506 European Union's first written submission, para. 892.
507 European Union's first written submission, para. 894.
508 European Union's first written submission, paras. 36, 120, 234.
509 Malaysia's first written submission, para. 629.
510 Appellate Body Reports, US – COOL (Article 21.5 – Canada and Mexico), para. 5.218.
511 Panel Reports, Australia – Tobacco Plain Packaging, para. 7.1287.

7.342. The Panel therefore finds that the "risks that non-fulfilment [of the objective] would create"
are that GHG emissions savings resulting from the promotion of conventional biofuels through RED II
are partially undermined, or even completely negated, by their IL UC-related GHG emissions. As
already noted above, avoiding GHG emissions is a central element in combating climate change, in
itself a key objective of current international and domestic efforts. The foregoing considerations
apply equally to the 7% maximum share and the high ILUC-risk cap and phase-out, given that the
Panel considers that both measures have the same objective.
7.1.2.3.5.3 Contribution to the objective
7.343. Having considered the first two factors that inform the weighing and balancing step of the
analysis, the Panel now turns to the third factor, which is the degree of contribution made by the
measures to their objective.
7.344. The present case has several parallels with Brazil – Retreaded Tyres, and therefore the Panel
considers it useful to briefly summarize the Appellate Body's analysis in that dispute.
7.345. The measure at issue in Brazil – Retreaded Tyres, namely, a ban on imports of retreaded
tyres, was particular in at least two respects. First, the import ban formed part of a comprehensive
policy designed and i mplemented by Brazil to deal with the public health and environmental
consequences of waste tyres. As the Appellate Body recognized, "certain complex public health or
environmental problems may be tackled only with a comprehensive policy comprising a multi plicity
of interacting measures ".512 Consequently, the Appellate Body noted, it may prove difficult in the
short term "to isolate the contribution to public health or environmental objectives of one specific
measure from those attributable to the other meas ures that are part of the same comprehensive
policy".513 Second, the Appellate Body considered that the results obtained from, for example,
certain preventive actions to reduce the incidence of diseases, "can only be evaluated with the
benefit of time".514 It referred, in this connection, to "measures adopted in order to attenuate global
warming and climate change".
7.346. The Appellate Body in Brazil – Retreaded Tyres was thus confronted with the particular
challenge of assessing the contribution of a measure that formed part of a broader policy scheme,
and that was not yet having, or likely itself to produce, an immediately discernible impact on its
objective. The Appellate Body thus sought to determine whether the measure was "apt to make a
material contribution" to its objective.515 It ultimately found that the broader regulatory scheme was
designed to induce changes in the practices and behaviour of commercial actors in order to reduce
the number of waste tyres generated and, thereby, to reduce the risks to human, animal, and plant
life and health arising from the accumulation of waste tyres.516
7.347. In the present case, the 7% maximum share and the high ILUC -risk cap and phase-out do
not take the form of a ban on imports of any crop -based biofuel. However, the measures have, by
design, a limiting effect on EU demand for and consumption of all crop -based biofuels, and will by
2030 eliminate RED II -induced EU demand for and consumption of those crop -based biofuels
deemed to be high ILUC risk. As with the impo rt ban at issue in Brazil – Retreaded Tyres, the
objective of the measures is related to the protection of human, animal or plant life or health (which
the Appellate Body accepted "is both vital and important in the highest degree".)517 Furthermore, it
appears to be common ground between the parties in this case that it is not possible to quantify the
extent to which the 7% maximum share and the high ILUC-risk cap and phase-out contribute to the
objective of limiting the risk of ILUC-related GHG emissions associated with crop-based biofuels. The
measure at issue in Brazil – Retreaded Tyres was likewise one that did not have an immediately
discernible impact on its objective. In these circumstances, the Appellate Body accepted that a
measure could be considered "necessary" even if the contribution of the measure "is not immediately

512 Appellate Body Report, Brazil – Retreaded Tyres, para. 151.
513 Appellate Body Report, Brazil – Retreaded Tyres, para. 151.
514 Appellate Body Report, Brazil – Retreaded Tyres, para. 151.
515 Appellate Body Report, Brazil – Retreaded Tyres, para. 150.
516 Appellate Body Report, Brazil – Retreaded Tyres, para. 154.
517 Appellate Body Report, Brazil – Retreaded Tyres, para. 144.

observable"518, and considered that the relevant standard was whether the measure was apt to
make a material contribution to its objective.
7.348. The Panel considers that the 7% maximum share and the high ILUC-risk cap and phase-out
are apt to make a material contribution to the objective of limiting ILUC -related GHG emissions
associated with crop-based biofuels. The measures have, by design, a limiting effect on EU demand
for and consumption of all crop-based biofuels and will by 2030 eliminate RED II-induced EU demand
for and consumption of those crop -based biofuels deemed to be high ILUC risk. It follows that the
measures are apt to make a material contribution to the objective of limitin g ILUC-related GHG
emissions associated with crop-based biofuels. In light of the design and intended operation of the
7% maximum share and the high ILUC -risk cap and phase-out, the Panel considers that there is a
direct correlation between their aptitude to contribute to their objectives and their degree of trade-
restrictiveness.
7.349. Malaysia submits that there are several reasons why the extent to which the measures at
issue fulfil their objectives, will be very difficult, if not impossible, to determine (whe ther in
quantitative or qualitative terms), and will, in any case, be quite limited. "519 The Panel has elected
to address most of these arguments elsewhere in its analysis, either in the context of assessing
whether the objective of limiting ILUC-related GHG emissions associated with crop-based biofuels is
a "legitimate objective" or in the context of the "legitimate regulatory distinction" step of the analysis
under Article 2.1.
7.350. For instance, Malaysia argues520 ILUC cannot be observed or measured and therefore there
is no evidence showing that oil palm crop -based biofuel exported from Malaysia into the
European Union will cause ILUC. Malaysia argues that it is therefore impossible to establish a causal
link between the cultivation of food and feed crops for producing biofuel in one geographical location,
and the growing of crops in another geographical location. As a result, Malaysia argues that it is not
possible to quantify the contribution, if any, of the limitation on the importation of the cap and
phase-out to the stated objective.
7.351. The Panel considers this argument to be pertinent to the a ssessment of whether the
objective of limiting ILUC-related GHG emissions associated with crop-based biofuels is a "legitimate
objective" and has elected to address it in that context. The Panel found that there exists a
reasonable basis for the European Union to conclude that increasing demand for crop-based biofuels
increases the risk of ILUC-related GHG emissions. The Panel therefore considers that this argument
does not undermine its conclusion that the high ILUC -risk cap and phase -out is apt to make a
material contribution to the objective of limiting the risk of ILUC -related GHG emissions associated
with crop-based biofuel.
7.352. Malaysia also argues521 that even if the European Commission's new ILUC methodology is
taken at face value, this methodology fails to demonstrate that the cap and phase -out contributes
to preventing ILUC GHG emissions, and in fact it is likely to increase GHG emissions. The reason is
that reducing the consumption of oil palm crop -based biofuel in the European Union in favour of
rapeseed or other crop -based biofuel would reduce the amount of rapeseed oil or other crops
produced for food purposes by an equivalent amount, which may therefore trigger ILUC effects
elsewhere in the world. The phase-out of palm oil-based biofuels may also result in a shift towards
palm oil being supplied for food and feed purposes in the European Union, which would not be subject
to the sustainability and GHG emissions saving criteria under RED I and RED II. Finally, even if the
cap and phase-out could actually limit global consumption of palm oil, the high yield and the high -
carbon sequestration value of oil palm, compared to other oil crops, means that ILUC GHG emissions
would likely increase.
7.353. The Panel notes that the issues raised by Malaysia relating to potential substitution effects
are also raised in the context of the "legitimate regulatory distinction " step of the analysis under
Article 2.1. The Panel considers it appropriate to address these arguments together with other
aspects of the design and operation of the measure in that context. The Panel notes that its
conclusions under Article 2.1 do not undermine its conclusion that the high ILUC-risk cap and phase-

518 Appellate Body Report, Brazil – Retreaded Tyres, para. 151.
519 Malaysia's first written submission, para. 611.
520 Malaysia's first written submission, para. 610(i) and (ii).
521 Malaysia's first written submission, paras. 610(iii) and (v) and 627.

out is apt to make a material contribution to the objective of limiting the risk of ILUC -related GHG
emissions associated with crop-based biofuel.
7.354. Malaysia further argues 522 that because the high ILUC-risk cap and phase -out targets
existing crop production for which the alleged emissions have already occurred in the past, as well
as feedstock produced from yield increases to existing land, such production does not cause ILUC
because it does not res ult in additional land use. In its view, this further undermines the ability of
the measures at issue, and in particular the high ILUC-risk cap and phase-out, to contribute to their
objective.
7.355. The Panel notes that the issues raised by Malaysia are also ra ised in the context of the
"legitimate regulatory distinction " step of the analysis under Article 2.1. The Panel considers it
appropriate to address these arguments together with other aspects of the design and operation of
the measure in that context. Her e again, the Panel notes that its conclusions under Article 2.1 do
not undermine its conclusion that the high ILUC -risk cap and phase -out is apt to make a material
contribution to the objective of limiting the risk of ILUC-related GHG emissions associated with crop-
based biofuel.
7.356. Malaysia also highlights the fact that, in the context of arguing that the measures are not
trade-restrictive, the European Union states that its measures will affect only "a drop in the ocean
of palm oil world production and consumption, and the EU measures challenged by Malaysia are not
capable of significantly affecting global trade in palm oil and palm oil biofuels".523 Malaysia expresses
surprise at this line of argumentation, "as it seems to be in direct contradiction to the stated raison
d'être of the limitations on palm oil set out in the offending measures " and suggests that the
European Union is overstating the impact of the measures when "in other contexts, the EU relies on
the supposition that EU demand is quite consequential in this area; asserting that it is necessary to
stifle that demand, with haste, in order to promote the stated goals of the measures."524
7.357. The Panel does not consider that the contribution that the 7% maximum share and the high
ILUC-risk cap and phase-out are apt to make to their objective (i.e. limiting ILUC -related GHG
emissions associated with crop-based biofuels) is undermined by the fact that the measures focus
only on a relatively narrow aspect of the problem of GHG emissions, and directed o nly at the
European Union's own demand and consumption of biofuels. It is often the case that a given measure
will "only address[] a specific component of the overall risk"525 it pertains to. A fortiori, in the context
of a global issues like climate change and GHG emissions the assessment of whether a single
measure taken by a single Member is apt to make a material contribution to its objective cannot be
directed at the global impact of the measure in quantitative terms.
7.358. Rather, a "contribution" exists "when there is a genuine relationship of ends and means
between the objective pursued and the measure at issue ".526 That is the case here. The measures
seek to address certain negative externalities of the European Union's policy promoting the use of
renewable energy sources in the transport sector. Therefore, insofar as the measures aim at
correcting a specific aspect of that policy, it is to be expected that the measures' contribution will be
limited to that specific element.
7.359. The Panel concludes that, while it is not possible to quantify the extent to which the 7%
maximum share and the high ILUC-risk cap and phase-out contribute to the objective of limiting the
risk of ILUC -related GHG emissions associated with crop -based biofuels, the measures are apt to
make a material contribution to the objective of limiting ILUC-related GHG emissions associated with
crop-based biofuels. The conclusion follows from the fact that the 7% maximum share has, by
design, a limiting effect on EU demand for and consumption of all crop-based biofuels, and from the
fact that the high ILUC -risk cap and phase -out has, by design, a limiting effect on EU demand for
and consumption of those crop-based biofuels deemed to be high ILUC risk.

522 Malaysia's first written submission, paras. 610(iv).
523 European Union's first written submission, para. 838.
524 Malaysia's first written submission, para. 95.
525 Panel Report, Brazil – Retreaded Tyres, para. 7.214.
526 Appellate Body Report, Brazil – Retreaded Tyres, para. 210.

7.1.2.3.5.4 Weighing and balancing of the three factors
7.360. Having considered the trade-restrictiveness of the measures, the risks that non-fulfilment of
their objective would create, and the degree of contribution made by the measures to the objective,
the Panel now proceeds to the "weighing and balancing " of these factors in order to reach a
"preliminary conclusion" on the necessity of the measures at issue.
7.361. In the context of considering these three factors individually, the Panel has concluded that:
a. The 7% maximum share and the high ILUC -risk cap and pha se-out are trade-restrictive
for the purposes of Article 2.2 because they establish a limitation on the total quantity of
crop-based biofuels that are eligible to count towards the 14% target in the
European Union, with the entirety of EU conventional biof uel demand being essentially
defined by the RED regime. While it is evident that the 7% maximum share is less trade-
restrictive than the high ILUC -risk cap and phase -out, both measures thereby have, by
design, a limiting effect on trade insofar as crop -based biofuels are imported into the
European Union. The fact that the European Union has created the market in question
does not modify this assessment.
b. The 7% maximum share and the high ILUC-risk cap and phase-out have the objective of
limiting the risk of ILUC-related GHG emissions associated with crop -based biofuels, and
the risk that non -fulfilment of that objective would create is that the GHG emissions
savings expected to result from the promotion of crop-based biofuels through RED II would
be partially undermined, or even completely negated, by their ILUC -related GHG
emissions.
c. While it is not possible to precisely quantify the extent to which the 7% maximum share
and the high ILUC -risk cap and phase-out contribute to the objective of limiting the risk
of ILUC-related GHG emissions associated with crop-based biofuels, the measures are apt
to make a material contribution to the objective of limiting ILUC -related GHG emissions
associated with crop -based biofuels. Th is conclusion follows from the fact that the 7%
maximum share has, by design, a limiting effect on EU demand for and consumption of all
crop-based biofuels, and from the fact that the high ILUC-risk cap and phase-out has, by
design, a limiting effect on EU demand for and consumption of those cro p-based biofuels
deemed to be high ILUC risk.
7.362. The Panel appreciates that the exercise of "weighing and balancing " implies that the
flexibility of such an exercise does not allow for the setting of pre-determined thresholds in respect
of any particular fac tor, and therefore the Appellate Body has stated that it does "not see that
mandating in advance a pre -determined threshold level of contribution would be instructive or
warranted in a necessity analysis ".527 Thus, a panel may be found to have erred insofar as it
considers that it is required to apply a standard of "materiality" as a generally applicable pre -
determined threshold in its "contribution" analysis.528
7.363. Having said this, the Panel notes that in every case where a panel or the Appellate Body has
found that a measure is apt to make a material contribution to the fulfilment of its objective, the
preliminary conclusion reached in the context of the weighing and balancing step has been that the
measure is necessary. This includes cases where the measure was highly trade-restrictive, including
cases where the measure was an outright ban on the importation or sale of the products at issue
(including for example Brazil – Retreaded Tyres and US – Clove Cigarettes ). Indeed , the
Appellate Body has suggested that the only circumstance in which a panel could end its analysis at
this juncture and find that a measure is more trade -restrictive than necessary based on the
"weighing and balancing", and not continue with a comparison of the measure against the proposed
alternative measures, would be if the measure "makes no contribution to the achievement of the
legitimate objective".529
7.364. The Panel preliminarily concludes that the measures are necessary to fulfil their objective,
on the grounds that they are "apt to make a material contribution " to the achievement of that

527 Appellate Body Reports, EC – Seal Products, para. 5.215.
528 Appellate Body Reports, EC – Seal Products, para. 5.216.
529 Appellate Body Report, US – Tuna II (Mexico), fn 647 to para. 322.

objective, and that this is the requisite degree of contribution required in the circumstances of this
case having weighed and balanced their trade-restrictiveness and the risks that non -fulfilment of
the objective would create.
7.1.2.3.6 Alternative measures
7.365. The Panel has reached the preliminary conclusion that the 7% maximum share and the high
ILUC-risk cap and phase-out are necessary under Article 2.2. Accordingly, the next and final step of
the analysis of the necessity test under Article 2.2 is a comparison of the challenged measures with
possible alternative measures.
7.366. Malaysia has identified six possible alternative measures to the high ILUC -risk cap and
phase-out and the 7% maximum share. In response to a question from the Panel asking Malaysia
to clarify which of the challenged measures each of the proposed alternative measures relates to,
Malaysia responded that each of the alternative measures proposed by Malaysia "respond to the
primary objective of the EU (i.e., the avoidance of additional GHG emissions) and, thereby, also the
broader secondary objectives ", and that Malaysia's proposed alternatives "are focused on
accomplishing as much or more than the EU measures (i.e. the 7% limit, the high ILUC-risk cap, the
high ILUC-risk phase out, and low ILUC-risk certification) are able to collectively accomplish in this
respect".530 The Panel therefore proceeds on the understanding that Malaysia has identified six
alternative measures, each of which is to be understood as being a less trade-restrictive alternative
measure that could replace both the high ILUC-risk cap and phase-out, and the 7% maximum share.
7.367. The Panel will proceed to individually examine the six less trade -restrictive alternative
measures that have been identified. According to Malaysia, the 7% maximum share and the high
ILUC-risk cap and phase-out are more trade-restrictive than necessary to fulfil a legitimate objective,
because the following measures are reasonably available to the European Union, that would make
an equivalent contribution to the stated objective, while being less trade-restrictive:
a. a legality scheme, such as the European Union's Forest Law Enforcement, Governance and
Trade (FLEGT) scheme;
b. certification by public authorities, such as the catch certificate under the European Union's
Illegal, Unreported and Unregulated (IUU) fishing scheme;
c. certification by existing non-governmental organizations, such as under the International
Sustainability and Carbon Certification (ISCC) and the Roundtable on Sustainable Palm Oil
(RSPO) and the RSPO-RED;
d. market access quotas;
e. the sustainability certification scheme and requirements adopted under the Indonesia -
EFTA Comprehensive Economic Partnership Agreement (CEPA); and
f. the European Union's approach applied in its deforestation-free initiative.
7.368. Before reviewing these measures individually, the Panel considers it useful to recall certain
aspects of the applicable legal standard that will guide its analysis of the alternative measures
proposed by Malaysia.
7.1.2.3.6.1 The purpose of identifying alternative measures
7.369. The Panel recalls that consideration of less trade -restrictive alternative measures is a
conceptual tool to analyse whether the measures at issue are more trade -restrictive than
necessary.531 The question that a panel seeks to answer in considering possible alternative measures

530 Malaysia's response to Panel question No. 120, p. 79.
531 See e.g. Appellate Body Reports, Australia – Tobacco Plain Packaging (Honduras), para. 6.461; US –
Tuna II (Mexico), para. 320; and US – COOL (Article 21.5 – Canada and Mexico), paras. 5.200.

is whether there are one or more less trade-restrictive measures that the regulating Member could
adopt to replace a challenged measure.
7.370. Accordingly, a panel must be satisfied that any proposed alternative measure is indeed less
trade-restrictive than the measure at issue, that it is reasonably available to the regulating Member,
and that it would make an equivalent contribution to the challenged measure's objective. 532 As
indicated above, all these elements of the comparative analysis are cumulative. The Appellate Body
has confirmed that a measure's objective serves as "the benchmark" against which a panel must
assess the degree of contribution made "by proposed alternative measures".533 Thus, in assessing
whether a proposed alternative measure would make an equivalent contribution to the challenged
measure's objective, it is important to start this analysis by clearly identifying the objective that
serves as the benchmark.
7.371. The Panel has identified the objective of the 7% maximum share and the high ILUC-risk cap
and phase -out as limiting the risk of ILUC -related GHG emissions associated with crop -based
biofuels. The Panel has also found that this is a "legitimate objective", and the Panel has further
found that the measures a t issue are apt to make a material contribution to that objective.
Accordingly, to establish that the measures are more trade-restrictive than necessary at this juncture
of its analysis, the Panel would need to be satisfied that one or more of the proposed alternatives
would make an equivalent contribution to the objective of limiting the risk of ILUC -related GHG
emissions associated with crop-based biofuels and that these alternatives are less trade -restrictive
than the challenged measures.
7.372. The Panel considers that it is necessary, but not sufficient, that any proposed alternative
measure be less trade-restrictive, be reasonably available, and make an equivalent contribution to
the objective of limiting the risk of ILUC-related GHG emissions associated with crop-based biofuels.
The Panel must further consider whether any proposed alternative is correctly viewed as an
alternative to, or rather as complementary to, the 7% maximum share and the high ILUC -risk cap
and phase-out. In Brazil – Retreaded Tyres, the Appellate Body upheld the panel's finding, made in
the context of applying the necessity test in Article XX(b), that certain alternatives proposed by the
complaining Member were "complementary" to the challenged import ban, and constituted "mutually
supportive elements of a comprehensive policy to deal with " waste tyres and "[t]herefore, these
measures cannot be considered real alternatives to " the import ban. 534 As the underlying panel
observed, "it is possible that different measures may address different aspects of the same risk and
complement each other towards addressing this risk".535
7.373. While the Appellate Body has not had occasion to elaborate further on the distinction
between alternative and complementary measures, the distinction would s eem to be reasonably
straightforward. Necessity tests under Article 2.2 and Article XX do not prevent a regulating Member
from taking more than one measure at the same time to fulfil any given objective. By way of
illustration, a technical regulation that laid down GHG emissions standards for scooters that have a
limiting effect on trade (in respect of non-compliant scooters) could not be shown to be more trade-
restrictive than necessary via a demonstration that introducing a subsidy for homeowners to install
solar panels (or purchase electric bikes, or electric cars) would make at least an equivalent
contribution to the reduction of GHG emissions. Such measures would in principle be
complementary, not alternative, measures.
7.374. An alternative measure is therefo re one that either could not co -exist with a challenged
measure as it currently stands, or that could co -exist but whose implementation alongside the
challenged measure would negate or render redundant or immaterial the contribution that the
challenged measure is apt to make to its objective. A complementary measure is one that could co-
exist with a challenged measure as it currently stands, and whose implementation alongside the
challenged measure would not negate or render redundant or immaterial the cont ribution that the
challenged measure is apt to make to its objective.

532 Appellate Body Reports, US – Tuna II (Mexico), para. 322; and US – COOL, para. 471.
533 Appellate Body Reports, US – COOL, para. 387.
534 Appellate Body Report, Brazil – Retreaded Tyres, para. 211. See also ibid., para. 172.
535 Panel Report, Brazil – Retreaded Tyres, para. 7.213.

7.1.2.3.6.2 Assessment of the alternative measures proposed by Malaysia
First proposed alternative: a legality scheme, such as the EU's Forest Law
Enforcement, Governance and Trade (FLEGT) scheme
7.375. Malaysia argues 536 that an alternative measure would be a legality scheme that links
environmental and sustainability certification to compliance with specific local laws and regulations,
aligned with the EU requirements, modelled on the EU FLEGT sch eme.537 Malaysia argues that
exporting countries could enter into agreements with the European Union for the purposes of
assuring the conformity of their exports with the agreed rules and their national rules, and issue
licences assuring the legality and provenance of the specific consignment of palm oil -based biofuel
"from a plantation on a land with low -carbon stock and that did not displace other crops onto land
with high-carbon stock".538 Malaysia clarifies that it is advocating for an approach that would look at
the individual consignment and certify whether it has been grown on high -carbon stock land and
that it did not lead to displacement of other food or feed crops "within a given jurisdiction ", and
observes that "[t]his is as much as an individual producing country can assure. "539 Malaysia
underscores the unfairness of the European Union's current global approach to regulating ILUC,
according to which "whatever an individual WTO Member, like Malaysia, does to avoid expansion of
agricultural land into high-carbon stock land, would be moot until such time that, globally, the issue
has been successfully addressed and the annual global expansions has been managed."540
7.376. The European Union responds541 that the sustainability criteria in Article 29 of RED II and
the reference to ILUC in Article 26(2) of RED II go beyond a legality check, and that "[l]ocal laws do
not address concerns related to the global impact of policy -induced increases in aggregate
demand."542 According to the European Union, what matters is the prevention of certain policy
effects, whether the LUC involved is legal or illegal. The European Union adds that the Voluntary
Partnership Agreements (VPAs) concluded under the EU FLEGT regime "are not so effective in
preventing illegal destruction of forests ".543 In addition, the European Union observes that insofar
as the alternative would be confined to ensuring that biofuel was not produced by expanding i nto
land with high-carbon stocks, this "is already a requirement under the sustainability criteria. Hence,
the proposed alternative is in reality a suggestion to remove the measure at issue altogether."544
7.377. The Panel observes that Malaysia's first proposed alternative measure, i.e. a legality scheme
that links environmental and sustainability certification to compliance with specific local laws and
regulations, aligned with the EU requirements , appears to be unrelated to the specific objective
pursued by the 7% maximum share and the high ILUC -risk cap and phase -out. This proposed
alternative also appears to be directed at DLUC associated with the production of individual
consignments of crop-based biofuels, as opposed to constituting an alternative measure that would
make an equivalent contribution to its chosen objective of limiting the risk of ILUC-related GHG

536 Malaysia's first written submission, paras. 636-650; second written submission, paras. 224-227; and
response to Panel question No 121, pp. 81-82.
537 Malaysia notes that the concept of the FLEGT scheme was introduced through the EU's Timber
Regulation, which was adopted in 2013. Malaysia explains that the EU Timber Regulation prohibits,
prospectively (i.e. not, as under the ILUC approach, retrospectively and per se for an entire commodity) the
placing of illegally harvested timber on the EU market, covering both imported and domestically produced
timber and timber products. Voluntary Partnership Agreements (VPAs) between the EU and timber-producing
countries also promote trade in legal timber products and help to close the EU market to illegal products. At
the heart of each VPA is a "timber legality assurance system", which verifies that wood products conform to
national laws. Once verified as legal, partner countries can give FLEGT licences to timber products destined for
the EU market. Malaysia explains the details of supply chain control under the FLEGT scheme at paras. 640-
644 of its first written submission.
538 Malaysia's first written submission, para. 647.
539 Malaysia's response to Panel question No. 121, p. 81. Malaysia adds that "[i]n order to ensure that
this approach be non-discriminatory, as capable as possible in deterring LUC, and able to restrict the
importation of commodities that encroach onto high-carbon stock land, the same import certification
requirements should be applied on all crops and commodities. A comprehensive DLUC approach, applied to all
crops, would be the best available alternative measure to the unreliable, unmeasurable, and discriminatory
ILUC approach." (Malaysia's response to Panel question No. 121, p. 82.)
540 Malaysia's second written submission, para. 225.
541 European Union's first written submission, paras. 918-933; and response to Panel question No. 122,
paras. 675-681.)
542 European Union's first written submission, para. 922.
543 European Union's first written submission, paras. 923-930.
544 European Union's response to Panel question No. 122, para. 677.

emissions associated with crop -based biofuels. In addition, the Panel does not see why the 7%
maximum share and the high ILUC-risk cap and phase-out could not co-exist with a legality scheme
that links environmental and sustainability certification to compliance with specific local laws and
regulations, aligned with the EU requirements. Given that the measures at issue have a focus that
is different from the proposed alternative, the challenged m easures would continue to be apt to
make a material contribution to their objectives if they operated alongside the proposed alternative.
As such, the first alternative appears to be complementary, and not a genuine alternative, to the EU
measures at issue.
Second proposed alternative: certification by public authorities, such as the catch
certificate under the EU's Illegal, Unreported and Unregulated (IUU) fishing scheme
7.378. Malaysia argues545 that a second alternative measure would be a certification scheme th at
relies on controls by public authorities, such as the approach introduced by the European Union for
catch certificates under its IUU fishing scheme. According to Malaysia, this IUU fishing scheme is a
less trade-restrictive framework because under this system, "the fact that a single species is fished
in illegal, unreported, or unregulated fashion, does not trigger its effective import restriction from
all countries and for all quantities, as in the case of biofuel feedstocks that are considered to have a
high ILUC-risk under the RED II and the Delegated Regulation."546 Malaysia submits that a licensing
system, including controls and traceability along the supply chain, would allow the European Union
to "prohibit th e importation of only the products that caused relevant land -use change, while
maintaining the trade opportunities for all the rest".547
7.379. The European Union responds548 that as an exception to the high ILUC -risk cap and phase
out, the RED II and the Delegated Regulation already allow for the certification of low ILUC -risk
biofuels, bioliquids and biomass fuels. Furthermore, the IUU Regulation uses a more complex toolbox
than the one described by Malaysia, which focuses on only one, the catch certificate, among st the
panoply of complementary measures provided by the IUU Regulation. The European Union adds that
there is a lack of precise information on the effectiveness of the EU rules to combat illegal,
unreported and unregulated fishing, as the respective instr ument did not benefit from a similar
fitness check as the FLEGT system. The European Union submits that the two instruments have
different purposes and operate in a different manner; as already explained, the IUU framework offers
both carrots and sticks as part of its toolbox. The European Union further submits that Malaysia has
not shown how the IUU system would be suitable in a completely different policy context.
7.380. The Panel observes that Malaysia's second proposed alternative measure, i.e. a certification
scheme that relies on public authorities to certify that individual consignments of biofuels were not
produced in an illegal, unreported, or unregulated fashion, or in a way that "caused relevant land-
use change", appears to be unrelated to the specific objective pursued by the 7% maximum share
and the high ILUC-risk cap and phase-out. This proposed alternative also appears to be directed at
DLUC associated with the production of individual consignments of crop-based biofuels, as opposed
to constituting a n alternative measure that would make an equivalent contribution to its chosen
objective of limiting the risk of ILUC-related GHG emissions associated with crop -based biofuels.
Given that the measures at issue have a focus that is different from the propos ed alternative, the
challenged measures would continue to be apt to make a material contribution to their objective if
they operated alongside the proposed alternative. As such the second alternative appears to be
complementary, and not a genuine alternative, to the EU measures at issue.
Third proposed alternative: certification by existing non -governmental
organizations, such as under the International Sustainability and Carbon
Certification (ISCC) and the Roundtable on Sustainable Palm Oil (RSPO) and the
RSPO-RED
7.381. Malaysia argues 549 that "enhanced certification requirements ", without opting for the
arbitrary high ILUC-risk approach and the merely theoretical low ILUC-risk certification, would be an

545 Malaysia's first written submission, paras. 651-657; and second written submission, paras. 231-232.
546 Malaysia's first written submission, para. 655.
547 Malaysia's first written submission, para. 655.
548 European Union's first written submission, paras. 934-942; and response to Panel question No. 122,
paras. 685-687.)
549 Malaysia's first written submission, paras. 658-666; and second written submission, paras. 234-236.

alternative option that is reasonably available to the Europ ean Union and that is less trade -
restrictive. It refers to two voluntary certification schemes that "already exist and have been
operating for a number of years in this very area of regulation, notably the certification of sustainable
biofuel feedstocks: i) The ISCC; and The RSPO, with the specific RSPO -RED scheme".550 Malaysia
states that the ISCC "allows for the implementation and certification of sustainable, deforestation -
free, and traceable supply -chains of feedstocks", and "[t]he European Commission recognised the
'ISCC EU' certification system in 2011. Since then, palm oil producers have been able to demonstrate
compliance with the sustainability requirements of the RED I in all EU member States, by obtaining
an 'ISCC EU' certificate. "551 Malaysia explains that a specific certification framework known as the
"RSPO-RED" scheme had been set up by the RSPO for compliance with RED I. According to Malaysia,
these alternatives are in place to pursue compliance with the sustainability criteria introduced under
the RED I "and only minimally differs from the approach selected by the EU under the RED II with
respect to ILUC".552
7.382. The European Union responds553 that the RSPO-RED is a scheme set up in response to RED
I, thus it only addresses DLUC and is irrelevant to ILUC. The European Union explains that ILUC
needs to be addressed in addition to these schemes, precisely because the "sustainability criteria"
(and thus the RED certification regime) are not designed to address ILUC. The European Union states
that Malaysia does not explain how these alternatives could make an equivalent contribution to the
objectives pursued as long as they do not address ILUC risks, nor what it means by "enhanced" in
this context. It adds that insofar as this enhanced certification requirement would be confined to the
evaluation of relevant land-use change within a given jurisdiction, "Malaysia's alternative with regard
to certification does not take into account the fact that ILUC is global in nature and that different
feedstocks have different ILUC risks."554
7.383. The Panel observes that Malaysia's third proposed alternative measure, i.e. certification by
existing non -governmental organi zations, also appears to be unrelated to the specific objective
pursued by the 7% maximum share and the high ILUC -risk cap and phase -out. This proposed
alternative also appears to be directed at DLUC associated with the production of individual
consignments of crop-based biofuels, as opposed to constituting an alternative measure that would
make an equivalent contribution to its chosen objective of limiting the risk of ILUC-related GHG
emissions associated with crop-based biofuels. The principal difference between the second and third
alternative measures appears to reside in which type of body (governmental or non-governmental)
would be entrusted with certifying individual consignments. Given that the measures at issue have
a focus that is different from the proposed alternative, the challenged measures would continue to
be apt to make a material contribution to their objective if they operated alongside the proposed
alternative. The third alternative therefore also appears to be complementary, and not a genu ine
alternative, to the EU measures at issue.
Fourth proposed alternative: market access quotas
7.384. Malaysia argues555 that another alternative would have been for the European Union to have
established a system of market access quotas . These quotas would have allowed the counting
towards EU renewable energy targets up to the amount used in the E uropean Union when the
relevant feedstock exceeded the threshold for being considered as having a high ILUC risk, as set
out in Article 3 of the Delegated Regulation. More specifically, Malaysia submits that the amounts to
be considered eligible for a quota of the EU market for oil crop -based biofuels could have been
calculated on the basis of the EU market share of each oil crop -based biofuel when the criteria for
the determination of high ILUC -risk were first met. Malaysia argues that it is both illogical and
unacceptably trade -restrictive to exclude the entire production of any particular oil crop -based
biofuels once the rate of expansion into high -carbon stock land meets the threshold for being high
ILUC risk, and thereafter make any amount of that feedstock that is to be counted towards the EU's
renewable energy targets subject to low ILUC-risk certification. According to Malaysia, the practical
implementation of this mechanism would be no harder for the E uropean Union than what it often
implements and has implemented in relation to many other agricultural commodities (e.g. bananas,

550 Malaysia's first written submission, para. 658.
551 Malaysia's first written submission, paras. 659-660.
552 Malaysia's first written submission, para. 666.
553 European Union's first written submission, paras. 944-948; and response to Panel question No. 122,
paras. 688-690.
554 European Union's response to Panel question No. 122, para. 690.
555 Malaysia's first written submission, paras. 667-674; and second written submission, para. 214.

sugar, poultry, beef, etc.) through tariff -rate quotas and WTO -compatible import licensi ng
procedures apportioning the quotas to individual producing countries.
7.385. The European Union responds556 that maintaining quotas irrespective of the association of a
certain oil crop biofuel feedstock to a certain advancement into high-carbon stock land would defeat
the purpose of not incentivizing high ILUC -risk feedstocks. The European Union adds that this
alternative of capping imports of high ILUC-risk biofuels at a certain level could be realized either by
a system of import restrictions, which would be a violation of Article XI of the GATT 1994, or de
facto, a system of TRQs coupled with out -of-quota prohibitive tariffs, which would violate the EU
tariff schedule and therefore Article II of the GATT 1994. Therefore this alternative measure would
be WTO-inconsistent and consequently is not available.
7.386. The Panel considers that Malaysia's fourth proposed alternat ive, i.e. maintaining a system
of market access quotas that would allow biofuels containing high ILUC -risk feedstock to count
towards EU renewable energy targets up to the amount consumed in the European Union when the
relevant feedstock exceeded the thres hold for being considered as having a high ILUC risk, as set
out in Article 3 of the Delegated Regulation, would not make an equivalent contribution to the
objective pursued as compared with the high ILUC -risk cap and phase -out. Malaysia's argument
appears to rest on assumptions that the global demand for a particular feedstock (e.g. palm oil)
remains fixed, whether it is used for biofuel production or other applications; that global demand for
the corresponding biofuel (e.g. palm oil -based biofuel) also remains fixed with the exception of EU
demand; and that the only variable that changes in a way that would be relevant to whether the
feedstock (e.g. palm oil) crosses the threshold for being considered as high ILUC-risk is the level for
EU demand for that p articular biofuel (e.g. palm oil -based biofuel. Unless those assumptions are
correct, then there is no basis to make the further assumption that where a relevant feedstock
exceeds the threshold for being considered as having a high ILUC risk, this is the c onsequence of,
or otherwise attributable to, the amount of the corresponding crop -based biofuel that was being
consumed in the European Union at the time that the threshold was exceeded).
7.387. The Panel does not see the basis for these assumptions. It is not the case that the level of
EU demand for a particular biofuel (e.g. palm oil -based biofuel) is the only variable that affects
whether a feedstock crosses the threshold for being considered as high ILUC risk. This is because
one cannot attribute a speci fic share of expansion to a particular driver of demand. 557 To the
contrary, the expansion rate for a given feedstock (e.g. palm oil), which is the basis for the
determination of whether that feedstock is determined to be high ILUC risk, is determined for t he
feedstock as a whole and irrespective of its use (e.g. food, cosmetics, biofuel, or other application),
and is determined globally. The Panel therefore considers that the amount of consumption in the
European Union at a given point in time would not be a good indicator of the extent to which EU
demand for biofuels and palm oil feedstock may cause ILUC.
7.388. The Panel further observes that if Malaysia's argument was correct, such that a capping of
EU demand for palm oil-based biofuel at a certain level should be expected to singularly halt or
reverse the expansion rate of the corresponding feedstock in such a way as to reverse its
classification as high ILUC risk, then this outcome should be expected to occur as a consequence of
the European Union's cap and phase-out of its consumption of palm oil-based biofuel. If this outcome
did materialize, then the review mechanism provided for in Article 7 of the Delegated Regulation
should lead to palm oil-based biofuel no longer being classified as high ILUC risk.
Fifth proposed alternative: a sustainability certification scheme and requirements
modelled on those adopted under CEPA
7.389. Malaysia argues558 that another alternative measure would be "specific import requirements
applied on a consignment basis", by which it means a measure akin to the sustainability certification
scheme and requirements adopted under the Indonesia-EFTA CEPA. Malaysia explains that this trade
agreement contains a Chapter on Trade and Sustainable Development and provides for an article on
"Sustainable management of the vegetable oils sector and associated trade ". In April 2021,

556 European Union's first written submission, paras. 949-953; and response to Panel question No. 122,
paras. 691-697.
557 As further explained in the section addressing Malaysia's claim under Article 2.1 and more specifically
whether the detrimental impact stems exclusively from a legitimate regulatory distinction.
558 Malaysia's first written submission, paras. 675-681.

Switzerland adopted an "Ordinance on Preferential Importation of Sustainable Produced Palm Oil
from Indonesia " that implements Article 8.10 of the Indonesia -EFTA CEPA for Swit zerland, and
Article 2 of the Ordinance lists four certification systems that will be recogni zed as proof of
compliance with the sustainability objectives set out in Article 8.10 of the Indonesia -EFTA CEPA,
namely (a) the RSPO "Identity Preserved" (RSPO IP); (b) the RSPO "Segregated" (RSPO SG); (c)
the ISCC PLUS "Segregated"; and (d) the Palm Oil Innovation Group (POIG) certification combined
with RSPO IP or RSPO SG. Malaysia submits that this alternative approach would also be less trade-
restrictive because, instead of introducing anew a certification system based on an as yet undefined
low-ILUC risk criteria and procedures, "it is based on already available and applied schemes of
certification, which would only need to be enhanced to also address relevant land-use changes".559
7.390. The European Union responds560 that this suggestion by Malaysia seems again to rely on
sustainability criteria which do not encompass ILUC considerations, which comes as no surprise
because Malaysia seems to constantly provide alternatives without considering the ILUC approach,
together with the low ILUC-risk possibility. The European Union states that it would welcome clear
explanations on how its concerns are addressed by this suggested "alternative", as the only
reference to ILUC in Malaysia's submissions is to the fact that its proposal "is based on already
available and applied schemes of certification, which would only need to be enhanced to also address
relevant land-use changes".561 The European Union recalls that the RED certification regime also
applies on a consignment basis and also addresses sustainability criteria. The European Union states
that "[u]nfortunately, it is irrelevant to ILUC and that is why additional considerations refined the
European Union's approach."562
7.391. The Panel observes that Malaysia's fifth proposed alternative measure, i.e. a sustainability
certification scheme and requirements modelled on those adopted under the Indonesia-EFTA CEPA,
appears to be unrelated to the specific objective pursued by the 7% maximum share and the high
ILUC-risk cap and phase -out. This proposed alternative, like the first, second and third proposed
alternatives, also appears to be directed at DLUC associated with the production of individual
consignments of crop-based biofuels, as opposed to constituting an alternative measure that would
make an equivalent contribution to its chosen objective of limiting the risk of ILUC-related GHG
emissions associated with crop-based biofuels. The Panel considers that for the same reasons given
in respect of the first, second, and third proposed alternatives, the fifth alternative appears to be
complementary, and not a genuine alternative, to the EU measures at issue.
Sixth proposed alternative: the EU approach applied i n its deforestation -free
initiative
7.392. In its first written submission, Malaysia refers to the legislative proposal by the Commission
for its initiative on deforestation -free supply chains.563 Malaysia argues that "[t]he policy choice of
the EU in this instanc e, if confirmed in the measure that will eventually be adopted, is a DLUC
approach, which vindicates the suggestion made above in terms of the available alternatives (e.g.,
FLEGT and IUU schemes)."564 According to Malaysia, "[g]iven that the European Commission intends
to specifically address 'deforestation caused by agricultural expansion' through future policy
instruments based on a DLUC approach, this would render the EU's rationale for ILUC under the RED
II obsolete."565 In its second written submission, Malaysia identifies the deforestation-free initiative
as an additional alternative measure. 566 Malaysia argues that unlike the measures at issue, this
alternative measure does not provide for the exclusion of an entire crop, but only prohibits the
placing on the EU market of the specific products that have contributed to deforestation and foresees
related due diligence obligations for operators.

559 Malaysia's first written submission, para. 679.
560 European Union's first written submission, paras. 954-960; and response to Panel question No. 122,
para. 698.
561 Malaysia's first written submission, para. 679.
562 European Union's first written submission, para. 959.
563 Malaysia's first written submission, paras. 75, 634, and 688-689.
564 Malaysia's first written submission, para. 689.
565 Malaysia's first written submission, para. 689.
566 Malaysia's second written submission, paras. 228-230.

7.393. The European Union responds567 that differences in scope and approach between that newly
proposed instrument and the measures at issue make clear that it is not itself a reasonably available
alternative measure. According to the European Union, the deforestation initiative is "radically
different from RED II, the Delegated Regulation and the Status Rep ort", and such differences have
important implications for the purported alternatives. 568 The European Union submits that it has
explained in detail why the sustainability criteria applying a DLUC approach were not sufficient to
address ILUC, and that the sustainability criteria found in Article 29 RED II do not address ILUC.
7.394. The Panel observes that Malaysia's sixth proposed alternative measure i.e. prohibiting the
placing on the EU market of the specific products that have contributed to deforestation based on
the "DLUC" approach reflected in the EU deforestation initiative , may be understood as being
indirectly related to the specific objective pursued by the 7% maximum share and the high ILUC -
risk cap and phase -out. The Panel accepts that the ILUC of one agricultural activity is always the
DLUC of another agricultural activity. The Panel therefore accepts that a comprehensive system of
regulating the DLUC-related impact of products other than biofuels, including DLUC in the form of
deforestation, could potentially contribute to limiting the risk of ILUC-related GHG emissions
associated with crop-based biofuels.
7.395. However, such a measure would not negate or render redundant or immaterial the
contribution that the 7% maximum share and the high ILUC -risk cap and phase -out make to the
objective of limiting the risk of ILUC-related GHG emissions associated with crop-based biofuels. The
reason is that only a fraction of the agricultural products produced in the world are imported to and
consumed in the European Union and would therefore be subject to the EU deforestation -free
initiative. Thus, for this measure to be a real alternative that would be capable of rendering the EU
rationale for limiting ILUC-related GHG emissions associated with crop-based biofuels "obsolete",569
at a minimum all countries in the world would have to create and administer the same scheme. Until
such time as all countries adopt a uniform scheme to regulate the DLUC of all agricultural products
and ban any further crop expansion into non-agricultural land, measures like the deforestation-free
initiative will remain a complementary measure, and not a genuine alternative, to the 7% maximum
share and the high ILUC-risk cap and phase-out.
7.1.2.3.6.3 Conclusion on the proposed alternative measures
7.396. The Panel finds that none of the alternative measures put forward by Malaysia demonstrate
that the 7% maximum share a nd the high ILUC-risk cap and phase-out are more trade-restrictive
than necessary to limit the risk of ILUC-related GHG emissions associated with crop-based biofuels.
7.1.2.3.7 Conclusion on Article 2.2
7.397. The Panel therefore concludes that Malaysia has failed to establish that the 7% maximum
share and the high ILUC-risk cap and phase-out are inconsistent with the obligation in Article 2.2 of
the TBT Agreement to ensure that technical regulations are not more trade -restrictive than
necessary to fulfil a legitimate objective.
7.398. One panelist has reached a different conclusion, as set out in section 7.4 of this Report.
7.1.2.4 Article 2.1 - Non-discrimination
7.1.2.4.1 Introduction
7.399. The Panel now turns to the claim under Article 2.1 of the TBT Agreement. The Panel
addresses this claim in light of its findings under Articles 2.2 and 2.4, for reasons already set out in
the Panel's discussion of its order of analysis.

567 European Union's first written submission, paras. 905-917; and response to Panel question No. 122,
paras. 682-684.
568 European Union's first written submission, paras. 916-917.
569 Malaysia's first written submission, para. 689.

7.400. Malaysia submits570 that the European Union violates the national treatment and the MFN
obligations under Article 2.1 because the high ILUC-risk cap and phase-out discriminates between
oil palm crop -based biofuel from Malaysia and like oil crop -based biofuel of EU origin, as well as
among like oil crop-based biofuels of different foreign origin. More specifically, Malaysia claims that
the high ILUC-risk cap and phase-out limits and eventually excludes the eligibility of palm oil-based
biofuel to count towards EU renewable energy targets, while allowing biofuel made from rapeseed
oil and soybean oil to count towards these targets within the 7% maximum share. Malaysia argues
that the detrimental impact on palm oil -based biofuel does not stem from a legitimate regulatory
distinction.
7.401. The European Union submits571 that the challenged measure does not discriminate against
imported products and that any difference in treatment between products stems exclusively from a
legitimate regulatory distinction. More specifically, the European Union contests that palm oil -,
rapeseed oil- and soybean oil-based biofuels are like products or that the measure adversely affects
the competitive opportunities for palm oil-based biofuel on the EU market. The European Union adds
that, in any event, any detrimental impact on palm oil -based biofuel stems exclusively from a
legitimate regulatory distinction bas ed on the risk of ILUC -related GHG emissions associated with
the production of palm oil.
7.1.2.4.2 Legal standard
7.402. Article 2.1 sets forth the obligation that:
Members shall ensure that in respect of technical regulations, products imported from
the territory of any M ember 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.
7.403. Article 2.1 has been interpreted and applied in a number of prior cases, and both parties
present their respective understandings of the applicable legal standard with reference to these prior
cases.
7.404. According to the text of Article 2.1, it must be established in respect of a technical regulation
that:
a. the imported products are like domestic products and/or products originating in other
countries; and
b. the treatment accorded to imported products is less favourable than accorded to like
domestic products and like products from other countries.572
7.405. Regarding the last element of this legal test, a panel considering a claim under Article 2.1
should seek to ascertain "whether the technical regulation at issue modifies the conditions of
competition in the relevant market to the detriment of the group of imported products vis-à-vis the
group of like domestic products or like products originating in any other country ".573 However, a
finding of a detrimental impact alone is not dispositive of less favourable treatment under Article 2.1.
Instead, when assessin g a claim under this provision a panel must further analyse whether the
detrimental impact on imported products stems exclusively from a legitimate regulatory
distinction.574

570 Malaysia's first written submission, paras. 522-585; second written submission, paras. 240-244;
responses to the Panel's questions, pp. 46-55 and 57-69; and comments on the European Union's responses to
the Panel's questions, pp. 160-168 and 172-182.
571 European Union's first written submission, paras. 599-769; second written submission, paras. 60-
101; responses to the Panel's questions, paras. 437-465, 471-474, 476-482 and 484-517; and comments on
Malaysia's responses to the Panel's questions, paras. 184-198 and 211-222.
572 Appellate Body Reports, US – Clove Cigarettes, para. 87; US – COOL, para. 267; and US – Tuna II
(Mexico), para. 202.
573 Appellate Body Reports, US – Tuna II (Mexico), para. 215; and US – Clove Cigarettes, para. 180.
574 Appellate Body Reports, US – Clove Cigarettes, para. 182; US – Tuna II (Mexico), para. 215; US –

7.406. As a general matter, the parties do not contest the legal standard developed under
Article 2.1.575 In the absence of any disagreement between the parties, the Panel proceeds on the
same understanding of the applicable legal standard.
7.407. The Panel will therefore elaborate further on the elements of the legal standard as necessary
in the course of its assessment of the issues in dispute.
7.1.2.4.3 Like products
7.408. Malaysia submits that the high ILUC-risk cap and phase-out discriminates against palm oil-
based biofuel, which is like other oil crop-based biofuels, in particular those made from rapeseed oil
and soybean oil.576 Malaysia argues that all three types of oil crop-based biofuels share the same or
similar basic physical characteristics and end -uses, and that this similarity is also reflected in
consumer tastes and habits as well as in the tariff classification.577
7.409. The European Union contends that Malaysia has failed to properly identify the universe of
like products by unduly limiting the scope of the likeness analysis to palm oil -, rapeseed oil - and
soybean oil-based biofuels.578 The European Union further contests that palm oil -based biofuel is
like biofuel made from rapeseed oil or soybean oil due to different physical characteristics, end-uses
or consumer tastes and habits. 579 The European Union also makes an alternative argument that if
the Panel were to find rapeseed oil- and soybean oil-based biofuels to be like palm oil-based biofuel,
then other biofuels made from sunflower oil, waste material and animal fat would also be like
products.580
7.1.2.4.3.1 Preliminary considerations
7.410. The Panel considers it useful to briefly explain at the outset certain characteristics of biofuels,
and related terminology, that are relevant to the analysis that follows. The Panel then turns to the
disputed issue of whether, for the purposes of the likeness analysis in this claim, Mala ysia has
properly identified the "universe of like products ".581 After setting forth these preliminary
considerations, the Panel turns to the disputed issue of whether palm oil-, rapeseed oil- and soybean
oil-based biofuels are like products.
Characteristics of biofuels
7.411. The general category of oil crop -based biofuels refers to biofuels that are made from
vegetable or tropical oils obtained from various food and feed crops, including oil palm, soybean,
rapeseed, sunflower, etc. 582 They undergo a process calle d transesterification, which consists of
mixing the fatty acids in oil of vegetable or animal origin with alcohol and a catalyst. 583 Biofuel
produced through this method is called biodiesel and has a chemical composition of a fatty acid
methyl ester (FAME).584 Biodiesel (or FAME) made from palm oil is called palm methyl ester (PME);

575 Malaysia's first written submission, para. 524; European Union's first written submission, para. 601.
In its third-party submission, the United States expresses the view that the legal standard developed under
Article 2.1, and in particular the requirement that any detrimental impact on imported products "stem
exclusively from" a legitimate regulatory distinction, has no basis in the text of the TBT Agreement and
significantly narrows the scope of regulatory action permitted under the Agreement. In its view, a measure is
not inconsistent with Article 2.1 or Article III:4 if the detrimental impact experienced by imports is explained
by factors unrelated to the foreign origin of the product. (United States' third-party submission, paras. 11-20).
576 Malaysia's first written submission, para. 536.
577 Malaysia's first written submission, paras. 536-546; responses to Panel questions Nos. 75-85; and
comments on the European Union's response to Panel question No. 81.
578 European Union's first written submission, paras. 610-628; and second written submission, para. 69.
579 European Union's first written submission, paras. 630-676; second written submission, paras. 70-74;
and responses to Panel question Nos. 84-85.
580 European Union's second written submission, paras. 615 and 621.
581 The Panel's finding in this regard will also be relevant for the assessment of other claims of
discrimination made by Malaysia, where the European Union raises the same issue.
582 UFOP Global Market Supply 2019/2020, (Exhibits EU-121, MYS-212), p. 27.
583 European Technology and Innovation Platform, "Transesterification to biodiesel", (Exhibit MYS-113),
p. 2. Feedstocks for the production of biodiesel include not only vegetable oils, but also other feedstocks of
organic origin, such as used cooking oil (UCO) or animal fat.
584 This is the case if methanol is used as the catalyst. European Technology and Innovation Platform,
"Transesterification to biodiesel", (Exhibit MYS-113), p. 2.

when made from rapeseed oil is called rapeseed methyl ester (RME); and when made from soybean
oil is called soybean methyl ester (SBME).585
7.412. Biodiesel can also be made from animal fat and waste material, such as used cooking oil.586
Biodiesel, frequently a mix of various biofuels, is blended with diesel, which is then sold as transport
fuel. Biodiesel should be distinguished from bioethanol, which is made from sugar -rich and starch-
rich crops through the fermentation process of sugars contained in these plants.587 Unlike biodiesel,
bioethanol is mixed with petrol.
7.413. Oil crops are also used as feedstocks for the production of hydrotreated vegetable oil (HVO)
or biomass-to-liquids biofuels (BTL). HVO is produced through the process of hydrogenation,
whereby oxygen is separated from the triglyceride of the oil through the use of hydrogen.588 Unlike
biodiesel, the chemical composition of HVO is similar to diesel fuel . As a result, HVO is particularly
suitable to replace diesel fuel and it is sometimes referred to as "renewable diesel " or "green
diesel".589 In order to produce BTL, biomass is converted to syngas through decomposition and
gasification, which is then cata lytically converted into alkanes through the Fischer -Tropsch
synthesis.590
Identification of the universe of like products
7.414. Malaysia's claim under Article 2.1 concerns the treatment of imported palm oil-based biofuel
as compared with the treatment of like rapeseed oil- and soybean oil-based biofuel of EU or foreign
origin. Although Malaysia refers in its submissions in general terms to "oil crop-based biofuels", it
confirms that the focus of its claim is the treatment of PME, as compared to RME and SBME, whic h
it refers to interchangeably with oil palm crop -based biofuel, rapeseed oil crop -based biofuel and
soybean oil crop-based biofuel.591Malaysia further explains that HVO can be made from all oil crop
biofuel feedstocks interchangeably.592
7.415. The European Union takes issue with Malaysia's identification of the universe of like products.
According to the European Union, Malaysia has unduly limited the likeness analysis to a subset of
biofuels that "according to [Malaysia's] own logic should have been included in t he universe of like
products".593 Relying on the Appellate Body's ruling in US – Clove Cigarettes, the European Union
submits that a proper likeness analysis should involve the "universe" of like products, going beyond
the products identified by Malaysia. 594 This universe is determined, based on the competitive
relationship between and among products and extends beyond palm oil-, rapeseed oil- and soybean
oil-based biofuels.595 According to the European Union, Malaysia fails to explain the exclusion from
the likeness analysis of a number of products, such as HVO and biofuels made from certain other
vegetable and tropical oils, animal fat and waste material. 596 The European Union submits that
comparing the treatment of only certain selected like products distorts the outcome of the analysis
by failing to reflect the measure's overall impact on like products imported from Malaysia and like

585 Soybean methyl ester oil is also sometimes abbreviated as "SME". In this dispute, the Panel uses the
term SBME to avoid confusion with sunflower methyl ester.
586 European Technology and Innovation Platform, "Transesterification to biodiesel", (Exhibit MYS-113),
p. 2.
587 T. Seljak, M. Buffi, A. Valera-Medina, C.T. Chong, D. Chiaramonti, T. Katrasnik, "Bioliquids and their
use in power generation – A technology review", Renewable and Sustainable Energy Reviews 129 (2020)
109930, (Exhibit EU-261), p. 6.
588 Greenea, "Is HVO the Holy Grail of the world biodiesel market?", (Exhibit MYS-14), p. 2.
589 Greenea, "Is HVO the Holy Grail of the world biodiesel market?", (Exhibit MYS-14), p. 2.
590 Greenea, "Is HVO the Holy Grail of the world biodiesel market?", (Exhibit MYS-14), p. 2.
591 Malaysia's responses to Panel question No. 75 and comments on the European Union's responses to
Panel question No. 81.
592 Malaysia's response to Panel question No. 75.
593 European Union's first written submission, paras. 612 and 628.
594 European Union's first written submission, paras. 608-609; and comments on Malaysia's response to
Panel question No. 83, para. 194 (referring to Appellate Body Report, US – Clove Cigarettes, paras. 191-192).
595 European Union's first written submission, paras. 609-624; and comments on Malaysia's response to
Panel question No. 83, para. 194.
596 European Union's first written submission, paras. 613-618 and 624-625.

products of EU and foreign origin. 597 In that respect, the European Union points out that palm oil -
based HVO represents up to 10% of EU-produced biodiesel.598
7.416. Malaysia rejects the European Union's argument that it has incorrectly identified the like
products to be compared. 599 According to Malaysia, it is appropriate to focus the analysis of like
products on the three types of biofuels, namely those made from palm oil, rapeseed oil and soybean
oil, whether in the form of FAME or HVO.600 Malaysia maintains that sunflower oil has been used only
marginally to produce biofuel in EU member States and omitting that product from the analysis is
clearly reasonable.601
7.417. The Panel considers that a complainant has a degree of leeway in how it frames its claim
under Article 2.1, including the identification of the imported and domestic products to compare.
However, this does not mean that a complainant's choice of products to compare for the purposes
of a likeness analysis is free of any scrutiny. It cannot be excluded that in particular factual
circumstances a complainant might identify only an artificially defined subset of like p roducts to
compare in a manner that could distort the picture of the adverse impact of the measure on the
groups of like products as it has defined them. This seems to be the concern that was recognized by
the Appellate Body in US – Clove Cigarettes, which the European Union relies on602, when stating
that "a panel is not bound by its terms of reference to limit its analysis to those products identified
by the complaining Member".603 Accordingly, a panel must be able to look beyond the like products
identified by the complainant to determine which domestic products and products of foreign origin
are in a sufficiently close competitive relationship with the products imported from the complaining
Member to be considered like.604
7.418. However, the Panel does not consid er that Malaysia's identification of the products to
compare for the purposes of its claim under Article 2.1 is geared towards artificially skewing the
outcome of the assessment. It is uncontested by the parties that the European Union's imports of
biofuel from Malaysia consists exclusively of oil palm crop -based biofuel, and more specifically
PME.605 Nor do the parties contest that the European Union produces and imports from other
countries biofuel made from rapeseed oil, soybean oil and palm oil. 606 Under these circumstances,
and especially given that Malaysia does not produce on a commercial scale biofuel made from other
feedstocks than palm oil, it is not clear how including biofuels made from other feedstocks than palm
oil, rapeseed oil and soybean oil i n the assessment of less favourable treatment would artificially
skew the outcome of the assessment.607
7.419. The Panel further considers inapposite the European Union's reliance on the Appellate Body
report in US – Tuna II (Mexico) (Article 21.5 – Mexico), which, in the European Union's view, stands
for the proposition that a likeness analysis must comprise the "universe of like products".608 In that
dispute, the Appellate Body faulted the panel not for a failure to assess whether all products that
are potentially in a competitive relationship are like, but for limiting the comparison of the treatment
accorded by the measure to a subset of the products the panel found to be like .609 The
Appellate Body's findings thus concern a different type of situation and do not support the

597 European Union's first written submission, para. 619.
598 European Union's first written submission, para. 618.
599 Malaysia's first written submission, para. 59; and second written submission, para. 240.
600 Malaysia's second written submission, para. 60.
601 Malaysia's second written submission, para. 61.
602 Appellate Body Report, US – Clove Cigarettes, paras. 191-194.
603 Appellate Body Report, US – Clove Cigarettes, para. 191.
604 Appellate Body Report, US – Clove Cigarettes, para. 191.
605 Malaysia's response to Panel question No. 83, pp. 52-53; European Union's first written submission,
paras. 1168-1172.
606 Malaysia's response to Panel question No. 83; European Union's response to Panel question No. 83,
para. 457.
607 The Appellate Body arrived at a similar conclusion in US – Clove Cigarettes based on the factual
circumstances established by the panel. (Appellate Body Report, US – Clove Cigarettes, para. 200.)
608 European Union's first written submission, para. 612.
609 Although, the panel found that US tuna products and tuna products originating in other countries are
like, the panel considered the impact of the measure only on Mexican tuna products made from tuna caught
through other methods than setting on dolphins with the impact of the measure on US or other origin tuna
products made from tuna caught through other methods than setting on dolphins. (Appellate Body Report, US
– Tuna II (Mexico) (Article 21.5 – Mexico), para. 7.70.)

European Union's contention that a complainant is obliged, as a general matter, to identify the
"universe of like products".
7.420. The Panel notes that the European Union argues that, if the Panel were to find rapeseed oil-
and soybean oil -based biofuel to be like palm oil -based biofuel, then other biofuels made from
sunflower oil, waste material and animal fat would also be like products. 610 However, the Panel
considers that the European Union has not substantiated this contention with sufficient arguments
or evidence. The European Union refers in general terms to certain characteristics of HVO, references
findings in a merger decision and a trade defence measure that HVO and FAME are interchangeable,
refers to a US government report finding that FAME faced strong competition from HVO and relies
on data showing an increase in the use of waste material and animal fat as biofuel feedstock to
argue that they compete with PME, SBME and RME.611 Other than that, however, the European Union
fails to seriously engage in a discussion on whether any of these products is like palm oil -based
biofuel.
7.421. The Panel concludes that for the purposes of its claim under Article 2.1, Malaysi a may limit
the scope of its "like products" demonstration to a comparison of biofuels made from rapeseed oil
and soybean oil with palm oil-based biofuel as regards both FAME and HVO.
7.1.2.4.3.2 The likeness analysis
7.422. The parties agree that similarly to Articles I:1 a nd III:4, the likeness analysis under
Article 2.1 entails a determination of the "nature and extent of a competitive relationship between
and among products".612 Both parties also rely in their submissions on four criteria relevant for the
assessment of like products:
a. physical properties of the products;
b. the extent to which the products can serve the same or similar end-uses;
c. consumers' perception of the products as alternatives; and
d. the tariff classification of the products.613
7.423. Indeed, when called upon to as sess whether products are like in the context of non -
discrimination obligations, panels and the Appellate Body have frequently relied on the above-listed
four criteria developed in the Report of the Working Party on Border Tax Adjustments.614 They have
done so when considering claims under Articles I:1 and III of the GATT 1994, and also when
considering claims under Article 2.1 of the TBT Agreement.615
7.424. The Panel will follow the same general approach, bearing in mind that the notion of "like
products" may vary depending on the specific obligation at issue616 and that the four likeness criteria
are neither "treaty-mandated" nor a "closed list of criteria" for determining the legal characterisation
of products.617 The Panel's determination whether products are like thus has to be based on all of
the pertinent evidence relating to each of the four criteria, none of which is determinative for the
Panel's conclusion.618 The Panel should consider them in a holistic manner, while remaining mindful
that:

610 European Union's second written submission, paras. 614-615 and 621.
611 European Union's first written submission, paras. 615-622, and response to Panel question No. 81,
para. 449.
612 Malaysia's first written submission, para. 528 (referring to Appellate Body Report, US – Clove
613 Malaysia's first written submission, para. 530 (referring to Appellate Body Report, EC – Asbestos,
614 Appellate Body Report, EC – Asbestos, para. 85; Panel Report, US – Clove Cigarettes, para. 7.121.
615 Appellate Body Report, US – Tuna II (Mexico) (Article 21.5 – Mexico), para. 7.281
616 Appellate Body Reports, Japan – Alcoholic Beverages II, p. 21; EC – Asbestos, para. 102; and
Panel Report, US – Clove Cigarettes, para. 7.122.
617 Appellate Body Report, EC – Asbestos, para. 101.
618 Appellate Body Report, EC – Asbestos, paras. 101-103. See also Ecuador's third-party submission,
pp. 17-18.

In many cases, the evidence will give conflicting indications, possibly within each of the
four criteria. For instance, there may be some evidence of similar physical properties
and some evidence of differing physical properties. Or the physical properties may differ
completely, yet there may be strong evidence of similar end uses and a high degree of
substitutability of the products from the perspective of the consumer.619
7.425. The overarching question is thus whether the degree of competition between the products
is sufficiently close to regard them as like. The Appellate Body recognized in this regard that "[t]here
is a spectrum of degrees of "competitiveness" or "substitutability" of products in the marketplace,
and that it is difficult, if not impossible, in the abstract, to indicate precisely where on this spectrum
the word like in Article III:4 of the GATT 1994 falls". 620 The Appellate Body also found that "Article
2.1 requires the panel to identify the domestic 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".621
7.426. Having recalled the applicable legal principles that will guide its analysis, the Panel turns to
the analysis of various aspects of the competitive relationship between palm oil -based biofuel and
rapeseed oil- and soybean oil-based biofuel.
Physical properties
7.427. Malaysia submits that PME, RME and SBME share a number of similar physical characteristics
and have the same chemical structure of FAME. 622 With respect to the CFPP, Malaysia argues that
"any difference in FAME’s CFPP values can easily be compensated either by mixing different types
of biodiesels or by using a dditives in pure biodiesel, in particular during wintertime". 623 The
European Union argues that the characteristics relevant to assessing whether palm oil-based biofuel,
rapeseed oil -based biofuel and soybean oil -based biofuel are like include the CFPP, the cetane
number and the iodine value.624 The European Union considers that Malaysia has failed to explain if
the FAME blends used in Northern Europe include palm oil at all and how many countries are
concerned and if palm oil based biofuel can fully replace other biofuels in FAME blends in Southern
Europe.625
7.428. The Panel observes that biodiesel, or FAME, is characterized by the basic chemical
composition of monoalkyl esters of long -chain fatty acids derived from vegetable oils or animal
fats.626 The exact chemical composition of this type of biofuel is dependent on the fatty acid
composition of the feedstock and determines some of the fuel's properties.627 However, the fact that
the three biodiesel fuels are made from different feedstocks could only be rele vant to the Panel's
analysis insofar as it affects the competitive relationship between the final products.628
7.429. It is uncontested between the parties that PME, RME and SBME share the basic chemical
composition of FAME. Where the parties' views differ is the significance of the differences in certain
specific properties of the three biofuels. For the purposes of addressing these arguments, Table 3
provides an overview of the various relevant biofuels' basic physical and chemical properties,
followed by a brief explanation provided by Malaysia.
Table 3: Physical properties of PME, RME and SBME629
Properties PME RME SBME
CN 62 56-61 48-56
ΔH (kJ kg-) 37400-38320 37300-37780 39720-40080

619 Appellate Body Report, EC – Asbestos, para. 120.
620 Appellate Body Report, EC – Asbestos, para. 99.
621 Appellate Body Report, US – Clove Cigarettes, para. 191.
622 Malaysia's first written submission, para. 537.
623 Malaysia's second written submission, para. 70.
624 European Union's response to Panel question No. 81, paras. 451-454.
625 European Union's first written submission, para. 648.
626 Moser, "Biodiesel Production, Properties, and Feedstocks", (Exhibit MYS-119), p. 286.
627 Moser, "Biodiesel Production, Properties, and Feedstocks", (Exhibit MYS-119), p. 287.
628 Panel Reports, Philippines – Distilled Spirits, para. 7.37.
629 Malaysia's first written submission, para. 537.

Properties PME RME SBME
CP(°𝐶) 15 ± 1 0 ± 1 1± 1
PP(°𝐶) -9 ± 1 -9 ± 1 -5 ± 1
CFPP(°𝐶) 12 ± 1 -7 ± 1 -4 ± 1
OSI(h) 10.3± 0.1 6.4 ± 0.1 5.0 ± 0.1
V (mm-2s-1) 4.58 ± 0.01 4.42 ± 0.01 4.12 ± 0.01
lub (μm) 126 ± 1 169 ± 1 136 ± 3
AV (mg of KOH g-1) 0.01 ± 0.01 0.01 ± 0.01 0.04 ± 0.01
Iodine value 54 110 134

7.430. Malaysia explains the different characteristics of biodiesel as follows:
Cetane number (CN) is the ability of fuel to ignite quickly after injection. The higher
value the better [ignition] of fuel. This is an important parameter considered during
selection of FAMEs for use as biodiesel. CN is included in a fuel quality specification in
petroleum diesel standard. CN of oil palm crop -based biodiesel is higher than that of
the standard number (>51), because palm oil and palm kernel oil are rich in saturated
fatty acids. The [cold flow properties include] three important parameters for low
temperature characteristics of biodiesel fuel, namely, CP (cloud point), PP (pour point)
and CFPP (cold filter plugging point). At the cloud point (CP), the crystals first become
visible as cloud when fuel is cooled under the conditions described by ASTM D2500 -09
or ISO 3015:1992. The pour point (PP) is the lowest temperature at which fuel can flow
and the amount of wax that crystallizes is sufficient to gel the fuel. Viscosity (V) is one
of the most important properties of biodiesel. Viscosity influences the ease of starting
the engine, the spray quality, the size of the particles (drops), the penetration of the
injected jet and the quality of the fuel -air mixture combustion. Fuel viscosity has both
an upper and a lower limit. Fuel with a too low viscosity provides a very fine spray, the
drops having a very low mass and speed. This leads to insufficient penetration and the
formation of black smoke specific to combustion in the absen ce of oxygen (near the
injector). A too viscous biodiesel leads to the formation of large drops, which will
penetrate the wall opposite to the injector. Lubricity describes the ability of the fuel to
reduce the friction between surfaces that are under load . This ability reduces the
damage that can be caused by friction in fuel pumps and injectors. Lubricity is an
important consideration when using low and ultra -low sulfur fuels. Biodiesel may be
used as a lubricity improver. Biodiesel quality can be affecte d by oxidation during
storage (in contact with air) and hydrolytic degradation (in contact with water). The two
processes can be characterised by the oxidative stability and hydrolytic stability of the
biodiesel. Biodiesel oxidation can occur during storag e while awaiting distribution or
within the vehicle fuel system itself. The stability of biodiesel can refer to two issues:
long-term storage stability or aging and stability at elevated temperatures or pressures
as the fuel is recirculated through an engi ne's fuel system. The iodine value is a
measurement of total unsaturation of fatty acids measured in g iodine/100 g of biodiesel
sample, when formally adding iodine to the double bonds. Biodiesel with high iodine
value is easily oxidized in contact with air.630
7.431. In the Panel's view, it follows from the above overview that a number of physical
characteristics of PME, RME and SBME, while not identical, are similar. This includes the properties
particularly relevant to the products' nature as a biofuel, such as viscosity, density, and flash point.
The Panel notes that the European Union does not explain why properties other than CFPP, cetane
number and iodine value would not be relevant to the assessment whether the biofuels at issue are
like. Ignoring these similarities, would run counter to the established practice of holistically assessing
whether two or more products are like based on the totality of evidence before the Panel.631 Finally,
the Panel will consider the significance of the differences in certain physical properties, such as CFPP,
when assessing their impact on end-uses and consumer perceptions of PME, RME and SBME.

630 Malaysia's first written submission, fn 393.
631 Appellate Body Reports, EC – Asbestos, para. 114.

End-uses
7.432. Having considered the physical properties of biofuels, the Panel now turns to the main
disputed issues pertaining to the second criterion, which is the extent to which the different products
can serve the same or similar end-uses.632
7.433. The core differences that are the focus of the parties' arguments relate to the cold flow
properties, in particular the CFPP, as well as the iodine value and cetane number. Malaysia argues
that such differences do not signific antly affect the competitive relationship between the three
biofuels, especially because they are usually blended together and into diesel fuel.633 Malaysia adds
that it does not need to show that the products are suitable for all consumers or that they act ually
compete in the entire market. 634 The European Union submits that the differences in the
characteristics of PME, RME and SBME, especially with regard to cold flow properties, are material
and affect their end-uses.635
7.434. The Panel notes that the parties do not dispute that PME, RME and SBME are all primarily
used as biofuel mixed with diesel transport fuel, in addition to certain other applications. 636 Where
the parties disagree is the extent of substitutability between the three types of biofuel.
7.435. The European Union argues that due to a higher CFPP value of PME, its substitutability with
RME and SBME is limited, including when blended. 637 The European Union relies in this regard on
the EU and EU member States' standards setting out the CFPP requirements for FA ME. The
European Union points out that the FAME 0 blend with a CFPP of 0°C, the most common biofuel
blend on the EU market, can contain no more than 20% of PME. 638 The European Union further
submits that the use of PME as biofuel is very low in certain EU member States with colder climates,
such as Austria, Denmark or the Czech Republic.639
7.436. Malaysia maintains that any differences in cold flow properties could be addressed either
through mixing with other biofuels or additives. 640 Malaysia points out in this r egard that the
European Commission's findings in an anti-dumping investigation into the imports of biodiesel from
the United States considered the differences in CFPP to be "minor" and could "easily be compensated
either by mixing different types of biodiesel or by using additives".641
7.437. The Panel considers that the evidence submitted by the parties confirms that low -
temperature operability is an important factor to be considered for the use of biofuel in diesel engines
in colder climates.642 The CFPP is the l owest temperature at which a given volume biodiesel flows
through a wire mesh filter.643 Below that temperature, solid particles crystalize in the fuel and plug

632 The Panel notes that evidence relating to certain aspects of a product could be relevant to more than
one likeness criterion, and the physical property of a product may "shape and limit" its end-uses
(Appellate Body Reports, US – Clove Cigarettes, para. 126; and EC – Asbestos, para. 102.) To the extent that
the physical properties of PME, RME and SBME "shape and limit" their end-uses, the Panel's assessment of the
other likeness criteria will be of particular relevance for determining the significance of the similarities and
differences in the products' physical properties.
633 Malaysia's first written submission, para. 538; and response to Panel question No. 85, p. 55.
634 Malaysia's first written submission, para. 534. (referring to Appellate Body Reports, US – Clove
635 European Union's first written submission, paras. 644-656.
636 Malaysia's first written submission, para. 540. European Union's response to Panel question No. 77,
para. 439.
637 European Union's first written submission, para. 645. Although the European Union makes these
arguments in the context of the products' physical properties, the Panel understands that to the extent that
they concern the use of biofuels in FAME blends in different countries, they are equally relevant to the
products' end-uses.
638 European Union's first written submission, para. 649.
639 European Union's first written submission, para. 658.
640 Malaysia's first written submission, paras. 146-147.
641 Malaysia's first written submission, para. 538 (referring to Commission Regulation (EC) 193/2009,
(Exhibit EU-134)).
642 Moser, "Influence of Blending Canola, Palm, Soybean, and Sunflower Oil Methyl Esters on Fuel
Properties of Biodiesel", (Exhibit EU-138), p. 4304.
643 Moser, "Biodiesel Production, Properties, and Feedstocks", (Exhibit MYS-119), p. 301.

the fuel filter, rendering the engine inoperable.644 As a result, and as argued by the European Union,
PME is less commonly used as biofuel in colder climates than RME and SBME and, by implication,
not fully substitutable with the latter two products in certain geographical areas. 645 However, in
other areas, such as western and southern Europe (including France, Netherlands, Spain, and Italy),
PME is more frequently used.646 The Panel notes in this regard that the measure at issue does not
distinguish between different parts of the European Union, but applies uniformly to the entirety of
its territory.
7.438. In addition the Panel observes that biofuels are commonly used with various additives such
as flow improvers enhancing the operability of biofuels and the scope of the degree of substitution.647
The Panel notes the European Union's argument that blending biofuels or mixing them with additives
to obtain fuel suitable for use in transport in certain conditions suggests that they have different
properties and qualities.648 The Panel cannot, however, ignore the fact that PME, RME, and SBME,
even if combined with additives, all are used nearly exclusively for transport fuel. Moreover, the
Panel notes that in warmer climates, PME, RME and SBME are nearly perfect substitutes and
demonstrate a very high degree of competition.
7.439. Regarding the differences in the cetane number, which reflects the fuel's ability to ignite,
studies and research papers submitted by the parties show that some quantities of SBME can in fact
meet the minimum value prescribed by the EU standard EN 14214.649 In addition, the cetane number
of SBME can be increased through a specific design of the distillation process or the use of so-called
cetane boosters.650
7.440. As for the iodine value, which relates to fuel's oxidation stability, the eviden ce relied on by
the European Union confirms that SBME does not comply with the iodine value in the EU standard
EN 14214 for biodiesel, but notes that "the incentives persist to maximize the use of S[B]ME and
PME due to their lower cost ".651 This indicates t hat PME, RME and SBME compete as biofuels
regardless of the differences in the iodine values. The Panel also notes that in the context of a trade
remedy investigation, the European Union itself found that iodine values of rapeseed oil and soybean
oil (which determine the iodine value of the biofuel) "correlate to some extent".652
7.441. Indeed, both PME and SBME have been imported into and produced in the European Union
in significant quantities primarily for the use as biofuel. 653 This would not have been the case had

644 Moser, "Influence of Blending Canola, Palm, Soybean, and Sunflower Oil Methyl Esters on Fuel
Properties of Biodiesel", (Exhibit EU-138), p. 4304.
645 Biofuel supply data reported under the Fuel Quality Directive and submitted by the European Union
shows that PME was either not supplied as fuel at all, or supplied in limited quantities, in Austria (3.2% of total
FAME), the Czech Republic (0.8% of total FAME) and Denmark (none). (See Austria's reporting under Article 7a
of the Fuel Quality Directive for 2019, (Exhibits EU-141, p. 56); Czech Republic's reporting under Article 7a of
the Fuel Quality Directive for 2019, (Exhibit EU-142), pp. 56-57; and Denmark's reporting under Article 7a of
the Fuel Quality Directive for 2018, (Exhibit EU-143), pp. 56-71.
646 USDA FAS, "GAIN Biofuels Annual: EU-28", 15 July 2019, (Exhibit EU-128), p. 31.
647 Arbeitsgemeinschaft Qualitätsmanagement Biodiesel e.V., "Cold Properties of Biodiesel", (Exhibit EU-
140), pp. 1-2.
648 Arbeitsgemeinschaft Qualitätsmanagement Biodiesel e.V., "Cold Properties of Biodiesel", (Exhibit EU-
140), pp. 2-3.
649 Depending on the study, the cetane number of SBME varies between 48-56, 37-52, and 48-52. (See
Moser, "Influence of Blending Canola, Palm, Soybean, and Sunflower Oil Methyl Esters on Fuel Properties of
Biodiesel", (Exhibit EU-138), p. 4303; K. Azly Zahan and M. Kano, "Biodiesel Production from Palm Oil, Its By-
Products, and Mill Effluent: A Review", Energies, Vol. 11 (2018), 2132, (Exhibit MYS-20), p. 9; and Eni press
release of 15 April 2021: "Eni: New Systems Installed at the Venice Biorefinery to Eliminate Palm Oil Entirely",
EU-146, p. 4.)
650 Concawe, "Guidelines for handling and blending FAME", (Exhibit MYS-123), p. 10.
651 USDA FAS, "GAIN, Biofuels Annual: European Union", 22 June 2021, (Exhibit EU-131), p. 29.
652 Commission Regulation (EC) 193/2009, (Exhibit EU-134), p. 26.
653 In 2018 and 2019, palm oil was the third most-used feedstock for the production of biodiesel, as
distinguished from HVO, in the European Union, following rapeseed oil and UCO. (ETC/CME Eionet Report,
Greenhouse gas intensities of road transport fuels in the EU in 2018 - Monitoring under the Fuel Quality
Directive, November 2020, (Exhibit EU-132), p. 9; and ETC/CME Eionet Report, Greenhouse gas intensities of
transport fuels in the EU in 2019 - Monitoring under the Fuel Quality Directive, October 2021, (Exhibit EU-133),
p. 9.) The volume of biodiesel imports to the European Union fluctuated over the years due to trade defence
measures imposed by the European Union on the imports of biodiesel from, among other countries, Argentina
and Indonesia. It is notable that biodiesel imported from these two countries to the European Union, which is

there been no or only limited substitution between the three products as a consequence of certain
differences in their physical properties. A market research report submitted by the European Union
confirms that in 2020 RME, being more expensive, "had difficulties competing with cheaper imported
soybean oil methyl ester (S[B]ME) and palm oil methyl ester (PME)" on the EU market.654
7.442. Furthermore, the Panel notes that both parties rely on the findings concerning the
substitutability between PME, RME and SB ME made by the European Union in the context of anti -
dumping and countervailing duty investigations into the imports of biodiesel from the United States
and from Argentina and Indonesia. Malaysia relies on the European Commission's findings that the
differences in CFPP values between PME, RME and SBME are minor and do not "play any role in most
blends sold in the Community market ".655 The European Union, for its part, refers to the findings
nuancing the conclusions of earlier trade defence instruments regard ing importance of differences
in CFPP values between different biofuels.656
7.443. The Panel must base its likeness analysis on the evidence and arguments presented by the
parties and should not accord undue weight to findings made by a national investigating auth ority
in the context of adopting anti-dumping and countervailing duty measures. The Panel further notes
that the findings at issue were subsequently reviewed by the panel in EU – Biodiesel (Indonesia).
Having said this, in the Panel's view the findings of the trade defence investigations relied on by the
parties, read in their proper context, confirm that despite certain differences in product
characteristics, there is a significant degree of overlap between PME, RME and SBME. 657 The
European Union found in these investigations, among other things, that "PME is in competition with
biodiesel produced in the Union, which is not just RME but also biodiesel made from other
feedstocks".658
7.444. The parties also discuss the panel's findings in EU – Biodiesel (Indonesia) relating to the
above-mentioned determinations of the European Commission in anti -dumping and countervailing
duty investigations. Malaysia relies on that panel report for the proposition that PME competes with
SBME from Argentina, RME and othe r biodiesels produced by the EU industry, but the
European Union argues that such reliance is misplaced. The European Union submits that the
relevant statement that the three biofuels compete is taken out of its context. It is also nuanced,
argues the European Union, by a finding that PME was not found to be like a CFPP 0 biodiesel blend
and noting the differences in the cetane number or iodine value.659
7.445. It is true, as the European Union points out, that in the relevant passage of the report in
EU – Biodiesel (Indonesia), the panel merely restates a finding of the investigating authority.660 The
panel then considers aspects of the competitive relationship that the investigating authority failed
to address, such as the extent of competition between PME and a CF PP 0 blend. 661 Importantly,

respectively almost exclusively SBME and PME, rapidly gained market share when the trade defence measures
were repealed or amended. (Transport and Environment, "The trend worsens: More palm oil for energy, less
for food", (Exhibit MYS-79), pp. 3-4.)
654 USDA FAS, "GAIN Biofuels Annual: European Union", 22 June 2021, (Exhibit EU-131), p. 27.
655 Malaysia's first written submission, para.538, referring to Commission Regulation (EC) 193/2009,
(Exhibit EU-134).
656 European Union's first written submission, para. 642 (referring to Commission Implementing
Regulation (EU) 2019/244 of 11 February 2019 imposing a definitive countervailing duty on imports of
biodiesel originating in Argentina, OJ 2019 L 40, p. 1, (Exhibit EU-135). The Panel notes, however, that in the
European Union's view, the findings of likeness between PME, RME and SBME in EU trade defence instruments
were made in a different regulatory context and were limited in scope. European Union's first written
submission, paras. 641-643.
657 Commission Regulation (EC) 193/2009, (Exhibits EU-134), pp. 26-27; and Council Implementing
Regulation (EU) 1194/2013, (Exhibit MYS-140), pp. 3-4.
658 Council Implementing Regulation (EU) 1194/2013, (Exhibit MYS-140), p. 3.
659 European Union's first written submission, paras. 641-643, referring to Malaysia's first written
submission, paras. 543-544.
660 Panel Report, EU – Biodiesel (Indonesia), para. 7.154.
661 The panel found that:
The fact that the imported and domestic products were considered to be like products does not
automatically mean that each of the products included in the basket of imported products is alike
in all respects to each of the products included into the basket of domestic products. Nor does
the fact that the imported and domestic products were considered to be like products address
the particular competitive dynamic that PME may only be used in a blend, and is actually a
component of the different blends sold to end users in the EU market. PME might compete with

these findings concern the existence of price undercutting under Article 3.2 of the Anti -Dumping
Agreement and not the determination whether products are like.662 While it cannot be excluded that
such considerations could be relev ant to a likeness analysis, they seem to be of limited assistance
in the current dispute. First, the quoted passage concerns different products than those subject of
the likeness analysis in the case at hand. Second, the Panel has already addressed the rol e of cold
flow properties, and CFPP in particular, in the competitive relationship between PME, RME and SBME
and the findings of the panel in EU – Biodiesel (Indonesia) do not undermine the Panel's conclusions
in this respect.
7.446. In sum, the Panel is of the v iew that despite certain differences in physical characteristics,
PME, RME and SBME all have the same primary end-use of biofuel mixed with diesel. The Panel notes
that the products are not all used in the same degree in colder conditions. However, this do es not
call into question the fact that they constitute nearly perfect substitutes in warmer climates and that
overall, there is a significant overlap in the use of PME, RME and SBME as biofuels.
Consumer perceptions
7.447. Having considered the physical propert ies of biofuels, and their end -uses, the Panel now
turns to the main disputed issues pertaining to the third criterion, which is consumer perception of
the products as alternatives.
7.448. The Panel further notes that the determinations made by the EU investigat ing authority in
the above -referenced national proceedings indicate that final consumers are not aware of, or
concerned by, the composition of the biofuel blend, if the product meets the required CFPP. 663 This
is also the view held by Malaysia. 664 Malaysia further submits that the choices of direct consumers
of biofuels, i.e. economic operators that blend them together and/or with diesel, are dictated by the
CFPP value and price. 665 The European Union agrees that in the absence of a feedstock labell ing
requirement, final consumers are not aware of the biofuel content blended with diesel.666
7.449. The Panel considers that the evidence of consumer perceptions relating to the CFPP
corroborates its findings regarding the significant degree of overlap in the use of PME, RME and
SBME as biofuels. Economic operators involved in blending of biofuels mix PME, RME and SBME with
a view to obtaining a blend conforming with the CFPP specifications required by the customer. 667
Consistent with the Panel's findings above, if the specification requires a particularly low CFPP, the
amount of PME will admittedly be lower compared to fuel destined for warmer climates. Within the
specification, however, PME competes with RME and SBME.
7.450. The European Union submits that the consumers' tastes and habits must nevertheless be
considered due to the widespread public concern with deforestation associated with palm oil
production and the impact of such concerns on decisions of fuel suppliers. 668 The European Union
posits that a more general concern with products containing or made from palm oil has manifested
itself in the food industry and is also relevant to the fuel sector.669 The European Union argues that
there is a latent demand for palm oil-free fuels that the Panel should consider in th e determination
whether PME is like RME and SBME.670 According to the European Union, the consumers' preference
for palm oil -free fuel is reflected in the decisions by certain EU fuel suppliers to avoid or reduce
producing palm oil-based biofuels.671 In the European Union's view, this shows that if there was a

RME to the extent that they both are used to produce a blend. However, this does not mean that
PME and blended CFPP 0 biodiesel are in competition with each other.
(Panel Report, EU – Biodiesel (Indonesia), paras. 7.156.)
662 Panel Report, EU – Biodiesel (Indonesia), paras. 7.149-7.154.
663 Council Implementing Regulation (EU) 1194/2013, (Exhibit MYS-140), p. 15.
664 Malaysia's second written submission, para. 72.
665 Malaysia's first written submission, para. 542.
666 European Union's first written submission, para. 666.
667 Council Implementing Regulation (EU) 1194/2013, (Exhibit MYS-140), p. 15.
668 European Union's first written submission, paras. 665-666.
669 European Union's first written submission, paras. 667-669.
670 European Union's first written submission, para. 669(quoting Appellate Body Report, EC – Asbestos,
para. 174).
671 European Union's first written submission, para. 667.

labelling requirement for the composition of biofuels, the latent preferences and tastes of EU
consumers would become manifest and indicate palm oil-based biofuel is not like other biofuels.672
7.451. The Panel finds unconvincing the evidence produced by the European Union and pertaining
to decisions by certain biofuel and fuel producers reducing the use of oil palm crop-based biofuel in
their fuel blends. 673 In particular, other than mentioning only in gene ral terms sustainability
considerations, the evidence does not elucidate the specific reasons behind such decisions or that
they were in fact driven by consumers' preferences.674
7.452. Furthermore, the statements by biofuel and fuel producers submitted by the European Union
appear to postdate the adoption of certain EU and member State regulatory measures, including
those challenged in this dispute. It is therefore unclear whether these statements reflect consumers'
preferences or business decisions dictated by a change in the regulatory environment. For example,
Repsol's information about replacing palm oil used at its Bilbao refinery with used cooking oil (UCO)
should be viewed in the context of the "Spain's climate change bill " debated at the time in the
Parliament.675 In a similar vein, before announcing a decrease in the use of palm oil as biofuel
feedstock, Total had unsuccessfully challenged the exclusion of PME from the scope of renewable
energy sources for the purposes of the TIRIB.676
7.453. In the Panel's view, t he European Union thus has failed to substantiate its assertion that
consumer preferences against palm oil-based biofuels are of such nature and magnitude that could
rebut the findings of a high degree of competition reached so far on the basis of the analysis of the
products' physical properties and end-uses.
Tariff classification
7.454. Turning to the tariff classification, Malaysia points out that PME, RME and SBME are all
classified under the same six-digit heading.677 It adds that the EU Combined Nomenclature does not
distinguish between biofuels based on the feedstock. 678 In the European Union's view, the
classification of PME, RME and SBME under the same heading is not determinative given the evidence
of differences between the products. 679 According to the Eur opean Union, the lack of detail of its
tariff classification undermines Malaysia's claim of likeness.680
7.455. The Panel notes that in circumstances where there is a sufficiently detailed tariff
classification, the fact that two products are classified under the same tariff sub-heading can be an
indication of product similarity. 681 It is uncontested between the parties that PME, RME and SBME
are classified under the same heading six -digit heading 3826.00 "Biodiesel and mixtures thereof,
not containing or containing less than 70 % by weight of petroleum oils or oils obtained from
bituminous minerals".682 As explained in the footnote to the heading, the term biodiesel covers
"mono-alkyl esters of fatty acids of a kind used as a fuel, derived from animal or vegetable fats and

672 European Union's first written submission, para. 670.
673 European Union's first written submission, paras. 666-668.
674 Excerpt from the website of Preem, a Swedish fuel company, (Exhibits EU-144), p. 1.; Midttun, Knut
Myrum Næss, and Proadpran Boonprasurd Piccini "Biofuel Policy and Industrial Transition—A Nordic
Perspective" in Energies 2019, 12(14), 2740, (Exhibit EU-145), pp. 5-6; Eni press release of 15 April 2021:
"Eni: New Systems Installed at the Venice Biorefinery to Eliminate Palm Oil Entirely", (Exhibit EU-146), p. 1;
Press article from Argusmedia of 11 September 2020: "Spain's climate bill threatens biofuel projects: Repsol",
(Exhibit EU-147), p. 2; Total's webpage (accessed on 22 April 2021): "GRANDPUITS: A ZERO-CRUDE
PLATFORM BY 2024", (Exhibit EU-148), p. 2; Total's webpage (accessed on 22 April 2021): "LA MÈDE: A
MULTIPURPOSE FACILITY FOR THE ENERGIES OF TOMORROW" (Exhibit EU-149), p. 2; and Press article of
1 April 2021 from Le Monde « Total condamné à revoir son étude d'impact sur l'utilisation del'huile de palme
675 Press article from Argusmedia of 11 September 2020: "Spain's climate bill threatens biofuel projects:
Repsol", (Exhibit EU-147), pp. 2-3.
676 Press article, 11 October 2019 (Exhibit MYS-245); and THEN24, "TotalEnergies will no longer use
palm oil from 2023", (Exhibit EU-324).
677 Malaysia's first written submission, para. 546.
678 Malaysia's first written submission, para. 546.
679 European Union's first written submission, para. 672.
680 European Union's second written submission, para. 74 (referring to Appellate Body Report, Japan –
Alcoholic Beverages II, p. 21).
681 Appellate Body Report, Japan – Alcoholic Beverages II, p. 21.
682 HS Nomenclature, 2017, Chapter 38, (Exhibit MYS-42), p. 8.

oils whether or not used ".683 It follows that a number of FAME biofuels of organic origin, including
those made from animal fat, UCO ad other waste material, as well as blends of different biofuels and
with mineral diesel, fall within the scope of th is heading.684 The customs classification of PME, RME
and SBME under the same six-digit heading thus is consistent with the indication that they all belong
to the category of biodiesel fuels and corroborates the finding that they share certain product
characteristics and have the same application. It is not, however, dispositive of the question whether
the three products are like.
Conclusion on the likeness of RME, SBME and PME
7.456. As noted above, Article 2.1 requires the panel to identify the domestic 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. 685 In the Panel's
assessment, evidence of such a close competitive relationship has be en put forward by the parties
in this dispute. The Panel therefore finds that Malaysia has demonstrated that RME and SBME
produced in the European Union and/or imported from other countries are like PME imported from
Malaysia.
Malaysia's additional argume nt concerning HVO made from palm oil, rapeseed oil
and soybean oil
7.457. In addition to PME, Malaysia considers HVO made from palm oil, rapeseed oil and soybean
oil to also be like products.686 Although its submissions could have been more detailed in this regard,
Malaysia does include in its first written submission arguments concerning the likeness of HVO made
from different feedstocks. 687 Malaysia also submits arguments that HVO and FAME are like
products.688 At the same time, Malaysia clarifies that "a determination of likeness between FAME
and HVO is not a primary or even necessary, likeness analysis in this case (which Malaysia asserts
is a comparison of biofuel feedstocks) ".689 Overall, the Panel understand s from Malaysia's
submissions that its claim of discrimination involves the treatment of both PME, as opposed to RME
and SBME, and HVO made from palm oil, as opposed to HVO made from rapeseed oil and soybean
oil. Based on this understanding, the Panel will now assess likeness within the latter group of
products.
7.458. Malaysia submits that HVO displays the same physical and chemical properties, and delivers
the same performance irrespective of the feedstock used to produce it. 690 As a result, HVO made
from palm oil is, according to Malaysia, "not only 'like' vis-à-vis other oil crop-based biofuels, but in
fact identical to any other HVO oil crop-based biofuels".691 In particular, and unlike FAME, HVO can
be used by all customers in all seasons in all EU member States regardless of the feedstock used.692
Finally, Malaysia points out that the EU tariff classification does not differentiate between HVO made
from different feedstocks.693
7.459. According to the European Union, Malaysia's assertions regarding the substitutability of HVO
made from different feedstocks are unsubstantiated. 694 The European Union contends that HVO
producers may prefer certain vegetable oils as feedstocks because of price, physical characteristics,

683 HS Nomenclature, 2017, Chapter 38, (Exhibit MYS-42), p. 2.
684 European Union's second written submission, para. 73.
685 Appellate Body Report, EC – Asbestos, para. 99.
686 Malaysia's response to Panel question No. 75, pp. 47-48.
687 Malaysia's first written submission, paras. 539, 541 and 545-546.
688 Malaysia's second written submission, paras. 62-67; responses to Panel questions No. 82, p. 52, and
No. 84, p. 54.
689 Malaysia's response to Panel question No. 82, p. 52. See also Malaysia's comments on the European
Union's response to Panel question No. 81, p. 163.
690 Malaysia's first written submission, para. 539.
691 Malaysia's first written submission, para. 539.
692 Malaysia's first written submission, paras. 160, 541 and 545; response to Panel question No. 85, p.
55.
693 Malaysia's first written submission, para. 546. Malaysia notes however that is it not clear whether
HVO is classified by customs nomenclatures as biodiesel or as oil obtained from bituminous materials.
(Malaysia's response to Panel question No. 84, p. 54.)
694 European Union's comments on Malaysia's response to Panel question No. 75, para. 188.

and regulatory requirements.695 To support this assertion, the European Union relies on data on the
use of different feedstocks for biofuel production, including HVO.696
7.460. The Panel observes that HVO, or hydrotreated vegetable oil, is a mixture of paraffinic
hydrocarbons and has a chemical composition similar to mineral diesel fuel.697 The evidence before
the Panel confirms that HVO can be produced from many types of vegetable oils, resulting in the
same chemical composition and without affecting the biofuel's characteristics. 698 Its properties, in
particular relating to cold flow, depend on the production process rather the feedstock. 699 HVO is
used as fuel in diesel engines either blended with mineral diesel or fully replacing it.700
7.461. Although the European Union maintains that certain fuel suppliers may prefer HVO m ade
from specific feedstocks, the Panel notes that it does not adduce sufficient evidence to substantiate
this assertion. In any event, this argument seems to be contradicted by evidence showing that the
properties of HVO and its use remain the same regardless of the feedstock used.701 There is also no
information on the record confirming price differentiation of HVO depending on the feedstock used.
In sum, the Panel finds that rapeseed oil -based HVO and soybean oil-based HVO is like HVO made
from palm oil.
7.462. As Malaysia refers to FAME and HVO made from palm oil, rapeseed oil and soybean oil as,
respectively, palm oil -based biofuel, rapeseed oil -based biofuel and soybean oil -based biofuel, so
will the Panel in the remaining sections of this report.
7.1.2.4.4 Detrimental impact on palm oil-based biofuel
7.463. Having determined the groups of like products at issue, the Panel turns to the question
whether products imported from Malaysia are accorded less favourable treatment than like products
of EU or foreign origin. Considering the nature of the obligation in Article 2.1, panels and the
Appellate Body have found its scope to overlap with the non-discrimination obligation in Article III:4
and noted a similar formulation of the two provisions.702 As such, Article III:4 was found to provide
relevant context for the interpretation of Article 2.1.703
7.464. In light of these considerations, panels and the Appellate Body have found that establishing
less favourable treatment under Article 2.1 involves an assessment of whether the tec hnical
regulation "modifies the conditions of competition to the detriment of the group of imported products
vis-à-vis the group of domestic products" and/or vis-à-vis the group of imported products originating
in other countries.704 As noted above, the existence of a detrimental impact on imported products is
not dispositive of less favourable treatment under Article 2.1. A panel must further analyse whether
the detrimental impact stems exclusively from a legitimate regulatory distinction.705
7.465. Therefore, the Panel will first determine whether the high ILUC -risk cap and phase-out has
a detrimental impact on imported palm oil-based biofuel as compared to the group of like products
of EU and/or foreign origin . Should the Panel find the existence of such detrimental impact, it will
then assess whether it stems exclusively from a legitimate regulatory distinction.
7.466. The Panel's assessment of whether the measure has a detrimental impact on imported
products requires an inquiry into the measure's impact on the equality of competitive opportunities

695 European Union's comments on Malaysia's response to Panel question No. 75, para. 188.
696 European Union's comments on Malaysia's response to Panel question No. 75, para. 188.
697 SAE International, "HVO as a Renewable Diesel Fuel", (Exhibits MYS-126), p. 2; and ETIP Bioenergy,
"Hydrogenated vegetable oil (HVO)", (Exhibit MYS-131), p. 1.
698 L.P. Lindfors, "High Quality Transportation Fuels from Renewable Feedstock", Neste Oil Corporation
Espoo, Finland, XXIst World Energy Congress Montreal, Canada September 12-16, 2010, (Exhibit MYS-127), p.
4; and ETIP Bioenergy, "Hydrogenated vegetable oil (HVO)", (Exhibit MYS-131), p. 2.
699 SAE International, "HVO as a Renewable Diesel Fuel", (Exhibit MYS-126), p. 2.
700 Greenea, "Is HVO the Holy Grail of the world biodiesel market?", (Exhibits MYS-14), p. 1; ETIP
Bioenergy, "Hydrogenated vegetable oil (HVO)", (MYS-131), p. 1.
701 SAE International, "HVO as a Renewable Diesel Fuel", (Exhibit MYS-126), p. 2.
702 Appellate Body Reports, US – Clove Cigarettes, para. 100; and EC – Seal Products, para. 5.122.
703 Appellate Body Reports, EC – Seal Products, para. 5.122.
704 Appellate Body Reports, US – Clove cigarettes, para. 180; and US – COOL, para. 268.
705 Appellate Body Reports, US – Clove Cigarettes, para. 182; US – Tuna II (Mexico), para. 215; US –

between imported products and like domestic products or like products originating in other
countries.706 In this regard, it is not necessary for the Panel to rely on eviden ce of actual effects of
the measures on trade in the relevant market. 707 Rather, a panel may base its assessment on
evidence of the design, structure and expected operation of the measure.708
7.467. Malaysia submits that the high ILUC -risk cap and phase-out limits and eventually excludes
palm oil-based biofuel from being counted towards the EU renewable energy targets, but not biofuels
made from rapeseed oil and soybean oil.709 Malaysia argues that as a result, there will be little to no
demand in the European Union for palm oil-based biofuel.710 Malaysia submit in this regard that the
market for biofuels would not exist in the European Union without the EU renewable energy
targets.711
7.468. The European Union submits that in order to demonstrate that a measure modifies the
conditions of competition to the detriment of imported products, the complainant has to provide
evidence relating to the relevant market, show that eligibility to contribute towards the renewable
energy targets is equivalent to a market access condition and not conduct the comparison on the
basis of a flawed approach to the product scope.712 More specifically, the European Union contends
that limiting the relevant market to the market for oil crop -based biofuels is overly narrow and is
not supported by eviden ce.713 The European Union submits that the Panel is required to examine
the competitive opportunities afforded to all like products from the complaining member and these
are to be compared with those afforded to all like domestic products (or all like other foreign
products).714
7.469. The European Union further contests that the measures at issue prohibit or condition access
to the EU market for palm oil -based biofuel.715 The European Union submits in this regard that
Malaysia has not demonstrated the alleged effect s of the measure on the conditions of
competition.716 According to the European Union, the renewable energy targets seek to ensure
greater penetration of renewables over fossil fuels but do not guarantee specific market share for
any specific biofuel. It is the EU member States that may, but are not required to, provide financial
support for certain types of biofuels. 717 The European Union thus contests that any detrimental
impact can be attributed to the EU measure.
7.470. The European Union submits that Malaysia's case is wrongly premised on the notion that
because it happens to only produce palm oil -based biofuel from the group of like products , it can
show less favourable treatment because the measure affects biofuels produced from pa lm oil. The
European Union asserts that this is not the correct comparative exercise. 718 The European Union
thus refers back to its arguments concerning the scope o f like products, arguing that Malaysia has
isolated the treatment of certain specific biofuels skewing the analytical approach. 719 In the
European Union's view, there is no differentiation in the treatment of imported and domestically
produced palm oil-based biofuel.720
7.471. The parties' arguments appear to raise a number of distinct albeit related issues, which the
Panel will address in turn. The first issue concerns the modification of the conditions of competition
on the EU biofuel market. The second issue concerns the ques tion whether the measure equally

706 Appellate Body Report, US – Tuna II (Mexico) (Article 21.5 – Mexico), para. 7.29.
707 Appellate Body Reports, US – COOL, para. 325; and US – Tuna II (Mexico) (Article 21.5 – Mexico),
para. 7.29.
708 Appellate Body Reports, US – COOL (Article 21.5 – Canada and Mexico), para. 5.15.
709 Malaysia's first written submission, paras. 566-570; second written submission, paras. 83-90 and
241.
710 Malaysia's first written submission, paras. 563-565.
711 Malaysia's first written submission, para. 563.
712 European Union's first written submission, paras. 691-692.
713 European Union's first written submission, paras. 703-708; and second written submission,
paras. 86.
714 European Union's first written submission, para. 719.
715 European Union's first written submission, paras. 717-732.
716 European Union's first written submission, paras. 724-732.
717 European Union's first written submission, para. 731-732; and second written submission, para. 82.
718 European Union's first written submission, para.724.
719 European Union's second written submission, para. 86.
720 European Union's first written submission, para. 723.

affects products imported from Malaysia and products of EU or foreign origin. The third issue
concerns the attributability of any detrimental impact to the high ILUC-risk cap and phase-out.
7.1.2.4.4.1 Modification of conditions of competition on the biofuel market
7.472. The Panel now turns to the question whether the high ILUC-risk cap and phase-out modifies
the conditions of competition in the relevant market to the detriment of products imported from
Malaysia. It is uncontested between the parties that the high ILUC-risk cap and phase-out does not
formally prohibit the importation or distribution of palm oil-based biofuel on the EU market. However,
Article 2.1 covers not only those measures that condition access to a Member's market, but a lso
those that result in a detrimental impact by creating incentives to choose certain products (domestic
or imported from other countries) over others (imported from the complaining Member). 721
Otherwise, the obligation of no less favourable treatment could easily be circumvented by adopting
measures that formally do not condition access to the market, but in other ways discriminate de
jure or de facto against imported products by causing a detrimental impact on competitive
opportunities for imported produc ts that do es not stem exclusively from a legitimate regulatory
distinction.722 This assessment should focus on the design and operation of the measure at issue
taking into account the relevant regulatory context.
7.473. In section 2 of this Report, the Panel has set out the relevant regulatory background for both
the 7% maximum share and the high ILUC -risk cap and phase -out. The Panel refers to that
discussion in order to avoid unnecessary repetition. Here, the Panel merely recalls that Article 25(1)
of RED II imposes on EU member States a target of at least 14% of the final consumption of energy
in the transport sector from renewable energy sources to be achieved by 2030 at the latest. Article
7(4) of RED II identifies "biofuels, biomass fuels and renewable liquid and gaseous transport fuels
of non-biological origin" as the renewable energy sources qualifying for the targets.723 It follows that
EU member States must consume sufficient "biofuels, biomass fuels and renewable liquid and
gaseous transport fuels" in order to meet the target set in Article 25(1) of RED II. Data shows that
biofuels, especially those made from food and feed crops, account for the vast majority of this
consumption.724
7.474. Biofuels, biomass fuels and other gaseous and liquid fuels can be used in internal combustion
engines. Petrol and diesel are by far the most popular fuels used in such engines. Evidence submitted
by the parties shows that currently, biofuels are not cost -competitive with fossil fuels, and this is
unlikely to change in the foreseeable future.725 It is thus accepted that on a global scale, statutory
blending requirements and other forms of support are the main driving force promoting the
consumption of biofuels. 726 EU member States thus need to and do promote the consumption o f
biofuels either through mandating the minimum use or through support schemes in order to ensure
they meet their national contributions towards the 14% target. It is on the basis of these
considerations, that Malaysia argues that the renewable energy cons umption targets create the
market and demand for biofuels in the European Union which would otherwise not exist.727

721 See e.g. Panel Reports, US – COOL, para. 7.372 ("the COOL measure creates an incentive to use
domestic livestock – and a disincentive to handle imported livestock – by imposing higher segregation costs on
imported livestock than on domestic livestock"); Appellate Body Reports, US – COOL, para. 270 ("[w]hile a
measure may not require certain treatment of imports, it may nevertheless create incentives for market
participants to behave in certain ways, and thereby treat imported products less favourably"). See also Panel
Reports, India – Solar Cells, para. 7.95; and Mexico – Taxes on Soft Drinks, para. 8.117.
722 Appellate Body Report, US – Clove Cigarettes, para. 215.
723 Article 7(4)(a) of RED II.
724 In 2019, biofuels constituted approximately 90% of the renewable energy consumed in the transport
sector in the European Union, and food and feed crop-based biofuel accounted for 60% of the total
consumption of renewable energy in the transport sector. (Eurostat, Consumption of renewable energy in the
transport sector in the EU-27 in 2011-2019, (Exhibit IDN-13), p. 1.)
725 A research paper by the Kiel Institute concludes that:
Our findings lead to several conclusions. First, we find that given current fossil fuel prices,
biofuels are not cost-competitive compared to fossil oil-based fuels … Without policies such as
the RED II, biofuel consumption in the EU would return to a negligible level.
(Delzeit et al, Kiel Working Paper No. 2203, (Exhibit IDN-2), p. 17.)
726 UFOP Global Market Supply 2019/2020, (Exhibits EU-121, MYS-212), p. 36.
727 Malaysia's first written submission, para. 563.

7.475. Although the European Union contests the existence of such a dependency between the
renewable energy consumption targets and biofuel demand728, it acknowledges that:
[T]he effect of the EU biofuels regime is to encourage a shift towards those forms of
renewable energy best able to meet the Union's policy objectives … Member States are
incentivised to rely less on those biofuels which are depend ent on the input of
agricultural commodities to meet their targets.729
7.476. Indeed, evidence submitted by the parties confirms that demand for biofuels in the
European Union is "almost exclusively"730 driven by the European Union's and its member States'
renewable energy policies and that in the absence of blending mandates applying to biofuel made
from a particular feedstock, there is no or little demand for biofuel made from that particular
feedstock. Relatedly, the evidence on the record does not support the European Union's contention
that environmental concerns would drive demand for biofuels regardless of any governmental
support.731
7.477. Logically, it follows that if the EU member States cannot use biofuel made from a particular
feedstock to meet their national contributions to the EU-wide renewable energy target, there will be
no reason to promote its use as fuel. As a result, and given the price difference between fossil fuels
and biofuels, there will be little to no demand for biofuels that are excluded from co unting towards
the renewable energy targets.
7.478. The Panel recalls that currently, the only biofuel deemed to be high ILUC -risk is that made
from palm oil.732 Pursuant to Article 26(2) of RED II, its eligibility to count towards the targets is
capped at 2019 levels and those levels will be gradually reduced to zero by 2030, at the latest. This
rule is mandatory in that it must be observed by EU member States and fuel suppliers for the purpose
of calculating EU-wide and national renewable energy consumption in t he transport sector. In sum
therefore, limiting and gradually excluding the eligibility to count towards the targets by virtue of
the high ILUC-risk cap and phase -out will result in a decrease if not complete absence of demand
for palm oil-based biofuel on the EU market.
7.479. Certain arguments of the European Union, especially those made in the context of the
measure's contribution to the pursued objectives, corroborate the existence of a link between the
high ILUC-risk cap and phase-out and limiting or eliminating the demand for palm oil-based biofuels
on the EU market. The European Union submits inter alia that "the high ILUC-risk phase-out makes
sure that the EU Biofuels Regime will gradually induce less and less demand for high ILUC-risk crop
biofuels".733 A decrease in demand for biofuels made from high ILUC-risk feedstocks (only palm oil-
based biofuel at present), is therefore an intended consequence of the design and operation of the
measure. In the Panel's view, there is thus a genuine relationship between the high ILUC-risk cap
and phase-out and the detrimental impact on the competitive opportunities for palm oil-based biofuel
on the EU biofuel market.734
7.480. The Panel finds illustrative in this regard the evidence of decreasing consumption in the
European Union's transport sector of biofuels not meeting the sustainability and GHG emissions
saving criteria under RED I (non-compliant biofuels). As pointed out by Malaysia, the high ILUC-risk
cap and phase-out has a similar design in that, analogous to non-compliant biofuels under RED I, it
adversely impacts the eligibility of high ILUC-risk biofuel to be counted towards the renewable energy
consumption targets.735 The expected operation of the high ILUC -risk cap and phase -out on palm
oil-based biofuel, including the effects on the biofuel's use in the transport sector, will thus be

728 European Union's first written submission, para. 716.
729 European Union's first written submission, para. 722, second written submission, para. 80.
730 UFOP Global Market Supply 2019/2020, (Exhibit EU-121, MYS-212), p. 36; and USDA FAS, "GAIN
Biofuels Annual: European Union", 22 June 2021, (Exhibit EU-131), p. 24.
731 While the European Union submits evidence relating to moral concerns with climate change, this
evidence does not show that consumers would buy more expensive fuel with the addition of biofuels.
732 This is the result of the application of the requirements and formula in Article 3 of the Delegated
Regulation.
733 European Union's response to Panel question No. 102, paras. 545-546. The European Union also
recognizes that the high ILUC-risk cap "caps the demand for … biofuels induced by the EU Biofuels Regime".
734 Appellate Body Reports, Thailand – Cigarettes (Philippines), para. 134; US – Clove Cigarettes, fn 372
735 Malaysia's first written submission, para. 564.

analogous to the sustainability and GHG emissions savings criteria. That consumption fell to
negligible levels reaching 0.8% of the consumption of compliant biofuels in 2019. 736 The
European Union argues that failing to meet the sustainability and GHG emissions savings criteria
results not only in ineligibility to count towards the renewab le energy targets but also impacts the
possibility of using the fuel on the EU market pursuant to the Fuel Quality Directive.737 However, the
European Union does not point to any specific provision of that directive which would support this
assertion.738
7.481. To demonstrate the detrimental impact of the measure, Indonesia acting as a third party,
submits an overview of adopted or proposed legislation in selected EU member States. These
legislative acts and proposals aim to limit the possibility of counting towards national contributions
to the renewable energy targets biofuels made from high ILUC -risk feedstocks, and envisage
terminating support schemes for such biofuels or introducing limitations to placing them on the
market.739 In the Panel's view, the EU member States' policies implementing Article 26(2) of RED II
constitute an additional illustration of the operation of the high ILUC-risk cap and phase-out on the
EU biofuel market.
7.482. Furthermore, Article 26(2) of RED II contains a derogation from the high ILUC-risk cap and
phase-out for biofuels certified as low ILUC risk. Specific yields can become eligible for counting
towards EU renewable energy targets in the same manner as other crop-based biofuels only if they
meet certain conditions set out in Articles 4 and 5 of the Delegated Regulation (the low ILUC -risk
certification criteria) and undergo a certification procedure.740 Low ILUC-risk certification thus applies
to specific yields and not a crop as a whole. In that sense, low ILUC risk certification does not alter
the general characterization of a biofuel feedstock as high ILUC risk. Pursuant to the low ILUC-risk
certification criteria, in order to qualify for certification, yields must meet certain specific conditions.
First, only yields going beyond the so -called dynamic yield baseline are eligible for certification. 741
Second, such yields need to be obtained through measures that either pass the financial
attractiveness or barriers test; are applied on abandoned or severely degraded land; or are applied
by smallholders.742
7.483. As a result, only a limited amount of a high ILUC -risk crop can qualify for low ILUC -risk
certification and thereby become eligible to count towards the renewable energy targets beyond the
limitations imposed by the high ILUC-risk cap and phase-out. This means that any mitigation of the
detrimental impact of the high ILUC -risk cap and phase -out is considerably limited. At the same
time, the Panel does not consider that limiting low ILUC -risk certification to additional yields
generates a detrimental impact of its own. In the Panel's view, any commercial disadvantage related
to this requirement stems directly from and is a corollary of the classification of a crop as high ILUC
risk.
7.484. In light of the above considerations, the Panel is unpersuaded by the European Union's
argument that Malaysia presents a flawed analysis of the relevant market conditions. The Panel is
of the view that by limiting and eventually excluding palm oil-based biofuel from eligibility to count
towards renewable energy targets, the high ILUC-risk cap and phase-out modifies the conditions of
competition to the detriment of this biofuel.
7.485. The Panel notes the European Union's additional argument in this regard that a WTO Member
should be allowed to distinguish between products on the basis of the perceived differences relating
to the measure's objectives.743 The Panel agrees. However, the Panel considers that this argument
is more appropriately addressed in the context of the analysis on whether the detrimental impact of
the measure stems exclusively from a legitimate regulatory distinction.

736 Eurostat, Energy from renewable sources – SHARES, (Exhibit MYS-43).
737 European Union's first written submission, para. 715.
738 European Union's first written submission, para. 715.
739 Examples of EU member States' measures restricting oil palm crop-based biofuel, (Exhibit IDN-1).
740 Section 2.3.3 above.
741 Articles 2(6) and 4 of the Delegated Regulation.
742 Article 5 of the Delegated Regulation.
743 European Union's response to Panel question No. 90, para. 473 (referring to Panel Report, EC –
Approval and Marketing of Biotech Products, para. 7.2514.

7.1.2.4.4.2 De facto nature of the detrimental impact
7.486. Turning to the European Union's argument that the measure does not differentiate between
palm oil-based biofuel imported from Malaysia and that of EU origin or other origin, the Panel agrees
that the high ILUC -risk cap and phase -out does not distinguish expressly between palm oil -,
rapeseed oil- and soybean oil -based biofuel based on their origin. However, the Panel notes that
Malaysia's makes a claim of de facto discrimination.744 A measure that appears on its face to be
origin neutral can nevertheless discriminate de facto against imported products in contravention of
Article 2.1.745 A panel's analysis whether the measure has a de facto detrimental impact on the
group of imported products must take into account the totality of the facts and circumstances before
it, including the relevant features of the market at issue. 746 A panel has to determine on this basis
whether there is a genuine relationship between t he measure at issue and any adverse impact on
competitive opportunities for imported versus like domestic products. 747 The European Union
appears to agree with this approach insofar as it emphasizes the importance of assessing all aspects
of the competition between like products on the relevant market.748
7.487. The Panel observes that the European Union is not only an importer but also a producer of
palm oil-based biofuel (but not of palm oil as such). 749 In that sense, the Panel agrees with the
European Union that the high ILUC -risk cap and phase -out also affects some of its domestic
production. However, as noted above, an important factual consideration is that among all the biofuel
products that compete in the market and which the European Union imports or produces itself, palm
oil-based biofuel is the only one that Malaysia exports to that market. This means that the measure,
while neutral on its face, disproportionally affects products imported from Malaysia.
7.488. This is the essence of de facto discrimination. Under these circumstances, the Panel must
compare the treatment of the only product imported from the complainant with all domestic products
and products of other origin found to be like.750 Although Malaysia has demonstrated that palm oil-
, rapeseed oil- and soybean oil-based biofuels are like, the European Union seems to be comparing
only the treatment of domestically produced and imported palm oil-based biofuel.751
7.1.2.4.4.3 Attributability of the detrimental impact to the high ILUC-risk cap and phase-
out
7.489. The Panel now turns to the European Union's argument that any detrimental impact on the
palm oil-based biofuel should not be attributed to the EU measure, as the EU member States enjoy
discretion in determining their energy mix and national contributions to the EU renewable energy
target.752
7.490. It is true that some of the EU member States' measures submitted as evidence go further
than appears to be required by RED II.753 However, there is no doubt that they seek to implement,
among other provisions, Article 26(2) of RED II. 754 RED II and the Delegated Regulation impose

744 Malaysia's first written submission, para. 572.
745 Appellate Body Reports, US – Tuna II (Mexico), para. 225; and US – COOL, para. 269.
746 Appellate Body Reports, US – COOL, para. 286.
747 Appellate Body Reports, Thailand – Cigarettes (Philippines), para. 134; and US – Clove Cigarettes,
fn 372.
748 European Union's first written submission, para. 703.
749 Oil World Annual 2021, (Exhibit MYS-17). See also Malaysia's response to Panel question No. 83, p.
53; European Union's response to Panel question 83, para. 457; and comments on Malaysia's response to
Panel question No. 75, para. 192.
750 Appellate Body Report, US – Tuna II (Mexico) (Article 21.5 – Mexico), para. 7.70.
751 In addition, for the reasons explained in preliminary considerations to the discussion of the like
products analysis, the Panel is also unpersuaded by the European Union's argument that the outcome of
Malaysia's detrimental impact analysis is skewed because of the complainant's focus on a subset of like
products.
752 European Union's first written submission, paras. 726-731.
753 Certain EU member States decided to exclude from counting towards the renewable energy targets
not only palm oil-based biofuel but also soybean oil-based biofuel, while other prohibited using palm oil-based
biofuel as transport fuel altogether. (Examples of EU member States' measures restricting oil palm crop-based
biofuel, (Exhibit IDN-1), pp. 11, 17, 33 and 35.)
754 The translated text of the EU member States' measures either mimics the language of Article 26(2)
of RED II or contains explicit references to that provision. (Examples of EU member States' measures
restricting oil palm crop-based biofuel, (Exhibit IDN-1).)

binding obligations on the EU member States, which they cannot derogate from and which have
regulatory effects throughout the EU territory. 755 Therefore, while EU member States may enjoy
some margin of discretion in adopting support schemes for renewable energy or regulate the use of
certain fuels, they cannot count palm oil-based biofuel towards the renewable energy targets to the
same extent as rapeseed oil- and soybean oil-based biofuel.756
7.491. In fact, EU member States are obliged to "set an obligation on fuel suppliers " to ensure
meeting the 2030 target share of renewable energy, "calculated in accordance with the methodology
set out in … Article 26 " of RED II.757 It follows that it is not only the EU member States that must
observe the rules set out in Article 26 of RED II, but also that these rules become mandatory for
fuel suppliers operating on the EU market.
7.492. Therefore, the Panel finds that the detrimental impact on palm oil-based biofuel can clearly
be attributed to the high ILUC-risk cap and phase-out.
7.1.2.4.4.4 Conclusion on detrimental impact
7.493. In sum, the Panel finds that the high ILUC-risk cap and phase-out limits market opportunities
for palm oil-based biofuel. By contrast, because rapeseed oil- and soybean oil-based biofuels are not
subject to the measure, they can potentially benefit from the full scope of commercial opportunities
provided within the 7% maximum share. In fact, evidence submitted by the parties suggests that
rapeseed oil- and soybean oil-based biofuel may benefit from increased opportunities, as a result of
demand shifting from oil palm crop -based biofuel.758 Therefore the high IL UC-risk cap and phase -
out has a detrimental impact on imported palm oil -based biofuel as compared to the group of
domestic like products.
7.494. Contrary to the European Union's argument, this finding should not be understood as
requiring the European Union to continue "to intervene in the energy market" in favour of all types
of biofuels, including those that do not meet European Union's policy objectives. 759 Rather, such
support, if falling within the ambit of Article 2.1, should not lead to less favourable treatment of
imported products vis-à-vis domestic like products and like products of other origins. In any event,
as mentioned above, establishing a measure's detrimental impact on imported products is not
sufficient to demonstrate a violation of the no less favourable treatment obligation in Article 2.1. A
panel must also analyse whether the detrimental impact stems exclusively from a legitimate
regulatory distinction, which is the next question the Panel will address.
7.1.2.4.5 Legitimate regulatory distinction
7.495. As noted above in the context of setting out the applicable legal standard under Article 2.1,
a finding of a detrimental impact on imported products alone is not dispositive of whether there is
less favourable treatment under Article 2.1. A panel must further analyse whether the detrimental
impact "stems exclusively from a legitimate regulatory distinction".760 In making this determination,
the Panel needs to a ssess the design, structure and operation of the measure at issue in order to
determine whether the technical regulation is applied in an even -handed manner and, as a result,
whether the detrimental impact on imported products stems exclusively from a legitimate regulatory

755 Panel Report, EU – Energy Package, para. 7.397.
756 With the exception of consignments of biofuels certified as low ILUC risk.
757 Article 25(1) of RED II.
758 Delzeit et al, Kiel Working Paper No. 2203, (Exhibit IDN-2), p. 11.
759 European Union's first written submission, para. 727.
760 Appellate Body Reports, US – Clove Cigarettes, para. 182; US – Tuna II (Mexico), para. 215; US –
COOL, para. 271; and EC – Seal Products, para. 5.311. This interpretation of Article 2.1 has been grounded in
the context provided by other provisions of the TBT Agreement, in particular Article 2.2, which "suggests that
'obstacles to international trade' may be permitted insofar as they are not found to be 'unnecessary'" and the
sixth recital of the Preamble. It is also consistent with the object and purpose of the TBT Agreement, which has
been found to strike a balance between, on the one hand, the objective of trade liberalization and, on the other
hand, Members' right to regulate. (Appellate Body Report, US – Clove Cigarettes, paras. 171 and 174.)

distinction.761 Overall, the parties seem to be in agreement as regards the basic elements and nature
of the legal test under Article 2.1.762
7.496. Malaysia submits that the detrimental impact on imports of palm oil-based biofuel does not
stem exclusively from a legitimate regulatory distinction. More specifically, Malaysia argues that the
high ILUC-risk cap and phase -out does not impose a regulatory distinction that is legitimate. 763
Malaysia further argues in the alternative that even if such legitimate regulatory distinction were to
exist, it is not applied in an even-handed manner.764 In this connection, Malaysia contends that the
measure is not calibrated to the risk, because it does not apply to biofuels made from feedstocks
with higher estimated ILUC emissions than palm oil.765
7.497. The European Union maintains that any impact of the high ILUC-risk cap and phase-out on
palm oil -based biofuel stems exclusively from a legitimate regulatory distinction. 766 The
European Union submits that the measure pursues long-standing and legitimate policy goals of the
EU Biofuels Regime relating to climate change mitigation, environmental and biodiversity objectives
and moral concerns. 767 The European Union relies in this regard on the scientific grounds
underpinning the EU Biofuels regime generally and the high ILUC -risk cap and phase -out more
specifically.768 The European Union further contests that the measure is not applied in an even -
handed manner, point ing to the existence of a rational relationship between the measure and its
stated objective.769
7.498. Whether the detrimental impacts stems exclusively from a particular legitimate regulatory
distinction needs to be considered in light of the nature and object of the distinction at issue and the
manner in which it operates. The parties' arguments focus on two main questions: whether the
regulatory distinction based on high ILUC -risk is legitimate, and if so whether it is applied in an
even-handed manner.
7.499. The Panel notes that the specific arguments raised by the parties relating to these two
questions largely overlap.770 The Panel appreciates that these overlaps are largely a consequence of
apparent overlaps in aspects of the legal test under Article 2.1 at issue, either of which, if
demonstrated, leads to the conclusion that the detrimental impact does not stem exclusively from a
legitimate regulatory distinction. The Appellate Body has recognized these overlaps, observing that
"where a regulatory distinction is no t designed and applied in an even -handed manner – because,
for example, it is designed or applied in a manner that constitutes a means of arbitrary or
unjustifiable discrimination – that distinction cannot be considered 'legitimate'".771 The Panel recalls
in this regard that it has "the discretion to address only those arguments it deems necessary to
resolve a particular claim".772 Therefore, the Panel does not consider that it is under an obligation to

761 Appellate Body Reports, US – Clove Cigarettes, para. 182; US – Tuna II (Mexico) (Article 21.5 –
Mexico), para. 7.33. Past panels and the Appellate Body have not elaborated on the meaning of "even-
handedness". The Appellate Body has noted, however, that "there is no set formula as to how a complainant
must make out its case" under Article 2.1 and cautioned against applying the rules on burden of proof in a
formalistic or mechanistic fashion. In a similar vein, the first compliance panel in US – Tuna II (Mexico)
understood "even-handedness" not as a separate criterion, but rather as an "analytical tool, a kind of rhetorical
measure or test that deploys a fluid, broadly equitable concept as a proxy or gauge". (Appellate Body Report,
US – Tuna II (Mexico) (Article 21.5 – Mexico), para. 7.33; and Panel Report, US – Tuna II (Mexico) (Article
21.5 – Mexico), para. 7.93.)
762 Malaysia's first written submission, paras. 571-572. European Union's first written submission,
paras. 694-697.
763 Malaysia's first written submission, paras. 574-577; and second written submission, para. 243.
764 Malaysia's first written submission, paras. 578-584; and second written submission, para. 244.
765 Malaysia's first written submission, paras. 580-581
766 European Union's first written submission, paras. 735-752; and second written submission,
paras. 91-96.
767 European Union's first written submission, para. 742.
768 European Union's first written submission, paras. 744-752; and second written submission, para. 96.
769 European Union's first written submission, paras. 753-768; and second written submission,
paras. 99-100.
770 The Panel notes that Malaysia makes similar arguments asserting that high ILUC-risk is not a
legitimate regulatory distinction and that the measure is not applied in an even-handed manner because only
palm oil-based biofuel is considered as high ILUC-risk and subject to the high ILUC-risk cap and phase-out as a
result of the application of the criteria in Article 3 of the Delegated Regulation. (Malaysia's first written
submission, paras. 575 and 578.)
771 Appellate Body Reports, US – COOL, para. 271.
772 Appellate Body Report, EC – Poultry, para. 135.

assess the parties' arguments formalistically, addressin g each and every element raised by the
parties following the order of their submissions.773
7.500. Having said this, the Panel will conduct its analysis following the general structure of the
arguments as made by the parties, by focusing on the two main questions raised. The Panel will
thus first identify the relevant regulatory distinction drawn by the high ILUC-risk cap and phase-out
and address whether this distinction is a priori legitimate. To that end, the Panel will consider any
aspects of the measure that, in the Panel's view, pertain to the very essence of the regulatory
distinction at issue, irrespective of the exact context in which they were raised by the parties. If the
Panel finds that the regulatory distinction based on high ILUC risk is a priori legitimate, it will then
consider aspects of the measure that, in the Panel's view, are pertine nt to assessing whether the
distinction is applied in an even -handed manner, including whether it is applied in a manner that
constitutes arbitrary or unjustifiable discrimination.
7.501. The Panel further notes that the parties' arguments made in relation to Mal aysia's claim
under Article 2.1 concern the scientific underpinnings of the concept of ILUC and high ILUC risk. The
parties also extensively discuss the scientific studies produced as evidence, the underlying data,
assumptions, their sources, as well as th eir use in the high ILUC -risk formula. The parties' views
differ on the degree of scrutiny that the Panel should exercise in reviewing such evidence.774
7.502. The Panel recalls that its mandate to "make an objective assessment of the matter before
it" under Article 11 of the DSU involves a duty to examine and consider all the evidence on the
record and to evaluate the relevance and probative force of each piece thereof. 775 Insofar as
discharging this duty could involve reviewing scientific evidence, the Panel cons iders that while it
may not be in a position to draw definitive conclusions on the methodological merits of the
approaches presented and the underlying scientific information, the Panel can consider whether the
body of evidence, as a whole, provides a reasonable basis in support of the proposition for which it
is being invoked. 776 To the extent that this Panel is called upon to review the robustness of such
evidence, its assessment may include, where relevant:
[A] consideration of whether such evidence 'come s from a qualified and respected
source', whether it has the 'necessary scientific and methodological rigor to be
considered reputable science' or reflects 'legitimate science according to the standards
of the relevant scientific community', and 'whether t he reasoning articulated on the
basis of the scientific evidence is objective and coherent'.777
7.503. Acting within these parameters, panels may rely on evidence reflecting a minority scientific
opinion, provided that this opinion emanates from respected sources and reflects legitimate and
reputable science in light of the evidence on the record .778 It would thus not be sufficient for the
complainant to simply put forward a different scientific opinion or point out some imperfections in
the approach adopted by the regulating Member, as long as the evidence on the record as a whole
provides a reasonable basis for that approach.779
7.504. Therefore, the Panel is of the view that its task in this dispute is not to attempt to resolve
scientific debates on the basis of the evid ence submitted by the parties.780 Rather, the Panel must

773 The Panel notes that the parties' arguments under Article 2.1 also cross-reference sections of their
arguments under Article 2.2 and Article XX (and vice versa). All of these sections also cross-reference several
up-front sections of their submissions setting forth extended discussions on the validity of the concepts of ILUC
and high ILUC risk, as well as the scientific basis for the measures at issue, and the history and factual
circumstances surrounding the measures at issue.
774 Malaysia's response to Panel question No. 59, pp. 32-33. European Union's response to Panel
question No. 59, paras. 361-386; comments on Malaysia's response to Panel question No. 59, paras. 98-107.
775 Appellate Body Report, Korea – Dairy, para. 137.
776 Panel Reports, Australia – Tobacco Plain Packaging, para. 7.627. The Panel is mindful that in
Australia – Tobacco Plain Packaging, the panel adapted the findings previously made in the context of Article
5.1 of the SPS Agreement for the purposes of assessing a claim made pursuant to Article 2.2 of the
TBT Agreement. However, the Panel is of the view that the same considerations could be relevant, mutatis
mutandis, in the context of an inquiry under Article 2.1.
777 Panel Reports, Australia – Tobacco Plain Packaging, para. 7.516. (referring to Appellate Body Report,
US – Continued Suspension, paras. 591-592.)
778 Appellate Body Report, EC – Asbestos, para. 178.
779 Panel Reports, Australia – Tobacco Plain Packaging, paras. 7.641-7.642.
780 Panel Reports, US – Tuna II (Mexico) (Article 21.5 – Mexico II), paras. 7.150-7.151.

determine whether, considering the entirety of the evidence, there is a reasonable basis for the
regulatory distinction drawn by the high ILUC-risk cap and phase-out and the manner in which it is
applied.
7.1.2.4.5.1 The regulatory distinction at issue
7.505. The starting point for determining whether the detrimental impact on imported products
stems exclusively from a legitimate regulatory distinction is a consideration of the regulatory
distinction that explains the difference in treatment giving rise to the detrimental impact. 781 In this
context, panels may examine not only the particular distinction causing the detrimental impact, but
also other probative elements that may shed light on the design of the measure and its operation.782
In US – Tuna II (Mexico), the Appellate Body considered the difference in treatment resulting in the
detrimental impact on imported tuna as the central element of the regulatory distinction at issue:
The aspect of the measure that causes the detrimental impact on Mexican tuna products
is thus the difference in labelling conditions for tuna products containing tuna caught by
setting on dolphins in the ETP, on the one hand, and for tuna products containing tuna
caught by other fishing methods outside the ETP, on the other hand. The question before
us is thus whether the United States has demonstrated that this difference in labelling
conditions is a legitimate regulatory distinction, and hence whether the detrimental
impact of the measure stems exclusively from such a distinction rather than reflecting
discrimination.783
7.506. Moreover, the stated objectives of a measure identified for the purposes of an analysis under
Article 2.2, if a claim concerning that provision is made in parallel, could further assist panels in
identifying the relevant regulatory distinction at issue.784
7.507. The Panel has found above that the detrimental impact on palm oil-based biofuel stems from
the classification of palm oil as a high ILUC-risk feedstock (currently the only one) and, as a result,
subjecting palm oil -based biofuel to the cap and phase -out. This classification is a result of the
application of the high ILUC-risk formula set out in Article 3 of the Delegated Regulation and relying
on the data contained in its Annex. The details of the formula, including its different elements are
explained in detail in the descriptive part of this Report.785 The formula is designed to determine the
degree of ILUC -risk for individual biofuel feedstocks using as p roxy the observed share of a
feedstock's production area expansion into land with high-carbon stock, adjusted for productivity.786
If that share exceeds 10%, the biofuel feedstock is determined to be high ILUC risk.
7.508. The classification of palm oil as a high ILUC-risk feedstock is thus a reflection of the degree
of the risk of ILUC and of ILUC-related GHG emissions associated with the feedstock's production.787
Therefore, it is the high degree of ILUC risk that lies at the heart of the regulatory distinction a t
issue rather than, for example, quantification of the respective volumes of GHG emissions linked to
ILUC caused by production of any particular biofuel feedstock. 788 In short, the measure draws a
regulatory distinction between different types of biofuels based on whether the feedstock used for
its production presents a high degree of ILUC risk.

781 Panel Reports, EC – Seal Products, para. 7.174; and Appellate Body Reports, US – COOL, para. 341.
782 Appellate Body Reports, US – COOL (Article 21.5 – Canada and Mexico), para. 5.96.
783 Appellate Body Report, US – Tuna II (Mexico), para. 284.
784 The Panel notes that in US – Tuna II (Mexico), the Appellate Body relied in compliance proceedings
on its earlier findings, as well as on the findings of the original panel, concerning the identification of the
measure's objectives under Article 2.2 when examining Mexico's claim under Article 2.1. (See Appellate Body
Report, US – Tuna II (Mexico) (Article 21.5 – Mexico), para. 7.16.)
785 See the descriptive part of this Report.
786 The Panel understands the feedstock's production area to encompass the global production area of a
crop used for biofuel production regardless of the specific purpose for which it is grown (i.e. including for non-
biofuel applications).
787 European Union's first written submission, paras. 176-177.
788 In this report, the terms "crop" and "feedstock" are used interchangeably following such use of these
terms by the parties in their submissions. The Panel notes in this regard that the references to feedstock's
"production area" in the Delegated Regulation and other accompanying documents essentially mean the total
cultivation area of the crop whether used to produce the feedstock or for other applications.

7.509. Understood in this way, the regulatory distinction at issue is commensurate with the
measures' objective identified in the context of Malaysia's claim under Article 2.2. The Panel has
concluded in that context that the stated rationale for the 7% maximum share and the high ILUC -
risk cap and phase-out is to limit the risk of ILUC-related GHG emissions associated with food and
feed crop-based biofuels. The classification of palm oil as high ILUC-risk feedstock, as a result of the
application of the high ILUC -risk formula, thus constitutes the key regulatory distinction that the
measure draws between palm oil-based biofuel on the one hand, and biofuels made from other food
and feed crops, including rapeseed oil and soybean oil, on the other hand.
7.510. The Panel's understanding of the regulatory distinction at issue is further confirmed by the
design of the low ILUC-risk criteria, which, at least formally, are aimed at tempering the detrimental
impact of the high ILUC-risk cap and phase-out. These criteria are designed to account for the fact
that the risk of causing ILUC is mitigated with respect to consignments of feedstocks produced within
schemes that avoid displacement effects.789 The risk of ILUC associated with a specific consignment
is thus a central element of the low ILUC-risk criteria (although low ILUC-risk certification does not
change the classification of a feedstock as a whole as high ILUC-risk).
7.1.2.4.5.2 Legitimacy of the regulatory distinction
7.511. The Panel now turns to the issue of whether a regulatory distinction based on a feedstock's
degree of ILUC risk cannot be a priori legitimate.
7.512. Malaysia submits that the regulatory distinction based on the concepts of ILUC and high
ILUC-risk cannot be legitimate because both concepts have an insufficient scientific basis and
specifically target palm oil-based biofuel.790 To support this contention, Malaysia repeats a number
of arguments it makes with respect to different elements of the legal test under Articles 2.2 and 2.4,
including those pertaining to the legitimacy of the measure's objective and the treatment of ILUC
under international standards. More specifically, Malaysia submits that ILUC cannot be observed or
quantified and as such cannot form the basis of a legitimate regulatory distinction. 791 According to
Malaysia, this is reflected in the exclusion of ILUC from being taken into account in the international
standards on the calculation of carbon footprint.792
7.513. When examining regulatory distinctions at issue under Article 2,1, in past disputes, and
especially when considering whether the distinctions at issue were legitimate, some panels and the
Appellate Body referred to conclusions reached regarding the existence of a "legitimate objective"
of a measure under Article 2.2, if such claim was made in parallel. 793 The Panel recalls that in the
context of Malaysia's claims under Article 2.2 it has concluded that the objective of limiting the risk
of ILUC-related GHG emissions associated with food and feed crop -based biofuels is a "legitimate
objective" within the meaning of that provision. In that context, the Panel has found that the risk of
ILUC-related GHG emissions, while currently not directly observable or precisely quantifiable, is not
a risk that appears to be theoretical, abstract or otherwise hypothetical .794 In the context of its
assessment of the claim under Article 2.4, which has informed the Panel's assessment under Article
2.2, the Panel has further found that ISO standards referred to by Malaysia do not "exclude ILUC
from being taken into account" where measures seek to address the risk of GHG emissions.795
7.514. The Panel has thus found a reasonable basis for the European Union to consider that
increasing demand for food and feed crop -based biofuels increases the risk of ILUC -related GHG
emissions. In the Panel's view, all these considerations are equally relevant to the question whether
the regulatory distinction drawn by the high ILUC -risk cap and phase -out is a legitimate one.

789 Recital 37 to RED II. In a similar vein, Recital 12 to the Delegated Regulation stipulates that:
Under certain circumstances, the ILUC impacts of biofuels, bioliquids and biomass fuels generally
considered as high ILUC-risk can be avoided and the cultivation of the related feedstock can even
prove to be beneficial for the relevant production areas. […] Certified low ILUC-risk biofuels,
bioliquids or biomass fuels should be exempted from the limit and gradual reduction set for high
ILUC-risk biofuels, bioliquids and biomass fuels.
790 Malaysia's first written submission, paras. 575-576.
791 Malaysia's first written submission, paras. 575-576.
792 Malaysia's first written submission, para. 575.
793 Appellate Body Report, US – Tuna II (Mexico), paras. 242-243; and Panel Reports, US – Tuna II
(Mexico) (Article 21.5 – Mexico II), paras. 7.186-7.187.
794 See para. 7.307 above.
795 See para. 7.290 above.

However, the Panel has already explained in the context of its assessment under Article 2.2 that this
conclusion leaves open any questions relating to estimating the degree of ILUC risk. In particular,
this conclusion leaves open any questions relating to the specific aspects of the high ILUC -risk
classification, including the elements of the high ILUC-risk formula. The Panel has indicated that it
would return to the issue in the context of the "legitimate regulatory distinction" step of the analysis
under Article 2.1.
7.515. Some of the parties' arguments concerning the high ILUC -risk classification relate to its
conceptual underpinnings, including certain basic elements of the high ILUC -risk formula. Others
focus on specific parameters or values on the basis of which the formula operates. The Panel
considers the former to be relevant to the issue of the a priori legitimacy of the regulatory distinction,
and therefore, will considers these in this section.
7.516. Based on the parties' arguments the Panel thus considers the following issues to present
fundamental questions regarding the a priori legitimacy of the regulatory distinction based on high
ILUC-risk: (i) the European Union's reliance on the share of expansion rate into land with high -
carbon stock as proxy of ILUC risk; (ii) the relationship between EU biofuel demand and a specific
share of feedstock's production area expansion; and (iii) distinguishing between different crops
based on their degree of ILUC risk.796 The Panel will address these issues in turn.
Share of expansion rate into land with high-carbon stock as proxy of ILUC risk
7.517. The formula uses, as a proxy for the level of ILUC risk, the observed share of a feedstock's
production area expanding into land with high-carbon stock, adjusted for productivity.797 If this share
exceeds 10%, the feedstock is determined to be high ILUC risk. It is thus the past expansion rate
of a feedstock's production area into land with high-carbon stock that is an indicator of the likelihood
of causing ILUC and ILUC-related GHG emissions.
7.518. It is uncontested between the parties that ILUC and its effects currently cannot be observed
or quantified with precision.798 The parties seem, however, to draw opposite conclusions from this
fact. Malaysia contends that because ILUC cannot be directly observed and quantified, it cannot form
the basis of a regulatory distinction seeking to address ILUC-related GHG emissions associated with
production of biofuel feedstocks. 799 The European Union argues, for its part, that due to the same
considerations it had to opt for a different methodology that uses the observed expansion into land
with high-carbon stock as a proxy of the risk of ILUC.800
7.519. Malaysia criticizes the methodology developed by the European Union and its use to estimate
the risk of ILUC. 801 Malaysia submits that an expansion of a feedstock's production area into land
with high-carbon stock (i.e. DLUC) is unrelated to GHG emissions associated with ILUC and that
factors other than increased biofuel demand could lead to such an expansion. 802 According to
Malaysia, there is no scientific evidence to support the proposi tion that where the production of
certain crops leads to large DLUC effects, this also comes with a higher risk of ILUC. 803 Malaysia
further submits that there are serious doubts as to the rational relationship between the regulatory
distinction drawn by the high ILUC-risk cap and phase-out and the measure's objectives.804

796 The Panel notes that Malaysia raises some of these issues, or certain aspects thereof, to support its
contention that the high ILUC-risk cap and phase-out is applied in manner that constitutes arbitrary or
unjustifiable discrimination, or otherwise is not applied in an even-handed manner. However, in the Panel's
view, these arguments relate to the very essence of the regulatory distinction based on the degree of ILUC
risk, rather than the manner in which the distinction has been applied in the case at hand.
797 The Panel understands the feedstock's production area to encompass the global production area of a
crop used for biofuel production regardless of the specific purpose for which it is grown (i.e. including for non-
biofuel applications).
798 In the context of Malaysia's claim under Article 2.2, the Panel has found that "[t]he existence of large
variability in the modelling estimates makes it difficult to assess with accuracy the specific quantity of ILUC-
related GHG emissions by specific types of conventional biofuel crops". See para. 7.305 above.
799 Malaysia's first written submission, paras. 576-577.
800 European Union's first written submission, paras. 396-405.
801 Malaysia's second written submission, paras. 132-138.
802 Malaysia's second written submission, para. 135 and 581.
803 Finkbeiner Expert Opinion, (Exhibit MYS-45), p. 18.
804 Malaysia's first written submission, para. 575.

7.520. The European Union maintains that relying on a crop's share of expansion into land with
high-carbon stock as a proxy of ILUC risk is justified due to the limitations of available techniques
of precisely modelling ILUC-related GHG emissions.805 The European Union contends that feedstocks
for which LUC has been observed are more likely to expand their production area to meet an
increasing demand than those for which such phenomena have not been observed. 806 Therefore,
high levels of observable DLUC are, in the European Union's view, indicative of the risk of ILUC. The
European Union adds that using observable expansion of a feedstock production area as proxy of
ILUC risk suffers from a significantly lower degree of parametric uncertainty than the modelling
approach.807
7.521. The Panel understands that under the high ILUC -risk formula, the share of a feedstock's
production area expansion into land with high-carbon stock reflects land use change that is relevant
to both DLUC and ILUC effects of a given biofuel feedstock. The former takes place when additional
demand for the crop directly causes expansion of its production area into land with high -carbon
stock. The latter occurs when, to meet additional demand for biofuel, the existing agricultural
production of the same crop is diverted fr om non -fuel purposes to producing biofuel feedstock.
Because the demand for agricultural commodities is not diminishing and productivity improvements
are insufficient to meet the additional demand, such diversion is likely to lead to expansion of non -
biofuel agricultural production of the same crop, including into land with high -carbon stock. Such
expansion resulting from the diversion of production between different applications within a single
crop is what the high ILUC-risk formula is aimed at capturing.
7.522. The formula thus establishes a link between the observed DLUC and the likelihood of ILUC
within a single crop by estimating that crop's pressure on the existing agricultural production
resulting from increased biofuel demand. In the Panel's view, the existence of this link is reinforced
taking into account the operation of the sustainability and GHG emissions saving criteria under RED
II. These criteria exclude eligibility to count towards the renewable energy targets of biofuels
produced as a result of DLUC into areas designated in Article 29 of RED II, including land with high-
carbon stock. Arguably, the sustainability and GHG emissions savings criteria thus create an
incentive to serve the EU biofuel market by expanding into existing agricultural land, instead of into
land with high-carbon stock, including the same crop's production area used for non-fuel purposes.
7.523. The Panel further notes that Malaysia puts forward evidence criticizing this aspect of the
measure as assuming that the displaced crop is oil palm grown in Malaysia for food purposes, while
accepting the global nature of agricultural markets. 808 According to Malaysia, it is impossible to
establish a link between cultivation of food and feed crops for biofuel production in one geographical
location and the growing of crops in another geographical location.809
7.524. The Panel understands Malaysia's argument to mean that relying on palm oil's share of
production area expansion into land with high-carbon stock may lead to extrapolating the situation
of oil palm to the displaced crop, which can be grown anywhere in the world. The Panel notes in this
regard that it is uncontested between the parties that expansion of agricultural production triggered
by ILUC of a biofuel feedstock can occur anywhere in the world.810 Admittedly, the land use change
caused by expansion of non -biofuel agricultural production is not directly captured by the formula
and thus cannot be attributed to any specific biofuel feedstock.
7.525. The Panel does not consider this aspect of the meth odology to be problematic. The Panel
recalls that the measure does not attempt to attribute to biofuel feedstocks any specific levels of
ILUC-related GHG emissions. Instead, the measure seeks to estimate the pressure that an increased
demand for a particular biofuel feedstock exerts on existing non-biofuel agricultural production. This
pressure reflects the degree of the risk of causing ILUC. Estimating such a degree of risk does not
require attributing land use change to the expansion of any particular fee dstock displacing non -
biofuel agricultural production. Rather, there appears to be a reasonable basis for focusing on that
feedstock's own land use change effects reflecting its propensity to expand the production area in

805 European Union's first written submission, paras. 396-405.
806 European Union's first written submission, paras. 421-422; and response to Panel question No. 38,
paras. 223-224.
807 European Union's response to Panel question No. 38, paras. 222-230.
808 Malaysia's first written submission, para. 575.
809 Malaysia's first written submission, para. 575.
810 Malaysia's second written submission, para. 140. European Union's first written submission,
para. 464.

response to an increase in demand. This, in the Panel's view, confirms the existence of a rational
connection between expansion of a feedstock's production area into land with high-carbon stock and
the risk of ILUC-related GHG emissions.
7.526. The European Union acknowledges that addressing ILUC-related effects on the basis of the
share of a feedstock's production area expansion is not a perfect methodology that is free from
uncertainties. The Panel agrees and observes that the approach pursued by the measure requires
making a number of assumpti ons concerning certain elements of the high ILUC -risk formula. The
Panel notes, however, that the methodology is based on an observable phenomenon (the share of
expansion into land with high -carbon stock), thereby increasing the probability that the formul a
captures the causal connection between the demand for the crop in question and ILUC risk.
Therefore, as long as the methodology as a whole bears a rational connection to the measure's
objective, the regulatory distinction cannot be said to be a priori not legitimate solely on the grounds
that the European Union has decided to use observable land use change effects as a proxy of ILUC.811
7.527. Accepting a contrary proposition would de facto deprive WTO Members of the right to
regulate risks that do not lend themselves to quantitative analysis, or which are not sufficiently
studied, even though such risks constitute a genuine cause of concern.812 Nothing in the text of the
TBT Agreement supports such an interpretation of Article 2.1. To the contrary, the Preamble to the
TBT Agreement expressly recognizes that "no country should be prevented from taking measures
necessary … for the protection … of the environment".813 To that end, Article 2.2 lists as a relevant
consideration for assessing regulatory risks "available scientific and technical information ". This
confirms, in the Panel's view, that the TBT Agreement does not require WTO Members to regulate
only where perfect data is available.814
7.528. The Panel is further unconvinced by Malaysia's reliance on the expert report submitted in
this dispute to support the contention that a crop's share of expansion into land with high -carbon
stock cannot be used as a proxy of the risk of ILUC. The Panel notes that the expert report at issue
considers reliance on ILUC from the perspective of estimating the levels of related GHG emissions
using an LCA-based approach.815 The premise of Malaysia's argument thus seems to be misguided,
because, as explained at length in the preceding paragraphs, the measure focuses on the risk of
ILUC instead of seeking to attribute specific GHG emissions levels to any feedstocks. The Panel thus
considers that the measure does not need to establish a direct causal link between the pr oduction
of biofuel feedstock in one geographical location and the growing of crops in another geographical
location that leads to land use change effects.
7.529. In sum, the Panel considers that the evidence on the record provides a reasonable basis for
relying on the expansion of a feedstock's production area into land with high-carbon stock as a proxy
of ILUC risk. The measure captures land use change effects of crops used as biofuel feedstocks at
least within biofuel and non-biofuel applications of a single crop, but also across different food and
feed crops. As such, the measure establishes a rational connection between the expansion into land
with high-carbon stock and the risk of ILUC. In the Panel's view, because the measure does not seek
to attribute specific quantities of ILUC-related GHG emissions to any particular biofuel feedstock, it
is not necessary to establish a direct causal link between the displacement of non-biofuel agricultural
production by a crop used to produce biofuels and the ILUC-related GHG emissions.

811 Insofar as Malaysia is challenging specific data and assumption used in the high ILUC-risk formula,
they are addressed in the next section.
812 The Panel recalls that in the context of Malaysia's claim under Article 2.2 it has found that the risk of
ILUC-related GHG emissions, while currently not directly observable or precisely quantifiable, is not a risk that
appears to be theoretical, abstract or otherwise hypothetical.
813 Recital 6 to the Preamble to the TBT Agreement.
814 The Panel notes that in the context of Article 5 of the SPS Agreement, prior panels and the
Appellate Body have found that a Member can choose either a quantitative or qualitative methodology to
conduct a risk assessment. (See e.g. Appellate Body Report, EC – Hormones, para. 187.) Sometimes a
quantitative approach may not be appropriate, in particular when reliable specific numeric data is not available.
(Panel Report, Australia – Apples, para. 7.441.) The Appellate Body has recognized that various elements of a
Panel's analysis under Article 2.2 could likewise involve both a quantitative and qualitative assessment.
(Appellate Body Report, US – COOL (Article 21.5 – Canada and Mexico), para. 5.211.)
815 Finkbeiner Expert Opinion, (Exhibit MYS-45), pp. 9-10.

The relationship between the share of crop's expansion into land with high -carbon
stock and EU biofuel demand
7.530. Malaysia submits that the distinction based on the concepts of ILUC and high ILUC -risk in
particular is not legitimate, because it is impossible to determine the share of a crop's expansion
driven by an increase in EU biofuel demand as opposed to other factors. 816 The European Union
acknowledges that it is impossible to attribute a specific rate of expansion to each driver given the
multitude of different causes of the expansion. 817 The European Union maintains that its approach
is justified because the impact of cultivating a particular crop is the same regardless of its use. 818
The European Union observes that because demand for agricultural commodities is not diminishing
and cannot be met through productivity increases, an increase in biofuel demand will lead to
expansion of non-biofuel agricultural production and, by implication, land use change.819
7.531. In the preceding subsection, the Panel has found that because the measure does not seek
to attribute specific levels of ILUC -related GHG emissions to any particular feedstocks, it does not
need to establish a direct causal link between the displacement of non-biofuel agricultural production
by a crop used to produce biofuels and the ILUC -related GHG emissions. In the Panel's view, a
similar rationale applies to Malaysia's argument that the European Union's methodology fails to
attribute ILUC-related GHG emissions to EU biofuel demand. The Panel agrees that the high ILUC -
risk formula does not account for different drivers of demand for crops used to make biofuel
feedstocks. However, attributing land use change to specific factors should not matter insofar as the
degree of ILUC risk is associated with the global average share of expansion into high-carbon stock
land of a crop as a whole (i.e. for all applications). The degree of ILUC risk reflects the pressure that
the crop production globally exerts on the agr icultural land as a result of an increased demand in
any particular sector. Therefore, whenever demand for a biofuel feedstock increases, it contributes
to that pressure and, by implication, to the risk of ILUC.
7.532. The Panel further notes Malaysia's argument that the high ILUC-risk determination applies
to the entire crop, regardless of the place of cultivation, whether the specific yields in question have
displaced any food and feed crops and local efforts with respect to sustainability.820 Malaysia submits
that a country-specific or even region-specific approach based on measuring the DLUC of all crops
would be more appropriate, precise and non -discriminatory.821 In Malaysia's view, taking such an
approach would allow taking into account national and regional differences, which focusing on global
expansion of a crop fails to do.822
7.533. The European Union contends that the approach proposed by Malaysia ignores the global
nature of ILUC and lacks feasibility. 823 The European Union reiterates that, as far as oil crops used
as biofuel feedstocks are concerned, their expansion into land with high-carbon stock, including any
changes in the trends potentially resulting from domestic policies, is captured by the high ILUC-risk
formula, which is subject of a review.824
7.534. The Panel recalls that in the context of Malaysia's claim under Article 2.2, it has addressed
various alternative measures proposed by Malaysia, based on a DLUC approach applicable to all
crops placed on the EU market. Here, the Panel's assessment is focused on the alleged discrimination
between the conditions in Malaysia and in other countries where LUC occurs. It is uncontested
between the parties that a high ILUC-risk classification applies to the entire crop, regardless of the
geographical location.
7.535. The Panel disagrees with Malaysia's argument that such a global approach to the risk of ILUC
is flawed because it fails to consider the conditions "of biofuel production " prevailing in Malaysia.
The Panel recalls in this regard that its determination of whether the relevant regulatory distinction
is applied in a manner that constitutes arbitrary or unjustifiable discrimination involves consideration

816 Malaysia's first written submission, para. 581.
817 European Union's first written submission, para. 118.
818 European Union's response to Panel question No. 39, para. 239.
819 European Union's first written submission, paras. 380-382.
820 Malaysia's first written submission, para. 66.
821 Malaysia's second written submission, paras. 158-169; response to Panel question No. 30, p. 12.
822 Malaysia's second written submission, para. 162.
823 European Union's comments on Malaysia's response to Panel question No. 30, paras. 35-37.
824 European Union's comments on Malaysia's response to Panel question No. 46, para. 54.

of the conditions that are "relevant" for that purpose.825 The relevant condition in the high ILUC-risk
cap and phase-out is the degree of ILUC risk posed by the biofuel feedstock. This degree of risk is
estimated on the basis of the share of that feedstock's production area expansion into high -carbon
stock land. The country -specific approach implied by Malaysia's argument disregards the fact that
the concept of ILUC-risk is global in nature. The global ILUC-risk profile of each crop distinguishes
this case from certain prior cases (such as US – Shrimp) in which the regulating Member's failure to
adequately account for coun try-specific circumstances was found to constitute arbitrary or
unjustifiable discrimination between countries where different "conditions prevail[ed]" within the
meaning of the chapeau of Article XX of the GATT 1994. Further, any regional differences affecting
such expansion would be reflected in the data that is fed into the high ILUC -risk formula. As such,
the measure thus reflects the conditions of biofuel feedstock production, including in Malaysia.
Therefore the Panel considers that the evidence submitted by the parties provides a reasonable basis
for designating a global ILUC-risk profile of a crop rather than determining it on a country-by-country
basis.
7.536. The Panel thus concludes that it is not necessary to demonstrate a direct causal link between
a specific share of a feedstock's production area expansion and demand for biofuel made from that
feedstock in the European Union. The Panel further concludes that even though the measure does
not distinguish between different drivers of the production area expansion, it is rationally related to
its objective of limiting the risk of ILUC-related GHG emissions associated with crop-based biofuels.
This is because the measure applies only to biofuels consumed on the EU market.
Distinguishing between different biofuel feedstocks based on their degree of ILUC
risk
7.537. Another defining feature of the high ILUC-risk cap and phase-out is that it seeks to attribute
different degrees of ILUC risk (i.e. high and not high) to different biofuel feedstocks. This approach
appears a priori consistent with the underlying assumption of the measure that the degree of ILUC
risk is associated with a specific feedstock, and reflected in that feedstock's share of production area
expansion into land with high -carbon stock, rather than with any specific condition causing the
expansion.
7.538. According to Malaysia, differentiating between crops on the basis of their alleged ILUC -risk
levels contradicts the evidence that ILUC effects cannot be measured or quantified.826 Malaysia adds
that the agricultural markets are global in nature and that it is generally agreed that ILUC effects
are not crop-specific, which, it argues, is confirmed in the European Union's rejection of the results
of the economic studies modelling the effects of ILUC in the Status Report.827
7.539. The European Union reiterates that the measure uses the share of expansion into land with
high-carbon stock as a proxy of ILUC risk. It points out in this regard that different biofuel feedstocks
are produced on land with varying carbon content and have different yields, impacting their overall
levels of GHG emissions.828 The degree of ILUC risk will thus vary from one feedstock to another as
the share of production area expansion into land with high-carbon stock varies for each of them.829
The European Union adds that differential ILUC effects are confirmed by the results of studies
examined as part of the Impact Assessment for the ILUC Directive.830
7.540. The Panel considers that the difficulties in quantifying ILUC-related GHG-emissions for each
feedstock with precision do not in and of themselves preclude the possibility that the degree of ILUC
risk may vary from one feedstock to another. As observed by the Panel in this Report, quantifying
ILUC-related GHG emissions and estimating the risk of ILUC and related GHG emissions are different
issues that raise different sets of questions and cannot be approached from the same methodological

825 Appellate Body Reports, EC – Seal Products, para. 5.299. The Panel notes that this finding by the
Appellate Body concern the chapeau of Article XX of the GATT 1994. As explained earlier, both the chapeau of
Article XX and sixth Recital to the TBT Agreement share textual similarities, including a reference to the
"arbitrary or unjustifiable discrimination between countries where the same conditions prevail". The Panel
considers the Appellate Body's interpretation of the chapeau of Article XX to be relevant to the Panel's
interpretation and application of Article 2.1.
826 Malaysia's first written submission, para. 580.
827 Malaysia's first written submission, paras. 580 and 610.
828 European Union's first written submission, paras. 417-430.
829 European Union's first written submission, paras. 417-418 and 428.
830 European Union's first written submission, para. 418, fn 287.

perspective. Indeed, evidence submitted by the parties indicates that ILUC -related GHG emissions
factors have been studied on a crop-by-crop basis.831 The Impact Assessment prepared for the ILUC
Directive confirms that "models tend to allocate different (indirect) land -use change emissions to
different feedstocks".832 Therefore, the fact that upon adoption of the ILUC Directive in 2015 the
European Union decided not to differentiate at that time between different feedstocks based on the
levels of their ILUC -related GHG emissions does not now preclude it from attributing different
degrees of ILUC risk on a feedstock -by-feedstock basis. 833 For the same reasons, the Panel is
unconvinced that it is generally agreed that effects of ILUC are not crop-specific. Such an assertion
does not find support in the evidence submitted by the parties.834
7.541. Moreover, the Panel recalls that the measure seeks to estimate the degree of ILUC risk
considered as a feedstock's pressure on existing agricultural land as a result of increased demand.
This pressure is, in turn, estimated through the share of expansion into land with high-carbon stock.
As evidenced in the Annex to the Delegated Regulation, different food and feed crops p resent
different shares of expansion into such type of land, suggesting different levels of pressure on the
existing agricultural land as a result of an increased demand. As noted by the European Union, these
differences can be associated with the carbon c ontent of the land on which expansion occurred, as
well as the crop's yield, both of which are captured in the high ILUC-risk formula. Since these factors
vary from one feedstock to another, they result in different levels of ILUC risk, as determined through
the formula.
7.542. In light of the foregoing, the Panel finds that the evidence submitted by the parties provides
a reasonable basis for distinguishing between different biofuel feedstocks based on their respective
degrees of ILUC risk estimated on the basis of the share of expansion into land with high -carbon
stock.
The alleged protectionist motive of the measure
7.543. The Panel further considers relevant to the question whether the regulatory distinction at
issue is legitimate Malaysia's arguments relating to the alleged protectionist motive of the
measure.835 According to Malaysia, this motive is reflected in the design and operation of the high
ILUC-risk cap and phase-out, including the high ILUC-risk formula; the European Union's history of
seeking to limit imports of palm oil -based biofuel, inter alia through trade defence measures; the
measure's legislative history and the stated intentions of the European Parliament.836
7.544. The Panel observes that Malaysia's arguments pertaining to the design of the measure and
in particular the high ILUC-risk formula are addressed throughout this and the following sections of
this Report, and need not be repeated here. As regards Malaysia's arguments concerning the use of
trade defence instruments against the imports of palm oil-based biofuel and the measure's legislative
history, including statements by members of the European Parliament, the Panel has addressed
them as part of its examination of the measure's objective under Article 2.2. The Panel has concluded
that the evidence submitted in this regard, considered individuall y and together, does not support
Malaysia's assertion that the measure has a protectionist motive. For the same reasons, the Panel
does not consider the evidence on the record to show that the regulatory distinction at issue is a
priori not legitimate.

831 Study Report (2017), (Exhibit EU-28), pp. 26-39. The very fact that the modelling studies relied on
by both parties and analysed by the European Union in the Status Report consider ILUC effects on a crop-
specific basis is, in the Panel's view, an indication that the risk of such effects vary across different crops. In
fact, Malaysia seems to implicitly acknowledge that different crops can present different degrees of the risks of
ILUC-related GHG emissions, insofar as it relies on the conclusions of these studies to argue that soybean has
higher estimated levels of ILUC-related GHG emissions than oil palm. Malaysia's first written submission,
para. 580.
832 Impact Assessment (2012), (Exhibit EU-26), p. 85.
833 As a result, ILUC was addressed in the ILUC Directive only through the 7% maximum share.
834 See Malaysia's first written submission, para. 580. The Panel notes that Malaysia relies primarily on
the results of modelling studies analysed in the Status Report and addressed by the Panel in this section of the
Report.
835 Malaysia's first written submission, para. 584.
836 Malaysia's first written submission, para. 584.

Conclusion on the a priori legitimacy of the regulatory distinction based on high
ILUC-risk
7.545. In light of the foregoing, the Panel disagrees with Malaysia's position that, conceptually, a
regulatory distinction based on a feedstock's degree of ILUC risk cannot be a priori legitimate. The
Panel has found that the evidence submitted by the parties provides a reasonable basis for relying
on the share of a feedstock's production area expansion into land with high-carbon stock as a proxy
of the risk of ILUC associated with production of a particular biofuel feedstock. Because the measure
seeks to estimate the degree of risk of ILUC rather than to attribute quantities of ILUC-related GHG
emissions to specific biofuel feedstocks, it is not necessary to establish a direct causal link between
EU biofuel demand, displacement of non -biofuel agricultural production and the resulting land use
change effects. The Panel thus finds that, on a conceptual level, the regulatory distinction based on
a high degree of ILUC risk is a priori legitimate.
7.1.2.4.5.3 Application of the regulatory distinction at issue
7.546. The Panel now turns to Malaysia's arguments, which, in the Panel's view, relate to the
manner in which the regulatory distinction at issue is applied in the high ILUC -risk cap and phase-
out. These arguments focus on certain aspects of the design, structure and operation of the measure
that could result in the regulatory distinction based on high ILUC -risk not being applied in an
even-handed manner or being applied in a manner that constitut es arbitrary or unjustifiable
discrimination. The Panel notes that some of these arguments are also raised to substantiate
Malaysia's contention that the regulatory distinction at issue is not legitimate. The Panel recalls,
however, that it is not bound by the presentation of the arguments by the parties and enjoys
discretion in structuring its analysis.837
7.547. Malaysia takes issue with a number of assumptions for the high ILUC -risk formula, as well
as the variables and sources of the data incorporated therein. 838 Malaysia refers in this regard to
factual sections of its submissions, where it addresses the scientific underpinnings of the measure.839
Malaysia also argues that the European Union has not disclosed the exact calculations and sources
relied on to arrive at the values, which applied in the formula lead to the determination of palm oil
as currently the only high ILUC-risk feedstock.840
7.548. The Panel agrees with Malaysia that the sources of certain assumptions and values
incorporated in the formula are not easily discernible from the Delegated Regulation and its Annex,
as well as other documents relevant to the adoption of the measure. 841 However, in response to a
number of questions from the Panel, the European Union indicates the relevant sources and explains
how data is used in the formula.842 The Panel notes that Malaysia has had an opportunity to comment
on those responses and to a large extent availed itself of this opportunity.
7.549. Malaysia raises overall a number of issues concerning the high ILUC-risk formula and the
underlying data and assumptions. More specifically, Malaysia contests the use of a relative, as
opposed to an absolute, share of a feedstock's production area expansion into land with high-carbon
stock to estimate ILUC risk, and r elying in this regard on historical data. 843 Malaysia also contests
the calculation of the share of palm oil's expansion into forestland and peatland, as well as the

837 The Panel is also of the view that the practical significance of a finding that a particular aspect of a
measure is inconsistent with Article 2.1 would be the same regardless of whether it is viewed as being
indicative of the absence of a legitimate regulatory distinction, or of that distinction being applied in a manner
that constitutes arbitrary or unjustifiable discrimination.
838 Malaysia's first written submission, para. 575.
839 Malaysia's first written submission, para. 575.
840 Malaysia's first written submission, para. 575.
841 Primarily in Status Report (2019), (Exhibits EU-3, MYS-92); and Study Report (2017), (Exhibit EU-
28).
842 See, for example, European Union's responses to Panel questions No. 16, No. 23, No. 40, and
No. 43.
843 Malaysia's first written submission, paras. 442-452 and 581; and second written submission,
paras. 149-154.

productivity factor.844 Last but not least, Malaysia takes issue with the calculation of the significant
expansion threshold.845
7.550. The Panel will address these arguments in more detail when dealing with specific aspects of
the high ILUC-risk formula. At this stage, the Panel recalls more generally that its task in this dispute
is not to attempt to resolve scientific debates on the basis of the evidence submitted by the parties.
Rather, as explained in more detail above, the Panel has to determine whether considering the
entirety of the evidence, there is a reasonable basis for the regulatory distinction and the manner in
which it is applied in the high ILUC -risk cap and phase-out.846 The Panel recalls that nothing in the
TBT Agreement precludes WTO Members from regulating areas in respect of which scientific
information is not readily available. Indeed, Article 2.2 recognizes Members' right to address
regulatory risks upon consideration of, inter alia, "available scientific and technical information".
7.551. With this background, the Panel now turns to the aspects of the measure which, in its view,
are relevant to the manner in which the regulatory distinction has been applied. The Panel recalls
that the central element of the formula relates to the share of a feedstock's production area
expansion into land with high -carbon stock, adjusted for the crop's productivity. This share is
calculated as the sum of the share of expansion into forestland and into wetland.847 Both forests and
wetlands, especially peatland, are known to contain high volumes of CO2, which are released to the
atmosphere when forests and wetlands are cleared.848 If the total share of expansion exceeds 10%,
the feedstock is considered as high ILUC -risk biofuel feedstock. On this very general level of the
formula, two elements thus impact the classification of a feedstock as high ILUC -risk: the
methodology and data used to calculate the share of expansion into high-carbon stock land and the
10% "significant expansion threshold".
Relative share of expansion rate into land with high-carbon stock
7.552. As noted above, to estimate the degree of ILUC risk associated with producing a particular
feedstock, the measure uses as proxy the share of expansion of the feedstock's production area into
land with high-carbon stock. As the measure relies on the share of expansion of a feedstock's global
production area, this element of the formula is expressed in relative terms. This means that the
central indicator of the degree of ILUC risk is not the absolute expansion of a crop's production area
but rather a portion of that expansion that has taken place on land with high-carbon stock, expressed
in percentage points.
7.553. Malaysia submits that relying on the relative share of expansion of a feedstock's production
area into land with high -carbon stock, rather than on the absolute expansion of such production,
area skews the analysis. According to Malaysia, this methodology disadvantages biofuels made from
feedstocks commercialized more recently, such as palm o il, as compared to biofuels made from
crops that have already reached significant levels of global production. 849 In support of this
contention, Malaysia relies on an expert report suggesting that the absolute area of expansion is a
better indicator of ILUC-related environmental effects.850 According to this report, for crops with a
significant global production area even a relatively small expansion of that area is likely to result in
substantial impacts on the environment, including through land use change.851 Malaysia provides
the example of soybean, which has increased its production area by 3183.5 kha in absolute terms,
which is 3.5 times more than oil palm, yet the relative increase of the production area of the two
crops is 3% and 4% respectively.852
7.554. The European Union submits that the measure is intended to capture the overall impact of
further stimulating demand for the agricultural commodity in question, including both the absolute

844 Malaysia's first written submission, para. 119; second written submission, paras. 138-140 and 173-
174; and responses to Panel questions No. 51, p. 24 and No. 52, pp. 25-28.
845 Malaysia's first written submission, para. 442; and second written submission, para. 170.
846 Panel Reports, Australia – Tobacco Plain Packaging, para. 7.627.
847 Article 3(b) of the Delegated Regulation.
848 IPCC Report, "Climate Change and Land", (Exhibits EU-225, MYS-89), p. 20.
849 Malaysia's first written submission, para. 581; and response to Panel question No. 47, pp. 19-20.
850 Finkbeiner Expert Opinion, (Exhibit MYS-45), p. 18. The report states, inter alia, that "for climate
change and the real world impact, it is not the relative effect that matters, it is the absolute effect as the
absolute amount of land use change correlates with the associated GHG emissions".
851 Finkbeiner Expert Opinion, (Exhibit MYS-45), p. 18.
852 Finkbeiner Expert Opinion, (Exhibit MYS-45), p. 18.

and relative expansion.853 In the European Union's view, a relative expansion is relevant because it
is an indicator of demand. 854 The European Union explains that focusing on the relative share of
expansion reflects the measure's objective to address the risk of ILUC -related GHG emissions
associated with each additional unit of biofuel produced.855 According to the European Union, the
risk of ILUC associated with such additional demand is thus not a function of the total expansion of
a crop, but rather of the portion of that expansion per unit of extra production of a feedstock t hat
takes place on land with high-carbon stock.856
7.555. The Panel recalls that the high ILUC -risk cap and phase-out does not seek to estimate the
quantities of GHG emissions resulting from land use change, but the risk of causing ILUC as a result
of increasing d emand for a particular biofuel feedstock. The European Union has thus opted for
addressing ILUC-related GHG emissions by identifying crops with the highest likelihood of expanding
into high-carbon stock land for an additional unit of biofuel produced.
7.556. Since each unit of additional biofuel consumed will lead to a corresponding additional unit of
feedstock produced (adjusted for productivity), identifying which crop has a higher risk of leading to
land use change will also help determine which crop would lead to higher absolute amounts of land
use change for the same increase in units of additional biofuel consumed. This is the case regardless
of the current size of the feedstock's global production area. Relying on the "relative" share of
expansion places th e focus on the crop's propensity to expand into land with high -carbon stock,
which is commensurate with the logic of the approach adopted in the measure. Malaysia's argument,
and the conclusions of the expert report it relies on, appear thus to be based on an incorrect
understanding of the operation of the measure. Therefore, the Panel observes that using a relative
share of expansion into land with high-carbon stock is better suited to reflect the risk of ILUC related
to a marginal increase in production of a given crop.
7.557. The Panel further observes that the measure takes into account the absolute expansion of
the production area by requiring that the average annual expansion of the production area affects
more than 100 000 hectares. 857 Therefore, the measure ensures that the share of expansion into
land with high -carbon stock is considered only with respect to feedstocks presenting overall a
sizeable expansion of the production area. The Panel notes that while Malaysia considers this
threshold arbitrary, it does not substantiate this contention.858 The Panel is thus not persuaded that
there is anything arbitrary in the application of such a minimum threshold insofar as it allows the
measure to focus on the most problematic biofuel feedstocks that could lead to land use change. In
sum, the evidence submitted by the parties provides a reasonable basis for estimating the degree
of ILUC risk based on the relative share of expansion into land with high-carbon stock.
Reliance on past data
7.558. In the preceding section, the Panel has discussed two elements of the formula conditioning
classification of a feedstock as high ILUC risk. The first is the average annual expansion rate of a
feedstock's production area, which has to exceed 1% and affect more than 100 000 h ectares in
order to be considered whether the feedstock can be associated with a high degree of ILUC risk. 859
The second is the share of that expansion into land with high -carbon stock, which is the proxy of
the degree of ILUC risk.860 Both of these values are estimated with respect to a 2008-2016 reference
period.
7.559. Malaysia criticizes the reliance on data relating to this reference period and earlier, which it
calls "historical". Malaysia argues that relying on such past data ignores r ecent trends and
developments regarding the protection of forestland and wetland. According to Malaysia, these
developments suggest that the forest area in Malaysia has been recently increasing. 861 Malaysia
adds that using past data disregards the efforts o f palm oil-producing countries to tame the

853 European Union's response to Panel question No. 122, para. 669.
854 European Union's response to Panel question No. 122, paras. 671-672.
855 European Union's response to Panel question No. 122, para. 671.
856 European Union's response to Panel question No. 122, para. 672.
857 Article 3(a) of the Delegated Regulation.
858 Malaysia's first written submission, para. 442.
859 Article 3(a) of the Delegated Regulation.
860 Article 3(b) of the Delegated Regulation.
861 Malaysia's first written submission, paras. 93 and 257.

expansion of oil palm plantations and reduce LUC -related GHG emissions more generally. 862 In
Malaysia's view, the selection of the 2008 -2016 reference period puts in focus oil palm, which
expanded more rapidly during that period of time, while ignoring high expansion rates of production
areas of other biofuel feedstocks recorded earlier in the past.863
7.560. The European Union submits that it is reasonable from a regulatory point of view to base
forecasts about future deve lopments on trends observed over a recent time period. 864 The
European Union contends that it relied on the data available at the time of preparing the Delegated
Regulation and the Status Report and the cut -off dates were aligned with the introduction of th e
protection of land with high-carbon stock in RED I and the tabling of the European Commission's
proposal for RED II.865
7.561. The Panel notes the European Union's explanation that the beginning of the reference period
corresponds with the introduction of the s ustainability and GHG emissions saving criteria intended
to protect land with high-carbon stock.866 Following the entry into force of these criteria, which focus
on DLUC-related effects, EU biofuel demand was expected to be met entirely by production coming
from crops grown on existing agricultural land.867 This has fuelled concerns about ILUC and its impact
on the environment.868 Malaysia does not appear to be contesting this rationale for choosing 2008
as the beginning of the reference period.
7.562. Rather, Malaysia argues that the reference period coincided with the expansion of oil palm,
whereas other food and feed crops had reached the peak of their expansion earlier. However,
Malaysia does not provide evidence concerning such peaks of expansion. In particular, Malaysia does
not provide data on the expansion of the production area into land with high-carbon stock for other
biofuel feedstocks coinciding with such peaks, or explain whether such data is available. As a result,
the Panel is not in a position to assess whether relying on pre -2008 data would lead to a different
high-ILUC risk classification of various food and feed crop -based biofuels. Moreover, the Panel
considers that this argument contradicts Malaysia's position that the reference period should reflect
the most recent developments allegedly indicating declining deforestation rates in Malaysia. 869 In
the Panel's view, rely ing on up -to-date data is of paramount importance for accurately assessing
risks related to current and future trends.
7.563. This brings the Panel to Malaysia's argument that the European Union has ignored the most
recent developments relevant to estimating the share of palm oil's production area expansion into
land with high-carbon stock and, by implication, the degree of ILUC risk. In this regard, Malaysia
refers to the international commitments and internal policies aimed at limiting deforestation.870 The
Panel acknowledges the importance of local efforts aimed at protecting the environment. The Panel
notes that the effects of such policies would be reflected in the data on the expansion into land with
high-carbon stock. This, in turn, raises the question whether the European Union should have relied
on more recent evidence pertaining to expansion rates of biofuel feedstock's production areas.
7.564. The Panel notes that the Delegated Regulation and the Status Report, which contain the
relevant requirements, data and a ssumptions resulting in the classification of palm oil as the only
high ILUC-risk feedstock, were adopted in early 2019. Therefore, as regards the adoption of the high
ILUC-risk cap and phase -out, the Panel considers as relevant data and scientific studies available
not only during the 2008-2016 period but also past the 2016 cut -off date until the adoption of the
Delegated Regulation.
7.565. With respect to the latter period, the parties produce as evidence two studies analysing
deforestation rates in palm oil -producing countries, as well as a 2020 -2029 FAO Agricultural

862 Malaysia's second written submission, para. 159.
864 European Union's response to Panel question No. 33, para. 174.
865 European Union's response to Panel question No. 58, para. 359.
866 The Status Report states that the 2008 year was chosen "to ensure policy coherence with the cut-off
dates for the protection of highly biodiverse land and land with high carbon stock set out in Article 29 of the
Directive." (Status Report (2019), (Exhibit EU-3), p. 6).
867 ILUC Directive, (Exhibits MYS-168), p. 2; and Status Report (2019), (Exhibit EU-3), p. 4.
868 ILUC Directive, (Exhibit MYS-168), Recital 5, p. 2.
869 Malaysia's first written submission, para. 58.
870 Malaysia's first written submission, paras. 277-294.

Outlook.871 The Panel notes that this evidence relates to deforestation rates more generally and does
not provide information on expansion into land with high -carbon stock on a crop-by-crop basis. As
a result, this evidence does not allow for a comparison with the data relied on by the European Union.
It does not therefore corroborate Malaysia's assertion that the rate of oil palm's expansion into land
with high-carbon stock w as lower than it would ap pear from the measure at issue. 872 The Panel
further notes that a 2021 study submitted by the European Union suggests that the expansion rate
of oil palm into forestland in Indonesia had hardly changed between 2001 and 2019. 873 The Panel
therefore considers that the evidence submitted by the parties does not put in question the data
relied on by the European Union with regard to the 2008-2016 reference period.
7.566. However, the Panel stresses the importance of grounding the high ILUC -risk determination
in the most recent available data to ensure a balanced and coherent application of the measure in
its current design. The share of feedstock's production area expansion into land with high -carbon
stock is a central element in the high ILUC-risk formula and one of the most significant factors that
can impact the classification of a biofuel feedstock as high ILUC risk.874 A balanced and coherent
operation of the high ILUC-risk cap and phase-out is therefore premised on the accuracy of the data
on expansion into land with high-carbon stock. This is all the more true given that the measure uses
information on past trends to address current and future concerns. These trends may be subject to
dynamic changes driven by market forces and the regulatory landscape, among other fa ctors. The
Panel considers particularly relevant in this context the efforts by Malaysia aimed at limiting the
expansion of oil palm plantations, including into land with high-carbon stock, and deforestation more
generally. It is therefore of paramount imp ortance that the underlying data, as well as the related
estimates and assumptions, are regularly reviewed to take due account of changes in the relevant
circumstances.
7.567. Regular reviews of, and updates to, the underlying data seem also pertinent in light of the
relatively short timeframe for the implementation of the high ILUC-risk cap and phase-out. To recall,
the measure aims at excluding biofuels made from high ILUC -risk feedstocks from the eligibility to
count towards the renewable energy targets by 2030 at the latest. In light of this timeline, an even-
handed application of the measure would require a regular review of the data until that date and
beyond.875
7.568. Moreover, the Panel notes that reviewing the data on expansion into land with high -carbon
stock allows accounting for possible substitution effects between different biofuel feedstocks. The
Panel notes in this regard Malaysia's argument that phasing out palm oil as biofuel feedstock could

871 M. Weisse and E.D. Goldman, "The World Lost a Belgium-sized Area of Primary Rainforests Last
Year", (Exhibit IDN-25), "Oilseeds and oilseed products" OECD-FAO Agricultural Outlook 2021-2030 (agri-
outlook.org), p. 7, (Exhibit EU-227); D.L.A. Gaveau et al., "Rise and fall of forest loss and industrial plantations
in Borneo (2000–2017)", Conservation Letters, Vol. 12:3 (2018), 1, (Exhibit EU-254). The Panel's analysis of
this evidence is limited to the question whether it supports Malaysia's contention regarding the alleged lower
rates of deforestation not being taken into account in the measure. The Panel will address the data relied on to
calculate the share of palm oil's production area expansion into land with high-carbon stock is addressed in the
next section of this Report.
872 See European Union's response to Panel question No. 50, paras. 309-315.
873 A 2021 study submitted by the European Union suggests that the share of oil palm's expansion into
forestland in Indonesia peaked in 2016 and started slowing down in 2017-2019. However, the study concludes
that the fall in the expansion of oil palm plantations in Indonesia is not related to the "the common drivers
described for forest transitions" and that "there is no guarantee that the low levels of conversion seen in 2017-
2019 will remain". (Gaveau D. & co., Slowing deforestation in Indonesia follows declining oil palm expansion
and lower oil prices, Research Square, 15 January 2021, (Exhibit EU-157), p. 8.) In addition, the study does
not seem to address the expansion of oil palm into peatland. The Panel notes that this study is specific to the
situation in Indonesia. The Panel recalls, however, that the share of a production area expansion is determined
for the feedstock as a whole, irrespective of where the expansion occurs. The Panel remains mindful of this
consideration when analysing other evidence concerning expansion of oil palm into land with high-carbon stock
land in Malaysia and/or Indonesia.
874 The Panel notes that it is much less likely that other elements of the high ILUC-risk formula, such as
the productivity factor or the significant expansion threshold evolve significantly within a relatively short period
of time.
875 In the context of its findings under Article 2.4, the Panel observed that Article 2.4 is "not a static
obligation and that there is an ongoing obligation to reassess technical regulations in light of new international
standards that are adopted or revised", and that the obligation in Article 2.3 of the TBT Agreement contextually
supports that view (referring to Panel Report, EC – Sardines, para. 7.81). The Panel considers that the same
considerations inform the assessment of a technical regulation under Article 2.1.

lead to substitution by biofuels made from other biofuel feedstocks.876 An increased demand for such
feedstocks, combined with lower productivity rates of the crops used to make them, will, in
Malaysia's view, lead to further expansion of the production area reducing the effectiveness of the
measure. While the evidence before the Panel suggests that excluding a particular biofuel from the
eligibility to count towards the renewable energy targets may lead to some gradual substitution by
other eligible biofuels, the extent of such substitution effects is difficult to predi ct.877 If such
substitution effects were to occur, they could indeed propel the production area expansion into land
with high-carbon stock for feedstocks which would benefit from a shift of demand away from palm
oil, potentially leading to an increase in their d egree of ILUC risk. As noted by Malaysia 878, a
periodical review of the data on the share of expansion into land with high -carbon stock could in
principle capture LUC effects of a potential substitution of palm oil -based biofuel by other food and
feed crop-based biofuels.
7.569. The European Union itself emphasizes the importance of a regular review of the available
information in the absence of more recent data and points out that such a review mechanism is
incorporated in Article 7 of the Delegated Regulation. 879 This provision requires the European
Commission to review "all relevant aspects of the report on feedstock expansion", including the data
on feedstock production area expansion and the low ILUC-risk certification criteria.880 It thus appears
to be of central importance to ensuring that the high ILUC-risk formula incorporates the most recent
available data.881 Malaysia does not question the scope of this review provision. It submits, however,
that the review provided for in Article 7 has not been conducted and it is uncertain whether it would
be carried out on a regular basis.882
7.570. Pursuant to Article 7 of the Delegated Regulation, the first review of the data on expansion
into land with high-carbon stock was to be concluded by 30 June 2021. It is uncontested between
the parties that this review had not taken place by the time the parties filed their last substantive
submissions.883 This means that the high ILUC -risk cap and phase-out was operating in 2022, and
likely beyond, on the basis of data covering the 2008 -2016 period, which had not been updated.
During that time, new data may have become available that might have required adjustments to
the operation of the measure and its application to any specific crop. Although the European Union
contends that the delay was due to the COVID-19 pandemic, which affected many activity areas of
the European Commission, it does not provide any specific arguments on how it affected the
feasibility of reviewing the data underlying the high ILUC risk determination.884 The Panel appreciates
the difficulties that may arise in reviewing complex scientific information, especially in times of a
global public health emergency. However, a general reference to the COVID -19 pandemic is
insufficient to justify a d elay in the review of data that is still ongoing at the time of drafting this
report. This is all the more true, given that the European Union itself considered that the review
could and should have been completed by 30 June 2021.885
7.571. Therefore, insofar as the review of data used as basis for the classification of feedstock(s)
as high ILUC-risk is not undertaken in a regular and timely manner, the measure cannot be said to
be applied in an even-handed manner. This is because the situation relevant to the asse ssment of
the share of expansion into land with high-carbon stock may have changed since the determination
was made on the basis of the 2008 -2016 reference period. This finding of the Panel should not be

876 Malaysia's first written submission, para. 123; and response to Panel question No. 54, pp. 28-31.
877 R. Delzeit, T. Heimann, F. Schünemann and M. Söder, "Who benefits really from phasing out palm
oil-based biodiesel in the EU", Kiel Working Paper No. 2203, Kiel Institute for the World Economy, December
2021, (Exhibit IDN-2), p. 11. See also above section concerning the substitutability of palm oil-, rapeseed oil-,
and soybean oil-based biofuels.
878 Malaysia's response to Panel question No. 54, pp. 31-32.
879 European Union's first written submission, para. 106; and second written submission, para. 36.
880 The full text of Article 7 of the Delegated Regulation is quoted in para. 2.55 above.
881 The Panel notes that Article 26(2) subpara. 5 of RED II provides for a review of the low ILUC-risk
certification criteria and the criteria for determining the high ILUC-risk feedstocks. This review seems,
however, to be of a more general nature, while the review under Article 7 of the Delegated Regulation appears
to be focusing on expansion into land with high-carbon stock, which is at the centre of the European Union's
arguments.
882 Malaysia's second written submission, para. 184; response to Panel question No. 54, p. 31.
883 European Union's response to Panel question No. 56, para. 348.
884 European Union's response to Panel question No. 57, para. 352.
885 The Panel is unpersuaded by the European Union's argument that the provision indicates an
"indicative deadline", given its normative language. European Union's response to Panel question No. 56,
para. 347.

understood as requiring the measure to be continuous ly updated to take account of any relevant
new data sources that becomes available and that might change the measure's accuracy in
determining high-ILUC risks and, consequently, its even-handedness. Rather, the regulatory design
of the measure, with its he avy reliance on data and assumptions reflecting past events in order to
address current and future risks requires the European Union to verify on a regular and timely basis
whether the data supports the high ILUC -risk classification. Finally, the Panel not es that while its
findings regarding the review of data take into account developments taking place after panel
establishment, both parties, in particular the European Union, relied on such developments to
support their respective positions.886
7.572. The Panel therefore finds that the European Union has applied the high ILUC -risk cap and
phase-out inconsistently with Article 2.1 of the TBT Agreement by failing to conduct a timely review
of the data used to determine which biofuels are high ILUC risk, as this resul ts in arbitrary or
unjustifiable discrimination between countries where the same conditions prevail.
Calculation of the share of expansion rate into land with high-carbon stock
7.573. The Panel further notes that Malaysia raises arguments contesting certain speci fic values
and assumptions used to calculate the share of palm oil's production area expansion into land with
high-carbon stock, as well as their sources. These arguments concern the method of calculation of
the share of expansion into forestland and peatl and, as well as the productivity factor. 887 All these
factors are incorporated in the high ILUC -risk formula, as described in the descriptive part of th is
Report. More specifically, the productivity-adjusted share of a feedstock's production area expansion
into land with high-carbon stock reflects the feedstock's propensity to cause LUC effects, including
ILUC. As noted above, the formula considers as land with high-carbon stock two main types of land:
forests and wetland, in particular peatland. Therefore, the share of a feedstock's production area
expansion into land with high-carbon stock is the sum of expansion into forestland and into peatland.
In addition, to take account of a particularly significant volume of carbon contained in peatland, the
formula includes a peatland multiplier. The share of a feedstock's production area expansion into
peatland is thus multiplied by 2.6 before being summed with the expansion into forestland. Finally,
the overall share of expansion into land with high-carbon stock is adjusted for the crop's productivity,
as explained in more detail further below.
7.574. Insofar as Malaysia's arguments contest the data that serves as the basis for the calculation
of these values, the Panel recalls its finding above regarding the absence of a timely review of the
data on the share of expansion into land with high -carbon stock, which implies that the data in
question might have required revisions. Nevertheless, the Panel considers that addressing
arguments of the parties relating to the nature of such data and their use in the high ILUC -risk
formula is appropriate in the circumstances of this dispute. Assessing these arguments is relevant
to the question whether the regulatory distinction has been applied in an even-handed manner and
is therefore necessary to assist the DSB in making recommendations and providing rulings in these
proceedings. The Panel is also of the view that such findings will be relevant for the implementation
of the recommendations and rulings of the DSB.
7.575. Starting with the calculation of the share of palm oil's production area expansion into forests
and peatland Malaysia's contests the methodology followed by the European Union and the
underlying data. To recall, this share has been estimated at 45% for expansion into forests and 23%
for the share of expansion into wetland, including peatland.888 The Panel has reviewed the arguments
and evidence adduced by the parties in relation to this criticism, in particular the data relied on for
the calculation of the respective values and their sources.889 The Panel considers that data relied on

886 See section 7.1.1 above, setting out preliminary considerations. The Panel notes that the European
Union in particular reiterates on multiple occasions that the review provision ensures that newly available data
will be duly taken into account in the high ILUC-risk formula.
887 Malaysia's first written submission, paras. 443-450; second written submission, paras. 147-149 and
174; and responses to Panel questions No. 95, pp. 63-64.
888 The share of expansion into peatland is further multiplied by 2.6 to account for the high-carbon
content of peat, before summing up with the share of expansion into forestland.
889 Basiron, Y and Yew F.K., "Land use impacts of the livestock and oil palm industries", Journal of Oil
Palm, Environment & Health 2015, (Exhibit MYS-163)); Status Report (2019), (Exhibits EU-3, MYS-92); M.
Weisse and E.D. Goldman, "The World Lost a Belgium-sized Area of Primary Rainforests Last Year", (Exhibit
IDN-25); D.L.A. Gaveau et al., "Rise and fall of forest loss and industrial plantations in Borneo (2000–2017)",

by the European Union come from "qualified and respected " sources, which do not lack the
"necessary scientific and methodological rigour to be considered reputable science ". Nor does the
record evidence show that the European Union used such studies and the data contained therein in
a manner that is not "objective and coherent".
7.576. Moreover, Malaysia takes issue with the European Union's calculation of the productivity
factor. The high ILUC-risk formula contains a productivity factor in the denominator to adjust the
share of production area expansion into land with high-carbon stock for the productivity of the crop
used as biofuel feedstock. The productivity factor reflects the differenc es in the amount of energy
that could be obtained from a given quantity of feedstock and production area. This adjustment
allows making an appropriate comparison of the shares of expansion into land with high -carbon
stock of crops with different productivi ty levels. Otherwise, less productive crops used as biofuel
feedstocks could be considered as presenting the same level of ILUC-risk as more productive crops
for which the same share of expansion has been calculated. However, such less productive crops
would need to expand into more area than more productive crops to produce the same additional
unit of biofuel. Different productivity factors are thus calculated for each crop by adjusting the
average yields with the respective share of area harvested and with the energy content for the main
product as well as by-products associated with the same crop.890
7.577. Malaysia essentially challenges the European Union's methodology of comparing yields of
different crops to calculate their respective productivity factors. Ma laysia relies on the data
comparing oil yields of different food and feed crops to argue that the productivity of oil palm is
much higher than is reflected in the high ILUC-risk formula.891
7.578. The European Union contests the productivity figures presented by Malaysia as relying on oil
yields only and leaving out other relevant co- and by-products.892 The European Union contends that
accounting for main products and economically used by -products reflects the fact that the demand
for certain crops is driven by al l co-products rather than only oil. 893 The European Union explains
this by referring to the example of soybean production, which is driven in the largest part by demand
for soybean meal rather than oil.894
7.579. The Panel recalls that the purpose of incorporating the productivity factor in the high ILUC -
risk formula is to ensure that the comparison of different crops' shares of expansion into land with
high-carbon stock takes account of the fact that some crops ha ve higher productivity levels than
others. This requires that where crops yield multiple co - or by -products, their inclusion in the
determination of the energy content needs to be conducted in a consistent manner across all relevant
crops.

Conservation Letters, Vol. 12:3 (2018), 1, (Exhibit EU-254); White Paper Nr. 17 by J. Miettinen et al.,
"Historical Analysis and Projection of Oil Palm Plantation Expansion on Peatland in Southeast Asia"
(International Council on Clean Transportation, 2012), (Exhibit EU-12); J. Miettinen, C. Shi, and S.C. Liew,
"Land Cover Distribution in the Peatlands of Peninsular Malaysia, Sumatra, and Borneo in 2015 with Changes
since 1990", Global Ecology and Conversation, Vol. 6 (2016), 67, (Exhibit EU-11); K.G. Austin et al., "Shifting
patterns of palm oil driven deforestation in Indonesia and implications for zero-deforestation commitments",
Land Use Policy, Vol. 69 (2017), 416, (Exhibit EU-231); J. Xu et al., "PEATMAP: Refining estimates of global
peatland distribution based on a meta-analysis", Catena, Vol. 160 (2018), 134, (Exhibit EU-123); Jukka
Miettinen et al, From carbon sink to carbon source: extensive peat oxidation in insular Southeast Asia since
1990, Environ. Res. Lett., 12 024014, 2017, (Exhibit EU-251); Hooijer, A., Page, S., Jauhiainen, J., Lee, W. A.,
Lu, X. X., Idris, A., and Anshari, G.: Subsidence and carbon loss in drained tropical peatlands, Biogeosciences,
9, pp. 1053–1071, (Exhibit EU-250); Page, S. E., Morrison, R., Malins, C., Hooijer, A., Rieley, J. O., and
Jauhiainen, J.: Review of peat surface greenhouse gas emissions from oil palm plantations in Southeast Asia
(ICCT White Paper 15), International Council on Clean Transportation, Washington, 2011, (Exhibit EU-249);
Couwenberg, J., Dommain, R. and Joosten, H., Global Change Biology (2009) Greenhouse gas fluxes from
tropical peatlands in South East Asia. doi: 10.1111/j.1365-2486.2009.02016, (Exhibit EU-253); Vijay V., Pimm
S.L., Jenkins C.N., Smith S.J., The Impacts of Oil Palm on Recent Deforestation and Biodiversity Loss, Plos
One, 27 July 2016, (Exhibit MYS-104).
890 European Union's response to Panel question No. 40, paras. 246-256.
891 Malaysia's first written submission, para. 83; response to Panel question No. 41, pp. 15-16.
892 European Union's response to Panel question No. 9, para. 19.
893 European Union's response to Panel question No. 41, paras. 284-285.
894 European Union's response to Panel question No. 41, paras. 284-285.The European Union points out
that soybean oil accounts for 40% of the value of soybeans.

7.580. The Panel further recalls that the high ILUC-risk formula does not differentiate between the
drivers of expansion. As a result, it is impossible to identify a specific share of expansion that results
from increased demand for biofuels in the European Union. Rather, this parameter of the formula
applies to the crop as a whole. It thus seems reasonable that the productivity adjustment factor
found in the denominator of the formula equally relates to the crop as a whole. This is all the more
relevant given that expansion of some food and feed crops is driven by the demand for co-products
other than oil.
7.581. Taking the example of soybean, the Panel notes that the demand is driven primarily by the
demand for soybean meal (approximately 60%, according to European Union) and to a lesser extent
by soybean oil (40%, according to the European Union).895 Ignoring this fact would, in the Panel's
view, skew the analysis by accounting for different drivers of demand in the nominator of the high
ILUC-risk formula (the global share of production area expansion of a crop as a whole) and different
drivers in the denominator of the formula (productivity measured as oil yield only). The Panel thus
finds inapposite Malaysia's position that oil palm should have been attributed a much higher
productivity factor based on the comparison of different crops' oil yields. Therefore, the evidence
submitted by the parties provides a reasonable basis for the European Union to consider all relevant
co- and by-products in the determination of the productivity factor.
7.582. In light of the foregoing, and bearing in mind the Panel's conclusion regarding the absence
of timely review of the data, the Panel finds that the evidence submitted by the parties provides a
reasonable basis for the European Union's methodology of ca lculating the share of expansion of
feedstock's production area into land with high-carbon stock, including the shares of expansion into
forestland and wetland, the peat multiplier and the productivity factor. The Panel further notes that
even if it were to accept some or many of the alternative values proposed by Malaysia, the outcome
of the application of the measure would remain the same, meaning that palm oil would remain the
only biofuel feedstock classified as high ILUC risk.
Significant share of expansion threshold
7.583. Pursuant to Article 3 of the Delegated Regulation, a biofuel feedstock is considered high
ILUC-risk if its share of expansion into land with high -carbon stock, adjusted for productivity,
exceeds 10%.896 This value of 10% has been calculated through a number of steps, which on their
own could constitute a separate formula. These steps essentially consist in comparing carbon
emissions savings from replacing fossil fuels with biofuels, feedstock's energy content and average
net loss of carbon stock from land use change.897 The resulting value of approximately 14% indicates
the estimated share of a biofuel feedstock production area expansion into land with high -carbon
stock at which LUC-related emissions will negate the direct GHG savings resulting from fossil fuel
replacement.898 To this figure of 14% a discount factor of 30% is further applied, based on the
precautionary principle, "to guarantee both that biofuels achieve net sizable GHG emission savings
and that biodiversity loss associated to ILUC is minimized ".899 The application of the significant
expansion threshold thus seeks to ensure that the GHG emissions savings achieved by replacing
fossil fuels with biofuels are not negated by the ILUC-related GHG emissions.
7.584. Malaysia contests the methodology leading to the calculation of the significant expansion
threshold.900 In its submissions, the European Union explains in detail the methodology it has
followed to arrive at the significant expansion threshold. 901 The European Union points out in this
regard that it has made conservative assumptions, which could underestimate the net carbon loss
value for oil palm.902

895 European Union's response to Panel question No. 41, para. 285. These approximate values provided
by the European Union are not contested as such by Malaysia.
896 Article 3(b) of the Delegated Regulation.
897 Status Report (2019), (Exhibits EU-3, MYS-92), p. 14. European Union's response to Panel question
No. 43, paras. 293-297.
898 Status Report (2019), (Exhibits EU-3, MYS-92), p. 14. European Union's response to Panel question
No. 43, para. 293.
899 Status Report (2019), (Exhibits EU-3, MYS-92), p. 13. European Union's response to Panel question
No. 43, para. 293
900 Malaysia's first written submission, para. 442.
901 European Union's response to Panel question No. 43, paras. 293-297.
902 European Union's response to Panel question No. 10, para. 23.

7.585. The Panel has reviewed the evidence submitted by the parties in relation to the calculation
of the significant expansion th reshold, including the available source data, assumptions and
methodology.903 This evidence provides, in the Panel's view, a reasonable basis for arriving at the
threshold value of 14%, beyond which the average net carbon stock loss from expansion into land
with high-carbon stock is likely to cancel out any emission saving from replacing fossil fuels with
biofuels. In particular, the Panel notes that the evidence and arguments put forward by Malaysia do
not undermine the European Union's calculation or the underlying data and assumptions.
7.586. Regarding the 30% discount factor, the Panel notes that it serves the purpose of ensuring
that the use of biofuels delivers sizeable GHG emissions savings that are not cancelled out by ILUC-
related GHG emissions associated w ith EU biofuel demand. The Panel is mindful that given the
complexity of estimating the significant expansion threshold and the lack of readily available data
for some of its elements, the value of 14% is an estimate. The Panel understands that in light of
these uncertainties, the European Union chooses to err on the side of caution and has applied the
30% discount factor to ensure that the measure is effective for its purpose. The Panel notes in this
regard that nothing in the TBT Agreement prevents WTO Me mbers from protection against
regulatory risks at the level they consider appropriate. The TBT Agreement recognizes this right of
WTO Members in its preamble:
[N]o country should be prevented from taking measures necessary to ensure the quality
of its exp orts, 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.904
7.587. The Panel further notes that the European Union's efforts to ensure that the use of biofuels
delivers sizeable GHG emissions savings that are not cancelled out by ILUC -related GHG emissions
associated with EU biofuel demand is a corollary of the measure's objective to "limit the risk of ILUC-
related GHG emissions associated with food and feed crop-based biofuels".
7.588. The Panel thus sees nothing in the application of the 30% discount factor that would result
in arbitrary or unjustifiable discrimination or otherwise the measure not being applied in an even -
handed manner. More specifical ly, the Panel observes that, if anything, the application of the
discount factor makes it more likely for other biofuel feedstocks to exceed the significant expansion
threshold, should the share of their production area expansion into land with high -carbon stock
increase in the future.905 The Panel recalls in this regard that the high ILUC -risk formula estimates
palm oil's share of expansion into land with high-carbon stock, adjusted for productivity, at 41.92%.
Therefore, the application of the 30% discount factor does not in any event impact the classification
of palm oil as a high ILUC-risk feedstock.
7.589. In light of the foregoing, the Panel considers that the evidence submitted by the parties
provides a reasonable basis for the application of the significant expansion threshold of 10%,
including the 30% discount factor.

903 European Union's response to Panel question No. 43, paras. 293-297. Status Report (2019),
(Exhibits EU-3, MYS-92), pp. 13-14; Gaveau, D.L.A., Sheil, D., Husnayaen, Salim, M.A., Arjasakusuma, S.,
Ancrenaz, M., Pacheco, P., Meijaard, E., 2016. Rapid conversions and avoided deforestation: examining four
decades of industrial plantation expansion in Borneo. Nature - Scientific Reports 6, 32017, (Exhibit EU-232; N.
Khasanah et al., "Aboveground carbon stocks in oil palm plantations and the threshold for carbon-neutral
vegetation conversion on mineral soils", Cogent Environmental Science, Vol. 1:1 (2015), 1, (Exhibit EU-221);
White Paper Nr. 17 by J. Miettinen et al., "Historical Analysis and Projection of Oil Palm Plantation Expansion on
Peatland in Southeast Asia" (International Council on Clean Transportation, 2012), (Exhibit EU-12); K.G. Austin
et al., "Shifting patterns of palm oil driven deforestation in Indonesia and implications for zero-deforestation
commitments", Land Use Policy, Vol. 69 (2017), 416, (Exhibit EU-231); IPCC, Refinement to the 2006 IPCC
Guidelines for National Greenhouse Gas Inventories (2019), Volume 1: General Guidance and Reporting,
Chapter 8. Reporting Guidance and Tables, considered in May 2019 during the IPCC's 49th Session and
adopted/accepted on 12 May 2019, (Exhibit IDN-20); and Guillaume, T., Kotowska, M.M., Hertel, D. et al.
Carbon costs and benefits of Indonesian rainforest conversion to plantations. Nat Commun 9, 2388 (2018),
(Exhibit EU-222).
904 Recital 6 to the Preamble of the TBT Agreement. (emphasis added)
905 The Panel notes that the share of production area expansion into land with high-carbon stock of the
three biofuel feedstocks with the highest estimated degree of ILUC-risk is currently estimated at 8%
(soybean), 5% (sugar cane), and 4% (maze). Annex to the Delegated Regulation.

The low ILUC risk criteria
7.590. As noted above, Article 26(2) of RED II contains an exemption from the high ILUC -risk cap
and phase-out for individual consignments of biofuels certified as low ILUC risk. Insofar as this
exemption mitigates the detrimental impact of the high ILUC -risk cap and phase -out on palm oil-
based biofuel, it is relevant to the Panel's assessment whether the regulatory distinction at issue is
applied in an even -handed manner. This is consistent with the Panel's approach outlined in the
preliminary considerations section of this Report discussing the relationship between the high ILUC-
risk cap and phase -out and the low ILUC -risk certification that the potential for low ILUC -risk
certification is relevant to the assessment of whether the high ILUC -risk cap and phase -out is
consistent with Article 2.1.
7.591. With these considerations in mind, the Panel will now assess whether the aspects of the low
ILUC-risk certification criteria critici zed by Malaysia are indicative of the high ILUC -risk cap and
phase-out not being applied in an even-handed manner.
Overview of the low ILUC-risk criteria
7.592. As explained above, the low ILUC-risk criteria are laid down in two sets of requirements.906
7.593. First, in order to qualify for low ILUC -risk certification, biofuel has to comply with the
sustainability and GHG emissions savings criteria and it has to be made from an "additional
feedstock".907 "Additional feedstock" is defined as the additional amount of a food and feed crop
produced in a clearly delineated area compared to the dynamic yield baseline that is the direct result
of applying a so-called "additionality measure".908 This means that only those yields obtained from
productivity improvements exceeding the increases that would already be achieved in a business -
as-usual scenario are eligible for low ILUC-risk certification.909
7.594. Second, the additional yields submitted for low ILUC -risk certification should further be
obtained only through a limited category of measures "as a further guarantee of the positive effects
of low ILUC -risk certification".910 These categories of measures are set out in Article 5(a) of the
Delegated Regulation:
i. they become financially attractive or face no barrier preventing their implementation
only because the biofuels produced from the additional feedstock can be counted
towards the renewable energy targets (the parties refer to this criterion as "financial
additionality");
ii. they allow for cultivation of food and feed crops on abandoned land or severely
degraded land; or
iii. they are applied by small holders.
7.595. The Delegated Regulation further stipulates that the additional feedstock can only be
certified as low ILUC-risk within 10 years of the adoption of the additionality measure.
7.596. The Panel recalls that in the context of Malaysia's claim under Article 2.1, its task is to assess
whether any aspect of the low ILUC -risk criteria results in the regulatory distinction based on high
ILUC-risk not being applied in an even-handed manner. The alleged impracticability of the low ILUC-

906 Articles 4 and 5 of the Delegated Regulation. For further details and texts of these provisions, see
descriptive part of this Report.
907 Article 5 of the Delegated Regulation. Subpara. (c) further stipulates that evidence identifying the
additional feedstock has to be duly collected and thoroughly documented.
908 Article 2(6) of the Delegated Regulation. The Delegated Regulation further defines "additionality
measures" as "any improvement of agricultural practices leading, in a sustainable manner, to an increase in
yields of food and feed crops on land that is already used for the cultivation of food and feed crops; and any
action that enables the cultivation of food and feed crops on unused land, including abandoned land, for the
production of biofuels, bioliquids and biomass fuels". Article 2(5) of the Delegated Regulation.
909 Recital 13 to the Delegated Regulation. See also recital 81, para. 2 to RED II.
910 Recital 14 to the Delegated Regulation.

risk criteria could provide such an indication if it resulted in a discrimination of palm oil-based biofuel
that could not be explained by the measure's objective.
7.597. The Panel notes that Malaysia makes a general assertion that the low ILUC -risk criteria are
impracticable and are prohibitively complex.911 In this regard, Malaysia argues that: (a) there is an
absence of detailed rules concerning the criteria and the process, thus preventing certification 912;
(b) limiting low ILUC -risk certification to the "additional feedstock" disadvantages highly-efficient
crops and is difficult to estimate for perennial crops913 and the amount of additional feedstock from
a yield increase is uncertain and difficult to predict due to a variety of factors, including weather914;
(c) the "financial additionality" pathway is unli kely to attract investment from farmers due to the
difficulties in demonstrating there is no business case for undertaking productivity -improving
measures other than for the prospects of selling the product as biofuel feedstock for the EU market,
as well as the uncertainty of such prospects915; (d) the notions of abandoned and severely degraded
land are not clearly defined in the Delegated Regulation and seem overly restrictive 916; (e) the
category of smallholders is defined too narrowly and imposes significant evidentiary requirements917;
and (f) other evidentiary requirements are unduly burdensome, in particular limiting the availability
of low ILUC-risk certification to 10 years from the adoption of the additionality measure for perennial
crops.918
7.598. The European Union contests that low ILUC -risk certification is impracticable and submits
that the requirements in the mechanism are formulated neutrally and apply to all feedstocks. 919 In
this regard, it argues that: (a) with regard to the alleged absence of suffici ent detail in the
certification criteria, there is no need for certification prior to entry into force of the phase-out aspect
of the measure in 2023 920; and, in any event, the detailed rules governing the application of the
additionality pathways will be set out in implementing rules soon to be adopted and that certification
is already possible through voluntary schemes921; (b) the concept of "additionality", as used in the
Delegated Regulation, is designed to avoid exacerbating existing rates of expansion into high-carbon
stock land related to displacement effects922; (c) the "financial additionality" pathway further ensures
that measures taken by farmers or producers go beyond the business -as-usual scenario, by
excluding those that are sufficiently financially attractive and which would have been implemented
regardless of the low ILUC -risk certification scheme923; (d) it has not been demonstrated that the
cost of converting abandoned or severely degraded land would be prohibitive 924; (e) the term
"smallholder" was defined in the legislation by reference to the characteristics of farmers producing
all types of feedstocks and not only palm oil925; and (f) the 10-year period of eligibility was chosen
on the basis that the criteria would apply to any perennial or annual crop and it was not devised
specifically for the lifecycle of oil palm 926, and, in any event, the 10-year period is sufficiently long
for the benefits of the additionality measures to materialize, including for crops that take up to a
few years to become productive or to reach their productivity peak.927 The Panel will address these
arguments in turn.

911 Malaysia's first written submission, paras. 460 and 568.
912 Malaysia's first written submission, para. 771; and response to Panel question No. 64, p. 40.
913 Malaysia's first written submission, paras. 471-473.
914 Malaysia's response to the Panel question No. 61, pp. 36-37.
915 Malaysia's first written submission, paras. 467 and 767; and second written submission, para. 178.
916 Malaysia's first written submission, para. 768; and second written submission, para. 179.
917 Malaysia's first written submission, paras. 769-770.
918 Malaysia's first written submission, paras. 767-770.
919 European Union's first written submission, para. 153.
920 European Union's first written submission, para. 154; and response to Panel question No. 92, para.
482.
921 European Union's first written submission, paras. 154, 841 and 1072; and response to Panel
questions No. 61, paras. 393-394, No. 62, paras. 396-397, and No. 63. paras. 398-407.
922 European Union's first written submission, para. 142.
923 European Union's first written submission, para. 155.
924 European Union's first written submission, para. 156.
925 European Union's first written submission, para. 157. The European Union adds that that
smallholders have the option of a group certification and that the financial additionality criterion does not apply
to smallholders due to their prevailing economic profile.
926 European Union's first written submission, para. 149.
927 European Union's first written submission, paras. 149-150.

The additionality requirement and the related evidentiary requirements
7.599. Starting with the concept of additionality, as used in the low ILUC-risk criteria, it is based on
the premise that, given the non -diminishing demand for food, any additional demand for biofuel
feedstocks creates the risk of displacing non-fuel agricultural production. This is due to food and
biofuel feedstock production competing for agricultural land, the availability of which is limited. The
Status Report explains in this regard that:
Producing biofuels from … additional feedstock wi ll not cause ILUC because that
feedstock is not in competition with food and feed production and displacements effects
are avoided.
…
Average increases in productivity are still not sufficient to avoid all risks of displacement
effects, though, because agr icultural productivity is constantly improving while the
concept of additionality, which is at the heart of the low ILUC certification, requires
taking measures going beyond business as usual.928
7.600. It follows that even ordinary productivity improvements withi n the business -as-usual
scenario do not guarantee that displacement effects related to increased biofuel demand can be
avoided. The Panel observes that the concept of additionality is thus rationally related to the
measure's objective of limiting the risk of ILUC-related GHG emissions associated with feed and food
crop-based biofuels.
7.601. Malaysia points to the difficulties in the record-keeping requirements concerning the average
yield during the three years preceding the adoption of the additionality measure .929 The
European Union submits that Malaysia has not shown that the rules establish "unsurmountable
burdens" for farmers or are prohibitively complex.930
7.602. The Panel notes that Article 4(2) of the Delegated Regulation contains a general requirement
to present evidence of the average yield over three years preceding application of the additionality
measure. This requirement is commensurate with the calculation method of the dynamic yield
baseline which concerns three years immediately preceding the application of the additionality
measure.931 Therefore, as the concept of additionality as reflected in the design of the low ILUC-risk
criteria does not result in arbitrary or unjustifiable discrimination, then the same is true for the
requirement in Article 4(2).
7.603. The Panel notes, however, that certain elements of the additionality criterion remain vague
and ambiguous to such an extent that the Panel has serious doubts about the feasibility of low ILUC-
risk certification under such conditions. More specifically, it is not clear from the Delegated
Regulation how certain elements pivotal to determining the dynamic yield baseline should be
established for different feedstocks, including palm oil. In particular, it is unclear how the average
yield increase or the lifetime y ield curves should be determined. Considering that the notion of
dynamic yield baseline is central to the determination of the additional feedstock that can be certified
as low ILUC risk, it would appear that no crop could be certified without further clarifying these and
potentially other related concepts as well as the specific methodology used for quantifying them.
7.604. Moreover, it is not clear what type of evidence would be required to demonstrate the average
yield over the three -year period preceding the application of the additionality measure. The Panel
notes the European Union's acknowledgement that detailed rules on the additionality criterion and
the evidentiary requirements are elaborated in an implementing act. 932 This, in the Panel's view,

928 Status Report (2019), (Exhibits EU-3, MYS-92), p. 16.
929 Malaysia's first written submission, para. 770.
930 European Union's first written submission, paras. 153-154.
931 Article 2(7) of the Delegated Regulation.
932 European Union's first written submission, para. 154.

confirms that the additionality criterion and the evidentiary requirements as reflected in the
Delegated Regulation are overly vague and ambiguous, as well as incomplete.933
The financial additionality pathway
7.605. The Panel now turns to the first of the three additiona lity pathways that can be used to
obtain the additional feedstock qualifying for low ILUC -risk certification, which the parties refer to
as "financial additionality".
7.606. The financial additionality pathway requires that productivity-improving measures qualifying
for low ILUC-risk certification would not have been taken in a business-as-usual scenario but for the
financial incentive relating to the prospect of selling the feedstock on the EU biofuel market.934 This,
in turn, assumes the existence of a premium o n a crop sold for the EU market as low ILUC -risk-
certified feedstock, compared to that same crop sold as, e.g. food. 935 This premium is expected to
render profitable productivity -improving measures that are otherwise financially not attractive, or
which present significant barriers of a non-financial nature (e.g. the lack of skills or technology). The
rationale for this ap proach rests on the premise that if such measures were financially attractive
regardless of the product's use, then food and biofuel demand would compete for the additional yield
and displacement effects could not be avoided.
7.607. The Panel notes that Malaysia considers the existence of any premium on a crop used as
biofuel feedstock uncertain and depending exclusively on access to the EU biofuel market.936 Indeed,
it is not entirely clear that such premium could be guaranteed on a market for an agricultural
commodity, including used as a biofuel feedstock. As pointed out by Malaysia, and corroborated by
evidence, a feedstock's price may vary from one year to another due to weather events or market
fluctuations.937 As a result, farmers, who frequently operate on thin margins, may be unwilling to
take the financial risk linked to investing in additionality measures without the return on such
investment being sufficiently certain. 938 The evidence thus confirms that the financial additionality
criterion is narrowly tailored and, as a result, may be very difficult to meet.
7.608. The narrow scope of an exemption alone is not, however, sufficient to demonstrate arbitrary
or unjustifiable discrimination, or more generally that the measure is not applied in an even-handed
manner. If one accepts that production of a biofuel feedstock can lead to displacement effects insofar
as it competes with food and feed production, and given the non-diminishing global demand for food
and feed, then the risk of ILUC does not seem to be mitigated even with respect to the additional
yield, if that yield was not produced solely to benefit from the premium related to selling it on the
EU biofuel market. In other words, the low ILUC -risk criteria require a link between the additional
yield and the premium on the EU biofuel market, which in the case of financial additionality is ensured
by the premium on biofuel feedstock. In sum, the Panel finds that there is a reasonable basis for the
European Union to rely on the concept of financial additionality in the low ILUC-risk criteria.
7.609. The Panel notes, however, that certain aspects of this pathway are overly vague and
ambiguous to such an extent that the Panel has serious doubts whether the financial additional ity
pathway, as reflected in the Delegated Regulation, could effectively be used for the purposes of low
ILUC-risk certification. It is not clear from the Delegated Regulation how the relevant authorities will
apply the financial attractiveness test and as sess non -financial barriers. The very basis for
determining that the additionality measure fulfils the financial additionality requirements is thus
unclear. The European Union also acknowledges that "the evidential requirements for [the financial
attractiveness and barrier analysis tests] are left open in the Delegated Regulation and will be further

933 Malaysia has not presented any arguments on the substantive consistency of those detailed rules
with the TBT Agreement or the GATT 1994. In the absence of any such arguments and taking account that the
measure was not in existence at the time of the panel's establishment, none of the Panel's findings in this
Report should be taken as implying any view on the substantive consistency of those detailed rules with the
European Union's obligations under the TBT Agreement, or with the European Union's obligations under the
GATT 1994.
934 Status Report (2019), (Exhibits EU-3, MYS-92), pp. 16-17.
935 European Union's comments on Malaysia's response to Panel question No. 61, para. 120.
936 Malaysia's response to Panel question No. 61, pp. 36-40.
937 Low ILUC-risk certification: Pilot report and recommendations Malaysia, Oil palm yield increase,
February 2021, (Exhibit MYS-233), pp. 4-6.
938 Low ILUC-risk certification: Pilot report and recommendations Malaysia, Oil palm yield increase,
February 2021, (Exhibit MYS-233), p. 11.

developed in the implementing rules ".939 This, in the Panel's view, casts serious doubts on the
feasibility of using this pathway to certify biofuel as low ILUC -risk (and assuming that the
additionality criterion was operational in the first place), as reflected in the Delegated Regulation.
The abandoned or severely degraded land pathway
7.610. Pursuant to Article 5(1)(a)(ii) of the Delegated Regulation, a consignment of biofuel can be
certified as low ILUC risk, if the additional feedstock was cultivated on abandoned or severely
degraded land. As noted in the Status Report, with respect to projects using such land, "additionality
can be assumed … as this situation of th e land already reflects the existence of barriers that are
preventing cultivation".940
7.611. The underlying rationale for the abandoned or severely degraded land pathway is thus
similar to the financial additionality pathway and similar considerations apply mutatis mutandis.
More specifically, cultivating crops on such types of land present obstacles of financial and non -
financial nature, which prevent farmers from using that land for growing crops under the business -
as-usual scenario. A premium related to selling crops as biofuel feedstocks on the EU market could,
however, provide for an additional incentive that would compensate for the cost of converting
abandoned or severely degraded land into productive agricultural land.
7.612. The Panel agrees with the European Union that the same assumption cannot be made with
respect to other types of land with low-carbon stock, which, as Malaysia argues, should have been
included in the second additionality pathway. 941 The Panel understands that the high ILUC -risk
formula already takes into account production on low-carbon stock land as part of the determination
of the share of expansion into high-carbon stock land. If the feedstock's production area expands
into low-carbon stock land, then it lowers the share of expansion into high-carbon stock land, and
thus the feedstock's degree of ILUC risk.
7.613. Furthermore, producing biofuel feedstocks on land other than abandoned or severely
degraded does not present barriers that could be compensated only by the premium associated with
EU biofuel market. Excluding such types of land from low ILUC -risk criteria seems thus
commensurate with the objective of avoiding displacement effects between biofuel and non -biofuel
agricultural production. As long as displacement effects between biofuel and non-biofuel agricultural
production cannot be avoided, the high risk of ILUC is not mitigated. Therefore, the conceptual
design of the abandoned or severely degraded land pathway is not reflective of the reg ulatory
distinction not being applied in an even-handed manner.
7.614. However, the Panel notes that, as argued by Malaysia 942, certain elements of this pathway
are expressed in terms that are overly vague and ambiguous, raising serious doubts whether the
abandoned and severely degraded land pathway can effectively be used for the purposes of the
certification. For example, it is not clear what circumstances would qualify as "biophysical or
socioeconomic constraints" due to which cultivation of crops had been stopped on abandoned land.
The Panel notes that the European Union appears to acknowledge the vague and ambiguous nature
of the specific requirements of the abandoned and severely degraded land pathway insofar as it
confirms that details governing its application will be set out in implementing rules to be adopted.943
It is thus unclear how the second additionality pathway would operate given the overly vague and
ambiguous formulation of some of its central concepts.

939 European Union's first written submission, para. 155.
940 Status Report (2019), (Exhibits EU-3, MYS-92), p. 18. This is further confirmed by Recital 15 to the
Delegated Regulation:
[I]t is appropriate not to apply the financial additionality criterion to the additional feedstock
cultivated on abandoned or severely degraded land or by independent small farm holders. This
would in fact amount to an unreasonable administrative burden in light of the significant
potential for productivity improvements and the barriers faced to finance the necessary
investments.
941 Malaysia's first written submission, para. 768.
942 Malaysia's first written submission, para. 768.
943 European Union's first written submission, para. 154.

The smallholder pathway
7.615. The last of the thre e additionality pathways concerns small farm holders, who cultivate
agricultural products on relatively small areas of land. The Delegated Regulation defines smallholders
as:
[F]armers who conduct independently an agricultural activity on a holding with an
agricultural area of less than 2 hectares for which they hold ownership, tenure rights or
any equivalent title granting them control over land, and who are not employed by a
company, except for a cooperative of which they are members with other small holders,
provided that such a cooperative is not controlled by a third party.944
7.616. The primary rationale for including the smallholder pathway in the low ILUC-risk certification
criteria is the lack of "the administrative capacity and knowledge [of small farm holders] to conduct
an in -depth [financial additionality] assessments while evidently facing barriers that hinder the
implementation of productivity -increasing measures ".945 This pathway thus seems to be an
expression of a balance struck in the EU legislation to allow productivity increases with a limited risk
of displacement effects, which could be foregone if smallholder farmers were required to
demonstrate financial additionality.946 At the same time, small farm holders can certify as low ILUC-
risk only the f eedstock additional to what would be produced under a business -as-usual scenario.
This is meant to ensure a relatively low risk of displacement effects potentially caused by producing
additional feedstock by smallholders. Therefore, the approach appears to be consistent with the
overall design of low ILUC-risk certification, which is concerned with mitigating rather than
eliminating the risk of ILUC.
7.617. The Panel notes Malaysia's argument that the smallholder pathway is excessively narrow, as
the definition of a "small holder" is limited to farmers cultivating less than two hectares. According
to Malaysia such producers do not have the capacity to avail themselves of the certification due to
the complexity of its requirements.947
7.618. The Panel observes that the definition of a "small holder" incorporated in the Delegated
Regulation is based on a study, which has found that an estimated 84% of the world's farms are
managed by smallholders cultivating less than 2 hectares of land.948 A significant number of farmers
around the world could thus in principle avail themselves of the smallholder pathway. The Panel
further notes that such category of farmers constitutes nearly 40% of the total number of
"independent smallholders in Malaysia, i.e . farmers holding less than 40.46 hectares ".949 Although
Malaysia argues that the Delegated Regulation does not take into account the definitions of a small
farm holder in the feedstock-producing countries950, the complainant has not shown, and the Panel
does not consider, that, in the circumstances of this dispute, a definition based on a global average
is arbitrary.
7.619. The Panel notes that the facts of this case are different from those that gave rise to the
finding of violation in EC – Seal Products, where the "indigenous community exception" was found
to be de facto available only to Inuit hunts in Greenland and not in Canada. 951 The evidence
submitted by the parties provides no indication that the definition of a "small holder" disadvantages
production of biofuels in Malaysia, as compared to other countries.

944 Article 2(9) of the Delegated Regulation.
945 Status Report (2019), (Exhibits EU-3, MYS-92), p. 18.
946 The Delegated Regulation recognizes that applying the financial additionality criterion to small farm
holders "[w]ould in fact amount to an unreasonable administrative burden in light of the significant potential
for productivity improvements and the barriers faced to finance the necessary investments". Recital 15 to the
Delegated Regulation.
947 Malaysia's first written submission, paras. 269 and 769-770.
948 Status Report (2019), (Exhibits EU-3, MYS-92), p. 18.
949 Malaysia's first written submission, para. 267. ISEAS Perspective, Serina Rahman, Malaysian
Independent Oil Palm Smallholders and their Struggle to Survive 2020, (Exhibit MYS-152), p. 5.
950 Malaysia's first written submission, paras. 265-269.
951 As discussed above, the wording of sixth Recital to the TBT Agreement is similar to that of the
chapeau of the GATT Article XX. (Appellate Body Reports, EC – Seal Products, para. 5.310.)

The 10-year limit on eligibility for low ILUC-risk certification
7.620. The Panel recalls that pursuant to the low ILUC -risk certification criteria, any additional
feedstock is eligible for low ILUC-risk certification for a maximum of 10 years from the adoption of
the additionality measure. 952 Limiting the eligibility of yield obtained through a particular
additionality measure to 10 years is meant to ensure that productivity improvements exceed the
general productivity increase under a business-as-usual scenario over time.
7.621. Malaysia submits that such a time limit is unjustified and disadvantages palm oil producers
because of the time it takes for an oil palm to bear fruit and achieve maturity.953 This is because oil
palm has an average lifespan of 25 years and starts bearing fruits at around four years with the
maximum yield potential normally reached between the age of 7 and 16. 954 According to Malaysia,
this problem is particularly acute for feed stock made from crop grown on abandoned or severely
degraded land, which requires additional time to convert it into arable land.955
7.622. The European Union argues that the 10 -year limit on the eligibility for low ILUC -risk
certification is justified because with time additionality measures become part of standard baseline
practices.956 The European Union maintains that, in any event, this period is sufficiently long for the
benefits of additionality measures to materialize.957
7.623. In the Panel's view, the evidence su bmitted by the parties provides a reasonable basis for
imposing a time limit on the eligibility of a yield obtained through application of a specific
additionality measure for low ILUC -risk certification. Such a limit seems justified by the increasing
global food demand and general improvements in agricultural practices over time. 958 This means
that the additional incentive related to selling feedstock on the EU biofuel market gradually
disappears with time and displacement effects between biofuel and non -biofuel production cannot
be avoided with respect to that yield.
7.624. Nevertheless, the Panel considers that the 10-year limit, even if in principle justified, could
still disadvantage certain types of biofuel feedstocks compared to others. The types of feedstoc ks
that could potentially be subject to low ILUC -risk certification are made from annual and perennial
crops. Annual crops terminate their lifecycle within a year and are replanted after harvest for the
following season. Perennial crops, by contrast, do no t need to be replanted after harvest and grow
back or continue growing. Of the eight food and feed crops used as biofuel feedstocks listed in the
Annex to the Delegated Regulation, and thus subject to the high ILUC-risk formula (and, therefore,
potentially also to low ILUC-risk certification), only oil palm is a perennial crop. Due to their nature,
annual crops are more frequently subject to productivity -improving additionality measures than
perennial crops, thus increasing their opportunities to benefit from low ILUC-risk certification within
the 10-year period.959
7.625. The Panel notes the European Union's argument that the 10-year limit would be applicable
to any perennial or annual crop and that, in the European Union's view, it is sufficiently long for the
benefits of low ILUC -risk certification to manifest. 960 However, the European Union fails to explain
why, for example, extending the eligibility period by the time necessary for perennial crops to start
bearing fruits or achieve maturity would be difficult to reconcile with the objective of the measure.
The disadvantage for feedstocks made from perennial crops in terms of benefit ting from low ILUC-
risk certification do not seem to be explained by the measure's objective. This indicates that the
regulatory distinction at issue is applied in a manner that constitutes arbitrary and unjustifiable

952 Article 5(1)(b) of the Delegated Regulation.
953 Malaysia's response to Panel question No. 61, pp. 36-37.
954 T. Mielke, "World Markets for Vegetable Oils: Status and Prospects", in M. Kaltschmitt (ed.), Energy
from Organic Minerals (Biomass), 2019, (Exhibit MYS-19), p. 264.
955 Malaysia's first written submission, para. 768.
956 European Union's first written submission, para. 149.
957 European Union's first written submission, para. 149.
958 Status Report (2019), (Exhibits EU-3, MYS-92), p. 16.
959 Malaysia notes in this regard that:
With regard to annual crops, growers can take advantage of new seeds every new growing
season. By contrast, the yield potential for perennial crops (e.g. oil palm), with a lifespan of up
to several decades, is fixed for each planting cycle.
(Malaysia's first written submission, para. 471.)
960 European Union's first written submission, para. 149.

discrimination. This is all the more so, as currently the only perennial crop on the list of eight is
subject to the high ILUC -risk cap and phase-out and thus could potenti ally benefit from low ILUC -
risk certification. The Panel notes in this regard that in response to a question from the Panel, the
European Union explains that a newly adopted legislation foresees a possibility of delaying the start
of the 10-year period by for up to two years for "operational additionality measures" and for up to
five years for replanting.961
7.626. Therefore, the 10 -year limit on the eligibility for low ILUC -risk certification disadvantages
perennial crops in a manner that constitutes arbitrary and unjustifiable discrimination.
Summary of findings on low ILUC-risk criteria and temporal issues
7.627. The Panel has found that, apart from the 10 -year limit on the eligibility for low ILUC -risk
certification, the conceptual design of the low ILUC -risk criteria does not result in the regulatory
distinction being applied in a manner constituting arbitrary or unjustifiable discrimination or
otherwise not being applied in an even-handed manner. As for the 10-year eligibility limit, the Panel
has found that it disad vantages perennial crops, such as oil palm, in a manner that constitutes
arbitrary and unjustifiable discrimination.
7.628. Moreover, the Panel has found that in the preceding sections of its analysis that several of
the low ILUC-risk criteria are formulated in overly vague and ambiguous terms, which cast serious
doubts as to whether these criteria could have been effectively used when the high ILUC -risk cap
and phase-out became operational.
7.629. The Panel notes the European Union's acknowledgement that the provisions of the Delegated
Regulation concerning low ILUC-risk criteria are incomplete and that they would be complemented
with detailed rules to be adopted in the Implementing Regulation. 962 The Panel further notes that
the Implementing Regulation referred to by the European Union was submitted as Exhibit EU -329
at a late stage of the proceedings. The substantive arguments of the parties do not address the
contents of the Implementing Regulation. The Panel therefore is not ruling on the design of the low
ILUC-risk criteria as complemented or modified in the Implementing Regulation.
7.630. The Panel observes, however, that the act contains very detailed disciplines concerning
evidentiary requirements963, detailed rules for demonstrating additionality, including determining
specific aspects of the dynamic yield baseline 964, eligibility for low ILUC -risk certification of
production on unused, abandoned or severely degraded land. 965 This, in the Panel's view, confirms
that the low ILUC -risk criteria, as reflected in the Delegated Regulation, were not operational and
did not allow for certification of palm oil -based biofuel, prior to the adoption of the Implementing
Regulation.
7.631. The Panel further notes the European Union's argument that the low ILUC -risk certification
could be carried out prior to the adoption of detailed rules on low ILUC-risk criteria through voluntary
certification schemes.966 The Panel is not convinced by this argument, given that, as explai ned in
more detail in the section addressing Malaysia's claims under Article 5 of the TBT Agreement, there
is no evidence that voluntary schemes for low ILUC -risk certification were operational at least until
the European Commission's decision to approve three such schemes in June 2022.
7.632. The Panel is further unconvinced by the European Union's argument that there is no need
for low ILUC-risk certification prior to December 2023, when the phase-out element of the measure
becomes operational. This argument of the European Union presupposes that the low ILUC -risk
certification is relevant only to the phase-out and not also to the cap. This assertion is contradicted

961 European Union's comments on Malaysia's response to Panel question No. 61, para. 113.
962 European Union's first written submission, paras. 154.
963 Article 24 of the Implementing Regulation.
964 Articles 25 and 27 of the Implementing Regulation.
965 Article 26 of the Implementing Regulation. Annex VIII further lays down the minimum requirements
on the process and method for certifying low ILUC-risk biomass, relating to the content of the application,
assessing additionality on the basis of the financial attractiveness and barriers test, guidelines on setting the
dynamic yield baseline for annual and perennial crops. Commission Implementing Regulation (EU) 2022/996,
(Exhibit EU-329), pp. 40-49.
966 European Union's first written submission, paras. 841 and 1072; and responses to Panel questions

by the text of Article 26(2) of RED II, where the exemption for biofuels made from feedstocks
certified as low ILUC-risk immediately follows the description of the cap:
For the calculation of a Member State's gross final consumption of energy from
renewable sources referred to in Article 7 and the minimum share referred to in the first
subparagraph of Article 25(1), the share of high indirect land- use change-risk biofuels,
bioliquids or biomass fuels produced from food and feed crops for which a significant
expansion of the production area into land with high-carbon stock is observed shall not
exceed the level of consumption of such fuels in that Member State in 2019, unless they
are certified to be low indirect land-use change- risk biofuels, bioliquids or biomass fuels
pursuant to this paragraph.967
7.633. Recital 12 to the Delegated Regulation also suggests that the exemption applies to the cap
and the phase-out alike:
Certified low ILUC-risk biofuels, bioliquids and biomass fuels should be exempted from
the limit and the gradual reduction set for high ILUC -risk biofuels, bioliquids and
biomass fuels produced from food and feed crops, provided that they meet the relevant
sustainability and greenhouse gas emissions saving criteria laid down in Article 29 of
[RED II]968
7.634. The exemption thus necessarily applies to the cap and to the phase-out, which is essentially
the cap that is gradually reduced to 0 by the end of 2030, at the latest. There can therefore be no
doubt that certifying consignments of a biofuel as low ILUC-risk becomes relevant not with the entry
into force of the phase -out aspect of the measure, but a s soon as the high ILUC -risk cap became
operational. In addition, the Panel notes that several EU member States have accelerated the
gradual phase -out of palm oil -based biofuel from eligibility to count towards renewable energy
targets.969
Conclusion on the application of the regulatory distinction at issue
7.635. In sum, the Panel finds that the regulatory distinction based on high ILUC-risk is not applied
in the high ILUC-risk cap and phase-out in an even-handed manner because (i) the European Union
has failed to conduct a timely review of the data used as a basis for the determination whether a
crop is high ILUC -risk; (ii) the additionality criterion as well as the financial additionality and the
abandoned or severely degraded land pathways are formulated in ov erly vague and ambiguous
terms which do not provide for an effective opportunity to certify specific consignments of palm oil-
based biofuel as low ILUC -risk; and (iii) the design of the 10 -year time limit for low ILUC -risk
certification is a further deficiency in the design and implementation of the low ILUC-risk criteria as
it unjustifiably disadvantages biofuels made from perennial crops, currently only from oil palm, as
regards commercial opportunities linked to the EU biofuel market. Therefore, th e regulatory
distinction drawn by the high ILUC-risk cap and phase-out cannot be said to stem exclusively from
a legitimate regulatory distinction.
7.1.2.4.6 Conclusion on Article 2.1
7.636. The European Union has administered the high ILUC -risk cap and phase-out inconsistently
with Article 2.1 of the TBT Agreement by failing to conduct a timely review of the data used to
determine which biofuels are high ILUC risk, and because there are deficiencies in the design and
implementation of the low ILUC-risk criteria, which results in arbitrary or unjustifiable discrimination
between countries where the same conditions prevail.
7.637. One panelist has reached a different conclusion, as set out in section 7.4 of this Report.

967 Article 26(2) of RED II. (emphasis added)
968 Recital 12 to the Delegated Regulation. (emphasis added)
969 This appears to be the case, among other EU member States, of Austria, France, Germany, Malta,
etc. (Exhibit IDN-1, pp. 7, 26, 31, 37).

7.1.2.5 Article 2.5 (first sentence) – Explanation of justification for technical regulation
7.1.2.5.1 Introduction
7.638. Having addressed the claims under the substantive obligations in Articles 2.4, 2.2 and 2.1
of the TBT Agreement, the Panel now turns to Malaysia's claim that the European Union failed to
comply with the procedural obligation in the first sentence of Article 2.5 of the TBT Agreement.
7.639. Malaysia submits970 that the European Union has violated Article 2.5 by failing to explain the
justification for preparing, adopting or applying the 7% maximum share and the high ILUC-risk cap
and phase-out in terms of Articles 2.2 to 2.4 of the TBT Agreement. More specifically, Malaysia
argues with reference to the elements of Article 2.5, that the 7% maximum share and the high
ILUC-risk cap and phase -out have a "significant effect " on the tra de of Malaysia with the
European Union, and that Malaysia, as well as other WTO Members, repeatedly requested an
explanation of the justification of the measures in the TBT Committee. However, in responding to
these repeated requests from Malaysia and other WTO Members, the European Union has not gone
further than stating that the measures are not technical regulations.
7.640. The European Union submits971 that the Panel should reject the claims under Article 2.5. The
European Union does not dispute that Malaysia made requests for an explanation of the justification
of the 7% maximum share and the high ILUC-risk cap and phase-out within the meaning of the first
sentence of Article 2.5. However, the European Union states that it "is not accepted " that the
measures "have a significant effect on trade ", and that in any event the European Union has
"explained the justification" for the measures on multiple occasions in multiple fora.
7.1.2.5.2 Legal standard
7.641. The first sentence of Article 2.5 sets forth the obligation that:
A Member preparing, adopting or applying a technical regulation which may have a
significant effect on trade of other Members shall, upon the request of another Member,
explain the justification for that technical regulation in terms of the provisions of
paragraphs 2 to 4.
7.642. This obligation in the first sentence of Article 2.5 has only been the subject of a claim of
inconsistency in one prior case, namely US – Clove Cigarettes.972 In the present dispute both parties
present their respective understandings of the applicable legal standard with reference to that case.

970 Malaysia's first written submission, paras. 710-722; second written submission, paras. 263-267; and
responses to the Panel's questions, pp. 87-88.
971 European Union's first written submission, paras. 1002-1008; second written submission,
paras. 167-170; and responses to the Panel's questions, paras. 730-742. The European Union also argues that
the challenged measures are not technical regulations within the meaning of Annex 1.1, and are therefore not
subject to any substantive or procedural obligations in the TBT Agreement.
972 In EC – Sardines, the Appellate Body referred to the first sentence of Article 2.5 as context for its
views on the legal standard for the allocation of the burden of proof for a claim under Article 2.4. In that case,
the complainant had argued that it rested on the respondent to explain the reasons why it had not used the
international standard at issue (i.e. its lack of "appropriateness"), and to "spell out" the legitimate objective of
the technical regulation. The Panel reasoned that this had to be so because these issues "involve[]
considerations which are properly the province of the Member adopting or applying a technical regulation" and
not the complaining party. The Appellate Body disagreed and stated that:

The TBT Agreement affords a complainant adequate opportunities to obtain information about
the objectives of technical regulations or the specific considerations that may be relevant to the
assessment of their appropriateness. A complainant may obtain relevant information about a
technical regulation from a respondent under Article 2.5 of the TBT Agreement, which establishes
a compulsory mechanism requiring the supplying of information by the regulating Member.
(Appellate Body Report, EC – Sardines, para. 277. (emphasis original))

7.643. To establish a violation of the first sentence of Article 2.5, it must be shown that the Member
in question is preparing, adopting or applying a technical regulation and that the following three
elements973 are satisfied:
a. the measure "may have a significant effect on trade of other Members";
b. there is a "request of another Member"; and
c. the Member in question is to "explain the justification for that technical regulation in terms
of the provisions of paragraphs 2 to 4" of Article 2.
7.644. These elements are cumulative, and thus each must be satisfied to establish an inconsistency
with the first sentence of Article 2.5.
7.645. The Panel will elaborate further on the elements of the legal standard in Article 2.5 as
necessary in the course of its assessment of the issues in dispute.
7.1.2.5.3 "may have a significant effect on trade of other Members"
7.646. The procedural obligation in the first sentence of Article 2.5 applies only to those technical
regulations "which may have a significant effect on trade of other Members".
7.647. The Panel notes that the procedural obligations in Article 2.9 and Article 5.6, which concern
the publication, notification and commenting procedure for technical regulations and conformity
assessment procedures respectively, are also subject to the same triggering condition (as is the set
of parallel procedural obligations in Annex B(5) to the SPS Agreement). In its analysis below,
therefore, the Panel will draw on relevant guidance regarding these provisions. Furthermore, the
Panel's conclusion and reasoning in this section of the Report apply mutatis mutandis to this element
of Malaysia's claims under Articles 2.9 and 5.6.
7.648. Malaysia argues that the 7% maximum share and the high ILUC-risk cap and phase-out not
only might have, but do in fact have, a "significant effect " on Malaysia 's trade with the
European Union. Malaysia argues that the measures at issue, namely the 7% maximum share and
the high ILUC-risk cap and phase-out, amount to a de facto ban on the importation of palm oil-based
biofuel and palm oil for use as a biofuel feedstock from Malaysia.974
7.649. The European Union responds by stating that it "is not accepted" that the measures identified
"have a significant effect on the trade of other Members ". The European Union states that t he
"alleged trade-restrictiveness" of these measures "is precisely one of the matters that Malaysia must
demonstrate", and that "[t]his has been addressed in response to the claims under Article 2.1 and
Article 2.2 of the TBT Agreement".975
7.650. The Panel notes that each party's arguments on the question of whether the measures have
"a significant effect on the trade of other M embers" for the purposes of Article 2.5 incorporate by
reference (or otherwise reiterate) its arguments on whether the measures are "trade-restrictive"
within the meaning of Article 2.2 and/or have a "detrimental impact" on imports for the purposes of
Article 2.1. The Panel sees no reason to proceed any differently and proceeds on the understanding
that its findings on whether a given measure is "trade-restrictive" under Article 2.2 and/or have a
"detrimental impact" on imports under Article 2.1 would in principle be highly relevant to, if not
determinative of, the question of whether the same measure "may have a significant effect on the
trade of other Members" within the meaning of Article 2.5.
7.651. The Panel has alread y found, in the context of its assessment of Malaysia's claim under
Article 2.2, that the measures are "trade-restrictive" on the grounds that they have, by design, a
"limiting effect on trade" in biofuels made from food and feed crops (as regards the 7% m aximum
share) and palm oil -based biofuels (as regards the high ILUC -risk cap and phase -out). The Panel
has also found, in the context of its assessment of Malaysia's claim under Article 2.1, that the high

973 Panel Report, US – Clove Cigarettes, para. 7.449.
974 Malaysia's first written submission, paras. 714-716; Malaysia's second written submission, para. 264.
975 European Union's first written submission, para. 1005.

ILUC-risk cap and phase -out has a "detrimental impact" on imported palm oil -based biofuels. The
Panel sees no need to repeat the same reasoning that led to those findings in this section.
7.652. The Panel considers that it follows from its earlier findings under Articles 2.2 and 2.1 that
the 7% maximum share and the high ILUC-risk cap and phase -out are in principle measures that
"may have a significant effect on the trade of other Members". As elaborated below, there is nothing
in the ordinary meaning of these terms, in the prior interpretations of panels interpre ting and
applying that condition, that would suggest otherwise.
7.653. First, the Panel considers that the words "may have" must be given their ordinary meaning
in the context of the phrase "may have a significant effect on trade of other Members". As the panel
in US – Clove Cigarettes observed when interpreting and applying this condition in the context of
Article 2.9 of the TBT Agreement:
[This] condition for the applicability of Article 2.9 is that the technical regulation "may
have a significant effect on tra de of other Members " as opposed to "will have a
significant effect" or "has a significant effect". "May" is used to express a possibility as
opposed to a certainty.[897] We therefore interpret these terms to mean that Article 2.9
of the TBT Agreement does not require proving actual trade effects. Rather, this
condition encompasses situations in which a technical regulation may have a significant
effect on trade of other Members.976
897 Oxford English Dictionary Online, accessed on 30 April 2011. See also Shorter Oxford English
Dictionary, 5th edn., W.R. Trumble, A. Stevenson (eds.) (Oxford University Press, 2002), Vol. I,
p. 1725, defining "may" to mean, among other things, "have the possibility, opportunity, or
suitable conditions to; be li kely to "; Webster's Online Dictionary, accessed on 30 April 2011,
defining "may" to mean, among other things, "used to indicate possibility or probability".
7.654. Second, the Panel agrees with prior panels that the ordinary meaning to be given to the
term "significant" in this context is "sufficiently great or important to be worthy of attention;
noteworthy"977, and a "significant effect " may thus be understood as encompassing "all non de
minimis effects on trade " or at least those that are "substantial and noteworthy ".978 This would
certainly include an outright prohibition on the importation or sale of specified products, which was
the circumstance in several prior disputes 979, but there is nothing in the terms of this triggering
condition that somehow limits it to "the most restrictive measure a Member could take with respect
to trade".980
7.655. Third, the terms "trade of other Members " may be understood as referring to the trade of
other Members either individually or co llectively. As already discussed in the context of its
assessment of the claim under Article 2.2, the panel in Australia – Plain Packaging concluded that
there was no basis to accept the respondent's argument that the effects of a technical regulation on
international trade, and specifically the existence and extent of a "trade-restrictive" effect for the
purposes of Article 2.2, should be assessed only on the basis of the effect of the measure on trade
of all WTO Members, in all products that are the subje ct of the technical regulation. 981 The Panel
considers it useful to highlight here that, in the course of its analysis under Article 2.2, the panel in

976 Panel Report, US – Clove Cigarettes, para. 7.529 and fn 897. (emphasis original)
977 Panel Report, US – Clove Cigarettes, para. 7.530 (referring to relevant dictionary definitions,
including Oxford English Dictionary (OED) Online, accessed on 30 April 2011). See also Shorter Oxford English
Dictionary, 5th edn., W.R. Trumble, A. Stevenson (eds.) (Oxford University Press, 2002), Vol. II, p. 2835,
defining "significant" to mean, among other things, "[i]mportant, notable; consequential"; Webster's Online
Dictionary, accessed on 30 April 2011, defining "significant" to mean, among other things, "of a noticeably or
measurably large amount"); and Panel Report, India – Agricultural Products, para. 7.773 (referring to OED
Online).
978 Panel Report, US – Clove Cigarettes, para. 7.530.
979 Panel Reports, US – Clove Cigarettes, para. 7.530; and India – Agricultural Products, para. 7.773.
980 Panel Report, India – Agricultural Products, para. 7.773.
981 Panel Reports, Australia – Tobacco Plain Packaging, para. 7.1078. The Panel considered that the
adoption of that interpretation "would have the effect that a WTO Member could have no recourse to Article 2.2
of the TBT Agreement in respect of a particular product in which its trade were being restricted, in the event
that the trade of (an)other Member(s) increased", and that "following Australia's logic, in order to succeed in a
claim under Article 2.2, a Member would in all cases need to establish the existence of a limiting effect not only
in respect of its own exports, but in respect of the entirety of exports from all Members." (ibid.)

Australia – Plain Packaging found useful guidance in the relevant TBT Committee Recommendation982
interpreting the terms "may have a significant effect on trade of other Members " in the context of
Article 2.9 and stated:
The TBT Committee Recommendation suggests that the concept of "significant effect on
trade of other Members", under Article 2.9, may be understood to refer to inter alia, the
effect on trade in a specific product, group of products or products in general and the
effect on trade between two or more Members . Furthermore, when assessing the
significance of these effects on trade, Members are invited to consider the value or other
importance of imports in respect of the importing and/or exporting Members concerned,
whether from other Members individually or collectively . We consider that this
interpretation confirms our observation … that the "trade-restrictiveness" of a technical
regulation need not be assessed only on the basis of the effect of the measure on trade
between all WTO Members, in all products that are the subject of the technical
regulation.983
7.656. Finally, the Panel sees nothing in that TBT Committee Recommendation that would call into
question the conclusion that the 7% maximum share and the high ILUC-risk cap and phase-out are
measures that "may have a significant effect on the trade of other Members". The Panel notes that
the TBT Committee Recommendation in question provides that:
i. for the purposes of Articles 2.9 and 5.6, the concept of "significant effect on
trade of other Members" may refer to the effect on trade:
− of one technical regulation or procedure for assessment of conformity only, or
of various technical regulations or procedures for assessment of conformity in
combination;
− in a specific product, group of products or products in general; and
− between two or more Members.
ii. when assessing the significance of the ef fect on trade of technical regulations,
the Member concerned should take into consideration such elements as:
− the value or other importance of imports in respect of the importing and/or
exporting Members concerned, whether from other Members individually o r
collectively,
− the potential growth of such imports, and
− difficulties for producers in other Members to comply with the proposed
technical regulations.
iii. the concept of a significant effect on trade of other Members should include both
import-enhancing and import-reducing effects on the trade of other Members,
as long as such effects are significant.
7.657. In light of the foregoing, the Panel finds that the 7% maximum share and the high ILUC-risk
cap and phase-out are technical regulations that "may have a significant effect on the trade of other
Members".

982 TBT Committee, Secretariat Note, "Decisions and Recommendations Adopted by the WTO Committee
on Technical Barriers to Trade Since 1 January 1995", WTO Document G/TBT/1/Rev.12 (21 January 2015),
Section 4.3.1.1, p. 20 (entitled "Significant effect on trade of other Members").
983 Panel Reports, Australia – Tobacco Plain Packaging, para. 7.1088.

7.1.2.5.4 "upon the request of another Member"
7.658. The procedural obligation in the first sentence of Article 2.5 to explain the justification for a
technical regulation in terms of the provisions of paragraphs 2 to 4 applies only "upon request of
another Member".
7.659. Malaysia argues that, Malaysia and other Members repeatedly requested the European Union
to explain the justification for the technical regulations at issue at multiple TBT Committee meetings
beginning from the second half of 2018, during the European Union's legislative process for RED II
and the Delegated Regulation. In its first written submission984, Malaysia summarizes and sets out
selected passages from statements that it made at the TBT Committee meetings held in November
2018 (regarding the proposed amendment to RED I); March 2019 (following the release of the
Delegated Regulation proposal); June 2019 (regarding the Delegated Regulation); November 2019
(reiterating its concerns); and May 2020 (reiterating its concerns). According to Malaysia, these
statements to the TBT Committee qualify as the relevant "requests" for an explanation of the
justification of the measures triggering the procedural obligation in the first sentence of Article 2.5.
7.660. The European Union does not dispute that Malaysia made "requests" for an explanation of
the justification of the 7% maximum share and the high ILUC -risk cap and phase -out within the
meaning of the first sentence of Article 2.5. In this regard, the Panel notes that the European Union
has presented no arguments on this element of the claim under the first sentence of Article 2.5 .
Furthermore, the European Union states, in response to a question from the Panel, that it "accepts
that the statements referenced by Malaysia in paragraphs 364 to 369 of its first written submission
constitute 'requests' for an explanation of the justifi cation within the meaning of the first sentence
of Article 2.5 of the TBT Agreement".985
7.661. The Panel considers that, as part of its assessment of whether Malaysia has made a prima
facie case of inconsistency under Article 2.5, the Panel may give some weight t o the fact that the
European Union does not contest that there was a "request" within the meaning of Article 2.5.
However, the absence of refutation from the European Union does not absolve the Panel from
conducting an independent assessment986 of whether Malaysia made "requests" for an explanation
of the justification of the 7% maximum share and the high ILUC-risk cap and phase-out within the
meaning of the first sentence of Article 2.5. The Panel has reviewed the various statements to the
TBT Committee referenced by Malaysia and considers that there may be grounds to doubt whether
Malaysia's statements to the TBT Committee can be characterized, in form or in substance, as a
"request" for the European Union to "explain the justification" of the technical regulations "in terms
of the provisions of paragraphs 2 to 4". The Panel's reasons are as follows.
7.662. The Panel first observes that none of the statements invoke or otherwise expressly refer to
Article 2.5. Furthermore, none of the questions directed at the European Union in these statements
are formulated in terms of a "request" for an "explanation of the justification" of the 7% maximum
share and the high ILUC -risk cap and phase -out, let alone an explanation of the justification "in
terms of the provisions of paragraphs 2 to 4" of Article 2.
7.663. In addition, the principal focus of Malaysia's statements, including its related questions to
the European Union, is alleged discrimination against palm oil-based biofuels that would be relevant
to Article 2.1 , not the obligations in paragraphs 2 to 4 of Article 2. While Malaysia's first written
submission highlights selected elements of these statements that set out assertions that the
impugned measures are more trade -restrictive than necessary, and not consis tent with
"international standards", it remains the case that the principal focus of these statements relates to
alleged discrimination under Article 2.1. To that extent, this does not suggest that Malaysia was
seeking an explanation of the justification in terms of the provisions of Articles 2.2, 2.3, or 2.4.
7.664. Finally, Malaysia's statements made to the TBT Committee are generally in the nature of
arguments or statements of concern , not requests to explain how the measure was justified, let
alone a request to explain how the measure was justified in terms of the provisions of Articles 2.2,
2.3 or 2.4. Indeed, the Panel's review of Malaysia's statements lead it to conclude that each is
essentially in the nature of an extended refutation of the European Union's ILUC-related justification

984 Malaysia's first written submission, paras. 363-366 and 718.
985 European Union's response to Panel question No. 135, para. 732.
986 See e.g. Panel Report, US – Shrimp (Ecuador), paras. 7.9-7.11.

of its measures, not a request for the European Union to explain the relevant justification of the
measures.
7.665. The circumstances of this case therefore present certain similarities to the circumstances in
the only prior case in which a claim under Article 2.5 was considered, and rejected on the grounds
that there was no "request" within the meaning of Article 2.5. In US – Clove Cigarettes, a set of 10
questions from Indonesia to the United States relating to the challenged technical regulation was
found to be neither in form nor in substance a "request" within the meaning of Article 2.5, because
the set of questions (a) made no mention of Article 2.5, (b) was not formulated in the terms used
in Article 2.5, and (c) related to various issues regulated by provisions of the WTO covered
agreements other than Articles 2.2, 2.3 and 2.4.987
7.666. The Panel recognizes that despite the apparent similarities with the circumstances in US –
Clove Cigarettes, Malaysia's statements include multiple questions to the European Union, and that
certain aspects of these questions reference or implicate either Article 2.2 or Article 2.4. I n any
event, the Panel does not consider it necessary to definitively rule on this issue, as it would not
change the outcome of the Panel's assessment of the claim under Article 2.5.
7.1.2.5.5 "explain the justification for that technical regulation in terms of the provisions
of paragraphs 2 to 4" of Article 2
7.667. The Panel now considers, on the arguendo assumption that there was a "request" within the
meaning of Article 2.5, whether the European Union discharged its obligation to "explain the
justification" of the 7% maximum share and the high ILUC-risk cap and phase-out "in terms of the
provisions of paragraphs 2 to 4" of Article 2.
7.668. Malaysia argues that, in responding to repeated requests from itself and other WTO Members
for an explanation of the justification of the relevant measures, the European Union has not gone
further than stating that the measures are not technical regulations.988 Malaysia submits that Article
2.5 requires more, namely that "[t]he explanation of the justification of the measure at issue must
be adequate to ensure that other Members understand those reasons and can assess the rationale
behind the measure at issue."989 Malaysia adds that the European Union does not cease to be subject
to the obligation under Article 2.5 by simpl y arguing that the measures are not "technical
regulations".990
7.669. The European Union responds that it has adequately explained the justification for the
measures in terms of the provisions of paragraphs 2 to 4 of Article 2. In responses to questions from
the Panel, it summarizes and sets out selected passages from: (a) letters or other materials (e.g.
fact sheets) that EU officials provided to the complainants during this period in response to concerns
raised; and (ii) the European Union's statements to the TB T Committee made in response to the
concerns raised in that forum. It also refers to various meetings and consultations held at various
points in time in other fora between relevant officials. 991 The European Union clarifies that it does
not dispute that if a panel "were to find that a measure qualifies as a technical regulation, the
obligation contained in the first sentence of Article 2.5 would apply despite the contrary position
taken by the concerned Member".992
7.670. The Panel notes that the rationale behind t he measures was explained as early as 2015, in
the form of the ILUC Directive which amended RED I for the stated purpose of "address[ing] the
impact of indirect land-use change given that current biofuels are mainly produced from crops grown

987 Panel Report, US – Clove Cigarettes, paras. 7.451-7.461. Malaysia argues that the panel's analysis in
US – Clove Cigarettes supports the view that a request pursuant to Article 2.5 may be made implicitly.
(Malaysia's first written submission, para. 717.)
988 Malaysia's first written submission, para. 720 (referring to WTO TBT Committee, Minutes of the
Meeting of 6-7 March 2019, G/TBT/M/77 (15 May 2019), para. 3.135; WTO TBT Committee, Minutes of the
Meeting of 20-21 June 2018, G/TBT/M/75 (14 September 2018), para. 4.245; WTO TBT Committee, Minutes of
the Meeting of 20-21 June 2019, G/TBT/M/78 (17 April 2018), para. 3.183; and WTO TBT Committee,
Statement by the European Union to the Committee on Technical Barriers to Trade - 21 and 22 March 2018,
989 Malaysia's first written submission, para. 719.
990 Malaysia's first written submission, para. 721.
991 European Union's response to Panel question Nos. 136 and 137, paras. 733-742.
992 European Union's response to Panel question No. 134, para. 731.

on existing ag ricultural land ".993 The Panel recalls and hereby incorporates by reference the
discussion at paragraphs 2.15 to 2.22 of this Report, which reference the ILUC Directive, the
European Commission's 2016 proposal for a "recast" Directive to address ILUC, and the Study Report
(2017) relating to ILUC.
7.671. Furthermore, in its statements to the TBT Committee on this matter dating at least as far
back as June 2018, Malaysia itself has addressed the European Union's ILUC-related justification for
the proposed (at the time) 7% maximum share and the high ILUC-risk cap and phase-out. Indeed,
Malaysia and other Members raising concerns with the measures at the TBT Committee meetings
have repeatedly demonstrated their familiarity with the ILUC-related studies done and commissioned
by the European Commission, and specific issues arising in connection with the European Union's
attempt to calculate GHG emissions associated with ILUC.994 As already indicated further above, the
Panel's review of Malaysia's statements leaves it with the impression that each is essentially in the
nature of an extended refutation of the European Union's ILUC-related justification of its measures,
not a request for the European Union to explain the relevant justification of the measures.
7.672. The Panel further recalls that the text of RED II itself, in particular Recitals 80 and 81, quite
clearly explains the ILUC -related justification for the measures at issue. The Delegated Regulation
reiterates that the measures are taken to address the issue of ILUC and begins with 16 recitals that
explain the measures by reference to ILUC. The Panel has already reviewed these and other aspects
of the regulatory framework in the context of identifying the specific "objective" of the 7% maximum
share and the high ILUC-risk cap and phase-out in the context of Article 2.2. Indeed, in the context
of its arguments under Article 2.2, Malaysia itself places considerable emphasis on the relevance of
the recitals of RED II for the purposes of defining the specific objectives of the technical regulations
at issue, and the Panel has already expressed its agreement with this approach to identifying the
objective of the challenged measures.995
7.673. It is clear that Malaysia does not agree with the ILUC -related justification for the measures
and does not consider that the measures are justified under the relevant provisions of the
TBT Agreement. However, the procedural obligation in Article 2.5 is not an obligation to justify the
measures to the satisfaction of the complainants o r the wider membership – it is a procedural
obligation to "explain the justification " so as to enable other Members to better assess, for
themselves, whether the technical regulation is consistent with Articles 2.2, 2.3 and 2.4.
7.674. In the Panel's view, the o nly issue that remains in light of the clear explanations of the
justification of the measures, which are already reflected in the text of the relevant legal instruments
themselves, is whether these justifications serve to explain the justification of the technical
regulations "in terms of the provisions of paragraphs 2 to 4" of Article 2. For the reasons that follow,
the Panel does not see an adequate basis to fault the European Union in this regard.
7.675. First, the Panel considers that the explanation of the justification of the measures provided
by the European Union (through the text of RED II itself and other relevant legal instruments) is
directly relevant to identifying the "objective" of the measures within the meaning of Articles 2.2,
2.3 and 2.4. This is significant because each of the obligations in Articles 2.2, 2.3 and 2.4 is
formulated by reference to a technical regulation's objective, making this the common denominator
in "the provisions of paragraphs 2 to 4" of Article 2.
7.676. In addition to being the common denominator to these provisions, the explanation of a
technical regulation's "objective" would appear to be central to understanding the reasons and
rationale for the challenge d measures, and ultimately its justification under paragraphs 2 to 4 of
Article 2. The reason is that the identification of a technical regulation's objective serves as "the
benchmark against which a panel must assess the degree of contribution made by a c hallenged

993 ILUC Directive, (Exhibit MYS-168), Recital (4), p. 2.
994 See e.g. WTO TBT Committee, Minutes of the Meeting of 20-21 June 2018, G/TBT/M/75
(14 September 2018), paras. 4.236-4.237 (Indonesia); Statement by Malaysia to the TBT Committee dated
5 July 2018, G/TBT/W/548, paras. 5-6.
995 The Panel recalls and hereby also incorporates by reference the discussion at section 7.1.2.3.3 of this
Report.

technical regulation, as well as by proposed alternative measures"996 for the purposes of Article 2.2.
It also constitutes a central point of reference for the obligations in Article 2.3997 and Article 2.4.998
7.677. Accordingly, the Panel considers that a sufficiently clear explanation of a measure's
"objective" by the regulating Member could plausibly qualify as a justification for a technical
regulation "in terms of provisions of paragraphs 2 to 4". It bears repeating that in the context of its
arguments under Article 2.2, Malaysia places considerable emphasis on the relevance of the recitals
of RED II for the purposes of defining the specific objectives of the technical regulations at issue,
and the Panel has already expressed its agreement with this approach.
7.678. Further, the Panel considers that any assessment of the adequacy of a regulating Member's
"explanation of the justification" of a technical regulation "in terms of the provisions of paragraphs
2 to 4 " of Article 2 will necessarily be informed by th e nature of the "request" made by the
complaining Member. This view stems from the fact that the provisions of Articles 2.2, 2.3 and 2.4
set out numerous distinct obligations, with each involving many distinct elements and analytical
steps. This implies th at the assessment of the adequacy of the form and content of a regulating
Member's "explanation of the justification " of a technical regulation "in terms of the provisions of
paragraphs 2 to 4 " of Article 2 must necessarily be conducted on a case -by-case basis and will
necessarily be informed by reference to the form and content of the request(s) that triggered the
explanation. In this case, Malaysia's various statements to the TBT Committee did not specify in
respect of which precise aspects of "the provisions of paragraphs 2 to 4 ", if any, an explanation of
the justification of the measures was being requested. In these circumstances, it would lack even -
handedness to subject the European Union to an asymmetrically strict and formalistic standard for
assessing whether the justification it provided is formulated "in terms of the provisions of paragraphs
2 to 4" of Article 2.
7.679. The Panel has reviewed the letters or other materials (e.g. fact sheets) that EU officials
provided to the complainants during this period, as well as the European Union's statements made
in the TBT Committee, and considers that there may be grounds to doubt whether the various
materials and statements would satisfy the obligation to "explain the justification" of the technical
regulations at issue "in terms of the provisions of paragraphs 2 to 4".
7.680. The European Union's response to Malaysia's stated concerns is principally focused on
disputing that the measures at issue are "technical regulations" and insisting that these measures
do not "ban" or even "restrict" imports of palm oil or palm oil-based biofuel into the European Union.
It is not clear that such considerations can be characterized as explanations of the justification of
the measure, in terms of the provisions of paragraphs 2 to 4 of Article 2 or otherwise. The
European Union's responses also include statements that could be characteri zed more as general
descriptions of the basic features of the measures, rather than elements of justification.
7.681. The Panel does not consider it necessary to rule on whether the letters or other materials on
record suffice to "explain the justification " for the purposes of Article 2.5. For the reasons stated
above, the text of the relevant legal instruments clearly "explain the justification" for both the 7%
maximum share and the high ILUC-risk cap and phase-out.
7.682. In light of the foregoing, the Panel finds that Malaysia has failed to establish that the
European Union failed to "explain the justification" of the 7% maximum share and the high ILUC -
risk cap and phase-out in terms of the provisions of paragraph 2 to 4 of Article 2.
7.1.2.5.6 Conclusion on Article 2.5
7.683. The Panel concludes that Malaysia has not established that the European Union has acted
inconsistently with Article 2.5 of the TBT Agreement by failing to explain the justification for

996 Appellate Body Reports, US – COOL, para. 387.
997 Article 2.3 provides that technical regulations shall not be maintained if the circumstances or
"objectives giving rise to their adoption" no longer exist or if the changed circumstances or "objectives" can be
addressed in a less trade-restrictive manner.
998 Article 2.4 provides that Members shall use relevant international standards as the basis for their
technical regulations except when such international standards or relevant parts would be an ineffective or
inappropriate means for the fulfilment of the "legitimate objectives" pursued.

preparing, adopting or applying the 7% maximum share and the high ILUC-risk cap and phase-out
in terms of Articles 2.2 to 2.4 of the TBT Agreement.
7.1.2.6 Article 2.8 – Requirements specified in terms of performance
7.1.2.6.1 Introduction
7.684. The Panel now turns to the claim under Article 2.8 of the TBT Agreement, regarding the
obligation to specify technical regulations in terms of "performance" rather than "design or
descriptive" characteristics wherever appropriate.
7.685. Malaysia submits999 that the high ILUC -risk cap and phase-out of palm oil -based biofuel is
based on an abstract and unsubstantiated high -ILUC risk concept instead of the "performance" of
such biofuel and, therefore, is inconsistent with Article 2.8. More specifically, Malaysia contends that
"high ILUC-risk" is a "descriptive" characteristic for which there is no scientific basis and does not
relate to environmental performance. Furthermore, Malaysia argues that to identify biofuels whic h
should not be counted towards EU renewable energy targets because of their negative environmental
impact, the European Union could and should have based the technical regulations at issue on
relevant ISO standards which would have enabled it to specify p roduct requirements in terms of
performance.
7.686. The European Union submits1000 that Malaysia has not established that there is a violation
of Article 2.8. More specifically, the European Union submits that Malaysia has not substantiated its
position that ILUC -risk is unrelated to environmental performance. Finally, the European Union
argues that Malaysia has not explained why the ISO standards should be used to address the
European Union's legitimate policy concerns over the effects of ILUC when Malaysia itself recognized
that those ISO standards do not currently encompass ILUC emissions.
7.1.2.6.2 Legal standard
7.687. Article 2.8 sets forth the obligation that:
Wherever appropriate, Members shall specify technical regulations based on product
requirements in terms of performance rather than design or descriptive characteristics.
7.688. Article 2.8 has been interpreted and applied in one prior case, namely US – Clove Cigarettes,
and both parties present their respective understandings of the applicable legal standard with
reference to that case.
7.689. To establish an inconsistency with Article 2.8, a complainant must demonstrate that:
a. the technical regulation at issue specifies product req uirements in terms of "design or
descriptive characteristics" rather than in terms of "performance"; and
b. it is "appropriate" to specify those product requirements in terms of performance rather
than design or descriptive characteristics.
7.690. The Panel will el aborate further on the elements of the legal standard in Article 2.8 as
necessary in the course of its assessment of the issues in dispute.
7.1.2.6.3 Assessment by the Panel
7.691. The Panel first addresses whether the technical regulation at issue specifies product
requirements in terms of design or descriptive characteristics rather than in terms of performance.

999 Malaysia's first written submission, paras. 723-729; second written submission, paras. 268-272;
responses to the Panel's questions, p. 89-90; and comments on the European Union's responses to the Panel's
questions, p. 243.
1000 European Union's first written submission, paras. 1009-1021; second written submission,
paras. 171-176; and responses to the Panel's questions, paras. 743-749.

7.692. As established in section 7.1.2.1 above, the high ILUC-risk cap and phase-out is a "technical
regulation" within the meaning of Annex 1.1 to the TBT Agreement. The Panel has concluded that it
sets out a "product characteristic " of biofuel, namely that of being produced from a particular
feedstock that has been identified to be high ILUC risk, and based on that product characteristic,
provides for specific rules on the extent to which that biofuel may be counted towards EU renewable
energy targets.
7.693. The Panel understands the term "product requirements" in Article 2.8 to refer to the "product
characteristics" laid down in a technical regulation and sees no disagree ment between the parties
on this point. Thus, what Malaysia must demonstrate is that the above product characteristic, namely
being produced from a particular feedstock that has been identified to be high ILUC risk, is a product
characteristic that has been specified in terms of "design or descriptive" characteristics rather than
in terms of "performance". In this regard, the Panel notes, and sees no problem in Malaysia focusing
specifically on a feedstock's classification as high ILUC risk as part of the above product requirement,
for the purposes of this claim.
7.694. Malaysia submits that high ILUC -risk is an abstract and unsubstantiated concept for which
there is no scientific basis and which does not relate to environmental performance. 1001 The
European Union submits that Malaysia has not substantiated its position that ILUC-risk is unrelated
to "environmental performance".1002
7.695. The Panel sees two issues with Malaysia's arguments that individually and collectively raise
the question whether Malaysia has made a prima facie case.1003 The first issue is that Malaysia's
arguments under Article 2.8 seem to merely repeat points made under other claims without properly
developing or substantiating them for the purposes of this claim. 1004 In particular, Malaysia does
not explain why the alleged lack of a scientific basis or the alleged unrelatedness to what it terms
"environmental performance " makes the product requirement one that is specified in terms of
"design or descriptive" characteristics. The Panel notes in this regard that it is not a panel's task,
but that of the complainant, to relate alleged facts to legal argument s that support a claim of
inconsistency.1005
7.696. The second issue is Malaysia's reliance on the concept of "environmental performance" – a
concept which it does not explain. The Panel assumes that this term refers to the effects, i.e. the
negative impact, of a given product on the environment. If so, the question may arise whether this
falls within the meaning of "performance" intended in Article 2.8.
7.697. The Panel notes that, as Malaysia itself points out, the ordinary meaning of "performance",
which the panel in EC – Sardines relied on in interpreting that term in Article 2.8, is "the operation
or functioning, usually with regard to effectiveness ".1006 As that definition makes clear,
"performance" is focused on the operation and functioning of the product itself. This is confirmed by
the French and Spanish language versions of the treaty text, which translate "performance"
respectively as "propriétés d'emploi" and "propiedades de uso y empleo".1007 In light of this meaning
it may be questionable whether a product's "environmental performance", at least when it comes to
indirect environmental effects as discussed here, qualifies as "performance" within the meaning of
Article 2.8. However, assuming that it does, then the question arises why a high ILU C-risk
classification (as opposed to the quantification of GHG emissions based on the LCA analysis that
Malaysia proposes, as elaborated below) would not also qualify as "environmental performance".
This, Malaysia has not explained.
7.698. The Panel considers it unnecessary to definitively rule on these issues, because in any event,
even if Malaysia had demonstrated that high ILUC-risk is specified in terms of "design or descriptive"

1001 Malaysia's first written submission, paras. 723 and 726; and second written submission, para. 270.
1002 European Union's first written submission, para. 1019; and second written submission, para. 176.
1003 A prima facie case is one which in the absence of effective refutation by the defending party,
requires a panel, as a matter of law, to rule in favour of the complaining party presenting the prima facie case.
(Appellate Body Report, US – Wool Shirts and Blouses, p.14.)
1004 See also European Union's first written submission, para. 1019.
1005 Appellate Body Report, US – Gambling, para. 140.
1006 Malaysia's first written submission, para. 725 (referring to Panel Report, EC – Sardines, para. 7.81).
1007 In US – Clove Cigarettes, the panel also understood "performance" to be an issue of "function" and
in this context referred to the French and Spanish translations of "performance" in Article 2.8. (Panel Report,
US – Clove Cigarettes, para. 7.493 and fn 863.)

characteristics rather than in terms of "performance", it would still have had to demonstrate that it
is appropriate to specify the product requirement in terms of performance rather than design or
descriptive characteristics. For the reasons that follow, the Panel concludes that Malaysia has not
done so.
7.699. Malaysia bases its argument i n this regard on the existence of the four ISO standards
discussed in section 7.1.2.2 above. These standards, as discussed above, provide for an LCA-based
quantification of GHG emissions of biofuels, from which they explicitly exclude ILUC effects. Malaysia
submits that the European Union could and should have based the technical regulations at issue on
relevant ISO standards which would have enabled it to specify product requirements in terms of
performance. Malaysia considers the four ISO standards to be of relevance in providing content and
context to the concept of "wherever appropriate" in the present case. 1008 However, Malaysia also
takes the view that its claim of inconsistency with Article 2.8 would survive even if the four ISO
standards "were not deemed to qualify the 'appropriatenes s' of technical measures in this
context".1009 The European Union submits that the respective ISO standards are irrelevant,
inappropriate and ineffective for the fulfilment of legitimate objectives pursued by the challenged
measures and that, therefore, Malaysia's claim falls.1010
7.700. The Panel notes that it has already examined whether the measures should have been based
on the four ISO standards in the context of Malaysia's claim under Article 2.4. The Panel recalls that
Article 2.4 contains the obligation to use relevant internationa l standards as a basis for technical
regulations, and that this obligation is found in the TBT Agreement. The obligation in Article 2.8 is
different from Article 2.4, as it is about specifying product characteristics in terms of performance
where appropriate. The term "appropriate" in that context has been understood to mean "suitable,
proper, or fitting".1011
7.701. While Article 2.8 is not about international standards per se , the Panel accepts that a
complainant may establish a prima facie case under Article 2.8 by referring to relevant international
standards as an argument for, and evidence of, why it is appropriate to specify a particular product
characteristic in terms of performance. This is what the Panel understands Malaysia to have done.
While there may be other ways to establish "appropriateness", Malaysia has not made any other
arguments in this regard.
7.702. In the context of Article 2.4, however, the Panel found that the four ISO standards are not
relevant under Article 2.4 because they do not address what is being addressed by the measures at
issue, namely the taking into account of ILUC. 1012 ILUC – and more specifically high ILUC -risk – is
also at issue here as (part of) the "product requirement" that allegedly was not specified in terms of
"performance" and that according to Malaysia should have been. Given that the four standards do
not address the taking into account of ILUC, they cannot say why it is appropriate – or, for that
matter, how - to specify high ILUC-risk in terms of "performance". In fact, rather than targeting how
ILUC is to be specified, the Panel understands Malaysia's argument to ultimately target eliminating
ILUC altogether as a product requirement precisely on the grounds that the ISO standards do not
address it. In Article 2.8, however, the issue is not whether a given "product requirement" should
exist at all, but only how it should be specified.
7.703. Malaysia's reliance on the four ISO standards is therefore misplaced, as the IS O standards
do not address ILUC, and for this reason are not pertinent to whether it is appropriate to specify
high ILUC-risk in terms of performance (where it is allegedly not specified in such terms). As noted
above, Malaysia has not presented any other argument on this issue.
7.1.2.6.4 Conclusion on Article 2.8
7.704. The Panel concludes that Malaysia has not established that the high ILUC-risk cap and phase-
out is inconsistent with the obligation in Article 2.8 of the TBT Agreement to whenever appropriate

1008 Malaysia's response to Panel question No. 138, p. 89.
1009 Malaysia's response to Panel question No. 138, p. 90.
1010 European Union's response to Panel question No. 138, para. 748.
1011 Panel Report, US – Clove Cigarettes, para. 7.489 (referring to Appellate Body Report, EC – Sardines,
para. 285).
1012 See para.7.186 above.

specify techn ical regulations in terms of performance rather than design or descriptive
characteristics.
7.1.2.7 Articles 2.9.2 and 2.9.4 – Proposed technical regulations
7.1.2.7.1 Introduction
7.705. The Panel now turns to the claims under Article 2.9 of the TBT Agreement, which include the
distinct transparency obligations in Article 2.9.2 and Article 2.9.4. The Panel addresses these claims
together given the relationship between these provisions and the manner in which the parties have
developed their arguments in this case.
7.706. Malaysia submits1013 that the European Union violates Articles 2.9.2 and 2.9.4 by failing to
(i) notify proposals of RED II and the Delegated Regulation and (ii) organize a meaningful
commenting process in respect of the proposals for RED II and the Delegated Regulation. More
specifically, Malaysia submits that: (i) the chapeau conditions in Article 2.9 are met; (ii) there was
no notification of the proposed RED II and Delegated Regulation in the TBT Information Management
System (TBT IMS) contrary to Article 2.9.2; and (iii) because there was no notification of the
proposed measures, there could be no meaningful commenting process pursuant to Article 2.9.4.
Further, the length of the informal feedback process for the Delegated Regulation was deficient
because i t would not have been sufficient for WTO Members to make comments, and for the
European Union to discuss them and take into account any comments and discussions in its process.
7.707. The European Union submits1014 that it was not required to fulfil the procedural requirements
in Articles 2.9.2 and 2.9.4 because the measures at issue are not technical regulations and that
Malaysia has not otherwise demonstrated a violation of these provisions. The European Union states
that "in factual terms", it acknowledges that there was no notification pursuant to Article 2.9.2 and
no formal commenting process pursuant to Article 2.9.4.1015 The European Union refers to extensive
"stakeholder consultations" held during the preparation of the legislative proposals but makes no
comment on the nature and extent of the "commenting process".1016
7.1.2.7.2 Legal standard
7.708. Article 2.9 sets forth several separate transparency obligations in relation to proposed
technical regulations:
2.9 Whenever a relevant international standard does not exist or the technical content
of a proposed technical regulation is not in accordance with the technical content of
relevant international standards, and if the technical regulation may have a significant
effect on trade of other Members, Members shall:
2.9.1 publish a notice in a publication at an early appropriate stage, in such a
manner as to enable interested parties in other Members to become
acquainted with it, that they propose to introduce a particular technical
regulation;
2.9.2 notify other Members through the Secretariat of the products to be covered
by the proposed technical regulation, together with a brief indication of its
objective and rationale. Such notifications shall take place at an early
appropriate stage, when amendments can still be introduced a nd
comments taken into account;

1013 Malaysia's first written submission, paras. 730-738; and second written submission, paras. 273-274.
1014 European Union's first written submission, paras. 1022-1028; and second written submission,
paras. 177-178.
1015 European Union's first written submission, para. 1024.
1016 European Union's first written submission, para. 1026; and second written submission, para. 178
(referring to Exhibit EU-13).

2.9.3 upon request, provide to other Members particulars or copies of the
proposed technical regulation and, whenever possible, identify the parts
which in substance deviate from relevant international standards;
2.9.4 without discrimination, allow reasonable time for other Members to make
comments in writing, discuss these comments upon request, and take
these written comments and the results of these discussions into account.
7.709. Article 2.9 has been interpreted and applied in one prior case, US – Clove Cigarettes, and
both parties present their respective understandings of the applicable legal standard with reference
to that case.
7.710. The Panel will elaborate further on the elements of the legal standard in Article 2.9 as
necessary in the course of its assessment of the issues in dispute.
7.1.2.7.3 Chapeau of Article 2.9
7.711. The obligations under Article 2.9 apply in respect of a technical regulation when the two
conditions of the chapeau of Article 2.9 are met, namely:
a. a relevant international standard does not exist, or the technical content of a proposed
technical regulation is not in accordance with the technical content of relevant international
standards; and
b. the proposed technical regulation may have a significant effect on trade of other Members.
7.712. With respect to the first condition, Malaysia argues that the high ILUC -risk cap and phase-
out is not in accordance with relevant international standards. Malaysia argues in the alternativ e
that no relevant international standards exist. With respect to the 7% maximum share, Malaysia
argues that there is no relevant international standard.1017
7.713. The European Union argues that the 7% maximum share and the high ILUC -risk cap and
phase-out are no t technical regulations, such that the procedural obligations in Article 2.9 do not
apply.1018 Beyond this, the European Union does not specifically respond to Malaysia's argument
with respect to the first condition.
7.714. The Panel recalls its finding, made above in the context of addressing Malaysia's claim under
Article 2.4 of the TBT Agreement, that there are no relevant international standards for the 7%
maximum share and the high ILUC -risk cap and phase -out. Accordingly, the first condition of the
chapeau is satisfied.
7.715. As to the second condition in the chapeau, Malaysia contends that the technical regulations
at issue have a significant effect on Malaysia's trade with the European Union.1019
7.716. The European Union does not specifically respond to Malaysia's argument on this condition.
7.717. The Panel recalls its finding, made above in the context of addressing Malaysia's claim under
Article 2.5 of the TBT Agreement, that the 7% maximum share and the high ILUC -risk cap and
phase-out are technical regulations that "may ha ve a significant effect on the trade of other
Members" for the purposes of Articles 2.5 and 2.9 of the TBT Agreement.
7.718. On that basis, the Panel finds that the conditions of the chapeau of Article 2.9 are satisfied.

1017 Malaysia's first written submission, para. 735.
1018 See European Union's first written submission, para. 1023.
1019 Malaysia's first written submission, para. 735.

7.1.2.7.4 Article 2.9.2 – notification of proposed technical regulations
7.719. The Panel recalls that "transparency is a cornerstone of the TBT Agreement "1020, and
Article 2.9.2 is "at the core of the TBT Agreement's transparency provisions: the very purpose of the
notification is to provide opportunity f or comment before the proposed measure enters into force,
when there is time for changes to be made before 'it is too late'".1021
7.720. More specifically, Article 2.9.2 requires that Members "notify other Members through the
Secretariat" of the products to be covered by a proposed technical regulation, with a brief indication
of its objective and rationale. Notification under Article 2.9.2 must occur at a multilateral level to
the WTO Secretariat, e.g. through what is now the "ePing SPS&TBT Platform" (and previously, the
TBT IMS).1022 That the same information is otherwise publicly available is insufficient to discharge
this obligation. Moreover, notification is not tied to another Member's request. 1023 The notification
obligation applies at an "early appropriate stage ", when amendments can still be introduced and
comments can be taken into account; therefore the technical regulation(s) at issue cannot have
been enacted or adopted prior to notification.1024
7.721. Malaysia argues that the RED II and Delegated Regulation proposals were not notified to the
WTO Secretariat via the TBT IMS.1025 The European Union acknowledges that "in factual terms ",
there was no notification pursuant to Article 2.9.2.1026
7.722. The Panel concludes that, absent any notification of the RED II and Delegated Regulation
proposals (which set out the high ILUC -risk cap and phase -out and the 7% maximum share) 1027,
confirmed by Malaysia's search of the TBT IMS and the European Union's own statement, the
European Union failed to comply with its obligations under Article 2.9.2 of the TBT Agreement.
7.1.2.7.5 Article 2.9.4 – commenting process for proposed technical regulations
7.723. Article 2.9.4 requires, with respect to proposed technical regulations, that Members allow
reasonable time for other Members to make comments in writing, discuss these comments upon
request, and take these written comments and the results of these discussions into account. The
wording of Article 2.9.4 indicates that this obligation is to provide an opportunity for comments and
discussion, and for taking such comments and discussions into account at the domestic level.
7.724. Article 2.9.4 has not been addressed in any prior WTO dispute. However, the TBT Committee
has at various intervals provided guidance with respe ct to time -limits for the presentation of
comments on notified technical regulations under Article 2.9.4.
7.725. In 2000 and 2003, the TBT Committee agreed: (i) that the normal time-limit for comments
on notifications should be 60 days. Any Member able to provid e a time-limit beyond 60 days, such
as 90 days, is encouraged to do so and should indicate this in the notification 1028; and (ii) in order
to improve the ability of developing country Members to comment on notifications, and consistent
with the principle of special and differential treatment, developed country Members are encouraged
to provide more than a 60-day commenting period.1029

1020 https://www.wto.org/english/tratop_e/tbt_e/tbt_e.htm.
1021 Panel Report, US – Clove Cigarettes, para. 7.536.
1022 The TBT IMS has now been replaced by the ePing SPS&TBT Platform. See https://eping.wto.org/;
https://www.wto.org/english/tratop_e/tbt_e/tbt_notifications_e.htm.
1023 Panel Report, US – Clove Cigarettes, paras. 7.535, and 7.540-7.541.
1024 Panel Report, US – Clove Cigarettes, paras. 7.536. The Panel notes that the circumstances of this
dispute are not (and are not argued to be) those in Article 2.10, whereby Members are exempt from the
obligations under Article 2.9 under certain circumstances.
1025 Malaysia's first written submission, para. 736.
1026 European Union's first written submission, para. 1024.
1027 See the Panel's description of the high ILUC-risk cap and phase-out and 7% maximum share in
section 2.3 of this Report.
1028 TBT Committee, Second triennial review of the operation and implementation of the TBT Agreement,
G/TBT/9, 13 November 2000 (G/TBT/9), para. 13 and Annex 3, p. 22.
1029 TBT Committee, third triennial review of the operation and implementation of the TBT Agreement
G/TBT/13, 11 November 2003 (G/TBT/13), para. 26.

7.726. In 2009, the TBT Committee agreed 1030: (i) to recall its earlier recommendation that the
normal time -limit for the presentation o f comments should be at least 60 days, and its
encouragement to Members to provide, whenever possible, a time -limit beyond 60 days, such as
90 days; (ii) to recall that developed country Members are encouraged to provide more than a
60-day commenting perio d, to improve the ability of developing country Members to make
comments on notifications consistent with the principle of special and differential treatment; and
(iii) to reiterate that an insufficient period of time for presentation of comments on propos ed
technical regulations and conformity assessment procedures may prevent Members from adequately
exercising their right to submit comments.1031
7.727. Malaysia argues that there was no meaningful commenting process because of the lack of
notification under Articl e 2.9.2. 1032 Malaysia further argues that the European Union failed to
discharge its obligations by organi zing an informal feedback process during which citizens and
stakeholders could submit comments on the proposed Delegated Regulation using an electronic
platform; the process was limited to inviting the public (i.e. including WTO Members) to fill in a
comments section on a webpage. 1033 Malaysia notes that t he feedback period ran from
8 February 2019 to 8 March 2019, and the Delegated Regulation was adopted on 13 March 2019.1034
The European Union therefore , in Malaysia's view, failed to organi ze a meaningful commenting
process on the proposal for the Delegated Regulation.1035
7.728. The European Union responds that it was not required to fulfil the procedural requiremen ts
in Article 2.9.4 because the measures at issue are not technical regulations, but acknowledges that
"in factual terms ", no notification pursuant to Article 2.9.2 was made and no formal commenting
process pursuant to Article 2.9.4 was organised.1036 The European Union also refers to "extensive
stakeholder consultations" during the "preparation of the legislative proposals", including a 12-week
public consultation, a stakeholder workshop on 5 February 2016, a stakeholder conference on
12 May 2016 with "third countries", a dedicated discussion at the Electricity Regulatory Forum in
Florence, and "numerous bilateral discussions"1037, but does not comment on the nature and extent
of the commenting process.1038
7.729. The Panel notes that Article 2.9.4 co ncerns a commenting period for proposed technical
regulations. The sequence of obligations in Articles 2.9.2 (multilateral notification of a complete draft
technical regulation) and 2.9.4 (the commenting process foreshadowed in Article 2.9.2) indicates
that such a commenting period should take place after a complete draft technical regulation has
been notified and before that draft is adopted and published pursuant to Article 2.11 of the
TBT Agreement. This stems from the fact that the obligation to notify in Article 2.9.2 is concerned
with and impacts the obligation to provide for a commenting period under Article 2.9.4. Thus, not
notifying a draft technical regulation at an early stage, in the manner required by Article 2.9.2,
impacts a Member's ability to discharge its obligations under Article 2.9.4.1039
7.730. Moreover, even if a commenting period had started at a reasonably early stage (absent any
notification under Article 2.9.2), in the present case it is undisputed that there was only a one-month

1030 TBT Committee, Fifth triennial review of the operation and implementation of the TBT Agreement,
G/TBT/26, 13 November 2009 (G/TBT/26), paras. 39-40.
1031 The Panel notes that the same guidance applies mutatis mutandis to the obligation in Article 5.6.4,
which concerns the equivalent commenting process for proposed conformity assessment procedures.
1032 Malaysia's second written submission, para. 274 (referring to European Union's first written
submission, para. 1024).
1033 Malaysia's second written submission, para. 274 (referring to European Union's first written
submission, para. 1024).
1034 Malaysia's first written submission, para. 737.
1035 Malaysia's first written submission, para. 737 (referring to Draft Delegated Regulation, (Exhibit MYS-
50)).
1036 European Union's first written submission, paras. 1023, 1024, and 1028; and second written
submission, para. 177.
1037 European Union's first written submission, para. 1026; and second written submission, para. 178
(referring to European Commission, Proposal for a Directive of the European Parliament and of the Council on
the promotion of the use of energy from renewable sources (recast), COM(2016) 767 final
(30 November 2016), (Exhibit EU-13), p.11).
1038 European Union's first written submission, para. 1026.
1039 See also Panel Report, India – Agricultural Products, where the panel followed similar reasoning in
assessing a claim under Annex B(5)(d) of the SPS Agreement, which contains an almost identical notification
obligation to that under Article 2.9.4. (ibid., para. 7.795.)

feedback period. This is short of the recommended minimum 60-day commenting period. Further,
having only four days to process comments or hold discussions falls short of the period foreseen to
give effect to the obligations under Article 2.9.4. This is notwithstanding the current TBT Committee
recommendations that developing country Members be given a period greater than 60 days under
Article 2.9.4.1040
7.731. These factors taken together, and the European Union's statement that "in factual terms" it
acknowledges that no publication, formal notification or organization of a commenting procedure for
the purposes of Article 2.9.4 has taken place, establish a violation of Article 2.9.4.
7.1.2.7.6 Conclusion on Articles 2.9.2 and 2.9.4
7.732. The Panel concludes that the European Union has acted inconsistently with Article 2.9.2 by
failing to notify the proposed 7% maximum share and the proposed high ILUC -risk cap and phase-
out measures.
7.733. The Panel finds that the European Union acted inconsistently with Article 2. 9.4 by having
failed to organi ze a commenting process in respect of the proposed 7% maximum share and the
proposed high ILUC-risk cap and phase-out measures in accordance with the requirements of that
provision.
7.1.3 Claims under Article 5 of the TBT Agreement
7.1.3.1 Annex 1.3 – Existence of a "conformity assessment procedure"
7.1.3.1.1 Introduction
7.734. The Panel now turns to the claims under Article 5 of the TBT Agreement. The Panel begins
with the threshold issue of whether the provisions relating to low ILUC-risk certification qualify as a
"conformity assessment procedure " within the meaning of Annex 1.3 of the TBT Agreement. The
Panel then considers whether the remaining conditions for the applicability of Article 5 are present.
7.735. Malaysia submits1041 that the provisions relating to low ILUC -risk certification qualify as a
"conformity assessment procedure " within the meaning of Annex 1.3. More specifically, Malaysia
argues that Articles 4 to 6 of the Delegated Regulation impose general conditions or cumulative
requirements on the certification of low ILUC -risk biofuels, which in turn determine whether such
biofuels are eligible to count toward s renewable energy targets within the 7% maximum share
without any limitation imposed by the cap and phase -out. Malaysia clarifies that, while Articles 4
and 5 of the Delegated Regulation lay down the criteria for certifying high ILUC -risk biofuel as low
ILUC-risk biofuel, Article 6 refers to the need to submit reliable information, to arrange for
independent auditing and proof of auditing.1042
7.736. The European Union submits1043 that the EU Biofuels regime is not a conformity assessment
procedure, and that the provisions relating to low ILUC -risk certification do not qualify as a
conformity assessment procedure, in particular because there are no underlying technical
regulations with which to assess conformity. The European Union also argues that Malaysia has not
adequately articulated what the alleged conformity assessment procedure is, as distinct from the
alleged technical regulation with wh ich it seeks to establish compliance; in this connection, the
European Union argues that Malaysia cannot rely on the same provisions as amounting to both a
technical regulation and conformity assessment procedure.1044

1040 G/TBT/26, paras. 39-40.
1041 Malaysia's first written submission, paras. 739-744; second written submission, paras. 277-281;
and responses to the Panel's questions, pp. 90-93.
1042 Malaysia's first written submission, para. 742.
1043 European Union's first written submission, paras. 1029-1035; second written submission,
paras. 179-180; responses to the Panel's questions, paras. 750-756; and comments on Malaysia's responses
to the Panel's questions, paras. 243-273.
1044 European Union's first written submission, paras. 1033-1034; and second written submission, para.
180.

7.1.3.1.2 Legal standard
7.737. As indicated in its title, Article 5 applies to "conformity assessment procedures". Article 1.2
provides that "for the purposes of this Agreement the meaning of the terms given in Annex 1
applies." Annex 1.3 defines "conformity assessment procedures" as:
Any procedure used, directly or indirectly, to determine that relevant requirements in
technical regulations or standards are fulfilled.
7.738. The Explanatory note to Annex 1.3 states:
Conformity assessment procedures include, inter alia, procedures for sampling, testing
and inspec tion; evaluation, verification and assurance of conformity; registration,
accreditation and approval as well as their combinations.
7.739. The definition of "conformity assessment procedures" in Annex 1.3 has been interpreted and
applied in prior cases 1045, to whic h both parties refer when presenting their respective
understandings of the applicable legal standard for assessing this definition. While the parties'
arguments reflect their divergent views on how findings in prior cases are relevant to the facts of
this dispute, there appears to be no fundamental disagreement between the parties on the elements
of that standard as described below.
7.740. The following components are discernible from Annex 1.3 and its Explanatory note:
a. "any procedure", including, inter alia, "procedures for sampling, testing and inspection;
evaluation, verification and assurance of conformity; registration, accreditation and
approval as well as their combinations";
b. which is "used directly or indirectly " to "determine" that relevant "requirements in
technical regulations… are fulfilled".
7.741. In other words, Annex 1.3 indicates that whether a measure amounts to a conformity
assessment procedure depends on its nature and purpose. With respect to its nature, the
TBT Agreement defines conformity assessment procedures very broadly since "any" procedure is in
principle covered, though specific examples are identified. With respect to its purpose, the procedure
must be one designed with the specific function of being used directly or indirectly to determine that
relevant requirements in a technical regulation or a standard are fulfilled.1046
7.742. The definition in Annex 1.3 distinguishes "conformity assessment procedures " from the
"relevant requirements in technical regulations or standards " with which they serve to establish
compliance. While a single measure or document may contain both a technical regulation and a
conformity assessment procedure, they are distinct concepts; one establishes conformity with the
requirements of the other.1047 In other words, a conformity assessment procedure is separate from,
but also dependent on, the existence of an underlying technical regulation containing the
"requirements" with which the procedure was designed to determine conformity.
7.743. The Panel will elaborate further on the elements of the legal standard in Annex 1.3 as
necessary in the course of its assessment of the issues in dispute.

1045 Appellate Body Report, Russia – Railway Equipment, paras. 5.119-5.120; Panel Reports,
EC – Trademarks and Geographical Indications (Australia), paras. 7.511 -7.513; and Russia – Railway
Equipment, paras. 7.240-7.241 and 7.249. See also Panel Reports, EC – Seal Products, paras. 7.506-7.507
and 7.510.
1046 The function of a conformity assessment procedure is to ensure that the underlying technical
regulations or standards are complied with. This is also confirmed by the language of Article 5.1.2 of the
TBT Agreement, which requires that conformity assessment procedures not be more strict or applied more
strictly than is necessary to "give the importing Member adequate confidence that products conform with the
applicable technical regulations or standards". (Appellate Body Report, Russia – Railway Equipment, fn 338.)
1047 Panel Report, EC – Trademarks and Geographical Indications (Australia), paras. 7.511-7.513.

7.1.3.1.3 "any procedure"
7.744. Malaysia refers to Articles 4 to 6 of the Delegated Regulation, both in its identification of a
low ILUC -risk certification measure alleged to be a conformity assessment procedure and the
substance of its claims under Article 5. The Panel first considers the meaning of the term "procedure"
in Annex 1.3, before assessing whether the pro visions identified as low ILUC -risk certification
amount to "any procedure" within the meaning of Annex 1.3. In doing so, the Panel will identify the
measure considered by Malaysia to be the alleged conformity assessment procedure before
examining whether and to what extent it is a "procedure" under Annex 1.3.
7.745. The term "procedure" is not defined in Annex 1.3.1048 However, Annex 1.3 expressly
identifies examples of relevant procedures, i.e. sampling, testing, inspection, verification,
registration, accreditation and approval procedures.1049 While ISO/IEC Guide 2:1991 (the definitions
of which apply to the TBT Agreement when not in conflict with those in Annex 11050) does not define
"procedure", subsequent ISO/IEC instruments do. In particul ar, ISO/IEC 17000:2004 (Conformity
Assessment – vocabulary and general principles) sets out terminology and definitions related to
conformity assessment procedures 1051, including a definition of "procedure". The Panel notes that
this definition does not seem to conflict with either Annex 1 or ISO/IEC Guide 2:1991. While not
discussed by the parties, these definitions are relevant to the Panel's assessment of whether
Malaysia identified a measure that is a conformity assessment procedure.1052
7.746. In ISO/IEC 17000:2004, a "procedure" is defined as a "specified way to carry out an activity
or a process". The notion of "procedure" is therefore very broad, given that the carrying out of an
activity or process can be specified in many ways. Annex 1.3 refers to "any" procedure, and the list
of examples in the Explanatory note to Annex 1.3 is non-exhaustive. These factors suggest that the
term "procedure" has a broad scope, with respect to the form a procedure might take. Moreover,
the list in the Explanatory note provides further guidance on the types of relevant procedures, based
on their function.
7.747. The Panel now turns to consider whether the provisions identified as low ILUC -risk
certification amount to "any procedure" within the meaning of Annex 1.3.
7.748. The Panel understands that, while Malaysia's position is not free of ambiguity, it ultimately
identifies a low ILUC-risk certification procedure, as set out in Article 6 of the Delegated Regulation,
as the measure it argue s is a conformity assessment procedure and subject to the disciplines in
Article 5 of the TBT Agreement.
7.749. Malaysia makes several references to the notion of "certification" and "certifying" in its panel
request. In particular, paragraphs 32(vii) -(xi) detailing Malaysia's claims under Article 5 indicate
that it is low ILUC-risk certification that is alleged to be a conformity assessment procedure. Malaysia
ties low ILUC-risk certification to the high ILUC-risk cap and phase-out measures, stating that high

1048 The TBT Agreement sets out the following hierarchical order of definitions: (i) the specific definitions
in Annex 1 apply and prevail over any other conflicting ones in other instruments (Article 1.2, Annex 1.1 and
Annex 1.2); followed by (ii) any definitions in the sixth edition of the ISO/IEC Guide 2:1991 (General Terms
and Their Definitions Concerning Standardization and Related Activities) that do not conflict with those in
Annex 1 (Appellate Body Report, US – Tuna II (Mexico), paras. 184, 353-354); and finally (iii) any further
definitions by the "UN system" or "international standardizing bodies" that neither conflict with those in
Annex 1 nor ISO/IEC Guide 2:1991 (See Article 1.1; and e.g. Appellate Body Reports, US – Tuna II (Mexico),
paras. 184, 353-354, and fn 702 to para. 353; and EC – Sardines, paras. 224-225). The Panel considers that
any non-conflicting definitions in subsequent editions of ISO/IEC Guide 2:1991, or other relevant separate
ISO/IEC definitions, would fall under the third group.
1049 This list is non-exhaustive, exemplified by the use of the terms "include" and "inter alia" in the
Explanatory note.
1050 Annex 1 provides that the terms presented in the sixth edition of the ISO/IEC Guide 2: 1991,
General Terms and Their Definitions Concerning Standardization and Related Activities, shall, when used in the
TBT Agreement, have the same meaning as given in the definitions in the said Guide, subject to the definitions
of certain terms set forth in Annex 1.
1051 See ISO/IEC 17000:2004 (Conformity Assessment - vocabulary and general principles), para. 4.3.
The Panel notes that ISO/IEC Guide 2:1991 was replaced in 1996 and 2004. In 2004, when the last and
current version (ISO/IEC Guide 2:2004 (8th edition)), all sections related to conformity assessment procedures
were deleted.
1052 Prior panels and the Appellate Body also relied on certain ISO/IEC definitions not discussed by the
parties. See e.g. Appellate Body Report, US – Tuna II (Mexico), paras. 353-362.

ILUC-risk biofuels are subject to certain limits "unless they are certified to be 'low ILUC -risk'
fuels".1053 Malaysia also refers to "criteria for certification " such as Article 4 of the Delegated
Regulation, which suggests that certification assesses complia nce with those criteria. However,
Malaysia does not point to a specific legislative provision containing a certification procedure, instead
referring, generally, to the Delegated Regulation as a relevant legal instrument. 1054 Moreover,
Malaysia does not neatly distinguish between criteria for accessing certification and the certification
process itself. Nevertheless, the Panel considers that, read as a whole, Malaysia's panel request
explains "low ILUC -risk certification " as a conformity assessment procedure which assesses
compliance with the substantive criteria in Article 4 of the Delegated Regulation, and links the
(non)operation of the low ILUC-risk certification with high ILUC-risk cap and phase-out.
7.750. The Panel notes that the identification of a low ILUC -risk certification procedure as set out
in Article 6 of the Delegated Regulation is confirmed in Malaysia's further written submissions1055:
a. While Malaysia submits that "Articles 4 to 6 of the Delegated Regulation provide the
specific rules for low ILUC -risk certification"1056 and that "low ILUC-risk certification" is
"set out in Articles 4 to 6 of the Delegated Regulation "1057, Malaysia also explains that
Article 3 of the Delegated Regulation sets out cumulative criteria for determining what is
a high ILUC-risk biofuel, Articles 4 and 5 set out "criteria that must be met to certify biofuel
made from high ILUC feedstock, as low ILUC-risk"1058, and that Article 6 of the Delegated
Regulation sets out the "need to submit reliable information, to arrange for independent
auditing and proof of auditing, and to comply with Article 30 of the RED II".1059
b. Malaysia refers to low ILUC-risk certification as "a procedure used, indirectly, to determine
whether biofuels fulfil the requirements to be subject to the high ILUC-risk cap and phase
out" and "a procedure used to determine whether biofuels fulfil the requirements to
'escape' from the high ILUC-risk cap and phase out".1060
7.751. The Panel observes that by these statements, Malaysia does not clearly distinguish between
criteria for obtaining low ILUC -risk certification and the procedure for low ILUC -risk certification
itself, as Malaysia refers to "Articles 4 to 6 of the Delegated Regulation" without further distinction
as to the role of each provision.1061 However, the Panel considers that while Malaysia's approach to
identifying a procedure is overinclusive by referring to Articles 4 to 6 taken together as providing for
a low ILUC-risk certification measure, some of the provisions it refers to actually concern the low
ILUC-risk certification procedure, in particular, Article 6 of the Delegated Regulation. Articles 26(2)
and 30 of RED II (also referred to by Malaysia) also p oint to the existence of a certification
procedure.1062 The Panel therefore limits its subsequent analysis to the provisions constituting the
low ILUC-risk certification procedure, in particular, Article 6 of the Delegated Regulation.
7.752. The Panel notes that c ertain aspects of Malaysia's claims under Article 5 concern not only
the low ILUC-risk certification procedure, but also the low ILUC-risk criteria. As discussed above1063,
insofar as Malaysia's arguments concern the low ILUC-risk criteria, they are addressed under Article
2, together with the Panel's assessment of the high ILUC-risk cap and phase-out.
7.753. The Panel further notes that despite the European Union's arguments that Malaysia does not
identify a measure that could be a conformity assessment procedure t hat is distinct from the

1054 Malaysia's panel request, paras. 13 and 17.
1055 Malaysia's first written submission, paras. 488, 739 and 741.
1056 Malaysia's first written submission, paras. 463 and 743; and second written submission, para. 277.
1057 Malaysia's first written submission, para. 739; and second written submission, para. 25.
1058 Malaysia's first written submission, para. 742.
1059 Malaysia's first written submission, para. 742.
1060 Malaysia's first written submission, para. 743; and second written submission, para. 281.
1061 This description also illustrates the basis on which the European Union considers that Malaysia has
not made clear which aspect it challenges as the conformity assessment procedure (and which it challenges as
a technical regulation). See e.g. European Union's first written submission, paras. 1033-1034; second written
submission, para. 180; response to Panel questions No. 139, para. 750 and No. 142, paras. 753-756; and
comments on Malaysia's response to Panel question Nos. 139-142.
1062 Malaysia's first written submission, paras. 463, and 742-743.
1063 See paras. 7.27-7.40 above.

technical regulations at issue, the European Union also dedicates a portion of its written submissions
to low ILUC-risk certification, referring to it as a "certification process" or "certification scheme".1064
7.754. Having identified the alleged conformity assessment procedure as the low ILUC -risk
certification procedure detailed in Article 6 of the Delegated Regulation, the Panel now turns to
consider whether this amounts to "any procedure" within the meaning of Annex 1.3. In this respect,
the Panel refers to section 2.3.3 of this Report, which sets out the relevant legal provisions
concerning low ILUC-risk certification.
7.755. Low ILUC-risk certification is referred to in Article 26(2) of RED II, as well as Recitals 17 and
18 of RED II. As des cribed by Malaysia, the criteria for certification are detailed in Articles 4 and 5
of the Delegated Regulation, while Article 6 addresses "Auditing and verification requirements for
certification of low indirect land-use change-risk biofuels, bioliquids and biomass fuels". Article 30 of
RED II (in particular Article 30(8)), which is referred to in Article 6(3) of the Delegated Regulation,
provides further detail on "implementing acts " to be adopted by the Commission to ensure
compliance with the provisions on "low or high direct and indirect land-use change-risk biofuels".
7.756. In the course of these proceedings, the European Union provided some information about
further implementation of the low ILUC -risk certification criteria and procedure, while for the mos t
part, acknowledging that implementing acts in the form of guidelines on the certification of low
ILUC-risk biofuels had yet to be adopted. 1065 These guidelines were eventually adopted in June
2022.1066
7.757. The information presented by the parties to the Panel shows that:
a. On 29 June 2021, a draft implementing act on "rules to verify sustainability and
greenhouse gas emissions saving criteria and low indirect land -use change-risk criteria"
was published for stakeholders' feedback.1067 The European Union informed the Panel that
the detailed criteria for certification would be set out in an implementing act.1068
b. On 3 February 2022, the RED II Committee on the Sustainability of Biofuels, Bioliqui ds
and Biomass Fuels gave a positive opinion on the decisions to recogni ze 13 voluntary
schemes and indicated that the Commission would soon adopt decisions recognizing them.
Three of these voluntary schemes also cover low -ILUC risk certification. 1069The
Commission adopted its decisions on 8 April 2022.1070
c. As of 25 April 2022, the European Commission had received five more applications for
recognition of voluntary certification schemes; positive technical assessments had been
made for three of them.1071
d. Further detailed rules on low ILUC-risk certification were adopted on 14 June 20221072 and
published on 27 June 2022 ("Commission Implementing Regulation (EU) 2022/996 of 14

1064 European Union's first written submission, paras. 188 and 561.
1065 With respect to the further implementation of the low ILUC-risk certification criteria and procedure,
the Panel refers to section 7.1.1 of this report, which outlines the steps and timeline for implementation that
the European Commission was required to take pursuant to RED II and the Delegated Regulation. European
Union's first written submission, paras. 1070-1071.
1066 European Union's response to Panel question No. 61, para. 394.
1067 European Union's first written submission, paras. 1070 and 1240 (referring to Draft Commission
Implementing Regulation, (Exhibit EU-161)).
1068 See e.g. European Union's first written submission, para. 1070.
1069 European Union's first written submission, para. 187 (referring to Webpage from the European
Commission's (DG Energy) website: Voluntary schemes, (Exhibit EU-213), p. 3).
1070 European Union's response to Panel question No. 60, para. 392 and fn 145 to para. 392 (referring to
Commission Implementing Decisions on Voluntary Schemes, (Exhibit EU-219)).
1071 European Union's response to Panel question No. 61, para. 393 (referring to DG Energy Voluntary
schemes (accessed on 25 April 2022), (Exhibit EU-259)).
1072 European Union's response to Panel question No., 61, para. 394; DG Energy Voluntary schemes
(accessed on 25 April 2022), (Exhibit EU-259).

June 2022 on rules to verify sustainability and greenhouse gas emissions saving criteria
and low indirect land-use change-risk criteria ").1073
7.758. Notably, the European Union stated that the "implementing act on the certification guidelines
will provide further information on the methodology for the auditing of the application of the criteria
set in the Delegated Regulation".1074
7.759. The Panel now turns to consider whether these provisions amount to "any procedure" within
the meaning of Annex 1.3.
7.760. By their express terms, Articles 4 to 6 of the Delegated Regulation concern low ILUC -risk
"certification". Articles 4 and 5 set out the requirements and criteria for certification, while Article 6
details how to demonstrate that the requirements for certification are met. Articles 4 and 5 indicate
that there is a general requirement for "certification", and Article 6 provides for "[a]uditing" and
"verification" requirements for certification of low ILUC-risk biofuels. The "[a]uditing and verification
requirements for certification of low indirect land -use change-risk biofuels, bioliquids and biomass
fuels" identified in Article 6 are expressly intended to serve as a means of verifying that "all
requirements" set out in Articles 4 and 5 have been "duly fulfil led"1075 and to "verify"1076 and
"demonstrate"1077 compliance with them.
7.761. While "verification"1078 is one of the examples of specific procedures listed in the Explanatory
note to Annex 1.3, "certification" and "auditing" are not mentioned in Annex 1.3 or ISO/IEC Guide
2:1991. "Audit" is defined in ISO/IEC 17000:2004 as the "systematic, independent, documented
process for obtaining records, statements of fact or other relevant information and assessing them
objectively to determine the extent to which specified requirements are fulfilled".1079 "Certification"
is also defined in ISO/IEC 17000:2004 as a "third-party attestation related to products, processes,
systems or persons".1080 An "attestation" is the "issue of a statement, based on a decision following
review, that fulfilment of specified requirements has been demonstrated".1081
7.762. The foregoing definitions suggest that the references to "verification" (listed in Annex 1.3),
"certification" and "auditing" (while not listed in Annex 1.3, appear comparable as they point to
verification processes), can be seen as referring to a "procedure" of the type covered under the
definition in Annex 1.3. These appear to be precisely the types of evaluations, verifications and
assurances of conformity that the Explanatory note to Annex 1.3 identifies as constitutive of a
conformity assessment procedure. Moreover, these procedures, as detailed in the
Delegated Regulation appear to be consistent with the definitions of "verification", "auditing" and
"certification" provided above.
7.763. In sum, the Panel finds that Malaysia has established that the procedure for verifying
whether biofuels meet the requirements for low ILUC-risk certification, the key features of which are
detailed in Article 6 of the Delegated Regulation, is a "procedure" of the type falling within the
meaning of this term under Annex 1.3 to the TBT Agreement.
7.764. The Panel considers that the fact that at the ti me of the Panel's establishment, this
certification procedure may still have been "incomplete" insofar as not all relevant implementing
actions had yet been taken by the European Union, does not detract from the fact that a procedure

1073 European Union's comments on Malaysia's response to Panel question No. 61, para. 108 (referring
to Commission Implementing Regulation (EU) 2022/996, (Exhibit EU-329)).
1074 European Union's first written submission, para. 1071.
1075 Article 6.1(a) of the Delegated Regulation.
1076 Article 6.2 of the Delegated Regulation.
1077 Article 6.3 of the Delegated Regulation.
1078 "Verification" is mentioned in Annex 1.3 and defined in ISO/IEC Guide 2:1991 as the
"[c]onfirmation, by examination of evidence, that a product, process or service fulfils specified requirements."
1079 ISO/IEC 17000:2004, 4.4.
1080 ISO/IEC 17000:2004, 5.5.
1081 ISO/IEC 17000:2004, 5.2.

of the type covered un der Annex 1.3 is referred to in Article 26(2) of RED II, the key features of
which are set out in Article 6 of the Delegated Regulation.1082
7.1.3.1.4 "used, directly or indirectly, to determine that relevant requirements in
technical regulations are fulfilled"
7.765. Having established that the provisions setting out a low ILUC -risk certification procedure
amount to "any procedure ", the Panel turns to consider the purpose or use of that procedure.
Annex 1.3 covers conformity assessment procedures that serve to determine co mpliance with
"requirements of technical regulations or standards " "directly or indirectly ". In other words, a
procedure is a conformity assessment procedure if it is used for the purpose of (i) directly or
indirectly (ii) determining the fulfilment of "relevant requirements " (iii) contained in a technical
regulation or standard.
7.766. The term "relevant requirements" (of technical regulations or standards) is not elaborated
on or explained further in Annex 1.3. The dictionary meaning of "relevant" is "[b]earing on or
connected with the matter in hand; closely relating to the subject or point at issue; pertinent to a
specified thing".1083 "Requirement" means "a condition which must be complied with".1084 The term
"relevant requirements" in Annex 1.3 thus suggests that a conformity assessment procedure needs
to be related to the subject -matter of the conditions of the technical regulation which need to be
complied with. This interpretation supports a view that a procedure could be a conformity
assessment procedure under Annex 1.3 even if it serves to establish fulfilment of only some of the
requirements in a technical regulation or a standard (and by implication, not all requirements in a
technical regulation will always need to be verified through a conformity assessment procedure).1085
7.767. The relationship between the procedure and the "relevant requirements " of a technical
regulation (or standard) is qualified by the terms "directly" "or" "indirectly". Annex 1.3 does not
define or explain further what types of situ ations might constitute "direct" or "indirect" use of a
procedure. According to the ordinary meaning of the term, "directly" means "in a direct manner or
way", and "without the intervention of a medium or agent; immediately; by a direct process or
mode".1086 "Indirectly" is defined as "in an indirect way or manner; not directly ", "not in a straight
line or with a straight course; circuitously: obliquely " and "by indirect action, means, connection,
agency, or instrumentality; through some intervening person or thing; mediately".1087 In the context
of Annex 1.3, the terms "directly" and "indirectly" are used to characterize the connection between
the use that is made of a procedure and the determination that relevant requirements in a technical
regulation are fulfilled.
7.768. That a procedure may constitute a conformity assessment procedure where it serves to
determine compliance with requirements "directly or indirectly " suggests an intention to cover a
broad range of modalities through which a procedure might be used in relation to a technical
regulation. Accordingly, the Panel considers that a conformity assessment procedure may be
understood as including a range of situations not limited to the most immediate type of connection

1082 See also section 7.1.1 of this Report. The Panel also notes, in this respect, that Article 1.6 of the
TBT Agreement states that "[a]ll references in this Agreement to technical regulations, standards and
conformity assessment procedures shall be construed to include any amendments thereto and any additions to
the rules or the product coverage thereof, except amendments and additions of an insignificant nature."
(emphasis added)
1083 Oxford English Dictionary online, definition of "relevant"
(https://www.oed.com/view/Entry/161893?redirectedFrom=relevant#eid) (accessed on 21 September 2023).
1084 Oxford English Dictionary online, definition of "requirement"
(https://www.oed.com/view/Entry/163260?redirectedFrom=requirement#eid) (accessed on
21 September 2023).
1085 The Panel notes, as discussed above in the context of the claim under Article 2.8 of the
TBT Agreement, that the term "product requirement", as used in that provision, is understood to mean
"product characteristics". The Panel considers that the deliberate use of the word "relevant" instead of
"product" here also serves as a distinguishing factor, indicating that "relevant requirements" is broader, and
not coterminous with, "product requirements" or "product characteristics".
1086 Oxford English Dictionary online, definition of "directly"
(https://www.oed.com/view/Entry/53307?redirectedFrom=directly#eid) (accessed on 21 September 2023).
1087 Oxford English Dictionary online, definition of "indirectly"
(https://www.oed.com/view/Entry/94534?redirectedFrom=indirectly#eid) (accessed on 21 September 2023).

where the procedure "directly" ascertains whether certain requirements of a technical regulation (or
a standard) are met.
7.769. The Panel now turns to consider whether Malaysia has demonstrated that the low ILUC-risk
certification procedure is used, "directly or indirectly" to determine whether "relevant requirements"
of a "technical regulation" are fulfilled.1088
7.770. Malaysia submits that low ILUC -risk certification is linked to the technical regulations laid
down in Article 26 of RED II, namely the 7% maximum share and the high ILUC-risk cap and phase-
out.1089 According to Malaysia, low ILUC-risk certification serves to establish that a consignment of
palm oil-based biofuel is low ILUC-risk and therefore complies with the exemption and is not subject
to the high ILUC-risk cap and phase-out.1090 Specifically, Malaysia refers to low ILUC-risk certification
as "a procedure used, indirectly, to determine whether biofuels fulfil the requirements to be subject
to the high ILUC -risk cap and phase out ".1091 Malaysia also refers to the use of low ILUC -risk
certification as relevant for a biofuel's eligibility to count towards renewable energy targets.1092 The
Panel understands Malaysia to refer to the eligibility of high ILUC-risk biofuels to count towards the
renewable energy consumption targets (i.e. to not be subject to the high ILUC-risk cap and phase-
out and be counted within the 7% maximum share without any limitation imposed by the cap and
phase-out).
7.771. Based on the above, the Panel understands Malaysia to identify the "relevant requirements"
as those th at serve to determine low ILUC -risk status, as contained in Articles 4 and 5 of the
Delegated Regulation.1093 The Panel further understands Malaysia to identify the relevant "technical
regulation" as the high ILUC-risk cap and phase-out. Moreover, the Panel understands Malaysia to
argue that low ILUC -risk certification is used to establish the compliance of consignments of high
ILUC-risk biofuels with the low ILUC -risk limited exemption to the cap and phase -out, thereby
affecting their eligibility to contribute to renewable energy targets.
7.772. The Panel notes that the European Union describes low ILUC-risk certification in terms similar
to Malaysia.1094 For example, in the European Union's words, low ILUC-risk biofuels "are not subject
to the phase-out provisions in Article 26(2) of RED II… [a]s the certification process is applicable to
fuels produced from feedstock which is designated as 'high ILUC -risk', under the EU legislative
regime, biofuel produced from palm oil production can be certified as low ILUC-risk".1095
7.773. This points to a common understanding between the parties as to how low ILUC -risk
certification operates, and its relationship with low ILUC -risk classification and the high ILUC -risk

1088 The Panel recalls its description of low ILUC-risk certification in section 2.3.3 of this Report, which
also sets out the text of Articles 4 to 6 of the Delegated Regulation. The Panel also refers to its discussions on
low ILUC-risk certification and its place within the EU Biofuels regime in section 7.1.1 of this Report.
1089 Malaysia's panel request, para. 12; and first written submission, paras. 280, 387 and 742-743.
1090 Malaysia's panel request, paras. 12, 17 and fn 20 to para. 17; first written submission, para. 743;
1091 Malaysia's first written submission, para. 743; second written submission, para. 281; and response
to Panel question No. 141. (emphasis added)
1092 Malaysia's first written submission, paras. 387, 393, and 742.
1093 Malaysia states that the high ILUC-risk cap and phase-out are the relevant technical regulations and
refers to an "indirect link" between low ILUC-risk certification procedure and the high ILUC-risk cap and
phase-out. (Malaysia's first written submission, para. 743; second written submission, para. 280; response to
Panel question No. 141). The Panel notes that, in response to questions from the Panel, Malaysia noted that
the technical regulation that is directly relevant is the exemption from the high ILUC-risk cap and phase-out,
which the Panel understands to mean the low ILUC-risk certification criteria. (Malaysia's response to Panel
question No. 141). The European Union takes issue with the apparently shifting basis of Malaysia's claim. The
Panel disagrees with the European Union's assertion that Malaysia is shifting the basis of its claim, as it has
consistently referred to what it considers to be the "indirectly relevant" technical regulation, drawing on the
language of Annex 1.3. Moreover, the Panel does not consider that it was necessary for Malaysia to identify the
"directly relevant" technical regulation in its panel request given the formulation of its claims under Article 5.
As discussed above, the measure at issue that had to be identified was the low ILUC-risk certification
procedure. Moreover, Malaysia's panel request identifies in its narrative all of the requisite links, e.g. between
the low ILUC-risk certification procedure and low ILUC-risk criteria, and how these interact with the high
ILUC-risk cap and phase-out, the 7% maximum share, and eligibility to count towards renewable energy
targets.
1094 Malaysia's first written submission, paras. 143-144.
1095 Malaysia's first written submission, paras. 143-144.

cap and phase-out, and ultimately, the extent of the eligibility of the biofuel to be counted towards
renewable energy targets.
7.774. The Panel therefore turns to consider whether the low ILUC-risk certification procedure can
be said to "directly or indirectly " determine whether the low ILUC -risk criteria (i.e. the "relevant
requirements" identified by Malaysia) are fulfilled. In this respect, the Panel refers to section 7.1.1
of this Report where it sets out the relationship between the 7% maximum share, the high ILUC -
risk cap and phase-out, and low ILUC-risk certification.
7.775. Article 6(1)(a) of the Delegated Regulation states that low ILUC -risk certification is used to
substantiate claims "that all requirements set out in Articles 4 and 5 have been duly fulfilled". Thus,
the low ILUC-risk certification procedure clearly serves to determine whether the requirements of
Article 4 and 5 of the Delegated Regulation have been fulfilled.
7.776. The Panel recalls its finding above that the 7% maximum share and the high ILUC -risk cap
and phase-out are technical regulations. The Panel further recalls its findings that the low ILUC-risk
criteria must be taken into account in the assessment of the high ILUC-risk cap and phase-out.
7.777. Taking these technical regulations as a starting point, the factor that determines in the first
instance whether they apply to a given biofuel is the determination of whether it is "high ILUC-risk",
based on the criteria contained in Article 3 of the Delegated Regulation. The low ILUC -risk
certification procedure verifies compliance with different criteria contained in Articles 4 and 5 of the
Delegated Regulation, so that consignments of biofuels determined in the first instance to be high
ILUC-risk may be exempted from the application of the high ILUC -risk cap and phase -out. Low
ILUC-risk certification by definition results in certain consignments of high ILUC-risk biofuel not being
treated as high ILUC-risk biofuel.
7.778. The Panel considers that it may thus be a matter of semantics whether the low ILUC -risk
certification procedure has a "direct" or "indirect" connection to the high ILUC -risk cap and
phase-out. It is clear that the low ILUC -risk certification procedure has a bearing on whether a
consignment of biofuel is subject to the high ILUC -risk cap and phase-out, or is instead eligible to
count toward s renewable energy targets within the 7% maximum share without any limitation
imposed by the cap and phase-out.
7.779. These factors indicate that the overarching purpose of the high ILUC-risk cap and phase-out
and the low ILUC-risk criteria and certification is the same, i.e. to determine, in combination, the
conditions of eligibility of conventional biofuels to count towards renewable energy targets. The low
ILUC-risk criteria and certification procedure do not exist in isolation, but as elements on the path
to determining the eligibility of a conventional biofuel to count toward s renewable energy targets.
While the immediate and "direct" purpose of the low ILUC-certification procedure is to establish that
the biofuels at issue meet the criteria for low ILUC-risk certification (as set out in Articles 4 and 5 of
the Delegated Regulation), indirectly, this is intended to determine whether biofuels are subject to
the high ILUC-risk cap and phase-out, and as a result, the extent of their eligibility to count towards
EU renewable energy targets.
7.780. The Panel therefore considers, that there is a sufficient relationship between these elements
– the low ILUC -risk certification procedure, the low ILUC -risk criteria, the high ILUC -risk cap and
phase-out, the 7% maximum share, and overall eligibility to count toward s EU renewable energy
targets – for the Panel to conclude that the low ILUC-risk certification procedure determines, directly
or indirectly, whether relevant requirements i n the technical regulations at issue (i.e. the high
ILUC-risk cap and phase-out and 7% maximum share) are fulfilled.
7.1.3.1.5 Other requirements for the applicability of Article 5
7.781. Having established that the low ILUC-risk certification procedure is a conformity assessment
procedure within the meaning of Annex 1.3, the Panel turns to consider the two remaining conditions
which must be met for Article 5 to apply.
7.782. First, the low ILUC-risk certification procedure must be a conformity assessment procedure
that is prepared, adopted or applied by a "central government body". As indicated in its title, Article 5
concerns obligations with respect to conformity assessment procedures by "Central Government

Bodies".1096 Annex 1.6 defines "central government bodies " as including not only "[c]entral
government, its ministries and departments" but also "any body subject to the control of the central
government in respect of the activity in question". The Explanatory note to Annex 1.6 also clarifies
that "[i]n the case of the European Communities the provisions governing central government bodies
apply." Voluntary certification procedures established at EU member State level or by a private body
would not fall within the scope of Article 5, but may be addressed by Articles 7 or 8 of the
TBT Agreement.
7.783. The parties do not dispute that the European Union is a central government body for the
purposes of Article 5, and do not raise arguments in this respect. Insofar as the low ILUC -risk
procedure is established in provisions of RED II and the Delegated Regulation, both EU instruments,
the low ILUC -risk certification appears to be a procedure by a central government body for the
purposes of Annex 1.6 and Article 5. I nsofar as certification schemes are subject to the control of
the European Commission, Article 5 also applies, regardless of whether these schemes are run by
national or non-government entities. The potential availability of voluntary certification schemes (or
the fact that the establishment of such schemes is provided for in the measure) does not in the
Panel's view detract from the fact that the low ILUC -risk certification procedure is a conformity
assessment procedure falling within the scope of Article 5.
7.784. However, given the complexities introduced to the implementation o f low ILUC -risk
certification through an EU structure which mobili zes EU member States and private actors (e.g.
through national and non -government certification schemes), including the possibility for purely
private voluntary schemes to be part of the cer tification process, the Panel limits its analysis and
conclusions of the claims under Article 5 to EU-level aspects of the low ILUC -risk certification
procedure.1097
7.785. Second, according to the introductory sentence of Article 5.1, Article 5 applies in cases where
a "positive assurance of conformity " with technical regulations (or standards) is "required".
Article 5.1 has been interpreted by the panel in Russia – Railway Equipment as meaning that
Article 5 only covers conformity assessment procedures that are "mandatory".1098
7.786. The Panel notes that in this dispute, the European Union submits that low ILUC -risk
certification is "not mandatory" in the sense that nobody is requi red to apply for certification. The
European Union recognizes, however, that low ILUC-risk certification becomes "binding" the moment
an application is made, i.e. "in the event that a producer wishes to avail themselves of the
scheme".1099 The Panel considers that the ordinary meaning of the term "required", in the context
of the introductory sentence of Article 5.1, covers situations in which an exporter wishes to avail
itself of flexibilities and other exemptions. 1100 Accordingly, and in this sense, the Panel considers
that a positive assurance of conformity is "required", i.e. is "mandatory", in order to obtain low ILUC-
risk certification.

1096 Appellate Body Report, Russia – Railway Equipment, para. 5.120; and Panel Report, Russia –
Railway Equipment, para. 7.249. See also Annex 1.6 of the TBT Agreement and the Explanatory note to
Annex 1.6.
1097 The Panel notes, without making any further assessment in this dispute, that Article 8.2 of the
TBT Agreement provides that "Members shall ensure that their central government bodies rely on conformity
assessment procedures operated by non-governmental bodies only if these latter bodies comply with the
provisions of Articles 5 and 6, with the exception of the obligation to notify proposed conformity assessment
procedures."
1098 Panel Report, Russia – Railway Equipment, para. 7.249. This interpretation was not reviewed by the
Appellate Body, which referred to the text of the introductory paragraph of Article 5.1 of the TBT Agreement
without any further elaboration on the meaning of these terms, limiting the coverage and scope of measures
captured by Article 5. (Appellate Body Report, Russia – Railway Equipment, para. 5.120).
1099 European Union's first written submission, para. 594.
1100 By way of illustration, the Panel notes that it is well established that in the context of Article III:4,
the term "requirement" includes not only those obligations which an enterprise is "legally bound to carry out"
or that apply "across the board", but also conditions that an enterprise voluntarily accepts "in order to obtain
an advantage". (See e.g. Panel Report, India – Autos, paras. 7.174 and 7.190, 7.191.)

7.1.3.1.6 Conclusion with respect to Annex 1.3
7.787. The Panel finds that the low ILUC -risk certification procedure is a "conformity assessment
procedure" within the meaning of Annex 1.3 to the TBT Agreement.
7.788. The Panel notes that the European Union reiterates its view that the low ILUC -risk
certification procedure is not a "conformity assessment procedure" when responding to each of the
claims made under Article 5. The Panel also appreciates that the way the European Union responds
to certain of the claims under Article 5 is informed by its view that the low ILUC -risk certification
procedure is not a conformity assessment procedure. However, having already addressed this issue
at the outset, and with a view to avoiding repetition, the remainder of the Panel's findings proceed
on the assumption that the low ILUC -risk certification procedu re is a conformity assessment
procedure within the meaning of Annex 1.3.
7.1.3.2 Article 5.1.1 – Non-discrimination
7.1.3.2.1 Introduction
7.789. Having concluded that the low ILUC -risk certification procedure qualifies as a "conformity
assessment procedure" within the meaning o f Annex 1.3, and is thus subject to the obligations in
Article 5 of the TBT Agreement, the Panel now addresses the claims under Article 5.
7.790. Malaysia submits1101 that the European Union violates Article 5.1.1 because the conformity
assessment procedure for certifying palm oil biofuel as low ILUC-risk discriminates against Malaysian
suppliers of palm oil-based biofuel. More specifically, Malaysia argues that the relevant like products
are palm oil-based biofuel and other oil crop-based biofuel, and that suppliers of such biofuel are in
a comparable situation. 1102 According to Malaysia, discrimination arises from the fact that unlike
suppliers of palm oil-based biofuel, other oil crop-based biofuel suppliers do not need to access any
conformity assessment procedure for their biofuel to be eligible to count toward s EU renewable
energy targets within the 7% maximum share.1103
7.791. The European Union submits that low ILUC -risk certification applies to high ILUC -risk
biofuels, such that the scope of the assessment is not between producers of oil crop-based biofuels
and palm oil-based biofuels.1104 Moreover, the focus of the non-discrimination obligations is on the
conditions for access to a procedure; here, all suppliers of high ILUC-risk biofuels have equal access
to the certification mechanism.
7.1.3.2.2 Legal standard
7.792. Article 5.1.1, read in conjunction with the introductory clause in Article 5.1, sets forth the
obligation that:
5.1 Members shall ensure that, in cases where a positive assurance of conformity with
technical regulations o r standards is required, their central government bodies apply
the following provisions to products originating in the territories of other Members:
5.1.1 conformity assessment procedures are prepared, adopted and applied so
as to grant access for suppliers of like products originating in the territories
of other Members under conditions no less favourable than those accorded
to suppliers of like products of national origin or originating in any other
country, in a comparable situation; access entails suppl iers' right to an
assessment of conformity under the rules of the procedure, including, when
foreseen by this procedure, the possibility to have conformity assessment

1101 Malaysia's first written submission, paras. 745-753; second written submission, paras. 282-287;
and responses to the Panel's questions, pp. 94-96.
1102 Malaysia's first written submission, paras. 748-749, and 752.
1104 European Union's first written submission, paras. 1050, 1052 and 1068. For the European Union's
other arguments on Article 5.1.1 concerning the applicability of Article 5, see European Union's first written
submission, paras. 1036-1061; second written submission, paras. 181-184; responses to the Panel's
questions, paras. 757-762; and comments on Malaysia's responses to the Panel's questions, paras. 275-279.

activities undertaken at the site of facilities and to receive the mark of the
system;
7.793. Article 5.1.1 has been interpreted and applied in one prior case, Russia – Railway Equipment,
and both parties present their respective understandings of the applicable legal standard with
reference to that case.
7.794. Based on the wording of Article 5.1.1, viola tions of this provision may arise from the
preparation or adoption of a conformity assessment procedure, or from its application.1105
7.795. An importing Member acts inconsistently with the non -discrimination obligations in
Article 5.1.1 in respect of a covered conformity assessment procedure if three elements are
established1106:
a. The suppliers of another Member who have been granted less favou rable access are
suppliers of products that are like the products of domestic suppliers or suppliers from any
other country who have been granted more favourable access;
b. the importing Member (through the preparation, adoption or application of a covered
conformity assessment procedure) grants access for suppliers of products from another
Member under "conditions less favourable" than those accorded to suppliers of domestic
products or products from any other country; and
c. the importing Member grants access under conditions less favourable for suppliers of like
products "in a comparable situation".
7.796. The Panel will elaborate further on the elements of the legal standard in Art icle 5.1.1 as
necessary in the course of its assessment of the issues in dispute.
7.1.3.2.3 Assessment by the Panel
7.797. The Panel turns to consider whether Malaysia's claim concerns the granting of access to the
low ILUC-risk certification procedure, to suppliers of lik e products in a comparable situation, under
conditions no less favourable than those accorded to domestic or other third country suppliers. The
Panel addresses these requirements together given the degree of interconnectedness between the
meaning of these requirements and the parties' arguments. In doing so, the Panel sets out the legal
standard and relevant arguments, followed by its assessment.
7.798. The second clause of Article 5.1.1 makes clear that the focus of the non -discrimination
obligations in Article 5 .1.1 is on the "conditions for access to a conformity assessment granted to
suppliers".1107 The Appellate Body in Russia – Railway Equipment explained that the focus is
therefore on the "factors or circumstances under which the opportunity to benefit from co nformity
assessment is accorded to those suppliers".1108 Whether conditions for access are no less favourable
turns on whether the conditions for access to the conformity assessment procedure for suppliers of
domestic or third-country products modify the conditions of competition to the detriment of suppliers
of like imported products. 1109 The panel in Russia – Railway Equipment considered that this
necessitates a "comparative analysis of the conditions of access granted to suppliers of products
from the complaining Member, on the one hand, and suppliers of like domestic products, or of like
products from any other country, on the other hand ". Only if this assessment "reveals a difference
in the access conditions granted to suppliers of the complaining Member ", should a panel go on to
consider whether that difference amounts to granting access under 'less favourable' conditions".1110
In reaching this conclusion, the panel underscored that Article 5.1.1 "focuses on suppliers and their

1105 Panel Report, Russia – Railway Equipment, para. 7.250.
1106 Panel Report, Russia – Railway Equipment, para. 7.251.
1107 Appellate Body Report, Russia – Railway Equipment, para. 5.123; and Panel Report, Russia –
Railway Equipment, para. 7.257. Both the panel and Appellate Body drew on the ordinary meaning of "access"
as well as the text of the second clause in Article 5.1.1 which states that access entails the "suppliers' right to
an assessment of conformity under the rules of the procedure". (Ibid.).
1108 Appellate Body Report, Russia – Railway Equipment, para. 5.123.
1109 Appellate Body Report, Russia – Railway Equipment, para. 5.123.
1110 Panel Report, Russia – Railway Equipment, para. 7.258.

conditions of access to a conformity assessment procedure" and "not the manner in which a Member
treats imported products from another Member". Moreover, a "mere difference" in access conditions
is not sufficient to establish a violation; that difference must modify the conditions of competition,
or competitive opportunities, among relevant suppliers of like products to the detriment of suppliers
of the complaining Member.1111
7.799. Further, the relevant treatment is that accorded to suppliers of like products in "a comparable
situation".1112 In assessing whether there is a comparable situation, relevant factors are those which
have a bearing on the conditions for granting access (e.g. the rules of the conformity assessment
procedure, nature of the products at issue, and the situation in a particular country or supplier), and
the "ability of the regulating Member to ensure compliance with the requirements in the underlying
technical regulation or standard". This analysis should be made on a case -by-case basis in light of
the measure at issue and circumstances of the case.1113
7.800. Malaysia argues that the conditions for access to the low ILUC -risk certification procedure
granted to suppliers of domestic or third-country products modify the conditions of competition to
the detriment of suppliers of like Malaysian products in a comparable situation.1114 Malaysia focuses
on the treatment of suppliers of low ILUC-risk palm oil-based biofuel, and considers that the relevant
like products are "oil palm crop -based biofuel " and "other oil crop -based biofuel ".1115 Further,
Malaysia submits that all suppliers of oil palm crop -based biofuel and other oil crop -based biofuel
are in a comparable situation. 1116 However, in response to questions from the Panel, Malaysia
clarified that the relevant factor for determining the existence of a "comparable situation " and,
therefore, granting a right to an assessment of conformity, is the alleged high ILUC-risk associated
with the particular feedstock.1117
7.801. In substantiating its claim, Malaysia refers to the fact that suppliers of other oil crop -based
biofuel do not need to access any conformity assessment procedure for their biofuel to be eligible to
count toward s renewable ene rgy targets within the 7% maximum share without any limitation
imposed by the cap and phase-out, i.e. there is "no certification requirement" for such biofuel.1118
7.802. The European Union submits that the low ILUC -risk certification procedure is not a
conformity assessment procedure.1119 The European Union alternatively submits that Article 5.1.1
does not apply as Malaysia's claim does not concern granting access under conditions less favourable
to suppliers of like products of national or third-country origin in a comparable situation.1120 Rather,
the obligation in Article 5.1.1 applies where there are suppliers of like products which are subject to
conformity assessment in the first place. The European Union explains that under the EU Biofuels
Regime, low ILUC -risk certification applies to a subset of conventional biofuels ( "those associated
with a high ILUC -risk of expansion into areas of high -carbon stock"); "access" to the conformity
assessment procedure is therefore only relevant to producers of biofuels produced from high ILUC-
risk feedstock. At present, this means that low ILUC-risk certification is "only relevant to producers
(and suppliers) of palm oil-based biofuel".1121 Moreover, Article 5.1.1 focuses on the "conditions for
access" to a conformity assessment procedure. 1122 In this case, all suppliers of palm oil -based
biofuels, irrespective of their origin, have equal access to the low ILUC -risk certification
mechanism.1123

1111 Panel Report, Russia – Railway Equipment, para. 7.260.
1112 Appellate Body Report, Russia – Railway Equipment, para. 5.124; and Panel Report, Russia –
Railway Equipment, para. 7.283.
1113 Appellate Body Report, Russia – Railway Equipment paras. 5.128 and 5.135. See also Panel Report,
Russia – Railway Equipment, para. 7.283.
1114 Malaysia's first written submission, para. 751.
1115 Malaysia's first written submission, paras. 745-753; and second written submission, para. 283.
1116 Malaysia's first written submission, para. 752; and second written submission, para. 287.
1117 Malaysia's response to Panel question No. 144.
1118 Malaysia's first written submission, para. 751; and second written submission, para. 286.
1119 Malaysia's first written submission, paras. 1029-1035.
1120 European Union's first written submission, paras. 1042-1061.
1121 European Union's first written submission, para. 1050; and response to Panel question No. 143,
para. 761.
1122 European Union's first written submission, para. 1048.
1123 European Union's first written submission, para. 1059.

7.803. In light of the requirements of Article 5.1.1, the Panel considers that Malaysia's claim under
Article 5.1.1 does not concern the granting of access to a conformity assessment procedure to
suppliers of like products who are in a comparable situation. At a general level, Malaysia's arguments
concern the imposition of a certification requirement per se as distinct from conditions of access to
the low ILUC-risk certification procedure. The Panel understands that the fundamental basis for this
claim is the fact that palm oil -based biofuel is subject to low ILUC -risk certification, while other oil
crop-based biofuels are not subject to low ILUC-risk certification.
7.804. The Panel agrees with the European Union that Article 5.1.1 concern s the conditions of
access to a conformity assessment procedure with respect to the products which are actually subject
to the conformity assessment procedure itself. 1124 The Panel's understanding is supported by the
example provided in the second clause of Article 5.1.1 of what is meant by "access": i.e. that "access
entails suppliers' right to an assessment of conformity under the rules of the procedure ". In other
words, the focus of the non-discrimination obligations in Article 5.1.1 is on the conditions for access
to a conformity assessment procedure, being the "factors or circumstances under which the
opportunity to benefit from conformity assessment is accorded to those suppliers ".1125 This is a
distinct question from the identification of which products (and in turn, suppliers) are – or are not –
subject to certification.
7.805. On the facts of this case, low ILUC-risk certification applies to all high ILUC-risk biofuels. The
fact that currently only palm oil -based biofuel is designated as high ILUC -risk does no t alter this
understanding of the operation of low ILUC-risk certification. There is thus no difference in treatment
with respect to access among the products to which certification applies. The group of relevant
products is high ILUC -risk biofuels; any su ch biofuel has the "right" of access to a conformity
assessment procedure and there is no question of less favourable treatment.
7.806. The Panel's analysis is supported by the meaning of suppliers of like products "in a
comparable situation". In light of the measures at issue, the Panel considers that the relevant factor
for determining the existence of "a comparable situation " and therefore granting a right to
assessment of conformity, is the alleged high ILUC-risk associated with a particular feedstock. This
is evident from the rules of the low ILUC-risk certification procedure, which is available only to high
ILUC-risk feedstocks. The Panel notes that this is the view held by both Malaysia and the European
Union.1126 Moreover, if the requirement under Article 5.1.1. protects equal opportunity to be certified
among products requiring certification, the situation is "comparable" only among suppliers of
products that are equally subject to the certification procedure. The Panel therefore also agrees with
the European Union that the universe of the like products of suppliers in "a comparable situation" is
limited to those which are subject to the conformity assessment procedure, i.e. biofuels produced
from high ILUC-risk feedstocks.
7.807. The Panel considers that Article 5.1.1 should not be interpreted in a manner that would allow
a regulating Member to circumvent the non -discrimination obligations in Article 2.1 by adopting a
technical regulation that applies to a group of like products on a non -discriminatory basis, and yet
require a positive assurance of conformity with the relevant requirements of that technical regulation
only for suppliers of a subset of those products. However, the Panel does not consider it necessary
or appropriate to adopt an expansive interpretation of the obligation in Article 5.1.1 to prevent such
a scenario from arising. Such a scenario would seem to involve a regulating Member discriminating
among like products that are, in the words of Article 5.1.1, in "a comparable situation". In the Panel's
view, the requirements set out in the text of Article 5.1.1 are sufficient to safeguard against such
potential circumvention.
7.1.3.2.4 Conclusion on Article 5.1.1
7.808. The Panel concludes that Malaysia has failed to establish that the low ILUC-risk certification
procedure is inconsistent with the obligation in Article 5.1.1 of the TBT Agreement to ensure that
conformity assessment pro cedures grant access for suppliers of like products originating in the

1124 The Panel notes that this interpretation is also consistent with the findings made in Russia – Railway
Equipment. (See e.g. Panel Report, Russia – Railway Equipment, para. 7.257; and Appellate Body Report,
Russia – Railway Equipment, paras. 5.121, and 5.123-5.124.)
1125 Appellate Body Report, Russia – Railway Equipment, para. 5.123.
1126 European Union's second written submission, paras. 182-183; and comments on Malaysia's
response to Panel question No. 144, para. 276. Malaysia's response to Panel question No. 144, p. 95.

territories of other Members under conditions no less favourable than those accorded to suppliers of
like products of national origin or originating in any other country.
7.1.3.3 Article 5.1.2 – Unnecessary obstacles to international trade
7.1.3.3.1 Introduction
7.809. The Panel now turns to the claim under Article 5.1.2 of the TBT Agreement.
7.810. Malaysia submits1127 that the European Union violates Article 5.1.2 by imposing a conformity
assessment procedure for cer tifying palm oil -based biofuel as low ILUC -risk which creates
unnecessary obstacles to international trade. More specifically, Malaysia argues that the low ILUC -
risk certification procedure is (i) an unnecessary obstacle to international trade, and (ii) more strict
(or applied more strictly) than necessary to give the European Union adequate confidence that
products conform with the applicable technical regulations, taking account of the risks non -
conformity would create. 1128 Malaysia explains that the Europe an Union has created unnecessary
obstacles to international trade by imposing a certification requirement without establishing how
certification may be obtained and failing to explain the meaning of the low ILUC -risk criteria.1129 In
other words, by adopting a conformity assessment procedure while making it impossible to apply it,
the European Union created an unnecessary obstacle to international trade.
7.811. The European Union submits that Malaysia does not take issue with the preparation, adoption
or applicatio n of the future implementing rules for low ILUC -risk certification, but their current
absence. For the European Union, this means that such claims "fall outside the scope " of Article
5.1.2.1130 As to these future implementing rules, t he European Union notes that it has taken steps
to prepare these rules, and argues that such rules are not indispensable for carrying out low ILUC -
risk certification, which could be conducted on the basis of national or voluntary schemes. 1131 The
European Union further submits that the low ILUC -risk criteria in the Delegated Regulation are
sufficiently detailed for certification to operate. 1132 Moreover, the European Union contends that it
cannot be that any form of verification amounts to an obstacle to trade, especially before "the actual
scope of the requirements" is fully defined.1133
7.1.3.3.2 Legal standard
7.812. Article 5.1.2, read in conjunction with the introductory clause in Article 5.1, sets forth the
obligation that:
5.1 Members shall ensure that, in cases where a positive assurance of conf ormity with
technical regulations or standards is required, their central government bodies apply
the following provisions to products originating in the territories of other Members:
…
5.1.2 conformity assessment procedures are not prepared, adopted or applied
with a view to or with the effect of creating unnecessary obstacles to
international trade. This means, inter alia, that conformity assessment
procedures shall not be more strict o r be applied more strictly than is
necessary to give the importing Member adequate confidence that products

1127 Malaysia's first written submission, paras. 754-800; second written submission, paras. 288-295;
and responses to the Panel's questions, pp. 36-43, and 96-101.
1128 Malaysia's first written submission, paras. 765-770; and second written submission, paras. 291-292.
1129 Malaysia's first written submission, para. 771; and second written submission, para. 292.
1130 European Union's first written submission, paras. 1067-1068; second written submission, para. 189;
and responses to the Panel's questions, para. 770. For the European Union's other arguments concerning the
applicability of the TBT Agreement, see European Union's first written submission, paras. 1062-1077; second
written submission, paras. 185-189; and responses to the Panel's questions, paras. 768-778.
1131 European Union's first written submission, paras. 1071-1075; and second written submission,
paras. 186-187. See also European Union's responses to the Panel's questions, paras. 771-774, 776 and 778.
1132 European Union's second written submission, para. 185.
1133 European Union's first written submission, para. 1074; second written submission, para. 189; and
responses to the Panel's questions, para. 775.

conform with the applicable technical regulations or standards, taking
account of the risks non-conformity would create.
7.813. Article 5.1.2 has been interpreted and applied in prior cases, and both parties present their
respective understandings of the applicable legal standard with reference to those cases.
7.814. Article 5.1.2 addresses the necessity of a conformity assessment procedure by a central
government body. The particular meaning of "necessity" in this context is informed by Article 5.1.2
itself. The first sentence of Article 5.1.2, referring to "unnecessary obstacles to international trade",
sets out a general obligation. The second sentence, referring to the strictness or strict application of
a conformity assessment procedure, is an example ("inter alia") of the general obligation.1134
7.815. The Panel will elaborate further on the elements of the legal standard in Article 5.1.2 as
necessary in the course of its assessment of the issues in dispute.
7.1.3.3.3 Preparation, adoption or application of a conformity assessment procedure
7.816. At the outset, the Panel considers whether Malaysia's claim concerns the "preparation,
adoption or application" of a conformity assessment procedure under Article 5.1 and therefore falls
within the scope of Article 5.1.2.
7.817. The Panel understands Malaysia to argue that the European Union created an unnecessary
obstacle to international trade by adopting the low ILUC -risk certification procedure, which despite
an active certification requirement for high ILUC -risk biofuels to be eligible to count towards
renewable energy consumption targets1135, is impossible to use. The Panel understands Malaysia to
argue that this is so, because this procedure, as set out in Article 6 of the Delegated Regulation, is
incomplete owing to a lack of detail, which, as Malaysia claims and the European Union admits, is to
be provided by certain implementing rules.
7.818. The Panel understands the European Union to admit that th e implementing regulations will
provide the missing detail, but to argue that insofar as Malaysia's claim is direct ed at the TBT -
consistency of those implementing regulations themselves the claim is "hypothetical and
premature". As a consequence, the European Union argues that this claim falls "outside the scope"
of Article 5.1.2.1136
7.819. The Panel recalls that Article 5.1.2 applies to the "preparation, adoption and application" of
conformity assessment procedures. The Panel considers that the terms "prepared, ad opted or
applied" mean that what occurs across the spectrum of preparation, adoption and application of a
conformity assessment procedure (i.e. its regulatory lifecycle1137), is captured by Article 5.1.2. Thus,
the Panel considers that Article 5.1.2 applies where certain elements of a conformity assessment
procedure have been adopted while others have not yet been adopted, and e.g. remain in a
preparatory phase. Therefore, a conformity assessment procedure which suffers from a partial
absence of detailed rules or incompleteness falls within the preparation and adoption of conformity
assessment procedures, and within scope of Article 5.1.2.

1134 Appellate Body Report, Russia – Railway Equipment, paras. 5.182-5.183.
1135 The Panel refers to its discussion of the temporal scope of issues arising from the ongoing
implementation of RED II and the Delegated Regulation in section 7.1.1 of this Report, and in particular the
entry into force of the requirements imposed by the high ILUC-risk cap and phase-out.
1136 Throughout the dispute, the European Union refers to a number of developments with respect to the
implementation of the low ILUC-risk certification procedure, including the publishing of draft implementing
regulations, the recognition of several voluntary schemes (some of which offer low ILUC-risk certification) and
the adoption and publication of the Implementing Regulation. The European Union also states variously that
the low ILUC-risk certification procedure need only be in place by the end of 2023, when the high ILUC-risk
"phase-out" element enters into force, and that it was not required to act before 30 June 2021. (European
Union's first written submission, paras. 1070 and 1072-1075, referring to Excerpt from RSB website, "RSB Low
ILUC Risk Biomass Module", (Exhibit EU-169), and Excerpt from UPM website, "All UPM BioVerno products are
certified" (accessed on 26 November 2021), (Exhibit EU-170); second written submission, paras. 186-187, and
189; and response to Panel question No. 145.)
1137 See TBT Handbook (WTO Secretariat, 2021), Fig. 10 ("Applying GRP to the lifecycle of a
TBT measure: an illustration"), p. 47. Available at: https://www.wto.org/english/res_e/booksp_e/tbt3rd_e.pdf.

7.820. The Panel understands that this interpretation of Article 5.1.2 is in keeping with the findings
of the panel in EC – Seal Products. In that case, the conformity assessment procedure was found to
not be capable of allowing trade in conforming products to occur on the date of its entry into force
and therefore posed an unnecessary obstacle to international trade. 1138 Further, the panel in EC –
Seal Products found that the obligation in Article 5.1.2 applies to third -party accreditation, as part
of a conformity assessment procedure.1139
7.821. On that basis, the Panel considers that Malaysia's claim that an incomplete conformity
assessment procedure (including its impact on third -party accreditation i.e. voluntary schemes)
might cause an unnecessary obstacle to international trade falls within the scope of Article 5.1.2.
This claim, which is based on the low ILUC -risk certification procedure as set out in Article 6 of the
Delegated Regulation, falls within the spectrum of steps constituting the preparation and adoption
of a conformity assessment procedure. This is notwithstanding the fact that the low ILUC -risk
certification procedure also anticipates that certain elements will be devised or come into force in
the future. The Panel therefore disagrees with the European Union's argument that this claim is
hypothetical, premature, and falls outside the scope of Article 5.1.2. Rather, this claim concerns the
low ILUC-risk certification procedure, as set out in Article 6 of the Delegated Regulation.1140
7.822. At the same time, the Panel considers that Article 5.1.2 only captures obstacles to trade
arising from the conformity assessment procedure itself, and not obstacles to trade arising from the
substantive criteria in the underlying technical regulation or standard with which a procedure
assesses compliance. In this regard, the Panel understands Malaysia to challenge not only aspects
relating to the low ILUC-risk certification procedure but also the low ILUC-risk criteria, including the
obstacles it identifies with respect to each of the additionality pathways, as the relevant "obstacles"
under Article 5.1.2. In particular, the Panel understands Malaysia to argue that the low ILUC -risk
criteria are impracticable (also because they are incomplete and otherwise inadequate) and that low
ILUC-risk certification is consequently unavailable.
7.823. Having identified the scope of Article 5.1.2 as referring to the preparation, adoption or
application of a conformity assessment procedure, the Panel considers that Article 5.1.2, by its
wording and in its context of Article 5, targets aspects of the procedure. This is distinct from the
"relevant requirements"1141 in the technical regulation (or standard) with which a procedure assesses
conformity. The Panel therefore finds that its task under this claim is limited to assessing whether
the preparation, adoption [or application] of the low ILUC-risk certification procedure itself (and not
the underlying low ILUC -risk criteria) is consistent with the European Union's obligations under
Article 5.1.2. Insofar as Malaysia's arguments concern the low ILUC-risk criteria, they are addressed
under Article 2.1 together with the Panel's assessment of the high ILUC-risk cap and phase-out.
7.1.3.3.4 Unnecessary obstacle to international trade
7.824. Having found that Malaysia's claim with respect to the low ILUC-risk certification procedure
falls within the scope of Article 5.1.2, the Panel turns to consider whether Malaysia has substantiated
its claim that by adopting an "incomplete" conformity assessment procedure (as set out in Article 6
of the Delegated Regulation), the European Union has created an obstacle to trade.
7.825. The Panel recalls that in EC – Seal Products, the conformity assessment procedure at issue
was not capable of allowing trade in conforming products to occur on the date of its entry into force.
Similarly, in this instance, a conformity assessment procedure which is not capable of allowing trade
in conforming products to occur on the date of its entry into force, or at least the date of entry into
force of the underlying requirement to use a conformity assessment procedure, i s capable of being
an obstacle to international trade. 1142 Therefore, if the low ILUC -risk certification procedure as set
out in Article 6 of the Delegated Regulation, in the absence of implementing regulations, is not
capable of allowing trade in conforming products to occur at the date of entry into force of th e low

1138 Panel Reports, EC – Seal Products, para. 7.528.
1139 Panel Reports, EC – Seal Products, para. 7.524.
1140 In this respect, the Panel refers to section 7.1.1 of this Report and its discussion there of its
jurisdiction and ability to take into account developments that occurred subsequent to panel establishment.
1141 TBT Agreement, Annex 1.3.
1142 In this respect, the Panel refers to its findings above in section 7.1.1 of this Report on the
relationship between the 7% maximum share, high ILUC-risk cap and phase-out, and their effect on trade
under Articles 2.1 and 2.5 of the TBT Agreement. The Panel also refers to its findings under Article 5.6 which
consider the effect on trade of the low ILUC-risk certification procedure.

ILUC-risk certification requirement, such a procedure would be capable of being an "obstacle" to
trade. As is also the case in Article 2.2, being an "obstacle" to international trade does not, alone,
render a procedure inconsistent with Article 5.1.2. Instead, such an inconsistency is only limited to
conformity assessment procedures that create obstacles that are, in addition, "unnecessary".1143
7.826. The Panel considers that, based on the evidence before it, certain detailed rules are missing
from the low I LUC-risk certification procedure as set out in Article 6 of the Delegated Regulation.
Recital 18 in the preamble to the Delegated Regulation and Article 30(8) of RED II both anticipate
such further rules to be stipulated in implementing acts. In support of this, the Panel refers to the
European Commission's implementation obligations and the progress made in this area.1144 In these
proceedings, the European Union acknowledged that it had not yet adopted the required
implementing rules .1145 In addition, the Euro pean Commission acknowledges that decisions
recognizing certification schemes state they are to be reassessed once the Implementing Regulation
is adopted and enters into force.1146 This, in the Panel's view, highlights the importance of detailed
implementing rules for conducting low ILUC-risk certification.
7.827. The Panel next considers whether the incomplete low ILUC -risk certification procedure (as
set out in Article 6 of the Delegated Regulation) has, in light of its relationship with the high ILUC -
risk cap and phase-out, created an unnecessary obstacle to international trade within the meaning
of Article 5.1.2.1147 The Panel recalls that in EC – Seal Products, a conformity assessment procedure
that could not be used at all (putting aside the role of voluntary sc hemes) was found to be an
unnecessary obstacle to international trade.
7.828. The Panel understands Malaysia to argue that the absence of detailed rules on the low ILUC-
risk certification procedure as set out in Article 6 of the Delegated Regulation prevents the re from
being any certification whatsoever; this is because without such detailed rules, it is impossible to
design a national or voluntary certification scheme. According to Malaysia, this means that the
European Commission cannot recogni ze such schemes a nd that, as a result, economic operators
cannot apply for certification (e.g. by collecting necessary financial and agricultural data, which need
to span at least three years of operation). Ultimately, Malaysia argues, no low ILUC -risk certified
biofuel is able to be used to meet renewable energy consumption targets, because certification is
the only means by which palm oil -based biofuel (at present the only high ILUC -risk biofuel) is
exempted from the high ILUC-risk cap and phase-out.
7.829. The Panel recalls the following facts:
a. the high ILUC -risk cap and phase -out, which gave rise to the need for low ILUC -risk
certification, came into force in 2019;
b. the implementation deadline for EU member States was 30 June 2021;
c. the European Union recognized some voluntary certification schemes in April 2022; and
d. the Implementing Regulation was adopted, published and entered into force in June 2022.

1143 As the Appellate Body observed with respect to Article 2.2, the context of Article 2.2 "suggests that
'obstacles to international trade' may be permitted insofar as they are not found to be 'unnecessary', that is,
'more trade-restrictive than necessary to fulfil a legitimate objective'[, and this in turn] supports a reading that
Article 2.1 does not operate to prohibit a priori any obstacle to international trade." (Appellate Body Report, US
– Clove Cigarettes, para. 171). See also Appellate Body Reports, US – Tuna II (Mexico), para. 319; and
Indonesia – Import Licensing Regimes, para. 5.49. The Panel considers that this same reasoning applies to
Article 5.1.2.
1144 See section 7.1.1 of this Report.
1145 European Union's first written submission, paras. 1070 and 1074; second written submission, para.
185; and response to Panel question No. 150, para. 778. The Panel recalls that the Implementing Regulation
was adopted on 14 June 2022. (European Union's comment on Malaysia's response to Panel question No. 61,
para. 108 (referring to Commission Implementing Regulation (EU) 2022/996, (Exhibit EU- 329)).)
1146 European Union's response to Panel question No. 150, paras. 776-777 (referring to Commission
Implementing Decisions on Voluntary Schemes, (Exhibit EU-219)).
1147 On the relationship between these measures, see section 7.1.1 of this Report.

7.830. The Panel notes that the high ILUC -risk cap and phase -out and the low ILUC -risk criteria
and certification procedure have been in force since 10 June 2019.1148 Although EU member States
did not have to incorporate these requirements into their national laws until 30 June 2021, they
were not precluded from doing so. 1149 It was therefore not possible to make use of low ILUC -risk
certification (as set out in Article 6 of the Delegated Regulation) in situations where such certification
was mandated over a three -year period. Even if one were to take 30 June 2021 (i.e. the date for
transposition of the high ILUC -risk cap across a ll EU member States) as the date when low ILUC -
risk certification became relevant, it would not have been possible to complete the process for
designing a certification scheme, having that scheme recognized by the European Union, and actually
applying and obtaining certification.
7.831. The Panel considers that these circumstances are even more significant given that low
ILUC-risk certification, whether through the designated authorities of EU member States or through
voluntary schemes, is the only means by which consignments of a high ILUC-risk biofuel may benefit
from an exemption to the high ILUC-risk cap and phase-out. Given that the low ILUC-risk certification
procedure was non -operational, there were simply no means by which low ILUC -risk certification
could be granted.
7.832. The Panel observes that while there are a limited number of certification schemes (~13) that
have been approved, and a small number of these (~3) concerned low ILUC -risk certification, the
Panel does not consider this to demonstrate that the low ILUC -risk certification procedure was
available or workable from the date of entry into force (or latest implementation) of the low ILUC -
risk certification requirement. Further, the examples provided by the European Union of low ILUC -
risk certification do not concern palm oil, but "crude tall oil" (notably not an oil crop-based biofuel)
and "brassica carinata oil" (an oil seed crop). There is no evidence at least as presented in these
proceedings, that these oils fall into the only category of biofuels that necessitate low ILUC -risk
certification, i.e. high ILUC-risk biofuels (which, to date, is limited to palm oil). Rather, this evidence
confirms, if anything, that certification of consignments of palm oil -based biofuel was not possible
prior to April 2 022 (with the approval of the first certification schemes) and only then, on a
provisional basis.1150
7.833. The Panel has some sympathy with the fact that designing and setting up a certification
scheme is itself a timely and costly exercise. This is all the more so, when such design and operation
needs to be revised following the late publishing of legislation, at an additional cost to the scheme
organizers and users. Therefore, the Panel does not consider that the option to design (at the risk
of doing so incorr ectly) a voluntary certification scheme based on the framework provided by
Article 6 of the Delegated Regulation, which explicitly acknowledges missing detailed rules, would
have been a reasonable course of action to expect. The level of detail added by th e published
Implementing Regulation further demonstrates this point.1151
7.834. The Panel does not consider it necessary to consider whether there are one or more less
trade-restrictive alternative measures to establish that deficiencies in the implementation of the low
ILUC-risk procedure have created unnecessary obstacles to internat ional trade. The Panel recalls
that the claim in EC – Seal Products was also based on the first sentence of Article 5.1.2, and that

1148 Despite initially insisting that certification only becomes necessary in 2023 with the entry into force
of the "phase-out", the European Union itself clarifies that the "cap" introduced a need for certification for low
ILUC-risk biofuels, if they are to be eligible to count towards renewable energy targets beyond the limitations
imposed by the high ILUC-risk cap and phase-out. See e.g. European Union's response to Panel question
1149 The Panel notes that this deadline for implementation did not in theory or practice prevent earlier
EU member State implementation, and this is not contested by the parties. For example, Austria introduced the
cap on high ILUC-risk biofuels as of 1 January 2021 and a complete phase-out as of 1 July 2021, i.e. much
earlier that the 2023-2030 period in RED II. (See Indonesia's third-party submission, para. 43 (referring to
Examples of EU member States' measures restricting oil palm crop-based biofuel, (Exhibit IDN-1)). See also
Malaysia's first written submission, para. 399.)
1150 The Panel notes that the European Commission Decisions approving voluntary certification schemes
referred to above stipulate expressly that their approval will be revised once detailed implementing rules (i.e.
the Implementing Regulations) come into effect. See Commission Implementing Decisions on Voluntary
Schemes, (Exhibit EU-219).
1151 The European Union itself refers to a number of areas where operational detail was added to the low
ILUC-risk criteria through the Implementing Regulation following e.g. a pilot study, indicating that important
details were missing prior to the Implementing Regulation. (See European Union's comments on Malaysia's
response to Panel question No. 61.)

panel did not consider alternative measures in finding that a conformity assessment procedure that
was not capable of allowi ng trade in conforming products to occur, despite the entry into force of
the EU Seal Regime, created an unnecessary obstacle to international trade.1152 The Panel observes
that this approach is also entirely consistent with the approach followed in the cont ext of necessity
tests under Article 2.2 of the TBT Agreement and Article XX of the GATT 1994 .1153 Therefore, the
Panel does not consider it necessary to address the parties' arguments concerning alternative
measures under Article 5.1.2 any further.
7.1.3.3.5 Strictness and strict application of low ILUC-risk certification
7.835. Malaysia also argues that low ILUC-risk certification is more strict or applied more strictly
than necessary, to give the European Union adequate confidence that products conform with the
applicable technical regulations, taking account of the risks non -conformity would create. 1154 The
Panel understands that this argument also turns on the argument that the European Union requires
certification in order to benefit from the limited low ILUC -risk exception but makes it impossible to
obtain certification, given the absence of further detailed rules with respect to the low ILUC -risk
certification.1155 Malaysia makes further submissions with respect to the objective of this measure,
its trade-restrictiveness and presents a range of alternative measures.
7.836. Malaysia essentially argues that the same aspects of low ILUC -risk certification (as set out
in Article 6 of the Delegated Regulation) considered under the first sentence of Article 5.1.2 also
illustrate a violation of the second sentence of Article 5.1.2. The Panel recalls that Article 5.1.2
addresses the "necessity" of a measure, the particular meaning of which is informed by Article 5.1.2
itself. The first sentence of Article 5.1.2, referring to unn ecessary obstacles to international trade,
sets out a general obligation, whereas the second sentence, referring to the strictness or strict
application of a conformity assessment procedure, is an example of the general obligation. This is
clear from the wording "this means, inter alia".1156 Therefore, a complainant need not show that a
measure is both an unnecessary obstacle to international trade and that it is more strict than
necessary or applied more strictly than necessary. Further, while the strictness or strict application
of a conformity assessment procedure may amount to an unnecessary obstacle to international
trade, these are not the only ways of demonstrating that there is an unnecessary obstacle to
international trade under Article 5.1.2.
7.837. The Panel has found above that Malaysia has demonstrated that a lack of completeness
surrounding the low ILUC -risk certification procedure as set out in Article 6 of the Delegated
Regulation meant that it could not be used as an exemption to the high ILUC -risk cap and phase-
out as intended, and there is therefore an unnecessary obstacle to international trade. Thus, it is
not necessary for the Panel to make further findings with respect to the second sentence of Article
5.1.2 in order to resolve this dispute, espe cially as the claim under the second sentence of Article
5.1.2 is based on the same alleged deficiencies of low ILUC-risk certification.
7.1.3.3.6 Conclusion on Article 5.1.2
7.838. The Panel finds that the low ILUC -risk certification procedure, as set out in Article 6 of the
Delegated Regulation, is inconsistent with Article 5.1.2 of the TBT Agreement since deficiencies in
the implementation of the low ILUC -risk procedure have created unnecessary obstacles to
international trade.

1152 Panel Reports, EC – Seal Products, paras. 7.527-7.528.
1153 In the context of Article XX of the GATT 1994, panels may conduct a threshold inquiry to assess
whether the challenged measure is designed to protect the interest in the subparagraph invoked. Where a
panel finds that a measure is incapable of meeting the stated objective, the analysis need not go further to
determine whether this measure is "necessary" to protect this objective, let alone whether there are one or
more less trade-restrictive alternative measures. (See e.g. Appellate Body Report, Colombia – Textiles, para.
5.68.) In the context of the necessity test under Article XX and Article 2.2, a panel need not continue with a
comparison of the measure against the proposed alternative measures if the measure "makes no contribution
to the achievement of the legitimate objective". (Appellate Body Report, US – Tuna II (Mexico), fn 647 to para.
322.)
1154 See e.g. Malaysia's first written submission, paras. 755 and 765-772.
1155 Malaysia's first written submission, para. 771.
1156 Appellate Body Report, Russia – Railway Equipment, para. 5.182-5.183; and Panel Report, Russia –
Railway Equipment, para. 7.413.

7.1.3.4 Article 5.2.1 – As expeditiously as possible
7.1.3.4.1 Introduction
7.839. The Panel now turns to the claim under Article 5.2.1 of the TBT Agreement.
7.840. Malaysia submits1157 that the European Union violates Article 5.2.1 by failing to ensure that
the detailed implementing rules required to undertake and complete the low ILUC -risk certification
procedure are made available as expeditiously as possi ble. More specifically, Malaysia argues that
due to the European Union's failure to adopt implementing rules providing for the necessary
elements that enable certification to be obtained, it is impossible for any certification scheme to be
designed and gai n approval, and for producers to start preparing for certification by collecting
financial and agricultural data, such that it has been impossible to undertake or complete
expeditiously, any low ILUC-risk certification.1158
7.841. The European Union submits1159 that there is no violation of Article 5.2.1. While the European
Union acknowledges that in factual terms it has not adopted detailed implementing rules on
certification1160, it maintains that the adoption of such rules is not indispensable to carrying out
certification.1161
7.1.3.4.2 Legal standard
7.842. Article 5.2.1, read in conjunction with the introductory clause in Article 5.2, sets forth the
obligation that:
5.2 When implementing the provisions of paragraph 1, Members shall ensure that:
5.2.1 conformity assessment procedur es are undertaken and completed as
expeditiously as possible and in a no less favourable order for products
originating in the territories of other Members than for like domestic
products[.]
7.843. Article 5.2.1 has been interpreted and applied in one prior case, EU – Seal Products, and
both parties present their respective understandings of the applicable legal standard with reference
to that case.
7.844. To establish a violation of Article 5.2.1, the following elements must be established1162:
a. the regulating Member is implementing the provisions of Article 5.1; and
b. the regulating Member has failed to ensure that conformity assessment procedures are
"undertaken and completed" "as expeditiously as possible"; or
c. the regulating Member has undertaken and completed conformity assessment procedures
in a "less favourable order " for products originating in the territories of other Members
than for like domestic products.
7.845. Article 5.2.1 therefore contains two separate obligations for Members implementing th e
provisions of Article 5.1. A violation can be established if a Member either (i) fails to ensure that
conformity assessment procedures are undertaken and completed as expeditiously as possible; or
(ii) undertakes or completes conformity assessment proced ures in a less favourable order for

1157 Malaysia's first written submission, paras. 801-807; second written submission, para. 296.
1158 Malaysia's first written submission, para. 805.
1159 European Union's first written submission, paras. 1078-1084; second written submission,
paras. 185-191.
1160 European Union's first written submission, para. 1081.
1161 European Union's first written submission, para. 1081.
1162 Panel Reports, EC – Seal Products, para. 7.556.

products of foreign vs domestic origin. The Panel understands that Malaysia's claim is based on the
first obligation ("as expeditiously as possible") only.
7.846. The Panel will elaborate further on the elements of the legal standard in Article 5.2.1 as
necessary in the course of its assessment of the issues in dispute.
7.1.3.4.3 Assessment by the Panel
7.847. The Panel considers that Malaysia's claim under Article 5.2.1 turns on the moment at which
the obligation in this provision can be said to apply.
7.848. The Panel understands that Malaysia's claim is premised on an interpretation of Article 5.2.1
that suggests there is a violation in circumstances where, owing to incomplete rules governing a
certification procedure, certification cannot occur.1163 The Panel notes Malaysia's explanation that,
without clearly defined conditions governing the certification procedure, certification schemes cannot
be designed, recogni zed and used to provide certification, despite there being a certification
requirement in force.1164 The Panel understands that it is on this basis that Malaysia contends that
the European Union fails to ensure that the low ILUC-risk certification procedure is "undertaken and
completed" "as expeditiously as possible ". The Panel therefo re understands the relevant
interpretative question to be whether an "incomplete" certification procedure, which in Malaysia's
view, cannot be undertaken at all, engages the obligation in Article 5.2.1.
7.849. As a matter of interpretation, Malaysia submits that Article 5.2.1 applies to all aspects of a
conformity assessment procedure, including individual applications for certification as well as
applications for accreditation to carry out conformity assessment procedures, in keeping with the
illustrative list o f conformity assessment procedures in the Explanatory note to Annex 1.3.1165
Malaysia further submits that, while the obligation in Article 5.2.1 is engaged where an individual
application has been received, it should not be confined to such cases.1166
7.850. The European Union responds that it does not engage with Malaysia's submissions on the
nature and extent of the obligations under Article 5.2.1 and makes no concession as to their
validity.1167 Nevertheless, the European Union submits that Article 5.2.1 presupposes the low ILUC-
risk certification schemes are already in operation, which at the time of its second written
submission, are "currently not".1168
7.851. The Panel observes that the text of the introductory clause of Article 5.2 indicates that
Article 5.2.1 applies to Members "[w]hen implementing the provisions of paragraph 1" (i.e. Article
5.1). The Panel recalls that the provisions of Article 5.1 concern the "preparation, adoption and
application" of a conformity assessment procedure. This, in turn, could be taken to mean that the
act of "implementing" under Article 5.2 might concern not just the "application" of a conformity
assessment procedure, but also its "preparation" and "adoption". However, the Panel considers that
because Article 5.2.1 contains an obligation to ensure that "procedures are undertaken and
completed" as expeditiously as possible, this implies that the conformity assessment procedures
already exist and that Article 5.2.1 is only concerned with their application and imminent completion.
7.852. This reading is supported by the panel's analysis in EC – Seal Products. That panel also
considered the point in time at which the obligation to "undertake and complete " a conformity
assessment procedure is triggered during the implementation process of a conformity assessment
procedure. The panel considered that the obligation in Article 5.2.1 is "limited to the application of
a CAP ".1169 The panel also referred to Annex C(1)(a) of the SPS Agreement, which refers to
undertaking and completing approval procedures without "undue delay", and recalled that in the

1163 Malaysia's first written submission, para. 805. The Panel does not consider any arguments
concerning the low ILUC-risk criteria, given the Panel's finding that these do not form part of the low ILUC-risk
certification procedure, which is the measure at issue alleged to be a conformity assessment procedure. (See
the Panel's findings in the context of Annex 1.3 above.)
1164 Malaysia's first written submission, para. 805.
1165 Malaysia's first written submission, para. 804. See section 7.1.3.1 of this Report for the full
illustrative list in the Explanatory note to Annex 1.3.
1166 See Malaysia's first written submission, paras. 804-805.
1167 European Union's first written submission, para. 1080.
1168 European Union's second written submission, para. 190.
1169 Panel Reports, EC – Seal Products, para. 7.558.

context of the SPS Agreement, the panel in EC – Approval and Marketing of Biotech Products
concluded that the obligation "covers all stages of approval procedures and should be taken as
meaning that, once an application has been received, approval procedures must be started and then
carried out from beginning to end".1170 The panel in EC – Seal Products concluded that the obligation
in Article 5.2.1 likewise applies to the implementation of a conformity assessment procedure "from
the moment when an application for recognition has been received and through the completion of
the process".1171
7.853. The Panel recalls Malaysia's argument that the lack of deta iled rules governing the
certification procedure (as set out in Article 6 of the Delegated Regulation) means that the procedure
cannot even begin owing to an inability to design certification schemes in the first place, such that
a certification scheme is in both theory and practice inoperable. A certification scheme, on this view,
is incapable of operating, regardless of whether the relevant application is one for accreditation or
conformity. The Panel understands Malaysia to argue that it follows, as a co nsequence of this
inoperability, that the regulating Member fails to ensure that the conformity assessment procedures
are undertaken and completed as expeditiously as possible.
7.854. The Panel considers that Malaysia's understanding would require it to go beyond the
interpretation of Article 5.2.1 set out above. The wording of Article 5.2.1 limits, by its reference to
the implementation of the application of conformity assessment procedures, its scope to a subset of
conformity assessment procedures: i.e. only those which are themselves capable of application (i.e.
can be "undertaken" and "completed"). In the Panel's view, there does not necessarily have to be
"full implementation" of a conformity assessment procedure, provided such procedures are capable
of being applied, and provided that pursuant to those procedures, individual applications can be
"undertaken" and "completed".
7.855. The Panel is not suggesting that the scope of the ob ligation in Article 5.2.1 is limited to
individual applications. 1172 Nor does the Panel exclude the possibility of an as such claim in
circumstances where there are elements of a conformity assessment procedure which, by their
terms, prevent relevant authori ties from undertaking and completing them as expeditiously as
possible. The Panel considers however that, in all cases, Article 5.2.1 is, in principle, only applicable
where there are conformity assessment procedures that are capable of being applied, purs uant to
which individual applications can be undertaken and completed.
7.856. The Panel considers that Malaysia's claim is effectively that the European Union has failed to
"undertake and complete " the adoption of a functional conformity assessment procedure "as
expeditiously as possible". For the reasons set out above, such a conte ntion, even if correct, falls
outside the scope of the obligation in Article 5.2.1.1173
7.1.3.4.4 Conclusion on Article 5.2.1
7.857. The Panel concludes that Malaysia has failed to establish that the European Union has acted
inconsistently with the obligation in Article 5.2. 1 of the TBT Agreement to ensure that conformity
assessment procedures are undertaken and completed as expeditiously as possible.
7.1.3.5 Articles 5.6.1, 5.6.2 and 5.6.4 – Proposed conformity assessment procedures
7.1.3.5.1 Introduction
7.858. The Panel now turns to the claims under Article 5.6 of the TBT Agreement, which include the
distinct transparency obligations in Articles 5.6.1, 5.6.2 and 5.6.4. The Panel addresses these claims

1170 Panel Reports, EC – Seal Products, para. 7.562 (referring to Panel Reports, EC – Approval and
Marketing of Biotech Products, para. 7.1494 (emphasis added)).
1171 Panel Reports, EC – Seal Products, para. 7.563.
1172 The Panel notes in this respect that, unlike Article 5.1.2, Article 5.2.2 contains terms which relate to
individual applications (e.g. "the applicant", "the application", "each conformity assessment procedure"). See
e.g. Panel Report, Russia – Railway Equipment, paras. 7.553-7.565, 7.783, 7.588-7.590, 7.794, 7.797, and
7.800-7.801.
1173 For that reason, the Panel does not consider it necessary to address the European Union's additional
arguments that the detailed implementing regulations are not indispensable for carrying out certification; and
the arguments concerning the lack of requests for recognition of voluntary schemes.

together given the relationship between these provisions and the manner in which the parties have
developed their arguments in this case.
7.859. Malaysia submits1174 that the European Union violates these separate obligations in Article
5.6. More specifically, Malaysia claims that the European Union violates (i) Article 5.6.1, by failing
to publish a notice at an early appropriate stage that it proposes to introduce a particular conformity
assessment procedure, in such a manner as to enable interested parties in Malaysia and other WTO
Members to become acquainted with it; (ii) Article 5.6.2, by failing to notify proposals of RED II and
the Delegated Regulation; and (iii) Article 5.6.4, by having failed to organi ze a meaningful
commenting process in respect of the proposal for RED II and that for the Delegated Regulation.
7.860. The European Union submits 1175 that it is not subject to the procedural requirements in
Article 5.6 because low ILUC -risk certification is not a conformity assessment procedure . The
European Union does not respond to Malaysia's submissions on the nature and extent of the
obligations under Article 5.6. Instead, it considers that, because the measures complained of will
not take effect until December 2023 and detailed implementing rules have yet to be adopted,
Malaysia's claims are "hypothetical and premature".
7.1.3.5.2 Legal standard
7.861. Article 5. 6 sets forth several separate transparency obligations in relation to proposed
conformity assessment procedures:
5.6 Whenever a relevant guide or recommendation issued by an international
standardizing body does not exist or the technical content of a prop osed conformity
assessment procedure is not in accordance with relevant guides and recommendations
issued by international standardizing bodies, and if the conformity assessment
procedure may have a significant effect on trade of other Members, Members shall:
5.6.1 publish a notice in a publication at an early appropriate stage, in such a
manner as to enable interested parties in other Members to become
acquainted with it, that they propose to introduce a particular conformity
assessment procedure;
5.6.2 notify other Members through the Secretariat of the products to be covered
by the proposed conformity assessment procedure, together with a brief
indication of its objective and rationale. Such notifications shall take place
at an early appropriate stage, wh en amendments can still be introduced
and comments taken into account;
5.6.3 upon request, provide to other Members particulars or copies of the
proposed procedure and, whenever possible, identify the parts which in
substance deviate from relevant guides o r recommendations issued by
international standardizing bodies;
5.6.4 without discrimination, allow reasonable time for other Members to make
comments in writing, discuss these comments upon request, and take
these written comments and the results of these discussions into account.
7.862. Article 5.6 has not been interpreted or applied in prior cases. However, the obligations
therein regarding proposed conformity assessment procedures mirror those found in Article 2.9 of
the TBT Agreement (concerning proposed tech nical regulations) and there appears to be no
fundamental disagreement between the parties on the elements of that standard as described below.
7.863. The Panel will elaborate further on the elements of the legal standard in Articles 5.6.1, 5.6.2
and 5.6.4 as necessary in the course of its assessment of the issues in dispute.

1174 Malaysia's first written submission, paras. 808-823; second written submission, paras. 297-299.
1175 European Union's first written submission, paras. 1085-1089; second written submission,
paras. 192-193.

7.1.3.5.3 Chapeau of Article 5.6
7.864. The obligations under Article 5.6 apply in respect of a conformity assessment procedure
when the two conditions of the chapeau of Article 5.6 are met, namely:
a. a relevant guide or recommendation issued by an international standardizing body does
not exist, or the technical content of a proposed conformity assessment procedure is not
in accordance with relevant guides and recommendations issued by international
standardizing bodies; and
b. the proposed conformity assessment procedure may have a significant effect on trade of
other Members.
7.865. As to the first condition of the chapeau, Malaysia argues that the low ILUC-risk certification
procedure is non-compliant with a relevant guide or recommendation, namely ISO/IEC 17007:2010.
According to Malaysia, this is because the European Union failed to adopt and/or make publicly
available all the relevant elements of this procedure, such that certification schemes are unable to
be designed and applications for conformity assessment cannot be made.1176
7.866. The Panel understands that ISO/IEC 17007:2010, entitled "Conformity assessment –
Guidance for drafting normative documents suitable for use for conformity assessment", is relevant
to all conformity assessment procedures. 1177 ISO/IEC 17007:2010 lays down several principles as
guidance for preparing conformity assessment procedures.
7.867. According to principle 2, all interested parties such as a manufacturer, supplier, user or
purchaser of a product or an independent body, must be able to assess the conformity of products
with the relevant specifications based on a written document. According to principle 4, the
requirements for the objects of conformity assessment, and the requirements for the conformity
assessment activities, should be specified in a clear and unambiguous manner, with sufficient detail
to ensure that conformity assessment results will be comparable and reproducible. Moreover,
paragraph 5.2.2 states that specified requirements should be written so that they are clear, direct
and precise and will result in accurate and uniform interpretation, so that parties making use of the
normative documents are a ble to derive from the contents of the normative document a common
understanding of its meaning and intent. Paragraph 5.2.9 further states that specified requirements
should be stated unambiguously using wording that is objective, logical, valid and specific.
7.868. The European Union states that low ILUC -risk certification is not a conformity assessment
procedure, such that it is not subject to the procedural requirements in Article 5.6.1178 Beyond this,
it does not specifically respond to Malaysia's contention that ISO/IEC 17007:2010 is a "relevant
guide or recommendation" within the meaning of the chapeau of Article 5.6, and that the low ILUC-
risk certification procedure is not "in accordance with" the principles above.
7.869. The Panel recalls its finding above that the low ILUC-risk certification procedure as set out
in Article 6 of the Delegated Regulation, in the absence of detailed rules which the European Union
admits are to follow in implementing regulations, is incomplete and non -functional. The Panel also
recalls its findings with respect to Article 2.1, that certain elements of the low ILUC-risk criteria are
not sufficiently defined. Accordingly, the Panel is satisfied that the principles of ISO/IEC 17007:2010

1176 Malaysia's first written submission, para. 816 (referring to ISO/IEC 17007:2010, (Exhibit MYS-52),
paras. 4.3, 4.5, and 5.2.2).
1177 The Panel notes that Clause 1 ("Scope") of ISO/IEC 17007:2010 does not appear to limit the
guidance in this document to certain types of conformity assessment procedures. While Clause 4.4 ("Principle
3: functional approach to conformity assessment") acknowledges that each of the various kinds of users of
conformity assessment has specific needs, and as a result, there is much variety in the way conformity
assessment is performed, all types of conformity assessment follow the same general approach, characterized
by the functions listed above.
1178 European Union's first written submission, para. 1086; second written submission, para. 192.

set out above have not been complied with, and thus, the low ILUC-risk certification procedure is
not "in accordance with" it.1179
7.870. With respect to the second condition of the chapeau, the Panel recalls its earlier finding, in
the context of the claim under Article 2.5, that the 7% maximum share and the high ILUC -risk cap
and phase-out are technical regulations that "may have a significant effect on the trade of other
Members" for the purposes of Articles 2.5 and 2.9.
7.871. Although that reasoning focuses on the 7% maximum share and the high ILUC-risk cap and
phase-out, the Panel considers that its reasoning also leads to the conclusion that the low ILUC-risk
certification procedure may by e xtension have a significant effect on trade of other Members. This
is because the high ILUC -risk cap and phase -out is connected with the low ILUC -risk certification
procedure, which the Panel has found above to directly or indirectly determine whether "relevant
requirements" in that technical regulation are fulfilled. 1180 Thus, the low ILUC -risk certification
procedure has an impact on whether the high ILUC -risk cap and phase -out applies to certain
consignments of high ILUC-risk biofuel. To the extent that the possibility of low ILUC-risk certification
mitigates the effect of the high ILUC -risk cap and phase -out on the trade of other Members, it
qualifies as a conformity assessment procedure that "may have a significant effect on trade of other
Members".
7.872. On that basis, the Panel considers that the conditions in the chapeau of Article 5.6 are
satisfied.
7.1.3.5.4 Article 5.6.1 – notification of an intention to regulate
7.873. Article 5.6.1 requires notification of an intention to regulate at domestic level by means of a
proposed conformity assessment procedure. This obligation precedes, temporally, the obligation in
Article 5.6.2 to notify multilaterally to the WTO Secretariat a draft conformity assessment procedure
and the subsequent obligation in Article 5.6.4 to provide for a commenting process before the
adoption of a proposed conformity assessment procedure.
7.874. Malaysia notes that the European Union first published a notice on the draft Delegated
Regulation, which sets out the proposed low ILUC-risk certification procedure, on 8 February 2019,
and that the Delegated Regulation was adopted on 13 March 2019. According to Malaysia, any notice
published on 8 February 2019 was not at an early stage of the process leading to the adoption of
the Delegated Regulation and low ILUC -risk certification procedure.1181 The European Union states
that "in factual terms ", there was a commenting procedure between 8 February 2019 and
8 March 2019, and refers to an expert workshop held on 19 November 2018 and a stakeholder
meeting held on 5 March 2019.1182
7.875. While the European Union refers, under Articles 2.9.4 and 5.6, to various consultations,
conferences, workshops and bilateral discussions which pre -date the publication of the full draft
measure, it does not argue that it published a notice, that t he particular conformity assessment
procedure was identified, or that it was identified in a manner as to enable interested parties in other
Members to become acquainted with it. Having found that the procedural requirements in Article 5.6
apply, the Panel therefore considers that there is a violation of Article 5.6.1.

1179 The Panel notes the obligation in Article 5.6.3 of the TBT Agreement that Members shall whenever
possible, identify the parts of a proposed conformity assessment procedure which in substance deviate from
relevant guides and recommendations. The Panel does not understand Article 5.6.3 to qualify the requirement
in the chapeau to necessarily require a respondent Member to have made its own assessment that a proposed
conformity assessment procedure deviates from a relevant guide or recommendation.
1180 The Panel refers to the relationship between the measures at issue, set out in sections 7.1.1 and
7.1.3.1 of this Report.
1181 Malaysia's first written submission, para. 820 (referring to Draft Delegated Regulation, (Exhibit MYS-
50)).
1182 European Union's first written submission, para. 1087; second written submission, para. 193
(referring to Draft Delegated Regulation, (Exhibit MYS-50), p. 2).

7.1.3.5.5 Article 5.6.2 – notification to the WTO Secretariat
7.876. The Panel considers that Article 5.6.2 (together with Article 2.9.2) is "at the core of the
TBT Agreement's transparency provisions: the v ery purpose of the notification is to provide
opportunity for comment before the proposed measure enters into force, when there is time for
changes to be made before 'it is too late'".1183
7.877. More specifically, Article 5.6.2 requires Members to notify other Members through the WTO
Secretariat of proposed conformity assessment procedures, at an early appropriate stage, when
amendments can still be introduced and comments taken into account. This obligation runs parallel
to that in Article 2.9.2, and should apply regardless of whether another Member has requested
notification and whether any information regarding the draft conformity assessment procedure was
otherwise publicly available.1184
7.878. The Panel notes that, as pointed out by Malaysia, the RED II and Delegated R egulation
proposals (the Delegated Regulation containing the proposed low ILUC-risk certification procedure),
were not notified to the WTO Secretariat, evidenced by a search of the TBT IMS for notifications.1185
On that basis, the Panel finds there is a violation of Article 5.6.2.
7.1.3.5.6 Article 5.6.4 – commenting process
7.879. Article 5.6.4 requires Members to allow reasonable time for other Members to make
comments in writing, discuss these comments upon request, and take these written comments and
the results of these discussions into account when finali zing proposed conformity assessment
procedures. As noted above, Article 5.6.4 contains an equivalent obligation to the commenting
process for proposed technical regulations under Article 2.9.4. The Panel recalls the TBT Committee
guidance1186 on time-limits for the presentation of comments on notified conformity assessment
procedures and considers these factors to be relevant here: (i) the normal time limit for the
presentation of comments should be at least 60 days, but Members are encouraged to provide,
whenever possible, a time-limit beyond 60 days, such as 90 days; (ii) developed country Members
are encouraged to provide more than a 60-day comment period, to improve the ability of developing
country Members to make comments on notifications consistent with the principle of special and
differential treatment; and (iii) an insufficient period of time for presentation of comments on
proposed conformity assessment procedures may prevent Members from adequately exercising their
right to submit comments.
7.880. Malaysia's arguments largely mirror those made under Article 2.9.4, given that it is the draft
Delegated Regulation that contained the proposed low ILUC-risk certification procedure.1187 Malaysia
also argues that the informal feedback process for the proposed Delegated Regulation, by its
timeframe was insufficient to discharge the European Union's obligations under Article 5.6.4. Given
the timeframe of the feedback window and adoption of the Delegated Regulation, there was not
enough time to read comments, identify Members' comments, consider whether there were any
requests for a discussion, to hold discussions, or to take into account written comments between 9
and 12 March 2019. The European Union responds that in factual terms, it organi zed a four week
feedback period between 8 February 2019 and 8 March 2019.1188
7.881. The Panel agrees with Malaysia's argument that there was no meaningful commenting
process as envisaged by Article 5.6.4. O ne month for feedback is short of the recommended
minimum 60-day comment period, and four days to process comments or hold discussions seems
too short to give effect to the obligations under Article 5.6.4. On this basis, together with the
European Union's statement that in factual terms, no organi zation of a commenting procedure for

1183 Panel Report, US – Clove Cigarettes, para. 7.536.
1184 Panel Report, US – Clove Cigarettes, paras. 7.535 and 7.540-7.541.
1185 Malaysia's first written submission, para. 821.
1186 Committee on Technical Barriers to Trade, Fifth Triennial Review of the Operation and
Implementation of the Agreement on Technical Barriers to Trade under Article 15.4, G/TBT/26, paras. 39-40.
1187 On Article 5.6.4, see Malaysia's first written submission, para. 822.
1188 European Union's second written submission, para. 193 (referring to Draft Delegated Regulation,
(Exhibit MYS-50); and Malaysian Palm Oil Council (MPOC), Comments on EC Commission Delegated Regulation
(EU Ref Ares (2019)762855-08/02/2019), (Exhibit MYS-40)).

the purposes of Article 5.6.4 has yet taken place, the Panel considers that the European Union failed
to comply with its obligations under Article 5.6.4.1189
7.1.3.5.7 Conclusion on Articles 5.6.1, 5.6.2 and 5.6.4
7.882. The Panel concludes that the European Union has acted inconsistently with Article 5.6.1 of
the TBT Agreement by failing to publish a notice of the proposed low ILUC-risk certification procedure
at an early appropriate stage in such a manner as to enable interested parties in Malaysia and other
WTO Members to become acquainted with it.
7.883. The Panel concludes that the European Union has acted inconsistently with Article 5.6.2 of
the TBT Agreement by failing to notify the proposed low ILUC-risk certification procedure.
7.884. The Panel concludes that the European Union has acted inconsistently with Article 5.6.4 of
the TBT Agreement by having failed to organi ze a commenting process in respect of the proposed
low ILUC-risk certification procedure in accordance with the requirements of that provision.
7.1.3.6 Article 5.8 – Publication of adopted conformity assessment procedures
7.1.3.6.1 Introduction
7.885. The Panel now turns to the claim under Article 5.8 of the TBT Agreement.
7.886. Malaysia submits 1190 that the Europea n Union violates Article 5.8 by failing to promptly
publish or otherwise make available the conformity assessment procedure for certifying oil palm
crop-based biofuel as low ILUC risk. More specifically, Malaysia contends that, while some elements
of the conformity assessment procedure have been published (i.e. Article 26 of RED II and Articles
4 to 6 of the Delegated Regulation), other elements (e.g. the detailed rules on low ILUC -risk
certification in any anticipated implementing regulations) have not been published or made available
within the meaning of Article 5.8.1191 Malaysia also points to the European Union's factual concession
that it has not yet adopted, published or made available, detailed implementing rules on low ILUC -
risk certification, and notes that the low ILUC-risk certification requirement has been effective from
10 June 2019.1192 Malaysia considers that this absence of detail means it is not possible to design
national or voluntary schemes.1193
7.887. The European Union submits1194 that Malaysia has not established a violation of Article 5.8.
More specifically, the European Union argues that low ILUC -risk certification cannot properly be
characterized as a conformity assessment procedure and so was "not subject to the procedural
requirements" under the TBT Agreement.1195 For that reason, the European Union does not engage
with Malaysia's submissions on the "nature and extent" of the obligations under Article 5.8, but also
does not concede their validity.1196 However, "in factual terms", the European Union "acknowledges
that it has not yet published or made available " the low ILUC -risk certification procedure for the

1189 The Panel also considers that its reasoning, that the obligation to notify in Article 2.9.2 is concerned
with and impacts the obligation to provide for a commenting period under Article 2.9.4, applies mutatis
mutandis in this context. In this respect, see also Panel Report, India – Agricultural Products, para. 7.795,
where the panel referred to Annex B5(a), B5(b) and B5(d) to the SPS Agreement, which contain obligations
similar to Articles 5.6.1, 5.6.2, and 5.6.4.
1190 Malaysia's first written submission, paras. 824-827; second written submission, paras. 301-303;
and comments on the European Union's responses to the Panel's questions, p. 261-262.
1191 Malaysia's first written submission, paras. 826-827 (referring to Recital 18 of the Delegated
Regulation; Status Report, p. 1; and Contract notice by the European Commission, Belgium – Brussels:
Support for the implementation of the Provisions on ILUC Set out in the Renewable Energy Directive, 2019/S
131-320816, OJ/S S131 and the Call for Tenders by the European Commission, Support for the
Implementation of the Provisions on ILUC Set out in the Renewable Energy Directive, N° ENER/C2/2018-462,
(Exhibit MYS-51)).
1192 Malaysia's first written submission, para. 826; second written submission, paras. 301-303. Malaysia
makes some submissions on "ripeness" for bringing a claim (also with respect to Article 5.8). See Malaysia's
comments on the European Union's response to Panel question No. 155 and No. 156.
1193 Malaysia's first written submission, para. 826.
1194 European Union's first written submission, paras. 1091-1095; second written submission,
paras. 194-195; and responses to the Panel's questions, paras. 801-802.
1195 European Union's first written submission, para. 1091; second written submission, para. 194.
1196 European Union's first written submission, para. 1093.

purposes of Article 5.8. 1197 The European Union also states that the "measures" complained of do
not take effect "until December 2023" and that it has not adopted the detailed implementing rules,
such that Malaysia's claims are "hypothetical and premature".1198 The European Union adds that
Article 5.8 only applies upon "adoption" of conformity assessment procedures, and that, since the
implementing regulation has not yet been adopted, the obligation to "publish/make available is not
yet applicable ".1199 The European Union also states that in any event, it "published a draft
implementing regulation" well in advance of the adoption of any implementing regulations.1200
7.1.3.6.2 Legal standard
7.888. Article 5.8 sets forth the obligation that:
Members shall ensure that all conformity assessment procedures which have been
adopted are published promptly or otherwise made available in such a manner as to
enable interested parties in other Members to become acquainted with them.
7.889. Article 5.8 has not been interpreted or applied in prior cases. However, the obligation mirrors
to some extent the more general obligation relating to the publication of trade regulations set out in
Article X:1 of the GATT 1994, and there appears to be no fundamental disagreement between the
parties on the elements of that standard as described below.1201
7.890. The language of Article 5.8 indicates the following elements must be present to establish a
violation of Article 5.8:
a. the conformity assessment procedure at issue has been adopted; and
b. the conformity assessment procedure has not been "published promptly" or "otherwise
made available", in "such a manner as to enable interested parties in other Members to
become acquainted with them".
7.891. The Panel will elaborate further on the elements of the legal standard in Article 5.8 as
necessary in the course of its assessment of the issues in dispute.
7.1.3.6.3 Assessment by the Panel
7.892. The Panel has found above that Malaysia has established a violation of Article 5.1.2 on
grounds that the low ILUC -risk certification procedure, as set out in Article 6 of the Delegated
Regulation, lacks detailed rules allowing low ILUC-risk certification to take place.1202 These detailed
rules are now found in the Implementing Regulation adopted on 14 June 2022 and published on
27 June 2022.1203
7.893. Malaysia asserts that although the low ILUC-risk certification procedure as set out in Article 6
of the Delegated Regulation was published promptly, its publication in the absence of detailed rules
for its implementation did not enable interested parties to become sufficiently acquainted with it.
According to Malaysia, this is because they are unable to design certification schemes, gain approval,
and start preparing for certification.1204
7.894. As the Panel noted above, Article 5.8 contains a similar obligation to Article X:1 of the
GATT 1994. Prior panels, when interpreting Article X:1, considered that Article X:1 seeks to ensure
that due process is accorded to traders, by placing them in a position where they can understand

1197 European Union's first written submission, para. 1092.
1198 European Union's first written submission, para. 1094.
1199 European Union's response to Panel question No. 156, paras. 801-802.
1200 European Union's response to Panel question No. 156, para. 802.
1201 Article 5.8 also mirrors to some extent the obligation in Annex B(1) of the SPS Agreement, which
requires Members to ensure that all sanitary and phytosanitary regulations which have been adopted are
published promptly in such a manner as to enable interested Members to become acquainted with them. See
Appellate Body Report, Korea – Radionuclides, paras. 5.153-5.157.
1202 See section 7.1.3.3 of this Report.
1203 See Commission Implementing Regulation (EU) 2022/996, (Exhibit EU-329).
1204 Malaysia's first written submission, paras. 826-827.

the requirements to which their products will be subject, and take necessary preparatory steps.1205
Article X:1 thus seeks to ensure that traders will not have to face measures that they could not be
aware of because such measures were published late or because they were not yet published .1206
Like Article 5.8, Article X:1 also refers to publication "in such a manner as to enable governments
and traders to become acquainted with it". Prior panels have interpreted this to concern the medium,
content and quality of a publication, which must be sufficient to give power to or supply governments
and traders with knowledge of the partic ular measures that is adequate, so that they may become
familiar with them, or known to them in more or less a complete way. 1207 Publication of a draft
measure1208 and the failure to publish a "final" measure1209 are likely to be insufficient to satisfy
Article X:1. Other panels have referred to the need to become acquainted with the "exact nature" of
a right accorded by a measure.1210
7.895. Similarly, in the context of Annex B(1) of the SPS Agreement, the Appellate Body
understood publication so as "to enable" interested Members "to become acquainted with" as giving
interested Members the means to become familiar with an adopted SPS regulation, by being , for
example, accessible and containing sufficient information.1211
7.896. The Panel understands Malaysia not to take issue with the publication of the low ILUC -risk
certification procedure as set out in RED II and the Delegated Regulation. Rather, the Panel
understands Malaysia to take issue with the fact that the low ILUC -risk certification procedure, as
set out in Article 6 of the Delegated Regulation, is published without setting out the detailed rules
on certification, which the European Union admits is to be provided by certain implementing rules.1212
The Panel turns to consid er whether the absence of these detailed rules can be said to affect the
quality of publication, such that interested parties were not able to become acquainted with the
"exact nature" of the right accorded by the measure.
7.897. The Panel notes that while Article 5.8 has similarities with Article X:1, the obligation under
Article 5.8 falls to be considered within the context of all of the obligations under Article 5 of the
TBT Agreement. The Panel understands that claims concerning the incomplete nature of a conformity
assessment procedure may, as in this case, be appropriately addressed under Article 5.1.2.
Subsequent obligations in Article 5 specifically deal with "complete" or "adopted" conformity
assessment procedures. For example, the Panel has found that Article 5.2.1 concerns conformity
assessment procedures that are functional, or in other words, sufficiently complete as to be capable
of being applied.1213
7.898. The Panel considers that Article 5.8 also falls within this group of obligations. It targets the
availability of individual iterations of a conformity assessment procedure. Once each iteration has
been adopted, it is subject to the obligations in Article 5.8. This avoids a situation where a regulating
Member could argue that its conformity assessment procedure is incomplete or not final, and that it
need only publish its procedure once all elements are complete or final, in the sense that there will
be no future iterations of the pro cedure. Conversely, it may be impracticable and burdensome to
require Members to include all possible details in a single iteration of a conformity assessment
procedure, or to otherwise consider a Member in violation of Article 5.8 for amending an existing
conformity assessment procedure where it could not have published the amended rules at the time
it initially adopted the procedure. For that reason, the Panel does not consider that a lack of detail

1205 Panel Reports, EC – Selected Customs Matters, para. 7.107; and EC – IT Products, para. 7.1015.
1206 Appellate Body Report, US – Countervailing and Anti-Dumping Measures (China), para. 4.65.
1207 Panel Reports, US – Countervailing and Anti-Dumping Measures (China), para. 7.83; and EC – IT
Products, para. 7.1086.
1208 Panel Reports, EC – IT Products, paras. 7.1082 and 7.1084.
1209 Panel Reports, China – Raw Materials, paras. 7.806-7.807. The final measure in this dispute was a
decision not to authorize an export quota.
1210 In Thailand – Cigarettes (Philippines), the panel upheld a claim regarding a failure to sufficiently
publish general rules on the right to the release of guarantees deposited by importers for excise and other
internal taxes. While Thailand, through its legislation and notices of assessment given to importers, had made
general statements that "in essence, guarantees are to be refunded", these did not clearly indicate a "definite
right" to the release of guarantees, such that importers were not able to become acquainted with the "exact
nature" of the right they had. (Panel Report, Thailand – Cigarettes (Philippines), para. 7.860.)
1211 Appellate Body Report, Korea – Radionuclides, paras. 5.154, 5.147, 5.151, 5.189, and 6.8.
1212 Malaysia's first written submission, paras. 826-827.
1213 See section 7.1.3.4 of this Report.

in a conformity assessment procedure, which is reflected in the publication of that procedure, results
in a consequential inconsistency with Article 5.8.1214
7.899. Second, in this instance, the Panel considers that the conformity assessment procedure was
in fact published in RED II and the Delegated Regulation and is s ufficiently clear to acquaint
interested parties with the "exact nature" of their right to conformity assessment procedure. While
the contours of certain requirements could be more definite, the nature of the right is clear as is.
Article 6 refers to a certification procedure for high ILUC-risk biofuels to be certified as low ILUC risk,
and it is clear that this is the only way for consignments of such biofuels to be exempted from the
high ILUC-risk cap and phase-out.1215
7.1.3.6.4 Conclusion on Article 5.8
7.900. The Panel finds that Malaysia has not established that the European Union acted
inconsistently with the obligation in Article 5.8 of the TBT Agreement to ensure that conformity
assessment procedures which have been adopted are published promptly or otherwise made
available in such a manner as to enable interested parties in other Members to become acquainted
with them.
7.1.4 Claims under Article 12 of the TBT Agreement
7.1.4.1 Introduction
7.901. Having addressed the claims under Article 2 and Article 5, the Panel now turns to Malaysia's
claims under Article 12 of the TBT Agreement, entitled "Special and Differential Treatment of
Developing Country Members". More specifically, Malaysia has raised claims under two provisions:
Article 12.1 and Article 12.3. In the course of the proceedings , however, Malaysia clarified that it
relies on Article 12.1 not as the basis for any separate claim, but as relevant context to inform its
claim under Article 12.3.
7.902. The Panel notes that Article 12.1 requires a demonstration that the Member concerned has
failed to provide the "differential and more favourable treatment " to developing country Members
that is required under other provisions of Article 12, or through relevant provisions of other
Articles of the TBT Agreement. Accordingly, the Panel first addresses the claim under Article 12.3,
and then turns to Article 12.1 in light of its findings under Article 12.3.
7.1.4.2 Article 12.3 – Taking account of special needs
7.1.4.2.1 Introduction
7.903. Malaysia submits1216 that the European Union violated Article 12.3 by failing to take into
account the circumstances specific to developing countries 1217 when preparing the technical
regulations and the conformity assessment procedure at issue . More specifically, Malaysia argues
that it is a developing country Member, and that it has "special development, financial and trade
needs" affected by the measur es at issue. Malaysia argues that the European Union has failed to
"take account of" those needs, in a manner that has resulted in unnecessary obstacles to exports
from developing countries such as Malaysia.

1214 The Panel's analysis is limited to the publication obligation in Article 5.8.
1215 See e.g. sections 7.1.1 and 7.1.3.3 of this Report.
1216 Malaysia's first written submission, paras. 828-885; second written submission, paras. 304-319;
opening statement at the meeting of the Panel, paras. 51-52; responses to the Panel's questions, pp. 106-109;
and comments on the European Union's responses to the Panel's questions, pp. 265-274.
1217 Malaysia first written submission, paras. 488 (last bullet), 828-829, 885, and 1216 (12th bullet);
second written submission, para. 532 (12th bullet). The Panel understands Malaysia's references to the
European Union's failure to take into account "the circumstances specific to developing countries" to be a
paraphrasing of the terms of Article 12.3, which refer to the "special development, financial and trade needs of
developing country Members".

7.904. The European Union submits1218 that the Panel should reject Malaysia's claims under Article
12.3. More specifically, while the European Union does not dispute that Malaysia is a developing
country Member or that it has "special development, financial and trade needs " in relation to palm
oil, the European Union disputes that those needs are affected by the measures at issue. It further
disputes that Malaysia has demonstrated that the European Union failed to "take account of" those
special needs.
7.1.4.2.2 Legal standard
7.905. Article 12.3 sets forth the obligation that:
Members shall, in the preparation and application of technical regulations, standards
and conformity assessment procedures, take account of the special development,
financial and trade needs of developing country Members, with a view to ensuring that
such technical regulations, standards and conformity assessment procedures do not
create unnecessary obstacles to exports from developing country Members.
7.906. Article 12.3 has been interpreted and applied in a number of prior cases, and both parties
present their respective understandings of the applicable legal standard with reference to prior cases.
7.907. For the purposes of the present dispute, in order to establi sh a violation of Article 12.3, it
must be established that the European Union is preparing, adopting or applying a technical regulation
and conformity assessment procedure, and that the following three elements1219 are satisfied:
a. Malaysia is a "developing country Member";
b. Malaysia has "special development, financial and trade needs" related to the measures at
issue; and
c. the European Union has failed to "take account of" those needs.
7.908. The panels in US – Clove Cigarettes and US – COOL both considered the meaning and
function of the final clause in Article 12.3 ("with a view to ensuring that such technical regulations,
standards and conformity assessment procedures do not create unnecessary obstacles to exports
from developing country Members"). Those panels concluded that this language merely serves the
purpose of clarifying how and why the Member preparing or applying the technical regulation or
conformity assessment procedure should "take account of" these special needs.1220 As expressed by
the panel in US – COOL, the final part of Article 12.3 "specifies the objective to be achieved by the
obligation contained in the operational part".1221
7.909. In the present dispute, Malaysia and the European Union both agree that the focus under
Article 12. 3 is on whether a Member has failed to "take account of " the special development,
financial, and trade needs of developing country Members.1222 The Panel sees no reason to disagree,
and considers that the final clause simply suggests that the failure to take account of the special
development, financial and trade needs of developing country Members may result in that the
specific measure at issue creates unnecessary obstacles to exports from developing country
Members.
7.910. The Panel will elaborate further on the elements of the legal standard in Article 12.3 as
necessary in the course of its assessment of the issues in dispute.

1218 European Union's first written submission, paras. 1097-1127; second written submission,
paras. 196-204; responses to the Panel's questions, paras. 803-826; and comments on Malaysia's responses
to the Panel's questions, paras. 292-299.
1219 See Panel Report, US – Clove Cigarettes, para. 7.620.
1220 See Panel Reports, US – Clove Cigarettes, paras. 7.614-7.619; and US – COOL, paras. 7.754-7.766.
1222 Malaysia's first written submission, paras. 779-880; European Union's response to Panel question
No. 157, paras. 805-806.

7.1.4.2.3 "developing country Members"
7.911. The obligation in Article 12.3 applies only in respect of the special development , financial
and trade needs of "developing country Members".
7.912. In US – Clove Cigarettes , the complaining Member (Indonesia) indicated that it was a
developing country and noted that the World Bank classified it as a developing country and that its
status as a developing country Member of the WTO was recognized in a previous panel proceeding.
The panel considered these facts, together with the fact that the responding Member did not contest
the point, to be "more than sufficient to conclude" that the complaining Member was a "developing
country Member".1223
7.913. In this case, Malaysia identifies seve ral bases for the conclusion that it is a developing
country Member, including that: (a) according to the World Economic Situation and Prospects
(WESP) dataset, it is considered to be a developing economy in the Asian region; (b) the United
Nations Conference on Trade and Development (UNCTAD) lists it as a developing country; (c) its
status as a developing country has never been contested in the framework of the WTO; and (d) in
the framework of the WTO Trade Policy Review, reference is made to Malaysia as a developing
country.1224
7.914. The European Union states that it does not challenge Malaysia's status as a developing
country for the purpose of applying WTO law.1225
7.915. The Panel is of the view that the foregoing is more than sufficient to conclude that Malaysia
is a "developing country Member", and accordingly finds that the first element under Article 12.3 is
satisfied.
7.1.4.2.4 "special development, financial and trade needs"
7.916. The obligation in Article 12.3 applies only where there are "special development, financial
and trade needs" of developing country Members.
7.917. The panel in US – Clove Cigarettes considered that "[w]hatever the exact meaning of the
terms 'special development, financial and trade needs'", Indonesia had satisfied the requirement of
being a developing country that had "'special development, financial and trade needs' affected by
the ban on clove cigarettes ".1226 The panel reached that conclusion on the grounds that Indonesia
had explained the importance of clove cigarettes to its economy and its people: clove cig arettes
have been produced in Indonesia for over a century; approximately 6 million Indonesians were
employed directly or indirectly in the manufacture of cigarettes and the growing of tobacco; and the
cigarette industry, including clove, accounted for approximately 1.66% of Indonesia's total GDP.1227
That panel added, after setting out the above considerations, that "[i]t is also not in dispute that, as
a result of the ban, U.S. imports of clove cigarettes produced in Indonesia have declined from
approximately $15 million in 2008 to zero in 2010."1228
7.918. In the present case, Malaysia submits that the challenged technical regulations and the
conformity assessment procedure "have significant effects on "1229 the development, financial and
trade needs of Malaysia. Malaysia relies on data demonstrating the import ance of its palm oil
industry, and the importance of exports to the EU market, to substantiate this point. 1230 Among
other things, Malaysia indicates that its palm oil industry employs as many as 3 million people,
corresponding to around 10% of the country's population. It notes that the palm oil industry made

1223 Panel Report, US – Clove Cigarettes, paras. 7.621-7.624.
1224 Malaysia's first written submission, para. 835 (referring to United Nations, World Economic Situation
and Prospects 2021, Statistical Annex, (United Nations, 2021), Table C "Developing economies by region",
(Exhibit MYS-53), p. 126; UNCTADSTAT, Development status groups and composition: Developing economies,
(Exhibit MYS-54); and WTO Trade Policy Review for Malaysia, 2017, WT/TPR/S/366).
1225 European Union's first written submission, para. 1104.
1226 Panel Report, US – Clove Cigarettes, para. 7.628.
1227 Panel Report, US – Clove Cigarettes, paras. 7.627-7.629.
1228 Panel Report, US – Clove Cigarettes, paras. 7.627-7.629.
1229 Malaysia's first written submission, para. 838.
1230 Malaysia's first written submission, paras. 838-856.

up 2.7% of its GDP. It explains that smallholder plantations account for around 28% of its oil palm
production area.
7.919. The European Union acknowledges Malaysia's detailed submissions concerning the
importance of the palm oil sector to the Malaysian economy and indicates that it does not dispute
that Malaysia produces and exports palm oil and that the cultivation of oil palm has an increasing
impact on the agricultural sector. However, the European Union a rgues that Malaysia has not
established that the effect of the measures in RED II would affect its "development, financial and
trade needs", even were it accepted that they could affect the level of exports of palm oil -based
biofuels to the European Union (quod non). In this connection, the European Union takes issue with
certain of Malaysia's assertions regarding the anticipated effects of the measures at issue, noting
that Malaysia itself argues that the market for palm oil is significant and exports are not solely to
the European Union nor is palm oil exported exclusively for use to produce biofuels.
7.920. The Panel observes that Malaysia's submissions regarding the second element under Article
12.3 not only address its special development, financial and trade needs in respect of palm oil, but
also argue that the challenged technical regulations and the conformity assessment procedures
"have significant effects on " those needs. The Panel further notes that the European Union's
arguments contesting this element a ppear to be directed not at the question of whether Malaysia
has demonstrated that it has "special development, financial and trade needs " in respect of palm
oil, which is something the European Union appears not to contest, but rather to the question of
whether the measures at issue have significant effects on those needs.
7.921. The Panel recalls that in US – Clove Cigarettes, the second element of the legal test under
Article 12.3 was formulated in terms calling for a demonstration that the complaining Member has
special development, financial and trade needs "that are affected by the measures at issue".1231 In
the Panel's view, however, the relevant question at this juncture of the analysis under Article 12.3
is simply whether Malaysia has demonstrated that it has special development, financial and trade
needs that are relevant from the perspective of the measures at issue. Such needs may be relevant
from the perspective of the measures if, for example, those needs are linked to trade in one or more
product(s) that are regulated by the measures at issue – and in that sense may be referred to as
special needs affected by the measures at issue.1232 In other words, the Panel considers that Article
12.3 simply requires that there be a nexus between the measures and the special development,
financial and trade needs of developing country Members.
7.922. The Panel notes that the text of Articl e 12.3 does not call for an assessment of the trade
effects of the challenged measures, or of whether, and if so how, the measures at issue otherwise
impact the special needs of developing country Members identified. Indeed, the Panel notes that
Malaysia employs a similar formulation when it concludes that it has special financial and trade needs
"that are closely linked to trade in palm oil and oil palm crop-based biofuel" that must be taken into
account by the European Union.1233
7.923. The Panel considers that Malaysia's detailed submissions concerning the importance of the
palm oil sector to the Malaysian economy make clear that it has "special development, financial and
trade needs" related to trade in palm oil and palm oil -based biofuel. Panels in previous cas es have
proceeded on the premise that a measure may implicate the special needs of developing country

1231 Panel Report, US – Clove Cigarettes, para. 7.620. (emphasis added)
1232 Indeed, the panel in US – Clove Cigarettes appeared to focus its analysis of this element of the
standard on whether the complaining Member in that case had established that it had "special development,
financial and trade needs" in respect of the product at issue, not on whether, and if so how, the measure at
issue affected those "needs". (See Panel Report, US – Clove Cigarettes, para. 7.620.) In US – Clove Cigarettes,
the panel found that Indonesia had explained the importance of clove cigarettes to its economy and its people.
(Panel Report, US – Clove Cigarettes, paras. 7.627-7.629.) The panel in US – COOL did not separately consider
or address the issue of what Mexico's "special development, financial or trade needs" were. The panel in US –
Animals, which addressed a similar provision in the SPS Agreement (Article 10.1), stated that "[w]ith regard to
the phrase 'special needs of developing country Members', … the provision is written broadly so as to
encompass both the needs of developing country Members generally, and the needs of a particular developing
country Member". That panel considered that it "may be that a product is so central to the economy of a
developing country that its special need could be precisely that the approval procedures need priority
consideration". (Panel Report, US – Animals, paras. 7.692 and 7.702.)
1233 Malaysia's first written submission, paras. 848 and 856.

Members insofar as the products affected are of particular export interest 1234 to one or more
developing country Members. 1235 The Panel does not understand th e European Union to argue
otherwise, and the Panel sees no reason to disagree in light of the detailed explanations provided
by Malaysia in its first written submission.
7.924. However, assuming arguendo that consideration of the extent to which the measures at
issue have an effect on Malaysia's trade in palm oil and palm oil -based biofuel is germane to the
assessment of whether Malaysia has demonstrated that it has relevant "special development,
financial and trade needs " related to trade in palm oil and palm oil -based biofuel, the Panel finds
that any such condition is also fulfilled. The Panel recalls its earlier findings in the context of its
assessment of the claims under Articles 2.2, 2.1, 2.5 and 2. 9. In those contexts, it found that:
(a) the measures are "trade-restrictive" within the meaning of Article 2.2 on the grounds that they
have, by design, a "limiting effect on trade " in crop-based biofuels (as regards the 7% maximum
share) and palm oil-based biofuels (as regards the high ILUC-risk cap and phase-out); (b) that the
high ILUC-risk cap and phase -out has a "detrimental impact" on imported palm oil -based biofuels
for the purposes of Article 2.1; and (c) the 7% maximum share and the high ILUC -risk cap and
phase-out are measures that may have a significant effect on the trade of other Members within the
meaning of Articles 2.5 and 2.9.1236
7.925. The Panel finds that Malaysia has demonstrated that it has relevant "special development,
financial and trade needs" related to trade in palm oil and palm oil-based biofuel.
7.1.4.2.5 "take account of"
7.926. The obligation in Article 12.3 is to "take account of" the special development, financial and
trade needs of developing country Members.
7.927. In US – Clove Cigarettes, Indonesia argued that the United States disregarded its repeated
concerns about the effect the US ban on flavoured cigarettes would have on Indonesia's trade and
development. The panel explained that the evidence before it consisted of a series of letters between
key figures in the Indonesian and US Governments. After reviewing these letters, the panel
concluded that Indonesia was able to communicate its concerns to key figures in the US Government
on multiple occasions, over a period of several years, and that Indonesia's concerns were
subsequently raised on a number of occasions, by key officials within the US Government. The panel
concluded that the exchanges among key US officials referencing Indonesia's concerns showed that
the United States "actively took account of" Indonesia's concerns.1237
7.928. In US – COOL, Mexico argued that the United States acted inconsistently with Article 12.3
by not having given Mexico an opportunity to commen t on the preparation of the COOL measure,
and by ignoring Mexico's comments and the impact that it knew the COOL measure would have on
Mexican exports. The panel found that Mexico did not substantiate those assertions, and that in fact
the United States actively reached out to discuss the development of the COOL measure with Mexico
on several occasions in the context of stakeholder consultations. It also found that Mexico had
submitted comments, and that US officials had indicated that such input would be taken into account.
Furthermore, the panel found that the United States actually introduced certain modifications to
certain elements of the COOL measure in response to concerns expressed by Mexico, namely by
softening certain record-keeping requirements and by introducing the commingling flexibility in part

1234 The Panel notes in this respect that, consistent with the notion that the focus is simply on products
of trade interest and not on trade effects, Article 10.6 of the TBT Agreement states that the WTO Secretariat
"shall, when it receives notifications in accordance with the provisions of this Agreement, circulate copies of the
notifications to all Members […] and draw the attention of developing country Members to any notifications
relating to products of particular interest to them." (emphasis added)
1235 In EC – Approval and Marketing of Biotech Products, the panel's assessment under Article 10.1 of
the SPS Agreement appeared to accept Argentina's argument that it had "special needs" by virtue of the fact
that some of the products affected by the European Communities' general moratorium on approvals were "of
particular export interest to Argentina as a major developing country". (Panel Reports, EC – Approval and
1236 The Panel notes that in the context of these other claims, the European Union similarly argued that
a decrease in EU biofuel demand for palm oil from Malaysia may be compensated by an increase in exports of
palm oil or palm oil-based biofuels to other markets such as India or China and also exports to the European
Union for uses other than biofuel production.
1237 Panel Report, US – Clove Cigarettes, paras. 7.635-7.645.

in response to Mexico's comments. On that basis, the panel found that Mexico failed to establish
that the United States did not "take account of " its special needs. 1238 Further, in US – COOL, the
panel concluded that the obligation to "take account of " the special needs of developing country
Members requires "active and meaningful consideration" of those needs.1239
7.929. In this case, Malaysia emphasizes that Article 12.3 requires active and meaningful
consideration1240 of the needs of developing country Members and submits that prior panels have
been too undemanding1241 in their interpretation of Article 12.3. Malaysia argues that the following
establishes that the European Union did not take account of the special needs of developing country
Members: (a) the European Union was well aware of Malaysia's special needs which were raised in
multiple fora including multiple statements to the TBT Committee1242; (b) there is no mention of the
needs of developing countries in the measures at issue or related documents (the explanatory
memorandum to the initial proposal for RED II, RED II itself, the impact assessment for RED II, the
Delegated Regulation, and the S tatus Report (2019)) 1243, and the provisions on independent
smallholders in the Delegated Regulation are merely a theoretical option1244; and (c) the European
Union failed to carry out an impact assessment when adopting the Delegated Regulation, contrary
to EU law.1245
7.930. The European Union argues that the obligation to "take account of" the needs of developing
country Members means "merely to give active and meaningful consideration ".1246 For the
European Union, this means that this obligation is met if the developin g country communicated its
concerns, including in the context of a public consultation, and then if, in response, the regulating
Member: (a) discussed these concerns, either internally or in exchanges or consultations with the
developing country; or (b) responded to these concerns in the context of the measure's rule-making
process.1247
7.931. With respect to the measures at issue in this case, and based on its articulation of what the
obligation to "take account of" means, the European Union argues that: (a) it duly responded to the
correspondence from Malaysia's officials on multiple occasions, and these exchanges (and the
bilateral discussions they reference) are evidence that the concerns were taken into account 1248;
(b) while WTO case law does not impose an obligation of result or require that the respective Member
must agree with or accept those needs 1249, a provision on smallholders was introduced in the
Delegated Regulation1250; and (c) conducting an impact assessment for the Delegated Regulation
would have reflected nothing more than the expression of a best practice for law-making procedures
in the European Union, and in any event the impact assessment for RED II examined a number of
relevant issues including impacts on third countries and describes the bre adth and depth of the
public consultation that preceded the proposal.1251
7.932. The Panel notes that the parties' arguments under Article 12.3 turn on the applicable legal
and evidentiary standard for assessing whether the special development, financial and trade needs
of developing country Members were "take[n] account of".
7.933. According to the European Union, US – Clove Cigarettes and US – COOL confirm its view
that the obligation to "take account of" the needs of developing country Members means "merely to
give act ive and meaningful consideration "1252, and confirm the European Union's view that this
standard is met if the developing country Member communicated its concerns, including in the

1238 Panel Reports, US – COOL, paras. 7.789-7.800.
1240 Malaysia's first written submission, paras. 858 and 877 (quoting Panel Reports, US – COOL, para.
7.786). See also Malaysia's second written submission, paras. 308-311 and 314.
1241 Malaysia's first written submission, paras. 874-875.
1242 Malaysia's first written submission, paras. 870-872; second written submission, para. 310.
1243 Malaysia's first written submission, paras. 868-869 and 873.
1244 Malaysia's comments on the European Union's response to Panel question No. 163, at p. 274.
1245 Malaysia's first written submission, paras. 863-867; second written submission, para. 315.
1246 European Union's second written submission, para. 196.
1247 European Union's first written submission, paras. 1112.
1248 European Union's first written submission, para. 1115; second written submission, paras. 198-204;
and response to Panel question No. 160, paras. 816-817.
1249 European Union's first written submission, paras. 1111 and 1125.
1250 European Union's response to Panel question No. 163, paras. 825-826.
1251 European Union's first written submission, paras. 1116-1122.
1252 European Union's second written submission, para. 196.

context of a public consultation, and if the Member discussed these concerns, either internally or in
exchanges or consultations with the developing country Member, or it responded to the concerns of
the developing country Member in the context of the measure's rule-making process.1253
7.934. Malaysia maintains that "the panels in US – Clove Cigarettes and US – COOL were too
undemanding in their interpretation of Article 12.3 of the TBT Agreement with respect to the
obligations linked to the 'special development, financial and trade needs of developing country
Members.'" More specifically, M alaysia considers that "the commitment under Article 12.3 of the
TBT Agreement cannot be interpreted merely as a 'procedural requirement' that, on the basis of the
panel's finding in US – COOL, does not even need to 'document specifically in their legislative process
and rule-making process how they actively considered the special development, financial and trade
needs of developing country Members'."1254
7.935. The Panel will make several related observations before turning to the facts of this case.
First, two pri or panels have ruled on claims under Article 12.3, i.e. US – COOL and US – Clove
Cigarettes, and two other panels have ruled on claims under the parallel obligation in Article 10.1 of
the SPS Agreement, namely EC – Approval and Marketing of Biotech Products and US – Animals. In
each of those prior cases, the panels gave the terms "take account of" their ordinary meaning, which
is to "consider along with other factors before reaching a decision "1255, and considered that the
obligation to "take account of" the special needs of developing country Members does not prescribe
any particular result.1256 All of these panels confirmed that the burden of proof is on a complaining
Member to establish that the regulating Member did not take account of such needs.1257
7.936. Second, both parties agree that Article 12.3 requires "active and meaningful consideration"
of the special needs of developing country Members, but they do not agree on what that legal and
evidentiary standard entails. Both parties have presented arguments that merit careful consideration
in this respect. With a view to ensuring a thorough and careful analysis of Malaysia's claim under
Article 12.3, the Panel posed several questions to the parties inviting further elaboration of their
views on the meaning and scope of the obligation. The Panel considers that the parties' arguments
confirm that it may be difficult to identify precisely, in the abstract, a legal and evidentiary
benchmark to assess whether the regulating Member complied with its obligation to take account of
the special needs of developing country Members under Article 12.3.
7.937. Third, an assessment of whether a regulating Member has failed to "take account of " the
special needs of developing country Members will generally require a panel to reach a conclusion
based on circumstantial evidence and inferences, rather than direct evidence. By way of elaboration,
requiring a complainant to adduce direct evidence – i.e. in the form of letters or other documents in
which a regulating Member would expressly state that it refused to consider the needs of developing
country Members when preparing a technical regulation – would entail a potentially insurmountable
burden of proof.1258 Previous panels have likewise been reluctant to impose on a regulating Member
a duty to provide direct evidence – i.e. to document in their legislative process and rule -making
process – of how they actively considered the special development, financial and trade needs of a
developing country Member. 1259 The Panel considers that requiri ng such direct evidence of a

1253 European Union's first written submission, paras. 1112.
1254 Malaysia's first written submission, para. 875 (quoting Panel Reports, US – COOL, para. 7.787).
1255 Panel Reports, EC – Approval and Marketing of Biotech Products, para. 7.1620; US – Clove
Cigarettes, paras. 7.632-7.634; US – COOL, paras. 7.779-7.781; and US – Animals, para. 7.694.
1256 Panel Reports, EC – Approval and Marketing of Biotech Products, para. 7.1620; US – Clove
Cigarettes, paras. 7.632-7.634 and 7.646; US – COOL, paras. 7.776 and 7.781; and US – Animals, para.
7.694.
1257 Panel Reports, EC – Approval and Marketing of Biotech Products, para. 7.1622; US – Clove
Cigarettes, para. 7.634; and US – Animals, paras. 7.695-7.700.
1258 See e.g. Panel Reports, EC – Approval and Marketing of Biotech Products, para. 7.1625; US – Clove
Cigarettes, fn 1022; and US – Animals, para. 7.698.
1259 See Panel Reports, EC – Approval and Marketing of Biotech Products, para. 7.1621 ("[t]he fact that
there is no indication that between June 1999 and August 2003 the European Communities accorded Argentina
special and differential treatment – e.g. by approving the marketing of biotech products exported from
Argentina – does not in and of itself constitute prima facie evidence that the European Communities has failed
to 'take account' of Argentina's needs."); US – COOL, para. 7.787 (finding no requirement to "to document
specifically in their legislative process and rule-making process how they actively considered the special
development, financial and trade needs of developing country Members"); US – Clove Cigarettes, paras. 7.596-
7.597 and 7.645 (finding that an exchange of letters showed that the United States "actively took account of"

regulating Member would not be consistent with the text of the obligation or with the normal
allocation of the burden of proof, and disagrees with Malaysia's argument that prior panels have
been "too undemanding" in this respect.
7.938. Fourth, while there is nothing unusual about a panel making findings on the basis of
inferences that are reasonably drawn from circumstantial rather than direct evidence1260, the typical
circumstances giving rise to a claim of inconsistency under Article 12.3, and the typical forms of
circumstantial evidence available, make it difficult to conclusively eliminate opposing inferences that
may be reasonably drawn from the same facts. When a regulating Member is made aware that a
proposed technical regulation or conformity assessment procedure is apt to have an adverse impact
on the special needs of developing country Members, and ultimately no modifications are made to
the measure to avoid or substantially mitigate those impacts despite those co ncerns having been
communicated, one inference that might be drawn is that the regulating Member did not take
account of the special needs of developing country Members contrary to the requirements of Article
12.3. However, without more, it is equally plau sible to draw the reasonable inference that the
regulating Member did take account of those special needs, as required by Article 12.3, and simply
decided to not make any such modification to the measure.
7.939. The Panel considers that in such circumstances, which may be expected to be the typical
circumstances when claims of inconsistency under Article 12.3 are raised, a relevant consideration
that must inform what inference should most reasonably be drawn is the nature of the modifications
to the measure that the regulating Member would have had to introduce to accommodate the special
needs of developing country Members. Where a regulating Member is made aware that a proposed
technical regulation or conformity a ssessment procedure is apt to have an adverse impact on the
special needs of developing country Members, and the regulating Member could modify the proposed
measure to accommodate those concerns without undermining the measure's contribution to its
objective or its chosen level of protection, then the absence of any such modifications may, all things
being equal, strengthen the inference that those special needs were not taken into account. In
contrast, when it is not apparent how the regulating Member could modify the proposed measure to
address those concerns without undermining the measure's contribution to its objective or its chosen
level of protection, this would weaken the inference that the special needs were not taken into
account, and suggest instead that "in weighing and balancing the various interests at stake,"1261 the
regulating Member decided to give priority to the competing objectives of the measures.1262
7.940. Turning to the facts of this case, in the various communications to EU officials that Malaysia
refers the Panel to, its officials repeatedly communicated their view that the proposed EU measures
relating to palm oil -based biofuels were fundamentally discriminatory and in violation of WTO
obligations, and made clear that the desired outcome was f or the European Union to not move
forward with the proposed cap and phase-out of palm oil-based biofuels. It is not apparent how the

Indonesia's concerns and did not separately address Indonesia's argument that the US "cannot point to
anywhere in the Act or its legislative history where the Congress even said the word 'developing country'");
and US – Animals, paras. 6.45-6.47, and 7.697-7.698 (rejecting Argentina's argument that compliance with
the obligation to "consider" particular factors in the context of an injury determination requires an importing
Member to document how it did so, and the same approach should be followed under Article 10.1 of the
SPS Agreement. The panel rejected this argument, noting that the Anti-Dumping and SCM Agreements have
very specific obligations with respect to publication and documentation of decisions and it was thus not
appropriate to transplant that interpretation to the context of Article 10.1).
1260 In Canada – Aircraft, the Appellate Body observed that "panels routinely draw inferences from the
facts placed on the record. The inferences drawn may be inferences of fact: that is, from fact A and fact B, it is
reasonable to infer the existence of fact C. […] The facts must, of course, rationally support the inferences
made, but inferences may be drawn whether or not the facts already on the record deserve the qualification of
a prima facie case. The drawing of inferences is, in other words, an inherent and unavoidable aspect of a
panel's basic task of finding and characterizing the facts making up a dispute." (Appellate Body Report, Canada
– Aircraft, para. 198.) In US – Continued Zeroing, the Appellate Body reiterated that "a panel may have a
sufficient basis to reach an affirmative finding regarding a particular fact or claim on the basis of inferences
that can be reasonably drawn from circumstantial rather than direct evidence." (Appellate Body Report,
US – Continued Zeroing, para. 357.)
1261 Panel Reports, EC – Approval and Marketing of Biotech Products, para. 7.1621; US – COOL,
1262 Similarly, even in circumstances where the modification of a measure to accommodate the special
needs of developing country Member could in principle be effected without undermining the objective of the
measure, depending on the circumstances, such modification could result in de facto or de jure discrimination
with respect to like products from Members other than those whose special needs were taken into account.

European Union could have modified the proposed measures to address those concerns without the
complete withdrawal of the measures at issue. The Panel notes its finding, in the context of Article
2.2, that none of the alternative measures proposed by Malaysia would have made an equivalent
contribution to the objective of limiting ILUC-related GHG emissions associated with the production
of biofuels from food and feed crops.1263
7.941. Insofar as the only clear way to have accommodated Malaysia's concerns would have
entailed the complete withdrawal of the measures at issue, the absence of any modification of this
kind does not imply that the European Union failed to take account of the special needs of developing
country Members. It suggests instead that "in weighing and balancing the various interests at
stake,"1264 the European Union decided to give priority to the competing objectives of the measures.
7.942. This inference is only strengthened by the European Union's express acknowledgement of
Malaysia's concerns on multiple occasions, in terms that suggest they were weighed and balanced
against other interests.
7.943. In its second written submission, the European Union explains that various letters from the
Prime Minister of Malaysia and other senior members of the Malaysian Government prompted the
following responses from several EU institutions1265:
a. A letter from the President of the European Comm ission addressed to the Prime Minister
of Malaysia, dated 14 May 2019, explaining that "[i]n the discussion process, stakeholders
have raised legitimate concerns on the possible negative implications of palm oil
production, if not produced sustainably, suc h as deforestation and biodiversity loss, as
well as greenhouse gas emissions especially coming from plantations on peatland. The
Commission appreciates the importance of the palm oil sector as a source of economic
growth and employment in producing countr ies and is concerned about the situation of
small holders. The Commission is determined to pursue a balanced approach on this
complex issue and it believes that the retained definitions of small holders and unused
land meet this objective."
b. A letter from t he European Commissioner for Climate Action and Energy addressed to
Malaysia's EU Ambassador, dated 26 July 2018, explaining that "[t]he Commission is fully
aware about the complexity of this issue and the need to find a balanced approach. We
appreciate the importance of the palm oil sector as a source of growth and employment
in your countries, including for smallholders. At the same time, we have a common interest
in addressing possible negative environmental and social impacts that the produ ction of
palm oil can have by ensuring that it happens in a sustainable manner."
c. A letter sent by the Director General of the Directorate -General Environment, Education,
Transport and Energy of the Council of the European Union addressed to several
Ambassadors, including from Malaysia and Indonesia, dated 11 April 2018, specifying that
"[t]he European Union is aware of the importance of the palm oil sector for Palm Oil

1263 The Panel notes that in the context of its claim under Article 12.3, Malaysia suggests that the
European Union's failure to take account of the special needs of developing countries is also reflected in the
European Union "not having considered, nor adopted, one of the many reasonably available alternative
measures" and cross-references its arguments under Article 2.2. (Malaysia's first written submission, para.
867.) In this connection, Malaysia submits that "simply engaging in communications and considering the inputs
received, without 'active and meaningful consideration' of the 'special development, financial and trade needs'
of developing country Members, must not be considered sufficient and cannot be regarded as a responsible
attitude when trying to avoid or minimise trade effects and trade restrictions, especially if less trade-restrictive
and reasonably available alternatives are being suggested by affected developing country Members, as
Malaysia did. Throughout the EU's legislative process to adopt the measures at issue, Malaysia underlined that
alternative, less trade-restrictive, options existed." (Malaysia's second written submission, para. 311.) The
Panel refers to its findings under Article 2.2, which already address the alternative measures identified by
Malaysia.
1264 Panel Reports, EC – Approval and Marketing of Biotech Products, para. 7.1621; US – COOL,
1265 European Union's second written submission, paras. 200-203 (referring to President Juncker's reply
of 14 May 2019 to a letter from PM Mahathir to President Juncker on the RED II Delegated Act, (Exhibit EU-
172); Letter of European Commissioner for Climate Action and Energy of 26 July 2018, (Exhibit EU-174); and
Letter by the Director General of the Directorate-General Environment, Education, Transport and Energy of the
Council of the European Union of 11 April 2018, (Exhibit MYS-36).

Producing Countries and for many of its farmers, and is giving this due consideration. …
As regards the ongoing legislative process for the revision of the Renewable Energy
Directive, I understand your concerns over an amendment by the European Parliament
which proposes not to count palm oil based biofuel towards the EU's future renewable
energy target. … In line with the proposal with the European Commission, any
distinguishing of different types of conventional biofuels should be based – in the Council's
view – on objective and transparent criteria to measure their environmentally sustainable
production."
7.944. The Panel has also considered Malaysia's argument that there is no mention of the needs of
developing countries in the measures at issue or related documents (the explanatory memorandum
to the initial proposal for RED II, RED II itself, the i mpact assessment for RED II, the Delegated
Regulation, and the Status Report (2019)), and that the provisions on independent smallholders in
the Delegated Regulation are merely a theoretical option.
7.945. The Panel does not consider that the absence of any refer ence to the special needs of
developing country Members in the text of the measure itself would support an inference that the
European Union did not take account of the special needs of developing country Members. The Panel
recalls that in EC – Approval an d Marketing of Biotech Products and US – COOL, the panels
considered that:
[T]he absence of a reference to developing country needs in the text of the EC approval
legislation does not demonstrate that that legislation itself fails to take account of these
needs, or that the European Communities is precluded from taking account, or has not
taken account, of these needs when applying that legislation.1266
7.946. In any event, it appears that the smallholder pathway was introduced in the Delegated
Regulation in light of the concerns raised during the legislative process. Many of the letters from EU
officials quoted above expressly acknowledge the situation of smallholders. The Delegated
Regulation states, in its Recital 15, that "it is appropriate not to apply the finan cial additionality
criterion to the additional feedstock cultivated on abandoned or severely degraded land or by
independent small farm holders. This would in fact amount to an unreasonable administrative burden
in light of the significant potential for pr oductivity improvements and the barriers faced to finance
the necessary investments. " The European Union explains that the smallholder pathway was
introduced at least in part in light of concerns raised by developing countries.1267
7.947. The Panel is unable to agr ee with Malaysia's argument that the provisions on independent
smallholders in the Delegated Regulation are merely a theoretical option and, for that reason, cannot
qualify as evidence that the European Union met its obligation to "take account of" the special needs
of developing country Members with respect to the situation of independent smallholders. Rather,
in the Panel's view, the inherently narrow scope of the smallholder pathway reasonably supports the
inference that the European Union considered tha t administrative simplification for smallholders
cannot come at the expense of jeopardizing the objective the measures seek to achieve.
7.948. Nor is the Panel persuaded by Malaysia's argument that the European Union's decision to
not conduct an impact assessment for the Delegated Regulation is necessarily relevant to whether
it complied with its obligation to "take account of" the special needs of developing country Members.
Malaysia has not demonstrate d that any such impact assessment would have been a central
mechanism, let alone the exclusive mechanism, for the European Union to have taken account of
the special development, financial and trade needs of developing country Members. Indeed, Malaysia
argues that the impact assessment conducted for RED II and other related documents contain s no
mention of the comments received from developing countries and only vague references to impacts
on third countries.1268
7.949. The Panel considers that the exchange of lett ers referred to above confirms that formal
impact assessments for RED II and the Delegated Regulation were not, and would not have been,
the exclusive mechanisms through which the European Union could have taken account of the

1266 Panel Reports, EC – Approval and Marketing of Biotech Products, para. 7.1623, cited in
Panel Reports, US – COOL, paras. 7.787.
1267 European Union's response to Panel question No. 163, paras. 825-826.
1268 Malaysia's first written submission, para. 868.

concerns raised by Malaysia. The Panel notes that the parties have engaged in a robust exchange of
arguments on the relevance or probative value of certain references to third countries contained in
the impact assessment conducted for RED II and other related documents. In the absence of any
argument that the impact assessment would have been the exclusive mechanism for the European
Union to take account of the special needs of developing country Members, the Panel does not
consider it necessary to consider them further.
7.950. The Panel has considered the relevance of the obligation in Article 2.9.4 of the
TBT Agreement to the interpretation and application of the obligation in Article 12.3, and the parties
have developed arguments on this issue in response to questions from the Panel. For r easons set
out earlier in this Report, the Panel has concluded that the European Union acted inconsistently with
the obligation in Article 2.9.4 to "allow reasonable time for other Members to make comments in
writing, discuss these comments upon request, and take these written comments and the results of
these discussions into account". The Panel considers that the scope of the obligation in Article 12.3
is different from the scope of the obligation in Article 2.9.4, and that it does not follow from its
finding of inconsistency with Article 2.9.4 that Malaysia has demonstrated that the European Union
acted inconsistently with its obligation to take account of the special needs of developing countries
in the preparation of the technical regulations and the conformity assessment procedure at issue.
7.951. Before concluding, the Panel observes that although the obligation in Article 12.3 requires a
regulating Member to take account of the special needs of developing countries in both the initial
preparation and subseq uent application of technical regulations and conformity assessment
procedures, Malaysia's arguments under Article 12.3 are directed to the preparation of the measures
at issue. In the absence of any arguments from Malaysia specifically directed at the European Union
failing to take account of the special needs of developing countries in the application of the measures
at issue, the Panel considers it appropriate to confine the scope of its assessment under Article 12.3
accordingly.
7.952. Based on its review of the evidence and the arguments of the parties, the Panel concludes
that the more reasonable inference to be drawn from the facts is that the European Union gave
active and meaningful consideration to the special needs of developing country Members identifi ed
by Malaysia and ultimately accorded more weight to the objective pursued through the measures at
issue. The Panel therefore finds that Malaysia has failed to demonstrate that the European Union
acted inconsistently with Article 12.3 by failing to take account of the special development, financial
and trade needs of developing country Members in its preparation of the measures at issue.
7.1.4.3 Article 12.1 – General obligation
7.953. In its first written submission, Malaysia stated that "[w]ith respect to its claims under Article
12.1 of the TBT Agreement, Malaysia intends to establish that the EU has failed to provide differential
and more favourable treatment to Malaysia."1269 Malaysia further argued that "in light of the literal
and teleological meaning of Article 12.1 of the TBT Agreement ("shall provide differential and more
favourable treatment ") … any measures adopted by WTO Members, which affect the special
development, financial and trade needs of developing country Members, must result in special and
differential treatment, the EU has fallen short of this obligation. "1270 However, in response to a
question from the Panel, Malaysia subsequently explained that while its "challenge under Article 12.3
of the TBT Agreement is further informed by the obligations under Article 12.1 of the
TBT Agreement", it "does not make a separate, individual claim under Article 12.1 of the
TBT Agreement" but merely "underlines the relevance of Article 12.1 in the context of its Article 12.3
claim".1271
7.954. The Panel understands that Malaysia does not make any separate claim under Article 12.1,
but that Malaysia still considers that Article 12.1 establishes a general and unqualified obligation to
accord "differential and more favourable treatment to developing country Members " that informs
other provisions of Article 12, such as Article 12.3.
7.955. Article 12.1 sets forth the obligation that:

1269 Malaysia's first written submission, para. 833.
1270 Malaysia's first written submission, para. 884.
1271 Malaysia's response to Panel question No. 158.

Members shall provide differential and more favourable treatment to developing country
Members to this Agreement, through the following provisions as well as through the
relevant provisions of other Articles of this Agreement.
7.956. It follows from the terms of Article 12.1 that a finding of inconsistency with th at provision
requires a demonstration that the Member concerned has failed to provide the differential and more
favourable treatment to developing country Members that is required under other provisions of
Article 12, or through relevant provisions of othe r Articles of the TBT Agreement.1272 Article 12.1
does not establish a self-standing or unqualified obligation to provide "differential and more
favourable treatment to developing country Members ". Rather, as the panel in EC – Approval and
Marketing of Biotech Products stated, "Article 12.1 is relevant whenever there is a violation of one
of the other provisions of Article 12, such as Articles 12.2, 12.3 or 12.7."1273
7.957. The Panel therefore is unable to agree with Malaysia to the extent that its arguments
referencing Article 12.1 are to be construed as implying that this provision sets forth a general and
unqualified obligation to provide "differential and more favourable treatment to developing country
Members".
7.1.4.4 Conclusion on Article 12
7.958. The Panel concludes that Malaysia has failed to establish that the European Union has acted
inconsistently with Article 12.3 of the TBT Agreement, as informed by Article 12.1 of the
TBT Agreement.
7.1.5 Claims under GATT 1994
7.1.5.1 Article XI:1 – Restrictions on importation
7.1.5.1.1 Introduction
7.959. Having addressed the claims under the TBT Agreement, the Panel now turns to the claims
against the EU measures under the GATT 1994. The Panel addresses the claim under Article XI:1
first, and then proceeds to address the claims under Articles III:4, I:1, and X:3(a) of the GATT 1994,
in that order, for reasons already set out in the Panel's discussion of its order of analysis.
7.960. Malaysia submits1274 that the European Union violates Article XI:1 because the high ILUC -
risk cap and phase -out and low IL UC-risk certification make effective quantitative prohibitions or
restrictions on imports of palm oil -based biofuel and palm oil . More specifically, as regards the
relationship between Article XI:1 and Article III:4, Malaysia argues that these measures aff ect the
opportunities for importation of palm oil-based biofuel and palm oil into the European Union as well
as the competitive opportunities on the domestic market and that, therefore, both Article XI:1 and
Article III:4 are applicable. In terms of the measure's limiting effects on trade, Malaysia refers to its
arguments under Article 2.2 of the TBT Agreement. Furthermore, Malaysia notes that low ILUC-risk
certification is neither effective nor practicable, and therefore has a negligible impact on the trad e-

1272 The TBT Agreement contains numerous provisions on special and differential treatment. While most
such provisions are indeed contained in Article 12, there are various others providing for such treatment in the
TBT Agreement. These include, for instance, Article 11 (several provisions on technical assistance),
Articles 2.12 and 5.9 (special attention to producers in developing countries when allowing a "reasonable
interval" between the publication and entry into effect of technical regulations or conformity assessment
procedures) or Article 15.4 (TBT Agreement Triennial Reviews, or any amendments to the Agreement, should
be undertaken without prejudice to the provisions of Article 12).
1273 Panel Reports, EC – Approval and Marketing of Biotech Products, para. 7.47, subpara. 77. In
US – COOL, which is the only prior dispute to involve a finding under Article 12.1, Mexico submitted a
consequential claim of violation under Article 12.1, arguing that the challenged measure's inconsistency with
Article 12.3 also resulted in its inconsistency with Article 12.1. After rejecting Mexico's claim under Article 12.3,
the panel rejected Mexico's consequential claim under Article 12.1. (Panel Reports, US – COOL, paras. 7.744
and 7.802-803.)
1274 Malaysia's first written submission, paras. 940-958; second written submission, paras. 118-126;
responses to the Panel's questions, pp. 109-116; and comments on the European Union's responses to the
Panel's questions, pp. 247-285.

restrictive effect of the high ILUC -risk cap and phase -out, and has its own limiting effect on
importation.
7.961. The European Union submits1275 that only measures that directly affect importation itself fall
within the scope of Article XI and that Malaysia has not demonstrated that this is the case here. The
European Union submits that Malaysia, for the purposes of this claim, has simply recast the same
arguments and factual circumstances it has put forward under Article III, and has neither challenged
different aspects of the measure nor shown specific circumstances that would warrant the application
of both Article XI:1 and Article III:4. For the European Union, any hypothetical effects on importation
are the consequence of a purely internal event, i.e. a supposed decrease in domestic demand for
that product. Furthermore, the European Union points out that palm oil is imported for different
purposes and that importation is not restricted in any way. With regard to low ILUC-risk certification,
the European Union considers that it is a measure that favours producers of a high ILUC-risk crop,
and as such incapable of negatively affecting imports.
7.1.5.1.2 Legal standard
7.962. Article XI is entitled "General Elimination of Quantitative Restrictions". Article XI:1 sets forth
the obligation that:
No prohibitions or restrictions other than duties, taxes or other charges, whether made
effective through quotas, import or export licences or other measures, shall be instituted
or maintained by any Member on the importation of any product of the territory of any
other Member or on the exportation or sale for export of any product destined for the
territory of any other Member.
7.963. Article XI:1 thus requires that Members do not institute or maintain "prohibitions or
restrictions … on the importation" of any product in their territory. Article XI:1 has been interpreted
and applied in a number of prior cases, and both parties present their respective understandings of
the applicable legal standard with reference to prior cases.
7.964. In fact, these understandings differ widely and lie at the heart of Malaysia's claim. The Panel
will therefore elaborate further on this below.
7.1.5.1.3 Assessment by the Panel
7.965. The high ILUC -risk cap and phase -out is, as is clear from the Panel's assessment of
Malaysia's claims under Articles 2.1 and 2.2 of the TBT Agreement, a measure that has trade -
restrictive effects. The Panel recalls its finding under Article 2.2, that the high ILUC -risk cap and
phase-out is a measure that, by design, has a "limiting effect on trade" in palm oil-based biofuel. In
the context of Article 2.1, the Panel found that this measure has a detrimental impact on imported
palm oil-based biofuel as compared to the group of domestic like products.1276
7.966. The parties' disagreement essentially turns on whether these trade-restrictive effects suffice
to bring the measure under Article XI:1. In this regard the parties have different understandings of
the terms "restrictions … on the importation " in Article XI:1. For Malaysia, these terms refer to
"limiting effects on importation" and therefore bring within the scope of Article XI any measure that
may have such effects. For the European Union, these terms qualify the measures falling within the
scope of Article XI as those directly limiting importation itself.
7.967. The Panel also understands the parties to disagree about the relationship between Article
XI:1 and Article III:4. The third parties have also offered different views on this issue. The Panel
considers that this relationship becomes relevant only if a measure appears to fall within the scope

1275 European Union's first written submission, paras. 1187-1210; second written submission,
paras. 250-253; responses to the Panel's questions, paras. 827-871; and comments on Malaysia's responses
to the Panel's questions, paras. 300-312.
1276 The Panel notes that it reaches a similar finding further below, in the context of assessing the claims
under Articles III:4 and I:1, in respect of both palm oi-based biofuel and palm oil.

of both provisions. In other words, that relationship only matters where both provisions appear to
apply to the same measure based on their respective terms.1277
7.968. The first question for the Panel is therefore whether the high ILUC -risk cap and phase-out
falls within the scope of Article XI:1. This, in turn, is linked to the interpretation of the terms
"restrictions… on the importation" in Article XI:1. Several factors support the European Union's
interpretation that the terms "restrictions on the importation" qualify the measures falling within the
scope of Article XI as being those directly limiting importation itself. First, the Panel observes that
Article XI:1 refers to "restrictions … on the importation" of any product. The ordinary meaning of the
term "on" ("with regard to", "in connection with" or "in relation to"1278) suggests that the obligation
in Article XI:1 is not meant to cover restrictions merely affecting the importation of products.
Similarly, the ordinary meaning of the term "importation" ("the action or practice of importing a
commodity, merchandise, goods, etc."1279) suggests that the obligation in Article XI:1 is not meant
to cover any restrictions on (let alone those merely affecting) for instance, "products imported from
the territory of" another Member. The object of the obligation in Article XI:1 is the action of importing
a good.
7.969. Second, the Panel considers that this interpretation is supported by analysing the term
"restriction" in the context of Article XI:1. As noted by prior panels and the Appellate Body,
"restriction" means "something that restrict s a person or thing; a limitation on action; a limiting
condition or regulation ".1280 This definition describes an act ( "limitation" "condition", "regulation")
(as distinct from an effect) and, therefore, a measure. This reading is confirmed by the phrase "other
than duties, taxes or other charges ". As Malaysia rightly points out, these are the only measures
expressly identified as not covered by Article XI:1 which makes for a broad scope of the "restrictions"
that are covered by Article XI:1. 1281 However, it also confirms that restrictions are measures, just
as these duties, taxes and other charges are. Finally, it is "restrictions", together with "prohibitions",
that "shall [not] be instituted or maintained ". This phrase, by its two verbs in passive form, also
denotes an act rather than the result or effect of such act. 1282 The term "restriction", therefore,
clearly designates a measure.
7.970. This said, the above definition of the term "restriction" not only describes an act ("condition",
"regulation") but also qualifies that act as one that is "limiting". The Appellate Body therefore
concluded that "restriction" has to be understood "generally, as something that has a limiting

1277 The Panel understands Japan to hold a similar view when stating the following:
[W]hether a measure falls within the scope of a particular provision of the GATT 1994 should be
primarily determined through interpretation of the text of that provision in the context of the
facts presented in a particular dispute.
There may be instances in which the plain reading of the language of respective articles appears
to suggest that the scope of application of two or more articles overlaps. In some of these
instances, it might become necessary, as required in settling a specific dispute, to contemplate
on the exclusivity of application of these articles in order to avoid contradictory consequences.
(Japan's third-party response to Panel question No. 3, para. 7. Other third parties also highlight the
difference in scope between Article XI and Article III. See Brazil's third-party response to Panel question No. 3,
para. 11; Colombia's third-party response to Panel question No. 3.)
1278 Panel Reports, India -Autos, paras. 7.257, 7.261; Colombia – Ports of Entry, para. 7.227; and Brazil
– Retreaded Tyres, para. 7.371.
1279 More specifically, the relevant definition reads in full "The action or practice of importing a
commodity, merchandise, goods, etc., from another country or territory for use or resale in the domestic
market; an instance of this." (Oxford English Dictionary online, definition of "importation"
(https://www.oed.com/dictionary/importation_n?tab=meaning_and_use#875896) (accessed on
21 September 2023).)
1280 Appellate Body Reports, China – Raw Materials, para. 319; and China – Rare Earths, para. 5.91, see
also Oxford English Dictionary online, definition of "restriction"
(https://www.oed.com/dictionary/restriction_n?tab=meaning_and_use#25718816) (accessed on
21 September 2023).
1281 Malaysia's first written submission, para. 945.
1282 "Institute" means "to set up, establish, found, ordain; to introduce, bring into use or practice", see
Oxford English Dictionary online, definition of "institute"
(https://www.oed.com/dictionary/institute_v?tab=meaning_and_use#382143) (accessed on
21 September 2023); "maintain" means " to uphold, back up, stand by", see Oxford English Dictionary online,
definition of "maintain" (https://www.oed.com/dictionary/maintain_v?tab=meaning_and_use#38643862)
(accessed on 21 September 2023).

effect".1283 The term "restriction" thus not only designates a measure, but it also qualifies that
measure by describing its effect. Like past panels and the parties in this proceeding, this Panel has
a broad understanding of what such limiting effects may be and how they can be demonstrated.1284
Indeed, the Panel does not see a material difference between demonstrating such limiting effects in
Article XI and demonstrating trade -restrictiveness, e.g. under Article 2.2 of the TBT Agreement.
However, and importantly, the Panel considers that any such limiting effects only become relevant,
if and where the measure at issue has been shown to be a measure "on the importation" of a product.
7.971. Thus, the Panel considers that the term "restriction" contains two different elements that
must be established, for a measure to fall within the scope of Article XI:1: there must be a measure
"on" importation, and that measure must have limiting effects on the importation of one or more
products. Indeed, a measure may well regulate importation without having any limiting effect 1285
and there may well be limiting effects on trade without there being any measure "on" importation.1286
In either case, there is no "restriction … on the importation" within the meaning of Article XI:1.
7.972. The Panel finds confirmation in prior cases, that the terms "restrictions … on the importation"
require that a measure applies on or in relation to the action of importation, in addit ion to having
trade-limiting effects. These cases include those that Malaysia refers to as supporting its own
interpretation. The measures at issue in these cases, which were found to fall within the scope of
Article XI:1, all concerned measures in relation to the action of importation. Some of these measures
were directly related to the process of importation itself in that they were linked to or part of a
licensing process.1287 Other measures concerned the action of importing in a more direct, physical
sense.1288 As Malaysia rightly points out some past cases concerned de jure measures, while others
concerned de facto measures, such as the measure considered (but not found to be in violation) in
Argentina – Hides and Leather, which provided for the presence of representatives of the domestic

1283 Appellate Body Reports, China – Raw Materials, para. 319; and China – Rare Earths, para. 5.91,
fn 548.
1284 As summarized by the panel in Colombia – Ports of Entry:
Thus, as evidenced above, a number of GATT and WTO panels have recognized the applicability
of Article XI:1 to measures which create uncertainties and affect investment plans, restrict
market access for imports or make importation prohibitively costly, all of which have implications
on the competitive situation of an importer. Moreover, it appears that findings in each of these
cases were based on the design of the measure and its potential to adversely affect importation,
as opposed to a standalone analysis of the actual impact of the measure on trade flows.
(Panel Report, Colombia – Ports of Entry, para. 7.240.)
1285 See for example the Appellate Body's discussion on import formalities and requirements within the
meaning of Article VIII of the GATT 1994 in Argentina – Import Measures:
In our view, not every burden associated with an import formality or requirement will entail
inconsistency with Article XI:1 of the GATT 1994. Instead, only those that have a limiting effect
on the importation of products will do so.
(Ibid., para. 5.243.)
1286 The Panel notes that the measure at issue in Australia – Plain Packaging may serve as an example.
It was found to have trade-restrictive effects within the meaning of Article 2.2. However, the complainants did
not challenge the measure under Article XI:1. (Panel Reports, Australia – Tobacco Plain Packaging,
para. 7.1255.)
1287 For example, in India – Autos a trade balancing condition contained in a Memorandum of
Understanding that manufacturers of automobiles were required to sign in order to obtain an import licence,
directly determined the amount of imports allowed into the country. (Panel Report, India – Autos,
paras. 2.4-2.5.) Similarly, in Argentina – Import Measures, companies were not allowed to import unless they
achieved a trade balance or an export surplus through a limited number of specific actions. (Panel Report,
Argentina – Import Measures, para. 6.121.) Other cases involving similar import licensing measures include
India – Quantitative Restrictions (import licensing and other measures); Indonesia – Import Licensing Regimes
(import licensing); Indonesia – Chicken (import licensing); China – Raw Materials (export licensing); Colombia
– Textiles (Article 21. 5 – Panama) (specific bond requirement).
1288 For example, in Colombia – Ports of Entry the measures at issue concerned physical access to
certain ports of entry. (Panel Report, Colombia – Ports of Entry, paras. 7.219-7.223.) Another example is the
dispute EU – Energy Package where the panel considered certain restrictions on services for gas pipelines to be
in the nature of restrictions on importation. The panel argued as follows:
We consider that due to the fixed nature of pipeline infrastructure and the necessity for natural
gas transported by pipeline to flow along predetermined paths and to be imported through a
limited number of fixed entry points, an arrangement conditioning access to the transport
capacity of such fixed infrastructure with a demonstrable and sufficiently direct link to an entry
point for that product into the market of the importing Member may have an effect on the
importation of the product in question. (Panel Report, EU – Energy Package, para. 7.994.)

tanning industry in the process of exportation of hides and leathers.1289 Finally, in some cases, panels
have had to explore whether the measure at issue concerned the action of "importation" itself rather
than an already imported product. In Brazil – Retreaded Tyres, for example, the panel decided that
certain fines (including fines on marketing and transport), because they served the purposes of
penalizing the act of importing and thus enforced an import ban, were restrictio ns on
"importation".1290
7.973. Turning to the facts of this case, the Panel observes that, based on its understanding that
Article XI:1 merely requires the showing of limiting effects on importation, Malaysia has not
demonstrated that the measure is applied on or in relation to importation with regard to either the
high ILUC-risk cap and phase-out itself or the low ILUC-risk certification procedure.1291 In fact, the
evidence before the Panel shows that the high ILUC-risk cap and phase-out is not applied on or in
relation to importation, but rather in relation to renewable energy targets that EU member States
are required to reach in their consumption, regardless of the origin of the various types of fuel they
consume. Malaysia has therefore failed to demonstrate that there is a "restriction … on the
importation" within the meaning of Article XI:1.
7.974. The Panel recalls that it must first consider whether a measure falls within the scope of both
Article XI:1 and Article III:4, before addressing any questions as to the relationship between these
two provisions. As Malaysia has not demonstrated that the high ILUC-risk cap and phase -out and
low ILUC-risk certification procedure fall within the scope of Article XI:1, the Panel does not go on
to consider the relationship between Article XI:1 and Article III:4.
7.1.5.1.4 Conclusion on Article XI:1
7.975. Malaysia has not established that the high ILUC-risk cap and phase-out or the low ILUC-risk
certification procedure is inconsistent with the obligation in Article XI:1 of the GATT 1994 to not
institute or maintain any prohibitions or restrictions on the importation of any product of the territory
of another Member.
7.1.5.2 Article III:4 – National treatment
7.1.5.2.1 Introduction
7.976. The Panel now turns to the claim under Article III:4 of the GATT 1994.
7.977. Malaysia submits1292 that the European Union violates Article III:4 of the GATT 1994 because
the high ILUC-risk cap and phase-out and low ILUC-risk certification discriminates between palm oil
and palm oil-based biofuel originating in Malaysia on the one hand and like products of EU origin on
the other hand. More specifically, Malaysia argues that the measure at issue is a law, regulation or
a requirement falling within the scope of Article III:4 that caps and ultimately phases -out the
eligibility of palm oil -based biofuels for counting towards EU renewable energy targets. Malaysia
contends that becaus e there is essentially no market for biofuels that are not eligible to count
towards the EU renewable energy targets, the measure limits and eventually eliminates the
competitive opportunities for palm oil-based biofuel on the EU market, as compared to rapeseed oil-
and soybean oil-based biofuel, which remain eligible. According to Malaysia, this in turn limits and

1289 Panel Report, Argentina – Hides and Leather, para. 11.22.
1290 Panel Report, Brazil – Retreaded Tyres, para. 7.372. Other cases that can be said to belong in this
category are those concerning state trading enterprises. In Korea – Various Measures on Beef, the panel stated
that:
Based on the panel findings in the Canada - Marketing Agencies (1988) case, the Panel considers
that to the extent that LPMO fully controls both the importation and distribution of its 30 per cent
share of Korean beef quota, the distinction normally made in the GATT between restrictions
affecting the importation of products (i.e. border measures) and restrictions affecting imported
products (i.e. internal measures) loses much of its significance.
(Panel Report, Korea – Various Measures on Beef, para. 766.)
1291 The Panel recalls that in its assessment of the high ILUC-risk cap and phase out it takes account of
the low ILUC-risk criteria. Therefore, the Panel considers Malaysia's separate challenge of low ILUC-risk
certification as relating to the low ILUC-risk certification procedure, see para. 7.40above.
1292 Malaysia's first written submission, paras. 921-939; second written submission, paras. 330-342;
responses to the Panel's questions, pp. 46-60; and comments on the European Union's responses to Panel's
questions, pp. 155-174.

eliminates the demand for palm oil on the EU market for biofuel feedstocks, which is not the case
for rapeseed oil or soybean oil. In addition, Malaysia claims less favourable treatment on the grounds
that Malaysian suppliers of palm oil-based biofuel are subject to low ILUC-risk certification while EU
suppliers of like biofuels are not.
7.978. The European Union contests1293 that the high ILUC-risk cap and phase-out falls within the
scope of Article III:4 and that it discriminates against palm oil -based biofuel and/or palm oil. More
specifically, the European Union disputes the characterization of the measure essentially as a market
access condition and s ubmits that Malaysia has failed to discharge the burden of proof that the
measure affects the internal sale of a product. According to the European Union, Malaysia has not
demonstrated the causal link between the eligibility to count towards the renewable energy targets
and market access for palm oil and palm oil-based biofuel. The European Union further argues that
Malaysia has unduly limited the less favourable treatment analysis to a few selected like products
and that the measure treats palm oil and palm oil-based biofuel in the same manner irrespective of
where it is produced.
7.979. In their arguments, both parties thus raise a number of issues that are the same or similar
to those addressed in the section concerning Malaysia's claim under Article 2.1 of the
TBT Agreement. More specifically, the parties refer back to or repeat the arguments they make with
respect to the like products and national treatment components of the analysis under Article 2.1.
Where relevant, the Panel thus relies on and refers back to the findings it has already made with
respect to that claim.
7.1.5.2.2 Legal standard
7.980. Article III of the GATT 1994 is entitled "National Treatment on Internal Taxation and
Regulation". Article III:4 sets forth the obligation that:
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, purchase, transportation, distribution or use. The
provisions of this paragraph shall not prevent the application of differential internal
transportation charges which are based exclusively on the economic operation of the
means of transport and not on the nationality of the product.
7.981. Article III:4 has been interpreted and applied in a number of prior cases, and both parties
present their respective understandings of the applicable legal standard with reference to prior cases.
7.982. Based on the text of the provision, panels and the Appellate Body have explained the three
elements of a violation of Article III:4 as follows1294:
a. the imported and domestic products at issue are "like products";
b. the measure at issue is a "law, regulation, or requi rement affecting their internal sale,
offering for sale, purchase, transportation, distribution, or use"; and
c. the imported products are accorded "less favourable" treatment than that accorded to like
domestic products.
7.983. The Panel will elaborate further on t he elements of the legal standard in Article III:4 as
necessary in the course of its assessment of the issues in dispute.
7.984. The Panel notes that Malaysia makes its claim under Article III:4 with respect to the
treatment of both palm oil -based biofuel and pal m oil used as biofuel feedstock. The Panel will

1293 European Union's first written submission, paras. 1140-1186; second written submission,
paras. 234-249; responses to the Panel's questions, paras. 429-431 and 437-483; and comments on
Malaysia's responses to the Panel's questions, paras. 184-210.
1294 Appellate Body Report, Korea – Various Measures on Beef, para. 133.

therefore first address the parties' arguments with respect to each of these two types of products in
turn.
7.1.5.2.3 Palm oil-, rapeseed oil-, and soybean oil-based biofuels
7.1.5.2.3.1 Like products
7.985. The Panel recognizes that the scope of the non-discrimination obligation in Article III:4 and
in Article 2.1 of the TBT Agreement is different; while the national treatment obligation features in
both provisions, the MFN obligation is contained only in the latter. The Panel is also mindful that the
very concept of like products is not identical across different provisions of WTO agreements. 1295
These differences notwithstanding, panels and the Appellate Body have highlighted important
parallels that exist between the non-discrimination obligations contained in Articles 2.1 and III:4.1296
7.986. In particular, the likeness analysis in each of these provisions is "fundamentally, a
determination about the nature and extent of a competitive relationship between and among
products".1297 To that end, and similarly to the assessment under Article 2.1, panels and the
Appellate Body have regarded the four likeness criteria outlined in the Working Party Report on
Border Tax Adjustments as a helpful analytical tool in determining whether products are like for the
purposes of Article III.1298 Therefore, in assessing whether the imported and domestic products are
like, the Panel will rely on the general principles set out in the Panel's findings under Article 2.1,
unless further considerations follow from the nature of the obligation in Article III:4 or the relevant
factual circumstances.
7.987. With respect to biofuels, Malaysia refers back to the arguments and evidence submitted in
support of the claim under Article 2.1 of the TBT Agreement.1299 The European Union, for its part,
reiterates that by failing to properly identify the universe of like products, Malaysia has failed to
make the case that the products are like1300 and otherwise refers back to the arguments concerning
the likeness of palm oil-, rapeseed oil- and soybean oil-based biofuel under Article 2.1.1301
7.988. Given the overlap in the arguments the parties make with respect to the likeness of palm
oil-, rapeseed oil-, and soybean oil-based biofuel, the Panel does not see anything that would lead
it, in the circumstances of this case, to a different conclusion about the likeness of these three
products than that reached under Article 2.1 of the TBT Agreement. Therefore, on the basis of the
findings made in the context of Article 2.1 above, the Panel conc ludes that, for the purposes of its
analysis under Article III:4, palm oil-, rapeseed oil- and soybean oil-based biofuels are like products.
7.1.5.2.3.2 The scope of application of Article III:4
7.989. Malaysia submits that the high ILUC -risk cap and phase-out and low ILUC-risk certification
are laws, regulations or requirements affecting the internal sale, offering for sale, purchase,
transportation, distribution or use of palm oil -based biofuel.1302 Malaysia relies on its arguments
concerning the impact of the high ILUC-risk cap and phase-out on market opportunities for palm oil-
based biofuel and argues that Article III:4 covers not only mandatory measures, but also those that
impact decisions of private parties with regard to the sale, offering for sale, purchase and use of a
product.1303

1295 Appellate Body Reports, Japan – Alcoholic Beverages II, p. 21; and EC – Seal Products, para. 5.81.
1296 Appellate Body Reports, EC – Seal Products, para. 5.82 and US – Tuna II (Mexico) (Article 21.5 –
Mexico), para. 7.278.
1297 Appellate Body Report, EC – Asbestos, para. 99.
1298 Appellate Body Report, EC – Asbestos, para. 101.
1299 Malaysia's first written submission, para. 927.
1300 European Union's first written submission, paras. 1158-1163.
1301 European Union's first written submission, para. 1143.
1302 Malaysia's first written submission, paras. 924-925; second written submission, paras. 333-334.
1303 Malaysia's first written submission, paras. 924-925.

7.990. The European Union does not dispute that the measures are a law or a regulation. 1304
However, it contests that the high ILUC-risk cap and phase-out "affects" internal sales, offering for
sale of products, as it does not impose market access conditions.1305
7.991. The Panel recalls that the term "affecting" in Article III:4 has been found to express a link
between certain types of government actions and "specific transactions, activities and uses relating
to products in the marketplace ".1306 It has also been interpreted broadly, extending beyond the
meaning of "regulating" or "governing" sales or offering for sale of products.1307 Accordingly, Article
III:4 covers not only laws and regulation which directly govern the conditions of sale or purc hase
but also those which might adversely modify the conditions of competition between domestic and
imported products.1308 To that end, the effects of a measure on those who sell, purchase, transport,
distribute, or use the products are not beyond scrutiny u nder Article III:4. 1309 Applying these
principles, past panels found governmental measures providing incentives to purchase or offer for
sale certain products over others to fall within the ambit of Article III:4.1310
7.992. Article 26(2) of RED II does not impose a n exact fuel mix on EU member States or fuel
producers. However, it specifically limits and gradually excludes from consideration for the purposes
of meeting the renewable energy targets those biofuels that are made from high ILUC -risk
feedstocks. All EU member States thus must take the high ILUC-risk cap and phase-out into account
in designing any domestic "incentives for market players to use certain biofuels ", as the European
Union itself acknowledges, to meet their national contribution targets. In that sense, the measure
affects the competitive opportunities for biofuels. In light of these considerations, the Panel finds
that the high ILUC -risk cap and phase -out is a measure "affecting" the sale, offering for sale,
purchase, transportation, distribution, or use of palm oil-based biofuel and falls within the scope of
Article III:4.
7.993. The Panel recalls that Malaysia submits that low ILUC-risk certification limits and eventually
excludes, in its own right, the possibility for imported palm oil-based biofuel to be counted towards
EU renewable energy targets. In the Panel's view, Malaysia's claim does not distinguish between the
ILUC-risk certification criteria or the certification procedure. To the extent that Malaysia argues that
it is the criteria for low IL UC-risk certification contained in Articles 4 and 5 of the Delegated
Regulation that accord less favourable treatment to palm oil -based biofuel, these arguments are
addressed by the Panel together with the high ILUC-risk cap and phase-out.1311
7.994. Insofar as Malaysia is challenging under Article III:4 the low ILUC -risk certification
procedure, the Panel must first consider whether it is a "law, regulation or requirement " affecting
the internal sale, offering for sale, purchase, transportation, distr ibution or use of biofuels. 1312
Elsewhere in its submissions, Malaysia argues that the European Union has devised a "prohibitively
complex system for low ILUC -risk certification ".1313 Malaysia also contends that the certification
procedure "arguably alters the conditions of competition … since currently all other feedstock do not
require" such certification.1314
7.995. Panels and the Appellate Body have found that procedural and administrative requirements
may fall within the scope of Article III:4, if they affect comp etitive opportunities in a given
market.1315 The Panel notes that the low ILUC -risk certification procedure is reflected in the
provisions of the Delegated Regulation and as such constitutes a "law, regulation or requirement".

1304 European Union's first written submission, para. 1154.
1305 European Union's first written submission, para. 1156.
1306 Appellate Body Report, US – FSC (Article 21.5 – EC), para. 208.
1307 Appellate Body Report, EC – Bananas III, para. 220 (fn omitted).
1308 Panel Report, Canada – Autos, para. 10.80. See also Panel Report, Argentina – Financial Services,
para. 7.1019-7.1023.
1309 Appellate Body Report, China – Publications and Audiovisual Products, para. 305.
1310 See e.g. Panel Reports, India – Autos, paras. 7.195-7.198 and 7.307-7.309; and China – Auto
Parts, para. 195.
1311 Regarding the distinction between low ILUC-risk certification criteria and procedure, see section of
this Report on preliminary considerations.
1312 Malaysia's first written submission, paras. 924-925.
1313 Malaysia's first written submission, para. 460.
1314 Malaysia's first written submission, para. 476.
1315 Appellate Body Reports, China – Auto Parts, para. 195; and Panel Report, Thailand – Cigarettes
(Philippines), para. 7.665.

The Panel further notes that any high ILUC-risk biofuel made from a yield meeting the low ILUC-risk
criteria must undergo a certification procedure in order to become eligible to count towards the EU
renewable energy targets outside of the limitations imposed by the high ILUC -risk cap and phase-
out. The design of the certification procedure thus can impact the biofuel's eligibility to count towards
the EU renewable energy targets. Therefore, and bearing in mind the Panel's findings regarding the
link between the eligibility for the EU re newable energy targets and the opportunities on the EU
biofuel market, the Panel considers that the low ILUC -risk certification procedure affects the sale,
offering for sale, purchase, transportation, distribution or use of biofuels generally classified as high
ILUC risk.
7.1.5.2.3.3 Treatment no less favourable
7.996. Article III:4 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.1316 This obligation has
been interpreted as requiring effective equality of competitive opportunities for imported and
domestic products on the internal market. 1317 In order to establish an inconsistency with Article
III:4, a complainant must therefore show tha t the measure modifies the conditions of competition
to the detriment of imported products.1318
7.997. The legal standard for demonstrating that a measure fails to accord "treatment no less
favourable" under Article III:4 is similar to that which applies under Art icle 2.1 of the
TBT Agreement, insofar as both require a demonstration that the measure modifies the conditions
of competition in the relevant market to the detriment of the group of imported products vis-à-vis
the group of like domestic products. Indeed, as noted above1319, there are important parallels in the
scope and formulation of these two non-discrimination obligations1320, with the main difference being
that Article III:4 does not require a Panel to determine whether any detrimental impact on the
imported product "stems exclusively from a legitimate regulatory distinction".1321
7.998. Mindful of these considerations, insofar as the parties rely on the same arguments that they
make under Article 2.1 of the TBT Agreement for the purposes of establishing the existe nce of a
"detrimental impact" under Article III:4, the Panel will refer back to the relevant findings made under
that provision.
7.999. The Panel notes that with respect to biofuels, the parties essentially refer to or repeat the
arguments they make with regard t o the national treatment component of Malaysia's claim under
Article 2.1.1322 Given the overlap in the parties' arguments, the Panel does not see anything that
would lead it, in the circumstances of this case, to a different conclusion regarding the "no less
favourable treatment" of biofuels than that which it has already reached concerning the existence of
a detrimental impact under Article 2.1. Therefore, for the reasons explained in its findings under
Article 2.1, the Panel finds that the high ILUC -risk ca p and phase -out accords less favourable
treatment to palm oil -based biofuel imported from Malaysia, as compared to rapeseed oil - and
soybean oil-based biofuel of EU origin.1323
7.1000. The Panel notes that Malaysia further argues that low ILUC -risk certification accords less
favourable treatment to palm oil-based biofuel.1324 The Panel recalls in this regard that the low ILUC-
risk certification criteria are considered together with the high ILUC -risk cap and phase-out.1325 As
regards the low ILUC-risk certification procedure, Malaysia refers to the same arguments it makes
in relation to its claim under Article 5.1.1 of the TBT Agreement and argues that "as a result of
Article 3 of the Delegated Regulation, only oil palm crop-based biofuel is high ILUC-risk biofuel and

1316 Appellate Body Report, EC – Asbestos, para. 100.
1317 Appellate Body Reports, Japan – Alcoholic Beverages, p. 16; and EC – Seal Products, para. 5.101.
1318 Appellate Body Reports, Thailand – Cigarettes (Philippines), para. 128; and Korea – Various
Measures on Beef, para. 137.
1319 See para. 7.463 above.
1320 Appellate Body Reports, US – Clove Cigarettes, para. 100; and EC – Seal Products, para. 5.122.
1321 Appellate Body Reports, EC – Seal Products, para. 5.125.
1322 Malaysia's first written submission, para. 936.
1323 The European Union acknowledges that it produces domestically both rapeseed oil- and soybean oil-
based biofuel. European Union's first written submission, para. 1172.
1324 Malaysia's first written submission, para. 937.
1325 See section of this Report on preliminary considerations.

therefore subject to low ILUC -risk certification."1326 Malaysia adds that being subject to low ILUC -
risk certification "distorts the conditions of competition to the detriment of the Malaysian
suppliers".1327
7.1001. Article 3 of the Delegated Regulation is one of the c entral elements of the design of the
high ILUC-risk cap and phase-out. It contains the formula which determines, on the basis of certain
variables and assumptions, whether a particular feed and food crop is to be considered as a high
ILUC-risk biofuel feedstock. As Malaysia itself appears to be arguing, it is the result of the application
of this formula, and the high ILUC-risk cap and phase-out more generally, that requires suppliers of
palm oil -based biofuel from Malaysia to undergo the certification proc edure for the purposes of
counting towards EU renewable energy targets outside of the limitations imposed by the high ILUC-
risk cap and phase-out. In other words, the "detrimental impact" that Malaysia has identified in its
claim stems not from low ILUC-risk certification, but from the high ILUC-risk cap and phase-out. As
such, it is addressed together with the Panel's findings concerning the high ILUC-risk cap and phase-
out. Malaysia has thus failed to establish that the low ILUC-risk certification procedure accords less
favourable treatment to palm oil-based biofuel in its own right.
7.1.5.2.4 Biofuel feedstocks
7.1002. The Panel understands the essence of Malaysia's position to be that insofar as the high
ILUC-risk cap and phase-out and low ILUC-risk certification procedure have a detrimental impact on
palm oil-based biofuel, that detrimental impact necessarily extends t o its feedstock (i.e. palm oil).
The Panel notes that Malaysia's arguments concerning the alleged less favourable treatment of palm
oil rest on the same premises as those relating to the treatment of palm oil-based biofuel. In these
circumstances, the Pane l must consider the practical value that any such findings would have for
implementation, in light of its other findings relating to palm oil-based biofuel.
7.1003. The Panel sees no reason for making separate and additional findings under Article III:4
on whether the same aspects of the same measure that have been found to have a detrimental
impact on imports of palm oil -based biofuel also have a detrimental impact o n its feedstock (i.e.
palm oil). The Panel recalls that, for the purposes of its claim under the national treatment and MFN
obligations in Article 2.1 of the TBT Agreement, Malaysia focuses only on palm oil-based biofuels,
and the Panel's findings are form ulated accordingly. Malaysia has not explained how additional
findings of a detrimental impact on the feedstock (i.e. palm oil) would have any practical value from
the perspective of a possible appeal, from the perspective of implementation, or otherwise.
7.1004. The Panel notes that, because the alleged detrimental impact on the feedstock allegedly
stems from the same aspects of the same measure that give rise to a detrimental impact on palm
oil-based biofuels, it necessarily follows that any action taken to impl ement the findings in respect
of discrimination in respect of palm oil -based biofuel would necessarily address any discrimination
arising from the same aspects of the same measure in respect of the feedstock (i.e. palm oil). Thus,
from the perspective of i mplementation, separate and additional findings regarding the feedstock
(i.e. palm oil) would appear to be entirely redundant.1328
7.1005. Therefore, the Panel does not consider it necessary to make additional findings on the
treatment of palm oil to secure a positive solution to this dispute or to assist the DSB in making the
rulings and recommendations provided for in the covered agreements.
7.1.5.2.5 Conclusion on Article III:4
7.1006. The Panel finds that the high ILUC -risk cap and phase -out out is inconsistent with
Article III:4 of the GATT 1994 because it accords less favourable treatment to palm oil-based biofuel
from Malaysia than that accorded to like products of EU origin.

1326 Malaysia's first written submission, para. 937; response to Panel question No. 91.
1327 Malaysia's first written submission, para. 937.
1328 Furthermore, the Panel does not consider that such additional findings on feedstocks would prejudge
the level of nullification or impairment arising from the high ILUC-risk cap and phase-out beyond any level that
would otherwise be found to exist.

7.1007. Insofar as Malaysia challenges the low ILUC -risk certification procedure as a separate
measure under A rticle III:4 of the GATT 1994, it has not established any inconsistency with this
obligation.
7.1.5.3 Article I:1 – Most-favoured nation treatment
7.1.5.3.1 Introduction
7.1008. The Panel now turns to the claim under Article I:1 of the GATT 1994.
7.1009. Malaysia submits1329 that the European Union violates Article I:1 because the high ILUC -
risk cap and phase-out and low ILUC-risk certification discriminate among palm oil and oil palm crop-
based biofuel and like products originating in third countries . More specifically, Malaysia reiterates
that palm oil-based biofuel is like rapeseed-oil based biofuel and soybean oil-based biofuel and that
palm oil is like rapeseed oil and soybean oil used as biofuel feedstock. Malaysia contends that
rapeseed oil-based biofuel and soybean oil-based biofuel, and, by extension, their feedstocks, benefit
from commercial opportunities flowing from their eligibility to count towards EU renewable energy
targets within the 7% maximum share. According to Malaysia, this advantage is not extended to
palm oil -based biof uel and palm oil due to the high ILUC -risk cap and phase -out limiting and
eventually excluding eligibility of palm oil -based biofuel to count towards the renewable energy
consumption targets. Malaysia adds that producers of other oil crop-based biofuels are exempt from
the obligation to certify their biofuels as low ILUC risk, which confers an advantage in itself.
7.1010. The European Union submits1330 that Malaysia has failed to demonstrate that the high ILUC-
risk cap and phase-out is inconsistent with Article I:1. More specifically, the European Union argues
that Malaysia has failed to demonstrate its case on like products and contests that the high ILUC -
risk cap and phase-out discriminates between palm oil and palm oil-based biofuel and like products,
and that an a dvantage is conferred on the latter. The European Union refers in this regard to its
submissions relating to Malaysia's claims under Article 2.1 of the TBT Agreement. The European
Union also submits that low ILUC-risk certification treats all feed and food crop-based biofuels in an
equivalent manner.
7.1011. In arguing their respective positions under Article I:1, the parties make the same or similar
arguments to those made in the context of Malaysia's claims under Articles 2.1 and Article III:4.
Therefore, where r elevant, the Panel will refer to the findings it makes with respect to those two
claims.
7.1.5.3.2 Legal standard
7.1012. Article I is entitled "General Most-Favoured Nation Treatment ". Article I:1 sets forth the
obligation that:
With respect to customs duties and charges of any kind imposed on or in connection
with importation or exportation or imposed on the international transfer of payments
for imports or exports, and with respect to the method of levying such duties and
charges, and with respect to all rules and formalities in connection with importation and
exportation, and with respect to all matters referred to in paragraphs 2 and 4 of Article
III, any advantage, favour, privilege or immunity granted by any Member to any product
originating in or destined for any oth er country shall be accorded immediately and
unconditionally to the like product originating in or destined for the territories of all
other Members.
7.1013. Article I:1 has been interpreted and applied in a number of prior cases, and both parties
present their respective understandings of the applicable legal standard with reference to prior cases.

1329 Malaysia's first written submission, paras. 890-920; second written submission, paras. 322-329;
responses to the Panel's questions, pp. 47-55 and 57-58; and comments on the European Union's responses to
the Panel's questions, pp. 156-174.
1330 European Union's first written submission, paras. 1129-1139; second written submission,
paras. 201-233; responses to the Panel's questions, paras. 432-466 and 471-482; and comments on
Malaysia's responses to the Panel's questions, paras. 184-198.

7.1014. Panels and the Appellate Body have found based on the text of Article I:1 that establishing
a violation of Article I:1 requires showing the following elements1331:
a. the measure at issue falls within the scope of application of Article I:1;
b. the imported products at issue are "like products" within the meaning of Article I:1;
c. the measure at issue confers an "advantage, favour, privilege, or immunity" on a product
originating in the territory of any country; and
d. the advantage so accorded is not extended "immediately" and "unconditionally" to "like"
products originating in the territory of all Members.
7.1015. If a Member grants an advantage of any nature to any product imported from any country,
it must accord such advantage "immediately and unconditionally" to any like imported product.1332
The terms of the non -discrimination obligation in Article I:1 are formulated differently from Article
III:4. Notwithstanding these differences, both provisions are concerned, fundamental ly, with
prohibiting discriminatory measures by requiring equality of competitive opportunities for like
imported products from all Members (Article I:1) and for imported products and like domestic
products (Article III:4).1333
7.1016. The Panel will elaborate furt her on the elements of the legal standard in Article I:1 as
necessary in the course of its assessment of the issues in dispute.
7.1.5.3.3 The scope of Article I:1
7.1017. As reflected in the text of the provision, the MFN obligation in Article I:1 applies:
With respect to customs duties and charges of any kind imposed on or in connection
with importation or exportation or imposed on the international transfer of payments
for imports or exports, and with respect to the method of levying such duties and
charges, and with respect to all rules and formalities in connection with importation and
exportation, and with respect to all matters referred to in paragraphs 2 and 4 of
Article III,*
7.1018. Malaysia argues that Article I:1 is applicable in the case at hand, because the high ILUC-risk
cap and phase-out and low ILUC-risk certification fall within the scope of Article III:4. 1334 As such,
they constitute a "matter referred to in paragraphs 2 and 4 of Article III".
7.1019. The Panel does not understand the European Union to be contesting the app licability of
Article I:1.
7.1020. The Panel has previously found, in the context of its assessment under Article III:4, that
the high ILUC-risk cap and phase-out is a "law, regulation or requirement affecting the sale, offering
for sale, purchase, transportation , distribution, or use " of palm oil -based biofuel and palm oil. 1335
The Panel thus makes the consequential finding that the measure is a "matter referred to in
paragraphs 2 and 4 of Article III" and as such falls within the ambit of Article I:1.
7.1021. The Panel no tes that, as regards low ILUC -risk certification, the premise of Malaysia's
argument is that the measure falls within the scope of Article III:4. As noted above 1336, Malaysia's
claim does not distinguish between the low ILUC-risk certification criteria or the certification
procedure. To the extent that Malaysia argues that it is the criteria for low ILUC -risk certification
contained in Articles 4 and 5 of the Delegated Regulation that do not extend to palm oil and palm

1331 Appellate Body Reports, EC – Seal Products, para. 5.86.
1332 Appellate Body Reports, EC – Seal Products, para. 5.87; and US – Tuna II (Mexico) (Article 21.5 –
Mexico), para. 7.277.
1333 Appellate Body Reports, EC – Seal Products, para. 5.82; and US – Tuna II (Mexico), para. 7.29, also
in the context of Article 2.1 of the TBT Agreement; Panel Report, EU – Energy Package, para. 7.571.
1334 Malaysia's first written submission, para. 895-896.
1335 See section on the scope of application of Article III:4 above.
1336 See section on the scope of application of Article III:4 above.

oil-based biofuel the advantage accorded to like products of other origins, these arguments are
addressed by the Panel together with the high ILUC -risk cap and phase-out. Insofar as Malaysia is
challenging under Article III:4 the low ILUC -risk certification procedure, the Panel recalls that it
accepts that it is a "law, regulation or requirement affecting the sale, offering for sale, purchase,
transportation, distribution, or use " of products. Therefore, the Panel makes the consequential
finding that the low ILUC-risk certification procedure is also a "matter referred to in paragraphs 2
and 4 of Article III" and that it also therefore falls within the scope of Article I:1.
7.1022. As with Article III:4, Malaysia makes its claim under Article I:1 with respect to the
treatment of both palm oil -based biofuel and palm oil used as biofuel feedstock. The Panel will
therefore first address the parties' arguments with respect to each of these two types of products in
turn.
7.1.5.3.4 Palm oil-, rapeseed oil- and soybean oil-based biofuels
7.1.5.3.4.1 Like products
7.1023. The Panel recognizes that the non -discrimination obligations in Articles I:1, III:4 and 2.1
differ in scope, and that the elements of the legal tests are not identical. The Panel is also mindful
that the very concept of "like products " is n ot identical across different provisions. 1337 These
differences notwithstanding, panels and the Appellate Body have highlighted important parallels
between these obligations. 1338 In particular, the likeness analysis in each of these provisions is
"fundamentally a determination about the nature and extent of a competitive relationship between
and among products ".1339 To that end, and similarly to the assessment under Article 2.1 of the
TBT Agreement, panels and the Appellate Body have regarded the four likeness cr iteria outlined in
the Working Party Report on Border Tax Adjustments as a helpful analytical tool in determining
whether products are like under Article I:1.1340
7.1024. The Panel notes that with respect to the likeness of palm oil -, rapeseed oil-, and soybean
oil-based biofuel, Malaysia makes essentially the same arguments as those submitted in support of
its claims under Article 2.1 and Article III:4.1341 Given the overlap in the arguments the parties make
with respect to the likeness of palm oil-, rapeseed oil-, and soybean oil-based biofuel the Panel does
not see anything that would lead it, in the circumstances of this case, to a different conclusion
regarding the likeness of these products compared with the conclusions already reached under
Articles 2.1 and III:4. In that context, the Panel has found that PME, RME and SBME, as well as HVO
made from palm oil, rapeseed oil and soybean oil have similar or the same properties, end -uses,
and are considered highly substitutable by the relevant consumers. Therefore, on the basis of those
findings, the Panel concludes that for the purposes of its analysis under Article I:1, palm oil -,
rapeseed oil- and soybean oil-based biofuels are like products.
7.1.5.3.4.2 Advantage, favour, privilege, or immunity
7.1025. Malaysia contends that rapeseed oil - and soybean oil -based biofuel benefit from an
advantage in the form of market access opportunities within the 7% maximum share. 1342 Malaysia
also contends that an additional advantage consists in exempting the producers of rapeseed oil- and
soybean oil-based biofuels from the obligation to certify biofuels as low ILUC risk.
7.1026. The European Union contests that any advantage is conferred on rapeseed oil- and soybean
oil-based biofuels. The European Union relies in this regard on its arguments contesting the link
between eligibility to count towards EU renewable energy targets and the demand for biofuels. 1343

1337 Appellate Body Reports, EC – Seal Products, paras. 5.81-5.82; and US – Tuna II (Mexico) (Article
21.5 – Mexico), para. 7.277.
1338 Appellate Body Reports, EC – Seal Products, para. 5.82; and US – Tuna II (Mexico) (Article 21.5 –
Mexico), para. 7.278.
1339 Appellate Body Report, EC – Asbestos, para. 99.
1340 Appellate Body Report, EC – Asbestos, para. 101.
1341 Regarding biofuels, see Malaysia's first written submission, para. 908.
1342 Malaysia's first written submission, para. 899.
1343 European Union's first written submission, para. 1135; second written submission, paras. 226 and
228-229.

The European Union also argues that the measu res at issue do not differentiate between palm oil -
based biofuel imported from Malaysia and any other country.1344
7.1027. The Panel notes that the parties' arguments on the existence of an advantage for the
purposes of Article I:1 essentially focus on an issue that the Panel has already addressed in several
preceding sections, namely the link between eligibility to count towards EU renewable energy targets
and the demand for biofuels. According to the European Union, Malaysia has not demonstrated that
such a link ex ists or is sufficiently close to confer an advantage on rapeseed oil - and soybean oil-
based biofuels.
7.1028. The Panel observes that the term "advantage" has been interpreted broadly and covers
situations creating more favourable competitive opportunities or affe cting the commercial
relationship between products originating in different countries. 1345 Panels and the Appellate Body
have considered as conferring an advantage not only those measures directly regulating access for
products to a Member's market, but also those measures that create incentives for economic
operators to choose certain imported products over others.1346
7.1029. The Panel has found that the demand for biofuels is mostly driven by EU renewable energy
consumption targets and blending mandates. The Panel has also found that limiting or excluding a
biofuel from eligibility to count towards these targets will reduce or vir tually eliminate the demand
for that biofuel on the EU market.1347 Insofar as Article I:1 refers not to some advantage but to any
advantage, it seeks to protect such competitive opportunities.1348
7.1030. The Panel further disagrees with the European Union that because the 7% maximum share
does not require EU member States to include specific biofuels in the renewable energy mix, no
"advantage" is conferred on rapeseed oil and soybean oil -based biofuels.1349 It may well be that
biofuels made from feedstocks other than rapeseed oil and soybean oil, or bioliquids or other gaseous
fuels, will be used to achieve the 14% renewable energy target up to the 7% maximum share. The
fact remains, however, that rapeseed oil- and soybean oil-based biofuels can be used to meet these
renewable energy targets to an extent that palm oil-based biofuel cannot. This is precisely the type
of "expectations of equal competitive opportunities" that Article I:1 seeks to protect for like imported
products from all Members.1350
7.1031. Malaysia is thus not re quired to show the actual effects of the measure insofar as it has
demonstrated that, based on the design and operation of the measure, it creates favourable
competitive opportunities for some imported like products. This being said, there is evidence showing
that food and feed crop -based biofuels accounted for approximately 60% of the renewable energy
consumed in the transport sector in 2019. 1351 This is a siz eable part of the market presenting
considerable commercial opportunities. The advantage conferred on rapeseed oil- and soybean oil-
based biofuels is thus very real and not merely "hypothetical", as the European Union asserts.
7.1032. However, the Panel is unconvinced that an additional advantage is conferred on rapeseed
oil- and soybean oil -based biofuels beca use they do not have to undergo the low ILUC -risk
certification procedure.1352 As noted above1353, the advantage identified by Malaysia appears to be
a corollary of the fact that rapeseed oil and soybean oil are not classified as high ILUC -risk
feedstocks. The refore, any such advantage cannot be considered as additional to the benefits

1344 European Union's first written submission, para. 1135; second written submission, para. 227.
1345 Panel Report, EC – Bananas III (Guatemala and Honduras), para. 7.239.
1346 Panel Report, EU – Energy Package, para. 7.1312. See also Panel Reports, US – Poultry (China),
1347 See section addressing the existence of a detrimental impact of the high ILUC-risk cap and phase-
out in the context of Malaysia's claim under Article 2.1.
1348 Appellate Body Report, Canada – Autos, para. 79.
1349 European Union's first written submission, para. 1135.
1350 Panel Report, Argentina – Hides and Leather, para. 11.20; Appellate Body Reports, EC – Seal
Products, para. 5.87.
1351 Eurostat, Consumption of renewable energy in the transport sector in the EU-27 in 2011-2019,
(Exhibit IDN-13).
1352 Malaysia's first written submission, para. 900.
1353 See paras. 7.1000-7.1001 above.

stemming from eligibility to count towards the EU renewable energy targets within the 7% maximum
share.
7.1.5.3.4.3 Accorded immediately and unconditionally
7.1033. Malaysia argues that the advantag e stemming from the eligibility to count towards the
renewable energy targets is not extended to palm oil-based biofuel.1354 Malaysia refers in this regard
to the arguments concerning the design and operation of the high ILUC-risk cap and phase-out and
in pa rticular the commercial consequences of the exclusion of palm oil -based biofuel from the
renewable energy targets.1355
7.1034. The European Union maintains that Article I:1 does not preclude WTO Members from
attaching conditions to the conferral of an advantage. 1356 The European Union explains that in the
case at hand, the condition attached to the advantage relates to the overall GHG emissions
associated with the production of biofuel. These, according to the European Union, are different for
palm oil-based biofuel on the one hand, and rapeseed oil- and soybean oil-based biofuel on the other
hand.1357
7.1035. In the preceding sections, the Panel has found that the high ILUC -risk cap and phase-out
limits and ultimately eliminates the eligibility of palm oil -based biofuel to cou nt towards the
renewable energy consumption targets. 1358 The Panel has further found that there is little to no
demand for biofuels that are not eligible to count towards these targets as far as the EU biofuel
market is concerned. The Panel has concluded on this basis that the high ILUC-risk cap and phase-
out affects the competitive opportunities for palm oil -based biofuel on the EU biofuel market. It
follows that, due to being subject to the high ILUC -risk cap and phase-out, palm oil-based biofuel
imported from Malaysia cannot enjoy the same market opportunities as rapeseed oil - and soybean
oil-based biofuels imported from other countries.
7.1036. It is true, as argued by the European Union, that Article I:1 does not preclude attaching
certain conditions to granting an advantage.1359 However, the Panel notes that Article I:1 "prohibits
those conditions that have a detrimental impact on the competitive opportunities for like imported
products from any Member".1360 In the preceding sections, the Panel identified the classif ication of
a biofuel feedstock as high ILUC risk, and the resulting application of the high ILUC -risk cap and
phase-out, as the element giving rise to a detrimental impact against palm oil-based biofuel. This is
precisely the type of condition that, when attached to an advantage, may have a detrimental impact
on the competitive opportunities for like imported products from one or more Members.
7.1037. The Panel notes that the European Union adds that Article I:1 does not require WTO
Members to extend an advantage which is subject to certain conditions to all Members in cases
where their products do not meet those specified conditions. 1361 Therefore, according to the
European Union, it is not required to extend an "advantage" to products which do not meet conditions
imposed to reflect the European Union's policy objectives. Here, the Panel observes that in contrast
to Article 2.1, and in line with Article III:4, the legal standard under Article I:1 does not entail any
consideration of whether the detrimental impact of a measure on competitive opportunities for l ike
imported products stems from a legitimate regulatory distinction .1362 Such analysis is more
appropriately conducted under Article XX, which the European Union has invoked in this dispute.

1354 Malaysia's first written submission, para. 919.
1355 Malaysia's first written submission, para. 919.
1356 European Union's first written submission, para. 1137.
1357 European Union's first written submission, paras. 1137-1138; response to Panel question No. 74,
paras. 435-436.
1358 See sections addressing the existence of a detrimental impact of the high ILUC-risk cap and phase-
out in the context of Malaysia's claims under Articles 2.1 of the TBT Agreement and Article III:4 of the
GATT 1994.
1359 Appellate Body Reports, EC – Seal Products, para. 5.88.
1360 Appellate Body Reports, EC – Seal Products, para. 5.88.
1361 European Union's first written submission, para. 1137.
1362 Appellate Body Reports, EC – Seal Products, para. 5.90.

7.1.5.3.5 Biofuel feedstocks
7.1038. For the reasons explained above in the context of the claim under Article III:4, the Panel
does not consider it necessary to make additional findings on the treatment of palm oil (as distinct
from palm oil -based biofuel) to secure a positive solution to this dispute or to assist the DSB in
making the rulings and recommendations provided for in the covered agreements.
7.1.5.3.6 Conclusion on Article I:1
7.1039. In light of the above, the Panel concludes that the high ILUC -risk cap and phase -out is
inconsistent with Article I:1 of the GATT 1994 because it does not accord an advantage to palm oil-
based biofuel from Malaysia that is accorded to like products imported from third countries.
7.1040. To the extent that Malaysia challenges the low ILUC -risk certification procedure as a
separate measure under Article I:1 of the GATT 1994, it has not established that this procedure is
inconsistent with this obligation.
7.1.5.4 Article X:3(a) – Reasonable and impartial administration
7.1.5.4.1 Introduction
7.1041. The Panel now turns to the claim under Article X:3(a) of the GATT 1994.
7.1042. Malaysia submits1363 that the European Union violates Article X:3(a) because the high ILUC-
risk cap and phase -out are based on/apply the concept of high ILUC risk, for which there is
insufficient scientific support and which cannot be directly observed, measured or otherwise
established1364, and so cannot be applied or implemented in an impartial or reasonable manner. As
regards low ILUC-risk certification, Malaysia submits that Articles 4 to 6 of the Delegated Regulation
are premised on vaguely defined concepts without providing for the necessary elements that enable
certification to be obtained. Malaysia explains that because the European Union failed to adopt
implementing legislation providing for detailed rules that would allow products to be certified as low
ILUC risk, no certification could take place, amounting to unreasonable administration.1365
7.1043. The European Union submits1366 that the claim under Article X:3(a) falls outside the scope
of Article X:3(a) because the Delegated Regulation does not administer RED II but creates
substantive rules. More specifically, the European Union argues that the high ILUC -risk criteria and
low ILUC -risk criteria are substantive matters not concerning the administration or putting into
practical effect of RED II, and that in any event, the low ILUC-risk criteria in the Delegated Regulation
provide sufficient elements for certification, and while implementing regulations are pending1367 they
are not indispensable to carrying out certification.
7.1.5.4.2 Legal standard
7.1044. Article X is entitled "Publication and Administration of Trade Regulations ". Article X:3(a)
sets forth the obligation that:
Each Member shall administer in a uniform, impartial and reasonable manner all its
laws, regulations, decisions and rulings of the k ind described in paragraph 1 of this
Article.
7.1045. Article X:3(a) has been interpreted and applied in a number of prior cases, and both parties
present their respective understandings of the applicable legal standard with reference to prior cases.
While the parties' arguments reflect their divergent views on how findings in prior cases are relevant

1363 Malaysia's first written submission, paras. 959-971; second written submission, paras. 343-348;
and responses to the Panel's questions, pp. 116-120.
1364 Malaysia's first written submission, paras. 969 and 1216.
1365 Malaysia's first written submission, paras. 970 and 1216.
1366 European Union's first written submission, paras. 1211-1235; second written submission,
paras. 254-256; and responses to the Panel's questions, paras. 872-892.
1367 The Panel notes that the implementing regulations were adopted in June 2022.

to the facts of this dispute, there appears to be no fundamental disagreement between the parties
on the elements of that standard as described below.
7.1046. In establishing a violation of Article X:3(a), a complainant is required to prove that the
measure at issue:
a. administers, i.e. put into effect, a legal instrument of the type listed in Article X:1 of the
GATT 1994; and
b. in a manner that is not uniform, impartial or reasonable.
7.1047. The Panel will elaborate further on the elements of the legal standard in Article X:3(a) as
necessary in the course of its assessment of the issues in dispute.
7.1.5.4.3 Administering or putting into effect a legal instrument of the type listed in
Article X:1
7.1048. First, the Panel considers whether the measures at issue administer or put into effect a
legal instrument of the type listed in Article X:1. The instruments listed in Article X:1 include
[l]aws, regulations, judicial decisions and administrative rulings o f general application,
made effective by any contracting party, pertaining to the classification or the valuation
of products for customs purposes, or to rates of duty, taxes or other charges, or to
requirements, restrictions or prohibitions on imports or exports or on the transfer of
payments therefor, or affecting their sale, distribution, transportation, insurance,
warehousing inspection, exhibition, processing, mixing or other use.
7.1049. Malaysia's claim concerns the administration or putting into effect of RED II through the
high ILUC-risk cap and phase-out, as well as the low ILUC-risk criteria and procedure. The Panel has
found above that the high ILUC-risk cap and phase-out and the low ILUC-risk criteria and certification
procedure, contained in RED II, a re laws which affect the sale or offering for sale, purchase,
transportation, distribution, or use of palm oil -based biofuels, and fall within the scope of
Article III:4. Consistent with this finding, the Panel considers that the high ILUC-risk cap and phase-
out, and the low ILUC -risk criteria and certification procedure, fall within the scope of Article X:1 .
Moreover, the Panel notes that it is not disputed by the parties, that the administration or putting
into effect of RED II would fall within the scope of Article X:3(a). Rather, the European Union submits
that the Delegated Regulation, which Malaysia challenges, does not administer RED II.
7.1050. Second, the Panel turns to consider whether the measures at issue "administer" or "put
into effect" RED II.
7.1051. Malaysia argues that the Delegated Regulation administers RED II through the low ILUC -
risk criteria and certification procedure, and through the high ILUC-risk cap and phase-out in its use
of the ILUC concept. Malaysia refers to administration through "vaguely defined concepts " and
without "detailed rules" that would allow certification pursuant to Articles 4 to 6 of the Delegated
Regulation to take place, and administration through the "concept of ILUC".1368 Malaysia points to
certain implementing regulations, which based on the provisions RED II and the Delegated
Regulation are to provide such missing details.
7.1052. The European Union argues that the Delegated Regulation, in particular the high ILUC-risk
criteria and low ILUC-risk criteria, are substantive matters.1369 The European Union also argues that
the Delegated Regulation explains the criteria and provides sufficient elements for low ILUC -risk
certification1370, and that while the "intended" implementing regulations will provide further
information, they are not indispensable to certification and the low ILUC-risk criteria in the Delegated

1368 Malaysia's first written submission, para. 970; response to questions from the Panel, pp. 117-118.
1369 European Union's first written submission, para. 1234; second written submission, para. 254; and
response to questions from the Panel, paras. 872-876. See also European Union's first written submission,
paras. 1218-1235.
1370 The European Union notes that the Delegated Regulation defines necessary terms, being "oil crops",
"unused land", "abandoned land", "severely degraded land", "additionality measure" and "additional
feedstock". (European Union's response to questions from the Panel, paras. 883-892).

Regulation are sufficiently detailed for EU member States (and voluntary schemes) to proceed with
certification.1371
7.1053. The Panel recalls that Article X:3(a) concerns the administration of the laws, regulations,
decisions and rulings referred to in Article X:1 and alluded to in the title of Article X. Administration
has been understood by the Appellate Body as meaning "putting into practical effect or applying "
e.g. a legal instrument, as distinct from the "substantive content" of such laws, regulations, decisions
and rulings.1372 Prior cases offer some useful illustrations of what qualifies as "administration": (i)
"a legal instrument that regulates the application or implementation" of another instrument1373; (ii)
"any definition, guidelines or standards" (e.g. with respect to the term "operation capacity"1374); and
(iii) "providing guidance on the meaning of specific requirements of a measure ".1375 The issue is
therefore whether the relevant elements of the Delegated Regulation constitute administration of
RED II or whether they create substantive rules.1376
7.1054. With respect to the low ILUC-risk criteria and certification procedure, the Panel notes that
Malaysia's claim is not about the substantive provisions in the Delegated Regulation itself. Rather,
this claim turns on the fact that low ILUC -risk certification, as set out in Articles 4 to 6 of the
Delegated Regulation, lacks detailed rules (which the European Union admits are to follow in certain
implementing regulations) that are necessary to put certain elements of the low ILUC -risk
certification criteria and procedure into effect. The Panel notes that low ILUC -risk certification, as
set out Articles 4 to 6 of the Delegated Regulation, is in turn to put into effect the exemption to the
high ILUC-risk cap and phase-out set out in Article 26(2) of RED II.
7.1055. The Panel recalls that while in past cases, legal criteria/requirements themselves seem to
have generally been considered to be "substantive" in nature, the absence of definitions or guidance
on the meaning or means of satisfying criteria/requirements has been considered to be
administrative in nature. Insofar as the European Union has failed to take timely steps to
operationalize and put into effect the low ILUC -risk criteria and certification procedure, set out in
Articles 4 to 6 of the Delegated Regulation, in a way that is necessary for certification to be obtained,
that absence of detailed rules (e.g. to be contained in implementing regulations) relates to the
allegedly deficient administration of RED II, not the criteria in the Delegated Regulation themselves.
7.1056. With respect to the high ILUC -risk cap and phase -out, the relevant provisions are
substantive in nature. As found by the Panel above, they impose a cap and gradual phasing out of
certain biofuels based on the application of the high ILUC-risk criteria. The concept of ILUC is also a
substantive analytical concept that underpins this measure and its provisions. This is notwithstanding
that any guidelines or further definitions concerning ILUC or the high ILUC -risk cap and phase-out
might separately be considered to be administrative in nature, however, this is not addressed by the
parties.1377 For that reason, the Panel considers that Malaysia's claim with respect to the high ILUC-
risk cap and phase-out falls outside the scope of Article X:3(a).
7.1.5.4.4 Manner of administration
7.1057. "Reasonable" has been understood in the context of Article X:3(a) in its ordinary sense,
i.e. to mean "in accordance with reason", "not irrational or absurd", "proportionate", "sensible", and
"within the limits of reason, not greatly les s or more than might be thought likely or appropriate ".
Whether an act of administration can be considered reasonable within the meaning of Article X:3(a)
entails a consideration of factual circumstances specific to each case such as the features of the
administrative act at issue in light of its objective, cause or the rationale behind it.1378

1371 European Union's first written submission, paras. 1240-1241; second written submission, para. 256.
1372 Appellate Body Reports, EC – Bananas III, para. 200; and EC – Poultry, para. 115.
1373 Appellate Body Report, EC – Selected Customs Matters, para. 200.
1374 Panel Reports, China – Raw Materials, paras. 7.745-7.746.
1375 Panel Reports, US – COOL, paras. 7.830, 7.833, and 7.840. In US – COOL, the panel found that the
USDA "put into practical effect" the COOL measure by providing guidance on the labelling requirements such
that the USDA guidelines constituted an act of administering the COOL measure. (Ibid.).
1376 See e.g. Panel Report, Argentina – Hides and Leather, paras. 11.71-11.72.
1377 See e.g. Malaysia's first written submission, para. 968.
1378 Panel Reports, US – COOL, paras. 7.850-7.851; and Thailand – Cigarettes (Philippines),
paras. 7.919 and 7.951.

7.1058. Previous panels have found that the imposition of a legal requirement with which it is
impossible to ensure compliance (e.g. because of uncertainty generated by legal requirements)
amounts to unreasonable administration, inconsistent with Article X:3(a). I n Thailand – Cigarettes
(Philippines) (Article 21.5 – Philippines), the panel found that the imposition on cigarette importers
of a VAT notification requirement with which individual traders could not ensure compliance (because
they did not have access to daily rates to be notified) amounted to an unreasonable administration
of the Thai Revenue Code. 1379 In China – Raw Materials, the panel found that the "lack of any
definition, guidelines or standards in how the 32 Local Departments in charge of Foreign Trad e
should apply the potentially critical operation capacity criterion constitutes relevant evidence in
establishing unreasonable administration of the operation capacity criterion; the lack of any
definition, guidelines or standards pose a very real risk th at this criterion will be administered
differently depending on which Local Department handles the quota application".1380 In US – COOL,
the panel found that a letter sent by the Secretary of Agriculture to industry representatives ( "the
Vilsack letter") in connection with a new rule governing labelling requirements led to "unreasonable"
administration because of an apparent tension between the letter and the rule. That panel stated
that the Vilsack letter "created uncertainties for industry regarding how to comply with the specific
labelling requirements" contained in the "2009 Final Rule", and on that basis found a violation of the
"reasonable" administration requirement.1381
7.1059. In this dispute, Malaysia argues that without the Implementing Regulation (adopted o nly
in June 2022), it was impossible to design certification schemes or otherwise begin a low ILUC -risk
certification process, as of the date of the entry into force of the Delegated Regulation
(10 June 2019) and by the "date on which Member States must ha ve fully implemented Article 26
of RED II" (30 June 2021).1382 In other words, the Panel understands Malaysia to point to uncertainty
surrounding the operation of a certification scheme rendering that scheme inoperable. The absence
of certain implementing re gulations that are necessary to put certain elements of the Delegated
Regulation (i.e. the low ILUC -risk certification criteria and procedure) and, by implication,
Article 26(2) of RED II, into effect is a situation that fits squarely within the type of si tuation found
to be in violation of Article X:3(a) in the aforementioned prior disputes.
7.1060. The European Union's main point of rebuttal is that implementing regulations (or further
detailed rules) are not "indispensable" to the functioning of low ILUC-risk certification such that there
is no violation of Article X:3(a). As evidence of this, the European Union points to a number of
voluntary schemes that have been recogni zed in early 2022 prior to the adoption of the
Implementing Regulation. The Panel observes however that, as discussed in the context of claims
under Article 5 of the TBT Agreement, some of these voluntary schemes do not concern oil crop -
based biofuels and none concern high ILUC-risk biofuels. In particular, the European Union has not
pointed to any examples of palm oil-based biofuel (the only biofuel currently considered to be made
from a high ILUC -risk feedstock) being certified as low ILUC risk. Moreover, the European
Commission decisions recognising certification schemes prior to th e adoption of any implementing
regulations expressly state that these decisions will be revised following the adoption of the
Implementing Regulation. There is also evidence concerning the instigation and results of pilot
projects to (test and ultimately revise) aspects of low ILUC-risk certification.
7.1061. The Panel therefore considers that the existence of voluntary schemes from April 2022 only
indicates that some certification may have been possible from April 2022, but would have been
subject to revision pending the introduction of further implementing rules. In addition, it is not clear
how such schemes could operate, if some of the substantive criteria determining whether a crop is
eligible for low ILUC-risk were not complete.
7.1062. On that basis, the Panel concl udes that by (i) introducing a low ILUC -risk certification
requirement (i.e. the criteria and procedure) together with the high ILUC-risk cap and phase out as
of mid-2019, which was to be transposed by all EU member States by mid-2021 at the latest, and
(ii) only publishing the promised detailed rules for operationalizing such a requirement in mid-2022

1379 Panel Report, Thailand – Cigarettes (Philippines) (Article 21.5 – Philippines), para. 7.923.
1380 Panel Reports, China – Raw Materials, para. 7.745.
1381 Panel Reports, US – COOL, paras. 7.833-7.840.
1382 Malaysia's first written submission, para. 970; response to questions from the Panel, pp. 119-120.

such that it is impossible to use1383 due to uncertainty attaching to its criteria and process, there is
a violation of Article X:3(a).
7.1063. Malaysia additionally argues that the European Union violates Article X:3(a) because the
high ILUC-risk cap and phase -out is based on and applies the concept of ILUC, for which there is
insufficient scientific support and which cannot be directly observed, measured or otherwise
established. Malaysia simply states that because ILUC lacks a sufficient scientific basis, it cannot be
applied impartially or reasonably.1384
7.1064. The Panel considers that this argument clearly relates to the "substance", not the
"administration", of the high ILUC-risk cap and phase out in Article 26(2) of RED II . In any event,
the Panel's conclusions on the same arguments made in the context of Articles 2.1 and 2.2 of the
TBT Agreement are a basis for rejecting the reiteration of the same argument made here in the form
of "impartial" or "unreasonable" administration.
7.1.5.4.5 Conclusion on Article X:3(a)
7.1065. The Panel concludes that the European Union has acted inconsistently with Article X:3(a)
of the GATT 1994 by administering the high ILUC-risk cap and phase-out in Article 26 of RED II in a
manner that is not reasonable, to the extent that deficiencies in the design and implementation of
the low ILUC-risk criteria and procedure do not provide for the elements needed for palm oil-based
biofuel to be certified as low ILUC risk.
7.1.5.5 Article XX – General exceptions
7.1.5.5.1 Introduction
7.1066. Having found that the high ILUC -risk cap and phase -out is inconsistent with Article III:4
and Article I:1, the Panel now proceeds to address the European Union's invocation of the general
exceptions in Article XX.
7.1067. The European Union submits1385 that the high ILUC-risk cap and phase-out is justified under
Article XX(a) ("necessary to protect public morals "), Article XX (b) ("necessary to protect human,
animal or plant life or health") and Article XX(g) ("relating to the conservation of exhaustible natural
resources").
7.1068. Malaysia submits1386 that the high ILUC-risk cap and phase-out is not justified under any
of these exceptions.
7.1069. The Panel notes at the outset that the arguments presented by the parties under Article XX
substantially overlap with the arguments presented by the parties in the context of Article 2.1 and
Article 2.2 of the TBT Agreement. As elaborated further below, the Panel draws upon its findings
under Article 2.1 and Article 2.2 for the purposes of making its findings under Article XX.

1383 Malaysia has not presented any arguments on the substantive consistency of those detailed rules
with the TBT Agreement or the GATT 1994. In the absence of any such arguments and taking account that the
measure was not in existence at the time of the panel's establishment, none of the Panel's findings in this
Report should be taken as implying any view on the substantive consistency of those detailed rules with the
European Union's obligations under the TBT Agreement, or with the European Union's obligations under the
GATT 1994.
1384 Malaysia's first written submission, para. 969; response to Panel questions from the Panel,
pp. 118-119.
1385 European Union's first written submission, paras. 1243-1421; second written submission,
paras. 257-281; opening statement at the meeting of the Panel, paras. 22-51, and 64-121; responses to the
Panel's questions, paras. 893-974; and comments on Malaysia's responses to the Panel's second set of
questions, paras. 313-315.
1386 Malaysia's second written submission, paras. 29-55, 81-104, 187-209 and 210-239; opening
statement at the meeting of the Panel, paras. 30-34, 55; responses to the Panel's questions, pp. 120-123; and
comments on the European Union's responses to the Panel's questions, pp. 292-313.

7.1.5.5.2 Legal standard
7.1070. Article XX is entitled "General Exceptions". Article XX(a), (b) and (g), read in conjunction
with the introductory clause (or "chapeau") read as follows:
Subject to the requirement that such measures 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 disguised restriction on international trade, nothing in
this Agreement shall be construe d to prevent the adoption or enforcement by any
Member of measures:
(a) necessary to protect public morals;
(b) necessary to protect human, animal or plant life or health;
…
(g) relating to the conservation of exhaustible natural resources if such measure s are
made effective in conjunction with restrictions on domestic production or consumption
7.1071. Article XX thus allows Members to justify measures that would otherwise be inconsistent
with the GATT 1994. Article XX sets out a two-tier test: (i) the measure must fall under one of the
listed exceptions in Article XX such as Article XX(b) (it is then provisionally justified); and (ii) the
measure must be applied in a manner that satisfies the requirements of the chapeau of Article XX.1387
7.1072. Article XX(a), (b) and (g) have each been interpreted and applied in a number of prior
cases, and both parties present their respective understandings of the applicable legal standards
with reference to prior cases.
7.1073. The Panel will elaborate further on the elements of the applicable legal standards in
Article XX(a), (b) and (g) as necessary in the course of its assessment of the issues in dispute.
7.1.5.5.3 Article XX(g) – relating to the conservation of exhaustible natural resources
7.1074. In the context of addressing the consistency of the high ILUC-risk cap and phase-out under
Article 2.2, the Panel has concluded that the objective of the high ILUC-risk cap and phase-out is to
limit the risk of ILUC-related GHG emissions associated with crop-based biofuels, and found that this
is a "legitimate objective" within the meaning of Article 2.2. In reaching that conclusion, the Panel
recalled the Appellate Body's view that "objectives recognized in the provisions of other covered
agreements may provide guidance for, or may inform, the analysis of what might be considered to
be a legitimate objective under Article 2.2 "1388, and considered, for that purpose, whether the
objective of limiting the risk of ILUC-related GHG emissions associated with crop-based biofuels fell
within the scope of the general exceptions in Article XX(g), (b) and (a).
7.1075. With respect to Article XX(g), the Panel observed that Article XX(g) covers measures
directed at the "the preservation of the environment, especially of natural resources"1389, and in past
cases a broad range of policies have been found to fall within the scope of measures relating to the
conservation of exhaustible natural resources. The Panel further recalled that t he Appellate Body
has held that the terms "exhaustible natural resources " must be r ead "in light of contemporary
concerns of the community of nations about the protection and conservation of the environment"1390
and has concluded that "exhaustible natural resources" covers both living and non-living exhaustible
natural resources.1391 Additionally, the Panel recalled that in past cases, measures taken to conserve

1387 Appellate Body Reports, US – Gasoline, p. 22; and Brazil – Retreaded Tyres, para. 139.
1388 Appellate Body Reports, US – Tuna II (Mexico), para. 313; and US – COOL, para. 370.
1389 Appellate Body Reports, China – Raw Materials, para. 355.
1390 Appellate Body Report, US – Shrimp, para. 129.
1391 Appellate Body Report, US – Shrimp, para. 131

clean air1392, sea turtles1393, petroleum1394, and various mineral resources1395 have been found to be
measures relating to the conservation of "exhaustible natural resources" under Article XX(g).
7.1076. Turning to the measures at issue, the Panel recalled that as set out in Recitals 80 and 81
of RED II, the high ILUC -risk cap and phase -out is aimed at limiting the risk of ILUC -related GHG
emissions that arise when the cultivation of crops f or biofuels displaces traditional production of
crops for food and feed purposes, leading to "the extension of agricultural land into areas with
high-carbon stock, such as forests, wetlands and peatland, causing additional greenhouse gas
emissions".1396 Thus, the measure seeks to limit the risk of ILUC-related GHG emissions associated
with crop -based biofuels, which would arise when the cultivation of crops for biofuels displaces
traditional production of crops for food and feed purposes requiring the extension of agricultural land
into areas with high -carbon stock, including forests, wetlands and peatland. The Panel concluded
that the objective of the high ILUC -risk cap and phase -out therefore prima facie relates to the
conservation of an "exhaustible natural resource", namely high-carbon stock land (forests, wetlands
and peatland).1397 On that basis, the Panel stated that it is satisfied that the objective of limiting the
risk of ILUC-related GHG emissions associated with crop -based biofuels prima facie falls within the
scope of the objective of "the conservation of exhaustible natural resources" within the meaning of
Article XX(g).
7.1077. The Panel proceeded to find, in light of its findings under Article 2.4, that the ISO standards
referred to by Malaysia do not "exclude ILUC from being taken into account " in the context of
measures seeking to regulate GHG emissions. The Panel further found that there exists a reasonable
basis for the European Union to conclude that increasing demand for crop-based biofuels increases
the risk of ILUC-related GHG emissions and explained that its assessment of that issue was in line
with the approach followed under Article XX(b). The Panel further found that there is a sufficient
nexus between the regulating Member and the activities being regulated, and based its analysis of
that issue on prior cases under Article 2.2 and Article XX.
7.1078. The Panel did not specifically address, in the context of its analysis under Article 2.2, the
issues of whether the high ILUC-risk cap and phase-out is a measure "relating to" the conservation
of exhaustible natural resources that is "made effective in conjunction with restrictions on domestic
production or consumption". The Panel now turns to these issues.
7.1079. In the context of Article XX(g), the Appellate Body has found that "for a measure to 'relate
to' conservation in the sense of Article XX(g), there must be 'a close and genuine relationship of
ends and means' between that measure and the conservation objective of the Member maintaining
the measure."1398 The Panel notes that a similar standard applies in relation to the assessment of
whether a measure makes a "contribution" to its objective under the "necessity" test that applies
under Article 2.2 and Article XX(b). In Brazil – Retreaded Tyres, the Appellate Body indicated that a
"contribution" exists "when there is a genuine relationship of ends and means between the objective
pursued and the measure at issue".1399
7.1080. In the context of its analysis of the "contribution" under Article 2.2, the Panel found that
because the high ILUC-risk cap and phase -out has, by design, a limiting effect on EU demand for
and consumption of those crop-based biofuels determined to be high ILUC risk, the measure is apt
to make a material contribution to the objective of limiting ILUC -related GHG emissions associated
with crop-based biofuels. In the course of its analysis, the Panel observed that a "contribution" exists
"when there is a genuine relationship of ends and means between the objecti ve pursued and the

1392 Appellate Body Report, US – Gasoline, p. 14.
1393 Appellate Body Report, US – Shrimp, para. 131.
1394 Appellate Body Report, US – Shrimp, para. 128.
1395 Appellate Body Report, US – Shrimp, para. 128; and Panel Reports, China – Raw Materials,
para. 7.369.
1396 Recital 80 of RED II.
1397 Furthermore, in addition to high-carbon stock land being an exhaustible natural resource in and of
itself, the Panel considered that measures taken to conserve high-carbon stock land, and thereby avoid the
GHG emissions that would be released through their use, are related to the conservation of a wide range of
exhaustible natural resources that are threatened by increased GHG emissions and climate change.
1398 Appellate Body Reports, China – Raw Materials, para. 355.
1399 Appellate Body Report, Brazil – Retreaded Tyres, para. 145. See also Panel Reports, Brazil –
Cells, para. 7.361.

measure at issue"1400, and stated that that is the case here. Accordingly, the Panel considers that
the high ILUC -risk cap and phase -out is a measure "relating to" the conservation of exhaustible
natural resources, notably high-carbon stock land (forests, wetlands, and peatland).
7.1081. The Panel considers that the high ILUC -risk cap and phase -out is "made effective in
conjunction with restrictions on domestic production or consumption ". The measure plainly meets
this requirement as it, of itself, aims at and results in restricting EU demand for and consumption of
crop-based biofuels classified as high ILUC-risk pursuant to the formula in Article 3 of the Delegated
Regulation. By restricting EU demand for and consumption of such crop-based biofuels, the measure
is aimed at ensuring that EU demand does not result in increased production of the crops used to
produce such biofuels. The formula applies to all crop-based biofuels, with no differentiation between
biofuels made from crops produced in the E uropean Union and biofuels made from crops produced
elsewhere. In addition, all crop -based biofuels are subject to the 7% maximum share, and th is
measure also applies to all crop-based biofuels, with no differentiation between biofuels made from
crops produced in the European Union and biofuels made from crops produced elsewhere.
7.1082. For these reasons, the Panel concludes that the high ILUC -risk cap and phase -out is
provisionally justified as a measure relating to the conservation of exhaustible natural resources that
is made effective in conjunction with restrictions on domestic production or consumption within the
meaning of Article XX(g).
7.1.5.5.4 Article XX(b) – necessary to protect human, animal or plant life or health
7.1083. In the context of its assessment under Articl e 2.2, the Panel noted that in past cases a
broad range of policies have been found to fall within the scope of measures taken for the protection
of human, animal and plant life or health. These include policies relating to the reduction of air
pollution a s a result of consumption of gasoline 1401, the reduction of risks arising from the
accumulation of waste tyres1402, and even the protection of monkeys in the wild.1403
7.1084. The Panel also noted that the objective of protecting human, animal or plant life and health
is referred to as a legitimate objective in similar if not identical terms in Article XX(b) 1404, Article
2.21405, and the Preamble to the TBT Agreement.1406 The Panel recalled that previous panels and the
Appellate Body have stated that "few interests are more 'vital' and 'important' than protecting human
beings from health risks, and protecting the environment is no less important."1407
7.1085. The Panel then recalled that as set out in Recitals 80 and 81 of RED II, the high ILUC-risk
cap and phase-out has the objective of limiting the risk of ILUC -related GHG emissions associated
with crop-based biofuels. The Panel recalled that in Brazil – Retreaded Tyres, the Appellate Body
suggested that "measures adopted in order to attenuate global warming and climate change" would
fall within the scope of Article XX(b) in the context of providing guidance on how panels should
assess certain "complex public health or environmental problems " under the necessity test in
Article XX(b).1408 The Panel further recalled that in Brazil – Taxation, the panel found that "the
reduction of CO2 emissions is one of the policies covered by subparagraph (b) of Article XX, given
that it can fall within the range of policies that protect human life or health."1409 The Panel indicated
that it sees no reason to disagree, considering that global warming and climate change pose one of
the greatest threats to life and health on the planet. On that basis, the Panel stated that the objective
of limiting the risk of ILUC -related GHG emissions associat ed with crop -based biofuels therefore
prima facie relates to the protection of human, animal or plant life or health.

1400 Appellate Body Report, Brazil – Retreaded Tyres, para. 210.
1402 Panel Reports, China – Raw Materials, para. 7.479 (referring to Panel Reports, US – Gasoline,
para. 6.21; and Brazil – Retreaded Tyres, paras. 7.108 and 7.115).
1403 Panel Report, Brazil – Retreaded Tyres, paras. 7.108 and 7.115.
1404 Article XX(b) refers to measures necessary "to protect human, animal or plant life or health".
1405 Article 2.2 refers to the "protection of human health or safety, animal or plant life or health".
1406 The sixth recital of the Preamble to the TBT Agreement refers to "the protection of human, animal or
plant life or health".
1407 Panel Report, Brazil – Retreaded Tyres, para. 7.108. See also Appellate Body Report, Brazil –
Retreaded Tyres, para. 179.
1408 Appellate Body Report, Brazil – Retreaded Tyres, para. 151.

7.1086. The Panel proceeded to find, in light of its findings under Article 2.4, that the ISO standards
referred to by Malaysia do not "exclude I LUC from being taken into account " in the context of
measures seeking to regulate GHG emissions. The Panel further found that there exists a reasonable
basis for the European Union to conclude that increasing demand for crop-based biofuels increases
the risk of ILUC -related GHG emissions. In relation to that finding, the Panel specifically linked its
approach to the legal standard under Article XX(b), and recalled that when assessing whether a
measure is taken to protect human, animal or pla nt life or health under Article XX(b), prior panels
have often commenced their analysis by determining the existence of the risk to human, animal or
plant life or health (health risk) that the challenged measure aims to reduce. 1410 The Panel further
found th at there is a sufficient nexus between the regulating Member and the activities being
regulated, and based its analysis of that issue on prior cases under Articles 2.2 and Article XX.
7.1087. In the context of its assessment under Article 2.2, the Panel then proc eeded to evaluate
the necessity of the high ILUC -risk cap and phase -out on the basis of the legal standard and
analytical framework that applies equally under Article XX(b). The Panel preliminarily concluded that
the high ILUC-risk cap and phase-out is necessary to fulfil the objective of limiting the risk of ILUC-
related GHG emissions associated with crop-based biofuels, on the grounds that it is apt to make a
material contribution to the achievement of that objective and that this is the appropriate standard
to apply having weighed and balanced its trade-restrictiveness and the risks that non -fulfilment of
the objective would create. The Panel then found that none of the alternative measures put forward
by Malaysia demonstrate that the high ILUC -risk cap and phase-out is more trade-restrictive than
necessary to limit the risk of ILUC -related GHG emissions associated with crop -based biofuels. On
that basis, the Panel found that Malaysia has failed to establish that the high ILUC -risk cap and
phase-out is inc onsistent with the obligation in Article 2.2 of the TBT Agreement to ensure that
technical regulations are not more trade-restrictive than necessary to fulfil a legitimate objective.
7.1088. The Panel's assessment under Article 2.2 applies mutatis mutandis to Article XX(b).
Accordingly, the Panel concludes that the high ILUC-risk cap and phase-out is provisionally justified
as a measure necessary to protect human, animal or plant life or health within the meaning of Article
XX(b).
7.1.5.5.5 Article XX(a) – necessary to protect public morals
7.1089. In the context of its assessment under Article 2.2, the Panel explained that, for reasons
already set out in the context of the Panel's identification of the objective of the measures at issue,
the Panel is unpersuaded that there is any need to make an additional ruling on whether the objective
of limiting the risk of ILUC -related GHG emissions associated with crop -based biofuels would fall
within the scope of the objective protecting EU "public morals".
7.1090. In this connection, the Panel observes that a finding on whether the high ILUC-risk cap and
phase-out is additionally justified under Article XX(a) would have no impact on the outcome of the
proceedings. If the Panel were to agree with the European Union that the same measure provisionally
justified under Article XX(b) a nd (g) is also provisionally justified under Article XX(a), this would
merely serve to establish an additional basis for the overall conclusion that the measure is
provisionally justified under Article XX. Were the Panel to agree with Malaysia that the mea sure is
not justified under Article XX(a), this would not alter the conclusion that the measure is provisionally
justified under Article XX(b) and (g).

1410 Panel Reports, EC – Asbestos, para. 8.170; Brazil – Retreaded Tyres, para. 7.42; China – Rare
EC – Asbestos, the panel determined, as the first step in its analysis, whether chrysotile-asbestos posed a risk
to human life or health. (Panel Report, EC – Asbestos, paras. 8.170, 8.182, and 8.185-8.194.) In Brazil –
Retreaded Tyres, the panel assessed whether the accumulation of waste tyres posed risks to human, animal or
plant life or health. (Panel Report, Brazil – Retreaded Tyres, paras. 7.42, and 7.53-7.93.) In China – Rare
Earths, the panel found that the mining and production of rare earths, tungsten, and molybdenum have caused
grave harm to the environment and to the life and health of humans, animals, and plants in China.
(Panel Reports, China – Rare Earths, paras. 7.149-7.156.) In some other cases, including those where there
was no dispute as to the existence of the risks that the measure allegedly aimed to address, prior panels have
addressed this step of the analysis succinctly. (See Panel Reports, US – Gasoline, para. 6.21; and EC – Tariff
Preferences, paras. 7.180 and 7.200.)

7.1091. The Panel sees no reason to follow a different approach in the context of Article XX. The
Panel therefore finds that it is unnecessary to rule on whether the high ILUC-risk cap and phase-out
is a measure necessary to protect public morals under Article XX(a).
7.1.5.5.6 Chapeau – arbitrary or unjustifiable discrimination between countries where
the same conditions prevail
7.1092. Having concluded that the high ILUC-risk cap and phase-out is provisionally justified under
Article XX(g) and Article XX(b), the Panel now turns to the chapeau of Article XX. For the reasons
that follow, the Panel considers that, in the particular circumstances of this case, its findings under
Article 2.1 of the TBT Agreement in connection with the "legitimate regulatory distinction" step of
the analysis are equally relevant, and applicable, to the analysis under the chapeau of Article XX.
7.1093. The Appell ate Body has observed that "there are important parallels "1411 between the
analyses under Article 2.1 and the chapeau of Article XX. In particular, the Appellate Body has noted
that the concepts of "arbitrary or unjustifiable discrimination between countries where the same
conditions prevail " and of a "disguised restriction on trade " are found both in the chapeau of
Article XX of the GATT 1994 and in the sixth Recital of the Preamble of the TBT Agreement, which
the Appellate Body has recognized as providing relevant context for Article 2.11412
7.1094. Furthermore, the Appellate Body has explained that "a regulatory distinction that is
designed or applied in a manner that constitutes a means of arbitrary or unjustifiable discrimination"
cannot be considered "legitimate", and that "any detrimental impact stemming from such a
distinction" will hence reflect discrimination prohibited under Article 2.1. 1413 In other words, in
assessing whether any detrimental impact on imports stems from a "legitimate regulatory
distinction" under Article 2.1, a panel may be guided by effectively the same standard that applies
under the chapeau of Article XX, i.e. whether the measure is designed or applied "in a manner that
constitutes a means of arbitrary or unjustifiable discrimination".
7.1095. The Panel understands that the assessment of whether any detrimental impact on imports
under Article 2.1 stems exclusively from a "legitimate regulatory distinction" will not necessarily, or
automatically, resolve the question of whether the measure at issue is applied consistently with the
requirements of the chapeau of Article XX. The Panel also appreciates that where a panel seeks to
rely on its findings under the "legitimate regulatory distinction" step of the analysis under Article 2.1
as a basis for its findings under the chapeau of Article XX, it is incumbent on a panel to provide an
adequate explanation of why that is so.1414
7.1096. In the present case, the parties' arguments under the "legitimate regulatory distinction "
step of the analysis under Article 2.1 are essentially the same as their arguments under the chapeau
of Article XX, and the Panel's assessment under this step of the analysis in Article 2.1 is expressly
formulated in terms of whether the measure is design ed or applied in a manner that constitutes
arbitrary or unjustifiable discrimination. In these circumstances, the Panel sees nothing to be gained,
and indeed significant potential for confusion, by repeating the same analysis that has already been
presented in the context of Article 2.1 again in the context of the chapeau of Article XX.
7.1097. The Panel's assessment under the "legitimate regulatory distinction" step of the analysis in
Article 2.1 thus applies mutatis mutandis to the chapeau of Article XX. Accordi ngly, the Panel
concludes that the high ILUC -risk cap and phase -out has been administered in a manner that
constitutes arbitrary or unjustifiable discrimination between countries where the same conditions
prevail because the European Union failed to conduct a timely review of the data used to determine
which biofuels are high ILUC risk, and because there are deficiencies in the design and
implementation of the low ILUC-risk criteria and certification procedure.

1411 Appellate Body Reports, EC – Seal Products, para. 5.310.
1412 Appellate Body Reports, US – Clove Cigarettes, para. 173; and US – Tuna II (Mexico), para. 213.
1413 Appellate Body Reports, EC – Seal Products, fn 1543 to para. 5.311, referring to Appellate Body
Reports, US – COOL, para. 271.
1414 Appellate Body Reports, EC – Seal Products, para. 5.310.

7.1098. The Panel notes that certain of these same def iciencies have been found to give rise to a
violation of the obligation in Article X:3(a), and the European Union has not argued that the
inconsistency with Article X:3(a) is justified under Article XX.
7.1.5.5.7 Conclusion on Article XX
7.1099. The Panel finds that:
a. the high ILUC -risk cap and phase -out is a measure relating to the conservation of
exhaustible natural resources that is made effective in conjunction with restrictions on
domestic production or consumption within the meaning of Article XX(g);
b. the high ILUC-risk cap and phase-out is a measure necessary to protect human, animal or
plant life or health within the meaning of Article XX(b);
c. it is unnecessary to rule on whether the high ILUC -risk cap and phase -out is a measure
necessary to protect public morals under Article XX(a); and
d. the high ILUC-risk cap and phase-out has been administered in a manner that constitutes
arbitrary or unjustifiable discrimination between countries where the same conditions
prevail because the European Union failed to conduct a timely review of the data used to
determine which biofuels are high ILUC risk, and because there are deficiencies in the
design and implementation of the low ILUC-risk criteria and certification procedure.
7.1100. One panelist has reached a different conclusion, as set out in section 7.4 of this Report.
7.2 Claims in respect of the French measure
7.2.1 Preliminary considerations
7.2.1.1 Preliminary considerations relating to the definition of the French TIRIB measure
7.1101. As explained in section 2 of this Report, the specific French measure challenged by Malaysia
concerns an annual tax, known as the TIRIB, payable by entities that release fuel for consumption
within the territory of France.
7.1102. Malaysia refers in its panel request to this tax as "the French fuel tax ".1415 Malaysia
challenges in particular the alleged tax reductions to the fuel tax for petrol and diesel that contain
certain oil crop-based biofuels and the alleged exclusion of petrol and diesel that contain palm oil -
based biofuel from the alleged tax reduction.1416
7.1103. In its first written submission, Malaysia further describes the "French fuel tax reduction" as
a measure that reduces the tax on petrol and diesel fuels containing oil crop -based biofuels, but
excludes from this reduction p etrol and diesel fuels to the extent that they contain oil palm crop -
based biofuel.1417 Malaysia refers both in its panel request and in its written submissions to the
"French measure at issue ", describing it as "the exclusion of petrol and diesel fuels, to the extent
that they contain oil palm crop-based biofuel, from the French fuel tax reduction".1418
7.1104. Thus, based on Malaysia's panel request, and as further elaborated in its subsequent
submissions, the Panel understands that Malaysia has specifically focused its claims on what it refers
to as the "exclusion of petrol and diesel fuels, to the extent that they contain oil palm crop -based
biofuel, from the French fuel tax reduction".1419

1415 Malaysia's panel request, WT/DS600/6, paras. 25 and 27.
1416 Malaysia's panel request, WT/DS600/6, paras. 25, 26, and 28.
1417 Malaysia's first written submission, para. 972.
1418 Malaysia's first written submission, paras. 975 and 980; second written submission, paras. 349,
353, 359, and 406.
1419 See, for example, Malaysia's first written submission, paras. 972-973.

7.1105. In its submissions, the European Union refers to the "TIRIB" when referring to what
Malaysia refers to as the "French Fuel tax ", and to the "TIRIB reduction" when referring to what
Malaysia refers to as the "French fuel tax reduction".1420
7.1106. For the sake of clarity and consistency, the Panel will refer throughout its analysis to the
"French TIRIB" when referring generally to the "TIRIB" or "French fuel tax", and to the "French TIRIB
measure" when referring to the specific aspect of the French TIRIB that is at issue in this dispute,
i.e. the "French fuel tax reduction" or "TIRIB reduction".
7.2.1.2 Order of analysis under the SCM Agreement and the GATT 1994
7.1107. Having defined the French measure at issue, the Panel now turns to the order of analysis
in respect of the multiple legal claims that Malaysia has raised under the SCM Agreement and the
GATT 1994.
7.1108. The Panel will first address the order of analysis between the SCM Agreement and the
GATT 1994 and wil l then address the order of analysis among the multiple claims brought under
those agreements. In structuring its order of analysis, the Panel has accorded due weight to the
manner in which the parties themselves have presented their claims and defences.1421
7.1109. Malaysia has brought claims under Articles I:1 and III:2 of the GATT 1994 and under
Articles 5 and 6 of the SCM Agreement. Malaysia has presented its claims under the GATT 1994 first,
and then its claims under the SCM Agreement. The European Union does th e same in its own
submissions.
7.1110. The Panel notes that the disciplines of the SCM Agreement clearly deal with certain types
of measures more specifically and in greater detail than certain corresponding provisions of the
GATT 1994, such as those provisions of the GATT 1994 relating to countervailing duty investigations
(Article VI) and subsidies (Article XVI). However, in this dispute the provisions of the GATT 1994
raised by Malaysia are the non -discrimination obligations in Articles I:1 and III:2. The Panel
considers that there is no mandatory order of analysis between the provisions of the GATT 1994 and
the provisions of the SCM Agreement which are at issue in this dispute.
7.1111. Therefore, the Panel will address the claims related to the French TIRIB measure in the
order presented by Malaysia, and begin with the claims under the GATT 1994. If the Panel finds that
any of Malaysia's claims is well founded, the Panel will proceed to address the European Union's
defence under Article XX. The Panel will then address Malaysia's claims under the SCM Agreement.
7.1112. With respect to the claims under the GATT 1994, Malaysia has presented its claim under
Article I:1 first, and then its claims under Article III:2. However, when conducting its analysis under
Article I:1, Malaysia refers to its claims under Article III:2 for the purposes of demonstrating that
the challenged measure falls within the scope of Article I:1. For this reason, the Panel considers it
more appropriate to analyse Malaysia's claims under Article III:2 first, and then proceed to address
Malaysia's claim under Article I:1.
7.1113. In respect of the claims under the SCM Agreement, the Panel begins by addressing whether
the French TIRIB measure falls within the definition of a subsidy under Article 1 of the
SCM Agreement. The Panel then addresses whether any subsidy found to exist is a specific subsidy
within the meaning of Article 2. This is followed by the Panel's assessment of Malaysia's claims of
serious prejudice under Articles 5(c), 6.3(a) and 6.3(c).

1420 See, for example, European Union's first written submission, paras. 1449-1450.
1421 See Appellate Body Report, Canada – Wheat Exports and Grain Imports, para. 126.

7.2.2 Claims under the GATT 1994
7.2.2.1 Article III:2, first sentence
7.2.2.1.1 Introduction
7.1114. The Panel now proceeds to address Malaysia's claim under Article III:2, first sentence of
the GATT 1994.
7.1115. Malaysia submits1422 that the exclusion of petrol and diesel fuels, to the extent that they
contain palm oil-based biofuel, from the French TIRIB measure is inconsistent with Article III:2, first
sentence, because France discriminates against such petrol and diesel fuels, and thus, indirectly
against imported palm oil -based biofuel and its feedstock, while favouring petrol and diesel fuels
that contain other like domestic oil crop -based biofuels, and thus, indirectly favouring other like
domestic oil crop-based biofuels and their feedstocks of domestic origin. More specifically, Malaysia
submits that: (i) the tax on petrol and diesel fuels, which results from the exclusion of such petrol
and diesel fuels from the French TIRIB measure constitutes an internal tax; (ii) petrol and diesel
fuels that contain imported palm oil-based biofuel are like petrol and diesel fuels that contain other
domestic oil crop -based biofuels; and (iii) petrol and diesel fuels that contain imported palm oil -
based biofuel are taxed in excess of petrol and diesel fuels that contain like domestic oil crop-based
biofuels, and thus, imported palm oil-based biofuel and palm oil are indirectly taxed in excess of like
domestic oil crop-based biofuels and their feedstocks of domestic origin.
7.1116. The European Union submits1423 that Malaysia's claim under Article III:2, first sentence is
groundless. More specifically, while the European Union does not dispute that the French TIRIB
constitutes an internal tax, the European Union contends that Malaysia has not demonstrated that
the relevant products are like within the meaning of Article III:2, first sentence. Furthermore, while
the European Union does not contest that the exclusion of palm oil -based biofuel from the French
TIRIB measure implies that fuels containing such bi ofuel, whether imported or domestically
produced, may be taxed in excess of fuels containing other types of biofuels, whether imported or
domestically produced, it contests that this tax differential is related to the origin of the product.
7.2.2.1.2 Legal standard
7.1117. Article III:2, first sentence states as follows:
The products of the territory of any Member imported into the territory of any other
Member shall not be subject, directly or indirectly, to internal taxes or other internal
charges of any kind in excess of those applied, directly or indirectly, to like domestic
products.
7.1118. Article III:2, first sentence has been interpreted and applied in a number of prior cases,
and both parties present their respective understandings of the applicable legal standard with
reference to prior cases.
7.1119. Based on its text, a complainant must demonstrate the following elements to establish an
inconsistency with Article III:2, first sentence:
a. that the measure is an internal tax or other internal charge applied, directly or indirectly,
to products1424;
b. that imported and domestic products are like products within the meaning of Article III:2,
first sentence; and

1422 Malaysia's first written submission, paras. 1000-1027; second written submission, paras. 353-405,
and 407-409.
1423 European Union's first written submission, paras. 1457-1503; second written submission,
paras. 293-294.
1424 Appellate Body Reports, China – Auto Parts, para. 181.

c. that the imported products are taxed in excess of the domestic products.1425
7.1120. The Panel will elaborate further on the elements of th e legal standard in Article III:2, first
sentence as necessary in the course of its assessment of the issues in dispute.
7.2.2.1.3 Internal taxes applied, directly or indirectly, to products
7.1121. The Panel begins its analysis with the issue of whether the French TIRIB co nstitutes an
internal tax applied, directly or indirectly, to products.
7.1122. Malaysia submits that the tax on petrol and diesel fuels containing palm oil -based biofuel,
which results from the exclusion of such petrol and diesel fuels from the French TIRIB measu re is
an internal tax within the meaning of Article III:2, because it applies to petrol and diesel fuels
incorporating eligible oil crop -based biofuel, and it becomes payable when the product is released
for consumption in France.1426
7.1123. The European Union does not contest that the French TIRIB is an internal tax.1427
7.1124. Article III:2 concerns "internal taxes or other internal charges of any kind … applied, directly
or indirectly, to … products ". The Appellate Body has explained that what is important for
determining if a measure is an "internal tax or other internal charge " is that the obligation to pay
must accrue due to an internal event, such as the distribution, sale, use or transportation of the
product.1428 For the purposes of Article III:2, the tax must be "applied, directly or indirectly, to
products". In this respect, the panel in Mexico – Taxes on Soft Drinks found that non-cane sugar
sweeteners were indirectly subject to the soft -drink tax when they were used in the production of
soft drinks and syrups.1429
7.1125. As explained in section 2 of th is Report, the French TIRIB is an annual tax payable by
entities that release fuel for consumption within the territory of France; and its applicable rate will
vary depending on the incorporation of sources qualifying as rene wable energy, which includes
certain biofuels, into such fuel. The French TIRIB is therefore a tax that applies to products. It applies
directly to fuel and indirectly to the biofuel incorporated into such fuel. The obligation to pay such
tax is accrued due to the internal event of releasing the fuel for consumption in France. Thus, the
French TIRIB is an internal tax applied, directly or indirectly, to products.
7.1126. The Panel therefore finds that the French TIRIB is an internal tax applied, directly or
indirectly, to products, that falls within the scope of Article III:2. Consequently, the French TIRIB
measure, as a feature of the French TIRIB, also falls within the scope of Article III:2.
7.2.2.1.4 Like products
7.1127. The Panel now proceeds to address the issue of whether th e products at issue are like
products within the meaning of Article III:2.
7.1128. Malaysia maintains that it has already demonstrated, in the context of its claims against
the high ILUC-risk cap and phase-out, that palm oil-based biofuel and palm oil as a biofuel feedstock
are like other oil crop -based biofuels and their respective biofuel feedstocks; and thus, that petrol
and diesel fuels that contain palm oil-based biofuel are like petrol and diesel fuels that contain other
oil crop-based biofuels. For Malaysia, it follows that petrol and diesel fuels that contain palm oil -
based biofuel and petrol and diesel fuels that contain other oil crop -based biofuels are also in a
sufficiently close competitive relationship to be considered like within the meaning of Articl e III:2,
first sentence.1430

1425 Appellate Body Report, Canada – Periodicals, pp. 22-23.
1426 Malaysia's first written submission, paras. 1007 and 1011.
1427 European Union's first written submission, para. 1463.
1428 Appellate Body Reports, China – Auto Parts, para. 162.
1429 Panel Report, Mexico – Taxes on Soft Drinks, para. 8.45.
1430 Malaysia's first written submission, para. 1013.

7.1129. The European Union contends that Malaysia has not demonstrated that the relevant
products are like within the meaning of Article III:2, first sentence.1431
7.1130. The Panel recalls that Malaysia has confirmed, in the context of its claims under Articles
2.1 of the TBT Agreement and Article III:4 of the GATT 1994 with respect to the high ILUC-risk cap
and phase-out, that the focus of its claims is the treatment of palm oil -based biofuel as compared
to the treatment of rapeseed oil- and soybean oil-based biofuels. Because, with respect to the French
TIRIB measure, Malaysia has explicitly referred to its arguments on like products put forward with
respect to the high ILUC-risk cap and phase-out, the Panel will compare the same products. Thus,
the Panel will compare palm oil -based biofuel with rapeseed oil and soybean oil -based biofuels as
regards both FAME and HVO.
7.1131. The Panel notes that Malaysia compares petrol and diesel fuels that contain imported palm
oil-based biofuel with petrol and diesel fuels that contain other domestic oil crop-based biofuels, and
argues that those products are like within the meaning of Article III:2, first sentence. However,
Article III:2, first sentence concerns the treatment of imported products as compared to the
treatment of like domestic products. Therefore, the comparison for the purposes of the like products
analysis must be between imported and domestic products and not between a domestic product
containing an imported input and a domestic product containing a domestic input.1432 Therefore, for
the purposes of its analysis of like products, the Panel will compare palm oil -based biofuel with
rapeseed oil and soybean oil -based biofuels, and not petrol and diesel fuels that contain imported
palm oil-based biofuel with petrol and diesel fuels that contain other domestic oil crop-based biofuels.
7.1132. The Panel also notes that Malaysia makes the argument that palm oil as feedstock for
biofuel production is like other oil-crop feedstocks for biofuel production within the meaning of Article
III:2, first sentence; and that palm oil as biofuel feedstock is indirectly taxed in excess of other like
oil-crop biofuel feedstocks of domestic origin. The Panel notes that Malaysia's argument with respect
to palm oil as biofuel feedstock rests on the same premise of its argument that palm oil-based biofuel
is indirectly taxed in excess of like domestic oil crop -based biofuels. In these circumstances, the
Panel must consider the practical value that any findings with respect to palm oil as biofuel feedstock
would have for implementation, in light of the findings relating to palm oil-based biofuel.
7.1133. The Panel sees no reason for making separate and additional findings under Article III:2,
first sentence with respect to palm oil as biofuel feedstock, when such findings would rest on the
same premise of the findings with respect to palm oil-based biofuel. Malaysia has not explained how
additional findings with respect to palm oil as biofuel feedstock would have any practical value from
the perspective of a possible appeal, implementation, or otherwise.
7.1134. The Panel notes that, because the alleged taxation in excess of palm oil as biofuel feedstock
stems from the alleged taxation in excess of palm oil-based biofuel, it follows that any action taken
to implement any findings of inconsistency with respect to taxation in excess of palm oil -based
biofuel would necessarily address any taxation in excess of palm oil as biofuel feedstock. Thus, from
the perspective of implementation, separate and additional findings regarding the palm oil as biofuel
feedstock would appear to be entirely redundant.1433
7.1135. Therefore, the Panel does not consider it necessary to make additional findings with respect
to palm oil as feedstock for biofuel production to secure a positive solution to this dispute or to assist
the DSB in making the rulings and recommendations provided for in the covered agreements.
7.1136. The Appellate Body has explained that the scope of like products in the first sentence of
Article III:2 must be construed na rrowly, given the existence of the second sentence providing for
a separate and distinctive consideration of the protective aspect of a measure in examining its
application to a broader category of products, namely, directly competitive or substitutable products.
The Appellate Body further explained that how narrowly the definition of like products in Article III:2,

1431 European Union's first written submission, paras. 1464 and 1467.
1432 Malaysia has not argued that there is taxation in excess with respect to imported petrol and diesel
fuel and domestic petrol and diesel fuel, but between petrol and diesel fuels that contain imported palm oil-
based biofuel and petrol and diesel fuels that contain other domestic oil crop-based biofuels.
1433 Furthermore, the Panel does not consider that such additional findings on feedstocks would prejudge
the level of nullification or impairment arising from the French TIRIB measure beyond any level that would
otherwise be found to exist.

first sentence should be construed "is a matter that should be determined separately for each tax
measure in each case".1434
7.1137. Panels and the Appellate Body have consistently explained that whether products are like
within the meaning of Article III:2, first sentence must be determined on a case-by-case basis, by
examining relevant factors, which include: (i) the products' physical characteristics (w hich may
relate to its physical properties, nature and qualities); (ii) the products' end-uses in a given market;
(iii) consumers' tastes and habits 1435; and (iv) the tariff classification of the products. 1436 As the
Appellate Body has cautioned, however, this approach for determining whether products are like will
be most helpful if decision makers keep in mind how narrow the range of like products in Article
III:2, first sentence is meant to be as opposed to the range of like prod ucts contemplated in some
other provisions of the GATT 1994 and other covered agreements.1437
7.1138. The Panel recalls that the four criteria are neither exhaustive nor mutually exclusive, none
of them necessarily has an overarching role, and they are rather analytical tools for organizing and
assessing the evidence relevant for the analysis of like products. 1438 Moreover, a panel is to use
these criteria to examine the nature and extent of a competitive relationship between and among
imported and domestic products, w hich will depend on the market where these products
compete.1439
7.1139. In order to conduct its analysis of like products under Article III:2, first sentence with
respect to the French TIRIB measure, the Panel will rely on factual aspects of its analysis of like
products under Articles 2.1 of the TBT Agreement and Article III:4 of the GATT 1994 with respect to
the high ILUC -risk cap and phase -out. The Panel will include in this section considerations with
respect to the French market, and will reach a conclusion bea ring in mind that the scope of like
products under Article III:2, first sentence is narrower than the scope of like products under the
provisions analysed with respect to the high ILUC-risk cap and phase-out.
7.2.2.1.4.1 Physical properties
7.1140. Regarding physical properties, Malaysia submits that biofuel produced from palm oil,
rapeseed oil and soybean oil share similar basic physical and chemical characteristics.1440
7.1141. The European Union argues that biodiesel produced from palm oil, rapeseed oil and soybean
oil have different properties, referring to the low -temperature operability expressed through the
CFPP, which typically is +13°C for PME, -14°C for RME and -2°C for SBME. For the European Union,
these differences are not minor or irrelevant, but are characteristics that define the extent to which
SBME, PME and RME can be substituted to each other and hence the degree of competition that
exists between them.1441
7.1142. As the Panel has already found, PME, RME and SBME share the same basic chemical
composition of FAME, and a number of physical characteristics, including viscosity, density, and flash
point, while not identical, are similar. The Panel recalls that the core differences that are in the focus
of the parties' arguments relate to the cold flow proper ties, in particular the CFPP, as well as the
iodine value and cetane number. For the purposes of the French measure, the parties refer mainly
to the CFPP, which is relevant to the analysis of the end-uses and consumers' tastes and habits.

1434 Appellate Body Report, Japan – Alcoholic Beverages II, p. 20.
1435 Appellate Body Report, Japan – Alcoholic Beverages II, p. 20.
1436 Appellate Body Report, Japan – Alcoholic Beverages II, pp. 21-22.
1437 Appellate Body Report, Japan – Alcoholic Beverages II, p. 20.
1438 Appellate Body Reports, Philippines – Distilled Spirits, paras. 119 and 131.
1439 Appellate Body Reports, Philippines – Distilled Spirits, para. 168. The Appellate Body further
stressed that the determination of likeness under Article III:2, first sentence is, fundamentally, a determination
about the nature and extent of a competitive relationship between and among imported and domestic
products. (Appellate Body Reports, Philippines – Distilled Spirits, para. 170.)
1440 Malaysia's first written submission, para. 911.
1441 European Union's first written submission, paras. 1470 and 1474.

7.2.2.1.4.2 End-uses
7.1143. With regard to end -uses, Malaysia maintains that all oil crop feedstocks have the same
end-use which is for the production of oil crop -based biofuels. Malaysia submits that , even if the
CFPP value for diesel fuel in France ranges between 0°C in the summer and -15°C in the winter,
petrol and diesel fuels that contain palm oil-based biofuels can still be placed on the French market
during a good portion of the year. For Malaysia, therefore, these fuels are competitive and perfectly
substitutable with petrol and diesel fuels that contain other oil crop-based biofuels, such as biofuels
made from rapeseed oil or soybean oil during the warm season.1442
7.1144. The European Union contends that the different properties of PME, SBME and RME have
consequences for their end -uses. The E uropean Union maintains that the CFPP for diesel fuel in
France ranges between 0oC in the summer and -15oC in the winter, and that PME is often blended
only up to 20% in FAME0 blends. For the European Union, the different standards required for diesel
mix and biodiesels in France in the summer and the winter season have an effect on the amount of
PME that can be used in biodiesel blends in France, which demonstrates that PME has a limited
substitutability with other biofuels mixed in blends not only in winter but also during the summer.1443
7.1145. As the Panel has already explained, the parties do not dispute that PME, RME and SBME
are all primarily used as biofuel mixed with mineral diesel transport fuel, in addition to certain other
applications. However, the parties disagree on the extent of substitutability between the three types
of biofuel, based on the different CFPP of each type of biofuel. Indeed, as explained, the evidence
submitted by the parties confirms that low -temperature operability, and therefore, the CFPP, is an
important factor to be considered for the use of biofuel in diesel engines depending on the climate
of the relevant geographical region.
7.1146. With respect to the French market, the evidence on the record confirms that France requires
a CFPP of -15oC for the winter season and a CFPP of 0oC during the summer season 1444, and also
that PME is often blended in "FAME0" blends (i.e. blends with a CFPP of 0°C).1445 Therefore, due to
its higher CFPP, PME has to be blended with other biofuels in France during the summer season and
is likely less commonly used during the winter season. However, the evidence on the record shows
that palm oil has been commonly used in Fr ance as feedstock for biofuel production 1446, and also
that the cold properties of fuels can be improved through the use of additives such as flow
improvers.1447
7.1147. The Panel notes that, according to data from the French Government, from the total amount
of biofuel produced in France for incorporation into diesel in 2019, 50% was made of rapeseed oil,
23% was made of palm oil and 18% was made of soybean oil; and, of the biofuel produced in France
for incorporation into diesel in 2018, 53.53% was made of rapeseed oil, 22.45% was made of palm
oil and 14.10% was made of soybean oil. This includes both methyl esters and HVO, which, in 2019,
comprised, respectively, 83.5% and 16.5% of the biofuel produced in France for incorporation into
diesel.1448 Also, of the vegetable oil methyl ester produced in France in 2019, 64% was made of
rapeseed oil, 23% was made of soybean oil and 9% was made of palm oil; and, of the vegetable oil
methyl ester produced in France in 2018, 65% was made of rapeseed oil, 17% of soybean oil and
14% of palm oil. 1449 This means that palm oil -based biofuel was the second most -used biofuel in
France in 2018 and 2019; and that PME was the third most -used oil-crop based methyl ester in

1443 European Union's first written submission, paras. 1475-1486.
1444 Biodiesel Standards in various EU member States (website accessed 25 April 2021),
(Exhibit EU-137).
1445 Commission Implementing Regulation (EU) 2019/1344 of 12 August 2019 imposing a provisional
countervailing duty on imports of biodiesel originating in Indonesia, OJ 2019 L 212, p. 1, (Exhibit EU-139),
recital 297.
1446 USDA FAS, "GAIN, Biofuels Annual: European Union", 22 June 2021, (Exhibit MYS-139), p. 27;
USDA FAS, "GAIN Biofuels Annual: EU-28", 15 July 2019, (Exhibit EU-128), p. 31; USDA FAS, "GAIN Report,
Biofuels Annual: EU-28", 15 July 2015, (Exhibit MYS-77), p. 25.
1447 Arbeitsgemeinschaft Qualitätsmanagement Biodiesel e.V., "Cold Properties of Biodiesel",
(Exhibit EU-140), p. 3.
1448 DGEC, "Panorama 2019 – Biofuels incorporated in France", (Exhibit EU-191), p. 6; French
Parliament Report n. 2609, (Exhibit EU-205), p. 16.
1449 DGEC, "Panorama 2019 – Biofuels incorporated in France", (Exhibit EU-191), p. 7.

France in 2018 and 2019. Palm oil-based biofuel was also more commonly used as biofuel feedstock
than biofuels made from waste and animal fat.1450
7.1148. The Panel also refers to its discussion on cetane number and iodine value with respect to
SBME, adding that both palm oil and soy have been imported into France in significant quantities for
the production of biofuel. 1451 This would not have been the case, had there been no substitution
between the PME, RME and SBME in spite of certain differences in their physical properties. Moreover,
a 2020 report on biofuels from the French Parliamen t indicates that the biodiesel sector had been
weakened by competition from imported biofuels made from palm oil and soybean oil, and that the
use of these oils had made it possible to considerably lower the costs. 1452 This corroborates a
significant degree of competition between PME, RME and SBME.
7.1149. These data evidence that, despite certain differences in product characteristics, there is a
significant degree of competition between PME, RME and SBME. This is further reinforced by the fact
that, in the context of an anti-dumping duty investigation into the imports of biodiesel from Argentina
and Indonesia, the European Union rejected the claim that PME was not a like product to RME or
SBME due to its higher CFPP, and considered that PME could be used throughout the Union
throughout the year, by blending with other biodiesels before use, in the same way as RME and
SBME; and that PME was therefore interchangeable with biodiesel made in the European Union.1453
7.2.2.1.4.3 Consumer perceptions
7.1150. With respect to consumer perceptions, Malaysia maintains that the relevant consumers,
namely the producers of oil crop -based biofuels base their choices on the price of the product, its
CFPP value and oxidative stability and the eligibility to count towards meeting the EU renewabl e
energy targets.1454
7.1151. The European Union submits that the direct consumers of biofuels are the economic
operators, who mix those fuels with fossil fuels to release them for consumption on the market. For
the European Union, since they have to produce a blend which complies with certain requirements
(for instance in terms of CFPP), and since different biofuels have different CFPP values, they
necessarily have to be concerned about what biofuels they are blending and in which proportions.1455
The European Union a dds that the final consumers are not aware of whether palm oil biodiesel is
contained in the product they are purchasing, but that, given the widespread public concern in the
European Union associating palm oil production with deforestation, loss of biodiv ersity and climate
change, it is clear that consumers' awareness about the presence of palm oil -based biofuels in the
fuel mix is entirely capable of influencing their purchasing decisions, and their preferences and tastes
necessarily influence what oil companies produce and what biofuels they blend.1456
7.1152. The Panel recalls its findings above that the evidence related to the trade defence measures
indicates that final consumers are not aware of or concerned by the composition of the biofuel blend,
if the product meets the required CFPP; and that economic operators involved in blending of biofuels
will mix PME, RME and SBME with a view to obtaining a blend conforming with the CFPP specifications
required by the customer. If the specification requires a particular ly low CFPP, the amount of PME
will admittedly be lower compared to fuel destined for warmer climates. Within the specification,
however, PME competes with RME and SBME.

1450 DGEC, "Panorama 2019 – Biofuels incorporated in France", (Exhibit EU-191), pp. 5-10.
1451 According to a report on biofuels from the French Parliament, in 2018, the volume released for
consumption of biofuels produced from palm oil in France represented 838 million litres, and the volume of
biofuels produced from soy represented 472 million litres, being respectively 18% and 9.6% of the total
volume of biofuels incorporated in France. Of the palm oil used in France for the production of biofuels
incorporated into fuels in 2018, 71% originated from Indonesia and 22% from Malaysia. Also, 56.4% of the soy
used was imported from Argentina, 21.5% from Brazil and 16.4% from Paraguay. (French Parliament Report n.
2609, (Exhibit EU-205), p. 62.)
1452 The report mentions in this respect that European rapeseed biodiesel was worth 956 dollars per
tonne, while Argentinian soy biodiesel was worth 708 dollars per tonne and Malaysian palm oil biodiesel was
678 dollars per tonne. (French Parliament Report n. 2609, (Exhibit EU-205), p. 75.)
1453 Council Implementing Regulation (EU) 1194/2013, (Exhibit MYS-140), recitals 18-19.
1454 Malaysia's first written submission, para. 913
1455 European Union's first written submission, para. 1488.
1456 European Union's first written submission, para. 1489-1490.

7.1153. The Panel also refers to its findings above regarding the European Union's assertion t hat
final consumers' awareness about the presence of palm oil-based biofuels in the fuel mix is capable
of influencing what biofuel oil companies will blend. The Panel recalls in particular that, before
announcing a decrease in the use of palm oil as biofu el feedstock, Total had unsuccessfully
challenged the exclusion of PME from the scope of renewable energy sources for the purposes of the
French TIRIB.1457
7.2.2.1.4.4 Tariff classification
7.1154. Finally, on tariff classification, Malaysia maintains that all products at issu e fall within the
same chapter of the HS (Animal or vegetable fats and oil) but acknowledges that they have different
HS codes at the 4-digit and 6-digit levels.1458
7.1155. The Panel has already found that the customs classification of PME, RME and SBME is
consistent with the indication that they all belong to the category of biodiesel and corroborates the
finding that they share important product characteristics and have the same application.
7.2.2.1.4.5 Conclusion on like products
7.1156. The Appellate Body has found that products that have very similar physical characteristics
may not be like within the meaning of Article III:2 if their competitiveness or substitutability is low,
while products that present certain physical differences may still be consider ed like if such physical
differences have a limited impact on the competitive relationship between and among the
products.1459 The Appellate Body considered that, as long as the differences among the products,
including difference in the raw material base, l eave fundamentally unchanged the competitive
relationship among the final products, the existence of these differences would not prevent a finding
of likeness if, by considering all factors, the panel is able to come to the conclusion that the
competitive relationship among the products is such as to justify a finding of likeness under Article
III:2.1460 The Appellate Body has also explained that not only products that are perfectly
substitutable can fall within the scope of Article III:2, first sentence, as this would be too narrow an
interpretation and would reduce the scope of the first sentence essentially to identical products.
Rather, products that are close to being perfectly substitutable can be like products, whereas
products that compete to a lesser degree would fall within the scope of the second sentence.1461
7.1157. The Panel considers that the evidence on the record demonstrates that, despite certain
differences in product characteristics, there is a significant degree of competition between PME, RME
and SBME in the French market. In the Panel's view, the competitive relationship among the products
at issue in the French market is sufficient to justify a finding that, as regards FAME, even under the
narrower scope of like products of Article III:2, first sentence, biofuels made from rapeseed oil and
soybean oil are like palm oil-based biofuel.
7.1158. The Panel therefore finds that, as regards FAME, biofuels made from rapeseed oil and
soybean oil are like palm oil-based biofuel within the meaning of Article III:2, first sentence.
7.2.2.1.4.6 Malaysia's additional argument concerning HVO made from palm oil, rapeseed
oil and soybean oil
7.1159. The Panel recalls that Malaysia also considers HVO made from palm oil, rapeseed oil and
soybean oil to be like products. The Panel has found, in th e context of its analysis of like products
under Articles 2.1 of the TBT Agreement and Article III:4 of the GATT 1994 with respect to the high
ILUC-risk cap and phase-out, that rapeseed oil-based HVO and soybean oil-based HVO is like HVO
made from palm oi l. The Panel has already explained, in this respect, that the evidence before it
confirms that HVO can be produced from many types of vegetable oils, resulting in the same
chemical composition and without affecting the biofuel's characteristics; that its pr operties, in
particular relating to cold flow, depend on the production process rather than the feedstock; and

1457 Press article, 11 October 2019, (Exhibit MYS-245); and THEN24, "TotalEnergies will no longer use
palm oil from 2023", (Exhibit EU-324).
1458 Malaysia's first written submission, para. 914.
1459 Appellate Body Reports, Philippines – Distilled Spirits, para. 120
1460 Appellate Body Reports, Philippines – Distilled Spirits, para. 125.
1461 Appellate Body Reports, Philippines – Distilled Spirits, para. 149.

that HVO is used as fuel in diesel engines either blended with mineral diesel or fully replacing it.
These factual findings apply mutatis mutandis with respect to the French TIRIB measure.
7.1160. The Panel therefore finds that rapeseed oil -based HVO and soybean oil -based HVO is like
HVO made from palm oil within the meaning of Article III:2, first sentence.
7.2.2.1.5 Taxation in excess of
7.1161. The Panel now proceeds to address the issue of whether imported palm oil-based biofuel is
indirectly taxed in excess of like domestic oil crop-based biofuels.
7.1162. Malaysia submits that petrol and diesel fuels that contain imported palm oil -based biofuel
are directly taxed in excess of petrol and diesel fuels that contain other like domestic oil crop-based
biofuels; and that imported palm oil-based biofuel and palm oil as a biofuel feedstock are indirectly
taxed in excess of like domestic oil crop -based biofuels and their feedstocks of d omestic origin.1462
Malaysia maintains that petrol and diesel fuels that contain palm oil-based biofuel, which is classified
as non-renewable, are not eligible to benefit from the advantageous tax treatment; whereas in
instances where petrol and diesel fuels incorporate biofuel made from other oil crop feedstock (e.g.
rapeseed), the French TIRIB measure applies.1463
7.1163. The European Union does not contest that the exclusion of palm oil-based biofuel from the
French TIRIB measure implies that fuels containing such biofuel, whether i mported or domestically
produced, may be taxed in excess of fuels containing other types of biofuels, whether imported or
domestically produced. The European Union contests, however, that this tax differential is related
to the origin of the product. 1464 For the European Union, the French TIRIB measure is an origin -
neutral measure, because it is not the incorporation of domestic vis-à-vis imported biofuels that
triggers the French TIRIB measure, but rather the type of biofuel that is incorporated regardless o f
its origin.1465
7.1164. The Panel notes that, with respect to taxation in excess of, the Appellate Body has stated
that even the smallest amount of "excess" is "too much ".1466 Furthermore, a determination of
whether an infringement of Article III:2, first sentence exists must be made on the basis of an overall
assessment of the actual tax burdens imposed on imported products, on the one hand, and like
domestic products, on the other hand.1467
7.1165. As explained in section 2 of th is Report, entities that release fuel for cons umption within
the territory of France are liable to pay the French TIRIB as an additional tax that varies in relation
to the extent to which the fuel released achieves established incorporation targets for renewable
energy sources. While biofuels, includi ng rapeseed oil - and soybean oil -based biofuels, are
considered as renewable energy sources for the purposes of the French TIRIB, palm oil -based
products are excluded from being considered as renewable energy sources for the purposes of the
French TIRIB. The French TIRIB is determined according to a formula whose application results in a
tax rate that varies in direct proportion to the difference between the targeted incorporation of
renewable energy sources and the actual inc orporation of such sources into the fuel released for
consumption.
7.1166. The Panel recalls the examples provided in section 2 of this Report to illustrate the operation
of the TIRIB formula using the 2020 incorporation target for diesel (8%) and the established
2020 rate (EUR 101 per hectolitre). Based on these examples, the Panel observes that:
a. If the diesel released for consumption contains 8% (or more) of renewable energy sources,
including rapeseed oil- and soybean oil-based biofuels, the TIRIB rate would be EUR zero
per hectolitre.

1462 Malaysia's first written submission, para. 1021.
1463 Malaysia's first written submission, para. 1020.
1464 European Union's first written submission, paras. 1500-1501.
1465 European Union's first written submission, paras. 1502-1503; second written submission, para. 294.
1466 Appellate Body Report, Japan – Alcoholic Beverages II, p. 23.
1467 Appellate Body Reports, Brazil – Taxation, para. 5.35.

b. If the diesel released for consumption contains 8% (or more) of renewable energy sources,
including rapeseed oil- and soybean oil-based biofuels, and any amount of palm oil-based
biofuel, the TIRIB rate would still be EUR zero per hectolitre.
c. If the diesel released for consumption contains 6% of renewable energy sources, including
rapeseed oil- and soybean oil-based biofuels, and 2% (or more) of palm oil-based biofuel,
the TIRIB rate would be EUR 2.02 per hectolitre.
d. If the diesel released for consumption contains 2% of renewable energy sources, including
rapeseed oil- and soybean oil-based biofuels, and 6% (or more) of palm oil-based biofuel,
the TIRIB rate would be 6.06 euros per hectolitre.
e. If the diesel released for consumption d oes not contain any renewable energy source,
including rapeseed oil- and soybean oil-based biofuels, but contains 8% (or more) of palm
oil-based biofuel, the TIRIB rate would be EUR 8.08 per hectolitre.
7.1167. These examples show that, if palm oil -based biofuel is incorporated into diesel to satisfy
any portion of the 8% incorporation target, replacing renewable energy sources, the tax burden on
such diesel will increase in proportion to the amount of palm oil -based biofuel incorporated. In
contrast, if rapeseed o il- and/or soybean oil -based biofuels are incorporated into diesel to satisfy
any portion of the 8% incorporation target, the tax burden on such diesel will decrease in proportion
to the amount of rapeseed oil - and/or soybean oil-based biofuels incorporated, with the possibility
of achieving a tax rate of EUR zero per hectolitre if the 8% incorporation target is fully satisfied.
7.1168. In other words, as a consequence of the exclusion of palm oil -based products from being
considered as renewable energy sources for the purposes of the French TIRIB, or more specifically,
as a result of the exclusion of palm oil-based biofuel from the group of qualifying biofuels for the
purposes of the French TIRIB measure, fuel containing palm oil -based biofuel for the purpose of
satisfying any portion of the incorporation target will always be taxed in excess of fuel containing
rapeseed oil - and soybean oil -based biofuels for the purpose of satisfying any portion of the
incorporation target. This means, in turn, that the palm oil -based biofuel that is incorporated into
fuel to satisfy any portion of the incorporation target will always be indirectly taxed in excess of the
like products rapeseed oil- and soybean oil-based biofuels when incorporated into fuel to satisfy the
incorporation targets.
7.1169. The European Union does not dispute this. However, it argues that the French TIRIB
measure is an origin -neutral measure because it is not the incorporation of domestic vis-à-vis
imported biofuels that triggers the reduction, but rather the typ e of biofuel that is incorporated
regardless of its origin. The European Union submits that the incorporation of imported soybean oil,
rapeseed oil, sunflower oil biofuels, and biofuels produced from waste material and animal fat as
well as second generation biofuels triggers the same reduction as when these biofuels are domestic;
and, conversely, the incorporation of domestic palm oil -based biofuel does not produce any
reduction. The European Union adds that palm oil -based biofuel is also produced in the
European Union, including in France.1468
7.1170. Malaysia submits that the relevant comparison is between the group of imported products
and the group of like products of national origin, i.e. between petrol and diesel fuels, to the extent
that they contain palm oil-based biofuels, and petrol and diesel fuels that contain other like domestic
oil crop-based biofuels and their feedstocks of French origin. Malaysia adds that the fact that a
Member produces itself the product that is subject to the challenged measure, or a complaining
Member does not export the whole group of products, does not imply that the measure at issue does
not distinguish based on the origin of the products.1469
7.1171. The Panel notes that Article III:2, first sentence provides for equality of competitive
conditions of all products found to be like. If palm oil -based biofuel has been found to be like
rapeseed oil- and soybean oil-based biofuel, the comparison to be made with respect to taxation in
excess of is not between imported palm oil -based biofuel and domestic palm oil-based biofuel, but

1468 European Union's first written submission, paras. 1501-1503; second written submission, para. 294.
1469 Malaysia's second written submission, paras. 399-404.

between imported palm oil-based biofuel and the like domestic products rapeseed oil and soybean
oil-based biofuel.1470
7.1172. Under this comparison, it is clear that fuel containing imported palm oil -based biofuel is
taxed "in excess" of fuel containing the like domestic products rapeseed oil- and soybean oil-based
biofuels. Consequently, imported palm oil -based biofuel is indirectly taxed "in excess" of the like
domestic products rapeseed oil- and soybean oil-based biofuels.1471
7.1173. In any event, and without ruling on whether the following additional findings are necessary
in order for Malaysia to establish its claim under Article III:2, first sentence, the Panel notes that
Malaysia is one of the two world's largest producers of palm oil, which produces and exports palm
oil as feedstock for biofuel production and palm oil -based biofuel 1472, including to the European
Union.1473
7.1174. The European Union is the largest biodiesel producer in the world1474 and France has been
one of the major producers and consumers of biodiesel in the European Union. 1475 Rapeseed oil,
palm oil and soybean oil have been the most-used feedstocks for biodiesel production in France.1476
Thus, France produces rapeseed oil -based biofuel, soybean oil -based biofuel and palm oil -based
biofuel. Rapeseed oil has been the major feedstock source for biodiesel production in the European
Union1477 and in France1478, so most of the oil crop-based biofuel produced in France is rapeseed oil-
based biofuel. France also produces soybean oil -based biofuel and palm oil -based biofuel, but to a
lesser extent.1479 Counted together, rapeseed oil- and soybean oil-based biofuels comprise most of
the biodiesel produced in France.
7.1175. This means that, in effect, palm oil-based biofuel imported from Malaysia, which is all the
biofuel imported from such Member, is indirectly taxed "in excess" of the like rapeseed oil and
soybean oil based biofuels produced in France, which comp rise most of the biofuels produced in
France.

1470 The situation at issue is similar to that in Japan – Alcoholic Beverages II. As the panel in Indonesia –
Autos described it, in Japan – Alcoholic Beverages II "the internal tax imposed on domestic shochu was the
same as that imposed on imported shochu; the higher tax imposed on imported vodka was also imposed on
domestic vodka. Identical products (not considering brand differences) were taxed identically. The issue was
whether the differences between the two products shochu and vodka, as defined for tax purposes, were so
minor that shochu and vodka should be considered to be like products and therefore subject to the
requirement of Article III:2, first sentence, that one should not be taxed in excess of the other." (Panel Report,
Indonesia – Autos, para. 14.112.)
1471 In line with the Panel's explanation in Indonesia – Autos regarding the situation Japan – Alcoholic
Beverages II, this finding is not affected by the fact that the European Union also produces palm oil-based
biofuel, and thus, that domestic palm oil-based biofuel is indirectly taxed identically to imported palm oil-based
biofuel.
1472 UFOP Global Market Supply 2020/2021, (Exhibit MYS-11), p. 27; UFOP Global Market Supply
2019/2020, (Exhibits EU-121, MYS-212), p. 25.
1473 USDA FAS, "GAIN Biofuels Annual: European Union", 22 June 2021, (Exhibit MYS-139), p. 29; USDA
FAS, "GAIN Biofuels Annual: EU-28", 15 July 2019, (Exhibit EU-128), p. 32; USDA FAS, "GAIN Report, Biofuels
Annual: EU-28", 15 July 2015, (Exhibit MYS-77), p. 27.
1474 UFOP Global Market Supply 2020/2021, (Exhibit MYS-11), p. 27; UFOP Global Market Supply
2019/2020, (Exhibits EU-121, MYS-212), p. 25.
1475 UFOP Global Market Supply 2020/2021, (Exhibit MYS-11), p. 28; UFOP Global Market Supply
2019/2020, (Exhibits EU-121, MYS-212), p. 24; USDA FAS, "GAIN Biofuels Annual: European Union",
22 June 2021, (Exhibit MYS-139), pp. 25-26; USDA FAS, "GAIN Biofuels Annual: EU-28", 15 July 2019,
(Exhibit EU-128), pp. 28-29; USDA FAS, "GAIN Report, Biofuels Annual: EU-28", 15 July 2015,
(Exhibit MYS-77), pp. 22-27.
1476 DGEC, "Panorama 2019 – Biofuels incorporated in France", (Exhibit EU-191), p. 6; French
Parliament Report n. 2609, (Exhibit EU-205), p. 16.
1477 UFOP Global Market Supply 2020/2021, (Exhibit MYS-11), p. 30; UFOP Global Market Supply
2019/2020, (Exhibits EU-121, MYS-212), p. 28; USDA FAS, "GAIN Biofuels Annual: European Union",
22 June 2021, (Exhibit MYS-139), p. 27; USDA FAS, "GAIN Biofuels Annual: EU-28", 15 July 2019,
(Exhibit EU-128), p. 30; USDA FAS, "GAIN Report, Biofuels Annual: EU-28", 15 July 2015, (Exhibit MYS-77),
p. 25.
1478 UFOP Global Market Supply 2020/2021, (Exhibit MYS-11), p. 30; UFOP Global Market Supply
2019/2020, (Exhibits EU-121, MYS-212), p. 28; DGEC, "Panorama 2019 – Biofuels incorporated in France",
(Exhibit EU-191), p.6; French Parliament Report n. 2609, (Exhibit EU-205), p. 16.
1479 DGEC, "Panorama 2019 – Biofuels incorporated in France", (Exhibit EU-191), p.6; French Parliament
Report n. 2609, (Exhibit EU-205), p. 16.

7.1176. The Panel therefore finds, without ruling on whether these additional findings are necessary
in order for Malaysia to establish its claim under Article III:2, that the situation where, as a result
of the exclusion of palm oil-based biofuel from the group of qualifying biofuels for the purposes of
the French TIRIB measure, palm oil-based biofuel is indirectly taxed "in excess" of rapeseed oil and
soybean oil-based biofuels is, in effect, one where imported products are subject to taxes "in excess"
of those applied to like domestic products.
7.2.2.1.6 Conclusion on Article III:2, first sentence
7.1177. For the reasons stated above, the Panel concludes that the exclusion of palm oil -based
biofuel from the group of qualifying biofuel s for the purposes of the French TIRIB measure is
inconsistent with Article III:2, first sentence, of the GATT 1994, because it results in the application
of internal taxes to imported palm oil -based biofuel in excess of those applied to the like domestic
rapeseed and soybean oil-based biofuels.
7.2.2.2 Article III:2, second sentence
7.2.2.2.1 Introduction
7.1178. The Panel now turns to Malaysia's claim under Article III:2, second sentence.
7.1179. Malaysia submits1480 that, should the Panel find that the measure at issue is not inconsistent
with Article III:2, first sentence, the exclusion of petrol and diesel fuels, to the extent that they
contain palm oil -based biofuel, from the French TIRIB measure is inconsistent with Article III:2,
second sentence. Malaysia submits that: (i) petrol and diesel fuels that contain imported palm oil -
based biofuel and petrol and diesel fuels that contain other domestic oil crop -based biofuels are
directly competitive or substitutable products; (ii) petrol and diesel fuels that contain imported palm
oil-based biofuel and palm oil as a feedstock for biofuel production are not similarly taxed to petrol
and diesel that contain domestic oil crop -based biofuel and their feedstocks for biofuel production;
and (iii) the dissimilar taxation of these directly competitiv e or substitutable products is applied so
as to afford protection to domestic production.
7.1180. The European Union submits1481 that Malaysia has not demonstrated that the French TIRIB
measure constitutes a violation of Article III:2, second sentence. More specifically, the European
Union contends that Malaysia has not demonstrated that the relevant products are "directly
competitive or substitutable " within the meaning of Article III:2, second sentence. Furthermore,
while the European Union does not contest that th e exclusion of palm oil -based biofuel from the
French TIRIB measure implies that fuels containing such biofuel, whether imported or domestically
produced, may be taxed differently to fuels containing other types of biofuels, whether imported or
domestically produced, it contests that this tax differential is related to the origin of the product,
that this tax differential exceeds the de minimis threshold to be considered as dissimilar taxation,
and that it is applied so as to afford protection to domestic production.
7.1181. The Panel notes that Malaysia has stated that its claim under Article III:2, second sentence
is made in the alternative to its claim under the first sentence. The Panel has already found a
violation of Article III:2, first sentence, finding that the products at issue are like within the narrow
meaning of such sentence. Therefore, the Panel could stop its analysis here.
7.1182. However, the Panel notes that the likeness of the products at issue under the first sentence
of Article III:2 is an issue that remains disputed, and is admittedly less clear than the likeness of
the products under the broader scope that applies with respect to Article 2.1 of the TBT Agreement
and Articles III:4 and III:2, second sentence. Furthermore, given that the like products within the
meaning of the first sentence have been considered as a subset of the "directly competitive or
substitutable products" within the meaning of the second sentence 1482, the Panel's factual findings
in the context of its assessment of the first sentence necessarily imply a view on whether the same

1480 Malaysia's first written submission, paras. 1025-1059; second written submission, paras. 353-405,
and 410-418.
1481 European Union's first written submission, paras. 1504-1561; second written submission,
paras. 295-312.
1482Appellate Body Report, Korea – Alcoholic Beverages, para. 118. See also Appellate Body Report,
Canada – Periodicals, p. 19.

products are directly competitive or substitutable for the purposes of the second sentence. In light
of this, and for the sak e of completeness, the Panel considers it appropriate to address Malaysia's
claim with respect to Article III:2, second sentence.1483
7.2.2.2.2 Legal standard
7.1183. Article III:2, second sentence provides as follows:
Moreover, no Member shall otherwise apply internal taxes or other internal charges to
imported or domestic products in a manner contrary to the principles set forth in
paragraph 1.*
7.1184. Article III:2, second sentence must be read together with the Note Ad Article III:2, which
states as follows:
A tax conforming to the requirements of the first sentence of paragraph 2 would be
considered to be inconsistent with the provisions of the second sentence only in cases
where competition was involved between, on the one hand, the taxed product and, on
the other hand, a directly competitive or substitutable product which was not similarly
taxed.
7.1185. Article III:1, referred to in Article III:2, second sentence, states that Members:
recognize that internal taxes and other internal charges, and laws, regulations and
requirements affecting the internal sale, offering for sale, purchase, transportation,
distribution or use of products, and internal quantitati ve regulations requiring the
mixture, processing or use of products in specified amounts or proportions, should not
be applied to imported or domestic products so as to afford protection to domestic
production.*
7.1186. Article III:2, second sentence has been interpreted and applied in a number of prior cases,
and both parties present their respective understandings of the applicable legal standard with
reference to prior cases.
7.1187. Based on the text of Article III:2, second sentence, read together with its Ad Note, a
complainant must demonstrate the following four elements to establish an inconsistency with this
provision:
a. that the measure is an internal tax or other internal charge applied, directly or indirectly,
to products;
b. that the imported and domestic products at issue are directly competitive or substitutable
with respect to each other;
c. that these directly competitive or substitutable products are not similarly taxed; and
d. that the dissimilar taxation of these directly competitive or substitutable products is
"applied… so as to afford protection to domestic production".1484
7.1188. With respect to the first element, the Panel has already found that the French TIRIB
measure falls within the scope of Article III:2.
7.1189. The Panel will elaborate further on the elements of the legal standard in Article III:2, second
sentence as necessary in the course of its assessment of the issues in dispute.

1483 The Panel observes that it is not necessarily bound by the fact that a claim is formulated as a claim
made in the alternative. (See e.g. Appellate Body Report, US – Continued Zeroing, paras. 274-279.)
1484 Appellate Body Report, Japan – Alcoholic Beverages II, p. 24.

7.2.2.2.3 Directly competitive or substitutable products
7.1190. The Panel begins with the issue of whether the products at issue are directly competitive
or substitutable within the meaning of Article III:2.
7.1191. Malaysia submits that if the Panel finds that petrol and diesel fuels that contain palm oil -
based biofuel are not like petrol and diesel fuels that contain other oil crop-based biofuels, the same
arguments and evidence lead to a conclusion that these products are directly competitive or
substitutable within the meaning of Article III:2, second sentence.1485
7.1192. The European Union submits that Malaysia has not discharged its burden of demonstrating
that palm oi l-based biofuel and other crop -based biofuels are directly competitive or
substitutable.1486 The European Union maintains that Malaysia has merely demonstrated that palm
oil, soybean and rapeseed oil biofuels appear to be in some competitive relationship, but it has not
investigated how intensive this competitive relationship is. For the European Union, Malaysia has
not described in any way the extent of the competitive relationship between those products on the
French market, which is characterized by the fact that France requires a CFPP of -15oC for the winter
season, which greatly affects the extent to which PME can substitute other biodiesels.1487
7.1193. The Panel notes that Malaysia compares petrol and diesel fuels that contain imported palm
oil-based biofuel with petrol and diesel fuels that contain other domestic oil crop-based biofuels, and
argues that those products are directly competitive or substitutable within the meaning of Article
III:2, second sentence. However, Article III:2, second sentence concerns the treatment of imported
products as compared to the treatment of directly competitive or substitutable domestic products.
Therefore, the comparison for the purposes of the analysis of directly competitive or substitutable
products must be between importe d and domestic products and not between a domestic product
containing an imported input and a domestic product containing a domestic input.1488 Therefore, for
the purposes of its analysis of directly competitive or substitutable products, the Panel will compare
palm oil-based biofuel with rapeseed oil and soybean oil -based biofuels, and not petrol and diesel
fuels that contain imported palm oil -based biofuel with petrol and diesel fuels that contain other
domestic oil crop-based biofuels.
7.1194. The Panel also notes that Malaysia makes the argument that palm oil as feedstock for
biofuel production and other oil -crop feedstocks for biofuel production are directly competitive or
substitutable within the meaning of Article III:2, second sentence; and that palm oil as bi ofuel
feedstock and other directly competitive or substitutable biofuel feedstocks of domestic origin are
dissimilarly taxed so as to afford protection to domestic production. The Panel notes that Malaysia's
argument with respect to palm oil as biofuel fee dstock rests on the same premise of its argument
that palm oil-based biofuel and domestic oil crop-based biofuels are dissimilarly taxed so as to afford
protection to domestic production. For the same reasons explained above 1489 with respect to
Malaysia's argument concerning biofuel feedstocks under Article III:2, first sentence, the Panel does
not consider it necessary to make additional findings with respect to palm oil as feedstock for biofuel
production to secure a positive solution to this dispute or to assist the DSB in making the rulings
and recommendations provided for in the covered agreements.
7.1195. The Panel recalls that both the analysis of like products under Article III:2, first sentence,
and the analysis of direct competitiveness and substitutability under Article III:2, second sentence,
require consideration of the competitive relationship between imported and domestic products, but
like products is a narrower category than directly competitive and substitutable products, so the
degree of competition and substitutability required under the first sentence is higher than that under
the second sentence.1490 The Panel further recalls that products that are close to being perfectly

1485 Malaysia's first written submission, paras. 1028-1029.
1486 European Union's first written submission, para. 1510.
1487 European Union's first written submission, para. 1511-1512.
1488 Malaysia has not argued that there is dissimilar taxation between imported petrol and diesel fuel
and domestic petrol and diesel fuel, but between petrol and diesel fuels that contain imported palm oil-based
biofuel and petrol and diesel fuels that contain other domestic oil crop-based biofuels.
1489 See paras. 7.1132-7.1135 above.
1490 Appellate Body Reports, Philippines – Distilled Spirits, para. 148.

substitutable can be like products, whereas products that compete to a lesser degree would fall
within the scope of Article III:2, second sentence.1491
7.1196. The Panel has already found the competitive relationship among the products at issue in
the French market to be sufficient to justify a finding that, as regards FAME and HVO, ev en under
the narrower scope of like products of Article III:2, first sentence, biofuels made from rapeseed oil
and soybean oil are like palm oil-based biofuel. The factual findings made by the Panel in the context
of finding that the competitive relationship among the products at issue suffices to make them like
within the narrow scope of Article III:2, first sentence mean that, for the same reasons, and a
fortiori, the products are directly competitive or substitutable within the wider scope of the second
sentence of Article III:2.
7.1197. The Panel therefore finds that, as regards FAME and HVO, rapeseed oil - and soybean oil-
based biofuels and palm oil -based biofuel are directly competitive and substitutable within the
meaning of Article III:2, second sentence.
7.2.2.2.4 Dissimilar taxation
7.1198. The Panel now proceeds to address the issue of whether imported palm oil -based biofuel
and domestic oil crop-based biofuel are not similarly taxed.
7.1199. Malaysia maintains that petrol and diesel fuels that contain imported palm oil-based biofuel
and palm oil as a feedstock for biofuel production are not similarly taxed to petrol and diesel that
contain domestic oil crop -based biofuel and their feedstocks for biofuel production. 1492 Malaysia
submits that, while petrol and diesel fuels that contai n oil crop-based biofuels other than palm oil
are eligible for the reduction of the rate of the French TIRIB, petrol and diesel fuels that contain
palm oil-based biofuel do not benefit from such reduction. For Malaysia, as a consequence, for petrol
and die sel fuels that contain imported palm oil -based biofuel a higher tax rate is imposed, as
compared to the tax levied on petrol and diesel fuels that contain domestic oil crop-based biofuel.1493
7.1200. The European Union submits that the incorporation of imported soyb ean oil, rapeseed oil,
sunflower oil biofuels, and biofuels produced from waste material and animal fat as well as second
generation biofuels triggers the same reduction as when these biofuels are domestic; and,
conversely, the incorporation of domestic pa lm oil-based biofuel does not produce any reduction.
For the European Union, it is not the incorporation of domestic vis-à-vis imported biofuels that
triggers the reduction, but rather the type of biofuel that is incorporated regardless of its origin.1494
The European Union adds that the discussion in the French Parliament on the exclusion of soybean
oil-based biofuel from the French TIRIB measure from 2022 confirms that the French TIRIB measure
makes a distinction based on crops, on the grounds of environmen tal protection, GHG emissions,
climate change mitigation and biodiversity conservation, and not based on whether the crops are
imported or domestically produced.1495
7.1201. The Panel has already found that imported palm oil -based biofuel is indirectly taxed in
excess of the like domestic rapeseed oil - and soybean oil -based biofuels. Thus, there is a tax
differential between the products at issue.
7.1202. The Appellate Body has clarified that to be "not similarly taxed " within the meaning of
Article III:2, second sentence, the tax burden on imported products must be heavier than on directly
competitive or substitutable domestic products, and more than de minimis. A determination of
whether the tax burden is more than de minimis can only be made on a case -by-case basis.1496
Panels must look at the market in question, and the products themselves, and assess whether the
difference in taxation has an impact on the market.1497

1491 Appellate Body Reports, Philippines – Distilled Spirits, para. 149.
1492 Malaysia's first written submission, para. 1045.
1493 Malaysia's first written submission, paras. 1033 and 1039.
1494 European Union's first written submission, paras. 1523-1524
1495 European Union's first written submission, paras. 1531-1535.
1496 Appellate Body Report, Japan – Alcoholic Beverages II, p. 27.
1497 Panel Report, Chile – Alcoholic Beverages, paras. 7.90-7.91.

7.1203. In this respect, Malaysia presents an example of an e conomic operator releasing for
consumption a volume of 200,000 hectolitres petrol and diesel fuels in 2020 and 2021. According to
Malaysia:
a. If the economic operator includes a share of renewable biofuels eligible for the tax
reduction of 7.92%, i.e. 0,08% below the target percentage of incorporation, the amount
of the tax for diesel in 2020 would be: 200,000 hL* EUR 101 /hL * 0.08% = EUR 16,160;
and the amount of the tax for petrol and diesel fuel in 2021 would be: 200,000 hL* EUR
104 /hL *0.08% = EUR 16,640. Should palm oil-based biofuel be incorporated in the petrol
and diesel fuels, it would not be counted within the 7.92% but within the 0.08%.1498
b. If the economic operator instead includes 4.09% of palm oil -based biofuel and 3.91% of
biofuel made of rapeseed oil, the amount of the TIRIB would be: 200,000 hL * EUR 101
/hL * 4.09% = EUR 826,180 for 2020; 200,000 hL * EUR 104 /hL * 4.09 = EUR 850,720
for 2021.1499
c. If the economic operator did not include any biofuel, or only palm oil -based biofuel, the
amount of the TIRIB would be: 200,000 hL * EUR 101 /hL * 8% = EUR 1,616,000 in 2020
and 200,000 hL * EUR 104 /hL * 8% = EUR 1,664,000 in 2021.1500
7.1204. Malaysia submits that the difference in taxation is far above de minimis. That is because if
the share of rapeseed oil-based biofuel incorporated into the petrol and diesel fuels is greater than
or equal to the national target percentage for using renewable energy in the transport sector (8%
in 2020 and 2021), the tax would be zero, case in which the difference in taxation between the two
categories of like products is significantly higher and thus far above the de minimis standard.1501
7.1205. The European Union argues that, even if the Panel were to find that there is a tax
differential, it would still find that it does not exceed th e de minimis threshold because when an
economic operator in France released petrol and diesel fuels for consumption that do not include any
biofuel or that include only palm oil -based biofuel, the amount of the TIRIB in 2021 would be EUR
0.08 per litre of biofuel, as compared to EUR 0 per litre as applicable TIRIB where the incorporation
objectives of renewable biofuels are fully met (8%). For the European Union, the difference is
certainly not significant. The European Union adds that the calculations made by Malaysia are an
overestimation of the TIRIB due, since the TIRIB revenue amounted to EUR 900,000 in 2018 and
EUR 600,000 in 2019, for the whole of France, and the incorporation rates of renewable biofuels
achieved in 2019 were 7.3% and 7.9% (in terms o f actual volume) respectively for the diesel and
petrol sectors, for target incorporation objectives, which were 7.9% that year on a national level.1502
7.1206. As previously explained, based on the examples provided in section 2 of th is Report to
illustrate the operation of the TIRIB formula, if the diesel released for consumption contains 8% (or
more) of renewable energy sources, including rapeseed oil- and soybean oil-based biofuel, the TIRIB
rate would be EUR zero per hectolitre. If this is compared to the full amount of the TIRIB rate of EUR
8.08 per hectolitre if the diesel released for consumption does not contain any renewable energy
source, including rapeseed oil and soybean oil-based biofuel, but contains 8% (or more) of palm oil-
based biofuel, the difference in taxation would be 8.08 euros per hectolitre.
7.1207. The Panel considers that the mere possibility of achieving a tax rate of EUR zero per
hectolitre by fully satisfying the incorporation target is sufficient to have a significant impact on the
market, incentivizing the use of qualifying biofuels for the purposes of the French TIRIB measure,
including rapeseed oil- and soybean oil-based biofuels, allowing such biofuels to compete for a share
of the fuel market, and excluding palm o il-based biofuel from competing for such share of the fuel
market.
7.1208. This impact on the market can be illustrated by the fact that, before announcing a decrease
in the use of palm oil as biofuel feedstock, Total had unsuccessfully challenged the exclusion o f oil
palm-crop based biofuel from the group of qualifying biofuels for the purposes of the French TIRIB

1498 Malaysia's first written submission, para. 1035.
1499 Malaysia's first written submission, para. 1036.
1500 Malaysia's first written submission, para. 1038.
1501 Malaysia's first written submission, para. 1040.
1502 European Union's first written submission, paras. 1540-1544.

measure.1503 In addition, this is further reinforced by the EU's characterization of the tax as being
"about increasing the cost of using fuels which do not contain a sufficient quantity of renewable
energy, thereby creating an incentive for the use of those that contain such quantity."1504
7.1209. In light of the above, in the Panel's view, the tax burden on imported palm oil-based biofuel
resulting from the diffe rence in taxation is heavier than on directly competitive or substitutable
domestic products, and more than de minimis. Consequently, the difference in taxation amounts to
dissimilar taxation within the meaning of Article III:2, second sentence.
7.1210. Malaysia also refers to a mandate change whereby the share of rapeseed oil-based biofuel
was counted at its actual value plus 20%. Malaysia submits that, from 1 August 2020 until
31 December 2021, any share of FAME whose CFPP is at the most -10°C, was counted at 20% over
its actual value for the purposes of the French TIRIB measure. Malaysia maintains that only rapeseed
oil-based biofuel, with a CFPP value of -14°C, benefited from the accounting change to the calculation
of the reduction of the French TIRIB. Accor ding to Malaysia, petrol and diesel fuels that contained
palm oil-based biofuel were excluded from benefitting from this increased counting because its CFPP
value is higher than -10°C. For Malaysia, this reinforces its conclusion that the tax burden differential
between the imported and domestic products is far above the de minimis standard.1505
7.1211. The European Union contends that the temporary incentive, which was in force from
1 August 2020 until 31 December 2020 and not prolonged, does not differentiate betwe en
domestically produced and imported biofuels, so it cannot be a valid basis for a claim regarding the
tax differential between domestic and imported biofuels.1506
7.1212. The Panel has already found dissimilar taxation within the meaning of Article III:2, second
sentence. This is regardless of the existence of the accounting change related to the CFPP of
rapeseed oil-based biofuel, which was valid from 1 August 2020 until 31 December 2020. Therefore,
it is not necessary for the Panel to rule on the increased counti ng, as it could only reinforce the
conclusion on dissimilar taxation that it has already reached.
7.1213. The Panel therefore finds that, as a result of the exclusion of palm oil -based biofuel from
the group of qualifying biofuels for the purposes of the French TI RIB measure, imported palm oil -
based biofuel and the like domestic products rapeseed oil - and soybean oil-based biofuels are not
similarly taxed.
7.2.2.2.5 So as to afford protection to domestic production
7.1214. The Panel now turns to the issue of whether the dissimilar taxation of these directly
competitive or substitutable imported and domestic products is applied so as to afford protection to
domestic production.
7.1215. Malaysia argues that the French TIRIB measure is applied so as to afford protection to
domestic oil crop-based biofuels and their feedstocks because the tax differential is sufficiently high
to conclude on its protective application; and because it is designed in such a way as to encourage
the incorporation into petrol and diesel fuels of domestic oil crop-based biofuels and their feedstocks,
such as rapeseed oil -based biofuel and its feedstock, to the detriment of imported palm oil -based
biofuel.1507 Malaysia submits that the design and structure of the French TIRIB measure demonstrate
its protective application, because it excludes from the tax reduction petrol and diesel fuels, to the
extent that they contain imported palm oil-based biofuel, and thus, palm oil-based biofuel and palm
oil as a biofuel feedstock, whereas petrol and diesel fuels that contain domesti c oil crop -based
biofuels, and thus, domestic oil crop -based biofuels and their feedstocks benefit from the tax
reduction. Malaysia adds that the increased counting for biofuel with a CFPP of at most -10°C for

1503 Press article, 11 October 2019, (Exhibit MYS-245); and THEN24, "TotalEnergies will no longer use
palm oil from 2023", (Exhibit EU-324).
1504 European Union's first written submission, para. 1425.
1505 Malaysia's first written submission, paras. 1046-1050.
1506 European Union's first written submission, paras. 1525-1530.
1507 Malaysia's first written submission, paras. 1055, 1057-1058; second written submission, para. 415.

the purposes of quantifying the tax reduction only benefited domestically produced rapeseed oil -
based biofuel.1508
7.1216. The European Union disputes that its legal framework for renewable energy as well as the
exclusion of palm oil-based biofuel from the French TIRIB measure is designed to afford protection
to domestic products. The European Union argues that palm oil -based biofuel is not excluded from
the French TIRIB measure because it is imported, as also domestic palm oil-based biofuel is subject
to the same exclusion, which had serious consequences on inv estment and employment in France.
The European Union maintains that, despite those consequences, the French legislator rejected the
French Government's proposal to relax that exclusion, referring to the environmental and climate
change impact of palm oil c ultivation and the associated moral concerns, in line with the very
objective and revealing structure of the French TIRIB.1509
7.1217. The Appellate Body has explained that the question of whether dissimilar taxation "affords
protection" for the purposes of Article III:2, second sentence is not one of intent, but rather the
structure of the measure in question and its application on domestic as compared to imported
products.1510 The Appellate Body also stated that, although the aim of a measure may not be easily
ascertained, its protective application can most often be discerned from the "design, the
architecture, and the revealing structure of a measure ".1511 The protective application of dissimilar
taxation can only be determined "on a case-by-case basis, taking account of all relevant facts".1512
In certain cases, the magnitude of the dissimilar taxation may be evidence of such a protective
application.1513
7.1218. The Panel's analysis of its structure and application reveals that the French TIRIB is a tax
that varies in re lation to the extent to which the fuel released achieves established incorporation
targets for renewable energy sources. While biofuels, including rapeseed oil- and soybean oil-based
biofuels, are considered as renewable energy sources for the purposes of the French TIRIB, palm
oil-based products are excluded from being considered as renewable energy sources.
7.1219. As already explained, as a consequence of the exclusion of palm oil -based products from
being considered as renewable energy sources for the purposes of the French TIRIB, or more
specifically, as a result of the exclusion of palm oil-based biofuel from the group of qualifying biofuels
for the purposes of the French TIRIB measure, if palm oil -based biofuel is incorporated into diesel
to satisfy any portion of the incorporation target, replacing renewable energy sources, the tax burden
on such diesel will increase in proportion to the amount of palm oil -based biofuel incorporated. In
contrast, if rapeseed oil - and/or soybean oil -based biofuels are incorpor ated into diesel to satisfy
any portion of the incorporation target, the tax burden on such diesel will decrease in proportion to
the amount of rapeseed oil - and/or soybean oil-based biofuels incorporated, with the possibility of
achieving a tax rate of EUR zero per hectolitre if the incorporation target is fully satisfied. The Panel
has already found that the mere possibility of achieving a tax rate of EUR zero per hectolitre by fully
satisfying the incorporation target is sufficient to incentivize the use of qualifying biofuels for the
purposes of the French TIRIB measure, including rapeseed oil - and soybean oil -based biofuels,
allowing such biofuels to compete for a share of the fuel market, and excluding palm oil-based biofuel
from competing for such share of the fuel market.
7.1220. The Panel also recalls that Malaysia is one of the two world's largest producers of palm oil,
which produces and exports palm oil as feedstock for biofuel production and palm oil -based
biofuel1514, including to the European Union.1515 In turn, France has been one of the major producers

1508 Malaysia's first written submission, paras. 1055-1056; second written submission, paras. 417.
1509 European Union's first written submission, paras. 1551-1552.
1510Appellate Body Report, Japan – Alcoholic Beverages II, p. 29.
1511Appellate Body Report, Japan – Alcoholic Beverages II, p. 29.
1512Appellate Body Report, Korea – Alcoholic Beverages, para. 137.
1513Appellate Body Report, Japan – Alcoholic Beverages II, p. 29.
1514 UFOP Global Market Supply 2020/2021, (Exhibit MYS-11), p. 27; UFOP Global Market Supply
2019/2020, (Exhibits EU-121, MYS-212), p. 25.
1515 USDA FAS, "GAIN Biofuels Annual: European Union", 22 June 2021, (Exhibit MYS-139), p. 29; USDA
FAS, "GAIN Biofuels Annual: EU-28", 15 July 2019, (Exhibit EU-128), p. 32; USDA FAS, "GAIN Report, Biofuels
Annual: EU-28", 15 July 2015, (Exhibit MYS-77), p. 27.

and consumers of biodiesel in the European Union1516, producing rapeseed oil-based biofuel, soybean
oil-based biofuel and palm oil -based biofuel.1517 While most of the oil crop -based biofuel produced
in France is rapeseed oil-based biofuel1518, France also produces soybean oil-based biofuel and palm
oil-based biofuel, but to a lesser extent.1519 Counted together, rapeseed oil- and soybean oil-based
biofuels comprise most of the biodiesel produced in France.
7.1221. This means that the exclusion of palm oil -based biofuels from the group of qualifying
biofuels for the purposes of the French TIRIB measure has the effect of incentivizing the use of
rapeseed oil-based biofuel, which is the oil crop -based biofuel that France produces the most, and
soybean oil -based biofuels, which is also produced in France but to a smaller extent, to the
advantage of the French domestic producers of such biofuels, and to the detriment of imports of
palm oil-based biofuels from Malaysia. Therefore, by excluding palm oil -based biofuels from the
group of qualifying biofuels, the French TIRIB measure has the effect of affording protection to
French producers of rapeseed oil- and soybean oil-based biofuels.
7.1222. Malaysia also maintains that the French measure is a support scheme implemented under
the general framework of the RED II and the Delegated Regulation and, therefore, any
argumentation as regards the protectionist intention of the EU measures, in general terms, is also
relevant to demonstra te the true objective pursued by the French TIRIB measure. Malaysia also
refers to the role that protectionist motivations may have played in advancing the legislation in the
French legislature.1520
7.1223. The European Union contends that the statements by Members of the French legislature in
parliamentary debates demonstrate that the French TIRIB measure is driven primarily by
environmental concerns. 1521 The European Union submits that the fact that the other oil crops
biofuels do not fall within the same exclusion from the French TIRIB measure is objectively explained
both by the EU analysis with regard to high ILUC-risk crop and their share of expansion in land with
high-carbon stock, as well as by information elaborated by the French authorities, which concluded,
for instance, that the large increase in rapeseed production in France between 2005 and 2008 had
a limited effect on deforestation.1522 For the European Union, it is coherent with the climate change
and environmental objective of the French TIRIB that this type of biofuel is not treated the same
way as palm oil -based biofuel for the purpose of the French TIRIB measure, and the fact that the
incorporation of imported biofuel in the fuel released for consumption in France contributes to the
French TIRIB measure confirms that the structure, design and application of the measure is not to
afford protection to domestic products.1523
7.1224. The Panel has focused its analysis on the structure and application of the measure itself,
and has found, on that basis, that the French TIRIB measure has the effect of affording protection
to French producers of rapeseed oil- and soybean oil-based biofuels. Under these circumstances, the
Panel considers it unnecessary, for the purposes of the evaluation of the claim under Artic le III:2,
second sentence, to delve further into objectives expressed by individual legislators or the public
policy concerns that may lay behind the measure.
7.1225. The Panel therefore finds that the French TIRIB measure has the effect of affording
protection to French producers of rapeseed oil - and soybean oil-based biofuels, which is sufficient

1516 UFOP Global Market Supply 2020/2021, (Exhibit MYS-11), p. 28; UFOP Global Market Supply
2019/2020, (Exhibits EU-121, MYS-212), p. 24; USDA FAS, "GAIN Biofuels Annual: European Union",
22 June 2021, (Exhibit MYS-139), pp. 25-26; USDA FAS, "GAIN Biofuels Annual: EU-28", 15 July 2019,
(Exhibit EU-128), pp. 28-29; USDA FAS, "GAIN Report, Biofuels Annual: EU-28", 15 July 2015, (Exhibit MYS-
77), pp. 22-27.
1517 DGEC, "Panorama 2019 - Biofuels incorporated in France", (Exhibit EU-191), p. 6; French Parliament
Report n. 2609, (Exhibit EU-205), p. 16.
1518 UFOP Global Market Supply 2020/2021, (Exhibit MYS-11), p. 30; UFOP Global Market Supply
2019/2020, (Exhibits EU-121, MYS-212), p. 28; DGEC, "Panorama 2019 - Biofuels incorporated in France",
(Exhibit EU-191), p.6; French Parliament Report n. 2609, (Exhibit EU-205), p. 16.
1519 DGEC, "Panorama 2019 - Biofuels incorporated in France", (Exhibit EU-191), p.6; French Parliament
Report n. 2609, (Exhibit EU-205), p. 16.
1521 European Union's first written submission, para. 1555-1567.
1522 European Union's first written submission, para. 1553.
1523 European Union's first written submission, para. 1554; second written submission, para. 308.

under the circumstances of this dispute to conclude that the dissimilar taxation is applied "so as to
afford protection to domestic production" within the meaning of Article III:2, second sentence.
7.2.2.2.6 Conclusion on Article III:2, second sentence
7.1226. The Panel concludes that the exclusion of palm oil -based biofuel from the group of
qualifying biofuels for the purposes of the French TIRIB measure is inconsistent with Article III:2,
second sentence, of the GATT 1994, because it results in dissimilar taxation between imported palm
oil-based biofuel and the directly competitive or substitutable domestic rapeseed oil and soybean
oil-based biofuels, and this dissimilar taxation is appl ied so as to afford protection to domestic
production.1524
7.2.2.3 Article I:1
7.2.2.3.1 Introduction
7.1227. Having addressed the claims relating to the national treatment obligations in the first and
second sentences of Article III:2, the Panel now proceeds to address whether the F rench TIRIB
measure is inconsistent with the MFN obligation in Article I:1.
7.1228. Malaysia submits1525 that the exclusion of petrol and diesel fuels, to the extent that they
contain palm oil -based biofuel, from the French TIRIB measure is inconsistent with Articl e I:1,
because it discriminates against such petrol and diesel fuels and, indirectly, against Malaysian palm
oil-based biofuel and its feedstock, while favouring petrol and diesel fuels that contain other like
imported oil crop -based biofuels and, thus, ot her like imported oil crop -based biofuels and their
feedstocks of foreign origin. More specifically, Malaysia submits that: (i) the exclusion of petrol and
diesel fuels, to the extent that they contain palm oil-based biofuel, from the French TIRIB measure
falls within the scope of application of Article I:1; (ii) petrol and diesel fuels that contain imported
palm oil-based biofuel are like petrol and diesel fuels that contain other imported oil crop -based
biofuels; (iii) the exclusion of petrol and diesel fuels, to the extent that they contain palm oil-based
biofuel, from the French TIRIB measure constitutes an advantage to petrol and diesel fuels that
contain other like imported oil crop -based biofuels and their feedstocks of foreign origin; and (iv)
that a dvantage is not extended immediately and unconditionally to petrol and diesel fuels that
contain palm oil-based biofuel and palm oil as a feedstock for biofuel production.
7.1229. The European Union submits1526 that Malaysia's claim under Article I:1 should be rejected.
More specifically, the European Union does not dispute that the French TIRIB measure is a matter
which is capable of falling within Article III:2, and therefore also within Article I:1. However, the
European Union contends that Malaysia has not demonstrated that the relevant products are like
within the meaning of Article I:1, first sentence. Furthermore, while the European Union does not
contest that the French TIRIB measure grants an advantage, it contests that such advantage is not
accorded immediately and unconditionally to the like product originating in all the other WTO
Members.
7.2.2.3.2 Legal standard
7.1230. Article I:1 states:
With respect to customs duties and charges of any kind imposed on or in connect ion
with importation or exportation or imposed on the international transfer of payments
for imports or exports, and with respect to the method of levying such duties and
charges, and with respect to all rules and formalities in connection with importation and
exportation, and with respect to all matters referred to in paragraphs 2 and 4 of Article
III,* any advantage, favour, privilege or immunity granted by any Member to any
product originating in or destined for any other country shall be accorded immedi ately

1524 Malaysia's first written submission, para. 1021.
1525 Malaysia's first written submission, para. 974-999; second written submission, paras. 353-406.
1526 European Union's first written submission, para. 1562-1577; second written submission,
paras. 313-314.

and unconditionally to the like product originating in or destined for the territories of all
other contracting parties.
7.1231. As already noted in the context of the Panel's assessment of the claim under Article I:1
against the high ILUC -risk cap and phase -out, a complainant must demonstrate the following
elements to establish an inconsistency with Article I:1:
a. that the measure at issue falls within the scope of application of Article I:1;
b. that the imported products at issue are like products within the meaning of Article I:1;
c. that the measure at issue grants an advantage, favour, privilege, or immunity on a product
originating in the territory of any country; and
d. that the advantage so accorded is not accorded immediately and unconditionally to like
products originating in the territory of all Members.1527
7.1232. The Panel will elaborate further on the elements of the legal standard in Article I:1 as
necessary in the course of its assessment of the issues in dispute.
7.2.2.3.3 Scope of application of Article I:1
7.1233. The Panel begins with the issue of whether the French TIRIB measure falls within the scope
of application of Article I:1.
7.1234. Malaysia maintains that, by demonstrating that the exclusion of petrol and diesel fuels, to
the extent that they contain palm oil -based biofuel, f rom the French TIRIB measure is a matter
referred to in Article III:2, it has established that it falls within the scope of Article I:1.1528 Malaysia
also contends that the likeness of the products is not relevant in determining whether a measure is
a matter referred to in Article III:2.1529
7.1235. The European Union submits that the French TIRIB is an internal tax, and France is a WTO
Member, so the French TIRIB is a matter which is capable of falling within Article III:2, and therefore
also within Article I:1. 1530 The European Union submits, however, that the exclusion of palm oil -
based biofuel from the French TIRIB measure creates a tax differential be tween products which
Malaysia has not demonstrated to be like or directly competitive or substitutable, so the Panel should
conclude that the exclusion from the French TIRIB measure is not a matter falling within Article III:2
and, as a consequence, under Article I:1.1531
7.1236. The Panel observes that Article I:1 covers a wide range of measures, including "all matters
referred to in paragraphs 2 and 4 of Article III ". Thus, internal matters subject to the national
treatment obligation under Articles III:2 and III:4 are also within the scope of the MFN obligation
under Article I:1.1532 This includes internal taxes applied, directly or indirectly, to products, referred
to in Article III:2.
7.1237. The Panel has already found that the French TIRIB is an internal tax applied, di rectly or
indirectly, to products, which falls within the scope of Article III:2, and that, consequently, the
French TIRIB measure, as a feature of the French TIRIB, also falls within the scope of Article III:2.
Because the French TIRIB measure falls within the scope of Article III:2, it is a matter referred to in
Article III:2 and it thus falls within the scope of Article I:1.
7.1238. As Malaysia contends, and contrary to the European Union's argument, whether the
products concerned are like is irrelevant in the determination of whether the French TIRIB measure
falls within the scope of Article I:1. Even if the products concerned were found not to be like, the
French TIRIB would still be an internal tax applied to products, subject to the MFN obligation

1527 Appellate Body Reports, EC – Seal Products, para. 5.86.
1528 Malaysia's first written submission, paras. 977-978.
1529 Malaysia's second written submission, para. 356.
1530 European Union's first written submission, para. 1563.
1531 European Union's first written submission, paras. 1564-1565.
1532 Appellate Body Reports, EC – Seal Products, para. 5.80.

contained in Article I:1, and the French TIRIB measure, as a feature of the French TIRIB, would still
fall under the scope of application of Article I:1 of the GATT 1994.
7.1239. The Panel therefore finds that the French TIRIB measure falls within the scope of application
of Article I:1.
7.2.2.3.4 Like products
7.1240. The Panel now turns to the issue of whether the products at issue are like products within
the meaning of Article I:1.
7.1241. Malaysia maintains that palm oil-based biofuel and palm oil as a biofuel feedstock are like
other oil crop-based biofuels and their respective feedstocks; and thus, petrol and diesel fuels that
contain palm oil -based biofuel are like petrol and diesel fuels that contain other oil crop -based
biofuels for the purposes of Article I:1. Malaysia refers to its a rguments in the context of its claims
against the high ILUC-risk cap and phase-out.1533
7.1242. The European Union submits that it has already explained with regard to Article III:2 that
Malaysia has neither demonstrated that palm oil-based biofuel is like all the other biodiesels or just
RME, and SBME, nor has it shown that these products are directly competitive or substitutable, and
notably in the French market. For the European Union, it follows that the exclusion of palm oil-based
biofuel from the French TIRIB m easure creates a tax differential between products which Malaysia
has not demonstrated to be like or directly competitive or substitutable.1534
7.1243. The Panel notes that Malaysia compares petrol and diesel fuels that contain imported palm
oil-based biofuel with petrol and diesel fuels that contain other imported oil crop-based biofuels, and
argues that those products are like within the meaning of Article I:1. However, Article I:1 concerns
the treatment of imported products as compared to the treatment of other li ke imported products.
Therefore, the comparison for the purposes of the analysis of like products must be between
imported products and not between a domestic product containing an imported input and a domestic
product containing another imported input. 1535 Therefore, for the purposes of its analysis of like
products, the Panel will compare palm oil -based biofuel with rapeseed oil and soybean oil -based
biofuels, and not petrol and diesel fuels that contain imported palm oil-based biofuel with petrol and
diesel fuels that contain other imported oil crop-based biofuels.
7.1244. The Panel also notes that Malaysia makes the argument that palm oil as feedstock for
biofuel production is like other oil crop-based feedstocks for biofuel production within the meaning
of Article I:I; and that the French TIRIB measure discriminates against palm oil as biofuel feedstock,
while favouring other like oil crop-based biofuel feedstocks of different origins. The Panel notes that
Malaysia's argument with respect to palm oil as biofuel fe edstock rests on the same premise of its
argument with respect to palm oil -based biofuel. For the same reasons explained above 1536 with
respect to Malaysia's argument concerning biofuel feedstocks under Article III:2, first sentence, the
Panel does not consider it necessary to make additional findings with respect to palm oil as feedstock
for biofuel production to secure a positive solution to this dispute or to assist the DSB in making the
rulings and recommendations provided for in the covered agreements.
7.1245. The Panel recalls that it has already found that, as regards FAME and HVO, rapeseed oil -
and soybean oil -based biofuels are like palm oil -based biofuel within the narrow scope of Article
III:2, first sentence. The factual findings made by the Panel in the context of finding that the
competitive relationship among the products at issue suffices to make them like within the narrow
scope of Article III:2, first sentence mean that, for the same reasons, and a fortiori, these products
are like under the wider scope of Article I:1.

1533 Malaysia's first written submission, para. 990.
1534 European Union's first written submission, para. 1564.
1535 Malaysia has not argued that there is discrimination among like petrol and diesel fuels of different
origins, but between petrol and diesel fuels that contain imported palm oil-based biofuel and petrol and diesel
fuels that contain other imported oil crop-based biofuels.
1536 See paras. 7.1132-7.1135 above.

7.1246. The Panel therefore finds that, as regards FAME and HVO, rapeseed oil - and soybean-oil
based biofuels are like palm oil-based biofuel within the meaning of Article I:1.
7.2.2.3.5 Advantage granted to a product originating in the territory of any other country
7.1247. The Panel will now proceed to address whether the exclusion of petrol and diesel fuels, to
the extent that they contain palm oil -based biofuel, from the French TIRIB measure grants an
advantage to other like imported oil crop-based biofuels.
7.1248. Malaysia submits that the exclusion of petrol and diesel fuels, to the extent that they
contain palm oil-based biofuel, from the French TIRIB measure constitutes an advantage granted to
petrol and diesel fuels that contain oil crop -based biofuels other tha n palm oil -based biofuel,
regardless of their origin, and thus, indirectly, to imported oil crop -based biofuels other than palm
oil-based biofuel and their respective feedstocks. 1537 Malaysia maintains that a tax reduction is
available to petrol and diesel incorporating renewable energy biofuels, but excludes petrol and diesel
fuels to the extent they contain palm oil -based biofuel. 1538 Malaysia argues that the economic
operators will favour oil crop-based biofuels other than palm oil-based biofuel, whose incorporation
into fuel can trigger either a lower or zero tax rate.1539 For Malaysia, thus, the advantage of qualifying
for a lower tax rate, and, as a result, better competitive opportunities, is granted to other imported
oil crop-based biofuels, but not to palm oil-based biofuel.1540
7.1249. The European Union does not contest that the French TIRIB measure grants an advantage
for the purpose of Article I:1.1541
7.1250. Previous panels have considered advantages within the meaning of Article I:1 to be those
that create more favourable competitive opportunities or affect the commercial relationship between
products of different origins. 1542 They have also found that an advantage exists when a measure
modifies the conditions of competition for certain imported products relative to other like imported
products.1543 The focus of the analysis under Article I:1 should be on the impact of a given measure
on the equality of competitive opportunities for the like imported products rather than the actual
trade effects of a measure.1544
7.1251. The Panel recalls that the French TIRIB is a tax that varies in relation to the extent to which
the fuel released achieves established incorporation targets for renewable energy sources. While
biofuels, including rapeseed oil- and soybean oil-based biofuels, are considered as renewable energy
sources for the purposes of the French T IRIB, palm oil -based products are excluded from being
considered as renewable energy sources. As explained, if rapeseed oil - and soybean oil -based
biofuels are incorporated into diesel to satisfy any portion of the incorporation target, the tax burden
on such diesel will decrease in proportion to the amount of rapeseed oil - and/or soybean oil-based
biofuels incorporated, with the possibility of achieving a tax rate of EUR zero per hectolitre if the
incorporation target is fully satisfied.
7.1252. The Panel considers that a lower tax rate that can be as low as zero undoubtedly creates
more favourable competitive opportunities for the products qualifying to receive such advantage.
Indeed, when incorporated into fuel to satisfy the incorporation targets, rapeseed oil - and soybean
oil-based biofuels originating in the territory of any country qualify to receive an advantage in the
form of a lower tax rate that can be as low as zero, and this advantage allows such biofuels to
compete for a share of the fuel market.
7.1253. The Panel therefore finds that the French TIRIB measure grants an advantage to rapeseed
oil- and soybean oil-based biofuels originating in the territory of any country.

1537 Malaysia's first written submission, para. 984.
1538 Malaysia's first written submission, paras. 984-986.
1539 Malaysia's first written submission, para. 987.
1540 Malaysia's first written submission, paras. 986-989.
1541 European Union's first written submission, para. 1567.
1542 Panel Reports, US – Poultry (China), para. 7.415, and Colombia – Ports of Entry, para. 7.341.
1544 Appellate Body Reports, EC – Seal Products, para. 5.87.

7.2.2.3.6 Not accorded immediately and unconditionally to like products originating in
the territory of all Members
7.1254. The Panel now turns to the issue of whether the advantage granted to rapeseed oil and
soybean oil-based biofuels originating in the territory of any country is accorded immediately and
unconditionally to imported palm oil-based biofuel.
7.1255. Malaysia maintains that the advantage granted to petrol and diesel fuels that contain other
like imported oil crop -based biofuels and to their feedstocks is not accorded immediately and
unconditionally to petrol and diesel fuels that contain imported palm oil-based biofuel and to palm
oil as a biofuel feedstock.1545 Malaysia submits that, by subjecting the French TIRIB measure to the
classification of biofuels as renewable, and excluding palm oil-based biofuel from such classification,
and thus, from the scope of products eligible to receive the tax reduction, a condition to the granting
of an advantage has been introduced, which has a detrimental impact on the competitive
opportunities of, and thus discriminates against petrol and diesel fuels that cont ain imported palm
oil-based biofuel from Malaysia and against palm oil as a biofuel feedstock.1546
7.1256. The European Union maintains that the French TIRIB measure grants an advantage to
imported or domestic oil crop-based biofuel other than imported or domestic palm oil-based biofuel.
For the European Union, therefore, the French TIRIB measure does not grant an advantage to any
product originating in any country, which is not accorded immediately and unconditionally to the like
product originating in all the other WTO Members.1547
7.1257. The Panel notes that palm oil -based products are excluded from being considered as
renewable energy sources for the purposes of the French TIRIB, or more specifically, palm oil-based
biofuel is excluded from the group of qualifying biofuels for the purposes of the French TIRIB
measure. This means that the advantage that is granted through the French TIRIB measure to
rapeseed oil- and soybean oil -based biofuels is not conferred immediately and unconditionally to
palm oil-based biofuel.
7.1258. The European Union submits that the French TIRIB measure is an origin-neutral measure,
which creates a tax differential in the group of like products identified by Malaysia as all oil -crop
based biofuels, but the tax differential created does not target any impo rts let alone imports from
any WTO Member. 1548 The European Union adds that, in order to understand if the measure
discriminates between like products from one Member vis-à-vis the products of other Members, it is
necessary to consider the whole group of products that are like, domestic and imported.1549 For the
European Union, Malaysia should have assessed the impact of the regulatory distinction introduced
by the French TIRIB measure on the whole group of like products, as they are produced by the
different WTO Members, but it concentrates on rapeseed oil - and soybean oil-based biofuels, and
therefore conducts a partial analysis that cannot demonstrate any asymmetrical impact of the
measure on the whole group of like imported products.1550
7.1259. For the European Union , the simple fact that Malaysia does not export to the EU other
vegetable oils for the production of biofuels than crude and refined palm oil does not say much about
whether Malaysia is discriminated against vis-à-vis other Members when all the products that should
be included in the comparison are considered.1551
7.1260. The Panel notes that Article I:1 requires that any advantage granted to any product, and
not to some products, originating in any other country, and not some other countries, is accorded
immediately and unconditionally to the like product originating in all other Members, and not in some
other Members.1552 A complainant does not need to demonstrate the trade effects of the measure

1545 Malaysia's first written submission, para. 997.
1546 Malaysia's first written submission, paras. 993-996.
1547 European Union's first written submission, paras. 1568-1569.
1548 European Union's first written submission, para. 1570.
1549 European Union's first written submission, para. 1571.
1550 European Union's first written submission, para. 1577.
1551 European Union's first written submission, para. 1574.
1552 Appellate Body Reports, EC – Seal Products, para. 5.87; and Canada – Autos, para. 79.

at issue, so the focus of the analysis should be on the impact of a given measure on the equality of
competitive opportunities for the like imported products.1553
7.1261. If palm oil -based biofuel has been found to be like rapeseed oil - and soybean oil -based
biofuels, the comparison to be made for the purposes of the MFN obligation is not between palm oil-
based biofuel imported from Malaysia and palm oil-based biofuel imported from any other country,
but between palm oil-based biofuel imported from Malaysia and the like products rapeseed oil- and
soybean oil-based biofuels imported from any other country. Under this comparison, it is clear that
the advantage that is granted to rapeseed oil - and soybean oil -based biofuels originating in the
territory of any country is not accorded immediately and unconditionally to like palm oil-based biofuel
originating in the territory of Malaysia. In the Panel's view, this is sufficient to find that this element
of the analysis has been established.
7.1262. In any event, and to illustrate this further, the Panel notes that Mala ysia is an important
producer of palm oil-based biofuel 1554, which exports palm oil -based biofuel to the European
Union1555, and such biofuel does not qualify to receive the advantage of the French TIRIB measure;
and France, one of the major consumers of biodi esel in the European Union 1556, imports biodiesel
from the European Union 1557, which is mostly rapeseed oil -based biofuel 1558, and such biofuel
qualifies to receive the advantage of the French TIRIB measure.
7.1263. The Panel therefore finds that the advantage granted to rapeseed oil and soybean oil based
biofuels originating in the territory of any country is not accorded immediately and unconditionally
to like palm oil-based biofuel originating in the territory of Malaysia.
7.2.2.3.7 Conclusion on Article I:1
7.1264. The Panel conclude s that the exclusion of palm oil -based biofuel from the group of
qualifying biofuels for the purposes of the French TIRIB measure is inconsistent with Article I:1 of
the GATT 1994, because it grants an advantage to imported rapeseed oil - and soybean oil -based
biofuels that is not immediately and unconditionally accorded to like palm oil-based biofuel imported
from Malaysia.
7.2.2.4 Article XX – General exceptions
7.2.2.4.1 Introduction
7.1265. Having found that the exclusion of palm oil -based biofuel from the group of qualifying
biofuels for the purposes of the French TIRIB measure is inconsistent with Article III:2 and Article
I:1, the Panel now proceeds to address the European Union's invocati on of the general exceptions
in Article XX.
7.1266. The European Union submits 1559 that the exclusion of palm oil -based biofuel from the
French TIRIB measure is justified under Article XX(a) ("necessary to protect public morals"), Article
XX (b) ("necessary to protect human, animal or plant life or health") and Article XX(g) ("relating to
the conservation of exhaustible natural resources "). The European Union maintains that the
arguments contained in its defence with respect to the high ILUC -risk cap and phase -out apply
mutatis mutandis to the exclusion of palm oil -based biofuel from the French TIRIB measure and

1553 Appellate Body Reports, EC – Seal Products, para. 5.87 and fn 1019.
1554 UFOP Global Market Supply 2020/2021, (Exhibit MYS-11), p. 27; UFOP Global Market Supply
2019/2020, (Exhibit MYS-212), p. 25.
1555 USDA FAS, "GAIN Biofuels Annual: European Union", 22 June 2021, (Exhibit MYS-139), p. 29; USDA
FAS, "GAIN Biofuels Annual: EU-28", 15 July 2019, (Exhibit EU-128), p. 32; USDA FAS, "GAIN Report, Biofuels
Annual: EU-28", 15 July 2015, (Exhibit MYS-77), p. 27.
1556 FAS, "GAIN Biofuels Annual: European Union", 22 June 2021, (Exhibit MYS-139), pp. 25-26; USDA
FAS, "GAIN Biofuels Annual: EU-28", 15 July 2019, (Exhibit EU-128), pp. 28-29; USDA FAS, "GAIN Report,
Biofuels Annual: EU-28", 15 July 2015, (Exhibit MYS-77), pp. 22-27.
1557 French Parliament Report n. 2609, (Exhibit EU-205), p. 62.
1558 UFOP Global Market Supply 2020/2021, (Exhibit MYS-11), p. 30.
1559 European Union's first written submission, paras. 1578-1585; second written submission,
paras. 315-318.

must be considered as an integral part of the European Union's response to Malaysia's GATT claims
concerning the French TIRIB measure.1560
7.1267. Malaysia rejects1561 the European Union's defence under Article XX with respect to the
French TIRIB measure, and submits that its arguments and evidence rebutting the European Union's
defence under Article XX of the high ILUC -risk cap and phase -out apply mutatis mutandis to the
exclusion of palm oil-based biofuels from the French TIRIB measure.1562
7.1268. The Panel notes at the outset that, as the Appellate Body has explained, the aspects of a
measure to be justified under the subparagraphs of Article XX are those that give rise to the finding
of inconsistency under the GATT 1994.1563 The Panel has concluded that the exclusion of palm oil -
based biofuel from the group of qualifying biofuels for the purposes of the French TIRIB measure is
inconsistent with the GATT. Therefore, the Panel will focus its analysis on the exclusion of palm oil-
based biofuel from the group of qualifying biofuels for the purposes of the French TIRIB measure,
as this is the aspect of the measure that gave rise to the finding of inconsistency.
7.1269. The Panel also notes that, given the parties' reliance on their arguments with respect to
the high ILUC -risk cap and phase -out, the Panel will mostly refer to its analysis of the European
Union's defence under Article XX with respect to the high ILUC-risk cap and phase -out. The Panel
notes, however, that the exclusion of palm oil-based biofuel from the group of qualifying biofuels for
the purposes of the French TIRIB measure is not identical in every aspect to the high ILUC-risk cap
and phase-out. The Panel will therefore include in this section, as necessary, additional explanations
on how its findings with respect to the high ILUC-risk cap and phase-out apply to the exclusion of
palm oil-based biofuel from the group of qualifying biofuels for the purposes of the French TIRIB
measure.
7.2.2.4.2 Legal standard
7.1270. The European Union invokes the same exceptions under Article XX in respect of the French
TIRIB measure that it invokes in respect of the high ILUC -risk cap and phase -out. For ease of
reference, the Panel recalls that Article XX (General Exceptions) provides in relevant part as follows:
Subject to the requirement that such measures 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 disguised restriction on international trade, nothing in
this Agreement shall be construed to prevent the adoption or enforcement by any
contracting party of measures:
(a) necessary to protect public morals;
(b) necessary to protect human, animal or plant life or health;
…
(g) relating to the conservation of exhaustible natural resources if such measures are
made effective in conjunction with restrictions on domestic production or consumption

1560 European Union's first written submission, para. 1580.
1561 Malaysia's second written submission, para. 350.
1562 Malaysia's second written submission, para. 350.
1563 Appellate Body Reports, EC – Seal Products, para. 5.185. Additionally, in Thailand – Cigarettes
(Philippines), the Appellate Body observed that: "[W]hen Article XX(d) is invoked to justify an inconsistency
with Article III:4, what must be shown to be "necessary" is the treatment giving rise to the finding of less
favourable treatment. Thus, when less favourable treatment is found based on differences in the regulation of
imports and of like domestic products, the analysis of an Article XX(d) defence should focus on whether those
regulatory differences are 'necessary'". (Appellate Body Report, Thailand – Cigarettes (Philippines), para. 177.)

7.2.2.4.3 The Panel's assessment
7.2.2.4.3.1 Article XX(b) – necessary to protect human, animal or plant life or health
7.1271. The European Union submits that the exclusion of palm oil-based biofuel from the French
TIRIB measure is consistent with the E uropean Union's objectives of avoiding that demand for
renewable energy contribute to increased greenhouse gas emissions and that they exacerbate
biodiversity loss.1564 For the European Union, the preservation of biodiversity and of the environment
falls within the range of policies designed to protect human, animal or plant life or health.1565
7.1272. Malaysia rejects the European Union's contention.1566
7.1273. In the context of its analysis of Article XX(b) with respect to high ILUC-risk cap and phase-
out, the Panel considered that this measure is aimed at limiting the risk of ILUC -related GHG
emissions associated with crop-based biofuels.
7.1274. With respect to the French TIRIB measure, the Panel notes that the Circular of
18 August 2020 explains in its introduction that this measure contributes to achieving the objective
of the European Union of having a 10% of final consumption of energy produced from renewable
sources in all forms of transport in 2020, as provided for in RED I, as amended; and that this
objective is part of a broader binding objective of a share of at least 20% of energy produced from
renewable sources in the gross final energy consumption of the European Union by 2020.1567
7.1275. With respect to the tax treatment of palm oil -based products more specifically, Article 46
of the Circular of 18 August 2020 explains that since 1 January 2020, pursuant to Article 266
quindecies of the French Customs Code, products made from palm oil are no longer considered to
be biofuels, and that therefore biofuels produced from palm oil are no longer taken into account for
the purposes of the French TIRIB measure. 1568 Articles 48 and 49 also explain, with respect to the
progressive elimination of the French TIRIB measure for certain feedstocks that present a high-ILUC
risk, that it follows from the Delegated Regulation, adopted on the basis of Article 26(2) of RED II,
that only palm oil products pose a high ILUC risk , and that the French national legislator did not
intend to use a different definition of high ILUC-risk from that established pursuant to Article 26(2)
of RED II.1569 Moreover, the 2020 report on biofuels from the French Parliament explains that, as
palm oil-based biofuels are considered at the European level as posing a high-ILUC risk, Article 266
quindecies, as worded in the 2019 Finance Law , provides that palm oil -based products are not
considered to be biofuels.1570 Also, the French Constitutional Court has confirmed that the exclusion
of palm oil -based biofuel from the group of qualifying biofuels for purposes of the French TIRIB
measure responds to concerns about the risk of ILUC-related GHG emissions associated with crop-
based biofuels, and the high-ILUC risk posed by oil palm cultivation.1571
7.1276. The Panel considers that the reference to the objectives of RED I, the reliance on RED II
and on the Delegated Regulation for considering that palm oil products pose a high ILUC risk, and
the explanations of the French Parliament Report and the French Constitutional Court demonstrate
that the exclusion of palm oil-based biofuel from the group of qualifying biofuels for the purposes of
the French TIRIB measure pursues the same objectives as the high ILUC -risk cap and phase -out.

1564 European Union's first written submission, paras. 1579 and 1581.
1565 European Union's first written submission, para. 1583.
1566 Malaysia's second written submission, para. 350.
1567 French Government Circular of 18 August 2020, (Exhibit EU-197), p. 6.
1568 French Government Circular of 18 August 2020, (Exhibit EU-197), p. 19.
1569 French Government Circular of 18 August 2020, (Exhibit EU-197), p. 19.
1570 French Parliament Report n. 2609, (Exhibit EU-205), p. 49.
1571 The 2019 Decision of the French Constitutional Court, concerning a challenge against the French
TIRIB measure, explains that French legislator sought to reduce both the direct GHG emissions and the GHG
indirect emissions caused by the displacement of agricultural crops for food with crops used to produce
biofuels, leading to the cultivation, for food purposes, of non-agricultural land with a high carbon stock, such as
forests or peatland. The French Constitutional Court also explains that the legislator had relied on the
observation that palm oil stands out for its strong growth and the significant expansion in the global area
surface devoted to its production, in particular on carbon-rich land, resulting in deforestation and the drying
out of peatland. The Constitutional Court adds that the legislator thus took into account the fact that oil palm
cultivation poses a high risk, higher than that posed by the cultivation of other oilseed crops, of indirectly
causing an increase in GHG emissions. (French Parliament Report n. 2609, (Exhibit EU-205), pp. 50-51.)

Therefore, in the Panel's view, its reasoning r egarding the identification of the objective of the
measure with respect to the high ILUC -risk cap and phase -out applies mutatis mutandis to the
exclusion of palm oil -based biofuel from the group of qualifying biofuels for the purposes of the
French TIRIB measure. For those same reasons already set out by the Panel with respect to
assessment of the high ILUC-risk cap and phase -out under Article 2.2 of the TBT Agreement and
Article XX(b) of the GATT, the Panel finds that the exclusion of palm oil-based biofuel from the group
of qualifying biofuels for the purposes of the French TIRIB has the objective of limiting the risk of
ILUC-related GHG emissions associated with crop -based biofuels, that this objective relates to the
protection of human, animal or plant life or health, and that there is a sufficient nexus between the
regulating Member and the activities being regulated.
7.1277. With respect to the necessity test, the European Union submits that the measure fulfils the
required level of connection with the objecti ves sought, considering that it makes a genuine
contribution to the protection of certain key values that are of the highest consideration in France
while entailing a minimum degree of trade-restrictiveness, and that there are no reasonably available
alternatives that would make an equally effective contribution to the objectives pursued.1572
7.1278. Malaysia rejects the European Union's contentions.1573
7.1279. In the context of its analysis of Article XX(b) with respect to the high ILUC-risk cap and
phase-out, the Panel considered its analysis under Article 2.2 of the TBT agreement to apply mutatis
mutandis to its analysis under Article XX(b). In particular, the Panel referred to its findings that the
high ILUC-risk cap and phase-out is necessary to fulfil its objective, on the grounds that it is apt to
make a material contribution to the achievement of that objective, and that this is the appropriate
standard to apply having weighed and balanced its trade-restrictiveness and the risks that non -
fulfilment of the objective would create. The Panel then found that none of the alternative measures
put forward by Malaysia demonstrate that the high ILUC -risk cap and phase -out is more trade -
restrictive than necessary to limit the risk of ILUC-related GHG emissions associated with crop-based
biofuels.
7.1280. With respect to trade-restrictiveness, the Panel considered that the high ILUC-risk cap and
phase-out is trade-restrictive because it establishes a limitation on the total quantity of crop-based
biofuels that are eligible to count towards the 14% target in the European Union, with the entirety
of EU conventional biofuel demand being essentially defined by the RED regime. The Panel
considered that the measure thereby has, by design, a "limiting effect on trade " insofar as crop -
based biofuels are imported into the European Union .1574 The Panel recalls that the fact that the
European Union has created the market in question does not modify this assessment. In the Panel's
view, very similar reasoning applies to its analysis with respect to the exclusion of palm oil -based
biofuel from the group of qualifying biofuels for the purposes of the French TIRIB measure. This
exclusion is trade -restrictive because it establishes a limitation for palm oil -based b iofuel to be
included within the group of qualifying biofuels for the purposes of the French TIRIB measure, and
thus, to count towards the incorporation targets set by France, with the entirety of French
conventional biofuel demand being essentially defined by those incorporation targets.
7.1281. With respect to contribution to the objective, the Panel considered that, while it is not
possible to quantify the extent to which the high ILUC -risk cap and phase -out contributes to the
objective of limiting the risk of ILUC-related GHG emissions associated with crop-based biofuels, the
measure is apt to make a material contribution to the objective of limiting ILUC -related GHG
emissions associated with crop-based biofuels. As the Panel explained, the conclusion follows fr om
the fact that the high ILUC -risk cap and phase-out has, by design, a limiting effect on EU demand
for and consumption of those crop -based biofuels determined to be high ILUC risk. In the Panel's
view, very similar reasoning applies to its analysis with respect to the exclusion of palm oil -based
biofuel from the group of qualifying biofuels for the purposes of the French TIRIB measure. The
exclusion is apt to make a material contribution to the objective of limiting ILUC -related GHG
emissions associated with crop-based biofuels, because it has, by design, a limiting effect on French

1572 European Union's first written submission, para. 1584.
1573 Malaysia's second written submission, para. 350.
1574 The Panel recalls that, where the design and structure of the measure is sufficient to establish that it
will have a limiting effect on trade, it is not necessary to make findings on the actual trade effects, or the
anticipated effects, of the challenged measure. (See e.g. Appellate Body Reports, Australia – Tobacco Plain
Packaging, para. 6.392.)

demand for and consumption of palm oil-based biofuel, which has been determined to be high ILUC
risk.
7.1282. The Panel's reasoning concerning the identification of the objective, the trade-
restrictiveness and the contribution to the objective with respect to the high ILUC -risk cap and
phase-out applies very similarly to the exclusion of palm oil -based biofuel from the group of
qualifying biofuels for the purposes of the French TIRIB me asure. In the Panel's view, its weighing
and balancing analysis of those elements with respect to the high ILUC -risk cap and phase -out
applies mutatis mutandis to the exclusion of palm oil -based biofuel from the group of qualifying
biofuels for the purposes of the French TIRIB measure. Therefore, for those same reasons already
set out by the Panel with respect to assessment of the high ILUC-risk cap and phase -out under
Article 2.2 of the TBT Agreement and Article XX(b) of the GATT, the Panel preliminary concludes
that the exclusion of palm oil-based biofuel from the group of qualifying biofuels for the purposes of
the French TIRIB measure is necessary to fulfil the objective of limiting the risk of ILUC-related GHG
emissions associated with crop-based biofuels.
7.1283. The Panel has already found that none of the alternative measures put forward by Malaysia
demonstrate that the high ILUC-risk cap and phase-out is more trade-restrictive than necessary to
limit the risk of ILUC-related GHG emissions associated with crop-based biofuels. Given that Malaysia
does not refer to any alternative measures other than those put forward, and already assessed by
the Panel, with respect to the high -ILUC risk cap and phase-out, the same reasoning applies with
respect to the exclusion of palm oil -based biofuel from the group of qualifying biofuels for the
purposes of the French TIRIB measure.
7.1284. For these reasons, the Panel concludes that the exclusion of palm oil -based biofuel from
the group of qualifying biofuels for the purposes of the French TIRIB measure is provisionally justified
as a measure necessary to protect human, animal or plant life or health within the meaning of Article
XX(b).
7.2.2.4.3.2 Article XX(g) – relating to the conservation of exhaustible natural resources
7.1285. The European Union submits that the exclusion of palm oil -based biofuel from the French
TIRIB measure falls within the policies related to the conservation of living and non-living exhaustible
natural resources, and it is even-handed inasmuch as such exclusion applies to the relevant biofuels
irrespective of whether they are of domestic or imported origin.1575
7.1286. In the context of its analysis of Article XX(g) with respect to high ILUC-risk cap and phase-
out, the Panel considered that because the high ILUC-risk cap and phase -out has, by design, a
limiting effect on EU demand for and consumption of those crop -based biofuels determined to be
high ILUC risk, the measure is apt to make a material contribution to the objective of limiting ILUC-
related GHG emissions associated with crop-based biofuels. For this reason, the Panel considered
that the high ILUC-risk cap and phase-out is a measure "relating to" the conservation of exhaustible
natural resources, notably high-carbon stock land (forests, wetlands, and peatland).1576
7.1287. In the Panel's view, the same reasoning applies to its analysis with respect to the exclusion
of palm oil-based biofuel from the group of qualifying biofuels for the purposes of the French TIRIB
measure. For those same reasons already set out by the Panel with respect to the high ILUC -risk
cap and phase-out under Article 2.2 of the TBT Agreement and Article XX(g) of the GATT, the Panel
finds that, because the exclusion of palm oil-based biofuel from the group of qualifying biofuels for
the purposes of the French TI RIB measure has, by design, a limiting effect on French demand for
and consumption of those crop-based biofuels determined to be high ILUC risk, the measure is apt
to make a material contribution to the objective of limiting ILUC -related GHG emissions associated
with crop-based biofuels. For this reason, the Panel finds that the exclusion of palm oil-based biofuel
from the group of qualifying biofuels for the purposes of the French TIRIB measure is a measure

1575 European Union's first written submission, para. 1582.
1576 Furthermore, in addition to high-carbon stock land being an exhaustible natural resource in and of
itself, the Panel considered that measures taken to conserve high-carbon stock land, and thereby avoid the
GHG emissions that would be released through their use, are related to the conservation of a wide range of
exhaustible natural resources that are threatened by increased GHG emissions and climate change.

"relating to " the conservation of exhaustible nat ural resources, notably high -carbon stock land
(forests, wetlands, and peatland).
7.1288. The Panel also considered, in the context of its analysis of Article XX(g) with respect to high
ILUC-risk cap and phase -out, that this measure meets the requirement to be made effective in
conjunction with restrictions on domestic production or consumption, because this measure, of itself,
aims at and results in restricting EU demand for and consumption of crop-based biofuels determined
to be high ILUC-risk pursuant to the formula in Article 3 of the Delegated Regulation. In the Panel's
view, the same reasoning applies to its analysis with respect to the exclusion of palm oil -based
biofuel from the group of qualifying biofuels f or the purposes the French TIRIB measure. For the
same reasons already set out with respect to the high ILUC-risk cap and phase-out in the context of
the Panel's earlier assessment under Article 2.2 and Article XX(g), the Panel finds that the exclusion
of palm oil-based biofuel from the group of qualifying biofuels for the purposes of the French TIRIB
measure, of itself, aims at and results in restricting French demand for and consumption of crop -
based biofuels determined to be high ILUC risk.
7.1289. For these reasons, the Panel concludes that the exclusion of palm oil -based biofuel from
the group of qualifying biofuels for the purposes of the French TIRIB measure is provisionally justified
as measure relating to the conservation of exhaustible natural resources th at is made effective in
conjunction with restrictions on domestic production or consumption within the meaning of
Article XX(g).
7.2.2.4.3.3 Article XX(a) – necessary to protect public morals
7.1290. The European Union submits that the exclusion of palm oil -based biofuel from the French
TIRIB measure is designed to contribute to the same objectives of the EU renewable energy legal
framework, and that the French civil society and the French legislat or consider the environmental
impact of oil palm cultivation in term s of climate change and loss of biodiversity to be an issue of
moral concern.1577 For the European Union, the exclusion of palm oil-based biofuel from the French
TIRIB measure addresses moral concerns in France related to climate change, environmental
degradation and biodiversity loss.1578
7.1291. Malaysia rejects the European Union's contention.1579
7.1292. In the context of its analysis of Article XX(a) with respect to high ILUC-risk cap and phase-
out, the Panel considered that a finding on whether the high ILUC -risk cap and p hase-out is
additionally justified under Article XX(a) would have no impact on the outcome of the proceedings.
In the Panel's view, the same reasoning applies to its analysis with respect to the exclusion of palm
oil-based biofuel from the group of qualifying biofuels for the purposes of the French TIRIB measure.
For those same reasons already set out with respect to the high ILUC-risk cap and phase-out in the
context of the Panel's earlier assessment under Article 2.2 and Article XX(a), the Panel finds tha t it
is unnecessary to rule on whether the exclusion of palm oil-based biofuel from the group of qualifying
biofuels for the purposes of the French TIRIB measure is a measure necessary to protect public
morals under Article XX(a).
7.2.2.4.3.4 Chapeau – arbitrary or unjustifiable discrimination between countries where
the same conditions prevail
7.1293. Regarding the chapeau, the European Union submits that the exclusion of palm oil -based
biofuel from the French TIRIB measure is applied without any arbitrary or unjustifiable discrimination
between countries where the same conditions prevail.1580
7.1294. Malaysia rejects the European Union's contention.1581
7.1295. In the context of its analysis of the chapeau with respect to high ILUC-risk cap and phase-
out, the Panel concluded that the high ILUC -risk cap and phase -out has been administered in a

1577 European Union's first written submission, para. 1579.
1578 European Union's first written submission, para. 1583.
1579 Malaysia's second written submission, para. 350.
1580 European Union's first written submission, para. 1585.
1581 Malaysia's second written submission, para. 350.

manner that constitutes arbitrary or unjustifiable discrimination between countries where the same
conditions prevail because the European Union failed to conduct a timely review of the data used to
determine which biofuels are high ILUC risk, and because there are deficiencies in the design and
implementation of the low ILUC -risk criteria and certification procedure. As explained by the Panel
in that context, those findings were based on the Panel's assessment of the high ILUC-risk cap and
phase-out under Article 2.1 of the TBT Agreement. More specifically, the Panel's assessment of
whether that measure's detrimental impact on palm oil -based biofuel stems exclusively from a
"legitimate regulatory distinction", for the purposes of Article 2.1, appears to the Panel to involve
the application of a legal standard that is very similar to the legal standard set out in the chapeau
of Article XX. It was for that reason that the Panel considered that its findings under Article 2.1
extended mutatis mutandis to the Panel's assessment of the high ILUC-risk cap and phase-out under
the chapeau of Article XX.
7.1296. The Panel notes that the European Union has not argued, or pointed to, the existence of
any provisions or flexibilities for palm oil -based biofuels to be certified as low ILUC -risk for the
purposes of the French TIRIB measure. If the existence of deficiencies in the design and
implementation of the low ILUC -risk criteria and certification procedure with respect to the high
ILUC-risk cap and phase-out is sufficient to conclude that such measure has been administered in a
manner that constitutes arbitrary or unjustifiable discrimination between countries where the same
conditions prevail, then a fortiori the European Union's failure to demonstrate the existence of any
provisions or flexibilities for pal m oil-based biofuels to be certified as low ILUC -risk requires the
Panel to conclude that the exclusion of palm oil -based biofuel from the group of qualifying biofuels
for the purposes of the French TIRIB measure has been administered in a manner that cons titutes
arbitrary or unjustifiable discrimination between countries where the same conditions prevail. Also,
as the Panel explained earlier, France has relied on RED II and on the Delegated Regulation for
considering that palm oil products pose a high ILUC risk, and the Panel has found that the European
Union has failed to conduct a timely review of the data used to determine which biofuels are high
ILUC risk.
7.1297. The Panel therefore concludes that the exclusion of palm oil -based biofuel from the group
of qualifying biofuels for the purposes of the French TIRIB measure has been administered in a
manner that constitutes arbitrary or unjustifiable discrimination between countries where the same
conditions prevail. This is because the European Union has failed to c onduct a timely review of the
data used to determine which biofuels are high ILUC risk 1582, and has failed to demonstrate the
existence of any provisions or flexibilities for palm oil-based biofuels to be certified as low ILUC risk.
7.2.2.4.4 Conclusion on Article XX
7.1298. The Panel finds that:
a. the exclusion of palm oil -based biofuel from the group of qualifying biofuels for the
purposes of the French TIRIB measure is a measure relating to the conservation of
exhaustible natural resources that is made effective in conjuncti on with restrictions on
domestic production or consumption within the meaning of Article XX(g);
b. the exclusion of palm oil -based biofuel from the group of qualifying biofuels for the
purposes of the French TIRIB measure is a measure necessary to protect human, animal
or plant life or health within the meaning of Article XX(b);
c. it is unnecessary to rule on whether the exclusion of palm oil-based biofuel from the group
of qualifying biofuels for the purposes of the French TIRIB measure is a measure necessary
to protect public morals under Article XX(a); and
d. the exclusion of palm oil -based biofuel from the group of qualifying biofuels for the
purposes of the French TIRIB measure has been administered in a manner that constitutes

1582 For greater clarity, the Panel is not suggesting that in parallel with the review that is to be undertaken
by the European Union, France should have also been expected to conduct a separate, independent review of
the data used to determine which biofuels are high ILUC risk . Instead, the Panel considers that because the
French TIRIB measure relies on the European Union's determination that palm oil products pose a high ILUC risk,
the Panel's finding that the European Union's failure to review the data used to make that deter mination leads
to arbitrary or unjustifiable discrimination necessarily extends to the French TIRIB measure, as well.

arbitrary or unjustifiable discrimination between countries where the same conditions
prevail because the European Union has failed to conduct a timely review of the data used
to determine which biofuels are high ILUC risk, and has failed to demonstrate the existence
of any provisions or flexibilities for palm oil-based biofuels to be certified as low ILUC risk.
7.1299. One panelist has reached a different conclusion, as set out in section 7.4 of this Report.
7.2.3 Claims under the SCM Agreement
7.2.3.1 Article 1 - Existence of a subsidy
7.2.3.1.1 Introduction
7.1300. Having addressed the claims under the GATT 1994 with respect to the French TIRIB
measure, the Panel now turns to the claims under the SCM Agreement. For Malaysia's claims to
prevail, it must demonstrate that the challenged measure is a subsidy within the meaning of Article
1 of the SCM Agreement.
7.1301. Malaysia alleges inconsistency 1583 with provisions of the SCM Agreement on the basis of
the French TIRIB measure. Malaysia asserts that the French TIRIB measure creates a financial
contribution in the form of government revenue that is otherwise due that is foregone or not collected
within the meaning of Article 1.1(a)(1)(ii). In the alternative, Malaysia also asserts that the French
TIRIB measure is a form of income support in the sense of Article XVI of the GATT 1994 as provided
for in Article 1.1(a)(2). Malaysia further submits that the alleged subsidy confers a benefit.
7.1302. The European Union submits1584 that because the challenged tax treatment constitutes the
same treatment as the appropriate normative benchmark, the French Government is not foregoing
any revenue that is otherwise due. More specifically, the European Union argues that the tax
treatment applied to all similarly situated taxpayers is identical because taxpayers are similarly
situated under the principles of French TIRIB measure to the extent that they similarly contribute to
the satisfaction of the qualifying biofuel incorporation targets. The European Union asserts that the
French TIRIB measure is not a form of income support in the sense of Article XVI of the GATT 1994
as provided for in Article 1.1(a)(2) because the French TIRIB does nothing to maintain the income
received by those entities releasing fuel for consumption in Franc e. The European Union further
submits that because the French TIRIB measure provides no financial contribution and is not a form
of income support it cannot confer a benefit.
7.2.3.1.2 Legal standard
7.1303. Article 1 is entitled "Definition of a Subsidy", and reads as follows:
1.1 For the purpose of this Agreement, a subsidy shall be deemed to exist if:
(a)(1) there is a financial contribution by a government or any public body
within the territory of a Member (referred to in this Agreement as
"government"), i.e. where:
(i) a government practice involves a direct transfer of funds (e.g.
grants, loans, and equity infusion), potential direct transfers of funds
or liabilities (e.g. loan guarantees);

1583 Malaysia's first written submission, paras. 1061-1213; second written submission, paras. 428-524;
responses to the Panel's questions, pp. 124-136; and comments on EU responses to the Panel's questions, pp.
326-339.
1584 European Union's first written submission, paras. 1586-1654; second written submission,
paras. 319-334; and responses to the Panel's questions, paras. 1030-1065.

(ii) government revenue that is otherwise due is foregone or not
collected (e.g. fiscal incentives such as tax credits)[1585];
(iii) a government provides goods or services other than general
infrastructure, or purchases goods;
(iv) a government makes payments to a funding mechanism, or entrusts
or directs a private body to carry out one or more of the type of
functions illustrated in (i) to (iii) above which would normally be
vested in the government and the practice, in no real sense, differs
from practices normally followed by governments;
or
(a)(2) there is any form of income or price support in the sense of
Article XVI of GATT 1994;
and
(b) a benefit is thereby conferred.
1.2 A subsidy as defined in paragraph 1 shall be subject to the provisions of Part II or
shall be subject to the provisions of Part III or V only if such a subsidy is specific in
accordance with the provisions of Article 2.
7.1304. The definition of a "subsidy" in Article 1, including the notion of a financial contribution in
the form of government revenue that is otherwise due is foregone or not collected and benefit have
been interpreted and applied in a number of prior cases, and both parties present their respective
understandings of the applicable legal standard with reference to prior cases. With respect to income
support, this precise term has no t been interpreted and applied in a prior case. The parties'
arguments reflect a divergence of views on how the term should be interpreted and applied to the
facts of this dispute. The Panel notes that the closely related term, "price support", from the same
provision has been interpreted and applied in several prior cases and may provide insights for a
relevant analysis of the issues presented here.
7.1305. The parties agree that the determination of what is otherwise due involves a comparison
between the circumstances presented and the circumstances that would pertain otherwise, the latter
being referred to as a "defined, normative benchmark".1586 The parties further agree that because
Members "have the sovereign authority to determine their own rules of taxation, the comparison
under Article 1.1(a)(1)(ii) of the SCM Agreement must necessarily be between the rules of taxation
contained in the contested measure and other rules of taxation of the Member in question".1587
7.1306. The parties agree upon the analytical approach to be applied in examining this question. In
particular, the parties agree that Article 1.1(a)(1)(ii) requires a panel to:
a. identify the tax treatment that applies to the alleged subsidy recipients;
b. identify a benchmark for comparison (e.g. a general rule of taxation); and
c. compare the challenged treatment and its reasons with the benchmark tax treatment.1588

1585 The footnote to the text of Article 1.1(a)(1)(ii) states: "In accordance with the provisions of Article
XVI of GATT 1994 (Note to Article XVI) and the provisions of Annexes I through III of this Agreement, the
exemption of an exported product from duties or taxes borne by the like product when destined for domestic
consumption, or the remission of such duties or taxes in amounts not in excess of those which have accrued,
shall not be deemed to be a subsidy."
1586 Appellate Body Reports, US – FSC, para. 90; and US – FSC (Article 21.5 – EC), paras. 87-89.
1587 Appellate Body Report, US – FSC (Article 21.5 – EC), para. 89.
1588 Appellate Body Reports, Brazil – Taxation, para. 5.162.

7.1307. The comparison of the challenged tax treatment with the defined normative benchmark
will determine the difference between the revenue actually raised and the revenue that would have
been raised "otherwise".1589
7.1308. The Panel will elaborate further on the elements of the legal standard in Article 1, and in
particular the notion of a financial contribution in the form of "government revenue that is otherwise
due is foregone or not collected", "income support", and "benefit" as necessary in the course of its
assessment of the issues in dispute. Each of these elements will be assessed in turn.
7.2.3.1.3 Financial contribution
7.1309. Malaysia contends that the challenged tax treatment confers a financial contribution in the
form of "government revenue, otherwise due, that is foregone or not collected " under
Article 1.1(a)(1)(ii).1590 The European Union disputes this contention. 1591 With regard to financial
contribution, there is n o dispute between the parties regarding whether the French TIRIB is
attributable to the French Government and operates within its territory.
7.1310. Malaysia emphasizes the exclusion of palm oil-based biofuel from the qualifying biofuels as
central to its claims, and frames its arguments accordingly. Malaysia further submits that under the
French TIRIB measure like products would be subject to the "same tax, 'but for' the tax rules applied
by France under the contested measure."1592 In other words, Malaysia submit that the French TIRIB
measure affords favourable treatment to fuel containing qualifying biofuels, but palm oil -based
biofuel is treated as equivalent to fossil fuel for tax purposes because it is not included among the
qualifying biofuels.
7.1311. The Panel understands that in Malaysia's view qualifying biofuels and palm oil-based biofuel
should be considered as similarly situated by the tax regime and should, therefore, receive similar
tax treatment. Accordingly, the favourable treatment of qualifying biofuels as compared to palm oil-
based biofuel should be considered as a financial contribution within the meaning of Article
1.1(a)(1)(ii). The Panel considers, however, that products that are similar (or like or even identical)
from the perspective of product characteristics, uses, subs titutability, production methods, tariff
classifications, etc., are not necessarily similarly situated from the perspective of a Member's tax
regime and tax principles. At this stage of the analysis, the Panel must focus on whether the allegedly
subsidized taxpayer receives from the government the functional equivalent of a direct transfer of
funds in the form of an amount of taxes that were due otherwise but was not required to be paid.
Accordingly, the question for the Panel is not whether similar products are taxed similarly, but rather
whether the challenged tax treatment constitutes the kind of departure from that tax regime and
tax principles such that government revenue that was otherwise due was foregone or not collected.
7.1312. The Panel turns, therefore, to the three-step analysis of whether it has been established
that "government revenue that is otherwise due is foregone or not collected " under
Article 1.1(a)(1)(ii). In particular, the Panel will: (i) identify the tax treatment that applies to the
alleged subsidy recipients; (ii) identify a benchmark for comparison (e.g. a general rule of taxation);
and (iii) compare the challenged treatment and its reasons with the benchmark tax treatment. If
the challenged treatment arises by reason of the application o f the tax regime and its principles to
the circumstances of the allegedly subsidized taxpayer, then government revenue otherwise due is
not foregone or not collected.
7.2.3.1.3.1 The tax treatment applicable to the alleged subsidy recipients
7.1313. As explained in section 2 of this Report, entities that release fuel for consumption within
the territory of France are liable to pay the TIRIB as an additional tax that varies in relation to the
extent to which the energy content of the fuel released achieves established incorpor ation targets
for qualifying energy sources. The Panel recalls that the TIRIB is applied in addition to the value
added tax (VAT) and the internal consumption tax on energy products (TICPE). The amount of the
TIRIB is determined according to the TIRIB formula.

1589 Appellate Body Report, US – FSC, para. 90.
1590 Malaysia's first written submission, para. 1067.
1591 European Union's first written submission, para. 1620.
1592 Malaysia's first written submission, para. 1078.

7.1314. The TIRIB formula results in a tax rate that varies in direct proportion to the factor (IT%
- AI%), which is the difference between the targeted energy incorporation of qualifying biofuel and
the actual incorporation of qualifying biofuel.
7.1315. The parties concur on the essential operation of the French TIRIB. The challenged tax
treatment consists of the treatment of taxpayer entities that partially or fully satisfy the incorporation
target of qualifying biofuel. In other words, the treatment of those entities that release fuel for
consumption in France with an AI% that is greater than zero, yielding a (IT% - AI%) factor that is
less than IT%.
7.2.3.1.3.2 Preliminary assessment of possible normative benchmarks
7.1316. The Panel now turns to a preliminary assessment of the appropriate normative benchmark.
An examination of the record suggests consideration of four different normative benchmarks for
comparison with the challenged tax treatment.
The General Tax on Polluting Activities
7.1317. The Panel first considers the appropriateness of the General Tax on Polluting Activities as
a normative benchmark, as proposed by Malaysia . The General Tax on Polluting Activities appears
to reflect a conceptual framework for imposing some level of taxation on certain polluting
activities1593 Under a different name and under a prior iteration of the relevant legislation, the TIRIB
was categorized as a tax under the umbrella of the General Tax on Polluting Activities.1594
7.1318. Malaysia submits that the General Tax on Polluting Activities is the appropriate benchmark
because it is alleged to apply to all comparable income of any comparably situated taxpayers .1595
Malaysia considers the General Tax on Polluting Activities to be a general rule of taxation, and the
challenged tax treatment to be an exception thereto.1596
7.1319. The Panel takes note of the conceptual and historical link between the General Tax on
Polluting Activities and the French TIRIB. The Panel finds that Malaysia has not established the nature
of the tax treatment provided for under the General Tax on Polluting Activities. 1597 Instead,
Malaysia's submissions exclusively identify the various tax treatments provided for under the French
TIRIB. To the extent that Malaysia intends the General Tax on Polluting Activities to serve as a
broader tax regime that links exclusively to the maximum amount of tax potentially payable pursuant
to the TIRIB formula, the P anel finds that such a link has not been established. 1598 Nor has the
French TIRIB been established to apply in lieu of the General Tax on Polluting Activities to the extent
that taxpayers subject to the French TIRIB also engage in polluting activities assoc iated with those
taxes.
7.1320. The Panel finds that the tax treatments associated with the General Tax on Polluting
Activities do not correspond to an amount of revenue "otherwise due" in relation to the challenged
tax treatment. Rather, the French TIRIB is an a dditional tax paid by entities in connection with the
particular activity of releasing fuel for consumption within the territory of France as an additional tax
that varies in relation to the extent to which the energy content of the fuel released achieves
established incorporation targets for qualifying energy sources.
7.1321. For the above reasons, the Panel finds that the General Tax on Polluting Activities is not an
appropriate normative benchmark in this case.

1593 European Union's first written submission, paras. 1423-1424.
1594 European Union's first written submission, paras. 1423-1424.
1595 Malaysia's first written submission, para. 1074; response to Panel question No. 196, pp. 131-132.
1596 Malaysia's second written submission, para. 444.
1597 Malaysia's response to Panel question 196, pp. 131-132.
1598 In any event, the Panel will examine below the maximum amount of tax potentially payable
pursuant to the TIRIB formula as possible normative benchmark.

The tax treatment associated with the release of fu el fully satisfying the
incorporation targets
7.1322. The second possible normative benchmark tax treatment, as proposed by the European
Union, is the tax treatment associated with the release of fuel for consumption in France that fully
satisfies the incorporation targets for qualifying biofuels.
7.1323. The European Union submits in this regard that the collection of no amount of tax pursuant
to the French TIRIB is the intended and expected outcome from the application of the TIRIB formula
and should, therefore, be con sidered as the normative benchmark treatment. 1599 The European
Union argues that this demonstrates that payment of the tax is truly exceptional and the general
rule is satisfaction of the incorporation targets.1600 While the achievement of such an outcome is not
mandated by the scheme, the European Union argues that collection of no tax is the intended and
expected result of application of the French TIRIB and it is so designed to achieve that objective. On
the basis of the above -described design and operation of the French TIRIB, the European Union
submits that any tax paid functions as a fine or penalty imposed upon non -compliance with the
incorporation objectives and should not be considered as an amount of tax that is "otherwise due".
In this regard, the Eur opean Union submits that the French TIRIB is a behavioural tax with an
environmental purpose and is not designed to raise any revenue.1601
7.1324. The Panel understands that all potential taxpayers operate under a scheme under which no
amount of tax is due if the f uel they release satisfies the incorporation targets. Access to the zero
tax treatment is otherwise uninhibited for these taxpayers. While it is established that some amount
of tax was collected pursuant to the French TIRIB during the time periods for whic h the Panel has
information, the extent of any failure of fuels released for consumption in France to satisfy the
incorporation targets is extremely small. Nevertheless, the Panel considers that under Article
1.1(a)(1)(ii), the issue is not whether the French TIRIB is a behavioural tax or has an environmental
purpose or was intended to raise revenue. The extent to which these features constitute elements
of the challenged tax treatment and/or elements of the tax regime and tax principles that will define
the normative benchmark does not require the Panel to assess the legitimacy of these features as
elements of a Member's tax rules.
7.1325. The Panel considers that the key concept guiding the selection of an appropriate normative
benchmark derives from the term otherwise due in the text of Article 1.1(a)(1)(ii). In particular, the
appropriate normative benchmark represents the treatment associated with the tax liability
otherwise due in accordance with the structure of the domestic tax regime and its organising
principles as adopted by the Member pursuant to its own authority in comparison to the challenged
tax treatment. The Panel is not persuaded that the collection of no amount of tax pursuant to the
French TIRIB constitutes the appropriate normative benchmark tre atment. Under certain
circumstances under the French TIRIB an amount of tax liability is imposed on the taxpayer and,
when paid, this amount represents government revenue that is due. The Panel does not consider
that it would be appropriate to find under such a sc heme that the structure of the domestic tax
regime and its organising principles imposes no tax liability as a normative benchmark regardless of
the frequency or the infrequency with which the circumstances associated with no tax liability arise.
Instead, the appropriate normative benchmark should take into account those circumstances in
which a tax liability arises in accordance with the "structure of the domestic tax regime and its
organising principles".
7.1326. The Panel understands that the European Union analogizes the French TIRIB with a scheme
of fines or penalties, but without asserting that the French TIRIB is not, in fact, a tax scheme.
Accordingly, the Panel does not consider it necessary to determine the circumstances under which
forms of payments, oth er than taxes, owing to the government would or would not constitute
government revenue foregone or not collected within the meaning of Article 1.1(a)(1)(ii).
7.1327. For the above reasons, the Panel finds that the collection of no amount of tax pursuant to
the French TIRIB is not an appropriate normative benchmark in this case.

1599 European Union's first written submission, paras. 1444-1453.
1600 European Union's first written submission, paras. 1444-1446.
1601 European Union's first written submission, paras. 1444-1453, 1621-1623.

The tax treatment associated with the release of fuel that does not satisfy any part
of the incorporation targets
7.1328. Malaysia submits that another possible benchmark that should be considered , as the
normative benchmark for the purposes of comparison with the challenged tax treatment , is the
maximum amount of tax potentially payable pursuant to the TIRIB formula, i.e. the amount of tax
that would be payable if no portion of qualifying biofuel was incorporated into the fuel released for
consumption. Malaysia argues that the French Government has established rules of taxation on fuel
released for consumption in France such that revenue whi ch is otherwise due is not collected from
operators incorporating qualifying biofuels, which do not include palm oil -based biofuel, into fuel
released for consumption in France.1602
7.1329. The Panel understands that this possible benchmark is premised on the notion that through
the TIRIB formula, the French Government establishes the elements (rate, IT%) and permits the
taxpayer to choose through their actions the amount of tax to pay by selecting the actual
incorporation element (AI%). The variable amount of tax th at a taxpayer would pay to the extent
that they do not fully satisfy the incorporation target is what provides the motivation for them to
incur whatever additional cost is associated with incorporating the qualifying biofuels. To the extent
that the taxpayer opts to take on those additional costs, they do it to obtain the benefit of the lower
tax liability and avoid the payment of the tax that would have otherwise been due if they had failed
to incorporate qualifying biofuels. The taxpayer is aware of the amount of tax that they would have
to pay if they do not incorporate qualifying biofuel into their fuel mix because the amount of TIRIB
they pay will depend exclusively on their own choice about how much qualifying biofuel to include
in the fuel mix they release for consumption in France.
7.1330. The above preliminary considerations suggest that the maximum amount of tax potentially
payable pursuant to the TIRIB formula highlights the conditionality of accessing the favourable tax
treatment which is a feature of a n ormative benchmark that might be relevant to the Panel's
determination of whether the French TIRIB involves a financial contribution in the form of
government revenue foregone or not collected.
The tax payable according to the TIRIB formula
7.1331. The fourth potential normative benchmark, as argued by the European Union, posits that
the challenged treatment and the normative benchmark are, in fact, the same tax treatment.
7.1332. The European Union has argued, in effect, that the elements of the formula set by the
government (rate, IT%) are established at a level designed, intended and expected to achieve the
incorporation target. 1603 The European Union has argued that taxpayers that do not fulfil the
incorporation targets are not considered as similarly situated under th e TIRIB tax regime. 1604 The
European Union has emphasized that the elements of the TIRIB formula are inseparable because
the tax would be without incentivizing effect unless it applies the variable rate in connection with
the extent to which the released fuel satisfies the incorporation targets.1605
7.1333. The Panel understands that this possible benchmark is premised on the notion that the
TIRIB formula establishes an amount of tax that is due on the basis of the formula elements, and
no element or elements of the formula considered in isolation from the rest of the formula represent
an amount of tax that is due or that is "otherwise due". The Panel recalls that while the rate element
of the formula is expressed as euros per hectolitre, the French TIRIB is exclusively concerned with
a relatively small portion of the energy content of the fuel, i.e. that portion which the regime has
targeted for incorporation of qualifying biofuels. The maximum tax due under the French TIRIB does
not reflect the application of the defin ed tax rate per hectolitre of fuel released because the factor
(IT% - AI%) will have a maximum value of IT%, which in 2020 was 8%.
7.1334. The Panel further recalls that an essential feature of the TIRIB regime is that the application
of the formula results in a tax rate that varies in direct proportion to the factor (IT% - AI%), which
is the difference between the targeted energy incorporation of qualifying biofuel and the actual

1602 Malaysia's first written submission, para. 1079.
1603 European Union's first written submission, paras. 1444-1453, and 1621-1623.
1604 European Union's first written submission, paras. 1630-1634.
1605 European Union's first written submission, para. 1450.

incorporation of qualifying biofuel. Because the tax varies directly in proportion t o this factor, it is
possible to characterize the TIRIB as a tax, not on the action of releasing hectolitres of fuel for
consumption in France, but rather a tax on the extent to which the targeted level of qualifying
biofuels has not been incorporated into the fuel released. Viewed in this light, the amount of tax can
be seen as starting at zero when the targeted portion of qualifying biofuels have been incorporated,
and increasing to its maximum amount in direct proportion to the missing percentages of qualifying
biofuel.
7.1335. The above preliminary considerations suggest that the tax payable according to the TIRIB
formula highlights the design and intended operation of the French TIRIB as a whole which is a
feature of a normative benchmark that might be relevan t to the Panel's determination of whether
the French TIRIB involves a financial contribution in the form of government revenue for egone or
not collected.
7.2.3.1.3.3 Final assessment of the appropriate normative benchmark
7.1336. Having preliminarily examined the four possib le normative benchmarks suggested in this
dispute, and having found two of those benchmarks exhibit certain features which could potentially
make them appropriate normative benchmarks for comparison with the challenged tax treatment,
the Panel now turns to a further assessment of those two benchmarks.
7.1337. The Panel recalls that the purpose of selecting a normative benchmark is to determine,
through a comparison with the challenged tax treatment, whether "government revenue that is
otherwise due is foregone or n ot collected" within the meaning of Article 1.1(a)(1)(ii). The Panel
notes as well that the first category of financial contributions provided for under Article 1.1(a)(1)(i)
includes various direct transfers of funds or potential direct transfers of funds. This provides some
context for understanding the inclusion of the second category, which is the one relevant in this
case. The Panel considers that where government revenue is otherwise due and the government
foregoes or does not collect the amount otherw ise due, this is the functional equivalent of a direct
transfer of funds from the government. It is useful to recall that this stage of the analysis focuses
solely on whether a financial contribution exists, rather than on any alleged effects of the challenged
measure.
7.1338. The Panel takes note of prior reports that offer guidance on considerations for selecting an
appropriate benchmark. The benchmark will not exist in the abstract, but rather in the rules of
taxation established by the Member in question. 1606 This also flows from the notion that Members,
in principle, have the sovereign authority to determine their own rules of taxation as they see fit.1607
The analysis must, therefore, be sufficiently flexible to adjust to the complexities of a Member's
domestic rules of taxation.1608 The benchmarks to be applied are the economy-wide tax treatments
from which the exemptions, reductions and suspensions are tak en.1609 However, given the variety
and complexity of domestic tax systems, it will usually be very difficult to isolate a 'general' rule of
taxation and 'exceptions' to that 'general' rule. 1610 In ascertaining a proper benchmark, the
Appellate Body in Brazil – Taxation went further, stating that a panel would be expected to "examine
the structure of the domestic tax regime and its organising principles" to determine what is "the tax
treatment of comparable income of comparably situated taxpayers".1611 The Panel agrees with that
approach.
7.1339. In this context, the Panel considers that "comparability" and "similarly situated" are not
determined in the abstract, nor on the basis of what is considered legitimate, appropriate or fair.
Rather, "comparability" and "similarly situated" are determined in relation to the "structure of the
domestic tax regime and its organising principles. " The concern of the Appellate Body in Brazil –
Taxation was over-reliance on the fact that the challenged measure took the form of an exception
to a general rule. When a general rule appears to be broadly applicable and subject to various

1606 Appellate Body Report, US – FSC, para. 90.
1607 Appellate Body Report, US – FSC (Article 21.5 – EC), para. 89.
1608 Appellate Body Reports, Brazil – Taxation, para. 5.162 (quoting Appellate Body Report, US – FSC
(Article 21.5 – EC), para. 91).
1609 Appellate Body Reports, Brazil – Taxation, para. 5.181 (quoting Panel Reports, Brazil – Taxation,
para. 7.414).
1610 Appellate Body Reports, Brazil – Taxation, para. 5.162 (quoting Appellate Body Report, US – FSC
(Article 21.5 – EC), para. 91).
1611 Appellate Body Reports, Brazil – Taxation, para. 5.167.

exceptions, it may be necessary to look further to examine the extent to which the general rule, in
light of the other exceptions, constitutes an inadequate ben chmark because it insufficiently
represents the structure of the tax regime and its organizing principles. This can be understood by
considering, as the Appellate Body did in Brazil – Taxation, an example of a generally applicable tax
with numerous and various exceptions. Thus, a corporate tax rate that is in principle applicable to
all commercial entities, but with numerous and overlapping adjustments for various categories, sizes
and circumstances of the entities taxed could not serve as an adequate bench mark for any one of
the exceptions because it could be that few if any entities actually pay the tax at the generally
applicable rate. This means that the tax regime and its organizing principles that determine the
normative benchmark may be found in rules that take the form of exceptions to a general rule as
much as in the form of the general rules themselves.
7.1340. This notion may be further illuminated with an example of a tax regime where the tax rate
depends on the size of the company. If the tax rate incre ased according to the size, then small
companies might appear to pay less than is otherwise due. If the tax rate decreases according to
size, then large companies might appear to pay less than is otherwise due. If, however, company
size is understood to be the organizing principle of the tax regime, then small, medium and large
companies would not be considered as similarly situated and the amounts paid by companies of
other sizes would not be relevant to determining what amount of tax is otherwise due. It might be
observed that all sizes are not available to all companies and this might justify additional scrutiny of
the breakdown of size categories and differences in tax rates, et cetera , possibly concluding
nevertheless that company size is indeed an orga nizing principle of the tax regime. With this
analytical approach in mind, the Panel turns to an examination of certain relevant aspects of the
French TIRIB and then proceeds to further assess the third and fourth possible normative
benchmarks as described above.
7.1341. The Panel recalls that the French TIRIB is not a broadly applicable, economy -wide tax.
Rather, it applies exclusively to a particular activity, and it applies in addition to all other applicable
taxes payable by these taxpayers. In relation to othe r taxes, the Panel therefore finds that the
French TIRIB operates to increase the amount of tax that is otherwise due from these taxpayers
because it has not been established that the French TIRIB applies in lieu of any broadly applicable
tax or any other tax. Moreover, on the basis of the evidence presented, the Panel finds that it has
not been established that any taxpayers are ex ante ineligible or otherwise incapable of incorporating
qualifying biofuels. In other words, it appears that the full range of tax treatments provided for under
the French TIRIB are available to all taxpayers without exception.
7.1342. Under the third possible normative benchmark, the Panel considers that the French TIRIB
and its principles must be understood to reside in certain elements of the TIRIB formula, namely the
elements established by the government (i.e. rate, IT%), but not in others, namely actual
incorporation percentage (AI%). Thus, the French TIRIB would be c haracterized as establishing an
amount of tax that would be due for each hectolitre of fuel released for consumption in France and
every taxpayer will pay this amount of tax unless they choose to take actions (selecting the value
for AI%) that will allow them to avoid payment of the tax.
7.1343. Under the fourth possible normative benchmark, the Panel understands that the French
TIRIB and its principles are considered to reside in the entire TIRIB formula. With this understanding,
taxpayers with different values of the factor (IT% - AI%) are not similarly situated with respect to
the French TIRIB and its organizing principles. In other words, there would be nothing exceptional
about the tax treatment of any particular taxpayer regardless of their particular value of AI%
because all taxpayers with the same AI% are treated the same, the TIRIB formula does not identify
any single rate of taxation as a default rate or as the general tax rate, nor as an exceptional tax
rate. Instead, the tax due varies in direct proportion to the factor (IT% - AI%).
7.1344. In weighing the appropriateness of these two possible normative benchmarks, the Panel
considers that the design and operation of the French TIRIB, as well as how it is situated in
relationship to the broader tax regime, reveal that the fact that the amount of tax due varies in
direct proportion to the factor (IT% - AI%) is a central and essential organizing principle of the
French TIRIB. Thus, the Panel considers that this element is not an element of the TIRIB formula
amenable to be disregarded as a principle of taxation under this scheme. As such, the Panel finds
that the elements of the TIRIB formula go hand in hand and do not exist in isolation, and are

accurately described as being inseparably linked as integral parts of the TIRIB formula. 1612 In
establishing a formula to determine the rate of tax that is proportional to the factor (IT% - AI%),
the design of the French TIRIB establishes a range of tax rates each of which is applicable to similarly
situated taxpayers. The Panel considers that fo r all taxpayers to which the TIRIB formula applies,
the amount of tax that is due is determined by the formula and no other amount of tax is due. In
sum, whatever tax liability is imposed by the French TIRIB it represents an additional tax on
operators releasing fuel for consumption in France that are similarly situated to the extent that the
targeted portion of the fuel released does not incorporate qualifying biofuels. Accordingly, the Panel
finds that the TIRIB formula represents the most appropriate normative benchmark for comparison
with the challenged tax treatment.
7.1345. While the third possible normative benchmark identifies a relationship between a lower tax
due and the satisfaction of certain conditions that can be perceived as functioning in a manner similar
to a tax credit, the Panel finds that this approach places inordinate emphasis on form rather than
substance. In particular, breaking the TIRIB formula into its elements and treating one part of the
formula, i.e. the maximum amount of tax per hectolitre (rate * IT%), as a general rule of taxation,
fails to accurately reflect the French TIRIB and its organizing principles. Thus, on balance, the Panel
finds that the maximum amount of tax potentially payable pursuant to the TIRIB formula fails to
represent an appropriate benchmark tax treatment for the challenged tax treatment. Despite the
conditionality attached to the lower tax rates, as highlighted by Malaysia, the Panel finds that the
maximum amount of tax potentially payable pursuant to the TIRIB for mula does not represent
government revenue otherwise due within the meaning of Article 1.1(a)(1)(ii). Accordingly, the Panel
finds that that the maximum amount of tax potentially payable pursuant to the TIRIB formula does
not represent the most appropriate normative benchmark for comparison with the challenged tax
treatment.
7.2.3.1.3.4 Conclusion on financial contribution
7.1346. The Panel finds that the challenged tax treatment consists of the treatment of taxpayer
entities releasing fuel for consumption in France that part ially or fully satisfies the incorporation
target for qualifying biofuel. The Panel finds that the TIRIB formula represents the most appropriate
normative benchmark for comparison with the challenged tax treatment. Because the challenged
tax treatment is part of and incorporated into the benchmark tax treatment, both of which flow from
the application of the TIRIB formula, the challenged tax treatment and the benchmark tax treatment
are the same.
7.1347. Accordingly, the Panel finds that there is no difference bet ween the challenged tax
treatment and the benchmark tax treatment, and therefore, no government revenue has been
foregone or not collected and no financial contribution exists within the meaning of Article
1.1(a)(1)(ii).
7.2.3.1.4 Income support
7.1348. Malaysia submits sh ould the Panel find that financial contribution does not exist under
Article 1.1(a)(1)(ii), that in the alternative the French TIRIB measure should be treated as providing
an income support within the meaning of Article 1.1(a)(2).1613
7.1349. Article 1.1(a)(2) provides that a subsidy shall be deemed to exist if "there is any form of
income or price support in the sense of Article XVI of GATT 1994 ". The first sentence of paragraph
1 of Article XVI refers to notification of "any subsidy, including any form of income or price support,
which operates directly or indirectly to increase exports of any product from, or to reduce imports
of any product into, its territory ". There is no definition or other form of guidance in the
SCM Agreement regarding the meaning of "income or price support".
7.1350. Malaysia submits that by lowering the costs for the economic operators incorporating
qualifying biofuels, the French TIRIB measure operates as an income support policy insulating such
economic operators from the true costs that they would have to face in the absence of the challenged

1612 Malaysia's second written submission, para. 452; European Union's first written submission,
para. 1628.
1613 Malaysia's first written submission, para. 1081.

tax treatment.1614 Malaysia contends that lowering the tax expense increases the net income of
economic operators incorporating qualifying biofuels, also permitting them to reduce the price of the
fuels released for consumption attracting consumers and increasing market share.1615
7.1351. The European Union asserts that the French TIRIB measure does nothing to maintain the
income received by those entities releasing fuel for consumption in France.1616 The European Union
argues that the production costs of the economic operators mixing different types of biofuels are not
affected by the French TIRIB because it does not lower the biofuel production costs or the costs of
acquiring biofuels.1617 The European Union also asserts th at the French TIRIB does not affect the
price at which the fuel is released for consumption and therefore does not support what "comes in
as the periodical produce of one's business".1618
7.1352. The Panel notes that the term "income support" in Article 1.1(a)(2) ha s not specifically
been interpreted and applied in a prior dispute. However, the panel in China – GOES interpreted the
closely connected term "price support", and the Panel is of the view that certain aspects of this
analysis are equally relevant to the term "income support". That panel noted that the Appellate Body
observed that the concept of "income or price support" under Article 1.1(a)(2) broadens the range
of measures capable of providing subsidies beyond those that constitute a financial contribution.1619
The panel further found that, like the notion of a financial contribution, "income or price support "
should be understood to refer to a particular form of government action rather than to the effects of
government action:
Reading the term "price support" in this context, it is our view that it does not include
all government intervention that may have an effect on prices, such as tariffs and
quantitative restrictions. In particular, it is not clear that Article 1.1(a)(2) was intended
to capture all manner of government measures that do not otherwise constitute a
financial contribution, but may have an indirect effect on a market, including on prices.
The concept of "price support" also acts as a gateway to the SCM Agreement, and it is
our view that its focus is on the nature of government action, rather than upon the
effects of such action. Consequently, the concept of "price support" has a more narrow
meaning than suggested by the applicants, and includes direct government intervention
in the market with the design to fix the price of a good at a particular level, for example,
through purchase of surplus production when price is set above equilibrium.1620
7.1353. The panel also noted that "market price support " is a term used in the Agreement on
Agriculture, and Annex 3 thereof provides that "market price support" is calculated as the difference
between an external reference price and the "applied administered price".1621 The panel considered
this an indication that for this type of price support "a direct form of government control over
domestic prices is required, in the form of a fixed, administered price, rather than a movement in
prices being an indirect effect of another form of government intervention."
7.1354. With this understanding of "price support" as being a direct government intervention to
achieve a particular price level for a good, the Panel considers that an "income support" would be a
similar direct government intervention in the market to ensure that income for certain enterprises
or associated with certain activities is maintained at or above a particular level. The Panel observes
that the French TIRIB does involve an intervention in the market to incentivize the incorporation of
the higher -cost biofuels through the application of different levels of tax liability. However, the
French TIRIB is not tied to income levels of the taxpayers and it does not ensure that incomes are
maintained at or above any particular level.
7.1355. While the variability factor as an element of the TIRIB formula, considered in isolation, does
reduce the amount of tax due under certain conditions, which could then be viewed as supplementing
the taxpayers' income net of tax as Malaysia argues, the Panel understands the concept of "income

1614 Malaysia's first written submission, paras. 1085-1086.
1615 Malaysia's second written submission, para. 456.
1616 European Union's first written submission, para. 1646; second written submission, para. 328.
1617 European Union's first written submission, para. 1646.
1618 European Union's first written submission, para. 1646.
1619 Appellate Body Report, US – Softwood Lumber IV, para. 52.

support" as narrower than a measure that simply reduces tax burden and thereby positively affects
after-tax income. An "income support " would be expected to do more than reduce an expense
(thereby permitting more income to be retained) and to do even more than merely add to income
through its effects.
7.1356. Considering the TIRIB as a whole presents a different picture, whereby incomes are neither
supplemented nor supported. The French TIRIB creates an additional variable tax on the economic
activity of releasing fuel for consumption in France – an activity already taxed by the TICPE and the
VAT. In addition, the French TIRIB creates a choice between incorporating qualifying biofuels at
greater expense or refraining from such incorporation at the cost of a higher tax burden. From this
perspective, the TIRIB overall increases the operating costs for the enterprises that undertake to
incorporate the qualifying biofuels and increases the tax burden on the enterprises that do not satisfy
the incorporation targets, and neither group of enterprises has their income supported.
7.1357. For the above reasons, the Panel finds that Malaysia has not established that the French
TIRIB measure constitutes or incorporates an "income support " within the meaning of Article
1.1(a)(2).
7.2.3.1.5 Benefit
7.1358. The Panel recalls that it has found that Malaysia has failed to establish the existence of a
financial contribution with respect to the French TIRIB. The Panel has also found that Malaysia has
failed to es tablish the existence of an income support with respect to the French TIRIB. In the
absence of establishing the alleged financial contribution or income support no benefit can be
conferred thereby, and Malaysia's claims that a subsidy exists under Article 1 cannot prevail.
7.2.3.1.6 Conclusion with respect to the existence of a financial contribution
7.1359. For the above reasons, the Panel finds that Malaysia has failed to establish that government
revenue has been for egone or not collected and, therefore, no financial con tribution exists within
the meaning of Article 1.1(a)(1)(ii). The Panel further finds that Malaysia has not established that
the French TIRIB measure constitutes or incorporates an "income support" within the meaning of
Article 1.1(a)(2). In the absence of establishing the alleged financial contribution or income support
Malaysia has failed to demonstrate that the French TIRIB measure is a subsidy within the meaning
of Article 1.
7.1360. Accordingly, the Panel concludes that Malaysia has failed to establish that the French TIRIB
measure provides a subsidy that constitutes a specific subsidy that causes adverse effects in the
form of serious prejudice under Articles 5.3(c), 6.3(a) and 6.3(c) of the SCM Agreement.
7.2.3.2 Further assessment assuming arguendo the existence of a financial contribution
7.1361. In the prior section, the Panel found that Malaysia has failed to establish that government
revenue has been for egone or not collected and, therefore, no financial contribution exists within
the meaning of Article 1.1(a)(1)(ii). Notwithstanding this conclusion, in the subsections that follow,
the Panel proceeds to evaluate the merits of Malaysia's complaints against the European Union's
alleged subsidization under the French TIRIB.
7.1362. Although the Panel did not find the maximum amount of tax potentially payable pursuant
to the TIRIB formula to be the most appropriate normative benchmark, the Panel considers that this
option exhibits certain features, which, at first view, suggested that it could have served as an
appropriate benchmark. In these circumstances, and in light of the extensive argumentation that
the parties have devoted to these issues, the Panel considers it appropriate to engage in a further
analysis of the merits of Malaysia's claims on the basis of this normative benchmark.
7.1363. Accordingly, the Panel will proceed in the subsections below to conduct a further analysis
of benefit, specificity, and adverse effects. The basis for this further analysis is the arguendo
assumption that the maximum amount of tax potentially payable pursuant to the TIRIB formula
could be considered as an appropriate normative benchmark. It is clear that the comparison of this
benchmark with the challenged tax treatment would lead to the conclusion that the challenged tax
treatment represents a tax li ability lower than the benchmark tax liability to the extent that the

taxpayer has incorporated qualifying biofuel. This difference in tax liability would, therefore,
represent a financial contribution in the form of government revenue foregone or not collected within
the meaning of Article 1.1(a)(1)(ii).
7.2.3.2.1 Benefit
7.1364. The Panel now proceeds to consider, on the arguendo assumption that a financial
contribution exists within the meaning of Article 1.1(a)(1)(ii), whether Malaysia has established that
a benefit was thereby conferred within the meaning of Article 1.1(b).
7.1365. The Panel notes the financial contribution at issue is in the form of government revenue
foregone or not collected, and this financial contribution would exist with respect to the difference
between (i) the challenged tax treatment of operators releasing fuel for consumption in France that
incorporates some portion of qualifying biofuels and (ii) the normative benchmark treatment of the
maximum amount of tax potentially payable pursuant to the TIRIB formula, which would be paid by
operators releasing fuel for consumption in France that incorporates no qualifying biofuels.
7.1366. The Panel considers that where a government purchases goods or services, sells goods,
loans money, infuses equity and so on, there can be an important distinction between the question
of a financial contribution being made and a benefit being conferred because the government could
take the above actions at market prices or market rates. In such cases, the recipient of the financial
contribution would be no better off than if they engaged in the same transaction with a private
commercial entity on commercial terms.1622 In the case of government revenue otherwise due that
is foregone or not collected, it has been considered that such financial contributions are not available
in the market. A recipient of a financial contribution in the form of government revenue foregone or
not collected receives a benefit equal to the amount of tax otherwise due that was foregone or not
collected.1623 This has been considered to be so even where the taxpayer is induced to undertake
some actions and incur associated expenses to qualify for the tax break. In this case the taxpayers
do incur additional production costs to incorporate qualifying biofuels into the fuel mix and they are
induced to do so to take advantage of the tax reduction. Because they choose to incorporate the
costlier biofuels into their fuel mix to take advantage of the tax reductions, it can be reasoned that
a benefit has been conferred on them by doing so.
7.1367. The Panel considers that the above rationale cannot be applied to assume that a benefit
conferred in the form of a lower tax liability on the taxpayers, who are operators releasing fuel for
consumption in France under the French TIRIB, will necessarily automatically confer a benefit upon
the upstream suppliers of qualifying biofuels or on the producers of qualifying biofuels. The Panel
considers that Malaysia has not provided sufficient additional information and argument to establish
that under the circumstances of this case the conferral of a benefit should be considered to extend
beyond the group of taxpayers.
7.1368. For the above reasons, the Panel considers that, on the arguendo assumption that a
financial contribution exists as describe d above, a benefit would thereby be conferred on the
operators that release fuel for consumption in France incorporating some portion of qualifying
biofuels. The Panel considers that Malaysia has not established that the conferral of a benefit should
be considered to extend beyond this group of taxpayers.
7.2.3.2.2 Article 2 - Specificity
7.2.3.2.2.1 Introduction
7.1369. Having proceeded on the arguendo assumption that the French TIRIB measure provides a
financial contribution that would confer a benefit, the Panel now turns to consid er whether such a
subsidy would be specific within the meaning of Article 2.

1622 See Panel Report, Canada – Aircraft, para. 9.112; see also Appellate Body Report,
Canada – Aircraft, paras. 154, 157; and Panel Report, Brazil – Aircraft, para. 7.24.
1623 See Panel Reports, US – FSC, paras. 7.41-7.103; US – FSC (Article 21.5 – EC), paras. 8.3-8.48;
US – Large Civil Aircraft (2nd complain), paras. 7.115-7.171; US – Tax Incentives, para. 7.161; and
Appellate Body Report, US – FSC, para. 140.

7.1370. Malaysia submits that the subsidy at issue is specific within the meaning of Article 2.1(a)
because access to it "is explicitly limited to and benefits solely and exclusively thos e economic
operators that incorporate and release for consumption petrol and diesel fuels incorporating biofuels
other than oil palm crop-based biofuel".1624
7.1371. The European Union responds that, whil e Malaysia's approach presupposes that certain
economic operators are excluded from the reduction because they incorporate only a given type of
biofuel in their final product, Malaysia itself "denies this assumption and explains that in reality there
is no such group of enterprises " by acknowledging that "all economic operators releasing fuel for
consumption blend different types of biofuels ".1625 Moreover, the European Union submits that
specificity does not exist by virtue of Article 2.1(b) because access to the subsidy is based on
objective criteria or conditions governing the eligibility for, and the amount of, the alleged subsidy
that are clearly spelled out in law, regulation, or other official document, so that they are capable of
verification, and that eligibility is automatic.1626
7.2.3.2.2.2 Legal standard
7.1372. Article 2 is entitled "Specificity". Article 2.1 consists of three subparagraphs, which read as
follows:
2.1 In order to determine whether a subsidy, as defined in paragraph 1 of Article 1, is
specific to an enterprise or industry or group of enterprises or industries (referred to in
this Agreement as "certain enterprises") within the jurisdiction of the granting authority,
the following principles shall apply:
(a) Where the granting authority, or the legislatio n pursuant to which the
granting authority operates, explicitly limits access to a subsidy to certain
enterprises, such subsidy shall be specific.
(b) Where the granting authority, or the legislation pursuant to which the
granting authority operates, esta blishes objective criteria or
conditions[1627] governing the eligibility for, and the amount of, a subsidy,
specificity shall not exist, provided that the eligibility is automatic and that such
criteria and conditions are strictly adhered to. The criteria or conditions must be
clearly spelled out in law, regulation, or other official document, so as to be
capable of verification.
(c) If, notwithstanding any appearance of non -specificity resulting from the
application of the principles laid down in subparagraphs (a) and (b), there are
reasons to believe that the subsidy may in fact be specific, other factors may be
considered. Such factors are: use of a subsidy programme by a limited number
of certain enterprises, predominant use by certain enterpri ses, the granting of
disproportionately large amounts of subsidy to certain enterprises, and the
manner in which discretion has been exercised by the granting authority in the
decision to grant a subsidy[1628]. In applying this subparagraph, account shall be
taken of the extent of diversification of economic activities within the jurisdiction
of the granting authority, as well as of the length of time during which the subsidy
programme has been in operation.

1624 Malaysia's first written submission, para. 1119. (emphasis original). See also Malaysia's response to
Panel question No. 195.
1625 European Union's first written submission, paras. 1666-1667.
1626 European Union's first written submission, para. 1673.
1627 The footnote to the text of Article 2.1(b) states: "Objective criteria or conditions, as used herein,
mean criteria or conditions which are neutral, which do not favour certain enterprises over others, and which
are economic in nature and horizontal in application, such as number of employees or size of enterprise."
1628 The footnote to text of Article 2.1(c) states: "In this regard, in particular, information on the
frequency with which applications for a subsidy are refused or approved and the reasons for such decisions
shall be considered."

7.1373. The provisions of Article 2 have been interpreted a nd applied in a number of prior cases,
and both parties present their respective understandings of the applicable legal standard with
reference to prior cases.
7.1374. The purpose of Article 2 is to ascertain whether the subsidy that is found to exist pursuant
to Article 1.1 is specific. To this end, Article 2.1 sets out certain "principles" for determining whether
access to a subsidy is limited to a particular class of recipients and the subsidy is, for that reason,
specific. Article 2.1(a) states that a subsidy s hall be specific if the granting authority, or the
legislation pursuant to which the granting authority operates, explicitly limits access to that subsidy
to certain enterprises or industries. Article 2.1(b) sets out that specificity "shall not exist " if the
granting authority, or the legislation pursuant to which the granting authority operates, establishes
objective criteria or conditions governing the eligibility for, and the amount of, the subsidy, provided
that eligibility is automatic, that such criteria or conditions are strictly adhered to, and that they are
clearly spelled out in an official document so as to be capable of verification.
7.1375. In determining whether a subsidy is specific, both subparagraphs (a) and (b) thus focus on
the same subject -matter, i.e. "the granting authority, or the legislation pursuant to which the
granting authority operates".1629 Article 2.1(a) talks of explicit limits on access to a subsidy. Article
2.1(b) enumerates the situations when a subsidy shall be regarded as non -specific, based on an
analysis of the conditions and criteria for eligibility and amount of the subsidy as clearly spelled out
in law, regulation, or other official document . The provisions thus envisage taking into account all
relevant de jure features of a subsidy established through legislation and other instruments for the
determination of specificity. The common aim and subject -matter of the two subparagraphs also
suggests to the Panel that they apply concurrently.1630
7.1376. The Panel will elaborate further on the elements of the legal standard in Article 2 as
necessary in the course of its assessment of the issues in dispute.
7.2.3.2.2.3 Assessment by the Panel
7.1377. In determining whether de jure specificity exists, Articles 2.1(a) directs the Panel to focus
on explicit limits on access to the subsidy placed by the granting authority or the legislation pursuant
to which it operates. Article 2.1(b) further requires the Panel to take into account the conditions and
criteria for eligibility and amount of the subsidy as reflected in l aw, regulation, or another official
document. In the present case, the Panel notes that the relevant de jure features of the subsidy at
issue are set out in several instruments. The operators liable to pay the TIRIB are set out in the
Circular of 18 August 2020 as follows:
The persons liable to pay the TIRIB are the persons liable to pay the TICPE for the
release for consumption of these fuels as a result of import, as a result of intra -
Community circulation under a tax suspensive procedure, or on leaving establishments
placed under a tax suspensive procedure (factories under customs control [ "usines
exercées"], tax warehouses for storage and, for ED95 and B100, tax warehouses for
energy products). They are importers, approved warehouse keepers, registered
recipients or occasional registered recipients.1631
7.1378. The text of this instrument expressly limits the payment of the TIRIB to those entities "that
release for consumption these fuels as a result of import, as a result of intra-Community circulation
under a t ax suspensive procedure, or on leaving establishments placed under a tax suspensive
procedure", i.e. "importers, approved warehouse keepers, registered recipients or occasional
registered recipients". It follows that access to any reduction in the TIRIB is also limited to the same
operators that are liable to pay the TIRIB, i.e. entities that release for consumption fuels in France,
i.e. "importers, approved warehouse keepers, registered recipients or occasional registered
recipients".
7.1379. Furthermore, Article 266 quindecies of the Customs Code provides that, for the purposes
of the TIRIB, qualifying sources of energy in the fuel mix for achieving the incorporation target are
renewable energy sources, and that energy from biofuels is renewable if it meets the sustainability

1629 Panel Report, US – Ripe Olives from Spain, para. 7.27.
1630 Panel Report, US – Ripe Olives from Spain, para. 7.28.
1631 French Government Circular of 18 August 2020, (Exhibit EU-197), Article 8.

and reduction of greenhouse gas emissions criteria that are in line with RED II and the Delegated
Regulation.1632 In this manner, the Circular and the Customs Code set out a scheme for the payment
of – and exemption from – the TIRIB for entities that release for consumption (i.e. importers,
approved warehouse keepers, registered recipients or occasional registered recipients) fuels
containing qualifying sources of energy.
7.1380. Article 266 quindecies of the French Customs Code also provides that "palm oil -based
products are not considered to be biofuels " starting from 1 January 2020.1633 The Circular of
18 August 2020 states that palm oil-based products are "excluded, from 2020, from the full benefit
of the tax advantage regardless of their mode of production."1634
7.1381. Working together, these instruments indicate to the Panel that only those economic
operators that incorporate and release for consumption fuels incorporating qualifying sources of
energy have access to a reduction in the TIRIB, whereas operators that do not incorporate qualifying
sources of energy do not have access to the reduction, and, to the extent that operators do not
incorporate sufficient qualifying biofuels to meet the target, they have proportionally less access to
the reduction in the TIRIB. Moreover, palm oil-based products do not constitute qualifying sources
of energy for the purposes of accessing the French TIRIB measure.
7.1382. Under Article 2.1(a), "a limitation on access to a subsidy may be established 'in many
different ways', including, for example, 'by virtue of the type of activities conducted by the
recipients'".1635 Based on the text of the underlying instruments discussed above, the Panel finds
that the subsidy assumed arguendo to exist pursuant to Article 1 .1 – i.e. the lower tax liability
associated with incorporating qualifying biofuels – is specific within the meaning of Article 2.1(a)
because access to such subsidy is limited to those economic operators that release for consumption
fuels incorporating qualifying biofuels.
7.1383. According to Malaysia, the subsidy is specific to "certain enterprises " that are "those
economic operators that incorporate and release for consumption petrol and diesel fuels
incorporating biofuels other than oil palm crop -based biofuel". 1636 The European Union responds
that whil e Malaysia's approach to specificity presupposes that certain economic operators are
excluded from the French TIRIB measure because they incorporate only a given type of biofuel in
their final product, Malaysia it self "denies this assumption and explains that in reality there is no
such group of enterprises " by acknowledging that "all economic operators releasing fuel for
consumption blend different types of biofuels. "1637 Moreover, the European Union points out that
Malaysia "recognises the peculiarities of the blending process, whereby economic operators, as a
general practice, incorporate different types of biofuels in the petrol and diesel fuels."1638 The Panel
notes, however, that, as discussed above, the focus of the inquiry of specificity under Article 2.1(a)
is on whether access to the subsidy is explicitly limited to certain enterprises, not on whether they,
in fact, receive the subsidy. 1639 Thus, the fact that Malaysia recognizes1640 that all economic
operators "in reality"1641, or "as a general practice "1642, blend different types of biofuel does not,
without more, negate the proposition that access to the subsidy is explicitly limited to those economic
operators that incorporate and release for consumption fuels incorporating biofuels other than palm
oil-based biofuel.
7.1384. The European Union also asserts that specificity does not exist by virtue of Article 2.1(b)
because the subsidy at issue is based on "objective criteria or conditions governing the eligibility for,

1632 Article 266 quindecies - Code des douanes – Légifrance, (Exhibit EU-199).
1633 Article 266 quindecies - Code des douanes – Légifrance, (Exhibit EU-199).
1634 French Government Circular of 18 August 2020, (Exhibit EU-197), Article 8.
1635 Panel Report, US – Softwood Lumber VII, para. 7.722 (quoting, inter alia, Appellate Body Report,
US – Washing Machines, para. 5.223).
1636 Malaysia's first written submission, para. 1119. (emphasis original) See also Malaysia's response to
Panel question No. 195.
1637 European Union's first written submission, paras. 1666-1667. (emphasis added)
1638 Malaysia's response to Panel question No. 195.
1639 Appellate Body Report, US – Anti-Dumping and Countervailing Duties (China), para. 368. (emphasis
original) See also Panel Report, US – Softwood Lumber VII, paras. 7.709 and 7.721.
1640 European Union's second written submission, para. 339 (noting that "[a]mong this group of
enterprises there is no group that only incorporates a given type of biofuels").
1641 European Union's first written submission, paras. 1666-1667. (emphasis added)
1642 Malaysia's response to Panel question No. 195.

and the amount of, the alleged subsidy " that "are clearly spelled out in law, regulation, or other
official document, so that they are capable of verification, and that eligibility is automatic".1643
7.1385. Malaysia, for its part, recognizes that the specificity analysis should accord appropriate
consideration to both Article 2.1(a) and Article 2.1(b). 1644 However, as noted above in the context
of Article 2.1(a), Malaysia also argues that access to the subsidy "is limited to certain enterprises,
in particular, to the economic operators that release for consumption petrol and diesel fuels that
contain biofuels other than oil palm crop-based biofuel".1645
7.1386. Article 2.1(b) stipulates that specificity "shall not exist" "[w]here the granting authority, or
the legislation pursuant to which the granting authority operates, establishes objective criteria or
conditions governing the eligibility for, and the amount of, a subsidy, provided that the eligibility is
automatic and that such criteria and conditions are strictly adhered to." Footnote 2 to Article 2.1(b)
defines "objective criteria or conditions " as those "which are neutral, which do not favour certain
enterprises over others, and which are economic in nature and horizontal in application, such as
number of employees or size of enterprise".
7.1387. As discussed in the context of the Article 2.1(a) analysis above, the text of the underlying
instruments establishes that only those operators that incorporate and release for consumption fuels
incorporating qualifying sources of energy have access to a reduction in the TIRIB. This also implies
that, for the purposes of Article 2.1(b), the criteria or conditions for eligibility for the French TIRIB
measure are not "objective" insofar as they "favour certain enterprises over others ", i.e. those
operators that incorporate and release for consumption fuels incorporating qualifying sources of
energy over those operators that incorporate and release for consumption fuels incorporating palm
oil-based biofuel.1646
7.2.3.2.2.4 Conclusion on Article 2
7.1388. The instruments setting out the eligibility conditions for the subsidy establish that only
those economic operators that release for consumption fuels incorporating qualifying biofuels have
access to a favourable tax t reatment under the French TIRIB measure, whereas operators that do
not incorporate qualifying biofuels do not have access to the favourable tax treatment, and, to the
extent that operators do not incorporate sufficient qualifying biofuels to meet the target, they have
proportionally less access to the favourable tax treatment.
7.1389. The Panel thus finds that the subsidy assumed to exist for the purposes of the Panel's
arguendo analysis is specific within the meaning of Article 2.1(a) because access to such subsidy is
limited to those economic operators that release for consumption fuels incorporating qualifying
biofuels. For the purposes of Article 2.1(b), this also means that the criteria or conditions for
eligibility for the favourable tax treatment are not "objective" insofar as they "favour certain
enterprises over others ", i.e. those operators that release for consumption fuels incorporating
qualifying biofuels over those operators that incorporate and release for consumption fuels not
incorporating qualifying biofuel.
7.2.3.2.3 Articles 5(c), 6.3(a) and 6.3(c) – Adverse effects and serious prejudice
7.2.3.2.3.1 Introduction
7.1390. The Panel proceeded on the arguendo assumption that the French TIRIB provides a financial
contribution, that a subsidy within the meaning of Article 1 would exist because a benefit would
thereby be conferred, and that such subsidy would be specific within the meaning of Article 2 . The
Panel now turns to the claims under Article 5(c), 6.3(a) and 6.3(c) of the SCM Agreement.

1643 European Union's first written submission, para. 1673.
1644 Malaysia's first written submission, para. 1115.
1645 Malaysia's first written submission, para. 1117.
1646 See e.g. Panel Report, US – Softwood Lumber VII, para. 7.727.

7.1391. Malaysia submits 1647 that the French TIRIB measure is inconsistent with Article 5(c)
because the favourable tax treatment it provides to operators releasing fuel for consumption in
France incorporating qualifying biofuels constitutes an actionable subsidy which causes adverse
effects to the interests of Malaysia, in the form of serious prejudice to its interests within the meaning
of Articles 6.3(a) and 6.3(c).
7.1392. The European Union submits1648 that Malaysia has not demonstrated that adverse effects
have been caused by the French TIRIB m easure. In particular, the European Union submits that
causation has not been substantiated because, inter alia, the posited counterfactual scenario to show
causation does not hold. According to the European Union, any decline of Malaysian exports of palm
oil into France between 2019 and 2020 cannot be assumed to be attributable to the French TIRIB
measure.1649 The European Union further submits that Malaysia's causation analysis ignores factors
that should be considered, including market conditions, the conc eptual distance between the
activities of the subsidy recipient and the products in respect of which the effects are alleged. 1650
Additionally, the European Union suggests that in the absence of the alleged subsidy the market
phenomena of displacement and/or lost sales would have nonetheless occurred due to market
factors as well as strong public pressure towards environmental protection and other demand related
factors such as ethical concerns, reputation, branding, and corporate social responsibility.1651
7.2.3.2.3.2 Legal standard
7.1393. Article 5 is entitled "Adverse Effects". Article 5(c) read in conjunction with the introductory
clause in Article 5 states:
No Member should cause, through the use of any subsidy referred to in paragraphs 1
and 2 of Article 1, adverse effects to the interests of other Members, i.e.:
…

(c) serious prejudice to the interests of another Member.[1652]
7.1394. Article 6 of the SCM Agreement is entitled "Serious Prejudice". Article 6.3(a) and (c) provide
that:
6.3 Serious prejudice in the sense of paragraph (c) of Article 5 may arise in any case
where one or several of the following apply:
(a) the effect of the subsidy is to displace or impede the imports of a like product
of another Member into the market of the subsidizing Member;

…
(c) the effect of the subsidy is a significant price undercutting by the subsidized
product as compared with the price of a like product of another Member in the
same market or significant price suppression, price depression or lost sales in the
same market;

1647 Malaysia's first written submission, paras. 1120-1211; second written submission, paras. 469-523;
responses to the Panel's questions, pp. 129-130; and comments on EU responses to the Panel's questions,
pp. 334-339
1648 European Union's first written submission, paras. 1675-1819; second written submission,
paras. 342-363; and responses to the Panel's questions, paras. 1066-1095.
1649 European Union's first written submission, para. 1710.
1650 European Union first written submission, para. 1777.
1651 European Union first written submission, paras. 1788-1793; European Union second written
submission, para. 360; European Union response to Question No. 192.
1652 The footnote to the text of Article 5(c) states: "The term "serious prejudice to the interests of
another Member" is used in this Agreement in the same sense as it is used in paragraph 1 of Article XVI of
GATT 1994, and includes threat of serious prejudice."

7.1395. Articles 5(c), 6.3(a) and 6.3(c) have been interpreted and applied in a number of prior
cases, and both parties present their respective understandings of the applicable legal standard with
reference to prior cases.
7.1396. The Panel will elaborate on the relevant eleme nts of the legal standards in Articles 5(c),
6.3(a) and 6.3(c) as necessary in the course of its assessment of the issues in dispute.
7.2.3.2.3.3 General approach to the assessment of adverse effects and serious prejudice
7.1397. Malaysia utilized a two-step approach in presenting its arguments regarding adverse effects
and serious prejudice. For each of the alleged effects of the alleged subsidy (displacement and lost
sales), Malaysia sought to demonstrate the existence of the alleged effect, and then argued in a
second step that the subsidy was a genuine and substantial cause of the effects.1653
7.1398. The Panel observes that analysis of adverse effects and serious prejudice has been
undertaken using either a unitary or two-step approach.1654 Under a unitary approach, the analysis
of the particular market phenomena identified in the subparagraphs of Article 6.3 is not conducted
separately from the analysis of whether there is a causal relationship between those market
phenomena and the challenged subsidies. By contrast, under a two-step approach the analysis first
seeks to identify the market phenomena, and then, as a second step, examines whether there is a
causal relationship between the observed situation on the market and the subsidy. The Panel notes
that the Appellate Body has observed that a unitary approach "has a sound conceptual foundation"
and that it may be difficult to ascertain the existence of some of the market phenomena in Article
6.3 without considering the effect of the subsidy at issue. 1655 The Panel agrees with this line of
thinking as elaborated in the following Appellate Body statement1656:
[A] unitary approach that uses a counterfactual will generally be the more appropriate
approach to undertaking the assessment required under Article 6.3 of the
SCM Agreement. … [I]t is difficult to understand the market phenomena described in
the various subparagraphs of Article 6.3 in isolation from the challenged subsidies.
Rather, consideration of the effects of the challenged subsidies is intrinsic to the
identification of those market phenomena. Any attempt to identify one of the market
phenomena in Article 6.3 without considering the subsidies at issue can only be
preliminary in nature since Article 6.3 requires that the market phenomenon be the
effect of the challenged subsidy. This also means that a two-step approach simply defers
the core of the analysis to the second step. In other cases, the problem might be the
opposite. By artificially leaving aside the question of whether the market phenomenon
is the effect of the subsidy, one could overlook market phenomena that are in fact
occurring.
The use of a counterfactual analysis provides an adjudicator with a useful analytical
framework to isolate and properly identify the effects of the challenged su bsidies. In
general terms, the counterfactual analysis entails comparing the actual market situation
that is before the adjudicator with the market situation that would have existed in the
absence of the challenged subsidies. This requires the adjudicator to undertake a
modelling exercise as to what the market would look like in the absence of the subsidies.
Such an exercise is a necessary part of the counterfactual approach. As with other
factual assessments, panels clearly have a margin of discretion in c onducting the
counterfactual analysis.
7.1399. Although Malaysia opted to follow the two -step approach, the Panel considers that it is
within its discretion to determine the approach it considers most appropriate under the
circumstances. The Panel considers certain aspects of the parties' submissions to have relevance in
this respect. The parties agree that in the absence of government measures incentivizing the use of

1653 Malaysia's first written submission, paras. 1143-1166, and 1184.
1654 Appellate Body Reports, EC and certain member States – Large Civil Aircraft, para. 1107;
US – Upland Cotton, para. 431; and US – Upland Cotton (Article 21.5 – Brazil), para. 354.
1655 Appellate Body Reports, EC and certain member States – Large Civil Aircraft, para. 1107; and
US – Upland Cotton, para. 354.
1656 Appellate Body Report, EC and certain member States – Large Civil Aircraft, paras. 1109-1110
(fns omitted).

biofuels, there would be no commercial reason for operators releasing fuel for consumption in France
to incorporate biofuels into their fuel mix. This is because biofuels cannot compete on a commercial
basis with fossil fuels. 1657 Moreover, there are substantial questions regarding whether, in the
absence of the challenged subsidy, any opportunities for palm oil-based biofuel to compete for a
share of the fuel mix would arise.1658
7.1400. The Panel's resolution of these latter questions will be key to establishing the appropriate
counterfactual for the causation analysis. Were the Panel to conclude that there wou ld be a
counterfactual biofuel market that did not offer competitive opportunities to palm oil-based biofuel,
then the alleged adverse effects would not have been caused by the subsidy. Alternatively, were the
Panel to take the opposite view, the nature of the competitive opportunities for palm oil-based biofuel
existing in the counterfactual would necessarily inform the subsequent analysis of the market effects.
This suggests that a unitary analysis of the adverse effects would be the most efficient way fo r the
Panel to proceed. In this respect, the Panel finds that in the circumstances of this dispute, and as
the Appellate Body has observed, "a two-step approach simply defers the core of the analysis to the
second step". Accordingly, the Panel determines to take a unitary approach and to turn next to the
issue of the appropriate counterfactual analysis.
7.2.3.2.3.4 The appropriate counterfactual analysis
7.1401. To prevail on a claim of serious prejudice, the complainant must demonstrate that the
subsidies at issue have caused one or more of a range of prescribed effects in the relevant market.
The causal link between a subsidy and its effects that is required to make this showing has been
consistently described as "a genuine and substantial relationship of cause and effect ", although a
panel need not determine it to be the sole cause of that effect, or even that it is the only substantial
cause of that effect.1659
7.1402. A number of factors have been considered as relevant for an assessment of whether a
challenged subsidy causes the effects that constitute serious prejudice, such as the nature of the
subsidy; the way in which the subsidy operates; the extent to which the subsidy is provided in
respect of a particular product or products; conditions in the market; and the conceptual di stance
between the activities of the subsidy recipient and the products in respect of which the market
phenomena are alleged.1660 As mentioned above, a counterfactual analysis has been considered as
critical in considering these factors to determine whether the alleged market phenomena are the
effect of the challenged subsidies.1661
7.1403. In an examination of alleged lost sales, for example, this would involve a comparison of
the sales actually made by the competing firm(s) of the complaining Member with a counterfa ctual
scenario in which the subsidized firm(s) would not have received the challenged subsidies. There
would be lost sales where a counterfactual scenario shows that sales made by the subsidized firm(s)
would have been made instead by the competing firm(s) of the complaining Member, thus revealing
the effect of the challenged subsidies.
7.1404. In some circumstances, factors other than the subsidy at issue may have caused or
contributed to a particular market effect. Effects of those other causal factors should not be
attributed to the subsidies at issue, and the extent to which the other causal factors dilute the causal
link between those subsidies and the alleged adverse effects should be taken into account when
determining whether there is a genuine and substantial relationship of cause and effect between the
subsidies and the alleged market phenomenon. 1662 This examination is referred to as the non -
attribution analysis.

1657 Malaysia's first written submission, paras. 563, 1188.
1658 Malaysia's first written submission, paras. 1151-1152; and second written submission, paras. 503-
506; European Union's first written submission paras. 1790-1795.
1659 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 913.
1660 See Panel Report, Korea – Commercial Vessels, para. 7.560.
1661 Appellate Body Report, EC and certain member States – Large Civil Aircraft, paras. 1109-1110.
1662 Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 914. See also Appellate Body
Reports, US – Upland Cotton, para. 437; US – Upland Cotton (Article 21.5 – Brazil), para. 375; and EC and
certain member States – Large Civil Aircraft, paras. 1232 and 1376.

7.1405. The selection of an appropriate counterfactual will, as a threshold matter, shape any
analysis of adverse effects and serious prejudice in the relevant markets, causation thereof, and
non-attribution.
7.1406. The parties acknowledge that the appropriate counterfactual scenario is one that would
exist in the absence of the challenged subsidy. 1663 The Panel recalls that it has found, premised on
the arguendo assumption that the French TIRIB provides a financial contribution in the form of
government revenue foregone, a benefit is conferred on the taxpayers whose tax liability is reduced,
and such subsidy is specific within the meaning of Article 2. Accordingly, the counterfactual scenario
would be one where the French TIRIB no longer lowers the tax liability of taxpayers incorporating
qualifying biofuels.
7.1407. The parties agree that in the absence of an incentive to in corporate biofuels into the fuel
mix, there is no commercial reason for operators releasing fuel for consumption in France to
incorporate such biofuels because biofuels cannot compete on a commercial basis with fossil
fuels.1664 It follows that in the absenc e of the incentive created by the French TIRIB there is no
market for biofuel to be incorporated in the fuel mix consumed in France. The commercial non -
viability of biofuels for incorporation in the fuel mix vis-à-vis fossil fuels supports the conclusion that
in the absence of the incentive created by the French TIRIB all crop-based biofuels would disappear
from the transport fuel market in France.
7.1408. In other words, while the absence of the subsidy would eliminate the incentive to
incorporate the qualifying biofuels into the mix of fuel released for consumption in France, it would
not restore palm oil -based biofuel to the market position where it competed with other oil crop -
based biofuels. According to this reasoning, the counterfactual analysis shows that "the market
situation that would have existed in the absence of the challenged subsidies " is not one where the
alleged adverse effects to Malaysia's interests are mitigated. If the subsidy were the cause of the
adverse effects then its absence should result in the mitigation of those adverse effects. This not
being the case, the challenged subsidies are shown not to have caused the alleged adverse effects.
Put simply, the absence of the challenged subsidy would not result in better market results for palm
oil-based biofuel in the face of commercial non-viability of any oil crop-based biofuels vis-à-vis fossil
fuels.
7.1409. Malaysia contends that the counterfactual should additionally account for the continued
applicability of EU renewable energy targets such that o il crop-based biofuel would still need to be
used in France to meet those targets. 1665 Malaysia views the EU renewable energy targets as
mandates that France must take some action to fulfil.1666
7.1410. The Panel recalls that while the EU renewable energy targets permit palm oil-based biofuel
to fulfil some portion of the targets during the phase -out period, incorporation of palm oil -based
biofuel is not required by the targets. The Panel notes Malaysia's emphasis on considerations that
could favour an implementation t hat results in market opportunities for palm oil -based biofuel,
whereas the European Union has highlighted the policy motivations for alternative outcomes that
would not entail market opportunities for palm oil-based biofuel.1667 In this regard, the Panel recalls
that the counterfactual approach "requires the adjudicator to undertake a modelling exercise as to
what the market would look like in the absence of the subsidies".1668 The differences in views of the
parties on the role of EU renewable energy targets, however, raises questions about whether, in
addition to modelling how market conditions would have responded in the absence of the subsidies,
the Panel should also speculate whether and how the subsidizing Member might adopt ( or might
have adopted) alternative interventions to respond to its various priorities in the absence of the
challenged subsidy.

1663 Malaysia's first written submission, paras. 1194-1196; European Union's first written submission,
paras. 1787-1788.
1664 Malaysia's first written submission, paras. 563 and 1188; European Union's first written submission,
paras. 10 and 1425.
1665 Malaysia's first written submission, para. 1152.
1666 Malaysia's first written submission, para. 1152.
1667 Malaysia's first written submission, paras. 1194-1201; European Union's first written submission,
para. 1624.
1668 Appellate Body Report, EC and certain member States – Large Civil Aircraft, para. 1110.

7.1411. The Panel recalls that the purpose of undertaking the counterfactual analysis under Article
5(c) is to ascertain whether the subsidy causes the alleged adverse effects rather than to explore a
range of alternative policy options. On the basis of reliable evidence and an understanding of market
dynamics, the Panel considers that it is relatively feasible to undertake a modelling exe rcise that
supports a reasoned conclusion that in the absence of the subsidy it is probable that market
conditions would respond, or would have responded, in a particular way that shows whether the
adverse effects would have been mitigated in the absence of the subsidy.
7.1412. The Panel recognizes that the existence of the EU renewable energy targets suggests that
it is possible that France would adopt, or would have adopted, some other implementation in the
absence of the subsidy. However, the Panel considers a counterfactual analysis regarding alternative
government interventions that could be, or could have been, adopted in the absence of the subsidy
to implement the EU renewable energy targets to be considerably more speculative than a market
modelling exercise. To the extent that any such speculation would be warranted, the Panel considers
that the evidence suggests the French Government would continue to pursue the policy goal of
excluding palm oil -based biofuels sooner than the deadline under the EU directive . Crucially, the
Panel finds insufficient evidence on the record to conclude that in the absence of the subsidy an
alternative government intervention would necessarily establish a competitive relationship between
palm oil-based biofuel and other oil crop-based biofuels for a share of the fuel mix in France.
7.1413. As mentioned, the usefulness of applying a counterfactual analysis is "to isolate and
properly identify the effects of the challenged subsidies ".1669 The Panel is, therefore, mindful that
the appropriate counterfactual analysis should isolate the effects of the challenged subsidy as
compared to other aspects of the French TIRIB that do not constitute the subsidy per se. Malaysia
has focused its causation arguments on alleged effects arising in the 2019 -2020 period when palm
oil-based biofuel was excluded from the group of qualifying biofuels as compared to prior years when
palm oil-based biofuel was a qualifying biofuel, was elig ible for the favourable tax treatment, and
was on that basis competing with other biofuels for incorporation in the fuel mix.1670 Malaysia points
to the correspondence in time of the effects of the challenged subsidy that ar ose from 2019 to
2020.1671 There is not, however, a correspondence in time between the adoption of the challenged
subsidy and the alleged adverse effects. Rather, the alleged adverse effects correspond in time with
the proposed and implemented exclusion of palm oil -based biofuel from the gro up of qualifying
biofuels. The correspondence in time of the adoption of the exclusion as opposed to the pre-existing
tax reduction suggests to the Panel that the alleged adverse effects were the effect of the exclusion
rather than the challenged subsidy. The Panel notes in this regard that Malaysia has claimed that
the exclusion of petrol and diesel fuels, to the extent that they contain palm oil-based biofuel, from
the French TIRIB measure is inconsistent with Articles I:1 and III:2 of the GATT 1994, and the Panel
has made affirmative findings in relation to those claims.
7.1414. The Panel recalls, however, that the subsidy in question is the favourable tax treatment
afforded to the taxpayers incorporating qualifying biofuels such that less tax is paid than would have
been due otherwise. The Panel is, therefore, constrained to examine the effects of the specific
subsidy found to exist (on an arguendo basis), and not other aspects of the French TIRIB that do
not constitute the subsidy. In the Panel's view, the subsi dy has the effect of creating demand for
qualifying biofuel to be incorporated into fuel released for consumption in France. The subsidy thus
permits the qualifying biofuels to overcome a competitive disadvantage vis-à-vis fossil fuel. The
marketing opportunities for palm oil-based biofuel existed when it was treated as a qualifying biofuel,
and such opportunities could exist again only as a consequence of some other intervention to create
similar opportunities. Accordingly, the Panel finds that the counter factual analysis supports the
conclusion that the alleged adverse effects are not caused by the subsidy at issue here (which
enables some biofuels to compete with fossil fuels), but are rather caused by the exclusion of palm
oil-based biofuel from the grou p of qualifying biofuels. As such, the Panel finds that Malaysia has
not established that the alleged adverse effects are caused by the subsidy within the meaning of
Articles 5(c), 6.3(a) and 6.3(c).

1669 Appellate Body Report, EC and certain member States – Large Civil Aircraft, para. 1100.
1670 Malaysia's first written submission, paras. 1144-1166.
1671 Malaysia's first written submission, paras. 1145, 1161-1162, 1165, and 1190; and second written
submission, paras. 490, 494, and 498.

7.2.3.2.3.5 Conclusion on adverse effects and serious prejudice
7.1415. For the above reasons, assuming arguendo that the French TIRIB provides a financial
contribution within the meaning of Article 1.1(a)(1)(ii) such that a subsidy within the meaning of
Article 1 exists because a benefit is thereby conferred, and that such subsid y is specific within the
meaning of Article 2, the Panel finds that Malaysia has not established that such subsidy causes the
alleged adverse effects within the meaning of Articles 5(c), 6.3(a) and 6.3(c).
7.2.3.3 Overall conclusion regarding the claims under the SCM Agreement
7.1416. The Panel finds that Malaysia has failed to establish that the French TIRIB measure provides
a subsidy that constitutes a specific subsidy that causes adverse effects in the form of serious
prejudice under Articles 5(c), 6.3(a) and 6.3(c) of the SCM Agreement.
7.3 Claims in respect of the Lithuanian measures
7.3.1 Introduction
7.1417. In addition to the EU-wide measures and the French measure, Malaysia challenges certain
Lithuanian measures.
7.1418. Malaysia submits1672 that if the EU measures at issue were to be fou nd inconsistent with
the E uropean Union's relevant WTO commitments, Lithuania 's rules transposing the relevant
elements of the RED II would also have to be found to be inconsistent with Lithuania's relevant WTO
commitments.
7.1419. The European Union submits1673 that Malaysia's panel request fails to identify with sufficient
precision the relevant provisions of the Lithuanian law in question, which of the EU measures they
relate to, or which provisions of Lithuania's legal order implementing those provis ions are
inconsistent with which WTO obligations. In any event, the European Union argues that Malaysia
has failed to make a prima facie case as it does not advance any evidence and arguments to explain
why Lithuania's measures violate the same obligations under the TBT Agreement and the GATT 1994
that Malaysia raises in respect of the EU measures.
7.3.2 Malaysia's panel request
7.1420. The Panel refers to paragraphs 2.76 and 2.77 in the descriptive part of this Report which
set out the Lithuanian measures as Malaysia describes them in Part III of its panel request.
7.1421. Furthermore, the Panel notes that Part IV of Malaysia's panel request is entitled "Legal
Basis of the Complaint". Following a review of the EU-wide and French measures, which include an
enumerated listing of the legal claims in respect of each set of measures, paragraph 34 of Malaysia's
panel request states the following, under the heading "Lithuania":
34. As noted above, Malaysia contends that the measures set out particularly, but
not exclusively, in Article 26 of the RED II and the Delegated Regulation are inconsistent
with the EU's obligations under the TBT Agreement and the GATT 1994. Hence, any
implementation by Lithuania of these measures in its domestic law would also be
inconsistent with the same obligations under the TBT Agreement and the GATT 1994.
7.3.3 Malaysia's submissions
7.1422. Malaysia addresses the Lithuanian measure in its first written submission in two identically
worded paragraphs that contain the argument set out above. Malaysia does not develop this

1672 Malaysia's first written submission, paras. 373, 380-383, 404-406, 1214; second written
submission, paras. 525-535; response to Panel question No. 5, pp. 3-4; and comments on the
European Union's responses to Panel questions No. 6 and No. 15, pp. 42, 62.
1673 European Union's first written submission, paras. 1821-1833; second written submission, para. 365;
response to Panel question No. 6, paras. 6-12; and comments on Malaysia's response to Panel question No. 5,
paras. 1-11.

argument in subsequent submissions. Furthermore, Malaysia while eventually submitting the text of
the Lithuanian Law No. XI-1375 as an exhibit, has not provided a translation of this text into a WTO
working language.
7.3.4 Panel's assessment
7.1423. The Panel is faced with two issues, namely whether the measure has been properly
identified pursuant to Article 6.2 of the DSU and if so, whether Malaysia has made a prima facie
case. These issues present a logical sequence, and the Panel would normally have to decide the
Article 6.2 issue first.
7.1424. The parties hold opposing views on whether Malays ia's panel request complies with the
dual requirements in Article 6.2 of the DSU to "identify the specific measures at issue" and "the legal
basis of the complaint sufficient to present the problem clearly ". The parties have elaborated their
arguments on the adequacy of Malaysia's panel request in the course of the proceedings, including
in responses to questions from the Panel. The parties' arguments as developed raise multiple
interrelated issues that would require the Panel to analyse and rule on multipl e issues implicating
different aspects of the panel request.
7.1425. First and foremost, while Malaysia's panel request does not appear to identify the contents
of any specific provision of the Lithuanian law in question1674, it does include references to elements
of RED II and the Delegated Regulation that might in principle enable a reasonable inference to be
drawn. However, the elements of RED II and the Delegated Regulation are referred to through
several different formulations that are potentially confusing, including:
• a relatively general reference to "the provisions of the RED II and the Delegated
Regulation" in paragraph 29;
• what could be construed as a narrower reference to the high ILUC-risk cap and phase-out
measure in Article 26(2) in the narrative description referring to "high ILUC-risk" and "the
gradual decrease to 0%" given in paragraph 30; and
• the reference to "the measures set out particularly, but not exclusively, in Article 26 of the
RED II and the Delegated Regulation" in paragraph 34, which is an explicit indication that
the relevant EU -wide measures whose implementation into Lithuanian law Malaysia is
challenging is not necessarily limited to the high ILUC-risk cap and phase-out measure in
Article 26(2).
7.1426. Furthermore, including in a panel request a hyperlink to the full text of the challenged
measure, as Malaysia did with respect to the Lithuanian law in question, could in principle be a
means of identifying the measure at issue.1675 Such identification would, however, still be subject to
the requirement of sufficient precision so as to put the respondent on notice with regard to the
nature of the challenged measure.1676 It appears that the website accessible through the hyperlink
included by Malaysia in the panel request contains the full text of the Lithuanian law without
specifying any particular provisions in which the measure(s) at issue is (are) contained. In addition,
the full text of the Lithuanian law that is linked is in the original language.
7.1427. The issues raised under Article 6.2 are further complicated by the fact that Malaysia's panel
request refers to "Lithuania's measure " in the singular in paragraph 31 but refers to "any
implementation by Lithuania of these measures in its domestic law " in paragraph 34 in a manner
that could be understood to mean that it challenges more than one Lithuanian measure. In its
response to Panel questions, Malaysia refers to "Lithuanian measures at issue ", in the plural, and
appears to contend that multiple measures are identified in paragraph 31 of the panel request. 1677

1674 Malaysia maintains that the panel request contains an "explicit list of Lithuanian legislation". (See
Malaysia's second written submission, para. 529; Malaysia's panel request, para. 31.) However, the Panel
notes that the list of provisions found in para. 31(i) refers to the amended provisions of the legal act in
question rather than the specific provisions containing the measures at issue.
1675 Appellate Body Report, Argentina – Import Measures, para. 5.51.
1676 Appellate Body Report, Argentina – Import Measures, para. 5.52.
1677 Malaysia's response to Panel question No. 5, pp. 3-4.

Yet, paragraph 31 merely lists the "legal instruments" through which "Lithuania's measure is set up
and implemented".1678
7.1428. The Panel would also need to clarify the relationship between the different parts of the
panel request set out above for the purposes of identifying "the legal basis of the complaint ". In
response to a question from the Panel, Malaysia contends th at its panel request identifies as the
legal basis of its complaint all provisions of the TBT Agreement and the GATT 1994 which form the
basis for Malaysia's claims against all the EU-wide measures.1679 The wording of paragraph 34 of the
panel request, if read in isolation, provides a textual basis for such a conclusion. However, paragraph
30 appears to refer specifically to implementation of the EU-wide high ILUC-risk cap and phase-out,
and paragraph 31 refers to the "measure" in the singular. If read in conjunction with those elements,
paragraph 34 could equally be read to mean "the same obligations under the TBT Agreement and
the GATT 1994" as those that provide the legal basis of its complaint against the high ILUC -risk
phase-out.
7.1429. In contrast to the potential complexities surrounding the issues relating to consistency with
the requirements of Article 6.2 of the DSU, however, it is in the Panel's view clear that Malaysia has
not endeavoured to make a prima facie case in respect of the Lithuanian measures.
7.1430. The Panel recalls that the burden of demonstrating that the Lithuanian measures are
inconsistent with the relevant provisions of the TBT Agreement and the GATT 1994 rests on Malaysia
as the complainant in this dispute. 1680 It is therefore for Malaysia to put forward evidence and
arguments sufficient to make a prima facie case of violation of obligations in those provisions. 1681
The Appellate Body has made it clear that:
[I]t is incumbent upon a party to identify in its submissio ns the relevance of the
provisions of legislation—the evidence—on which it relies to support its arguments. It is
not sufficient merely to file an entire piece of legislation and expect a panel to discover,
on its own, what relevance the various provisions may or may not have for a party's
legal position.1682
7.1431. In US – Gambling, the panel found that the complaining Member "could not and did not
make any prima facie demonstration"1683 in respect of a category of US federal and state laws which
the panel summed up as:
Laws that are contained in the Panel request but which are not discussed to an extent
that could enable the Panel to identify according to which particular provisions and how
the laws result in a prohibition on the cross -border supply of gambling and b etting
services which would be inconsistent with the United States' obligations under the
GATS.1684
7.1432. This finding was not reviewed on appeal, but in that same dispute the Appellate Body
confirmed that a complaining party "may not simply submit evidence and expect the panel to divine
from it a claim of WTO-inconsistency".1685
7.1433. The Panel agrees with the European Union that Malaysia has not advanced arguments or
adduced evidence that the Lithuanian measure(s) is inconsistent with any of the specific p rovisions
of the TBT Agreement and the GATT 1994 claimed by Malaysia to have been violated. In particular,
Malaysia has not identified or described the contents of any specific provision of Law No XI-1375
containing the challenged measure(s), let alone how the measure(s) operates. Consequently, the
Panel agrees with the European Union that, after receiving all the parties' submissions in these
proceedings, neither the Panel nor the European Union is in a position to know which specific
provision(s) of Lithuanian Law No XI-1375 on renewable energy should be analysed in light of which

1679 Malaysia's response to Panel question No. 5, pp. 3-4.
1680 Appellate Body Reports, US – Wool Shirts and Blouses, p. 14; and EC – Hormones, para. 109.
1681 Appellate Body Report, EC – Hormones, para. 98.
1682 Appellate Body Report, Canada – Wheat Exports and Grain Imports, para. 191.
1685 Appellate Body Report, US – Gambling, para. 140.

legal claims (i.e. what measure (s) are at stake and which claims are to be connected to which
measure).1686 Additionally, Malaysia has not provided the Panel or the European Union with the text
of Lithuania's Law No XI-1375 translated into a WTO working language, contrary to the requirements
of paragraph 6(1) of the Working Procedures adopted by the Panel.1687
7.1434. Furthermore, Malaysia's arguments against the Lithuanian measure (s) in thi s dispute
consist of only two paragraphs, in its first written submission, that essentially repeat the description
of the Lithuanian measure(s) at issue included in its panel request.1688
7.1435. In sum, Malaysia has effectively left to the Panel the task of identif ying which specific
provision(s) of Lithuanian Law No XI-1375 on renewable energy should be analysed in light of which
legal claims, and has not provided the Panel with the text of the Lithuanian legislation in a WTO
working language in accordance with paragraph 6(1) of the Working Procedures. While Malaysia has
not formally abandoned its claims against the Lithuanian measure(s), the foregoing establishes that
it has made no effort to develop or argue its claims and has patently failed to present a prima facie
case. In light of this, the Panel sees no reason to rule on the host of interrelated issues regarding
the consistency of Malaysia's panel request with Article 6.2.
7.1436. In a prior case where a responding Member requested a preliminary ruling under Article 6.2
in respect of claims that the complaining Member subsequently abandoned, the panel stated that:
The mere fact that we are still left with an Article 6.2 issue does not mean that we need
to, or should, resolve it. As a threshold matter, it is necessary to consider whether
resolving this issue would make any practical difference. …
At this stage, we note that other panels confronting issues that they determined were
moot responded by not examining them further. [33] In the particular circumstances of
this case, we consider that the aim of the WTO dispute settlement mechanism, which is
to "secure a positive solution to a dispute "[34], does not require us to rule on an
Article 6.2 issue that we have determined is moot. Indeed, it appears futile to offer a
ruling linked to claims that the complaining party no longer deems fruitful to pursue.[35]
We likewise consider that a ruling on the Article 6.2 issue that pertains to the abandoned
claims is not necessary to "assist the DSB in making the recommendations or in giving
the rulings provided for"[36] in the covered agreements.1689
33 See, e.g. Panel Reports, China – X-Ray Equipment, para. 7.410; US – Hot-Rolled Steel,
34 Article 3.7, second sentence, of the DSU.
35 Article 3.7, first sentence, of the DSU provides that before bringing a case, a Member is to
exercise its judgement as to whether action under the DSU procedures would be fruitful. It seems
to us that similar logic can be reasonably brought to bear on the matter of pursuing claims before
a panel.
36 Article 11, second sentence, of the DSU.
7.1437. Similarly, here, it would be entirely futile to resolve the host of interrelated issues regarding
the consistency of Malaysia's panel request with Article 6.2 of the DSU only to conclude that Malaysia
had failed to establish a prima facie case. The Panel, therefore, leaves these issues open and, for
the purposes of a finding on the non -existence of a prima facie case, assumes consistency with
Article 6.2 on an arguendo basis.

1686 European Union's response to Question No. 6, paras. 6-12.
1687 Para. 6(1) of the Working Procedures states that "If the original language of an exhibit or portion
thereof is not a WTO working language, the submitting party or third party shall simultaneously submit a
translation of the exhibit or relevant portion into the WTO working language of the proceeding." Para. 6(1)
adds that "The Panel may grant reasonable extensions of time for the translation of exhibits upon a showing of
good cause." Malaysia has not invoked any alleged good cause for not complying with para. 6(1), or for
seeking time to provide a translation in accordance with para. 6(1).
1688 Malaysia's first written submission, paras. 380-382.
1689 Preliminary ruling by the panel in US – Countervailing and Anti-Dumping Duties (China),
WT/DS449/4, paras. 3.9-3.10.

7.3.5 Conclusion with respect to the Lithuanian measure(s)
7.1438. The Panel finds that Malaysia has failed to establish a prima facie case of violation under
the TBT Agreement or the GATT 1994 with respect to any Lithuanian measure(s) that fall within its
terms of reference.
7.4 Separate opinion by one panelist
7.1439. The Panel majority has undertaken a long and careful evaluation of the parties' arguments
concerning the high ILUC-risk cap and phase-out. The Panel majority has found that the high ILUC-
risk cap and phase-out is consistent with the requirements of Article 2.2 of the TBT Agreement. The
Panel majority has further found that while this measure is inconsistent with the requirements of
Article 2.1 of the TBT Agreement and Article XX of the GATT 1994, such inconsistencies are limited
to certain aspects of how the high ILUC-risk cap and phase-out is administered. While I agree with
parts of the Panel majority's analysis, I respectfully disagree with certain key aspects of its reasoning
that lead to the conclusions that (i) the measure is consistent with Article 2.2, and (ii) the
inconsistencies under Article 2.1 and Article XX are limited to certain aspects of how the high ILUC-
risk cap and phase-out is administered.
7.1440. Malaysia has challenged two sets of measures.
7.1441. First, Malaysia challenges the 7% maximum share under RED II that applies equ ally and
without discrimination to all crop -based biofuels. I agree with the Panel majority that the 7%
maximum share, which applies without differentiation to all crop-based biofuels, has not been shown
to be inconsistent with the TBT Agreement. It may be noted in this respect that Malaysia did not
pursue any claims under Article 2.1 of the TBT Agreement or Article I:1 and III:4 of the GATT 1994
in respect of the 7% maximum share.
7.1442. Second, Malaysia challenges the EU and French measures that single out one particular
type of crop-based biofuels – i.e. palm oil-based biofuel – and with a view to eliminating that one
type of biofuel from the EU renewable energy market. I also agree with the Panel majority that the
high ILUC-risk cap and phase-out has been applied in a manner that is inconsistent with Article 2.1
of the TBT Agreement and the chapeau of Article XX of the GATT 1994, for the reasons stated by
the majority; and I further agree that this extends mutatis mutandis to the French TIRIB measure.
7.1443. However, I do not consider the inconsistencies with the TBT Agreement and the GATT 1994
to be limited to these issues, which relate exclusively to certain deficiencies in the manner in which
it has been administered. In my view Malaysia has provided sufficient evidence to meet its burden
of demonstrating that the objective of the measure includes an element of protectionism; and this
conclusion is reinforced by the evidence showing there is an element of arbitrariness in singling out
palm oil-based biofuel for the high ILUC-risk cap and phase -out when other types of oils, notably
soybean, appear to pose the same alleged risk.
7.1444. The difference in view underlying this separate opinion is essentially a matter of how much
weight to give to certain evidence before the Pane l. I will not exhaustively identify and analyse all
of the evidence that could be referred to in connection with the issues raised, or repeat all of the
arguments and counterarguments of the parties that have a bearing on these issues. Instead, what
follows sets forth the basic rationale behind the conclusions I reach by identifying some of the
evidence that I give more weight to than the Panel majority.
7.1445. Beginning with the objective of the high ILUC-risk cap and phase-out, and the related issue
of protectionism, there is evidence before the Panel that is difficult to reconcile with the conclusion
that the exclusive objective of the measure is to limit the risk of ILUC -related GHG emissions
associated with crop -based biofuels. What follows briefly identifies and discusses some of this
evidence.
7.1446. First, I give more weight than the Panel majority to the explicitly protectionist
recommendation contained in the 4 April 2017 resolution of the European Parliament that called for
a phase-out of palm oil as a biofuel component preferably by 2020. In this 15-page resolution, the
European Parliament conducts an analysis of the climate change, environmental, deforestation and
social implications of palm oil production (and to some extent that of other vegetable crops and

agriculture in general). While this resolution does refer to ILUC -related concerns, it explicitly calls
for the promotion of "more sustainable alternatives for biofuel use, such as … oils produced from
domestically cultivated rape and sunflower seeds ".1690 Thus, by its own terms, the resolution
recommends a ban or phase -out of consumption of palm oil-based biofuel in the European Union
while calling for biofuels to be produced from "domestically cultivated" rape and sunflower seeds.
7.1447. Second, I give more weight than the Panel majority to the evidence provided by Malaysia
showing that the European Union has a long history of enacting trade barriers to limit imports of
palm oil-based biofuel to protect the EU biofuel industry .1691 Malaysia has referred to, as evidence,
various EU anti-dumping determinations on imports of biodiesel.1692 The trade defence measures on
imported biofuels taken by the European Union over an extended period of time can be viewed as
evidence that domestic EU producers have at various points sought and received protection from
imports of biofuels, including (but not limited to) palm oil-based biofuel, in the form of trade
measures.
7.1448. Third, I give more weight than the Panel majority to the anticipated effect of the high ILUC-
risk cap and phase-out on EU production of competing vegetable oils and biofuels when assessing
the objective of the measure. The measures at issue in this dispute have been the subject of
academic analyses and commentary by various institutions, and some of these studies have been
placed on the record. According to Delzeit et al1693:
The palm oil restriction leads to an increased input of all other vegetable oils into
biodiesel production, while rapeseed oil is the main beneficiary of the restriction with an
increased input share of 9 percentage points. This finding already indicates a
preferential treatment of EU -domestically produced vegetable oil over imports, given
that the EU is the largest global producer of rapeseed.1694
…
[T]he increasing demand for biofuels is to a large extent satisfied by rapeseed based
biodiesel, which is especially driven by the phase -out of palm oil-based biodiesel that
causes imports of palm oil and palm oil -based biodiesel to the EU to decline. This is
compensated for by higher production quantities of EU -based rapeseed and rapeseed
oil, and to a certain degree by an increase of imported soybe an oil. EU farmers can be
considered to be beneficiaries of this policy since they generate additional revenues due
to expanding the production of rapeseed while simultaneously obtaining higher
prices.1695
7.1449. This evidence must be assessed holistically, rather than examining each of these
statements in isolation from the others. When it is assessed in this manner, I conclude that the
objective of the high ILUC-risk cap and phase-out is not simply to limit the risk of ILUC-related GHG
emissions associated with crop-based biofuels. Rather, the objective of the measure appears to also
include an element of protectionism.
7.1450. The conclusion that the measure appears to include an element of protectionism is
reinforced by other evidence before the Panel that strongly impl ies a degree of arbitrariness in
singling out palm oil -based biofuel from the perspective of the stated objective of limiting ILUC -
related GHG emissions associated with the production of crop-based biofuels. The fundamental issue
here is that certain other types of crop-based biofuels, in particular soybean-based biofuels, appear
to pose a similar risk of ILUC -related GHG emissions. What follows briefly identifies and discusses
some of this evidence.
7.1451. First, the 4 April 2017 resolution of the European Parliament that called for a phase-out of
palm oil as a biofuel component preferably by 2020 (already referred to above) actually

1690 European Parliament Resolution of 4 April 2017, (Exhibit MYS-102), para. 83. (emphasis added)
1691 Malaysia's first written submission, para. 584.
1692 The relevant determinations and exhibits are referenced at Malaysia's first written submission,
paras. 207 and 584.
1693 See Delzeit et al, Kiel Working Paper No. 2203, (Exhibit IDN-2).
1694 See Delzeit et al, Kiel Working Paper No. 2203, (Exhibit IDN-2), p. 10.
1695 See Delzeit et al, Kiel Working Paper No. 2203, (Exhibit IDN-2), p. 17.

acknowledges that soybean - and other plant -based oils may have a much higher environmental
footprint than palm oil-based biofuels. In this resolution, the European Parliament:
Observes that other plant-based oils produced from soybeans, rapeseed and other crops
have a much higher environmental footprint and require much more extensive land use
than palm oil; notes that other oil crops typically entail a more intensive use of
pesticides and fertiliser[.]1696
7.1452. Second, in a literature review summarized in the Study Report (2017), in seven out of the
nine studies which were examined and estimated ILUC emissions for all types of oil crop, soybean
and rapeseed were found to have higher estimated ILUC emissions than oil palm.1697
7.1453. Third, an internal legal opinion prepared by the European Commission in 2018 constitutes
further evidence of the same conclusion, and I gave appropriate weight to this piece of evidence. To
recall, on 17 January 2018, the European Parliament called for the phasing out, by 2021, of palm
oil-based biofuel for calculating EU renewable energy targets. The proposed amendment would have
singled out palm oil as the only biofuel fee dstock to be excluded from counting towards the EU
renewable energy consumption targets. The European Parliament's proposed amendment raised
substantive concerns in the European Commission about the compatibility of those amendments
with the European Union's WTO obligations. Malaysia has submitted as an exhibit, in this connection,
internal legal advice regarding the consistency of the proposed amendment with EU and WTO law.1698
That opinion concludes that:
Such discriminatory treatment does not seem to be justifiable under the GATT general
exceptions, not least because of a lack of sound scientific evidence warranting the
suggested differential treatment to safeguard certain legitimate societal values, notably
life or health (Art. XX(b)) or the conservation of exhaustible natural resources (Art.
XX(g)).1699
7.1454. The conclusion that there is "a lack of sound scientific evidence warranting the suggested
differential treatment" appears to have been based on the assessment that other types of crops
could have higher ILUC-related GHG emissions than palm oil. The opinion states:
While there is some evidence that palm oil creates, on average, more carbon emissions
than other oil crops, certain sources of palm oil may have associated emissions below
that average. Other types of crops also vary in terms of emissions and, depending on
circumstances, could have higher associated emissions than certain sources of palm oil.
The Parliament position does not take this issue into account. This is something that
could clearly undermine any EU argument under subparagraph (g).1700
7.1455. Such concerns are also reflected in the independent academic analysis conducted by Delzeit
et al:
The motivation by the EU for the phase-out is the protection of high carbon stock (hcs)
land by reducing the expansion of palm fruit production. Nevertheless, besides an
expansion in rapeseed production, our results show an expansion of soybean production

1696 European Parliament Resolution of 4 April 2017, (Exhibit MYS-102), para. 6.
1697 Malaysia's first written submission, para. 580(ii). In 2017, a Study Report on the Reporting
Requirements on Biofuels and Bioliquids stemming from the Directive (EU) 2015/1513 was published, authored
by Woltjer et al. (Study Report (2017), (Exhibit MYS-189)). Study Report (2017) found 30 studies which
reported on land use change and ILUC factors of different biofuel. These studies were based on a number of
models and methods, reporting (I)LUC per mass unit. Out of the 30 studies selected by the Study Report
(2017), nine made a comparison possible between so-called ILUC GHG emissions of different types of
biodiesel, as relevant to this dispute. Seven of those studies produced results that provided higher GHG
emissions estimates for soybean-based biofuel than oil palm crop-based biofuel.
1698 Letter of DG Trade to DG Energy, (Exhibit MYS-44).
1699 See Letter of DG Trade to DG Energy, (Exhibit MYS-44), p. 2. (emphasis added)
1700 See Letter of DG Trade to DG Energy, (Exhibit MYS-44), Annex - Revision of the EU RED (RED II):
Compatibility of Amendment 307 of the European Parliament with WTO law – Key elements of legal analysis, at
p. 2. (emphasis added)

in Brazil. There is a considerable probability that a share of this expansion might actually
take place in hcs land, but now in South America instead of South-East Asia.
Therefore, a key factor for accessing the effectiveness of the policy is the biofuel
productivity of oilseed crops in terms of land use. As shown above, our model results
indicate that due to the palm oil phase-out, more than three times of the area saved by
reduced palm fruit cultivation is needed for additional soybean and rapeseed production
to meet the demand for biofuels. These findings lie in between the range of results of
other studies. Debenath (2019) states that the biofuel yield for palm fruit is 4.45 mt/ha
while it is 1 mt/ha for rapeseed and 0.36 mt/ha for soybean. In contrast, in their report
for the European Commission, Valin et al. (2015) assume 1.7 times higher biofuel yield
per ha for palm fruit compared to rapeseed, and 5 times higher yield compared to
soybean. For the RED II calculation of land expansion into hcs-land, as described in the
introduction, the European Commission chooses a productivity factor of 2.5 for palm
fruit and 1 for rapeseed and soybean (European Union 2019). Compared to the scientific
studies, especially the productivity factor for soybean is selected very generously.
Moreover, given the absolute historic expansion of soybean production areas into hcs
land in South America, like the Amazon Forest but also the Cerrado or the Chaco Forest,
it is questionable whether the shift in biodiesel production from palm oil to soybean oil
substantially reduces global emissions from land use change. The relatively lower share
of expansion into hcs land of soybean compared to palm fruit production might be
overcompensated by the higher amount of land required for producing the same amount
of biodiesel. Consequently, it raises concerns if it is justified to have a palm oil biodiesel
phase-out, but not a soybean oil biodiesel phase-out.1701
7.1456. The formula developed by the European Union in the context of the Delegated Regulation
raises a number o f highly technical issues. However, the singling out of palm oil -based biofuel,
notwithstanding the seemingly similar risk of ILUC-related GHG emissions associated with soybean,
seems to stem from how the formula seeks to measure ILUC-related GHG emissions on the basis of
relative expansion of land, and the relative share of that expansion into high-carbon stock land. As
Delzeit et al explain when discussing this central feature of the formula:
The resulting share of expansion into land with high -carbon stock is much higher for
palm fruit (42%) than for soybean (8%). However, the absolute annual expansion of
production areas since 2008 is 4.5 times higher for soybean compared to palm fruit
(ibid.). As a consequence, when multiplying the absolute annual expan sion area with
Xhcs, the resulting absolute expansion into land with high -carbon stock of palm fruit
and soybean are quite close in size.1702
7.1457. On this issue, I give more weight to the expert opinion of Professor Finkbeiner than the
Panel majority. In his expert opinion, Professor Finkbeiner states:
[F]or climate change and the real world impact, it is not the relative effect that matters,
it is the absolute effect as the absolute amount of land use change correlates with the
associated GHG emissions (see section 2.2.1). As an example, based on the data in the
Delegated Regulation, soybean leads to an annual increase in land use of 3183,5 kha
and 3,0%, whereas palm oil leads to an annual increase in land use of 702,5 kha and
4,0%. This means that for soybean abo ut 3,5 times more land expansion happened,
but the relative growth for palm oil is larger. However, it is the absolute amount of land
use that matters and contributes to GHG emissions, not the relative one.1703
7.1458. This evidence relating to the arbitrariness of singling out palm oil must be assessed
holistically, rather than examining each of these statements in isolation from the others and must
also be viewed together with the evidence suggesting that the measure appears to also include an
element of protectionism. My weighing of the evidence leads me to the conclusions that Malaysia
has substantiated its assertion that there is an element of protectionism behind the decision to single
out palm oil-based biofuel, and that the different treatment of soybean and palm oil is arbitrary from

1701 See Delzeit et al, Kiel Working Paper No. 2203, (Exhibit IDN-2), pp. 17-18.
1702 See Delzeit et al, Kiel Working Paper No. 2203, (Exhibit IDN-2), p. 5.
1703 See Finkbeiner Expert Opinion, (Exhibit MYS-45), p. 18.

the perspective of limiting the risk of ILUC -related GHG emissions associated with crop -based
biofuels.
7.1459. Those conclusions, taken together, lead me to conclude that the high ILUC -risk cap and
phase-out (a) does not have an exclusi vely "legitimate objective", and is therefore fundamentally
inconsistent with Article 2.2 of the TBT Agreement; (b) results in a detrimental impact on palm oil-
based-biofuel that does not stem "exclusively from a legitimate regulatory distinction ", and is
therefore fundamentally inconsistent with Article 2.1 of the TBT Agreement; and (c) is applied in a
manner that constitutes "arbitrary or unjustifiable discrimination " and a "disguised restriction on
trade" within the meaning of the chapeau of Article XX o f the GATT 1994. This analysis extends
mutatis mutandis to the assessment of the French TIRIB measure under Article XX of the GATT 1994.
8 CONCLUSIONS AND RECOMMENDATION
8.1. With regard to the EU measures at issue, the Panel finds that1704:
a. the 7% maximum share an d the high ILUC -risk cap and phase -out are technical
regulations within the meaning of Annex 1.1 to the TBT Agreement;
b. Malaysia has failed to establish that the high ILUC -risk cap and phase-out is inconsistent
with the obligation in Article 2.4 of the TBT Agreement to use relevant international
standards as a basis for technical regulations;
c. Malaysia has failed to establish that the 7% maximum share and the high ILUC -risk cap
and phase-out are inconsistent with the obligation in Article 2.2 of the TBT Agreement to
ensure that technical regulations are not more trade -restrictive than necessary to fulfil a
legitimate objective;
d. the European Union has administered the high ILUC-risk cap and phase-out inconsistently
with Article 2.1 of the TBT Agreement by failing to conduct a timely review of the data
used to determine which biofuels are high ILUC risk, and because there are deficiencies in
the design and implementation of the low ILUC -risk criteria, which results in arbitrary or
unjustifiable discrimination between countries where the same conditions prevail;
e. Malaysia has not established that the European Union has acted inconsistently with Article
2.5 of the TBT Agreement by failing to explain the justification for preparing, adopting or
applying the 7% maximum share and the high ILUC -risk cap and phase -out in terms of
Articles 2.2 to 2.4 of the TBT Agreement;
f. Malaysia has not established that the high ILUC -risk cap and phase -out is inconsistent
with the obligation in Article 2.8 of the TBT Agreement to whenever appropriate specify
technical regulations in terms of performance rather than design or descriptive
characteristics;
g. regarding the claims under Article 2.9 of the TBT Agreement, the European Union has
acted inconsistently with:
i. Article 2.9.2 by failing to notify the proposed 7% maximum share and the
proposed high ILUC-risk cap and phase-out measures; and
ii. Article 2.9.4 by having failed to organize a commenting process in respect of the
proposed 7% maximum share and the proposed high ILUC -risk cap and phase -
out measures in accordance with the requirements of that provision;
h. the low ILUC -risk certification procedure is a "conformity assessment procedure " within
the meaning of Annex 1.3 to the TBT Agreement;

1704 The Panel sets out its conclusions in accordance with the order of analysis of the claims followed in
section 7. The Panel recalls that the basis for following this order of analysis is elaborated in section 7.1.1.2 of
this Report.

i. Malaysia has failed to establish that the low ILUC -risk certification procedure is
inconsistent with the obligation in Article 5.1.1 of the TBT Agreement to ensur e that
conformity assessment procedures grant access for suppliers of like products originating
in the territories of other Members under conditions no less favourable than those accorded
to suppliers of like products of national origin or originating in any other country;
j. the low ILUC -risk certification procedure , as set out in Article 6 of the Delegated
Regulation, is inconsistent with Article 5.1.2 of the TBT Agreement since deficiencies in
the implementation of the low ILUC-risk procedure have created unnecessary obstacles to
international trade;
k. Malaysia has failed to establish that the European Union has acted inconsistently with the
obligation in Article 5.2.1 of the TBT Agreement to ensure that conformity assessment
procedures are undertaken and completed as expeditiously as possible;
l. regarding the claims under Article 5.6 of the TBT Agreement, the European Union has
acted inconsistently with:
i. Article 5.6.1 of the TBT Agreement by failing to publish a notice of the proposed
low ILUC -risk certification procedure at an early appropriate stage in such a
manner as to enable interested parties in Malaysia and other WTO Members to
become acquainted with it;
ii. Article 5.6.2 of the TBT Agreement by failing to notify the proposed low ILUC-risk
certification procedure; and
iii. Article 5.6.4 of the TBT Agreement by having failed to organi ze a commenting
process in respect of the proposed low ILUC -risk certification procedure in
accordance with the requirements of that provision;
m. Malaysia has not established that the European Union has acted inconsistently with the
obligation in Article 5.8 of the TBT Agreement to ensure that conformity assessment
procedures which have been adopted are published promptly or otherwise made available
in such a manner as to enable interested parties in other Members to become acquainted
with them;
n. Malaysia has failed to establish that the European Union has acted inconsistently with
Article 12.3 of the TBT Agreement, as informed by Article 12.1 of the TBT Agreement;
o. Malaysia has not established that the high ILUC -risk cap and phase-out or the low ILUC-
risk certification procedure is inconsistent with the obligation in Article XI:1 of the
GATT 1994 to not institute or maintain any prohibitions or restrictions on the importation
of any product of the territory of another Member;
p. the high ILUC-risk cap and phase -out is inconsistent with Article III:4 of the GATT 1994
because it accords less favourable treatment to palm oil-based biofuel from Malaysia than
that accorded to like products of EU origin;
q. the high ILUC -risk cap and phase -out is inconsistent with Article I:1 of the GATT 1994
because it does not accord an advantage to palm oil -based biofuel from Malaysia that is
accorded to like products imported from third countries;
r. insofar as Malaysia challenges the low ILUC -risk certification procedure as a separate
measure under Article III:4 and Article I:1 it has not established any inconsistency with
these obligations;
s. the European Union has acted inconsistently with Article X:3(a) of the GATT 1994 by
administering the high ILUC -risk cap and phase -out in Article 26 of RED II in a manner
that is not reasonable, to the extent that deficiencies in the design and implementation of
the low ILUC-risk criteria and procedure do not provide for the elements needed for palm
oil-based biofuel to be certified as low ILUC-risk;

t. with respect to Article XX of the GATT 1994:
i. the high ILUC-risk cap and phase -out is a measure relating to the c onservation
of exhaustible natural resources that is made effective in conjunction with
restrictions on domestic production or consumption within the meaning of Article
XX(g);
ii. the high ILUC-risk cap and phase-out is a measure necessary to protect human,
animal or plant life or health within the meaning of Article XX(b);
iii. it is unnecessary to rule on whether the high ILUC -risk cap and phase -out is a
measure necessary to protect public morals under Article XX(a); and
iv. the high ILUC -risk cap and phase-out has been administered in a manner that
constitutes arbitrary or unjustifiable discrimination between countries where the
same conditions prevail because the European Union failed to conduct a timely
review of the data used to determine which biof uels are high ILUC risk, and
because there are deficiencies in the design and implementation of the low ILUC-
risk criteria and certification procedure.
8.2. With regard to the French TIRIB measure, the Panel finds that1705:
a. the exclusion of palm oil -based biofuel from the group of qualifying biofuels for the
purposes of the French TIRIB measure is inconsistent with Article III:2, first sentence, of
the GATT 1994, because it results in the application of internal taxes to imported palm oil-
based biofuel in excess of those applied to the like domestic rapeseed and soybean oil
based biofuels;
b. the exclusion of palm oil -based biofuel from the group of qualifying biofuels for the
purposes of the French TIRIB measure is inconsistent with Article III:2, second sentence,
of the GATT 1994, because it results in dissimilar taxation between imported palm oil -
based biofuel and the directly competitive or substitutable domestic rapeseed and soybean
oil based biofuels, and this dissimilar taxation is applied so as to affor d protection to
domestic production;
c. the exclusion of palm oil -based biofuel from the group of qualifying biofuels for the
purposes of the French TIRIB measure is inconsistent with Article I:1 of the GATT 1994,
because it grants an advantage to imported rapeseed and soybean oil based biofuels that
is not immediately and unconditionally accorded to like palm oil -based biofuel imported
from Malaysia;
d. with respect to Article XX of the GATT 1994:
i. the exclusion of palm oil -based biofuel from the group of qualify ing biofuels for
the purposes of the French TIRIB measure is a measure relating to the
conservation of exhaustible natural resources that is made effective in
conjunction with restrictions on domestic production or consumption within the
meaning of Article XX(g);
ii. the exclusion of palm oil -based biofuel from the group of qualifying biofuels for
the purposes of the French TIRIB measure is a measure necessary to protect
human, animal or plant life or health within the meaning of Article XX(b);
iii. it is unnecessary to rule on whether the exclusion of palm oil-based biofuel from
the group of qualifying biofuels for the purposes of the French TIRIB measure is
a measure necessary to protect public morals under Article XX(a); and

1705 The Panel sets out its conclusions in accordance with the order of analysis of the claims followed in
section 7 of this Report. The Panel recalls that the basis for following this order of analysis is explained in
section 7.2.1.2.

iv. the exclusion of palm oil -based biofuel from the group of qualifying biofuels for
the purposes of the French TIRIB measure has been administered in a manner
that constitutes arbitrary or unjustifiable discrimination between countries where
the same conditions prevail, because the European Union has failed to conduct a
timely review of the data used to determine which biofuels are high ILUC risk,
and has failed to demonstrate the existence of any provisions or flexibilities for
palm oil-based biofuels to be certified as low ILUC-risk;
e. Malaysia has failed to establish that the French TIRIB measure provides a specific subsidy
that causes adverse effects in the form of serious prejudice under Articles 5(c), 6.3(a) and
6.3(c) of the SCM Agreement.
8.3. The Panel finds that Malaysia has failed to establish a prima facie case of violation under the
TBT Agreement or the GATT 1994 with respect to any Lithuanian measure(s) that fall within its terms
of reference.
8.4. Under Article 3.8 of the DSU, in cases where there is an infringement of the obligations
assumed under a covered agreement, the action is considered prima facie to constitute a case of
nullification or impairment. The Panel concludes that, to the extent that the measures at issue are
inconsistent with the TBT Agreement and the GATT 1994, they have nullif ied or impaired benefits
accruing to the Malaysia under those agreements.
8.5. Pursuant to Article 19.1 of the DSU, the Panel recommends that the European Union bring its
measures into conformity with its obligations under the TBT Agreement and the GATT 1994 to the
extent that it has not already done so.