EUROPEAN COMMUNITIES �
TRADE DESCRIPTION OF SARDINES

VII. FINDINGS

A. PRODUCTS AT ISSUE

7.1 This dispute concerns Sardina pilchardus Walbaum (" Sardina pilchardus") and Sardinops sagax sagax ("Sardinops sagax"), two small fish species which belong, respectively, to genus Sardina and Sardinops of the Clupeinae subfamily of the Clupeidae family; fish of the Clupeidae family populate almost all oceans. Sardina pilchardus is found mainly around the coasts of the Eastern North Atlantic, in the Mediterranean Sea and in the Black Sea, and Sardinops sagax is found mainly in the Eastern Pacific along the coasts of Peru and Chile. Despite the various morphological differences that can be observed between them, such as those concerning the head and length, the type and number of gillrakes or bone striae and size and weight, Sardina pilchardus and Sardinops sagax display similar characteristics: they live in a coastal pelagic environment, form schools, engage in vertical migration, feed on plankton and have similar breeding seasons.

7.2 Both fish, as well as other species of the Clupeidae family, are used in the preparation of preserved and canned fish products, packed in water, oil or other suitable medium.

B. MEASURE AT ISSUE⁴¹

7.3 Regulation (EEC) 2136/89 laying down common marketing standards for preserved sardines (the "EC Regulation") was adopted on 21 June 1989.⁴² The EC Regulation defines the standards governing the marketing of preserved sardines in the European Communities.

7.4 Article 2 of the EC Regulation provides that only products prepared from fish of the species Sardina pilchardus may be marketed as preserved sardines. Article 2 reads as follows:

Only products meeting the following requirements may be marketed as preserved sardines and under the trade description referred to in Article 7:

�  they must be covered by CN codes 1604 13 10 and ex 1604 20 50;

�  they must be prepared exclusively from the fish of the species "Sardina pilchardus Walbaum";

�  they must be pre-packaged with any appropriate covering medium in a hermetically sealed container;

�  they must be sterilized by appropriate treatment.

C. THE CODEX ALIMENTARIUS COMMISSION STANDARD FOR CANNED SARDINES AND SARDINE TYPE PRODUCTS (CODEX STAN 94 -1981 REV.1 - 1995)

7.5 The Codex Alimentarius Commission of the United Nations Food and Agriculture Organization ("FAO") and the World Health Organisation ("WHO") ("Codex Alimentarius Commission") adopted, in 1978, a standard ("Codex Stan 94") for canned sardines and sardine-type products.⁴³ Article 1 of Codex Stan 94 states that this standard applies to "canned sardines and sardine-type products packed in water or oil or other suitable packing medium" and that it does not apply to speciality products where fish content constitutes less than 50% m/m of the net contents of the can.

7.6 Article 2.1 of Codex Stan 94 provides that canned sardines or sardine-type products are prepared from fresh or frozen fish from a list of 21 species, amongst them Sardina pilchardus and Sardinops sagax.⁴⁴

7.7 Article 6 of Codex Stan 94 reads as follows:

6. LABELLING

In addition to the provisions of the Codex General Standard for the Labelling of Prepackaged Foods (CODEX STAN 1-1985, Rev. 3-1999) the following specific provisions shall apply:

6.1 NAME OF THE FOOD

The name of the products shall be:

6.1.1    (i) "Sardines" (to be reserved exclusively for Sardina pilchardus (Walbaum)); or

(ii) "X sardines" of a country, a geographic area, the species, or the common name of the species in accordance with the law and custom of the country in which the product is sold, and in a manner not to mislead the consumer.

D. FINDINGS AND RECOMMENDATIONS REQUESTED BY THE PARTIES

7.8 Peru makes the following requests:

(a) Peru requests the Panel to find that the measure at issue, the EC Regulation, prohibiting the use of the term "sardines" to be used in combination with the name of the country of origin ("Peruvian Sardines"); the geographical area in which the species is found ("Pacific Sardines"); the species ("Sardines - Sardinops sagax"); or the common name of the species Sardinops sagax customarily used in the language of the member State of the European Communities in which the product is sold ("Peruvian Sardines" in English or "S�damerikanische Sardinen" in German) is inconsistent with Article 2.4 of the TBT Agreement because the European Communities did not use the naming standard set out in paragraph 6.1.1(ii) of Codex Stan 94 as a basis for its Regulation even though that standard would be an effective and appropriate means to fulfil the legitimate objectives pursued by the Regulation.

(b) If the Panel were to find that the EC Regulation is consistent with Article 2.4 of the TBT Agreement, Peru requests the Panel to find that the EC Regulation is inconsistent with Article 2.2 of the TBT Agreement because it is more trade-restrictive than necessary to fulfil the legitimate objective of market transparency that the European Communities claims to pursue.

(c) If the Panel were to find that the EC Regulation is consistent with Articles 2.2 and 2.4 of the TBT Agreement, Peru requests the Panel to find that the measure is inconsistent with Article 2.1 of the TBT Agreement because it is a technical regulation that accords Peruvian products prepared from fish of the species Sardinops sagax treatment less favourable than that accorded to like European products made from fish of the species Sardina pilchardus.

(d) If the Panel were to find that the measure at issue is consistent with the TBT Agreement, Peru requests the Panel to find that it is inconsistent with Article III:4 of the GATT 1994 because it is a requirement affecting the offering for sale of imported sardines that accords Peruvian products prepared from fish of the species Sardinops sagax treatment less favourable than that accorded to like European products made from fish of the species Sardina pilchardus.

7.9 Peru requests the Panel to recommend that the Dispute Settlement Body ("DSB") request the European Communities to bring its measure into conformity with the TBT Agreement. Peru specifically requests the Panel to suggest that the European Communities permit Peru, without any further delay, to market its sardines in accordance with a naming standard consistent with the TBT Agreement.

7.10 The European Communities requests the Panel to reject Peru's claims that the EC Regulation is inconsistent with Articles 2.4, 2.2 and 2.1 of the TBT Agreement and Article III:4 of the GATT 1994.

E. GENERAL INTERPRETATIVE ISSUES

1. Rules of interpretation

7.11 The TBT Agreement constitutes an integral part of the Marrakesh Agreement Establishing the World Trade Organization (the "WTO Agreement"). As such, the TBT Agreement is one of the "covered agreements" and is therefore subject to the DSU. Article 3.2 of the DSU provides that panels are to clarify the provisions of "covered agreements" in accordance with customary rules of interpretation of public international law.

7.12 In US - Gasoline, the Appellate Body stated that the fundamental rule of treaty interpretation as set out in Articles 31 and 32 of the Vienna Convention on the law of Treaties (the "Vienna Convention")⁴⁵ had "attained the status of a rule of customary or general international law" and "forms part of the 'customary rules of interpretation of public international law'".⁴⁶ Pursuant to Article 31(1) of the Vienna Convention, the duty of a treaty interpreter is to determine the meaning of a term in accordance with the ordinary meaning to be given to the term in its context and in light of the object and purpose of the treaty.

7.13 If, after applying the rule of interpretation set out in Article 31(1), the meaning of the treaty term remains ambiguous or obscure or leads to a result that is manifestly absurd or unreasonable, Article 32 allows the treaty interpreter to have a recourse to "supplementary means of interpretation, including the preparatory work on the treaty and the circumstances of its conclusion".⁴⁷ We will apply the principles enunciated by the Appellate Body in the US - Gasoline to interpret the relevant provisions of the TBT Agreement in this Report.

2. Order of analysis of the claims

7.14 Peru requests that we examine its claim under Article 2.4 of the TBT Agreement first and then examine its claims in the order of Articles 2.2 and 2.1 of the TBT Agreement only if we were to determine that the EC Regulation is not inconsistent with Article 2.4. If we were to determine that the EC Regulation is not inconsistent with the provisions of the TBT Agreement invoked by Peru, it requests that we examine its claims in respect of Article III:4 of the GATT 1994.

7.15 In addressing the issue of the order of analysis, we have taken into account earlier considerations of this question. We recall the Appellate Body's statement in EC - Bananas III which stated that the panel "should" have applied the Licensing Agreement first because this agreement deals "specifically, and in detail" with the administration of import licensing procedures. The Appellate Body noted that if the panel had examined the measure under the Licensing Agreement first, there would have been no need to address the alleged inconsistency with Article X:3 of the GATT 1994.⁴⁸ The Appellate Body suggests that where two agreements apply simultaneously, a panel should normally consider the more specific agreement before the more general agreement.

7.16 Arguably, the TBT Agreement deals "specifically, and in detail" with technical regulations. If the Appellate Body's statement in EC - Bananas III is a guide, it suggests that if the EC Regulation is a technical regulation, then the analysis under the TBT Agreement would precede any examination under the GATT 1994. Moreover, Peru, as the complaining party, requested that we first examine its claim under Article 2.4 of the TBT Agreement followed by Article 2.2 if we find that the EC Regulation is consistent with Article 2.4. And similarly, only if we were to find that the EC Regulation is consistent with Article 2.2 does Peru ask us to consider its claim under Article 2.1. In the event that we were to find that the EC Regulation is consistent with the TBT Agreement, Peru requests that we examine its claim under Article III:4 of the GATT 1994. We note that the European Communities did not contest Peru's request regarding this sequencing analysis.

7.17 These requests by Peru on sequencing of claims thereby oblige us to consider whether there is an interpretative methodology that compels panels to adopt a particular order which, if not followed, would constitute an error of law.⁴⁹ We recall the Appellate Body's statement in US - FSC in relation to the US argument that the panel erred by commencing its analysis with Article 3.1(a) rather than footnote 59 of the Subsidies and Countervailing Measures Agreement. The Appellate Body stated:

In our view, it was not a legal error for the Panel to begin its examination of whether the FSC measure involves export subsidies by examining the general definition of a "subsidy" that is applicable to export subsidies in Article 3.1(a). In any event, whether the examination begins with the general definition of a "subsidy" in Article 1.1 or with footnote 59, we believe that the outcome of the European Communities' claim under Article 3.1(a) would be the same. The appropriate meaning of both provisions can be established and can be given effect, irrespective of whether the examination of the claim of the European Communities under Article 3.1(a) begins with Article 1.1 or with footnote 59.⁵⁰

7.18 In our view, if the EC Regulation is a technical regulation, 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.

7.19 Accordingly, the order of examination will follow the order of the claims set out in Peru's submission. That is, claims will be examined in the following order: Articles 2.4, 2.2, 2.1 of the TBT Agreement and Article III:4 of the GATT 1994.

F. APPLICABILITY OF THE TBT Agreement

1. Consideration of the EC Regulation as a technical regulation

7.20 Peru, as the complaining party, invoked paragraphs 1, 2 and 4 of Article 2 of the TBT Agreement as the legal basis of its claim to argue that the EC Regulation is inconsistent with those provisions. We note that the substantive provisions of the TBT Agreement have not been construed by either panels or the Appellate Body⁵¹ and that the provisions of the Tokyo Round Agreement on Technical Barriers to Trade (the "Tokyo Round Standards Code") which preceded the TBT Agreement have also not been addressed by any panel. As the drafters of the TBT Agreement intended to further the objective of the GATT 1994 with a specialized legal regime that applies only to a limited class of measures, it is necessary to commence our analysis by examining whether the EC Regulation constitutes a technical regulation within the meaning of the TBT Agreement. Only if it is established that the EC Regulation constitutes a technical regulation within the meaning of Annex 1.1 of the TBT Agreement, will we then proceed to consider the consistency of the EC Regulation with the substantive obligations set out in Articles 2.4, 2.2 and 2.1 of the TBT Agreement.

7.21 Peru notes that paragraph 1 of Annex 1 of the TBT Agreement defines the term "technical regulation" as a document which lays down product characteristics with which compliance is mandatory and submits that the EC Regulation lays down "common marketing standards for preserved sardines". Peru argues that the EC Regulation constitutes a technical regulation within the meaning of Annex 1.1 of the TBT Agreement because it lays down characteristics which preserved sardines must possess if they are to be "marketed as preserved sardines and under the trade description referred to in Article 7" of the EC Regulation. In particular, Peru submits that Article 2 of the EC Regulation sets out characteristics preserved sardines must possess in order to market them in the European Communities under the name "sardines" and notes that one such characteristic is that the product in question must be prepared from the fish of species Sardina pilchardus. Peru also argues that the language of Article 9 of the EC Regulation which provides that the EC Regulation "shall be binding in its entirety and directly applicable in all Member States" makes compliance with the measure mandatory.

7.22 The European Communities does not contest that the EC Regulation is a technical regulation for the purposes of the TBT Agreement. Nevertheless, the European Communities does not accept that the measure identified by Peru is a technical regulation because the EC Regulation deals with naming, not labelling, and the definition of technical regulation refers to labelling of products and not to naming of products. The European Communities also argues that the Regulation does not lay down mandatory labelling requirements for fish of species other than Sardina pilchardus, i.e., Sardinops sagax.

7.23 The term "technical regulation" is defined in Annex 1.1 of the TBT Agreement and states:

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 also include or deal exclusively with terminology, symbols, packaging, marking or labelling requirements as they apply to a product, process or production method.

7.24 Based on the textual reading of the definition as set out in Annex 1.1 of the TBT Agreement, a measure constitutes a "technical regulation" if the measure lays down product characteristics and compliance is mandatory. We note that the key part of the definition is that the document has to lay down "product characteristics". In this regard, the Appellate Body in EC - Asbestos stated:

[T]he "characteristics" of a product include, in our view, any objectively definable "features", "qualities", "attributes", or other "distinguishing mark" of a product. Such "characteristics" might relate, inter alia, to a product's composition, size, shape, colour, texture, hardness, tensile strength, flammability, conductivity, density, or viscosity. In the definition of a "technical regulation" in Annex 1.1, the TBT Agreement itself gives certain examples of "product characteristics" - "terminology, symbols, packaging, marking or labelling requirements". These examples indicate that "product characteristics" include, not only features and qualities intrinsic to the product itself, but also related "characteristics", such as the means of identification, the presentation and the appearance of a product. In addition, according to the definition in Annex 1.1 of the TBT Agreement, a "technical regulation" may set forth the "applicable administrative provisions" for products which have certain "characteristics". Further, we note that the definition of a "technical regulation" provides that such a regulation "may also include or deal exclusively with terminology, symbols, packaging, marking or labelling requirements". (emphasis added) The use here of the word "exclusively" and the disjunctive word "or" indicates that a "technical regulation" may be confined to laying down only one or a few "product characteristics".⁵²

7.25 The Appellate Body provides a comprehensive definition of "characteristics" of a product and adds that a technical regulation, if it is to be enforceable, must be applicable to an identifiable product, or group of products. In support of this view, the Appellate Body states that compliance with Article 2.9.2 of the TBT Agreement, which imposes an obligation on Members to notify other Members "of the products to be covered" by a proposed technical regulation, calls for identification of the product coverage of a technical regulation.⁵³ By this logic, if a technical regulation applies to a group of products or products generally, the product need not be expressly named, identified or specified in the regulation.

7.26 In determining whether the EC Regulation is a technical regulation, we first note that it identifies a product, namely preserved sardines. In its preambular language, the EC Regulation alludes to "the adoption of [common marketing standards] for preserved sardines". In addition to identifying the product, the EC Regulation lays down certain product characteristics, both intrinsic and related, that preserved sardines must possess in order for them to be "marketed as preserved sardines and under the trade description refered to in Article 7" of the EC Regulation. The definition provided in Annex 1.1 of the TBT Agreement indicates that a technical regulation can require one or more product characteristics. This is confirmed by the Appellate Body's finding that the use of the word "exclusively" with the disjunctive word "or" indicates that a technical regulation may lay down one or a few product characteristics. Thus, it is plausible that a technical regulation may contain just one product characteristic or several product characteristics, whether they be intrinsic and/or related characteristics of the product.

7.27 Various provisions of the EC Regulation lay down product characteristics that deal with features and qualities affecting composition, size, shape, colour and texture of preserved sardines. For instance, one product characteristic required by Article 2 of the EC Regulation is that preserved sardines must be prepared exclusively from fish of the species Sardina pilchardus. This product characteristic must be met for the product to be "marketed as preserved sardines and under the trade description referred to in Article 7" of the EC Regulation. We consider that the requirement to use exclusively Sardina pilchardus is a product characteristic as it objectively defines features and qualities of preserved sardines for the purposes of their "market[ing] as preserved sardines and under the trade description referred to in Article 7" of the EC Regulation. Article 2 of the EC Regulation lays down additional product characteristics for a product to be "marketed as preserved sardines and under the trade description referred to in Article 7", e.g., the product must be pre-packaged with any appropriate covering medium in a hermetically sealed container and sterilized by appropriate treatment. In addition to these product characteristics laid down in Article 2, the EC Regulation contains other product characteristics of preserved sardines.

7.28 Article 3 states that sardines must be "appropriately trimmed of the head, gills, caudal fin and internal organs other than ova, milt and kidneys, and according to the market presentation concerned, backbone and skin". Article 4 sets out the presentation of preserved sardines and Article 5 deals with the covering media. Article 6 requires, inter alia, that sardines be uniform in size and must not have significant breaks in the abdominal wall; comprise flesh of normal consistency with light or pinkish color; and retain the odour and flavor characteristics of the species Sardina pilchardus. Article 7, in addition to dealing with trade description, covers the ratio between the weight of the sardines and covering media. We find that these provisions of the EC Regulation also lay down product characteristics.

7.29 The second requirement for a measure to be a technical regulation is that compliance must be mandatory. With regard to this requirement, the Appellate Body stated:

A "technical regulation" must, in other words, regulate the "characteristics" of products in a binding or compulsory fashion. It follows that, with respect to products, a "technical regulation" has the effect of prescribing or imposing one or more "characteristics" - "features", "qualities", "attributes", or other "distinguishing mark".⁵⁴

7.30 With respect to the requirement that compliance with the technical regulation must be mandatory, Article 9 of the EC Regulation states that the requirements contained therein are "binding in its entirety and directly applicable in all Member States". Thus, the EC Regulation fulfils the mandatory compliance aspect of the definition set out in Annex 1.1 of the TBT Agreement.

7.31 Although the European Communities does not contest that its Regulation is a technical regulation, it argued that Peru has taken one aspect of the measure, i.e., Article 2 of the EC Regulation, isolated that provision and classified the Regulation as a technical regulation. The European Communities argued that it is not possible to single out one aspect of a measure and analyze it as a technical regulation and that Article 2 has to be interpreted in the context of the entire Regulation.

7.32 In EC - Asbestos, in determining whether French Decree No. 96-1133 concerning asbestos and products containing asbestos constitutes a technical regulation within the meaning of Annex 1.1 of the TBT Agreement, the Appellate Body stated that "the proper legal character of the measure at issue cannot be determined unless the measure is examined as a whole" and concluded that the measure at issue had to be examined as an "integrated whole, taking into account, as appropriate, the prohibitive and the permissive elements that are part of it".⁵⁵ We note that Peru did not argue that it was taking Article 2 of the EC Regulation in separation from the whole regulation and classifying only that provision as a technical regulation. Peru argued that it considers the EC Regulation in its entirety to be a technical regulation because it lays down characteristics for sardines to be marketed in the European Communities as preserved sardines but Peru challenges only the WTO-consistency of the requirement set out in Article 2 of the EC Regulation.⁵⁶

7.33 Moreover, Peru indicated that the other elements of the EC Regulation were relevant in considering whether the requirement set out in Article 2 of the EC Regulation is consistent with Articles 2.1, 2.2 and 2.4 of the TBT Agreement. Indeed, examining Article 2 of the EC Regulation for the purposes of determining the trade description would necessarily entail examining Article 7 which in turn refers to Articles 4 and 5 of the EC Regulation. Peru refers to other provisions of the EC Regulation, i.e., objectives of the regulation as set out in the preamble and the provision relating to the binding nature of the Regulation, in its claim that the EC Regulation is inconsistent with Article 2 of the TBT Agreement.

7.34 We do not consider that, under the DSU, a complaining party is required to list all provisions of a measure it deems inconsistent and can instead identify and challenge only those offending provisions of the measure it deems central to its interest in resolving the dispute. Peru decided in this case to focus on Article 2 of the EC Regulation and its decision to narrow the scope of the examination to Article 2 does not suggest that Peru considers only Article 2 to be a technical regulation in isolation from the rest of the provisions of the EC Regulation. We therefore reject the European Communities' argument that the measure identified by Peru is not a technical regulation because it did not take into account the whole of the EC Regulation but only Article 2 of the EC Regulation.

7.35 Based on the reasons set out above and subject to review below of the arguments advanced by the European Communities, we find that the EC Regulation is a technical regulation as it lays down product characteristics for preserved sardines and makes compliance with the provisions contained therein mandatory.

2. Consideration of the European Communities' arguments that its Regulation does not contain a labelling requirement and does not concern preserved Sardinops sagax

7.36 Although the European Communities accepts that the EC Regulation is a technical regulation for the purposes of the TBT Agreement because it lays down marketing standards for preserved Sardina pilchardus, the European Communities argues that its Regulation does not contain a labelling requirement and does not lay down marketing standards for preserved Sardinops sagax.

(a) The European Communities' argument that its Regulation is not a technical regulation because it deals with naming rather than labelling of a product

7.37 The European Communities claims that its Regulation does not constitute a technical regulation because the definition of technical regulation as set out in Annex 1 of the TBT Agreement covers labelling of products, not naming of products. The European Communities argues that it is Directive 2000/13 on the laws of the European Communities' member States relating to the labelling, presentation and advertising of foodstuffs for sale to the final consumer ("EC Directive 2000/13"), in conjunction with Article 2 of the EC Regulation, that requires preserved Sardina pilchardus to be labelled "preserved sardines".

7.38 We reject the European Communities' argument on two grounds. First, we do not consider that the EC Regulation, even if it were to contain a "naming" rather than "labelling" requirement, could no longer be a technical regulation within the meaning of the TBT Agreement. Second, we do not consider that the distinction between "naming" and "labelling" as applied by the European Communities to its Regulation is meaningful.

7.39 First, we recall the Appellate Body's statement that a "technical regulation" may be confined to laying down only one or a few "product characteristics" and we have already found that the EC Regulation lays down product characteristics that preserved sardines must possess, i.e., they must be prepared from fish of species Sardina pilchardus only and meet certain requirements dealing with weight, organoleptic aspects and the covering medium. Consequently, even if it were determined that the EC Regulation does not contain a labelling requirement, it cannot detract from our conclusion that the EC Regulation constitutes a technical regulation because that conclusion is based on our finding that it lays down certain product characteristics we have already identified. A finding to the effect that the EC Regulation does not contain a related product characteristic in the form of a labelling requirement does not negate the existence of other product characteristics set out in the EC Regulation.

7.40 Second, we fail to see the basis on which a distinction can be drawn between a requirement to "name" and a requirement to "label" a product for the purposes of the TBT Agreement. The ordinary meaning of the term "label" is "name" and vice versa.⁵⁷ Moreover, these two concepts denote the means of identification of a product. The Appellate Body in EC - Asbestos referred to "terminology, symbols, packaging, marking or labelling requirements" as constituting "the means of identification, the presentation and the appearance of a product". The ordinary meaning of the term "label" is "[a]n affixation to or marking on a manufactured article, giving information as to its nature or quality, or the contents of a material, package or container, or the name of the maker"⁵⁸ and the term "marking" in turn is defined as "write a word or symbol on (an object), typically for identification".⁵⁹ The ordinary meaning of the term "naming" is "identify by name".⁶⁰ Based on the ordinary meaning, we consider that labelling and naming requirements are essentially "means of identification" of a product and as such, they come within the scope of the definition of "technical regulation".

7.41 In any event, the distinction which we have been asked to draw between "naming" and "labelling" requirements is not supported by the text and structure of the EC Regulation. Article 2 of the EC Regulation states that only products meeting the requirements contained therein may be marketed as preserved sardines and under the trade description referred to in Article 7. Article 7 of the EC Regulation in turn stipulates that the trade description must correspond to the presentation of sardines on the basis of corresponding designation set out in Article 4 of the EC Regulation which allows the marketing of preserved sardines as simply "sardines", "sardines without bones", "sardines without skin or bones", "sardine fillets", "sardine trunks" or any other form that is distinguishable from the five presentations mentioned above. Article 7 of the EC Regulation also requires that the designation of the covering medium, which is addressed in Article 5, must form an integral part of the trade description. Article 5 allows olive oil, other refined vegetable oils, tomato sauce, natural juice, marinade and any other covering medium that is distinguishable from the five covering media mentioned above. Based on the foregoing reading of the EC Regulation, the label would have to indicate the term "sardines" accompanied by the corresponding designation for presentation and the covering medium. The European Communities confirmed this interpretation of its Regulation when it stated, in response to the Panel's question whether the EC Regulation requires that the label indicate that the product is preserved sardines, that Article 7 of the EC Regulation, in conjunction with Articles 4 and 5, require "the description of the product on the labels will bear the indication 'sardines' and will have to reflect these two requirements".⁶¹ In light of the ordinary meaning of the term "label" and based on the European Communities' response, Article 2 of the EC Regulation, in conjunction with Articles 4, 5 and 7, also constitutes a related product characteristic in the form of a labelling requirement as it comes within the ambit of "[an] affixation to or marking on a manufactured article, giving information as to its nature or quality, or the content of a material, package or container, or the name of the maker". Finally, the fact that the European Communities may have another domestic regulation deemed to be a labelling regulation does not vitiate our conclusion that the EC Regulation contains a labelling element within the meaning of the TBT Agreement.⁶²

7.42 For the reasons stated above, we reject the European Communities' argument that its Regulation does not constitute a technical regulation on the basis that it deals with naming, not labelling.

(b) The European Communities' argument that its Regulation does not lay down mandatory labelling requirement for products other than preserved Sardina pilchardus

7.43 The European Communities argues that although Article 2 of the EC Regulation provides that the term "sardines" can only be used for preserved Sardina pilchardus, it does not mean that the EC Regulation lays down mandatory labelling requirement for preserved Sardinops sagax or any species other than Sardina pilchardus.⁶³

7.44 The European Communities' argument goes to the issue of whether its Regulation is the relevant technical regulation. This argument, in our view, disregards the notion that a document may prescribe or impose product characteristics in either a positive or negative form - that is, by inclusion or by exclusion.⁶⁴ In discussing the form in which a document may regulate a product, the Appellate Body held in EC - Asbestos that a document may require positively that a product contain certain characteristics or it may require negatively that the product not possess certain characteristics.⁶⁵ In the case at hand, Article 2 of the EC Regulation states that "only the products meeting the � requirements [set out in that Article] may be marketed as preserved sardines and under the trade description referred to in Article 7". This formulation thereby makes a distinction between those product characteristics that are included in the measure versus those that are excluded.

7.45 By this logic, the language contained in Article 2 of the EC Regulation requires positively that preserved sardines possess the product characteristic of using only fish of the species Sardina pilchardus. The negative implication that follows from this requirement is that preserved sardines cannot possess the product characteristic of using fish of species other than Sardina pilchardus. That is, a product containing fish of the species Sardinops sagax, or any species other than Sardina pilchardus for that matter, cannot be "marketed as preserved sardines and under the trade description referred to in Article 7" of the EC Regulation. Therefore, by requiring the use of only the species Sardina pilchardus as preserved sardines, the EC Regulation in effect lays down product characteristics in a negative form, that is, by excluding other species, such as Sardinops sagax, from being "marketed as preserved sardines and under the trade description referred to in Article 7" of the EC Regulation. It is for this reason that we do not accept the European Communities' argument that the EC Regulation is not a technical regulation for preserved Sardinops sagax. This argument would be persuasive only if technical regulations were to lay down product characteristics in a positive form.

7.46 If only characteristics set out in a positive form of an identifiable product can be taken into account in determining whether it constitutes a technical regulation without considering the negative implications stemming therefrom, it would be possible to circumvent the obligations contained in the TBT Agreement. It would be possible to argue that a measure is not the relevant technical regulation on the basis that it does not positively set out product characteristics of the identifiable product although such product would be affected by the negative implications of the technical regulation. Yet, the European Communities makes this argument when it claims that because the EC Regulation lays down product characteristic of preserved Sardina pilchardus, it is not a labelling requirement for preserved Sardinops sagax and that "the fact that the name 'sardines' cannot be used for products other than preserved Sardina pilchardus is in fact simply the logical consequence of the fact that this name is reserved for � products produced exclusively from preserved Sardina pilchardus".⁶⁶ In our judgement, if only product characteristics set out in a positive form can be considered in examining a technical regulation, such interpretation could render the TBT Agreement meaningless and it is unlikely that the drafters of the TBT Agreement envisaged such situation.

7.47 Based on the foregoing reasons, we reject the European Communities' argument that the EC Regulation does not lay down mandatory labelling requirements for products other than preserved Sardina pilchardus and that its Regulation is not a technical regulation for preserved Sardinops sagax.

41 Pertinent parts of the European Communities measure at issue and Codex Stan 94 set out in the descriptive part are reproduced in this part of the Report.

42 The EC Regulation in its entirety is attached as Annex 1.

43 Codex Stan 94 was amended in 1979 and 1989 by adding more species and revised in 1995. Codex Stan 94 is attached in its entirety as Annex 2.

44 Article 2.1.1 lists the following species:

� Sardina pilchardus
 Sardinops melanostictus, S. neopilchardus, S. ocellatus, S. sagax S. caeruleus
�  Sardinella aurita, S. brasiliensis, S. maderensis, S. longiceps, S. gibbosa
�  Clupea harengus
�  Sprattus sprattus
�  Hyperlophus vittatus
�  Nematalosa vlaminghi
�  Etrumeus teres
�  Ethmidium maculatum
� Engraulis anchoita, E. mordax, E. ringens
�  Opisthonema oglinum

66 EC's Rebuttal Submission, para. 12.

To continue with G. Consistency of the EC Regulation with article 2.4 of theTBT Agreement

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