INTRODUCTION

On 10 December 2003, the Dispute Settlement Body (“DSB”) adopted its recommendations and rulings in the dispute Japan - Measures Affecting the Importation of Apples (the “Japan – Apples Panel Report”). Having found Japan's phytosanitary measure for imported US apples to be inconsistent with its obligations under the Agreement on the Application of Sanitary and Phytosanitary Measures (“SPS Agreement”), the DSB recommended that Japan bring its measure into conformity with that agreement. On 30 January 2004, the United States and Japan concluded an agreement pursuant to Article 21.3(b) of the Understanding on Rules and Procedures Governing the Settlement of Disputes (“DSU”) that the reasonable period of time available to Japan to implement the DSB's recommendations and rulings would expire on 30 June 2004.

On 19 July 2004, the United States requested authorization from the DSB to suspend tariff concessions and other related obligations with respect to Japan under the General Agreement on Tariffs and Trade 1994 (GATT 1994), pursuant to Article 22.2 of the DSU.

At the meeting of the DSB held on 30 July 2004, Japan informed the DSB that it had amended its measures on 30 June 2004 to implement the DSB's recommendations and rulings within the reasonable period of time. At the same meeting, the United States requested the establishment of a panel pursuant to Article 21.5 of the DSU. The DSB agreed that the Article 21.5 request be referred to the Original Panel. The DSB also agreed, at the request of Japan, that the matter would be referred to arbitration to determine the level of suspension of concessions, pursuant to Article 22.6 of the DSU. Japan and the United States agreed that the arbitration proceedings would be suspended until after the adoption of the panel report under Article 21.5. If the Article 21.5 Panel found that Japan had acted inconsistently with its WTO obligations, then the Article 22.6 arbitrator would automatically resume its work.