## Facts

- Indonesia challenged a U.S. federal law provision banning cigarettes with “characterizing flavors” other than tobacco or menthol.
- The measure effectively removed clove cigarettes from the U.S. market; clove cigarettes were almost entirely imported from Indonesia.
- Menthol cigarettes, predominantly produced in the United States and comprising a large market share, were exempted and remained on the market.
- The United States justified the measure as a public-health regulation aimed at reducing youth smoking.
- A WTO Panel found the measure to be a “technical regulation,” found violations of TBT Agreement arts. 2.1 and 2.2 and certain procedural provisions, and made an alternative finding under GATT 1994 art. III:4.
- The United States appealed; the Appellate Body affirmed some findings and reversed others.

## Issues

1. Whether the flavor ban is a “technical regulation” under TBT Agreement Annex 1.1.
2. Whether clove cigarettes and menthol cigarettes are “like products” for purposes of TBT Agreement art. 2.1.
3. Whether the measure accords imported clove cigarettes “treatment no less favourable” than like domestic products under TBT Agreement art. 2.1, including whether any detrimental impact stems exclusively from a legitimate regulatory distinction.
4. Whether the measure creates an “unnecessary obstacle to international trade” under TBT Agreement art. 2.2.
5. Whether the United States provided a “reasonable interval” between publication and entry into force under TBT Agreement art. 2.12.

## Decision

- The Appellate Body upheld that the measure is a technical regulation.
- The Appellate Body upheld that clove and menthol cigarettes are “like products” due to their competitive relationship, including among youth and novice smokers.
- The Appellate Body upheld a violation of TBT art. 2.1, concluding the ban’s detrimental impact on imported clove cigarettes did not stem exclusively from a legitimate regulatory distinction given the continued availability of menthol cigarettes.
- The Appellate Body reversed the Panel’s TBT art. 2.2 inconsistency finding and did not complete the analysis; there was no final ruling of violation under art. 2.2.
- The Appellate Body upheld that the United States violated TBT art. 2.12 by failing to provide a reasonable interval (three months) before entry into force.

## Legal Principles

- A measure is a TBT “technical regulation” when it applies to identifiable products, lays down mandatory product characteristics, and is binding.
- Under TBT art. 2.1, the analysis focuses on whether the measure modifies conditions of competition to the detriment of imports; detrimental impact is discriminatory when it does not stem exclusively from a legitimate regulatory distinction.
- “Like products” under TBT art. 2.1 is assessed primarily through competitive relationships (including physical characteristics, end-uses, consumer tastes and habits, and substitutability), not by importing the measure’s regulatory categories into the likeness inquiry.
- Public-health objectives (including reducing youth smoking) can be legitimate, but even facially neutral regulation can breach TBT art. 2.1 if applied in a manner that treats imported like products less favourably without an even-handed regulatory basis.
- TBT art. 2.12 requires a reasonable interval between publication and entry into force sufficient for affected producers, including foreign producers, to adapt.

## Conclusion

The Appellate Body concluded that the U.S. flavored-cigarette ban, while pursuing a legitimate public-health aim, discriminated against imported clove cigarettes relative to like domestic menthol cigarettes in violation of TBT Agreement art. 2.1 and was implemented without a reasonable interval in violation of art. 2.12, while leaving no final determination of inconsistency under TBT Agreement art. 2.2.


United States—Measures Affecting the Production and Sale of Clove Cigarettes, WTO Doc. WT/DS406/AB/R (Apr. 4, 2012)