WTO Appellate Body: Revised US tuna labelling regime violates trade rules

1 December 2015

The WTO’s highest court has ruled that the revised version of the US’ dolphin-safe labelling regime for tuna products is still in violation of the organisation’s rules, granting victory to Mexico in the long-running case (DS381).

The Appellate Body finding comes following several years of proceedings under the WTO’s dispute settlement system, following Mexico’s request for consultations in October 2008 which first launched the high-profile case. Disagreements between the two sides over tuna, however, long predate these proceedings. (See Bridges Weekly, 6 November 2008) [Editor's note, Bridges Weekly is ICTSD's flagship trade and sustainable development news publication]

During the proceedings involving the original labelling regime, the Appellate Body in May 2012 had found that the US scheme violated core trade rules and discriminated unfairly against Mexican tuna products. (See Bridges Weekly, 16 May 2012)

According to the Appellate Body’s ruling at the time, while the original US measure fully addressed the adverse effects on dolphins – both observed and unobserved – resulting from setting on dolphins in the Eastern Tropical Pacific (ETP) area, it did not address mortality arising from other fishing methods in other parts of the ocean.

The method of setting involves purposely encircling dolphins under purse-seine nets in order to reach the tuna that swim below.

The amended measure

Given the 2012 ruling, the US introduced changes to the labelling scheme the following year, claiming that these revisions brought the measure into compliance with the Appellate Body’s findings.

The amended tuna measure consists of the revised version of the US Dolphin Protection Consumer Information Act, together with its implementation regulations and a court decision.

Under the amended tuna measure, relative to the original version, the disqualification of tuna caught by setting on dolphins remains unchanged. However, a new substantive requirement was introduced allowing other tuna products – that is, those containing tuna harvested by all other fishing methods – to be eligible for the label so long as no dolphins were killed or seriously injured in the set in which the tuna were caught.

The amended tuna measure also prescribes a number of certification requirements, as well as tracking and verification requirements, relating to the substantive conditions.

Access to the label is conditional upon the provision of a certification by the vessel captain and an approved observer that there were “no dolphins killed or seriously injured” and that there was “no setting on dolphins” for tuna caught by a large purse-seine vessel in the ETP.

The tuna caught outside the ETP large purse-seine fishery would just need captain certification. Observer certification in those cases is required only if an assistant administrator from the National Marine Fisheries Service (NMFS) has determined that there is a regular and significant association between dolphins and tuna in a non-ETP purse-seine fishery, similar to that in the ETP; or that there is a regular and significant mortality or serious injury of dolphins within “all other fisheries.”

Moreover, the amended tuna measure extends the same basic condition to separate “dolphin-safe” from “non-dolphin-safe” tuna across fisheries in all ocean areas. Specific documentation requirements in the form of Tuna Tracking Forms (TTF), however, exist only for products derived from tuna caught in the ETP large purse-seine fishery.

Mexico disagreed with the US’ claim of compliance, asking that a panel be established to review the WTO-consistency of the 2013 version.

The compliance panel found this past April that the Appellate Body had confirmed Washington’s right to ban tuna that has been caught through “setting” on dolphins from being eligible for the “dolphin-safe” label. However, the panel made discrete findings that other elements of the amended tuna measure – specifically, the certification, tracking, and verification requirements – still violated the non-discrimination requirements under the WTO agreements. (See Bridges Weekly, 16 April 2015)

Mexico and the US each appealed in June 2015 certain aspects of the compliance panel’s reasoning and findings. (See Bridges Weekly, 16 July 2015 and 18 June 2015, respectively)

Article 2.1 of the TBT Agreement

Article 2.1 of the WTO’s Technical Barriers to Trade (TBT) Agreement is the core legal provision raised in the two members’ appeals.

In order to establish that a measure is inconsistent with Article 2.1 of the TBT Agreement, the following elements must be shown: firstly, that the measure constitutes a technical regulation within the meaning of Annex 1.1; secondly, that the imported products are “like” the domestic products and products of other origins; and lastly that the treatment accorded to imported products is “less favourable” than that accorded to like domestic products and/or like products from any other country. 

The compliance panel had earlier accepted that the first two elements had been established, which was not appealed by the participants. 

An analysis of “treatment no less favourable” under Article 2.1 consists of two steps: whether the technical regulation at issue modifies the conditions of competition to the detriment of imported products relative to like products of domestic or foreign origin; and, if so, whether such detrimental impact stems exclusively from a legitimate regulatory distinction. 

Detrimental impact, even-handedness

In addressing Mexico’s non-discrimination claims, the Appellate Body found that the compliance panel failed to conduct a holistic assessment of how those various labelling conditions adversely affect the competiveness conditions for Mexican tuna products in the US market relative to like products from other sources – and, in turn, how the detrimental impact from the original measure has changed as a result of the 2013 revisions.

After disagreeing with other elements of the panel’s analysis, the Appellate Body deemed that Washington’s exclusion of most Mexican tuna products from access to the dolphin-safe label while granting conditional access to like US and foreign products meant that the revised tuna measure modifies competition conditions to the detriment of Mexican tuna products in the US market.

The Appellate Body also found that the panel erred in applying the legal test under TBT Article 2.1 regarding whether the detrimental impact on Mexican tuna products stems exclusively from a legitimate regulatory distinction.

This test involves an examination of whether the technical regulation at issue is even-handed in its design, architecture, revealing structure, operation, and application in the light of the particular circumstances of the case.

The Appellate Body clarified that, contrary to what the panel supposed, there was no statement in the 2012 Appellate Body report saying that the US is entitled to disqualify tuna caught by setting from ever being labelled as dolphin-safe, much less that the eligibility criteria are even-handed.

For this test, the Appellate Body said that the panel should have conducted an assessment of whether, under the amended tuna measure, the differences in labelling conditions are calibrated to the likelihood that dolphins would be adversely affected in the course of tuna fishing operations in different fisheries – something that the panel did not do.

Absent a proper assessment by the panel of the overall relative risks posed to dolphins inside and outside the ETP large purse-seine fishery, the Appellate Body was unable to assess fully whether all of the regulatory distinctions drawn under the amended tuna measure can be explained and justified in the light of differences in the relative risks to dolphins in those various fisheries.

Observer certification

As outlined previously, for tuna products derived from tuna caught anywhere other than the ETP large purse-seine fishery, the requirement that there be observer certification in order to receive the dolphin-safe label depends on a determination made by the NMFS Assistant Administrator.

In its review, the Appellate Body referred back to earlier panel findings. For instance, it cited the finding that a determination of regular and significant mortality cannot be made regarding purse-seine fisheries outside the ETP, and a determination of regular and significant tuna-dolphin association cannot be made with respect to non-purse-seine fisheries. The WTO judges also referred to the panel’s finding that captains do not necessarily have the technical skills as observers to certify that no dolphins were killed or seriously injured.

The WTO judges found that the “determination provisions” – in other words, the criteria that would be need to be met for the NMFS official to deem that observer certification is required – do not appear to address some scenarios in which there may be heightened risks of harm to dolphins associated with particular fishing methods other than the ETP large purse-seine fishery.

For the Appellate Body, the determination provisions do not provide for the substantive conditions enabling access to the dolphin-safe label to be reinforced by observer certification in all cases where risk is comparably high. This may also entail different tracking and verification requirements than those that apply inside the ETP large purse-seine fishery.

For this reason, the Appellate Body said that it has not been shown that the differences in the dolphin-safe labelling conditions under the revised tuna measure match up with the risks to dolphins that arise from various fishing methods in different areas of the oceans. 

GATT findings

In completing the legal analysis under the General Agreement on Tariffs and Trade (GATT) 1994, the Appellate Body found that the amended measure modifies the competitive conditions to the detriment of Mexican tuna products, inconsistent with Articles I:1 and III:4, which deal with most-favoured nation and national treatment, respectively, and also cannot be justified under the general exception provision under Article XX of the GATT 1994.

The GATT Article XX exceptions outline a set of justifications under which WTO members may enact measures that would otherwise be illegal under international trade rules so long as these are used to fulfil greater public policy objectives, such as natural resource conservation or the protection of human, animal, or plant life or health.

Next steps

Under a bilateral understanding between the two countries, Mexico may request authorisation to suspend concessions or other obligations under the covered agreements to the US, in line with Article 22 of the Dispute Settlement Understanding.  This same understanding says that the US cannot object against Mexico asking for such authorisation should the request be made outside the 30-day window specified under WTO rules.

If Mexico requests this authorisation, the US may object under DSU Article 22.6 to the level of suspended concessions or other obligations and/or claim that the principles and procedures set forth in DSU Article 22.3 have not been followed, thereby referring the matter to arbitration.

The two parties have agreed, if the matter is referred to arbitration, to help enable this arbitrator to circulate its decision within 60 days.

ICTSD reporting.

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