WTO panel finds US revisions to "dolphin-safe" tuna labels in conflict with trade rules

16 April 2015

A WTO panel has released its highly-anticipated report on the US’ compliance in its dispute with Mexico over “dolphin-safe” tuna labelling, finding that Washington has not made enough revisions to the previous labelling measure to bring it in line with global trade rules.

Despite this finding, the report issued on Tuesday did sustain Washington’s right to ban tuna that has been caught through “setting” on dolphins – in other words, purposely encircling them to reach the tuna that swim below – from being eligible for the country's “dolphin-safe” label.

Back in 2012, the WTO Appellate Body had found that the US' original dolphin-safe labelling scheme violated core trade rules and discriminated unfairly against Mexican tuna products. (See BioRes, 17 May 2012)

In particular, the Appellate Body said that by excluding most Mexican tuna products from using the “dolphin-safe” label while allowing it for most tuna from the US and elsewhere, the measure modified competition conditions in the US market to the detriment of Mexican tuna products.

The 2012 Appellate Body ruling also found that, while the US measure fully addresses the adverse effects on dolphins – both observed and unobserved – resulting from setting on dolphins in the Eastern Tropical Pacific (ETP) area, it does not address mortality arising from other fishing methods in other areas of the ocean.

Therefore, the WTO’s highest court said, the US measure was not even-handed and the detrimental impact on Mexican tuna products did not stem exclusively from a legitimate regulatory distinction.

The US subsequently introduced changes to the original labelling scheme in 2013, claiming that it had fully complied with the Appellate Body’s rulings.

Mexico disagreed, asking that a compliance panel be established to review the WTO consistency of the revised labelling scheme.

Amended measure

Pursuant to the 2013 “Final Rule,” which introduced changes to the substantive labelling measure, tuna could only enter the US as “dolphin-safe” on the condition that it was accompanied by a certification that no nets were intentionally set on dolphins in catching the tuna, and that no dolphins were killed or seriously injured in the sets in which the tuna was caught.

Whereas the original measure applied the disqualification only inside the ETP, the “Final Rule” applied the eligibility requirement regardless of where the tuna was caught, i.e. inside and outside the Eastern Tropical Pacific (ETP), and the nationality of the fishing vessel.

However, other documentation and tracking and verification requirements essentially remained the same and continued to vary depending on where the tuna was caught, i.e. either inside or outside ETP. Mexican fishermen predominantly fish for tuna inside the ETP.

Mexico’s claims

Mexico challenged what in its view were discriminatory elements of the labelling scheme, namely the disqualification of tuna caught by setting on dolphins, and the different observer certification and tracking and verification requirements.

Mexico argued that the different observer certification and tracking and verification requirements which were unchanged under the “Final Rule” continued to discriminate against Mexican tuna and tuna products since these requirements were not similarly applied inside and outside the ETP.

In this week’s report, the compliance panel notably decided to review the overall regulatory scheme – both old and new elements, taken as a whole – given that the 2013 Final Rule is an integral part of the labelling measure and interacts with the other allegedly unchanged elements of the policy.

Eligibility for label

In the original dispute, the Appellate Body had said that the disqualification of tuna caught by setting on dolphins from the label fully addresses risks to dolphins, and that requiring the US to remove that ban would undermine the country’s achievement of its desired level of protection.

The compliance panel therefore emphasised that the WTO-inconsistency of the original measure was due to a failure in addressing harm to dolphins caused by other methods of fishing in an even-handed manner.

The compliance panel affirmed that the US is entitled to disqualify tuna caught by setting on dolphins and was not persuaded that Mexico has raised any useful new evidence on the harm to the animal caused by alternative fishing methods that would require overturning this position.

Certification, tracking requirements

The panel acknowledged that the substantive certification requirements included in the 2013 Final Rule works toward US compliance with the Appellate Body ruling.

However, regarding Mexico’s concerns over the differences in certification, tracking, and verification requirements depending on where the tuna was caught, the panel said that these indeed subjected Mexican tuna to regulatory burdens unlike those faced by tuna from other countries.

In turn, this made it more difficult for Mexico’s product to compete on the US market.

Regarding differences in certification requirements – namely the use of independent observers in addition to requiring captains’ certification inside the ETP – the panel said that the US may legitimately draw distinctions based on the more systemic setting on dolphin inside the ETP compared to outside.

However, the panel noted, among other concerns, that in the absence of observers outside the ETP, the United States was not able to convince it that captains necessarily have the skills to certify whether dolphins have been killed or seriously injured. As a result, this made it difficult for the different certification requirements to be considered even-handed.

The panel was also unconvinced by the US’ arguments for imposing different tracking and verification requirements, finding that the resulting detrimental impact to Mexican tuna did not stem exclusively from a legitimate regulatory distinction, as required by Article 2.1 of the WTO’s Technical Barriers to Trade (TBT) Agreement.

That TBT provision requires members to ensure that technical regulations do not prevent imports from any country to receive less favourable treatment than their domestic counterparts or imports sourced elsewhere.

GATT questions

The panel ruled that the amended tuna measure violated Articles I:1 and III:4 of the WTO’s General Agreement on Tariffs and Trade (GATT) 1994, since the policy accorded less favourable treatment to Mexican tuna than their US equivalent, or those from other countries.

The differences in requirements for obtaining this “dolphin-safe” label in the revised tuna measure hurt Mexico’s competitiveness on the US tuna market, the panel said, therefore putting Washington in violation of these same articles.

However, the US had also argued that, to the extent the amended tuna measure was inconsistent with the GATT, it was still justified under Article XX(b) and Article XX(g) of the same agreement.

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. These include, among others, policies deemed necessary to protect human, animal, or plant life or health, as outlined under paragraph (b), or for natural resource conservation, under paragraph (g).

The panel sustained that the ban on applying the dolphin-safe label to tuna caught by setting on dolphins was justified under Article XX(g),since it related to the goal of conserving dolphins and was applied together with restrictions on domestic tuna production. The panel likewise ruled that this aspect of the amended tuna measure was applied by the US in a manner that did not violate WTO rules, and was therefore consistent with the chapeau of Article XX.

Separately, the panel ruled that both the different certification and tracking and verification requirements of the amended tuna measure were also justified under Article XX(g). However, since the measure was applied in an arbitrary and discriminatory manner, it did not meet the overall requirements needed for an Article XX exception and was therefore in breach of trade rules.

Citing judicial economy, the panel did not consider it necessary to rule on the US’ defence under Article XX(b) on human, animal, or plant life or health.

Next steps

Under a bilateral understanding between the two countries, either side may ask that the Dispute Settlement Body (DSB) adopt the compliance panel’s report at a DSB meeting held at least 20 days after the report’s circulation, unless an appeal is filed by one or both of the parties.

Should the report be appealed, the parties have agreed to work with the Appellate Body in an effort to have a final report within 90 days of the appeal.

ICTSD reporting.

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