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TWN Info Service on WTO and Trade Issues (Sept11/04)
24 September 2011
Third World Network

WTO rules against US in tuna-dolphin dispute
Published in SUNS #7220 dated 19 September 2011

Geneva, 16 Sep (Kanaga Raja) -- A dispute panel of the World Trade Organization (WTO) has ruled that "dolphin-safe" measures taken by the United States concerning the importation, marketing and sale of tuna and tuna products from Mexico are inconsistent with its obligations under the WTO.

In a ruling issued on 15 September, the panel recommended that the Dispute Settlement Body (DSB) request the United States to bring its measures into conformity with its obligations under the Technical Barriers to Trade (TBT) Agreement.

The panel found that the US dolphin-safe provisions were inconsistent with Article 2.2 of the TBT Agreement because they were "more trade-restrictive than necessary to achieve a legitimate objective", but ruled that these provisions were not inconsistent with Articles 2.1 and 2.4 of the TBT Agreement.

The panel also exercised judicial economy with respect to Mexico's claims under Articles I: 1 and III: 4 of the GATT 1994.

According to the panel report, in its dispute with the US, Mexico had identified the following measures adopted by the United States concerning the importation, marketing and sale of tuna and tuna products: (a) United States Code, Title 16, Section 1385 (Dolphin Protection Consumer Information Act); (b) Code of Federal Regulations, Title 50, Section 216.91 (Dolphin-safe labelling standards) and Section 216.92 (Dolphin-safe requirements for tuna harvested in the ETP [Eastern Tropical Pacific Ocean] by large purse seine vessels); and, ( c) The ruling in Earth Island Institute v. Hogarth, 494 F. 3d 757 (9th Cir. 2007).

The measures highlight the US "dolphin-safe" labelling scheme and sets the conditions for the use of the term "dolphin-safe" for tuna and tuna products.

According to the panel, Mexico presented claims under Articles 2.1, 2.2 and 2.4 of the TBT Agreement. All three of these provisions relate to "technical regulations". The United States, however, considered that the measures at issue do not constitute "technical regulations" within the meaning of the TBT Agreement.

On whether the measures at issue constitute a "technical regulation" within the meaning of Annex 1.1 of the TBT Agreement, the panel outlined that Annex 1.1 of the TBT Agreement defines a "technical regulation" as follows: "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".

The panel said that a measure is a "technical regulation", if: (a) the measure applies to an identifiable product or group of products; (b) it lays down one or more characteristics of the product; and ( c) compliance with the product characteristics is mandatory.

In this context, the panel considered the following issues in turn: (a) Whether the US dolphin-safe labelling provisions apply to an identifiable group of products; (b) Whether they lay down one or more characteristics of these products; and ( c) Whether compliance with them is mandatory within the meaning of Annex 1.

On whether the measures apply to an identifiable product or group of products, the panel highlighted that Mexico notes that the term "tuna product" is defined in Section 1385( c)(5) of the DPCIA (Dolphin Protection Consumer Information Act of 1990). Mexico also observes that the provisions of the DPCIA apply specifically to a "tuna product" as defined by such provisions. Therefore, according to Mexico, the list of items identified by this definition, constitute an "identifiable group of products" to which the document applies.

The panel agreed with Mexico that the US dolphin-safe labelling provisions apply to an "identifiable" product or group of products, that is, "tuna products", as defined in the DPCIA and in Section 216.3 of Title 50 of the Code of Federal Regulations.

On whether the US dolphin-safe labelling provisions lay down one or more "characteristics" of the products, the panel noted that Mexico argues amongst others that the US measures govern the conditions under which a tuna product can be labelled as "dolphin-safe". According to Mexico, this requirement is a product characteristic of the tuna product that is laid down by the United States' measures.

In the present case, the panel said, the US dolphin-safe labelling provisions define the conditions that must be met in order to bear a "dolphin-safe" label. In so doing, they "convey criteria to be fulfilled" in order to qualify for such label. They therefore lay down "labelling requirements" within the meaning of Annex 1.1. Further, the panel noted that the second sentence of Annex 1.1 refers to labelling requirements "as they apply to a product, process or production method".

The panel said that it must therefore also determine whether the labelling requirements laid down in the US dolphin-safe labelling provisions apply to "a product, process or production method".

The panel agreed with the United States' characterization of the terms "as they apply to" as meaning that the labelling requirements and other elements listed in the second sentence must relate to and concern "a product, process or production method". It also noted that there is no disagreement among the parties that the labelling requirements laid down in the US dolphin-safe labelling provisions "apply to" a product, namely, tuna products. "We agree with this determination," said the panel.

"We are therefore satisfied that the measures at issue lay down labelling requirements, as they apply to a product, process or production method and that the subject-matter of the measures therefore falls within the scope of the second sentence of Annex 1.1."

On whether compliance with the US dolphin-safe labelling provisions is "mandatory" within the meaning of Annex 1.1, the panel noted that Mexico submits that the US dolphin-safe provisions constitute a mandatory regulation.

Recalling Annex 1.1 of the TBT Agreement (that defines a "technical regulation"), the panel noted that dictionary definitions of the term "mandatory" include "binding" as well as "obligatory, compulsory, not discretionary", or "required by law or mandate; compulsory". This suggests that the notion of "mandatory" may encompass the legally binding and enforceable character of the instrument, and may also relate to its contents, prescribing/imposing a certain behaviour.

In Annex 1.1, the term "mandatory" appears in the phrase "with which compliance is mandatory". In interpreting this expression, the panel found useful guidance in the following passage of the Appellate Body's decision in EC - Asbestos: "The definition of a technical regulation in Annex 1.1 of the TBT Agreement also states that 'compliance' with the 'product characteristics' laid down in the 'document' must be 'mandatory'. 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'."

In this and subsequent cases, the Appellate Body further clarified that the product characteristics laid down in a technical regulation may "be prescribed or imposed ... in either a positive or a negative form", which means that, for instance, "the document may require, positively, that products must possess certain 'characteristics', or the document may require, negatively, that products must not possess certain 'characteristics'".

As the panel understood it therefore, and as interpreted by the Appellate Body, the notion of "mandatory" "compliance" in Annex 1.1 relates both to the "binding" character of the instrument and the fact that it prescribes certain characteristics or other features that the product must or must not possess.

The panel went on to say that it is mindful of the fact that the term "mandatory" expresses the single characteristic that defines the key conceptual distinction between two of the three types of measures covered under the TBT Agreement (technical regulations and standards) and therefore plays a central role in preserving the balance between the different sub-regimes coexisting within that Agreement.

In sum, the panel considered that compliance with product characteristics or their related production methods or processes is "mandatory" within the meaning of Annex 1.1, if the document in which they are contained has the effect of regulating in a legally binding or compulsory fashion the characteristics at issue, and if it thus prescribes or imposes in a binding or compulsory fashion that certain product must or must not possess certain characteristics, terminology, symbols, packaging, marking or labels or that it must or must not be produced by using certain processes and production methods.

By contrast, it added, compliance with the characteristics or other features laid out in the document would not be "mandatory" if compliance with them was discretionary or "voluntary".

On whether the US dolphin-safe provisions are "mandatory" within the meaning of Annex 1.1, the panel noted that Mexico submits two alternative arguments on this point. First, Mexico submits that the US dolphin-safe provisions de jure establish mandatory labelling requirements. Alternatively, Mexico asks the panel to decide that, even if the US dolphin-safe provisions do not on their face require certain product characteristics, they do so in a de facto manner.

In the panel's view, compliance would be de jure "mandatory" in a situation in which the mandatory character of the provisions would be discernable from an examination of the terms or structure of the measures themselves. The question to be addressed is therefore whether the US measures "regulate" the labelling requirements at issue "in a binding or compulsory fashion", and whether they "have the effect of prescribing or imposing" the labelling requirements at issue, either in a positive or in a negative fashion, the panel added.

In the panel's view, to the extent that they prescribe, in a binding and legally enforceable instrument, the manner in which a dolphin-safe label can be obtained in the United States, and disallow any other use of a dolphin-safe designation, the US tuna labelling measures "regulate" dolphin-safe labelling requirements "in a binding or compulsory fashion". It is not compulsory to meet these requirements and to bear the label, in order to sell tuna on the US market. The US measures therefore do not impose any requirement to label, in a "positive" manner. However, they do prescribe and impose the conditions under which a product may be labelled dolphin-safe.

In particular, the measures prescribe "in a negative form", to use the Appellate Body's terms, that no tuna product may be labelled dolphin-safe or otherwise refer to dolphins, porpoises or marine mammals if it does not meet the conditions set out in the measures, and thus impose a prohibition on the offering for sale in the United States of tuna products bearing a label referring to dolphins and not meeting the requirements that they set out.

"We see a difference, in this respect, between the fact that compliance with the underlying standard that provides access to the label (i. e. the use of certain fishing methods to harvest tuna) is not obligatory, and the fact that the measures prescribe in a binding manner the conditions for the use of certain terms on labels for tuna products, on the basis of compliance or absence of compliance with that underlying standard."

In order to be marketed as dolphin-safe tuna, tuna products must be prepared exclusively from fish caught in the specific conditions laid down in the US dolphin-safe labelling provisions. Tuna products containing tuna caught in a manner not complying with the specific conditions identified in the regulation are, by virtue of the measures at issue, prohibited from being identified and marketed under an appellation including the term "dolphin-safe" or other related designations, said the panel.

Citing some prior rulings, the panel said that its consideration of these prior rulings thus confirms further its view that compliance with the labelling requirements laid out in the US dolphin-safe labelling provisions is "mandatory" within the meaning of Annex 1.1. In making this determination, the panel said it is mindful that a proper interpretation of the expression "mandatory" compliance in Annex 1.1 of the TBT Agreement must preserve the conceptual and functional distinction between technical regulations and standards.

"In this respect, we find it useful to highlight that we are not suggesting that any situation in which access to a label reflecting compliance with a particular standard is reserved for products that comply with the specific requirements of that standard would amount to a situation in which a mandatory technical regulation exists. In our view, the measures at issue in the present case go significantly beyond that."

The panel found that the measures at issue establish labelling requirements, compliance with which is mandatory. "In light of our conclusion that the measures at issue establish de jure mandatory labelling requirements, we do not find it necessary to consider further Mexico's argument that they are also de facto mandatory."

The panel report noted that one of the three panellists was unable to agree with the reasoning and conclusions contained in paragraphs 7.128 to 7.145 of the report.

The dissenting panellist said: "While I agree with the three-tier test for determining whether a measure is a 'technical regulation' under the TBT Agreement as established in principle by the Appellate Body in EC - Asbestos and followed in EC - Sardines, I do not agree with the conclusions of the majority that the measures at issue meet the requirements of this test."

In a separate opinion, while the panellist agreed with the majority that the measures at issue meet the first two requirements - namely, (i) a measure has to apply to an identifiable product or group of products, and (ii) it has to lay down one or more characteristics of the product or related processes and production methods - the panellist did not agree that the measures at issue require mandatory compliance with the prescribed product characteristics or process and production method.

The dissenting panellist found that Mexico has failed to demonstrate that the US dolphin-safe provisions establish either de jure or de facto mandatory labelling requirements.

Thus, the panellist concluded that the third condition for a document to be considered a technical regulation, i. e. that compliance with the labelling requirements at issue is mandatory, has not been met in the present case. Therefore, the US dolphin-safe labelling provisions should not be seen as constituting technical regulations within the meaning of the TBT Agreement. Consequently, the provisions of Article 2 of the TBT Agreement, including its paragraphs 1, 2 and 4 should not be applicable to the measures at issue.

Notwithstanding this conclusion, the dissenting panellist said: "I consider it appropriate to pursue the analysis of the measures at issue as a technical regulation, on the basis of the opinion of the majority of the Panel. Without prejudice to my views with respect to this initial determination, I therefore associate myself with the remainder of these findings."

On whether the US dolphin-safe labelling provisions are inconsistent with Article 2.1 of the TBT Agreement, the panel noted that Article 2.1 of the TBT Agreement provides: "Members shall ensure that in respect of technical regulations, products imported from the territory of any Member shall be accorded treatment no less favourable than that accorded to like products of national origin and to like products originating in any other country."

Mexico claimed that the US dolphin-safe labelling provisions are inconsistent with Article 2.1 because they afford treatment less favourable to Mexican tuna products than to US tuna products and tuna products originating in other countries.

In approaching this aspect, the panel cited Article 2.1 which reads as follows: "Members shall ensure that in respect of technical regulations, products imported from the territory of any Member shall be accorded treatment no less favourable than that accorded to like products of national origin and to like products originating in any other country."

According to the panel, the terms of this provision thus suggest that a violation of Article 2.1 exists if two sets of conditions are met: (a) the measure is a technical regulation prepared, adopted or applied by a Member's central government bodies; and (b) products imported from the territory of a Member are accorded "less favourable treatment" than like products of national origin or originating in any other country in respect of this technical regulation.

As to whether the products at issue are like products, the panel noted that Mexico considers that Mexican tuna products are "like" tuna products of US origin and tuna products originating in any other country. The United States does not dispute this determination.

The panel went on to clarify the meaning of the term "like products" in Article 2.1 of the TBT Agreement. It said that the TBT Agreement applies to a limited set of measures, and the panel's understanding of its terms, including the terms "like products" must be informed by this context. As expressed in the preamble of the TBT Agreement, this Agreement reflects the intention of the negotiators to: "[E]nsure that technical regulations and standards, including packaging, marking and labelling requirements, and procedures for assessment of conformity with technical regulations and standards do not create unnecessary obstacles to trade."

The panel said that to the extent that Article 2.1 contributes to avoiding "unnecessary obstacles to trade" arising from undue discrimination with respect to technical regulations, it seeks to preserve the competitive opportunities of products originating in any Member, in relation to technical regulations. Thus, the term "like products" under Article 2.1 of the TBT Agreement may be similarly understood as relating to "the nature and extent of a competitive relationship" between and among products.

The panel understood Mexico to be seeking findings in relation to tuna products and not in relation to tuna as such. Accordingly, the products to be compared for the purposes of determining their likeness are US tuna products and Mexican tuna products, as well as tuna products originating in any other country, it said.

On whether Mexican tuna products are like tuna products originating in the United States or any other country, the panel concluded that Mexico has established that Mexican tuna products are like tuna products of US origin and tuna products originating in any other country within the meaning of Article 2.1 of the TBT Agreement.

On whether Mexican tuna products are afforded less favourable treatment than tuna products originating in the United States and other countries in respect of the US dolphin-safe labelling provisions, the panel said that "less favourable treatment" would be afforded to Mexican tuna products in respect of the measures if they were placed at a disadvantage compared to US and/or other imported products with respect to the preparation, adoption or application of the US dolphin-safe measures.

Mexico's claim in the present case is that it is de facto deprived of the benefit of access to the label, and thus at a competitive disadvantage on the US market because it fishes in the ETP (Eastern Tropical Pacific Ocean) by setting on dolphins while the US and other fleets fish outside the ETP by other methods.

The panel said that based on the evidence presented to it, it was not persuaded that Mexico has demonstrated that the US dolphin-safe provisions afford less favourable treatment to Mexican tuna products within the meaning of Article 2.1 of the TBT Agreement. That these measures may, through the operation of origin-neutral regulatory categories, have a detrimental impact on certain imports does not, in the panel's view, necessarily imply that the measures afford less favourable treatment to such imported products within the meaning of Article 2.1.

"We acknowledge, in this respect, that different products of various origins may be affected differently by a measure that lays down certain product characteristics with which compliance is mandatory. However, as observed above, what matters for the purposes of determining whether there is a violation of Article 2.1 is not only the existence of some adverse impact on some imported products, but whether the group of imported products is placed at a disadvantage, in this respect, compared to the groups of like domestic and imported products originating in any other country."

In the present case, the panel said, "it appears to us that the measures at issue, in applying the same origin-neutral requirement to all tuna products, do not inherently discriminate on the basis of the origin of the products, and that they also do not make it impossible for Mexican tuna products to comply with this requirement, or, as Mexico puts it, 'prohibit' the use of the label for Mexican tuna products."

Rather, on the basis of the elements presented to the panel in these proceedings, the panel said "it appears to us that the impact of the US dolphin-safe provisions on different operators on the market and on tuna products of various origins depends on a number of factors that are not related to the nationality of the product, but to the fishing and purchasing practices, geographical location, relative integration of different segments of production, and economic and marketing choices. In this context, any particular adverse impact felt by Mexican tuna products on the US market is, in our view, primarily the result of 'factors or circumstances unrelated to the foreign origin of the product', including the choices made by Mexico's own fishing fleet and canners."

On whether the US dolphin-safe labelling provisions are inconsistent with Article 2.2 of the TBT Agreement, the panel noted that Mexico submits that the US dolphin-safe provisions are inconsistent with Article 2.2 of the TBT Agreement because they do not fulfil a legitimate objective or, in the alternative, to the extent that the US measures fulfil any objectives, taking into account the risks of non-fulfilment, those objectives could be fulfilled using less trade-restrictive measures.

In the panel's view, the objectives of protecting consumers from deceptive practices and contributing to protecting dolphins by discouraging certain fishing practices do not go against the object and purpose of the TBT Agreement, even in light of the existence of potentially conflicting objectives that could also be recognized as legitimate. It found that the objectives of the US dolphin-safe provisions, as described by the United States and ascertained by the panel, are legitimate within the meaning of Article 2.2 of the TBT Agreement.

The panel went on to examine whether the US dolphin-safe provisions are more trade-restrictive than necessary to fulfil their objectives, taking into account the risks that non-fulfilment would create. It found that, in relation to the objective of consumer information, Mexico has identified a less trade-restrictive alternative that would achieve a level of protection equivalent to that achieved by the US measures, taking account of the risks non-fulfilment would create.

The panel concluded that Mexico has demonstrated that the US dolphin-safe provisions are more trade restrictive than necessary to fulfil their objective of ensuring that consumers are not misled about whether tuna products contain tuna that was caught in a manner that adversely affects dolphins, and the United States has not successfully rebutted this claim. In reaching this conclusion, the panel said it has considered the available scientific and technical information, related processing technology and the intended end-uses of tuna products.

The panel also concluded that the US dolphin-safe provisions are capable of protecting dolphins by ensuring that the US market is not used to encourage fishing practices that may kill or seriously injure dolphins, only within the ETP. In other fisheries, the US measures are capable of achieving their objective only in relation to the practices of setting on dolphins and using high seas driftnets. However, in relation to all other fishing techniques used outside the ETP, the US measures are not able to contribute to the protection of dolphins.

Therefore, the panel concluded that US measures may, at best, only partially fulfil their stated objective of protecting dolphins by ensuring that the US market is not used to encourage fishing fleets to catch tuna in a manner that adversely affects dolphins.

In sum, the panel said that in light of its determinations in relation to both objectives of the US dolphin-safe provisions, it found that these measures are more trade-restrictive than necessary to fulfil their legitimate objectives, taking account of the risks non-fulfilment would create. Consequently, the panel found that the US dolphin-safe provisions are inconsistent with Article 2.2 of the TBT Agreement.

The panel said it made this determination taking into account its finding that the US dolphin-safe measures, as applied, only partly address the adverse effects on dolphins of tuna fishing that the United States has identified as relevant in the context of its objectives of informing consumers and contributing to the protection of dolphins in relation to the impact of such fishing techniques. Specifically, the US dolphin-safe provisions do not address observed mortality, and any resulting adverse effects on dolphin populations, for tuna not caught by setting on dolphins or high seas driftnet fishing outside the ETP.

Similarly, the panel noted, the proposed AIDCP (Agreement on International Dolphin Conservation Program) dolphin-safe standard which Mexico identified as part of its proposed alternative measure would also not address the entirety of the adverse effects identified by the United States, insofar as it would not address unobserved mortalities from setting on dolphins, and any resulting adverse effects on dolphin populations.

"We also recall, in this context, our determination that the choice of the level of protection to be achieved in pursuance of the legitimate objectives identified is the prerogative of the Member taking the measures, and we therefore make no determination as to what might be an appropriate level of protection to achieve in relation to the objectives identified by the United States for the information of consumers and the protection of dolphins in relation to the manner in which tuna is caught."

On whether the US dolphin-safe labelling provisions are inconsistent with Article 2.4 of the TBT Agreement, the panel noted that Mexico argues the US dolphin-safe labelling measures are not based on an existing relevant international standard for the following reasons: (i) a relevant international standard exists (the AIDCP standard); (ii) the United States has failed to base its regulation on that international standard; and (iii) the relevant international standard is not an ineffective or inappropriate means for the fulfilment of the legitimate objective pursued.

The panel went on to examine whether the "dolphin-safe" definitions and labelling provisions contained in the AIDCP resolutions identified by Mexico constitute a "relevant international standard" in relation to the US dolphin-safe labelling provisions within the meaning of Article 2.4 of the TBT Agreement.

From an analysis of the content of the AIDCP resolutions, the panel concluded that the dolphin-safe definition in the AIDCP tuna tracking and verification resolution cross-referenced in the AIDCP dolphin-safe certification resolution provides, for common and repeated use, rules, guidelines or characteristics for tuna fishing and tuna products, and thus constitutes a "standard" for the purposes of Article 2.4 of the TBT Agreement.

It further concluded that the AIDCP is open to the relevant body of every country and is therefore an international standardizing organization for the purposes of Article 2.4 of the TBT Agreement.

On whether the AIDCP dolphin-safe definition and certification are "relevant", the panel found that the AIDCP dolphin-safe definition and certification constitute a "relevant international standard" within the meaning of Article 2.4 of the TBT Agreement, for the purpose of the US dolphin-safe labelling provisions.

On whether the United States used the AIDCP standard as a basis for its dolphin-safe labelling provisions, the panel noted that Mexico contends that the United States has not based the US labelling provisions on the AIDCP standard, but on the contrary it "contemplated the application of the AIDCP Standard - which is incorporated into the US national statute - but rejected its application in favour of a unilateral standard, a setting of nets on dolphins standard". Under these circumstances, it is obvious that the current US standard is not based on the AIDCP Standard, Mexico states.

The panel went on to conclude that the United States failed to base the US dolphin-safe labelling provisions on the relevant international standard of the AIDCP.

On whether the AIDCP dolphin-safe standard would be an ineffective or inappropriate means for the fulfilment of the legitimate objective(s) pursued by the United States, the panel said that to the extent that it would not allow consumers to be informed of the fact that dolphins were chased in the context of catching the tuna at issue, and of the existence of potential unobserved consequences from such setting, the AIDCP label would not address some of the adverse effects on dolphins that the United States has identified as part of its objectives.

The panel concluded that the AIDCP standard, applied alone, would not be an effective or appropriate means of fulfilling the US objective of ensuring that consumers are not misled or deceived about whether tuna products contain tuna that was caught in a manner that adversely affects dolphins.

Citing several reasons, the panel found that Mexico has failed to demonstrate that the AIDCP dolphin-safe standard is an effective and appropriate means to fulfil the US objectives at the United States' chosen level of protection.

In its overall rulings and recommendations, the panel found that the US dolphin-safe provisions: (a) are not inconsistent with Article 2.1 of the TBT Agreement; (b) are inconsistent with Article 2.2 of the TBT Agreement because they are more trade-restrictive than necessary to achieve a legitimate objective, taking into account the risks that non-fulfilment would create; ( c) are not inconsistent with Article 2.4 of the TBT Agreement.

The panel exercised judicial economy with respect to Mexico's claims under Articles I: 1 and III: 4 of the GATT 1994.

The panel concluded that, to the extent that the United States has acted inconsistently with the provisions of the TBT Agreement, it has nullified or impaired benefits accruing to Mexico under that Agreement. It therefore recommended that the DSB request the United States to bring its measures into conformity with its obligations under the TBT Agreement. +

 


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