Article 2.1 of the TBT Agreement (Detrimental Impact Stemming from a Legitimate Regulatory Distinction)

The Appellate Body – which addressed the US dolphin-safe labelling regime for the third time in these compliance proceedings – recalled the two-step analysis for examining whether a technical regulation accords less favourable treatment to imported products under Article 2.1 of the TBT Agreement: (i) whether it modifies the conditions of competition to the detriment of imported products vis-à-vis like products of domestic origin and/or like products originating in any other country; and (ii) whether the detrimental impact stems exclusively from a legitimate regulatory distinction.Footnote ³ In the original proceedings, the Appellate Body examined the legitimacy of the original Tuna Measure's regulatory distinctions ‘through the lens of … “calibration”’ because the United States had contended that the regulatory distinctions drawn under the original Tuna Measure between different tuna fishing methods and different areas of the oceans ‘could be explained or justified by differences in the risks associated with such fishing methods and areas of the oceans’.Footnote ⁴ On this second compliance appeal, the main disagreement between Mexico, and the United States focused on whether the PanelFootnote ⁵ conducted this calibration analysis properly and correctly found that the detrimental impact caused by the 2016 Tuna Measure stems exclusively from a legitimate regulatory distinction.

Mexico first argued that the Panel erred by failing to include risks relating to inaccurate labelling in its calibration analysis, thereby failing to assess whether the regulatory distinctions under the 2016 Tuna Measure were ‘rationally related to its objectives’Footnote ⁶ (which include consumer information).Footnote ⁷ The Appellate Body considered that the Panel had correctly considered that ‘the relevant inquiry is one that focuses on the risks that dolphins face as a result of the use, in different areas of the ocean, of different fishing methods’.Footnote ⁸ While risks of inaccurate labelling are relevant to the calibration analysis, this does not mean that the applicable legal standard required the Panel to determine whether the measure at issue was calibrated, inter alia, to the risk of inaccurate dolphin-safe information being passed to consumers. The Appellate Body also noted that, if conducted properly, the calibration analysis would encompass consideration of the rational relationship between the regulatory distinctions drawn by the 2016 Tuna Measure and its objectives, so there was no need to assess this consideration separately.Footnote ⁹

Mexico also argued that the Panel erred by failing to properly assess the risk profiles of different fishing methods and ocean areas for the purpose of its calibration analysis. The Appellate Body disagreed. It noted that the Panel reviewed all relevant evidence provided by the parties and appropriately took into account all pertinent types of harm to dolphins in assessing the risk profiles of different fishing methods and fisheries. Moreover, the Panel did not err in relying on per set data, instead of a comparison of absolute levels of harm, essentially because the relevant risks to be assessed for the purpose of calibration were the risks of individual dolphins being harmed or killed in the fishing process.Footnote ¹⁰

Lastly, Mexico argued that the Panel erred by finding that the individual conditions of the 2016 Tuna Measure, as well as the 2016 Tuna Measure as a whole, are calibrated to the risks to dolphins arising from the use of different fishing methods in different ocean areas. The Appellate Body found, however, that, with respect to the eligibility criteria, the Panel did not err in finding that ‘setting on dolphins is significantly more dangerous to dolphins than are other fishing methods’, which implies that the distinction between fishing methods in the 2016 Tuna Measure is appropriately calibrated.Footnote ¹¹ With respect to the certification and tracking/verification requirements, the Appellate Body found that the Panel adopted the correct approach in comparing the risk profiles of individual fisheries, because these requirements make a distinction on the basis of both fishing methods and ocean area. In the Appellate Body's view, the Panel did not err in finding that the ETP large purse seine fishery has a ‘special risk profile’ that distinguishes it from other fisheriesFootnote ¹², given both the technical and legal possibilities of setting on dolphins in the ETP and the fact that dolphin sets occur in a consistent and systematic manner in the ETP large purse seine fishery. Lastly, the Appellate Body found that the Panel's examination of the 2016 Tuna Measure as a whole was properly informed by the interlinkages between its elements and the fact that they operate together to regulate access to the dolphin-safe label.

In conclusion, the Appellate Body found that the distinctions made by the 2016 Tuna Measure are appropriately ‘calibrated’ and, therefore, the detrimental impact caused by the measure ‘stems exclusively from a legitimate regulatory distinction’. In the light of this, the Appellate Body upheld the Panel's conclusion that the 2016 Tuna Measure accords to Mexican tuna products treatment no less favourable than that accorded to like products from the United States and other countries and thus is consistent with Article 2.1 of the TBT Agreement.Footnote ¹³

Article XX of the GATT 1994 (Arbitrary or unjustifiable discrimination)

Before the Panel, Mexico and the United States agreed that the 2016 Tuna Measure is inconsistent with Articles I:1 and III:4 of the GATT 1994, but is provisionally justified under Article XX(g) of the GATT 1994. They disagreed, however, as to whether the measure meets the requirements of the chapeau of Article XX. The Panel found that, indeed, the US measure was consistent with the chapeau. On appeal, the disagreement between the parties focused on whether it was permissible for the Panel ‘to rely on [its] calibration analysis under Article 2.1 [of the TBT Agreement] in reaching [its] conclusion that the 2016 Tuna Measure is not applied in a manner that constitutes arbitrary or unjustifiable discrimination within the meaning of the chapeau of Article XX’.Footnote ¹⁴

The Appellate Body observed that one of the most important factors in the assessment of arbitrary or unjustifiable discrimination under the chapeau of Article XX is whether the discrimination can be ‘rationally related to the policy objective with respect to which the measure has been provisionally justified’.Footnote ¹⁵ It then recalled its previous finding that, if done properly, the calibration analysis would encompass consideration of the rational relationship between the regulatory distinction of the 2016 Tuna Measure and its objectives. As the Panel's calibration analysis under Article 2.1 of the TBT Agreement was properly done, the Appellate Body found that the Panel did not err in relying on the reasoning developed under this provision in assessing the conformity of the 2016 Tuna Measure with the chapeau of Article XX of the GATT 1994.Footnote ¹⁶

In conclusion, the Appellate Body upheld the Panel's finding that the 2016 Tuna Measure is not applied in a manner that constitutes a means of arbitrary or unjustifiable discrimination and is, therefore, justified under Article XX of the GATT 1994.Footnote ¹⁷