In its ruling in the Tuna/Dolphin case, US-Tuna II, the WTO Appellate Body found that the role of the United States authorities in ensuring the integrity and honesty of a voluntary industry-based ecolabeling scheme violated the TBT Agreement in one narrow aspect. The Appellate Body held that while the US maintained elaborate monitoring and enforcement requirements at the point of catch to ensure that the claim of the "dolphin-safe" label on tuna is genuine, these requirements were only imposed with respect to imports on tuna caught in the Eastern Tropical Pacific (ETP); no effort was required to back up a dolphin-safe claim where the source of the tuna was other seas. According to the Appellate Body, this constituted discrimination against ETP tuna products, which could not be justified by a "legitimate regulatory distinction", because in this case Mexico, the complainant, had adduced evidence that there is some risk to dolphins from tuna fishing outside the ETP. How could the US justify a strict approach to risk of tuna being "dolphin unsafe" within the ETP, while taking no steps to ensure the integrity of the claim with respect to non-ETP tuna? Thus, the AB suggested that the US must do something to address the verification of the claim of "dolphin safe" in the case of non-ETP tuna. It noted that one available option was certification by the ship's captain.
But, of critical importance, the AB implicitly recognized that the chances of harm to dolphins from fishing outside the ETP were vastly less-thus, the US could reasonably impose laxer verification requirements, for example certification by a ship's captain-it was a question of "calibration" of regulatory burden to regulatory risk, and certainly not of the US being required under TBT to impose the same regulatory burden regardless of the nature and magnitude of the regulatory risk (in this case the risk of the claim of tuna-safe being inaccurate or fraudulent) . The "calibration" logic of the AB was watertight: it is understandable that monitoring and verification would, legitimately, be much stricter in a situation where the the risk is much greater, due to different eco-geographic realities. Rational regulators will rely more on self-regulation where the inherent dangers of non-compliance in terms of the objectives of supporting the labeling scheme are demonstrably lower, as in this case the chances of any given tuna catch from the non-ETP being dolphin unsafe are inherently less, due to the conditions in those seas, and the behavior of the animals there.
The United States authorities perfectly grasped the spirit and letter of the AB decision. Regulatory changes were made that created oversight with respect to the use of the "dolphin safe" designation in the case of non-ETP tuna. But, of course, the oversight was less strict, because, as noted, the inherent risk of tuna being caught in a dolphin unsafe way was considerably lower, indeed rather marginal.
Now comes back the original panel, whose analysis the AB had substantially corrected in its original ruling. The panel, with the partial exception of the partial dissent, instead of performing its function under DSU 21.5 of review of the implementation of the AB ruling has instead re-adjudicated the case de novo, imposing obligations on the United States without foundation either in that original AB ruling nor indeed with any basis in the covered agreements. This is one of the most pernicious panel decisions, because it fundamentally corrupts the Dispute Settlement Understanding. In effect, it invites a losing party to abuse 21.5 to have another kick at the can, in the hope that a panel, perhaps upset that it was corrected by the AB in the first place, constructs a new dispute about the same matters, which leads to the defending party being held liable on grounds, in effect, soundly rejected in the original proceedings. At issue are the authority of the Appellate Body, the capacity of the dispute settlement system to bring finality to the disputes, and, ultimately, the legitimacy of the WTO system. If this panel report is not reversed by the AB, there will be gravely negative consequences for the WTO.
Fortunately, there is a cogent partial dissent in this panel report. The dissent duplicates the reasoning of the AB in great measure on the issue of certification at the point of catch. Finding fault with the captain's certification method, which the AB itself had held might be sufficient given lesser risk of dolphin-unsafe results outside the ETP, simply flies in the face of what a reasonable regulator would do in the circumstances of risks of greatly differing magnitudes. As the dissent cogently puts it "the general rule that captains' certifications are sufficient outside the ETP large purse seine fishery while observers are required inside the ETP large purse seine fishery is even-handed....this distinction represents a fair response to the different risk profiles existing in different fisheries, as established by the evidence."(Paragraph 7.282). Nevertheless, the dissent does not, and this is disappointing, address the major attack on the integrity of the dispute settlement system represented by the panel's rejection of the very means of satisfying the requirements of the TBT Agreement that was suggested by the AB-captain's certification in the case of non-ETP tuna.
And, perhaps for this reason, the dissenting panelist makes the mistake of joining the majority in impugning the US for different tracking and verification methods in the case of non-ETP tuna. Briefly, in determining whether in fact the tuna in the can actually derives from a dolphin-safe catch, as defined by the regulations, the US relies heavily on industry self-regulation in the case of non-ETP tuna. Egregiously, the panel, in essence creating a new dispute out of the difference between tracking and verification methods in the case of ETP and non-ETP tuna, found the difference unjustified even though Mexico admitted that "it is not aware of any specific instances of dolphin safe certifications being sold so as to accompany a batch of non-dolphin-safe tuna."(paragraph 7.345). The lack of regulatory burden with respect to ensuring the integrity of the label, other than that at the point of catch, played no role in the AB's initial ruling, so here the panel is simply allowing Mexico to abuse the 21.5 process to start a new dispute. Of great concern is the non-sequitur of the panel that the lesser underlying risk of tuna being dolphin-unsafe by virtue of being from non-ETP waters would be relevant to the regulatory burden downstream as it were. Briefly, the ignorance of the panel of rational principles of risk regulation leads it to the absurd rejection of the rational regulatory decision of the United States that non-ETP tuna simply represents overall a less serious problem with regard to the integrity of the dolphin-safe label, and thus, that all the way down the line it makes sense to impose less of a regulatory burden and rely more on self-regulation in the case of non-ETP tuna. Why could a lesser regulatory burden be fully justified even if the inherent risk of fraud is no less at the downstream stage but simply because the overall regulatory problem is less serious in the first place? But, again to come back to the sinister systemic consequences of what the panel is doing here, an even more fundamental point is that it is ignoring the AB's own apparent acceptance of the proposition that a different regulatory burden is fitting in the case of a lesser risk, i.e. calibration of burden to regulatory risk, and replacing it with its own economically irrational intuition that even-handedness should mean imposing an equal regulatory burden regardless of different magnitudes of risk of non-compliant product being mislabeled.
There is much more to be said about this decision, including the reopening of the dispute under the GATT, which was no part of the AB's ruling of a violation and thus is irrelevant to what the US is required to do to bring itself into conformity; the GATT issues are not ones that arise uniquely as a consequence of the US modified measure but the same issues as underlay the initial dispute.
These are very preliminary observations and require greater precision and refinement in the days ahead, but the fundamental defects of this ruling are evident even from such preliminary observations.
