United States – measures concerning the importation, marketing and sale of tuna and tuna products

recourse to article 21.5 of the dsu by Mexico

AB-2015-6

Report of the Appellate Body

Table of Contents

1   Introduction.. 12

2   Arguments of the Participants. 18

3   Arguments of the third participants. 18

4   Issues Raised in This Appeal. 18

5   Preliminary issues. 20

5.1    Business confidential information. 20

5.2    The scope of Article 21.5 proceedings. 22

6   Background and Overview of the Measure at Issue. 24

6.1    The amended tuna measure. 26

6.1.1      The ETP large purse-seine fishery. 29

6.1.2      The non-ETP purse-seine fishery. 31

6.1.3      "All other fisheries". 32

6.2    Principal modifications under the amended tuna measure. 32

7   Analysis of the Appellate Body. 33

7.1    Mexico's claim regarding the amended tuna measure as a whole. 33

7.2    Article 2.1 of the TBT Agreement. 40

7.2.1      "Treatment no less favourable" under Article 2.1 of the TBT Agreement 41

7.2.2      Less favourable treatment – Detrimental impact 45

7.2.2.1   The findings of detrimental impact in the original proceedings. 47

7.2.2.2   The Panel's findings. 49

7.2.2.3   Whether the Panel erred in its analysis of the detrimental impact of the amended tuna measure  52

7.2.3      Less favourable treatment – Stems exclusively from a legitimate regulatory distinction. 58

7.2.3.1   Whether the Panel erred in its interpretation of Article 2.1 and its articulation of the legal standard for determining whether the detrimental impact on imported products stems exclusively from a legitimate regulatory distinction. 58

7.2.3.2   Whether the Panel erred in its assessment of whether the detrimental impact of the amended tuna measure on Mexican tuna products stems exclusively from a legitimate regulatory distinction  66

7.2.3.2.1     Preliminary observations. 66

7.2.3.2.2     The eligibility criteria. 70

7.2.3.2.2.1  The Panel's findings. 70

7.2.3.2.2.2  Whether the Panel erred by misreading the findings of the Appellate Body in the original proceedings. 71

7.2.3.2.3     The certification and tracking and verification requirements. 74

7.2.3.2.3.1  The Panel's findings. 75

7.2.3.2.3.2  Whether the Panel erred by failing to examine whether the different certification and tracking and verification requirements are "calibrated" to the risks to dolphins arising from different fishing methods in different areas of the oceans. 78

7.2.3.2.3.3  Whether the Panel erred in finding that, by virtue of the determination provisions, the detrimental impact does not stem exclusively from a legitimate regulatory distinction. 86

7.2.3.3   Whether the Panel acted inconsistently with Article 11 of the DSU. 92

7.2.3.4   Overall conclusions on the Panel's analysis under Article 2.1 of the TBT Agreement 102

7.2.4      Completion of the legal analysis. 103

7.3    Articles I, III, and XX of the GATT 1994. 116

7.3.1      Articles I:1 and III:4 of the GATT 1994. 116

7.3.2      The chapeau of Article XX of the GATT 1994. 120

7.3.2.1   The Panel's findings. 120

7.3.2.2   Whether the Panel erred in its analysis under the chapeau of Article XX of the GATT 1994  123

7.3.2.2.1     Discrimination between countries where the same conditions prevail 124

7.3.2.2.2     Arbitrary or unjustifiable discrimination. 127

7.3.2.2.3     Conclusion. 133

7.3.3      Completion of the legal analysis. 134

7.3.3.1   Articles I:1 and III:4 of the GATT 1994. 134

7.3.3.2   Article XX of the GATT 1994. 135

8   FINDINGS AND CONCLUSIONS. 142

ABBREVIATIONS USED IN THIS REPORT

PANEL EXHIBITS CITED IN THIS REPORT

CASES CITED IN THIS REPORT

World Trade Organization

Appellate Body

1  Introduction

1.1.  The United States and Mexico each appeals certain issues of law and legal interpretations developed in the Panel Report, United States – Measures Concerning the Importation, Marketing and Sale of Tuna and Tuna Products – Recourse to Article 21.5 of the DSU by Mexico.^[1] The Panel was established pursuant to Article 21.5 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) to consider a complaint by Mexico^[2] concerning the alleged failure of the United States to comply with the recommendations and rulings of the Dispute Settlement Body (DSB) in the original proceedings in United States – Measures Concerning the Importation, Marketing and Sale of Tuna and Tuna Products.^[3]

1.2.  This dispute concerns the United States' labelling regime for "dolphin‑safe" tuna products. In the original proceedings, Mexico raised claims under the General Agreement on Tariffs and Trade 1994 (GATT 1994) and the Agreement on Technical Barriers to Trade (TBT Agreement) challenging the consistency with these Agreements of certain measures imposed by the United States on the importation, marketing, and sale of tuna and tuna products.^[4] Specifically, Mexico challenged: the Dolphin Protection Consumer Information Act of 1990, codified in United States Code, Title 16, Section 1385^[5] (DPCIA); United States Code of Federal Regulations (CFR), Title 50, Sections 216.91 and 216.92 (original implementing regulations)^[6]; and a ruling by a US Federal Appeals Court in Earth Island Institute v. Hogarth^[7] (Hogarth ruling).^[8] The original panel and the Appellate Body referred to these measures, collectively^[9], as the "measure at issue" or the "US dolphin-safe labelling provisions".^[10] In these compliance proceedings, we refer to them as the "original tuna measure".

1.3.  The original tuna measure specified the conditions to be fulfilled in order for tuna products sold in the United States to be labelled "dolphin-safe" or to make similar claims on their labels.^[11] The specific conditions varied depending on the fishing method by which tuna contained in the tuna product was harvested, the area of the ocean where the tuna was caught, and the type of vessel used.^[12] The original tuna measure did not make the use of a dolphin‑safe label obligatory for the importation or sale of tuna products in the United States^[13], although the preferences of retailers and consumers are such that the dolphin-safe label has "significant commercial value", and access to that label constitutes an "advantage" on the US market for tuna products.^[14]

1.4.  The original panel found that the US "dolphin-safe" labelling provisions constituted a "technical regulation" within the meaning of Annex 1.1 to the TBT Agreement.^[15] With respect to Mexico's claim that the original tuna measure was inconsistent with Article 2.1 of the TBT Agreement, the original panel found that Mexico had failed to establish that the measure accorded treatment less favourable to Mexican tuna products than to US tuna products and tuna products originating in other countries.^[16] The panel therefore concluded that the measure was not inconsistent with the United States' obligations under Article 2.1.^[17] The original panel found, however, that the original tuna measure was more trade restrictive than necessary to fulfil its legitimate objectives, taking account of the risks non-fulfilment would create, and concluded for that reason that the measure was inconsistent with Article 2.2 of the TBT Agreement.^[18] With respect to Mexico's claim under Article 2.4 of the TBT Agreement, the original panel found that the Agreement on the International Dolphin Conservation Program^[19] (AIDCP) dolphin-safe definition and certification were a relevant international standard^[20], but that Mexico had failed to prove that this standard was an effective and appropriate means to fulfil the United States' objectives at its chosen level of protection.^[21] Therefore, the panel found that the original tuna measure was not inconsistent with Article 2.4.^[22] The original panel decided to exercise judicial economy with respect to Mexico's claims under Articles I:1 and III:4 of the GATT 1994.^[23]

1.5.  On appeal, the Appellate Body found that the original panel did not err in characterizing the original tuna measure as a "technical regulation" within the meaning of Annex 1.1 to the TBT Agreement.^[24] The Appellate Body found, however, that the original panel had erred in its interpretation and application of the phrase "treatment no less favourable" in Article 2.1 of the TBT Agreement. The Appellate Body reversed the panel's finding that the US dolphin-safe labelling provisions were not inconsistent with Article 2.1 of the TBT Agreement, and found, instead, that the dolphin-safe labelling provisions were inconsistent with that provision.^[25] Furthermore, the Appellate Body found that the original panel had erred in concluding that the original tuna measure was more trade restrictive than necessary to fulfil the United States' legitimate objectives, taking account of the risks non-fulfilment would create. Therefore, the Appellate Body reversed the panel's finding that the original tuna measure was inconsistent with Article 2.2 of the TBT Agreement.^[26] The Appellate Body also reversed the panel's finding that the AIDCP dolphin‑safe definition and certification constituted a relevant international standard within the meaning of Article 2.4 of the TBT Agreement, while leaving undisturbed the panel's finding that the original tuna measure was not inconsistent with Article 2.4 of the TBT Agreement.^[27] Finally, the Appellate Body found that the original panel acted inconsistently with Article 11 of the DSU in deciding to exercise judicial economy with respect to Mexico's claims under Articles I:1 and III:4 of the GATT 1994.^[28] The Appellate Body recommended that the DSB request the United States to bring its measure into conformity with its obligations under the TBT Agreement.^[29]

1.6.  On 13 June 2012, the DSB adopted the original panel and Appellate Body reports. On 2 August 2012, Mexico and the United States informed the DSB that additional time was required to discuss a mutually agreed reasonable period of time for the United States to implement the recommendations and rulings of the DSB.^[30] On 17 September 2012, Mexico and the United States informed the DSB that they had agreed on a reasonable period of time of 13 months from 13 June 2012. The reasonable period of time expired on 13 July 2013.^[31]

1.7.  On 9 July 2013, the United States published in its Federal Register a legal instrument entitled "Enhanced Document Requirements to Support Use of the Dolphin Safe Label on Tuna Products"^[32] (2013 Final Rule).^[33] The 2013 Final Rule made certain changes to Sections 216.91 and 216.93 of CFR Title 50.^[34] Both the DPCIA and the Hogarth ruling remained unchanged.^[35] According to the United States, the 2013 Final Rule constitutes the measure taken to comply with the DSB's recommendations and rulings pursuant to Article 21.5 of the DSU.^[36]

1.8.  Mexico considers that the United States has not brought its labelling regime for "dolphin‑safe" tuna products into compliance with the DSB's recommendations and rulings, and that the regime remains inconsistent with the United States' obligations under the covered agreements.^[37] On 2 August 2013, Mexico and the United States informed the DSB of their Agreed Procedures under Articles 21 and 22 of the DSU^[38] and, on 14 November 2013, Mexico requested the establishment of a panel under Articles 6 and 21.5 of the DSU, Article 14 of the TBT Agreement, and Article XXIII of the GATT 1994.^[39]

1.9.  In its panel request, Mexico indicated that the "measure taken to comply with the recommendations and rulings" of the DSB, hereinafter referred to as the "amended tuna measure", comprises: (i) the DPCIA; (ii) Subpart H of Part 216 of CFR Title 50 as amended by the 2013 Final Rule^[40] (implementing regulations); (iii) the Hogarth ruling; and (iv) any implementing guidance, directives, policy announcements, or any other document issued in relation to instruments (i) through (iii), including any modifications or amendments in relation to those instruments.^[41] Mexico claimed that the amended tuna measure is still inconsistent with Article 2.1 of the TBT Agreement, and with Articles I:1 and III:4 of the GATT 1994.^[42] On this basis, Mexico requested the Panel to find that the United States has failed to comply with the recommendations and rulings adopted by the DSB.^[43]

1.10.  The Panel Report was circulated to Members of the World Trade Organization (WTO) on 14 April 2015. Before proceeding to the merits of the case, the Panel addressed several preliminary issues.^[44] The Panel rejected two arguments made by the United States relating to the scope of the Panel's jurisdiction in these Article 21.5 proceedings, namely: (i) that the scope of the Panel's review was limited to the measure taken to comply – the 2013 Final Rule – rather than extending to the amended tuna measure as a whole; and (ii) that the Panel could not entertain Mexico's claims relating to three elements of the amended tuna measure – the eligibility criteria for the dolphin-safe label, the different tracking and verification requirements, and the different observer or certification requirements – because these elements were unchanged from the original tuna measure, and were not found by the Appellate Body to be WTO-inconsistent in the original proceedings. The Panel considered that the legal question before it was whether the amended tuna measure, including the 2013 Final Rule, brought the United States into compliance with WTO law^[45], and that it had jurisdiction to consider all of Mexico's claims, including as they related to the eligibility criteria, the certification requirements, and the tracking and verification requirements.^[46] In addition, at the outset of its analysis of Mexico's claim under Article 2.1 of the TBT Agreement, in the light of the findings made in the original proceedings, as well as the agreement of both parties, the Panel accepted that the US dolphin-safe labelling regime is a "technical regulation" for purposes of the TBT Agreement, and that the relevant tuna products are "like".^[47]

1.11.  In its Report, the Panel made the following findings with respect to the "eligibility criteria", the "certification requirements", and the "tracking and verification requirements" in the amended tuna measure^[48]:

a.    with respect to Mexico's claims under Article 2.1 of the TBT Agreement:

i.      the eligibility criteria in the amended tuna measure do not accord less favourable treatment to Mexican tuna and tuna products than that accorded to like products from the United States and to like products originating in any other country, and are thus consistent with Article 2.1 of the TBT Agreement^[49];

ii.     the different certification requirements in the amended tuna measure accord less favourable treatment to Mexican tuna and tuna products than that accorded to like products from the United States and to like products originating in any other country, in violation of Article 2.1 of the TBT Agreement^[50]; and

iii.    the different tracking and verification requirements in the amended tuna measure accord less favourable treatment to Mexican tuna and tuna products than that accorded to like products from the United States and to like products originating in any other country, in violation of Article 2.1 of the TBT Agreement^[51];

b.    with respect to Mexico's claims under the GATT 1994:

i.      the eligibility criteria in the amended tuna measure accord less favourable treatment to Mexican tuna and tuna products than that accorded to like products from the United States and to like products originating in any other country, in violation of Articles I:1 and III:4 of the GATT 1994^[52];

ii.     the different certification requirements in the amended tuna measure accord less favourable treatment to Mexican tuna and tuna products than that accorded to like products from the United States and to like products originating in any other country, in violation of Articles I:1 and III:4 of the GATT 1994^[53]; and

iii.    the different tracking and verification requirements in the amended tuna measure accord less favourable treatment to Mexican tuna and tuna products than that accorded to like products from the United States and to like products originating in any other country, in violation of Articles I:1 and III:4 of the GATT 1994^[54];

c.    with respect to the United States' defence under Article XX(g) of the GATT 1994, the eligibility criteria, the different certification requirements, and the different tracking and verification requirements in the amended tuna measure are provisionally justified under Article XX(g)^[55]; and

d.    with regard to whether the challenged aspects of the amended tuna measure satisfy the requirements of the chapeau of Article XX of the GATT 1994, the eligibility criteria in the amended tuna measure are applied in a manner that meets the requirements of the chapeau of Article XX, whereas the different certification requirements and the different tracking and verification requirements are applied in a manner that does not meet the requirements of the chapeau of Article XX of the GATT 1994.^[56]

1.12.  The Panel recommended, pursuant to Article 19.1 of the DSU, that the DSB request the United States to bring its measure into conformity with its obligations under the TBT Agreement and the GATT 1994.^[57]

1.13.  On 5 June 2015, the United States notified the DSB, pursuant to Articles 16.4 and 17 of the DSU, of its intention to appeal certain issues of law covered in the Panel Report, and certain legal interpretations developed by the Panel, and filed a Notice of Appeal and an appellant's submission.^[58] On 10 June 2015, Mexico notified the DSB, pursuant to Articles 16.4 and 17 of the DSU, of its intention to appeal certain issues of law covered in the Panel Report, and certain legal interpretations developed by the Panel, and filed a Notice of Other Appeal and an other appellant's submission.^[59] On 23 June 2015, Mexico and the United States each filed an appellee's submission.^[60] On 26 June 2015, Canada, the European Union, Japan, and New Zealand each filed a third participant's submission.^[61] On the same day, Australia, China, Guatemala, Korea, and Norway each notified its intention to appear at the oral hearing as a third participant.^[62] On 17 September 2015, Thailand also notified its intention to appear at the oral hearing as a third participant.^[63]

1.14.  On 13 July 2015, the Appellate Body Division hearing this appeal informed the participants and the third participants that the oral hearing would take place on 7‑8 September 2015. On 15 July 2015, the Division received a letter from Mexico requesting that the oral hearing not be held as scheduled because a key member of Mexico's litigation team would not be available on those dates. Mexico submitted that attending the hearing with a reduced legal team would have an impact on its ability to present adequately its arguments before the Appellate Body. Mexico requested the Division to modify the date of the oral hearing to a date either before, or after, 7‑8 September 2015, and proposed 3-4 September or 21-22 September as possible alternative dates. The Division wrote to the United States and to the third participants soliciting their views on Mexico's request. Neither the United States nor any of the third participants objected to Mexico's request, at least with respect to the proposed alternative dates of 21‑22 September 2015. On 21 July 2015, the Division issued a Procedural Ruling finding that Mexico had identified "exceptional circumstances", within the meaning of Rule 16(2) of the Working Procedures for Appellate Review^[64], warranting modification of the dates for the oral hearing, and deciding to hold the oral hearing on 21‑22 September 2015.^[65] In reaching its conclusion, the Division took into account Mexico's right to defend properly its case, as well as the high level of activity experienced currently by the WTO dispute settlement system, which can impair a Member's ability to engage effectively in multiple, parallel proceedings.^[66]

1.15.  By letter dated 3 August 2015^[67], the Chair of the Appellate Body notified the Chair of the DSB that the Appellate Body would not be able to circulate its Report within the 60‑day period pursuant to Article 17.5 of the DSU, or within the 90-day period pursuant to the same provision. The Chair of the Appellate Body explained that this was due to a number of factors, including the substantial workload of the Appellate Body, scheduling difficulties arising from overlap in the composition of Divisions hearing appeals concurrently pending before the Appellate Body, the rescheduling of the oral hearing in this appeal, the number and complexity of the issues raised in these and concurrent appellate proceedings, and the shortage of staff in the Appellate Body Secretariat. The Chair of the Appellate Body estimated that the Report in this appeal would be circulated to WTO Members no later than Friday, 20 November 2015.

1.16.  The oral hearing in this appeal was held on 21-22 September 2015. The participants and five of the third participants (Australia, Canada, Japan, New Zealand, and Norway) made opening oral statements. The participants and third participants responded to questions posed by the Members of the Appellate Body Division hearing the appeal.^[68]

2  Arguments of the Participants

2.1.  The claims and arguments of the participants are reflected in the executive summaries of their written submissions provided to the Appellate Body.^[69] The Notices of Appeal and Other Appeal, and the executive summaries of the participants' claims and arguments, are contained in Annexes A and B of the Addendum to this Report, WT/DS381/AB/RW/Add.1.

3  Arguments of the third participants

3.1.  The arguments of those third participants that submitted written submissions are reflected in the executive summaries of their written submissions provided to the Appellate Body^[70], and are contained in Annex C of the Addendum to this Report, WT/DS381/AB/RW/Add.1.

4  Issues Raised in This Appeal

4.1.  The following issues are raised in this appeal:

a.    whether the Panel erred in its application of Article 2.1 of the TBT Agreement and Articles I:1, III:4, and XX of the GATT 1994 by making discrete findings regarding each of the three different sets of requirements under the amended tuna measure^[71], rather than making findings under those provisions in respect of the amended tuna measure as a whole (raised by Mexico);

b.    with respect to Article 2.1 of the TBT Agreement:

i.      with respect to the detrimental impact of the amended tuna measure, whether the Panel erred by finding that the different certification requirements and the different tracking and verification requirements modify the conditions of competition to the detriment of Mexican tuna products in the US market on the basis that such requirements impose a lesser burden on tuna products derived from tuna caught outside the ETP large purse-seine fishery than on tuna products derived from tuna caught within that fishery (raised by the United States);

ii.     with respect to the Panel's analysis of whether the detrimental impact of the amended tuna measure stems exclusively from a legitimate regulatory distinction:

-     whether the Panel erred in its interpretation of Article 2.1 by articulating an incorrect legal standard (raised by the United States);

-     with respect to the "eligibility criteria" (raised by Mexico):

·            whether the Panel erred in its application of Article 2.1 by misreading the Appellate Body's findings in the original proceedings; and

·            whether the Panel acted inconsistently with its duty to conduct an objective assessment of the matter pursuant to Article 11 of the DSU in reaching its findings: (i) regarding the unobserved adverse effects on dolphins of the fishing method of "setting on" dolphins; (ii) regarding the unobserved adverse effects on dolphins of tuna fishing methods other than setting on dolphins; and (iii) that the Appellate Body had made a finding in the original proceedings that setting on dolphins is more harmful to dolphins than other fishing methods; and

-     with respect to the "certification requirements" and the "tracking and verification requirements":

·            whether the Panel erred in its application of Article 2.1 by not taking into account: (i) the different levels of risk to dolphins inside and outside the ETP large purse-seine fishery; or (ii) the fact that the certification requirements and the tracking and verification requirements that apply to the ETP large purse-seine fishery reflect international obligations under the AIDCP (raised by the United States);

·            whether the Panel disregarded evidence on the record and thereby acted inconsistently with its duty to conduct an objective assessment of the matter pursuant to Article 11 of the DSU by failing to find that: (i) captains in some cases have an economic incentive to under-report dolphin injury and mortality; and (ii) tuna‑dolphin association and setting on dolphins occur in certain ocean regions outside the ETP (raised by Mexico); and

·            whether, with respect to the "determination provisions"^[72] (raised by the United States):

o           the Panel erred in its application of Article 2.1 by: (i) improperly making the case for Mexico; and (ii) making its findings based solely on the design of the determination provisions and not on their application;

o           the Panel acted inconsistently with its duty to conduct an objective assessment of the matter pursuant to Article 11 of the DSU by failing to base its findings on a sufficient evidentiary basis; and

c.    whether the Panel erred in its application of Article I:1 of the GATT 1994 to the amended tuna measure by finding that the certification requirements and the tracking and verification requirements under the amended tuna measure provide an "advantage, favour, privilege, or immunity" to tuna products from other Members that is not "accorded immediately and unconditionally" to like products from Mexico because they impose a lesser burden on tuna products derived from tuna caught outside the ETP large purse-seine fishery than on tuna products derived from tuna caught within that fishery (raised by the United States);

d.    whether the Panel erred in its application of Article III:4 of the GATT 1994 to the amended tuna measure by finding that the certification requirements and the tracking and verification requirements under the amended tuna measure accord "treatment less favourable" to Mexican tuna products than that accorded to like domestic products because they impose a lesser burden on tuna products derived from tuna caught outside the ETP large purse-seine fishery than on tuna products derived from tuna caught within that fishery (raised by the United States); and

e.    with respect to the chapeau of Article XX of the GATT 1994:

i.      whether, in assessing "countries where the same conditions prevail", the Panel erred in its application of the chapeau of Article XX by finding that:

-     the conditions are not the same in respect of the eligibility criteria (raised by Mexico); or

-     the conditions are the same in respect of the certification requirements and the tracking and verification requirements (raised by the United States);

ii.     whether, in assessing "arbitrary or unjustifiable discrimination":

-     the Panel erred in its interpretation of the chapeau of Article XX by articulating an incorrect legal standard and improperly relying on its analysis under Article 2.1 of the TBT Agreement (raised by the United States);

-     the Panel erred in its application of the chapeau of Article XX by finding that the eligibility criteria are not applied in a manner that constitutes a means of arbitrary or unjustifiable discrimination (raised by Mexico);

-     the Panel erred in its application of the chapeau of Article XX by finding that the certification requirements and the tracking and verification requirements are applied in a manner that constitutes a means of arbitrary or unjustifiable discrimination and, more specifically, whether the Panel erred (raised by the United States):

·            by not taking into account the different levels of risk to dolphins inside and outside the ETP large purse-seine fishery;

·            by not taking into account the fact that the certification requirements and the tracking and verification requirements that apply to the ETP large purse-seine fishery reflect international obligations under the AIDCP; and

·            in finding that, due to the determination provisions, the certification requirements constitute a means of arbitrary and unjustifiable discrimination.

5  Preliminary issues

5.1  Business confidential information

5.1.  The cover page of Mexico's appellee's submission indicates that it "[c]ontains business confidential information (BCI) on page 13".^[73] Mexico also indicates in the cover letter to its appellee's submission that it has served a "non-BCI version" of that submission on the third participants.

5.2.  Neither participant has requested that we adopt special procedures for handling information designated as BCI in these appellate proceedings, although the European Union, in its third participant's submission, requests that the issue of BCI be addressed in this Report. The European Union does not, however, refer to Mexico's appellee's submission. Rather, the European Union asserts that, in these proceedings, its ability to comment upon the Panel Report is impaired by the extensive redaction of text said to contain BCI from the Panel's reasoning with respect to the tracking and verification requirements under the amended tuna measure.^[74]

5.3.  In disputes raising issues relating to BCI, the Appellate Body has highlighted the need to distinguish between "the general layer of confidentiality that applies in WTO dispute settlement proceedings, as foreseen in Articles 18.2 and 13.1 of the DSU", and "the additional layer of protection of sensitive business information that a panel may choose to adopt, usually at the request of a party".^[75] It is for the parties to request and justify the need for additional protection of BCI.^[76] It is for the panel and/or the Appellate Body, relying upon objective criteria, to determine whether particular information deserves additional protection, as well as the degree of protection that is warranted.^[77] When additional procedures to protect BCI are adopted, the panel and/or Appellate Body must also "adjudicate any disagreement or dispute that may arise under those procedures regarding the designation or the treatment of information as business confidential".^[78] It is, moreover, for the adjudicator to ensure that an appropriate balance is struck between the need to guard against the risk of harm that could result from the disclosure of particularly sensitive information, on the one hand, and the integrity of the adjudication process, the participation rights of third participants, and the rights and systemic interests of the WTO membership at large, on the other hand.^[79] That same balance must be struck by a panel in applying any additional procedures adopted. This means, among other things, that, when considering whether to redact information from its report, a panel "should bear in mind the rights of third parties and other WTO Members under various provisions of the DSU"^[80] and "ensure that the public version of its report circulated to all Members of the WTO is understandable."^[81]

5.4.  In these proceedings, while the cover page of the Panel Report does not mention BCI, the Panel redacted, in part or in full, 17 paragraphs and 3 footnotes of its Report, in each case replacing the redacted text with the following designation: "[[BCI]]".^[82] We see no indication in the Panel record suggesting that either Mexico or the United States requested the adoption of special procedures to protect BCI. Nor does the record show that the Panel adopted such special procedures either as part of its Working Procedures or on an ad hoc basis.^[83] The Panel Report also lacks an indication of the criteria used to identify the information considered to constitute BCI. We are therefore surprised by the fact that the Panel redacted portions of its reasoning from its Report, and uncertain of the legal basis on which it did so.

5.5.  We also observe that, absent any request from the participants, procedures for additional protection of BCI do not apply in these appellate proceedings.

5.2  The scope of Article 21.5 proceedings

5.6.  A second preliminary issue relates to the scope of these proceedings under Article 21.5 of the DSU. We note that neither Mexico nor the United States claims on appeal that the Panel erred in interpreting Article 21.5, or in understanding the scope and nature of proceedings conducted under that provision.^[84] Nonetheless, we find it useful to recall certain observations that the Appellate Body has previously made in this regard.

5.7.  The task of a panel operating pursuant to Article 21.5 of the DSU is to resolve disagreements "as to the existence or consistency with a covered agreement of a measure taken to comply with the recommendations and rulings" of the DSB.^[85] Article 21.5 proceedings involve "a new and different measure which was not before the original panel"^[86], such that "the claims, arguments and factual circumstances which are pertinent to the 'measure taken to comply' will not, necessarily, be the same as those which were pertinent in the original dispute."^[87] When a Member revises a measure found to be WTO-inconsistent in the original proceedings by modifying only certain aspects and leaving others unchanged, such revision, in principle, turns the original measure "in its totality"^[88] into a "new and different measure".^[89] Indeed, even when certain elements of a compliance measure remain unchanged from an original measure, the legal import and significance of such elements may be altered as a result of the modifications introduced in other parts of the compliance measure.^[90]

5.8.  In reviewing the WTO-consistency of a measure "taken to comply", compliance panels should be mindful of the principle of prompt settlement of disputes embodied in Article 3.3 of the DSU.^[91] Accordingly, compliance proceedings cannot be used "to 're-open' issues decided in substance in the original proceedings".^[92] At the same time, if certain claims against aspects of a measure were not decided on the merits in the original proceedings, "they are not covered by the recommendations and rulings of the DSB" and, therefore, "a Member should not be entitled to assume that those aspects of the measure are consistent with the covered agreements."^[93] In
US – Upland Cotton (Article 21.5 – Brazil), the Appellate Body stated that "[a] complaining Member ordinarily would not be allowed to raise claims in an Article 21.5 proceeding that it could have pursued in the original proceedings, but did not."^[94] In US – Zeroing (EC) (Article 21.5 – EC), the Appellate Body clarified, however, that this is not the case for "new claims against a measure taken to comply" when such measure "incorporates components of the original measure that are unchanged, but are not separable from other aspects of the measure taken to comply".^[95] Thus, the possibility to challenge an element of the measure at issue for the first time in compliance proceedings, even if that element may not have changed, hinges on the "critical question" of whether such an element forms "an integral part of the measure taken to comply".^[96]

5.9.  The Appellate Body has also explained that "Article 21.5 proceedings do not occur in isolation from the original proceedings, but that both proceedings form part of a continuum of events."^[97] Since Article 21.5 of the DSU expressly links the "measures taken to comply" with the recommendations and rulings of the DSB concerning the original measure, a panel's examination of a measure taken to comply "cannot … be undertaken in abstraction from the findings by the original panel and the Appellate Body adopted by the DSB"^[98], but must rather be conducted "with due cognizance of this background".^[99] Indeed, "doubts could arise about the objective nature of an Article 21.5 panel's assessment" if, on a specific issue, that panel were to "deviate from the reasoning" in the original report "in the absence of any change in the underlying evidence in the record".^[100] In other words, a compliance panel should take due account of the relevant reasoning that led to the original measure being found to be WTO-inconsistent in its examination of whether the measure taken to comply redresses such WTO-inconsistencies. The relevance of the original reasoning and findings to a compliance panel's analysis must be ascertained on a case-by-case basis, and may vary depending on factors such as the degree of similarity between the measure taken to comply with the original measure, or the extent to which the features of the relevant market have changed.

6  Background and Overview of the Measure at Issue

6.1.  These proceedings under Article 21.5 of the DSU concern a labelling regime for tuna products^[101] maintained by the United States.

6.2.  Commercial tuna fishing can have harmful effects on marine mammals, including dolphins, and these may vary depending on factors such as the method of fishing used, the size of the fishing vessel, and the area of the ocean in which the vessel engages in tuna fishing. Since the 1970s^[102], the United States has undertaken certain domestic measures, and participated in certain multilateral initiatives, aimed at reducing the adverse effects on dolphins associated with commercial fishing operations.

6.3.  In 1990, the United States put in place a domestic regime for labelling tuna products as "dolphin-safe" through the enactment of the DPCIA.^[103] As explained below, this instrument, as subsequently amended, together with its implementing regulations and a court decision, constitute the "amended tuna measure", the measure at issue in these compliance proceedings. Together, these instruments aim to: (i) ensure that consumers are not misled or deceived about whether tuna products contain tuna caught in a manner that adversely affects dolphins; and (ii) contribute to the protection of dolphins by ensuring that the US market is not used to encourage fishing fleets to catch tuna in a manner that adversely affects dolphins.^[104] The amended tuna measure defines what constitutes dolphin-safe tuna products for purposes of the US market, and establishes certain requirements and conditions that must be satisfied in order for a tuna product sold in the United States to bear a label indicating that it is dolphin-safe. The preferences of consumers and retailers in the United States are such that a dolphin-safe label has "significant commercial value" in the US market for tuna products.^[105]

6.4.  At the international level, both the United States and Mexico are parties to the AIDCP, an agreement among 14 countries that entered into force in February 1999.^[106] The AIDCP, administered by the Inter-American Tropical Tuna Commission (IATTC), addresses a particular tuna fishing method (purse-seine fishing) in a specific area of the ocean, namely, the Eastern Tropical Pacific Ocean (ETP).^[107]

6.5.  Within this area of the ocean^[108], there is a regular association between tuna and dolphins, meaning that schools of tuna tend to aggregate and swim beneath certain species of dolphins.^[109] Certain vessels operating in this area thus employ the fishing technique known as "setting on" dolphins, which takes advantage of this association, and involves chasing and encircling the dolphins with a purse-seine net in order to catch the tuna swimming beneath the dolphins.^[110] The ETP is a "traditional fishing ground" for Mexico, and its tuna fleet operates almost exclusively therein using the method of setting on dolphins.^[111]

6.6.  The AIDCP was negotiated in response to evidence that many dolphins were dying in the ETP each year^[112] and, together with the instruments that have been adopted thereunder^[113], establishes a programme of monitoring, tracking, verification, and certification of particular tuna fishing practices in the ETP.^[114] The AIDCP is recognized to have made an important contribution to dolphin protection and to the dramatic reduction of observed dolphin mortality in the ETP.^[115] The AIDCP regulates the fishing methods of purse-seine vessels in the ETP according to the size of the vessel, by prohibiting small purse-seine vessels from setting on dolphins and permitting large purse-seine vessels to set on dolphins only within specified dolphin mortality limits (DMLs).^[116] Under the AIDCP, large purse-seine vessels are also subject to a number of requirements in respect of the fishing gear that they must carry and certain procedures that they must perform, so as to reduce the risks to dolphins arising from setting on dolphins. The AIDCP has established certain mechanisms to enforce these requirements and mortality limits. In addition to mandating the presence of independent observers on board large purse-seine vessels fishing in the ETP, each party must also establish its own tracking and verification programme, implemented and operated by a designated national authority, and ensure that it includes periodic audits and spot checks for tuna products.^[117] Finally, voluntary procedures are put in place to enable tuna caught and tracked in accordance with this programme to receive an "AIDCP dolphin-safe certification".^[118] As discussed below, the AIDCP's definition of "dolphin safe" is not coextensive with the definition of "dolphin safe" under the US measure at issue in this dispute.^[119]

6.1  The amended tuna measure

6.7.  Mexico challenges the United States' regulatory regime establishing the conditions for the use of a dolphin-safe label on tuna products sold in the US market. As discussed above^[120], in its request for the establishment of an Article 21.5 panel, Mexico asserted that the US regime comprises the following three legal instruments: (i) the DPCIA^[121]; (ii) the implementing regulations^[122]; and (iii) the Hogarth ruling.^[123]

6.8.  Taken together, the DPCIA, the implementing regulations, and the Hogarth ruling constitute the "amended tuna measure"^[124] and condition access to a dolphin-safe label upon certain requirements that vary depending on the fishing method by which tuna contained in the tuna product is harvested, the ocean area where it is caught, and the type of vessel used. The DPCIA and the implementing regulations also prohibit any reference to dolphins, porpoises, or marine mammals on the label of a tuna product if the tuna contained in the product does not comply with the labelling conditions spelled out in these instruments.^[125]

6.9.  The amended tuna measure sets out several substantive conditions for access to the dolphin‑safe label. First, the measure disqualifies from access to that label all tuna products containing tuna harvested by two methods of fishing: (i) large-scale driftnet fishing on the high seas; and (ii) vessels using purse-seine nets to encircle or "set on" dolphins anywhere in the world.^[126] Although the DPCIA's disqualification of tuna products derived from tuna caught by setting on dolphins was suspended in 2002 by virtue of administrative action^[127], the Hogarth ruling overturned that action shortly thereafter^[128], thereby restoring this condition of access to the US dolphin-safe labelling regime. The disqualification of tuna products containing tuna caught by setting on dolphins thus formed part of, and is unchanged as compared to, the original tuna measure. Second, all other tuna products, that is, those containing tuna harvested by all other fishing methods, are eligible for the dolphin-safe label only if no dolphins were killed or seriously injured in the sets or other gear deployment in which the tuna were caught. The amended tuna measure also prescribes a number of certification requirements and tracking and verification requirements relating to the substantive conditions.

6.10.  Apart from large-scale driftnet fishing on the high seas^[129], the amended tuna measure distinguishes among three general categories of fisheries^[130]: (i) large purse-seine^[131] vessels in the ETP^[132] (the ETP large purse-seine fishery); (ii) purse-seine vessels outside the ETP^[133] (the non-ETP purse‑seine fishery); and (iii) other fisheries, which include non-purse-seine vessels in any ocean area and small purse‑seine vessels in the ETP ("all other fisheries").^[134] Access to the dolphin-safe label for all fisheries requires certification that no dolphins were killed or seriously injured in the sets or other gear deployment in which the tuna were caught ("no dolphins killed or seriously injured" certification). For tuna caught by purse-seine vessels falling within the first two categories, certification that no purse-seine net was intentionally deployed on or used to encircle dolphins during the particular trip on which the tuna were caught ("no setting on dolphins" certification) is also a condition of access to the label. The relevant certification(s) must be made by a vessel's captain. The relevant certification(s) may also need to be made by an observer in certain defined circumstances.

6.11.  More specifically, for tuna products derived from tuna caught in the ETP large purse-seine fishery, both of the above certifications have to be provided by both the captain and an International Dolphin Conservation Program (IDCP)‑approved observer. For tuna products derived from tuna caught in any fishery other than the ETP large purse-seine fishery, these certifications have to be provided, in principle, only by the vessel captain.^[135] For such tuna products, it is only where the National Marine Fisheries Service (NMFS)^[136] Assistant Administrator has made certain determinations that the amended tuna measure also conditions access to the label upon the provision of the above certifications by a qualified and approved observer. This additional requirement to provide observer certification(s) is triggered when the NMFS Assistant Administrator makes a determination with respect to a specific fishery: (i) within the non-ETP purse‑seine fishery, that there is a regular and significant association between dolphins and tuna, similar to the association between dolphins and tuna in the ETP; or (ii) within "all other fisheries", that there is a regular and significant mortality or serious injury of dolphins.^[137] The Panel referred to this aspect of the amended tuna measure as the "determination provisions".^[138]

6.12.  Furthermore, under the amended tuna measure, access to the dolphin-safe label requires the segregation of dolphin-safe and non-dolphin-safe tuna from the moment of the catch through the entire processing chain. In order to track and verify the dolphin-safe status of tuna, the NMFS has established the Tuna Tracking and Verification Program (TTVP).^[139] The basic requirement to segregate dolphin-safe from non-dolphin-safe tuna from the time it was caught through unloading and processing applies irrespective of the area of the ocean in which the tuna was caught and the type of vessel that harvested it.^[140] More detailed segregation requirements apply, however, to tuna products derived from tuna caught in the ETP large purse-seine fishery, given that the tracking and verification of tuna caught in this fishery should be conducted consistent with the AIDCP Resolution to Adopt the Modified System for Tracking and Verification of Tuna^[141] (AIDCP Tracking and Verification System).^[142]

6.13.  Certain documentation requirements pertain to the segregation that is to be conducted by persons and entities involved in the catch and processing of tuna. First, all tuna products imported into the United States, regardless of where the tuna is caught and whether the dolphin-safe label is used, must be accompanied by a Fisheries Certificate of Origin^[143] (Form 370) of the National Oceanic and Atmospheric Administration (NOAA).^[144] Form 370 requires the importer to indicate whether it seeks to declare the status of the tuna product as "dolphin‑safe", and, if so, to attach the certification(s) identified as necessary to establish the dolphin-safe status of the relevant category.^[145] Second, tuna caught by US-flagged large purse-seine vessels fishing in the ETP must be accompanied by Tuna Tracking Forms (TTFs), which record certain information regarding each tuna set made on a particular fishing trip. One TTF is used to record dolphin-safe sets and another one to record non-dolphin-safe sets. For non-US-flagged large purse-seine vessels in the ETP, the TTF numbers must be listed in a certification attached to the Form 370.^[146]

6.14.  Tracking and verification requirements also apply regarding the oversight exercised by US authorities on importers and US-based persons and entities involved in the catch and processing of tuna for sale in the US market. The relevant provisions provide for checks to be performed on the operation of US canneries^[147], and require monthly reports from canneries and other US tuna processors containing certain specified information, including the certifications required for access to the dolphin-safe label.^[148] US authorities may also conduct audits and spot checks on any exporter, trans-shipper, importer, processor, or wholesaler/distributor of tuna or tuna products.^[149]

6.15.  The specific conditions applicable to the three categories of fisheries under the amended tuna measure are described below.

6.16.  We recall that the original tuna measure comprised three legal instruments: the DPCIA; the original implementing regulations; and the Hogarth ruling. In the amended tuna measure, the DPCIA and the Hogarth ruling remain unchanged. Conversely, the 2013 Final Rule, which the United States identifies as the measure taken to comply with the recommendations and rulings of the DSB in the original proceedings^[150], modified certain aspects of Sections 216.91 and 216.93 of CFR Title 50.^[151] The other sections of the implementing regulations challenged by Mexico – notably Section 216.92, which sets out requirements for access to the dolphin-safe label that apply specifically to tuna products derived from tuna harvested in the ETP by large purse-seine vessels – are unchanged by the 2013 Final Rule.

6.1.1  The ETP large purse-seine fishery

6.17.  In order to qualify for the dolphin-safe label, tuna products derived from tuna caught by a large purse-seine vessel in the ETP must be accompanied by the following certifications:

a.    a certification from an authorized IATTC or government official that an IDCP‑approved observer was on board the vessel during the entire trip during which the tuna was caught^[152]; and

b.    a certification from the vessel captain and an IDCP-approved observer that:

i.      no purse-seine net was intentionally deployed on or used to encircle dolphins during the same fishing trip^[153]; and

ii.     no dolphins were killed or seriously injured in the sets in which the tuna was caught.^[154]

6.18.  These certification requirements should be distinguished from those under the AIDCP, where "dolphin-safe" tuna is defined as "tuna captured in sets in which there is no mortality or serious injury of dolphins".^[155]

6.19.  As regards the tracking and verification requirements, access to the dolphin-safe label for US-flagged large purse-seine vessels fishing in the ETP is conditional upon maintaining TTFs consistently with the AIDCP Tracking and Verification System.^[156] IDCP‑approved TTFs, each bearing a unique number, are used by the observer to record every set made during a fishing trip. Two TTFs are used for each trip, one to record tuna harvested in dolphin-safe sets, and one to record tuna harvested in non‑dolphin-safe sets.^[157] A set is "non‑dolphin safe" if a dolphin died or was seriously injured during the set.^[158] The IDCP-approved observer^[159] and the vessel engineer each initials the entry following each set, and the vessel captain and the observer review and sign both TTFs at the end of the fishing trip certifying that the information on the forms is accurate. Tuna caught in sets designated as dolphin safe by the observer must be stored separately from tuna caught in non-dolphin-safe sets from the time of capture through unloading.^[160] Independent observers monitor the loading and unloading of wells, and individual lots of tuna are assigned the corresponding TTF tracking numbers that can be traced through each step of production of the tuna products.^[161]

6.20.  The amended tuna measure directly conditions access to the dolphin-safe label upon maintaining TTFs only for tuna products derived from tuna caught by US‑flagged ETP large purse‑seine vessels.^[162] In practice, however, the same tracking and verification regime also applies in respect of non-US-flagged large purse-seine vessels in the ETP. Under the amended tuna measure, tuna products containing tuna harvested in the ETP by non-US-flagged large purse-seine vessels may be labelled dolphin safe only if the vessel belongs to a nation that is a party to the AIDCP.^[163] In addition, it is undisputed between the parties that the AIDCP requires imposition of the same TTF system as the one implemented by the amended tuna measure for US-flagged ETP large purse-seine vessels.^[164] Moreover, Form 370 requires that imports of tuna harvested by non‑US-flagged ETP large purse-seine vessels, or of tuna products derived from the same, be accompanied by documentation from the appropriate IDCP member country certifying that there was an IDCP‑approved observer on board the vessel at all times and listing the numbers for the associated TTFs.^[165] Thus, under the amended tuna measure, tuna products containing tuna caught by both US‑flagged and non-US-flagged large purse-seine vessels in the ETP have access to the dolphin-safe label only if the handling of the TTFs and the tracking and verification of tuna is conducted consistent with the AIDCP Tracking and Verification System.^[166]

6.21.  The certification and tracking and verification requirements applicable to large purse-seine vessels in the ETP remain unchanged from the original tuna measure.^[167]

6.1.2  The non-ETP purse-seine fishery

6.22.  In order to qualify for the dolphin-safe label, tuna products derived from tuna caught by a non-ETP purse-seine vessel^[168] must be accompanied by a certification from the vessel captain that:

a.    no purse-seine net was intentionally deployed on or used to encircle dolphins during the same fishing trip; and

b.    no dolphins were killed or seriously injured in the sets in which the tuna was caught.^[169]

6.23.  Therefore, in principle, certification by the vessel captain is sufficient for tuna products derived from tuna caught by purse-seine vessels outside the ETP to gain access to the label. Nevertheless, a requirement also to provide these certifications from an observer participating in a national or international programme acceptable to the NMFS Assistant Administrator will be triggered, in the event that the NMFS Assistant Administrator determines for a specific fishery that regular and significant association occurs between dolphins and tuna similar to the association between dolphins and tuna in the ETP.^[170] At the time of the panel request in these Article 21.5 proceedings, however, no fishery outside the ETP had been determined to have regular and significant association between dolphins and tuna similar to that in the ETP.^[171]

6.24.  Therefore, in order to obtain access to the dolphin-safe label, tuna products derived from tuna caught by purse-seine vessels outside the ETP are presently required to have a captain's certification that there were "no dolphins killed or seriously injured" and that there was "no setting on dolphins". Under the original tuna measure, the only requirement for access to the dolphin-safe label applicable to such tuna products was to provide a captain's certification of "no setting on dolphins".^[172]

6.25.  The amended tuna measure also imposes segregation requirements on this fishery. Tuna caught in sets designated as dolphin safe must be stored separately from tuna caught in non‑dolphin-safe sets from the time of capture through unloading.^[173] Imported tuna products must also be accompanied by a Form 370, which identifies the gear type that was used to catch the tuna, and contains the necessary certifications.^[174]

6.1.3  "All other fisheries"

6.26.  Imported tuna products derived from tuna caught in "all other fisheries", i.e. by non‑purse‑seine vessels in any fishery and small purse-seine vessels in the ETP, may be labelled dolphin safe when accompanied by a certification by the vessel captain that no dolphins were killed or seriously injured during the sets in which the tuna was caught.^[175]

6.27.  Nevertheless, a requirement also to provide such certification from an observer participating in a national or international programme acceptable to the NMFS Assistant Administrator will be triggered, in the event that the NMFS Assistant Administrator determines for a certain fishery that there is regular and significant mortality or serious injury of dolphins.^[176] At the time of the panel request in these Article 21.5 proceedings, no fishery outside the ETP had been determined to have regular and significant mortality or serious injury of dolphins.^[177]

6.28.  Therefore, in order to obtain access to the dolphin-safe label, tuna products derived from tuna caught by non-purse-seine vessels in any fishery and by small purse-seine vessels in the ETP are presently required to have a captain's certification that there were "no dolphins killed or seriously injured". Under the original tuna measure, access to the dolphin-safe label for such tuna products was not subject to any certification requirements.^[178]

6.29.  The tracking and verification requirements applicable to this category of fisheries correspond to those for tuna caught by purse-seine vessels outside the ETP.^[179]

6.2  Principal modifications under the amended tuna measure

6.30.  In summary, under the amended tuna measure, all tuna products derived from tuna caught on a fishing trip involving setting on dolphins remain disqualified from access to the dolphin-safe label. Access to the label is conditional upon the provision of a certification: (a) from both the vessel captain and an IDCP-approved observer that there were "no dolphins killed or seriously injured" and that there was "no setting on dolphins", in the case of tuna products derived from tuna caught by a large purse-seine vessel in the ETP^[180]; (b) from the vessel captain that there were "no dolphins killed or seriously injured" and that there was "no setting on dolphins", in the case of tuna products derived from tuna caught by a non-ETP purse-seine vessel; and (c) from the vessel captain that there were "no dolphins killed or seriously injured", in the case of tuna products derived from tuna caught in "all other fisheries". Therefore, in the absence of any determinations made by the NMFS Assistant Administrator^[181], observer certification is a condition for access to the dolphin-safe label only as regards tuna products derived from tuna harvested in the ETP large purse‑seine fishery. Moreover, the amended tuna measure extends the same basic condition to segregate dolphin-safe from non‑dolphin-safe tuna across fisheries in all ocean areas. Specific documentation requirements in the form of TTFs, however, exist only for tuna products derived from tuna caught in the ETP large purse-seine fishery.

6.31.  As the overview above shows, the 2013 Final Rule introduced several modifications to the conditions for access to the dolphin-safe label, as compared to the original tuna measure. All of the changes apply only in respect of tuna caught in fisheries outside the ETP large purse-seine fishery. For such fisheries, the 2013 Final Rule introduced three additional conditions, as set out below.

6.32.  First, outside the ETP large purse-seine fishery, the amended tuna measure adds as a condition of access to the dolphin-safe label for any tuna product the requirement that a certification be provided by the vessel captain that "no dolphins were killed or seriously injured in the sets or other gear deployments in which the tuna were caught". No such certification was required under the original tuna measure. Rather, under the original tuna measure, such certification was required only for tuna products derived from tuna caught by large purse-seine vessels fishing in the ETP.^[182]

6.33.  Second, outside the ETP large purse-seine fishery, the amended tuna measure establishes as a condition of access to the dolphin-safe label certain segregation requirements whereby tuna caught in sets or other gear deployments designated as dolphin safe must be stored separately from tuna caught in non-dolphin-safe sets or other gear deployments. Such tuna must be offloaded and stored in such a way as to maintain segregation as the tuna leaves the fishing vessel, as well as during the operations of US tuna canneries and other processors. By contrast, under the original tuna measure, segregation was a condition for access to the dolphin-safe label only for tuna products derived from tuna caught by large purse-seine vessels fishing in the ETP.^[183]

6.34.  Third, outside the ETP large purse-seine fishery, the amended tuna measure contemplates that access to the dolphin-safe label for a particular fishery may also be subject to certification by an observer of "no dolphins killed or seriously injured" and, where applicable, of "no setting on dolphins"^[184], where the NMFS Assistant Administrator has determined such observer to be qualified and authorized to make the relevant certifications, and the observer is already on board the vessel.^[185] Under the original tuna measure, no such possibility to trigger an additional requirement for certification by an observer existed as a condition for access to the dolphin-safe label.

7  Analysis of the Appellate Body

7.1  Mexico's claim regarding the amended tuna measure as a whole

7.1.  We first address Mexico's claim that the Panel erred because it reached findings of inconsistency in "a narrow manner rather than concluding that the amended tuna measure, as a whole, is inconsistent with the covered agreements".^[186] Specifically, Mexico considers that the Panel erred in finding that only two of the three elements of the amended tuna measure – the "certification requirements" and the "tracking and verification requirements", but not the "eligibility criteria" – are inconsistent with Article 2.1 of the TBT Agreement and Articles I:1 and III:4 of the GATT 1994. Mexico asserts that it challenged the amended tuna measure "as a whole"^[187], and that it differentiated between the three different elements of the measure only in making its arguments regarding the legitimate regulatory distinction that is the focus of the second step in the analysis of "treatment no less favourable" under Article 2.1 of the TBT Agreement, and regarding the chapeau analysis under Article XX of the GATT 1994. According to Mexico, "it is the amended tuna measure that violates WTO provisions, … not individual elements of the measure considered in isolation".^[188] Mexico requests us to modify the findings and conclusions of the Panel and find that the amended tuna measure as a whole is inconsistent with Article 2.1 of the TBT Agreement and Articles I:1 and III:4 of the GATT 1994.^[189]

7.2.  The United States maintains that Mexico's claim should be rejected. First, the United States contends that Mexico identifies no legal basis for its assertion that the Panel did not properly consider Mexico's claims of discrimination.^[190] Second, the United States considers that the factual premise of Mexico's claim is wrong since Mexico did refer to the certification and tracking and verification requirements elsewhere in its submissions, notably in its arguments relating to detrimental impact under the first step of the analysis of "treatment no less favourable" under Article 2.1 of the TBT Agreement.^[191] Third, the United States maintains that, whether the detrimental impact caused by the three elements is assessed together or separately, the Panel's analysis would have been the same.^[192]

7.3.  In addressing this claim by Mexico, we first recount the relevant findings from the panel and the Appellate Body in the original proceedings, as well as the relevant findings of the Panel in these Article 21.5 proceedings. In the original proceedings, the panel considered that the separate legal instruments challenged by Mexico – consisting of the DPCIA, the original implementing regulations, and the Hogarth ruling – together, set out the terms of the US dolphin-safe labelling regime, and therefore comprised a single measure for purposes of its analysis of Mexico's claims.^[193] The Appellate Body made a similar statement in its report, further noting that the requirements set out in these separate legal instruments, together, "condition eligibility for a 'dolphin-safe' label upon certain documentary evidence that varies depending on the area where the tuna contained in the tuna product is harvested and the type of vessel and fishing method by which it is harvested".^[194] Although both the original panel and the Appellate Body addressed different aspects of the conditions for access to the US dolphin-safe label under Article 2.1 of the TBT Agreement, including certain certification and tracking and verification requirements^[195], they also each defined, and reached ultimate findings in respect of, a single measure consisting of "the US dolphin-safe labelling provisions".^[196]

7.4.  The Article 21.5 Panel addressed the scope and content of the amended tuna measure in two separate parts of its reasoning. At the outset of its Report, in discussing its jurisdiction under Article 21.5 of the DSU, the Panel considered it "clear" that the Appellate Body's conclusions and recommendations in the original proceedings were meant to apply to the original tuna measure "as a whole, including all its components".^[197] The Panel also addressed the United States' argument that the distinctions drawn by the challenged elements of the amended tuna measure were unchanged from the original measure and therefore not subject to these Article 21.5 proceedings. In that analysis, the Panel stressed that, in finding that the original tuna measure lacked even‑handedness, the Appellate Body "did not say that any one particular element of the regulatory scheme … was solely responsible for this lack of even-handedness."^[198] Instead, it was "the tuna measure as a whole, with its varying regulatory requirements, that was found to be inconsistent with Article 2.1 of the TBT Agreement."^[199] In particular, the Panel considered that the Appellate Body's reference in the plural to "the difference in labelling conditions" and "different requirements" indicated that the Appellate Body's findings encompassed various distinctions embedded in the original tuna measure, including in respect of the requirements pertaining to certification and tracking and verification.^[200] On the basis of this analysis, the Panel concluded that it was faced with the legal question of whether the amended tuna measure, including the 2013 Final Rule, brings the United States into compliance with WTO law, and that it had jurisdiction to consider all of Mexico's claims, including as they relate to the eligibility criteria and the certification and tracking and verification requirements.^[201]

7.5.  Subsequently, in examining Mexico's claim under Article 2.1 of the TBT Agreement, the Panel stated that its task was "to determine whether the amended tuna measure as a whole affords 'less favourable treatment' to Mexican tuna and tuna products than to tuna and tuna products from the United States and other WTO Members."^[202] Noting Mexico's explanation that such an analysis focuses "on the regulatory distinction that accounts for the detrimental treatment on Mexican tuna products as compared to US tuna products and tuna products originating in other countries"^[203], the Panel considered that Mexico had identified three "central regulatory distinctions" whose design and application give rise to less favourable treatment, namely:

a.    the "eligibility criteria", defined as "[t]he disqualification of setting on dolphins in accordance with [the] AIDCP as a fishing method that can be used to catch tuna in the ETP in a dolphin-safe manner and the qualification of other fishing methods to catch tuna in a dolphin-safe manner";

b.    the "certification requirements", defined as "[t]he mandatory independent observer requirements for tuna caught in the ETP by setting on dolphins in accordance with the AIDCP and the absence of such requirements for tuna caught outside the ETP using the same and different fishing methods"; and

c.    the "tracking and verification requirements", defined as "[t]he record-keeping and verification requirements for tuna caught in the ETP by setting on dolphins in accordance with the AIDCP and the different requirements for tuna caught outside the ETP using both the same and different fishing methods".^[204]

7.6.  Mexico referred to these collectively as "the difference in labelling conditions and requirements", and maintained that this difference means that "all like US tuna products and most tuna products of other countries have access to the dolphin-safe label", whereas "the amended tuna measure denies access to this label for most Mexican tuna products."^[205] The Panel also recalled the United States' view that any detrimental impact results only from the eligibility criteria, and that the certification and tracking and verification requirements are not relevant because they "do not cause the detrimental impact that was the basis for the DSB's recommendations and rulings".^[206]

7.7.  The Panel considered that Mexico's argumentation on the detrimental impact caused by the certification and tracking and verification requirements "developed" over the course of its written submissions.^[207] Although the Panel noted Mexico's contention that it is the differences in labelling conditions and requirements of the measure that "together"^[208] deny Mexican products competitive opportunities, the Panel considered that "Mexico's argumentation throughout these proceedings made clear that different elements of the amended tuna measure negatively affect Mexican tuna in different ways."^[209] The Panel then summarized its understanding of the parties' arguments and the structure of the analysis that it would follow, thusly:

[B]oth parties have structured their arguments throughout these proceedings on the basis of the three regulatory distinctions identified by Mexico. That is, while Mexico has argued that the relevant less favourable treatment emerges only or at least most clearly when all three distinctions are considered together, it has nevertheless presented its arguments on a distinction-by-distinction basis. The United States has followed suit, and presented its arguments on the three regulatory distinctions separately. We have decided to follow the approach of the parties in presenting our own analysis. Although we will indicate the connections between these distinctions where relevant, we conduct our analysis in three parts, considering first the eligibility criteria; second, the different certification requirements; and third, the different tracking and verification requirements.^[210]

7.8.  In the remainder of its Report, the Panel proceeded to undertake separate analyses, and to make separate findings, in respect of each of: the "eligibility criteria"; the "different certification requirements"; and the "different tracking and verification requirements".

7.9.  We make several observations about the nature of Mexico's claim of error on appeal and how it relates to the analytical approach that was adopted by the Panel.

7.10.  First, we note Mexico's contention that it identified and addressed the three different elements of the measure as relevant to the second step of the analysis under Article 2.1 of the TBT Agreement (namely, whether any detrimental impact stems exclusively from a legitimate regulatory distinction), rather than to the first step of that analysis (namely, whether the measure at issue modifies the conditions of competition to the detriment of imported products). According to Mexico, the Panel confused Mexico's arguments relating to these two different steps of the analysis and wrongly characterized Mexico's identification of the regulatory distinctions that were relevant for the second step of the analysis under Article 2.1 as arguments relating to the detrimental impact of the amended tuna measure.^[211] Although Mexico claims, generally, that the Panel erred by making discrete findings of consistency and inconsistency in respect of the three elements of the measure, instead of in respect of the measure as a whole, we understand that Mexico is principally targeting the Panel's decision to analyse three distinct forms of detrimental impact and to segment its analysis of them.^[212]

7.11.  We further note that the Panel's decision to segment its analysis and separately address the three elements of the amended tuna measure had repercussions beyond its detrimental impact analysis. Indeed, the Panel also segmented its consideration of the three elements of the amended tuna measure for purposes of the second step of its Article 2.1 analysis, namely, the assessment of whether the detrimental impact stems exclusively from a legitimate regulatory distinction. In addition, the Panel similarly segmented its analysis concerning Mexico's claims under Articles I:1 and III:4 of the GATT 1994, as well as the United States' affirmative defence under Article XX. Thus, the Panel divided every stage of its analysis under the substantive obligations of the TBT Agreement and the GATT 1994 into three parts relating to the "eligibility criteria", the "different certification requirements", and the "different tracking and verification requirements."^[213]

7.12.  In addition, the Panel also made discrete findings regarding the conformity of each element with the applicable legal obligation. Thus, the Panel found that the "eligibility criteria" in the amended tuna measure do not accord less favourable treatment to Mexican tuna and tuna products than that accorded to like products from the United States and other countries, and are thus not inconsistent with Article 2.1 of the TBT Agreement.^[214] Conversely, the Panel separately found that each set of "certification requirements" and "tracking and verification requirements" accord less favourable treatment to Mexican tuna and tuna products than that accorded to like products from the United States and other countries, in violation of Article 2.1 of the TBT Agreement.^[215] Similarly, the Panel made three discrete findings that each element of the amended tuna measure is inconsistent with Articles I:1 and III:4 of the GATT 1994.^[216] Finally, the Panel made discrete findings with respect to each of the three elements of the amended tuna measure under subparagraph (g) and the chapeau of Article XX of the GATT 1994. Although the Panel found that each element of the amended tuna measure was provisionally justified under Article XX(g), it found that the "eligibility criteria" meet the requirements of the chapeau, whereas the "different certification requirements" and the "different tracking and verification requirements" do not.^[217] Thus, the Panel found the "eligibility criteria", but not the "certification requirements" or "tracking and verification requirements", to be justified under Article XX. At no point in its Report did the Panel reach a finding of consistency or inconsistency of the amended tuna measure more broadly, or as a whole, with a substantive obligation of the WTO covered agreements.^[218]

7.13.  We observe that analysing a measure in a segmented manner may raise concerns when the constituent parts of the measure are interrelated and operate in an integrated way. In
EC – Asbestos, the Appellate Body criticized the panel's approach of examining the measure at issue in two separate stages by focusing first on the prohibitions of the measure, before examining the measure's exceptions. Because the scope of the prohibitions of that measure "can only be understood in light of the exceptions", and because "the exceptions in the measure would have no autonomous legal significance in the absence of the prohibitions", the Appellate Body concluded that the measure should have been examined "as an integrated whole".^[219] In EC – Seal Products, the Appellate Body noted that the issue of how best to characterize a measure at issue that consists of several different elements is an issue of "particular significance" in cases where the inclusion or exclusion of certain elements in the definition of the measure "can affect the legal characterization, or substantive analysis of the measure".^[220] Noting that the panel had found that the relevant legal instruments in that dispute operated in conjunction with each other, that the permissive and the prohibitive elements of the measure were intertwined, and that the parties had agreed that the measure at issue should be treated as a single measure, the Appellate Body "consider[ed] it appropriate to draw conclusions regarding the legal characterization of the EU Seal Regime as a whole on the basis of an integrated analysis of the constituent parts of the measure".^[221] The Appellate Body went on to consider that it was only the combined operation of the various aspects of the measure at issue that gave rise to findings of discrimination under Articles I:1 and III:4 of the GATT 1994.^[222]

7.14.  As a general matter, we do not see that it is necessarily inappropriate for a panel, in analysing the conformity of a measure with obligations under the WTO covered agreements, to proceed by assessing different elements of the measure in a sequential manner. Indeed, such an approach may, depending on the nature of the measure at issue, be useful, or in some instances critical, to understanding how that measure is designed and applied. In some instances, it may even be unobjectionable for a panel to reach separate findings of inconsistency with respect to separate elements of a measure, for instance, where the elements of the measure are separable, such that they do not depend on each other in substance or in operation.

7.15.  Other types of measures, however, may not be so easily parsed, and the approach taken in scrutinizing such measures must not lead to the isolated consideration of a particular element, or particular elements, of a measure in a manner that undermines the legal analysis or leads to a legal conclusion that would have differed had that element been assessed in relation to other relevant elements of the measure. In scenarios where the elements of a measure are interrelated, and certain elements cannot be properly understood without reference to other elements of the measure, such a segmented approach may create artificial distinctions constituting legal error. We also see that, depending on the nature of the legal obligation at issue, a segmented approach may raise concerns when a panel fails to make an overall assessment that synthesizes its reasoning or intermediate conclusions concerning related elements of a measure at issue so as to reach a proper finding of consistency or inconsistency in respect of that measure.

7.16.  In our view, there are various "connections" between the different elements of the amended tuna measure that are relevant to the regulatory distinctions examined by the Panel. We observe, for instance, that the original panel and the Appellate Body found that the objectives of the US dolphin-safe labelling regime are, first, "ensuring that consumers are not misled or deceived about whether tuna products contain tuna that was caught in a manner that adversely affects dolphins", and, second, "contributing to the protection of dolphins, by ensuring that the US market is not used to encourage fishing fleets to catch tuna in a manner that adversely affects dolphins".^[223] These are also the objectives of the amended tuna measure.^[224] Thus, like the original measure, the amended tuna measure establishes a labelling regime consisting of various elements that are aimed at fulfilling the same objectives.

7.17.  In addition to sharing a common purpose, the elements of the amended tuna measure are also highly interconnected. For instance, the two substantive conditions for access to the dolphin‑safe label – namely, the conditions of "no setting on dolphins" and "no dolphins killed or seriously injured" – are both defined by, and verified through, the associated certification and tracking and verification requirements. For all covered fisheries, compliance with these conditions is demonstrated through the provision of certain certifications.^[225] The measure also establishes a programme for the tracking of tuna that is based on the substantive conditions and that depends, inter alia, on the certifications that must accompany tuna products derived from tuna meeting these conditions throughout the catch and subsequent processing of such tuna.^[226] In our view, these various provisions underscore the interrelated nature of the different elements of the amended tuna measure examined by the Panel. As the original panel and the Appellate Body noted, the existence of the substantive conditions of "no setting on dolphins" and "no dolphins killed or seriously injured" would be meaningless in the absence of requirements that enforce compliance with such standards.^[227] Under these circumstances, we do not consider that the substantive conditions for gaining access to the dolphin-safe label can be properly understood without reference to the certification and tracking and verification requirements that define, and demonstrate compliance with, those very conditions.

7.18.  At several points in its analysis, the Panel acknowledged the interrelationships between the various elements of the amended tuna measure. As we have noted, in discussing its jurisdiction under Article 21.5, the Panel confirmed that it would examine the amended tuna measure as a whole, including its varying regulatory requirements.^[228] In addition, after noting that the Appellate Body's findings encompassed various distinctions embedded in the original tuna measure, including the certification and tracking and verification requirements, the Panel stated that the US dolphin-safe labelling regime "necessarily includes" not only the certification requirements, but also the various documentation requirements constituting "the mechanisms by which compliance with that standard is monitored and demonstrated".^[229] The Panel subsequently underscored not only that the amended tuna measure, and in particular the 2013 Final Rule, "relates directly to the substantive declarations or certifications that must be made before a catch of tuna can be labelled as being dolphin‑safe", but that, in addition, the tracking and verification mechanisms "are central aspects of the tuna measure, working together with the substantive certification requirements".^[230] On that basis, the Panel disagreed with the United States that the tracking and verification requirements are "separable" from the certification rules set out in the 2013 Final Rule.^[231]

7.19.  In the light of this understanding by the Panel of the manner in which the various elements of the amended tuna measure interrelate, it is not clear to us why the Panel considered it appropriate to conduct its subsequent analysis in a segmented manner that addressed particular elements of the measure in isolation from other related elements. For instance, in its consideration of the "eligibility criteria", the Panel adopted a particularly limited focus by examining only the substantive condition that tuna products not be derived from tuna caught on a trip involving setting on dolphins. As we have noted, however, tuna products that meet this condition are eligible for the dolphin-safe label only if they also meet another substantive condition, namely, that no dolphins were killed or seriously injured in the sets in which the tuna were caught. By focusing only on the criteria related to the "no setting on dolphins" condition, the Panel's analysis excluded consideration of whether the products concerned also meet the "no dolphins killed or seriously injured" condition. Similarly, in its analysis of the "certification requirements" and "tracking and verification requirements", the Panel considered that such requirements "are relevant only to tuna eligible and intended to receive the dolphin-safe label" – that is, only to "tuna [not] caught by setting on dolphins".^[232] In so proceeding, the Panel did not assess how the certification and tracking and verification requirements, which the Panel itself considered to be an integral part of the overall measure, interrelate with each other and with the substantive conditions for access to the dolphin‑safe label. The Panel's approach is even more surprising given its earlier conclusion that the tracking and verification requirements are not "separable" from the certification requirements set out in the 2013 Final Rule. Although the Panel stated that it would "indicate the connections between these distinctions where relevant"^[233], we do not see that the Panel, in its analysis of whether the amended tuna measure brought the United States into conformity with provisions of the TBT Agreement and the GATT 1994, explained the "connections" between the different elements of the measure giving rise to the distinctions examined by the Panel.

7.20.  We further recall that the original tuna measure, like the amended tuna measure, contained provisions relating to qualifying fishing methods, certification, and tracking and verification. While the amended tuna measure has introduced certain changes, as explained in our description of the measure at issue, these have not altered the overall architecture of the US dolphin-safe labelling regime by somehow undermining the existence of interrelationships among its constituent elements. If anything, the changes reflected in the amended tuna measure serve to reinforce the nature of those interrelationships. The Panel, however, did not adopt an analytical approach to the measure similar to the one used by the panel and the Appellate Body in the original proceedings. In these circumstances, and given the Panel's statements regarding the need to examine the amended tuna measure as a whole and in an integrated manner, we would have expected some discussion by the Panel, during the course, or at the conclusion, of its segmented analysis, as to how the various findings related to one another, and on what basis the Panel proceeded to make discrete findings of consistency and inconsistency notwithstanding the interrelationships among the various elements of the measure.

7.21.  In sum, although the Panel had, in discussing its jurisdiction under Article 21.5 of the DSU, emphasized the interlinkages between elements of the amended tuna measure, it subsequently conducted a segmented analysis that isolated consideration of each element of the measure without accounting for the manner in which the elements are interrelated, and without aggregating or synthesizing its analyses or findings relating to those elements before reaching its ultimate conclusions as to the consistency or inconsistency of the amended tuna measure. We recognize that a proper appreciation of the extent to which the interrelationships are relevant, and the extent to which a segmented analysis had a bearing on the outcome of the legal analysis, will be a function of the particular legal obligation under examination – in this case, those set out in Article 2.1 of the TBT Agreement and Articles I:1, III:4, and XX of the GATT 1994. At this stage of our Report, however, we see no merit in analysing the consequences of the Panel's segmented approach in the abstract. Rather, we will assess whether the Panel's approach amounted to, or led it to commit, legal error when we examine the specific claims on appeal that the participants have directed at the Panel's analysis and findings.

7.2  Article 2.1 of the TBT Agreement

7.22.  The United States and Mexico each appeals certain aspects of the Panel's reasoning and findings under Article 2.1 of the TBT Agreement. Mexico requests us to reverse the Panel's finding that the eligibility criteria in the amended tuna measure are consistent with Article 2.1 of the TBT Agreement^[234], whereas the United States seeks reversal of the Panel's findings that the different certification requirements and the different tracking and verification requirements in the amended tuna measure are inconsistent with Article 2.1 of the TBT Agreement.^[235]

7.23.  Our analysis is divided into three parts. First, we begin by recalling relevant jurisprudence on the legal standard to be applied under Article 2.1 of the TBT Agreement. Second, we consider the issues raised by the United States on appeal with regard to the Panel's application of Article 2.1 to the measure at issue, and in particular its analysis of whether the amended tuna measure, and the discrete sets of requirements set out therein, adversely modify the conditions of competition for Mexican tuna products in the US market. Third, we consider the respective claims of error raised by the United States and Mexico in connection with the Panel's analysis of whether the detrimental impact that it found the measure at issue to have on Mexican tuna products in the United States' market stems exclusively from a legitimate regulatory distinction. In this third part of our analysis, we begin by assessing the United States' claim that the Panel erred in its articulation of the legal standard under the second step of the "treatment no less favourable" analysis under Article 2.1, before turning to consider the various issues raised by the participants in connection with the Panel's application of the second step of the "treatment no less favourable" analysis under Article 2.1 to the amended tuna measure and to the discrete sets of requirements set out therein.

7.2.1  "Treatment no less favourable" under Article 2.1 of the TBT Agreement

7.24.  Article 2 of the TBT Agreement addresses the "Preparation, Adoption and Application of Technical Regulations by Central Government Bodies", and its first paragraph provides that, "[w]ith respect to their central government bodies":

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.

7.25.  Article 2.1 contains both a national treatment obligation and a most-favoured-nation treatment obligation. In order to establish a violation of either obligation, a complainant must demonstrate three elements: (i) that the measure at issue is a "technical regulation" within the meaning of Annex 1.1 to the TBT Agreement; (ii) that the relevant products are "like products"; and (iii) that the measure at issue accords less favourable treatment to the imported products than to the relevant group of like products.^[236] As the United States' appeal with respect to the Panel's interpretation of Article 2.1 concerns only the third of these elements, we limit our summary below to recalling key aspects of the "treatment no less favourable" requirement in Article 2.1, as explained by the Appellate Body in previous reports.

7.26.  In US – Clove Cigarettes, the Appellate Body identified a two-step analysis to be followed in examining whether the technical regulation at issue accords less favourable treatment to imported products under Article 2.1 of the TBT Agreement.^[237] The Appellate Body indicated that the first step of the analysis focuses on whether the technical regulation at issue modifies the conditions of competition to the detriment of such imported products vis-à-vis like products of domestic origin and/or like products originating in any other country.^[238] However, a finding that the measure at issue modifies the conditions of competition to the detriment of imported products is not sufficient to demonstrate less favourable treatment under Article 2.1.^[239] Rather, a second step of analysis is needed, namely, an assessment of whether the detrimental impact on imports stems exclusively from a legitimate regulatory distinction rather than reflecting discrimination against the group of imported products.^[240] Where the detrimental impact caused by a technical regulation stems exclusively from a legitimate regulatory distinction, such technical regulation is not according less favourable treatment to imported products within the meaning of Article 2.1 of the TBT Agreement.

7.27.  Regarding the first step in the analysis, the scope of the comparison to be undertaken in assessing whether there is less favourable treatment of imports depends on the products that a panel has found to be "like" for the purposes of Article 2.1.^[241] Once the like products have been properly identified, Article 2.1 requires a panel to compare, on the one hand, the treatment accorded under the measure at issue to the "group" of like products imported from the complaining Member with, on the other hand, that accorded to the "group" of like domestic products and/or the "group" of like products originating in any other country.^[242] In making this comparison, any adverse impact on competitive opportunities for imported products vis-à-vis like domestic products that is caused by a particular measure may potentially be relevant to a detrimental impact finding.^[243]

7.28.  That there is a difference in treatment between products of different country origins is neither necessary, nor sufficient to establish detrimental impact.^[244] By the same token, the application of formally identical legal provisions to imported and like products of different origins may nevertheless entail a detrimental impact on the competitive conditions for the imported products.^[245] In examining whether a technical regulation has a de facto detrimental impact, a panel "must take into consideration 'the totality of facts and circumstances before it'"^[246] and assess any "implications" for competitive conditions "discernible from the design, structure, and expected operation of the measure".^[247] Such an examination must take account of all the relevant features of the market, which may include the particular characteristics of the industry at issue, the relative market shares in a given industry, consumer preferences, and historical trade patterns.^[248] That is, a panel must examine the operation of the particular technical regulation at issue in the particular market in which it is applied.^[249]

7.29.  Article 2.1 of the TBT Agreement, like Articles I:1 and III:4 of the GATT 1994, protects the equality of competitive opportunities between like products rather than any particular volume of trade.^[250] Therefore, a panel is not required under Article 2.1 to ground its legal conclusions on evidence of the actual trade effects of the technical regulation in the relevant market.^[251] Nor is a panel limited, in analysing detrimental impact, to an examination of the operation of the technical regulation at issue within the confines of scenarios that are representative of current patterns of trade.^[252] Rather, a party may make its case and a panel may reach conclusions concerning detrimental impact on the basis of evidence and arguments going to the "design, structure, and expected operation of the measure".^[253] At the same time, a finding of detrimental impact cannot rest on simple assertion^[254], and a panel should not "ascribe undue weight to the effect of a technical regulation in any hypothetical scenario".^[255]

7.30.  Turning to the second step of the "treatment no less favourable" analysis under Article 2.1 of the TBT Agreement, we note that the Appellate Body has emphasized that the specific context provided by other provisions of the TBT Agreement is instructive in understanding the expression "treatment no less favourable" under Article 2.1. The specific context provided by, in particular, Annex 1.1, Article 2.2, and the second, fifth, and sixth recitals of the preamble, "supports a reading that Article 2.1 does not operate to prohibit a priori any restriction on international trade".^[256] The sixth recital sheds light on the meaning and ambit of the "treatment no less favourable" requirement in Article 2.1 by making clear that technical regulations may pursue legitimate objectives but must not be applied in a manner that would constitute a means of arbitrary or unjustifiable discrimination.^[257] Article 2.1 should not be read to mean that any distinctions, in particular ones that are based exclusively on such particular product characteristics, or on particular processes and production methods, would per se constitute less favourable treatment within the meaning of Article 2.1.^[258] Rather, some distinctions that entail detrimental impact may not amount to less favourable treatment under Article 2.1. This would be the case, in particular, where the detrimental impact on imports stems exclusively from a legitimate regulatory distinction.

7.31.  In determining whether the detrimental impact on imports stems exclusively from a legitimate regulatory distinction, a panel must carefully scrutinize 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.^[259] The Appellate Body has pointed out that where a regulatory distinction is not designed and applied in an even‑handed manner – because, for example, it is designed or applied in a manner that constitutes a means of arbitrary or unjustifiable discrimination – that distinction cannot be considered "legitimate", and thus the detrimental impact will reflect discrimination prohibited under Article 2.1.^[260] Therefore, a measure that involves "arbitrary or unjustifiable discrimination" would not be designed and applied in an "even-handed manner". At the same time, the fact that a measure is designed in a manner that constitutes a means of arbitrary or unjustifiable discrimination is not the only way in which a measure may lack even-handedness, such that the detrimental impact cannot be said to stem exclusively from legitimate regulatory distinctions.

7.32.  With respect to the burden of showing that a technical regulation is inconsistent with Article 2.1 of the TBT Agreement, as we have already explained, a finding that a technical regulation modifies the conditions of competition to the detriment of imported products is not sufficient to demonstrate less favourable treatment under Article 2.1^[261] because a regulation that has a de facto detrimental impact on imports will not be inconsistent with Article 2.1 when such impact stems exclusively from a legitimate regulatory distinction.^[262] With respect to the burden of demonstrating these elements of Article 2.1, in the original proceedings, the Appellate Body noted that it is well established that the burden of proof rests upon the party, whether complaining or defending, who asserts the affirmative of a particular claim or defence.^[263] Where the complaining party has met the burden of making its prima facie case, it is then for the responding party to rebut that showing.^[264] Under Article 2.1, this means that a complainant must show that, under the technical regulation at issue, the treatment accorded to imported products is less favourable than that accorded to like domestic products or like products originating in any other country. Provided that it has shown detrimental impact, a complainant may, therefore, make a prima facie showing of less favourable treatment by, for example, adducing evidence and arguments showing that the measure is not even-handed, which would suggest that the measure is inconsistent with Article 2.1.^[265] If, however, the respondent shows that the detrimental impact on imported products stems exclusively from a legitimate regulatory distinction, it follows that the challenged measure is not inconsistent with Article 2.1.^[266]

7.33.  Of course, there is no set formula as to how a complainant must make out its case. Rather, the nature and scope of arguments and evidence required to establish a prima facie case will necessarily vary according to the facts of the case^[267] and from measure to measure, provision to provision, and case to case.^[268] Moreover, these rules and principles of WTO jurisprudence must not be applied in an unduly formalistic or mechanistic fashion^[269], nor inhibit the substantive analysis that must be undertaken by a panel. In seeking to make out a claim of de facto discrimination under Article 2.1, a complainant may elect to rely on some or all of the same regulatory distinctions and evidence as to how they are designed and operate in the relevant market both to establish de facto detrimental impact and to show that the regulatory distinctions drawn under the technical regulation involve a lack of even-handedness. While the complaining party bears the burden of making its prima facie case, the responding party must prove the case it seeks to make in response^[270], and each party bears the burden of substantiating the assertions that it makes.^[271] In our view, having promulgated the technical regulation containing the regulatory distinctions that result in the detrimental impact, the responding Member will be best situated to adduce the arguments and evidence needed to explain why, contrary to the complainant's assertions, the technical regulation is even-handed and thus why the detrimental impact on imports stems exclusively from a legitimate regulatory distinction. Thus, the Appellate Body noted in the original proceedings that, although the burden of proof to show that the US dolphin-safe labelling provisions were inconsistent with Article 2.1 was on Mexico as the complainant, it was for the United States to support its assertion that its regime was "calibrated" to the risks to dolphins arising from different fishing methods in different areas of the oceans.^[272]

7.34.  We are not certain that, in its discussion of the burden of proof under Article 2.1, the Panel fully recognized the responsibilities of both parties in this regard. To us, the Panel's reasoning seems to cast the burden of proof as an entirely binary issue. For example, the Panel stated that, on one possible understanding of the burden of proof, "it is Mexico that bears the burden of showing prima facie both that the amended tuna measure modifies the conditions of competition in the United States' market to the detriment of Mexican tuna and tuna products and that such detrimental treatment reflects discrimination because it does not stem exclusively from a legitimate regulatory distinction and is not even‑handed".^[273] Alternatively, the Panel explained, the burden of proof might be allocated such that, if Mexico established detrimental impact, "the Panel would need to determine whether the United States has made a prima facie case that this detrimental treatment nevertheless stems exclusively from a legitimate regulatory distinction."^[274] These statements are not in consonance with the Appellate Body's discussion of the burden of proof in the original proceedings and seem to reflect a mechanistic articulation of the function of the burden of proof^[275], as well as an improper conflation of the burden and the standard of proof.^[276]

7.35.  Moreover, we have reservations about the reason given by the Panel for choosing the approach that it did, namely, that "in the present proceedings both parties agree" on the allocation of the burden of proof.^[277] In the analysis leading up to its decision to adopt this approach, the Panel expressed its "uncertainty"^[278] about what the Appellate Body had previously found with respect to the burden of proving less favourable treatment under Article 2.1. The Panel went on to set out in some detail the views of the parties and the third parties with respect to the allocation of the burden of proof, stating that it was "mindful that there may be systemic reasons for favouring"^[279] an approach different from the one agreed upon by the parties, and then decided nevertheless to adopt the parties' agreed approach to allocating the burden of proof.^[280] To us, an approach whereby a panel allocates the burden of proof under a provision of the covered agreements solely on the basis of the parties' agreement would not be consistent with its duty to interpret and apply such provision. We recognize that, in this context, the Panel stated that it was aware that it was not "bound by the legal interpretations offered by the parties or the third‑parties".^[281] Yet, it does appear to have been the parties' joint endorsement that ultimately induced the Panel to adopt the approach that it did. In any event, neither participant has challenged on appeal the Panel's approach to the burden of proof, and we will proceed on the basis of the Appellate Body's articulation of the applicable burden of proof as outlined in paragraphs 7.32 and 7.33 above.

7.2.2  Less favourable treatment – Detrimental impact

7.36.  We now turn to the issue of whether the Panel erred in its analysis of whether the amended tuna measure modifies the conditions of competition to the detriment of Mexican tuna products in the US market.

7.37.  The United States requests us to reverse the Panel's findings of detrimental impact with respect to the certification and tracking and verification requirements.^[282] First, the United States claims that, by grounding its findings on the difference in costs and burdens imposed on tuna products originating inside and outside the ETP large purse-seine fishery, the Panel improperly made the case for Mexico, given that Mexico had not presented arguments and evidence concerning such costs and burdens in its written submissions.^[283] Second, according to the United States, the Panel erred in finding that the certification and tracking and verification requirements impose different costs and burdens on tuna products derived from tuna caught inside the ETP large purse-seine fishery as compared to tuna products derived from tuna caught in other fisheries. Even assuming that any such differences exist, the United States claims that the Panel failed to explain how such different costs and burdens modify the conditions of competition to the detriment of Mexican tuna products in the light of the relevant features of the US market.^[284] Rather, the Panel erred by reaching conclusions on detrimental impact "without making any factual findings" other than to establish the existence of different certification and tracking and verification requirements.^[285] Third, the United States submits that the Panel did not properly establish a genuine relationship between the certification and tracking and verification requirements under the amended tuna measure, on the one hand, and any detrimental impact on the competitive opportunities for Mexican tuna products, on the other hand. In its view, no such relationship exists. The amended tuna measure does not subject Mexican tuna products to its certification and tracking and verification requirements because those products are derived from tuna caught by setting on dolphins and are therefore disqualified from access to the dolphin-safe label from the outset. Further, the United States argues, since the certification and tracking and verification requirements for tuna products derived from tuna caught in the ETP large purse-seine fishery are mandated by the AIDCP, any detrimental impact on Mexican tuna products is not attributable to the amended tuna measure, but rather to Mexico's international obligations.^[286]

7.38.  Mexico, for its part, maintains that the question of whether the amended tuna measure modifies the conditions of competition to the detriment of its tuna products in the US market was settled by the panel and the Appellate Body in the original proceedings. In particular, Mexico recalls the Appellate Body's finding that the detrimental impact of the original tuna measure on Mexican tuna products was caused by the fact that most such products "contain tuna caught by setting on dolphins in the ETP and are therefore not eligible for a 'dolphin-safe' label", whereas "most tuna products from the United States and other countries that are sold in the US market contain tuna caught by other fishing methods outside the ETP and are therefore eligible for a 'dolphin‑safe' label."^[287] The amended tuna measure "does not change those aspects of the design and structure of the original tuna measure" that were found to cause detrimental impact.^[288] In other words, the amended tuna measure continues to permit all US tuna products and most tuna products from other countries to have access to the dolphin-safe label, while it denies access to this label for most Mexican tuna products.^[289] Therefore, in Mexico's view, the Appellate Body's findings, which have not been challenged by the parties in the current proceedings, "definitively establish" that the US dolphin-safe labelling regime modifies the competitive conditions in the US market to the detriment of Mexican tuna products. At the oral hearing, Mexico clarified that this argument relates to its claim on appeal, discussed in section 7.1 above, that the Panel erred in analysing the three sets of requirements under the amended tuna measure – the "eligibility criteria", the "certification requirements", and the "tracking and verification requirements" – separately, as opposed to focusing on the WTO-consistency of the measure as a whole.^[290] According to Mexico, these three sets of requirements "operate together" to modify the competitive conditions in the US market to the detriment of Mexican tuna products.^[291] Because the amended measure as a whole continues to have a detrimental impact on Mexican tuna products in the US market, Mexico argues that it neither sought to, nor needed to, establish "independent and complete prima facie cases" of detrimental impact "for each of the three [sets of] labelling conditions and requirements".^[292]

7.39.  As a third participant, the European Union echoes Mexico's view and contends that a detrimental impact assessment must focus on what is caused by the measure at issue as a whole – that is, the entire "set of relevant regulatory distinctions".^[293] According to the European Union, the main aspects that led the original panel and the Appellate Body to find that the US dolphin‑safe labelling regime has a detrimental impact on Mexican tuna products "remain unchanged".^[294] In the European Union's view, the Panel should have taken into account the relevant findings from the original proceedings, and should have refrained from undertaking an analysis of whether the certification and tracking and verification requirements, "considered in isolation", have a detrimental impact.^[295] The "increased" certification and tracking and verification requirements bear only on the question of whether the amended tuna measure is even‑handed.^[296] In the light of the above, the European Union suggests that we declare the Panel's findings regarding the detrimental impact of the certification and tracking and verification requirements moot and of no legal effect.^[297]

7.40.  In addressing the issues raised by the participants on appeal, we begin by providing an overview of the panel and Appellate Body findings in the original proceedings concerning the detrimental impact of the original tuna measure, as well as the Panel's findings in these compliance proceedings concerning the detrimental impact of the amended tuna measure. We then examine whether the Panel erred in its analysis of whether the various elements constituting the amended tuna measure modify the conditions of competition to the detriment of Mexican tuna products in the US market within the meaning of Article 2.1.

7.2.2.1  The findings of detrimental impact in the original proceedings

7.41.  Before the original panel, Mexico claimed that the original tuna measure modified the conditions of competition in the US market to the detriment of its tuna products because: (i) Mexican tuna products are derived almost exclusively from tuna caught in the ETP by setting on dolphins, and cannot therefore access the dolphin-safe label; (ii) US tuna products are derived from tuna caught outside the ETP using other fishing methods, and are thus eligible for access to the label; (iii) most consumers and retailers are sensitive to issues related to dolphin mortality and will not purchase tuna products that are not designated as "dolphin safe"; and (iv) most US canneries will not accept non-dolphin-safe tuna for processing.^[298]

7.42.  The original panel agreed with Mexico that the dolphin-safe label has "significant commercial value on the US market for tuna products", and that therefore access to such label constitutes an "advantage" on that market.^[299] The original panel then considered whether the regulatory distinction drawn by the original tuna measure – whereby tuna products containing tuna caught by setting on dolphins could not access the dolphin-safe label, whereas tuna products containing tuna caught by other fishing methods were eligible for such label – modified the conditions of competition to the detriment of Mexican tuna products vis‑à‑vis like products from the United States and other countries. In its view, this regulatory distinction did not, de jure, place Mexican tuna products "at a disadvantage as compared to US and other imported tuna products"^[300], because "any fleet operating anywhere in the world must comply with the requirement" not to set on dolphins.^[301]

7.43.  Turning to examine whether the original measure nonetheless had a de facto detrimental impact in the light of the fishing practices of the Mexican and other fishing fleets, the original panel noted that, since 1990, when the first version of the DPCIA was adopted, US vessels had gradually discontinued setting on dolphins to catch tuna in the ETP, whereas the Mexican fleet had not abandoned the use of such fishing technique.^[302] Thus, the original panel considered that any difference in the relative competitive situations of Mexican and other tuna products was not attributable to the original measure, but was rather the result of the choices of private actors^[303], including "Mexico's own fishing fleet and canners".^[304] It further held that, for similar reasons, "[t]he existence of additional costs for some operators as a result of factors such as existing practices also does not necessarily … imply" a detrimental impact on the competitive conditions of such operators' products.^[305] In the light of the above, the original panel was not persuaded that the original tuna measure modified the conditions of competition to the detriment of Mexican tuna products as compared to like products originating in the United States or in any other country.^[306]

7.44.  The Appellate Body noted that the panel had made the following factual findings: (i) "the Mexican tuna cannery industry is vertically integrated, and the major Mexican tuna products producers and canneries own their vessels, which operate in the ETP"; (ii) "at least two thirds of Mexico's purse seine tuna fleet fishes in the ETP by setting on dolphins" and is "therefore fishing for tuna that would not be eligible to be contained in a 'dolphin‑safe' tuna product under the US dolphin-safe labelling provisions"; (iii) "the US fleet currently does not practice setting on dolphins in the ETP"; and (iv) "as the practices of the US and Mexican tuna fleets currently stand, most tuna caught by Mexican vessels, being caught in the ETP by setting on dolphins, would not be eligible for inclusion in a dolphin-safe product under the US dolphin-safe labelling provisions", while "most tuna caught by US vessels is potentially eligible for the label".^[307]

7.45.  In the Appellate Body's view, such findings "clearly establish[ed]" that the lack of access to the dolphin-safe label of tuna products containing tuna caught by setting on dolphins had a detrimental impact on the competitive opportunities of Mexican tuna products in the US market.^[308] The Appellate Body stated that a detrimental impact determination does not hinge on whether imported products "could" somehow obtain market access "by complying with all applicable conditions", but rather on "whether the contested measure modifies the conditions of competition to the detriment of imported products".^[309] The Appellate Body disagreed with the Panel that the different competitive situations of Mexican and other tuna products were not attributable to the original tuna measure, but rather to the choices of private actors. For the Appellate Body, the relevant question for assessing whether a genuine relationship exists between a measure and an adverse impact on competitive opportunities for imported products is whether "governmental action 'affects the conditions under which like goods, domestic and imported, compete in the market within a Member's territory'."^[310] The Appellate Body took the view that it was the "governmental action" in the form of adoption and application of the original tuna measure that had modified the conditions of competition in the market to the detriment of Mexican tuna products, and thus that the detrimental impact flowed from the original measure.^[311] In its opinion, "[t]he fact that the detrimental impact on Mexican tuna products may involve some element of private choice [did] not … relieve the United States of responsibility under the TBT Agreement."^[312]

7.46.  Based on the foregoing, the Appellate Body concluded that the original tuna measure did, indeed, modify the conditions of competition in the US market to the detriment of Mexican tuna products.^[313] Later in its report, the Appellate Body summarized its conclusions on detrimental impact in the following terms:

[T]he detrimental impact of the measure on Mexican tuna products is caused by the fact that most Mexican tuna products contain tuna caught by setting on dolphins in the ETP and are therefore not eligible for a "dolphin-safe" label, whereas most tuna products from the United States and other countries that are sold in the US market contain tuna caught by other fishing methods outside the ETP and are therefore eligible for a "dolphin-safe" label. The aspect of the measure that causes the detrimental impact on Mexican tuna products is thus the difference in labelling conditions for tuna products containing tuna caught by setting on dolphins in the ETP, on the one hand, and for tuna products containing tuna caught by other fishing methods outside the ETP, on the other hand.^[314]

7.2.2.2  The Panel's findings

7.47.  Before the Article 21.5 Panel, both Mexico and the United States indicated that the detrimental impact of the amended tuna measure is the same as that of the original measure. Mexico's principal argument with respect to detrimental impact was that "[t]he key elements of the design and structure of the measure that operated together to deny competitive opportunities … have not been changed."^[315] In particular, the detrimental impact found by the panel and the Appellate Body in the original proceedings – namely, the disqualification of most Mexican tuna products from access to the dolphin‑safe label, as opposed to the eligibility of most like products originating in the United States and in other countries for such label – continues to exist.^[316] The United States, for its part, did not contest the Appellate Body's conclusions on detrimental impact in the original proceedings^[317], which, in its view, focused on access to the dolphin-safe label in the light of "the fishing practices of the US and Mexican fleets".^[318] According to the United States, the exclusion of tuna products derived from tuna caught by setting on dolphins "is the detrimental impact".^[319] In the United States' opinion, the certification and tracking and verification requirements were "not relevant" to the Panel's detrimental impact analysis^[320], because Mexican tuna products containing tuna caught by setting on dolphins would still be ineligible for the dolphin-safe label even if those requirements did not exist.^[321]

7.48.  The Panel took the view that Mexico's arguments concerning the detrimental impact of the amended tuna measure had "developed" over the course of the proceedings.^[322] At first, Mexico had focused on the fact that the amended measure denies access to the dolphin‑safe label to most Mexican tuna products, whereas all US tuna products and most like products from other countries have access to the label.^[323] Subsequently, Mexico explained that it is "the absence of sufficient fishing method qualification, record keeping, verification and observer requirements" outside the ETP large purse-seine fishery that causes Mexican tuna products to "los[e] competitive opportunities to tuna products that may be inaccurately labelled as dolphin-safe".^[324] For the Panel, Mexico's later arguments "constitute[d] a clear and cognizable claim of detrimental impact" that was "distinct" and "separate" from the type of detrimental impact that Mexico identified as resulting from the eligibility criteria.^[325] While the eligibility criteria are "responsible for the fact that most Mexican tuna products are ineligible to receive the label", the certification and tracking and verification requirements provide a "competitive advantage" to non-Mexican tuna products.^[326]

7.49.  Accordingly, as discussed in section 7.1 above, the Panel segmented its assessment of the consistency of the amended tuna measure with Article 2.1 into three separate analyses, one for each of the three sets of requirements constituting the measure – the "eligibility criteria", the "different certification requirements", and the "different tracking and verification requirements".^[327]

7.50.  The Panel began by assessing the consistency with Article 2.1 of the "eligibility criteria" – i.e. the regulatory distinction between tuna products derived from tuna caught by setting on dolphins and tuna products derived from tuna caught by other fishing methods.^[328] It observed that these criteria lay "at the very heart of the original proceedings".^[329] For this first set of requirements, the Panel did not conduct a two-step analysis of: (i) whether the eligibility criteria have a detrimental impact on the competitive conditions for Mexican tuna products in the US market; and, if so, (ii) whether such detrimental impact stems exclusively from a legitimate regulatory distinction. Rather, it took the view that, as an Article 21.5 panel, it ought to "rely upon factual and legal conclusions made by the original panel and the Appellate Body, at least in the absence of compelling new evidence that would render those previous findings unsustainable."^[330] The Panel understood the Appellate Body in the original proceedings to have "clearly found" that the United States is entitled to treat setting on dolphins differently from other fishing methods^[331] and that, therefore, the disqualification from the dolphin-safe label of tuna caught by setting on dolphins, coupled with the qualification for the label of tuna caught by other fishing methods, is not inconsistent with Article 2.1.^[332] The Panel did not consider it appropriate to "re-open this inquiry" and, instead, stated that it would "respect and reaffirm" the Appellate Body's finding that, "to the extent that they modify the conditions of competition in the US market to the detriment of Mexican … tuna products, the eligibility criteria are even‑handed, and, accordingly, are not inconsistent with Article 2.1 of the TBT Agreement."^[333]

7.51.  The Panel then moved on to assess, in turn, the consistency with Article 2.1 of the "different certification requirements"^[334] and the "different tracking and verification requirements".^[335] For each of these sets of requirements, the Panel did conduct a two-step analysis aimed at establishing: (i) whether the set of requirements in question has a detrimental impact on the competitive conditions of Mexican tuna products in the US market; and, if so, (ii) whether such detrimental impact stems exclusively from a legitimate regulatory distinction.

7.52.  In examining whether the different "certification requirements" – i.e. the requirement that certifications be made by both captains and observers in the ETP large purse-seine fishery, as opposed to the requirement of captain certification only for "all other fisheries" – give rise to detrimental impact on Mexican tuna products in the US market, the Panel grounded its reasoning on the costs of implementing observer coverage. It noted the United States' recognition that "observer coverage involves the expenditure of significant resources"^[336], as well as the parties' acknowledgement that "the costs of implementing observer coverage can be significant."^[337] In the light of the above, the Panel found that, by not requiring independent observer coverage in fisheries other than the ETP large purse-seine fishery, the certification requirements "impose a lesser burden" on tuna products derived from tuna caught in those other fisheries.^[338] Having so found, the Panel considered it unnecessary to also "make a definitive finding"^[339] on Mexico's allegation that the certification requirements "make it more likely that tuna caught outside the ETP large purse seine fishery will be inaccurately labelled".^[340] Albeit seeing "some merit" in Mexico's allegation, the Panel opined that "a definitive finding on this point would require a complex and detailed analysis of all of the various factors that may lead to tuna being inaccurately labelled."^[341]

7.53.  Based on the foregoing, the Panel concluded that the certification requirements modify the conditions of competition to the detriment of Mexican tuna products in the US market.^[342]

7.54.  Subsequently, the Panel addressed the alleged detrimental impact of the "tracking and verification requirements" under the amended tuna measure – i.e. the different "record-keeping and verification requirements" for tuna products containing tuna caught in the ETP large purse‑seine fishery and for tuna products containing tuna caught in other fisheries.^[343] The Panel found that the tracking and verification requirements for tuna products originating in the ETP large purse-seine fishery, which are largely mandated by the AIDCP, bring with them "strict obligations"^[344] aimed at ensuring the segregation of tuna caught without killing or seriously injuring dolphins from tuna caught in sets involving dolphin mortality or serious injury throughout the whole production process – including storage on board fishing vessels, unloading at port, brokering through intermediaries, trans‑shipment, partial processing into loins, and canning.^[345] With respect to tuna products derived from tuna caught outside the ETP large purse-seine fishery, the Panel took note of the United States' explanations as to how the amended tuna measure provides for verification that there has been segregation between dolphin-safe and non‑dolphin‑safe tuna. The Panel found that the United States ensures that tuna has been properly tracked and verified primarily through cannery audits – including spot checks – aimed at acquiring "the documents that track particular lots received by the canneries from the vessel trip on which the tuna was caught."^[346] Canneries are also required to submit monthly reports containing information about the tuna received and processed, including dolphin-safe status, weight, ocean of capture, gear type used, type of catcher vessel, trip dates, carrier name, unloading dates, place of unloading, and, if the tuna products are to be labelled as dolphin safe, the required certifications.^[347] Other forms of control on the part of US authorities include retail spot checks – which work "in essentially the same way as cannery audits"^[348] – and inspections on the high seas, in US waters, or at US ports.^[349]

7.55.  The Panel held that the tracking and verification requirements applied inside and outside the ETP large purse-seine fishery, respectively, present "crucial differences" in terms of "depth, accuracy, and degree of government oversight".^[350] In terms of depth, the Panel found that the system applied to the ETP large purse-seine fishery allows the trace-back of tuna "all the way to the particular set in which the tuna was caught and the particular well in which it was stored".^[351] Conversely, the system applied to other fisheries allows the trace-back of tuna only "to the vessel and trip on which it was caught".^[352] As for accuracy, the Panel found that, in respect of the ETP large purse-seine fishery, the TTFs and the relevant certifications accompany particular batches of tuna "throughout the fishing and production process, from the point of catch right through to the point of retail".^[353] In contrast, for tuna harvested in other fisheries, the United States had not shown how the relevant certifications are kept with particular batches of tuna up until the tuna reaches the cannery.^[354] Finally, as regards government oversight, the Panel took the view that, in respect of the ETP large purse-seine fishery, information concerning every stage of tuna harvest and processing is made available to the competent authorities by sending them copies of the TTFs and notifying them whenever ownership of tuna changes.^[355] Conversely, for tuna harvested in other fisheries, the competent authorities receive information on the origin and history of the tuna only from the canneries themselves – through the mandatory monthly reports or audits and spot checks – and are thus not able to go "behind the documents" and appraise the veracity of such information.^[356]

7.56.  In the light of the above, the Panel concluded that the tracking and verification system applied to tuna caught in fisheries other than the ETP large purse-seine fishery presents some "major gaps in coverage"^[357], which "strongly suggest[]" that the system in question is "significantly less burdensome" than the system in place for tuna caught inside the ETP large purse‑seine fishery.^[358] Having made such a finding, the Panel did not consider it necessary to further examine Mexico's allegation that the differences in the two sets of tracking and verification requirements make it more likely that tuna products derived from tuna caught outside the ETP large purse-seine fishery will be incorrectly labelled. While the Panel did see "some merit" in Mexico's allegation, it took the view that a definitive finding on this point would require "a detailed technical analysis of the system's effective operation".^[359]

7.57.  Based on the foregoing, the Panel found that the tracking and verification requirements modify the conditions of competition in the US market to the detriment of Mexican tuna products.^[360]

7.58.  In each of its two analyses of detrimental impact, the Panel addressed the United States' argument that any detrimental impact suffered by Mexican tuna products because of the certification and tracking and verification requirements applied to tuna products derived from tuna caught in the ETP large purse-seine fishery "stems from the AIDCP regime" rather than from the amended tuna measure, with the consequence that there is no "genuine relationship" between the measure and any detrimental impact on competitive opportunities for Mexican tuna products.^[361] The Panel found that, while the AIDCP imposes certain certification and tracking and verification requirements on the ETP large purse-seine fishery, "it has nothing to say" about analogous requirements applicable to other fisheries.^[362] The amended tuna measure, by contrast, imposes certain certification and tracking and verification requirements on the ETP large purse-seine fishery and different such requirements on other fisheries. Thus, the Panel reasoned that "[i]t is the amended tuna measure" that, within the same regulatory framework, "provides for two sets of rules for access to the dolphin-safe label – one set for tuna caught by large purse seine vessels in the ETP, and another set for all other tuna."^[363] In the Panel's view, the fact that one element of the regulatory distinction – i.e. the requirements applicable to the ETP large purse-seine fishery – is mandated by international obligations does not detract from a conclusion that the distinction as a whole is attributable to "the design and structure of the amended tuna measure itself".^[364]

7.2.2.3  Whether the Panel erred in its analysis of the detrimental impact of the amended tuna measure

7.59.  At the outset of our review of the Panel's detrimental impact analysis, we recall that, in examining whether a technical regulation entails de facto detrimental impact, a panel must take into consideration "the totality of facts and circumstances before it" and assess any implications for competitive conditions "discernible from the design, structure, and expected operation of the measure."^[365] Such examination must also "take account of all the relevant features of the market, which may include the particular characteristics of the industry at issue, the relative market shares in a given industry, consumer preferences, and historical trade patterns" – that is, "the operation of the particular technical regulation at issue in the particular market in which it is applied."^[366] Thus, a panel conducting a de facto detrimental impact analysis under Article 2.1 of the TBT Agreement ought to take into account both the design and structure of the measure at issue and the way in which the measure operates (or can be expected to operate) in the light of the relevant features of the market concerned.

7.60.  We further recall that, as was found in the original proceedings and as both parties have acknowledged in these compliance proceedings, access to the dolphin-safe label constitutes an "advantage" on the US market for tuna products by virtue of that label's "significant commercial value".^[367]

7.61.  In section 7.1 above, we expressed the view that it is only through the design and operation of all its labelling conditions combined that the amended tuna measure establishes access to the dolphin-safe label for tuna products sold in the US market. Indeed, different labelling conditions may affect access to the dolphin-safe label for groups of like tuna products in different ways. For instance, while the disqualification of tuna products derived from tuna caught by setting on dolphins means that most Mexican tuna products are not eligible for the dolphin-safe label^[368], other elements of the amended tuna measure – such as the new certification and tracking and verification requirements imposed outside the ETP large purse-seine fishery by virtue of the 2013 Final Rule – may also exclude some tuna products of US or other origin from access to the label. The various sets of requirements under the amended tuna measure may have varying degrees of significance for the question of whether Mexican tuna products are detrimentally affected, such that it may be appropriate to unbundle the different elements and examine them in a sequential manner. However, we do not consider that an examination of the detrimental impact of the amended tuna measure could be properly conducted without also taking account of the interrelationship among those elements and addressing the manner in which they operate together to modify the conditions of competition in the US market for tuna products.

7.62.  We do not see that the Panel considered such interrelationship in its examination. Instead, the Panel conducted a segmented analysis for each of the "eligibility criteria"^[369], the "different certification requirements"^[370], and the "different tracking and verification requirements".^[371] In setting out those separate analyses, the Panel took the view that the type of detrimental impact caused by the sets of certification and tracking and verification requirements is of a "distinct" and "separate" nature from the detrimental impact caused by the eligibility criteria.^[372] In particular, the Panel referred to Mexico's statement that the eligibility criteria "are responsible for the fact that most Mexican tuna products are ineligible to receive the label".^[373] Conversely, the Panel identified the nature of the detrimental impact flowing from the different certification requirements and from the different tracking and verification requirements as the "competitive advantage" that is accorded to tuna products derived from tuna caught outside the ETP large purse-seine fishery, in the form of the lesser costs and burdens that the amended tuna measure imposes on such tuna products, as compared to those that it imposes on tuna products derived from tuna caught within the ETP large purse-seine fishery.^[374] After having conducted these three segmented analyses, the Panel did not seek to synthesize them or to examine more holistically the implications that the combined operation of the different sets of requirements might have had for its analysis of the detrimental impact of the amended tuna measure on Mexican tuna products.

7.63.  In our view, the Panel's analytical approach overlooks that the detrimental impact resulting from the amended tuna measure cannot properly be examined through isolated analyses of the detrimental impact associated with discrete sets of requirements under that measure. Since all of the conditions for access to the dolphin-safe label may bear on such detrimental impact^[375], a proper assessment of the detrimental impact of the amended tuna measure on Mexican tuna products calls for an examination of the manner in which the different labelling conditions under the measure operate together in a way that affects the conditions of competition for Mexican tuna products in the US market.

7.64.   We further recall that, as pointed out in paragraph 5.9 above, "Article 21.5 proceedings do not occur in isolation from the original proceedings"; rather, "both proceedings form part of a continuum of events".^[376] A panel's examination of a measure taken to comply must take due account of the findings by the original panel and the Appellate Body adopted by the DSB.^[377] Thus, for example, in setting out the analytical scope of its detrimental impact analysis, the panel in
US – COOL (Article 21.5 – Canada and Mexico) stated that it would "follow the original panel's approach".^[378] On that basis, the compliance panel assessed whether the measure taken to comply with the recommendations and rulings of the DSB modified the detrimental impact that was found to exist in the original proceedings.^[379]