A World Trade Organization appeals organ on Wednesday ruled against U.S. labeling rules that keep tuna caught by Mexican fishing fleets from benefiting from "dolphin-safe" labels, finding that those restrictions impede Mexican producers' ability to compete on a level playing field.

Its ruling reversed key findings of a WTO panel that in a report issued last year had found that the dolphin-friendly label did not violate the principles of the WTO Agreement on Technical Barriers to Trade.

That panel had concluded that Mexican tuna did not receive - based on country of origin - less favorable treatment than tuna caught in U.S. waters or waters of other countries using methods that met high U.S. dolphin-safe standards.

But the WTO Appellate Body said in its report circulated Wednesday that "by excluding most Mexican tuna products from access to the dolphin-safe label while granting access to most U.S. tuna products and tuna products from other countries, the measure modifies the conditions of competition in the U.S. market to the detriment of Mexican tuna products," the WTO's Appellate Body said.

The case dates back to October 2008, when Mexico requested consultations with the United States over three laws in the neighboring country regarding protections for dolphins, product labeling and restrictions on tuna harvested by large purse-sein vessels, commonly used by Mexican fishermen.

Fishermen who employ that method set up a wall of netting around tuna - and dolphins, since they frequently swim together - and "purse" the bottom to catch them.

Mexico complained about the standards that must be met for the "dolphin-safe" label and which condition access to it on producers' showing that they did not "lay a trap" for dolphins - meaning they did not chase them or encircle them in large nets in their effort to catch the tuna.

Mexico argued these standards violate the principles of the General Agreement on Tariffs and Trade and the Agreement on Technical Barriers to Trade, although the panel that handled the case found them to be consistent with those principles.

But the Appellate Body, whose decisions are binding on the parties once adopted by the Dispute Settlement Body, ruled in favor of Mexico, saying it was not persuaded that "purse seining" was more harmful to dolphins than other methods of catching tuna.

The body found that Mexico had demonstrated that U.S. dolphin-safe labeling provisions were "more trade-restrictive than necessary to fulfill the legitimate objectives of ensuring that consumers are not misled or deceived about whether tuna products contain tuna that was caught in a manner that adversely affects dolphins and contributing to the protection of dolphins."