The Future of “Country of Origin” Labeling Regulations

By Ching-Fu Lin

The U.S. Court of Appeals for the District Columbia Circuit recently ruled against the meat industry’s challenge to stop the United States Department of Agriculture’s (USDA) implementation of the amended Country of Origin Labeling (COOL) rules.  The current COOL regulations (amended in May 2013) require retailers to identify several types of information on beef, pork, and poultry products that were previously not required.  It now requires labeling of the country where the animals were born, raised, and slaughtered along with the prohibition of the commingling of meat muscle cuts from different origins.

The old and less stringent version of the COOL regulations was published in 2009 by the USDA’s Agricultural Marketing Service (AMS) based on the 2008 Farm Bill (Food, Conservation, and Energy Act of 2008) amending the Agricultural Marketing Act of 1946.  In the same year, Canada and Mexico brought a case in front of the World Trade Organization (WTO) Dispute Settlement Body (DSB), arguing that the old COOL requirements violated relevant WTO rules.  The WTO DSB found that the old COOL requirements were inconsistent with the US’s obligations under Article 2.1 (national treatment principle) of the WTO Agreement on Technical Barriers to Trade (TBT Agreement) as well as Article X:3(a) (uniform, impartial, and reasonable administration) of the General Agreement on Tariffs and Trade (GATT 1994).

The Appellate Body upheld, albeit for modified reasons, the Panel’s finding that the COOL measure was inconsistent with Art. 2.1 because it accorded less favourable treatment to imported livestock than to like domestic livestock. The Appellate Body concluded that the least costly way of complying with the COOL measure was to rely exclusively on domestic livestock, creating an incentive for US producers to use exclusively domestic livestock and thus causing a detrimental impact on the competitive opportunities of imported livestock. The Appellate Body found further that the recordkeeping and verification requirements imposed a disproportionate burden on upstream producers and processors compared to origin information conveyed to consumers. This regulatory distinction drawn by the COOL measure was therefore not legitimate within the meaning of Art. 2.1.

The WTO Arbitrator determined a deadline – within what is considered a reasonable period of time according to WTO procedural rules – for the US to bring its measures into compliance.  The USDA consequently issued the current and amended final rules that, as claimed by the US, are consistent with the DSB recommendations and rulings.  However, Mexico disagreed that the new rules are WTO consistent, as they are even more restrictive than the old regulations.  The three countries are now back in the WTO compliance proceedings, and a decision is expected to be rendered this summer.

At the domestic level, the industry argues that the amended COOL regulations violate the First Amendment, the Agricultural Marketing Act, and the Administrative Procedures Act.  They also argue that the amended regulations do not resolve the WTO violations, but instead, exacerbate them.  But on March 28 this year, the DC Circuit denied a preliminary injunction against COOL enforcement and stated that the industry seemed “unlikely to succeed on the merits of its claims.”  Civil society members including the Food & Water Watch welcomed the ruling, saying that COOL helps consumers make informed decisions by knowing more about the quality and safety of the meat products.  But interim President of the American Meat Institute commented that “the rule will continue to harm livestock producers and the industry with little benefit to consumers.”

At the international level, however, COOL regulations may face a totally different ruling.  In this regard, Tom Vilsack, Secretary of Agriculture, stated last month that the USDA “will respond and react accordingly” when the WTO DSB reaches a decision.  As to the future of the COOL regulation, is a possible WTO decision that authorizes trade retaliation at the amount of $2 billion going to be a game changer in the cost-benefit calculation?

 

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