As expected, a WTO dispute settlement panel recently made public a final decision that finds that the U.S. mandatory country of origin labelling requirements for various agricultural products are inconsistent with U.S. multi-lateral obligations.
The 2008 Farm Bill revised previous mandatory COOL requirements to provide that in order for a commodity to be labelled as a product of the U.S. all production activities associated with the commodity have to occur on U.S. soil or in U.S. waters. For products produced in the integrated North American marketplace, the label must indicate every country in which a stage of production has taken place. The 2008 Farm Bill also imposed mandatory COOL requirements for muscle cuts of beef (including veal), lamb, chicken, goat and pork; ground beef, lamb, chicken, goat and pork; wild and farm-raised fish and shellfish; perishable agricultural commodities; macadamia nuts; pecans; ginseng; and peanuts. The COOL regulations require any person engaged in the business of supplying a covered commodity to a retailer to provide the retailer with the product's country of origin information. For fish and shellfish, the method of production (wild or farm-raised) must be specified as well. The rule also sets forth the requirements for consumer notification and product marking as well as the recordkeeping responsibilities of both retailers and suppliers.
Commodities are excluded from mandatory COOL if the commodity is an ingredient in a processed food item. Also excluded from COOL are items derived from a covered commodity that have undergone a physical or chemical change - such as cooking, curing or smoking - or that have been combined with other covered commodities or other substantive food components such as chocolate, breading or tomato sauce.
Canada and Mexico alleged that these provisions appear to be inconsistent with the General Agreement on Tariffs and Trade 1994 as well as certain provisions of the WTO agreements on Technical Barriers to Trade, the Application of Sanitary and Phytosanitary Measures, and Rules of Origin. Among other things, the panel found that the COOL requirements violate (i) Article 2.1 of the TBT Agreement (particularly in regard to the muscle cut meat labels) because they afford imported livestock treatment less favourable than that accorded to like domestic livestock, and (ii) Article 2.2 of the TBT Agreement because they do not fulfil the objective of providing consumer information on origin with respect to meat products. In addition, the panel found that a 20 February 2009 letter by Agriculture Secretary Tom Vilsack to industry representatives violates Article X:3(a) of the General Agreement on Tariffs and Trade 1994 because it does not constitute a reasonable administration of the COOL measure.
Canadian Minister of International Trade Ed Fast indicated that the panel decision "recognizes the integrated nature of the North American supply chain" in a "vitally important industry." Fast believes that the elimination of the COOL requirements will "improve competitiveness, boost growth and help strengthen the prosperity of Canadian and American producers alike." By contrast, the USTR argued that even though the panel disagreed with the way the U.S. designed the COOL requirements it affirmed the U.S. right to require country of origin labelling for meat products. The USTR expressed its commitment to provide consumers "accurate and relevant information with respect to the origin of meat products that they buy at the retail level" and said that it is considering all options, including filing an appeal with the WTO Appellate Body.
