Trade Compliance

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WTO Rejects Final COOL Appeal, U.S. Urged to Repeal or Face Retaliation

Posted May 19, 2015


The World Trade Organization’s Appellate Body announced yesterday that it had rejected the final appeal by the United States of a previous ruling that sided with Canada and Mexico in their challenge of the U.S. Department of Agriculture’s mandatory country-of-origin labeling (COOL) regulations. The widely predicted decision represents the fourth time the WTO has ruled against the controversial labelling requirement that was first written into the 2002 Farm Bill and implemented after the 2008 Farm Bill, then later amended in 2013, purportedly to bring it into compliance with international trade requirements.

The latest U.S. appeal was made in reference to the WTO’s October 2014 ruling that the amended COOL regulations discriminate against Canadian cattle and pigs and Mexican cattle in violation of Article 2.1 of the international trade body’s Technical Barriers to Trade Agreement, thereby effectively providing U.S. livestock producers with an unfair commercial advantage.

The decision upholds prior conclusions by a WTO compliance panel that the USDA’s amended COOL measure actually amplified the discriminatory effect against Canadian and Mexican producers by increasing the record-keeping burden for imported livestock called for by the original COOL legislation, which itself had previously been ruled an unfair barrier to trade. The Appellate Body rejected U.S. arguments that the panel’s conclusions were based on “incorrect hypothetical” scenarios that were not based on actual, or the most common, trade situations.

The Appellate Body agreed with the panel that the recordkeeping and verification requirements of the amended COOL measure imposes a disproportionate burden on producers and processors of livestock that cannot be explained by the need to provide origin information to consumers, and that “the exemptions under the amended COOL measure support a conclusion that the detrimental impact of that measure on imported livestock does not stem exclusively from legitimate regulatory distinctions.” In this regard, the panel had noted that the vast majority of beef and pork muscle cuts consumed in the U.S. presently “convey no consumer information on origin despite imposing an upstream recordkeeping burden on producers and processors that has a detrimental impact on competitive opportunities for imported livestock.”

The WTO’s decision paves the way for Canada and Mexico to place retaliatory tariffs on a range of U.S. products at a level equivalent to the economic harm determined to have been incurred from the labelling requirements. The latest estimate of the damage done to the Canadian livestock industry by COOL is roughly $1.4 billion a year. Joint statements issued yesterday by Canadian and Mexican government ministers calling on the U.S. to repeal the COOL legislation indicated that both countries will be moving quickly to request authorization from the WTO for such action, something the trade organization could be expected to provide within the next few months.

While the Obama administration has for years vigorously defended the COOL legislation, both in federal courts and at the WTO in Geneva, Agriculture Secretary Tom Vilsack recently signaled that it may finally be resigned to defeat on the troublesome issue. Earlier this month, Vilsack told lawmakers that the USDA had done all it could to help resolve the trade dispute in terms of amending the labeling rules and that it would now be up to Congress to ensure that the U.S. avoided costly retaliation from Canada and Mexico.

Chairman of the House Agriculture Committee, Texas Republican Michael Conaway has called for full repeal of the COOL saying as retaliatory tariffs become a reality, “it is more important now than ever to act quickly to avoid a protracted trade war with our two largest partners.” To that end, Conaway released draft legislation today to repeal parts of the law requiring country-of-origin labeling for beef, pork and poultry. His counterpart though, ranking member Collin Peterson, a Democrat from Minnesota, has vowed to oppose efforts that would fully repeal COOL.

A similar divide along partisan lines also exists in the Senate, with Agriculture Committee Chairman Pat Roberts saying that he “will consider any option,” including repeal, to bring the U.S. into compliance and avoid retaliation. Opposing that view, ranking member Debbie Stabenow, a strong proponent of the labelling rules, has said that irrespective of the WTO decision, she will fight to preserve the consumers right to know where their food comes from. This despite new research from the International Food Information Council (IFIC) showing that country-of-origin information is near the bottom of the list of things consumers look for when choosing a product and that the number of consumers using COOL labels has steadily declined in recent years, to just 15% in the most recent IFIC survey.

Related: Getting Ready Now to Lose Your COOL