On May 23, 2013, the United States Department of Agriculture’s (USDA) Agriculture Marketing Service (AMS) issued a final rule to amend the Country of Origin Labeling (COOL) regulations (which became effective March 16, 2009). The final rule provides consumers more detailed information for muscle cut commodities by requiring that labels specify the production steps of birth, raising, and slaughter of the animal from which the meat is derived that took place in each country listed on the origin designation, including the United States. It also eliminates any commingling of the covered muscle cut commodities originating from different countries and amends the definition for “retailer” to include “any person subject to be licensed as a retailer under the Perishable Agricultural Commodities Act (PACA).”
These amendments to the 2009 COOL regulation were in response to the fact that in June 2012, the Appellate Body of the World Trade Organization (WTO) affirmed an earlier WTO Panel decision finding that the United States’ COOL requirements for muscle cut meat commodities discriminated against Canadian and Mexican imports and thus were inconsistent with the WTO Agreement on Technical Barriers to Trade. Specifically, it was determined that the COOL requirements were inconsistent in ensuring that imported products were treated no less favorably than domestic product. It was determined that, “The United States had until May 23, 2013, to come into compliance with the WTO ruling.” A proposed rule to address this ruling was issued for comments on March 12, 2013.
There is a significant estimated cost for implementing the changes that will be incurred—primarily by the packers and processors of muscle cut commodities as well as retailers that are subject to the regulations. AMS has determined the total cost for the rule will be driven by costs to firms changing labels as well as losses to firms having to adjust processes to accommodate for the loss of flexibility that was previously afforded by commingling. The cost estimate for label changes required by the final rule is an estimated range of $17 to $47.3 million. The Agency provides various scenarios to estimate the costs associated with the loss of flexibility to commingle. When all the various costs are taken into consideration and combined, the total estimated costs range from $53.1 million to $192.1 million. Additionally, AMS acknowledges that the economic benefits are small relative to the 2009 final rule.
The regulation is effective immediately, however, AMS will provide education and outreach for the first six months after publication. Existing stocks of muscle cut covered commodities labeled in accordance with the 2009 COOL regulations that are already in the system would have the opportunity to move through commerce during this time frame. Finally, after the 6 month outreach and education period, retailers may continue to use the older labels if they provide the more specific information through alternative means such as signage.
With regards to the WTO obligations, AMS stated in the preamble to the final rule that the rule would bring the United States into compliance with the WTO obligations. However, trading partners have publicly expressed contrary views. If WTO compliance is not met, then this could lead to increased discrimination against U.S. products in foreign commerce, as well as other trade sanctions. OFW Law will continue to monitor activity in regards to this concern.
