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U.S. Loses WTO Challenge to Origin Labeling Rules for Agricultural Products

Tuesday, November 22, 2011
Sandler, Travis & Rosenberg Trade Report

As expected, a World Trade Organization dispute settlement panel recently made public a final decision that finds that the U.S. mandatory country of origin labeling requirements for various agricultural products are inconsistent with U.S. multilateral obligations.

The 2008 Farm Bill revised previous mandatory COOL requirements to provide that in order for a commodity to be labeled 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 and ground beef, pork, lamb, goat, and chicken, wild and farm-raised fish and shellfish, fresh and frozen fruits and vegetables, peanuts, pecans, macadamia nuts and ginseng.

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 favorable than that accorded to like domestic livestock, and (ii) Article 2.2 of the TBT Agreement because they do not fulfill the objective of providing consumer information on origin with respect to meat products. In addition, the panel found that a Feb. 20, 2009, letter by Agriculture Secretary Tom Vilsack to industry representatives violates Article X:3(a) of the GATT 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 Office of the U.S. Trade Representative 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 labeling 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.

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