Country-of-Origin Labeling for Foods
Remy Jurenas
Specialist and the
WTO Trade Dispute on Meat Labeling
Remy Jurenas
Specialist in Agricultural Policy
Joel L. Greene
Analyst in Agricultural Policy
July 15, 20103, 2012
Congressional Research Service
7-5700
www.crs.gov
RS22955
CRS Report for Congress
Prepared for Members and Committees of Congress
Country-of-Origin Labeling for Foods and the WTO Trade Dispute on Meat Labeling
Summary
Most
Summary
Many retail food stores are now required to inform consumers about the country of origin of fresh
fruits and vegetables, seafoodfish, shellfish, peanuts, pecans, macadamia nuts, ginseng, and ground and muscle
muscle cuts of beef, pork, lamb, chicken, and goat. The rules are required by the 2002 farm bill
(P.L. 107171107-171) as amended by the 2008 farm bill (P.L. 110-246). Other U.S. laws have required such
such labeling, but only for imported food products already pre-packaged for consumers. The final
rule to implement COOL took effect on March 16, 2009.
Both the authorization and implementation of country-of-origin labeling (COOL) by the U.S.
Department of Agriculture’s Agricultural Marketing Service have not been without controversy.
Much been controversial. Much
attention has focused on the labeling rules that now apply to meat and meat product
importsproducts. A number of leading agricultural
of livestock and food industry groups continue to oppose COOL as
costly and unnecessary. They and some major food and
and the main livestock exporters to the United States
(e.g., Canada and Mexico) also view the new —Canada and Mexico—view the
requirement as trade-distorting. Others, including
some cattle and consumer groups, maintain that
Americans want and deserve to know the origin
of their foods, and point out that many U.S. trading partners have their own, equally restrictive import
labeling requirements.
Obama Administration officials announced in February 2009 that they would allow the final rule
on COOL, published just before the end of the Bush Administration on January 15, 2009, to take
effect as planned on March 16, 2009. However, the Secretary of Agriculture also urged affected
industries to adopt—voluntarily—several additional changes that, the Obama Administration
asserts, would provide more useful origin information to consumers and also would more closely
adhere to the intent of the COOL law.
Retail compliance with COOL requirements appears to have proceeded reasonably well. To
address identified labeling problems, observers have called for additional outreach to retailers to
help them better understand what is required and the steps they can take to improve compliance.
The most significant issue that has arisen to date is the November 2009 decision by Canada and
Mexico to challenge COOL rules and the “voluntary suggestions” using the World Trade
Organization’s (WTO’s) trade dispute resolution process. Both countries argue that COOL has a
trade-distorting impact by reducing the shipment of their cattle and hogs to the U.S. market, as
U.S. livestock market participants began to make adjustments in anticipation of new meat
labeling rules. They also argue that COOL rules violate trade rules that the United States agreed
to under the WTO and the North American Free Trade Agreement. Responses to this development
reflect the heated debate seen earlier among key players in the livestock sector. U.S. meatpackers
and processors support Canada’s and Mexico’s position that COOL violates U.S. trade
obligations. Some cattle producer groups argue that COOL is consistent with U.S. commitments
and does not discriminate between imported and domestic beef. Twenty-five Senators have
expressed their support for COOL, noting that other countries (including Canada and Mexico)
require country-of-origin information to be provided to consumers.
The 111th Congress is considering legislation that would expand COOL labeling requirements to
cover more food products. H.R. 2749, the House-passed food safety bill, would expand such
labeling to apply to all processed foods and to other agricultural commodities not now covered by
the farm bill and other statutory provisions. The Senate-reported companion bill (S. 510) does not
include a comparable provision, but pertinent amendments may be offered during floor debate.
Separately, S. 1783 would require retailers to implement COOL for dairy products.
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Contents
Recent Developments..................................................................................................................1
Background ................................................................................................................................1
Other Laws with Labeling Provisions ..........................................................................................2
Tariff Act ..............................................................................................................................2
Meat and Poultry Products Inspection Acts............................................................................3
Federal Food, Drug, and Cosmetic Act ..................................................................................4
Implementation of Farm Bill COOL Requirements......................................................................4
Key Provisions............................................................................................................................5
Defining Origin.....................................................................................................................6
Coverage ..............................................................................................................................8
Record-Keeping, Verification, and Penalties ..........................................................................8
Economic and Trade Issues .........................................................................................................9
Costs and Benefits ................................................................................................................9
North American Livestock Trade......................................................................................... 10
Overview ...................................................................................................................... 10
U.S. Livestock Imports ................................................................................................. 10
WTO Case Brought Against COOL by Canada and Mexico........................................... 13
Legislation ................................................................................................................................ 15
Expansion of COOL in Food Safety Measures..................................................................... 16
COOL for Dairy Products ................................................................................................... 16
Figures
Figure 1. U.S. Cattle Imports from Canada and Mexico............................................................. 11
Figure 2. U.S. Hog Imports from Canada .................................................................................. 11
Figure 3. U.S. Cattle Imports from Canada and Mexico............................................................. 12
Figure 4. Monthly U.S. Hog Imports from Canada .................................................................... 13
Contacts
Author Contact Information ...................................................................................................... 17
Acknowledgments .................................................................................................................... 17
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Country-of-Origin Labeling for Foods
Recent Developments
On June 16, 2010, the European Parliament voted to accept draft food labeling legislation that
would expand food country-of-origin labeling (COOL) requirements throughout the European
Union (EU). Mandatory COOL is already required for beef, honey, olive oil, and fresh fruits and
vegetables. The rules now would also apply to all meat, poultry, dairy products, and other singleingredient foods. Also, country-of-origin information for meat, poultry, and fish used as an
ingredient in a processed food product would need to be shown. The measure will next be
considered by the EU’s 27 member governments early next year, before returning back to the
European Parliament for final consideration. If then adopted, the measure would take effect in
three to five years.1
On May 10, 2010, the World Trade Organization’s (WTO) director named three members of the
dispute settlement panel that will consider Canada’s and Mexico’s complaint that the U.S. law
and rules on mandatory COOL are inconsistent with its several WTO-related trade commitments
that the United States has entered into (see “WTO Case Brought Against COOL by Canada and
Mexico”).
Half of surveyed consumers reported that COOL is extremely or very important when making
decisions to purchase fresh meat, fish, fruits, or vegetables, according to a March 2010 food
survey conducted by consulting firm Deloitte. Survey results showing that consumers want to
know more about food nutrition, quality, and safety also revealed that 45% would like to learn on
a website the country of origin for all ingredients in a packaged or bottled food product.2
Background
Since the 1930s, U.S. tariff law has required almost all imports to carry labels so that the
“ultimate purchaser,” usually the retail consumer, can determine their country of origin. However,
certain products, including a number of agricultural commodities in their “natural” state such as
meats, fruits and vegetables, were excluded. For almost as many decades, various farm and
consumer groups have pressed Congress to end one or more of these exceptions, arguing that U.S.
consumers have a right to know where all of their food comes from and that, given a choice, they
would purchase the domestic version. This would strengthen demand and prices for U.S. farmers
and ranchers, it was argued.
Opponents of ending these exceptions to country-of-origin labeling (COOL) contended that there
was little or no real evidence that consumers want such information and that industry compliance
costs would far outweigh any potential benefits to producers or consumers. Such opponents,
including other farm and food marketing groups, argued that mandatory COOL for meats,
produce, or other agricultural commodities was a form of protectionism that would undermine
U.S. efforts to reduce foreign barriers to trade in the global economy. COOL supporters countered
that it was unfair to exempt agricultural commodities from the labeling requirements that U.S.
1
Reuters, “UPDATE 1—EU Lawmakers Demand Stricter Food-Labelling Rules,” June 16, 2010; Food Business News,
“E.U. Votes in Favor of Uniform Food Labeling,” July 6, 2010, p.30.
2
Feedstuffs, “Consumers Seek Food Information,” July 5, 2010, p. 7.
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importers of almost all other products already must meet, and that major U.S. trading partners
impose their own COOL requirements for imported meats, produce, and other foods.
With passage of the 2002 farm bill (P.L. 107-171, § 10816), retail-level COOL was to become
mandatory for fresh fruits and vegetables, beef, pork, lamb, seafood, and peanuts, starting
September 30, 2004. Continuing controversy over the new requirements within the food and
agricultural industry itself led Congress to postpone full implementation. The FY2004 omnibus
appropriations act (P.L. 108-199) postponed COOL—except for seafood—until September 30,
2006; the FY2006 agriculture appropriation (P.L. 109-97) further postponed it until September
30, 2008.3
During deliberations on a new omnibus farm bill in 2007 and 2008, those affected by COOL
reached consensus on a series of amendments intended to ease what many of them viewed as
some of the more onerous provisions of the 2002 COOL law. Modified were provisions dealing
with record-keeping requirements, the factors to be considered for labeling U.S. and non-U.S.
origin products, and penalties for noncompliance. These amendments were incorporated into the
final farm bill (P.L. 110-246, § 11002). The enacted 2008 bill required that COOL take effect on
September 30, 2008, and added goat meat, chicken, macadamia nuts, pecans, and ginseng as
commodities covered by mandatory COOL.
Final rules to fully implement the COOL requirements were published by the U.S. Department of
Agriculture’s (USDA’s) Agricultural Marketing Service (AMS) during the final days of the Bush
Administration in January 2009. Obama Administration officials announced in February 2009
that they would allow the final rules to take effect as planned on March 16, 2009. However, they
also urged affected industries to adopt—voluntarily—several additional changes that, the
Administration asserts, would provide more specific origin information to consumers and more
closely adhere to the intent of the COOL law.
Major U.S. trading partners, including Canada and Mexico, which are challenging COOL using
the WTO’s dispute settlement process, continue to closely watch implementation developments.
So are lawmakers in the 111th Congress, where additional legislation to expand COOL’ s coverage
to include other food products is being considered.
Other Laws with Labeling Provisions
Tariff Act
Under §304 of the Tariff Act of 1930, as amended (19 U.S.C. 1304), every imported item must be
conspicuously and indelibly marked in English to indicate to the “ultimate purchaser” its country
of origin. The U.S. Customs and Border Protection generally defines the “ultimate purchaser” as
the last U.S. person to receive the article in the form in which it was imported. So, articles
arriving at the U.S. border in retail-ready packages—including food products, such as a can of
Danish ham, or a bottle of Italian olive oil—must carry such a mark. However, if the article is
destined for a U.S. processor where it will undergo “substantial transformation,” the processor is
3
An interim final rule for seafood COOL was published on October 5, 2004, and took effect April 4, 2005 (69 Federal
Register, pp. 59708-59750).
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considered the ultimate purchaser. Over the years, numerous technical rulings by Customs have
determined what is, or is not, considered “substantial transformation,” depending upon the item in
question.
The law has authorized exceptions to labeling requirements, including articles on a so-called “J
List,” named for §1304(a)(3)(J) of the statute. This empowered the Secretary of the Treasury to
exempt classes of items that were “imported in substantial quantities during the five-year period
immediately preceding January 1, 1937, and were not required during such period to be marked
to indicate their origin.” Among the items placed on the J List were specified agricultural
products including “natural products, such as vegetables, fruits, nuts, berries, and live or dead
animals, fish and birds; all the foregoing which are in their natural state or not advanced in any
manner further than is necessary for their safe transportation.”4 Although J List items themselves
have been exempt from the labeling requirements, § 304 of the 1930 act has required that their
“immediate container” (essentially, the box they came in) have country-of-origin labels. But, for
example, when Mexican tomatoes or Chilean grapes are sold unpackaged at retail in a store bin,
country labeling had not been required by the Tariff Act.
Meat and Poultry Products Inspection Acts
USDA’s Food Safety and Inspection Service (FSIS) is required to ensure the safety and proper
labeling of most meat and poultry products, including imports, under the Federal Meat Inspection
Act, as amended (21 U.S.C. 601 et seq.), and the Poultry Products Inspection Act, as amended (21
U.S.C. 451 et seq.). Regulations issued under these laws have required that country of origin
appear in English on immediate containers of all meat and poultry products entering the United
States (9 C.F.R. 327.14 and 9 C.F.R. 381.205). Only plants in countries certified by USDA to
have inspection systems equivalent to those of the United States are eligible to export products to
the United States.
All individual, retail-ready packages of imported meat products (for example, canned hams or
packages of salami) have had to carry such labeling. Imported bulk products, such as carcasses,
carcass parts, or large containers of meat or poultry destined for U.S. plants for further
processing, also have had to bear country-of-origin marks. However, once these non-retail items
have entered the country, the federal meat inspection law has deemed them to be domestic
products. When they are further processed in a domestic, FSIS-inspected meat or poultry
establishment—which has been considered the ultimate purchaser for purposes of country-oforigin labeling—FSIS no longer requires such labeling on either the new product or its container.
FSIS has considered even minimal processing, such as cutting a larger piece of meat into smaller
pieces or grinding it for hamburger, enough of a transformation so that country markings are no
longer necessary.
Meat and poultry product imports must comply not only with the meat and poultry inspection
laws and rules but also with Tariff Act labeling regulations. Because Customs generally requires
that imports undergo more extensive changes (i.e., “substantial transformation”) than required by
USDA to avoid the need for labeling, a potential for conflict has existed between the two
requirements.
4
The J list is published in 19 C.F.R. 134.33, available at http://edocket.access.gpo.gov/cfr_2008/aprqtr/
19cfr134.33.htm.
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Federal Food, Drug, and Cosmetic Act
Foods other than meat and poultry are regulated by the U.S. Department of Health and Human
Services’ Food and Drug Administration (FDA), primarily under the Federal Food, Drug, and
Cosmetic Act (FFDCA; 21 U.S.C. 301 et seq.). This act does not expressly require COOL for
foods. Section 403(e) of the FFDCA does regard a packaged food to be misbranded if it lacks a
label containing the name and place of business of the manufacturer, packer, or distributor
(among other ways a food can be misbranded). However, this name and place of business is not
an indicator of the origin of the product itself. (See “Legislation” for a proposal to amend the
FFDCA to penalize sellers if they do not label the country of origin of processed foods and of
non-processed foods that are not covered by farm bill provisions.)
Implementation of Farm Bill COOL Requirements
The COOL provisions of the 2002 and 2008 farm bills do not change the requirements of the
Tariff Act or the food safety inspection statutes; rather, they amend the Agricultural Marketing
Act (AMA) of 1946 (7 U.S.C. 1621 note). USDA’s Agricultural Marketing Service (AMS)
administers most AMA-authorized programs, including COOL.5 AMS published a final rule to
implement COOL for all covered commodities on January 15, 2009, which took effect on March
16, 2009.6 This final rule, issued during the closing days of the Bush Administration, replaces
both the April 4, 2005, interim final rule for seafood (see footnote 3), and the August 1, 2008,
interim final rule for all other covered commodities.7
The COOL rule was re-examined in early 2009 by newly confirmed Secretary of Agriculture Tom
Vilsack to comply with an Obama White House directive that all agencies review recent
regulations issued by the outgoing Administration. After this re-examination, Secretary Vilsack
announced, on February 20, 2009, that the regulations would take effect as planned on March 16.
However, the Secretary’s announcement included two significant provisos. First, he urged
affected industries to voluntarily adopt several suggested labeling changes in order to provide
more useful information to consumers than the rule itself might imply, and to better meet
congressional intent. Second, he stated that USDA would closely monitor industry compliance to
determine whether “additional rulemaking may be necessary to provide consumers with adequate
information.”8
The Secretary’s “suggestions for voluntary action” were detailed in a February 20, 2009, letter
sent to industry representatives. They deal with the treatment of meat products with multiple
5
AMS maintains an extensive website on COOL, with links to implementing regulations, cost-benefit analysis, and
other materials at http://www.ams.usda.gov/cool/.
6
USDA, January 12, 2009, “USDA Issues Final Rule On Mandatory Country of Origin Labeling,” available at
http://www.usda.gov/wps/portal/usda/usdahome?printable=true&contentidonly=true&contentid=2009/01/0006.xml; 74
Federal Register, January 15, 2009, pp. 2658-2707. An AMS fact sheet on the final rule, including a summary of
changes from the interim final rules and estimates on COOL implementation costs, is available at
http://www.ams.usda.gov/AMSv1.0/getfile?dDocName=STELPRDC5074847.
7
73 Federal Register, August 1, 2008, pp. 45106-45151. AMS had indicated in August 2008 that it would not
aggressively enforce the interim rule for six months (a period that, under the final rule as well, was to continue through
March 2009) to give those affected more time to understand and fully comply with it.
8
USDA, “Vilsack Announces Implementation of Country of Origin Labeling Law,” February 20, 2009, available at
http://www.usda.gov/wps/portal/usda/usdahome?printable=true&contentidonly=true&contentid=2009/02/0045.xml.
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countries of origin, exemptions in the rules for processed products, and time allowances provided
to ground meat manufacturers regarding their inventory.9 These are further detailed below, in the
appropriate sections.
During FY2009, state agencies conducted about 12,000 surveillance reviews (compared to 2,000
in FY2008) to ensure retail compliance with COOL requirements. The significant increase
reflects the expansion of COOL’s coverage from only fish and shellfish to include more
commodities (see list below in “Key Provisions”). Agencies of all 50 states now perform this
function under cooperative agreements signed with the AMS, which included participating in
training sessions on their enforcement responsibilities. AMS also has developed educational and
outreach activities for state cooperators, retailers, suppliers, and other interested parties. During
FY2010, AMS plans to develop an expanded real-time database to track the findings of federalstate retail reviews, enforcement actions taken, and other information viewed as critical to COOL
operations.10
Audits to gauge retail store efforts to meet COOL rules for vegetables and fruit have found the
absence of any label to be the main noncompliance issue. Other issues discovered include nonspecific labeling (e.g., not identifying the origin of “locally grown” produce) and conflicting or
inaccurate declarations as to the origin of the produce displayed. Industry representatives suggest
that these issues can be resolved by helping retailers better understand the details laid out in
COOL regulations, and encouraging them to be more diligent in labeling local produce. AMS
currently is focused on using additional store reviews to look for possible differences between
states in compliance levels, and analyzing whether supermarket chains operate differently than
single-store retailers in meeting COOL rules.11
Key Provisions
Mandatory country-of-origin labeling:
9
•
applies to ground and muscle cuts of beef, lamb, and pork, farm-raised and wild
fish and shellfish, peanuts, “perishable agricultural commodities” as defined by
the Perishable Agricultural Commodities Act (PACA, i.e., fresh and frozen fruits
and vegetables), goat meat, chicken, pecans, macadamia nuts, and ginseng (these
are referred to as “covered commodities”).12
•
exempts these items if they are an ingredient in a processed food.
•
covers only PACA-regulated retailers (those purchasing at least $230,000 a year
in fresh fruits and vegetables), and requires them to inform consumers of origin
This letter is available at http://www.usda.gov/documents/0220_IndustryLetterCOOL.pdf.
10
USDA, FY2011 Budget Explanatory Notes for Committee on Appropriations for Agricultural Marketing Service, pp.
19-9, 19g-9, and 19-47, available at http://www.obpa.usda.gov/19ams2011notes.pdf.
11
Supermarket News, “Simply COOL,” May 24, 2010.
12
A slightly different COOL requirement applies to packaged honey if it bears any official USDA certificate, mark, or
statement with respect to quality and grade. It was added by Section 10402 of the 2008 farm bill (P.L. 110-246) to the
Agricultural Marketing Act, and took effect on October 6, 2009. For more information, see http://www.ams.usda.gov/
AMSv1.0/ams.fetchTemplateData.do?startIndex=1&startIndex=2&startIndex=1&startIndex=2&template=
TemplateN&navID=ProcessedFVUpdates&rightNav1=&topNav=&leftNav=&page=ProcessedFVUpdates&
resultType=&acct=procsdgrdcert.
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“by means of a label, stamp, mark, placard, or other clear and visible sign on the
covered commodity or on the package, display, holding unit, or bin containing
the commodity at the final point of sale.”
•
exempts from these labeling requirements such “food service establishments” as
restaurants, cafeterias, bars, and similar facilities that prepare and sell foods to
the public.
Defining Origin
In designating country of origin, difficulties arise when products—particularly meats—are
produced in multiple countries. For example, beef might be from an animal that was born and fed
in Canada, but slaughtered and processed in the United States. Likewise, products from several
different countries often are mixed, such as for ground beef. For covered red meats and chicken,
the COOL law:
•
permits the U.S. origin label to be used only on items from animals that were
exclusively born, raised, and slaughtered in the United States, with an exception
for those animals present here before July 15, 2008;
•
permits meats or chicken with multiple countries of origin to be labeled as being
from all of the countries in which the animals may have been born, raised, or
slaughtered;
•
requires meat or chicken from animals imported for immediate U.S. slaughter to
be labeled as from both the country the animal came from and the United States;
•
requires products from animals not born, raised, or slaughtered in the United
States to be labeled with their correct country(ies) of origin; and
•
requires, for ground meat and chicken products, that the label list all countries of
origin, or all “reasonably possible” countries of origin.
The meat labeling requirements have proven to be among the most complex and controversial
areas of rulemaking, in large part because of the steps that U.S. feeding operations and packing
plants must adopt to segregate, hold, and slaughter foreign-origin livestock from U.S. livestock.
After issuance of the interim rules in August 2008, many retailers and meat processors reportedly
had planned to use the “catch-all” label (see second bullet, above) on as much meat as possible—
even products that would qualify for the U.S.-only label, because it was both permitted and the
easiest requirement to meet. COOL supporters objected that the label would be overused,
undermining the whole intent of COOL (i.e., to distinguish between U.S. and non-U.S. meats).13
In an effort to balance the concerns of both sides, USDA issued a statement attempting to clarify
its August 2008 interim rule, stating that meats derived from both U.S.- and non-U.S.-origin
animals may carry a mixed-origin claim (e.g., “Product of U.S., Canada, and Mexico”), but that
the mixed-origin label cannot be used if only U.S.-origin meat was produced on a production
day. 14
13
Cattle Buyers Weekly, August 4, 2008; and Food Chemical News, September 15, 2008.
“Country of Origin Labeling (COOL) Frequently Asked Questions,” September 26, 2008. Virtually all foreign live
meat animals now come from either Canada or Mexico (see “North American Livestock Trade”).
14
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The final (January 2009) rule attempts to further clarify the “multiple countries of origin”
language. For example, muscle cut products of exclusively U.S. origin along with those from
foreign-born animals, if commingled on a single production day, can continue to qualify for a
combined U.S. and non-U.S. label. “It was never the intent of the Agency [AMS] for the majority
of product eligible to bear a U.S. origin declaration to bear a multiple origin destination. The
Agency made additional modifications for clarity,” AMS stated in material accompanying the
rule. 15
The clarifying change failed to mollify some producer groups, who have continued to view this
portion of the rule as a “loophole that would allow meat packers to use a multiple countries, or
NAFTA [North American Free Trade Agreement] label, rather than labeling U.S. products as
products of the United States. This is misleading to consumers,” stated National Farmers Union
(NFU) President Tom Buis.16
In his February 20, 2009 letter, Secretary Vilsack asked industry representatives to voluntarily
provide additional information. He stated that:
processors should voluntarily include information about what production step occurred in each
country when multiple countries appear on the label. For example, animals born and raised in
Country X and slaughtered in Country Y might be labeled as “Born and Raised in Country X and
Slaughtered in Country Y.” Animals born in Country X but raised and slaughtered in Country Y
might be labeled as “Born in Country X and Raised and Slaughtered in Country Y.”
The Vilsack letter also noted that the final rule allows a label for ground meat to bear the name of
a country even if the meat from that country was not present in a processor’s inventory in the
preceding 60-day period. Noting that this allows for labeling this product “in a way that does not
clearly indicate [its] country of origin,” the Secretary asked processors to reduce this time
allowance to 10 days, stating that this “would enhance the credibility of the label.” The Vilsack
letter is widely viewed as an effort to address the concerns of COOL adherents without reopening
the rule and thereby attracting renewed criticism from the meat industry and U.S. trading
partners.
For perishable agricultural commodities, ginseng, peanuts, pecans, and macadamia nuts, retailers
may only claim U.S. origin if they were exclusively produced in the United States. However, a
U.S. state, region, or locality designation is a sufficient U.S. identifier (e.g., Idaho potatoes). For
farm-raised fish and shellfish, a U.S.-labeled product must be derived exclusively from fish or
shellfish hatched, raised, harvested, and processed in the United States; wild fish and shellfish
must be derived exclusively from those either harvested in U.S. waters or by a U.S. flagged
vessel, and processed in the United States or on a U.S. vessel. Also, labels must differentiate
between wild and farm-raised seafood.
15
USDA, AMS, January 12, 2009, fact sheet on the mandatory COOL final rule, available at http://www.ams.usda.gov/
AMSv1.0/getfile?dDocName=STELPRDC5074847.
16
“NFU Statement: USDA Issues Final Rule for COOL,” January 12, 2009, available at http://nfu.org/news/2009/01/
12/nfu-statement-usda-issues-final-rule-for-cool.html.
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Coverage
Consumers may not find country-of-origin labels on much more of the food they buy, due to
COOL’s statutory and regulatory exemptions. First, as noted, all restaurants and other food
service providers are exempt, as are all retail grocery stores that buy less than $230,000 a year in
fresh fruits and vegetables. Second, “processed food items” derived from the covered
commodities are exempt, and USDA, in its final rule, defined this term broadly (at 7 C.F.R. §
65.220). Essentially, any time a covered commodity is subjected to a change that alters its basic
character, it is considered to be processed. Although adding salt, water, or sugar do not, under
USDA’s definition, change the basic character, virtually any sort of cooking, curing, or mixing
apparently does. For example, roasting a peanut or pecan, mixing peas with carrots, or breading a
piece of meat or chicken, all count as processing. As a result, only about 30% of the U.S. beef
supply, 11% of all pork, 39% of chicken, and 40% of all fruit and vegetable supplies may be
covered by COOL requirements at the retail level. 17 Whole peanuts are almost always purchased
in roasted form, which will not have to be labeled. Some critics are arguing that AMS
overstepped its authority, and congressional intent, by excepting such minimally processed
commodities.
AMS had countered that in fact many imported items still must carry COOL under provisions of
the Tariff Act of 1930. “For example, while a bag of frozen peas and carrots is considered a
processed food item under the COOL final rule, if the peas and carrots are of foreign origin, the
Tariff Act requires that the country of origin be marked on the bag,” AMS argued, citing similar
regulatory situations for roasted nuts and for a variety of seafood items.18
In his February 20, 2009 letter, however, Secretary Vilsack acknowledged that the “processed
foods” definition in the final rule “may be too broadly drafted. Even if products are subject to
curing, smoking, broiling, grilling, or steaming, voluntary labeling would be appropriate,” he
wrote.
Record-Keeping, Verification, and Penalties
The COOL law prohibits USDA from using a mandatory animal identification (ID) system, 19 but
the original 2002 version stated that the Secretary “may require that any person that prepares,
stores, handles, or distributes a covered commodity for retail sale maintain a verifiable recordkeeping audit trail that will permit the Secretary to verify compliance.” Verification immediately
became one of the most contentious issues, particularly for livestock producers, in part because of
the potential complications and costs to affected industries of tracking animals and their products
from birth through retail sale. Producers of the plant-based commodities, as well as food retailers
and others, also expressed concern about the cost and difficulty of maintaining records for
commodities that are highly fungible and often widely sourced. The 2008 law eased these
requirements somewhat by stating that USDA “may conduct an audit of any person that prepares,
stores, handles, or distributes a covered commodity” in order to verify compliance. Such persons
17
Percentages calculated by CRS based upon USDA estimates of retail-level COOL coverage in pounds, divided by
total annual supply (USDA data on domestic production plus imports).
18
USDA, AMS, “Frequently Asked Questions,” January 12, 2009, available at http://www.ams.usda.gov/AMSv1.0/
getfile?dDocName=STELPRDC5074846.
19
For information on this related issue, see CRS Report R40832, Animal Identification and Traceability: Overview and
Issues, by Randy Schnepf.
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Country-of-Origin Labeling for Foods
must provide verification, but USDA may not ask for any additional records beyond those
maintained “in the course of the normal conduct of business.”
In its final rule, AMS stated that covered persons generally would have to keep records for one
year that can identify both the immediate previous source and the immediate subsequent recipient
of a covered commodity; certain exceptions are provided for pre-labeled products. Also, a
slaughter facility can accept a producer affidavit as sufficient evidence for animal origin claims.
Also, potential fines for willful noncompliance are set for retailers and other persons at no more
than $1,000 per violation. The 2002 law had set the fine at no more than $10,000 (and for
retailers only), but the 2008 farm bill lowered this amount.
Economic and Trade Issues
Costs and Benefits
COOL supporters argue that a number of studies show that consumers want country-of-origin
labeling and would pay extra for it. Analysis accompanying USDA’s interim and final rules
concluded that, while benefits are difficult to quantify, it appears they will be small and accrue
mainly to consumers who desire such information. A Colorado State University economist
suggested that consumers might be willing to pay a premium for “COOL meat” from the United
States, but only if they perceive U.S. meat to be safer and of higher quality than foreign meat.20
USDA earlier had estimated that purchases of (i.e., demand for) covered commodities would have
to increase by between 1% and 5% for benefits to cover COOL costs, but added that such
increases were not anticipated. Data from several economic modeling studies of COOL impacts
appear to fall within this range. 21 Another research paper found that demand for domestic apples
would need to increase by a range of 3% to 7% and for domestic tomatoes by 8% to 22% for
COOL to increase total economic welfare in these markets.22
Critics of mandatory COOL have argued that large compliance costs will more than offset any
consumer benefits. USDA’s analysis of its final rule estimates that first-year implementation costs
to be approximately $2.6 billion for those affected. Of the total, each commodity producer would
bear an average estimated cost of $370, intermediary firms (such as wholesalers or processors)
$48,219 each, and retailers $254,685 each. The USDA analysis also includes estimates of recordkeeping costs and of food sector economic losses due to the rule.
20
Wendy J. Umberger, “Will Consumers Pay a Premium for Country-of-Origin Labeled Meat?” Choices, 4th quarter
2004, available online at http://www.choicesmagazine.org/2004-4/cool/2004-4-04.htm.
21
Gary W. Brewster et al., “Who Will Bear the Costs of Country-of-Origin Labeling?”
(http://www.choicesmagazine.org/2004-4/cool/2004-4-02.htm); and Daniel D. Hanselka et al., “Demand Shifts in Beef
Associated with Country-of-Origin Labeling to Minimize Losses in Social Welfare” (http://www.choicesmagazine.org/
2004-4/cool/2004-4-03.htm), Choices, 4th quarter 2004.
22
Alejandro Plastina and Konstantinos Giannakis, “Market and Welfare Effects of Mandatory Country-of-Origin
Labeling in the U.S. Specialty Crops Sector,” Selected Paper, American Agricultural Economics Association Annual
Meeting, Portland, Oregon, 2007.
Congressional Research Service
9
Country-of-Origin Labeling for Foods
North American Livestock Trade
Overview
With implementation now well underway, foreign suppliers—particularly Canada and Mexico—
have questioned the trade legality of mandatory COOL. They have claimed that the August 2008
publication of the interim rule had an immediate impact in beginning to alter normal trade
patterns and caused large financial losses. The initial focus of these concerns was on livestock
(i.e., cattle and hogs, and their products).
For background, the animal products industries have become increasingly integrated across all
three North American countries over the last two decades, particularly after NAFTA took effect in
1994 and, before that, the Canada-U.S. Free Trade Agreement in 1988. These agreements, along
with the global Uruguay Round Agreements under the WTO, by helping to reduce tariff and
nontariff barriers to trade, have enabled animals or their products to move across borders more
freely, based on market demands. For example, in the pork industry, the Canadians tended toward
breeding and farrowing small pigs, which in turn were shipped to the United States, where access
to large supplies of grain made it more economical to feed them to slaughter weight.23
However, a number of animal health and other incidents have disrupted this market integration
from time to time. The most significant event was the discovery of bovine spongiform
encephalopathy (BSE) in 2003, first in Canada and later in the United States, which halted most
cross-border movement of cattle from Canada to the United States from mid-2003 through mid2005. The predominance of BSE (mad cow) cases in Canada rather than in the United States may
have contributed to wider support for the mandatory COOL law, some analysts believe, although
government officials assert that both countries now have strong, scientifically defensible
safeguards in place to ensure that BSE is controlled and that its infectious agent does not enter the
human food supply.
U.S. Livestock Imports
Almost all U.S. live cattle imports come from Canada and Mexico; all live hog imports come
from Canada. After U.S. cattle and beef markets adjusted to the discovery of BSE in Canada’s
cattle herds in mid-2003, total cattle imports from both countries rose steadily each year from
2004 through 2007, reaching almost 2.5 million head (Figure 1). Similarly, annual hog imports
from Canada almost doubled over the last several years, from 5.3 million head in 2001 to 10.0
million in 2007 (Figure 2).24
23
See for example, USDA, Economic Research Service (ERS), Market Integration of the North American Animal
Products Complex (LDP-M-131-01), May 2005.
24
USDA, ERS, Livestock and Meat Trade Data series, available at http://www.ers.usda.gov/data/meattrade/.
Congressional Research Service
10
Country-of-Origin Labeling for Foods
Figure 1. U.S. Cattle Imports from
Canada and Mexico
Figure 2. U.S. Hog Imports from Canada
3,000,000
Canada
Mexico
10,000,000
2,000,000
8,000,000
1,500,000
Jan - April
1,000,000
number of head
number of head
2,500,000
6,000,000
4,000,000
Jan - April
500,000
2,000,000
0
2001 2002 2003 2004 2005 2006 2007 2008 2009
2009 2010
Source: USDA, Economic Research Service (ERS),
“Livestock and Meat Trade Data – Cattle”
0
2001 2002 2003 2004 2005 2006 2007 2008 2009
2009 2010
Source: USDA, ERS, “Livestock and Meat Trade
Data – Hogs”
Cattle
U.S. imports of feeder cattle (those destined for feedlots) and of slaughter-ready cattle (steers and
heifers) from both Canada and Mexico declined on average 10% each year from 2007 to 2009.
Imports totaled 2.0 million head in 2009, compared to 2.5 million head in 2007 (Figure 1). About
80% of the cattle imported from Canada are immediately slaughtered; all Mexican cattle enter to
be grazed or fed. According to USDA, these imports have accounted for an estimated 10% of the
U.S. cattle supply in recent years.
From July 2008 through June 2009, the period during which the U.S. beef sector began to prepare
for and to implement COOL, U.S. cattle imports from both countries totaled almost 2.3 million
head. This was 25% below the 3.0 million head imported during the same period in 2007/2008.
Some analyses attribute the import decline in the first several months of this period to COOL but
differ on the extent that currency exchange rates may have contributed to this development.
CattleFax, an industry-funded data and analysis service based in Colorado, observed that the 2008
decline in cattle imports were due to mandatory COOL regulations, and that imports would “face
a big wild card in 2009” for the same reason. 25 Livestock sector analysts with the Chicago
Mercantile Exchange (CME), examining cattle import trends through year-end 2008, commented
that the COOL law “has been quite effective, if you measure effectiveness by the degree to which
it has been able to stifle cattle trade in North America.” They wrote that reductions in imports
from both Mexico and Canada “came at a time when a significant devaluation in the value of the
Peso and Canadian dollar normally would have been conducive of increased imports from these
two countries. Under normal circumstances, one would expect cattle imports to actually increase
rather than be cut by almost 40%.”26
Late in 2008, however, USDA’s Economic Research Service (ERS) suggested that the currency
exchange factor may be somewhat more involved. The decline in Canadian cattle imports:
coincided with the rapid depreciation of the Canadian dollar, making Canadian cattle relatively
cheaper in U.S. dollar terms, but also making Canadian beef more competitive on the export
25
26
CME, “CattleFax Long Term Outlook Special Edition,” December 12, 2008, p. 3.
CME Daily Livestock Report, January 7, 2009.
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Country-of-Origin Labeling for Foods
market. Feeder cattle have been remaining in Canada. ... Imports of slaughter steers and heifers
from Canada also declined dramatically in September, driven by the same exchange rate
conditions affecting feeder cattle. Additionally, the past increase in Canadian exports of feeder
cattle would reduce the current supply of fed cattle in Canada to be marketed or exported,
lowering the number of Canadian cattle sent to the United States for slaughter.27
Other factors also have contributed to the decline in cattle imports since mid-2008. The drop in
Mexican cattle shipments to the United States in the fourth quarter of 2008 compared to the same
period a year earlier was due to good pasture conditions in Mexico and ranchers’ decisions to
hold on longer to their herds. The year-on-year fall in cattle imports from both countries during
2009 reflected less demand for cattle to slaughter, as processors adjusted to reduced domestic and
foreign consumer demand for U.S. beef due to the economic recession (Figure 3).
Figure 3. U.S. Cattle Imports from Canada and Mexico
(quarterly, 2007 to mid-2010)
1,600,000
1,400,000
Canada
Mexico
number of head
1,200,000
1,000,000
800,000
600,000
400,000
200,000
0
Q1
Q2
Q3
2007
Q4
Q1
Q2
Q3
2008
Q4
Q1
Q2
Q3
Q4
2009
Q1
Q2
2010
Source: Derived by CRS from USDA, Agricultural Marketing Service (AMS) published reports
Hogs
U.S. imports of Canadian hogs (feeder pigs and hogs ready for slaughter) fell slightly in 2008 and
more noticeably in 2009 (Figure 2). From July 2008 through June 2009 (the 12-month period that
coincided with initial steps taken by U.S. hog producers and pork processors to prepare for COOL
implementation), hog imports from Canada of almost 7.2 million head were 31% below the same
period in 2007/2008 (10.5 million head).28 Monthly hog imports have been lower on a year over
year basis since mid-2008 (Figure 4).
27
USDA, ERS. Livestock, Dairy, and Poultry Outlook, December 18, 2008, p. 8. ERS analysts point out that prior to
2008, the United States was easing the BSE-related restrictions on Canadian cattle imports; in November 2007, cattle
over 30 months of age were again permitted to enter from Canada.
28
Derived by CRS from AMS marketing report “Canadian Live Animal Imports by Destination,” selected issues in
2008 and 2009.
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Country-of-Origin Labeling for Foods
Figure 4. Monthly U.S. Hog Imports from Canada
(2007 to April 2010)
1,300,000
2007
2008
2009
2010
number of head
1,100,000
900,000
700,000
500,000
300,000
Jan
Feb
Mar
Apr
May
June
July
Aug
Sept
Oct
Nov
Dec
Source: USDA, ERS, “Livestock and Meat Trade Data – Hogs”
Though developments in Canada’s hog sector account in part for this drop, an early 2009 USDA
analysis suggested that COOL’s implementation likely “made U.S. swine finishers reluctant to
import Canadian finishing animals, in light of some major U.S. packers’ stated unwillingness to
process Canadian-origin animals.”29 Another report suggested that COOL was affecting the U.S.
hog sector, particularly in Iowa, as packers moved to process only U.S.-born hogs. With many
Iowa producers operating finishing operations that source feeder pigs from Canada, a USDA
document on COOL implementation cited that some producers’ barns are “empty because of a
lack of an assured outlet for slaughter hogs of mixed country of origin” (i.e., Product of Canada
and United States). USDA also reported that some lenders were not extending credit to operations
that finish mixed-origin pigs, and that lower prices at times were “being paid for mixed origin
slaughter hogs compared to hogs of exclusively U.S. origin.”30
WTO Case Brought Against COOL by Canada and Mexico
Canada and Mexico are major suppliers of live cattle and hogs that are fed in U.S. facilities
and/or processed into beef and pork in U.S. meat packing plants. As the U.S. meat processing
sector geared up to implement COOL in mid-2008, Canadian and Mexican cattle and Canadian
hog exports to the U.S. market initially declined. Both countries expressed concern about the
adverse impacts this development had on their livestock sectors. Not satisfied with the outcome
29
30
USDA, ERS, Livestock, Dairy, and Poultry Outlook, April 16, 2009, p. 4.
CattleBuyers Weekly, “MCOOL Hurts Iowa Hog Finishers,” April 27, 2009.
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Country-of-Origin Labeling for Foods
of two sets of consultations held with U.S. officials on their concerns (December 2008 and June
2009), both Canada and Mexico in November 2009 requested the establishment of a WTO
dispute resolution panel to consider their case.
Both the Canadian and Mexican governments, in their requests for a panel, assert that COOL is
inconsistent with several WTO-related trade commitments, including those providing that imports
must be treated no less favorably than products of domestic origin; that laws on marks of origin
should not damage imports, reduce their value, or unreasonably increase their cost; and that laws,
rules, and procedures on country of origin should not “themselves” create or disrupt international
trade, among other things.
In proceeding with a WTO case, Canadian officials stated that the COOL requirements are “so
onerous” that when they were implemented, Canadian exporters of cattle and hogs were
discriminated against in the U.S. market. The Canadian beef and pork industries, led by the
Canadian Cattlemen’s Association (CCA) and the Canadian Pork Council, actively pushed their
government to initiate a WTO challenge. The CCA argued that COOL cost its producers C$92
million (Canadian dollars) in losses over the two months following the publication of the interim
rule in July 2008, and could cost C$500 million per year. CCA estimated that slaughter steers and
heifers were losing C$90 per head, because U.S. meat establishments did not want to assume the
increased costs of complying with new labeling requirements by segregating, holding, and then
slaughtering Canadian cattle separately from U.S. cattle. The losses included lower prices for all
Canadian cattle due to decreased U.S. demand, as well as the cost of shipping those that are sold
further distances, to the fewer number of U.S. plants willing to take them. Canadian pork
producers expressed similar concerns.31
U.S. officials regretted that the consultations did not resolve Canada’s concerns, and stated their
belief that U.S. implementation of COOL provides consumers with information that is consistent
with WTO commitments. They noted that countries had agreed that COOL was legitimate policy
long before the WTO was created, and that other countries also require goods to be labeled with
their origin.32
In December 2009, 25 senators wrote to Obama Administration officials to express their support
for implementing COOL according to congressional intent, stating that the program is
nondiscriminatory in its requirements that both domestic and imported goods be labeled with
their origin. They also noted that 45 other countries (including Canada and Mexico) implement
programs that provide country of origin information to consumers.33
USTR’s request for public comment on this pending WTO case generated responses that reflected
the heated debate on mandatory COOL seen earlier among key players in the livestock sector. The
31
Various trade publication reports, including Cattle Buyers Weekly, “MCOOL Has Cost Canadian Producers C$92M,”
December 8, 2008; Agri-Pulse, “COOL regulations create heartburn for Canadians,” December 3, 2008; and
Washington Trade Daily, December 2, 2008, pp. 3-4.
32
U.S. Trade Representative, “Vilsack, Kirk Comment on Canadian Panel Request Regarding Country-of-Origin
Labeling,” October 7, 2009, available at http://www.ustr.gov/about-us/press-office/press-releases/2009/october/vilsackkirk-comment-canadian-panel-request-regard.
33
Office of Senator Tim Johnson, “Johnson, Enzi Lead the Fight to Keep Congressional Intent on COOL as WTO
Dispute Moves Forward,” December 21, 2009, available at http://johnson.senate.gov/public/index.cfm?p=
PressReleases&ContentRecord_id=c48ed4be-eebd-43da-95a1-2b079437819a&ContentType_id=c3d73cfe-c14b-467696ed-43a65aea57c0&Group_id=6ae28060-e7a2-46ba-bbab-cce51bb5cb91&MonthDisplay=12&YearDisplay=2009.
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Country-of-Origin Labeling for Foods
American Meat Institute (AMI), representing U.S. meat processors and packers, stated that the
U.S. law, in addition to violating WTO commitments, also violates NAFTA commitments. AMI
argued that COOL discriminates against imports in favor of domestic meat.34
In opposition, the U.S. Cattlemen’s Association (USCA) and the National Farmers Union argued
that COOL is “fully consistent” with the General Agreement on Tariffs and Trade and the
Agreement on Technical Barriers of Trade (key WTO commitments). Both stated that this U.S.
law “does not discriminate between domestic and imported beef ... [and] operates neutrally in the
market place,” and noted that COOL does not impose any domestic content requirements (i.e.,
does not stipulate what share of value or quantity determines country of origin).35
Earlier, the National Cattlemen’s Beef Association (NCBA) expressed concern that Canada’s
decision to pursue its case against U.S. COOL rules has the potential for retaliatory action to be
taken against U.S. beef. It noted that “COOL has damaged critically important trading
relationships [i.e., the import of Canadian and Mexican livestock, the value added as they pass
through U.S. feedlots and are processed into meat, and the export of finished meat products back
to Mexican and Canadian consumers], and is not putting additional money into the pockets of
cattlemen.”36 The Ranchers-Cattlemen Action Legal Fund, United Stockgrowers of America (RCALF USA), presented similar comments.37
The scope of the case that the WTO is now considering is not specific to livestock and their
products. Presumably other covered commodities could be affected if the dispute panel rules
against the U.S. COOL law.
Legislation
A number of lawmakers appear to agree with some industry groups’ criticisms of mandatory
COOL and could offer legislation to limit its scope and impacts. Other lawmakers remain
strongly supportive of the new law and likely would oppose any significant rollback. Still others
seek to bring more commodities under the scope of mandatory country-of-origin labeling.
Observers point out that the 2008 farm bill changes were intended to balance the concerns of both
sides and, in effect, settle the longstanding controversy over requiring COOL. However,
unfolding trade and market developments, including the WTO challenge initiated by Canada and
Mexico and changes in import patterns, could alter the dynamics of any COOL debate in the 111th
Congress and later.
34
AMI, “American Meat Institute Tells U.S. Trade Representative that Mandatory Country-of-Origin Labeling
Violates International Trade Obligations,” January 8, 2010, available at http://www.meatami.com/ht/display/
ReleaseDetails/i/56358.
35
USCA, “USCA and Farmers Union Urge Vigorous COOL Defense,” January 12, 2010, available at
http://www.uscattlemen.org/TheNewsRoom/2010_News/1-12COOLdefense.htm.
36
NCBA, “NCBA Statement on Canadian WTO Complaint against U.S. COOL Law,” October 7, 2009, available at
http://www.beefusa.org/NEWSNCBAStatementonCanadianWTOComplaintagainstUSCOOLLaw39616.aspx.
37
R-CALF USA, “Canada, Mexico Have No Standing to Bring Complaint Against U.S. COOL Law,” July 2, 2009,
available at http://www.r-calfusa.com/news_releases/2009/090702-canada.htm.
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Country-of-Origin Labeling for Foods
Expansion of COOL in Food Safety Measures
Provisions in one major food safety bill (H.R. 2749) would expand the scope of country-of-origin
labeling to apply to all processed foods and other agricultural commodities not now covered
under other statutory authorities. Earlier, during the 2008 debate over the safety of imported foods
due in part to the scare over melamine in imports from China, some suggested that COOL be
extended to additional products—a proposal included in an FDA reform bill and subsequent food
safety measures.
Section 202 of H.R. 2749 (the House-passed food safety measure) would, by amending the
Federal Food, Drug, and Cosmetic Act (FFDCA), significantly expand the country-of-origin food
labeling requirement to apply to all processed foods, and to all non-processed foods not covered
by the 2002 and 2008 farm bill provisions. As noted earlier, the FFDCA does not contain express
COOL requirements for foods (or drugs). Failure to meet either of the following labeling
requirements would be cause for FDA to deem such an incident a “misbranding” of the product,
which would result in the imposition of fines and/or other penalties on the seller.38 Specifically, a
processed food would be “misbranded” if its label did not identify the country where final
processing occurred. Relatedly, a non-processed food would be “misbranded” if its label failed to
identify the country of origin. These requirements would take effect two years after enactment.
Acknowledging that other federal laws already require COOL for food, this provision would
direct FDA to develop its regulations to account for the labeling requirements already mandated
by U.S. Customs and Border Protection for processed foods (see “Tariff Act”) and by the
Agricultural Marketing Service for non-processed foods (see “Key Provisions”). No comparable
provision is in the Senate’s food safety bill (S. 510) as reported by the Health, Education, Labor,
and Pensions (HELP) Committee. Amendments to require COOL for additional products might
be offered during Senate floor debate. An earlier version of the House bill (Section 133 of H.R.
759, 110th Congress) also would have required a manufacturer of a processed food to identify the
country or countries of origin for each ingredient in the product, and an original packer of nonprocessed food to identify its country of origin, on their respective websites.
COOL for Dairy Products
Separately, S. 1783 would amend the Agricultural Marketing Act of 1946 to provide for countryof-origin labeling for dairy products (fluid milk, cheese, yogurt, ice cream, butter, and other dairy
products). Each retailer of dairy products would be required to designate the product’s origin as
(1) each country in which or from which the one or more dairy ingredients were produced or
originated, and each country in which the product was processed; and (2) if a U.S.-produced dairy
product, the state, region, or locality where the product was produced. Proponents argue that this
“tool” would give consumers information to “quickly and easily identify” U.S.-made dairy
products from milk that meets U.S. “high safety standards,” in light of the 2008 discovery of
melamine in Chinese dairy products.39
38
The concept of misbranding is one of the basic components of the FFDCA, and persons who violate its prohibitions
are subject to criminal and civil penalties, as well as injunctions and seizures of the misbranded product.
39
Office of Senator Al Franken, “Franken, Feingold, and Brown Introduce Dairy COOL Act,” October 14, 2009,
http://franken.senate.gov/?p=press_release&id=563.
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Country-of-Origin Labeling for Foods
The National Milk Producers Federation, the largest trade association representing dairy
producers, in late 2008 stated that it “does not desire to extend any COOL regulations to milk and
milk products.” It has not taken a position on this measure.40 Observers point out that imports of
fluid milk, cottage cheese, yogurt, and ice cream are minimal and that most imported cheeses and
butter already are labeled with country of origin under other federal authority (see “Tariff Act”).
The International Dairy Foods Association, a trade association representing dairy processors,
opposes the bill. It argues that mandating COOL for dairy products and not for other processed
foods “will reduce demand for [them] and encourage food manufacturers to substitute vegetablebased or other protein ingredients” instead.41
Author Contact Information
Remy Jurenas
Specialist in Agricultural Policy
rjurenas@crs.loc.gov, 7-7281
Acknowledgments
This is an update of a report written by Geoffrey S. Becker, Specialist in Agricultural Policy.
40
NMPF, “Comments on USDA’s Interim Final Rule on Mandatory COOL,” September 29, 2008, available at
http://www.nmpf.org/files/file/NMPF%20COOL%20comments%2009-29-08.pdf; E-mail communication from Dana
Brooks, NMPF, July 8, 2010.
41
Supermarket News, “Dairy Group Opposes COOL Law,” October 29, 2009, p. 19.
Congressional Research Service
17
trading partners have their own import labeling requirements.
Less than one year after the COOL rules took effect, Canada and Mexico used the World Trade
Organization’s (WTO’s) trade dispute resolution process to challenge some features that apply to
labeling meat. Both countries argued that COOL has a trade-distorting impact by reducing the
value and number of cattle and hogs shipped to the U.S. market. For this reason, they argued that
COOL violates WTO trade commitments agreed to by the United States. On November 18, 2011,
a WTO dispute settlement (DS) panel found that (1) COOL treats imported livestock less
favorably than like U.S. livestock (particularly in the labeling of beef and pork muscle cuts), and
(2) COOL does not meet its objective to provide complete information to consumers on the origin
of meat products. The panel reached these conclusions by examining the economic effects of the
measures taken by U.S. livestock producers and meat processors to implement COOL, and by
accepting arguments that the way meat is labeled to indicate where the multiple steps of livestock
birth, raising, and slaughtering occurred is confusing.
On March 23, 2012, the United States appealed the panel report to the WTO Appellate Body
(AB). On June 29, 2012, the AB upheld the DS panel’s finding that the COOL measure treats
imported Canadian cattle and hogs, and imported Mexican cattle, less favorably than like
domestic livestock, because of its record-keeping and verification requirements. The AB,
however, reversed the panel’s finding that COOL does not fulfill its legitimate objective to
provide consumers with information on origin. The Obama Administration welcomed the AB’s
affirmation of the U.S. right to adopt labeling requirements to inform consumers on the origin of
the meat they purchase, but did not signal what steps might be considered to address the ‘less
favorable treatment’ finding. Participants in the U.S. livestock sector had mixed reactions,
reflecting the heated debate on COOL that occurred over the last decade. Two consumer groups
expressed concern that this WTO decision further undermines U.S. consumer protections.
If the United States decides to bring COOL into compliance with the AB finding, WTO rules call
for that to occur within a reasonable period of time. Options would be to consider regulatory
and/or statutory changes to the COOL regulations and/or law. If the United States does not
comply, Canada and Mexico would have the right to seek compensation or retaliate against
imports from the United States.
Congressional Research Service
Country-of-Origin Labeling for Foods and the WTO Trade Dispute on Meat Labeling
Contents
Overview.......................................................................................................................................... 1
Legislation ................................................................................................................................. 1
USDA Regulations and Secretary’s Statement to Implement COOL........................................ 1
Costs and Benefits ..................................................................................................................... 2
COOL’s Meat Labeling Challenged in the WTO ...................................................................... 2
Key Provisions of COOL................................................................................................................. 3
Defining and Labeling Origin for Meats ................................................................................... 3
Changes Made from Interim Rule to Final Rule ................................................................. 4
Vilsack Letter ...................................................................................................................... 5
Defining Origin for Other Covered Commodities..................................................................... 5
Scope of Coverage..................................................................................................................... 6
Record-Keeping, Verification, and Penalties............................................................................. 6
Administrative Enforcement and Audits.......................................................................................... 7
COOL Challenged by Canada and Mexico in WTO........................................................................ 8
Dispute Panel Ruling................................................................................................................. 9
U.S. Appeal of the WTO Panel Ruling.................................................................................... 10
WTO Findings ......................................................................................................................... 11
COOL Treats Imported Livestock Less Favorably than Domestic Livestock................... 11
Ground Meat Label Does Not Result in Less Favorable Treatment for Imported
Livestock........................................................................................................................ 14
COOL Does Not Meet Objective of Providing Consumers with Information on
Origin of Meats .............................................................................................................. 15
Vilsack Letter Is Not a Technical Regulation.................................................................... 16
Reaction to WTO DS Panel and Appellate Body Reports....................................................... 16
United States ..................................................................................................................... 16
Canada............................................................................................................................... 18
Reactions to the USTR Decision to Appeal ...................................................................... 19
Next Steps................................................................................................................................ 19
Compliance under WTO Procedures with Appellate Body’s Report ................................ 19
U.S. Options and Timetable .............................................................................................. 20
Legislation in the 112th Congress................................................................................................... 21
Figures
Figure C-1. U.S. Cattle Imports from Canada ............................................................................... 27
Figure C-2. U.S. Cattle Imports from Mexico............................................................................... 27
Figure C-3. U.S. Cattle Imports from Canada and Mexico ........................................................... 28
Figure C-4. U.S. Hog Imports from Canada.................................................................................. 30
Tables
Table 1. COOL for Beef and Pork: From Statute to Label ............................................................ 12
Congressional Research Service
Country-of-Origin Labeling for Foods and the WTO Trade Dispute on Meat Labeling
Table B-1. COOL Developments & WTO Dispute Settlement Case............................................. 24
Table C-1. Value of U.S. Cattle and Hog Trade............................................................................. 26
Appendixes
Appendix A. Other Laws with Food Labeling Provisions............................................................. 22
Appendix B. Timeline of COOL.................................................................................................... 24
Appendix C. North American Livestock Trade ............................................................................. 25
Contacts
Author Contact Information........................................................................................................... 31
Acknowledgments ......................................................................................................................... 31
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Country-of-Origin Labeling for Foods and the WTO Trade Dispute on Meat Labeling
Overview
Since the 1930s, U.S. tariff law has required almost all imports to carry labels so that the
“ultimate purchaser,” usually the retail consumer, can determine their country of origin. However,
certain products, including a number of agricultural commodities in their “natural” state, such as
meats, fruits and vegetables, were excluded (see Appendix A for a description of this and two
other food labeling laws dealing with the display of country of origin on imported products). For
almost as many decades, various farm and consumer groups have pressed Congress to end one or
more of these exceptions, arguing that U.S. consumers have a right to know where all of their
food comes from and that, given a choice, they would purchase the domestic version. This would
strengthen demand and prices for U.S. farmers and ranchers, it was argued.
Opponents of ending these exceptions to country-of-origin labeling (COOL) contended that there
was little or no real evidence that consumers want such information and that industry compliance
costs would far outweigh any potential benefits to producers or consumers. Such opponents,
including some farm and food marketing groups, argued that mandatory COOL for meats,
produce, or other agricultural commodities was a form of protectionism that would undermine
U.S. efforts to reduce foreign barriers to trade in the global economy. COOL supporters countered
that it was unfair to exempt agricultural commodities from the labeling requirements that U.S.
importers of almost all other products already must meet, and that major U.S. trading partners
impose their own COOL requirements for imported meats, produce, and other foods.
Legislation
With passage of the 2002 farm bill (P.L. 107-171, §10816), retail-level COOL was to become
mandatory for fresh fruits and vegetables, beef, pork, lamb, seafood, and peanuts, starting
September 30, 2004. Continuing controversy over the new requirements within the food and
agricultural industry led Congress to postpone full implementation. The FY2004 Omnibus
Appropriations Act (P.L. 108-199) postponed COOL—except for seafood—until September 30,
2006; the FY2006 Agriculture Appropriations Act (P.L. 109-97) further postponed it until
September 30, 2008.
During deliberations on the 2008 farm bill, the interest groups most affected by COOL reached
consensus on various changes intended to ease what they viewed to be some of the more onerous
provisions of the 2002 COOL law. Provisions dealing with record-keeping requirements, the
factors to be considered for labeling U.S. and non-U.S. origin products, and penalties for
noncompliance were modified. These amendments were incorporated into P.L. 110-246, Section
11002. The enacted 2008 farm bill required that COOL take effect on September 30, 2008, and
added goat meat, chicken, macadamia nuts, pecans, and ginseng as commodities covered by
mandatory COOL. (See Appendix B for a timeline of key COOL developments.)
USDA Regulations and Secretary’s Statement to Implement COOL
The final rule to implement the COOL requirements for all covered commodities was issued by
the U.S. Department of Agriculture’s (USDA’s) Agricultural Marketing Service (AMS) during the
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final days of the Bush Administration in January 2009.1 It included changes to the interim rule
published in August 2008 that some had criticized as watering down the COOL statute (see
“Changes Made from Interim Rule to Final Rule”). In February 2009, the Secretary of Agriculture
announced that the final rule would take effect as planned on March 16, 2009. However, he also
urged affected industries to adopt—voluntarily—additional changes that, he asserted, would
provide more specific origin information to consumers and more closely adhere to the intent of
the COOL law (see section titled “Vilsack Letter” for details).
Costs and Benefits
COOL supporters argued that numerous studies show that consumers want country-of-origin
labeling and would pay extra for it. Analysis accompanying USDA’s interim and final rules
concluded that, while benefits are difficult to quantify, it appears they will be small and will
accrue mainly to consumers who desire such information. A Colorado State University economist
suggested that consumers might be willing to pay a premium for “COOL meat” from the United
States, but only if they perceive U.S. meat to be safer and of higher quality than foreign meat.2
USDA earlier had estimated that purchases of (i.e., demand for) covered commodities would have
to increase by 1% to 5% for benefits to cover COOL costs, but added that such increases were not
anticipated. Data from several economic studies that aimed to model COOL impacts appear to fall
within this range.3
Critics of mandatory COOL have argued that large compliance costs will more than offset any
consumer benefits. USDA’s analysis of its final rule estimates first-year implementation costs to
be approximately $2.6 billion for those affected. Of the total, each commodity producer would
bear an average estimated cost of $370, intermediary firms (such as wholesalers or processors)
$48,219 each, and retailers $254,685 each. The USDA analysis also includes estimates of recordkeeping costs and of food sector economic losses due to the rule.
COOL’s Meat Labeling Challenged in the WTO
Meat labeling proved to be the most contentious of COOL requirements, leading Canada and
Mexico to challenge COOL using the World Trade Organization’s (WTO’s) dispute settlement
process. They were concerned that normal livestock trade flows would be disrupted in response to
the COOL regulations and questioned COOL’s legality under international trade rules. After
1
USDA, January 12, 2009, “USDA Issues Final Rule On Mandatory Country of Origin Labeling,” available at
http://www.usda.gov/wps/portal/usda/usdahome?printable=true&contentidonly=true&contentid=2009/01/0006.xml;
and Federal Register, January 15, 2009, pp. 2658-2707. This final rule replaced both the April 4, 2005, interim final
rule for seafood, and the August 1, 2008, interim final rule (Federal Register, pp. 45106-45151) for all other covered
commodities. An AMS fact sheet on the final rule, including a summary of changes from the interim final rules and
estimates on COOL implementation costs, is available at http://www.ams.usda.gov/AMSv1.0/getfile?dDocName=
STELPRDC5074847.
2
Wendy J. Umberger, “Will Consumers Pay a Premium for Country-of-Origin Labeled Meat?,” Choices, 4th quarter
2004, http://www.choicesmagazine.org/2004-4/cool/2004-4-04.htm.
3
Gary W. Brewster et al., “Who Will Bear the Costs of Country-of-Origin Labeling?,” available at
http://www.choicesmagazine.org/2004-4/cool/2004-4-02.htm; Daniel D. Hanselka et al., “Demand Shifts in Beef
Associated with Country-of-Origin Labeling to Minimize Losses in Social Welfare,” Choices, 4th quarter 2004,
http://www.choicesmagazine.org/2004-4/cool/2004-4-03.htm; and Alejandro Plastina and Konstantinos Giannakis,
“Market and Welfare Effects of Mandatory Country-of-Origin Labeling in the U.S. Specialty Crops Sector,” American
Agricultural Economics Association Annual Meeting, Portland, Oregon, 2007.
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weighing available options, the Obama Administration decided to appeal the WTO’s adverse
findings issued in late 2011 on some of COOL’s provisions. If the U.S. appeal is not successful,
Congress may step in to amend the COOL statute or to advocate regulatory changes to bring this
labeling program into compliance with WTO rules.
Key Provisions of COOL
Mandatory country-of-origin labeling:
•
applies to ground and muscle cuts of beef, lamb, and pork, farm-raised and wild
fish and shellfish, peanuts, “perishable agricultural commodities” as defined by
the Perishable Agricultural Commodities Act (i.e., fresh and frozen fruits and
vegetables), goat meat, chicken, pecans, macadamia nuts, and ginseng (these are
referred to as “covered commodities”);4
•
exempts these items if they are an ingredient in a processed food;
•
covers only those retailers that annually purchase at least $230,000 of perishable
agricultural commodities,5 and requires them to inform consumers of origin “by
means of a label, stamp, mark, placard, or other clear and visible sign on the
covered commodity or on the package, display, holding unit, or bin containing
the commodity at the final point of sale”; and
•
exempts from these labeling requirements such “food service establishments” as
restaurants, cafeterias, bars, and similar facilities that prepare and sell foods to
the public.
Defining and Labeling Origin for Meats
In designating country of origin, difficulties arise when products—particularly meats—are
produced in multiple countries. For example, beef might be from an animal that was born and fed
in Canada, but slaughtered and processed in the United States. Likewise, products from several
different countries often are mixed, such as for ground beef. For covered red meats and chicken,
the COOL law:
•
permits the U.S. origin label to be used only on meats from animals that were
exclusively born, raised, and slaughtered in the United States, with an exception
for those animals present here before July 15, 2008;
•
permits meats or chicken with multiple countries of origin to be labeled as being
from all of the countries in which the animals may have been born, raised, or
slaughtered;
4
A slightly different COOL requirement applies to packaged honey if it bears any official USDA certificate, mark, or
statement with respect to quality and grade. It was added by Section 10402 of the 2008 farm bill (P.L. 110-246) to the
Agricultural Marketing Act, and took effect on October 6, 2009. For more information, see http://www.ams.usda.gov/
AMSv1.0/ams.fetchTemplateData.do?startIndex=1&startIndex=2&startIndex=1&startIndex=2&template=
TemplateN&navID=ProcessedFVUpdates&rightNav1=&topNav=&leftNav=&page=ProcessedFVUpdates&
resultType=&acct=procsdgrdcert.
5
The COOL statute uses by reference this definition of “retailer” laid out in the Perishable Agricultural Commodities
Act to identify those retailers required to comply with COOL requirements.
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•
requires meat or chicken from animals imported for immediate U.S. slaughter to
be labeled as from both the country the animal came from and the United States;
•
requires products from animals not born, raised, or slaughtered in the United
States to be labeled with their correct country(ies) of origin; and
•
requires, for ground meat and chicken products, that the label list all countries of
origin, or all “reasonably possible” countries of origin.
Because these statutory requirements are at the heart of the ongoing WTO dispute case, Table 1
traces the progression of statutory language to implementing regulations to the retail labels to be
used for each of these five categories.
Changes Made from Interim Rule to Final Rule
The meat labeling requirements have proven to be among the most complex and controversial
areas of rulemaking, in large part because of the steps that U.S. feeding operations and packing
plants must adopt to segregate, hold, and slaughter foreign-origin livestock separately from U.S.
livestock. After AMS issued the interim rules in August 2008, many retailers and meat processors
reportedly planned to use the “catch-all” multiple countries of origin label on as much meat as
possible—even products that would qualify for the U.S.-only label, because it was both permitted
and the easiest requirement to meet. COOL supporters objected that the label would be overused,
undermining the intent of COOL (i.e., to distinguish between U.S. and non-U.S. meats).6 In an
effort to balance the concerns of both sides, USDA issued a statement attempting to clarify its
August 2008 interim rule, stating that meats derived from both U.S.- and non-U.S.-origin animals
may carry a mixed-origin claim (e.g., “Product of U.S., Canada, and Mexico”), but that the
mixed-origin label cannot be used if only U.S.-origin meat was produced on a production day.7
The final (January 2009) rule attempted to further clarify the “multiple countries of origin”
language. For example, muscle cut products of exclusively U.S. origin along with those from
foreign-born animals, if commingled for slaughter on a single production day, can continue to
qualify for a combined U.S. and non-U.S. label. “It was never the intent of the Agency [AMS] for
the majority of product eligible to bear a U.S. origin declaration to bear a multiple origin
destination. The Agency made additional modifications for clarity,” AMS stated in material
accompanying the rule.8
The clarifying changes failed to mollify some. The National Farmers Union continued to view
this portion of the rule as a “loophole that would allow meat packers to use a multiple countries,
or NAFTA [North American Free Trade Agreement] label, rather than labeling U.S. products as
products of the United States” and stated “[t]his is misleading to consumers”.9 Seven senators
highlighted similar concerns, stating that it would allow “meatpackers to put a multiple country of
origin label on products that are exclusively U.S. products as well as those that are foreign.” They
characterized the final rule as defeating COOL’s primary purpose to provide “clear, accurate and
6
Cattle Buyers Weekly, August 4, 2008; and Food Chemical News, September 15, 2008.
AMS, “Country of Origin Labeling (COOL) Frequently Asked Questions,” September 26, 2008,
http://www.ams.usda.gov/AMSv1.0/getfile?dDocName=STELPRDC5071922.
8
USDA, AMS, January 12, 2009, fact sheet on the mandatory COOL final rule, p. 5, http://www.ams.usda.gov/
AMSv1.0/getfile?dDocName=STELPRDC5074847.
9
“NFU Statement: USDA Issues Final Rule for COOL,” January 12, 2009, http://nfu.org/news/news-archives/2009news/86-agriculture-programs/198-nfu-statement-usda-issues-final-rule-for-cool.
7
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truthful information” to U.S. consumers, and hoped the rules will be revised “to close these
loopholes.”10
Vilsack Letter
To address these views to comply with an Obama White House directive that all agencies review
recent regulations issued by the outgoing Administration, Secretary of Agriculture Vilsack in a
February 20, 2009, letter urged industry representatives to voluntarily adopt three suggested
labeling changes in order to provide more useful information to consumers than the final rule
itself might imply, and to better meet congressional intent. These dealt with the labeling of meat
products with multiple countries of origin, a reduction in the time allowance for labeling ground
meat held in inventory, and exemptions to the rules for processed products.
On labeling for multiple countries of origin, he stated that
processors should voluntarily include information about what production step occurred in each
country when multiple countries appear on the label. For example, animals born and raised in
Country X and slaughtered in Country Y might be labeled as “Born and Raised in Country X and
Slaughtered in Country Y.” Animals born in Country X but raised and slaughtered in Country Y
might be labeled as “Born in Country X and Raised and Slaughtered in Country Y.”
Vilsack’s letter noted that the final rule allows a label for ground meat to bear the name of a
country even if the meat from that country was not present in a processor’s inventory in the
preceding 60-day period. Noting that this allows for labeling this product “in a way that does not
clearly indicate [its] country of origin,” the Secretary asked processors to reduce this time
allowance to 10 days, stating that this “would enhance the credibility of the label.” (See also
“Scope of Coverage.”)
Secretary Vilsack also stated that USDA would closely monitor industry compliance to determine
whether “additional rulemaking may be necessary to provide consumers with adequate
information.”11 His letter was widely viewed as an effort to address the concerns of COOL
adherents without reopening the rule and thereby attracting renewed criticism from the meat
industry and U.S. trading partners.
Defining Origin for Other Covered Commodities
For perishable agricultural commodities, ginseng, peanuts, pecans, and macadamia nuts, retailers
may only claim U.S. origin if the product was exclusively produced in the United States.
However, a U.S. state, region, or locality designation is a sufficient U.S. identifier (e.g., Idaho
potatoes). For farm-raised fish and shellfish, a U.S.-labeled product must be derived exclusively
from fish or shellfish hatched, raised, harvested, and processed in the United States; wild fish and
shellfish must be derived exclusively from those harvested either in U.S. waters or by a U.S.
flagged vessel, and processed in the United States or on a U.S. vessel. Also, labels must
differentiate between wild and farm-raised fish and shellfish.
10
Letter to Secretary of Agriculture Tom Vilsack, February 3, 2009, http://web.archive.org/web/20090226012829/
http://dorgan.senate.gov/newsroom/extras/020309vilsack.pdf.
11
USDA, “Vilsack Announces Implementation of Country of Origin Labeling Law,” February 20, 2009,
http://www.usda.gov/wps/portal/usda/usdahome?printable=true&contentidonly=true&contentid=2009/02/0045.xml.
His letter is available at http://www.usda.gov/documents/0220_IndustryLetterCOOL.pdf.
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Scope of Coverage
Consumers may not find country-of-origin labels on much more of the food they buy, due to
COOL’s statutory and regulatory exemptions. First, as noted, all restaurants and other food
service providers are exempt, as are all retail grocery stores that buy less than $230,000 a year in
fresh fruits and vegetables. Second, “processed food items” derived from the covered
commodities are exempt, and USDA, in its final rule, defined this term broadly (at 7 C.F.R.
§65.220). Essentially, any time a covered commodity is subjected to a change that alters its basic
character, it is considered to be processed. Although adding salt, water, or sugar do not, under
USDA’s definition, change the basic character, virtually any sort of cooking, curing, or mixing
apparently does. For example, roasting a peanut or pecan, mixing peas with carrots, or breading a
piece of meat or chicken all count as processing. As a result, only about 30% of the U.S. beef
supply, 11% of all pork, 39% of chicken, and 40% of all fruit and vegetable supplies may be
covered by COOL requirements at the retail level.12 Whole peanuts are almost always purchased
in roasted form, and will not have to be labeled. Some critics argued that AMS overstepped its
authority, and congressional intent, by excepting such minimally processed commodities.
AMS countered that in fact many imported items still must carry COOL under provisions of the
Tariff Act of 1930. “For example, while a bag of frozen peas and carrots is considered a processed
food item under the COOL final rule, if the peas and carrots are of foreign origin, the Tariff Act
requires that the country of origin be marked on the bag,” AMS argued, citing similar regulatory
situations for roasted nuts and for a variety of seafood items.13
Vilsack’s letter, however, acknowledged that the “processed foods” definition in the final rule
“may be too broadly drafted. Even if products are subject to curing, smoking, broiling, grilling, or
steaming, voluntary labeling would be appropriate,” he wrote.
Record-Keeping, Verification, and Penalties
The COOL law prohibits USDA from using a mandatory animal identification (ID) system,14 but
the original 2002 version stated that the Secretary “may require that any person that prepares,
stores, handles, or distributes a covered commodity for retail sale maintain a verifiable recordkeeping audit trail that will permit the Secretary to verify compliance.” Verification immediately
became one of the most contentious issues, particularly for livestock producers, in part because of
the potential complications and costs to affected industries of tracking animals and their products
from birth through retail sale. Producers of plant-based commodities, as well as food retailers and
others, also expressed concern about the cost and difficulty of maintaining records for
commodities that are highly fungible and often widely sourced. The 2008 law eased these
requirements somewhat by stating that USDA “may conduct an audit of any person that prepares,
stores, handles, or distributes a covered commodity” in order to verify compliance. Such persons
must provide verification, but USDA may not ask for any additional records beyond those
maintained “in the course of the normal conduct of business.”
12
Percentages calculated by CRS based on USDA estimates of retail-level COOL coverage in pounds, divided by total
annual supply (USDA data on domestic production plus imports).
13
AMS, “Frequently Asked Questions,” January 12, 2009, available at http://www.ams.usda.gov/AMSv1.0/getfile?
dDocName=STELPRDC5074846.
14
For information on this related issue, see CRS Report R40832, Animal Identification and Traceability: Overview and
Issues, by Joel Greene.
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In its final rule, AMS stated that covered persons generally would have to keep records for one
year that can identify both the immediate previous source and the immediate subsequent recipient
of a covered commodity; certain exceptions are provided for pre-labeled products. Also, a
slaughter facility can accept a producer affidavit as sufficient evidence for animal origin claims.
Also, potential fines for willful noncompliance are set for retailers and other persons at no more
than $1,000 per violation. The 2002 law had set the fine at no more than $10,000 (and for
retailers only), but the 2008 farm bill lowered this amount.
Administrative Enforcement and Audits
USDA’s Agricultural Marketing Service implements COOL through cooperative agreements with
all 50 states.15 During FY2010, state agencies conducted 8,363 retail surveillance reviews to
ensure compliance with COOL requirements. These reviews involved the auditing of 200
products as they moved from initial suppliers to retail shelves. AMS resources (i.e., appropriated
funding of almost $10.7 million and 14 staff years in FY2011) are available to train federal and
state employees on enforcement responsibilities, conduct supply chain audits, analyze and
respond to formal complaints, and develop educational and outreach activities for retailers,
suppliers, and other interested parties. During FY2011, AMS planned to implement a real-time
database to track the findings of federal-state retail reviews, enforcement actions taken, and other
information viewed as critical to COOL operations.16
USDA’s Office of Inspector General (OIG) audited the operations of the COOL program during
2010. Its report noted that “AMS made significant strides implementing the final rule” but found
the need for improvements in its controls and processes to ensure that retailers and suppliers fully
comply with COOL regulations.” The OIG identified the need for AMS to strengthen its process
to select retailers to be reviewed and the review process itself, and to more quickly evaluate the
documentation kept by retailers and issue noncompliance letters. Auditors also pointed out that
AMS needs to be more vigorous in enforcing COOL requirements, provide better oversight of the
state agencies that conduct retailer reviews, and improve how it communicates with and provides
program guidance to retailers. AMS agreed with all of the OIG recommendations, and has taken,
or will take, steps to put them into effect.17
In reviews conducted in FY2009 and FY2010 in retail stores, AMS found that almost threequarters of the findings of noncompliance with COOL were due to the lack of labeling on covered
commodities. The second most frequent finding was that of inaccurate labeling (14%). Vegetables
and fruit accounted for a much higher rate of not complying with COOL requirements than any
other commodity group.18
15
AMS maintains an extensive website on COOL, with links to implementing regulations, cost-benefit analysis, and
other materials at http://www.ams.usda.gov/cool/.
16
USDA, FY2012 Budget Explanatory Notes for Committee on Appropriations for Agricultural Marketing Service, pp.
19-5, 19-14 to 19-15, 19g-10, and 19-47, http://www.obpa.usda.gov/19ams2012notes.pdf.
17
USDA, OIG, “Implementation of Country of Origin Labeling,” August 2011, pp. 1 and 4, http://www.usda.gov/oig/
webdocs/01601-04-HY.pdf.
18
USDA, AMS, “COOL—Retail Compliance FY2009-2010,” http://www.ams.usda.gov/AMSv1.0/getfile?
dDocName=STELPRDC5093595.
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COOL Challenged by Canada and Mexico in WTO
Canada and Mexico are major suppliers of live cattle and hogs that are fed in U.S. feeding
facilities and/or processed into beef and pork in U.S. meat packing plants. As the U.S. meat
processing sector geared up to implement COOL in mid-2008, Canada and Mexico expressed
concern that COOL would adversely impact their livestock sectors. Indeed, U.S. cattle imports
from Canada and Mexico and hog imports from Canada dropped in both 2008 and 2009 from
year-earlier levels. Some analyses supported claims that COOL hampered livestock imports.
Other analyses pointed out that factors such as exchange rates and inventory levels were also
affecting import levels and that declines could not be entirely attributed to COOL (see Appendix
C for background on livestock trade in North America).
Canada and Mexico requested consultations with the United States in December 2008 and June
2009 about their concerns. Not satisfied with the outcome of these consultations with U.S.
officials, both countries in early October 2009 requested the establishment of a WTO dispute
settlement (DS) panel to consider their case. In response, the U.S. Trade Representative (USTR)
and the Secretary of Agriculture commented that they “regretted that the formal consultations”
did not resolve concerns, and stated their belief that U.S. implementation of COOL provides
consumers with information that is consistent with WTO commitments. They noted that countries
worldwide had agreed that the principle of country-of-origin labeling was legitimate policy long
before the WTO was created, and that other countries also require goods to be labeled with their
origin.19
Both the Canadian and Mexican governments, in requesting a panel, asserted that COOL is
inconsistent with U.S. obligations under certain WTO agreements—the General Agreement on
Tariffs and Trade 1994, the Agreement on Technical Barriers to Trade, and the Agreement on
Rules of Origin. These obligations include treating imports no less favorably than like products of
domestic origin; making sure that product-related requirements are not more trade-restrictive than
necessary to fulfill a legitimate public policy objective; ensuring that compliance with laws on
marks of origin does not result in damaging imports, reducing their value, or unreasonably
increasing their cost; and ensuring that laws, rules, and procedures on country of origin do not
“themselves create restrictive, distorting, or disruptive” international trade, among others.
On November 19, 2009, the WTO’s Dispute Settlement Body established a panel to consider both
countries’ complaints. In proceeding with this WTO case, Canadian officials stated that the
COOL requirements are “so onerous” that when they were implemented, Canadian exporters of
cattle and hogs were discriminated against in the U.S. market. The Canadian beef and pork
industries, led by the Canadian Cattlemen’s Association (CCA) and the Canadian Pork Council,
actively pushed their government to initiate a WTO challenge. The CCA argued that COOL cost
its producers C$92 million over the two months following the publication of the interim rule in
August 2008, and could cost C$500 million per year. CCA estimated that slaughter steers and
heifers were losing C$90 per head, because U.S. meat establishments did not want to assume the
increased costs of complying with new labeling requirements by segregating, holding, and then
slaughtering Canadian cattle separately from U.S. cattle. The losses included lower prices for all
Canadian cattle due to decreased U.S. demand, as well as the cost of shipping those that are sold
19
U.S. Trade Representative, “Vilsack, Kirk Comment on Canadian Panel Request Regarding Country-of-Origin
Labeling,” October 7, 2009, http://www.ustr.gov/about-us/press-office/press-releases/2009/october/vilsack-kirkcomment-canadian-panel-request-regard.
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further distances to the fewer number of U.S. plants willing to take them. Canadian pork
producers expressed similar concerns.20
USTR’s request for public comment on this pending WTO case generated responses that reflected
the heated debate on mandatory COOL seen earlier among key players in the livestock sector. The
American Meat Institute (AMI), representing U.S. meat processors and packers, stated that the
U.S. law, in addition to violating WTO commitments, also violates NAFTA commitments. AMI
argued that COOL discriminates against imports in favor of domestic meat.21
In opposition, the U.S. Cattlemen’s Association (USCA) and the National Farmers Union argued
that COOL is “fully consistent” with the General Agreement on Tariffs and Trade and the
Agreement on Technical Barriers to Trade (key WTO commitments). Both stated that COOL
“does not discriminate between domestic and imported beef ... [and] operates neutrally in the
market place,” and noted that COOL does not impose any domestic content requirements (i.e.,
does not stipulate what share of value or quantity determines country of origin).22 The RanchersCattlemen Action Legal Fund, United Stockgrowers of America (R-CALF USA), presented
similar comments.23
The National Cattlemen’s Beef Association (NCBA) expressed concern that Canada’s decision to
pursue its case against U.S. COOL rules has the potential for retaliatory action to be taken against
U.S. beef. It noted that “COOL has damaged critically important trading relationships [i.e., the
import of Canadian and Mexican livestock, the value added as they pass through U.S. feedlots
and are processed into meat, and the export of finished meat products back to Mexican and
Canadian consumers], and is not putting additional money into the pockets of cattlemen.”24
Dispute Panel Ruling
On November 18, 2011, the WTO DS panel ruled that certain COOL requirements violate two
articles of the WTO Agreement on Technical Barriers to Trade (TBT) and the requirement for
impartial administration of regulations laid out in the General Agreement on Tariffs and Trade
1994 (GATT 1994).25 The panel concluded that the COOL “measure”—the statute and the final
rule—constituted a “technical regulation” under the TBT Agreement and was thus subject to TBT
obligations. It further found that the COOL measure (1) treated imported livestock less favorably
than “like domestic livestock,” particularly in the labeling of muscle cut meats (beef and pork), in
violation of the national treatment obligation in the TBT’s Article 2.1; and (2) failed to meet the
20
Various trade publication reports, including Cattle Buyers Weekly, “MCOOL Has Cost Canadian Producers C$92M,”
December 8, 2008; Agri-Pulse, “COOL Regulations Create Heartburn for Canadians,” December 3, 2008; and
Washington Trade Daily, December 2, 2008, pp. 3-4.
21
AMI, “American Meat Institute Tells U.S. Trade Representative That Mandatory Country-of-Origin Labeling
Violates International Trade Obligations,” January 8, 2010, http://www.meatami.com/ht/display/ReleaseDetails/i/
56358.
22
USCA, “USCA and Farmers Union Urge Vigorous COOL Defense,” January 12, 2010, http://www.uscattlemen.org/
TheNewsRoom/2010_News/1-12COOLdefense.htm.
23
R-CALF USA, “Canada, Mexico Have No Standing to Bring Complaint Against U.S. COOL Law,” July 2, 2009,
http://www.r-calfusa.com/news_releases/2009/090702-canada.htm.
24
NCBA, “NCBA Statement on Canadian WTO Complaint against U.S. COOL Law,” October 7, 2009,
http://www.beefusa.org/NEWSNCBAStatementonCanadianWTOComplaintagainstUSCOOLLaw39616.aspx.
25
CRS Legislative Attorneys Emily Barbour and Jeanne Grimmett contributed to this section summarizing the panel’s
ruling.
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legitimate objective of providing information to consumers on the origin of meat products, and
thus violated the TBT’s Article 2.2. The panel also found that the Vilsack letter’s “suggestions for
voluntary action” went beyond COOL’s obligations and, while not a “technical regulation,”
constitute unreasonable administration of COOL itself, thus violating Article X:3(a) of the GATT
1994.26 The panel concluded that the United States has “nullified or impaired benefits” to which
Canada and Mexico are entitled, and recommended that the WTO’s Dispute Settlement Body
(DSB)27 request the United States to conform these “inconsistent measures” with its obligations
under the TBT Agreement and GATT 1994.28 These three findings, along with the subsequent
decisions made by the WTO Appellate Body on two findings appealed by the United States, are
discussed below.
U.S. Appeal of the WTO Panel Ruling
Under WTO rules, the United States had various options available to respond to the dispute
panel’s adverse ruling on certain aspects of U.S. COOL. One was to accept the decision and make
changes to the COOL statute and/or regulations to comply with the WTO findings. Another was
to appeal the panel report on legal issues.29
On March 23, 2012, the United States appealed the WTO DS panel’s report to the WTO Appellate
Body (AB).30 The USTR spokeswoman restated USTR’s position that the report had confirmed
the U.S. right to adopt rules to inform consumers of the country of origin in their purchasing
decisions, but expressed disappointment that the panel “disagreed with the way that the United
States designed its COOL requirements” for beef and pork. USTR’s chief counsel stated that the
U.S. appeal is “a signal of our commitment” to ensure that consumers “are provided with accurate
and relevant information” on the origin of beef and pork, and “to fight for the interests of U.S.
consumers at the WTO.”31 On June 29, 2012, the WTO’s AB upheld the DS panel’s finding that
the COOL measure treats imported Canadian cattle and hogs, and imported Mexican cattle, less
favorably than like domestic livestock, due to its record-keeping and verification requirements.
The AB, however, reversed the panel’s finding that COOL does not fulfill its legitimate objective
26
The TBT Agreement is summarized in CRS Report R41306, Trade Law: An Introduction to Selected International
Agreements and U.S. Laws, by Jeanne J. Grimmett. The GATT 1994 commitment refers to the provision that requires
laws and regulations to be administered “in a uniform, impartial and reasonable manner.”
27
The Dispute Settlement Body has the sole authority to establish “panels” of experts to consider a trade dispute case
filed by any WTO member country, and to accept or reject the panels’ findings or the results of an appeal. It monitors
the implementation of the rulings and recommendations, and has the power to authorize retaliation when a country does
not comply with a ruling.
28
WTO, United States—Certain Country of Origin Labelling (COOL) Requirements, Reports of the Panel,
WT/DS384/R, WT/DS386/R, November 18, 2011, http://www.wto.org/english/tratop_e/dispu_e/384_386r_e.pdf.
Background on the COOL dispute case is available on the WTO’s website at http://wto.org/english/tratop_e/dispu_e/
cases_e/ds384_e.htm (Canada) and http://wto.org/english/tratop_e/dispu_e/cases_e/ds386_e.htm (Mexico).
29
CRS Legislative Attorney Jeanne Grimmett contributed to the sections summarizing the WTO’s appeals process for
panel reports and the WTO procedures that would apply if the United States is not successful with its appeal.
30
This “is a standing body of seven persons that hears appeals from reports issued by panels in disputes brought by
WTO Members. ... Appellate Body Reports, once adopted by the Dispute Settlement Body (DSB), must be accepted by
the parties to the dispute.” See http://wto.org/english/tratop_e/dispu_e/appellate_body_e.htm.
31
Reuters, “U.S. to appeal WTO ruling against meat labels,” March 23, 2012 (hereinafter cited as Reuters); AgriPulse.com, “USTR will appeal WTO ruling on COOL,” March 23, 2012. USTR’s appeal submission to the WTO is
available at http://www.ustr.gov/sites/default/files/US.AppellantSub.fin_.pdf.
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to provide consumers with information on origin. These determinations are briefly highlighted in
“WTO Findings,” below.
WTO Findings
COOL Treats Imported Livestock Less Favorably than Domestic Livestock
The DS panel found that Canada and Mexico demonstrated that COOL is a technical regulation
governed by, and in violation of, Article 2.1 of the TBT. The AB upheld this finding, but for
different reasons (see below). This TBT article states: “Members shall ensure that in respect of
technical regulations, products imported from the territory of any Member shall be accorded
treatment no less favourable than that accorded to like products of national origin and to like
products originating in any other country.” The panel first found that the COOL statute and the
final rule (but not the Vilsack letter) are a “technical regulation” because they are legally
enforceable requirements governing the labeling of meat products offered for sale.32 The panel
further found that Canadian and U.S. cattle, Canadian and U.S. hogs, and Mexican and U.S. cattle
are “like products,” and the muscle cut labels used to implement COOL affect competitive
conditions for these products in the U.S. market to the detriment of imported livestock. According
to the panel, COOL creates this “competitive advantage” by creating an incentive for “processing
exclusively domestic livestock and a disincentive against handling imported livestock.” More
specifically, the panel found that to comply with COOL, processors need to segregate imported
from domestic livestock to an extent that discourages them from using imported livestock at all.
In turn, this reduces the competitive opportunities for imported livestock relative to those for
domestic livestock. This is the first time that a WTO dispute panel took trade effects into account
in determining whether “less favorable treatment” was accorded to like products under
Article 2.1.
The panel based this conclusion on its assessment of the compliance requirements of COOL. It
first reviewed the four statutory definitions used to label the origin of beef and pork muscle cuts
(Table 1), noting that “origin is determined by the country in which specific livestock production
and processing steps took place (i.e., birth, raising and slaughtering),” and highlighted the
distinctions between the exclusive U.S. origin label and the other three labels that identified
livestock with an imported element (i.e., at least one step took place outside the United States). It
observed that “there was ... major flexibility” under COOL’s interim final rule (August 2008) to
use “multiple countries of origin” (Category B) for muscle cuts eligible for the U.S.-origin only
label (Category A) “without limitations.” However, as a response to public comment, COOL’s
final rule (January 2009) ended this flexibility, allowing the multiple countries declaration
(Category B) to be used to label U.S.-origin meat only if U.S. and foreign livestock were
commingled for slaughter “on a single production day.”
32
The panel made its determination on what is, and is not, a technical regulation with reference to TBT’s Annex 1.1. It
defines such to be a document that spells out “labeling requirements” among other features, including administrative
provisions, “with which compliance is mandatory.” The panel concluded that the COOL statute and final rule are “legal
instruments that are legally binding in US law,” with wording clearly mandating compliance, while the Vilsack letter,
rather than mandating additional labeling requirements, presents them as “suggestions for voluntary action.”
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Table 1. COOL for Beef and Pork: From Statute to Label
Muscle Cuts
& Ground
Meat
Categories
UNITED STATES
COUNTRY OF
ORIGIN
[Category A]
COOL
Statutory
Definition
“beef [or] ... pork
... derived from
an animal that
was ... exclusively
born, raised, and
slaughtered in the
United States”
“beef [or] ... pork
... derived from
an animal that
is—
(i) not exclusively
born, raised and
slaughtered in the
United States;
MULTIPLE
COUNTRIES OF
ORIGIN
[Category B]
(ii) born, raised
or slaughtered in
the United States;
and
(iii) not imported
into the United
States for
immediate
slaughter”
AMS Final Rule (January 2009)
COOL
Label at
Retail
Level
For beef and pork, means:
“(1) From animals exclusively born, raised, and slaughtered in the United
States; (2) From animals born and raised in Alaska or Hawaii and
transported for a period of not more than 60 days through Canada
to the United States and slaughtered in the United States; ...”
Product of
the US(A)
For muscle cuts of beef and pork “derived from animals that were
born in Country X or (as applicable) Country Y, raised and slaughtered
in the United States, and were not derived from animals imported for
immediate slaughter [defined as “consignment directly from the port
of entry to a recognized slaughtering establishment and slaughtered
within 2 weeks from the date of entry”], the origin may be designated
as Product of the United States, Country X, and (as applicable)
Country Y.”
For muscle cuts of beef and pork “derived from animals born, raised,
and slaughtered in the U.S. that are commingled during a production day
with muscle cuts [of beef and pork from animals born outside the U.S.,
raised and slaughtered in the U.S., and not imported for immediate
slaughter], the origin may be designated as Product of the United
States, Country X, and (as applicable) Country Y.”
For muscle cuts of beef and pork “derived from animals that are born
in Country X or Country Y, raised and slaughtered in the United States,
that are commingled during a production day with muscle cut[s of beef
and pork] derived from animals that are imported into the United States
for immediate slaughter ..., the origin may be designated as Product of
the United States, Country X, and (as applicable) Country Y.”
Product of
the US,
Country X,
and Country
Y (if
applicable)
“In each case, the countries may be listed in any order. In addition,
the origin declaration may include more specific information related
to production steps provided records to substantiate the claims are
maintained and the claim is consistent with other applicable Federal
legal requirements.”
IMPORTED FOR
IMMEDIATE
SLAUGHTER
[Category C]
FOREIGN
COUNTRY OF
ORIGIN
[Category D]
“beef [or] ... pork
... derived from
an animal that is
imported into the
United States for
immediate
slaughter”
“If an animal was imported into the United States for immediate
slaughter [defined as “consignment directly from the port of entry to
a recognized slaughtering establishment and slaughtered within 2
weeks from the date of entry”], the origin of the resulting [beef and
pork] derived from that animal shall be designated as Product of
Country X and the United States.”
“beef [or] ... pork
... derived from
an animal ... not
born, raised, or
slaughtered in the
United States”
“Imported [beef and pork] for which origin has already been
established as defined by this law (e.g., born, raised, and slaughtered
or produced) and for which no production steps have occurred in the
United States, shall retain their origin, as declared to U.S. Customs
and Border Protection at the time the product entered the United
States, through retail sale.”
Congressional Research Service
Product of
Country X,
US
Product of
Country X
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Country-of-Origin Labeling for Foods and the WTO Trade Dispute on Meat Labeling
Muscle Cuts
& Ground
Meat
Categories
GROUND BEEF
OR PORK
COOL
Statutory
Definition
“notice ... for
ground beef,
ground pork ...
shall include a list
of all [or] ... all
reasonably
possible countries
of origin of such
ground beef,
ground pork, ...”
AMS Final Rule (January 2009)
“The declaration for ground beef, ground pork, ... shall list all countries
of origin contained therein or that may be reasonably contained therein. In
determining what is considered reasonable, when a raw material
from a specific origin is not in a processor’s inventory for more than
60 days, that country shall no longer be included as a possible
country of origin.”
COOL
Label at
Retail
Level
Product of
US, Country
X, [and as
applicable]
Country Y,
Country Z,
...
Source: 7 U.S.C. §§1638a(a)(2)(A)-(D), Section 282 of Agricultural Marketing Act of 1946, as amended by 2008
farm bill (§10816 of P.L. 107-171); 7 CFR 65.260(a)(1), 65.300(e)(1)-(4) and 65.300(h), as published in the Federal
Register, January 15, 2008, p. 2706; Agricultural Marketing Service, “Labeling Options,” p. 2,
http://www.ams.usda.gov/AMSv1.0/getfile?dDocName=STELPRDC5074845.
Notes: Key terms are in italics. These same designations also apply to other covered meats (lamb, chicken, and
goat meat), but they were not the subject of complaints filed by Canada and Mexico in the WTO case.
The panel then examined what is involved in segregating livestock and meat between domestic
and foreign origin under five business scenarios. It determined that “the least costly way” to
comply with COOL “is to rely on exclusively domestic livestock” rather than imported livestock.
Accepting evidence provided by Canada and Mexico that major U.S. slaughterhouses are
“applying a considerable COOL discount of [US$] 40-60 per head for imported livestock” but not
to domestic livestock, the panel observed that COOL creates an incentive to process domestic
rather than imported livestock because it is less costly to do so. It pointed out that several U.S.
meat processors indicated they plan to move to use Category A (U.S. origin) “for the vast
majority of their beef and pork products” and to ensure segregation by origin (i.e., minimize
commingling). Other evidence presented confirmed that the U.S.-origin label accounts for a large
share of the meat marketed. The United States indicated that 71% of the beef, and 70% of the
pork, sold at the retail level carries the exclusive U.S. label. Canada showed that close to 90% of
meat sold at retail carries this U.S. label. Based on the above, the panel “preliminarily” concluded
that COOL “creates an incentive to use domestic livestock—and a disincentive to handle
imported livestock—by imposing higher segregation costs on imported livestock than on
domestic livestock.” The panel’s report also showed that some U.S. plants and companies “are
simply refusing to process any imported livestock any more,” and that fewer U.S. processing
plants are accepting cattle and hog imports than before. It also noted that certain suppliers had to
transport imported livestock longer distances than before COOL, and that they also faced
logistical problems and additional costs for timing delivery to specific times or days when
processing is scheduled. Although the panel took these into account, it decided it also was
important to make findings on COOL’s actual trade effects. To do this, it considered data,
economic analyses, and econometric studies submitted by Canada, Mexico, and the United States.
In reviewing two economic studies on COOL’s livestock segregation costs submitted by Canada,
the panel stated “both studies shed some light on the different types of segregation and
compliance costs encountered at different stages of the supply chain.” Noting that such costs need
to be absorbed somewhere in the marketing system, it concluded that “economic competition
pressure” will dictate how these costs are allocated. Whether this involves processing only U.S.origin livestock because it is the cheapest way to comply with COOL and because many U.S.
consumers are not willing to pay a price premium for country-of-origin labeling, or incurring the
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additional costs associated with segregating imported livestock before processing, either option
“is likely to cause a decrease in the volume and price of imported livestock.”
The panel also reviewed econometric analyses33 submitted by Canada and the United States that
purported to assess COOL’s impacts on prices and shares of imported livestock. Whereas the
Canadian study concluded that COOL caused the reduced competitive opportunities for Canadian
livestock in the U.S. market, the U.S. study concluded that the economic recession was the
primary cause. Rather than seeking to reconcile these disparate conclusions, the panel instead
assessed “the robustness of each study.” It considered Canada’s study to be “sufficiently robust”
because it included other economic variables that confirmed that COOL—not the economic
recession that began in 2008, the 2004-2005 U.S. import ban due to the discovery of BSE in
Canada’s cattle herds, or transport costs—“had a negative and significant impact on Canadian
import shares and price basis.” Conversely, the panel found the U.S. study did not sufficiently
show that the economic recession rather than COOL accounted for the negative impacts
experienced in the cattle sector, did not fully analyze what occurred in both countries’ hog
sectors, and thus did not refute what Canada’s study laid out.
In reviewing the U.S. appeal of this finding, the Appellate Body found that the panel’s analysis
was incomplete in not considering whether or not the detrimental impact on imports were due
exclusively to a “legitimate regulatory distinction.” The AB found that the COOL measure
lacks even-handedness because its recordkeeping and verification requirements impose a
disproportionate burden on upstream producers and processors of livestock as compared to the
information conveyed to consumers through the mandatory labelling requirements for meat sold
at the retail level. That is, although a large amount of information must be tracked and transmitted
by upstream producers for purposes of providing consumers with information on origin, only a
small amount of this information is actually communicated to consumers in an understandable or
accurate manner, including because a considerable proportion of meat sold in the United States is
not subject to the COOL measure’s labelling requirements at all.34
Because the detrimental impacts did not have a sufficient regulatory basis, the AB found the
measure to be discriminatory against imports and thus upheld the DS panel’s finding.
Ground Meat Label Does Not Result in Less Favorable Treatment for Imported
Livestock
The DS panel determined that, unlike the muscle cut labels, the ground meat labels were
consistent with Article 2.1 of the TBT. It found that the 60-day “inventory allowance” gives
significant flexibility to processors (e.g., beef grinders) in labeling country of origin. This rule is
based on the statutory requirement that ground meat labels list all actual or “reasonably possible”
countries of origin. In practice, the rule allows a processor to use the same label for all of its
ground meat so long as the label lists all countries of origin of the meat in the processor’s
inventory for the last 60 days. Moreover, the 60-day “inventory allowance” flexibility is available
not only for meat processors, but for market participants at every stage of meat supply and
distribution. The panel determined that, contrary to Canada and Mexico’s assertions, the rule’s
33
These involve applying mathematics and statistical methods to study relationships between economic variables.
WTO, United States—Certain Country of Origin Labelling (COOL) Requirements, ‘Summary of key findings,”
available at http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds384_e.htm.
34
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flexibility “limits any additional costs of implementing” the ground meat labeling requirements.
Canada and Mexico did not present any evidence that, despite this flexibility, compliance with
COOL for ground meat affected imported livestock less favorably than domestic livestock.
Canada and Mexico did not appeal this finding to the AB.
COOL Does Not Meet Objective of Providing Consumers with Information on
Origin of Meats
Canada and Mexico also alleged that COOL violates Article 2.2 of the TBT by being more traderestrictive than necessary to fulfill a legitimate policy objective. Article 2.2 reads: “Members shall
ensure that technical regulations are not prepared, adopted or applied with a view to or with the
effect of creating unnecessary obstacles to international trade. For this purpose, technical
regulations shall not be more trade-restrictive than necessary to fulfil a legitimate objective,
taking account of the risks non-fulfillment would create. Such legitimate objectives are, inter
alia: national security requirements; the prevention of deceptive practices; protection of human
health or safety, animal or plant life or health, or the environment. In assessing such risks,
relevant elements of consideration are, inter alia: available scientific and technical information,
related processing technology or intended end-uses of products” (italics added for emphasis). The
panel accepted the U.S. position that COOL’s objective is to inform consumers of the country of
origin of meat products, 35 and it agreed with the United States that this is a “legitimate” policy
objective under TBT’s Article 2.2 to pursue. However, it concluded that COOL’s implementation
is more trade-restrictive than necessary to fulfill this objective because it does not, in fact,
meaningfully inform consumers about the countries of origin of meat products. In other words,
the panel held that because COOL is both trade-restrictive by virtue of its inconsistency with
Article 2.1 of the TBT and ineffective at achieving its policy objective, it is “more traderestrictive than necessary.”
In reaching its conclusion that COOL does not achieve its objective, the DS panel agreed with
Canada and Mexico that the labels identifying multiple countries of origin could confuse or
mislead, rather than inform, consumers. It noted that a consumer could not readily distinguish the
origins of meat products listed on a Category B label as coming from multiple countries, from the
origins of meat products shown on a Category C label as coming from those same multiple
countries (e.g., Product of the United States, Canada [Category B], compared to Product of
Canada, United States [Category C]) (Table 1). The panel added that because processors have the
flexibility to use both types of labels interchangeably for commingled meat (i.e., meat processed
from animals of different origins), the labels not only fail to inform the average consumer of the
distinction between them but could also mislead a fully informed consumer about the precise
origins of some meat products.
However, the Appellate Body found that the DS panel erred in interpreting and applying Article
2.2. Although it agreed with the panel that COOL’s objective is to provide consumers with
information on origin and that this is a legitimate objective, the AB viewed the panel’s finding as
too narrow. Its summary states that the panel “ignored its own findings, which demonstrated that
the COOL measure does contribute, at least to some extent, to achieving its objective.” The AB
35
The panel rejected Canada’s and Mexico’s argument that COOL’s objective is to protect the domestic U.S. livestock
industry (p. 143 of WTO panel’s report; see footnote 28).
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reversed the panel’s finding, but was not able to determine whether COOL is more traderestrictive than necessary to meet the TBT requirement that it be a legitimate objective.36
Vilsack Letter Is Not a Technical Regulation
Although the panel recognized that the Vilsack letter was not a technical regulation within the
scope of the TBT Agreement, the panel agreed with Canada and Mexico that the Vilsack letter
violates Article X:3(a) of GATT 1994 (see “Vilsack Letter,” above, for details). This article states
that “[e]ach contracting party shall administer in a uniform, impartial and reasonable manner all
its laws, regulations, decisions and rulings ...” Specifically, the panel found that the letter is an
unreasonable act of administering COOL because (1) it could not find any “justifiable rationale”
for simultaneously permitting the final rule to enter into force and suggesting stricter practices
than the ones the rule requires, (2) the language of the letter may have caused uncertainty and
confusion as to its force and effect, and (3) its timing relative to the final rule’s entry into force
may have caused confusion about whether processors should comply with the final rule or the
Vilsack letter. The letter, it wrote, did not meet the minimum standards for transparency and
procedural fairness in the administration of trade regulations. In its appeal, Canada requested that
the AB make certain rulings on the Vilsack letter, but this was withdrawn after the United States
asserted that this measure had been withdrawn.
Reaction to WTO DS Panel and Appellate Body Reports
United States
With the WTO’s release of the DS panel’s report, USTR welcomed its affirmation of “the right of
the United States to require country of origin labeling for meat products.” Acknowledging that the
panel disagreed with the details on how the U.S. COOL requirements were designed, it expressed
the U.S. commitment to provide “consumers with accurate and relevant information [on] the
origin of meat products that they buy at the retail level.” USTR stated that it would consider all
options going forward, including an appeal.37
The U.S. meat sector expressed mixed reactions. Those in favor of making changes to COOL to
address the panel’s conclusions include the National Cattlemen’s Beef Association (NCBA), the
National Pork Producers Council (NPPC), and the American Meat Institute (AMI). The NCBA
advised against appealing this ruling. Instead, it urged USTR to work “to apply pressure on
Congress to bring the United States into WTO compliance across the board” and to act quickly
before Canada and Mexico—two important trading partners—impose “unnecessary and
unfortunate tariffs” on U.S. agricultural exports. The NPPC “will be working with lawmakers to
craft a legislative fix so that [COOL] is WTO-compliant” to avoid risking “retaliation from and a
trade war with Canada and Mexico.” AMI commented that the ruling “was not surprising,” stating
that it had “contended for years ... that [COOL] was not just costly and cumbersome, but a
violation of our country’s WTO obligations.”38
36
WTO, United States—Certain Country of Origin Labelling (COOL) Requirements, ‘Summary of key findings,”
available at http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds384_e.htm.
37
USTR, “Statement in Response to WTO Panel Decision on Country of Origin Labeling,” November 18, 2011,
http://www.ustr.gov/about-us/press-office/press-releases/2011/november/statement-office-us-trade-representativeresponse.
38
NCBA, “Statement ... [on] WTO Ruling on US Country of Origin Labeling,” http://www.beefusa.org/
(continued...)
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Livestock groups that support COOL as now implemented include the Ranchers-Cattlemen
Action Legal Fund (R-CALF) and the U.S. Cattlemen’s Association (USCA). R-CALF responded
that “the WTO is trying to usurp our nation’s sovereignty,” questioning “when do we allow an
international tribunal to dictate to our U.S. Congress what is or is not a legitimate objective of
providing information to United States’ citizens?” The USCA strongly disagreed with the panel’s
findings, but was pleased that the report “affirmed the right of the U.S. to label meat for
consumers.” Its president expressed support for USTR’s efforts to defend U.S. rights, pledging to
assist “with the appeal process” and to work “with our allies in the Administration and Congress
to ensure that COOL continues.”39
Other groups that had participated in the debate leading up to COOL’s enactment also weighed in.
The Food Marketing Institute (FMI) agreed with the panel’s conclusion that COOL “fails to
provide information in a meaningful way” and highlighted that “COOL enforcement has become
more burdensome than ever ... for retailers.” Its spokesman stated that COOL “will need to be
repealed or rewritten for the U.S. to meet its [trade obligations]” and that FMI will work with
Congress and USDA “to develop an alternative system” that informs consumers with useful
information.40 Among those supporting COOL, the National Farmers Union (NFU) responded
that it will work with USTR and USDA “to ensure that COOL is implemented to the fullest extent
of the law and in accordance with WTO.” Its statement concluded that “if these results are
unsatisfactory, then NFU will push to appeal the decision and continue to fight ... to ensure
COOL is allowed to continue for as long as it takes to get this done.” Public Citizen commented
that the WTO’s ruling against COOL for meats “make[s] it increasingly clear to the public that
the WTO is leading a race to the bottom in consumer protection” by its second-guessing “the U.S.
Congress, courts and public by elevating the goal of maximizing trade flows over consumer and
environmental protection.” Food and Water Watch urged the Administration to appeal the ruling,
noting that the WTO “should not get to decide what U.S. consumers get to know about their food
and should not be able to undermine rules put in place by U.S. elected officials.”41
Members of Congress also hold diverse views on COOL’s future. Some did not expect the WTO
panel’s decision on COOL to be favorable and view more “unwinnable” WTO cases as not in the
“best interest” of U.S. agricultural producers. Senator Pat Roberts, ranking Member of the Senate
Agriculture Committee, at a regional livestock meeting stated that he does not know of any
market study that “shows American consumers will buy more American products with labels in
(...continued)
newsreleases1.aspx?NewsID=1248; Pork Magazine, “NPPC: What’s on Tap for 2012?”, January 2012,
http://www.porknetwork.com/pork/pork-exec/Whats-on-Tap-for-2012-136695033.html; AMI, “WTO Rules in Favor of
Canada in Complaint Over U.S. Country-of-Origin Labeling Law,” http://www.meatami.com/ht/display/ArticleDetails/
i/73951.
39
R-CALF, “U.S. Sovereignty Usurped by WTO’s COOL Decision,” http://www.r-calfusa.com/news_releases/2011/
111118-sovereignty.htm; USCA, “WTO Dispute Panel Issues Final COOL Report,” http://www.uscattlemen.org/
TheNewsRoom/2011_News/11-21WTO_DisputePanel.htm.
40
FMI, “Food Retail Industry Applauds WTO Ruling on COOL,” http://www.fmi.org/news_releases/index.cfm?
fuseaction=mediatext&id=1277.
41
NFU, “NFU Will Work With Administration to Ensure COOL Compliance With WTO Rules,” http://nfu.org/news/
65-international-policy/723-nfu-will-work-with-administration-to-ensure-cool-compliance-with-wto-rules; Public
Citizen, “WTO Rules Against Country-of-Origin Meat Labeling Law: Third Ruling Against U.S. Consumer Safeguards
in 2011”, November 18, 2011, http://www.citizen.org/documents/release-wto-rules-against-coo-11-18-11.pdf; Food
and Water Watch, “WTO Decision on COOL Attacks Consumers’ Right to Know,” November 18, 2011,
http://www.foodandwaterwatch.org/pressreleases/wto-decision-on-cool-attacks-consumers%e2%80%99-right-to-know/
.
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the store” and hoped “we can change people’s minds.”42 By contrast, 19 Senators requested that
the Obama Administration appeal the panel’s ruling and “work to ensure that our COOL program
both meets our international trade obligations while continuing to provide such information to
consumers.” Their letter expressed concern about the ruling’s impact “on our ability to continue
providing [COOL] information to consumers” and noted that congressional intent behind the
2008 statutory changes was for “such labeling [to] be nondiscriminatory in its treatment of
imported products by requiring the labeling of both domestic as well as imported products.” The
letter further stated that the final COOL rule “appropriately establishes a labeling system which
provides important and useful information to consumers while not placing an undue burden on
the industry” and which “continues to provide the same opportunity for imported livestock to
compete in the domestic marketplace as was the case prior to USDA’s implementation of
COOL.”43
Canada
The Canadian government welcomed the panel’s ruling as a “clear victory for Canada’s livestock
industry.” Its Minister of Agriculture stated that the WTO decision “recognizes the integrated
nature of the North American supply chain in this vitally important industry” and that
“[r]emoving onerous labelling measures and unfair, unnecessary costs will improve
competitiveness, boost growth and help strengthen the prosperity of Canadian and American
producers alike.” He expressed the hope this ruling “will open the door to a negotiated settlement
of the dispute” and stressed Canada’s commitment to work with the United States to “create a
stronger more profitable livestock industry on both sides of the 49th parallel.”44
The Canadian Pork Council (CPC) stated that the panel’s report “vindicates [the] objections” the
pork industry had to COOL legislation, which it believes restricts market access (i.e., the
movement of live swine to the U.S. market) and constitutes a technical barrier. The CPC plans to
work “with like-minded groups in the U.S. to find a meaningful solution without further
litigation” (referring to a possible U.S. appeal and the process that would follow). The Canadian
Cattlemen’s Association (CCA) stated the ruling confirms Canada’s position that COOL
discriminates against live cattle shipped to the United States to the detriment of Canadian cattle
producers. In particular, it noted that since taking effect, COOL “has increased costs for U.S.
companies that import live Canadian cattle,” which has reduced “the competiveness of those
Canadian cattle in the U.S. market.” The CCA plans to continue working with the U.S. industry
“not ... for the outright repeal of COOL but [to] seek only those regulatory and statutory changes
necessary to eliminate the discrimination that COOL has imposed to the comparative
disadvantage of livestock imported into the U.S. vis-a-vis U.S. livestock.”45
42
High Plains/Midwest Ag Journal, “TCFA Members Face Scary Issues from Washington,” November 14, 2011,
http://www.hpj.com/archives/2011/nov11/nov14/1109TexasCattleFeedersjmlsr.cfm.
43
Office of Senator Tim Johnson, “Johnson, Enzi to Administration: Keep COOL Strong,” December 15, 2011, press
release with text of letter, http://johnson.senate.gov/public/index.cfm?p=PressReleases.
44
Foreign Affairs and International Trade Canada, “Canada Wins World Trade Organization Case on U.S. Country-ofOrigin Labelling,” November 18, 2011, http://www.international.gc.ca/media_commerce/comm/news-communiques/
2011/349.aspx?lang=eng&view=d; Farmscape, “Canada Hopes for Negotiated Resolution of M-COOL Dispute,”
November 22, 2011, http://www.farmscape.com/f2ShowScript.aspx?i=23812&q=
Canada+Hopes+for+Negotiated+Resolution+of+M-COOL+Dispute.
45
CPC, “Canadian Pork Producers Welcome the WTO Panel Decision on COOL,” November 18, 2011,
http://www.cpc-ccp.com/documents/news-releases/FINALWTOpaneldecisionpressrelease.pdf; CCA, “WTO Rules
Strongly in Favor of Canada in COOL Case,” November 18, 2011, http://www.cattle.ca/media/file/original/
(continued...)
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Reactions to the USTR Decision to Appeal
Interest groups that had urged the Obama Administration to appeal the WTO report (R-CALF,
NCA, NFU, Food and Water Watch, Public Citizen) supported this decision.46 Those that
advocated resolving this dispute (NCBA, NPPC) expressed disappointment, and noted that the
appeal jeopardizes strong trading relationships with Canada and Mexico and invites the prospect
of retaliation by these two countries against U.S. meat exports.47 (For background on all of these
groups’ positions, see “Reaction to WTO Panel Ruling, United States,” above.)
Canada’s Agriculture Minister expressed disappointment that the United States appealed, stating
his confidence that the WTO findings “will be upheld so that trade can move more freely,
benefiting producers and processors on both sides of the border.” Mexico’s Economic Ministry
declared that it would defend Mexico’s interests in the appeal process, and that it plans to file its
own notice of appeal seeking a review of some issues in the panel’s report that it says reflect
inadequate legal analysis.48
Next Steps
Compliance under WTO Procedures with Appellate Body’s Report
The Dispute Settlement Body will meet on July 10, 2012 to adopt the appellate report and the
panel report, as modified by the AB, under the reverse consensus rule.49 Under this rule, both
reports will be adopted unless all WTO member countries present at the meeting vote not to do
so. This rule makes adoption virtually automatic.50 In turn, the United States, Canada, and Mexico
will have to unconditionally accept the AB’s decision.
(...continued)
1058_2011_11_18_CCA_News_Release_WTO_rules_strongly_in_favor_of_Canada_in_COOL_case.pdf.
46
“R-CALF USA Applauds U.S. Appeal of WTO’s Adverse COOL Ruling,” March 23, 2012,
http://www.tradereform.org/2012/03/r-calf-usa-applauds-u-s-appeal-of-wtos-adverse-cool-ruling/#comment-163002;
“USCA Appreciates USTR Support for U.S. Cattle Producers,” March 26, 2012, http://www.uscattlemen.org/
TheNewsRoom/2012_News/3-26USTRSupport.htm; “NFU Applauds USTR Decision to Appeal WTO Ruling on
COOL,” March 23, 2012, http://nfu.org/news/212-international-policy/947-nfu-applauds-ustr-decision-to-appeal-wtoruling-on-cool-; Food & Water Watch, “President Obama Finally Stands Up for U.S. Farmers and Consumers: U.S.
Appeals WTO Decision on COOL,” March 23, 2012; “Public Citizen Applauds Obama Administration’s Efforts to
Defend Consumer Country of Origin Meat Labeling; Appeal of WTO Ruling Necessary First Step,” March 23, 2012,
http://citizen.typepad.com/eyesontrade/2012/03/public-citizen-applauds-obama-administrations-efforts-to-defendconsumer-country-of-origin-meat-labe.html.
47
“NCBA Statement on USTR Appeal of WTO Ruling on Country of Origin Labeling,” http://www.beefusa.org/
newsreleases1.aspx?newsid=2419; NPPC, “Capital Update, For the Week Ending March 23, 2012,”
http://www.nppc.org/2012/03/for-the-week-ending-march-23-2012/; Pork Network, “Pork, beef producers fear
retaliation from COOL appeal,” March 26, 2012, http://www.porknetwork.com/pork-news/latest/Pork-beef-producersfear-retaliation-from-COOL-appeal-144248155.html.
48
Reuters; Secretaría de Economía, “México continuará la defensa legal en OMC del caso COOL,” March 23, 2012,
http://www.economia.gob.mx/eventos-noticias/sala-de-prensa/informacion-relevante/7646-boletin087-12.
49
CRS Legislative Attorney Jeanne Grimmett contributed to this section summarizing the WTO procedures that apply
to complying with an AB report if a country is not successful with an appeal of a DS panel’s findings.
50
For details, see “Adoption of Panel Reports/Appellate Review (Articles 16, 17, 20)” in CRS Report RS20088,
Dispute Settlement in the World Trade Organization (WTO): An Overview, by Jeanne J. Grimmett.
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With the DSB expected to adopt both reports, the United States will need to take steps to comply
with the key findings in the AB’s report. Given that the compliance phase has not yet begun, the
United States has not indicated what course of action it will pursue. But the United States likely at
some point will begin the process to engage with both countries to resolve the dispute in a way
that is mutually acceptable to all of the parties.
U.S. Options and Timetable
With the United States having lost its appeal on one of the DS panel’s findings, USTR may
initiate consultations with Canada and Mexico to explore options on how to comply with the
AB’s decision. Possible options include modifying those COOL provisions highlighted in the
panel’s report, replacing them with others, or eliminating them altogether. Also, the
Administration is expected to engage in discussions with Congress on how to proceed. Certain
beef and pork groups, some farm organizations, and those in the meat industry that support
changing COOL have indicated that they will offer their suggestions on how the United States
should comply. Opponents of amending COOL will weigh in against making any changes.
USTR, in consultation with Congress, stakeholders, and Canada and Mexico, will need to
ascertain whether regulatory changes would suffice or whether the COOL statute would need to
be amended to secure sufficient flexibility to address the AB’s finding that imported Canadian
cattle and hogs, and imported Mexican cattle, are treated less favorably than like domestic
livestock.
If regulatory changes are determined to be sufficiently adequate to comply with the AB’s finding,
USDA would need to revisit the final regulations issued in January 2009 to implement COOL for
beef and pork. But if changes in the COOL statute are required, the debate that would follow
undoubtedly would bring back into the open long-standing divergent views on COOL’s efficacy
and cost. Congressional activity would likely mirror this debate.
Once the DSB adopts the DS panel and AB reports, the United States has 30 days to announce its
plans for implementing the final findings. If the United States is unable to comply immediately,
the WTO’s Dispute Settlement Understanding (DSU) allows for a “reasonable period of time” for
this to occur. For example, the United States could negotiate with Canada and Mexico what that
time frame might be, among other possibilities that are laid out in the DSU. If the disputing
countries fail to agree on a compliance deadline, the time period may be arbitrated. Often, WTO
members are given approximately one year from the date of adoption of the panel report to
comply; in any event, compliance that requires legislative action would likely be a more timeconsuming effort than if only administrative action was required.
If the United States were not to comply with the WTO decision within the established compliance
period, Canada and Mexico could request the United States to negotiate a compensation
agreement. If an agreement is not requested, or if it is requested but an agreement is not reached,
Canada and Mexico may request authorization from WTO’s DSB to retaliate. The retaliation
request is to be made within 30 days after the compliance period ends. This can involve the
suspension of concessions or obligations owed by Canada and Mexico to the United States under
a WTO agreement. One permitted action could involve Canada and Mexico increasing tariffs on
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agricultural products imported from the United States.51 The United States may object to the
retaliation request, in which case it would be automatically sent to arbitration.
Further, if the United States does not comply or only partially complies with the WTO decision,
Canada and Mexico may also request that a compliance panel investigate whether the United
States has in fact adopted a compliance measure or whether any measure that it has adopted is
consistent with the WTO decision. Because WTO dispute settlement rules do not provide a
timetable in the event that a party requests both authorization to retaliate and a compliance panel,
disputing parties often enter into so-called “sequencing” agreements that accommodate both
procedures.
If the United States ultimately decides to comply, the deadline to do so under the procedures
outlined above may not occur until mid- to late 2013. Prevailing parties also have agreed on
occasion to extend the original deadline in a dispute if progress is being made toward compliance.
Those opposed to a long compliance period fear that, if the United States does not change certain
aspects of COOL, Canada and Mexico—two significant markets for U.S. beef and pork—might
retaliate by imposing tariffs on these products that now enter freely. At the same time, WTO
Members have agreed in the WTO Dispute Settlement Understanding that they will not suspend
WTO concessions or other obligations as retaliatory measures in a particular dispute unless
authorized by the WTO Dispute Settlement Body. If that were to occur, the United States could
challenge any unauthorized retaliation in a separate WTO dispute settlement proceeding.
Legislation in the 112th Congress
Observers point out that the 2008 farm bill amendments to the initial COOL statute were intended
to balance the concerns of both proponents and opponents and to settle the longstanding
controversy over requiring COOL for meats and other covered commodities. However, the
outcome of the WTO challenge initiated by Canada and Mexico is now expected to influence the
dynamics of COOL debate in the 112th Congress and beyond. Some lawmakers agree with some
industry groups’ criticisms of mandatory COOL and could offer legislation to limit its scope and
impacts. Others may propose to narrowly amend the COOL statute to change only what is
determined as necessary to respond to the details of the WTO decision. Other lawmakers remain
strongly supportive of COOL as enacted and will oppose any significant rollback. For example,
19 Senators sent a letter to the Administration in late 2011 highlighting the WTO panel’s
validation of the right of the United States to require country-of-origin labeling and affirming that
Congress’s intent in the 2008 farm bill was to provide consumers with information on the origin
of foods.52 Also, Representative DeLauro on the House floor offered an amendment to exempt
COOL from the proposed requirement in H.R. 10 that a joint resolution of approval be enacted
before any economically significant rule (i.e., one with a $100 million annual impact on the
economy) could take effect. Another measure seeks to bring more commodities under the scope
of mandatory country-of-origin labeling. S. 831 (introduced by Senator Franken) would extend
COOL requirements to fluid milk, cheese, yogurt, ice cream, butter, and other dairy products.
51
For details, see “Compliance Panels (Article 21.5)” and “Compensation and Suspension of Concessions (Article 22)”
in CRS Report RS20088, Dispute Settlement in the World Trade Organization (WTO): An Overview, by Jeanne J.
Grimmett.
52
See footnote 43.
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Appendix A. Other Laws with Food
Labeling Provisions
The COOL provisions of the 2002 and 2008 farm bills53 do not change the requirements of the
Tariff Act or the food safety inspection statutes described below. Instead, they were incorporated
into the Agricultural Marketing Act of 1946 (Sections 281-285).
Tariff Act
Under Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. 1304), every imported item
must be conspicuously and indelibly marked in English to indicate to the “ultimate purchaser” its
country of origin. The U.S. Customs and Border Protection generally defines the “ultimate
purchaser” as the last U.S. person to receive the article in the form in which it was imported. So,
articles arriving at the U.S. border in retail-ready packages—including food products, such as a
can of Danish ham, or a bottle of Italian olive oil—must carry such a mark. However, if the
article is destined for a U.S. processor where it will undergo “substantial transformation,” the
processor is considered the ultimate purchaser. Over the years, numerous technical rulings by
Customs have determined what is, or is not, considered “substantial transformation,” depending
upon the item in question.
The law has authorized exceptions to labeling requirements, including articles on a so-called
“J List,” named for Section 1304(a)(3)(J) of the statute. This empowered the Secretary of the
Treasury to exempt classes of items that were “imported in substantial quantities during the fiveyear period immediately preceding January 1, 1937, and were not required during such period to
be marked to indicate their origin.” Among the items placed on the J List were specified
agricultural products including “natural products, such as vegetables, fruits, nuts, berries, and live
or dead animals, fish and birds; all the foregoing which are in their natural state or not advanced
in any manner further than is necessary for their safe transportation.”54 Although J List items
themselves have been exempt from the labeling requirements, Section 304 of the 1930 act has
required that their “immediate container” (essentially, the box they came in) have country-oforigin labels. But, for example, when Mexican tomatoes or Chilean grapes were sold unpackaged
at retail in a store bin, country labeling had not been required by the Tariff Act.
Meat and Poultry Products Inspection Acts
USDA’s Food Safety and Inspection Service (FSIS) is required to ensure the safety and proper
labeling of most meat and poultry products, including imports, under the Federal Meat Inspection
Act, as amended (21 U.S.C. 601 et seq.), and the Poultry Products Inspection Act, as amended (21
U.S.C. 451 et seq.). Regulations issued under these laws have required that country of origin
appear in English on immediate containers of all meat and poultry products entering the United
States (9 C.F.R. 327.14 and 9 C.F.R. 381.205). Only plants in countries certified by USDA to
53
P.L. 107-171, Section 10816, approved May 13, 2002, 111 Stat. 533; and P.L. 110-246, Section 11002, approved
June 18, 2008, 122 Stat. 2113. The COOL provisions in the AMA of 1946 are codified at 7 U.S.C. 1638 – 1638d.
54
The J list is published in 19 C.F.R. 134.33, available at http://edocket.access.gpo.gov/cfr_2008/aprqtr/
19cfr134.33.htm.
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have inspection systems equivalent to those of the United States are eligible to export products to
the United States.
All individual, retail-ready packages of imported meat products (for example, canned hams or
packages of salami) have had to carry such labeling. Imported bulk products, such as carcasses,
carcass parts, or large containers of meat or poultry destined for U.S. plants for further processing
also have had to bear country-of-origin marks. However, once these non-retail items have entered
the country, the federal meat inspection law has deemed them to be domestic products. When they
are further processed in a domestic, FSIS-inspected meat or poultry establishment—which has
been considered the ultimate purchaser for purposes of country-of-origin labeling—FSIS no
longer requires such labeling on either the new product or its container. FSIS has considered even
minimal processing, such as cutting a larger piece of meat into smaller pieces or grinding it for
hamburger, enough of a transformation so that country markings are no longer necessary.
Meat and poultry product imports must comply not only with the meat and poultry inspection
laws and rules but also with Tariff Act labeling regulations. Because Customs generally requires
that imports undergo more extensive changes (i.e., “substantial transformation”) than required by
USDA to avoid the need for labeling, a potential for conflict has existed between the two
requirements.
Federal Food, Drug, and Cosmetic Act
Foods other than meat and poultry are regulated by the U.S. Department of Health and Human
Services’ Food and Drug Administration (FDA), primarily under the Federal Food, Drug, and
Cosmetic Act (FFDCA; 21 U.S.C. 301 et seq.). This act does not expressly require COOL for
foods. Section 403(e) of the FFDCA does regard a packaged food to be misbranded if it lacks a
label containing the name and place of business of the manufacturer, packer, or distributor
(among other ways a food can be misbranded). However, this name and place of business is not
an indicator of the origin of the product itself.
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Country-of-Origin Labeling for Foods and the WTO Trade Dispute on Meat Labeling
Appendix B. Timeline of COOL
Table B-1. COOL Developments & WTO Dispute Settlement Case
May 13, 2002
COOL provisions are enacted in the 2002 farm bill to take effect on September 30, 2004
(P.L. 107-171, §10816).
October 30, 2003
Agricultural Marketing Service (AMS) publishes in the Federal Register the proposed rule on
COOL . The comment period, initially to close December 29, 2003, is extended to February
27, 2004.
January 23, 2004
Implementation of COOL for covered commodities except fish and shellfish is delayed until
September 30, 2006, per enactment of the FY2004 omnibus appropriations act (P.L. 108-199,
Division A, §749).
October 5, 2004
AMS publishes in the Federal Register the interim final rule on COOL for fish and shellfish.
April 4, 2005
COOL labeling for fish and shellfish takes effect.
November 10, 2005
Implementation of COOL for all other covered commodities is delayed until September 30,
2008, per enactment of the FY2006 agriculture appropriations act (P.L. 109-97, §792).
May 22, 2008
Amendments to the 2002-enacted COOL provisions become law in the 2008 farm bill (P.L.
110-246, §11002), to take effect on September 30, 2008.
August 1, 2008
AMS publishes in the Federal Register the interim final rule to implement COOL for all
covered commodities except fish and shellfish, to take effect on September 30, 2008.
December 16, 2008
Canada, joined by Mexico, holds consultations on COOL with the United States.
January 15, 2009
AMS publishes the final rule to implement COOL for all covered commodities, to take effect
on March 16, 2009.
February 20, 2009
Secretary of Agriculture sends letter to meat and food industry representatives urging the
voluntary adoption of three labeling changes.
March 16, 2009
COOL’s final rule for all covered commodities takes effect.
June 5, 2009
Canada holds consultations with the United States to resolve differences on COOL.
October 7, 2009
Canada requests the establishment of a World Trade Organization (WTO) dispute
settlement (DS) panel to consider its complaint on the U.S. COOL program. Mexico follows
with a comparable request on October 9.
November 19, 2009
WTO establishes a DS panel to consider complaints made by Canada and Mexico on the
U.S. COOL program.
November 18, 2011
WTO DS panel releases final report that concludes that some features of U.S. COOL
discriminate against foreign livestock and are not consistent with U.S. WTO trade
obligations.
March 23, 2012
The United States appeals the WTO DS panel’s conclusions.
March 28, 2012
Canada and Mexico also appeal some of the DS panel’s conclusions.
June 29, 2012
The WTO’s Appellate Body (AB) issues its report, upholding the DS panel finding that U.S.
COOL does not favorably treat imported livestock but reversing the other finding that
COOL does not provide sufficient information to consumers on the origin of meat products.
July 10, 2012
The WTO’s Dispute Settlement Body meets to consider approving the AB’s report.
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Country-of-Origin Labeling for Foods and the WTO Trade Dispute on Meat Labeling
Appendix C. North American Livestock Trade
Overview
After COOL took full effect in March 2009, Canada and Mexico continued to question the trade
legality of mandatory COOL, and claimed that COOL disrupted normal live cattle and hog trade
patterns and caused large financial losses to their livestock industries. Canada and Mexico were
concerned that labeling requirements and the need to segregate imported and domestic animals to
assure proper labeling would raise the cost of handling and processing imported animals. The
increased cost would ultimately lead U.S. livestock buyers to reduce live animal imports or to
offer lower prices for imported animals.
The cattle and hog industries of Canada, Mexico, and the United States have become increasingly
integrated over the last two decades, particularly after NAFTA took effect in 1994 and, before
that, the Canada-U.S. Free Trade Agreement in 1988. These agreements, along with the global
Uruguay Round Agreements under the WTO that reduced tariff and non-tariff barriers to trade,
have enabled animals and animal products to move across borders more freely, based on market
demand.
A number of animal health incidents have disrupted this market integration from time to time.
The most significant event was the discovery of bovine spongiform encephalopathy (BSE or mad
cow disease) in 2003, first in Canada and later in the United States, which halted most crossborder movement of cattle from Canada to the United States from mid-2003 through mid-2005.
The predominance of BSE cases in Canada rather than in the United States may have contributed
to wider support for the mandatory COOL law, some analysts believe, although government
officials assert that both countries now have strong, scientifically defensible safeguards in place
to ensure that BSE is controlled and that its infectious agent does not enter the human food
supply.
Proximity, abundant feed supplies, and established feeding operations in the United States have
resulted in an increase in live cattle and hog imports from Canada and Mexico. Imports may
fluctuate year to year as factors such as relative animal and feed prices, inventory levels, currency
exchange rates, and weather conditions influence the movement of cattle and hogs into the United
States.
Canada and Mexico are important U.S. trading partners for live animals. The value of U.S. cattle
and hog exports to Canada and Mexico was about $65 million in 2011 (Table C-1). The United
States primarily exports breeding animals. In recent years, U.S. cattle and hogs have been shipped
to more than 70 foreign markets, but Canada and Mexico have accounted for most of the exports.
On the import side, the value of trade with Canada and Mexico is much greater. In 2011, the
United States imported more than $1.8 billion worth of cattle and hogs from Canada and Mexico
(Table C-1). Almost all U.S. live cattle imports come from Canada and Mexico and almost all
live hog imports come from Canada.
In volume terms, on average, cattle imports have accounted for about 6% of total U.S.
commercial cattle slaughter since 2000. Over the same period, hog imports have accounted for
nearly 7% of total hog commercial slaughter, but the hog share has dropped to 5% since 2009 as
hog imports have declined from recent highs.
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Table C-1.Value of U.S. Cattle and Hog Trade
($ million)
EXPORTS
2007
2008
2009
2010
2011
Cattle
15.2
9.7
13.5
19.7
39.3
Hogs
0.6
1.0
1.4
1.6
2.1
Cattle
15.3
51.5
25.8
30.8
20.8
Hogs
12.8
9.0
1.0
2.0
2.9
44.0
71.2
41.6
54.1
65.1
Cattle
48.0
108.1
58.8
132.7
375.9
Hogs
19.4
27.9
9.6
8.6
24.1
Canada
Mexico
Canada & Mexico Total
World
IMPORTS
2007
2008
2009
2010
2011
1,402.8
1,462.6
917.7
1,051.9
832.3
653.2
482.3
295.2
363.3
362.9
475.5
298.3
381.0
522.8
616.9
0.0
0.0
0.0
0.0
0.0
2,531.5
2,243.1
1,593.9
1,938.0
1,812.1
1,878.3
1,760.8
1,298.7
1,574.6
1,449.2
653.2
482.3
295.2
363.5
362.9
Canada
Cattle
Hogs
Mexico
Cattle
Hogs
Canada & Mexico Total
World
Cattle
Hogs
Source: USDA, Foreign Agricultural Service, Global Agricultural Trade System Online.
U.S. Cattle Imports
A majority of the cattle that Canada ships to the United States are for immediate slaughter, 84% in
2011. Most of the remaining imports are feeder cattle that are usually destined for U.S. feedlots to
be fed out to slaughter-ready weights. The 15% feeder share of cattle imports in 2011 was the
smallest feeder share since 2000. Declining cattle inventories combined with the availability of
relatively inexpensive barley supplies in Canada during 2011 slowed shipments to the United
States. A small share of Canadian imports are dairy cows and breeding stock (Figure C-1).
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Figure C-1. U.S. Cattle Imports from Canada
1,800
Dairy/Breeding
1,600
Feeder
1,400
Slaughter
1,000 head
1,200
1,000
800
``````
600
400
200
0
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Source: USDA, Economic Research Service, “Livestock and Meat Trade Data-Cattle.”
Almost 100% of Mexican cattle shipped to the United States are stocker or feeder cattle55 that are
usually raised in the northern states of Mexico, then shipped to the United States and placed on
pasture or into feedlots56 (Figure C-2). Cattle imports from Mexico are often influenced by
prevailing precipitation conditions in northern Mexico. Persistent dryness since 2009 has led to an
increasing number of cattle imports from Mexico.
Figure C-2. U.S. Cattle Imports from Mexico
1,600
Slaughter/Breeding
1,400
Feeder
1,000 head
1,200
1,000
800
600
400
200
0
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Source: USDA, Economic Research Service, “Livestock and Meat Trade Data-Cattle.”
55
Stocker cattle are lightweight, usually 200 to 400 pounds, and are placed in grazing programs to grow the animals.
Feeder cattle are heavier, mostly 400 to 700 pounds, and may be placed on grass or placed directly in feedlots.
56
USDA, Economic Research Service, Trade, the Expanding Mexican Beef Industry, and Feedlot and Stocker Cattle
Production in Mexico, by Darrell S. Peel, Kenneth H. Mathews, Jr., and Rachel J. Johnson, August 2011.
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U.S. cattle imports plunged in 2004 after the discovery of BSE in Canada in May 2003 and the
subsequent ban on Canadian cattle imports. But once the border was reopened to Canadian cattle
in 2005, imports steadily increased and reached pre-BSE levels by 2007 on a strong rebound in
imports from Canada. In 2008, cattle imports dropped 8% to 2.3 million head, and fell 12% to 2
million head in 2009 (Figure C-3).
Figure C-3. U.S. Cattle Imports from Canada and Mexico
3,000
Mexico
Canada
2,500
1,000 head
2,000
1,500
1,000
500
0
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Source: USDA, Economic Research Service, “Livestock and Meat Trade Data-Cattle.”
U.S. cattle imports during the first half of 2008 were almost 9% higher than the previous year, but
import growth slowed during the last part of 2008, and by December cattle imports had fallen to
8% below 2007. Imports from Canada continued to grow during 2008 and imports of Canadian
feeder cattle were particularly strong in the first half of the year. Under COOL regulations, cattle
that were in the United States before July 15, 2008 were considered U.S. origin cattle, which
likely encouraged feeder imports from Canada during the first part of the year. Canadian feeder
imports through June 2008 were 72% higher than the previous year, but ended the year only 16%
higher. However, during 2008 cattle imports from Mexico were 35% lower than 2007, and the
lowest imports since 1998. Good range and forage conditions in Mexico allowed producers to
keep cattle on grass and resulted in slower imports.
U.S. cattle imports continued to decline in 2009, but contrary to 2008, imports from Canada
declined. USDA’s Economic Research Service indicated that weaker cattle prices and weaker
demand for beef in the United States, combined with a stronger Canadian dollar reduced
Canadian returns and incentives to send cattle to the United States.57 On the other hand, imports
from Mexico started rising due to worsening drought conditions in the latter part of 2009 that
encouraged Mexican producers to ship cattle to the United States.
57
USDA, Economic Research Service, Livestock, Dairy, and Poultry Outlook, December 17, 2009. p. 5.
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Country-of-Origin Labeling for Foods and the WTO Trade Dispute on Meat Labeling
Some analyses attribute the import decline during the last part of 2008 and all of 2009 to COOL
but differ on the extent that currency exchange rates may have contributed to this development.
CattleFax, an industry-funded data and analysis service based in Colorado, observed that the 2008
decline in cattle imports was due to mandatory COOL regulations, and that imports would “face a
big wild card in 2009” for the same reason.58 Livestock sector analysts with the Chicago
Mercantile Exchange (CME), examining cattle import trends through year-end 2008, commented
that the COOL law “has been quite effective, if you measure effectiveness by the degree to which
it has been able to stifle cattle trade in North America.” They wrote that reductions in imports
from both Mexico and Canada “came at a time when a significant devaluation in the value of the
Peso and Canadian dollar normally would have been conducive of increased imports from these
two countries. Under normal circumstances, one would expect cattle imports to actually increase
rather than be cut by almost 40%.”59 However, USDA’s Economic Research Service (ERS)
suggested that the currency exchange factor may be somewhat more involved and that Canada’s
available supplies of slaughter cattle were reduced by earlier strong shipments of feeder cattle.60
In 2010, U.S. cattle imports increased 14% from 2009 to 2.3 million head as shipments of feeder
cattle from Mexico continued to expand, due to continued drought conditions and strong U.S.
feeder cattle prices that further encouraged Mexican producers to send cattle north (Figure C-3).
Canadian cattle imports in 2010 remained flat. In 2011, total cattle imports turned down again,
dropping 8% as increased imports from Mexico (+16%) were more than offset by a sharp drop in
imports from Canada (-35%). Ample feed supplies last year caused more cattle to be fed in
Canadian feedlots and, in addition, the relatively strong Canadian dollar dampened shipments to
the United States. USDA has forecast lower cattle imports in 2012 as both Canada and Mexico
ship fewer cattle.61
U.S. Hog Imports
U.S. hog imports from Canada have grown sharply since the mid-1990s. U.S. hog imports were a
record 10 million head in 2007, growing more than 13% per year on average during the previous
10 years. Furthermore, the composition of U.S. hog imports significantly shifted from hogs for
immediate slaughter to feeder pigs.62 At one time the U.S. hog industry was comprised of many
small operations that raised hogs from birth to slaughter-ready weight (farrow-to-finish
operations), but from the mid-1980’s the hog industry moved toward vertical integration. With
vertical integration there came increased demand for feeder pigs to meet the needs of finishing
operations. Some Canadian producers focused their production on providing feeder pigs for
shipment to the United States where access to abundant and cheaper supplies of grain made it
more economical to feed pigs to slaughter weight.63 The feeder pig share of hog imports increased
steadily from the mid-1990s, peaking at 82% in 2009, and remained stable in 2010 and 2011.
58
CattleFax, “CattleFax Long Term Outlook Special Edition,” December 12, 2008, p. 3.
CME Daily Livestock Report, January 7, 2009.
60
USDA, Economic Research Service, Livestock, Dairy, and Poultry Outlook, December 18, 2008, p. 8. ERS analysts
point out that prior to 2008, the United States was easing the BSE-related restrictions on Canadian cattle imports; in
November 2007, cattle over 30 months of age were again permitted to enter from Canada.
61
USDA, Foreign Agricultural Service, Livestock and Poultry: World Markets and Trade, October 2011.
62
Feeder pigs are light-weight pigs—the majority weighing less than 15 pounds, others weighing between 15 and 100
pounds—that are shipped to the United States for feeding to slaughter-ready weight.
63
USDA, Economic Research Service, Market Integration of the North American Hog Industries, November 2004, pp.
(continued...)
59
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U.S. imports of Canadian hogs have steadily declined since 2007. U.S. hog imports fell 7% in
2008 on a 30% drop in hogs for immediate slaughter. In 2009, hog imports dropped another 32%
as both feeder pigs and hogs for immediate slaughter declined (Figure C-4).
Figure C-4. U.S. Hog Imports from Canada
12
Slaughter*
10
Feeder
Million head
8
6
4
2
0
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Source: USDA, Economic Research Service, “Livestock and Meat Trade Data—Hogs.”
An early 2009 USDA analysis suggested that COOL’s implementation likely “made U.S. swine
finishers reluctant to import Canadian finishing animals, in light of some major U.S. packers’
stated unwillingness to process Canadian-origin animals.”64 Another report suggested that COOL
was affecting the U.S. hog sector, particularly in Iowa, as packers moved to process only U.S.born hogs. With many Iowa producers operating finishing operations that source feeder pigs from
Canada, a USDA document on COOL implementation cited that some producers’ barns are
“empty because of a lack of an assured outlet for slaughter hogs of mixed country of origin” (i.e.,
Product of Canada and United States). USDA also reported that some lenders were not extending
credit to operations that finish mixed-origin pigs, and that lower prices at times were “being paid
for mixed origin slaughter hogs compared to hogs of exclusively U.S. origin.”65
In 2010, hog imports continued to decline but at a slower pace than in 2009. U.S. hog imports
steadied during 2011, and totaled 5.8 million head, about 1% above 2010. USDA projects that the
U.S. will import about the same number of hogs in 2012.66
(...continued)
9-12.
64
USDA, Economic Research Service, Livestock, Dairy, and Poultry Outlook, April 16, 2009, p. 4.
65
CattleBuyers Weekly, “MCOOL Hurts Iowa Hog Finishers,” April 27, 2009.
66
USDA, Economic Research Service, Livestock, Dairy, and Poultry Outlook, February 15, 2012, p. 24.
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Author Contact Information
Remy Jurenas
Specialist in Agricultural Policy
rjurenas@crs.loc.gov, 7-7281
Joel L. Greene
Analyst in Agricultural Policy
jgreene@crs.loc.gov, 7-9877
Acknowledgments
This is an update of a report written by Geoffrey S. Becker, Specialist in Agricultural Policy.
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