Country-of-Origin Labeling for Foods and the
WTO Trade Dispute on Meat Labeling
Remy Jurenas
Specialist in Agricultural Policy
Joel L. Greene
Analyst in Agricultural Policy
August 1, 2012
Congressional Research Service
7-5700
www.crs.gov
RS22955
CRS Report for Congress
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epared for Members and Committees of Congress
Country-of-Origin Labeling for Foods and the WTO Trade Dispute on Meat Labeling
Summary
Most retail food stores are now required to inform consumers about the country of origin of fresh
fruits and vegetables, fish, shellfish, peanuts, pecans, macadamia nuts, ginseng, and ground and
muscle cuts of beef, pork, lamb, chicken, and goat. The rules are required by the 2002 farm bill
(P.L. 107-171) as amended by the 2008 farm bill (P.L. 110-246). Other U.S. laws have required
such labeling, but only for imported food products already pre-packaged for consumers. The final
rule to implement country-of-origin labeling (COOL) took effect on March 16, 2009.
Both the authorization and implementation of COOL by the U.S. Department of Agriculture’s
Agricultural Marketing Service have been controversial. Much attention has focused on the
labeling rules that now apply to meat and meat products. A number of livestock and food industry
groups continue to oppose COOL as costly and unnecessary. They and the main livestock
exporters to the United States—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 labeling laws.
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.
The AB and panel reports were adopted by the Dispute Settlement Body (DSB) on July 23, 2012,
starting a 30-day deadline for the United States to inform the DSB how it will implement the final
findings. If this cannot be done quickly, WTO rules call for implementation within a reasonable
period of time. U.S. 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 authorization to retaliate against imports from the United
States.
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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 Settlement Panel Ruling............................................................................................. 10
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........................................................................................................................ 15
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................................................................................................................................ 20
Compliance under WTO Procedures with Appellate Body’s Report ................................ 20
U.S. Options and Timetable .............................................................................................. 20
Legislation in the 112th Congress................................................................................................... 22
Figures
Figure C-1. U.S. Cattle Imports from Canada ............................................................................... 28
Figure C-2. U.S. Cattle Imports from Mexico............................................................................... 28
Figure C-3. U.S. Cattle Imports from Canada and Mexico ........................................................... 29
Figure C-4. U.S. Hog Imports from Canada.................................................................................. 31
Tables
Table 1. COOL for Beef and Pork: From Statute to Label ............................................................ 12
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Table B-1. COOL Developments & WTO Dispute Settlement Case............................................. 25
Table C-1. Value of U.S. Cattle and Hog Trade............................................................................. 27
Appendixes
Appendix A. Other Laws with Food Labeling Provisions............................................................. 23
Appendix B. Timeline of COOL.................................................................................................... 25
Appendix C. North American Livestock Trade ............................................................................. 26
Contacts
Author Contact Information........................................................................................................... 32
Acknowledgments ......................................................................................................................... 32
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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 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 record-
keeping 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. In
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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November 2011, the WTO found that COOL discriminated against foreign livestock and was not
consistent with WTO rules. After weighing available options, the Obama Administration decided
to appeal the WTO’s adverse findings issued in late 2011 on some of COOL’s provisions. In June
2012, WTO’s appellate body upheld part of the original findings for Canada and Mexico, and
overturned another. The United States now is obligated to bring COOL 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;
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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• 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.
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
6 Cattle Buyers Weekly, August 4, 2008; and Food Chemical News, September 15, 2008.
7 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/2009-
(continued...)
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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
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
(...continued)
news/86-agriculture-programs/198-nfu-statement-usda-issues-final-rule-for-cool.
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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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.
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 record-
keeping 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
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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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.”
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
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.
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In reviews conducted in FY2009 and FY2010 in retail stores, AMS found that almost three-
quarters 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
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.
18 USDA, AMS, “COOL—Retail Compliance FY2009-2010,” http://www.ams.usda.gov/AMSv1.0/getfile?
dDocName=STELPRDC5093595.
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-kirk-
comment-canadian-panel-request-regard.
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On November 19, 2009, the WTO’s Dispute Settlement Body (DSB)20 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 further distances to the fewer number of U.S. plants willing to take them. Canadian
pork producers expressed similar concerns.21
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.22
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).23 The Ranchers-
Cattlemen Action Legal Fund, United Stockgrowers of America (R-CALF USA), presented
similar comments.24
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
20 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.
21 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.
22 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.
23 USCA, “USCA and Farmers Union Urge Vigorous COOL Defense,” January 12, 2010, http://www.uscattlemen.org/
TheNewsRoom/2010_News/1-12COOLdefense.htm.
24 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.
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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.”25
Dispute Settlement Panel Ruling
On November 18, 2011, the WTO dispute settlement (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).26 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 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 1994.27 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
DSB 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
25 NCBA, “NCBA Statement on Canadian WTO Complaint against U.S. COOL Law,” October 7, 2009,
http://www.beefusa.org/NEWSNCBAStatementonCanadianWTOComplaintagainstUSCOOLLaw39616.aspx.
26 CRS Legislative Attorneys Emily Barbour and Jeanne Grimmett contributed to this section summarizing the panel’s
ruling.
27 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.”
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
(continued...)
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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
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
(...continued)
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); Agri-
Pulse.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.
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), 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.”
Table 1. COOL for Beef and Pork: From Statute to Label
Muscle Cuts
COOL
& Ground
COOL
Label at
Meat
Statutory
Retail
Categories
Definition
AMS Final Rule (January 2009)
Level
“beef [or] ... pork
U
For beef and pork, means:
NITED STATES
... derived from
COUNTRY OF
an animal that
“(1) From animals exclusively born, raised, and slaughtered in the United
Product of
ORIGIN
was ... exclusively
States; (2) From animals born and raised in Alaska or Hawaii and
the US(A)
born, raised, and
[Category A]
transported for a period of not more than 60 days through Canada
slaughtered in the to the United States and slaughtered in the United States; ...”
United States”
“beef [or] ... pork
For muscle cuts of beef and pork “derived from animals that were
... derived from
born in Country X or (as applicable) Country Y, raised and slaughtered
an animal that
in the United States, and were not derived from animals imported for
is—
immediate slaughter [defined as “consignment directly from the port
of entry to a recognized slaughtering establishment and slaughtered
(i) not exclusively
within 2 weeks from the date of entry”], the origin may be designated
born, raised and
as Product of the United States, Country X, and (as applicable)
slaughtered in the Country Y.”
United States;
For muscle cuts of beef and pork “derived from animals born, raised,
(ii) born, raised
and slaughtered in the U.S. that are commingled during a production day
or slaughtered in
Product of
M
with muscle cuts [of beef and pork from animals born outside the U.S.,
ULTIPLE
the United States; raised and slaughtered in the U.S., and not imported for immediate
the US,
COUNTRIES OF
and
slaughter], the origin may be designated as Product of the United
Country X,
ORIGIN
(iii) not imported
States, Country X, and (as applicable) Country Y.”
and Country
[Category B]
into the United
Y (if
For muscle cuts of beef and pork “derived from animals that are born
States for
applicable)
in Country X or Country Y, raised and slaughtered in the United States,
immediate
that are commingled during a production day with muscle cut[s of beef
slaughter”
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.”
“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.”
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Muscle Cuts
COOL
& Ground
COOL
Label at
Meat
Statutory
Retail
Categories
Definition
AMS Final Rule (January 2009)
Level
“beef [or] ... pork
“If an animal was imported into the United States for immediate
IMPORTED FOR
... derived from
slaughter [defined as “consignment directly from the port of entry to
Product of
IMMEDIATE
an animal that is
a recognized slaughtering establishment and slaughtered within 2
Country X,
SLAUGHTER
imported into the weeks from the date of entry”], the origin of the resulting [beef and
US
United States for
[Category C]
pork] derived from that animal shall be designated as Product of
immediate
Country X and the United States.”
slaughter”
FOREIGN
“beef [or] ... pork
“Imported [beef and pork] for which origin has already been
COUNTRY OF
... derived from
established as defined by this law (e.g., born, raised, and slaughtered
ORIGIN
an animal ... not
or produced) and for which no production steps have occurred in the
Product of
born, raised, or
United States, shall retain their origin, as declared to U.S. Customs
Country X
[Category D]
slaughtered in the and Border Protection at the time the product entered the United
United States”
States, through retail sale.”
“notice ... for
ground beef,
Product of
ground pork ...
“The declaration for ground beef, ground pork, ... shall list all countries
US, Country
GROUND BEEF
shall include a list
of origin contained therein or that may be reasonably contained therein. In X, [and as
OR PORK
of all [or] ... all
determining what is considered reasonable, when a raw material
applicable]
reasonably
from a specific origin is not in a processor’s inventory for more than
Country Y,
possible countries 60 days, that country shal no longer be included as a possible
Country Z,
of origin of such
country of origin.”
...
ground beef,
ground pork, ...”
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
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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
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.
33 These involve applying mathematics and statistical methods to study relationships between economic variables.
34 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.
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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
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 trade-
restrictive 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 trade-
restrictive 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
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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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
reversed the panel’s finding, but was not able to determine whether COOL is more trade-
restrictive 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
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-representative-
response.
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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
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,
38 NCBA, “Statement ... [on] WTO Ruling on US Country of Origin Labeling,” http://www.beefusa.org/
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.
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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
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
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/
.
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-of-
Origin 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.
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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
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
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/
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-wto-
ruling-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-defend-
consumer-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-producers-
fear-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.
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Next Steps
Compliance under WTO Procedures with Appellate Body’s Report
On July 23, 2012, the Dispute Settlement Body (DSB) adopted the appellate report and the panel
report, as modified by the AB, under the reverse consensus rule.49 Under this rule, both reports
are 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 are required
to unconditionally accept the AB’s decision. With adoption of the AB and DS panel reports, the
United States has 30 days to inform the DSB of its plans to implement the WTO findings.
The adoption of the AB and DS panel reports was initially scheduled for July 10, 2012. However,
Canada, Mexico, and the United States asked that consideration be withdrawn from the DSB
meeting agenda for technical reasons.51 According to the rules of the Dispute Settlement
Understanding (DSU),52 an AB report is to be issued within 90 days of an appeal. But because the
June 29 release date of the AB report fell beyond the required 90-day period, the disputing parties
requested time to consult on this situation, and to ask the DSB to confirm that the late report was
in compliance with WTO rules.53
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
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 unsuccessfully appeals 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.
51 WTO, China blocks panel requests by the US, EU and Japan on “rare earths” dispute, 2012 NEWS ITEMS, July
10, 2012, http://www.wto.org/english/news_e/news12_e/dsb_10jul12_e.htm.
52 The Dispute Settlement Understanding is one of the multilateral agreements resulting from the Uruguay Round that
provides the primary means for WTO members to settle disputes arising under WTO agreements.
53 WTO, Joint Request by Canada, Mexico and the United States for a Decision by the DSB, WT/DS384/15 and
WT/DS386/14, June 29, 2012.
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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.
With adoption of 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 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 time-consuming 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
agricultural products imported from the United States.54 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 DSU 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.
54 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.
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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.
On July 11, 2012, during the House Agriculture Committee’s markup of the 2012 farm bill (H.R.
6083), an amendment was adopted that requires USDA to submit a report to the House and
Senate Agriculture Committees explaining steps to be taken to bring the United States into
compliance with the WTO decision on COOL.55 The report would be due within 90 days of the
2012 farm bill’s enactment. The Senate 2012 farm bill (S. 3240) contains no comparable
provision.
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.56 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.
55 Text of amendment available at http://agriculture.house.gov/sites/republicans.agriculture.house.gov/files/pdf/
legislation/FARRMAmend74Neugebaueradopted.pdf.
56 See footnote 43.
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Appendix A. Other Laws with Food
Labeling Provisions
The COOL provisions of the 2002 and 2008 farm bills57 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 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.”58 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-of-
origin 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
57 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.
58 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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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).
Agricultural Marketing Service (AMS) publishes in the Federal Register the proposed rule on
October 30, 2003
COOL . The comment period, initial y to close December 29, 2003, is extended to February
27, 2004.
Implementation of COOL for covered commodities except fish and shellfish is delayed until
January 23, 2004
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 al 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 shel fish, 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.
Canada requests the establishment of a World Trade Organization (WTO) dispute
October 7, 2009
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.
WTO DS panel releases final report that concludes that some features of U.S. COOL
November 18, 2011
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.
The WTO’s Appellate Body (AB) issues its report, upholding the DS panel finding that U.S.
June 29, 2012
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.
Canada, Mexico, and the United States withdraw consideration of the AB report from the
July 10, 2012
Dispute Settlement Body (DSB) agenda to provide more time to consult on the 90-day
reporting requirement that was missed by the AB.
July 23, 2012
WTO’s DSB adopts the DS panel and AB reports.
August 22, 2012
30-day deadline for the United States to inform the DSB about how it plans to implement
the WTO findings.
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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 cross-
border 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
Canada
Cattle
15.2
9.7
13.5
19.7
39.3
Hogs
0.6
1.0
1.4
1.6
2.1
Mexico
Cattle
15.3
51.5
25.8
30.8
20.8
Hogs
12.8
9.0
1.0
2.0
2.9
Canada & Mexico Total
44.0 71.2 41.6 54.1 65.1
World
Cattle
48.0
108.1
58.8
132.7
375.9
Hogs
19.4
27.9
9.6
8.6
24.1
IMPORTS
2007 2008 2009 2010 2011
Canada
Cattle
1,402.8
1,462.6
917.7
1,051.9
832.3
Hogs
653.2
482.3
295.2
363.3
362.9
Mexico
Cattle
475.5
298.3
381.0
522.8
616.9
Hogs
0.0
0.0
0.0
0.0
0.0
Canada & Mexico Total
2,531.5 2,243.1 1,593.9 1,938.0 1,812.1
World
Cattle
1,878.3
1,760.8
1,298.7
1,574.6
1,449.2
Hogs
653.2
482.3
295.2
363.5
362.9
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
1,600
Dairy/Breeding
Feeder
1,400
Slaughter
1,200
ad 1,000
0 he
800
1,00
``````
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 cattle59 that are
usually raised in the northern states of Mexico, then shipped to the United States and placed on
pasture or into feedlots60 (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
1,200
1,000
ead
800
0 h
00
1,
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.”
59 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.
60 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
2,000
ead
h 1,500
000
1,
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.61 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.
61 USDA, Economic Research Service, Livestock, Dairy, and Poultry Outlook, December 17, 2009. p. 5.
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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.62 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%.”63 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.64
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.65
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.66 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.67 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.
62 CattleFax, “CattleFax Long Term Outlook Special Edition,” December 12, 2008, p. 3.
63 CME Daily Livestock Report, January 7, 2009.
64 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.
65 USDA, Foreign Agricultural Service, Livestock and Poultry: World Markets and Trade, October 2011.
66 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.
67 USDA, Economic Research Service, Market Integration of the North American Hog Industries, November 2004, pp.
(continued...)
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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
8
d
6
illion hea
M
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.”68 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.”69
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 2012.70
(...continued)
9-12.
68 USDA, Economic Research Service, Livestock, Dairy, and Poultry Outlook, April 16, 2009, p. 4.
69 CattleBuyers Weekly, “MCOOL Hurts Iowa Hog Finishers,” April 27, 2009.
70 USDA, Economic Research Service, Livestock, Dairy, and Poultry Outlook, February 15, 2012, p. 24.
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Country-of-Origin Labeling for Foods and the WTO Trade Dispute on Meat Labeling
Author Contact Information
Remy Jurenas
Joel L. Greene
Specialist in Agricultural Policy
Analyst in Agricultural Policy
rjurenas@crs.loc.gov, 7-7281
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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