COOL Violates International Trade Obligations

US - Mandatory country-of-origin labelling (COOL) violates the US international trade obligationS, the American Meat Institute (AMI) has told the Office of the US Trade Representative.

11 January 2010

5 minute read

North America

The comments were provided in response to a 4 December 2009, Federal Register Notice. Canada and Mexico in late 2009 filed a case against the United States with the World Trade Organisation (WTO), a move that came as no surprise given those countries’ outspoken opposition to the labelling law when it was under consideration by Congress.

In comments, AMI Senior Vice President of Regulatory Affairs and General Counsel Mark Dopp said that equitable enforcement of international trade rules is a high priority for everyone and that all too often, market access for US meat products has been threatened or cut off with little or no legitimate justification.

“American challenges to these actions have been based upon the rights provided under international trade agreements. These challenges will continue, as demonstrated by a recent limitation to an important market for beef. Critical to the United States’ ability to enforce successfully World Trade Organisation (WTO) and North American Free Trade Agreement (NAFTA) obligations is consistency in US behaviour and actions,” Mr Dopp said. “In that regard, the United States’ credibility is undermined when US legislation violates America’s commitments pursuant to those international agreements. In the instant case, the US COOL requirements, as provided for in the 2002 Farm Bill (and modified in the 2008 Farm Bill) and as implemented through regulations that became effective March 16, 2009, are not consistent with US obligations under both WTO and the General Agreement on Tariffs and Trade (“GATT”) and NAFTA.”

COOL is inconsistent with trade agreements because of its discriminatory effect on imported meat and imported live animals, Mr Dopp said. The US must ensure that the products of other countries “imported into the territory of [the United States]…be accorded treatment no less favorable than that accorded to like products of [US] origin in respect of all laws…affecting their internal sale.”

According to Mr Dopp, COOL affects the internal sale of meat derived from foreign animals in the United States by creating notable disadvantages in selling imported foreign meat, as well as selling “foreign” animals to US meat packing facilities. Significantly, GATT provides that “formal” identical treatment, i.e., that both US and imported products must be marked with the country of origin, does not justify a law such as COOL where that law discriminates against imports in practice.

“The result is that COOL is in fact discrimination against foreign products, a result even contemplated by sponsors of the legislation who declared that it would be ‘helpful to a lot of American agricultural producers’ and forces companies to rely ‘on our independent producers here in this country,’” according to Mr Dopp.

COOL also is not consistent with the WTO Agreement on Technical Barriers to Trade (TBT). The TBT Agreement specifically governs any technical regulation which, like COOL, “deal[s] exclusively with…marking or labelling requirements as they apply to a product.” The TBT Agreement requires that the United States use international standards as the basis for its technical regulations. COOL breaches those US obligations by failing to use two such standards.

First, the Codex General Standard for the Labelling of Prepackaged Foods provides that “when a food undergoes processing in a second country which changes its nature, the country in which the processing is performed shall be considered to be the country of origin for the purposes of labelling.” COOL does not meet this international standard, Mr Dopp said. In addition, the Codex General Standard provides that “the country of origin of the food shall be declared if its omission would mislead or deceive the consumer.” The US Government, however, has never claimed that customers were misled or deceived.

Second, the WTO Rules of Origin Agreement stipulates that the final harmonisation work programme must determine a country of origin as “the country where the last substantial transformation has been carried out.” COOL, however, denies US country of origin to animals and meat products that are substantially transformed in the United States, and thus fails to conform to this international standard, Mr Dopp noted.

COOL also violates the TBT agreement by creating unnecessary obstacles to international trade. Its non-trade objectives are minimal, and COOL does not have as an objective protecting “human health or safety, animal or plant life or health, or the environment.”

“Indeed, the US Government has repeatedly stated that COOL ‘is not a food safety or animal health measure. Likewise, COOL is not a ‘national security requirement’ nor does COOL have as its purpose preventing ‘deceptive practices.’ Neither sponsors of the legislation nor US Government agencies have made such a claim,” Mr Dopp said.

The stated objective of COOL is to provide ‘consumer information,’ but AMS found that the “expected benefits from implementation of this rule are difficult to quantify. In fact, the agency concluded that that the economic benefits will be small and will accrue mainly to those consumers who desire country of origin information and that all available evidence shows that “consumers do not have a strong preference for country of origin labelling.”

“In a number of cases meat packers have chosen either to cease buying imported livestock – an extreme trade restriction – or have confined the processing of imported livestock to limited dates and times. These practices, in turn, have significantly restricted trade,” Mr Dopp wrote.

In addition, to be consistent with GATT, COOL must be administered uniformly and reasonably. But according to Mr Dopp, “COOL applies only to “covered commodities” and not to a host of products such as turkey, processed foods, etc. and, therefore, is not consistent,” he said. Reasonableness requires that the administration of laws be “proportionate” and “appropriate” and, comparing the significant costs imposed on the US importers and the foreign producers of animals and meat products to the scant legitimate benefit identified by the US government, COOL cannot be deemed to be reasonable.