...the World Trade Organization has again ruled against U.S. regulations on the country of origin labeling of meat products. The decision brings the U.S. one step closer to billions of dollars’ worth of retaliatory sanctions against its exports to Canada and Mexico.

The 2008 Farm Bill revised the previous mandatory COOL requirements to provide that in order for a commodity to be labeled as a product of the U.S. all production activities associated with the commodity have to occur on U.S. soil or in U.S. waters. For products produced in the integrated North American marketplace, the label must indicate every country in which a stage of production has taken place. The 2008 Farm Bill also imposed mandatory COOL requirements for muscle cuts of beef (including veal), lamb, chicken, goat and pork; ground beef, lamb, chicken, goat and pork; wild and farm-raised fish and shellfish; perishable agricultural commodities; macadamia nuts; pecans; ginseng; and peanuts.

The WTO subsequently ruled that the U.S. Department of Agriculture’s implementing regulations were inconsistent with U.S. obligations under the WTO Agreement on Technical Barriers to Trade to accord imported products treatment no less favorable than that accorded to domestic products. The USDA responded by revising its regulations to require origin designations for muscle cut covered commodities derived from animals slaughtered in the U.S. to specify the production steps of birth, raising and slaughter of the animal from which the meat is derived that took place in each country listed on the origin designation. The rule also eliminated the allowance for commingling of muscle cut covered commodities of different origins.

While the USDA believed these changes brought the COOL regulations into compliance with U.S. international trade obligations, Mexico and Canada said they “made things worse” and took the U.S. back to the WTO to challenge them. ..a WTO dispute settlement panel has now ruled in favor of Mexico and Canada, although no details are yet available because the decision is not expected to be made public for at least another month.

In June 2013 Canada issued a list of U.S. goods that could be subject to retaliatory sanctions (expected to be in the form of higher tariffs) if the WTO were to overturn the revised COOL regulations and Mexico’s Economy Ministry said it could target products such as fruits and vegetables, juices, meat, dairy products, machinery, furniture and home appliances, among others. It could be another year or more before any such measures are actually imposed, however, given that the U.S. is likely to appeal the panel’s decision...

This has been excerpted from the 26 August 2014 article by Sandler, Travis & Rosenberg Trade Report.