John Block: “COOL” Isn’t Cool

By John R. Block

As a farmer, we understand that if you have something that doesn’t work, you fix it. It will just cost you money if you ignore the problem. Somehow, the federal government doesn’t seem to understand that common sense fact.

The Country of Origin Labeling (COOL) law was first passed in 2002. Canada and Mexico have been challenging the law now for 13 years. The World Trade Organization (WTO) just this week ruled it to be a violation of U.S. international trade obligations. We are a member of the WTO and therefore should live within the rules. That is our obligation, and we expect other countries to do the same.

This week, for the third time, the WTO ruled against us. That ruling gives Canada and Mexico the legal right to retaliate. Canada already has a list of proposed restrictions, which will result in a dramatic cut in our exports to Canada and Mexico. That is serious. Canada and Mexico are our number 1 and 2 export markets. Besides, they are our closest neighbors.

Senator Pat Roberts (KS) had this to say: “If Congress doesn’t act swiftly, retaliation will wreak havoc on the U.S. economy.” I think we should be aware that if we don’t fix this law, it will cost us millions of dollars in ag exports as well as other exports.

The law today requires that meat from a calf born in Canada and shipped to the U.S. bare a label that reads “Born in Canada, raised and slaughtered in U.S.”  Just imagine the cost and confusion that can cause.  What about the Montana farmer who imports Canadian calves and mixes his own U.S. calves with the Canadian calves?  By law, he would have to keep track of them and market them separately. The U.S. processing plant would then have to process them separately. That would be the only way to ensure the Canadian label was on the Canadian steak.

Consumers say they have the right to know where that animal has been. Why? It isn’t worth the hassle. USDA just released new study results that point out the COOL labeling policy costs consumers nearly 8 billion dollars over 10 years.

We don’t need to try and change COOL. We’ve tried that before. COOL isn’t cool. Just get rid of it.

John Block was Secretary of the U.S. Department of Agriculture from 1981-1985, where he played a key role in the development of the 1985 Farm Bill.

2014 And 2015

By Arthur Y. Tsien

As we say goodbye to 2014 and welcome 2015, it’s time for a little backward and forward looking.

Here’s what we saw in the 2014 rear view mirror in our little corner of the Universe devoted to the regulatory aspects of foods, drugs, medical devices, agriculture, and the like.

In January, the Food and Drug Administration (FDA) published its long-awaited, long-overdue draft guidance on the promotion of drug and biologic products in interactive social media.  The draft guidance, formally entitled “Fulfilling Regulatory Requirements for Post-Marketing Submission of Interactive Promotional Media for Prescription Human and Animal Drugs and Biologics,” is long on process (how and when to make required submissions to FDA), and short on substance.  Presumably, draft guidances that will address FDA’s views on the substantive content of drug and biologic promotion through social media will follow.

The Agricultural Act of 2014, almost universally known as the 2014 Farm Bill, became law in February.  The Farm Bill is the primary agriculture and food policy tool of the federal government. Enacted every five years, plus or minus (mostly plus), the Farm Bill addresses a broad range of substantive programs administered by the U.S. Department of Agriculture (USDA), including commodity programs, rural development, foreign agriculture and trade, conservation, renewable energy, forestry, nutrition, and other topics.  Unbeknownst to the average American, the Supplemental Nutrition Assistance Program (commonly known as “food stamps”) and other nutrition assistance programs represent by far the biggest expenditure of funds under the Farm Bill.

In March, FDA proposed to update its “Nutrition Facts” nutrition labeling requirements, which have largely been unchanged for over 20 years.  The proposed changes appear to be significant for industry, as FDA estimates the compliance price to be $2 billion.  Even if the proposed changes are not readily noticeable to more casual observers (like me), they are surely of major interest to my colleagues who spend their time looking at the back or side panels of pasta sauce jars or cereal boxes.

In April, President Obama appeared to signal his support for the important role that biotechnology plays in modern agriculture.  Mr. Obama did so in a letter to the granddaughter of Dr. Norman Borlaug, the Nobel laureate who is often recognized as the “Father of the Green Revolution.”

In May, Vermont became the first state to require labeling of genetically engineered foods.  Effective in 2016, Vermont will require the affirmative labeling of foods containing ingredients that are commonly referred to as “genetically modified organisms” or “GMOs.”  The legislation may be vulnerable to a constitutional challenge under the First Amendment.  It, and the prospect of similar legislation in other states, may also serve as the impetus for federal legislation that would preempt some or all state labeling laws related to GMOs.

In June, the U.S. Supreme Court decided Pom Wonderful LLC v. Coca-Cola Co.  The Court held that a company may bring a private lawsuit against a competitor under the Lanham Act to challenge the competitor’s food label, even if the competitor’s label technically complies with FDA requirements.  In essence, the Pom Wonderful decision means that FDA food labeling requirements are a floor, but not a ceiling.  It appears that Pom Wonderful is limited to FDA-regulated products where FDA does not approve or mandate specific labeling, such as food and beverage products.

The Biologics Price Competition and Innovation Act became federal law in 2009, creating a regulatory pathway for FDA approval of “biosimilar” products.  In July, FDA finally accepted the first biosimilar application under that statute.

In August, Grocers Manufacturers Association (GMA) announced an industry initiative that is, in its view, designed to improve the process and transparency for making “generally recognized as safe” (GRAS) determinations for food ingredients.  GMA’s GRAS initiative is intended to respond to criticism about the widespread use of the GRAS process, including FDA’s GRAS notification pilot program, as a mechanism for the review and marketing of new or modified food ingredients.

September marked the 30th anniversary of the Hatch-Waxman Amendments to the Federal Food, Drug, and Cosmetic Act.  Hatch-Waxman is the legislative foundation for the modern generic drug industry in the United States.  Today, generic drugs account for about 80 percent of all prescriptions filled in the U.S.  My personal musings on 30 years of Hatch-Waxman can be found here.

In October, the World Trade Organization ruled in favor of Canada and Mexico, rejecting USDA’s mandatory country-of-origin labeling (COOL) requirements for meat products.  The current U.S. labeling rules, which went into effect in 2013, require meat sold at the retail level to identify the country or countries where the animal was born, raised, and slaughtered.  The USDA COOL requirements were upheld by the D.C. Circuit earlier in 2014.  The U.S. has appealed within WTO; a decision early in 2015 is expected.

In November, OFW Law celebrated its semiseptuagennial anniversary.  Phil Olsson and Rick Frank founded Olsson and Frank in 1979 as a two-lawyer shop.  Fast-forward 3½ decades to 2014.  OFW Law now has nearly 40 lawyers and Policy Advisors, and is one of the few remaining FDA/USDA law and lobbying boutique firms.  Phil’s and Rick’s musings on the past 35 years can be found here.  We look forward to our second 35 years of providing outstanding client service, with creative solutions to difficult problems.

In December, FDA published two companion final rules regarding the labeling of foods sold in chain restaurants and in vending machines.  Covered chain restaurants (and similar chain retail food establishments) will have to declare the caloric content of standard menu items on menus and menu boards and make other nutrition information available on the premises.  Restaurants that are not covered by the final rule may voluntarily register with FDA to receive the protection of federal preemption from inconsistent state and local menu labeling laws.  Foods sold in vending machines will also have to declare caloric content.  Most packaged foods sold in vending machines likely will provide caloric information in the form of a “front-of-pack” label that can be viewed by prospective purchasers.

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Enough looking back.  Let’s briefly turn our attention to looking forward, to see what 2015 may have in store for us.  The following come to mind:

  • FDA final rules under the Food Safety Modernization Act (FSMA) on produce safety, preventive controls for human food, preventive controls for animal food, and foreign supplier verification, presumably by the court ordered deadlines in 2015. (Other FSMA final rules have 2016 deadlines.)
  • FDA’s first biosimilar approval. There is no track record here, so no one knows quite what to expect.  For whatever it’s worth, FDA review of biosimilar applications is subject to user fee performance goals, much like user fee performance goals for a variety of other products that require FDA premarket approval.
  • Additional FDA guidance on drug and biologic promotion through social media, hopefully addressing the substance of what FDA considers acceptable and not acceptable.
  • Federal GMO labeling legislation to preempt some or all state requirements in this area.
  • The WTO’s final decision on USDA’s COOL requirements.
  • The extent of cooperation between President Obama and the Republican Congress. Personally, I’m skeptical that they can work together towards less gridlock and more bipartisanship going forward.

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Thanks for reading!  Best wishes to one and all for a wonderful 2015, personally and professionally.  May 2015 be better than 2014!

OFW Law’s MMXIII in Retrospect

By Arthur Y. Tsien

2014-option 3As MMXIV starts, it’s time for a retrospective look at MMXIII.  What follows is a list of noteworthy events from MMXIII in our food, drug, medical device, and agriculture corner of the universe, focusing on matters that were of particular interest to OFW Law’s attorneys and Senior Policy Advisors and our clients.

We start, of course, with January, when three long awaited rulemaking documents finally saw the light of day, albeit well behind statutory rulemaking deadlines.  The Food and Drug Administration (FDA) published two major proposed rules – hazard analysis and preventive controls for human food; standards for growing, harvesting, packing, and holding produce for human consumption.  See our memoranda on these two new proposed rules here and here.  Both proposed rules are part of FDA’s efforts to implement the FDA Food Safety Modernization Act (FSMA), which became federal law in January 2011.  FSMA is the biggest expansion of FDA’s authority in the food safety arena since the Federal Food, Drug, and Cosmetic Act became federal law in 1938.

Later in the month, the U.S. Department of Health and Human Services (HHS) published a long awaited final rule to revise federal medical privacy requirements, commonly called the HIPAA Privacy Rule.  Restrictive interpretations in the rulemaking preamble had the potential to disrupt many customized pharmacy communications programs sponsored by pharmaceutical companies.  Following substantial public outcry and a lawsuit challenging the rule on First Amendment grounds (subsequently voluntarily dismissed by the plaintiff), HHS issued a guidance in September that provides substantially more flexibility than the interpretations set forth in the preamble to the final rule.  See our blog posts here, here, here and here.

In February, the Federal Trade Commission (FTC) set in motion events that may dramatically alter the beverage alcohol labeling landscape.  To settle a complaint, the FTC ordered a maker of a flavored malt beverage to have an “Alcohol Facts” panel, similar to “Nutrition Facts” for food, “Supplement Facts” for dietary supplements, and “Drug Facts” for over-the-counter drugs.  See our February 13 blog post here.  As a follow-up (and possibly spurred to act by the FTC’s action), in May, the Treasury Department’s Alcohol and Tobacco Tax and Trade Bureau (TTB) issued a ruling that allows beer, wine, and distilled spirits makers to voluntarily add Serving Facts to their labels.  See our May 29 blog post here.  A 2007 proposed rule to require Serving Facts remains pending.

Rick Blumberg, FDA’s longstanding Deputy Chief Counsel for Litigation, passed away unexpectedly in March.  I had the privilege of learning from Rick when I worked in FDA’s Office of Chief Counsel from the waning days of the Carter Administration through the first half of the Reagan Administration.  My partner Steve Terman’s tenure with Rick as a colleague in FDA’s Office of Chief Counsel exceeded mine on both ends.  For those of us in private practice, Rick was a tough cookie with whom to negotiate, but he was always principled.  Above all, he believed in his work and in FDA’s mission.  Steve and I, and the rest of the food and drug bar that works on FDA enforcement matters, will miss him.

Oxycontin (oxycodone) Tablets, an opioid pain relief medicine, is the “poster child” for the public health crisis stemming from the abuse of FDA-approved prescription drug products.   In MMX, FDA had approved the current Oxycontin formulation, which has properties that make it more difficult to abuse.   In April, FDA decided that the prior (MMX and before) version of Oxycontin had been withdrawn for safety reasons.  FDA’s decision effectively prolongs the monopoly for Oxycontin by delaying generic competition.  To put FDA’s decision into context, later events confirm that FDA’s decision-making in this area is on a case-by-case basis.  The next month, FDA decided that a prior version of Opana (oxymorphone) Tablets, another prescription opioid pain medicine, had not been withdrawn for safety reasons, even though the reformulated version was said to be more abuse-resistant.

In May, the U.S. Supreme Court issued its decision in Bowman v. Monsanto Co., holding that a patent holder’s rights in biotech seeds extends to subsequent generations of crops grown by farmers.  Widely viewed as a victory for biotech seed producers and American farmers, that decision should provide seed trait developers with the confidence that they will be able to protect their substantial research and development investments in seed biotechnology.  OFW Law attorneys authored an amicus brief for several agricultural trade associations in support of Monsanto Co.  See our May 15 blog post here.

The Supreme Court was on a roll, issuing another important decision in June.  In Mutual Pharmaceutical Co. v. Bartlett, the Supreme Court held in a 5-4 decision that federal law preempts state law product liability design-defect claims based on inadequate labeling warning statements.  Although the decision represented a major victory for the generic drug industry, that victory may not be a permanent one.  The Supreme Court’s decision in Bartlett arguably leads to an unfair result, as a seriously and permanently injured plaintiff was unable to collect any damages despite a jury finding – untouched on appeal – that a drug product design defect was the cause of her injuries.  In response to the decision, FDA published a proposed rule in November that would create a regulatory mechanism generic drug application sponsors could use to revise their labeling in light of new safety information, before receiving FDA approval for the revised labeling.  Having said that, FDA’s proposed solution appears to go too far and would undermine the longstanding basis for the approval of generic drugs under the Hatch-Waxman Amendments, namely, that (with certain exceptions not relevant here) a generic product have the “same” labeling as the innovator product being copied.

In July, the House of Representatives passed, by a narrow margin,  a pared-back farm bill, stripping out the Supplemental Assistance Nutrition Program (commonly known as food stamps) to satisfy some from the conservative Republican wing, but losing what little Democratic support the bill had when a broader version unexpectedly failed to pass a month earlier.  It was the first time food stamps have not been a part of the farm bill since MCMLXXIII, and created a great deal of uncertainty regarding the future of agriculture policy as the food stamp program remained the centerpiece of the Senate’s bipartisan version of the farm bill.  (Currently, farm bill conferees are said to be making progress on a conference report, which could be passed when Congress returns to work in MMXIV.)

Not much happened in our universe in August, just as in MMXII, because most of us – along with Congress and federal employees – left town on vacation.

In September, the meat and livestock industry received a setback when the U.S. District Court for the District of Columbia rejected a request for a preliminary injunction that would have stopped the United States Department of Agriculture’s (USDA) new mandatory Country of Origin Labeling (COOL) rule from taking effect.  That decision is on appeal.  The new COOL rule requires retailers to notify purchasers of fresh cuts of meat and poultry where the derivative animal was born, raised, and slaughtered. Complying with the COOL rule is particularly onerous for beef and pork feeders and packers located near the Canadian and Mexican borders because of the costs that come with segregating livestock based on their various COOL categorizations before packaging. The Farm Bill conferees have been debating whether to repeal the labeling requirement in the 2014 Farm Bill.  So, stay tuned!

As the entire country knows, much of the federal government shut down for 17 days in October.  Turning to our little corner of the universe, the shutdown was, at most, a minor hiccup for the meat, poultry, and egg products inspection activities of the USDA’s Food Safety and Inspection Service.  The shutdown also did not affect the application review activities of FDA that are funded by user fees.  However, many other USDA and FDA activities ground to a complete halt.  Despite the shut down, FDA was able to publish a proposed rule on hazard analysis and preventive controls for animal feed late in the month.  FDA’s proposed rule paralleled, in most respects, its proposed rule on hazardous analysis and preventive controls for human food from January.  Arguably, FDA’s proposed rule would have an even greater impact on the animal feed industry than its companion rule (see January above) would have on the human food industry.

Also in October, the World Food Prize was held in Des Moines, IA, honoring three leaders in agricultural biotechnology research for their contributions towards improving the quality, quantity and availability of food in the world.  Their research has made it possible for farmers to grow crops with improved yields, resistance to insects and disease and the ability to tolerate extreme variations in climate such as excessive heat and drought.  It was the presentation of Cardinal Peter Turkson, President of the Vatican’s Pontifical Council for Justice and Peace, which may have had the most profound impact.  Cardinal Turkson directly addressed the controversy surrounding biotechnology and genetic modification in the production of food using Catholic thought and Vatican II as his reference points.  A major coalition of farm, food and anti-hunger organizations joined 30 institutions of higher education in praising the World Food Prize Foundation for shining a spotlight on agricultural biotechnology with this year’s World Food Prize theme.

In November, FDA published an advance notice of a proposed rulemaking, tentatively concluding that partially hydrogenated oils are no longer generally recognized as safe (GRAS) because of the presence of trans fatty acids.  See our November 8 blog post here.  FDA did so even though consumption of trans fats in the U.S. has declined sharply – by more than 75 percent – because the food industry has reformulated foods and replaced most partially hydrogenated oils with other ingredients.

Also in November, the President signed into law the Drug Quality and Security Act (DQSA).  DQSA is the culmination of a decade-long effort by the drug distribution industry to establish interoperable, uniform, electronic “track-and-trace” requirements for prescription drug products.  These requirements will preempt state requirements, thereby preventing a potential mish-mash of state requirements that could present real burdens to trade.  DQSA also increased federal authority over pharmacy drug compounding.  See our blog posts here and here.  DQSA was passed by Congress on a bipartisan basis and offers a glimmer of hope that partisan differences have not resulted in total gridlock.

That brings us to December.  FDA issued a final guidance to implement its “voluntary” plan to help phase out and reduce the use of medically important antimicrobial drugs in food animals for “production” purposes, such as using less animal feed to gain weight.  The plan set forth in the final guidance, which has been under discussion with industry for a number of years, is FDA’s latest step in its efforts to address the possible transfer of antimicrobial resistance from food animals to human beings, thereby resulting in compromises in human medicine.  FDA started this process in MCMLXXII with the publication of a policy statement in the Federal Register.  Only time will tell whether FDA’s latest step in its 40-year journey represents a real public health advance.

My apologies to readers who are too young to have learned Roman numerals in grade school.  For MMXIV, consider adding Roman numerals to your adult learning list, along with other no-longer-taught subjects like U.S. geography and English grammar.

Thanks for reading.  Best wishes to all for a happy, health, and prosperous MMXIV!

10 Ag-Related Items to Watch in 2014

By John G. Dillard, as published on his AgWeb.com Blog – Ag in the Courtroom

With 2013 nearly in the books and the holiday season nearly behind us, its time to prepare for the challenges that face us in the coming year. While I am no expert on forecasting long-range weather patterns, commodity market fluctuations, or predicting the future of the Kardashian family, I do feel adequately qualified to indulge in a few predictions regarding what will be hot topics in the agricultural policy realm in the coming year. Accordingly, I, like most writers with access to an audience, have prepared a top 10 list of things to watch in agriculture in 2014.

1.      The 2012 2013 2014 Farm Bill

Farm Bills are getting harder and harder to come by these days. The 2012 effort to pass a Farm Bill failed. Congress punted by granting a one-year extension. The 2013 effort has been a struggle that will spill over into 2014. In particular, the fight over how far to cut SNAP benefits has put Democrats and Republicans at loggerheads. Based on the latest developments, we can expect to see one some time in January. However, the specifics of the Farm Bill remain to be seen because the legislation is being worked out behind the scenes by committee leaders and their staff.

2.      The Chesapeake Bay TMDL

The Chesapeake Bay is entering its third year under the restrictions imposed by the Chesapeake Bay TMDL. Under the TMDL plan, EPA is requiring the states in the watershed to make significant annual progress in reducing nitrogen, phosphorus and sediment pollution. Agriculture bears a significant portion of this burden. Achieving water quality goals in a watershed as large as the Chesapeake Bay through a single plan is a clunky process. It’s also questionable as to whether EPA has the authority to impose such a plan. American Farm Bureau Federation challenged EPA’s authority to mandate the TMDL as it did. Farm Bureau lost at the district court level, but it has appealed the case to the Third Circuit Court of Appeals. We will likely get a decision from the appeals court some time this year. The outcome of this litigation will determine how EPA approaches watershed restoration in not only the Chesapeake Bay, but other large watersheds.

3.      Mississippi River Basin Numeric Limitations on Nutrients

The Chesapeake Bay TMDL was supposed to be EPA’s case study in approaching large scale watershed restoration efforts. EPA’s plan was to take the lessons that it learned from the Bay TMDL and apply it to other watersheds across the country, with the Mississippi River being the ultimate goal. However, some environmental groups were impatient with EPA’s approach. They petitioned EPA to develop numeric limitations for nitrogen and phosphorus for all waters in the Mississippi River Basin. When EPA denied this petition, the environmental groups took them to court. A federal court held that EPA has to respond to the petition and determine whether numeric nutrient limitations are appropriate for the Mississippi River Basin. EPA has appealed this decision to the Fifth Circuit Court of Appeals. We can expect a decision on this case in the coming year.

4.      Mandatory Country of Origin Labeling

The new COOL “born, raised, and slaughtered” regulations became effective on November 23, 2013. The battle to overturn these regulations, which are intended to protect American swine and cattle producers from foreign competition, is waging on three fronts – Capitol Hill, the federal courts, and the WTO.

mCOOL supporters and opponents have been working the Farm Bill conferees to ensure that their interests are protected on the legislative front. We will likely know what the Farm Bill looks like in the next month.

The major livestock and meatpacking trade associations have challenged mCOOL in the federal courts. The mCOOL supporters, including USDA, R-CALF and HSUS, prevailed on the first round of litigation. mCOOL opponents have appealed this decision. The appeal will be heard in the D.C. Circuit on January 9th. We can expect a decision sometime in the next few months on this matter.

Canada and Mexico have also challenged the new mCOOL regulations at the WTO because mCOOL provides an incentive to discriminate against Mexican and Canadian livestock. The WTO has assigned their challenge to the same panel that rejected earlier mCOOL provisions that were lessdiscriminatory against foreign livestock. The wheels turn slow at the WTO, but we can expect to hear at least an initial decision on the matter before the end of the year.

5.      Lawyers, Dust and Feathers – the Alt case

One of the major cases decided this year was Alt v. EPA. In Alt, EPA alleged that a poultry farmer needed a NPDES permit on the basis that the farm was discharging pollutants when stormwater washed dust, feathers and litter away from the barnyard area. Under this theory, nearly every CAFO would be required to obtain a NPDES permit, a costly and onerous process. A federal judge held that the farm was not required to obtain a NPDES permit because runoff from the barnyard area is an agricultural stormwater discharge that is exempt from permitting requirements under the Clean Water Act. While this decision is a major victory for animal agriculture, it’s not quite time to uncork the champagne. EPA and the environmental groups that intervened in the suit have decided to appeal this case. Arguments will take place later this year and we can expect a decision towards the end of 2014 or the beginning of 2015.

6.      FSMA Rollout

FDA is under the gun, or actually a court order, to write the rules that implement the Food Safety Modernization Act of 2011. FDA has to propose, accept public comment on, and finalize several major regulations pursuant to FSMA by June 30, 2015. This is a major strain on FDA’s resources and some of the rules that have been proposed reflect the rushed state that the Agency is operating under. While these rules will not be finalized until 2015, FDA is accepting public comments on their various proposals through the early months of 2014. We can expect that the new FSMA rules will have a substantial impact on various segments of the ag sector, especially produce farms and feed manufacturers.

7.      GMO Labeling

Whether food manufacturers should be required to label their products that include genetically engineered ingredients has been a hot button issue for the past few years. Supporters of mandatory labeling have hit several roadblocks at the federal level, so they have turned to state governments to require labeling. While high-profile ballot initiatives in California and Washington state have failed, supporters have made inroads with some measures in the northeastern states. For instance, Maine and Connecticut have labeling measures in place, but they only become effective if a critical mass of other states require GMO labeling. In order to avoid a patchwork of various state labeling laws, we may see efforts ramp up in 2014 to pass some type of law regarding GMO labeling at the federal level, which would preempt state labeling laws.

8.      The Renewable Fuels Standard

The fight over the Renewable Fuels Standard will likely come to a head this year. Much of the political support for the policy has dwindled in the face of opposition from a growing number of strange bedfellows including environmentalists, livestock producers, and the oil industry. With petroleum consumption decreasing, the RFS mandate for renewable fuel use is hitting the “blend wall” much sooner than was anticipated when the legislation was drafted in 2007. In response to the blend wall concerns, EPA has proposed lowering the targets for corn ethanol use in 2014. Opponents of the RFS believe this is a step in the right direction, but not far enough. Meanwhile, supporters believe this is a step down a slippery slope. We can expect 2014 to bring us legislative proposals to gut the corn ethanol portion of the RFS. We can also expect RFS supporters to sue EPA if it finalizes its proposal to reduce the corn ethanol mandate.

9.      Trade Agreements

The Obama Administration is currently negotiating two major trade agreements that could have a major long-term effect on agricultural trade. The Trans-Pacific Partnership could significantly improve our access to export markets in the Asia-Pacific region. However, agriculture is a major sticking point in these negotiations. Japan, in particular, wants to protect much of its agricultural industry from foreign competition. If this is allowed, then other countries to the agreement will likely seek similar protections, making the TPA a much weaker deal for US agriculture. We will likely see some progress on this matter in the coming year.

The second major trade agreement under negotiation is the Transatlantic Trade and Investment Partnership (TTIP). This is a proposed trade agreement between the US and the European Union. While this trade agreement could be the biggest trade deal in the world, agriculture could be a major sticking point in the negotiations. Conflicts over GMO acceptance in some of the EU member countries, the use of hormones for growth promotion, and animal welfare practices could be roadblocks for increasing trade with the EU. The TTIP negotiations have not progressed as far as TPA, so we can expect developments in TPA to influence the outcome in TTIP.

10.  Immigration Reform

The story for immigration reform in 2014 will likely be a disappointment. While it seemed possible that some type of bipartisan immigration reform deal could have emerged in early 2013, that window has likely closed. The mid-term elections will be looming over Congress and its unlikely that enough members will be motivated to take what could be a risky stand on immigration issues so close to election day. While the Republican Party continues to take a pounding on a national level for failure to catch up to the electorate’s view on immigration reform, many of the individual members of the House are from districts where any appearance of granting amnesty is a political non-starter. In the meantime, millions of undocumented workers must remain in the shadows and farmers and ranchers that depend on immigrants for labor will face the same uncertainty and labor shortfalls that they have experienced the last few years.

John Block: What’s In The Farm Bill?

By John R. Block

The obvious issues in the farm bill are nutrition programs, crop insurance, and farm safety net supports. However, there are some important sections in the bill that could be almost as important that don’t get much attention.

The first one deals with trade. Trade accounts for 25 percent of U.S. farm receipts. When we plant our crops, we can count on seeing one-third of that production go to some other country. 95 percent of the world’s customers are not in the U.S. The growing world population, expected to surpass 9 billion by 2050, will need our food.

We are good at what we do, but we can be even better. The U.S. Department of Ag Trade function has not been significantly reorganized in 35 years. This is the time to reorganize the trade-related agencies, programs and activities at the USDA. Create a new Under Secretary for Trade and Foreign Agriculture Affairs. The Trade Under Secretary would report directly to the U.S. Secretary of Agriculture. This would give that individual a high-level position to lead in trade negotiations with senior foreign officials. That would give our Trade Secretary the power and respect to effectively fight to keep existing foreign markets open and gain access to new markets. It’s not easy. We are constantly facing a wall of non-tariff barriers holding back our exports.

Both the House and Senate have trade reorganization language in their farm bill proposals. The final bill needs to give the Department of Agriculture this new focus.

Another issue that I hope is fixed in the farm bill is the country of origin labeling (COOL) language. Either get rid of COOL altogether or, perhaps, approve a label that simply says “North American.” COOL is our non-tariff barrier. A consistent trade policy should be to avoid such trade restrictions.

The final issue is California’s trade barrier. California has a law prohibiting the import of eggs from farms that don’t meet California’s strict hen housing requirements. There is some possibility that this trade barrier can be dealt with in the farm bill. If not – congratulations to Missouri’s Attorney General, who has announced that he intends to sue California for their egg restrictions.

John Block was Secretary of the U.S. Department of Agriculture from 1981-1985, where he played a key role in the development of the 1985 Farm Bill.

Mandatory Country-of-Origin Labeling: A Short-Sighted, Protectionist Scheme

By Philip C. Olsson and John G. Dillard

November 23rd was a significant date for the livestock and meat industry. After more than a decade of lobbying, litigating, and haranguing, all fresh cuts of beef, pork, lamb and chicken sold in retail establishments must bear a label stating the country (or countries) where each animal supplying meat in the package was born, raised, and slaughtered. Known as mandatory Country-of-Origin Labeling (mCOOL), this new, onerous labeling requirement is a long-sought victory for the protectionist fringe of the U.S. beef cattle industry.

Prior to the implementation of the mCOOL legislation, beef and beef products were subject to the generic country of origin labeling requirements which apply to all processed products, both foods and non-foods, that is that the label should designate the place of most recent substantial transformation as the place of origin. For beef and pork, where the animals were born and/or fed in Canada or Mexico, but slaughtered and processed in the United States, this traditional rule has allowed the United States to be designated as the country of origin.

We are all familiar with the country of origin labeling which applies to fruits and vegetables, each of which usually bears a small, sticky label identifying the single country where it was cultivated, harvested and processed. It is not unusual to visit a supermarket’s produce department and see tomatoes from the United States, Canada, Guatemala, Mexico and the Netherlands displayed separately, side-by-side.

On its face, the mCOOL regulation appears rather innocuous. Retailers are simply required to denote the country where the derivative animal was born, raised, and slaughtered. However, the behind the scenes efforts that are necessary to allow retailers to comply with this labeling requirement are anything but simple. Prior to the implementation of mCOOL, meat processors “commingled” meat products with different country of origin designations in a single shipment to retail customers. On a given day, a large packing plant might process 2,000 carcasses of similar age and quality with anywhere from 100 to 800 of those carcasses attributable to animals born and/or fed in Canada or Mexico. Since these carcasses are not separated out on the production line, the various cuts of meat from these carcasses are commingled when they are packaged for shipment to retailers.  This has been a standard industry practice because, unlike various physical attributes such as age, leanness and fat cover, political boundaries do not have a material bearing on the quality, safety, or taste of meat products. However, despite a long history of “commingling” products with different country of origin designations, the new mCOOL rule does away with this practice.

The ban on commingling will cause dramatic reverberations for the beef and swine industry that will unnecessarily increase costs that will be passed along to consumers. Feedlots will be required to maintain additional records and segregate livestock based on country of origin. Processing plants will have to do separate production runs based on an animal’s country of origin designation. These processing plants will also have to use extra cold storage space to allow for segregation of finished product by country of origin. Retailers will want to purchase product with consistent country of origin labeling, which will mean that packing houses will need to contract for and process meat with the same geographical origin, day after day and month after month. This will be a strong incentive for retailers to demand that packers provide beef and pork from a single country of origin, which will lead to the loss of work and  jobs at packing houses near the borders with Canada and Mexico, which have traditionally shipped commingled products to their retailer customers. The alternative for the retailer would be to build extra SKUs into their inventory management systems to account for the different labels under the new mCOOL Rule, something which would likely be both cumbersome and costly.

These extra costs are not the unintended consequences that were overlooked when the commingling ban was put into place. Instead, these extra costs are the rather deliberate consequences forced on the livestock and meat industry via the seemingly innocuous mCOOL regulation. That is because the costs of compliance with mCOOL provide a clear incentive to avoid processing Mexican and Canadian livestock. Retailers do not want to provide extra shelf space for different label designations, packers do not want to have separate production runs or extra storage space, and stockyards do not want to undertake the burden of segregating livestock with various countries of origin. The new mCOOL regime picks winners and losers, and the clear winner is meat from animals that are born, raised, and slaughtered in the United States.

Many do not see a problem with this. American beef and pork producers grow a great product and take pride in their work. mCOOL helps to protect them from competition with our neighbors to the north and south. However, this is a short-sighted view which will cause harm to livestock demand that will greatly outweigh any benefits resulting from discriminating against foreign livestock. The U.S. cannot raise all of the beef and pork that its packers process domestically. Packers, especially those near our northern and southern borders, rely on Canadian and Mexican cattle and swine to even out seasonal fluctuations in supply. With a reduced market for meat not bearing a “Born, Raised, and Slaughtered in the United States” label, these packers will have to pay a premium for domestic livestock – exactly as the crafters of mCOOL intended. Large packers may follow Tyson’s lead and decide to not slaughter Canadian cattle at all. Smaller, single-plant packers will have to decide whether they can remain in business with this cost squeeze.

Supporters of mCOOL are careful not to designate these labeling requirements as a protectionist measure. Instead, they frame mCOOL as a measure that provides consumers with more detailed information regarding where their food comes from. mCOOL supporters have received a relative pass from the popular press regarding the specifics of the regulation because the supporters have couched the regulation as furthering the consumer’s “right to know.” Ironically, many of the strongest advocates for mCOOL were also parties and amici in Ranchers Cattlemen Action Legal Fund United Stock Growers of America v. United States Department of Agriculture 415 F.3d 1078 (9th Cir, 2005), where the Court of Appeals struck down an injunction which these parties had obtained from the United States District Court in Billings Montana (2004 WL 1047837), to keep the Canadian border closed to imports of Canadian cattle. It seems clear that many of the producer parties and amici are protectionists at heart. Their protestations regarding the consumer’s “right to know” about where cattle and hogs are born or fed are unpersuasive, because nothing in current law has prevented voluntary labeling of U.S. product to provide such information on a voluntary basis. If consumers were really interested in knowing these things, they would have created a market for this kind of more detailed labeling.

The fundamental flaw in the mCOOL supporters’ logic is the presumption that competition in the beef industry is a contest between U.S. producers and foreign producers; the real competition in the beef industry is between beef and cheaper forms of protein. While mCOOL does shield domestic producers from foreign competition, it does not insulate beef producers from the consumers that decide whether to purchase their product or not. mCOOL will tighten beef and pork supplies. This will, in turn, increase the price of meat for consumers. Faced with higher prices, consumers often turn to lower cost forms of protein, choosing pork, chicken, or turkey over beef. The retail price of beef is already high due to elevated grain prices and short supplies recovering from the 2012 drought – the added costs of mCOOL will only serve to further nudge beef prices higher and further weaken demand. Ultimately, some of the most ardent supporters of mCOOL, disaffected beef producers, may prove to be the biggest victims of mCOOL.

Upcoming Webinar on Mandatory Country of Origin Labeling (CLE Credit Opportunity)

The National Agricultural Law Center is hosting a webinar on USDA’s Country of Origin Labeling rule for meat sold in retail establishments. The webinar, “COOL or Not-So-COOL: An Overview and Discussion of Country of Origin Labeling,” will take place on November 14, 2013, at 1 PM (EST). The webinar will feature a friendly point-counterpoint discussion between J. Dudley Butler, attorney and former GIPSA Administrator, and OFW Law’s John Dillard. Mr. Butler will be arguing in favor of COOL and Mr. Dillard will be arguing against the regulation. The webinar will be moderated by Harrison Pittman, Director of the National Agricultural Law Center.

The webinar discussion is intended for attorneys, lobbyists, policymakers, extension personnel, livestock producers, and others that have an interest in the fate of the COOL Rule. It will feature opportunities for Q&A discussion with the speakers.

Webinar participants will be eligible to receive 90 minutes of CLE credit. The cost of the webinar is $75 for attorneys seeking CLE credit and $50 for others.

If you are interested in participating in the COOL webinar, you can register with the National Agricultural Law Center.

Livestock & Meat Groups Want COOL Relief Pending WTO Review

By John G. Dillard

On Monday, a group of trade associations representing the spectrum of America’s beef and pork production system issued an urgent plea to USDA Secretary Tom Vilsack and the Office of the U.S. Trade Representative Ambassador Froman. The coalition wants USDA’s Agricultural Marketing Service (AMS) to hold off on enforcing new country of origin labeling requirements until the World Trade Organization (WTO) has an opportunity to hear Canada and Mexico’s challenge to the new regulations.

The groups requesting the delay represent the meat industry, grocers, and livestock producers. They assert that implementation of AMS’s new COOL labeling requirements, which will ban commingling of products with different countries of origin will be disruptive at many different levels of the meat production value chain. The groups indicate they are concerned that the new labeling scheme is vulnerable to a challenge before the WTO, which would require AMS to re-write the COOL Rule again.

Read the rest of this post on John Dillard’s AgWeb.com Blog – Ag in the Courtroom.

Judge Denies Attempt to Stop New COOL Rule

By John G. Dillard

Opponents of USDA’s new mandatory Country-of-Origin-Labeling (mCOOL) rule received a setback this morning.  A federal judge denied the mCOOL opponents request for a preliminary injunction, which would have halted implementation of the new labeling rule pending ultimate resolution of whether the new mCOOL rule was lawful.

Opponents of the mCOOL rule argued that the new mCOOL compelled speech that was in violation of the First Amendment and that USDA’s new rule was an “arbitrary and capricious” agency action that was not in line with Congress’ intent in requiring country-of-origin labeling on fresh meat products. Furthermore, opponents argue that compliance with the labeling requirements will require fundamental structural changes in the American meat industry that will lead to discrimination against Mexican and Canadian livestock. (Disclosure: I represent North American Meat Association, one of the plaintiffs in this matter).

Read the rest of this post on John Dillard’s AgWeb.com Blog – Ag in the Courtroom.

Canada, Mexico Think U.S. Labeling Requirements are un-COOL

By John G. Dillard

The United States has irked its neighbors with a meat labeling mandate that may have the effect of discriminating against Canadian and Mexican livestock.  The Canadian and Mexican governments believe that USDA’s new mandatory Country-of-Origin-Labeling (mCOOL) Rule is a thinly-veiled technical trade barrier that will be devastating to their respective livestock sectors, which are dependent on U.S. trade.

Sample COOL label, as mandated by USDA.

Sample COOL label, as mandated by USDA.

In an effort to pressure USDA to not implement the new mCOOL rule, Canada and Mexico have requested the World Trade Organization (WTO) to establish a compliance panel to sign off on a number of politically-charged retaliatory tariffs that they can bring to bear if USDA does not scrap the new rule.  This is the latest development in an ongoing controversy that has chilled livestock trade between our neighbors for the last few years.

mCOOL’s Origins

The 2002 Farm Bill contained a provision requiring USDA to develop rules that require certain meat packages to bear a label indicating the country of origin for meat sold at retail establishments.  However, Congress did not authorize funding for USDA to carry out this rulemaking.  The 2008 Farm Bill amended the labeling provision to its current form, which created four COOL categories (Product of US, Multiple Countries of Origin, Imported for Immediate Slaughter, and Foreign Country of Origin).

Based on these new categorizations and a lift on the funding ban, USDA released a final rule in 2009.  The 2009 Rule required labels stating “Product of the U.S” if the packaging contained strictly meat from livestock that were born, raised and slaughtered in the United States.  If the packaging contained meat with commingled origins, the packaging was required to state “Product of the U.S./Canada” or “Product of U.S./Mexico.”

The Canadian and Mexican governments did not take kindly to the 2009 mCOOL Rule.  They filed a complaint with the WTO, arguing that USDA’s rule discriminated against foreign livestock by favoring U.S.-origin meat products.  The WTO panel agreed.  In June 2012, the WTO appellate body issued a report finding that the 2009 rule was not in compliance with the United States’ obligations under the WTO.  They ordered USDA to issue new regulations that would bring it into compliance.

The 2013 mCOOL Rule

USDA followed the order to issue new mCOOL regulations, but it’s not apparent that it took the WTO’s ruling to heart.  The new mCOOL Rule further discriminates against foreign livestock by banning the practice of comingling products with a different country or origin in a single package.  Under the new rule, U.S.-only products must bear a label stating “Born, Raised, and Slaughtered in the United States.”  Packaging containing meat products from Canadian or Mexican cattle that are fed and slaughtered in the U.S. must be labeled “Born in Canada (or Mexico), Raised and Slaughtered in the U.S.”  Foreign fed cattle shipped to the U.S. for slaughter must be labeled “Born and raised in Canada (or Mexico), Slaughtered in the U.S.”

The labeling requirements and the ban on commingling of packaged product is likely to create a logistical nightmare for some packers and retailers.  Packers near our northern and southern borders will be required to segregate livestock and maintain several different production runs based on the COOL label categorizations.  Distributors and retailers will also be required to handle a bevy of new SKUs to accommodate the new labeling requirements.  Many experts believe that the end result of the labeling scheme will be that packers will favor U.S.-origin livestock, and aggressively discount foreign-born livestock to reduce the costs of compliance with the 2013 mCOOL Rule.

In addition to facing scrutiny under the WTO, the logistical difficulties of implementation and compliance with the 2013 mCOOL Rule are also the subject of litigation in the U. S. District Court for the District of Columbia.  In the case, American Meat Institute v. USDA, a group of trade associations representing packers, domestic livestock producers, and Mexican and Canadian livestock producers are seeking to overturn the 2013 mCOOL Rule.  (Disclosure: OFW Law represents a client in this matter).  The groups oppose the new rule on the basis that the law compels commercial speech in violation of the First Amendment and that it is “arbitrary and capricious” under the Administrative Procedure Act.  A federal judge heard oral arguments for a preliminary injunction in this case on August 27th.  We expect to hear a decision on the case within the next two weeks.

WTO: Round 2

Anticipating heavy losses to their respective livestock industries, the Canadian and Mexican governments compiled an extensive list of retaliatory tariffs that they wish to enact.  In addition to instituting tariffs on U.S. livestock and meat products, the Canadian government has identified products from influential legislator’s districts, in hopes of exerting maximum pain on those with the power to repeal mCOOL.  This list includes wheat products, such as cereal, bread and pasta, cheese, sugar, some steel products, jewelry, and wooden furniture.  The Mexican government is expected to announce similar politically-motivated tariffs in the near future.

Before the Canadian and Mexican government can implement these retaliatory measures, they must receive approval by the WTO.  They have requested that the WTO’s Dispute Settlement Body (DSB) form a compliance panel to evaluate their proposed tariffs.  The DSB, which meets this Friday (8/30), will decide whether to form a compliance committee.  If the Canadian and Mexican governments receive approval for retaliatory tariffs, it will likely be 18 to 24 months before they are implemented.

With the proposed tariffs looming in the future, Congress and USDA may begin to question whether mCOOL is more trouble than it is worth.  Or at least that is the hope of our neighbors and trade partners.