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.

2015 Dietary Guidelines Advisory Committee Report Mixes Science and Policy

By Robert A. Hahn

The 2015 Dietary Guidelines Advisory Committee (DGAC) submitted its report to the Secretaries of Agriculture and Health and Human Services last month and disbanded.  It is now up to the USDA and HHS to take the DGAC’s conclusions and recommendations and issue a revised edition of the Dietary Guidelines for Americans.  Interested persons may submit comments on the DGAC report until May 8, 2015.

Some aspects of the DGAC report have been controversial.

  • More than any previous committee, the 2015 DGAC wades heavily into the policy arena. Its report includes a number of controversial policy prescriptions such as the following:
    • FDA should revise the Nutrition Facts label to include a mandatory declaration for Added Sugars, in both grams and teaspoons per serving, as well as a % Daily Value based on a DV of no more than 10% of total calories (e., 50 g);
    • FDA should create a standardized front-of-pack (FOP) nutrition label that would appear on all food products and that would provide clear guidance regarding a food’s healthfulness;
    • FDA should establish mandatory national standards for the sodium content of foods;
    • Federal nutrition assistance programs, including Food Stamps (the Supplemental Nutrition Assistance Program), should be aligned with the Dietary Guidelines; and
    • Governments should use economic and tax policies to encourage the production and consumption of healthy foods and reduce consumption of unhealthy foods (g., by taxing sugar-sweetened beverages, snack foods, and desserts; by restricting marketing of certain foods to children and teens).

We expect USDA and HHS to take these policy recommendations under advisement, but not include them in the Dietary Guidelines.

  • For the first time, the DGAC report includes a chapter devoted mainly to the issue of sustainability. While the committee offers a justification for addressing environmental sustainability in a document about nutrition, some have questioned whether environmental issues are within its mandate.
  • While acknowledging that virtually all foods can be part of a healthy dietary pattern, the DGAC strongly favors a diet higher in vegetables, fruits, whole grains, low and non-fat dairy products, seafood, legumes, and nuts and lower in red and processed meats, sugar-sweetened foods and beverages, and refined grains.  There is a concern that some of the complexities of previous nutritional recommendations may be lost in this emphasis on a healthy dietary pattern.  For example, the emphasis on whole grains might lead some consumers to neglect enriched refined grains, which also play a significant nutritional role.  The emphasis on reducing consumption of red and processed meats may cause some consumers to overlook lean meat as a good source of heme iron, even though the report notes that iron is a nutrient of concern for adolescent girls and premenopausal women.

While these controversial aspects of the DGAC report have received the most attention, there are some other interesting findings and recommendations in the report worth noting:

  • While continuing to recommend reductions in intake of sodium and saturated fat, the 2015 DGAC backs away from the sharper reductions recommended by the 2010 committee. Whereas the 2010 DGAC recommended no more than 1,500 mg/day of sodium, the 2015 DGAC recommends no more than 2,300 mg/day.  Whereas the 2010 DGAC called for gradually reducing saturated fat to <7% of total calories, the 2015 DGAC only recommends reducing saturated fat to <10% of total calories.
  • The report deflates some of the recent concerns expressed by FDA and members of Congress about caffeine. The DGAC concludes that U.S. caffeine intake does not exceed what is currently considered to be a safe level in any group.
  • The DGAC concludes that there is limited and inconsistent evidence that calorie labeling on menus and menu boards affects food selection or consumption.
  • For commonly consumed fish species (g., cod, trout, salmon), the DGAC found that farm-raised seafood contains as much or more of the omega-3 fatty acids EPA and DHA as the same species caught in the wild.

The 2015 Dietary Guidelines is expected to be released in the fall.

Don’t Rush the Holiday Preparations – Make Certain the Meat is Properly Cooked

By Barbara J. Masters, D.V.M.

Getting ready for holiday “get togethers”, one often finds themselves in a rush or behind on preparing the food for the party.  Don’t let tardiness be the reason the party attendees end up with a case of foodborne illness.  Don’t rush cooking of product; I am certain the guests would rather wait a few minutes than risk the potential of being sick because the product was not properly cooked.

Always read the product label for specific cooking instructions and follow them!  Be sure to verify whether the product has been pre-cooked and simply needs to be re-heated, or if the product is raw and needs to be thoroughly cooked.   All of this information will be included on the product label.  If there are questions on what temperature to cook a specific product to, USDA’s Food Safety and Inspection Service provides a chart that includes safe minimum internal cooking temperatures:

Cook all food to these minimum internal temperatures as measured with a food thermometer before removing food from the heat source. For reasons of personal preference, consumers may choose to cook food to higher temperatures.

Product Minimum Internal Temperature & Rest Time
Beef, Pork, Veal & Lamb
Steaks, chops, roasts
145 °F (62.8 °C) and allow to rest for at least 3 minutes
Ground meats 160 °F (71.1 °C)
Ham, fresh or smoked (uncooked) 145 °F (60 °C) and allow to rest for at least 3 minutes
Fully Cooked Ham
(to reheat)
Reheat cooked hams packaged in USDA-inspected plants to 140 °F (60 °C) and all others to 165 °F (73.9 °C).


Product Minimum Internal Temperature
All Poultry (breasts, whole bird, legs, thighs, and wings, ground poultry, and stuffing) 165 °F (73.9 °C)
Eggs 160 °F (71.1 °C)
Fish & Shellfish 145 °F (62.8 °C)
Leftovers 165 °F (73.9 °C)
Casseroles 165 °F (73.9 °C)

Source: Food Safety and Inspection Service

You can not see or smell bacteria that may be on raw products.  It is important to follow the manufacturer’s cooking instructions to ensure the safety of the product.

Pontifications by Dr. Doom

By Barbara J. Masters, D.V.M.

As described by Dennis Johnson in his recent article from our Regulatory Round-Up Newsletter, the current human illness rate for E. coli O157:H7 has not gone down as documented by the Centers for Disease Control and is, in fact, trending upwards. This is very concerning.  Our firm has been advocating that the beef industry be aware of this information, review their food safety systems and ensure they are doing everything possible to “attack this pathogen at the slaughter and processing levels.”  As a prior regulator and a current advisor to the beef industry, I feel very strongly that this is necessary and that the beef industry has and will continue to remain vigilant in the “war on this pathogen.”

For a moment however, I must speak as a consumer, which I am.  As I search the internet, I compare downloadable menus to the FDA Food Code.  Yes, I realize the Food Code is not mandatory, and the one in use varies by state.  That said, at the “local burger joints,” this is what I have been finding:

According to the various editions of the Food Code, my burger should be cooked well done (e.g. the FDA 2013 Food Code indicates comminuted meat should be cooked to 158°F).  The Food Code does permit “consumer advisories” alerting the person ordering “of the significantly increased risk of consuming such foods by way of a disclosure and reminder such as on the menu or brochures that consuming raw or undercooked meats, poultry, seafood, shellfish, or eggs may increase your risk of foodborne illness.”  Restaurants are not permitted to serve undercooked burgers to children.

While many of the internet menus that I have found for “local burger joints” do contain the necessary advisory statement, I am left to ponder whether the consumer is more intrigued and motivated by the highlighted ordering options than they are concerned by the advisory in fine print.  “Select your protein and cooking temperature” seem to be a very popular way of presenting burgers at the current time.  The selection for rare and medium rare cooking temperatures are not discouraged, and in fact, at some locations are “suggested” as preferred.

I am very concerned that individuals ordering may be relying on the restaurant to assist them in making “safe” ordering decisions rather than on the “fine print” advisory at the bottom of the menu alerting them that eating raw or undercooked meat may cause illnesses.  It seems possible that the association between rare and undercooked has been lost. In reading “yelp” reviews of these restaurants, it is clear that the individuals eating at these locations are enjoying burgers cooked to the rare temperatures; no one is focusing on the consumer advisory.

As for me, I will continue to “advise” the beef industry to do all they can to prevent E. coli O157:H7 contamination.  I will make certain my family orders their burgers well done; as well as educate all those I can to do the same!

About “Dr. Doom”

Mixed in with the attorneys at OFW Law is the former USDA Food Safety Inspection Service’s (FSIS) Administrator, Dr. Barbara Masters.  Dr. Masters is a veterinarian who spent eighteen years with FSIS – the final three years as Acting Administrator and Administrator.  During her rise to the Administrator’s position, Dr. Masters served as the Deputy Assistant Administrator for Office of Field Operations.  While in these key leadership positions at FSIS, Dr. Masters’ primary focus was on the implementation of science-based policies for the protection of public health.  Dr. Masters issued the initial Federal Register Notices for a systematic approach to humane treatment of livestock and poultry.

Dr. Masters was involved in the drafting of the training of inspection personnel on the Hazard analysis and critical control points (HACCP) and Sanitation Standard Operating Procedures (SSOP) regulations.  She was the lead of the FSIS HACCP Hotline.  In addition, Dr. Masters provided technical review for establishment’s hazard analysis, HACCP plans and supporting documentation.  She started her career at FSIS as a public health veterinarian that had responsibilities for ante-mortem inspection, sanitation inspection and all post-mortem inspection responsibilities.  She has a good understanding of what happens at the in-plant location, because she has spent many of long days working there.

FNS Permanently Eliminates Grain and Protein Maximums; Allows Sugar to Process Frozen Fruit in School Nutrition Programs

By Roger R. Szemraj

According to an advance copy of the rule made public earlier today, USDA’s Food and Nutrition Service will be making permanent the elimination of weekly maximums on grains and meat/meat alternates, and the allowance of processing frozen fruit with sugar, within the National School Lunch Program.  The rule will be published in the Federal Register on Friday, January 3.

Some of the key language follows from pages 7-8:

“Feedback on the memoranda concerning flexibility for weekly maximum grains and meat/meat alternates has been overwhelmingly positive, and there have been numerous requests to further extend this change. This new flexibility  or measuring compliance has had a meaningful impact on the certification process by making it less complicated for school food authorities (SFAs) to be certified as compliant with the new meal pattern. Allowing for more grain and meat/meat alternates has also increased student acceptability of the new meals they are being served. Therefore, FNS is making this flexibility permanent by including it in this final rule at 7 CFR 210.7(d)(1). Because ongoing compliance with the meal patterns is assessed during administrative reviews, FNS is further extending this flexibility by including in the final rule at 7 CFR 210.18(g)(2)(vi). When conducting administrative reviews, State agencies should consider any SFA compliant with the weekly ranges for grains and meats if the weekly minimums are met. SFAs continue to be required to meet the weekly minimum and maximum range requirements for calories and the other dietary specifications.”

From pages 9-10:

“In addition to the challenges associated with processing frozen fruit without sugar, allowing SFAs to use frozen fruit with added sugar will make it less complicated for SFAs to meet meal pattern requirements, and also expand the types of frozen fruit allowable in school meals. It is also consistent with canned fruits since some added sugar is allowed in canned products. Additionally, the calorie limits for meals help preserve the integrity of the updated nutrition standards, as schools have to plan menus and select products carefully, including frozen fruit with added sugar, in order to be in compliance with the standards.  For those reasons, FNS is making this flexibility permanent by including it in this final rule at 7 CFR 210.7(d)(1)(iii)(B). Because ongoing compliance with the meal patterns is assessed during administrative reviews, FNS is further extending this flexibility by including it in the final rule at 7 CFR 210.18(g)(2)(vi). When conducting administrative reviews, State agencies should consider any SFA compliant with the meal pattern requirements even if the SFA serves frozen fruit containing added sugar. This flexibility is also applicable to fruit offered in the School Breakfast Program.”

The pertinent rule language is as follows:

§210.7 Reimbursement for school food authorities.

* * * * *

(d) * * *

(1) * * *

(iii) State agencies must review certification documentation submitted by the school food authority to ensure compliance with meal pattern requirements set forth in §210.10, §220.8, or §220.23, as applicable. For certification purposes, State agencies should consider any school food authority compliant:

(A) If when evaluating daily and weekly range requirements for grains and meat/meat alternates, the certification documentation shows compliance with the daily and weekly minimums for these two components, regardless of whether the school food authority has exceeded the maximums for the same components.

(B) If when evaluating the service of frozen fruit, the school food authority serves products that contain added sugar.

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.

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 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 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.

AMS Issues Final COOL Amendment

By Barbara J. Masters, D.V.M.

On May 23, 2013, the United States Department of Agriculture’s (USDA) Agriculture Marketing Service (AMS) issued a final rule to amend the Country of Origin Labeling (COOL) regulations (which became effective March 16, 2009).  The final rule provides consumers more detailed information for muscle cut commodities by requiring that labels 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, including the United States. It also eliminates any commingling of the covered muscle cut commodities originating from different countries and amends the definition for “retailer” to include “any person subject to be licensed as a retailer under the Perishable Agricultural Commodities Act (PACA).”

These amendments to the 2009 COOL regulation were in response to the fact that in June 2012, the Appellate Body of the World Trade Organization (WTO) affirmed an earlier WTO Panel decision finding that the United States’ COOL requirements for muscle cut meat commodities discriminated against Canadian and Mexican imports and thus were inconsistent with the WTO Agreement on Technical Barriers to Trade.  Specifically, it was determined that the COOL requirements were inconsistent in ensuring that imported products were treated no less favorably than domestic product.  It was determined that, “The United States had until May 23, 2013, to come into compliance with the WTO ruling.”  A proposed rule to address this ruling was issued for comments on March 12, 2013.

There is a significant estimated cost for implementing the changes that will be incurred—primarily by the packers and processors of muscle cut commodities as well as retailers that are subject to the regulations. AMS has determined the total cost for the rule will be driven by costs to firms changing labels as well as losses to firms having to adjust processes to accommodate for the loss of flexibility that was previously afforded by commingling.  The cost estimate for label changes required by the final rule is an estimated range of $17 to $47.3 million.  The Agency provides various scenarios to estimate the costs associated with the loss of flexibility to commingle.  When all the various costs are taken into consideration and combined, the total estimated costs range from $53.1 million to $192.1 million.  Additionally, AMS acknowledges that the economic benefits are small relative to the 2009 final rule.

The regulation is effective immediately, however, AMS will provide education and outreach for the first six months after publication.  Existing stocks of muscle cut covered commodities labeled in accordance with the 2009 COOL regulations that are already in the system would have the opportunity to move through commerce during this time frame.  Finally, after the 6 month outreach and education period, retailers may continue to use the older labels if they provide the more specific information through alternative means such as signage.

With regards to the WTO obligations, AMS stated in the preamble to the final rule that the rule would bring the United States into compliance with the WTO obligations.  However, trading partners have publicly expressed contrary views.  If WTO compliance is not met, then this could lead to increased discrimination against U.S. products in foreign commerce, as well as other trade sanctions.  OFW Law will continue to monitor activity in regards to this concern.