DISPUTE SETTLEMENT: DISPUTE DS384

United States — Certain Country of Origin Labelling (COOL) Requirements


This summary has been prepared by the Secretariat under its own responsibility. The summary is for general information only and is not intended to affect the rights and obligations of Members.

  

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One-page summary of key findings of this dispute
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Current status  back to top

 

Key facts  back to top

Short title:
Complainant:
Respondent:
Third Parties:
Agreements cited:
(as cited in request for consultations)
Request for Consultations received:
Panel Report circulated: 18 November 2011
Appellate Body Report circulated: 29 June 2012
Article 21.3(c) Arbitration Report circulated: 4 December 2012
Article 21.5 Panel Report circulated: 20 October 2014

  

Summary of the dispute to date  back to top

The summary below was up-to-date at
See also: One-page summary of key findings of this dispute

Consultations

Complaint by Canada.  (See also DS386)

On 1 December 2008, Canada requested consultations with the United States concerning certain mandatory country of origin labelling (COOL) provisions in the Agricultural Marketing Act of 1946 as amended by the 2008 Farm Bill and as implemented through an Interim Final Rule of 28 July 2008. These include the obligation to inform consumers at the retail level of the country of origin in respect of covered commodities, including beef and pork. The eligibility for a designation of a covered commodity as exclusively having a US origin can only be derived from an animal that was exclusively born, raised and slaughtered in the United States. This would exclude such a designation in respect of beef or pork derived from livestock that is exported to the United States for feed or immediate slaughter.

Canada alleges that the mandatory COOL provisions appear to be inconsistent with the United States' obligations under the WTO Agreement, including:

  • Articles III:4, IX:4 and X:3 of the GATT 1994;
      
  • Article 2 of the TBT Agreement, or, in the alternative, Articles 2, 5 and 7 of the SPS Agreement;  and
      
  • Article 2 of the Agreement on Rules of Origin.

On 12 December 2008, Mexico and Nicaragua requested to join the consultations.  Subsequently, the United States informed the DSB that it had accepted the request of Mexico to join the consultations.

On 7 May 2009, Canada requested further consultations concerning related amendments and measures adopted by the United States after Canada's initial request for consultations.  It also includes any modifications or amendments to the COOL measures, including any further implementing guidance or other documents that may be published in relation to such measures.

Canada considers that the cited measures appear to be inconsistent with the United States' obligations under the WTO Agreement, including:

  • Articles III:4, IX:2, IX:4 and X:3 of GATT 1994;
      
  • Article 2 of the TBT Agreement, or, in the alternative, Articles 2, 5 and 7 of the SPS Agreement;  and
      
  • Article 2 of the Agreement on Rules of Origin.

On 15 May 2009, Mexico requested to join the further consultations.  On 22 May 2009, Peru requested to join the further consultations.  Subsequently, the United States informed the DSB that it had accepted the requests of Mexico and Peru to join the consultations.

On 7 October 2009, Canada requested the establishment of a panel.  At its meeting on 23 October 2009, the DSB deferred the establishment of a panel. 

 

Panel and Appellate Body proceedings

At its meeting on 19 November 2009, the DSB established a single panel pursuant to Article 9.1 of the DSU, to examine this dispute and dispute DS386.  Argentina, Australia, China, Colombia, India, Japan, Korea, Mexico, Peru and New Zealand reserved their third-party rights.  Subsequently, Brazil, the European Communities, Guatemala and Chinese Taipei reserved their third-party rights. On 30 April 2010, Canada requested the Director-General to compose the panel.  On 10 May 2010, the Director-General composed the panel. On 21 December 2010, the Chairman of the panel informed the DSB that it would not be able to issue its report within six months.  The timetable adopted by the Panel after consultations with the parties to the dispute envisaged that the final report shall be issued to the parties by the middle of 2011.  The panel expects to conclude its work within that timeframe.

On 18 November 2011, the panel report was circulated to Members.

Summary of key findings

  • This dispute concerns:  (i) the US statutory provisions and implementing regulations setting out the United States' mandatory country of origin labelling regime for beef and pork (“COOL measure”);  as well as (ii) a letter issued by the US Secretary of Agriculture Vilsack on the implementation of the COOL measure (“Vilsack letter”).
     
  • The Panel determined that the COOL measure is a technical regulation under the TBT Agreement, and that it is inconsistent with the United States' WTO obligations.  In particular, the Panel found that the COOL measure violates Article 2.1 of the TBT Agreement by according less favourable treatment to imported Canadian cattle and hogs than to like domestic products.  The Panel also found that the COOL measure does not fulfil its legitimate objective of providing consumers with information on origin, and therefore violates Article 2.2 of the TBT Agreement.
     
  • As regards the Vilsack letter, the Panel found that the letter's “suggestions for voluntary action” went beyond certain obligations under the COOL measure, and that the letter therefore constitutes unreasonable administration of the COOL measure in violation of Article X:3(a) of the GATT 1994.  The Panel refrained from reviewing the Vilsack letter under the TBT Agreement, as it found that this letter is not a technical regulation under that agreement.
     
  • In light of the above findings of violation, the Panel did not consider it necessary to rule on the claims under Article III:4 of the GATT 1994 (national treatment) or on the non‑violation claims under Article XXIII:1(b) of the GATT 1994.

 

On 21 December 2011, Canada and the United States requested the DSB to adopt a draft decision extending the 60-day time period stipulated in Article 16.4 of the DSU, to 23 March 2012. At its meeting on 5 January 2012, the DSB agreed that, upon a request by Canada or the United States, the DSB, shall no later than 23 March 2012, adopt the panel report, unless the DSB decides by consensus not to do so or Canada or the United States notifies the DSB of its decision to appeal pursuant to Article 16.4 of the DSU.

On 23 March 2012, the United States notified the DSB of its decision to appeal certain issues of law covered in the panel report and certain legal interpretations developed by the panel. On 28 March 2012, Canada notified the DSB of its decision to appeal certain issues of law covered in the panel report and certain legal interpretations developed by the panel. On 21 May 2012, the Chair of the Appellate Body informed the DSB that the Appellate Body would not be able to circulate its report within the 90-day timeframe as provided for in Article 17.5 of the DSU due in part to the size of the appeal, including the number and complexity of the issues raised by participants as well as the Appellate Body's heavy caseload, scheduling difficulties resulting from the overlap in the composition of the Divisions hearing different appeals at the same time, as well as constraints resulting from the relocation of the Appellate Body and its Secretariat.  Accordingly, the Appellate Body expects to circulate its report no later than 29 June 2012.

On 29 June 2012, the Appellate Body report was circulated to Members.

Summary of key findings

The appeal concerned primarily the COOL measure (the US statutory provisions and implementing regulations setting out the United States' mandatory country of origin labelling regime for beef and pork), and the Panel's findings that this measure is inconsistent with Articles 2.1 and 2.2 of the TBT Agreement.  The United States appealed both findings.  Canada appealed certain aspects of the Panel's analysis under Article 2.2, and requested the Appellate Body to complete the legal analysis in the event that it reversed the Panel's finding under Article 2.2.  Canada also raised conditional appeals with respect to the COOL measure under Articles III:4 and XXIII:1(b) of the GATT 1994.  Although Canada originally also sought to have the Appellate Body make certain rulings with respect to the Vilsack letter, Canada withdrew these requests following the United States' assertion that this measure had been withdrawn.

The Appellate Body upheld, albeit for different reasons, the Panel's finding that the COOL measure violates Article 2.1 of the TBT Agreement by according less favourable treatment to imported Canadian cattle and hogs than to like domestic cattle and hogs.  The Appellate Body reversed the Panel's finding that the COOL measure violates Article 2.2 of the TBT Agreement because it does not fulfil its legitimate objective of providing consumers with information on origin, and was unable to complete the legal analysis and determine whether the COOL measure is more trade restrictive than necessary to meet its objective. 

In its analysis under Article 2.1 of the TBT Agreement, the Appellate Body agreed with the Panel that the COOL measure has a detrimental impact on imported livestock because its recordkeeping and verification requirements create an incentive for processors to use exclusively domestic livestock, and a disincentive against using like imported livestock.  The Appellate Body found, however, that the Panel's analysis was incomplete because the Panel did not go on to consider whether this de facto detrimental impact stems exclusively from a legitimate regulatory distinction, in which case it would not violate Article 2.1.  In its own analysis, the Appellate Body found that the COOL measure lacks even-handedness because its recordkeeping and verification requirements impose a disproportionate burden on upstream producers and processors of livestock as compared to the information conveyed to consumers through the mandatory labelling requirements for meat sold at the retail level.  That is, although a large amount of information must be tracked and transmitted by upstream producers for purposes of providing consumers with information on origin, only a small amount of this information is actually communicated to consumers in an understandable or accurate manner, including because a considerable proportion of meat sold in the United States is not subject to the COOL measure's labelling requirements at all.  Accordingly, the detrimental impact on imported livestock cannot be said to stem exclusively from a legitimate regulatory distinction, and instead reflects discrimination in violation of Article 2.1.  For these reasons, the Appellate Body upheld the Panel's finding under Article 2.1.

In its analysis under Article 2.2 of the TBT Agreement, the Appellate Body found that the Panel properly identified the objective of the COOL measure as being “to provide consumer information on origin”, and did not err in concluding that this is a “legitimate” objective.  The Appellate Body found, however, that the Panel erred in its interpretation and application of Article 2.2.  This was because the Panel appeared to have considered, incorrectly, that a measure could be consistent with Article 2.2 only if it fulfilled its objective completely or exceeded some minimum level of fulfilment, and to have ignored its own findings, which demonstrated that the COOL measure does contribute, at least to some extent, to achieving its objective.  The Appellate Body therefore reversed the Panel's finding that the COOL measure is inconsistent with Article 2.2, but was unable to determine whether the COOL measure is more trade restrictive than necessary to fulfil a legitimate objective within the meaning of Article 2.2.

As the conditions on which Canada's appeals with respect to Articles III:4 and XXIII:1(b) of the GATT 1994 were made were not satisfied, the Appellate Body made no findings under these provisions.

At its meeting on 23 July 2012, the DSB adopted the Appellate Body report and the panel report, as modified by the Appellate Body report.

 

Reasonable period of time

On 21 August 2012, the United States informed the DSB that it intended to implement the DSB recommendations and rulings in a manner that respects its WTO obligations and that they would need a reasonable period of time to do so.

On 13 September 2012, Canada requested that the reasonable period of time be determined through binding arbitration pursuant to Article 21.3(c) of the DSU. On 26 September 2012, Canada requested the Director-General to appoint the arbitrator.  On 4 October 2012, the Director-General appointed Mr Giorgio Sacerdoti to act as arbitrator under Article 21.3(c) of the DSU.  Mr Sacerdoti accepted this appointment by letter dated 5 October 2012.

On 4 December 2012, the Arbitration under Article 21.3(c) was circulated to Members.

WTO Arbitrator determines “reasonable period of time” in United States — Certain Country of Origin Labelling (COOL) Requirements trade disputes

A WTO Arbitrator, Mr. Giorgio Sacerdoti, on 4 December 2012, issued his award regarding the “reasonable period of time” for the implementation of Dispute Settlement Body recommendations and rulings in the disputes “United States — Certain Country of Origin Labelling (COOL) Requirements” (DS384 and DS386).  The Arbitrator determined that the reasonable period of time for the United States to implement the recommendations and rulings of the DSB was 10 months from the date of adoption of the panel and Appellate Body reports.  The reasonable period of time expired on 23 May 2013.

At the DSB meeting on 24 May 2013, the United States informed the DSB that on 23 May 2013, the USDA had issued a final rule that made certain changes to the COOL labelling requirements that had been found to be inconsistent with Article 2.1 of the TBT Agreement. The United States was of the view that the final rule had brought it into compliance with the DSB recommendations and rulings. Canada did not agree that the changes had brought the United States into full compliance. In its view, the changes were more restrictive and caused further harm.

On 10 June 2013, the United States and Canada informed the DSB of Agreed Procedures under Articles 21 and 22 of the DSU.

 

Compliance proceedings

On 19 August 2013, Canada requested the establishment of a compliance panel. At its meeting on 30 August 2013, the DSB deferred the establishment of a panel. At its meeting on 25 September 2013, the DSB agreed to refer to the original panel, if possible, the matter raised by Canada pertaining to this dispute and the matter raised by Mexico pertaining to dispute DS386. Brazil, China, the European Union, India, Japan, Korea and New Zealand reserved their third-party rights. Subsequently, Australia, Colombia, Guatemala and Mexico reserved their third-party rights. On 27 September 2013, the compliance panel was composed. On 26 March 2014, the Chair of the compliance panel informed the DSB that the compliance panel expects to issue its final report to the parties towards the end of July 2014, in accordance with the timetable adopted after consultation with the parties.

On 20 October 2014, the compliance panel report was circulated to Members.

Summary of key findings

This dispute concerns whether the measure taken by the United States in 2013 complies with the DSB recommendations and rulings in the original US – COOL dispute. Canada and Mexico challenged the treatment accorded to imported Canadian cattle and hogs, and imported Mexican cattle, under the United States' amended country of origin labelling rules for beef and pork. This “amended COOL measure” consists of:

  • the “COOL statute” (7 U.S.C. § 1638), which remains unchanged from the original dispute; and
     
  • the “2013 Final Rule” (78 Fed. Reg. 31367) amending certain provisions of the 2009 Final Rule (74 Fed. Reg. 2658) following the original dispute.

The compliance panel found that the amended COOL measure violates Article 2.1 of the TBT Agreement because it accords to Canadian and Mexican livestock less favourable treatment than that accorded to like US livestock. In particular, the compliance panel concluded that the amended COOL measure increases the original COOL measure's detrimental impact on the competitive opportunities of imported livestock in the US market, because it necessitates increased segregation of meat and livestock according to origin; entails a higher recordkeeping burden; and increases the original COOL measure's incentive to choose domestic over imported livestock. Further, the compliance panel found that the detrimental impact caused by the amended COOL measure does not stem exclusively from legitimate regulatory distinctions. In this regard, the compliance panel followed the approach of the Appellate Body in the original dispute by taking into account the amended COOL measure's increased recordkeeping burden, new potential for label inaccuracy, and continued exemption of a large proportion of relevant products. These considerations confirmed that, as with the original COOL measure, the detrimental impact caused by the amended COOL measure's labelling and recordkeeping rules could not be explained by the need to convey to consumers information regarding the countries where livestock were born, raised, and slaughtered.

The compliance panel determined that the complainants had not made a prima facie case that the amended COOL measure is more trade restrictive than necessary within the meaning of Article 2.2 of the TBT Agreement. In reaching this conclusion, the compliance panel found that the amended COOL measure makes a considerable but, given the exemptions from coverage, necessarily partial contribution to its objective of providing consumer information on origin. The compliance panel further found that the amended COOL measure had increased the “considerable degree of trade-restrictiveness” found in the original dispute. The compliance panel also assessed the risks non-fulfilment of the objective would create in terms of consumer interest in, and willingness to pay for, different types of country of origin information. Additionally, the compliance panel reviewed four alternative measures proposed by the complainants and concluded that either they would not make an equivalent contribution to the relevant objective as the amended COOL measure would, or they were not adequately identified so as to enable meaningful comparison with the amended COOL measure. As a result, the compliance panel was not able to conclude that the amended COOL measure is more trade restrictive than necessary in the light of the proposed alternative measures.

The compliance panel found that the amended COOL measure violates Article III:4 of the GATT 1994 based on its finding that the amended COOL measure increases the original COOL measure's detrimental impact on the competitive opportunities of imported livestock in comparison with like US products. In this regard, the compliance panel relied on the same considerations that informed its finding of detrimental impact under Article 2.1 of the TBT Agreement. However, consistent with Appellate Body jurisprudence, it was not necessary in order to find a violation under Article III:4 of the GATT 1994 for the compliance panel to determine whether the detrimental impact stemmed exclusively from legitimate regulatory distinctions.

Given the above findings of violation, the compliance panel exercised judicial economy with regard to the complainants' non-violation claims under Article XXIII:1(b) of the GATT 1994.

On 28 November 2014, the United States notified the DSB of its decision to appeal to the Appellate Body certain issues of law covered in the compliance panel report and certain legal interpretations developed by the panel.

 

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