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Legal Update

WTO Appellate Body Strikes Down US Country-of-Origin Labeling Requirement; US House Poised to Repeal

19 May 2015
Mayer Brown Legal Update

The World Trade Organization (WTO) Appellate Body has issued its long-awaited report rejecting US efforts to modify meat labeling requirements. In the underlying dispute, initiated by Mexico and Canada, the Appellate Body held that US country-of-origin labeling (COOL) requirements for meat products violated US obligations under the WTO agreements. This latest decision is the United States' fourth adverse opinion in this dispute. Most recently, in October 2014, a WTO panel held that the United States' amended COOL measure not only fell short of bringing it into compliance with prior rulings but, in fact, worsened the United States’ treaty violations.

In the underlying dispute, the Appellate Body held that the original COOL measure created additional recordkeeping and verification requirements for imported livestock, creating an incentive for meat processors to use domestic livestock. Additionally, the Appellate Body found that the original COOL measure was not applied in an “even-handed manner” because its recordkeeping and verification requirements imposed a disproportionate burden on upstream producers and processors of livestock as compared to the information conveyed to consumers through the mandatory labeling requirements for meat sold at the retail level.

In an attempt to come into compliance with these rulings, the US Department of Agriculture altered its labeling guidelines to require meat products to display origin information with regard to all production steps (i.e., the country or countries in which the animal was born, raised and slaughtered). The US Congress did not, however, amend the underlying COOL statute, which contains the problematic country-of-origin category designations as well as broad exemptions from such labeling requirements at the retail level. Canada and Mexico challenged the sufficiency of these changes before a WTO compliance panel, which found that amended COOL measure failed to come into full compliance with the recommendations and rulings of the WTO’s Dispute Settlement Body.1

On May 18, 2015, in an opinion that was largely expected by the global trade community, the WTO Appellate Body upheld the compliance panel's decision that the amended COOL measure continues to violate the United States' obligations under Article 2.1 of the WTO Agreement on Technical Barriers to Trade by according less-favorable treatment to imported livestock than to “like” domestic livestock.

If the United States allows COOL to continue, in violation of its WTO obligations, Canada and Mexico may seek authorization to impose retaliatory measures through a separate WTO proceeding called Article 22.6 arbitration. Under Article 22.6 arbitration, another panel will be convened to calculate the extent to which the US COOL measure has "nullified or impaired" the benefits Canada and Mexico would have otherwise received under the WTO agreements: i.e., the level of harm caused by import discrimination. This level of nullification or impairment of benefits will then be used to calculate the level of suspension of WTO concessions—i.e., the level of retaliatory measures—that Canada and Mexico will be authorized to impose against the United States.

Members of the US House Committee on Agriculture have already indicated their willingness to repeal COOL to avoid retaliation from Canada and Mexico. On May 15, 2015, Agriculture Committee Chairman Mike Conaway (R-Texas) told the press he is willing to move a bill to repeal COOL as soon as this week, before Congress adjourns for its weeklong Memorial Day recess.

1 For more information, see our October 23, 2014 Legal Update, “US Loses WTO Battle Over Country-of-Origin Labeling Requirements for Meat Products.”

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