CANADA and Mexico have both released draft retaliation lists for the latest country-of-origin labeling (COOL) rule the U.S. Department of Agriculture proposed to meet the standards called for in a World Trade Organization challenge.
However, it could take up to two years before any retaliation occurs, assuming that the U.S. is found to be out of compliance, as the process moves forward.
U.S. Trade Representative spokesperson Andrea Mead explained that the two nations have issued proposed retaliation lists "for the purpose of initiating an internal consultation process."
For Canada, that list includes meat, dairy products, pasta, fruits, vegetables, chocolate and maple syrup. Mexico has a similar list, including fruits, vegetables, juice, meat, dairy products, machinery, furniture, household goods and other items.
Nick Giordano, vice president and counsel, international affairs, for the National Pork Producers Council, explained that these lists have "no force of law" and added that retaliation is not imminent.
The WTO review process has several steps, starting with the new COOL rule proposed May 23. Canada and Mexico must request consultations on the rule, which would then have to be heard by a compliance panel. Those two steps could take a few months.
A compliance panel must issue a decision within 90 days; if any party is unsatisfied with that ruling, it can then appeal to the WTO Appellate Body, which could theoretically take 60 days or possibly even longer.
Giordano said under the best-case scenario, it would take six months for WTO to issue a decision, but it likely will take longer, perhaps up to a year.
"If the WTO upholds this new rule, the case is over; Mexico and Canada have no further rights," he said. "If the U.S. loses, then the retaliation phase starts."
If Canada and Mexico wish to impose trade sanctions, a request authorization has to be sent to the WTO Dispute Settlement Body, and then it is referred to arbitration. This can be done by the original panel, but it is often sent to an individual arbitrator.
Mead added that Canada has stated that it will not retaliate unless it receives authorization from WTO, which it acknowledges will not happen for 18-24 months, if ever.
"As we have said from the outset, USDA's new final rule brings the U.S. into compliance, and therefore, no retaliation should be authorized," she said.
The updated rule requires COOL labels to include specific information regarding three production steps. Thus, a "U.S." label will state: "Born, Raised and Slaughtered in the United States."
The rule became mandatory as of May 23, 2013, but USDA is granting a phase-in period of six months to allow previously printed labels and products to be transitioned out of the marketplace.
The Agricultural Marketing Service (AMS)released guidance on its proposed rule and said it "understands that it may not be feasible for all of the affected entities to achieve 100% compliance immediately and that some entities will need time to make the necessary changes."
Therefore, during the six-month phase-in period, AMS will conduct an industry education and outreach program concerning the provisions and requirements of the COOL rule. (The same was done following the 2008 interim final rule and the 2009 final rule.)
In the guidance, AMS said clearing existing stock from the chain of commerce should help prevent retailer and supplier confusion and alleviate some of the economic burden on regulated entities.
Giordano said pork producers and other affected industries asked the U.S. not to require compliance until the WTO challenge is completed and are "frustrated" that they haven't received it. He noted that "most lawyers in the private sector in Mexico, Canada and the U.S." have indicated that the updated COOL rule might not pass WTO scrutiny.
Groups had pushed for a legislative fix to COOL within the farm bill discussions, but Giordano said most members of Congress wanted to see the WTO decision first. "Our preference was to solve this sooner rather than later and not impose extraordinary costs on the industry," he said.
USDA estimated total adjustment costs of $123.3 million at the midpoint and ranging from $53.1 million at the low end to $192.1 million at the high end. The costs of implementing these requirements will be incurred by intermediaries (primarily packers and processors of muscle cut commodities) and retailers that are subject to requirements of mandatory COOL.