WTO rules against U.S. appeal on country-of-origin labeling

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The WTO Appellate Body that upheld an earlier WTO finding that mandatory country of origin labeling (COOL) for livestock violates U.S. WTO obligations. Under the U.S. COOL law in force since March 2009, food processors must identify the nations from which cattle, hogs, and some fresh produce originate. Canada and Mexico said the provisions impose unjust costs on their exports, reducing their competitiveness. WTO judges agreed on Nov. 18 that beef and pork from Canada and Mexico were treated less favorably than the same U.S. products. From the WTO summary:

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 labeling 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”.  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 fulfillment, 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 fulfill a legitimate objective within the meaning of Article 2.2.

The appellate body ruling is available here.