Country of Origin Labeling (COOL): An Overview
The Tariff Act of 1930, 19 U.S.C. §§ 1202-1681b, has historically required nearly every item imported into the United States to disclose the item’s country of origin to the “ultimate purchaser, ” unless the item met one of the specified exemptions under the law. The main exceptions are items that are incapable of being marked, items economically prohibitive of being marked, and items on the “J List.” The J List includes classes of goods that were imported for five years after 1932 and were not required to indicate their country of origin during that time. Many agricultural products are on the list, including vegetables, fruits, nuts, berries, and live or dead animals, fish, and birds. See 19 C.F.R. § 134.33 (2003) (listing J List products). To qualify for the J List exception, these agricultural products may only be processed to the extent necessary for transportation. However, the immediate container in which the ultimate purchaser receives these products must be labeled. The labeled container may be a bulk shipping container or a retail-ready package. Generally, consumers will only see the label if the imported goods arrive at the border in retail-ready packaging.
The definition of ultimate purchaser also affects which products required labeling. The ultimate purchaser is the last person in the United States who will receive the product in the form in which it was imported. If a manufacturer or processor receives the product and substantially transforms it, no origin labeling is required, even though a new or different product is not produced. Only a minor process that leaves the identity of the imported product intact will result in a consumer’s being the ultimate purchaser.
Under the authority of the Federal Meat Inspection Act, 21 U.S.C. §§ 601-695, and the Poultry Products Inspection Act, 21 U.S.C. §§ 451-471, the USDA is charged with ensuring the proper labeling of imported meats and poultry. USDA regulations require COOL on the immediate containers of imported meat. Retail-ready containers of meat and shipping containers of bulk meat must bear country of origin markings. Imported bulk meat is often processed inside a domestic plant. Prior to 2012 processors such as slaughterhouses were deemed “ultimate purchasers” by the USDA, allowing those processors who have attained imported meat, or meat of “mixed origin,” to be labeled with just the location of the processor.
Foods other than meat and poultry are regulated by the U.S. Department of Health and Human Services’ Food and Drug Administration (FDA), primarily under the Federal Food, Drug, and Cosmetic Act (FFDCA), 21 U.S.C. §301 et seq.
COOL for Ag Products at Retail
While agricultural commodities remained exempt from COOL requirements for many years, the 2002 Farm Bill, Pub. L. No. 107-171 § 10816, 116 Stat. 134, 533-35, amended the Agricultural Marketing Act of 1946, 7 U.S.C. §§ 1621-1637b (codified at 7 U.S.C. §§ 1638-1638d), to require retail level country of origin labeling (COOL) for ground and muscle cuts of beef, lamb, and pork, as well as farm-raised fish, wild fish, shellfish, peanuts, and fresh fruits and vegetables.
. If these items are ingredients in processed foods, they are not required to be labeled. The Act also exempted food service establishments, such as restaurants, cafeterias, and bars engaged in selling prepared food to the public. The COOL law adopted the definition of retailer contained in the Perishable Agricultural Commodities Act of 1930, 7 U.S.C. §§ 499a-499t. Thus, retailers that sell less than $230,000.00 of fresh fruits and vegetables in any calendar year are not required to furnish COOL labeling on their products.
Retailers have the primary burden of providing labeling to consumers under the COOL law. Retailers are required to provide the country of origin information on a clear and visible sign on the commodity itself, the package, the display, or the holding bin at the final point of sale to consumers. Retailers may also be required under the law to maintain records sufficient to enable an auditor to determine compliance with the law. Suppliers to the final retailers are required to provide necessary country of origin information to the retailer to ensure compliance with the law.
While having the authority to require a verifiable audit trail for country of origin information, the USDA is specifically prohibited by a provision in the COOL law from using a mandatory identification system to verify the country of origin of a covered commodity.
As for the recordkeeping requirements, upon request by the USDA, suppliers and retailers must provide the USDA with documents that will allow substantiation of an origin claim and method of production. 7 C.F.R. § 60.400(a)(2). For pre-labeled products, retailers are expected to be able to keep documentation on the product’s country of origin and method of production for the time they have the product. 7 C.F.R. § 60.400(c)(1). For products not pre-labeled, retailers must keep the documents for one year. 7 C.F.R. § 60.400(c)(2).
Suppliers who deal directly with retailers are responsible for providing them with the documentation relating to country of origin and methods of production. 7 C.F.R. § 60.400(b)(1). Suppliers who are responsible for the country of origin and/or method of production claim(s) are expected to have the documentation to substantiate those claims. 7 C.F.R. § 60.400(b)(1). Nevertheless, all suppliers whose commodities end up being sold to a retailer must keep documents for one year indicating where the product was purchased and where it was sold. 7 C.F.R. § 60.400(b)(3). The initial importer must keep records tracking the commodity from its entry into the United States. to the time it reached its immediate recipient for a period of one year from the date of transaction. 7 C.F.R. § 60.400(b)(4). All those documents must reflect the country of origin and method of production of the commodity.
Willful violations on the part of a retailer may result in up to $10,000 in fines for each violation, 7 U.S.C. § 1638b. The retailer is entitled to notice and a hearing before the Secretary of Agriculture.
According to the bill as originally enacted, mandatory COOL was to begin for covered commodities on September 30, 2004. The implementation of mandatory COOL, however, has faced many delays. Agricultural Marketing Service (AMS) promulgated their proposed rule for the mandatory country of origin labeling on October 30, 2003. Congress delayed the implementation of mandatory COOL on all covered commodities, except farm-raised fish and wild fish, until September 30, 2006 through language in the GY2004 Omnibus Appropriations Act, Pub. L. No 108-199. USDA Agricultural Marketing Service (AMS) promulgated an interim final rule for fish and shellfish on October 5, 2004. This interim final rule became effective on April 4, 2005, thus triggering all of the requirements of the COOL law upon suppliers and retailers of fish and shellfish. However, a second delay was effectuated on November 10, 2005 by Public Law 109-97 § 792 (FY2006 Agriculture Appropriations Act), which postponed the implementation of mandatory COOL for covered commodities, except wild and farm-raised fish and shellfish, until September 30, 2008.
Amendments to the COOL law were approved by Congress in the 2008 Farm Bill, Pub. L. No 110-246 § 11002. The AMS published an interim final rule in August 2008, and their final rule in January 2009, attempting to clarify some of the confusion and discontent specifically related to COOL labeling of meats under the law. Secretary Vilsack sent a letter shortly after the final rule was announced, encouraging meat and food industries to voluntarily adopt the new labeling changes. The final COOL regulations went into effect on March 16, 2009 and were quickly faced with legal challenges within the World Trade Organization (WTO).
COOL Requirements for Beef and Pork
The requirements for listing the country of origin for beef and pork specifically were outlined in the COOL law, but were altered through the evolution of the proposed regulations and litigation with the World Trade Organization. In the original regulations, if the product had not undergone a substantial transformation in the United States, its country of origin was the one that was declared to the U.S. Customs and Border Protection. 7 C.F.R. § 60.200(f). However, if the product underwent a substantial transformation in the United States., the product must have been labeled as “product from [the country it was imported from], and processed in the U.S.” 7 C.F.R. § 60.200(g)(2). If commodities were sold together, with only a part of it undergoing a substantial transformation in the United States, all the countries of origin must have been disclosed. 7 C.F.R. § 60.200(h). Similarly, commodities that had different countries of origin and/or methods of production could still be sold together, as long as all the countries and methods were listed, pursuant to 7 C.F.R. § 60.300(d).
In December of 2008, Canada brought suit, and was joined shortly after by Mexico, against the United States’ COOL requirements for beef and pork . The World Trade Organization (WTO) panel found, in November of 2011, that the COOL requirements were inconsistent with the United States’ obligations under the WTO Agreement on Technical Barriers to Trade (TBT) because the regulations accorded less favorable treatment to imported cattle and hogs than like domestic products and did not fulfill its legitimate objective of providing consumers with information on origin. Both the United States and Canada appealed portions of the WTO Panel ruling in March of 2012. A ruling was issued by the WTO Appellate Body in June of 2012, which upheld the panel’s earlier ruling as to the preferential treatment of beef and pork violations, but reversed the findings related to fulfilling legitimate informational objectives. The Appellate Body further agreed that the recordkeeping and verification requirements under COOL created a detrimental impact on imported livestock because it incentivized producers to use exclusively domestic livestock. Following the Appellate ruling the United States was given until May 23, 2013 (a date that was deemed a reasonable amount of time by the WTO) to rework the regulations so they would conform to WTO directives. The United States followed through and on May 23rd, issued an amended COOL requirement concerning meat and fish commodities. Regulations for meat, fish, and shellfish (7 CFR part 65) amended the definition of “retailer” to include any person subject as a licensed retailer under the Perishable Agricultural Commodities Act (PACA) (7 U.S.C. 499(a)(b)).
The amended COOL requirements require processors of meat to be more specific, and to include information about three production steps (7 C.F.R. § 65.300(e)). Labels for animals born, raised, and slaughtered exclusively in the United States will thus be labeled “Born, Raised, and Slaughtered in the United States.” Other labels might read “Born and Raised in Canada, Slaughtered in the United States” or “Born in Mexico, Raised and Slaughtered in the United States.” At the time the amendments became effective, they were given a six-month compliance window.
In August of 2013, Canada and Mexico challenged the revised COOL requirements at a WTO dispute panel and with an October 2014 WTO Compliance Panel ruling they were successful in arguing that the revised rule was a technical barrier to trade because of the increased production segregation and recordkeeping requirements. The United States appealed the ruling and in May of 2015 a WTO Appellate Body ruled against the U.S., upholding their earlier finding against the revised COOL regulations. Canada and Mexico requested and in December of 2015 were granted approval by the WTO to move forward with approximately $1.01 billion worth of retaliatory tariffs against the United States due to the trade restrictions from the COOL regulations.
Throughout the WTO challenges, a number of bills were presented in the House and Senate that aimed to repeal the COOL requirements, but none were successfully passed into law. The omnibus spending bill, Pub. L. No. 114-113, passed by the United States Congress in December of 2015, included language that permanently repealed the COOL requirements for beef and pork. Shortly after USDA Secretary Vilsack sent out guidance that the USDA will no longer enforce the COOL regulations.