The comment period for the Federal Trade Commission’s (FTC) “Made in the USA” (MUSA) labeling proposed rule closed on September 14, 2020. The comments submitted raised several issues with the proposed rule. Namely, commenters are concerned about the applicability of this rule to the meat and poultry industry. Commenters argued that the FTC does not have the authority to label meat and poultry products because the Federal Meat Inspection Act (FMIA) and the Poultry Products Inspection Act (PPIA) grant ultimate labeling authority to United States Department of Agriculture (USDA) for these products. Commenters also raised concerns regarding the recent decision from the World Trade Organization (WTO) Appellate Body regarding USDA’s Country of Origin Labeling Law (COOL). Further, while the FTC Commission voted 4-1 to issue the proposed rule, two commissioners expressed concern through published statements over the statutory authority of the FTC regarding authority to regulate advertising. However, none of the Commissioners’ statements directly referenced FSIS jurisdiction.
The Proposed Rule
FTC’s proposed rule prohibits marketers from including unqualified MUSA claims on labels unless: (1) final assembly or processing of the product occurs in the United States, (2) all significant processing that goes into the product occurs in the United States, and (3) all or virtually all ingredients or components of the product are made and sourced in the United States. The proposed rule also covers unqualified MUSA claims appearing in seals, marks, tags, or stamps in mail order catalogs or mail order promotional materials, defined in the proposed rule as “any materials, used in the direct sale or direct offering for sale of any product or service, that are disseminated in print or by electronic means, and that solicit the purchase of such product or service by mail, telephone, electronic mail, or some other method without examining the actual product purchased.”
The proposed rule specifies that it does not “supersede, alter, or affect any other federal or state statute or regulation relating to country-of-origin labels, except to the extent that a state country-of-origin statute, regulation, order, or interpretation is inconsistent with the [proposed rule]”.
Many major meat and poultry processors purchase livestock and poultry from other countries, but slaughter and process the meat in the United States. Currently, these products can be labeled as “Made in the USA.” However, under the FTC’s rule, these products would not be able to use that label because the components are sourced from outside of the United States.
FSIS vs. FTC
Under the authority of the FMIA, and the PPIA, USDA is charged with ensuring the proper labeling of imported meats and poultry. USDA carries out this responsibility through regulations enforced by the Food Safety and Inspection Service (FSIS). Congress has granted the FTC authority to address MUSA labeling, including rulemaking authority under 15 U.S.C. 45a, “Labels on products”. The proposed FTC rule states “This part shall not be construed as superseding, altering, or affecting any other federal statute or regulation relating to country-of-origin labeling requirements.” This provision in the proposed rule seems to address any conflict between FSIS and FTC, however, many commenters have stated that FTC should not be able to regulate the labeling of meat and poultry products at all as FSIS maintains sole authority over the labeling of meat “Product of U.S.A.” Labeland poultry.
Currently, FSIS allows for the label “Product of the USA” to be placed on meat and poultry products under FIMA and PPIA. However, “Product of the USA” simply means that the meat or poultry product was processed in the U.S. The meat and poultry can be sourced outside of the U.S. According to FSIS rules, “Product of the USA . . . has never been construed by FSIS to mean that the product is derived only from animals that were born, raised, slaughtered, and prepared in the United States. The only requirement for products bearing this labeling statement is that the product has been prepared (i.e., slaughtered, canned, salted, rendered, boned, etc.).”
Further, FSIS has expressed its intention to promulgate a rule limiting MUSA and other voluntary U.S. origin label claims on meat and poultry. Some commenters believe that it is inappropriate for the FTC to intrude on FSIS’s goal of updating the rules regarding these labeling claims.
WTO Decision and COOL history
Concerns were also raised that the proposed rule will again run afoul of WTO agreements, similar to the mandatory COOL. COOL was found to violate Article 2.1 of the Technical Barriers to Trade (TBT) Agreement because it resulted in less favorable treatment to Canadian and Mexican livestock than U.S. livestock by U.S. consumers and was more trade restrictive than necessary within the meaning of Article 2.2 of the TBT Agreement. COOL required that meat and poultry labels state where animals were born, raised and slaughtered in an effort to afford more transparency to the U.S. consumer. While U.S. lawmakers attempted to amend COOL in order to comply with WTO agreements, that effort failed. In December of 2015, the WTO approved $1.1 billion in retaliatory tariffs by Canada and Mexico. U.S. lawmakers were swift to act, and on December 18, 2015, amended COOL to remove mandatory COOL requirements for muscle cut beef and pork, and ground beef and pork. On March 2, 2016, the Agricultural Marketing Service issued a final rule that removed mandatory COOL requirements for muscle cut beef and pork, and ground beef and pork in order to avoid tariffs. Currently, meat can be sold under a “Product of the USA” label if the product is processed in the United States, even if it is of foreign origin. Processing can include simply changing the packaging that the meat is in.
As stated above, the proposed FTC rule prohibits MUSA labeling unless assembly, and processing occurs in the U.S. and all components of the product are sourced from the U.S. However, contrary to the problematic COOL laws, this is not mandatory labeling. The FTC is addressing voluntary labeling with the proposed rule. This difference between the two rules could avoid the FTC rule violating any WTO trade agreements.
Further, The WTO Appellate Board found that COOL had extensive upstream recordkeeping requirements that did not always result in more information getting to the consumer. COOL required that “any person that prepares, stores, handles, or distributes” covered beef or pork commodities must maintain detailed records to identify the immediate previous source for the animal, along with the immediate subsequent recipient for the animal. The WTO Appellate Board found the recordkeeping provisions too burdensome because the required recorded information regarding the supply chain was not conveyed to the consumer. Here, there could be a similar issue, as there would be a requirement for upstream information to accompany the label regarding final assembly, processing and sourcing at all stages to support MUSA labels.
Commission concerns regarding rule
FTC Commissioners Noah Joshua Phillips and Christine S. Wilson wrote dissenting statements discussing the proposed rule. Commissioner Phillips’s statement laid out concerns that the proposed rule exceeded FTC’s statutory authority by broadly construing the definition of “labels on products.” His statement argues that regulating “labels on products” does not include advertising claims appearing in catalogs and online as articulated by the proposed rule. Commissioner Phillips believes that the FTC has gone outside the bounds of their statutory authority in interpreting the meaning of “labels on products.”
Commissioner Wilson stated, “While the goal of ensuring truth in labeling is important, this agency should only expand its regulatory footprint after thoughtful deliberation and in a manner that falls squarely within the jurisdiction granted to the FTC by Congress.” Again, Commissioner Wilson expresses a concern that the proposed rule goes too far in regulating advertising where the statute allows for the regulation of “labels on products.” She states that she dissents “[t]o the extent that the proposed rule exceeds the scope of authority granted by Congress to the FTC.”
While both Commissioners discuss concerns over FTC’s jurisdiction and statutory reach over the advertising provisions in the proposed rule, neither offered thoughts on the jurisdictional issues regarding FSIS in their dissents. The strong concern regarding interference with FSIS jurisdiction stems from the comments provided by industry and consumers.
The comment period on this proposed rule has closed. The FTC will next decide if it will move forward with the proposed rule. While many of the 838 comments express support for the MUSA labeling rule, concerns have arisen over the FTC’s authority to regulate certain products and the reach of this rule. The final rule must be tailored to avoid preemption issues, WTO agreement violation issues, and challenges to the statutory authority of the FTC.
If the proposed rule is made final, the meat and poultry industry fears that they will likely face greater costs in supply chain tracking if the new rule applies to these products. Further, through enactment of the proposed rule, the FTC will be able to assess civil penalties against those making unlawful MUSA claims on product labels. However, if the proposed rule is not made final, FSIS’s “Product of the USA” labeling claim will continue as the standard while FSIS works on their country of origin labeling rules.
To view the Notice of Proposed Rule Making and Comments, click here.
To read a summary of the WTO dispute, click here.
To read Commissioner Wilson’s statement, click here.
To read Commissioner Phillips’s statement, click here.
To read the repealed COOL laws, click here.