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. Exempt items are those 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 had been 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 still must be labeled. The labeled container may be a bulk shipping container or a retail-ready package. Generally, consumers 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. A minor process that leaves the identity of the imported product intact though will result in a consumer 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. Notably, the 2016 Consolidated Appropriations Act removed COOL labeling requirements from beef and pork muscle cuts and ground beef and pork.
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. However, a 2016 appropriations bill modified the products covered so that COOL laws no longer apply to muscle cuts of beef or pork. The most recent 2016 regulation applies COOL laws to lamb, chicken, and goat meat, perishable agricultural commodities, macadamia nuts, pecans, peanuts, and ginseng.
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 from 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 exempt from complying with COOL laws Retailers have the primary burden of labeling procedures for 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. The law may also require retailers to maintain records that are sufficient to enable an auditor to determine compliance with the law. Suppliers to the final retailers are also required to provide necessary country of origin information to the retailer to ensure compliance with the law.
The USDA does have the authority to require a verifiable audit trial for country of origin information. However, a provision in the COOL law explicitly prohibits the USDA 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 retain the product. 7 C.F.R. § 60.400(c)(1). For products that are not pre-labeled, retailers must keep the relevant documents for one year. 7 C.F.R. § 60.400(c)(2).
Suppliers who deal directly with retailers are responsible for providing the retailer 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 $10,000.00 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. The USDA 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. 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. The Secretary of Agriculture at the time, 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). In 2015, as a result of the WTO legal challenges, the COOL requirements for beef and pork have been repealed.
COOL Requirements for Beef and Pork
The requirements for listing the country of origin for beef and pork products were specifically outlined in the COOL law. The requirements have since been altered and repealed through the evolution of the proposed regulations and litigation with the World Trade Organization. The original regulations provided that if the product had not undergone a substantial transformation in the United States, its country of origin was the country 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 a commodity undergoing a substantial transformation in the United States, all of the countries of origin had to be 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, so 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. In November 2011, the World Trade Organization (WTO) panel found that the COOL requirements were inconsistent with the United States’ obligations under the WTO Agreement on Technical Barriers to Trade (TBT). The panel reasoned that this was a violation of the agreement 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. The WTO Appellate Body issued a ruling 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 the law 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 to conform to WTO directives. The United States complied and on May 23, 2013 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 required processors of meat to be more specific, and to include information about three production steps (7 C.F.R. § 65.300(e)). For example, labels for animals born, raised, and slaughtered exclusively in the United States would read, “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, processors were given a six-month compliance window.
In August of 2013, Canada and Mexico challenged the revised COOL requirements at a WTO dispute panel. An October 2014 WTO Compliance Panel ruled that Canada and Mexico 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 confirmed the Panel’s ruling against the U.S., finding against the revised COOL regulations. In December of 2015, Canada and Mexico requested and 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. However in 2015, Congress passed the 2016 Consolidated Appropriations Act, an omnibus spending bill, Pub. L. NO. 114-114, that repealed all COOL requirements from muscle cuts of beef and pork, and ground beef and pork. USDA Secretary Vilsack also sent out guidance that the USDA will no longer enforce the COOL regulations for beef and pork in accordance with the law. Thus, retailers are no longer required to provide COOL at the point of sale. However, COOL regulations and requirements are still in full effect for the following products: chicken, lamb, goat, farm-raised and wild caught fish and shellfish, perishable agricultural commodities, peanuts, pecans, macadamia nuts, and ginseng.