Bipartisan Group of Senators Try to Pass a New COOL Law for Beef

Sept. 14, 2021
By: Mert Ermen Arkan

On September 8, 2021, a bipartisan group of Senators announced legislation that aims to reinstate mandatory country of origin labeling (“COOL”) for beef produced. These developments represent only the most recent chapter of a long-running dispute between the United States, Canada and Mexico dating back to changes first made to the Agricultural Marketing Act of 1946, as amended by the 2008 Farm Bill. While the legislation itself has yet to be formally introduced, a press release published by Senator John Thune, R-S.D. described the intent of the new legislation as targeting “the current labeling system {which} allows imported beef that is neither born nor raised in the United States, but simply finished here, to be labeled as a product of the USA.” 

Specifically, the new COOL bill will require the U.S. Trade Representative (“USTR”), consulting with the Agriculture Secretary, to develop a new mandatory COOL regime that could withstand scrutiny at the WTO.  The agency would have six months to develop the plan and six months to implement it, according to Senator John Thune. If the USTR does not come up with a plan, an automatic (non-WTO compliant) mandatory COOL system would come into effect. Mike Schultz, Congressmen, R-UT, and COOL Committee Chair calculates that if passed the legislation could restore up to $20 billion in lost revenue to the cattle industry per year.

It remains unclear how the stated goals of the COOL legislation may be achieved in a WTO-compliant matter. The original Final Interim Rule implementing the COOL provisions in the 2008 Farm Bill included an obligation to inform consumers at the retail level of the country of origin of all beef and pork products.  Per the regulation, in order for beef or pork products to qualify as having a US origin, the livestock must have been exclusively born, raised and slaughtered in the US.  Most prominently, beef or pork derived from livestock that was exported to the US for feed or immediate slaughter could not be labelled as having a country of origin in the US.

Following issuance of the Rule, on December 1, 2008 Canada requested consultations at the WTO challenging the COOL provisions in the 2008 Farm Bill. Following affirmative Panel and Appellate Body Reports the law in violation of Article 2.1 of the Technical Barriers to Trade Agreement, the United States notified the Dispute Settlement Body (“DSB”) of the WTO on August 21, 2012 that they would move forward to implement the requested changes to the COOL provisions. In summary, the Appellate Body had found that the COOL provisions unlawfully according less favorable treatment to imported Canadian cattle and hogs than to like domestic cattle and hogs. Consequently, on May 23, 2013, the United States informed the DSB that the US Department of Agriculture (“USDA”) had issued a final rule that made certain changes to the COOL labelling requirements that had been found to be inconsistent with Article 2.1 of the TBT Agreement.

The 2013 rule was issued by the Agricultural Marketing Service of the USDA and only amended requirements to label muscle cuts of meat by eliminating the allowance to commingle muscle cut covered commodities of different origins. The United States took the view that the final rule had brought it into compliance with the DSB recommendations and rulings.  Canada (and other Third Parties) did not agree that the changes had brought the United States into full compliance.  In their view, the changes were actually more restrictive and caused further harm. Following additional proceedings and appeals at the WTO, finally, on May 29, 2015 the Appellate Body held once again that the USDA rule continued to be in non-compliance with the TBT Agreement. Left with no other options and risking trade retaliation from other Member States, the USDA formally rescinded the COOL provisions on March 2, 2016.

The Biden Administration has thus far largely followed the lead of the Trump administration with regards to international trade and has demonstrated a willingness to pursue protectionist policies even where it flouts long-standing international norms and commitments. As the above-described proceedings illustrate, even where the United States adopts a non-WTO compliant regulation, it can take nearly a decade before the threat of lawful retaliation from other Member Countries results in the rescission of the original law. Given the practical difficulties associated with crafting genuinely WTO-compliant COOL legislation, parties should follow this legislation carefully as a bellwether for just how far the Biden administration is willing to go to protect domestic US industries.

If you have any questions about importing food or country of origin labeling, do not hesitate to contact any attorney at Barnes, Richardson & Colburn, LLP.
 

White House Contemplating New China Tariffs

Sept. 14, 2021
By: Michael N. Coopersmith

According to recent reports, the White House is now considering the initiation of a new investigation under Section 301 of the 1974 Trade Act which, pending its outcome, could ultimately lead to the imposition of a new round of 301 China tariffs. According to sources close to the matter, the investigation would be aimed at understanding and ultimately combating what the US perceives as harmful Chinese government subsidies. The US Trade Representative (USTR) has reportedly retained outside consultants to help quantify the economic damage caused by Chinese subsidies, in order to prepare an appropriate response following the conclusion of any investigation. All outlets reporting on the matter, including the Washington Post and the New York Times, have so far cited “unnamed administration sources.”

News regarding a new 301 investigation comes shortly after President Biden and Chinese President Xi Jinping engaged in their first direct conversation in over seven months. The roughly 90-minute September 9, 2021, call is said to have been initiated by President Biden and stemmed from his administration’s frustration with lower-level Chinese officials and their apparent unwillingness to engage in constructive trade discussions. The Biden administration described the discussion between leaders as frank yet respectful. According to the official Chinese Summary of the call, President Xi relayed to President Biden that “The policies that the United States has adopted toward China for some period of time have pushed Chinese-U.S. relations into serious difficulties.”

While news regarding a potential expansion of 301 tariffs, an economic lever heavily utilized former President Trump, may appear surprising at first glance, a review of recent history shows that the Biden administration is not opposed to the use of 301 tariffs. The Biden administration, it should be noted, defended President Trump’s use of Section 301 tariffs at the US Court of International Trade earlier this year. With this in mind, the move by the administration to release news of a potential Section 301 investigation may very well be an attempt by the administration to test the waters prior to taking any action, with the administration likely wanting to see how the business community might react to a trade agenda that not only leaves in place most of former President Trump’s tariffs, but potentially adds to them. Administration sources also expressed that President Biden may look to reopen Section 301 exemptions and cut tariffs on goods used in manufacturing.

While expanded 301 tariffs may very well be on the table, only time will tell if the Biden administration ultimately decides to take such an action. While expanded 301 tariffs seem to be a potentially realistic outcome, some have speculated that the release of this information may simply be a strategic move in a high stakes economic battle of wills. By releasing information about a potential new investigation, the Biden administration, some have argued, may be attempting to remind Beijing that despite a multiyear trade dispute Washington believes it still retains substantial economic leverage.

If you have any questions regarding 301 tariffs or the potential impact of expanded tariffs do not hesitate to contact an attorney at Barnes, Richardson & Colburn LLP.