Consistencies Emerge as COOL Comment Period Deadline Closes In

April 10, 2013 07:29 AM

Via a special arrangement with Informa Economics, Inc.

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April 11 is end of comment period on USDA's proposal to bring COOL law into compliance with the WTO ruling.

The more than 440 public comments made on USDA's proposal to bring the Country of Origin Labeling (COOL) law in line with U.S. WTO obligations have some consistent trends from both those in favor of the and those opposed to it as the comment period closing date of April 11 draws near. Link to view comments.

Many of those commenting in favor of the rule are using a "canned" public comment that says the following:

"I am a consumer, and I support mandatory country of origin labeling so that American citizens can get clear information about where our food comes from. The World Trade Organization should not get to decide what information I get about the food I buy for my family. I urge you to stand up for U.S. consumers and farmers, and adopt the new and improved COOL rule."

While some have creatively edited the above comment to make it seem a little more original, there still seems to be a few common phrases in even these edited responses.

Other backers of the COOL proposal have utilized information from the National Farmers Union or R-CALF USA as they comment. There are comments in support of the plan from the National Farmers Union along with several state Farmers Union organizations and several respondents from R-CALF.

Many commenting in favor of the plan state that it is their "right" to know where their food comes from and many also state that it is a matter of food safety - that labeling the country where meat comes from is a sign of how safe it is.

"United States citizens should have the same right to know where their food comes from and whether it is real food or GMO as other countries," wrote one commenter. "Russia has better labeling than we do because they demanded it. International corporations already label their overseas products so it is not asking much to have them print and use the same wrappers in this country."

Predictably, others cite the recent developments in Europe where horse meat has been detected in packages labeled as being "beef," something which those offering comments in support of the COOL plan apparently believe would not happen if they knew where the meat came from.

As for those against the plan, their responses tend to be based on economics and on additional costs and record keeping requirements in the case of comments from meat processing firms and cattle producers.

One New Jersey meat processor commented that their assessment of the proposal impact the firm "significantly and adversely" by the requirement to provide information or labeling about three separate production steps of livestock -- born, raised, and slaughtered. "Such a requirement would require additional segregation of livestock and products throughout our system and the supply chain," the commenter noted. "In addition, we would be forced to revamp our labeling information and systems, which would also be very costly and time consuming to stay compliant for this purposed change in the current rule." The firm estimated it would raise their costs $100,000 annually and additional up-front costs of $40,000 to $50,000. "This would further diminish the already very small profit margins small plants like ours currently work off of," the commenter noted.

Then there are those that build their case on "home-spun" logic. "Let's see… a calf is born in Canada, 8 months later it leaves its mother and makes its way to Colorado. There, in the United States of America, it is fed and cared for by U.S. citizens. It is fed U.S. grain, and is fed in a facility owned and constructed by U.S. citizens. When the time comes, it is then trucked (in U.S. trucks and drivers) to a USDA certified plant, is processed by U. S. citizens, and even carries the grade of the USDA. However, now the Government thinks the public should be aware that this product was derived from an animal born in Canada. What is the relevant scientific factor here that the public need be aware of? Is it the hope of the government that the public will discriminate against this product? It certainly is not food safety, that's for sure. COOL appears to say, 'since this calf, at birth, did not touch the sovereign soil of the USA, somehow, a U.S. rancher has been cheated, therefore, no bovine shall enter into the USA food chain without penalty.'"

Others against the COOL plan warn that Canada or Mexico could likely retaliate against the U.S. over the proposal, even though it is not clear yet whether the USDA plan will pass world trade rule muster.

Canadian Ag Minister Gerry Ritz made it clear Tuesday following a meeting with USDA Secretary Tom Vilsack (see second item below) that Canada would pursue retaliation against the U.S. if the COOL law was not brought into compliance by the May 23 deadline. And, perhaps importantly, Ritz said they viewed the COOL proposal from USDA as not meeting that test.


How Cargill commented on the proposed COOL rule:

The following comments are filed by Cargill, Incorporated. Cargill's interest in the country of origin labeling law and regulation is established through our business as a producer, buyer and processor of beef and pork and in supplying the sector with animal nutrition products.

USDA's proposal stems from the June 2012 World Trade Organization (WTO) Appellate Body (AB) ruling holding that the COOL requirements are inconsistent with the U.S. international obligation to treat imported products no less favorably than domestic products.

In Cargill's view, the WTO ruling was exactly the right one. The USDA proposal insufficiently addresses the WTO ruling and the substance of the case filed by Canada and Mexico. The premise of the case was that the segregation requirements established in U.S. law disadvantage the imported production of substantially the same products.

Our analysis of the proposed rule leads us to conclude that not only does it not successfully address the ruling, it is worse. It creates even more difficult segregation requirements that will even further injure production in Canada and Mexico and importantly, the United States.

Segregation requirements are harmful not only for our live cattle demand, but also for businesses that create substantial added value in their plants using imported meat products. For instance, the U.S. is heavily reliant on beef trimmings and that are blended with U.S. meats in the production of ground beef. We use boxed beef from Canada to further process into other retail products in USDA inspected facilities. Current requirements make it impossible to maximize their value and create American manufacturing jobs.

With regard to the legal and economic analysis of the proposed rule Cargill fully associates itself with the comments filed by the National Pork Producers Council, the National Cattlemen's Beef Association, the American Meat Institute, and the North America Meat Association. Their analyses are very credible and should be carefully studied.

Cargill was a leader in fighting COOL going back to the early 1990s, consistently pointing out the consequences of the policy. We lost this debate and the law and regulations were implemented. But the fall out across the industry and the marketplace have now shown us that every point we made about the potential consequences has come true.

The integrated nature of the global beef system must be more clearly understood by all stakeholders. In North America this is particularly the case in that the U.S. is highly dependent on feeder cattle from outside the country to be able to sustain our tremendous packing capacity. With the U.S. cattle herd at the lowest level in modern times the problem is now not only apparent, but is having extreme effects on supply chain. Cargill knows this well, having idled in February our 4200 head per day beef plant in Plainview, Texas, due to a lack of reliable cattle supply. The impact of COOL is clearly one of the reasons that led to the closing of the plant - eliminating over 2000 jobs and affecting many more indirect beneficiaries of the facility.

The January/February cattle supply left us with roughly 10,000 per head daily surplus packing capacity. Once Cargill idled its plant, there remains 6000 head of excess capacity. As the USDA rule moves farther to disadvantage value of cattle born outside the U.S., the issue will compound. To illustrate the role of COOL, consider this: it takes a fixed cost of $X to process an animal regardless of where it was born. But value of the carcass and the boxed beef from it will be very different because of COOL requirements and retail demand for a single label. Thus, the margin is going to be significantly lower for the non-U.S. animal. And simply put, plants with negative margins do not remain viable. This was the case with Plainview. Not only did we not have the needed numbers of cattle, those we had were of considerably less value because of COOL. Consequently, producers in the southwest have one less plant to which they can market cattle. A question is to whether there may be even fewer plants so long as there is the current level of excess capacity.

The COOL law has had a devastating impact on the Canadian pork industry. Canada was once a significant supplier of feeder pigs that were imported and finished by U.S. farmers. Because of the devaluation of Canadian-born pigs, the very beneficial U.S./Canada relationship went away for hog finishers.

A significant concern for the U.S. animal protein sector must be that in failing to honor our international trade obligations we open ourselves up to retaliatory tariffs. Nowhere are we more vulnerable than with our highest value agricultural exports: beef, pork and poultry. Mexico and Canada happen to be among our most critical markets for all of these commodities.

Finally, we must file an important request. Because we believe so strongly that the WTO will not find the USDA proposal acceptable, and that policy change will need to be accomplished through legislation, we request that USDA not implement any new regulation prior to a final WTO review. The cattle feeding and beef and pork processing sector's significant downsizing cannot stand making an immediate adjustment only to be followed by another after a negative WTO ruling.


Comments: The comments received on this issue paint it both as an economic and in many cases, a near-emotional issue. What is also clear is that those backing the modifications to the COOL program do not express any concern about costs to the additional requirements, and those that did mention the potential increased costs say the figures being touted are too high for what is being proposed. It's far from clear that the comments received thus far will alter the proposal. But the threat of or actual imposition of retaliation to the tune of $1 billion annually could be what shifts this issue as we saw in the Mexico trucking case where Mexico successfully used that tactic. But emotion and not economics have been a key factor in this issue from the beginning and this latest chapter indicates that has not changed.

Canada's Ritz: Retaliation Still Option if U.S. COOL Not WTO Compliant by May 23 Deadline

Says Canada will do "what's right" for their livestock sector

Canada will "consider all options, including retaliatory measures," if the U.S. does not bring its Country of Origin Labeling (COOL) law into compliance with the WTO by the May 23, 2013, deadline, Canadian Ag Minister Gerry Ritz said Tuesday.

The Canadian livestock industry has said that the U.S. COOL law costs Canada $1 billion annually, and Ritz said in a teleconference after meeting with USDA Secretary Tom Vilsack and others in Washington if the U.S. is not in compliance by May 23, "we are looking at those kind of dollars" for retaliation.

What is ahead. While not specifying products to be targeted in the event retaliation comes about, Ritz said, "We will put together an extensive list with the Department of Foreign Affairs and Trade," adding that it will "take a number of initiatives to reach that dollar value."

In his session with Vilsack, Ritz said he related their "strong concerns" with the "negative impacts" from the U.S. COOL law.

Further, Ritz said that the current proposal from USDA does not in the view of Canada bring the U.S. law into WTO compliance. "Our government is extremely disappointed with the regulatory changes put forward," he observed, adding that in their view they "will not bring the U.S. into compliance. It will increase the discrimination of exports of Canada." However, he added that if the U.S. took steps to bring COOL to meet "the letter and spirit" of WTO rules, then retaliation would not be pursued.

The ability of the U.S. livestock industry to utilize hogs and cattle from Canada is something that "maximizes efficiencies" for both industries, Ritz observed. Also, Ritz expressed a hope that an aggressive retaliation plan, if it comes about, would bring pressure on the U.S. to change the COOL law yet again.

"We will do what is the right thing to do for our livestock sector," Ritz commented.

Ritz is now headed to Mexico where he will meet with Mexican officials to plan and coordinate their response to the U.S. COOL plans. Besides meeting with Vilsack, Ritz met with some U.S. lawmakers to convey Canada's position. He also met with the American Meat Institute and livestock industry stakeholders.


Proposed changes to COOL rules would change labeling provisions for muscle cut covered commodities to provide consumers with more information. Under the proposal, all origin designations for muscle cut covered commodities derived from animals imported for immediate slaughter in the United States would have to include specific information on the place of birth, raising, and slaughter of the animal. The proposal said this requirement would provide consumers with more information on which to base their purchase decisions. Further, the proposal would eliminate the allowance for any commingling of muscle cut covered commodities of different origins. Current COOL regulations allow for commingling of different origins.


The COOL requirements in the 2008 Farm Bill mandated that retailers label covered commodities to indicate where the animal was raised and processed. Covered commodities include muscle cuts of beef (including veal), lamb, chicken, goat, and pork as well as ground beef, ground lamb, ground chicken, ground goat, and ground pork.


The WTO Appellate Body concluded that, while providing consumer information on the origin of meat was legitimate, the COOL rules for muscle cut meat commodities were inconsistent with Article 2.1 of the WTO's Agreement on Technical Barriers to Trade (TBT) because they treated foreign products less favorably.

Comments: Retaliation continues to be a real possibility as Ritz made it clear that what has been proposed by USDA will not bring the U.S. into compliance with its WTO obligations. The mention of the May 23 deadline doesn't necessarily mean that on May 24, Canada will launch retaliatory measures. But Ritz's message is clear that Canada will not shy away from taking action in this case. Meanwhile, the public comment period on USDA's proposal for COOL comes to a close April 11. A review of comments thus far -- more than 400 -- provide a mixed bag of views with many of those filed thus far backing the COOL changes proposed by USDA.

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