Mandatory country of origin labeling for meat became effective in the U.S. on October 1 of this year. Nothing unexpected happened. U.S. meat processors said they would figure out how to live with it at some cost, and the Canadian livestock industry said they are being harmed by it and urge their national government to file WTO and NAFTA cases against it. The larger issue for U.S. agriculture is how to minimize the impact of these regulations on the attitudes of other countries as it relates to labeling.

Country of origin labeling (COOL) is not a new idea nor is it unique to agriculture. The Tariff Act of 1930 (better known as the Smoot-Hawley Tariff Act) requires most products imported into the U.S. to be identified with a country of origin mark and for the mark to remain on the product until purchased by the final consumer. The Treasury Department maintains a list of excluded products, referred to as the J-List, which includes unprocessed meat. Processed meat imported in packaging to be purchased by the final consumer, such as Danish hams, are required to show the country of origin.

COOL as it applies to meat was included in the 2002 farm bill with anticipated implementation in 2004. It was twice delayed by appropriations bill language until September 30, 2008. The 2008 farm bill made minor changes in labeling, record keeping and enforcement. Muscle cuts and ground beef, pork and lamb were included in the 2002 farm bill and goat meat and chicken were added in 2008. These products must be labeled with country of origin when sold by retailers that invoice each year more than $230,000 in fresh fruits and vegetables. Products sold at food service establishments are excluded. Products processed in the U.S. like cured hams and ingredients in another product do not have to be labeled.

Muscle meats fit into one of four categories. Meat is labeled U.S. origin only if it comes entirely from an animal exclusively born, raised, and slaughtered in the U.S. Meat from an animal not exclusively from the U.S. is labeled with the countries in which it was born, raised, or slaughtered. Meat from an animal imported to the U.S. directly for slaughter is labeled as product of the country from which the animal was imported and the U.S. Meat from an animal that was not born, raised, or slaughtered in the U.S. is labeled with the country of origin. Ground cuts of meat are labeled with all reasonably possible countries of origin.

It is logical for Canada to have the loudest complaints because their beef and pork industries are the most integrated with the U.S. Feeder pigs are produced in Canada and fed out in the U.S. because of abundant corn supplies. Other feeder pigs born in Canada are fed out in Canada and sent to the U.S. for slaughter. The same is true for beef with the additional twist that some calves are born in the U.S., fed out in Canada and return to the U.S. for slaughter. Most of the live animal trade with Mexico is feeder cattle shipped to the U.S. for finishing. Prior to September 30 all hogs and cattle slaughtered in the U.S. regardless of where produced received the USDA inspection stamp as slaughtered in the U.S.

WTO rules require that imported products be provided national treatment (treated no less favorably than domestic products for offering for sale, purchase, transportation, distribution, or use) and that the labeling not result in serious damage to the product, a material reduction in value, or an unreasonable increase in cost. NAFTA allows COOL, but requires that any marking requirements be applied in a manner that would minimize difficulties, costs, and inconvenience. The WTO and NAFTA provide procedures for settling disputes between member countries over the consistency of a country’s laws, regulations, and practices with the agreement. COOL is also covered as a technical regulation under the WTO Agreement on Technical Barriers to Trade. Because the U.S. is a large importer and exporter of meat, Canada, Mexico and others may be more ready to challenge U.S. COOL than regulations of other countries. U.S. regulations are also more likely to be copied by other countries.

According to media reports, Canadian beef and hog producers are already making a list of the negative impacts of COOL. Some U.S. beef and pork processors have refused to buy Canadian animals at any price or are buying only on certain days of the week. Costs have been estimated for the pork industry at $350 million per year and beef at $500 million per year. They also complain that the rules continue to change. The current interim rule is to be finalized by April 1, 2009. USDA is operating in an educational mode until then before taking a regulatory compliance approach. Canadian beef producers believe that meat further processed in a U.S. facility (ground or combined with other ingredients) should no longer be labeled as Canadian.

Any government action, labeling or otherwise, that disrupts the efficiencies gained through integrating the industries over the last 15 years will result in higher costs and lower market prices for Canadian producers. Whether those issues rise to the level of a violation under NAFTA or the WTO remains to be seen. Other countries like Australia which are not integrated or more targeted to the food services industry are less impacted. New Zealand uses its country of origin label for lamb in the U.S. and other countries as a brand indicating superior quality compared to domestic or other imported products.

Labels are the latest battleground in trade policy. The U.S. and other countries are already in disagreement with the EU over geographical indicators for labeling products from specific regions in the EU. Labeling of products produced through biotechnology is an ongoing issue. Biofuels labels that give an indication of “sustainability” of production are being discussed and animal husbandry labeling is waiting in the wings.