The 2002 farm bill included a provision that mandates country of origin labeling (COOL) for beef and certain other perishable products previously exempt from such requirements. Implementing regulations are scheduled to become effective on September 30, 2004. However, late last year the House of Representatives passed a moratorium on implementing mandatory COOL for all products except fish until September 2006. The Senate is scheduled to begin debate on this bill on January 20.
Advocates of country of origin labeling are pointing to the recent case of mad cow disease as evidence that such rules should be mandatory. But COOL has nothing to do with food safety. By attempting to link the COOL issue to a health concern, particularly one that generates hysteria and overreaction, advocates are hoping to scare up support for a complicated, controversial, and costly idea.
Proponents argue that mandatory COOL is desired by both producers and consumers. A “made‐in‐the‐USA” label, they contend, would help identify U.S. products for consumers who are otherwise unsure and who may be willing to pay a premium to know they are buying American food.
That sounds fair enough. But there’s more to the story. If, in fact, consumers are overwhelmingly in favor of country of origin labeling, then why haven’t domestic producers voluntarily obliged? After all, if there is demand for it, why does there need to be a law mandating it?
Proponents argue that the costs of implementing COOL are small, yet none of them has been willing to implement it voluntarily. Instead, they have been expending considerable time and money to force those requirements further down the supply chain. Processors, wholesalers, and retailers‐firms that buy and sell both domestic and imported products‐would incur the costs of segregating inventory, keeping records, constructing and maintaining compliance systems, and often physically labeling products. Burdensome compliance costs may induce those firms to limit their sources, in some cases to only domestic suppliers. In this regard, there is question as to the WTO legitimacy of this legislation. If products of foreign origin are treated differently from U.S. products as a result of domestic regulations, the principle of “national treatment,” a touchstone of the rules‐based trading system, could be found to be violated.
Saddling others with what should be the marketing costs of domestic producers and reducing import competition are ultimately what COOL is all about.
Current Country of Origin Labeling Requirements
For more than 70 years, federal law has required most items imported into the United States‐including food items‐to bear a conspicuous label identifying their country of origin to the ultimate purchaser. U.S. Customs and Border Protection (formerly the U.S. Customs Service) defines “ultimate purchaser” as the last person in the United States who receives the article in the form in which it was imported. It defines “country of origin” as the country of manufacture, production, or growth of any article of foreign origin entering the United States.
The law exempts from labeling requirements articles that would be “economically prohibitive” to label. Among those items are livestock, vegetables, fruits, nuts, live or dead animals, and fish. Although those products are exempt from country of origin labeling requirements, their “immediate containers” are required to bear country of origin labels. So while the cartons containing oranges from Brazil or tomatoes from Mexico must be labeled, produce sold individually from those cartons is exempted.
Expanding Country of Origin Labeling Requirements
In 2002 Congress passed the Farm Security and Rural Investment Act (the Farm Bill of 2002), which included language making country of origin labeling mandatory for certain products that previously had been exempt. The law requires retailers to notify their customers of the country of origin of covered commodities beginning September 30, 2004. Covered commodities include muscle cuts of beef (including veal), lamb, and pork; ground beef, ground lamb, and ground pork; farm‐raised fish and shellfish; wild fish and shellfish; perishable agricultural commodities (fresh and frozen fruits and vegetables); and peanuts. In accordance with the law, the U.S. Department of Agriculture issued proposed regulations for implementing this legislation, which were published in the Federal Register on October 30, 2003.
In addition to requiring certain “retailers” to notify their customers of the country of origin of covered commodities, the law stipulates how certain products should be labeled if the various stages of production are completed in more than one country or if the final product includes covered commodities from more than one country (e.g., frozen mixed vegetables with carrots from the United States and peas from Canada). It also stipulates exemptions for certain processed food items derived from the covered commodities.
Although covered meat products imported in consumer‐ready packaging for retail are already required to bear a country of origin label, the new rules for beef, pork, and lamb would require greater specificity with respect to the various stages of production. Currently, if an imported cow, pig, or sheep is destined for a U.S. processor where it will undergo “substantial transformation” (e.g., the cow is slaughtered and its meat sold as steaks), that processor is considered the ultimate purchaser and U.S. origin is conferred upon the resulting value‐added products. Under the new rule, however, such processing in the United States will no longer confer U.S. origin to the resulting meat products if they are sold as covered commodities. Specific criteria must be met for a covered commodity to bear a U.S.-origin label.
Covered beef must be derived exclusively from an animal that was born, raised, and slaughtered in the United States (including an animal born and raised in Alaska or Hawaii and transported for a period not to exceed 60 days through Canada to the United States and slaughtered in the United States). Covered lamb and pork must be derived exclusively from an animal that was born, raised, and slaughtered in the United States. If any of the three stages of production (born, raised, and slaughtered) occurred outside the United States, the label must identify where each of the three stages occurred.
Covered farm‐raised fish and shellfish must be exclusively fish or shellfish hatched, raised, harvested, and processed in the United States, and covered wild fish and shellfish must be exclusively fish or shellfish either harvested in the waters of the United States or by a U.S.-flagged vessel and processed in the United States or aboard a U.S.-flagged vessel. If any of these stages occurs outside the United States, the label must identify where each stage occurs.
Covered fresh and frozen fruits and vegetables and covered peanuts must be exclusively perishable agricultural commodities or peanuts grown in the United States. If a fruit or vegetable product is comprised of covered commodities from multiple countries, the label must list the countries of origin for each ingredient alphabetically.
Published with the proposed regulations was an extensive analysis of the costs and benefits to directly affected companies. USDA estimates the costs of first‐year implementation at somewhere between $582 million and $3.9 billion. Largely in response to that analysis, in December 2003 the House of Representatives voted to impose a two‐year moratorium on implementation of the mandatory country of origin labeling requirements stipulated in the Farm Bill of 2002. The Consolidated Appropriations bill for 2004, which contains this moratorium language, will be debated in the Senate beginning January 20, 2004.
COOL Is Not a Health Safety Measure
Included in USDA’s proposed regulations on COOL are the following description and disclaimer: