Ag organizations challenge USDA country-of-origin labeling rules with lawsuit

Jul 15, 2013

Eight organizations representing the U.S. and Canadian meat and livestock industries last week filed suit in the U.S. District Court for the District of Columbia to block implementation of a mandatory country-of-origin labeling (“COOL”) rule finalized by USDA in May 2013.

In their complaint, the meat and livestock organizations explained that the final rule violates the U.S. Constitution by compelling speech in the form of costly and detailed labels on meat products that do not directly advance a government interest. In addition, the organizations explained that the 2013 regulation exceeds the scope of the statutory mandate, because the statute does not permit the kind of detailed and onerous labeling requirements the final rule puts in place, and that the rule is arbitrary and capricious, because it imposes vast burdens on the industry with little to no countervailing benefit.

Plaintiffs include the American Association of Meat Processors, American Meat Institute (AMI), Canadian Cattlemen’s Association, Canadian Pork Council, National Cattlemen’s Beef Association, National Pork Producers Council, North American Meat Association and Southwest Meat Association.

In the complaint, the organizations explained that the new and complex country-of-origin labels required for meat and poultry sold at retail constitute “compelled speech.” Under the U.S. Constitution, commercial speech may be compelled only where it serves a substantial government interest— for example, if the compelled speech is aimed at preventing the spread of a contagious disease. Because these labels offer no food safety or public health benefit, yet impose costs the government modestly estimates at $192 million, the government cannot require them.

“All livestock and meat processed at federally inspected establishments in the United States and sold in interstate commerce are subject to the same health and safety requirements, as prescribed by the Federal Meat Inspection Act and the Poultry Products Inspection Act,” the complaint states. “Those products are also graded for quality according to a system administered by AMS [Agricultural Marketing Service] without variation based on where an animal was born or raised. In short, beef is beef, whether the steer or heifer was born in Montana, Manitoba, or Mazatlán. The same goes for hogs, chickens, and other livestock.”

The organizations also explain in their complaint that in addition to violating the Constitution, the new rule also violates the Agriculture Marketing Act because it exceeds the authority granted to USDA in the 2008 Farm Bill. While Congress mandated COOL, the statute does not permit labels that detail where animals were born, raised and slaughtered—yet that is what USDA will now require.

Finally, the meat and livestock organizations explain that the COOL rule is arbitrary and capricious. The rule will fundamentally alter the meat industry and pick winners and losers in the marketplace with no benefit to anyone—and at great harm to many meat companies, especially those located along U.S.- Mexico or U.S.-Canada borders whose companies depend upon a steady supply of livestock that may have been born in another country. For example, some Texas-based companies that rely on Mexican-born, but U.S.-raised and -slaughtered cattle will incur dramatic segregation costs that place their businesses at serious risk. Companies along the U.S.-Canadian border will face the same issue.

And because retailers must implement the new labeling requirement, they, too, will face onerous segregation burdens in ensuring that meat from animals with multiple countries of origin is not packaged together.

USDA proposed the new rule in March after the World Trade Organization (WTO) panel ruled in response to a complaint by Canada and Mexico that the existing country-of-origin labeling requirements violated the U.S.’ WTO obligations.

In a highly illogical move, USDA made COOL requirements even more complex and discriminatory against foreign meat and livestock, and Canada and Mexico have already made clear that the new rule does nothing to ease the concerns that prompted their original complaint.

In fact, retail organizations have conveyed that the cost of segregating, tracking, and labeling meat according to these complex new rules will force them to reject meat sourced from Canada or Mexico and stock only meat with the designation “Born, Raised, and Slaughtered in the United States.” Specifically, the complaint notes that new labels will need to be larger, and many grocers will have to acquire new weighing and labeling machines to handle the complex sorting of packages for each possible label.

Canadian cattle and hog producers have made clear that they will have to accept steep discounts to make up for the downstream production costs faced by processors and retailers, according to the complaint.

“Sorting and tracking livestock and labeling meat by the various ‘routes’ that livestock may take on the way to market is needlessly complex with no measurable benefits,” said AMI Senior Vice President of Regulatory Affairs and General Counsel Mark Dopp.

“Shoes, for example, may say ‘Made in the USA.’ They do not say ‘Leather from cattle born in Canada, harvested in the USA, tanned in South Korea and processed in the USA, yet that is the sort of labeling that we are now being forced to apply.”

“Congress mandated country-of-origin labeling for meat and poultry—not lifetime itinerary labeling,” Dopp concluded. “Segregating and tracking animals according to the countries where production steps occurred and detailing that information on a label may be a bureaucrat’s paperwork fantasy, but the labels that result will serve only to confuse consumers, raise the prices they pay, and put some producers and meat and poultry companies out of business in the process. Everyone loses under this rule.” But those supporting the COOL changes are calling the lawsuit a delay tactic.

National Farmers Union President Roger Johnson said, “Time and again, many organizations that represent or are heavily influenced by meatpackers have dragged their feet when it comes to COOL. They prevented COOL from being implemented after the 2002 Farm Bill, tried to block it following the 2008 Farm Bill, and now are suing to stop the revised COOL rules from taking effect. Such delaying and stalling tactics only serve to deprive their customers of important information about the products they buy.” — Traci Eatherton, WLJ Editor

American Meat Institute’s COOL timeline: A review

2002— Mandatory country of origin language included in 2002 Farm Bill.

2003— USDA published burdensome rule requiring labeling that specified countries where various production points occurred, e.g., born, raised, and slaughtered.

2008— Congress includes in 2008 Farm Bill amendments to address key problems identified in previously proposed COOL rule to make it less burdensome.

2009— Final rule takes effect.

2009— Mexico and Canada file complaint against U.S., arguing that COOL violates U.S. WTO obligations.

2011— Panel finds in favor of Mexico and Canada for several reasons.

2012— WTO Appellate Body also finds U.S. out of compliance.

2012— May 23, 2013 Compliance date set.

March 2013— USDA proposes new rule that is very similar to original 2003 rule.

May 2013— USDA finalizes rule with no changes, unjustifiably dismissing significant comments from public.

2013 Final Rule

• Requires labels for muscle cut covered commodities to declare the country of origin regarding three production steps – born, raised, and slaughtered.

• Eliminates ability to commingle products, which requires segregation of livestock and products throughout the supply chain.

• This rule puts companies, plants and producers, at risk of going out of business.

2009— “Agency concluded that the measurable economic benefits of mandatory COOL will be small.”

2013— “The Agency believes that the incremental economic benefits from the labeling of production steps will be comparatively small relative to those that were discussed in the 2009 final rule.”