The WTO Appellate Body on May 18, 2015, publicly released a report upholding earlier findings that the United States has violated WTO rules in applying country of origin labeling (COOL) to beef, pork, and other meat products. This latest ruling may result in repeal of the U.S. COOL requirements.

The WTO dispute was brought by Canada and Mexico. WTO dispute settlement panels have repeatedly found that the U.S. COOL regulations violate WTO rules by unfairly discriminating against imported meat products. Canadian and Mexican authorities have threatened to impose roughly US$2 billion in retaliatory tariffs on imports of a wide range of U.S. food products if the United States does not repeal the measures or otherwise bring them into compliance with WTO rules.

At issue are COOL regulations that were revised by the United States in response to earlier WTO dispute settlement rulings. The May 18 decision upheld findings of an earlier WTO compliance panel that these revised U.S. COOL regulations failed to bring the COOL regulations into conformity with WTO rules. Among other deficiencies, the COOL regulations were found to be discriminatory toward imported meat products in violation of WTO rules on “national treatment.”

The new ruling paves the way for Canada and Mexico to move toward retaliation. This would involve a shorter, 60-day arbitration phase to determine the correct monetary value of the retaliation, and Canadian and/or Mexican retaliatory tariffs/duties would take effect after that. We note that Canada has already released a preliminary list of U.S. products subject to potential retaliation (see here).

This latest decision, and the enhanced threat of retaliation, makes it somewhat more likely the United States will now take action to repeal the COOL regulations. U.S. Secretary of Agriculture Tom Vilsack recently re-iterated that he is ready for a repeal or retooling of the U.S. COOL labeling rules if the WTO again rules against the United States. The Department of Agriculture also published a report in April finding that the economic benefits of implementing the COOL labeling rules would be insufficient to offset the costs of the requirements.

Key congressional leaders in the House have also stated publicly that they would support repeal of the COOL measures if a decision were to go against the United States, thus opening the door to retaliation by Canada and Mexico. Draft legislation to this effect has reportedly already been prepared and is said to be supported by the Chairman of the Agriculture Committee, Michael Conaway (R-Texas), and others. On the other hand, there remains some opposition to outright repeal by certain lawmakers, including ranking member of the House Agriculture Committee Collin Peterson (D-Minn.) and Rep. Rosa DeLauro (D-Conn.), a member of the House Appropriations Agriculture Subcommittee.