USDA finalizes final COOL rule

Published on: May 23, 2013

In time for the World Trade Organization (WTO) established deadline, the U.S. Department of Agriculture published the final country-of-origin labeling law designed to satisfy the requirements of an earlier WTO panel ruling.

USDA interpreted the WTO ruling as requiring more specific information for consumers. Under the final rule to be published May 24, origin designations for muscle cut covered commodities derived from animals slaughtered in the United States are required to specify the production steps of birth, raising, and slaughter of the animal from which the meat is derived that took place in each country listed on the origin designation. In addition, the rule eliminates the allowance for commingling of muscle cut covered commodities of different origins.

"These changes will provide consumers with more specific information about the origin of muscle cut covered commodities," USDA said in its rule.

USDA estimated that the total cost of the rule is driven by the cost to firms of changing the labels and the cost some firms will incur to adjust to the loss of the flexibility afforded by comingling. Commingling is used by the beef and pork segments, and USDA estimates U.S. packers use the process in 5 to 20% of their product.

The Agency estimates the midpoint cost of the final rule for this label change is $32.8 million with a range of $17.0 million to $47.3 million.

In the final rule's cost analysis, USDA estimated costs for the loss of commingling flexibility at the packer/processor level are $7.16 per head for cattle and $1.79 per head for hogs that are currently commingled. Estimated costs at the retail level are $0.050 per pound for beef and $0.045 per pound for pork muscle cuts derived from commingled livestock.

For the beef segment, total costs for the loss of commingling flexibility to intermediaries and retailers are estimated to be $21.1 million, $52.8 million, and $84.5 million at the lower, midpoint, and upper levels. Similarly for the pork segment, total costs for the loss of commingling flexibility to intermediaries and retailers are estimated to be $15.0 million, $37.7 million, and $60.3 million at the lower, midpoint, and upper levels.

The Agency believes commingling use likely is on the lower end of estimates, and as such estimates implementation costs in a range of $53.1 to $137.8 million.

The National Farmers Union, a long-time supporter of the provisions, welcomed USDA's move to provide consumers more information instead of "simply watering down the process."

In a statement, NFU said legal analysis has found that this will satisfy WTO’s requirements and meets the compliance deadline of May 23, 2013.

Groups such as the National Pork Producers Council and National Cattlemen's Beef Association have been opposed to the rule since its inception, and said the USDA proposed rule first released in March doesn't meet the WTO trade standards.

Canada and Mexico, who filed the challenge in the WTO, have threatened sanctions if the U.S. does not change the law. It could take several months for the WTO to review the new rule and make a new decision on the latest COOL rule change.